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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1993 COMMISSION FILE NUMBER 1-1499
EAGLE-PICHER INDUSTRIES, INC.
AN OHIO CORPORATION I.R.S. EMPLOYER IDENTIFICATION
NO. 31-0268670
580 BUILDING, 580 WALNUT STREET, P. O. BOX 779, CINCINNATI, OHIO 45201
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 513-721-7010
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Capital Stock, New York Stock Exchange
Par Value $1.25 per Share Cincinnati Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 Act of 1934 during
the preceding 12 months, 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 on
February 18, 1994 was $9,579,457 at the bid price and $13,000,691 at the asking
price. See footnote 3 at page 13 of the Registrant's Annual Report to
Shareholders for fiscal 1993, Exhibit 13 herein. On February 18, 1994,
11,040,932 shares of the registrant's Common Stock were outstanding. The
Registrant had and has no other classes of stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Shareholders for the fiscal year ended
November 30, 1993 -- Part I and Part II.
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NOTE
This copy of Eagle-Picher's Form 10-K for 1993 includes only Exhibits 11,
13, 22, 23, 24(a), 24(b), and 99.
In accordance with SEC requirements, copies of the following exhibits will
be furnished upon payment of a fee of ten cents per page. Please remit the
proper amount with your request to:
David W. Matthews, Assistant Secretary
Eagle-Picher Industries, Inc.
P. O. Box 779
Cincinnati, Ohio 45201.
Exhibits not included in this Form 10-K for 1993 have the following number
of pages (see list of Exhibits in Part IV, Item 14(a)(3)):
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3. (i) - 10 4. (a) - 99 10. (a) - 9
(ii) - 12 (b) - 120 (b) - 6
(c) - 14.
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TABLE OF CONTENTS
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ITEM PAGE
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Part I
1. Business......................................................................
2. Properties....................................................................
3. Legal Proceedings.............................................................
4. Submission of Matters to a Vote of Security Holders...........................
Part II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.....
6. Selected Financial Data.......................................................
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................
8. Financial Statements and Supplementary Data...................................
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................
Part III
10. Directors and Executive Officers of the Registrant............................
11. Executive Compensation........................................................
12. Security Ownership of Certain Beneficial Owners and Management................
13. Certain Relationships and Related Transactions................................
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............
Signatures............................................................................
Independent Auditor's Report..........................................................
Schedules.............................................................................
Exhibit Index.........................................................................
Exhibits..............................................................................
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PART I
ITEM 1. BUSINESS.
General Development of Business.
Eagle-Picher Industries, Inc. (the "Company") was incorporated in 1867
under the laws of the State of Ohio as an outgrowth of a business enterprise
founded in Cincinnati in 1843.
On January 7, 1991 the Company and seven of its domestic subsidiaries each
filed a voluntary petition for relief under chapter 11 of the United States
Bankruptcy Code (chapter 11). The chapter 11 filings were the consequence of a
cash shortfall resulting from the Company's inability to satisfy certain
immediate asbestos litigation liabilities. See Item 3.(a) below.
Financial Information About Industry Segments.
The Company's major industry segments are:
1. Industrial;
2. Machinery; and
3. Automotive.
Industry Segment Data is incorporated herein by reference to Exhibit 13, the
Eagle-Picher Industries, Inc. 1993 Annual Report to Shareholders, pages 25-26.
Narrative Description of Business.
The Industrial Group, which is composed of three divisions, produces a
variety of products for industrial markets, principally manufacturers of
consumer products. The Minerals Division mines and refines diatomaceous earth
products used for high purity filtration primarily by the food and beverage
industry and also for general industrial applications. The Fabricon Products
Division produces printed packaging materials for the dairy and confectionery
industries. The Specialty Materials Division refines rare metals, such as high
purity germanium and gallium compounds, and is a major source of boron isotopes
for nuclear applications. This Division also produces a wide range of
super-clean containers, which meet strict EPA protocols, for environmental
sampling. Other products manufactured in the Industrial Group segment include
custom designed cast and injection molded rubber and plastic parts, and
industrial chemicals.
The methods of distribution and competitive positions of the Industrial
Group Divisions vary widely. For example, the Minerals Division is second to the
Alleghany Corporation in the sale of certain filter aid products which are sold
both directly and through distributors to many large and small customers. By
contrast, the Fabricon Products Division conducts its sales through sales
personnel and competes against many other firms in a highly price-sensitive
market. Other products are sold under competitive conditions which vary widely
from plant to plant.
The Machinery Group consists of five divisions, which are involved in
producing products for various industrial markets. The Construction Equipment
Division produces earthmoving equipment for Caterpillar Inc., and began
manufacturing a line of heavy-duty industrial forklift trucks in 1993. The
Electronics Division is a leading supplier of sophisticated special purpose
batteries for aerospace and defense applications. The Cincinnati Industrial
Machinery Division produces specialized high-volume metal cleaning and finishing
systems. The Ross Aluminum Foundries Division manufactures complex aluminum
castings in sand and plaster, and Transicoil Inc. manufactures sophisticated
electronic components for aerospace, shipboard, ground based, and industrial
applications.
The principal products manufactured by the Machinery Group are distributed
through various methods and in a variety of competitive environments. The
Electronics Division bids competitively for numerous fixed price government
contracts for special purpose batteries. The Division is a recognized leader in
this business and has few competitors for some highly technological products,
but many large and small competitors for other products. The Construction
Equipment Division is the sole supplier of its earthmoving equipment
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products to its longstanding largest customer, Caterpillar Inc. The forklifts
are distributed through a dealer network.
The Automotive Group consists of eight divisions, which are involved
largely in the production and sale of mechanical, structural and trim parts for
passenger cars, trucks, vans, recreational and utility vehicles. The Hillsdale
Tool Division specializes in the manufacture of precision-machined aluminum and
steel parts. Typical machined products include torsional vibration dampers and a
variety of castings and forgings. The Division also produces the entire front
pump assembly for the Ford Motor Company's electronic four-speed overdrive
transmission primarily used on one-half and three-quarter ton pick-up trucks,
vans and recreational vehicles. The Plastics Division is a major supplier of
fiberglass reinforced molded plastic parts to automotive and other customers.
The Division also produces the fiberglass reinforced plastic roof panels for
General Motors Corporation's all-plastic body, all-purpose vehicle. The
Wolverine Gasket Division coats steel and aluminum with elastomeric compounds
and produces materials which are particularly suitable for high compression
applications. The Eagle-Picher International Division, with three plants in
Europe, manufactures sealing and insulating products, elastomeric extrusions,
and injection molded parts for the European automotive market. This Division is
also responsible for engineering and marketing efforts in the Asian market. The
Trim Division manufactures automotive interior trim including headliners, rear
package trays, spare tire covers, and door panels. The Michigan Automotive
Research Corporation Division offers vehicle and vehicle system manufacturers a
comprehensive range of testing programs for engines, power trains and power
train components. The Rubber Molding Division manufactures engineered rubber and
rubber-to-metal products, and small precision-molded parts. The Orthane Division
produces injection-molded plastic parts for automotive and industrial
applications.
The Automotive Group distributes its products primarily to the "Big Three"
automotive manufacturers, directly through internal sales personnel. With
respect to the hundreds of products manufactured by the Automotive Group,
competition varies widely as to the number and type of competitors, the methods
of competition and the Group's competitive positions. Divisions producing
precision-machined parts, such as the Hillsdale Tool Division, tend to have a
few strong competitors (including among others the automotive manufacturers
themselves) and compete on the basis of quality and price. Divisions such as the
Trim and Wolverine Gasket Divisions, which manufacture less-sophisticated
products, tend to have many competitors of varying sizes and compete primarily
on the basis of price. Generally, competitive conditions for this Group are
characterized by a decreasing number of competitors, an increasing amount of
foreign competition (particularly from the Far East), and an increased emphasis
on quality.
Due to its diversification, the Company is not dependent upon any
particular product or customer. No product accounted for more than 7%, and no
customer accounted for more than 10%, of total sales of the Company for fiscal
1991 through fiscal 1993 except Ford Motor Company, for which sales were $148.0
million in 1993, $132.7 million in 1992, and $116.4 million in 1991, and General
Motors Corporation, for which sales were $73.1 million in 1993, and $64.5
million in 1992. In addition, due to its diversification, the Company is not
dependent upon any individual raw material source for a substantial part of its
business and believes that its sources of raw materials are adequate.
In the Machinery Group, order backlog was approximately $148.1 million as
of November 30, 1993, $118.1 million as of November 30, 1992, and $115.3 million
as of November 30, 1991. The increase from prior years is due primarily to
improved economic conditions and the new heavy-duty forklift truck line. A
substantial portion of the order backlog outstanding at November 30, 1993 is
expected to be filled within the current fiscal year. In no other segment is
order backlog of significance.
In fiscal 1993, the Company spent approximately $17.1 million for research
and development and related activities, primarily for the development of new
products or the improvement of existing products. Comparable costs were $13.5
million and $11.9 million for 1992 and 1991, respectively.
The Company owns or is licensed under patents relating to methods and
products in several areas of its business. Although these have been of value and
are expected to be of value in the future, the loss of any individual patent or
group of patents would not materially affect the conduct of the Company's
business.
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In the fiscal years 1993, 1992, and 1991, for current operations the
Company spent approximately $8.6, $9.6, and $9.9 million, respectively, for
purposes of compliance with federal, state and local legal provisions relating
to the protection of the environment. This level of expenditures has had no
material effect on the earnings or competitive position of the Company or its
subsidiaries during the period described. The Company expects these expenditures
to be approximately $11.6 million in fiscal 1994. See Item 3.(c) for information
with respect to various other environmental proceedings.
As of November 30, 1993, the Company employed approximately 6,600 persons
in its operations, of whom approximately 1,800 were salaried employees and
approximately 4,800 were hourly employees. Approximately 19% of the Company's
hourly employees are represented by eight labor organizations under 12 separate
contracts. The Company believes that its relations with its employees generally
are good.
Export sales totaled approximately $73.2 million and $64.7 million in
fiscal 1993 and 1992 respectively, but did not exceed ten percent of net sales
in 1991. Foreign operations were not material to the business taken as a whole.
ITEM 2. PROPERTIES.
Eagle-Picher Industries, Inc. manufactures at 52 locations a wide variety
of products primarily for other manufacturers. Types of manufacturing include,
among others, chemical processing, mining, metal fabrication, aluminum
foundries, precision machining, electronic and electrical assembly, molding and
extruding rubber and plastic.
The plants are fully utilized for the purposes intended and generally have
capacity for expansion of existing buildings on owned real estate. Plants range
in size from 425,000 square feet of floor area to under 50,000 square feet and
generally are located away from large urban centers.
Information on the locations of all manufacturing plants is contained in
Exhibit 99 attached hereto, which is incorporated by reference into this report.
The Company considers the following plants to be its most important
physical properties:
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LOCATION GENERAL CHARACTER
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INDUSTRIAL GROUP
Minerals Division Colado, NV Processing facility
MACHINERY GROUP
Electronics Division Joplin, MO Manufacturing plants
(five locations)
Construction Equipment Division Lubbock, TX Fabrication and
assembly facility
AUTOMOTIVE GROUP
Hillsdale Tool Division Hillsdale, Manufacturing plants
MI (four locations)
Plastics Division Grabill, IN Manufacturing plant.
</TABLE>
All of such properties are held in fee and none of them is subject to any
major encumbrances.
ITEM 3. LEGAL PROCEEDINGS.
(A) Chapter 11 Proceedings.
On January 7, 1991 (the "petition date"), the Company and seven of its
domestic subsidiaries each filed voluntary petitions for relief under chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the
"Bankruptcy Court"). The subsidiaries that filed chapter 11 petitions are Daisy
Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation (MARCO),
EDI, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Europe, Inc., and Hillsdale
Tool & Manufacturing Co. On November 30, 1991, substantially all of the assets
of EDI,
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Inc., were sold pursuant to authority granted by the Bankruptcy Court. All of
the chapter 11 cases have been consolidated for procedural purposes only under
the caption: "In re Eagle-Picher Industries, Inc., et al.," Consolidated Case
No. 1-91-00100, before the Honorable Burton Perlman, United States Bankruptcy
Judge. The Company and its petitioning subsidiaries are operating their
businesses and managing their properties as debtors in possession, in accordance
with the provisions of the Bankruptcy Code.
The chapter 11 petitions were filed because the Company faced an immediate
cash shortage. The Company was required to satisfy certain asbestos litigation
costs, but could do so only through the sale of operating assets. The Company's
Mat Division was under a contract of sale, but the buyers failed to fulfill the
contract and the cash shortfall resulted.
The filing of a chapter 11 petition operates as an automatic stay of all
litigation against the debtor that was or could have been commenced before the
filing of the chapter 11 petition and of any act to collect or recover a claim
against the debtor that arose before the commencement of the chapter 11 case.
While claimants or the Company may petition the Bankruptcy Court for a
modification of the stay, the Company believes that it is unlikely that the
Bankruptcy Court will grant such permission except in certain limited instances
to permit the liquidation of a pre-petition claim, but not any payment or
collection efforts with respect thereto. Consistent with the provisions of
chapter 11, the Company intends to address all of the pre-petition claims in a
plan of reorganization.
An unsecured creditors' committee ("UCC"), an injury claimants' committee
("ICC"), an equity security holders' committee ("EC") and a legal representative
for future claimants ("RFC"), have been appointed in the chapter 11 cases. An
unofficial asbestos co-defendants' committee also has been participating in the
chapter 11 cases. In accordance with the provisions of the Bankruptcy Code,
these parties have the right to be heard with respect to transactions outside
the ordinary course of business. The official committees and the RFC also will
be the primary entities with which the Company will negotiate the terms of a
plan of reorganization.
At the Company's request, the Bankruptcy Court established a bar date of
October 31, 1991 for all pre-petition claims against the Company other than
those arising from the sale of asbestos-containing products and other than those
arising from any future rejection of executory contracts or unexpired leases in
the chapter 11 cases. The bar date is the date by which claimants who disagree
with the amounts recorded by the Company as owing to such claimants must file a
proof of claim against the Company in the Bankruptcy Court. The Company notified
all known or potential claimants subject to the October 31, 1991 bar date of
their possible need to file a proof of claim with the Bankruptcy Court. Of the
5,600 claims filed pursuant to this bar date, 2,675 were general (e.g. vendor,
note holder and other miscellaneous claims), 1,325 were other litigation and
environmental claims, and 1,600 were asbestos related claims.
Substantially all of the general claims have been reconciled by the
Company. Such claims, as reconciled, have been allowed as pre-petition claims
against the Company's estate. The impact of these reconciliations on the
Company's financial statements was not material. The Company continues to
attempt to negotiate settlements for the remaining unreconciled general claims.
If they cannot be resolved by a negotiated settlement, the Company intends to
have them resolved by the Bankruptcy Court. The Company does not expect that the
impact of the resolution of these claims will be material. The litigation and
environmental claims are discussed in subsections (c) and (d) respectively,
below.
The Bankruptcy Court also established a bar date of September 30, 1992 for
all present asbestos-related claims. Approximately 161,000 asbestos-related
claims were filed with the Bankruptcy Court pursuant to the bar date.
Approximately 1,000 of these claims alleged property damage. The 1,600
asbestos-related claims referred to above filed prior to the October 31, 1991
bar date will be treated in the reorganization cases in the same manner as the
asbestos-related claims filed in connection with the September 30, 1992 bar
date. The asbestos-related claims are discussed more fully in subsection (b),
below.
On June 5, 1992, a mediator was appointed by the Bankruptcy Court to assist
the Company, the ICC, the UCC, the RFC and the EC in their efforts to negotiate
a consensual plan of reorganization.
The Bankruptcy Court has approved four extensions of the period during
which the Company has the exclusive right to file a reorganization plan. The
most recent extension expires sixty days after the Bankruptcy
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Court is notified by the mediator that mediation has reached an impasse. To
date, no such notification has been given by the mediator and the mediation
process is continuing.
On November 9, 1993, the Company reached an agreement (the "Agreement") on
the principal elements of a joint plan of reorganization that provides a basis
for the Company and its subsidiaries to emerge from chapter 11. The Agreement is
with the ICC and the RFC, the representatives of the holders of present and
future asbestos-related and other toxic tort claims in the Company's chapter 11
case, and was reached with the assistance of the mediator appointed by the
Bankruptcy Court.
The Agreement contemplates a settlement of the Company's liability for all
present and future asbestos-related personal injury claims. These claims would
be channeled to and resolved by a claims administration trust that would receive
cash, debt securities and substantially all of the common stock of the
reorganized Company under a plan of reorganization.
The Agreement provides that the Company, the ICC and the RFC will negotiate
with the UCC and the EC with the goal of developing a fully consensual plan of
reorganization. If such a consensual plan cannot be achieved, the Agreement
provides that a plan will be filed under which holders of pre-petition unsecured
claims, other than asbestos, lead and silica-related claims, will receive 30% of
their allowed claims in value, and no distribution will be made to the Company's
existing common shareholders whose shares will be cancelled. Under the
Bankruptcy Code, shareholders are not entitled to any distribution under a plan
of reorganization unless all classes of pre-petition unsecured creditors receive
satisfaction in full of their allowed claims or accept a plan which allows
shareholders to participate in the reorganized company or to receive a
distribution. The treatment under the plan of reorganization of asbestos
property damage, lead and silica claims is to be negotiated.
Following the negotiations described above, the Company intends to file a
plan of reorganization with the Bankruptcy Court and proceed to confirmation in
accordance with the provisions of the Bankruptcy Code, including soliciting the
requisite creditor and shareholder acceptances. Implementation of the Agreement
and the treatment of claims and interests as provided therein is subject to
confirmation of the plan of reorganization in accordance with the provisions of
the Bankruptcy Code. Parties in interest in the chapter 11 cases may challenge
the Plan.
Each class of creditors and equity security holders that is impaired under
a plan of reorganization is entitled to vote to accept or reject the plan. The
Bankruptcy Code defines acceptance of a plan by a class of creditors as
acceptance by holders of two-thirds in dollar amount and more than one-half in
number of claims of that class that have timely voted to accept or reject the
plan. The Bankruptcy Code defines acceptance of a plan by a class of equity
security holders as acceptance by holders of equity interests that hold at least
two-thirds in amount of the allowed equity interests in such class who have
timely voted to accept or reject the plan. The Bankruptcy Court will confirm a
plan only if all of the requirements of section 1129 of the Bankruptcy Code are
met. Among the requirements for confirmation of a plan are that the plan is (i)
accepted by all impaired classes of claims and equity interests or, if rejected
by an impaired class, that the plan "does not discriminate unfairly" and is
"fair and equitable" as to such class, (ii) feasible, and (iii) in the "best
interest" of creditors and stockholders impaired under the plan.
Additional information concerning the chapter 11 cases can be found in Note
B to the Company's Consolidated Financial Statements in the Company's Annual
Report to Shareholders for fiscal 1993, which is attached as Exhibit 13 to this
Form 10-K and which is incorporated herein by reference.
(b) Asbestos.
Prior to its chapter 11 filing, the Company had been named as a
co-defendant in a substantial number of lawsuits alleging personal injury from
exposure to asbestos-containing insulation products. As of the petition date,
there were approximately 67,800 asbestos-related claims outstanding against the
Company. The claims, which were pending in 48 states, British Columbia, Guam,
the Virgin Islands, and the District of Columbia, alleged, in general, that the
Company and other defendant manufacturers failed to warn of the potential hazard
to health from the inhalation of asbestos fiber contained in their products. As
a result of the chapter 11 filing by the Company, all of such litigation was
automatically stayed pursuant to section 362 of the Bankruptcy Code and
additional suits were not allowed to be filed against the Company.
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Since the first asbestos case was filed in 1966, the Company has disposed
of approximately 73,500 claims through trial, dismissal or settlement. On
average, the Company spent approximately $7,800 per claim, including attorneys'
fees and other defense costs, to dispose of these claims.
All persons with a pre-petition asbestos-related claim were required to
file a proof of claim by the September 30, 1992 bar date. Approximately 160,000
proofs of claim were filed alleging personal injury. The Company believes that
approximately 11,000 of these claims are duplicates or were filed by persons
whose lawsuits were previously disposed of through trial, dismissal, or
settlement. The Company expects that additional asbestos-related personal injury
claims will arise for several decades into the future. Such future claims were
not subject to the September 30, 1992 bar date. The Company is not able to
project precisely the number and value of future claims at this time.
The Company, and numerous others, also were sued in both state and federal
courts by various entities that own or operate commercial properties and public
buildings, such as school districts, counties, cities, states, libraries and
hospitals, based on allegations that asbestos or asbestos-containing products
are or may be in the buildings. The typical demand in the suits is that the
defendants compensate the plaintiffs for any costs incurred in identifying,
repairing, encapsulating or removing the asbestos-containing products, or that
defendants perform such remedial action. Many suits seek an injunction requiring
abatement and punitive damages on the basis that the defendants allegedly knew
of the hazards and, in concert with one another, concealed and misrepresented
the dangers. Many such suits also seek indemnification from the defendants for
all claims for personal injury brought against plaintiffs resulting from the
presence of asbestos-containing products in plaintiffs' buildings. These suits
too have been stayed as against the Company as a result of the commencement of
the chapter 11 cases.
One hundred forty-nine such lawsuits were instituted against the Company
prior to the filing of its chapter 11 petition, including two which were
certified as class actions. Two of such suits were consolidated into one. One
hundred were disposed of through dismissals by the court following rulings on
pre-trial motions, or voluntarily by the plaintiffs. The Company settled seven
of these cases for less than $22,000 in the aggregate, prior to filing its
chapter 11 petition. Forty-one such suits were pending as of the petition date
and have been stayed as a consequence of the chapter 11 filing.
The class actions that were certified pre-petition are a national school
class action consisting of all public and private elementary and secondary
school systems in the United States that have not excluded themselves from the
suit; and a Michigan school class action consisting of all public and private
elementary and secondary school systems in Michigan that have excluded
themselves from the national school class action and included themselves in the
state class action. In four lawsuits, class certification petitions were pending
pre-petition. One of these suits has since been dismissed, one suit has been
suspended, and the remaining two suits, one involving a class of colleges and
universities and the other a class of buildings leased to the government, have
been certified as class actions. Many of the claimants which voluntarily
dismissed their individual claims as set forth above, did so to pursue them in
one of the certified class actions.
Approximately 1,000 proofs of claim alleging such asbestos property damage
claims were filed in the chapter 11 cases pursuant to the bar date. These claims
include most, if not all, of the lawsuits described above that were pending as
of the petition date.
Many of the asbestos-related claims filed in the chapter 11 cases do not
provide sufficient information to enable the Company to determine whether or not
it has liability for the claim or to definitively value any such liability.
Similarly, the Company is not able to precisely project the number and value of
future claims. The Company, however, is certain that it has significant
liability with respect to the 160,000 proofs of claim which were filed against
the Company pursuant to the September 30, 1992 bar date and which allege
asbestos-related personal injury. The Company also is certain that there is
significant liability with respect to future asbestos-related personal injury
claims. In fact, the Company recorded a provision in the fourth quarter of 1993
of $1.135 billion to increase the asbestos liability subject to compromise on
its books to $1.5 billion, as a consequence of the proposed settlement
discussed above.
Additional information concerning the asbestos litigation can be found in
Note L to the Company's Consolidated Financial Statements in the Company's
Annual Report to Shareholders for fiscal 1993, which is attached as Exhibit 13
to this Form 10-K and which is incorporated herein by reference.
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(c) Other.
In November, 1990, the Company was served with a suit by the City of
Philadelphia (the "Philadelphia action") which sought certification of a class
action on behalf of all cities in the United States with a population over
100,000 and their affiliated housing authorities. The suit sought monetary
damages for inspection, testing, monitoring or abatement costs related to the
presence of lead paint in buildings located in the cities. It also sought to
recover costs incurred to screen, test, diagnose and treat residents of housing
in the cities for exposure to lead paint and to educate residents about the
alleged hazards of lead paint. The Company was alleged to be liable because it
manufactured lead chemicals used as pigment by the manufacturers of the paint.
This suit and an amended complaint filed by the same plaintiffs were dismissed
in their entirety, and the dismissal was affirmed by a United States Circuit
Court of Appeals. A proof of claim filed in the Bankruptcy Court asserting a
claim with respect to the Philadelphia action, and a similar proof of claim
filed on behalf of a class of residents of public housing in Philadelphia, were
withdrawn in their entirety.
The Philadelphia suit is similar to one served on the Company in June, 1989
by the City of New York that sought indemnity for costs New York had incurred
and would incur because residents of housing owned by the city were allegedly
injured by ingesting paint in that housing. Counts in this suit alleging
negligence and strict product liability have been dismissed. Certain other
counts are still pending. The City of New York did not file a timely claim in
the Company's chapter 11 case, but, in November, 1993, after the 1991 bar date,
it filed three proofs of claim with respect to the litigation seeking $50
million in damages. The Company has filed in the Bankruptcy Court an objection
to these claims seeking to have them disallowed on the basis that they were
filed after the bar date. The Company intends to litigate such objection
vigorously.
The Housing Authority of New Orleans filed a similar suit in 1988, but did
not file a proof of claim in the Bankruptcy Court with respect to its
prepetition lawsuit.
These housing-related suits are variations on litigation initiated in
Massachusetts late in 1987 against the Company and numerous other defendants.
These suits alleged personal injuries resulting from ingestion of
lead-containing paint. Such suits have been stayed as to the Company as a
consequence of the filing of the chapter 11 cases.
One hundred thirty one (131) proofs of claim were timely filed in the
Bankruptcy Court asserting liability from lead chemicals allegedly manufactured
and sold by the Company. Seven of such claims have been voluntarily withdrawn at
the Company's request. The one hundred twenty four (124) that remain assert
liability based on personal injury. The Company has demanded that the claimants
withdraw several of the remaining claims. The Company also believes that it has
valid grounds to object to the allowance of the remaining claims.
On August 31, 1990, after a settlement agreement covering approximately
1,800 plaintiffs in the Lone Star Steel Toxic Tort Litigation was rejected by
the Company, plaintiffs amended their complaint to add claims on behalf of
approximately 1,200 additional persons, bringing the number of plaintiffs to
approximately 3,000. In this action, plaintiffs seek unspecified compensatory
and punitive damages for personal injuries and/or for wrongful death allegedly
resulting from exposure to toxic and hazardous substances and defective
machinery and equipment at the Lone Star Steel Plant in Dangerfield, Texas. The
claims in this lawsuit are now included in the information on asbestos-related
litigation, above, because the Company expects that the plaintiffs will allege
that the Company supplied asbestos-containing insulation products to the plant.
Further, the plaintiffs also named additional defendants in the amended
complaint, including Chi-Vit Corporation. Chi-Vit Corporation is an entity not
related to the Company that was formed in 1988 to acquire the assets of the
Company's former unincorporated division, Chi-Vit Corporation Division, which
was divested on December 9, 1988. On October 8, 1990, Chi-Vit Corporation
demanded that the Company indemnify it for this litigation.
On August 27, 1990, the Company and two of its officers were sued in the
United States District Court for the Northern District of Texas by American
Imaging Services, Inc., an approximately 60%-owned subsidiary, and its president
and minority shareholder. This suit asserts numerous claims, based primarily on
an alleged breach of fiduciary duty to the subsidiary and its minority
shareholder, and usurpation and waste of the subsidiary's assets. By reason of
the automatic stay imposed by Section 362(a) of the Bankruptcy Code,
7
<PAGE> 10
the prosecution of the action against the Company was stayed by the filing of
the Company's chapter 11 petition. Additionally, on May 7, 1991, the Bankruptcy
Court entered an order preliminarily enjoining the continued prosecution of the
action as against the officers. On February 7, 1992, the plaintiffs filed an
amended complaint in the action which named another officer of the Company as an
additional defendant. The plaintiffs also commenced a separate action against
such third officer in the same court in which essentially the same allegations
were made. The Bankruptcy Court's order preliminarily enjoining the continued
prosecution of the initial action as against the officers was expanded to
prohibit the prosecution of any claims against the third officer. The two
plaintiffs in the action have also filed two proofs of claim in the Company's
chapter 11 case in the amount of $500 million each based upon the claims
asserted in the above-described actions. The claims appear to be duplicates,
although the claimants have denied that they are.
In August, 1993, the Company filed in the Bankruptcy Court an objection to
these claims and also asserted various counterclaims (the "Objection").
Contemporaneously therewith, the Company also filed with the Bankruptcy Court a
motion requesting that the Bankruptcy Court consolidate the actions pending in
the United States District Court with the Objection and allow such consolidated
matter to proceed before the Bankruptcy Court. By order entered January 24,
1994, the Bankruptcy Court denied the Company's motion and ordered that all
claims asserted by the parties be resolved in the District Court in Texas. The
Bankruptcy Court also lifted the automatic stay against the Company and vacated
the injunction with respect to the officers so as to permit the litigation to
proceed.
On June 18, 1993, the Company, together with its wholly-owned subsidiary,
Transicoil Inc., commenced an adversary proceeding in the chapter 11 case
against Blue Dove Development Associates ("Blue Dove"), the landlord for
Transicoil's domestic manufacturing facility in Valley Forge, Pennsylvania, and
against K-Jem, Inc., Blue Dove's general partner. The suit seeks, among other
things, to reform the provisions of the lease to provide a means of calculating
rent due, to recover excess rent that the Company and Transicoil believe has
been paid to the landlord, and for relief from certain orders of the Bankruptcy
Court that led to the assumption of the lease pursuant to Section 365 of the
Bankruptcy Code. The landlord filed a counterclaim in the adversary proceeding
seeking a determination that Transicoil has breached the lease and therefore,
the entire rent through June 30, 2005 should be due. The landlord made similar
claims in a suit filed against Transicoil in October, 1993 in the United States
District Court for the Eastern District of Pennsylvania (the "Pennsylvania
Action"). Prosecution of this suit seeking approximately $10.3 million in
damages has been enjoined by the Bankruptcy Court. The Company believes that the
counterclaim asserted by the landlord and claims asserted in the Pennsylvania
Action are without merit and that the resolution of the dispute with respect
to the lease will not have a materially adverse impact on the Company's or
Transicoil Inc.'s financial condition.
In September, 1993, Moltan Company, a competitor in the diatomaceous earth
oil and grease absorbent market of the Company's subsidiary, Eagle-Picher
Minerals, Inc., sued the Company and such subsidiary in the United States
District Court for the Western District of Tennessee, Western Division, seeking
trebled damages of $3 million. Moltan alleged that the defendants wrongfully
contacted federal and state regulators, as well as customers and prospective
customers, concerning Moltan's product labels. The Company and its subsidiary
countersued, seeking damages and an injunction requiring Moltan to cease its
misleading and deceptive practices and to place appropriate and accurate
information required by OSHA and other authorities on its products. On February
9, 1994, the court granted the Company's request for a preliminary injunction
against Moltan, concluding as a matter of law that some of Moltan's product
labels and other information are "blatantly false." The court enjoined Moltan
from selling its products with labels containing false and misleading
information in violation of OSHA and other regulations. Although Moltan's
complaint has not yet been formally dismissed, the Company is confident that it
will prevail with respect to Moltan's claims. In addition, the Company intends
to continue to press its claims against Moltan and will seek to have the
injunction made permanent.
(d) Environmental.
On January 30, 1989, the Company was served with a suit in the United
States District Court for the District of Colorado under the federal Clean Water
Act alleging that the Company's operations in Colorado Springs, Colorado had not
timely filed certain reports and that the plant's wastewater discharge did not
comply
8
<PAGE> 11
with the battery manufacturing pretreatment standards. The Company and the
United States Environmental Protection Agency ("EPA") agreed to settle the suit
in December, 1990. Under the terms of the settlement, the Company agreed to pay
a penalty of $112,500 and the EPA agreed to issue a permit for the Company's
wastewater discharge. After the filing of the Company's chapter 11 petition, the
EPA repudiated the settlement because it had not been reduced to writing before
the filing. Subsequently, the EPA agreed to accept an allowed, unsecured claim
in the Company's chapter 11 case in the amount of $150,000 in settlement of the
litigation. The Company believes that it is in compliance with the permit and
that no harm has occurred to human health or the environment. In December, 1989,
the Company's operations in Colorado Springs, Colorado were the subject of an
investigation by state and federal environmental regulators. In December, 1993,
the Company was advised by the United States Attorney's Office in Denver,
Colorado, that the investigation concerned the alleged unlawful treatment,
storage or disposal of hazardous wastes and alleged false statements relating to
such alleged activities by plant personnel. The Company is also investigating
the events that occurred in 1989, but has not yet completed its evaluation.
Concurrently, the Company is conducting remedial activities at its Colorado
Springs operations in accordance with work plans approved by both EPA and the
Colorado Department of Health.
The Company has been advised by the EPA and other similar state agencies
that the EPA and such agencies believe the Company to be one of a large number
of parties potentially responsible for undertaking remedial measures and for
future remedial costs to counteract the threat of releases of hazardous
substances at a number of waste disposal sites. Investigation into the Company's
involvement at these sites indicates that the Company either sent no waste or a
very small amount of waste to most of these disposal sites and its liability, if
any, should be accordingly limited. The Company has entered into agreements
resolving the issues posed by the EPA in its notification with respect to a few
of the sites.
The Company has received notice from the EPA that the EPA believes the
Company may be one of a number of parties responsible for the costs of remedial
measures in the Ottawa County, Oklahoma, Cherokee County, Kansas and Jasper
County, Missouri portions of the Tri-State mining district of Kansas, Missouri
and Oklahoma. The propriety of placing the Ottawa County, Oklahoma, and a
portion of the Cherokee County, Kansas mining areas on the National Priorities
List was affirmed by the U.S. Court of Appeals for the District of Columbia
(Eagle-Picher Industries, Inc., et al. v. Ruckelshaus, No. 83-2259, 1983). The
Company has been an active participant in the Oklahoma Governor's Task Force and
its technical subcommittee which, in conjunction with the EPA, has considered
whether any significant environmental problems exist in the Oklahoma portion and
part of the Kansas portion of the district due to mining activities which ceased
in the mid-1960s. The Task Force has completed its study and has concluded that
present conditions do not pose an imminent and substantial threat to human
health and welfare. The recommendations of the Task Force and Region VI of the
EPA were approved by the EPA and a three point remedial program to avert any
future water problems in the area, including a portion of Cherokee County,
Kansas, has been undertaken. The program consists of (1) plugging abandoned
water wells; (2) diking and diverting surface water runoff away from openings to
the mine workings; and (3) implementing an ongoing groundwater monitoring
program of wells in the surrounding communities. Approximately $6,000,000 in
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA), as amended, funds were spent for the program. In November, 1990, the
Company and five other entities identified by EPA as responsible parties
negotiated a Consent Agreement under which, without acknowledging
responsibility, they agreed to pay $3,050,000 in settlement of any assessed
liability for expenditures at the site authorized by CERCLA. Under the
Agreement, the Company would have contributed $1,777,000. The Agreement was not
fully executed, however, due to filing of the Company's chapter 11 petition.
Region VII of the EPA is studying the necessity of remedial action in other
parts of Cherokee County, Kansas. EPA has divided the Cherokee County site into
several subsites, and activities to date have been limited to three of these
subsites. In May, 1990, the Company and six other respondents entered into an
Administrative Order on Consent with EPA to fund and conduct a Remedial
Investigation and Feasibility Study (RI/FS) with respect to the Baxter Springs
and Treece subsites. The RI/FS was expected to cost $2.5 million. The Company
was expected to contribute approximately $875,000 to fund the study; as a
consequence of filing its chapter 11 petition, the Company has made no such
contribution.
9
<PAGE> 12
In January, 1990, the Company received special notice from the EPA as a
potentially responsible party in connection with remedial activities completed
and to be undertaken at the Galena Subsite of the Cherokee County Superfund site
located in the Tri-State mining district ("Galena Subsite"). The Company was
unable to negotiate an acceptable settlement with the EPA during the special
notice period. In June, 1990 the Company received an administrative order under
Section 106 of CERCLA, as amended, from the EPA directing the Company and
another respondent to perform the remedial design for the remedy selected by EPA
at the Galena Subsite and to implement the design by performing a remedial
action. The Company submitted a detailed legal and technical response to EPA
objecting to the activities proposed to be conducted at the Galena Subsite and
declining to perform the remedial design for the selected remedy. No response
from the EPA has been received by the Company.
In July, 1990, the Company received notice that the EPA considers the
Company to be one of several parties potentially responsible for undertaking
remedial measures and for future remedial costs in connection with the Missouri
portion of the Tri-State mining district, which has been listed on the National
Priorities List under CERCLA. Given the lack of available information concerning
the site, the Company declined to negotiate an administrative order on consent
to perform a Remedial Investigation and Feasibility Study at the site.
For information concerning discussions with the EPA about settlement of
federal environmental claims, please see Note M to the Company's Consolidated
Financial Statements in the Company's Annual Report to Shareholders for fiscal
1993, which is attached as Exhibit 13 to this Form 10-K and which is
incorporated herein by reference.
As of the October 31, 1991, non-asbestos claims bar date, in excess of
1,300 proofs of claim were filed asserting claims based upon the foregoing and
other litigation matters. Additional information concerning such litigation
claims can be found in Note M to the Company's Consolidated Financial Statements
in the Company's Annual Report to Shareholders for fiscal 1993, which is
attached as Exhibit 13 to this Form 10-K and which is incorporated herein by
reference.
(e) Summary -- Environmental and Other Claims.
The Company and the individual defendants who were named in some lawsuits
intend to defend all litigation claims vigorously in the manner permitted by the
Bankruptcy Code and/or applicable law. All pre-petition claims against the
Company arising from litigation must be liquidated or otherwise addressed in the
context of the chapter 11 cases. Further, all such claims against the Company
will be addressed in a plan of reorganization. During the pendency of the
chapter 11 cases, any unresolved litigation with respect to pre-petition claims
can proceed against the Company only with the express permission of the
Bankruptcy Court.
The Company has resolved many of the litigation claims that were asserted
pursuant to the October 31, 1991 bar date other than those claims arising from
the sale of asbestos-containing products. However, as pointed out above, the
two largest litigation claims, which together seek $1.0 billion, the
environmental claims, and certain claims relating to lead chemicals are still
pending. The Company has filed objections to certain of these litigation-based
claims seeking to reduce the amount of such claims or eliminate them entirely.
These objections have not yet been resolved. The Company anticipates filing
additional objections to other such claims if they cannot be resolved through
negotiation. These objections will be vigorously litigated by the Company
pursuant to the provisions of the Bankruptcy Code and applicable law.
The eventual outcome of the environmental and other litigation claims
described herein cannot be reasonably predicted due to numerous uncertainties
that are inherent in the reorganization process. However, negotiations
concerning environmental claims and attempts to negotiate settlements of other
litigation claims progressed to a point in 1993 that enabled the Company to
record a provision of $41.4 million for these claims. In addition, the Company
may have insurance coverage for certain of these claims and may have other
factual and legal defenses available to it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
10
<PAGE> 13
EAGLE-PICHER
ANNUAL REPORT 1993
MARKED AS EXHIBIT 13
PART II
CROSS REFERENCE SHEET
TO 1993 ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
PAGES CAPTIONS
------ -----------------------------------
<S> <C> <C> <C>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information 13 -- Quarterly Data
(b) Holders of Common Stock -- 6,215 holders of record at
February 18, 1994
(c) Dividends 31 -- Selected Financial Data
</TABLE>
Although the principal market for the Registrant's Common Stock is the New
York Stock Exchange, Inc., trading on that Exchange is currently suspended. The
Registrant's Common Stock is also listed for trading on the Cincinnati Stock
Exchange, on which trading is also currently suspended. See footnote 3 at page
13 of Exhibit 13, and the last paragraph of item 5, page 2 of Exhibit 13.
<TABLE>
<S> <C> <C> <C>
ITEM 6. SELECTED FINANCIAL DATA 31 -- Selected Financial Data
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 28-30 -- Management's Discussion and
Analysis of Results of
Operations and Financial
Condition
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 8 -- Consolidated Statement Income
(Loss) for the Three Years Ended
November 30, 1993
9 -- Consolidated Statement of Cash
Flows for the Three Years Ended
November 30, 1993
10-11 -- Consolidated Balance Sheet as of
November 30, 1993 and 1992
12 -- Consolidated Statement of
Shareholders' Equity (Deficit)
for the Three Years Ended
November 30, 1993
14-26 -- Notes to Consolidated Financial
Statements
28 -- Report of Management
27 -- Independent Auditors' Report
13 -- Quarterly Data
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Directors.
The name and age; principal occupation during the last five years and
present employer; other boards of directors on which he serves; the year in
which he first became a director of the Company and the committees on which he
serves, follow for each director:
<TABLE>
<CAPTION>
FIRST PRESENT TERM
BECAME OF OFFICE
DIRECTOR EXPIRES
-------- ------------
<S> <C> <C>
PAUL W. CHRISTENSEN, JR., 69 1969 1996
Retired, 1987; Chairman of the Board 1978-1987, and
President prior thereto, of The Cincinnati Gear Company,
Cincinnati, Ohio, a manufacturer of custom gears and
enclosed drives.
Director of Cincinnati Bell Inc., The Ohio National
Life Insurance Co.
Member of Executive and Stock Option/Compensation
Committees and Chairman of Audit Committee.
MELVIN F. CHUBB, JR., 60 1990 1995
Senior Vice President 1988, of Eagle-Picher Industries,
Inc.; Lieutenant General, United States Air Force and
Commander of the Electronic Systems Division at Hanscom
Air Force Base, Massachusetts, 1984-1988.
Director of Empire District Electric Co.
V. ANDERSON COOMBE, 67 1974 1996
Chairman of the Board since March 1991, and President
prior thereto (through April 1991), of The Wm. Powell
Company, Cincinnati, Ohio, a valve manufacturer.
Director of Star Banc Corporation, Cincinnati, The
Starflo Corp., Union Central Life Insurance Co., The
Wm. Powell Company.
Member of Audit, Executive and Stock Option/ Compensation
Committees.
ROGER L. HOWE, 59 1986 1995
Chairman of the Board of U.S. Precision Lens, Inc.,
Cincinnati, Ohio, a manufacturer of optics for video
projection, instrumentation, and photographic
applications.
Director of Cintas Corporation, Star Banc Corporation,
Cincinnati, U.S. Shoe Corporation, Baldwin Piano &
Organ Co.
Member of Executive and Stock Option/Compensation
Committees.
DANIEL W. LeBLOND, 67 1965 1994
Chairman of the Board of LeBlond Makino Machine Tool
Company, Cincinnati, Ohio, a manufacturer of machine
tools.
Director of The Ingersoll Milling Machine Company,
LeBlond Makino Machine Tool Company, The Ohio National
Life Insurance Co.
Member of Executive Committee and Chairman of Stock
Option/Compensation Committee.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
FIRST PRESENT TERM
BECAME OF OFFICE
DIRECTOR EXPIRES
-------- ------------
<S> <C> <C>
POWELL McHENRY, 67 1991 1995
Of Counsel to Dinsmore & Shohl, a law firm, Cincinnati,
Ohio as of October 1, 1991; Senior Vice President and
General Counsel of The Procter & Gamble Company,
Cincinnati, Ohio, a manufacturer of consumer and
industrial products, 1983-1991.
Member of Audit Committee.
CHARLES S. MECHEM, JR., 63 1973 1994
Commissioner, Ladies Professional Golf Association, 1991;
Of Counsel, Taft, Stettinius & Hollister, a law firm,
1990; Chairman of the Executive Committee, 1990 and
Chairman of the Board and Chief Executive Officer,
1967-1990, of Great American Broadcasting Company,
Cincinnati, Ohio.
Director of AGCO Corporation, Great American
Communications Company, Mead Corporation, The Ohio
National Life Insurance Co., J.M. Smucker Company,
Star Banc Corporation, Cincinnati, U.S. Shoe
Corporation (Chairman of the Board).
THOMAS E. PETRY, 54 1981 1994
Chairman of the Board, President, and Chief Executive
Officer 1992, Chairman of the Board and Chief Executive
Officer 1989, President and Chief Executive Officer 1982,
President and Chief Operating Officer 1981, Group Vice
President 1978, President, Akron Standard Division 1977,
Vice President and Treasurer 1974, of Eagle-Picher
Industries, Inc.
Director of Cincinnati Gas & Electric Co., Star Banc
Corporation, Cincinnati, Union Central Life Insurance
Co., Insilco Corp.
Chairman of Executive Committee.
EUGENE P. RUEHLMANN, 68 1991 1996
Partner, Vorys, Sater, Seymour & Pease, a law firm, 1989;
of Counsel to that firm, 1987; Chairman, Hamilton County
(Ohio) Republican Central Committee, 1991.
Director of Western-Southern Life Insurance Company.
Member of Audit Committee.
</TABLE>
(b) Executive Officers.
<TABLE>
<CAPTION>
YEAR ELECTED
OR ASSUMED
PRESENT
AGE DUTIES
--- ------------
<S> <C> <C> <C>
Thomas E. Petry Chairman of the Board of Directors, 54 1982
President and Chief Executive Officer
David N. Hall Senior Vice President-Finance 54 1977
Melvin F. Chubb, Jr. Senior Vice President and Director 60 1988
Andries Ruijssenaars Senior Vice President 51 1989
Carroll D. Curless Vice President and Controller 55 1984
James A. Ralston Vice President and General Counsel 47 1982
</TABLE>
Executive officers serve during the pleasure of the Board, or until their
successors are elected and qualified.
13
<PAGE> 16
There are no family relationships existing between or among the above
executive officers of the registrant.
Mr. Thomas E. Petry was first employed by the Company in 1968, elected
Assistant Treasurer in 1971, elected Treasurer in 1973, elected Vice President
and Treasurer in 1974, served as President, Akron Standard Division, from 1977
to 1978, elected Group Vice President in 1978, elected a Director and President
and Chief Operating Officer in 1981, elected President and Chief Executive
Officer in 1982, and has also been serving as Chairman of the Board since 1989.
Mr. David N. Hall was first employed by the Company and elected Treasurer
in 1977, was elected Vice President and Treasurer in 1979, and was elected and
has been serving as Senior Vice President-Finance since 1987.
Mr. Melvin F. Chubb, Jr. was employed by the Company in 1988 and was
elected and has been serving as Senior Vice President since that time. In 1990
Mr. Chubb was elected a Director. Prior to joining the Company, he completed a
career in the United States Air Force, having attained the rank of Lieutenant
General and having served most recently as commander of the Electronic Systems
Division, Air Force Systems Command at Hanscom Air Force Base.
Mr. Andries Ruijssenaars was first employed by the Company in 1980 as
General Manager of Eagle-Picher Industries GmbH in hringen, Germany, served as
Executive Vice President, The Ohio Rubber Company Division from 1986 to 1987,
President, The Ohio Rubber Company Division from 1987 to 1989, and was elected
and has been serving as Senior Vice President since 1989.
Mr. Carroll D. Curless was first employed by the Company in 1964, elected
Assistant Controller in 1978, Controller in 1984, and was elected and has been
serving as Vice President and Controller since 1986.
Mr. James A. Ralston was first employed in the Legal Department of the
Company in 1979, elected Assistant Secretary in 1982, General Counsel in 1982,
and was elected and has been serving as Vice President and General Counsel since
1984.
Item 11. EXECUTIVE COMPENSATION.
The following Summary Compensation Table shows cash compensation and stock
option awards to the listed executive officers for the last three fiscal years,
and other annual compensation and all other compensation for fiscal 1992 and
fiscal 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND YEAR COMPENSATION COMPENSATION
PRINCIPAL OCCUPATION ENDED SALARY($) BONUS($) ($)(1)(2) ($)(1)(3)
- ------------------------- --------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas E. Petry 11/30/93 575,000 100,000 149,492 178,154
Chairman, 11/30/92 575,000 105,000 75,488 128,557
President and 11/30/91 575,000 0 -- --
Chief Executive Officer
David N. Hall 11/30/93 310,000 65,000 50,133 62,692
Senior Vice 11/30/92 300,000 90,000 12,046 24,181
President -- Finance 11/30/91 280,000 0 -- --
Melvin F. Chubb, Jr. 11/30/93 275,000 45,000 0 4,497
Senior Vice 11/30/92 265,000 70,000 0 4,364
President 11/30/91 250,000 0 0 --
Andries Ruijssenaars 11/30/93 275,000 75,000 22,760 31,420
Senior Vice 11/30/92 265,000 80,000 9,764 20,800
President 11/30/91 250,000 0 -- --
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND YEAR COMPENSATION COMPENSATION
PRINCIPAL OCCUPATION ENDED SALARY($) BONUS($) ($)(1)(2) ($)(1)(3)
- ------------------------- --------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James A. Ralston 11/30/93 200,000 34,000 7,214 13,303
Vice President and 11/30/92 195,000 42,000 2,593 8,625
General Counsel 11/30/91 180,000 0 -- --
</TABLE>
- ---------------
(1) Under transition rules, this information need not be given for fiscal years
ended 11/30/92 or earlier; however, it is being provided for the fiscal year
ended 11/30/92.
(2) Amounts for payment of taxes on purchases of annuities under Supplemental
Executive Retirement Plan.
(3) All Other Compensation:
<TABLE>
<CAPTION>
COST OF COMPANY
ANNUITY UNDER CONTRIBUTIONS
NON-QUALIFIED TO
SUPPLEMENTAL EAGLE-PICHER
EXECUTIVE RETIREMENT
YEAR RETIREMENT SAVINGS
ENDED PLAN(S) PLAN($) TOTAL($)
--------- ------------- ------------- --------
<S> <C> <C> <C> <C>
Thomas E. Petry
Chairman, President, and Chief
Executive Officer................ 11/30/93 173,657 4,497 178,154
David N. Hall
Senior Vice President -- Finance... 11/30/93 58,195 4,497 62,692
Melvin F. Chubb, Jr.
Senior Vice President.............. 11/30/93 0 4,497 4,497
Andries Ruijssenaars
Senior Vice President.............. 11/30/93 26,923 4,497 31,420
James A. Ralston
Vice President and General
Counsel.......................... 11/30/93 8,806 4,497 13,303
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Note: The Company has never granted Stock Appreciation Rights (SARs), so there
are no SARs outstanding. There were no exercises of options by the named
executive officers during fiscal 1993.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------- -------------------
<S> <C> <C>
Thomas E. Petry.................................. 100,000 *
0/100,000
David N. Hall.................................... 50,000 *
0/50,000
Melvin F. Chubb, Jr.............................. 50,000 *
0/50,000
Andries Ruijssenaars............................. 50,000 *
0/50,000
James A. Ralston................................. 30,000 *
0/30,000
</TABLE>
- ---------------
* None of the unexercised options held by any of the named executive officers
was "In-the-Money" as of November 30, 1993 -- the price at which the options
were exercisable was above the closing price on the New York Stock Exchange at
the end of the fiscal year. Further, the options were exercisable only if the
last selling price per share on the New York Stock Exchange prior to the date
on which the Company received written notice of the exercise was at least 20%
above the option price per share. Trading in the Company's shares on the New
York Stock Exchange was suspended on November 15, 1993 and remained so on
15
<PAGE> 18
November 30, 1993; the last reported New York Stock Exchange trade was
November 9, 1993 at $2.125 per share. All of the unexercised options are at a
price of $2.50 per share.
PENSION BENEFITS
The following table shows the estimated total combined annual benefits to
participants upon retirement at age 62 payable under Social Security, the
Retirement Income Plan for Salaried Employees, and the Supplemental Executive
Retirement Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$200,000 $ 72,000 $ 96,000 $ 120,000 $ 120,000 $ 120,000
225,000 81,000 108,000 135,000 135,000 135,000
250,000 90,000 120,000 150,000 150,000 150,000
300,000 108,000 144,000 180,000 180,000 180,000
350,000 126,000 168,000 210,000 210,000 210,000
400,000 144,000 192,000 240,000 240,000 240,000
450,000 162,000 216,000 270,000 270,000 270,000
500,000 180,000 240,000 300,000 300,000 300,000
550,000 198,000 264,000 330,000 330,000 330,000
600,000 216,000 288,000 360,000 360,000 360,000
650,000 234,000 312,000 390,000 390,000 390,000
700,000 252,000 336,000 420,000 420,000 420,000
750,000 270,000 360,000 450,000 450,000 450,000
800,000 288,000 384,000 480,000 480,000 480,000
850,000 306,000 408,000 510,000 510,000 510,000
</TABLE>
The Retirement Income Plan for Salaried Employees of the Company, a defined
benefit pension plan in which the above-named executive officers are
participants, provides non-contributory benefits after retirement based on the
highest average monthly compensation during five consecutive years of the last
ten years preceding retirement. For purposes of the Plan, compensation includes
base salary, bonuses, commissions, and severance payments; salary and bonus
included are as reported in the Summary Compensation Table, and commissions and
severance payments, if there had been any, would have been included in that
Table. The benefits shown by the Pension Plan Table above include amounts
payable under Social Security and the Company's Supplemental Executive
Retirement Plan as well as those payable under the Retirement Income Plan for
Salaried Employees. Benefits are computed on the basis of straight-life annuity
amounts.
The estimated credited years of service with the Company for the named
executive officers at age 62 are:
<TABLE>
<S> <C>
Thomas E. Petry.................................. 33
David N. Hall.................................... 24
Melvin F. Chubb, Jr.............................. 12
Andries Ruijssenaars............................. 24
James A. Ralston................................. 29
</TABLE>
SEVERANCE PLAN
On February 6, 1991 the Board of Directors adopted a Severance Plan for certain
employees, including the named executive officers, which was approved by the
Bankruptcy Court on May 13, 1991. Under the Plan, a participant whose employment
is terminated by the Company receives: a Base Severance Benefit of one week's
pay for each year of Company service, payable under general payroll pay
practices, but reduced dollar for dollar by any compensation earned from a
subsequent employer during the period such benefits are being paid; a
Supplemental Severance Benefit ranging from three months' salary up to one
year's salary, payable in a lump sum upon termination; and continuation of
certain insurance benefits for up to one week for each year of
16
<PAGE> 19
service. Currently, the plan provides that an employee who is terminated after
the confirmation of a plan of reorganization will not be eligible for a
Supplemental Severance Benefit. Payments under the Plan cannot exceed twice the
terminated employee's annual compensation, and all payments cease upon the
terminated employee's death.
COMPENSATION OF DIRECTORS
Directors are paid a retainer of $18,000 per year, a fee of $750 for each Board
meeting attended, and a fee of $750 for each Board committee meeting attended.
Board committee members, excluding committee chairmen, are paid a retainer of
$3,000 per year for each committee on which they serve; the chairman of each
Board committee is paid a retainer of $5,000 per year. The Company does not pay
director retainers or attendance fees, or committee retainers or attendance
fees, to directors who are employees of the Company.
Directors who are not also employees of the Company who retire with ten or
more years of service as active members of the Board are paid an advisory fee
for life in an amount equal to the annual directors retainer paid at the time of
their retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1993, Messrs. LeBlond (Chairman), Christensen, Coombe, and
Howe, directors of the Company, constituted the Stock Option/Compensation
Committee.
During fiscal 1993 and as of February 11, 1994 Mr. Petry, Chairman,
President, and Chief Executive Officer of the Company, served as a director and
as a member of the compensation committee of The Wm. Powell Company. During
fiscal 1993 and as of February 11, 1994 Mr. Coombe was Chairman of the Board of
The Wm. Powell Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of February 11, 1994, beneficial ownership of the Company's Common Stock by:
all directors; each of the executive officers named in Item 11 above under
"Compensation of Executive Officers"; and all directors and executive officers
as a group, was:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
DIRECTORS OWNERSHIP OF CLASS
------------------------------------------------------------------- --------
<S> <C> <C>
Paul W. Christensen, Jr.................................. 43,000(1) *
Melvin F. Chubb, Jr...................................... 39,414(1)(2)(3) *
V. Anderson Coombe....................................... 4,480(1) *
Roger L. Howe............................................ 1,000 *
Daniel W. LeBlond........................................ 3,500 *
Powell McHenry........................................... 1,000 *
Charles S. Mechem, Jr.................................... 1,720 *
Thomas E. Petry.......................................... 104,102(2)(3) *
Eugene P. Ruehlmann...................................... 1,000 *
</TABLE>
- ---------------
* Less than 1%.
(1) The following persons disclaim beneficial ownership as to the following
numbers of shares which are beneficially owned by family members: Mr.
Christensen -- 18,000 shares; Mr. Chubb -- 660 shares; Mr. Coombe -- 1,520
shares.
(2) Mr. Chubb and Mr. Petry are also executive officers of the Company; their
holdings of Company stock are listed here and not duplicated under the
Executive Officers individual listing immediately below.
(3) Includes shares subject to options to purchase within 60 days: Mr. Chubb --
37,500; Mr. Petry -- 75,000. The terms of the option grants make the options
exercisable if the last selling price per share on the New
17
<PAGE> 20
York Stock Exchange is at least $3.00 on the day prior to the date on which
the Company receives written notice of the exercise.
There were as of February 11, 1994 no beneficial owners of more than 5% of
the Company's Common Stock.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
OWNERSHIP OF CLASS
---------- --------
<S> <C> <C>
David N. Hall............................................... 49,982 *
James A. Ralston............................................ 29,297 *
Andries Ruijssenaars........................................ 39,933 *
</TABLE>
- ---------------
* Less than 1%
Note: These figures include shares subject to options to purchase within 60
days: Mr. Hall -- 37,500; Mr. Ralston -- 22,500; Mr. Ruijssenaars --
37,500. The terms of the option grants make the options exercisable if the
last selling price per share on the New York Stock Exchange is at least
$3.00 on the day prior to the date on which the Company receives written
notice of the exercise.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
OWNERSHIP OF CLASS
---------- --------
<S> <C> <C>
Directors and Executive Officers
As a Group (13 persons)................................... 325,481 2.95%
</TABLE>
- ---------------
Note: For the same reason stated in the Note above immediately following the
Executive Officers shareholding table, this figure includes 232,500 shares
subject to options to purchase.
All shares shown above as owned were directly owned except as footnoted.
Directors and executive officers are considered control persons of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Board of Directors has no knowledge of any significant transaction or
proposed significant transaction to which the Company or any subsidiary and any
director, officer, or nominee for director, or any associate of such director,
officer, or nominee, were or are to be parties.
During fiscal 1993 Mr. Andries Ruijssenaars, a Senior Vice President of the
Company, was indebted to the Company in the amount of $79,072.73 in connection
with loans made for relocation expenses. Interest is payable at an annual rate
of 10%. As of November 30, 1993 the outstanding loan balance was less than
$60,000.
18
<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<C> <C> <S> <C> <C>
(a) 1. All Financial Statements
Eagle-Picher Industries, Inc. (Incorporated by reference to the
Company's Annual Report to Shareholders for the year 1993,
Exhibit 13, pages 8-13 -- See Part II above)
Independent Auditors' Report -- Incorporated by reference to
Exhibit 13, page 27
</TABLE>
<TABLE>
<CAPTION>
PAGE NO.
-----------
<C> <C> <S> <C> <C>
2. Financial Statement Schedules
Schedule V -- Property, Plant and Equipment for the Three Years 40
Ended November 30, 1993
Schedule VI -- Accumulated Depreciation, Depletion and 41
Amortization of Property, Plant and Equipment for the Three
Years Ended November 30, 1993
Schedule X -- Supplementary Income Statement Information for the 42
Three Years Ended November 30, 1993
</TABLE>
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NO.
-----------
<C> <C> <S> <C> <C>
3. Exhibits (numbers keyed to Item 601, Regulation S-K).
* 3. (i) Amended Articles of Incorporation through May 28, 1986.
Incorporated by reference to Exhibit 1 to Form S-8 Registration
Statement for the Registrant's Stock Option Plan of 1990 (SEC
File No. 33-45179).
* (ii) Code of Regulations of Eagle-Picher Industries, Inc., last
amended March 26, 1985. Incorporated by reference to Exhibit
3(b) to Form 10-K Annual Report of the Registrant for its fiscal
year ended November 30, 1992 (SEC File No. 1-1499).
* 4. (a) Form of Indenture relating to the $50,000,000 Eagle-Picher
Industries, Inc. 9% Sinking Fund Debentures due March 1, 2017,
dated as of March 1, 1987 between Eagle-Picher Industries, Inc.
and The Bank of New York. Incorporated by reference to Form 8-K
of Eagle-Picher Industries, Inc., March, 1987 (SEC File No.
1-1499).
* (b) Credit and Agency Agreement (debtor-in-possession financing
agreement) dated as of November 5, 1992. Incorporated by
reference to Exhibit 4(b) to Form 10-K Annual Report of the
Registrant for its fiscal year ended November 30, 1992 (SEC File
No. 1-1499).
* 10. (a) Eagle-Picher Industries, Inc. Stock Option Plan of 1983, as
amended. Incorporated by reference to Appendix A to Proxy
Statement for Annual Meeting of Shareholders, March 28, 1989 and
Exhibit 28 to Post Effective Amendment No. 1 to Registration
Statement No. 33-5792, dated April 10, 1990 (SEC File No.
1-1499).
* (b) Eagle-Picher Industries, Inc. Stock Option Plan of 1990.
Incorporated by reference to Appendix A to Proxy Statement for
Annual Meeting of Shareholders, March 27, 1990 (SEC File No.
1-1499).
* (c) Eagle-Picher Supplemental Executive Retirement Plan.
Incorporated by reference to Report on Form 10-K of Eagle-Picher
Industries, Inc. for the fiscal year ended November 30, 1987
(SEC File No. 1-1499) and Proxy Statement for Annual Meeting of
Shareholders to be held March 26, 1992 under the caption
"Retirement Plans" (SEC File No. 1-1499).
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE NO.
-----------
<C> <C> <S> <C> <C>
11. Calculation of Average Number of Shares. 44
13. Excerpts from the registrant's Annual Report to Shareholders for 45
the year ended November 30, 1993.
22. Subsidiaries of the registrant. 90
23. Independent Auditors' Consent. 91
24. (a),(b) Powers of Attorney. 92
99. Plants and Locations. 95
(b) Reports on Form 8-K.
* (i) November 10, 1993 -- Reporting November 9, 1993 agreement with
the Injury Claimants' Committee and the Legal Representative for
Future Claimants in the registrant's pending chapter 11 cases on
the principal elements of a joint plan of reorganization to be
presented to the Bankruptcy Court in which the cases are
pending. (SEC File No. 1-1499). Incorporated by reference.
* (ii) November 19, 1993 -- Reporting the New York Stock Exchange's
November 15, 1993 announcement of immediate suspension of
trading in the registrant's common stock and intent to apply to
the Securities and Exchange Commission to delist the
registrant's common stock. (SEC File No. 1-1499). Incorporated
by reference.
* Incorporated by reference.
</TABLE>
20
<PAGE> 23
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, THEREUNTO DULY AUTHORIZED.
EAGLE-PICHER INDUSTRIES, INC.
By /s/ THOMAS E. PETRY
Thomas E. Petry
Chairman of the Board,
President and Chief Executive
Officer
Date: February 18, 1994
PURSUANT TO THE REQUIREMENTS 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 ON THE DATES INDICATED.
<TABLE>
<S> <C>
/s/ THOMAS E. PETRY Date: February 18, 1994
Thomas E. Petry, Chairman of the Board,
President and Chief Executive Officer
/s/ DAVID N. HALL Date: February 18, 1994
David N. Hall, Senior Vice President-Finance
(Principal Financial Officer)
/s/ CARROLL D. CURLESS Date: February 23, 1994
Carroll D. Curless, Vice President and
Controller (Principal Accounting Officer)
/s/ MELVIN F. CHUBB, JR. Date: February 18, 1994
Melvin F. Chubb, Jr., Senior Vice President
and Director
/s/ PAUL W. CHRISTENSEN, JR. Date: February 21, 1994
Paul W. Christensen, Jr., Director
/s/ V. ANDERSON COOMB Date: February 21, 1994
V. Anderson Coombe, Director
/s/ ROGER L. HOWE Date: February 21, 1994
Roger L. Howe, Director
/s/ DANIEL W. LEBLOND Date: February 21, 1994
Daniel W. LeBlond, Director
/s/ POWELL MCHENRY Date: February 21, 1994
Powell McHenry, Director
/s/ CHARLES S. MECHEM, JR. Date: February 21, 1994
Charles S. Mechem, Jr., Director
/s/ EUGENE P. RUEHLMANN Date: February 21, 1994
Eugene P. Ruehlmann, Director
</TABLE>
21
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle-Picher Industries, Inc.:
Under date of February 2, 1994, we reported on the consolidated balance
sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession,
as of January 7, 1991) as of November 30, 1993 and 1992 and the related
consolidated statements of income (loss), shareholders' equity (deficit), and
cash flows for each of the years in the three-year period ended November 30,
1993, as contained in the 1993 Annual Report to Shareholders. These consolidated
financial statements and our report, with explanatory paragraphs, thereon are
incorporated by reference in the Annual Report on Form 10-K for the year 1993.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules as
listed in Part IV, item 14(a)2. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
The accompanying financial statement schedules have been prepared assuming
that the Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, Eagle-Picher Industries, Inc. (the Company)
and seven of its domestic subsidiaries each filed a voluntary petition for
relief under chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court on January 7, 1991. Although the Company and its
operating subsidiaries are currently operating their business as debtors in
possession under the jurisdiction of the Bankruptcy Court, the continuation of
their businesses as going concerns is contingent upon, among other things, the
ability to formulate a plan of reorganization which will gain approval of the
creditors and confirmation by the Bankruptcy Court. The filing under chapter 11
and the continued uncertainty related to claims associated with the Company's
sale of asbestos products and certain other litigation as discussed in the
following paragraph, raise substantial doubt about the Company's ability to
continue as a going concern. The aforementioned financial statement schedules do
not include any adjustments that may be required in connection with
restructuring the Company and its subsidiaries as they reorganize under chapter
11 of the United States Bankruptcy Code.
As discussed in Notes B and L to the consolidated financial statements, the
consolidated financial statements include an estimated liability related to
claims associated with the Company's sale of asbestos products. The final
resolution of actual amounts, however, is dependent upon future events, the
outcome of which is not fully determinable at the present time. In addition, as
discussed in Note M, the Company is a defendant is various other litigation.
Although provisions have been made for these matters, the final outcomes and
their effect on the Company's consolidated financial statement are not presently
determinable.
/s/ KPMG Peat Marwick
Cincinnati, Ohio
February 2, 1994
22
<PAGE> 25
SCHEDULE V
EAGLE-PICHER INDUSTRIES, INC.
PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED NOVEMBER 30, 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE OTHER
AT CHANGES- BALANCE
BEGINNING ADD AT END
OF ADDITIONS (DEDUCT) OF
CLASSIFICATION PERIOD AT COST RETIREMENTS(1) (2) PERIOD
- ---------------------------------------- -------- --------- -------------- -------- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1993
Land and land improvements......... $ 11,322 $ 486 $ 22 $ (126 ) $ 11,660
Buildings.......................... 75,520 1,591 653 (709 ) 75,749
Machinery and equipment............ 243,851 17,220 6,835 (1,548 ) 252,688
Transportation equipment........... 3,826 785 519 (46 ) 4,046
Furniture and fixtures............. 16,110 3,229 953 (189 ) 18,197
Construction in progress........... 8,191 5,201 -- -- 13,392
-------- --------- -------------- -------- --------
$358,820 $28,512 $ 8,982 $(2,618 ) $375,732
-------- --------- -------------- -------- --------
-------- --------- -------------- -------- --------
YEAR ENDED NOVEMBER 30, 1992
Land and land improvements......... $ 11,234 $ 345 $ 333 $ 76 $ 11,322
Buildings.......................... 76,171 1,006 1,811 154 75,520
Machinery and equipment............ 234,249 16,026 7,168 744 243,851
Transportation equipment........... 3,681 942 786 (11 ) 3,826
Furniture and fixtures............. 14,134 2,268 336 44 16,110
Construction in progress........... 7,195 996 -- -- 8,191
-------- --------- -------------- -------- --------
$346,664 $21,583 $ 10,434 $ 1,007 $358,820
-------- --------- -------------- -------- --------
-------- --------- -------------- -------- --------
YEAR ENDED NOVEMBER 30, 1991
Land and land improvements......... $ 11,887 $ 220 $ 783 $ (90 ) $ 11,234
Buildings.......................... 75,683 6,870 5,979 (403 ) 76,171
Machinery and equipment............ 242,594 16,395 23,423 (1,317 ) 234,249
Transportation equipment........... 3,886 352 540 (17 ) 3,681
Furniture and fixtures............. 14,119 2,441 2,099 (327 ) 14,134
Construction in progress........... 9,458 (1,952) 311 -- 7,195
-------- --------- -------------- -------- --------
$357,627 $24,326 $ 33,135 $(2,154 ) $346,664
-------- --------- -------------- -------- --------
-------- --------- -------------- -------- --------
</TABLE>
- ---------------
(1) Includes $27,256 related to sales or dispositions of operations in 1991.
(2) Represents reclassifications, adjustments and foreign currency translations.
23
<PAGE> 26
SCHEDULE VI
EAGLE-PICHER INDUSTRIES, INC.
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED NOVEMBER 30, 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE OTHER
AT ADDITIONS CHANGES- BALANCE
BEGINNING CHARGED TO ADD AT END
OF COSTS AND (DEDUCT) OF
DESCRIPTION PERIOD EXPENSES RETIREMENTS(1) (2)(3) PERIOD
- ---------------------------------------- -------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1993
Land improvements.................. $ 4,430 $ 314 $ 17 $ (15) $ 4,712
Buildings.......................... 34,868 3,096 463 (141) 37,360
Machinery and equipment............ 172,234 18,123 5,047 (893) 184,417
Transportation equipment........... 2,657 558 439 (23) 2,753
Furniture and fixtures............. 10,709 2,416 922 (114) 12,089
-------- ---------- -------------- ------------ --------
$224,898 $ 24,507 $ 6,888 $ (1,186) $241,331
-------- ---------- -------------- ------------ --------
-------- ---------- -------------- ------------ --------
YEAR ENDED NOVEMBER 30, 1992
Land improvements.................. $ 4,348 $ 317 $ 246 $ 11 $ 4,430
Buildings.......................... 33,061 3,267 1,564 104 34,868
Machinery and equipment............ 159,746 17,773 5,338 53 172,234
Transportation equipment........... 2,768 521 629 (3) 2,657
Furniture and fixtures............. 8,765 2,282 358 20 10,709
-------- ---------- -------------- ------------ --------
$208,688 $ 24,160 $ 8,135 $ 185 224,898
-------- ---------- -------------- ------------ --------
-------- ---------- -------------- ------------ --------
YEAR ENDED NOVEMBER 30, 1991
Land improvements.................. $ 4,579 $ 306 $ 527 $ (10) $ 4,348
Buildings.......................... 33,858 3,173 3,921 (49) 33,061
Machinery and equipment............ 161,917 17,524 17,983 (1,712) 159,746
Transportation equipment........... 2,774 440 435 (11) 2,768
Furniture and fixtures............. 7,766 2,199 1,067 (133) 8,765
-------- ---------- -------------- ------------ --------
$210,894 $ 23,642 $ 23,933 $ (1,915) $208,688
-------- ---------- -------------- ------------ --------
-------- ---------- -------------- ------------ --------
</TABLE>
- ---------------
(1) Includes $20,172 related to sales or dispositions of operations in 1991.
(2) Represents reclassifications, adjustments and foreign currency translations.
(3) For 1991, includes the reversal of a $1,798 reserve set up in 1990 for
future disposition of assets; those assets were sold in 1991.
24
<PAGE> 27
SCHEDULE X
EAGLE-PICHER INDUSTRIES, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED NOVEMBER 30, 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COL. B
-------------------------------
CHARGED TO COSTS AND EXPENSES
COL. A -------------------------------
ITEM 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs............................. $21,314 $19,138 $18,907
------- ------- -------
------- ------- -------
</TABLE>
25
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBER PAGE PAGE NO.
- ----------------- ------ ----------
<C> <S> <C> <C>
3(i) -- Articles of Incorporation*
3(ii) -- Code of Regulations*
4(a) -- Form of Indenture, $50,000,000 9% Sinking Fund
Debentures due March 1, 2017*
4(b) -- Credit and Agency Agreement, dated as of
November 5, 1992*
10(a),(b) -- Eagle-Picher Industries, Inc. Stock Option Plans
of 1983, and 1990*
10(c) -- Eagle-Picher Supplemental Executive Retirement
Plan*
11 -- Statement re Calculation of Average Number of 44
Shares
13 -- Excerpts from Annual Report to Security Holders 45
for Fiscal Year 1993
21 -- Subsidiaries of the Registrant 90
23 -- Independent Auditors' Consent 94
24(a),(b) -- Powers of Attorney 95
99 -- Plants and Locations 98
</TABLE>
- ---------------
* Incorporated by reference. See pages 33-36 above.
26
<PAGE> 1
EXHIBIT 11
EAGLE-PICHER INDUSTRIES, INC.
CALCULATION OF AVERAGE NUMBER OF SHARES
THREE YEARS ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Average common shares issued.......................... 11,125,000 11,125,000 11,125,000
Less: Average common treasury shares................. (94,485) (146,568) (146,568)
---------- ---------- ----------
Average number of common shares outstanding........... 11,030,515 10,978,432 10,978,432
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE> 1
Exhibit 13
EXCERPTS from Eagle-Picher Industries, Inc.
1993 Annual Report to Shareholders
5) The treatment under the Plan of asbestos property damage, lead and silica
claims is to be negotiated. Additionally, the Plan will provide that
convenience claims, general unsecured claims of $500 or less, will be paid in
full.
Following the negotiations with the other Committees and with respect to
asbestos property damage, lead and silica claims, the Company intends to file a
plan with the Bankruptcy Court and proceed to confirmation in accordance with
the provisions of the Bankruptcy Code, including soliciting creditor and
shareholder acceptances. Implementation of the agreement and the treatment of
claims and interests as set forth above is subject to confirmation of the Plan
in accordance with the provisions of the Bankruptcy Code. Parties in interest
in the chapter 11 case may challenge the Plan and its basis, including the
magnitude of the asbestos-related personal injury claims.
After the Company's announcement of November 10, 1993, the New York Stock
Exchange ("NYSE") suspended trading in the common stock of Eagle-Picher and
announced on November 15, 1993, that it would make application to the
Securities and Exchange Commission to delist the issue. The NYSE indicated
that the action was taken because the Company does not meet the NYSE's
continued listing criteria. The Company requested a hearing to review the
NYSE's action and as of this writing such hearing had not been held. As of
November 30, 1993, the Company's common stock was being traded on the
Over-the-Counter market under the symbol "EPIH."
- 1 -
<PAGE> 2
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (LOSS)
Eagle-Picher Industries, Inc.
<CAPTION>
Years Ended November 30
---------------------------
(In thousands of dollars, except per share) 1993 1992 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 661,452 $611,458 $598,631
OPERATING COSTS AND EXPENSES
Cost of products sold 548,605 497,341 510,736
Selling and administrative 69,093 67,557 69,046
--------- -------- --------
617,698 564,898 579,782
--------- -------- --------
OPERATING INCOME 43,754 46,560 18,849
Provision for asbestos litigation (1,135,500) - -
Provision for environmental and other claims (41,436) (2,000) (500)
Loss on disposition of operations - - (12,326)
Interest expense (contractual
interest of $9,369 in 1993, $10,193
in 1992 and $12,624 in 1991) (2,070) (2,691) (5,873)
Other expense (174) (945) (938)
--------- -------- --------
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS, TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (1,135,426) 40,924 (788)
REORGANIZATION ITEMS (4,344) (9,038) (12,124)
--------- -------- --------
INCOME (LOSS) BEFORE TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,139,770) 31,886 (12,912)
INCOME TAXES 5,000 3,000 2,900
--------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (1,144,770) 28,886 (15,812)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS (12,598) - -
--------- -------- --------
NET INCOME (LOSS) $(1,157,368) $ 28,886 $(15,812)
=========== ======== ========
INCOME (LOSS) PER SHARE:
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $(103.78) $ 2.63 $(1.44)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS (1.14) - -
------- ------ ------
NET INCOME (LOSS) $(104.92) $ 2.63 $(1.44)
======== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
- 8 -
<PAGE> 3
CONSOLIDATED STATEMENT OF CASH FLOWS
Eagle-Picher Industries, Inc.
<TABLE>
<CAPTION>
Years Ended November 30
-------------------------
(In thousands of dollars) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,157,368) $ 28,886 $(15,812)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Provision for asbestos litigation 1,135,500 - -
Provision for environmental and
other claims 41,436 2,000 500
Cumulative effect of accounting change 12,598 - -
Depreciation and amortization 24,955 24,655 24,142
Loss on disposition of operations - - 12,326
Changes in assets and liabilities, net of
effects of divestitures:
Receivables (10,764) 579 8,253
Income tax refund receivable 101 (1,290) 13,799
Due from insurance carriers - 4,377 5,309
Inventories (4,098) 1,787 8,508
Deferred income taxes (12,137) (4,574) 109
Accounts payable 5,539 1,263 (17,685)
Asbestos liability 78 (1,203) (9,687)
Other 2,111 (8,439) 9,038
----------- -------- --------
Net cash provided by
operating activities before
changes in liabilities from
reorganization activities 37,951 48,041 38,800
Changes in liabilities from reorganization
activities:
Accounts payable 342 3,372 39,421
Accrued liabilities (617) (616) 8,692
----------- -------- --------
Net cash provided by
operating activities 37,676 50,797 86,913
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 540 2,016 1,060
Capital expenditures (28,512) (21,583) (24,326)
Other (205) (664) 2,424
----------- -------- --------
Net cash used in investing activities (28,177) (20,231) (20,842)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 810 2,243 1,969
Reduction of long-term debt (4,007) (8,972) (10,153)
Borrowings under revolving credit agreement - - 10,100
Repayments under revolving credit agreement - - (29,800)
Issuance of common shares 156 - -
----------- -------- --------
Net cash used in financing activities (3,041) (6,729) (27,884)
----------- -------- --------
</TABLE>
- 9 -
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,458 23,837 38,187
-------- -------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 78,116 54,279 16,092
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 84,574 $ 78,116 $ 54,279
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
- 9 -
<PAGE> 5
<TABLE>
CONSOLIDATED BALANCE SHEET
Eagle-Picher Industries, Inc.
<CAPTION>
ASSETS
November 30
-----------------
(In thousands of dollars) 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 84,574 $ 78,116
Receivables, less allowances of $1,182
in 1993 and $1,297 in 1992 97,586 86,822
Income tax refund receivable 3,275 3,376
Inventories 68,306 64,208
Deferred income taxes - 11,297
Prepaid expenses 8,283 8,159
-------- --------
TOTAL CURRENT ASSETS 262,024 251,978
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 11,660 11,322
Buildings 75,749 75,520
Machinery and equipment 274,931 263,787
Construction in progress 13,392 8,191
-------- --------
375,732 358,820
Less accumulated depreciation 241,331 224,898
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 134,401 133,922
-------- --------
DEFERRED INCOME TAXES 29,924 -
OTHER ASSETS 33,011 33,535
-------- --------
TOTAL ASSETS $459,360 $419,435
-------- ========
See accompanying notes to consolidated financial statements.
</TABLE>
- 10 -
<PAGE> 6
<TABLE>
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<CAPTION>
November 30
-----------------
1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 32,365 $ 26,826
Compensation and employee benefits 12,167 10,805
Long-term debt - current portion 2,737 3,462
Income taxes 5,613 5,077
Other accrued liabilities 21,918 23,042
-------- --------
TOTAL CURRENT LIABILITIES 74,800 69,212
-------- --------
LIABILITIES SUBJECT TO COMPROMISE 1,656,563 479,576
LONG-TERM DEBT, less current portion 21,712 25,033
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 20,209 -
OTHER LONG-TERM LIABILITIES 3,282 4,572
-------- --------
TOTAL LIABILITIES 1,776,566 578,393
--------- --------
SHAREHOLDERS' EQUITY (DEFICIT)
Preference stock - no par value.
Authorized 873,457 shares; none issued - -
Common stock - $1.25 par value per share.
Authorized 30,000,000 shares; issued
11,125,000 shares 13,906 13,906
Additional paid-in capital 36,378 37,644
Accumulated deficit (1,365,867) (208,499)
Foreign currency translation 290 1,326
-------- --------
(1,315,293) (155,623)
Cost of 84,068 and 146,568 common treasury shares (1,913) (3,335)
-------- --------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,317,206) (158,958)
---------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $459,360 $419,435
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
- 11 -
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Eagle-Picher Industries, Inc.
<CAPTION>
TOTAL
ADDITIONAL FOREIGN SHAREHOLDERS'
COMMON PAID-IN ACCUMULATED CURRENCY TREASURY EQUITY
(In thousands of dollars) STOCK CAPITAL DEFICIT TRANSLATION STOCK (DEFICIT)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE NOVEMBER 30, 1990 $13,906 $37,644 $ (221,573) $1,876 $(3,335) $(171,482)
Net loss - - (15,812) - - (15,812)
Foreign currency translation - - - (736) - (736)
--------------------------------------------------------------------------------
BALANCE NOVEMBER 30, 1991 13,906 37,644 (237,385) 1,140 (3,335) (188,030)
Net income - - 28,886 - - 28,886
Foreign currency translation - - - 186 - 186
--------------------------------------------------------------------------------
BALANCE NOVEMBER 30, 1992 13,906 37,644 (208,499) 1,326 (3,335) (158,958)
Net loss - - (1,157,368) - - (1,157,368)
Stock options - (1,266) - - 1,422 156
Foreign currency translation - - - (1,036) - (1,036)
--------------------------------------------------------------------------------
BALANCE NOVEMBER 30, 1993 $13,906 $36,378 $(1,365,867) $ 290 $(1,913) $(1,317,206)
================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
- 12 -
<PAGE> 8
<TABLE>
QUARTERLY DATA
(Unaudited)
(In thousands of dollars, except per share)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1993 FIRST SECOND THIRD FOURTH YEAR
- ---------------------------------------------------------------------------------------------------------
NET SALES $146,971 $176,366 $162,228 $175,887 $661,452
- ---------------------------------------------------------------------------------------------------------
OPERATING INCOME 8,390 14,100 10,384 10,880 43,754
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS):
- ---------------------------------------------------------------------------------------------------------
BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 6,404 (1) 11,515 (1) 8,006(1) (1,170,695)(2) (1,144,770)
- ---------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (12,598)(1) - - - (12,598)
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (6,194) 11,515 8,006 (1,170,695) (1,157,368)
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) PER SHARE:
- ---------------------------------------------------------------------------------------------------------
BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE .59 (1) 1.04 (1) .73 (1) (106.14)(2) (103.78)
- ---------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (1.14) (1) - - - (1.14)
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (.55) 1.04 .73 (106.14) (104.92)
- ---------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE (NYSE)
HIGH 4 3-5/8 3 2-5/8 4
- ---------------------------------------------------------------------------------------------------------
LOW 2-1/8 2-1/4 2-1/8 -- (3) -- (3)
- ---------------------------------------------------------------------------------------------------------
1992 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------
Net Sales $134,221 $160,537 $155,371 $161,329 $611,458
- ---------------------------------------------------------------------------------------------------------
Operating Income 7,054 14,081 12,676 12,749 46,560
- ---------------------------------------------------------------------------------------------------------
Net Income 4,076 9,290 8,246 7,274 28,886
- ---------------------------------------------------------------------------------------------------------
Net Income Per Share .37 .85 .75 .66 2.63
- ---------------------------------------------------------------------------------------------------------
Common Stock Price (NYSE)
High 2 5/8 2 5/8 2 3/4 2 5/8 2 3/4
- ---------------------------------------------------------------------------------------------------------
Low 15/16 2 2 1/8 2 1/8 15/16
- ---------------------------------------------------------------------------------------------------------
(1) During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits," retroactively to December 1, 1992. Besides the cumulative aftertax charge of $12.6
million, this accounting change reduced previously reported income by $254,000 in the first quarter ($.02 per share), $254,000 in
the second quarter ($.02 per share) and $250,000 in the third quarter ($.02 per share). The Company also adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The impact of adopting this standard on previously reported
income was not material.
(2) On November 9, 1993, the Company reached an agreement on the principal elements of a joint plan of reorganization (see Note B)
that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability
for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company
recorded a provision to its income statement of $1.135 billion to increase its asbestos liability subject to compromise to $1.5
billion. The Company also recorded a provision for environmental and other claims of $41.4 million in the fourth quarter.
(3) As a result of the Company's announcement on November 10, 1993 regarding the agreement, the New York Stock Exchange suspended
trading of the Company's common stock, and on November 15, 1993, announced that it would make application to the Securities and
Exchange Commission to delist the issue. Consequently, the stock has not been traded on an organized exchange since that date, nor
is the stock regularly quoted in the automated quotation system of a registered securities association. Therefore, common stock
prices beyond November 10, 1993 have not been included above.
</TABLE>
- 13 -
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of the consolidated
financial statements are summarized below. These policies conform to generally
accepted accounting principles and have been consistently applied.
The Company has accounted for all transactions related to the chapter 11
proceedings in accordance with Statement of Position 90-7 ("SOP 90- 7"),
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,"
issued by the American Institute of Certified Public Accountants. Accordingly,
liabilities subject to compromise under the chapter 11 proceedings have been
segregated on the consolidated balance sheet and are recorded at the amounts
that have been or are expected to be allowed on known claims rather than
estimates of consideration those claims may receive in a plan of
reorganization. In addition, the consolidated statements of income (loss) and
cash flows separately disclose expenses and cash transactions, respectively,
related to the chapter 11 proceedings.
Principles of Consolidation
The consolidated financial statements include the accounts of all of the
Company's subsidiaries. Intercompany accounts and transactions have been
eliminated.
Separate condensed combined financial statements of the entities in chapter 11
have not been presented because they represent a substantial portion of the
Company. Additionally, entities not in chapter 11 represent identifiable
investments of those entities in chapter 11 and are therefore subject to the
chapter 11 process.
Cash and Cash Equivalents
<PAGE> 10
Marketable securities with original maturities of three months or less are
considered to be cash equivalents. The carrying amount reported in the
Consolidated Balance Sheet approximates fair value.
- 14 -
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards No. 105,
consist primarily of trade accounts receivable. The Company's customer base
includes all significant automotive manufacturers and their first tier
suppliers in North America and Europe. Although the Company is directly
affected by the well-being of the automotive industry, management does not
believe significant credit risk existed at November 30, 1993.
Inventories
Inventories are valued at the lower of cost or market, which approximates
current replacement cost. The last-in first-out ("LIFO") method of valuation
was used for a substantial portion of inventories.
Property, Plant and Equipment
The Company records investments in land and land improvements, buildings and
machinery and equipment at cost. Improvements are capitalized, while repair
and maintenance costs are charged to operations as incurred.
The Company provides for depreciation of plant and equipment using the
straight-line method over the estimated lives of the assets.
Cost in Excess of Net Assets Acquired
Amounts are being amortized using the straight-line method primarily over 40
years.
Retirement Plans
Pension or profit sharing retirement plans cover substantially all of the
Company's employees.
<PAGE> 11
Postretirement Benefits Other Than Pensions
Effective December 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 ("FAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This standard requires that the
Company charge the expected cost of retiree health benefits to
- 14 -
expense during the years employees render service. In prior years, the Company
recognized these benefits on a pay-as-you-go basis.
Income Taxes
Effective December 1, 1992, the Company implemented the provisions of Statement
of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes," which changes the criteria for recognizing deferred tax assets on the
balance sheet. In 1992 and 1991, the Company accounted for income taxes in
accordance with the provisions of Statement of Financial Accounting Standards
No. 96 ("FAS 96"), "Accounting for Income Taxes."
- 14 -
Foreign Currency Translation
Adjustments resulting from translation of foreign currency financial statements
generally are excluded from the results of operations and accumulated in a
separate component of shareholders' equity (deficit). Gains and losses from
foreign currency transactions are included in the determination of net income
(loss) and were not material.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
financial statement presentation.
B. PROCEEDINGS UNDER CHAPTER 11
On January 7, 1991 (the "petition date"), Eagle-Picher Industries, Inc. (the
"Company") and seven of its domestic subsidiaries each filed a voluntary
petition for relief under chapter 11 of the United States Bankruptcy Code
("chapter 11") with the United States Bankruptcy Court for the Southern
District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy
<PAGE> 12
Court"). Each filing entity is currently operating its business as a debtor in
possession in accordance with the provisions of the Bankruptcy Code.
The chapter 11 filings were the consequence of a cash shortfall resulting from
the Company's inability to satisfy certain immediate asbestos litigation
liabilities. As a result of the chapter 11 filings, substantially all
litigation pending against the Company as of the petition date is stayed and
- 15 -
no party may take any action to recover a pre-petition claim, except pursuant
to further order of the Bankruptcy Court.
An Unsecured Creditors' Committee, an Injury Claimants' Committee ("ICC"), an
Equity Security Holders' Committee and a Legal Representative for Future
Claimants ("RFC") have been appointed in the chapter 11 cases. An unofficial
asbestos co-defendants' committee has also been participating in the chapter 11
cases. In accordance with the provisions of the Bankruptcy Code, these parties
have the right to be heard with respect to transactions outside the ordinary
course of business. The official committees and the RFC are the primary
parties with whom the Company is negotiating the terms of a plan of
reorganization. In June 1992, a mediator was appointed by the Bankruptcy Court
to assist the constituencies in their negotiations.
The Bankruptcy Court established a bar date of October 31, 1991 for all
pre-petition claims against the Company other than those arising from the sale
of asbestos-containing products. The bar date is the date by which claimants
who disagree with the amounts recorded as owed to them by the Company must file
a proof of claim against the Company. Substantially all of the general claims
filed by vendors, note holders and other miscellaneous parties pursuant to this
bar date have been reconciled by the Company. The reconciled claims have been
allowed as pre-petition claims against the Company's estate. A small number
of such claims remains to be resolved; however, the Company does not expect the
effect of their resolution to be material. See Note M for further information
regarding certain environmental and other litigation claims which were also
filed pursuant to the October 31,
<PAGE> 13
1991 bar date. In addition, the Bankruptcy Court established a bar date of
September 30, 1992 for all present asbestos-related claims. See Note L for
further information about asbestos-related claims.
On November 9, 1993, the Company reached an agreement on the principal elements
of a joint plan of reorganization that provides a basis for the Company and its
subsidiaries to emerge from chapter 11. The agreement is with the ICC and the
RFC, the representatives of the holders of present and
- 15 -
future asbestos-related and other toxic tort claims in the Company's chapter 11
case, and was reached with the assistance of the mediator appointed by the
Bankruptcy Court.
The agreement contemplates a settlement of the Company's liability for all
present and future asbestos-related personal injury claims. These claims would
be channeled to and resolved by a claims administration trust that would
receive cash, debt securities and substantially all of the common stock of the
reorganized Company under a plan of reorganization (the "Plan"). As a
consequence of the proposed settlement, the Company recorded a provision in the
fourth quarter of 1993 of $1.135 billion to increase the asbestos liability
subject to compromise to $1.5 billion.
The Company also recorded a provision of $41.4 million in 1993 for
environmental and other litigation claims in anticipation of settlement of such
claims (see Note M).
- 15 -
Liabilities incurred by the Company as of the petition date and subject to
compromise under a plan of reorganization are separately classified in the
Consolidated Balance Sheet and include the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
---- ----
<S> <C> <C>
Asbestos liability - Note L $ 1,500,029 $ 364,451
Long-term debt - Note F 62,004 61,756
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C>
Accounts payable 43,135 42,793
Accrued liabilities - Note M 51,395 10,576
--------- ---------
$ 1,656,563 $ 479,576
========= =========
</TABLE>
The accompanying consolidated financial statements have been prepared on a
going concern basis which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. The
liabilities subject to compromise listed above have been reported on the
- 16 -
basis of the expected amount of the allowed claims even though they may be
settled for lesser amounts. Upon confirmation of a plan of reorganization, the
Company would utilize the fresh-start reporting principles contained in SOP
90-7, which would result in adjustments relating to the amounts and
classification of recorded assets and liabilities, determined as of the plan
confirmation date. At this date, because no plan of reorganization has been
filed with the court, the Company cannot be certain of the terms and provisions
thereof. However, the Company believes that the ultimate consideration to be
received by the unsecured creditors will be substantially less than the amounts
shown in the accompanying Consolidated Balance Sheet.
The agreement on the principal elements of a joint plan of reorganization
discussed above provides that the Company, the ICC and the RFC will negotiate
with the Unsecured Creditors' Committee and the Equity Security Holders'
Committee with the goal of developing a consensual plan of reorganization. If
such a consensual plan cannot be achieved, the agreement provides that a plan
will be filed under which holders of pre-petition unsecured claims, other than
asbestos, lead and silica-related claims, will receive 30% of their allowed
claims in value, and no distribution would be made to the Company's existing
common shareholders whose shares would be canceled. Under the Bankruptcy Code,
shareholders are not entitled to any distribution under a plan of
reorganization unless all classes of pre-petition creditors receive
satisfaction in full of their allowed claims or accept a plan which allows
<PAGE> 15
shareholders to participate in the reorganized company or to receive a
distribution. The treatment under the Plan of asbestos property damage, lead
and silica claims is to be negotiated.
Following the negotiations described above, the Company intends to file a plan
of reorganization with the Bankruptcy Court and proceed to confirmation in
accordance with the provisions of the Bankruptcy Code, including soliciting the
requisite creditor and shareholder acceptances. Implementation of the
agreement and the treatment of claims and interests as provided therein is
subject to confirmation of the Plan in accordance with
- 16 -
the provisions of the Bankruptcy Code.
The net expense resulting from the Company's chapter 11 filings has been
segregated from expenses related to ordinary operations in the accompanying
consolidated financial statements and includes the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Professional fees $ 5,921 $ 8,996 $ 9,584
Employee retention plan - - 1,500
Debt financing costs - 476 1,397
Other expenses 807 1,823 1,259
Interest income (2,384) (2,257) (1,616)
------- ------- -------
$ 4,344 $ 9,038 $12,124
======= ======= =======
</TABLE>
Interest income is attributable to the accumulation of cash and cash
equivalents subsequent to the petition date.
C. DISPOSITIONS
The Company closed its Mat Division in Willoughby, Ohio in October 1991 and
subsequently sold the assets. A provision of $10,000,000 or $.91 per share was
recorded in 1991 for the costs of that closure. Sales for this operation in
1991 were $23,060,000 and pre-tax losses in 1991, excluding the provision for
closure, were $6,560,000. In 1991, the Company also made provisions
<PAGE> 16
totaling $2,326,000 for the disposition of other operations and properties.
- 16 -
<PAGE> 17
D. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
------- --------
<S> <C> <C>
Raw materials and supplies $ 39,319 $ 33,404
Work-in-process 25,381 25,646
Finished goods 13,983 15,193
------- --------
78,683 74,243
Allowance to value inventory at
cost on the LIFO method 10,377 10,035
-------- --------
$ 68,306 $ 64,208
======== ========
</TABLE>
The percentage of inventories valued using the LIFO method was 79% in 1993 and
71% 1992. The effects of liquidations of LIFO inventory quantities carried at
lower costs prevailing in prior years were not material in 1993 and 1992. In
1991, these liquidations increased pre-tax income by $1,099,000.
E. OTHER ASSETS
Other assets consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
---- ----
<S> <C> <C>
Cost in excess of net assets acquired,
net of accumulated amortization of
$3,580 in 1993 and $3,132 in 1992 $ 12,900 $ 13,348
Notes receivable 6,273 8,115
Prepaid pension cost - Note J 7,019 6,780
Other 6,819 5,292
-------- --------
$ 33,011 $ 33,535
======== ========
</TABLE>
Notes receivable include $4,550,000 received as partial consideration for the
sale of a division. This note is payable in two equal installments in 1997 and
1998 and bears interest at 8% with the first interest payment due in August
1994.
F. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
In October 1992, the Bankruptcy Court approved a debtor in possession financing
agreement which provides a $40,000,000 committed revolving credit
<PAGE> 18
- 17 -
facility ("Facility"). The Facility replaced the $42,000,000 committed
revolving credit facility provided by a debtor in possession financing
agreement approved in May 1991. The entire amount of the Facility is available
for both cash borrowings and letters of credit and expires on the earlier of
December 31, 1994 or the effective date of a confirmed plan of reorganization.
Letters of credit totaling $34,091,000 and $33,195,000 were outstanding on
November 30, 1993 and 1992, respectively, leaving the Company with $5,909,000
and $6,805,000, respectively, in available borrowing capacity under the
Facility. There were no cash borrowings at any time in 1993 or 1992 under
either of these facilities.
The annual rate of interest under this Facility is the agent bank's prime rate
plus 1-1/2%. Fees for letters of credit are 1-1/2% to 2-1/2% per annum and a
commitment fee equal to 1/2% per annum is due on the unused portion. The
obligations are secured by accounts receivable and inventories and are afforded
administrative priority under the Bankruptcy Code. The Company has had
sufficient collateral to borrow the maximum amount under this Facility. The
Facility also contains affirmative and negative covenants which include, among
other things, limitations on capital expenditures and additional borrowings and
minimum quarterly and annual cash flow requirements. The Company has been in
compliance with these covenants.
Repayments of pre-petition debt obligations may be made only with the approval
of the Bankruptcy Court. The Bankruptcy Court has approved payments by the
Company with respect to certain pre-petition secured debt obligations in order
to provide the holders of such obligations with adequate protection of their
interests in their collateral security. These adequate protection payments
generally have been in the form of principal payments paid over the remaining
lives of the collateral assets in an aggregate amount equal to the determined
market value of those assets. The amount by which the original obligation and
pre-petition accrued interest exceeds the collateral value is deemed to be a
general unsecured claim. These claims are included in
<PAGE> 19
liabilities subject to compromise. Interest expense has not been recorded on
these obligations for the post-petition period because interest is not
- 17 -
payable. Interest on undersecured and other unsecured pre-petition debt
obligations would have been $7,299,000 in 1993, $7,502,000 in 1992, and
$6,751,000 for the post-petition period in 1991. Due to the extenuating
circumstances involving both secured and unsecured long-term debt as a result
of the chapter 11 filings and the anticipated reorganization, it is not
practicable to estimate the fair value of long-term debt which is described
below.
- 17 -
Long-term debt consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
---- ----
<S> <C> <C>
9-1/2% Sinking fund debentures, due
2017 $ 50,000 $ 50,000
Industrial revenue bonds 18,200 18,275
Secured notes 15,005 16,515
Debt of foreign subsidiaries 2,684 4,840
Other 564 621
------- -------
86,453 90,251
Less:
Current portion 2,737 3,462
Subject to compromise 62,004 61,756
------- -------
Long-term debt, less current portion $ 21,712 $ 25,033
======= =======
Unsecured debt included in liabilities
subject to compromise consisted of:
Sinking fund debentures $ 50,000 $ 50,000
Industrial revenue bonds 7,500 7,500
Unsecured portion of secured notes 4,132 3,884
Other 372 372
------- -------
$ 62,004 $ 61,756
======= =======
</TABLE>
Interest rates averaged 7% in 1993, 8% in 1992, and 9% in 1991 on the
industrial revenue bonds, foreign and other long-term debt, which were to
mature at various dates through 2004.
Interest rates averaged approximately 11% in 1993, 1992, and 1991 on the
secured notes which were due to mature at various dates through 1999.
<PAGE> 20
Long-term debt (excluding amounts subject to compromise) is scheduled to mature
as follows: $2,737,000 in 1994, $1,901,000 in 1995, $1,640,000 in 1996,
$2,225,000 in 1997, and $1,648,000 in 1998. The unsecured portion of
- 18 -
long-term debt will be resolved in a plan of reorganization.
During 1993, 1992, and 1991, the Company paid interest of $2,100,000,
$2,700,000, and $5,100,000, respectively.
G. INCOME TAXES
The Company adopted FAS 109 in 1993. Like FAS 96, FAS 109 is an asset and
liability method for accounting for income taxes. Generally, FAS 109 allows
for at least the partial recognition of deferred tax assets in the current
period for the future benefit of net operating loss carryforwards and items for
which expenses have been recognized for financial statement purposes, but will
be deductible in future periods. Generally, FAS 96 prohibited any
consideration of future events in calculating deferred tax assets. Given the
uncertainties surrounding the chapter 11 case, the Company does not believe
that recognition of a significant portion of the deferred tax assets relating
to the asbestos liability is appropriate at this time. Accordingly, a
significant valuation allowance was provided at the time of adoption. As a
result, the cumulative effect of this change in accounting for income taxes was
not material and prior year financial statements have not been restated to
apply the provisions of FAS 109. The effect of adopting FAS 109 on quarterly
results in 1993 was also not material.
Total income tax benefit for the year ended November 30, 1993 of $1,490,000
consists of $5,000,000 expense from operations and $6,490,000 tax benefit of
the cumulative effect of the change in accounting for postretirement benefits.
The following is a summary of the components of income taxes (benefit) from
operations:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal - current $12,500 $4,200 $ 900
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
- deferred (11,800) (4,600) 100
Foreign 2,700 2,700 2,300
State and local 1,600 700 (400)
-------- -------- --------
$ 5,000 $ 3,000 $ 2,900
======== ======== ========
</TABLE>
- 18 -
The significant components of deferred income tax expense (benefit)
attributable to income from operations are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Asbestos litigation, net of insurance
proceeds $(397,500) $ (1,300) $ 1,500
Change in valuation allowance 404,900 - -
Environmental and other claims (14,500) - -
Utilization of accounting
loss carryforward - (8,300) -
Accounting losses for which
deferred Federal income tax
benefits could not be recognized - - 6,100
Change in Federal income tax rate (3,800) - -
Utilization (reversal) of tax credits 1,300 4,100 (2,000)
Liquidated operations 400 2,300 (3,600)
Depreciation (1,100) (2,300) (1,200)
Other (1,500) 900 (700)
-------- ------- -------
Deferred tax expense (benefit) $(11,800) $(4,600) $ 100
======== ======= =======
</TABLE>
- 18 -
Components of deferred tax balances as of November 30, 1993 are as follows (in
thousands of dollars):
<TABLE>
<S> <C>
Deferred tax liabilities:
Property, plant and equipment $ (6,863)
Prepaid pension (2,457)
Other (3,866)
--------
Total deferred tax liabilities (13,186)
--------
Deferred tax assets:
Asbestos liability 525,010
Accrued liabilities (including amounts
subject to compromise) 25,742
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
Postretirement benefit liability 7,073
Other 4,848
--------
Total deferred tax assets 562,673
--------
Valuation allowance (519,563)
--------
Net deferred tax assets $ 29,924
========
</TABLE>
- 19 -
A significant portion of the net deferred tax asset at November 30, 1993 is
expected to be recovered through the carryback of amounts which will become
deductible when paid.
The differences between the total income tax expense from operations and the
income tax expense (benefit) computed using the Federal income tax rate were
as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax
expense (benefit) $(398,900) $ 10,800 $ (4,400)
Change in valuation allowance 404,900 - -
Utilization of accounting
loss carryforward - (8,300) -
Accounting losses for which
deferred Federal income tax
benefits could not be recognized - - 6,100
Change in Federal income tax rate (3,800) - -
Tax rate differential 1,300 600 600
Other 1,500 (100) 600
-------- --------- ---------
Total income tax expense $ 5,000 $ 3,000 $ 2,900
======== ========= =========
</TABLE>
The Company received tax refunds in 1992 and 1991 of $1,400,000 and
$17,500,000, respectively. The Company paid income taxes in 1993, 1992, and
1991 of $16,500,000, $11,300,000, and $4,700,000, respectively.
H. INCOME (LOSS) PER SHARE
The calculation of net income (loss) per share is based upon the average number
of common shares outstanding assuming the exercise of stock options.
<PAGE> 23
The average number of shares used in the computation of net income (loss) per
share was 11,030,515 in 1993 and 10,978,432 in 1992 and 1991.
- 19 -
<PAGE> 24
I. COMMON STOCK OPTIONS
At November 30, 1993, there were outstanding common stock options under a 1990
and a 1983 plan each authorizing 450,000 shares. The options expire at various
dates through 2000. No options could be exercised as of November 30, 1993.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
Shares Option Price
------ ------------
<S> <C> <C>
Outstanding at November 30, 1990 762,600 $ 2.50 to $24.25
Expired (69,000) $ 2.50 to $24.25
------- -------
Outstanding at November 30, 1991 693,600 $ 2.50 to $14.50
Expired (96,600) $ 2.50 to $14.50
------- -------
Outstanding at November 30, 1992 597,000 $ 2.50 TO $14.25
Exercised (62,500) $ 2.50
Expired (15,000) $ 2.50
------- -------
Outstanding at November 30, 1993 519,500 $ 2.50 TO $14.25
</TABLE>
There were 259,274 shares available for future grants at November 30, 1993.
- 19 -
<PAGE> 25
J. RETIREMENT BENEFIT PLANS
Employees of the Company and its subsidiaries are covered by various pension or
profit sharing retirement plans. The cost of providing retirement benefits was
$849,000 in 1993, $1,734,000 in 1992, and $2,015,000 in 1991.
Plan benefits for salaried employees are based primarily on employees' highest
five consecutive years' earnings during the last ten years of employment. Plan
benefits for hourly employees are based on a dollar unit multiplied by the
number of service years.
- 19 -
Net periodic pension expense for the Company's defined benefit plans included
the following components:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 3,924 $ 3,204 $ 3,329
Interest cost on projected
benefit obligation 12,490 12,228 11,533
Actual gain on plan assets (20,658) (26,536) (29,360)
Net amortization and deferral 3,943 11,978 15,763
-------- -------- --------
Net periodic pension expense $ (301) $ 874 $ 1,265
======== ======== ========
</TABLE>
The plans' assets consist primarily of listed equity securities and publicly
traded notes and bonds. The actual net return on plan assets was 11.3% in
1993, 15.4% in 1992, and 18.8% in 1991.
The following table sets forth the plans' funded status and amounts recognized
in the Company's Consolidated Balance Sheet at November 30:
<TABLE>
<CAPTION>
(In thousands of dollars)
1993 1992
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(156,059) $(134,792)
========= =========
Accumulated benefit obligation $(161,674) $(140,477)
========= =========
Projected benefit obligation $(176,875) $(156,713)
Plan assets at fair value 188,380 178,081
--------- ---------
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C>
Projected benefit obligation
less than plan assets 11,505 21,368
Unrecognized net (gain) loss 7,822 (1,905)
Unrecognized prior service cost (benefit) (754) 56
Unrecognized net asset at
November 30 (11,554) (12,739)
--------- ---------
Prepaid pension cost
recognized in Consolidated
Balance Sheet $ 7,019 $ 6,780
========= =========
</TABLE>
The discount rate and weighted average rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.2%, and 8.0% and 6.2%, respectively, at November 30,
1993 and 1992, respectively. The expected long-term rate of return on assets
was 9.0% during 1993 and 1992.
The Company's funding policy is to fund amounts on an actuarial basis to
provide for current and future benefits in accordance with the funding
guidelines of ERISA.
K. EMPLOYEE BENEFITS OTHER THAN PENSIONS
In addition to providing pension retirement benefits, the Company makes health
care and life insurance benefits available to certain retired employees on a
limited basis. Generally, the medical plans pay a stated percentage of medical
expenses reduced by deductibles and other coverages. Eligible employees may
elect to be covered by these health and life insurance benefits if they reach
early or normal retirement age while working for the Company. In most cases a
retiree contribution for health insurance coverage is required. The Company
funds these benefit costs primarily on a pay-as-you-go basis.
In the fourth quarter of 1993, the Company adopted the provisions of FAS 106.
The Company elected to recognize the accumulated postretirement benefit
obligation of $19,088,000 retroactively to December 1, 1992 as an accounting
change. On an aftertax basis, this charge was $12,598,000 or $1.14 per share.
Previously reported quarterly results in 1993 have been restated to
<PAGE> 27
reflect the adoption of FAS 106 as of December 1, 1992. The adoption of FAS
106 had no impact on consolidated cash flows. In 1992 and
- 20 -
1991, prior to adoption of FAS 106, the cost of retiree health care and life
insurance benefits, net of retiree contributions, was approximately $911,000
and $503,000, respectively. The components of expense for 1993 were as follows
(in thousands of dollars):
<TABLE>
<S> <C>
Service cost - benefits earned
during the period $ 467
Interest cost on accumulated
postretirement benefit obligation 1,394
-------
Net postretirement benefit expense $ 1,861
=======
</TABLE>
The accumulated postretirement benefit obligation at November 30, 1993
consisted of the following components:
<TABLE>
<CAPTION>
(In thousands of dollars)
<S> <C>
Retirees and dependents $13,545
Eligible active participants 2,011
Other active participants 6,743
-------
Accumulated postretirement
benefit obligation 22,299
Unrecognized net loss (2,090)
-------
Accrued postretirement benefit cost $20,209
=======
</TABLE>
Benefit costs were estimated assuming retiree health care costs would initially
increase at a 13% annual rate which
- 20 -
decreases to an ultimate rate of 6% in 7 years. If this annual trend rate
would increase by 1%, the accumulated postretirement obligation as of November
30, 1993 would increase by $2,375,000 with a corresponding increase of $102,000
in the postretirement benefit expense in 1993. The discount rate used in
determining the accumulated postretirement obligation at December 1, 1992 was
7.5%. At November 30, 1993, the discount rate was 6.5%.
<PAGE> 28
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," will require companies to accrue postemployment
benefits if the obligation is attributable to employees' services already
rendered, employees' rights to those benefits accumulate or
- 21 -
vest, payment of benefits is probable and the amount of the benefits can be
reasonably estimated. The cost of the Company's postemployment benefits is
currently recognized as incurred. When adopted, the Company believes the new
standard will not have a material effect on the results of its operations or
financial position.
L. ASBESTOS LITIGATION AND CLAIMS
On November 9, 1993, the Company reached agreement on the principal elements of
a joint plan of reorganization (the "Plan") with the Injury Claimants'
Committee ("ICC") and the Legal Representative for Future Claimants ("RFC").
The agreement, reached with the assistance of a court-appointed mediator,
provides, among other things, that all present and future asbestos-related
personal injury claims will be channeled to and resolved by an independently
administered claims trust. Similar plans of reorganization have been confirmed
in the chapter 11 cases of certain other companies involved in asbestos
litigation. The treatment under the Plan of asbestos property damage, lead and
silica claims is to be negotiated.
Implementation of the agreement and the treatment of claims and interests as
provided therein (including asbestos-related personal injury claims), is
subject to confirmation of the Plan in accordance with the provisions of the
Bankruptcy Code. In addition, a prerequisite to the effectiveness of the Plan
is the issuance by the Bankruptcy Court of an order permanently prohibiting and
enjoining all holders of asbestos- related personal injury claims from
asserting or pursuing their claims against the reorganized Company; instead
requiring that all such claims be asserted against and resolved by the
independently administered trust. Parties in interest in the chapter 11 case
may challenge the Plan and the basis therefor. While the
<PAGE> 29
Company cannot predict when the Plan will be confirmed or become effective, it
intends to pursue confirmation vigorously.
The asbestos-related claims, which consist of personal injury and property
damage claims, are discussed below.
- 21 -
Personal Injury
Prior to its chapter 11 filing, the Company had been named as a co-defendant in
a substantial number of lawsuits brought by present or former insulators,
shipyard workers, steel workers, tire workers and other persons alleging damage
to their health from exposure to dust from asbestos-containing industrial
insulation products. As a result of the chapter 11 filing by the Company, all
such litigation is automatically stayed pursuant to section 362 of the
Bankruptcy Code.
As of the petition date, there were approximately 67,800 asbestos-related
personal injury claims outstanding against the Company. In fiscal 1991, prior
to the imposition of the automatic stay on January 7, 1991, approximately 1,100
new claims were filed and the Company disposed of 1,000 claims. The average
cost per disposed claim, excluding legal fees, was approximately $6,800. The
total cost of this litigation in fiscal 1991, prior to the imposition of the
stay, was $9,700,000.
The 1991 settlement of a claim with an insurance company and a favorable ruling
from the Bankruptcy Court resulted in the reimbursement to the Company of
$4,377,000 in 1992 and $5,309,000 in 1991 for asbestos-related losses and
expenses paid in earlier years. At November 30, 1993, $314,000 of insurance
coverage remained as due from insurance carriers with respect to
asbestos-related claims.
The Bankruptcy Court set September 30, 1992 as the bar date for present
asbestos-related claims. The Company implemented the Court-approved notice
<PAGE> 30
plan by sending out approximately 187,000 proof of claim forms to known
claimants and their attorneys; by publishing the notice of the bar date twice
in approximately 88 newspapers and other periodicals; and by providing visual
and/or audio messages concerning such bar date to approximately 400 radio and
300 television stations to be used in public service announcements.
- 21 -
All persons with a pre-petition asbestos-related claim were required to file a
proof of claim by the bar date in order to participate in the reorganization
cases. Approximately 160,000 proofs of claim were filed alleging personal
injury. The Company believes that approximately 11,000 of these claims are
duplicates or were filed by persons whose lawsuits were previously closed.
The vast majority of persons who had filed pre-petition lawsuits against the
Company, which were pending as of the petition date, filed proofs of claim in
the reorganization cases. Therefore, approximately 81,200 previously
undisclosed claims were filed as a result of the bar date. The Company
believes that most of the approximately 40,000 claimants who in 1991, pursuant
to a previous Bankruptcy Court order, notified the Company of their intent to
assert a claim against the Company, also filed claims pursuant to the bar date.
The Company expects that additional asbestos-related personal injury claims
will arise for several decades into the future. Holders of these claims were
not required to file claims pursuant to the bar date. The Company cannot
definitively estimate the number of such future claims at this time.
The agreement on the principal elements of the Plan contemplates a settlement
of the Company's liability for all present and future asbestos-related
personal injury claims. This may moot the Company's motion which sought
authority to collect medical, occupational and product exposure information to
evaluate the extent of such liability. No decision has yet been rendered with
respect to this motion that was submitted to the Bankruptcy Court in April
1992.
<PAGE> 31
The mediation to arrive at a consensual plan of reorganization, that began with
the appointment of a mediator by the Bankruptcy Court in June 1992, is ongoing.
The agreement on the principal elements of the Plan, which was reached with the
assistance of the mediator, also provides that the Company, the ICC and the RFC
will negotiate with the Unsecured Creditors' Committee and the Equity Security
Holders' Committee, the other statutory committees appointed in the Company's
chapter 11 case, with the goal of developing a consensual plan of
reorganization. These negotiations have commenced under
- 22 -
the direction of the mediator appointed by the Bankruptcy Court and the Company
intends to proceed with these negotiations expeditiously.
Many of the asbestos-related claims filed in the chapter 11 case do not provide
sufficient information to enable the Company to determine whether or not it has
liability for the claim or to definitively value any such liability.
Similarly, the Company is not able to project precisely the number and value of
future claims. The Company, however, is certain that it has significant
liability with respect to the 160,000 proofs of claim which were filed against
the Company pursuant to the September 30, 1992 bar date and which allege
asbestos-related personal injury. The Company also is certain that there is
significant liability with respect to future asbestos-related personal injury
claims. After considering the significant costs that likely would be incurred
in litigating the extent and nature of its asbestos-related personal injury
liability, the uncertainty as to the outcome of such an exercise, the need to
conserve the estate's assets for every creditor, and the benefits that would
accrue to the Company's operations, customers, vendors, employees and host
communities from the Company's timely emergence from chapter 11, the Board of
Directors and management concluded that the settlement contemplated by the
agreement on the principal elements of the Plan discussed in this footnote is
in the best interests of the Company. As a consequence of the proposed
settlement, the Company recorded a provision in the fourth quarter of 1993 of
$1.135 billion to increase the asbestos liability subject to compromise to $1.5
billion.
<PAGE> 32
Property Damage
There were forty-one lawsuits pending against the Company at the end of fiscal
1991 resulting from the presence of asbestos-containing products in buildings.
The pending lawsuits typically named numerous defendants, were filed in both
state and federal courts, and were brought by school districts, cities, states,
counties, universities, hospitals, a public library and commercial building
owners. The lawsuits typically demanded compensation for
- 22 -
any costs incurred in identifying, repairing, encapsulating or removing
asbestos-containing products, or sought to have the defendants do these things
directly. Many lawsuits also sought punitive damages. At least three of the
pending cases have been certified as class actions and class certification has
been sought by the plaintiffs in three other cases. Prior to filing its
chapter 11 petition, the
- 22 -
Company settled seven building related cases for less than $22,000 in the
aggregate.
Approximately 1,000 proofs of claim alleging such property damage claims were
filed in the chapter 11 cases pursuant to the bar date. These claims include
most, if not all, of the lawsuits described above that were pending on the
petition date. Many of the other claims also appear to be asserted by
claimants similar to those which had commenced pre-petition lawsuits.
The agreement on the principal elements of the Plan provide that the treatment
under a plan of reorganization of the asbestos property damage claims asserted
against the Company, including both the pre-petition lawsuits and the proofs of
claim filed pursuant to the bar date, will be negotiated with the assistance of
the mediator as discussed above.
M. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS
<PAGE> 33
The Bankruptcy Court established a bar date of October 31, 1991 for all
pre-petition claims against the Company other than those arising from the sale
of asbestos-containing products. Pursuant to the general claims bar date,
numerous proofs of claim were filed alleging a right to payment from the estate
due to litigation matters. Certain of such claims are discussed below.
Environmental
The Company received 1,102 proofs of claim alleging a right to payment because
of environmental matters. These claims, relating primarily to
- 23 -
various Superfund sites, sought payment aggregating $27.9 billion, of which
readily identifiable duplicate claims approximated $27.5 billion. The Company
is attempting to resolve the majority of these environmental claims through
negotiations with the United States Environmental Protection Agency ("USEPA")
and the United States Department of Interior ("DOI"). Pursuant to a tentative
agreement between the Company and the USEPA (which is subject to definitive
documentation and appropriate approvals), the USEPA would be afforded an
allowed, pre-petition, general unsecured claim of approximately $30.3 million
in full satisfaction of all of the Company's alleged liability at most of the
Superfund sites. In exchange for the allowed claim, the USEPA would release
the Company from liability and grant it protection from claims of other parties
that may be liable at the sites so that the Company's settlement will
completely resolve all claims with respect to these sites.
With respect to the small number of sites as to which the USEPA believes that
it does not have sufficient information to negotiate a meaningful settlement
with the Company, the tentative agreement provides a process which would permit
any liability with respect to these sites to be resolved in the future when
additional information is available. Pursuant to this process, the Company
would retain all of its rights and defenses as to these sites and settle or
litigate its liability at such future time. The tentative agreement provides
that any future liability of the Company, when fixed,
<PAGE> 34
would be satisfied with the same type and amount of consideration that
pre-petition, general unsecured creditors receive pursuant to a confirmed plan
of reorganization in the Company's chapter 11 case. The proposed settlement
will be subject to the approval of the Bankruptcy Court.
The negotiations with the DOI to resolve the Company's liability for any
natural resource damage that may have occurred at the Superfund sites, on
similar terms, have not progressed as far. Natural resource damage is damage
caused to the environment or to plants or animals by the release of hazardous
materials at Superfund sites. At this stage of such negotiations, the DOI has
demanded an allowed pre-petition, general unsecured claim in the amount of $7.2
million. Negotiations are continuing.
- 23 -
The Company believes that the negotiations have progressed sufficiently to
enable it to prepare a proposed settlement agreement resolving the
environmental and natural resource damage claims. Until such agreement is
completed and all requisite approvals are obtained, no party is in any way
bound to the terms of the settlement. The Company believes, however, that the
terms and provisions of the tentative agreement with the USEPA are fair and
equitable and that a settlement, as contemplated thereby, is in the Company's
best interests.
Lead Chemicals
The Bankruptcy Court received 131 timely proofs of claim asserting liability
based on personal injury or property damage from lead chemicals allegedly
manufactured and sold by the Company. Three additional claims were filed in
- 23 -
November 1993, after the 1991 bar date. While some of the timely filed claims
did not specify an amount, those that did sought an aggregate of $165 million.
The late filed claims seek $50 million in damages. All of the timely claims
which specified an amount of damages have been fully withdrawn without the
allowance of any amount by the Company.
<PAGE> 35
There have been significant legal rulings in the last year in three lead
paint-based lawsuits that were brought against the Company pre-petition and
that have been proceeding against other defendants even though they were stayed
against the Company as a result of the commencement of its chapter 11 case.
Specifically, those counts alleging negligence and strict product liability in
the suit brought by the City of New York seeking indemnity for costs New York
had incurred and would incur because residents of city-owned housing ingested
lead- containing paint in that housing, were dismissed. Certain other counts
in that suit are still pending. The City of New York did not file a timely
proof of claim against the Company before the October 31, 1991 bar date for
such claims, nor did the co-defendants in such suit. However, the late filed
claims discussed above were filed in connection with the suit by the City of
New York.
- 24 -
A suit brought by the City of Philadelphia on behalf of a requested class of
all cities in the United States with more than 100,000 residents for
inspection, testing, monitoring or abatement costs related to the presence of
lead paint in buildings in the cities was dismissed in its entirety. An
amended complaint filed by the same plaintiffs was also dismissed, and the
dismissal was affirmed by a United States Circuit Court of Appeals.
Finally, the Federal District Judge presiding over a lead-related personal
injury suit in Boston, Massachusetts that was among the first such suits filed
against manufacturers of lead pigments, has dismissed the "market share" count
in the suit. This legal theory would impose liability on all manufacturers of
lead pigments in the marketplace in a case in which the plaintiff cannot
identify the particular manufacturer that injured the plaintiff. Following the
dismissal of the market share theory, the Court granted motions for summary
judgment in favor of defendants disposing of the remainder of the case. The
complete dismissal of this case has also been affirmed by a United States
Circuit Court of Appeals.
Following the withdrawals and dismissals discussed above, 128 of the 134 proofs
of claim referred to above remain outstanding. The Company has
<PAGE> 36
demanded that the claimants withdraw several of these pending claims. It also
believes that it has valid grounds to object to the allowance of the remaining
claims. As mentioned above, the treatment of present and future lead claims
under a plan of reorganization remains a subject of the mediation.
Other Litigation
The Company received ninety-two claims arising out of litigation matters other
than those related to lead, asbestos or environmental issues. These claims
aggregate approximately $1.1 billion.
The two largest claims appear to be duplicates, although the claimants have
- 24 -
denied that they are. They arise from the suit filed in 1990 by the Company's
majority owned subsidiary, American Imaging Services, Inc., and such
subsidiary's president and minority shareholder against the Company and two of
its officers in the United States District Court for the Northern District of
Texas (the "District Court Action"). Subsequent to the chapter 11 filing, the
plaintiffs amended the complaint to add a third officer of the Company as a
defendant and also filed a separate action against such third officer alleging
the same claims (the "Second District Court Action"). These claims for $500
million each allege numerous breaches of fiduciary duty and a usurpation and
waste of the subsidiary's assets. As a result of the chapter 11 filing, the
District Court Action was stayed against the Company. Additionally, subsequent
to the chapter 11 filing, at the request of the Company, the Bankruptcy Court
issued an order enjoining the plaintiffs from prosecuting such litigation
against any of the Company's three officers. In August 1993, the Company filed
in the Bankruptcy Court an objection to the claims filed against the Company
and also asserted various counterclaims (the "Claims Objection").
Concurrently, the Company also filed with the Bankruptcy Court a motion
requesting that the Bankruptcy Court consolidate the District Court Action and
the Second District Court Action with the
<PAGE> 37
Claims Objection and to allow such consolidated proceeding to proceed before
the Bankruptcy Court. By order entered on January 24, 1994, the Bankruptcy
Court denied the Company's motion and
- 24 -
ordered that all claims asserted by the parties be resolved in the Texas
District Court. The Bankruptcy Court also lifted the automatic stay against
the Company and vacated the injunction with respect to the officers so as to
permit the litigation to proceed.
Thirty-two of the other litigation claims filed against the Company were from
individuals alleging personal injury as a result of exposure to diatomaceous
earth products manufactured and sold by the Company. Each sought $200,000 as a
general unsecured claim. Each claim also included a medical report from a
physician diagnosing an asbestos-related disease or condition. Each of these
claimants also subsequently filed a proof of claim in the amount of $50,000
- 25 -
alleging an asbestos-related disease or condition. In light of the information
contained in the medical reports, the Company filed objections to each of the
thirty-two claims alleging personal injury as a result of exposure to
diatomaceous earth. The claimants did not contest the objections and the
claims were dismissed by the Bankruptcy Court. The thirty-two duplicate claims
that allege an asbestos-related disease or condition are still pending.
Summary
The Company and the individual defendants who were named in some lawsuits
intend to defend all litigation claims vigorously in the manner permitted by
the Bankruptcy Code and/or applicable law. All pre-petition claims against the
Company arising from litigation must be liquidated or otherwise addressed in
the context of the chapter 11 cases. Further, all such claims against the
Company will be resolved in a plan of reorganization. During the pendency of
the chapter 11 cases, any unresolved litigation with respect to pre-petition
<PAGE> 38
claims can proceed against the Company only with the express permission of the
Bankruptcy Court.
The Company has resolved most of the litigation claims that were asserted
pursuant to the October 31, 1991 bar date for claims other than those arising
from the sale of asbestos-containing products. However, as pointed out above,
the two largest litigation claims, which together seek $1.0 billion, and
certain lead chemical claims are still pending. The Company has filed
objections to certain of these litigation-based claims which have not been
resolved, seeking to reduce the amount of such claims or eliminate them
entirely. The Company anticipates filing additional objections to other such
claims if they cannot be resolved through negotiation. These objections will
be vigorously litigated by the Company pursuant to the provisions of the
Bankruptcy Code and applicable law.
The eventual outcome of the environmental and other litigation claims described
herein cannot be reasonably predicted due to numerous uncertainties
- 25 -
that are inherent in the reorganization process. However, negotiations
concerning environmental claims and attempts to negotiate settlements of other
litigation claims have progressed to a point in 1993 that enabled the Company
to record a provision of $41.4 million for these claims. In addition, the
Company may have insurance coverage for certain of these claims and other
factual and legal defenses available to it.
N. INDUSTRY SEGMENT INFORMATION
A general description of the products manufactured by the Company's three
industry segments is:
Industrial
Diatomaceous earth products, rubber products, rare metals, fiberglass
reinforced plastic parts, industrial chemicals and other industrial products.
Machinery
<PAGE> 39
Earth moving machines, heavy-duty forklift trucks, aerospace and defense parts,
metal cleaning and finishing systems, aluminum castings and related products.
Automotive
Mechanical, structural, and trim parts for passenger cars, trucks, vans and
utility vehicles for the OEM and replacement markets.
Sales between segments and foreign operations were not material.
Consolidated sales to Ford Motor Company amounted to $148,000,000 in 1993,
$132,700,000 in 1992, and $116,400,000 in 1991. Consolidated sales to General
Motors Corporation amounted to $73,100,000 in 1993 and $64,500,000 in 1992. No
other customer accounted for 10% or more of consolidated sales.
Consolidated export sales were $73,200,000 in 1993 and $64,700,000 in 1992.
Export sales did not exceed 10% of consolidated sales in 1991.
- 25 -
<PAGE> 40
<TABLE>
INDUSTRY SEGMENT INFORMATION
Years ended November 30
(In millions of dollars)
<CAPTION>
Industrial Machinery Automotive
1993 1992 1991 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $132.6 $122.1 $117.3 $171.7 $151.4 $184.1 $357.2 $338.0 $297.2
====== ====== ====== ====== ====== ====== ====== ====== ======
Operating income 15.0 13.1 13.2 9.1 14.8 17.6 37.4 36.2 7.9
====== ====== ====== ====== ====== ====== ====== ====== ======
Identifiable assets 72.7 70.8 74.8 92.8 78.6 84.0 168.2 163.6 166.4
====== ====== ====== ====== ====== ====== ====== ====== ======
Depreciation and 4.9 4.7 5.0 3.4 3.5 3.3 16.2 16.2 15.6
amortization
====== ====== ====== ====== ====== ====== ====== ====== ======
Capital expenditures 5.6 4.6 5.1 7.4 4.5 4.3 15.4 12.4 14.7
====== ====== ====== ====== ====== ====== ====== ====== ======
Segment Total Corporate Total
1993 1992 1991 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ---- ----
Sales $661.5 $611.5 $598.6 $ - $ - $ - $661.5 $611.5 $598.6
====== ====== ====== ====== ====== ====== ====== ====== ======
Operating income (loss) 61.5 64.1 38.7 (17.7) (17.5) (19.8) 43.8 46.6 18.9
====== ====== ====== ====== ====== ====== ====== ====== ======
Provision for asbestos (1,135.5) - - (1,135.5) - -
Litigation
Provision for environmental (41.4) (2.0) (.5) (41.4) (2.0) (.5)
and other claims
Loss on disposition of - - (12.3) - - (12.3)
operations
Interest expense (2.1) (2.7) (5.9) (2.1) (2.7) (5.9)
Other expense (.2) (1.0) (1.0) (.2) (1.0) (1.0)
Reorganization items (4.4) (9.0) (12.1) (4.4) (9.0) (12.1)
====== ====== ====== ------ ------ ------
Income (loss) before taxes (1,139.8)(1) 31.9 (12.9)
====== ====== ====== ====== ====== ====== ====== ====== ======
Identifiable assets 333.7 313.0 325.2 125.7 106.4 73.8 459.4 419.4 399.0
====== ====== ====== ====== ====== ====== ====== ====== ======
Depreciation and 24.5 24.4 23.9 .5 .3 .2 25.0 24.7 24.1
amortization
====== ====== ====== ====== ====== ====== ====== ====== ======
Capital expenditures 28.4 21.5 24.1 .1 .1 .2 28.5 21.6 24.3
====== ====== ====== ====== ====== ====== ====== ====== ======
(1) Before cumulative effect of accounting change.
</TABLE>
- 26 -
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle-Picher Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Eagle-Picher
Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991)
as of November 30, 1993 and 1992, and the related consolidated statements of
income (loss), shareholders' equity (deficit), and cash flows for each of the
years in the three-year period ended November 30, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle-Picher
Industries, Inc. and subsidiaries as of November 30, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended November 30, 1993 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note B to
the consolidated financial statements, Eagle-Picher Industries, Inc. (the
Company) and seven of its domestic subsidiaries, each filed a voluntary
petition for relief under chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court on January 7, 1991. Although the Company
and its operating subsidiaries are currently operating their businesses as
debtors in possession under the jurisdiction of the Bankruptcy Court, the
continuation of their businesses as going concerns is contingent upon, among
other things, the ability to formulate a plan of reorganization which will gain
approval of the creditors and confirmation by the Bankruptcy Court. The filing
under chapter 11 and the continued uncertainty related to claims associated
with the Company's sale of asbestos products and certain other litigation as
discussed in the following paragraph, raised substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that may be required in connection
with restructuring the Company and its subsidiaries as they reorganize under
chapter 11 of the United States Bankruptcy Code.
As discussed in Notes B and L to the consolidated financial statements, the
accompanying consolidated financial statements include an estimated liability
related to claims associated with the Company's sale of asbestos products. The
final resolution of actual amounts, however, is dependent upon future events,
the outcome of which is not fully determinable at the present time. In
addition, as discussed in Note M, the Company is a defendant in various other
litigation. Although provisions have been made for these matters, the final
outcomes and their effect on the Company's consolidated financial statements
are not presently determinable.
- 27 -
<PAGE> 42
As discussed in Notes A and K, the Company adopted the provisions of the
Financial Accounting Standards Board's SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, in 1993. As discussed in Notes A
and G, the Company changed its method of accounting for income taxes in 1993 to
adopt the provisions of the Financial Accounting Standards Board's SFAS No.
109, Accounting for Income Taxes.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
Cincinnati, Ohio
February 2, 1994
- 27 -
<PAGE> 43
Report of Management
The Company's management is responsible for the preparation and presentation of
the consolidated financial statements and related financial data included in
this annual report. The financial information has been prepared in conformity
with generally accepted accounting principles and as such includes amounts
based on judgments and estimates made by management.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance at reasonable costs that assets are safeguarded
from loss or unauthorized use, and that the financial records may be relied
upon for the preparation of the consolidated financial statements.
The consolidated financial statements have been audited by our independent
auditors, KPMG Peat Marwick. Their audit is conducted in accordance with
generally accepted auditing standards and provides an independent assessment as
to the fair presentation, in all material respects, of the Company's
consolidated financial statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management and the independent auditors to
review internal accounting controls and the quality of financial reporting.
Financial management and the independent auditors have full and free access to
the Audit Committee.
/s/ Thomas E. Petry
Thomas E. Petry
Chairman, President and
Chief Executive Officer
/s/ David N. Hall
David N. Hall
Senior Vice President -
Finance
Cincinnati, Ohio
February 2, 1994
- 28 -
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
On an increase of 8% in sales, operating income decreased to $43.8 million in
1993 from $46.6 million in 1992. Comparative sales volume by industry segment
showed an increase of 9% in the Industrial segment, an increase of 13% in the
Machinery segment, and an increase of 6% in the Automotive segment. Operating
income by industry segment showed an increase of 15% in the Industrial segment,
a decrease of 39% in the Machinery segment, and an increase of 3% in the
Automotive segment. The decrease in operating income in 1993 is entirely
attributable to the Machinery segment and resulted primarily from start-up
costs associated with the production of a new line of heavy-duty forklift
trucks. Difficulties have been encountered in the start-up process in
achieving manufacturing efficiencies and meeting production schedules. In the
Industrial segment, the majority of the increase in sales and operating income
was attributable to the departments which produce isotopically pure boron for
defense and commercial nuclear applications and a wide range of super clean
containers used in environmental testing which meet strict EPA protocols. In
the Automotive segment an increase in demand in the domestic auto market due to
improving economic conditions offset the effects of a severe recession in both
the European and Japanese markets. However, the Automotive Group continues to
face severe pricing pressures.
In November 1993, the Company reached an agreement on the principal elements of
a plan of reorganization that provides a basis for the Company to emerge from
chapter 11. The agreement contemplates a settlement of the Company's liability
for all present and future asbestos-related personal injury claims. As a
consequence of the proposed settlement, the Company recorded a provision of
approximately $1.1 billion to increase the existing liability on the balance
sheet to $1.5 billion. In addition, as a result of the Company's negotiations
concerning environmental claims and attempts to negotiate settlements of other
litigation claims, a provision of $41.4 million was made for environmental and
other litigation claims, which increased accrued liabilities subject to
compromise to $51.4 million.
<PAGE> 45
- 28 -
Interest expense decreased to $2.1 million from $2.7 million due to lower
interest rates charged on variable-rate debt and the repayment of certain
secured debt in November 1992, which was approved by the Bankruptcy Court in
conjunction with the debtor in possession financing agreement.
The components of reorganization items are described in Note B.
The primary components of income tax provision are described in Note G.
During the fourth quarter of 1993, the Company elected to recognize the
accumulated postretirement benefit obligation of $19.1 million retroactively to
December 1, 1992 as a cumulative effect of an accounting change. On an
aftertax basis, this charge was $12.6 million.
1992 COMPARED TO 1991
On a modest increase of 2% in sales, operating income in 1992 increased to
$46.6 million from $18.8 million in 1991. During the fourth quarter of 1991
the Company closed the Mat Division. In 1991, the Mat Division had sales of
$23.1 million and an operating loss of $5.8 million. Excluding this operation,
comparative sales volume by industry segment showed an increase of 5% in the
Industrial segment, a decrease of 18% in the Machinery segment, and an increase
of 23% in the Automotive segment. Operating income by industry segment showed
a decrease of 3% for the Industrial segment, a decrease of 16% for the
Machinery segment, and an increase of 171% for the Automotive segment after
excluding the Mat Division. The increase in operating income in 1992, all
attributable to the Automotive segment, was achieved in the face of the most
severe pricing and competitive pressures ever experienced by the automotive
supplier base. There were several reasons for the improved performance of the
Automotive segment in 1992: 1) continued success in penetrating the light
truck market in North America; 2) continued implementation of cost reduction
programs at all locations that resulted in reduced breakeven levels; and 3)
continued development of new business in all major world automotive markets
(North America, Europe, Japan, and Korea). In the Industrial segment, a slight
increase in sales produced level operating
<PAGE> 46
income in 1992 compared to 1991. In the Machinery segment, the large decline
- 29 -
in sales and operating income reflected the weakness in the defense, capital
equipment and worldwide construction markets.
The Company did not dispose of any operations in 1992. In 1991, there was a
$12.3 million loss on the sale or disposition of operations of which $10.0
million was attributable to the closure of the Mat Division.
Interest expense decreased to $2.7 million from $5.9 million because the
Bankruptcy Court approved partial payment of secured debt as part of the debtor
in possession financing agreements and the Company has not accrued interest on
unsecured or undersecured debt since the chapter 11 petitions were filed on
January 7, 1991.
The components of reorganization items are described in Note B.
The primary component of the income tax provision in 1992 was foreign taxes.
INDUSTRY SEGMENT DATA
Industry segment data for 1993, 1992 and 1991 is summarized on page 26.
FINANCIAL CONDITION
The filing of the petitions for reorganization under chapter 11 on January 7,
1991 had a significant positive impact on the Company's liquidity. The filing
stayed all litigation against the Company with respect to pre-petition claims
and reduced the cash drain for asbestos litigation. In 1993, the Company
increased the amount of its asbestos liability to $1.5 billion and the amount
of accrued liabilities subject to compromise, which includes environmental and
other litigation claims, to $51.4 million. These and the other liabilities
subject to compromise have been recorded based on the expected amount of the
allowed claims, not the amounts of consideration that such allowed claims may
receive under a plan of reorganization.
<PAGE> 47
During 1993, the Company generated $37.7 million from operating activities
while it used $28.2 million for investing activities (primarily capital
expenditures) and $3.0 million
- 29 -
for financing activities. These activities resulted in an overall increase in
cash of $6.5 million in 1993. In October 1992, the Bankruptcy Court approved a
new debtor in possession financing agreement which provides the Company with a
$40.0 million committed revolving credit facility. At November 30, 1993, $34.1
million in letters of credit were outstanding under the facility leaving the
Company with $5.9 million in available borrowing capacity. There were no cash
borrowings in 1993 under this facility.
As of November 30, 1993, the Company had $86.5 million of long-term debt versus
$90.3 million at November 30, 1992. The disposition of unsecured debt of $62.0
million at November 30, 1993 will be resolved in a plan of reorganization in
the chapter 11 cases.
Capital expenditures were $28.5 million in 1993 compared to $21.6 million in
1992.
The cost of reorganization items was $4.3 million in 1993 compared to $9.0
million in 1992.
While the Company is reorganizing under chapter 11, it is prohibited from
paying interest or principal on pre-petition obligations without the approval
of the Bankruptcy Court. To the extent cash generated from operations exceeds
capital expenditures, working capital requirements, approved payments of
secured debt and administrative expenses of the reorganization, the Company
will continue to accumulate cash. Consequently, the liquidity of the Company
should improve.
Although the Company reached an agreement with the Injury Claimants' Committee
and the Legal Representative for Future Claimants on the principal elements of
a plan of reorganization in November 1993, negotiations remain with other
parties before a consensual plan can be filed with the Bankruptcy Court, and
<PAGE> 48
the timing of confirmation of any plan is unpredictable. However, the Company
intends to propose a reorganization plan that will discharge its pre-petition
liabilities (liabilities subject to compromise), provide the reorganized
Company with a capital structure appropriate for an industrial products
- 30 -
company and enable the Company to obtain financing in the credit and debt
markets on an unsecured basis.
SELECTED FINANCIAL DATA
(Unaudited)
(In thousands of dollars, except per share)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $661,452 $611,458 $598,631 $699,347 $729,915
- -----------------------------------------------------------------------------------
Income (Loss) Before
Reorganization Items
and Taxes (1,135,426)(1) 40,924 (788) 44,060 56,314
- -----------------------------------------------------------------------------------
Reorganization Items (2) (4,344) (9,038) (12,124) - -
- -----------------------------------------------------------------------------------
Income (Loss) Before Taxes (1,139,770) 31,886 (12,912) 44,060 56,314
- -----------------------------------------------------------------------------------
Net Income (Loss) (1,144,770)(3) 28,886 (15,812) 39,360 53,814
- -----------------------------------------------------------------------------------
Net Income (Loss) Per Share (103.78)(3) 2.63 (1.44) 3.64 5.04
- -----------------------------------------------------------------------------------
Common Dividend Per Share - - - - -
- -----------------------------------------------------------------------------------
Total Assets 459,360 419,435 398,990 413,695 478,954
- -----------------------------------------------------------------------------------
Long-Term Debt,
less current portion $21,712(4) $25,033(4)$ 32,001(4) $ 3,618(5) $100,693
- -----------------------------------------------------------------------------------
(1) Includes a provision for asbestos litigation of $1.135 billion and a provision
for environmental and other claims of $41.4 million in 1993.
(2) On January 7, 1991, the Company and seven of its domestic subsidiaries each
filed a petition for relief under chapter 11 of the U.S. Bankruptcy Code.
(3) Excludes cumulative adjustment for adoption of FAS 106 in 1993 which decreased
net income by $12.6 million ($1.14 per share).
(4) Long-term debt of $62.0 million in 1993 and $61.7 million in 1992 and 1991 has
been included in liabilities subject to compromise.
(5) Long-term debt totaling $91.1 million for legal entities in chapter 11 was
classified as current due to the chapter 11 filings.
</TABLE>
- 31 -
<PAGE> 1
EXHIBIT 21
EAGLE-PICHER INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
REGISTRANT'S
VOTING
POWER
---------------
<S> <C>
Daisy Parts, Inc., a Michigan corporation..................................... 100%
Dong Yang Eagle-Picher Limited, organized under the laws of South Korea....... 49%
Eagle-Picher Development Company, Inc., a Delaware corporation................ 100%
Eagle-Picher Espana, S.A., organized under the laws of Spain.................. 100%
Eagle-Picher Europe, Inc., a Delaware corporation............................. 100%
Eagle-Picher Far East, Inc., a Delaware corporation........................... 100%
Eagle-Picher Industries of Canada Limited, an Ontario (Canada) corporation.... 100%
Eagle-Picher Industries GmbH, organized under the laws of Germany............. 100%
Eagle-Picher, Inc., organized under the laws of the Virgin Islands............ 100%
Eagle-Picher Minerals, Inc., a Nevada corporation............................. 100%
Equipos de Acuna, S.A. de C.V., organized under the laws of Mexico............ 100%
Hillsdale Tool & Manufacturing Co., a Michigan corporation.................... 100%
Diehl & Eagle-Picher GmbH, organized under the laws of Germany................ 45%
EPTEC, S.A. de C.V., organized under the laws of Mexico....................... 100%
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Eagle-Picher Industries, Inc.:
We consent to incorporation by reference in Registration Statement Nos.
2-50595, 33-5792, 33-31975 and 33-37518 on Form S-8 of Eagle-Picher Industries,
Inc. of our reports, with explanatory paragraphs, dated February 2, 1994
relating to the consolidated balance sheet of Eagle-Picher Industries, Inc. and
subsidiaries (debtor in possession, as of January 7, 1991) as of November 30,
1993 and 1992, and the related consolidated statements of income (loss),
shareholders' equity (deficit), and cash flows and related schedules for each of
the years in the three-year period ended November 30, 1993, which reports appear
in the Company's 1993 Annual Report on Form 10-K and in the 1993 Annual Report
to Shareholders, which is incorporated by reference in the Company's 1993 Annual
Report on Form 10-K. Our report on the consolidated financial statements refers
to changes in accounting for postretirement benefits other than pensions and in
accounting for income taxes in 1993.
/s/ KPMG Peat Marwick
Cincinnati, Ohio
February 25, 1994
<PAGE> 1
EXHIBIT 24(A)
POWER OF ATTORNEY
Each of the undersigned officers and/or directors of Eagle-Picher
Industries, Inc. hereby consents to and appoints Thomas E. Petry and David W.
Matthews, and each of them, as his true and lawful attorneys-in-fact and agents
with all power of substitution, for him and in his name, place and stead, in any
and all capacities, to sign the 1993 Annual Report on Form 10-K of Eagle-Picher
Industries, Inc., a corporation organized and existing under the laws of the
State of Ohio, and any and all amendments thereto, and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the same as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
In Witness Whereof, each of the undersigned has hereunto set his hand on
this 2nd day of February, 1994.
/s/ THOMAS E. PETRY
Thomas E. Petry
Director, Chairman of the
Board, President and Chief
Executive Officer
/s/ CARROLL D. CURLESS
Carroll D. Curless
Vice President and Controller
(Principal Accounting Officer)
/s/ PAUL W. CHRISTENSEN, JR.
Paul W. Christensen, Jr.
Director
/s/ MELVIN F. CHUBB, JR.
Melvin F. Chubb, Jr.
Director
/s/ V. ANDERSON COOMBE
V. Anderson Coombe
Director
/s/ ROGER L. HOWE
Roger L. Howe
Director
/s/ DAVID N. HALL
David N. Hall
Senior Vice President-Finance
(Principal Financial Officer)
/s/ DANIEL W. LEBLOND
Daniel W. LeBlond
Director
/s/ POWELL MCHENRY
Powell McHenry
Director
/s/ EUGENE P. RUEHLMANN
Eugene P. Ruehlmann
Director
<PAGE> 1
EXHIBIT 24(B)
POWER OF ATTORNEY
The undersigned director of Eagle-Picher Industries, Inc. hereby consents
to and appoints Thomas E. Petry and David W. Matthews, and each of them, as his
true and lawful attorneys-in-fact and agents with all power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign the
1993 Annual Report on Form 10-K of Eagle-Picher Industries, Inc., a corporation
organized and existing under the laws of the State of Ohio, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission
pursuant to the requirements of the Securities Exchange Act of 1934, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the same as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
In Witness Whereof, the undersigned has hereunto set his hand on this 24th
day of February, 1994.
/s/ CHARLES S. MECHEM, JR.
Charles S. Mechem, Jr.
Director
<PAGE> 1
<TABLE>
EXHIBIT 99
<CAPTION>
EPI OPERATIONS (DIVISIONS) PLANT LOCATIONS
- --------------------------------------------- -------------------------------------
<S> <C>
CINCINNATI INDUSTRIAL MACHINERY
3280 Hageman Street
Sharonville, Ohio 45241 Sharonville, Ohio
CONSTRUCTION EQUIPMENT
1802 E. 50th Street
Lubbock, Texas 79404 Lubbock, Texas
Acuna, Coahuila, Mexico
ELECTRONICS
"C" and Porter Streets
Joplin, Missouri 64801 Colorado Springs, Colorado
Galena, Kansas
Joplin, Missouri (5)
Seneca, Missouri
Stella, Missouri
Socorro, New Mexico
Grove, Oklahoma
FABRICON PRODUCTS
1721 West Pleasant Avenue
River Rouge, Michigan 48218 River Rouge, Michigan
Riverton, New Jersey
Philadelphia, Pennsylvania
HILLSDALE TOOL & MANUFACTURING CO.
135 E. South Street
Hillsdale, Michigan 49242 Hamilton, Indiana
Hillsdale, Michigan (4)
Jonesville, Michigan
Vassar, Michigan
MICHIGAN AUTOMOTIVE
Research Corporation
1254 North Main Street
Ann Arbor, Michigan 48104 Ann Arbor, Michigan
MINERALS
1755 E. Plumb Lane, #151
Reno, Nevada 89510 Clark, Nevada
Colado, Nevada
Vale, Oregon
ORTHANE
1500 I-35 W. (at Airport Road)
Denton, Texas 76202 Denton, Texas
PLASTICS
14123 Roth Road
Grabill, Indiana 46741 Ashley, Indiana
Grabill, Indiana
Huntington, Indiana
ROSS ALUMINUM FOUNDRIES
707-815 North Oak Avenue
Sidney, Ohio 45365 Sidney, Ohio (2)
RUBBER MOLDING
2424 John Daly Road
Inkster, Michigan 48141 Norwich, Connecticut
Stratford, Connecticut
Paris, Illinois
SPECIALTY MATERIALS
200 9th Avenue, N.E.
Miami, Oklahoma 74354 Lexena, Kansas
Harrisonville, Missouri
Miami, Oklahoma (2)
Quapaw, Oklahoma (2)
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
EPI OPERATIONS (DIVISIONS) PLANT LOCATIONS
- --------------------------------------------- -------------------------------------
<S> <C>
TRANSICOIL INC
2560 General Armistead Avenue
Trooper, Pennsylvania 19403 Valley Forge, Pennsylvania
Melaka, Malaysia
TRIM
829 U.S. Highway 131 South
Kalkaska, Michigan 49646 Kalkaska, Michigan
WOLVERINE GASKET
2638 Princess Street
Inkster, Michigan 48141 Leesburg, Florida
Inkster, Michigan
Blacksburg, Virginia
EAGLE-PICHER INTERNATIONAL Market Harborough, England
Soria, Spain
Ohringen, Germany
</TABLE>
