Company Quick10K Filing
Quick10K
Icahn Enterprises
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$71.18 187 $13,290
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-12-18 Officers
8-K 2018-12-05 Regulation FD, Exhibits
8-K 2018-11-15 Regulation FD, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-10-22 Enter Agreement, Other Events, Exhibits
8-K 2018-10-01 Enter Agreement, M&A, Other Events, Exhibits
8-K 2018-09-11 Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-15 Regulation FD, Exhibits
8-K 2018-06-08 Regulation FD, Exhibits
8-K 2018-04-15 Enter Agreement, Other Events, Exhibits
8-K 2018-04-10 Enter Agreement, Regulation FD, Exhibits
8-K 2018-03-23 Regulation FD, Exhibits
IR Ingersoll-Rand
BWA BorgWarner
ALSN Allison Transmission
DORM Dorman Products
DAN Dana
VC Visteon
DLPH Delphi Technologies
LDL Lydall
UFAB Unique Fabricating
ADOM Adomani
IEP 2018-09-30
Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 6. Exhibits.
EX-31.1 ex311-93018.htm
EX-31.2 ex312-93018.htm
EX-32.1 ex321-93018.htm

Icahn Enterprises Earnings 2018-09-30

IEP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a10q-93018.htm 10-Q Wdesk | Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2018

(Commission File Number)
(Exact Name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(Telephone Number)
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification No.)
1-9516
ICAHN ENTERPRISES L.P.
Delaware
13-3398766
 
767 Fifth Avenue, Suite 4700
New York, NY 10153
(212) 702-4300
 
 
 
 
 
 
333-118021-01
ICAHN ENTERPRISES HOLDINGS L.P.
Delaware
13-3398767
 
767 Fifth Avenue, Suite 4700
New York, NY 10153
(212) 702-4300
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Icahn Enterprises L.P. Yes x No o             Icahn Enterprises Holdings L.P. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     
Icahn Enterprises L.P. Yes x No o             Icahn Enterprises Holdings L.P. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One):
Icahn Enterprises L.P.
 
Icahn Enterprises Holdings L.P.
Large Accelerated Filer x
Accelerated Filer o
 
Large Accelerated Filer o
Accelerated Filer o
Non-accelerated Filer o
Smaller Reporting Company o
 
Non-accelerated Filer x
Smaller Reporting Company o
Emerging Growth Company o
 
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Icahn Enterprises L.P. Yes o No x          Icahn Enterprises Holdings L.P. Yes o No x
As of November 8, 2018, there were 186,650,073 of Icahn Enterprises' depositary units outstanding.



ICAHN ENTERPRISES L.P.
ICAHN ENTERPRISES HOLDINGS L.P.
TABLE OF CONTENTS






i


EXPLANATORY NOTE

This Quarterly Report on Form 10-Q (this "Report") is a joint report being filed by Icahn Enterprises L.P. and Icahn Enterprises Holdings L.P. Each registrant hereto is filing on its own behalf all of the information contained in this Report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

FORWARD-LOOKING STATEMENTS

This Report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"), or by Public Law 104-67. All statements included in this Report, other than statements that relate solely to historical fact, are “forward-looking statements.” Such statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events, or any statement that may relate to strategies, plans or objectives for, or potential results of, future operations, financial results, financial condition, business prospects, growth strategy or liquidity, and are based upon management’s current plans and beliefs or current estimates of future results or trends. Forward-looking statements can generally be identified by phrases such as “believes,” “expects,” “potential,” “continues,” “may,” “should,” “seeks,” “predicts,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “could,” “designed,” “should be” and other similar expressions that denote expectations of future or conditional events rather than statements of fact.
Forward-looking statements include certain statements made under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under Part I, Item 2 of this Report, but also forward-looking statements that appear in other parts of this Report. Forward-looking statements reflect our current views with respect to future events and are based on certain assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from trends, plans, or expectations set forth in the forward-looking statements. These risks and uncertainties may include the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2017 and those set forth in this Report, including under the caption "Risk Factors," under Part II, Item 1A of this Report. Additionally, there may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results to differ materially from the forward-looking statements.





1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except unit amounts)
 
September 30, 2018
 
December 31, 2017
ASSETS
(Unaudited)
Cash and cash equivalents
$
1,053

 
$
1,264

Cash held at consolidated affiliated partnerships and restricted cash
801

 
766

Investments
9,332

 
10,038

Due from brokers
338

 
506

Accounts receivable, net
700

 
612

Inventories, net
1,961

 
1,805

Property, plant and equipment, net
6,179

 
6,364

Goodwill
336

 
334

Intangible assets, net
513

 
544

Assets held for sale
8,891

 
8,790

Other assets
871

 
778

Total Assets
$
30,975

 
$
31,801

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
1,025

 
$
1,001

Accrued expenses and other liabilities
1,069

 
1,033

Deferred tax liability
787

 
924

Unrealized loss on derivative contracts
985

 
1,275

Securities sold, not yet purchased, at fair value
625

 
1,023

Due to brokers
243

 
1,057

Liabilities held for sale
5,998

 
6,202

Debt
7,907

 
7,918

Total liabilities
18,639

 
20,433

 
 
 
 
Commitments and contingencies (Note 16)

 

 
 
 
 
Equity:
 
 
 
Limited partners: Depositary units: 186,650,073 units issued and outstanding at September 30, 2018 and 173,564,307 units issued and outstanding at December 31, 2017
5,837

 
5,341

General partner
(225
)
 
(235
)
Equity attributable to Icahn Enterprises
5,612

 
5,106

Equity attributable to non-controlling interests
6,724

 
6,262

Total equity
12,336

 
11,368

Total Liabilities and Equity
$
30,975

 
$
31,801


See notes to condensed consolidated financial statements.


2


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
(Unaudited)
Net sales
$
2,864

 
$
2,404

 
$
8,220

 
$
7,107

Other revenues from operations
217

 
181

 
632

 
705

Net (loss) gain from investment activities
(514
)
 
420

 
328

 
604

Interest and dividend income
36

 
34

 
99

 
94

Gain on disposition of assets, net
65

 
446

 
65

 
1,969

Other income (loss), net
17

 
19

 
83

 
(11
)
 
2,685

 
3,504

 
9,427

 
10,468

Expenses:
 
 
 
 
 
 
 
Cost of goods sold
2,406

 
2,054

 
7,007

 
6,174

Other expenses from operations
173

 
144

 
490

 
469

Selling, general and administrative
340

 
323

 
1,042

 
945

Restructuring, net
17

 
1

 
20

 
3

Impairment

 

 
7

 
76

Interest expense
130

 
164

 
407

 
525

 
3,066

 
2,686

 
8,973

 
8,192

(Loss) income from continuing operations before income tax benefit (expense)
(381
)
 
818

 
454

 
2,276

Income tax benefit (expense)
71

 
(18
)
 
57

 
(13
)
(Loss) income from continuing operations
(310
)
 
800

 
511

 
2,263

Income from discontinued operations
163

 
29

 
353

 
131

Net (loss) income
(147
)
 
829

 
864

 
2,394

Less: net (loss) income attributable to non-controlling interests
(273
)
 
232

 
292

 
262

Net income attributable to Icahn Enterprises
$
126

 
$
597

 
$
572

 
$
2,132

 
 
 
 
 
 
 
 
Net (loss) income attributable to Icahn Enterprises from:
 
 
 
 
 
 
 
    Continuing operations
$
(29
)
 
$
577

 
$
243

 
$
2,027

    Discontinued operations
155

 
20

 
329

 
105

 
$
126

 
$
597

 
$
572

 
$
2,132

Net income attributable to Icahn Enterprises allocable to:
 
 
 
 
 
 
 
Limited partners
$
124

 
$
586

 
$
561

 
$
2,090

General partner
2

 
11

 
11

 
42

 
$
126

 
$
597

 
$
572

 
$
2,132

Basic and diluted (loss) income per LP unit:
 
 
 
 
 
 
 
Continuing operations
$
(0.16
)
 
$
3.41

 
$
1.34

 
$
12.58

Discontinued operations
0.84

 
0.12

 
1.81

 
0.65

 
$
0.68

 
$
3.53

 
$
3.15

 
$
13.23

Basic and diluted weighted average LP units outstanding
183

 
166

 
178

 
158

Cash distributions declared per LP unit
$
1.75

 
$
1.50

 
$
5.25

 
$
4.50


See notes to condensed consolidated financial statements.


3


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(Unaudited)
Net (loss) income
$
(147
)
 
$
829

 
$
864

 
$
2,394

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Post-retirement benefits
4

 
7

 
21

 
17

Hedge instruments
(1
)
 
(4
)
 
(3
)
 
(1
)
Translation adjustments and other
(11
)
 
(1
)
 
(86
)
 
107

Other comprehensive (loss) income, net of tax
(8
)
 
2

 
(68
)
 
123

Comprehensive (loss) income
(155
)
 
831

 
796

 
2,517

Less: Comprehensive (loss) income attributable to non-controlling interests
(275
)
 
235

 
284

 
274

Comprehensive income attributable to Icahn Enterprises
$
120

 
$
596

 
$
512

 
$
2,243

 
 
 
 
 
 
 
 
Comprehensive income attributable to Icahn Enterprises allocable to:
 
 
 
 
 
 
 
Limited partners
$
118

 
$
584

 
$
502

 
$
2,198

General partner
2

 
12

 
10

 
45

 
$
120

 
$
596

 
$
512

 
$
2,243


Accumulated other comprehensive loss was $1,479 million and $1,411 million at September 30, 2018 and December 31, 2017, respectively.





















See notes to condensed consolidated financial statements.


4


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
General Partner's (Deficit) Equity
 
Limited Partners' Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2017
$
(235
)
 
$
5,341

 
$
5,106

 
$
6,262

 
$
11,368

Net income
11

 
561

 
572

 
292

 
864

Other comprehensive loss
(1
)
 
(59
)
 
(60
)
 
(8
)
 
(68
)
Partnership distributions
(2
)
 
(71
)
 
(73
)
 

 
(73
)
Investment segment contributions

 

 

 
280

 
280

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(109
)
 
(109
)
Cumulative effect adjustment from adoption of accounting principle
(1
)
 
(28
)
 
(29
)
 

 
(29
)
Changes in subsidiary equity and other
3

 
93

 
96

 
7

 
103

Balance, September 30, 2018
$
(225
)
 
$
5,837

 
$
5,612

 
$
6,724

 
$
12,336


 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
General Partner's (Deficit) Equity
 
Limited Partners' Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2016
$
(294
)
 
$
2,448

 
$
2,154

 
$
5,863

 
$
8,017

Net income
42

 
2,090

 
2,132

 
262

 
2,394

Other comprehensive income
3

 
108

 
111

 
12

 
123

Partnership distributions
(1
)
 
(60
)
 
(61
)
 

 
(61
)
Partnership contributions
12

 
600

 
612

 

 
612

Investment segment contributions

 

 

 
600

 
600

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(38
)
 
(38
)
Cumulative effect adjustment from adoption of accounting principle
(1
)
 
(46
)
 
(47
)
 

 
(47
)
Changes in subsidiary equity and other
(3
)
 
(114
)
 
(117
)
 
(285
)
 
(402
)
Balance, September 30, 2017
$
(242
)
 
$
5,026

 
$
4,784

 
$
6,414

 
$
11,198








See notes to condensed consolidated financial statements.


5


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Nine Months Ended
September 30,
 
2018
 
2017
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
864

 
$
2,394

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Income from discontinued operations
(353
)
 
(131
)
Net gain from securities transactions
(858
)
 
(1,852
)
Purchases of securities
(3,911
)
 
(704
)
Proceeds from sales of securities
5,538

 
2,292

Purchases to cover securities sold, not yet purchased
(1,390
)
 
(692
)
Proceeds from securities sold, not yet purchased
949

 
1,222

Changes in receivables and payables relating to securities transactions
(609
)
 
(2,702
)
Gain on disposition of assets, net
(65
)
 
(1,969
)
Depreciation and amortization
389

 
406

Impairment
7

 
76

Deferred taxes
(65
)
 
(9
)
Other, net
39

 
5

Changes in operating assets and liabilities
(554
)
 
340

Net cash used in operating activities from continuing operations
(19
)
 
(1,324
)
Net cash provided by operating activities from discontinued operations
345

 
410

Net cash provided by (used in) operating activities
326

 
(914
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(276
)
 
(333
)
Acquisition of businesses, net of cash acquired
(13
)
 
(105
)
Purchase of additional interests in consolidated subsidiaries

 
(349
)
Proceeds from disposition of assets
160

 
1,405

Other, net
(20
)
 
14

Net cash (used in) provided by investing activities from continuing operations
(149
)
 
632

Net cash used in investing activities from discontinued operations
(318
)
 
(298
)
Net cash (used in) provided by investing activities
(467
)
 
334

Cash flows from financing activities:
 
 
 
Investment segment contributions from non-controlling interests
280

 
600

Partnership contributions

 
612

Partnership distributions
(73
)
 
(61
)
Proceeds from offering of subsidiary equity
6

 

Dividends and distributions to non-controlling interests in subsidiaries
(104
)
 
(34
)
Proceeds from Holding Company senior unsecured notes

 
1,195

Repayments of Holding Company senior unsecured notes

 
(1,175
)
Proceeds from subsidiary borrowings
1,003

 
843

Repayments of subsidiary borrowings
(1,065
)
 
(933
)
Other, net
6

 
2

Net cash provided by financing activities from continuing operations
53

 
1,049

Net cash used in financing activities from discontinued operations
(131
)
 
(191
)
Net cash (used in) provided by financing activities
(78
)
 
858

Effect of exchange rate changes on cash and cash equivalents and restricted cash and restricted cash equivalents
(1
)
 
2

Add back decrease in cash of assets held for sale
44

 
232

Net (decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents
(176
)
 
512

Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period
2,030

 
2,097

Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period
$
1,854

 
$
2,609

See notes to condensed consolidated financial statements.


6



ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
 
September 30, 2018
 
December 31, 2017
ASSETS
(Unaudited)
Cash and cash equivalents
$
1,053

 
$
1,264

Cash held at consolidated affiliated partnerships and restricted cash
801

 
766

Investments
9,332

 
10,038

Due from brokers
338

 
506

Accounts receivable, net
700

 
612

Inventories, net
1,961

 
1,805

Property, plant and equipment, net
6,179

 
6,364

Goodwill
336

 
334

Intangible assets, net
513

 
544

Assets held for sale
8,891

 
8,790

Other assets
903

 
810

Total Assets
$
31,007

 
$
31,833

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
1,025

 
$
1,001

Accrued expenses and other liabilities
1,069

 
1,033

Deferred tax liability
787

 
924

Unrealized loss on derivative contracts
985

 
1,275

Securities sold, not yet purchased, at fair value
625

 
1,023

Due to brokers
243

 
1,057

Liabilities held for sale
5,998

 
6,202

Debt
7,911

 
7,923

Total liabilities
18,643

 
20,438

 
 
 
 
Commitments and contingencies (Note 16)

 

 
 
 
 
Equity:
 
 
 
Limited partner
5,922

 
5,420

General partner
(282
)
 
(287
)
Equity attributable to Icahn Enterprises Holdings
5,640

 
5,133

Equity attributable to non-controlling interests
6,724

 
6,262

Total equity
12,364

 
11,395

Total Liabilities and Equity
$
31,007

 
$
31,833





See notes to condensed consolidated financial statements.


7


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
(Unaudited)
Net sales
$
2,864

 
$
2,404

 
$
8,220

 
$
7,107

Other revenues from operations
217

 
181

 
632

 
705

Net (loss) gain from investment activities
(514
)
 
420

 
328

 
604

Interest and dividend income
36

 
34

 
99

 
94

Gain on disposition of assets, net
65

 
446

 
65

 
1,969

Other income (loss), net
17

 
19

 
83

 
(11
)
 
2,685

 
3,504

 
9,427

 
10,468

Expenses:
 
 
 
 
 
 
 
Cost of goods sold
2,406

 
2,054

 
7,007

 
6,174

Other expenses from operations
173

 
144

 
490

 
469

Selling, general and administrative
340

 
323

 
1,042

 
945

Restructuring, net
17

 
1

 
20

 
3

Impairment

 

 
7

 
76

Interest expense
130

 
164

 
406

 
524

 
3,066

 
2,686

 
8,972

 
8,191

(Loss) income from continuing operations before income tax benefit (expense)
(381
)
 
818

 
455

 
2,277

Income tax benefit (expense)
71

 
(18
)
 
57

 
(13
)
(Loss) income from continuing operations
(310
)
 
800

 
512

 
2,264

Income from discontinued operations
163

 
29

 
353

 
131

Net (loss) income
(147
)
 
829

 
865

 
2,395

Less: net (loss) income attributable to non-controlling interests
(273
)
 
232

 
292

 
262

Net income attributable to Icahn Enterprises Holdings
$
126

 
$
597

 
$
573

 
$
2,133

 
 
 
 
 
 
 
 
Net (loss) income attributable to Icahn Enterprises from:
 
 
 
 
 
 
 
    Continuing operations
$
(29
)
 
$
577

 
$
244

 
$
2,028

    Discontinued operations
155

 
20

 
329

 
105

 
$
126

 
$
597

 
$
573

 
$
2,133

 
 
 
 
 
 
 
 
Net income attributable to Icahn Enterprises Holdings allocable to:
 
 
 
 
 
 
 
Limited partner
$
124

 
$
591

 
$
567

 
$
2,112

General partner
2

 
6

 
6

 
21

 
$
126

 
$
597

 
$
573

 
$
2,133


See notes to condensed consolidated financial statements.


8


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(Unaudited)
Net (loss) income
$
(147
)
 
$
829

 
$
865

 
$
2,395

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Post-retirement benefits
4

 
7

 
21

 
17

Hedge instruments
(1
)
 
(4
)
 
(3
)
 
(1
)
Translation adjustments and other
(11
)
 
(1
)
 
(86
)
 
107

Other comprehensive (loss) income, net of tax
(8
)
 
2

 
(68
)
 
123

Comprehensive (loss) income
(155
)
 
831

 
797

 
2,518

Less: Comprehensive (loss) income attributable to non-controlling interests
(275
)
 
235

 
284

 
274

Comprehensive income attributable to Icahn Enterprises Holdings
$
120

 
$
596

 
$
513

 
$
2,244

 
 
 
 
 
 
 
 
Comprehensive income attributable to Icahn Enterprises Holdings allocable to:
 
 
 
 
 
 
 
Limited partner
$
119

 
$
590

 
$
508

 
$
2,222

General partner
1

 
6

 
5

 
22

 
$
120

 
$
596

 
$
513

 
$
2,244


Accumulated other comprehensive loss was $1,479 million and $1,411 million at September 30, 2018 and December 31, 2017, respectively.























See notes to condensed consolidated financial statements.


9


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions, Unaudited)
 
Equity Attributable to Icahn Enterprises Holdings
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partner's Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2017
$
(287
)
 
$
5,420

 
$
5,133

 
$
6,262

 
$
11,395

Net income
6

 
567

 
573

 
292

 
865

Other comprehensive loss
(1
)
 
(59
)
 
(60
)
 
(8
)
 
(68
)
Partnership distributions
(1
)
 
(72
)
 
(73
)
 

 
(73
)
Investment segment contributions

 

 

 
280

 
280

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(109
)
 
(109
)
Cumulative effect adjustment from adoption of accounting principle

 
(29
)
 
(29
)
 

 
(29
)
Changes in subsidiary equity and other
1

 
95

 
96

 
7

 
103

Balance, September 30, 2018
$
(282
)
 
$
5,922

 
$
5,640

 
$
6,724

 
$
12,364


 
Equity Attributable to Icahn Enterprises Holdings
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partner's Equity
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2016
$
(317
)
 
$
2,496

 
$
2,179

 
$
5,863

 
$
8,042

Net income
21

 
2,112

 
2,133

 
262

 
2,395

Other comprehensive income
1

 
110

 
111

 
12

 
123

Partnership distributions
(1
)
 
(60
)
 
(61
)
 

 
(61
)
Partnership contributions
6

 
606

 
612

 

 
612

Investment segment contributions

 

 

 
600

 
600

Dividends and distributions to non-controlling interests in subsidiaries

 

 

 
(38
)
 
(38
)
Cumulative effect adjustment from adoption of accounting principle

 
(47
)
 
(47
)
 

 
(47
)
Changes in subsidiary equity and other
(1
)
 
(116
)
 
(117
)
 
(285
)
 
(402
)
Balance, September 30, 2017
$
(291
)
 
$
5,101

 
$
4,810

 
$
6,414

 
$
11,224








See notes to condensed consolidated financial statements.


10


ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Nine Months Ended
September 30,
 
2018
 
2017
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
865

 
$
2,395

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Income from discontinued operations
(353
)
 
(131
)
Net gain from securities transactions
(858
)
 
(1,852
)
Purchases of securities
(3,911
)
 
(704
)
Proceeds from sales of securities
5,538

 
2,292

Purchases to cover securities sold, not yet purchased
(1,390
)
 
(692
)
Proceeds from securities sold, not yet purchased
949

 
1,222

Changes in receivables and payables relating to securities transactions
(609
)
 
(2,702
)
Gain on disposition of assets, net
(65
)
 
(1,969
)
Depreciation and amortization
388

 
405

Impairment
7

 
76

Deferred taxes
(65
)
 
(9
)
Other, net
39

 
5

Changes in operating assets and liabilities
(554
)
 
340

Net cash used in operating activities from continuing operations
(19
)
 
(1,324
)
Net cash provided by operating activities from discontinued operations
345

 
410

Net cash provided by (used in) operating activities
326

 
(914
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(276
)
 
(333
)
Acquisition of businesses, net of cash acquired
(13
)
 
(105
)
Purchase of additional interests in consolidated subsidiaries

 
(349
)
Proceeds from disposition of assets
160

 
1,405

Other, net
(20
)
 
14

Net cash (used in) provided by investing activities from continuing operations
(149
)
 
632

Net cash used in investing activities from discontinued operations
(318
)
 
(298
)
Net cash (used in) provided by investing activities
(467
)
 
334

Cash flows from financing activities:
 
 
 
Investment segment contributions from non-controlling interests
280

 
600

Partnership contributions

 
612

Partnership distributions
(73
)
 
(61
)
Proceeds from offering of subsidiary equity
6

 

Dividends and distributions to non-controlling interests in subsidiaries
(104
)
 
(34
)
Proceeds from Holding Company senior unsecured notes

 
1,195

Repayments of Holding Company senior unsecured notes

 
(1,175
)
Proceeds from subsidiary borrowings
1,003

 
843

Repayments of subsidiary borrowings
(1,065
)
 
(933
)
Other, net
6

 
2

Net cash provided by financing activities from continuing operations
53

 
1,049

Net cash used in financing activities from discontinued operations
(131
)
 
(191
)
Net cash (used in) provided by financing activities
(78
)
 
858

Effect of exchange rate changes on cash and cash equivalents
(1
)
 
2

Add back decrease in cash of assets held for sale
44

 
232

Net (decrease) increase in cash and cash equivalents and restricted cash and restricted cash equivalents
(176
)
 
512

Cash and cash equivalents and restricted cash and restricted cash equivalents, beginning of period
2,030

 
2,097

Cash and cash equivalents and restricted cash and restricted cash equivalents, end of period
$
1,854

 
$
2,609

See notes to condensed consolidated financial statements.


11


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)


1.
Description of Business.
Overview
Icahn Enterprises L.P. ("Icahn Enterprises") owns a 99% limited partner interest in Icahn Enterprises Holdings L.P. ("Icahn Enterprises Holdings"). Icahn Enterprises G.P. Inc. ("Icahn Enterprises GP"), which is 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 September 30, 2018. Icahn Enterprises Holdings and its subsidiaries own substantially all of the assets and liabilities of Icahn Enterprises and conduct substantially all of its operations. Therefore, the financial results of Icahn Enterprises and Icahn Enterprises Holdings are substantially the same, with differences relating primarily to allocations of the general partner interest, which is reflected as an aggregate 1.99% general partner interest in the financial statements of Icahn Enterprises, as well as due to the carrying amount of deferred financing costs related to our senior unsecured notes. In addition to the above, Mr. Icahn and his affiliates owned approximately 91.5% of Icahn Enterprises' outstanding depositary units as of September 30, 2018.
References to "we," "our" or "us" herein include both Icahn Enterprises and Icahn Enterprises Holdings and their subsidiaries, unless the context otherwise requires.
Description of Continuing Operating Businesses
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment, Automotive, Energy, Railcar, Metals, Mining, Food Packaging, Real Estate and Home Fashion. We also report the results of our Holding Company, which includes the results of certain subsidiaries of Icahn Enterprises and Icahn Enterprises Holdings (unless otherwise noted), and investment activity and expenses associated with our Holding Company. See Note 11, "Segment Reporting," for a reconciliation of each of our reporting segment's results of operations to our consolidated results. Certain additional information with respect to our segments is discussed below.
Investment
Our Investment segment is comprised of various private investment funds ("Investment Funds") in which we have general partner interests and through which we invest our proprietary capital. We and certain of Mr. Icahn's wholly owned affiliates are the only investors in the Investment Funds. As general partner, we provide investment advisory and certain administrative and back office services to the Investment Funds but do not provide such services to any other entities, individuals or accounts. Interests in the Investment Funds are not offered to outside investors. We had interests in the Investment Funds with a fair value of approximately $3.0 billion and $3.0 billion as of September 30, 2018 and December 31, 2017, respectively.
Automotive
We conduct our Automotive segment through our wholly owned subsidiary Icahn Automotive Group LLC ("Icahn Automotive"). Icahn Automotive is engaged in the retail and wholesale distribution of automotive parts in the aftermarket as well as providing automotive repair and maintenance services to its customers.
Energy
We conduct our Energy segment through our majority ownership in CVR Energy, Inc. ("CVR Energy"). CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining L.P. ("CVR Refining") and CVR Partners L.P. ("CVR Partners"), respectively. CVR Refining is a petroleum refiner and marketer of high value transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of ammonia and urea ammonium nitrate. As of September 30, 2018, CVR Energy owned 100% of each of the general partners of CVR Refining and CVR Partners and approximately 81% and 34% of the common units of CVR Refining and CVR Partners, respectively.
On August 1, 2018, CVR Energy completed an exchange offer whereby CVR Refining's public unitholders tendered a total of 21,625,106 common units of CVR Refining in exchange for 13,699,549 shares of CVR Energy common stock. As of September 30, 2018, we owned approximately 70.8% of the total outstanding common stock of CVR Energy. In addition, as of September 30, 2018, we directly owned approximately 3.9% of the total outstanding common units of CVR Refining.
Railcar
We conduct our Railcar segment through our majority ownership in American Railcar Industries, Inc. ("ARI") and, prior to its sale on June 1, 2017, our wholly owned subsidiary American Railcar Leasing, LLC ("ARL"). As of September 30, 2018, we owned approximately 62.2% of the total outstanding common stock of ARI.


12


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

ARI is a North American designer and manufacturer of hopper and tank railcars. ARI provides its railcar customers with integrated solutions through a comprehensive set of high-quality products and related services through its manufacturing, railcar leasing and railcar services operations. ARI's manufacturing consists of railcar manufacturing and railcar and industrial component manufacturing. ARI's railcar leasing business consists of railcars built by ARI leased to third parties under operating leases. ARI's railcar services consist of railcar repair, engineering and field services.
On October 22, 2018, we announced a definitive agreement to sell ARI to ITE Rail Fund L.P. ("ITE Rail") for $70.00 per share of ARI common stock. If this transaction is consummated, our share of the cash proceeds will be approximately $831 million. We expect the sale of ARI to close in the fourth quarter of 2018, subject to customary closing conditions. Under certain circumstances, ARI may be subject to a termination fee of $65 million or ITE Rail may be subject to a termination fee of $130 million. This transaction met all the criteria to be classified as held for sale on October 22, 2018 upon execution of the definitive agreement.
On June 1, 2017, we closed on the initial sale of ARL. In connection with this sale, we received cash consideration of approximately $1.3 billion and reassigned the debt of ARL to the purchaser, resulting in a pretax gain on disposition of assets of approximately $1.5 billion during the nine months ended September 30, 2017.
Metals
We conduct our Metals segment through our indirect wholly owned subsidiary PSC Metals LLC, f/k/a, PSC Metals, Inc. (“PSC Metals”). PSC Metals is principally engaged in the business of collecting, processing and selling ferrous and non-ferrous metals, as well as the processing and distribution of steel pipe and plate products. PSC Metals collects industrial and obsolete scrap metal, processes it into reusable forms and supplies the recycled metals to its customers.
Mining
We conduct our Mining segment through our majority ownership in Ferrous Resources Ltd. ("Ferrous Resources"). As of September 30, 2018, we owned approximately 77.2% of the total outstanding common stock of Ferrous Resources. Ferrous Resources acquired certain rights to iron ore mineral resources in Brazil and develops mining operations and related infrastructure to produce and sell iron ore products to the global steel industry.
Food Packaging
We conduct our Food Packaging segment through our majority ownership in Viskase Companies, Inc. ("Viskase"). During January 2018, Viskase received $50 million in connection with its common stock rights offering. In connection with this rights offering, we fully exercised our subscription rights under our basic and over subscription privileges to purchase additional shares of Viskase common stock, thereby increasing our ownership of Viskase from 74.6% to 78.6%, for an aggregate additional investment of $44 million.
Viskase is a producer of cellulosic, fibrous and plastic casings used to prepare and package processed meat products.
Real Estate
Our Real Estate operations consist primarily of rental real estate, property development and associated club activities. Our rental real estate operations consist primarily of office and industrial properties leased to single corporate tenants. Our property development operations are run primarily through a real estate investment, management and development subsidiary that focuses primarily on the construction and sale of single-family and multi-family homes, lots in subdivisions and planned communities, and raw land for residential development. Our property development locations also operate golf and club operations. In addition, our Real Estate operations also includes a hotel, timeshare and casino resort property in Aruba as well as the Trump Plaza Hotel and Casino in Atlantic City, which ceased operations in September 2014 prior to our obtaining control of the property.
In August 2018, our Real Estate segment sold a commercial rental property for $139 million, resulting in a pretax gain on disposition of assets of $67 million. The proceeds from the sale were initially classified as restricted cash on our condensed consolidated balance sheet as of September 30, 2018 in connection with section 1031 of the Internal Revenue Code, as amended, however, such restriction was released in October 2018.
In August 2017, our Real Estate segment sold a development property in Las Vegas, Nevada for $600 million, resulting in a pretax gain on disposition of assets of $456 million. The transaction included cash proceeds from the sale of $225 million and two tranches of seller financing totaling $375 million (including a $345 million first-lien mortgage and a $30 million second-lien mortgage). The seller financing receivables, plus accrued and unpaid interest receivable, are included in other assets on our condensed consolidated balance sheets. Such receivables were received in full in October 2018.


13


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Home Fashion
We conduct our Home Fashion segment through our indirect wholly owned subsidiary, WestPoint Home LLC (“WPH”). WPH's business consists of manufacturing, sourcing, marketing, distributing and selling home fashion consumer products.
Description of Discontinued Operating Businesses
As of September 30, 2018, we also operated discontinued operations previously reported in our Automotive and former Gaming segments as discussed below. In addition, see Note 12, "Discontinued Operations," for additional information with respect to our discontinued operating businesses.
Automotive
Our discontinued Automotive operations consists of our wholly owned subsidiary, Federal-Mogul LLC ("Federal-Mogul"). During January 2017, we increased our ownership in Federal-Mogul from 82.0% to 100% for an aggregate purchase price of $305 million.
On October 1, 2018, we closed on the previously announced sale of Federal-Mogul to Tenneco Inc. ("Tenneco"). In connection with the sale, we received $800 million in cash and approximately 29.5 million shares of Tenneco common stock, of which approximately 23.8 million shares are non-voting shares that will convert to voting shares if and when sold. The remaining approximately 5.7 million voting shares received by us represents approximately 9.9% of the aggregate voting interest in Tenneco. There are restrictions on how many shares of Tenneco common stock that can be sold by us within the first 150 days after the closing of the sale. The voting and non-voting shares of Tenneco common stock have the same economic value. As of October 1, 2018, the approximately 29.5 million voting and non-voting shares of Tenneco common stock had a fair value of approximately $1.2 billion, which our Holding Company will hold and record as a Level 1 investment measured at fair value on a recurring basis. In addition, Federal-Mogul's outstanding debt was assumed by Tenneco.
Gaming
Our discontinued Gaming operations consists of our majority ownership in Tropicana Entertainment Inc. ("Tropicana") and the Trump Taj Mahal Casino Resort ("Taj Mahal"). As of September 30, 2018, we owned approximately 83.9% of the total outstanding common stock of Tropicana. In August 2017, we increased our ownership in Tropicana from 72.5% to 83.9% through a tender offer for additional shares of Tropicana common stock not already owned by us for an aggregate purchase price of $95 million. In addition, Tropicana repurchased and retired shares of its common stock in connection with this tender offer for an aggregate purchase price of $36 million. Taj Mahal closed in October 2016 and was subsequently sold on March 31, 2017.
On October 1, 2018, Tropicana closed on the previously announced real estate sales and merger transaction for aggregate cash consideration, net of adjustments, of approximately $1.8 billion. The transaction did not include Tropicana Aruba Resort and Casino, which was retained by us and is now reported within our Real Estate segment. Our proportionate share of the cash proceeds, net of adjustments, was approximately $1.5 billion.
Gain on Sales of Discontinued Operations
As a result of the sales of Federal-Mogul and Tropicana described above, we will recognize aggregate pre-tax gains on the sales of discontinued operations of approximately $1.0 billion in the fourth quarter of 2018.

2.
Basis of Presentation and Summary of Significant Accounting Policies.
We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “'40 Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the '40 Act. In addition, we do not invest or intend to invest in securities as our primary business. We intend to structure our investments to continue to be taxed as a partnership rather than as a corporation under the applicable publicly traded partnership rules of the Internal Revenue Code, as amended.
Events beyond our control, including significant appreciation or depreciation in the market value of certain of our publicly traded holdings or adverse developments with respect to our ownership of certain of our subsidiaries, could result in our inadvertently becoming an investment company that is required to register under the ’40 Act. Our recent sales of Federal-Mogul and Tropicana did not result in our being considered an investment company. However, additional transactions involving the sale of certain assets could result in our being considered an investment company. Following such events or transactions, an exemption under the '40 Act would provide us up to one year to take steps to avoid becoming classified as an investment


14


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

company. We expect to take steps to avoid becoming classified as an investment company, but no assurance can be made that we will successfully be able to take the steps necessary to avoid becoming classified as an investment company.
The accompanying condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2017. The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) related to interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are necessary to present fairly the results for the interim periods. All such adjustments are of a normal and recurring nature.
Principles of Consolidation
As of September 30, 2018, our condensed consolidated financial statements include the accounts of (i) Icahn Enterprises and Icahn Enterprises Holdings and (ii) the wholly and majority owned subsidiaries of Icahn Enterprises and Icahn Enterprises Holdings, in addition to variable interest entities ("VIEs") in which we are the primary beneficiary. In evaluating whether we have a controlling financial interest in entities that we consolidate, we consider the following: (1) for voting interest entities, including limited partnerships and similar entities that are not VIEs, we consolidate these entities in which we own a majority of the voting interests; and (2) for VIEs, we consolidate these entities in which we are the primary beneficiary. See below for a discussion of our VIEs. Kick-out rights, which are the rights underlying the limited partners' ability to dissolve the limited partnership or otherwise remove the general partners, held through voting interests of partnerships and similar entities that are not VIEs are considered the equivalent of the equity interests of corporations that are not VIEs.
Except for our Investment segment, for equity investments in which we own 50% or less but greater than 20%, we generally account for such investments using the equity method. All other equity investments are accounted for at fair value.
Discontinued Operations and Held For Sale
In April 2018, we announced separate definitive agreements to sell Federal-Mogul and Tropicana, each of which are considered separate disposal groups. Each transaction met the criteria to be classified as discontinued operations in the second quarter of 2018. As a result, in accordance with U.S. GAAP, the assets and liabilities of each disposal group have been reclassified to held for sale and their respective results of operations have been reclassified to discontinued operations for all periods presented. Each disposal group is reported at the lesser of carrying value or fair value less cost to sell.
Reclassifications
In connection with our adoption of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-18, Restricted Cash, as discussed below, our net cash used in operating activities for the nine months ended September 30, 2017 was increased by $195 million.
In connection with our adoption of FASB ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, as discussed below, we decreased our selling, general and administrative costs by $1 million and decreased other income, net by $1 million for the three months ended September 30, 2017. For the nine months ended September 30, 2017, we decreased our selling, general and administrative costs by $3 million and decreased other income, net by $3 million.
In addition, certain other reclassifications from the prior year presentation have been made to conform to the current year presentation, which did not have an impact on previously reported net income and equity and are not deemed material.
Consolidated Variable Interest Entities
Icahn Enterprises Holdings
We determined that Icahn Enterprises Holdings is a VIE because it lacks both substantive kick-out and participating rights. Icahn Enterprises is the primary beneficiary of Icahn Enterprises Holdings principally based on its 99% limited partner interest in Icahn Enterprises Holdings and therefore continues to consolidate Icahn Enterprises Holdings. The condensed consolidated financial statements of Icahn Enterprises Holdings are included in this Report. The balances with respect to Icahn Enterprises Holdings' consolidated VIEs are discussed below, comprising the Investment Funds, CVR Refining, CVR Partners and Viskase.


15


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Investment
We determined that each of the Investment Funds are considered VIEs because these limited partnerships lack both substantive kick-out and participating rights. Because we have a general partner interest in each of the Investment Funds and have significant limited partner interests in each of the Investment Funds, coupled with our significant exposure to losses and benefits in each of the Investment Funds, we are the primary beneficiary of each of the Investment Funds and therefore continue to consolidate each of the Investment Funds.
Energy
CVR Refining and CVR Partners are each considered VIEs because each of these limited partnerships lack both substantive kick-out and participating rights. In addition, CVR Energy also concluded that, based upon its general partner's roles and rights in CVR Refining and CVR Partners as afforded by their respective partnership agreements, coupled with its exposure to losses and benefits in each of CVR Refining and CVR Partners through its significant limited partner interests, intercompany credit facilities and services agreements, it is the primary beneficiary of both CVR Refining and CVR Partners. Based upon this evaluation, CVR Energy continues to consolidate both CVR Refining and CVR Partners.
Food Packaging
Viskase holds a variable interest in a joint venture for which Viskase is the primary beneficiary. Viskase's interest in the joint venture includes a 50% equity interest and also relates to the sales, operations, administrative and financial support to the joint venture through providing many of the assets used in its business.
The following table includes balances of assets and liabilities of VIE's included in Icahn Enterprises Holdings' condensed consolidated balance sheets.
 
September 30, 2018
 
December 31, 2017
 
(in millions)
Cash and cash equivalents
$
460

 
$
223

Cash held at consolidated affiliated partnerships and restricted cash
637

 
734

Investments
8,794

 
9,615

Due from brokers
338

 
506

Property, plant and equipment, net
3,034

 
3,191

Inventories, net
427

 
385

Intangible assets, net
283

 
298

Other assets
381

 
226

Accounts payable, accrued expenses and other liabilities
1,656

 
1,816

Securities sold, not yet purchased, at fair value
625

 
1,023

Due to brokers
243

 
1,057

Debt
1,168

 
1,166

Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, cash held at consolidated affiliated partnerships and restricted cash, accounts receivable, due from brokers, accounts payable, accrued expenses and other liabilities and due to brokers are deemed to be reasonable estimates of their fair values because of their short-term nature. See Note 4, “Investments and Related Matters,” and Note 5, “Fair Value Measurements,” for a detailed discussion of our investments and other non-financial assets and/or liabilities.
The fair value of our long-term debt is based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. The carrying value and estimated fair value of our long-term debt as of September 30, 2018 was approximately $7.9 billion and $8.1 billion, respectively. The carrying value and estimated fair value of our long-term debt as of December 31, 2017 was approximately $7.9 billion and $8.2 billion, respectively.


16


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Cash Flow
Cash and cash equivalents and restricted cash and restricted cash equivalents on our condensed consolidated statements of cash flows is comprised of (i) cash and cash equivalents and (ii) cash held at consolidated affiliated partnerships and restricted cash.
Cash Held at Consolidated Affiliated Partnerships and Restricted Cash
Our cash held at consolidated affiliated partnerships balance was $64 million and $192 million as of September 30, 2018 and December 31, 2017, respectively. Cash held at consolidated affiliated partnerships relates to our Investment segment and consists of cash and cash equivalents held by the Investment Funds that, although not legally restricted, is not available to fund the general liquidity needs of the Investment segment or Icahn Enterprises.
Our restricted cash balance was $737 million and $574 million as of September 30, 2018 and December 31, 2017, respectively. Restricted cash primarily relates to our Investment segment's cash pledged and held for margin requirements on derivative transactions.
Revenue From Contracts With Customers and Contract Balances
As discussed below, on January 1, 2018, we adopted FASB ASC Topic 606, Revenue from Contracts with Customers. Due to the nature of our business, we derive revenue from various sources in various industries. Investment segment and Holding Company revenues are not in scope of FASB ASC Topic 606. Railcar leasing and Real Estate leasing revenues are also not in scope of FASB ASC Topic 606. The following is a summary of our revenue recognition that is in scope of FASB ASC Topic 606 for certain of our reporting segments. In addition, we present disaggregated revenue information in Note 11, "Segment Reporting."
Automotive
Revenue:   Our Automotive segment recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Our Automotive segment revenue from retail and commercial sales is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. Automotive service revenues are recognized on completion of the service and consist of products and the labor charged for installing products or maintaining or repairing vehicles. Automotive services labor revenues are included in other revenues from operations in our condensed consolidated statements of operations, however, the sale of any installed parts or materials related to automotive services are included in net sales. Our Automotive segment recognizes revenues from extended warranties offered to its customers on tires its sells, including lifetime warranties for road hazard assistance (recognized over 3 years) and 1-year, 3-year and lifetime plans for alignments (recognized over 1 year, 3 years and 5 years, respectively), for which it receives payment upfront. Revenues from extended warranties are recognized over the term of the warranty contract with the satisfaction of its performance obligations measured using the output method. Our Automotive segment recognizes revenues from franchise fees, which it receives payment upfront, and franchise royalties, for which it receives payment over time. Revenues from upfront franchise fees are recognized at the time the store opens, as that is when our Automotive segment's performance obligations are deemed complete, and revenues from franchise royalties are recognized in the period in which royalties are earned, generally based on a percentage of franchise sales.
Contract balances:   Our Automotive segment has deferred revenue with respect to extended warranty plans of $42 million and $42 million as of September 30, 2018 and January 1, 2018, respectively, which are included in accrued expenses and other liabilities on our condensed consolidated balance sheets. For the three and nine months ended September 30, 2018, our Automotive segment recorded revenue of $5 million and $18 million, respectively, with respect to deferred revenue outstanding as of January 1, 2018. For deferred revenue outstanding as of September 30, 2018, our Automotive segment expects to recognize approximately $36 million in 2019 and thereafter.
Energy
Revenue: Our Energy segment revenues from the sale of petroleum products are recorded upon delivery of the products to customers, which is the point at which title is transferred and the customer has assumed the risk of loss. This generally takes place as product passes into the pipeline, as a product transfer order occurs within a pipeline system, or as product enters equipment or locations supplied or designated by the customer. For our Energy segment's nitrogen fertilizer products sold, revenues are recorded at the point in time at which the customer obtains control of the product, which is generally upon delivery and acceptance by the customer. Nitrogen fertilizer products are sold on a wholesale basis under a contract or by purchase order. Excise and other taxes collected from customers and remitted to governmental authorities by our Energy segment are not included in reported revenues.


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Notes to Condensed Consolidated Financial Statements (Unaudited)

Many of the petroleum business' contracts have index-based pricing which is considered variable consideration that should be estimated in determining the transaction price. Our Energy segment determined that it does not need to estimate the variable consideration because the uncertainty related to the consideration is resolved on the pricing date or the date when the product is delivered. The nitrogen fertilizer business has an immaterial amount of variable consideration for contracts with an original duration of less than a year. A small portion of the nitrogen fertilizer partnership's revenue includes contracts extending beyond one year and contain variable pricing in which the majority of the variability is attributed to the market-based pricing. The nitrogen fertilizer business' contracts do not contain a significant financing component.
As of September 30, 2018, our Energy segment had $12 million of remaining performance obligations for contracts within an original expected duration of more than one year. Our Energy segment expects to recognize approximately $6 million of these performance obligations as revenue by the end of 2019, approximately $3 million in 2020 and the remaining balance thereafter.
Contract balances:   Our Energy segment's deferred revenue is a contract liability that primarily relates to fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer. Deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional prior to transferring product to the customer. An associated receivable is recorded for uncollected prepaid contract amounts. Contracts requiring prepayment are generally short-term in nature and, as discussed above, revenue is recognized at the point in time in which the customer obtains control of the product. Our Energy segment had deferred revenue of $32 million and $34 million as of September 30, 2018 and January 1, 2018, respectively, which is included in accrued expense and other liabilities on the condensed consolidated balance sheets. For the three and nine months ended September 30, 2018, our Energy segment recorded revenue of $2 million and $34 million, respectively, with respect to deferred revenue outstanding as of January 1, 2018.
Railcar
Revenue: Revenues from manufactured railcar sales are recognized following completion of manufacturing, inspection, customer acceptance and title transfer, which is when the risk for any damage or loss with respect to the railcars passes to the customer, in accordance with our Railcar segment's contractual terms. Revenues from railcar and industrial components are recorded at the time of product shipment, in accordance with our Railcar segment's contractual terms. Revenues from railcar maintenance services are recognized upon completion and shipment of railcars from our Railcar segment's plants. Our Railcar segment does not currently bundle railcar service contracts with new railcar sales. Revenues from engineering and field services are recognized as performed.
As of September 30, 2018, our Railcar segment had $963 million of remaining performance obligations for contractual commitments from customers for which work is partially completed. Our Railcar segment expects to recognize approximately $184 million of these performance obligations as revenue during the next twelve months and an additional $779 million thereafter.
Contract balances:  ARI bills its customers once services have been rendered or products have been delivered and ARI has an unconditional right to consideration as only the passage of time is required before payment of that consideration is due. The contract assets that ARI maintains are related to unbilled revenues recognized on repair services that have been performed but the entire project has not yet been completed, and the railcar has not yet been shipped to the customer. Contract liabilities represent deferred revenue related to railcar manufacturing and repair services. Our Railcar segment had unbilled revenue of $7 million and $4 million as of September 30, 2018 and January 1, 2018, respectively, which is included in accounts receivable, net on our condensed consolidated balance sheets. Our Railcar segment had deferred revenue of $2 million and $2 million as of September 30, 2018 and January 1, 2018, respectively, which is included in accrued expense and other liabilities on the condensed consolidated balance sheets.
Adoption of New Accounting Standards
Revenue Accounting Standards Updates
In May 2014, the FASB issued ASU No. 2014-09, creating a new topic, FASB ASC Topic 606, Revenue from Contracts with Customers, superseding revenue recognition requirements in FASB ASC Topic 605, Revenue Recognition. This ASU requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, an entity is required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU was amended by ASU No. 2015-14, issued in August 2015, which deferred the original effective date by one year; the effective date of this ASU is for


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Notes to Condensed Consolidated Financial Statements (Unaudited)

fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, using one of two retrospective application methods. In addition, the FASB issued other amendments during 2016 and 2017 to FASB ASC Topic 606 that include implementation guidance to principal versus agent considerations, guidance to identifying performance obligations and licensing guidance and other narrow scope improvements. We adopted these new standards on January 1, 2018 using the modified retrospective application method which required a cumulative effect adjustment recognized in equity at such date. The standard has been applied to all contracts at the date of initial application. No adjustment to revenue for periods prior to adoption were required. We have not identified any material differences in our revenue recognition methods that required modification under the new standards. Additionally, our internal control framework did not materially change as a result of the adoption of these new standards. The impact of adopting these new standards on our condensed consolidated financial statements is a cumulative effect adjustment to decrease our equity attributable to Icahn Enterprises and Icahn Enterprises Holdings as of January 1, 2018 by $29 million, primarily relating to our Automotive segment.
As of January 1, 2018, our Automotive segment increased accrued expenses and other liabilities by $42 million and decreased deferred tax liabilities by $10 million for certain extended warranties to reflect the revenues from these plans as deferred revenue. Previously, revenues from these plans were recognized upfront. Our Automotive segment also recognizes revenue from the sale of goods on a drop ship basis. Previously, revenues from these transactions were recognized gross. For the three months ended September 30, 2018, net sales and costs of goods sold would have been higher by $15 million and $15 million, respectively, under prior accounting principles and for the nine months ended September 30, 2018, net sales and cost of goods sold would have been higher by $47 million and $47 million, respectively.
As of January 1, 2018, our Energy segment increased each of accounts receivable, net and accrued expenses and other liabilities by $21 million for customer prepayments prior to delivery and to gross up certain fees collected from customers to reflect a receivable and deferred revenue recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional. Previously, deferred revenue was recorded by our Energy segment upon customer prepayment.
In addition to the above, we increased assets by an aggregate of $32 million and increased liabilities by $29 million as of January 1, 2018, primarily with respect to Federal-Mogul's asset and liabilities classified as held for sale. For the three and nine months ended September 30, 2018, the impact on revenues would have been immaterial under prior accounting principles.
Other Accounting Standards Updates
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall, which amends FASB ASC Topic 825, Financial Instruments. This ASU requires that equity investments (except those accounted for under the equity method of accounting or those that result in the consolidation of the investee) to be measured at fair value with changes recognized in earnings. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment. In addition, there were other amendments to certain disclosure and presentation matters pertaining to financial instruments, including the requirement of an entity to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this new standard on January 1, 2018 using the modified retrospective application method which required a cumulative effect adjustment recognized in equity at such date. The amendments related to equity securities without readily determinable fair values were applied prospectively to equity investments that existed as of the date of adoption. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU seeks to reduce the diversity currently in practice by providing guidance on the presentation of eight specific cash flow issues in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this standard on January 1, 2018 using the retrospective application method. The adoption of this standard did not have a material impact on our condensed consolidated statements of cash flows.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU requires that the statement of cash flows explain the change during the period total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We have adopted this standard on January 1, 2018 using the retrospective application method. The impact of adopting this new standard is discussed above under "Reclassifications."


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ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends FASB ASC Topic 715, Compensation - Retirement Benefits. This ASU requires entities to present the service cost component of net periodic benefit cost in the same line item or items in the financial statements as other compensation costs arising from services rendered by the pertinent employees during the period. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this standard on January 1, 2018 using the retrospective application method. The impact of adopting this new standard is discussed above under "Reclassifications."
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, which amends FASB ASC Topic 718, Compensation - Stock Compensation. This ASU provides updated guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this standard on January 1, 2018 which has been applied prospectively and which did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases. This ASU requires the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. In addition, among other changes to the accounting for leases, this ASU retains the distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance. Furthermore, quantification and qualitative disclosures, including disclosures regarding significant judgments made by management, will be required. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments in this ASU should be applied using a modified retrospective approach. Early application is permitted. In addition, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), which provides an additional (and optional) transition method to adopt the new leases standard. We anticipate adopting the new leases standard using the new transition method option effective January 1, 2019, which will require adopting the new leases standard at the adoption date and recognizing a cumulative-effect adjustment to the opening balance of equity in the period of adoption instead of the earliest period presented. In addition, prior period presentation and disclosure will not be adjusted. We believe the most significant impact will relate to the recognition of right-of-use assets and lease liabilities on our condensed consolidated balance sheets for long-term operating leases with the significant majority of the impact within our Automotive segment. We anticipate our assessment and implementation plan to be ongoing during the remainder of 2018 and continue to evaluate the impact of this standard on our condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which amends FASB ASC Topic 326, Financial Instruments - Credit Losses. This ASU requires financial assets measured at amortized cost to be presented at the net amount to be collected and broadens the information, including forecasted information incorporating more timely information, that an entity must consider in developing its expected credit loss estimate for assets measured. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Targeting Improvements to Accounting for Hedging Activities, which amends FASB ASC Topic 815, Derivatives and Hedging. This ASU includes amendments to existing guidance to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends FASB ASC Topic 220, Income Statement - Reporting Comprehensive Income. This ASU allows a reclassification out of accumulated other comprehensive loss within equity for standard tax effects resulting from the Tax Cuts and Jobs Act and consequently, eliminates the stranded tax effects resulting from the Tax Cuts and Jobs Act. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which amends FASB ASC Topic 820, Fair Value Measurements. This ASU eliminates, modifies and adds


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Notes to Condensed Consolidated Financial Statements (Unaudited)

various disclosure requirements on fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain disclosures are required to be applied using a retrospective approach and others using a prospective approach. Early adoption is permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which amends FASB ASC Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software. This ASU adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU should be applied either using a retrospective or prospective approach. Early adoption is permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.

3.
Related Party Transactions.
Our second amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general partner or any of its affiliates, including, without limitation, buying or selling properties from or to our general partner and any of its affiliates and borrowing and lending money from or to our general partner and any of its affiliates, subject to limitations contained in our partnership agreement and the Delaware Revised Uniform Limited Partnership Act. The indentures governing our indebtedness contain certain covenants applicable to transactions with affiliates.
Investment Funds
During the nine months ended September 30, 2018 and 2017, Mr. Icahn and his affiliates (excluding us) invested $280 million and $600 million, respectively, in the Investment Funds, net of redemptions. As of September 30, 2018 and December 31, 2017, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates (excluding us) was approximately $4.8 billion and $4.4 billion, respectively, representing approximately 62% and 59% of the Investment Funds' assets under management as of each respective date.
We pay for expenses pertaining to the operation, administration and investment activities of our Investment segment for the benefit of the Investment Funds (including salaries, benefits and rent). Effective April 1, 2011, based on an expense-sharing arrangement, certain expenses borne by us are reimbursed by the Investment Funds. For the three months ended September 30, 2018 and 2017, $4 million and $2 million, respectively, was allocated to the Investment Funds based on this expense-sharing arrangement and for the nine months ended September 30, 2018 and 2017, such allocation was $6 million and $7 million, respectively.
Hertz Global Holdings, Inc.
As discussed in Note 4, "Investments and Related Matters," the Investment Funds have an investment in the common stock of Hertz Global Holdings, Inc. ("Hertz") measured at fair value that would have otherwise been subject to the equity method of accounting. Icahn Automotive provides services to Hertz in the ordinary course of business. For the three months ended September 30, 2018 and 2017, revenue from Hertz was $11 million and $5 million, respectively, and $29 million and $10 million for the nine months ended September 30, 2018 and 2017, respectively. Additionally, Federal-Mogul had payments to Hertz in the ordinary course of business of zero and $1 million for the three and nine months ended September 30, 2018, respectively and $2 million for each of the three and nine months ended September 30, 2017.
For the nine months ended September 30, 2018, the Investment Funds purchased shares of a certain investment from Hertz in the amount of $36 million.
In addition to our transactions with Hertz disclosed above, in January 2018, we entered into a Master Motor Vehicle Lease and Management Agreement with Hertz, pursuant to which Hertz granted 767 Auto Leasing LLC ("767 Leasing"), a joint venture created to purchase vehicles for lease, the option to acquire certain vehicles from Hertz at rates aligned with the rates at which Hertz sells vehicles to third parties. Under this agreement, Hertz will lease the vehicles that 767 Leasing purchases from Hertz, or from third parties, under a mutually developed fleet plan and Hertz will manage, service, repair, sell and maintain those leased vehicles on behalf of 767 Leasing. Additionally, Hertz will rent the leased vehicles to transportation network company drivers from rental counters within locations leased or owned by us. This agreement has an initial term of 18 months and is subject to automatic six-month renewals thereafter, unless terminated by either party (with or without cause) prior to the


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ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

start of any such six-month renewal. Our agreement with Hertz was unanimously approved by the independent directors of Icahn Enterprises' audit committee. Due to the nature of our involvement with 767 Leasing, which includes guaranteeing the payment obligations of 767 Leasing and sharing in the profits of 767 Leasing with Hertz, we determined that 767 Leasing is a variable interest entity. Furthermore, we determined that we are not the primary beneficiary as we do not have the power to direct the activities of 767 Leasing that most significantly impact its economic performance. Therefore, we do not consolidate the results of 767 Leasing. As of September 30, 2018, 767 Leasing had assets of $25 million, primarily vehicles for lease, and liabilities of $1 million. For the three and nine months ended September 30, 2018, our Automotive segment invested $15 million and $25 million, respectively, in 767 Leasing. As of September 30, 2018, our Automotive segment had an equity method investment in 767 Leasing of $24 million.
ACF Industries, Inc.
Our Railcar segment has certain transactions with ACF Industries LLC ("ACF"), an affiliate of Mr. Icahn, under various agreements, as well as on a purchase order basis. ACF is a manufacturer and fabricator of specialty railcar parts and miscellaneous steel products. Agreements and transactions with ACF include the following:
Railcar component purchases from ACF;
Railcar parts sales to ACF;
Railcar purchasing and engineering services agreements with ACF;
Lease of certain intellectual property to ACF;
Railcar repair services and support for ACF; and
Railcar purchases from ACF.
Purchases from ACF were $1 million and $1 million for the three months ended September 30, 2018 and 2017, respectively, and $2 million and $4 million for the nine months ended September 30, 2018 and 2017, respectively. For each of the three and nine months ended September 30, 2018, revenues from ACF were $3 million. For each of the three and nine months ended September 30, 2017, revenues from ACF were not material.
Insight Portfolio Group LLC
Insight Portfolio Group LLC ("Insight Portfolio Group") is an entity formed and controlled by Mr. Icahn in order to maximize the potential buying power of a group of entities with which Mr. Icahn has a relationship in negotiating with a wide range of suppliers of goods, services and tangible and intangible property at negotiated rates. Icahn Enterprises Holdings has a minority equity interest in Insight Portfolio Group and agreed to pay a portion of Insight Portfolio Group's operating expenses. In addition to the minority equity interest held by Icahn Enterprises Holdings, certain subsidiaries of ours, including Federal-Mogul (prior to October 1, 2018), CVR Energy, PSC Metals, ARI, ARL (prior to June 1, 2017), Tropicana (prior to October 1, 2018), Viskase and WPH also acquired minority equity interests in Insight Portfolio Group and agreed to pay a portion of Insight Portfolio Group's operating expenses. A number of other entities with which Mr. Icahn has a relationship also have minority equity interests in Insight Portfolio Group and also agreed to pay certain of Insight Portfolio Group's operating expenses. For the nine months ended September 30, 2018 and 2017, we and certain of our subsidiaries paid certain of Insight Portfolio Group's operating expenses of $2 million and $2 million, respectively.



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ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

4.
Investments and Related Matters.
Investment
Investments and securities sold, not yet purchased consist of equities, bonds, bank debt and other corporate obligations, all of which are reported at fair value in our condensed consolidated balance sheets. These investments are considered trading securities. In addition, our Investment segment has certain derivative transactions which are discussed in Note 6, “Financial Instruments." The carrying value and detail by security type, including business sector for equity securities, with respect to investments and securities sold, not yet purchased held by our Investment segment consist of the following:
 
September 30, 2018
 
December 31, 2017
Assets
(in millions)
Investments:
 
 
 
   Equity securities:
 
 
 
      Basic materials
$
559

 
$
1,170

      Consumer, non-cyclical
2,402

 
2,551

      Consumer, cyclical
1,378

 
777

      Energy
1,870

 
1,489

      Financial
477

 
2,185

      Technology
1,603

 
833

      Other
212

 
372

 
8,501

 
9,377

   Corporate debt securities
210

 
155

 
$
8,711

 
$
9,532

Liabilities
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
   Equity securities:
 
 
 
      Consumer, non-cyclical
$
74

 
$
101

      Consumer, cyclical
122

 
667

      Energy
362

 
110

      Industrial
67

 
110

 
625

 
988

   Corporate debt securities

 
35

 
$
625

 
$
1,023

The portion of unrealized (losses) gains that relates to securities still held by our Investment segment, primarily equity securities, was $(4) million and $635 million for the three months ended September 30, 2018 and 2017, respectively, and $356 million and $1,242 million for the nine months ended September 30, 2018 and 2017, respectively.
As of September 30, 2018, the Investment Funds owned approximately 27.8% of the outstanding common stock of Hertz. Our Investment segment recorded net gains of $23 million and $254 million for the three months ended September 30, 2018 and 2017, respectively, and net (losses) gains of $(135) million and $19 million for the nine months ended September 30, 2018 and 2017, respectively, with respect to its investment in Hertz. As of September 30, 2018 and December 31, 2017, the aggregate fair value of our Investment segment's investment in Hertz was $382 million and $517 million, respectively.
The Investment Funds also owned approximately 17.9% of the outstanding common stock of Herbalife Ltd. ("Herbalife") as of September 30, 2018. We are deemed to have significant influence with respect to our investment in Herbalife after considering the collective ownership in Herbalife by us and affiliates of Mr. Icahn, as well as our collective representation on the board of directors of Herbalife. Our Investment segment recorded net gains (losses) of $23 million and $(64) million for the three months ended September 30, 2018 and 2017, respectively, and net gains of $740 million and $359 million for the nine months ended September 30, 2018 and 2017, respectively, with respect to its investment in Herbalife. As of September 30, 2018


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Notes to Condensed Consolidated Financial Statements (Unaudited)

and December 31, 2017, the aggregate fair value of our Investment segment's investment in Herbalife was approximately $1.5 billion and $1.2 billion, respectively.
Herbalife and Hertz each file annual, quarterly and current reports, and proxy and information statements with the SEC, which are publicly available.
Other Segments and Holding Company
With the exception of certain equity method investments at our operating subsidiaries and our Holding Company disclosed in the table below, our investments are measured at fair value in our condensed consolidated balance sheets. The carrying value of investments held by our other segments and our Holding Company consist of the following:
 
September 30, 2018
 
December 31, 2017
 
(in millions)
Equity method investments
$
127

 
$
106

Other investments (measured at fair value)
494

 
400

 
$
621

 
$
506


5.
Fair Value Measurements.
U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 - Quoted prices are available in active markets for identical investments and non-financial assets and/or liabilities as of the reporting date.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies where all significant inputs are observable. The inputs and assumptions of our Level 2 investments are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.
Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the investments', non-financial assets' and/or liabilities' level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.


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Notes to Condensed Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the valuation of our assets and liabilities by the above fair value hierarchy levels measured on a recurring basis:
 
September 30, 2018
 
December 31, 2017
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
(in millions)
Investments (Note 4)
$
8,502

 
$
323

 
$
368

 
$
9,193

 
$
9,378

 
$
264

 
$
278

 
$
9,920

Derivative contracts, at fair value (Note 6)(1)

 
42

 

 
42

 

 

 

 

 
$
8,502

 
$
365

 
$
368

 
$
9,235

 
$
9,378

 
$
264

 
$
278

 
$
9,920

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities sold, not yet purchased (Note 4)
$
625

 
$

 
$

 
$
625

 
$
988

 
$
35

 
$

 
$
1,023

Other liabilities

 
2

 

 
2

 

 
1

 

 
1

Derivative contracts, at fair value (Note 6)
3

 
982

 

 
985

 
36

 
1,239

 

 
1,275

 
$
628

 
$
984

 
$

 
$
1,612

 
$
1,024

 
$
1,275

 
$

 
$
2,299

(1) 
Amounts are classified within other assets in our condensed consolidated balance sheets.

Assets Measured at Fair Value on a Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value
The changes in investments measured at fair value on a recurring basis for which we use Level 3 inputs to determine fair value are as follows:
 
Nine Months Ended
September 30,
 
2018
 
2017
 
(in millions)
Balance at January 1
$
278

 
$
211

Net unrealized gains
91

 
51

Purchases

 
5

Transfers out

 
(5
)
Transfers in

 
2

Other
(1
)
 

Balance at September 30
$
368

 
$
264

Net unrealized gains during the nine months ended September 30, 2018 and 2017 relate to a certain equity investment which is considered a Level 3 investment due to unobservable market data and is measured at fair value on a recurring basis. We determined the fair value of this investment based on recent market transactions. As of September 30, 2018 and December 31, 2017, the fair value of this investment was $365 million and $274 million, respectively.
Assets Measured at Fair Value on a Non-Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value
Certain assets measured at fair value using Level 3 inputs on a non-recurring basis have been impaired. During the nine months ended September 30, 2018 and 2017, we recorded impairment charges of $7 million and $2 million, respectively, relating to property, plant and equipment. We determined the fair value of property, plant and equipment by applying probability weighted, expected present value techniques to the estimated future cash flows using assumptions a market participant would utilize. In addition, during the nine months ended September 30, 2017, we recorded a loss of $6 million from marking inventory down to net realizable value at our Automotive segment. Additionally, in connection with our reclassification of certain railcars leased to others from held and used to assets held for sale, we recorded an impairment charge at our Railcar segment of $1 million and $68 million for the three and nine months ended September 30, 2017, respectively. Refer to Note 11, "Segment Reporting," for total impairment recorded by each of our segments.


25


ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
ICAHN ENTERPRISES HOLDINGS L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

6.
Financial Instruments.
Overview