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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-25 · 117 added, 146 removed, 362 unchanged (42% of the section changed)

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We also report the results of our Holding Company, which includes the results of certain subsidiaries of Icahn Enterprises (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.

References to “we,” “our” or “us” herein include Icahn Enterprises and its subsidiaries, unless the context otherwise requires.

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Significant Transactions and Developments

On October 27, 2021, IEP Utility Holdings LLC (“IEP Utility”), a wholly owned subsidiary of Icahn Enterprises Holdings, commenced a cash offer (the “SWX Tender Offer”) to acquire, subject to certain terms and conditions, all of the issued and outstanding shares of common stock of Southwest Gas Holdings, Inc.

(“Southwest Gas”) not held by affiliates of Icahn Enterprises Holdings at a price of $75.00 per share.

Southwest Gas, through its wholly owned subsidiaries, is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California.

Southwest Gas’ shares of common stock are listed on the New York Stock Exchange under the symbol “SWX.” The SWX Tender Offer has been extended and is scheduled to expire at 12:00 midnight, New York City Time, on March 23, 2022, unless the offer is further extended.

Sale of PSC Metals, LLC

On December 7, 2021, we closed on the previously announced sale of 100% of the equity interests in PSC Metals, LLC (“PSC Metals”).

In connection with this sale, we received proceeds of $323 million and recorded a pretax gain on disposition of assets of $163 million in the fourth quarter of 2021.

As a result of the sale of PSC Metals, we no longer operate a Metals segment.

Debt Issuances and Repayments

In January 2021, Icahn Enterprises and Icahn Enterprises Finance Corp.

(together the “Issuers”) issued $750 million in aggregate principal amount of 4.375% senior unsecured notes due 2029 (the “New 2029 Notes”).

The proceeds from the New 2029 Notes were used to redeem $750 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.

In April 2021, the Issuers issued $455 million in aggregate principal amount of additional 5.250% senior unsecured notes due 2027.

The proceeds from this issuance were used to redeem the remaining $455 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.

In February 2022, we repaid all of our outstanding $500 million aggregate principal amount of 6.750% senior unsecured notes due 2024 at par.

In February 2022, we redeemed all of our $500 million aggregate principal amount of 6.750% senior unsecured notes due 2024 at par.

Results of Operations

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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 13, “Segment and Geographic Reporting,” to the consolidated financial statements for a reconciliation of each of our reporting segment’s results of continuing operations to our consolidated results.

Throughout 2020 and 2021, the COVID-19 pandemic, and actions taken by governments and others in response thereto, has negatively impacted the global economy, financial markets, and certain of the industries in which our subsidiaries operate.

Throughout 2020, 2021 and continuing in 2022, the COVID-19 pandemic, and actions taken by governments and others in response thereto, has negatively impacted the global economy, financial markets, and certain of 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 as well as volatility 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 and recording write-downs to inventories.

The economic conditions that persisted for much of 2020 have improved in 2021 as more governments reduce restrictions and more businesses resume operations.

The comparability of our summarized consolidated financial results presented below is affected by, among other factors, (i) the performance of the Investment Funds, (ii) the results of our Energy segment’s operations, impacted by the demand and prices for its products and (iii) the sales of PSC Metals in 2021 and Ferrous Resources in 2019.

The economic conditions that persisted for much of 2020 have improved in 2021 and 2022 as more governments reduce restrictions and more businesses resume operations,

although supply chain issues have continued to persist.

Recent interest rate increases have increased the costs of borrowing.

In February 2022, Russia invaded Ukraine, disrupting the global oil, fertilizer, and agriculture markets, and leading to heightened uncertainty in the worldwide economy recovering from the COVID-19 pandemic.

In response, many Western countries have formally or informally adopted sanctions on a number of Russian exports, including Russian oil and natural gas, and individuals affiliated with Russian government leadership.

These sanctions, thus far, have resulted in oil prices and supply becoming volatile, continued elevation of natural gas prices, and are likely to continue to impact commodity prices in the near-term, which could have a material effect on our financial condition, cash flows, or results of operations.

A global recession stemming from market volatility could result in a reduction in demand, thereby lowering commodity prices.

The ultimate outcome of the Russia-Ukraine conflict and any associated market disruptions are difficult to predict and may materially affect our business, operations, and cash flows in unforeseen ways.

Refer to our respective segment discussions and “Other Consolidated Results of Operations” below for further discussion.

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We invest our proprietary capital through various private investment funds (the “Investment Funds”).

As of December 31, 2021 and 2020, we had investments with a fair market value of approximately $4.2 billion and $4.3 billion, respectively, in the Investment Funds.

As of December 31, 2022 and 2021, we had investments with a fair market value of approximately $4.2 billion, in the Investment Funds.

As of December 31, 2022 and 2021, the total fair market value of investments in the Investment Funds made by Mr.

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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.

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 December 31, 2022.

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Short positions

The following table presents net income (loss) for our Investment segment:

The following table presents net loss for our Investment segment:

Year Ended December 31,

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Short positions

For 2021, the Investment Funds’ negative performance was driven by net losses in short positions, offset in part by net gains in long positions.

The negative performance of our Investment segment’s short positions was driven primarily by the negative performance of broad market hedges of $1.2 billion, an energy sector investment of $752 million and a consumer, cyclical sector investment of $506 million.

For the year ended December 31, 2022, the Investment Funds’ negative performance was driven by net losses in long positions and short positions.

The negative performance of long positions was primarily driven by the negative performance of a healthcare investment of approximately $1.3 billion and the aggregate performance of investments with net losses across various sectors of $1.0 billion, offset in part by gains from two energy sector investments aggregating $2.0 billion.

The negative performance of our Investment segment’s short positions was driven by the negative performance of certain credit default swap positions of $742 million and an energy sector hedge totaling $420 million offset in part by gains from a broad market hedge totaling $1.0 billion.

For the year ended December 31, 2021, the Investment Funds’ negative performance was driven by net losses in short positions, offset in part by net gains in long positions.

The negative performance of our Investment segment’s short positions was primarily driven by the negative performance of broad market hedges of $1.2 billion, an energy sector investment of $752 million and a consumer, cyclical sector investment of $506 million.

The aggregate performance of investments with net losses across various sectors accounted for an additional negative performance of our Investment segment’s short positions.

The negative performance of our Investment segment’s short positions was offset in part by gains from a consumer, cyclical sector investment of $204 million.

The positive performance of our Investment segment’s long positions was driven primarily by gains from two energy sector investments aggregating approximately $1.7 billion, a consumer, non-cyclical sector investment of $420 million and a utilities sector investment of $220 million.

The positive performance of our Investment segment’s long positions was primarily driven by gains from two energy sector investments aggregating approximately $1.7 billion, a consumer, non-cyclical sector investment of $420 million and a utilities sector investment of $220 million.

The aggregate performance of investments with net gains across various sectors accounted for an additional positive performance of our Investment segment’s long positions.

For 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 approximately $1.6 billion, losses from two consumer, non-cyclical sector investments aggregating $362 million, losses from a consumer, cyclical sector investment of $118 million and the aggregate performance of various other short positions with net losses aggregating $357 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 $902 million.

The negative performance of our Investment Segment’s long positions was driven by losses from a consumer, non-cyclical sector investment of $637 million, and two technology sector investments aggregating $402 million, offset in part by gains from two consumer, cyclical sector investments aggregating $497 million, two consumer, non-cyclical sector investments aggregating $271 million and a technology sector investment of $162 million.

Net losses in long positions were further offset in part by the aggregate performance of investments with net gains across various other sectors.

Our Energy segment is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses.

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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.

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 COVID-19 pandemic has also resulted in significant business and operational disruptions, including business closures, liquidity strains, destruction of non-essential demand, as well as supply chain challenges, travel restrictions, stay-at home orders, and limitations on the availability of the workforce.

As a result, the demand for gasoline and diesel in the regions that our Energy segment operates declined beginning in the first quarter of 2020.

The declines were amplified in the first quarter of 2020 by market plays between the world’s largest oil producers.

The simultaneous shocks in oil supply and demand have 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.

However, beginning in late 2020 and into 2021, the U.S.

market for refined products has improved and demand has increased as travel restrictions and stay-at-home orders have been eased.

In addition to recent market conditions, there are long-term factors that may impact the demand for refined products.

In addition to recent market conditions, including the impact of the Russia/Ukraine conflict, 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.

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Refer to Note 17, “Commitments and Contingencies,” to the consolidated financial statements for further discussion of RINs.

In December 2020, our Energy segment approved a renewable diesel project at one of its refineries, which would convert the refinery’s hydrocracker to a renewable diesel unit (“RDU”) capable of producing 100 million gallons of renewable diesel per year and approximately 170 to 180 million RINs annually.

As a result of conversion, the crude oil capacity of the refinery will be reduced.

Further, the conversion enables our Energy segment to capture additional benefits associated with the existing blenders’ tax credit that expires at the end of 2022 and low carbon fuel standard programs in states such as California.

Our Energy segment has additional plans to add pretreating capabilities for the RDU and construction of a similar facility at its other refinery.

In April 2022, our Energy segment completed a renewable diesel project at one of its refineries, which converted the refinery’s hydrocracker to a renewable diesel unit (“RDU”) capable of producing 100 million gallons of renewable diesel per year and approximately 170 to 180 million RINs annually at a total cost of $179 million.

The renewable diesel facility produces renewable diesel and has a capacity of approximately 7,500 barrels per day.

Further, the conversion enables our Energy segment to capture additional benefits associated with the existing blenders’ tax credit that is currently set to expire at the end of 2024 and low carbon fuel standard programs in states such as California.

Our Energy segment has additional plans to add pretreating capabilities for the RDU and is exploring potential additional renewables projects at its other facilities.

These collective renewable diesel efforts could reduce our Energy segment’s Renewable Fuels Standard (“RFS”) exposure.

However, any actions taken by the Supreme Court, resulting administration efforts under the RFS, such as denial of existing or previous waiver applications, and market conditions could significantly impact the amount by which our Energy segment’s renewable diesel business mitigates our costs to comply with the RFS, if at all.

However, any actions taken by the courts, the EPA or the Biden administration, and/or market conditions could significantly impact the amount by which our Energy segment’s renewable diesel business mitigates our costs to comply with the RFS, if at all.

The following table presents our Energy segment’s net sales, cost of goods sold and gross margin:

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Net sales for our Energy segment increased by approximately $3.7 billion (50%) for the year ended December 31, 2022 as compared to the comparable prior year period due to an increase in our petroleum business’ net sales, which increased approximately $3.4 billion, as well as an increase in our nitrogen fertilizer business’ net sales, which increased $303 million over the comparable periods.

The increase in the petroleum business’ net sales was primarily due to an increase in sales of gasoline and distillates attributable to an increase in volumes and more favorable pricing conditions.

Volumes were lower in the comparable prior year period due to the full planned turnaround at one of the refineries while another refinery experienced reduced utilization in response to demand reductions driven by the impacts of the COVID-19 pandemic.

Our nitrogen fertilizer business’ net sales increased primarily due to an increase in urea ammonium nitrate (“UAN”) sales primarily due to favorable pricing conditions.

The increase in the petroleum business’ net sales was primarily due to price increases resulting from tight inventory levels and increased demand in Europe, which is impacted by the ongoing Russia-Ukraine conflict.

Further, net sales were lower in the comparable period due to the impact of Winter Storm Uri, resulting in reduced production rates at both refineries.

Our nitrogen fertilizer business’ net sales increased primarily due to favorable pricing conditions for ammonia and urea ammonium nitrate (“UAN”).

Cost of goods sold for our Energy segment increased by approximately $2.7 billion (39%) for the year ended December 31, 2022 as compared to the comparable prior year period.

The increase was primarily due to our petroleum business as a result of higher cost of consumed crude oil.

The higher cost of consumed crude oil was due to an increase in volumes, as discussed above, as well as a $245 million increase in the net cost of RINs and lower derivative performance of $99 million.

Gross margin for our Energy segment improved by $407 million for the year ended December 31, 2021 as compared to the comparable prior year period.

Gross margin as a percentage of net sales was 2% and (6)% for the year ended December 31, 2021 and 2020, respectively.

The improvement in the gross margin as a percentage of net sales was primarily attributable to the petroleum business, which was primarily due to higher crack spreads, offset in part by an increase in the net cost of RINs and lower derivative performance.

Our Automotive segment’s results of operations are generally driven by the distribution and installation of automotive aftermarket parts and the demand for automotive service and maintenance, and is affected by the relative strength of automotive part replacement trends, among other factors.

Our Automotive segment has been in the process of implementing a multi-year transformation plan, which includes the 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.

As part of this plan, in 2021 Icahn Automotive entered into an agreement to sell certain inventory assets relating to its aftermarket parts business at 109 locations and a distribution center in California and certain other inventory and fixed assets in California.

Aftermarket parts sales from these locations aggregated $78 million during the year ended December 31, 2021.

Costs to implement the transformation plan include restructuring charges, which are recorded when specific plans are approved.

The increase was primarily due to our petroleum business as a result of higher cost of consumed crude oil, which was primarily due to higher oil prices.

Gross profit for our Energy segment improved by $912 million for the year ended December 31, 2022 as compared to the comparable prior year period.

Gross margin as a percentage of net sales was 10% and 2% for the year ended December 31, 2022 and

2021, respectively.

The improvement in gross margin was primarily attributable to the petroleum business, which was primarily due to higher crack spreads.

Our Automotive segment’s results of operations are generally driven by the demand for automotive service and maintenance and are affected by the relative strength of automotive replacement trends, among other factors.

Our Automotive segment has been in the process of a multi-year transformational plan.

As part of this plan, during the year ended December 31, 2022, our Automotive segment completed the separation of certain of its automotive services and aftermarket parts businesses into two separate operating companies.

In January 2023, Auto Plus filed a voluntary bankruptcy petition seeking relief under Chapter 11 of the Bankruptcy Code, which we anticipate will reduce the assets and negatively impact the net sales of our Automotive segment in future periods.

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 capital projects within Icahn Automotive’s owned and leased locations to increase leasing revenue and reduce occupancy costs;

● Investment in customer experience initiatives and selective upgrades in facilities;

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● 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.

The following table presents our Automotive segment’s operating revenue, cost of goods sold and other expenses and gross margin.

Our Automotive segment’s results of operations also include automotive services labor.

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however, the sale of any installed parts or materials related to automotive services are included in net sales.

Our Automotive segment’s revenues from operating leases and expenses are included in other revenues from operations and other expenses from operations, respectively, in our consolidated statements of operations, but are excluded from the table below.

Therefore, we discuss the combined results of our automotive net sales and automotive services labor revenues below.

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The decrease was attributable to a decrease in aftermarket parts sales of $175 million (13%), offset in part by an increase in automotive services revenue of $210 million (21%).

Store closures related to the transformation plan accounted for a $249 million decrease in aftermarket parts sales, which was offset in part by a $6 million increase in aftermarket parts sales on an organic basis.

The increase in automotive services revenues represents an increase on a primarily organic basis as sales have improved over the comparable prior year period.

The COVID-19 pandemic, and the impacts of the actions taken by governments and others, have significantly contributed to a decline in revenues in 2020, which have recovered significantly in 2021.

Cost of goods sold and other expenses from operations for the year ended December 31, 2021 increased by $8 million as compared to the comparable prior year period.

The increase was primarily due to a $56 million inventory obsolescence write-down and higher costs associated with higher services revenues, offset in part by lower costs attributable to lower aftermarket parts sales.

Gross margin on net sales and other revenue from operations for the year ended December 31, 2021 decreased by $102 million (15%) as compared to the comparable prior year period.

The decrease in aftermarket part sales was driven by lower volumes, offset in part by price increases.

The increases in automotive services revenues was driven by price increases, offset in part by lower volumes.

Cost of goods sold and other expenses from operations for the year ended December 31, 2022 decreased by $75 million as compared to the comparable prior year period.

The decrease was primarily driven by lower costs attributable to lower volumes for the year ended December 31, 2022.

Gross profit on net sales and other revenue from operations for the year ended December 31, 2022 increased by $40 million (7%) as compared to the comparable prior year period.

Gross margin as a percentage of net sales and other revenue from operations was 26% and 24% for the years ended December 31, 2022 and 2021, respectively.

Gross margins were negatively impacted by the write down to inventory, as described above, and the continuation of store closures however, this was offset in part by an increase in services revenues, which had a positive impact on gross margins.

The increase in gross margin was primarily driven by price increases.

In addition, cost of goods sold and other expenses from operations for the year ended December 31, 2022 was impacted by

out-of-period adjustments substantially related to inventory write-downs totaling $51 million and current period inventory write-downs totaling $33 million.

Cost of goods sold and other expenses from operations for the year ended December 31, 2021 was impacted by inventory write-downs of $56 million.

Food Packaging

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Net sales for the year ended December 31, 2022 increased $15 million (4%) as compared to the comparable prior year period.

The increase was due to an increase in price and product mix as well as the favorable effects of foreign exchange, offset in part by lower volumes.

Cost of goods sold for the year ended December 31, 2021 increased by $16 million (5%) as compared to the comparable prior year period due to the effects raw material price inflation,

manufacturing variances and distribution costs.

The increase was due to an increase of $60 million in price and product mix, offset by a decrease of $16 million due to unfavorable effects of foreign exchange and a decrease of $29 million due to lower volume.

Cost of goods sold for the year ended December 31, 2022 increased by $14 million (4%) as compared to the comparable prior year period due to inflation of raw material costs and lower absorption of manufacturing costs at Viskase plants due to labor and raw material supply shortages.

Gross margin as a percentage of net sales was 17% and 18% for the year ended December 31, 2022 and 2021, respectively.

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Results from investment properties and country club operations are included in other revenues from operations in our consolidated statements of operations.

Revenue from our real estate operations for each of the years ended December 31, 2021 and 2020 were primarily derived from the sale of residential units and rental operations.

Revenue from our real estate operations for each of the years ended December 31, 2022 and 2021 were primarily derived from the sale of single-family homes.

Our Home Fashion segment is significantly influenced by the overall economic environment, including consumer spending, at the retail level, for home textile products.

Net sales for the year ended December 31, 2021 increased by $9 million (5%) compared to the comparable prior year period primarily due to the reduced impact of the COVID-19 pandemic on our Home Fashion segment’s hospitality and department store businesses, offset in part by a decline resulting from lower demand for facemasks.

Net sales for the year ended December 31, 2022 increased by $20 million (10%) compared to the comparable prior year period primarily due to increased hospitality sales driven by leisure and business travel.

Cost of goods sold for the year ended December 31, 2022 increased $27 million (17%) compared to the comparable prior year period due to higher material and freight costs.

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The decrease is due to higher material and freight costs and a decline in the sale of certain higher margin products.

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.

As discussed above, we sold PSC Metals on December 7, 2021, which impacts the comparability of the results of operations discussed below.

Net sales for the year ended December 31, 2021 increased by $211 million (67%) compared to the comparable prior year period primarily due to higher volumes and higher selling prices.

Cost of goods sold for the year ended December 31, 2021 increased by $183 million (61%) compared to the comparable prior year period due to higher volumes as well as higher material costs.

Gross margin as a percentage of net sales was 8% and 5% for the year ended December 31, 2021 and 2020, respectively, with the improvement primarily due to higher material margins as the prior year period was negatively impacted by the effects of the COVID-19 pandemic.

Our Pharma segment derives revenues primarily from the sale of its products directly to customers, wholesalers and pharmacies.

Net sales for the year ended December 31, 2022 decreased by $15 million (19%) compared to the comparable prior year period primarily due to a one-time sale of approximately $13 million in the first quarter of 2021.

Cost of goods sold for the year ended December 31, 2022 decreased $2 million (4%) compared to the comparable prior year period due to lower volumes.

Gross margin as a percentage of net sales was 27% and 38% for the year ended December 31, 2022 and 2021, respectively.

The decrease is mostly due to the absence of the one-time sale in the first quarter of 2021 mentioned above.

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 years ended December 31, 2021 and 2020.

Our Holding Company’s results of operations primarily reflect the interest expense on its senior unsecured notes and investment gains and losses from equity investments for each of the years ended December 31, 2022 and 2021.

Other Consolidated Results of Operations

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As discussed in Note 1, "Description of Business,"

to the consolidated financial statements, we sold PSC Metals, resulting in a pretax gain on disposition of assets of $163 million for the year ended December 31, 2021.

In addition, we sold Ferrous Resources, resulting in a pretax gain on disposition of assets of $252 million for the year ended December 31, 2019.

to the consolidated financial statements included in this Form 10-K, we sold PSC Metals, resulting in a pretax gain on disposition of assets of $163 million for the year ended December 31, 2021.

Selling, General and Administrative

Our consolidated selling, general and administrative during the year ended December 31, 2021 increased by $50 million (4%) as compared to the comparable prior year period primarily due to the addition of the results of our Pharma segment for a full year, our Energy segment, primarily due to higher share-based compensation as well as higher compensation costs for our Investment segment, offset in part by lower costs resulting from our Automotive segment, due to store closures and our Real Estate segment, which incurred additional costs in the second quarter of 2020 relating to the demolition of one of its properties.

Refer to Note 5, “Fair Value Measurements,” and Note 9, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements for a discussion of impairments of assets, which were not significant.

Our consolidated selling, general and administrative during the year ended December 31, 2022 increased by $12 million (1%) as compared to the comparable prior year period primarily due to higher expenses of our Energy segment mainly related to increased personnel costs driven by higher share-based compensation.

Refer to Note 9, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements for a discussion of impairments of assets, which were not significant.

Interest Expense

Our consolidated interest expense during the year ended December 31, 2022 decreased by $98 million (15%) as compared to the comparable prior year period.

The decrease was primarily due to lower interest expense for our Holding Company and Energy segment due to lower weighted average interest rates resulting from their respective debt refinancings.

This was offset in part by an increase in interest expense for our Investment segment relating to its derivatives and margin balances.

The decrease was primarily due to lower interest expense from our Investment segment due to lower balances on certain credit default swap positions, lower interest expense for our Energy segment due to lower weighted average interest rates resulting from their respective debt refinancings and lower interest expense for our Holding Company due to the redemption of $500 million of senior unsecured notes in February 2022.

Income Tax Expense

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4.375% senior unsecured notes due 2029

Holding Company debt consists of various issues of fixed-rate senior unsecured notes issued by Icahn Enterprises and Icahn Enterprises Finance Corp.

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Interest on each tranche of senior unsecured notes is payable semi-annually.

In January 2021, the Issuers issued $750 million in aggregate principal amount of 4.375% senior unsecured notes due 2029 (the “New 2029 Notes”).

The proceeds from the New 2029 Notes were used to redeem $750 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.

Interest on the New 2029 Notes is payable semi-annually.

In April 2021, the Issuers issued $455 million in aggregate principal amount of additional 5.250% senior unsecured notes due 2027.

The proceeds from this issuance were used to redeem the remaining $455 million principal amount of 6.250% senior unsecured notes due 2022, and to pay accrued interest, related fees and expenses.

In February 2022, we redeemed all of our $500 million in aggregate principal amount of 6.750% senior unsecured notes due 2024 at par.

This transaction is expected to result in annual savings of approximately $34 million in future interest expense.

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.

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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 December 31, 2021, except for the 4.750% senior unsecured notes due 2024, the 5.250% senior unsecured notes due 2027 and 4.375% senior unsecured notes due 2029, are subject to optional redemption premiums in the event we redeem any of the notes prior to certain dates as described in the indentures.

Additionally, the 6.375% senior unsecured note due 2025 and the 6.250% senior unsecured note due 2026 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 December 31, 2022 and 2021, we were in compliance with all covenants, including maintaining certain minimum financial ratios, as defined in the indentures.

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however, we are permitted to issue new notes in connection with debt refinancings of existing notes.

In February 2022, we repaid all of our outstanding $500 million aggregate principal amount of 6.750% senior unsecured notes due 2024 at par.

Future Debt Service Obligations

Interest payments on our Holding Company’s senior unsecured notes, including the effects of the debt repayment in January 2022, as described above, will be approximately $308 million for 2022, $290 million for each of 2023 and 2024, $237 million for 2025 and an aggregate of $276 million for 2026 through 2029.

Interest payments on our Holding Company’s senior unsecured notes will be approximately $287 million for 2023, $272 million for 2024, $235 million for 2025, $138 million for 2026 and an aggregate of $97 million for 2026 through 2029.

At-The-Market Offerings

In May 2019, Icahn Enterprises entered into a new Open Market Sale Agreement, pursuant to which Icahn Enterprises was able to sell its depositary units, from time to time, for up to $400 million in aggregate sale proceeds, under its ongoing “at-the-market” offering.

In May 2019, Icahn Enterprises entered into an Open Market Sale Agreement, pursuant to which Icahn Enterprises was able to sell its depositary units, from time to time, for up to $400 million in aggregate sale proceeds, under its ongoing “at-the-market” offering.

This agreement has been subsequently terminated and superseded by subsequent agreements with substantially the same terms.

During the year ended December 31, 2022, Icahn Enterprises sold 14,619,272 depositary units pursuant to these agreements, resulting in gross proceeds of $759 million.

As of December 31, 2021, we continue to have an active Open Market Sale Agreement and Icahn Enterprises may sell its depositary units for up to an additional $328 million in aggregate gross sale proceeds pursuant to this agreement entered into on December 3, 2021.

As of December 31, 2022, we continue to have an active Open Market Sale Agreement and Icahn Enterprises may sell its depositary units for up to an additional $325 million in aggregate gross sale proceeds pursuant to this agreement entered into on November 21, 2022.

No assurance can be made that any or all amounts will be sold during the term of this agreement, and we have no obligation to sell additional depositary units under this Open Market Sale Agreement.

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During 2022, we received proceeds of $153 million from the sale of equity investments held by the Holding Company.

On October 27, 2021, IEP Utility, a wholly owned subsidiary of Icahn Enterprises Holdings, commenced the SWX Tender Offer.

We estimate that the maximum amount of funds required to complete the SWX Tender Offer would be up to approximately $4.2 billion.

IEP Utility and Icahn Enterprises Holdings intend to obtain such funds from cash, cash equivalents, and from their ability to make redemptions from their investment in the Investment Funds.

Investment Segment Liquidity

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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 December 31, 2022.

Of the Investment Funds’ 112% long exposure, 95% was comprised of the fair value of its long positions (with certain adjustments) and 17% was comprised of single name equity forward contracts and credit contracts.

Of the Investment Funds’ 94% long exposure, 74% was comprised of the fair value of its long positions (with certain adjustments) and 20% was comprised of single name equity forward and swap contracts and an option contract.

Of the Investment Funds’ 140% short exposure, 71% was comprised of the fair value of its short positions and 69% was comprised of short broad market index swap derivative contracts and short credit default swap contracts.

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Food Packaging

In June 2021, CVR Partners issued $550 million in aggregate principal amount of 6.125% senior secured notes due 2028.

Proceeds from these notes were used to fund a partial redemption of its existing 9.25% senior secured notes due 2023.

Subsequent to this, an additional $30 million of CVR Partners’ existing 9.25% senior secured notes due 2023 were redeemed in 2021 and the remaining $65 million outstanding was redeemed in February 2022.

These senior secured notes issued by CVR Partners are guaranteed on a senior secured basis by all of CVR Partners’ existing domestic subsidiaries, excluding CVR Nitrogen Finance Corporation.

The indenture governing these notes contain certain covenants that restrict the ability of the issuers and their restricted subsidiaries from incurring additional debt or issuing certain disqualified equity, create liens on certain assets to secure debt, pay dividends/distributions or make other equity distributions, purchase or redeem capital stock/common units, make certain investments, transfer and sell assets, agree to certain restrictions on the ability of restricted subsidiaries to make distributions, loans, or other asset transfers to the issuers, consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets, engage in transactions with affiliates and designate restricted subsidiaries as unrestricted subsidiaries.

In August 2021, all of our Automotive segment’s outstanding credit facility was repaid in full in the amount of $350 million.

In February 2022, CVR Partners redeemed the remaining $65 million aggregate principal amount of its 9.25% senior secured notes due June 2023 at par.

This transaction is expected to result in annual savings of approximately $6 million in future interest expense.

As of December 31, 2022, all of our subsidiaries were in compliance with all debt covenants.

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Food Packaging

As of December 31, 2022 and 2021, total availability under CVR Refining and CVR Partners variable rate asset based revolving credit facilities aggregated $287 million and $396 million, respectively.

CVR Refining also had $23 million and $39 million of letters of credit outstanding as of December 31, 2022 and December 31, 2021, respectively.

The above outstanding debt and borrowing availability with respect to each of our continuing operating segments reflects third-party obligations.

Certain terms of financings for certain of our businesses impose restrictions on the business’ ability to transfer funds to us, including restrictions on dividends, distribution, loans and other transactions.

Certain terms of financings for certain of our businesses impose restrictions on the

business’ ability to transfer funds to us, including restrictions on dividends, distribution, loans and other transactions.

See Note 11, “Debt,” to the consolidated financial statements for further discussion regarding our segment debt, including information relating to maturities, interest rates and borrowing availabilities.

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After giving effect to certain debt activity in February 2022, as discussed above, our Energy segment’s future debt maturities (excluding financing leases) are $600 million for 2025 and $950 million for 2028.

Future interest payments for our Energy segment are expected to be approximately $88 million to $89 million for each of 2022, 2023 and 2024.

Interest payments are expected to be $62 million for 2025, $57 million for 2026 and an aggregate of $77 million for 2027 through 2028.

Future interest payments for our Energy segment are expected to be approximately $91 million to $89 million for each of 2022, 2023 and $63 million for 2024.

Interest payments are expected to be $59 million for each of 2025 and 2026, and an aggregate of $11 million for 2027 through 2028.

Subsidiary Dividends

In the second quarter of 2021, our Energy segment paid a special dividend, which was comprised of $241 million in cash as well as the common stock of an equity investment with a fair value of $251 million.

Our portion of the dividend included $171 million in cash and the common stock of an equity investment with a fair value of $177 million.

In addition, in the third and fourth quarters of 2021, our Energy segment had aggregate distributions to non-controlling interests of $31 million as a result of distributions paid by CVR Partners to its common unit holders.

During the year ended December 31, 2022, our Energy segment paid three quarterly distributions aggregating $1.20 per share.

Our portion of the dividend aggregated to $85 million.

In addition, in the second, third and fourth quarters of 2022, our Energy segment paid a special dividend which included $256 million in cash for our portion.

Furthermore, during the year ended December 31, 2022, our energy segment had aggregate distributions to non-controlling interests of $129 million as a result of distributions paid by CVR Partners to its common unit holders.

Subsidiary Stock Repurchase Program

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During 2022, CVR Partners repurchased common units on the open market at a cost of $12 million.

As of December 31, 2021, CVR Partners has $12 million remaining under its unit repurchase program.

As of December 31, 2022, CVR Partners has a nominal amount remaining under its unit repurchase program.

Purchase Obligations

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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.

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

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Proceeds from sale of investments

Proceeds from sale of CVR Refining common units to CVR Energy

Net investments in the Investment Funds

Net (investments in) distributions from other operating segments

Net distributions from (investments in) other operating segments

Other investing activities, net

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Partnership distributions

Payments to acquire additional interests in subsidiaries

Net debt transactions

(Decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents

The decrease in interest payments during 2021 compared to 2020 is due to lower interest rates on certain of our senior unsecured notes due to certain debt refinancings in the first and second quarters of 2021.

Proceeds from the sale of businesses and assets includes proceeds from the sales PSC Metals in 2021 and Ferrous Resources in 2019.

Net (investments in) distributions from the Investment Funds and Net distributions from (investments in) other operating segments are eliminated in consolidation and discussed further below.

Other financing activities, net

Increase (decrease) in cash and cash equivalents and restricted cash and restricted cash equivalents

The decrease in interest payments during 2022 compared to 2021 was due to the redemption of $500 million of senior secured unsecured notes in February 2022.

Proceeds from the sale of investments includes proceeds from the sale of equity investments in 2022 and 2021.

Proceeds from the sale of businesses and assets includes proceeds from the sale of PSC Metals in 2021.

Net distributions from (investments in) distributions from the Investment Funds and Net distributions from (investments in) other operating segments are eliminated in consolidation and discussed further below.

Partnership contributions represent sales in connection with our “at-the-market” offerings pursuant to our Open Market Sale Agreements entered into beginning May 2019, as discussed above.

Net debt transactions includes the redemption of our $500 million aggregate principal amount of 6.750% senior unsecured notes due 2024.

Partnership distributions represent cash paid to depositary unitholders in connection with our regularly quarterly distributions.

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however, for the first quarter of 2020, they elected to receive their distribution in cash.

For distributions declared for all other quarters in 2021, 2020 and 2019, Mr.

For distributions declared for all

other quarters in 2022, 2021 and 2020, Mr.

Icahn and his affiliates elected to receive their distributions in additional depositary units.

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Icahn and his affiliates and Brett Icahn.

Our Investment segment had net cash provided by financing activities of $74 million for the year ended December 31, 2021, as a result of contributions from Brett Icahn in accordance with his manager agreement.

For the year ended December 31, 2020, our Investment segment had net cash provided by financing activities of $763 million, including an investment from us of $750 million, net of redemptions, a contribution of $12 million from Brett Icahn in accordance with his manager agreement and $1 million from Mr.

Icahn and his affiliates (excluding us).

Our Investment segment had net cash used in financing activities of $14 million for the year ended December 31, 2022, as a result of net redemptions from Brett Icahn in accordance with his manager agreement.

For the year ended December 31, 2021, our Investment segment had net cash provided by financing activities of $74 million, as a result of contributions from Brett Icahn in accordance with his manager agreement.

Other Operating Segments

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(Decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents

Our other operating segments’ net cash flow from operating activities before changes in operating assets and liabilities were primarily attributable to our Automotive segment’s negative results in 2021 and 2020 and our Energy segment’s positive results from operations for 2021.

Changes in operating assets and liabilities for 2021 were primarily attributable to our Energy segment resulting primarily from an increase in crude oil prices during 2021 and increase in its open RFS position.

Changes in operating assets and liabilities for 2020 were primarily attributable to our Automotive segment resulting from inventory reductions.

Our other operating segments’ net cash flow from operating activities before changes in operating assets and liabilities were primarily attributable to our Automotive segment’s negative results in 2022, 2021 and 2020 and our Energy segment’s positive results from operations for 2022 and 2021.

Changes in operating assets and liabilities for 2022 and 2021 were primarily attributable to our Energy segment resulting primarily from an increase in crude oil prices and increase in its open RFS position.

Changes in operating

assets and liabilities for 2020 were primarily attributable to our Automotive segment resulting from inventory reductions.

Capital expenditures are primarily from our Energy and Automotive segments and are primarily for maintenance.

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Our Automotive segment continues to sell stores and other assets in connection with its transformation plan.

Distributions to non-controlling interests were from our Energy segment relating to its regular quarterly dividends and distributions, excluding payments made to us, as well as a special dividend made in 2021.

Due to the recent economic conditions, our Energy segment only paid dividends in 2020 relating to the fourth quarter of 2019 and a reduced dividend relating to the first quarter of 2020.

Net contributions from and distributions to our Holding Company include the dividends and distributions paid by our Energy segment of $171 million in 2021 compared to $85 million in 2020, as well as by our Automotive segment of $36 million in 2021 compared to $75 million in 2020.

Net contributions from and distributions to our Holding Company include the dividends and distributions paid by our Energy segment of $342 million in 2022 compared to $171 million in 2021, as well as by our Automotive segment of $36 million in 2021.

During 2022, Automotive segment received funds in the form of investments and loans from our Holding Company of $187 million compared to $425 million for 2021, primarily for the refinancing of its debt and costs associated with our Automotive segment’s multi-year transformation plan.

During 2020, our Food Packaging segment received funds in the amount of $100 million in connection with Viskase’s equity private placement in October 2020.

Our other operating segments received funds in the form of loans and investments from our Holding Company aggregating $3 million in 2021 compared to $23 million in 2020.

During 2022, our Home Fashion segment received funds in the amount of $50 million primarily for the refinancing of its debt.

Consolidated Capital Spending

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For 2023, we estimate our consolidated capital expenditures to be approximately $200 million to $225 million for our Energy segment, for both maintenance and growth, including $39 million to $47 million for our Energy segments’ renewable diesel unit capital expenditures, $127 million for our Automotive segment and approximately $59 million in the aggregate for all other segments.

Our Energy segment also expects its turnaround expenditures to be approximately $28 million to $33 million in 2022.

In addition, our Energy segment approved a renewable diesel project at one of its refineries, which would convert the refinery’s hydrocracker to a renewable diesel unit (“RDU”) capable of producing 100 million gallons of renewable diesel per year.

The total estimated costs for the project are currently $160 million and completion of the project is expected in in the second quarter to 2022.

In May 2021, our Energy segment approved $10 million to complete the process design and ordering of certain long-lead equipment relating to a potential project to add pretreating capabilities for the RDU at one of its refineries and to complete process design to potentially convert an existing hydrotreater at another refinery to renewable diesel service.

In November 2021, our Energy segment approved a pretreater project at one of its refineries, which is expected to be completed in the fourth quarter of 2022 at an estimated cost of $60 million.

In addition, our Energy segment completed a renewable diesel project at one of its refineries, which would convert the refinery’s hydrocracker to a renewable diesel unit (“RDU”) capable of producing 100 million gallons of renewable diesel per year at a total cost of $179 million.

In November 2021, our Energy segment approved a pretreater project at one of its refineries, which is expected to be completed in the third quarter of 2023 at an estimated cost of $95 million.

Critical Accounting Estimates

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The preparation of financial statements in conformity with U.S.

requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.

Among others, estimates are used when accounting for valuation of investments.

Estimates used in determining fair value measurements include, but are not limited to, expected future cash flow assumptions, market rate assumptions for contractual obligations, actuarial assumptions for benefit plans, settlement plans for litigation and contingencies, and appropriate discount rates.

Estimates and assumptions are evaluated on an ongoing basis and are based on historical and other factors believed to be reasonable under the circumstances.

Estimates and assumptions are evaluated on an ongoing basis and are based on historical and other factors believed to be reasonable

under the circumstances.

The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources.

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Long-Lived Assets

Long-lived assets held and used by our various operating segments and long-lived assets to be disposed of are reviewed for impairment whenever events or changes in circumstances indicate a possible significant deterioration in future expected cash flows that could result in the carrying amount of an asset not being recoverable.

future expected cash flows that could result in the carrying amount of an asset not being recoverable.

In performing the review for recoverability, we estimate the future cash flows expected to result from the remaining useful life of the asset and its eventual disposition.

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We perform the annual goodwill impairment test for our Automotive segment as of October 1 of each year.

Based on our annual goodwill impairment analysis for our Automotive segment, we determined that the fair value of our Automotive segment’s Service reporting unit was significantly in excess of its carrying value and therefore, no impairment is required.

Based on our qualitative annual goodwill impairment analysis for our Automotive segment, we determined it was not more likely than not that the fair value of the Service reporting unit was below its carrying amount and therefore, no impairment is required.

As of December 31, 2022, our Automotive segment had remaining goodwill of $250 million, which is allocated entirely to its Service reporting unit.

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The inputs used to determine the fair values of our reporting units, including future cash flows, discount rates and growth rates and other assumptions involves a significant degree of judgment.

See Note 5, “Fair Value Measurements,” and Note 9, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements for further discussion regarding the fair value measurements of our long-live assets as well as goodwill and intangible assets.

See Note 9, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements for further discussion regarding goodwill and intangible assets.

Recently Issued Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis