Good morning, and welcome to the Icahn Enterprises L.P. Q3 2015 earnings call with Jesse Lynn, General Counsel, Keith Cozza, President and Chief Executive Officer, and SungHwan Cho, Chief Financial Officer. I would now like to hand over the call to Jesse Lynn, who will read the opening statement.
Thank you. 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 otherwise required by law. This presentation also includes certain non-GAAP financial measures. I will now turn the call over to Keith Cozza, our Chief Executive Officer.
Thanks, Jesse. Good morning, and welcome to the third quarter 2015 Icahn Enterprises earnings conference call. Joining me on today's call is SungHwan 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 Q3 2015 was $440 million, or $3.40 per LP unit, compared to a net loss of $355 million, or $2.90 per LP unit in the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for Q3 2015 was a loss of $32 million, compared to a loss of $2 million in Q3 of 2014. Our investment fund had a negative return of 10.3% in the third quarter of 2015, compared to negative 5.3% in the prior year period.
Q3 performance was negatively impacted by losses from some of our long equity positions with significant exposure to the commodity sector. Year-to-date through September 30th, 2015, the funds had a negative return of 2.8%. In our energy segment, CVR's petroleum subsidiary had another solid quarter. The petroleum business benefited from favorable product margins and had combined refinery crude throughput of over 200,000 barrels per day. The fertilizer business results were affected by lost production associated with the scheduled plant turnaround, as well as downtime due to several outages caused by third-party equipment failures. In Q3, the fertilizer business announced an agreement to acquire Rentech Nitrogen Partners. The acquisition will create an expanded MLP with a leading position in the U.S. nitrogen fertilizer industry, a more diverse production base, enhanced margins through cost savings of the combined entities, and is expected to be accretive to distributable cash flow per share.
In our automotive segment, Federal-Mogul reported sales of $1.8 billion, an increase of 7% in constant dollar terms. This increase was due to sales generated by the engine valve business acquired from TRW earlier this year. Federal-Mogul continues to make progress integrating the significant acquisitions made over the last couple of years, consisting of TRW's engine valve, Honeywell's brake, and Affinia's chassis businesses. This was the first full quarter of sales from IEH Auto, which was acquired by IEP in the second quarter of this year. Third-quarter net sales were approximately $189 million. Our rail car segment had strong margins for rail car manufacturing and rail car service operations in Q3, and we continued to build our lease fleet with over 44,000 rail cars at quarter end. In our gaming segment, Tropicana had another solid quarter with improved operational performance at a majority of the properties.
Tropicana Atlantic City experienced higher gaming volumes as it has benefited from significant capital investments made at the property, in addition to the closure of certain competitors. With that, let me turn it over to Sung.
Thanks, Keith. I will begin by briefly reviewing our consolidated results for Q3 2015 and then highlight the performance of our operating segments and comment on the strength of our balance sheet. Net loss attributable to Icahn Enterprises for Q3 2015 was $440 million, or $3.40 per LP unit, compared to a net loss of $355 million, or $2.90 per LP unit in the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for Q3 2015 was a loss of $32 million, compared to a loss of $2 million in Q3 2014. As you can see on slide five, most of the decrease in EBITDA net income from the prior year is tied to the performance of the investment segment. I will now provide more detail regarding the performance of the individual segments. Our investment segment had a loss attributable to Icahn Enterprises of $479 million in Q3 2015.
The investment funds had a return of negative 10.3% in Q3 2015, compared to a return of negative 5.3% for Q3 2014. Long positions had a negative 24.5% return for the current quarter, while short positions and other expenses had a positive performance attribution of 14.2%. Since inception in November 2004 through the end of Q3 2015, the investment fund's gross return is 221% or 11% annualized. The investment funds continue to be significantly hedged. At the end of Q3 2015, net short exposure was 26%, compared to a net long exposure of 14% at the end of 2014. IEP's investment in the funds was $4.2 billion as of September 30, 2015. Now to the energy segment.
For Q3 2015, our energy segment reported net sales of $1.4 billion and consolidated adjusted EBITDA of $236 million, compared to net sales of $2.3 billion and consolidated adjusted EBITDA of $144 million for the prior year period. CVR Refining reported Q3 2015 adjusted EBITDA of $230 million compared to $130 million in the prior year. CVR Refining reported a solid quarter driven by high throughputs and favorable product margins. The Coffeyville and Wynnewood refineries posted a combined crude throughput of over 200,000 barrels per day. CVR Partners reported Q3 2015 adjusted EBITDA of $4 million compared to $21 million in Q3 2014. Impacting the third quarter results were expenses and loss production related to a scheduled major plant turnaround. Third quarter results were also impacted by more than two weeks of additional plant downtime following the outage of third-party suppliers.
Results for the quarter also add back transaction-related expenses associated with the partnership's announced agreement to acquire Rentech Nitrogen Partners. Now turning to our automotive segment. In Q3 2015, net sales for our consolidated automotive segment, which includes both Federal-Mogul and IEH Auto, increased by $109 million from the prior year period, and consolidated adjusted EBITDA was $153 million in Q3 2015 compared to $152 million in Q3 2014. Federal-Mogul, on a standalone basis, reported sales of $1.8 billion, down 3% from the prior year, but up 7% in constant dollars. This constant dollar sales increase was due to sales generated by the engine valve business acquired from TRW this year. Federal-Mogul operational EBITDA was $153 million, which was up slightly from the prior year, despite $28 million of negative EBITDA impact due to foreign exchange rates.
During the third quarter, Federal-Mogul Powertrain division completed its second phase of the acquisition of TRW's engine valve business with the purchase of two plants located in the U.S. and in Thailand. With this phase of the acquisition's integration complete, the division's global valve train footprint now includes 13 manufacturing sites ideally located to support its growing and diverse customer base. IEH Auto, on a standalone basis, had Q3 2015 net sales of approximately $189 million and approximately $6 million of adjusted EBITDA. Turning to our railcar segment. Our railcar segment's consolidated adjusted EBITDA attributable to IEP grew to $121 million in Q3 2015 from $98 million in the prior year period. The increase was primarily driven by higher leasing revenues and a higher mix of sales to third-party customers.
Railcar shipments in Q3 2015 were approximately 1,900 railcars, including approximately 1,160 railcars to leasing customers, as compared to 2,150 railcars for the prior year period, of which approximately 1,920 railcars were to leasing customers. As of September 30, 2015, ARI had a backlog of approximately 7,900 railcars, including 1,180 railcars for lease customers. According to the Railway Supply Institute, the railcar manufacturing backlog has dropped from a record level of nearly 143,000 railcars at the end of 2014, down to approximately 123 railcars at the end of Q3 2015. Tank cars are now only 31% of the industry backlog, down from a peak of 85% in Q1 2013. The leasing businesses within the railcar segment continue to perform well. In Q3, we grew the combined lease car portfolios to roughly 44,600 railcars from approximately 39,700 railcars at the end of 2014.
Our railcar segment's liquidity position is strong, with $271 million of cash at the end of the quarter. Now turning to gaming. Our gaming segment posted solid Q3 2015 results with consolidated adjusted EBITDA of $50 million, compared to $37 million in the prior year. A majority of the properties experienced year-over-year improvement in operating performance. Tropicana Atlantic City's gross casino win increased 4% in Q3 2015 as compared to prior year period as a result of increased customer volumes. Promotional gaming credits redeemed at Tropicana Atlantic City were reduced by 3% during this time period. Internet gaming revenues also increased during Q3 2015. Based on market data, the Atlantic City market experienced year-over-year declines in gross casino win of 5.4% for Q3 2015. This was due primarily to the closure of four casino properties.
Tropicana has a solid balance sheet with $223 million of cash and cash equivalents at the end of the quarter. Now turning to food packaging. Net sales for Q3 2015 decreased by $9 million or 9% compared to the prior year. The decrease was primarily due to unfavorable foreign currency translation and unfavorable price and product mix, offset in part by higher sales volumes. Consolidated adjusted EBITDA was $14 million in Q3 2015, which was a $2 million decrease from the prior year. Gross margin as a percent of net sales was 22% in Q3 '15 compared to 24% in the prior year period. Viskase 's cash balance at the end of Q3 '15 was $43 million. Now to metals. Net sales for Q3 2015 decreased by $94 million or 51% compared to the prior year period.
The decrease was primarily due to lower shipment volumes and lower prices of ferrous and non-ferrous scrap. Ferrous shipments decreased approximately 27%, and the average ferrous selling price per ton decreased approximately 37% from $366 to $230. Adjusted EBITDA was a loss of $6 million in Q3 2015 compared to breakeven in the prior year. Gross margin as a percentage of net sales was a loss of 11% in Q3 '15 compared to a loss of 1% in Q3 '14. The market environment remains challenging with reduced demand from domestic steel mills, a weak export market, declining iron ore prices, and competition for shredder feedstock. The company continues to invest in its operations with a focus on strengthening our competitive position within our existing markets. Now to real estate. Q3 real estate revenues were $42 million compared to $27 million in the prior year period.
Revenues were higher primarily due to the $18 million gain recorded on the sale of 12 triple net lease properties, partially offset by lower development sales and club revenues. Revenues from our club operations were down from the prior year period due to the sale of the Oak Harbor operations in Q2 2015. Our net lease portfolio continues to drive earnings in this segment, with its 15 properties generating strong cash flows. The real estate segment generated $10 million of adjusted EBITDA in Q3 2015. Year to date, we have sold 14 net lease properties and the Oak Harbor operations for net proceeds of $65 million compared to a book value of $26 million. Now turning to our mining segment. As we discussed in the prior quarter's call, IEP obtained control of Ferrous Resources Limited during the second quarter of 2015 through a tender offer for our outstanding shares.
Ferrous Resources owns rights to certain iron ore mineral resources in Brazil and develops mining operations to produce and sell iron ore products to the global steel industry. Our mining segment has been concentrating its sales in Brazil, where the best margins are being captured. During Q3, both domestic and global steel industries continued to show weakness as steel mill utilization rates have not recovered, and seaborne iron ore prices are still under $60 per metric ton. Our mining segment expects the remainder of 2015 and the foreseeable future to be challenging for the steel industry as it contends with slowing growth over capacity and increased competition. Now turning to our home fashion segment. Q3 2015 net sales increased by $2 million compared to the prior year period due to higher sales volumes.
We are continuing to concentrate on higher margin lines and believe we will have solid placements for the remainder of 2015. Adjusted EBITDA was $1 million for Q3 2015, which was in line with the prior year period. Gross margin as a percentage of net sales was 15% for both Q3 '15 and Q3 '14. As of September 30th, 2015, WestPoint had $14 million of unrestricted cash. Now I will discuss our liquidity position. We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended Q3 with cash equivalents, liquid assets, and our investment in the investment funds totaling approximately $6.2 billion. Our subsidiaries have approximately $1.9 billion of cash
$0.7 billion 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 turn the call over to questions, please?
Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please press star, then one on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, if you'd like to ask a question, please press star, then one on your touch-tone telephone. Our first question is from Daniel Fannon of Jefferies. Your question please.
I'd like to start with a question around the investment segment. I understand the positioning of the portfolio is net short at this point. Can you talk about previous periods where you've gone net short and the length of time that you've generally stayed there, or any other color around that as well, please?
Sure. Hey, Dan. I would say at net negative 26%, this is on the shorter side, but it reflects I would say our views on the macro environment in general on a number of different fronts from high yield debt and credit, that we're in a credit bubble, potential impact of interest rate rises, and the fact that we just don't really see a tremendous amount of growth in earnings. We see a lot of kind of manufactured earnings in some of the more popular or broader S&P 500. The portfolio's positioned to take advantage of I think with the market trading down.
Compared to historically, this is a little bit more short than we probably have been, but there have been some periods, whether it be intra-quarter or at quarter end, where we have been net short, and I think we tend to adjust based on the facts and circumstances and changes in our outlook on the macro environment.
That's helpful. Related to that, are you able to provide any color on, given that the markets have rebounded very strongly here in 4Q, where the portfolio stands or any update there in terms of performance?
Yeah. We're not going to do intra-quarter updates on performance. You know how that goes with the lawyers, so.
Yeah. No. Fair enough. I was just checking, given the sharp reversal in sentiment between 3Q and 4Q. I guess my next question is just around the larger portfolio in general. The non-market valued companies, ones where you basically hold 100% of the stake, that portfolio continues to grow. How should we think about that longer term? In terms of the exit strategies there, is there potentially a better use of the capital where maybe some of the stories there are longer term in terms of the turnaround, so it's better to get rid of them now and allocate that capital elsewhere, or how should we be thinking about that?
I would refer to historically the way we think about it, and I think we've been pretty consistent about this, is we're potentially buyers and/or sellers in any particular one of our segments, right? We manage the businesses on an ongoing basis with the assumption that we could potentially own it forever, and we want to increase value, right? We take actions and hold management accountable for increasing value of our portfolio companies over the long term. At some point, markets get hot, multiples get high, and you can look over the last 10 or 15 years, we've sold casinos at large profits. We've sold oil and gas properties at large profits over the years. When things get cheap, we tend to be buyers.
You saw some things that we obviously think are cheap, and you saw some new tuck-in acquisitions in mining and our purchase of IEH Auto earlier in the year that we think are on the cheaper side, and we're going to work to grow and create value there. It really just depends. What we're focused on though in the short term is making each portfolio company making the appropriate investments, and it could be acquisitions as well, to ultimately increase the long-term value. It wouldn't surprise me if you looked at it five years from now, you'd see a few of these segments may not be there, and you'd probably see a few new segments.
Thank you. That's helpful. Then maybe one other question. You guys continue to maintain a healthy dividend yield. How should we be thinking about that maybe a little bit longer term in terms of is it primarily driven by what's going on in your high cash flow businesses, meaning like the energy business and stuff? Because the $1.50 per quarter, while it provides a fantastic yield, it's been stable now for almost two years now.
I'd say two things. We listen to our investors. They've made it crystal clear that dividend's important to them. We've made a concerted effort over the past, I think we originally really started increasing the dividend about three years ago, to maintain that dividend and grow it over time. In this market environment. We've certainly maintained that dividend. Our hope is to grow it over time. That's going to be a correlation of performance on the underlying businesses and particularly the investment segment, which is going to drive a lot of the liquidity in the overall portfolio. As far as sustainability, we think it's very sustainable. We have significant cash outflows from a number of portfolio companies such as CVR Energy, ARI, and our real estate segment.
The dividend's important. We hope to grow it, which will be performance-based.
Thank you. That's it for me.
Okay, thanks, Dan.
Once again, ladies and gentlemen, if you have a question at this time, please press star then one on your touch tone telephone. Our next question is from John Reitler of RH Capital. Your question, please.
I just wanted to understand where you're going to commit, what platforms you think will attract the most capital for you guys. I know you've been putting money into automotive and energy. Are those two most likely candidates in the future, or is there another existing segment where you could see that expanding materially?
The first comment I would make is that we do endeavor to maintain each operating portfolio with its own standalone capital structure. Whether it be access to the capital markets, through debt, bond, bank offerings, that type of stuff. Each company, we do endeavor to have their own capital structure. As far as we obviously have a lot of capital at the parent level, and if for some reason they needed more capital for the right opportunity, I think we'd be willing to commit it. I would tell you that we honestly are looking at potential acquisitions in four or five different segments because we think they can create value in the long term.
I don't think right now we're in a position where I suppose it's an embarrassment of riches in the sense that we have enough capital to support all the segments, and we haven't been pushed to make the decision of this opportunity or that opportunity. If they're both very compelling, high double-digit return profiles, we've been lucky enough to be able to do both. I think we're very active in a number of the segments, so it's hard for me to say which one will ultimately lead to the most capital allocated to it.
Are those acquisitions that you're looking at, would those be more bolt-on or materially large?
It's a little bit of a hybrid. The acquisitions we're looking at are all bolt-on with respect to various segments that we're already in.
Some of them could be material bolt-ons, if that makes sense.
Sure. Also, quarter-over-quarter Q3 versus Q2, did you guys increase the short exposure in the S&P and the credit default swaps?
Yes, we increased our net short position quarter-over-quarter.
That's all I have. Thank you.
Okay, thanks.
Once again, ladies and gentlemen, if you have a question, please press star then one. I currently have no more questions in queue.
Okay, thanks everybody. We'll be talking to you early next year for the full year results.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.