10-Q 1 l90728ae10-q.txt EAGLE-PICHER HOLDINGS AND CO-FILERS FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended August 31, 2001 Commission file number 333-49957-01 ------------- EAGLE-PICHER HOLDINGS, INC. ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 13-3989553 --------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 250 East Fifth Street, Suite 500, Cincinnati, Ohio 45202 ----------------------------------------------------------------------------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code 513-721-7010 --------------------------- (Not Applicable) ----------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report EAGLE-PICHER HOLDINGS, INC. IS FILING THIS RPEORT VOLUNTARILY IN ORDER TO COMPLY WITH THE REQUIREMENTS OF THE TERMS OF ITS 9 3/8% SENIOR SUBORDINATED NOTES AND 11 3/4% SERIES B CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND IS NOT REQUIRED TO FILE THIS REPORT PURSUANT TO EITHER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. (See explanatory note immediately above.) Yes No X ---- ---- Indicate by check mark whether the additional registrant, Eagle-Picher Industries, Inc., has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ---- ---- 1,000,000 shares of common capital stock, $.01 par value each, were outstanding at October 13, 2001. 1 2 TABLE OF ADDITIONAL REGISTRANTS
Jurisdiction of IRS Employer Incorporation or Commission File Identification Name Organization Number Number ---- ------------ ------ ------ Eagle-Picher Industries, Inc. Ohio 333-49957 31-0268670 Daisy Parts, Inc. Michigan 333-49957-02 38-1406772 Eagle-Picher Development Co., Inc. Delaware 333-49957-03 31-1215706 Eagle-Picher Far East, Inc. Delaware 333-49957-04 31-1235685 Eagle-Picher Minerals, Inc. Nevada 333-49957-06 31-1188662 Eagle-Picher Technologies, LLC Delaware 333-49957-09 31-1587660 Hillsdale Tool & Manufacturing Co. Michigan 333-49957-07 38-0946293 EPMR Corporation (f/k/a Michigan Automotive Research Corp.) Michigan 333-49957-08 38-2185909
2 3 TABLE OF CONTENTS Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements......................................... 4 Condensed Consolidated Statements of Income (Loss)(Unaudited).... 4 Condensed Consolidated Balance Sheets (Unaudited)................ 5 Condensed Consolidated Statements of Cash Flows (Unaudited)...... 7 Notes to Condensed Consolidated Financial Statements (Unaudited). 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................20 Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 28 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................... 31 Item 6. Exhibits and Reports on Form 8-K............................ 31 Signatures........................................................... 32 Exhibit Index........................................................ 39 3 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)(UNAUDITED) (Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended August 31 August 31 --------------------- ------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net Sales $169,520 $176,243 $517,676 $576,359 Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 139,673 141,287 417,300 457,546 Selling and administrative 13,054 14,438 37,925 49,387 Depreciation 11,250 9,830 32,882 31,411 Amortization of intangibles 4,135 3,955 12,240 12,163 Proceeds from insurance settlement - - - (16,000) Divestitures - 2,089 500 (12,220) Management compensation - special 609 - 2,498 1,560 Other 107 (51) (162) (439) ------- ------- ------- ------- 168,828 171,548 503,183 523,408 ------- ------- ------- ------- Operating Income 692 4,695 14,493 52,951 Interest expense (9,920) (10,454) (30,170) (33,478) Other income(expense) 1,600 775 2,439 398 ----- ------ ------ ------ Income(Loss)from Continuing Operations Before Taxes (7,628) (4,984) (13,238) 19,871 Income Taxes (Benefit) (2,525) (1,000) (4,300) 13,900 ------ ----- ------ ------ Income (Loss) from Continuing Operations (5,103) (3,984) (8,938) 5,971 Discontinued Operations: Loss from operations of discontinued segment, net of income tax benefit of $ - , $1,150, $900 and $2,300 - (183) (1,657) (970) Loss on disposal of business segment including provisions of $1,733 and $4,138 for operating losses during phase-out periods, net of income tax benefits of $2,000 and $11,800 (5,500) - (23,700) - ------- ------ ------ ------ Net Income (Loss) $(10,603) $(4,167) $(34,295) $ 5,001 ====== ===== ====== ===== Loss Applicable to Common Shareholders $(13,921) $(7,127) $(44,065) $(3,714) ====== ===== ====== ===== Comprehensive Income (Loss) $(12,180) $(4,200) $(36,769) $ 3,532 ====== ===== ====== ===== Earnings per Share: Loss from continuing operations $ (8.58) $ (6.95) $ (19.02) $ (2.74) Loss from discontinued operations (5.60) (.18) (25.79) (.97) ----- ------ ----- ---- Net Loss $(14.18) $ (7.13) $(44.81) $ (3.71) ===== ====== ===== =====
See accompanying notes to the condensed consolidated financial statements. 4 5 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) August 31 November 30 ASSETS 2001 2000 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 14,755 $ 7,467 Receivables, less allowances 111,301 104,875 Inventories: Raw materials and supplies 29,359 32,664 Work in process 34,155 37,034 Finished goods 17,106 13,821 ------- ------- 80,620 83,519 Net assets of discontinued operations 7,553 44,080 Prepaid expenses 8,409 7,141 Deferred income taxes 24,326 12,860 ------ ------- Total current assets 246,964 259,942 ------- ------- PROPERTY, PLANT AND EQUIPMENT 351,954 316,981 Less accumulated depreciation 125,364 90,977 ------- ------- Net property, plant and equipment 226,590 226,004 ------- ------- EXCESS OF ACQUIRED NET ASSETS OVER COST, net of accumulated amortization of $53,667 and $42,089, respectively 183,626 195,575 ------- ------- OTHER ASSETS 87,378 86,178 ------ ------- Total Assets $744,558 $767,699 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 70,920 $ 57,865 Long-term debt - current portion 65,163 65,358 Income taxes 2,526 2,682 Other current liabilities 60,418 65,235 ------- ------- Total current liabilities 199,027 191,140 LONG-TERM DEBT - less current portion 405,018 392,573 DEFERRED INCOME TAXES 2,302 10,278 OTHER LONG-TERM LIABILITIES 27,672 24,707 ------ ------- Total Liabilities 634,019 618,698 ------- ------- 11-3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK; authorized 50,000 shares; issued and outstanding 14,191 shares 119,573 109,804 ------- --------- 5 6 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
August 31 November 30 2001 2000 ---- ---- SHAREHOLDERS' EQUITY (DEFICIT) Common stock, authorized 1,000,000 shares $.01 par value each; issued and outstanding 1,000,000 shares 10 - Class A Common stock, authorized 625,001 shares, $.01 par value each; issued and outstanding 625,001 shares - 6 Class B Common stock, authorized 374,999 shares, $.01 par value each; issued and outstanding 374,999 shares - 4 Additional paid-in capital 99,991 99,991 Deficit (100,205) (56,140) Other comprehensive loss (4,767) (2,293) ------- ------- (4,971) 41,568 Treasury Stock, at cost: 22,750 and 11,500 shares (4,063) (2,371) ------- ------- Total Shareholders' Equity (Deficit) (9,034) 39,197 ------- ------- Total Liabilities and Shareholders' Equity (Deficit) $744,558 $767,699 ======= ======= See accompanying notes to the condensed consolidated financial statements. 6 7 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Nine Months Ended August 31 ------------------ 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(34,295) $5,001 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for discontinued operations 23,700 - Depreciation and amortization 47,611 45,999 Divestitures 500 (12,220) Changes in assets and liabilities, net of effect of acquisitions and divestitures: Receivables (6,447) 13,038 Inventories 2,899 (5,405) Accounts payable 13,055 2,529 Accrued liabilities (5,317) (7,821) Other (9,314) (4,000) ------ ------ Net cash provided by operating activities 32,392 37,121 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of divisions - 84,833 Acquisitions - (11,796) Capital expenditures (34,874) (30,193) Other (966) 1,604 ---- ------ Net cash provided by (used in) investing activities (35,840) 44,448 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt (14,322) (19,093) Net borrowings (repayments) under revolving credit agreements 26,765 (63,482) Other (2,734) (902) ------ ------- Net cash provided by (used in) financing activities 9,709 (83,477) ------ ------ Net cash provided by discontinued operations 1,027 663 ----- ----- 7 8 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Nine Months Ended August 31 --------- 2001 2000 ---- ---- Net increase (decrease) in cash and cash equivalents 7,288 (1,245) Cash and cash equivalents, beginning of period 7,467 10,071 ------ ------ Cash and cash equivalents, end of period $14,755 $ 8,826 ====== ====== Supplemental cash flow information: 2001 2000 ---- ---- Cash paid during the three months ended August 31: Interest paid $ 4,431 $ 5,294 Income taxes paid (refunded) $ 207 $ 3,037 Cash paid during the nine months ended August 31: Interest paid $23,135 $28,655 Income taxes paid (refunded) $(1,695) $ 6,827
See accompanying notes to the condensed consolidated financial statements. 8 9 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements of Eagle-Picher Holdings, Inc. (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended November 30, 2000 presented in the Company's Form 10-K filed with the SEC on February 28, 2001, as amended on March 8, 2001. The financial statements presented herein reflect all adjustments (consisting of normal and recurring accruals) which, in the opinion of management, are necessary to fairly state the results of operations for the three months and nine months ended August 31, 2001 and August 31, 2000. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. Certain prior year amounts have been reclassified to conform with current year financial statement presentation. B. BASIC EARNINGS PER SHARE The calculation of net income (loss) per share is based upon the average number of common shares outstanding, which was 981,417 in the three months ended August 31, 2001, 983,361 in the nine months ended August 31, 2001 and 1,000,000 in the three months and nine months ended August 31,2000. The net loss applicable to common shareholders represents the net income reduced by, or the net loss increased by, accreted dividends on preferred stock of $3,318 and $9,770 for the three and nine months ended August 31, 2001, respectively, and $2,960 and $8,715 for the three and nine months ended August 31, 2000, respectively. No potential common stock was outstanding during the three months ended August 31, 2001 or 2000. C. DISCONTINUED OPERATIONS The Board of Directors authorized Management to sell the assets and business of the Construction Equipment Division, which comprises the Machinery Segment. The Company has entered into a letter of intent to sell the Segment, which is subject to certain contingencies. The sale is now expected to be completed by November 30, 2001. Sales were $18,677 and $21,671 in the Machinery Segment in the three months ended August 31, 2001 and 2000, respectively, and $50,568 and $64,878 in the nine months ended August 31, 2001 and 2000, respectively. The Company recorded provisions of $7,500 and $35,500, net of income tax benefits of $2,000 and $11,800, in the three months and nine months ended August 31, 2001, respectively. These provisions include estimated losses and costs to be incurred in connection with the disposition of the Machinery Segment, including an aggregate of $4,183 of expected losses during the phase-out period from March 1 through November 30, 2001. An operating loss of $1,657, net of tax, was incurred in the first quarter of 2001. The results of the Machinery Segment's operations have been reported separately as discontinued operations in the consolidated statement of income (loss). Prior year amounts have been restated to present the operations of the Machinery Segment 9 10 as a discontinued operation. The net assets of the discontinued operations have been recorded at their estimated net realizable value under the caption "Net assets of discontinued operations" in the accompanying Condensed Consolidated Balance Sheets at August 31, 2001 and November 30, 2000. At August 31, 2001, total assets of the Machinery Segment, which consisted primarily of accounts receivable, inventory, property, plant and equipment and goodwill, were $48,297. Total liabilities of the Machinery Segment were $40,744 and consisted of accounts payable and accrued liabilities. D. LEGAL MATTERS For other information on legal proceedings, see Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2000 and Part II, Item 1 of the Company's Quarterly Reports on Form 10-Q for the quarters ended February 28, 2001 and May 31, 2001. On May 8, 1997, Caradon Doors and Windows, Inc. ("Caradon"), filed suit against the Company's wholly owned subsidiary, Eagle-Picher Industries, Inc. ("EPI") in the United States District Court for the Northern District of Georgia (the "Georgia Court") alleging breach of contract, negligent misrepresentation, and contributory infringement and seeking contribution and indemnification in an amount not less than $10 million (the "Caradon suit"). The Caradon suit arose out of patent infringement litigation between Caradon and Therma-Tru Corporation extending over the 1989-1996 time period, the result of which was for Caradon to be held liable for patent infringement in an amount believed to be in excess of $10 million. In June 1997, EPI filed a Motion with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, ("Bankruptcy Court") seeking an order enforcing EPI's plan of reorganization as confirmed by the Bankruptcy Court in November 1996 (the "Plan") against Caradon, and enjoining the Caradon suit from going forward. The Bankruptcy Court in a decision entered on December 24, 1997, held that the Caradon suit did violate the Plan and enjoined Caradon from pursuing the Caradon suit. Caradon appealed the Bankruptcy Court's decision to the United States District Court for the Southern District of Ohio (the "District Court"), and in a decision entered on February 3, 1999, the District Court reversed and remanded the matter back to the Bankruptcy Court. The Bankruptcy Court held a hearing on this matter on September 24 and 25, 2001. EPI anticipates a decision on the bankruptcy related issues by the end of this calendar year. EPI intends to contest this suit vigorously. EPI does not believe that resolution of this suit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. On December 1, 1999, Eagle-Picher Technologies, LLC ("EPT") acquired the depleted zinc distribution business (the "DZ Business") of Isonics Corporation ("Isonics") for approximately $8.2 million, payable $6.7 million at closing and $1.5 million in three installments of $500,000 each payable on the first three anniversaries of the closing. At the time of the acquisition, a single customer represented approximately 55% of the DZ Business. Following the completion of the acquisition, this customer informed EPT that it would no longer be purchasing depleted zinc from an outside supplier. EPT initiated binding arbitration against Isonics on March 26, 2001 with the American Arbitration Association in Dallas, Texas pursuant to contractual dispute resolution procedures. EPT's arbitration demand is based on breach of representations and warranties in the purchase and sale agreement for the DZ Business as well as fraud and negligent misrepresentation, and seeks to recover damages in excess of $10 million and other remedies. While the Company believes it has a meritorious claim against Isonics, there can be no assurance that the Company will obtain any recovery as a result of this claim. 10 11 In connection with the sale of the DZ Business, EPT agreed to sell 200 kg of isotopically purified silicon-28 to Isonics. Due to various factors, EPT has not yet delivered any silicon-28 to Isonics. Isonics has asserted a counterclaim against EPT in the DZ Business arbitration described above for failure to deliver silicon-28, seeking damages in excess of $10 million. EPT believes that any obligation to deliver silicon-28 has been excused by, among other things, a force majeure clause in the purchase and sale agreement for the DZ Business. Contemporaneously with the purchase and sale of the DZ Business, EPT and Isonics entered into a supply agreement (the "Supply Agreement") pursuant to which EPT agreed that, commencing upon delivery of 200 kg of silicon-28, EPT would devote the capacity of a pilot plant used to produce such material to producing silicon-28 and sell all silicon-28 produced in such pilot plant and meeting certain specifications, as well as any silicon-29 or silicon-30 actually produced as a byproduct, to Isonics for a ten year term. Isonics amended its counterclaim in the DZ Business arbitration to assert a claim that the Supply Agreement requires EPT to produce a certain amount of silicon-28, silicon-29 and silicon-30 and alleging damages of not less than $75 million for anticipatory breach of such alleged obligation. EPT believes that the terms of the Supply Agreement and applicable law clearly establish that the Supply Agreement does not impose any obligation to produce any quantity of silicon-28, silicon-29 or silicon-30 and that Isonics' claims are without merit. Isonics also amended its counterclaim to allege that EPT's parent company, Eagle-Picher Industries, Inc. ("EPI") is liable for any damages of EPT under an "alter ego" theory, a claim which EPI and EPT believe is also without merit. EPT and EPI intend to assert other defenses as well and to defend this counterclaim vigorously. EPT continues to explore alternative processes that may enable it to produce silicon-28, but there is no assurance that such efforts will be successful. In addition, the Company is involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course of business. In management's opinion, the ultimate liability resulting from all claims, individually or in the aggregate, will not materially affect the Company's consolidated financial position, results of operations or cash flows. E. SEGMENT REPORTING The Company has the following reportable segments: Automotive, Technologies, Machinery and Minerals. Please see discussion in Note C regarding the discontinuance of the Machinery Segment. The method for determining what information to report is based on the way management organizes the operating segments within the company for making operational decisions and assessing performance. The operations in the Automotive Segment provide mechanical and structural parts and raw materials for passenger cars, vans, trucks and sport utility vehicles for original equipment manufacturers and replacement markets. The operations in the Technologies Segment produce a variety of products for the aerospace, nuclear, telecommunications, electronics, and other industrial markets. The operations in the Minerals Segment mine and refine diatomaceous earth products. The accounting policies used to develop segment information correspond to those disclosed in the Company's consolidated financial statements for the year ended November 30, 2000 included in Form 10-K with the exception that interest is allocated at a higher rate in 2001. Sales between segments are not material. The Company does not allocate certain corporate expenses to its segments. Information about reported segment income or loss is as follows for the three months and nine months ended August 31, 2001 and 2000: 11 12
Three Months Ended Nine Months Ended August 31 August 31 -------------------- -------------------- 2001 2000 2001 2000 ---- ---- ---- ---- (In thousands of dollars) Net Sales Automotive $104,494 $109,591 $320,032 $347,078 Technologies 48,681 49,477 149,008 138,079 Minerals 16,345 15,590 48,636 48,443 Divested Divisions - 1,585 - 42,759 ------- ------- -------- -------- Total $169,520 $176,243 $517,676 $576,359 ======= ======= ======= ======= Income (Loss) from Continuing Operations Before Taxes: Automotive $(5,367) $ (473) $(7,777) $ 3,593 Technologies (1,348) (927) (1,555) (1,197) Minerals (155) (170) (587) 372 Divested Divisions - (2,489) (500) 7,288 Corporate (758) (925) (2,819) 9,815 ------ ------- ------- ------- $(7,628) $(4,984) $(13,238) $19,871 ====== ====== ======= ====== Total Depreciation and Amortization: Automotive $ 9,982 $ 8,418 $29,365 $25,510 Technologies 3,803 3,562 11,166 10,520 Minerals 1,466 1,490 4,206 4,467 Divested Divisions - 43 - 2,413 Corporate 134 272 385 664 ------- ------- ------ ------- Total $15,385 $13,785 $45,122 $43,574 ====== ====== ====== ====== Interest Expense: Automotive $ 5,311 $ 5,053 $16,167 $14,833 Technologies 3,762 3,086 11,290 9,319 Minerals 1,041 809 3,172 2,402 Divested Divisions - 103 - 2,772 Corporate/Intersegment (194) 1,403 (459) 4,152 ------- ------- ------- ------- Total $ 9,920 $10,454 $ 30,170 $33,478 ====== ====== ====== ======
The Company sold its Ross Aluminum, MARCO and Fluid Systems Divisions in the first quarter of 2000. The Rubber Molding Division was sold in the second quarter of 2000 and the Cincinnati Industrial Machinery Division was sold in the third quarter of 2000. These divisions are referred to collectively herein as the "Divested Divisions." F. FINANCIAL INSTRUMENTS Effective December 1, 2000, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of SFAS 133." Under this guidance, all derivatives, 12 13 including foreign currency exchange contracts and interest rate swaps, are recognized in the consolidated balance sheet at fair value. On the date the derivative contract is entered into, the company designates the derivative as either a hedge of the fair value of a recognized asset or liability (fair value hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or hedge of a net investment in a foreign operation (net investment hedge). Changes in the fair value of derivatives that are designed as fair value hedges are recorded in the consolidated statement of income along with the loss or gain on the hedged asset or liability. Changes in the fair value of derivatives that are designated as cash flow hedges are recorded in other comprehensive income, until the underlying transactions occur. Changes in the fair value of derivatives that are designated as net investment hedges are recorded as a component of other comprehensive income. The ineffective portion of derivatives that are hedges are recorded in the consolidated statement of income. Upon initial application of SFAS 133, the Company recorded the fair value of existing foreign currency exchange contracts and interest rate swaps on the consolidated balance sheet and a corresponding unrecognized gain of $327, net of tax, as a cumulative effect adjustment of accumulated other comprehensive income. G. CAPITAL STOCK On August 31, 2001, the Company adopted an amendment to its Amended and Restated Certificate of Incorporation to change its capital structure. Effective with this amendment, the total number of shares of common stock which the Company is authorized to issue is 1,000,000 shares, par value $0.01 per share (the "Common Stock"). The holders of shares of Common Stock are entitled to one vote per share on all matters which may be submitted to the holders of Common Stock of the Company. At the effective time of this amendment, each share of Class A Common Stock of the Company and each share of Class B Common Stock of the Company outstanding immediately prior to the effective time changed into and was reclassified as one share of Common Stock of the Company. H. SUPPLEMENTAL GUARANTOR INFORMATION The indebtedness of the Company's wholly-owned subsidiary, EPI, includes a syndicated secured loan facility ("Credit Agreement") and $220.0 million in senior subordinated notes ("Subordinated Notes"). Both the Credit Agreement and the Subordinated Notes are guaranteed on a full, unconditional and joint and several basis by the Company and certain of EPI'S wholly-owned domestic subsidiaries ("Subsidiary Guarantors") including Carpenter Enterprises Ltd., which was acquired in 1999, and Eagle-Picher Acceptance Corporation, which was formed in 1999. Management has determined that full financial statements and other disclosures concerning EPI or the Subsidiary Guarantors would not be material to investors and such financial statements are not presented. The following supplemental condensed combining financial statements present information regarding EPI, the Subsidiary Guarantors and the subsidiaries that did not guarantee the debt. EPI and the Subsidiary Guarantors are subject to restrictions on the payment of dividends under the terms of both the Credit Agreement and the Indenture supporting the Subordinated Notes, both of which were filed with the Company's Form S-4 Registration Statement No. 333-49957-01 filed on April 11, 1998 and amended on May 20, 1998 and June 5, 1998, and both of which were incorporated by reference to the Company's Form 10-K which was filed on February 28, 2001 and amended on March 8, 2001. 13 14 EAGLE-PICHER HOLDINGS,INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) THREE MONTHS ENDED AUGUST 31, 2001
Guarantors Non-Guarantors --------------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------------ --------------- --------------- ------------ -------------- --------------- (IN THOUSANDS OF DOLLARS) Net Sales Customers $ 11,536 $ - $ 137,332 $ 20,652 $ - $ 169,520 Intercompany 4,522 - 3,099 - (7,621) - Operating Costs and Expenses: Cost of products sold 9,890 - 120,215 16,981 (7,413) 139,673 Selling & Administrative 5,208 4 5,966 1,965 (89) 13,054 Intercompany charges (1,642) - 1,618 (65) 89 - Depreciation 950 - 9,427 873 - 11,250 Amortization of intangibles 936 - 2,846 353 - 4,135 Other 630 - 112 (26) - 716 -------- -------- -------- -------- ------- -------- Total 15,972 4 140,184 20,081 (7,413) 168,828 ======== ======== ======== ======== ======= ======== Operating Income 86 (4) 247 571 (208) 692 Other Income (Expense) Interest expense (2,482) - (8,923) (344) 1,829 (9,920) Other income (expense) 438 - 2,349 73 (1,260) 1,600 Equity in earnings of consolidated subsidiaries (7,127) (10,599) (390) - 18,116 - -------- -------- -------- -------- -------- -------- Income (Loss) from Continuting (9,085) (10,603) (6,717) 300 18,477 (7,628) Operations Before Taxes Income Taxes (Benefit) (3,275) - 7 743 - (2,525) -------- -------- -------- -------- -------- -------- Income (Loss) from Continuing Operations (5,810) (10,603) (6,724) (443) 18,477 (5,103) Discontinued Operations (5,500) - - 40 (40) (5,500) -------- -------- -------- -------- ------- -------- Net Income (Loss) $ (11,310) $ (10,603) $ (6,724) $ (403) $ 18,437 $ (10,603) ======== ======== ======== ======== ======= ========
14 15 EAGLE-PICHER HOLDINGS,INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) NINE MONTHS ENDED AUGUST 31, 2001
Guarantors Non-Guarantors ----------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------------ -------------- ------------ ------------ ------------ ------------ (IN THOUSANDS OF DOLLARS) Net Sales Customers $ 36,320 $ - $ 414,713 $ 66,643 $ - $ 517,676 Intercompany 11,892 - 10,620 1 (22,513) - Operating Costs and Expenses: Cost of products sold 28,453 - 357,427 53,933 (22,513) 417,300 Selling & Administrative 16,021 4 16,051 6,113 (264) 37,925 Intercompany charges (4,963) - 4,861 (162) 264 - Depreciation 3,105 - 27,120 2,657 - 32,882 Amortization of intangibles 2,800 - 8,372 1,068 - 12,240 Other 2,867 - 12 (43) - 2,836 --------- --------- -------- ------- -------- ---------- Total 48,283 4 413,843 63,566 (22,513) 503,183 --------- --------- -------- ------- -------- ---------- Operating Income (71) (4) 11,490 3,078 - 14,493 Other Income (Expense) Interest expense (7,442) - (27,104) (1,375) 5,751 (30,170) Other income (expense) 1,343 - 5,835 1,012 (5,751) 2,439 Equity in earnings of consolidated subsidiaries (8,944) (34,291) 311 - 42,924 - --------- --------- -------- ------- -------- ---------- Income (Loss) from Continuting (15,114) (34,295) (9,468) 2,715 42,924 (13,238) Operations Before Taxes Income Taxes (Benefit) (6,558) - (8) 2,266 - (4,300) --------- --------- -------- ------- -------- ---------- Income (Loss) from Continuing Operations (8,556) (34,295) (9,460) 449 42,924 (8,938) Discontinued Operations (25,357) - - 67 (67) (25,357) --------- --------- -------- ------- -------- ---------- Net Income (Loss) $ (33,913) $ (34,295) $ (9,460) $ 516 $ 42,857 $ (34,295) ========= ========= ======== ======= ======== =========
15 16 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS (UNAUDITED) AS OF AUGUST 31, 2001
Guarantors Non-Guarantors ------------------------ Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ ------------------------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Assets Cash and cash equivalents $ 8,040 $ 1 $ 540 $ 6,103 $ 71 $ 14,755 Receivables, net (12,750) - 109,066 14,985 - 111,301 Intercompany accounts receivable 5,616 - 2,996 448 (9,060) - Inventories 4,267 - 64,570 13,018 (1,235) 80,620 Net assets of discontinued operations 7,720 - - 6,143 (6,310) 7,553 Prepaid expenses 1,275 - 4,027 3,837 (730) 8,409 Deferred income taxes 24,660 - - - (334) 24,326 --------- --------- --------- --------- --------- --------- Total current assets 38,828 1 181,199 44,534 (17,598) 246,964 Property, Plant & Equipment, net 25,125 - 170,533 30,971 (39) 226,590 Investment in Subsidiaries 82,462 120,266 15,038 11,616 (229,382) - Excess of Acquired Net Assets Over Cost, net 42,873 - 123,636 20,257 (3,140) 183,626 Other Assets 93,957 - 15,731 538 (22,848) 87,378 --------- --------- --------- --------- --------- --------- Total Assets $ 283,245 $ 120,267 $ 506,137 $ 107,916 $(273,007) $ 744,558 ========= ========= ========= ========= ========= ========= Liabilities and Shareholders' Equity Accounts payable $ 8,010 $ - $ 51,322 $ 11,588 $ - $ 70,920 Intercompany accounts payable 540 - 17 8,476 (9,033) - Long-term debt - current portion 24,375 - 40,750 5,784 (5,746) 65,163 Income taxes 1,587 - - 939 - 2,526 Other current liabilities 38,449 - 18,902 3,067 - 60,418 --------- --------- --------- --------- --------- --------- Total current liabilities 72,961 - 110,991 29,854 (14,779) 199,027 Long-term Debt - less current portion 402,837 - 23,222 2,181 (23,222) 405,018 Deferred Income Taxes 5,175 - - - (2,873) 2,302 Other Long-Term Liabilities 25,465 18 1,000 1,189 - 27,672 --------- --------- --------- --------- --------- --------- Total Liabilities 506,438 18 135,213 33,224 (40,874) 634,019 Intercompany Accounts (322,291) - 290,276 37,386 (5,371) - 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock - 119,573 - - - 119,573 Shareholders' Equity 99,098 676 80,648 37,306 (226,762) (9,034) --------- --------- --------- --------- --------- --------- Total Liabilities and Shareholders' Equity $ 283,245 $ 120,267 $ 506,137 $ 107,916 $(273,007) $ 744,558
16 17 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED AUGUST 31, 2001
Guarantors Non-Guarantors -------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ -------------- ---------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Cash Flows From Operating Activities: Net Income (Loss) $ (33,913) $ (34,295) $ (9,460) $ 516 $ 42,857 $ (34,295) Equity in earnings of consolidated subsidiaries 8,944 34,291 (311) - (42,924) - Depreciation and amortization 8,070 - 35,816 3,725 - 47,611 Provision for discontinued operations 23,700 - - - - 23,700 Divestitures 500 500 Adjustments to reconcile net income (loss) to cash provided by operating activities: Working capital and other (1,595) 4 (13,789) 4,608 5,648 (5,124) --------- --------- -------- ----- -------- --------- Net cash provided by operating activities 5,706 - 12,256 8,849 5,581 32,392 Cash Flows From Investing Activities: Capital expenditures (7,013) - (16,602) (11,259) - (34,874) Other 1,578 - - (2,544) - (966) --------- --------- -------- ----- -------- --------- Net cash provided by (used in) investing activities (5,435) - (16,602) (13,803) - (35,840) Cash Flows From Financing Activities: Reduction of long-term debt (14,322) - - - - (14,322) Borrowings (repayments) on revolving credit agreement 30,340 - (2,000) (1,575) - 26,765 Other (2,541) - - (193) - (2,734) --------- --------- -------- ----- -------- --------- Net cash provided by (used in) financing activities 13,477 - (2,000) (1,768) - 9,709 --------- --------- -------- ----- -------- --------- Net cash provided by discontinued operations 1,027 - - - - 1,027 Increase (decrease) in cash & cash equivalents 14,775 - (6,346) (6,722) 5,581 7,288 Intercompany accounts (8,032) - 6,347 8,512 (6,827) - Cash & cash equivalents, beginning of period 1,297 1 539 4,313 1,317 7,467 --------- --------- -------- ----- -------- --------- Cash & cash equivalents, end of period $ 8,040 $ 1 $ 540 $ 6,103 $ 71 $ 14,755 ========= ========= ======== ======== ======== =========
17 18 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) THREE MONTHS ENDED AUGUST 31, 2000
Guarantors Non-Guarantors ------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ -------------- ---------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Net Sales Customers $ 14,964 $ -- $ 140,508 $ 20,771 $ -- $ 176,243 Intercompany 4,676 -- 2,973 2,476 (10,125) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 13,181 -- 118,854 19,377 (10,125) 141,287 Selling and administrative 7,260 1 5,254 1,990 (67) 14,438 Intercompany charges (3,221) -- 3,221 (67) 67 -- Depreciation 1,055 -- 7,923 852 -- 9,830 Amortization of intangibles 935 -- 2,780 240 -- 3,955 Loss on sales of divisions 2,043 -- -- 46 -- 2,089 Gain on sales of assets (3) -- (48) -- -- (51) --------- --------- --------- --------- --------- --------- Total 21,250 1 137,984 22,438 (10,125) 171,548 --------- --------- --------- --------- --------- --------- Operating Income (Loss) (1,610) (1) 5,497 809 -- 4,695 Other Income (Expense) Interest expense (2,945) -- (7,101) (753) 345 (10,454) Other income (expense) 123 -- 692 305 (345) 775 Equity in earnings of consolidated subsidiaries (177) (2,566) 754 -- 1,989 -- --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations Before Taxes (4,609) (2,567) (158) 361 1,989 (4,984) Income Taxes (Benefit) (1,380) -- 13 367 -- (1,000) --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations (3,229) (2,567) (171) (6) 1,989 (3,984) Discontinued Operations (183) -- -- -- -- (183) --------- --------- --------- --------- --------- --------- Net Income (Loss) $ (3,412) $ (2,567) $ (171) $ (6) $ 1,989 $ (4,167) ========= ========= ========= ========= ========= =========
18 19 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) NINE MONTHS ENDED AUGUST 31, 2000
Guarantors Non-Guarantors ------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ -------------- ---------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Net Sales Customers $ 61,903 $ -- $ 435,547 $ 78,909 $ -- $ 576,359 Intercompany 12,804 -- 10,021 7,635 (30,460) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 51,123 -- 362,919 73,886 (30,382) 457,546 Selling and administrative 25,084 8 16,926 7,474 (105) 49,387 Management compensation - special 1,560 -- -- -- -- 1,560 Intercompany charges (9,913) -- 9,912 (104) 105 -- Depreciation 3,928 -- 24,245 3,238 -- 31,411 Amortization of intangibles 3,141 -- 8,302 720 -- 12,163 Proceeds from insurance settlement (16,000) -- -- -- -- (16,000) (Gain) loss on sales of divisions 3,303 -- (3,976) (11,547) -- (12,220) (Gain) loss on sales of assets (37) -- (442) 7 33 (439) --------- --------- --------- --------- --------- --------- Total 62,189 8 417,886 73,674 (30,349) 523,408 --------- --------- --------- --------- --------- --------- Operating Income (Loss) 12,518 (8) 27,682 12,870 (111) 52,951 Other Income (Expense) Interest expense (9,933) -- (21,601) (3,392) 1,448 (33,478) Other income (expense) 526 -- 1,750 (430) (1,448) 398 Equity in earnings of consolidated subsidiaries 12,437 6,609 1,524 -- (20,570) -- --------- --------- --------- --------- --------- --------- Income (Loss) Before Taxes 15,548 6,601 9,355 9,048 (20,681) 19,871 Income Taxes 7,934 -- 5,478 488 -- 13,900 --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations 7,614 6,601 3,877 8,560 (20,681) 5,971 Discontinued Operations (970) -- -- -- -- (970) --------- --------- --------- --------- --------- --------- Net Income (Loss) $ 6,644 $ 6,601 $ 3,877 $ 8,560 $ (20,681) $ 5,001 ========= ========= ========= ========= ========= =========
19 20 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS (UNAUDITED) AS OF NOVEMBER 30, 2000
Guarantors Non-Guarantors ------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ -------------- ---------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Assets Cash and cash equivalents $ 1,297 $ 1 $ 539 $ 4,313 $ 1,317 $ 7,467 Receivables, net 3,140 -- 84,004 17,731 -- 104,875 Intercompany accounts receivable 22,266 -- 9,768 980 (33,014) -- Inventories 4,919 -- 67,299 12,630 (1,329) 83,519 Net assets of discontinued operations 43,793 -- -- 6,256 (5,969) 44,080 Prepaid expenses 906 -- 4,999 1,503 (267) 7,141 Deferred income taxes 12,860 -- -- -- -- 12,860 --------- --------- --------- --------- --------- --------- Total current assets 89,181 1 166,609 43,413 (39,262) 259,942 Property, Plant & Equipment, net 22,191 -- 181,898 21,958 (43) 226,004 Investment in Subsidiaries 118,526 151,302 12,377 -- (282,205) -- Excess of Acquired Net Assets Over Cost, net 45,673 -- 131,637 21,404 (3,139) 195,575 Other Assets 70,021 -- 17,799 8,472 (10,114) 86,178 --------- --------- --------- --------- --------- --------- Total Assets $ 345,592 $ 151,303 $ 510,320 $ 95,247 $(334,763) $ 767,699 --------- --------- --------- --------- --------- --------- Liabilities and Shareholders' Equity Accounts payable $ 10,987 $ -- $ 42,119 $ 4,759 $ -- $ 57,865 Intercompany accounts payable 92 -- -- 9,327 (9,419) -- Long-term debt - current portion 20,795 -- 42,750 1,813 -- 65,358 Income taxes 2,162 -- -- 520 -- 2,682 Other current liabilities 41,092 -- 22,046 2,364 (267) 65,235 --------- --------- --------- --------- --------- --------- Total current liabilities 75,128 -- 106,915 18,783 (9,686) 191,140 Long-Term Debt - less current portion 390,398 -- 22,266 2,175 (22,266) 392,573 Deferred Income Taxes 11,512 -- -- -- (1,234) 10,278 Other Long-Term Liabilities 22,075 14 1,000 1,618 -- 24,707 --------- --------- --------- --------- --------- --------- Total Liabilities 499,113 14 130,181 22,576 (33,186) 618,698 Intercompany Accounts (290,399) -- 290,081 36,777 (36,459) -- 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock -- 109,804 -- -- -- 109,804 Shareholders' Equity 136,878 41,485 90,058 35,894 (265,118) 39,197 --------- --------- --------- --------- --------- --------- Total Liabilities and Shareholders' Equity $ 345,592 $ 151,303 $ 510,320 $ 95,247 $(334,763) $ 767,699 ========= ========= ========= ========= ========= =========
20 21 EAGLE-PICHER HOLDINGS, INC. SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED AUGUST 31, 2000
Guarantors Non-Guarantors ------------------------- Eagle-Picher Subsidiary Foreign Issuer Holdings, Inc. Guarantors Subsidiaries Eliminations Total ------ -------------- ---------- ------------ ------------ ----- (IN THOUSANDS OF DOLLARS) Cash Flows From Operating Activities: Net Income (Loss) $ 6,644 $ 6,601 $ 3,877 $ 8,560 $(20,681) $ 5,001 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Equity in earnings (loss) of consolidated subsidiaries (12,437) (6,609) (1,524) -- 20,570 -- Depreciation and amortization 9,185 -- 32,856 3,958 -- 45,999 (Gain) loss on sales of divisions 3,349 -- (3,976) (11,593) -- (12,220) Changes in assets and liabilities, net of effect of acquisitions and divestitures 2,685 8 4,724 (14,501) 5,425 (1,659) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 9,426 -- 35,957 (13,576) 5,314 37,121 -------- -------- -------- -------- -------- -------- Cash Flows From Investing Activities: Proceeds from sales of divisions 46,787 -- 10,430 27,616 -- 84,833 Acquisition of divisions -- -- (11,796) -- -- (11,796) Capital expenditures (3,534) -- (23,034) (3,625) -- (30,193) Other 2,113 -- 111 (90) (530) 1,604 -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities 45,366 -- (24,289) 23,901 (530) 44,448 -------- -------- -------- -------- -------- -------- Cash Flows From Financing Activities: Reduction of long-term debt (19,093) -- -- -- -- (19,093) Net borrowings(repayments)under revolving credit agreements (34,700) -- (18,250) (10,532) -- (63,482) Other (7) -- -- (895) -- (902) -------- -------- -------- -------- -------- -------- Net cash used in financing activities (53,800) -- (18,250) (11,427) -- (83,477) -------- -------- -------- -------- -------- -------- Net cash provided by discontinued operations 663 -- -- -- -- 663 -------- -------- -------- -------- -------- -------- Increase (decrease) in cash 1,655 -- (6,582) (1,102) 4,784 (1,245) Intercompany accounts (4,714) -- 7,143 3,937 (6,366) -- Cash and cash equivalents, beginning of period 4,064 1 870 5,088 48 10,071 -------- -------- -------- -------- -------- -------- Cash and cash equivalents, end of period $ 1,005 $ 1 $ 1,431 $ 7,923 $ (1,534) $ 8,826 ======== ======== ======== ======== ======== ========
21 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Please refer to Note E. regarding Segment Reporting contained in Item 1. of this report. All references to years or quarters refer to the Company's fiscal year, which is December 1 to November 30, unless otherwise indicated. THE AUTOMOTIVE SEGMENT The general economic slowdown in the United States has continued to have a negative impact on volumes and operating results throughout 2001. Sales declined 4.7% from $109.6 million in the third quarter of 2000 to $104.5 million in the comparable period in 2001. Year-to-date sales in 2001 are 7.8% below last year's sales. The loss from continuing operations before tax was $(5.4) million and $(.5) million in the third quarters of 2001 and 2000, respectively. In the nine months ended August 31, 2000, income from continuing operations before taxes was $3.6 million compared to a loss of $(7.8) million in the comparable period of 2001. Besides the negative impact reduced volumes had on results, this segment also experienced inefficiencies in certain new product launches and incurred additional expenses in preparation for a potential work stoppage, which did not occur. Depreciation costs were significantly higher in 2001 than in 2000 due to substantial capital expenditures made in recent years to support the volume of new business awarded to the Company. Automotive Segment Outlook Sales for the Automotive Segment for 2001 are expected to be approximately $420 million, $10 million less than originally forecast, although the product mix is different than originally anticipated. While sales of product to the Company's largest customer, Honda, have remained steady through 2001, production slowdowns at other of the Company's customers in the automotive industry have been worse than expected. Additionally, contrary to the Company's earlier estimates, the economy and its effect on production in the automotive industry have not stabilized or improved during the latter half of 2001, but instead have worsened. The terrorist attacks that occurred on September 11, 2001 have also served to exacerbate economic conditions such that additional production cutbacks were received and are expected throughout the remainder of 2001. The Company now expects that the combination of these factors will have an additional adverse impact of approximately $4 million on the operating income and EBITDA of the Automotive Segment. THE TECHNOLOGIES SEGMENT Sales for the third quarter of 2001 were $48.7 million, a decrease of 1.6% from the comparable period of 2000, when they were $49.5 million. Demand for special-purpose batteries is growing and demand for fiber-optic materials has been strong, which has resulted in sales increases in these areas in the third quarter of 2001 compared to the same period of 2000. However, these increases have been offset by a decline in sales resulting from several factors, including soft demand for semi-conductor products, a fire in a bulk-pharmaceutical manufacturing plant and a temporary halt in orders from a large customer in the commercial battery market while it reduced inventory levels. Year-to-date sales were $149.0 million and $138.1 million in 2001 and 2000, respectively. The largest increases have been in the special-purpose battery and fiber-optic markets. 22 23 The loss from continuing operations before tax in the third quarter has increased from $(.9) million in 2000 to $(1.3) million in 2001. The segment has experienced an increase in depreciation and amortization and interest expenses due to the acquisition of Eagle-Picher Energy Products Corp. (formerly BlueStar Battery Systems Corporation) in June 2000 and other recent capital investments. Year-to-date, the loss from continuing operations before tax was $(1.6) million and $(1.2) million in 2001 and 2000, respectively. As noted above, during the third quarter, the Company had a fire in a bulk pharmaceutical manufacturing plant. While the fire may have a short term impact on results of operations, the Company does not expect the fire to have a material impact on its financial condition or results of operations due to casualty insurance, including business interruption insurance. Technologies Segment Outlook For 2001, sales in the Technologies Segment are expected to be approximately $202 million, slightly lower than the $210 million anticipated at the beginning of the year. EBITDA for the Technologies Segment for 2001 is expected to be relatively flat when compared to 2000. THE MINERALS SEGMENT The Minerals Segment experienced a sales increase of 4.8% to $16.3 million in the third quarter of 2001, from $15.6 million in the same quarter of 2000. Although volumes are slightly down this year due to general economic weakness, revenues have increased as a result of a more favorable product mix, additional value added with product sold and an energy surcharge that was in effect for part of the quarter to defray a portion of the increased natural gas costs experienced nationwide. On a year-to-date basis, sales were relatively flat, totaling $48.6 million in 2001 compared to $48.4 million in 2000. The loss from continuing operations before taxes in those quarters was virtually unchanged at $(.2) million. On a year-to-date basis, the income (loss) from continuing operations before taxes was $(.6) million and $.4 million for 2001 and 2000, respectively, a decline of $1.0 million, despite an increase in energy costs of $2.7 million in 2001 from the comparable period in 2000. The increases in energy costs have been significantly mitigated by cost savings from production efficiencies, energy surcharges to customers and a reduction of general and administrative expenses. Minerals Outlook As originally anticipated, the Company expects sales for the Minerals Segment for 2001 to be relatively flat when compared to 2000 at approximately $65 million. As originally forecast, the Minerals Segment's operating margin will be slightly lower in 2001 as a result of the substantially higher natural gas prices experienced earlier in the year. Summary of the Company Net Sales. Net sales of the Company decreased 3.8% from $176.2 million in the third quarter of 2000 to $169.5 million in the third quarter of 2001. The sales of the Divested Divisions in 2000 accounted for $1.6 million of this decrease. See discussions of the various segments for further information. 23 24 Cost of Products Sold. Cost of products sold increased as a percentage of net sales from 80.2% in the third quarter of 2000 to 82.4% in 2001. Increased energy costs have impacted the margins in operations which are heavy consumers of natural gas in the Minerals and Automotive Segments. Lower volumes resulting from the current economic slump and inefficiencies in certain new product launches also contributed to the increase. Selling and Administrative. Selling and administrative expenses have declined from $14.4 million in the third quarter of 2000 to $13.1 million for the same period in 2001. Of this amount, $.3 million is attributable to the Divested Division 2000. Other decreases were due to fewer personnel at the Company's headquarters, a new method of funding the Supplemental Executive Retirement Plan, and lower consulting fees. Depreciation and Amortization. Depreciation and amortization expense was $15.4 million and $13.8 million in the third quarters of 2001 and 2000, respectively. The increase is largely attributable to recent capital expenditures made in the Automotive Segment for new business achieved in 2000 and 2001. Divestitures. In 2000, as part of the Company's previously announced program to focus management, technical and financial resources on core businesses, the Company sold several divisions. The Cincinnati Industrial Machinery Division was sold in the third quarter of 2000, resulting in a loss of $2.1 million. Management Compensation - Special. Management compensation expenses of $.6 million in the third quarter of 2001 relate to compensation to corporate officers upon their separation from the Company. Interest Expense. Interest expense declined from $10.5 million in the third quarter of 2000 to $9.9 million in the comparable period this year. Although debt levels have been slightly higher during the third quarter of 2001 than in the same period of 2000, interest rates have been lower on variable rate debt in 2001. The Company has entered into swap agreements to manage its interest rate risk. The agreement in effect in 2000 fixed the base interest rate on $150.0 million of debt at 5.805% plus the applicable spread, where the swap agreement in 2001 fixed $90.0 million of debt at 5.678% plus the applicable spread. This results in more of the Company's debt being subject to the variable base rates, which are currently lower than the rates at which the base rates are fixed per the swap agreements. Other Income (Expense). Other income was $1.6 million and $.8 million in the third quarters of 2001 and 2000, respectively. The increase was due to royalty received on the sale of certain product designs and currency gains as the euro strengthened compared to the dollar during the third quarter. Income (Loss) from Continuing Operations Before Tax. The losses from continuing operations before tax were $(7.6) million and $(5.0) million in the third quarters of 2001 and 2000, respectively. The difference is primarily due to the effect of the weak economy on the Automotive Segment and increased depreciation costs. Income Taxes (Benefit). Income tax benefits were $(2.5) million and $(1.0) million in the third quarters of 2001 and 2000, respectively. The divestitures in 2000 affect comparability of income taxes and the effective tax rates due to taxable gains resulting from the divestitures. Discontinued Operations. As previously reported, the Board of Directors has authorized management to sell the assets and business of the Machinery Segment. The Company has entered into a letter of intent to sell the Segment, which is subject to certain contingencies. The Company continues to implement a plan which focuses on 24 25 improving the efficiency of its operations to achieve a lower cost structure. This segment has been severely impacted by general economic conditions in 2001. Sales of the Machinery Segment declined 13.8% from $21.7 million in the three months ended August 31, 2000 to $18.7 million in the comparable period of 2001. Sales of fork-lift trucks were down significantly, there was a slight decrease in sales of wheel-tractor scrapers, and sales of component parts for construction and agricultural equipment were flat. The lower volumes resulted in lower margins which were mitigated somewhat through reductions in general and administrative costs. The Company estimates the disposition of the Machinery Segment will take place by November 30, 2001 and has recorded aggregate provisions, net of tax, of $5.5 million and $23.7 million in the three and nine months ended August 31, 2001, respectively, for estimated losses and costs to be incurred in connection with the disposition of the Machinery Segment, including expected losses during the phase-out period. Net Income (Loss). The net loss for the third quarters of 2001 and 2000 was $(10.6) million and $(4.2) million, respectively. The net loss in 2001 was significantly impacted by the provision for discontinued operations as well as other factors discussed above. Dividends accreted of $3.3 million and $3.0 million in the third quarters of 2001 and 2000, respectively, on the 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock ("Preferred Stock") increased the loss applicable to common shareholders to $(13.9) million and $(7.1) million, respectively. Company Outlook The Company was fortunate in that it did not suffer the loss of any of its employees or property in the recent terrorist attacks on the United States. The attacks have exacerbated the general economic slow-down that the country had been experiencing, however, and the Company, especially the Automotive Segment, is expected to be adversely impacted in the fourth quarter of 2001 and possibly beyond. On the other hand, the anticipated prolonged military conflict and increased defense spending is expected to result in increased business in certain areas of the Technologies Segment. Excluding sales of the Machinery Segment, which is being treated as a discontinued operation, the Company expects its sales for 2001 to be approximately $695 million compared to the $705 million sales estimate provided by the Company in its fiscal year 2001 annual report on Form 10-K/A. Most of the decrease in sales is attributable to the Automotive Segment. Excluding EBITDA of the Machinery Segment, the Company now expects its EBITDA for the 2001 to be between $85 and $88 million, compared to the $93 million estimate provided by the Company at the beginning of the year. Substantially all of the decrease in EBITDA is attributable to the Automotive Segment. FINANCIAL CONDITION The following are certain financial data regarding EBITDA, as defined below, cash flows and earnings to fixed charges and preferred stock dividends (excluding the Machinery Segment): 25 26
Nine Months Ended August 31 ------------------------ 2001 2000 ---- ---- (In millions of dollars) EBITDA $65.1 $70.3 Cash provided by operating activities 32.4 37.1 Cash provided by (used in)investing activities (35.8) 44.4 Cash provided by (used in) financing activities 9.7 (83.5) Cash provided by discontinued operations 1.0 .7 Preferred stock dividends accreted 9.8 8.7 Earnings/fixed charges and preferred stock dividends .44X 1.26X
EBITDA The Company's EBITDA is defined for purposes hereof as earnings before interest expense, income taxes, depreciation and amortization, certain special management compensation expenses, insurance proceeds and other non-cash items, such as gains and losses from divestitures. EBITDA, as defined herein, may not be comparable to similarly titled measures reported by other companies and should not be construed as an alternative to operating income or to cash flows from operating activities, as determined by accounting principles generally accepted in the United States of America, as a measure of the Company's operating performance or liquidity, respectively. Funds depicted by EBITDA are not available for management's discretionary use to the extent they are required for debt service and other commitments. The Company's EBITDA for the nine months ended August 31, 2001 and 2000, excluding the Machinery Segment, was $65.1 million and $70.3 million, respectively. The decrease in EBITDA occurred primarily in the Automotive Segment. As stated above, excluding EBITDA of the Machinery Segment EBITDA, for the Company for 2001 is expected to be between $85 million and $88 million. Operating Activities Cash provided by operating activities was $32.4 million and $37.1 million for the nine months ended August 31, 2001 and 2000, respectively, and consisted of the following: NINE MONTHS ENDED AUGUST 31 ----------------- 2001 2000 ---- ---- (in millions of dollars) Income (Loss) from continuing operations before taxes $(13.2) $19.9 Depreciation and amortization, excluding amortization of deferred financing costs 45.1 43.6 Divestitures .5 (12.2) Excess of interest expense 26 27 over interest paid 7.0 4.8 Income taxes refunded (paid), net 1.7 (6.8) Working capital and other (8.7) (12.2) ---- ----- $32.4 $37.1 ==== ==== See "Results of Operations" for discussions concerning income (loss) before taxes, depreciation and amortization, divestitures and interest expense. The excess of interest expense over interest paid results primarily from three items. First, semi-annual interest was due September 1 on the Company's Subordinated Notes. Secondly, interest expense includes amortization of deferred financing costs, which does not affect cash. Finally, the Company's revolving credit facility consists of numerous notes with varying maturities. In 2001, certain of the notes matured after May 31, so less interest was paid in the first six months of 2001 compared to 2000. The Company received a "quick refund" in the first quarter of 2001 of some of the income tax payments made in 2000. The Company has made a concerted effort to improve its working capital position by monitoring receivables, managing inventory levels and seeking longer payment terms. However, in the third quarter of 2001, the Company made the final distribution from EPI's chapter 11 reorganization of approximately $10.6 million, which adversely impacted cash provided by operating activities. Investing Activities Capital expenditures were $34.9 million in the nine months ended August 31, 2001. The majority of the capital expenditures were made in the Automotive Segment. These expenditures related to new product launches for precision-machined products and a new rubber-to-metal coating line. Investing activities provided $44.4 million in cash in the comparable period of 2000. The Company sold the Divested Divisions during the first nine months of 2000, which resulted in aggregate net proceeds of $84.8 million. Also in the first nine months of 2000, the Company made capital investments of $30.2 million, primarily in the Automotive Segment, and acquisitions totaling $11.8 million in the Technologies Segment. Financing Activities The Company had a net increase in borrowing of $12.4 million in the nine months ended August 31, 2001. This was due in part to large amounts of cash received on the last day of the month by the Company that we were unable to apply to debt. The Company had $14.8 million in cash on August 31, which was $7.3 million more than was held at November 30, 2000. In addition, the Company spent $34.9 million in capital expenditures, which was $2.5 million more than was generated by continuing operations. In the comparable period of 2000, the Company applied the proceeds from the divestitures and the insurance settlement to debt, reducing the balances on revolving credit facilities by $63.5 million, in addition to regularly scheduled debt repayments of $11.1 million and repayment of an industrial revenue bond of $8.0 million. Earnings to Fixed Charges and Preferred Stock Dividends The ratio of earnings from continuing operations to fixed charges and preferred stock dividends for the nine months ended August 31, 2001 and 2000 was .44x and 1.26x, 27 28 respectively. In 2001, earnings were insufficient to cover fixed charges and preferred stock dividends by $23.0 million. In 2000, the ratio was significantly impacted by the insurance proceeds of $16.0 million and gains resulting from divestitures of $12.2 million. If these items were excluded from the calculation in 2000, the ratio of earnings from continuing operations to fixed charges and preferred stock dividends would be .60x and earnings would not have been sufficient to cover fixed charges and preferred stock dividends by $17.1 million. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flow from operations and available credit facilities are considered adequate to fund both the short-term and long-term capital needs of the Company. As of August 31, 2001, the company had $45.9 million available to be drawn under its revolving credit facility and an amount up to $7.3 million available to be drawn under its Receivables Loan Agreement, based on a formula of total receivables outstanding as of a certain date. In addition, the Company's European operations had several unsecured lines of credit on which $4.7 million was available to draw as of August 31, 2001. The Company was in compliance with the covenants of its Credit Agreement, Subordinated Notes and the European credit agreements as of August 31, 2001. The Company enters into interest rate swap agreements to manage its variable interest rate exposure. Per the terms of the swap agreement, the Company exchanges, at specified intervals, the difference between fixed and variable interest amounts based on a certain notional amount. During the first quarter of 2001, the Company entered into various swap agreements effectively fixing the base interest rate (i.e. before the applicable spread) on $90 million of the Company's debt under the Credit Agreement at a weighted average interest rate of 5.678%. These swap agreements mature by December 15, 2003. The second and final bankruptcy distribution from EPI's chapter 11 reorganization of approximately $10.6 million was made June 25, 2001. This was financed from the Company's revolving credit facility. The Company's Receivables Loan Agreement, which was renewed through May 15, 2002, has a term of 364 days and it is expected to be renewed for an additional 364 days upon maturity. NEW ACCOUNTING STANDARDS In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125" ("SFAS 140"). SFAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS 125's provisions without reconsideration. This Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company would be required to adopt this statement for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for the year ending November 30, 2001. In June 2001, the FASB issued three additional pronouncements. SFAS No. 141, "Business Combinations," requires that all acquisitions be accounted for using the purchase method. SFAS No. 142, "Goodwill and Intangible Assets," presumes that goodwill and other intangible assets have infinite lives and, as such, prescribes that these assets will not be amortized, but rather tested at least annually for impairment. This pronouncement also 28 29 provides specific guidance on testing intangible assets. SFAS No. 143, "Accounting for Asset Retirement Obligations," requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 141 is effective for all business combinations initiated after June 30, 2001. We will be required to adopt SFAS No. 142 and SFAF No. 143 no later than our fiscal year ending November 30, 2003. In September 2001, the FASB issued SFAS No. 144, " Accounting for the Impairment or Disposal of Long-Lived Assets," which superceded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The primary difference is that goodwill has been removed from the scope of SFAS No. 144. It also broadens the presentation of discontinued operations to include a component of an entity rather than a segment of a business. A component of an entity comprises operations and cash flows that can clearly be distinguished operationally and for financial accounting purposes from the rest of the entity. The Company will be required to adopt the provisions of SFAF No. 144 no later than the first quarter of our fiscal year ended November 30, 2003. The Company is currently analyzing these new pronouncements. RESTRICTIONS ON PAYMENT OF DIVIDENDS EPI and the Subsidiary Guarantors are subject to restrictions on the payment of dividends and other forms of payment in both the Credit Agreement and the Indenture for the Subordinated Notes. Those restrictions generally prohibit the payment of dividends to the Company either directly by EPI or indirectly through any Subsidiary Guarantor. Certain limited exceptions are provided allowing for payments to the Company. Specifically, EPI is authorized to make payments to the Company in amounts not in excess of any amounts the Company is required to pay to meet its consolidated income tax obligations. Additional payments from EPI to the Company are permitted commencing September 1, 2003 in amounts not in excess of the Company's obligations to make any cash dividend payments required to be paid under the Company's Preferred Stock and to make any cash interest payments required to be paid under any debentures issued by the Company in exchange for the Company's Preferred Stock ("Exchange Debentures"). FORWARD-LOOKING STATEMENTS This report contains statements which, to the extent that they are not statements of historical fact, constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934. The words "estimate," "anticipate," "project," "intend," "believe," "expect," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, statements under the headings "Automotive Segment Outlook," "Technologies Segment Outlook," "Minerals Segment Outlook," and "Company Outlook." Such forward-looking information involves risks and uncertainties that could cause actual results to differ materially from those expressed in any such forward-looking statements. These risks and uncertainties include, but are not limited to, the ability of the Company to maintain existing relationships with customers, demand for the Company's products, the ability of the Company to successfully implement productivity improvements and/or cost reduction initiatives, the ability of the Company to develop, market and sell new products, the ability of the Company to obtain raw materials, increased government regulation or changing regulatory policies resulting in higher costs and/or restricting output, increased price competition, currency fluctuations, general economic conditions, acquisitions and divestitures, technological developments and 29 30 changes in the competitive environment in which the Company operates. Persons reading this report are cautioned that such forward-looking statements are only predictions and that actual events or results may differ materially. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company enters into interest rate swap agreements ("Swap Agreements") to manage interest rate costs and risks associated with changing interest rates. The differential to be paid or received under these agreements is accrued and recognized as adjustments to interest expense. During the first quarter ended February 28, 2001, the Company entered into various interest rate swap agreements with a commercial bank having a total notional amount of $90 million. The effective dates of these agreements were March 5, 2001 and March 15, 2001 and they mature December 5, 2003 and December 15, 2003, respectively. These agreements effectively change the interest rate exposure on $90 million of the Company's floating debt to a fixed rate of 5.678% plus the applicable spread. The Company anticipates entering into additional interest rate swap agreements through the maturity date of the Credit Agreement. Both the revolving and term loans bear interest at the Company's option, of an adjusted LIBOR rate plus 2-3/4% or the bank's prime rate plus 1-1/2%. There is a commitment fee on the facility equal to 1/2% per annum on the undrawn portion of the facility and fees for letters of credit are equal to 2-3/4% per annum. If the Company meets or fails to meet certain financial benchmarks, the interest rate spreads, commitment fees and fees for letters of credit may be reduced or increased. Loans under the Company's accounts receivable loan agreement ("Receivables Agreement") bear interest at a variable rate equal to market rates on commercial paper having a term similar to the applicable interest period with fees of 1-1/4% on the maximum amount available. The Company's industrial revenue bonds ("IRB's") bear interest at variable rates based on the market for similar issues. Loans under the Receivables Agreement and the IRB's are not covered by the Swap Agreements. As of August 31, 2001, $188.5 million of revolving and term loans were outstanding under the Credit Agreement, of which interest on $90.0 million is essentially fixed by the Swap Agreements. The interest rate risk on the debt outstanding under the Receivables Agreement, the foreign debt and the IRB's, which in the aggregate totals $61.6 million, has not been hedged. Accordingly, a 1% increase in the applicable index rates would result in additional interest expenses of $1.6 million per year, assuming no change in the level of borrowing. Based on the fair value of the Swap Agreements held at August 31, 2001, the Company has recorded a loss of $3.4 million in Other Comprehensive Income. The Company also enters into various foreign currency forward contracts to hedge a portion of its forecasted sales, generally within the next 12 months. The Company manages most of these exposures on a consolidated basis, which allows for netting certain exposures to take advantage of any natural offsets. The Company's principal areas of exposure are related to sales denominated in the currencies of Europe, Mexico and Canada with the majority of this exposure in European currencies. As of August 31, 2001, the Company had outstanding foreign exchange forward contracts with aggregate notional amounts of $15.2 million. Based on the fair value of the futures contracts being held as of August 31, 2001, the Company has recorded a net loss of $.4 million in the nine months ended August 31, 2001 in Other Comprehensive Income. 30 31 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Please refer to Note D regarding Legal Matters contained in Item 1 of this report, which is incorporated by reference in this Part II, as its Item 1. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.21 - Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 31, 2001. 10.59 - Executive Employment Agreement effective July 15, 2001 between EPI and John H. Weber. (b) Reports on Form 8-K None. 31 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER HOLDINGS, INC. /s/ Albert Iedema ------------------------------- Albert Iedema Senior Vice President and Chief Financial Officer (Principal Financial Officer) DATE October 12, 2001 -------------------------- 32 33 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER INDUSTRIES, INC. /s/ Albert Iedema ------------------------------- Albert Iedema Senior Vice President and Chief Financial Officer (Principal Financial Officer) DATE October 12, 2001 -------------------------- 33 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAISY PARTS, INC. /s/ Tom B. Scherpenberg ----------------------------- Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 34 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER DEVELOPMENT COMPANY, INC. /s/ Tom B. Scherpenberg -------------------------------------- Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 35 36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER FAR EAST, INC. /s/ Tom B. Scherpenberg ----------------------------- Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 36 37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER MINERALS, INC. /s/ Tom B. Scherpenberg ------------------------------ Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 37 38 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EAGLE-PICHER TECHNOLOGIES, LLC /s/ R. Doug Wright ------------------------------- R. Doug Wright Vice President, Controller and Chief Financial Officer DATE October 12, 2001 ----------------------- 38 39 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HILLSDALE TOOL & MANUFACTURING CO. /s/ Tom B. Scherpenberg ---------------------------------- Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 39 40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EPMR CORPORATION (F/K/A MICHIGAN AUTOMOTIVE RESEARCH CORPORATION) /s/ Tom B. Scherpenberg ---------------------------------- Tom B. Scherpenberg Treasurer (Principal Financial Officer) DATE October 12, 2001 ----------------------- 40 41 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 3.21 Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 31, 2001. 10.59 Executive Employment Agreement effective July 15, 2001 between EPI and John H. Weber.