-----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, aaOSBTGAr69wAkSnvBpOskqCBnMHlPdG8IyFH188z0U5fFjXsxBCZZAEtJVwwUtK 7ipCM2FEaEQS6SnN2645qg== 0000950152-95-000251.txt : 19950601 0000950152-95-000251.hdr.sgml : 19950601 ACCESSION NUMBER: 0000950152-95-000251 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950228 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER INDUSTRIES INC CENTRAL INDEX KEY: 0000030927 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 310268670 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-01499 FILM NUMBER: 95517238 BUSINESS ADDRESS: STREET 1: 580 WALNUT ST STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45201 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: 580 WALNUT ST PO BOX 779 STREET 2: 580 WALNUT ST PO BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45201 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE PICHER CO DATE OF NAME CHANGE: 19660921 10-K405 1 EAGLE PICHER 10-K405 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994 COMMISSION FILE NUMBER 1-1499 EAGLE-PICHER INDUSTRIES, INC. AN OHIO CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 31-0268670 580 BUILDING, 580 WALNUT STREET, P. O. BOX 779, CINCINNATI, OHIO 45201 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 513-721-7010 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: TITLE OF CLASS Common Capital Stock, Par Value $1.25 per Share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 24, 1995 was $6,152,299 based upon the average of the bid and asked prices as of such date. On February 24, 1995, 11,040,932 shares of the registrant's Common Stock were outstanding. The registrant had and has no other classes of stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Excerpts from registrant's Annual Report for the fiscal year ended November 30, 1994 -- Incorporated in Part I and Part II. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 NOTE This copy of Eagle-Picher's Form 10-K for 1994 includes only Exhibits 4(b)(ii), 10(d), 11, 13, 21, 23, 24(a), 24(b), 27 and 99. In accordance with SEC requirements, copies of the following exhibits will be furnished upon payment of a fee of ten cents per page. Please remit the proper amount with your request to: James A. Ralston, Vice President, General Counsel and Secretary Eagle-Picher Industries, Inc. P. O. Box 779 Cincinnati, Ohio 45201. Exhibits not included in this Form 10-K for 1994 have the following number of pages (see list of Exhibits in Part IV, Item 14(a)(3)): 3. (i) -- 10 4. (a) -- 99 10. (a) -- 7 (ii) -- 12 (b)(i) -- 120 (b) -- 6 (c) -- 14
TABLE OF CONTENTS
ITEM PAGE - ---- ---- PART I 1. Business........................................................................... 3 2. Properties......................................................................... 5 3. Legal Proceedings.................................................................. 6 4. Submission of Matters to a Vote of Security Holders................................ 13 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......... 14 6. Selected Financial Data............................................................ 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................................... 15 8. Financial Statements and Supplementary Data........................................ 15 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure......................................................................... 15 PART III 10. Directors and Executive Officers of the Registrant................................. 16 11. Executive Compensation............................................................. 20 12. Security Ownership of Certain Beneficial Owners and Management..................... 23 13. Certain Relationships and Related Transactions..................................... 23 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................... 24 Signatures............................................................................... 25 Exhibit Index............................................................................ 26
2 3 PART I ITEM 1. BUSINESS. General Development of Business. Eagle-Picher Industries, Inc. (the "Company") was incorporated in 1867 under the laws of the State of Ohio as an outgrowth of a business enterprise founded in Cincinnati in 1843. It conducts its business through unincorporated operating divisions and separately incorporated subsidiaries, both of which are referred to herein as divisions. On January 7, 1991 the Company and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code ("chapter 11"). The chapter 11 filings were the consequence of a cash shortfall resulting from the Company's inability to satisfy certain immediate asbestos litigation liabilities. See Item 3.(a) below. Financial Information About Industry Segments. The Company's major industry segments are: 1. Industrial; 2. Machinery; and 3. Automotive. Industry Segment Data is incorporated herein by reference to Exhibit 13, the Company's Annual Report for the fiscal year ended November 30, 1994, pages 29-30. Narrative Description of Business. The Industrial Group, which is composed of three divisions and operations in three other divisions, produces a variety of products for industrial markets, principally manufacturers of consumer products. The Minerals Division mines and refines diatomaceous earth products used for high purity filtration primarily by the food and beverage industry and also for general industrial applications. The Fabricon Products Division produces printed packaging materials for the dairy and confectionery industries. The Specialty Materials Division refines rare metals, such as high purity germanium and gallium compounds, and is a major source of boron isotopes for nuclear applications. This Division also produces a wide range of super-clean containers, which meet strict EPA protocols, for environmental sampling. Other products manufactured in the Industrial Group include custom designed cast and injection molded rubber and plastic parts, and industrial chemicals. The methods of distribution and competitive positions of the divisions of the Industrial Group vary widely. For example, the Minerals Division is second to the Alleghany Corporation in the sale of certain filter aid products which are sold both directly and through distributors to many large and small customers. By contrast, the Fabricon Products Division conducts its sales through sales personnel and competes against many other firms in a highly price-sensitive market. Other products are sold under competitive conditions which vary widely from plant to plant. The Machinery Group consists of five divisions, which are involved in manufacturing products for various industrial markets. The Construction Equipment Division produces earthmoving equipment for Caterpillar Inc. and began manufacturing a line of heavy-duty industrial forklift trucks in 1993. The Electronics Division is a leading supplier of sophisticated special purpose batteries for aerospace and defense applications. The Cincinnati Industrial Machinery Division produces specialized high-volume metal cleaning and finishing systems. The Ross Aluminum Foundries Division manufactures complex aluminum castings in sand and plaster. Transicoil Inc. manufactures sophisticated electronic components for aerospace, shipboard, ground-based, and industrial applications. The principal products manufactured by the Machinery Group are distributed through various methods and in a variety of competitive environments. The Electronics Division bids competitively for numerous fixed price government contracts for special purpose batteries. The Division is a recognized leader in this business 3 4 and has a few competitors for some highly technological products, but many large and small competitors for other products. The Construction Equipment Division is the sole supplier of four lines of earthmoving equipment to its longstanding largest customer, Caterpillar Inc. The forklifts are distributed through a dealer network. The Automotive Group consists of eight divisions, which are involved largely in the production and sale of mechanical, structural and trim parts for passenger cars, trucks, vans, and recreational and sport utility vehicles. The Hillsdale Tool Division specializes in the manufacture of precision-machined aluminum and steel parts. Typical machined products include torsional vibration dampers and a variety of castings and forgings. The Division also produces the entire front pump assembly for Ford Motor Co.'s electronic four-speed overdrive transmission primarily used on one-half and three-quarter ton pick-up trucks, vans and sport utility vehicles. The Plastics Division is a major supplier of fiberglass reinforced molded plastic parts to automotive and other customers. The Division also produces the fiberglass reinforced plastic roof panels for General Motors Corporation's all-plastic body, all-purpose vehicle. The Wolverine Gasket Division coats steel and aluminum with elastomeric compounds and produces materials which are particularly suitable for high compression applications. The International Operations Division includes Eagle-Picher Industries Europe GmbH, with responsibility over three plants in Europe which manufacture sealing and insulating products, elastomeric extrusions, and injection molded parts for the European automotive market. The Division also includes a sales and engineering office in Japan that serves the Asian market. The Trim Division manufactures automotive interior trim including headliners, rear package trays, spare tire covers and door panels. The Michigan Automotive Research Corporation Division offers vehicle and vehicle system manufacturers a comprehensive range of testing programs for engines, power trains and power train components. The Rubber Molding Division manufactures engineered rubber and rubber-to-metal products and small precision-molded parts. The Orthane Division produces injection-molded plastic parts for automotive and industrial applications. The Automotive Group distributes its products primarily to the "Big Three" automotive manufacturers or to other suppliers to those manufacturers directly through internal sales personnel. With respect to the hundreds of products manufactured by the Automotive Group, competition varies widely as to the number and type of competitors, the methods of competition and the Group's competitive positions. Divisions producing precision-machined parts, such as Hillsdale Tool Division, tend to have a few strong competitors (including among others the automotive manufacturers themselves) and compete on the basis of quality and price. Divisions such as Trim and Wolverine Gasket tend to have many competitors of varying sizes and compete primarily on the basis of price. Generally, competitive conditions for this Group are characterized by a decreasing number of competitors, an increasing amount of foreign competition (particularly from the Far East), and an increased emphasis on quality. No product accounted for more than 7%, and no customer accounted for more than 10%, of total sales of the Company for fiscal 1992 through fiscal 1994 except Ford Motor Co., for which sales were $165.3 million in 1994, $148.0 million in 1993, and $132.7 million in 1992, and General Motors Corporation, for which sales were $81.4 million in 1994, $73.1 million in 1993, and $64.5 million in 1992. In addition the Company is not dependent upon any individual raw material source for a substantial part of its business and believes that its sources of raw materials are adequate. In the Machinery Group, order backlog was approximately $190.1 million as of November 30, 1994, $148.1 million as of November 30, 1993 and $118.1 million as of November 30, 1992. The increase from prior years is due primarily to improved demand for capital equipment and heavy-duty forklift trucks. A substantial portion of the order backlog outstanding at November 30, 1994 is expected to be filled within the current fiscal year. In no other segment is order backlog of significance. In fiscal 1994, the Company spent approximately $21.1 million for research and development and related activities, primarily for the development of new products or the improvement of existing products. Comparable costs were $17.1 million and $13.5 million for 1993 and 1992, respectively. 4 5 The Company owns or is licensed under patents relating to methods and products in several areas of its business. Although these have been of value and are expected to be of value in the future, the loss of any individual patent or group of patents would not materially affect the conduct of the Company's business. In the fiscal years 1994, 1993, and 1992, for current operations the Company spent approximately $9.6 million, $8.6 million and $9.6 million, respectively, to comply with federal, state and local regulatory provisions relating to the protection of the environment. This level of expenditures has had no material effect on the earnings or competitive position of the Company or its operations during the period described. The Company expects these expenditures to be approximately $9.2 million in fiscal 1995. See Item 3.(d) for information with respect to various other environmental proceedings. As of November 30, 1994, the Company employed approximately 7,100 persons in its operations, of whom approximately 1,800 were salaried employees and approximately 5,300 were hourly employees. Approximately 18% of the Company's hourly employees are represented by eight labor organizations under 12 separate contracts. The Company believes that its relations with its employees generally are good. Export sales totaled approximately $76.9 million, $73.2 million, and $64.7 million in fiscal 1994, 1993, and 1992, respectively. The revenues generated by foreign operations do not exceed 10% of consolidated revenues, nor do their identifiable assets exceed 10% of consolidated total assets. The Company and its lenders executed a First Amendment to Credit Agreement in August, 1994, with the approval of the Bankruptcy Court, extending the Company's debtor-in-possession financing to the earlier of December 31, 1996 or the effective date of a confirmed plan of reorganization. ITEM 2. PROPERTIES. Eagle-Picher Industries, Inc. manufactures at 55 locations a wide variety of products primarily for other manufacturers. Types of manufacturing include, among others, chemical processing, mining, metal fabricating, aluminum casting, precision machining, electronic and electrical assembling, and rubber and plastic molding and extruding. The plants are fully utilized for the purposes intended and generally have capacity for expansion of existing buildings on owned real estate. Plants range in size from 425,000 square feet of floor area to under 50,000 square feet and generally are located away from large urban centers. Information on the locations of all manufacturing plants is contained in Exhibit 99 attached hereto, which is incorporated by reference into this report. The Company considers the following plants to be its most important physical properties:
LOCATION GENERAL CHARACTER ------------ --------------------- INDUSTRIAL GROUP Minerals Division............................... Colado, NV Processing facility MACHINERY GROUP Electronics Division............................ Joplin, MO Manufacturing plants (six locations) Construction Equipment Division................. Lubbock, TX Fabrication and assembly facility AUTOMOTIVE GROUP Hillsdale, Hillsdale Tool Division......................... MI Manufacturing plants (three locations) Plastics Division............................... Grabill, IN Manufacturing plant.
All of such properties are held in fee and none of them is subject to any major encumbrances. 5 6 ITEM 3. LEGAL PROCEEDINGS. (a) Chapter 11 Proceedings. On January 7, 1991 (the "petition date"), the Company and seven of its domestic subsidiaries each filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy Court"). The subsidiaries that filed chapter 11 petitions are Daisy Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation (MARCO), EDI, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Europe, Inc., and Hillsdale Tool & Manufacturing Co. On November 30, 1991, substantially all of the assets of EDI, Inc., were sold pursuant to authority granted by the Bankruptcy Court. All of the chapter 11 cases have been consolidated for procedural purposes only under the caption: "In re Eagle-Picher Industries, Inc., et al.," Consolidated Case No. 1-91-00100, before the Honorable Burton J. Perlman, United States Bankruptcy Judge. The Company and its petitioning subsidiaries are operating their businesses and managing their properties as debtors in possession, in accordance with the provisions of the Bankruptcy Code. The filing of a chapter 11 petition operates as an automatic stay of all litigation against the debtor that was or could have been commenced before the filing of the chapter 11 petition and of any act to collect or recover a claim against the debtor that arose before the commencement of the chapter 11 case. While claimants or the Company may petition the Bankruptcy Court for a modification of the stay, the Company believes that it is unlikely that the Bankruptcy Court will grant such permission except in certain limited instances to permit the liquidation of a pre-petition claim, but not any payment or collection efforts with respect thereto. Consistent with the provisions of chapter 11, the Company intends to address all of the pre-petition claims in a plan of reorganization. An unsecured creditors' committee ("UCC"), an injury claimants' committee ("ICC"), an equity security holders' committee ("EC") and a legal representative for future claimants ("RFC"), have been appointed in the chapter 11 cases. An unofficial asbestos co-defendants' committee also has been participating in the chapter 11 cases. In accordance with the provisions of the Bankruptcy Code, these parties have the right to be heard with respect to transactions outside the ordinary course of business. The official committees and the RFC also are the primary entities with which the Company has been negotiating the terms of a plan of reorganization. At the Company's request, the Bankruptcy Court established a bar date of October 31, 1991 for all pre-petition claims against the Company other than those arising from the sale of asbestos-containing products and other than those arising from any future rejection of executory contracts or unexpired leases in the chapter 11 cases. The bar date is the date by which claimants who disagree with the amounts recorded by the Company as owing to such claimants must file a proof of claim against the Company in the Bankruptcy Court. The Company notified all known or potential claimants subject to the October 31, 1991 bar date of their possible need to file a proof of claim with the Bankruptcy Court. Of the 5,600 claims filed pursuant to this bar date, 2,675 were general (e.g. vendor, note holder and other miscellaneous claims), 1,325 were other litigation and environmental claims, and 1,600 were asbestos-related claims. Substantially all of the general claims have been reconciled by the Company. Such claims, as reconciled, have been allowed as pre-petition claims against the Company's estate. The impact of these reconciliations on the Company's financial statements was not material. The Company continues to attempt to negotiate settlements for the remaining unreconciled general claims. If they cannot be resolved by a negotiated settlement, the Company intends to have them resolved by the Bankruptcy Court. The Company does not expect that the impact of the resolution of these claims will be material. The litigation and environmental claims are discussed in subsections (c) and (d) respectively, below. The Bankruptcy Court also established a bar date of September 30, 1992 for all present asbestos-related claims. Approximately 161,000 asbestos-related claims were filed with the Bankruptcy Court pursuant to the bar date. Approximately 1,000 of these claims alleged property damage. The 1,600 asbestos-related claims referred to above filed prior to the October 31, 1991 bar date will be treated in the reorganization cases in the 6 7 same manner as the asbestos-related claims filed in connection with the September 30, 1992 bar date. The asbestos-related claims are discussed more fully in subsection (b), below. On June 5, 1992, a mediator was appointed by the Bankruptcy Court to assist the Company, the ICC, the UCC, the RFC and the EC in their efforts to negotiate a consensual plan of reorganization. The Bankruptcy Court has approved four extensions of the period during which the Company has the exclusive right to file a reorganization plan. The most recent extension expires sixty days after the Bankruptcy Court is notified by the mediator that mediation has reached an impasse. To date, no such notification has been given by the mediator and the mediation process is continuing. On January 18, 1995, however, the Bankruptcy Court indicated that it was likely to terminate the exclusive period if a plan and disclosure statement were not filed on or before March 1, 1995. On November 9, 1993, the Company reached an agreement (the "Agreement") on the principal elements of a joint plan of reorganization that provides a basis for the Company and its subsidiaries to emerge from chapter 11. The Agreement is with the ICC and the RFC, the representatives of the holders of present and future asbestos-related and other toxic tort claims in the Company's chapter 11 case, and was reached with the assistance of the mediator appointed by the Bankruptcy Court. As a consequence of this agreement, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision of $41.4 million in 1993 for environmental and other litigation claims. Throughout 1994, the Company, the ICC and the RFC continued to refine the details of a joint plan of reorganization ("the Plan"). On January 18, 1995, the Company advised the Bankruptcy Court that it intended to file a plan of reorganization by the end of February 1995. It is currently contemplated that such plan of reorganization will be a joint plan among the Company, the ICC and the RFC. Implementation of the Plan treatment of claims and interests as provided therein is subject to confirmation of the Plan in accordance with the provisions of the Bankruptcy Code. Parties in interest in the chapter 11 cases may object to confirmation of the proposed Plan. The proposed Plan to be filed is premised on a settlement of the Company's liability for all present and future asbestos-related personal injury claims and certain other tort claims. These claims will be channeled to and resolved by an independently administered claims trust (the "Trust"). It is also currently contemplated that the Plan will provide for the distribution of cash, notes, debentures, and common stock of the reorganized Company to the Trust and to holders of allowed unsecured claims on a pro-rata basis proportionate to their share of the aggregate amount of allowed pre-petition unsecured claims. Pursuant to the proposed Plan, asbestos-related personal injury claims will be channeled to the Trust and the Bankruptcy Court will issue an injunction with respect to such claims. The injunction will forever stay, restrain and enjoin actions against the Company for the purpose of, directly or indirectly, collecting, recovering, or receiving payment of, on, or with respect to any personal injury claims resulting from exposure to asbestos-containing products allegedly manufactured or sold by the Company. In 1994, the Bankruptcy Code was amended to add, among others, new subsections 524(g) and (h), which authorize the issuance of a permanent injunction to supplement the existing injunctive relief afforded by section 524 of the Bankruptcy Code in asbestos-related reorganizations under chapter 11. The section provides that, if certain specified conditions are satisfied, a court may issue a supplemental permanent injunction barring the assertion of asbestos-related claims or demands against the reorganized company and channeling those claims to an independent trust. It is the Company's current intention that the issuance of such a channeling injunction will be a condition precedent to confirmation of the proposed Plan. It is intended that the proposed Plan will also provide that priority claims and convenience claims (general unsecured claims of $500 or less) will be paid in full, in cash. Under the Bankruptcy Code, shareholders are not entitled to any distribution under a plan of reorganization unless all classes of pre-petition creditors receive satisfaction in full of their allowed claims or accept a plan which allows shareholders to participate in the reorganized company or to receive a distribution. The proposed Plan does not provide that all 7 8 classes of pre-petition creditors receive satisfaction in full of their allowed claims. Consequently, the proposed Plan will not provide for any distribution to shareholders and their equity interests will be canceled. Each class of creditors and equity security holders that is impaired under a plan of reorganization is entitled to vote to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of two-thirds in dollar amount and more than one-half in number of claims of that class that have timely voted to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of equity security holders as acceptance by holders of equity interests that hold at least two-thirds in amount of the allowed equity interests in such class who have timely voted to accept or reject the plan. The Bankruptcy Code further provides that any class that does not receive a distribution under a plan is deemed to have rejected the plan. Accordingly, because it is contemplated that the proposed Plan will not provide for any distribution to the Company's existing shareholders, that class will not vote on the proposed Plan and will be deemed to reject the Plan. The Bankruptcy Court will confirm a plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation of a plan are that the plan is (i) accepted by all impaired classes of claims and equity interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is "fair and equitable" as to such class, (ii) feasible, and (iii) in the "best interest" of creditors and stockholders impaired under the plan. Additional information concerning the Plan and the chapter 11 cases can be found in Note B to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (b) Asbestos. Prior to its chapter 11 filing, the Company had been named as a co-defendant in a substantial number of lawsuits alleging personal injury from exposure to asbestos-containing insulation products. As of the petition date, there were approximately 67,800 asbestos-related claims outstanding against the Company. The claims, which were pending in 48 states, British Columbia, Guam, the Virgin Islands, and the District of Columbia, alleged, in general, that the Company and other defendant manufacturers failed to warn of the potential hazard to health from the inhalation of asbestos fiber contained in their products. As a result of the chapter 11 filing by the Company, all of such litigation was automatically stayed pursuant to section 362 of the Bankruptcy Code and additional suits were not allowed to be filed against the Company. Since the first asbestos case was filed in 1966, the Company has disposed of approximately 73,500 claims through trial, dismissal or settlement. On average, the Company spent approximately $7,800 per claim, including attorneys' fees and other defense costs, to dispose of these claims. All persons with a pre-petition asbestos-related claim were required to file a proof of claim by the September 30, 1992 bar date. Approximately 160,000 proofs of claim were filed alleging personal injury. The Company believes that approximately 11,000 of these claims are duplicates or were filed by persons whose lawsuits were previously disposed of through trial, dismissal, or settlement. The Company expects that additional asbestos-related personal injury claims will arise for several decades into the future. Such future claims were not subject to the September 30, 1992 bar date. The Company is not able to project precisely the number and value of future claims at this time. In summary, many of the asbestos-related personal injury claims filed in the chapter 11 cases do not provide sufficient information to enable the Company to determine whether or not it has liability for the claim or to definitively value any such liability. Similarly, the Company is not able to precisely project the number and value of future claims. The Company, however, is certain that it has significant liability with respect to the 160,000 proofs of claim which were filed against the Company pursuant to the September 30, 1992 bar date and which allege asbestos-related personal injury. The Company also is certain that there is significant liability with respect to future asbestos-related personal injury claims. In fact, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise on its books to $1.5 billion, as a consequence of the proposed settlement discussed above. 8 9 The Company, and numerous others, also were sued in both state and federal courts by various entities that own or operate commercial properties and public buildings, such as school districts, counties, cities, states, libraries and hospitals, based on allegations that asbestos or asbestos-containing products are or may be in the buildings. The typical demand in the suits is that the defendants compensate the plaintiffs for any costs incurred in identifying, repairing, encapsulating or removing the asbestos-containing products, or that defendants perform such remedial action. Many suits seek an injunction requiring abatement and punitive damages on the basis that the defendants allegedly knew of the hazards and, in concert with one another, concealed and misrepresented the dangers. Many such suits also seek indemnification from the defendants for all claims for personal injury brought against plaintiffs resulting from the presence of asbestos-containing products in plaintiffs' buildings. These suits too have been stayed as against the Company as a result of the commencement of the chapter 11 cases. One hundred forty-nine such lawsuits were instituted against the Company prior to the filing of its chapter 11 petition, including two which were certified as class actions. Two of such suits were consolidated into one. One hundred were disposed of through dismissals by the court following rulings on pre-trial motions, or voluntarily by the plaintiffs. The Company settled seven of these cases for less than $22,000 in the aggregate, prior to filing its chapter 11 petition. Forty-one such suits were pending as of the petition date and have been stayed as a consequence of the chapter 11 filing. The class actions that were certified pre-petition are a national school class action consisting of all public and private elementary and secondary school systems in the United States that have not excluded themselves from the suit; and a Michigan school class action consisting of all public and private elementary and secondary school systems in Michigan that have excluded themselves from the national school class action and included themselves in the state class action. In four lawsuits, class certification petitions were pending pre-petition. One of these suits has since been dismissed, one suit has been suspended, and the remaining two suits, one involving a class of colleges and universities and the other a class of buildings leased to the government, have been certified as class actions. Many of the claimants which voluntarily dismissed their individual claims as set forth above did so to pursue them in one of the certified class actions. Approximately 1,000 proofs of claim alleging such asbestos property damage claims were filed in the chapter 11 cases pursuant to the bar date. These claims include most of the lawsuits described above that were pending as of the petition date. It is currently contemplated that the asbestos-related property damage claims will be resolved in the Bankruptcy Court pursuant to claims resolution procedures that will be set forth in the proposed Plan. The eventual outcome of the asbestos-related property damage claims cannot be reasonably predicted due to numerous uncertainties that are inherent in the reorganization process. However, the Company expects that all such claims will be resolved without material adverse effect on the Company, its operations, or its financial condition. In addition, the Company may have insurance coverage for certain of these claims and factual and legal defenses available to it. Additional information concerning the asbestos litigation can be found in Note K to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (c) Other. In June 1989 the City of New York filed suit against the Company and others in New York state court seeking indemnity for costs New York had incurred and would incur because residents of housing owned by the city were allegedly injured by ingesting paint in that housing. Counts in this suit alleging negligence and strict product liability have been dismissed. Certain other counts are still pending. The City of New York did not file a proof of claim in the Company's chapter 11 case with respect to the claims asserted in such lawsuit by the 1991 bar date. In November 1993, however, it filed three proofs of claim with respect to the litigation each seeking $50 million in damages. The Company's objection to these claims, seeking to have them disallowed on the basis that they were filed after the bar date, was sustained in November 1994, and the claims were disallowed. As a result, and given the voluntary withdrawal of three other lead-related property damage 9 10 claims, the Company has disposed of all lead-related property damage claims that were asserted in its chapter 11 case. In addition to the foregoing, late in 1987, litigation was initiated against the Company and numerous other defendants, which alleged claims for personal injuries resulting from ingestion of lead-containing paint. Such suits have been stayed as to the Company as a consequence of the filing of the chapter 11 cases. One hundred twenty eight (128) non-duplicative proofs of claim were timely filed in the Bankruptcy Court asserting liability for personal injuries from lead chemicals allegedly manufactured and sold by the Company. Four of such claims have been voluntarily withdrawn at the Company's request. One of such claims was dismissed by the Bankruptcy Court. The one hundred twenty three (123) that remain assert liability based on personal injury. The Company has pending objections to seven of such claims. Pursuant to the objections, the Company has sought an order of the Bankruptcy Court disallowing such claims because the claimants' lawsuits asserting similar claims against other defendants which were not in bankruptcy have been dismissed. Prior to the filing of its chapter 11 case, the Company also had been a defendant in these lawsuits. The claimants have opposed the relief sought by the Company and the Bankruptcy Court has not yet ruled on these objections. The Company believes that these seven objections it has filed are meritorious. It also believes that it has valid grounds to object to the allowance of all of the remaining lead-related personal injury claims. However, in December 1994, the Eighth District Court of Appeals, Cleveland, Ohio, ruled that the plaintiff in a lawsuit filed in state court in Cuyahoga County, Ohio, may pursue certain claims against defendants, such as the Company, that manufactured lead pigment. The trial court had dismissed the plaintiffs' enterprise liability, market share and alternative liability theories pursuant to a defense motion to dismiss. The Ohio Appeals Court upheld the dismissal of the enterprise liability count, but reversed the dismissal as to the market share and alternative liability counts. This decision may be appealed to the Supreme Court of Ohio. It is not possible to predict if the trial court's dismissal or the appellate court's reinstatement will be sustained if the Supreme Court accepts review of the case. It is currently contemplated that all lead-related personal injury claims that were filed that are not disposed of pursuant to an objection filed by the Company, and all such claims which may be filed in the future, will be channeled to and resolved by the Trust that will be established under the Plan for the benefit of holders of asbestos-related personal injury claims discussed in subsection (a), above. Claims related to the Lone Star Steel Toxic Tort Litigation, reported in the Company's Form 10-K for the fiscal year ended November 30, 1993 and in earlier such reports, are now included in the information on asbestos-related litigation discussed in subsection (b), above, as the plaintiffs in this action filed proofs of claim in the Company's chapter 11 case alleging asbestos-related personal injuries. Chi-Vit Corporation, which acquired the assets of the Company's former Chi-Vit Corporation Division in 1988, was also named as a defendant in the Lone Star Steel Litigation. Chi-Vit Corporation filed a proof of claim in the Company's chapter 11 case including a claim seeking indemnity from the Company for any damages it incurs in this litigation. Chi-Vit Corporation has settled this litigation with the Lone Star Steel plaintiffs, and the Company believes that any indemnity claim Chi-Vit Corporation may have against the Company will not be material. The lawsuit filed on August 27, 1990 in the United States District Court for the Northern District of Texas against the Company and two of its officers, the amended complaint in such suit filed on February 7, 1992 naming another officer of the Company as an additional defendant, and the two proofs of claim filed in the Company's chapter 11 case in the amount of $500 million each, were resolved in December 1994 through settlement. The settlement of the litigation and claims filed by American Imaging Services, Inc., an approximately 60%-owned subsidiary, and its president and minority shareholder, which settlement was not material to the Company or its operations, was approved by the Bankruptcy Court in January 1995. This litigation was previously discussed in the Company's Form 10-K for the fiscal year ended November 30, 1993, and in earlier such reports. On June 18, 1993, the Company, together with its wholly-owned subsidiary, Transicoil Inc., commenced an adversary proceeding in the Bankruptcy Court against Blue Dove Development Associates ("Blue Dove"), 10 11 the landlord for Transicoil's domestic manufacturing facility in Valley Forge, Pennsylvania, and against K-Jem, Inc., Blue Dove's general partner. The suit seeks to recover excess rent that the Company and Transicoil believe has been paid to the landlord. The landlord filed a counterclaim in the adversary proceeding seeking a determination that Transicoil has breached the lease and, therefore, the entire rent through June 30, 2005 should be accelerated and due. The landlord made similar claims in a suit filed against Transicoil in October 1993 in the United States District Court for the Eastern District of Pennsylvania (the "Pennsylvania Action"). Prosecution of the Pennsylvania Action which seeks approximately $10.3 million in damages has been enjoined by the Bankruptcy Court. The Company and Transicoil have filed two Motions for Summary Judgment in the adversary proceeding in the Bankruptcy Court. One seeks to have the Bankruptcy Court award the Company the relief it sought in the adversary proceeding without the need for a trial. The other seeks total dismissal of the counterclaim also without a trial. The Motions are fully briefed, and a request for oral argument is pending. The Company cannot predict when the Bankruptcy Court will rule on these Motions. The Company believes that the counterclaim asserted by the landlord and the claims asserted in the Pennsylvania Action are without merit and that the resolution of the dispute with respect to the lease will not have a materially adverse impact on the Company's or Transicoil Inc.'s financial condition. In September 1993, Moltan Company, a competitor in the diatomaceous earth oil and grease absorbent market of the Company's subsidiary, Eagle-Picher Minerals, Inc., sued the Company and such subsidiary in the United States District Court for the Western District of Tennessee, Western Division, seeking trebled damages of $3 million. Moltan alleged that the defendants wrongfully contacted federal and state regulators, as well as customers and prospective customers, concerning Moltan's lack of product warnings. The Company and its subsidiary countersued, seeking damages and an injunction requiring Moltan to cease its misleading and deceptive practices and to place appropriate and accurate information required by OSHA and other authorities on its products. On February 9, 1994, the court granted the Company's request for a preliminary injunction against Moltan, concluding as a matter of law that some of Moltan's product labels and other information were "blatantly false." The court enjoined Moltan from selling its products with labels containing false and misleading information in violation of OSHA and other regulations. Further, in August 1994, Moltan's complaint was dismissed in its entirety. Later, in September 1994, the court issued an order making the injunction permanent and granting the Company a judgment as a matter of law as to Moltan's liability under the Lanham Act. Accordingly, the Company must now prove its damages in order to receive a monetary judgment against Moltan. Moltan has appealed certain of these orders and the Company intends to oppose the appeals. In addition, the Company intends to continue to press its claims against Moltan for monetary damages. Additional information concerning such litigation claims can be found in Note L to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (d) Environmental. On January 30, 1989, the Company was served with a suit in the United States District Court for the District of Colorado under the federal Clean Water Act alleging that the Company's operations in Colorado Springs, Colorado had not timely filed certain reports and that the plant's wastewater discharge did not comply with the battery manufacturing pretreatment standards. The Company and the United States Environmental Protection Agency ("EPA") agreed to settle the suit in December 1990. Under the terms of the settlement, the Company agreed to pay a penalty of $112,500 and the EPA agreed to issue a permit for the Company's wastewater discharge. After the filing of the Company's chapter 11 petition, the EPA repudiated the settlement because it had not been reduced to writing before the filing. Subsequently, the EPA agreed to accept an allowed, unsecured claim in the Company's chapter 11 case in the amount of $150,000 in settlement of the litigation. The Company believes that it is in compliance with the permit and that no harm has occurred to human health or the environment. In December 1989, the Company's operations in Colorado Springs, Colorado were also the subject of an investigation by state and federal environmental regulators. In December 1993, the Company was advised by the United States Attorney's Office in Denver, Colorado that the investigation concerned the alleged unlawful 11 12 treatment, storage or disposal of hazardous wastes and alleged false statements relating to such alleged activities by plant personnel. As a result of this investigation, the United States Attorney advised the Company that criminal charges would be filed against it. Further, Region VIII of the EPA filed an administrative complaint against the Company on March 14, 1994, because of conduct it alleges took place and which resulted in the investigation begun in December 1989. The Company has tentatively reached agreements settling all of the charges and issues resulting from this investigation. Pursuant to the settlement, the Company has agreed with the United States Attorney to plead guilty to two criminal misdemeanors for its alleged failure to report discharges of hazardous substances to a navigable waterway. The Company also agreed to the allowance of a pre-petition general unsecured claim in its chapter 11 case in the amount of $300,000 to resolve these charges. Further, the Company agreed to allow EPA's Region VIII a pre-petition general unsecured claim in the amount of $200,000 for alleged use of existing storage ponds after they were no longer permitted to receive wastes, improper storage of certain wastes longer than the 90 days the law allows, and improper labeling of stored hazardous waste. Finally, the Company agreed with the EPA that it would implement certain programs including, among others, publication of environmental ethics and non-reprisal policies; adoption of pollution prevention, environmental training, and compliance reporting programs; and agreements for periodic compliance audits of the involved facility. The resolution of these matters is subject to the negotiation of definitive settlement agreements and to the approval of the Bankruptcy Court and the federal District Court in Denver, Colorado. While the Company does not believe that the actions at issue resulted in any harm to human health or the environment, it has renewed its commitment to strict compliance with all laws, including those regulating environmental issues. These settlements, and the remedial activities the Company is currently conducting, will not have a materially adverse effect on the Company's or the Colorado Springs' operations or financial condition. The Company received 1,102 proofs of claim in its chapter 11 cases alleging a right to payment because of environmental matters. Many of these claims were filed in connection with environmental matters reported in Form 10-K reports for prior fiscal years. These include claims with respect to numerous waste disposal sites previously discussed. They also include claims with respect to the Tri-State mining district of Kansas, Missouri and Oklahoma previously disclosed: Ottawa County, Oklahoma; Cherokee County, Kansas; Jasper County, Missouri; and the Baxter Springs, Treece, and Galena Subsites in Kansas. The Company is attempting to resolve the majority of these environmental claims through negotiations with the EPA and the United States Department of Interior. A tentative settlement agreement reached in fiscal 1993 was renegotiated during fiscal 1994 and fiscal 1995 after the EPA received additional information concerning three sites that were previously resolved. Pursuant to the proposed renegotiated agreement, the agencies and certain states will be granted allowed pre-petition general unsecured claims in the Company's chapter 11 case aggregating approximately $43.0 million in full satisfaction of all of the Company's alleged liability at most of its known Superfund sites, including any liability for any natural resource damage. In exchange for these allowed claims, the agencies will release the Company from liability at such Superfund sites and the Company will be protected from contribution claims of other parties with potential liability at the sites. Accordingly, the Company's settlement should completely resolve all claims with respect to these sites. Further, the tentative agreement provides a process which will permit any liability, which may arise with respect to a small number of sites as to which the EPA believes that it does not have sufficient information to negotiate a meaningful settlement at this time, to be resolved in the future when additional information is available. The Company has executed the settlement agreement which resolves these claims and expects the other parties to execute it also. Until all requisite approvals, including approval of the Bankruptcy Court, are obtained, no party is in any way bound to the terms of the settlement. The Company expects, however, that the settlement will be approved. 12 13 Additional information concerning the environmental claims can be found in Note L to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. (e) Summary -- Environmental And Other Claims. All lawsuits naming individual defendants have been resolved. Certain claims remain pending against the Company. The Company intends to defend all remaining litigation claims vigorously in the manner permitted by the Bankruptcy Code and/or applicable law. All pre-petition claims against the Company arising from litigation must be liquidated or otherwise addressed in the context of the chapter 11 cases. Further, all such claims against the Company will be addressed in a plan of reorganization. During the pendency of the chapter 11 cases, any unresolved litigation with respect to pre-petition claims can proceed against the Company only with the express permission of the Bankruptcy Court. The Company has resolved most of the litigation claims that were asserted pursuant to the October 31, 1991 bar date, other than those claims arising from the sale of asbestos-containing products. The Company has filed objections to certain of the unresolved litigation-based claims seeking to reduce the amount of such claims or eliminate them entirely. These objections have not yet been resolved. The Company anticipates filing additional objections to other such claims if they cannot be resolved through negotiation. These objections will be litigated vigorously by the Company pursuant to the provisions of the Bankruptcy Code and applicable law. The eventual outcome of the environmental and other litigation claims described herein cannot reasonably be predicted due to numerous uncertainties that are inherent in the reorganization process. However, the Company expects that all such claims will be resolved without material adverse effect on the Company, its operations, or its financial condition. In addition, the Company may have insurance coverage for certain of these claims and may have factual and legal defenses available to it. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 13 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. (a) Market Information On November 10, 1993, the New York Stock Exchange ("NYSE") suspended trading of the Company's Common Stock, and on November 15, 1993, announced that it would make application to the Securities and Exchange Commission to delist the issue. On June 21, 1994, the NYSE notified the Company that the SEC had granted the NYSE's application effective at the opening of the trading session on June 9, 1994. The Company's Common Stock is presently trading on the Over-the-Counter market (trading symbol is EPIH.U). - ------------------------------------------------------------------------------------------------ Quarterly Stock Prices -- 1993-1994 - ------------------------------------------------------------------------------------------------ First Second Third Fourth Year - ------------------------------------------------------------------------------------------------ 1994(1) - ------------------------------------------------------------------------------------------------ Bid Prices - ------------------------------------------------------------------------------------------------ High 7/8 13/16 1/2 7/16 7/8 - ------------------------------------------------------------------------------------------------ Low 1/16 1/4 7/32 1/16 1/16 - ------------------------------------------------------------------------------------------------ Ask Price - ------------------------------------------------------------------------------------------------ High 1 3/8 1 1/4 7/8 11/16 1 3/8 - ------------------------------------------------------------------------------------------------ Low 5/32 9/16 15/32 1/4 5/32 - ------------------------------------------------------------------------------------------------ 1993 - ------------------------------------------------------------------------------------------------ Price (NYSE) - ------------------------------------------------------------------------------------------------ High 4 3 5/8 3 2 5/8 4 - ------------------------------------------------------------------------------------------------ Low 2 1/8 2 1/4 2 1/8 2 1/8(2) 2 1/8(2) - ------------------------------------------------------------------------------------------------ - --------------- (1) The sources of all 1994 prices are quotations from the pink sheets and the OTC Bulletin Board. The 1994 bid and ask quotations represent prices between dealers, do not include retail markup, markdown or commission and do not represent actual transactions. (2) This represents the low price as of November 9, 1993. Price data for November 10, 1993 is not available. From November 11 through November 30, 1993, the common stock was listed in the pink sheets without prices.
(b) Holders of Common Stock As of February 21, 1995, there were 6,072 holders of record of the Company's Common Stock. (c) Dividends There have been no cash dividends declared on the Company's Common Stock during the last two fiscal years. See "Selected Financial Data" and Note B to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference. 14 15 CROSS REFERENCE SHEET TO ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994 MARKED AS EXHIBIT 13 EXHIBIT 13
PAGES CAPTIONS ------ -------------------------------------- ITEM 6. SELECTED FINANCIAL DATA 35 -- Selected Financial Data ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 32-34 -- Management's Discussion and Analysis of Results of Operations and Financial Condition ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13 -- Consolidated Statement of Income (Loss) for the Three Years Ended November 30, 1994 16 -- Consolidated Statement of Cash Flows for the Three Years Ended November 30, 1994 14-15 -- Consolidated Balance Sheet as of November 30, 1994 and 1993 17 -- Consolidated Statement of Shareholders' Equity (Deficit) for the Three Years Ended November 30, 1994 19-30 -- Notes to Consolidated Financial Statements 32 -- Report of Management 31 -- Independent Auditors' Report 18 -- Quarterly Data
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 15 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a) Directors. The name and age; the positions and offices held with the registrant; principal occupation during the past five years and present employer; other boards of directors on which he serves; the year in which he first became a director of the Company and the committees on which he serves, follow for each director:
PRESENT FIRST TERM BECAME OF OFFICE DIRECTOR EXPIRES -------- --------- PAUL W. CHRISTENSEN, JR., 70.............................................. 1969 1996 Retired, 1987; Chairman of the Board 1978-87, and President prior thereto, of The Cincinnati Gear Company, Cincinnati, Ohio, a manufacturer of custom gears and enclosed drives. Director of Cincinnati Bell Inc., The Ohio National Life Insurance Co. Member of Executive and Stock Option/Compensation Committees and Chairman of Audit Committee. MELVIN F. CHUBB, JR., 61.................................................. 1990 1995 Senior Vice President 1988, of Eagle-Picher Industries, Inc.; Lieutenant General, United States Air Force and Commander of the Electronic Systems Division at Hanscom Air Force Base, Massachusetts, 1984-88. Director of Empire District Electric Co. V. ANDERSON COOMBE, 68.................................................... 1974 1996 Chairman of the Board since March 1991, and President prior thereto (through April 1991), of The Wm. Powell Company, Cincinnati, Ohio, a valve manufacturer. Director of Star Banc Corp., The Starflo Corp., Union Central Life Insurance Co., The Wm. Powell Company. Member of Audit, Executive and Stock Option/Compensation Committees. ROGER L. HOWE, 60......................................................... 1986 1995 Chairman of the Board of U.S. Precision Lens, Inc., Cincinnati, Ohio, a manufacturer of optics for video projection, instrumentation, and photographic applications. Director of Cintas Corporation, Star Banc Corp., U.S. Shoe Corporation, Baldwin Piano & Organ Co. Member of Executive and Stock Option/Compensation Committees. DANIEL W. LEBLOND, 68..................................................... 1965 * Chairman of the Board of LeBlond Makino Machine Tool Company, Cincinnati, Ohio, a manufacturer of machine tools. Director of The Ingersoll Milling Machine Company, LeBlond Makino Machine Tool Company, The Ohio National Life Insurance Co. Member of Executive Committee and Chairman of Stock Option/Compensation Committee. POWELL MCHENRY, 68........................................................ 1991 1995 Of Counsel to Dinsmore & Shohl, a law firm, Cincinnati, Ohio as of October 1, 1991; Senior Vice President and General Counsel of The Procter & Gamble Company, Cincinnati, Ohio, a manufacturer of consumer and industrial products, 1983-91. Member of Audit Committee.
16 17
PRESENT FIRST TERM BECAME OF OFFICE DIRECTOR EXPIRES -------- --------- THOMAS E. PETRY, 55....................................................... 1981 * Chairman of the Board and Chief Executive Officer 1994, Chairman of the Board, President, and Chief Executive Officer 1992, Chairman of the Board and Chief Executive Officer 1989, President and Chief Executive Officer 1982, President and Chief Operating Officer 1981, Group Vice President 1978, President, Akron Standard Division 1977, Vice President and Treasurer 1974, of Eagle-Picher Industries, Inc. Director of Cinergy Corp., Star Banc Corp. Union Central Life Insurance Co., Insilco Corp. Chairman of Executive Committee. EUGENE P. RUEHLMANN, 70................................................... 1991 1996 Partner, Vorys, Sater, Seymour & Pease, a law firm, 1989; of Counsel to that firm, 1987; Chairman, Hamilton County (Ohio) Republican Central Committee, 1991. Director of Western-Southern Life Insurance Company. Member of Audit Committee. ANDRIES RUIJSSENAARS, 52.................................................. 1994 * President and Chief Operating Officer as of December 1, 1994, Senior Vice President 1989-94, President, the Ohio Rubber Company Division 1987-89, Executive Vice President, the Ohio Rubber Company Division 1986-87, General Manager of the subsidiary, Eagle-Picher Industries GmbH in Ohringen, Germany 1980-86, of Eagle-Picher Industries, Inc. - --------------- * Messrs. LeBlond and Petry were elected directors to hold office for terms expiring at the annual meeting of shareholders in 1994 or when their successors are elected and qualified. As the Company did not hold an annual meeting of shareholders in 1994, these directors continue to hold office until their successors are elected and qualified. Mr. Ruijssenaars was elected director by the incumbent directors on November 2, 1994 to serve in the same class as Messrs. LeBlond and Petry and accordingly will hold office until his successor is elected and qualified.
17 18 (b) Executive Officers. The names and ages, the positions and offices held with the registrant and employment history with the registrant, term of office as officer and period during which each has served as such, follow for each executive officer:
YEAR ELECTED OR ASSUMED PRESENT AGE DUTIES --- ------------ Thomas E. Petry.......... Chairman of the Board of Directors, President* and Chief Executive Officer 55 1982 Andries Ruijssenaars..... President and Chief Operating Officer**; Senior Vice President*, Director*** 52 1994 Melvin F. Chubb, Jr...... Senior Vice President and Director 61 1988 David N. Hall............ Senior Vice President -- Finance 55 1987 Wayne R. Wickens......... Senior Vice President** 48 1994 Carroll D. Curless....... Vice President and Controller 56 1984 James A. Ralston......... Vice President, General Counsel and Secretary**** 48 1982 - --------------- * Through November 30, 1994 ** Effective December 1, 1994 *** Effective November 2, 1994 **** Elected Secretary May 4, 1994
18 19 Mr. Thomas E. Petry was first employed by the Company in 1968, elected Assistant Treasurer in 1971, elected Treasurer in 1973, elected Vice President and Treasurer in 1974, served as President, Akron Standard Division, from 1977 to 1978, elected Group Vice President in 1978, elected a Director and President and Chief Operating Officer in 1981, elected President and Chief Executive Officer in 1982, served as President from 1981-89 and from 1992-94, has been serving as Chief Executive Officer since 1982, and has also been serving as Chairman of the Board since 1989. Mr. Andries Ruijssenaars was first employed by the Company in 1980 as General Manager of Eagle-Picher Industries GmbH in Ohringen, Germany; served as Executive Vice President, The Ohio Rubber Company Division from 1986 to 1987; President, The Ohio Rubber Company Division from 1987 to 1989; was elected Senior Vice President in 1989; was appointed a Director in November 1994; and was elected President and Chief Operating Officer effective December 1, 1994 and has been serving in those capacities since December 1, 1994. Mr. Melvin F. Chubb, Jr., was employed by the Company in 1988 and was elected and has been serving as Senior Vice President since that time. In 1990 Mr. Chubb was elected a Director. Prior to joining the Company, he completed a career in the United States Air Force, having attained the rank of Lieutenant General and having served most recently as commander of the Electronic Systems Division, Air Force Systems Command at Hanscom Air Force Base. Mr. David N. Hall was first employed by the Company and elected Treasurer in 1977, was elected Vice President and Treasurer in 1979, and was elected and has been serving as Senior Vice President -- Finance since 1987. Mr. Wayne R. Wickens joined the Company in 1976 as a management trainee with the former Fabricon Automotive Division, was promoted to Plant Manager in 1979, Vice President in 1981 and then President of Fabricon Automotive in 1986; was named President of the Wolverine Gasket Division in 1988; was named Vice President of the Eagle-Picher Automotive Group in 1989; was named Division President of Hillsdale Tool & Manufacturing Co. in 1990, and was elected Senior Vice President of the Company effective December 1, 1994. Mr. Carroll D. Curless was first employed by the Company in 1964, elected Assistant Controller in 1978, Controller in 1984, and was elected and has been serving as Vice President and Controller since 1986. Mr. James A. Ralston was first employed in the Legal Department of the Company in 1979, elected Assistant Secretary in 1982, General Counsel in 1982, was elected Vice President and General Counsel in 1984; and was also elected Secretary in May 1994. He has been serving as Vice President, General Counsel and Secretary since May 4, 1994. Executive officers serve during the pleasure of the Board, or until their successors are elected and qualified. There are no family relationships existing between or among the above executive officers and directors of the registrant. 19 20 ITEM 11. EXECUTIVE COMPENSATION. The following Summary Compensation Table sets forth the compensation provided by the Company to the Chief Executive Officer and each of the other four most highly compensated executive officers (collectively, the "named executive officers") for the last three fiscal years: SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ---------------------------------------------- OTHER FISCAL ANNUAL ALL OTHER NAME AND YEAR COMPENSATION COMPENSATION PRINCIPAL POSITION ENDED SALARY($) BONUS($) ($)(4)(5) ($)(4)(6) - ----------------------------------------- --------- --------- -------- ------------ ------------ Thomas E. Petry.......................... 11/30/94 575,000 216,000 150,149 169,763 Chairman and Chief Executive Officer(1) 11/30/93 575,000 100,000 149,492 178,154 11/30/92 575,000 105,000 75,488 128,557 David N. Hall............................ 11/30/94 320,000 95,000 193,447 216,177 Senior Vice President -- Finance 11/30/93 310,000 65,000 50,133 62,692 11/30/92 300,000 90,000 12,046 24,181 Andries Ruijssenaars..................... 11/30/94 300,000 100,000 86,033 101,197 President and Chief Operating Officer(2) 11/30/93 275,000 75,000 22,760 31,420 11/30/92 265,000 80,000 9,764 20,800 Melvin F. Chubb, Jr. .................... 11/30/94 280,000 75,000 326,853 370,313 Senior Vice President 11/30/93 275,000 45,000 0 4,497 11/30/92 265,000 70,000 0 4,364 James A. Ralston......................... 11/30/94 205,000 52,000 7,399 13,441 Vice President, General Counsel and 11/30/93 200,000 34,000 7,214 13,303 Secretary(3) 11/30/92 195,000 42,000 2,593 8,625 - --------------- (1) Also served as President through November 30, 1994. (2) Served as Senior Vice President through November 30, 1994; elected President and Chief Operating Officer effective December 1, 1994. (3) Elected Secretary May 4, 1994. (4) Under transition rules, this information need not be given for fiscal years ended 11/30/92 or earlier; however, it is being provided for the fiscal year ended 11/30/92. (5) This column includes nothing for perquisites since in no case did they exceed the reporting thresholds (the lesser of 10% of salary plus bonuses or $50,000), but includes amounts for the payment of taxes on purchases of annuities under the Supplemental Executive Retirement Plan. (6) All Other Compensation:
COST OF ANNUITY UNDER COMPANY NON-QUALIFIED CONTRIBUTIONS SUPPLEMENTAL TO EAGLE-PICHER EXECUTIVE RETIREMENT YEAR RETIREMENT SAVINGS ENDED PLAN($) PLAN($) TOTAL($) --------- ------------- ---------------- -------- Thomas E. Petry.................. 11/30/94 165,143 4,620 169,763 David N. Hall.................... 11/30/94 211,557 4,620 216,177 Andries Ruijssenaars............. 11/30/94 96,577 4,620 101,197 Melvin F. Chubb, Jr.............. 11/30/94 365,693 4,620 370,313 James A. Ralston................. 11/30/94 8,821 4,620 13,441
20 21 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES Note: Registrant has never granted Stock Appreciation Rights (SARs), so there are no SARs outstanding. There were no exercises of options by, or grants of options to, the named executive officers during fiscal 1994.
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR-END(#) YEAR-END($) NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ---------------------------------------- ------------------------- ------------------------- Thomas E. Petry......................... 0/100,000 * David N. Hall........................... 0/ 50,000 * Andries Ruijssenaars.................... 0/ 50,000 * Melvin F. Chubb, Jr..................... 0/ 50,000 * James A. Ralston........................ 0/ 30,000 * - --------------- * None of the unexercised options held by any of the named executive officers was "In-the-Money" as of November 30, 1994. Further, the options were exercisable only if the last selling price per share on the New York Stock Exchange or its successor prior to the date on which the Company received written notice of the exercise was at least 20% above the option price per share. Trading in the Company's shares on the New York Stock Exchange ("NYSE") was suspended on November 15, 1993, and the NYSE delisted the Company's shares effective June 9, 1994. All of the unexercised options are at a price of $2.50 per share.
PENSION BENEFITS The following table shows the estimated total combined annual benefits to named executive officers upon retirement at age 62 payable under Social Security, the Eagle-Picher Salaried Plan, and the Supplemental Executive Retirement Plan: PENSION PLAN TABLE
YEARS OF SERVICE ------------------------------------------------------------- REMUNERATION 15 20 25 30 35 ---------------------------- --------- --------- --------- --------- --------- $250,000.................... $ 90,000 $ 120,000 $ 150,000 $ 150,000 $ 150,000 300,000.................... 108,000 144,000 180,000 180,000 180,000 350,000.................... 126,000 168,000 210,000 210,000 210,000 400,000.................... 144,000 192,000 240,000 240,000 240,000 450,000.................... 162,000 216,000 270,000 270,000 270,000 500,000.................... 180,000 240,000 300,000 300,000 300,000 550,000.................... 198,000 264,000 330,000 330,000 330,000 600,000.................... 216,000 288,000 360,000 360,000 360,000 650,000.................... 234,000 312,000 390,000 390,000 390,000 700,000.................... 252,000 336,000 420,000 420,000 420,000 750,000.................... 270,000 360,000 450,000 450,000 450,000 800,000.................... 288,000 384,000 480,000 480,000 480,000 850,000.................... 306,000 408,000 510,000 510,000 510,000 900,000.................... 324,000 432,000 540,000 540,000 540,000 950,000.................... 342,000 456,000 570,000 570,000 570,000
The Eagle-Picher Salaried Plan, a non-contributory defined benefit pension plan in which the named executive officers are participants, provides benefits after retirement based on the highest average monthly compensation during five consecutive years of the last ten years preceding retirement. For purposes of the 21 22 Plan, compensation includes base salary, bonuses, commissions, and severance payments; salary and bonus included are as reported in the Summary Compensation Table, and commissions and severance payments, if there had been any, would have been included in that Table. The benefits shown by the Pension Plan Table above include amounts payable under Social Security and the Company's Supplemental Executive Retirement Plan as well as those payable under the Eagle-Picher Salaried Plan. Benefits are computed on the basis of straight-life annuity amounts. The estimated credited years of service with the Company for the named executive officers at age 62 are: Thomas E. Petry............................................ 33 David N. Hall.............................................. 24 Andries Ruijssenaars....................................... 24 Melvin F. Chubb, Jr........................................ 12 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 Severance Plan, a participant whose employment is terminated by the Company other than for cause receives: a Base Severance Benefit of one week's pay for each year of Company service, payable under general payroll pay practices, but reduced dollar for dollar by any compensation earned from a subsequent employer during the period such benefits are being paid; a Supplemental Severance Benefit ranging from three months' salary up to one year's salary, payable in a lump sum upon termination; and continuation of certain insurance benefits for up to one week for each year of service. Currently, the Severance Plan provides that the payment of Supplemental Severance Benefits will terminate upon confirmation of a plan of reorganization. The proposed plan of reorganization provides, however, for the continuation of the Severance Plan for a period of at least 12 months after the effective date of the plan of reorganization. COMPENSATION OF DIRECTORS Directors are paid a retainer of $18,000 per year, a fee of $750 for each Board meeting attended, and a fee of $750 for each Board committee meeting attended. Board committee members, excluding committee chairmen, are paid a retainer of $3,000 per year for each committee on which they serve; the chairman of each Board committee is paid a retainer of $5,000 per year. The Company does not pay director retainers or attendance fees, or committee retainers or attendance fees, to directors who are employees of the Company. Directors who are not also employees of the Company who retire with ten or more years of service as members of the Board are paid an annual advisory fee for life in an amount equal to the annual directors retainer paid at the time of their retirement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During fiscal 1994, Messrs. LeBlond (Chairman), Christensen, Coombe, and Howe, directors of the Company, constituted the Stock Option/Compensation Committee. During fiscal 1994 and as of February 24, 1995 Mr. Petry, Chairman, President (through November 30, 1994), and Chief Executive Officer of the Company, served as a director and as a member of the compensation committee of The Wm. Powell Company. During fiscal 1994 and as of February 24, 1995, Mr. Coombe was Chairman of the Board of The Wm. Powell Company. 22 23 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of February 24, 1995, beneficial ownership of the Company's Common Stock by all directors; each of the named executive officers; and all directors and executive officers as a group, was:
AMOUNT AND NATURE OF BENEFICIAL PERCENT OWNERSHIP OF CLASS ----------- --------- DIRECTORS Paul W. Christensen, Jr....................................... 38,000(1) * Melvin F. Chubb, Jr........................................... 51,474(2)(3)(4) * V. Anderson Coombe............................................ 4,480(1) * Roger L. Howe................................................. 1,000 * Daniel W. LeBlond............................................. 0 * Powell McHenry................................................ 1,000 * Thomas E. Petry............................................... 129,102(2)(3) * Eugene P. Ruehlmann........................................... 1,000 * Andries Ruijssenaars.......................................... 52,443(2)(3) * NAMED EXECUTIVE OFFICERS David N. Hall................................................. 62,482(3) * James A. Ralston.............................................. 36,797(3) * DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (13 PERSONS)...... 422,511(5) 3.83% - --------------- * Less than 1%. (1) The following persons disclaim beneficial ownership as to the following numbers of shares included herein which are beneficially owned by family members: Mr. Christensen -- 13,000 shares; Mr. Coombe -- 1,520 shares. (2) Messrs. Chubb, Petry and Ruijssenaars are also executive officers of the Company; their holdings of Company stock are listed here and not duplicated under the Named Executive Officers individual listing immediately below. (3) Includes shares subject to options to purchase within 60 days: Mr. Chubb -- 50,000; Mr. Petry -- 100,000; Mr. Ruijssenaars -- 50,000; Mr. Hall -- 50,000; Mr. Ralston -- 30,000. The terms of the option grants make the options exercisable if the last selling price per share on the New York Stock Exchange or its successor is at least $3.00 on the day prior to the date on which the Company receives written notice of the exercise. (4) Does not include 360 shares owned under the Uniform Gifts to Minors Act by adult children not of the same household. (5) This figure includes 320,000 shares subject to options to purchase within 60 days on the same terms as set forth in footnote (3) above.
All shares shown above as owned were directly owned except as footnoted. Directors and executive officers are considered control persons of the Company. There were as of February 24, 1995 no beneficial owners of more than 5% of the Company's Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Board of Directors has no knowledge of any significant transaction or proposed significant transaction to which the Company or any subsidiary and any director, officer, or nominee for director, or any associate of such director, officer, or nominee, were or are to be parties. 23 24 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) All Financial Statements
1. Eagle-Picher Industries, Inc. (Incorporated by reference to the Company's Annual Report for the fiscal year ended November 30, 1994, Exhibit 13 -- See Part II above) Independent Auditors' Report -- Incorporated by reference to Exhibit 13, page 31 3. Exhibits (numbers keyed to Item 601, Regulation S-K) * 3.(i) Amended Articles of Incorporation through May 28, 1986. Incorporated by reference to Exhibit 1 to Form S-8 Registration Statement No. 33-45179 for the Registrant's Stock Option Plan of 1990 (SEC File No. 1-1499) * (ii) Code of Regulations of Eagle-Picher Industries, Inc., last amended March 26, 1985. Incorporated by reference to Exhibit 3(b) to Form 10-K Annual Report of the Registrant for its fiscal year ended November 30, 1992 (SEC File No. 1-1499) * 4.(a) Form of Indenture relating to the $50,000,000 Eagle-Picher Industries, Inc. 9% Sinking Fund Debentures due March 1, 2017, dated as of March 1, 1987 between Eagle-Picher Industries, Inc. and The Bank of New York. Incorporated by reference to Form 8-K of Eagle-Picher Industries, Inc., March 5, 1987 (located on microfiche at the SEC Public Reference Facility) (SEC File No. 1-1499) * (b)(i) Credit and Agency Agreement (debtor-in-possession financing agreement) dated as of November 5, 1992. Incorporated by reference to Exhibit 4(b) to Form 10-K Annual Report of the Registrant for its fiscal year ended November 30, 1992 (SEC File No. 1-1499) (ii) First Amendment to Credit Agreement dated as of August 29, 1994 *10.(a) Eagle-Picher Industries, Inc. Stock Option Plan of 1983, as amended. Incorporated by reference to Exhibit 28 to Post Effective Amendment No. 1 dated April 10, 1990 and Appendix 2 dated May 30, 1991 to Form S-8 Registration Statement No. 33-5792 (SEC File No. 1-1499) * (b) Eagle-Picher Industries, Inc. Stock Option Plan of 1990. Incorporated by reference to Appendix A to Proxy Statement for Annual Meeting of Shareholders, March 27, 1990 (SEC File No. 1-1499) * (c) Eagle-Picher Supplemental Executive Retirement Plan. Incorporated by reference to Report on Form 10-K of Eagle-Picher Industries, Inc. for the fiscal year ended November 30, 1987 (located on microfiche at the SEC Public Reference Facility) (SEC File No. 1-1499) (d) Eagle-Picher Industries, Inc. Severance Plan dated as of June 25, 1991 11. Calculation of Average Number of Shares 13. Excerpts from Eagle-Picher Industries, Inc. Annual Report for the fiscal year ended November 30, 1994 21. Subsidiaries of the Registrant 23. Independent Auditors' Consent 24.(a),(b) Powers of Attorney 27. Financial Data Schedules (submitted electronically to the SEC for its information) 99. Plants and Locations - --------------- * Incorporated by reference.
(b) Reports on Form 8-K. (i) None during last quarter of fiscal 1994. 24 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Eagle-Picher Industries, Inc. By /s/ THOMAS E. PETRY ------------------------------------- Thomas E. Petry Chairman of the Board and Chief Executive Officer Date: February 28, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ THOMAS E. PETRY Date: February 28, 1995 - --------------------------------------------- Thomas E. Petry, Chairman of the Board and Chief Executive Officer /s/ DAVID N. HALL Date: February 28, 1995 - --------------------------------------------- David N. Hall, Senior Vice President-Finance (Principal Financial Officer) /s/ CARROLL D. CURLESS Date: February 28, 1995 - --------------------------------------------- Carroll D. Curless, Vice President and Controller (Principal Accounting Officer) /s/ MELVIN F. CHUBB, JR. Date: February 28, 1995 - --------------------------------------------- Melvin F. Chubb, Jr., Director /s/ PAUL W. CHRISTENSEN, JR. Date: February 28, 1995 - --------------------------------------------- Paul W. Christensen, Jr., Director /s/ V. ANDERSON COOMBE Date: February 28, 1995 - --------------------------------------------- V. Anderson Coombe, Director /s/ ROGER L. HOWE Date: February 28, 1995 - --------------------------------------------- Roger L. Howe, Director /s/ DANIEL W. LEBLOND Date: February 28, 1995 - --------------------------------------------- Daniel W. LeBlond, Director /s/ POWELL MCHENRY Date: February 28, 1995 - --------------------------------------------- Powell McHenry, Director /s/ EUGENE P. RUEHLMANN Date: February 28, 1995 - --------------------------------------------- Eugene P. Ruehlmann, Director /s/ ANDRIES RUIJSSENAARS Date: February 28, 1995 - --------------------------------------------- Andries Ruijssenaars, Director
25 26 EXHIBIT INDEX
EXHIBIT NUMBER - --------- 3(i) -- Articles of Incorporation* 3(ii) -- Code of Regulations* 4(a) -- Form of Indenture, $50,000,000 9% Sinking Fund Debentures due March 1, 2017* 4(b)(i) -- Credit and Agency Agreement, dated as of November 5, 1992* 4(b)(ii) -- First Amendment to Credit Agreement, dated as of August 29, 1994 10(a),(b) -- Eagle-Picher Industries, Inc. Stock Option Plans of 1983 and 1990* 10(c) -- Eagle-Picher Supplemental Executive Retirement Plan* 10(d) -- Eagle-Picher Industries, Inc. Severance Plan dated as of June 25, 1991 11 -- Statement re Calculation of Average Number of Shares 13 -- Excerpts from Annual Report for the Fiscal Year Ended November 30, 1994 21 -- Subsidiaries of the Registrant 23 -- Independent Auditors' Consent 24(a),(b) -- Powers of Attorney 27 -- Financial Data Schedules (Submitted electronically to the SEC for its information.) 99 -- Plants and Locations - --------------- * Incorporated by reference. See page 24 above.
26 EX-4.B.2 2 EAGLE PICHER 10-K EXHIBIT 4(B)(II) 1 Exhibit 4(b)(ii) FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AND AGENCY AGREEMENT, dated as of August 29, 1994 (this "First Amendment"), among EAGLE-PICHER INDUSTRIES, INC., an Ohio corporation and a debtor and debtor in possession (the "Debtor"), MICHIGAN AUTOMOTIVE RESEARCH CORP., a Michigan corporation and a debtor and debtor in possession, EDI, INC., a Michigan corporation and a debtor and debtor in possession, DAISY PARTS, INC., a Michigan corporation and a debtor and debtor in possession, HILLSDALE TOOL AND MANUFACTURING CO., a Michigan corporation and a debtor and debtor in possession, EAGLE-PICHER MINERALS, INC., a Nevada corporation and a debtor and debtor in possession, and TRANSICOIL INC., a Pennsylvania corporation and a debtor and debtor in possession (collectively, the "Guarantors"), the Banks set forth on the signature pages hereof (collectively, the "Banks" and individually, a "Bank"), and NBD BANK, N.A., as agent for the Banks (in such capacity, the "Agent"). RECITALS A. The parties hereto have entered into a Credit and Agency Agreement dated as of November 5, 1992 (the "Credit Agreement"), which is in full force and effect. B. The Debtor desires to amend the Credit Agreement as herein provided, and the Banks and the Agent are willing to so amend the Credit Agreement on the terms and conditions set forth herein. AGREEMENT Based upon these recitals, the parties agree as follows: 1. Amendment. Upon the Debtor satisfying the conditions set forth in paragraph 4 (the date that this occurs being called the "effective date"), the Credit Agreement shall be amended as follows: (a) The definition of "Automatic Termination Date" in Section 1.1 shallbe amended to read as follows: "'Automatic Termination Date' means the later of December 31, 1996, or any extended date established pursuant to Section 2.9." (b) Section 5.2(j) concerning Capital Expenditures shall be amended by deleting the figure "$35,000,000" and substituting therefor the figure "$50,000,000". 2 2. References to Credit Agreement. From and after the effective date of this First Amendment, references to the Credit Agreement in the Credit Agreement and all other Loan Documents (as each of the foregoing is amended hereby or pursuant hereto) shall be deemed to be references to the Credit Agreement as amended hereby. 3. Representations and Warranties. The Debtor and the Guarantors jointly and severally represent and warrant to the Banks and the Agent that: (a) (i) The execution, delivery and performance of this First Amendment and all agreements and documents delivered pursuant hereto by each of the Debtor and each Guarantor have been duly authorized by all necessary corporate action and does not and will not violate any provision of any law, rule, regulation, order, judgment, injunction, or award presently in effect applying to it, or of its articles of incorporation or By-Laws or Code of Regulations, or result in a breach of or constitute a default under any material agreement, lease or instrument to which the Debtor or any Guarantor is a party or by which it or its properties may be bound or affected; (ii) no authorization, consent, approval, license, exemption or filing of a registration with any court or governmental department, agency or instrumentality is or will be necessary to the valid execution, delivery or performance by each of the Debtor and each Guarantor of this First Amendment and all agreements and documents delivered pursuant hereto; and (iii) this First Amendment and all agreements and documents delivered pursuant hereto by each of the Debtor and each Guarantor are the legal, valid and binding obligations of the Debtor and each Guarantor enforceable against each in accordance with the terms thereof. (b) After giving effect to the amendments contained herein, the representations and warranties contained in Article IV (other than Section 4.5) of the Credit Agreement are true and correct on and as of the effective date hereof with the same force and effect as if made on and as of such effective date. (c) The consolidated balance sheet of the Debtor and its Subsidiaries and the consolidated statements of income, retained earnings, and cash flows of the Debtor and its Subsidiaries for the fiscal year ended November 30, 1993, certified by the Debtor's accountants, and the interim consolidated balance sheet of the Debtor and its Subsidiaries and the interim consolidated statements of income, retained earnings, and cash flows of the Debtor and its Subsidiaries for the six-month period ended May 31, 1994, copies of which have been furnished to the Banks, fairly present the consolidated financial condition of the Debtor and its Subsidiaries as at the date thereof, and the consolidated results of operations of the Debtor and its Subsidiaries for the respective periods indicated, all in accordance with generally accepted accounting principles consistently applied (subject in the case of the interim statements to year-end audit adjustments). There has been no material adverse change in the business, properties, operations, or condition, financial or otherwise, of the Debtor and its Subsidiaries, on a consolidated basis, since November 30, 1993. There are no liabilities of the Debtor or any Subsidiary, fixed or contingent, which are material but are not reflected in such financial statements or the notes thereto. (d) No Event of Default has occurred and is continuing or will exist under the Credit Agreement as of the effective date hereof. 3 4. Conditions to Effectiveness. This First Amendment shall not become effective until the Agent has received the following documents and the following conditions have been satisfied, each in form and substance satisfactory to the Agent: (a) Copies, certified as of the effective date hereof, of such corporate documents of the Debtor and each Guarantor, including articles of incorporation, bylaws (or certifying as to the copies of the articles of incorporation and by-laws previously delivered to the Banks), and incumbency certificates, and such documents evidencing necessary corporate action by the Debtor and each Guarantor with respect to this First Amendment and all other agreements or documents delivered pursuant hereto; (b) The favorable written opinion of counsel for the Debtor and the Guarantors, relating to those matters referenced in Section 3(a) of this First Amendment, Section 4.1 of the Credit Agreement, and as to such other matters as the Banks may reasonably request, such opinion to be in form and substance satisfactory to the Banks; (c) A certified copy of an order of the Bankruptcy Court authorizing and approving this First Amendment; (d) An amendment fee of $200,000 is paid to the Agent for the account of each Bank, such amount to be distributed by the Agent pro rata to the Banks based on their respective Commitment Percentages; and (e) Such additional agreements and documents, fully executed by the Debtor and its Subsidiaries, reasonably requested by the Agent. 5. Execution by Guarantors. Each of the Guarantors is joining in the execution of this First Amendment for the purpose of acknowledging and agreeing to all of the terms hereof and confirming the continued effect of the Credit Agreement and all other obligations to be observed or performed by each such Guarantor thereunder. Without limiting the foregoing, each Guarantor fully consents to the terms and provisions of this First Amendment and all other agreements and documents delivered pursuant hereto and the consummation of the transactions contemplated hereby. 6. Miscellaneous. The terms used but not defined herein shall have the respective meanings ascribed thereto in the Credit Agreement. Except as expressly amended hereby, the Credit Agreement and all other Loan Documents are hereby ratified and confirmed by the Banks, the Agent, the Debtor and the Guarantors and shall remain in full force and effect, and the Debtor and each Guarantor hereby acknowledge that they have no defense, offset or counterclaim with respect thereto. 7. Counterparts. This First Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this First Amendment by signing any such counterpart. 8. Governing Law. This First Amendment is a contract made under, and shall be governed by and construed in accordance with, the laws of the State of Michigan applicable to contracts made and to be performed entirely within such 4 state and without giving effect to the choice law principles of such state. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered as of the date first written above. EAGLE-PICHER INDUSTRIES, INC. an Ohio corporation and Debtor and Debtor in Possession By: /s/ David N. Hall And By: /s/ Harry A. Neely ------------------------ ------------------- Its: Senior Vice President- Its: Treasurer Finance HILLSDALE TOOL AND MICHIGAN AUTOMOTIVE MANUFACTURING CO. RESEARCH CORP. a Michigan corporation and a Michigan corporation and Debtor and Debtor in Debtor and Debtor in Possession Possession By: /s/ Harry A. Neely By: /s/ Harry A. Neely -------------------- -------------------- Its: Vice President Its: Vice President EDI, INC. EAGLE-PICHER MINERALS, INC. a Michigan corporation and a Nevada corporation and Debtor and Debtor in Debtor and Debtor in Possession Possession By: /s/ Harry A. Neely By: /s/ Harry A. Neely -------------------- -------------------- Its: Vice President Its: Vice President DAISY PARTS, INC. TRANSICOIL INC. a Michigan corporation and a Pennsylvania corporation Debtor and Debtor in and Debtor and Debtor in Possession Possession By: /s/ Harry A. Neely By: /s/ Harry A. Neely -------------------- ---------------------- Its: Vice President Its: Vice President 5 NBD BANK, N.A. By: /s/ Gary C. Wilson -------------------- Gary C. Wilson Its: Vice President THE BANK OF NOVA SCOTIA STAR BANK, N.A., CINCINNATI By: /s/ F.C.H. Ashby By: /s/ Wm. Goodwin, VP ------------------ -------------------- F.C.H. Ashby Its: Senior Manager Loan Operations Its: Vice President PNC BANK, OHIO, N.A. (formerly NBD BANK, N.A., as Agent known as The Central Trust Company, N.A.) By: /s/ David F. Knuth By: /s/ Gary C. Wilson -------------------- -------------------- David F. Knuth Gary C. Wilson Its: Vice President Its: Vice President EX-10.D 3 EAGLE PICHER 10-K EXHIBIT 10(D) 1 Exhibit 10(d) EAGLE-PICHER INDUSTRIES, INC. SEVERANCE PLAN SECTION 1. THE PLAN 1.1 The Plan. Eagle-Picher Industries, Inc. ("Company") adopts the following severance plan (the "Plan") effective May 13, 1991. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used in the Plan, the following terms shall mean: (a) "ADMINISTRATOR" means the Company's Director of Taxes or his designee. The Administrator shall be a named fiduciary under the Plan. (b) "AFFILIATES" means Daisy Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation, EDI, Inc., Eagle-Picher Europe, Inc., Eagle-Picher Minerals, Inc. and Hillsdale Tool & Manufacturing Company. (c) "ANNUAL COMPENSATION" means the total of all compensation, including wages, salary, and any other benefit of monetary value, whether paid in the form of cash or otherwise, which was paid as consideration for the participant's service during the 12-month period preceding the participant's severance, or the total which would have been so paid at the participant's usual rate of compensation for any participant who did not work for the Company or an Affiliate for the full 12-month period preceding the participant's severance. (d) "BASE PAY" means the participant's base annual pay rate at the date of his termination of employment. (e) "COMPANY" means Eagle-Picher Industries, Inc., or any successor thereto. (f) "EFFECTIVE DATE" means May 13, 1991 pursuant to Judge Burton Perlman's order entered that date. (g) "ELIGIBLE EMPLOYEES" means officers of the Company, division presidents (including the presidents of wholly-owned subsidiaries), all other General Office salaried employees and those employees designated by the Chief Executive Officer of the Company as key division employees. (h) "SERVICE" means Vesting Service as defined in the Eagle-Picher Retirement Income Plan for Salaried Employees. (i) "WEEK'S PAY" means a participant's Base Pay divided by 52. 2 2.2 Gender Reference. Any words in this Plan document (or amendments to it) which are used in one gender shall be read and construed to mean or include the other gender wherever they would so apply. SECTION 3. PARTICIPATION 3.1 Participants. Eligible Employees employed on the Effective Date shall become participants on that date. 3.2 New Participants. Any one meeting the definition of Eligible Employee hired or designated by the Chief Executive Officer after the Effective Date shall become a participant after completion of three months of Service. The Company's Chief Executive Officer can waive any service period required of a new participant by a written letter to the participant with a copy to the Administrator. SECTION 4. BENEFITS 4.1 Severance Benefit. Participants terminated by the Company or an Affiliate after the Effective Date other than for cause will receive a Base Severance Benefit, a Supplemental Severance Benefit and Group Medical and Life Insurance Benefits as described herein. The eligibility for, and the level of, benefits will be determined by the employee's status as an officer, division president or key employee at the date of the employee's termination of employment. 4.2 Base Severance Benefit. The Base Severance Benefit will provide one Week's Pay for each completed year of Service and, for any partial year of Service, one-twelfth Week's Pay for each completed month of Service. Payments shall be reduced dollar for dollar by compensation earned for services rendered by a participant for a subsequent employer during the period Base Severance Benefits are being paid. The minimum Base Severance Benefit shall be two Week's Pay. Payments under the Base Severance Benefit will be made under the general payroll practice for the unit in which the participant was employed. 4.3 Supplemental Severance Benefit. The Supplemental Severance Benefit will provide one year's Base Pay for officers and division presidents; six months Base Pay for salaried General Office and division employees designated as key employees by the Chief Executive Officer; and three months Base Pay for all other salaried General Office employees. The Supplemental Severance Benefit shall be paid in a lump sum on termination of employment. The Supplemental Severance Benefit shall terminate upon confirmation of a plan of reorganization. A participant who has not been terminated prior to the confirmation of a plan of reorganization will not be eligible for the Supplemental Severance Benefit. 4.4 Group Medical and Life Insurance Benefits. The Group Medical and Life Insurance Benefits will provide continued participation in the medical indemnity benefits, self-funded medical benefits, health maintenance organizations, and group term life insurance benefits (including the additional group term life insurance available at employee cost) as if the participant were an active employee of the Company or an Affiliate. These benefits will continue for one week for each year of Service unless 3 similar coverage is obtained from a subsequent employer. Any period for which medical benefits are provided hereunder shall reduce the period for which COBRA benefits are available. These benefits shall continue under the participant's election in force when his severance occurs, subject to any new election that would be available to him as an active employee. If the HMO or medical indemnity provider refuses to continue coverage for the participant, the participant will receive coverage under the self-funded medical benefit program available to employees at his location. 4.5 Vacation Pay. Any existing practices of the Company or Affiliates with respect to payment for unused vacation time at termination of employment shall not be affected by this Plan. 4.6 Maximum Severance Benefits. Payments under the Plan shall not exceed twice the participant's Annual Compensation. 4.7 Death of Participant. No benefits shall be payable upon the death of a participant except for any payment which may have been due prior to his date of death. SECTION 5. ADMINISTRATION 5.1 Powers and Duties. The Administrator shall have the power and the duty to take all action, and to make all decisions necessary or proper to carry out the Plan, including, without limitation, the following: (a) To interpret the Plan, which interpretations shall be final and conclusive; (b) To compute the benefit to be paid to any person under the Plan; (c) To provide procedures for withholding of any income or employment taxes from benefits payable hereunder. 5.2 Claims Procedure. (a) CLAIM, DENIAL AND NOTICE: Any participant who disagrees with the Administrator's determination of his right to benefits or the amount of the benefits shall file a written claim for the benefits he believes he is entitled to. If the Administrator denies the claim, in whole or in part, he shall furnish the participant with written notice of the denial of his claim within sixty (60) days of receipt of the claim. Such notice shall be written in a manner calculated to be understood by the participant and shall contain the specific reasons for such denial, specific references to pertinent Plan provisions on which the denial is based, a description of additional material or information which is needed to complete the claim and why such is necessary, and an explanation of the Plan's appeal procedure. 4 (b) APPEAL: Within sixty (60) days after the receipt of a notice that his claim was denied, the claimant may appeal the denial of his claim to the Administrator in writing stating the reason for his appeal and submitting any issues or comments for the Administrator's review. (c) DECISION ON APPEAL: Within sixty (60) days of receipt of an appeal, the Administrator shall mail to the applicant a written notice of his decision setting forth, in a manner calculated to be understood by the applicant, the specific reasons for his decision and the specific references to the pertinent Plan provisions on which his decision was based. 5.3 Indemnity For Liability. The Company shall indemnify the Administrator against any and all claims, losses, damages, expenses, including counsel fees, incurred by the Administrator and any liability, including any amounts paid in settlement with the Company's approval, arising from the Administrator's action or failure to act, except when the same is judicially determined to be attributable to the gross negligence or willful misconduct of the Administrator. SECTION 6. MISCELLANEOUS 6.1 Plan Year. The plan year shall be the calendar year. 6.2 Amendment or Termination. The Company reserves the right to amend or terminate this Plan at any time. A participant whose employment terminates after the termination or amendment of this Plan shall be entitled only to the benefits available under the Plan, if any, in existence at his termination of employment. In Witness Whereof, Eagle-Picher Industries, Inc. has caused this plan to be executed by its duly authorized corporate officers this 25th day of June 1991. EAGLE-PICHER INDUSTRIES, INC. By: /s/ Thomas E. Petry ------------------------- Attest: Thomas E. Petry Chairman of the Board and Chief Executive Officer /s/ David W. Matthews - ----------------------- David W. Matthews Assistant Secretary EX-11 4 EAGLE PICHER 10-K EXHIBIT 11 1 EXHIBIT 11 EAGLE-PICHER INDUSTRIES, INC. CALCULATION OF AVERAGE NUMBER OF SHARES THREE YEARS ENDED NOVEMBER 30, 1994
1994 1993 1992 ---- ---- ---- Average common shares issued 11,125,000 11,125,000 11,125,000 Less: Average common treasury shares (84,068) (94,485) (146,568) ---------- ---------- ---------- Average number of common shares outstanding 11,040,932 11,030,515 10,978,432 ========== ========== ==========
EX-13 5 EAGLE PICHER 10-K EXHIBIT 13 1 EXHIBIT 13 Excerpts from Eagle-Picher Industries, Inc. Annual Report for the fiscal year ended November 30, 1994. 2 CONSOLIDATED STATEMENT OF INCOME (LOSS) Eagle-Picher Industries, Inc.
Years Ended November 30 (In thousands of dollars, except per share) 1994 1993 1992 - ----------------------------------------------------------------------------------- NET SALES $756,741 $ 661,452 $611,458 OPERATING COSTS AND EXPENSES Cost of products sold 622,907 548,605 497,341 Selling and administrative 75,553 69,093 67,557 -------- ----------- -------- 698,460 617,698 564,898 -------- ----------- -------- OPERATING INCOME 58,281 43,754 46,560 Provision for asbestos litigation - (1,135,500) - Provision for environmental and other claims - (41,436) (2,000) Interest expense (contractual interest of $8,940 in 1994, $9,369 in 1993 and $10,193 in 1992) (1,809) (2,070) (2,691) Other income (expense) 703 (174) (945) -------- ----------- -------- INCOME (LOSS) BEFORE REORGANIZATION ITEMS, TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 57,175 (1,135,426) 40,924 REORGANIZATION ITEMS (3,426) (4,344) (9,038) -------- ----------- -------- INCOME (LOSS) BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 53,749 (1,139,770) 31,886 INCOME TAXES 5,000 5,000 3,000 -------- ----------- -------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 48,749 (1,144,770) 28,886 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS - (12,598) - -------- ----------- -------- NET INCOME (LOSS) $ 48,749 $(1,157,368) $ 28,886 ======== =========== ======== INCOME (LOSS) PER SHARE: INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 4.42 $(103.78) $ 2.63 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS - (1.14) - ------ -------- ------ NET INCOME (LOSS) $ 4.42 $(104.92) $ 2.63 ====== ======== ======
See accompanying notes to consolidated financial statements. -13- 3 CONSOLIDATED BALANCE SHEET Eagle-Picher Industries, Inc.
ASSETS November 30 (In thousands of dollars) 1994 1993 - -------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 92,606 $ 84,574 Receivables, less allowances of $1,445 in 1994 and $1,182 in 1993 109,130 97,586 Income tax refund receivable 2,246 3,275 Inventories 81,982 68,306 Prepaid expenses 10,295 8,283 -------- -------- TOTAL CURRENT ASSETS 296,259 262,024 -------- -------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements 11,940 11,660 Buildings 79,937 75,749 Machinery and equipment 301,518 274,931 Construction in progress 14,623 13,392 -------- -------- 408,018 375,732 Less accumulated depreciation 263,369 241,331 -------- -------- NET PROPERTY, PLANT AND EQUIPMENT 144,649 134,401 -------- -------- DEFERRED INCOME TAXES 43,924 29,924 OTHER ASSETS 36,275 33,011 -------- -------- TOTAL ASSETS $521,107 $459,360 ======== ========
See accompanying notes to consolidated financial statements. -14- 4 CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) November 30 (In thousands of dollars) 1994 1993 - ---------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable $ 43,691 $ 32,365 Compensation and employee benefits 14,005 12,167 Long-term debt - current portion 1,726 2,737 Income taxes 5,223 5,613 Taxes other than income 4,611 4,125 Other accrued liabilities 16,705 17,793 ---------- ---------- TOTAL CURRENT LIABILITIES 85,961 74,800 ---------- ---------- LIABILITIES SUBJECT TO COMPROMISE 1,657,265 1,656,563 LONG-TERM DEBT, less current portion 19,896 21,712 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 21,070 20,209 OTHER LONG-TERM LIABILITIES 3,608 3,282 ---------- ---------- TOTAL LIABILITIES 1,787,800 1,776,566 ---------- ---------- SHAREHOLDERS' EQUITY (DEFICIT) Preference stock - no par value. Authorized 873,457 shares; none issued - - Common stock - $1.25 par value per share. Authorized 30,000,000 shares; issued 11,125,000 shares 13,906 13,906 Additional paid-in capital 36,378 36,378 Accumulated deficit (1,317,118) (1,365,867) Foreign currency translation 2,054 290 ---------- ---------- (1,264,780) (1,315,293) Cost of 84,068 common treasury shares (1,913) (1,913) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,266,693) (1,317,206) ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 521,107 $ 459,360 ========== ==========
See accompanying notes to consolidated financial statements. -15- 5 CONSOLIDATED STATEMENT OF CASH FLOWS Eagle-Picher Industries, Inc.
Years Ended November 30 (In thousands of dollars) 1994 1993 1992 - -------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 48,749 $(1,157,368) $ 28,886 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for asbestos litigation - 1,135,500 - Provision for environmental and other claims - 41,436 2,000 Cumulative effect of accounting change - 12,598 - Depreciation and amortization 26,143 24,955 24,655 Changes in assets and liabilities: Receivables (11,544) (10,764) 579 Income tax refund receivable 1,029 101 (1,290) Due from insurance carriers - - 4,377 Inventories (13,676) (4,098) 1,787 Deferred income taxes (14,000) (12,137) (4,574) Accounts payable 11,326 5,539 1,263 Other (3,636) 2,111 (8,439) -------- ----------- -------- Net cash provided by operating activities before changes in liabilities subject to compromise 44,391 37,873 49,244 Changes in liabilities subject to compromise 702 (197) 1,553 -------- ----------- -------- Net cash provided by operating activities 45,093 37,676 50,797 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (35,887) (28,512) (21,583) Other 1,800 335 1,352 -------- ----------- -------- Net cash used in investing activities (34,087) (28,177) (20,231) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt - 810 2,243 Reduction of long-term debt (2,974) (4,007) (8,972) Issuance of common shares - 156 - -------- ----------- -------- Net cash used in financing activities (2,974) (3,041) (6,729) -------- ----------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 8,032 6,458 23,837 -------- ----------- -------- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 84,574 78,116 54,279 -------- ----------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 92,606 $ 84,574 $ 78,116 ======== =========== ========
See accompanying notes to consolidated financial statements. -16- 6 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, 1991 $13,906 $37,644 $ (237,385) $1,140 $(3,335) $ (188,030) Net income - - 28,886 - - 28,886 Foreign currency translation - - - 186 - 186 -------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1992 13,906 37,644 (208,499) 1,326 (3,335) (158,958) Net loss - - (1,157,368) - - (1,157,368) Stock options - (1,266) - - 1,422 156 Foreign currency translation - - - (1,036) - (1,036) -------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1993 13,906 36,378 (1,365,867) 290 (1,913) (1,317,206) Net income - - 48,749 - - 48,749 Foreign currency translation - - - 1,764 - 1,764 ------------------------------------------------------------------------- BALANCE NOVEMBER 30, 1994 $13,906 $36,378 $(1,317,118) $ 2,054 $(1,913) $(1,266,693) =========================================================================
See accompanying notes to consolidated financial statements. -17- 7 QUARTERLY DATA (Unaudited) (In thousands of dollars, except per share)
1994 FIRST SECOND THIRD FOURTH YEAR - -------------------------------------------------------------------------------------------------- NET SALES $177,754 $196,994 $186,191 $195,802 $756,741 - -------------------------------------------------------------------------------------------------- OPERATING INCOME 13,781 17,537 14,226 12,737 58,281 - -------------------------------------------------------------------------------------------------- NET INCOME 11,039 14,669 11,733 11,308 48,749 - -------------------------------------------------------------------------------------------------- NET INCOME PER SHARE 1.00 1.33 1.06 1.03 4.42 - -------------------------------------------------------------------------------------------------- COMMON STOCK PRICE (NYSE) HIGH (3) -- -- -- -- -- ------------------------------------------------------------------------------------------------ LOW (3) -- -- -- -- -- ------------------------------------------------------------------------------------------------ 1993 First Second Third Fourth Year - -------------------------------------------------------------------------------------------------- Net Sales $146,971 $176,366 $162,228 $175,887 $661,452 - -------------------------------------------------------------------------------------------------- Operating Income 8,390 14,100 10,384 10,880 43,754 - -------------------------------------------------------------------------------------------------- Income (Loss): Before Cumulative Effect of Accounting Change 6,404(1) 11,515(1) 8,006(1) (1,170,695)(2) (1,144,770) ------------------------------------------------------------------------------------------------ Cumulative Effect of Accounting Change (12,598)(1) - - - (12,598) ------------------------------------------------------------------------------------------------ Net Income (Loss) (6,194) 11,515 8,006 (1,170,695) (1,157,368) ------------------------------------------------------------------------------------------------ Income (Loss) Per Share: - -------------------------------------------------------------------------------------------------- Before Cumulative Effect of Accounting Change .59(1) 1.04(1) .73(1) (106.14)(2) (103.78) ------------------------------------------------------------------------------------------------ Cumulative Effect of Accounting Change (1.14)(1) - - - (1.14) ------------------------------------------------------------------------------------------------ Net Income (Loss) (.55) 1.04 .73 (106.14) (104.92) ------------------------------------------------------------------------------------------------ Common Stock Price (NYSE) High 4 3-5/8 3 2-5/8 4 ------------------------------------------------------------------------------------------------ Low 2-1/8 2-1/4 2-1/8 -- (3) -- (3) ------------------------------------------------------------------------------------------------
(1) During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits," retroactively to December 1, 1992. Besides the cumulative aftertax charge of $12.6 million, this accounting change reduced previously reported income by $254,000 in the first quarter ($.02 per share), $254,000 in the second quarter ($.02 per share) and $250,000 in the third quarter ($.02 per share). The Company also adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The impact of adopting this standard on previously reported income was not material. (2) On November 9, 1993, the Company reached an agreement on the principal elements of a joint plan of reorganization (see Note B) that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company recorded a provision to its income statement of $1.135 billion to increase its asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision for environmental and other claims of $41.4 million in the fourth quarter. (3) As a result of the Company's announcement on November 10, 1993 regarding the agreement discussed in note (2) above, the New York Stock Exchange ("NYSE") suspended trading of the Company's common stock, and on November 15, 1993 announced that it would make application to the Securities and Exchange Commission to delist the issue. The Company's common stock was removed from listing and registration on the NYSE effective June 9, 1994. The stock has not been traded on an organized exchange since the date of the Company's announcement, nor is the stock regularly quoted in the automated quotation system of a registered securities association. Therefore, common stock prices beyond November 10, 1993 have not been included above. -18- 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used in the preparation of the consolidated financial statements are summarized below. These policies conform to generally accepted accounting principles and have been consistently applied. The Company has accounted for all transactions related to the chapter 11 proceedings in accordance with Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," issued by the American Institute of Certified Public Accountants. Accordingly, Liabilities Subject to Compromise under the chapter 11 proceedings have been segregated on the Consolidated Balance Sheet and are recorded at the amounts that have been or are expected to be allowed on known claims rather than estimates of consideration those claims may receive in a plan of reorganization. In addition, the Consolidated Statements of Income (Loss) and Cash Flows separately disclose expenses and cash transactions, respectively, related to the chapter 11 proceedings. Principles of Consolidation The consolidated financial statements include the accounts of all of the Company's subsidiaries which are more than 50% owned and controlled. Intercompany accounts and transactions have been eliminated. Investments in nonconsolidated companies which are at least 20% owned are accounted for using the equity method. Separate condensed combined financial statements of the entities in chapter 11 have not been presented because they represent a substantial portion of the Company. Additionally, entities not in chapter 11 represent identifiable investments of those entities in chapter 11 and are therefore subject to the chapter 11 process. Cash and Cash Equivalents Marketable securities with original maturities of three months or less are considered to be cash equivalents. The carrying amount reported in the Consolidated Balance Sheet approximates fair value. Concentrations of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company's customer base includes all significant automotive manufacturers and their first tier suppliers in North America and Europe. Although the Company is directly affected by the well-being of the automotive industry, management does not believe significant credit risk existed at November 30, 1994. Inventories Inventories are valued at the lower of cost or market, which approximates current replacement cost. The last-in first-out ("LIFO") method of valuation was used for a substantial portion of inventories. Property, Plant and Equipment The Company records investments in land and land improvements, buildings and machinery and equipment at cost. Improvements are capitalized, while repair and maintenance costs are charged to operations as incurred. The Company provides for depreciation of plant and equipment using the straight-line method over the estimated lives of the assets. Cost in Excess of Net Assets Acquired Amounts are being amortized using the straight-line method primarily over 40 years. Retirement Plans Pension or profit sharing retirement plans cover substantially all of the Company's employees. Postretirement Benefits Other Than Pensions Effective December 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 ("FAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions." This standard requires that the Company charge the expected cost of retiree health benefits to expense during the years employees render service. In prior years, the Company recognized these benefits on a pay-as-you-go basis. Income Taxes Effective December 1, 1992, the Company implemented the provisions of Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes," which changes the criteria for recognizing deferred tax assets on the balance sheet. In 1992, the Company accounted for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 96 ("FAS 96"), "Accounting for Income Taxes." -19- 9 Foreign Currency Translation Adjustments resulting from translation of foreign currency financial statements generally are excluded from the results of operations and accumulated in a separate component of shareholders' equity (deficit). Gains and losses from foreign currency transactions are included in the determination of net income (loss) and were not material. Reclassifications Certain prior year amounts have been reclassified to conform with current year financial statement presentation. B. PROCEEDINGS UNDER CHAPTER 11 On January 7, 1991 (the "petition date"), Eagle-Picher Industries, Inc. (the "Company") and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code ("chapter 11") with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy Court"). Each filing entity is currently operating its business as a debtor in possession in accordance with the provisions of the Bankruptcy Code. An Unsecured Creditors' Committee, an Injury Claimants' Committee ("ICC"), an Equity Security Holders Committee and a Legal Representative for Future Claimants ("RFC") have been appointed in the chapter 11 cases. An unofficial asbestos co-defendants' committee has also been participating in the chapter 11 cases. In accordance with the provisions of the Bankruptcy Code, these parties have the right to be heard with respect to transactions outside the ordinary course of business. The ICC and the RFC are the primary parties with whom the Company is negotiating the terms of a plan of reorganization. In June 1992, a mediator was appointed by the Bankruptcy Court to assist the constituencies in their negotiations. On November 9, 1993, the Company reached an agreement on the principal elements of a joint plan of reorganization that provides a basis for the Company and its subsidiaries to emerge from chapter 11. The agreement is with the ICC and the RFC, the representatives of the holders of present and future asbestos-related personal injury and other toxic tort claims in the Company's chapter 11 case, and was reached with the assistance of the mediator appointed by the Bankruptcy Court. As a consequence of this agreement, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision of $41.4 million in 1993 for environmental and other litigation claims. Throughout 1994, the Company, the ICC and the RFC continued to refine the details of a joint plan of reorganization ("the Plan"). On January 18, 1995, the Company advised the Bankruptcy Court that it intended to file a plan of reorganization by the end of February 1995. It is currently contemplated that such plan of reorganization will be a joint plan among the Company, the ICC and the RFC. Because the Company could not conclude that the negotiations with the Unsecured Creditors' Committee and the Equity Security Holders' Committee would result in a consensual plan of reorganization, the Company expects to file the proposed Plan without the consent of such parties. Implementation of the treatment of claims and interests as provided in the proposed Plan is subject to confirmation of the Plan in accordance with the provisions of the Bankruptcy Code. The proposed Plan to be filed contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims and certain other tort claims. These claims will be channeled to and resolved by an independently administered claims trust (the "Trust"). It is also currently contemplated that the Plan will provide for the distribution of cash, notes, debentures, and common stock of the reorganized Company to the Trust and to holders of allowed unsecured claims on a pro-rata basis proportionate to the percentage of their claims to the total of the Liabilities Subject to Compromise. It is intended that the Plan will also provide that priority claims and convenience claims (general unsecured claims of $500 or less) will be paid in full, in cash. Under the Bankruptcy Code, shareholders are not entitled to any distribution under a plan of reorganization unless all classes of pre- petition creditors receive satisfaction in full of their allowed claims or accept a plan which allows shareholders to participate in the reorganized company or to receive a distribution. The proposed Plan does not contemplate that all classes of pre-petition creditors receive satisfaction in full of their allowed claims. Consequently, the Plan will not -20- 10 provide for any distribution to shareholders and their equity will be canceled. Liabilities incurred by the Company as of the petition date and subject to compromise under a plan of reorganization are separately classified in the Consolidated Balance Sheet and include the following:
(In thousands of dollars) 1994 1993 ---- ---- Asbestos liability - Note K $ 1,499,993 $ 1,500,029 Long-term debt - Note E 62,004 62,004 Accounts payable 41,074 43,135 Accrued liabilities - Note L 54,194 51,395 --------- --------- $ 1,657,265 $ 1,656,563 ========= =========
The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The Liabilities Subject to Compromise listed above have been reported on the basis of the expected amount of the allowed claims even though they may be settled for lesser amounts. Upon confirmation of a plan of reorganization, the Company would utilize the "fresh-start" reporting principles contained in SOP 90-7, which would result in adjustments relating to the amounts and classification of recorded assets and liabilities, determined as of the plan confirmation date. The Company believes that the ultimate consideration to be received by all unsecured creditors will be substantially less than the amounts shown in the accompanying Consolidated Balance Sheet. The net expense resulting from the Company's chapter 11 filings has been segregated from expenses related to ordinary operations in the accompanying Consolidated Statement of Income (Loss) and includes the following:
(In thousands of dollars) 1994 1993 1992 ---- ---- ---- Professional fees $ 6,304 $ 5,921 $ 8,996 Debt financing costs 200 - 476 Other expenses 210 807 1,823 Interest income (3,288) (2,384) (2,257) ------- ------- ------- $ 3,426 $ 4,344 $ 9,038 ======= ======= =======
Interest income is attributable to the accumulation of cash and cash equivalents subsequent to the petition date. C. INVENTORIES Inventories consisted of:
(In thousands of dollars) 1994 1993 ---- ---- Raw materials and supplies $ 52,146 $ 39,319 Work-in-process 24,907 25,381 Finished goods 15,853 13,983 -------- -------- 92,906 78,683 Allowance to value inventory at cost on the LIFO method 10,924 10,377 -------- -------- $ 81,982 $ 68,306 ======== ========
The percentage of inventories valued using the LIFO method was 81% in 1994 and 79% in 1993. The effects of liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years were not material. D. OTHER ASSETS Other assets consisted of:
(In thousands of dollars) 1994 1993 ---- ---- Cost in excess of net assets acquired, net of accumulated amortization of $3,973 in 1994 and $3,580 in 1993 $ 12,507 $ 12,900 Notes receivable 5,778 6,273 Prepaid pension cost - Note I 7,879 7,019 Other 10,111 6,819 -------- -------- $ 36,275 $ 33,011 ======== ========
Notes receivable include $4,550,000 received as partial consideration for the sale of a division. This note is payable in two equal installments in 1997 and 1998 and bears interest at 8%. Pursuant to the terms of the note, interest is payable semiannually commencing in August, 1994. The Company received the first interest payment in accordance with the terms of the note. The Company has not yet adopted Statement of Financial Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments in Debt and Equity Securities." The Company holds certain investments with no cost basis which would be accounted for in accordance with FAS 115. A substantial portion of these investments relate to shares of stock in a Canadian mining concern that the Company received in 1990 in settlement of certain indebtedness. The Company had previously deemed the investment to be permanently impaired and had recorded a loss on the investment in the amount of its full book value. The price of the stock, however, has significantly -21- 11 increased since then. At November 30, 1994, the fair value of investments that would be accounted for in accordance with FAS 115 was approximately $5.4 million. The Company is required to adopt FAS 115 on December 1, 1994 on a prospective basis. Upon adoption, the investments would be recorded at their fair value in the Consolidated Balance Sheet and any unrealized gains or losses would be reported in a separate component of shareholders' equity until realized. E. LONG-TERM DEBT AND SHORT-TERM BORROWINGS In October 1992, the Bankruptcy Court approved a debtor in possession financing agreement which provides a $40,000,000 committed revolving credit facility ("Facility"). The entire amount of the Facility is available for both cash borrowings and letters of credit. The Facility has been extended and it currently expires on the earlier of December 31, 1996 or the effective date of a confirmed plan of reorganization. Letters of credit totaling $32,941,000 and $34,091,000 were outstanding on November 30, 1994 and 1993, respectively, leaving the Company with $7,059,000 and $5,909,000, respectively, in available borrowing capacity under the Facility. There were no cash borrowings under the Facility at any time in 1994 or 1993. The annual rate of interest under this Facility is the agent bank's prime rate plus 1-1/2%. Fees for letters of credit are 1-1/2% to 2-1/2% per annum and a commitment fee equal to 1/2% per annum is due on the unused portion. The obligations are secured by accounts receivable and inventories and are afforded administrative priority under the Bankruptcy Code. The Company has had sufficient collateral to borrow the maximum amount under this Facility. The Facility also contains affirmative and negative covenants which include, among other things, limitations on capital expenditures and additional borrowings and minimum quarterly and annual cash flow requirements. The Company has been in compliance with these covenants throughout the term of the Facility and its extensions. Repayments of pre-petition debt obligations may be made only with the approval of the Bankruptcy Court. The Bankruptcy Court has approved payments by the Company with respect to certain pre-petition secured debt obligations in order to provide the holders of such obligations with adequate protection of their interests in their collateral security. These adequate protection payments generally have been in the form of principal payments paid over the remaining lives of the collateral assets in an aggregate amount equal to the determined market value of those assets. The amount by which the original obligation and pre-petition accrued interest exceeds the collateral value is deemed to be a general unsecured claim. These claims are included in Liabilities Subject to Compromise. Interest expense has not been recorded on these obligations for the post-petition period because interest is not payable. Interest on undersecured and other unsecured pre-petition debt obligations would have been $7,131,000, $7,299,000, and $7,502,000 in 1994, 1993, and 1992, respectively. Due to the extenuating circumstances involving both secured and unsecured long-term debt as a result of the chapter 11 filings and the anticipated reorganization, it is not practicable to estimate the fair value of long-term debt which is described below. Long-term debt consisted of:
(In thousands of dollars) 1994 1993 ---- ---- 9-1/2% Sinking fund debentures, due 2017 $ 50,000 $ 50,000 Industrial revenue bonds 18,125 18,200 Secured notes 13,683 15,005 Debt of foreign subsidiaries 1,304 2,684 Other 514 564 ------- ------- 83,626 86,453 Less: Current portion 1,726 2,737 Subject to compromise 62,004 62,004 ------- ------- Long-term debt, less current portion $ 19,896 $ 21,712 ======= ======= Unsecured debt included in Liabilities Subject to Compromise consisted of: Sinking fund debentures $ 50,000 $ 50,000 Industrial revenue bonds 7,500 7,500 Unsecured portion of secured notes 4,132 4,132 Other 372 372 ------- ------- $ 62,004 $ 62,004 ======= =======
Interest rates averaged 4% in 1994, 5% in 1993, and 6% in 1992 on the industrial revenue bonds, foreign and other long-term debt on which the Company is obligated to pay interest. These long-term debt amounts are to mature at various dates through 2004. Long-term debt (excluding amounts subject to compromise) is scheduled to mature as follows: $1,726,000 in 1995, -22- 12 $1,616,000 in 1996, $2,257,000 in 1997, $1,589,000 in 1998, and $1,295,000 in 1999. The unsecured portion of long-term debt will be resolved in a plan of reorganization. During 1994, 1993, and 1992, the Company paid interest of $1,765,000, $2,075,000, and $2,746,000, respectively. F. INCOME TAXES The Company adopted FAS 109 in 1993. The cumulative effect of this change in accounting for income taxes was not material and prior year financial statements were not restated to apply the provisions of FAS 109. The effect of adopting FAS 109 on quarterly results in 1993 was also not material. Total income tax benefit for the year ended November 30, 1993 of $1,490,000 consisted of $5,000,000 expense from operations and $6,490,000 tax benefit of the cumulative effect of the change in accounting for postretirement benefits. The following is a summary of the components of income taxes (benefit) from operations:
(In thousands of dollars) 1994 1993 1992 ---- ---- ---- Federal - current $ 15,600 $ 12,500 $ 4,200 - deferred (14,000) (11,800) (4,600) Foreign 900 2,700 2,700 State and local 2,500 1,600 700 -------- -------- -------- $ 5,000 $ 5,000 $ 3,000 ======== ======== ========
The sources of income (loss) before income tax expense (benefit) and cumulative effect of accounting change are as follows:
(In thousands of dollars) 1994 1993 1992 ---- ---- ---- United States $ 47,670 $(1,143,312) $ 27,916 Foreign 6,079 3,542 3,970 -------- ----------- -------- $ 53,749 $(1,139,770) $ 31,886 ======== =========== ========
The significant components of deferred income tax expense (benefit) attributable to income from operations are as follows:
(In thousands of dollars) 1994 1993 ---- ---- Deferred tax benefit (exclusive of the effects of other components listed below) $ (400) $(412,900) Adjustments to deferred tax assets and liabilities for enacted changes in tax laws and rates - (3,800) Change in beginning-of-the-year balance of the valuation allowance for deferred tax assets (13,600) 404,900 -------- -------- $(14,000) $(11,800)
======== ======== In 1992, the deferred tax benefit of $4,600,000 was primarily attributable to the utilization of accounting loss carryforwards and tax credits. Components of deferred tax balances as of November 30 are as follows:
(In thousands of dollars) 1994 1993 ---- ---- Deferred tax liabilities: Property, plant and equipment $ (6,608) $ (6,863) Prepaid pension (2,758) (2,457) Other (3,371) (3,866) -------- -------- Total deferred tax liabilities (12,737) (13,186) -------- -------- Deferred tax assets: Asbestos liability 524,998 525,010 Accrued liabilities (including amounts subject to compromise) 26,223 25,742 Postretirement benefit liability 7,375 7,073 Other 4,048 4,848 -------- -------- Total deferred tax assets 562,644 562,673 -------- -------- Valuation allowance (505,983) (519,563) -------- -------- Net deferred tax assets $ 43,924 $ 29,924 ======== ========
Given the uncertainties surrounding the chapter 11 case, the Company does not believe that recognition of a significant portion of the deferred tax assets relating to the asbestos liability and other pre-petition liabilities is appropriate at -23- 13 this time. These liabilities have been recorded at the expected amounts of the allowed claims; if the liabilities are settled for lesser amounts, there will be a corresponding reduction in the deferred tax assets and related valuation allowance. A significant portion of the net deferred tax asset recognized at November 30, 1994 is expected to be recovered through the carryback of amounts which will become deductible when the related liabilities are paid. The change in the valuation allowance in 1994 approximates the increase in the amounts recoverable through these carrybacks. The differences between the total income tax expense from operations and the income tax expense (benefit) computed using the Federal income tax rate were as follows:
(In thousands of dollars) 1994 1993 1992 ---- ---- ---- Computed "expected" tax expense (benefit) $ 18,800 $(398,900) $ 10,800 Change in valuation allowance (13,600) 404,900 - Utilization of accounting loss carryforward - - (8,300) Change in Federal income tax rate - (3,800) - Foreign tax rate differential (1,500) 1,300 600 State and local taxes, net of Federal benefit 1,600 1,000 500 Other (300) 500 (600) -------- --------- --------- Total income tax expense $ 5,000 $ 5,000 $ 3,000 ======== ========= =========
The Company paid income taxes, net of refunds received in 1994, 1993, and 1992 of $18,200,000, $16,500,000, and $9,900,000, respectively. G. INCOME (LOSS) PER SHARE The calculation of net income (loss) per share is based upon the average number of common shares outstanding assuming the exercise of stock options. The average number of shares used in the computation of net income (loss) per share was 11,040,932 in 1994, 11,030,515 in 1993 and 10,978,432 in 1992. H. COMMON STOCK OPTIONS At November 30, 1994, there were outstanding common stock options under a 1990 and a 1983 plan each authorizing 450,000 shares. The options expire at various dates through 2000. No options could be exercised as of November 30, 1994. Stock option transactions are summarized as follows:
Shares Option Price ------ ------------ Outstanding at November 30, 1991 693,600 $ 2.50 to $14.50 Expired (96,600) $ 2.50 to $14.50 Outstanding at November 30, 1992 597,000 $ 2.50 to $14.25 Exercised (62,500) $ 2.50 Expired (15,000) $ 2.50 Outstanding at November 30, 1993 519,500 $ 2.50 TO $14.25 Expired (20,000) $ 2.50 Outstanding at November 30, 1994 499,500 $ 2.50 TO $14.25
There were 279,274 shares available for future grants at November 30, 1994. I. RETIREMENT BENEFIT PLANS Employees of the Company and its subsidiaries are covered by various pension or profit sharing retirement plans. The cost of providing retirement benefits was $998,000 in 1994, $849,000 in 1993, and $1,734,000 in 1992. Plan benefits for salaried employees are based primarily on employees' highest five consecutive years' earnings during the last ten years of employment. Plan benefits for hourly employees typically are based on a dollar unit multiplied by the number of service years. Net periodic pension expense for the Company's defined benefit plans included the following components:
(In thousands of dollars) 1994 1993 1992 ---- ---- ---- Service cost - benefits earned during the period $ 4,684 $ 3,924 $ 3,204 Interest cost on projected benefit obligation 12,144 12,490 12,228 Actual gain on plan assets (635) (20,658) (26,536) Net amortization and deferral (17,052) 3,943 11,978 -------- -------- -------- Net periodic pension costs $ (859) $ (301) $ 874 ======== ======== ========
The plans' assets consist primarily of listed equity securities and publicly traded notes and bonds. The actual net return on plan assets was .3% in 1994, 11.3% in 1993, and 15.4% in 1992, and generally reflects the performance of the equity and bond markets. -24- 14 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) 1994 1993 ---- ---- Actuarial present value of: Vested benefit obligation $(143,249) $(156,059) ========= ========= Accumulated benefit obligation $(148,243) $(161,674) ========= ========= Projected benefit obligation $(161,089) $(176,875) Plan assets at fair value 178,216 188,380 --------- --------- Projected benefit obligation less than plan assets 17,127 11,505 Unrecognized net (gain) loss (72) 7,822 Unrecognized prior service cost (benefit) 1,192 (754) Unrecognized net (asset) obligation (10,368) (11,554) --------- --------- Prepaid pension cost recognized $ 7,879 $ 7,019 ========= =========
The discount rate and weighted average rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8.0% and 4.2%, and 7.0% and 4.2%, respectively, at November 30, 1994 and 1993, respectively. The expected long-term rate of return on assets was 9.0% during 1994 and 1993. The Company's funding policy is to fund amounts on an actuarial basis to provide for current and future benefits in accordance with the funding guidelines of ERISA. J. EMPLOYEE BENEFITS OTHER THAN PENSIONS In addition to providing pension retirement benefits, the Company makes health care and life insurance benefits available to certain retired employees on a limited basis. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Eligible employees may elect to be covered by these health and life insurance benefits if they reach early or normal retirement age while working for the Company. In most cases a retiree contribution for health insurance coverage is required. The Company funds these benefit costs primarily on a pay-as-you-go basis. In the fourth quarter of 1993, the Company adopted the provisions of FAS 106. The Company recognized the accumulated postretirement benefit obligation of $19,088,000 retroactively to December 1, 1992 as an accounting change. On an aftertax basis, this charge was $12,598,000 or $1.14 per share. Previously reported quarterly results in 1993 were restated to reflect the adoption of FAS 106 as of December 1, 1992. The adoption of FAS 106 had no impact on consolidated cash flows. In 1992, prior to adoption of FAS 106, the cost of retiree health care and life insurance benefits, net of retiree contributions, was approximately $911,000. The components of expense were as follows:
(In thousands of dollars) 1994 1993 ---- ---- Service cost - benefits earned during the period $ 510 $ 467 Interest cost on accumulated postretirement benefit obligation 1,327 1,394 ------- ------- Net periodic postretirement benefit costs $ 1,837 $ 1,861 ======= =======
The accumulated postretirement benefit obligation at November 30 consisted of the following components:
(In thousands of dollars) 1994 1993 ---- ---- Retirees and dependents $13,017 $13,545 Eligible active participants 1,602 2,011 Other active participants 4,823 6,743 ------- ------- Accumulated postretirement benefit obligation 19,442 22,299 Unrecognized net gain (loss) 1,628 (2,090) ------- ------- Accrued postretirement benefit costs $21,070 $20,209 ======= =======
Benefit costs were estimated assuming retiree health care costs would initially increase at an 11% annual rate which decreases to an ultimate rate of 6% in 5 years. If this annual trend rate would increase by 1%, the accumulated postretirement obligation as of November 30, 1994 would increase by $2,599,000 with a corresponding increase of $111,000 in the postretirement benefit expense in 1994. The discount rates used in determining the accumulated postretirement obligation at November 30, 1994 and 1993 were 7.5% and 6.5%, respectively. In 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112 ("FAS 112"), "Employers' Accounting for Postemployment Benefits." This statement requires companies to accrue postemployment benefits if the obligation is attributable to employees' services already rendered, employees' rights to those benefits accumulate or vest, payment of benefits is probable and the amount of the benefits can be reasonably estimated. Previously, the cost of the Company's -25- 15 postemployment benefits was recognized as incurred. The cumulative effect of the change in accounting for postemployment benefits was not material. K. ASBESTOS LITIGATION AND CLAIMS As discussed above, the Company currently intends to file a joint plan of reorganization (the "Plan") with the Injury Claimants' Committee ("ICC") and the Legal Representative for Future Claimants ("RFC") on or before February 28, 1995. It is contemplated that the Plan will provide, among other things, that all present and future asbestos-related personal injury claims will be channeled to and resolved by an independently administered claims trust. Similar plans of reorganization have been confirmed in the chapter 11 cases of certain other companies involved in asbestos litigation. It is also currently contemplated that the Plan will provide a procedure to resolve and discharge asbestos property damage claims. These procedures will require such claimants to prove by application of a scientific protocol that the asbestos containing insulation products for which they are seeking damages were manufactured by the Company. The asbestos-related claims, which consist of personal injury and property damage claims, are discussed below. Personal Injury Prior to its chapter 11 filing, the Company had been named as a co-defendant in a substantial number of lawsuits brought by present or former insulators, shipyard workers, steel workers, tire workers and other persons alleging damage to their health from exposure to dust from asbestos-containing industrial insulation products. As a result of the chapter 11 filing by the Company, all such litigation is automatically stayed pursuant to section 362 of the Bankruptcy Code. As of the petition date, there were approximately 67,800 asbestos-related personal injury claims outstanding against the Company. The Bankruptcy Court set September 30, 1992 as the bar date for present asbestos-related claims. The Company implemented the Court-approved plan to notify known and potential claimants of the bar date. All persons with a pre-petition asbestos-related claim were required to file a proof of claim by the bar date in order to participate in the reorganization cases. Approximately 160,000 proofs of claim were filed alleging personal injury. The Company believes that approximately 11,000 of these claims are duplicates or were filed by persons whose lawsuits were previously closed. The vast majority of persons who had filed pre-petition lawsuits against the Company, and whose lawsuits were pending as of the petition date, filed proofs of claim in the reorganization cases. Therefore, approximately 81,200 previously undisclosed claims were filed as a result of the bar date. The Company believes that most of the approximately 40,000 claimants who in 1991, pursuant to a previous Bankruptcy Court order, notified the Company of their intent to assert a claim against the Company, also filed claims pursuant to the bar date. The Company expects that additional asbestos-related personal injury claims will arise for several decades into the future. Holders of these claims were not required to file claims pursuant to the bar date. The Company cannot definitively estimate the number of such future claims at this time. Many of the asbestos-related claims filed in the chapter 11 case do not provide sufficient information to enable the Company to determine whether or not it has liability for the claim or to definitively value any such liability. Similarly, the Company is not able to project precisely the number and value of future claims. The Company, however, is certain that it has significant aggregate liability with respect to the 160,000 proofs of claim which were filed against the Company pursuant to the September 30, 1992 bar date and which allege asbestos-related personal injury. The Company also is certain that there is significant liability with respect to future asbestos-related personal injury claims. After considering the significant costs that likely would be incurred in litigating the extent and nature of its asbestos-related personal injury liability, the uncertainty as to the outcome of such an exercise, the need to conserve the estate's assets for every creditor, and the benefits that would accrue to the Company's operations, customers, vendors, employees and host communities from the Company's timely emergence from chapter 11, the Board of Directors and management concluded that the proposed Plan discussed in this footnote and elsewhere, which is premised on a settlement of the Company's liability for all present and future asbestos-related personal injury claims, is in the best interests of the Company. -26- 16 Property Damage There were forty-one lawsuits pending against the Company at the end of fiscal 1991 resulting from the presence of asbestos-containing products in buildings. The pending lawsuits typically named numerous defendants, were filed in both state and federal courts, and were brought by school districts, cities, states, counties, universities, hospitals and commercial building owners. The lawsuits typically demanded compensation for any costs incurred in identifying, repairing, encapsulating or removing asbestos-containing products, or sought to have the defendants do these things directly. Many lawsuits also sought punitive damages. At least three of the pending cases were certified as class actions and one was conditionally certified. Class certification was sought by the plaintiffs in two other cases. One of such cases has been dismissed; the other is still pending, but to the Company's knowledge, no decision has yet been rendered on the request for class certification. Prior to filing its chapter 11 petition, the Company settled seven building related cases for less than $22,000 in the aggregate. Approximately 1,000 proofs of claim alleging such property damage claims were filed in the chapter 11 cases pursuant to the bar date. These claims include most, if not all, of the lawsuits described above that were pending on the petition date. Many of the other claims also appear to be asserted by claimants similar to those which had commenced pre-petition lawsuits. As previously discussed, it is currently contemplated that the asbestos-related property damage claims will be resolved in the Bankruptcy Court pursuant to procedures that will be set forth in the Plan. The eventual outcome of the asbestos property damage claims cannot be reasonably predicted due to numerous uncertainties that are inherent in the reorganization process. In addition, the Company may have insurance coverage for certain of these claims and other factual and legal defense available to it. L. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS The Bankruptcy Court established a bar date of October 31, 1991 for all pre- petition claims against the Company other than those arising from the sale of asbestos-containing products. Pursuant to this general claims bar date, numerous proofs of claim were filed alleging a right to payment from the estate due to litigation matters. Certain of such claims are discussed below. Environmental The Company received 1,102 proofs of claim alleging a right to payment because of environmental matters. These claims, relating primarily to various Superfund sites, sought payment aggregating $27.9 billion, of which readily identifiable duplicate claims approximated $27.5 billion. The Company is attempting to resolve the majority of these environmental claims through negotiations with the United States Environmental Protection Agency ("USEPA") and the United States Department of Interior ("DOI"). The USEPA is responsible for resolving, among other things, claims arising from Superfund sites and the DOI is responsible for resolving the Company's liability for any natural resource damage that may have occurred at the Superfund sites. Natural resource damage is damage caused to the environment or to plants or animals by the release of hazardous materials at Superfund sites. Following the tentative agreement resolving these claims that was discussed in this Annual Report for fiscal 1993, the USEPA received additional information concerning three of the sites that were the subject of the tentative agreement. This additional information resulted in a renegotiation of the tentative agreement which has resulted in a new tentative agreement among the Company, USEPA, and DOI, and certain states. Pursuant to such agreement, the agencies would be afforded allowed pre-petition general unsecured claims aggregating approximately $43.0 million in full satisfaction of all of the Company's alleged liability at most of its known Superfund sites, including any liability for any natural resource damage. This amount has been provided for and is included in Liabilities Subject to Compromise. In exchange for these allowed claims, the agencies would release the Company from liability and grant it protection from claims of other parties that may be liable at the sites so that the Company's settlement will completely resolve all claims with respect to these sites. With respect to the small number of sites as to which the USEPA believes that it does not have sufficient information to negotiate a meaningful settlement with the Company, the tentative agreement provides a process which would permit -27- 17 any liability with respect to these sites to be resolved in the future when additional information is available. Pursuant to this process, the Company would retain all of its rights and defenses as to these sites and settle or litigate its liability at such future time. The tentative agreement provides that any future liability of the Company, when fixed, would be satisfied essentially with the same type and amount of consideration that pre-petition general unsecured creditors receive pursuant to a confirmed plan of reorganization in the Company's chapter 11 case. The proposed settlement will be subject to the approval of the Bankruptcy Court. The Company believes that the negotiations have progressed sufficiently and it is finalizing a settlement agreement resolving these environmental and natural resource damage claims. Until such agreement is completed and all requisite approvals are obtained, no party is in any way bound to the terms of the settlement. The Company believes, however, that the terms and provisions of the tentative agreement are fair and equitable and that a settlement, as contemplated thereby, is in the Company's best interests. Lead Chemicals The Bankruptcy Court received 131 timely proofs of claim asserting liability based on personal injury or property damage from lead chemicals allegedly manufactured and sold by the Company. Three additional claims were filed in November 1993, after the 1991 bar date. While some of the timely filed claims did not specify an amount, those that did sought an aggregate of $165 million. All of the timely claims which specified an amount of damages have been fully withdrawn without the allowance of any amount by the Company. The three late filed claims discussed above were filed by the City of New York or its agencies which had filed a pre-petition lawsuit against the Company. In November 1994, the Bankruptcy Court sustained the Company's objection to these claims and disallowed them because they were late filed. No appeal of this ruling was sought by the claimants. As a result, the Company has disposed of all lead-related property damage claims. The Company has also filed objections to seven other claims that were filed against it seeking damages for bodily injuries resulting from exposure to lead. Pursuant to the objections, the Company has sought an order of the Bankruptcy Court disallowing such claims because the claimants' lawsuits asserting similar claims against other defendants which were not in bankruptcy had been dismissed in the trial court. The claimants have opposed the relief sought by the Company and the Bankruptcy Court has not yet ruled on these objections. The Company believes that its objections are meritorious. It also believes that it has valid grounds to object to the allowance of all of the remaining lead-related personal injury claims. It is currently contemplated that all lead-related personal injury claims that were filed that are not disposed of pursuant to an objection filed by the Company and all future lead-related personal injury claims will be channeled to and resolved by the Trust referred to above to be established under the Plan for the benefit of holders of personal injury claims resulting from exposure to asbestos or lead-containing products. Other Litigation The Company received ninety-two claims arising out of litigation matters other than those related to lead, asbestos or environmental issues. These claims aggregated approximately $1.1 billion. The majority of these claims have been resolved by disallowance or by the allowance of a pre-petition general unsecured claim for amounts that are not material to the Company or its operations. The two largest such claims, for $500 million each, resulted from lawsuits brought by the Company's majority owned subsidiary, American Imaging Services, Inc., and such subsidiary's president and minority shareholder against the Company and three of its officers in the United States District Court for the Northern District of Texas. These claims were resolved in December 1994 through settlement. The settlement, which was not material to the Company or its operations, was approved by the Bankruptcy Court in January 1995. Summary During the pendency of the chapter 11 cases, any unresolved litigation with respect to pre-petition claims can proceed against the Company only with the express permission of the Bankruptcy Court. The Company intends to defend all litigation claims vigorously in the manner permitted by the Bankruptcy Code and/or applicable law. All pre-petition claims against the Company arising from litigation must be liquidated or otherwise addressed in the -28- 18 context of the chapter 11 cases. Further, all such claims against the Company will be resolved in a plan of reorganization. The Company has resolved most of the litigation claims that were asserted pursuant to the October 31, 1991 bar date for claims other than those arising from the sale of asbestos-containing products. The Company has filed objections to certain of these litigation-based claims which have not been resolved, seeking to reduce the amount of such claims or eliminate them entirely. The Company anticipates filing additional objections to other such claims if they cannot be resolved through negotiation. These objections will be vigorously litigated by the Company pursuant to the provisions of the Bankruptcy Code and applicable law. The eventual outcome of the environmental and other litigation claims described herein cannot be reasonably predicted due to numerous uncertainties that are inherent in the reorganization process. However, the Company believes that its provision for these claims is adequate. In addition, the Company may have insurance coverage for certain of these claims and other factual and legal defenses available to it. M. INDUSTRY SEGMENT INFORMATION A general description of the products manufactured by the Company's three industry segments is: Industrial Diatomaceous earth products, rubber products, rare metals, fiberglass reinforced plastic parts and industrial chemicals. Machinery Earth moving machines, heavy-duty forklift trucks, aerospace and defense parts, metal cleaning and finishing systems and aluminum castings. Automotive Mechanical, structural, and trim parts for passenger cars, trucks, vans and utility vehicles for the OEM and replacement markets. Sales between segments and foreign operations were not material. Consolidated sales to Ford Motor Company amounted to $165,300,000 in 1994, $148,000,000 in 1993, and $132,700,000 in 1992. Consolidated sales to General Motors Corporation amounted to $81,400,000 in 1994, $73,100,000 in 1993 and $64,500,000 in 1992. No other customer accounted for 10% or more of consolidated sales. Consolidated export sales were $76,900,000 in 1994, $73,200,000 in 1993 and $64,700,000 in 1992. -29- 19 INDUSTRY SEGMENT INFORMATION Years ended November 30 (In millions of dollars)
Industrial Machinery Automotive 1994 1993 1992 1994 1993 1992 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- ---- ---- Sales $141.4 $132.6 $122.1 $217.0 $171.7 $151.4 $398.3 $357.2 $338.0 ====== ====== ====== ====== ====== ====== ====== ====== ====== Operating income 14.4 15.0 13.1 18.8 9.1 14.8 43.7 37.4 36.2 ====== ====== ====== ====== ====== ====== ====== ====== ====== Identifiable assets 78.2 72.7 70.8 109.8 92.8 78.6 190.6 168.2 163.6 ====== ====== ====== ====== ====== ====== ====== ====== ====== Depreciation and amortization 5.5 4.9 4.7 4.0 3.4 3.5 16.2 16.2 16.2 ====== ====== ====== ====== ====== ====== ====== ====== ====== Capital expenditures 7.7 5.6 4.6 6.9 7.4 4.5 21.2 15.4 12.4 ====== ====== ====== ====== ====== ====== ====== ====== ====== Segment Total Corporate Total 1994 1993 1992 1994 1993 1992 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- ---- ---- Sales $756.7 $661.5 $611.5 $ - $ - $ - $756.7 $661.5 $611.5 ====== ====== ====== ====== ====== ====== ====== ====== ====== Operating income (loss) 77.0 61.5 64.1 (18.7) (17.7) (17.5) 58.3 43.8 46.6 ====== ====== ====== Provision for asbestos - (1,135.5) - - (1,135.5) - Litigation Provision for - (41.4) (2.0) - (41.4) (2.0) environmental and other claims Interest expense (1.8) (2.1) (2.7) (1.8) (2.1) (2.7) Other income (expense) .6 (.2) (1.0) (.6) (.2) (1.0) Reorganization items (3.4) (4.4) (9.0) (3.4) (4.4) (9.0) Income (loss) before ====== ====== ====== ---- ---- ------ taxes 53.7 (1,139.8)(1) 31.9 ======== ====== Identifiable assets 378.6 333.7 313.0 142.5 125.7 106.4 521.1 459.4 419.4 ====== ====== ====== ====== ====== ====== ====== ====== ====== Depreciation and 25.7 24.5 24.4 .4 .5 .3 26.1 25.0 24.7 amortization ====== ====== ====== ====== ====== ====== ====== ====== ====== Capital expenditures 35.8 28.4 21.5 .1 .1 .1 35.9 28.5 21.6 ====== ====== ====== (1) Before cumulative effect of accounting changes.
-30- 20 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991) as of November 30, 1994 and 1993, and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended November 30, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended November 30, 1994 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the consolidated financial statements, on January 7, 1991, Eagle-Picher Industries, Inc., and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court. Although the Company and its operating subsidiaries are currently operating their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court, the continuation of their businesses as going concerns is contingent upon, among other things, the ability to formulate a plan of reorganization which will gain approval of the creditors and confirmation by the Bankruptcy Court. The filing under chapter 11 and the continued uncertainty related to claims associated with the Company's sale of asbestos products and certain other litigation as discussed in the following paragraph, raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that may be required in connection with restructuring the Company and its subsidiaries as they reorganize under chapter 11 of the United States Bankruptcy Code. As discussed in Notes B and K to the consolidated financial statements, the accompanying consolidated financial statements include an estimated liability related to claims associated with the Company's sale of asbestos products. The final resolution of actual amounts, however, is dependent upon future events, the outcome of which is not fully determinable at the present time. In addition, as discussed in Note L, the Company is a defendant in various other litigation. Although provisions have been made for these matters, the final outcomes and their effect on the Company's consolidated financial statements are not presently determinable. As discussed in Notes A and J, the Company adopted the provisions of the Financial Accounting Standards Board's SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, in 1993. As discussed in Notes A and F, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's SFAS No. 109, Accounting for Income Taxes. KPMG Peat Marwick LLP Cincinnati, Ohio February 8, 1995 -31- 21 Report of Management The Company's management is responsible for the preparation and presentation of the consolidated financial statements and related financial data included in this annual report. The financial information has been prepared in conformity with generally accepted accounting principles and as such includes amounts based on judgments and estimates made by management. The Company's system of internal accounting controls is designed to provide reasonable assurance at reasonable costs that assets are safeguarded from loss or unauthorized use, and that the financial records may be relied upon for the preparation of the consolidated financial statements. The consolidated financial statements have been audited by our independent auditors, KPMG Peat Marwick LLP. Their audit is conducted in accordance with generally accepted auditing standards and provides an independent assessment as to the fair presentation, in all material respects, of the Company's consolidated financial statements. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management and the independent auditors to review internal accounting controls and the quality of financial reporting. Financial management and the independent auditors have full and free access to the Audit Committee. Thomas E. Petry Chairman and Chief Executive Officer David N. Hall Senior Vice President - Finance Cincinnati, Ohio February 8, 1995 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS 1994 COMPARED TO 1993 On a 14% sales increase, operating income increased 33% to $58.3 million in 1994 from $43.8 million in 1993. Comparative sales volume by industry segment showed increases of 7% in the Industrial segment, 26% in the Machinery segment, and 12% in the Automotive segment. Operating income decreased 3% in the Industrial segment, but increased 107% in the Machinery segment and 17% in the Automotive segment. The decrease in operating income in the Industrial segment is attributable to pricing pressures on diatomaceous earth products. The increase in operating income of the Machinery segment was primarily associated with improvements in production of a line of heavy-duty forklift trucks. While there have been improvements in 1994 from the difficulties encountered in 1993 with the start-up process and in achieving efficiencies and meeting production schedules, an acceptable level of performance for this product line has not yet been achieved. An increase in sales volumes of metal cleaning and finishing equipment also contributed to the increase in operating income of the Machinery segment. The increase in operating income of the Automotive segment was due to: 1) an increase in export sales and stronger performance of our operations in Great Britain and Spain; 2) broader market penetration coupled with record domestic auto production; and 3) favorable product mix heavily weighted toward the light truck, van, and sport utility segment of the market for which several divisions produce components. In November 1993, the Company reached an agreement on the principal elements of a plan of reorganization that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company recorded an additional provision of $1.135 billion for all present and future asbestos-related personal injury claims, thereby increasing the asbestos liability on the Consolidated Balance. -32- 22 Sheet to $1.5 billion. In addition, in 1993 a provision of $41.4 million was made for environmental and other litigation claims. Interest expense decreased to $1.8 million from $2.1 million due primarily to the repayment of certain foreign debt in 1994. Reorganization items are described in Note B. The primary components of the income tax provision are described in Note F. 1993 COMPARED TO 1992 On an increase of 8% in sales, operating income decreased to $43.8 million in 1993 from $46.6 million in 1992. Comparative sales volume by industry segment showed increases of 9% in the Industrial segment, 13% in the Machinery segment, and 6% in the Automotive segment. Operating income by industry segment showed an increase of 15% in the Industrial segment, a decrease of 39% in the Machinery Segment, and an increase of 3% in the Automotive segment. The decrease in operating income in 1993 is entirely attributable to the Machinery segment and resulted primarily from start-up costs associated with the production of a new line of heavy-duty forklift trucks. Difficulties have been encountered in the start-up process in achieving manufacturing efficiencies and meeting production schedules. In the Industrial segment, the majority of the increase in sales and operating income was attributable to the departments which produce isotopically pure boron for defense and commercial nuclear applications and a wide range of super clean containers used in environmental testing which meet strict EPA protocols. In the Automotive segment, an increase in demand in the domestic auto market due to improving economic conditions offset the effects of a severe recession in both the European and Japanese markets. However, the Automotive Group continues to face severe pricing pressures. In November 1993, the Company reached an agreement on the principal elements of a plan of reorganization that provides a basis for the Company to emerge from chapter 11. The agreement contemplates a settlement of the Company's liability for all present and future asbestos-related personal injury claims. As a consequence of the proposed settlement, the Company recorded a provision of approximately $1.135 billion to increase the existing liability on the balance sheet to $1.5 billion. In addition, as a result of the Company's negotiations concerning environmental claims and attempts to negotiate settlements of other litigation claims, a provision of $41.4 million was made for environmental and other litigation claims, which increased accrued liabilities subject to compromise to $51.4 million. Interest expense decreased to $2.1 million from $2.7 million due to lower interest rates charged on variable-rate debt and the repayment of certain secured debt in November 1992, which was approved by the Bankruptcy Court in conjunction with the debtor in possession financing agreement. Reorganization items are described in Note B. The primary components of the income tax provision are described in Note F. During the fourth quarter of 1993, the Company elected to recognize the accumulated postretirement benefit obligation of $19.1 million retroactively to December 1, 1992 as a cumulative effect of an accounting change. On an aftertax basis, this charge was $12.6 million. INDUSTRY SEGMENT DATA Industry segment data for 1994, 1993 and 1992 is summarized on page __. FINANCIAL CONDITION The filing of the petitions for reorganization under chapter 11 on January 7, 1991 had a significantly favorable impact on the Company's liquidity. The filing stayed all litigation against the Company with respect to pre-petition claims and reduced the cash drain resulting from asbestos litigation. In 1993, the Company increased the amount of its asbestos liability to $1.5 billion. At November 30, 1994, the balance of Liabilities Subject to Compromise was $1.657 billion. These amounts were recorded based on the expected amount of the allowed claims, not the amounts of consideration that such allowed claims may receive under a plan of reorganization. During 1994, the Company generated $45.1 million from operating activities while it used $34.1 million for investing activities and $3.0 million to repay debt. These activities resulted in an overall increase in cash of $8.0 million in 1994. -33- 23 The overall increase in cash was relatively small in 1994 due primarily to an increase in inventory in the Machinery segment and a greater amount of capitalized tooling costs in anticipation of several major orders in the Automotive segment. The anticipated reduction in these two items will favorably impact cash flows in 1995. In October 1992, the Bankruptcy Court approved a debtor in possession financing agreement which provides the Company with a $40.0 million committed revolving credit facility. This facility has been extended to expire the earlier of December 31, 1996 or the effective date of a plan of reorganization. At November 30, 1994, $32.9 million in letters of credit were outstanding under the facility leaving the Company with $7.1 million in available borrowing capacity. There were no cash borrowings in 1994 under this facility. As of November 30, 1994, the Company had $83.6 million of long-term debt versus $86.5 million at November 30, 1993. The disposition of unsecured debt of $62.0 million at November 30, 1994 will be resolved in a plan of reorganization in the chapter 11 cases. Capital expenditures were $35.9 million in 1994 compared to $28.5 million in 1993. The cost of reorganization items was $3.4 million in 1994 compared to $4.3 million in 1993. While the Company is reorganizing under chapter 11, it is prohibited from paying interest or principal on pre-petition obligations without the approval of the Bankruptcy Court. To the extent cash generated from operations exceeds capital expenditures, working capital requirements, approved payments of secured debt and administrative expenses of the reorganization, the Company will continue to accumulate cash. Consequently, the liquidity of the Company should improve. The Company advised the Bankruptcy Court that it intended to file a plan of reorganization by the end of February, 1995. The Plan which the Company intends to propose will discharge its pre-petition liabilities (Liabilities Subject to Compromise), provide the reorganized Company with a capital structure appropriate for an industrial products company and enable the Company to access financing in the credit and debt markets. -34- 24 SELECTED FINANCIAL DATA (Unaudited)
(In thousands of dollars, except per share) 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------- Net Sales $756,741 $661,452 $611,458 $598,631 $699,347 - ------------------------------------------------------------------------------------------- Income (Loss) Before Reorganization Items and Taxes 57,175 (1,135,426)(1) 40,924 (788) 44,060 - ------------------------------------------------------------------------------------------- Reorganization Items (2) (3,426) (4,344) (9,038) (12,124) - - ------------------------------------------------------------------------------------------- Income (Loss) Before Taxes 53,749 (1,139,770) 31,886 (12,912) 44,060 - ------------------------------------------------------------------------------------------- Net Income (Loss) 48,749 (1,144,770)(3) 28,886 (15,812) 39,360 - ------------------------------------------------------------------------------------------- Net Income (Loss) Per Share 4.42 (103.78)(3) 2.63 (1.44) 3.64 - ------------------------------------------------------------------------------------------- Common Dividend Per Share - - - - - - ------------------------------------------------------------------------------------------- Total Assets 521,107 459,360 419,435 398,990 413,695 - ------------------------------------------------------------------------------------------- Long-Term Debt, less current portion 19,896(4) 21,712(4) 25,033(4) 32,001(4) 3,618(5) - -------------------------------------------------------------------------------------------
(1) Includes a provision for asbestos litigation of $1.135 billion and a provision for environmental and other claims of $41.4 million in 1993. (2) On January 7, 1991, the Company and seven of its domestic subsidiaries each filed a petition for relief under chapter 11 of the U.S. Bankruptcy Code. (3) Excludes cumulative adjustment for adoption of FAS 106 in 1993 which decreased net income by $12.6 million ($1.14 per share). (4) Long-term debt of $62.0 million in 1994 and 1993 and $61.7 million in 1992 and 1991 has been included in Liabilities Subject to Compromise. (5) Long-term debt totalling $91.1 million for legal entities in chapter 11 was classified as current due to the chapter 11 filings. -35- EX-21 6 EAGLE PICHER 10-K EXHIBIT 21 1
EXHIBIT 21 EAGLE-PICHER INDUSTRIES, INC. SUBSIDIARIES OF THE REGISTRANT REGISTRANT'S VOTING POWER ------------ Cincinnati Industrial Machinery Sales Company, an Ohio corporation 100% Daisy Parts, Inc., a Michigan corporation 100% Dong Yang Eagle-Picher Limited, organized under the laws of South Korea 49% Eagle-Picher Development Company, Inc., a Delaware corporation 100% Eagle-Picher Espana, S.A., organized under the laws of Spain 100% Eagle-Picher Europe, Inc., a Delaware corporation 100% Eagle-Picher Far East, Inc., a Delaware corporation 100% Eagle-Picher Industries of Canada Limited, an Ontario (Canada) corporation 100% Eagle-Picher Industries GmbH, organized under the laws of Germany 100% Eagle-Picher, Inc., organized under the laws of the Virgin Islands 100% Eagle-Picher Minerals, Inc., a Nevada corporation 100% Equipos de Acuna, S.A. de C.V., organized under the laws of Mexico 100% Hillsdale Tool & Manufacturing Co., a Michigan corporation 100% Diehl & Eagle-Picher GmbH, organized under the laws of Germany 45% EPTEC, S.A. de C.V., organized under the laws of Mexico 100% Eagle-Picher Industries Europe GmbH, organized under the laws of Germany 100%
EX-23 7 EAGLE PICHER 10-K EXHIBIT 23 1 EXHIBIT 23 Independent Auditors' Consent The Board of Directors Eagle-Picher Industries, Inc.: We consent to incorporation by reference in Registration Statement Nos. 2-50595, 33-5792, 33-31975 and 33-37518 on Form S-8 of Eagle-Picher Industries, Inc. of our report, with explanatory paragraphs, dated February 8, 1995 relating to the consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries (debtor in possession, as of January 7, 1991) as of November 30, 1994 and 1993, and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows and related schedules for each of the years in the three-year period ended November 30, 1994, which reports appear in the Company's 1994 Annual Report on Form 10-K and in the 1994 Annual Report, which is incorporated by reference in the Company's 1994 Annual Report on Form 10-K. Our report on the consolidated financial statements refers to changes in accounting for postretirement benefits other than pensions and in accounting for income taxes in 1993. /s/ KPMG Peat Marwick LLP Cincinnati, Ohio February 24, 1995 EX-24.A 8 EAGLE PICHER 10-K EXHIBIT 24(A) 1 EXHIBIT 24(a) POWER OF ATTORNEY Each of the undersigned officers and/or directors of Eagle-Picher Industries, Inc. hereby consents to and appoints Thomas E. Petry and James A. Ralston, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the 1994 fiscal year of Eagle-Picher Industries, Inc., a corporation organized and existing under the laws of the State of Ohio, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, each of the undersigned has hereunto set his hand on this 1st day of February, 1995. /s/ Thomas E. Petry /s/ David N. Hall - ------------------------------ ----------------------------- Thomas E. Petry David N. Hall Director, Chairman of the Senior Vice President-Finance Board and Chief Executive (Principal Financial Officer) Officer /s/ Carroll D. Curless /s/ Roger L. Howe - ------------------------------ ----------------------------- Carroll D. Curless Roger L. Howe Vice President and Controller Director (Principal Accounting Officer) /s/ Paul W. Christensen, Jr. /s/ Daniel W. LeBlond - ------------------------------ ----------------------------- Paul W. Christensen, Jr. Daniel W. LeBlond Director Director /s/ Melvin F. Chubb, Jr. /s/ Powell McHenry - ------------------------------ ----------------------------- Melvin F. Chubb, Jr. Powell McHenry Director Director /s/ V. Anderson Coombe /s/ Eugene P. Ruehlmann - ------------------------------ ----------------------------- V. Anderson Coombe Eugene P. Ruehlmann Director Director EX-24.B 9 EAGLE PICHER 10-K EXHIBIT 24(B) 1 EXHIBIT 24(b) POWER OF ATTORNEY The undersigned director of Eagle-Picher Industries, Inc. hereby consents to and appoints Thomas E. Petry and James A. Ralston, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the 1994 fiscal year of Eagle-Picher Industries, Inc., a corporation organized and existing under the laws of the State of Ohio, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, the undersigned has hereunto set his hand on this 6th day of February, 1995. /s/ Andries Ruijssenaars ------------------------ Andries Ruijssenaars Director EX-27 10 EAGLE PICHER 10-K EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 U.S. DOLLARS YEAR NOV-30-1994 DEC-01-1993 NOV-30-1994 1 92,606 0 110,575 1,445 81,982 296,259 408,018 263,369 521,107 85,961 83,626 13,906 0 0 (1,280,599) 521,107 756,741 756,741 622,907 622,907 0 0 1,809 53,749 5,000 48,749 0 0 0 48,749 4.42 4.42
EX-99 11 EAGLE PICHER 10-K EXHIBIT 99 1 EXHIBIT 99 EPI OPERATIONS (DIVISIONS) PLANT LOCATIONS - -------------------------- --------------- Cincinnati Industrial Machinery 3280 Hageman Street Sharonville, Ohio 45241 Sharonville, Ohio Construction Equipment 1802 E. 50th Street Lubbock, Texas 79404 Lubbock, Texas Acuna, Coahuila, Mexico Electronics "C" and Porter Streets Joplin, Missouri 64801 Colorado Springs, Colorado (2) Galena, Kansas Joplin, Missouri (6) Seneca, Missouri Stella, Missouri Socorro, New Mexico Grove, Oklahoma Fabricon Products 1721 West Pleasant Avenue River Rouge, Michigan 48218 River Rouge, Michigan Riverton, New Jersey Philadelphia, Pennsylvania Hillsdale Tool & Manufacturing Co. 135 E. South Street Hillsdale, Michigan 49242 Hamilton, Indiana Hillsdale, Michigan (3) Jonesville, Michigan Vassar, Michigan San Luis Potosi, Mexico Michigan Automotive Research Corporation 1254 North Main Street Ann Arbor, Michigan 48104 Ann Arbor, Michigan Minerals 1755 E. Plumb Lane, #151 Reno, Nevada 89510 Clark, Nevada Colado, Nevada Vale, Oregon Orthane 1500 I-35 W. (at Airport Road) Denton, Texas 76202 Denton, Texas -----END PRIVACY-ENHANCED MESSAGE-----