-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, s5iMFWhchQ+xR3jg/sa6SE1RRhZKM0fT90W10+lWMXVt1OUBcq9yJPyp9HZd7gN3 20uuDRq/faPwka5RlTretA== 0000950152-94-000180.txt : 19940302 0000950152-94-000180.hdr.sgml : 19940302 ACCESSION NUMBER: 0000950152-94-000180 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER INDUSTRIES INC CENTRAL INDEX KEY: 0000030927 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 310268670 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-01499 FILM NUMBER: 94513585 BUSINESS ADDRESS: STREET 1: 580 WALNUT ST STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45201 BUSINESS PHONE: 5137217010 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE PICHER CO DATE OF NAME CHANGE: 19660921 10-K 1 EAGLE PICHER 10-K 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, 1993 COMMISSION FILE NUMBER 1-1499 EAGLE-PICHER INDUSTRIES, INC. AN OHIO CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 31-0268670 580 BUILDING, 580 WALNUT STREET, P. O. BOX 779, CINCINNATI, OHIO 45201 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 513-721-7010 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - --------------------------------------------- --------------------------------------------- Common Capital Stock, New York Stock Exchange Par Value $1.25 per Share Cincinnati Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the voting stock held by non-affiliates of the registrant on February 18, 1994 was $9,579,457 at the bid price and $13,000,691 at the asking price. See footnote 3 at page 13 of the Registrant's Annual Report to Shareholders for fiscal 1993, Exhibit 13 herein. On February 18, 1994, 11,040,932 shares of the registrant's Common Stock were outstanding. The Registrant had and has no other classes of stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Registrant's Annual Report to Shareholders for the fiscal year ended November 30, 1993 -- Part I and Part II. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 NOTE This copy of Eagle-Picher's Form 10-K for 1993 includes only Exhibits 11, 13, 22, 23, 24(a), 24(b), and 99. In accordance with SEC requirements, copies of the following exhibits will be furnished upon payment of a fee of ten cents per page. Please remit the proper amount with your request to: David W. Matthews, Assistant Secretary Eagle-Picher Industries, Inc. P. O. Box 779 Cincinnati, Ohio 45201. Exhibits not included in this Form 10-K for 1993 have the following number of pages (see list of Exhibits in Part IV, Item 14(a)(3)): 3. (i) - 10 4. (a) - 99 10. (a) - 9 (ii) - 12 (b) - 120 (b) - 6 (c) - 14.
TABLE OF CONTENTS
ITEM PAGE - ------ ---- Part I 1. Business...................................................................... 2. Properties.................................................................... 3. Legal Proceedings............................................................. 4. Submission of Matters to a Vote of Security Holders........................... Part II 5. Market for the Registrant's Common Equity and Related Stockholder Matters..... 6. Selected Financial Data....................................................... 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 8. Financial Statements and Supplementary Data................................... 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.................................................................. Part III 10. Directors and Executive Officers of the Registrant............................ 11. Executive Compensation........................................................ 12. Security Ownership of Certain Beneficial Owners and Management................ 13. Certain Relationships and Related Transactions................................ Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............. Signatures............................................................................ Independent Auditor's Report.......................................................... Schedules............................................................................. Exhibit Index......................................................................... Exhibits..............................................................................
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. On January 7, 1991 the Company and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code (chapter 11). The chapter 11 filings were the consequence of a cash shortfall resulting from the Company's inability to satisfy certain immediate asbestos litigation liabilities. See Item 3.(a) below. Financial Information About Industry Segments. The Company's major industry segments are: 1. Industrial; 2. Machinery; and 3. Automotive. Industry Segment Data is incorporated herein by reference to Exhibit 13, the Eagle-Picher Industries, Inc. 1993 Annual Report to Shareholders, pages 25-26. Narrative Description of Business. The Industrial Group, which is composed of three divisions, produces a variety of products for industrial markets, principally manufacturers of consumer products. The Minerals Division mines and refines diatomaceous earth products used for high purity filtration primarily by the food and beverage industry and also for general industrial applications. The Fabricon Products Division produces printed packaging materials for the dairy and confectionery industries. The Specialty Materials Division refines rare metals, such as high purity germanium and gallium compounds, and is a major source of boron isotopes for nuclear applications. This Division also produces a wide range of super-clean containers, which meet strict EPA protocols, for environmental sampling. Other products manufactured in the Industrial Group segment include custom designed cast and injection molded rubber and plastic parts, and industrial chemicals. The methods of distribution and competitive positions of the Industrial Group Divisions vary widely. For example, the Minerals Division is second to the Alleghany Corporation in the sale of certain filter aid products which are sold both directly and through distributors to many large and small customers. By contrast, the Fabricon Products Division conducts its sales through sales personnel and competes against many other firms in a highly price-sensitive market. Other products are sold under competitive conditions which vary widely from plant to plant. The Machinery Group consists of five divisions, which are involved in producing products for various industrial markets. The Construction Equipment Division produces earthmoving equipment for Caterpillar Inc., and began manufacturing a line of heavy-duty industrial forklift trucks in 1993. The Electronics Division is a leading supplier of sophisticated special purpose batteries for aerospace and defense applications. The Cincinnati Industrial Machinery Division produces specialized high-volume metal cleaning and finishing systems. The Ross Aluminum Foundries Division manufactures complex aluminum castings in sand and plaster, and Transicoil Inc. manufactures sophisticated electronic components for aerospace, shipboard, ground based, and industrial applications. The principal products manufactured by the Machinery Group are distributed through various methods and in a variety of competitive environments. The Electronics Division bids competitively for numerous fixed price government contracts for special purpose batteries. The Division is a recognized leader in this business and has few competitors for some highly technological products, but many large and small competitors for other products. The Construction Equipment Division is the sole supplier of its earthmoving equipment 1 4 products to its longstanding largest customer, Caterpillar Inc. The forklifts are distributed through a dealer network. The Automotive Group consists of eight divisions, which are involved largely in the production and sale of mechanical, structural and trim parts for passenger cars, trucks, vans, recreational and utility vehicles. The Hillsdale Tool Division specializes in the manufacture of precision-machined aluminum and steel parts. Typical machined products include torsional vibration dampers and a variety of castings and forgings. The Division also produces the entire front pump assembly for the Ford Motor Company's electronic four-speed overdrive transmission primarily used on one-half and three-quarter ton pick-up trucks, vans and recreational vehicles. The Plastics Division is a major supplier of fiberglass reinforced molded plastic parts to automotive and other customers. The Division also produces the fiberglass reinforced plastic roof panels for General Motors Corporation's all-plastic body, all-purpose vehicle. The Wolverine Gasket Division coats steel and aluminum with elastomeric compounds and produces materials which are particularly suitable for high compression applications. The Eagle-Picher International Division, with three plants in Europe, manufactures sealing and insulating products, elastomeric extrusions, and injection molded parts for the European automotive market. This Division is also responsible for engineering and marketing efforts in the Asian market. The Trim Division manufactures automotive interior trim including headliners, rear package trays, spare tire covers, and door panels. The Michigan Automotive Research Corporation Division offers vehicle and vehicle system manufacturers a comprehensive range of testing programs for engines, power trains and power train components. The Rubber Molding Division manufactures engineered rubber and rubber-to-metal products, and small precision-molded parts. The Orthane Division produces injection-molded plastic parts for automotive and industrial applications. The Automotive Group distributes its products primarily to the "Big Three" automotive manufacturers, directly through internal sales personnel. With respect to the hundreds of products manufactured by the Automotive Group, competition varies widely as to the number and type of competitors, the methods of competition and the Group's competitive positions. Divisions producing precision-machined parts, such as the Hillsdale Tool Division, tend to have a few strong competitors (including among others the automotive manufacturers themselves) and compete on the basis of quality and price. Divisions such as the Trim and Wolverine Gasket Divisions, which manufacture less-sophisticated products, tend to have many competitors of varying sizes and compete primarily on the basis of price. Generally, competitive conditions for this Group are characterized by a decreasing number of competitors, an increasing amount of foreign competition (particularly from the Far East), and an increased emphasis on quality. Due to its diversification, the Company is not dependent upon any particular product or customer. No product accounted for more than 7%, and no customer accounted for more than 10%, of total sales of the Company for fiscal 1991 through fiscal 1993 except Ford Motor Company, for which sales were $148.0 million in 1993, $132.7 million in 1992, and $116.4 million in 1991, and General Motors Corporation, for which sales were $73.1 million in 1993, and $64.5 million in 1992. In addition, due to its diversification, the Company is not dependent upon any individual raw material source for a substantial part of its business and believes that its sources of raw materials are adequate. In the Machinery Group, order backlog was approximately $148.1 million as of November 30, 1993, $118.1 million as of November 30, 1992, and $115.3 million as of November 30, 1991. The increase from prior years is due primarily to improved economic conditions and the new heavy-duty forklift truck line. A substantial portion of the order backlog outstanding at November 30, 1993 is expected to be filled within the current fiscal year. In no other segment is order backlog of significance. In fiscal 1993, the Company spent approximately $17.1 million for research and development and related activities, primarily for the development of new products or the improvement of existing products. Comparable costs were $13.5 million and $11.9 million for 1992 and 1991, respectively. The Company owns or is licensed under patents relating to methods and products in several areas of its business. Although these have been of value and are expected to be of value in the future, the loss of any individual patent or group of patents would not materially affect the conduct of the Company's business. 2 5 In the fiscal years 1993, 1992, and 1991, for current operations the Company spent approximately $8.6, $9.6, and $9.9 million, respectively, for purposes of compliance with federal, state and local legal provisions relating to the protection of the environment. This level of expenditures has had no material effect on the earnings or competitive position of the Company or its subsidiaries during the period described. The Company expects these expenditures to be approximately $11.6 million in fiscal 1994. See Item 3.(c) for information with respect to various other environmental proceedings. As of November 30, 1993, the Company employed approximately 6,600 persons in its operations, of whom approximately 1,800 were salaried employees and approximately 4,800 were hourly employees. Approximately 19% of the Company's hourly employees are represented by eight labor organizations under 12 separate contracts. The Company believes that its relations with its employees generally are good. Export sales totaled approximately $73.2 million and $64.7 million in fiscal 1993 and 1992 respectively, but did not exceed ten percent of net sales in 1991. Foreign operations were not material to the business taken as a whole. ITEM 2. PROPERTIES. Eagle-Picher Industries, Inc. manufactures at 52 locations a wide variety of products primarily for other manufacturers. Types of manufacturing include, among others, chemical processing, mining, metal fabrication, aluminum foundries, precision machining, electronic and electrical assembly, molding and extruding rubber and plastic. The plants are fully utilized for the purposes intended and generally have capacity for expansion of existing buildings on owned real estate. Plants range in size from 425,000 square feet of floor area to under 50,000 square feet and generally are located away from large urban centers. Information on the locations of all manufacturing plants is contained in Exhibit 99 attached hereto, which is incorporated by reference into this report. The Company considers the following plants to be its most important physical properties:
LOCATION GENERAL CHARACTER ------------ --------------------- INDUSTRIAL GROUP Minerals Division Colado, NV Processing facility MACHINERY GROUP Electronics Division Joplin, MO Manufacturing plants (five locations) Construction Equipment Division Lubbock, TX Fabrication and assembly facility AUTOMOTIVE GROUP Hillsdale Tool Division Hillsdale, Manufacturing plants MI (four locations) Plastics Division Grabill, IN Manufacturing plant.
All of such properties are held in fee and none of them is subject to any major encumbrances. ITEM 3. LEGAL PROCEEDINGS. (A) Chapter 11 Proceedings. On January 7, 1991 (the "petition date"), the Company and seven of its domestic subsidiaries each filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy Court"). The subsidiaries that filed chapter 11 petitions are Daisy Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation (MARCO), EDI, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Europe, Inc., and Hillsdale Tool & Manufacturing Co. On November 30, 1991, substantially all of the assets of EDI, 3 6 Inc., were sold pursuant to authority granted by the Bankruptcy Court. All of the chapter 11 cases have been consolidated for procedural purposes only under the caption: "In re Eagle-Picher Industries, Inc., et al.," Consolidated Case No. 1-91-00100, before the Honorable Burton Perlman, United States Bankruptcy Judge. The Company and its petitioning subsidiaries are operating their businesses and managing their properties as debtors in possession, in accordance with the provisions of the Bankruptcy Code. The chapter 11 petitions were filed because the Company faced an immediate cash shortage. The Company was required to satisfy certain asbestos litigation costs, but could do so only through the sale of operating assets. The Company's Mat Division was under a contract of sale, but the buyers failed to fulfill the contract and the cash shortfall resulted. The filing of a chapter 11 petition operates as an automatic stay of all litigation against the debtor that was or could have been commenced before the filing of the chapter 11 petition and of any act to collect or recover a claim against the debtor that arose before the commencement of the chapter 11 case. While claimants or the Company may petition the Bankruptcy Court for a modification of the stay, the Company believes that it is unlikely that the Bankruptcy Court will grant such permission except in certain limited instances to permit the liquidation of a pre-petition claim, but not any payment or collection efforts with respect thereto. Consistent with the provisions of chapter 11, the Company intends to address all of the pre-petition claims in a plan of reorganization. An unsecured creditors' committee ("UCC"), an injury claimants' committee ("ICC"), an equity security holders' committee ("EC") and a legal representative for future claimants ("RFC"), have been appointed in the chapter 11 cases. An unofficial asbestos co-defendants' committee also has been participating in the chapter 11 cases. In accordance with the provisions of the Bankruptcy Code, these parties have the right to be heard with respect to transactions outside the ordinary course of business. The official committees and the RFC also will be the primary entities with which the Company will negotiate the terms of a plan of reorganization. At the Company's request, the Bankruptcy Court established a bar date of October 31, 1991 for all pre-petition claims against the Company other than those arising from the sale of asbestos-containing products and other than those arising from any future rejection of executory contracts or unexpired leases in the chapter 11 cases. The bar date is the date by which claimants who disagree with the amounts recorded by the Company as owing to such claimants must file a proof of claim against the Company in the Bankruptcy Court. The Company notified all known or potential claimants subject to the October 31, 1991 bar date of their possible need to file a proof of claim with the Bankruptcy Court. Of the 5,600 claims filed pursuant to this bar date, 2,675 were general (e.g. vendor, note holder and other miscellaneous claims), 1,325 were other litigation and environmental claims, and 1,600 were asbestos related claims. Substantially all of the general claims have been reconciled by the Company. Such claims, as reconciled, have been allowed as pre-petition claims against the Company's estate. The impact of these reconciliations on the Company's financial statements was not material. The Company continues to attempt to negotiate settlements for the remaining unreconciled general claims. If they cannot be resolved by a negotiated settlement, the Company intends to have them resolved by the Bankruptcy Court. The Company does not expect that the impact of the resolution of these claims will be material. The litigation and environmental claims are discussed in subsections (c) and (d) respectively, below. The Bankruptcy Court also established a bar date of September 30, 1992 for all present asbestos-related claims. Approximately 161,000 asbestos-related claims were filed with the Bankruptcy Court pursuant to the bar date. Approximately 1,000 of these claims alleged property damage. The 1,600 asbestos-related claims referred to above filed prior to the October 31, 1991 bar date will be treated in the reorganization cases in the same manner as the asbestos-related claims filed in connection with the September 30, 1992 bar date. The asbestos-related claims are discussed more fully in subsection (b), below. On June 5, 1992, a mediator was appointed by the Bankruptcy Court to assist the Company, the ICC, the UCC, the RFC and the EC in their efforts to negotiate a consensual plan of reorganization. The Bankruptcy Court has approved four extensions of the period during which the Company has the exclusive right to file a reorganization plan. The most recent extension expires sixty days after the Bankruptcy 4 7 Court is notified by the mediator that mediation has reached an impasse. To date, no such notification has been given by the mediator and the mediation process is continuing. On November 9, 1993, the Company reached an agreement (the "Agreement") on the principal elements of a joint plan of reorganization that provides a basis for the Company and its subsidiaries to emerge from chapter 11. The Agreement is with the ICC and the RFC, the representatives of the holders of present and future asbestos-related and other toxic tort claims in the Company's chapter 11 case, and was reached with the assistance of the mediator appointed by the Bankruptcy Court. The Agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. These claims would be channeled to and resolved by a claims administration trust that would receive cash, debt securities and substantially all of the common stock of the reorganized Company under a plan of reorganization. The Agreement provides that the Company, the ICC and the RFC will negotiate with the UCC and the EC with the goal of developing a fully consensual plan of reorganization. If such a consensual plan cannot be achieved, the Agreement provides that a plan will be filed under which holders of pre-petition unsecured claims, other than asbestos, lead and silica-related claims, will receive 30% of their allowed claims in value, and no distribution will be made to the Company's existing common shareholders whose shares will be cancelled. Under the Bankruptcy Code, shareholders are not entitled to any distribution under a plan of reorganization unless all classes of pre-petition unsecured creditors receive satisfaction in full of their allowed claims or accept a plan which allows shareholders to participate in the reorganized company or to receive a distribution. The treatment under the plan of reorganization of asbestos property damage, lead and silica claims is to be negotiated. Following the negotiations described above, the Company intends to file a plan of reorganization with the Bankruptcy Court and proceed to confirmation in accordance with the provisions of the Bankruptcy Code, including soliciting the requisite creditor and shareholder acceptances. Implementation of the Agreement and the treatment of claims and interests as provided therein is subject to confirmation of the plan of reorganization in accordance with the provisions of the Bankruptcy Code. Parties in interest in the chapter 11 cases may challenge the Plan. Each class of creditors and equity security holders that is impaired under a plan of reorganization is entitled to vote to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of two-thirds in dollar amount and more than one-half in number of claims of that class that have timely voted to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of equity security holders as acceptance by holders of equity interests that hold at least two-thirds in amount of the allowed equity interests in such class who have timely voted to accept or reject the plan. The Bankruptcy Court will confirm a plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation of a plan are that the plan is (i) accepted by all impaired classes of claims and equity interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is "fair and equitable" as to such class, (ii) feasible, and (iii) in the "best interest" of creditors and stockholders impaired under the plan. Additional information concerning the chapter 11 cases can be found in Note B to the Company's Consolidated Financial Statements in the Company's Annual Report to Shareholders for fiscal 1993, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (b) Asbestos. Prior to its chapter 11 filing, the Company had been named as a co-defendant in a substantial number of lawsuits alleging personal injury from exposure to asbestos-containing insulation products. As of the petition date, there were approximately 67,800 asbestos-related claims outstanding against the Company. The claims, which were pending in 48 states, British Columbia, Guam, the Virgin Islands, and the District of Columbia, alleged, in general, that the Company and other defendant manufacturers failed to warn of the potential hazard to health from the inhalation of asbestos fiber contained in their products. As a result of the chapter 11 filing by the Company, all of such litigation was automatically stayed pursuant to section 362 of the Bankruptcy Code and additional suits were not allowed to be filed against the Company. 5 8 Since the first asbestos case was filed in 1966, the Company has disposed of approximately 73,500 claims through trial, dismissal or settlement. On average, the Company spent approximately $7,800 per claim, including attorneys' fees and other defense costs, to dispose of these claims. All persons with a pre-petition asbestos-related claim were required to file a proof of claim by the September 30, 1992 bar date. Approximately 160,000 proofs of claim were filed alleging personal injury. The Company believes that approximately 11,000 of these claims are duplicates or were filed by persons whose lawsuits were previously disposed of through trial, dismissal, or settlement. The Company expects that additional asbestos-related personal injury claims will arise for several decades into the future. Such future claims were not subject to the September 30, 1992 bar date. The Company is not able to project precisely the number and value of future claims at this time. The Company, and numerous others, also were sued in both state and federal courts by various entities that own or operate commercial properties and public buildings, such as school districts, counties, cities, states, libraries and hospitals, based on allegations that asbestos or asbestos-containing products are or may be in the buildings. The typical demand in the suits is that the defendants compensate the plaintiffs for any costs incurred in identifying, repairing, encapsulating or removing the asbestos-containing products, or that defendants perform such remedial action. Many suits seek an injunction requiring abatement and punitive damages on the basis that the defendants allegedly knew of the hazards and, in concert with one another, concealed and misrepresented the dangers. Many such suits also seek indemnification from the defendants for all claims for personal injury brought against plaintiffs resulting from the presence of asbestos-containing products in plaintiffs' buildings. These suits too have been stayed as against the Company as a result of the commencement of the chapter 11 cases. One hundred forty-nine such lawsuits were instituted against the Company prior to the filing of its chapter 11 petition, including two which were certified as class actions. Two of such suits were consolidated into one. One hundred were disposed of through dismissals by the court following rulings on pre-trial motions, or voluntarily by the plaintiffs. The Company settled seven of these cases for less than $22,000 in the aggregate, prior to filing its chapter 11 petition. Forty-one such suits were pending as of the petition date and have been stayed as a consequence of the chapter 11 filing. The class actions that were certified pre-petition are a national school class action consisting of all public and private elementary and secondary school systems in the United States that have not excluded themselves from the suit; and a Michigan school class action consisting of all public and private elementary and secondary school systems in Michigan that have excluded themselves from the national school class action and included themselves in the state class action. In four lawsuits, class certification petitions were pending pre-petition. One of these suits has since been dismissed, one suit has been suspended, and the remaining two suits, one involving a class of colleges and universities and the other a class of buildings leased to the government, have been certified as class actions. Many of the claimants which voluntarily dismissed their individual claims as set forth above, did so to pursue them in one of the certified class actions. Approximately 1,000 proofs of claim alleging such asbestos property damage claims were filed in the chapter 11 cases pursuant to the bar date. These claims include most, if not all, of the lawsuits described above that were pending as of the petition date. Many of the asbestos-related claims filed in the chapter 11 cases do not provide sufficient information to enable the Company to determine whether or not it has liability for the claim or to definitively value any such liability. Similarly, the Company is not able to precisely project the number and value of future claims. The Company, however, is certain that it has significant liability with respect to the 160,000 proofs of claim which were filed against the Company pursuant to the September 30, 1992 bar date and which allege asbestos-related personal injury. The Company also is certain that there is significant liability with respect to future asbestos-related personal injury claims. In fact, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise on its books to $1.5 billion, as a consequence of the proposed settlement discussed above. Additional information concerning the asbestos litigation can be found in Note L to the Company's Consolidated Financial Statements in the Company's Annual Report to Shareholders for fiscal 1993, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. 6 9 (c) Other. In November, 1990, the Company was served with a suit by the City of Philadelphia (the "Philadelphia action") which sought certification of a class action on behalf of all cities in the United States with a population over 100,000 and their affiliated housing authorities. The suit sought monetary damages for inspection, testing, monitoring or abatement costs related to the presence of lead paint in buildings located in the cities. It also sought to recover costs incurred to screen, test, diagnose and treat residents of housing in the cities for exposure to lead paint and to educate residents about the alleged hazards of lead paint. The Company was alleged to be liable because it manufactured lead chemicals used as pigment by the manufacturers of the paint. This suit and an amended complaint filed by the same plaintiffs were dismissed in their entirety, and the dismissal was affirmed by a United States Circuit Court of Appeals. A proof of claim filed in the Bankruptcy Court asserting a claim with respect to the Philadelphia action, and a similar proof of claim filed on behalf of a class of residents of public housing in Philadelphia, were withdrawn in their entirety. The Philadelphia suit is similar to one served on the Company in June, 1989 by the City of New York that sought indemnity for costs New York had incurred and would incur because residents of housing owned by the city were allegedly injured by ingesting paint in that housing. Counts in this suit alleging negligence and strict product liability have been dismissed. Certain other counts are still pending. The City of New York did not file a timely claim in the Company's chapter 11 case, but, in November, 1993, after the 1991 bar date, it filed three proofs of claim with respect to the litigation seeking $50 million in damages. The Company has filed in the Bankruptcy Court an objection to these claims seeking to have them disallowed on the basis that they were filed after the bar date. The Company intends to litigate such objection vigorously. The Housing Authority of New Orleans filed a similar suit in 1988, but did not file a proof of claim in the Bankruptcy Court with respect to its prepetition lawsuit. These housing-related suits are variations on litigation initiated in Massachusetts late in 1987 against the Company and numerous other defendants. These suits alleged personal injuries resulting from ingestion of lead-containing paint. Such suits have been stayed as to the Company as a consequence of the filing of the chapter 11 cases. One hundred thirty one (131) proofs of claim were timely filed in the Bankruptcy Court asserting liability from lead chemicals allegedly manufactured and sold by the Company. Seven of such claims have been voluntarily withdrawn at the Company's request. The one hundred twenty four (124) that remain assert liability based on personal injury. The Company has demanded that the claimants withdraw several of the remaining claims. The Company also believes that it has valid grounds to object to the allowance of the remaining claims. On August 31, 1990, after a settlement agreement covering approximately 1,800 plaintiffs in the Lone Star Steel Toxic Tort Litigation was rejected by the Company, plaintiffs amended their complaint to add claims on behalf of approximately 1,200 additional persons, bringing the number of plaintiffs to approximately 3,000. In this action, plaintiffs seek unspecified compensatory and punitive damages for personal injuries and/or for wrongful death allegedly resulting from exposure to toxic and hazardous substances and defective machinery and equipment at the Lone Star Steel Plant in Dangerfield, Texas. The claims in this lawsuit are now included in the information on asbestos-related litigation, above, because the Company expects that the plaintiffs will allege that the Company supplied asbestos-containing insulation products to the plant. Further, the plaintiffs also named additional defendants in the amended complaint, including Chi-Vit Corporation. Chi-Vit Corporation is an entity not related to the Company that was formed in 1988 to acquire the assets of the Company's former unincorporated division, Chi-Vit Corporation Division, which was divested on December 9, 1988. On October 8, 1990, Chi-Vit Corporation demanded that the Company indemnify it for this litigation. On August 27, 1990, the Company and two of its officers were sued in the United States District Court for the Northern District of Texas by American Imaging Services, Inc., an approximately 60%-owned subsidiary, and its president and minority shareholder. This suit asserts numerous claims, based primarily on an alleged breach of fiduciary duty to the subsidiary and its minority shareholder, and usurpation and waste of the subsidiary's assets. By reason of the automatic stay imposed by Section 362(a) of the Bankruptcy Code, 7 10 the prosecution of the action against the Company was stayed by the filing of the Company's chapter 11 petition. Additionally, on May 7, 1991, the Bankruptcy Court entered an order preliminarily enjoining the continued prosecution of the action as against the officers. On February 7, 1992, the plaintiffs filed an amended complaint in the action which named another officer of the Company as an additional defendant. The plaintiffs also commenced a separate action against such third officer in the same court in which essentially the same allegations were made. The Bankruptcy Court's order preliminarily enjoining the continued prosecution of the initial action as against the officers was expanded to prohibit the prosecution of any claims against the third officer. The two plaintiffs in the action have also filed two proofs of claim in the Company's chapter 11 case in the amount of $500 million each based upon the claims asserted in the above-described actions. The claims appear to be duplicates, although the claimants have denied that they are. In August, 1993, the Company filed in the Bankruptcy Court an objection to these claims and also asserted various counterclaims (the "Objection"). Contemporaneously therewith, the Company also filed with the Bankruptcy Court a motion requesting that the Bankruptcy Court consolidate the actions pending in the United States District Court with the Objection and allow such consolidated matter to proceed before the Bankruptcy Court. By order entered January 24, 1994, the Bankruptcy Court denied the Company's motion and ordered that all claims asserted by the parties be resolved in the District Court in Texas. The Bankruptcy Court also lifted the automatic stay against the Company and vacated the injunction with respect to the officers so as to permit the litigation to proceed. On June 18, 1993, the Company, together with its wholly-owned subsidiary, Transicoil Inc., commenced an adversary proceeding in the chapter 11 case against Blue Dove Development Associates ("Blue Dove"), the landlord for Transicoil's domestic manufacturing facility in Valley Forge, Pennsylvania, and against K-Jem, Inc., Blue Dove's general partner. The suit seeks, among other things, to reform the provisions of the lease to provide a means of calculating rent due, to recover excess rent that the Company and Transicoil believe has been paid to the landlord, and for relief from certain orders of the Bankruptcy Court that led to the assumption of the lease pursuant to Section 365 of the Bankruptcy Code. The landlord filed a counterclaim in the adversary proceeding seeking a determination that Transicoil has breached the lease and therefore, the entire rent through June 30, 2005 should be due. The landlord made similar claims in a suit filed against Transicoil in October, 1993 in the United States District Court for the Eastern District of Pennsylvania (the "Pennsylvania Action"). Prosecution of this suit seeking approximately $10.3 million in damages has been enjoined by the Bankruptcy Court. The Company believes that the counterclaim asserted by the landlord and claims asserted in the Pennsylvania Action are without merit and that the resolution of the dispute with respect to the lease will not have a materially adverse impact on the Company's or Transicoil Inc.'s financial condition. In September, 1993, Moltan Company, a competitor in the diatomaceous earth oil and grease absorbent market of the Company's subsidiary, Eagle-Picher Minerals, Inc., sued the Company and such subsidiary in the United States District Court for the Western District of Tennessee, Western Division, seeking trebled damages of $3 million. Moltan alleged that the defendants wrongfully contacted federal and state regulators, as well as customers and prospective customers, concerning Moltan's product labels. The Company and its subsidiary countersued, seeking damages and an injunction requiring Moltan to cease its misleading and deceptive practices and to place appropriate and accurate information required by OSHA and other authorities on its products. On February 9, 1994, the court granted the Company's request for a preliminary injunction against Moltan, concluding as a matter of law that some of Moltan's product labels and other information are "blatantly false." The court enjoined Moltan from selling its products with labels containing false and misleading information in violation of OSHA and other regulations. Although Moltan's complaint has not yet been formally dismissed, the Company is confident that it will prevail with respect to Moltan's claims. In addition, the Company intends to continue to press its claims against Moltan and will seek to have the injunction made permanent. (d) Environmental. On January 30, 1989, the Company was served with a suit in the United States District Court for the District of Colorado under the federal Clean Water Act alleging that the Company's operations in Colorado Springs, Colorado had not timely filed certain reports and that the plant's wastewater discharge did not comply 8 11 with the battery manufacturing pretreatment standards. The Company and the United States Environmental Protection Agency ("EPA") agreed to settle the suit in December, 1990. Under the terms of the settlement, the Company agreed to pay a penalty of $112,500 and the EPA agreed to issue a permit for the Company's wastewater discharge. After the filing of the Company's chapter 11 petition, the EPA repudiated the settlement because it had not been reduced to writing before the filing. Subsequently, the EPA agreed to accept an allowed, unsecured claim in the Company's chapter 11 case in the amount of $150,000 in settlement of the litigation. The Company believes that it is in compliance with the permit and that no harm has occurred to human health or the environment. In December, 1989, the Company's operations in Colorado Springs, Colorado were the subject of an investigation by state and federal environmental regulators. In December, 1993, the Company was advised by the United States Attorney's Office in Denver, Colorado, that the investigation concerned the alleged unlawful treatment, storage or disposal of hazardous wastes and alleged false statements relating to such alleged activities by plant personnel. The Company is also investigating the events that occurred in 1989, but has not yet completed its evaluation. Concurrently, the Company is conducting remedial activities at its Colorado Springs operations in accordance with work plans approved by both EPA and the Colorado Department of Health. The Company has been advised by the EPA and other similar state agencies that the EPA and such agencies believe the Company to be one of a large number of parties potentially responsible for undertaking remedial measures and for future remedial costs to counteract the threat of releases of hazardous substances at a number of waste disposal sites. Investigation into the Company's involvement at these sites indicates that the Company either sent no waste or a very small amount of waste to most of these disposal sites and its liability, if any, should be accordingly limited. The Company has entered into agreements resolving the issues posed by the EPA in its notification with respect to a few of the sites. The Company has received notice from the EPA that the EPA believes the Company may be one of a number of parties responsible for the costs of remedial measures in the Ottawa County, Oklahoma, Cherokee County, Kansas and Jasper County, Missouri portions of the Tri-State mining district of Kansas, Missouri and Oklahoma. The propriety of placing the Ottawa County, Oklahoma, and a portion of the Cherokee County, Kansas mining areas on the National Priorities List was affirmed by the U.S. Court of Appeals for the District of Columbia (Eagle-Picher Industries, Inc., et al. v. Ruckelshaus, No. 83-2259, 1983). The Company has been an active participant in the Oklahoma Governor's Task Force and its technical subcommittee which, in conjunction with the EPA, has considered whether any significant environmental problems exist in the Oklahoma portion and part of the Kansas portion of the district due to mining activities which ceased in the mid-1960s. The Task Force has completed its study and has concluded that present conditions do not pose an imminent and substantial threat to human health and welfare. The recommendations of the Task Force and Region VI of the EPA were approved by the EPA and a three point remedial program to avert any future water problems in the area, including a portion of Cherokee County, Kansas, has been undertaken. The program consists of (1) plugging abandoned water wells; (2) diking and diverting surface water runoff away from openings to the mine workings; and (3) implementing an ongoing groundwater monitoring program of wells in the surrounding communities. Approximately $6,000,000 in Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), as amended, funds were spent for the program. In November, 1990, the Company and five other entities identified by EPA as responsible parties negotiated a Consent Agreement under which, without acknowledging responsibility, they agreed to pay $3,050,000 in settlement of any assessed liability for expenditures at the site authorized by CERCLA. Under the Agreement, the Company would have contributed $1,777,000. The Agreement was not fully executed, however, due to filing of the Company's chapter 11 petition. Region VII of the EPA is studying the necessity of remedial action in other parts of Cherokee County, Kansas. EPA has divided the Cherokee County site into several subsites, and activities to date have been limited to three of these subsites. In May, 1990, the Company and six other respondents entered into an Administrative Order on Consent with EPA to fund and conduct a Remedial Investigation and Feasibility Study (RI/FS) with respect to the Baxter Springs and Treece subsites. The RI/FS was expected to cost $2.5 million. The Company was expected to contribute approximately $875,000 to fund the study; as a consequence of filing its chapter 11 petition, the Company has made no such contribution. 9 12 In January, 1990, the Company received special notice from the EPA as a potentially responsible party in connection with remedial activities completed and to be undertaken at the Galena Subsite of the Cherokee County Superfund site located in the Tri-State mining district ("Galena Subsite"). The Company was unable to negotiate an acceptable settlement with the EPA during the special notice period. In June, 1990 the Company received an administrative order under Section 106 of CERCLA, as amended, from the EPA directing the Company and another respondent to perform the remedial design for the remedy selected by EPA at the Galena Subsite and to implement the design by performing a remedial action. The Company submitted a detailed legal and technical response to EPA objecting to the activities proposed to be conducted at the Galena Subsite and declining to perform the remedial design for the selected remedy. No response from the EPA has been received by the Company. In July, 1990, the Company received notice that the EPA considers the Company to be one of several parties potentially responsible for undertaking remedial measures and for future remedial costs in connection with the Missouri portion of the Tri-State mining district, which has been listed on the National Priorities List under CERCLA. Given the lack of available information concerning the site, the Company declined to negotiate an administrative order on consent to perform a Remedial Investigation and Feasibility Study at the site. For information concerning discussions with the EPA about settlement of federal environmental claims, please see Note M to the Company's Consolidated Financial Statements in the Company's Annual Report to Shareholders for fiscal 1993, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. As of the October 31, 1991, non-asbestos claims bar date, in excess of 1,300 proofs of claim were filed asserting claims based upon the foregoing and other litigation matters. Additional information concerning such litigation claims can be found in Note M to the Company's Consolidated Financial Statements in the Company's Annual Report to Shareholders for fiscal 1993, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (e) Summary -- Environmental and Other Claims. The Company and the individual defendants who were named in some lawsuits intend to defend all litigation claims vigorously in the manner permitted by the Bankruptcy Code and/or applicable law. All pre-petition claims against the Company arising from litigation must be liquidated or otherwise addressed in the context of the chapter 11 cases. Further, all such claims against the Company will be addressed in a plan of reorganization. During the pendency of the chapter 11 cases, any unresolved litigation with respect to pre-petition claims can proceed against the Company only with the express permission of the Bankruptcy Court. The Company has resolved many of the litigation claims that were asserted pursuant to the October 31, 1991 bar date other than those claims arising from the sale of asbestos-containing products. However, as pointed out above, the two largest litigation claims, which together seek $1.0 billion, the environmental claims, and certain claims relating to lead chemicals are still pending. The Company has filed objections to certain of these litigation-based claims seeking to reduce the amount of such claims or eliminate them entirely. These objections have not yet been resolved. The Company anticipates filing additional objections to other such claims if they cannot be resolved through negotiation. These objections will be vigorously litigated by the Company pursuant to the provisions of the Bankruptcy Code and applicable law. The eventual outcome of the environmental and other litigation claims described herein cannot be reasonably predicted due to numerous uncertainties that are inherent in the reorganization process. However, negotiations concerning environmental claims and attempts to negotiate settlements of other litigation claims progressed to a point in 1993 that enabled the Company to record a provision of $41.4 million for these claims. In addition, the Company may have insurance coverage for certain of these claims and may have other factual and legal defenses available to it. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 10 13 EAGLE-PICHER ANNUAL REPORT 1993 MARKED AS EXHIBIT 13 PART II CROSS REFERENCE SHEET TO 1993 ANNUAL REPORT TO SHAREHOLDERS
PAGES CAPTIONS ------ ----------------------------------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) Market Information 13 -- Quarterly Data (b) Holders of Common Stock -- 6,215 holders of record at February 18, 1994 (c) Dividends 31 -- Selected Financial Data
Although the principal market for the Registrant's Common Stock is the New York Stock Exchange, Inc., trading on that Exchange is currently suspended. The Registrant's Common Stock is also listed for trading on the Cincinnati Stock Exchange, on which trading is also currently suspended. See footnote 3 at page 13 of Exhibit 13, and the last paragraph of item 5, page 2 of Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA 31 -- Selected Financial Data ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28-30 -- Management's Discussion and Analysis of Results of Operations and Financial Condition ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8 -- Consolidated Statement Income (Loss) for the Three Years Ended November 30, 1993 9 -- Consolidated Statement of Cash Flows for the Three Years Ended November 30, 1993 10-11 -- Consolidated Balance Sheet as of November 30, 1993 and 1992 12 -- Consolidated Statement of Shareholders' Equity (Deficit) for the Three Years Ended November 30, 1993 14-26 -- Notes to Consolidated Financial Statements 28 -- Report of Management 27 -- Independent Auditors' Report 13 -- Quarterly Data
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11 14 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a) Directors. The name and age; principal occupation during the last five years and present employer; other boards of directors on which he serves; the year in which he first became a director of the Company and the committees on which he serves, follow for each director:
FIRST PRESENT TERM BECAME OF OFFICE DIRECTOR EXPIRES -------- ------------ PAUL W. CHRISTENSEN, JR., 69 1969 1996 Retired, 1987; Chairman of the Board 1978-1987, and President prior thereto, of The Cincinnati Gear Company, Cincinnati, Ohio, a manufacturer of custom gears and enclosed drives. Director of Cincinnati Bell Inc., The Ohio National Life Insurance Co. Member of Executive and Stock Option/Compensation Committees and Chairman of Audit Committee. MELVIN F. CHUBB, JR., 60 1990 1995 Senior Vice President 1988, of Eagle-Picher Industries, Inc.; Lieutenant General, United States Air Force and Commander of the Electronic Systems Division at Hanscom Air Force Base, Massachusetts, 1984-1988. Director of Empire District Electric Co. V. ANDERSON COOMBE, 67 1974 1996 Chairman of the Board since March 1991, and President prior thereto (through April 1991), of The Wm. Powell Company, Cincinnati, Ohio, a valve manufacturer. Director of Star Banc Corporation, Cincinnati, The Starflo Corp., Union Central Life Insurance Co., The Wm. Powell Company. Member of Audit, Executive and Stock Option/ Compensation Committees. ROGER L. HOWE, 59 1986 1995 Chairman of the Board of U.S. Precision Lens, Inc., Cincinnati, Ohio, a manufacturer of optics for video projection, instrumentation, and photographic applications. Director of Cintas Corporation, Star Banc Corporation, Cincinnati, U.S. Shoe Corporation, Baldwin Piano & Organ Co. Member of Executive and Stock Option/Compensation Committees. DANIEL W. LeBLOND, 67 1965 1994 Chairman of the Board of LeBlond Makino Machine Tool Company, Cincinnati, Ohio, a manufacturer of machine tools. Director of The Ingersoll Milling Machine Company, LeBlond Makino Machine Tool Company, The Ohio National Life Insurance Co. Member of Executive Committee and Chairman of Stock Option/Compensation Committee.
12 15
FIRST PRESENT TERM BECAME OF OFFICE DIRECTOR EXPIRES -------- ------------ POWELL McHENRY, 67 1991 1995 Of Counsel to Dinsmore & Shohl, a law firm, Cincinnati, Ohio as of October 1, 1991; Senior Vice President and General Counsel of The Procter & Gamble Company, Cincinnati, Ohio, a manufacturer of consumer and industrial products, 1983-1991. Member of Audit Committee. CHARLES S. MECHEM, JR., 63 1973 1994 Commissioner, Ladies Professional Golf Association, 1991; Of Counsel, Taft, Stettinius & Hollister, a law firm, 1990; Chairman of the Executive Committee, 1990 and Chairman of the Board and Chief Executive Officer, 1967-1990, of Great American Broadcasting Company, Cincinnati, Ohio. Director of AGCO Corporation, Great American Communications Company, Mead Corporation, The Ohio National Life Insurance Co., J.M. Smucker Company, Star Banc Corporation, Cincinnati, U.S. Shoe Corporation (Chairman of the Board). THOMAS E. PETRY, 54 1981 1994 Chairman of the Board, President, and Chief Executive Officer 1992, Chairman of the Board and Chief Executive Officer 1989, President and Chief Executive Officer 1982, President and Chief Operating Officer 1981, Group Vice President 1978, President, Akron Standard Division 1977, Vice President and Treasurer 1974, of Eagle-Picher Industries, Inc. Director of Cincinnati Gas & Electric Co., Star Banc Corporation, Cincinnati, Union Central Life Insurance Co., Insilco Corp. Chairman of Executive Committee. EUGENE P. RUEHLMANN, 68 1991 1996 Partner, Vorys, Sater, Seymour & Pease, a law firm, 1989; of Counsel to that firm, 1987; Chairman, Hamilton County (Ohio) Republican Central Committee, 1991. Director of Western-Southern Life Insurance Company. Member of Audit Committee.
(b) Executive Officers.
YEAR ELECTED OR ASSUMED PRESENT AGE DUTIES --- ------------ Thomas E. Petry Chairman of the Board of Directors, 54 1982 President and Chief Executive Officer David N. Hall Senior Vice President-Finance 54 1977 Melvin F. Chubb, Jr. Senior Vice President and Director 60 1988 Andries Ruijssenaars Senior Vice President 51 1989 Carroll D. Curless Vice President and Controller 55 1984 James A. Ralston Vice President and General Counsel 47 1982
Executive officers serve during the pleasure of the Board, or until their successors are elected and qualified. 13 16 There are no family relationships existing between or among the above executive officers of the registrant. Mr. Thomas E. Petry was first employed by the Company in 1968, elected Assistant Treasurer in 1971, elected Treasurer in 1973, elected Vice President and Treasurer in 1974, served as President, Akron Standard Division, from 1977 to 1978, elected Group Vice President in 1978, elected a Director and President and Chief Operating Officer in 1981, elected President and Chief Executive Officer in 1982, and has also been serving as Chairman of the Board since 1989. Mr. David N. Hall was first employed by the Company and elected Treasurer in 1977, was elected Vice President and Treasurer in 1979, and was elected and has been serving as Senior Vice President-Finance since 1987. Mr. Melvin F. Chubb, Jr. was employed by the Company in 1988 and was elected and has been serving as Senior Vice President since that time. In 1990 Mr. Chubb was elected a Director. Prior to joining the Company, he completed a career in the United States Air Force, having attained the rank of Lieutenant General and having served most recently as commander of the Electronic Systems Division, Air Force Systems Command at Hanscom Air Force Base. Mr. Andries Ruijssenaars was first employed by the Company in 1980 as General Manager of Eagle-Picher Industries GmbH in hringen, Germany, served as Executive Vice President, The Ohio Rubber Company Division from 1986 to 1987, President, The Ohio Rubber Company Division from 1987 to 1989, and was elected and has been serving as Senior Vice President since 1989. Mr. Carroll D. Curless was first employed by the Company in 1964, elected Assistant Controller in 1978, Controller in 1984, and was elected and has been serving as Vice President and Controller since 1986. Mr. James A. Ralston was first employed in the Legal Department of the Company in 1979, elected Assistant Secretary in 1982, General Counsel in 1982, and was elected and has been serving as Vice President and General Counsel since 1984. Item 11. EXECUTIVE COMPENSATION. The following Summary Compensation Table shows cash compensation and stock option awards to the listed executive officers for the last three fiscal years, and other annual compensation and all other compensation for fiscal 1992 and fiscal 1993: SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ---------------------------------------------------- OTHER FISCAL ANNUAL ALL OTHER NAME AND YEAR COMPENSATION COMPENSATION PRINCIPAL OCCUPATION ENDED SALARY($) BONUS($) ($)(1)(2) ($)(1)(3) - ------------------------- --------- --------- -------- ------------ ------------ Thomas E. Petry 11/30/93 575,000 100,000 149,492 178,154 Chairman, 11/30/92 575,000 105,000 75,488 128,557 President and 11/30/91 575,000 0 -- -- Chief Executive Officer David N. Hall 11/30/93 310,000 65,000 50,133 62,692 Senior Vice 11/30/92 300,000 90,000 12,046 24,181 President -- Finance 11/30/91 280,000 0 -- -- Melvin F. Chubb, Jr. 11/30/93 275,000 45,000 0 4,497 Senior Vice 11/30/92 265,000 70,000 0 4,364 President 11/30/91 250,000 0 0 -- Andries Ruijssenaars 11/30/93 275,000 75,000 22,760 31,420 Senior Vice 11/30/92 265,000 80,000 9,764 20,800 President 11/30/91 250,000 0 -- --
14 17
ANNUAL COMPENSATION ---------------------------------------------------- OTHER FISCAL ANNUAL ALL OTHER NAME AND YEAR COMPENSATION COMPENSATION PRINCIPAL OCCUPATION ENDED SALARY($) BONUS($) ($)(1)(2) ($)(1)(3) - ------------------------- --------- --------- -------- ------------ ------------ James A. Ralston 11/30/93 200,000 34,000 7,214 13,303 Vice President and 11/30/92 195,000 42,000 2,593 8,625 General Counsel 11/30/91 180,000 0 -- --
- --------------- (1) Under transition rules, this information need not be given for fiscal years ended 11/30/92 or earlier; however, it is being provided for the fiscal year ended 11/30/92. (2) Amounts for payment of taxes on purchases of annuities under Supplemental Executive Retirement Plan. (3) All Other Compensation:
COST OF COMPANY ANNUITY UNDER CONTRIBUTIONS NON-QUALIFIED TO SUPPLEMENTAL EAGLE-PICHER EXECUTIVE RETIREMENT YEAR RETIREMENT SAVINGS ENDED PLAN(S) PLAN($) TOTAL($) --------- ------------- ------------- -------- Thomas E. Petry Chairman, President, and Chief Executive Officer................ 11/30/93 173,657 4,497 178,154 David N. Hall Senior Vice President -- Finance... 11/30/93 58,195 4,497 62,692 Melvin F. Chubb, Jr. Senior Vice President.............. 11/30/93 0 4,497 4,497 Andries Ruijssenaars Senior Vice President.............. 11/30/93 26,923 4,497 31,420 James A. Ralston Vice President and General Counsel.......................... 11/30/93 8,806 4,497 13,303
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES Note: The Company has never granted Stock Appreciation Rights (SARs), so there are no SARs outstanding. There were no exercises of options by the named executive officers during fiscal 1993.
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR-END(#) YEAR-END($) EXERCISABLE/ EXERCISABLE/ NAME UNEXERCISABLE UNEXERCISABLE - ---------------------------------------------------------------------- ------------------- Thomas E. Petry.................................. 100,000 * 0/100,000 David N. Hall.................................... 50,000 * 0/50,000 Melvin F. Chubb, Jr.............................. 50,000 * 0/50,000 Andries Ruijssenaars............................. 50,000 * 0/50,000 James A. Ralston................................. 30,000 * 0/30,000
- --------------- * None of the unexercised options held by any of the named executive officers was "In-the-Money" as of November 30, 1993 -- the price at which the options were exercisable was above the closing price on the New York Stock Exchange at the end of the fiscal year. Further, the options were exercisable only if the last selling price per share on the New York Stock Exchange prior to the date on which the Company received written notice of the exercise was at least 20% above the option price per share. Trading in the Company's shares on the New York Stock Exchange was suspended on November 15, 1993 and remained so on 15 18 November 30, 1993; the last reported New York Stock Exchange trade was November 9, 1993 at $2.125 per share. All of the unexercised options are at a price of $2.50 per share. PENSION BENEFITS The following table shows the estimated total combined annual benefits to participants upon retirement at age 62 payable under Social Security, the Retirement Income Plan for Salaried Employees, and the Supplemental Executive Retirement Plan: PENSION PLAN TABLE
YEARS OF SERVICE ------------------------------------------------------------- REMUNERATION 15 20 25 30 35 ------------ --------- --------- --------- --------- --------- $200,000 $ 72,000 $ 96,000 $ 120,000 $ 120,000 $ 120,000 225,000 81,000 108,000 135,000 135,000 135,000 250,000 90,000 120,000 150,000 150,000 150,000 300,000 108,000 144,000 180,000 180,000 180,000 350,000 126,000 168,000 210,000 210,000 210,000 400,000 144,000 192,000 240,000 240,000 240,000 450,000 162,000 216,000 270,000 270,000 270,000 500,000 180,000 240,000 300,000 300,000 300,000 550,000 198,000 264,000 330,000 330,000 330,000 600,000 216,000 288,000 360,000 360,000 360,000 650,000 234,000 312,000 390,000 390,000 390,000 700,000 252,000 336,000 420,000 420,000 420,000 750,000 270,000 360,000 450,000 450,000 450,000 800,000 288,000 384,000 480,000 480,000 480,000 850,000 306,000 408,000 510,000 510,000 510,000
The Retirement Income Plan for Salaried Employees of the Company, a defined benefit pension plan in which the above-named executive officers are participants, provides non-contributory benefits after retirement based on the highest average monthly compensation during five consecutive years of the last ten years preceding retirement. For purposes of the Plan, compensation includes base salary, bonuses, commissions, and severance payments; salary and bonus included are as reported in the Summary Compensation Table, and commissions and severance payments, if there had been any, would have been included in that Table. The benefits shown by the Pension Plan Table above include amounts payable under Social Security and the Company's Supplemental Executive Retirement Plan as well as those payable under the Retirement Income Plan for Salaried Employees. Benefits are computed on the basis of straight-life annuity amounts. The estimated credited years of service with the Company for the named executive officers at age 62 are: Thomas E. Petry.................................. 33 David N. Hall.................................... 24 Melvin F. Chubb, Jr.............................. 12 Andries Ruijssenaars............................. 24 James A. Ralston................................. 29
SEVERANCE PLAN On February 6, 1991 the Board of Directors adopted a Severance Plan for certain employees, including the named executive officers, which was approved by the Bankruptcy Court on May 13, 1991. Under the Plan, a participant whose employment is terminated by the Company receives: a Base Severance Benefit of one week's pay for each year of Company service, payable under general payroll pay practices, but reduced dollar for dollar by any compensation earned from a subsequent employer during the period such benefits are being paid; a Supplemental Severance Benefit ranging from three months' salary up to one year's salary, payable in a lump sum upon termination; and continuation of certain insurance benefits for up to one week for each year of 16 19 service. Currently, the plan provides that an employee who is terminated after the confirmation of a plan of reorganization will not be eligible for a Supplemental Severance Benefit. Payments under the Plan cannot exceed twice the terminated employee's annual compensation, and all payments cease upon the terminated employee's death. COMPENSATION OF DIRECTORS Directors are paid a retainer of $18,000 per year, a fee of $750 for each Board meeting attended, and a fee of $750 for each Board committee meeting attended. Board committee members, excluding committee chairmen, are paid a retainer of $3,000 per year for each committee on which they serve; the chairman of each Board committee is paid a retainer of $5,000 per year. The Company does not pay director retainers or attendance fees, or committee retainers or attendance fees, to directors who are employees of the Company. Directors who are not also employees of the Company who retire with ten or more years of service as active members of the Board are paid an advisory fee for life in an amount equal to the annual directors retainer paid at the time of their retirement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During fiscal 1993, Messrs. LeBlond (Chairman), Christensen, Coombe, and Howe, directors of the Company, constituted the Stock Option/Compensation Committee. During fiscal 1993 and as of February 11, 1994 Mr. Petry, Chairman, President, and Chief Executive Officer of the Company, served as a director and as a member of the compensation committee of The Wm. Powell Company. During fiscal 1993 and as of February 11, 1994 Mr. Coombe was Chairman of the Board of The Wm. Powell Company. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of February 11, 1994, beneficial ownership of the Company's Common Stock by: all directors; each of the executive officers named in Item 11 above under "Compensation of Executive Officers"; and all directors and executive officers as a group, was:
AMOUNT AND NATURE OF BENEFICIAL PERCENT DIRECTORS OWNERSHIP OF CLASS ------------------------------------------------------------------- -------- Paul W. Christensen, Jr.................................. 43,000(1) * Melvin F. Chubb, Jr...................................... 39,414(1)(2)(3) * V. Anderson Coombe....................................... 4,480(1) * Roger L. Howe............................................ 1,000 * Daniel W. LeBlond........................................ 3,500 * Powell McHenry........................................... 1,000 * Charles S. Mechem, Jr.................................... 1,720 * Thomas E. Petry.......................................... 104,102(2)(3) * Eugene P. Ruehlmann...................................... 1,000 *
- --------------- * Less than 1%. (1) The following persons disclaim beneficial ownership as to the following numbers of shares which are beneficially owned by family members: Mr. Christensen -- 18,000 shares; Mr. Chubb -- 660 shares; Mr. Coombe -- 1,520 shares. (2) Mr. Chubb and Mr. Petry are also executive officers of the Company; their holdings of Company stock are listed here and not duplicated under the Executive Officers individual listing immediately below. (3) Includes shares subject to options to purchase within 60 days: Mr. Chubb -- 37,500; Mr. Petry -- 75,000. The terms of the option grants make the options exercisable if the last selling price per share on the New 17 20 York Stock Exchange is at least $3.00 on the day prior to the date on which the Company receives written notice of the exercise. There were as of February 11, 1994 no beneficial owners of more than 5% of the Company's Common Stock. EXECUTIVE OFFICERS
AMOUNT AND NATURE OF BENEFICIAL PERCENT OWNERSHIP OF CLASS ---------- -------- David N. Hall............................................... 49,982 * James A. Ralston............................................ 29,297 * Andries Ruijssenaars........................................ 39,933 *
- --------------- * Less than 1% Note: These figures include shares subject to options to purchase within 60 days: Mr. Hall -- 37,500; Mr. Ralston -- 22,500; Mr. Ruijssenaars -- 37,500. The terms of the option grants make the options exercisable if the last selling price per share on the New York Stock Exchange is at least $3.00 on the day prior to the date on which the Company receives written notice of the exercise.
AMOUNT AND NATURE OF BENEFICIAL PERCENT OWNERSHIP OF CLASS ---------- -------- Directors and Executive Officers As a Group (13 persons)................................... 325,481 2.95%
- --------------- Note: For the same reason stated in the Note above immediately following the Executive Officers shareholding table, this figure includes 232,500 shares subject to options to purchase. All shares shown above as owned were directly owned except as footnoted. Directors and executive officers are considered control persons of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Board of Directors has no knowledge of any significant transaction or proposed significant transaction to which the Company or any subsidiary and any director, officer, or nominee for director, or any associate of such director, officer, or nominee, were or are to be parties. During fiscal 1993 Mr. Andries Ruijssenaars, a Senior Vice President of the Company, was indebted to the Company in the amount of $79,072.73 in connection with loans made for relocation expenses. Interest is payable at an annual rate of 10%. As of November 30, 1993 the outstanding loan balance was less than $60,000. 18 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. All Financial Statements Eagle-Picher Industries, Inc. (Incorporated by reference to the Company's Annual Report to Shareholders for the year 1993, Exhibit 13, pages 8-13 -- See Part II above) Independent Auditors' Report -- Incorporated by reference to Exhibit 13, page 27
PAGE NO. ----------- 2. Financial Statement Schedules Schedule V -- Property, Plant and Equipment for the Three Years 40 Ended November 30, 1993 Schedule VI -- Accumulated Depreciation, Depletion and 41 Amortization of Property, Plant and Equipment for the Three Years Ended November 30, 1993 Schedule X -- Supplementary Income Statement Information for the 42 Three Years Ended November 30, 1993
SEQUENTIAL PAGE NO. ----------- 3. Exhibits (numbers keyed to Item 601, Regulation S-K). * 3. (i) Amended Articles of Incorporation through May 28, 1986. Incorporated by reference to Exhibit 1 to Form S-8 Registration Statement for the Registrant's Stock Option Plan of 1990 (SEC File No. 33-45179). * (ii) Code of Regulations of Eagle-Picher Industries, Inc., last amended March 26, 1985. Incorporated by reference to Exhibit 3(b) to Form 10-K Annual Report of the Registrant for its fiscal year ended November 30, 1992 (SEC File No. 1-1499). * 4. (a) Form of Indenture relating to the $50,000,000 Eagle-Picher Industries, Inc. 9% Sinking Fund Debentures due March 1, 2017, dated as of March 1, 1987 between Eagle-Picher Industries, Inc. and The Bank of New York. Incorporated by reference to Form 8-K of Eagle-Picher Industries, Inc., March, 1987 (SEC File No. 1-1499). * (b) Credit and Agency Agreement (debtor-in-possession financing agreement) dated as of November 5, 1992. Incorporated by reference to Exhibit 4(b) to Form 10-K Annual Report of the Registrant for its fiscal year ended November 30, 1992 (SEC File No. 1-1499). * 10. (a) Eagle-Picher Industries, Inc. Stock Option Plan of 1983, as amended. Incorporated by reference to Appendix A to Proxy Statement for Annual Meeting of Shareholders, March 28, 1989 and Exhibit 28 to Post Effective Amendment No. 1 to Registration Statement No. 33-5792, dated April 10, 1990 (SEC File No. 1-1499). * (b) Eagle-Picher Industries, Inc. Stock Option Plan of 1990. Incorporated by reference to Appendix A to Proxy Statement for Annual Meeting of Shareholders, March 27, 1990 (SEC File No. 1-1499). * (c) Eagle-Picher Supplemental Executive Retirement Plan. Incorporated by reference to Report on Form 10-K of Eagle-Picher Industries, Inc. for the fiscal year ended November 30, 1987 (SEC File No. 1-1499) and Proxy Statement for Annual Meeting of Shareholders to be held March 26, 1992 under the caption "Retirement Plans" (SEC File No. 1-1499).
19 22
SEQUENTIAL PAGE NO. ----------- 11. Calculation of Average Number of Shares. 44 13. Excerpts from the registrant's Annual Report to Shareholders for 45 the year ended November 30, 1993. 22. Subsidiaries of the registrant. 90 23. Independent Auditors' Consent. 91 24. (a),(b) Powers of Attorney. 92 99. Plants and Locations. 95 (b) Reports on Form 8-K. * (i) November 10, 1993 -- Reporting November 9, 1993 agreement with the Injury Claimants' Committee and the Legal Representative for Future Claimants in the registrant's pending chapter 11 cases on the principal elements of a joint plan of reorganization to be presented to the Bankruptcy Court in which the cases are pending. (SEC File No. 1-1499). Incorporated by reference. * (ii) November 19, 1993 -- Reporting the New York Stock Exchange's November 15, 1993 announcement of immediate suspension of trading in the registrant's common stock and intent to apply to the Securities and Exchange Commission to delist the registrant's common stock. (SEC File No. 1-1499). Incorporated by reference. * Incorporated by reference.
20 23 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER INDUSTRIES, INC. By /s/ THOMAS E. PETRY Thomas E. Petry Chairman of the Board, President and Chief Executive Officer Date: February 18, 1994 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ THOMAS E. PETRY Date: February 18, 1994 Thomas E. Petry, Chairman of the Board, President and Chief Executive Officer /s/ DAVID N. HALL Date: February 18, 1994 David N. Hall, Senior Vice President-Finance (Principal Financial Officer) /s/ CARROLL D. CURLESS Date: February 23, 1994 Carroll D. Curless, Vice President and Controller (Principal Accounting Officer) /s/ MELVIN F. CHUBB, JR. Date: February 18, 1994 Melvin F. Chubb, Jr., Senior Vice President and Director /s/ PAUL W. CHRISTENSEN, JR. Date: February 21, 1994 Paul W. Christensen, Jr., Director /s/ V. ANDERSON COOMB Date: February 21, 1994 V. Anderson Coombe, Director /s/ ROGER L. HOWE Date: February 21, 1994 Roger L. Howe, Director /s/ DANIEL W. LEBLOND Date: February 21, 1994 Daniel W. LeBlond, Director /s/ POWELL MCHENRY Date: February 21, 1994 Powell McHenry, Director /s/ CHARLES S. MECHEM, JR. Date: February 21, 1994 Charles S. Mechem, Jr., Director /s/ EUGENE P. RUEHLMANN Date: February 21, 1994 Eugene P. Ruehlmann, Director
21 24 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: Under date of February 2, 1994, we reported on the consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991) as of November 30, 1993 and 1992 and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended November 30, 1993, as contained in the 1993 Annual Report to Shareholders. These consolidated financial statements and our report, with explanatory paragraphs, thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in Part IV, item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. The accompanying financial statement schedules have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the consolidated financial statements, Eagle-Picher Industries, Inc. (the Company) and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court on January 7, 1991. Although the Company and its operating subsidiaries are currently operating their business as debtors in possession under the jurisdiction of the Bankruptcy Court, the continuation of their businesses as going concerns is contingent upon, among other things, the ability to formulate a plan of reorganization which will gain approval of the creditors and confirmation by the Bankruptcy Court. The filing under chapter 11 and the continued uncertainty related to claims associated with the Company's sale of asbestos products and certain other litigation as discussed in the following paragraph, raise substantial doubt about the Company's ability to continue as a going concern. The aforementioned financial statement schedules do not include any adjustments that may be required in connection with restructuring the Company and its subsidiaries as they reorganize under chapter 11 of the United States Bankruptcy Code. As discussed in Notes B and L to the consolidated financial statements, the consolidated financial statements include an estimated liability related to claims associated with the Company's sale of asbestos products. The final resolution of actual amounts, however, is dependent upon future events, the outcome of which is not fully determinable at the present time. In addition, as discussed in Note M, the Company is a defendant is various other litigation. Although provisions have been made for these matters, the final outcomes and their effect on the Company's consolidated financial statement are not presently determinable. /s/ KPMG Peat Marwick Cincinnati, Ohio February 2, 1994 22 25 SCHEDULE V EAGLE-PICHER INDUSTRIES, INC. PROPERTY, PLANT AND EQUIPMENT THREE YEARS ENDED NOVEMBER 30, 1993 (IN THOUSANDS OF DOLLARS)
BALANCE OTHER AT CHANGES- BALANCE BEGINNING ADD AT END OF ADDITIONS (DEDUCT) OF CLASSIFICATION PERIOD AT COST RETIREMENTS(1) (2) PERIOD - ---------------------------------------- -------- --------- -------------- -------- -------- YEAR ENDED NOVEMBER 30, 1993 Land and land improvements......... $ 11,322 $ 486 $ 22 $ (126 ) $ 11,660 Buildings.......................... 75,520 1,591 653 (709 ) 75,749 Machinery and equipment............ 243,851 17,220 6,835 (1,548 ) 252,688 Transportation equipment........... 3,826 785 519 (46 ) 4,046 Furniture and fixtures............. 16,110 3,229 953 (189 ) 18,197 Construction in progress........... 8,191 5,201 -- -- 13,392 -------- --------- -------------- -------- -------- $358,820 $28,512 $ 8,982 $(2,618 ) $375,732 -------- --------- -------------- -------- -------- -------- --------- -------------- -------- -------- YEAR ENDED NOVEMBER 30, 1992 Land and land improvements......... $ 11,234 $ 345 $ 333 $ 76 $ 11,322 Buildings.......................... 76,171 1,006 1,811 154 75,520 Machinery and equipment............ 234,249 16,026 7,168 744 243,851 Transportation equipment........... 3,681 942 786 (11 ) 3,826 Furniture and fixtures............. 14,134 2,268 336 44 16,110 Construction in progress........... 7,195 996 -- -- 8,191 -------- --------- -------------- -------- -------- $346,664 $21,583 $ 10,434 $ 1,007 $358,820 -------- --------- -------------- -------- -------- -------- --------- -------------- -------- -------- YEAR ENDED NOVEMBER 30, 1991 Land and land improvements......... $ 11,887 $ 220 $ 783 $ (90 ) $ 11,234 Buildings.......................... 75,683 6,870 5,979 (403 ) 76,171 Machinery and equipment............ 242,594 16,395 23,423 (1,317 ) 234,249 Transportation equipment........... 3,886 352 540 (17 ) 3,681 Furniture and fixtures............. 14,119 2,441 2,099 (327 ) 14,134 Construction in progress........... 9,458 (1,952) 311 -- 7,195 -------- --------- -------------- -------- -------- $357,627 $24,326 $ 33,135 $(2,154 ) $346,664 -------- --------- -------------- -------- -------- -------- --------- -------------- -------- --------
- --------------- (1) Includes $27,256 related to sales or dispositions of operations in 1991. (2) Represents reclassifications, adjustments and foreign currency translations. 23 26 SCHEDULE VI EAGLE-PICHER INDUSTRIES, INC. ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT THREE YEARS ENDED NOVEMBER 30, 1993 (IN THOUSANDS OF DOLLARS)
BALANCE OTHER AT ADDITIONS CHANGES- BALANCE BEGINNING CHARGED TO ADD AT END OF COSTS AND (DEDUCT) OF DESCRIPTION PERIOD EXPENSES RETIREMENTS(1) (2)(3) PERIOD - ---------------------------------------- -------- ---------- -------------- ------------ -------- YEAR ENDED NOVEMBER 30, 1993 Land improvements.................. $ 4,430 $ 314 $ 17 $ (15) $ 4,712 Buildings.......................... 34,868 3,096 463 (141) 37,360 Machinery and equipment............ 172,234 18,123 5,047 (893) 184,417 Transportation equipment........... 2,657 558 439 (23) 2,753 Furniture and fixtures............. 10,709 2,416 922 (114) 12,089 -------- ---------- -------------- ------------ -------- $224,898 $ 24,507 $ 6,888 $ (1,186) $241,331 -------- ---------- -------------- ------------ -------- -------- ---------- -------------- ------------ -------- YEAR ENDED NOVEMBER 30, 1992 Land improvements.................. $ 4,348 $ 317 $ 246 $ 11 $ 4,430 Buildings.......................... 33,061 3,267 1,564 104 34,868 Machinery and equipment............ 159,746 17,773 5,338 53 172,234 Transportation equipment........... 2,768 521 629 (3) 2,657 Furniture and fixtures............. 8,765 2,282 358 20 10,709 -------- ---------- -------------- ------------ -------- $208,688 $ 24,160 $ 8,135 $ 185 224,898 -------- ---------- -------------- ------------ -------- -------- ---------- -------------- ------------ -------- YEAR ENDED NOVEMBER 30, 1991 Land improvements.................. $ 4,579 $ 306 $ 527 $ (10) $ 4,348 Buildings.......................... 33,858 3,173 3,921 (49) 33,061 Machinery and equipment............ 161,917 17,524 17,983 (1,712) 159,746 Transportation equipment........... 2,774 440 435 (11) 2,768 Furniture and fixtures............. 7,766 2,199 1,067 (133) 8,765 -------- ---------- -------------- ------------ -------- $210,894 $ 23,642 $ 23,933 $ (1,915) $208,688 -------- ---------- -------------- ------------ -------- -------- ---------- -------------- ------------ --------
- --------------- (1) Includes $20,172 related to sales or dispositions of operations in 1991. (2) Represents reclassifications, adjustments and foreign currency translations. (3) For 1991, includes the reversal of a $1,798 reserve set up in 1990 for future disposition of assets; those assets were sold in 1991. 24 27 SCHEDULE X EAGLE-PICHER INDUSTRIES, INC. SUPPLEMENTARY INCOME STATEMENT INFORMATION THREE YEARS ENDED NOVEMBER 30, 1993 (IN THOUSANDS OF DOLLARS)
COL. B ------------------------------- CHARGED TO COSTS AND EXPENSES COL. A ------------------------------- ITEM 1993 1992 1991 ------- ------- ------- Maintenance and repairs............................. $21,314 $19,138 $18,907 ------- ------- ------- ------- ------- -------
25 28 EXHIBIT INDEX
SEQUENTIAL EXHIBIT NUMBER PAGE PAGE NO. - ----------------- ------ ---------- 3(i) -- Articles of Incorporation* 3(ii) -- Code of Regulations* 4(a) -- Form of Indenture, $50,000,000 9% Sinking Fund Debentures due March 1, 2017* 4(b) -- Credit and Agency Agreement, dated as of November 5, 1992* 10(a),(b) -- Eagle-Picher Industries, Inc. Stock Option Plans of 1983, and 1990* 10(c) -- Eagle-Picher Supplemental Executive Retirement Plan* 11 -- Statement re Calculation of Average Number of 44 Shares 13 -- Excerpts from Annual Report to Security Holders 45 for Fiscal Year 1993 21 -- Subsidiaries of the Registrant 90 23 -- Independent Auditors' Consent 94 24(a),(b) -- Powers of Attorney 95 99 -- Plants and Locations 98
- --------------- * Incorporated by reference. See pages 33-36 above. 26 EX-11 2 EXHIBIT 1 EXHIBIT 11 EAGLE-PICHER INDUSTRIES, INC. CALCULATION OF AVERAGE NUMBER OF SHARES THREE YEARS ENDED NOVEMBER 30, 1993
1993 1992 1991 ---------- ---------- ---------- Average common shares issued.......................... 11,125,000 11,125,000 11,125,000 Less: Average common treasury shares................. (94,485) (146,568) (146,568) ---------- ---------- ---------- Average number of common shares outstanding........... 11,030,515 10,978,432 10,978,432 ---------- ---------- ---------- ---------- ---------- ----------
EX-13 3 EXHIBIT 1 Exhibit 13 EXCERPTS from Eagle-Picher Industries, Inc. 1993 Annual Report to Shareholders 5) The treatment under the Plan of asbestos property damage, lead and silica claims is to be negotiated. Additionally, the Plan will provide that convenience claims, general unsecured claims of $500 or less, will be paid in full. Following the negotiations with the other Committees and with respect to asbestos property damage, lead and silica claims, the Company intends to file a plan with the Bankruptcy Court and proceed to confirmation in accordance with the provisions of the Bankruptcy Code, including soliciting creditor and shareholder acceptances. Implementation of the agreement and the treatment of claims and interests as set forth above is subject to confirmation of the Plan in accordance with the provisions of the Bankruptcy Code. Parties in interest in the chapter 11 case may challenge the Plan and its basis, including the magnitude of the asbestos-related personal injury claims. After the Company's announcement of November 10, 1993, the New York Stock Exchange ("NYSE") suspended trading in the common stock of Eagle-Picher and announced on November 15, 1993, that it would make application to the Securities and Exchange Commission to delist the issue. The NYSE indicated that the action was taken because the Company does not meet the NYSE's continued listing criteria. The Company requested a hearing to review the NYSE's action and as of this writing such hearing had not been held. As of November 30, 1993, the Company's common stock was being traded on the Over-the-Counter market under the symbol "EPIH." - 1 - 2 CONSOLIDATED STATEMENT OF INCOME (LOSS) Eagle-Picher Industries, Inc.
Years Ended November 30 --------------------------- (In thousands of dollars, except per share) 1993 1992 1991 - ----------------------------------------------------------------------------------- NET SALES $ 661,452 $611,458 $598,631 OPERATING COSTS AND EXPENSES Cost of products sold 548,605 497,341 510,736 Selling and administrative 69,093 67,557 69,046 --------- -------- -------- 617,698 564,898 579,782 --------- -------- -------- OPERATING INCOME 43,754 46,560 18,849 Provision for asbestos litigation (1,135,500) - - Provision for environmental and other claims (41,436) (2,000) (500) Loss on disposition of operations - - (12,326) Interest expense (contractual interest of $9,369 in 1993, $10,193 in 1992 and $12,624 in 1991) (2,070) (2,691) (5,873) Other expense (174) (945) (938) --------- -------- -------- INCOME (LOSS) BEFORE REORGANIZATION ITEMS, TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,135,426) 40,924 (788) REORGANIZATION ITEMS (4,344) (9,038) (12,124) --------- -------- -------- INCOME (LOSS) BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,139,770) 31,886 (12,912) INCOME TAXES 5,000 3,000 2,900 --------- -------- -------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,144,770) 28,886 (15,812) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS (12,598) - - --------- -------- -------- NET INCOME (LOSS) $(1,157,368) $ 28,886 $(15,812) =========== ======== ======== INCOME (LOSS) PER SHARE: INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $(103.78) $ 2.63 $(1.44) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS (1.14) - - ------- ------ ------ NET INCOME (LOSS) $(104.92) $ 2.63 $(1.44) ======== ====== ====== See accompanying notes to consolidated financial statements.
- 8 - 3 CONSOLIDATED STATEMENT OF CASH FLOWS Eagle-Picher Industries, Inc.
Years Ended November 30 ------------------------- (In thousands of dollars) 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,157,368) $ 28,886 $(15,812) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Provision for asbestos litigation 1,135,500 - - Provision for environmental and other claims 41,436 2,000 500 Cumulative effect of accounting change 12,598 - - Depreciation and amortization 24,955 24,655 24,142 Loss on disposition of operations - - 12,326 Changes in assets and liabilities, net of effects of divestitures: Receivables (10,764) 579 8,253 Income tax refund receivable 101 (1,290) 13,799 Due from insurance carriers - 4,377 5,309 Inventories (4,098) 1,787 8,508 Deferred income taxes (12,137) (4,574) 109 Accounts payable 5,539 1,263 (17,685) Asbestos liability 78 (1,203) (9,687) Other 2,111 (8,439) 9,038 ----------- -------- -------- Net cash provided by operating activities before changes in liabilities from reorganization activities 37,951 48,041 38,800 Changes in liabilities from reorganization activities: Accounts payable 342 3,372 39,421 Accrued liabilities (617) (616) 8,692 ----------- -------- -------- Net cash provided by operating activities 37,676 50,797 86,913 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of fixed assets 540 2,016 1,060 Capital expenditures (28,512) (21,583) (24,326) Other (205) (664) 2,424 ----------- -------- -------- Net cash used in investing activities (28,177) (20,231) (20,842) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt 810 2,243 1,969 Reduction of long-term debt (4,007) (8,972) (10,153) Borrowings under revolving credit agreement - - 10,100 Repayments under revolving credit agreement - - (29,800) Issuance of common shares 156 - - ----------- -------- -------- Net cash used in financing activities (3,041) (6,729) (27,884) ----------- -------- --------
- 9 - 4 NET INCREASE IN CASH AND CASH EQUIVALENTS 6,458 23,837 38,187 -------- -------- -------- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 78,116 54,279 16,092 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 84,574 $ 78,116 $ 54,279 ======== ======== ======== See accompanying notes to consolidated financial statements.
- 9 - 5 CONSOLIDATED BALANCE SHEET Eagle-Picher Industries, Inc.
ASSETS November 30 ----------------- (In thousands of dollars) 1993 1992 - ---------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 84,574 $ 78,116 Receivables, less allowances of $1,182 in 1993 and $1,297 in 1992 97,586 86,822 Income tax refund receivable 3,275 3,376 Inventories 68,306 64,208 Deferred income taxes - 11,297 Prepaid expenses 8,283 8,159 -------- -------- TOTAL CURRENT ASSETS 262,024 251,978 -------- -------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements 11,660 11,322 Buildings 75,749 75,520 Machinery and equipment 274,931 263,787 Construction in progress 13,392 8,191 -------- -------- 375,732 358,820 Less accumulated depreciation 241,331 224,898 -------- -------- NET PROPERTY, PLANT AND EQUIPMENT 134,401 133,922 -------- -------- DEFERRED INCOME TAXES 29,924 - OTHER ASSETS 33,011 33,535 -------- -------- TOTAL ASSETS $459,360 $419,435 -------- ======== See accompanying notes to consolidated financial statements.
- 10 - 6 CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
November 30 ----------------- 1993 1992 - ---------------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable $ 32,365 $ 26,826 Compensation and employee benefits 12,167 10,805 Long-term debt - current portion 2,737 3,462 Income taxes 5,613 5,077 Other accrued liabilities 21,918 23,042 -------- -------- TOTAL CURRENT LIABILITIES 74,800 69,212 -------- -------- LIABILITIES SUBJECT TO COMPROMISE 1,656,563 479,576 LONG-TERM DEBT, less current portion 21,712 25,033 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 20,209 - OTHER LONG-TERM LIABILITIES 3,282 4,572 -------- -------- TOTAL LIABILITIES 1,776,566 578,393 --------- -------- SHAREHOLDERS' EQUITY (DEFICIT) Preference stock - no par value. Authorized 873,457 shares; none issued - - Common stock - $1.25 par value per share. Authorized 30,000,000 shares; issued 11,125,000 shares 13,906 13,906 Additional paid-in capital 36,378 37,644 Accumulated deficit (1,365,867) (208,499) Foreign currency translation 290 1,326 -------- -------- (1,315,293) (155,623) Cost of 84,068 and 146,568 common treasury shares (1,913) (3,335) -------- -------- TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,317,206) (158,958) ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $459,360 $419,435 ======== ======== See accompanying notes to consolidated financial statements.
- 11 - 7 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) Eagle-Picher Industries, Inc.
TOTAL ADDITIONAL FOREIGN SHAREHOLDERS' COMMON PAID-IN ACCUMULATED CURRENCY TREASURY EQUITY (In thousands of dollars) STOCK CAPITAL DEFICIT TRANSLATION STOCK (DEFICIT) - ----------------------------------------------------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1990 $13,906 $37,644 $ (221,573) $1,876 $(3,335) $(171,482) Net loss - - (15,812) - - (15,812) Foreign currency translation - - - (736) - (736) -------------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1991 13,906 37,644 (237,385) 1,140 (3,335) (188,030) Net income - - 28,886 - - 28,886 Foreign currency translation - - - 186 - 186 -------------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1992 13,906 37,644 (208,499) 1,326 (3,335) (158,958) Net loss - - (1,157,368) - - (1,157,368) Stock options - (1,266) - - 1,422 156 Foreign currency translation - - - (1,036) - (1,036) -------------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1993 $13,906 $36,378 $(1,365,867) $ 290 $(1,913) $(1,317,206) ================================================================================ See accompanying notes to consolidated financial statements.
- 12 - 8 QUARTERLY DATA (Unaudited) (In thousands of dollars, except per share) - --------------------------------------------------------------------------------------------------------- 1993 FIRST SECOND THIRD FOURTH YEAR - --------------------------------------------------------------------------------------------------------- NET SALES $146,971 $176,366 $162,228 $175,887 $661,452 - --------------------------------------------------------------------------------------------------------- OPERATING INCOME 8,390 14,100 10,384 10,880 43,754 - --------------------------------------------------------------------------------------------------------- INCOME (LOSS): - --------------------------------------------------------------------------------------------------------- BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 6,404 (1) 11,515 (1) 8,006(1) (1,170,695)(2) (1,144,770) - --------------------------------------------------------------------------------------------------------- CUMULATIVE EFFECT OF ACCOUNTING CHANGE (12,598)(1) - - - (12,598) - --------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) (6,194) 11,515 8,006 (1,170,695) (1,157,368) - --------------------------------------------------------------------------------------------------------- INCOME (LOSS) PER SHARE: - --------------------------------------------------------------------------------------------------------- BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE .59 (1) 1.04 (1) .73 (1) (106.14)(2) (103.78) - --------------------------------------------------------------------------------------------------------- CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1.14) (1) - - - (1.14) - --------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) (.55) 1.04 .73 (106.14) (104.92) - --------------------------------------------------------------------------------------------------------- COMMON STOCK PRICE (NYSE) HIGH 4 3-5/8 3 2-5/8 4 - --------------------------------------------------------------------------------------------------------- LOW 2-1/8 2-1/4 2-1/8 -- (3) -- (3) - --------------------------------------------------------------------------------------------------------- 1992 First Second Third Fourth Year - --------------------------------------------------------------------------------------------------------- Net Sales $134,221 $160,537 $155,371 $161,329 $611,458 - --------------------------------------------------------------------------------------------------------- Operating Income 7,054 14,081 12,676 12,749 46,560 - --------------------------------------------------------------------------------------------------------- Net Income 4,076 9,290 8,246 7,274 28,886 - --------------------------------------------------------------------------------------------------------- Net Income Per Share .37 .85 .75 .66 2.63 - --------------------------------------------------------------------------------------------------------- Common Stock Price (NYSE) High 2 5/8 2 5/8 2 3/4 2 5/8 2 3/4 - --------------------------------------------------------------------------------------------------------- Low 15/16 2 2 1/8 2 1/8 15/16 - --------------------------------------------------------------------------------------------------------- (1) During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits," retroactively to December 1, 1992. Besides the cumulative aftertax charge of $12.6 million, this accounting change reduced previously reported income by $254,000 in the first quarter ($.02 per share), $254,000 in the second quarter ($.02 per share) and $250,000 in the third quarter ($.02 per share). The Company also adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The impact of adopting this standard on previously reported income was not material. (2) On November 9, 1993, the Company reached an agreement on the principal elements of a joint plan of reorganization (see Note B) that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company recorded a provision to its income statement of $1.135 billion to increase its asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision for environmental and other claims of $41.4 million in the fourth quarter. (3) As a result of the Company's announcement on November 10, 1993 regarding the agreement, the New York Stock Exchange suspended trading of the Company's common stock, and on November 15, 1993, announced that it would make application to the Securities and Exchange Commission to delist the issue. Consequently, the stock has not been traded on an organized exchange since that date, nor is the stock regularly quoted in the automated quotation system of a registered securities association. Therefore, common stock prices beyond November 10, 1993 have not been included above.
- 13 - 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used in the preparation of the consolidated financial statements are summarized below. These policies conform to generally accepted accounting principles and have been consistently applied. The Company has accounted for all transactions related to the chapter 11 proceedings in accordance with Statement of Position 90-7 ("SOP 90- 7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," issued by the American Institute of Certified Public Accountants. Accordingly, liabilities subject to compromise under the chapter 11 proceedings have been segregated on the consolidated balance sheet and are recorded at the amounts that have been or are expected to be allowed on known claims rather than estimates of consideration those claims may receive in a plan of reorganization. In addition, the consolidated statements of income (loss) and cash flows separately disclose expenses and cash transactions, respectively, related to the chapter 11 proceedings. Principles of Consolidation The consolidated financial statements include the accounts of all of the Company's subsidiaries. Intercompany accounts and transactions have been eliminated. Separate condensed combined financial statements of the entities in chapter 11 have not been presented because they represent a substantial portion of the Company. Additionally, entities not in chapter 11 represent identifiable investments of those entities in chapter 11 and are therefore subject to the chapter 11 process. Cash and Cash Equivalents 10 Marketable securities with original maturities of three months or less are considered to be cash equivalents. The carrying amount reported in the Consolidated Balance Sheet approximates fair value. - 14 - Concentrations of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards No. 105, consist primarily of trade accounts receivable. The Company's customer base includes all significant automotive manufacturers and their first tier suppliers in North America and Europe. Although the Company is directly affected by the well-being of the automotive industry, management does not believe significant credit risk existed at November 30, 1993. Inventories Inventories are valued at the lower of cost or market, which approximates current replacement cost. The last-in first-out ("LIFO") method of valuation was used for a substantial portion of inventories. Property, Plant and Equipment The Company records investments in land and land improvements, buildings and machinery and equipment at cost. Improvements are capitalized, while repair and maintenance costs are charged to operations as incurred. The Company provides for depreciation of plant and equipment using the straight-line method over the estimated lives of the assets. Cost in Excess of Net Assets Acquired Amounts are being amortized using the straight-line method primarily over 40 years. Retirement Plans Pension or profit sharing retirement plans cover substantially all of the Company's employees. 11 Postretirement Benefits Other Than Pensions Effective December 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 ("FAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions." This standard requires that the Company charge the expected cost of retiree health benefits to - 14 - expense during the years employees render service. In prior years, the Company recognized these benefits on a pay-as-you-go basis. Income Taxes Effective December 1, 1992, the Company implemented the provisions of Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes," which changes the criteria for recognizing deferred tax assets on the balance sheet. In 1992 and 1991, the Company accounted for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 96 ("FAS 96"), "Accounting for Income Taxes." - 14 - Foreign Currency Translation Adjustments resulting from translation of foreign currency financial statements generally are excluded from the results of operations and accumulated in a separate component of shareholders' equity (deficit). Gains and losses from foreign currency transactions are included in the determination of net income (loss) and were not material. Reclassifications Certain prior year amounts have been reclassified to conform with current year financial statement presentation. B. PROCEEDINGS UNDER CHAPTER 11 On January 7, 1991 (the "petition date"), Eagle-Picher Industries, Inc. (the "Company") and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code ("chapter 11") with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy 12 Court"). Each filing entity is currently operating its business as a debtor in possession in accordance with the provisions of the Bankruptcy Code. The chapter 11 filings were the consequence of a cash shortfall resulting from the Company's inability to satisfy certain immediate asbestos litigation liabilities. As a result of the chapter 11 filings, substantially all litigation pending against the Company as of the petition date is stayed and - 15 - no party may take any action to recover a pre-petition claim, except pursuant to further order of the Bankruptcy Court. An Unsecured Creditors' Committee, an Injury Claimants' Committee ("ICC"), an Equity Security Holders' Committee and a Legal Representative for Future Claimants ("RFC") have been appointed in the chapter 11 cases. An unofficial asbestos co-defendants' committee has also been participating in the chapter 11 cases. In accordance with the provisions of the Bankruptcy Code, these parties have the right to be heard with respect to transactions outside the ordinary course of business. The official committees and the RFC are the primary parties with whom the Company is negotiating the terms of a plan of reorganization. In June 1992, a mediator was appointed by the Bankruptcy Court to assist the constituencies in their negotiations. The Bankruptcy Court established a bar date of October 31, 1991 for all pre-petition claims against the Company other than those arising from the sale of asbestos-containing products. The bar date is the date by which claimants who disagree with the amounts recorded as owed to them by the Company must file a proof of claim against the Company. Substantially all of the general claims filed by vendors, note holders and other miscellaneous parties pursuant to this bar date have been reconciled by the Company. The reconciled claims have been allowed as pre-petition claims against the Company's estate. A small number of such claims remains to be resolved; however, the Company does not expect the effect of their resolution to be material. See Note M for further information regarding certain environmental and other litigation claims which were also filed pursuant to the October 31, 13 1991 bar date. In addition, the Bankruptcy Court established a bar date of September 30, 1992 for all present asbestos-related claims. See Note L for further information about asbestos-related claims. On November 9, 1993, the Company reached an agreement on the principal elements of a joint plan of reorganization that provides a basis for the Company and its subsidiaries to emerge from chapter 11. The agreement is with the ICC and the RFC, the representatives of the holders of present and - 15 - future asbestos-related and other toxic tort claims in the Company's chapter 11 case, and was reached with the assistance of the mediator appointed by the Bankruptcy Court. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. These claims would be channeled to and resolved by a claims administration trust that would receive cash, debt securities and substantially all of the common stock of the reorganized Company under a plan of reorganization (the "Plan"). As a consequence of the proposed settlement, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision of $41.4 million in 1993 for environmental and other litigation claims in anticipation of settlement of such claims (see Note M). - 15 - Liabilities incurred by the Company as of the petition date and subject to compromise under a plan of reorganization are separately classified in the Consolidated Balance Sheet and include the following:
(In thousands of dollars) 1993 1992 ---- ---- Asbestos liability - Note L $ 1,500,029 $ 364,451 Long-term debt - Note F 62,004 61,756
14 Accounts payable 43,135 42,793 Accrued liabilities - Note M 51,395 10,576 --------- --------- $ 1,656,563 $ 479,576 ========= =========
The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The liabilities subject to compromise listed above have been reported on the - 16 - basis of the expected amount of the allowed claims even though they may be settled for lesser amounts. Upon confirmation of a plan of reorganization, the Company would utilize the fresh-start reporting principles contained in SOP 90-7, which would result in adjustments relating to the amounts and classification of recorded assets and liabilities, determined as of the plan confirmation date. At this date, because no plan of reorganization has been filed with the court, the Company cannot be certain of the terms and provisions thereof. However, the Company believes that the ultimate consideration to be received by the unsecured creditors will be substantially less than the amounts shown in the accompanying Consolidated Balance Sheet. The agreement on the principal elements of a joint plan of reorganization discussed above provides that the Company, the ICC and the RFC will negotiate with the Unsecured Creditors' Committee and the Equity Security Holders' Committee with the goal of developing a consensual plan of reorganization. If such a consensual plan cannot be achieved, the agreement provides that a plan will be filed under which holders of pre-petition unsecured claims, other than asbestos, lead and silica-related claims, will receive 30% of their allowed claims in value, and no distribution would be made to the Company's existing common shareholders whose shares would be canceled. Under the Bankruptcy Code, shareholders are not entitled to any distribution under a plan of reorganization unless all classes of pre-petition creditors receive satisfaction in full of their allowed claims or accept a plan which allows 15 shareholders to participate in the reorganized company or to receive a distribution. The treatment under the Plan of asbestos property damage, lead and silica claims is to be negotiated. Following the negotiations described above, the Company intends to file a plan of reorganization with the Bankruptcy Court and proceed to confirmation in accordance with the provisions of the Bankruptcy Code, including soliciting the requisite creditor and shareholder acceptances. Implementation of the agreement and the treatment of claims and interests as provided therein is subject to confirmation of the Plan in accordance with - 16 - the provisions of the Bankruptcy Code. The net expense resulting from the Company's chapter 11 filings has been segregated from expenses related to ordinary operations in the accompanying consolidated financial statements and includes the following:
(In thousands of dollars) 1993 1992 1991 ---- ---- ---- Professional fees $ 5,921 $ 8,996 $ 9,584 Employee retention plan - - 1,500 Debt financing costs - 476 1,397 Other expenses 807 1,823 1,259 Interest income (2,384) (2,257) (1,616) ------- ------- ------- $ 4,344 $ 9,038 $12,124 ======= ======= =======
Interest income is attributable to the accumulation of cash and cash equivalents subsequent to the petition date. C. DISPOSITIONS The Company closed its Mat Division in Willoughby, Ohio in October 1991 and subsequently sold the assets. A provision of $10,000,000 or $.91 per share was recorded in 1991 for the costs of that closure. Sales for this operation in 1991 were $23,060,000 and pre-tax losses in 1991, excluding the provision for closure, were $6,560,000. In 1991, the Company also made provisions 16 totaling $2,326,000 for the disposition of other operations and properties. - 16 - 17 D. INVENTORIES Inventories consisted of:
(In thousands of dollars) 1993 1992 ------- -------- Raw materials and supplies $ 39,319 $ 33,404 Work-in-process 25,381 25,646 Finished goods 13,983 15,193 ------- -------- 78,683 74,243 Allowance to value inventory at cost on the LIFO method 10,377 10,035 -------- -------- $ 68,306 $ 64,208 ======== ========
The percentage of inventories valued using the LIFO method was 79% in 1993 and 71% 1992. The effects of liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years were not material in 1993 and 1992. In 1991, these liquidations increased pre-tax income by $1,099,000. E. OTHER ASSETS Other assets consisted of:
(In thousands of dollars) 1993 1992 ---- ---- Cost in excess of net assets acquired, net of accumulated amortization of $3,580 in 1993 and $3,132 in 1992 $ 12,900 $ 13,348 Notes receivable 6,273 8,115 Prepaid pension cost - Note J 7,019 6,780 Other 6,819 5,292 -------- -------- $ 33,011 $ 33,535 ======== ========
Notes receivable include $4,550,000 received as partial consideration for the sale of a division. This note is payable in two equal installments in 1997 and 1998 and bears interest at 8% with the first interest payment due in August 1994. F. LONG-TERM DEBT AND SHORT-TERM BORROWINGS In October 1992, the Bankruptcy Court approved a debtor in possession financing agreement which provides a $40,000,000 committed revolving credit 18 - 17 - facility ("Facility"). The Facility replaced the $42,000,000 committed revolving credit facility provided by a debtor in possession financing agreement approved in May 1991. The entire amount of the Facility is available for both cash borrowings and letters of credit and expires on the earlier of December 31, 1994 or the effective date of a confirmed plan of reorganization. Letters of credit totaling $34,091,000 and $33,195,000 were outstanding on November 30, 1993 and 1992, respectively, leaving the Company with $5,909,000 and $6,805,000, respectively, in available borrowing capacity under the Facility. There were no cash borrowings at any time in 1993 or 1992 under either of these facilities. The annual rate of interest under this Facility is the agent bank's prime rate plus 1-1/2%. Fees for letters of credit are 1-1/2% to 2-1/2% per annum and a commitment fee equal to 1/2% per annum is due on the unused portion. The obligations are secured by accounts receivable and inventories and are afforded administrative priority under the Bankruptcy Code. The Company has had sufficient collateral to borrow the maximum amount under this Facility. The Facility also contains affirmative and negative covenants which include, among other things, limitations on capital expenditures and additional borrowings and minimum quarterly and annual cash flow requirements. The Company has been in compliance with these covenants. Repayments of pre-petition debt obligations may be made only with the approval of the Bankruptcy Court. The Bankruptcy Court has approved payments by the Company with respect to certain pre-petition secured debt obligations in order to provide the holders of such obligations with adequate protection of their interests in their collateral security. These adequate protection payments generally have been in the form of principal payments paid over the remaining lives of the collateral assets in an aggregate amount equal to the determined market value of those assets. The amount by which the original obligation and pre-petition accrued interest exceeds the collateral value is deemed to be a general unsecured claim. These claims are included in 19 liabilities subject to compromise. Interest expense has not been recorded on these obligations for the post-petition period because interest is not - 17 - payable. Interest on undersecured and other unsecured pre-petition debt obligations would have been $7,299,000 in 1993, $7,502,000 in 1992, and $6,751,000 for the post-petition period in 1991. Due to the extenuating circumstances involving both secured and unsecured long-term debt as a result of the chapter 11 filings and the anticipated reorganization, it is not practicable to estimate the fair value of long-term debt which is described below. - 17 - Long-term debt consisted of:
(In thousands of dollars) 1993 1992 ---- ---- 9-1/2% Sinking fund debentures, due 2017 $ 50,000 $ 50,000 Industrial revenue bonds 18,200 18,275 Secured notes 15,005 16,515 Debt of foreign subsidiaries 2,684 4,840 Other 564 621 ------- ------- 86,453 90,251 Less: Current portion 2,737 3,462 Subject to compromise 62,004 61,756 ------- ------- Long-term debt, less current portion $ 21,712 $ 25,033 ======= ======= Unsecured debt included in liabilities subject to compromise consisted of: Sinking fund debentures $ 50,000 $ 50,000 Industrial revenue bonds 7,500 7,500 Unsecured portion of secured notes 4,132 3,884 Other 372 372 ------- ------- $ 62,004 $ 61,756 ======= =======
Interest rates averaged 7% in 1993, 8% in 1992, and 9% in 1991 on the industrial revenue bonds, foreign and other long-term debt, which were to mature at various dates through 2004. Interest rates averaged approximately 11% in 1993, 1992, and 1991 on the secured notes which were due to mature at various dates through 1999. 20 Long-term debt (excluding amounts subject to compromise) is scheduled to mature as follows: $2,737,000 in 1994, $1,901,000 in 1995, $1,640,000 in 1996, $2,225,000 in 1997, and $1,648,000 in 1998. The unsecured portion of - 18 - long-term debt will be resolved in a plan of reorganization. During 1993, 1992, and 1991, the Company paid interest of $2,100,000, $2,700,000, and $5,100,000, respectively. G. INCOME TAXES The Company adopted FAS 109 in 1993. Like FAS 96, FAS 109 is an asset and liability method for accounting for income taxes. Generally, FAS 109 allows for at least the partial recognition of deferred tax assets in the current period for the future benefit of net operating loss carryforwards and items for which expenses have been recognized for financial statement purposes, but will be deductible in future periods. Generally, FAS 96 prohibited any consideration of future events in calculating deferred tax assets. Given the uncertainties surrounding the chapter 11 case, the Company does not believe that recognition of a significant portion of the deferred tax assets relating to the asbestos liability is appropriate at this time. Accordingly, a significant valuation allowance was provided at the time of adoption. As a result, the cumulative effect of this change in accounting for income taxes was not material and prior year financial statements have not been restated to apply the provisions of FAS 109. The effect of adopting FAS 109 on quarterly results in 1993 was also not material. Total income tax benefit for the year ended November 30, 1993 of $1,490,000 consists of $5,000,000 expense from operations and $6,490,000 tax benefit of the cumulative effect of the change in accounting for postretirement benefits. The following is a summary of the components of income taxes (benefit) from operations:
(In thousands of dollars) 1993 1992 1991 ---- ---- ---- Federal - current $12,500 $4,200 $ 900
21 - deferred (11,800) (4,600) 100 Foreign 2,700 2,700 2,300 State and local 1,600 700 (400) -------- -------- -------- $ 5,000 $ 3,000 $ 2,900 ======== ======== ========
- 18 - The significant components of deferred income tax expense (benefit) attributable to income from operations are as follows:
(In thousands of dollars) 1993 1992 1991 ---- ---- ---- Asbestos litigation, net of insurance proceeds $(397,500) $ (1,300) $ 1,500 Change in valuation allowance 404,900 - - Environmental and other claims (14,500) - - Utilization of accounting loss carryforward - (8,300) - Accounting losses for which deferred Federal income tax benefits could not be recognized - - 6,100 Change in Federal income tax rate (3,800) - - Utilization (reversal) of tax credits 1,300 4,100 (2,000) Liquidated operations 400 2,300 (3,600) Depreciation (1,100) (2,300) (1,200) Other (1,500) 900 (700) -------- ------- ------- Deferred tax expense (benefit) $(11,800) $(4,600) $ 100 ======== ======= =======
- 18 - Components of deferred tax balances as of November 30, 1993 are as follows (in thousands of dollars): Deferred tax liabilities: Property, plant and equipment $ (6,863) Prepaid pension (2,457) Other (3,866) -------- Total deferred tax liabilities (13,186) -------- Deferred tax assets: Asbestos liability 525,010 Accrued liabilities (including amounts subject to compromise) 25,742
22 Postretirement benefit liability 7,073 Other 4,848 -------- Total deferred tax assets 562,673 -------- Valuation allowance (519,563) -------- Net deferred tax assets $ 29,924 ========
- 19 - A significant portion of the net deferred tax asset at November 30, 1993 is expected to be recovered through the carryback of amounts which will become deductible when paid. The differences between the total income tax expense from operations and the income tax expense (benefit) computed using the Federal income tax rate were as follows:
(In thousands of dollars) 1993 1992 1991 ---- ---- ---- Computed "expected" tax expense (benefit) $(398,900) $ 10,800 $ (4,400) Change in valuation allowance 404,900 - - Utilization of accounting loss carryforward - (8,300) - Accounting losses for which deferred Federal income tax benefits could not be recognized - - 6,100 Change in Federal income tax rate (3,800) - - Tax rate differential 1,300 600 600 Other 1,500 (100) 600 -------- --------- --------- Total income tax expense $ 5,000 $ 3,000 $ 2,900 ======== ========= =========
The Company received tax refunds in 1992 and 1991 of $1,400,000 and $17,500,000, respectively. The Company paid income taxes in 1993, 1992, and 1991 of $16,500,000, $11,300,000, and $4,700,000, respectively. H. INCOME (LOSS) PER SHARE The calculation of net income (loss) per share is based upon the average number of common shares outstanding assuming the exercise of stock options. 23 The average number of shares used in the computation of net income (loss) per share was 11,030,515 in 1993 and 10,978,432 in 1992 and 1991. - 19 - 24 I. COMMON STOCK OPTIONS At November 30, 1993, there were outstanding common stock options under a 1990 and a 1983 plan each authorizing 450,000 shares. The options expire at various dates through 2000. No options could be exercised as of November 30, 1993. Stock option transactions are summarized as follows:
Shares Option Price ------ ------------ Outstanding at November 30, 1990 762,600 $ 2.50 to $24.25 Expired (69,000) $ 2.50 to $24.25 ------- ------- Outstanding at November 30, 1991 693,600 $ 2.50 to $14.50 Expired (96,600) $ 2.50 to $14.50 ------- ------- Outstanding at November 30, 1992 597,000 $ 2.50 TO $14.25 Exercised (62,500) $ 2.50 Expired (15,000) $ 2.50 ------- ------- Outstanding at November 30, 1993 519,500 $ 2.50 TO $14.25
There were 259,274 shares available for future grants at November 30, 1993. - 19 - 25 J. RETIREMENT BENEFIT PLANS Employees of the Company and its subsidiaries are covered by various pension or profit sharing retirement plans. The cost of providing retirement benefits was $849,000 in 1993, $1,734,000 in 1992, and $2,015,000 in 1991. Plan benefits for salaried employees are based primarily on employees' highest five consecutive years' earnings during the last ten years of employment. Plan benefits for hourly employees are based on a dollar unit multiplied by the number of service years. - 19 - Net periodic pension expense for the Company's defined benefit plans included the following components:
(In thousands of dollars) 1993 1992 1991 ---- ---- ---- Service cost - benefits earned during the period $ 3,924 $ 3,204 $ 3,329 Interest cost on projected benefit obligation 12,490 12,228 11,533 Actual gain on plan assets (20,658) (26,536) (29,360) Net amortization and deferral 3,943 11,978 15,763 -------- -------- -------- Net periodic pension expense $ (301) $ 874 $ 1,265 ======== ======== ========
The plans' assets consist primarily of listed equity securities and publicly traded notes and bonds. The actual net return on plan assets was 11.3% in 1993, 15.4% in 1992, and 18.8% in 1991. The following table sets forth the plans' funded status and amounts recognized in the Company's Consolidated Balance Sheet at November 30:
(In thousands of dollars) 1993 1992 ---- ---- Actuarial present value of: Vested benefit obligation $(156,059) $(134,792) ========= ========= Accumulated benefit obligation $(161,674) $(140,477) ========= ========= Projected benefit obligation $(176,875) $(156,713) Plan assets at fair value 188,380 178,081 --------- ---------
26 Projected benefit obligation less than plan assets 11,505 21,368 Unrecognized net (gain) loss 7,822 (1,905) Unrecognized prior service cost (benefit) (754) 56 Unrecognized net asset at November 30 (11,554) (12,739) --------- --------- Prepaid pension cost recognized in Consolidated Balance Sheet $ 7,019 $ 6,780 ========= =========
The discount rate and weighted average rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.0% and 4.2%, and 8.0% and 6.2%, respectively, at November 30, 1993 and 1992, respectively. The expected long-term rate of return on assets was 9.0% during 1993 and 1992. The Company's funding policy is to fund amounts on an actuarial basis to provide for current and future benefits in accordance with the funding guidelines of ERISA. K. EMPLOYEE BENEFITS OTHER THAN PENSIONS In addition to providing pension retirement benefits, the Company makes health care and life insurance benefits available to certain retired employees on a limited basis. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Eligible employees may elect to be covered by these health and life insurance benefits if they reach early or normal retirement age while working for the Company. In most cases a retiree contribution for health insurance coverage is required. The Company funds these benefit costs primarily on a pay-as-you-go basis. In the fourth quarter of 1993, the Company adopted the provisions of FAS 106. The Company elected to recognize the accumulated postretirement benefit obligation of $19,088,000 retroactively to December 1, 1992 as an accounting change. On an aftertax basis, this charge was $12,598,000 or $1.14 per share. Previously reported quarterly results in 1993 have been restated to 27 reflect the adoption of FAS 106 as of December 1, 1992. The adoption of FAS 106 had no impact on consolidated cash flows. In 1992 and - 20 - 1991, prior to adoption of FAS 106, the cost of retiree health care and life insurance benefits, net of retiree contributions, was approximately $911,000 and $503,000, respectively. The components of expense for 1993 were as follows (in thousands of dollars): Service cost - benefits earned during the period $ 467 Interest cost on accumulated postretirement benefit obligation 1,394 ------- Net postretirement benefit expense $ 1,861 =======
The accumulated postretirement benefit obligation at November 30, 1993 consisted of the following components:
(In thousands of dollars) Retirees and dependents $13,545 Eligible active participants 2,011 Other active participants 6,743 ------- Accumulated postretirement benefit obligation 22,299 Unrecognized net loss (2,090) ------- Accrued postretirement benefit cost $20,209 =======
Benefit costs were estimated assuming retiree health care costs would initially increase at a 13% annual rate which - 20 - decreases to an ultimate rate of 6% in 7 years. If this annual trend rate would increase by 1%, the accumulated postretirement obligation as of November 30, 1993 would increase by $2,375,000 with a corresponding increase of $102,000 in the postretirement benefit expense in 1993. The discount rate used in determining the accumulated postretirement obligation at December 1, 1992 was 7.5%. At November 30, 1993, the discount rate was 6.5%. 28 Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," will require companies to accrue postemployment benefits if the obligation is attributable to employees' services already rendered, employees' rights to those benefits accumulate or - 21 - vest, payment of benefits is probable and the amount of the benefits can be reasonably estimated. The cost of the Company's postemployment benefits is currently recognized as incurred. When adopted, the Company believes the new standard will not have a material effect on the results of its operations or financial position. L. ASBESTOS LITIGATION AND CLAIMS On November 9, 1993, the Company reached agreement on the principal elements of a joint plan of reorganization (the "Plan") with the Injury Claimants' Committee ("ICC") and the Legal Representative for Future Claimants ("RFC"). The agreement, reached with the assistance of a court-appointed mediator, provides, among other things, that all present and future asbestos-related personal injury claims will be channeled to and resolved by an independently administered claims trust. Similar plans of reorganization have been confirmed in the chapter 11 cases of certain other companies involved in asbestos litigation. The treatment under the Plan of asbestos property damage, lead and silica claims is to be negotiated. Implementation of the agreement and the treatment of claims and interests as provided therein (including asbestos-related personal injury claims), is subject to confirmation of the Plan in accordance with the provisions of the Bankruptcy Code. In addition, a prerequisite to the effectiveness of the Plan is the issuance by the Bankruptcy Court of an order permanently prohibiting and enjoining all holders of asbestos- related personal injury claims from asserting or pursuing their claims against the reorganized Company; instead requiring that all such claims be asserted against and resolved by the independently administered trust. Parties in interest in the chapter 11 case may challenge the Plan and the basis therefor. While the 29 Company cannot predict when the Plan will be confirmed or become effective, it intends to pursue confirmation vigorously. The asbestos-related claims, which consist of personal injury and property damage claims, are discussed below. - 21 - Personal Injury Prior to its chapter 11 filing, the Company had been named as a co-defendant in a substantial number of lawsuits brought by present or former insulators, shipyard workers, steel workers, tire workers and other persons alleging damage to their health from exposure to dust from asbestos-containing industrial insulation products. As a result of the chapter 11 filing by the Company, all such litigation is automatically stayed pursuant to section 362 of the Bankruptcy Code. As of the petition date, there were approximately 67,800 asbestos-related personal injury claims outstanding against the Company. In fiscal 1991, prior to the imposition of the automatic stay on January 7, 1991, approximately 1,100 new claims were filed and the Company disposed of 1,000 claims. The average cost per disposed claim, excluding legal fees, was approximately $6,800. The total cost of this litigation in fiscal 1991, prior to the imposition of the stay, was $9,700,000. The 1991 settlement of a claim with an insurance company and a favorable ruling from the Bankruptcy Court resulted in the reimbursement to the Company of $4,377,000 in 1992 and $5,309,000 in 1991 for asbestos-related losses and expenses paid in earlier years. At November 30, 1993, $314,000 of insurance coverage remained as due from insurance carriers with respect to asbestos-related claims. The Bankruptcy Court set September 30, 1992 as the bar date for present asbestos-related claims. The Company implemented the Court-approved notice 30 plan by sending out approximately 187,000 proof of claim forms to known claimants and their attorneys; by publishing the notice of the bar date twice in approximately 88 newspapers and other periodicals; and by providing visual and/or audio messages concerning such bar date to approximately 400 radio and 300 television stations to be used in public service announcements. - 21 - All persons with a pre-petition asbestos-related claim were required to file a proof of claim by the bar date in order to participate in the reorganization cases. Approximately 160,000 proofs of claim were filed alleging personal injury. The Company believes that approximately 11,000 of these claims are duplicates or were filed by persons whose lawsuits were previously closed. The vast majority of persons who had filed pre-petition lawsuits against the Company, which were pending as of the petition date, filed proofs of claim in the reorganization cases. Therefore, approximately 81,200 previously undisclosed claims were filed as a result of the bar date. The Company believes that most of the approximately 40,000 claimants who in 1991, pursuant to a previous Bankruptcy Court order, notified the Company of their intent to assert a claim against the Company, also filed claims pursuant to the bar date. The Company expects that additional asbestos-related personal injury claims will arise for several decades into the future. Holders of these claims were not required to file claims pursuant to the bar date. The Company cannot definitively estimate the number of such future claims at this time. The agreement on the principal elements of the Plan contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. This may moot the Company's motion which sought authority to collect medical, occupational and product exposure information to evaluate the extent of such liability. No decision has yet been rendered with respect to this motion that was submitted to the Bankruptcy Court in April 1992. 31 The mediation to arrive at a consensual plan of reorganization, that began with the appointment of a mediator by the Bankruptcy Court in June 1992, is ongoing. The agreement on the principal elements of the Plan, which was reached with the assistance of the mediator, also provides that the Company, the ICC and the RFC will negotiate with the Unsecured Creditors' Committee and the Equity Security Holders' Committee, the other statutory committees appointed in the Company's chapter 11 case, with the goal of developing a consensual plan of reorganization. These negotiations have commenced under - 22 - the direction of the mediator appointed by the Bankruptcy Court and the Company intends to proceed with these negotiations expeditiously. Many of the asbestos-related claims filed in the chapter 11 case do not provide sufficient information to enable the Company to determine whether or not it has liability for the claim or to definitively value any such liability. Similarly, the Company is not able to project precisely the number and value of future claims. The Company, however, is certain that it has significant liability with respect to the 160,000 proofs of claim which were filed against the Company pursuant to the September 30, 1992 bar date and which allege asbestos-related personal injury. The Company also is certain that there is significant liability with respect to future asbestos-related personal injury claims. After considering the significant costs that likely would be incurred in litigating the extent and nature of its asbestos-related personal injury liability, the uncertainty as to the outcome of such an exercise, the need to conserve the estate's assets for every creditor, and the benefits that would accrue to the Company's operations, customers, vendors, employees and host communities from the Company's timely emergence from chapter 11, the Board of Directors and management concluded that the settlement contemplated by the agreement on the principal elements of the Plan discussed in this footnote is in the best interests of the Company. As a consequence of the proposed settlement, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise to $1.5 billion. 32 Property Damage There were forty-one lawsuits pending against the Company at the end of fiscal 1991 resulting from the presence of asbestos-containing products in buildings. The pending lawsuits typically named numerous defendants, were filed in both state and federal courts, and were brought by school districts, cities, states, counties, universities, hospitals, a public library and commercial building owners. The lawsuits typically demanded compensation for - 22 - any costs incurred in identifying, repairing, encapsulating or removing asbestos-containing products, or sought to have the defendants do these things directly. Many lawsuits also sought punitive damages. At least three of the pending cases have been certified as class actions and class certification has been sought by the plaintiffs in three other cases. Prior to filing its chapter 11 petition, the - 22 - Company settled seven building related cases for less than $22,000 in the aggregate. Approximately 1,000 proofs of claim alleging such property damage claims were filed in the chapter 11 cases pursuant to the bar date. These claims include most, if not all, of the lawsuits described above that were pending on the petition date. Many of the other claims also appear to be asserted by claimants similar to those which had commenced pre-petition lawsuits. The agreement on the principal elements of the Plan provide that the treatment under a plan of reorganization of the asbestos property damage claims asserted against the Company, including both the pre-petition lawsuits and the proofs of claim filed pursuant to the bar date, will be negotiated with the assistance of the mediator as discussed above. M. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS 33 The Bankruptcy Court established a bar date of October 31, 1991 for all pre-petition claims against the Company other than those arising from the sale of asbestos-containing products. Pursuant to the general claims bar date, numerous proofs of claim were filed alleging a right to payment from the estate due to litigation matters. Certain of such claims are discussed below. Environmental The Company received 1,102 proofs of claim alleging a right to payment because of environmental matters. These claims, relating primarily to - 23 - various Superfund sites, sought payment aggregating $27.9 billion, of which readily identifiable duplicate claims approximated $27.5 billion. The Company is attempting to resolve the majority of these environmental claims through negotiations with the United States Environmental Protection Agency ("USEPA") and the United States Department of Interior ("DOI"). Pursuant to a tentative agreement between the Company and the USEPA (which is subject to definitive documentation and appropriate approvals), the USEPA would be afforded an allowed, pre-petition, general unsecured claim of approximately $30.3 million in full satisfaction of all of the Company's alleged liability at most of the Superfund sites. In exchange for the allowed claim, the USEPA would release the Company from liability and grant it protection from claims of other parties that may be liable at the sites so that the Company's settlement will completely resolve all claims with respect to these sites. With respect to the small number of sites as to which the USEPA believes that it does not have sufficient information to negotiate a meaningful settlement with the Company, the tentative agreement provides a process which would permit any liability with respect to these sites to be resolved in the future when additional information is available. Pursuant to this process, the Company would retain all of its rights and defenses as to these sites and settle or litigate its liability at such future time. The tentative agreement provides that any future liability of the Company, when fixed, 34 would be satisfied with the same type and amount of consideration that pre-petition, general unsecured creditors receive pursuant to a confirmed plan of reorganization in the Company's chapter 11 case. The proposed settlement will be subject to the approval of the Bankruptcy Court. The negotiations with the DOI to resolve the Company's liability for any natural resource damage that may have occurred at the Superfund sites, on similar terms, have not progressed as far. Natural resource damage is damage caused to the environment or to plants or animals by the release of hazardous materials at Superfund sites. At this stage of such negotiations, the DOI has demanded an allowed pre-petition, general unsecured claim in the amount of $7.2 million. Negotiations are continuing. - 23 - The Company believes that the negotiations have progressed sufficiently to enable it to prepare a proposed settlement agreement resolving the environmental and natural resource damage claims. Until such agreement is completed and all requisite approvals are obtained, no party is in any way bound to the terms of the settlement. The Company believes, however, that the terms and provisions of the tentative agreement with the USEPA are fair and equitable and that a settlement, as contemplated thereby, is in the Company's best interests. Lead Chemicals The Bankruptcy Court received 131 timely proofs of claim asserting liability based on personal injury or property damage from lead chemicals allegedly manufactured and sold by the Company. Three additional claims were filed in - 23 - November 1993, after the 1991 bar date. While some of the timely filed claims did not specify an amount, those that did sought an aggregate of $165 million. The late filed claims seek $50 million in damages. All of the timely claims which specified an amount of damages have been fully withdrawn without the allowance of any amount by the Company. 35 There have been significant legal rulings in the last year in three lead paint-based lawsuits that were brought against the Company pre-petition and that have been proceeding against other defendants even though they were stayed against the Company as a result of the commencement of its chapter 11 case. Specifically, those counts alleging negligence and strict product liability in the suit brought by the City of New York seeking indemnity for costs New York had incurred and would incur because residents of city-owned housing ingested lead- containing paint in that housing, were dismissed. Certain other counts in that suit are still pending. The City of New York did not file a timely proof of claim against the Company before the October 31, 1991 bar date for such claims, nor did the co-defendants in such suit. However, the late filed claims discussed above were filed in connection with the suit by the City of New York. - 24 - A suit brought by the City of Philadelphia on behalf of a requested class of all cities in the United States with more than 100,000 residents for inspection, testing, monitoring or abatement costs related to the presence of lead paint in buildings in the cities was dismissed in its entirety. An amended complaint filed by the same plaintiffs was also dismissed, and the dismissal was affirmed by a United States Circuit Court of Appeals. Finally, the Federal District Judge presiding over a lead-related personal injury suit in Boston, Massachusetts that was among the first such suits filed against manufacturers of lead pigments, has dismissed the "market share" count in the suit. This legal theory would impose liability on all manufacturers of lead pigments in the marketplace in a case in which the plaintiff cannot identify the particular manufacturer that injured the plaintiff. Following the dismissal of the market share theory, the Court granted motions for summary judgment in favor of defendants disposing of the remainder of the case. The complete dismissal of this case has also been affirmed by a United States Circuit Court of Appeals. Following the withdrawals and dismissals discussed above, 128 of the 134 proofs of claim referred to above remain outstanding. The Company has 36 demanded that the claimants withdraw several of these pending claims. It also believes that it has valid grounds to object to the allowance of the remaining claims. As mentioned above, the treatment of present and future lead claims under a plan of reorganization remains a subject of the mediation. Other Litigation The Company received ninety-two claims arising out of litigation matters other than those related to lead, asbestos or environmental issues. These claims aggregate approximately $1.1 billion. The two largest claims appear to be duplicates, although the claimants have - 24 - denied that they are. They arise from the suit filed in 1990 by the Company's majority owned subsidiary, American Imaging Services, Inc., and such subsidiary's president and minority shareholder against the Company and two of its officers in the United States District Court for the Northern District of Texas (the "District Court Action"). Subsequent to the chapter 11 filing, the plaintiffs amended the complaint to add a third officer of the Company as a defendant and also filed a separate action against such third officer alleging the same claims (the "Second District Court Action"). These claims for $500 million each allege numerous breaches of fiduciary duty and a usurpation and waste of the subsidiary's assets. As a result of the chapter 11 filing, the District Court Action was stayed against the Company. Additionally, subsequent to the chapter 11 filing, at the request of the Company, the Bankruptcy Court issued an order enjoining the plaintiffs from prosecuting such litigation against any of the Company's three officers. In August 1993, the Company filed in the Bankruptcy Court an objection to the claims filed against the Company and also asserted various counterclaims (the "Claims Objection"). Concurrently, the Company also filed with the Bankruptcy Court a motion requesting that the Bankruptcy Court consolidate the District Court Action and the Second District Court Action with the 37 Claims Objection and to allow such consolidated proceeding to proceed before the Bankruptcy Court. By order entered on January 24, 1994, the Bankruptcy Court denied the Company's motion and - 24 - ordered that all claims asserted by the parties be resolved in the Texas District Court. The Bankruptcy Court also lifted the automatic stay against the Company and vacated the injunction with respect to the officers so as to permit the litigation to proceed. Thirty-two of the other litigation claims filed against the Company were from individuals alleging personal injury as a result of exposure to diatomaceous earth products manufactured and sold by the Company. Each sought $200,000 as a general unsecured claim. Each claim also included a medical report from a physician diagnosing an asbestos-related disease or condition. Each of these claimants also subsequently filed a proof of claim in the amount of $50,000 - 25 - alleging an asbestos-related disease or condition. In light of the information contained in the medical reports, the Company filed objections to each of the thirty-two claims alleging personal injury as a result of exposure to diatomaceous earth. The claimants did not contest the objections and the claims were dismissed by the Bankruptcy Court. The thirty-two duplicate claims that allege an asbestos-related disease or condition are still pending. Summary The Company and the individual defendants who were named in some lawsuits intend to defend all litigation claims vigorously in the manner permitted by the Bankruptcy Code and/or applicable law. All pre-petition claims against the Company arising from litigation must be liquidated or otherwise addressed in the context of the chapter 11 cases. Further, all such claims against the Company will be resolved in a plan of reorganization. During the pendency of the chapter 11 cases, any unresolved litigation with respect to pre-petition 38 claims can proceed against the Company only with the express permission of the Bankruptcy Court. The Company has resolved most of the litigation claims that were asserted pursuant to the October 31, 1991 bar date for claims other than those arising from the sale of asbestos-containing products. However, as pointed out above, the two largest litigation claims, which together seek $1.0 billion, and certain lead chemical claims are still pending. The Company has filed objections to certain of these litigation-based claims which have not been resolved, seeking to reduce the amount of such claims or eliminate them entirely. The Company anticipates filing additional objections to other such claims if they cannot be resolved through negotiation. These objections will be vigorously litigated by the Company pursuant to the provisions of the Bankruptcy Code and applicable law. The eventual outcome of the environmental and other litigation claims described herein cannot be reasonably predicted due to numerous uncertainties - 25 - that are inherent in the reorganization process. However, negotiations concerning environmental claims and attempts to negotiate settlements of other litigation claims have progressed to a point in 1993 that enabled the Company to record a provision of $41.4 million for these claims. In addition, the Company may have insurance coverage for certain of these claims and other factual and legal defenses available to it. N. INDUSTRY SEGMENT INFORMATION A general description of the products manufactured by the Company's three industry segments is: Industrial Diatomaceous earth products, rubber products, rare metals, fiberglass reinforced plastic parts, industrial chemicals and other industrial products. Machinery 39 Earth moving machines, heavy-duty forklift trucks, aerospace and defense parts, metal cleaning and finishing systems, aluminum castings and related products. Automotive Mechanical, structural, and trim parts for passenger cars, trucks, vans and utility vehicles for the OEM and replacement markets. Sales between segments and foreign operations were not material. Consolidated sales to Ford Motor Company amounted to $148,000,000 in 1993, $132,700,000 in 1992, and $116,400,000 in 1991. Consolidated sales to General Motors Corporation amounted to $73,100,000 in 1993 and $64,500,000 in 1992. No other customer accounted for 10% or more of consolidated sales. Consolidated export sales were $73,200,000 in 1993 and $64,700,000 in 1992. Export sales did not exceed 10% of consolidated sales in 1991. - 25 - 40 INDUSTRY SEGMENT INFORMATION Years ended November 30 (In millions of dollars)
Industrial Machinery Automotive 1993 1992 1991 1993 1992 1991 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- ---- ---- Sales $132.6 $122.1 $117.3 $171.7 $151.4 $184.1 $357.2 $338.0 $297.2 ====== ====== ====== ====== ====== ====== ====== ====== ====== Operating income 15.0 13.1 13.2 9.1 14.8 17.6 37.4 36.2 7.9 ====== ====== ====== ====== ====== ====== ====== ====== ====== Identifiable assets 72.7 70.8 74.8 92.8 78.6 84.0 168.2 163.6 166.4 ====== ====== ====== ====== ====== ====== ====== ====== ====== Depreciation and 4.9 4.7 5.0 3.4 3.5 3.3 16.2 16.2 15.6 amortization ====== ====== ====== ====== ====== ====== ====== ====== ====== Capital expenditures 5.6 4.6 5.1 7.4 4.5 4.3 15.4 12.4 14.7 ====== ====== ====== ====== ====== ====== ====== ====== ====== Segment Total Corporate Total 1993 1992 1991 1993 1992 1991 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- ---- ---- Sales $661.5 $611.5 $598.6 $ - $ - $ - $661.5 $611.5 $598.6 ====== ====== ====== ====== ====== ====== ====== ====== ====== Operating income (loss) 61.5 64.1 38.7 (17.7) (17.5) (19.8) 43.8 46.6 18.9 ====== ====== ====== ====== ====== ====== ====== ====== ====== Provision for asbestos (1,135.5) - - (1,135.5) - - Litigation Provision for environmental (41.4) (2.0) (.5) (41.4) (2.0) (.5) and other claims Loss on disposition of - - (12.3) - - (12.3) operations Interest expense (2.1) (2.7) (5.9) (2.1) (2.7) (5.9) Other expense (.2) (1.0) (1.0) (.2) (1.0) (1.0) Reorganization items (4.4) (9.0) (12.1) (4.4) (9.0) (12.1) ====== ====== ====== ------ ------ ------ Income (loss) before taxes (1,139.8)(1) 31.9 (12.9) ====== ====== ====== ====== ====== ====== ====== ====== ====== Identifiable assets 333.7 313.0 325.2 125.7 106.4 73.8 459.4 419.4 399.0 ====== ====== ====== ====== ====== ====== ====== ====== ====== Depreciation and 24.5 24.4 23.9 .5 .3 .2 25.0 24.7 24.1 amortization ====== ====== ====== ====== ====== ====== ====== ====== ====== Capital expenditures 28.4 21.5 24.1 .1 .1 .2 28.5 21.6 24.3 ====== ====== ====== ====== ====== ====== ====== ====== ====== (1) Before cumulative effect of accounting change.
- 26 - 41 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991) as of November 30, 1993 and 1992, and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended November 30, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended November 30, 1993 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the consolidated financial statements, Eagle-Picher Industries, Inc. (the Company) and seven of its domestic subsidiaries, each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court on January 7, 1991. Although the Company and its operating subsidiaries are currently operating their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court, the continuation of their businesses as going concerns is contingent upon, among other things, the ability to formulate a plan of reorganization which will gain approval of the creditors and confirmation by the Bankruptcy Court. The filing under chapter 11 and the continued uncertainty related to claims associated with the Company's sale of asbestos products and certain other litigation as discussed in the following paragraph, raised substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that may be required in connection with restructuring the Company and its subsidiaries as they reorganize under chapter 11 of the United States Bankruptcy Code. As discussed in Notes B and L to the consolidated financial statements, the accompanying consolidated financial statements include an estimated liability related to claims associated with the Company's sale of asbestos products. The final resolution of actual amounts, however, is dependent upon future events, the outcome of which is not fully determinable at the present time. In addition, as discussed in Note M, the Company is a defendant in various other litigation. Although provisions have been made for these matters, the final outcomes and their effect on the Company's consolidated financial statements are not presently determinable. - 27 - 42 As discussed in Notes A and K, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, in 1993. As discussed in Notes A and G, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's SFAS No. 109, Accounting for Income Taxes. /s/ KPMG Peat Marwick KPMG Peat Marwick Cincinnati, Ohio February 2, 1994 - 27 - 43 Report of Management The Company's management is responsible for the preparation and presentation of the consolidated financial statements and related financial data included in this annual report. The financial information has been prepared in conformity with generally accepted accounting principles and as such includes amounts based on judgments and estimates made by management. The Company maintains a system of internal accounting controls designed to provide reasonable assurance at reasonable costs that assets are safeguarded from loss or unauthorized use, and that the financial records may be relied upon for the preparation of the consolidated financial statements. The consolidated financial statements have been audited by our independent auditors, KPMG Peat Marwick. Their audit is conducted in accordance with generally accepted auditing standards and provides an independent assessment as to the fair presentation, in all material respects, of the Company's consolidated financial statements. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management and the independent auditors to review internal accounting controls and the quality of financial reporting. Financial management and the independent auditors have full and free access to the Audit Committee. /s/ Thomas E. Petry Thomas E. Petry Chairman, President and Chief Executive Officer /s/ David N. Hall David N. Hall Senior Vice President - Finance Cincinnati, Ohio February 2, 1994 - 28 - 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS 1993 COMPARED TO 1992 On an increase of 8% in sales, operating income decreased to $43.8 million in 1993 from $46.6 million in 1992. Comparative sales volume by industry segment showed an increase of 9% in the Industrial segment, an increase of 13% in the Machinery segment, and an increase of 6% in the Automotive segment. Operating income by industry segment showed an increase of 15% in the Industrial segment, a decrease of 39% in the Machinery segment, and an increase of 3% in the Automotive segment. The decrease in operating income in 1993 is entirely attributable to the Machinery segment and resulted primarily from start-up costs associated with the production of a new line of heavy-duty forklift trucks. Difficulties have been encountered in the start-up process in achieving manufacturing efficiencies and meeting production schedules. In the Industrial segment, the majority of the increase in sales and operating income was attributable to the departments which produce isotopically pure boron for defense and commercial nuclear applications and a wide range of super clean containers used in environmental testing which meet strict EPA protocols. In the Automotive segment an increase in demand in the domestic auto market due to improving economic conditions offset the effects of a severe recession in both the European and Japanese markets. However, the Automotive Group continues to face severe pricing pressures. In November 1993, the Company reached an agreement on the principal elements of a plan of reorganization that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company recorded a provision of approximately $1.1 billion to increase the existing liability on the balance sheet to $1.5 billion. In addition, as a result of the Company's negotiations concerning environmental claims and attempts to negotiate settlements of other litigation claims, a provision of $41.4 million was made for environmental and other litigation claims, which increased accrued liabilities subject to compromise to $51.4 million. 45 - 28 - Interest expense decreased to $2.1 million from $2.7 million due to lower interest rates charged on variable-rate debt and the repayment of certain secured debt in November 1992, which was approved by the Bankruptcy Court in conjunction with the debtor in possession financing agreement. The components of reorganization items are described in Note B. The primary components of income tax provision are described in Note G. During the fourth quarter of 1993, the Company elected to recognize the accumulated postretirement benefit obligation of $19.1 million retroactively to December 1, 1992 as a cumulative effect of an accounting change. On an aftertax basis, this charge was $12.6 million. 1992 COMPARED TO 1991 On a modest increase of 2% in sales, operating income in 1992 increased to $46.6 million from $18.8 million in 1991. During the fourth quarter of 1991 the Company closed the Mat Division. In 1991, the Mat Division had sales of $23.1 million and an operating loss of $5.8 million. Excluding this operation, comparative sales volume by industry segment showed an increase of 5% in the Industrial segment, a decrease of 18% in the Machinery segment, and an increase of 23% in the Automotive segment. Operating income by industry segment showed a decrease of 3% for the Industrial segment, a decrease of 16% for the Machinery segment, and an increase of 171% for the Automotive segment after excluding the Mat Division. The increase in operating income in 1992, all attributable to the Automotive segment, was achieved in the face of the most severe pricing and competitive pressures ever experienced by the automotive supplier base. There were several reasons for the improved performance of the Automotive segment in 1992: 1) continued success in penetrating the light truck market in North America; 2) continued implementation of cost reduction programs at all locations that resulted in reduced breakeven levels; and 3) continued development of new business in all major world automotive markets (North America, Europe, Japan, and Korea). In the Industrial segment, a slight increase in sales produced level operating 46 income in 1992 compared to 1991. In the Machinery segment, the large decline - 29 - in sales and operating income reflected the weakness in the defense, capital equipment and worldwide construction markets. The Company did not dispose of any operations in 1992. In 1991, there was a $12.3 million loss on the sale or disposition of operations of which $10.0 million was attributable to the closure of the Mat Division. Interest expense decreased to $2.7 million from $5.9 million because the Bankruptcy Court approved partial payment of secured debt as part of the debtor in possession financing agreements and the Company has not accrued interest on unsecured or undersecured debt since the chapter 11 petitions were filed on January 7, 1991. The components of reorganization items are described in Note B. The primary component of the income tax provision in 1992 was foreign taxes. INDUSTRY SEGMENT DATA Industry segment data for 1993, 1992 and 1991 is summarized on page 26. FINANCIAL CONDITION The filing of the petitions for reorganization under chapter 11 on January 7, 1991 had a significant positive impact on the Company's liquidity. The filing stayed all litigation against the Company with respect to pre-petition claims and reduced the cash drain for asbestos litigation. In 1993, the Company increased the amount of its asbestos liability to $1.5 billion and the amount of accrued liabilities subject to compromise, which includes environmental and other litigation claims, to $51.4 million. These and the other liabilities subject to compromise have been recorded based on the expected amount of the allowed claims, not the amounts of consideration that such allowed claims may receive under a plan of reorganization. 47 During 1993, the Company generated $37.7 million from operating activities while it used $28.2 million for investing activities (primarily capital expenditures) and $3.0 million - 29 - for financing activities. These activities resulted in an overall increase in cash of $6.5 million in 1993. In October 1992, the Bankruptcy Court approved a new debtor in possession financing agreement which provides the Company with a $40.0 million committed revolving credit facility. At November 30, 1993, $34.1 million in letters of credit were outstanding under the facility leaving the Company with $5.9 million in available borrowing capacity. There were no cash borrowings in 1993 under this facility. As of November 30, 1993, the Company had $86.5 million of long-term debt versus $90.3 million at November 30, 1992. The disposition of unsecured debt of $62.0 million at November 30, 1993 will be resolved in a plan of reorganization in the chapter 11 cases. Capital expenditures were $28.5 million in 1993 compared to $21.6 million in 1992. The cost of reorganization items was $4.3 million in 1993 compared to $9.0 million in 1992. While the Company is reorganizing under chapter 11, it is prohibited from paying interest or principal on pre-petition obligations without the approval of the Bankruptcy Court. To the extent cash generated from operations exceeds capital expenditures, working capital requirements, approved payments of secured debt and administrative expenses of the reorganization, the Company will continue to accumulate cash. Consequently, the liquidity of the Company should improve. Although the Company reached an agreement with the Injury Claimants' Committee and the Legal Representative for Future Claimants on the principal elements of a plan of reorganization in November 1993, negotiations remain with other parties before a consensual plan can be filed with the Bankruptcy Court, and 48 the timing of confirmation of any plan is unpredictable. However, the Company intends to propose a reorganization plan that will discharge its pre-petition liabilities (liabilities subject to compromise), provide the reorganized Company with a capital structure appropriate for an industrial products - 30 - company and enable the Company to obtain financing in the credit and debt markets on an unsecured basis. SELECTED FINANCIAL DATA (Unaudited) (In thousands of dollars, except per share)
- ----------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 - ----------------------------------------------------------------------------------- Net Sales $661,452 $611,458 $598,631 $699,347 $729,915 - ----------------------------------------------------------------------------------- Income (Loss) Before Reorganization Items and Taxes (1,135,426)(1) 40,924 (788) 44,060 56,314 - ----------------------------------------------------------------------------------- Reorganization Items (2) (4,344) (9,038) (12,124) - - - ----------------------------------------------------------------------------------- Income (Loss) Before Taxes (1,139,770) 31,886 (12,912) 44,060 56,314 - ----------------------------------------------------------------------------------- Net Income (Loss) (1,144,770)(3) 28,886 (15,812) 39,360 53,814 - ----------------------------------------------------------------------------------- Net Income (Loss) Per Share (103.78)(3) 2.63 (1.44) 3.64 5.04 - ----------------------------------------------------------------------------------- Common Dividend Per Share - - - - - - ----------------------------------------------------------------------------------- Total Assets 459,360 419,435 398,990 413,695 478,954 - ----------------------------------------------------------------------------------- Long-Term Debt, less current portion $21,712(4) $25,033(4)$ 32,001(4) $ 3,618(5) $100,693 - ----------------------------------------------------------------------------------- (1) Includes a provision for asbestos litigation of $1.135 billion and a provision for environmental and other claims of $41.4 million in 1993. (2) On January 7, 1991, the Company and seven of its domestic subsidiaries each filed a petition for relief under chapter 11 of the U.S. Bankruptcy Code. (3) Excludes cumulative adjustment for adoption of FAS 106 in 1993 which decreased net income by $12.6 million ($1.14 per share). (4) Long-term debt of $62.0 million in 1993 and $61.7 million in 1992 and 1991 has been included in liabilities subject to compromise. (5) Long-term debt totaling $91.1 million for legal entities in chapter 11 was classified as current due to the chapter 11 filings.
- 31 - EX-21 4 EXHIBIT 1 EXHIBIT 21 EAGLE-PICHER INDUSTRIES, INC. SUBSIDIARIES OF THE REGISTRANT
REGISTRANT'S VOTING POWER --------------- 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%
EX-23 5 EXHIBIT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors Eagle-Picher Industries, Inc.: We consent to incorporation by reference in Registration Statement Nos. 2-50595, 33-5792, 33-31975 and 33-37518 on Form S-8 of Eagle-Picher Industries, Inc. of our reports, with explanatory paragraphs, dated February 2, 1994 relating to the consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991) as of November 30, 1993 and 1992, and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows and related schedules for each of the years in the three-year period ended November 30, 1993, which reports appear in the Company's 1993 Annual Report on Form 10-K and in the 1993 Annual Report to Shareholders, which is incorporated by reference in the Company's 1993 Annual Report on Form 10-K. Our report on the consolidated financial statements refers to changes in accounting for postretirement benefits other than pensions and in accounting for income taxes in 1993. /s/ KPMG Peat Marwick Cincinnati, Ohio February 25, 1994 EX-24.A 6 EXHIBIT 1 EXHIBIT 24(A) POWER OF ATTORNEY Each of the undersigned officers and/or directors of Eagle-Picher Industries, Inc. hereby consents to and appoints Thomas E. Petry and David W. Matthews, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1993 Annual Report on Form 10-K of Eagle-Picher Industries, Inc., a corporation organized and existing under the laws of the State of Ohio, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, each of the undersigned has hereunto set his hand on this 2nd day of February, 1994. /s/ THOMAS E. PETRY Thomas E. Petry Director, Chairman of the Board, President and Chief Executive Officer /s/ CARROLL D. CURLESS Carroll D. Curless Vice President and Controller (Principal Accounting Officer) /s/ PAUL W. CHRISTENSEN, JR. Paul W. Christensen, Jr. Director /s/ MELVIN F. CHUBB, JR. Melvin F. Chubb, Jr. Director /s/ V. ANDERSON COOMBE V. Anderson Coombe Director /s/ ROGER L. HOWE Roger L. Howe Director /s/ DAVID N. HALL David N. Hall Senior Vice President-Finance (Principal Financial Officer) /s/ DANIEL W. LEBLOND Daniel W. LeBlond Director /s/ POWELL MCHENRY Powell McHenry Director /s/ EUGENE P. RUEHLMANN Eugene P. Ruehlmann Director EX-24.B 7 EXHIBIT 1 EXHIBIT 24(B) POWER OF ATTORNEY The undersigned director of Eagle-Picher Industries, Inc. hereby consents to and appoints Thomas E. Petry and David W. Matthews, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1993 Annual Report on Form 10-K of Eagle-Picher Industries, Inc., a corporation organized and existing under the laws of the State of Ohio, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, the undersigned has hereunto set his hand on this 24th day of February, 1994. /s/ CHARLES S. MECHEM, JR. Charles S. Mechem, Jr. Director EX-99 8 EXHIBIT 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 Galena, Kansas Joplin, Missouri (5) Seneca, Missouri Stella, Missouri Socorro, New Mexico Grove, Oklahoma FABRICON PRODUCTS 1721 West Pleasant Avenue River Rouge, Michigan 48218 River Rouge, Michigan Riverton, New Jersey Philadelphia, Pennsylvania HILLSDALE TOOL & MANUFACTURING CO. 135 E. South Street Hillsdale, Michigan 49242 Hamilton, Indiana Hillsdale, Michigan (4) Jonesville, Michigan Vassar, Michigan MICHIGAN AUTOMOTIVE Research Corporation 1254 North Main Street Ann Arbor, Michigan 48104 Ann Arbor, Michigan MINERALS 1755 E. Plumb Lane, #151 Reno, Nevada 89510 Clark, Nevada Colado, Nevada Vale, Oregon ORTHANE 1500 I-35 W. (at Airport Road) Denton, Texas 76202 Denton, Texas PLASTICS 14123 Roth Road Grabill, Indiana 46741 Ashley, Indiana Grabill, Indiana Huntington, Indiana ROSS ALUMINUM FOUNDRIES 707-815 North Oak Avenue Sidney, Ohio 45365 Sidney, Ohio (2) RUBBER MOLDING 2424 John Daly Road Inkster, Michigan 48141 Norwich, Connecticut Stratford, Connecticut Paris, Illinois SPECIALTY MATERIALS 200 9th Avenue, N.E. Miami, Oklahoma 74354 Lexena, Kansas Harrisonville, Missouri Miami, Oklahoma (2) Quapaw, Oklahoma (2)
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EPI OPERATIONS (DIVISIONS) PLANT LOCATIONS - --------------------------------------------- ------------------------------------- TRANSICOIL INC 2560 General Armistead Avenue Trooper, Pennsylvania 19403 Valley Forge, Pennsylvania Melaka, Malaysia TRIM 829 U.S. Highway 131 South Kalkaska, Michigan 49646 Kalkaska, Michigan WOLVERINE GASKET 2638 Princess Street Inkster, Michigan 48141 Leesburg, Florida Inkster, Michigan Blacksburg, Virginia EAGLE-PICHER INTERNATIONAL Market Harborough, England Soria, Spain Ohringen, Germany
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