XML 104 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements
 6 Months Ended 12 Months Ended
Jun. 30, 2012
Dec. 31, 2011
Fair Value Disclosures [Abstract]    
Fair Value Measurements
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 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
The following table summarizes the valuation of the Investment Funds' investments by the above fair value hierarchy levels as of June 30, 2012 and December 31, 2011: 
 
June 30, 2012
 
December 31, 2011
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
(in millions)
Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic materials
$
81

 
$
—

 
$
—

 
$
81

 
$
128

 
$
—

 
$
—

 
$
128

      Communications
318

 
13

 
—

 
331

 
2,593

 
—

 
—

 
2,593

      Consumer, non-cyclical
1,523

 
—

 
—

 
1,523

 
1,778

 
26

 
—

 
1,804

      Consumer, cyclical
371

 
433

 
—

 
804

 
376

 
378

 
—

 
754

      Energy
824

 
57

 
—

 
881

 
1,644

 
29

 
—

 
1,673

      Financial
228

 
—

 
—

 
228

 
263

 
—

 
—

 
263

      Funds
—

 
216

 
—

 
216

 
—

 
—

 
—

 
—

      Industrial
—

 
—

 
—

 
—

 
—

 
32

 
—

 
32

      Technology
253

 
—

 
—

 
253

 
254

 
—

 
—

 
254

      Utilities
50

 
40

 
—

 
90

 
83

 
21

 
—

 
104

 
3,648

 
759

 
—

 
4,407

 
7,119

 
486

 
—

 
7,605

   Corporate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Communications
—

 
—

 
—

 
—

 
—

 
84

 
—

 
84

      Consumer, cyclical
—

 
—

 
287

 
287

 
—

 
150

 
289

 
439

      Financial
—

 
94

 
—

 
94

 
—

 
109

 
—

 
109

      Sovereign debt
—

 
3

 
—

 
3

 
—

 
10

 
—

 
10

      Utilities
—

 
27

 
—

 
27

 
—

 
34

 
—

 
34

 
—

 
124

 
287

 
411

 
—

 
387

 
289

 
676

   Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Financial
—

 
164

 
—

 
164

 
—

 
167

 
—

 
167

 
3,648

 
1,047

 
287

 
4,982

 
7,119

 
1,040

 
289

 
8,448

Derivative contracts, at fair value(1)
—

 
—

 
—

 
—

 
—

 
3

 
—

 
3

 
$
3,648

 
$
1,047

 
$
287

 
$
4,982

 
$
7,119

 
$
1,043

 
$
289

 
$
8,451

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities sold, not yet purchased, at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Consumer, cyclical
$
294

 
$
—

 
$
—

 
$
294

 
$
—

 
$
—

 
$
—

 
$
—

      Energy
46

 
—

 
—

 
46

 
—

 
—

 
—

 
—

      Funds
—

 
208

 
—

 
208

 
4,466

 
10

 
—

 
4,476

 
340

 
208

 
—

 
548

 
4,466

 
10

 
—

 
4,476

Derivative contracts, at fair value(2)
—

 
92

 
—

 
92

 
—

 
42

 
—

 
42

 
$
340

 
$
300

 
$
—

 
$
640

 
$
4,466

 
$
52

 
$
—

 
$
4,518


(1) 
Included in other assets in our consolidated balance sheets.
(2) 
Included in accrued expenses and other liabilities in our consolidated balance sheets.
The changes in investments measured at fair value for which the Investment segment has used Level 3 input to determine fair value are as follows:
 
Six Months Ended June 30,
  
2012
 
2011
 
(in millions)
Balance at January 1
$
289


$
329

Gross realized and unrealized gains
2

 
2

Gross proceeds
(4
)
 
(42
)
Balance at June 30
$
287


$
289


Unrealized gains of $2 million are included in earnings related to Level 3 investments still held at June 30, 2012. Total realized and unrealized gains and losses recorded for Level 3 investments, if any, are reported in net gain from investment activities in our consolidated statements of operations.
The Investment Funds owned one Level 3 corporate debt investment at June 30, 2012.  Fair value was determined through yield analysis of comparable loans to which we applied a risk premium that we determined to be appropriate, which resulted in a lower valuation for our Level 3 investment.  Adjusting the risk premium by 1% in either direction would result in a 3% change in the fair value of the loan.
Other Segments and Icahn Enterprises Holdings
The following table summarizes the valuation of our Automotive and Energy segments and Icahn Enterprises Holdings' investments and derivative contracts by the above fair value hierarchy levels as of June 30, 2012 and December 31, 2011: 
 
June 30, 2012
 
December 31, 2011
  
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Assets
(in millions)
Marketable equity and debt securities
$
1

 
$
—

 
$
1

 
$
20

 
$
—

 
$
20

Trading securities
—

 
60

 
60

 
—

 
—

 
—

Investments in precious metals
—

 
—

 
—

 
150

 
—

 
150

Derivative contracts, at fair value(1)
—

 
7

 
7

 
—

 
3

 
3

 
$
1

 
$
67


$
68

 
$
170

 
$
3

 
$
173

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

 
$
45

 
$
45

 
$
—

 
$
57

 
$
57


(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 measured at fair value on a nonrecurring basis during the six months ended June 30, 2012 are set forth in the table below:
 
 
June 30, 2012
 
 
Level 3
 
 
 
 
Asset
 
Recognized
Category
 
(Liability)
 
Loss
 
 
(in millions)
Property, plant and equipment
 
$
29

 
$
19

Intangibles
 
62

 
15


Property, plant and equipment with an aggregate carrying value of $48 million were written down to their fair values of $29 million, resulting in an impairment charge of $19 million for the six months ended June 30, 2012. 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 and through the use of valuation specialists.
Intangibles with carrying values of $77 million were written down to their fair value of $62 million, resulting in an impairment charge of $15 million, for the six months ended June 30, 2012. The fair values, primarily related to certain trademarks and brand names, are based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that reflect the rates of return appropriate for these intangible assets.
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 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
The following table summarizes the valuation of the Investment Funds' investments by the above fair value hierarchy levels as of December 31, 2011 and 2010:
 
December 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
  
(in millions)
Assets
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Investments:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Equity securities:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Communications
$
2,593

 
$
—

 
$
—

 
$
2,593

 
$
1,945

 
$
—

 
$
—

 
$
1,945

Consumer, non-cyclical
1,778

 
26

 
—

 
1,804

 
2,227

 
7

 
—

 
2,234

Consumer, cyclical (1)
376

 
378

 
—

 
754

 
295

 
318

 
1

 
614

Basic materials
128

 
—

 
—

 
128

 
—

 
—

 
—

 
—

Energy
1,644

 
29

 
—

 
1,673

 
541

 
317

 
—

 
858

Financial
263

 
—

 
—

 
263

 
137

 
—

 
—

 
137

Industrial
—

 
32

 
—

 
32

 
114

 
1

 
—

 
115

Technology
254

 
—

 
—

 
254

 
405

 
—

 
—

 
405

Utilities
83

 
21

 
—

 
104

 
100

 
43

 
—

 
143

  
7,119

 
486

 
—

 
7,605

 
5,764

 
686

 
1

 
6,451

Corporate debt:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Communications
—

 
84

 
—

 
84

 
—

 
—

 
—

 
—

Consumer, cyclical
—

 
150

 
289

 
439

 
—

 
157

 
328

 
485

Utilities
—

 
34

 
—

 
34

 
—

 
—

 
—

 
—

Sovereign debt
—

 
10

 
—

 
10

 
—

 
—

 
—

 
—

Financial
—

 
109

 
—

 
109

 
—

 
5

 
—

 
5

  
—

 
387

 
289

 
676

 
—

 
162

 
328

 
490

Mortgage-backed securities:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Financial
—

 
167

 
—

 
167

 
—

 
206

 
—

 
206

  
7,119

 
1,040

 
289

 
8,448

 
5,764

 
1,054

 
329

 
7,147

Derivative contracts, at
fair value (2) :
—

 
3

 
—

 
3

 
—

 
6

 
—

 
6

  
$
7,119

 
$
1,043

 
$
289

 
$
8,451

 
$
5,764

 
$
1,060

 
$
329

 
$
7,153

Liabilities
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Securities sold, not yet purchased, at fair value:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Equity securities:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Consumer, cyclical
$
—

 
$
—

 
$
—

 
$
—

 
$
356

 
$
—

 
$
—

 
$
356

Financial
—

 
—

 
—

 
—

 
58

 
—

 
—

 
58

Index
—

 
—

 
—

 
—

 
—

 
5

 
—

 
5

Funds
4,466

 
10

 
—

 
4,476

 
800

 
—

 
—

 
800

  
4,466

 
10

 
—

 
4,476

 
1,214

 
5

 
—

 
1,219

Derivative contracts, at
fair value (3) :
—

 
42

 
—

 
42

 
—

 
60

 
—

 
60

  
$
4,466

 
$
52

 
$
—

 
$
4,518

 
$
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 segment no longer held an investment in Tropicana common stock. See Note 3, "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 changes in investments measured at fair value for which the Investment segment has used Level 3 input to determine fair value are as follows:


 
Year Ended December 31,
  
2011
 
2010
  
(in millions)
Balance at January 1
$
329

 
$
228

Gross realized and unrealized gains
8

 
18

Gross proceeds
(48
)
 
(138
)
Gross purchases
—

 
221

Balance at December 31
$
289

 
$
329


Unrealized gains of $8 million are included in earnings related to Level 3 investments still held at December 31, 2011. Total realized and unrealized gains and losses recorded for Level 3 investments, if any, are reported in net gain (loss) from investment activities in our consolidated statements of operations.
Other Segments
The following table summarizes the valuation of our Automotive and Metals segments and Icahn Enterprises Holdings investments and derivative contracts by the above fair value hierarchy levels as of December 31, 2011 and 2010:
 
December 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
  
(in millions)
Assets
  

 
  

 
  

 
  

 
  

 
  

Marketable equity and debt securities
$
20

 
$
—

 
$
20

 
$
19

 
$
—

 
$
19

Investments in precious metals
150

 
—

 
150

 
—

 
—

 
—

Derivative contracts, at fair value (1) :
—

 
3

 
3

 
—

 
12

 
12

  
$
170

 
$
3

 
$
173

 
$
19

 
$
12

 
$
31

Liabilities
  

 
  

 
  

 
  

 
  

 
  

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

 
$
57

 
$
57

 
$
—

 
$
97

 
$
97


(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 December 31, 2011 and 2010 are set forth in the table below:
 
 
December 31, 2011
 
December 31, 2010
Category
 
Level 3
Asset
(Liability)
 
Recognized
Loss
 
Level 3
Asset
(Liability)
 
Recognized
Gain
(Loss)
  
 
(in millions)
Trademarks and brand names
 
$
280

 
$
(39
)
 
$
29

 
$
(4
)
Property, plant and equipment
 
92

 
(32
)
 
9

 
(7
)
Asset retirement obligation
 
(4
)
 
—

 
—

 
1


Trademarks and brand names with a carrying value of $319 million were written down to their fair value of $280 million, resulting in an impairment charge of $39 million for the year ended December 31, 2011. Trademarks and brand names with a carrying value of $33 million were written down to their fair value of $29 million, resulting in an impairment charge of $4 million for the year ended December 31, 2010.
Property, plant and equipment with a carrying value of $124 million were written down to their fair value of $92 million, resulting in an impairment charge of $32 million for the year ended December 31, 2011. Property, plant and equipment with a carrying value of $16 million were written down to their fair value of $9 million, resulting in an impairment charge of $7 million for the year ended December 31, 2010. 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.
An asset retirement obligation with a carrying value of $4 million was written down to its fair value of $2 million, resulting in a $2 million credit to impairment expense during the year ended December 31, 2011. An asset retirement obligation with a carrying value of $2 million was established in fiscal 2011 related to a facility that is closed. As the fair value of the facility did not support the capitalization of this asset retirement obligation, it was immediately impaired, resulting in a $2 million debit to impairment expense during the year ended December 31, 2011. An asset retirement obligation with a carrying value of $1 million was written down to its fair value of zero, resulting in a $1 million credit to impairment expense for the year ended December 31, 2010.
The following table presents our Automotive segment's defined benefit plan assets measured at fair value on a recurring basis as of December 31, 2011 and 2010:
 
December 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
  
(in millions)
U.S. Plans:
  

 
  

 
  

 
  

 
  

 
  

Cash
$
669

 
$
—

 
$
669

 
$
—

 
$
—

 
$
—

Investments with registered investment companies:
  

 
  

 
  

 
  

 
  

 
  

Equity securities
1

 
—

 
1

 
512

 
—

 
512

Fixed income securities
—

 
—

 
—

 
150

 
—

 
150

  
$
670

 
$
—

 
$
670

 
$
662

 
$
—

 
$
662

Non-U.S. Plans:
  

 
  

 
  

 
  

 
  

 
  

Insurance contracts
$
—

 
$
35

 
$
35

 
$
—

 
$
33

 
$
33

Cash
1

 
—

 
1

 
—

 
—

 
—

Investments with registered investment companies:
  

 
  

 
  

 
  

 
  

 
  

Fixed income securities
9

 
—

 
9

 
11

 
—

 
11

Equity securities
1

 
—

 
1

 
1

 
—

 
1

Corporate bonds
—

 
2

 
2

 
—

 
3

 
3

Equity securities
—

 
—

 
—

 
—

 
—

 
—

Cash
—

 
—

 
—

 
—

 
—

 
—

  
$
11

 
$
37

 
$
48

 
$
12

 
$
36

 
$
48


Federal-Mogul changed investment managers for its U.S. pension plan assets towards the end of fiscal 2011. The transition was implemented on December 31, 2011 and almost all of the plan assets were sold and the proceeds reinvested as funds became available on January 3, 2012. Accordingly, the plans assets were comprised almost entirely of cash at December 31, 2011and then immediately reinvested beginning January 3, 2012 in accordance with Federal-Mogul's investment strategy, which includes a target asset allocation of 50% equity investments, 25% fixed income investments and 25% in other investment types including hedge funds. Approximately 87% of the U.S. plan assets will be invested in actively managed investment funds.
For fiscal 2010, investments with registered investment companies are valued at the closing price reported on the active market on which the funds are traded. Corporate bonds and equity securities are valued at the closing price reported on the active market on which the individual investments are traded. The insurance contracts guarantee a minimum rate of return. Our Automotive segment has no input into the investment strategy of the assets underlying the contracts, but they are typically heavily invested in active bond markets and are highly regulated by local law.
The following table presents our Food Packaging segment's defined benefit plan assets measured at fair value on a recurring basis as of December 31, 2011 and 2010:
 
December 31, 2011
 
December 31, 2010
  
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
  
(in millions)
U.S. and Non-U.S. Plans:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Asset category:
  

 
  

 
  

 
  

 
  

 
  

 
  

 
  

Cash equivalents
$
3

 
$
—

 
$
—

 
$
3

 
$
2

 
$
—

 
$
—

 
$
2

Equity securities
14

 
29

 
—

 
43

 
19

 
26

 
—

 
45

Fixed income securities
2

 
11

 
—

 
13

 
16

 
12

 
—

 
28

Other
10

 
—

 
27

 
37

 
—

 
—

 
28

 
28

  
$
29

 
$
40

 
$
27

 
$
96

 
$
37

 
$
38

 
$
28

 
$
103


In addition to items that are measured at fair value on a recurring basis, there are also assets and liabilities that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets (see Note 3, “Operating Units” and Note 8, “Goodwill and Intangible Assets, Net”), investments in non-consolidated affiliates (see Note 5, “Investment and Related Matters”) and asset retirement obligations (“ARO”) (see Note 17, “Commitments and Contingencies”). We determined that the fair value measurements included in each of these assets and liabilities rely primarily on our assumptions as unobservable inputs that are not publicly available. As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.