Good morning, and welcome to the Icahn Enterprises LP Q4 2016 Earnings Call with Jesse Lin, General Counsel Keith Cozza, President and CEO and Seung Won Cho, Chief Financial Officer. I would now like to hand the call over to Jesse Lynn, who will read the opening statement.
Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses 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 circumstances change, except as otherwise required by law.
This presentation also includes certain non GAAP financial measures. A reconciliation of such non GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. I'll now turn it over to Keith Cozza, our Chief Executive Officer.
Thanks, Jesse. Good morning, and welcome to the Q4 2016 16 Icahn Enterprises earnings conference call. Joining me on today's call is Sung Hwang Cho, our Chief Financial Officer. I would like to 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. Net loss attributable to Icahn Enterprises for 2016 was $1,100,000,000 or $8.07 per LP unit compared to a net loss of $1,200,000,000 or $9.29 per LP unit in 2015. For Q4 2016, the net loss attributable to Icahn Enterprises was $206,000,000 as compared to a net loss of 1,100,000,000
dollars in
the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for 2016 was 842 dollars compared to approximately $930,000,000 in 2015. For the Q4 of 2016, indicative net asset value increased by $1,400,000,000 to $5,600,000,000 compared to $4,200,000,000 as of September 30, 2016. Our investment funds had a negative return of 8.7 percent in the Q4 of 2016 and a negative return 20.3% for the full year of 2016. Performance was driven by losses in our short equity Net sales for our automotive segment in
Q4 twenty
sixteen Net sales for our automotive segment in Q4 2016 were $2,300,000,000 compared to $2,000,000,000 in the prior year period. This 16% net sales increase was primarily due to the Q1 2016 acquisition of Pep Boys. Net sales for full year 20 16 were $9,400,000,000 or 21% above 2015 results. In January Icahn Enterprises purchased the 18% of Federal Mogul it did not already own for total consideration of 305,000,000 dollars Federal Mogul is now a private company 100 percent owned by Icahn Enterprises. In our Energy segment, our Q4 2016 net sales were $1,400,000,000 and consolidated adjusted EBITDA was 43,000,000 dollars CVR Refining posted solid operational performance during the quarter with combined crude throughput of 207,000 barrels per day.
CVR Partners, Coffeyville and East Dubuque facilities also recorded high on stream rates for their fertilizer operations. CVR Energy's 4th quarter earnings were negatively impacted by seasonally weak refining margins and increased RINs expense. In our railcar segment, investments in our railcar services and railcar leasing businesses continue to complement our manufacturing operation. The segment's lease fleet was over 45,000 railcars at the end of Q4 of 20 16. In December of 2016, IEP announced the sale of American Railcar Leasing.
The transaction values the business at approximately $3,400,000,000 The initial sale of approximately 29,000 railcars is expected to close in the Q2 of 20 17 and generate net proceeds of approximately $1,100,000,000 We have the ability to sell an additional 4,800 railcars for up to 3 years upon meeting certain conditions for a value of an additional $586,000,000
as of the initial closing
date. In our gaming segment, Tropicana finished 2016 on a strong note, delivering solid performance for the quarter. Our Atlantic City, Evansville and Laughlin properties recognized increased year over year revenue and profitability in 2016. Subsequent to year end, IEP issued approximately $1,200,000,000 of new senior unsecured notes maturing in 202220 24 to refinance the 2017 notes that were maturing in Q1 of 2017. Yesterday, we announced the completion of our previously announced equity rights offering, which raised proceeds of $600,000,000 to support IEP's credit rating and to bolster the holding company's liquidity position.
As you can see, it was a busy 4th quarter, which continued into the Q1 of this year. Our balance sheet is strong with ample capital to deploy as we find new investment opportunities. With that, let me turn it over to Sung.
Thanks, Keith. I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on our balance sheet. In Q4 2016, the net loss attributable to Icahn Enterprises was 206 $1,000,000 compared to a net loss of $1,100,000,000 in the prior year period. Full year net loss attributable to Icahn Enterprises for 20 16 was $1,100,000,000 or $8.07 per LP unit compared to a net loss of $1,200,000,000 or $9.29 per LP unit in the prior year period. As you can see on Slide 5, in Q4 2016, IEP had a decrease in our net loss from prior year.
Q4 2015 had higher losses in the investment funds and we also incurred significant non cash impairments of assets primarily in the auto, energy and mining segments. Adjusted EBITDA attributable to Icahn Enterprises for Q4 2016 was $153,000,000 compared to a loss of $239,000,000 in Q4 2015. For the full year 2016, we had a net loss attributable to IEP of $1,100,000,000 compared to a net loss of $1,200,000,000 in 2015. Lower impairments in our automotive and mining segments as well as lower losses in the investment funds were partially offset by higher impairments in energy and gaming segments. Adjusted EBITDA attributable to Icahn Enterprises for 2016 was $842,000,000 compared to $930,000,000 for 2015.
I will now provide detail regarding the performance of our individual segments. Our Investment segment had a loss attributable to Icahn Enterprises of $158,000,000 for Q4 2016 and a loss of $604,000,000 for the full year. The investment funds had a loss of 8.7 percent in Q4 2016 compared to a loss of 15.6% in Q4 2015. Long positions gained 1.3% for the current quarter, while short positions and other expenses had a negative performance attribution of 10%. For the full year 2016, the Investment segment lost 20.3% compared to an 18% loss for 2015.
Long positions had a 16.3% gain for the full year 2016, while short positions and other expenses had negative performance attribution of 36.6%. Since inception in November 2004 through the end of 2016, the investment fund's gross return is 116 percent or 6.5 percent annualized. The investment funds continue to be significantly hedged. At the end of 2016, the funds were net short 128% compared to net short 25% at the end of 2015. IEP's investment in the funds was $1,700,000,000 as of December 31, 2016.
In Q1, 2017, we redeemed $300,000,000 from the funds to help fund the purchase of Federal Mogul shares. We plan on replenishing this investment with the proceeds of the recently completed rights offering. And now to the Energy segment. For Q4 2016, our Energy segment reported revenues of $1,300,000,000 and consolidated adjusted EBITDA of $43,000,000 compared to revenues of $1,000,000,000 and consolidated adjusted EBITDA of $53,000,000 for the prior year period. Both the refining and fertilizer businesses had solid operational performance, but earnings were negatively impacted by seasonal weak refining margins and continued high RINs expense.
Low nitrogen fertilizer pricing and a decrease in ammonia shipments due to unfavorable application conditions further impacted results in the fertilizer segment. For the full year 2016, the Energy segment reported revenues of $4,800,000,000 and consolidated adjusted EBITDA of $313,000,000 compared to revenue of $5,400,000,000 and consolidated adjusted EBITDA of $755,000,000 in 'fifteen. CVR Refining reported Q4 20 16 adjusted EBITDA of $28,000,000 compared to $16,000,000 in the prior year period. Refining margins adjusted for FIFO impact per crude oil throughput barrel, a non GAAP financial measure, was $7.32 in Q4 2016 compared to $8.96 in the prior year period. This decrease was primarily driven by lower regional crack spreads.
CVR Partners reported Q4 2016 adjusted EBITDA of $18,000,000 compared to $28,000,000 in Q4 2015. CVR Partners results for Q4 2016 included the results of East Dubuque fertilizer facility acquired in April of 2016. While Q4 ammonia shipments from the East Dubuque plant were impacted by unfavorable fertilizer application conditions, CVR Partners anticipates the tonnage that was not applied in the fall will be applied during the spring planting season. Now turning to our Automotive segment. Our Automotive segment's Q4 2016 net sales were $2,300,000,000 up 16% from the prior year period.
Net sales for the full year 2016 were $9,400,000,000 or 21% above the 20 Federal Mogul on a standalone basis reported Q4 net sales of $1,800,000,000 which was consistent with the comparable prior year period. Higher OE sales were offset by lower aftermarket sales in North America and $27,000,000 of negative impact from currency exchange rate fluctuations. Operational EBITDA in Q4 2016 was $182,000,000 up $18,000,000 or 11% compared to Q4 2015. For the full year, Federal Mogul generated 7 point $4,000,000,000 of net sales and $744,000,000 of operational EBITDA, a 16% increase from 2015. As Keith mentioned earlier, IEP acquired the remaining non controlling interest of Federal Mogul during Q1 2017 for a total consideration of $305,000,000 IEH Auto and Pep Boys together had Q4 2016 revenue of approximately $638,000,000 and adjusted EBITDA of $14,000,000 For the full year, which includes approximately 11 months of Pep Boys, IEH Auto and Pep Boys generated $2,500,000,000 of sales and $103,000,000 in adjusted EBITDA.
Also, we completed an acquisition of a 134 location chain in January of 2017 and maintain an active pipeline of additional acquisition opportunities. Now turning to our railcar segment. Our Railcar segment had railcar shipments in 2016 of 4,721 railcars, including 799 railcars to leasing customers as compared to 8,903 railcars for the prior year period, of which 5,063 railcars were to leasing customers. As of December 31, 2016, ARI had a backlog of 3,813 railcars, including 1637 railcars for lease customers. According to the Railway Supply Institute, the railcar manufacturing backlog has decreased from a record level of nearly 143,000 railcars at the end of 2014, down to approximately 67,000 railcars at the end of 2016.
81% of the current industry backlog is comprised of tank cars and covered hopper cars, the 2 primary railcar types manufactured and leased by our railcar segment. Adjusted EBITDA attributable to IEP for the railcar segment was $379,000,000 in 2016 compared to $318,000,000 in the prior year period. The leasing businesses within the railcar segment continue to perform well. In 2016, we grew the combined leased car portfolios to roughly 45,800 cars from approximately 45,100 railcars at the end of 2015. Average lease rates in 2016 improved slightly from the prior year period.
Tank cars manufactured by ARI. Our railcar segment had discussions with the FRA regarding implementation of this directive and a revised directive was issued in November 2016. For the full year 2016, we have recorded a loss contingency of $16,000,000 to cover the costs associated with the new In December 2016, IUP announced the sale of American Railcar Leasing, which is expected to close in the Q2 of 2017. The initial sale of approximately 20,000 railcars is expected to generate 1 point Total Gaming segment operating revenues were $944,000,000 in 2016 compared to $811,000,000 in 20.50. The increase was primarily due to an increase in consolidated gaming volumes of 17%, primarily due to the inclusion of results from Trump Entertainment Resorts in February of 2016, coupled with higher gaming volumes and table hold percentage at Trop Atlantic City and Trop Evansville.
At the beginning of Q4 2016, Trump Taj Mahal closed in Atlantic City. For 2016, we recorded impairments to the property and associated intangibles of approximately $106,000,000 Our gaming segment's consolidated adjusted EBITDA for 2016 was $118,000,000 While EBITDA was roughly flat at Tropicana, overall EBITDA for the segment was lower by $24,000,000 from 2015 due to the losses at Trump Entertainment. Now turning to our Food Packaging segment. Net sales for 2016 decreased by $15,000,000 or 4% compared to the prior year period. The decrease was primarily due to lower sales volume, unfavorable price and product mix and unfavorable foreign currency translation.
Consolidated adjusted EBITDA was $55,000,000 in 2016, which was $4,000,000 below the prior year period. Gross margin as a percentage of net sales was 24% in 2016, which was consistent with the prior year. In December 2016, this case purchased a plastic casings manufacturer in Poland and in January of 2017, this case purchased a fibrous and plastic casing manufacturer in Germany. Both transactions are expected to broaden this case's product portfolio and provide significant operational synergies. And now to our Metals segment.
Net sales for 2016 decreased by $94,000,000 or 26% compared to the prior year. The net sales decrease was driven by lower selling prices and lower shipping volumes across all product lines with the exception of secondary plate. Adjusted EBITDA was a loss of $15,000,000 in 2016 compared to a loss of $29,000,000 in the prior year period. Scrap prices are still at low levels and volumes continue to be challenged in this market environment. And now to Real Estate.
Real estate revenues were $88,000,000 in 2016, which was approximately $43,000,000 below the prior year period. The decrease was primarily due to gains recorded in 2015 from the sales of net leased properties in the Oak Harbor operations. Operating revenues from our Real Estate segment were substantially derived from our resort and rental operations for both 2016 2015. Our net lease portfolio continues to drive earnings in this segment with its 15 properties generating strong cash flows. Adjusted real estate segment sorry, the real estate segment generated $41,000,000 of adjusted EBITDA in 2016.
Now to Mining. Our Mining segment has been concentrating its sales in Brazil. During 2016, international iron ton in Q4 2016. With the improved prices, the business has returned to EBITDA positive in Q4. Iron ore prices have continued to increase in 2017 and near term prices are in the high $80 per ton range.
Now turning to Home Fashion. 2016 net sales for our Home Fashion segment were up slightly from the prior year period. Adjusted EBITDA was a loss of $1,000,000 for 20.16 compared to a gain of $6,000,000 in the prior year. Gross margin as a percentage of net sales was 14% for 2016 as compared to 16% for 2015. The drop in gross margin percentage was primarily due to sales mix.
Now I will discuss liquidity. We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended Q4 2016 with cash, cash equivalents, our investment in the funds and revolver availability totaling approximately $4,500,000,000 In 2017, we have successfully refinanced our upcoming holding company debt maturity and raised an additional $600,000,000 via a rights offering. Our subsidiaries have approximately $1,600,000,000 of cash and $1,000,000,000 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 existing operating segments.
Thank you. Operator, can you please open the call for questions, please?
Thank you. We'll now take questions as part of our Q and A session. And our first question comes from Dan Fannon with Jefferies. Your line is now open.
Thanks. Good morning. I guess, could you just kind of give some color around the other announcement this morning around the hiring of Doctor. Mulligan to be to join the investment team and kind of update us on some of the other investment staff with Brett Eikon and others that you've been negotiating with or talked about bringing back previously?
Sure. Hey, Dan, it's Keith.
Yes, the
hiring of Doctor. Mulligan was we've known Doctor. Mulligan for a long time. He was a Board nominee on several successful activist campaigns back in the 2004 through 2007 timeframe, and we have a great amount of respect for him. And he recently became available and the biopharma investing segment is an area that we've played in over the last decade and we couldn't think of a better person to help us pursue new investment ideas in that space.
So really just broadening out the investment team and happy to have him on board. As far as Dave and Brett, we continue to negotiate with them. There's not really a material update at this point. As we've said in the past, the negotiations are moving along. They are going fairly slow just given current market multiples and both our Chairman and their view of it's not the greatest time for large, long investments at all time high multiples.
We're taking it the negotiations are going maybe a little bit slower than they normally would otherwise. But we continue to negotiate with them. And we had as far as anything else, we had several a couple of employees that contracts expired at the end of 2016 that ultimately one retired and one left to pursue other opportunities.
Okay. That's helpful. And I guess just broadly, obviously, your the positioning of the fund highlights in your comments just previously about valuations. I guess anything on asset class level? I know historically, the negative view in high yield.
Just wondering if there's any shifting in terms of where is it just valuation or if there are certain sub segments or portions of the market that you're more skeptical about?
There are I don't want to publicly call them out, but there are certain industries we think are especially susceptible to potential border adjusted tax plans and other dynamics in related to the retail space in certain industries that we continue to have strong views on valuation. Other than that, the majority of our short exposure is just in general macro indices. Just it's more of a obviously, it's a directional bet at this point besides hedging all of our long exposure just at very high market multiples. Market does seem priced for perfection. It's up even further today.
So but we continue to have a fairly bearish view. I think net short exposure is down a little bit from Q3, but still a very large number.
Got it. Thank you.
Thanks.
Thank you. I currently have no more questions in queue. I'll now turn the call back to Keith Cozza for closing remarks.
Okay. Thanks everybody for joining us and we'll look forward to
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.