SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
CURRENT REPORT
| x | | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2002
OR
| ¨ | | TRANSITION REPORT PURSANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-1511
FEDERAL-MOGUL CORPORATION
401(k) INVESTMENT PROGRAM
26555 Northwestern Highway
Southfield, MI 48034
(248) 354-7700
The Plan holds shares of common stock (without par value) of Federal-Mogul Corporation
FEDERAL-MOGUL CORPORATION
401(k) INVESTMENT PROGRAM
TABLE OF CONTENTS
REPORT OF INDEPENDENT AUDITOR S
Retirement Programs Committee
Federal-Mogul Corporation
We have audited the accompanying statement of net assets available for plan benefits of the Federal-Mogul Corporation 401(k) Investment Program (Plan) as of December 31, 2002, and the related statement of changes in net assets available for benefits for the period from November 25, 2002 through December 31, 2002. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2002, and the changes in its net assets available for benefits for the period from November 25, 2002 through December 31, 2002, in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
June 20, 2003
Federal-Mogul Corporatio n
401(k) Investment Program
Statement of Net Assets Available for Plan Benefits
| | | December 31, 2002
|
Assets | | | |
Investments in Master Trust (See Note 6) | | $ | 264,705,287 |
Liabilities | | | |
Forfeited accounts owed to the Company (See Note 1) | | | 170,559 |
| | |
|
|
Net Assets Available for Plan Benefits | | $ | 264,534,728 |
| | |
|
|
See notes to financial statements
2
Federal-Mogul Corporatio n
401(k) Investment Program
Statement of Changes in Net Assets Available for Plan Benefits
| | | Period from
November 25, 2002
through December 31, 2002
| |
Additions | | | | |
Dividends and interest | | $ | 2,344,994 | |
Participant contributions | | | 1,833,144 | |
| | |
|
|
|
Total Additions | | | 4,178,138 | |
Deductions | | | | |
Benefits paid to participants | | | 971,126 | |
Portion of Company match account forfeited upon withdrawal of members (see Note 3) | | | 33,959 | |
| | |
|
|
|
Total Deductions | | | 1,005,085 | |
Transfer from other Company investment program | | | 267,113,964 | |
Net realized/unrealized depreciation in fair value of investments in Master Trust (See Note 6) | | | (5,752,289 | ) |
| | |
|
|
|
Net increase | | | 264,534,728 | |
Net assets available for plan benefits at beginning of period | | | — | |
| | |
|
|
|
Net Assets Available for Plan Benefits | | $ | 264,534,728 | |
| | |
|
|
|
See notes to financial statements
3
Federal-Mogul Corporatio n
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
| 1. | | Description of the Plan |
Federal-Mogul Corporation (the “Company”) sponsors the Federal-Mogul Corporation 401(k) Investment Program (the “Plan”). The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
General
The Company adopted the Plan on November 25, 2002. The Plan is a defined contribution plan which provides eligible salaried employees of the Company with a program for making voluntary pre-tax and after-tax contributions. All domestic salaried employees of the Company and subsidiaries are eligible to participate in the Plan. It is subject to the provisions of the Employee Retirement Income Security Act (ERISA).
On October 1, 2001, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “U.S. Restructuring”).
Master Trust
The Plan invests participant directed contributions in a master trust. The Plan’s assets are administered under the terms of the master trust agreement (the “Master Trust”) between the Company and Fidelity Management Trust Company (the “Trustee”). The agreement provides, among other things, that the Trustee safekeeps all investments, and keeps account for all investments, receipts, disbursements, benefit payments, and other transactions.
During 2002, the Plan received assets from the Company’s Salaried Employees’ Investment Program (the “Predecessor Plan”). The assets of the Predecessor Plan were administered under the terms of a master trust agreement between the Company and The State Street Bank and Trust through the date of the asset transfer.
Contributions & Vesting
Participants are immediately vested in their contributions plus earnings thereon. Vesting in the Company’s matching contribution portion of their accounts plus earnings thereon is based on years of vesting service as follows:
Years of Vesting Service
| | % of Vesting in Company Contribution
|
1 | | 0% |
2 | | 25% |
3 | | 50% |
4 | | 75% |
5 | | 100% |
Full vesting also occurs upon death, total and permanent disability, or retirement at designated ages. In addition, special-vesting provisions will become effective if the Plan is determined to be “top-heavy,” pursuant to the Internal Revenue Code.
Forfeitures
Account balances which are not vested at the time of a participant’s withdrawal from the Plan are forfeited and will be applied as a reduction of discretionary Company contributions.
If the individual is re-employed within 60 months of his/her severance of employment and repays the full amount previously distributed to him/her from the Company contribution account and otherwise qualifies for reinstatement in the Plan, the amount of the forfeitures is re-credited to his/her account in the reinstatement year.
4
Federal-Mogul Corporatio n
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
| 1. | | Description of the Plan (continued) |
Participant Accounts
Each participant’s account is credited with the participant’s contribution, Company’s contribution, if applicable, and Plan earnings. The benefit to which a participant is entitled is the benefit that can be provided not in excess of the participant’s vested account balance.
Investment Options
The Plan provides for 24 investment options which includes the following funds:
| | • | | Fidelity Asset Manager Fund |
| | • | | Fidelity Asset Manager: Growth Fund |
| | • | | Fidelity Asset Manager: Income Fund |
| | • | | PIMCO Total Return Bond Fund |
| | • | | Fidelity Low-Priced Stock Fund |
| | • | | Fidelity Dividend Growth Fund |
| | • | | Fidelity Mid-Cap Stock Fund |
| | • | | Fidelity Diversified International Fund |
| | • | | Fidelity U.S. Bond Index Fund |
| | • | | PIMCO Foreign Bond Fund |
| | • | | Spartan U.S. Equity Index Fund |
| | • | | The Oakmark Select Fund |
| | • | | Dreyfus Mid-Cap Index Fund |
| | • | | T. Rowe Price Mid-Cap Growth Fund |
| | • | | Dreyfus Small Cap Stock Index Fund |
| | • | | Liberty Acorn Fund – Class Z |
| | • | | Spartan International Index Fund |
| | • | | GMO Emerging Countries Fund – Class M |
| | • | | Federal-Mogul Common Stock |
(closed to new investments)
Employees were not permitted to make additional investments in Federal-Mogul Common Stock.
Participant Loans Receivable
The Plan allows participants to borrow from their account under certain plan conditions. The maximum amount of a participant’s borrowings shall not exceed $50,000 over a 12 month period and is limited to the lower of 50% of the participant’s vested account balance or 90% of the participant’s employee contribution accounts. No borrowings shall be given for amounts under $1,000. Loans for the purchase of a primary residence can be for a 15-year duration. All other borrowings shall be paid back in equal payments through payroll deductions not to exceed four-and-one-half years.
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Federal-Mogul Corporatio n
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
| 1. | | Description of the Plan (continued) |
Payment of Benefits / Withdrawals
In the event of retirement (as defined by the Plan agreement), death, total and permanent disability, termination of employment (as defined by the Plan agreement), or attainment of age 59 1/2, the vested balances in the participant’s accounts will be distributed to the participant or the participant’s beneficiary in either a lump-sum distribution, or periodic installments.
| 2. | | Significant Accounting Policies |
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Investment Valuation and Income Recognition
Investments in all the investment funds, except the Stable Value Fund, are valued at quoted market prices. The Stable Value Fund is valued at fair market value as determined by Fidelity Management Trust Company.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
Expenses incurred in the operation of the Plan are paid by the Trust unless paid by the Company or the Participants. No expenses are paid from the trust unless such payment is permitted by law.
| 3. | | Party-In-Interest Transaction |
Fees incurred for legal and other services rendered by parties-in-interest were based on customary and reasonable rates for such services and were paid by the Company on behalf of the Plan.
Although it has not expressed any intent to do so, the Company has the right, under the Plan document to terminate the Plan, subject to the provisions of ERISA. In the event the Plan is terminated or partially terminated, the Company shall determine the share of each participant affected thereby and all accounts shall fully vest. The Funds shall then be distributed to the member and no portion of the funds shall be returned to the Company.
6
Federal-Mogul Corporatio n
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
The Plan has not received a determination letter from the Internal Revenue Service stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code. However, the plan administrator believes that the Plan is qualified and, therefore, the related trust is exempt from taxation.
| 6. | | Investments in Master Trust |
The Plan’s investments are held by the Master Trust administered by the Trustee. At December 31, 2002, the Plan holds approximately a 57% share of the consolidated Master Trust.
The fair value of net assets of the Master Trust were as follows:
| | | December 31, 2002
|
Investments: | | | |
Fidelity Asset Manager Fund | | | 229,250 |
Fidelity Asset Manager: Growth Fund | | | 24,328 |
Fidelity Asset Manager: Income Fund | | | 41,353 |
Stable Value Fund | | | 186,718,689 |
PIMCO Total Return Bond Fund | | | 81,305,816 |
Fidelity Low-Priced Stock Fund | | | 29,455,113 |
Fidelity Dividend Growth Fund | | | 96,068,926 |
Fidelity Mid-Cap Stock Fund | | | 30,793,427 |
Fidelity Diversified International Fund | | | 16,832,133 |
Fidelity U.S. Bond Index Fund | | | 1,874,661 |
PIMCO Foreign Bond Fund | | | 47,187 |
Spartan U.S. Equity Index Fund | | | 48,144 |
Dreyfus Small Cap Stock Index Fund | | | 59,979 |
Liberty Acorn Fund—Class Z | | | 95,137 |
T. Rowe Price Mid-Cap Growth Fund | | | 113,601 |
The Oakmark Select Fund | | | 259,405 |
Dodge & Cox Stock Fund | | | 214,662 |
Royce Opportunity Fund | | | 29,989 |
AMCAP Fund—Class R4 | | | 68,112 |
Dreyfus Mid Cap Index Fund | | | 167,960 |
Spartan International Index Fund | | | 16,207 |
GMO Emerging Countries Fund—Class M | | | 18,263 |
Federal-Mogul Common Stock | | | 2,157,673 |
Brokerage Account | | | 2,916,610 |
Participant Loans | | | 14,895,629 |
| | |
|
|
Total investments and assets of the Master Trust | | $ | 464,452,254 |
| | |
|
|
7
Federal-Mogul Corporation
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
| 6. | | Investments in Master Trust (continued) |
During the period from November 25, 2002 through December 31, 2002, the Master Trust had investment income of $4,113,560 and had net realized and unrealized depreciation in the fair value of investments of $9,156,975 as follows:
Period from November 25, 2002 through December 31, 2002
| | Net Investment
Income/(Loss) During
Period
| | | Net Realized and
Unrealized
(Depreciation) in Fair Value During
Period
| |
Fidelity Asset Manager Fund | | $ | 2,092 | | | $ | (4,488 | ) |
Fidelity Asset Manager: Growth Fund | | | 679 | | | | (1,224 | ) |
Fidelity Asset Manager: Income Fund | | | 88 | | | | (240 | ) |
Stable Value Fund | | | 681,796 | | | | — | |
PIMCO Total Return Bond Fund | | | 2,768,140 | | | | (1,513,624 | ) |
Fidelity Low-Priced Stock Fund | | | (20 | ) | | | (640,680 | ) |
Fidelity Dividend Growth Fund | | | 386,619 | | | | (4,394,352 | ) |
Fidelity Mid-Cap Stock Fund | | | 370 | | | | (1,049,405 | ) |
Fidelity Diversified International Fund | | | 126,606 | | | | (77,066 | ) |
Fidelity U.S. Bond Index Fund | | | 21,743 | | | | (106 | ) |
PIMCO Foreign Bond Fund | | | 458 | | | | (153 | ) |
Spartan U.S. Equity Index Fund | | | 10 | | | | (264 | ) |
Dreyfus Small Cap Stock Index Fund | | | 6 | | | | (866 | ) |
Liberty Acorn Fund—Class Z | | | — | | | | (786 | ) |
T. Rowe Price Mid-Cap Growth Fund | | | — | | | | (1,138 | ) |
The Oakmark Select Fund | | | — | | | | (3,276 | ) |
Dodge & Cox Stock Fund | | | 1,724 | | | | (2,445 | ) |
Royce Opportunity Fund | | | — | | | | (117 | ) |
AMCAP Fund—Class R4 | | | 1 | | | | (975 | ) |
Dreyfus Mid Cap Index Fund | | | 3,097 | | | | (4,755 | ) |
Spartan International Index Fund | | | 73 | | | | (10 | ) |
GMO Emerging Countries Fund—Class M | | | — | | | | (410 | ) |
Federal-Mogul Common Stock | | | 66 | | | | (1,194,641 | ) |
Brokerage Account | | | — | | | | (265,954 | ) |
Participant Loans | | | 120,012 | | | | — | |
| | |
|
|
| |
|
|
|
| | | $ | 4,113,560 | | | $ | (9,156,975 | ) |
| | |
|
|
| |
|
|
|
8
Federal-Mogul Corporation
401(k) Investment Program
Notes to Financial Statements
December 31, 2002
| 6. | | Investments in Master Trust (continued) |
The changes in the fair value of net assets of the Master Trust, held at Fidelity Trust Management Company for the period from November 25, 2002 through December 31, 2002 are summarized as follows:
| | | Period from November 25,
2002 through December 31, 2002
| |
Additions | | | | |
Dividends and interest income | | $ | 4,113,560 | |
Participant contributions | | | 3,441,642 | |
Contributions from the Company | | | 591,830 | |
| | |
|
|
|
Total Additions | | | 8,147,032 | |
Deductions | | | | |
Benefits paid to participants | | | 2,156,683 | |
Net realized/unrealized depreciation in fair value of investments | | | (9,156,975 | ) |
Transfer from predecessor Trustee | | | 467,618,880 | |
| | |
|
|
|
Net increase | | | 464,452,254 | |
| | |
|
|
|
Net assets available for plan benefits at beginning of period | | | — | |
| | |
|
|
|
Net assets of the master trust at end of period | | $ | 464,452,254 | |
| | |
|
|
|
9
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, The Federal-Mogul Corporation 401(k) Investment Program has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 30, 2003
| |
By: | | /s/ DAVID A. BOZYNSKI
|
| | | David A. Bozynski Retirement Programs Committee, Chairman |
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