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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
  
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period ended March 31, 2011
 
OR
£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period From ______ to _______
 
Commission File Number 1-9516
 
ICAHN ENTERPRISES L.P.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
13-3398766
(State or Other Jurisdiction
of Incorporation or Organization)
 
(IRS Employer
Identification No.)
 
767 Fifth Avenue, Suite 4700
New York, NY 10153
(Address of Principal Executive Offices) (Zip Code)
 
(212) 702-4300
(Registrant's Telephone Number, Including Area Code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No £
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No £
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer £  
                Accelerated filer   x
Non-accelerated filer £  
               Smaller reporting company  £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes £ No x
As of May 2, 2011, there were 84,728,419 depositary units outstanding.
 

ICAHN ENTERPRISES L.P.
TABLE OF CONTENTS
 
 
 
Page
No.
 
 
Item 1.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 1.
Item 1A.
Item 6.
 
 

 
i

PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
 
  CONSOLIDATED BALANCE SHEETS
 (In millions, except unit amounts)
 
 
March 31,
2011
 
December 31,
2010
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
2,669
 
 
$
2,963
 
Cash held at consolidated affiliated partnerships and restricted cash
3,892
 
 
2,174
 
Investments
8,426
 
 
7,470
 
Accounts receivable, net
1,449
 
 
1,285
 
Due from brokers
31
 
 
50
 
Inventories, net
1,274
 
 
1,163
 
Property, plant and equipment, net
3,527
 
 
3,455
 
Goodwill
1,133
 
 
1,129
 
Intangible assets, net
984
 
 
999
 
Other assets
918
 
 
650
 
Total Assets
$
24,303
 
 
$
21,338
 
LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
952
 
 
$
844
 
Accrued expenses and other liabilities
1,688
 
 
1,931
 
Securities sold, not yet purchased, at fair value
2,892
 
 
1,219
 
Redemptions payable
1,861
 
 
346
 
Due to brokers
1,627
 
 
1,323
 
Post-employment benefit liability
1,282
 
 
1,272
 
Debt
7,110
 
 
6,509
 
Total liabilities
17,412
 
 
13,444
 
 
 
 
 
Commitments and contingencies (Note 19)
 
 
 
 
 
 
 
Equity:
 
 
 
   Limited partners:
       Depositary units: 92,400,000 authorized; issued 85,865,619
           at March 31, 2011 and December 31, 2010; outstanding 84,728,419
           at March 31, 2011 and December 31, 2010
3,761
 
 
3,477
 
   General partner
(276
)
 
(282
)
   Treasury units at cost: 1,137,200 depositary units
(12
)
 
(12
)
Equity attributable to Icahn Enterprises
3,473
 
 
3,183
 
Equity attributable to non-controlling interests
3,418
 
 
4,711
 
Total Equity
6,891
 
 
7,894
 
Total Liabilities and Equity
$
24,303
 
 
$
21,338
 
 
 
 
See notes to consolidated financial statements.

 
1

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
 
  CONSOLIDATED STATEMENTS OF OPERATIONS
 (In millions, except per unit amounts)
 
 
Three Months Ended March 31,
 
2011
 
2010
 
(Unaudited)
Revenues:
 
 
 
   Net sales
$
2,257
 
 
$
1,870
 
   Revenues from other operations
186
 
 
28
 
   Net gain (loss) from investment activities
617
 
 
(1
)
   Interest and dividend income
35
 
 
68
 
   Other income (loss), net
9
 
 
(50
)
 
3,104
 
 
1,915
 
Expenses:
 
 
 
   Cost of goods sold
1,925
 
 
1,575
 
   Other expenses from operations
98
 
 
20
 
   Selling, general and administrative
355
 
 
274
 
   Restructuring
3
 
 
4
 
   Impairment
 
 
4
 
   Interest expense
109
 
 
95
 
 
2,490
 
 
1,972
 
Income (loss) before income tax (expense) benefit
614
 
 
(57
)
Income tax (expense) benefit
(18
)
 
7
 
Net income (loss)
596
 
 
(50
)
Less: net income attributable to non-controlling interests
(356
)
 
(15
)
Net income (loss) attributable to Icahn Enterprises
$
240
 
 
$
(65
)
 
 
 
 
Net income (loss) attributable to Icahn Enterprises allocable to:
 
 
 
   Limited partners
$
235
 
 
$
(64
)
   General partner
5
 
 
(1
)
 
$
240
 
 
$
(65
)
 
 
 
 
Basic income (loss) per LP unit
$
2.76
 
 
$
(0.80
)
Basic weighted average LP units outstanding
85
 
 
80
 
 
 
 
 
Diluted income (loss) per LP unit
$
2.68
 
 
$
(0.80
)
Diluted weighted average LP units outstanding
90
 
 
80
 
 
 
 
 
Cash distributions declared per LP unit
$
0.25
 
 
$
0.25
 
 
 
 
 
 
 
See notes to consolidated financial statements.

 
2

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF CHANGES
 IN EQUITY AND COMPREHENSIVE INCOME
(In millions)
 
 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
 
 
 
 
Held in Treasury
 
 
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partners' Equity
 
Amount
 
Units
 
Total Partners' Equity
 
Non-controlling Interest
 
Total Equity
 
(Unaudited)
Balance, December 31, 2010
$
(282
)
 
$
3,477
 
 
$
(12
)
 
1
 
 
$
3,183
 
 
$
4,711
 
 
$
7,894
 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
5
 
 
235
 
 
 
 
 
 
240
 
 
356
 
 
596
 
Post-employment benefits, net of tax
 
 
1
 
 
 
 
 
 
1
 
 
 
 
1
 
Hedge instruments, net of tax
 
 
4
 
 
 
 
 
 
4
 
 
1
 
 
5
 
Translation adjustments and other, net of tax
1
 
 
63
 
 
 
 
 
 
64
 
 
23
 
 
87
 
Comprehensive income
6
 
 
303
 
 
 
 
 
 
309
 
 
380
 
 
689
 
Partnership distributions
 
 
(21
)
 
 
 
 
 
(21
)
 
 
 
(21
)
Investment Management distributions
 
 
 
 
 
 
 
 
 
 
(1,817
)
 
(1,817
)
Change in subsidiary equity and other
 
 
2
 
 
 
 
 
 
2
 
 
144
 
 
146
 
Balance March 31, 2011
$
(276
)
 
$
3,761
 
 
$
(12
)
 
1
 
 
$
3,473
 
 
$
3,418
 
 
$
6,891
 
 
 
Accumulated other comprehensive loss was $504 and $597 at March 31, 2011 and December 31, 2010, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See notes to consolidated financial statements.

 
3

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Three Months Ended March 31,
 
2011
 
2010
 
 (Unaudited)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
596
 
 
$
(50
)
   Adjustments to reconcile net income (loss) to net cash used in operating activities:
 
 
 
   Investment (gains) losses
(617
)
 
1
 
   Purchases of securities
(1,405
)
 
(1,171
)
   Proceeds from sales of securities
1,114
 
 
922
 
   Purchases to cover securities sold, not yet purchased
(51
)
 
(719
)
   Proceeds from securities sold, not yet purchased
1,669
 
 
33
 
   Net premiums received (paid) on derivative contracts
18
 
 
(43
)
   Changes in receivables and payables relating to securities transactions
74
 
 
(394
)
   Depreciation and amortization
110
 
 
110
 
   Other, net
(14
)
 
35
 
   Changes in cash held at consolidated affiliated partnerships and restricted cash
(1,718
)
 
938
 
   Changes in other operating assets and liabilities
(223
)
 
(52
)
Net cash used in operating activities
(447
)
 
(390
)
Cash flows from investing activities:
 
 
 
   Capital expenditures
(115
)
 
(166
)
   Acquisitions of businesses
(31
)
 
 
   Other, net
7
 
 
(7
)
Net cash used in investing activities
(139
)
 
(173
)
Cash flows from financing activities:
 
 
 
   Investment management equity:
 
 
 
      Capital subscriptions received in advance
 
 
46
 
      Capital distributions to non-controlling interests
(302
)
 
(50
)
      Capital contributions by non-controlling interests
 
 
173
 
   Partnership contributions
 
 
5
 
   Partnership distributions
(21
)
 
(20
)
   Proceeds from issuance of senior unsecured notes
 
 
1,987
 
   Proceeds from other borrowings
602
 
 
65
 
   Repayments of borrowings
(9
)
 
(1,357
)
   Other, net
1
 
 
(26
)
Net cash provided by financing activities
271
 
 
823
 
Effect of exchange rate changes on cash and cash equivalents
19
 
 
(21
)
Net (decrease) increase in cash and cash equivalents
(296
)
 
239
 
Net change in cash of assets held for sale
2
 
 
 
Cash and cash equivalents, beginning of period
2,963
 
 
2,256
 
Cash and cash equivalents, end of period
$
2,669
 
 
$
2,495
 
Supplemental information:
 
 
 
Cash payments for interest, net of amounts capitalized
$
162
 
 
$
51
 
Net cash payments for income taxes
$
24
 
 
$
12
 
Net unrealized gains (losses) on available-for-sale securities
$
1
 
 
$
(4
)
Redemptions payable to non-controlling interests
$
1,861
 
 
$
70
 
LP unit issuance to purchase majority interests in ARI and Viskase
$
 
 
$
273
 
LP unit issuance to settle preferred LP unit redemptions
$
 
 
$
138
 
 
 
See notes to consolidated financial statements.

 
4

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

 
1.
Description of Business and Basis of Presentation.
General
Icahn Enterprises L.P. (“Icahn Enterprises” or the “Company”) is a master limited partnership formed in Delaware on February 17, 1987. We own a 99% limited partner interest in Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”). Icahn Enterprises Holdings and its subsidiaries own substantially all of our assets and liabilities and conduct substantially all of our operations. Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”), our sole general partner, which is owned and controlled by Mr. Carl C. Icahn, owns a 1% general partner interest in both us and Icahn Enterprises Holdings, representing an aggregate 1.99% general partner interest in us and Icahn Enterprises Holdings. As of March 31, 2011, affiliates of Mr. Icahn owned 78,454,899 of our depositary units which represented approximately 92.6% of our outstanding depositary units. As further discussed in Note 13, “Preferred Limited Partner Units,” on March 31, 2010 we redeemed all of our outstanding preferred units.
We are a diversified holding company owning subsidiaries currently engaged in the following continuing operating businesses: Investment Management, Automotive, Gaming, Railcar, Food Packaging, Metals, Real Estate and Home Fashion. We also report the results of our Holding Company, which includes the unconsolidated results of Icahn Enterprises and Icahn Enterprises Holdings, and investment activity and expenses associated with the Holding Company. Further information regarding our continuing reportable segments is contained in Note 2, “Operating Units,” and Note 15, “Segment Reporting.”
The accompanying consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (“fiscal 2010”). The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are necessary to present fairly the results for the interim periods. All such adjustments are of a normal and recurring nature. Certain reclassifications from the prior year presentation have been made to conform to the current year presentation.
 Our consolidated financial statements include the accounts of (i) Icahn Enterprises and (ii) the wholly and majority owned subsidiaries of Icahn Enterprises, in addition to those entities in which we have a controlling interest as a general partner interest or in which we are the primary beneficiary of a variable interest entity (“VIE”). In evaluating whether we have a controlling financial interest in entities in which we would consolidate, we consider the following: (1) for voting interest entities, we consolidate these entities in which we own a majority of the voting interests; (2) for VIEs that are not subject to the deferral provisions described below in the section entitled, “Adoption of New Accounting Standards,” we consolidate these entities in which we are considered the primary beneficiary because we (i) have the direct or indirect ability through voting rights or similar rights to make decisions about the VIE's activities that have a significant effect on its success and (ii) absorb the majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both (see Note 4, “Investments and Related Matters,” for further discussion regarding our VIEs); and (3) for limited partnership entities that are not considered VIEs, we consolidate these entities if we are the general partner of such entities and for which no substantive kick-out rights (the rights underlying the limited partners' ability to dissolve the limited partnership or otherwise remove the general partners are collectively referred to as “kick-out” rights) or participating rights exist. All material intercompany accounts and transactions have been eliminated in consolidation.
 We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “'40 Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the '40 Act. In addition, we do not invest or intend to invest in securities as our primary business. We intend to structure our investments to continue to be taxed as a partnership rather than as a corporation under the applicable publicly traded partnership rules of the Internal Revenue Code, as amended (the “Code”).
Because of the nature of our businesses, the results of operations for quarterly and other interim periods are not indicative of the results to be expected for the full year. Variations in the amount and timing of gains and losses on our investments can be significant.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, cash held at consolidated affiliated partnerships and restricted cash, accounts receivable, due from brokers, accounts payable, accrued expenses and other liabilities and due to brokers are deemed

 
5

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

to be reasonable estimates of their fair values because of their short-term nature.
See Note 4, “Investments and Related Matters,” and Note 5, “Fair Value Measurements,” for a detailed discussion of our investments.
The fair value of our long-term debt is based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. The carrying value and estimated fair value of our long-term debt as of March 31, 2011 are approximately $7.1 billion and $7.3 billion, respectively. The carrying value and estimated fair value of our long-term debt as of December 31, 2010 was approximately $6.5 billion and $6.1 billion, respectively.
Restricted Cash
Our restricted cash balance was approximately $3.3 billion and $1.6 billion as of March 31, 2011 and December 31, 2010, respectively.
Adoption of New Accounting Standards
In December 2009, the Financial Accounting Standards Board ("FASB") issued amended standards for determining whether to consolidate a VIE. This new standard affects all entities currently within the scope of the Consolidation Topic of the FASB Accounting Standards Codification ("FASB ASC"), as well as qualifying special-purpose entities that are currently excluded from the scope of the Consolidation Topic of the FASB ASC. This new standard amends the evaluation criteria to identify the primary beneficiary of the VIE and requires ongoing reassessment of whether an enterprise is the primary beneficiary of such VIEs. This new standard is effective as of the beginning of the first fiscal year beginning after November 15, 2009. The adoption of this new standard did not have a material impact on our financial condition, results of operations and cash flows. As discussed below, we determined that certain entities within our Investment Management segment met the deferral criteria and we will therefore be deferring the application of this new guidance for these applicable entities.
In February 2010, the FASB issued new guidance which amended the consolidation requirement discussed above. This amendment deferred consolidation requirements for a reporting entity's interest in an entity if the reporting entity (1) has all the attributes of an investment company or (2) represents an entity for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. The deferral does not apply in situations in which a reporting entity has the explicit or implicit obligation to fund losses of an entity that could be potentially significant to the entity. The deferral also does not apply to interests in securitization entities, asset-backed financing entities or entities formerly considered special-purpose entities. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of VIEs or other applicable consolidation guidance, such as the consolidation of partnerships. Entities are required, however, to provide disclosures for all VIEs in which they hold a variable interest. This includes variable interests in entities that qualify for the deferral but are considered VIEs under the prior accounting provisions. This new guidance is effective as of the beginning of a reporting entity's first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period. We determined that certain entities within our Investment Management segment met the deferral provisions of this new guidance. Accordingly, these entities within our Investment Management segment will continue to be subject to the overall guidance on the consolidation of VIEs prior to the new standard described above or other applicable consolidation guidance, such as the consolidation of partnerships. See Note 4, “Investments and Related Matters - Investments in Variable Interest Entities,” for further discussion.
Filing Status of Subsidiaries
Federal-Mogul Corporation (“Federal-Mogul”), American Railcar Industries, Inc. (“ARI”) and Tropicana Entertainment Inc. (“Tropicana”) are each a reporting entity under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and file annual, quarterly and current reports and proxy and information statements. Each of these reports is publicly available at www.sec.gov.
 
2.
Operating Units.
Investment Management
Icahn Onshore LP (the “Onshore GP”) and Icahn Offshore LP (the “Offshore GP” and, together with the Onshore GP, the “General Partners”) act as general partner of Icahn Partners LP (the “Onshore Fund”) and the Offshore Master Funds (as defined herein), respectively. The General Partners do not provide such services to any other entities, individuals or accounts. Interests in the Private Funds (as defined below) are offered only to certain sophisticated and qualified investors on the basis of exemptions from the registration requirements of the federal securities laws and are not publicly available. The “Offshore

 
6

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

Master Funds” consist of (i) Icahn Partners Master Fund LP ("Master Fund I"), (ii) Icahn Partners Master Fund II LP ("Master Fund II") and (iii) Icahn Partners Master Fund III LP ("Master Fund III"). The Onshore Fund and the Offshore Master Funds are collectively referred to herein as the “Investment Funds.” In addition, as discussed elsewhere in this Quarterly Report on Form 10-Q, the “Offshore Funds” consist of (i) Icahn Fund Ltd., (ii) Icahn Fund II Ltd. and (iii) Icahn Fund III Ltd. The Offshore GP also acts as general partner of a fund formed as a Cayman Islands exempted limited partnership that invests in the Offshore Master Funds. This fund, together with other funds that also invest in the Offshore Master Funds, constitute the “Feeder Funds” and, together with the Investment Funds, are referred to herein as the “Private Funds.”
Our Investment Management segment's revenues are affected by the combination of fee-paying assets under management (“AUM”) and the investment performance of the Private Funds. The General Partners are entitled to receive an incentive allocation and special profits interest allocation from the Investment Funds which are accrued on a quarterly basis and are allocated to the General Partners at the end of the Investment Funds' fiscal year (or sooner on redemptions) assuming there are sufficient net profits to cover such amounts. Such quarterly accruals may be reversed as a result of subsequent investment performance prior to the date of such allocation. As a result of the return of fee-paying capital as described below, no further incentive allocations or special profits interest allocations will accrue for periods subsequent to March 31, 2011.
As more fully disclosed in a letter to investors in the Private Funds filed with the SEC on Form 8-K on March 7, 2011, the Private Funds will be returning all fee-paying capital to its investors as of March 31, 2011. Payments will be funded through cash on hand and borrowings under existing credit lines. See Note 4, "Investments and Related Matters-Investment Management," for further discussion regarding this reconsideration event and its consolidation impact.
Our interest in the Investment Funds, including earned incentive allocations and special profits interest allocation from prior periods that were retained in the Investment Funds, was $2.8 billion and $2.6 billion as of March 31, 2011 and December 31, 2010, respectively, for which no special profits interest allocation or incentive allocations are applicable. These investments and related earnings are reflected in the consolidated Private Funds' net assets and earnings.
As of March 31, 2011, the full Target Special Profits Interest Amount was $9 million, which is comprised of a Target Special Profits Interest Amount of $8 million for the three months ended March 31, 2011 and a hypothetical return of $1 million on the full Target Special Profits Interest Amount from the Investment Funds. As a result of the return of fee-paying capital as described above, the full Target Special Profits Interest Amount of $9 million at March 31, 2011 was allocated to the General Partners at March 31, 2011. As of March 31, 2010, the full Target Special Profits Interest Amount was $12 million, including a Target Special Profits Interest Amount for the first three months of fiscal 2010 and a hypothetical return on the full Target Special Profits Interest Amount from the Investment Funds. Of the full Target Special Profits Interest Amount as of March 31, 2010, $11 million was accrued as a special profits interest allocation for the first quarter of fiscal 2010.
Incentive allocations were $7 million for the three months ended March 31, 2011 and were not material for the three months ended March 31, 2010, as a result of "high watermarks" that were established for fee-paying investors during fiscal 2008. Incentive allocations are calculated on an investor-by-investor basis. (The General Partners do not earn incentive allocations during a particular period even though the Investment Funds may have a positive return in such period until losses for each investor in prior periods have been recovered.) The General Partners' incentive allocations earned from the Investment Funds are accrued on a quarterly basis and are allocated to the General Partners at the end of the Investment Funds' fiscal year (or sooner on redemptions), provided that, effective July 1, 2009, certain new options do not provide for incentive allocations at the end of each fiscal year.
Automotive
We conduct our Automotive segment through our majority ownership in Federal-Mogul.  Federal-Mogul is a leading global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reduction, alternative energies, environment and safety systems. Federal-Mogul serves the world's foremost original equipment manufacturers (“OEM”) of automotive, light commercial, heavy-duty, industrial, agricultural, aerospace, marine, rail and off-road vehicles, as well as the worldwide aftermarket.   As of March 31, 2011, Federal-Mogul is organized into four product groups: Powertrain Energy, Powertrain Sealing and Bearings, Vehicle Safety and Protection, and Global Aftermarket. 
Federal-Mogul believes that its sales are well-balanced between OEM and aftermarket, as well as domestic and international markets. Federal-Mogul's customers include the world's largest light and commercial vehicle OEMs and major distributors and retailers in the independent aftermarket. Federal-Mogul has operations in established markets including Canada, France, Germany, Italy, Japan, Spain, Sweden, the United Kingdom and the United States, and emerging markets including Argentina, Brazil, China, Czech Republic, Hungary, India, Korea, Mexico, Poland, Russia, South Africa, Thailand, Turkey and Venezuela. The attendant risks of Federal-Mogul's international operations are primarily related to currency fluctuations, changes in local economic and political conditions and changes in laws and regulations.

 
7

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

On March 18, 2011, Federal-Mogul announced that it had engaged Lazard Ltd. to explore strategic alternatives to enhance shareholder value. There can be no assurance that the exploration of alternatives will result in a transaction. Further, it is not certain what impact any particular alternative, or lack thereof, may have on Federal-Mogul's operating results, financial condition, business prospects and our investment in Federal-Mogul.
 
Accounts Receivable, net
Federal-Mogul's subsidiaries in Brazil, France, Germany, Italy, Japan, Spain and the United States are party to accounts receivable factoring and securitization facilities. Gross accounts receivable transferred under these facilities were $252 million and $211 million as of March 31, 2011 and December 31, 2010, respectively. Of those gross amounts, $250 million and $210 million, respectively, qualify as sales as defined in FASB ASC Topic 860, Transfers and Servicing. The remaining transferred receivables were pledged as collateral and accounted for as secured borrowings and recorded in the consolidated balance sheets within “Accounts receivable, net” and “Debt.” Under the terms of these facilities, Federal-Mogul is not obligated to draw cash immediately upon the transfer of accounts receivable. Thus, as of March 31, 2011 and December 31, 2010, Federal-Mogul had outstanding transferred receivables for which cash of $5 million and $1 million, respectively, had not yet been drawn. Proceeds from the transfers of accounts receivable qualifying as sales were $413 million and $305 million for the three months ended March 31, 2011 and 2010, respectively.
For the three months ended March 31, 2011 and 2010, expenses associated with transfers of receivables of $2 million and $1 million, respectively, were recorded in the consolidated statements of operations within other income (loss), net. Where Federal-Mogul receives a fee to service and monitor these transferred receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not incurred as a result of such activities. Certain of the facilities contain terms that require Federal-Mogul to share in the credit risk of the sold receivables. The maximum exposures to Federal-Mogul associated with certain of these facilities' terms were $31 million and $32 million as of March 31, 2011 and December 31, 2010, respectively. Based on Federal-Mogul's analysis of the creditworthiness of its customers on which such receivables were sold and outstanding as of March 31, 2011 and December 31, 2010, Federal-Mogul estimated the loss to be immaterial.
 
Restructuring
 Federal-Mogul's restructuring charges are comprised of two types: employee costs (principally termination benefits) and facility closure costs. Termination benefits are accounted for in accordance with FASB ASC Topic 712, Compensation - Nonretirement Post-employment Benefits, and are recorded when it is probable that employees will be entitled to benefits and the amounts can be reasonably estimated. Estimates of termination benefits are based on the frequency of past termination benefits, the similarity of benefits under the current plan and prior plans, and the existence of statutory required minimum benefits. Facility closure and other costs are accounted for in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligation, and are recorded when the liability is incurred.
Estimates of restructuring charges are based on information available at the time such charges are recorded. In certain countries where Federal-Mogul operates, statutory requirements include involuntary termination benefits that extend several years into the future. Accordingly, severance payments continue well past the date of termination at many international locations. Thus, these programs appear to be ongoing when, in fact, terminations and other activities under these programs have been substantially completed.
Federal-Mogul expects to finance its restructuring programs through cash generated from its ongoing operations or through cash available under its existing credit facility, subject to the terms of applicable covenants. Federal-Mogul does not expect that the execution of these programs will have an adverse impact on its liquidity position.
Federal-Mogul's restructuring activities are undertaken as necessary to execute its strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize Federal-Mogul's businesses and to relocate manufacturing operations to best cost markets. These activities generally fall into one of the following categories:
1.
Closure of Facilities and Relocation of Production - in connection with Federal-Mogul's strategy, certain operations have been closed and related production relocated to best cost countries or to other locations with available capacity.
2.
Consolidation of Administrative Functions and Standardization of Manufacturing Processes - as part of its productivity strategy, Federal-Mogul has acted to consolidate its administrative functions to reduce selling, general and administrative costs and change its manufacturing processes to improve operating efficiencies through standardization of processes.
An unprecedented downturn in the global automotive industry and global financial markets led Federal-Mogul to

 
8

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

announce, in September and December 2008, certain restructuring actions, herein referred to as “Restructuring 2009,” designed to improve operating performance and respond to increasingly challenging conditions in the global automotive market. Federal-Mogul did not record any net accruals related to Restructuring 2009 for each of the three months ended March 31, 2011 and 2010. Federal-Mogul expects to incur additional restructuring charges of up to $1 million through the fiscal year ending December 31, 2011 ("fiscal 2011") all of which are expected to be facility closure costs. Total cumulative restructuring charges related to Restructuring 2009 through March 31, 2011 were $158 million, of which $151 million were employee costs and $7 million were facility closure costs.
As of December 31, 2010, the accrued liability balance relating to all restructuring programs was $24 million. For each of the three months ended March 31, 2011 and 2010, Federal-Mogul incurred $1 million of net restructuring charges. During the three months ended March 31, 2011, Federal-Mogul paid $6 million of restructuring charges. As of March 31, 2011, the accrued liability balance was $19 million, and is included in accrued expenses and other liabilities in our consolidated balance sheets.
Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially estimated. Accordingly, previously recorded liabilities of $1 million were reversed for each of the three months ended March 31, 2011 and 2010. Such reversals result from: changes in estimated amounts to accomplish previously planned activities; changes in expected (based on historical practice) outcome of negotiations with labor unions, which reduced the level of originally committed actions; newly implemented government employment programs, which lowered the expected cost; and changes in approach to accomplish restructuring activities.
Currency Matters
Federal-Mogul has operated an aftermarket distribution center in Venezuela for several years, supplying imported replacement automotive parts to the local independent aftermarket. Since 2005, two exchange rates have existed in Venezuela: the official rate, which had been frozen since 2005 at 2.15 bolivars per U.S. dollar; and the parallel rate, which floats at a rate much higher than the official rate. Given the existence of the two rates in Venezuela, Federal-Mogul deemed the official rate was appropriate for the purpose of conversion into U.S. dollars at December 31, 2009 based on no positive intent to repatriate cash at the parallel rate and demonstrated ability to repatriate cash at the official rate.
Near the end of 2009, the three-year cumulative inflation rate for Venezuela was above 100%, which requires the Venezuelan operation to report its results as though the U.S. dollar is its functional currency in accordance with FASB ASC Topic 830, Foreign Currency Matters, commencing January 1, 2010 (“inflationary accounting”). The impact of this transition to a U.S. dollar functional currency requires that any change in the U.S. dollar value of bolivar denominated monetary assets and liabilities be recognized directly in earnings.
On January 8, 2010, the Venezuelan government devalued its currency. During the three months ended March 31, 2010, Federal-Mogul recorded $20 million in foreign currency exchange expense due to this currency devaluation.
The remaining Venezuelan cash balance of $12 million as of March 31, 2011 is expected to be used to pay intercompany balances for the purchase of product and to pay dividends, subject to local government restrictions.
Impairment
Federal-Mogul recorded $4 million in impairment charges for the three months ended March 31, 2010 related to certain of its equipment where the assessment of future undiscounted cash flows of such equipment, when compared to the current carrying value of the equipment, indicated the assets were not recoverable. Federal-Mogul did not incur any impairment charges for the three months ended March 31, 2011. Federal-Mogul determined the fair value of the assets by applying a probability weighted, expected present value technique to the estimated future cash flows using assumptions a market participant would utilize. The discount rate used is consistent with other long-lived asset fair value measurements.
Gaming
We conduct our Gaming segment through Tropicana, which is held by the Private Funds, and in which we have a controlling interest. Tropicana currently owns and operates a diversified, multi-jurisdictional collection of casino gaming properties. The eight casino facilities it operates feature approximately 411,000 square feet of gaming space with approximately 7,800 slot machines, 230 table games and 6,000 hotel rooms with three casino facilities located in Nevada, two in Mississippi and one in each of Indiana, Louisiana and New Jersey. In addition, in August 2010 Tropicana acquired a resort under development in Aruba.
On March 8, 2010, (the ''Effective Date''), Tropicana completed the acquisition of certain assets of its predecessor, Tropicana Entertainment, LLC, and certain subsidiaries and affiliates thereof (together, the ''Predecessors'') and Tropicana

 
9

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

Resort and Casino-Atlantic City (''Tropicana AC''). Such transactions, referred to as the ''Restructuring Transactions,'' were effected pursuant to the Joint Plan of Reorganization of Tropicana Entertainment, LLC (''Tropicana LLC'') and Certain of Its Debtor Affiliates Under Chapter 11 of the Bankruptcy Code, filed with the United States Bankruptcy Court for the District of Delaware on January 8, 2009, as amended (the ''Plan''). As a result of the Restructuring Transactions pursuant to the Plan, the Investment Funds received shares of Tropicana common stock.
In addition, in connection with Tropicana's completion of the Restructuring Transactions, Tropicana entered into a credit agreement, dated as of December 29, 2009 (the ''Exit Facility''). Each of the Investment Funds is a lender under the Exit Facility and, in the aggregate, collectively hold over 50% of the loans under the Exit Facility.
On November 15, 2010, the Investment Funds acquired 668,000 additional shares of Tropicana common stock. As a result of this purchase, the Investment Funds hold, in the aggregate, 13,538,446 shares of Tropicana common stock, representing approximately 51.5% of the outstanding shares of Tropicana common stock. The additional purchase of shares of Tropicana common stock required us to consolidate Tropicana's financial results effective November 15, 2010, which now comprises our Gaming segment.
As further described in Note 20, "Subsequent Events-Investment Management," on April 29, 2011, the Investment Funds made a distribution-in-kind of Tropicana common stock to us and, as a result, we directly own 51.5% of Tropicana's outstanding common stock as of that date.
Railcar
We conduct our Railcar segment through our majority ownership in ARI. ARI manufactures railcars, which are offered for sale or lease, custom designed railcar parts and other industrial products, primarily aluminum and special alloy steel castings. These products are sold to various types of companies including leasing companies, railroads, industrial companies and other non-rail companies. ARI provides railcar repair and maintenance services for railcar fleets. In addition, ARI provides fleet management and maintenance services for railcars owned by certain customers. Such services include inspecting and supervising the maintenance and repair of such railcars.
Food Packaging
We conduct our Food Packaging segment through our majority ownership in Viskase Companies, Inc. ("Viskase"). Viskase is a worldwide leader in the production and sale of cellulosic, fibrous and plastic casings for the processed meat and poultry industry. Viskase currently operates seven manufacturing facilities and nine distribution centers throughout North America, Europe and South America and derives approximately 70% of its total net sales from customers located outside the United States. Viskase believes it is one of the two largest manufacturers of non-edible cellulosic casings for processed meats and one of the three largest manufacturers of non-edible fibrous casings. In fiscal 2011, Viskase is constructing a manufacturing and distribution facility in Asia.
At March 31, 2011, Viskase had $136 million of assets located outside of the United States, primarily in France.
Metals
We conduct our Metals segment through our indirect wholly owned subsidiary, PSC Metals, Inc. (“PSC Metals”). PSC Metals collects industrial and obsolete scrap metal, processes it into reusable forms and supplies the recycled metals to its customers including electric-arc furnace mills, integrated steel mills, foundries, secondary smelters and metals brokers. PSC Metals' ferrous products include shredded, sheared and bundled scrap metal and other purchased scrap metal such as turnings (steel machining fragments), cast furnace iron and broken furnace iron. PSC Metals also processes non-ferrous metals including aluminum, copper, brass, stainless steel and nickel-bearing metals. Non-ferrous products are a significant raw material in the production of aluminum and copper alloys used in manufacturing. PSC Metals also operates a secondary products business that includes the supply of secondary plate and structural grade pipe that is sold into niche markets for counterweights, piling and foundations, construction materials and infrastructure end-markets.
PSC Metals had four customers who accounted for approximately 43% of PSC Metals' net sales for the three months ended March 31, 2011 and 48% of PSC Metals' net sales for the three months ended March 31, 2010.
Real Estate
Our Real Estate segment consists of rental real estate, property development and resort activities.
As of March 31, 2011 and December 31, 2010, we owned 30 rental real estate properties. Our property development

 
10

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

operations are run primarily through Bayswater, a real estate investment, management and development subsidiary that focuses primarily on the construction and sale of single-family and multi-family homes, lots in subdivisions and planned communities and raw land for residential development. Our New Seabury development property in Cape Cod, Massachusetts and our Grand Harbor and Oak Harbor development property in Vero Beach, Florida each include land for future residential development of approximately 327 and 870 units of residential housing, respectively. Both developments operate golf and resort operations as well.
In February 2010, our Real Estate operations acquired from Fontainebleau Las Vegas, LLC (“Fontainebleau”), and certain affiliated entities, certain assets associated with property and improvements (the “Former Fontainebleau Property”) located in Las Vegas, Nevada for an aggregate purchase price of $148 million. The Former Fontainebleau Property includes (i) an unfinished building situated on approximately 25 acres of land and (ii) inventory.
As of March 31, 2011 and December 31, 2010, $104 million and $106 million, respectively, of the net investment in financing leases, net real estate leased to others and resort properties, which is included in property, plant and equipment, net, were pledged to collateralize the payment of nonrecourse mortgages payable.
Home Fashion
We conduct our Home Fashion segment through our majority ownership in WestPoint International, Inc. (“WPI”), a manufacturer and distributor of home fashion consumer products. WPI is engaged in the business of manufacturing, sourcing, marketing, distributing and selling home fashion consumer products. WPI markets a broad range of manufactured and sourced bed, bath, basic bedding and kitchen textile products, including, sheets, pillowcases, comforters, flocked blankets, woven blankets and throws, heated blankets, quilts, bedspreads, duvet covers, bed skirts, bed pillows, feather beds, mattress pads, drapes, bath and beach towels, bath accessories, bath rugs, kitchen towels and kitchen accessories. WPI recognizes revenue primarily through the sale of home fashion products to a variety of retail and institutional customers. In addition, WPI receives a small portion of its revenues through the licensing of its trademarks. 
WPI has transitioned the majority of its manufacturing to low-cost countries and continues to maintain its corporate offices and certain distribution operations in the United States.
A relatively small number of customers have historically accounted for a significant portion of WPI's net sales. WPI had five customers who accounted for approximately 54% and seven customers who accounted for approximately 65% of WPI's net sales for the three months ended March 31, 2011 and 2010, respectively.
In light of WPI's recent operating performance and challenging industry conditions, we are considering various strategic alternatives which may include, without limitation, joint ventures, other forms of strategic alliances, and/or a sale or divestiture of all or a significant portion of WPI's assets. We cannot determine whether any of these transactions will be consummated or, if so, upon what terms.  Any sale of WPI may result in consideration that is materially less than the carrying value of our investment in WPI. 
Restructuring
To improve WPI's competitive position, WPI's management intends to continue its restructuring efforts. On January 31, 2011, WPI announced the closure of its Greenville, Alabama manufacturing and distribution facility. The vast majority of the products manufactured or fabricated is sourced from plants located outside of the United States.  As of March 31, 2011, WPI had $160 million of assets located outside of the United States, primarily in Bahrain.
WPI incurred restructuring costs of $2 million and $3 million for the three months ended March 31, 2011 and 2010, respectively. Included in restructuring expenses are cash charges associated with the ongoing costs of closed plants, transition expenses and employee severance, benefits and related costs. During the three months ended March 31, 2011, WPI paid $2 million in restructuring costs. As of March 31, 2011, the accrued liability balance was less than $1 million, which is included in accrued expenses and other liabilities in our consolidated balance sheet.
Total cumulative restructuring charges from August 8, 2005 (acquisition date) through March 31, 2011 are $87 million.
WPI anticipates incurring approximately $3 million of additional restructuring costs in fiscal 2011, particularly with respect to the carrying costs of closed facilities until such time as these locations are sold. Restructuring costs could be affected by, among other things, WPI's decision to accelerate or delay its restructuring efforts. As a result, actual costs incurred could vary materially from these anticipated amounts.
 
3.
Related Party Transactions.
Our amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general

 
11

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

partner or any of its affiliates, including, without limitation, buying or selling properties from or to our general partner and any of its affiliates and borrowing and lending money from or to our general partner and any of its affiliates, subject to limitations contained in our partnership agreement and the Delaware Revised Uniform Limited Partnership Act. The indentures governing our indebtedness contain certain covenants applicable to transactions with affiliates.
Investment Management
Until August 8, 2007, Icahn Management LP (“Icahn Management”) elected to defer most of the management fees from the Offshore Funds and such amounts remain invested in the Offshore Funds. At December 31, 2010, the balance of the deferred management fees payable (included in accrued expenses and other liabilities) by Icahn Fund Ltd. to Icahn Management was $143 million. As further discussed in Note 4, "Investments and Related Matters-Investment Management-Investment in Variable Interest," because we are no longer considered the primary beneficiary of Icahn Fund Ltd. as of March 31, 2011, we deconsolidated the results and financial position of Icahn Fund Ltd. as of March 31, 2011.  As a result of deconsolidating Icahn Fund Ltd., our consolidated financial statements will no longer contain this deferred management fee payable effective March 31, 2011.
Effective January 1, 2008, Icahn Capital LP (“Icahn Capital”) paid for salaries and benefits of certain employees who may also perform various functions on behalf of certain other entities beneficially owned by Mr. Icahn (collectively, “Icahn Affiliates”), including administrative and investment services.  Prior to January 1, 2008, Icahn & Co. LLC paid for such services.  Under a separate expense-sharing agreement, Icahn Capital charged Icahn Affiliates $0.2 million and $0.3 million for the three months ended March 31, 2011 and 2010, respectively. As of March 31, 2011 and December 31, 2010, accrued expenses and other liabilities in our consolidated balance sheets included $1 million and $2 million, respectively, to be applied to Icahn Capital's charges to Icahn Affiliates for services to be provided to them.
In addition, effective January 1, 2008, certain expenses borne by Icahn Capital are reimbursed by Icahn Affiliates, as appropriate, when such expenses are incurred. The expenses include investment-specific expenses for investments acquired by both the Private Funds and Icahn Affiliates that are allocated based on the amounts invested by each party, as well as investment management-related expenses that are allocated based on estimated usage agreed upon by Icahn Capital and Icahn Affiliates. For the three months ended March 31, 2011 and 2010, these reimbursement amounts were $1 million and $0.1 million, respectively.
In addition to our interest in the Investment Funds, Mr. Icahn, along with his affiliates, makes investments in the Investment Funds. These investments are not subject to special profits interest allocations or incentive allocations. As of March 31, 2011 and December 31, 2010, the total fair value of these investments was approximately $2.3 billion and $2.1 billion, respectively.
Railcar
Agreements with ACF Industries LLC and American Railcar Leasing LLC
ARI has or had various agreements with ACF Industries LLC ("ACF") and American Railcar Leasing LLC ("ARL"), companies controlled by Mr. Icahn.
Under the manufacturing services agreement entered into in 1994 and amended in 2005, ACF agreed to manufacture and distribute, at ARI's instruction, various railcar components. In consideration for these services, ARI agreed to pay ACF based on agreed-upon rates. During the three months ended March 31, 2011 and 2010, ARI purchased inventory of less than $0.1 million and $1 million, respectively, of components from ACF. The agreement automatically renews unless written notice is provided by ARI.
Effective as of January 1, 2008, ARI entered into a fleet services agreement with ARL. Under the agreement, ARI provided ARL fleet management services for a fixed monthly fee and railcar repair and maintenance services for a charge of labor, components and materials. Railcar services revenues, included in other revenues from operations on our consolidated statements of operations, recorded by ARI were $6 million and $3 million under this agreement for the three months ended March 31, 2011 and 2010, respectively. Profit margins on sales to related parties approximate the margins on sales in comparable transactions with unrelated third parties. This agreement was replaced by a new agreement (referred to as the "Railcar Services Agreement"), which became effective April 16, 2011 for a term of three years that will automatically renew for additional one-year periods unless either party provides at least sixty days' written prior notice of termination. As stipulated in the Railcar Services Agreement, ARI will provide railcar repair, engineering, administrative and other services, on an as needed basis, for ARL's lease fleet at mutually agreed-upon prices.
ARI from time to time manufactures and sells railcars to ARL under long-term agreements as well as on a purchase order

 
12

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

basis. Revenues from railcars sold to ARL were $1 million and $13 million for the three months ended March 31, 2011 and 2010, respectively, and are included in net sales in our consolidated statements of operations. Profit margins on sales to related parties approximate the margins on sales in comparable transactions with unrelated third parties. ARL also has acted as an agent for ARI to source railcar leasing customers. In connection therewith, ARL has assigned orders to ARI for railcars to be manufactured and leased by ARI. ARI is currently negotiating the terms of its agency relationship with ARL. Any such agreement, including payments that ARI may agree to make to ARL for these services, will be on an arm's length basis and subject to the approval of ARI's audit committee.
As of March 31, 2011 and December 31, 2010, ARI had accounts receivable of $2 million and $5 million, respectively, due from ACF and ARL. These amounts are included in other assets in our consolidated balance sheets.
Holding Company
For each of the three months ended March 31, 2011 and 2010, we paid an affiliate $0.6 million and $0.5 million, respectively, for the non-exclusive use of office space.
For each of the three months ended March 31, 2011 and 2010 we paid $0.2 million and $0.1 million, respectively, to XO Holdings, Inc., an affiliate of Icahn Enterprises GP, our general partner, for telecommunications services. XO Holdings, Inc. is controlled by Mr. Icahn.
The Holding Company provided certain professional services to an Icahn Affiliate for which it charged $0.7 million and $0.5 million for the three months ended March 31, 2011 and 2010, respectively. As of March 31, 2011 and December 31, 2010, accrued expenses and other liabilities in our consolidated balance sheets included $0.1 million and $0.2 million, respectively, to be applied to the Holding Company's charges to the affiliate for services to be provided to it.
 

 
13

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

4.
Investments and Related Matters.
Investment Management
Investments, and securities sold, not yet purchased consist of equities, bonds, bank debt and other corporate obligations, and derivatives, all of which are reported at fair value in our consolidated balance sheets. The following table summarizes the Private Funds' investments, securities sold, not yet purchased and unrealized gains and losses on derivatives:
  
March 31, 2011
 
December 31, 2010
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
(in millions)
Assets
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
      Communications
$
2,169
 
 
$
2,023
 
 
$
2,169
 
 
$
1,945
 
      Consumer, non-cyclical
2,550
 
 
3,168
 
 
1,833
 
 
2,234
 
      Consumer, cyclical(1)
596
 
 
586
 
 
595
 
 
614
 
      Energy
45
 
 
66
 
 
757
 
 
858
 
      Financial
100
 
 
169
 
 
100
 
 
137
 
      Index
 
 
 
 
9
 
 
 
      Industrial
116
 
 
140
 
 
94
 
 
115
 
      Technology
317
 
 
515
 
 
313
 
 
405
 
      Utilities
176
 
 
182
 
 
157
 
 
143
 
 
6,069
 
 
6,849
 
 
6,027
 
 
6,451
 
   Corporate debt:
 
 
 
 
 
 
 
      Consumer, cyclical
740
 
 
585
 
 
544
 
 
485
 
      Utilities
436
 
 
441
 
 
 
 
 
      Financial
4
 
 
5
 
 
48
 
 
5
 
 
1,180
 
 
1,031
 
 
592
 
 
490
 
   Mortgage-backed securities:
 
 
 
 
 
 
 
      Financial
186
 
 
207
 
 
144
 
 
206
 
 
7,435
 
 
8,087
 
 
6,763
 
 
7,147
 
 
 
 
 
 
 
 
 
Derivative contracts, at fair value(2)
14
 
 
1
 
 
15
 
 
6
 
 
$
7,449
 
 
$
8,088
 
 
$
6,778
 
 
$
7,153
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
      Communications
$
15
 
 
$
15
 
 
$
 
 
$
 
      Consumer, non-cyclical
36
 
 
38
 
 
 
 
 
      Consumer, cyclical
301
 
 
351
 
 
305
 
 
356
 
      Financial
46
 
 
53
 
 
51
 
 
58
 
      Index
 
 
 
 
9
 
 
5
 
      Funds
2,220
 
 
2,435
 
 
638
 
 
800
 
 
2,618
 
 
2,892
 
 
1,003
 
 
1,219
 
 
 
 
 
 
 
 
 
Derivative contracts, at fair value(3)
30
 
 
43
 
 
24
 
 
60
 
 
$
2,648
 
 
$
2,935
 
 
$
1,027
 
 
$
1,279
 
 
1 
We consolidated the financial results of Tropicana effective November 15, 2010. As a result, we eliminated our investment in Tropicana with a fair value of approximately $287 million and $279 million at March 31, 2011 and December 31, 2010, respectively.
2 
Included in other assets in our consolidated balance sheets.
3 
Included in accrued expenses and other liabilities in our consolidated balance sheets.

 
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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

The General Partners adopted FASB ASC Section 946-810-45, Financial Services-Investment Companies-Consolidation-Other Presentation Matters, as of January 1, 2007. FASB ASC Section 946-810-45 provides guidance on whether investment company accounting should be retained in the financial statements of a parent entity. Upon the adoption of FASB ASC Section 946-810-45, the General Partners lost their ability to retain specialized accounting. For those investments that (i) were deemed to be available-for-sale securities, (ii) fall outside the scope of FASB ASC Topic 320, Investments-Debt and Equity Securities or (iii) the Private Funds would otherwise account for under the equity method, the Private Funds apply the fair value option. The application of the fair value option is irrevocable.
The Private Funds assess the applicability of equity method accounting with respect to their investments based on a combination of qualitative and quantitative factors, including overall stock ownership of the Private Funds combined with those of our affiliates along with board of directors representation.
The Private Funds applied the fair value option to certain of its investments that would have otherwise been subject to the equity method of accounting.  As of March 31, 2011, the fair value of these investments was $408 million. During the three months ended March 31, 2011 and 2010, the Investment Funds recorded gains of $20 million and losses of $18 million, respectively, with respect to these investments.   Such amounts are included in net gain (loss) from investment activities in our consolidated statements of operations. These gains and losses include the unrealized gains and losses for our Investment Management segment's investment in Tropicana for periods prior to November 15, 2010 when Tropicana was accounted for at fair value with changes in fair value reflected in earnings. See Note 2, “Operating Units-Gaming” for further discussion regarding the history of the Investment Funds' investment in Tropicana and the effects of consolidation effective November 15, 2010. Also included in these investments is the Investment Funds' investment in Lions Gate Entertainment Corp (“Lions Gate”) and The Hain Celestial Group, Inc. (“Hain”). As of March 31, 2011, the Investment Funds, together with their affiliates held, in the aggregate, 7,130,563 shares of Hain, representing approximately 17% of the outstanding shares of Hain. As of March 31, 2011, the Investment Funds together with their affiliates held, in the aggregate, 44,642,069 shares of Lions Gate, representing approximately 33% of the outstanding shares of Lions Gate. During the third quarter of fiscal 2010, Lions Gate issued 16,236,305 of its shares to one of its directors; the validity of such issuance is in dispute. Should we prevail in our dispute, our ownership of the outstanding shares of Lions Gate would increase to 37% based on the outstanding shares of Lions Gate at March 31, 2011. The Private Funds have applied the fair value option to their investment in Lions Gate and Hain.
We believe that these investments to which we applied the fair value option are not material, individually or in the aggregate, to our consolidated financial statements. Lions Gate and Hain are registered SEC reporting companies whose financial statements are available at www.sec.gov
Investments in Variable Interest Entities
As discussed in Note 1, “Description of Business and Basis of Presentation,” in February 2010, the FASB issued new guidance which amends the consolidation requirement of VIEs for certain entities meeting certain criteria. We determined that certain entities within our Investment Management segment met the criteria for the deferral of this new consolidation guidance. Accordingly, our Investment Management segment will continue to apply the overall guidance on the consolidation of VIEs with respect to applicable entities prior to the issuance of the new standard as described in Note 1.
The General Partners consolidate certain VIEs when they are determined to be their primary beneficiary, either directly or indirectly through other consolidated subsidiaries. The assets of our consolidated VIEs are primarily classified within cash and cash equivalents and investments in our consolidated balance sheets. The liabilities of our consolidated VIEs are primarily classified within securities sold, not yet purchased, at fair value, and accrued expenses and other liabilities in our consolidated balance sheets and are non-recourse to the General Partners' general credit. Any creditors of VIEs do not have recourse against the general credit of the General Partners solely as a result of our including these VIEs in our consolidated financial statements.
As discussed in Note 2, "Operating Units-Investment Management," on March 7, 2011, the Private Funds determined to return fee-paying capital to its investors. We evaluated the impact of this reconsideration event (referred to as the "2011 Reconsideration Event") with respect to the VIE and primary beneficiary status of each of the Investment Funds and the Offshore Funds. We determined that the 2011 Reconsideration Event only impacted the primary beneficiary status of Icahn Fund Ltd. Previously Icahn Fund Ltd. was considered a VIE and we consolidated it because the Offshore GP was its primary beneficiary. As a result of the 2011 Reconsideration Event, we determined that, although Icahn Fund Ltd. is still considered a VIE, the Offshore GP is no longer the primary beneficiary. We deconsolidated Icahn Fund Ltd. as of March 31, 2011, the result of which decreased consolidated total liabilities by $146 million and increased equity attributable to non-controlling interests by the same amount.
As of March 31, 2011, our consolidated VIEs consist of the Master Fund II and Master Fund III. The Offshore GP sponsored the formation of and manages each of these VIEs and has an investment therein. In evaluating whether the Offshore

 
15

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

GP is the primary beneficiary of such VIEs, the Offshore GP has considered the nature and extent of its involvement with such VIEs and whether it absorbs the majority of losses among other variable interest holders, including those variable interest holders who are deemed related parties or de facto agents. In both cases, as of March 31, 2011, the Offshore GP was deemed to be the primary beneficiary of Master Fund II and Master Fund III because it (i) has the direct or indirect ability through voting rights or similar rights to make decisions about the VIE's activities that have a significant effect on its success and (ii) in a related party tie-breaker among a group of related parties and their de facto agents in determining which party is the primary beneficiary, the Offshore GP is considered the variable interest holder most closely associated with Master Fund II and Master Fund III. In evaluating which entity among the related party group and their de facto agents is most closely related to the VIE, we evaluated the following considerations: (1) the principal-agency relationship between parties; (2) relationship and significance of the VIE's activities to variable interest holders; (3) variable interest holder's exposure to VIE's expected losses; and (4) the design of the VIE.
 The following table presents information regarding interests in VIEs for which the Offshore GP holds a variable interest as of March 31, 2011:
 
Offshore GP is the Primary Beneficiary
 
Offshore GP is not the Primary Beneficiary
  
Net Assets
 
Offshore GP Interests(1)
 
Pledged Collateral(2)
 
Net Assets
 
Offshore GP Interests(1)
 
(in millions)
Offshore Funds, Master Fund II and Master Fund III
$
900
 
 
$
60
 
 
$
1,014
 
 
$
 
 
$
 
 
(1) 
Amount principally represents the Offshore GP's reinvested incentive allocations and special profits interest allocations and therefore its maximum exposure to loss. Such amounts are subject to the financial performance of the Offshore Funds, Master Fund II and Master Fund III and are included in the Offshore GP's net assets.
(2) 
Includes collateral pledged in connection with securities sold, not yet purchased, derivative contracts and collateral held for securities loaned. Pledged amounts may be in excess of margin requirements.
Other Segments
 Investments held by our Automotive, Gaming, Railcar, Holding Company and other segments consist of the following:
 
March 31, 2011
 
December 31, 2010
 
Amortized Cost
 
Carrying Value
 
Amortized Cost
 
Carrying Value
 
(in millions)
Marketable equity and debt securities - available for sale
$
17
 
 
$
16
 
 
$
24
 
 
$
19
 
Equity method investments and other
323
 
 
323
 
 
304
 
 
304
 
 
$
340
 
 
$
339
 
 
$
328
 
 
$
323
 
With the exception of certain operating segments, it is our general policy to apply the fair value option to all of our investments that would be subject to the equity method of accounting. We record unrealized gains and losses for the change in fair value of such investments as a component of net gain (loss) from investment activities in the consolidated statement operations. We believe that these investments, individually or in the aggregate, are not material to our consolidated financial statements.
Investments in Non-Consolidated Affiliates
Automotive
Federal-Mogul maintains investments in several non-consolidated affiliates, which are located in China, France, Germany, India, Italy, Korea, Turkey and the United States. Federal-Mogul's direct ownership in such affiliates ranges from approximately 2% to 50%. The aggregate investments in these affiliates were $229 million and $210 million at March 31, 2011 and December 31, 2010, respectively.
Equity earnings from non-consolidated affiliates were $10 million and $7 million for the three months ended March 31, 2011 and 2010, respectively, which are included in other (loss) income, net in our consolidated financial statements. For the three months ended March 31, 2011 and 2010, these entities generated sales of $184 million and $147 million, respectively, and net income of $24 million and $17 million, respectively. As of March 31, 2011, these entities had total net assets of $508

 
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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

million. Distributed dividends to Federal-Mogul from non-consolidated affiliates were less than $1 million and $20 million, respectively, for the three months ended March 31, 2011 and 2010, respectively.
Federal-Mogul does not consolidate any entity for which it has a variable interest based solely on power to direct the activities and significant participation in the entity's expected results that would not otherwise be consolidated based on control through voting interests. Further, Federal-Mogul's joint ventures are businesses established and maintained in connection with its operating strategy and are not special purpose entities.
Federal-Mogul holds a 50% non-controlling interest in a joint venture located in Turkey. This joint venture was established in 1995 for the purpose of manufacturing and marketing automotive parts, including pistons, piston rings, piston pins, and cylinder liners to OE and aftermarket customers. Pursuant to the joint venture agreement, Federal-Mogul's partner holds an option to put its shares to a subsidiary of Federal-Mogul's at the higher of the current fair value or at a guaranteed minimum amount. The term of the contingent guarantee is indefinite, consistent with the terms of the joint venture agreement. However, the contingent guarantee would not survive termination of the joint venture agreement. The guaranteed minimum amount represents a contingent guarantee of the initial investment of the joint venture partner and can be exercised at the discretion of the partner. The total amount of the contingent guarantee, should all triggering events have occurred, approximated $62 million as of March 31, 2011. Federal-Mogul believes that this contingent guarantee is less than the estimated current fair value of the partners' interest in the affiliate. As such, the contingent guarantee does not give rise to a contingent liability and, as a result, no amount is recorded for this guarantee. If this put option were exercised, the consideration paid and net assets acquired would be accounted for in accordance with business combination accounting. Any value in excess of the guaranteed minimum amount of the put option would be the subject of negotiation between Federal-Mogul and its joint venture partner.
Railcar
As of March 31, 2011, ARI was party to three joint ventures which are all accounted for using the equity method. ARI determined that, although these joint ventures are considered VIEs, it is not the primary beneficiary of such VIEs, does not have a controlling financial interest and does not have the ability to individually direct the activities of the VIEs that most significantly impact their economic performance. A significant factor in this determination was that ARI does not have the rights to a majority of returns, losses or votes.
The risk of loss to ARI is limited to its investment in these joint ventures, certain loans and related interest and fees due from these joint ventures to ARI and ARI's guarantee of a loan. As of March 31, 2011 and December 31, 2010, the carrying amount of these investments was $47 million and $48 million, respectively, and the maximum exposure to loss was $50 million at each of March 31, 2011 and December 31, 2010. Maximum exposure to loss was determined based on ARI's carrying amounts in such investments, loans, accrued interest thereon and accrued unused line fee due from applicable joint ventures and loan guarantees made to the applicable joint ventures.
 
5.
Fair Value Measurements.
U.S. GAAP requires enhanced disclosures about investments and non-recurring nonfinancial assets and nonfinancial liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or nonfinancial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments and nonfinancial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments included in Level 1 include listed equities and listed derivatives. We do not adjust the quoted price for these investments, even in situations where we hold a large position.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. The inputs and assumptions of our Level 2 investments are derived from market observable sources including: reported trades, broker/dealer quotes and other pertinent data.
Level 3 - Pricing inputs are unobservable for the investment and nonfinancial asset and/or liability and include situations

 
17

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

where there is little, if any, market activity for the investment or nonfinancial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period.

 
18

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

Investment Management
The following table summarizes the valuation of the Investment Funds' investments by the above fair value hierarchy levels as of March 31, 2011 and December 31, 2010
 
March 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
(in millions)
Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Communications
$
2,023
 
 
$
 
 
$
 
 
$
2,023
 
 
$
1,945
 
 
$
 
 
$
 
 
$
1,945
 
Consumer, non-cyclical
3,148
 
 
20
 
 
 
 
3,168
 
 
2,227
 
 
7
 
 
 
 
2,234
 
Consumer, cyclical1
284
 
 
301
 
 
1
 
 
586
 
 
295
 
 
318
 
 
1
 
 
614
 
Energy
66
 
 
 
 
 
 
66
 
 
541
 
 
317
 
 
 
 
858
 
Financial
169
 
 
 
 
 
 
169
 
 
137
 
 
 
 
 
 
137
 
Industrial
64
 
 
76
 
 
 
 
140
 
 
114
 
 
1
 
 
 
 
115
 
Technology
515
 
 
 
 
 
 
515
 
 
405
 
 
 
 
 
 
405
 
Utilities
139
 
 
43
 
 
 
 
182
 
 
100
 
 
43
 
 
 
 
143
 
 
6,408
 
 
440
 
 
1
 
 
6,849
 
 
5,764
 
 
686
 
 
1
 
 
6,451
 
Corporate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer, cyclical
 
 
267
 
 
318
 
 
585
 
 
 
 
157
 
 
328
 
 
485
 
Utilities
 
 
441
 
 
 
 
441
 
 
 
 
 
 
 
 
 
Financial
 
 
5
 
 
 
 
5
 
 
 
 
5
 
 
 
 
5
 
 
 
 
713
 
 
318
 
 
1,031
 
 
 
 
162
 
 
328
 
 
490
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial
 
 
207
 
 
 
 
207
 
 
 
 
206
 
 
 
 
206
 
 
6,408
 
 
1,360
 
 
319
 
 
8,087
 
 
5,764
 
 
1,054
 
 
329
 
 
7,147
 
Derivative contracts, at fair value2:
 
 
1
 
 
 
 
1
 
 
 
 
6
 
 
 
 
6
 
 
$
6,408
 
 
$
1,361
 
 
$
319
 
 
$
8,088
 
 
$
5,764
 
 
$
1,060
 
 
$
329
 
 
$
7,153
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Communications
$
15
 
 
$
 
 
$
 
 
$
15
 
 
$
 
 
$
 
 
$
 
 
$
 
Consumer, non-cyclical
38
 
 
 
 
 
 
38
 
 
 
 
 
 
 
 
 
Consumer, cyclical
351
 
 
 
 
 
 
351
 
 
356
 
 
 
 
 
 
356
 
Financial
53
 
 
 
 
 
 
53
 
 
58
 
 
 
 
 
 
58
 
Index
 
 
 
 
 
 
 
 
 
 
5
 
 
 
 
5
 
Funds
2,435
 
 
 
 
 
 
2,435
 
 
800
 
 
 
 
 
 
800
 
 
2,892
 
 
 
 
 
 
2,892
 
 
1,214
 
 
5
 
 
 
 
1,219
 
Derivative contracts, at fair value3:
 
 
43
 
 
 
 
43
 
 
 
 
60
 
 
 
 
60
 
 
$
2,892
 
 
$
43
 
 
$
 
 
$
2,935
 
 
$
1,214
 
 
$
65
 
 
$
 
 
$
1,279
 
 
1 
We consolidated the financial results of Tropicana effective November 15, 2010. As a result, we eliminated our investment in Tropicana with a fair value of approximately $287 million and $279 million at March 31, 2011 and December 31, 2010, respectively.
2 
Included in other assets in our consolidated balance sheets.
3 
Included in accrued expenses and other liabilities in our consolidated balance sheets.

 
19

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

The changes in investments measured at fair value for which the Investment Management segment has used Level 3 input to determine fair value are as follows:
 
Three Months Ended March 31,
  
2011
 
2010
 
(in millions)
Balance at January 1
$
329
 
 
$
228
 
Gross realized and unrealized gains
 
 
 
Gross proceeds
(10
)
 
(1
)
Gross purchases
 
 
219
 
Balance at March 31
$
319
 
 
$
446
 
There were no unrealized losses or gains included in earnings related to Level 3 investments still held at March 31, 2011. Total realized and unrealized gains and losses recorded for Level 3 investments, if any, are reported in net gain (loss) from investment activities in our consolidated statements of operations.
Other Segments
The following table summarizes the valuation of our Automotive, Railcar, Holding Company and other investments by the above fair value hierarchy levels as of March 31, 2011 and December 31, 2010
 
March 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
 
(in millions)
Marketable equity and debt securities
$
16
 
 
$
 
 
$
16
 
 
$
19
 
 
$
 
 
$
19
 
 Derivative contracts, at fair value(1)
 
 
8
 
 
8
 
 
 
 
12
 
 
12
 
 
$
16
 
 
$
8
 
 
$
24
 
 
$
19
 
 
$
12
 
 
$
31
 
 
 
 
 
 
 
 
 
 
 
 
 
 Derivative contracts, at fair value(2)
$
 
 
$
93
 
 
$
93
 
 
$
 
 
$
94
 
 
$
94
 
 
(1) 
Amounts are classified within other assets in our consolidated balance sheets.
(2) 
Amounts are classified within accrued expenses and other liabilities in our consolidated balance sheets.
 
In addition to items that are measured at fair value on a recurring basis, there are also assets and liabilities that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets (see Note 2, “Operating Units” and Note 8, “Goodwill and Intangible Assets, Net”). We determined that the fair value measurements included in each of these assets and liabilities rely primarily on our assumptions as unobservable inputs that are not publicly available. As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. 
 
6.
Financial Instruments.
Certain derivative contracts executed by the Private Funds with a single counterparty or by our Automotive segment with a single counterparty are reported on a net-by-counterparty basis where a legal right of offset exists under an enforceable netting agreement. Values for the derivative financial instruments, principally swaps, forwards, over-the-counter options and other conditional and exchange contracts are reported on a net-by-counterparty basis. As a result, the net exposure to counterparties is reported in either other assets or accrued expenses and other liabilities in our consolidated balance sheets.
Investment Management and Holding Company
The Investment Funds currently maintain cash deposits and cash equivalents with major financial institutions. Certain

 
20

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

account balances may not be covered by the Federal Deposit Insurance Corporation, while other accounts may exceed federally insured limits. The Investment Funds have prime broker arrangements in place with multiple prime brokers as well as a custodian bank. These financial institutions are members of major securities exchanges. The Investment Funds also have relationships with several financial institutions with which they trade derivative and other financial instruments.
In the normal course of business, the Investment Funds trade various financial instruments and enter into certain investment activities, which may give rise to off-balance-sheet risk. Currently, the Investment Funds' investments include options, credit default swaps and securities sold, not yet purchased. These financial instruments represent future commitments to purchase or sell other financial instruments or to exchange an amount of cash based on the change in an underlying instrument at specific terms at specified future dates. Risks arise with these financial instruments from potential counterparty non-performance and from changes in the market values of underlying instruments.
Securities sold, not yet purchased, at fair value represent obligations of the Investment Funds to deliver the specified security, thereby creating a liability to repurchase the security in the market at prevailing prices. Accordingly, these transactions result in off-balance-sheet risk, as the Investment Funds' satisfaction of the obligations may exceed the amount recognized in our consolidated balance sheets. The Investment Funds' investments in securities and amounts due from brokers are partially restricted until the Investment Funds satisfy the obligation to deliver the securities sold, not yet purchased.
The Investment Funds enter into derivative contracts, including swap contracts, futures contracts and option contracts with the objective of capital appreciation or as economic hedges against other securities or the market as a whole. The Investment Funds also enter into foreign currency derivative contracts to economically hedge against foreign currency exchange rate risks on all or a portion of their non-U.S. dollar denominated investments.
The Investment Funds and the Holding Company have entered into various types of swap contracts with other counterparties. These agreements provide that they are entitled to receive or are obligated to pay in cash an amount equal to the increase or decrease, respectively, in the value of the underlying shares, debt and other instruments that are the subject of the contracts, during the period from inception of the applicable agreement to its expiration. In addition, pursuant to the terms of such agreements, they are entitled to receive other payments, including interest, dividends and other distributions made in respect of the underlying shares, debt and other instruments during the specified time frame. They are also required to pay to the counterparty a floating interest rate equal to the product of the notional amount multiplied by an agreed-upon rate, and they receive interest on any cash collateral that they post to the counterparty at the federal funds or LIBOR rate in effect for such period.
The Investment Funds may trade futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of a standardized amount of a deliverable grade commodity, security, currency or cash at a specified price and specified future date unless the contract is closed before the delivery date. Payments (or variation margin) are made or received by the Investment Funds each day, depending on the daily fluctuations in the value of the contract, and the whole value change is recorded as an unrealized gain or loss by the Investment Funds. When the contract is closed, the Investment Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The Investment Funds utilize forward contracts to seek to protect their assets denominated in foreign currencies from losses due to fluctuations in foreign exchange rates. The Investment Funds' exposure to credit risk associated with non-performance of forward foreign currency contracts is limited to the unrealized gains or losses inherent in such contracts, which are recognized in unrealized gains or losses on derivative, futures and foreign currency contracts, at fair value in our consolidated balance sheets.
The Investment Funds may also purchase and write option contracts. As a writer of option contracts, the Investment Funds receive a premium at the outset and then bear the market risk of unfavorable changes in the price of the underlying financial instrument. As a result of writing option contracts, the Investment Funds are obligated to purchase or sell, at the holder's option, the underlying financial instrument. Accordingly, these transactions result in off-balance-sheet risk, as the Investment Funds' satisfaction of the obligations may exceed the amount recognized in our consolidated balance sheets. At March 31, 2011 and December 31, 2010, the maximum payout amounts relating to certain put options written by the Investment Funds were $327 million and $195 million, respectively. As of each of March 31, 2011 and December 31, 2010, there were unrealized gains of $0.2 million.
Certain terms of the Investment Funds' contracts with derivative counterparties, which are standard and customary to such contracts, contain certain triggering events that would give the counterparties the right to terminate the derivative instruments. In such events, the counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on March 31, 2011 and December 31, 2010 was $43 million and $60 million, respectively.

 
21

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

At March 31, 2011 and December 31, 2010, the Investment Funds had $239 million and $248 million, respectively, posted as collateral for derivative positions, including those derivative instruments with credit-risk-related contingent features; these amounts are included in cash held at consolidated affiliated partnerships and restricted cash within our consolidated balance sheet.
U.S. GAAP requires the disclosure of information about obligations under certain guarantee arrangements. Such guarantee arrangements requiring disclosure include contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.
The Investment Funds have entered into certain derivative contracts, in the form of credit default swaps, which meet the accounting definition of a guarantee, whereby the occurrence of a credit event with respect to the issuer of the underlying financial instrument may obligate the Investment Funds to make a payment to the swap counterparties. As of each of March 31, 2011 and December 31, 2010, the Investment Funds have entered into such credit default swaps with a maximum notional amount of $32 million with terms of approximately two years as of March 31, 2011. We estimate that our maximum exposure related to these credit default swaps approximates 53.1% and 39.4% of such notional amounts as of March 31, 2011 and December 31, 2010, respectively.
The following table presents the notional amount, fair value, underlying referenced credit obligation type and credit ratings for derivative contracts in which the Investment Funds are assuming risk:
 
 
March 31, 2011
 
December 31, 2010
 
 
Credit Derivative Type Risk Exposure
 
Notional Amount
 
Fair Value
 
Notional Amount
 
Fair Value
 
Underlying Reference Obligation
 
 
(in millions)
 
 
Single name credit default swaps:
 
 
 
 
 
 
 
 
 
 
Below investment grade risk exposure
 
$
32
 
 
$
1
 
 
$
32
 
 
$
1
 
 
Corporate credit
The Investment Funds have entered into derivative contracts that meet the accounting definition of a guarantee. As further described in Note 10, "Debt-Investment Management," the SPV (as such term is defined in Note 10) entered into swap transactions with a global financial services institution that reference a portfolio of loans that are expected (but not required) to match certain collateral assets of the SPV. Pursuant to the swap transactions, the financial institution will pay to the SPV the amount by which the total payments made on, or the sale price of, loans in the reference portfolio are less than the amount of the interest and principal due on the SPV Notes (as such term is defined in Note 10) and amounts senior to the SPV Notes in right of payment. Pursuant to certain offsetting swap agreements, the equity holders of the SPV may be required to pay to the global financial institution the amounts by which the total payments made on, or the sale price of, loans in the reference portfolio are less than the amount of the interest and principal due on the SPV Notes and amounts senior to the SPV Notes in right of payment. The maximum potential payout under these swap agreements approximate the amortized cost and accrued interest of the SPV Notes. As of March 31, 2011, the amortized cost and accrued interest of the SPV notes was $595 million. The maximum payout amount may be reduced by certain collateral posted by the relevant parties in the swap agreements and available collateral assets held by the SPV. The approximate term of the swap agreements corresponds to the maturity dates of the SPV Notes. As of March 31, 2011, no amounts are due from any parties under these swap agreements.

 
22

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

The following table presents the fair values of the Investment Funds' derivatives:
 
 
Asset Derivatives(1)
 
Liability Derivatives(2)
Derivatives Not Designated as Hedging Instruments
 
March 31, 2011
 
December 31, 2010
 
March 31, 2011
 
December 31, 2010
 
 
(in millions)
Equity contracts
 
$
 
 
$
1
 
 
$
1
 
 
$
 
Foreign exchange contracts
 
 
 
 
 
1
 
 
2
 
Credit contracts
 
2
 
 
24
 
 
42
 
 
77
 
Sub-total
 
2
 
 
25
 
 
44
 
 
79
 
Netting across contract types(3)
 
(1
)
 
(19
)
 
(1
)
 
(19
)
Total(4)
 
$
1
 
 
$
6
 
 
$
43
 
 
$
60
 
 
(1) 
Net asset derivatives are located within other assets in our consolidated balance sheets.
(2) 
Net liability derivatives are located within accrued expenses and other liabilities in our consolidated balance sheets.
(3) 
Represents the netting of receivables balances with payable balances for the same counterparty across contract types pursuant to netting agreements.
(4) 
Excludes netting of cash collateral received and posted.  The total collateral posted at March 31, 2011 and December 31, 2010 was $239 million and $248 million, respectively, across all counterparties.
The following table presents the effects of the Investment Funds' derivative instruments on the statements of operations for the three months ended March 31, 2011 and 2010:
 
 
Gain (Loss) Recognized in Income(1)
 
 
Three Months Ended March 31,
Derivatives Not Designated as Hedging Instruments
 
2011
 
2010
 
 
(in millions)
Foreign exchange contracts
 
$
(10
)
 
$
 
Equity contracts
 
(1
)
 
(1
)
Credit contracts
 
25
 
 
29
 
 
 
$
14
 
 
$
28
 
 
(1) 
Gains (losses) recognized on the Investment Funds' derivatives are classified in net gain (loss) from investment activities within our consolidated statements of operations.
At March 31, 2011, the volume of the Investment Funds' and the Holding Company's derivative activities based on their notional exposure, categorized by primary underlying risk, are as follows:
  
Long Notional Exposure
 
Short Notional Exposure
Primary underlying risk:
(in millions)
Credit default swaps
$
32
 
 
$
(2,114
)
Equity swaps
27
 
 
 
Foreign currency forwards
169
 
 
 
Future index spread
24
 
 
(53
)
Each Investment Fund's assets may be held in one or more accounts maintained for the Investment Fund by its prime broker or at other brokers or custodian banks, which may be located in various jurisdictions. The prime broker and custodian banks are subject to various laws and regulations in the relevant jurisdictions in the event of their insolvency. Accordingly, the practical effect of these laws and their application to the Investment Fund's assets may be subject to substantial variations, limitations and uncertainties. The insolvency of any of the prime brokers, custodian banks or clearing corporations may result in the loss of all or a substantial portion of the Investment Fund's assets or in a significant delay in the Investment Fund having access to those assets.
Credit concentrations may arise from investment activities and may be impacted by changes in economic, industry or political factors. The Investment Funds routinely execute transactions with counterparties in the financial services industry, resulting in credit concentration with respect to this industry. In the ordinary course of business, the Investment Funds may also be subject to a concentration of credit risk to a particular counterparty.

 
23

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

The Investment Funds seek to mitigate these risks by actively monitoring exposures, collateral requirements and the creditworthiness of our counterparties.
During the third quarter of fiscal 2010, the Holding Company purchased and wrote option contracts on the S&P 500 stock index futures. At March 31, 2011, the maximum payout was $178 million, assuming the value of the S&P 500 Index falls below certain limits on our put spreads, and $138 million assuming the value of the S&P 500 Index increases in value above certain limits on our call spreads. As of March 31, 2011, the unrealized gain from the S&P stock index futures was $7 million and was included in the net gain (loss) from investment activities in our consolidated statements of operations. As of March 31, 2011, the Holding Company had $29 million in liability derivatives related to the S&P 500 Index which are not designated as hedging instruments.
Automotive
During fiscal 2008, Federal-Mogul entered into a series of five-year interest rate swap agreements with a total notional value of $1,190 million to hedge the variability of interest payments associated with its variable-rate term loans. Through these swap agreements, Federal-Mogul has fixed its base interest and premium rate at a combined average interest rate of approximately 5.37% on the hedged principal amount of $1,190 million. As of March 31, 2011 and December 31, 2010, unrealized net losses of $61 million and $70 million, respectively, were recorded in accumulated other comprehensive loss as a result of these hedges. As of March 31, 2011, losses of $37 million are expected to be reclassified from accumulated other comprehensive loss to the consolidated statement of operations within the next 12 months.
These interest rate swaps reduce Federal-Mogul's overall interest rate risk. However, due to the remaining outstanding borrowings on Federal-Mogul's debt facilities and other borrowing facilities that continue to have variable interest rates, management believes that interest rate risk to Federal-Mogul could be material if there are significant adverse changes in interest rates.
Federal-Mogul's production processes are dependent upon the supply of certain raw materials that are exposed to price fluctuations on the open market. The primary purpose of Federal-Mogul's commodity price forward contract activity is to manage the volatility associated with forecasted purchases. Federal-Mogul monitors its commodity price risk exposures regularly to maximize the overall effectiveness of its commodity forward contracts. Principal raw materials hedged include natural gas, copper, nickel, tin, zinc, high-grade aluminum and aluminum alloy. Forward contracts are used to mitigate commodity price risk associated with raw materials, generally related to purchases forecast for up to fifteen months in the future.
Federal-Mogul had commodity price hedge contracts outstanding with combined notional values of $82 million and $50 million at March 31, 2011 and December 31, 2010, respectively, of which substantially all mature within one year and substantially all were designated as hedging instruments for accounting purposes. Unrealized net gains of $9 million and $12 million were recorded in accumulated other comprehensive loss as of March 31, 2011 and December, 31, 2010, respectively.
Federal-Mogul manufactures and sells its products in North America, South America, Asia, Europe and Africa. As a result, Federal-Mogul's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which Federal-Mogul manufactures and sells its products. Federal-Mogul's operating results are primarily exposed to changes in exchange rates between the U.S. dollar and European currencies.
Federal-Mogul generally tries to use natural hedges within its foreign currency activities, including the matching of revenues and costs, to minimize foreign currency risk. Where natural hedges are not in place, Federal-Mogul considers managing certain aspects of its foreign currency activities and larger transactions through the use of foreign currency options or forward contracts. Principal currencies hedged have historically included the euro, British pound, and Polish zloty. Federal-Mogul had notional values of $29 million and $20 million of foreign currency hedge contracts outstanding at March 31, 2011 and December 31, 2010, respectively, of which substantially all mature in less than one year and substantially all were designated as hedging instruments for accounting purposes. Unrealized net losses of $1 million were recorded in “Accumulated other comprehensive loss” as of March 31, 2011. Immaterial unrealized net losses were recorded in accumulated other comprehensive loss as of December 31, 2010.
Financial instruments, which potentially subject Federal-Mogul to concentrations of credit risk, consist primarily of accounts receivable and cash investments. Federal-Mogul's customer base includes virtually every significant global light and commercial vehicle manufacturer and a large number of distributors, installers and retailers of automotive aftermarket parts. Federal-Mogul's credit evaluation process and the geographical dispersion of sales transactions help to mitigate credit risk concentration. No individual customer accounted for more than 5% of Federal-Mogul's direct sales during the quarter ended March 31, 2011. Federal-Mogul requires placement of cash in financial institutions evaluated as highly creditworthy.

 
24

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

The following table presents the fair values of Federal-Mogul's derivative instruments:
 
 
Asset Derivatives
 
Liability Derivatives
Derivatives Designated as Cash Flow Hedging Instruments
 
March 31, 2011
 
December 31, 2010
 
March 31, 2011
 
December 31, 2010
 
 
(in millions)
Interest rate swap contracts(1)
 
$
 
 
$
 
 
$
61
 
 
$
70
 
Commodity contracts(2)
 
10
 
 
13
 
 
1
 
 
1
 
Foreign currency contracts(2)
 
 
 
 
 
1
 
 
 
 
 
$
10
 
 
$
13
 
 
$
63
 
 
$
71
 
 
(1) 
Located within accrued expenses and other liabilities in our consolidated balance sheets.
(2) 
Located within other assets in our consolidated balance sheets.
The following tables present the effect of Federal-Mogul's derivative instruments in our consolidated financial statements for the three months ended March 31, 2011 and 2010:
Three Months Ended March 31, 2011
Derivatives Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
 
 
(in millions)
 
 
 
(in millions)
Interest rate swap contracts
 
$
(1
)
 
Interest expense
 
$
(10
)
Commodity contracts
 
2
 
 
Cost of goods sold
 
5
 
Foreign currency contracts
 
(1
)
 
Cost of goods sold
 
 
 
 
$
 
 
 
 
$
(5
)
 
Three Months Ended March 31, 2010
Derivatives Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
 
 
(in millions)
 
 
 
(in millions)
Interest rate swap contracts
 
$
(21
)
 
Interest expense
 
$
(9
)
Commodity contracts
 
3
 
 
Cost of goods sold
 
1
 
 
 
$
(18
)
 
 
 
$
(8
)
 
 
 
 
 
 
Gain Recognized on Derivatives
Derivatives Not Designated as Hedging Instruments
 
Location of Gain Recognized on Derivatives
 
Three Months Ended March 31,
 
2011
 
2010
 
 
 
 
(in millions)
Commodity contracts
 
Cost of goods sold
 
$
 
 
$
1
 
 
 
 
 
$
 
 
$
1
 
 

 
25

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

7.
Inventories, Net.
Inventories, net consists of the following:
  
March 31, 2011
 
December 31, 2010
 
(in millions)
Raw materials
$
217
 
 
$
211
 
Work in process
215
 
 
195
 
Finished goods
739
 
 
670
 
  
1,171
 
 
1,076
 
Other:
 
 
 
Ferrous metals
60
 
 
43
 
Non-ferrous metals
21
 
 
21
 
Secondary metals
22
 
 
23
 
  
103
 
 
87
 
Total inventories, net
$
1,274
 
 
$
1,163
 
 
8.
Goodwill and Intangible Assets, Net.
Goodwill consists of the following:
 
March 31, 2011
 
December 31, 2010
  
Gross
Carrying
Amount
 
Accumulated
Impairment
 
Net
Carrying
Value
 
Gross
Carrying
Amount
 
Accumulated
Impairment
 
Net
Carrying
Value
 
(in millions)
Automotive
$
1,338
 
 
$
(226
)
 
$
1,112
 
 
$
1,343
 
 
$
(226
)
 
$
1,117
 
Railcar
7
 
 
 
 
7
 
 
7
 
 
 
 
7
 
Food Packaging
3
 
 
 
 
3
 
 
3
 
 
 
 
3
 
Metals
11
 
 
 
 
11
 
 
2
 
 
 
 
2
 
 
$
1,359
 
 
$
(226
)
 
$
1,133
 
 
$
1,355
 
 
$
(226
)
 
$
1,129
 
 

 
26

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

Intangible assets, net consists of the following:
 
 
 
March 31, 2011
 
December 31, 2010
  
Useful lives
(years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
 
(in millions)
Definite-lived intangible assets:
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
Automotive
1 - 22
 
$
658
 
 
$
(186
)
 
$
472
 
 
$
658
 
 
$
(174
)
 
$
484
 
Gaming
3 - 42
 
25
 
 
 
 
25
 
 
25
 
 
 
 
25
 
Food Packaging
6 - 13.5
 
23
 
 
(12
)
 
11
 
 
23
 
 
(11
)
 
12
 
Metals
5 - 15
 
11
 
 
(5
)
 
6
 
 
11
 
 
(5
)
 
6
 
Real Estate
12 - 12.5
 
121
 
 
(26
)
 
95
 
 
121
 
 
(24
)
 
97
 
 
 
 
$
838
 
 
$
(229
)
 
609
 
 
$
838
 
 
$
(214
)
 
624
 
Indefinite-lived intangible assets:
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
Automotive
  
 
  
 
 
  
 
 
314
 
 
  
 
 
  
 
 
314
 
Gaming
  
 
  
 
 
  
 
 
54
 
 
  
 
 
  
 
 
54
 
Food Packaging
  
 
  
 
 
  
 
 
2
 
 
  
 
 
  
 
 
2
 
Home Fashion
 
 
 
 
 
 
5
 
 
 
 
 
 
5
 
 
 
 
 
 
 
 
375
 
 
 
 
 
 
375
 
Intangible assets, net
 
 
 
 
 
 
$
984
 
 
 
 
 
 
$
999
 
For each of the three months ended March 31, 2011 and 2010, we recorded amortization expense of $15 million associated with definite-lived intangible assets. We utilize the straight line method of amortization, recognized over the estimated useful lives of the assets.
Automotive
During the three months ended March 31, 2011, Federal-Mogul corrected $6 million of tax adjustments that were improperly recorded to goodwill.
Gaming
Upon the acquisition of the controlling interest in Tropicana on November 15, 2010, we recognized $25 million in definite-lived intangible assets and $54 million in indefinite-lived intangible assets. The definite-lived intangible assets relate primarily to favorable lease arrangements which are being amortized on a straight-line basis over their respective useful lives. Approximately $29 million of the indefinite-lived intangible assets relates to gaming licenses related to entities that are located in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. The remainder of the indefinite-lived intangible assets relates to the “Tropicana” trade name.
Intangible assets related to the acquisition of Tropicana were valued using the income and cost based methods as appropriate. The “Tropicana” trade name was valued based on the relief-from-royalty method which is a function of projected revenue, the royalty rate that would hypothetically be charged by a licensor of an asset to an unrelated licensee and a discount rate. Gaming licenses were valued based on the Greenfield method, which is the function of the cost to build a new casino operation, the build out period, projected cash flows attributed to the casino once operational and a discount rate.
Food Packaging
As a result of our acquisition of a controlling interest in Viskase on January 15, 2010, certain long-term assets have been adjusted as a result of our required utilization of common control parties' underlying basis in such assets. As of March 31, 2011, the net balances of such assets included adjustments as follows: $3 million for goodwill and $12 million for intangible assets.
Metals
On January 5, 2011, PSC Metals acquired substantially all the assets and certain liabilities of Cash's Scrap Metal and Iron

 
27

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

Inc. ("CSMI") for $32 million. CSMI is a scrap recycler and operates in five different locations in Missouri. As a result of this acquisition, PSC Metals recognized $9 million in goodwill. In allocating the purchase price to the fair value of assets acquired and liabilities assumed, PSC Metals utilized, in part, third-party appraisers to assist it in assessing the fair values of certain components of the assets acquired and liabilities assumed.
Our Metals segment tests indefinite-lived intangible assets for impairment annually as of September 30 or more frequently if it believes indicators of impairment exist.  Our Metals segment determines the fair value of its indefinite-lived intangible assets utilizing discounted cash flows. The resultant fair value is compared to its carrying value and an impairment loss is recorded if the carrying value exceeds its fair value.  
Real Estate
In August 2008, our Real Estate operations acquired two net leased properties for $465 million pursuant to a Code Section 1031 exchange. Of the aggregate purchase price of $465 million, $121 million was allocated to definite-lived intangible assets relating to values determined for in-place leases and tenant relationships. The definite-lived intangible assets are being amortized over the 12 - 12.5 year initial term of the respective leases.
 
 
9.
Property, Plant and Equipment, Net.
Property, plant and equipment, net consists of the following:
  
Useful Life
 
March 31, 2011
 
December 31, 2010
 
(years)
 
(in millions)
Land
 
 
$
470
 
 
$
456
 
Buildings and improvements
4 - 40
 
1,044
 
 
1,028
 
Machinery, equipment and furniture
1 - 30
 
2,476
 
 
2,371
 
Assets leased to others
15 - 39
 
481
 
 
482
 
Construction in progress
 
 
383
 
 
346
 
  
 
 
4,854
 
 
4,683
 
Less: Accumulated depreciation and amortization
 
 
(1,327
)
 
(1,228
)
Property, plant and equipment, net
 
 
$
3,527
 
 
$
3,455
 
Depreciation and amortization expense from continuing operations related to property, plant and equipment for the three months ended March 31, 2011 and 2010 was $86 million and $88 million, respectively.
 
 

 
28

 
ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2011
 

10.
Debt.
Debt consists of the following:
 
 
March 31, 2011
 
December 31, 2010
 
(in millions)
8% senior unsecured notes due 2018 - Icahn Enterprises
$
1,450
 
 
$
1,450