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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 1996 Commission file number 1-1499
EAGLE-PICHER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-0268670
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
580 Walnut Street, P. O. Box 779, Cincinnati, Ohio 45201
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code 513-721-7010
(Not Applicable)
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
11,040,932 shares of common capital stock, par value $1.25 per share, were
outstanding at July 12, 1996.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................... 3
Consolidated Statement of Income............................ 3
Consolidated Balance Sheet.................................. 4
Consolidated Statement of Cash Flows........................ 6
Notes to Consolidated Financial Statements.................. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................... 14
Item 3. Defaults Upon Senior Securities......................... 14
Item 6. Exhibits and Reports on Form 8-K........................ 15
Signature........................................................ 16
Exhibit Index.................................................... 17
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31 May 31
------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 235,126 $ 225,378 $ 443,708 $ 422,981
--------- --------- --------- ---------
Operating Costs and Expenses:
Cost of products sold 194,276 186,658 368,640 349,946
Selling and administrative 21,569 19,573 42,416 38,775
--------- --------- --------- ---------
215,845 206,231 411,056 388,721
--------- --------- --------- ---------
Operating Income 19,281 19,147 32,652 34,260
Interest expense (462) (500) (949) (987)
Other income 30 21 357 406
--------- --------- --------- ---------
Income Before Reorganization
Items and Taxes 18,849 18,668 32,060 33,679
Reorganization items 22 (331) 90 (756)
--------- --------- --------- ---------
Income Before Taxes 18,871 18,337 32,150 32,923
Income Taxes 2,115 1,561 3,886 3,115
--------- --------- --------- ---------
Net Income $ 16,756 $ 16,776 $ 28,264 $ 29,808
========= ========= ========= =========
Income per Share $ 1.52 $ 1.52 $ 2.56 $ 2.70
========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
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EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS May 31 Nov. 30
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 109,719 $ 93,330
Receivables, less allowances 131,289 127,044
Income tax refund receivable 679 4,402
Inventories:
Raw materials and supplies 37,060 42,140
Work in process 30,842 23,349
Finished goods 17,069 18,158
---------- ----------
84,971 83,647
Prepaid expenses 12,057 17,695
---------- ----------
Total current assets 338,715 326,118
---------- ----------
PROPERTY, PLANT AND EQUIPMENT 452,153 441,957
Less accumulated depreciation 294,861 286,139
---------- ----------
Net property, plant and equipment 157,292 155,818
DEFERRED INCOME TAXES 70,024 62,824
OTHER ASSETS 35,493 35,313
---------- ----------
Total Assets $ 601,524 $ 580,073
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 35,026 $ 40,318
Long-term debt - current portion 2,611 1,525
Income taxes 4,836 4,789
Other current liabilities 36,666 35,991
---------- ----------
Total current liabilities 79,139 82,623
---------- ----------
LIABILITIES SUBJECT TO COMPROMISE 2,662,414 2,662,530
LONG-TERM DEBT - less current portion 17,572 19,103
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 22,278 21,720
OTHER LONG TERM LIABILITIES 4,714 5,405
---------- ----------
Total liabilities 2,786,117 2,791,381
---------- ----------
</TABLE>
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EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31 Nov. 30
1996 1995
----------- -----------
<S> <C> <C>
SHAREHOLDERS' EQUITY (DEFICIT)
Common shares - par value $1.25 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 (2,233,025) (2,261,289)
Unrealized gain on investments 396 333
Foreign currency translation (335) 1,277
----------- -----------
(2,182,680) (2,209,395)
Cost of 84,068 common treasury shares (1,913) (1,913)
----------- -----------
Total Shareholders' Equity (Deficit) (2,184,593) (2,211,308)
----------- -----------
Total Liabilities and Shareholders' Equity
(Deficit) $ 601,524 $ 580,073
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
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EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31
-----------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 28,264 $ 29,808
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,299 14,572
Changes in assets and liabilities:
Receivables (4,245) (8,538)
Inventories (1,324) (5,300)
Deferred taxes (7,200) (9,500)
Accounts payable (5,292) (492)
Accrued liabilities 675 4,122
Other 8,834 (6,394)
-------- --------
Net cash provided by
operating activities 35,011 18,278
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,109) (13,978)
Other 687 908
-------- --------
Net cash used in
investing activities (18,422) (13,070)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt (200) (980)
-------- --------
Net cash used in
financing activities (200) (980)
</TABLE>
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EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31
----------------------
1996 1995
---- ----
<S> <C> <C>
Net increase in cash and cash equivalents 16,389 4,228
Cash and cash equivalents, beginning of period 93,330 92,606
-------- --------
Cash and cash equivalents, end of period $109,719 $ 96,834
======== ========
Supplemental cash flow information:
Cash paid during the year:
Interest paid $ 842 $ 955
Income taxes paid (net of refunds received) $ 7,316 $ 10,119
Cash paid during the quarter:
Interest paid $ 432 $ 462
Income taxes paid (net of refunds received) $ 6,216 $ 9,478
</TABLE>
See accompanying notes to consolidated financial statements.
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EAGLE-PICHER INDUSTRIES, INC.
Notes to Consolidated Financial Statements
A. PROCEEDINGS UNDER CHAPTER 11
On January 7, 1991 ("petition date"), Eagle-Picher Industries, Inc.
("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") in the United States Bankruptcy Court for the Southern District
of Ohio, Western Division, in Cincinnati, Ohio ("Bankruptcy Court"). Each filing
entity, other than EDI, Inc., is currently operating its business as a debtor in
possession in accordance with the provisions of the Bankruptcy Code.
An Unsecured Creditors' Committee ("UCC"), an Injury Claimants' Committee
("ICC"), an Equity Security Holders' Committee ("ESC"), and a Legal
Representative for Future Claimants ("RFC") have been appointed in the chapter
11 cases. An unofficial asbestos co-defendants' committee has also been
participating in the chapter 11 cases. In accordance with the provisions of the
Bankruptcy Code, these parties have the right to be heard with respect to
transactions outside the ordinary course of business. The official committees
and the RFC typically are the entities with which the Company would negotiate
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. The agreement was 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. One of the
principal elements of the agreement was a negotiated settlement of the Company's
aggregate liability for such claims in the amount of $1.5 billion. 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 in anticipation of
settlement of such claims.
Throughout 1994, the Company, the ICC and the RFC continued to refine the
details of a joint plan of reorganization ("Original Plan"). The Original Plan
was filed with the Bankruptcy Court on February 28, 1995. The Original Plan did
not have the support of the UCC or the ESC because they did not agree with the
amount of the aggregate asbestos liability which had been negotiated and which
was used in the Original Plan to determine the allocation of the consideration
to be distributed to the unsecured creditor and shareholder classes. As a result
of the dispute, the Company was unable to move forward with the Original Plan.
In order to resolve this dispute, the Company filed a motion in July 1995
requesting that the Bankruptcy Court estimate the Company's aggregate liability
on account of present and future asbestos-related personal injury claims. The
Bankruptcy Court ruled in December 1995 that such estimated liability is $2.5
billion ("Estimation Ruling"). The UCC, the ESC and two individual members of
the UCC have appealed the Estimation Ruling. The U.S. District Court for the
Southern District of Ohio, Western Division heard oral argument on these
appeals in June 1996. A decision is pending.
On April 9, 1996, the Company filed a First Amended Consolidated Plan of
Reorganization ("Amended Plan") reflecting the Estimation Ruling, and a proposed
First Amended Joint Disclosure Statement ("Disclosure Statement"). The principal
substantive modification to the Original Plan relates to the allocation of the
consideration to be distributed under the plan to the various classes of
unsecured claims. A hearing before the Bankruptcy Court to consider approval of
the Disclosure Statement has been scheduled for July 22, 1996. Pursuant
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to the Bankruptcy Code, the acceptance or rejection of a plan of reorganization
may not be solicited from the holder of a claim unless at the time of or before
such solicitation there is transmitted to such holder the plan or a summary of
the plan and a disclosure statement approved by the Bankruptcy Court as
containing information of a kind and in sufficient detail that would enable a
hypothetical reasonable investor typical of holders of claims to make an
informed judgment about the plan.
The Amended Plan, like the Original Plan, contemplates a resolution 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 ("Trust"). The Amended
Plan provides for the distribution of cash, notes 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. Accordingly, pursuant to the Amended
Plan, it is anticipated that the Trust will be distributed approximately 94% of
such cash, notes and stock, and claimants holding environmental-related and
other pre-petition unsecured claims will be distributed approximately 6% of such
cash, notes and stock.
Pursuant to the Amended Plan, claims entitled to priority under the
Bankruptcy Code and "convenience claims" (pre-petition general unsecured claims
of $500 or less or claims that are reduced to that amount) will be paid in full,
in cash. The Amended Plan also provides for the resolution of all
asbestos-related property damage claims, as further discussed in Note B below.
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. Under the Amended Plan, existing shareholders will receive no
distributions and their shares will be canceled.
Following the Estimation Ruling, the Company recorded a provision of
approximately $1.0 billion to increase the asbestos liability subject to
compromise to the amount estimated by the Bankruptcy Court. This resulted in a
negative shareholders' equity in excess of $2.2 billion. As a result, the
Company filed a motion in the Bankruptcy Court in December 1995 seeking an order
directing the United States Trustee to disband the ESC on the basis that
existing equity holders do not have an economic interest in the chapter 11
cases. In January 1996, the Bankruptcy Court ruled that the ongoing activities
of the ESC shall be limited to pursuing its appeal of the Estimation Ruling.
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 the AICPA's
Statement of Position 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. Pursuant to the Amended Plan, the ultimate
consideration to be received by unsecured creditors will be substantially less
than the amounts shown in the accompanying Consolidated Balance Sheet. Until a
plan of reorganization is confirmed, however, the Company cannot be certain of
the final terms and provisions thereof or the ultimate amount creditors will
receive.
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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 (in thousands of dollars):
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
---- ----
<S> <C> <C>
Asbestos liability $2,502,511 $ 2,502,511
Long-term debt (unsecured portion) 62,003 62,003
Accounts payable 41,181 41,236
Accrued and other liabilities 56,719 56,780
--------- ---------
$2,662,414 $ 2,662,530
========= =========
</TABLE>
The net expense (income) resulting from the Company's administration of the
chapter 11 cases has been segregated from expenses related to ordinary
operations in the accompanying financial statements and includes the following
(in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
May 31 May 31
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Professional fees and other
expenses directly related
to bankruptcy $ 1,248 $ 1,563 $ 2,401 $ 3,078
Interest income (1,270) (1,232) (2,491) (2,322)
------- ------- ------- -------
$ (22) $ 331 $ (90) $ 756
======= ======= ======= =======
</TABLE>
Interest income is attributable to the accumulation of cash and short-term
investments subsequent to the petition date.
B. LITIGATION
As discussed in Note K to the Consolidated Financial Statements included in
the Company's Annual Report and Form 10-K for the fiscal year ended November 30,
1995 and Note A above, the accompanying Consolidated Financial Statements
include an estimated liability related to personal injury claims resulting from
the Company's sale of asbestos-containing insulation products. Litigation with
respect to asbestos-related claims was stayed by reason of the chapter 11
filing.
Approximately 1,000 proofs of claim alleging asbestos-related property
damage were filed in the chapter 11 cases pursuant to the September 30, 1992 bar
date for asbestos-related claims. Under the Amended Plan, a second trust will be
established to resolve asbestos-related property damage claims. If the class of
asbestos-related property damage claims votes to accept the Amended Plan, such
trust will be funded with $3 million in cash. If such class votes to reject the
Amended Plan, but the Amended Plan is nevertheless confirmed, the trust will be
funded with the pro-rata share of plan consideration allocable to asbestos-
related property damage claims in the aggregate, based upon the Bankruptcy
Court's estimate of the aggregate value of such claims. It cannot be reasonably
predicted at this time what the Bankruptcy Court's estimate of the aggregate
value of such claims would be. The Company may have insurance coverage for
certain of these claims.
In February 1996, the hospital members of the American Hospital
Association, which had filed asbestos-related property damage claims against the
Company ("Hospitals"), filed a motion in the Bankruptcy Court seeking an order
estimating the aggregate value of all
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asbestos-related property damage claims against the Company and temporarily
allowing such claims for purposes of voting on a plan of reorganization. The
Company and the RFC opposed the motion on the basis that, should the class of
asbestos-related property damage claims accept the Amended Plan, an estimation
of these claims would be unnecessary. The Company also argued that voting issues
should be addressed in connection with the Company's motion for an order from
the Bankruptcy Court establishing the voting procedures with respect to the
Amended Plan. At a hearing held in May 1996, the Bankruptcy Court denied the
Hospitals' motion.
In February and May 1996, the Company filed with the Bankruptcy Court
objections to many asbestos-related property damage claims, including claims
filed by the Hospitals, because the claims are barred by the applicable time
limitations under state laws for prosecuting the claims, the claims fail to
state the requisite legal and factual bases therefor, and/or the claims fail to
provide any evidence that the Company's products were located in the claimants'
facilities. The holders of approximately 365 claims did not respond to the
objections; some of these claims have been disallowed by the Bankruptcy
Court and the Company's request for disallowance of the other such claims is
pending with the Bankruptcy Court. With respect to the remaining claims that
were objected to, the Bankruptcy Court has not yet issued a ruling.
The Company is a defendant in other litigation which was pending as of the
petition date which was discussed in Note L to the Consolidated Financial
Statements for the fiscal year ended November 30, 1995. 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
context of the chapter 11 cases and will be treated in any plan of
reorganization.
The Company has resolved most of the litigation-based 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. In June 1996, the
Bankruptcy Court approved the settlement agreement among the Company, the EPA,
the U.S. Department of Interior and certain states which resolves the majority
of the environmental claims asserted against the Company. The terms of the
settlement agreement were discussed in Note L to the Consolidated Financial
Statements included in the Company's Annual Report and Form 10-K for the fiscal
year ended November 30, 1995. Certain parties that may be liable at certain of
the sites resolved by the settlement agreement have appealed the Bankruptcy
Court's decision.
The Company has filed objections to certain of the litigation-based
claims that have not yet 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 pursued by the Company. The Company
believes that its provisions for these claims is adequate, and, in addition,
the Company may have insurance coverage for certain of them.
C. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report and Form 10-K for the fiscal year ended November 30,
1995.
The financial statements presented herewith reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three month and six month periods ended May 31, 1996 and 1995. Results of
operations for interim periods are not necessarily indicative of results to be
expected for an entire year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Sales for the second quarter ended May 31, 1996 were $235.1 million
compared with $225.4 million for the second quarter of 1995. Operating income
was $19.3 million compared with $19.1 million for the same period last year. Net
income for the second quarter of 1996 was $16.8 million or $1.52 per share which
was equal to that of the second quarter of 1995.
There was an organizational change during the second quarter of 1996. The
Electronics Division was merged with the Specialty Materials Division to form
the Eagle-Picher Technologies Division. Those operations of the Eagle-Picher
Technologies Division which are included within the Machinery Group (formerly
the operations of the Electronics Division) constitute the largest international
supplier of power systems for commercial, military and weather satellites. These
operations also produce special purpose batteries for a variety of other
purposes. Those operations of the Eagle-Picher Technologies Division which are
included within the Industrial Group (formerly the operations of the Specialty
Materials Division) produce germanium substrates for solar cells which are used
on satellites, boron isotopic components and certified clean sample containers
for environmental testing.
Sales for the Automotive Group for the second quarter of 1996 were ahead
of the levels for the second quarter of 1995, while operating income was
essentially the same as that of the second quarter of 1995. Despite a strike at
the General Motor's Delphi Division, increased production levels in the North
American market and a favorable product mix were important factors in the
improving trend during the second quarter of 1996. European operations did well
during the second quarter as these operations continue to increase market share.
Start-up costs associated with expansions, and continued delays by one customer
in meeting anticipated production schedules, placed pressure on profit margins
during the quarter.
Sales for the Machinery Group were essentially equal to those for the
second quarter of last year, while operating income declined. The primary reason
for the decline in operating income was reduced shipments of earth moving
machinery by the Construction Equipment Division. Shipments of special purpose
batteries by the Eagle-Picher Technologies Division were strong. Results for the
remaining operations in the Machinery Group were mixed.
Sales and operating income for the Industrial Group increased in the
second quarter of 1996 over the results for last year's second quarter.
Shipments of diatomaceous earth products, both to the domestic and to the
international markets, continue to be at a high level. Diatomaceous earth
products are used for high purity filtration in the food and beverage industry
and in a variety of general industrial applications. Eagle-Picher Technologies'
operations in the Industrial Group enjoyed an outstanding quarter. The increase
in cellular communications has expanded demand for satellite components.
Additionally, although the price of certain raw materials has increased over the
past year, it has had a minimal impact on margins as the raw material price
increases were absorbed by the customer. Shipments of boron isotopic compounds
were also at a high level. Recent penetration of the European nuclear market has
provided an excellent growth opportunity for boron products.
It is expected that economic activity will be at a reasonably high level
during the second half of 1996. Several operations are serving growing markets
and/or are increasing market share, while others are serving sluggish segments
of the economy. On balance, and based on forecasts from the Company's Divisions,
results for the second half of 1996 should approximate those of the second half
of 1995.
Interest expense did not change appreciably in the second quarter or the
first six months of 1996 compared to the same periods in 1995. Contractual
interest on debt outstanding was $2.2 million in the second quarters of 1996 and
1995 and $4.4 and $4.5 million in the six
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month periods ended May 31, 1996 and 1995, respectively.
Interest income on the cash balances accumulated as a result of the
reorganization slightly exceeded the expenses of the reorganization effort
throughout 1996.
FINANCIAL CONDITION
The cash balance of the Company increased from $93.3 million at November 30,
1995 to $109.7 million at May 31, 1996, an increase of $16.4 million. One
component of this increase was the reduction in the amount of customer tooling
carried on the balance sheet to $16.7 million at May 31, 1996 from $26.5 million
at November 30, 1995. It is custom practice in the automotive industry to
accumulate customer tooling costs while the tooling is under construction and
bill the customer upon its completion. It is anticipated that the amount of
customer tooling on the balance sheet will decline further throughout the
remainder of the year. There were increases in working capital, which are
typical in periods in which sales growth is experienced, which partially offset
the effects of the decrease in tooling.
Capital expenditures totaled $9.4 million in the second quarter of 1996 and
$19.1 million for the six months ended May 31, 1996 compared to $7.5 million and
$14.0 million in the respective periods of 1995. The Company presently expects,
however, that the total amount of capital expenditures in the 1996 fiscal year
will be comparable to that of 1995.
On April 9, 1996, the Company filed a First Amended Consolidated Plan
of Reorganization with the Bankruptcy Court. Such plan provides for the
satisfaction and discharge of the Company's pre-petition liabilities
(Liabilities Subject to Compromise) and for the reorganized Company to have a
capital structure appropriate for an industrial products company that is
intended to enable the Company to access financing in the credit and debt
markets. Decisions with respect to the appeals of the Estimation Ruling and the
hearing on the Disclosure Statement, as further discussed in Note A to the
Consolidated Financial Statements contained herein, will have a direct impact
on the reorganization process. Accordingly, at this time it is not possible to
predict when a plan of reorganization will be confirmed and become effective.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In May 1996, the Bankruptcy Court denied the motion of the Hospitals
seeking an order estimating the aggregate value of all asbestos-related
property damage claims against the Company and temporarily allowing such claims
for purposes of voting on a plan of reorganization. This motion, as well as
objections the Company has filed with the Bankruptcy Court to many of the
asbestos-related property damage claims, are discussed in Note B to the
Consolidated Financial Statements contained herein.
Following the close of the quarter, on June 6, 1996, the Bankruptcy Court
issued a judgment and decision in which it granted the motions of the Company
and the United States seeking an order approving the settlement agreement among
the Company, the EPA, the U.S. Department of Interior and certain states
relating to certain environmental claims asserted against the Company. The
settlement agreement provides, among other things, that the agencies and certain
states will be granted allowed pre-petition 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 23 specified Superfund sites,
including any liability for any natural resource damage. The settlement
agreement also provides that the liability, if any, of the Company at certain
other sites will be determined in the future and be satisfied at that time in
substantially the same manner and with the same value as such claims would have
been satisfied if they had been treated under a reorganization plan. The
settlement agreement was discussed in the Company's Report on Form 10-K for the
fiscal year ended November 30, 1995. Certain parties that may be liable at
certain of the sites resolved by the settlement agreement have filed a notice of
appeal of the Bankruptcy Court's decision.
Following the close of the quarter, on June 14, 1996, the U.S. District
Court for the Southern District of Ohio heard oral argument on the appeals of
the Estimation Ruling filed by the UCC, the ESC and two individual members of
the UCC. The Estimation Ruling is further discussed in Note A to the
Consolidated Financial Statements contained herein. The parties who filed the
appeals argued, among other things, that the Bankruptcy Court lacked
jurisdiction to estimate the Company's liability with respect to
asbestos-related personal injury claims and that it erred in its determination
of the amount of such liability. The Company, the ICC and the FRC have opposed
the appeals. The District Court has not yet ruled on the appeals.
Following the close of the quarter, on June 21, 1996, the UCC withdrew the
motion it had filed with the Bankruptcy Court seeking relief from the Estimation
Ruling. In its motion, the UCC had argued that, through inadvertence or mistake,
the Bankruptcy Court overestimated the Company's liability for future
asbestos-related personal injury claims by approximately $500 million. Because
this issue was also raised in the appeal filed by the UCC to the Estimation
Ruling, the UCC withdrew it from present consideration by the Bankruptcy Court.
This motion was reported in the Company's Report on Form 10-Q for the quarter
ended February 29, 1996.
The Bankruptcy Court has scheduled a hearing for July 22, 1996 to consider
the adequacy of the Debtors' First Amended Joint Disclosure Statement, which the
Company submitted in connection with the filing of the Amended Plan, as further
discussed in Note A to the Consolidated Financial Statements contained herein.
Following the close of the quarter, at a hearing in June 1996, the Bankruptcy
Court granted the Company's Motion for an Order Establishing Procedures for
Solicitation and Tabulation of Votes to Accept or Reject the Consolidated Plan
of Reorganization, subject to such procedures being modified to provide that
individual creditors holding multiple claims shall have a separate vote for each
allowed claim they hold.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The chapter 11 filings constituted a default under substantially all of the
14
<PAGE> 15
Company's and its 'affiliates' senior securities. The obligations under the
Company's pre-petition credit facility and other obligations owing to the
lenders who were party to the pre-petition credit facility have been addressed
in the debtor in possession financing agreement approved by the Bankruptcy Court
on May 24, 1991. At that time, certain of such obligations were repaid and the
remaining of such obligations were deemed to be post-petition.
With respect to certain other secured obligations, the Company (or its
affiliates) have been making settlements or "adequate protection" payments
approved by orders of the Bankruptcy Court.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 - Financial Data Schedule.
(b) Reports on Form 8-K
Report on Form 8-K (File 1-1499), dated April 9, 1996, in which the
Company reported that on April 9, 1996 the Company and seven of its
domestic subsidiaries filed a First Amended Consolidated Plan of
Reorganization in their chapter 11 cases pending before the U.S.
Bankruptcy Court for the Southern District of Ohio, Western Division.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE-PICHER INDUSTRIES, INC.
/s/ David N. Hall
-------------------------------
David N. Hall,
Senior Vice President - Finance and
Chief Financial Officer
DATE July 12, 1996
---------------
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule (submitted
electronically to the Securities
and Exchange Commission for its
information)
</TABLE>
17
<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> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 109,719
<SECURITIES> 0
<RECEIVABLES> 133,057
<ALLOWANCES> 1,768
<INVENTORY> 84,971
<CURRENT-ASSETS> 338,715
<PP&E> 452,153
<DEPRECIATION> 294,861
<TOTAL-ASSETS> 601,524
<CURRENT-LIABILITIES> 79,139
<BONDS> 82,187
0
0
<COMMON> 13,906
<OTHER-SE> (2,198,499)
<TOTAL-LIABILITY-AND-EQUITY> 601,524
<SALES> 443,708
<TOTAL-REVENUES> 443,708
<CGS> 368,640
<TOTAL-COSTS> 441,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 949
<INCOME-PRETAX> 32,150
<INCOME-TAX> 3,886
<INCOME-CONTINUING> 28,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,264
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.56
</TABLE>
