Icahn
Enterprises L.P.
May 13,
2009
VIA
ELECTRONIC TRANSMISSION
AND
OVERNIGHT COURIER
Mr. Kevin
Woody
Accounting
Branch Chief
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
Re: Icahn
Enterprises L.P.
Form 10-K
for fiscal year ended December 31, 2008
Filed on
March 4, 2009
File No.
1-9515
Dear Mr.
Woody:
Reference
is made to the comments of the Staff of the Securities and Exchange Commission
(the “Staff”) in your letter dated April 28, 2009 with respect to the Annual
Report on Form 10-K of Icahn Enterprises L.P., a Delaware limited
partnership (the “Company”), for the fiscal year ended December 31,
2008. (the “Comment Letter”).
We are
writing to respond to the comments contained in the Comment
Letter. For your convenience, the Staff’s comments have been
retyped below in boldface type, and the Company’s responses are provided
immediately after each comment.
Form 10-K for the fiscal
year ended December 31, 2008
Item 6. Selected Financial
Data
1. It
appears that EBITDA is used as a performance measure and you have excluded the
components of EBITDA without demonstrating the usefulness of excluding these
recurring items. Please explain to us how you considered the need to provide the
disclosures in Item 10(e) of Regulation S-K and questions 8 and 15 of the SEC's
Frequently Asked
Questions Regarding the Use of Non-GAAP Financial Measures for this
measure.
In
response to the Staff’s observations as provided in comment 1 above, the Company
believes its disclosures are in compliance with Regulation S-K. However, in
future filings in which the Company includes such non-GAAP measure, the Company
will include additional language, as described below, to clarify management’s
use of this measure and the usefulness of removing the components of EBITDA.
Furthermore, the Company does not plan to include Adjusted EBITDA in future
filings as the Company no longer deems this to be meaningful information
relating to the operating performance of the Company’s continuing operating
businesses.
The
Company believes that providing EBITDA to investors has economic substance as
this measure provides important supplemental information of the Company’s
performance to investors and permits investors and management to evaluate the
operating performance of the Company’s business without regard to potential
distortions introduced by interest, taxes and depreciation and amortization.
Additionally, the Company believes this information is frequently used by
securities analysts, investors and other interested parties in the evaluation of
companies that have issued debt. Management uses, and believes that
investors benefit from referring to these non-GAAP financial measures in
assessing the Company’s operating results, as well as in planning, forecasting
and analyzing future periods. Adjusting earnings for these recurring charges
allows investors to evaluate the Company’s performance from period to period, as
well as its peers, without the effects of certain items that may vary depending
on accounting methods and the book value of assets. Additionally, EBITDA
presents a meaningful measure of corporate performance exclusive of the
Company’s capital structure and the method by which assets were acquired and
financed.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Results of
Operations
Consolidated Financial
Results of Continuing Operations
Investment
Management
Revenues. page
56
2. We
note that in the event that sufficient net profits are not generated by an
Investment Fund that the special profits interest allocation will be carried
forward for any shortfall to the targeted amount. Regarding the waiving of
special profits interest allocations effective January 1, 2008, please confirm
to us that the target special profits interest allocations will not be due in
future periods related to all investments held during fiscal year 2008, not only
the $510 million net investment made by you and affiliates of Carl Icahn during
the current year ended December 31, 2008. It appears that based on your
disclosure that the $70 million representing the entire fiscal 2008 Target
Special Profits Amount will be carried forward into future periods and will be
accrued to the extent that there are sufficient net profits in the Investment
Funds during the investment period to cover such amounts.
Special
profits interest allocations are calculated on fee-paying assets under
management (“AUM”) on a quarterly basis and are allocated to the General
Partners if there are sufficient net profits in the Investment Funds to make
such allocations. Any shortfall will be carried forward into future periods and
will be accrued to the extent there are sufficient net profits in the Investment
Funds to cover such amounts. As disclosed in Footnote 4 and the
MD&A in Form 10-K, the Company’s investments in the Private Funds are not
subject to special profits interest allocations. Additionally, Carl
C. Icahn, along with his affiliates, makes investments in the Private Funds
(other than the amounts invested by the Company), which also are not subject to
special profits interest allocations. The combined net amount of $510 million
invested during 2008 by the Company and Mr. Icahn is specifically excluded from
fee-paying AUM, the base on which special profits interest allocations is
calculated.
As
disclosed in Footnote 4 and the MD&A in Form 10-K, during fiscal year 2008,
the Target Special Profits Interest Amount was $70 million. It is noted that the
Target Special Profits Interest Amount of $70 million is calculated based on
fee-paying AUM and will be carried forward into future periods due to losses in
the Investment Funds during fiscal 2008 and will be accrued to the extent there
are sufficient net profits in the Investment Funds during the investment period
to cover such amounts.
Automotive. page
62
3. Please
tell us the basis for consolidating the financial position, results of
operations and cash flows of Federal-Mogul Corporation as of March 1, 2008,
which approximates the date of acquisition of Federal-Mogul by a separate
limited partnership wholly-owned by Carl Icahn, and not as of July 3, 2008, the
date of acquisition by the partnership. Please cite accounting literature relied
upon.
As
disclosed in the Company’s 2008 Form 10-K, on July 3, 2008, pursuant to a stock
purchase agreement with Thornwood Associates Limited Partnership (“Thornwood”)
and Thornwood’s general partner, Barberry Corp. (“Barberry”), the Company
acquired an approximate 50.5% majority interest in Federal-Mogul
Corporation (“Federal-Mogul”) for an aggregate price of $862,750,000. Thornwood
and Barberry are wholly owned by Mr. Carl C. Icahn, who, on July 3, 2008,
indirectly owned approximately 91.8% and 86.5% of the Company’s depositary units
and preferred units, respectively, and thus are entities under common control
with the Company. Prior to the Company’s majority interest acquisition of
Federal-Mogul, Thornwood owned an aggregate of 75,241,924 shares of
Federal-Mogul (“Federal-Mogul Shares”), which represented approximately
74.87% of the total issued and outstanding Federal-Mogul Shares. Thornwood
had acquired such shares as follows: (i) 50,100,000 Federal-Mogul Shares
pursuant to the exercise of two options on February 25, 2008 acquired in
December 2007 from the Federal-Mogul Asbestos Personal Injury Trust; and (ii)
25,141,924 Federal-Mogul Shares pursuant to and in connection with
Federal-Mogul’s Plan of Reorganization under Chapter 11 of the United States
Code, which became effective on December 27, 2007.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
According
to paragraph 9 of Statement of Financial Accounting Standards (“SFAS”) No. 141,
Business Combinations,
“control is generally indicated by ownership by one company, directly or
indirectly, of over fifty percent of the outstanding voting shares of another
company”. Paragraph 11 of SFAS No. 141 states that a “business combination”
excludes transfers of net assets or exchanges of equity interests between
entities under common control. Paragraph 11 of SFAS No. 141 also states that
transfers of net assets or exchanges of equity interests between entities under
common control should be accounted for pursuant to the guidance provided at
paragraphs D11 - D18 of Appendix D of SFAS No. 141. In practice, the method used
to account for such transactions is similar to the pooling-of-interests method
(“as-if pooling-of-interests”) in that the entity that receives the net assets
or the equity interests initially recognizes the assets and liabilities
transferred at their carrying amounts in the accounts of the transferring entity
at the date of transfer.
Regarding
the reporting periods required to be presented by an entity following an “as-if
pooling-of-interests” transaction, SFAS No. 141 paragraphs D16-D17
specify:
The
financial statements of the receiving entity should report results of operations
for the period in which the transfer occurs as though the transfer of net assets
or exchange of equity interests had occurred at the beginning of the period.
Results of operations for that period will thus comprise those of the previously
separate entities combined from the beginning of the period to the date the
transfer is completed and those of the combined operations from that date to the
end of the period.... Similarly, the receiving entity should present the
statement of financial position and other financial information as of the
beginning of the period as though the assets and liabilities had been
transferred at that date. Financial statements and financial information
presented for prior years should also be restated to furnish comparative
information. All restated financial statements and financial summaries should
indicate clearly that financial data of previously separate entities are
combined.
The SEC
staff has indicated that, in “as-if pooling-of-interests” accounting, the
financial statements of the previously separate entities should not be combined
for periods prior to the date that common control was established. Reference is
made to the speech by Leslie A. Overton, Associate Chief Accountant, Division of
Corporate Finance, in remarks before the AICPA National Conference on Current
SEC and PCAOB Developments on December 12, 2006. The response to question I C.
effectively states that the combined financial statements should reflect each
combining company only from the date the parent acquired control.
In
applying the above guidance, the Company concluded that the transfer of the
equity interests in Federal-Mogul would be accounted for at historical cost in a
manner similar to that in a pooling of interests. Therefore, as of February 25,
2008 (the effective date of control by Thornwood and, indirectly, Carl C.
Icahn), and, thereafter, as a result of the Company’s acquisition of a majority
interest in Federal-Mogul on July 3, 2008, the Company consolidated the
financial position, results of operations and cash flows of Federal-Mogul. The
Company evaluated the activity between February 25, 2008 and February 29, 2008
and, based on the immateriality of such activity, concluded that the use of an
accounting convenience date of February 29, 2008 was appropriate.
Other Liquidity and Capital
Resource Items
Distributions
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
Preferred Units, page
80
4. Please
tell us and disclose in future filings the company's ability to redeem the
preferred units by March 31, 2010. We note that you have the option to settle
the redemption in cash or issuance of depository units. Please tell us and
disclose the sources of cash that would be used to redeem the preferred units if
you were to redeem the preferred units for cash. If such preferred units are
redeemed for depository units, please discuss whether the amount of authorized
depository units available for issuance is sufficient to redeem the preferred
units. If not, please note whether you will authorize additional depository
units to redeem the preferred units.
In
response to the Staff’s observations and recommendations as provided in comment
4 above, in its Quarterly Report on Form 10-Q filed on May 6, 2009 and in future
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K filed with the
Commission, the Company has, and will expand its disclosure of the sources of
cash and availability of depositary units that would be used to redeem its
preferred units on the Redemption Date as indicated in the following
paragraph.
Pursuant
to certain rights offerings, the Company’s preferred limited partner units must
be redeemed on March 31, 2010, the “Redemption Date.” Each preferred unit has a
liquidation preference of $10.00 and entitles the holder to receive
distributions, payable solely in additional preferred units, at the rate of
$0.50 per preferred unit per annum (which is equal to a rate of 5% of the
liquidation preference thereof). In addition, on the Redemption Date,
subject to the approval of the Company’s Audit Committee, the Company may opt to
redeem all of the preferred units for an amount, payable either in cash or
depositary units, equal to the liquidation preference of the preferred units,
plus any accrued but unpaid distributions thereon. On the Redemption Date, if
the Company elects to redeem the preferred units in cash, the Company believes
that it will have sufficient cash available to do so from its existing cash and
liquid investments; if the Company elects to redeem by issuance of the Company’s
depositary units, the Company will have sufficient authorized depositary units
available to do so. As of March 31, 2009, there were 13,127,179 preferred units
issued and outstanding.
Item 8. Financial Statements
and Supplementary Data
Consolidated Balance Sheets,
page 94
5. We
note that you separately present the assets and liabilities of your continuing
operating segments on the face of your consolidated balance sheets. Explain to
us how your presentation complies with Rule 5-02 of Regulation S-X.
As
indicated in Rule 5-02 of Regulation S-X, “the purpose of this rule is to
indicate the various line items and certain additional disclosures which, if
applicable, and except as otherwise permitted by the Commission, should appear
on the face of the balance sheets or related notes filed for the persons to whom
this article pertains (see Rule 4-01(a)).”
Rule
4-01(a) provides that financial statements included in SEC filings should be
filed in a manner that will best indicate their significance and character in
the light of the various rules, regulations and other provisions that apply to
these statements. That is, the statements should fairly present the operations
and financial condition of the company in question, and should reasonably
present the disclosures required by statutes and SEC regulations. The statements
should include, at a minimum, information required by the rules and regulations,
as well as any further material information necessary to prevent the statements
from being misleading.
As noted
above, Rule 4-01(a) provides that financial statements should be prepared in a
way that best indicates their significance and character. In addition, Rule 4-02
of Regulation S-X allows a filer to omit separate disclosure of immaterial
items, and Rule 4-03 of Regulation S-X permits omission of inapplicable captions
and unrequired or inapplicable financial statements. The combined effect of
these rules is to allow a filer to submit financial statements prepared in
accordance with U.S. GAAP without having to make adjustments to rigidly comply
with filing requirements of Regulation S-X.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
Rule 408
of the Securities Act of 1933, as amended (the “Securities Act”), echoes the
requirements of Rule 4-01(a) which states, “In addition to the information
expressly required to be included in a registration statement, there shall be
added such further material information, if any, as may be necessary to make the
required statements, in the light of the circumstances under which they are
made, not misleading.”
The
Company is a diversified holding company owning subsidiaries engaged in the
following operating segments: Investment Management, Automotive, Metals, Real
Estate and Home Fashion. The Company’s core business strategy includes acquiring
and developing independent businesses. The nature of the operations of each of
these businesses is diverse. For example, the assets and liabilities of the
Investment Management segment are those of the investment funds that the Company
manages and are generally not available to the Company for its general liquidity
purposes. In addition, the Automotive segment has a significant amount of debt
that does not encumber the assets of the other segments. Thus, in accordance
with the intent of Rule 408 of the Securities Act, in its consolidated balance
sheet the Company has segregated the assets and liabilities of its significant
segments in order to make the consolidated balance sheet not misleading. The
Company believes that the presentation of its balance sheet on a segment basis
better enables the reader in understanding the financial position of the
Company’s segments.
The
Company believes that its disclosures in its consolidated balance sheet comply
in all material respects with Rule 5-02 of Regulation S-X. All material balances
of cash, accounts receivable, investments, inventories, property, plant &
equipment and liabilities are separately disclosed. Certain balances pertaining
to its Metals, Real Estate and Home Fashion segments have been grouped with
other assets because they are not material.
6. We
note that you have a balance in accumulated other comprehensive loss as of
December 31, 2008. Please tell us how the disclosure of Partners' equity within
your consolidated balance sheets complies with paragraph 26 of SFAS 130.
Further, please tell us what accounting literature you relied upon to disclose
only the balance as of the end of the most recently completed fiscal
year.
Paragraph
26 of SFAS 130 provides that, “The total of other comprehensive income for a
period shall be transferred to a component of equity that is displayed
separately from retained earnings and additional paid-in capital in a statement
of financial position at the end of an accounting period.” As a master limited
partnership, the Company presents the total of its partners’ capital accounts in
the equity section of its consolidated balance sheet as opposed to separately
presenting retained earnings and additional paid-in capital and accumulated
other comprehensive income. The Company historically has allocated all items
affecting equity transactions to its respective partners’ capital accounts and
believes that this more appropriately presents the capital balances of the
partners at the end of an accounting period.
In
response to the Staff’s observations, the Company will disclose the balance of
accumulated other comprehensive income or loss for all balance sheet dates
presented in its future Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K filed with the Commission.
Consolidated Statements of
Operations, page 95
7. We
note that you disclose only the revenue totals for each of your continuing
operating segments on the face of your consolidated statements of operations.
Explain to us how your presentation complies with Rule 5-03 of Regulation
S-X.
As
indicated in Rule 5-03 of Regulation S-X, “The purpose of this rule is to
indicate the various line items which, if applicable, and except as otherwise
permitted by the Commission, should appear on the face of the income statements
filed for the persons to whom this article pertains (see Rule
4-01(a)).”
As noted
in our response to question #5 above, Rule 4-01(a) provides that financial
statements included in SEC filings should be filed in a manner that will best
indicate their significance and character in the light of the various rules,
regulations and other provisions that apply to these statements. That is, the
statements should fairly present the operations and financial condition of the
company in question, and should reasonably present the disclosures required by
statutes and SEC regulations. The statements should include, at a minimum,
information required by the rules and regulations, as well as any further
material information necessary to prevent the statements from being
misleading.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
The
Company is a diversified holding company owning subsidiaries, the operations of
which are independent separate operating entities in very diverse businesses.
The Company believes that presenting revenue totals for each of our segments on
the statements of operations presents our operations fairly by providing the
user relevant information in the most meaningful way given the nature of our
business. Furthermore, disclosing totals by segment is useful as the Company
holds positions in different companies within different industries and combining
them together would not provide the relevant and meaningful depiction of our
operations that our investors seek.
Certain
of the line items indicated by Rule 5-03 of Regulation S-X are immaterial in our
financial statements and therefore, we do not believe that including them in
total revenue is misleading. Revenues from the Company’s Investment Management
segment and the Holding Company are primarily related to investment activities.
Revenues for the Company’s other segments are substantially all from net sales;
amounts attributable to interest, dividends and other income are not material.
To the extent that such items become material in the future the Company would
reflect them separately on the face of its statements of
operations.
We direct
the Staff’s attention to Footnote 18 to the Company’s Form 10-K wherein the
details of the components of the Company’s net sales and the immaterial amounts
of other revenues are disclosed. Accordingly, based on the nature of our
business and the intent of Rule 401(a), the Company believes that it has
appropriately combined the revenues of each of its segments in its consolidated
statements of operations.
Consolidated Statements of
Cash Flows, page 97
8. We
note that you separately present operating, investing, and financing cash flows
of your continuing operating segments on the face of your consolidated
statements of cash flows. Please cite accounting literature relied upon in
determining how such presentation is in accordance with US-GAAP.
As noted
above in response to questions 5 and 7, the Company is a diversified holding
company owning subsidiaries engaged in the following operating segments:
Investment Management, Automotive, Metals, Real Estate and Home Fashion. The
nature of the operations of the Company’s Investment Management segment is
different from the Company’s other segments in that its business is investing in
securities. Accordingly, its purchases and sales of securities are classified
within operating activities in the Company’s consolidated statements of cash
flows as opposed to investing cash flows for the Company’s other
segments. Thus, in a period of capital inflows, the receipt of funds
from investors are presented as positive financing cash flows and simultaneously
presented as negative operating cash flows as the funds are
invested.
The
Company has segregated the operating cash flows for the Company’s Investment
Management segment from its other segments because of the underlying difference
of the Investment Management segment’s business which is investing in
securities. The Company believes that by segregating the Investment Management
segment’s cash flows it provides a meaningful presentation of the true operating
cash flows of the Company’s other segments.
The
Company follows the guidance in SFAS 95, Statement of Cash Flows (as
amended). Paragraph 4 of that statement states, “The primary purpose of a
statement of cash flows is to provide relevant information about the cash
receipts and cash payments of an enterprise during a period.” The Company
believes that, for the reasons stated above, segregation of its Investment
Management operating and financing cash flows from that of its other segments
accomplishes this purpose.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
9. Please
tell us the composition of Net cash provided by investing activities from
discontinued operations within your Consolidated Statement of Cash Flows of
$1,069 million. Please tell us how such amount correlates to the Gain on
dispositions, net of income taxes recorded within your Consolidated Statements
of Operations totaling $478 million. Also, we note your disclosure within note 5
which notes the gain "includes $472 million, net of income taxes of $260
million, recorded on the sale of ACEP on February 20, 2008."
The
composition of net cash provided by investing activities from discontinued
operations in the Company’s consolidated statement of cash flows of $1,069
million and the correlation of such amount to the gain on dispositions, net of
income taxes in the consolidated statements of operations is provided as follows
(in millions):
|
Per
Cash
|
Per
Statement
|
|||||||
|
Flow
|
of
Operations
|
|||||||
|
Proceeds
from sales of discontinued operations
|
$ | 1,223 | $ | 1,223 | ||||
|
Less:
|
||||||||
|
Net book value of assets
sold
|
n/a | (485 | ) | |||||
|
Income
Taxes
|
(134 | ) | (260 | ) | ||||
|
Net
Cash / Gain on sale
|
1,089 | 478 | ||||||
|
Other
|
(20 | ) | - | |||||
|
Totals
|
$ | 1,069 | $ | 478 | ||||
Included
in the gain on dispositions of $478 million is $472 million relating to the sale
of ACEP and $6 million relating to the sale of certain real estate properties
classified as discontinued operations.
Notes to Consolidated
Financial Statements
2. Summary of Significant
Accounting Policies
Revenue and Expense
Recognition
Home
Fashion
10. Regarding
sales incentives, please tell us and disclose in future filings the composition
of such customer incentives (i.e., volume-based incentive arrangements;
consideration in the form of discounts or rebates; et cetera) and quantify the
amount recorded in period presented. Further, please note the accounting
literature relied upon in accounting for such incentives, including your
treatment of incentives as a reduction to sales.
The
Company’s Home Fashion segment has customer incentives that are comprised
primarily of volume-based discounts for advertising, marketing, defective
products and opening orders. The amount of accrued customer incentives that were
recorded as reductions to sales were $23.8 million, $34.3 million and $40.5
million for the fiscal years ended December 31, 2008, 2007 and 2006,
respectively.
In
determining the appropriate accounting for sales incentives, the Company refers
to EITF 01-9 wherein the Task Force reached a consensus that cash consideration
(including a sales incentive) given by a vendor to a customer is presumed to be
a reduction of the selling prices of the vendor's products or services and,
therefore, should be characterized as a reduction of revenue when recognized in
the vendor's income statement.
In
response to the Staff’s observations, the Company will disclose the composition
of such sales incentives in its future Annual Reports on Form 10-K filed with
the Commission.
7. Investments and Related
Matters
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
c. Automotive, page
133
11. We
note that pursuant to the agreement related to your non-controlling interest in
a joint venture located in Turkey that your partner holds an option to put its
shares in the joint venture to a subsidiary of Federal-Mogul at the higher of
the current fair value and a guaranteed amount. We further note that no amount
is recorded for such contingent guarantee. Please tell us the scope exemption
relied upon to conclude that such guarantee is not subject to the initial
recognition and measurement provisions of FIN 45.
The
Turkey joint venture was established during 1995 between T&N plc (“T&N”)
and the Dereli family (“Dereli”). Federal-Mogul became affiliated with this
entity through its acquisition of T&N during 1998. The purpose of this joint
venture is to manufacture and market automotive parts, including pistons, pins,
piston rings and cylinder liners to Original Equipment (“OE”) and Aftermarket
customers. At the time of formation, the joint venture allowed T&N access to
certain Middle-Eastern geographic markets and customers as well as to low-cost
manufacturing capabilities, while Dereli gained access to the Aftermarket brand
names, product and process technology and distribution capability of
T&N.
The joint
venture was initially capitalized through the contribution of 100% of T&N’s
shares in Goetze Istanbul Segman ve Gomlek Sanayi Ticaret A.S. (“GIS”) and
Dereli’s shares in Istanbul Motor Piston ve Pim Sanayi A.S. (“IMP”) and Dereli
Holding A.S. (“DHAS”). The fair value of each party’s contribution in kind was
DM65 million for total capitalization of DM130 million. This initial
capitalization resulted in equal ownership interests of 50% each.
The joint
venture relationship between Federal-Mogul and Dereli is governed by a written
shareholders agreement (the “Turkey Shareholders Agreement”). The Turkey
Shareholders Agreement establishes joint control of the entity and outlines the
process for key decision-making such that neither party is able to unilaterally
control the entity. The agreement also includes an option for Dereli to put its
shares in the entity to Federal-Mogul in an amount equal to the higher of the
existing fair value or a guaranteed minimum amount. The put option can be
exercised at the discretion of Dereli.
The joint
venture is managed through its board of directors, which is comprised of eight
directors, four of which are appointed by each of Federal-Mogul and Dereli. An
executive committee oversees the operations of the joint venture in accordance
with the policies and directives of the board through monthly meetings. The
executive committee is comprised of four members, two of which are nominated by
each of Federal-Mogul and Dereli. The day-to-day operations of the joint venture
are directed by two General Managers. Federal-Mogul nominates the
General Manager for the OE business while Dereli nominates the General Manager
for the Aftermarket business. Each nominated General Manager must be approved by
the other joint venture partner.
Consistent
with the transition requirements of paragraph 20 of FIN No. 45, no liability was
recorded by Federal-Mogul as the provisions of FIN No. 45 are applied
prospectively to guarantees issued or modified after December 31, 2002.
Accordingly, Federal- Mogul’s previous accounting for guarantees issued prior to
the date of the initial application of FIN No. 45 has not been revised or
restated to reflect the recognition and measurement provisions of the
Interpretation.
In
connection with Federal-Mogul’s emergence from Bankruptcy, Federal-Mogul, with
the assistance of a third-party valuation firm, estimated the fair value of a
50% interest in the Turkey joint venture entity as of December 31, 2007. This
estimate was completed using various generally-accepted valuation techniques,
including discounted cash flows and market multiples. This estimate of fair
value was updated by Federal-Mogul as of December 31, 2008, and was adjusted to
its revised estimate of fair value. The estimated fair value of the 50% interest
in the Turkey joint venture entity at both December 31, 2007 and December 31,
2008 significantly exceeded the guaranteed minimum consideration that would have
been paid in connection with the put option. As such, Federal-Mogul does not
have a contingent liability to be recognized. If the put option were exercised,
the purchase price paid for the shares would be recorded in accordance with
appropriate acquisition accounting guidance.
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP
For
commercial reasons, the Company does not believe that disclosure of this
estimated fair value is appropriate since settlement of the put option, if
exercised, would likely become a matter of negotiation between the joint venture
partners. Accordingly, the Company only provides qualitative disclosure related
to the potential impact on Federal-Mogul’s liquidity and the estimated value of
the contingent guarantee.
In
connection with responding to the Comment Letter, the Company acknowledges
that:
|
●
|
the
Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
|
|
●
|
staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
|
|
●
|
the
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
Please
contact me should you have any questions or additional comments.
Very
truly yours,
/s/ Dominick Ragone
Dominick
Ragone
Chief
Financial Officer
Icahn
Enterprises G.P. Inc., the General Partner of
Icahn
Enterprises L.P.
Enclosures
cc: Keith
A. Meister (Icahn Enterprises L.P.)
767 Fifth
Avenue, New York, New York 10153 Telephone
(212) 702-4300 Fax (212) 750-5841
NYSE -
IEP