Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist you in understanding our present business and the results of operations together with our present financial condition. This section should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q for the period ended September 30, 2020 (this “Report”), as well as our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 28, 2020.
Executive Overview
Introduction
Icahn Enterprises L.P. (“Icahn Enterprises”) is a master limited partnership formed in Delaware on February 17, 1987. Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”) is a limited partnership formed in Delaware on February 17, 1987. References to “we,” “our” or “us” herein include both Icahn Enterprises and Icahn Enterprises Holdings and their subsidiaries, unless the context otherwise requires.
Icahn Enterprises owns a 99% limited partner interest in Icahn Enterprises Holdings. Icahn Enterprises Holdings and its subsidiaries own substantially all of the assets and liabilities of Icahn Enterprises and conduct substantially all of its operations. Therefore, the financial results of Icahn Enterprises and Icahn Enterprises Holdings are substantially the same, with differences relating primarily to allocations to the general and limited partners. We do not discuss Icahn Enterprises and Icahn Enterprises Holdings separately unless we believe it is necessary to an understanding of the businesses.
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Metals, Real Estate and Home Fashion. We also report the results of our Holding Company, which includes the results of certain subsidiaries of Icahn Enterprises and Icahn Enterprises Holdings (unless otherwise noted), and investment activity and expenses associated with our Holding Company. Our historical results also report the results of our Mining segment, until sold on August 1, 2019.
Significant Transactions and Developments
Current Economic Conditions
In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic, and actions taken by governments and others in response thereto, has negatively impacted the global economy, financial markets, and the industries in which our subsidiaries operate. Our consolidated results of operations and financial condition have been impacted primarily by the volatility in the fair value of investments held by our Investment segment and the Holding Company (primarily unrealized) as well as declines in the global demand for refined products, especially gasoline and diesel fuels, with respect to our Energy segment. The impact on our businesses has also included the acceleration of selective planned store closures in our Automotive segment, lowering current year forecasts across various segments and recording write-downs to inventories. We believe that the current economic conditions will continue to impact our businesses through at least the remainder of the year. The extent and duration of the impact on our future results of operations, liquidity and financial condition is uncertain and may be significant. However, we believe that we and our subsidiaries have sufficient available liquidity to meet anticipated cash requirements for at least the next twelve months.
Debt Issuances
In January 2020, Icahn Enterprises and Icahn Enterprises Finance Corp. (together the “Issuers”) issued an additional $600 million in aggregate principal amount of 4.750% senior unsecured notes due 2024 (the “New 2024 Notes”) and an additional $250 million in aggregate principal amount of 5.250% senior unsecured notes due 2027 (the “New 2027 Notes,” and together with the New 2024 Notes, the “New Notes”). The proceeds from the New Notes, together with cash
44
Table of Contents
on hand, were used to redeem all of our prior outstanding $1.35 billion principal amount of 5.875% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.
Results of Operations
Consolidated Financial Results
Our operating businesses comprise consolidated subsidiaries which operate in various industries and are managed on a decentralized basis. In addition to our Investment segment’s revenues from investment transactions, revenues for our operating businesses primarily consist of net sales of various products, services revenue, franchisor operations and leasing of real estate. Due to the structure and nature of our business, we primarily discuss the results of operations by individual reporting segment in order to better understand our consolidated operating performance. Certain other financial information is discussed on a consolidated basis following our segment discussion, including other revenues and expenses included in continuing operations as well as our results from discontinued operations. In addition to the summarized financial results below, refer to Note 12, “Segment Reporting,” to the condensed consolidated financial statements for a reconciliation of each of our reporting segment’s results of continuing operations to our consolidated results.
The comparability of our summarized consolidated financial results presented below is affected primarily by the sale of Ferrous Resources Ltd. (“Ferrous Resources”) in August 2019, the performance of the Investment Funds (as defined below), the results of operations of our Energy segment, impacted by the demand and pricing for its products, and our Holding Company’s realized and unrealized gains and losses on certain equity investments. Refer to our respective segment discussions and “Other Consolidated Results of Operations,” below for further discussion.
Net Income (Loss) From
Net Income (Loss) From
Continuing Operations
Revenues
Continuing Operations
Attributable to Icahn Enterprises
Three Months Ended September 30,
Three Months Ended September 30,
Three Months Ended September 30,
2020
2019
2020
2019
2020
2019
(in millions)
Investment
$
(1,130)
$
(649)
$
(1,183)
$
(681)
$
(543)
$
(342)
Holding Company
(21)
61
(87)
14
(87)
14
Other Operating Segments:
Energy
943
1,625
(120)
92
(73)
79
Automotive
658
749
(26)
(48)
(26)
(48)
Food Packaging
105
92
4
(12)
3
(10)
Metals
85
82
3
(7)
3
(7)
Real Estate
29
29
8
4
8
4
Home Fashion
53
51
1
(5)
1
(5)
Mining
—
280
—
270
—
266
Other operating segments
1,873
2,908
(130)
294
(84)
279
Consolidated
$
722
$
2,320
$
(1,400)
$
(373)
$
(714)
$
(49)
45
Table of Contents
Net Income (Loss) From
Net Income (Loss) From
Continuing Operations
Revenues
Continuing Operations
Attributable to Icahn Enterprises
Nine Months Ended September 30,
Nine Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
2020
2019
(in millions)
Investment
$
(1,793)
$
(1,488)
$
(1,937)
$
(1,564)
$
(990)
$
(785)
Holding Company
(226)
(292)
(507)
(494)
(507)
(494)
Other Operating Segments:
Energy
2,794
4,812
(236)
298
(140)
221
Automotive
1,875
2,191
(149)
(128)
(149)
(128)
Food Packaging
297
282
3
(16)
3
(13)
Metals
205
271
(10)
(13)
(10)
(13)
Real Estate
76
79
(4)
9
(4)
9
Home Fashion
143
134
(2)
(13)
(2)
(13)
Mining
—
382
—
311
—
299
Other operating segments
5,390
8,151
(398)
448
(302)
362
Consolidated
$
3,371
$
6,371
$
(2,842)
$
(1,610)
$
(1,799)
$
(917)
Investment
We invest our proprietary capital through various private investment funds (“Investment Funds”). As of September 30, 2020 and December 31, 2019, we had investments with a fair market value of approximately $4.0 billion and $4.3 billion, respectively, in the Investment Funds. As of September 30, 2020 and December 31, 2019, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding us) was approximately $4.8 billion and $4.5 billion, respectively. During the nine months ended September 30, 2020, we invested $750 million in the Investment Funds, net of redemptions, and affiliates of Mr. Icahn (excluding us) contributed approximately $1.2 billion of primarily like-kind investments in the Investment Funds.
Our Investment segment’s results of operations are reflected in net income (loss) in the condensed consolidated statements of operations. Our Investment segment’s net income (loss) is driven by the amount of funds allocated to the Investment Funds and the performance of the underlying investments in the Investment Funds. Future funds allocated to the Investment Funds may increase or decrease based on the contributions and redemptions by our Holding Company and by Mr. Icahn and his affiliates. Additionally, historical performance results of the Investment Funds are not indicative of future results as past market conditions, investment opportunities and investment decisions may not occur in the future. Changes in general market conditions coupled with changes in exposure to short and long positions have significant impact on our Investment segment’s results of operations and the comparability of results of operations year over year and as such, future results of operations will be impacted by our future exposures and future market conditions, which may not be consistent with prior trends. Refer to the “Investment Segment Liquidity” section of our “Liquidity and Capital Resources” discussion for additional information regarding our Investment segment’s exposure as of September 30, 2020.
For the three months ended September 30, 2020 and 2019, our Investment Funds’ returns were (11.8%) and (7.4%), respectively, and for the nine months ended September 30, 2020 and 2019, our Investment Funds’ returns were (18.8%) and (15.6%), respectively. Our Investment Funds’ returns represent a weighted-average composite of the average returns, net of expenses.
46
Table of Contents
The following table sets forth the performance attribution for the Investment Funds’ returns.
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Long positions
(3.0)
%
(5.2)
%
(20.4)
%
4.2
%
Short positions
(8.8)
%
(2.3)
%
1.6
%
(20.0)
%
Other
—
%
0.1
%
—
%
0.2
%
(11.8)
%
(7.4)
%
(18.8)
%
(15.6)
%
The following table presents net income (loss) for our Investment segment for the three and nine months ended September 30, 2020 and 2019.
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(in millions)
Long positions
$
(260)
$
(487)
$
(1,952)
$
393
Short positions
(923)
(197)
10
(1,981)
Other
—
3
5
24
$
(1,183)
$
(681)
$
(1,937)
$
(1,564)
Three Months Ended September 30, 2020 and 2019
For the three months ended September 30, 2020, the Investment Funds’ negative performance was driven by net losses in their short positions and, to a lesser extent, net losses in their long positions. The negative performance of our Investment segment’s short positions was driven primarily by the negative performance of broad market hedges of $677 million, losses from a consumer, non-cyclical sector investment of $156 million and the aggregate performance of various other short positions with net losses aggregating $161 million across various sectors. The negative performance of our Investment segment’s short positions was partially offset by net gains from its short exposure to commercial mortgage-backed securities through credit default swap contracts of $71 million. The negative performance of our Investment Segment’s long positions was driven by losses from an energy sector investment of $699 million, offset in part by gains from a consumer, cyclical sector investment of $257 million. Net losses in long positions were further offset in part by the aggregate performance of investments with net gains across various other sectors.
For the three months ended September 30, 2019, the Investment Funds’ negative performance was driven by net losses in their long positions and, to a lesser extent, losses in their short positions. The negative performance of our Investment segment’s long positions was driven by losses from a consumer, cyclical sector investment, an Energy sector investment and a technology sector investment aggregating $441 million. The aggregate performance of investments with net losses across various other sectors accounted for an additional negative performance of our Investment segment’s long positions. Losses in long positions were offset in part by gains from a financial sector investment, a consumer, cyclical sector investment and a technology sector investment aggregating $377 million. The negative performance of our Investment segment’s short positions was driven by the negative performance of broad market hedges of $209 million offset in part by the aggregate performance of short positions with net gains across various sectors.
Nine Months Ended September 30, 2020 and 2019
For the nine months ended September 30, 2020, the Investment Funds’ negative performance was driven by net losses in their long positions. The negative performance of our Investment segment’s long positions was driven by losses from an energy sector investment of $758 million, a consumer, non-cyclical sector investment of $637 million and aggregate losses from two technology sector investments of $536 million. The aggregate performance of investments with net losses across various other sectors accounted for an additional negative performance of our Investment segment’s long positions. The negative performance of our Investment segment’s long positions was partially offset by net gains from a consumer, cyclical sector investment of $284 million. The performance of our Investment segment’s short positions was driven by the positive performance of their short exposure to commercial mortgage-backed securities
47
Table of Contents
through credit default swap contracts of approximately $1.4 billion, offset in part primarily by the negative performance of broad market hedges of $910 million and the aggregate performance of various other short positions with net losses across various sectors.
For the nine months ended September 30, 2019, the Investment Funds’ positive performance was driven by net gains in their long positions offset in part by net losses in their short positions. The positive performance of our Investment segment’s long positions was driven by gains from a consumer, non-cyclical sector investment and two energy sector investments with gains aggregating approximately $1.3 billion. The aggregate performance of investments with net gains across various other sectors accounted for an additional positive performance of our Investment segment’s long positions. Gains in long positions were offset in part by losses from a basic materials sector investment, a consumer, cyclical sector investment and a consumer, non-cyclical sector investment with losses aggregating $537 million. The negative performance of our Investment segment’s short positions was driven by the negative performance of broad market hedges of $650 million, offset in part by the aggregate performance of multiple short positions with net gains across various sectors.
Energy
Our Energy segment is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses. The petroleum business accounted for approximately 91% and 93% of our Energy segment’s net sales for the nine months ended September 30, 2020 and 2019, respectively.
The results of operations of the petroleum business are primarily affected by the relationship between refined product prices and the prices for crude oil and other feedstocks that are processed and blended into petroleum products, such as gasoline, diesel fuel and jet fuel, that are produced by a refinery (“refined products”). The cost to acquire crude oil and other feedstocks and the price for which refined products are ultimately sold depend on factors beyond our Energy segment’s control, including the supply of and demand for crude oil, as well as gasoline and other refined products. This supply and demand depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and the extent of government regulation. Because the petroleum business applies first-in, first-out accounting to value its inventory, crude oil price movements may impact gross margin in the short-term fluctuations in the market price of inventory. The effect of changes in crude oil prices on the petroleum business’ results of operations is influenced by the rate at which the prices of refined products adjust to reflect these changes.
The COVID-19 pandemic, and the actions taken by governments and others, has negatively impacted the energy industry. The global demand for refined products, especially gasoline, has declined significantly since the middle of March 2020. Concerns over the negative effects of the COVID-19 pandemic on economic and business prospects across the world have contributed to increased market and price volatility. Volatility was further amplified in March 2020 by market plays between the world’s largest oil producers. The simultaneous shocks in oil supply and demand has resulted in a decline in the price of crude oil and lead to a significant decrease in the price of refined products sold by our Energy segment.
In addition to current market conditions, there are long-term factors that may impact the demand for refined products. These factors include mandated renewable fuels standards, proposed climate change laws and regulations, and increased mileage standards for vehicles. The petroleum business is also subject to the Renewable Fuel Standard of the United States Environmental Protection Agency, which requires it to either blend “renewable fuels” with its transportation fuels or purchase renewable identification numbers (“RINs”), in lieu of blending. The price of RINs has been extremely volatile and the future cost of RINs for the petroleum business is difficult to estimate. Additionally, the cost of RINs is dependent upon a variety of factors, which include the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels, the mix of the petroleum business’ petroleum products, as well as the fuel blending performed at its refineries and downstream terminals, all of which can vary significantly from period to period. Refer to Note 16, “Commitments and Contingencies,” to the condensed consolidated financial statements for further discussion of RINs.
48
Table of Contents
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(in millions)
Net sales
$
1,005
$
1,622
$
2,811
$
4,794
Cost of goods sold
1,040
1,440
2,934
4,229
Gross margin
$
(35)
$
182
$
(123)
$
565
Three Months Ended September 30, 2020 and 2019
Net sales for our Energy segment decreased by approximately $617 million (38%) for the three months ended September 30, 2020 as compared to the comparable prior year period, primarily due to a decrease in our petroleum business’ net sales which decreased $607 million. The decrease in the petroleum business’ net sales was primarily due to a decrease in sales of distillates as well as a decrease in gasoline sales attributable to a decrease in volumes and unfavorable pricing conditions. These decreases were the result of reduced demand and excess supply attributable to the current market dynamics resulting from government actions to address the COVID-19 pandemic. Our nitrogen fertilizer business’ net sales decreased $10 million primarily due to a decrease in urea ammonium nitrate (“UAN”) sales due to unfavorable pricing, partially offset by an increase in volumes.
Cost of goods sold for our Energy segment decreased by $400 million (28%) for the three months ended September 30, 2020 as compared to the comparable prior year period. The decrease was primarily due to our petroleum business as a result of lower cost of consumed crude oil. The lower cost of consumed crude oil was due to a decrease in volumes, as discussed above, and lower crude oil prices offset in part by lower derivative gains of $5 million and a $38 million increase in the net cost of RINs. Gross margin for our Energy segment decreased by $217 million for the three months ended September 30, 2020 as compared to the comparable prior year period. Gross margin as a percentage of net sales was (3)% and 11% for the three months ended September 30, 2020 and 2019, respectively. The decrease in the gross margin as a percentage of net sales was primarily attributable to the petroleum business, which was primarily due to unfavorable market pricing and crack spreads as well as lower derivative gains over the comparable periods.
Nine Months Ended September 30, 2020 and 2019
Net sales for our Energy segment decreased by approximately $2.0 billion (41%) for the nine months ended September 30, 2020 as compared to the comparable prior year period, primarily due to a decrease in our petroleum business’ net sales which decreased approximately $1.9 billion. The decrease in the petroleum business’ net sales was primarily due to a decrease in gasoline sales as well as a decrease in sales of distillates attributable to a decrease in volumes and unfavorable pricing conditions. These decreases were the result of reduced demand and excess supply attributable to the current market dynamics resulting from government actions to address the COVID-19 pandemic. Additionally, during 2020, scheduled maintenance at one refinery has contributed to the decline in volumes. Our nitrogen fertilizer business’ net sales decreased $58 million primarily due to a decrease in UAN sales due to unfavorable pricing, partially offset by an increase in volumes.
Cost of goods sold for our Energy segment decreased by approximately $1.3 billion (31%) for the nine months ended September 30, 2020 as compared to the comparable prior year period. The decrease was primarily due to our petroleum business as a result of lower cost of consumed crude oil. The lower cost of consumed crude oil was due to a decrease in volumes resulting from the scheduled maintenance, as discussed above, and lower crude oil prices. Cost of goods sold for our petroleum business was also lower due to higher derivative gains of $54 million, offset in part by a $58 million write-down of inventory to net realizable value in the first quarter of 2020 and a $40 million increase in the net cost of RINs. Gross margin for our Energy segment decreased by $688 million for the nine months ended September 30, 2020 as compared to the comparable prior year period. Gross margin as a percentage of net sales was (4)% and 12% for the nine months ended September 30, 2020 and 2019, respectively. The decrease in the gross margin as a percentage of net sales was primarily attributable to the petroleum business, which was primarily due to unfavorable market pricing and crack spreads, offset in part by higher derivative gains over the comparable periods.
49
Table of Contents
Automotive
Our Automotive segment’s results of operations are generally driven by the distribution and installation of automotive aftermarket parts and are affected by the relative strength of automotive part replacement trends, among other factors.
Our Automotive segment is in the process of implementing a multi-year transformation plan, which includes the integration and restructuring of its businesses. The transformation plan includes operating the automotive services and aftermarket parts businesses as separate businesses, streamlining Icahn Automotive’s corporate and field support teams, facility closures, consolidations and conversions, inventory optimization actions, and the re-focusing of its automotive parts business on certain core markets. Costs to implement the transformation plan will include restructuring charges, which will be recorded when specific plans are approved, and which may be significant.
Our Automotive segment’s priorities include:
● Positioning the service business to take advantage of opportunities in the do-it-for-me market and vehicle fleets;
● Optimizing the value of the commercial parts distribution business in certain high-volume core markets;
● Exiting the automotive parts distribution business in certain low volume, non-core markets;
● Improving inventory management across Icahn Automotive’s parts and tire distribution network;
● Investment in customer experience initiatives such as enhanced customer loyalty programs and selective upgrades in facilities;
● Investment in employees with focus on training and career development investments; and
● Business process improvements, including investments in our supply chain and information technology capabilities.
The following table presents our Automotive segment’s operating revenue, cost of revenue and gross margin. Our Automotive segment’s results of operations also include automotive services labor. Automotive services labor revenues are included in other revenues from operations in our condensed consolidated statements of operations, however, the sale of any installed parts or materials related to automotive services are included in net sales. Therefore, we discuss the combined results of our automotive net sales and automotive services labor revenues below.
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(in millions)
Net sales and other revenue from operations
$
660
$
744
$
1,882
$
2,181
Cost of goods sold and other expenses from operations
466
534
1,375
1,558
Gross margin
$
194
$
210
$
507
$
623
Three Months Ended September 30, 2020 and 2019
Net sales and other revenue from operations for our Automotive segment for the three months ended September 30, 2020 decreased by $84 million (11%) as compared to the comparable prior year period. The decrease was attributable to a decrease in aftermarket parts sales of $55 million (14%) and a decrease in automotive services revenues of $29 million (8%). On an organic basis, aftermarket parts sales decreased $7 million over the comparable periods due to a decrease in commercial sales of $6 million (2%) and a decrease in retail sales of $1 million (1%). Store closures related to the transformation plan accounted for another $48 million decrease in aftermarket parts sales. The decrease in automotive services revenues represents a decrease on a primarily organic basis. The COVID-19 pandemic, and the impacts of the actions taken by governments and others, have significantly contributed to the decline in revenues, in particular the automotive services revenues and commercial sales revenues which, until March 2020, were experiencing growth on an organic basis.
50
Table of Contents
Cost of goods sold and other expenses from operations for the three months ended September 30, 2020 decreased by $68 million (13%) as compared to the comparable prior year period. The decrease was due to lower sales volumes as described above. Gross margin on net sales and other revenue from operations for the three months ended September 30, 2020 decreased by $16 million (8%) as compared to the comparable prior year period. Gross margin as a percentage of net sales and other revenue from operations was 29% and 28% for the three months ended September 30, 2020 and 2019, respectively. Due to the COVID-19 pandemic, our Automotive segment accelerated planned store closures, shifting our Automotive segment’s business from a majority attributable to aftermarket parts sales to a majority attributable to higher margin automotive services. This was offset in part by some margin rate contraction for its existing aftermarket parts businesses due to the effect of the shift in aftermarket parts sales from retail to commercial and the negative impacts from the COVID-19 pandemic.
Nine Months Ended September 30, 2020 and 2019
Net sales and other revenue from operations for our Automotive segment for the nine months ended September 30, 2020 decreased by $299 million (14%) as compared to the comparable prior year period. The decrease was attributable to a decrease in aftermarket parts sales of $184 million (16%) and a decrease in automotive services revenues of $115 million (11%). On an organic basis, aftermarket parts sales decreased $79 million over the comparable periods due to a decrease in commercial sales of $44 million (6%) and a decrease in retail sales of $35 million (12%). Store closures related to the transformation plan accounted for another $105 million decrease in aftermarket parts sales. The decrease in automotive services revenues represent a decrease on a primarily organic basis. The COVID-19 pandemic, and the impacts of the actions taken by governments and others, have significantly contributed to the decline in revenues, in particular the automotive services revenues and commercial sales revenues which, until March 2020, were experiencing growth on an organic basis.
Cost of goods sold and other expenses from operations for the nine months ended September 30, 2020 decreased by $183 million (12%) as compared to the comparable prior year period. The decrease was due to lower sales volumes as described above. Gross margin on net sales and other revenue from operations for the nine months ended September 30, 2020 decreased by $116 million (19%) as compared to the comparable prior year period. Gross margin as a percentage of net sales and other revenue from operations was 27% and 29% for the nine months ended September 30, 2020 and 2019, respectively. Our Automotive segment has experienced some margin rate contraction for its aftermarket parts businesses due to the effect of stores that were in the process of closing down and the shift in aftermarket parts sales from retail to commercial, as well as from the negative impact from the COVID-19 pandemic, as described above. This was offset in part by the acceleration of planned store closures, which resulted in a greater portion of our Automotive segment’s business being derived from higher margin automotive services, as described above.
Food Packaging
Our Food packaging segment’s results of operations are primarily driven by the production and sale of cellulosic, fibrous and plastic casings for the processed meat and poultry industry and derives a majority of its total net sales from customers located outside the United States.
Three Months Ended September 30, 2020 and 2019
Net sales for the three months ended September 30, 2020 increased $7 million (7%) as compared to the comparable prior year period. The increase was due to an increase of $3 million in volumes, an increase of $3 million due to price and product mix and $1 million from the favorable effects of foreign exchange. Cost of goods sold for the three months ended September 30, 2020 increased by $4 million (5%) as compared to the comparable prior year period due to an increase in volumes. Gross margin as a percentage of net sales was 20% and 18% for the three months ended September 30, 2020 and 2019, respectively.
Nine Months Ended September 30, 2020 and 2019
Net sales for the nine months ended September 30, 2020 increased $16 million (6%) as compared to the comparable prior year period. The increase was due to an increase of $10 million in volumes and an increase of $8 million due to
51
Table of Contents
price and product mix, offset in part by $2 million from the unfavorable effects of foreign exchange. Cost of goods sold for the nine months ended September 30, 2020 increased by $13 million (6%) as compared to the comparable prior year period due to an increase in volumes. Gross margin as a percentage of net sales was 21% and 21% for the nine months ended September 30, 2020 and 2019, respectively.
Metals
The scrap metals business is highly cyclical and is substantially dependent upon the overall economic conditions in the United States and other global markets. Ferrous and non-ferrous scrap has been historically vulnerable to significant declines in consumption and product pricing during prolonged periods of economic downturn or stagnation.
Three Months Ended September 30, 2020 and 2019
Net sales for the three months ended September 30, 2020 increased by $1 million (1%) compared to the comparable prior year period. Cost of goods sold for the three months ended September 30, 2020 decreased by $6 million (7%) compared to the comparable prior year period due to lower material costs. Gross margin as a percentage of net sales was 6% and (2)% for the three months ended September 30, 2020 and 2019, respectively, primarily due to higher material margins.
Nine Months Ended September 30, 2020 and 2019
Net sales for the nine months ended September 30, 2020 decreased by $67 million (25%) compared to the comparable prior year period due to lower shipping volumes and market selling prices for most grades of metal due to unfavorable market conditions driven by the impact of the COVID-19 pandemic. Cost of goods sold for the nine months ended September 30, 2020 decreased by $67 million (25%) compared to the comparable prior year period due to lower material costs due to lower volumes and market prices, as discussed above. Gross margin as a percentage of net sales was less than 1% for each of the nine months ended September 30, 2020 and 2019, respectively.
Real Estate
Real Estate revenues and expenses primarily include sales of residential units, results from club operations, rental operations, and hotel, timeshare and casino operations. Sales of residential units are included in net sales in our condensed consolidated statements of operations. Results from club and rental operations, and hotel, timeshare and casino operations are included in other revenues from operations in our condensed consolidated statements of operations. Revenue from our real estate operations for each of the three and nine months ended September 30, 2020 and 2019 were primarily derived from the sale of residential units and rental operations.
Home Fashion
Our Home Fashion segment is significantly influenced by the overall economic environment, including consumer spending, at the retail level, for home textile products.
Three Months Ended September 30, 2020 and 2019
Net sales for the three months ended September 30, 2020 increased by $2 million (4%) compared to the comparable prior year period. Cost of goods sold for the three months ended September 30, 2020 decreased $1 million (2%) compared to the comparable prior year period due to a shift to lower cost products. Gross margin as a percentage of net sales was 21% and 16% for the three months ended September 30, 2020 and 2019, respectively. The increase is due to the reduction in sales to certain lower margin customers as well as the addition of newly added higher margin products.
Nine Months Ended September 30, 2020 and 2019
Net sales for the nine months ended September 30, 2020 increased by $6 million (4%) compared to the comparable prior year period due to a business acquired in the second quarter of 2019, which accounted for an increase of $21
52
Table of Contents
million, offset in part by a $15 million decrease from existing businesses, primarily as a result of the current economic conditions. Cost of goods sold for the nine months ended September 30, 2020 decreased by $4 million (3%) compared to the comparable prior year period due to a decrease in sales from existing businesses, as discussed above, as well as a shift to lower cost products, offset in part by an increase from the acquired business. Gross margin as a percentage of net sales was 21% and 14% for the nine months ended September 30, 2020 and 2019, respectively. The increase is due to the reduction in sales to certain lower margin customers, the business acquired having higher margins than the existing businesses and due to the addition of newly added higher margin products.
Holding Company
Our Holding Company’s results of operations primarily reflect investment gains and losses from equity investments and the interest expense on its senior unsecured notes for each of the three and nine months ended September 30, 2020 and 2019.
Other Consolidated Results of Operations
Gain on Disposition of Assets, Net
In August 2019, we sold Ferrous Resources, resulting in a pretax gain on disposition of assets of $252 million for the three and nine months ended September 30, 2019.
Selling, General and Administrative
Three Months Ended September 30, 2020 and 2019
Our consolidated selling, general and administrative during the three months ended September 30, 2020 decreased by $62 million (18%) as compared the comparable prior year period primarily due to lower occupancy costs for various locations and other general and administrative costs due to the current market conditions for our Automotive segment as well as from our Energy segment due to lower deferred compensation costs.
Nine Months Ended September 30, 2020 and 2019
Our consolidated selling, general and administrative during the nine months ended September 30, 2020 decreased by $138 million (13%) as compared the comparable prior year period primarily due to (i) lower occupancy costs for various locations and other general and administrative costs due to the current market conditions for our Automotive segment, (ii) lower deferred compensation costs for our Energy segment and (iii) the sale of our former Mining segment in August 2019, offset in part by an increase attributable to our Real Estate segment primarily for the accrual of demolition costs relating to a property not in service.
Interest Expense
Three Months Ended September 30, 2020 and 2019
Our consolidated interest expense during the three months ended September 30, 2020 increased by $18 million (12%) as compared the comparable prior year period. The increase was primarily due to higher interest expense from our Investment segment attributable to an increase in average due to broker balances over the respective periods as well as higher interest expense from our Energy segment as a result of certain debt offerings in the first quarter of 2020.
Nine Months Ended September 30, 2020 and 2019
Our consolidated interest expense during the nine months ended September 30, 2020 increased by $74 million (17%) as compared the comparable prior year period. The increase was primarily due to higher interest expense from our Investment segment attributable to an increase in average due to broker balances over the respective periods as well as higher interest expense from our Energy segment as a result of certain debt offerings in the first quarter of 2020.
53
Table of Contents
Income Tax Expense
Certain of our subsidiaries are partnerships not subject to taxation in our condensed consolidated financial statements and certain other subsidiaries are corporations, or subsidiaries of corporations, subject to taxation in our condensed consolidated financial statements. Therefore, our consolidated effective tax rate generally differs from the statutory federal tax rate. Refer to Note 13, “Income Taxes,” to the condensed consolidated financial statements for a discussion of income taxes.
Liquidity and Capital Resources
Holding Company Liquidity
We are a holding company. Our cash flow and our ability to meet our debt service obligations and make distributions with respect to depositary units will depend on the cash flow resulting from divestitures, equity and debt financings, interest income, returns on our interests in the Investment Funds and the payment of funds to us by our subsidiaries in the form of loans, dividends and distributions. We may pursue various means to raise cash from our subsidiaries. To date, such means include receipt of dividends and distributions from subsidiaries, obtaining loans or other financings based on the asset values of subsidiaries or selling debt or equity securities of subsidiaries through capital market transactions. To the degree any distributions and transfers are impaired or prohibited, our ability to make payments on our debt or distributions on our depositary units could be limited. The operating results of our subsidiaries may not be sufficient for them to make distributions to us. In addition, our subsidiaries are not obligated to make funds available to us and distributions and intercompany transfers from our subsidiaries to us may be restricted by applicable law or covenants contained in debt agreements and other agreements.
As of September 30, 2020, our Holding Company had cash and cash equivalents of approximately $1.1 billion and total debt of approximately $5.8 billion. During the nine months ended September 30, 2020, we invested $750 million in the Investment Funds, net of redemptions. As of September 30, 2020, our Holding Company had investments in the Investment Funds with a total fair market value of approximately $4.0 billion. We may redeem our direct investment in the Investment Funds upon notice. See “Investment Segment Liquidity” below for additional information with respect to our Investment segment liquidity. See “Consolidated Cash Flows” below for additional information with respect to our Holding Company liquidity.
Holding Company Borrowings and Availability
September 30,
December 31,
2020
2019
(in millions)
5.875% senior unsecured notes due 2022
$
—
$
1,345
6.250% senior unsecured notes due 2022
1,209
1,211
6.750% senior unsecured notes due 2024
499
498
4.750% senior unsecured notes due 2024
1,107
498
6.375% senior unsecured notes due 2025
748
748
6.250% senior unsecured notes due 2026
1,250
1,250
5.250% senior unsecured notes due 2027
999
747
$
5,812
$
6,297
Holding Company debt consists of various issues of fixed-rate senior unsecured notes issued by the Issuers and guaranteed by Icahn Enterprises Holdings (the “Guarantor”). Interest on each tranche of senior unsecured notes are payable semi-annually.
In January 2020, the Issuers issued an additional $600 million in aggregate principal amount of the New 2024 Notes and an additional $250 million in aggregate principal amount of the New 2027 Notes. The additional proceeds from the New Notes, together with cash on hand, were used to redeem all of our prior outstanding $1.35 billion principal amount of 5.875% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.
54
Table of Contents
Each of our senior unsecured notes and the related guarantees are the senior unsecured obligations of the Issuers and rank equally with all of the Issuers’ and the Guarantor’s existing and future senior unsecured indebtedness and senior to all of the Issuers’ and the Guarantor’s existing and future subordinated indebtedness. Each of our senior unsecured notes and the related guarantees are effectively subordinated to the Issuers’ and the Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness. Each of our senior unsecured notes and the related guarantees are also effectively subordinated to all indebtedness and other liabilities of the Issuers’ subsidiaries other than the Guarantor.
The indentures governing our senior unsecured notes described above restrict the payment of cash distributions, the purchase of equity interests or the purchase, redemption, defeasance or acquisition of debt subordinated to the senior unsecured notes. The indentures also restrict the incurrence of debt or the issuance of disqualified stock, as defined in the indentures, with certain exceptions. In addition, the indentures require that on each quarterly determination date, Icahn Enterprises and the guarantor of the notes (currently only Icahn Enterprises Holdings) maintain certain minimum financial ratios, as defined therein. The indentures also restrict the creation of liens, mergers, consolidations and sales of substantially all of our assets, and transactions with affiliates. Additionally, each of the senior unsecured notes outstanding as of September 30, 2020, except for the New 2024 Notes and the New 2027 Notes, are subject to optional redemption premiums in the event we redeem any of the notes prior to certain dates as described in the indentures.
As of September 30, 2020 and December 31, 2019, we were in compliance with all covenants, including maintaining certain minimum financial ratios, as defined in the indentures. Additionally, as of September 30, 2020, based on covenants in the indentures governing our senior unsecured notes, we are not permitted to incur additional indebtedness.
2019 At-The-Market Offering
On May 2, 2019, Icahn Enterprises announced the commencement of its “at-the-market” offering pursuant to its Open Market Sale Agreement, pursuant to which Icahn Enterprises may sell its depositary units, from time to time, during the term of the program ending on March 31, 2021, for up to $400 million in aggregate sale proceeds. During the nine months ended September 30, 2020, Icahn Enterprises sold 1,118,596 depositary units pursuant to this agreement, resulting in gross proceeds of $60 million. As of September 30, 2020, Icahn Enterprises may sell its depositary units for up to an additional $285 million in aggregate sale proceeds pursuant to this agreement. No assurance can be made that any or all amounts will be sold during the term of the program.
LP Unit Distributions
During the nine months ended September 30, 2020, we declared three quarterly distributions aggregating $6.00 per depositary unit. In connection with these distributions, aggregate cash distributions to all depositary unitholders was $483 million, primarily due to Mr. Icahn and his affiliates’ significant ownership of Icahn Enterprises’ depositary units.
On November 4, 2020, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of $2.00 per depositary unit. The quarterly distribution is payable in either cash or additional depositary units, at the election of each depositary unitholder and will be paid on or about December 29, 2020 to depositary unitholders of record at the close of business on November 24, 2020.
The declaration and payment of distributions is reviewed quarterly by Icahn Enterprises GP’s board of directors based upon a review of our balance sheet and cash flow, our expected capital and liquidity requirements, the provisions of our partnership agreement and provisions in our financing arrangements governing distributions, and keeping in mind that limited partners subject to U.S. federal income tax have recognized income on our earnings even if they do not receive distributions that could be used to satisfy any resulting tax obligations. The payment of future distributions will be determined by the board of directors quarterly, based upon the factors described above and other factors that it deems relevant at the time that declaration of a distribution is considered. Payments of distributions are subject to certain restrictions, including certain restrictions on our subsidiaries which limit their ability to distribute dividends to us. There can be no assurance as to whether or in what amounts any future distributions might be paid.
55
Table of Contents
Subsequent Events
In October 2020, in connection with Viskase’s equity private placement, we acquired an additional 50,000,000 shares of Viskase common stock for $100 million.
Investment Segment Liquidity
During the nine months ended September 30, 2020, we invested $750 million in the Investment Funds, net of redemptions, and affiliates of Mr. Icahn (excluding us) contributed approximately $1.2 billion of primarily like-kind investments in the Investment Funds. In addition to investments by us and Mr. Icahn, the Investment Funds historically have access to significant amounts of cash available from prime brokerage lines of credit, subject to customary terms and market conditions.
Additionally, our Investment segment liquidity is driven by the investment activities and performance of the Investment Funds. As of September 30, 2020, the Investment Funds’ had a net long notional exposure of 8%. The Investment Funds’ long exposure was 70% (69% long equity and 1% long credit) and its short exposure was 62% (34% short equity and 28% short credit and other). The notional exposure represents the ratio of the notional exposure of the Investment Funds’ invested capital to the net asset value of the Investment Funds at September 30, 2020.
The Investment Funds’ 70% long exposure was comprised of the fair value of its long positions (with certain adjustments). Of the Investment Funds’ 62% short exposure, 11% was comprised of the fair value of its short positions and 51% was comprised of short broad market index swap derivative contracts and short credit default swap contracts.
With respect to both our long positions that are not notionalized (70% long exposure) and our short positions that are not notionalized (11% short exposure), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit.
With respect to the notional value of our other short positions (51% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.
Other Segment Liquidity
Segment Cash and Cash Equivalents
Segment cash and cash equivalents (excluding our Investment segment) consists of the following:
September 30,
December 31,
2020
2019
(in millions)
Energy
$
672
$
652
Automotive
55
46
Food Packaging
12
22
Metals
2
3
Real Estate
18
53
Home Fashion
3
1
$
762
$
777
56
Table of Contents
Segment Borrowings and Availability
Segment debt consists of the following:
September 30,
December 31,
2020
2019
(in millions)
Energy
$
1,690
$
1,195
Automotive
333
405
Food Packaging
258
268
Metals
23
7
Real Estate
2
2
Home Fashion
28
18
$
2,334
$
1,895
Refer to our Annual Report on Form 10-K for the year ended December 31, 2019 for information concerning terms, restrictions and covenants pertaining to our subsidiaries’ debt. As of September 30, 2020, all of our subsidiaries were in compliance with all debt covenants.
In January 2020, CVR Energy issued $600 million in aggregate principal amount of 5.25% senior unsecured notes due 2025 and $400 million in aggregate principal amount of 5.75% senior unsecured notes due 2028. A portion of the net proceeds from the issuance of these notes were used to fund the redemption of CVR Refining’s existing senior unsecured notes due 2022. The remaining net proceeds will be used for CVR Energy’s general corporate purposes, which may include funding (i) acquisitions, (ii) capital projects, and/or (iii) share repurchases or other distributions to CVR Energy’s stockholders.
In October 2020, Viskase entered into a credit agreement providing for a $150 million term loan and a $30 million revolving credit facility. The proceeds from the new term loan, plus cash received from the equity private placement in October 2020, as discussed in Note 1, “Description of Business,” were used to repay in full Viskase’s existing term loan. The new term loan and credit facility mature in 2023.
Our segments have additional borrowing availability under certain revolving credit facilities as summarized below:
September 30,
2020
(in millions)
Energy
$
418
Automotive
132
Food Packaging
6
Metals
25
Home Fashion
10
$
591
The above outstanding debt and borrowing availability with respect to each of our continuing operating segments reflects third-party obligations.
Subsidiary Dividends
In view of the uncertainty of the depth and extent of the contraction in oil demand due to the COVID-19 pandemic, combined with the weaker commodity price environment, CVR Energy has remained focused on safe and reliable operations, cash conservation and protecting its balance sheet. As a result of these factors, and in light of the uncertainty of the current economic environment as well as potential future cash requirements of CVR Energy, the Board of Directors of CVR Energy approved a reduction in its cash dividend for the first quarter of 2020 and elected not to declare a cash dividend for the second and third quarters of 2020. These decisions support CVR Energy’s continued
57
Table of Contents
focus on financial discipline through a balanced approach of stockholder distributions and strategic investments while providing the flexibility to weather the uncertain environment. The Board of Directors of CVR Energy will continue to evaluate the economic environment, CVR Energy’s cash needs, and other applicable factors, and may elect to make additional changes to CVR Energy’s dividend in future periods.
Subsidiary Stock Repurchase Program
On October 23, 2019, the Board of Directors of CVR Energy approved a stock repurchase program which would enable it to repurchase up to $300 million of its common stock from time to time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. The stock repurchase program has a duration of four years, which may be terminated by the Board of Directors of CVR Energy at any time. Repurchases, if any, including the timing, price and amount, may be made at the discretion of CVR Energy management and CVR Energy is not obligated to make any repurchases. CVR Energy did not repurchase any shares of its common stock as of September 30, 2020. Due to the market and oil price volatility, coupled with the current economic conditions, CVR Energy does not currently intend to repurchase any stock if these, and other, conditions continue.
On May 6, 2020, the Board of Directors of CVR Partners’ general partner approved a unit repurchase program which would enable it to repurchase up to $10 million of its common units from time to time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. During 2020, CVR Partners repurchased common units on the open market at a cost of $2 million. As of September 30, 2020, CVR Partners has $8 million remaining under its unit repurchase program.
Consolidated Cash Flows
Our Holding Company’s cash flows are generally driven by payments and proceeds associated with our senior unsecured debt obligations and payments and proceeds associated with equity transactions with Icahn Enterprises’ depositary unitholders. Additionally, our Holding Company’s cash flows include transactions with our Investment and other operating segments. Our Investment segment’s cash flows are primarily driven by investment transactions, which are included in net cash flows from operating activities due to the nature of its business, as well as contributions to and distributions from Mr. Icahn and his affiliates (including Icahn Enterprises and Icahn Enterprises Holdings), which are included in net cash flows from financing activities. Our other operating segments’ cash flows are driven by the activities and performance of each business as well as transactions with our Holding Company, as discussed below.
58
Table of Contents
The following table summarizes cash flow information for Icahn Enterprises’ reporting segments and our Holding Company:
Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2019
Net Cash Provided By (Used In)
Net Cash Provided By (Used In)
Operating
Investing
Financing
Operating
Investing
Financing
Activities
Activities
Activities
Activities
Activities
Activities
(in millions)
Holding Company
$
(266)
$
(867)
$
(919)
$
(270)
$
893
$
1
Investment
912
—
751
(2,264)
—
220
Other Operating Segments:
Energy
62
(396)
361
653
(73)
(556)
Automotive
19
41
(51)
(81)
(98)
184
Food Packaging
8
(10)
(7)
(11)
(12)
(4)
Metals
(20)
(1)
16
5
(31)
9
Real Estate
14
(3)
(39)
12
(18)
(17)
Home Fashion
(5)
(4)
9
(5)
(32)
38
Mining
—
—
—
93
(14)
4
Other operating segments
78
(373)
289
666
(278)
(342)
Total before eliminations
724
(1,240)
121
(1,868)
615
(121)
Eliminations
—
689
(689)
—
16
(16)
Consolidated
$
724
$
(551)
$
(568)
$
(1,868)
$
631
$
(137)
Eliminations
Eliminations in the table above relate to certain of our Holding Company’s transactions with our Investment and other operating segments. Our Holding Company’s net (investments in) distributions from the Investments Funds, when applicable, are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our Investment segment. Similarly, our Holding Company’s net distributions from (investments in) our other operating segments are included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our other operating segments. In addition, during January 2019, our Holding Company sold its direct investment in CVR Refining to CVR Energy, which is included in cash flows from investing activities for our Holding Company and cash flows from financing activities for our Energy segment.
Holding Company
Our Holding Company’s cash flows from operating activities for each of the nine months ended September 30, 2020 and 2019 were primarily attributable to our semi-annual interest payments on our senior unsecured notes. The decrease in interest payments over the comparable periods is due to the timing of the payment of the semi-annual interest as our recent debt transactions resulted in a change in certain interest payment dates as well as a lower weighted average interest rate over the comparative periods.
Our Holding Company’s cash flows from investing activities for the nine months ended September 30, 2020 were primarily due to our investment in the Investment Funds of $750 million (net of redemptions), aggregate purchases of investments for $177 million and net contributions and loans to our operating subsidiaries of $63 million, including a net investment in our Automotive segment of $60 million. This was offset in part by net cash dividends and distributions from our Energy and Real Estate segments aggregating $124 million. Our Holding Company’s cash flows from investing activities for the nine months ended September 30, 2019 were primarily due to our sale of a certain equity investment for which we received $458 million, the sale of Ferrous Resources for which we received $451 million and the sale of our direct investment in CVR Refining to CVR Energy for $60 million. During the nine months ended September 30, 2019, we also received net cash dividends and distributions from our Energy and Real Estate segments aggregating $176 million and we had aggregate investments in our Automotive segment of $221 million and an investment in our Home Fashion segment of $31 million.
59
Table of Contents
Our Holding Company’s cash flows from financing activities for the nine months ended September 30, 2020 included the issuances of additional senior unsecured notes and proceeds from our “at-the-market” offering, offset in part by the repayment of senior unsecured notes and related fees and expenses, as described above, as well as payments on our aggregate quarterly distributions. Our Holding Company’s cash flows from financing activities for the nine months ended September 30, 2019 included the issuances of additional senior unsecured notes and proceeds from our “at-the-market” offering, offset in part by payments on our aggregate quarterly distributions.
Investment Segment
Our Investment segment’s cash flows from operating activities for the comparable periods were attributable to its net investment transactions.
Our Investment segment’s cash flows from financing activities for the nine months ended September 30, 2020 were attributable to our investment in the Investment Funds of $750 million, net of redemptions, and $1 million from Mr. Icahn and his affiliates (excluding us). Our Investment segment’s cash flows from financing activities for the nine months ended September 30, 2019 were attributable to Mr. Icahn and his affiliates’ (excluding us) investments in the Investment Funds of $220 million.
Other Operating Segments
Our other operating segments’ cash flows from operating activities included net cash flows from operating activities before changes in operating assets and liabilities of $6 million and $559 million for the nine months ended September 30, 2020 and 2019, respectively. The change in cash flows from operating activities for the nine months ended September 30, 2020 as compared to the comparable prior year period was primarily due to a decline in the operating results of our Energy segment as well as unfavorable changes in working capital also attributable to our Energy segment, offset in part by an increase in working capital for our Automotive segment due to inventory reductions over the comparable periods. In addition, our cash flows from operating activities decreased by $93 million as a result of the exclusion of Ferrous Resources in 2020, which was sold in August 2019.
Our other operating segments’ cash flows from investing activities were primarily due to the purchase of investments of $140 million in 2020 compared to $50 million in 2019 and due to capital expenditures of $155 million in 2020 and $195 million in 2019, primarily within our Energy and Automotive segments for both periods. In addition, our Energy segment had payments for scheduled turnaround expenses of $158 million in 2020 compared to $24 million in 2019. Our other operating segments also had net payments for the acquisitions of businesses in 2020 of $2 million, net of cash acquired, compared to $52 million, net of cash acquired in 2019.
Our other operating segments’ cash flows from financing activities were primarily due to our Energy segment. In 2020, our Energy segment had net proceeds from senior debt transactions of $500 million and in 2019 our Energy segment had payments to acquire the remaining common units of CVR Refining not already owned by CVR Energy of $301 million, including $60 million paid to our Holding Company for our direct ownership in CVR Refining. In addition, our other operating segments also had net distributions to our Holding Company of $61 million for the nine months ended September 30, 2020 compared to net contributions of $76 million form our Holding Company for the nine months ended September 30, 2019, as described above. For the nine months ended September 30, 2020 and 2019, our Energy segment had distributions to non-controlling interests of $36 million and $90 million, respectively.
Consolidated Capital Expenditures
Our Energy segment accounts for a significant portion of our capital expenditures. As a result of the current economic conditions, our Energy segment revised its planned capital expenditures down approximately 10% for 2020, which is subject to further change due to unanticipated changes in the cost, scope, and completion time for capital projects. Although other subsidiaries of ours have curtailed their capital expenditures, there have been no other material changes to our planned capital expenditures as compared to the estimated capital expenditures for 2020 reported in our Annual Report on Form 10-K for the year ended December 31, 2019. However, such estimated capital expenditures are
60
Table of Contents
subject to further revisions due to the uncertainty of the scope and duration of the impact of the current economic conditions.
Consolidated Contractual Commitments and Contingencies
There have been no material changes to our contractual commitments and contingencies during the nine months ended September 30, 2020 as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2019 .
Consolidated Off-Balance Sheet Arrangements
We have off-balance sheet risk related to investment activities associated with certain financial instruments, including futures, options, credit default swaps and securities sold, not yet purchased. For additional information regarding these arrangements, see Note 6, “Financial Instruments,” to the condensed consolidated financial statements.
Critical Accounting Policies and Estimates
The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2020 as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2019.
Recently Issued Accounting Standards
Refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements for a discussion of recent accounting pronouncements applicable to us.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.