ITEM 1. BUSINESS.
General Development of Business.
Eagle-Picher Industries, Inc. (the "Company") was incorporated in 1867 under the laws of the State of Ohio as an outgrowth of a business enterprise founded in Cincinnati in 1843. It conducts its business through unincorporated operating divisions and separately incorporated subsidiaries, both of which are referred to herein as divisions.
On January 7, 1991 the Company and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code ("chapter 11"). The chapter 11 filings were the consequence of a cash shortfall resulting from the Company's inability to satisfy certain immediate asbestos litigation liabilities. See Item 3.(a) below.
Financial Information About Industry Segments.
The Company's major industry segments are:
1. Industrial;
2. Machinery; and
3. Automotive.
Industry Segment Data is incorporated herein by reference to Exhibit 13, the Company's Annual Report for the fiscal year ended November 30, 1994, pages 29-30.
Narrative Description of Business.
The Industrial Group, which is composed of three divisions and operations in three other divisions, produces a variety of products for industrial markets, principally manufacturers of consumer products. The Minerals Division mines and refines diatomaceous earth products used for high purity filtration primarily by the food and beverage industry and also for general industrial applications. The Fabricon Products Division produces printed packaging materials for the dairy and confectionery industries. The Specialty Materials Division refines rare metals, such as high purity germanium and gallium compounds, and is a major source of boron isotopes for nuclear applications. This Division also produces a wide range of super-clean containers, which meet strict EPA protocols, for environmental sampling. Other products manufactured in the Industrial Group include custom designed cast and injection molded rubber and plastic parts, and industrial chemicals.
The methods of distribution and competitive positions of the divisions of the Industrial Group vary widely. For example, the Minerals Division is second to the Alleghany Corporation in the sale of certain filter aid products which are sold both directly and through distributors to many large and small customers. By contrast, the Fabricon Products Division conducts its sales through sales personnel and competes against many other firms in a highly price-sensitive market. Other products are sold under competitive conditions which vary widely from plant to plant.
The Machinery Group consists of five divisions, which are involved in manufacturing products for various industrial markets. The Construction Equipment Division produces earthmoving equipment for Caterpillar Inc. and began manufacturing a line of heavy-duty industrial forklift trucks in 1993. The Electronics Division is a leading supplier of sophisticated special purpose batteries for aerospace and defense applications. The Cincinnati Industrial Machinery Division produces specialized high-volume metal cleaning and finishing systems. The Ross Aluminum Foundries Division manufactures complex aluminum castings in sand and plaster. Transicoil Inc. manufactures sophisticated electronic components for aerospace, shipboard, ground-based, and industrial applications.
The principal products manufactured by the Machinery Group are distributed through various methods and in a variety of competitive environments. The Electronics Division bids competitively for numerous fixed price government contracts for special purpose batteries. The Division is a recognized leader in this business
and has a few competitors for some highly technological products, but many large and small competitors for other products. The Construction Equipment Division is the sole supplier of four lines of earthmoving equipment to its longstanding largest customer, Caterpillar Inc. The forklifts are distributed through a dealer network.
The Automotive Group consists of eight divisions, which are involved largely in the production and sale of mechanical, structural and trim parts for passenger cars, trucks, vans, and recreational and sport utility vehicles. The Hillsdale Tool Division specializes in the manufacture of precision-machined aluminum and steel parts. Typical machined products include torsional vibration dampers and a variety of castings and forgings. The Division also produces the entire front pump assembly for Ford Motor Co.'s electronic four-speed overdrive transmission primarily used on one-half and three-quarter ton pick-up trucks, vans and sport utility vehicles. The Plastics Division is a major supplier of fiberglass reinforced molded plastic parts to automotive and other customers. The Division also produces the fiberglass reinforced plastic roof panels for General Motors Corporation's all-plastic body, all-purpose vehicle. The Wolverine Gasket Division coats steel and aluminum with elastomeric compounds and produces materials which are particularly suitable for high compression applications. The International Operations Division includes Eagle-Picher Industries Europe GmbH, with responsibility over three plants in Europe which manufacture sealing and insulating products, elastomeric extrusions, and injection molded parts for the European automotive market. The Division also includes a sales and engineering office in Japan that serves the Asian market. The Trim Division manufactures automotive interior trim including headliners, rear package trays, spare tire covers and door panels. The Michigan Automotive Research Corporation Division offers vehicle and vehicle system manufacturers a comprehensive range of testing programs for engines, power trains and power train components. The Rubber Molding Division manufactures engineered rubber and rubber-to-metal products and small precision-molded parts. The Orthane Division produces injection-molded plastic parts for automotive and industrial applications.
The Automotive Group distributes its products primarily to the "Big Three" automotive manufacturers or to other suppliers to those manufacturers directly through internal sales personnel. With respect to the hundreds of products manufactured by the Automotive Group, competition varies widely as to the number and type of competitors, the methods of competition and the Group's competitive positions. Divisions producing precision-machined parts, such as Hillsdale Tool Division, tend to have a few strong competitors (including among others the automotive manufacturers themselves) and compete on the basis of quality and price. Divisions such as Trim and Wolverine Gasket tend to have many competitors of varying sizes and compete primarily on the basis of price. Generally, competitive conditions for this Group are characterized by a decreasing number of competitors, an increasing amount of foreign competition (particularly from the Far East), and an increased emphasis on quality.
No product accounted for more than 7%, and no customer accounted for more than 10%, of total sales of the Company for fiscal 1992 through fiscal 1994 except Ford Motor Co., for which sales were $165.3 million in 1994, $148.0 million in 1993, and $132.7 million in 1992, and General Motors Corporation, for which sales were $81.4 million in 1994, $73.1 million in 1993, and $64.5 million in 1992. In addition the Company is not dependent upon any individual raw material source for a substantial part of its business and believes that its sources of raw materials are adequate.
In the Machinery Group, order backlog was approximately $190.1 million as of November 30, 1994, $148.1 million as of November 30, 1993 and $118.1 million as of November 30, 1992. The increase from prior years is due primarily to improved demand for capital equipment and heavy-duty forklift trucks. A substantial portion of the order backlog outstanding at November 30, 1994 is expected to be filled within the current fiscal year. In no other segment is order backlog of significance.
In fiscal 1994, the Company spent approximately $21.1 million for research and development and related activities, primarily for the development of new products or the improvement of existing products. Comparable costs were $17.1 million and $13.5 million for 1993 and 1992, respectively.
The Company owns or is licensed under patents relating to methods and products in several areas of its business. Although these have been of value and are expected to be of value in the future, the loss of any individual patent or group of patents would not materially affect the conduct of the Company's business.
In the fiscal years 1994, 1993, and 1992, for current operations the Company spent approximately $9.6 million, $8.6 million and $9.6 million, respectively, to comply with federal, state and local regulatory provisions relating to the protection of the environment. This level of expenditures has had no material effect on the earnings or competitive position of the Company or its operations during the period described. The Company expects these expenditures to be approximately $9.2 million in fiscal 1995. See Item 3.(d) for information with respect to various other environmental proceedings.
As of November 30, 1994, the Company employed approximately 7,100 persons in its operations, of whom approximately 1,800 were salaried employees and approximately 5,300 were hourly employees. Approximately 18% of the Company's hourly employees are represented by eight labor organizations under 12 separate contracts. The Company believes that its relations with its employees generally are good.
Export sales totaled approximately $76.9 million, $73.2 million, and $64.7 million in fiscal 1994, 1993, and 1992, respectively. The revenues generated by foreign operations do not exceed 10% of consolidated revenues, nor do their identifiable assets exceed 10% of consolidated total assets.
The Company and its lenders executed a First Amendment to Credit Agreement in August, 1994, with the approval of the Bankruptcy Court, extending the Company's debtor-in-possession financing to the earlier of December 31, 1996 or the effective date of a confirmed plan of reorganization.
ITEM 2.
ITEM 2. PROPERTIES.
Eagle-Picher Industries, Inc. manufactures at 55 locations a wide variety of products primarily for other manufacturers. Types of manufacturing include, among others, chemical processing, mining, metal fabricating, aluminum casting, precision machining, electronic and electrical assembling, and rubber and plastic molding and extruding.
The plants are fully utilized for the purposes intended and generally have capacity for expansion of existing buildings on owned real estate. Plants range in size from 425,000 square feet of floor area to under 50,000 square feet and generally are located away from large urban centers.
Information on the locations of all manufacturing plants is contained in Exhibit 99 attached hereto, which is incorporated by reference into this report.
The Company considers the following plants to be its most important physical properties:
All of such properties are held in fee and none of them is subject to any major encumbrances.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
(a) Chapter 11 Proceedings.
On January 7, 1991 (the "petition date"), the Company and seven of its domestic subsidiaries each filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio (the "Bankruptcy Court"). The subsidiaries that filed chapter 11 petitions are Daisy Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation (MARCO), EDI, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Europe, Inc., and Hillsdale Tool & Manufacturing Co. On November 30, 1991, substantially all of the assets of EDI, Inc., were sold pursuant to authority granted by the Bankruptcy Court. All of the chapter 11 cases have been consolidated for procedural purposes only under the caption: "In re Eagle-Picher Industries, Inc., et al.," Consolidated Case No. 1-91-00100, before the Honorable Burton J. Perlman, United States Bankruptcy Judge. The Company and its petitioning subsidiaries are operating their businesses and managing their properties as debtors in possession, in accordance with the provisions of the Bankruptcy Code.
The filing of a chapter 11 petition operates as an automatic stay of all litigation against the debtor that was or could have been commenced before the filing of the chapter 11 petition and of any act to collect or recover a claim against the debtor that arose before the commencement of the chapter 11 case. While claimants or the Company may petition the Bankruptcy Court for a modification of the stay, the Company believes that it is unlikely that the Bankruptcy Court will grant such permission except in certain limited instances to permit the liquidation of a pre-petition claim, but not any payment or collection efforts with respect thereto. Consistent with the provisions of chapter 11, the Company intends to address all of the pre-petition claims in a plan of reorganization.
An unsecured creditors' committee ("UCC"), an injury claimants' committee ("ICC"), an equity security holders' committee ("EC") and a legal representative for future claimants ("RFC"), have been appointed in the chapter 11 cases. An unofficial asbestos co-defendants' committee also has been participating in the chapter 11 cases. In accordance with the provisions of the Bankruptcy Code, these parties have the right to be heard with respect to transactions outside the ordinary course of business. The official committees and the RFC also are the primary entities with which the Company has been negotiating the terms of a plan of reorganization.
At the Company's request, the Bankruptcy Court established a bar date of October 31, 1991 for all pre-petition claims against the Company other than those arising from the sale of asbestos-containing products and other than those arising from any future rejection of executory contracts or unexpired leases in the chapter 11 cases. The bar date is the date by which claimants who disagree with the amounts recorded by the Company as owing to such claimants must file a proof of claim against the Company in the Bankruptcy Court. The Company notified all known or potential claimants subject to the October 31, 1991 bar date of their possible need to file a proof of claim with the Bankruptcy Court. Of the 5,600 claims filed pursuant to this bar date, 2,675 were general (e.g. vendor, note holder and other miscellaneous claims), 1,325 were other litigation and environmental claims, and 1,600 were asbestos-related claims.
Substantially all of the general claims have been reconciled by the Company. Such claims, as reconciled, have been allowed as pre-petition claims against the Company's estate. The impact of these reconciliations on the Company's financial statements was not material. The Company continues to attempt to negotiate settlements for the remaining unreconciled general claims. If they cannot be resolved by a negotiated settlement, the Company intends to have them resolved by the Bankruptcy Court. The Company does not expect that the impact of the resolution of these claims will be material. The litigation and environmental claims are discussed in subsections (c) and (d) respectively, below.
The Bankruptcy Court also established a bar date of September 30, 1992 for all present asbestos-related claims. Approximately 161,000 asbestos-related claims were filed with the Bankruptcy Court pursuant to the bar date. Approximately 1,000 of these claims alleged property damage. The 1,600 asbestos-related claims referred to above filed prior to the October 31, 1991 bar date will be treated in the reorganization cases in the
same manner as the asbestos-related claims filed in connection with the September 30, 1992 bar date. The asbestos-related claims are discussed more fully in subsection (b), below.
On June 5, 1992, a mediator was appointed by the Bankruptcy Court to assist the Company, the ICC, the UCC, the RFC and the EC in their efforts to negotiate a consensual plan of reorganization.
The Bankruptcy Court has approved four extensions of the period during which the Company has the exclusive right to file a reorganization plan. The most recent extension expires sixty days after the Bankruptcy Court is notified by the mediator that mediation has reached an impasse. To date, no such notification has been given by the mediator and the mediation process is continuing. On January 18, 1995, however, the Bankruptcy Court indicated that it was likely to terminate the exclusive period if a plan and disclosure statement were not filed on or before March 1, 1995.
On November 9, 1993, the Company reached an agreement (the "Agreement") on the principal elements of a joint plan of reorganization that provides a basis for the Company and its subsidiaries to emerge from chapter 11. The Agreement is with the ICC and the RFC, the representatives of the holders of present and future asbestos-related and other toxic tort claims in the Company's chapter 11 case, and was reached with the assistance of the mediator appointed by the Bankruptcy Court.
As a consequence of this agreement, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise to $1.5 billion. The Company also recorded a provision of $41.4 million in 1993 for environmental and other litigation claims.
Throughout 1994, the Company, the ICC and the RFC continued to refine the details of a joint plan of reorganization ("the Plan"). On January 18, 1995, the Company advised the Bankruptcy Court that it intended to file a plan of reorganization by the end of February 1995. It is currently contemplated that such plan of reorganization will be a joint plan among the Company, the ICC and the RFC. Implementation of the Plan treatment of claims and interests as provided therein is subject to confirmation of the Plan in accordance with the provisions of the Bankruptcy Code. Parties in interest in the chapter 11 cases may object to confirmation of the proposed Plan.
The proposed Plan to be filed is premised on a settlement of the Company's liability for all present and future asbestos-related personal injury claims and certain other tort claims. These claims will be channeled to and resolved by an independently administered claims trust (the "Trust"). It is also currently contemplated that the Plan will provide for the distribution of cash, notes, debentures, and common stock of the reorganized Company to the Trust and to holders of allowed unsecured claims on a pro-rata basis proportionate to their share of the aggregate amount of allowed pre-petition unsecured claims.
Pursuant to the proposed Plan, asbestos-related personal injury claims will be channeled to the Trust and the Bankruptcy Court will issue an injunction with respect to such claims. The injunction will forever stay, restrain and enjoin actions against the Company for the purpose of, directly or indirectly, collecting, recovering, or receiving payment of, on, or with respect to any personal injury claims resulting from exposure to asbestos-containing products allegedly manufactured or sold by the Company. In 1994, the Bankruptcy Code was amended to add, among others, new subsections 524(g) and (h), which authorize the issuance of a permanent injunction to supplement the existing injunctive relief afforded by section 524 of the Bankruptcy Code in asbestos-related reorganizations under chapter 11. The section provides that, if certain specified conditions are satisfied, a court may issue a supplemental permanent injunction barring the assertion of asbestos-related claims or demands against the reorganized company and channeling those claims to an independent trust. It is the Company's current intention that the issuance of such a channeling injunction will be a condition precedent to confirmation of the proposed Plan.
It is intended that the proposed Plan will also provide that priority claims and convenience claims (general unsecured claims of $500 or less) will be paid in full, in cash. Under the Bankruptcy Code, shareholders are not entitled to any distribution under a plan of reorganization unless all classes of pre-petition creditors receive satisfaction in full of their allowed claims or accept a plan which allows shareholders to participate in the reorganized company or to receive a distribution. The proposed Plan does not provide that all
classes of pre-petition creditors receive satisfaction in full of their allowed claims. Consequently, the proposed Plan will not provide for any distribution to shareholders and their equity interests will be canceled.
Each class of creditors and equity security holders that is impaired under a plan of reorganization is entitled to vote to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of two-thirds in dollar amount and more than one-half in number of claims of that class that have timely voted to accept or reject the plan. The Bankruptcy Code defines acceptance of a plan by a class of equity security holders as acceptance by holders of equity interests that hold at least two-thirds in amount of the allowed equity interests in such class who have timely voted to accept or reject the plan. The Bankruptcy Code further provides that any class that does not receive a distribution under a plan is deemed to have rejected the plan. Accordingly, because it is contemplated that the proposed Plan will not provide for any distribution to the Company's existing shareholders, that class will not vote on the proposed Plan and will be deemed to reject the Plan. The Bankruptcy Court will confirm a plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation of a plan are that the plan is (i) accepted by all impaired classes of claims and equity interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is "fair and equitable" as to such class, (ii) feasible, and (iii) in the "best interest" of creditors and stockholders impaired under the plan.
Additional information concerning the Plan and the chapter 11 cases can be found in Note B to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference.
(b) Asbestos.
Prior to its chapter 11 filing, the Company had been named as a co-defendant in a substantial number of lawsuits alleging personal injury from exposure to asbestos-containing insulation products. As of the petition date, there were approximately 67,800 asbestos-related claims outstanding against the Company. The claims, which were pending in 48 states, British Columbia, Guam, the Virgin Islands, and the District of Columbia, alleged, in general, that the Company and other defendant manufacturers failed to warn of the potential hazard to health from the inhalation of asbestos fiber contained in their products. As a result of the chapter 11 filing by the Company, all of such litigation was automatically stayed pursuant to section 362 of the Bankruptcy Code and additional suits were not allowed to be filed against the Company.
Since the first asbestos case was filed in 1966, the Company has disposed of approximately 73,500 claims through trial, dismissal or settlement. On average, the Company spent approximately $7,800 per claim, including attorneys' fees and other defense costs, to dispose of these claims.
All persons with a pre-petition asbestos-related claim were required to file a proof of claim by the September 30, 1992 bar date. Approximately 160,000 proofs of claim were filed alleging personal injury. The Company believes that approximately 11,000 of these claims are duplicates or were filed by persons whose lawsuits were previously disposed of through trial, dismissal, or settlement. The Company expects that additional asbestos-related personal injury claims will arise for several decades into the future. Such future claims were not subject to the September 30, 1992 bar date. The Company is not able to project precisely the number and value of future claims at this time.
In summary, many of the asbestos-related personal injury claims filed in the chapter 11 cases do not provide sufficient information to enable the Company to determine whether or not it has liability for the claim or to definitively value any such liability. Similarly, the Company is not able to precisely project the number and value of future claims. The Company, however, is certain that it has significant liability with respect to the 160,000 proofs of claim which were filed against the Company pursuant to the September 30, 1992 bar date and which allege asbestos-related personal injury. The Company also is certain that there is significant liability with respect to future asbestos-related personal injury claims. In fact, the Company recorded a provision in the fourth quarter of 1993 of $1.135 billion to increase the asbestos liability subject to compromise on its books to $1.5 billion, as a consequence of the proposed settlement discussed above.
The Company, and numerous others, also were sued in both state and federal courts by various entities that own or operate commercial properties and public buildings, such as school districts, counties, cities, states, libraries and hospitals, based on allegations that asbestos or asbestos-containing products are or may be in the buildings. The typical demand in the suits is that the defendants compensate the plaintiffs for any costs incurred in identifying, repairing, encapsulating or removing the asbestos-containing products, or that defendants perform such remedial action. Many suits seek an injunction requiring abatement and punitive damages on the basis that the defendants allegedly knew of the hazards and, in concert with one another, concealed and misrepresented the dangers. Many such suits also seek indemnification from the defendants for all claims for personal injury brought against plaintiffs resulting from the presence of asbestos-containing products in plaintiffs' buildings. These suits too have been stayed as against the Company as a result of the commencement of the chapter 11 cases.
One hundred forty-nine such lawsuits were instituted against the Company prior to the filing of its chapter 11 petition, including two which were certified as class actions. Two of such suits were consolidated into one. One hundred were disposed of through dismissals by the court following rulings on pre-trial motions, or voluntarily by the plaintiffs. The Company settled seven of these cases for less than $22,000 in the aggregate, prior to filing its chapter 11 petition. Forty-one such suits were pending as of the petition date and have been stayed as a consequence of the chapter 11 filing.
The class actions that were certified pre-petition are a national school class action consisting of all public and private elementary and secondary school systems in the United States that have not excluded themselves from the suit; and a Michigan school class action consisting of all public and private elementary and secondary school systems in Michigan that have excluded themselves from the national school class action and included themselves in the state class action. In four lawsuits, class certification petitions were pending pre-petition. One of these suits has since been dismissed, one suit has been suspended, and the remaining two suits, one involving a class of colleges and universities and the other a class of buildings leased to the government, have been certified as class actions. Many of the claimants which voluntarily dismissed their individual claims as set forth above did so to pursue them in one of the certified class actions.
Approximately 1,000 proofs of claim alleging such asbestos property damage claims were filed in the chapter 11 cases pursuant to the bar date. These claims include most of the lawsuits described above that were pending as of the petition date. It is currently contemplated that the asbestos-related property damage claims will be resolved in the Bankruptcy Court pursuant to claims resolution procedures that will be set forth in the proposed Plan. The eventual outcome of the asbestos-related property damage claims cannot be reasonably predicted due to numerous uncertainties that are inherent in the reorganization process. However, the Company expects that all such claims will be resolved without material adverse effect on the Company, its operations, or its financial condition. In addition, the Company may have insurance coverage for certain of these claims and factual and legal defenses available to it.
Additional information concerning the asbestos litigation can be found in Note K to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference.
(c) Other.
In June 1989 the City of New York filed suit against the Company and others in New York state court seeking indemnity for costs New York had incurred and would incur because residents of housing owned by the city were allegedly injured by ingesting paint in that housing. Counts in this suit alleging negligence and strict product liability have been dismissed. Certain other counts are still pending. The City of New York did not file a proof of claim in the Company's chapter 11 case with respect to the claims asserted in such lawsuit by the 1991 bar date. In November 1993, however, it filed three proofs of claim with respect to the litigation each seeking $50 million in damages. The Company's objection to these claims, seeking to have them disallowed on the basis that they were filed after the bar date, was sustained in November 1994, and the claims were disallowed. As a result, and given the voluntary withdrawal of three other lead-related property damage
claims, the Company has disposed of all lead-related property damage claims that were asserted in its chapter 11 case.
In addition to the foregoing, late in 1987, litigation was initiated against the Company and numerous other defendants, which alleged claims for personal injuries resulting from ingestion of lead-containing paint. Such suits have been stayed as to the Company as a consequence of the filing of the chapter 11 cases.
One hundred twenty eight (128) non-duplicative proofs of claim were timely filed in the Bankruptcy Court asserting liability for personal injuries from lead chemicals allegedly manufactured and sold by the Company. Four of such claims have been voluntarily withdrawn at the Company's request. One of such claims was dismissed by the Bankruptcy Court. The one hundred twenty three (123) that remain assert liability based on personal injury. The Company has pending objections to seven of such claims. Pursuant to the objections, the Company has sought an order of the Bankruptcy Court disallowing such claims because the claimants' lawsuits asserting similar claims against other defendants which were not in bankruptcy have been dismissed. Prior to the filing of its chapter 11 case, the Company also had been a defendant in these lawsuits. The claimants have opposed the relief sought by the Company and the Bankruptcy Court has not yet ruled on these objections.
The Company believes that these seven objections it has filed are meritorious. It also believes that it has valid grounds to object to the allowance of all of the remaining lead-related personal injury claims. However, in December 1994, the Eighth District Court of Appeals, Cleveland, Ohio, ruled that the plaintiff in a lawsuit filed in state court in Cuyahoga County, Ohio, may pursue certain claims against defendants, such as the Company, that manufactured lead pigment. The trial court had dismissed the plaintiffs' enterprise liability, market share and alternative liability theories pursuant to a defense motion to dismiss. The Ohio Appeals Court upheld the dismissal of the enterprise liability count, but reversed the dismissal as to the market share and alternative liability counts. This decision may be appealed to the Supreme Court of Ohio. It is not possible to predict if the trial court's dismissal or the appellate court's reinstatement will be sustained if the Supreme Court accepts review of the case.
It is currently contemplated that all lead-related personal injury claims that were filed that are not disposed of pursuant to an objection filed by the Company, and all such claims which may be filed in the future, will be channeled to and resolved by the Trust that will be established under the Plan for the benefit of holders of asbestos-related personal injury claims discussed in subsection (a), above.
Claims related to the Lone Star Steel Toxic Tort Litigation, reported in the Company's Form 10-K for the fiscal year ended November 30, 1993 and in earlier such reports, are now included in the information on asbestos-related litigation discussed in subsection (b), above, as the plaintiffs in this action filed proofs of claim in the Company's chapter 11 case alleging asbestos-related personal injuries. Chi-Vit Corporation, which acquired the assets of the Company's former Chi-Vit Corporation Division in 1988, was also named as a defendant in the Lone Star Steel Litigation. Chi-Vit Corporation filed a proof of claim in the Company's chapter 11 case including a claim seeking indemnity from the Company for any damages it incurs in this litigation. Chi-Vit Corporation has settled this litigation with the Lone Star Steel plaintiffs, and the Company believes that any indemnity claim Chi-Vit Corporation may have against the Company will not be material.
The lawsuit filed on August 27, 1990 in the United States District Court for the Northern District of Texas against the Company and two of its officers, the amended complaint in such suit filed on February 7, 1992 naming another officer of the Company as an additional defendant, and the two proofs of claim filed in the Company's chapter 11 case in the amount of $500 million each, were resolved in December 1994 through settlement. The settlement of the litigation and claims filed by American Imaging Services, Inc., an approximately 60%-owned subsidiary, and its president and minority shareholder, which settlement was not material to the Company or its operations, was approved by the Bankruptcy Court in January 1995. This litigation was previously discussed in the Company's Form 10-K for the fiscal year ended November 30, 1993, and in earlier such reports.
On June 18, 1993, the Company, together with its wholly-owned subsidiary, Transicoil Inc., commenced an adversary proceeding in the Bankruptcy Court against Blue Dove Development Associates ("Blue Dove"),
the landlord for Transicoil's domestic manufacturing facility in Valley Forge, Pennsylvania, and against K-Jem, Inc., Blue Dove's general partner. The suit seeks to recover excess rent that the Company and Transicoil believe has been paid to the landlord. The landlord filed a counterclaim in the adversary proceeding seeking a determination that Transicoil has breached the lease and, therefore, the entire rent through June 30, 2005 should be accelerated and due. The landlord made similar claims in a suit filed against Transicoil in October 1993 in the United States District Court for the Eastern District of Pennsylvania (the "Pennsylvania Action"). Prosecution of the Pennsylvania Action which seeks approximately $10.3 million in damages has been enjoined by the Bankruptcy Court. The Company and Transicoil have filed two Motions for Summary Judgment in the adversary proceeding in the Bankruptcy Court. One seeks to have the Bankruptcy Court award the Company the relief it sought in the adversary proceeding without the need for a trial. The other seeks total dismissal of the counterclaim also without a trial. The Motions are fully briefed, and a request for oral argument is pending. The Company cannot predict when the Bankruptcy Court will rule on these Motions. The Company believes that the counterclaim asserted by the landlord and the claims asserted in the Pennsylvania Action are without merit and that the resolution of the dispute with respect to the lease will not have a materially adverse impact on the Company's or Transicoil Inc.'s financial condition.
In September 1993, Moltan Company, a competitor in the diatomaceous earth oil and grease absorbent market of the Company's subsidiary, Eagle-Picher Minerals, Inc., sued the Company and such subsidiary in the United States District Court for the Western District of Tennessee, Western Division, seeking trebled damages of $3 million. Moltan alleged that the defendants wrongfully contacted federal and state regulators, as well as customers and prospective customers, concerning Moltan's lack of product warnings. The Company and its subsidiary countersued, seeking damages and an injunction requiring Moltan to cease its misleading and deceptive practices and to place appropriate and accurate information required by OSHA and other authorities on its products. On February 9, 1994, the court granted the Company's request for a preliminary injunction against Moltan, concluding as a matter of law that some of Moltan's product labels and other information were "blatantly false." The court enjoined Moltan from selling its products with labels containing false and misleading information in violation of OSHA and other regulations. Further, in August 1994, Moltan's complaint was dismissed in its entirety. Later, in September 1994, the court issued an order making the injunction permanent and granting the Company a judgment as a matter of law as to Moltan's liability under the Lanham Act. Accordingly, the Company must now prove its damages in order to receive a monetary judgment against Moltan. Moltan has appealed certain of these orders and the Company intends to oppose the appeals. In addition, the Company intends to continue to press its claims against Moltan for monetary damages.
Additional information concerning such litigation claims can be found in Note L to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference.
(d) Environmental.
On January 30, 1989, the Company was served with a suit in the United States District Court for the District of Colorado under the federal Clean Water Act alleging that the Company's operations in Colorado Springs, Colorado had not timely filed certain reports and that the plant's wastewater discharge did not comply with the battery manufacturing pretreatment standards. The Company and the United States Environmental Protection Agency ("EPA") agreed to settle the suit in December 1990. Under the terms of the settlement, the Company agreed to pay a penalty of $112,500 and the EPA agreed to issue a permit for the Company's wastewater discharge. After the filing of the Company's chapter 11 petition, the EPA repudiated the settlement because it had not been reduced to writing before the filing. Subsequently, the EPA agreed to accept an allowed, unsecured claim in the Company's chapter 11 case in the amount of $150,000 in settlement of the litigation. The Company believes that it is in compliance with the permit and that no harm has occurred to human health or the environment.
In December 1989, the Company's operations in Colorado Springs, Colorado were also the subject of an investigation by state and federal environmental regulators. In December 1993, the Company was advised by the United States Attorney's Office in Denver, Colorado that the investigation concerned the alleged unlawful
treatment, storage or disposal of hazardous wastes and alleged false statements relating to such alleged activities by plant personnel.
As a result of this investigation, the United States Attorney advised the Company that criminal charges would be filed against it. Further, Region VIII of the EPA filed an administrative complaint against the Company on March 14, 1994, because of conduct it alleges took place and which resulted in the investigation begun in December 1989.
The Company has tentatively reached agreements settling all of the charges and issues resulting from this investigation. Pursuant to the settlement, the Company has agreed with the United States Attorney to plead guilty to two criminal misdemeanors for its alleged failure to report discharges of hazardous substances to a navigable waterway. The Company also agreed to the allowance of a pre-petition general unsecured claim in its chapter 11 case in the amount of $300,000 to resolve these charges. Further, the Company agreed to allow EPA's Region VIII a pre-petition general unsecured claim in the amount of $200,000 for alleged use of existing storage ponds after they were no longer permitted to receive wastes, improper storage of certain wastes longer than the 90 days the law allows, and improper labeling of stored hazardous waste. Finally, the Company agreed with the EPA that it would implement certain programs including, among others, publication of environmental ethics and non-reprisal policies; adoption of pollution prevention, environmental training, and compliance reporting programs; and agreements for periodic compliance audits of the involved facility. The resolution of these matters is subject to the negotiation of definitive settlement agreements and to the approval of the Bankruptcy Court and the federal District Court in Denver, Colorado.
While the Company does not believe that the actions at issue resulted in any harm to human health or the environment, it has renewed its commitment to strict compliance with all laws, including those regulating environmental issues. These settlements, and the remedial activities the Company is currently conducting, will not have a materially adverse effect on the Company's or the Colorado Springs' operations or financial condition.
The Company received 1,102 proofs of claim in its chapter 11 cases alleging a right to payment because of environmental matters. Many of these claims were filed in connection with environmental matters reported in Form 10-K reports for prior fiscal years. These include claims with respect to numerous waste disposal sites previously discussed. They also include claims with respect to the Tri-State mining district of Kansas, Missouri and Oklahoma previously disclosed: Ottawa County, Oklahoma; Cherokee County, Kansas; Jasper County, Missouri; and the Baxter Springs, Treece, and Galena Subsites in Kansas. The Company is attempting to resolve the majority of these environmental claims through negotiations with the EPA and the United States Department of Interior. A tentative settlement agreement reached in fiscal 1993 was renegotiated during fiscal 1994 and fiscal 1995 after the EPA received additional information concerning three sites that were previously resolved. Pursuant to the proposed renegotiated agreement, the agencies and certain states will be granted allowed pre-petition general unsecured claims in the Company's chapter 11 case aggregating approximately $43.0 million in full satisfaction of all of the Company's alleged liability at most of its known Superfund sites, including any liability for any natural resource damage.
In exchange for these allowed claims, the agencies will release the Company from liability at such Superfund sites and the Company will be protected from contribution claims of other parties with potential liability at the sites. Accordingly, the Company's settlement should completely resolve all claims with respect to these sites. Further, the tentative agreement provides a process which will permit any liability, which may arise with respect to a small number of sites as to which the EPA believes that it does not have sufficient information to negotiate a meaningful settlement at this time, to be resolved in the future when additional information is available.
The Company has executed the settlement agreement which resolves these claims and expects the other parties to execute it also. Until all requisite approvals, including approval of the Bankruptcy Court, are obtained, no party is in any way bound to the terms of the settlement. The Company expects, however, that the settlement will be approved.
Additional information concerning the environmental claims can be found in Note L to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference.
(e) Summary -- Environmental And Other Claims.
All lawsuits naming individual defendants have been resolved. Certain claims remain pending against the Company. The Company intends to defend all remaining litigation claims vigorously in the manner permitted by the Bankruptcy Code and/or applicable law. All pre-petition claims against the Company arising from litigation must be liquidated or otherwise addressed in the context of the chapter 11 cases. Further, all such claims against the Company will be addressed in a plan of reorganization. During the pendency of the chapter 11 cases, any unresolved litigation with respect to pre-petition claims can proceed against the Company only with the express permission of the Bankruptcy Court.
The Company has resolved most of the litigation claims that were asserted pursuant to the October 31, 1991 bar date, other than those claims arising from the sale of asbestos-containing products. The Company has filed objections to certain of the unresolved litigation-based claims seeking to reduce the amount of such claims or eliminate them entirely. These objections have not yet been resolved. The Company anticipates filing additional objections to other such claims if they cannot be resolved through negotiation. These objections will be litigated vigorously by the Company pursuant to the provisions of the Bankruptcy Code and applicable law.
The eventual outcome of the environmental and other litigation claims described herein cannot reasonably be predicted due to numerous uncertainties that are inherent in the reorganization process. However, the Company expects that all such claims will be resolved without material adverse effect on the Company, its operations, or its financial condition. In addition, the Company may have insurance coverage for certain of these claims and may have factual and legal defenses available to it.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information
On November 10, 1993, the New York Stock Exchange ("NYSE") suspended trading of the Company's Common Stock, and on November 15, 1993, announced that it would make application to the Securities and Exchange Commission to delist the issue. On June 21, 1994, the NYSE notified the Company that the SEC had granted the NYSE's application effective at the opening of the trading session on June 9, 1994. The Company's Common Stock is presently trading on the Over-the-Counter market (trading symbol is EPIH.U).
(b) Holders of Common Stock
As of February 21, 1995, there were 6,072 holders of record of the Company's Common Stock.
(c) Dividends
There have been no cash dividends declared on the Company's Common Stock during the last two fiscal years. See "Selected Financial Data" and Note B to the Consolidated Financial Statements in the Company's Annual Report for the fiscal year ended November 30, 1994, which is attached as Exhibit 13 to this Form 10-K and which is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Mr. Thomas E. Petry was first employed by the Company in 1968, elected Assistant Treasurer in 1971, elected Treasurer in 1973, elected Vice President and Treasurer in 1974, served as President, Akron Standard Division, from 1977 to 1978, elected Group Vice President in 1978, elected a Director and President and Chief Operating Officer in 1981, elected President and Chief Executive Officer in 1982, served as President from 1981-89 and from 1992-94, has been serving as Chief Executive Officer since 1982, and has also been serving as Chairman of the Board since 1989.
Mr. Andries Ruijssenaars was first employed by the Company in 1980 as General Manager of Eagle-Picher Industries GmbH in Ohringen, Germany; served as Executive Vice President, The Ohio Rubber Company Division from 1986 to 1987; President, The Ohio Rubber Company Division from 1987 to 1989; was elected Senior Vice President in 1989; was appointed a Director in November 1994; and was elected President and Chief Operating Officer effective December 1, 1994 and has been serving in those capacities since December 1, 1994.
Mr. Melvin F. Chubb, Jr., was employed by the Company in 1988 and was elected and has been serving as Senior Vice President since that time. In 1990 Mr. Chubb was elected a Director. Prior to joining the Company, he completed a career in the United States Air Force, having attained the rank of Lieutenant General and having served most recently as commander of the Electronic Systems Division, Air Force Systems Command at Hanscom Air Force Base.
Mr. David N. Hall was first employed by the Company and elected Treasurer in 1977, was elected Vice President and Treasurer in 1979, and was elected and has been serving as Senior Vice President -- Finance since 1987.
Mr. Wayne R. Wickens joined the Company in 1976 as a management trainee with the former Fabricon Automotive Division, was promoted to Plant Manager in 1979, Vice President in 1981 and then President of Fabricon Automotive in 1986; was named President of the Wolverine Gasket Division in 1988; was named Vice President of the Eagle-Picher Automotive Group in 1989; was named Division President of Hillsdale Tool & Manufacturing Co. in 1990, and was elected Senior Vice President of the Company effective December 1, 1994.
Mr. Carroll D. Curless was first employed by the Company in 1964, elected Assistant Controller in 1978, Controller in 1984, and was elected and has been serving as Vice President and Controller since 1986.
Mr. James A. Ralston was first employed in the Legal Department of the Company in 1979, elected Assistant Secretary in 1982, General Counsel in 1982, was elected Vice President and General Counsel in 1984; and was also elected Secretary in May 1994. He has been serving as Vice President, General Counsel and Secretary since May 4, 1994.
Executive officers serve during the pleasure of the Board, or until their successors are elected and qualified. There are no family relationships existing between or among the above executive officers and directors of the registrant.
The Eagle-Picher Salaried Plan, a non-contributory defined benefit pension plan in which the named executive officers are participants, provides benefits after retirement based on the highest average monthly compensation during five consecutive years of the last ten years preceding retirement. For purposes of the
Plan, compensation includes base salary, bonuses, commissions, and severance payments; salary and bonus included are as reported in the Summary Compensation Table, and commissions and severance payments, if there had been any, would have been included in that Table. The benefits shown by the Pension Plan Table above include amounts payable under Social Security and the Company's Supplemental Executive Retirement Plan as well as those payable under the Eagle-Picher Salaried Plan. Benefits are computed on the basis of straight-life annuity amounts.
The estimated credited years of service with the Company for the named executive officers at age 62 are:
SEVERANCE PLAN
On February 6, 1991 the Board of Directors adopted a Severance Plan for certain employees, including the named executive officers, which was approved by the Bankruptcy Court on May 13, 1991. Under the Severance Plan, a participant whose employment is terminated by the Company other than for cause receives: a Base Severance Benefit of one week's pay for each year of Company service, payable under general payroll pay practices, but reduced dollar for dollar by any compensation earned from a subsequent employer during the period such benefits are being paid; a Supplemental Severance Benefit ranging from three months' salary up to one year's salary, payable in a lump sum upon termination; and continuation of certain insurance benefits for up to one week for each year of service. Currently, the Severance Plan provides that the payment of Supplemental Severance Benefits will terminate upon confirmation of a plan of reorganization. The proposed plan of reorganization provides, however, for the continuation of the Severance Plan for a period of at least 12 months after the effective date of the plan of reorganization.
COMPENSATION OF DIRECTORS
Directors are paid a retainer of $18,000 per year, a fee of $750 for each Board meeting attended, and a fee of $750 for each Board committee meeting attended. Board committee members, excluding committee chairmen, are paid a retainer of $3,000 per year for each committee on which they serve; the chairman of each Board committee is paid a retainer of $5,000 per year. The Company does not pay director retainers or attendance fees, or committee retainers or attendance fees, to directors who are employees of the Company.
Directors who are not also employees of the Company who retire with ten or more years of service as members of the Board are paid an annual advisory fee for life in an amount equal to the annual directors retainer paid at the time of their retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994, Messrs. LeBlond (Chairman), Christensen, Coombe, and Howe, directors of the Company, constituted the Stock Option/Compensation Committee.
During fiscal 1994 and as of February 24, 1995 Mr. Petry, Chairman, President (through November 30, 1994), and Chief Executive Officer of the Company, served as a director and as a member of the compensation committee of The Wm. Powell Company. During fiscal 1994 and as of February 24, 1995, Mr. Coombe was Chairman of the Board of The Wm. Powell Company.
All shares shown above as owned were directly owned except as footnoted. Directors and executive officers are considered control persons of the Company.
There were as of February 24, 1995 no beneficial owners of more than 5% of the Company's Common Stock.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Board of Directors has no knowledge of any significant transaction or proposed significant transaction to which the Company or any subsidiary and any director, officer, or nominee for director, or any associate of such director, officer, or nominee, were or are to be parties.
(b) Reports on Form 8-K.
(i) None during last quarter of fiscal 1994.