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Icahn Enterprises L.P. (IEP)

Q3 2016 Earnings Conference Call

November 03, 2016, 10:00 ET

Executives

Louis Pastor - Deputy General Counsel

Keith Cozza - President & CEO

SungHwan Cho - CFO

Analysts

Dan Fannon - Jefferies

Andrew Berg - Post Advisory Group

Josh Lipchin - Eaton Vance

Cindy Boyle - Wells Fargo

Presentation

Operator

Welcome to the Icahn Enterprises Third Quarter 2016 Earnings Call. With Louis Pastor, Deputy General Counsel; Keith Cozza, President and CEO; and SungHwan Cho, Chief Financial Officer.

I would now like to hand the call over to Louis Pastor, who will read the opening statement.

Louis Pastor

Good morning. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for forward-looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. These forward-looking statements involve risks and uncertainties that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our expectations will be realized.

We assume no obligation to update or revise any forward-looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non-GAAP financial measures and a reconciliation of such numbers to the GAAP comparable numbers can be found I the back of the investor presentation.

And now I will turn it over to Keith Cozza, the CEO of Icahn Enterprises.

Keith Cozza

Good morning and welcome to the third quarter 2016 Icahn Enterprises Earnings Conference Call. Joining me on today's call is SungHwan Cho, our Chief Financial Officer. I would like to begin by providing some brief highlights. SungHwan will then provide an in-depth review of our financial results and the performance of our business segment. We will then be available to address your question. For Q3 2016 we have a net loss attributable to Icahn Enterprises of 16 million or $0.12 per LP unit compared to a net loss of 440 million or $3.40 per LP unit in the prior year period.

Adjusted EBITDA attributable to Icahn Enterprises for Q3 2016 was 458 million compared to a loss of 31 million in Q3 of 2015. Our investment funds had a return of 6.5% in Q3 of 2016 with the positive performance being driven by gains in our core long equity position offset partially by our short equity and credit exposures. Q3 2016 net sales for our automotive segment were 2.3 billion, an increase of 18% over Q3 of 2015. Higher revenues were primarily due to the Q1 2016 acquisition of Pep Boys. Federal Mogul had an 11% increase in operational EBITDA from the prior year period due to improved margins in both the power train and motor parts division.

In our energy segment our Q3 2016 revenues were 1.2 billion and consolidated adjusted EBITDA was 96 million. CVR Refining posted solid operational performance during the quarter with combined crude throughput of `198,000 barrels per day however as results continued to be hampered by the increasing cost of RINs which are needed to comply with the renewable fuel standard program. We along with others in the industry continue to push the EPA to address this broken program by changing the point of obligations for the party that can control the blending of renewable fuels.

In our rail car segment, investments in our rail car services and rail car leasing businesses continue to complement our manufacturing operation. The segments lease lead was 45,000 rail cars at the end of Q3, 2016 and continued to be a source of significant cash flow. In our gaming segment, Tropicana delivered a strong performance for the quarter particularly at its Trop Atlantic City and Evansville properties. Our gaming segment consolidated adjusted EBITDA for Q3 2016 was $42 million. We close the quarter with our balance sheet remaining strong and are optimistic that we have our portfolio of investments positioned for positive returns going forward.

With that let me turn it over SungHwan.

SungHwan Cho

Thanks, Keith. I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comments on the strength of our balance sheet. In Q3 2016 the net loss attributable to Icahn Enterprises was $16 million compared to a net loss of $440 million in the prior year period. As you can see on slide 5, in Q3 2016 our net loss was primarily driven by Whole Co [ph] debt service costs and impairments recorded in our gaming segment offset in part by the positive return in our investment segment.

I will now provide more detail regarding the performance of the individual segments. Our investment segment had a gain attributable to Icahn Enterprises of $111 million for Q3 2016. The investment fund set of return of positive 6.5% in Q3 of '16 compared to a return of negative 10.3% in Q3 2015. Long positions that it has a positive performance attribution of 15.9% for the current quarter, while short positions and other expenses had a negative performance attribution of 9.4%. Since inception since November 2004 through the end of Q3 2016 the investment funds gross return is 137% or approximately 7.5% annualized.

The investment funds continue to be significantly hedged, at the end of Q3, 2016 net short exposure was 138% compared to a net short exposure of 25% at the end of 2015. IEP's Investment in the funds was $1.8 billion dollars as of September 30, 2016. Now to our Energy segment, for Q3 2016 our Energy segment reported revenues of $1.2 billion and consolidated adjusted EBITDA of $96 million compared to revenues of $1.4 billion in consolidated adjusted EBITDA of $236 million for the prior year. Operating results for Q3 2016 include the April 2016 acquisition of the East Dubuque fertilizer facility. CVR Refining reported Q3 2016 adjusted EBITDA of $75 million compared to $230 million in the prior year period. The low regional crack spreads and increasing cost of rents continues to negatively impact the refining operations overall financial results.

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