Good morning and welcome to the Icahn Enterprises LP Q2 20 15 Earnings Call with Andrew Langham, General Counsel Keith Cozza, President and CEO and Seung Won Cho, Chief Financial Officer. I would now like to hand over the call to Andrew Langham, 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. Looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non GAAP financial measures.
And now I'd like to
hand it over to Keith Cozza, President and CEO. Thanks, Andrew. Good morning, and welcome to the Q2 2015 Icahn Enterprises earnings conference call. Joining me on today's call is Sung Hwan 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 income attributable to Icahn Enterprises for the Q2 of 2015 was 212,000,000 dollars or $1.68 per LP unit compared to an adjusted net income after adding back the loss on extinguishment of debt of $520,000,004.32 per LP unit in the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for the Q2 of 2015 was $619,000,000 compared to $883,000,000 in the prior year period. Our investment funds earned a return of 3.9 percent in the Q2 of 2015 compared to 10.7% in the prior year period.
2nd quarter performance was driven by gains in our core long equity positions as well as positive performance from various hedging activities. Year to date through June 30, 2015, the funds have earned a return of 8.4%. Federal Mogul had record sales of $2,000,000,000 for the Q2 of 2015, an increase of 16% in constant dollars compared to the prior year period. Federal Mogul's powertrain division maintained strong performance in the quarter with revenue increasing 12% on a constant dollar basis compared to the prior year period. Powertrain's revenue reflects the inclusion of TRW's the purchase of engine component plants located in Tennessee and Thailand.
Federal Mogul's Motor Parts division reported sales growth driven by acquisitions as well as organic growth. The Motor Parts division continues to make progress in a number of strategic initiatives designed to accelerate growth and increase value. During the quarter, IEH Auto Holdings, a wholly owned subsidiary of IEP, acquired substantially all of the U. S. Auto parts assets of Uni Select USA, now known as Auto Plus, for a purchase price of approximately $330,000,000 The acquisition included 39 distribution centers and satellite locations and 2 40 owned Jabber stores in the United States and supports a network of more than 2,000 independent wholesalers.
This business is reported as part of our Automotive segment and will be operated independently of Federal Mogul. We are excited about the opportunity this presents and would like to welcome all the members of the Auto Plus team to the IEP family. In our Energy segment, CVR's petroleum and fertilizer subsidiaries performed well during the Q2. The petroleum business benefited from favorable product margins and had combined refinery crude throughput of over 210,000 barrels per day. The fertilizer business also had a strong quarter with on stream rates ranging from 97% to 100% for all facility operating units.
Our Railcar segment had strong quarterly railcar shipments in the second quarter and continues to build its lease fleet with over 43,000 railcars at quarter end. In our Gaming segment, In our gaming segment, Tropicana had strong operational quarter with improved performance at a majority of the properties. Trop AC experienced higher gaming volumes as it has operations. Finally, during the quarter, IEP obtained a controlling interest in Ferrous Resources Limited, a Brazilian iron ore mining operation through a tender offer for a majority of the outstanding shares. Ferrous Resources owns rights to certain iron ore mineral resources in Brazil and related infrastructure to produce and sell iron ore products to the global steel industry.
With that, let me turn it over to Sung.
Thanks, Keith. I will begin by briefly reviewing our consolidated results for the Q2 of 2015 and then highlight the performance of our operating segments and comment on the strength of our balance sheet. Net income attributable to Icahn Enterprises for Q2 2015 was $212,000,000 or 1 point compared to adjusted net income after adding back the loss on extinguishment of debt of $520,000,000 or $4.32 per LP unit in the prior year period. Adjusted EBITDA attributable to Icahn Enterprises for 15 was $619,000,000 compared to $883,000,000 in Q2, twenty fourteen. As you can see on Slide 5, most of the decrease from the prior year is tied to the performance in the investment segment had a gain attributable to Icahn Enterprises of $176,000,000 for Q2 2015.
The investment funds had a return of 3.9 percent in Q2 2015 compared to a return of 10.7% 14. Long positions had a positive 5.5% return 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 2015, the investment funds gross return is 258% or 13% annualized. The investment funds continue to be significantly hedged. At the end of Q2 2015, net long exposure was 3% compared to 14% at the end of 2014.
IEP's investment in the funds was $4,600,000,000 as of June 30, 2015. And now to our Energy segment. For Q2 2015, our Energy segment reported net sales of $1,600,000,000 and consolidated adjusted EBITDA of $230,000,000 compared to net sales of $2,500,000,000 and consolidated adjusted EBITDA of 2 $15,000,000 for the prior year period. Q2 results reflect the solid financial and operational performance of our fertilizer petroleum subsidiaries. CVR Refining reported Q2 2015 adjusted EBITDA of $194,000,000 compared to $193,000,000 in the prior year period.
CBR Refining posted solid results operationally and financially for Q2 2015. The Coffeyville and Wynnewood refineries ran well during the quarter, posting a combined crude throughput of approximately 211 1,000 barrels per day. The refineries also benefited from favorable product margins during quarter. CVR Partners reported Q2 2015 adjusted EBITDA of $36,000,000 compared to 26 $1,000,000 in Q2 2014. The fertilizer facility performed well in the quarter with on stream rates ranging from nearly 97% to 100% for all facility operating units.
For Q2 2015, average realized gate prices for UAN in ammonia were $2.59 per ton $5.46 per ton, respectively, compared to 2 $83 per ton $5.21 per ton respectively for the same period in 2014. Now turning to our Automotive segment. As Keith discussed earlier, on June 1, 2015, a wholly owned subsidiary of IEP, IEH Auto Holdings acquired substantially all of the U. S. Auto parts assets of Uni Select USA for a purchase price of approximately $330,000,000 This business will operate independently at Federal Mogul and all transactions between the two entities have been eliminated in consolidation.
In Q2 2015, net sales for our consolidated automotive segment, which includes both Federal Mobile and IH Auto, increased by $144,000,000 from the prior year period and adjusted EBITDA was $181,000,000 for Q2 2015 compared to 184,000,000 dollars in Q2 2014. Federal Mogul on a standalone basis reported sales of $2,000,000,000 up 5% from prior year and up 16% in constant dollars. This reflects organic growth both in Powertrain and Motorparts division as well as Powertrain's acquisition of the TRW engine valve business and Motorparts acquisition of the Honeywell brake component business. Operational EBITDA was $180,000,000 compared to $184,000,000 in the prior year due to a $28,000,000 negative impact from currency changes. Subsequent to quarter end, Federal Mogul's powertrain division closed on Phase 2 of the acquisition of TRW's engine valve business.
IEH Auto is included in Q2 2015 results for only 1 month. On a standalone basis, net sales were approximately $65,000,000 and there was minimal contribution to segment adjusted EBITDA. Now turning to our railcar segment. Our railcar segment had strong railcar shipments in Q2 2015 of approximately 2 1,400 railcars, including approximately 1760 railcars to leasing customers as compared to 2,140 railcars for the prior year period, of which 10 20 railcars were to leasing customers. As of June 30, 2015, ARI had a backlog of approximately 80450 railcars, including 2,060 railcars for lease customers.
According to the Railway Supply Institute, the railcar manufacturing backlog has dropped from a record of nearly 143 000 railcars at the end of 2014, down to approximately 136,000 at the end of Q2 2015. Tank cars are now only 34% of the industry backlog, down from a peak of 85% in Q1 2013. Total manufacturing revenues for Q2, 2015 were $268,000,000 which is in line with the prior year before elimination of railcar sales to our railcar segment's leasing operation. Gross margin from manufacturing operations before intercompany eliminations for Q2 2015 was $72,000,000 compared to $65,000,000 for the prior year period. Gross margin for manufacturing operations as a percentage of manufacturing revenues increased to 27% for Q2 2015 as compared to 24% in the prior year period.
The increase in gross margin percentage was primarily due to stronger efficiencies and favorable pricing. The leasing businesses within the railcar segment continue to perform well. In Q2, we grew the combined leased car portfolios to roughly 43,000 500 railcars from approximately 39,700 railcars at the end of 2014. Consolidated adjusted EBITDA attributable to IEP grew to $127,000,000 in Q2 2015 from $102,000,000 in the prior year period. The increase was primarily driven by higher railcar manufacturing margins and higher leasing revenues.
Our railcar segment's liquidity position is strong with $432,000,000 of cash at the end of Q2 2015. ARI recently announced that its board has authorized a share repurchase program pursuant to which ARI may repurchase up to $250,000,000 of its shares from time to time. Now turning to our gaming segment. Our Gaming segment posted solid Q2 twenty fifteen results with consolidated adjusted EBITDA of $33,000,000 compared to $26,000,000 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 1.8% in Q2 2015 as compared to the prior year period as a result of increased customer volumes. In addition, promotional gaming credits redeemed at Trop AC were reduced by 16% during that time period. Internet gaming revenues also increased during Q2 2015 as compared to the prior year period. Based on market data, the Atlantic City market experienced year over year declines in gross casino win of 10.9% for Q2 2015. Results have also improved significantly at Lumiere Place as promotional spending intended to relaunch the casino under new ownership in 2014 has been reduced.
Tropicana has a solid balance sheet with $185,000,000 in cash and cash equivalents as of June 30, 2015. Tropicana recently announced that its board has authorized a share repurchase program pursuant to which Tropicana may repurchase up to $50,000,000 of its shares from time to time. Now turning to our Food Packaging segment. Net sales for Q2 2015 decreased by $2,000,000 or 2% 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 $18,000,000 in Q2 2015, which was a $1,000,000 increase from the prior year period. Gross margin as a percentage of net sales was 20 6% in Q2 2015, which was consistent with the prior year. This case's cash balance at the end of Q2 2015 was $37,000,000 And now to our Metals segment. Net sales for Q2 2015 decreased by $85,000,000 or 45% compared to the prior year. The decrease was primarily due to lower shipment volumes and lower prices of ferrous and non ferrous scrap.
Ferrous scrap volumes decreased approximately 28% and the average ferrous selling price per ton decreased approximately 35% from $3.77 to $2.46 Adjusted EBITDA was a loss of $3,000,000 in Q2 2015 compared to a loss of $4,000,000 in the prior year. Gross margin as a percentage of net sales was a loss of 7% in Q2 2015 compared to a loss of 2% in Q2 2014. 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 strengthening our competitive position within our existing markets. And now to our Real Estate segment.
Q2 Real Estate revenues were $23,000,000 compared to $26,000,000 the prior year period. Revenues were higher in the prior year, primarily due to residential development sales. Revenues from our rental and resort operations were consistent with prior year period. Our net lease portfolio continued to drive earnings in this segment with its 27 properties generating strong cash flows. The Real Estate segment generated $12,000,000 of adjusted EBITDA in Q2 2015.
So far in 2015, we have sold 2 rental properties in the Oak Harbor operations for $41,000,000 which was over double the book carrying value. Subsequent to quarter end, we have also dollars Now turning to our Mining segment. IAP obtained control of Ferrous Resources Limited during the Q2 of 2015 through a tender offer for outstanding shares. Prior to the tender offer, IEP owned 14% of the company's common stock and as of the end of Q2, we owned 77%. Ferrous Resources owns rights to certain iron ore mineral resources in Brazil and developed mining operations and the related infrastructure to produce and sell iron ore products to the global steel industry.
Of the 6 properties acquired, 3 are already extracting and producing iron ore, while the other assets are at an early stage of exploration. Now turning to home margin lines and believe we will have solid placements for the remainder of 2015. Adjusted EBITDA was $1,000,000 in Q2 2015 compared to $2,000,000 in the prior year. Gross margin as a percentage of sales was 14% for Q2 2015 compared to 16% in the prior year. The decrease was primarily due to a sell off and write down of aging inventory.
As of June 30, 2015, West Point had $7,000,000 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 Q2 with cash, cash equivalents, liquid assets and our investment in the investment funds totaling approximately $6,800,000,000 Our subsidiaries have approximately $2,700,000,000 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 our existing operating segments.
Thank you. Operator, can you please open it up for questions please?
Thank you. We'll now take questions as part of our Q and A session. And our first question comes from the line of Daniel Fannon of Jefferies. Your line is open.
Good morning, guys. I'd actually like to start touch base first just on the liquidity. I noticed that the cash at the holding company level is down to about $230,000,000 or so. That's the lowest level it's been in some time. How are you guys thinking about that in terms of going forward?
What is the right level? And maybe are we looking at maybe raising some more capital if you continue to see some interesting opportunities out there?
Yes. Hey, Dan, it's Keith. Yes, so I think it's we had 2 as we discussed, 2 very big acquisitions that obviously took down the holding company cash and we acquired the Auto Plus assets or the formerly known as Uni Select assets. And then we acquired this Ferris Resources. So that was the reason for it.
I don't I wouldn't say just to answer your question, I don't think we have plans to if you're asking about like equity issuances or anything like that. We certainly don't see that as being necessary. That will always be price dependent. But we think we'll see that cash balance build back up over the next quarter or so from the typical dividend upstreams. I think you're pretty familiar with them, but we have a number of cash flows that are upstream from CVI and American Railcar Industries.
And then we're also going to we paid for the Auto Plus assets fully in cash. That's a business that is highly concentrated on inventory and accounts receivable. So it's frankly right for probably some debt at that level of the capital structure for our Auto Plus business and that could also also result in some cash flow up top as well. So we see it rebuilding over the next couple quarters. What's the right level?
We've always talked historically the $500,000,000 level as kind of a base level and more if we're not finding lots of opportunities, it's gone up, as you know, in history over $1,000,000,000 But we're generally seeing a lot of good opportunities in the marketplace.
That's helpful. And then so I guess maybe on the topic of opportunities, it seems like the market for M and A activity seems to be picking up a little bit. Would you agree with that? And in the past that we've in our previous conversations, we've talked about that maybe M and A activity has been a little bit light. So do you think we're potentially entering a cycle where we may see some more activity and opportunity?
100%. From an IUP's perspective, obviously, we agree. I mean, we bought 2 companies this quarter alone. We have a bunch of stuff that we're looking at in the pipeline at our subsidiary levels of tack on acquisitions. So we see the M and A activity very robust from an industry from an overall global or at least a U.
S. Perspective. We were recently looking at data and this year M and A activity is on pace to exceed 2,000,000,000,000 dollars to double what it was 5 years ago. So there's a lot of M and A going on. Industry expertise or where we already have a company or a segment where it could be where we could expand that segment.
So is that maybe one of the things is that the investment fund continues to have a take a relatively cautious outlook? So is maybe the M and A to be a sign of we're maybe nearing a market top at this point? Or are there certain segments of the market that you guys are seeing that are maybe much more interesting than perhaps other segments that may be overvalued?
I would say I have to break the question into 2 components from the 9 operating segments that we have. We have, I would say, more of a balanced approach because if we already have a company and we're doing a tack on acquisition, we may be paying multiple that is higher than we would normally pay, but they're pro form a of synergies and things of that nature. It may still make a lot of sense for us and that gives us a lot of cushion on the downside and or comfort level in what we're paying. At the investment fund level, I think we're finding opportunities in certain segments. Obviously, there are certain segments that are beaten down pretty substantially.
And so we've been pretty aggressive in building positions in a couple of opportunities that will be disclosed over the next quarter or so. So we are finding segments that are beaten down. But obviously, we're very cautious on overall market levels and hence the Sung's reference earlier to net equity exposures in the single digits. Very, very cautious on and our Chairman has been very vocal about that over the last quarter in seeing various aspects of the market in bubble state.
Fair enough. That's helpful. And then maybe kind of just a final question here. Just any thoughts on maybe how the market environment might change as we potentially enter a rising rate environment here? Or will it simply be business as usual for you guys?
Do you see anything any maybe slight change in strategy or anything like that going forward?
I don't think you will not see a change in the strategy of IEP. How the market reacts to higher interest rates, again, I our Chairman has been very vocal on we'd be very, very cautious, especially in the high yield debt space as to how that reaction will be absorbed by the market in a rising rate environment. Again, we've been pretty vocal about credit spreads for low quality corporate companies. And that there could be a problem there. But I don't think it will change our approach.
And I think we've positioned ourselves from an IEP perspective to we hope to be able to make market money in a rising rate environment or a lower rate environment. So we're cautiously optimistic, but very, very cautious on the answer is we don't know what the reaction will be, but we have worries.
Fair enough. And then maybe just a quick tack on, is there anything that would make you less cautious like I guess maybe you would get a little more bullish or optimistic about what's out there or a change in stats?
It's hard to answer. I mean, there's for us, it always comes down to risk adjusted returns, risk risks that everybody talks about in China in the high yield market rate environment. We see a lot of risks. And so simply put, paying 20 times PE ratios when weighing those risks is not, in our opinion, a great risk reward return. So if we see those risks subside or valuations come in to reflect a better risk return ratio, then we could we would probably adjust accordingly.
But it's hard to say what would cause us to adjust. I think the single digit equity exposure speaks for itself on our view of the markets.
Okay. Excellent. Thanks for your help.
Yeah. Thanks, Dan.
Thank you. And I'm currently showing no more questions in queue.
Okay. Thanks everybody. We'll look forward to talking to you in November for the 3rd quarter results. Have a good day.