Q4 2020 Icahn Enterprises LP Earnings Call
Good morning, and welcome to the Icahn Enterprises L. P fourth quarter 2020 earnings call with Jesse Lynn General Counsel, Keith Cozza, President and Chief Executive Officer, and sung Hwan Cho Chief Financial Officer, I would now like to hand, the call over to Jesse Lynn who will read the opening statement.
Okay.
Thank you operator.
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 on potential acquisitions forward looking statements maybe identified by words, such as expects anticipates intends plans.
<unk> believes seeks estimates will or words of similar meaning and include but are not limited to statements about the expected future business and financial performance of Icahn Enterprises L P and its subsidiaries.
Actual events results and outcomes may differ materially from our expectations due to a variety of known and unknown risks uncertainties and other factors that are discussed in our filings with the securities and Exchange Commission, including economic competitive legal and other factors, including the severity magnitude and duration of the COVID-19 pandemic.
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 a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation.
I'll now turn it over to Keith Cozza, our Chief Executive Officer.
Thanks Jessie.
Good morning, and welcome to the fourth quarter 2020, Icahn Enterprises earnings Conference call.
Joining me on today's call sung hwan, Cho, our Chief Financial Officer.
I will begin by providing some brief highlights sung will provide an in depth review of our financial results on the performance of our business segments.
We will then be available to address your questions.
For Q4, 2020, we had net income attributable to Icahn enterprises of $146 million or <unk> 61 per LP unit compared to a net loss of $157 million or 74 cents per LP unit in the prior year period.
The quarterly net income was primarily driven by gains in our investment segment.
Adjusted EBITDA attributable to Icahn enterprises for Q4, 2020 was $420 million compared to $111 million in Q4 of 2019.
Yeah.
Our investment funds earned a positive return of five 6% for Q4 of 2020 compared to a positive return of <unk> two per cent for Q4 of 2019.
The positive performance was driven by net gains in certain long equity positions, primarily in the energy industry offset in part by net losses from our short index and short single name equity positions.
Net sales for our energy segment decreased by 451 million for Q4 2020 compared to the prior year period.
Our petroleum business was negatively impacted by narrow crack spreads tight crude oil differentials that resulted from the COVID-19 demand destruction and high RIN prices.
Our fertilizer business had strong utilization rates at both facilities offset by a weaker price environment as agriculture markets continue to be hampered.
Net sales and service revenues for our automotive segment were 596 million for Q4 of 2020.
The COVID-19, pandemic and the impact of actions taken by governments and others have significantly contributed to the decline in revenues.
Icahn automotive group continues to push forward with a multiyear transformational plan to restructure the operations and improve profitability.
We have substantially completed the legal separation of our automotive service business from our aftermarket parts business, which will position the service business for new growth and value enhancing opportunities.
Okay.
In December of 2020, we acquired all the outstanding common stock of <unk>, Inc. Upon its emergence from bankruptcy and began reporting the results within our new pharma segment.
We are excited to work with the <unk> management team to gross sales of our two approved commercial drugs and to further advance the development of our pipeline product candidates.
In January of 2021, we issued 750 million for 375% senior unsecured notes due in 2029.
Earlier this month, we repaid $750 million of our six on a quarter percent senior unsecured notes due in 2022.
Reducing our annual interest expense and extending our debt maturity profile.
We closed the quarter with cash and investments in the funds of over $5 2 billion and had been very active during the first two months of 2021, and making new investments that have a favorable risk reward profile.
With that let me turn it over to sung.
Thanks Keith.
I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet.
For Q4, 2020, net income attributable to Icahn enterprises was $146 million as compared to a net loss of $157 million in the prior year period.
As you can see on slide five in Q4 2020, the performance of our investment funds was a significant driver of our net income for the quarter.
Adjusted EBITDA attributable to Icahn enterprises for Q4, 2020 was $420 million compared to $111 million in the prior year period.
I will now provide more detail regarding the performance of our individual segments.
Our investment segment had net income attributable to Icahn enterprises of $225 million for Q4 2020.
The investment funds had a positive return of five 6% in Q4 2020 compared to a positive return on 0.2% for Q4 2019.
Long positions had a positive performance attribution of $19 four per cent for the current quarter, while short positions had a negative performance attribution of 13, 8%.
Since inception in November 2000, and for through the end of Q4 2020, the investment funds gross return of 73% or three 4% annualized.
The investment funds had a net short notional exposure of 52% compared to net long of 8% at the end of Q3 2020.
Okay.
Our investment in the funds was $4 $3 billion as of December 31, 2020.
And now to our energy segment.
For Q4 2020, our energy segment reported net sales of $1 1 billion and consolidated adjusted EBITDA of $1 million.
Per to net sales of $1 $6 billion and consolidated adjusted EBITDA of $142 million for the prior year period.
For Q4 2020, adjusted EBITDA includes a gain of $54 million related to <unk> investment in Delek.
Q4, 2020, combined total throughput was approximately 219000 barrels per day compared to approximately 213 barrels per day for Q4 2019.
Refining margin per throughput barrel was $1 32.
In the fourth quarter of 2020 compared to $12 47 during.
During the same period in 19.
The refining margin was negatively impacted by the continued narrow crack spreads.
An increased cost of rents.
CVR has begun construction of its renewable diesel plant, which is expected to significantly mitigate future exposure to rens.
CVR partners reported Q4, 2020, EBITDA of $18 million compared to $11 million for Q4 2019.
Results were driven by increased sales volume for UAE on ammonia and lower operating and turnaround expenses.
Now turning to our automotive segment.
Q4, 2020, net sales and service revenues for Icahn automotive group was $596 million down $107 million from the prior year period.
Q4, 2020, adjusted EBITDA, which excludes the losses associated with closed stores was a loss of $3 million compared to a loss of $31 million in the prior year period.
Icahn auto continues to push forward with a multiyear transformational plan to restructure the operations and improve profitability.
Icahn auto accelerated closures of certain part stores implemented significant cost savings and.
And reduced capital spending to minimum levels.
All of these initiatives helped icahn auto offset the impact of significant sales decline and position the company for profitability on sales return.
Now turning to our food packaging segment.
Q4, 2020, net sales increased by $8 million or 8% and consolidated adjusted EBITDA was $14 million compared to $8 million on the prior year period.
Net sales increased due to an increase in volumes and an increase due to price and product mix and favorable effects of foreign exchange.
In October 2020, this case completed an equity private placement with IEP for $100 million. In this case also entered into a credit agreement provided which provided for a $150 million term loan and the $30 million revolving credit facility.
The proceeds from the new term loans plus the equity private placement were used to repay and for the existing term loans.
And now to our metals segment.
Q4, 2020, net sales increased by $40 million and adjusted EBITDA increased by $16 million compared to the prior year period.
Volume and price has continued to be strong driven by high demand from steel mills.
Yeah.
And now for our real estate segment.
Q4, 2020, net operating revenues increased by $12 million compared to the prior year adjusted.
Adjusted EBITDA for the quarter increased by $2 million compared to the prior year period.
Revenue from our real estate operations for both Q4 2020 in Q4 2019 were substantially derived from income from the sales of residential units and rental operations.
Now turning to our home fashion segment.
Q4, 2020, net sales decreased by $5 million compared to the comparable prior year period.
Sales to hospitality customers were down significantly due to weak demand as holiday travel was strongly discouraged.
West Point's adjusted EBITDA was a loss of $2 million in Q4 compared to a loss of $1 million in the prior year period.
Now turning to our pharma segment.
In December 2020, we acquired all of the outstanding common stock on visas upon its emergence from bankruptcy.
Prior to Veeva <unk> emergence from bankruptcy, we held an investment in all of this is convertible corporate debt securities as well as all of it.
Other outstanding debt.
As a result of this transaction we consolidate the results of EBIT beginning December 2020 and report the results within our new pharma segment.
And this month of December farmers, adjusted EBITDA was $1 million.
Now I will discuss our liquidity position.
Okay.
We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities.
We ended Q4 2020 with cash cash equivalents, our investment in the investment funds and revolver availability totaling approximately $6 6 billion.
Our subsidiaries have approximately $774 million of cash.
$586 million of Undrawn credit facilities to enable them to take advantage of attractive opportunities.
In summary, we continue to focus on building asset value and maintaining ample liquidity to enable us to capitalize on opportunities within and outside of our existing operating segments.
Operator can you please open the call for questions.
Thank you.
To ask a question you will need to press star one on your telephone.
Question. Please press the pound Keith please standby, while we compile the Q&A roster.
Our first question comes from Dan.
And then with Jefferies. Your line is open.
Thanks, Good morning, I wanted to follow up on.
Keith your comments about new investments year to date and some of the opportunities you're seeing in the market today I assume that should the fund, but maybe if you could just flush that out a bit more.
Yeah, sure Hi, Dan Yes.
Yeah. It is a lot of it has been at the fund level and a lot of it has been quite public frankly, the first couple of months here.
We've been very active with some public filings on.
A relatively large stakes in some new names at the fund like Bausch health care and.
Dana Corp.
You know in the news recently with Firstenergy and.
So.
You know, where we're finding pockets of opportunity, where we think our model.
Of.
Finding a deeply discounted.
<unk> that you now have the ability to.
Yeah.
Implement some activism, where we can help unlock that value is.
Right right now and.
So where are you know we've been quite quite active in the early part of the year here.
Great. That's helpful. And then just the pharma segment for purchase of EBIT.
You know a new segment for you guys at the Holdco is this something where you're thinking about as kind of a larger broader pharma opportunity or something where.
Alright, I guess.
I'm curious about how we should think about this over time.
Yeah, I think I think we'd never take any possibilities off the table so to speak.
We have a lot of we have a lot of capital if so if there were.
Ways to expand it that we thought would.
Would create value for our shareholders. We would certainly consider that I'd say like in the near to intermediate term, we're very focused on on what we have right now.
Now that the company has the appropriate capital structure in place.
We have.
Two commercial drugs that we think have.
Have more potential.
Uh huh.
Or have a lot of potential to grow and perform better than they have historically and we have a very interesting pipeline candidate.
That.
Would require some investment, but if if if.
You know and in fee in Phase II studies.
And further developing it but if it.
If it works so to speak it has a very large addressable market.
So that's something we're looking heavily at right now as well so I think in the interim very focused on what we have right now, but and then continuing to work and get to know that our management team.
And.
And then to the extent that they bring additional tack on opportunities to the table, we'll evaluate it at the same way, we would evaluate any of our segments wanting to grow if it makes sense, it's not a capital issue as you know, it's we just need to get our arms around the.
The value creating opportunity.
That makes sense.
I just wanted to clarify.
In this case, you mentioned I think on private placement debt, so where does your ownership.
The equity investment in that today.
What.
It sits at 89%.
Okay.
And then just a clarification also on the hedge fund positioning.
Typically youre, giving that.
Is that as of 12 31, the net short or.
Now I'm, just trying to kind of.
Compare the bullishness on some of the activity Youre seeing in terms of new investment opportunity versus the overall positioning of this on.
Yes, I think well for this.
Closures would be as of December 31.
As we go as we've added on long exposure.
With that I don't want to get too specific but you should assume that we continue to try to hedge out.
Individual risks as well as macro risks so as we take on sort of new single name long exposure.
Where we are at.
At the same time, putting on granular hedges that COVID-19 exposed some of the industry risk related to some of those names.
Got it makes sense that's it for me thanks for taking my questions Yes.
Yes, Youre welcome. Thank you as a reminder, ladies and gentlemen, Thats Star one to ask your question. Our next question comes from Jason Meacham with Northeast Investors Trust. Your line is open.
Oh, Hi, good morning, guys. Thanks for taking my question I just have a quick one on Thats, probably more just have an accounting thing but on this case.
EBITDA was 14.
And I noticed that the attributable it's only nine and I'm just wondering if you can explain what that is.
Why that owning 89%.
Well, hopefully I won't be too far over my skis here, but we are the equity offering occurred in the fourth quarter, taking our ownership up to 89%. So I'm assuming that that's a weighted average.
So on can you confirm that or yes, that's that's.
Correct. So the.
Earlier parts of the year, we owned.
Less than the 89% so that's what that reflects.
But the year over years kind of funky because last year. It was eight and you guys were attributable seven so it's almost like the percentage has gone down not up.
We can look into it and may be some rounding in there as well.
Net.
They can we can get back to you on that one.
Okay cool thank you okay.
Thank you and at this time Im showing no further questions in the queue I'd like to hand, the call back over to Mr. Keith Cozza for any closing remarks.
Okay. Thank you operator.
Thank you everybody for your interest in IEP will look forward to talking to you.
After the first quarter and regarding our results have a good day.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
[music].