Fair Value of Financial Investments

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Investments [Abstract]

Fair Value of Financial Investments

E. The Company has maintained investments in available-for-sale securities and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses. Financial investments included in other assets were as follows, in millions:

	June 30,		December 31,
	2012		2011
Auction rate securities	$	22	$	22
Total recurring investments		22		22
Private equity funds		74		86
Other investments		4		4
Total non-recurring investments		78		90
Total	$	100	$	112

The Company’s investments in available-for-sale securities at June 30, 2012 and December 31, 2011 were as follows, in millions:

			Pre-tax
			Unrealized		Unrealized		Recorded
	Cost Basis		Gains		Losses		Basis
June 30, 2012	$	19	$	3	$	—	$	22
December 31, 2011	$	19	$	3	$	—	$	22

Recurring Fair Value Measurements. Financial investments measured at fair value on a recurring basis at each reporting period and the amounts for each level within the fair value hierarchy were as follows, in millions:

			Fair Value Measurements Using
	June 30, 2012		Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Auction rate securities	$	22		—		—	$	22
Total	$	22	$	—	$	—	$	22

			Fair Value Measurements Using
	Dec. 31, 2011		Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Auction rate securities	$	22	$	—	$	—	$	22
Total	$	22	$	—	$	—	$	22

The fair value of the auction rate securities held by the Company have been estimated, on a recurring basis, using a discounted cash flow model (Level 3 input). The significant inputs in the discounted cash flow model used to value the auction rate securities include: expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

The following table summarizes the changes in Level 3 financial assets measured at fair value on a recurring basis for the six months ended June 30, 2012 and the year ended December 31, 2011, in millions:

	June 30, 2012 Auction Rate Securities		December 31, 2011 Auction Rate Securities
Fair value at beginning of period	$	22	$	22
Total losses included in earnings		—		—
Unrealized (losses)		—		—
Purchases		—		—
Settlements		—		—
Transfer from Level 3 to Level 2		—		—
Fair value at period end	$	22	$	22

Non-Recurring Fair Value Measurements. During the period ended June 30, 2011, the Company did not measure any financial investments on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of private equity funds. Financial investments measured at fair value on a non-recurring basis during the period June 30, 2012 and the amounts for each level within the fair value hierarchy were as follows, in millions:

			Fair Value Measurements Using
	June30, 2012		Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Total Inputs (Level 3)		Gains (Losses)
Private equity funds	$	2		—		—	$	2	$	(2	)
Total	$	2	$	—	$	—	$	2	$	(2	)

The remaining private equity investments at June 30, 2012, with an aggregate carrying value of $72 million, were not reviewed for impairment, as there were no indicators of impairment or identified events or changes in circumstances that would have a significant adverse effect on the fair value of the investment.

The Company did not have any transfers between Level 1 and Level 2 financial assets in the second quarter or in the first six months of 2012 or 2011.

Realized Gains (Losses). Income (loss) from financial investments, net, included in other, net, within other income (expense), net, was as follows, in millions:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012			2011		2012			2011
Realized gains – distributions from private equity funds	$	2		$	6	$	18		$	9
Realized gains—sale of TriMas Corporation common stock		—			27		—			41
Total income from financial investments	$	2		$	33	$	18		$	50
Impairment charges – private equity funds	$	(2	)	$	—	$	(2	)	$	—

The fair value of the Company’s short-term and long-term fixed-rate debt instruments is based principally upon quoted market prices for the same or similar issues or the current rates available to the Company for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at June 30, 2012 was approximately $4.6 billion, compared with the aggregate carrying value of $4.4 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2011 was approximately $4.0 billion, compared with the aggregate carrying value of $4.0 billion.