IEP-9.30.11-10Q
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 September 30, 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 x 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 November 1, 2011, there were 85,571,714 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)

 
September 30,
2011
 
December 31,
2010
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
2,171

 
$
2,963

Cash held at consolidated affiliated partnerships and restricted cash
2,734

 
2,174

Investments
8,311

 
7,470

Accounts receivable, net
1,446

 
1,285

Due from brokers
89

 
50

Inventories, net
1,402

 
1,163

Property, plant and equipment, net
3,535

 
3,455

Goodwill
1,141

 
1,129

Intangible assets, net
956

 
999

Other assets
693

 
650

Total Assets
$
22,478

 
$
21,338

LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
942

 
$
844

Accrued expenses and other liabilities
1,921

 
2,277

Securities sold, not yet purchased, at fair value
2,142

 
1,219

Due to brokers
2,351

 
1,323

Post-employment benefit liability
1,231

 
1,272

Debt
6,489

 
6,509

Total liabilities
15,076

 
13,444

 
 
 
 
Commitments and contingencies (Note 18)

 

 
 
 
 
Equity:
 
 
 
   Limited partners: Depositary units: 92,400,000 authorized; issued 86,708,914
        at September 30, 2011 and 85,865,619 at December 31, 2010; outstanding
        85,571,714 at September 30, 2011 (including 843,295 units issued as a unit
        distribution on May 31, 2011) and 84,728,419 at December 31, 2010
3,916

 
3,477

   General partner
(273
)
 
(282
)
   Treasury units at cost: 1,137,200 depositary units
(12
)
 
(12
)
Equity attributable to Icahn Enterprises
3,631

 
3,183

Equity attributable to non-controlling interests
3,771

 
4,711

Total equity
7,402

 
7,894

Total Liabilities and Equity
$
22,478

 
$
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 September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
   Net sales
$
2,280

 
$
1,956

 
$
6,888

 
$
5,860

   Other revenues from operations
215

 
38

 
591

 
113

   Net (loss) gain from investment activities
(49
)
 
793

 
1,158

 
540

   Interest and dividend income
22

 
32

 
83

 
152

   Other income (loss), net
2

 
6

 
15

 
(34
)
 
2,470

 
2,825

 
8,735

 
6,631

Expenses:
 
 
 
 
 
 
 
   Cost of goods sold
1,977

 
1,690

 
5,911

 
4,988

   Other expenses from operations
106

 
27

 
309

 
78

   Selling, general and administrative
316

 
234

 
993

 
741

   Restructuring
5

 
2

 
9

 
13

   Impairment

 
4

 
3

 
13

   Interest expense
105

 
96

 
327

 
286

 
2,509

 
2,053

 
7,552

 
6,119

(Loss) income before income tax expense
(39
)
 
772

 
1,183

 
512

Income tax expense
(13
)
 
(7
)
 
(55
)
 
(19
)
Net (loss) income
(52
)
 
765

 
1,128

 
493

Less: net loss (income) attributable to non-controlling interests
13

 
(467
)
 
(638
)
 
(376
)
Net (loss) income attributable to Icahn Enterprises
$
(39
)
 
$
298

 
$
490

 
$
117

 
 
 
 
 
 
 
 
Net (loss) income attributable to Icahn Enterprises allocable to:
 
 
 
 
 
 
 
   Limited partners
$
(38
)
 
$
292

 
$
480

 
$
115

   General partner
(1
)
 
6

 
10

 
2

 
$
(39
)
 
$
298

 
$
490

 
$
117

 
 
 
 
 
 
 
 
Basic (loss) income per LP unit
$
(0.44
)
 
$
3.44

 
$
5.58

 
$
1.37

Basic weighted average LP units outstanding
86

 
85

 
86

 
84

 
 
 
 
 
 
 
 
Diluted (loss) income per LP unit
$
(0.44
)
 
$
3.31

 
$
5.46

 
$
1.37

Diluted weighted average LP units outstanding
86

 
90

 
91

 
84

 
 
 
 
 
 
 
 
Cash distributions declared per LP unit
$
0.10

 
$
0.25

 
$
0.45

 
$
0.75



See notes to consolidated financial statements.


2

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF CHANGES
 IN EQUITY AND COMPREHENSIVE INCOME
(In millions, except units)

 
Equity Attributable to Icahn Enterprises
 
 
 
 
 
 
 
 
 
Held in Treasury
 
 
 
 
 
 
 
General Partner's Equity (Deficit)
 
Limited
Partners' Equity
 
Amount
 
Units
 
Total Partners' Equity
 
Non-controlling Interests
 
Total Equity
 
(Unaudited)
Balance, December 31, 2010
$
(282
)
 
$
3,477

 
$
(12
)
 
1,137,200

 
$
3,183

 
$
4,711

 
$
7,894

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
10

 
480

 

 

 
490

 
638

 
1,128

Post-employment benefits, net of tax

 
3

 

 

 
3

 
1

 
4

Hedge instruments, net of tax

 
(13
)
 

 

 
(13
)
 
(4
)
 
(17
)
Translation adjustments and other, net of tax
(1
)
 
(46
)
 

 

 
(47
)
 
(18
)
 
(65
)
Comprehensive income
9

 
424

 

 

 
433

 
617

 
1,050

Partnership distributions
(1
)
 
(38
)
 

 

 
(39
)
 

 
(39
)
Investment Management distributions

 

 

 

 

 
(1,818
)
 
(1,818
)
Investment Management contributions

 

 

 

 

 
250

 
250

Changes in subsidiary equity
1

 
53

 

 

 
54

 
11

 
65

Balance, September 30, 2011
$
(273
)
 
$
3,916

 
$
(12
)
 
1,137,200

 
$
3,631

 
$
3,771

 
$
7,402



Accumulated other comprehensive loss was $675 million and $597 million at September 30, 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)
 
Nine Months Ended September 30,
 
2011
 
2010
 
 (Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
1,128

 
$
493

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
   Net gain from investment activities
(1,158
)
 
(540
)
   Purchases of securities
(4,183
)
 
(3,768
)
   Proceeds from sales of securities
4,150

 
3,057

   Purchases to cover securities sold, not yet purchased
(3,895
)
 
(2,918
)
   Proceeds from securities sold, not yet purchased
5,263

 
1,556

   Net premiums (paid) received on derivative contracts
(20
)
 
19

   Changes in receivables and payables relating to securities transactions
1,149

 
429

   Depreciation and amortization
333

 
338

   Other, net
9

 
(71
)
   Changes in cash held at consolidated affiliated partnerships and restricted cash
(560
)
 
1,393

   Changes in other operating assets and liabilities
(356
)
 
(148
)
Net cash provided by (used in) operating activities
1,860

 
(160
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(359
)
 
(309
)
Purchase of investments in precious metals
(150
)
 

Acquisitions of businesses, net of cash acquired
(126
)
 
(39
)
Other, net
5

 
(4
)
Net cash used in investing activities
(630
)
 
(352
)
Cash flows from financing activities:
 
 
 
Investment Management equity:
 
 
 
   Capital distributions to non-controlling interests
(2,164
)
 
(555
)
   Capital contributions by non-controlling interests
250

 
419

Partnership contributions

 
6

Partnership distributions
(39
)
 
(63
)
Distribution to non-controlling interests in subsidiary
(20
)
 

Proceeds from issuance of senior unsecured notes

 
1,987

Proceeds from other borrowings
612

 
107

Repayments of borrowings
(653
)
 
(1,373
)
Other, net

 
(11
)
Net cash (used in) provided by financing activities
(2,014
)
 
517

Effect of exchange rate changes on cash and cash equivalents
(10
)
 

Net (decrease) increase in cash and cash equivalents
(794
)
 
5

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
$
2,171

 
$
2,261

Supplemental information:
 
 
 
Cash payments for interest, net of amounts capitalized
$
368

 
$
237

Net cash payments for income taxes
$
53

 
$
10

Net unrealized gains on available-for-sale securities
$
2

 
$
1

Redemptions payable to non-controlling interests
$

 
$
75

LP unit issuance to purchase majority interests in ARI and Viskase
$

 
$
310

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)
SEPTEMBER 30, 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 September 30, 2011, affiliates of Mr. Icahn owned 79,238,262 of our depositary units which represented approximately 92.6% of our outstanding depositary 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 14, “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 of which we are considered the primary beneficiary of such entities (see section below entitled, "Adoption of New Accounting Standards," and Note 4, “Investments and Related Matters-Investment Management,” for further discussion regarding the accounting and reporting of 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 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


5



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 September 30, 2011 was approximately $6.5 billion and $6.3 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 $2.4 billion and $1.6 billion as of September 30, 2011 and December 31, 2010, respectively.

Summary of Significant Accounting Policies
Other than the accounting policies discussed below, there have been no material changes to our significant accounting policies or estimates that were included in our Annual Report on Form 10-K for fiscal 2010.
Revenue Recognition-Railcar
Revenues from railcar sales are recognized following completion of manufacturing, inspection, customer acceptance and title transfer, which is when the risk for any damage or loss with respect to the railcars passes to the customer. Paint and lining work may be outsourced and, as a result, the sale for the railcar may be recorded after customer acceptance when it leaves the manufacturing plant and the sale for the lining work may be separately recorded following completion of that work by the independent contractor, customer acceptance and final shipment. Revenues from railcar leasing are recognized on a straight-line basis over the life of the lease. Revenues from railcar and industrial components are recorded at the time of product shipment, in accordance with ARI's contractual terms. Revenue for railcar maintenance services is recognized upon completion and shipment of railcars from ARI's plants. ARI does not currently bundle railcar service contracts with new railcar sales. Revenue for fleet management services is recognized as performed.
Revenues related to consulting type contracts are accounted for under the percentage-of-completion method. Profits expected to be realized on these contracts are based on the total contract revenues and costs based on the estimate of the percentage of project completion. Revenues recognized in excess of amounts billed are recorded to unbilled revenues and included in other assets on the consolidated balance sheets. Billings in excess of revenues recognized on in-progress contracts are recorded to unbilled costs and included in accrued expenses and other liabilities on the consolidated balance sheets. These estimates are reviewed and revised periodically throughout the term of the contracts and any adjustments are recorded on a cumulative basis in the period the revisions are made.
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 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 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. In addition, this amendment deferred the application of this standard for a reporting entity's interest in an entity if the reporting entity met certain attributes of an investment company. This standard is effective as of the beginning of the first fiscal year beginning after November 15, 2009.
We determined that certain entities within our Investment Management segment previously met the deferral criteria and, accordingly, we applied the consolidation guidance before the issuance of this standard. Effective March 31, 2011, we applied this guidance for certain entities within our Investment Management segment in determining whether we are considered the primary beneficiary of such entities. The adoption of this standard did not have an impact on our financial condition, results of operations and cash flows. See Note 2, "Operating Units-Investment Management," for further discussion.
Recently Issued Accounting Standards
In May 2011, the FASB issued Accounting Standard Update ("ASU") No. 2011-04, which amends ASC Topic 820, Fair Value Measurements and Disclosures. This ASU clarifies among other things, the intent about the application of existing fair


6



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


value requirements, including those related to highest and best use concepts, and also expands the disclosure requirements for fair value measurements categorized within Level 3 of the fair value hierarchy. This ASU clarifies that a reporting entity should disclose quantitative information about significant unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. Additionally, this ASU expands the disclosures for fair value measurements categorized within Level 3 where a reporting entity will be required to include a description of the valuation processes used and the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any.  Additional disclosure will also be required for any transfers between Level 1 and Level 2 of the fair value hierarchy of fair value measurements on a gross basis as well as additional disclosure of the level in the fair value hierarchy of assets and liabilities that are not recorded at fair value. For many of the requirements, the FASB does not intend for this ASU to result in a change in the application of the requirements in ASC Topic 820.  The guidance in this ASU is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011.  Early adoption is not permitted. The adoption of this ASU will not have a material impact on our financial condition, results of operations or cash flows.
In June 2011, the FASB issued ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. The guidance in this ASU is intended to increase the prominence of items reported in other comprehensive income in the financial statements by presenting the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The guidance in this ASU does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. Upon adoption, this update is to be applied retrospectively and is effective during interim and annual periods beginning after December 15, 2011.  Early adoption is permitted. The adoption of this ASU will not have a material impact on our financial condition, results of operations or cash flows.
In September 2011, the FASB issued ASU No. 2011-08, which amends ASC Topic 350, Intangibles-Goodwill and Other. The guidance in this ASU permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of this ASU will not have a material impact on our financial condition, results of operations or cash flows.
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 not offered to outside investors. Interests in the Private Funds had been previously offered only to certain sophisticated and qualified investors on the basis of exemptions from the registration requirements of the federal securities laws and were not (and still are not) publicly available. The “Offshore 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


7



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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.”
Prior to March 31, 2011, our Investment Management segment's revenues were affected by the combination of fee-paying assets under management (“AUM”) and the investment performance of the Private Funds. The General Partners were entitled to receive an incentive allocation and special profits interest allocation from the Investment Funds which were accrued on a quarterly basis and were allocated to the General Partners at the end of the Investment Funds' fiscal year (or sooner on redemptions) assuming there were sufficient net profits to cover such amounts. 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 returned all fee-paying capital to its investors during fiscal 2011. Payments were funded through cash on hand and borrowings under existing credit lines.
As a result of returning fee-paying capital to its investors on March 31, 2011, each of the Private Funds no longer meets the criteria of an investment company as set forth in FASB ASC Paragraph 946-10-15-2, Financial Services-Investment Companies, and, therefore, the application of FASB ASC Section 946-810-45, Financial Services-Investment Companies-Consolidation, is no longer applicable effective March 31, 2011. This change has no material effect on our consolidated financial statements as the Private Funds would account for its investments as trading securities pursuant to FASB ASC Topic 320, Investments-Debt and Equity Securities, effective March 31, 2011. For those investments that fall outside the scope of FASB ASC Topic 320, or for those investments in which the Private Funds would otherwise have been required to account for under the equity method, the Private Funds apply the fair value option to such investments. See Note 4, "Investments and Related Matters-Investment Management," for further discussion regarding this reconsideration event and its consolidation impact.
As a result of the return of fee-paying capital as described above, a special profits interest allocation of $9 million was allocated to the General Partners at March 31, 2011. No further special profits interest allocation accrued in periods subsequent to March 31, 2011. A special profits interest allocation accrual of $34 million was made for the three and nine months ended September 30, 2010.
As a result of the return of fee-paying capital as described above, an incentive allocation of $7 million was allocated to the General Partners at March 31, 2011. No further incentive allocation will accrue in periods subsequent to March 31, 2011. Incentive allocations for each of the three and nine months ended September 30, 2010 were $3 million.
The fair value of our interest in the Investment Funds was approximately $2.8 billion and $2.6 billion as of September 30, 2011 and December 31, 2010, respectively.
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 September 30, 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.



8



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


During the third quarter of fiscal 2011, we acquired additional shares of Federal-Mogul common stock.  As of September 30, 2011, we owned approximately 76.8% of the total outstanding common stock of 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 $263 million and $211 million as of September 30, 2011 and December 31, 2010, respectively. Of those gross amounts, $262 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 each of September 30, 2011 and December 31, 2010, Federal-Mogul had outstanding transferred receivables for which cash of $1 million had not yet been drawn. Proceeds from the transfers of accounts receivable qualifying as sales were $1,335 million and $894 million for the nine months ended September 30, 2011 and 2010, respectively.
For the nine months ended September 30, 2011 and 2010, expenses associated with transfers of receivables of $7 million and $5 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 $26 million and $32 million as of September 30, 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 September 30, 2011 and December 31, 2010, Federal-Mogul estimated the loss to be immaterial.
Restructuring
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.
 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.
An unprecedented downturn in the global automotive industry and global financial markets led Federal-Mogul to 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 restructuring charges related to Restructuring 2009 for the nine months ended September 30, 2011. Federal-Mogul does not expect to incur additional restructuring charges through the fiscal year ending December 31, 2011 ("fiscal 2011"). Total cumulative restructuring charges related to Restructuring 2009 through September 30, 2011 were $157 million, of which $148 million were employee costs and $9 million were facility closure costs.
As of December 31, 2010, the accrued liability balance relating to all restructuring programs was $24 million. For the


9



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


three and nine months ended September 30, 2011, Federal-Mogul incurred $3 million and $4 million of net restructuring charges, respectively. For the three and nine months ended September 30, 2010, Federal-Mogul incurred $1 million and $7 million of net restructuring charges, respectively. During the nine months ended September 30, 2011, Federal-Mogul paid $19 million of restructuring charges. As of September 30, 2011, the accrued liability balance was $9 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 $4 million were reversed for the nine months ended September 30, 2011. 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 nine months ended September 30, 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 September 30, 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 $3 million of impairment charges for the nine months ended September 30, 2011. There were no impairment charges for the three months ended September 30, 2011. This compares with a reversal of $1 million and impairment charge of $7 million for the three and nine months ended September 30, 2010, respectively.
The $3 million in impairment charges for the nine months ended September 30, 2011 includes a $2 million impairment charge related to an asset retirement obligation for a facility that is closed. As the fair value of the facility did not support the capitalization of this asset retirement obligation, it was impaired. The remaining $1 million in impairment charges recorded during the nine months ended September 30, 2011 was made up of immaterial fixed asset impairments at several facilities.
The reversal of $1 million and impairment charge of $7 million for the three and nine months ended September 30, 2010, respectively, relate to certain 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 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 our majority ownership in Tropicana. 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 7,448 slot machines, 223 table games and 6,048 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.


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 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.
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 held, 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 gave us a controlling interest and required us to consolidate Tropicana's financial results effective November 15, 2010, which now comprises our Gaming segment. On April 29, 2011, the Investment Funds made a distribution-in-kind of 13,538,446 shares of Tropicana common stock with a value of $216 million to us in redemption of $216 million of our limited and general partner interests in the Investment Funds. The distribution transferred the ownership of the Tropicana common stock held by the Investment Funds directly to us. As a result of this transaction, we directly own 51.5% of Tropicana's outstanding common stock. This distribution increased equity attributable to Icahn Enterprises by $27 million and decreased equity attributable to non-controlling interests by $27 million, representing the basis difference between the redemption value determined as of April 29, 2011 and the application to the controlling interest in Tropicana of purchase accounting pursuant to ASC Topic 805, Business Combinations, on November 15, 2010.
During the third quarter of fiscal 2011, we acquired additional shares of Tropicana common stock.  As of September 30, 2011, we owned approximately 61.7% of the total outstanding common stock of Tropicana.
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 was a lender under the Exit Facility and, in the aggregate, collectively held over 50% of the loans thereunder. On June 30, 2011, the Investment Funds made a distribution-in-kind of the loans under the Exit Facility with a value of $71 million to us in redemption of $71 million of our general partner interests in the Investment Funds. The distribution transferred the ownership of the loans under the Exit Facility held by the Investment Funds directly to us. As a result of this transaction, we directly own over 50% of the loans under the Exit Facility.
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.
During the third quarter of fiscal 2011, we acquired additional shares of ARI common stock.  As of September 30, 2011, we owned approximately 55.3% of the total outstanding common stock of ARI.
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.
Metals
We conduct our Metals segment through our indirect wholly owned subsidiary, PSC Metals, Inc. (“PSC Metals”). PSC


11



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 has made several acquisitions during fiscal 2011. See Note 8, "Goodwill and Intangible Assets, Net-Metals," and Note 19, "Subsequent Events," for further discussion regarding these acquisitions.
Real Estate
Our Real Estate segment consists of rental real estate, property development and resort activities.
As of September 30, 2011 and December 31, 2010, we owned 30 rental real estate properties. Our property development operations are run primarily through Bayswater Development LLC, 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 326 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 September 30, 2011 and December 31, 2010, $78 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, LLC (f/k/a WestPoint International, Inc., as described below) (“WPI”), a manufacturer and distributor of home fashion consumer products. WPI is engaged in the business of manufacturing, sourcing, designing, 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 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.
Effective October 1, 2011, West Point International, Inc. converted to a Delaware limited liability company through a merger with its wholly owned subsidiary formed for such purpose, with such subsidiary surviving the merger being named WestPoint International, LLC.
During the third quarter of fiscal 2011, we acquired additional shares of WPI common stock. As of September 30, 2011, we owned approximately 96.5% of the total outstanding common shares of WPI.
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 seven customers who accounted for approximately 63% and six customers who accounted for approximately 62% of WPI's net sales for the nine months ended September 30, 2011 and 2010, respectively.


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 are sourced from plants located outside of the United States.  
WPI incurred restructuring costs of $2 million and $5 million for the three and nine months ended September 30, 2011, respectively, compared to $1 million and $6 million in restructuring costs for the three and nine months ended September 30, 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 nine months ended September 30, 2011, WPI paid $5 million in restructuring costs. As of September 30, 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 September 30, 2011 are $90 million.
WPI anticipates incurring approximately $1 million of additional restructuring costs for the remainder of 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.

Impairment
WPI incurred non-cash impairment charges of $5 million and $6 million for the three and nine months ended September 30, 2010, respectively, due to impairment charges related to certain plants that have been closed or will be closed. WPI did not incur any impairment charges for the three and nine months ended September 30, 2011. In recording impairment charges related to its plants, WPI compares estimated net realizable values of property, plant and equipment to their current carrying values.

3.
Related Party Transactions.
Our amended and restated agreement of limited partnership expressly permits us to enter into transactions with our general 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 such date.  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 $0.4 million and $0.8 million for the three and nine months ended September 30, 2011, respectively, and $0.2 million and $0.5 million for the three and nine months ended September 30, 2010. As of September 30, 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


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 nine months ended September 30, 2011 and 2010, these reimbursement amounts were $2 million and $1 million, respectively.
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. On April 1, 2011, affiliates of Mr. Icahn made aggregate contributions of $250 million in the Investment Funds. As of September 30, 2011 and December 31, 2010, the total fair market value of investments in the Investment Funds made by Mr. Icahn and his affiliates was approximately $2.8 billion and $2.1 billion, respectively. In addition, an affiliate of Mr. Icahn has a deferred management fee arrangement with the Feeder Funds with balances of $168 million and $148 million as of September 30, 2011 and December 31, 2010, respectively. Such amounts are invested in and receive applicable returns thereon from the Investment Funds.
Effective April 1, 2011, based on a new expense-sharing arrangement, certain expenses borne by Icahn Capital are reimbursed by the Investment Funds, when such expenses are incurred. Such expenses relate to the operation, administration and investment activities of Icahn Capital for the benefit of the Investment Funds (including salaries, benefits and rent) and shall be allocated pro rata in accordance with each investor's capital accounts in the Investment Funds. For the three and nine months ended September 30, 2011, $3 million and $7 million, respectively, was allocated to the Investment Funds based on this expense-sharing arrangement.
Railcar
Agreements with American Railcar Leasing LLC
Effective as of January 1, 2008, ARI entered into a fleet services agreement with American Railcar Leasing LLC ("ARL"), a company controlled by Mr. Icahn. 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. 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 60 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. Railcar services revenues, included in other revenues from operations in our consolidated statements of operations, recorded by ARI were $7 million and $4 million under these agreements for the three months ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011 and 2010, revenues of $19 million and $10 million, respectively, were recorded under these agreements. The terms and pricing on services to related parties are not less favorable to ARI than the terms and pricing on services provided to unaffiliated third parties.
ARI from time to time manufactures and sells railcars to ARL under long-term agreements as well as on a purchase order basis. ARI did not sell any railcars to ARL during the three months ended September 30, 2011. Revenues from railcars sold to ARL were $19 million for the three months ended September 30, 2010. For the nine months ended September 30, 2011 and 2010, revenues from railcars sold to ARL were $1 million and $65 million, respectively. Revenues from railcars sold to ARL are included in net sales in our consolidated statements of operations. The terms and pricing on services to related parties are not less favorable to ARI than the terms and pricing on services provided to unaffiliated 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 and Icahn Enterprises' independent audit committee.
As of September 30, 2011 and December 31, 2010, ARI had accounts receivable of $2 million and $5 million, respectively, due from ARL. These amounts are included in other assets in our consolidated balance sheets.

4.
Investments and Related Matters.
Investment Management
Investments, and securities sold, not yet purchased consist of equities, bonds, bank debt and other corporate obligations,


14



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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:
  
September 30, 2011
 
December 31, 2010
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
(in millions)
Assets
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
      Communications
$
2,266

 
$
2,388

 
$
2,169

 
$
1,945

      Consumer, non-cyclical
2,352

 
2,504

 
1,833

 
2,234

      Consumer, cyclical(1)
762

 
570

 
595

 
614

      Energy
954

 
923

 
757

 
858

      Financial
261

 
203

 
100

 
137

      Index
16

 
29

 
9

 

      Industrial
168

 
125

 
94

 
115

      Technology
207

 
235

 
313

 
405

      Utilities
171

 
151

 
157

 
143

 
7,157

 
7,128

 
6,027

 
6,451

   Corporate debt:
 
 
 
 
 
 
 
      Communications
49

 
48

 

 

      Consumer, cyclical
521

 
431

 
544

 
485

      Utilities
40

 
33

 

 

      Financial
3

 
4

 
48

 
5

 
613

 
516

 
592

 
490

   Mortgage-backed securities:
 
 
 
 
 
 
 
      Financial
135

 
183

 
144

 
206

 
7,905

 
7,827

 
6,763

 
7,147

 
 
 
 
 
 
 
 
Derivative contracts, at fair value(2)

 
2

 
15

 
6

 
$
7,905

 
$
7,829

 
$
6,778

 
$
7,153

Liabilities
 
 
 
 
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
      Consumer, non-cyclical
$
1

 
$
1

 
$

 
$

      Consumer, cyclical
104

 
135

 
305

 
356

      Financial
26

 
24

 
51

 
58

      Index

 

 
9

 
5

      Funds
2,202

 
1,982

 
638

 
800

 
2,333

 
2,142

 
1,003

 
1,219

 
 
 
 
 
 
 
 
Derivative contracts, at fair value(3)

 
3

 
24

 
60

 
$
2,333

 
$
2,145

 
$
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 at December 31, 2010. As of April 29, 2011, our Investment Management segment no longer held an investment in Tropicana common stock. See Note 2, "Operating Units-Gaming," for further discussion regarding the history of the Investment Funds' investment in Tropicana.
(2) 
Included in other assets in our consolidated balance sheets.
(3) 
Included in accrued expenses and other liabilities in our consolidated balance sheets.

The General Partners adopted FASB ASC Section 946-810-45, Financial Services-Investment Companies-Consolidation, 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


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


Partners lost their ability to retain specialized accounting. Prior to March 31, 2011, for those investments that (i) were deemed to be available-for-sale securities, (ii) fell outside the scope of FASB ASC Topic 320, Investments-Debt and Equity Securities, or (iii) the General Partners would otherwise have accounted for under the equity method, the General Partners applied the fair value option. The application of the fair value option is irrevocable.
As further discussed in Note 2, "Operating Units-Investment Management," as a result of returning fee-paying capital to its investors on March 31, 2011, each of the Private Funds no longer meets the criteria of an investment company as set forth in FASB ASC Paragraph 946-10-15-2, Financial Services-Investment Companies, and, therefore, the application of FASB ASC Section 946-810-45 is no longer applicable effective March 31, 2011. This change has no material effect on our consolidated financial statements.
Our Investment Management segment assesses 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.
Our Investment Management segment applied the fair value option to certain of its investments that would have otherwise been subject to the equity method of accounting.  As of September 30, 2011, the fair value of these investments was $303 million. During the three and nine months ended September 30, 2011, our Investment Management segment recorded a loss of $5 million and a gain of $35 million compared to a gain of $1 million and $18 million for the three and nine months ended September 30, 2010, respectively.   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. 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 September 30, 2011, the Investment Funds, together with their affiliates held, in the aggregate, 7,130,563 shares of Hain, representing approximately 16% of the outstanding shares of Hain. As of September 30, 2011, the Investment Funds together with their affiliates held, in the aggregate, 23,317,923 shares of Lions Gate, representing approximately 17% of the outstanding shares of Lions Gate.  The General Partners have applied the fair value option to their investments 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 guidance which amends the consolidation requirement of VIEs for certain entities meeting certain criteria. We determined that certain entities within our Investment Management segment previously met the criteria for the deferral of this new consolidation guidance. Accordingly, our Investment Management segment applied the overall guidance on the consolidation of VIEs with respect to applicable entities prior to the issuance of the standard as described in Note 1, "Description of Business and Basis of Presentation-Adoption of New Accounting Standards." Effective March 31, 2011, we applied the consolidation guidance to certain entities within our Investment Management segment to determine whether such entities are considered VIEs, including the determination of who is deemed the primary beneficiary of such VIEs. The application of this consolidation guidance did not have an impact on our financial condition, results of operations and cash flows.
We consolidate certain VIEs when we are determined to be their primary beneficiary, either directly or indirectly through other consolidated subsidiaries. Prior to the 2011 Reconsideration Event (as discussed below), the assets of our consolidated VIEs were primarily classified within cash and cash equivalents and investments in our consolidated balance sheets. The liabilities of our consolidated VIEs were 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 impacted Master Fund II, Master Fund III and Icahn


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


Fund Ltd. Prior to the 2011 Reconsideration Event, Master Fund II, Master Fund III and Icahn Fund Ltd. were each considered VIEs and for which we were determined to be their primary beneficiary and therefore we consolidated them. As a result of the 2011 Reconsideration Event, Master Fund II and Master Fund III are no longer considered VIEs. However, the VIE status change in Master Fund II and Master Fund III did not impact their consolidation status. Because we control Master Fund II and Master Fund III through our general partner interests, we continue to consolidate Master Fund II and Master Fund III. There are no substantive kick-out or participating rights in either Master Fund II or Master Fund III. In addition, 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.
Other Segments
Investments held by our Automotive, Gaming, Railcar, Home Fashion segments and Holding Company consist of the following:
 
September 30, 2011
 
December 31, 2010
 
Amortized Cost
 
Carrying Value
 
Amortized Cost
 
Carrying Value
 
(in millions)
Marketable equity and debt securities - available for sale
$
16

 
$
14

 
$
24

 
$
19

Investments in precious metals(1)
150

 
150

 

 

Equity method investments and other
320

 
320

 
304

 
304

 
$
486

 
$
484

 
$
328

 
$
323

(1) Carrying value is net of a derivative liability of $12 million.
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 statements of 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 $227 million and $210 million at September 30, 2011 and December 31, 2010, respectively.
Equity earnings from non-consolidated affiliates were $7 million and $27 million for the three and nine months ended September 30, 2011, respectively, which are included in other income (loss), net in our consolidated statements of operations, compared to $6 million and $24 million for the three and nine months ended September 30, 2010, respectively. For the nine months ended September 30, 2011 and 2010, these entities generated sales of $556 million and $453 million, respectively, and net income of $67 million and $58 million, respectively. Distributed dividends to Federal-Mogul from non-consolidated affiliates were $14 million for the nine months ended September 30, 2011 as compared to $27 million for the nine months ended September 30, 2010.
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


17



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 September 30, 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 September 30, 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. As of September 30, 2011, the carrying amount of these investments was $45 million and the maximum exposure to loss was $47 million. 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.

5.
Fair Value Measurements.
U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and non-financial 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 non-financial 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 non-financial 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 non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial 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


18



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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.
Investment Management
The following table summarizes the valuation of the Investment Funds' investments by the above fair value hierarchy levels as of September 30, 2011 and December 31, 2010
 
September 30, 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
$
2,385

 
$
3

 
$

 
$
2,388

 
$
1,945

 
$

 
$

 
$
1,945

      Consumer, non-cyclical
2,494

 
10

 

 
2,504

 
2,227

 
7

 

 
2,234

      Consumer, cyclical(1)
283

 
287

 

 
570

 
295

 
318

 
1

 
614

      Energy
923

 

 

 
923

 
541

 
317

 

 
858

      Financial
203

 

 

 
203

 
137

 

 

 
137

      Index

 
29

 

 
29

 

 

 

 

      Industrial
88

 
37

 

 
125

 
114

 
1

 

 
115

      Technology
235

 

 

 
235

 
405

 

 

 
405

      Utilities
110

 
41

 

 
151

 
100

 
43

 

 
143

 
6,721

 
407

 

 
7,128

 
5,764

 
686

 
1

 
6,451

   Corporate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Communications

 
48

 

 
48

 

 

 

 

      Consumer, cyclical

 
147

 
284

 
431

 

 
157

 
328

 
485

      Utilities

 
33

 

 
33

 

 

 

 

      Financial

 
4

 

 
4

 

 
5

 

 
5

 

 
232

 
284

 
516

 

 
162

 
328

 
490

   Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Financial

 
183

 

 
183

 

 
206

 

 
206

 
6,721

 
822

 
284

 
7,827

 
5,764

 
1,054

 
329

 
7,147

Derivative contracts, at fair value(2):

 
2

 

 
2

 

 
6

 

 
6

 
$
6,721

 
$
824

 
$
284

 
$
7,829

 
$
5,764

 
$
1,060

 
$
329

 
$
7,153

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Consumer, non-cyclical
$
1

 
$

 
$

 
$
1

 
$

 
$

 
$

 
$

      Consumer, cyclical
135

 

 

 
135

 
356

 

 

 
356

      Financial
24

 

 

 
24

 
58

 

 

 
58

      Index

 

 

 

 

 
5

 

 
5

      Funds
1,941

 
41

 

 
1,982

 
800

 

 

 
800

 
2,101

 
41

 

 
2,142

 
1,214

 
5

 

 
1,219

Derivative contracts, at fair value(3):

 
3

 

 
3

 

 
60

 

 
60

 
$
2,101

 
$
44

 
$

 
$
2,145

 
$
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 at December 31, 2010. As of April 29, 2011, our Investment Management segment no longer held an investment in Tropicana common stock. See Note 2, "Operating Units-Gaming," for further discussion regarding the history of the Investment Funds' investment in Tropicana.
(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)
SEPTEMBER 30, 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:
 
Nine Months Ended September 30,
  
2011
 
2010
 
(in millions)
Balance at January 1
$
329

 
$
228

Gross realized and unrealized gains
2

 
18

Gross proceeds
(47
)
 
(137
)
Gross purchases

 
221

Balance at September 30
$
284

 
$
330

Unrealized gains of $2 million are included in earnings related to Level 3 investments still held at September 30, 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 and Metals segments and Holding Company investments by the above fair value hierarchy levels as of September 30, 2011 and December 31, 2010
 
September 30, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Assets
(in millions)
Marketable equity and debt securities
$
14

 
$

 
$
14

 
$
19

 
$

 
$
19

Investments in precious metals
150

 

 
150

 

 

 

Derivative contracts, at fair value(1):

 

 

 

 
12

 
12

 
$
164

 
$

 
$
164

 
$
19

 
$
12

 
$
31

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Derivative contracts, at fair value(2):
$

 
$
100

 
$
100

 
$

 
$
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.

Assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2011 are set forth in the table below:
 
 
Level 3
 
 
 
 
Asset
 
Recognized
Category
 
(Liability)
 
Loss
 
 
(in millions)
Property, plant and equipment
 
$
6

 
$
3

Asset retirement obligation
 
(2
)
 

Property, plant and equipment with a carrying value of $9 million were written down to their fair value of $6 million, resulting in an impairment charge of $3 million, which was recorded within other income (loss), net for the nine months ended September 30, 2011. We determined the fair value of these assets by applying probability weighted, expected present value techniques to the estimated future cash flows using assumptions a market participant would utilize. The discount rate used is consistent with our reporting units' goodwill fair value measurements.


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


An asset retirement obligation of $2 million was recorded as of September 30, 2011. The fair value of this liability was determined with the assistance of an outside third-party specialist.

6.
Financial Instruments.
Certain derivative contracts executed by the Private Funds with a single counterparty or by our Automotive segment with a single counterparty or by our Holding Company 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 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 and the Holding Company may trade various financial instruments and enter into certain investment activities, which may give rise to off-balance-sheet risk. The Investment Funds and the Holding Company's investments may 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 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 satisfaction of the obligations may exceed the amount recognized in our consolidated balance sheets. Our investments in securities and amounts due from brokers are partially restricted until we satisfy the obligation to deliver the securities sold, not yet purchased.
The Investment Funds and the Holding Company may 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 may 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 and the Holding Company 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 and the Holding Company 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 and the Holding Company. When the contract is closed, the Investment Funds and the Holding Company 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 and the Holding Company may utilize forward contracts to seek to protect their assets denominated in foreign currencies and precious metals holdings from losses due to fluctuations in foreign exchange rates and spot rates. The


21



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


Investment Funds and the Holding Company's exposure to credit risk associated with non-performance of forward 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 September 30, 2011 and December 31, 2010, the maximum payout amounts relating to certain put options written by the Investment Funds, excluding a certain stock index option strategy which is separately discussed below, were $233 million and $195 million, respectively.  As of September 30, 2011 and December 31, 2010, there were unrealized gains of $0.1 million and $0.2 million, respectively.
As of September 30, 2011, the Investment Funds were synthetically short a certain stock index through an option strategy.  As of September 30, 2011 and December 31, 2010, there were unrealized gains of $21 million and unrealized losses of $5 million, respectively, related to this option strategy.
During the third quarter of fiscal 2010, the Holding Company purchased and wrote option contracts on a certain stock index futures. At September 30, 2011, the maximum payout was $170 million, assuming the value of certain stock index futures falls below certain limits on our put spreads, and $89 million assuming the value of certain stock index futures increases above certain limits on our call spreads. As of September 30, 2011 and December 31, 2010, the Holding Company had $23 million and $22 million, respectively, in liability derivatives related to a certain stock index futures which are not designated as hedging instruments.
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 September 30, 2011 and December 31, 2010 was $3 million and $60 million, respectively.
At September 30, 2011 and December 31, 2010, the Investment Funds had $77 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 in our consolidated balance sheets.
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 September 30, 2011 and December 31, 2010, the Investment Funds have entered into such credit default swaps with a maximum notional amount of $8 million and $32 million with terms of approximately one year and two years as of September 30, 2011 and December 31, 2010, respectively. We estimate that our maximum exposure related to these credit default swaps approximates 48.4% and 39.4% of such notional amounts as of September 30, 2011 and December 31, 2010, respectively.


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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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:
 
 
September 30, 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
 
$
8

 
$
(0.3
)
 
$
32

 
$
1

 
Corporate credit

The following table presents the fair values of the Investment Funds and the Holding Company's derivatives:
 
 
Asset Derivatives(1)
 
Liability Derivatives(2)
Derivatives Not Designated as Hedging Instruments
 
September 30, 2011
 
December 31, 2010
 
September 30, 2011
 
December 31, 2010
 
 
(in millions)
Equity contracts
 
$

 
$
1

 
$
5

 
$
2

Commodity swap contract
 

 

 
12

 

Foreign exchange contracts
 
2

 

 

 
2

Credit contracts
 

 
24

 
1

 
77

Futures index spread
 

 

 
23

 
22

Sub-total
 
2

 
25

 
41

 
103

Netting across contract types(3)
 

 
(19
)
 
(12
)
 
(19
)
Total(4)
 
$
2

 
$
6

 
$
29

 
$
84


(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 September 30, 2011 and December 31, 2010 was $77 million and $248 million, respectively, across all counterparties.

The following table presents the effects of the Investment Funds and the Holding Company's derivative instruments on the statements of operations for the three and nine months ended September 30, 2011 and 2010:
 
 
Gain (Loss) Recognized in Income(1)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Derivatives Not Designated as Hedging Instruments
 
2011
 
2010
 
2011
 
2010
 
 
(in millions)
Equity contracts
 
$
28

 
$
5

 
$
37

 
$
4

Foreign exchange contracts
 
11

 
(16
)
 
(2
)
 
(12
)
Credit contracts
 

 
(7
)
 
19

 
43

Futures index spread
 
(7
)
 
(8
)
 
16

 
(8
)
 
 
$
32

 
$
(26
)
 
$
70

 
$
27

 
(1) 
Gains (losses) recognized on derivatives are classified in net gain (loss) from investment activities in our consolidated statements of operations.


23



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


At September 30, 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
$
8

 
$

Commodity swaps

 
(150
)
Equity swaps
7

 

Foreign currency forwards
152

 

Futures index spread
68

 
(91
)

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's 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 and the Holding Company 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 and the Holding Company may also be subject to a concentration of credit risk to a particular counterparty.
The Investment Funds and the Holding Company seek to mitigate these risks by actively monitoring exposures, collateral requirements and the creditworthiness of our counterparties.
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 September 30, 2011 and December 31, 2010, unrealized net losses of $53 million and $70 million, respectively, were recorded in accumulated other comprehensive loss as a result of these hedges. As of September 30, 2011, losses of $36 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 high-grade aluminum, copper, natural gas, nickel, tin and zinc. Forward contracts are used to mitigate commodity price risk associated with raw materials, generally related to purchases forecast for up to 15 months in the future.
Federal-Mogul had commodity price hedge contracts outstanding with combined notional values of $133 million and $50 million at September 30, 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 losses of $23 million were recorded in accumulated other comprehensive loss as of September 30, 2011. Unrealized net gains of $12 million were recorded in accumulated other comprehensive loss as of December 31, 2010.


24



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


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 $38 million and $20 million of foreign currency hedge contracts outstanding at September 30, 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 gains of $3 million were recorded in accumulated other comprehensive loss as of September 30, 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 nine months ended September 30, 2011. Federal-Mogul requires placement of cash in financial institutions evaluated as highly creditworthy.
The following table presents the fair values of Federal-Mogul's derivative instruments:
 
 
Asset Derivatives(1)
 
Liability Derivatives(2)
Derivatives Designated as Cash Flow Hedging Instruments
 
September 30, 2011
 
December 31, 2010
 
September 30, 2011
 
December 31, 2010
 
 
(in millions)
Interest rate swap contracts
 
$

 
$

 
$
53

 
$
70

Commodity contracts
 

 
13

 
24

 
1

Foreign currency contracts
 
3

 

 

 

        Sub-total
 
3

 
13

 
77

 
71

        Netting across contract types
 
(3
)
 
(1
)
 
(3
)
 
(1
)
Total
 
$

 
$
12

 
$
74

 
$
70


(1) 
Located within other assets in our consolidated balance sheets.
(2) 
Located within accrued expenses and other liabilities in our consolidated balance sheets.


25



ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011


The following tables present the effect of Federal-Mogul's derivative instruments in our consolidated financial statements for the three and nine months ended September 30, 2011 and 2010:
Three Months Ended September 30, 2011
Derivatives Designated as Hedging Instruments
 
Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)
 
Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Location of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Amount of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Location of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
 
(in millions)
 
(in millions)
 
 
 
(in millions)
 
 
Interest rate swap contracts
 
$
(2
)
 
$
(10
)
 
Interest expense
 
$

 
 
Commodity contracts
 
(21
)
 
2

 
Cost of goods sold
 
(1
)
 
Other income, net
Foreign currency contracts
 
4

 

 
 
 

 
 
 
 
$
(19
)
 
$
(8
)
 
 
 
$
(1
)
 
 

Three Months Ended September 30, 2010
Derivatives Designated as Hedging Instruments
 
Amount of Loss Recognized in OCI on Derivatives (Effective Portion)
 
Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Location of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Amount of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Location of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
 
(in millions)
 
(in millions)
 
 
 
(in millions)
 
 
Interest rate swap contracts
 
$
(17
)
 
$
(10
)
 
Interest expense
 
$

 
 
Commodity contracts
 
9

 
2

 
Cost of goods sold
 
1

 
Other income, net
Foreign currency contracts
 
(1
)
 

 
 
 

 
 
 
 
$
(9
)
 
$
(8
)
 
 
 
$
1

 
 
 
Nine Months Ended September 30, 2011
Derivatives Designated as Hedging Instruments
 
Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)
 
Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Location of (Loss) Gain Reclassified from AOCI into Income (Effective Portion)
 
Amount of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Location of Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
 
(in millions)
 
(in millions)
 
 
 
(in millions)
 
 
Interest rate swap contracts
 
$
(12
)
 
$
(29
)
 
Interest expense
 
$

 
 
Commodity contracts
 
(26
)
 
8

 
Cost of goods sold
 
(1
)
 
Other income, net
Foreign currency contracts
 
2

 
(1
)
 
Cost of goods sold