Good day, and welcome to Icahn Enterprises LP Q2 2018 Earnings Conference Call with Jesse Lin, General Counsel Keith Cozza, President and CEO and Sung Hwan Cho, Chief Financial Officer. I would now like to turn the call over to Jesse Lynn, who will read the opening statement.
Thank you, and good morning. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. These forward looking statements involve risks and uncertainties that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our expectations will be realized. We assume no obligation to update or revise any forward looking statements should circumstances change except as required by law.
This presentation also includes certain non GAAP financial measures. A reconciliation of such non GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. Now I'll turn it over to Keith Cozza, our Chief Executive Officer.
Thanks, Jesse. Good morning, and welcome to the Q2 2018 Icahn Enterprises earnings call. Joining me on today's call is Sung Hwan Cho, our Chief Financial Officer. I will begin by providing some brief highlights. Sung will then provide an in-depth review of our financial results and the performance of our business segments.
We will then be available to address your questions. For Q2 2018, we had net income attributable to Icahn Enterprises of $309,000,000 or $1.70 per LP unit, compared to net income of $1,600,000,000 or $9.51 per LP unit in the prior year period. Net income attributable to Icahn Enterprises from continuing operations for Q2 2018 was 164,000,000 dollars or $0.90 per LP unit compared to net income of $1,500,000,000 or $9.20 per LP unit in the prior year period. The prior year period included a $1,000,000,000 gain net of tax from the sale of ARL. Adjusted EBITDA attributable to Icahn Enterprises for Q2 2018 was $356,000,000 compared to $288,000,000 for Q2 of 2017.
We previously announced in April of 2018 separate definitive agreements to sell both Federal Mogul and Tropicana Entertainment. We are reporting their respective results and discontinued operations and we have reclassified the assets and liabilities of each group to help for sale on our balance sheet. We agreed to sell Federal Mogul to Tenneco Inc. For approximately $5,400,000,000 comprised of $800,000,000 in cash and 29,500,000 shares of Tenneco common stock. All of Federal Mogul's outstanding debt at the time of closing will be assumed by Tenneco.
We expect the sale to close in the early part of the 4th quarter. We agreed to sell Tropicana's real estate to Gaming and Leisure Properties, Inc. And to merge Tropicana's Gaming and Hotel operations into Eldorado Resorts Inc. For aggregate consideration of approximately $1,850,000,000 The transaction does not include Tropicana's Aruba assets, which will be disposed of prior to closing with the consideration received being added to the 1,850,000,000 dollars We expect this sale to close in the beginning of Q4. Our investment funds earned a return of 4.9% in Q2 of 2018 compared to 4.3% for the prior year period.
Our positive performance in Q2 2018 was driven by net gains in our core long equity position, offset in part by net losses in our short equity index position. We moderately decreased our net long exposure to 11% as of the end of Q2 compared to 18% at the end of Q1 twenty eighteen. Net sales and service for our automotive segment in Q2 2018, which now excludes the operating results of Federal Mogul were $737,000,000 compared to $694,000,000 in the prior year period. The increase was due to acquisitions at ICON Automotive Group as well as strong organic sales growth in the commercial and service businesses. In our energy segments, our Q2 2018 net sales were $1,900,000,000 and consolidated adjusted EBITDA was 175,000,000 dollars CVR Refining had a solid second quarter led by strong Group 3 crack spreads, low RIN prices and wide crude oil differentials, while CVR Partners results were hampered by both planned and unplanned downtime at the Coffeyville and East Dubuque fertilizer facilities.
As you can see, we had a very busy quarter and are quite pleased with our results thus far in 2018. With that, let me
turn it over to Saum. Thanks, Keith. I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet. In Q2 2018, net income attributable to Icahn 60 from continuing operations in Q2 2018 was $164,000,000 compared to net income of $1,500,000 in the prior year period. On Slide 5, in Q2 of 2018, the performance of our investment funds was the primary driver of net income in the quarter.
In 2017, you can see we had significant one time gains related to the sale of ARL railcars flowing through both the railcar segment and the holding company. Adjusted EBITDA attributable to Icahn Enterprises for Q2 2018 was $356,000,000 compared to $288,000,000 in Q2 2017. I will now provide more detail regarding the performance of the individual segments. Our investment segment had a gain attributable to Icahn Enterprises of $157,000,000 for Q2 2018. The investment funds had a positive return of 4.9 percent in Q2 2018 compared to a positive return of 4.3% for Q2 2017.
Long positions had a positive performance attribution of 6.5% for the current quarter, while short positions and other expenses had a negative performance attribution of 1.6%. Since inception in November 2004 through the end of Q2 2018, the investment funds gross return is 144% or approximately 6.7% annualized. The investment funds continue to be significantly hedged. At the end of Q2 2018, net long exposure was 11% compared to a net long exposure of 14% at the end of 2017 and a net long exposure of 18% at the end of Q1 2018. IAP's investment in the funds was $3,300,000,000 as of June 30, 2018.
And now to our Energy segment. For Q2 2018, our Energy segment reported revenues of $1,900,000,000 and consolidated adjusted EBITDA of $170,000,000 compared to revenues of $1,400,000,000 and consolidated adjusted EBITDA of $73,000,000 for the prior year period. CVR Refining had solid second quarter performance led by strong crack spreads, wide crude oil differentials and lower RIN prices. CVR Refining reported Q2 2018 adjusted EBITDA of $147,000,000 compared to $43,000,000 in the prior year period. Combined crude oil throughput approximately 206,000 barrels per day for the quarter, which was 4% below the prior year period.
Refining margin adjusted for FIFO impact, a non GAAP financial measure, was $12.61 per barrel in Q2 2018 compared to $7.21 per barrel in the prior year. CVRR declared a distribution of $0.66 per unit for the quarter. CVR Partners reported Q2 2018 adjusted EBITDA of $26,000,000 compared to $32,000,000 for Q2 2017. CVR Partners results were hampered by both planned and unplanned downtime at the Coffeyville and East Dubuque fertilizer facilities. Average prices for UAN and ammonia were $191 per ton and $3.48 per ton respectively in Q2 2018 compared to $174 per ton and $3.33 per ton respectively for the same period in 2017.
Management believes that the U. S. Nitrogen fertilizer market has finally adjusted to the new production capacity that has come on stream during the past 3 years. Now turning to our Automotive segment. With the pending sale, Federal Mogul is now accounted for in discontinued operations and our Automotive segment now represents only the operations of Icon Automotive, which includes Pep Boys, Auto Plus and the franchise ore businesses of Precision Tune and Ampco.
Q2222018 net sales and service revenues were $737,000,000 up 6% from the prior year period. 2018 sales reflect new revenue recognition rules, which account for dropship sales on a net basis. This accounting change accounted for $18,000,000 of sales decline in the commercial business from 2Q 2017 to 2Q 2018. Adjusting for the new revenue recognition rules, sales increased by $61,000,000 or 9%. $34,000,000 of the increase was related to acquisitions and the remaining $28,000,000 was due to organic growth.
The commercial parts business organic growth was 7% driven by growing Pep Boys commercial sales and strong Auto Plus sales. The service business had organic growth of 4% driven by growth in DIFM and fleet businesses. Adjusted EBITDA attributable to IAP for the automotive segment was $10,000,000 in Q2 2018 compared to $28,000,000 in the prior year period. Now turning to our Railcar segment. Our Railcar segment had railcar shipments in Q2 2018 of 9 33 railcars, including 19 railcars to leasing customers compared to 10 76 railcars for the prior year period, of which 5 45 railcars were to leasing customers.
As of June 30, 2018, ARI had a backlog of 3,387 railcars, including 10 41 railcars for lease customers. According to the Railway Supply Institute, the railcar manufacturing backlog was approximately 65,000 railcars at the end of Q2. 82% of the current industry backlog is comprised of tank cars and covered hopper railcars, the 2 primary railcar types manufactured and leased by our railcar segment. Total manufacturing revenue for Q2 2018 increased by $35,000,000 or 64% as compared to the prior year period. The increase was primarily due to an increase in shipments to non leasing customers.
The segment's railcar leasing revenue declined in Q2 2018 as compared to the prior year due to the closing of the initial sale of ARL railcars on June 1, 2017, as well as to a decrease in weighted average lease rates. The lease fleet was 13,128 railcars at the end of Q2 2018, down from 16,905 railcars at the end of Q2 2017 due to the further sale closings of the ARL lease fleet. Adjusted EBITDA attributable to IEP for the railcar segment was $23,000,000 in Q2 2018 compared to $79,000,000 in the prior year period. Subsequent to quarter end, ARI announced a multi year agreement to sell 7,650 railcars to GATX through 2023. GATX will also have the option to purchase an additional 4,400 railcars subject to certain restrictions.
Now turning to our Food Packaging segment. Net sales for Q2 2018 increased by $5,000,000 or 5% compared to the prior year period. The increase was primarily due to higher sales volume and the favorable effects of foreign exchange, offset in part by unfavorable price and product mix. Consolidated adjusted EBITDA was $17,000,000 in Q2 2018, which was $1,000,000 above the prior year period. Gross margin as a percentage of net sales was 23% for Q2 2018, which was slightly below the prior year period.
And now to the metals segment. Net sales for Q2 2018 increased by $30,000,000 or 29% compared to the prior year period. The net sales increase was primarily due to higher shipment volumes of ferrous and non ferrous materials and higher average selling prices for almost all product lines. Ferrous shipment volumes increased due to the improved demand from domestic steel mills and improved flow of raw materials into the recycling yards driven by increased market pricing. Adjusted EBITDA was $8,000,000 for Q2 2018 compared to $4,000,000 in the prior year period.
Gross margin has improved due to continued focus on disciplined buying, higher pricing for non ferrous auto residue, improved market pricing and by continued efforts to bring processing costs in line with volume and market pricing. And now to our Real Estate segment. Real Estate operating revenues were $24,000,000 in Q2 2018, which was slightly down from the prior year period. Revenue from our real estate operations for both Q2 2018 and Q2 2017 were substantially derived from income from club and rental operations. The Real Estate segment generated $13,000,000 of adjusted EBITDA in Q2 2018.
Now turning to Mining. Our Mining segment has been concentrating on sales in Brazil. In Q2 2018, sales increased $4,000,000 as compared to the prior year period, primarily due to iron ore price and volume increases. Consolidated adjusted EBITDA was $5,000,000 for Q2 2018, which was consistent with the prior year period. The company continues to invest in upgrading its ability to process iron ore and produce a higher quality product, which currently sells for significant premiums.
The project is on schedule and is expected to fully ramp up in early 2019. Now turning to our home fashion segment. Q2 2018 net sales for our home fashion segment were flat compared to the prior year period. Adjusted EBITDA was breakeven for the quarter compared to a loss of $1,000,000 in the prior year period. Gross margin as a percentage of net sales was 13% for Q2 2018 as compared to 11% for Q2 2017.
Now I will discuss our liquidity. We maintain ample liquidity at the holding company and at each of our operating subs to take advantage of attractive opportunities. We ended Q2 2018 with cash, cash equivalents, our investment in the funds and revolver availability totaling approximately $5,000,000,000 HoldCo cash will be replenished with the close of Federal Mogul and Tropicana transactions. Our subsidiaries have approximately $800,000,000 of cash and $770,000,000 of undrawn credit facilities to enable them to take advantage of attractive opportunities. In summary, we continue to focus on building asset value and maintaining ample liquidity to enable us to capitalize on opportunities within and outside of our existing operating segments.
Thank you. Operator, can you please open the call for questions?
Thank Our first question comes from Dan Fannon of Jefferies. Your line is open.
Thanks. Good morning, guys. I guess just first on the you talked about the Holdco cash getting replenished after these deals. Should we just think about the fund kind of the $3,300,000,000 kind of investment in the fund going up in the short term as you think about deploying that cash or should you're looking at paying down any more debt or any kind of use of those proceeds?
Yes, sure. Hi, Dan, it's Keith. I think the way we look at it is a significant portion of the pro form a proceeds from dispositions would go into the Investment segment. All things being equal, with some portion of it also replenishing cash at the Holdco level. But we're not sure that it makes a ton of economic sense at this juncture to pay down any of our bonds.
They have significant call protection that would probably not make a ton of economic sense.
Got it. And then I guess could you just kind of give us a sense broadly of we have your positions on the kind of net long in the fund, but I guess kind of your view at an investment level of kind of where we are in the cycle and kind of valuations or any kind of more context around how you're thinking about new investments and kind of the overall kind of, I guess, attractiveness of the markets today?
Yes, sure. Broadly speaking, obviously, it does feel like we're at the tail end of the cycle, but we have no way of knowing whether it lasts another year, 2 years or 2 months. So we're always kind of trying to manage risk accordingly of the unknown macro situation. On the multiples do seem high and it's harder to find what we like to refer to as cheap or value oriented situations. We are finding a handful of stuff.
You've seen our public filings. We've been quite active this year on a number of fronts. So we are finding pockets of opportunity. But in general, it's represented by our net long exposure trying to stay pretty cautious and hedge out some of the macro risk.
Got it. Thank you.
Yes. Thank you. Our next question comes from Justin Schipper of The Hill. Your line is open.
Hey, guys. I was wondering if you can give us an update on the sale process of the Aruba Casino Hotel as a part of the Tropicana sale?
I mean, the only update I would say is that we're currently we ran a process. There were a number of bids received and we're in the later rounds of that process. And hopefully, we'll have a transaction to announce in the next, I'd say, 2 months. But that's really the only update. Yes, that's really the only update I can give on that.
And can you give an update on expected proceeds, roughly speaking?
I can't at this juncture.
Understood. And when do you expect that transaction to close? The entire transaction, entire sale.
Yes, I referenced in my prepared remarks early Q4.
Wonderful. Thank you very much. Congrats.
Okay. Thank you.
Thank you. I currently have no more questions in queue. I'd like to turn the conference back over to Keith Cozza for any closing remarks.
Okay. Thank you, operator. Thank you very much for joining us today, everyone, and we'll look forward to talking to you about the Q3 results. Have a good day.
Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day.