UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q





(Mark
      One)x
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the Quarterly Period ended March 31, 2009




OR





 ̈
              
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the Transition Period From ______ to _______





Commission
File Number 1-9516











ICAHN
ENTERPRISES L.P.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
              
              13-3398766(State
      or Other Jurisdiction
                of
      Incorporation or Organization)
              
              (IRS
      Employer
                Identification
      No.)




767
Fifth Avenue, Suite 4700


New
York, NY 10153


(Address
of Principal Executive Offices) (Zip Code)


(212)
702-4300


(Registrant’s
Telephone Number, Including Area Code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x NO
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes  ̈ NO
 ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


(Check
One).


Large
      Accelerated Filer  Yes  ̈ NO  ̈ 
              Accelerated
      Filer  xNon-accelerated
      Filer  Yes  ̈ NO  ̈ 
              Smaller
      reporting company   ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ NO
x


As of May
1, 2009, there were 74,775,597 depositary units and 13,127,179 preferred units
outstanding.





INDEX





PART
I. FINANCIAL INFORMATION





Item 1.  Financial
      StatementsConsolidated
      Balance Sheets – March 31, 2009 (unaudited) and December 31,
      2008
                    1Consolidated
      Statements of Operations – Three Months Ended March 31, 2009 and 2008
      (unaudited)
                    2Consolidated
      Statement of Changes in Equity and Comprehensive Income – Three Months
      EndedMarch
      31, 2009 (unaudited)
                    3Consolidated
      Statements of Cash Flows – Three Months Ended March 31, 2009 and 2008
      (unaudited)
                    4Notes
      to Consolidated Financial Statements1.
      Description of Business and Basis of Presentation
                    62.
      Operating Units
                    83.
      Discontinued Operations and Assets Held for Sale
                    124.
      Related Party Transactions
                    125.
      Investments and Related Matters
                    146.
      Fair Value Measurements
                    167.
      Financial Instruments
                    188.
      Inventories, Net
                    239.
      Goodwill and Intangible Assets
                    2410.
      Property, Plant and Equipment, Net
                    2511.
      Equity Attributable to Non-Controlling Interests
                    2512.
      Debt
                    2613.
      Compensation Arrangements
                    2914.
      Pensions, Other Postemployment Benefits and Employee Benefit
      Plans
                    3015.
      Preferred Limited Partner Units
                    3016.
      Earnings Per LP Unit
                    3017.
      Segment Reporting
                    3118.
      Income Taxes
                    3319.
      Commitments and Contingencies
                    3320.
      Subsequent Events
                    35Reports
      of Independent Registered Public Accounting Firms
                    36Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                    381.
      Overview
                    382.
      Results of Operations
                    383.
      Liquidity and Capital Resources
                    384.
      Critical Accounting Policies and Estimates
                    385.
      Forward-Looking Statements
                    38Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                    55Item
      4.  Controls and Procedures
                    55PART
      II.  OTHER INFORMATIONItem
      1.     Legal Proceedings
                    56Item
      1A.  Risk Factors
                    56Item
      6.     Exhibits
                    56Signature
                    57





Part
I.  Financial Information





Item
1.  Financial Statements





ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
millions, except unit amounts)





March 31, 2009
                  
                  
                  December 31, 2008(Unaudited)ASSETSInvestment
      Management:Cash
      and cash equivalents
                  
                  $
                  2
                  
                  
                  $
                  5Cash
      held at consolidated affiliated partnerships and restricted
      cash
                  
                  
                  2,815
                  
                  
                  
                  3,862Securities
      owned, at fair value
                  
                  
                  3,677
                  
                  
                  
                  4,261Due
      from brokers
                  
                  
                  101
                  
                  
                  
                  54Other
      assets
                  
                  
                  133
                  
                  
                  
                  1826,728
                  
                  
                  
                  8,364Automotive:Cash
      and cash equivalents
                  
                  
                  664
                  
                  
                  
                  888Accounts
      receivable, net
                  
                  
                  983
                  
                  
                  
                  939Inventories,
      net
                  
                  
                  888
                  
                  
                  
                  894Property,
      plant and equipment, net
                  
                  
                  1,821
                  
                  
                  
                  1,911Goodwill
      and intangible assets
                  
                  
                  1,958
                  
                  
                  
                  1,994Other
      assets
                  
                  
                  549
                  
                  
                  
                  5966,863
                  
                  
                  
                  7,222Metals,
      Real Estate and Home Fashion:Cash
      and cash equivalents
                  
                  
                  337
                  
                  
                  
                  350Other
      assets
                  
                  
                  1,375
                  
                  
                  
                  1,4261,712
                  
                  
                  
                  1,776Holding
      Company:Cash
      and cash equivalents
                  
                  
                  1,077
                  
                  
                  
                  1,369Restricted
      cash
                  
                  
                  14
                  
                  
                  
                  35Other
      assets
                  
                  
                  44
                  
                  
                  
                  491,135
                  
                  
                  
                  1,453Total
      Assets
                  
                  $
                  16,438
                  
                  
                  $
                  18,815LIABILITIES
      AND EQUITYLiabilities:Investment
      Management:Accounts
      payable, accrued expenses and other liabilities
                  
                  $
                  877
                  
                  
                  $
                  1,106Securities
      sold, not yet purchased, at fair value
                  
                  
                  991
                  
                  
                  
                  2,273Due
      to brokers
                  
                  
                  73
                  
                  
                  
                  7131,941
                  
                  
                  
                  4,092Automotive:Accounts
      payable, accrued expenses and other liabilities
                  
                  
                  1,914
                  
                  
                  
                  2,068Debt
                  
                  
                  2,572
                  
                  
                  
                  2,576Postemployment
      benefit liability
                  
                  
                  1,285
                  
                  
                  
                  1,3025,771
                  
                  
                  
                  5,946Metals,
      Real Estate and Home Fashion:Accounts
      payable, accrued expenses and other liabilities
                  
                  
                  139
                  
                  
                  
                  156Debt
                  
                  
                  125
                  
                  
                  
                  126264
                  
                  
                  
                  282Holding
      Company:Accounts
      payable, accrued expenses and other liabilities
                  
                  
                  142
                  
                  
                  
                  154Debt
                  
                  
                  1,869
                  
                  
                  
                  1,869Preferred
      limited partner units
                  
                  
                  131
                  
                  
                  
                  1302,142
                  
                  
                  
                  2,153Total
      Liabilities
                  
                  
                  10,118
                  
                  
                  
                  12,473Equity:Equity
      attributable to Icahn Enterprises:Limited
      partnersDepositary
      units: 92,400,000 authorized; issued 75,912,797 at March 31, 2009 and
      December 31, 2008; outstanding 74,775,597 at March 31, 2009 and December
      31, 2008
                  
                  
                  2,498
                  
                  
                  
                  2,582General
      partner
                  
                  
                  (174
                  )
                  
                  
                  (172
                  )Treasury
      units at cost
                  
                  
                  (12
                  )
                  
                  
                  (12
                  )Equity
      attributable to Icahn Enterprises
                  
                  
                  2,312
                  
                  
                  
                  2,398Equity
      attributable to non-controlling interests
                  
                  
                  4,008
                  
                  
                  
                  3,944Total
      Equity
                  
                  
                  6,320
                  
                  
                  
                  6,342Total
      Liabilities and Equity
                  
                  $
                  16,438
                  
                  
                  $
                  18,815





See
notes to consolidated financial statements.


1





ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS


(In
millions, except per unit amounts)





Three Months Ended March
31,2009
                        
                        
                        
                        20081(Unaudited)Revenues:Investment
      Management
                        
                        $
                        334
                        
                        
                        $
                        14Automotive
                        
                        
                        1,254
                        
                        
                        
                        653Metals
                        
                        
                        77
                        
                        
                        
                        303Real
      Estate
                        
                        
                        22
                        
                        
                        
                        24Home
      Fashion
                        
                        
                        85
                        
                        
                        
                        115Holding
      Company
                        
                        
                        (6
                        )
                        
                        
                        21Total
      revenues
                        
                        
                        1,766
                        
                        
                        
                        1,130Expenses:Investment
      Management
                        
                        
                        29
                        
                        
                        
                        15Automotive
                        
                        
                        1,349
                        
                        
                        
                        660Metals
                        
                        
                        114
                        
                        
                        
                        276Real
      Estate
                        
                        
                        16
                        
                        
                        
                        21Home
      Fashion
                        
                        
                        103
                        
                        
                        
                        138Holding
      Company
                        
                        
                        38
                        
                        
                        
                        41Total  expenses
                        
                        
                        1,649
                        
                        
                        
                        1,151Income
      (loss) from continuing operations before income tax
expense
                        
                        
                        117
                        
                        
                        
                        (21
                        )Income
      tax benefit (expense)
                        
                        
                        10
                        
                        
                        
                        (20
                        )Income
      (loss) from continuing operations
                        
                        
                        127
                        
                        
                        
                        (41
                        )Income
      from discontinued operations
                        
                        
                        -
                        
                        
                        
                        489Net
      income
                        
                        
                        127
                        
                        
                        
                        448Less:
      net (income) loss attributable to non-controlling
interests
                        
                        
                        (126
                        )
                        
                        
                        5Net
      income attributable to Icahn Enterprises
                        
                        $
                        1
                        
                        
                        $
                        453Net
      income (loss) attributable to Icahn Enterprises from:Continuing
      operations
                        
                        $
                        1
                        
                        
                        $
                        (36
                        )Discontinued
      operations
                        
                        
                        -
                        
                        
                        
                        489$
                        1
                        
                        
                        $
                        453Net
      income (loss) attributable to Icahn Enterprises allocable
    to:Limited
      partners
                        
                        $
                        1
                        
                        
                        $
                        485General
      partner
                        
                        
                        -
                        
                        
                        
                        (32
                        )$
                        1
                        
                        
                        $
                        453Basic
      and diluted income (loss) per LP unit:Income
      (loss) from continuing operations
                        
                        $
                        0.01
                        
                        
                        $
                        (0.26
                        )Income from discontinued operations
                        
                        
                        0.00
                        
                        
                        
                        7.14$
                        0.01
                        
                        
                        $
                        6.88Weighted average LP units outstanding
                        
                        
                        75
                        
                        
                        
                        70Cash
      distributions declared per LP unit
                        
                        $
                        0.25
                        
                        
                        $
                        0.25


1Automotive
segment results are for the period March 1, 2008 through March 31,
2008.





See
notes to consolidated financial statements.


2





ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES





CONSOLIDATED
STATEMENT OF CHANGES


IN
EQUITY AND COMPREHENSIVE INCOME


Three
Months Ended March 31, 2009


(Unaudited)
(In millions)





Equity
      Attributable to Icahn EnterprisesGeneral
                              
                              
                              Limited
                              
                              
                              Held
      in Treasury
                              
                              
                              Total
                              
                              
                              Non-Partner's
      Equity
                                (Deficit)
                              
                              
                              Partners'
      Equity -
                                Depositary
      Units
                              
                              
                              Amount
                              
                              
                              Units
                              
                              
                              Partners'
                                Equity
                              
                              
                              Controlling
                                Interests
                              
                              
                              Total
                                EquityBalance,
      December 31, 2008
                              
                              $
                              (172
                              )
                              
                              $
                              2,582
                              
                              
                              $
                              (12
                              )
                              
                              
                              1
                              
                              
                              $
                              2,398
                              
                              
                              $
                              3,944
                              
                              
                              $
                              6,342Comprehensive
      income:Net
      income
                              
                              
                              -
                              
                              
                              
                              1
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1
                              
                              
                              
                              126
                              
                              
                              
                              127Net
      unrealized losses on available-for-sale securities
                              
                              
                              -
                              
                              
                              
                              (5
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (5
                              )
                              
                              
                              -
                              
                              
                              
                              (5
                              )Translation
      adjustments and other
                              
                              
                              (2
                              )
                              
                              
                              (62
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (64
                              )
                              
                              
                              (21
                              )
                              
                              
                              (85
                              )Comprehensive
      income
                              
                              
                              (2
                              )
                              
                              
                              (66
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (68
                              )
                              
                              
                              105
                              
                              
                              
                              37Partnership
      distributions
                              
                              
                              -
                              
                              
                              
                              (19
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (19
                              )
                              
                              
                              -
                              
                              
                              
                              (19
                              )Investment
      Management distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (47
                              )
                              
                              
                              (47
                              )Investment
      Management contributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              8
                              
                              
                              
                              8Change
      in subsidiary equity and other
                              
                              
                              -
                              
                              
                              
                              1
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1
                              
                              
                              
                              (2
                              )
                              
                              
                              (1
                              )Balance,
      March 31, 2009
                              
                              $
                              (174
                              )
                              
                              $
                              2,498
                              
                              
                              $
                              (12
                              )
                              
                              
                              1
                              
                              
                              $
                              2,312
                              
                              
                              $
                              4,008
                              
                              
                              $
                              6,320





Accumulated
Other Comprehensive Loss attributable to Icahn Enterprises was $639 and $570 at
March 31, 2009 and December 31, 2008, respectively.





See
notes to consolidated financial statements.


3


ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


Three
Months Ended March 31, 2009 and 2008


(Unaudited) (In
millions)




Three Months Ended March
31,2009
                
                
                
                20081Cash
      Flows from operating activities:Net
      income
                
                $
                127
                
                
                $
                448Income
      (loss) from continuing operations:Investment
      Management
                
                $
                305
                
                
                $
                (1
                )Adjustments
      to reconcile net income (loss) from continuing operations to net cash used
      in operating activities:Investment
      (gains) losses
                
                
                (189
                )
                
                
                396Purchases
      of securities
                
                
                (304
                )
                
                
                (1,977
                )Proceeds
      from sales of securities
                
                
                807
                
                
                
                1,497Purchases
      to cover securities sold, not yet purchased
                
                
                (1,141
                )
                
                
                (116
                )Proceeds
      from securities sold, not yet purchased
                
                
                129
                
                
                
                263Net
      premiums (paid) received on derivative contracts
                
                
                8
                
                
                
                28Changes
      in operating assets and liabilities
                
                
                233
                
                
                
                (259
                )Net
      cash used in continuing operations
                
                
                (152
                )
                
                
                (169
                )Automotive,
      Holding Company and other
                
                
                (178
                )
                
                
                (40
                )Adjustments
      to reconcile net loss from continuing operations to net cash used in
      operating activities:Depreciation
      and amortization
                
                
                96
                
                
                
                39Investment
      gains
                
                
                (4
                )
                
                
                (2
                )Deferred
      income tax (expense) benefit
                
                
                (17
                )
                
                
                1Impairment
      loss on long-lived assets
                
                
                15
                
                
                
                -Other,
      net
                
                
                44
                
                
                
                3Changes
      in operating assets and liabilities
                
                
                (144
                )
                
                
                (38
                )Net
      cash used in continuing operations
                
                
                (188
                )
                
                
                (37
                )Net
      cash used in continuing operations
                
                
                (340
                )
                
                
                (206
                )Net
      cash used in discontinued operations
                
                
                (1
                )
                
                
                (3
                )Net
      cash used in operating activities
                
                
                (341
                )
                
                
                (209
                )Cash
      flows from investing activitiesCapital
      expenditures
                
                
                (51
                )
                
                
                (34
                )Purchases
      of marketable equity and debt securities
                
                
                -
                
                
                
                (1
                )Proceeds
      from sales of marketable equity and debt securities
                
                
                -
                
                
                
                63Net
      change in restricted cash relating to 1031 exchange
      transactions
                
                
                -
                
                
                
                (1,168
                )Net
      proceeds from the sale and disposition of long-lived
assets
                
                
                -
                
                
                
                15Acquisitions
      of businesses, net of cash acquired
                
                
                -
                
                
                
                795Other
                
                
                1
                
                
                
                (2
                )Net
      cash used in investing activities from continuing
    operations
                
                
                (50
                )
                
                
                (332
                )Net
      cash provided by investing activities from discontinued
      operations
                
                
                -
                
                
                
                1,199Net
      cash (used in) provided by investing activities
                
                
                (50
                )
                
                
                867





See
notes to consolidated financial statements.


4





ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS –(continued)


Three
Months Ended March 31, 2009 and 2008


(Unaudited) (In
millions)




Three Months Ended March
31,2009
                
                
                
                20081Cash
      flows from financing activities:Investment
      Management:Capital
      subscriptions received in advance
                
                
                -
                
                
                
                4Capital
      distributions to non-controlling interests
                
                
                (109
                )
                
                
                (220
                )Capital
      contributions by non-controlling interests
                
                
                8
                
                
                
                368Net
      cash (used in) provided by financing activities from continuing
      operations
                
                
                (101
                )
                
                
                152Automotive,
      Holding Company and other:Equity:Partnership
      distributions
                
                
                (19
                )
                
                
                (1
                )Proceeds
      from borrowings
                
                
                2
                
                
                
                -Repayments
      of borrowings
                
                
                (9
                )
                
                
                (8
                )Other
                
                
                (9
                )
                
                
                6Net
      cash used in financing activities from continuing
    operations
                
                
                (35
                )
                
                
                (3
                )Net
      cash (used in) provided by financing activities from continuing
      operations
                
                
                (136
                )
                
                
                149Net
      cash used in financing activities from discontinued
    operations
                
                
                -
                
                
                
                (255
                )Net
      cash used in financing activities
                
                
                (136
                )
                
                
                (106
                )Effect
      of exchange rate changes on cash
                
                
                (5
                )
                
                
                5Net
      (decrease) increase in cash and cash equivalents
                
                
                (532
                )
                
                
                557Net
      increase in cash of assets held for sale
                
                
                -
                
                
                
                69Cash
      and cash equivalents, beginning of period
                
                
                2,612
                
                
                
                2,113Cash
      and cash equivalents, end of period
                
                $
                2,080
                
                
                $
                2,739Supplemental
      information:Cash
      payments for interest
                
                $
                87
                
                
                $
                53Net
      cash payments (refunds) for income taxes
                
                $
                (15
                )
                
                $
                9Net
      realized losses on securities available for sale
                
                $
                (5
                )
                
                $
                (8
                )Redemptions
      payable to non-controlling interests
                
                $
                107
                
                
                $
                1








1Automotive
segment results are for the period March 1, 2008 through March 31,
2008.





See
notes to consolidated financial statements.


5




1.
Description of Business and Basis of Presentation




General





Icahn
Enterprises L.P. (“Icahn Enterprises” or the “Company”) is a master limited
partnership formed in Delaware on February 17, 1987. We own a 99% limited
partner interest in Icahn Enterprises Holdings L.P. (“Icahn Enterprises
Holdings”). Icahn Enterprises Holdings and its subsidiaries own substantially
all of our assets and liabilities and conduct substantially all of our
operations. Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”), our sole
general partner, which is owned and controlled by Mr. Carl C. Icahn, owns a 1%
general partner interest in both us and Icahn Enterprises Holdings, representing
an aggregate 1.99% general partner interest in us and Icahn Enterprises
Holdings. As of March 31, 2009, affiliates of Mr. Icahn owned 68,740,822 of our
depositary units and 11,360,173 of our preferred units, which represented
approximately 91.9% and 86.5% of our outstanding depositary units and preferred
units, respectively.





We are a
diversified holding company owning subsidiaries currently engaged in the
following continuing operating businesses: Investment Management, Automotive,
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 17, “Segment
Reporting.”




The
accompanying  consolidated financial statements and related notes
should be read in conjunction with the consolidated financial statements and
related notes contained in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 (“fiscal 2008”). The financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the “SEC”) related to interim financial statements. 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 prior period amounts have been reclassified in order
to conform to the current period presentation.




In
accordance with United States generally accepted accounting principles (“U.S.
GAAP”), assets transferred between entities under common control are accounted
for at historical cost similar to a pooling of interests, and the financial
statements of previously separate companies for all periods under common control
prior to the acquisition are restated on a consolidated basis.




The
consolidated financial statements include the accounts of (i) Icahn Enterprises,
(ii) the wholly and majority owned subsidiaries of Icahn Enterprises in which
control can be exercised and (iii) entities in which Icahn Enterprises has a
controlling, general partner interest or in which it is the primary beneficiary
of a variable interest entity in accordance with Financial Accounting Standards
Board (“FASB”) Interpretation No. (“FIN”) 46R, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51(“FIN 46R”). Icahn Enterprises
is considered to have control if it has a direct or indirect ability to make
decisions about an entity’s activities through voting or similar rights. As a
result, there are entities that are consolidated in our financial statements in
which we only have a minority interest in the equity and income. 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 (the
“‘40 Act”). Therefore, no more than 40% of our total assets will 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 business, 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. The results of our Real Estate and Home Fashion segments are
seasonal. The results of our Automotive segment are moderately
seasonal.


6




Adoption
of New Accounting Pronouncements





SFAS No. 160. In December
2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
160,Noncontrolling Interests
in Consolidated Financial Statements — An Amendment of ARB No.
51(“SFAS No. 160”). SFAS No. 160 requires a company to clearly identify
and present ownership interests in subsidiaries held by parties other than the
company in the consolidated financial statements within the equity section but
separate from the company’s equity; non-controlling interests will be presented
within the statement of changes in equity and comprehensive income as a separate
equity component. It also requires that the amount of consolidated net income
attributable to the parent and to the non-controlling interest be clearly
identified and presented on the face of the consolidated statement of income;
earnings per LP unit be reported after the adjustment for non-controlling
interest in net income (loss); changes in ownership interest be accounted for
similarly as equity transactions; and, when a subsidiary is deconsolidated, any
retained non-controlling equity investment in the former subsidiary and the gain
or loss on the deconsolidation of the subsidiary be measured at fair value. SFAS
No. 160 applies prospectively as of January 1, 2009, except for the presentation
and disclosure requirements which will be applied retrospectively for all
periods presented. We adopted SFAS No. 160 as of January 1, 2009 with the
presentation and disclosure requirements as discussed above reflected in our
consolidated financial statements.





SFAS No. 161. In March 2008,
the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of
FASB Statement No. 133  (“SFAS No. 161”), which requires
enhanced disclosures about an entity’s derivative and hedging activities thereby
improving the transparency of financial reporting. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early adoption encouraged. We adopted SFAS No. 161 on a
prospective basis as of January 1, 2009.  The adoption of SFAS No. 161
did not affect our financial condition, results of operations or cash
flows.  See Note 7, “Financial Instruments,” for additional
information.




Recently
Issued Accounting Pronouncements




FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (“FSP 115-2 and 124-2”). On
April 9, 2009, the FASB issued FSP FAS 115-2 and 124-2 which is
intended to make the guidance more operational and improve the presentation and
disclosure of other-than-temporary impairments (“OTTI”) on debt and equity
securities in the financial statements. FSP 115-2 and 124-2 applies to debt
securities and requires that the total OTTI be presented in the statement of
income with an offset for the amount of impairment that is recognized in other
comprehensive income, which amount represents the noncredit component. Noncredit
component losses are to be recorded in other comprehensive income if an investor
can assess that (a) it does not have the intent to sell or (b) it is
not more likely than not that it will have to sell the security prior to its
anticipated recovery. FSP 115-2 and 124-2 is effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. FSP 115-2 and 124-2 will be applied
prospectively with a cumulative effect transition adjustment as of the beginning
of the period in which it is adopted. An entity early adopting FSP 115-2 and
124-2 must also early adopt FSP 157-4 (as defined below). We are currently
evaluating the impact of FSP 115-2 and 124-2 on our consolidated financial
statements.




FSP
FAS 157-4, Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly
(“FSP 157-4”). On April 9, 2009, the FASB issued FSP 157-4 which provides
additional guidance on determining whether a market for a financial asset is not
active and a transaction is not distressed for fair value measurements under
SFAS No. 157, Fair Value
Measurements. FSP 157-4 will be applied prospectively and retrospective
application will not be permitted. FSP 157-4 will be effective for interim and
annual periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. An entity early adopting FSP 157-4
must also early adopt FSP 115-2 and 124-2.  We are currently
evaluating the impact of FSP 157-4 on our consolidated financial
statements.




FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments (“FSP 107-1 and APB 28-1”). On
April 9, 2009, the FASB issued FSP FAS 107-1 and APB 28-1 which
will amend SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. FSP 107-1 and APB 28-1 will require an entity to
provide disclosures about the fair value of financial instruments in interim
financial information. FSP 107-1 and APB 28-1 would apply to all financial
instruments within the scope of SFAS No. 107 and will require entities to
disclose the method(s) and significant assumptions used to estimate the fair
value of financial instruments, in both interim financial statements as well as
annual financial statements. FSP 107-1 and APB 28-1 will be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early
adopt FSP 107-1 and APB 28-1only if it also elects to early adopt FSP 157-4 and
FSP 115-2 and 124-2. Since FSP 107-1 and APB-28-1 will require
disclosures about fair values in interim periods, the adoption of FSP
FAS 107-1 and APB 28-1 will not have any impact on our consolidated
financial statements.


7




Filing
Status of Subsidiary




Federal-Mogul
Corporation (“Federal-Mogul”) is a reporting company under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and files annual,
quarterly and current reports.  Each of these reports is separately
filed with the SEC and is publicly available.




2.
Operating Units




a.
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 “Offshore Master Funds” consist of (i)
Icahn Partners Master Fund LP, (ii) Icahn Partners Master Fund II L.P. and (iii)
Icahn Partners Master Fund III L.P. The Onshore Fund and the Offshore Master
Funds are collectively referred to herein as the “Investment Funds.” In
addition, the “Offshore Funds” consist of (i) Icahn Fund Ltd. (referred to
herein as the Offshore Fund), (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.”





Effective
January 1, 2008, in addition to providing investment advisory services to the
Private Funds, the General Partners provide or cause their affiliates to provide
certain administrative and back office services to the Private Funds that had
been previously provided by Icahn Capital Management LP (the “Services”) and, in
consideration of providing the Services, the General Partners will receive
special profits interest allocations from the Investment Funds. This allocation
is generally equal to 0.625% of the balance in each fee-paying capital account
as of the beginning of each quarter (for each investor of fee-paying capital
account, the Target Special Profits Interest Amount) except that amounts are
only allocated to the General Partners in respect of special profits interest
allocations if there is sufficient net profits in the Investment Funds to cover
such amounts.  The General Partners may also receive incentive
allocations, generally 25% of the net profits generated by fee-paying investors
in the Investment Funds, and are subject to a “high water mark” (whereby the
General Partners do not earn incentive allocations during a particular year even
though the fund had a positive return in such year until losses in prior periods
have been recovered). The General Partners do not provide such services to any
other entities, individuals or accounts. Interests in the Private Funds are
offered only to certain sophisticated and qualified investors on the basis of
exemptions from the registration requirements of the federal securities laws and
are not publicly available.





Our
Investment Management segment’s revenues are affected by the combination of
fee-paying assets under management (“AUM”) and the investment performance of the
Private Funds. The General Partners’ incentive allocations and special profits
interest allocations earned from the Private Funds are accrued on a quarterly
basis in accordance with Method 2 of Emerging Issues Task Force (“EITF”) Topic
D-96, Accounting for
Management Fees Based on a Formula, and are allocated to the General
Partners at the end of the Private Funds’ fiscal year (or sooner on
redemptions). Such quarterly accruals may be reversed as a result of subsequent
investment performance or redemptions prior to the conclusion of the Private
Funds’ fiscal year.





As of
March 31, 2009, the full Target Special Profits Interest Amount was $91 million,
which includes a carryforward Target Special Profits Interest Amount of $70
million from December 31, 2008, a Target Special Profits Interest Amount for the
first quarter of the fiscal year ending December 31, 2009 (“fiscal 2009”), and a
hypothetical return on the full Target Special Profits Interest Amount from the
Investment Funds. Of the full Target Special Profits Interest Amount as of March
31, 2009, $87 million was accrued as a special profits interest allocation for
the first quarter of fiscal 2009 and $4 million will be carried forward to the
extent that there are sufficient  net profits in the Investment Funds
during the investment period to cover such amounts. This compares with a special
profits interest allocation accrual for the first quarter of fiscal 2008 of $5
million.


8




b.
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,
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.





In
accordance with U.S. GAAP, assets transferred between entities under common
control are accounted for at historical cost similar to a pooling of interests.
As of February 25, 2008 (the effective date of control by Thornwood Associates
Limited Partnership, or Thornwood, and, indirectly, by Carl C. Icahn) and
thereafter, as a result of our acquisition of a majority interest in
Federal-Mogul on July 3, 2008, we consolidated the financial position, results
of operations and cash flows of Federal-Mogul. We evaluated the activity between
February 25, 2008 and February 29, 2008 and, based on the immateriality of such
activity, concluded that the use of an accounting convenience date of February
29, 2008 was appropriate.




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, such as Canada, France, Germany, Italy, Japan, Spain, the
United Kingdom and the United States, and emerging markets, including Brazil,
China, Czech Republic, Hungary, India, Korea, Mexico, Poland, Russia, Thailand
and Turkey. 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.





Accounts
Receivable, net





Federal-Mogul’s
subsidiaries in Brazil, France, Germany, India, Italy and Spain are parties to
accounts receivable factoring arrangements. Gross accounts receivable factored
under these facilities were $205 million and $222 million as of March 31, 2009
and December 31, 2008, respectively. Of those gross amounts, $185 million and
$209 million, respectively, were factored without recourse and treated as sales
under SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities(“SFAS No. 140”). Under terms of these factoring
arrangements, Federal-Mogul is not obligated to draw cash immediately upon the
factoring of accounts receivable. Thus, as of March 31, 2009 and December 31,
2008, Federal-Mogul had outstanding factored amounts of $14 million and $8
million, respectively, for which cash had not yet been drawn. Expenses
associated with receivables factored or discounted are recorded in the
consolidated statements of operations within “Expenses-Automotive.”




Restructuring
Expenses




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 lower cost markets. These activities
generally fall into one of the following categories:




1.
            Closure of Facilities and
      Relocation of Production — in connection with Federal-Mogul’s
      strategy, certain operations have been closed and related production
      relocated to best cost countries or to other locations with available
      capacity.




2.
            Consolidation of
      Administrative Functions and Standardization of Manufacturing
      Processes — as part of its productivity strategy, Federal-Mogul has
      acted to consolidate its administrative functions and change its
      manufacturing processes to reduce selling, general and administrative
      costs and improve operating efficiencies through standardization of
      processes.


9


An
unprecedented downturn in the global automotive industry and global financial
markets led Federal-Mogul to announce, in September 2008 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. This plan, when combined
with other workforce adjustments, is expected to reduce Federal-Mogul’s global
workforce by approximately 8,600 positions. Federal-Mogul continues to solidify
certain components of this plan, and will announce those components as plans are
finalized. For the three months ended March 31, 2009, Federal-Mogul has recorded
$38 million in restructuring charges associated with Restructuring 2009 and
other restructuring programs, and expects to incur additional restructuring
charges up to $18 million through the fiscal year ending December 31, 2010. As
the majority of the costs expected to be incurred in relation to Restructuring
2009 are related to severance, such activities are expected to yield future
annual savings at least equal to the incurred costs.





Federal-Mogul
expects to finance its restructuring programs over the next several years
through cash generated from its ongoing operations or through cash available
under its debt agreements, 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.





As of
December 31, 2008, the accrued liability balance relating to restructuring
programs was $113 million. For the three months ended March 31, 2009,
Federal-Mogul incurred $38 million of restructuring charges and paid $21 million
of restructuring charges. Restructuring charges are included in expenses within
our consolidated statements of operations. As of March 31, 2009, the accrued
liability balance was $126 million, which is included in accounts payable,
accrued expenses and other liabilities in our consolidated balance
sheet.





Total
cumulative restructuring charges through March 31, 2009 were $170 million. We
report cumulative restructuring charges for Federal-Mogul effective March 1,
2008, the date on which Federal-Mogul became under common control with
us.




c.
Metals




We
conduct our Metals segment through our indirect wholly owned subsidiary, PSC
Metals Inc. (“PSC Metals”). PSC Metals collects industrial and obsolete scrap
metal, processes it into reusable forms and supplies the recycled metals to its
customers including electric-arc furnace mills, integrated steel mills,
foundries, secondary smelters and metals brokers. PSC Metals’ ferrous products
include shredded, sheared and bundled scrap metal and other purchased scrap
metal such as turnings (steel machining fragments), cast furnace iron and broken
furnace iron. PSC Metals also processes non-ferrous metals including aluminum,
copper, brass, stainless steel and nickel-bearing metals. Non-ferrous products
are a significant raw material in the production of aluminum and copper alloys
used in manufacturing. PSC Metals also operates a secondary products business
that includes the supply of secondary plate and structural grade pipe that is
sold into niche markets for counterweights, piling and foundations, construction
materials and infrastructure end-markets. For each of the three months ended
March 31, 2009 and 2008, PSC Metals’ had four customers who accounted for
approximately 30% and 37% of net sales, respectively.




See Note
9, “Goodwill and Intangible Assets,” for disclosures concerning our Metals
segment’s impairment charges related to its goodwill and indefinite lived
intangibles.




d.
Real Estate





Our Real
Estate segment consists of rental real estate, property development and
associated resort activities.





As of
March 31, 2009 and December 31, 2008, we owned 31 rental real estate properties.
Our property development operations are run primarily through Bayswater, a real
estate investment, management and development subsidiary that focuses primarily
on the construction and sale of single-family and multi-family homes, lots in
subdivisions and planned communities and raw land for residential development.
Our New Seabury development property in Cape Cod, Massachusetts and our Grand
Harbor and Oak Harbor development property in Vero Beach, Florida each include
land for future residential development of approximately 335 and 870 units of
residential housing, respectively. Both developments operate golf and resort
operations as well.





Our Real
Estate operations compares the carrying value of its real estate portfolio,
which includes commercial property for rent and residential property for current
and future development, to its estimated realizable value to determine if its
carrying costs will be recovered. In cases where our Real Estate operations do
not expect to recover its carrying cost, an impairment charge is recorded as an
expense and a reduction in the carrying cost of the asset. In developing
assumptions as to estimated realizable value, our Real Estate operations
consider current and future house prices, construction and carrying costs and
sales absorptions for its residential inventory and current and future rental
rates for its commercial properties.


10


For the
three months ended March 31, 2009 and 2008, our Real Estate operations recorded
no impairment charges.




As of
March 31, 2009 and December 31, 2008, $93 million and $94 million, respectively,
of the net investment in financing leases and net real estate leased to others,
which is included in other assets, was pledged to collateralize the payment of
nonrecourse mortgages payable.




e.
Home Fashion





We
conduct our Home Fashion segment through our majority ownership in WestPoint
International, Inc. (“WPI”), a manufacturer and distributor of home fashion
consumer products. WPI is engaged in the business of manufacturing, sourcing,
marketing and distributing bed and bath home fashion products, including, among
others, sheets, pillowcases, comforters, blankets, bedspreads, pillows, mattress
pads, towels and related products. 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.




A
relatively small number of customers have historically accounted for a
significant portion of WPI’s net sales. For three months ended March 31, 2009
and 2008 net sales to two customers amounted to 33% and 30%, respectively, of
total net sales.




Restructuring
and Impairment Expenses





To
improve WPI’s competitive position, WPI management intends to continue to reduce
its cost of goods sold by restructuring its operations in the plants located in
the United States, increasing production within its non-U.S. facilities and
joint venture operation and sourcing goods from lower cost overseas facilities.
In the second quarter of fiscal 2008, WPI entered into an agreement with a third
party to manage the majority of its U.S. warehousing and distribution
operations, which WPI consolidated into its Wagram, NC facility. In April 2009,
as part of its ongoing restructuring activities, WPI announced the closure of
certain of its manufacturing facilities located in the United
States.  In the future, the vast majority of the products currently
manufactured or fabricated in these facilities will be sourced from plants
located outside of the United States.  As of March 31, 2009, $158
million of WPI’s assets are located outside of the United States, primarily in
Bahrain.





WPI
incurred restructuring costs of $4 million and $7 million for the three months
ended March 31, 2009 and 2008, respectively. Included in restructuring expenses
are cash charges associated with the ongoing costs of closed plants, employee
severance, benefits and related costs and transition expenses. Restructuring
charges are included in expenses within our consolidated statements of
operations. The amount of accrued restructuring costs at December 31, 2008 was
$1 million. WPI paid $4 million of restructuring charges for the three months
ended March 31, 2009. As of March 31, 2009, the accrued liability balance was $1
million, which is included in accounts payable, accrued expenses and other
liabilities in our consolidated balance sheet.





Total
cumulative restructuring charges from August 8, 2005 (acquisition date) through
March 31, 2009 were $62 million.





WPI
incurred non-cash impairment charges that were primarily related to plants that
will close of $2 million for the three months ended March 31, 2009. In recording
the impairment charges related to its plants, WPI compared estimated net
realizable values of property, plant and equipment to their current carrying
values. Impairment charges are included in expenses within our consolidated
statements of operations.





WPI
anticipates that restructuring charges will continue to be incurred throughout
fiscal 2009. WPI anticipates incurring restructuring costs and impairment
charges in fiscal 2009 relating to the current restructuring plan between $20
million and $24 million primarily related to the continuing costs of its closed
facilities, employee severance, benefits and related costs, transition expenses
and impairment charges. 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.


11




3.Discontinued Operations and
Assets Held for Sale




Gaming




On
February 20, 2008, we consummated the sale of our subsidiary, American Casino
& Entertainment Properties LLC (“ACEP”), for $1.2 billion to an affiliate of
Whitehall Street Real Estate Fund, realizing a gain of approximately $476
million, after taxes. The sale of ACEP included the Stratosphere and three other
Nevada gaming properties, which represented all of our remaining gaming
operations.




Home
Fashion  — Retail Stores




WPI
closed all of its retail stores based on a comprehensive evaluation of the
stores’ long-term growth prospects and their on-going value to the business. On
October 18, 2007, WPI entered into an agreement to sell the inventory at all of
its retail stores and subsequently ceased operations of its retail stores.
Accordingly, it has reported the retail outlet stores business as discontinued
operations for all periods presented. As a result of the sale, WPI incurred
charges related to the termination of the leases relating to its retail outlet
stores facilities. As of March 31, 2009 and December 31, 2008, the accrued lease
termination liability balance was $3 million each, which is included in accounts
payable, accrued expenses and other liabilities in our consolidated balance
sheets.




Real
Estate




Operating
properties are reclassified to held for sale when subject to a contract. The
operations of such properties are classified as discontinued operations. The
properties classified as discontinued operations did not change during the three
months ended March 31, 2009.




Results
of Discontinued Operations




The
financial position and results of operations for our former Gaming and certain
portions of the Home Fashion and Real Estate segments described above are
presented as other assets in the consolidated balance sheets and discontinued
operations in the consolidated statements of operations for all periods
presented in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.




Results
from discontinued operations for the three months ended March 31, 2009 were not
material.  Results from discontinued operations for the three months
ended March 31, 2008 included a gain on sale of discontinued operations of $476
million, net of income taxes of approximately $260 million, recorded on the sale
of ACEP. With respect to the taxes recorded on the sale of ACEP, $103 million
was recorded as a deferred tax liability pursuant to a Code 1031 Exchange
transaction completed during the third quarter of fiscal 2008.




4.
Related Party Transactions





From time
to time, we have entered into several transactions with entities affiliated with
Carl C. Icahn. The transactions include purchases by us of business and business
interests, including debt, of the affiliated entities. Additionally, other
transactions have occurred as described below.





All
related party transactions are reviewed and approved by our Audit Committee. Our
Audit Committee obtains independent legal counsel on all related party
transactions and independent financial advice when appropriate.





In
accordance with U.S. GAAP, assets transferred between common control entities
are accounted for at historical cost similar to a pooling of interests, and the
financial statements of previously separate companies for periods prior to the
acquisition are restated on a consolidated basis. Additionally, prior to the
acquisition, the earnings, losses, capital contributions and distributions of
the acquired entities are allocated to the general partner as an adjustment to
equity, and the consideration in excess of the basis of net assets acquired is
shown as a reduction to the general partner’s capital account.


12




a.
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 March 31, 2009, the balance of the deferred management
fees payable (included in accounts payable, accrued expenses and other
liabilities) by the Offshore Funds to Icahn Management was $100 million. The
deferred management fee payable increased by $7 million for the three months
ended March 31, 2009.  The change in deferred management fee payable
for the three months ended March 31, 2008 was not material.





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 Carl C. 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 $0.3 million for such services for the three months
ended March 31, 2009 and 2008, respectively.  As of March 31, 2009,
accounts payable, accrued expenses and other liabilities in the consolidated
balance sheet included $1.4 million to be applied to Icahn Capital’s charges to
Icahn Affiliates for services to be provided to them.


Carl C.
Icahn, along with his affiliates, make investments in the Private Funds (other
than the amounts invested by Icahn Enterprises and its affiliates). These
investments are not subject to special profits interest allocations or incentive
allocations. As of March 31, 2009 and December 31, 2008, the total fair value of
these investments was approximately $1.2 billion and $1.1 billion,
respectively.




b.
Metals





For the
three months ended March 31, 2008, PSC Metals sold material to Alliance Castings
aggregating $3 million.  Such amounts were not material for the three
months ended March 31, 2009.  Mr. Icahn is a major shareholder of
Alliance Castings.




c.
Administrative Services - Holding Company





For each
of three months ended March 31, 2009 and 2008, we paid an affiliate
approximately $1 million for the non-exclusive use of office space.




For each
of the three months ended March 31, 2009 and 2008, the Holding Company provided
certain professional services to an Icahn affiliate for which we charged $0.6
million and $0.5 million respectively.  As of March 31, 2009, accounts
payable, accrued expenses and other liabilities in the consolidated balance
sheet included $2.2 million to be applied to the Holding Company’s charges to
the affiliate for services to be provided to it.





13


5.
Investments and Related Matters
  a.
Investment Management
  Securities
owned, and securities sold, not yet purchased consist of equities, bonds, bank
debt and other corporate obligations, and derivatives, all of which are reported
at fair value in our consolidated balance sheets. The following table summarizes
the Private Funds’ securities owned, securities sold, not yet purchased and
unrealized gains and losses on derivatives (in millions of
dollars):




March 31, 2009
                  
                  
                  December 31, 2008Amortized Cost
                  
                  
                  Carrying Value
                  
                  
                  Amortized Cost
                  
                  
                  Carrying ValueSecurities
      Owned, at fair value:Common
      stock
                  
                  $
                  4,397
                  
                  
                  $
                  2,340
                  
                  
                  $
                  5,112
                  
                  
                  $
                  2,826Convertible
      preferred stock
                  
                  
                  31
                  
                  
                  
                  5
                  
                  
                  
                  30
                  
                  
                  
                  9Call
      options
                  
                  
                  16
                  
                  
                  
                  22
                  
                  
                  
                  41
                  
                  
                  
                  41Corporate
      debt
                  
                  
                  1,900
                  
                  
                  
                  1,310
                  
                  
                  
                  1,830
                  
                  
                  
                  1,385Total
      Securities Owned, at fair value
                  
                  $
                  6,344
                  
                  
                  $
                  3,677
                  
                  
                  $
                  7,013
                  
                  
                  $
                  4,261Securities
      Sold, Not Yet Purchased, at fair value:Common
      stock
                  
                  $
                  1,266
                  
                  
                  $
                  988
                  
                  
                  $
                  2,821
                  
                  
                  $
                  2,273Corporate
      debt
                  
                  
                  3
                  
                  
                  
                  3
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      Securities Sold, Not Yet Purchased, at fair value
                  
                  $
                  1,269
                  
                  
                  $
                  991
                  
                  
                  $
                  2,821
                  
                  
                  $
                  2,273Unrealized
      Gains on Derivative Contracts, at fair value1
                  
                  $
                  90
                  
                  
                  $
                  76
                  
                  
                  $
                  74
                  
                  
                  $
                  79Unrealized
      Losses on Dervivative Contracts, at fair value2
                  
                  $
                  118
                  
                  
                  $
                  525
                  
                  
                  $
                  95
                  
                  
                  $
                  440





1Amounts
are included in other assets in our consolidated financial
statements.




2Amounts
are included in accounts payable, accrued expenses and other liabilities in our
consolidated financial statements.





Upon the
adoption of Statement of Position No. 07-1,Clarification of the Scope of the
Audit and Accounting Guide — Investment Companies and Accounting by
Parent Companies and Equity Method Investors for Investment
Companies  (“SOP 07-1”), the General Partners lost their
ability to retain specialized accounting pursuant to the AICPA Audit and
Accounting Guide — Investment Companies. For those investments that
(i) were deemed to be available-for-sale securities, (ii) fall outside the scope
of SFAS No. 115 or (iii) the Private Funds would otherwise account for under the
equity method, the Private Funds apply the fair value option pursuant to SFAS
No. 159. The application of the fair value option pursuant to SFAS No. 159 is
irrevocable. The Private Funds record unrealized gains and losses for the change
in the fair value of these securities as a component of Investment Management
revenues in the consolidated statements of operations.





The
following table summarizes those investments for which the Private Funds would
otherwise apply the equity method of accounting under APB 18. The Private Funds
applied the fair value option pursuant to SFAS No. 159 to such investments
through March 31, 2009 (in millions of dollars):





Private
      Funds
                                              
                                              
                                              
                                              
                                              
                                              Gains
      (Losses)Stock
      Ownership
                                              
                                              
                                              Fair
      Value
                                              
                                              
                                              Three
      Months Ended March 31,Investment
                                              
                                              Percentage
                                              
                                              
                                              March
      31, 2009
                                              
                                              
                                              2009
                                              
                                              
                                              2008Adventrx
      Pharmaceuticals Inc.
                                              
                                              
                                              3.83
                                              %
                                              
                                              $
                                              0.6
                                              
                                              
                                              $
                                              0.3
                                              
                                              
                                              $
                                              0.3Blockbuster
      Inc.
                                              
                                              
                                              7.75
                                              %
                                              
                                              
                                              9.6
                                              
                                              
                                              
                                              (6.6
                                              )
                                              
                                              
                                              (9.3
                                              )WCI
      Communities Inc.
                                              
                                              
                                              0.00
                                              %
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (2.1
                                              )$
                                              10.2
                                              
                                              
                                              $
                                              (6.3
                                              )
                                              
                                              $
                                              (11.1
                                              )




The
Private Funds assess the applicability of APB 18 to their investments based on a
combination of qualitative and quantitative factors, including overall stock
ownership of the Private Funds combined with those of affiliates of Icahn
Enterprises.




We
believe that these investments as noted in the above table are not material,
individually or in the aggregate, to our consolidated financial statements.
These companies are registered SEC filers and their consolidated financial
statements are available at www.sec.gov.




Investments
in Variable Interest Entities




The
General Partners consolidate certain variable interest entities (“VIEs”) when
they are determined to be their primary beneficiary, either directly or
indirectly through other consolidated subsidiaries. The assets of the
consolidated VIEs are primarily classified within cash and cash equivalents and
securities owned, at fair value in the consolidated balance sheets. The
liabilities of the consolidated VIEs are primarily classified within securities
sold, not yet purchased, at fair value, and accounts payable, accrued expenses
and other liabilities in the 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.


14




The
consolidated VIEs consist of the Offshore Fund and each of the Offshore Master
Funds. The Offshore GP sponsored the formation of and manages each of these VIEs
and, in some cases, has an investment therein.   In evaluating
whether the Offshore GP is the primary beneficiary of such VIEs, the Offshore GP
has considered the nature and extent of its involvement with such VIEs and
whether it absorbs the majority of losses among other variable interest
holders.  In most cases, the Offshore GP was deemed to be the primary
beneficiary of such VIEs because it would absorb the majority of expected losses
among other variable interest holders and its close association with such VIEs,
including the ability to direct the business activities of such
VIEs.




The
following table presents information regarding interests in VIEs for which the
Offshore GP holds a variable interest as of March 31, 2009 (in millions of
dollars):





Offshore
      GP
                              
                              
                              Offshore
      GPis
      the Primary Beneficiary
                              
                              
                              is
      not the Primary BeneficiaryOffshore GP's
                              
                              
                              Pledged
                              
                              
                              
                              
                              
                              Offshore GP'sNet
      Assets
                              
                              
                              Interests2
                              
                              
                              Collateral1
                              
                              
                              Net
      Assets
                              
                              
                              Interests2Offshore
      Fund and Offshore Master Funds
                              
                              $
                              2,313
                              
                              
                              $
                              5
                              
                              
                              $
                              830
                              
                              
                              $
                              545
                              
                              
                              $
                              0.1





1Includes collateral pledged in connection with securities sold, not yet
purchased, derivative contracts and collateral held for securities
loaned.


2Amount represents Offshore GP's maximum exposure to loss and are included
in the Offshore GP's net assets.




b.
Automotive, Metals, Home Fashion and Holding Company




Investments
included within other assets on the consolidated balance sheets for Automotive,
Metals, Home Fashion and Holding Company consist of the following (in millions
of dollars):





March
      31, 2009
                            
                            
                            December
      31, 2008Carrying
                            
                            
                            
                            
                            CarryingAmortized
      Cost
                            
                            Value
                            
                            
                            Amortized
      Cost
                            
                            ValueMarketable
      equity and debt securities - available for sale
                            
                            $
                            26
                            
                            
                            $
                            13
                            
                            
                            $
                            26
                            
                            
                            $
                            19Equity
      method investments and other
                            
                            
                            221
                            
                            
                            
                            221
                            
                            
                            
                            235
                            
                            
                            
                            235Total  investments
                            
                            $
                            247
                            
                            
                            $
                            234
                            
                            
                            $
                            261
                            
                            
                            $
                            254




With the
exception of the Automotive segment as discussed below, it is our policy to
apply the fair value option to all of our investments that would be subject to
the equity method of accounting pursuant to APB 18. We record unrealized gains
and losses for the change in fair value of such investments as a component of
revenues in the consolidated statements of operations. We believe that these
investments, individually or in the aggregate, are not material to our
consolidated financial statements.


15




The Holding Company previously had
applied the fair value option pursuant to SFAS No. 159 to its investments in
ImClone Systems Incorporated and Lear Corporation.  The Holding
Company held no positions with respect to these investments as of March 31,
2009.  For the three months ended March 31, 2008, the Holding Company
recorded $4 million of unrealized losses with respect to these
investments.  Such amounts are included in “Revenues-Holding Company”
in the consolidated statements of operations.




Investments
in Non-Consolidated Affiliates





Federal-Mogul
maintains investments in 14 non-consolidated affiliates, which are located in
China, Germany, Italy, Japan, Korea, Turkey, the United Kingdom and the United
States. Federal-Mogul’s direct ownership in such affiliates ranges from
approximately 1% to 50%. The aggregate investment in these affiliates
approximates $210 million and $221 million at March 31, 2009 and December 31,
2008, respectively, and is included in our consolidated balance sheets as a
component of other assets.  These investments are accounted for under
the equity method pursuant to APB 18.





Equity in
the earnings of non-consolidated affiliates amounted to approximately $1 million
and $3 million for three months ended March 31, 2009 and the period March 1,
2008 through March 31, 2008, respectively.  For the three months ended
March 31, 2009, these entities generated sales of approximately $89 million, net
income of approximately $3 million and at March 31, 2009 had total net assets of
approximately $401 million. Distributed dividends to Federal-Mogul from
non-consolidated affiliates were not material for the three months ended March
31, 2009.




6.
Fair Value Measurements




We
adopted SFAS No. 157, Fair
Value Measurements (“SFAS No. 157”), as of January 1, 2007, which, among
other things, requires enhanced disclosures about investments that are measured
and reported at fair value. SFAS No. 157 establishes a hierarchal disclosure
framework that prioritizes and ranks the level of market price observability
used in measuring investments 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
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 type of investments included in Level 1 include listed
equities and listed derivatives. As required by SFAS No. 157, 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.




Level 3 —
Pricing inputs are unobservable for the investment and include situations where
there is little, if any, market activity for the investment. 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.


16


The
following table summarizes the valuation of our investments by the above SFAS
No. 157 fair value hierarchy levels as of March 31, 2009 (in millions of
dollars).




Investment
Management





Level 1
                          
                          
                          Level 2
                          
                          
                          Level 3
                          
                          
                          TotalAssetsSecurities
      owned
                          
                          $
                          2,340
                          
                          
                          $
                          1,314
                          
                          
                          $
                          23
                          
                          
                          $
                          3,677Unrealized
      gains on derivative contracts1
                          
                          
                          -
                          
                          
                          
                          76
                          
                          
                          
                          -
                          
                          
                          
                          76$
                          2,340
                          
                          
                          $
                          1,390
                          
                          
                          $
                          23
                          
                          
                          $
                          3,753LiabilitiesSecurities
      sold, not yet purchased
                          
                          $
                          988
                          
                          
                          $
                          3
                          
                          
                          $
                          -
                          
                          
                          $
                          991Unrealized
      losses on derivative contracts2
                          
                          
                          16
                          
                          
                          
                          509
                          
                          
                          
                          -
                          
                          
                          
                          525$
                          1,004
                          
                          
                          $
                          512
                          
                          
                          $
                          -
                          
                          
                          $
                          1,516





The
changes in investments measured at fair value for which the Investment
Management operations has used Level 3 input to determine fair value are as
follows (in millions of dollars):





Balance
      at December 31, 2008
                    
                    $
                    56Realized
      and unrealized (losses), net
                    
                    
                    (33
                    )Purchases,
      net
                    
                    
                    -Balance
      at March 31, 2009
                    
                    $
                    23Unrealized
      (losses) included in earningsrelated
      to investments still held at reporting date
                    
                    $
                    (33
                    )





Total
realized and unrealized gains and losses recorded for Level 3 investments are
reported in “Revenues — Investment Management” in the consolidated
statements of operations.


17


Automotive,
Holding Company and Other





Level 1
                        
                        
                        Level 2
                        
                        
                        TotalAssets1Available
      for sale investments:Marketable
      equity and debt securities
                        
                        $
                        13
                        
                        
                        $
                        -
                        
                        
                        $
                        13Unrealized
      gains on derivative contracts
                        
                        
                        -
                        
                        
                        
                        1
                        
                        
                        
                        1$
                        13
                        
                        
                        $
                        1
                        
                        
                        $
                        14Liabilities2Derivative
      financial instruments
                        
                        $
                        -
                        
                        
                        $
                        95
                        
                        
                        $
                        95Unrealized
      losses on derivative contracts
                        
                        
                        -
                        
                        
                        
                        5
                        
                        
                        
                        5$
                        -
                        
                        
                        $
                        100
                        
                        
                        $
                        100





1Amounts
are classified within other assets in our consolidated balance
sheets.




2Amounts
are classified within accounts payable, accrued expenses and other liabilities
in our consolidated balance sheets.




7.
Financial Instruments





Certain
derivative contracts executed by the Private Funds and our Automotive operations
with the same 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 as either an asset or a liability in our consolidated
balance sheets.




a.
Investment Management and Holding Company





The
Private 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 Onshore Fund and the Offshore Master 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
Onshore Fund and Offshore Master Funds also have relationships with several
financial institutions with whom they trade derivative and other financial
instruments.





In the
normal course of business, the Private Funds trade various financial instruments
and enter into certain investment activities, which may give rise to
off-balance-sheet risk. Currently, the Private Funds’ investments include
futures, 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 represent obligations of the Private Funds to deliver
the specified security, thereby creating a liability to repurchase the security
in the market at prevailing prices. Accordingly, these transactions result in
off-balance-sheet risk, as the Private Funds’ satisfaction of the obligations
may exceed the amount recognized in the consolidated balance sheets. The Private
Funds’ investments in securities and amounts due from broker are partially
restricted until the Private Funds satisfy the obligation to deliver the
securities sold, not yet purchased.




The
Private Funds enter into derivative contracts, including swap contracts, futures
contracts and option contracts with the objective of capital appreciation or as
economic hedges against other securities or the market as a whole. The Private
Funds also enter into foreign currency derivative contracts to economically
hedge against foreign currency exchange rate risks on all or a portion of their
non-U.S. dollar denominated investments.


18




The
Private 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
Private Funds 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 Private Funds each day, depending
on the daily fluctuations in the value of the contract, and the whole value
change is recorded as an unrealized gain or loss by the Private Funds. When the
contract is closed, the Private Funds record a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.





The
Private Funds utilize forward contracts to seek to protect their assets
denominated in foreign currencies from losses due to fluctuations in foreign
exchange rates. The Private Funds’ exposure to credit risk associated with
non-performance of forward foreign currency contracts is limited to the
unrealized gains or losses inherent in such contracts, which are recognized in
unrealized gains or losses on derivative, futures and foreign currency
contracts, at fair value in the consolidated balance sheets.





From time
to time, the Private Funds also purchase and write option contracts. As a writer
of option contracts, the Private 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 Private 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 Private Funds’ satisfaction of the obligations
may exceed the amount recognized in the consolidated balance sheets. The Private
Funds did not have any written put options at each of March 31, 2009 and
December 31, 2008.




Certain
terms of the Private Funds’ contracts with derivative counterparties, which are
standard and customary to such contracts, contain certain triggering events that
would give the counterparties the right to terminate the derivative instruments.
In such events, the counterparties to the derivative instruments could request
immediate payment on derivative instruments in net liability
positions.  The aggregate fair value of all derivative instruments
with credit-risk-related contingent features that are in a liability position on
March 31, 2009 is $525 million.


At March
31, 2009, the Private Funds had approximately $1 billion posted as collateral
for derivative positions, including those derivative instruments with
credit-risk-related contingent features; these amounts are included in cash held
at consolidated affiliated partnerships and restricted cash within our
consolidated balance sheet.


FIN 45
requires the disclosure of information about obligations under certain guarantee
arrangements. FIN 45 defines guarantees as 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
Private Funds have entered into certain derivative contracts, in the form of
credit default swaps, that meet the accounting definition of a guarantee under
FIN 45, whereby the occurrence of a credit event with respect to the issuer of
the underlying financial instrument may obligate the Private Funds to make a
payment to the swap counterparties. As of March 31, 2009 and December 31, 2008,
the Private Funds have entered into such credit default swaps with a maximum
notional amount of approximately $476 million and $604 million, respectively,
with terms ranging from three months to eight years. We estimate that our
potential exposure related to these credit default swaps approximates 22.9% of
such notional amounts.


19


The
following table presents the notional amount, fair value, underlying referenced
credit obligation type and credit ratings for derivative contracts in which the
Private Funds are assuming risk as of March 31, 2009 (in millions of
dollars).


Credit Derivative Type by
                                  
                                  Notional
                                  
                                  
                                  Fair
                                  
                                  UnderlyingDerivative Risk Exposure
                                  
                                  Amount
                                  
                                  
                                  Value
                                  
                                  Reference ObligationSingle name credit default swapsInvestment grade risk exposure
                                  
                                  
                                  40
                                  
                                  
                                  
                                  -
                                  
                                  Corporate CreditBelow investment grade risk exposure
                                  
                                  
                                  196
                                  
                                  
                                  
                                  (121
                                  )
                                  Corporate CreditIndex credit default swapsInvestment grade risk exposure
                                  
                                  
                                  240
                                  
                                  
                                  
                                  (80
                                  )
                                  Commercial Mortgage-Backed  Securities$
                                  476
                                  
                                  
                                  $
                                  (201
                                  )





The
following table presents the fair values of the Private Funds’ derivative and
balance sheet locations within the consolidated balance sheets (in millions of
dollars):


Asset
      Derivatives1
                    
                    
                    Liability
      Derivatives2Derivatives
      not designated as hedging
                    
                    March
      31,
                    
                    
                    December
      31,
                    
                    
                    March
      31,
                    
                    
                    December
      31,instruments
      under SFAS No. 133
                    
                    2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Interest
      rate contracts
                    
                    $
                    -
                    
                    
                    $
                    20
                    
                    
                    $
                    -
                    
                    
                    $
                    18Foreign
      exchange contracts
                    
                    
                    -
                    
                    
                    
                    8
                    
                    
                    
                    2
                    
                    
                    
                    -Equity
      contracts
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    31
                    
                    
                    
                    17Credit
      contracts
                    
                    
                    214
                    
                    
                    
                    176
                    
                    
                    
                    630
                    
                    
                    
                    530Sub-total
                    
                    
                    214
                    
                    
                    
                    204
                    
                    
                    
                    663
                    
                    
                    $
                    565Netting
      across contract types3
                    
                    
                    (138
                    )
                    
                    
                    (125
                    )
                    
                    
                    (138
                    )
                    
                    
                    (125
                    )Total4
                    
                    $
                    76
                    
                    
                    $
                    79
                    
                    
                    $
                    525
                    
                    
                    $
                    440


1Asset
derivatives are located within other assets in our consolidated balance
sheets.
 2Liability
derivatives are located within accounts payable, accrued expenses and other
liabilities in our consolidated balance sheets.
 3Represents
the netting of receivables balances with payable balances for the same
counterparty across contract types pursuant to netting agreements.
 4Excludes
netting of cash collateral received and posted.  The total collateral
posted at March 31, 2009 is approximately $1 billion across all
counterparties.




The
following table presents the effects of the Private Funds’ derivative
instruments on the statement of operations for the three months ended March 31,
2009 (in millions of dollars):




Derivatives not designated as hedging
                    
                    Amount
      of Gain (Loss)instruments
      under SFAS No. 133
                    
                    Recognized
      in Income5Interest
      rate contracts
                    
                    $
                    48Foreign
      exchange contracts
                    
                    
                    1Equity
      contracts
                    
                    
                    (14
                    )Credit
      contracts
                    
                    
                    74$
                    109




5Gains
(loss) recognized on the Private Funds’ derivatives are classified as part of
“Revenues-Investment Management” in our consolidated statements of
operations.




b.
Automotive





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.


20


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, Japanese yen and
Canadian dollar.  Federal-Mogul had notional values of approximately
$3 million and $5 million of foreign currency hedge contracts outstanding at
March 31, 2009 and December 31, 2008, respectively, of which all mature in less
than one year and substantially all were designated as hedging instruments for
accounting purposes. Unrealized net gains of $1 million each were recorded in
accumulated other comprehensive loss as of March 31, 2009 and December 31, 2008.
No hedge ineffectiveness was recognized during the three months ended March 31,
2009.





During
fiscal 2008, Federal-Mogul entered into a series of five-year interest rate swap
agreements with a total notional value of $1,190 million to hedge the
variability of interest payments associated with its variable-rate term loans.
Through these swap agreements, Federal-Mogul has fixed its base interest and
premium rate at a combined average interest rate of approximately 5.37% on the
hedged principal amount of $1,190 million. As of March 31, 2009 and December 31,
2008, unrealized net losses of $65 million and $67 million, respectively, were
recorded in accumulated other comprehensive loss as a result of these
hedges.  As of March 31, 2009, losses of $26 million are expected to
be reclassified from accumulated other comprehensive loss to consolidated
statement of operations within the next 12 months.  No hedge
ineffectiveness was recognized for the three months ended March 31,
2009.





These
interest rate swaps reduce Federal-Mogul’s overall interest rate risk. However,
due to the remaining outstanding borrowings on Federal-Mogul’s debt agreements
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 these forecasted purchases. Federal-Mogul monitors
its commodity price risk exposures regularly to maximize the overall
effectiveness of its commodity forward contracts. Principal raw materials hedged
include natural gas, copper, nickel, lead, high-grade aluminum and aluminum
alloy. Forward contracts are used to mitigate commodity price risk associated
with raw materials, generally related to purchases forecast for up to 15 months
in the future.





Federal-Mogul
had 292 and 364 commodity price hedge contracts outstanding with a combined
notional value of $64 million and $91 million at March 31, 2009 and December 31,
2008, respectively, of which substantially all mature within one year. Of these
outstanding contracts, 241 and 346 commodity price hedge contracts with a
combined notional value of $50 million and $83 million at March 31, 2009 and
December 31, 2008, respectively, were designated as hedging instruments for
accounting purposes. Unrealized net losses of $19 million and $33 million were
recorded in accumulated other comprehensive loss as of March 31, 2009 and
December, 31, 2008, respectively. Unrealized net gains of $1 million were
recognized in “Revenues-Automotive” during the three months ended March 31, 2009
associated with designated hedge ineffectiveness. Realized and unrealized net
losses of $2 million and $3 million, respectively, were recognized in
“Expenses-Automotive” and “Revenues-Automotive,” respectively, during the three
months ended March 31, 2009 associated with undesignated commodity price hedge
contracts.





For
derivatives designated as cash flow hedges, changes in the time value are
excluded from the assessment of hedge effectiveness. Unrealized gains and losses
associated with ineffective hedges, determined using the hypothetical derivative
method, are recognized in “Revenues-Automotive.”  Derivative gains and
losses included in accumulated other comprehensive loss for effective hedges are
reclassified into operations upon recognition of the hedged transaction.
Derivative gains and losses associated with undesignated hedges are recognized
in “Revenues-Automotive” for outstanding hedges and “Expenses-Automotive” upon
hedge maturity. Federal-Mogul’s undesignated hedges are primarily commodity
hedges and such hedges have become undesignated mainly due to forecasted volume
declines.





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 and
installers 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 6% of
Federal-Mogul’s
sales during the three months ended March 31, 2009. Federal-Mogul requires
placement of cash in financial institutions evaluated as highly
creditworthy.


21




The
following table presents the fair values and balance sheet locations of
Federal-Mogul’s derivative instruments (in millions of dollars):




Asset Derivatives4
            
            
            Liability Derivatives4Derivatives Designated as Cash Flow
            
            March 31,
            
            
            December 31,
            
            
            March 31,
            
            
            December31,Hedging instruments Under SFAS No. 133
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Interest
      rate swap contracts
            
            $
            -
            
            
            $
            -
            
            
            $
            (65
            )
            
            $
            (67
            )Commodity
      contracts
            
            
            -
            
            
            
            -
            
            
            
            (21
            )
            
            
            (37
            )Foreign
      exchange contracts
            
            
            1
            
            
            
            1
            
            
            
            -
            
            
            
            -$
            1
            
            
            $
            1
            
            
            $
            (86
            )
            
            $
            (104
            )Derivatives
      not Designated as HedgingInstruments
      under SFAS No. 133Commodity
      contracts
            
            $
            -
            
            
            $
            -
            
            
            $
            (9
            )
            
            $
            (7
            )$
            -
            
            
            $
            -
            
            
            $
            (9
            )
            
            $
            (7
            )




4
Federal-Mogul’s asset derivatives and liability derivatives are classified
within accounts payable, accrued expenses and other liabilities on the
consolidated balance sheets.





The
following tables present the effect of Federal-Mogul’s derivative instruments on
the consolidated statement of operations for the three months ended March 31,
2009 (in millions of dollars):




Location of Gain
                            
                            Amount of Gain(Loss) Recognized
                            
                            RecognizedAmount of
                            
                            
                            
                            Amount of
                            
                            in Income on
                            
                            in Income onGain (Loss)
                            
                            
                            
                            Gain (Loss)
                            
                            Deriviatives
                            
                            DerivativesRecognized in
                            
                            Location of Gain
                            
                            Reclassified
                            
                            (Ineffective Portion
                            
                            (IneffectivePortionOCI on
                            
                            (Loss) Reclassified
                            
                            from AOCIinto
                            
                            and Amount
                            
                            and AmountDerivatives Designated as
                            
                            Derivatives
                            
                            from AOCI into
                            
                            Income
                            
                            Excluded from
                            
                            Excluded fromHedging Instruments
                            
                            (Effective
                            
                            Income (Effective
                            
                            (Effective
                            
                            Effectiveness
                            
                            EffectivenessUnder SFAS No. 133
                            
                            Portion)
                            
                            Portion)
                            
                            Portion)
                            
                            Testing)
                            
                            TestingInterest
      rate swap contracts
                            
                            $
                            (7
                            )
                            Expenses-Automotive
                            
                            $
                            (9
                            )
                            
                            
                            $
                            -Commodity
      contracts
                            
                            
                            6
                            
                            Expenses-Automotive
                            
                            
                            (8
                            )
                            Revenues-Automotive
                            
                            
                            1Foreign
      exchange contracts
                            
                            
                            1
                            
                            Expenses-Automotive
                            
                            
                            1
                            
                            
                            
                            
                            -





Amount of LossDerivatives Not Designated
                        
                        Location of Loss
                        
                        Recognized inas Hedging Instruments
                        
                        Recognized in
                        
                        Income onUnder SFAS No. 133
                        
                        Income on Derivatives
                        
                        DerivativesCommodity
      contracts
                        
                        Expenses-Automotive
                        
                        $
                        (2
                        )Commodity
      contracts
                        
                        Revenues-Automotive
                        
                        
                        (3
                        )$
                        (5
                        )


22




8.
Inventories, Net




Our
consolidated inventories, net consists of the following (in millions of
dollars):




March 31,
                      
                      
                      December 31,2009
                      
                      
                      2008Raw
      materials:Automotive
                      
                      $
                      164
                      
                      
                      $
                      166Home
      Fashion
                      
                      
                      13
                      
                      
                      
                      12177
                      
                      
                      
                      178Work
      in process:Automotive
                      
                      
                      124
                      
                      
                      
                      125Home
      Fashion
                      
                      
                      29
                      
                      
                      
                      33153
                      
                      
                      
                      158Finished
      Goods:Automotive
                      
                      
                      600
                      
                      
                      
                      603Home
      Fashion
                      
                      
                      69
                      
                      
                      
                      87669
                      
                      
                      
                      690Metals:Ferrous
                      
                      
                      16
                      
                      
                      
                      27Non-ferrous
                      
                      
                      4
                      
                      
                      
                      5Secondary
                      
                      
                      33
                      
                      
                      
                      3553
                      
                      
                      
                      67Total
      Inventories, net
                      
                      $
                      1,052
                      
                      
                      $
                      1,093




Home
Fashion and Metals inventories are included in other assets in the accompanying
consolidated balance sheets.


23




9.
Goodwill and Intangible Assets




Goodwill
and other intangible assets consist of the following (in millions of
dollars):




March
      31, 2009
                                                                      
                                                                      
                                                                      December
      31, 2008Gross
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      Net
                                                                      
                                                                      
                                                                      Gross
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      NetAmortization
                                                                      
                                                                      Carrying
                                                                      
                                                                      
                                                                      Accumulated
                                                                      
                                                                      
                                                                      Carrying
                                                                      
                                                                      
                                                                      Carrying
                                                                      
                                                                      
                                                                      Accumulated
                                                                      
                                                                      
                                                                      CarryingDescription
                                                                      
                                                                      Periods
                                                                      
                                                                      Amount
                                                                      
                                                                      
                                                                      Amortization
                                                                      
                                                                      
                                                                      Value
                                                                      
                                                                      
                                                                      Amount
                                                                      
                                                                      
                                                                      Amortization
                                                                      
                                                                      
                                                                      ValueDefinite-lived
      intangible assets:Automotive
                                                                      
                                                                      1 -
      22 years
                                                                      
                                                                      $
                                                                      639
                                                                      
                                                                      
                                                                      $
                                                                      (88
                                                                      )
                                                                      
                                                                      $
                                                                      551
                                                                      
                                                                      
                                                                      $
                                                                      640
                                                                      
                                                                      
                                                                      $
                                                                      (76
                                                                      )
                                                                      
                                                                      $
                                                                      564Metals
                                                                      
                                                                      5
      -15 years
                                                                      
                                                                      
                                                                      11
                                                                      
                                                                      
                                                                      
                                                                      (3
                                                                      )
                                                                      
                                                                      
                                                                      8
                                                                      
                                                                      
                                                                      
                                                                      11
                                                                      
                                                                      
                                                                      
                                                                      (2
                                                                      )
                                                                      
                                                                      
                                                                      9$
                                                                      650
                                                                      
                                                                      
                                                                      $
                                                                      (91
                                                                      )
                                                                      
                                                                      $
                                                                      559
                                                                      
                                                                      
                                                                      $
                                                                      651
                                                                      
                                                                      
                                                                      $
                                                                      (78
                                                                      )
                                                                      
                                                                      $
                                                                      573Goodwill:Automotive
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      $
                                                                      1,053
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      $
                                                                      1,076Metals
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      101,053
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,086Indefinite-lived
      intangible assets:Automotive
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      354
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      354Metals
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      3Home
      Fashion
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      13
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      13367
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      370Total
      goodwill and indefinite-lived intangible assets
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      $
                                                                      1,420
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      $
                                                                      1,456




Goodwill
and intangible assets for our Home Fashion and Metals segments are included in
other assets in the accompanying consolidated balance sheets.




Automotive





Given the
complexity of the calculation of goodwill impairment and the significance of
fourth quarter economic activity, Federal-Mogul had not completed its annual
impairment assessment for fiscal 2008 prior to filing its annual report on Form
10-K. During the quarter ended March 31, 2009, Federal-Mogul completed this
assessment, and recorded a reduction to its goodwill impairment charge of $3
million. The goodwill impairment charges were required to adjust the carrying
value of goodwill and other indefinite-lived intangible assets to estimated fair
value. The estimated fair values were determined based upon consideration of
various valuation methodologies, including guideline transaction multiples,
multiples of current earnings, and projected future cash flows discounted at
rates commensurate with the risk involved.




For the
three months ended March 31, 2009 and for the period March 1, 2008 through March
31, 2008, Federal-Mogul recorded amortization expense of $12 million and $5
million, respectively, associated with definite-lived intangible assets.
Federal-Mogul utilizes the straight line method of amortization, recognized over
the estimated useful lives of the assets.




Metals





Our
Metals segment tests indefinite-lived intangible assets for impairment annually
as of September 30 or more frequently if it believes indicators of impairment
exist.  Our Metals segment determines the fair value of its
indefinite-lived intangible assets utilizing discounted cash flows. The
resultant fair value is compared to its carrying value and an impairment loss is
recorded if the carrying value exceeds its fair value.  Impairment
tests performed as of September 30, 2008 indicated that no impairment was
necessary based on economic conditions at that time.





Our
Metals segment’s sales for the first quarter of fiscal 2009 declined
significantly as the demand and prices for scrap fell to extremely low levels
due to historically low steel mill capacity utilization rates and declines in
other sectors of the economy served by our Metals segment.  Given the
indication of a potential impairment, our Metals segment completed a valuation
in accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, as of March 31, 2009, utilizing discounted cash
flows based on current market conditions.  This valuation resulted in
an impairment loss for goodwill and other indefinite-lived intangible assets of
$13 million which was recorded in the first quarter of fiscal
2009.  Impairment charges are included in expenses within our
consolidated statements of operations.


24




10.
Property, Plant and Equipment, Net




Property,
plant and equipment consists of the following (in millions of
dollars):





March
      31,
                    
                    
                    December 31,2009
                    
                    
                    2008Land
                    
                    $
                    294
                    
                    
                    $
                    307Buildings
      and improvements
                    
                    
                    480
                    
                    
                    
                    492Machinery,
      equipment and furniture
                    
                    
                    1,590
                    
                    
                    
                    1,605Assets
      leased to others
                    
                    
                    590
                    
                    
                    
                    590Construction
      in progress
                    
                    
                    275
                    
                    
                    
                    2753,229
                    
                    
                    
                    3,269Less
      accumulated depreciation and amortization
                    
                    
                    (449
                    )
                    
                    
                    (391
                    )Property,
      plant and equipment, net
                    
                    $
                    2,780
                    
                    
                    $
                    2,878




Depreciation
and amortization expense from continuing operations related to property, plant
and equipment for the three months ended March 31, 2009 and 2008 were $70
million and $22 million, respectively.




Except
for the Automotive segment, property, plant and equipment is included in other
assets on our consolidated balance sheets.




11.
Equity Attributable to Non-Controlling Interests




Equity
attributable to non-controlling interests consists of the following (in millions
of dollars):




March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Investment
      Management
                      
                      $
                      3,678
                      
                      
                      $
                      3,560Automotive
                      
                      
                      230
                      
                      
                      
                      276Home
      Fashion and other
                      
                      
                      100
                      
                      
                      
                      108Total
      equity attributable to non-controlling interests
                      
                      $
                      4,008
                      
                      
                      $
                      3,944




Investment
Management




The
Investment Management segment consolidates those entities in which it (i) has an
investment of more than 50% and has control over significant operating,
financial and investing decisions of the entity, (ii) has a controlling general
partner interest pursuant to EITF Issue No. 04-05, Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners Have Certain Rights (“EITF
04-05”), or (iii) is the primary beneficiary of a VIE pursuant to FIN 46R. The
Investment Funds and the Offshore Fund are consolidated into our financial
statements even though we have only a minority interest in the equity and income
of these funds. As a result, our consolidated financial statements reflect the
assets, liabilities, revenues, expenses and cash flows of these funds on a gross
basis, rather than reflecting only the value of our investments in such funds.
As of March 31, 2009, the net asset value of the consolidated Private Funds on
our consolidated balance sheet was approximately $4.8 billion, while the net
asset value of our investments in these consolidated funds was approximately
$1.1 billion.


25




12.
Debt




Debt
consists of the following (in millions of dollars):




March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Senior
      unsecured variable rate convertible notes due 2013- Icahn
      Enterprises
                    
                    $
                    556
                    
                    
                    $
                    556Senior
      unsecured 7.125% notes due 2013 — Icahn
    Enterprises
                    
                    
                    961
                    
                    
                    
                    961Senior
      unsecured 8.125% notes due 2012 — Icahn
    Enterprises
                    
                    
                    352
                    
                    
                    
                    352Exit
      facilities — Federal-Mogul
                    
                    
                    2,495
                    
                    
                    
                    2,495Mortgages
      payable
                    
                    
                    122
                    
                    
                    
                    123Other
                    
                    
                    80
                    
                    
                    
                    84Total
      debt
                    
                    $
                    4,566
                    
                    
                    $
                    4,571




Senior
Unsecured Variable Rate Convertible Notes Due 2013 — Icahn
Enterprises





In April
2007, we issued an aggregate of $600 million of variable rate senior convertible
notes due 2013 (the “variable rate notes”). The variable rate notes were sold in
a private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and issued pursuant to an indenture dated as of
April 5, 2007, by and among us, as issuer, Icahn Enterprises Finance Corp.
(“Icahn Enterprises Finance”), as co-issuer, and Wilmington Trust Company, as
trustee. Icahn Enterprises Finance, our wholly owned subsidiary, was formed
solely for the purpose of serving as a co-issuer of our debt securities in order
to facilitate offerings of the debt securities. Other than Icahn Enterprises
Holdings, no other subsidiaries guarantee payment on the variable rate notes.
The variable rate notes bear interest at a rate of three-month LIBOR minus 125
basis points, but the all-in-rate can be no less than 4.0% nor more than 5.5%,
and are convertible into our depositary units at a conversion price of $132.595
per depositary unit per $1,000 principal amount, subject to adjustments in
certain circumstances. Pursuant to the indenture governing the variable rate
notes, on October 5, 2008, the conversion price was adjusted downward to $105.00
per depositary unit per $1,000 principal amount.  As of March 31,
2009, the interest rate was 4.0%. The interest on the variable rate notes is
payable quarterly on each January 15, April 15, July 15 and October 15. The
variable rate notes mature on August 15, 2013, assuming they have not been
converted to depositary units before their maturity date.




In the
event that we declare a cash dividend or similar cash distribution in any
calendar quarter with respect to our depositary units in an amount in excess of
$0.10 per depositary unit (as adjusted for splits, reverse splits and/or stock
dividends), the indenture governing the variable rate notes requires that we
simultaneously make such distribution to holders of the variable rate notes in
accordance with a formula set forth in the indenture. On March 30, 2009, we paid
an aggregate cash distribution of $1 million to holders of our variable rate
notes in respect to our distributions payment to our depositary
unitholders.  Such amounts have been classified as interest
expense.




Senior
Unsecured Notes — Icahn Enterprises




Senior
Unsecured 7.125% Notes Due 2013




On
February 7, 2005, we issued $480 million aggregate principal amount of 7.125%
senior unsecured notes due 2013 (the “7.125% notes”), priced at 100% of
principal amount. The 7.125% notes were issued pursuant to an indenture dated
February 7, 2005 among us, as issuer, Icahn Enterprises Finance, as co-issuer,
Icahn Enterprises Holdings, as guarantor, and Wilmington Trust Company, as
trustee (referred to herein as the “2005 Indenture”). Other than Icahn
Enterprises Holdings, no other subsidiaries guarantee payment on the
notes.




On
January 16, 2007, we issued an additional $500 million aggregate principal
amount of 7.125% notes (the “additional 7.125% notes” and, together with the
7.125% notes, the “notes”), priced at 98.4% of par, or at a discount of 1.6%,
pursuant to the 2005 Indenture. The notes have a fixed annual interest rate of
7.125%, which is paid every six months on February 15 and August 15, and will
mature on February 15, 2013.




As
described below, the 2005 Indenture restricts the ability of Icahn Enterprises
and Icahn Enterprises Holdings, subject to certain exceptions, to, among other
things: incur additional debt; pay dividends or make distributions; repurchase
units; create liens; and enter into transactions with
affiliates.


26




Senior
Unsecured 8.125% Notes Due 2012




On May
12, 2004, Icahn Enterprises and Icahn Enterprises Finance co-issued senior
unsecured 8.125% notes due 2012 (“8.125% notes”) in the aggregate principal
amount of $353 million. The 8.125% notes were issued pursuant to an indenture,
dated as of May 12, 2004, among Icahn Enterprises, Icahn Enterprises Finance,
Icahn Enterprises Holdings, as guarantor, and Wilmington Trust Company, as
trustee. The 8.125% notes were priced at 99.266% of principal amount and have a
fixed annual interest rate of 8.125%, which is paid every six months on June 1
and December 1. The 8.125% notes will mature on June 1, 2012. Other than Icahn
Enterprises Holdings, no other subsidiaries guarantee payment on the
notes.




As
described below, the indenture governing the 8.125% notes restricts the ability
of Icahn Enterprises and Icahn Enterprises Holdings, subject to certain
exceptions, to, among other, things: incur additional debt; pay dividends or
make distributions; repurchase units; create liens and enter into transactions
with affiliates.




Senior
Unsecured Notes Restrictions and Covenants




The 2005
Indenture governing our senior unsecured 7.125% notes and the indenture
governing our senior unsecured 8.125% notes restrict the payment of cash
distributions, the purchase of equity interests or the purchase, redemption,
defeasance or acquisition of debt subordinated to the senior unsecured notes.
The indentures also restrict the incurrence of debt or the issuance of
disqualified stock, as defined in the indentures, with certain exceptions. In
addition, the indentures governing our senior unsecured notes require that on
each quarterly determination date that we and the guarantor of the notes
(currently only Icahn Enterprises Holdings) maintain certain minimum financial
ratios, as defined in the applicable indenture. The indentures also restrict the
creation of liens, mergers, consolidations and sales of substantially all of our
assets, and transactions with affiliates.




As of
March 31, 2009 and December 31, 2008, we are in compliance with all covenants,
including maintaining certain minimum financial ratios, as defined in the
applicable indentures.  Additionally, as of March 31, 2009, based on
certain minimum financial ratios, we and Icahn Enterprises Holdings could not
incur additional indebtedness.




Senior
Secured Revolving Credit Facility — Icahn Enterprises




On August
21, 2006, we and Icahn Enterprises Finance as the borrowers, and certain of our
subsidiaries, as guarantors, entered into a credit agreement with Bear Stearns
Corporate Lending Inc., as administrative agent, and certain other lender
parties. Under the credit agreement, we are permitted to borrow up to $150
million, including a $50 million sub-limit that may be used for letters of
credit. Borrowings under the agreement, which are based on our credit rating,
bear interest at LIBOR plus 1.0% to 2.0%. We pay an unused line fee of 0.25% to
0.5%. As of March 31, 2009, there were no borrowings under the
facility.




Obligations
under the credit agreement are guaranteed and secured by liens on substantially
all of the assets of certain of our indirect wholly owned holding company
subsidiaries. The credit agreement has a term of four years and all amounts are
due and payable on August 21, 2010. The credit agreement includes covenants
that, among other things, restrict the creation of liens and certain
dispositions of property by holding company subsidiaries that are guarantors.
Obligations under the credit agreement are immediately due and payable upon the
occurrence of certain events of default.




Exit
Facilities — Federal-Mogul




On
December 27, 2007 (the “Effective Date”), Federal-Mogul entered into a Term Loan
and Revolving Credit Agreement (the “Exit Facilities”) with Citicorp U.S.A. Inc.
as Administrative Agent, JPMorgan Chase Bank, N.A. as Syndication Agent and
certain lenders. The Exit Facilities include a $540 million revolving credit
facility (which is subject to a borrowing base and can be increased under
certain circumstances and subject to certain conditions) and a $2,960 million
term loan credit facility divided into a $1,960 million tranche B loan and a
$1,000 million tranche C loan. Federal-Mogul borrowed $878 million under the
term loan facility on the Effective Date and the remaining $2,082 million of
term loans, which were available for up to 60 days after the Effective Date,
have been fully drawn.


27




The
obligations under the revolving credit facility shall mature December 27, 2013
and shall bear interest for the six months at LIBOR plus 1.75% or at the
alternate base rate (“ABR,” defined as the greater of Citibank, N.A.’s announced
prime rate or 0.50% over the Federal Funds Rate) plus 0.75%, and thereafter
shall be adjusted in accordance with a pricing grid based on availability under
the revolving credit facility. Interest rates on the pricing grid range from
LIBOR plus 1.50% to LIBOR plus 2.00% and ABR plus 0.50% to ABR plus 1.00%.
The tranche B term loans shall mature December 27, 2014 and the tranche C
term loans shall December 27, 2015; provided, however, that in each case, such
maturity may be shortened to December 37, 2013 under certain circumstances. In
addition, the tranche C term loans are subject to a pre-payment premium, should
Federal-Mogul choose to prepay the loans prior to December 27, 2011. All Exit
Facilities term loans bear interest at LIBOR plus 1.9375% or at ABR plus 0.9375%
at Federal-Mogul’s election.




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
under the Exit Facilities. 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.  Since the interest rate swaps hedge the variability of
interest payments on variable rate debt with the same terms, they qualify for
cash flow hedge accounting treatment.





Under the
Exit Facilities, Federal-Mogul had $96 million and $57 million of letters of
credit outstanding at March 31, 2009 and December 31, 2008,
respectively.  As of March 31, 2009 and December 31, 2008, the
borrowing availability under the revolving credit facility was $494 million and
$476 million, respectively.




The
obligations of Federal-Mogul under the Exit Facilities are guaranteed by
substantially all of its domestic subsidiaries and certain foreign subsidiaries
of Federal-Mogul, and are secured by substantially all personal property and
certain real property of Federal-Mogul and such guarantors, subject to certain
limitations. The liens granted to secure these obligations and certain cash
management and hedging obligations have first priority.




The Exit
Facilities contain certain affirmative and negative covenants and events of
default, including, subject to certain exceptions, restrictions on incurring
additional indebtedness, mandatory prepayment provisions associated with
specified asset sales and dispositions, and limitations on (i) investments; (ii)
certain acquisitions, mergers or consolidations; (iii) sale and leaseback
transactions; (iv) certain transactions with affiliates; and (v) dividends and
other payments in respect of capital stock. At March 31, 2009 and December 31,
2008, Federal-Mogul was in compliance with all debt covenants under the Exit
Facilities.




Mortgages
Payable




Mortgages
payable, all of which are non-recourse to us, bear interest at rates between
4.97% and 7.99% and have maturities between July 1, 2009 and July 1,
2016.




Secured
Revolving Credit Agreement — WestPoint Home, Inc.




On June
16, 2006, WestPoint Home, Inc., an indirect wholly owned subsidiary of WPI,
entered into a $250 million loan and security agreement with Bank of America,
N.A., as administrative agent and lender. On September 18, 2006, The CIT
Group/Commercial Services, Inc., General Electric Capital Corporation and Wells
Fargo Foothill, LLC were added as lenders under this credit agreement. Under the
five-year agreement, borrowings are subject to a monthly borrowing base
calculation and include a $75 million sub-limit that may be used for letters of
credit. Borrowings under the agreement bear interest, at the election of
WestPoint Home, either at the prime rate adjusted by an applicable margin
ranging from minus 0.25% to plus 0.50% or LIBOR adjusted by an applicable margin
ranging from plus 1.25% to 2.00%. WestPoint Home pays an unused line fee of
0.25% to 0.275%. Obligations under the agreement are secured by WestPoint Home’s
receivables, inventory and certain machinery and equipment.




The
agreement contains covenants including, among others, restrictions on the
incurrence of indebtedness, investments, redemption payments, distributions,
acquisition of stock, securities or assets of any other entity and capital
expenditures. However, WestPoint Home is not precluded from effecting any of
these transactions if excess availability, after giving effect to such
transaction, meets a minimum threshold.




As of
March 31, 2009, there were no borrowings under the agreement, but there were
outstanding letters of credit of approximately $11 million. Based upon the
eligibility and reserve calculations within the agreement, WestPoint Home had
unused borrowing availability of approximately $35 million at March 31,
2009.


28




13.
Compensation Arrangements




Investment
Management




Effective
January 1, 2008, the General Partners amended employment agreements with certain
of their employees whereby such employees have been granted rights to
participate in a portion of the special profits interest allocations (in certain
cases, whether or not such special profits interest is earned by the General
Partners) effective January 1, 2008 and incentive allocations earned by the
General Partners, typically net of certain expenses and generally subject to
various vesting provisions. The vesting period of these rights is generally
between two and seven years, and such rights expire at the end of the
contractual term of each respective employment agreement. The unvested amounts
and vested amounts that have not been withdrawn by the employee generally remain
invested in the Investment Funds and earn the rate of return of these funds,
before the effects of any special profits interest allocations effective January
1, 2008 or incentive allocations, which are waived on such amounts. Accordingly,
these rights are accounted for as liabilities in accordance with SFAS No. 123
(Revised 2004), Share-Based
Payment (“SFAS No. 123(R)”), and remeasured at fair value each reporting
period until settlement.




The General Partners recorded
compensation expense of $5 million and $3 million related to these rights for
the three months ended March 31, 2009 and 2008, respectively. Compensation
expense is included in expenses of our Investment Management segment in the
consolidated statements of operations. Compensation expense arising from grants
in special profits interest allocations is recognized in the consolidated
financial statements over the vesting period. Accordingly, unvested balances of
special profits interest allocations allocated to certain employees are not
reflected in the consolidated financial statements. Unvested amounts not yet
recognized as compensation expense within the consolidated statements of
operations were $4 million each as of March 31, 2009 and December 31, 2008,
respectively. That cost is expected to be recognized over a weighted average of
2.8 years. Cash paid to settle rights that had been withdrawn for the three
months ended March 31, 2009 was not material.  Cash paid to settle
rights that had been withdrawn for the three months ended March 31, 2008 was $3
million.




Automotive




Stock-Based
Compensation




On
December 27, 2007, Federal-Mogul entered into a deferred compensation agreement
with Mr. José Maria Alapont, its President and Chief Executive
Officer.  Under the terms of this deferred compensation agreement, Mr.
Alapont is entitled to certain distributions of Federal-Mogul Common Stock, or,
at the election of Mr. Alapont, certain distributions of cash upon certain
events as set forth in the agreement. The amount of the distributions shall be
equal to the fair value of 500,000 shares of Federal-Mogul Common Stock, subject
to certain adjustments and offsets.




On
February 15, 2008, Federal-Mogul entered into a Stock Option Agreement with Mr.
Alapont dated as of February 15, 2008 (the “CEO Stock Option Agreement”), which
was subsequently approved by Federal-Mogul’s stockholders effective July 28,
2008.  The CEO Stock Option Agreement grants Mr. Alapont a
non-transferable, non-qualified option (the “CEO Option”) to purchase up to
4,000,000 shares of Federal-Mogul’s Common Stock subject to the terms and
conditions described below. The exercise price for the CEO Option is $19.50 per
share, which is at least equal to the fair market value of a share of
Federal-Mogul’s Common Stock on the date of grant of the CEO Option. In no event
may the CEO Option be exercised, in whole or in part, after December 27, 2014.
The CEO Stock Option Agreement provides for vesting as follows: 80% of the
shares of Common Stock subject to the CEO Option are vested as of March 31, 2009
and the final 20% of the shares of Common Stock subject to the CEO Option shall
vest on March 23, 2010.




Federal-Mogul
revalued the options granted to Mr. Alapont at March 31, 2009, resulting in a
revised fair value of $8 million. During the three months ended March 31, 2009
and 2008, Federal-Mogul recognized $3.4 million and $1.7 million, respectively,
in expense associated with these options. Since the deferred compensation
agreement provides for net cash settlement at the option of Mr. Alapont, the CEO
Option is treated as a liability award under SFAS No. 123(R), and the vested
portion of the CEO Option, aggregating $6.5 million, has been recorded as a
liability as of March 31, 2009. The remaining $1.5 million of total unrecognized
compensation cost as of March 31, 2009 related to non-vested stock options is
expected to be recognized ratably over the remaining term of Mr. Alapont’s
employment agreement.


29




Key
assumptions and related option-pricing models used by Federal-Mogul are
summarized in the following table:





March 31, 2009 ValuationPlain Vanilla
                              Options
                            
                            
                            Options
                              Connected
                              to Deferred
                              Compensation
                            
                            
                            Deferred
                              CompensationValuation Model
                            
                            Black-Scholes
                            
                            
                            Monte Carlo
                            
                            
                            Monte CarloExpected
      volatility
                            
                            
                            69
                            %
                            
                            
                            69
                            %
                            
                            
                            69
                            %Expected
      dividend yield
                            
                            
                            0
                            %
                            
                            
                            0
                            %
                            
                            
                            0
                            %Risk-free
      rate over the estimated expected option life
                            
                            
                            1.14
                            %
                            
                            
                            1.25
                            %
                            
                            
                            1.25
                            %Expected
      option life (in years)
                            
                            
                            2.97
                            
                            
                            
                            3.36
                            
                            
                            
                            3.36




14.
Pensions, Other Postemployment Benefits and Employee Benefit Plans




Automotive




Pensions
and Other Postemployment Benefits




Federal-Mogul
sponsors several defined benefit pension plans (“Pension Benefits”) and health
care and life insurance benefits (“Other Benefits”) for certain employees and
retirees around the world. Federal-Mogul funds the Pension Benefits based on the
funding requirements of federal and international laws and regulations in
advance of benefit payments and the Other Benefits as benefits are provided to
participating employees. The net periodic benefit costs for the three months
ended March 31, 2009 and the period March 1, 2008 through March 31, 2008 were
$32 million and $6 million, respectively.




15.
Preferred Limited Partner Units




Pursuant
to certain rights offerings consummated in 1995 and 1997, preferred units were
issued. Each preferred unit has a liquidation preference of $10.00 and entitles
the holder to receive distributions, payable solely in additional preferred
units, at the rate of $0.50 per preferred unit per annum (which is equal to a
rate of 5% of the liquidation preference thereof), payable annually at the end
of March (each referred to herein as a Payment Date). On any Payment Date, we,
subject to the approval of the Audit Committee, may opt to redeem all of the
preferred units for an amount, payable either in all cash or by issuance of our
depositary units, equal to the liquidation preference of the preferred units,
plus any accrued but unpaid distributions thereon. On March 31, 2010, we must
redeem all of the preferred units on the same terms as any optional
redemption.




Pursuant
to the terms of the preferred units, on February 23, 2009, we declared our
scheduled annual preferred unit distribution payable in additional preferred
units at the rate of 5% of the liquidation preference per preferred unit of
$10.00. The distribution was paid on March 31, 2009 to holders of record as of
March 17, 2009. A total of 624,925 additional preferred units were issued. As of
March 31, 2009, the number of authorized preferred units was 14,100,000. As of
March 31, 2009 and December 31, 2008, 13,127,179 and 12,502,254 preferred units
were issued and outstanding, respectively.




We
recorded $2 million of interest expense for the three months ended March 31,
2009 and $2 million for the three months ended March 31, 2008, in connection
with the preferred units distribution.




16.
Earnings per LP Unit




Basic
earnings per LP unit are based on net income attributable to Icahn Enterprises
allocable to limited partners after deducting preferred pay-in-kind
distributions to preferred unitholders. Net income allocable to limited partners
is divided by the weighted-average number of LP units outstanding. Diluted
earnings per LP unit are based on basic earnings adjusted for interest charges
applicable to the variable rate notes and earnings before the preferred
pay-in-kind distributions as well as the weighted-average number of units and
equivalent units outstanding. The preferred units are considered to be
equivalent units for the purpose of calculating earnings per LP unit. All
equivalent units have been excluded from the calculation of diluted earnings per
LP unit for the three months ended March 31, 2009 and 2008 as the effect of
including them would have been anti-dilutive.


30




The
following table sets forth the allocation of net income (loss) from continuing
operations attributable to Icahn Enterprises allocable to limited partners and
the computation of basic and diluted earnings per LP unit for the periods
indicated (in millions, except per unit data):




Three Months Ended March 31,2009
                                  
                                  
                                  2008Income
      (loss) from continuing operations attributable toIcahn
      Enterprises
                                  
                                  $
                                  1
                                  
                                  
                                  $
                                  (36
                                  )Less:
      Income from common control acquisitionsallocated
      to general partner
                                  
                                  
                                  -
                                  
                                  
                                  
                                  171
                                  
                                  
                                  
                                  (19
                                  )Limited
      partners' 98.01% share of income (loss)
                                  
                                  
                                  1
                                  
                                  
                                  
                                  (19
                                  )Basic
      and diluted income (loss) from continuing operationsattributable
      to Icahn Enterprises allocable to limited partners
                                  
                                  $
                                  1
                                  
                                  
                                  $
                                  (19
                                  )Basic
      and diluted income from discontinued operationsattributable
      to Icahn Enterprises allocable to limited partners
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  504
                                  (1)Weighted
      average LP units outstanding
                                  
                                  
                                  75
                                  
                                  
                                  
                                  70Basic
      and diluted earnings per LP Unit:Income
      (loss) from continuing operations per LP unit (basic and
      diluted)
                                  
                                  $
                                  0.01
                                  
                                  
                                  $
                                  (0.26
                                  )Income
      from discontinued operations per LP unit (basic and
    diluted)
                                  
                                  
                                  0.00
                                  
                                  
                                  
                                  7.14$
                                  0.01
                                  
                                  
                                  $
                                  6.88





(1)Includes a charge of $25 allocated to the general partner relating to the
sale of ACEP.




As their
effect would have been anti-dilutive, the following equivalent units have been
excluded from the weighted-average LP units outstanding for the periods
indicated (in millions):




Three
      Months EndedMarch
      31,2009
                        
                        
                        2008Redemption
      of preferred LP units
                        
                        
                        4
                        
                        
                        
                        1Variable
      rate notes
                        
                        
                        5
                        
                        
                        
                        5




17.
Segment Reporting




As of
March 31, 2009, our five reportable segments are: (1) Investment Management; (2)
Automotive; (3) Metals; (4) Real Estate and (5) Home Fashion. Our Investment
Management segment provides investment advisory and certain management services
to the Private Funds, but does not provide such services to any other entities,
individuals or accounts. Our Automotive segment consists of Federal-Mogul. Our
Metals segment consists of PSC Metals. Our Real Estate segment consists of
rental real estate, residential property development and the operation of resort
properties associated with our residential developments. Our Home Fashion
segment consists of WPI. In addition to our five reportable segments, we present
the results of the Holding Company which includes the unconsolidated results of
Icahn Enterprises and Icahn Enterprises Holdings, and investment activity and
expenses associated with the activities of the Holding Company.




We assess
and measure segment operating results based on segment earnings as disclosed
below. Segment earnings from operations are not necessarily indicative of cash
available to fund cash requirements, nor synonymous with cash flow from
operations. Certain terms of financings for our Automotive, Home Fashion and
Real Estate segments impose restrictions on the segments’ ability to transfer
funds to us, including restrictions on dividends, distributions, loans and other
transactions.


31




In the
table below, the Investment Management segment is represented by the first four
columns. The first column, entitled Icahn Enterprises’ Interests, represents our
interests in the results of operations of the Investment Management segment
without the impact of eliminations arising from the consolidation of the Private
Funds. This includes the gross amount of any special profits interest
allocations, incentive allocations and returns on investments in the Private
Funds that are attributable to Icahn Enterprises only. This also includes gains
and losses on Icahn Enterprises’ direct investments in the Private Funds. The
second column represents the total consolidated income and expenses of the
Private Funds for all investors, including Icahn Enterprises, before
eliminations.  Additionally, the second column includes the results of
the General Partners and Icahn Capital.  The third column represents
the eliminations required in order to arrive at our consolidated U.S. GAAP
reported results for the segment, which is provided in the fourth
column.  (Amounts are in millions of dollars).




Three
      Months Ended March 31, 2009Investment
      ManagementIcahn
                                    
                                    
                                    Consolidated
                                    
                                    
                                    
                                    
                                    
                                    U.S.
      GAAPEnterprises'
                                    
                                    
                                    Private
                                    
                                    
                                    
                                    
                                    
                                    Investment
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    Real
                                    
                                    
                                    Home
                                    
                                    
                                    Holding
                                    
                                    
                                    ConsolidatedInterests
                                    
                                    
                                    Funds
                                    
                                    
                                    Eliminations
                                    
                                    
                                    Management
                                    
                                    
                                    Automotive
                                    
                                    
                                    Metals
                                    
                                    
                                    Estate
                                    
                                    
                                    Fashion
                                    
                                    
                                    Company
                                    
                                    
                                    ResultsRevenues:Net
      sales
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,238
                                    
                                    
                                    $
                                    76
                                    
                                    
                                    $
                                    22
                                    
                                    
                                    $
                                    84
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,420Special
      profits interest allocations
                                    
                                    
                                    87
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (87
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Incentive
      allocations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      gain (loss) from investment activities
                                    
                                    
                                    71
                                    (1)
                                    
                                    
                                    259
                                    
                                    
                                    
                                    (71
                                    )
                                    
                                    
                                    259
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (8
                                    )
                                    
                                    
                                    251Interest,
      dividends and other income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    75
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    75
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    79Other
      income, net
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    14
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    16158
                                    
                                    
                                    
                                    334
                                    
                                    
                                    
                                    (158
                                    )
                                    
                                    
                                    334
                                    
                                    
                                    
                                    1,254
                                    
                                    
                                    
                                    77
                                    
                                    
                                    
                                    22
                                    
                                    
                                    
                                    85
                                    
                                    
                                    
                                    (6
                                    )
                                    
                                    
                                    1,766Costs
      and expenses
                                    
                                    
                                    9
                                    
                                    
                                    
                                    19
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    28
                                    
                                    
                                    
                                    1,315
                                    
                                    
                                    
                                    114
                                    
                                    
                                    
                                    14
                                    
                                    
                                    
                                    102
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    1,577Interest
      expense
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    34
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    34
                                    
                                    
                                    
                                    729
                                    
                                    
                                    
                                    20
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    29
                                    
                                    
                                    
                                    1,349
                                    
                                    
                                    
                                    114
                                    
                                    
                                    
                                    16
                                    
                                    
                                    
                                    103
                                    
                                    
                                    
                                    38
                                    
                                    
                                    
                                    1,649Income
      (loss) from continuing operations before incometax
      (expense) benefit
                                    
                                    
                                    149
                                    
                                    
                                    
                                    314
                                    
                                    
                                    
                                    (158
                                    )
                                    
                                    
                                    305
                                    
                                    
                                    
                                    (95
                                    )
                                    
                                    
                                    (37
                                    )
                                    
                                    
                                    6
                                    
                                    
                                    
                                    (18
                                    )
                                    
                                    
                                    (44
                                    )
                                    
                                    
                                    117Income
      tax (expense) benefit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    14
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    10Income
      (loss) from continuing operations
                                    
                                    
                                    149
                                    
                                    
                                    
                                    314
                                    
                                    
                                    
                                    (158
                                    )
                                    
                                    
                                    305
                                    
                                    
                                    
                                    (98
                                    )
                                    
                                    
                                    (23
                                    )
                                    
                                    
                                    6
                                    
                                    
                                    
                                    (18
                                    )
                                    
                                    
                                    (45
                                    )
                                    
                                    
                                    127Less:
      (Income) loss from continuing operationsattributable
      to non-controlling
                                      interests
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (223
                                    )
                                    
                                    
                                    67
                                    
                                    
                                    
                                    (156
                                    )
                                    
                                    
                                    24
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    6
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (126
                                    )Income
      (loss) from continuing operations attributableto
      Icahn Enterprises
                                    
                                    $
                                    149
                                    
                                    
                                    $
                                    91
                                    
                                    
                                    $
                                    (91
                                    )
                                    
                                    $
                                    149
                                    
                                    
                                    $
                                    (74
                                    )
                                    
                                    $
                                    (23
                                    )
                                    
                                    $
                                    6
                                    
                                    
                                    $
                                    (12
                                    )
                                    
                                    $
                                    (45
                                    )
                                    
                                    $
                                    1





Three
      Months Ended March 31, 2008Investment
      ManagementIcahn
                                    
                                    
                                    Consolidated
                                    
                                    
                                    
                                    
                                    
                                    U.S.
      GAAPEnterprises'Interests
                                    
                                    
                                    PrivateFunds
                                    
                                    
                                    Eliminations
                                    
                                    
                                    InvestmentManagement
                                    
                                    
                                    Automotive2
                                    
                                    
                                    Metals
                                    
                                    
                                    RealEstate
                                    
                                    
                                    HomeFashion
                                    
                                    
                                    HoldingCompany
                                    
                                    
                                    ConsolidatedResultsRevenues:Net
      sales
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    646
                                    
                                    
                                    $
                                    303
                                    
                                    
                                    $
                                    23
                                    
                                    
                                    $
                                    114
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,086Special
      profits interest allocations
                                    
                                    
                                    5
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (5
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Incentive
      allocations
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      gain (loss) from investment activities
                                    
                                    
                                    (1
                                    )(1)
                                    
                                    
                                    (26
                                    )
                                    
                                    
                                    1
                                    
                                    
                                    
                                    (26
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    (24
                                    )Interest,
      dividends and other income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    40
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    40
                                    
                                    
                                    
                                    5
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    19
                                    
                                    
                                    
                                    66Other
      income, net
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    25
                                    
                                    
                                    
                                    14
                                    
                                    
                                    
                                    (5
                                    )
                                    
                                    
                                    14
                                    
                                    
                                    
                                    653
                                    
                                    
                                    
                                    303
                                    
                                    
                                    
                                    24
                                    
                                    
                                    
                                    115
                                    
                                    
                                    
                                    21
                                    
                                    
                                    
                                    1,130Costs
      and expenses
                                    
                                    
                                    8
                                    
                                    
                                    
                                    6
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    14
                                    
                                    
                                    
                                    639
                                    
                                    
                                    
                                    276
                                    
                                    
                                    
                                    19
                                    
                                    
                                    
                                    138
                                    
                                    
                                    
                                    7
                                    
                                    
                                    
                                    1,093Interest
      expense
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    21
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    34
                                    
                                    
                                    
                                    588
                                    
                                    
                                    
                                    7
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    15
                                    
                                    
                                    
                                    660
                                    
                                    
                                    
                                    276
                                    
                                    
                                    
                                    21
                                    
                                    
                                    
                                    138
                                    
                                    
                                    
                                    41
                                    
                                    
                                    
                                    1,151(Loss)
      income from continuingoperations
      before income tax (expense) benefit
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    7
                                    
                                    
                                    
                                    (5
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (7
                                    )
                                    
                                    
                                    27
                                    
                                    
                                    
                                    3
                                    
                                    
                                    
                                    (23
                                    )
                                    
                                    
                                    (20
                                    )
                                    
                                    
                                    (21
                                    )Income
      tax (expense) benefit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (10
                                    )
                                    
                                    
                                    (11
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    (20
                                    )(Loss)
      income from continuing operations
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    7
                                    
                                    
                                    
                                    (5
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (17
                                    )
                                    
                                    
                                    16
                                    
                                    
                                    
                                    3
                                    
                                    
                                    
                                    (23
                                    )
                                    
                                    
                                    (19
                                    )
                                    
                                    
                                    (41
                                    )Less:
      (Income) loss fromcontinuing 
      operations attributable to non-controlling interests
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (2
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    5(Loss)
      income from continuingoperations
      attributable to Icahn Enterprises
                                    
                                    $
                                    (3
                                    )
                                    
                                    $
                                    6
                                    
                                    
                                    $
                                    (6
                                    )
                                    
                                    $
                                    (3
                                    )
                                    
                                    $
                                    (17
                                    )
                                    
                                    $
                                    16
                                    
                                    
                                    $
                                    3
                                    
                                    
                                    $
                                    (16
                                    )
                                    
                                    $
                                    (19
                                    )
                                    
                                    $
                                    (36
                                    )





(1)
            We
      made investments aggregating $1.2 billion in the Private Funds for which
      no special profits interest allocations or incentive allocations are
      applicable. As of March 31, 2009, the total value of these investments is
      $977 million, with an unrealized gain of $67 million and unrealized loss
      of $1 million for the three months ended March 31, 2009 and 2008,
      respectively. These amounts are reflected in the Private Funds’ net assets
      and earnings.




(2)
            Automotive results
      are for the period March 1, 2008 through March 31,
  2008.




32




Total
assets by reportable segment are not presented because there have been no
material changes for the three months ended March 31, 2009.




18.  Income
Taxes





We
recorded an income benefit of $10 million and an income tax expense of $20
million on pre-tax income of $117 million and pre-tax loss of $21 million for
the three months ended March 31, 2009 and 2008, respectively.  Our
effective income tax rate was (8.5)% and (95.2)% for the respective
periods.  The difference between the effective tax rate and the
statutory federal rate of 35% is due principally to income or losses from
partnership entities in which taxes are the responsibility of the partners, as
well as changes in valuation allowances.




19.
Commitments and Contingencies




Federal-Mogul




Environmental
Matters





Federal-Mogul
has been designated as a potentially responsible party (“PRP”) by the United
States Environmental Protection Agency, other national environmental agencies
and various provincial and state agencies with respect to certain sites with
which Federal-Mogul may have had a direct or indirect involvement. PRP
designation typically requires the funding of site investigations and subsequent
remedial activities.





Many of
the sites that are likely to be the costliest to remediate are often current or
former commercial waste disposal facilities to which numerous companies sent
wastes. Despite the joint and several liability that might be imposed on
Federal-Mogul pertaining to these sites, Federal-Mogul’s share of the total
waste sent to these sites has generally been small. The other companies that
sent wastes to these sites, often numbering in the hundreds or more, generally
include large, solvent, publicly owned companies and in most such situations the
government agencies and courts have imposed liability in some reasonable
relationship to contribution of waste. Thus, Federal-Mogul believes its exposure
for liability at these sites is limited.





Federal-Mogul
has also identified certain other present and former properties at which it may
be responsible for cleaning up or addressing environmental contamination, in
some cases as a result of contractual commitments. Federal-Mogul is actively
seeking to resolve these actual and potential statutory, regulatory and
contractual obligations. Although difficult to quantify based on the complexity
of the issues, Federal-Mogul has accrued amounts corresponding to its best
estimate of the costs associated with such regulatory and contractual
obligations on the basis of available information from site investigations and
best professional judgment of consultants.





Federal-Mogul
is a party to two lawsuits in Ohio and Michigan relating to indemnification
for costs arising from environmental releases from industrial operations of the
predecessor company to Federal-Mogul prior to 1986. In the Ohio lawsuit brought
by Federal-Mogul against a number of insurers, most of the insurer-defendants
have been dismissed because of settlements that Federal-Mogul has reached with
them. The case is proceeding against several non-settling insurers. In the
insurer-initiated Michigan lawsuit, Federal-Mogul has settled with the insurer
that initiated the action, and these two parties have jointly filed a motion for
dismissal of the action. The settlements with insurers reached by Federal-Mogul
during the three months ended March, 31 2009 resulted in a net recovery to
Federal-Mogul of $12 million. Federal-Mogul continues to engage in settlement
discussions with several of the parties remaining in the Ohio case, although no
assurances can be given regarding the outcome of such discussions.





Total
environmental reserves were $24 million and $26 million at March 31, 2009 and
December 31, 2008, respectively, and are included in accounts payable, accrued
expenses and other liabilities in our consolidated balance
sheet.


33


Federal-Mogul
believes that recorded environmental liabilities will be adequate to cover its
estimated liability for its exposure in respect to such matters. In the event
that such liabilities were to significantly exceed the amounts recorded by
Federal-Mogul, our Automotive segment’s results of operations could be
materially affected. At March 31, 2009, Federal-Mogul estimates that reasonably
possible material additional losses above and beyond its best estimate of
required remediation costs as recorded to be $44 million.




Conditional
Asset Retirement Obligations





Federal-Mogul
records conditional asset retirement obligations (“CARO”) in accordance FIN 47,
Accounting for Conditional
Asset Retirement Obligations – an interpretation of FASB Statement 143
(“FIN 47”), when the amount can be reasonably estimated, typically upon the
expectation that an operating site may be closed or sold. Federal-Mogul has
identified sites with contractual obligations and several sites that are closed
or expected to be closed and sold in connection with Restructuring 2009. In
connection with these sites, Federal-Mogul has accrued $27 million each as of
March 31, 2009 and December 31, 2008 for CARO, primarily related to anticipated
costs of removing hazardous building materials, and has considered impairment
issues that may result from capitalization of CARO in accordance with SFAS No.
144.





Federal-Mogul
has additional CARO, also primarily related to removal costs of hazardous
materials in buildings, for which it believes reasonable cost estimates cannot
be made at this time because Federal-Mogul does not believe it has a reasonable
basis to assign probabilities to a range of potential settlement dates for these
retirement obligations. Accordingly, Federal-Mogul is currently unable to
determine amounts to accrue for CARO at such sites.





For those
sites that Federal-Mogul identifies in the future for closure or sale, or for
which it otherwise believes it has a reasonable basis to assign probabilities to
a range of potential settlement dates, Federal-Mogul will review these sites for
both CARO in accordance with FIN 47 and impairment issues in accordance with
SFAS No. 144.




Other
Matters





Federal-Mogul
is involved in other legal actions and claims, directly and through its
subsidiaries. We do not believe that the outcomes of these other actions or
claims are likely to have a material adverse effect on the operating results or
cash flows of our Automotive segment. However, we cannot predict the outcome of
these proceedings or the ultimate impact on our investment in Federal-Mogul and
its subsidiaries.




WPI
Litigation





We are
defendants in two lawsuits, one in federal court in New York and one in the
Delaware state court, challenging, among other matters, the status of our
ownership interests in the common and preferred stock of WPI.





We
continue to vigorously defend against all claims asserted in the federal and
Delaware proceedings and believe that we have valid defenses. However, we cannot
predict the outcome of these proceedings or the ultimate impact on our
investment in WPI and its subsidiaries or the business prospects of WPI and its
subsidiaries.





If we
were to lose control of WPI, it could adversely affect the business and
prospects of WPI and the value of our investment in it. In addition, we
consolidated the balance sheet of WPI as of March 31, 2009 and WPI’s results of
operations for the period from the date of acquisition (August 8, 2005) through
March 31, 2009. If we were to own less than 50% of the outstanding common stock
or the challenge to our preferred stock ownership is successful, we would have
to evaluate whether we should consolidate WPI and, if so, our consolidated
financial statements could be materially different from those presented for all
periods presented.




National
Energy Group, Inc.





National
Energy Group, Inc. (“NEGI”) is a defendant, together with Icahn Enterprises and
various individuals, including one of our current directors, as additional
defendants, in a purported stockholder derivative and class action lawsuit filed
in February 2008 alleging that among other things, certain of NEGI’s current and
former officers and directors breached their fiduciary duties to NEGI and its
stockholders in connection with NEGI’s sale of its 50% interest in an oil and
gas holding company. Following such disposition, NEGI has had no business and
its principal assets consist of cash and short term investments which currently
aggregate approximately $48 million. In March, 2008, NEGI dissolved and filed a
Form 15 with the SEC deregistering its securities with the SEC under the
Exchange Act.  As a result, NEGI’s status as a public company has been
suspended. No cash distributions will be made to NEGI’s shareholders until the
NEGI board determines that NEGI has paid, or made adequate provision for the
payment of, its liabilities and obligations, including any liabilities relating
to the lawsuit.


34





NEGI
believes it has meritorious defenses to all claims and will vigorously defend
the action; however, we cannot predict the outcome of the litigation on us or on
our interest in NEGI.




PSC
Metals




Environmental
Matters





PSC
Metals has been designated as a PRP by U.S. federal and state superfund laws
with respect to certain sites with which PSC Metals may have had a direct or
indirect involvement. It is alleged that PSC Metals and its subsidiaries or
their predecessors transported waste to the sites, disposed of waste at the
sites or operated the sites in question. PSC Metals has reviewed the nature and
extent of the allegations, the number, connection and financial ability of other
named and unnamed potentially responsible parties and the nature and estimated
cost of the likely remedy. Based on reviewing the nature and extent of the
allegations, PSC Metals has estimated its liability to remediate these sites to
be immaterial at each of March 31, 2009 and December 31, 2008. If it is
determined that PSC has liability to remediate those sites and that more
expensive remediation approaches are required in the future, PSC Metals could
incur additional obligations, which could be material.





Certain
of PSC Metals’ facilities are environmentally impaired in part as a result of
operating practices at the sites prior to their acquisition by PSC Metals and as
a result of PSC Metals’ operations. PSC Metals has established procedures to
periodically evaluate these sites, giving consideration to the nature and extent
of the contamination. PSC Metals has provided for the remediation of these sites
based upon management’s judgment and prior experience. PSC Metals has estimated
the liability to remediate these sites to be $24 million at each of March 31,
2009 and December 31, 2008. Management believes, based on past experience that
the vast majority of these environmental liabilities and costs will be assessed
and paid over an extended period of time. PSC Metals believes that it will be
able to fund such costs in the ordinary course of business.





Estimates
of PSC Metals’ liability for remediation of a particular site and the method and
ultimate cost of remediation require a number of assumptions that are inherently
difficult to make, and the ultimate outcome may be materially different from
current estimates. Moreover, because PSC Metals has disposed of waste materials
at numerous third-party disposal facilities, it is possible that PSC Metals will
be identified as a PRP at additional sites. The impact of such future events
cannot be estimated at the current time.




20.
Subsequent Events




Investment
Management




Based on
values at March 31, 2009, the Private Funds have received redemption notices of
approximately 10% of the net assets under management as of March 31, 2009 for
redemptions effective June 30, 2009.




Declaration
of Distribution on Depositary Units




On May 4,
2009, the Board of Directors approved a payment of a quarterly cash distribution
of $0.25 per unit on our depositary units payable in the second quarter of
fiscal 2009. The distribution will be paid on June 3, 2009, to depositary
unitholders of record at the close of business on May 22, 2009. Under the terms
of the indenture dated April 5, 2007 governing our variable rate notes due 2013,
we will also be making a $0.15 distribution to holders of these notes in
accordance with the formula set forth in the indenture.


35




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of
Directors and Partners of
 Icahn
Enterprises L.P.
 
 We have
reviewed the accompanying consolidated interim balance sheet of Icahn
Enterprises L.P. and Subsidiaries (the “Partnership”) (a Delaware limited
partnership) as of March 31, 2009, and the related  consolidated
interim statements of operations and cash flows for the three-month periods
ended March 31, 2009 and 2008, and the consolidated interim statement of changes
in partners’ equity and comprehensive income for the three-month period ended
March 31, 2009.  These consolidated interim financial statements are
the responsibility of the Partnership’s management.
 
 We were
furnished with the report of other accountants on their reviews of the
consolidated financial statements of Federal-Mogul Corporation, a subsidiary,
whose total assets as of March 31, 2009, and whose revenues for the three-month
period ended March 31, 2009 and the period from February 29, 2008 (date of
consolidation) through March 31, 2008, constituted $6.9 billion, $1.3 billion
and $0.7 billion, respectively, of the related consolidated totals.
 
 We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.  Accordingly, we
do not express such an opinion.
 
 Based on
our reviews and the report of other accountants, we are not aware of any
material modifications that should be made to the accompanying consolidated
interim financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
 
 We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
the Partnership as of December 31, 2008, and the related consolidated statements
of operations, changes in partners’ equity and comprehensive income, and cash
flows for the year then ended (not presented herein); and in our report dated
March 4, 2009, we expressed an unqualified opinion on those consolidated
financial statements.  Our report made reference to the report of
other auditors as it relates to amounts included for Federal-Mogul Corporation,
a subsidiary, and contained explanatory paragraphs relating to the change in
method of accounting for its investments with the adoption of SFAS No. 157 and
SFAS No. 159 in 2007. As described in Note 1, on January 1, 2009, the
Partnership adopted SFAS No. 160, which resulted in revisions to the December
31, 2008 consolidated balance sheet for the Partnership’s non-controlling
interests. We have not audited and reported on the revised balance sheet
reflecting the change in the method of accounting for non-controlling
interests.
 
 /s/ Grant
Thornton LLP
 
 New York,
New York
 May 6,
2009


36


Report
of Independent Registered Public Accounting Firm





To the
Board of Directors and Shareholders of


Federal-Mogul
Corporation





We have
reviewed the consolidated balance sheet of Federal-Mogul Corporation and
subsidiaries as of March 31, 2009, and the related consolidated statements of
operations and cash flows for the three-month periods ended March 31, 2009 and
2008, included in its Form 10-Q for the quarter ended March 31, 2009 (and not
separately presented herein).  These financial statements are the
responsibility of the Company's management.





We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole.  Accordingly, we do not express such an
opinion.





Based on
our review, we are not aware of any material modifications that should be made
to the consolidated financial statements referred to above for them to be in
conformity with U.S. generally accepted accounting principles.





We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Federal-Mogul Corporation and subsidiaries as of December 31, 2008, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the year ended December 31, 2008 (not presented herein) and
in our report dated February 24, 2009, we expressed an unqualified opinion on
those consolidated financial statements and included an explanatory paragraph
for the application of AICPA Statement of Position 90-7, Financial Reporting by Entities
under the Bankruptcy Codeand a change in method of accounting for
pensions and other postretirement plans in 2006 and tax uncertainties in
2007.  As described in Note 1, on January 1, 2009, Federal-Mogul
Corporation and subsidiaries changed its method of accounting for noncontrolling
interests on a retrospective basis resulting in revision of the December 31,
2008 consolidated balance sheet.  We have not audited and reported on
the revised balance sheet reflecting the change in the method of accounting for
noncontrolling interests.





/s/ Ernst
& Young LLP





Detroit,
Michigan


May 5,
2009


37


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations




Management’s
discussion and analysis of financial condition and results of operations is
comprised of the following sections:




(1)   Overview




·
            Introduction




·
            Other
      Significant Events




(2)   Results
of Operations




·
            Overview




·
            Consolidated
      Financial Results of Continuing
Operations




·
            Investment
      Management




·
            Automotive




·
            Metals




·
            Real
      Estate




·
            Home
      Fashion




·
            Holding
      Company




·
            Interest
      Expense — Automotive, Holding Company and
Other




·
              Income
      Taxes·
              Discontinued
      Operations




(3)   Liquidity
and Capital Resources




·
            Holding
      Company




·
            Consolidated
      Cash Flows




·
            Borrowings




·
            Contractual
      Commitments




·
            Off-Balance
      Sheet Arrangements




·
            Discussion
      of Segment Liquidity and Capital
Resources




·
            Investment
      Management




·
            Automotive




·
            Metals




·
            Real
      Estate




·
            Home
      Fashion




·
            Distributions




(4)   Critical
Accounting Policies and Estimates




(5)   Forward-Looking
Statements


38


The
following discussion is intended to assist you in understanding our present
business and the results of operations together with our present financial
condition. This section should be read in conjunction with our Consolidated
Financial Statements and the accompanying notes.




Overview




Introduction





Icahn
Enterprises L.P., or Icahn Enterprises, 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., or 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., or Icahn Enterprises GP, our sole general partner, which is owned and
controlled by Mr. Carl C. Icahn, owns a 1% general partner interest in both us
and Icahn Enterprises Holdings, representing an aggregate 1.99% general partner
interest in us and Icahn Enterprises Holdings. As of March 31, 2009, affiliates
of Mr. Icahn owned 68,740,822 of our depositary units and 11,360,173 of our
preferred units, which represented approximately 91.9% and 86.5% of our
outstanding depositary units and preferred units, respectively.





We are a
diversified holding company owning subsidiaries engaged in the following
operating businesses: Investment Management, Automotive, Metals, Real Estate and
Home Fashion. In addition to our operating businesses, we discuss the Holding
Company, which includes the unconsolidated results of Icahn Enterprises and
Icahn Enterprises Holdings, and investment activity and expenses associated with
the activities of the Holding Company.





In
accordance with United States generally accepted accounting principles, or U.S.
GAAP, assets transferred between entities under common control are accounted for
at historical cost similar to a pooling of interests, and the financial
statements of previously separate companies for all periods under common control
prior to the acquisition are restated on a consolidated basis.





Variations
in the amount and timing of gains and losses on our investments can be
significant. The results of our Real Estate and Home Fashion segments are
seasonal while our Automotive segment is moderately seasonal.




Other
Significant Events




Declaration
of Distribution on Depositary Units




On May 4,
2009, the Board of Directors approved a payment of a quarterly cash distribution
of $0.25 per unit on our depositary units payable in the second quarter of
fiscal 2009. The distribution will be paid on June 3, 2009, to depositary
unitholders of record at the close of business on May 22, 2008. Under the terms
of the indenture dated April 5, 2007 governing our variable rate notes due 2013,
we will also be making a $0.15 distribution to holders of these notes in
accordance with the formula set forth in the indenture.




Results
of Operations




Overview




The key
factors affecting our financial position and results of operations for the three
months ended March 31, 2009, or the first quarter of fiscal 2009, are as
follows:





·
            Gross
      performance of 7.0% for the Private Funds, resulting in $87 million of
      special profits interest allocations revenues and unrealized gains of $67
      million on our investments in the Private
Funds;


·
            Additional
      investment of $250 million in the Private Funds, bringing our cumulative
      investment in the Private Funds to $1.2
billion;


·
            Loss
      from continuing operations attributable to Icahn Enterprises of $74
      million for our Automotive segment, including restructuring expenses of
      $38 million;


·
            Loss
      from continuing operations attributable to Icahn Enterprises of $23
      million for our Metals segment, including pretax impairment charges of $13
      million and charges to write-down inventory to current market prices of
      $13 million; and


·
            Loss
      from continuing operations attributable to Icahn Enterprises of $12
      million for our Home Fashion segment, including restructuring and
      impairment charges of $6
million.


39




Consolidated
Financial Results of Continuing Operations




The
following tables summarize revenues and income (loss) from continuing operations
attributed to Icahn Enterprises for each of our segments (in millions of
dollars):





Revenues1Three Months Ended March 31,2009
                          
                          
                          2008Investment
      Management
                          
                          $
                          334
                          
                          
                          $
                          14Automotive2
                          
                          
                          1,254
                          
                          
                          
                          653Metals
                          
                          
                          77
                          
                          
                          
                          303Real
      Estate
                          
                          
                          22
                          
                          
                          
                          24Home
      Fashion
                          
                          
                          85
                          
                          
                          
                          115Holding
      Company
                          
                          
                          (6
                          )
                          
                          
                          21Total
                          
                          $
                          1,766
                          
                          
                          $
                          1,130




Income (Loss) From
                        Continuing Operations
                        Attributable to
                        Icahn EnterprisesThree Months
      Ended March 31,2009
                      
                      
                      2008Investment
      Management
                      
                      $
                      149
                      
                      
                      $
                      (3
                      )Automotive2
                      
                      
                      (74
                      )
                      
                      
                      (17
                      )Metals
                      
                      
                      (23
                      )
                      
                      
                      16Real
      Estate
                      
                      
                      6
                      
                      
                      
                      3Home
      Fashion
                      
                      
                      (12
                      )
                      
                      
                      (16
                      )Holding
      Company
                      
                      
                      (45
                      )
                      
                      
                      (19
                      )Total
                      
                      $
                      1
                      
                      
                      $
                      (36
                      )




_____________________________


1Revenues
include interest, dividends and other income.


2Automotive
results for fiscal 2008 are for the period March 1, 2008 through March 31,
2008.




Investment
Management




Overview





Icahn
Onshore LP, or the Onshore GP, and Icahn Offshore LP, or the Offshore GP (and,
together with the Onshore GP, being referred to herein as the General Partners)
act as general partner of Icahn Partners LP, or the Onshore Fund, and the
Offshore Master Funds (as defined below), respectively. Effective January 1,
2008, in addition to providing investment advisory services to the Private
Funds, the General Partners provide or cause their affiliates to provide certain
administrative and back office services to the Private Funds. The General
Partners do not provide such services to any other entities, individuals or
accounts. Interests in the Private Funds are offered only to certain
sophisticated and accredited investors on the basis of exemptions from the
registration requirements of the federal securities laws and are not publicly
available. As referred to herein, the Offshore Master Funds consist of (i) Icahn
Partners Master Fund LP, (ii) Icahn Partners Master Fund II L.P. and (iii) Icahn
Partners Master Fund III L.P. The Onshore Fund and the Offshore Master Funds are
collectively referred to herein as the Investment Funds.





The
Offshore GP also acts as general partner of certain funds formed as a Cayman
Islands exempted limited partnership that invests in the Offshore Master Funds.
These funds, 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.


40





Continued
volatility characterized the first quarter of fiscal 2009, with the S&P 500
index down nearly 11% during this period.  Despite the volatility, the
Private Funds had a positive return for the first quarter of fiscal
2009.  We believe that the continuation of constrained credit markets
and a deepening global recession will continue to impact price volatility and
asset values.  The Private Funds’ positive performance was primarily
attributable to their short equity and short credit positions for the first
quarter of fiscal 2009.  Additionally, for the first quarter of fiscal
2009, the Private Funds’ long equity, credit and treasury positions were
essentially flat.  We expect that the remainder of fiscal 2009 will
continue to present opportunities for capitalizing on distressed
investing.  Based on values at March 31, 2009, the Private Funds have
received redemption notices of approximately 10% of the net assets under
management as of March 31, 2009 for redemptions effective June 30,
2009.





Revenues





The
Investment Management segment derives revenues from three sources: (1) special
profits interest allocations; (2) incentive allocations and (3) gains and losses
from our investments in the Private Funds.





Effective
January 1, 2008, the limited partnership agreements of the Investment Funds
provide that the applicable General Partner will receive a special profits
interest allocation at the end of each calendar year from each capital account
maintained in the Investment Funds that is attributable to: (i) in the case of
the Onshore Fund, each fee-paying limited partner in the Onshore Fund and (ii)
in the case of the Feeder Funds, each fee-paying investor in the Feeder Funds
(that excludes certain investors that are affiliates of Mr. Icahn) (in each
case, referred to herein as an Investor). This allocation is generally equal to
0.625% of the balance in each fee-paying capital account as of the beginning of
each quarter (for each Investor, the Target Special Profits Interest Amount)
except that amounts are allocated to the General Partners in respect of special
profits interest allocations only to the extent that net increases (i.e., net
profits) are allocated to an Investor for the fiscal year. Accordingly, any
special profits interest allocations allocated to the General Partners in
respect of an Investor in any year cannot exceed the net profits allocated to
such Investor in such year.





The
General Partners waived the special profits interest allocations and incentive
allocations for Icahn Enterprises’ investments in the Private Funds and Mr.
Icahn’s direct and indirect holdings and may, in their sole discretion, modify
or may elect to reduce or waive such fees with respect to any investor that is
an affiliate, employee or relative of Mr. Icahn or his affiliates, or for any
other investor.





All of
the special profits interest allocations and  incentive allocations
are eliminated in consolidation; however, our share of the net income from the
Private Funds includes the amount of these allocations.





Our
Investment Management results are driven by the combination of the Private
Funds’ AUM and the investment performance of the Private Funds, except, as
discussed above, that special profits interest allocations are only earned to
the extent that there are sufficient net profits generated from the Private
Funds to cover such allocations.





Incentive
allocations are determined based on the aggregate amount of net profits earned
by the Investment Funds (after the special profits interest allocation is made).
Incentive allocations are determined by the investment performance of the
Private Funds, which is a principal determinant of the long-term success of the
Investment Management segment because it enables AUM to increase through
retention of fund profits and by making it more likely to attract new investment
capital and minimize redemptions by Private Fund investors. Incentive
allocations are generally 25% of the net profits (both realized and unrealized)
generated by fee-paying investors in the Investment Funds and are subject to a
“high water mark” (whereby the General Partners do not earn incentive
allocations during a particular year even though the fund had a positive return
in such year until losses in prior periods are recovered). These allocations are
calculated and allocated to the capital accounts of the General Partners
annually except for incentive allocations earned as a result of investor
redemption events during interim periods.





The
General Partners and their affiliates also earn income (or are subject to
losses) through their investments in the Investment Funds. Icahn Enterprises
Holdings earns income (or is subject to losses) through its investment in the
Investment Funds. In both cases the income or losses consist of realized and
unrealized gains and losses on investment activities along with interest,
dividends and other income.


41




AUM
and Fund Performance





The table
below reflects changes to AUM for the three months ended March 31, 2009 and
2008. The end-of-period balances represent total AUM, including any accrued
special profits interest allocations and any incentive allocations and our own
investments in the Private Funds as well as investments of other affiliated
parties who have not been charged special profits interest
allocations  or incentive allocations for the periods presented (in
millions of dollars):





Three Months Ended March 31,2009
                  
                  
                  2008Balance,
      beginning of period
                  
                  $
                  4,368
                  
                  
                  $
                  7,511Net
      in-flows
                  
                  
                  212
                  
                  
                  
                  378Appreciation
                  
                  
                  322
                  
                  
                  
                  6Balance,
      end of period
                  
                  $
                  4,902
                  
                  
                  $
                  7,895Fee-paying
      AUM
                  
                  $
                  2,502
                  
                  
                  $
                  5,422




The
following table sets forth performance information for the Private Funds that
were in existence for the comparative periods presented. These gross returns
represent a weighted-average composite of the average gross returns, net of
expenses for the Private Funds.




Gross Return1for theThree Months Ended March 31,2009
                        
                        
                        2008Private
      Funds
                        
                        
                        7.0
                        %
                        
                        
                        0.1
                        %


(1)
            These
      returns are indicative of a typical investor who has been invested since
      inception of the Private Funds. The performance information is presented
      gross of any accrued special profits interest allocations but net of
      expenses. Past performance is not necessarily indicative of future
      results.




The
Private Funds’ aggregate gross performance was 7.0% for the first quarter of
fiscal 2009.  The Private Funds’ positive performance was primarily
attributable to their short equity and short credit positions for the first
quarter of fiscal 2009.  Additionally, for the first quarter of fiscal
2009, the Private Funds’ long equity, credit and treasury positions were
essentially flat.





Current
dislocations in the global financial markets and the lack of confidence
resulting from unprecedented systemic risks associated with derivative and
financial leverage may provide potential long-term opportunities for the Private
Funds.





The
Private Funds’ aggregate gross performance for the first quarter of fiscal 2008
was 0.1%. BEA Systems, a core position, was a positive contributor to
performance due to the announcement that Oracle would acquire it. Defensively
positioned, the Private Funds’ short exposure in equity and credit produced
gains due to the negative U.S. equity markets and the widening of credit
spreads. Those gains were offset by the Private Funds’ largest position,
Motorola Inc, or Motorola, and other long positions which declined in value
during the first quarter of fiscal 2008.




Equity
positions in BEA Systems and Motorola have been previously disclosed in other
filings with the SEC.




Since
inception in November 2004, the Private Funds’ gross returns are 32.7%,
representing an annualized rate of return of 6.6% through March 31, 2009, which
is indicative of a typical investor who has invested since inception of the
Private Funds.  Past performance is not necessarily indicative of
future results, particularly in the near-term given current market
conditions.




Operating
Results





We
consolidate certain of the Private Funds into our results. Accordingly, in
accordance with U.S. GAAP, any special profits interest allocations, incentive
allocations and earnings on investments in the Private Funds are eliminated in
consolidation. These eliminations have no impact on our net income, however, as
our allocated share of the net income from the Private Funds includes the amount
of these allocations and earnings.





The
tables below provide a reconciliation of the unconsolidated revenues and
expenses of our interest in the General Partners and Icahn Capital L.P., or
Icahn Capital, to the consolidated U.S. GAAP revenues and expenses. The first
column represents the results of operations of our interest in the General
Partners and Icahn Capital without the impact of consolidating the Private Funds
or the eliminations arising from the consolidation of these funds. This includes
the gross amount of any special profits interest allocations, incentive
allocations and returns on investments in the Private Funds that is attributable
to us only. This also includes gains and losses on our direct investments in the
Private Funds. The second column represents the total consolidated income and
expenses of the Private Funds for all investors, including us, before
eliminations. The third column represents the eliminations required in order to
arrive at our consolidated U.S. GAAP reported income for the segment, which is
provided in the fourth column.


42





Summarized
income statement information on a deconsolidated basis and on a U.S. GAAP basis
for the three months ended March 31, 2009 and 2008 as follows (in millions of
dollars):




Three Months Ended March 31, 2009Icahn
                      
                      
                      Consolidated
                      
                      
                      
                      
                      
                      TotalEnterprises'
                      
                      
                      Private
                      
                      
                      
                      
                      
                      U.S.
      GAAPInterests
                      
                      
                      Funds
                      
                      
                      Eliminations
                      
                      
                      ResultsRevenues:Special
      profits interest allocations
                      
                      $
                      87
                      
                      
                      $
                      -
                      
                      
                      $
                      (87
                      )
                      
                      $
                      -Incentive
      allocations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      gains from investment activities
                      
                      
                      71
                      (1)
                      
                      
                      259
                      
                      
                      
                      (71
                      )
                      
                      
                      259Interest,
      dividends and other income
                      
                      
                      -
                      
                      
                      
                      75
                      
                      
                      
                      -
                      
                      
                      
                      75158
                      
                      
                      
                      334
                      
                      
                      
                      (158
                      )
                      
                      
                      334Costs
      and expenses
                      
                      
                      9
                      
                      
                      
                      19
                      
                      
                      
                      -
                      
                      
                      
                      28Interest
      expense
                      
                      
                      -
                      
                      
                      
                      1
                      
                      
                      
                      -
                      
                      
                      
                      19
                      
                      
                      
                      20
                      
                      
                      
                      -
                      
                      
                      
                      29Income
      from continuing operationsbefore
      income tax expense
                      
                      
                      149
                      
                      
                      
                      314
                      
                      
                      
                      (158
                      )
                      
                      
                      305Income
      tax expense
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Income
      from continuing operations
                      
                      
                      149
                      
                      
                      
                      314
                      
                      
                      
                      (158
                      )
                      
                      
                      305Less:
      Income from continuing operations attributable to non-controlling
      interests
                      
                      
                      -
                      
                      
                      
                      (223
                      )
                      
                      
                      67
                      
                      
                      
                      (156
                      )Income
      from continuing operations attributable to Icahn
    Enterprises
                      
                      $
                      149
                      
                      
                      $
                      91
                      
                      
                      $
                      (91
                      )
                      
                      $
                      149





Three
      Months Ended March 31, 2008Icahn
                      
                      
                      Consolidated
                      
                      
                      
                      
                      
                      TotalEnterprises'
                      
                      
                      Private
                      
                      
                      
                      
                      
                      U.S.
      GAAPInterests
                      
                      
                      Funds
                      
                      
                      Eliminations
                      
                      
                      ResultsRevenues:Special
      profit interests allocations
                      
                      $
                      5
                      
                      
                      $
                      -
                      
                      
                      $
                      (5
                      )
                      
                      $
                      -Incentive
      allocations
                      
                      
                      1
                      
                      
                      
                      -
                      
                      
                      
                      (1
                      )
                      
                      
                      -Net
      loss from investment activities
                      
                      
                      (1
                      )(1)
                      
                      
                      (26
                      )
                      
                      
                      1
                      
                      
                      
                      (26
                      )Interest,
      dividends and other income
                      
                      
                      -
                      
                      
                      
                      40
                      
                      
                      
                      -
                      
                      
                      
                      405
                      
                      
                      
                      14
                      
                      
                      
                      (5
                      )
                      
                      
                      14Costs
      and expenses
                      
                      
                      8
                      
                      
                      
                      6
                      
                      
                      
                      -
                      
                      
                      
                      14Interest
      expense
                      
                      
                      -
                      
                      
                      
                      1
                      
                      
                      
                      -
                      
                      
                      
                      18
                      
                      
                      
                      7
                      
                      
                      
                      -
                      
                      
                      
                      15(Loss)
      income from continuing operationsbefore
      income tax expense
                      
                      
                      (3
                      )
                      
                      
                      7
                      
                      
                      
                      (5
                      )
                      
                      
                      (1
                      )Income
      tax expense
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -(Loss)
      income from continuing operations
                      
                      
                      (3
                      )
                      
                      
                      7
                      
                      
                      
                      (5
                      )
                      
                      
                      (1
                      )Less:
      Income from continuing operations attributable to non-controlling
      interests
                      
                      
                      -
                      
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )
                      
                      
                      (2
                      )(Loss)
      income from continuing operations attributable to Icahn
      Enterprises
                      
                      $
                      (3
                      )
                      
                      $
                      6
                      
                      
                      $
                      (6
                      )
                      
                      $
                      (3
                      )





1 We made
investments aggregating $1.2 billion in the Private Funds for which no special
profits interest allocations or incentive  allocations are applicable.
As of March 31, 2009, the total value of these investments is $977 million, with
an unrealized gain of $67 million and unrealized loss of $1 million for the
three months ended March 31, 2009 and 2008, respectively. Additionally, Carl C.
Icahn, along with his affiliates, make investments in the Private Funds (other
than the amounts invested by us and our affiliates). These investments are
also not subject to special profits interest allocations or incentive
allocations. As of March 31, 2009 and December 31, 2008, the total fair value of
these investments was approximately $1.2 billion and $1.1 billion,
respectively.




43




As of
March 31, 2009, the full Target Special Profits Interest Amount was $91 million,
which includes a carryforward Target Special Profits Interest Amount of $70
million from December 31, 2008, a Target Special Profits Interest Amount for the
first quarter of fiscal 2009, and a hypothetical return on the full Target
Special Profits Interest Amount from the Investment Funds. Of the full Target
Special Profits Interest Amount as of March 31, 2009, $87 million was accrued as
a special profits interest allocation for the first quarter of fiscal 2009 and
$4 million will be carried forward to the extent that there are
sufficient  net profits in the Investment Funds during the investment
period to cover such amount. This compares with a special profits interest
allocation accrual for the first quarter of fiscal 2008 of $5
million.




Incentive
allocations were immaterial for the three months ended March 31, 2009 while
incentive allocations were $1 million for the three months ended March 31, 2008.
The General Partners’ incentive allocations earned from the Private Funds are
accrued on a quarterly basis and are allocated to the General Partners at the
end of the Private Funds’ fiscal year (or sooner on redemptions).




The net
gain from investment activities of $71 million in the first quarter of fiscal
2009 consists of two components. The first reflects a net gain of $4 million
relating to the increase in the General Partners’ investment in the Private
Funds as a result of earned incentive allocations and the return on the General
Partners’ investment. In the first quarter of fiscal 2008, this amount was
immaterial. The second component includes a net investment gain in the first
quarter of fiscal 2009 of $67 million on our cumulative original investment of
$1.2 billion in the Private Funds as compared to a net investment loss of $1
million in the first quarter of fiscal 2008, at which time our cumulative
original investment in the Private Funds was $700 million.




Net
realized and unrealized gains of the Private Funds on investment activities were
$259 million for the first quarter of fiscal 2009 as compared to a loss of $26
million for the first quarter of fiscal 2008. This increase relates to the
positive performance of the Private Funds during the first quarter of fiscal
2009.




Interest,
dividends and other income increased by $35 million to $75 million for the first
quarter of fiscal 2009, compared to $40 million for the first quarter of fiscal
2008. The increase was primarily attributable to increases in amounts earned on
interest-paying investments.




The
General Partners and Icahn Capital’s costs and expenses increased by $1 million
to $9 million for the first quarter of fiscal 2009, compared to $8 million for
the first quarter of fiscal 2008. This increase was primarily due to an increase
in compensation awards relating to special profits interest allocations in the
first quarter of fiscal 2009.




The
Private Funds’ costs and expenses increased by $13 million to $20 million for
the first quarter of fiscal 2009, compared to $7 million for the first quarter
of fiscal 2008. This increase is primarily attributable to an increase in
dividends expense and appreciation of the deferred management fee payable for
the first quarter of fiscal 2009 as compared to the first quarter of fiscal
2008.





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,
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. Effective July 3, 2008,
we acquired a majority interest in Federal-Mogul.




Federal-Mogul
believes that its sales are well balanced between OEM and aftermarket as well as
domestic and international. During the first quarter of fiscal 2009,
Federal-Mogul derived 53% of its sales from the OE market and 47% from the
aftermarket. Federal-Mogul’s customers include the world’s largest automotive
OEMs and major distributors and retailers in the independent aftermarket. During
the first quarter of fiscal 2009, Federal-Mogul derived 44% of
its  sales in North America and 56% internationally. During the first
quarter of fiscal 2009, Federal-Mogul consolidated its product groups and
eliminated the Automotive Products group.  As of March 31, 2009,
Federal-Mogul is organized into four product groups: Powertrain Energy,
Powertrain Sealing and Bearings, Vehicle Safety and Protection, and Global
Aftermarket. Federal-Mogul has operations in established markets including
Canada, France, Germany, Italy, Japan, Spain, the United Kingdom and the United
States, and emerging markets including Brazil, China, Czech Republic, Hungary,
India, Korea, Mexico, Poland, Russia, Thailand and Turkey. 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.


44





Federal-Mogul’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed
with the SEC on February 24, 2009 contains a detailed description of its
business, products, industry, operating strategy and associated
risks.  Federal-Mogul’s most recent Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2009 was filed with the SEC on May 5,
2009.





In
accordance with U.S. GAAP, assets transferred between entities under common
control are accounted for at historical cost similar to a pooling of interests.
As of February 25, 2008 (the effective date of control by Thornwood Associates
Limited Partnership, or Thornwood, and, indirectly, by Carl C. Icahn) and
thereafter, as a result of our acquisition of a majority interest in
Federal-Mogul on July 3, 2008, we consolidated the financial position, results
of operations and cash flows of Federal-Mogul. We evaluated the activity between
February 25, 2008 and February 29, 2008 and, based on the immateriality of such
activity, concluded that the use of an accounting convenience date of February
29, 2008 was appropriate.





Although
Federal-Mogul’s results are included in our consolidated financial statements as
of March 1, 2008, as discussed above, we believe that a meaningful discussion of
Federal-Mogul’s results should encompass its results for the entire first
quarter of fiscal 2008.  Therefore, for comparative purposes, revenues
and earnings of Federal-Mogul for the three months ended March 31, 2008 are
provided below.  Additionally, Federal Mogul’s results for the period
March 1, 2008 through March 31, 2008 are provided below.





The four
product groups of our Automotive segment have been aggregated for purposes of
reporting our operating results below. Summarized statements of operations and
performance data for the Automotive segment for the first quarters of fiscal
2009 and fiscal 2008 and the period March 1, 2008 through March 31, 2008 as
follows (in millions of dollars):





PeriodThree Months Ended
                  
                  
                  Variance
                  
                  
                  March 1, 2008March 31,
                  
                  
                  2009 vs 2008
                  
                  
                  through2009
                  
                  
                  2008
                  
                  
                  $
                  
                  
                  
                  %
                  
                  
                  March 31, 2008Net
      sales
                  
                  $
                  1,238
                  
                  
                  $
                  1,859
                  
                  
                  $
                  (621
                  )
                  
                  
                  -33.4
                  %
                  
                  $
                  646Cost
      of sales
                  
                  
                  1,080
                  
                  
                  
                  1,593
                  
                  
                  
                  (513
                  )
                  
                  
                  -32.2
                  %
                  
                  
                  560Gross
      margin
                  
                  
                  158
                  
                  
                  
                  266
                  
                  
                  
                  (108
                  )
                  
                  
                  -40.6
                  %
                  
                  
                  86Expenses:Selling,
      general and administrative expenses
                  
                  
                  197
                  
                  
                  
                  235
                  
                  
                  
                  (38
                  )
                  
                  
                  -16.2
                  %
                  
                  
                  77Restructuring
      and impairment expenses, net
                  
                  
                  38
                  
                  
                  
                  2
                  
                  
                  
                  36
                  
                  
                  
                  1800.0
                  %
                  
                  
                  2Total
      expenses
                  
                  
                  235
                  
                  
                  
                  237
                  
                  
                  
                  (2
                  )
                  
                  
                  -0.8
                  %
                  
                  
                  79(Loss)
      income from continuing operations before interest, income taxes, 
      other income, net
                  
                  $
                  (77
                  )
                  
                  $
                  29
                  
                  
                  $
                  (106
                  )
                  
                  
                  N/M
                  
                  
                  $
                  7




Net
Sales





Net sales
decreased by $621 million, or 33.4%, to $1,238 million for the first quarter of
2009 compared to $1,859 million in the corresponding prior year
period.  In general, light and commercial vehicle OE production
declined in all regions with a net impact on Federal-Mogul’s net sales of $461
million. The largest OE production declines were concentrated in North America.
Despite these production declines, Federal-Mogul generally maintained its OE
market share in all regions, with increased aftermarket share concentrated in
North America. The impact of the U.S. dollar strengthening, primarily against
the euro, decreased reported net sales by $163 million.




Gross
margin





Gross
margin was $158 million, or 12.8% of net sales, for the first quarter of fiscal
2009 and $266 million, or 14.3% of net sales, for the first quarter of fiscal
2008. Favorable productivity in excess of labor and benefits inflation of $22
million and net customer price increases of $3 million were more than offset by
sales volume decreases that reduced margins by $159 million and material cost
increases of $18 million.The impact of the U.S.
dollar strengthening, primarily against the euro, decreased reported gross
margin by $21 million.





In
connection with fresh-start reporting completed as of December 31, 2007,
Federal-Mogul’s inventory balances as of that date were increased by $68
million. During the three months ended March 31, 2008, Federal-Mogul recognized
$68 million in additional cost of goods sold, which reduced gross margin by the
same. The non-recurrence of this one-time event has resulted in an increase in
gross margin for the three months ended March 31, 2009 when compared to the
corresponding prior year period.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses (“SG&A”) decreased by $38 million, or
16.2%, to $197 million.  The decrease was primarily due to an impact
of exchange movements of $15 million and lower professional fees directly
related to Chapter 11 and UK Administration of $9 million in the first quarter
of fiscal 2009 as compared to the corresponding prior year
period.   Additionally, research and development (“R&D”)
costs, which are included in SG&A, were lower by $13 million in the first
quarter of fiscal 2009 as compared to the corresponding prior year
period.  As a percentage of OE sales, R&D was 5% and 4% for the
first quarters of fiscal 2009 and fiscal 2008, respectively.


45




Restructuring
and Impairment Expenses, net





Restructuring
and impairment expenses increased by $36 million in the first quarter of fiscal
2009 to $38 million as compared to the corresponding prior year period. 
The increase is primarily due to “Restructuring 2009” (as defined below)
expenses of $38 million incurred in the first quarter of fiscal 2009. In
September 2008, Federal-Mogul announced a restructuring plan, herein referred to
as “Restructuring 2009,” designed to improve operating performance and respond
to increasingly challenging conditions in the global automotive market. This
plan, when combined with other workforce adjustments, is expected to reduce
Federal-Mogul’s global workforce by 8,600 positions. Federal-Mogul continues to
solidify the individual components of this plan, and will announce those
components as plans are finalized. Federal-Mogul expects to incur additional
restructuring expenses up to $18 million through the fiscal year ending December
31, 2009. As the majority of the costs expected to be incurred in relation to
Restructuring 2009 are related to severance, such activities are expected to
yield future annual savings at least equal to the incurred costs.




Metals




Our
Metals segment is conducted through our indirect, wholly owned subsidiary, PSC
Metals.




Summarized
statements of operations and performance data for PSC Metals for the three
months ended March 31, 2009 and 2008 are as follows (in millions of
dollars):




Three
      Months Ended
                      
                      
                      VarianceMarch
      31,
                      
                      
                      2009
      vs. 20082009
                      
                      
                      2008
                      
                      
                      $
                      
                      
                      
                      %Net
      sales
                      
                      $
                      76
                      
                      
                      $
                      303
                      
                      
                      $
                      (227
                      )
                      
                      
                      -74.9
                      %Cost
      of sales
                      
                      
                      98
                      
                      
                      
                      270
                      
                      
                      
                      (172
                      )
                      
                      
                      -63.7
                      %Gross
      profit
                      
                      
                      (22
                      )
                      
                      
                      33
                      
                      
                      $
                      (55
                      )
                      
                      
                      -166.7
                      %Selling,
      general and administrative expenses
                      
                      
                      3
                      
                      
                      
                      6
                      
                      
                      
                      (3
                      )
                      
                      
                      -50.0
                      %Impairment
      expenses
                      
                      
                      13
                      
                      
                      
                      -
                      
                      
                      
                      13
                      
                      
                      
                      N/M(Loss)
      income from continuing operations before interest,income
      taxes and other income, net
                      
                      $
                      (38
                      )
                      
                      $
                      27
                      
                      
                      $
                      (65
                      )
                      
                      
                      N/MFerrrous
      tons sold (in '000s)
                      
                      
                      208
                      
                      
                      
                      549Non-ferrous
      pounds sold (in '000s)
                      
                      
                      19,466
                      
                      
                      
                      34,016




Net sales
for the first quarter of fiscal 2009 decreased by $227 million, or 74.9%, to $76
million as compared to $303 million for the first quarter of fiscal 2008. This
decrease was primarily due to a $156 million decline in ferrous revenues.
Ferrous average pricing was approximately $147 per gross ton lower and ferrous
shipments were 341,000 gross tons lower in the first quarter of fiscal 2009
compared to the first quarter of fiscal 2008.   Revenues for all
product lines in the first quarter of fiscal 2009 were significantly lower
compared to the first quarter of fiscal 2008 as demand and prices for scrap
metal fell to extremely low levels primarily due to historically low steel mill
capacity utilization rates, as well as lower demand for metals from the housing,
construction, automotive and infrastructure sectors of the economy.




Gross
profit for the first quarter of fiscal 2009 decreased by $55 million, or 166.7%,
to a loss of $22 million compared to a $33 million profit in the first quarter
of fiscal 2008. As a percentage of net sales, cost of sales was 129% and 89% for
the first quarter of fiscal 2009 and fiscal 2008,
respectively.   Cost of sales for the first quarter of fiscal
2009 included a $13 million charge related to market adjustments due to falling
scrap metal prices.  Falling demand and production levels increased
operating costs per unit despite concerted efforts to align costs with
volume.




As noted
above, PSC Metals’ net sales for the first quarter of fiscal 2009 declined
significantly as the demand and prices for scrap fell to extremely low levels
due to historically low steel mill capacity utilization rates and declines in
other sectors of the economy.  Given the indication of a potential
impairment, PSC Metals completed a valuation of its goodwill and other
indefinite- lived intangibles as of March 31, 2009, utilizing discounted cash
flows based on current market conditions.  This valuation resulted in an
impairment loss for goodwill and other indefinite-lived intangibles of $13
million which was recorded in the first quarter of fiscal 2009.




SG&A
expenses decreased by $3 million, or 50.0%, to $3 million for the first quarter
of fiscal 2009 compared to the first quarter of fiscal 2008. The decrease is
primarily due to the reversal of a prior year incentive accrual and lower
spending for outside purchased services.


46


Real
Estate




Our Real
Estate segment is comprised of rental real estate, property development and
resort activities associated with property development. The three related
operating lines of our real estate segment have been aggregated for purposes of
reporting our operating results below. Certain properties are reclassified as
discontinued operations when subject to a contract and are excluded from income
from continuing operations.




The
following table summarizes the key operating data for our real estate activities
for the three months ended March 31, 2009 and 2008 (in millions of
dollars):




Three
      Months Ended
                        
                        
                        VarianceMarch
      31,
                        
                        
                        2009
      vs 20082009
                        
                        
                        2008
                        
                        
                        $
                        
                        
                        %Revenues
                        
                        $
                        22
                        
                        
                        $
                        24
                        
                        
                        $
                        (2
                        )
                        
                        
                        -8.3
                        %Expenses
                        
                        
                        14
                        
                        
                        
                        19
                        
                        
                        
                        (5
                        )
                        
                        
                        -26.3
                        %Income
      from continuing operations before interest and income
taxes
                        
                        $
                        8
                        
                        
                        $
                        5
                        
                        
                        $
                        3
                        
                        
                        
                        60.0
                        %





Total
revenues decreased by $2 million, or 8.3%, to $22 million in the first quarter
of fiscal 2009 from $24 million in the first quarter of fiscal 2008. The
decrease was primarily attributable to a decrease in property development sales
activity due to the general slowdown in residential and vacation home sales. In
the first quarter of fiscal 2009, we sold 3 residential units for approximately
$3 million at an average price of $1.0 million. In the first quarter of fiscal
2008, we sold 11 residential units for approximately $12 million at an average
price of $1.1 million.




Total
expenses decreased by $5 million, or 26.3%, to $14 million in the first quarter
of fiscal 2009 from $19 million in first quarter of fiscal 2008. The net
decrease was primarily due to a decrease in property development sales activity
and lower resort expenses, offset in part by an increase in net lease expenses
due to the acquisition of properties during the third quarter of fiscal
2008.




Based on
current residential sales conditions, we anticipate that property development
sales will likely continue to decline throughout fiscal 2009. We may incur asset
impairment charges if sales price assumptions and unit absorptions are not
achieved.




Home
Fashion




Historically,
WPI has been adversely affected by a variety of unfavorable conditions,
including the following items that continue to have an impact on its operating
results:




·
            adverse
      competitive conditions for U.S. manufacturing facilities compared to
      manufacturing facilities located outside of the United
    States;




·
            growth
      of low-priced competitive imports from Asia and Latin America resulting
      from lifting of import quotas; and




·
            a
      difficult retail market for home textiles driven by both the current
      economy and the slowdown in residential home
  sales.




Summarized
statements of operations for the three months ended March 31, 2009 and 2008
included in the consolidated statements of operations is as follows (in millions
of dollars):




Three Months Ended
                                
                                
                                VarianceMarch 31,
                                
                                
                                2009 vs 20082009
                                
                                
                                2008
                                
                                
                                $
                                
                                
                                %Net
      sales
                                
                                $
                                84
                                
                                
                                $
                                114
                                
                                
                                $
                                (30
                                )
                                
                                
                                -26.3
                                %Cost
      of sales
                                
                                
                                79
                                
                                
                                
                                105
                                
                                
                                
                                (26
                                )
                                
                                
                                -24.8
                                %Gross
      margin
                                
                                
                                5
                                
                                
                                
                                9
                                
                                
                                
                                (4
                                )
                                
                                
                                -44.4
                                %Expenses:Selling,
      general and administrative expenses
                                
                                
                                17
                                
                                
                                
                                26
                                
                                
                                
                                (9
                                )
                                
                                
                                -34.6
                                %Restructuring
      and impairment charges
                                
                                
                                6
                                
                                
                                
                                7
                                
                                
                                
                                (1
                                )
                                
                                
                                -14.3
                                %Total
      expenses
                                
                                
                                23
                                
                                
                                
                                33
                                
                                
                                
                                (10
                                )
                                
                                
                                -30.3
                                %Loss
      from continuing operations before interest, income taxes and other
      income, net
                                
                                $
                                (18
                                )
                                
                                $
                                (24
                                )
                                
                                $
                                6
                                
                                
                                
                                25.0
                                %





Net sales
decreased by $30 million, or 26.3%, to $84 million for first quarter of fiscal
2009 as compared to the first quarter of  fiscal 2008. Gross margin
for the first quarter of fiscal 2009 decreased by $4 million, or 44.4%, to $5
million as compared to the first quarter of fiscal 2008. The decrease in net
sales and gross margins continued to reflect lower sales due to the weak home
textile retail environment, but has been mitigated by improvements in operating
earnings as a result of lowering selling, general and administrative
expenditures. WPI will continue to realign its manufacturing operations to
optimize its cost structure, pursuing offshore sourcing arrangements that employ
a combination of owned and operated facilities, joint ventures and third-party
supply contracts.


47





Selling,
general and administrative expenses for the first quarter of fiscal 2009
decreased by $9 million, or 34.6%, to $17 million as compared to the first
quarter of fiscal 2008, reflecting WPI’s continuing efforts to reduce its
selling, warehousing, shipping and general and administrative expenses. WPI
continues to lower its selling, general and administrative expenditures by
consolidating its locations, reducing headcount and applying more stringent
oversight of expense areas where potential savings may be realized.





Restructuring
and impairment charges decreased by $1 million, or 14.3%, to $6 million for the
first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008,
primarily due to lower restructuring charges, partially offset by higher
impairment charges related to plant closures during the first quarter of fiscal
2009.  Restructuring and impairment charges include severance,
benefits and related costs, non-cash impairment charges related to plants that
have been or will be closed, and continuing costs of closed plants and
transition expenses.





WPI
continues its restructuring efforts and, accordingly, anticipates that
restructuring charges (particularly with respect to the carrying costs of closed
facilities until such time as these locations are sold) and operating losses
will continue to be incurred throughout fiscal 2009. If WPI’s restructuring
efforts are unsuccessful or its existing strategic manufacturing plans are
amended, it may be required to record additional impairment charges related to
the carrying value of long-lived assets.





WPI’s
business is significantly influenced by the overall economic environment,
including consumer spending, at the retail level, for home textile products.
Certain U.S. retailers continue to report comparable store sales that were
either negative or below their stated expectations. Many of these retailers are
customers of WPI. Based on prevailing difficult economic conditions, it will
likely be challenging for these same retailers during fiscal 2009. WPI believes
that it provides adequate reserves against its accounts receivable to mitigate
exposure to known or likely bad debt situations, as well as sufficient overall
reserves for reasonably estimated situations, should this arise.




Holding
Company





The
Holding Company engages in various investment activities. The activities include
those associated with investing its available liquidity, investing to earn
returns from increases or decreases in the market price of securities, and
investing with the prospect of acquiring operating businesses that we would
control. Holding Company expenses, excluding interest expense, are principally
related to payroll, legal and other professional fees.





Summarized
operating revenues and expenses for the Holding Company for the three months
ended March 31, 2009 and 2008 are as follows (in millions of
dollars):


Three Months EndedMarch 31,
                      
                      
                      2009 vs 20082009
                      
                      
                      2008
                      
                      
                      $
                      
                      
                      %Net
      (loss) gain from investment activities
                      
                      $
                      (8
                      )
                      
                      $
                      2
                      
                      
                      $
                      (10
                      )
                      
                      NMInterest,
      dividends and other income
                      
                      
                      2
                      
                      
                      
                      19
                      
                      
                      
                      (17
                      )
                      
                      
                      -89.5
                      %Holding
      Company revenues
                      
                      
                      (6
                      )
                      
                      
                      21
                      
                      
                      
                      (27
                      )
                      
                      
                      -128.6
                      %Holding
      Company expenses
                      
                      
                      4
                      
                      
                      
                      7
                      
                      
                      
                      (3
                      )
                      
                      
                      -42.9
                      %(Loss)
      income from continuing operations before interest expense and income
      taxes
                      
                      $
                      (10
                      )
                      
                      $
                      14
                      
                      
                      $
                      (24
                      )
                      
                      NM





Net loss
from investment activities was $8 million in the first quarter of fiscal 2009 as
compared to a net gain of $2 million in the first quarter of fiscal
2008.  The net loss in the first quarter of fiscal 2009 is due to
unrealized losses on investments as compared to unrealized gains in the first
quarter of fiscal 2008.





Interest,
dividends and other income decreased by $17 million, or 89.5%, to $2 million for
the first quarter of fiscal 2009 as compared to the first quarter of fiscal
2008. This decrease was primarily due to lower yields on lower cash balances in
the first quarter of fiscal 2009 as compared to the first quarter of
2008.





Expenses,
excluding interest expense, decreased by $3 million, or 42.9%, to $7 million in
the first quarter of fiscal 2009 as compared to the first quarter of fiscal
2008. The decrease is primarily due to lower professional and legal
fees.




Interest
Expense — Automotive, Holding Company and Other




Interest
expense increased by $14 million, or 24.6%, to $71 in the first quarter of
fiscal 2009 as compared to the first quarter of fiscal 2008. The increase is
primarily due to a $13 million increase due to three months of interest expense
incurred by our Automotive segment in the first quarter of fiscal 2009 as
compared to one month of interest expense in the first quarter of fiscal 2008 as
we consolidated Federal-Mogul’s results effective March 1,
2008.


48




Income Taxes




We
recorded an income tax benefit of $10 million and an income tax expense of $20
million on pre-tax income of $117 million and pre-tax loss of $21 million for
the three months ended March 31, 2009 and 2008, respectively.  Our
effective income tax rate was (8.5)% and (95.2)% for the respective
periods.  The difference between the effective tax rate and the
statutory federal rate of 35% is due principally to income or losses from
partnership entities in which taxes are the responsibility of the partners, as
well as changes in valuation allowances.




Discontinued
Operations




Results
from discontinued operations for the three months ended March 31, 2009 were not
material.  Results from discontinued operations for the three months
ended March 31, 2008 included a gain on sales of discontinued operations of $476
million, net of income taxes of approximately $260 million, recorded on the sale
of ACEP.  With respect to the taxes recorded on the sale of ACEP, $103
million was recorded as a deferred tax liability pursuant to a Code 1031Exchange
transaction during the third quarter of fiscal 2008.  The sale of ACEP
included the Stratosphere and three other Nevada gaming properties, which
represented all of our remaining gaming operations.




The
financial position and results of discontinued operations are presented as other
assets in the consolidated balance sheets and discontinued operations in the
consolidated statements of operations, respectively, for all periods presented
in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets (“SFAS No. 144”). For further
discussion, see Note 4, “Discontinued Operations and Assets Held for Sale,” to
our consolidated financial statements.




Liquidity
and Capital Resources




Holding
Company





As of
March 31, 2009, we had cash and cash equivalents of approximately $1.1 billion
and total debt of approximately $1.9 billion. We have made investments
aggregating $1.2 billion in the Private Funds for which no special profits
interest allocations or incentive allocations are applicable. As of March 31,
2009, the total value of this investment is $977 million, with an unrealized
gain of $67 million for the first quarter of fiscal 2009. These amounts are
reflected in the Private Funds’ net assets and earnings. In August 2006, we
entered into a credit agreement with a consortium of banks pursuant to which we
will be permitted to borrow up to $150 million. As of March 31, 2009, there were
no borrowings under the facility. Additionally, as of March 31, 2009, based on
certain minimum financial ratios, we and Icahn Enterprises Holdings could not
incur additional indebtedness.  See Note 12, “Debt,” to the
consolidated financial statements for additional information concerning credit
facilities for our subsidiaries.





Pursuant
to certain rights offering, our preferred limited partner units must be redeemed
on March 31, 2010, the Redemption Date.  Each preferred unit has a
liquidation preference of $10.00 and entitles the holder to receive
distributions, payable solely in additional preferred units, at the rate of
$0.50 per preferred unit per annum (which is equal to a rate of 5% of the
liquidation preference thereof).  In addition, on the Redemption Date,
subject to the approval of our Audit Committee, we may opt to redeem all of the
preferred units for an amount, payable either in cash or depositary units, equal
to the liquidation preference of the preferred units, plus any accrued but
unpaid distributions thereon.  On the Redemption Date, if we elect to
redeem the preferred units in cash, we believe that we will have sufficient cash
available to do so; if we elect to redeem by issuance of our depositary units,
we will have sufficient authorized depositary units available to do
so.  As of March 31, 2009, there were 13,127,179 preferred units
issued and outstanding.





We are a
holding company. Our cash flow and our ability to meet our debt service
obligations and make distributions with respect to depositary units and
preferred units likely will depend on the cash flow resulting from divestitures,
equity and debt financings, interest income and the payment of funds to us by
our subsidiaries in the form of loans, dividends and distributions. We may
pursue various means to raise cash from our subsidiaries. To date, such means
include payment of dividends from subsidiaries, obtaining loans or other
financings based on the asset values of subsidiaries or selling debt or equity
securities of subsidiaries through capital market transactions. To the degree
any distributions and transfers are impaired or prohibited, our ability to make
payments on our debt or distributions on our depositary units and preferred
units could be limited. The operating results of our subsidiaries may not be
sufficient for them to make distributions to us. In addition, our subsidiaries
are not obligated to make funds available to us, and distributions and
intercompany transfers from our subsidiaries to us may be restricted by
applicable law or covenants contained in debt agreements and other
agreements.


49




Consolidated
Cash Flows





Operating
Activities





Net cash
used in operating activities was $341 million for the three months ended March
31, 2009. Our Investment Management segment had $152 million used in continuing
operations primarily driven by net investment transactions. Our Automotive,
Holding Company and other segments had cash used in operating activities from
continuing operations of $188 million primarily from net loss before non-cash
charges of $44 million and changes in operating assets and liabilities of $144
million.





Investing
Activities





Net cash
used in investing activities was $50 million for the three months ended March
31, 2009, due to capital expenditures during the period.





Financing
Activities





Net cash
used in financing activities was $136 million for the three months ended March
31, 2009 of which $101 million is attributable to our Investment Management
segment. Capital distributions to non-controlling interests of $109 million were
offset in part by $8 million in capital contributions by non-controlling
interests within our Investment Management segment. During the first quarter of
fiscal 2009, we invested an additional $250 million in the Private Funds which
has been eliminated in consolidation. Net cash used in financing activities
attributable to our Automotive, Holding Company and other segments was $35
million for the three months ended March 31, 2009, due primarily to
distributions and repayments of borrowings.




Borrowings




Debt
consists of the following (in millions of dollars):




March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Senior
      unsecured variable rate convertible notes due 2013- Icahn
      Enterprises
                    
                    $
                    556
                    
                    
                    $
                    556Senior
      unsecured 7.125% notes due 2013 — Icahn
    Enterprises
                    
                    
                    961
                    
                    
                    
                    961Senior
      unsecured 8.125% notes due 2012 — Icahn
    Enterprises
                    
                    
                    352
                    
                    
                    
                    352Exit
      facilities — Federal-Mogul
                    
                    
                    2,495
                    
                    
                    
                    2,495Mortgages
      payable
                    
                    
                    122
                    
                    
                    
                    123Other
                    
                    
                    80
                    
                    
                    
                    84Total
      debt
                    
                    $
                    4,566
                    
                    
                    $
                    4,571




See Note
12, “Debt,” to our consolidated financial statements for additional information
concerning terms, restrictions and covenants of our debt. As of March 31, 2009
and December 31, 2008, we are in compliance with all debt
covenants.




Contractual
Commitments




There
were no other material changes in our contractual obligations or any other
liabilities reflected on our consolidated balance sheets compared to those
reported in our Annual Report on Form 10-K for fiscal 2008 filed with the SEC on
March 4, 2009.




Off-Balance
Sheet Arrangements




We have
off-balance sheet risk related to investment activities associated with certain
financial instruments, including futures, options, credit default swaps and
securities sold, not yet purchased. For additional information regarding these
arrangements, please see Note 7, “Financial Instruments,” in our consolidated
financial statements.




Discussion
of Segment Liquidity and Capital Resources




Investment
Management





Effective
January 1, 2008, the General Partners are eligible to receive special profits
interest allocations which, to the extent that they are earned, will generally
be allocated at the end of each fiscal year. In the event that amounts earned
from special profits interest allocations are not sufficient to cover the
operating expenses of the Investment Management segment in any given year, the
Holding Company has and intends to continue to provide funding as needed. The
General Partners may also receive incentive allocations which are generally
calculated and allocated to the General Partners at the end of each fiscal year.
To the extent that incentive allocations are earned as a result of redemption
events during interim periods, they are made to the General Partners in such
periods. Additionally, certain incentive allocations earned by the General
Partners have historically remained invested in the Private Funds which may also
serve as an additional source of cash.


50





The
investment strategy utilized by the Investment Management segment is generally
not heavily reliant on leverage. As of March 31, 2009, the ratio of the notional
exposure of the Private Funds’ invested capital to net asset value of the
Private Funds was approximately 0.99 to 1.00 on the long side and 0.48 to 1.00
on the short side. The notional principal amount of an investment instrument is
the reference amount that is used to calculate profit or loss on that
instrument. The Private Funds historically have had, which we expect to continue
to have, access to significant amounts of cash from prime brokers, subject to
customary terms and market conditions.





Investment
related cash flows in the consolidated Private Funds are classified within
operating activities in our consolidated statements of cash flows. Therefore,
there are no cash flows attributable to investing activities presented in the
consolidated statements of cash flows.





Cash
inflows from and distribution to investors in the Private Funds are classified
within financing activities in our consolidated statements of cash flows. These
amounts are reported as contributions from and distributions to non-controlling
interests in consolidated affiliated partnerships. Net cash provided by
financing activities was $149 million for the first quarter of fiscal 2009 due
to capital contributions by non-controlling interests of $258 million during the
first quarter of fiscal 2009 offset in part by $109 million in capital
distributions to non-controlling interests. Capital contributions by
non-controlling interest include our additional investment in the Private Funds
of $250 million which have been eliminated in consolidation.




Automotive




We
include the operating results and cash flows of Federal-Mogul in our
consolidated financial statements effective March 1, 2008.





Cash flow
used by operating activities was $160 million for the first three months of
fiscal 2009, compared to cash provided from operating activities of $116 million
for the comparable period of fiscal 2008.





Cash flow
used by investing activities was $45 million in the first three months of fiscal
2009, compared to cash used by investing activities of $66 million for the
comparable period of fiscal 2008.





Cash flow
used by financing activities was $15 million for the first three months of
fiscal 2009, compared to cash provided from financing activities of $285 million
for the comparable period of fiscal 2008.





In
connection with the consummation of the Plan, on the Effective Date,
Federal-Mogul entered into a Term Loan and Revolving Credit Agreement (the “Exit
Facilities”). The Exit Facilities include a $540 million revolving credit
facility (which is subject to a borrowing base and can be increased under
certain circumstances and subject to certain conditions) and a $2,960 million
term loan credit facility divided into a $1,960 million tranche B loan and a
$1,000 million tranche C loan. Federal-Mogul borrowed $878 million under the
term loan facility on the Effective Date and the remaining $2,082 million of
term loans were drawn on January 3, 2008 for the purpose of refinancing
obligations under the Tranche A Term Loan Agreement (the “Tranche A Facility
Agreement”) and the Indenture.  As of March 31, 2009, there was $494
million of borrowing availability under the revolving credit
facility.





Federal-Mogul's
ability to obtain cash adequate to fund its needs depends generally on the
results of its operations, restructuring initiatives, and the availability of
financing. Federal-Mogul’s management believes that cash on hand, cash flow from
operations, and available borrowings under the Exit Facilities will be
sufficient to fund capital expenditures and meet its operating obligations
through the end of fiscal 2009. In the longer term, Federal-Mogul believes that
its base operating potential, supplemented by the benefits from its announced
restructuring programs, will provide adequate long-term cash flows. However,
there can be no assurance that such initiatives are achievable in this
regard.





At March
31, 2009, Federal-Mogul was in compliance with all debt covenants under the Exit
Facilities. Based on current
forecasts, Federal-Mogul expects to be in compliance with all debt covenants
through December 31, 2009. Changes
in the business environment, market factors, macro-economic factors, or
Federal-Mogul’s ability to achieve its
forecasts and other factors outside of Federal-Mogul’s control could adversely
impact its ability to remain in compliance
with debt covenants. If Federal-Mogul were to not be in compliance at a
measurement date, Federal-Mogul would be
required to renegotiate the Exit Facilities. No assurance can be provided as to
the impact of such actions.




51




Federal-Mogul
maintains investments in 14 non-consolidated affiliates, which are located in
China, Germany, Italy, Japan, Korea, Turkey, the United Kingdom and the United
States. Federal-Mogul’s direct ownership in such affiliates ranges from
approximately 1% to 50%. The aggregate investment in these affiliates
approximates $210 million and $221 million at March 31, 2009 and December 31,
2008, respectively. Dividends received from non-consolidated affiliates of
Federal-Mogul during the first quarter of fiscal 2009 were not
material.





Federal-Mogul’s
joint ventures are businesses established and maintained in connection with its
operating strategy and are not special purpose entities. In general,
Federal-Mogul does not extend guarantees, loans or other instruments of a
variable nature that may result in incremental risk to Federal-Mogul’s liquidity
position. Furthermore, Federal-Mogul does not rely on dividend payments or other
cash flows from its non-consolidated affiliates to fund its operations and,
accordingly, does not believe that they have a material effect on
Federal-Mogul’s liquidity.





Federal-Mogul
holds a 50% non-controlling interest in a joint venture located in Turkey. This
joint venture was established in 1995 for the purpose of manufacturing and
marketing automotive parts, including pistons, piston rings, piston pins and
cylinder liners, to OE and aftermarket customers. Pursuant to the joint venture
agreement, Federal-Mogul’s partner holds an option to put its shares to a
subsidiary of Federal-Mogul 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. As of March 31, 2009, the total amount of the contingent
guarantee, were all triggering events to occur, approximated $56 million.
Federal-Mogul believes that this contingent guarantee is substantially less than
the estimated current fair value of the guarantees’ 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 SFAS No. 141(R), Business
Combinations.  If this put option were exercised at its
estimated current fair value, such exercise could have a material effect on
Federal-Mogul’s liquidity. 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.





In
accordance with SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity,
Federal-Mogul has determined that its investments in Chinese joint venture
arrangements are considered to be “limited-lived” as such entities have
specified durations ranging from 30 to 50 years pursuant to regional statutory
regulations. In general, these arrangements call for extension, renewal or
liquidation at the discretion of the parties to the arrangement at the end of
the contractual agreement. Accordingly, a reasonable assessment cannot be made
as to the impact of such contingencies on the future liquidity position of
Federal-Mogul.





Federal-Mogul’s
subsidiaries in Brazil, France, Germany, India, Italy and Spain are party to
accounts receivable factoring arrangements. Gross accounts receivable factored
under these facilities were $205 million and $222 million as of March 31, 2009
and December 31, 2008, respectively. Of those gross amounts, $185 million and
$209 million, respectively, were factored without recourse and treated as sales
under SFAS  No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. Under
the terms of these factoring arrangements, Federal-Mogul is not obligated to
draw cash immediately upon the factoring of accounts receivable. Thus, as of
March 31, 2009, Federal-Mogul had outstanding factored amounts of $14 million
for which cash had not yet been drawn.




Metals




The
primary source of cash from our Metals segment is from the operation of its
properties.




As of
March 31, 2009, our Metals segment had cash and cash equivalents of $38 million.
During the first quarter of fiscal 2009, net cash used in operating activities
was $9 million, resulting primarily from $23 million attributable to net loss,
offset in part by a $10 million decrease in working capital.  The
decrease in working capital was primarily due to receipt of a tax refund of $12
million.




Net cash
used in investing activities for the first quarter of fiscal 2009 included
capital spending of $4 million. Capital expenditures for the remainder of fiscal
2009 are expected to total approximately $9 million for existing facilities, and
include work on a new shredder and ongoing growth and maintenance capital for
existing recycling facilities.




Net cash
used in financing activities for the first quarter of fiscal 2009 was not
material.





Our
Metals’ segment believes that its current cash levels and cash flow from
operating activities are adequate to fund its ongoing operations and capital
plan for the next 12 months.




52




Real
Estate




Our Real
Estate segment generates cash through rentals, leases and asset sales
(principally sales of rental and residential properties) and the operation of
resorts. All of these operations generate cash flows from
operations.




At March
31, 2009, our Real Estate segment had cash and cash equivalents of $174
million.




In
the first quarter of fiscal 2009, cash provided by operating activities from
continuing operations was $15 million resulting primarily from income from
continuing operations of $6 million, non-cash charges of $4 million and a
decrease in property development inventory of $1 million and changes in
operating assets and liabilities of $4 million. Cash used in investing
activities was $1 million. Cash used in financing activities was $1 million for
payments of mortgage debt.




We expect
operating cash flows to be positive from our Real Estate operations during
fiscal 2009.




Home
Fashion




At March
31, 2009, WPI had approximately $125 million of unrestricted cash and cash
equivalents. There were no borrowings under the WestPoint Home revolving credit
agreement as of March 31, 2009, but there were outstanding letters of credit of
$11 million. Based upon the eligibility and reserve calculations within the
agreement, WestPoint Home had unused borrowing availability of $35 million at
March 31, 2009.




For the
first quarter of fiscal 2009, the Home Fashion segment had a negative operating
cash flow from continuing operations of $5 million. Negative operating cash flow
in the first quarter of fiscal 2009 resulted primarily from loss from continuing
operations before non-cash charges of $14 million, offset by changes in working
capital of $9 million. WPI anticipates that its operating losses and
restructuring charges will continue to be incurred for the remainder of fiscal
2009.




Capital
expenditures by WPI were $1 million for the first quarter of fiscal 2009.
Capital expenditures for fiscal 2009 are expected to total $5
million.





Through a
combination of its existing cash on hand and its borrowing availability under
the WestPoint Home senior secured revolving credit facility (together, an
aggregate of $160 million), WPI believes that it has adequate capital resources
and liquidity to meet its anticipated requirements to continue its operational
restructuring initiatives and for working capital and capital spending through
the next 12 months. In its analysis with respect to the sufficiency of adequate
capital resources and liquidity, WPI has considered that its retail customers
may continue to face either negative or flat comparable store sales for home
textile products during fiscal 2009. However, depending upon the levels of
additional acquisitions and joint venture investment activity, if any,
additional financing, if needed, may not be available to WPI or, if available,
the financing may not be on terms favorable to WPI. WPI’s estimates of its
anticipated liquidity needs may not be accurate and new business opportunities
or other unforeseen events could occur, resulting in the need to raise
additional funds from outside sources.




Distributions




Depositary
Units




On March
30, 2009, we paid a distribution of $0.25 per LP unit, aggregating $19 million,
to depositary unitholders of record at the close of business on March 16,
2009.




On May 4,
2009, the Board of Directors approved a payment of a quarterly cash distribution
of $0.25 per unit on our depositary units payable in the second quarter of
fiscal 2009. The distribution will be paid on June 3, 2009, to depositary
unitholders of record at the close of business on May 22, 2009. Under the terms
of the indenture dated April 5, 2007 governing our variable rate notes due 2013,
we will also be making a $0.15 distribution to holders of these notes in
accordance with the formula set forth in the indenture.




Preferred
Units




Pursuant
to the terms of the preferred units, on February 23, 2009, we declared our
scheduled annual preferred unit distribution payable in additional preferred
units at the rate of 5% of the liquidation preference of $10.00. In addition,
pursuant to the terms of the preferred units, on March 31, 2009, we distributed
624,925 preferred units to holders of record of our preferred units at the close
of business on March 17, 2009.




Our
preferred units are subject to redemption at our option on any payment date, and
the preferred units must be redeemed by us on or before March 31, 2010. The
redemption price is payable, at our option, subject to the indenture, either all
in cash or by the issuance of depositary units, in either case, in an amount
equal to the liquidation preference of the preferred units plus any accrued but
unpaid distributions thereon.




53




Critical
Accounting Policies and Estimates




There
were no material changes to our critical accounting policies and estimates
during the first quarter of fiscal 2009 compared to those reported in our Annual
Report on Form 10-K for fiscal 2008 filed with the SEC on March 4,
2009.




Recently
Issued Accounting Pronouncements




FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (“FSP 115-2 and 124-2”). On
April 9, 2009, the FASB issued FSP FAS 115-2 and 124-2 which is
intended to make the guidance more operational and improve the presentation and
disclosure of other-than-temporary impairments (“OTTI”) on debt and equity
securities in the financial statements. FSP 115-2 and 124-2 applies to debt
securities and requires that the total OTTI be presented in the statement of
income with an offset for the amount of impairment that is recognized in other
comprehensive income, which amount represents the noncredit component. Noncredit
component losses are to be recorded in other comprehensive income if an investor
can assess that (a) it does not have the intent to sell or (b) it is
not more likely than not that it will have to sell the security prior to its
anticipated recovery. FSP 115-2 and 124-2 is effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. FSP 115-2 and 124-2 will be applied
prospectively with a cumulative effect transition adjustment as of the beginning
of the period in which it is adopted. An entity early adopting FSP 115-2 and
124-2 must also early adopt FSP 157-4 (as defined below). We are currently
evaluating the impact of FSP 115-2 and 124-2 on our consolidated financial
statements.




FSP
FAS 157-4, Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly
(“FSP 157-4”). On April 9, 2009, the FASB issued FSP 157-4 which provides
additional guidance on determining whether a market for a financial asset is not
active and a transaction is not distressed for fair value measurements under
SFAS No. 157, Fair Value
Measurements. FSP 157-4 will be applied prospectively and retrospective
application will not be permitted. FSP 157-4 will be effective for interim and
annual periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. An entity early adopting FSP 157-4
must also early adopt FSP 115-2 and 124-2.  We are currently
evaluating the impact of FSP 157-4 on our consolidated financial
statements.




FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments (“FSP 107-1 and APB 28-1”). On
April 9, 2009, the FASB issued FSP FAS 107-1 and APB 28-1 which
will amend SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. FSP 107-1 and APB 28-1 will require an entity to
provide disclosures about the fair value of financial instruments in interim
financial information. FSP 107-1 and APB 28-1 would apply to all financial
instruments within the scope of SFAS No. 107 and will require entities to
disclose the method(s) and significant assumptions used to estimate the fair
value of financial instruments, in both interim financial statements as well as
annual financial statements. FSP 107-1 and APB 28-1 will be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early
adopt FSP 107-1 and APB 28-1only if it also elects to early adopt FSP 157-4 and
FSP 115-2 and 124-2. Since FSP 107-1 and APB-28-1 will require
disclosures about fair values in interim periods, the adoption of FSP
FAS 107-1 and APB 28-1 will not have any impact on our consolidated
financial statements.





Forward-Looking
Statements





Statements
included in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” which are not historical in nature are intended to be,
and are hereby identified as, “forward-looking statements” for purposes of the
safe harbor provided by Section 27A of the Securities Act and Section 21E of the
Exchange Act of 1934, or the Exchange Act, as amended, or by Public Law
104-67.





Forward-looking
statements regarding management’s present plans or expectations involve risks
and uncertainties and changing economic or competitive conditions, as well as
the negotiation of agreements with third parties, which could cause actual
results to differ from present plans or expectations, and such differences could
be material.





Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in this document. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
predicted. Also, please see Item 1A “Risk Factors” in our Annual Report on Form
10-K for fiscal 2008 that we filed with the SEC on March 4,
2009.


54


Item
3. Quantitative and Qualitative Disclosures About Market Risk





Market
risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates and commodity
prices. Our significant market risks are primarily associated with interest
rates and equity prices. Reference is made to Part II, Item 7A of our Annual
Report on Form 10-K for fiscal 2008 that we filed with the SEC on March 4, 2009
for disclosures relating to interest rates and our equity prices. With the
exception of the market risk of our Investment Management segment as discussed
below, there have been no other material changes to our market risk during the
first quarter of fiscal 2009.





Investment
Management





The
Private Funds hold investments that are reported at fair value as of the
reporting date, which include securities owned, securities sold, not yet
purchased and derivatives as reported on our consolidated balance sheets. Based
on their respective balances as of March 31, 2009, we estimate that in the event
of a 10% adverse change in the fair value of these investments, the fair values
of securities owned, securities sold, not yet purchased, and derivatives would
decrease by $368 million, $99 million and $62 million, respectively. However, as
of March 31, 2009 we estimate that the impact to our share of the net gain or
loss from investment activities reported on our consolidated statement of
operations would be significantly less than the change in fair value since we
have an investment of approximately 22.9% in these Private Funds, and the
non-controlling interests in income would correspondingly offset approximately
77.1% of the change in fair value.





Item
4. Controls and Procedures





As of
March 31, 2009, our management, including our Principal Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the design and operation
of Icahn Enterprises’ and our subsidiaries’ disclosure controls and procedures
pursuant to the Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.
Based upon that evaluation, our Principal Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are currently
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms, and
include controls and procedures designed to ensure that information required to
be disclosed by us in such reports is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure.





Changes
in Internal Control Over Financial Reporting





There
have been no changes in our internal control over financial reporting during the
first quarter of fiscal 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.


55





PART
II. OTHER INFORMATION





Item
1. Legal Proceedings




Icahn
Enterprises and its subsidiaries are parties in a variety of legal actions
arising out of the normal course of business.  For further information
regarding our legal proceedings, see our Legal Proceedings set forth in
Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, filed with the SEC on March 4, 2009, and Note 19,
“Commitments and Contingencies,” of the consolidated financial statements
included in Part I of this Form 10-Q.





Item
1A. Risk Factors





The risk
factors included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, filed with the SEC on March 4, 2009, did not materially
change during the period covered by this report.





Item
6. Exhibits





Exhibit
      No.
                
                DescriptionExhibit
      15.1
                
                Letter
      of Grant Thornton LLP regarding unaudited interim financial
      informationExhibit
      15.2
                
                Letter
      of Ernst & Young LLP regarding unaudited interim financial
      informationExhibit
      31.1
                
                Certification
      of Principal Executive Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.Exhibit
      31.2
                
                Certification
      of Chief Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.Exhibit
      32.1
                
                Certification
      of Principal Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.Exhibit
      32.2
                
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.


56


SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.


ICAHN
      ENTERPRISES L.P.(Registrant)By:
                          Icahn
      Enterprises G.P. Inc., its general partnerBy:
                          
                          /s/
      Dominick RagoneDominick
      RagoneChief
      Financial Officer





Date:
  May 6, 2009


57