<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 1998 Commission file number 333-49971
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EAGLE-PICHER HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 13-3989553
- ------------------------------------ --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 East Fifth Street, Suite 500, Cincinnati, Ohio 45202
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code 513-721-7010
-------------------------
(Not Applicable)
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
--- ---
625,001 shares of Class A common capital stock, no par value, were outstanding
at June 26, 1998.
374,999 shares of Class B common capital stock, no par value, were outstanding
at June 26, 1998.
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TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.........................................3
Condensed Consolidated Statements of Income (Loss)(Unaudited)....3
Condensed Consolidated Balance Sheets (Unaudited)................4
Condensed Consolidated Statements of Cash Flows (Unaudited)......6
Notes to Condensed Consolidated Financial Statements (unaudited).8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk..15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................16
Signature............................................................17
Exhibit Index........................................................18
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)(UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
May 31 ---------------------- Six Months Ended
------------------- May 31 Feb. 28 May 31
1998 1997 1998 1998 1997
---- ---- ---- ---- ----
Predecessor Predecessor Predecessor
<S> <C> <C> <C> <C> <C>
Net Sales $ 219,921 $ 242,183 $ 219,921 $ 205,842 $ 465,790
--------- --------- --------- --------- ---------
Operating Costs and Expenses:
Cost of products sold 169,575 194,578 169,575 162,796 374,979
Selling and administrative 20,287 19,619 20,287 17,141 39,343
Management compensation expense 17,321 - 17,321 2,056 -
Depreciation 9,773 10,643 9,773 8,983 21,009
Amortization of intangibles 4,497 4,079 4,497 3,839 8,155
--------- --------- --------- --------- ---------
221,453 228,919 221,453 194,815 443,486
--------- --------- --------- --------- ---------
Operating Income (Loss) (1,532) 13,264 (1,532) 11,027 22,304
Interest expense (12,554) (7,924) (12,554) (6,940) (16,851)
Other income 326 (347) 326 820 1,356
--------- --------- --------- --------- ---------
Income (Loss) Before Taxes (13,760) 4,993 (13,760) 4,907 6,809
Income Taxes (4,461) 4,448 (4,461) 4,100 7,484
--------- --------- --------- --------- ---------
Net Income (Loss) $ (9,299) $ 545 $ (9,299) $ 807 $ (675)
========= ========= ========= ========= =========
Income (Loss) per Share $ (9.29) $ .05 $ (9.29) $ .08 $ (.07)
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
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EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31 Nov. 30
ASSETS 1998 1997
---- ----
Predecessor
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 10,979 $ 53,739
Receivables, less allowances 121,257 130,927
Income tax refunds receivable 1,956 3,025
Inventories:
Raw materials and supplies 53,653 51,592
Work in process 19,690 25,801
Finished goods 17,500 14,803
-------- --------
90,843 92,196
Prepaid expenses 8,457 8,290
Deferred income taxes 18,935 13,793
-------- --------
Total current assets 252,427 301,970
-------- --------
PROPERTY, PLANT AND EQUIPMENT 248,675 279,847
Less accumulated depreciation 9,813 36,309
-------- --------
Net property, plant and equipment 238,862 243,538
DEFERRED INCOME TAXES - 98,991
EXCESS OF ACQUIRED NET ASSETS OVER COST NET OF
ACCUMULATED AMORTIZATION OF $4,491 251,004 -
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS NET OF ACCUMULATED AMORTIZATION
OF $16,284 - 48,837
OTHER ASSETS 86,601 53,545
-------- --------
Total Assets $828,894 $746,881
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 48,045 $ 52,886
Long-term debt - current portion 13,028 3,403
Income taxes 6,878 2,294
Other current liabilities 64,655 55,419
-------- --------
Total current liabilities 132,606 114,002
-------- --------
LONG-TERM DEBT - less current portion 498,773 269,994
-------- --------
DEFERRED INCOME TAXES 1,115 -
-------- --------
OTHER LONG TERM LIABILITIES 25,040 26,768
-------- --------
Series A 11-3/4% Cumulative Exchangeable Preferred Stock;
authorized 50,000 shares; issued and outstanding 14,191
shares 82,540 -
-------- --------
</TABLE>
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EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31 Nov. 30
1998 1997
--------- ---------
Predecessor
<S> <C> <C>
SHAREHOLDERS' EQUITY
Class A Common stock, authorized 625,001 shares;
issued and outstanding 625,001 shares 55,001 -
Class B Common stock, authorized 374,999 shares;
issued and outstanding 374,999 shares 45,000 -
Common shares -- authorized 20,000,000 shares;
issued and outstanding 10,000,000 shares - 341,807
Foreign currency translation 653 (1,836)
Accumulated deficit (11,834) (3,854)
--------- ---------
Total Shareholders' Equity 88,820 336,117
--------- ---------
Total Liabilities and Shareholders' Equity $ 828,894 $ 746,881
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
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EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months
------------------ Ended
May 31 Feb. 28 May 31
1998 1998 1997
---- ---- ----
Predecessor Predecessor
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,299) $ 807 $ (675)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 14,952 12,822 29,159
Changes in assets and liabilities:
Receivables 14,375 (4,705) 117
Income tax refunds receivable 45 1,024 69,741
Inventories 4,205 (2,235) (3,946)
Accounts payable (2,854) (2,787) 4,571
Accrued liabilities 14,724 (5,488) (4,206)
Other (298) (8,521) 8,094
--------- --------- ---------
Net cash provided by (used in)
operating activities 35,850 (9,083) 102,855
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,064) (5,692) (29,264)
Other 561 (1,042) (2,025)
--------- --------- ---------
Net cash used in
investing activities (8,503) (6,734) (31,289)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 445,000 -
Reduction of long-term debt - (250,000) (69,658)
Borrowings under revolving credit agreement 14,825 79,100 -
Repayments under revolving credit agreement (49,925) - -
Redemption of common stock - (446,638) -
Issuance of common stock - 100,001 -
Issuance of preferred stock - 80,005 -
Debt issuance cost - (26,062) -
Other (236) (360) 2,311
--------- --------- ---------
Net cash used in
financing activities (35,336) (18,954) (67,347)
--------- --------- ---------
</TABLE>
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EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months
------------------ Ended
May 31 Feb. 28 May 31
1998 1998 1997
---- ---- ----
Predecessor Predecessor
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents (7,989) (34,771) 4,219
Cash and cash equivalents, beginning of period 18,968 53,739 32,725
------ ------- ------
Cash and cash equivalents, end of period $10,979 $ 18,968 $36,944
====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Supplemental cash flow information: 1998 1997
---- ----
<S> <C> <C>
Cash paid during the six months ending May 31:
Interest paid $13,492 $ 16,501
Income taxes paid (refunded), net $ 305 $(67,229)
Cash paid during the three months ended May 31:
Interest paid $ 7,090 $ 16,026
Income taxes paid (refunded), net $ 681 $(51,301)
</TABLE>
See accompanying notes to the consolidated financial statements.
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EAGLE-PICHER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and notes thereto included for the
fiscal year ended November 30, 1997 and for the three months ended February 28,
1998, presented in the Company's Form S-4/A filed with the SEC on June 5, 1998.
The financial statements presented herein reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three and six month periods ended May 31, 1998 and 1997. (See Note B.) Results
of operations for interim periods are not necessarily indicative of results to
be expected for an entire year.
The three month periods ended May 31, 1998, and February 28, 1998
(Predecessor) included in the Condensed Consolidated Statements of Income (Loss)
and of Cash Flows are presented for comparison to the six months ended May 31,
1997 of the Predecessor Company. (See Note B.)
B. ACQUISITION OF THE COMPANY
On February 24, 1998 ("Closing Date"), Eagle-Picher Industries, Inc.
("Company") was acquired by a subsidiary of Granaria Industries BV, Eagle-Picher
Holdings, Inc. ("Parent"), from the Eagle-Picher Industries, Inc. Personal
Injury Settlement Trust ("Trust") (the "Acquisition"). The Trust was established
pursuant to the Company's Plan of Reorganization upon its emergence from
bankruptcy.
The unaudited condensed consolidated financial statements as of and for
the three months ended February 28, 1998 include the effects of the Acquisition
as of February 24, 1998. Accordingly, the condensed consolidated statement of
income (loss) for the three months ended February 28, 1998 includes results of
operations from (1) December 1, 1997 through February 24, 1998 of the Company
prior to the consummation of the Acquisition (for clarity, sometimes referred to
herein as the "Predecessor Company") and (2) February 25 through February 28,
1998 of the Company.
The Acquisition was accounted for using the purchase method of accounting.
The preliminary allocation of the purchase price of the Company has been
determined based on estimates of fair value and are subject to change.
Appraisals are currently being completed to value property, plant, equipment and
identifiable intangible assets. The excess of purchase price over the assessed
values of those assets will be allocated to goodwill. The Company expects to
finalize the purchase price allocation by November 30, 1998. Adjustments are not
expected to be material.
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Upon closing of the acquisition, the Parent received $100 million equity
investment from Granaria Industries BV and an equity partner. The Parent also
received proceeds approximating $80 million from its offering of preferred
stock. These proceeds were invested in the Company, which issued approximately
$180 million of common stock to the Parent. The Company also borrowed $225
million in term loans and $79.1 million in revolving credit loans under a
syndicated senior secured loan facility, and issued $220 million in senior
subordinated notes ("Subordinated Notes"), the proceeds of which were used to
redeem the Company's 10% Senior Unsecured Sinking Fund Debentures ("Debentures")
and common stock, both held by the Trust. The Company, which is the operating
entity, is a wholly-owned subsidiary of the Parent. The Parent's results of
operations and cash flow approximate those of the Company.
The following pro forma information for six months ended May 31, 1998 and
1997 gives effect to the Acquisition as if it had been consummated on December
1, 1997 and 1996, respectively. This information is not necessarily indicative
of either the future results of operations or the results of operations that
would have occurred if those events had been consummated on the indicated dates.
<TABLE>
<CAPTION>
Six Months Ended
May 31
----------------
1998 1997
---- ----
(In thousands of
dollars, except
per share amounts)
<S> <C> <C>
Net Sales $425,763 $465,790
Net income (loss) $(12,700) $(17,100)
Net income (loss) per share $ (12.70) $(17.10)
Average number of shares outstanding 1,000,000 1,000,000
</TABLE>
C. BASIC EARNINGS PER SHARE
The calculation of net income (loss) per share is based upon the average
number of common shares outstanding, which was 9,600,071 in the three months
ended February 28, 1998, 10,000,000 in the six months ended May 31, 1997, and
1,000,000 and 10,000,000 in the three months ended May 31, 1998 and 1997,
respectively. In 1998, 1,000,000 shares were outstanding after the acquisition.
Prior to the acquisition, 10,000,000 shares were outstanding.
D. INTANGIBLE ASSETS
Excess of acquired net assets over cost is being amortized on a
straight-line basis over fifteen years. The recoverability of these assets is
evaluated periodically based on current and estimated future cash flows of each
of the related business units over the remaining amortization period.
Reorganization value in excess of amounts allocable to identifiable assets was
being amortized on a straight-line basis over four years.
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E. LEGAL MATTERS
The Company is involved in routine litigation, environmental proceedings
and claims pending with respect to matters arising out of the normal course of
business. In managements' opinion, the ultimate liability resulting from all
claims, individually or in the aggregate, will not materially affect the
Company's consolidated financial position, results of operations or cash flows.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
As a result of the Acquisition of the Company by Granaria Industries B.V.
from the Trust as of February 24, 1998, which was accounted for as a purchase,
the Company's results of operations and financial position for periods after
February 24, 1998 are not comparable to prior periods. The unaudited condensed
consolidated statement of income (loss) as of February 28, 1998 includes results
of operations from (1) December 1, 1997 through February 24, 1998 of the
Predecessor Company and (2) February 25 through February 28, 1998 of the
Company.
In addition to the effects of the Acquisition, another factor affecting
comparability of operations is the sale of the Plastics, Transicoil and Fabricon
Products divisions in 1997. The Company also contributed the assets of its
former Suspension Systems division to Eagle-Picher-Boge, L.L.C., a joint venture
formed in 1997 in which the Company has a 45% interest. These divisions are
collectively referred to as the "Divested Divisions."
The following table sets forth certain sales and operating data, net of all
inter-segment transactions, for the Company's businesses for the periods
indicated:
<TABLE>
<CAPTION>
Three months ended Three months ended
May 31 ------------------ Six months ended
------------------ May 31 Feb. 28 May 31
1998 1997 1998 1998 1997
---- ---- ---- ---- ----
(In millions of dollars)
Predecessor Predecessor Predecessor
<S> <C> <C> <C> <C> <C>
Net sales by segment:
Industrial $ 36.4 $ 54.8 $ 36.4 $ 37.6 $104.9
Machinery 68.9 68.9 68.9 64.4 133.6
Automotive 114.6 118.5 114.6 103.8 227.3
----- ----- ----- ----- -----
Total $219.9 $242.2 $219.9 $205.8 $465.8
===== ===== ===== ===== =====
EBITDA by segment:
Industrial $ 7.1 $ 8.6 $ 7.1 $ 6.6 $ 15.7
Machinery 10.9 8.3 10.9 7.8 16.3
Automotive 17.8 16.6 17.8 15.2 30.0
Corporate overhead (5.7) (5.5) (5.7) (3.7) (10.5)
----- ----- ----- ----- -----
$ 30.1 $ 28.0 $ 30.1 $ 25.9 $ 51.5
====== ===== ===== ===== =====
Total
</TABLE>
Net Sales. The Company's net sales were $219.9 million for the second quarter
ended May 31, 1998, a decrease of $22.3 million or 9.2% from the comparable
period of 1997. Included in the results of the second quarter of 1997 are $32.6
million of sales of the Divested Divisions, which, if excluded, would result in
an increase in the Company's quarterly net sales of approximately 4.9%.
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Net sales of Industrial products, excluding net sales of the Divested
Divisions, decreased 17.9% in the second quarter of 1998 from the comparable
period in 1997, due primarily to decreased sales of germanium products.
Germanium sales have been affected by lower market prices which have resulted
from increased supplies, the completion of a major satellite project and the
increased use of recycled germanium by the Company's customers in response to
sharp increases in germanium prices which took place in 1996. Since the
customers now supply a larger portion of the Company's raw materials, the sales
volume is less as a toll refiner than as a buyer and seller of germanium.
Operating margins, however, have been maintained.
Net sales for the Machinery Group in the second quarter of 1998, excluding
the Divested Divisions, increased 7.9% due in part to an increase in demand for
heavy-duty fork lift trucks. Although demand remains low for special purpose
can-washing equipment, resources at that operation have been successfully
redeployed to produce and market other industrial machinery, which also
contributed to the increased net sales of the Machinery Group.
The Automotive Group's net sales, excluding the Divested Divisions, increased
13.0% primarily due to increased market penetration of precision machined
components, many of which are used in light trucks, vans and sport utility
vehicles which have recently grown in popularity. Volumes of fuel systems have
also increased as new programs are implemented.
The Ford Motor Company ("Ford") has recently notified the Company that it
will no longer purchase certain products from the Automotive Group. Sales
contributed by those products in 1997 were $19.4 million. The Company
anticipates that these programs will be discontinued gradually through 1999 and
that this revenue will be replaced by new programs currently being implemented.
The current strike by the United Auto Workers at certain General Motors
Corporation ("GM") plants has not impacted the second quarter results of the
Automotive Group. However, the third quarter of 1998 could be significantly
impacted. Some of the Automotive Group operations have experienced lay-offs as a
result of the strike at GM. Historically, the third quarter results of the
Automotive Group are depressed as most of the automobile companies shut their
plants for two weeks in July to retool for new model years.
Since the 1980's, original equipment manufacturers ("OEM's") such as Ford, GM
and the Chrysler Corporation have been outsourcing an increasing percentage of
their production requirements. OEM's benefit from outsourcing because outside
suppliers generally have significantly lower cost structures and can assist in
shortening development periods for new products. The Company expects to continue
to benefit from the trend toward outsourcing.
The Company expects strong price pressure to continue across all product
lines, particularly in the Automotive Group. The Company will continue to pursue
productivity improvements and material cost reductions to mitigate such price
pressure.
Historically, sales to certain Asian markets have been insignificant to the
Company's total net sales; therefore, the current economic conditions in Asia
have not had, nor are they expected to have, a material adverse effect on the
Company's operations. The Company believes that despite these conditions, the
Asian region has solid long-term growth opportunities and will continue to
explore these opportunities.
Cost of Products Sold. Cost of products sold, excluding depreciation expense,
decreased by $25.0 million or 12.8% from the second quarter of 1997 compared to
the comparable period in 1998. Excluding the results of Divested Divisions, as a
percentage of sales, cost of products sold declined from 78.9% in the second
quarter of 1997 to 77.1% in the second quarter of 1998. Reasons for this decline
include better absorption of overhead due to increased sales volumes and
improved performance at certain start-up operations.
12
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Selling and Administrative. Selling and administrative expenses increased by
$.7 million or 3.4% in the quarter ended May 31, 1998 from the quarter ended May
31, 1997. Excluding results of Divested Divisions, these expenses increased $2.5
million or 14.1% over the same time frame. Besides a general increase due to
activity relating to increased sales volumes, items contributing to this
increase include management fees now payable to Granaria Industries B.V. and a
retention program for mid-level management.
Depreciation and Amortization. Depreciation and amortization are not
comparable for the three months ended May 31, 1998 and 1997 due to the
differences in asset bases as a result of the Acquisition on February 24, 1998.
EBITDA. The Company defines EBITDA as earnings before interest, taxes,
depreciation, amortization and management expenses. Due to the differences in
the asset bases, it is preferable to compare EBITDA rather than operating
income. EBITDA increased from $28.0 million in the three months ended May 31,
1997 to $30.1 million for the same period in 1998 or 7.5%. The increase is 14.0%
after excluding the results of Divested Divisions. In the second quarter of
1998, EBITDA for the Industrial Group declined to $7.1 million from $8.6 million
in the comparable period of 1997. Excluding the results of Divested Divisions,
this decline was $.4 million or 5.3% on a 17.9% decrease in sales. As previously
mentioned, although lower germanium prices have contributed to reduced sales,
EBITDA has remained relatively consistent as did results at other Industrial
Group operations.
In the Machinery Group, EBITDA increased from $8.3 million in the second
quarter of 1997 to $10.9 million in the same period of 1998. Excluding results
of the Divested Divisions, the increase was $3.1 million. Reasons for this
increase include a shift in product mix toward more profitable products at
operations manufacturing special-purpose batteries, better absorption of
overhead on increased sales volumes at the other industrial equipment facilities
previously mentioned and improved efficiencies at the aluminum foundry.
EBITDA for the Automotive Group increased to $17.8 million in the second
quarter of 1998 from $16.6 million in the same period in the prior year.
Excluding the results of Divested Divisions, the increase was 7.9%. This
increase results from the increased volumes previously discussed.
Interest Expense. Interest expense for the three months ended May 31, 1998
and 1997 was $12.6 million and $7.9 million, respectively. In 1997, interest
expense included interest on the $250 million Subordinated Debentures held by
the Trust which were retired upon the Acquisition and the $50 million
Divestiture Notes retired in August 1997. In 1998, the increase in interest was
attributable to the borrowings against the new credit facility totaling $304.1
million, the issuance of $220 million in Subordinated Notes and the issuance of
an additional $8 million industrial revenue bond in June 1997.
FINANCIAL CONDITION
The Company generated cash from operations in the second quarter of 1998
despite the net loss of $9.3 million. EBITDA of $30.1 was sufficient to cover
interest payments of $7.1 million and capital expenditures of $9.1 million. The
receivables were at high levels at February 28, 1998, primarily due to February
being a short month. Receivables are at what would be considered a more normal
level at May 31, 1998, resulting in an influx of cash in the second quarter of
$14.4 million. After drawing down cash balances by $8.0 million, the Company was
able to repay $35.1 million of the debt incurred upon the Acquisition.
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<PAGE> 14
The Company's liquidity needs are primarily for debt service and capital
maintenance. The Company has scheduled debt payments of $5.3 million in the
second half of 1998 and $10.4 million in 1999. The Company anticipates that
capital spending will be approximately $15.0 to $18.0 million in the second half
of 1998.
The Company believes that its cash flows from operations and available
borrowings under its bank credit facilities will be sufficient to fund its
anticipated liquidity requirements for the next twelve months. In the event that
the foregoing sources are not sufficient to fund the Company's expenditures and
service its indebtedness, the Company would be required to raise additional
funds.
YEAR 2000
The Company is performing a comprehensive review to identify the systems
affected by the Year 2000 issue. A project committee meets regularly to review
the status of the investigation into and resolution of Year 2000 issues. As a
result of the committee's progress to date, the Company expects to modify or
upgrade existing systems and, in some cases, replace systems. The Company does
not expect to spend any significant incremental amounts with outside contractors
to complete any necessary modifications or conversions, but is redeploying
existing internal resources. The Company presently believes that through the
planned modification to existing systems and conversion to new systems, as well
as ongoing correspondence with suppliers and customers, the Year 2000 issue will
be resolved on a timely basis, and any related costs will not have a material
impact on the results of operations, cash flows or financial condition of the
Company.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. The words
"estimate," "anticipate," "project," "intend," "believe," "expect," and similar
expressions are intended to identify forward looking statements. Such
forward-looking information involves important risks and uncertainties that
could materially alter results in the future from those expressed in any
forward-looking statements made by, or on behalf of, the Company. These risks
and uncertainties include, but are not limited to, the ability of the Company to
maintain existing relationships with long-standing customers, the ability of the
Company to successfully implement productivity improvements, cost reduction
initiatives, facilities expansion and the ability of the Company to develop,
market and sell new products and to continue to comply with environmental laws,
rules and regulations. Other risks and uncertainties include uncertainties
relating to economic conditions, acquisitions and divestitures, government and
regulatory policies, technological developments and changes in the competitive
environment in which the Company operates. Persons reading this Form 10-Q are
cautioned that such forward-looking statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements.
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<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's $225 million term loan facility (the "Term Loan Facility")
bears interest at a variable rate equal to either (a) the average daily rate on
overnight U.S. federal funds transactions ("Federal Funds Rate"), or (b) the
London Interbank Offered Rate shown on Telerate Page 3750 for the applicable
interest period ("LIBOR"), plus, in either case, an applicable spread.
On February 26, 1998, the Company entered into a three year interest rate
swap agreement with its lead bank to partially hedge its interest rate risk on
the Term Loan Facility. Under this agreement the Company pays a fixed rate of
5.805% on a notional amount of $150 million and receives LIBOR on that amount.
This swap transaction effectively fixes the interest rate on $150 million of the
Term Loan Facility at 5.805% plus the applicable spread for the duration of the
interest rate swap.
The remaining $75 million of the Term Loan Facility bears interest at the
variable rates described above. Accordingly, a 1% increase in an applicable
index rate would result in additional interest expense of $750,000 per year.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K--None
16
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE-PICHER HOLDINGS, INC.
/s/ David N. Hall
-------------------------------------
David N. Hall
Senior Vice President - Finance and
Chief Financial Officer
DATE June 29, 1998
---------------
17
<PAGE> 18
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule (submitted
electronically to the Securities
and Exchange Commission for its
information)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND THE CONDENSED
CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<EXCHANGE-RATE> 1
<CASH> 10,979
<SECURITIES> 0
<RECEIVABLES> 122,919
<ALLOWANCES> 1,662
<INVENTORY> 90,843
<CURRENT-ASSETS> 252,427
<PP&E> 248,675
<DEPRECIATION> 9,813
<TOTAL-ASSETS> 828,894
<CURRENT-LIABILITIES> 132,606
<BONDS> 498,773
82,540
0
<COMMON> 100,001
<OTHER-SE> (11,181)
<TOTAL-LIABILITY-AND-EQUITY> 828,894
<SALES> 219,921
<TOTAL-REVENUES> 219,921
<CGS> 169,575
<TOTAL-COSTS> 169,575
<OTHER-EXPENSES> 51,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,554
<INCOME-PRETAX> (13,760)
<INCOME-TAX> (4,461)
<INCOME-CONTINUING> (9,299)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,299)
<EPS-PRIMARY> (9.29)
<EPS-DILUTED> (9.29)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND THE CONDENSED
CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 242,183
<TOTAL-REVENUES> 242,183
<CGS> 194,578
<TOTAL-COSTS> 194,578
<OTHER-EXPENSES> 34,341
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,924
<INCOME-PRETAX> 4,993
<INCOME-TAX> 4,448
<INCOME-CONTINUING> 545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
