Item 7. Management’s Discussion and Analysis
Item 7. 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 consolidated financial statements and the accompanying notes contained in this Report.
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Executive Overview
Introduction
Icahn Enterprises L.P. (“Icahn Enterprises”) is a master limited partnership formed in Delaware on February 17, 1987 and headquartered in Sunny Isles Beach, Florida. We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion and Pharma. In addition, we operated our Metals segment until sold in December 2021. 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. References to “we,” “our ,” “us” or “the Company” herein include Icahn Enterprises and its subsidiaries, unless the context otherwise requires.
Icahn Enterprises owns a 99% limited partner interest in Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”). Icahn Enterprises Holdings and its subsidiaries own substantially all of our assets and liabilities and conduct substantially all of our operations. Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”), which is indirectly owned and controlled by Mr. Carl C. Icahn, owns a 1% general partner interest in each of Icahn Enterprises and Icahn Enterprises Holdings as of December 31, 2023, representing an aggregate 1.99% general partner interest in Icahn Enterprises Holdings and us. Mr. Icahn and his affiliates owned approximately 86% of Icahn Enterprises’ outstanding depositary units as of December 31, 2023.
Significant Transactions and Developments
Subsidiary Bankruptcy and Deconsolidation
On January 31, 2023, a subsidiary of Icahn Automotive Group LLC (“Icahn Automotive”), IEH Auto Parts Holding LLC and its subsidiaries (collectively “Auto Plus”), an Aftermarket Parts distributor held within our Automotive segment, filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code. As a result of this filing, the Company determined that it no longer controls Auto Plus under the criteria set out in Statement of Financial Accounting Standards ASC Topic 810, “Consolidation” and deconsolidated its investment effective the date of the filing. As a result of Auto Plus’ bankruptcy, the Company recorded a non-cash charge of $246 million in the year ended December 31, 2023. We collected cash for the repayment of the note receivable of $48 million during the year ended December 31, 2023. We estimated our cash to be collected for the repayment of the note receivable to be $11 million at December 31, 2023, resulting in a write-off of $127 million during the year ended December 31, 2023.
Debt Repurchase, Issuance and Discharge
In November and December of 2023, we repurchased in the open market approximately $35 million aggregate principal amount of our 4.750% senior unsecured notes due 2024 which the Company then cancelled and reduced the outstanding principal, $12 million aggregate principal amount of our 6.25% senior unsecured notes due 2026, $5 million aggregate principal amount of our 5.25% senior unsecured notes due 2027, and $40 million aggregate principal amount of our 4.375% senior unsecured notes due 2029 for total cash paid of $84 million for a total aggregate principal amount $92 million. The remaining repurchased notes of $57 million aggregate principal were extinguished but were not retired and are held in treasury.
In December 2023, Icahn Enterprises and Icahn Enterprises Finance Corp. issued $700 million in aggregate principal amount of 9.750% senior unsecured notes due 2029. The net proceeds, together with $376 million of cash and cash equivalents on hand, was used to satisfy and discharge the remaining outstanding 4.750% senior unsecured notes due 2024, along with any accrued interest associated with the notes and related fees and expenses.
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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. In addition to the summarized financial results below, refer to Note 15, “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 2021 and continuing in 2022, the COVID-19 pandemic, and actions taken by governments and others in response thereto, 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 were 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 also included the acceleration of selective planned store closures in our Automotive segment and recording write-downs to inventories. The economic conditions improved in 2021 and 2022 as more governments reduced restrictions and more businesses resumed operations, although supply chain issues have continued to persist. Recent interest rate increases have increased the costs of borrowing.
The war between Israel and Hamas, which began in October 2023, and the ongoing Russian/Ukraine conflict, can significantly impact the global oil, fertilizer, and agriculture markets. Such conflicts pose significant geopolitical risks to global markets, raise concerns of major implications, such as enforcement of sanctions, can contribute to further oil inventory tightening and price volatility, and can disrupt the production and trade of fertilizer, grains, and feedstock supply through several means, including trade restrictions and supply chain disruptions. The ultimate outcome of these conflicts and any associated market disruptions are difficult to predict and may affect our business, operations, and cash flows in unforeseen ways.
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The comparability of our summarized consolidated financial results presented below is affected primarily by (i) the performance of the Investment Funds (as defined below), (ii) the results of operations of our Energy segment, impacted by the demand and pricing for its products, (iii) the sale of PSC Metals in 2021 and (iv) the deconsolidation of Auto Plus within our Automotive segment. Refer to our respective segment discussions and “Other Consolidated Results of Operations” below for further discussion.
Net Income (Loss) From
Continuing Operations
Net Income (Loss) From
Attributable to Icahn
Revenues
Continuing Operations
Enterprises
Year Ended December 31,
Year Ended December 31,
Year Ended December 31,
2023
2022
2021
2023
2022
2021
2023
2022
2021
(in millions)
Investment
$
(1,165)
$
(23)
$
202
$
(1,353)
$
(223)
$
(32)
$
(701)
$
(89)
$
(16)
Holding Company
110
78
(25)
(504)
(175)
(402)
(504)
(175)
(402)
Other Operating Segments:
Energy
9,297
10,815
7,327
831
596
29
508
304
(5)
Automotive
1,754
2,398
2,370
(6)
(192)
(260)
(6)
(192)
(260)
Food Packaging
435
426
402
13
2
(2)
12
2
(2)
Real Estate
143
118
96
16
7
(8)
16
7
(8)
Home Fashion
175
217
197
(6)
(22)
(8)
(6)
(22)
(8)
Pharma
98
72
85
(3)
(18)
(3)
(3)
(18)
(3)
Metals
—
—
684
—
—
186
—
—
186
Other operating segments
11,902
14,046
11,161
845
373
(66)
521
81
(100)
Consolidated
$
10,847
$
14,101
$
11,338
$
(1,012)
$
(25)
$
(500)
$
(684)
$
(183)
$
(518)
Management’s Discussion and Analysis of Results of Operations discusses the comparisons between the years ended December 31, 2023 and 2022. Certain discussions of results of operations for the comparisons between the years ended December 31, 2022 and 2021 are not included in this Report. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on February 24, 2023, which is incorporated by reference herein, for such discussions.
Investment
We invest our proprietary capital through various private investment funds (the “Investment Funds”). As of December 31, 2023 and 2022, we had investments with a fair market value of approximately $3.2 billion and $4.2 billion, respectively, in the Investment Funds. As of December 31, 2023 and 2022, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding us and Brett Icahn) was approximately $2.1 billion and $4.9 billion, respectively. During the year ended December 31, 2023, Mr. Icahn and his affiliates (excluding us and Brett Icahn) redeemed $2.0 billion from the Investment Funds. In addition, in December 2023, the Investment Funds issued a pro-rata distribution of $400 million, including $158 million to Mr. Icahn and his affiliates (excluding us and Brett Icahn) and $242 million to the Holding Company. As of December 31, 2023, Mr. Icahn and his affiliates have pledged approximately $1.3 billion of interests in the Investment Funds.
Our Investment segment’s results of operations are reflected in net income (loss) in the 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, Mr. Icahn and his affiliates and by Brett Icahn, Mr. Icahn’s son. 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
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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, 2023.
For the years ended December 31, 2023, 2022 and 2021, our Investment Funds’ returns were (16.9)%, (2.4)%, and (0.3)%, respectively. Our Investment Funds’ returns represent a weighted-average composite of the average returns, net of expenses.
The following table sets forth the performance attribution for the Investment Funds’ returns:
Year Ended December 31,
2023
2022
2021
Long positions
(2.8)
%
(3.3)
%
84.9
%
Short positions
(18.5)
%
0.1
%
(84.0)
%
Other
4.4
%
0.8
%
(1.2)
%
(16.9)
%
(2.4)
%
(0.3)
%
The following table presents net (loss) for our Investment segment:
Year Ended December 31,
2023
2022
2021
(in millions)
Long positions
$
(299)
$
(264)
$
2,916
Short positions
(1,355)
(38)
(2,906)
Other
299
79
(42)
$
(1,355)
$
(223)
$
(32)
For the year ended December 31, 2023, the Investment Funds’ negative performance was driven by net losses in both our short and long positions. The negative performance of our Investment segment’s short positions was driven primarily by losses from a broad market hedge of $704 million, the negative performance of certain credit default swap positions totaling $188 million, losses from two energy and industrial segment investments aggregating $172 million and $124 million, respectively, and the aggregate performance of short positions with net losses across various sectors of $167 million. The negative performance of our Investment segment’s long positions was driven primarily by the negative performance of one healthcare investment of $164 million, one communications investment of $116 million and one material sector investment of $100 million, offset in part by the aggregate performance of investments with net gains of $81 million across various sectors.
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.
Energy
Our Energy segment is primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing businesses. The petroleum business accounted for approximately 93%, 92% and 93% of our Energy segment’s net sales for the years ended December 31, 2023, 2022 and 2021, respectively.
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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, distillate, and other refined products, which, in turn, depend on, among other factors, changes in domestic and foreign economies, driving habits, weather conditions, domestic and foreign political affairs, production levels, the availability or permissibility of imports and exports, the marketing of competitive fuels and the extent of government regulations. Because the petroleum business applies first-in, first-out accounting to value its inventory, crude oil price movements may impact gross margin as a result of changes in the value of its unhedged inventory. The effect of changes in crude oil prices on the petroleum business’ results of operations is partially influenced by the rate at which the processing of refined products adjusts to reflect these changes.
In addition to recent market conditions, such as the war between Israel and Hamas and 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 and emissions standards for vehicles. The petroleum business is also subject to the EPA’s Renewable Fuel Standard (“RFS”), which, each year, absent exemptions or waivers, requires the operating companies in our Energy segment to blend “renewable fuels” with their transportation fuels, purchase renewable identification numbers (“RINs”), to the extent available, in lieu of blending, or face liability. 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 but are not limited to the availability of RINs for purchase, the actions of RINs market participants including non-obligated parties, the price at which RINs can be purchased, transportation fuel and renewable diesel production levels and pricing, the mix of the petroleum business’ petroleum products, the refining margin of the petroleum business and other factors, , all of which can vary significantly from period to period, as well as certain waivers or exemptions to which the petroleum business’ obligated-party subsidiaries may be entitled. The costs to comply with the RFS are also impacted by, and dependent upon the outcome of, the numerous lawsuits filed by multiple refiners including the petroleum business’ obligated-party subsidiaries, biofuels groups and others. Refer to Note 19, “Commitments and Contingencies,” to the consolidated financial statements for further discussion of RINs. The costs to comply with the RFS (excluding the impacts of any exemptions or waivers to which the petroleum business’ obligated-party subsidiaries may be entitled) increased significantly throughout 2022, remained significant in 2023 and is expected to remain significant through 2024 and beyond.
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 up to 100 million gallons of renewable diesel per year at a total cost of $179 million. The renewable diesel facility produces renewable diesel and has a nameplate 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. In addition, our Energy segment’s renewable feedstock pretreater was mechanically completed in the fourth quarter of 2023, at a cost of approximately $94 million. These collective renewable efforts could reduce our Energy segment’s RFS exposure. However, impacts from recent climate change initiatives under the Biden Administration, actions taken by the courts, resulting administration actions under the RFS, and market conditions could significantly impact the amount by which our Energy segment’s renewables business could mitigate 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 profit:
Year Ended December 31,
2023
2022
2021
(in millions)
Net sales
$
9,247
$
10,896
$
7,242
Cost of goods sold
8,019
9,811
7,069
Gross profit
$
1,228
$
1,085
$
173
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Net sales for our Energy segment decreased by approximately $1.6 billion (15%) for the year ended December 31, 2023 as compared to the comparable prior year period due to a decrease in our petroleum business’ net sales by approximately $1.5 billion, as well as a decrease in our nitrogen fertilizer business’ net sales by $155 million over the comparable period. The decrease in the petroleum business’ net sales was primarily due to lower refined product prices resulting from declining demand and increased inventory levels in the current period. In addition, the onset of the Russia/Ukraine war disrupted global energy markets in the prior period causing increased prices and tighter inventory levels resulting in higher sales in the prior period. Our nitrogen fertilizer business’ net sales decreased primarily due to a decrease in UAN and ammonia pricing conditions primarily due to lower natural gas prices and increased global supply of nitrogen fertilizers in the current year, offset in part by increased sales volumes, which were primarily attributable to increased production at both fertilizer facilities due to operating reliability, strong customer demand in the Fall and a draw in inventories of UAN and ammonia.
Cost of goods sold for our Energy segment decreased by approximately $1.8 billion (18%) for the year ended December 31, 2023 as compared to the comparable prior year period. The variance was primarily due to a lower crude oil price environment reducing feedstock costs and a decline in RFS expense which includes a favorable RINs liability revaluation of $419 million which was driven by a decline in RINs prices and an increase in RINs generated from ethanol and biodiesel blending. Gross profit for our Energy segment improved by $143 million for the year ended December 31, 2023 as compared to the comparable prior year period. Gross margin as a percentage of net sales was 13% and 10% for the year ended December 31, 2023 and 2022, respectively. The improvement in gross margin was primarily attributable to the petroleum business, and was a result of the decline in RFS expense and favorable derivative impacts, offset by lower crack spreads and unfavorable inventory valuation.
Automotive
Our Automotive segment’s results of operations are generally driven by the demand for automotive service and maintenance, which is impacted by general economic factors, vehicle miles traveled, and the average age of vehicles on the road, among other factors.
Our Automotive segment has been in the process of a multi-year transformation 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 has reduced our Automotive segment’s assets, reduced the sales of our Automotive segment in the year ended December 31, 2023, and will result in lower net sales from our Automotive segment in future periods. Our results of operations for the year ended December 31, 2023 include the results of Auto Plus prior to its January 31, 2023 bankruptcy petition.
Our Automotive segment’s results include AEP PLC LLC (“AEP PLC”), which acquired $10 million in assets, mainly comprised of Aftermarket Parts inventory from the Auto Plus auction.
Our Automotive segment’s priorities include:
● Positioning the Automotive Services business to take advantage of opportunities in the do-it-for-me market and vehicle fleets;
● Improving inventory management and distribution network;
● Investment in, and strategic review of, capital projects within Icahn Automotive’s owned and leased locations to increase leasing revenue, restructure lease liabilities, and reduce occupancy costs;
● Strategic investment in brownfield and greenfield supplementing existing store footprints;
● Investment in customer experience initiatives and selective upgrades in facilities;
● Investment in employees with focus on training and career development; and
● Business process improvements, including investments in our supply chain and information technology capabilities.
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The following table presents our Automotive segment’s net sales and other revenue from operations, cost of goods sold and other expenses from operations and gross profit. Our Automotive segment’s results of operations include Automotive Services labor along with the sale of any installed parts or materials related to Automotive Services. Automotive Services labor revenues are included in other revenues from operations in our consolidated statements of operations, however, the sales of any installed parts or materials related to Automotive Services are included in net sales. Rental revenues and related expenses for properties leased to third parties, which are included in other revenues from operations and related expenses which are included in other expenses in our consolidated statements of operations, are excluded from the table below. Therefore, we discuss the combined results of our Automotive net sales and Automotive Services labor revenues below.
Year Ended December 31,
2023
2022
2021
(in millions)
Net sales and other revenue from operations
$
1,685
$
2,349
$
2,384
Cost of goods sold and other expenses from operations
1,196
1,729
1,804
Gross profit
$
489
$
620
$
580
Net sales and other revenues from operations for our Automotive segment for the year ended December 31, 2023 decreased by $664 million (28%) as compared to the comparable prior year period. The decrease was attributable to a decrease in Aftermarket Parts sales of $660 million (83%), as well as a decrease in Automotive Services revenue of $4 million (0%). The decrease in Aftermarket Part sales was primarily due to the deconsolidation of Auto Plus as of January 31, 2023. The decrease in Automotive Services revenues was driven by lower car counts primarily from closed stores.
Cost of goods sold and other expenses from operations for the year ended December 31, 2023 decreased by $533 million (31%) as compared to the comparable prior year period. The decrease was primarily driven by decreased Aftermarket Parts sales of $660 million, primarily related to the deconsolidation of Auto Plus. Gross profit on net sales and other revenue from operations for the year ended December 31, 2023 decreased by $131 million (21%) as compared to the comparable prior year period. Gross profit as a percentage of net sales and other revenue from operations was 29% and 26% for the years ended December 31, 2023 and 2022, respectively.
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.
Net sales for the year ended December 31, 2023 increased $15 million (3%) as compared to the comparable prior year period. The increase was due to an increase of $39 million in price and product mix and $3 million due to favorable effects of foreign exchange rates, offset by a decrease of $27 million due to lower volume. Cost of goods sold for the year ended December 31, 2023 decreased by $5 million (1%) as compared to the comparable prior year period due to lower absorption of manufacturing costs resulting from lower sales volume. Gross margin as a percentage of net sales was 21% and 17% for the year ended December 31, 2023 and 2022, respectively.
Real Estate
Our Real Estate segment consists of investment properties which includes land, retail, office and industrial properties leased to corporate tenants, the development and sale of single-family homes, and the operations of a resort and two country clubs. Sales of single-family homes and investment properties are included in net sales in our consolidated statements of operations. Results from operations at investment properties and our country clubs are included in other revenues from operations in our consolidated statements of operations. Revenue from our real estate operations for the year ended December 31, 2023 was primarily derived from the sale of residential units and rental operations. Revenue from our real estate operations for the year ended December 31, 2022 was primarily derived from the sale of single-family homes.
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Net sales for the year ended December 31, 2023 increased by $8 million (13%) as compared to the comparable prior year period. The increase was primarily due to higher net sales of single-family homes of $5 million and the sale of an investment property of $17 million in the current period, offset in part by the sale of an investment property of $14 million in the prior period. Cost of goods sold for the year ended December 31, 2023 increased $8 million (20%) compared to the prior year period primarily due to the sale of an investment property which had a cost basis of $11 million. Gross margin as a percentage of net sales was 30% and 34% for the years ended December 31, 2023 and 2022, respectively.
Other revenues from operations for the year ended December 31, 2023 increased by $16 million (28%) as compared to the comparable prior year period primarily due to a lease termination fee of $5 million on an investment property during the year ended December 31, 2023. Other expenses from operations for the year ended December 31, 2023 increased $7 million (13%) compared to the comparable prior year period primarily due to higher expenses related to a lease default that occurred at an investment property in the year ended December 31, 2023.
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.
Net sales for the year ended December 31, 2023 decreased by $42 million (19%) compared to the comparable prior year period mostly due to normalized demand for our hospitality business in 2023 compared to a post pandemic related increase in demand in 2022 and a one-time textile award for the 2022 FIFA World Cup. Retail sales have decreased as the soft home category has slowed, retailers have trimmed inventory and some retail customers have filed for bankruptcy. Cost of goods sold for the year ended December 31, 2023 decreased $48 million (26%) compared to the comparable prior year period mostly due to lower hospitality and retail sales along with lower material and freight costs. Gross margin as a percentage of net sales was 21% and 14% for the years ended December 31, 2023 and 2022, respectively.
Pharma
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, 2023 increased by $27 million (41%) compared to the comparable prior year period primarily due to higher prescription growth resulting in increased sales. Cost of goods sold for the year ended December 31, 2023 increased $8 million (17%) compared to the comparable prior year period due to increased sales. Gross margin as a percentage of net sales was 40% and 27% for the years ended December 31, 2023 and 2022, respectively.
Holding Company
Our Holding Company’s results of operations primarily reflect the loss on deconsolidation of one of its subsidiaries, credit loss on its related party note receivable, and net interest expense on its senior unsecured notes for each of the years ended December 31, 2023 and 2022.
Other Consolidated Results of Operations
Loss on deconsolidation of subsidiary
As discussed in Note 3, “Subsidiary Bankruptcy and Deconsolidation”, to the consolidated financial statements, we deconsolidated Auto Plus effective as of January 31, 2023, resulting in a pretax loss on deconsolidation of subsidiary of $246 million during the year ended December 31, 2023.
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Credit loss on related party note receivable
Our credit loss on related party note receivable of $139 million for the year ended December 31, 2023 relates to the related party note receivable expected to be uncollectible.
Selling, General and Administrative
Our consolidated selling, general and administrative costs during the year ended December 31, 2023 decreased by $398 million (32%) as compared to the comparable prior year period primarily due to lower expenses of $402 million at our Automotive segment mainly related to the deconsolidation of Auto Plus, partially offset by higher expenses at the Holding Company.
Impairment
Refer to Note 11, “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, 2023 decreased by $14 million (2%) as compared to the comparable prior year period. The decrease was primarily due to lower interest expense from our Investment segment due to a reduction in short credit exposure.
Income Tax Expense
Certain of our subsidiaries are partnerships not subject to taxation in our consolidated financial statements and certain other subsidiaries are corporations, or subsidiaries of corporations, subject to taxation in our consolidated financial statements. Therefore, our consolidated effective tax rate generally differs from the statutory federal tax rate. Refer to Note 16, “Income Taxes,” to the consolidated financial statements for a discussion of income taxes.
In addition, in accordance with FASB ASC Topic 740, Income Taxes , we analyze all positive and negative evidence and maintain a valuation allowance on deferred tax assets that are not considered more likely than not to be realized.
Liquidity and Capital Resources
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 depends on the cash flow resulting from divestitures, equity offerings 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 December 31, 2023, our Holding Company had cash and cash equivalents of approximately $1.6 billion and total debt of approximately $4.8 billion. As of December 31, 2023, our Holding Company had investments in the Investment Funds with a total fair market value of approximately $3.2 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.
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Holding Company Borrowings and Availability
December 31,
2023
2022
(in millions)
4.750% senior unsecured notes due 2024
—
1,103
6.375% senior unsecured notes due 2025
749
749
6.250% senior unsecured notes due 2026
1,238
1,250
5.250% senior unsecured notes due 2027
1,454
1,460
4.375% senior unsecured notes due 2029
708
747
9.750% senior unsecured notes due 2029
698
—
$
4,847
$
5,309
Holding Company debt consists of various issues of fixed-rate senior unsecured notes issued by Icahn Enterprises and Icahn Enterprises Finance Corp. (together the “Issuers”) and guaranteed by Icahn Enterprises Holdings (the “Guarantor”). Interest on each tranche of senior unsecured notes is payable semi-annually.
In November and December of 2023, we repurchased in the open market approximately $35 million aggregate principal amount of our 4.750% senior unsecured notes due 2024 which the Company then cancelled and reduced the outstanding principal, $12 million aggregate principal amount of our 6.25% senior unsecured notes due 2026, $5 million aggregate principal amount of our 5.25% senior unsecured notes due 2027, and $40 million aggregate principal amount of our 4.375% senior unsecured notes due 2029 for total cash paid of $84 million for a total aggregate principal amount of $92 million. The remaining repurchased notes of $57 million aggregate principal were extinguished but were not retired and are held in treasury.
In December 2023, the Issuers issued $700 million in aggregate principal amount of 9.750% senior unsecured notes due 2029. The net proceeds, together with $376 million of cash and cash equivalents on hand, was used to satisfy and discharge the remaining outstanding 4.750% senior unsecured notes due 2024, along with any 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.
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, the 6.375% senior unsecured notes due 2025, the 6.250% senior unsecured notes due 2026 and the 9.750% 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.
As of December 31, 2023 and 2022, we were in compliance with all covenants, including maintaining certain minimum financial ratios, as defined in the indentures. Additionally, as of December 31, 2023, based on covenants in the
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indentures governing our senior unsecured notes, we are not permitted to incur additional indebtedness; however, we are permitted to issue new notes in connection with debt refinancings of existing notes.
Future Debt Service Obligations
Interest payments on our Holding Company’s senior unsecured notes will be approximately $271 million for 2024, $301 million for 2025, $214 million for 2026, $137 million for 2027 and an aggregate of $149 million for 2028 through 2029.
At-The-Market Offerings
In May 2019, Icahn Enterprises entered into an Open Market Sale Agreement for the sale of 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, 2023, Icahn Enterprises sold 3,395,353 depositary units pursuant to its current agreement, resulting in gross proceeds of $175 million. During the year ended December 31, 2022, Icahn Enterprises sold 14,619,272 depository units pursuant to its current agreement, resulting in gross proceeds of $759 million. As of December 31, 2023, we continue to have an Open Market Sale Agreement and Icahn Enterprises may sell its depositary units for up to an additional $149 million in aggregate gross sale proceeds pursuant to this agreement. 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. Depending on market conditions, we may continue to sell depositary units under the Open Market Sale Agreement, and, if appropriate, enter into a new Open Market Sale Agreement to continue our “at-the-market” sales program once we have sold the full amount of our existing Open Market Sale Agreement. Our ability to access remaining capital under our “at-the-market” program may be limited by market conditions at the time of any future potential sale. While we were able to sell depositary units during the year ended December 31, 2023 (all of which were completed during the three months ended March 31, 2023), there can be no assurance that any future capital will be available on acceptable terms or at all under this program.
LP Unit Distributions
During the year ended December 31, 2023, we declared four quarterly distributions aggregating $6.00 per depositary unit in which each depositary unitholder had the option to make an election to receive either cash or additional depositary units. In connection with these distributions, aggregate cash distributions to all depositary unitholders that made a timely election to receive cash were $301 million, of which $70 million was distributed to Mr. Icahn and his affiliates.
On February 26, 2024, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of $1.00 per depositary unit, which will be paid on or about April 18, 2024 to depositary unitholders of record at the close of business on March 11, 2024. Depositary unitholders will have until April 5, 2024 to make a timely election to receive either cash or additional depositary units. If a unitholder does not make a timely election, it will automatically be deemed to have elected to receive the distribution in additional depositary units. Depositary unitholders who elect to receive (or who are deemed to have elected to receive) additional depositary units will receive units valued at the volume weighted average trading price of the units during the five consecutive trading days ending April 12, 2024. Icahn Enterprises will make a cash payment in lieu of issuing fractional depositary units to any unitholders electing to receive (or who are deemed to have elected to receive) depositary units.
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
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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.
Repurchase Authorization
On May 9, 2023, the Board of Directors of Icahn Enterprises GP, the Company’s General Partner, approved a repurchase program which authorizes Icahn Enterprises or affiliates of Icahn Enterprises to repurchase up to an aggregate of $500 million worth of any of our outstanding fixed-rate senior unsecured notes issued by Icahn Enterprises and Icahn Enterprises Finance Corp. and up to an aggregate of $500 million worth of the depositary units issued by Icahn Enterprises (the “Repurchase Program”). The repurchases of senior notes or depositary units may be done for cash from time to time in the open market, through tender offers or in privately negotiated transactions upon such terms and at such prices as management may determine. The authorization of the Repurchase Program is for an indefinite term and does not expire until later terminated by the Board of Directors of Icahn Enterprises GP. As of December 31, 2023, the Company has not repurchased any of the Company’s depositary units and the Company has repurchased $92 million worth of senior notes in the aggregate under the Repurchase Program, of which $57 million are held in treasury and $35 million was cancelled.
Partial Sale of Interests in Consolidated Subsidiaries
During the year ended December 31, 2023, we decreased our ownership in CVR Energy through the sale of common stock resulting in proceeds of $158 million, and as of December 31, 2023, we owned approximately 66% of the total outstanding common stock of CVR Energy, compared to 71% as of December 31, 2022.
Captive Insurance Program
On May 1, 2023, we established a captive insurance program to supplement the insurance coverage of the officers, directors, employees and agents of the Company, its subsidiaries and our general partner, in addition to our newly established commercial insurance program. As a result, our cash available to our Holding Company decreased by $100 million as these assets were transferred to restricted cash. Whenever the captive insurance program is cancelled, any remaining assets will become available to the Holding Company.
Sale of Investments
In 2023, the Holding Company did not sell any investments. During 2022, we received proceeds of $153 million from the sale of equity investments held by the Holding Company.
Investment Segment Liquidity
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 December 31, 2023, the Investment Funds had a net short notional exposure of 36%. The Investment Funds’ long exposure was 89% (84% long equity and 5% long credit) and its short exposure was 125% (106% short equity, 11% short credit and 8% short commodity). 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, 2023.
Of the Investment Funds’ 89% long exposure, 54% was comprised of the fair value of its long positions (with certain adjustments) and 35% was comprised mostly of single name equity forward and swap contracts and an option contract. Of the Investment Funds’ 125% short exposure, 65% was comprised of the fair value of its short positions and 60% was comprised mostly of short broad market index swap derivative contracts, short credit default swap contracts and short commodity contracts.
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With respect to both our long positions that are not notionalized (54% long exposure) and our short positions that are not notionalized (65% 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 (60% 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.
During the second quarter of 2023, our bearish view on the market shifted which has impacted and may continue to impact our net short position accordingly, which can be offset by exiting certain long positions and market performance.
Investment Funds Redemption
During the year ended December 31, 2023, Mr. Icahn and his affiliates (excluding us and Brett Icahn) redeemed $2.0 billion from his personal interests in the Investment Funds included in the Investment segment. As of December 31, 2023 and 2022, the total fair market value of investments in the Investment Funds owned by the Company was approximately $3.2 billion and $4.2 billion, respectively, representing approximately 60% and 46% of the Investment Funds’ assets under management as of each respective date. In addition, in December 2023, the Investment Funds issued a pro-rata distribution of $400 million, including $158 million to Mr. Icahn and his affiliates (excluding us and Brett Icahn) and $242 million to the Holding Company.
Other Segment Liquidity
Segment Cash and Cash Equivalents
Segment cash and cash equivalents (excluding our Investment segment) consists of the following:
December 31,
2023
2022
(in millions)
Energy
$
1,179
$
510
Automotive
104
32
Food Packaging
8
9
Real Estate
22
26
Home Fashion
5
5
Pharma
26
16
$
1,344
$
598
As of December 31, 2023, our Energy segment’s cash and cash equivalents includes $598 million of reserved funds to be utilized for the repayment of the 5.250% senior unsecured notes due 2025.
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Segment Borrowings and Availability
Segment debt consists of the following:
December 31,
2023
2022
(in millions)
Energy
$
2,185
$
1,591
Automotive
33
21
Food Packaging
133
162
Real Estate
1
1
Home Fashion
8
12
$
2,360
$
1,787
In December 2023, CVR Energy issued $600 million in aggregate principal amount of 8.500% senior unsecured notes due 2029.
In February 2024, CVR Energy redeemed all outstanding 5.250% senior unsecured notes due 2025, at par. As a result of this transaction, CVR Energy will recognize a $1 million loss on extinguishment of debt in the first quarter of 2024.
As of December 31, 2023, all of our subsidiaries were in compliance with all debt covenants.
Our segments have additional borrowing availability under certain revolving credit facilities as summarized below:
December 31,
2023
(in millions)
Energy
$
288
Food Packaging
30
Home Fashion
3
$
321
As of December 31, 2023 and 2022, total availability under CVR Energy ABL and CVR Partners variable rate asset based revolving credit facilities aggregated $288 million and $287 million, respectively. CVR Energy ABL also had $26 million and $23 million of letters of credit outstanding as of December 31, 2023 and December 31, 2022, 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, distributions, loans and other transactions. See Note 13, “Debt,” to the consolidated financial statements for further discussion regarding our segment debt, including information relating to maturities, interest rates and borrowing availabilities.
Future Debt Service Obligations
Future debt service obligations for our other operating segments are primarily within our Energy segment.
After giving effect to certain debt activity in February 2024, as discussed above, our Energy segment’s future debt maturities (excluding financing leases) are $950 million for 2028 and $600 million for 2029. Future interest payments for our Energy segment are expected to be approximately $113 million for 2024, $108 to $109 million for each of 2025, 2026, and 2027, $64 million for 2028 and $13 million for 2029.
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Subsidiary Distributions and Dividends
During the year ended December 31, 2023, our Investment segment paid a pro-rata distribution of $400 million, which included $242 million in cash received by the Company in connection with its portion.
During the year ended December 31, 2023, our Energy segment paid four quarterly distributions aggregating $2.00 per share. Our portion of the dividend aggregated to $140 million. In addition, in the third and fourth quarters of 2023, our Energy segment paid a special dividend aggregating $2.50 per share, which included $171 million in cash for our portion. Furthermore, during the year ended December 31, 2023, our Energy segment had aggregate distributions of $319 million to non-controlling interests, of which $178 million are distributions paid by CVR Partners to its public unit holders.
Subsequent to December 31, 2023, our Energy segment declared a dividend of $0.50 per share, which is payable March 11, 2024 to shareholders of record as of March 4, 2024. Our portion of the dividend is estimated to be $33 million in cash.
Subsidiary Stock Repurchase Program
On October 23, 2019, the Board of Directors of CVR Energy authorized a stock repurchase program, which would have enabled it to repurchase up to $300 million of its common stock. As of December 31, 2023, CVR Energy did not repurchase any common stock, and such program expired, in accordance with its terms, on October 22, 2023.
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. On February 22, 2021, the Board of Directors of CVR Partners authorized an additional $10 million under the unit repurchase program. During 2023, CVR Partners did not repurchase any common units. During 2022, CVR Partners repurchased common units on the open market at a cost of $12 million. As of December 31, 2023, CVR Partners had a nominal amount remaining under its unit repurchase program. On February 20, 2024, the UAN GP Board, on behalf of CVR Partners, terminated the nominal authority remaining under the unit repurchase program.
Purchase Obligations
Future purchase obligations for our other operating segments are primarily within our Energy and Pharma segments, as discussed in Note 19, “Commitments and Contingencies,” to the consolidated financial statements.
Consolidated Cash Flows
Our consolidated cash flows are composed of the activities within our Holding Company, Investment segment and other operating segments. Our Holding Company’s cash flows are generally driven by cash flows resulting from our subsidiaries loans, dividends, distributions and contributions, as well as divestitures and acquisitions, equity offerings and debt financings, interest income and expense. 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) and Brett Icahn, 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.
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The following table summarizes cash flow information for Icahn Enterprises’ reporting segments and our Holding Company:
Year Ended December 31, 2023
Year Ended December 31, 2022
Year Ended December 31, 2021
Net Cash Provided By (Used In)
Net Cash Provided By (Used In)
Net Cash Provided By (Used In)
Operating
Investing
Financing
Operating
Investing
Financing
Operating
Investing
Financing
Activities
Activities
Activities
Activities
Activities
Activities
Activities
Activities
Activities
(in millions)
Holding Company
$
(221)
$
616
$
(424)
$
(315)
$
282
$
40
$
(368)
$
507
$
704
Investment
2,789
—
(2,441)
461
—
(14)
381
—
74
Other Operating Segments:
Energy
948
(239)
(40)
967
(271)
(696)
396
(238)
(315)
Automotive
115
(47)
3
(88)
(110)
195
(119)
77
42
Food Packaging
43
(14)
(29)
15
(22)
6
3
(17)
4
Real Estate
42
(20)
(30)
26
(10)
(23)
18
(9)
3
Home Fashion
—
(1)
1
(13)
(2)
21
(20)
(2)
18
Pharma
20
—
(10)
2
—
—
6
—
—
Metals
—
—
—
—
—
—
24
(11)
(16)
Other operating segments
1,168
(321)
(105)
909
(415)
(497)
308
(200)
(264)
Total before eliminations
3,736
295
(2,970)
1,055
(133)
(471)
321
307
514
Eliminations
—
(585)
585
—
(127)
127
—
221
(221)
Consolidated
$
3,736
$
(290)
$
(2,385)
$
1,055
$
(260)
$
(344)
$
321
$
528
$
293
The discussion of consolidated cash flows below primarily discusses the comparisons between the years ended December 31, 2023 and 2022. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 24, 2023, which is incorporated by reference herein, for additional discussion of consolidated cash flows for the comparisons between the years ended December 31, 2022 and 2021.
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.
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Holding Company
Year Ended December 31,
2023
2022
2021
(in millions)
Operating Activities:
Cash payments for interest on senior unsecured notes
$
(287)
$
(306)
$
(339)
Interest and dividend income
94
31
5
Cash payments for income taxes, net of receipts
(2)
(3)
—
Operating costs and other
(26)
(37)
(34)
$
(221)
$
(315)
$
(368)
Investing Activities:
Proceeds from the sale of consolidated businesses
$
—
$
—
$
323
Distributions from the Investment Funds
242
—
—
Cash from operating segments
385
367
231
Cash to operating segments
(42)
(239)
(452)
Proceeds from sale of investments held at the Holding Company segment
—
153
405
Related party note receivable repayments and disbursements, net
30
—
—
Other investing activities, net
1
1
—
$
616
$
282
$
507
Financing Activities:
Partnership contributions
$
185
$
768
$
835
Partnership distributions
(307)
(226)
(134)
Payments to acquire additional interests in subsidiaries
—
(1)
—
Proceeds from partial sale of interests in consolidated subsidiaries
158
—
—
Proceeds from Holding Company senior unsecured notes
699
—
1,214
Repayments and repurchases of Holding Company senior unsecured notes
(1,159)
(500)
(1,205)
Other financing activities, net
—
(1)
(6)
$
(424)
$
40
$
704
(Decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents
$
(29)
$
7
$
843
The decrease in interest payments during 2023 compared to 2022 was primarily due to the redemption of $500 million of senior unsecured notes in February 2022.
Proceeds from the sale of consolidated businesses include proceeds from the sale of PSC Metals in 2021.
Distributions paid from the Investment Funds include a pro-rata distribution paid, which includes payment to the Holding Company, and are eliminated in consolidation.
Cash from operating segments is made up of dividends, distributions, and intercompany loans that are eliminated in consolidation. During 2023, this includes cash dividends received from CVR Energy of $311 million, cash distributions received from our Real Estate segment of $64 million and repayments of intercompany loans received from our Pharma segment of $10 million. During 2022, this includes cash dividends received from CVR of $342 million and cash distributions received from our Real Estate segment of $25 million.
Cash to operating segments is made up of contributions and intercompany loans to our operating segments that are eliminated in consolidation. Changes in cash to operating segments were mainly attributable to cash paid to our Real Estate and Automotive segment in 2023.
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Proceeds from the sale of investments include proceeds from the sale of equity investments in 2022 and 2021.
Cash to operating segments are eliminated in consolidation. Changes in cash to operating segments was mainly attributable for cash paid to our Automotive and Real Estate segments for each year presented.
Proceeds from the sale of investments include proceeds from the sale of equity investments in 2022 and 2021.
Partnership contributions represent sales in connection with our “at-the-market” offerings pursuant to our Open Market Sale Agreements entered into May 2019, as discussed above.
Proceeds from the partial sale of interests in consolidated subsidiaries include proceeds related to the sale of CVR common stock in 2023.
Partnership distributions represent cash paid to depositary unitholders in connection with our regularly quarterly distributions. In the fourth quarter of 2023, Mr. Icahn and his affiliates elected to receive their distribution in a combination of cash and additional depositary units. For distributions declared for all other quarters in 2023, 2022 and 2021, Mr. Icahn and his affiliates elected to receive their distributions in additional depositary units.
In December 2023, proceeds from Holding Company senior unsecured notes include the issuance of $700 million aggregate principal amount of 9.750% senior unsecured notes due 2029.
Repayments of Holding Company senior unsecured notes include the satisfaction and discharge of the 4.750% senior unsecured notes due 2024 and repurchases of treasury notes.
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 used in financing activities for the year ended December 31, 2023 were mainly attributable to redemptions paid to Mr. Icahn and his affiliates (excluding us and Brett Icahn) of $2.0 billion. In addition, in December 2023, our Investment segment distributed a pro-rata distribution of $400 million. For the year ended December 31, 2022, our Investment segment had net cash provided by financing activities of $14 million, as a result of contributions from Brett Icahn in accordance with his manager agreement.
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Other Operating Segments
Year Ended December 31,
2023
2022
2021
(in millions)
Operating Activities:
Net cash flow from operating activities before changes in operating assets and liabilities
$
1,370
$
938
$
158
Changes in operating assets and liabilities
(202)
(29)
150
$
1,168
$
909
$
308
Investing Activities:
Capital expenditures
$
(303)
$
(338)
$
(305)
Turnaround expenditures
(57)
(83)
(5)
Acquisition of businesses, net of cash acquired
(20)
—
(20)
Proceeds from sale of investments
—
—
40
Proceeds from sale of assets
33
4
91
Other
26
2
(1)
$
(321)
$
(415)
$
(200)
Financing Activities:
Proceeds from other borrowings
$
683
$
110
$
1,165
Repayments of other borrowings
(112)
(216)
(1,545)
Dividends and distributions to non-controlling interests
(319)
(270)
(101)
Cash from Holding Company
42
239
452
Cash to Holding Company
(385)
(367)
(231)
Other
(14)
7
(4)
$
(105)
$
(497)
$
(264)
Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents
(1)
(1)
3
Increase (decrease) in cash and cash equivalents and restricted cash and restricted cash equivalents
$
741
$
(4)
$
(153)
Our other operating segments’ net cash flow from operating activities before changes in operating assets and liabilities were primarily attributable to an increase in the operating results of our Energy segment primarily associated with a decrease in expenses resulting from lower crude oil prices and favorable RINs liability revaluation.
Changes in operating assets and liabilities for 2023 and 2022 were primarily attributable to our Energy segment resulting primarily from a decrease in RINs obligations.
Capital expenditures are primarily from our Energy and Automotive segments and are primarily for maintenance and growth. Refer to Note 15, “Segment and Geographic Reporting,” for capital expenditures reported for each of our segments. Turnaround expenditures relates to our Energy segment, which were higher in 2022 due to planned maintenance at one of its refineries.
Acquisition of businesses, net of cash acquired relates to our Real Estate segment’s purchase of an development land and a country club in 2023.
Proceeds from other borrowings were mainly attributable to CVR Energy’s issuance of $600 million aggregate principal amount of its 8.50% senior unsecured notes due 2029 issued in 2023.
Repayments of other borrowings was mainly attributable to loan repayments in our Home Fashion and Food Packaging segments.
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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 2023, 2022 and 2021.
Cash to Holding Company is made up of dividends, distributions, and intercompany loans that are eliminated in consolidation. During 2023, this includes cash dividends received from CVR Energy of $311 million, cash distributions received from our Real Estate segment of $64 million and repayments of intercompany loans received from our Pharma segment of $10 million. During 2022, this includes cash dividends received from CVR of $342 million and cash distributions received from our Real Estate segment of $25 million.
Cash from Holding Company is made up of intercompany loans to our Holding Company that are eliminated in consolidation. Changes in cash to operating segments were mainly attributable to cash paid to our Real Estate and Automotive segment in 2023.
Consolidated Capital Spending
Refer to Note 15, “Segment and Geographic Reporting,” for a reconciliation of our segments’ capital expenditures to consolidated capital expenditures for each of the years ended December 31, 2023, 2022 and 2021. In addition, our Energy segment had turnaround expenditures of $57 million, $83 million and $5 million during the years ended December 31, 2023, 2022 and 2021, respectively, which is reported separately from capital expenditures in our consolidated statements of cash flows.
For 2024, we estimate our consolidated capital expenditures to be approximately $226 million to $250 million for our Energy segment, for both maintenance and growth, $73 million for our Automotive segment and approximately $29 million in the aggregate for all other segments.
In addition, our Energy segment mechanically completed a renewable diesel project at one of its refineries in the fourth quarter of 2023 at a cost of $94 million.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. 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. 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. Actual results, under conditions and circumstances different from those assumed, may differ from estimates.
We believe the following accounting estimates are critical to our business operations and the understanding of results of operations and affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Income Taxes
Except as described below, no provision has been made for federal, state, local or foreign income taxes on the results of operations generated by partnership activities as such taxes are the responsibility of the partners. Our corporate subsidiaries account for their income taxes under the asset and liability method.
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Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Management periodically evaluates all evidence, both positive and negative, in determining whether a valuation allowance to reduce the carrying value of deferred tax assets is still needed. For each of December 31, 2023 and 2022, we concluded, based on the projections of taxable income, that certain of our corporate subsidiaries more likely than not will realize a partial benefit from their deferred tax assets and loss carry forwards. Ultimate realization of the deferred tax assets is dependent upon, among other factors, our corporate subsidiaries’ ability to generate sufficient taxable income within the carryforward periods and is subject to change depending on the tax laws in effect in the years in which the carryforwards are used.
See Note 16, “Income Taxes,” to the consolidated financial statements for further discussion regarding our income taxes.
Valuation of Investments
The fair value of our investments, including securities sold, not yet purchased, is based on observable market prices when available. Securities owned by the Investment Funds that are listed on a securities exchange are valued at their last sales price on the primary securities exchange on which such securities are traded on such date. Securities that are not listed on any exchange but are traded over-the-counter are valued at the mean between the last “bid” and “ask” price for such security on such date. Securities and other instruments for which market quotes are not readily available are valued at fair value as determined in good faith by the applicable general partner. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances and may incorporate management’s own assumptions and involves a significant degree of judgment.
See Note 6, “Fair Value Measurements” to the consolidated financial statements for further discussion regarding our investments.
Long-Lived Assets and Goodwill
We calculate depreciation and amortization on a straight-line basis over the estimated useful lives of the various definite-lived assets. When assets are placed in service, we make estimates of what we believe are their reasonable useful lives.
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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. 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. Assumptions used in the review of recoverability require the exercise of significant judgment, including judgment about terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on current plans and for years beyond that plan, the estimates are based on assumed growth rates. If the sum of the estimated future cash flows, undiscounted and without interest charges, is less than the carrying amount of the asset, a fair value assessment is performed. If the carrying amount of the asset exceeds its fair value, an impairment loss is recognized in accordance with U.S. GAAP. Similarly, long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
We performed a trademarks and brand names impairment analysis in accordance with FASB ASC 350, Intangibles-Goodwill and other , as of December 31, 2023. Our impairment analyses compare the fair values of these assets to the related carrying values, and impairment charges are recorded for any excess of carrying values over fair values. The fair values of these assets are based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that reflect the rates of return appropriate for these intangible assets. Following this analysis, our Automotive segment recognized a $7 million impairment charge in the fourth quarter of 2023.
Goodwill
Indefinite-lived intangible assets, such as goodwill and trademarks, held by our various segments are reviewed for impairment annually, or more frequently if impairment indicators exist. Goodwill impairment testing consists of (i) a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, and/or, if necessary, (ii) a quantitative analysis which involves comparing the fair value of our reporting units to their respective carrying values. If the fair value of the reporting unit exceeds its carrying value, no impairment is necessary. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss, equal to the difference (limited to the total amount of goodwill allocated to the tested reporting unit), is recognized in accordance with U.S. GAAP. As of December 31, 2023, our consolidated goodwill was $288 million, primarily within our Automotive segment’s reporting unit. We perform the annual goodwill impairment test for our Automotive segment as of October 1 of each year. Based on our quantitative annual goodwill impairment analysis for our Automotive segment, we determined that the fair value of our Automotive segment was higher than its carrying value and therefore, no impairment is required. As of December 31, 2023, our Automotive segment had remaining goodwill of $250 million, which is allocated entirely to its reporting unit.
When performing the quantitative analysis for goodwill impairment testing, we base the fair value of our reporting units on consideration of various valuation methodologies, including projecting future cash flows discounted at rates commensurate with the risks involved (“DCF”). Assumptions used in a DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on current plans and for years beyond that plan, the estimates are based on assumed growth rates. We believe that our assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in a DCF are based on estimates of the weighted-average cost of capital of a market participant. Such estimates are derived from our analysis of peer companies and consider the industry weighted average return on debt and equity from a market participant perspective. 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 11, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements for further discussion regarding goodwill and intangible assets.
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Recently Issued Accounting Standards
See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to the consolidated financial statements for a discussion of recent accounting pronouncements applicable to us.