Icahn Enterprises L.P.

Good morning and welcome to the Icon Enterprises LP fourth quarter 2023 earnings conference call with Jesse Lynn, General Counsel Andrew Tino, President and Chief Executive Officer Ted Papastolo, Chief Financial Officer, and Robert Flint, Chief Accounting Officer. I would now like to hand the conference over to Jesse Lynn, who will read the opening statement.

Thank you, Operator. The Private Security 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. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, 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 Icon Enterprises LP 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. 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, including adjusted EBITDA, 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. We also present indicative net asset value. Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries which are not included in our GAAP earnings. All net income and EBITDA amounts we will discuss are attributable to ICON Enterprises unless otherwise specified. I'll now turn it over to Andrew Tino, our Chief Executive Officer.

Thank you, Jesse. Let me first say I am honored to take on my new role as CEO. Carl, IEP, and our activism strategy have established an important place in corporate America, and I'm excited to get to work. So today I'll provide a brief overview of Q4 results, and then we will be available for questions. The fourth quarter net loss was $139 million, an improvement of $116 million over Q4 22. Fourth quarter adjusted EBITDA was $9 million, an increase of $84 million compared to Q4-22. Our controlled operating companies have performed well. CVI has benefited from strong crack spreads, good operating utilization, reduced RIN costs, and has authorized a $0.50 dividend per share. Our automotive segment has posted strong year-over-year performance. David Willits is now leading the day-to-day operations at Pet Boys, and we see the potential for significant long-term value creation, both through margin improvement and reinvigorating the top line. In the investment segment this quarter, the funds had a negative return of 4.1%, primarily driven by broad market shorts. Our headline net short exposure of 36% is approximately 6% when you adjust for the energy hedges. This compares to approximately 34% as of the prior year end, excluding the energy hedges. The indicative net asset value ended the quarter at $4.8 billion. Additionally, the Board approved a $1 quarterly distribution per depository unit, which is consistent with the last quarter. With that, let me turn it over to Ted for a detailed discussion of all of our segments.

Thank you, Andrew. I will begin by reviewing the performance of our segments and comment on the strength of our balance sheet. Turning to our investment segment, the funds had a negative return of 4.1% for the quarter. Long and other positions had a positive performance attribution of 2.4%, while short positions had a negative performance attribution of 6.5%. During the quarter, the segment made a prorated distribution of $400 million, of which the holding company received its portion of $242 million. The holding company's interest in the funds was approximately $3.2 billion as of quarter end. Turning to our energy segment. In Q4-23, adjusted EBITDA was $120 million as compared to $168 million in Q4-22. Q4-23 refining margin per throughput barrel was $15.01 compared to $17.14 in the prior year quarter. This decrease was driven by weaker crack spreads and unfavorable inventory valuations that were offset in part by favorable derivative and RIN-related impacts. Q4 23 average realized gate prices for UAN decreased by 47% to $241 per ton, and ammonia decreased by 52% to $461 per ton when compared to the prior year quarter. CVI declared a fourth quarter cash dividend of 50 cents per share. And now to our automotive segment. As we previously discussed, the segment has undergone significant change due to the deconsolidation of AutoPlus in January of 23. The segment results throughout 23 are made up primarily of automotive service operations as compared to 22, which also included the aftermarket parts operations of AutoPlus. Q4-23 automotive service revenues were down $15 million compared to Q4-22, driven by store closures and lower car count. Adjusted EBITDA was $28 million for the quarter, a $71 million improvement as compared to Q4-22, mainly due to the exit of the auto plus aftermarket parts business. Now turning to our real estate segment. Q423 net sales and other revenues increased by $8 million and adjusted EBITDA increased by $3 million compared to the prior year quarter, primarily driven by the sale of single-family homes. Now on to our other operating segments. Food Packaging's adjusted EBITDA was flat for Q423 as compared to the prior year quarter. The quarter-over-quarter comparison was positively impacted by pricing initiatives and lower distribution costs, which was offset by lower sales volume. Home fashions adjusted EBITDA increased by $6 million as compared to the prior year quarter, primarily due to lower raw material and freight costs. The pharma segments adjusted EBITDA for Q4-23 improved by $3 million as compared to the prior year quarter, mainly due to increased sales volume along with margin improvement. Now turning to our liquidity. During December, IEP issued 700 million of nine and three quarter senior unsecured notes due 2029. The net proceeds from this issuance together with 376 million of cash on hand was used to satisfy the outstanding notes due 2024. We maintain liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. As of year end, the holding company had cash and investment in the funds of $4.8 billion, and our subsidiaries had cash and revolver availability of $1.7 billion. In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open the call up for questions?

Thank you. To ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Dan Fannin with Jefferies. Your line is now open.

Thanks. Good morning. Andrew was hoping to get your thoughts on the auto business. I know that putting David there was a change, but I guess as you think about 2024, what are you guys doing differently or what are you expecting in terms of improvement as you think about that business over the next 12 months?

We don't really look at it on a 12-month basis. I would just say longer term, if you look at the company, If you look at its margins and you compare it to its peers, we think there's a lot more upset. And so Dave is the person to lead that effort, and so that's why he's there. He's excited about it, and so are we.

So I guess just in the context, I mean, is there anything different you guys are doing? You guys did a lot last year proactively to change the business. Now is it more of continuing to let that play out in the economic backdrop improving, or I guess, what else should we think about in terms of driving that improvement, I guess, on a multi-year basis, not even just this year?

So last year, you had the deconsolidation. That required a lot of effort. And this year is about focusing on Pep Poison's business and the years to come.

Okay. That's not really giving me much there, I guess. I guess then on the fund side, the performance of the funds sounds very similar or has been very similar despite and positioning similar despite what was characterized as a change in strategy a few quarters ago. So given your closeness to it, I was hoping maybe to get a little bit more color as you think about what really changed in terms of how you are thinking about managing the overall portfolio. And if we should think about, you know, again, prospectively how, if there's anything different and or what you are thinking you know, positioning and or changing within the portfolio to obviously generate, you know, different, more positive returns?

Yeah. So if you, I think the first thing you said was about the, call it the overall net short exposure. So if you look at year end 22 and you looked at our exposure, I think the headline net short was 47%. And if you adjusted that for the refining hedges and energy hedges, you'd be down to minus 34%. Now, if you compare that to today, our exposure, call it, is mid-single digits negative when you exclude our energy hedges. And so we think the portfolio has changed significantly. And then in terms of what are we going to do going forward, we're going to do exactly what Carl said we would do, which is we'll stick to our netting, we'll focus on activism, and I think more recently you've seen us announce involved in it, two names, both of which we're very excited about. And we think the portfolio is in very good shape for the future.

Understood. Could you give the rough comparison? You went to 2022. What was that comparison, you know, last quarter net of the energy exposures versus what you did with the low single digits as of the end of the year?

Yeah, so I think it's down a little bit, probably another 5% from what it was in 930.

Great. Okay. Thanks for taking my question.

Maybe another question you asked in there, which is, you know, we continue to refine the portfolio, so we trimmed a few names, and, you know, we're focusing on the names that we like best.

Understood. Thanks for taking my questions.

Thank you. One moment for our next question, please. Our next question comes from the line of Bruce Monrad with Northeast Investors Trust. Your line is now open.

Hi, guys. Thanks for hosting the call. A question, if I could, on food packaging. So volumes were down year over year, I guess. Could you add a little more color on that? And, you know, is Osceola running fine, or are there waste issues? Um, maybe other geographic, uh, is there a geographic dimension to it? Um, and then also is everything, um, flat at the SG&A line or because, you know, is it possible that SG&A went up, uh, because of accruals, cause you had such a good start to the year or anything, anything going on at that line either? Two questions. Thanks.

Hey, Bruce, it's Ted. Uh, thanks for the question. But before I answer the question, let me just give more context on the quarter and I think it'll help answer a lot of them. So volume softened during the quarter, and when comparing Q4 of 23 to Q4 of 22, David actually touched on this in the last call, the new round of Russian sanctions went into effect during 23, so that affected comparability. Not all these sanctions were there in 22, but the more significant reason was our customers have drawn down on their inventories, and this is to bring them to more historical levels And you can attribute this to the supply chain correcting or actually improving as compared to recent years. When supply chain issues arise, you can imagine raw material inventory levels tend to creep up just to ensure operations. And we knew this correction was coming, but it's very hard to time. And it looks like the majority of it happened in Q4. And although it affected demand in Q4, we don't think that's sustainable. And once the rebalance finishes, the demand will come back. And just the other part of the equation in terms of EBITDA, it was flat as compared to prior year's quarters because of the pricing initiatives management has taken. And those have helped along with lower distribution costs. So in a nutshell, that's what's occurring in Q4. SG&A levels, management has always continued to do a good job of maintaining it. But the story there is the volume softening.

Okay, and is that continued? I'm sorry, did you say for 1Q? And by the way, this is consistent with, you know, what DiscoFan would have said in their 3Q numbers about due stocking. Is it pretty much runs course?

Yeah, we think it's going to come back, but, you know, we'll talk about Q1 in about two months when we release Q1's earnings. Oh, yeah, we don't think the demand destruction is sustainable.

Okay, thank you. Appreciate it. All right, thanks, Ruth.

Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Andrew Tino for closing remarks.

Thanks, everyone, for joining the call today, and we'll speak to you in a few months.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a wonderful day.