EX-99.7 9 p68044exv99w7.txt EX-99.7 EXHIBIT 99.7 Selected historical financial data The following selected historical financial data is derived from our the historical consolidated financial statements of our parent, EaglePicher Holdings, Inc. This table does not include the obligations of our unconsolidated accounts receivable asset-backed securitization entity. The following table should be read in conjunction with "Management's discussion and analysis of financial condition and results of operations" and the historical financial statements and related notes of our parent included elsewhere in this offering memorandum. Data and ratios relating to preferred stock refer to our parent's 11 3/4% cumulative redeemable exchangeable preferred stock.
NINE MONTHS YEAR ENDED NOVEMBER 30, ENDED ------------------------------------------------------------ NOVEMBER 30, 1998 1999 2000 2001 2002 ------------ --------- --------- --------- --------- (IN THOUSANDS EXCEPT RATIOS) STATEMENTS OF INCOME (LOSS) DATA: Net sales(1) .......................... $ 567,774 $ 824,133 $ 752,509 $ 689,776 $ 682,829 Costs of products sold (exclusive of depreciation) ....................... 441,405 647,297 593,688 559,748 534,605 --------- --------- --------- --------- --------- Gross profit .......................... 126,369 176,836 158,821 130,028 148,224 Selling and administrative ............ 52,670 66,665 57,654 49,343 60,348 Depreciation and amortization ......... 27,059 44,101 40,676 42,338 47,299 Goodwill amortization ................. 11,908 15,877 15,877 15,825 15,822 Restructuring ......................... -- -- -- 14,163 5,898 Losses (gains) from divestitures ...... -- 21,407 (3,149) 2,105 6,497 Management compensation-special(2) .... 26,808 556 1,560 3,125 3,383 Insurance (gains) losses(3) ........... -- -- (16,000) -- 3,100 --------- --------- --------- --------- --------- Operating income (loss) ............... 7,924 28,230 62,203 3,129 5,877 Interest expense(4) ................... (32,295) (44,297) (42,644) (38,883) (40,022) Other income, net ..................... 1,839 3,893 624 3,566 1,516 --------- --------- --------- --------- --------- Income (loss) from continuing operations before taxes ............. (22,532) (12,174) 20,183 (32,188) (32,629) Income tax (provision) benefit ........ 4,812 96 (9,321) 10,063 (1,938) --------- --------- --------- --------- --------- Income (loss) from continuing operations .......................... (17,720) (12,078) 10,862 (22,125) (34,567) Discontinued operations, net(5) ....... 3,356 (5,509) (5,252) (31,846) (2,265) --------- --------- --------- --------- --------- Net income (loss) ..................... $ (14,364) $ (17,587) $ 5,610 $ (53,971) $ (36,832) ========= ========= ========= ========= ========= BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents ............. $ 13,681 $ 10,071 $ 7,467 $ 24,620 $ 31,522 Working capital ....................... 115,501 114,737 72,405 48,408 8,681 Property, plant and equipment, net .... 226,043 218,993 219,559 210,421 177,135 Total assets .......................... 807,307 833,947 767,699 728,934 613,041 Total debt(6) ......................... 484,095 540,275 456,118 440,989 373,725 Preferred stock ....................... 87,387 97,956 109,804 123,086 137,973 Shareholders' equity (deficit) ........ 80,612 49,311 39,197 (33,655) (87,578) OTHER DATA AND SELECTED RATIOS: Adjusted EBITDA(7) .................... $ 59,492 $ 115,271 $ 102,951 $ 85,259 $ 92,500 Earnings to fixed charges and preferred stock dividends(8) .................. N/A N/A 1.15x N/A N/A Adjusted EBITDA/interest expense(9) ... 2.3x 2.2x 2.0x 2.2x Total debt/Adjusted EBITDA(10) ........ 4.7x 4.4x 5.2x 4.0x Capital expenditures .................. N/A $ 41,746 $ 40,846 $ 35,711 $ 16,397 Gross margin .......................... 22.3% 21.5% 21.1% 18.9% 21.7%
TWELVE SIX MONTHS ENDED MONTHS MAY 31, ENDED -------------------------- MAY 31, 2002 2003 2003 --------- --------- --------- STATEMENTS OF INCOME (LOSS) DATA: Net sales(1) .......................... $ 340,555 $ 345,610 $ 687,884 Costs of products sold (exclusive of depreciation) ....................... 267,253 266,285 533,637 --------- --------- --------- Gross profit .......................... 73,302 79,325 154,247 Selling and administrative ............ 33,797 29,797 56,348 Depreciation and amortization ......... 22,864 22,458 46,893 Goodwill amortization ................. 7,912 -- 7,910 Restructuring ......................... 2,998 -- 2,900 Losses (gains) from divestitures ...... 5,970 -- 527 Management compensation-special(2) .... 2,381 424 1,426 Insurance (gains) losses(3) ........... 3,100 (5,736) (5,736) --------- --------- --------- Operating income (loss) ............... (5,720) 32,382 43,979 Interest expense(4) ................... (21,696) (18,146) (36,472) Other income, net ..................... 918 73 671 --------- --------- --------- Income (loss) from continuing operations before taxes ............. (26,498) 14,309 8,178 Income tax (provision) benefit ........ (1,205) (2,046) (2,779) --------- --------- --------- Income (loss) from continuing operations .......................... (27,703) 12,263 5,399 Discontinued operations, net(5) ....... (472) (3,409) (5,202) --------- --------- --------- Net income (loss) ..................... $ (28,175) $ 8,854 $ 197 ========= ========= ========= BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents ............. $ 22,088 $ 13,508 $ 13,508 Working capital ....................... (3,529) (87,237) (87,237) Property, plant and equipment, net .... 195,668 164,705 164,705 Total assets .......................... 640,565 608,250 608,250 Total debt(6) ......................... 378,533 370,762 370,762 Preferred stock ....................... 130,317 146,079 146,079 Shareholders' equity (deficit) ........ (67,877) (82,648) (82,648) OTHER DATA AND SELECTED RATIOS: Adjusted EBITDA(7) .................... $ 44,856 $ 49,874 $ 97,518 Earnings to fixed charges and preferred stock dividends(8) .................. N/A 1.23x N/A Adjusted EBITDA/interest expense(9) ... 2.6x Total debt/Adjusted EBITDA(10) ........ 3.8x Capital expenditures .................. $ 8,516 $ 8,808 $ 16,689 Gross margin .......................... 21.5% 23.0% 22.4%
-------------------- (1) Net sales includes $121.6 million in the nine months ended November 30, 1998; $146.1 million in the year ended November 30, 1999; $56.2 million in year ended November 30, 2000; $10.2 million in the year ended November 30, 2001; $3.4 million in the year ended November 30, 2002; $2.6 million in the six months ended May 31, 2002; and $0.8 million in the twelve months ended May 31, 2003, which is attributed to certain divested or sold businesses. (2) Management compensation -- special expense consists of payments to former officers upon their separation from employment. (3) In 2000, we received $16.0 million from insurance companies as a result of the settlement of certain claims relating primarily to environmental remediation. In the second quarter of 2002, we recorded a provision of $3.1 million primarily related to a dispute with an insurance carrier over the coverage on a fire which occurred at one of our facilities during 2001. In the second quarter of 2003, we recorded a $5.7 million gain primarily related to the settlement of a claim with our insurance carrier over the coverage on a fire during 2002 at a non-operating facility. (4) Interest expense excludes $4.0 million in the nine months ended November 30, 1998; $4.8 million in the year ended November 30, 1999; $4.7 million in the year ended November 30, 2000; $4.5 million in the year ended November 30, 2001; $1.1 million in the year ended November 30, 2002; $0.6 million in the six months ended May 31, 2002; $0.6 million in the six months ended May 31, 2003; and $1.1 million in the twelve months ended May 31, 2003, which has been allocated to discontinued operations (see footnote 5). (5) In 2001, we discontinued the operations of our former Construction Equipment Division, which represented our entire former Machinery Segment. We completed this sale on December 14, 2001, effective November 30, 2001. In addition, during the second quarter of 2003, we discontinued the operations of our Hillsdale UK automotive operation. We sold our Hillsdale UK automotive operation on June 11, 2003. (6) Total debt excludes $0.3 million at November 30, 1998; $3.8 million at November 30, 1999; $1.8 million at November 30, 2000; $2.1 million at November 30, 2001; and $2.2 million at May 31, 2002, which has been allocated to discontinued operations (see footnote 5). In addition, total debt excludes $46.5 million at November 30, 2002; $52.4 million at May 31, 2002; and $26.2 million at May 31, 2003, which represents amounts advanced under our accounts receivable asset-backed securitization. (7) Adjusted EBITDA represents net income (loss) adjusted for (i) loss (gain) from discontinued operations, net; (ii) loss on disposal of discontinued operations, net; (iii) income taxes; (iv) interest expense; (v) depreciation and amortization; (vi) restructuring; (vii) losses (gains) from divestitures; (viii) insurance related losses (gains); (ix) certain legal and litigation costs; and (x) Adjusted EBITDA impact from discontinued operations. Adjusted EBITDA is presented herein because we believe it is a useful supplement to operating income and cash flow from operations in understanding cash flows generated from operations that are available for taxes, debt service and capital expenditures. Management also uses this measurement as part of its evaluation of core operating results and underlying trends and therefore believes it is a key measure of its performance. However, Adjusted EBITDA, which does not represent operating income or net cash provided by operating activities as those items are defined by GAAP, should not be considered by prospective purchasers of the notes to be an alternative to operating income or cash flow from operations or indicative of whether cash flows will be sufficient to fund our future cash requirements. In addition, Adjusted EBITDA may differ from and may not be comparable to similarly titled measures used by other companies. The following table reconciles our net income (loss) to Adjusted EBITDA for each period presented:
NINE MONTHS ENDED YEAR ENDED NOVEMBER 30, NOVEMBER 30, ------------------------------------------------------ 1998 1999 2000 2001 2002 ----------- --------- -------- -------- -------- (IN THOUSANDS) Net income (loss) ................ $(14,364) $ (17,587) $ 5,610 $(53,971) $(36,832) Loss (gain) from discontinued operations, net .............. (3,356) 5,509 5,252 1,430 2,265 Loss on disposal of discontinued operations, net .............. -- -- -- 30,416 -- Income taxes ................... (4,812) (96) 9,321 (10,063) 1,938 Interest expense ............... 32,295 44,297 42,644 38,883 40,022 Depreciation and amortization .. 38,967 59,978 56,553 58,163 63,121 Restructuring .................. -- -- -- 14,163 5,898 Losses (gains) from divestitures ................. -- 21,407 (3,149) 2,105 6,497 Insurance related losses (gains) ...................... -- -- 16,000) -- 3,100 Certain legal and litigation costs(11) .................... -- -- -- -- 6,050 Adjusted EBITDA impact from discontinued operations ...... 10,762 1,763 2,720 4,133 441 -------- --------- -------- -------- -------- Adjusted EBITDA .................. $ 59,492 $ 115,271 $102,951 $ 85,259 $ 92,500 ======== ========= ======== ======== ========
TWELVE SIX MONTHS ENDED MONTHS MAY 31, ENDED ----------------------- MAY 31, 2002 2003 2003 -------- -------- -------- Net income (loss) ................ $(28,175) $ 8,854 $ 197 Loss (gain) from discontinued operations, net .............. 472 431 2,224 Loss on disposal of discontinued operations, net .............. -- 2,978 2,978 Income taxes ................... 1,205 2,046 2,779 Interest expense ............... 21,696 18,146 36,472 Depreciation and amortization .. 30,776 22,458 54,803 Restructuring .................. 2,998 -- 2,900 Losses (gains) from divestitures ................. 5,970 -- 527 Insurance related losses (gains) ...................... 3,100 (5,736) (5,736) Certain legal and litigation costs(11) .................... 6,250 -- (200) Adjusted EBITDA impact from discontinued operations ...... 564 697 574 -------- -------- -------- Adjusted EBITDA .................. $ 44,856 $ 49,874 $ 97,518 ======== ======== ========
(8) For purposes of determining the ratio of earnings to fixed charges and preferred stock dividends, "earnings" consist of income from continuing operations before provision (benefit) for income taxes and fixed charges. "Fixed charges" consist of interest expense (including amortization of deferred financing costs) and approximately 30% of our rental expense, representing that portion of interest expense deemed to be representative of the interest factor. Earnings were insufficient to cover fixed charges and preferred stock dividends by $29.9 million in the nine months ended November 30, 1998; $22.7 million in the year ended November 30, 1999; $45.5 million in the year ended November 30, 2001; $47.5 million in the year ended November 30, 2002; $33.7 million in the six months ended May 31, 2002; and $7.6 million in the twelve months ended May 31, 2003. (9) For purposes of calculating Adjusted EBITDA/interest expense, we have included the interest expense from the summary financial table and interest expense allocated to discontinued operations (see footnote 4 above). (10) For purposes of calculating total debt/Adjusted EBITDA, we have included the total debt from the summary financial table and debt allocated to discontinued operations (see footnote 6). (11) Certain legal and litigation costs are included in selling and administrative expense and are discussed in greater detail in Note M to our parent's November 30, 2002 consolidated financial statements included in Exhibit 99.4 of this Report.