<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
Commission File Number: 1-1511
------------------------
FEDERAL-MOGUL CORPORATION
(Exact name of Registrant as specified in its charter)
Michigan 38-0533580
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
26555 Northwestern Highway, Southfield, Michigan 48034
(Address of Principal executive offices) (Zip code)
Registrant's telephone no. including area code: (810) 354-7700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
------------------- ------------------------
Common Stock and Rights to purchase New York and Pacific Stock Exchanges
Preferred Shares
7 1/2% Sinking Fund Debentures due
January 15, 1998 New York Stock Exchange
The Registrant has no securities registered pursuant to Section 12(g) of the
Act.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is as follows:
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $646,594,592 as of March 3, 1995
based on the reported last sales price as published for the New York Stock
Exchange--Composite Transactions for such date.
The Registrant had 34,951,059 shares of Common Stock outstanding as of
March 3, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1995
Annual Meeting of Shareholders dated March 15, 1995, and filed with
the Securities and Exchange Commission pursuant to Regulation 14A,
are incorporated by reference in Part III (Items 10, 11, 12 and 13)
of this Form 10-K.<PAGE>
<PAGE> 2
PART I
FEDERAL-MOGUL CORPORATION
-------------------------
ITEM 1. BUSINESS
Overview
Federal-Mogul Corporation (which together with its consolidated
subsidiaries is referred to herein as "Federal-Mogul" or the "Company")
is a global distributor and manufacturer of a broad range of
non-discretionary parts, primarily vehicular components for automobiles,
light trucks, heavy duty trucks and farm and construction vehicles and
industrial products.
Through the Company's worldwide distribution network, Federal-Mogul sells
replacement parts in the vehicular aftermarket ("Aftermarket" products).
The Company also sells parts to original equipment manufacturers ("OE"
products), principally the major automotive manufacturers in the United
States and Europe.
Federal-Mogul's core business is providing value added services for the
distribution and manufacture of non-discretionary parts to the global
vehicular aftermarket and to vehicular and industrial original equipment
manufacturers. The strategic direction of the Company is to increase
the emphasis on its aftermarket business opportunities, capitalizing on its
strength in global distribution and systems logistics to improve customer
service.
Vehicular components sold by Federal-Mogul include ball and roller bearings,
suspension and steering parts, engine and transmission products, sealing
devices, fuel pumps and related systems, and lighting and electrical
components. Industrial products sold by the Company include ball and
roller bearings, sealing products, and specialized heavy duty fluid-film
bearings.
Federal-Mogul also manufactures heavy wall bearings and precision forged
powdered metal parts. Sales of these products account for the balance
of the Company's sales. During the first quarter of 1995, the Company
announced that it had entered into an agreement to sell its precision
forged powdered metal products division.
The Company was incorporated in 1924 under Michigan law to carry on a
business begun in 1900. The Company's executive offices are located
at 26555 Northwestern Highway, Southfield, Michigan 48034, telephone
(810) 354-7700.
<PAGE>
<PAGE> 3
Sales Data
The following table sets forth the Company's net sales by market segment
and geographic region as a percentage of total net sales.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1994 1993 1993 1992 1992
Actual Pro Actual Pro Actual
Forma <F1> Forma <F2>
<S> <C> <C> <C> <C> <C>
Aftermarket
U.S. and Canada 43% 48% 43% 44% 36%
International 21% 18% 20% 19% 19%
Original Equipment
U.S. and Canada 22% 21% 23% 20% 24%
International 8% 8% 8% 11% 13%
Other <F3>
U.S. and Canada 4% 3% 3% 3% 4%
International 2% 2% 3% 3% 4%
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
<FN>
<F1> Pro forma for the acquisition of SPX Corporation's automotive
aftermarket business ("SPR") in October 1993 as if such acquisition
had occurred in January 1, 1993.
<F2> Pro forma for the acquisition of TRW's automotive aftermarket business
("AAB") in October 1992 as if such acquisition had occurred on
January 1, 1992.
<F3> Sales of these products -- air bearing spindles, heavy wall bearings,
and precision forged powdered metal parts -- are accounted for by the
Company primarily as OE sales for financial reporting purposes. The
Company's air bearing spindles operation was sold in May 1993.
</TABLE>
Recent Acquisitions
In line with the Company's strategy to emphasize Aftermarket product sales,
on October 31, 1994, the Company finalized the acquisition of Varex
Corporation, Ltd., South Africa's largest independent auto parts
distributor. Varex offers a complete line of parts covering engine,
drivetrain, cooling, ignition, brake, electrical and suspension systems
which are currently distributed through 31 retail and 18 wholesale outlets.
The acquisition strategically positions the Company to participate in the
large growth potential of South Africa. It also complements the Company's
1993 acquisition of the United States and Canadian automotive aftermarket
operations of SPX Corporation as well as its 1992 acquisition of TRW, Inc.'s
global automotive aftermarket business. The Company intends to continue to
emphasize sales of Aftermarket products.
<PAGE>
<PAGE> 4
Aftermarket
The Company supplies a wide variety of Aftermarket products, including engine
and transmission products (engine bearings, pistons, piston rings,
valves, camshafts, valve lifters, valvetrain parts, timing components and
engine kits, bushings and washers), ball and roller bearings, sealing
devices (gaskets and oil seals and other high performance specialty seals),
lighting and electrical components, and automotive fuel pumps, water
pumps, oil pumps and related systems. The Company also sells steering and
suspension parts which include such items as tie rod ends, ball joints,
idler and pitman arms, center links, constant velocity parts, rack and pinion
assemblies, coil springs, U-joints, engine mounts and alignment products.
Federal-Mogul sells Aftermarket products under its own brand names, under
brand names for which it has long term licenses such as TRW and
Sealed Power, and also packages its products under third-party private brand
labels such as NAPA and CARQUEST.
The Company's Aftermarket business supplies over 150,000 part numbers to
more than 10,000 customers. Federal-Mogul's customers are located in
approximately 80 countries around the world. For 1994, Aftermarket net
sales in the United States and Canada represented 67% of total Aftermarket
net sales, with net sales outside of the United States and Canada
representing 33% of such sales.
Domestic customers include industrial bearing distributors, distributors of
heavy duty vehicular parts, machine shops, retail parts stores and
independent warehouse distributors who redistribute products to local parts
suppliers called jobbers. Internationally, the Company sells Aftermarket
products to jobbers, local retail parts stores and independent warehouse
distributors. Aftermarket sales to jobbers and local retail parts stores
comprise a larger proportion of total international Aftermarket sales than
of total domestic Aftermarket sales.
Federal-Mogul's distribution centers in Jacksonville, Alabama and
Maysville, Kentucky (the "Distribution Centers") serve as the hub of the
Company's domestic Aftermarket distribution network. Products are shipped
from the Distribution Centers to North America service centers. For
international sales, products are shipped through a facility in Port
Everglades, Florida to international regional distribution centers and
Latin American branches.
Original Equipment
Federal-Mogul supplies original equipment ("OE") customers with a wide
variety of parts under a number of well-established brand names, including
Federal-Mogul and Glyco engine bearings, National and Mather oil seals,
BCA ball bearings, Carter fuel systems and Signal-Stat and Switches
electrical components. The Company manufactures all of the OE products it
sells.
<PAGE>
<PAGE> 5
Customers consist primarily of automotive, heavy duty vehicle and farm and
industrial equipment manufacturers. In 1994, approximately 15% of the
of the Company's net sales were to the three major automotive manufacturers
in the United States, with General Motors Corporation ("GM") accounting for
approximately 9% of the Company's net sales, Ford Motor Company accounting
for approximately 4% of the Company's net sales and Chrysler Corporation
accounting for approximately 2% of net sales. In addition, the Company
sells OE products to most of the major automotive manufacturers
headquartered outside the United States. The Glyco facility in Germany
sells OE products to Volkswagen, Daimler-Benz and BMW. The Company also
sells Federal-Mogul engine bearings to Renault and Peugeot in France and
to Fiat in Italy. In addition, the Company sells a small amount of OE
products to certain Japanese manufacturers, including Nissan-Mexico and
certain Toyota operations in the United States and to Komatsu in Japan.
Manufactured Products
The Company manufactures the following vehicular and industrial components:
Engine and Transmission Products -- The Company manufactures engine
bearings and other engine and transmission products, including pistons,
bushings and washers. Bimetallic engine bearings, bushings and washers
are used in automotive, truck, industrial, construction and farm
equipment applications. These products are marketed under the brand
names of Federal-Mogul, Glyco and Sterling.
Ball Bearings -- The Company manufactures ball bearings for use chiefly
in farm and construction equipment, trucks, automobiles and some
industrial machinery under the brand name BCA. The Company also
produces clutch and other specialty type precision ball bearings.
Sealing Devices -- The Company manufactures a line of sealing products
consisting of oil seals and other specialty seals, including oil
bath seals and high performance sealing products. Sealing products are
used in the automotive, truck, farm and off-highway construction
equipment markets. Sealing devices are also supplied for aircraft,
marine, stationary machinery and fuel power equipment. These products
are marketed under the brand names of Bruss, Mather, and National.
Lighting and Electrical Products -- The Company manufactures lighting
and safety components for heavy duty truck applications, and electrical
switches, controls and assemblies for vehicular applications. These
products are marketed under the brand names of Switches and Signal
Stat. The Company focuses on the heavy duty truck market segment where
strict government regulations require that all lighting and electrical
systems be operational at all times.
Fuel Systems -- The Company manufactures a full line of automotive fuel
pumps and related systems under the Carter brand name.
<PAGE>
<PAGE> 6
Other Businesses
The Company also manufactures:
Heavy Wall Bearings -- Braunschweig Huttenwerk GmbH ("BHW"), an indirect,
wholly-owned German subsidiary of the Company, manufactures heavy wall
bearings used primarily for large diesel engines in ships and stationary
power plants. The Company also manufactures heavy wall bearings at
facilities in Indiana and Brazil.
Precision Forged Powdered Metal Parts -- The Company manufactures intricate
component parts from compressed metal powders. These parts are used in
applications requiring high fatigue strength, such as clutch races for
automatic transmissions and engine connecting rods. During the first
quarter of 1995, the Company announced that it had signed an agreement to
sell its precision forged powdered metal products division.
Suppliers
Federal-Mogul sells Aftermarket parts manufactured by other manufacturers
as well as those produced by the Company and its subsidiaries. The
products not manufactured by Federal-Mogul are supplied by over 600
companies. In 1994, no outside supplier of the Company provided products
which accounted for more than 10% of the Company's net sales.
In connection with the acquisition of the automotive aftermarket business of
TRW, Inc. in 1992, the Company and TRW entered into a Supply Agreement for
an initial term of 15 years (the "Supply Period") pursuant to which TRW has
agreed to supply to the Company parts manufactured by TRW and distributed by
the Company. For the first five years of the Supply Period (the "Exclusive
Period"), the Company will be an exclusive distributor of such TRW parts and
thereafter will be a nonexclusive distributor for the remaining term of the
Supply Agreement, subject to certain exceptions. Both the Exclusive Period
and the Supply Period are automatically renewable for one-year periods
thereafter, terminable on one year's notice by either party.
Employee Relations
On January 1, 1995, the Company had approximately 15,600 full-time employees
of whom approximately 10,000 were employed in the United States.
Approximately 55% of the Company's U.S. employees are represented by one of
four unions. Approximately 55% of the Company's foreign employees are
represented by various unions. Each manufacturing facility of the Company
has its own contract with differing expiration dates so, in general, no
contract expiration date affects more than one facility. The Company
believes its labor relations to be good.
<PAGE>
<PAGE> 7
Research and Development
The Company is actively engaged in research and development to improve
existing products and manufacturing processes and to design and develop new
products and materials. The development of superior quality control systems
is a major focus as well.
Each of the Company's operating units is engaged in various engineering and
research and development efforts. These efforts are conducted primarily at
the Company's four major research centers as well as at several manufacturing
locations.
Total expenditures for research and development activities were approximately
$18.7 million in 1994, $17.2 million in 1993 and $18.2 million in 1992.
Environmental Regulations
The Company's operations, in common with those of industry generally, are
subject to numerous existing and proposed laws and governmental
regulations designed to protect the environment, particularly regarding plant
wastes and emissions and solid waste disposal. Capital expenditures
for property, plant and equipment for environment control activities were not
material during 1994 and are not expected to be material in 1995 or 1996.
Raw Materials
The Company does not normally experience supply shortages of raw materials.
Although shortages may occur occasionally, the Company generally buys from
many reliable long-term suppliers and purchases most raw material, purchased
parts, components and assemblies from multiple sources.
Backlog
The majority of the Company's products are not on a backlog status. They
are produced from readily available materials and have a relatively short
manufacturing cycle. For products supplied by outside suppliers, the
Company generally purchases products from more than one source. The
Company expects to be capable of handling the anticipated 1995 sales
volumes.
Patents and Licenses
The Company has a large number of patents which relate to a wide variety of
products and processes, and has pending a substantial number of patent
applications. While in the aggregate its patents are of material
importance to its business, the Company does not consider that any patent
or group of patents relating to a particular product or process is of
material importance when judged from the standpoint of the business as a
whole.<PAGE>
<PAGE> 8
Competition
The global vehicular parts business is highly competitive. The Company
competes with many of its customers that produce their own components
as well as independent manufacturers and distributors of component parts
in the United States and abroad. In general, competition for such sales
is based on price, product quality, customer service and the breadth of
products offered by a given supplier. The Company has attempted to meet
these competitive challenges through more efficiently integrating its
manufacturing and distribution operations, expanding its product coverage
within its core businesses, and expanding its worldwide distribution
network.
Information About International and Domestic Operations and Export Sales
The Company has both manufacturing and distribution facilities for its
products, principally in the United States, Europe, Latin America, Mexico
and Canada. Certain of these products, primarily engine bearings and oil
seals, are sold to international original equipment manufacturers and
vehicular aftermarket customers.
International operations are subject to certain risks inherent in carrying on
business abroad, including expropriation and nationalization, currency
exchange rate fluctuations and currency controls, and export and import
restrictions. The likelihood of such occurrences and their potential effect
on the Company vary from country to country and are unpredictable.
Aftermarket and original equipment sales by major geographical region were:
<TABLE>
<CAPTION>
1994 1993 1992
(Millions of Dollars)
<S> <C> <C> <C>
Aftermarket
United States and Canada $ 819.4 $ 689.9 $ 461.7
International 401.9 309.2 239.6
Original Equipment
United States and Canada 487.2 401.4 352.7
International 187.4 175.0 210.0
Total Sales $1,895.9 $1,575.5 $1,264.0
</TABLE>
Detailed results of operations by geographic area for each of the years
ended December 31, 1994, 1993 and 1992 appear in Note 12 to the
Consolidated Financial Statements contained in Item 8 of this Report.
<PAGE>
<PAGE> 9
Executive Officers of the Registrant
Set forth below are the names, ages (at December 31, 1994), positions and
offices held, and a brief account of the business experience during
the past five years of each executive officer.
D. J. Gormley (55)
Chairman of the Board since May, 1990 and President and Chief Executive
Officer since May 1989; Chief Operating Officer, February
1988 to May 1989; Executive Vice President, January 1986 to February
1988. Mr. Gormley first became an executive officer in 1980.
J. B. Carano (45)
Vice President and Controller since December 1992; International
Distribution Manager - Port Everglades, Florida, February 1990 to
November 1992; Group Controller - Worldwide Aftermarket Operation
January 1989 to February 1990. Mr. Carano first became an executive
officer in 1992.
D. J. Davis (43)
Vice President of the Company and Vice President of Chassis Operations
since December 1993; Vice President of Ball Bearing Products November
1992 to December 1993; General Manager Ball Bearing Products October
1991 to November 1992; General Manager, Lighting and Electrical Division
November 1987 to October 1991. Mr. D. J. Davis first became an
executive officer in 1993.
J. O. Davis (46)
Vice President, Distribution and Logistics, Worldwide Aftermarket
Operation since December 1993; General Manager, Lighting and
Electrical Division October 1992 to December 1993; Plant Manager,
Lighting and Electrical Division January 1989 to October 1991.
Mr. J. O. Davis first became an executive officer in 1993.
J. M. Eastman (58)
Vice President - Employee Relations since January 1980. Mr. Eastman
first became an executive officer in 1980.
<PAGE>
<PAGE> 10
R. F. Egan (48)
Vice President of the Company and Vice President of Automotive Sales
- Worldwide Aftermarket Operation since December 1993; Vice President of
Automotive Sales - Worldwide Aftermarket Operation November 1992 to
December 1993; National Sales Manager, Automotive Aftermarket - Worldwide
Aftermarket Operation May 1985 to November 1992. Mr. Egan first became
an executive officer in 1993.
C. J. Fischer (37)
Vice President - Global Sourcing since December 1994. Vice President
for Global Sourcing of the Company's Worldwide Aftermarket
Organization from December 1992 to December 1994; Senior Vice
President - Purchasing and Management Information Systems at Hi-Lo
Automotive, Inc., September 1990 to November 1992. Mr. Fischer first
became an executive officer in 1994.
C. B. Grant (50)
Vice President - Corporate Development since December 1992; Vice
President and Controller, May 1988 to December 1992. Mr. Grant first
became an executive officer in 1985.
S. G. Heim (42)
Assistant Secretary and Associate General Counsel since May 1988;
Associate General Counsel since June 1987. Ms. Heim first became an
executive officer in 1988.
A. C. Johnson (46)
Vice President of Company and President, Worldwide Manufacturing
Operation since February 1995; Vice President of the Company
and Vice President of Powertrain Operations - Americas from December
1993 until February 1995; Vice President and General Manager of Seal
Operations November 1992 to December 1993; General Manager, Oil Seals
Operations January 1990 to November 1992; Manager, Worldwide
Distribution Center August 1988 to January 1990. Mr. Johnson first
became an executive officer in 1993.
W. A. Schmelzer (54)
Vice President and Group Executive, Engine and Transmission Products
- Europe since January 1992; General Manager, Engine and Transmission
Products - America April 1987 to December 1991. Mr. Schmelzer first
became an executive officer in 1992.
<PAGE>
<PAGE> 11
W. G. Smith (45)
Vice President of the Company and President, Worldwide Aftermarket Operation
since January 1989; Vice President and General Manager - North American
Aftermarket, February 1988 to January 1989; General Manager North American
Aftermarket, August 1987 to February 1988. Mr. Smith first became an
executive officer in 1988.
M. J. Viola (40)
Vice President and Treasurer since December 1992; Director of Corporate
Finance, April 1992 to December 1992; Manager - Domestic Planning and
Analysis, Chrysler Corporation, March 1991 to April 1992; Manager
- - Foreign Exchange and Financing Studies, Chrysler Corporation, January
1989 to March 1991; Manager - Corporate Financial Analysis, Chrysler
Corporation March 1987 to January 1989. Mr. Viola first became an
executive officer in 1992.
M. E. Welch III (46)
Senior Vice President and Chief Financial Officer since December 1991;
Assistant Treasurer, Chrysler Corporation, September 1988 to November 1991;
General Auditor, Chrysler Corporation, July 1987 to September 1988.
Chief Financial Officer, Chrysler Canada Ltd., March 1986 to July 1987.
Mr. Welch joined Chrysler in 1982 as corporate accounting manager and
served in positions of increasing responsibility in a wide range of areas
including banking, audit and international finance, acquiring diverse and
comprehensive experience in corporate financial operations. Mr. Welch first
became an executive officer of the Company in December of 1991 when he left
Chrysler to assume the position of Senior Vice President and Chief Financial
Officer with the Company.
J. J. Zamoyski (48)
Vice President and General Manager Worldwide Aftermarket Operation
International since November 1993; General Manager, Worldwide Aftermarket,
Distribution and Logistics August 1991 to November 1993; Vice President
and General Manager, Distribution and Logistics Operations, March 1990 to
August 1991; Vice President - Corporate Development and Assistant Treasurer
March 1989 to March 1990; Director of Corporate Development and Assistant
Treasurer, May 1988 to March 1989. Mr. Zamoyski first became an executive
officer in 1980.
Generally, officers of the Company are elected at the time of the Annual
Meeting of Shareholders but the Board also elects officers are various
times during the year. Each officer holds office until his or her successor
is elected or appointed or until his or her resignation or removal.
<PAGE>
<PAGE> 12
ITEM 2. PROPERTIES
The Company conducts its business from its World Headquarters complex in
Southfield, Michigan, which is leased pursuant to a sale-lease back
arrangement. The principal manufacturing and other materially important
physical properties of the Company at December 31, 1994 are listed
below. All properties are owned in fee except where otherwise noted.
A. Manufacturing Facilities.
<TABLE>
<CAPTION>
# Of Sq. Ft.
North American Manufacturing Facilities Facilities @ 12/31/94
--------------------------------------- ---------- ----------
<S> <C> <C>
Frankfort, Indiana 1 160,000
Greensburg, Indiana 1 204,845
Leiters Ford, Indiana 1 116,900
Lititz, Pennsylvania 1 275,000
Milan, Michigan 1 83,000
Van Wert, Ohio 1 222,835
Blacksburg, Virginia 1 190,386
Gallipolis, Ohio <F3> 1 125,000
Greenville, Michigan 1 197,070
Lafayette, Tennessee <F2> 1 110,400
Logansport, Indiana 2 240,550
Malden, Missouri <F1> 1 120,000
Mooresville, Indiana 1 65,934
Plymouth, Michigan <F3> 1 15,000
Romulus, Michigan <F3> 1 170,000
St. Johns, Michigan 1 266,000
Puebla, Mexico 1 100,572
Mexico City, Mexico 1 72,210
Mexico City, Mexico 1 192,950
Juarez, Mexico 1 33,000
Juarez, Mexico <F1> 1 33,000
Summerton, South Carolina 1 136,000
-- ---------
23 3,130,652
</TABLE>
<TABLE>
<CAPTION>
# Of Sq. Ft.
International Manufacturing Facilities Facilities @ 12/31/94
-------------------------------------- ---------- ----------
<S> <C> <C>
Braunschweig, Germany 1 21,801
Cataguases/MG, Brazil 1 46,600
Cuorgne, Italy 1 114,930
Laplata, Argentina 1 64,691
Orleans, France 1 120,300
Wiesbaden, Germany 1 837,903
Wiesbaden, Germany <F1> 1 43,600
San Luis, Argentina <F1> 1 6,995
-- ---------
8 1,256,820
Total Manufacturing Facilities 31 4,387,472
== =========
</TABLE>
<PAGE>
<PAGE> 13
[FN]
<F1> This facility is leased by the Company and accounted for as an
operating lease. The Company believes these leases could be renewed
or comparable facilities could be obtained without materially affecting
operations.
<F2> The Company closed this facility in 1994. Operations have been
consolidated into the Logansport plant.
<F3> The Company has announced that it had signed an agreement to sell its
precision forged powdered metal products division.
B. Aftermarket Warehouses. The Company operates 110 warehouses and
distribution centers of which 103 are leased. In addition, 2
warehouses are financed and leased through the issuance of Industrial
Revenue Bonds.
C. Retail Properties. The Company leases 8 retail facilities in Australia,
13 facilities in Venezuela, 4 facilities in Chile, 31 facilities in
South Africa, 7 facilities in Panama and 1 facility in Ecuador.
All owned and leased properties are well maintained and equipped for the
purposes for which they are used. The Company considers that its
facilities are suitable and adequate for the operations involved.
ITEM 3. LEGAL PROCEEDINGS
A. The Company is a party to two lawsuits filed in various jurisdictions
alleging claims pursuant to the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA") or other
state or federal environmental laws. In addition the Company has been
notified by the Environmental Protection Agency and various state
agencies that it may be a potentially responsible party ("PRP") for the
cost of cleaning up eight other hazardous waste storage or disposal
facilities pursuant to CERCLA and other federal and state environmental
laws. PRP designation requires the funding of site investigations and
subsequent remedial activities. Although these laws could impose joint
and several liability upon each party at any site, the potential
exposure is expected to be limited because at all sites other companies,
generally including many large, solvent public companies, have been named
as PRP's as well as the Company. In addition, the Company has identified
eight present and former properties at which it may be responsible for
resolving certain environmental matters, which the Company is actively
seeking to resolve. Although difficult to quantify based on the
complexity of the issues and the limited available information, the
Company has accrued the estimated costs associated with such matters.
Management believes these accruals, which have not been discounted or
reduced by any anticipated insurance proceeds, will cover the Company's
estimated foreseeable total liability for these sites.
The Company is one of a large number of defendants in a number of
lawsuits brought by claimants alleging injury due to exposure
to asbestos. The Company is defending all such claims vigorously
<PAGE>
<PAGE> 14
and believes it has substantial defenses to liability and adequate
insurance coverage for its defense costs. While the outcome of
litigation cannot be predicted with certainty, after consulting with
counsel for the Company, management believes that these matters will
not have a material effect on the Company's consolidated financial
statements.
The Company is involved in various other legal actions and claims.
After taking into consideration legal counsel's evaluation of such
actions, management believes that these matters will not have
a material effect on the Company's consolidated financial statements.
B. There were no material legal proceedings which were terminated during
the fourth quarter of 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1994 to a vote of
security holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCK HOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange under
the trading symbol (FMO). The approximate number of shareholders of record
of the Company's common stock at December 31, 1994 was 11,687. The following
table sets forth the high and low sale price of the Company's common stock as
reported on the New York Stock Exchange Composite Transactions Tape for the
last two years:
<TABLE>
<CAPTION>
1994 1993
------------------ --------------------
<S> <C> <C> <C> <C>
Quarter High Low High Low
- ------- ---- --- ---- ---
First $37 5/8 $28 $20 1/2 $16 1/4
Second 32 3/8 24 5/8 22 17 5/8
Third 32 3/4 22 26 1/4 19 7/8
Fourth 23 3/4 18 3/4 29 7/8 23 1/4
</TABLE>
Quarterly dividends of $.12 per common share were declared during 1994 and
1993. The payment of dividends is subject to the restrictions described in
Note 7 to the consolidated financial statements contained in Item 8 of this
Report. In February 1995, the Company's Board of Directors declared a
quarterly dividend of $.12 per common share. This was the 236th consecutive
quarterly dividend declared by the Company.
<PAGE>
<PAGE> 15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
<TABLE>
FIVE-YEAR FINANCIAL SUMMARY
- ---------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
(Millions of Dollars,
Except Per Share Amounts)
1994 1993 1992 1991 1990
-------- -------- -------- -------- -------
Consolidated Statement of
Earnings Data
- -------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Aftermarket $1,221.3 $ 999.1 $ 701.3 $ 583.2 $ 544.9
Original equipment 674.6 576.4 562.7 515.5 419.9
------- ------- ------- ------- -------
Total net sales 1,895.9 1,575.5 1,264.0 1,098.7 964.8
Costs and expenses <F1> (1,792.3) (1,521.9) (1,262.3) (1,124.0) (961.5)
Other income (expense) (1.5) 4.0 7.3 6.6 3.7
Income taxes (38.8) (17.5) (4.6) (1.1) (6.7)
------- ------- ------- ------- -------
Earnings (loss) from
continuing operations 63.3 40.1 4.4 (19.8) .3
Discontinued operations <F4> - - - 16.1 6.5
Cumulative effect of
accounting change <F2> - - (88.1) - -
------- ------- ------- ------- -------
Net earnings (loss) 63.3 40.1 (83.7) (3.7) 6.8
Preferred stock dividends,
net of tax benefits (9.0) (9.1) (4.6) (3.1) (3.7)
------- ------- ------- ------- -------
Net earnings (loss) available
for common shares $ 54.3 $ 31.0 $ (88.3) $ (6.8) $ 3.1
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Common Share Summary (Primary)
- ------------------------------
Average shares and equivalents
outstanding (in thousands) 35,062 27,342 22,390 22,314 22,310
Earnings (loss) per share:
Continuing operations $ 1.55 $ 1.13 $ (.01) $(1.03) $ (.15)
Discontinued operations <F4> - - - .72 .29
Cumulative effect of
accounting change <F2> - - (3.93) - -
----- ----- ----- ----- -----
Net earnings (loss) per share 1.55 1.13 (3.94) (.31) .14
Dividends paid per share .48 .48 .48 .92 .92
Consolidated Balance Sheet Data
- -------------------------------
Total assets $1,496.1 $1,301.4 $1,110.6 $ 917.4 $1,098.6
Short-term debt <F3> 74.0 39.2 69.4 47.5 61.4
Long-term debt 319.4 382.5 350.6 304.0 417.9
Shareholders' equity 597.2 371.1 230.9 259.0 292.9
</TABLE>
<PAGE>
<PAGE> 16
<TABLE>
FIVE YEAR FINANCIAL SUMMARY (continued)
- ---------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
(Millions of Dollars,
Except Per Share Amounts) 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Other Financial Information
- ---------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided from
operating activities $ 24.3 $ 43.5 $ 57.2 $ 52.5 $ 84.9
Expenditures for property,
plant and equipment 74.9 60.0 40.2 44.0 47.1
Depreciation expense 45.7 43.9 43.9 48.7 43.3
<FN>
<F1> Includes special charges of $14 million and $25 million in 1992 and 1991,
respectively.
<F2> The company changed its method of accounting for postretirement benefits
other than pensions effective in 1992.
<F3> Includes current maturities of long-term debt.
<F4> Discontinued operations reflect the operating results (and sale in 1991)
of the company's fastening systems business and include an allocation of
interest expense in each year based on annual net asset ratios.
</TABLE>
<PAGE>
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
-----------------------------------
FEDERAL-MOGUL CORPORATION
-------------------------
Overview
- --------
Federal-Mogul's core business is providing value added services for the
distribution and manufacture of non-discretionary parts to the global
vehicular aftermarket and to vehicular and industrial original equipment
manufacturers. The strategic direction of the company is to increase the
emphasis on its aftermarket business opportunities, capitalizing on its
strength in global distribution and systems logistics to improve customer
service.
On October 31, 1994, the company finalized the acquisition of Varex
Corporation, Ltd., South Africa's largest independent auto parts
distributor. The acquisition strategically positions the company to
participate in the large growth potential in South Africa. Varex offers
a complete line of parts covering engine, drivetrain, cooling, ignition,
brake, electrical and suspension systems which are currently distributed
through 36 retail and 18 wholesale outlets.
On October 26, 1993, the company completed the purchase of SPX Corporation's
United States and Canadian automotive aftermarket operations, Sealed Power
Replacement (SPR). The SPR acquisition further expanded the company's broad
base of products and provided additional vendor sourcing opportunities. The
consolidation of the two businesses has resulted in significant cost savings
through the elimination of duplicative processes and facilities.
On October 20, 1992, the company completed the purchase of TRW Inc.'s global
automotive aftermarket business (AAB). The AAB acquisition was a major step
in expanding aftermarket activity through an increased presence as a
distributor of replacement parts for European and Japanese manufactured
vehicles. In addition, the acquisition expanded the company's engine and
chassis product offerings and increased purchasing power with outside
suppliers.
During 1993, the company sold a number of non-strategic businesses and
assets that were no longer consistent with the company's primary focus on
vehicular parts for the global aftermarket and utilized the proceeds to
finance restructuring activities in core businesses. These included the
sale of Westwind Air Bearings Ltd. and its affiliated operations in the
United States and Japan, an equity interest in the Japanese engine bearing
manufacturer Taiho Kogyo Co., and an equity interest in a Bermuda-based
insurance company. The gains from the sale of businesses and assets were
used to offset restructuring charges for the closing of a fuel systems
manufacturing facility and the subsequent consolidation of fuel systems
operations in the company's lighting and electrical business. Also, the
gain from the sale of idle land in Germany was used to provide for the
restructuring of the Glyco engine bearing operations. Restructuring
costs recorded in 1993 include amounts applicable to the physical
relocation of operating assets, startup of new facilities and provisions
for non-terminated employees of $2,200,000, $600,000 and $200,000,
respectively. These costs would not have qualified as restructuring
costs under new guidance introduced in 1994. There were no amounts
remaining to be incurred as of the end of 1994 for these restructuring
activities.
<PAGE>
<PAGE> 18
The company reported 1994 net earnings of $63.3 million or $1.46 per
share, on a fully diluted basis. Earnings for 1994 improved significantly
over 1993 and 1992 as a result of the inclusion of SPR earnings for the
entire year, a reduction in operating expenses of $10 million from the
integration of SPR facilities, and a decrease in product costs from global
sourcing efforts of $14.8 million. Additionally, the strong North American
original equipment markets and increased productivity in domestic
manufacturing operations contributed to the earnings improvement.
In 1993, the company reported earnings of $40.1 million or $1.12 per share,
on a fully diluted basis, including a one-time after tax gain of $.06 per
share on asset sales net of restructuring charges.
In 1992, the company reported earnings from continuing operations of $4.4
million. Due to the adoption of Statement of Financial Accounting Standards
Nos. 106 and 112, "Employers' Accounting for Postretirement Benefits Other
than Pensions" (SFAS 106), and "Employers' Accounting for Postemployment
Benefits" (SFAS 112), the company incurred a net loss in 1992 of $83.7
million, or $3.94 per common share.
The company has made a strategic decision to emphasize and expand its
global aftermarket business. Management believes that aftermarket sales
are less cyclical than original equipment sales, and aftermarket expansion
will offer greater potential for long-term growth and higher operating
margins. Additionally, the company expects to benefit from improvements
in the reduction of manufacturing lead time and other process changes,
particularly in European operations.
Rationalization Costs of Acquired Businesses
- --------------------------------------------
A significant component of the acquisition of Varex is the ability to
recognize savings through the elimination of redundant sales and
administrative staff, and the consolidation of wholesale facilities.
Rationalization costs to be incurred of $2.7 million have been capitalized
as part of the purchase price.
A key aspect of the acquisitions of SPR and AAB was the opportunity to
realize significant savings through consolidation of operations in
North America and, to a lesser extent, in Europe. Savings realized in 1994
from the integration of SPR and AAB exceeded $31 million, and the company
estimates increasing annual cost savings by an additional $14 million in
1995. The components of these savings include eliminating redundancies
with sales staff, overlapping warehouses, distribution and administration
facilities and consolidating freight.
In order to obtain these anticipated cost savings and achieve the benefit
of increased sales volume, the company incurred one-time costs of
approximately $32 million in connection with the integration of
Federal-Mogul and AAB and $31 million in the consolidation of SPR.
Of the total rationalization costs, $1 million was expensed for SPR in
1993 and $14 million was expensed for AAB in 1992. The remaining portion
of the rationalization costs of $30 million for SPR and $18 million for
AAB has been capitalized as part of the purchase price. The rationalization
expense was significantly higher in the case of AAB based on the greater
number of Federal-Mogul locations impacted by the consolidation.
<PAGE>
<PAGE> 19
Results of Operations
- ---------------------
Sales
- -----
The company achieved a sales increase of $320.4 million, or 20.3%, in 1994
and $311.5 million, or 24.6%, in 1993. Excluding the impact of the Varex
acquisition, sales grew 16.1% to $1,829.1 million in 1994. This increase
was largely due to the full year impact of the SPR acquisition completed
in the fourth quarter of 1993. Other factors include increased sales to
domestic original equipment customers in nearly every manufactured product
line. Price had a minimal effect on the increase in sales.
<TABLE>
Aftermarket and original equipment sales by major geographic area were:
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Aftermarket:
United States and Canada $ 819.4 $ 689.9 $ 461.7
International 401.9 309.2 239.6
Original Equipment:
United States and Canada 487.2 401.4 352.7
International 187.4 175.0 210.0
------- ------- -------
Total sales $1,895.9 $1,575.5 $1,264.0
------- ------- -------
------- ------- -------
</TABLE>
Sales to aftermarket customers represented 64% of total company sales in
1994. Comparatively, aftermarket sales were 63% of 1993 sales and 55% of
1992 sales.
United States and Canada aftermarket sales improved $129.5 million primarily
due to the acquisition of SPR. Base North American aftermarket sales were
flat with significant improvements in core engine products, pistons and oil
seals offset by decreases in ball bearing and suspension products. The
latter was significantly impacted by a reduction in supplier order fill
rates throughout 1994. Federal-Mogul is the North American automotive
aftermarket leader in engine bearings, engine parts, ball and roller
bearings, fuel pumps, oil seals and lighting and electrical components.
International aftermarket sales increased $92.7 million, or 30.0% in 1994,
largely as a result of the acquisition of Varex and the full year impact of
retail acquisitions in Venezuela and Australia. The company has made modest
gains in expanding its retail operations by opening several retail stores in
1994. The total number of retail outlets increased from 19 to 65 by the end
of 1994. Sales from these outlets totaled approximately $35 million in 1994.
During 1995 the company will limit store growth and concentrate on refining
existing operations.
United States and Canada original equipment sales increased $85.8 million,
or 21.4% in 1994. Stronger automotive and light truck production rates in
North America contributed to this growth. Sales growth also continued in
the new sealing products application for bonded pistons in transmissions.
United States and Canada original equipment sales improved $48.7 million,
or 13.8% between 1993 and 1992, due to new product programs and a recovering
demand for light automotive vehicles.<PAGE>
<PAGE> 20
In 1994, European original equipment sales increased $10.2 million, as a
result of the appreciating European currencies and improving European
vehicle production. In 1993, international original equipment sales
decreased $35 million, $6.5 million of which was due to the divestiture
of the Westwind Air Bearing business in May 1993. European automotive and
heavy duty vehicle production experienced the effects of depressed economic
conditions resulting in lower sales volumes and price erosion in 1993.
Operating Margin
- ----------------
<TABLE>
Operating margins improved $48.3 million, or 57.2%, in 1994 and $40.8
million, or 93.6%, in 1993 and were:
<CAPTION>
(Millions of Dollars) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Total operating margin $ 132.7 $ 84.4 $ 43.6
------ ------ ------
------ ------ ------
Margin percentage 7.0% 5.4% 3.4%
------ ------ ------
------ ------ ------
</TABLE>
A key components of this improvement was the successful integration of SPR.
This resulted in a cost savings of $10 million in 1994. The company's
global sourcing efforts in 1994 also had a favorable impact on the operating
margin of $14.8 million.
As the economic recovery continues in Europe, auto and light truck build
rates are expected to improve. North American build rates are expected to
increase slightly in 1995. The company anticipates that earnings will
continue to improve in 1995.
There is substantial and continuing pressure from major global automotive
companies to reduce costs, including costs associated with outside suppliers
such as Federal-Mogul. The company has reduced exposure in this area due to
recent acquisitions that have significantly modified the sales mix and
reduced sales volatility. However, there can be no assurance that the
company will be able to maintain its gross margins on product sales to
original equipment manufacturers. Due to recent raw material price
increases, margins will be under pressure throughout 1995.
The global vehicular parts business is highly competitive. The company
competes with many of its customers that produce their own components, as
well as independent manufacturers and distributors of component parts in
the United States and abroad. In general, competition for such sales is
based on price, product quality, customer service and product coverage.
The company's strategic response to these competitive challenges is to
more efficiently and effectively integrate its distribution and
manufacturing operations, consolidate its purchasing requirements and
expand its product coverage within its global base of aftermarket and
original equipment businesses.
<PAGE>
<PAGE> 21
Other Income and Expense
- ------------------------
Net interest expense decreased to $13.6 million in 1994 from $18.3 million
in 1993. This was the result of several actions taken to repay and
refinance debt. In February 1994, the company sold 5.75 million shares
of common stock, generating net proceeds of $191 million which was used
to repay a substantial portion of the outstanding revolver balance. Also
in 1994, the company implemented a global cash pooling strategy and a
European revolving credit facility, both of which had a favorable impact
on interest expense. These actions resulted in the company attaining an
investment grade status from both Moody's and Standard and Poor's rating
agencies.
International currency exchange losses totalled $5.5 million in 1994,
compared to $5.7 million in 1993 and $5.8 million in 1992. The effect
of the devaluation of the Venezuelan bolivar and Turkish lira represents
the majority of the foreign exchange losses.
When deemed prudent and cost effective, the company uses foreign exchange
options and forward exchange contracts to hedge material net foreign
exchange transaction exposures. However, the company does not typically
hedge translation exposures in countries whose local currency is the
functional currency. At December 31, 1994, the company's most significant
translation exposures were in German deutsche marks and Mexican pesos.
Changes in the exchange rate between the U.S. dollar and these currencies
are recorded directly as a component of shareholder's equity. The net
effect of translation exposure was $6.3 million in 1994. This reduction
to shareholders' equity is primarily due to the recent devaluation of
the Mexican peso.
Amortization of intangible assets increased in 1994 to $10.0 million from
$6.8 million and $2.8 million in 1993 and 1992, respectively. The
amortization of trademark and non-compete agreements and the goodwill
associated with the acquisitions of Varex, AAB and SPR represent the
increase in this expense.
SFAS 106 & SFAS 112
- -------------------
In 1992, in accordance with Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions", the company began accruing the cost of providing future
postretirement benefits, such as health care and life insurance, over the
related employee's service period. Prior to the adoption, the cost of
providing these benefits to retired employees was recognized by the company
when payments were made. The company elected to immediately recognize the
accumulated postretirement benefit obligation at the date of adoption.
The charges to operations were:
<PAGE>
<PAGE> 22
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Incremental annual expense $ 4.0 $ 6.6 $ 7.6
Income tax benefit (1.5) (2.4) (2.7)
------ ------ ------
2.5 4.2 4.9
Cumulative effect of accounting change - - 135.7
Income tax benefit - - (47.6)
------ ------ ------
- - 88.1
------ ------ ------
Net effect of SFAS 106 $ 2.5 $ 4.2 $ 93.0
------ ------ ------
------ ------ ------
</TABLE>
Also in 1992, the company adopted Statement of Financial Accounting Standard
No. 112, "Employers' Accounting for Postemployment Benefits", which requires
the accrual of future postemployment benefits, when such amounts can be
estimated. The impact of adopting this standard on the company's financial
position and operating results was not significant.
Income Taxes
- ------------
The company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). At December 31, 1994, the company had deferred tax assets of
$110.6 million and deferred tax liabilities of $94.2 million.
The company records valuation allowances ($20.9 million at December 31,
1994) for all deferred tax assets, except where management believes it is
more likely than not that the tax benefit will be realized. A valuation
allowance was not established against deferred tax assets attributable to
the company's postretirement benefit obligation and its German net operating
loss carryforward.
The deferred tax asset for the company's postretirement benefit obligation
was $56.9 million at December 31, 1994. The company expects that the tax
deduction associated with this obligation will be claimed over a period of
35 to 40 years. The total amount of future taxable income in the United
States necessary to realize the asset is approximately $154 million. The
company expects to generate sufficient taxable income in the United States
through future operations in order to fully realize the deferred tax asset
for the company's postretirement benefit obligation.
The deferred tax asset attributable to the German net operating loss
carryforward was $25.3 million at December 31, 1994. The carryforward is
not subject to expiration. The company expects that sufficient taxable
income will be generated through the reversal of existing taxable temporary
differences to enable the carryforward to be utilized.
<PAGE>
<PAGE> 23
Liquidity and Financial Condition
- ---------------------------------
Assets
- ------
The acquisitions of Varex, SPR and AAB in 1994, 1993 and 1992, respectively,
added the following operating assets at the time of the purchase.
<TABLE>
<CAPTION>
(Millions of Dollars) Varex SPR AAB
------- ------- -------
<S> <C> <C> <C>
Accounts receivable $ 18 $ 21 $ 54
Inventories 22 64 117
Property, plant and equipment 3 8 12
</TABLE>
The additions of these assets reflects the most significant transactions
affecting comparisons of these accounts from year to year. The increase in
intangible assets in 1994, 1993 and 1992 represents the cost of long-term
non-compete and trademark agreements with Varex, SPX and TRW and goodwill
of the acquired businesses.
Excluding the acquisition of Varex in 1994, accounts receivable at
December 31, 1994 increased approximately $64 million. This increase
results primarily from the overall increase in sales.
Inventories increased by approximately $27 million from December 31, 1993
excluding the impact of Varex.
Liabilities
- -----------
In February 1994, the company issued 5.75 million shares of common stock
which generated net proceeds of $191 million. The proceeds were used to
repay debt incurred for the 1993 acquisition of SPR. In August 1994,
the company filed a registration statement with the SEC for the issuance
of medium-term notes not to exceed $200 million. In November 1994, the
company issued $54 million of the medium-term notes to finance the
acquisition of Varex. The company had $90.0 million of the medium-term
notes outstanding as of December 31, 1994.
To finance the 1992 AAB acquisition, the company used net proceeds of $76.6
million from the issuance of 1.6 million shares of Series D preferred stock
in September 1992 and $125 million of unsecured senior bank financing
pursuant to a bank credit agreement maturing September 1998 (the $125 million
term loan). During the first half of 1993, the $125 million term loan was
repaid with the net proceeds from the sale of $40 million of accounts
receivable and $85 million of the $116 million net proceeds from the sale
of 6.2 million shares of the company's common stock in April 1993.
The decrease in other accrued liabilities represents amounts spent for
the rationalization of Varex, the AAB and SPR acquisitions and the
restructuring of manufacturing operations at Glyco and the lighting,
electrical and fuel systems businesses.
The discount rate used to determine the actuarial present value of domestic
postretirement pension, health insurance and life insurance benefits
increased to 8 1/2% for 1994 from 7 1/2% in 1993. The 8 1/2% discount
rate reflects the current expected yield for long-term, high quality
investments. The higher discount rate decreased net pension expense
from domestic plans by about $1.8 million for 1994. Assumptions for
expected long-term rates of return on plan assets and future compensation
increases were also adjusted for current conditions. The changes in
<PAGE>
<PAGE> 24
assumptions had an insignificant effect on 1994 operating results and the
impact in the future is expected to be minimal. The company also increased
the discount rate on its international plans from 8% in 1993 to 8 1/2% in
1994, decreasing 1994 pension expense by approximately $.7 million.
Better than expected experience, lower medical trend rates and program
modifications further contributed to a reduction in the recorded liability
for postretirement health care and life insurance benefits.
Environmental Matters
- ---------------------
The company is a party to two lawsuits filed in various jurisdictions
alleging claims pursuant to the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (CERCLA) or other state or federal
environmental laws. In addition, the company has been notified by the
Environmental Protection Agency and various state agencies that it may be
a potentially responsible party (PRP) for the cost of cleaning up eight
other hazardous waste storage or disposal facilities pursuant to CERCLA
and other federal and state environmental laws. PRP designation requires
the funding of site investigations and subsequent remedial activities.
Although these laws could impose joint and several liability upon each
party at any site, the potential exposure is expected to be limited because
at all sites other companies, generally including many large, solvent
public companies, have been named as PRP's. In addition, the company has
identified eight present and former properties at which it may be
responsible for cleaning up certain environmental contamination. The
company is actively seeking to resolve these matters. Although difficult
to quantify, based on the complexity of the issues, the company has
accrued the estimated cost associated with such matters. Management
believes these accruals, which have not been discounted or reduced by any
anticipated insurance proceeds, will be adequate to cover the company's
estimated liability for these exposures.
Cash Flows
- ----------
Operating Activities
- --------------------
The company generated cash of $24.3 million from operations in 1994
compared to $43.5 million and $57.2 million in 1993 and 1992, respectively.
These year-to-year changes include net earnings from continuing operations
of $63.3 million, $40.1 million and $4.4 million in 1994, 1993 and 1992,
respectively. An increase in accounts receivable resulting from increased
sales and an increase in inventory from acquired product lines were the
major factors that offset cash flows generated by net earnings and
depreciation.
It is the company's belief that cash from operations will continue to be
sufficient to meet its ongoing working capital requirements.
<PAGE>
<PAGE> 25
Investing Activities
- --------------------
Other than the purchases of Varex, SPR and AAB, the company's principal
investing activity in 1994, 1993 and 1992 was the acquisition of property
and equipment for its existing operations. Approximately $75 million,
$60 million and $40 million of cash in 1994, 1993 and 1992, respectively,
was reinvested in productive assets of the company. These investments
were made to support the company's long-term objective of improving
operating productivity and product mix and to provide support for expansion
of international distribution facilities. These investments were funded in
1994, 1993 and 1992 with cash from operating and financing activities.
Spending related to rationalizing acquired businesses also impacted
investing activities.
Capital expenditures for 1995 are anticipated to be approximately $82
million, as the company continues to enhance manufacturing capabilities
in the United States and Europe and expand global aftermarket capacity.
Financing Activities
- --------------------
As previously noted, the sale of common stock in 1994 and 1993 and the
securitization of accounts receivable in 1993 helped the company reduce
debt associated with the purchase of SPR in 1993 and AAB n 1992.
The issuance of Series D Convertible Exchangeable Preferred Stock,
borrowings under short and long-term agreements, and proceeds from the
accounts receivable securitization contributed an additional $274
million in cash in 1992.
<PAGE>
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
- -----------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
Year Ended December 31 1994 1993 1992
-------- -------- --------
(Millions of Dollars,
Except Per Share Amounts)
<S> <C> <C> <C>
Net sales $1,895.9 $1,575.5 $1,264.0
Cost of products sold 1,486.4 1,263.8 1,054.6
Selling, distribution and administrative expenses 276.8 227.3 165.8
------- ------- -------
Operating margin 132.7 84.4 43.6
Special charges and sales of business investments - - (14.0)
------- ------- -------
132.7 84.4 29.6
Other income (expense):
Interest expense (21.2) (25.9) (27.2)
Interest income 7.6 7.6 7.9
Amortization of intangible assets (10.0) (6.8) (2.8)
International currency exchange losses (5.5) (5.7) (5.8)
Other (1.5) 4.0 7.3
------- ------- -------
Earnings from Continuing Operations
Before Income Taxes and Cumulative
Effect of Accounting Change 102.1 57.6 9.0
Income taxes 38.8 17.5 4.6
------- ------- -------
Earnings from Continuing Operations
Before Cumulative Effect of Accounting Change 63.3 40.1 4.4
Cumulative effect of change in accounting for
postretirement benefits, net of income taxes - - (88.1)
------- ------- -------
Net Earnings (Loss) $ 63.3 $ 40.1 $ (83.7)
------- ------- -------
------- ------- -------
Earnings (Loss) Per Common and Equivalent Share <F1>
Primary:
Earnings from continuing operations $ 1.55 $ 1.13 $ (.01)
Cumulative effect of accounting change - - (3.93)
------- ------- -------
Net Earnings (Loss) $ 1.55 $ 1.13 $ (3.94)
------- ------- -------
------- ------- -------
Fully Diluted:
Earnings from continuing operations $ 1.46 $ 1.12 $ (.01)
Cumulative effect of accounting change - - (3.93)
------- ------- -------
Net Earnings (Loss) $ 1.46 $ 1.12 $ (3.94)
------- ------- -------
------- ------- -------
<FN>
<F1> Based on net earnings (loss) after deduction of preferred stock
dividends, net of related tax benefits, of $9.0 million, $9.1 million
and $4.6 million for 1994, 1993 and 1992, respectively.
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 27
<TABLE>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
December 31 1994 1993
-------- --------
(Millions of Dollars)
Assets
- ------
<S> <C> <C>
Current Assets:
Cash and equivalents $ 25.0 $ 33.8
Accounts receivable 269.5 186.9
Inventories 372.1 322.3
Prepaid expenses and income tax benefits 37.6 40.6
------- -------
Total Current Assets 704.2 583.6
Property, Plant and Equipment 437.3 399.8
Goodwill 172.9 126.7
Other Intangible Assets 71.2 72.6
Business Investments and Other Assets 110.5 118.7
------- -------
Total Assets $1,496.1 $1,301.4
------- -------
------- -------
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 74.0 $ 39.2
Accounts payable 136.6 104.1
Accrued compensation 33.3 31.7
Other accrued liabilities 92.0 117.9
------- -------
Total Current Liabilities 335.9 292.9
Long-Term Debt 319.4 382.5
Postemployment Benefits 199.8 196.5
Other Accrued Liabilities 43.8 58.4
------- -------
Total Liabilities 898.9 930.3
Shareholders' Equity:
Series D preferred stock 76.6 76.6
Series C ESOP preferred stock 59.1 60.2
Unearned ESOP compensation (39.8) (44.6)
Common stock 174.9 147.5
Additional paid-in capital 277.8 117.2
Retained earnings 82.0 46.4
Currency translation and other (33.4) (32.2)
------- -------
Total Shareholders' Equity 597.2 371.1
------- -------
Total Liabilities and Shareholders' Equity $1,496.1 $1,301.4
------- -------
------- -------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 28
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
Series C Unearned Currency
Series D ESOP ESOP Additional Transla-
Preferred Preferred Compen- Common Paid-In Retained tion and
Stock Stock sation Stock Capital Earnings Other Total
--------- --------- -------- ------ ---------- -------- -------- ------
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 1/1/92 $ 62.3 $(53.5) $111.8 $ 17.3 $130.9 $ (9.8) $259.0
- -----------------
Net loss (83.7) (83.7)
Issuance of
preferred stock $ 76.6 76.6
Exercise of
stock options .1 .3 .4
Retirement of
preferred stock (1.4) (1.4)
Amortization of
unearned compensation 4.3 .2 4.5
Dividends (17.0) (17.0)
Preferred dividend
tax benefits 1.7 1.7
Currency translation (8.6) (8.6)
Pension adjustment (.6) (.6)
----- ----- ----- ----- ----- ----- ----- -----
Balance at 12/31/92 76.6 60.9 (49.2) 111.9 19.3 30.2 (18.8) 230.9
- ------------------- ----- ----- ----- ----- ----- ----- ----- -----
Net earnings 40.1 40.1
Issuance of
common stock 33.9 91.0 124.9
Exercise of
stock options 1.7 5.3 7.0
Retirement of
preferred stock (.7) (.7)
Amortization of
unearned compensation 4.6 4.6
Dividends (23.9) (23.9)
Preferred dividend
tax benefits 1.6 1.6
Currency translation (10.7) (10.7)
Sale of business 2.4 2.4
Pension adjustment (5.1) (5.1)
----- ----- ----- ----- ----- ----- ----- -----
Balance at 12/31/93 76.6 60.2 (44.6) 147.5 117.2 46.4 (32.2) 371.1
- ------------------- ----- ----- ----- ----- ----- ----- ----- -----
Net earnings 63.3 63.3
Issuance of
common stock 28.8 162.5 191.3
Exercise of
stock options 1.6 6.1 7.7
Repurchase of
common stock (3.0) (9.6) (12.6)
Retirement of
preferred stock (1.1) (1.1)
Amortization of
unearned compensation 4.8 .2 5.0
Dividends (27.7) (27.7)
Preferred dividend
tax benefits 1.6 1.6
Currency translation (6.3) (6.3)
Pension adjustment 4.9 4.9
----- ----- ----- ----- ----- ----- ----- -----
Balance at 12/31/94 $ 76.6 $ 59.1 $(39.8) $174.9 $277.8 $ 82.0 $(33.4) $597.2
- ------------------- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 29
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
Year Ended December 31 1994 1993 1992
-------- -------- --------
(Millions of Dollars)
Cash Provided From (Used By) Operating Activities
- -------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $ 63.3 $ 40.1 $ (83.7)
Adjustments to reconcile net earnings (loss) to
net cash provided from operating activities:
Depreciation and amortization 55.7 50.7 46.7
Deferred income taxes 8.1 (8.8) (3.7)
Postemployment benefits other than pensions 4.0 6.6 93.0
Gain on sale of business - (19.2) -
Increase in accounts receivable (61.7) (40.3) (22.2)
(Increase) decrease in inventories, prepaid
expenses and other (49.0) (7.1) 27.3
Increase in other current liabilities 17.9 34.2 1.8
Payments against restructuring reserves (14.0) (12.7) (2.0)
------ ------ ------
Net Cash Provided From Operating Activities 24.3 43.5 57.2
Cash Provided From (Used By) Investing Activities
- -------------------------------------------------
Expenditures for property, plant and equipment (74.9) (60.0) (40.2)
Acquisitions of automotive aftermarket businesses (58.3) (147.4) (218.4)
Payments for rationalization of acquired businesses (24.5) (12.0) (2.1)
Proceeds from sale of business investments - 38.3 -
Other (.8) (.5) .8
------ ------ ------
Net Cash Used By Investing Activities (158.5) (180.1) (259.9)
Cash Provided From (Used By) Financing Activities
- -------------------------------------------------
Issuance of common stock 196.8 122.1 .4
Repurchase of common stock (10.6) - -
Issuance of Series D preferred stock - - 76.6
Proceeds from issuance of long-term debt 157.8 258.3 120.6
Principal payments on long-term debt (203.7) (227.3) (73.0)
Increase (decrease) in short-term debt 14.8 (24.1) 23.1
Sale of accounts receivable - 39.6 54.1
Dividends (27.7) (23.9) (16.7)
Other (2.0) (.3) (5.5)
------ ------ ------
Net Cash Provided From Financing Activities 125.4 144.4 179.6
------ ------ ------
Increase (Decrease) in Cash and Equivalents (8.8) 7.8 (23.1)
Cash and Equivalents at Beginning of Year 33.8 26.0 49.1
------ ------ ------
Cash and Equivalents at End of Year $ 25.0 $ 33.8 $ 26.0
------ ------ ------
------ ------ ------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
1. ACCOUNTING POLICIES
-------------------
Principles of Consolidation - The consolidated financial statements include
the accounts of Federal-Mogul Corporation and its majority-owned
subsidiaries (the company). Intercompany accounts and transactions have
been eliminated in consolidation.
Cash and Equivalents - The company considers all highly liquid investments
with maturities of 90 days or less from the date of purchase to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
determined by the last-in, first-out (LIFO) method was used for 61% and 66%
of the inventory at December 31, 1994 and 1993, respectively. The remaining
inventories are costed using the first-in, first-out (FIFO) method. If
inventories had been valued at current cost, amounts reported at December 31
would have been increased by $61.7 million in 1994 and $65.4 million in 1993.
<TABLE>
At December 31, inventories consisted of the following:
<CAPTION>
(Millions of Dollars) 1994 1993
------ ------
<S> <C> <C>
Finished products $342.9 $304.5
Work-in-process 27.7 23.2
Raw materials 27.2 23.5
----- -----
397.8 351.2
Reserve for inventory valuation 25.7 28.9
----- -----
$372.1 $322.3
----- -----
----- -----
</TABLE>
Inventory quantity reductions resulting in liquidations of certain LIFO
inventory layers and the reduction in international locations using the
LIFO method increased net earnings in 1994, 1993 and 1992 by $1.6 million
($.04 per share), $5.3 million ($.15 per share) and $6.9 million ($.27
per share), respectively.
Goodwill and Other Intangible Assets - Intangible assets, which result
principally from acquisitions, consist of goodwill, trademark and
non-compete agreements, patents and other intangibles and are amortized
on a straight-line basis over appropriate periods, generally ranging from
7 to 40 years. Goodwill and other intangible assets reflected in the
consolidated balance sheets are net of accumulated amortization of
$8.8 million and $5.3 million for goodwill and $11.1 million and
$6.7 million for other intangible assets in 1994 and 1993, respectively.
The company evaluates the recoverability of goodwill and reviews the
amortization period on an annual basis. Several factors are used to
evaluate goodwill, including but not limited to: management's plans for
future operations, recent operating results and future projected cash flows.
<PAGE>
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
1. ACCOUNTING POLICIES (continued)
-------------------
Currency Translation - Exchange adjustments related to international
currency transactions and translation adjustments for subsidiaries whose
functional currency is the United States dollar (principally those located
in highly inflationary economies) are reflected in the consolidated
statements of earnings. Translation adjustments of international
subsidiaries whose local currency is the functional currency are reflected
in the consolidated financial statements as a separate component of
shareholders' equity.
Earnings Per Share - The computation of primary earnings per share is based
on the weighted average number of outstanding common shares during the
period plus, when their effect is dilutive, common stock equivalents
consisting of certain shares subject to stock options. Fully diluted
earnings per share additionally assumes the conversion of outstanding
Series C ESOP and Series D preferred stock and the contingent issuance of
common stock to satisfy the Series C ESOP preferred stock redemption price
guarantee. The number of contingent shares used in the fully diluted
calculation is based on the market price of the company's common stock on
December 31, 1994, and the number of preferred shares held by the Employee
Stock Ownership Plan (ESOP) as of December 31 of each of the respective
years.
The primary weighted average number of common and equivalent shares
outstanding (in thousands) was 35,062, 27,342, and 22,390 for 1994, 1993
and 1992, respectively. The fully diluted weighted average number of
common and equivalent shares outstanding (in thousands) was 41,812 for
1994, 34,211 for 1993 and 25,782 for 1992.
Net earnings used in the computation of primary earnings per share are
reduced by preferred stock dividend requirements. Net earnings used in
the computation of fully diluted earnings per share are reduced by amounts
representing the additional after-tax contribution that would be necessary
to meet ESOP debt service requirements under an assumed conversion of the
Series C ESOP preferred stock.
Environmental Liabilities - The company recognizes environmental
liabilities when a loss is probable and can be reasonably estimated.
Such obligations are generally not subject to insurance coverage.
Each environmental obligation is estimated by engineering and legal
specialists within the company based on current law and existing
technologies. Such estimates are based primarily upon the estimated
cost of investigation and remediation required and the likelihood that
other potentially responsible parties ("PRPs") will be able to fulfill
their commitments at the sites where the company may be jointly and
severally liable. At sites being addressed under the U.S. Comprehensive
Environmental Response, Compensation and Liability Act or similar state
laws (the "Superfund Sites"), the company typically recognizes an
estimated liability once it has been named as a PRP and has determined
that such estimated liability is probable. The Superfund Sites are
primarily multi-PRP sites not owned or operated by the company. An
estimated liability is typically recognized either upon completion of
an environmental assessment or when the company proposes an agreement with
the appropriate regulatory agency to take action at a site. <PAGE>
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
1. ACCOUNTING POLICIES (continued)
-------------------
The company periodically evaluates and revises estimates for environmental
obligations based on expenditures against established reserves and the
availability of additional information.
Changes in Accounting Method - During the fourth quarter of 1992, the
company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions"
(SFAS 106) effective as of January 1, 1992, and restated previously
reported 1992 quarterly results. Prior to adoption, the cost of
providing health care and life insurance benefits to retired employees
was recognized as expense as payments were made. The company recorded
a charge of $88.1 million, or $3.93 per common share, net of applicable
tax benefits of $47.6 million to reflect the cumulative effect for years
prior to 1992 of the change in accounting method. In addition to the
cumulative effect, the company's 1994, 1993 and 1992 postretirement
health care and life insurance costs increased $4.0 million, $6.6 million
and $7.6 million, respectively, as a result of adopting SFAS 106.
Also in the fourth quarter of 1992, the company adopted Statement of
Financial Accounting Standard No. 112, "Employers' Accounting for
Postemployment Benefits", which requires the accrual of future
postemployment benefits, when such amounts can be estimated. The impact
of adopting this standard on the company's financial position and
operating results was not significant.
Reclassifications - Certain items in the prior year financial statements
have been reclassified to conform with the presentation used in 1994.
<PAGE>
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
2. ACQUISITIONS
------------
On October 31, 1994, the company completed the transaction to purchase all
the outstanding shares of Varex Corporation, Ltd., the largest independent
auto parts distributor in South Africa. The acquisition has been accounted
for as a purchase and, accordingly, the total cost of $58.3 million was
allocated to acquired assets and assumed liabilities based on their
estimated fair values as of the acquisition date. The excess of the
consideration paid over the estimated fair value of net assets acquired of
$49 million has been recorded as goodwill. The consolidated statement of
earnings includes the operating results of the acquired business from
July 1, 1994.
On October 26, 1993, the company completed its acquisition of SPX
Corporation's United States and Canadian automotive aftermarket operations,
Sealed Power Replacement (SPR). The acquisition has been accounted for as
a purchase and, accordingly, the total cost of $167 million was allocated
to the acquired assets and assumed liabilities based on their estimated
fair values as of the acquisition date. The company and SPX Corporation
also executed a non-compete agreement and a long-term trademark agreement
making Federal-Mogul the sole distributor of engine and chassis parts sold
under the Sealed Power and Speed-Pro brand names in North America.
Federal-Mogul also acquired the right to use these trademarks throughout
the rest of the world. The excess of the consideration paid over the
estimated fair value of net assets acquired of $70 million has been
recorded as goodwill. The earnings statement includes the operating
results of the acquired business from October 26, 1993.
On October 20, 1992, the company acquired substantially all of TRW Inc.'s
automotive aftermarket business (AAB). The acquisition has been accounted
for as a purchase and, accordingly, the total cost of $232 million was
allocated to the acquired assets and assumed liabilities based on their
estimated fair values as of the acquisition date. The company and TRW Inc.
also executed a non-compete agreement and completed a long-term supply
contract and a trademark agreement (valued at $48.2 million in the aggregate)
making the company the exclusive supplier of TRW-brand engine and chassis
parts to the independent automotive aftermarket. The excess of the
consideration paid over the estimated fair value of net assets acquired of
$34 million has been recorded as goodwill. The consolidated statement of
earnings includes the operating results of the acquired business from
October 20, 1992.
The following unaudited pro forma results of operations for the years ended
December 31, 1993 and 1992 assume the acquisition of SPR and TRW occurred
as of the beginning of the respective periods, after giving effect to
certain adjustments, including amortization of intangible assets, increased
interest expense on acquisition debt and related income tax effects, with
the SPR acquisition impacting 1993 and the SPR and AAB acquisitions
impacting 1992. The pro forma results do not include the acquisition of
Varex as it would have had little impact on the results of operations in
1994, 1993 and 1992. The pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of
operations which would actually have occurred had the combination been in
effect on the dates indicated, or which may occur in the future.
<PAGE>
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
2. ACQUISITIONS (continued)
------------
<TABLE>
<CAPTION>
(Millions of Dollars,
Except Per Share Amounts) 1993 1992
---------- ----------
<S> <C> <C>
Net sales $1,705.3 $1,672.0
Earnings from continuing operations 74.3 42.0
Net earnings (loss) 50.2 (62.1)
Net earnings (loss) per common share:
Primary $ 1.50 $ (3.17)
Fully diluted 1.41 (3.17)
</TABLE>
Operating results for 1993 include a $1 million ($.02 per share) charge and
for 1992 a $14 million ($.34 per share) charge to provide for certain aspects
of the rationalization of the company's present aftermarket business. This
charge includes costs incurred for severance, eliminating redundant company
facilities and equipment, and integrating the operations of the acquired
businesses.
On April 27, 1993, the company's wholly-owned Australian subsidiary,
Federal-Mogul Pty. Ltd., acquired the automotive aftermarket business and
certain assets of Brown & Dureau Automotive Pty. Limited. The acquisition
was accounted for as a purchase and the cost of $5.6 million was allocated
to the acquired assets and assumed liabilities.
<PAGE>
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
3. SALES OF BUSINESSES AND RELATED MATTERS
---------------------------------------
In 1993, the company sold a number of non-strategic businesses and assets,
using the proceeds to restructure manufacturing operations to enhance future
profitability. On an after-tax basis, a gain of $.06 per share was recorded
primarily due to a favorable tax treatment on the sale of Westwind Air
Bearings, Ltd. In 1992, the effect of similar transactions was a charge
to income of $14 million.
The 1993 pretax gain on the sale of these non-strategic businesses and assets
totalled $19.2 million and were offset by restructuring charges amounting to
$19.2 million. The significant components of these transactions are:
In April 1993, the company sold the assets and business of its subsidiary,
Westwind Air Bearings, Ltd. in England and its affiliated operations in the
United States and Japan for $16.3 million in cash and a 20% equity position
in the new Westwind operating company. The pretax earnings effect was a gain
of $5.1 million.
In September 1993, the company sold its equity interest in the Japanese
engine bearing manufacturer, Taiho Kogyo Co., for $9.3 million. A total of
1,544,400 shares were sold to Taiho's principal shareholders, Toyota Motor
Corporation and certain Toyota affiliates. The pretax earnings effect was a
gain of $8.8 million.
In November 1993, the company sold equity interests in a Bermuda-based
insurance company, Corporate Officers and Directors Assurance Holding Ltd.
for $5.5 million to ACE Limited. The pretax earnings effect was a gain of
$2.7 million.
During the second half of 1993, the company recorded special charges relating
to the rationalization of manufacturing operations. In November 1993, the
company announced the closing of its Lafayette, Tennessee fuel systems plant
with a plan to consolidate operations with the Lighting and Electrical
Division. A restructuring reserve was recorded for $7 million based on the
plan to consolidate these two businesses. Spending against the reserve was
completed by December 31, 1994. The company also announced plans to
restructure Glyco manufacturing operations in Germany. A reserve of $8.4
million was recorded to provide for personnel reductions and reengineering
of manufacturing facilities. Spending related to this reserve was
approximately $2.5 million in 1994. $2.1 million of the reserve was
reversed into income as a result of favorable treatment from the German
government related to severance. In 1993, the company also sold idle land
for $5 million connected with its Glyco operations, resulting in a pretax
gain of $1.5 million.
<PAGE>
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
4. FINANCIAL INSTRUMENTS
---------------------
Foreign Exchange Risk Management
- --------------------------------
The company operates internationally, giving rise to exposure to market risks
from changes in foreign exchange rates and raw material price fluctuations.
Derivative financial instruments are utilized by the company to reduce those
risks. The company does not hold or issue financial instruments for trading
purposes.
The company has entered into forward exchange contracts and purchased currency
options to hedge committed and anticipated sales and purchases denominated in
foreign currencies. Some of the contracts involve the exchange of two
currencies, according to local needs in foreign subsidiaries. The term of
the currency derivatives is less than one year. The purpose of the company's
foreign currency hedging activities is to protect the company from the risk
that the eventual U.S. dollar cash flows resulting from the purchase of
products from suppliers and sale of products to customers in international
markets will be adversely affected by changes in exchange rates.
The following table summarizes the company's various types of foreign
exchange contracts in managing its foreign exchange risk.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------ ------------------------
Contract Deferred Contract Deferred
Amount Gain/(Loss) Amount Gain/(Loss)
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Forwards $ 9,618,154 $405,335 $7,823,776 $ 57,824
Options Purchased 1,002,531 3,452 1,126,833 (21,223)
---------- ------- --------- -------
$10,620,685 $408,787 $8,950,609 $ 36,601
---------- ------- --------- -------
---------- ------- --------- -------
</TABLE>
The table below summaries by major currency the contractual amounts of
the company's forward exchange and option contracts in U.S. dollars.
Foreign currency amounts are translated at contract rates applicable
to each instrument. The "buy" amounts represent the U.S. dollar
equivalent of commitments to purchase foreign currencies, and the "sell"
amounts represent the U.S. dollar equivalent of commitments to sell
foreign currencies.
<PAGE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
4. FINANCIAL INSTRUMENTS (continued)
---------------------
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------ ------------------------
Buy Sell Buy Sell
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Canadian Dollar - - - $2,199,960
Australian Dollar - $3,053,775 - 441,290
Japanese Yen $5,024,379 - $1,167,175 -
Mexican Peso - 1,850,000 - -
British Pound/
Deutsche Mark - - - 2,903,011
Other 602,531 90,000 424,642 1,814,531
--------- --------- --------- ---------
$5,626,910 $4,993,775 $1,591,817 $7,358,792
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Deferred gains and losses are included in other assets and liabilities and
recognized in earnings when the future purchase or sale occurs or at the
point in time when the purchase of sale is no longer expected to occur.
All amounts deferred at December 31, 1994 are expected to be recognized
in earnings in 1995.
The company has also entered into copper and aluminum contracts to hedge
against the risk of price increases. These contracts are expected to offset
the effects of price changes on the firm purchase commitments for copper
and aluminum. Under the agreements, the company is committed to purchase
6.3 million pounds of copper, representing 60% of anticipated consumption
consistently throughout 1995 at prices ranging from $1.11 to $1.17. The
company is also committed to purchase 1.4 million pounds of aluminum,
representing 50% of anticipated consumption consistently throughout 1995
at a price of $.84 per pound. The net unrealized gain on these firm
purchase commitments at December 31, 1994 was $846,000 which will be
recognized in earnings as copper and aluminum are purchased.
Concentrations of Credit Risk
- -----------------------------
Financial instruments which potentially subject the company to concentrations
of credit risk consist primarily of accounts receivable and cash investments.
The company's customer base includes virtually every significant global
automotive manufacturer and a large number of distributors and installers of
automotive replacement parts. However, the company's credit evaluation
process, reasonably short collection terms and the geographical dispersion
of sales transactions help to mitigate any concentration of credit risk.
The company also has cash investment policies that limit the amount of credit
exposure to any one financial institution and require placement of investments
in financial institutions evaluated as highly credit worthy.
<PAGE>
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
4. FINANCIAL INSTRUMENTS (continued)
---------------------
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts of certain financial instruments such as cash and
equivalents, accounts receivable, accounts payable and short-term borrowings
approximate their fair values. The carrying amounts and estimated fair
values of the company's long-term borrowings were $319.4 million and
$340.0 million at December 31, 1994. The fair value of the long-term
debt is estimated using discounted cash flow analysis and the company's
current incremental borrowing rates for similar types of arrangements.
<PAGE>
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
5. ACCOUNTS RECEIVABLE SECURITIZATION
----------------------------------
In June 1992 and March 1993, the company entered into agreements to sell, on
a revolving basis, an undivided interest in a designated pool of accounts
receivable. Accordingly, the company irrevocably and without recourse
transferred all of its U.S. dollar denominated trade accounts receivable
(approximately $214 million at December 31, 1994 and principally representing
amounts owed to the company by original equipment and aftermarket customers
in the U.S. automotive and related industries) and $5 million Canadian
receivables to the Federal-Mogul Trade Receivables Master Trust. The Trust
sold investor certificates representing an interest in $55 million and $40
million of trust assets in 1992 and 1993, respectively. The company holds
seller certificates representing an interest in the remaining assets of the
Trust, which certificates are included with accounts receivable in the
company's balance sheet at December 31, 1994. The agreement expires in 1997.
The trust agreement requires the company to maintain its interest in the
assets of the Trust at a certain calculated participation level (approximately
38% at December 31, 1994) which, if not met, requires the company to
contribute cash or additional trade accounts receivable in order to satisfy
such participation requirement. The company exceeded the required
participation level by approximately $47 million and $29 million
as of December 31, 1994 and 1993, respectively.
All losses, credits or other adjustments on receivables owned by the Trust
are deductions from the assets represented by the seller certificates owned
by the company. Accordingly, the owners of the investor certificates have
no recourse to the company beyond the assets represented by the seller
certificates. The company does not generally require collateral for its
trade accounts receivable and maintains an allowance ($10.9 million and $14.5
million at December 31, 1994 and 1993, respectively) based upon the expected
collectibility of all trade accounts receivable, including receivables sold.
Accounts receivable in the 1994 and 1993 consolidated balance sheet exclude
$95 million, respectively, representing investory certificates sold. The
discount related to the sale of receivables under this agreement of $6.2
million in 1994 and $5.3 million in 1993 have been classified as a reduction
of other income.
<PAGE>
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
6. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Properties are stated at cost, which includes expenditures for additional
facilities and those which materially extend the useful lives of existing
buildings and equipment. Fully depreciated assets have been eliminated from
the accounts.
Depreciation is computed principally by the straight-line method for
financial reporting purposes and by accelerated methods for income tax
purposes.
<TABLE>
At December 31, property, plant and equipment consisted of the following:
<CAPTION>
Millions of Dollars) 1994 1993
-------- --------
<S> <C> <C>
Land $ 33.0 $ 30.8
Buildings 181.8 162.3
Machinery and equipment 441.8 423.4
------ ------
656.6 616.5
Accumulated depreciation (219.3) (216.7)
------ ------
$ 437.3 $ 399.8
------ ------
------ ------
</TABLE>
The company leases various facilities and equipment under both capital and
operating leases. Net assets subject to capital leases are not significant
at December 31, 1994.
The balance of a deferred gain resulting from the 1988 sale and leaseback
of a portion of the corporate headquarters complex was $9.2 million at
December 31, 1994. The deferred gain is being amortized over the term of
the lease as a reduction of rent expense. Future minimum payments under
noncancelable operating leases with initial or remaining terms of more than
one year are, in millions: 1995--$17.4; 1996--$15.3; 1997--$14.6;
1998--$13.0; 1999--$11.2 and thereafter--$58.7. Future minimum lease
payments have been reduced by approximately $26 million and $7.2 million
for amounts to be received under sublease agreements and amounts related
to the pending sale of the Precision Forged Products Division discussed
in Note 14, respectively.
Total rental expense under operating leases was $24.9 million in 1994,
$21.1 million in 1993 and $17.7 million in 1992, exclusive of property
taxes, insurance and other occupancy costs generally payable by the company.
<PAGE>
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
7. DEBT
----
<TABLE>
Long-term debt at December 31 consists of the following:
<CAPTION>
(Millions of Dollars) 1994 1993
-------- --------
<S> <C> <C>
Revolver due 1998 $ 55.0 $245.0
Medium-term notes 90.0 -
Notes payable due 2000 71.6 75.0
ESOP obligation 39.0 43.9
European revolver 29.4 -
Other 62.6 30.7
----- -----
347.6 394.6
Less current maturities included
in short-term debt 28.2 12.1
----- -----
$319.4 $382.5
----- -----
----- -----
</TABLE>
In June of 1994 the company renegotiated its $300 million revolving credit
agreement, resulting in a lower interest rate and fewer restrictive
financial covenants. The variable interest rate was reduced from 87.5
to 50 basis points over LIBOR. Restrictive covenants regarding tangible
net worth, the current ratio and dividends were eliminated. The revolving
credit facility matures in June 1998. As of December 31, 1994 the company
had $55 million borrowed against the facility at a rate of 5.7375%.
In July of 1994 the company increased its existing Universal Shelf from
$102 million to $202 million. In August of 1994 the company announced
a Medium-Term Note Program for $200 million. A total of $90 million in
medium-tern notes were issued in 1994, $54 million for the acquisition of
Varex and $36 million to convert outstanding short-term debt to long-term
debt. Notes were issued in maturities ranging from 5 to 8 years. The
average interest rate was approximately 8.4%.
The Employee Stock Ownership Plan (ESOP) obligation represents the unpaid
principal balance on an eleven-year loan entered into by the company's
ESOP in 1989. Proceeds of the loan were used by the ESOP to purchase the
company's Series C ESOP preferred stock. Payment of principal and interest
on the notes is unconditionally guaranteed by the company, and therefore
the unpaid principal balance of the borrowing is classified as long-term
debt. Company contributions and dividends on the preferred shares held by
the ESOP are used to meet semi-annual principal and interest obligations.
The company established a European revolving credit facility for $50 million
in September of 1994. The amount borrowed under the facility as of
December 31, 1994 was $29.4 million at a variable interest rate (50 basis
points over the corresponding country LIBOR). The European revolving
credit agreement matures in September of 1997. The company has additional
international lines of credit with several banks in the maximum amount of
$64.2 million. At December 31, 1994 and 1993, borrowings under these
lines of credit amounted to $39.0 million and $35.7 million, respectively.
<PAGE>
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
7. DEBT (continued)
----
In 1994 and 1993, the company exercised an option to prepay principal in
the amount of $4.8 million and $4.5 million, respectively, on the original
ESOP loan, which bears interest at 11.45% per annum. The prepayment is
being refinanced with bank debt that carries a variable interest rate
based on a tax-effected LIBOR plus 50 basis points (5.95% as of
December 31, 1994).
Certain of the company's debt agreements contain restrictive covenants that,
among other matters, require the company to maintain certain financial ratios
and minimum levels of working capital and tangible net worth.
Aggregate maturities of long-term debt for each of the four years following
1995 are, in millions: 1996--$23; 1997--$68; 1998--$82; 1999--$50 and
thereafter--$96.
Interest paid in 1994, 1993, and 1992 was $21.4 million, $26.9 million
and $27.1 million, respectively.
<PAGE>
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
8. CAPITAL STOCK AND PREFERRED SHARE PURCHASE RIGHTS
-------------------------------------------------
The company's articles of incorporation authorize 60,000,000 shares of common
stock, of which 34,987,810 shares, 29,497,994 shares and 22,391,154 shares
were outstanding at December 31, 1994, 1993 and 1992, respectively. In
February 1994, the company sold in a public offering 5,750,000 shares of
its common stock which generated net proceeds of approximately $191 million.
The proceeds were used to repay bank debt outstanding, including debt
incurred for the acquisition of SPR. In April 1993, the company sold
6,250,000 shares of its common stock in a public offering with net proceeds
of approximately $116 million that were used to repay a portion of the debt
incurred with the 1992 acquisition of AAB. Simultaneously, the company
issued 500,000 additional shares, valued at approximately $9.6 million,
to contribute to the company's domestic pension plans.
The articles of incorporation also authorize 5,000,000 shares of preferred
stock. On September 24, 1992, the company completed an $80,000,000 private
issue of 1,600,000 shares of its $3.875 Series D convertible exchangeable
preferred stock. Sold to institutional investors in a private placement
under rule 144A of the Securities Act, each share of stock has a liquidation
preference of $50 and is convertible into the company's common stock at a
conversion price of $18 per share. The shares are not redeemable prior to
September 1996, but they may be exchanged at the company's option for 7.75%
convertible subordinated debentures due in 2012. Such debentures would be
convertible into the company's common stock at a rate of $50 principal amount
for each share of common stock and at the same conversion price as the
Series D preferred stock.
The company's ESOP covers substantially all domestic salaried employees and
allocates Series C ESOP convertible preferred stock to eligible employees
based on their contributions to the Salaried Employees' Investment Program
and their eligible compensation. The company had 926,136 shares, 944,016
shares and 954,196 shares of Series C ESOP preferred stock outstanding at
December 31, 1994, 1993 and 1992, respectively. The company repurchased
and retired 17,880 Series C ESOP preferred shares valued at $1.1 million
during 1994 and 10,180 Series C ESOP preferred shares valued at $.7 million
during 1993, all of which were forfeited by participants upon early
withdrawal from the plan.
The Series C ESOP preferred stock is convertible into shares of the company's
common stock at a rate of two shares of common stock for each share of
preferred stock. The Series C ESOP preferred stock may only be issued to a
trustee acting on behalf of an employee stock ownership plan or other
employee benefit plan of the company. The shares are automatically converted
into shares of common stock in the event of any transfer to any person other
than the plan trustee. The preferred stock is redeemable, in whole or in
part, at the option of the company.
The charge to operations for the cost of the ESOP was $4.9 million in 1994,
$4.9 million in 1993 and $4.7 million in 1992. The company made cash
contributions to the plan of $9.2 million in 1994, 1993 and 1992 for debt
service, including preferred stock dividends of $4.5 million in 1994,
$4.5 million in 1993 and $4.8 million in 1992.
<PAGE>
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
8. CAPITAL STOCK AND PREFERRED SHARE PURCHASE RIGHTS (continued)
-------------------------------------------------
In 1988, the company's Board of Directors authorized the distribution of one
Preferred Share Purchase Right for each outstanding share of common stock of
the company. Each Right entitles shareholders to buy one-half of one-hundredth
of a share of a new series of preferred stock at a price of $70.
As distributed, the Preferred Share Purchase Rights trade together with the
common stock of the company. They may be exercised or traded separately only
after the earlier to occur of: (i) 10 days following a public announcement
that a person or group of persons has obtained the right to acquire 10% or
more of the outstanding common stock of the company (20% in the case of
certain institutional investors), or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors) following the
commencement or announcement of an intent to make a tender offer or exchange
offer which would result in beneficial ownership by a person or group of
persons of 10% or more of the company's outstanding common stock.
Additionally, if the company is acquired in a merger or other business
combination, each Right will entitle its holder to purchase, at the Right's
exercise price, shares of the acquiring company's common stock (or stock of
the company if it is the surviving corporation) having a market value of
twice the Right's exercise price.
The Preferred Share Purchase Rights may be redeemed at the option of the
Board of Directors for $.005 per Right at any time before a person or group
of persons acquires 10% or more of the company's common stock. The Board
may amend the Rights at any time without shareholder approval. The Rights
will expire by their terms on November 14, 1998.
<PAGE>
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
9. INCENTIVE STOCK PLANS
---------------------
The company's shareholders adopted stock option plans in 1976 and 1984 and a
performance incentive stock plan in 1989. These plans provide generally for
awarding restricted shares or granting options to purchase shares of the
company's common stock. Restricted shares entitle employees to all the
rights of common stock shareholders, subject to certain transfer restrictions
or forfeitures. Options entitle employees to purchase shares at an exercise
price not less than 100% of the fair market value on the grant date and
expire after ten years.
Under the plans, options become exercisable ranging from six months to four
years as determined by the Board of Directors at the time of grant. At
December 31, 1994, 633,909 shares were available for future grants under
the plans.
The following table summarizes the activity relating to the company's
incentive stock plans:
<TABLE>
<CAPTION>
Number of
Shares Share Price
------------- ---------------
(In Millions)
<S> <C> <C>
Outstanding at January 1, 1992 2.4 $ 9.47 - $26.19
Options granted .1 16.44 - 22.00
Options exercised -
Options lapsed or cancelled (.1)
---
Outstanding at December 31, 1992 2.4 $14.34 - $26.19
Options granted .5 19.25 - 24.13
Options exercised (.3) 14.34 - 22.69
Options lapsed or cancelled -
---
Outstanding at December 31, 1993 2.6 $15.69 - $26.19
Options granted .1 28.63 - 36.69
Options exercised (.3) 15.69 - 26.19
Options lapsed or cancelled -
---
Outstanding at December 31, 1994 2.4 $15.69 - $36.69
---
---
Exercisable at December 31, 1994 1.2 $15.69 - $26.19
---
---
</TABLE>
<PAGE>
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
10. POSTEMPLOYMENT BENEFITS
-----------------------
The company maintains several defined benefit pension plans which cover
substantially all domestic employees and certain employees in other
countries. Benefits for domestic salaried employees are based on
compensation and years of service, while hourly employees' benefits are
primarily based on negotiated rates and years of service. International
plans maintained by the company provide benefits based on years of
service and compensation.
The company's funding policy is consistent with funding requirements of
federal and international laws and regulations. Plan assets consist
primarily of listed equity securities and fixed income instruments.
As of December 31, 1994, plan assets included 309,000 shares of
Federal-Mogul Corporation common stock valued at approximately
$6.2 million.
Net periodic pension cost for the company's defined benefit plans
in 1994, 1993 and 1992 consist of the following:
<TABLE>
<CAPTION>
(Millions of Dollars)
U.S. Plans International Plans
---------------------- ----------------------
Year Ended December 31, 1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------
(Income)/Expense
<S> <C> <C> <C> <C> <C> <C>
Service cost - benefits
earned during the period $ 6.8 $ 6.8 $ 5.6 $ .3 $ .4 $ .3
Interest cost on projected
benefit obligation 14.0 12.9 12.7 2.4 2.2 2.2
Actual return on plan assets (3.7) (29.8) (5.7) - - -
Net amortization and deferral (22.7) 7.3 (16.9) - - -
Curtailment loss 1.1 - - - - -
---- ---- ---- ---- ---- ----
Net periodic pension
(income) cost $(4.5) $(2.8) $(4.3) $ 2.7 $ 2.6 $ 2.5
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
</TABLE>
<PAGE>
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
10. POSTEMPLOYMENT BENEFITS (continued)
-----------------------
The following table sets forth the funded status for the company's defined
benefit plans at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
(Millions of Dollars)
International
U.S. Plans Plans
------------------------------- --------------
Assets Exceed Accumulated Accumulated
Accumulated Benefits Benefits
Benefits Exceed Assets Exceed Assets
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------
Actuarial present value of
benefit obligations:
Vested benefit
obligation $ 86.7 $ 79.0 $ 67.7 $ 82.8 $ 28.7 $ 26.7
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Accumulated benefit
obligation $ 92.6 $ 83.1 $ 78.8 $ 97.2 $ 30.0 $ 28.0
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Projected benefit
obligation $ 94.6 $ 84.0 $ 79.3 $ 97.4 $ 30.1 $ 28.1
Plan assets at fair value 155.5 151.1 63.0 78.7 - -
Plan assets in excess of
(less than) projected
benefit obligation 60.9 67.1 (16.3) (18.7) (30.1) (28.1)
Unrecognized net (asset)
liability at transition (12.4) (15.2) .9 .6 - -
Unrecognized prior
service cost (.2) (1.8) 8.8 10.5 - -
Unrecognized net
(gain) loss (8.4) (15.8) 3.9 9.2 1.4 2.6
----- ----- ----- ----- ----- -----
Accrued pension asset
(liability) included
in the consolidated
balance sheet $ 39.9 $ 34.3 $ (2.7) $ 1.6 $(28.7) $(25.5)
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
The assumptions used in computing the above information are as follows:
<TABLE>
<CAPTION>
U.S. Plans International Plans
---------------------- ----------------------
1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Discount rates 8 1/2% 7 1/2% 8 3/4% 8 1/2% 8% 9%
Rates of increase in
compensation levels 5 1/2% 4 1/2% 5 1/2% 4 1/2% 5% 5%
Expected long-term rates
of return on assets 10% 10% 9% N/A N/A N/A
</TABLE>
<PAGE>
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
10. POSTEMPLOYMENT BENEFITS (continued)
-----------------------
The company's minimum liability adjustment at December 31 was $13.1 million
for U.S. plans and $1.4 million for international plans in 1994 and
$20.2 million for U.S. plans and $2.5 million for international plans in
1993.
In addition to providing pension benefits, the company provides health care
and life insurance benefits for certain domestic retirees covered under
company-sponsored benefit plans. Employees who are participants in these
plans may become eligible for these benefits if they reach normal retirement
age while working for the company. Beginning in 1992, the company is
required to accrue the cost of providing post-retirement benefits over
the employees' service period. The company's policy is to fund benefit
costs as they are provided, with retirees paying a portion of the costs.
Periodic postretirement benefit costs were $11.8 million in 1994,
$13.8 million in 1993 and $14.4 million in 1992. The components of net
periodic postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
(Millions of Dollars)
Year Ended December 31, 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service Cost $ 2.8 $ 2.7 $ 2.7
Interest Cost 9.0 11.1 11.7
---- ---- ----
$11.8 $13.8 $14.4
---- ---- ----
---- ---- ----
</TABLE>
The following schedule reconciles the funded status of the company's
postretirement benefit plans to the amounts recorded in the accompanying
financial statements:
<TABLE>
<CAPTION>
(Millions of Dollars)
<S> <C> <C>
December 31, 1994 1993
-------- --------
Accumulated postretirement
benefit obligations:
Retirees $ 80.4 $ 96.2
Fully eligible plan participants 15.4 15.0
Other active plan participants 31.5 39.5
----- -----
127.3 150.7
Unrecognized net gain/(loss) 26.6 (.8)
----- -----
Accrued postretirement benefit liability $153.9 $149.9
----- -----
----- -----
</TABLE>
The discount rate used in determining the APBO was 8 1/2% at December 31,
1994 and 7 1/2% at December 31, 1993.
<PAGE>
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
10. POSTEMPLOYMENT BENEFITS (continued)
-----------------------
At December 31, 1994, the assumed annual health care cost trend used in
measuring the APBO approximated 8 1/2% in 1994, declining to 8% in 1995
and to an ultimate annual rate of 5 1/2% estimated to be achieved in 2008.
At December 31, 1993 the assumed health care cost trend rate used in
measuring the APBO approximated 9% in 1993, declining to 8 1/2% in 1994
to an annual rate of 5 1/2% to be achieved in 2007. Increasing the
assumed cost trend rate by 1% each year would have increased the APBO by
approximately 11% at December 31, 1994 and 1993, respectively. Aggregate
service and interest costs would have increased by approximately
13%, 13% and 12% for 1994, 1993 and 1992, respectively.
In 1991, the company established a retiree health benefits account (as
defined in Section 401 of the Internal Revenue Code) within its domestic
salaried employees' pension plan. Annually through 1995, the company may
elect to transfer excess pension plan assets (subject to defined limitations)
to the 401(h) account for purposes of funding current salaried retiree
health care costs. The company transferred excess pension plan assets
of $4.0 million in 1994, $3.6 million in 1993 and $3.9 million in 1992
to the 401(h) account to fund salaried retiree health care benefits. <PAGE>
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
11. INCOME TAXES
------------
Under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109) adopted by the company in 1992, the liability method
is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
The components of earnings (loss) from continuing operations before income
taxes consisted of the following:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Domestic $100.1 $ 54.5 $ 7.1
International 2.0 3.1 1.9
----- ----- -----
$102.1 $ 57.6 $ 9.0
----- ----- -----
----- ----- -----
</TABLE>
Significant components of the provision for income taxes (tax benefit)
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
<C> <C> <C>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S>
Current:
Federal $ 18.4 $ 16.1 $ 4.1
State and local 2.1 1.9 1.0
International 5.2 6.5 5.0
----- ----- -----
Total current 25.7 24.5 10.1
Deferred:
Federal 18.5 5.2 (2.7)
State and local 1.0 .1 (.2)
International (6.4) (12.3) (2.6)
----- ----- -----
Total deferred 13.1 (7.0) (5.5)
----- ----- -----
$ 38.8 $ 17.5 $ 4.6
----- ----- -----
----- ----- -----
</TABLE>
<PAGE>
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
11. INCOME TAXES (continued)
------------
The reconciliation of income tax attributable to continuing operations
computed at the United States federal statutory tax rates to income tax
expense is:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rates $ 35.7 $ 20.1 $ 3.0
Increase (decrease) from:
State income taxes 2.4 1.3 .6
International earnings subject
to varying tax rates
and tax effect of losses 2.2 (.2) 1.3
Tax effect on sale of business - (1.8) -
Tax effect of rate changes
U.S. - (1.4) -
Germany - (2.9) -
Other differences (1.5) 2.4 (.3)
----- ----- -----
$ 38.8 $ 17.5 $ 4.6
----- ----- -----
----- ----- -----
</TABLE>
In 1993 the company was subject to statutory rate changes both in the United
States and in Germany. Income tax expense was decreased by $1.4 million and
$2.9 million as a result of applying the newly enacted tax rates to the
deferred tax balances as of the beginning of the period in the United States
and Germany, respectively. However, the effect of the change in tax rates on
the 1993 income was to increase the United States and Germany income tax
expense by $.6 million and $1 million, respectively. As a result, net tax
benefits of $.8 million and $1.9 million have been recognized, respectively.
The following table summarizes the company's total provision for income taxes:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Continuing operations $ 38.8 $ 17.5 $ 4.6
Cumulative effect of
accounting change - - (47.6)
Allocated to equity:
Currency translation 3.6 (3.0) (2.5)
Preferred dividends (1.6) (1.6) (1.7)
Other .6 - (.7)
----- ----- -----
$ 41.4 $ 12.9 $(47.9)
----- ----- -----
----- ----- -----
</TABLE>
<PAGE>
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
11. INCOME TAXES (continued)
------------
Significant components of the company's deferred tax liabilities and assets
as of December 31 are as follows:
<TABLE>
<CAPTION>
<C> <C> <C>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S>
Deferred tax liabilities:
Fixed asset basis differences $(66.3) $(60.0) $(67.9)
Pension (13.3) (12.5) (9.4)
Restructuring costs (14.6) - -
----- ----- -----
Total deferred tax liabilities (94.2) (72.5) (77.3)
Deferred tax assets:
Postretirement benefits other
than pensions 56.9 55.3 51.6
Special charges - .2 11.9
Other temporary differences 27.7 29.3 14.3
AMT credit carryforwards - - 5.6
Foreign tax credit carryforwards - 2.4 7.9
Net operating loss carryforwards
of international subsidiaries 46.2 37.6 28.0
Other, net .7 2.6 4.3
----- ----- -----
Total deferred tax assets 131.5 127.4 123.6
Valuation allowance for
deferred tax assets (20.9) (21.0) (24.3)
----- ----- -----
Net deferred tax assets 110.6 106.4 99.3
----- ----- -----
$ 16.4 $ 33.9 $ 22.0
----- ----- -----
----- ----- -----
</TABLE>
Deferred tax liabilities and assets are recorded in the consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
<C> <C>
(Millions of Dollars) 1994 1993
-------- --------
<S>
Assets:
Prepaid expenses and income tax benefits $ 12.4 $ 19.4
Business investments and other assets 13.3 27.5
Liabilities:
Other accrued liabilities (9.3) (13.0)
----- -----
$ 16.4 $ 33.9
----- -----
----- -----
</TABLE>
Income taxes paid in 1994, 1993 and 1992 were $20.0 million, $16.3 million
and $10.5 million, respectively.
<PAGE>
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
11. INCOME TAXES (continued)
------------
Undistributed earnings of the company's international subsidiaries amounted
to approximately $78 million at December 31, 1994. No taxes have been
provided on approximately $71 million of these earnings which are considered
by the company to be permanently reinvested. Upon distribution of these
earnings, the company would be subject to U.S. income taxes and foreign
withholding taxes. Determining the unrecognized deferred tax liability on
the distribution of these earnings is not practicable. However, the company
believes the foreign withholding taxes would be insignificant and any
United States income tax would be largely offset by foreign tax credits.
<PAGE>
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
12. OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
--------------------------------------------------
The company is a global distributor and manufacturer of a broad range of non-
discretionary parts, primarily vehicular components for automobiles, light
trucks, heavy duty trucks and farm and construction vehicles and industrial
products. Through its worldwide distribution network, the company sells
replacement parts in the vehicular aftermarket. The company also sells parts
to original equipment manufacturers, principally the major automotive
manufacturers in the United States and Europe. All of these activities
constitute a single business segment.
Financial information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States and Canada $1,306.5 $1,092.3 $ 817.5
Europe 285.3 270.4 268.3
Other international 304.1 212.8 178.2
------- ------- -------
$1,895.9 $1,575.5 $1,264.0
------- ------- -------
------- ------- -------
Operating profit:
United States and Canada $ 135.6 $ 91.0 $ 30.8
Europe (3.4) (2.3) (.9)
Other international 27.1 20.0 22.1
------- ------- -------
Total operating profit <F1> 159.3 108.7 52.0
Corporate expenses and other (26.6) (24.3) (22.4)
------- ------- -------
Operating earnings $ 132.7 $ 84.4 $ 29.6
------- ------- -------
------- ------- -------
Identifiable assets:
United States and Canada $ 872.4 $ 807.3 $ 619.2
Europe 267.4 243.2 290.1
Other international 356.3 250.9 201.3
------- ------- -------
$1,496.1 $1,301.4 $1,110.6
------- ------- -------
------- ------- -------
<FN>
<F1> Operating profit includes a special charge of $14 million in 1992.
</TABLE>
Transfers between geographic areas are not significant, and when made, are
recorded at prices comparable to normal unaffiliated customer sales.
<PAGE>
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
13. LITIGATION
----------
The company is involved in various legal actions arising in the normal course
of business. After taking into consideration legal counsel's evaluation of
such actions, management is of the opinion that their outcome will not have
a significant effect on the company's consolidated financial statements.
<PAGE>
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
14. SUBSEQUENT EVENTS
-----------------
In February 1995, the company announced an agreement to sell its Precision
Forged Products Division in a transaction valued at approximately $47 million.
<PAGE>
<PAGE> 57
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
- ---------------------------------------------------
To Our Shareholders:
The management of Federal-Mogul has the responsibility for preparing the
accompanying financial statements and for their integrity and objectivity.
The financial statements were prepared in accordance with generally accepted
accounting principles and include amounts based on the best estimates and
judgments of management. Management also prepared the other financial
information in this report and is responsible for its accuracy and consistency
with the financial statements. Federal-Mogul has retained independent
auditors, ratified by election of the shareholders, to audit the financial
statements.
Federal-Mogul maintains a strong system of internal accounting controls
supplemented by written policies and procedures, implemented by the careful
selection and training of qualified personnel and verified by an extensive
internal audit program. These measures, the cost of which is balanced against
the benefits that may reasonably be expected therefrom, are designed to
prevent significant misuse of company assets or misstatements of financial
reports and to assure that business is conducted as directed by management in
accordance with all applicable laws and the Federal-Mogul Code of Conduct.
The Audit Committee of the Board of Directors, comprised of five outside
directors, performs an oversight role related to financial reporting. The
Committee periodically meets jointly and separately with the independent
auditors, internal auditors and management to review their activities and
reports, and to take any action appropriate to their findings. At all times
the independent auditors have the opportunity to meet with the Audit Committee,
without management representatives present, to discuss matters related to
their audit.
(Dennis J. Gormley)
Dennis J. Gormley
Chairman and Chief Executive Officer
(Martin E. Welch III)
Martin E. Welch III
Senior Vice President
Chief Financial Officer
(James B. Carano)
James B. Carano
Vice President and Controller
<PAGE>
<PAGE> 58
REPORT OF INDEPENDENT AUDITORS
- ------------------------------
Shareholders and Board of Directors
Federal-Mogul Corporation
We have audited the accompanying consolidated balance sheets of Federal-Mogul
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. Our audits
also included the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of Federal-Mogul
Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1992 the
company changed its method of accounting for postretirement benefits other
than pensions.
(Ernst & Young, LLP)
ERNST & YOUNG, LLP
Detroit, Michigan
February 7, 1995
<PAGE>
<PAGE> 59
<TABLE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
- ------------------------------------
FEDERAL-MOGUL CORPORATION
- -------------------------
<CAPTION>
Net Sales Fully
Less Cost Diluted
(Millions of Dollars, Net of Products Operating Net Earnings
Except Per Share Amounts) Sales Sold Margin Earnings Per Share
-------- ----------- --------- -------- ---------
Year ended December 31, 1994:
<S> <C> <C> <C> <C> <C>
First quarter $ 460.3 $ 96.7 $ 32.0 $15.0 $ .37
Second quarter 474.8 104.9 40.0 20.4 .47
Third quarter 445.3 95.6 29.6 16.1 .37
Fourth quarter 515.5 112.3 31.1 11.8 .27
------- ----- ----- ---- ----
$1,895.9 $409.5 $132.7 $63.3 $1.46
------- ----- ----- ---- ----
------- ----- ----- ---- ----
Year ended December 31, 1993:
First quarter $ 410.5 $ 79.0 $ 21.8 $ 7.5 $ .23
Second quarter 401.8 78.8 22.2 15.3 .43 <F1>
Third quarter 370.0 74.5 19.1 10.0 .26
Fourth quarter 393.2 79.4 21.3 7.3 .17 <F2>
------- ----- ----- ----- -----
$1,575.5 $311.7 $ 84.4 $ 40.1 $ 1.13
------- ----- ----- ----- -----
------- ----- ----- ----- -----
<FN>
<F1> Includes a gain of $.14 per share related to the sale of Westwind Air
Bearings Ltd.
<F2> Includes special charges net of gains from asset sales of $.07.
</TABLE>
<TABLE>
STOCK PRICES DIVIDENDS
- ------------ ---------
<CAPTION>
High and low prices for the company's common Quarterly dividends of $.12 per
stock for each quarter in the past two years common share were declared for
were as follows: 1994 and 1993. In February
1995, the company's Board of
1994 1993 Directors declared a quarterly
---------------- ---------------- dividend of $.12 per common
share. This was the 236th
Quarter High Low High Low consecutive quarterly dividend
- ------- ------- ------- ------- ------- declared by the company.
<S> <C> <C> <C> <C>
First $37 5/8 $28 $20 1/2 $16 1/4
Second 32 3/8 24 5/8 22 17 5/8
Third 32 3/4 22 26 1/4 19 7/8
Fourth 23 3/4 18 3/4 29 7/8 23 1/4
</TABLE>
<PAGE>
<PAGE> 60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference
from pages 1 through 4 and the first paragraph at the top of page 5 of the
Company's definitive proxy statement dated March 15, 1995 relating to its
1995 annual meeting of shareholders (the "1995 Proxy") under the heading
"Nominees for Election as Directors" and the section on page 14 of the 1995
Proxy under the heading "Compliance With Section 16(a) of the Exchange Act",
except that certain information required by Item 10 with respect to executive
officers is included under Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the 1995 Proxy under the headings "Information on Executive Compensation"
on pages 6 to 7, excluding the Compensation Committee Report, and under the
headings "Retirement Plans" on page 11 and "Nominees for Election as
Directors" on page 4, and the first paragraph on page 5 of the 1995 Proxy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference from
pages 11 through 14 of the 1995 Proxy under the heading "Information
on Securities".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
page 5 of the Proxy under the heading "Certain Transactions.
<PAGE>
<PAGE> 61
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Financial statements filed as part of this Form 10-K are
listed under Part II, Item 8 of this Form 10-K.
2. Financial Statement Schedules:
Schedule II - Valuation and qualifying accounts
Financial Statements and Schedules Omitted:
Schedules other than those listed above are omitted because
they are not required under instructions contained in
Regulation S-X or because the information called for is shown
in the financial statements and notes thereto.
Individual financial statements of subsidiaries of the Company
have been omitted as the Company is primarily an operating
company and all subsidiaries included in the consolidated
financial statements filed, in the aggregate, do not have
minority equity interests and/or indebtedness to any person
other than the Company or its consolidated subsidiaries in
amounts which together exceed 5% of the total assets of the
Company as shown by the most recent year-end Consolidated
Balance Sheet.
<PAGE>
<PAGE> 62
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
- ------------------------------------------
(In Millions)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------- --------- ------------------------ ------------ ---------
Additions
------------------------
Balance Charged to
at Charged Other Balance
Beginning to Costs Accounts - Deductions - at End
Description of Period and Expenses Describe Describe of Period
- ----------------------------- --------- ------------ ---------- ------------ ---------
Year Ended December 31, 1994:
- ----------------------------
<S> <C> <C> <C> <C> <C>
Valuation allowance
for trade receivable $15.5 $ 2.0 $ 3.2 <F2> $6.6 <F1> $14.1
Valuation allowance
for notes receivable .7 - - - .7
Reserve for
inventory valuation 28.9 - 6.3 <F2> 3.4 <F6> 25.7
6.1 <F7>
Valuation allowance
for deferred tax assets 21.0 - - (.1)<F8> 20.9
Year Ended December 31, 1993:
- ----------------------------
Valuation allowance
for trade receivable 8.6 1.5 5.7 <F2> .3 <F1> 15.5
Valuation allowance for
notes receivable 1.0 - - .3 <F3> .7
Reserve for
inventory valuation 23.1 .6 9.9 <F2> 1.3 <F5> 28.9
3.4 <F6>
Valuation allowance
for deferred tax assets 24.3 - - 3.3 <F8> 21.0
Year Ended December 31, 1992:
- ----------------------------
Valuation allowance
for trade receivable 6.2 1.2 1.8 <F2> .6 <F1> 8.6
Valuation allowance
for notes receivable 1.1 - - .1 <F3> 1.0
Reserve for
inventory valuation 30.0 3.4 6.1 <F2> 7.3 <F4> 23.1
9.1 <F5>
Valuation allowance
for deferred tax assets 21.2 3.1 - - 24.3
<FN>
<F1> Uncollectible accounts charged off net of recoveries.
<F2> Increase to reserve due to acquisition of automotive aftermarket
businesses.
<F3> Decrease to reserve due to change in market value of note.
<F4> Reduction in restructuring reserve for inventory disposed of during
the year.
<F5> Reduction of Glyco inventory reserves to current requirements.
<F6> Reduction of automotive aftermarket businesses' reserves to current
requirements.
<F7> Reduction in inventory reserves for inventory disposed of during the
year.
<F8> Decrease due to utilization of excess foreign tax credit carryforwards.
</TABLE>
<PAGE>
<PAGE> 63
3. Exhibits:
--------
3.1 The Company's Second Restated Articles of Incorporation, as
amended, (filed as Exhibit 3.1 to the Company's Registrant's
Form 10-Q for the quarter ended September 30, 1993, and
incorporated herein by reference).
3.2 The Company's Bylaws, as amended, (filed as Exhibit 3.2 to the
Company's Form 10-K for the year ended December 31, 1993
("1993 10-K"), and incorporated herein by reference).
4.2 Rights Agreement ("Rights Agreement") between the Company and
National Bank of Detroit, as Rights Agent, with Bank of New York,
as successor Rights Agent, (filed as Exhibit 1 to the Company's
Form 8-A Registration Statement dated November 7, 1988, and
incorporated herein by reference).
4.3 Amendments dated July 25, 1990 to Rights Agreement (filed as
Exhibit 4.5 to the Company's Form 10-Q for the quarter ended
June 30, 1990, and incorporated herein by reference).
4.4 Amendment dated September 23, 1992 to Rights Agreement (filed
as Exhibit 4.4 to the Company's 1993 10-K, and incorporated
herein by reference).
4.5 Reference is made to Exhibit 3.1 hereto which contains
provisions defining the rights of securities holders of the
long-term debt securities of the Company and any of its
subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed. Other instruments
defining the rights of holders of long-term debt of the Company
and its subsidiaries have not been filed because in each case
the total amount of long-term debt permitted thereunder does not
exceed 10% of the Company's consolidated assets and the Company
hereby agrees to furnish such instruments to the Securities and
Exchange Commission upon its request.
4.6 Revolving Credit and Competitive Advance Facility Agreement
dated as of June 30, 1994 among the Company, various banks, and
Chemical Bank, as agent, (filed as Exhibit 4.11 to Pre-Effective
Amendment No. 1 to a Registration Statement on Form S-3,
No. 33-54717 dated August 3, 1994, and incorporated herein by
reference).
10.1 The Company's 1976 Stock Option Plan, as last amended November
3, 1988 (filed as Exhibit 10.27 to the Company's Form 10-K for
the year ended December 31, 1988 ("1988 10-K"), and incorporated
herein by reference).
10.2 The Company's 1984 Stock Option Plan as last amended, (filed
as Exhibit 10.26 to the Company's 1988 10-K and incorporated
herein by reference).
<PAGE>
<PAGE> 64
10.3 The Company's 1977 Supplemental Compensation Plan, as amended
and restated effective as of January 1, 1994 (filed as Exhibit
10.27 to the Company's Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference).
10.4 The Company's Supplemental Compensation Retirement Trust
Agreement (filed as Exhibit 10.1 to the Company's Form 10-Q for
the quarter ended September 30, 1988, and incorporated herein by
reference).
10.6 Form of Executive Severance Agreement between the Company and
certain executive officers (filed as Exhibit 10.6 to the
Company's Form 10-K for the year ended December 31, 1990,
("1990 10-K"), and incorporated herein by reference).
10.7 Amended and Restated Deferred Compensation Plan for Corporate
Directors (filed as Exhibit 10.7 to the 1990 10-K, and
incorporated herein by reference).
10.10 Supplemental Executive Retirement Plan, as amended, (filed as
Exhibit 10.10 to the Company's Form 10-K for the year ended
December 31, 1992 ("1992 10-K"), and incorporated herein by
reference).
10.11 Description of Umbrella Excess Liability Insurance for the
Executive Council (filed as Exhibit 10.11 to the 1990 10-K,
and incorporated herein by reference).
10.12 Guaranty and Contingent Purchase Agreement of Federal-Mogul
Corporation dated February 15, 1989, between the Company and
Aetna Life Insurance Company ("Guaranty and Contingent Purchase
Agreement"), (filed as Exhibit 10.28 to the Company's Form 10-K
for the year ended December 31, 1988 ("1988 10-K"), and
incorporated herein by reference).
10.13 Note Agreement dated February 15, 1989, between the
Federal-Mogul Corporation Salaried Employees Stock Ownership
Trust and Aetna Life Insurance Company (filed as Exhibit 10.29
to the 1988 10-K, and incorporated herein by reference).
10.14 Federal-Mogul Corporation 1989 Performance Incentive Stock
Plan, as amended, (filed as Exhibit 10.29 to the Company's 1988
10-K, and incorporated herein by reference).
10.15 Supply Agreement dated as of October 19, 1992 between the
Company and TRW Inc. (filed as Exhibit 10.15 to the Company's
1992 10-K, and incorporated herein by reference).
10.16 Federal-Mogul Corporation Note Agreement dated December 1, 1990
("12/1/90 Note Agreement") between the Company and various
financial institutions listed therein (filed as Exhibit 10.17
to the Company's Form 10-K for the year ended December 31,
1991, and incorporated herein by reference).
<PAGE>
<PAGE> 65
10.17 First Amendment dated as of March 9, 1992 to Note Agreement
dated February 15, 1989, between the Federal-Mogul Corporation
Salaried Employees Stock Ownership Trust and Aetna Life
Insurance Company (filed as Exhibit 10.19 to the Company's
Form 10-Q for the quarter ended March 31, 1993, and
incorporated herein by reference).
10.18 First Amendment dated as of March 9, 1992 to Guaranty and
Contingent Purchase Agreement (filed as Exhibit 10.20 to the
Company's Form 10-Q for the quarter ended March 31, 1993, and
incorporated herein by reference).
10.19 Pooling and Servicing Agreement dated as of June 1, 1992
("Pooling and Servicing Agreement") among Federal-Mogul
Funding Corporation, as Seller, Federal-Mogul Corporation, as
Servicer, and Chemical Bank, as Trustee, (filed as Exhibit
10.21 to the Company's Form 10-Q for the quarter ended March
31, 1993, and incorporated herein by reference).
10.20 Series 1992-1 Supplement dated as of June 1, 1992 to the
Pooling and Servicing Agreement (filed as Exhibit 10.22 to the
Company's Form 10-Q for the quarter ended June 30, 1992, and
incorporated herein by reference).
10.21 Receivables Purchase Agreement dated as of June 1, 1992 between
the Company and Federal-Mogul Funding Corporation (filed as
Exhibit 10.23 to the Company's 1992 10-K, and incorporated
herein by reference).
10.22 Second Amendment dated as of October 19, 1992 to Guaranty and
Contingent Purchase Agreement (filed as Exhibit 10.24 to the
Company's 1992 10-K, and incorporated herein by reference).
10.23 First Amendment dated as of December 11, 1992, to 12/1/90 Note
Agreement (filed as Exhibit 10.27 to the Company's 1992 10-K,
and incorporated herein by reference).
10.24 Series 1993-1 Supplement dated as of March 1, 1993 to the
Pooling and Servicing Agreement dated June 1, 1992, among
the Company, Federal-Mogul Funding Corporation, as Seller,
Federal-Mogul Corporation, as Servicer, and Chemical Bank, as
Trustee, (filed as Exhibit 10.29 to the Company's Form
10-Q for the quarter ended March 31, 1993, and incorporated
herein by reference).
10.25 Amendment to Rights Agreement between Federal-Mogul
Corporation and the Bank of New York (filed as Exhibit 10.30
to the Company's Form 10-Q for the quarter ended June 30, 1992,
and incorporated herein by reference).
<PAGE>
<PAGE> 66
10.26 Federal-Mogul Corporation Executive Loan Program (filed as
Exhibit 10.26 to the Company's Report on Form 10-Q for the
first quarter of 1994, and incorporated herein by reference).
10.27 Federal-Mogul Corporation Non-Employee Director Stock Plan
(filed as Exhibit 4 to the Company's Registration Statement
on Form S-8, No. 33-54301 dated June 24, 1994, and incorporated
herein by reference).
10.28 Federal-Mogul Corporation Investment Program Company Match
Reinstatement Plan (filed with this Report).
11.1 Statement Re: Computation of Per Share earnings (filed with
this Report).
21.1 Subsidiaries of the Registrant (filed with this Report).
23.1 Consent of Ernst & Young, LLP (filed with this Report).
24.1 Powers of Attorney (filed with this Report).
The Company will furnish upon request any exhibit described above upon
payment of the Company's reasonable expenses for furnishing such exhibit.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company for the quarter ended
December 31, 1994.
<PAGE>
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
FEDERAL-MOGUL CORPORATION
(Martin E. Welch III)
-------------------------
By: Martin E. Welch III
Senior Vice President and
Chief Financial Officer
Dated as of March 17, 1995
Pursuant to the required of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the date(s) indicated.
Signature Title
--------- -----
(D.J. Gormley)
- ----------------------- Chairman of the Board, President and
D. J. Gormley Chief Executive Officer
(M. E. Welch III)
- ----------------------- Senior Vice President and Chief Financial
M. E. Welch III Officer (Principal Financial Officer)
(J. B. Carano)
- ----------------------- Vice President and Controller
J. B. Carano (Principal Accounting Officer)
*
- ----------------------- Director
Roderick M. Hills
*
- ----------------------- Director
John J. Fannon
<PAGE>
<PAGE> 68
*
- ----------------------- Director
Antonio Madero
*
- ----------------------- Director
Walter J. McCarthy, Jr.
*
- ----------------------- Director
Robert S. Miller, Jr.
*
- ----------------------- Director
John C. Pope
*
- ----------------------- Director
Dr. Hugo Michael Sekyra
(Stephanie G. Heim)
-------------------
By: Stephanie G. Heim*
Attorney-in-fact
Dated as of March 17, 1995
<PAGE> 1
EXHIBIT 10.28
FEDERAL-MOGUL CORPORATION
INVESTMENT PROGRAM
COMPANY MATCH REINSTATEMENT AGREEMENT
This Investment Program Company Match Reinstatement Agreement is
established and is effective as of December 31, 1994, by the Federal-Mogul
Corporation, a corporation organized under the laws of the State of
Michigan.
1. Purpose of the Agreement
------------------------
The purpose of this Agreement is to reinstate benefits for Employees
of the Corporation whose company match under the Investment Program is
required to be reduced pursuant to any applicable provisions of law.
2. Eligibility
-----------
An Employee is eligible to receive a benefit under this Agreement if
the Employee is eligible to receive a benefit under the Investment
Program.
3. Separate Accounting
-------------------
A separate accounting is maintained for each Employee participating in
this Agreement. Each Employee's accrued benefit is equal to the
Employee's vested account balance.
4. Credits to Accounts
-------------------
The following amounts are credited to each eligible Employee's separate
account under this Agreement.
<PAGE>
<PAGE> 2
A. Employees contributing to the Investment Program who are
restricted from credits under the company match feature due to
Internal Revenue Code limits shall be eligible for reinstatement
benefits.
B. Reinstatement benefits shall be equal to what the company match
benefits would be, absent Internal Revenue Service limits minus
company match benefits eligible under the Investment Program.
C. Benefits under this Agreement shall be in the form of bookkeeping
entries which will replicate an investment in Federal-Mogul
securities used to match Investment Program contributions.
D. Any annual limits on benefits in the Internal Revenue Code are
disregarded in determining the size of credits under this Section.
5. Vesting/Forfeiture
------------------
The vested percentage of an Employee's benefit under this Agreement is
equal to the vested percentage of the Employee's accrued benefit under
the Investment Program. However, an Employee forfeits all benefits
under this Agreement if the employer terminates the Employee for any of
the following reasons.
A. Fraud in connection with the Employee's service.
<PAGE>
<PAGE> 3
B. Embezzlement or theft of employer funds or property by the
Employee.
C. Other criminal activity in connection with the Employee's service.
6. Payment of Benefits
-------------------
The retirement benefits under this Agreement are paid to Employees
upon termination of employment with the Company.
7. Form of Benefit
---------------
Benefits under this Agreement are paid in a lump sum within 180 days
of termination of service from the Company.
8. Income Tax Withholding
----------------------
The Company shall deduct from all payments under this Agreement the
account of federal and state income taxes it is required to withhold.
9. Funding
-------
This Agreement is not funded. Each Employee's account consists of an
entry in the Employee's financial records. Benefits are paid in cash
from the Company's general assets. However, in the event of a
potential hostile change in control an amount equal to the benefits
which have accrued under this Agreement may be transferred to the
Supplemental Compensation Retirement Trust.
<PAGE>
<PAGE> 4
10. General Unsecured Creditor
--------------------------
In the event the Company seeks protection under the federal bankruptcy
laws, all persons are general unsecured creditors of the Company with
respect to benefits derived from this Agreement, including benefits
funded through the Supplement Compensation Retirement Trust.
11. ERISA Status
------------
This Agreement constitutes an unfunded promise to pay deferred
compensation. This Agreement is not intended to comply with Section
401(a) of the Internal Revenue Code. Participation in this Agreement
is limited to a select group of highly compensated Employees and it
is intended to qualify as a top-hat plan for purposes of Title I of
the Employee Retirement Income Security Act of 1974.
12. Assignment
----------
Except to the extent required by law, the Company does not recognize
any assignment, pledge, collateralization or attachment of benefits
under this Agreement.
13. Employment Rights
-----------------
This Agreement is not an employment contract and it creates no right
in an Employee to continue employment with the Company for any length
of time.
<PAGE>
<PAGE> 5
14. Administrator
-------------
This Agreement is administered by the Retirement Programs Committee
of Federal-Mogul Corporation. The Committee has the authority to do
all things necessary to administer this Agreement, including
construing its language and determining eligibility for benefits.
The Committee has the authority to equitably adjust an Employee's
rights under this Agreement or the amount of an Employee's benefit.
The Committee may adopt any rules necessary to administer this
Agreement which are not inconsistent with this Agreement.
15. Incompetent Persons
-------------------
If the employer finds that any person entitled to a benefit under
this Agreement is unable to manage his affairs because of legal
incompetence, the Company, in its discretion, may pay the benefit
due to such person to an individual deemed by the Company to be
responsible for the maintenance of such person. Any such payment
constitutes a discharge of the Company's liability under this
Agreement.
16. Expenses
--------
The Company is responsible for the cost of administering this
Agreement.
<PAGE>
<PAGE> 6
17. Amendment/Termination of the Agreement
--------------------------------------
The Company, through the Retirement Programs Committee, may amend
or terminate this Agreement at any time. An amendment may reduce or
eliminate only future benefits to be paid under this Agreement.
18. Binding Agreement
-----------------
This Agreement is binding on the beneficiaries, executor and
administrator of the Employee, and upon the successors (by sale or
otherwise) of the Company who succeed to substantially all the assets
and the business of the Company.
19. Governing Law
--------------
The validity and construction of this Agreement is governed by the
laws of the State of Michigan, without giving effect to the
principles of conflicts of laws.
20. Construction
------------
The following principles apply to the construction of this Agreement.
A. The Company, through the Retirement Programs Committee, has
the authority to construe the language of this Agreement and to
resolve all questions concerning the administration and the
interpretation of this Agreement.
<PAGE>
<PAGE> 7
B. If the Investment Program is amended or terminated, this
Agreement must be construed in a manner consistent with such
amendment or termination.
C. In the event any provision of this Agreement is invalid, in whole
or in part, the remaining provisions of this Agreement are
unaffected and remain in full force and effect.
D. A provision of this Agreement which is invalid in a jurisdiction
should be construed in such a manner that it is valid in such
jurisdiction.
E. A provision of this Agreement which is invalid in any jurisdiction
remains in effect and is enforceable in all jurisdictions in which
the provision is valid.
21. Claims Procedures
-----------------
The claims procedure set forth in this paragraph is the exclusive
method of resolving disputes that arise under this Agreement.
A. Any claim that a person makes under this Agreement must be in
writing. All claims must be submitted to the Company within
six (6) months of the date on which the claimant contends he
first had a right to receive a benefit under this Agreement.
<PAGE>
<PAGE> 8
B. Where the Company denies a claim, in whole or in part, it must
furnish the claimant with a written notice of the denial setting
forth the following information, in a manner calculated to be
understood by the claimant.
(1) A statement of the specific reasons for the denial of the
claim.
(2) References to the specific provisions of the Agreement on
which the denial is based.
(3) A description of any additional material or information
necessary to perfect the claim with an explanation of why
such material or information is necessary.
(4) An explanation of the claims review procedure with a
statement that the claimant must request review of the
decision denying the claim within 90 days following the
date on which such notice was received by the claimant.
The written notice of denial must be mailed to the claimant
within 90 days following the date on which the claim was received
by the Company. If special circumstances require an extension of
time for processing a claim, the written notice may be mailed to
<PAGE>
<PAGE> 9
the claimant not more than 180 days following the date on which
the claim was received by the Company. Within the initial 90 day
period, the claimant must be notified in writing of the extension,
of the special circumstances requiring the extension and of the
date by which the claimant will be furnished with written notice
of the decision concerning his claim.
C. The claimant (or an authorized representative) may request review
of the denial of a claim. A request for review must be mailed to
the Company within 90 days of the date on which the written notice
of denial is received by the claimant and must set forth the
following information
(1) The date on which the notice of the claim was received by
the claimant.
(2) The specific portions of the denial of the claim that the
claimant disputes.
(3) A statement by the claimant setting forth the basis upon
which the claimant believes the Company should reverse the
denial of the claim for benefits under this Agreement.
<PAGE>
<PAGE> 10
(4) Written material (included as exhibits) that the claimant
desires the Company to examine.
D. The Company must afford the claimant (or his authorized
representative) an opportunity to review documents pertinent
to the claim and must conduct a full and fair review of the claim
and its denial. The Company's decision on review must be
furnished to the claimant in writing in a manner calculated to
be understood by the claimant, and it must include a statement of
the reasons for the decision with references to the specific
provisions of the Agreement upon which the decision is based.
The decision on review must be mailed to the claimant within 90
days following the date on which the request for review is
received by the Company. If special circumstances require an
extension of time to consider a request for review, the Company's
written review of the claim may be mailed to the claimant not
more than 180 days after the Company received the request for
review. Within the initial 90 day period, the Company must notify
the claimant in writing of the extension, of the special
circumstances requiring the extension and of the date by which
the claimant will be furnished with written notice of the
decision reviewing his claim.
<PAGE>
<PAGE> 11
E. All written documents required by these claim procedures must be
sent by first-class certified mail (return receipt requested)
through the United States Postal Service. The date on which any
document is mailed is determined by the postmark affixed to the
document by the United States Postal Service. The date on which
any document is received is determined by the date on the signed
receipt for certified mail. Notices to an Employee must be mailed
to the Employee's last known address. Notices to the Company must
be mailed to:
Vice President, Human Resources
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
22. Definitions
-----------
A. Employee - An individual who works under the direct supervision
and control of the Company.
B. Company - Federal-Mogul Corporation and its subsidiaries or
affiliated entities to which the Board of Directors of
Federal-Mogul Corporation extends coverage under this Agreement.
C. Plan Year - The 12 month period ending December 31.
D. Investment Program - The Federal-Mogul Corporation Salaried
Employees' Investment Program.
<PAGE> 1
<TABLE>
EXHIBIT 11.1 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
- -------------------------------------------------------------
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
- ------------------------------------------
<CAPTION>
Primary Earnings Per Share Fully Diluted Earnings Per Share
---------------------------- --------------------------------
1994 1993 1992 1994 1993 1992
-------- -------- -------- -------- -------- --------
EARNINGS: (In Millions)
- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) from
continuing operations $ 63.3 $ 40.1 $ 4.4 $ 63.3 $ 40.1 $ 4.4
Series C preferred
dividend requirements (2.8) (2.9) (3.0)
Series D preferred
dividend requirements (6.2) (6.2) (1.6)
Additional required
ESOP contribution <F1> (2.1) (2.3) (2.3)
----- ----- ----- ----- ----- -----
Earnings (loss) from
continuing operations,
as adjusted 54.3 31.0 (.2) 61.2 37.8 2.1
Cumulative effect
of accounting change (88.1) (88.1)
----- ----- ----- ----- ----- -----
Net earnings (loss)
available for common
& equivalent shares $ 54.3 $ 31.0 $(88.3) $ 61.2 $ 37.8 $(86.0)
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
WEIGHTED AVERAGE SHARES: (In Millions)
- -----------------------
Common shares outstanding 34.8 27.2 22.4 34.8 27.2 22.4
Dilutive stock
options outstanding .3 .1 .3 .3
Conversion of Series C
preferred stock <F3> 1.9 1.9 1.9
Contingent issuance of
common stock to satisfy
the redemption price
guarantee <F2><F4> .4 .1 .1
Conversion of Series D
preferred stock <F3> 4.4 4.4 1.2
----- ----- ----- ----- ----- -----
Common and equivalent
shares outstanding 35.1 27.3 22.4 41.8 33.9 25.6
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
PER COMMON AND EQUIVALENT SHARE:
- -------------------------------
Continuing operations $ 1.55 $ 1.13 $ (.01) $ 1.46 $ 1.12 $ .08
Cumulative effect
of accounting change (3.93) (3.44)
----- ----- ------ ----- ----- -----
Net earnings (loss) $ 1.55 $ 1.13 <F6> $ (3.94) $ 1.46 $ 1.12 $(3.36)<F5>
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
<PAGE>
<PAGE> 2
EXHIBIT 11.1 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (continued)
- -------------------------------------------------------------
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
- ------------------------------------------
[FN]
<F1> Amount represents the additional after-tax contribution that would be
necessary to meet the ESOP debt service requirements under an assumed
conversion of the Series C preferred stock.
<F2> Calculations consider the December 31, 1994 common stock market price
in accordance with the Emerging Issues Task Force Abstract No. 89-12.
<F3> Amount represents the weighted average number of common shares issued
assuming conversion of preferred stock outstanding.
<F4> Amount represents the additional number of common shares that would be
issued in order to satisfy the preferred stock redemption price guarantee.
This calculation considers only the number of preferred shares held by the
ESOP that have been allocated to participants' accounts as of December 31
of the respective year.
<F5> This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion
No. 15 because it produces an anti-dilutive result.
<F6> Calculation is based on net earnings available for common and equivalent
shares of approximately $30,940,000 and common and equivalent shares
outstanding of 27,342,160.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Company has no parent. The direct and indirect subsidiaries of the
Company and their respective States or other jurisdictions of incorporation
as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Owned by
Company and
Jurisdiction Each Other
Name of Subsidiary of Incorporation Subsidiary
<S> <C> <C>
Carter Automotive Company, Inc. Delaware, U.S.A. 100%
Mather Seal Company Michigan, U.S.A. 100%
Metaltec, Inc. Michigan, U.S.A. 100%
Federal-Mogul Funding Corp. Michigan, U.S.A. 100%
Federal-Mogul World Wide, Inc. Michigan, U.S.A. 100%
Federal-Mogul Venture Corporation Nevada, U.S.A. 100%
Federal-Mogul World Trade, Inc. Nevada, U.S.A. 100%
Federal-Mogul/Bruss Sealing Systems South Carolina, 74%
(Partnership) U.S.A.
In-De-Co., H. Minoli, S.A.I.C. Argentina 61%
Neoprint, S.A. Argentina 60%
Federal-Mogul Pty. Ltd. Australia 100%
Federal-Mogul Handelsgesellschaft m.b.H. Austria 100%
Federal-Mogul World Trade E.C. Bahrain 100%
Federal-Mogul World Trade Ltd. ("FSC") Barbados 100%
Coventry Assurance Ltd. Bermuda 100%
Federal-Mogul Boliviana, S.A. Bolivia 100%
Federal-Mogul Comercio Internacional, S.A. Brazil 100%
Glyco do Brasil Brazil 100%
Federal-Mogul Canada Investment Co. ("NRO") Canada 100%
Federal-Mogul Canada Limited Canada 100%
Federal-Mogul Cayman Investment Company Cayman Islands 100%
Limited
Federal-Mogul World Trade Chile Ltda. Chile 99%
Federal-Mogul de Costa Rica, S.A. Costa Rica 100%
Federal-Mogul Dominicana, S.A. Dominican Republic 100%
Federal-Mogul del Ecuador, S.A. Ecuador 100%
Federal-Mogul S.A. France 100%
BHW GmbH Germany 100%
Federal-Mogul Karosserieteile GmbH Germany 100%
F-M Motorentiele Holding GmbH Germany 100%
Glyco GmbH Germany 100%
</TABLE>
<PAGE>
<PAGE> 2
SUBSIDIARIES OF THE REGISTRANT (cont)
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Owned by
Company and
Jurisdiction Each Other
Name of Subsidiary of Incorporation Subsidiary
<S> <C> <C>
Glyco KG (partnership) Germany 100%
Glyco Antriebstechnik GmbH Germany 100%
Federal-Mogul de Guatemala, S.A. Guatemala 100%
Federal-Mogul World Trade Hong Kong, Ltd. Hong Kong 100%
Federal-Mogul S.p.A. Italy 100%
Federal-Mogul Japan K.K. Japan 100%
Federal-Mogul World Trade SDN, BHD Malaysia 100%
Conaba S.A. de C.V. ("CONABA") Mexico 51%
Federal-Mogul S.A. de C.V. ("PUEBLA") Mexico 61%
Manufacturas Metalicas Linan S.A. ("LINAN") Mexico 100%
Raimsa S.A. de C.V. ("RAIMSA") Mexico 70%
Servicios Administrativos Industriales, Mexico 100%
S.A. ("SAISA")
Servicios de Components Automotrices, Mexico 100%
S.A. ("SEDECA")
Subensambles Internacionales S.A. de C.V. Mexico 100%
Femosa Mexico, S.A. Mexico 90%
Glyco B.V. Netherlands 100%
Federal-Mogul New Zealand Limited New Zealand 100%
Federal-Mogul Panama, S.A. Panama 100%
Federal-Mogul World Trade Pte. Ltd. Singapore 100%
Eddies Holdings (Pty) Limited South Africa 100%
Parts Centre (Pty) Limited South Africa 100%
Two-Way Holdings (Pty) Limited South Africa 50%
V & P (Pty) Limited South Africa 100%
Varex Corporation South Africa 100%
Varex Limited South Africa 100%
Federal-Mogul Distribucion, S.A. Spain 51%
Federal-Mogul S.A. Switzerland 100%
Federal-Mogul Holding U.K., Limited United Kingdom 100%
Federal-Mogul, Limited United Kingdom 100%
Federal-Mogul Divestiture Limited United Kingdom 100%
Federal-Mogul Uruguay Uruguay 100%
Federal-Mogul de Venezuela C.A. Venezuela 100%
La Font Repuestos C.A. Venezuela 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in Form S-3 Registration
Statement No. 33-54717, effective August 5, 1994, Form S-3 Registration
Statement No. 33-55135, effective September 2, 1994, Form S-3 Registration
Statement No. 33-51265, effective January 13, 1994, Form S-8 Registration
Statement No. 33-54301 effective June 24, 1994, Form S-8 Registration
Statement No. 33-51403, effective December 10, 1993, Form S-8 Registration
Statement No. 33-32429, effective December 31, 1989, Form S-8 Registration
Statement No. 33-32323, effective December 22, 1989, Form S-8 Registration
Statement No. 33-30172, effective August 21, 1989, and Form S-8
Registration Statement No. 2-93179, effective October 1, 1984, of our
report dated February 7, 1995, with respect to the consolidated financial
statements and schedule of Federal-Mogul Corporation included in the
Annual Report on Form 10-K for the year ended December 31, 1994.
(Ernst & Young, LLP)
ERNST & YOUNG, LLP
Detroit, Michigan
March 17, 1995
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
of FEDERAL-MOGUL CORPORATION, a Michigan corporation, which is about to
file with the Securities and Exchange Commission, Washington D.C. under
the provisions of the Securities Exchange Act of 1934 as amended, the
Corporation's Annual Report on Form 10-K for the year ended December 31,
1994, hereby constitutes and appoints MARTIN E. WELCH III and STEPHANIE
G. HEIM, or either of them, his true and lawful attorney-in-fact, with
full power to act, with the other, for him and in his name, place and
stead, to sign such Report and any and all amendments thereto, and to
file and cause to be filed said Report and each Amendment so signed,
with all Exhibits thereto, with the Securities and Exchange Commission.
IN WITNESS WHEREOF, each of the undersigned has executed this Power
of Attorney this 8th day of February, 1995.
(DENNIS J. GORMLEY)
--------------------------------
DENNIS J. GORMLEY
Chairman of the Board and
Chief Executive Officer
(JOHN J. FANNON) (ROBERT S. MILLER)
- ---------------------------- ------------------------------------
JOHN J. FANNON ROBERT S. MILLER, JR.
Director Director
(RODERICK M. HILLS) (JOHN C. POPE)
- ---------------------------- ------------------------------------
RODERICK M. HILLS JOHN C. POPE
Director Director
(ANTONIO MADERO) (DR. HUGO MICHAEL SEKYRA)
- ---------------------------- ------------------------------------
ANTONIO MADERO DR. HUGO MICHAEL SEKYRA
Director Director
(WALTER J. MCCARTHY, JR.)
- ----------------------------
WALTER J. McCARTHY, JR.
Director
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 25,000,000
<SECURITIES> 0
<RECEIVABLES> 283,600,000
<ALLOWANCES> 14,100,000
<INVENTORY> 372,100,000
<CURRENT-ASSETS> 704,200,000
<PP&E> 656,600,000
<DEPRECIATION> 219,300,000
<TOTAL-ASSETS> 1,496,100,000
<CURRENT-LIABILITIES> 335,900,000
<BONDS> 319,400,000
<COMMON> 174,900,000
0
135,700,000
<OTHER-SE> 286,600,000
<TOTAL-LIABILITY-AND-EQUITY> 1,496,100,000
<SALES> 1,895,900,000
<TOTAL-REVENUES> 1,895,900,000
<CGS> 1,486,400,000
<TOTAL-COSTS> 276,800,000
<OTHER-EXPENSES> 9,400,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,200,000
<INCOME-PRETAX> 102,100,000
<INCOME-TAX> 38,800,000
<INCOME-CONTINUING> 63,300,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,300,000
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.46
</TABLE>
