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 June 30, 2008

OR

 
o   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 o

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One).

 
Large Accelerated Filer o   Accelerated Filer x
Non-accelerated Filer o   Smaller Reporting Company o

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

As of August 8, 2008, there were 70,489,510 depositary units and 12,502,254 preferred units outstanding.

 

 


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P.

INDEX

 
  Page
PART I. FINANCIAL INFORMATION
        

Item 1.

Financial Statements

    1  
Consolidated Balance Sheets – June 30, 2008 (unaudited) and December 31, 2007     1  
Consolidated Statements of Operations – Three Months Ended June 30, 2008 and 2007 (unaudited)     2  
Consolidated Statements of Operations – Six Months Ended June 30, 2008 and 2007 (unaudited)     3  
Consolidated Statement of Changes in Partners’ Equity and Comprehensive Income –  Six Months Ended June 30, 2008 (unaudited)     4  
Consolidated Statements of Cash Flows – Six Months Ended June 30, 2008 and 2007 (unaudited)     5  
Notes to Consolidated Financial Statements
        

1.

Description of Business and Basis of Presentation

    7  

2.

Operating Units

    9  

3.

Discontinued Operations and Assets Held for Sale

    17  

4.

Related Party Transactions

    19  

5.

Investments and Related Matters

    21  

6.

Fair Value Measurements

    24  

7.

Financial Instruments, Off-Balance-Sheet Risk, Concentrations of Credit Risk and Guarantees

    25  

8.

Inventories, Net

    27  

9.

Property, Plant and Equipment, Net

    28  

10.

Non-Controlling Interests

    28  

11.

Debt

    29  

12.

Compensation Arrangements

    31  

13.

Employee Benefit Plans

    33  

14.

Preferred Limited Partnership Units

    33  

15.

Earnings Per LP Unit

    35  

16.

Segment Reporting

    35  

17.

Income Taxes

    38  

18.

Commitments and Contingencies

    39  

19.

Subsequent Events

    42  

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

    44  

1.

Overview

    45  

2.

Results of Operations

    46  

3.

Liquidity and Capital Resources

    64  

4.

Critical Accounting Policies and Estimates

    68  

5.

Recently Issued Accounting Pronouncements

    69  

6.

Forward-Looking Statements

    70  

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

    70  

Item 4.

Controls and Procedures

    70  
PART II. OTHER INFORMATION
        

Item 1.

Legal Proceedings

    72  

Item 1A.

Risk Factors

    73  

Item 6.

Exhibits

    73  
Signatures     74  
Exhibits Index     75  

i


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED BALANCE SHEETS
(In $000s, except unit amounts)

   
  June 30,
2008
  December 31,
2007
     (unaudited)     
ASSETS
                 
Investment Management Operations:
                 
Cash and cash equivalents   $ 11,649     $ 26,027  
Cash held at consolidated affiliated partnerships and restricted cash     2,102,613       1,104,748  
Securities owned, at fair value     6,433,524       5,920,209  
Unrealized gains on derivative contracts, at fair value     79,522       110,181  
Due from brokers     716,849       847,891  
Other assets     26,958       40,831  
       9,371,115       8,049,887  
All Other Operations:
                 
Cash and cash equivalents     2,074,985       2,086,805  
Restricted cash     1,182,604       41,681  
Investments     279,088       512,560  
Unrealized gains on derivative contracts, at fair value     1,324       2,621  
Inventories, net     245,635       266,223  
Trade, notes and other receivables, net     248,092       178,990  
Assets of discontinued operations held for sale     15,113       632,277  
Property, plant and equipment, net     520,423       533,127  
Goodwill and intangible assets     41,151       39,579  
Other assets     101,365       89,896  
       4,709,780       4,383,759  
Total Assets   $ 14,080,895     $ 12,433,646  
LIABILITIES AND PARTNERS’ EQUITY
                 
Investment Management Operations:
                 
Accounts payable, accrued expenses and other liabilities   $ 238,064     $ 116,990  
Deferred management fee payable to related party     130,266       143,972  
Due to broker     847,256        
Subscriptions received in advance     4,250       144,838  
Payable for purchases of securities     6,600       46,055  
Securities sold, not yet purchased, at fair value     1,114,828       206,128  
Unrealized losses on derivative contracts, at fair value     157,425       15,726  
       2,498,689       673,709  
All Other Operations:
                 
Accounts payable, accrued expenses and other liabilities     203,372       193,611  
Accrued income taxes     237,888       8,641  
Unrealized losses on derivative contracts, at fair value     8,631       3,462  
Accrued environmental costs     24,614       24,296  
Liabilities of discontinued operations held for sale     3,749       317,345  
Debt     2,035,376       2,041,453  
Preferred limited partnership units     126,589       123,538  
       2,640,219       2,712,346  
Total Liabilities     5,138,908       3,386,055  
Commitments and contingencies (Note 18)
                 
Non-controlling interests:
                 
Investment Management Operations     6,179,469       6,594,014  
All Other Operations     123,283       140,549  
Partners’ equity:
                 
Limited partners:
                 
Depositary units; 92,400,000 authorized; issued 71,626,710 at June 30, 2008 and December 31, 2007; outstanding 70,489,510 at June 30, 2008 and December 31, 2007     3,400,581       3,056,598  
General partner     (749,425 )      (731,649 ) 
Treasury units at cost: 1,137,200 depositary units     (11,921 )      (11,921 ) 
Partners’ equity     2,639,235       2,313,028  
Total Liabilities and Partners’ Equity   $ 14,080,895     $ 12,433,646  

 
 
See notes to consolidated financial statements.

1


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000s, except per unit amounts)

   
  Three Months Ended June 30,
     2008   2007
     (unaudited)
Revenues:
                 
Investment Management Operations:
                 
Interest, dividends and other income   $ 62,982     $ 42,857  
Net (loss) gain from investment activities     (772,533 )      323,366  
Management fees, related parties           2,565  
       (709,551 )      368,788  
All Other Operations:
                 
Metals     434,106       214,493  
Real Estate     24,329       25,948  
Home Fashion     96,018       151,111  
Interest and other income     16,731       41,383  
Net loss from investment activities     (9,455 )      (17,843 ) 
Other income (expense), net     (1,868 )      (780 ) 
       559,861       414,312  
Total revenues     (149,690 )      783,100  
Expenses:
                 
Investment Management Operations     6,494       35,090  
All Other Operations:
                 
Metals     371,090       209,441  
Real Estate     21,415       24,421  
Home Fashion     120,119       202,638  
Holding Company     7,602       3,860  
Interest expense     36,103       35,515  
       556,329       475,875  
Total expenses     562,823       510,965  
(Loss) income from continuing operations before income taxes and
non-controlling interests in (income) loss
    (712,513 )      272,135  
Income tax expense     (22,290 )      (2,190 ) 
Non-controlling interests in (income) loss:
                 
Investment Management Operations     630,012       (246,446 ) 
All Other Operations     7,872       20,116  
       637,884       (226,330 ) 
(Loss) income from continuing operations     (96,919 )      43,615  
Discontinued operations:
                 
Income from discontinued operations, net of income taxes     189       19,254  
Non-controlling interests in (income) loss     (4 )      519  
(Loss) gain on dispositions, net of income taxes     (2,109 )      841  
(Loss) income from discontinued operations     (1,924 )      20,614  
Net (loss) earnings   $ (98,843 )    $ 64,229  
Net (loss) earnings attributable to:
                 
Limited partners   $ (96,876 )    $ (25,010 ) 
General partner     (1,967 )      89,239  
     $ (98,843 )    $ 64,229  
Net (loss) earnings per LP unit:
                 
Basic and diluted earnings (loss):
                 
Loss from continuing operations   $ (1.35 )    $ (0.73 ) 
(Loss) income from discontinued operations     (0.02 )      0.33  
Basic and diluted loss per LP unit   $ (1.37 )    $ (0.40 ) 
Weighted average LP units outstanding     70,490       61,857  
Cash dividends declared per LP unit   $ 0.25     $ 0.15  

 
 
See notes to consolidated financial statements.

2


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000s, except per unit amounts)

   
  Six Months Ended June 30,
     2008   2007
     (unaudited)
Revenues:
                 
Investment Management Operations:
                 
Interest, dividends and other income   $ 103,103     $ 81,924  
Net (loss) gain from investment activities     (798,596 )      687,875  
Management fees, related parties           3,376  
       (695,493 )      773,175  
All Other Operations:
                 
Metals     736,941       423,379  
Real Estate     46,914       53,992  
Home Fashion     209,874       347,749  
Interest and other income     38,747       72,643  
Net (loss) gain from investment activities     (7,284 )      61,491  
Other income (expense), net     (1,893 )      5,082  
       1,023,299       964,336  
Total revenues     327,806       1,737,511  
Expenses:
                 
Investment Management Operations     21,591       62,481  
All Other Operations:
                 
Metals     647,291       405,131  
Real Estate     40,481       47,731  
Home Fashion     257,894       435,987  
Holding Company     15,003       11,539  
Interest expense     72,321       63,292  
       1,032,990       963,680  
Total expenses     1,054,581       1,026,161  
(Loss) income from continuing operations before income taxes and
non-controlling interests in (income) loss
    (726,775 )      711,350  
Income tax expense     (32,725 )      (3,855 ) 
Non-controlling interests in (income) loss:
                 
Investment Management Operations     628,159       (511,518 ) 
All Other Operations     15,537       30,963  
       643,696       (480,555 ) 
(Loss) income from continuing operations     (115,804 )      226,940  
Discontinued operations:
                 
Income from discontinued operations, net of income taxes     7,745       45,234  
Non-controlling interests in loss (income)     50       (531 ) 
Gain on dispositions, net of income taxes     479,517       14,026  
Income from discontinued operations     487,312       58,729  
Net earnings   $ 371,508     $ 285,669  
Net earnings (loss) attributable to:
                 
Limited partners   $ 388,383     $ 69,646  
General partner     (16,875 )      216,023  
     $ 371,508     $ 285,669  
Net (loss) earnings per LP unit:
                 
Basic and diluted earnings (loss):
                 
(Loss) income from continuing operations   $ (1.61 )    $ 0.20  
Income from discontinued operations     7.12       0.93  
Basic and diluted earnings per LP unit   $ 5.51     $ 1.13  
Weighted average LP units outstanding     70,490       61,857  
Cash dividends declared per LP unit   $ 0.50     $ 0.25  

 
 
See notes to consolidated financial statements.

3


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENT OF CHANGES
IN PARTNERS’ EQUITY AND COMPREHENSIVE INCOME
Six Months Ended June 30, 2008
(Unaudited) (In 000s)

         
  General
Partner’s
Equity
(Deficit)
  Limited
Partner’s
Equity
Depositary Units
    
  
Held in Treasury
  Total
Partners’
Equity
     Amounts   Units
Balance, December 31, 2007   $ (731,649 )    $ 3,056,598     $ (11,921 )      1,137     $ 2,313,028  
Comprehensive (loss) income:
                                            
Net (loss) earnings     (16,875 )(1)      388,383                   371,508  
Net unrealized losses on available-for-sale securities     (197 )      (9,711 )                  (9,908 ) 
Translation adjustments     (18 )      (916 )                  (934 ) 
Comprehensive (loss) income     (17,090 )      377,756                   360,666  
Partnership distributions     (715 )      (35,245 )                  (35,960 ) 
Change in subsidiary equity and other     29       1,472                   1,501  
Balance, June 30, 2008   $ (749,425 )    $ 3,400,581     $ (11,921 )      1,137     $ 2,639,235  

Accumulated Other Comprehensive Loss at June 30, 2008 was $2,300.

(1) Includes a charge of $24,761 relating to the sale of ACEP.

 
 
See notes to consolidated financial statements.

4


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2008 and 2007
(Unaudited) (In $000s)

   
  Six Months Ended June 30,
     2008   2007
Cash flows from operating activities:
                 
Net (loss) earnings:
                 
Investment Management Operations   $ (89,197 )    $ 197,572  
All Other Operations     (26,607 )      29,368  
Income from discontinued operations     487,312       58,729  
Net earnings   $ 371,508     $ 285,669  
Earnings (loss) from continuing operations:
                 
Investment Management Operations   $ (89,197 )    $ 197,572  
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
                 
Non-controlling interests in (loss) income     (628,159 )      511,518  
Deferred income tax expense           1,320  
Investment losses (gains)     957,347       (649,630 ) 
Purchases of securities     (4,280,037 )      (4,346,548 ) 
Proceeds from sales of securities     2,780,528       2,940,457  
Purchases to cover securities sold, not yet purchased     (179,490 )      (1,061,959 ) 
Proceeds from securities sold, not yet purchased     1,117,037       519,087  
Net premiums received on derivative contracts     122,722        
Changes in operating assets and liabilities:
                 
Cash held at consolidated affiliated partnerships and restricted cash     (997,865 )      21,886  
Due from brokers     131,042       (50,957 ) 
Other assets     159       6,895  
Payable for purchases of securities     (39,455 )      50,471  
Unrealized gains on derivative contracts, at fair value, net     49,636       49,992  
Due to broker     847,256        
Accounts payable, accrued expenses and other liabilities     (5,895 )      3,976  
Net cash used in continuing operations     (214,371 )      (1,805,920 ) 
All Other Operations     (26,607 )      29,368  
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
                 
Depreciation and amortization     18,359       20,020  
Investment losses (gains)     22,683       (61,491 ) 
Preferred LP unit interest expense     3,051       2,906  
Non-controlling interests in loss     (15,537 )      (30,963 ) 
Deferred income tax expense     (3,246 )      (1,266 ) 
Impairment loss on long-lived assets     580       17,653  
Net cash provided by (used in) activities on trading securities     7,894       (5,202 ) 
Other, net     4,507       7,499  
Changes in operating assets and liabilities:
                 
Trade, notes and other receivables, net     (68,987 )      (4,101 ) 
Other assets     (4,227 )      2,742  
Inventories, net     21,644       (22,765 ) 
Accounts payable, accrued expenses and other liabilities     16,445       7,654  
Net cash used in continuing operations     (23,441 )      (37,946 ) 
Net cash used in continuing operations     (237,812 )      (1,843,866)  
Income from discontinued operations     487,312       58,729  
Depreciation and amortization     5       9,044  
Net gain from sales of businesses and properties     (479,517 )      (22,294 ) 
Other, net     (14,611 )      7,048  
Net cash (used in) provided by discontinued operations     (6,811 )      52,527  
Net cash used in operating activities     (244,623 )      (1,791,339 ) 

 
 
See notes to consolidated financial statements.

5


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)
Six Months Ended June 30, 2008 and 2007
(Unaudited) (In $000s)

   
  Six Months Ended June 30,
     2008   2007
Cash flows from investing activities:
                 
All Other Operations:
                 
Capital expenditures     (25,043 )      (35,350 ) 
Purchases of marketable equity and debt securities     (1,612 )      (74,412 ) 
Proceeds from sales of marketable equity and debt securities     208,251       326,786  
Net change in restricted cash relating to Section 1031 exchange
transactions
    (1,150,630 )       
Net proceeds from the sales and disposition of long-lived assets     20,710       15,060  
Acquisitions of businesses, net of cash acquired     (5,709 )      (6,930 ) 
Net cash (used in) provided by investing activities from continuing operations     (954,033 )      225,154  
Discontinued operations:
                 
Capital expenditures     (5,265 )      (15,238 ) 
Net proceeds from the sales and disposition of assets     1,222,232       4,359  
Net change in restricted cash relating to sales and disposition of assets     646       58,172  
Other, net     (15,376 )      (47,283 ) 
Net cash provided by investing activities from discontinued operations     1,202,237       10  
Net cash provided by investing activities     248,204       225,164  
Cash flows from financing activities:
                 
Investment Management Operations:
                 
Capital subscriptions received in advance     4,250       252,173  
Capital distributions to non-controlling interests     (221,038 )      (30,083 ) 
Capital contributions by non-controlling interests     416,781       1,591,193  
Net cash provided by financing activities from continuing operations     199,993       1,813,283  
All Other Operations:
                 
Partners’ equity:
                 
Partnership distributions     (35,960 )      (15,778 ) 
Dividends paid to minority holders of subsidiary           (18,529 ) 
Proceeds from issuance of senior notes payable           492,130  
Proceeds from variable rate notes           600,000  
Proceeds from other borrowings     283       27,204  
Repayments of credit facilities           (27,393 ) 
Repayments of other borrowings     (7,306 )      (2,571 ) 
Debt issuance cost           (275 ) 
Net cash (used in) provided by financing activities from continuing operations     (42,983 )      1,054,788  
Net cash provided by financing activities from continuing operations     157,010       2,868,071  
Net cash used in financing activities from discontinued operations     (254,915 )      (245 ) 
Net cash (used in) provided by financing activities     (97,905 )      2,867,826  
Effect of exchange rate changes on cash     (934 )      2,086  
Net (decrease) increase in cash and cash equivalents*     (95,258 )      1,303,737  
Net change in cash of assets held for sale     69,060       (29,086 ) 
Cash and cash equivalents, beginning of period     2,112,832       1,884,477  
Cash and cash equivalents, end of period   $ 2,086,634     $ 3,159,128  
*Net (decrease) increase in cash and cash equivalents
consists of the following:
                 
Investment Management Operations   $ (14,378 )    $ 7,363  
All Other Operations     (1,021,391 )      1,244,082  
Discontinued operations     (940,511 )      52,292  
     $ (95,258 )    $ 1,303,737  
Supplemental information:
                 
Cash payments for interest   $ 77,307     $ 66,998  
Cash payments for income taxes, net of refunds   $ 37,569     $ 15,944  
Net realized losses on securities available for sale   $ (9,908 )    $ (2,943 ) 
Redemptions payable to non-controlling interests   $ 214,722     $ 5,417  

 
 
See notes to consolidated financial statements.

6


TABLE OF CONTENTS

ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

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”), 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 June 30, 2008, affiliates of Mr. Icahn owned 64,288,061 of our depositary units and 10,819,213 of our preferred units, which represented approximately 91.2% 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, 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. Detailed information regarding our continuing reportable segments is contained in Note 2, “Operating Units,” and Note 16, “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 year ended December 31, 2007. 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 year amounts have been reclassified in order to conform to the current year 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. 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. The majority interests in these entities are reflected as non-controlling interests in our financial statements. 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”).

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

1. Description of Business and Basis of Presentation  – (continued)

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.

Discontinued Operations

Gaming Divestiture

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 $473.9 million, after taxes. The sale of ACEP included the Stratosphere and three other Nevada gaming properties, which represented all of our remaining gaming operations.

In connection with the closing, we repaid all of ACEP’s outstanding 7.85% Senior Secured Notes due 2012, which were tendered pursuant to ACEP’s previously announced tender offer and consent solicitation. In addition, ACEP repaid in full all amounts outstanding, and terminated all commitments, under its credit facility with Bear Stearns Corporate Lending Inc., as administrative agent, and the other lenders thereunder.

We elected to deposit approximately $1.156 billion of the gross proceeds from the sale into escrow accounts to fund investment activities through tax-deferred exchanges under Section 1031 of the Code. These funds are classified as restricted cash. Such proceeds were deposited into the escrow accounts pending the fulfillment of Section 1031 exchange requirements. There are no assurances that we will fulfill our Section 1031 exchange obligations using the proceeds placed into escrow.

Other

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. These operations met the criteria for discontinued operations during the third quarter of the fiscal year ended December 31, 2007 (“fiscal 2007”). Therefore, the portion of the business related to the stores’ retail operations has been classified for all periods presented as discontinued operations.

Operating properties of our real estate segment 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 have changed during the three and six months ended June 30, 2008 and certain amounts in the consolidated statements of operations for the three and six months ended June 30, 2007 and consolidated cash flows for the six months ended June 30, 2007 have been reclassified to conform to the properties that have been classified as held for sale in the current periods.

New Accounting Policies

The Investment Management operations adopted Method 2 of Emerging Issues Task Force (“EITF”) Topic D-96, Accounting for Management Fees Based on a Formula (“EITF D-96”) related to a new special profits interest allocation agreement, effective January 1, 2008 as more fully described in Note 2, “Operating Units — Investment Management Operations.”

The Investment Management operations enter into various derivative contracts, such as credit default swaps, and have adopted FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”), as more fully described in Note 7, “Financial Instruments, Off-Balance-Sheet Risk, Concentrations of Credit Risk and Guarantees.”

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

1. Description of Business and Basis of Presentation  – (continued)

Recently Issued Accounting Pronouncements

SFAS No. 141(R).  In December 2007, the FASB issued Standard of Financial Accounting Standards (“SFAS”) No. 141(R), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) requires the acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-date fair values. Certain forms of contingent consideration and certain acquired contingencies will be recorded at fair value at the acquisition date. SFAS No. 141(R) also requires that acquisition-related costs be expensed as incurred and restructuring costs be expensed in periods after the acquisition date. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption of SFAS No. 141(R) is not permitted. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

SFAS No. 160.  In December 2007, the FASB issued 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. 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; 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. This statement is effective for fiscal years beginning after December 15, 2008. Early adoption of SFAS No. 160 is not permitted. We are currently evaluating the impact that SFAS No. 160 will have on our consolidated financial statements.

2. Operating Units

a. Investment Management Operations

On August 8, 2007, we entered into a Contribution and Exchange Agreement (the “Contribution Agreement”) with CCI Offshore Corp. (“CCI Offshore”), CCI Onshore Corp. (“CCI Onshore”), Icahn Management LP, a Delaware limited partnership (“Icahn Management” and, together with CCI Offshore and CCI Onshore, collectively referred to herein as the “Contributors”), and Carl C. Icahn. Pursuant to the Contribution Agreement, we acquired the general partnership interests in Icahn Onshore LP (the “Onshore GP”) and Icahn Offshore LP (the “Offshore GP” and, together with the Onshore GP, the “General Partners”), acting as general partners of Icahn Partners LP (the “Onshore Fund”) and the Offshore Master Funds (as defined below), and Icahn Capital Management L.P. (“New Icahn Management”), a Delaware limited partnership.

Prior to January 1, 2008, the General Partners and New Icahn Management provided investment advisory and certain management services to the Private Funds (as defined below). As further discussed below, effective January 1, 2008, in addition to providing investment advisory services to the Private Funds, the General Partners provide certain administrative and back office services to the Private Funds (as defined below) that had been previously provided by New Icahn Management. 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. The Offshore Fund consists of Icahn Fund Ltd. (and, together with Icahn Fund II Ltd. and Icahn Fund III Ltd. are collectively referred to herein as the “Offshore Funds”). As referred to herein, the “Offshore Master Funds” consist of (i) Icahn Partners Master Fund LP (“Offshore Master Fund I”); (ii) Icahn Partners Master Fund II L.P. (“Offshore Master Fund II”) and (iii) Icahn Partners Master Fund III L.P. (“Offshore Master Fund III”). The Onshore Fund and the Offshore Master Funds are collectively referred to herein as the “Investment Funds.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

The Offshore GP also acts as general partner of certain funds formed as Cayman Islands exempted limited partnerships that invest 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.”

Effective January 1, 2008, the management agreements between New Icahn Management and the Private Funds were terminated, resulting in the termination of the Feeder Funds’ and the Onshore Fund’s obligations to pay management fees thereunder. In addition, the limited partnership agreements of the Investment Funds (the “Investment Fund LPAs”) were amended to provide that, as of January 1, 2008, the General Partners will provide or cause their affiliates to provide to the Private Funds the administrative and back office services that were formerly provided by New Icahn Management (the “Services”) and, in consideration of providing the Services, the General Partners will receive special profits interest allocations from the Investment Funds. As of January 1, 2008, New Icahn Management distributed its net assets to Icahn Capital L.P. (“Icahn Capital”). Effective January 1, 2008, we have adopted a new revenue recognition policy with respect to the special profits interest allocation as discussed below.

Prior to January 1, 2008, the management agreements provided for the management fees to be paid by each of the Feeder Funds and the Onshore Fund to New Icahn Management at the beginning of each quarter, generally in an amount equal to 0.625% (2.5% annualized) of the net asset value of each Investor’s (as defined below) investment in the Feeder Fund or the Onshore Fund, as applicable, and the management fees were recognized quarterly.

Effective January 1, 2008, the Investment Fund LPAs 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 at the Investment Funds that is attributable to: (i) in the case of the Onshore Fund, each limited partner in the Onshore Fund and (ii) in the case of the Feeder Funds, each investor in the Feeder Funds (excluding certain investors that were not charged management fees which include affiliates of Mr. Icahn) (in each case, 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 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.

In the event that sufficient net profits are not generated by an Investment Fund with respect to a capital account to meet the full Target Special Profits Interest Amount for an Investor for a calendar year, a special profits interest allocation will generally be made to the extent of such net profits, if any, and the shortfall will be carried forward (without interest or a preferred return thereon) and added to the Target Special Profits Interest Amount determined for such Investor for the next calendar year. Appropriate adjustments will be made to the calculation of the special profits interest allocation for new subscriptions and withdrawals by Investors. In the event that an Investor withdraws or redeems in full from a Feeder Fund or the Onshore Fund before the entire Target Special Profits Interest Amount determined for such Investor has been allocated to the applicable General Partner in the form of a special profits interest allocation, the amount of the Target Special Profits Interest Amount that has not yet been allocated to such General Partner will be eliminated and the General Partner will never receive it.

Each Target Special Profits Interest Amount will be deemed contributed to a separate hypothetical capital account (that is not subject to an incentive allocation or a special profits interest allocation) in the applicable Investment Fund and any gains or losses that would have been allocated on such amounts will be credited or debited, as applicable, to such hypothetical capital account. The special profits interest allocation attributable to an Investor will be deemed to be made from (and thereby debited from) such hypothetical capital account

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

and, accordingly, the aggregate amount of any special profits interest allocation attributable to such Investor will also depend upon the investment returns of the Investment Fund in which such hypothetical capital account is maintained.

In addition to receiving special profits interest allocations as described above, the General Partners receive incentive allocations from the Private Funds. Incentive allocations, which are primarily earned on an annual basis, are generally 25% of the net profits (both realized and unrealized) generated by fee-paying investors in the Private Funds that we manage. The incentive allocations 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. Therefore, our Investment Management operations’ revenues will be affected by the combination of fee-paying assets under management (“AUM”) and the investment performance of the Private Funds.

Summarized income statement information for our Investment Management operations for the three and six months ended June 30, 2008 and 2007 is as follows (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Revenues:
                                   
Management fees from related
parties
  $     $ 2,565     $     $ 3,376  
Consolidated affiliated partnerships:
                                   
Realized gains – securities     337,754       249,835       329,422       515,481  
Unrealized (losses) gains – securities     (903,696 )      142,354       (1,290,840 )      134,438  
Realized (losses) gains – derivative contracts     (235,708 )      37,621       210,992       103,448  
Unrealized gains (losses) – derivative contracts     29,117       (106,444 )      (48,170 )      (65,492 ) 
Interest, dividends and other
income
    62,871       42,670       102,343       81,617  
Other income     111       187       760       307  
       (709,551 )      368,788       (695,493 )      773,175  
Costs and expenses:
                                   
Compensation     5,238       12,375       11,168       24,596  
Shareholder actions     1,087       2,616       1,447       3,106  
General and administrative     3,993       1,043       5,709       2,681  
Consolidated affiliated partnerships:
                                   
Interest expense     2,398       6,331       3,256       9,545  
Dividend expense     4,332       53       5,519       591  
Other investment expenses     574       10,787       4,164       18,062  
Other expenses, net     (11,128 )      1,885       (9,672 )      3,900  
       6,494       35,090       21,591       62,481  
(Loss) income before taxes and
non-controlling interests in income
    (716,045 )      333,698       (717,084 )      710,694  
Non-controlling interests in loss (income)     630,012       (246,446 )      628,159       (511,518 ) 
Income tax benefit (expense)     215       (855 )      (272 )      (1,604 ) 
Net (loss) earnings   $ (85,818 )    $ 86,397     $ (89,197 )    $ 197,572  

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

The table below reflects changes to the Private Funds’ AUM for the three and six months ended June 30, 2008 and 2007 (in $000s). Amounts presented are net of any special profits interest allocations effective January 1, 2008 (and prior to January 1, 2008, management fees) and any accrued incentive allocations and include deferred balances and amounts invested by us and certain other affiliated parties for which we are charged no special profits interest allocation effective January 1, 2008 (and prior to January 1, 2008, management fees) and pay no incentive allocations for the periods presented. Accordingly, the amounts presented below are not the amounts used to calculate the Target Special Profits Interest Amount effective January 1, 2008 (and prior to January 1, 2008, management fees) for the respective periods.

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Balance, beginning of period   $ 7,894,921     $ 5,337,435     $ 7,510,670     $ 4,019,993  
Net (out-flows) in-flows     (166,406 )      679,901       211,473       1,614,207  
(Depreciation) appreciation     (719,596 )      338,654       (713,224 )      721,790  
Balance, end of period   $ 7,008,919     $ 6,355,990     $ 7,008,919     $ 6,355,990  
Fee-paying AUM   $ 4,749,237     $ 4,804,594     $ 4,749,237     $ 4,804,594  

The amount of any special profits interest allocations (and prior to January 1, 2008, management fees) and incentive allocations accrued before related eliminations for the periods stated is as follows (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Special Profits Interest Allocations:
                                   
Investment Funds   $ (5,046 )    $     $     $  
Management Fees:
                                   
Consolidated Private Funds   $     $ 32,284     $     $ 62,468  
Unconsolidated Private Funds           2,565             3,376  
Total   $     $ 34,849     $     $ 65,844  
Incentive Allocations:
                                   
Investment Funds   $ (477 )    $ 51,735     $     $ 120,509  

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 EITF Topic D-96 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 prior to the conclusion of the Private Funds’ fiscal year.

For the three and six months ended June 30, 2008, the Target Special Profits Interest Amount was $27.6 million and $60.0 million, respectively. There was a special profits interest allocation reversal of $5.0 million made for the three months ended June 30, 2008 due to losses in the Investment Funds. No accrual for special profits interest allocation was made for the six months ended June 30, 2008 due to losses in the Investment Funds. The Target Special Profits Interest Amount of $60.0 million will be carried forward and will be accrued to the extent that there are sufficient net profits in the Investment Funds to cover such amounts. There was no special profits interest allocation for the first three and six months ended June 30, 2007 because the special profits interest allocations started effective January 1, 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

b. Metals

We conduct our Metals operations 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.

Summary balance sheet information for our Metals operations as of June 30, 2008 and December 31, 2007 included in the consolidated balance sheets is as follows (in $000s):

   
  June 30,
2008
  December 31,
2007
Cash and cash equivalents   $ 12,830     $ 20,215  
Investments     7,311       7,299  
Accounts receivable, net of allowance for doubtful accounts     172,155       77,281  
Inventories, net     72,877       72,282  
Property, plant and equipment, net     94,028       83,398  
Other assets     62,176       62,196  
Total assets   $ 421,377     $ 322,671  
Accounts payable, accrued expenses and other liabilities   $ 75,510     $ 36,707  
Debt and capital lease obligations     3,230       3,223  
Accrued environmental costs     24,614       24,296  
Total liabilities   $ 103,354     $ 64,226  

Summarized income statement information for our Metals operations for the three and six months ended June 30, 2008 and 2007 included in the consolidated statements of operations is as follows (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Net sales   $ 434,106     $ 214,493     $ 736,941     $ 423,379  
Expenses:
                                   
Cost of sales     362,763       204,014       632,558       394,772  
Selling, general and administrative expenses     8,327       5,427       14,733       10,359  
Total expenses     371,090       209,441       647,291       405,131  
Income from continuing operations before interest, income taxes and non-controlling interests in income   $ 63,016     $ 5,052     $ 89,650     $ 18,248  

For the six months ended June 30, 2008 and 2007, sales to PSC Metals’ top five customers amounted to approximately 42% and 33% of net sales, respectively. Two customers accounted for approximately 23% of PSC Metals’ net sales for the six months ended June 30, 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

The following is a breakdown of depreciation expense for the three and six months ended June 30, 2008 and 2007 (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Depreciation expense included in cost of sales   $ 3,371     $ 3,011     $ 6,615     $ 5,092  
Depreciation expense included in selling, general and administrative expenses     56       65       117       131  
Total depreciation expense   $ 3,427     $ 3,076     $ 6,732     $ 5,223  

c. Real Estate

Our Real Estate operations consist of rental real estate, property development and associated resort activities.

Rental Real Estate

As of June 30, 2008 and December 31, 2007, we owned 29 and 32 rental real estate properties, respectively. As of June 30, 2008, these primarily consisted of fee and leasehold interests in real estate in 13 states. Most of these properties are net-leased to single corporate tenants. Approximately 94% of these properties are currently net-leased, 3% are operating properties and 3% are vacant.

Property Development and Associated Resort Activities

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 370 and 900 units of residential housing, respectively. Both developments operate golf and resort operations as well. We are also completing a residential community in Westchester County, New York.

Summarized income statement information for our continuing Real Estate operations for the three and six months ended June 30, 2008 and 2007 is as follows (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Revenues:
                                   
Rental real estate   $ 3,873     $ 3,754     $ 7,800     $ 7,593  
Property development     12,635       14,736       24,804       32,881  
Resort operations     7,821       7,458       14,310       13,518  
Total revenues     24,329       25,948       46,914       53,992  
Expenses:
                                   
Rental real estate     1,533       1,286       2,859       2,590  
Property development     12,177       15,073       23,097       30,685  
Resort operations     7,705       8,062       14,525       14,456  
Total expenses     21,415       24,421       40,481       47,731  
Income from continuing operations before interest, income taxes and non-controlling interests in income   $ 2,914     $ 1,527     $ 6,433     $ 6,261  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

For each of the three and six months ended June 30, 2008, property development expenses include asset impairment charges of approximately $0.6 million primarily attributable to inventory units at our Grand Harbor, Florida division. For each of the three and six months ended June 30, 2007, property development expenses include asset impairment charges of approximately $1.8 million related to certain condominium land in our Oak Harbor, Florida subdivision.

The following is a consolidated summary of our Real Estate operating unit property and equipment as of June 30, 2008 and December 31, 2007 included in the consolidated balance sheets (in $000s):

   
  June 30,
2008
  December 31,
2007
Rental properties   $ 111,711     $ 115,843  
Property development     101,964       107,036  
Resort properties     44,618       43,823  
Total real estate   $ 258,293     $ 266,702  

As of June 30, 2008 and December 31, 2007, $95.9 million and $80.0 million, respectively, of the net investment in financing leases and net real estate leased to others was pledged to collateralize the payment of nonrecourse mortgages payable.

d. Home Fashion

We conduct our Home Fashion operations 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. During the fourth quarter of fiscal 2007, WPI sold the inventory at all of its 30 retail outlet stores and subsequently ceased operations of its retail stores. Therefore, the portion of the business related to the stores’ retail operations has been classified for all periods presented as discontinued operations.

The following is summary balance sheet information for our Home Fashion operations as of June 30, 2008 and December 31, 2007, as included in the consolidated balance sheets (in $000s):

   
  June 30,
2008
  December 31,
2007
Cash and cash equivalents   $ 128,770     $ 135,667  
Restricted cash     139       1,827  
Trade receivables, net     68,882       93,085  
Inventories, net     172,758       193,941  
Assets of discontinued operations held for sale     12,255       13,587  
Property, plant and equipment, net     165,383       183,027  
Investments     13,162       13,290  
Other assets     28,488       31,375  
Total assets   $ 589,837     $ 665,799  
Accounts payable, accrued expenses and other liabilities   $ 68,509     $ 87,651  
Debt     5,132       9,243  
Liabilities of discontinued operations held for sale     3,749       8,616  
Total liabilities   $ 77,390     $ 105,510  
Non-controlling interests   $ 99,290     $ 116,496  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

Summarized income statement information for our Home Fashion operations for the three and six months ended June 30, 2008 and 2007 is as follows (in $000s):

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2008   2007   2008   2007
Net sales   $ 96,018     $ 151,111     $ 209,874     $ 347,749  
Expenses:
                                   
Cost of sales     89,198       155,104       194,104       352,084  
Selling, general and administrative expenses     23,902       27,152       50,123       59,210  
Restructuring and impairment charges     7,019       20,382       13,667       24,693  
Total expenses     120,119       202,638       257,894       435,987  
Loss from continuing operations before interest, income taxes and
non-controlling interests in loss
  $ (24,101 )    $ (51,527 )    $ (48,020 )    $ (88,238 ) 

A relatively small number of customers have historically accounted for a significant portion of WPI’s net sales. For the six months ended June 30, 2008 and 2007, sales to five customers amounted to approximately 45% and 47% of net sales, respectively. Two customers accounted for approximately 13% each of WPI’s net sales in the six months ended June 30, 2008 and one customer accounted for approximately 19% of WPI’s net sales in the six months ended June 30, 2007.

The following is a breakdown of depreciation expense for the three and six months ended June 30, 2008 and 2007 (in $000s):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2008   2007   2008   2007
Depreciation expense included in cost of sales   $ 1,780     $ 3,512     $ 3,570     $ 7,222  
Depreciation expense included in selling, general and administrative expenses     1,111       930       1,991       1,878  
Total depreciation expenses   $ 2,891     $ 4,442     $ 5,561     $ 9,100  

Total expenses for the three months ended June 30, 2008 included $1.5 million of non-cash impairment charges related to plants that have closed and $5.5 million of restructuring charges (of which $1.0 million related to severance costs and $4.5 million related to continuing costs of closed plants and transition expenses). Total expenses for the six months ended June 30, 2008 included $1.5 million of non-cash impairment charges related to plants that have closed and $12.1 million of restructuring charges (of which $2.5 million related to severance costs and $9.6 million related to continuing costs of closed plants and transition expenses). Total expenses for the three months ended June 30, 2007 included $15.4 million of fixed asset impairment charges and $5.0 million restructuring charges (of which approximately $1.4 million related to severance and $3.6 million related to continuing costs of closed plants and transition expenses). Total expenses for the six months ended June 30, 2007 included $15.4 million of fixed asset impairment charges and $9.3 million restructuring charges (of which approximately $1.8 million related to severance and $7.5 million related to continuing costs of closed plants and transition expenses).

To improve WPI’s competitive position, WPI management intends to continue to significantly 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

2. Operating Units  – (continued)

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 is consolidating into its Wagram, NC facility. As of June 30, 2008, approximately $176.8 million of WPI’s assets are located outside of the United States, primarily in Bahrain.

Included in restructuring expenses are cash charges associated with the ongoing costs of closed plants, employee severance, benefits and related costs. The amount of accrued restructuring costs at December 31, 2007 was $0.8 million. During the six months ended June 30, 2008, WPI incurred additional restructuring costs of $12.1 million. WPI paid $11.8 million of restructuring charges during the six months ended June 30, 2008. As of June 30, 2008, the accrued liability balance was $1.1 million, which is included in accounts payable, accrued expenses and other liabilities in our consolidated balance sheet.

Total cumulative impairment and restructuring charges from August 8, 2005 (acquisition date) through June 30, 2008 were $110.3 million.

WPI anticipates that restructuring charges will continue to be incurred throughout the fiscal year ending December 31, 2008 (“fiscal 2008”). WPI anticipates incurring restructuring costs and impairment charges in fiscal 2008 relating to the current restructuring plan of between $17.0 million and $20.0 million primarily related to the continuing costs of its closed facilities. 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.

3. Discontinued Operations and Assets Held for Sale

Results of Discontinued Operations and Assets and Liabilities Held for Sale

Gaming Operations

On February 20, 2008, we consummated the sale of our subsidiary, ACEP, to an affiliate of Whitehall Street Real Estate Fund for $1.2 billion, realizing a gain of approximately $473.9 million, after taxes. The sale of ACEP included the Stratosphere and three other Nevada gaming properties, which represented all of our remaining gaming operations. Therefore, the results of our Gaming operations are reflected as discontinued operations through February 20, 2008.

Home Fashion Operations — 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 accrued in fiscal 2007 approximately $8.1 million of expense relating to the estimated liability for termination of the leases relating to its retail outlet stores facilities. As of June 30, 2008 and December 31, 2007, the accrued lease termination liability balance was approximately $3.5 million and $7.1 million, respectively, which is included in liabilities of discontinued operations in our consolidated balance sheets.

Real Estate Operations

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 changed during the three and six months ended June 30, 2008 and certain amounts in the consolidated statements of operations for the three and six months ended June 30, 2007 and cash flows for the six months ended June 30, 2007 have been reclassified to conform to the properties that have been classified as held for sale in the current periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

3. Discontinued Operations and Assets Held for Sale  – (continued)

Results of Operations and Assets Held for Sale

The financial position and results of operations for our Gaming and certain portions of the Home Fashion and Real Estate operations described below are presented as assets and liabilities of discontinued operations held for sale 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 Asset (“SFAS No. 144”).

A summary of the results of operations for our discontinued operations for the three and six months ended June 30, 2008 and 2007 is as follows (in $000s):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2008   2007   2008   2007
Revenues:
                                   
Gaming(1)   $     $ 114,138     $ 59,619     $ 227,026  
Real Estate     274       995       811       2,076  
Home Fashion – retail stores           14,678             28,644  
Total revenues   $ 274     $ 129,811     $ 60,430     $ 257,746  
Income (loss) from discontinued operations:
                                   
Gaming   $     $ 31,319     $ 13,430     $ 54,546  
Real Estate     179       636       601       1,266  
Home Fashion – retail stores     13       (1,475 )      (154 )      (3,779 ) 
Total income from discontinued operations before income taxes, interest and other income     192       30,480       13,877       52,033  
Interest expense           (5,461 )      (2,564 )      (10,901 ) 
Interest and other income           273       322       19,334  
Income from discontinued operations before income taxes and non-controlling interests in loss     192       25,292       11,635       60,466  
Income tax expense     (3 )      (6,038 )      (3,890 )      (15,232 ) 
       189       19,254       7,745       45,234  
Non-controlling interest in (income) loss     (4 )      519       50       (531 ) 
(Loss) gain on sales of discontinued operations, net of income tax expense     (2,109 )      841       479,517       14,026  
(Loss) income from discontinued operations   $ (1,924 )    $ 20,614     $ 487,312     $ 58,729  

(1) Gaming segment results for the six months ended June 30, 2008 are through February 20, 2008, the date of the ACEP sale.

Interest and other income for the six months ended June 30, 2007 includes approximately $8.3 million relating to a real estate tax refund received by Atlantic Coast Entertainment Holdings, Inc. (“Atlantic Coast”) and approximately $10.1 million representing the net gain on settlement of litigation relating to GB Holdings Inc. (“GBH”).

The gain on sales of discontinued operations for the six months ended June 30, 2008 includes approximately $473.9 million, net of income taxes of approximately $258.4 million, recorded on the sale of ACEP on February 20, 2008. The gain on sales of discontinued operations for the six months ended June 30, 2007 includes approximately $4.7 million of gain on sales of real estate assets and $9.3 million relating to a working capital adjustment to the gain recorded on the sale of the Oil and Gas business in November 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

3. Discontinued Operations and Assets Held for Sale  – (continued)

Assets and Liabilities of Discontinued Operations

A summary of assets and liabilities of discontinued operations held for sale as of June 30, 2008 and December 31, 2007 is as follows (in $000s):

   
  June 30,
2008
  December 31,
2007
Cash and cash equivalents   $     $ 107,265  
Trade, notes and other receivables           5,615  
Property, plant and equipment     15,113       459,149  
Other assets           60,248  
Assets of discontinued operations held for sale   $ 15,113     $ 632,277  
Accounts payable and accrued expenses   $     $ 49,013  
Debt           257,330  
Other liabilities     3,749       11,002  
Liabilities of discontinued operations held for sale   $ 3,749     $ 317,345  

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. (See Note 19, “Subsequent Events,” for additional information.)

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 previous 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.

a. Investment Management Operations

Until August 8, 2007, Icahn Management elected to defer management fees from the Offshore Funds and such amounts remain invested in the Offshore Funds. At June 30, 2008, the balance of the deferred management fees payable by the consolidated Offshore Fund to Icahn Management was $130.3 million and the depreciation upon them was $13.8 million and $13.7 million for the three and six months ended June 30, 2008, respectively. For the three and six months ended June 30, 2007, the deferred management fees from the Offshore Funds and related appreciation were eliminated in consolidation. (Prior to August 8, 2007, Icahn Management’s financial results were consolidated into our consolidated financial statements).

Effective January 1, 2008, Icahn Capital and the Holding Company 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 accounting, administrative, investment, legal and tax services. Prior to January 1, 2008, Icahn & Co. LLC paid for such services. Under a separate expense-sharing agreement, Icahn Capital and the Holding Company have charged Icahn Affiliates $1.1 million and $1.8 million for such services for the three and six months ended June 30, 2008, respectively. Icahn Affiliates charged Icahn Management $2.3 million and $4.0 million for such services for the three

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

4. Related Party Transactions  – (continued)

and six months ended June 30, 2007, respectively. Management believes that all allocated amounts are reasonable based upon the nature of the services provided.

In addition, effective January 1, 2008, certain expenses borne by Icahn Capital have been reimbursed by Icahn Affiliates, as appropriate, when such expenses were incurred. The expenses included investment-specific expenses for investments acquired by both the Private Funds and Icahn Affiliates that were allocated based on the amounts invested by each party, as well as investment management-related expenses that were allocated based on estimated usage agreed upon by Icahn Capital and Icahn Affiliates.

Carl C. Icahn, along with his affiliates (other than Icahn Enterprises and its affiliates), makes investments in the Private Funds. These investments are not subject to special profits interest allocations effective January 1, 2008 (and prior to January 1, 2008, management fees) or incentive allocations. As of June 30, 2008, the total of these investments was approximately $1.36 billion.

b. All Other Operations

Metals

Prior to our acquisition of PSC Metals on November 5, 2007, PSC Metals was wholly owned by Philip Services Corporation (“Philip”), which entered into a Tax Allocation Agreement (the “Agreement”) with Starfire Holding Corporation (“Starfire”). Mr. Icahn is the sole shareholder of Starfire. The Agreement provided that Starfire would pay all consolidated federal income taxes on behalf of the Philip consolidated group, which included PSC Metals. Philip was required to make payments to Starfire in an amount equal to the tax liability, if any, that it would have if it was to file as a consolidated group separate and apart from Starfire. Subsequent to our acquisition of PSC Metals on November 5, 2007, PSC Metals is no longer a party to the Agreement with Starfire.

PSC Metals sold material to Alliance Castings for the three and six months ended June 30, 2008 of approximately $5.8 million and $8.7 million, respectively, and for the three and six months ended June 30, 2007, approximately $3.1 million and $5.1 million, respectively. Mr. Icahn is a major shareholder of Alliance Castings.

Philip issued approximately $5.9 million and $6.3 million in letters of credit collateralizing certain of PSC Metals’ obligations, which remained outstanding at June 30, 2008 and December 31, 2007, respectively. During the third quarter of fiscal 2008, PSC Metals will replace the letters of credit issued through Philip and issue its own letters of credit to collaterize its obligations that it anticipates funding with cash generated through current operations.

Administrative Services

In July 2005, we entered into a license agreement with an affiliate for the non-exclusive use of approximately 1,514 square feet for which we paid monthly base rent of $13,000 plus 16.4% of certain “additional rent” (as defined herein). The license agreement was amended effective August 8, 2007 to reflect an increase in our portion of the office space to approximately 4,246 square feet or approximately 64.76% of the total space leased to an affiliate, of which 3,125 square feet is allocated to Icahn Capital. Under the amended license agreement, effective August 8, 2007, the monthly base rent is approximately $147,500, of which approximately $39,000 is allocated to the Holding Company and approximately $108,500 is allocated to Icahn Capital. We also pay 64.76% of the additional rent payable under the license agreement, which is allocated 17.10% to the Holding Company and 47.66% to Icahn Capital. The license agreement expires in May 2012. Under the amended agreement, base rent is subject to increases in July 2008 and December 2011. We are also entitled to certain annual rent credits each December beginning December 2005 and continuing through December 2011. For the three and six months ended June, 2008, we paid such affiliate $0.5 million and $1.0 million, respectively, and for the three and six months ended June 30, 2007, $0.4 million and $0.8 million, respectively, in connection with this licensing agreement.

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

4. Related Party Transactions  – (continued)

An affiliate occupies a portion of certain office space leased by us. Monthly payments from the affiliate for the use of the space began on October 12, 2006. For each of the three and six months ended June 30, 2008 and 2007, we received $21,000 and $40,000, for the use of such space, respectively.

For the three and six months ended June 30, 2008, we paid $188,000 and $357,000, respectively, to XO Holdings, Inc., an affiliate of Icahn Enterprises GP, our general partner, for telecommunication services, and for the three and six months ended June 30, 2007, we paid $251,000 and $500,000, respectively.

We provide certain professional services to an affiliate of Icahn Enterprises GP for which we charged $0.5 million and $1.0 million for three and six months ended June 30, 2008, respectively, and for each of three and six months ended June 30, 2007, we charged $100,000. In October 2006, an affiliate remitted $0.4 million to us as an advance payment for future services. As of June 30, 2008, accounts payable, accrued expenses and other liabilities in the consolidated balance sheet included $3.5 million to be applied to our charges to the affiliate for services to be provided to it.

An affiliate provided certain professional services to WPI for which it incurred charges of approximately $50,000 and $74,000 for the three and six months ended June 30, 2008, respectively, and for the three and six months ended June 30, 2007, it incurred $222,000 and $314,000, respectively.

5. Investments and Related Matters

a. Investment Management Operations

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 $000s):

       
  June 30, 2008   December 31, 2007
     Amortized
Cost
  Carrying
Value
  Amortized
Cost
  Carrying
Value
Securities Owned, at fair value:
                                   
Common stock   $ 6,407,223     $ 5,260,137     $ 4,929,067     $ 5,133,486  
Convertible preferred stock     30,400       19,988       30,400       28,272  
Call options     131,334       63,293       196,562       177,127  
Put options     76,563       193,892       48,325       67,387  
Corporate debt     931,386       896,214       558,402       513,937  
Total Securities Owned, at fair value   $ 7,576,906     $ 6,433,524     $ 5,762,756     $ 5,920,209  
Securities Sold, Not Yet Purchased, at fair value:
                                   
Common stock   $ 1,090,842     $ 1,101,861     $ 177,157     $ 192,935  
Call options     13,038       1,702              
Put options     7,119       9,777       5,315       8,480  
Corporate debt     1,504       1,488       11,061       4,713  
Total Securities Sold, Not Yet Purchased, at fair value   $ 1,112,503     $ 1,114,828     $ 193,533     $ 206,128  
Unrealized Gains on Derivative
Contracts, at fair value:
  $ 15,057     $ 79,522     $ 74,340     $ 110,181  
Unrealized Losses on Derivative
Contracts, at fair value:
  $ 81,041     $ 157,425     $ 17,602     $ 15,726  

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

5. Investments and Related Matters  – (continued)

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 (i) that were deemed to be available-for-sale securities, (ii) that fall outside the scope of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS No. 115”), or (iii) which 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 Fair Value Option for Financial Assets and Financial Liabilities —  Including an Amendment of FAS 115 (“SFAS No. 159”), for such investments. 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 net gain from investment activities 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 Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock (“APB 18”), and are presented before non-controlling interests. The Private Funds applied the fair value option pursuant to SFAS No. 159 to such investments through June 30, 2008 (in $000s):

           
  Private
Funds
Stock
Ownership
Percentage
  Fair Value
June 30, 2008
  Gains (Losses)   Gains (Losses)
     Three Months Ended June 30,   Six Months Ended June 30,
Investment   2008   2007   2008   2007
Adventrx
Pharmaceuticals Inc.
    3.83 %    $ 1,289     $ (579 )    $ 138     $ (268 )    $ (1,418 ) 
BKF Capital Group Inc.     8.72 %      1,564       229       (654 )      21       (723 ) 
Blockbuster Inc.     7.75 %      35,304       (11,694 )      (28,875 )      (21,057 )      (13,412 ) 
Lear Corporation(1)     12.41 %      136,071       (112,561 )      (8,636 )      (129,353 )      58,343  
Motorola Inc.     6.39 %      1,057,840       (300,048 )      1,458       (784,619 )      (66,625 ) 
WCI Communities Inc.     11.42 %      6,984       (9,151 )      (22,445 )      (11,222 )      (13,379 ) 
           $ 1,239,052     $ (433,804 )    $ (59,014 )    $ (946,498 )    $ (37,214 ) 

(1) Holding Company owns approximately 0.4% as of June 30, 2008. See below for additional information.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

5. Investments and Related Matters  – (continued)

securities sold, not yet purchased, at fair value, subscriptions received in advance and redemptions payable 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.

The consolidated VIEs consist of the Offshore Fund and each of the Offshore Master Funds. The General Partners sponsored the formation of and manage each of these VIEs and, in some cases, have an investment therein.

The following table presents information regarding interests in VIEs for which the General Partners hold a variable interest as of June 30, 2008 (in $000s):

         
  General Partners
are the Primary Beneficiary
  General Partners
are not the Primary Beneficiary
     Net Assets   General
Partners'
Interests
  Pledged
Collateral(1)
  Net Assets   General
Partners'
Interests
Offshore Fund and
Offshore Master Funds
  $ 4,123,396     $ 7,067 (2)    $ 276,769     $ 710,359     $ 134 (2) 

(1) Includes collateral pledged in connection with securities sold, not yet purchased and derivative contracts.
(2) Amount represents General Partners' maximum exposure to loss.

b. All Other Operations

Investments consist of the following (in $000s):

       
  June 30, 2008   December 31, 2007
     Amortized
Cost
  Carrying
Value
  Amortized
Cost
  Carrying
Value
Available for Sale
                                   
Marketable equity and debt securities   $ 82,683     $ 74,966     $ 118,785     $ 118,872  
Other investments                 172,197       173,323  
Total available for sale     82,683       74,966       290,982       292,195  
Trading
                                   
Investment in ImClone Systems, at fair value     122,122       184,644       122,122       196,235  
Investment in Lear Corporation, at fair value     12,500       4,758       12,500       9,282  
Total trading     134,622       189,402       134,622       205,517  
Other securities     14,720       14,720       14,848       14,848  
Total investments   $ 232,025     $ 279,088     $ 440,452     $ 512,560  

The following table summarizes those investments for which the Holding Company has applied the fair value option pursuant to SFAS No. 159 through June 30, 2008 (in $000s). 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 net gain (loss) from investments in the consolidated statements of operations. We believe that these investments, individually or in the aggregate, are not material to our consolidated financial statements. These companies are registered SEC filers and their consolidated financial statements are available at www.sec.gov.

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

5. Investments and Related Matters  – (continued)

           
  Holding
Company
Stock
Ownership
Percentage
  Fair Value
June 30, 2008
  Gains (Losses)   Gains (Losses)
     Three Months Ended June 30,   Six Months Ended June 30,
Investment   2008   2007   2008   2007
ImClone Systems Incorporated     5.3 %    $ 184,644     $ (8,945 )    $ (24,689 )    $ (11,592 )    $ 39,247  
Lear Corporation     0.4 %      4,758       (3,936 )            (4,523 )       
           $ 189,402     $ (12,881 )    $ (24,689 )    $ (16,115 )    $ 39,247  

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 I 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.

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.

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

6. Fair Value Measurements  – (continued)

The following table summarizes the valuation of our investments by the above SFAS No. 157 fair value hierarchy levels as of June 30, 2008 (in $000s).

Investment Management Operations

     
  Level 1   Level 2   Total
ASSETS
                          
Securities owned   $ 5,032,631     $ 1,400,893     $ 6,433,524  
Unrealized gains on derivative contracts     42,615       36,907       79,522  
     $ 5,075,246     $ 1,437,800     $ 6,513,046  
LIABILITIES
                          
Securities sold, not yet purchased   $ 1,100,503     $ 14,325     $ 1,114,828  
Unrealized losses on derivative contracts           157,425       157,425  
     $ 1,100,503     $ 171,750     $ 1,272,253  

All Other Operations

     
  Level 1   Level 2   Total
ASSETS
                          
Available for sale investments:
                          
Marketable equity and debt securities   $ 74,966     $     $ 74,966  
Other securities                  
       74,966             74,966  
Trading investments:
                          
Investment in ImClone Systems Inc.     184,644             184,644  
Investment in Lear Corporation     4,758             4,758  
       189,402             189,402  
Unrealized gains on derivative contracts           1,324       1,324  
     $ 264,368     $ 1,324     $ 265,692  
LIABILITIES
                          
Unrealized losses on derivative contracts   $     $ 8,631     $ 8,631  
     $     $ 8,631     $ 8,631  

7. Financial Instruments, Off-Balance-Sheet Risk, Concentrations of Credit Risk and Guarantees

The Private Funds currently maintain cash deposits and cash equivalents with major financial institutions. Most of the Onshore Fund’s and Offshore Master Funds’ investments are held by, and its depository and clearing operations are transacted by, several prime brokers and a custodian. 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 derivatives 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 invest in 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

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

7. Financial Instruments, Off-Balance-Sheet Risk, Concentrations of Credit Risk and Guarantees  – (continued)

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 and the Holding Company have entered into various types of swap contracts with other counterparties. These agreements provide that we 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, we 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. We are also required to pay to our counterparty a floating interest rate equal to the product of the notional amount multiplied by an agreed-upon rate, and we receive interest on any cash collateral that we 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. At June 30, 2008 and December 31, 2007, the maximum payout amounts relating to written put options were $101.1 million and $461.4 million, respectively. As of June 30, 2008 and December 31, 2007, the carrying amounts of the liability under written put options recorded within securities sold, not yet purchased, at fair value was $7.4 million and $8.5 million, respectively.

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.

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

7. Financial Instruments, Off-Balance-Sheet Risk, Concentrations of Credit Risk and Guarantees  – (continued)

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. As of June 30, 2008 and December 31, 2007, the Private Funds have such credit default swaps with a maximum notional amount of approximately $319.1 million and $252.0 million, respectively, with terms ranging from one to five years. We estimate that our potential risk related to these credit default swaps approximates 10% of such notional amounts.

8. Inventories, Net

Metals Inventories.  Inventories at our Metals segment are stated at the lower of cost or market. Cost is determined using the average cost method. The production and accounting process utilized by the Metals segment to record recycled metals inventory quantities relies on significant estimates.

Metals inventories consisted of the following (in $000s):

   
  June 30,
2008
  December 31,
2007
Ferrous   $ 42,167     $ 39,078  
Non-ferrous     13,325       9,658  
Secondary     17,385       23,546  
     $ 72,877     $ 72,282  

Home Fashion Inventories.  Inventories at our Home Fashion segment are stated at the lower of cost or market. Cost is determined using the first-in-first-out method. The cost of manufactured goods includes material, labor and factory overhead. WPI maintains reserves for estimated excess, slow-moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. A portion of its inventories serves as collateral under West Point Home Inc.’s unused senior secured revolving credit facility.

Home Fashion inventories consisted of the following (in $000s):

   
  June 30,
2008
  December 31,
2007
Raw materials and supplies   $ 12,862     $ 14,427  
Goods in process     35,545       46,483  
Finished goods     124,351       133,031  
     $ 172,758     $ 193,941  

Total Inventories (in $000s):

   
  June 30,
2008
  December 31,
2007
Metals segment   $ 72,877     $ 72,282  
Home Fashion segment     172,758       193,941  
     $ 245,635     $ 266,223  

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ICAHN ENTERPRISES L.P. AND SUBSIDIARIES
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

9. Property, Plant and Equipment, Net

Property, plant and equipment consist of the following (in $000s):

   
  June 30,
2008
  December 31,
2007
Land   $ 52,003     $ 52,299  
Buildings and improvements     139,003       139,673  
Machinery, equipment and furniture     212,497       223,104  
Assets leased to others     127,063       128,186  
Construction in progress     112,692       101,700  
       643,258       644,962  
Less accumulated depreciation and amortization     (122,835 )      (111,835 ) 
Property, plant and equipment, net   $ 520,423     $ 533,127  

Depreciation and amortization expense from continuing operations related to property, plant and equipment for the three and six months ended June 30, 2008 were $7.7 million and $14.9 million, respectively, and for the three and six months ended June 30, 2007, $8.9 million and $17.1 million, respectively.

10. Non-Controlling Interests

Non-controlling interests consist of the following (in $000s):

   
  June 30,
2008
  December 31,
2007
Investment Management operations   $ 6,179,469     $ 6,594,014  
All Other operations:
                 
WPI     99,290       116,496  
NEGI     23,993       24,053  
Total other     123,283       140,549  
Total non-controlling interests   $ 6,302,752     $ 6,734,563  

Investment Management Operations

The Investment Management operations consolidate those entities in which (i) they have an investment of more than 50% and have control over significant operating, financial and investing decisions of the entity, (ii) they have 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) they are 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 June 30, 2008, the net asset value of the consolidated Private Funds on our consolidated balance sheet was approximately $6.9 billion, while the net asset value of our investments in these consolidated funds was approximately $693.0 million. The majority ownership interests in these funds, which represent the portion of the consolidated Private Funds’ net assets and net income attributable to the limited partners and shareholders in the consolidated Private Funds for the periods presented, are reflected as non-controlling interests in the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2008

11. Debt

Debt consists of the following (in $000s):

   
  June 30,
2008
  December 31,
2007
Senior unsecured variable rate convertible notes due 2013 – Icahn Enterprises   $ 600,000     $ 600,000  
Senior unsecured 7.125% notes due 2013 – Icahn Enterprises     974,043       973,387  
Senior unsecured 8.125% notes due 2012 – Icahn Enterprises     351,731       351,570  
Senior secured 7.85% notes due 2012 – ACEP           215,000  
Borrowings under credit facility – ACEP           40,000  
Mortgages payable     101,240       104,030  
Other     8,362       14,796  
Total debt     2,035,376       2,298,783  
Less debt related to assets held for sale           (257,330 ) 
     $ 2,035,376     $ 2,041,453  

Senior Unsecured Variable Rate Convertible Notes Due 2013 — Icahn Enterprises

In April 2007, we issued an aggregate of $600.0 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. 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 unit per $1,000 principal amount, subject to adjustments in certain circumstances. As of June 30, 2008, the interest rate was 4.0%. The interest on the variable rate notes is payable quarterly on each Janua