<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994
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: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF CLASS
Common Capital Stock,
Par Value $1.25 per Share
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 as of February 24, 1995 was $6,152,299 based upon the average of
the bid and asked prices as of such date. On February 24, 1995, 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
Excerpts from registrant's Annual Report for the fiscal year ended November
30, 1994 -- Incorporated in Part I and Part II.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
NOTE
This copy of Eagle-Picher's Form 10-K for 1994 includes only Exhibits
4(b)(ii), 10(d), 11, 13, 21, 23, 24(a), 24(b), 27 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:
James A. Ralston, Vice President,
General Counsel and Secretary
Eagle-Picher Industries, Inc.
P. O. Box 779
Cincinnati, Ohio 45201.
Exhibits not included in this Form 10-K for 1994 have the following number
of pages (see list of Exhibits in Part IV, Item 14(a)(3)):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3. (i) -- 10 4. (a) -- 99 10. (a) -- 7
(ii) -- 12 (b)(i) -- 120 (b) -- 6
(c) -- 14
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
PART I
1. Business........................................................................... 3
2. Properties......................................................................... 5
3. Legal Proceedings.................................................................. 6
4. Submission of Matters to a Vote of Security Holders................................ 13
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.......... 14
6. Selected Financial Data............................................................ 15
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 15
8. Financial Statements and Supplementary Data........................................ 15
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................... 15
PART III
10. Directors and Executive Officers of the Registrant................................. 16
11. Executive Compensation............................................................. 20
12. Security Ownership of Certain Beneficial Owners and Management..................... 23
13. Certain Relationships and Related Transactions..................................... 23
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................... 24
Signatures............................................................................... 25
Exhibit Index............................................................................ 26
</TABLE>
2
<PAGE> 3
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. It conducts its business through unincorporated
operating divisions and separately incorporated subsidiaries, both of which are
referred to herein as divisions.
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
Company's Annual Report for the fiscal year ended November 30, 1994, pages
29-30.
Narrative Description of Business.
The Industrial Group, which is composed of three divisions and operations
in three other 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
include custom designed cast and injection molded rubber and plastic parts, and
industrial chemicals.
The methods of distribution and competitive positions of the divisions of
the Industrial Group 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
manufacturing 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. 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
3
<PAGE> 4
and has a 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 four lines of earthmoving equipment 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, and recreational and sport 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 Ford Motor Co.'s electronic four-speed overdrive
transmission primarily used on one-half and three-quarter ton pick-up trucks,
vans and sport utility 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 International Operations Division includes Eagle-Picher
Industries Europe GmbH, with responsibility over three plants in Europe which
manufacture sealing and insulating products, elastomeric extrusions, and
injection molded parts for the European automotive market. The Division also
includes a sales and engineering office in Japan that serves 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 or to other suppliers to those 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 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 Trim and Wolverine Gasket 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.
No product accounted for more than 7%, and no customer accounted for more
than 10%, of total sales of the Company for fiscal 1992 through fiscal 1994
except Ford Motor Co., for which sales were $165.3 million in 1994, $148.0
million in 1993, and $132.7 million in 1992, and General Motors Corporation, for
which sales were $81.4 million in 1994, $73.1 million in 1993, and $64.5 million
in 1992. In addition 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 $190.1 million as
of November 30, 1994, $148.1 million as of November 30, 1993 and $118.1 million
as of November 30, 1992. The increase from prior years is due primarily to
improved demand for capital equipment and heavy-duty forklift trucks. A
substantial portion of the order backlog outstanding at November 30, 1994 is
expected to be filled within the current fiscal year. In no other segment is
order backlog of significance.
In fiscal 1994, the Company spent approximately $21.1 million for research
and development and related activities, primarily for the development of new
products or the improvement of existing products. Comparable costs were $17.1
million and $13.5 million for 1993 and 1992, respectively.
4
<PAGE> 5
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.
In the fiscal years 1994, 1993, and 1992, for current operations the
Company spent approximately $9.6 million, $8.6 million and $9.6 million,
respectively, to comply with federal, state and local regulatory 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 operations during the period described. The Company expects these
expenditures to be approximately $9.2 million in fiscal 1995. See Item 3.(d) for
information with respect to various other environmental proceedings.
As of November 30, 1994, the Company employed approximately 7,100 persons
in its operations, of whom approximately 1,800 were salaried employees and
approximately 5,300 were hourly employees. Approximately 18% 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 $76.9 million, $73.2 million, and $64.7
million in fiscal 1994, 1993, and 1992, respectively. The revenues generated by
foreign operations do not exceed 10% of consolidated revenues, nor do their
identifiable assets exceed 10% of consolidated total assets.
The Company and its lenders executed a First Amendment to Credit Agreement
in August, 1994, with the approval of the Bankruptcy Court, extending the
Company's debtor-in-possession financing to the earlier of December 31, 1996 or
the effective date of a confirmed plan of reorganization.
ITEM 2. PROPERTIES.
Eagle-Picher Industries, Inc. manufactures at 55 locations a wide variety
of products primarily for other manufacturers. Types of manufacturing include,
among others, chemical processing, mining, metal fabricating, aluminum casting,
precision machining, electronic and electrical assembling, and rubber and
plastic molding and extruding.
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:
<TABLE>
<CAPTION>
LOCATION GENERAL CHARACTER
------------ ---------------------
<S> <C> <C>
INDUSTRIAL GROUP
Minerals Division............................... Colado, NV Processing facility
MACHINERY GROUP
Electronics Division............................ Joplin, MO Manufacturing plants
(six locations)
Construction Equipment Division................. Lubbock, TX Fabrication and
assembly facility
AUTOMOTIVE GROUP
Hillsdale,
Hillsdale Tool Division......................... MI Manufacturing plants
(three 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.
5
<PAGE> 6
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, 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 J. 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 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 are
the primary entities with which the Company has been negotiating 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
6
<PAGE> 7
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 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 January 18, 1995, however, the Bankruptcy Court indicated that it
was likely to terminate the exclusive period if a plan and disclosure statement
were not filed on or before March 1, 1995.
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.
As a consequence of this agreement, 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.
Throughout 1994, the Company, the ICC and the RFC continued to refine the
details of a joint plan of reorganization ("the Plan"). On January 18, 1995, the
Company advised the Bankruptcy Court that it intended to file a plan of
reorganization by the end of February 1995. It is currently contemplated that
such plan of reorganization will be a joint plan among the Company, the ICC and
the RFC. Implementation of the Plan treatment of claims and interests as
provided therein is subject to confirmation of the Plan in accordance with the
provisions of the Bankruptcy Code. Parties in interest in the chapter 11 cases
may object to confirmation of the proposed Plan.
The proposed Plan to be filed is premised on a settlement of the Company's
liability for all present and future asbestos-related personal injury claims and
certain other tort claims. These claims will be channeled to and resolved by an
independently administered claims trust (the "Trust"). It is also currently
contemplated that the Plan will provide for the distribution of cash, notes,
debentures, and common stock of the reorganized Company to the Trust and to
holders of allowed unsecured claims on a pro-rata basis proportionate to their
share of the aggregate amount of allowed pre-petition unsecured claims.
Pursuant to the proposed Plan, asbestos-related personal injury claims will
be channeled to the Trust and the Bankruptcy Court will issue an injunction with
respect to such claims. The injunction will forever stay, restrain and enjoin
actions against the Company for the purpose of, directly or indirectly,
collecting, recovering, or receiving payment of, on, or with respect to any
personal injury claims resulting from exposure to asbestos-containing products
allegedly manufactured or sold by the Company. In 1994, the Bankruptcy Code was
amended to add, among others, new subsections 524(g) and (h), which authorize
the issuance of a permanent injunction to supplement the existing injunctive
relief afforded by section 524 of the Bankruptcy Code in asbestos-related
reorganizations under chapter 11. The section provides that, if certain
specified conditions are satisfied, a court may issue a supplemental permanent
injunction barring the assertion of asbestos-related claims or demands against
the reorganized company and channeling those claims to an independent trust. It
is the Company's current intention that the issuance of such a channeling
injunction will be a condition precedent to confirmation of the proposed Plan.
It is intended that the proposed Plan will also provide that priority
claims and convenience claims (general unsecured claims of $500 or less) will be
paid in full, in cash. 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 shareholders to participate in the reorganized
company or to receive a distribution. The proposed Plan does not provide that
all
7
<PAGE> 8
classes of pre-petition creditors receive satisfaction in full of their allowed
claims. Consequently, the proposed Plan will not provide for any distribution to
shareholders and their equity interests will be canceled.
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 Code further provides
that any class that does not receive a distribution under a plan is deemed to
have rejected the plan. Accordingly, because it is contemplated that the
proposed Plan will not provide for any distribution to the Company's existing
shareholders, that class will not vote on the proposed Plan and will be deemed
to 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 Plan and the chapter 11 cases can be
found in Note B to the Consolidated Financial Statements in the Company's Annual
Report for the fiscal year ended November 30, 1994, 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.
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.
In summary, many of the asbestos-related personal injury 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.
8
<PAGE> 9
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 of the lawsuits described above that were pending as of the
petition date. It is currently contemplated that the asbestos-related property
damage claims will be resolved in the Bankruptcy Court pursuant to claims
resolution procedures that will be set forth in the proposed Plan. The eventual
outcome of the asbestos-related property damage claims cannot be reasonably
predicted due to numerous uncertainties that are inherent in the reorganization
process. However, the Company expects that all such claims will be resolved
without material adverse effect on the Company, its operations, or its financial
condition. In addition, the Company may have insurance coverage for certain of
these claims and factual and legal defenses available to it.
Additional information concerning the asbestos litigation can be found in
Note K to the Consolidated Financial Statements in the Company's Annual Report
for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to
this Form 10-K and which is incorporated herein by reference.
(c) Other.
In June 1989 the City of New York filed suit against the Company and others
in New York state court seeking 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 proof of claim in
the Company's chapter 11 case with respect to the claims asserted in such
lawsuit by the 1991 bar date. In November 1993, however, it filed three proofs
of claim with respect to the litigation each seeking $50 million in damages. The
Company's objection to these claims, seeking to have them disallowed on the
basis that they were filed after the bar date, was sustained in November 1994,
and the claims were disallowed. As a result, and given the voluntary withdrawal
of three other lead-related property damage
9
<PAGE> 10
claims, the Company has disposed of all lead-related property damage claims that
were asserted in its chapter 11 case.
In addition to the foregoing, late in 1987, litigation was initiated
against the Company and numerous other defendants, which alleged claims for
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 twenty eight (128) non-duplicative proofs of claim were timely
filed in the Bankruptcy Court asserting liability for personal injuries from
lead chemicals allegedly manufactured and sold by the Company. Four of such
claims have been voluntarily withdrawn at the Company's request. One of such
claims was dismissed by the Bankruptcy Court. The one hundred twenty three (123)
that remain assert liability based on personal injury. The Company has pending
objections to seven of such claims. Pursuant to the objections, the Company has
sought an order of the Bankruptcy Court disallowing such claims because the
claimants' lawsuits asserting similar claims against other defendants which were
not in bankruptcy have been dismissed. Prior to the filing of its chapter 11
case, the Company also had been a defendant in these lawsuits. The claimants
have opposed the relief sought by the Company and the Bankruptcy Court has not
yet ruled on these objections.
The Company believes that these seven objections it has filed are
meritorious. It also believes that it has valid grounds to object to the
allowance of all of the remaining lead-related personal injury claims. However,
in December 1994, the Eighth District Court of Appeals, Cleveland, Ohio, ruled
that the plaintiff in a lawsuit filed in state court in Cuyahoga County, Ohio,
may pursue certain claims against defendants, such as the Company, that
manufactured lead pigment. The trial court had dismissed the plaintiffs'
enterprise liability, market share and alternative liability theories pursuant
to a defense motion to dismiss. The Ohio Appeals Court upheld the dismissal of
the enterprise liability count, but reversed the dismissal as to the market
share and alternative liability counts. This decision may be appealed to the
Supreme Court of Ohio. It is not possible to predict if the trial court's
dismissal or the appellate court's reinstatement will be sustained if the
Supreme Court accepts review of the case.
It is currently contemplated that all lead-related personal injury claims
that were filed that are not disposed of pursuant to an objection filed by the
Company, and all such claims which may be filed in the future, will be channeled
to and resolved by the Trust that will be established under the Plan for the
benefit of holders of asbestos-related personal injury claims discussed in
subsection (a), above.
Claims related to the Lone Star Steel Toxic Tort Litigation, reported in
the Company's Form 10-K for the fiscal year ended November 30, 1993 and in
earlier such reports, are now included in the information on asbestos-related
litigation discussed in subsection (b), above, as the plaintiffs in this action
filed proofs of claim in the Company's chapter 11 case alleging asbestos-related
personal injuries. Chi-Vit Corporation, which acquired the assets of the
Company's former Chi-Vit Corporation Division in 1988, was also named as a
defendant in the Lone Star Steel Litigation. Chi-Vit Corporation filed a proof
of claim in the Company's chapter 11 case including a claim seeking indemnity
from the Company for any damages it incurs in this litigation. Chi-Vit
Corporation has settled this litigation with the Lone Star Steel plaintiffs, and
the Company believes that any indemnity claim Chi-Vit Corporation may have
against the Company will not be material.
The lawsuit filed on August 27, 1990 in the United States District Court
for the Northern District of Texas against the Company and two of its officers,
the amended complaint in such suit filed on February 7, 1992 naming another
officer of the Company as an additional defendant, and the two proofs of claim
filed in the Company's chapter 11 case in the amount of $500 million each, were
resolved in December 1994 through settlement. The settlement of the litigation
and claims filed by American Imaging Services, Inc., an approximately 60%-owned
subsidiary, and its president and minority shareholder, which settlement was not
material to the Company or its operations, was approved by the Bankruptcy Court
in January 1995. This litigation was previously discussed in the Company's Form
10-K for the fiscal year ended November 30, 1993, and in earlier such reports.
On June 18, 1993, the Company, together with its wholly-owned subsidiary,
Transicoil Inc., commenced an adversary proceeding in the Bankruptcy Court
against Blue Dove Development Associates ("Blue Dove"),
10
<PAGE> 11
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 to recover excess rent that the Company and Transicoil believe has been
paid to the landlord. 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 accelerated and 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 the Pennsylvania Action
which seeks approximately $10.3 million in damages has been enjoined by the
Bankruptcy Court. The Company and Transicoil have filed two Motions for Summary
Judgment in the adversary proceeding in the Bankruptcy Court. One seeks to have
the Bankruptcy Court award the Company the relief it sought in the adversary
proceeding without the need for a trial. The other seeks total dismissal of the
counterclaim also without a trial. The Motions are fully briefed, and a request
for oral argument is pending. The Company cannot predict when the Bankruptcy
Court will rule on these Motions. The Company believes that the counterclaim
asserted by the landlord and the 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 lack of product warnings. 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 were "blatantly false." The court enjoined
Moltan from selling its products with labels containing false and misleading
information in violation of OSHA and other regulations. Further, in August 1994,
Moltan's complaint was dismissed in its entirety. Later, in September 1994, the
court issued an order making the injunction permanent and granting the Company a
judgment as a matter of law as to Moltan's liability under the Lanham Act.
Accordingly, the Company must now prove its damages in order to receive a
monetary judgment against Moltan. Moltan has appealed certain of these orders
and the Company intends to oppose the appeals. In addition, the Company intends
to continue to press its claims against Moltan for monetary damages.
Additional information concerning such litigation claims can be found in
Note L to the Consolidated Financial Statements in the Company's Annual Report
for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to
this Form 10-K and which is incorporated herein by reference.
(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 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 also 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
11
<PAGE> 12
treatment, storage or disposal of hazardous wastes and alleged false statements
relating to such alleged activities by plant personnel.
As a result of this investigation, the United States Attorney advised the
Company that criminal charges would be filed against it. Further, Region VIII of
the EPA filed an administrative complaint against the Company on March 14, 1994,
because of conduct it alleges took place and which resulted in the investigation
begun in December 1989.
The Company has tentatively reached agreements settling all of the charges
and issues resulting from this investigation. Pursuant to the settlement, the
Company has agreed with the United States Attorney to plead guilty to two
criminal misdemeanors for its alleged failure to report discharges of hazardous
substances to a navigable waterway. The Company also agreed to the allowance of
a pre-petition general unsecured claim in its chapter 11 case in the amount of
$300,000 to resolve these charges. Further, the Company agreed to allow EPA's
Region VIII a pre-petition general unsecured claim in the amount of $200,000 for
alleged use of existing storage ponds after they were no longer permitted to
receive wastes, improper storage of certain wastes longer than the 90 days the
law allows, and improper labeling of stored hazardous waste. Finally, the
Company agreed with the EPA that it would implement certain programs including,
among others, publication of environmental ethics and non-reprisal policies;
adoption of pollution prevention, environmental training, and compliance
reporting programs; and agreements for periodic compliance audits of the
involved facility. The resolution of these matters is subject to the negotiation
of definitive settlement agreements and to the approval of the Bankruptcy Court
and the federal District Court in Denver, Colorado.
While the Company does not believe that the actions at issue resulted in
any harm to human health or the environment, it has renewed its commitment to
strict compliance with all laws, including those regulating environmental
issues. These settlements, and the remedial activities the Company is currently
conducting, will not have a materially adverse effect on the Company's or the
Colorado Springs' operations or financial condition.
The Company received 1,102 proofs of claim in its chapter 11 cases alleging
a right to payment because of environmental matters. Many of these claims were
filed in connection with environmental matters reported in Form 10-K reports for
prior fiscal years. These include claims with respect to numerous waste disposal
sites previously discussed. They also include claims with respect to the
Tri-State mining district of Kansas, Missouri and Oklahoma previously disclosed:
Ottawa County, Oklahoma; Cherokee County, Kansas; Jasper County, Missouri; and
the Baxter Springs, Treece, and Galena Subsites in Kansas. The Company is
attempting to resolve the majority of these environmental claims through
negotiations with the EPA and the United States Department of Interior. A
tentative settlement agreement reached in fiscal 1993 was renegotiated during
fiscal 1994 and fiscal 1995 after the EPA received additional information
concerning three sites that were previously resolved. Pursuant to the proposed
renegotiated agreement, the agencies and certain states will be granted allowed
pre-petition general unsecured claims in the Company's chapter 11 case
aggregating approximately $43.0 million in full satisfaction of all of the
Company's alleged liability at most of its known Superfund sites, including any
liability for any natural resource damage.
In exchange for these allowed claims, the agencies will release the Company
from liability at such Superfund sites and the Company will be protected from
contribution claims of other parties with potential liability at the sites.
Accordingly, the Company's settlement should completely resolve all claims with
respect to these sites. Further, the tentative agreement provides a process
which will permit any liability, which may arise with respect to a small number
of sites as to which the EPA believes that it does not have sufficient
information to negotiate a meaningful settlement at this time, to be resolved in
the future when additional information is available.
The Company has executed the settlement agreement which resolves these
claims and expects the other parties to execute it also. Until all requisite
approvals, including approval of the Bankruptcy Court, are obtained, no party is
in any way bound to the terms of the settlement. The Company expects, however,
that the settlement will be approved.
12
<PAGE> 13
Additional information concerning the environmental claims can be found in
Note L to the Consolidated Financial Statements in the Company's Annual Report
for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to
this Form 10-K and which is incorporated herein by reference.
(e) Summary -- Environmental And Other Claims.
All lawsuits naming individual defendants have been resolved. Certain
claims remain pending against the Company. The Company intends to defend all
remaining 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 most 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. The Company has filed objections to
certain of the unresolved 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
litigated vigorously 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 reasonably be predicted due to numerous uncertainties
that are inherent in the reorganization process. However, the Company expects
that all such claims will be resolved without material adverse effect on the
Company, its operations, or its financial condition. In addition, the Company
may have insurance coverage for certain of these claims and may have 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.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information
On November 10, 1993, the New York Stock Exchange ("NYSE") 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. On June 21, 1994, the NYSE notified the Company that the SEC had
granted the NYSE's application effective at the opening of the trading session
on June 9, 1994. The Company's Common Stock is presently trading on the
Over-the-Counter market (trading symbol is EPIH.U).
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Quarterly Stock Prices -- 1993-1994
- ------------------------------------------------------------------------------------------------
First Second Third Fourth Year
- ------------------------------------------------------------------------------------------------
1994(1)
- ------------------------------------------------------------------------------------------------
Bid Prices
- ------------------------------------------------------------------------------------------------
High 7/8 13/16 1/2 7/16 7/8
- ------------------------------------------------------------------------------------------------
Low 1/16 1/4 7/32 1/16 1/16
- ------------------------------------------------------------------------------------------------
Ask Price
- ------------------------------------------------------------------------------------------------
High 1 3/8 1 1/4 7/8 11/16 1 3/8
- ------------------------------------------------------------------------------------------------
Low 5/32 9/16 15/32 1/4 5/32
- ------------------------------------------------------------------------------------------------
1993
- ------------------------------------------------------------------------------------------------
Price (NYSE)
- ------------------------------------------------------------------------------------------------
High 4 3 5/8 3 2 5/8 4
- ------------------------------------------------------------------------------------------------
Low 2 1/8 2 1/4 2 1/8 2 1/8(2) 2 1/8(2)
- ------------------------------------------------------------------------------------------------
<FN>
- ---------------
(1) The sources of all 1994 prices are quotations from the pink sheets and the
OTC Bulletin Board. The 1994 bid and ask quotations represent prices between
dealers, do not include retail markup, markdown or commission and do not
represent actual transactions.
(2) This represents the low price as of November 9, 1993. Price data for
November 10, 1993 is not available. From November 11 through November 30,
1993, the common stock was listed in the pink sheets without prices.
</TABLE>
(b) Holders of Common Stock
As of February 21, 1995, there were 6,072 holders of record of the
Company's Common Stock.
(c) Dividends
There have been no cash dividends declared on the Company's Common Stock
during the last two fiscal years. See "Selected Financial Data" and Note B to
the Consolidated Financial Statements in the Company's Annual Report for the
fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this
Form 10-K and which is incorporated herein by reference.
14
<PAGE> 15
<TABLE>
CROSS REFERENCE SHEET
TO ANNUAL REPORT FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1994
MARKED AS EXHIBIT 13
EXHIBIT 13
<CAPTION>
PAGES CAPTIONS
------ --------------------------------------
<S> <C> <C> <C>
ITEM 6. SELECTED FINANCIAL DATA 35 -- Selected Financial Data
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 32-34 -- Management's Discussion and
Analysis of Results of Operations
and Financial Condition
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 13 -- Consolidated Statement of Income
(Loss) for the Three Years Ended
November 30, 1994
16 -- Consolidated Statement of Cash
Flows for the Three Years Ended
November 30, 1994
14-15 -- Consolidated Balance Sheet as of
November 30, 1994 and 1993
17 -- Consolidated Statement of
Shareholders' Equity (Deficit) for
the Three Years Ended November 30,
1994
19-30 -- Notes to Consolidated Financial
Statements
32 -- Report of Management
31 -- Independent Auditors' Report
18 -- Quarterly Data
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
15
<PAGE> 16
<TABLE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Directors.
The name and age; the positions and offices held with the registrant;
principal occupation during the past 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:
<CAPTION>
PRESENT
FIRST TERM
BECAME OF OFFICE
DIRECTOR EXPIRES
-------- ---------
<S> <C> <C>
PAUL W. CHRISTENSEN, JR., 70.............................................. 1969 1996
Retired, 1987; Chairman of the Board 1978-87, 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., 61.................................................. 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, 1984-88.
Director of Empire District Electric Co.
V. ANDERSON COOMBE, 68.................................................... 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 Corp., The Starflo Corp., Union
Central Life Insurance Co., The Wm. Powell Company.
Member of Audit, Executive and Stock Option/Compensation Committees.
ROGER L. HOWE, 60......................................................... 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 Corp., U.S.
Shoe Corporation, Baldwin Piano & Organ Co.
Member of Executive and Stock Option/Compensation Committees.
DANIEL W. LEBLOND, 68..................................................... 1965 *
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.
POWELL MCHENRY, 68........................................................ 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, 1983-91. Member of Audit Committee.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
PRESENT
FIRST TERM
BECAME OF OFFICE
DIRECTOR EXPIRES
-------- ---------
<S> <C> <C>
THOMAS E. PETRY, 55....................................................... 1981 *
Chairman of the Board and Chief Executive Officer 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 Cinergy Corp., Star Banc Corp.
Union Central Life Insurance Co., Insilco Corp.
Chairman of Executive Committee.
EUGENE P. RUEHLMANN, 70................................................... 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.
ANDRIES RUIJSSENAARS, 52.................................................. 1994 *
President and Chief Operating Officer as of December 1, 1994, Senior Vice
President 1989-94, President, the Ohio Rubber Company Division 1987-89,
Executive Vice President, the Ohio Rubber Company Division 1986-87,
General Manager of the subsidiary, Eagle-Picher Industries GmbH in
Ohringen, Germany 1980-86, of Eagle-Picher Industries, Inc.
<FN>
- ---------------
* Messrs. LeBlond and Petry were elected directors to hold office for terms
expiring at the annual meeting of shareholders in 1994 or when their
successors are elected and qualified. As the Company did not hold an annual
meeting of shareholders in 1994, these directors continue to hold office until
their successors are elected and qualified. Mr. Ruijssenaars was elected
director by the incumbent directors on November 2, 1994 to serve in the same
class as Messrs. LeBlond and Petry and accordingly will hold office until his
successor is elected and qualified.
</TABLE>
17
<PAGE> 18
<TABLE>
(b) Executive Officers.
The names and ages, the positions and offices held with the registrant and
employment history with the registrant, term of office as officer and period
during which each has served as such, follow for each executive officer:
<CAPTION>
YEAR ELECTED
OR ASSUMED
PRESENT
AGE DUTIES
--- ------------
<S> <C> <C> <C>
Thomas E. Petry.......... Chairman of the Board of Directors, President*
and Chief Executive Officer 55 1982
Andries Ruijssenaars..... President and Chief Operating Officer**;
Senior Vice President*, Director*** 52 1994
Melvin F. Chubb, Jr...... Senior Vice President and Director 61 1988
David N. Hall............ Senior Vice President -- Finance 55 1987
Wayne R. Wickens......... Senior Vice President** 48 1994
Carroll D. Curless....... Vice President and Controller 56 1984
James A. Ralston......... Vice President, General Counsel and
Secretary**** 48 1982
<FN>
- ---------------
* Through November 30, 1994
** Effective December 1, 1994
*** Effective November 2, 1994
**** Elected Secretary May 4, 1994
</TABLE>
18
<PAGE> 19
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, served as President from 1981-89 and from 1992-94, has been
serving as Chief Executive Officer since 1982, and has also been serving as
Chairman of the Board since 1989.
Mr. Andries Ruijssenaars was first employed by the Company in 1980 as
General Manager of Eagle-Picher Industries GmbH in Ohringen, 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; was elected
Senior Vice President in 1989; was appointed a Director in November 1994; and
was elected President and Chief Operating Officer effective December 1, 1994 and
has been serving in those capacities since December 1, 1994.
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. 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. Wayne R. Wickens joined the Company in 1976 as a management trainee
with the former Fabricon Automotive Division, was promoted to Plant Manager in
1979, Vice President in 1981 and then President of Fabricon Automotive in 1986;
was named President of the Wolverine Gasket Division in 1988; was named Vice
President of the Eagle-Picher Automotive Group in 1989; was named Division
President of Hillsdale Tool & Manufacturing Co. in 1990, and was elected Senior
Vice President of the Company effective December 1, 1994.
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,
was elected Vice President and General Counsel in 1984; and was also elected
Secretary in May 1994. He has been serving as Vice President, General Counsel
and Secretary since May 4, 1994.
Executive officers serve during the pleasure of the Board, or until their
successors are elected and qualified. There are no family relationships existing
between or among the above executive officers and directors of the registrant.
19
<PAGE> 20
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION.
The following Summary Compensation Table sets forth the compensation
provided by the Company to the Chief Executive Officer and each of the other
four most highly compensated executive officers (collectively, the "named
executive officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND YEAR COMPENSATION COMPENSATION
PRINCIPAL POSITION ENDED SALARY($) BONUS($) ($)(4)(5) ($)(4)(6)
- ----------------------------------------- --------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas E. Petry.......................... 11/30/94 575,000 216,000 150,149 169,763
Chairman and Chief Executive Officer(1) 11/30/93 575,000 100,000 149,492 178,154
11/30/92 575,000 105,000 75,488 128,557
David N. Hall............................ 11/30/94 320,000 95,000 193,447 216,177
Senior Vice President -- Finance 11/30/93 310,000 65,000 50,133 62,692
11/30/92 300,000 90,000 12,046 24,181
Andries Ruijssenaars..................... 11/30/94 300,000 100,000 86,033 101,197
President and Chief Operating Officer(2) 11/30/93 275,000 75,000 22,760 31,420
11/30/92 265,000 80,000 9,764 20,800
Melvin F. Chubb, Jr. .................... 11/30/94 280,000 75,000 326,853 370,313
Senior Vice President 11/30/93 275,000 45,000 0 4,497
11/30/92 265,000 70,000 0 4,364
James A. Ralston......................... 11/30/94 205,000 52,000 7,399 13,441
Vice President, General Counsel and 11/30/93 200,000 34,000 7,214 13,303
Secretary(3) 11/30/92 195,000 42,000 2,593 8,625
<FN>
- ---------------
(1) Also served as President through November 30, 1994.
(2) Served as Senior Vice President through November 30, 1994; elected President
and Chief Operating Officer effective December 1, 1994.
(3) Elected Secretary May 4, 1994.
(4) 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.
(5) This column includes nothing for perquisites since in no case did they
exceed the reporting thresholds (the lesser of 10% of salary plus bonuses or
$50,000), but includes amounts for the payment of taxes on purchases of
annuities under the Supplemental Executive Retirement Plan.
(6) All Other Compensation:
</TABLE>
<TABLE>
<CAPTION>
COST OF
ANNUITY UNDER COMPANY
NON-QUALIFIED CONTRIBUTIONS
SUPPLEMENTAL TO EAGLE-PICHER
EXECUTIVE RETIREMENT
YEAR RETIREMENT SAVINGS
ENDED PLAN($) PLAN($) TOTAL($)
--------- ------------- ---------------- --------
<S> <C> <C> <C> <C>
Thomas E. Petry.................. 11/30/94 165,143 4,620 169,763
David N. Hall.................... 11/30/94 211,557 4,620 216,177
Andries Ruijssenaars............. 11/30/94 96,577 4,620 101,197
Melvin F. Chubb, Jr.............. 11/30/94 365,693 4,620 370,313
James A. Ralston................. 11/30/94 8,821 4,620 13,441
</TABLE>
20
<PAGE> 21
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Note: Registrant has never granted Stock Appreciation Rights (SARs), so
there are no SARs outstanding. There were no exercises of options by, or grants
of options to, the named executive officers during fiscal 1994.
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Thomas E. Petry......................... 0/100,000 *
David N. Hall........................... 0/ 50,000 *
Andries Ruijssenaars.................... 0/ 50,000 *
Melvin F. Chubb, Jr..................... 0/ 50,000 *
James A. Ralston........................ 0/ 30,000 *
<FN>
- ---------------
* None of the unexercised options held by any of the named executive officers
was "In-the-Money" as of November 30, 1994. Further, the options were
exercisable only if the last selling price per share on the New York Stock
Exchange or its successor 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 ("NYSE")
was suspended on November 15, 1993, and the NYSE delisted the Company's shares
effective June 9, 1994. All of the unexercised options are at a price of $2.50
per share.
</TABLE>
<TABLE>
PENSION BENEFITS
The following table shows the estimated total combined annual benefits to
named executive officers upon retirement at age 62 payable under Social
Security, the Eagle-Picher Salaried Plan, and the Supplemental Executive
Retirement Plan:
PENSION PLAN TABLE
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------
REMUNERATION 15 20 25 30 35
---------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$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
900,000.................... 324,000 432,000 540,000 540,000 540,000
950,000.................... 342,000 456,000 570,000 570,000 570,000
</TABLE>
The Eagle-Picher Salaried Plan, a non-contributory defined benefit pension
plan in which the named executive officers are participants, provides 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
21
<PAGE> 22
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 Eagle-Picher
Salaried Plan. 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
Andries Ruijssenaars....................................... 24
Melvin F. Chubb, Jr........................................ 12
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 Severance Plan, a
participant whose employment is terminated by the Company other than for cause
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 service. Currently, the Severance Plan provides that the
payment of Supplemental Severance Benefits will terminate upon confirmation of
a plan of reorganization. The proposed plan of reorganization provides,
however, for the continuation of the Severance Plan for a period of at least 12
months after the effective date of the plan of reorganization.
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 members of the Board are paid an annual 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 1994, Messrs. LeBlond (Chairman), Christensen, Coombe, and
Howe, directors of the Company, constituted the Stock Option/Compensation
Committee.
During fiscal 1994 and as of February 24, 1995 Mr. Petry, Chairman,
President (through November 30, 1994), 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 1994 and as of February 24, 1995, Mr.
Coombe was Chairman of the Board of The Wm. Powell Company.
22
<PAGE> 23
<TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of February 24, 1995, beneficial ownership of the Company's Common Stock
by all directors; each of the named executive officers; and all directors and
executive officers as a group, was:
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
OWNERSHIP OF CLASS
----------- ---------
<S> <C> <C>
DIRECTORS
Paul W. Christensen, Jr....................................... 38,000(1) *
Melvin F. Chubb, Jr........................................... 51,474(2)(3)(4) *
V. Anderson Coombe............................................ 4,480(1) *
Roger L. Howe................................................. 1,000 *
Daniel W. LeBlond............................................. 0 *
Powell McHenry................................................ 1,000 *
Thomas E. Petry............................................... 129,102(2)(3) *
Eugene P. Ruehlmann........................................... 1,000 *
Andries Ruijssenaars.......................................... 52,443(2)(3) *
NAMED EXECUTIVE OFFICERS
David N. Hall................................................. 62,482(3) *
James A. Ralston.............................................. 36,797(3) *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (13 PERSONS)...... 422,511(5) 3.83%
<FN>
- ---------------
* Less than 1%.
(1) The following persons disclaim beneficial ownership as to the following
numbers of shares included herein which are beneficially owned by family
members: Mr. Christensen -- 13,000 shares; Mr. Coombe -- 1,520 shares.
(2) Messrs. Chubb, Petry and Ruijssenaars are also executive officers of the
Company; their holdings of Company stock are listed here and not duplicated
under the Named Executive Officers individual listing immediately below.
(3) Includes shares subject to options to purchase within 60 days: Mr.
Chubb -- 50,000; Mr. Petry -- 100,000; Mr. Ruijssenaars -- 50,000; Mr.
Hall -- 50,000; Mr. Ralston -- 30,000. The terms of the option grants make
the options exercisable if the last selling price per share on the New York
Stock Exchange or its successor is at least $3.00 on the day prior to the
date on which the Company receives written notice of the exercise.
(4) Does not include 360 shares owned under the Uniform Gifts to Minors Act by
adult children not of the same household.
(5) This figure includes 320,000 shares subject to options to purchase within 60
days on the same terms as set forth in footnote (3) above.
</TABLE>
All shares shown above as owned were directly owned except as footnoted.
Directors and executive officers are considered control persons of the Company.
There were as of February 24, 1995 no beneficial owners of more than 5% of
the Company's Common Stock.
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.
23
<PAGE> 24
<TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) All Financial Statements
<CAPTION>
<S> <C>
1. Eagle-Picher Industries, Inc. (Incorporated by reference to the
Company's Annual Report for the fiscal year ended November 30, 1994,
Exhibit 13 -- See Part II above)
Independent Auditors' Report -- Incorporated by reference to Exhibit 13,
page 31
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 No. 33-45179
for the Registrant's Stock Option Plan of 1990 (SEC File No. 1-1499)
* (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 5, 1987 (located on microfiche at the SEC Public Reference
Facility) (SEC File No. 1-1499)
* (b)(i) 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)
(ii) First Amendment to Credit Agreement dated as of August 29, 1994
*10.(a) Eagle-Picher Industries, Inc. Stock Option Plan of 1983, as amended.
Incorporated by reference to Exhibit 28 to Post Effective Amendment No.
1 dated April 10, 1990 and Appendix 2 dated May 30, 1991 to Form S-8
Registration Statement No. 33-5792 (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 (located on microfiche at the
SEC Public Reference Facility) (SEC File No. 1-1499)
(d) Eagle-Picher Industries, Inc. Severance Plan dated as of June 25, 1991
11. Calculation of Average Number of Shares
13. Excerpts from Eagle-Picher Industries, Inc. Annual Report for the fiscal
year ended November 30, 1994
21. Subsidiaries of the Registrant
23. Independent Auditors' Consent
24.(a),(b) Powers of Attorney
27. Financial Data Schedules (submitted electronically to the SEC for its
information)
99. Plants and Locations
<FN>
- ---------------
* Incorporated by reference.
</TABLE>
(b) Reports on Form 8-K.
(i) None during last quarter of fiscal 1994.
24
<PAGE> 25
<TABLE>
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
and Chief Executive Officer
Date: February 28, 1995
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.
<S> <C>
/s/ THOMAS E. PETRY Date: February 28, 1995
- ---------------------------------------------
Thomas E. Petry, Chairman of the Board
and Chief Executive Officer
/s/ DAVID N. HALL Date: February 28, 1995
- ---------------------------------------------
David N. Hall, Senior Vice President-Finance
(Principal Financial Officer)
/s/ CARROLL D. CURLESS Date: February 28, 1995
- ---------------------------------------------
Carroll D. Curless, Vice President and
Controller (Principal Accounting Officer)
/s/ MELVIN F. CHUBB, JR. Date: February 28, 1995
- ---------------------------------------------
Melvin F. Chubb, Jr., Director
/s/ PAUL W. CHRISTENSEN, JR. Date: February 28, 1995
- ---------------------------------------------
Paul W. Christensen, Jr., Director
/s/ V. ANDERSON COOMBE Date: February 28, 1995
- ---------------------------------------------
V. Anderson Coombe, Director
/s/ ROGER L. HOWE Date: February 28, 1995
- ---------------------------------------------
Roger L. Howe, Director
/s/ DANIEL W. LEBLOND Date: February 28, 1995
- ---------------------------------------------
Daniel W. LeBlond, Director
/s/ POWELL MCHENRY Date: February 28, 1995
- ---------------------------------------------
Powell McHenry, Director
/s/ EUGENE P. RUEHLMANN Date: February 28, 1995
- ---------------------------------------------
Eugene P. Ruehlmann, Director
/s/ ANDRIES RUIJSSENAARS Date: February 28, 1995
- ---------------------------------------------
Andries Ruijssenaars, Director
</TABLE>
25
<PAGE> 26
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <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)(i) -- Credit and Agency Agreement, dated as of November 5, 1992*
4(b)(ii) -- First Amendment to Credit Agreement, dated as of August 29, 1994
10(a),(b) -- Eagle-Picher Industries, Inc. Stock Option Plans of 1983 and 1990*
10(c) -- Eagle-Picher Supplemental Executive Retirement Plan*
10(d) -- Eagle-Picher Industries, Inc. Severance Plan dated as of June 25,
1991
11 -- Statement re Calculation of Average Number of Shares
13 -- Excerpts from Annual Report for the Fiscal Year Ended November 30,
1994
21 -- Subsidiaries of the Registrant
23 -- Independent Auditors' Consent
24(a),(b) -- Powers of Attorney
27 -- Financial Data Schedules (Submitted electronically to the SEC for
its information.)
99 -- Plants and Locations
<FN>
- ---------------
* Incorporated by reference. See page 24 above.
</TABLE>
26
<PAGE> 1
Exhibit 4(b)(ii)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AND AGENCY AGREEMENT, dated as of August
29, 1994 (this "First Amendment"), among EAGLE-PICHER INDUSTRIES, INC., an Ohio
corporation and a debtor and debtor in possession (the "Debtor"), MICHIGAN
AUTOMOTIVE RESEARCH CORP., a Michigan corporation and a debtor and debtor in
possession, EDI, INC., a Michigan corporation and a debtor and debtor in
possession, DAISY PARTS, INC., a Michigan corporation and a debtor and debtor in
possession, HILLSDALE TOOL AND MANUFACTURING CO., a Michigan corporation and a
debtor and debtor in possession, EAGLE-PICHER MINERALS, INC., a Nevada
corporation and a debtor and debtor in possession, and TRANSICOIL INC., a
Pennsylvania corporation and a debtor and debtor in possession (collectively,
the "Guarantors"), the Banks set forth on the signature pages hereof
(collectively, the "Banks" and individually, a "Bank"), and NBD BANK, N.A., as
agent for the Banks (in such capacity, the "Agent").
RECITALS
A. The parties hereto have entered into a Credit and Agency Agreement
dated as of November 5, 1992 (the "Credit Agreement"), which is in full force
and effect.
B. The Debtor desires to amend the Credit Agreement as herein provided,
and the Banks and the Agent are willing to so amend the Credit Agreement on the
terms and conditions set forth herein.
AGREEMENT
Based upon these recitals, the parties agree as follows:
1. Amendment. Upon the Debtor satisfying the conditions set forth in
paragraph 4 (the date that this occurs being called the "effective date"), the
Credit Agreement shall be amended as follows:
(a) The definition of "Automatic Termination Date" in Section 1.1
shallbe amended to read as follows:
"'Automatic Termination Date' means the later of December 31, 1996,
or any extended date established pursuant to Section 2.9."
(b) Section 5.2(j) concerning Capital Expenditures shall be amended
by deleting the figure "$35,000,000" and substituting therefor the figure
"$50,000,000".
<PAGE> 2
2. References to Credit Agreement. From and after the effective date of
this First Amendment, references to the Credit Agreement in the Credit Agreement
and all other Loan Documents (as each of the foregoing is amended hereby or
pursuant hereto) shall be deemed to be references to the Credit Agreement as
amended hereby.
3. Representations and Warranties. The Debtor and the Guarantors
jointly and severally represent and warrant to the Banks and the Agent that:
(a) (i) The execution, delivery and performance of this First
Amendment and all agreements and documents delivered pursuant hereto by each of
the Debtor and each Guarantor have been duly authorized by all necessary
corporate action and does not and will not violate any provision of any law,
rule, regulation, order, judgment, injunction, or award presently in effect
applying to it, or of its articles of incorporation or By-Laws or Code of
Regulations, or result in a breach of or constitute a default under any material
agreement, lease or instrument to which the Debtor or any Guarantor is a party
or by which it or its properties may be bound or affected; (ii) no
authorization, consent, approval, license, exemption or filing of a registration
with any court or governmental department, agency or instrumentality is or will
be necessary to the valid execution, delivery or performance by each of the
Debtor and each Guarantor of this First Amendment and all agreements and
documents delivered pursuant hereto; and (iii) this First Amendment and all
agreements and documents delivered pursuant hereto by each of the Debtor and
each Guarantor are the legal, valid and binding obligations of the Debtor and
each Guarantor enforceable against each in accordance with the terms thereof.
(b) After giving effect to the amendments contained herein, the
representations and warranties contained in Article IV (other than Section 4.5)
of the Credit Agreement are true and correct on and as of the effective date
hereof with the same force and effect as if made on and as of such effective
date.
(c) The consolidated balance sheet of the Debtor and its
Subsidiaries and the consolidated statements of income, retained earnings, and
cash flows of the Debtor and its Subsidiaries for the fiscal year ended November
30, 1993, certified by the Debtor's accountants, and the interim consolidated
balance sheet of the Debtor and its Subsidiaries and the interim consolidated
statements of income, retained earnings, and cash flows of the Debtor and its
Subsidiaries for the six-month period ended May 31, 1994, copies of which have
been furnished to the Banks, fairly present the consolidated financial condition
of the Debtor and its Subsidiaries as at the date thereof, and the consolidated
results of operations of the Debtor and its Subsidiaries for the respective
periods indicated, all in accordance with generally accepted accounting
principles consistently applied (subject in the case of the interim statements
to year-end audit adjustments). There has been no material adverse change in the
business, properties, operations, or condition, financial or otherwise, of the
Debtor and its Subsidiaries, on a consolidated basis, since November 30, 1993.
There are no liabilities of the Debtor or any Subsidiary, fixed or contingent,
which are material but are not reflected in such financial statements or the
notes thereto.
(d) No Event of Default has occurred and is continuing or will exist
under the Credit Agreement as of the effective date hereof.
<PAGE> 3
4. Conditions to Effectiveness. This First Amendment shall not become
effective until the Agent has received the following documents and the following
conditions have been satisfied, each in form and substance satisfactory to the
Agent:
(a) Copies, certified as of the effective date hereof, of such
corporate documents of the Debtor and each Guarantor, including articles of
incorporation, bylaws (or certifying as to the copies of the articles of
incorporation and by-laws previously delivered to the Banks), and incumbency
certificates, and such documents evidencing necessary corporate action by the
Debtor and each Guarantor with respect to this First Amendment and all other
agreements or documents delivered pursuant hereto;
(b) The favorable written opinion of counsel for the Debtor and the
Guarantors, relating to those matters referenced in Section 3(a) of this First
Amendment, Section 4.1 of the Credit Agreement, and as to such other matters as
the Banks may reasonably request, such opinion to be in form and substance
satisfactory to the Banks;
(c) A certified copy of an order of the Bankruptcy Court authorizing
and approving this First Amendment;
(d) An amendment fee of $200,000 is paid to the Agent for the
account of each Bank, such amount to be distributed by the Agent pro rata to the
Banks based on their respective Commitment Percentages; and
(e) Such additional agreements and documents, fully executed by the
Debtor and its Subsidiaries, reasonably requested by the Agent.
5. Execution by Guarantors. Each of the Guarantors is joining in the
execution of this First Amendment for the purpose of acknowledging and agreeing
to all of the terms hereof and confirming the continued effect of the Credit
Agreement and all other obligations to be observed or performed by each such
Guarantor thereunder. Without limiting the foregoing, each Guarantor fully
consents to the terms and provisions of this First Amendment and all other
agreements and documents delivered pursuant hereto and the consummation of the
transactions contemplated hereby.
6. Miscellaneous. The terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. Except as
expressly amended hereby, the Credit Agreement and all other Loan Documents are
hereby ratified and confirmed by the Banks, the Agent, the Debtor and the
Guarantors and shall remain in full force and effect, and the Debtor and each
Guarantor hereby acknowledge that they have no defense, offset or counterclaim
with respect thereto.
7. Counterparts. This First Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this First Amendment by
signing any such counterpart.
8. Governing Law. This First Amendment is a contract made under, and
shall be governed by and construed in accordance with, the laws of the State of
Michigan applicable to contracts made and to be performed entirely within such
<PAGE> 4
state and without giving effect to the choice law principles of such state.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed and delivered as of the date first written above.
EAGLE-PICHER INDUSTRIES, INC.
an Ohio corporation and
Debtor and Debtor in
Possession
By: /s/ David N. Hall And By: /s/ Harry A. Neely
------------------------ -------------------
Its: Senior Vice President- Its: Treasurer
Finance
HILLSDALE TOOL AND MICHIGAN AUTOMOTIVE
MANUFACTURING CO. RESEARCH CORP.
a Michigan corporation and a Michigan corporation and
Debtor and Debtor in Debtor and Debtor in
Possession Possession
By: /s/ Harry A. Neely By: /s/ Harry A. Neely
-------------------- --------------------
Its: Vice President Its: Vice President
EDI, INC. EAGLE-PICHER MINERALS, INC.
a Michigan corporation and a Nevada corporation and
Debtor and Debtor in Debtor and Debtor in
Possession Possession
By: /s/ Harry A. Neely By: /s/ Harry A. Neely
-------------------- --------------------
Its: Vice President Its: Vice President
DAISY PARTS, INC. TRANSICOIL INC.
a Michigan corporation and a Pennsylvania corporation
Debtor and Debtor in and Debtor and Debtor in
Possession Possession
By: /s/ Harry A. Neely By: /s/ Harry A. Neely
-------------------- ----------------------
Its: Vice President Its: Vice President
<PAGE> 5
NBD BANK, N.A.
By: /s/ Gary C. Wilson
--------------------
Gary C. Wilson
Its: Vice President
THE BANK OF NOVA SCOTIA STAR BANK, N.A., CINCINNATI
By: /s/ F.C.H. Ashby By: /s/ Wm. Goodwin, VP
------------------ --------------------
F.C.H. Ashby
Its: Senior Manager Loan Operations Its: Vice President
PNC BANK, OHIO, N.A. (formerly NBD BANK, N.A., as Agent
known as The Central Trust
Company, N.A.)
By: /s/ David F. Knuth By: /s/ Gary C. Wilson
-------------------- --------------------
David F. Knuth Gary C. Wilson
Its: Vice President Its: Vice President
<PAGE> 1
Exhibit 10(d)
EAGLE-PICHER INDUSTRIES, INC. SEVERANCE PLAN
SECTION 1. THE PLAN
1.1 The Plan. Eagle-Picher Industries, Inc. ("Company") adopts the following
severance plan (the "Plan") effective May 13, 1991.
SECTION 2. DEFINITIONS
2.1 Definitions. Whenever used in the Plan, the following terms shall mean:
(a) "ADMINISTRATOR" means the Company's Director of Taxes or his designee.
The Administrator shall be a named fiduciary under the Plan.
(b) "AFFILIATES" means Daisy Parts, Inc., Transicoil Inc., Michigan
Automotive Research Corporation, EDI, Inc., Eagle-Picher Europe, Inc.,
Eagle-Picher Minerals, Inc. and Hillsdale Tool & Manufacturing Company.
(c) "ANNUAL COMPENSATION" means the total of all compensation, including
wages, salary, and any other benefit of monetary value, whether paid in
the form of cash or otherwise, which was paid as consideration for the
participant's service during the 12-month period preceding the
participant's severance, or the total which would have been so paid at
the participant's usual rate of compensation for any participant who
did not work for the Company or an Affiliate for the full 12-month
period preceding the participant's severance.
(d) "BASE PAY" means the participant's base annual pay rate at the date of
his termination of employment.
(e) "COMPANY" means Eagle-Picher Industries, Inc., or any successor thereto.
(f) "EFFECTIVE DATE" means May 13, 1991 pursuant to Judge Burton Perlman's
order entered that date.
(g) "ELIGIBLE EMPLOYEES" means officers of the Company, division presidents
(including the presidents of wholly-owned subsidiaries), all other
General Office salaried employees and those employees designated by the
Chief Executive Officer of the Company as key division employees.
(h) "SERVICE" means Vesting Service as defined in the Eagle-Picher
Retirement Income Plan for Salaried Employees.
(i) "WEEK'S PAY" means a participant's Base Pay divided by 52.
<PAGE> 2
2.2 Gender Reference. Any words in this Plan document (or amendments to it)
which are used in one gender shall be read and construed to mean or include
the other gender wherever they would so apply.
SECTION 3. PARTICIPATION
3.1 Participants. Eligible Employees employed on the Effective Date shall become
participants on that date.
3.2 New Participants. Any one meeting the definition of Eligible Employee hired
or designated by the Chief Executive Officer after the Effective Date shall
become a participant after completion of three months of Service. The
Company's Chief Executive Officer can waive any service period required of
a new participant by a written letter to the participant with a copy to the
Administrator.
SECTION 4. BENEFITS
4.1 Severance Benefit. Participants terminated by the Company or an Affiliate
after the Effective Date other than for cause will receive a Base Severance
Benefit, a Supplemental Severance Benefit and Group Medical and Life
Insurance Benefits as described herein. The eligibility for, and the level
of, benefits will be determined by the employee's status as an officer,
division president or key employee at the date of the employee's
termination of employment.
4.2 Base Severance Benefit. The Base Severance Benefit will provide one Week's
Pay for each completed year of Service and, for any partial year of Service,
one-twelfth Week's Pay for each completed month of Service. Payments shall
be reduced dollar for dollar by compensation earned for services rendered by
a participant for a subsequent employer during the period Base Severance
Benefits are being paid. The minimum Base Severance Benefit shall be two
Week's Pay. Payments under the Base Severance Benefit will be made under the
general payroll practice for the unit in which the participant was
employed.
4.3 Supplemental Severance Benefit. The Supplemental Severance Benefit will
provide one year's Base Pay for officers and division presidents; six months
Base Pay for salaried General Office and division employees designated as
key employees by the Chief Executive Officer; and three months Base Pay for
all other salaried General Office employees. The Supplemental Severance
Benefit shall be paid in a lump sum on termination of employment. The
Supplemental Severance Benefit shall terminate upon confirmation of a plan
of reorganization. A participant who has not been terminated prior to the
confirmation of a plan of reorganization will not be eligible for the
Supplemental Severance Benefit.
4.4 Group Medical and Life Insurance Benefits. The Group Medical and Life
Insurance Benefits will provide continued participation in the medical
indemnity benefits, self-funded medical benefits, health maintenance
organizations, and group term life insurance benefits (including the
additional group term life insurance available at employee cost) as if the
participant were an active employee of the Company or an Affiliate. These
benefits will continue for one week for each year of Service unless
<PAGE> 3
similar coverage is obtained from a subsequent employer. Any period for
which medical benefits are provided hereunder shall reduce the period for
which COBRA benefits are available. These benefits shall continue under the
participant's election in force when his severance occurs, subject to any
new election that would be available to him as an active employee. If the
HMO or medical indemnity provider refuses to continue coverage for the
participant, the participant will receive coverage under the self-funded
medical benefit program available to employees at his location.
4.5 Vacation Pay. Any existing practices of the Company or Affiliates with
respect to payment for unused vacation time at termination of employment
shall not be affected by this Plan.
4.6 Maximum Severance Benefits. Payments under the Plan shall not exceed twice
the participant's Annual Compensation.
4.7 Death of Participant. No benefits shall be payable upon the death of a
participant except for any payment which may have been due prior to his date
of death.
SECTION 5. ADMINISTRATION
5.1 Powers and Duties. The Administrator shall have the power and the duty to
take all action, and to make all decisions necessary or proper to carry out
the Plan, including, without limitation, the following:
(a) To interpret the Plan, which interpretations shall be final and
conclusive;
(b) To compute the benefit to be paid to any person under the Plan;
(c) To provide procedures for withholding of any income or employment taxes
from benefits payable hereunder.
5.2 Claims Procedure.
(a) CLAIM, DENIAL AND NOTICE: Any participant who disagrees with the
Administrator's determination of his right to benefits or the amount of
the benefits shall file a written claim for the benefits he believes he
is entitled to. If the Administrator denies the claim, in whole or in
part, he shall furnish the participant with written notice of the
denial of his claim within sixty (60) days of receipt of the claim.
Such notice shall be written in a manner calculated to be understood by
the participant and shall contain the specific reasons for such denial,
specific references to pertinent Plan provisions on which the denial is
based, a description of additional material or information which is
needed to complete the claim and why such is necessary, and an
explanation of the Plan's appeal procedure.
<PAGE> 4
(b) APPEAL: Within sixty (60) days after the receipt of a notice that
his claim was denied, the claimant may appeal the denial of his
claim to the Administrator in writing stating the reason for his
appeal and submitting any issues or comments for the
Administrator's review.
(c) DECISION ON APPEAL: Within sixty (60) days of receipt of an appeal,
the Administrator shall mail to the applicant a written notice of
his decision setting forth, in a manner calculated to be understood
by the applicant, the specific reasons for his decision and the
specific references to the pertinent Plan provisions on which his
decision was based.
5.3 Indemnity For Liability. The Company shall indemnify the Administrator
against any and all claims, losses, damages, expenses, including counsel
fees, incurred by the Administrator and any liability, including any amounts
paid in settlement with the Company's approval, arising from the
Administrator's action or failure to act, except when the same is judicially
determined to be attributable to the gross negligence or willful misconduct
of the Administrator.
SECTION 6. MISCELLANEOUS
6.1 Plan Year. The plan year shall be the calendar year.
6.2 Amendment or Termination. The Company reserves the right to amend or
terminate this Plan at any time. A participant whose employment terminates
after the termination or amendment of this Plan shall be entitled only to
the benefits available under the Plan, if any, in existence at his
termination of employment.
In Witness Whereof, Eagle-Picher Industries, Inc. has caused this plan to be
executed by its duly authorized corporate officers this 25th day of June 1991.
EAGLE-PICHER INDUSTRIES, INC.
By: /s/ Thomas E. Petry
-------------------------
Attest: Thomas E. Petry
Chairman of the Board and
Chief Executive Officer
/s/ David W. Matthews
- -----------------------
David W. Matthews
Assistant Secretary
<PAGE> 1
EXHIBIT 11
EAGLE-PICHER INDUSTRIES, INC.
CALCULATION OF AVERAGE NUMBER OF SHARES
THREE YEARS ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Average common shares issued 11,125,000 11,125,000 11,125,000
Less: Average common treasury shares (84,068) (94,485) (146,568)
---------- ---------- ----------
Average number of common shares
outstanding 11,040,932 11,030,515 10,978,432
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 13
Excerpts from Eagle-Picher Industries, Inc. Annual Report for the fiscal year
ended November 30, 1994.
<PAGE> 2
CONSOLIDATED STATEMENT OF INCOME (LOSS)
Eagle-Picher Industries, Inc.
<TABLE>
<CAPTION>
Years Ended November 30
(In thousands of dollars, except per share) 1994 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $756,741 $ 661,452 $611,458
OPERATING COSTS AND EXPENSES
Cost of products sold 622,907 548,605 497,341
Selling and administrative 75,553 69,093 67,557
-------- ----------- --------
698,460 617,698 564,898
-------- ----------- --------
OPERATING INCOME 58,281 43,754 46,560
Provision for asbestos litigation - (1,135,500) -
Provision for environmental and other claims - (41,436) (2,000)
Interest expense (contractual
interest of $8,940 in 1994, $9,369
in 1993 and $10,193 in 1992) (1,809) (2,070) (2,691)
Other income (expense) 703 (174) (945)
-------- ----------- --------
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS, TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 57,175 (1,135,426) 40,924
REORGANIZATION ITEMS (3,426) (4,344) (9,038)
-------- ----------- --------
INCOME (LOSS) BEFORE TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 53,749 (1,139,770) 31,886
INCOME TAXES 5,000 5,000 3,000
-------- ----------- --------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 48,749 (1,144,770) 28,886
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS - (12,598) -
-------- ----------- --------
NET INCOME (LOSS) $ 48,749 $(1,157,368) $ 28,886
======== =========== ========
INCOME (LOSS) PER SHARE:
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 4.42 $(103.78) $ 2.63
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS - (1.14) -
------ -------- ------
NET INCOME (LOSS) $ 4.42 $(104.92) $ 2.63
====== ======== ======
</TABLE>
See accompanying notes to consolidated financial statements.
-13-
<PAGE> 3
CONSOLIDATED BALANCE SHEET
Eagle-Picher Industries, Inc.
<TABLE>
<CAPTION>
ASSETS November 30
(In thousands of dollars) 1994 1993
- --------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 92,606 $ 84,574
Receivables, less allowances of $1,445
in 1994 and $1,182 in 1993 109,130 97,586
Income tax refund receivable 2,246 3,275
Inventories 81,982 68,306
Prepaid expenses 10,295 8,283
-------- --------
TOTAL CURRENT ASSETS 296,259 262,024
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 11,940 11,660
Buildings 79,937 75,749
Machinery and equipment 301,518 274,931
Construction in progress 14,623 13,392
-------- --------
408,018 375,732
Less accumulated depreciation 263,369 241,331
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 144,649 134,401
-------- --------
DEFERRED INCOME TAXES 43,924 29,924
OTHER ASSETS 36,275 33,011
-------- --------
TOTAL ASSETS $521,107 $459,360
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-14-
<PAGE> 4
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
November 30
(In thousands of dollars) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 43,691 $ 32,365
Compensation and employee benefits 14,005 12,167
Long-term debt - current portion 1,726 2,737
Income taxes 5,223 5,613
Taxes other than income 4,611 4,125
Other accrued liabilities 16,705 17,793
---------- ----------
TOTAL CURRENT LIABILITIES 85,961 74,800
---------- ----------
LIABILITIES SUBJECT TO COMPROMISE 1,657,265 1,656,563
LONG-TERM DEBT, less current portion 19,896 21,712
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 21,070 20,209
OTHER LONG-TERM LIABILITIES 3,608 3,282
---------- ----------
TOTAL LIABILITIES 1,787,800 1,776,566
---------- ----------
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 36,378
Accumulated deficit (1,317,118) (1,365,867)
Foreign currency translation 2,054 290
---------- ----------
(1,264,780) (1,315,293)
Cost of 84,068 common treasury shares (1,913) (1,913)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,266,693) (1,317,206)
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 521,107 $ 459,360
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-15-
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
Eagle-Picher Industries, Inc.
<TABLE>
<CAPTION>
Years Ended November 30
(In thousands of dollars) 1994 1993 1992
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 48,749 $(1,157,368) $ 28,886
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Provision for asbestos litigation - 1,135,500 -
Provision for environmental and
other claims - 41,436 2,000
Cumulative effect of accounting change - 12,598 -
Depreciation and amortization 26,143 24,955 24,655
Changes in assets and liabilities:
Receivables (11,544) (10,764) 579
Income tax refund receivable 1,029 101 (1,290)
Due from insurance carriers - - 4,377
Inventories (13,676) (4,098) 1,787
Deferred income taxes (14,000) (12,137) (4,574)
Accounts payable 11,326 5,539 1,263
Other (3,636) 2,111 (8,439)
-------- ----------- --------
Net cash provided by
operating activities before
changes in liabilities subject
to compromise 44,391 37,873 49,244
Changes in liabilities subject to
compromise 702 (197) 1,553
-------- ----------- --------
Net cash provided by
operating activities 45,093 37,676 50,797
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (35,887) (28,512) (21,583)
Other 1,800 335 1,352
-------- ----------- --------
Net cash used in investing
activities (34,087) (28,177) (20,231)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 810 2,243
Reduction of long-term debt (2,974) (4,007) (8,972)
Issuance of common shares - 156 -
-------- ----------- --------
Net cash used in financing
activities (2,974) (3,041) (6,729)
-------- ----------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,032 6,458 23,837
-------- ----------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 84,574 78,116 54,279
-------- ----------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 92,606 $ 84,574 $ 78,116
======== =========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-16-
<PAGE> 6
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Eagle-Picher Industries, Inc.
<TABLE>
<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, 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)
Net income - - 48,749 - - 48,749
Foreign currency translation - - - 1,764 - 1,764
-------------------------------------------------------------------------
BALANCE NOVEMBER 30, 1994 $13,906 $36,378 $(1,317,118) $ 2,054 $(1,913) $(1,266,693)
=========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-17-
<PAGE> 7
QUARTERLY DATA
(Unaudited)
(In thousands of dollars, except per share)
<TABLE>
<CAPTION>
1994 FIRST SECOND THIRD FOURTH YEAR
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $177,754 $196,994 $186,191 $195,802 $756,741
- --------------------------------------------------------------------------------------------------
OPERATING INCOME 13,781 17,537 14,226 12,737 58,281
- --------------------------------------------------------------------------------------------------
NET INCOME 11,039 14,669 11,733 11,308 48,749
- --------------------------------------------------------------------------------------------------
NET INCOME PER SHARE 1.00 1.33 1.06 1.03 4.42
- --------------------------------------------------------------------------------------------------
COMMON STOCK PRICE (NYSE)
HIGH (3) -- -- -- -- --
------------------------------------------------------------------------------------------------
LOW (3) -- -- -- -- --
------------------------------------------------------------------------------------------------
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)
------------------------------------------------------------------------------------------------
</TABLE>
(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 discussed in note (2) above, the New York Stock Exchange
("NYSE") 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. The Company's common stock was
removed from listing and registration on the NYSE effective June 9, 1994.
The stock has not been traded on an organized exchange since the date of
the Company's announcement, 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.
-18-
<PAGE> 8
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 which are more than 50% owned and controlled.
Intercompany accounts and transactions have been eliminated. Investments in
nonconsolidated companies which are at least 20% owned are accounted for using
the equity method.
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
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.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk 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, 1994.
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.
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 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, 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."
-19-
<PAGE> 9
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 Court"). Each
filing entity is currently operating its business as a debtor in possession in
accordance with the provisions of the Bankruptcy Code.
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 ICC 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.
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 future asbestos-related
personal injury 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.
As a consequence of this agreement, 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.
Throughout 1994, the Company, the ICC and the RFC continued to refine the
details of a joint plan of reorganization ("the Plan"). On January 18, 1995, the
Company advised the Bankruptcy Court that it intended to file a plan of
reorganization by the end of February 1995. It is currently contemplated that
such plan of reorganization will be a joint plan among the Company, the ICC and
the RFC. Because the Company could not conclude that the negotiations with the
Unsecured Creditors' Committee and the Equity Security Holders' Committee would
result in a consensual plan of reorganization, the Company expects to file the
proposed Plan without the consent of such parties. Implementation of the
treatment of claims and interests as provided in the proposed Plan is subject to
confirmation of the Plan in accordance with the provisions of the Bankruptcy
Code.
The proposed Plan to be filed contemplates a settlement of the Company's
liability for all present and future asbestos-related personal injury claims and
certain other tort claims. These claims will be channeled to and resolved by an
independently administered claims trust (the "Trust"). It is also currently
contemplated that the Plan will provide for the distribution of cash, notes,
debentures, and common stock of the reorganized Company to the Trust and to
holders of allowed unsecured claims on a pro-rata basis proportionate to the
percentage of their claims to the total of the Liabilities Subject to
Compromise.
It is intended that the Plan will also provide that priority claims and
convenience claims (general unsecured claims of $500 or less) will be paid in
full, in cash. 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 shareholders to participate in the reorganized company or to
receive a distribution. The proposed Plan does not contemplate that all classes
of pre-petition creditors receive satisfaction in full of their allowed claims.
Consequently, the Plan will not
-20-
<PAGE> 10
provide for any distribution to shareholders and their equity will be
canceled.
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)
1994 1993
---- ----
<S> <C> <C>
Asbestos liability - Note K $ 1,499,993 $ 1,500,029
Long-term debt - Note E 62,004 62,004
Accounts payable 41,074 43,135
Accrued liabilities - Note L 54,194 51,395
--------- ---------
$ 1,657,265 $ 1,656,563
========= =========
</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 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.
The Company believes that the ultimate consideration to be received by all
unsecured creditors will be substantially less than the amounts shown in the
accompanying Consolidated Balance Sheet.
The net expense resulting from the Company's chapter 11 filings has been
segregated from expenses related to ordinary operations in the accompanying
Consolidated Statement of Income (Loss) and includes the following:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Professional fees $ 6,304 $ 5,921 $ 8,996
Debt financing costs 200 - 476
Other expenses 210 807 1,823
Interest income (3,288) (2,384) (2,257)
------- ------- -------
$ 3,426 $ 4,344 $ 9,038
======= ======= =======
</TABLE>
Interest income is attributable to the accumulation of cash and cash equivalents
subsequent to the petition date.
C. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Raw materials and supplies $ 52,146 $ 39,319
Work-in-process 24,907 25,381
Finished goods 15,853 13,983
-------- --------
92,906 78,683
Allowance to value inventory at
cost on the LIFO method 10,924 10,377
-------- --------
$ 81,982 $ 68,306
======== ========
</TABLE>
The percentage of inventories valued using the LIFO method was 81% in 1994 and
79% in 1993. The effects of liquidations of LIFO inventory quantities carried at
lower costs prevailing in prior years were not material.
D. OTHER ASSETS
Other assets consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Cost in excess of net assets acquired,
net of accumulated amortization of
$3,973 in 1994 and $3,580 in 1993 $ 12,507 $ 12,900
Notes receivable 5,778 6,273
Prepaid pension cost - Note I 7,879 7,019
Other 10,111 6,819
-------- --------
$ 36,275 $ 33,011
======== ========
</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%. Pursuant to the terms of the note, interest is
payable semiannually commencing in August, 1994. The Company received the first
interest payment in accordance with the terms of the note.
The Company has not yet adopted Statement of Financial Accounting Standards No.
115 ("FAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities." The Company holds certain investments with no cost basis which
would be accounted for in accordance with FAS 115. A substantial portion of
these investments relate to shares of stock in a Canadian mining concern that
the Company received in 1990 in settlement of certain indebtedness. The Company
had previously deemed the investment to be permanently impaired and had recorded
a loss on the investment in the amount of its full book value.
The price of the stock, however, has significantly
-21-
<PAGE> 11
increased since then. At November 30, 1994, the fair value of investments that
would be accounted for in accordance with FAS 115 was approximately $5.4
million. The Company is required to adopt FAS 115 on December 1, 1994 on a
prospective basis. Upon adoption, the investments would be recorded at their
fair value in the Consolidated Balance Sheet and any unrealized gains or losses
would be reported in a separate component of shareholders' equity until
realized.
E. 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 facility
("Facility"). The entire amount of the Facility is available for both cash
borrowings and letters of credit. The Facility has been extended and it
currently expires on the earlier of December 31, 1996 or the effective date of a
confirmed plan of reorganization. Letters of credit totaling $32,941,000 and
$34,091,000 were outstanding on November 30, 1994 and 1993, respectively,
leaving the Company with $7,059,000 and $5,909,000, respectively, in available
borrowing capacity under the Facility. There were no cash borrowings under the
Facility at any time in 1994 or 1993.
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 throughout the term of the Facility and its
extensions.
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 Liabilities Subject to
Compromise. Interest expense has not been recorded on these obligations for the
post-petition period because interest is not payable. Interest on undersecured
and other unsecured pre-petition debt obligations would have been $7,131,000,
$7,299,000, and $7,502,000 in 1994, 1993, and 1992, respectively.
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.
Long-term debt consisted of:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
9-1/2% Sinking fund debentures, due
2017 $ 50,000 $ 50,000
Industrial revenue bonds 18,125 18,200
Secured notes 13,683 15,005
Debt of foreign subsidiaries 1,304 2,684
Other 514 564
------- -------
83,626 86,453
Less:
Current portion 1,726 2,737
Subject to compromise 62,004 62,004
------- -------
Long-term debt, less current portion $ 19,896 $ 21,712
======= =======
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 4,132
Other 372 372
------- -------
$ 62,004 $ 62,004
======= =======
</TABLE>
Interest rates averaged 4% in 1994, 5% in 1993, and 6% in 1992 on the industrial
revenue bonds, foreign and other long-term debt on which the Company is
obligated to pay interest. These long-term debt amounts are to mature at various
dates through 2004.
Long-term debt (excluding amounts subject to compromise) is scheduled to
mature as follows: $1,726,000 in 1995,
-22-
<PAGE> 12
$1,616,000 in 1996, $2,257,000 in 1997, $1,589,000 in 1998, and $1,295,000 in
1999. The unsecured portion of long-term debt will be resolved in a plan of
reorganization.
During 1994, 1993, and 1992, the Company paid interest of $1,765,000,
$2,075,000, and $2,746,000, respectively.
F. INCOME TAXES
The Company adopted FAS 109 in 1993. The cumulative effect of this change in
accounting for income taxes was not material and prior year financial statements
were not 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
consisted 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)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal - current $ 15,600 $ 12,500 $ 4,200
- deferred (14,000) (11,800) (4,600)
Foreign 900 2,700 2,700
State and local 2,500 1,600 700
-------- -------- --------
$ 5,000 $ 5,000 $ 3,000
======== ======== ========
</TABLE>
The sources of income (loss) before income tax expense (benefit) and cumulative
effect of accounting change are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States $ 47,670 $(1,143,312) $ 27,916
Foreign 6,079 3,542 3,970
-------- ----------- --------
$ 53,749 $(1,139,770) $ 31,886
======== =========== ========
</TABLE>
The significant components of deferred income tax expense (benefit) attributable
to income from operations are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Deferred tax benefit (exclusive of the
effects of other components listed
below) $ (400) $(412,900)
Adjustments to deferred tax assets and
liabilities for enacted changes in
tax laws and rates - (3,800)
Change in beginning-of-the-year balance
of the valuation allowance for
deferred tax assets (13,600) 404,900
-------- --------
$(14,000) $(11,800)
</TABLE> ======== ========
In 1992, the deferred tax benefit of $4,600,000 was primarily attributable to
the utilization of accounting loss carryforwards and tax credits.
Components of deferred tax balances as of November 30 are as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ (6,608) $ (6,863)
Prepaid pension (2,758) (2,457)
Other (3,371) (3,866)
-------- --------
Total deferred tax liabilities (12,737) (13,186)
-------- --------
Deferred tax assets:
Asbestos liability 524,998 525,010
Accrued liabilities (including amounts
subject to compromise) 26,223 25,742
Postretirement benefit liability 7,375 7,073
Other 4,048 4,848
-------- --------
Total deferred tax assets 562,644 562,673
-------- --------
Valuation allowance (505,983) (519,563)
-------- --------
Net deferred tax assets $ 43,924 $ 29,924
======== ========
</TABLE>
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 and other pre-petition liabilities is
appropriate at
-23-
<PAGE> 13
this time. These liabilities have been recorded at the expected amounts of the
allowed claims; if the liabilities are settled for lesser amounts, there will
be a corresponding reduction in the deferred tax assets and related valuation
allowance. A significant portion of the net deferred tax asset recognized at
November 30, 1994 is expected to be recovered through the carryback of amounts
which will become deductible when the related liabilities are paid. The change
in the valuation allowance in 1994 approximates the increase in the amounts
recoverable through these carrybacks. 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)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax
expense (benefit) $ 18,800 $(398,900) $ 10,800
Change in valuation allowance (13,600) 404,900 -
Utilization of accounting
loss carryforward - - (8,300)
Change in Federal income tax rate - (3,800) -
Foreign tax rate differential (1,500) 1,300 600
State and local taxes, net of
Federal benefit 1,600 1,000 500
Other (300) 500 (600)
-------- --------- ---------
Total income tax expense $ 5,000 $ 5,000 $ 3,000
======== ========= =========
</TABLE>
The Company paid income taxes, net of refunds received in 1994, 1993, and 1992
of $18,200,000, $16,500,000, and $9,900,000, respectively.
G. 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. The average
number of shares used in the computation of net income (loss) per share was
11,040,932 in 1994, 11,030,515 in 1993 and 10,978,432 in 1992.
H. COMMON STOCK OPTIONS
At November 30, 1994, 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, 1994.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
Shares Option Price
------ ------------
<S> <C> <C>
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
Expired (20,000) $ 2.50
Outstanding at November 30, 1994 499,500 $ 2.50 TO $14.25
</TABLE>
There were 279,274 shares available for future grants at November 30, 1994.
I. 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
$998,000 in 1994, $849,000 in 1993, and $1,734,000 in 1992.
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 typically are based on a dollar unit multiplied by
the number of service years.
Net periodic pension expense for the Company's defined benefit plans included
the following components:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 4,684 $ 3,924 $ 3,204
Interest cost on projected
benefit obligation 12,144 12,490 12,228
Actual gain on plan assets (635) (20,658) (26,536)
Net amortization and deferral (17,052) 3,943 11,978
-------- -------- --------
Net periodic pension costs $ (859) $ (301) $ 874
======== ======== ========
</TABLE>
The plans' assets consist primarily of listed equity securities and publicly
traded notes and bonds. The actual net return on plan assets was .3% in 1994,
11.3% in 1993, and 15.4% in 1992, and generally reflects the performance of the
equity and bond markets.
-24-
<PAGE> 14
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)
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(143,249) $(156,059)
========= =========
Accumulated benefit obligation $(148,243) $(161,674)
========= =========
Projected benefit obligation $(161,089) $(176,875)
Plan assets at fair value 178,216 188,380
--------- ---------
Projected benefit obligation
less than plan assets 17,127 11,505
Unrecognized net (gain) loss (72) 7,822
Unrecognized prior service cost (benefit) 1,192 (754)
Unrecognized net (asset) obligation (10,368) (11,554)
--------- ---------
Prepaid pension cost recognized $ 7,879 $ 7,019
========= =========
</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 8.0% and 4.2%, and 7.0% and 4.2%, respectively, at November 30,
1994 and 1993, respectively. The expected long-term rate of return on assets was
9.0% during 1994 and 1993. 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.
J. 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 recognized 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 were restated to 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, prior to adoption of FAS 106, the cost of
retiree health care and life insurance benefits, net of retiree contributions,
was approximately $911,000. The components of expense were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Service cost - benefits earned
during the period $ 510 $ 467
Interest cost on accumulated
postretirement benefit obligation 1,327 1,394
------- -------
Net periodic postretirement benefit costs $ 1,837 $ 1,861
======= =======
</TABLE>
The accumulated postretirement benefit obligation at November 30 consisted of
the following components:
<TABLE>
<CAPTION>
(In thousands of dollars)
1994 1993
---- ----
<S> <C> <C>
Retirees and dependents $13,017 $13,545
Eligible active participants 1,602 2,011
Other active participants 4,823 6,743
------- -------
Accumulated postretirement
benefit obligation 19,442 22,299
Unrecognized net gain (loss) 1,628 (2,090)
------- -------
Accrued postretirement benefit costs $21,070 $20,209
======= =======
</TABLE>
Benefit costs were estimated assuming retiree health care costs would initially
increase at an 11% annual rate which decreases to an ultimate rate of 6% in 5
years. If this annual trend rate would increase by 1%, the accumulated
postretirement obligation as of November 30, 1994 would increase by $2,599,000
with a corresponding increase of $111,000 in the postretirement benefit expense
in 1994. The discount rates used in determining the accumulated postretirement
obligation at November 30, 1994 and 1993 were 7.5% and 6.5%, respectively.
In 1994, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 112 ("FAS 112"), "Employers' Accounting for Postemployment
Benefits." This statement requires companies to accrue postemployment benefits
if the obligation is attributable to employees' services already rendered,
employees' rights to those benefits accumulate or vest, payment of benefits is
probable and the amount of the benefits can be reasonably estimated. Previously,
the cost of the Company's
-25-
<PAGE> 15
postemployment benefits was recognized as incurred. The cumulative effect of
the change in accounting for postemployment benefits was not material.
K. ASBESTOS LITIGATION AND CLAIMS
As discussed above, the Company currently intends to file a joint plan of
reorganization (the "Plan") with the Injury Claimants' Committee ("ICC") and the
Legal Representative for Future Claimants ("RFC") on or before February 28,
1995. It is contemplated that the Plan will provide, 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. It is also currently contemplated
that the Plan will provide a procedure to resolve and discharge asbestos
property damage claims. These procedures will require such claimants to prove by
application of a scientific protocol that the asbestos containing insulation
products for which they are seeking damages were manufactured by the Company.
The asbestos-related claims, which consist of personal injury and property
damage claims, are discussed below.
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.
The Bankruptcy Court set September 30, 1992 as the bar date for present
asbestos-related claims. The Company implemented the Court-approved plan to
notify known and potential claimants of the bar date. 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, and whose lawsuits 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.
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 aggregate
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 proposed Plan discussed in this
footnote and elsewhere, which is premised on a settlement of the Company's
liability for all present and future asbestos-related personal injury claims,
is in the best interests of the Company.
-26-
<PAGE> 16
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 and commercial building owners. The lawsuits
typically demanded compensation for 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 were certified as class actions and
one was conditionally certified. Class certification was sought by the
plaintiffs in two other cases. One of such cases has been dismissed; the other
is still pending, but to the Company's knowledge, no decision has yet been
rendered on the request for class certification. Prior to filing its chapter 11
petition, the 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.
As previously discussed, it is currently contemplated that the asbestos-related
property damage claims will be resolved in the Bankruptcy Court pursuant to
procedures that will be set forth in the Plan. The eventual outcome of the
asbestos property damage claims cannot be reasonably predicted due to numerous
uncertainties that are inherent in the reorganization process. In addition, the
Company may have insurance coverage for certain of these claims and other
factual and legal defense available to it.
L. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS
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 this 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 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"). The USEPA is responsible for resolving,
among other things, claims arising from Superfund sites and the DOI is
responsible for resolving the Company's liability for any natural resource
damage that may have occurred at the Superfund sites. Natural resource damage
is damage caused to the environment or to plants or animals by the release of
hazardous materials at Superfund sites. Following the tentative agreement
resolving these claims that was discussed in this Annual Report for fiscal
1993, the USEPA received additional information concerning three of the sites
that were the subject of the tentative agreement. This additional information
resulted in a renegotiation of the tentative agreement which has resulted in a
new tentative agreement among the Company, USEPA, and DOI, and certain states.
Pursuant to such agreement, the agencies would be afforded allowed pre-petition
general unsecured claims aggregating approximately $43.0 million in full
satisfaction of all of the Company's alleged liability at most of its known
Superfund sites, including any liability for any natural resource damage. This
amount has been provided for and is included in Liabilities Subject to
Compromise. In exchange for these allowed claims, the agencies 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
-27-
<PAGE> 17
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, would be satisfied essentially 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 Company believes that the negotiations have progressed sufficiently and it
is finalizing a settlement agreement resolving these 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 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
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.
All of the timely claims which specified an amount of damages have been fully
withdrawn without the allowance of any amount by the Company.
The three late filed claims discussed above were filed by the City of New York
or its agencies which had filed a pre-petition lawsuit against the Company. In
November 1994, the Bankruptcy Court sustained the Company's objection to these
claims and disallowed them because they were late filed. No appeal of this
ruling was sought by the claimants. As a result, the Company has disposed of all
lead-related property damage claims. The Company has also filed objections to
seven other claims that were filed against it seeking damages for bodily
injuries resulting from exposure to lead. Pursuant to the objections, the
Company has sought an order of the Bankruptcy Court disallowing such claims
because the claimants' lawsuits asserting similar claims against other
defendants which were not in bankruptcy had been dismissed in the trial court.
The claimants have opposed the relief sought by the Company and the Bankruptcy
Court has not yet ruled on these objections.
The Company believes that its objections are meritorious. It also believes that
it has valid grounds to object to the allowance of all of the remaining
lead-related personal injury claims. It is currently contemplated that all
lead-related personal injury claims that were filed that are not disposed of
pursuant to an objection filed by the Company and all future lead-related
personal injury claims will be channeled to and resolved by the Trust referred
to above to be established under the Plan for the benefit of holders of personal
injury claims resulting from exposure to asbestos or lead-containing products.
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
aggregated approximately $1.1 billion. The majority of these claims have been
resolved by disallowance or by the allowance of a pre-petition general unsecured
claim for amounts that are not material to the Company or its operations.
The two largest such claims, for $500 million each, resulted from lawsuits
brought by the Company's majority owned subsidiary, American Imaging Services,
Inc., and such subsidiary's president and minority shareholder against the
Company and three of its officers in the United States District Court for the
Northern District of Texas. These claims were resolved in December 1994 through
settlement. The settlement, which was not material to the Company or its
operations, was approved by the Bankruptcy Court in January 1995.
Summary
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 intends 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
-28-
<PAGE> 18
context of the chapter 11 cases. Further, all such claims against the
Company will be resolved in a plan of reorganization.
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. 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 that are
inherent in the reorganization process. However, the Company believes that its
provision for these claims is adequate. In addition, the Company may have
insurance coverage for certain of these claims and other factual and legal
defenses available to it.
M. 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 and industrial chemicals.
Machinery
Earth moving machines, heavy-duty forklift trucks, aerospace and defense parts,
metal cleaning and finishing systems and aluminum castings.
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 $165,300,000 in 1994,
$148,000,000 in 1993, and $132,700,000 in 1992. Consolidated sales to General
Motors Corporation amounted to $81,400,000 in 1994, $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 $76,900,000 in 1994,
$73,200,000 in 1993 and $64,700,000 in 1992.
-29-
<PAGE> 19
INDUSTRY SEGMENT INFORMATION
Years ended November 30
(In millions of dollars)
<TABLE>
<CAPTION>
Industrial Machinery Automotive
1994 1993 1992 1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $141.4 $132.6 $122.1 $217.0 $171.7 $151.4 $398.3 $357.2 $338.0
====== ====== ====== ====== ====== ====== ====== ====== ======
Operating income 14.4 15.0 13.1 18.8 9.1 14.8 43.7 37.4 36.2
====== ====== ====== ====== ====== ====== ====== ====== ======
Identifiable assets 78.2 72.7 70.8 109.8 92.8 78.6 190.6 168.2 163.6
====== ====== ====== ====== ====== ====== ====== ====== ======
Depreciation and
amortization 5.5 4.9 4.7 4.0 3.4 3.5 16.2 16.2 16.2
====== ====== ====== ====== ====== ====== ====== ====== ======
Capital expenditures 7.7 5.6 4.6 6.9 7.4 4.5 21.2 15.4 12.4
====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
Segment Total Corporate Total
1994 1993 1992 1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $756.7 $661.5 $611.5 $ - $ - $ - $756.7 $661.5 $611.5
====== ====== ====== ====== ====== ====== ====== ====== ======
Operating income (loss) 77.0 61.5 64.1 (18.7) (17.7) (17.5) 58.3 43.8 46.6
====== ====== ======
Provision for asbestos - (1,135.5) - - (1,135.5) -
Litigation
Provision for - (41.4) (2.0) - (41.4) (2.0)
environmental
and other claims
Interest expense (1.8) (2.1) (2.7) (1.8) (2.1) (2.7)
Other income (expense) .6 (.2) (1.0) (.6) (.2) (1.0)
Reorganization items (3.4) (4.4) (9.0) (3.4) (4.4) (9.0)
Income (loss) before ====== ====== ====== ---- ---- ------
taxes 53.7 (1,139.8)(1) 31.9
======== ======
Identifiable assets 378.6 333.7 313.0 142.5 125.7 106.4 521.1 459.4 419.4
====== ====== ====== ====== ====== ====== ====== ====== ======
Depreciation and 25.7 24.5 24.4 .4 .5 .3 26.1 25.0 24.7
amortization ====== ====== ====== ====== ====== ====== ====== ====== ======
Capital expenditures 35.8 28.4 21.5 .1 .1 .1 35.9 28.5 21.6
====== ====== ======
(1) Before cumulative effect of accounting changes.
</TABLE>
-30-
<PAGE> 20
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, 1994 and 1993, 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, 1994. 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, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended November 30, 1994 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, on January 7, 1991, Eagle-Picher Industries,
Inc., and seven of its domestic subsidiaries each filed a voluntary petition for
relief under chapter 11 of the United States Bankruptcy Code with the United
States Bankruptcy Court. 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, raise 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 K 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 L, 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.
As discussed in Notes A and J, 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 F, 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.
KPMG Peat Marwick LLP
Cincinnati, Ohio
February 8, 1995
-31-
<PAGE> 21
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's system of internal accounting controls is 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 LLP. 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.
Thomas E. Petry
Chairman and Chief
Executive Officer
David N. Hall
Senior Vice President -
Finance
Cincinnati, Ohio
February 8, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
On a 14% sales increase, operating income increased 33% to $58.3 million in 1994
from $43.8 million in 1993. Comparative sales volume by industry segment showed
increases of 7% in the Industrial segment, 26% in the Machinery segment, and 12%
in the Automotive segment. Operating income decreased 3% in the Industrial
segment, but increased 107% in the Machinery segment and 17% in the Automotive
segment. The decrease in operating income in the Industrial segment is
attributable to pricing pressures on diatomaceous earth products. The increase
in operating income of the Machinery segment was primarily associated with
improvements in production of a line of heavy-duty forklift trucks. While there
have been improvements in 1994 from the difficulties encountered in 1993 with
the start-up process and in achieving efficiencies and meeting production
schedules, an acceptable level of performance for this product line has not yet
been achieved. An increase in sales volumes of metal cleaning and finishing
equipment also contributed to the increase in operating income of the Machinery
segment. The increase in operating income of the Automotive segment was due to:
1) an increase in export sales and stronger performance of our operations in
Great Britain and Spain; 2) broader market penetration coupled with record
domestic auto production; and 3) favorable product mix heavily weighted toward
the light truck, van, and sport utility segment of the market for which several
divisions produce components.
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 an additional
provision of $1.135 billion for all present and future asbestos-related
personal injury claims, thereby increasing the asbestos liability on the
Consolidated Balance.
-32-
<PAGE> 22
Sheet to $1.5 billion. In addition, in 1993 a provision of $41.4 million was
made for environmental and other litigation claims.
Interest expense decreased to $1.8 million from $2.1 million due primarily to
the repayment of certain foreign debt in 1994.
Reorganization items are described in Note B.
The primary components of the income tax provision are described in Note F.
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 increases of 9% in the Industrial segment, 13% in the Machinery segment,
and 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 $1.135 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.
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.
Reorganization items are described in Note B.
The primary components of the income tax provision are described in Note F.
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.
INDUSTRY SEGMENT DATA
Industry segment data for 1994, 1993 and 1992 is summarized on page __.
FINANCIAL CONDITION
The filing of the petitions for reorganization under chapter 11 on January 7,
1991 had a significantly favorable 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 resulting from asbestos litigation. In 1993, the
Company increased the amount of its asbestos liability to $1.5 billion. At
November 30, 1994, the balance of Liabilities Subject to Compromise was $1.657
billion. These amounts were 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.
During 1994, the Company generated $45.1 million from operating activities while
it used $34.1 million for investing activities and $3.0 million to repay debt.
These activities resulted in an overall increase in cash of $8.0 million in
1994.
-33-
<PAGE> 23
The overall increase in cash was relatively small in 1994 due primarily to an
increase in inventory in the Machinery segment and a greater amount of
capitalized tooling costs in anticipation of several major orders in the
Automotive segment. The anticipated reduction in these two items will favorably
impact cash flows in 1995.
In October 1992, the Bankruptcy Court approved a debtor in possession financing
agreement which provides the Company with a $40.0 million committed revolving
credit facility. This facility has been extended to expire the earlier of
December 31, 1996 or the effective date of a plan of reorganization. At November
30, 1994, $32.9 million in letters of credit were outstanding under the facility
leaving the Company with $7.1 million in available borrowing capacity. There
were no cash borrowings in 1994 under this facility.
As of November 30, 1994, the Company had $83.6 million of long-term debt versus
$86.5 million at November 30, 1993. The disposition of unsecured debt of $62.0
million at November 30, 1994 will be resolved in a plan of reorganization in the
chapter 11 cases.
Capital expenditures were $35.9 million in 1994 compared to $28.5 million in
1993.
The cost of reorganization items was $3.4 million in 1994 compared to $4.3
million in 1993.
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.
The Company advised the Bankruptcy Court that it intended to file a plan of
reorganization by the end of February, 1995. The Plan which the Company intends
to propose will discharge its pre-petition liabilities (Liabilities Subject to
Compromise), provide the reorganized Company with a capital structure
appropriate for an industrial products company and enable the Company to access
financing in the credit and debt markets.
-34-
<PAGE> 24
SELECTED FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars, except per share)
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $756,741 $661,452 $611,458 $598,631 $699,347
- -------------------------------------------------------------------------------------------
Income (Loss) Before
Reorganization Items
and Taxes 57,175 (1,135,426)(1) 40,924 (788) 44,060
- -------------------------------------------------------------------------------------------
Reorganization Items (2) (3,426) (4,344) (9,038) (12,124) -
- -------------------------------------------------------------------------------------------
Income (Loss) Before Taxes 53,749 (1,139,770) 31,886 (12,912) 44,060
- -------------------------------------------------------------------------------------------
Net Income (Loss) 48,749 (1,144,770)(3) 28,886 (15,812) 39,360
- -------------------------------------------------------------------------------------------
Net Income (Loss) Per Share 4.42 (103.78)(3) 2.63 (1.44) 3.64
- -------------------------------------------------------------------------------------------
Common Dividend Per Share - - - - -
- -------------------------------------------------------------------------------------------
Total Assets 521,107 459,360 419,435 398,990 413,695
- -------------------------------------------------------------------------------------------
Long-Term Debt,
less current portion 19,896(4) 21,712(4) 25,033(4) 32,001(4) 3,618(5)
- -------------------------------------------------------------------------------------------
</TABLE>
(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 1994 and 1993 and $61.7 million in 1992
and 1991 has been included in Liabilities Subject to Compromise.
(5) Long-term debt totalling $91.1 million for legal entities in chapter 11 was
classified as current due to the chapter 11 filings.
-35-
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21
EAGLE-PICHER INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANT
REGISTRANT'S
VOTING
POWER
------------
<S> <C>
Cincinnati Industrial Machinery Sales Company, an Ohio corporation 100%
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%
Eagle-Picher Industries Europe GmbH, organized under the
laws of Germany 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 report, with explanatory paragraphs, dated February 8, 1995 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, 1994 and 1993,
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, 1994, which reports appear in the Company's
1994 Annual Report on Form 10-K and in the 1994 Annual Report, which is
incorporated by reference in the Company's 1994 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 LLP
Cincinnati, Ohio
February 24, 1995
<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 James A. Ralston, 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 Annual Report on Form 10-K for the 1994 fiscal year 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
1st day of February, 1995.
/s/ Thomas E. Petry /s/ David N. Hall
- ------------------------------ -----------------------------
Thomas E. Petry David N. Hall
Director, Chairman of the Senior Vice President-Finance
Board and Chief Executive (Principal Financial Officer)
Officer
/s/ Carroll D. Curless /s/ Roger L. Howe
- ------------------------------ -----------------------------
Carroll D. Curless Roger L. Howe
Vice President and Controller Director
(Principal Accounting Officer)
/s/ Paul W. Christensen, Jr. /s/ Daniel W. LeBlond
- ------------------------------ -----------------------------
Paul W. Christensen, Jr. Daniel W. LeBlond
Director Director
/s/ Melvin F. Chubb, Jr. /s/ Powell McHenry
- ------------------------------ -----------------------------
Melvin F. Chubb, Jr. Powell McHenry
Director Director
/s/ V. Anderson Coombe /s/ Eugene P. Ruehlmann
- ------------------------------ -----------------------------
V. Anderson Coombe Eugene P. Ruehlmann
Director 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 James A. Ralston, 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 Annual
Report on Form 10-K for the 1994 fiscal year 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 6th day of
February, 1995.
/s/ Andries Ruijssenaars
------------------------
Andries Ruijssenaars
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> NOV-30-1994
<EXCHANGE-RATE> 1
<CASH> 92,606
<SECURITIES> 0
<RECEIVABLES> 110,575
<ALLOWANCES> 1,445
<INVENTORY> 81,982
<CURRENT-ASSETS> 296,259
<PP&E> 408,018
<DEPRECIATION> 263,369
<TOTAL-ASSETS> 521,107
<CURRENT-LIABILITIES> 85,961
<BONDS> 83,626
<COMMON> 13,906
0
0
<OTHER-SE> (1,280,599)
<TOTAL-LIABILITY-AND-EQUITY> 521,107
<SALES> 756,741
<TOTAL-REVENUES> 756,741
<CGS> 622,907
<TOTAL-COSTS> 622,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,809
<INCOME-PRETAX> 53,749
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 48,749
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,749
<EPS-PRIMARY> 4.42
<EPS-DILUTED> 4.42
</TABLE>
<PAGE> 1
EXHIBIT 99
EPI OPERATIONS (DIVISIONS) PLANT LOCATIONS
- -------------------------- ---------------
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 (2)
Galena, Kansas
Joplin, Missouri (6)
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 (3)
Jonesville, Michigan
Vassar, Michigan
San Luis Potosi, Mexico
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
