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Fair Value of Financial Investments | 9 Months Ended
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Sep. 30, 2012
Fair Value of Financial Investments |
E. | The Company has maintained investments in available-for-sale securities and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses. Financial investments included in other assets were as follows, in millions:
|  | September 30, |  |  | December 31, |
|  | 2012 |  |  | 2011 |
Auction rate securities |  | $ | 22 |  |  | $ | 22 |
Total recurring investments |  |  | 22 |  |  |  | 22 |
Private equity funds |  |  | 71 |  |  |  | 86 |
Other investments |  |  | 4 |  |  |  | 4 |
Total non-recurring investments |  |  | 75 |  |  |  | 90 |
Total |  | $ | 97 |  |  | $ | 112 |
The Company’s investments in available-for-sale securities at September 30, 2012 and December 31, 2011 were as follows, in millions:
|  |  |  |  | Pre-tax |  |  |  |
|  | Cost Basis |  |  | Unrealized Gains |  |  | Unrealized Losses |  |  | Recorded Basis |
September 30, 2012 |  | $ | 19 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 22 |
December 31, 2011 |  | $ | 19 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 22 |
Recurring Fair Value Measurements. Financial investments measured at fair value on a recurring basis at each reporting period and the amounts for each level within the fair value hierarchy were as follows, in millions:
|  |  |  |  | Fair Value Measurements Using |
|  | Sep. 30, 2012 |  |  | Quoted Market Prices (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Auction rate securities |  | $ | 22 |  |  |  | — |  |  |  | — |  |  | $ | 22 |
Total |  | $ | 22 |  |  | $ | — |  |  | $ | — |  |  | $ | 22 |
|  |  |  |  | Fair Value Measurements Using |
|  | Dec. 31, 2011 |  |  | Quoted Market Prices (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Auction rate securities |  |  | 22 |  |  | $ | — |  |  | $ | — |  |  |  | 22 |
Total |  | $ | 22 |  |  | $ | — |  |  | $ | — |  |  | $ | 22 |
The fair value of the auction rate securities held by the Company have been estimated, on a recurring basis, using a discounted cash flow model (Level 3 input). The significant inputs in the discounted cash flow model used to value the auction rate securities include expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements. The following table summarizes the changes in Level 3 financial assets measured at fair value on a recurring basis for the nine months ended September 30, 2012 and the year ended December 31, 2011, in millions:
|  | September 30, 2012 |  |  | December 31, 2011 |
|  | Auction Rate |  |  | Auction Rate |
|  | Securities |  |  | Securities |
Fair value at beginning of period |  | $ | 22 |  |  | $ | 22 |
Total losses included in earnings |  |  | — |  |  |  | — |
Unrealized (losses) |  |  | — |  |  |  | — |
Purchases |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | — |
Transfer from Level 3 to Level 2 |  |  | — |  |  |  | — |
Fair value at period end |  | $ | 22 |  |  | $ | 22 |
Non-Recurring Fair Value Measurements. Financial investments measured at fair value on a non-recurring basis during the nine-month period ended September 30, 2012 and the amounts for each level within the fair value hierarchy were as follows, in millions:
|  |  |  |  | Fair Value Measurements Using |  |  |  |
|  |  |  |  |  |  |  | Significant |  |  |  |  |  |  |
|  |  |  |  | Quoted |  |  | Other |  |  | Significant |  |  |  |
|  |  |  |  | Market |  |  | Observable |  |  | Total |  |  |  |
|  | Sep. 30, |  |  | Prices |  |  | Inputs |  |  | Inputs |  |  | Gains |
|  | 2012 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | (Losses) |
Private equity funds |  | $ | 2 |  |  |  | — |  |  |  | — |  |  | $ | 2 |  |  | $ | (2 | )
Total |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | (2 | )
The remaining private equity investments at September 30, 2012, with an aggregate carrying value of $69 million, were not reviewed for impairment, as there were no indicators of impairment or identified events or changes in circumstances that would have a significant adverse effect on the fair value of the investment. During the nine-month period ended September 30, 2011, the Company did not measure any financial investments at fair value on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of private equity funds. The Company did not have any transfers between Level 1 and Level 2 financial assets in the third quarter or in the first nine months of 2012 or 2011. Realized Gains (Losses). Income (loss) from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Realized gains - distributions from private equity funds |  | $ | 2 |  |  | $ | 19 |  |  | $ | 20 |  |  | $ | 28 |
Realized gains - sale of TriMas Corporation common stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 41 |
Total income from financial investments |  | $ | 2 |  |  | $ | 19 |  |  | $ | 20 |  |  | $ | 69 |
Impairment charges - private equity funds |  | $ | — |  |  | $ | — |  |  | $ | (2 | ) |  | $ | — |
| The fair value of the Company’s short-term and long-term fixed-rate debt instruments is based principally upon quoted market prices for the same or similar issues or the current rates available to the Company for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at September 30, 2012 was approximately $3.9 billion, compared with the aggregate carrying value of $3.6 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2011 was approximately $4.0 billion, compared with the aggregate carrying value of $4.0 billion.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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