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, 2001
OR
[_] TRANSITION REPORT PURSUANT 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
SALARIED EMPLOYEES' 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
SALARIED EMPLOYEES' INVESTMENT PROGRAM
TABLE OF CONTENTS
Page Number
-----------
Report of Independent Auditors
Financial Statements of the Years Ended December 31, 2001 and 2000
Statement of Net Assets Available for Plan Benefits 1
Statement of Changes in Net Assets Available for Plan Benefits 2
Notes to Financial Statements 3-12
Supplemental Schedules for the Year Ended December 31, 2001
Schedule H, Line 4I-Schedule of Assets Held for Investment Purposes 13
REPORT OF INDEPENDENT AUDITORS
Retirement Programs Committee
Federal-Mogul Corporation
We have audited the accompanying statements of net assets available for plan
benefits of the Federal-Mogul Corporation Salaried Employees' Investment Program
as of December 31, 2001 and 2000, and the related statements of changes in net
assets available for benefits for the years then ended. 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 audits.
We conducted our audits 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 audits provide 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, 2001 and 2000, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes at end of year as of December 31, 2001 is presented
for purposes of additional analysis and is not a required part of the financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Detroit, MI
June 26, 2002
FEDERAL-MOGUL CORPORATION
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
SALARIED EMPLOYEES' INVESTMENT PROGRAM
December 31
2001 2000
------------ -------------
ASSETS
Cash equivalents $ - $ 333,696
Investments in master trust (See Note 7) 301,227,290 287,831,249
Federal-Mogul Corporation (FMC) Common Stock - 1,443
Federal-Mogul Corporation (FMC) Preferred Stock 695,100 38,102,610
Transfers receivable - 49,726
------------ ------------
Total Assets 301,922,390 326,318,724
LIABILITIES
Accrued Expenses 3,839 1,662
Advance from FMC - 322,198
Forfeited accounts owed to FMC (See Note 1) 71,505 48,299
------------ ------------
Total Liabilities 75,344 372,159
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $301,847,046 $325,946,565
============ ============
See notes to financial statements
1
FEDERAL-MOGUL CORPORATION
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
SALARIED EMPLOYEES' INVESTMENT PROGRAM
December 31
2001 2000
------------ ------------
Additions
Dividends and Interest $ 6,290,325 $ 17,303,860
Contributions:
Participants 23,130,867 26,449,952
Federal-Mogul Corporation 6,376,237 11,463,643
------------ ------------
Total Additions 35,797,429 55,217,455
Deductions
Benefits paid to participants 53,762,074 57,968,785
Portion of company match account forfeited upon
withdrawal of members (see Note 3) 23,206 17,472
Interest expense - 457,778
------------ ------------
Total Deductions 53,785,280 58,444,035
Transfers from another FMC investment program 55,181,681 -
Net unrealized appreciation/(depreciation) in fair value of
assets held outside the Master Trust (27,363,826) 245,074
Net unrealized depreciation in fair value of
investments in Master Trust (See Note 7) (33,929,523) (70,494,507)
------------ ------------
Net increase/(decrease) (24,099,519) (73,476,013)
Net assets available for plan benefits at beginning of year 325,946,565 399,422,578
------------ ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $301,847,046 $325,946,565
============ ============
See notes to financial statements
2
Federal-Mogul Corporation
Salaried Employees' Investment Program
Notes to Financial Statements
December 31, 2001 and 2000
1. Description of the Plan
The following description of the Federal-Mogul Corporation Salaried Employees'
Investment Program (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 Plan is a defined contribution plan which provides eligible salaried
employees of the Federal-Mogul Corporation ("the Company") with a program for
making voluntary pre-tax and after-tax contributions. Substantially 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, Federal-Mogul Corporation filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code (the "U.S.
Restructuring"). The United States Bankruptcy Court for the District of Delaware
approved Federal-Mogul's motion to continue to operate the Plan.
Master Trust and ESOP 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 State Street Bank (the "Trustee")
and Comerica Bank (the "ESOP Trustee"). The agreements provide, among other
things, that the Trustee and ESOP Trustee safekeep all investments, and keep
account for all investments, receipts, and disbursements, benefit payments, and
other transactions.
During 2001, the Plan received assets transferred from another investment
program of the Company. The assets of the other investment program are also
administered under the terms of the Master Trust.
Contributions & Vesting
During the 2001 plan year, the Company suspended its matching contributions to
the Plan. Company contributions that were made during the Plan year were made
with Company common stock until August 1, 2001. After that date, Company
contributions were made in cash and subsequently invested in accordance with the
Participant's investment election until they were suspended on November 1, 2001.
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's matching contribution portion of their
accounts plus actual earnings thereon is based on years of continuous service,
as follows:
1. Company Match 50%
2. Matching Amount 4%
3. Maximum Contribution 20%
4. Vesting of Match
Years of Service
----------------
1 0%
2 25%
3 50%
4 75%
5 100%
5. Eligibility to Participate
Eligibility for employee to contribute Immediate
Eligibility for company match Immediate
3
Contributions & Vesting (continued)
Full vesting also occurs upon death, 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.
Participant Accounts
Each participant's account is credited with the participant's contribution and
allocations of (a) the Company's contribution and (b) Plan earnings, and charged
with an allocation of certain administrative expenses. These administrative
expenses paid by participants are netted against the net asset value of the
investment fund. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
Forfeitures
Shares of Federal-Mogul Corporation common stock which are not vested at the
time of a participant's withdrawal from the Plan are forfeited and are applied
as a reduction of required Company contributions.
Shares of Federal-Mogul Corporation Series C 7-1/2% convertible preferred stock
which are not vested at the time of a participant's withdrawal from the Plan
become available for allocation to other Plan participants.
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 forfeiture is re-credited to his/her account in the
reinstatement year.
Investment Options
The Plan provides for eight investment options which includes the Stable Value
Fund, Bond Fund, Large Cap Equity Fund, Mid Cap Equity Fund, Small Cap Equity
Fund, International Fund, Brokerage Account and common stock of the Company.
Effective August 31, 2001, employees are no longer permitted to make additional
investments in the common stock of the Company.
Participant Loans Receivable
The Plan allows participants to borrow from their account upon written request
and 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.
Payment of Benefits / Withdrawals
In the event of retirement (as defined by the Plan agreement), death, 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, an annual or more frequent installment.
4
2. Significant Account Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Plan's management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investment Valuation and Income Recognition
Investments in the Bond Fund, Large Cap Equity Fund, Mid Cap Equity Fund, Small
Cap Equity Fund, International Fund, Brokerage Account and Federal-Mogul
Corporation Common Stock Fund are valued at quoted market prices. The Stable
Value Fund is valued at fair market value as determined by State Street Bank and
Trust.
As stated in the Certificate of Designations of Series C ESOP Preferred Stock,
the Company's Series C 7-1/2% convertible preferred stock ("Preferred Stock") is
to be redeemed at the greater value of $63.75 or two times the fair market value
of Federal-Mogul Corporation common stock. The Preferred Stock was allocated to
participants at the stated value of $63.75 per share. At the time of withdrawal
from the Plan, the stated redemption value of the Preferred Stock was the
greater of $63.75 or the equivalent value of two shares of Federal-Mogul
Corporation common stock. At December 31, 2000, the Preferred Stock was valued
at $63.75. However, as a result of the U.S. Restructuring, the ultimate
realization of the full value from the Preferred Stock is highly uncertain, but
is likely to be substantially less than the stated value. Therefore, at December
31, 2001, the fair value of the Preferred Stock was estimated at two times the
market value of Federal-Mogul common stock. The change in valuation of Preferred
Stock from $63.75 to two times the market value of the common stock resulted in
a reduction in net assets of $27,350,903 during the 2001 plan year.
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.
3. Party-In-Interest Transactions
Certain of the Plan's investments are held by a consolidated master trust (the
"Trust") administered by the Trustee. During the years ended December 31, 2001
and 2000, the Master Trust purchased 4,761,400 and 6,094,700 shares of common
stock of the Company pursuant to the direction of the employee, for a total cost
of $15,167,371 and $37,289,450 respectively. During the years ended December 31,
2001 and 2000, the Company repurchased and retired 157,751 and 101,010 of
preferred stock for a total cost of $10,056,626 and $6,439,387 respectively.
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. Forfeited shares which have not been applied as a
reduction of contributions at year-end are reflected as a liability to the
Company and will be applied to reduce future Company contributions.
5
4. Plan Termination
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.
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated October 25, 1996, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. The Plan has applied for but has not received a new
determination letter from the Internal Revenue Service. However, the plan
administrator believes that the Plan is qualified and, therefore, the related
trust is exempt from taxation.
6. Senior ESOP Notes
The Employee Stock Ownership Trust issued $61,750,000 of Senior ESOP Notes in a
private placement on February 15, 1989. The Senior ESOP Notes were paid off
fully in November 2000. The notes were payable in semi-annual installments,
including interest at 6.63%.
6
7. Investments in Master Trust & ESOP Trust
Certain of the Plan's investments are held by the Master Trust administered by
the Trustee.
At December 31, 2001 and 2000, the Plan holds a 57% and a 51% share,
respectively, of the consolidated master trust.
The fair value of net assets of the Trust were as follows at December 31:
2001 2000
------------ ------------
Investments:
Stable Value Fund $182,773,036 $165,864,120
Bond Fund 67,659,149 53,026,996
Large Cap Equity Fund 133,046,949 169,359,732
Mid Cap Equity Fund 47,728,564 42,785,461
Small Cap Equity Fund 36,370,757 36,365,908
International Fund 19,807,345 24,152,206
Brokerage Account 4,187,402 3,330,673
Federal-Mogul Common Stock Fund* 9,496,339 20,959,983
Cooper Common Stock Fund 10,064,994 23,536,290
Cooper Cameron Stock Fund 495,659 1,376,367
Loan Fund 15,913,221 15,857,386
------------ ------------
Total Investments 527,543,415 556,615,122
Receivable from FMC 13,553 12,182
Transfers receivable from other FMC plans - 8,265,352
------------ ------------
Total Assets 527,556,968 564,892,656
Forfeited accounts owed to FMC 501,723 1,165,969
Accrued Expenses 6,723 2,262
------------ ------------
Total Liabilities 508,446 1,168,231
------------ ------------
NET ASSETS OF THE MASTER TRUST $527,048,522 $563,724,425
============ ============
* non-participant directed
The Company's Series C 7 1/2% convertible preferred stock, financed through a
leveraged Employee Stock Ownership Plan is held by the ESOP Trust, administered
by the ESOP Trustee. These assets represent investments in excess of 5% or more
of the fair value of net assets available for benefits at December 31, 2001 and
December 31, 2000:
December 31, 2001
------------------------------
Preferred Stock:
Federal-Mogul Corporation 439,937 shares $695,100
December 31, 2000
------------------------------
Preferred Stock:
Federal-Mogul Corporation 597,688 shares $38,102,610
7
7. Investments in Master Trust & ESOP Trust (continued)
During the year ended December 31, 2001 and December 2000, the Master Trust had
investment income amounting to $11,382,946 and $28,827,266, respectively, and
had realized and unrealized depreciation in the fair value of investments of
$54,490,583 and $100,823,005, respectively as follows:
Net Realized and
Unrealized
Appreciation
Net Investment (Depreciation) in
Income/(Loss) During Fair Value During
Year Ended December 31, 2001 Year Year
- ---------------------------- -------------------- -----------------
Stable Value Fund $ 10,167,394 $ -
Bond Fund 1,424,910 3,242,783
Large Cap Equity Fund (1,146,951) (19,476,153)
Mid Cap Equity Fund (24,817) (6,114,022)
Small Cap Equity Fund 2,459 (2,056,137)
International Fund 283,221 (3,834,169)
Brokerage Account (1,221,329) -
Federal-Mogul Common Stock Fund (353) (22,714,707)
Cooper Common Stock Fund 535,013 (3,092,578)
Cooper Cameron Stock Fund (188) (445,600)
Loan Fund 1,363,587 -
-------------------- -----------------
$ 11,382,946 $ (54,490,583)
Year Ended December 31, 2000
- ----------------------------
Stable Value Fund $ 8,916,371 $ 3,093
Bond Fund 950,760 3,439,582
Large Cap Equity Fund 2,684,403 (21,225,615)
Mid Cap Equity Fund 6,710,914 (4,090,229)
Small Cap Equity Fund 9,903,083 (9,396,897)
International Fund 2,193,248 (4,594,137)
Brokerage Account (1,538,061) -
Federal-Mogul Common Stock Fund (1,680,430) (68,754,551)
Cooper Common Stock Fund (690,524) 3,567,699
Cooper Cameron Stock Fund 249,246 228,050
Loan Fund 1,128,256 -
-------------------- -----------------
$ 28,827,266 $ (100,823,005)
8
7. Investments in Master Trust & ESOP Trust (continued)
The changes in the fair value of net assets of the consolidated master trust for
the years ended December 31, 2001 and December 31, 2000 are summarized as
follows:
Year Ended Year Ended
December 31, December 31,
2001 2000
------------ ------------
Additions:
Dividends/interest income $ 11,382,946 $ 28,827,266
Contributions from participating employees 40,109,084 42,434,605
Contributions from FMC 15,349,300 16,228,250
------------ ------------
Total Additions 66,841,330 87,490,121
Deductions:
Benefits paid to participants 80,879,046 75,032,579
Portion of company match account forfeited upon withdrawal
of members (664,246) 1,057,192
------------ ------------
Total Deductions 80,214,800 76,089,771
Net realized & unrealized depreciation in fair value of investments (54,490,583) (100,823,005)
Transfers from another FMC investment program 31,188,150 97,998,701
------------ ------------
NET INCREASE/(DECREASE) (36,675,903) 8,576,046
------------ ------------
Net assets available for plan benefits at beginning of period 563,724,425 555,148,379
------------ ------------
NET ASSETS OF THE MASTER TRUST AT END OF PERIOD $527,048,522 $563,724,425
============ ============
9
8. Reconciliation of financial statements to Form 5500
The following is a reconciliation of benefits per the financial statements to
the Form 5500:
Period ended
December 31, 2000
-----------------
Benefits paid to participants per financial statements $57,968,785
Less: Amounts allocated to withdrawing participants at December 31, 1999 (3,959,576)
-----------
Benefits paid to participants per Form 5500 as of December 31, 2000 $54,009,209
===========
10
9. Nonparticipant-directed investments
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
December 31, 2001
-------------------------------------
Federal-Mogul Federal-Mogul
Common Stock Preferred Stock
Fund Fund
-------------------------------------
Investments at market value:
FMC Common Stock $ 5,823,936 $ -
FMC Preferred Stock: - 695,100
-------------------------------------
Total Assets 5,823,936 695,100
Liabilities:
Interfund payable 4,599 -
Forfeited accounts owed to FMC 32,405 -
-------------------------------------
Total Liabilities 37,004 -
-------------------------------------
Net Assets Available for Plan Benefits $ 5,786,932 $ 695,100
=====================================
December 31, 2000
-------------------------------------
Federal-Mogul Federal-Mogul
Common Stock Preferred Stock
Fund Fund
-------------------------------------
Investments at market value
FMC Common Stock $ 13,430,036 $ 1,443
FMC Preferred Stock: - 38,102,610
-------------------------------------
Total Investments 13,430,036 38,104,053
Cash equivalents - 333,696
Interfund receivable 80,863 -
-------------------------------------
Total Assets 13,510,899 38,437,749
Liabilities
Advance from FMC - 322,198
Forfeited accounts owed to FMC 41,020 -
-------------------------------------
Total Liabilities 41,020 322,198
-------------------------------------
Net Assets Available for Plan Benefits $ 13,469,879 $ 38,115,551
=====================================
11
9. Nonparticipant-directed investments (continued)
Changes in Net Assets:
Year ended December 31, 2001
----------------------------------------
Federal-Mogul Federal-Mogul
Common Stock Fund Preferred Stock Fund
----------------------------------------
Additions
Investment income $ - $ 1,283,946
Contributions 6,957,706 -
Deductions
Withdrawals (1,398,350) $(10,056,626)
Forfeitures (28,981) -
Net depreciation (15,072,394) (27,363,826)
Net member transfers between funds (589,323) (1,283,946)
Transfers from another FMC investment program 2,439,781 -
---------------------------------
$ (7,691,561) $(37,420,452)
=================================
Year ended December 31, 2000
---------------------------------------------------------
Federal-Mogul Federal-Mogul Exempt Loan
Common Stock Fund Preferred Stock Fund Fund
---------------------------------------------------------
Additions
Investment income $ 42,843 - $2,646,904
Contributions 9,307,798 - 5,676,070
Deductions
Withdrawals (1,838,969) $(10,609,658)
Forfeitures (17,062) -
Interest expense - - (457,778)
Net appreciation/(depreciation) (50,380,923) 5,373,041 (5,127,968)
Net member transfers between funds 13,422,636 -
Transfers from another FMC investment program (299) -
--------------------------------------------------------
$(29,463,976) $ (5,236,617) $2,737,228
========================================================
12
Federal-Mogul Corporation
Salaried Employees' Investment Program
EIN: 38-0533580 Plan Number 040
Schedule H, Line 4i
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2001
The following is a Schedule of Assets Held for Investment outside of the Master
Trust:
Description of Investment
Identity of Issue, including Maturity Date,
Borrower, Lessor or Interest, Collateral, Par Historical Current
Similar Party or Maturity Value Cost Value
- ----------------------------------------------------------------------------------------------------
Preferred Stock:
*Federal-Mogul Corporation 439,937 shares - stated value $63.75 per share $28,046,003 $695,100
----------------------
$28,046,003 $695,100
======================
There were no investment assets reportable as acquired and disposed of during
the year.
* Indicates party-in-interest to the Plan.
13