Icahn Enterprises LP (IEP) 2009 Q1 法說會逐字稿

Good morning and welcome to the Icahn Enterprises L.P. first-quarter 2009 earnings call with Felicia P. Buebel, Counsel; Keith A. Meister, Principal Executive Officer and Vice Chairman; and Dominick Ragone, CFO and CAO. I would now like to hand over the call to Felicia Buebel, Counsel.

I will now read the forward-looking statement. 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 non-GAAP financial measures. Please note that quantitative reconciliations between each non-GAAP financial measure contained in this presentation and its most directly comparable GAAP measure are available on our website by viewing the copy of this presentation at www.icahnenterprises.com\investor.shtml.

I would now like to turn it over to Keith A. Meister for the overview and a discussion of investment (inaudible).

Thank you, Felicia. Good morning and welcome to the first-quarter 2009 Icahn Enterprises earnings conference call. Joining me on today's call is Dominick Ragone, our Chief Financial Officer. I will be very brief today. I will provide some introductory remarks and a brief review of our investment management segment, after which Dominick will provide an overview of our financial results and the performance for our business segments. Following our remarks, we will be available to address your questions.

Our balance sheet continues to be a source of strength. We ended the quarter with significant liquidity. At quarter-end, liquid assets totaled approximately $3.1 billion. Subsequent to quarter-end, our Board of Directors approved a quarterly cash distribution of $0.25 per depository unit payable in the second quarter of 2009.

During the first quarter of 2009, our investment management segment had positive performance. For the three months ended March 31, 2009, our returns were 7% on a gross basis compared to an 11.7% decline in the S&P 500. As of March 31, the funds had approximately $4.9 billion in assets under management.

Subsequent to quarter-end, our fund's investment performance has continued its strong year-to-date trend. We have work to do to make up for losses incurred in 2008, but we are well-positioned and have made progress and beginning to earn our way back. With that, let me introduce Dominick to discuss our financial results in detail.

Thanks, Keith. I will briefly review our consolidated results for the first quarter of 2009 and then highlight the performances of our operating segments and comment on the strength of our balance sheet.

Net income from continuing operations attributable to Icahn Enterprises for the first quarter of 2009 was $1 million compared to a loss of $36 million for the same period in 2008. As Keith mentioned earlier, the improvement in the performance of the private funds offset the difficulties faced by our other operating segments in the continuing economic downturn.

There was no income from discontinued operations attributable to Icahn Enterprises for the first quarter of 2009 compared to income of $489 million recorded in the first quarter of 2008, which is primarily the gain on the sale of our Nevada gaming operations.

I will now provide more detail regarding our performance of our automotive, metals, real estate and home fashion segments. Although Federal-Mogul's results are included in our consolidated financial statements as of March 1, 2008, our effective date of control for US GAAP purposes, we believe that a meaningful discussion of Federal-Mogul's results should encompass its results for the entire first quarter of 2008.

Net sales decreased by $621 million, or 33.4%, to $1.238 billion for the first quarter of 2009 compared to $1.859 billion in the corresponding prior-year period. Federal-Mogul sales were better than the global automotive production downturn of 39% versus first quarter of 2008.

Federal-Mogul has implemented numerous actions throughout its global operations and functional teams to improve operating performance. Our automotive segment recorded a gross margin of $158 million, or 12.8% of sales in the first quarter of 2009 as compared to $266 million, or 14.3% of sales in the first quarter of 2008. Approximately $25 million of cost reductions were achieved through operational productivity and cost management, including labor flexing, short work weeks, down weeks, modified shift patterns, elimination of premium shifts and tight control on discretionary spending.

Restructuring charges of $38 million were incurred in the first quarter of 2009 as part of Federal-Mogul's global restructuring program designed to improve operating performance. An additional $18 million of restructuring costs are expected through the remainder of 2009. Federal-Mogul will continue to aggressively implement right-sized actions to have the maximum impact on near-term results while simultaneously protecting its business strategy.

Turning to the metals segment. Market price and demand declines attributed to the global economic recession continued in the first quarter of 2009, resulting in losses and significantly lower revenue in the quarter. Steel mill operating levels continue to fall during the first quarter of 2009, reaching close to 30-year lows.

Export demand was also weak in the current quarter. Ferrous shredded scrap dropped from $243 per gross ton in January of 2009 to $192 in March of 2009. In the first quarter of 2008, the price indicator rose from $354 per gross ton in January to $400 in March. Non-ferrous pricing and volume were also off significantly from a year ago.

During the current quarter, falling market prices resulted in a $13 million unfavorable [lower cost of] market inventory adjustment. There was also a $13 million impairment charge against goodwill and other indefinite live intangibles in the first quarter.

Our metals segment continues to make aggressive actions to counteract the dismal economic conditions to align its cost structure to the current market environment. Some of these measures include reduced headcount, temporary idling of major equipment operations and reduced capital spending. These measures helped reduce SG&A by approximately 55% in the first quarter of 2008.

Next is our real estate segment. Operating income for the first quarter of 2009 was $8 million compared to $4 million in the first quarter of 2008. This improvement primarily reflects an increase in rental income from the acquisition of two net leased office properties in August of 2008. This was offset in part by a drop-off in residential real estate sales.

In the first quarter of 2009, we sold three residential units for $3 million, while in the first quarter of 2008, we sold 11 residential units for $12 million. Our resort operations at New Seabury and Vero Beach were flat from prior-year results.

Turning to our home fashion segment. Net sales declined by 26% to $84 million for the first quarter of 2009 as retailers continued to pull back on replenishing existing programs in reaction to a sharp decline in consumer demand for home products.

Operating losses before restructuring and impairment charges for the first quarter of 2009 were $18 million compared to $24 million in the first quarter of 2008 due to improved gross margins and reduced SG&A from cost-cutting initiatives.

Restructuring and impairment charges decreased by $1 million, or 14.3% to $6 million for the quarter of 2009 as compared to the first quarter of 2008, primarily due to lower restructuring charges partially offset by higher impairment charges related to plant closures made during the first quarter of 2009.

Restructuring and impairment charges include severance, benefits and related costs, non-cash impairment charges related to plants that have been or will be closed and continuing costs of closed plants and transition expenses.

WPI has continued to move its manufacturing base to lower-cost offshore locations as evidenced by the announcement of the disclosure of its three -- four remaining US facilities -- its closure of its three remaining four facilities.

Now I will highlight our debt and liquidity position. We finished the year with ample liquidity. Our cash, cash equivalents and liquid assets totaled approximately $3.1 billion. It should be noted that liquid assets include our investment in private funds, as well as our holding company investments. These investments have a ready market and could be liquidated quickly. In addition to our strong cash position, we have undrawn credit facilities totaling $529 million as of March 31, 2009.

In summary, we continue to focus on having ample liquidity and a strong balance sheet to enable us to execute our strategy and to capitalize on opportunities. Thank you. Operator, can you please open it up for questions?

(Operator Instructions). Andrew Berg.

Hey, Dominick. Obviously it was a challenging quarter in the metals segment. Some of the things you did to cut costs in terms of headcount reduction, is that completely reflected in the first quarter's numbers or do we only have the partial benefit of the reduction in the quarter?

There were plant closures in -- I'm sorry -- there were restructuring charges reflected in the numbers in the first quarter of 2009, yes.

Okay, so if we think about what you guys did in the first quarter to try and improve the profitability, can you tell us what the cost savings would be in that segment on a full-year run rate basis?

Andrew, it's Keith Meister. I don't think we are going to get into that level of detail other than to say the costs weren't all cut on the first day of the quarter. They were cut throughout the period and we continue to assess and look at the cost structure. So if the price of the commodity continues to drop, we're going to continue to do what we can to right-size our cost structure. We have been relatively aggressive about it, but there is only so much cost that can come out and a big driver of the results obviously will be driven towards the operations and the price for the commodity.

So it sounds like, given what you have done, I shouldn't expect that that segment can be profitable even with your cost cuts. You're going to need the much improved pricing to get you there?

I think I would say we have cut costs. We continue to -- we haven't gotten the full benefit of that and we will continue to look at cutting costs. At the same time, the top line stabilizing will also be a big benefit.

Okay, thanks.

(Operator Instructions). At this time, we have no questions in queue.

Well, thank you all for joining us and we look forward to speaking with you on our second-quarter earnings conference call.