SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

For the quarterly period ended February 28,August 31, 2003

OR

For the transition period fromto.

Commission file number 333-49957-01

11201 North Tatum Blvd. Suite 110, Phoenix, Arizona 85028

Registrant’s telephone number, including area code:
602-923-7200602-652-9600

Former Name

EAGLEPICHER HOLDINGS, INC. IS FILING THIS REPORT VOLUNTARILY IN ORDER TO COMPLY WITH THE REQUIREMENTS OF THE TERMS OF ITS 9 3/8%9-3/4% SENIOR SUBORDINATED NOTES AND 11 3/11-3/4% 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 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yeso Nox (See explanatory note immediately above.)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

Yeso Nox

930,5001,000,000 shares of common capital stock, $.01$0.01 par value each, were issued and outstanding at April 14,October 9, 2003

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TABLE OF ADDITIONAL REGISTRANTS

TABLE OF CONTENTS

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PART I.FINANCIAL INFORMATION

Item 1.Financial Statements.Statements.

EaglePicher Holdings, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS
November 30, 2002 and February 28,August 31, 2003
(unaudited) (in thousands of dollars)

The accompanying notes are an integral part of these consolidated balance sheets.

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EaglePicher Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three and Nine Months Ended February 28,August 31, 2002 and 2003
(unaudited) (in thousands of dollars, except share and per share amounts)

The accompanying notes are an integral part of these consolidated financial statements.

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EaglePicher Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-MonthsNine Months Ended February 28,August 31, 2002 and 2003
(unaudited) (in(In thousands of dollars)

The accompanying notes are an integral part of these consolidated financial statements.

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EaglePicher Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

A.      BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS

     OurThe accompanying unaudited condensed consolidated financial statements 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 we believe that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with our financial statements and notes thereto for the fiscal year ended November 30, 2002 presented in our Form 10-K, filed with the SEC on March 3, 2003.

     The financial statements presented herein reflect all adjustments (consisting of normal and recurring adjustments), which, in our opinion are necessary to fairly state the results of operations for the three and nine month periods ended February 28,August 31, 2002 and 2003. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

     In the fourth quarter of fiscal 2002, we restated our financial statements to reflect the appropriate adoption of EITF 00-10, “Accounting for Shipping and Handling Fees and Costs,” which we should have adopted in 2001. EITF 00-10 states that all amounts billed to a customer in a sale transaction related to shipping and handling represent revenues earned for the goods provided and should be classified as revenue. Prior to the adoption of EITF 00-10, some of the costs billed to our customers for shipping and handling costs (our transportation expenses) were included as an offset to our costs. This restatement had no impact on operating income, net income, or cash flows. The impactsimpact to the financial statements for the three months ended February 28,August 31, 2002 was an increase in Net Sales and Cost of Products Sold by $3.9 million. The impact to the financial statements for the nine months ended August 31, 2002 was an increase in Net Sales and Cost of Products Sold by $11.9 million. In addition, certain amounts in 2002 have been reclassified to conform to the 2003 financial statement presentation.

     As discussed in Note H to these financial statements, the accompanying 2002 financial statements have been restated to reflect as discontinued operations our Hillsdale U.K. Automotive operation and certain operations of our Germanium-based business in our Technologies Segment.

InventoriesB.INVENTORIES

     Inventories consisted of the following at November 30, 2002 and February 28,August 31, 2003 (in thousands of dollars):

Comprehensive Income (Loss)C.REVENUE RECOGNITION

     For certain products sold under fixed-price contracts and subcontracts with various United States Government agencies and aerospace and defense contractors, we utilize the percentage-of-completion method of accounting. When we use the percentage-of-completion method, we measure our percent complete based on total costs incurred to date as compared to our best estimate of total costs to be incurred.

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     The following provides information on contracts in progress at November 30, 2002 and August 31, 2003 (in thousands of dollars):

D.COMPREHENSIVE INCOME (LOSS)

     During the three and nine months ended February 28,August 31, 2002 and 2003 our comprehensive lossincome (loss) was as follows (in thousands of dollars):

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B.E.      GOODWILL

     On December 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” The ratable amortization of goodwill and other intangible assets with indefinite lives was replaced with an annual test for impairment. Accordingly, we ceased amortization of goodwill on December 1, 2002. We have determined that we have six reporting units, as defined in SFAS No. 142, within our three reportable business segments. The following goodwill amounts by reporting unit were recorded as of November 30, 2002 and February 28,August 31, 2003 (in thousands of dollars):

     We have completed our initial impairment test as of December 1, 2002, and determined that no impairment charge exists. Our fair values for each reporting unit were determined based on our estimate of future cash flows by reporting unit, which were derived from our annual forecasting process.

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     The following pro forma disclosure presents our net income (loss) applicable to common shareholders and our basic and diluted netper share income (loss) per share applicable to common shareholders for the three-monthsthree and nine months ended February 28,August 31, 2002 and 2003 as if SFAS No. 142 had been adopted on December 1, 2001 (in thousands of dollars, except per share amounts):

C.F.      RECENTLY RELEASED OR ADOPTED ACCOUNTING STANDARDS

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which 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 assets and depreciated over their estimated useful life while the liability is accreted to its expected obligation amount upon retirement. We adopted SFAS No. 143 on December 1, 2002. The adoption of this statement did not have a material impact on our financial condition or results of operations.

     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 and certain intangibles with indefinite lives have been removed from the scope of SFAS No. 144, as they are covered by SFAS No. 142, as described above.142. 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. We adopted SFAS No. 144 on December 1, 2002. The adoption did not have a material impact on2002 and accounted for the sale of our financial condition or resultsHillsdale U.K. Automotive operation and the sale of operations.

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certain assets of our Germanium-based business in our Technologies Segment, as discussed in Note H, in accordance with this statement.

     In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or disposalDisposal Activities,” which is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The adoption of this statement did not have a material impact on our financial condition or results of operations.

     On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after June 20, 2003, for hedging relationships designated after June 30, 2003, and to certain preexisting contracts. We adopted SFAS No. 149 on a prospective basis at its effective date on July 1, 2003. The adoption of this statement did not have a material impact on our financial condition or results of operations.

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     In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, except for mandatorily redeemable financial instruments. Mandatorily redeemable financial instruments are subject to the provisions of this statement beginning on January 1, 2004. We have not completed our evaluation of the impact, if any, the adoption of this statement will have on our financial condition or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”) “Guarantor’s Accounting and Disclosure requirementsRequirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee. However, the provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor’s obligations does not apply to product warranties or to guarantees accounted for as derivatives. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. FIN 45 does not affect the accounting for guarantees issued prior to the effective date, unless the guarantee is modified subsequent to December 31, 2002. We adopted the disclosure requirements on December 1, 2002, and the initial recognition and measurement provisions in our February 28, 2003 financial statements. The adoption of FIN 45this interpretation did not have a material impact on our financial condition or results of operations.

     In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”) “Consolidation of Variable Interest Entities.” Until this interpretation, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns. FIN 46 applies to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest in after that date. A public entity with a variable interest in a variable interest entity created before February 1, 2003, shall apply the provisions of this interpretation (other than the transition disclosure provisions in paragraph 26) to that entity no later than the beginning of the first interim or annual reporting period beginning after JuneDecember 15, 2003. The related disclosure requirements arewere effective immediately. The impact of this interpretation is not expected to have a material impact on our financial condition or results of operations.

     In November 2002, the EITF issued EITF 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF 00-21 prescribes a method to account for contracts that have multiple elements or deliverables. It provides guidance on how to allocate the value of a contract to its different deliverables, as well as guidance on when to recognize revenue allocated to each deliverable over its performance period. We are required to adopt EITF 00-21 on December 1,for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We are evaluating the impact EITF 00-21 will have on us, but do not expect it to have a material impact on our financial condition or results of operations.

D.G.      RESTRUCTURING

     During 2001, we recorded asset write-downs and other charges totaling $14.1 million in connection with a restructuring plan (the “Plan”) announced in November 2001. The Plan primarily relocated our corporate headquarters from Cincinnati, Ohio to Phoenix, Arizona and closed three plants in theour Technologies Segment as a result of the elimination of certain product lineslines. During the second quarter of 2002, we determined that a portion of the assets in our over-funded pension plan could be made available to pay severance costs related to the Plan. We amended the pension plan and provided new or amended severance plans to allow for such payments. Approximately $2.5 million of severance was expected to be paid out of the pension plan. Accordingly, during the second quarter of 2002, we reduced our restructuring provision originally recorded in the Power Group business.fourth quarter of 2001 by $2.5 million.

     In Maythe second quarter of 2002, we announced we would exit theour Gallium based business in our Technologies Segment due to the downturn in the fiber-optic, telecommunication and semiconductor markets, the primary markets for

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our Gallium products. This action resulted in a $5.5 million charge to restructuring expense.

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     The remaining balance of $2.2$1.0 million as of February 28,August 31, 2003, is included in Other Accrued Liabilities in our balance sheets. An analysis of the facilities, severance and other costs incurred related to restructuring reserves since November 30, 2002 is as follows (in thousands of dollars):

E.H.      DIVESTITURES AND DISCONTINUED OPERATIONS

Divestitures

     We have indemnified buyers of our former divisions and subsidiaries for certain liabilities related to items such as environmental remediation and warranty issues on divisions sold in previous years. We had previously recorded liabilities for these exposures; however, from time to time, as additional information becomes available, additional amounts may need to be recorded.

     In the second quarter of 2002, we signed a letter of intent to sell certain assets and liabilities of the Precision Products business in our Technologies Segment to a group of employees and management personnel. We recorded a $2.8 million estimated loss on sale in Loss from Divestitures in the Statements of Income (Loss). In addition, during 2002, we recorded approximately $3.2 million in additional accruals for costs related to certain litigation issues and environmental remediation.

     An analysis of the liabilities related to divestitures is as follows (in thousands of dollars):

Discontinued Operations

     Effective December 14, 2001, we sold certain of the assets of our former Construction Equipment Division. This division represented our entire former Machinery Segment. The sale price was $6.1 million in cash, plus an estimated working capital adjustment of $1.0 million, and the assumption of approximately $6.7 million of current liabilities. We retained the land and buildings of the Construction Equipment Division’s main facility in Lubbock, Texas and leased the facility to the buyer for a five-year term. The buyer has an option to buy the facility for $2.5 million, increasing $100,000 per year over the term of the lease. We also retained $900,000 of accounts receivable, and approximately $2.3 million of raw materials inventory, which the buyer was required to purchase within one year. TheAt August 31, 2003, the buyer failed to purchase approximately $400,000$182,000 of the inventory.inventory, which is included in Assets of Discontinued Operations in the accompanying balance sheets. We are pursuing collection actions.

     During the second quarter of 2003, we reached an agreement in principle for the sale of certain assets at our Hillsdale U.K. Automotive operation (a component of our Automotive Segment) for cash of $1.1 million. The Net Assetssale closed on June 11, 2003. In addition, we will be winding down the remaining operations of our Hillsdale U.K. Automotive operation during 2003. Accordingly, effective in the second quarter of 2003, upon receipt of authority from our Board of Directors, we discontinued the operations of our Hillsdale U.K. Automotive operation and restated all prior period financial statements. We have included in Loss from Operations to be Sold at November 30,of Discontinued Businesses in our Statements of Income (Loss) $902,000 for the three months ended August 31, 2002, $1.4 million for the nine months ended August 31, 2002, and February 28,$431,000 for the nine months ended August 31, 2003. In addition, in the second quarter of 2003, we recognized a Loss on Disposal of Business of $3.0 million, which is net of a $600,000 tax benefit related to this sale, and

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during the third quarter of 2003, we recognized an increase of $751,000 to that Loss on Disposal due to various shutdown costs. We expect to incur an additional $500,000 of shutdown costs, such as one-time termination benefits, contract termination costs and facility closure costs during the fourth quarter of 2003, which have not accrued as of August 31, 2003.

     In July 2003, we completed the sale of certain assets of our Germanium-based business in our Technologies Segment for cash of approximately $15.0 million, subject to a working capital adjustment. These assets relate to the production of Germanium-based products primarily used in the infrared optics and fiber optics applications and do not include any of our assets that are primarilyinvolved in the production of Germanium substrates and wafers. We agreed that if the buyer is required to divest the acquired business due to certain regulatory proceedings commenced within one year of the sale, then we would reimburse the buyer for 50% of the amount by which the sale price is less than $15.0 million up to a maximum reimbursement of $4.0 million, and we would receive 50% of any excess of the sale price over the $15.0 million up to a maximum of $4.0 million. We believe that the likelihood of being required to make or receive payments pursuant to these provisions is remote, and therefore, we have not recorded an asset or liability. During the third quarter of 2003, we discontinued the operations of our Germanium-based business and restated all prior period financial statements. We have included in Loss from Operations of Discontinued Businesses in our Statements of Income (Loss) $890,000 for the three months ended August 31, 2002, $213,000 for the three months August 31, 2003, $2.0 million for the nine months ended August 31, 2002, and $1.3 million for the nine months ended August 31, 2003. In addition, during the third quarter of 2003, we recorded in Loss on Disposal of Discontinued Businesses a gain of $484,000, which is net of zero tax provision (benefit).

     At August 31, 2003, the remaining balance in Assets of Discontinued Operations was primarily accounts receivable, inventory, and property, plant, and equipment related to our Hillsdale U.K. Automotive operation and an insurance receivable related to an entity that was supposed to provide a source of Germanium for the inventory, as thesale of certain assets within our Germanium-based business. The balance in Liabilities of Discontinued Operations was primarily accounts payable and accrued liabilities associated with this transaction, totaling $2.9 million and representing primarily environmental liabilities, had been transferredrelated to the Accrued Divestitures reserve at November 30, 2002.

     During the first quarter of 2002, we entered into an agreement with a major U.S.United States financial institution to sell an interest in certain receivables through an unconsolidated qualifying special purpose entity, EaglePicher Funding Corporation (“EPFC”). Initially $47.0 million of proceeds from this new facility were used primarily to payoff amounts outstanding under our existing Receivables Loan Agreement with our wholly owned subsidiary, EaglePicher Acceptance Corporation. This agreement provides for the sale of certain receivables to EPFC, which in turn sells an interest in a revolving pool of receivables to the financial institution. EPFC has no recourse against us for failure of the debtors to pay when due. TheIn the third quarter of 2003, we amended this agreement provides forto extend the continuation of thereceivables program on a revolving basis until the earlier of a)(a) 90 days prior to the maturity of our senior credit facility,New Credit Agreement (as defined in Note P) or b) assuming we are able to refinance our senior credit facility, the fourth quarter of 2004.(b) January 2008.

     We account for the securitization of these sold receivables in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities—a Replacement of FASB Statement No. 125.” Under this

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guidance, at the time the receivables are sold, the balances are removed from our financial statements. For purposes of calculating our debt covenant compliance under our New Credit Agreement (as defined in Note P), we include the debt outstanding onobligations of EPFC.

     In conjunction with the initial transaction during 2002, we sold $82.5 million of receivables to EPFC, and we incurred charges of $1.5 million, which arewere included in Interest Expense in the accompanying condensed consolidated statements of income (loss) for the three-monthsnine-months ended February 28,August 31, 2002. We continue to service sold receivables and receive a monthly servicing fee from EPFC of approximately 1% per annum of the receivable pool’s average balance. As this servicing fee approximates our cost to service, no servicing asset or liability has been recorded at November 30, 2002 or February 28,August 31, 2003. We retain an interest in a portion of the receivables transferred, representing an over collateralization on the securitization. Our involvement with both this over collateralization interest and the transferred receivables is generally limited to the servicing performed. The carrying value of our interest in the receivables is carriedrecorded at fair value, which is estimated as its net realizable value due to the short duration of the receivables

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transferred. The net realizable value considers the collection period and includes an estimated provision for credit losses and returns and allowances, which is based on our historical results and probable future losses.

     At November 30, 2002, our interest in EPFC including a service fee receivable, was $29.4 million and the revolving pool of receivables that we serviced totaled $77.5 million. At November 30, 2002, the outstanding balance of the interest sold to the financial institution recorded on EPFC’s financial statements was $46.5 million. During the three months ended February 28,August 31, 2002, we sold outside of the initial sale, $109.0$147.5 million of accounts receivable to EPFC. DuringEPFC, and during the same period, EPFC collected $104.5$145.0 million of cash that was reinvested in new securitizations. At February 28,During the nine months ended August 31, 2002, we sold, outside of the initial sale, $422.0 million of accounts receivable to EPFC, and during the same period, EPFC collected $403.0 million of cash that was reinvested in new securitizations.

     As of August 31, 2003, we reduced the amount due to the financial institution by EPFC. Accordingly, our interest in EPFC including a service fee receivable, was $29.4$66.5 million and the revolving pool of receivables that we serviced totaled $75.0$67.9 million. At February 28,August 31, 2003, the outstanding balance of the interest sold to the financial institution recorded on EPFC’s financial statements was $43.8 million.zero. During the three months ended February 28,August 31, 2003, we sold $138.6$132.4 million of accounts receivable to EPFC. DuringEPFC, and during the same period, EPFC collected $130.9$135.0 million of cash that was reinvested in new securitizations. During the nine months ended August 31, 2003, we sold $418.0 million of accounts receivable to EPFC, and during the same period, EPFC collected $405.9 million of cash that was reinvested in new securitizations. The effective interest rate as of February 28,for the nine month period ended August 31, 2003 in the securitization was approximately 2.5%2.58%.

G.J.INSURANCE RELATED LOSSES (GAINS)

     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 during 2001 at our Harrisonville, Missouri bulk pharmaceutical plant. During the third quarter of 2003, we recorded a $2.8 million gain related to the settlement of this claim.

     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 our Seneca, Missouri non-operating facility.

K.SHAREHOLDERS’ EQUITY (DEFICIT)

     During the second quarter of 2003, we sold to our controlling common shareholder, Granaria Holdings B.V., Bert Iedema, one of our directors and an executive officer of Granaria Holdings B.V., and two of our executive officers the 69,500 shares of common stock held in our Treasury for $13.00 per share, or $903,000. In connection with this stock issuance, we reclassified the balance in our Treasury, or $7.2 million, to Additional Paid in Capital in our accompanying balance sheets.

L.      LEGAL MATTERS

     On January 25, 1996, Richard Darrell Peoples, a former employee, filed a lawsuit in the United States District Court for the Western District of Missouri claiming that we violated the federal False Claims Act based on alleged irregularities in testing procedures in connection with certain U.S.United States Government contracts. Mr. Peoples filed this lawsuit under a procedure which gives a private individual the right to file a lawsuit for a violation of a Federal statute and be awarded up to 30% of any recovery. The government has the right to intervene and take control of such a lawsuit. Following an extensive investigation, the U.S.United States Government declined the opportunity to intervene or take control of this suit. The allegations in the lawsuit are similar to allegations made by Mr. Peoples, and investigated by our outside counsel, prior to the filing of the lawsuit. Our outside counsel’s investigation found no evidence to support any of Mr. Peoples’ allegations, except for some inconsequential expense account matters. The case is in a discovery phase. Recently the court disqualified Mr. Peoples’ lawyer from the case after he read some of our attorney-client privileged documents that Mr. Peoples took from our lawyers’ offices without authorization. We intend to contest this suit vigorously and do not believe that the resolution of this lawsuit will have a material adverse effect on our financial condition, results of operations or cash flows.

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     On May 8, 1997, Caradon Doors and Windows, Inc. (“Caradon”), filed a suit against us in the United States District Court for the Northern District of Georgia alleging breach of contract, negligent misrepresentation, and contributory infringement and seeking contribution and indemnification in the amount of approximately $20.0 million. This 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 June 1997, we filed a motion with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, seeking an order that Caradon’s claims had been discharged by our bankruptcy and enjoining Caradon from pursuing its lawsuit. On December 24, 1997, the Bankruptcy Court held that Caradon’s claims had been discharged and enjoined Caradon from pursuing its lawsuit. Caradon appealed the Bankruptcy Court’s decision to the United States District Court for the Southern District of Ohio, and on February 3, 1999, the District Court reversed on the grounds that the Bankruptcy Court had not done the proper factual analysis and remanded the matter back to the Bankruptcy Court. The Bankruptcy Court held a hearing on this matter on September 24 and 25, 2001, and on May 9, 2002 again held that Caradon’s claims had been discharged and enjoined Caradon from pursuing the Caradon Suit. Caradon has again appealed this decision to the District Court. We intend to contest this suit vigorously and do not believe that the resolution of this suit will have a material adverse effect on our financial condition, results of operations or cash flows.

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     In March 2002, a purported class action on behalf of approximately 3,000 homeowners was filed in state court in Colorado against us and a company with a facility adjacent to our facility in Colorado Springs, Colorado seeking property damages, testing and remediation costs and punitive damages arising out of chlorinated solvents and nitrates in the groundwater alleged to arise out of activities at our facility and the adjacent facility. The case has been removed to federal court and there has been no decision whether to certify a class. In September 2002, as amended in May 2003, a trust purportedly the assignee of approximately 200 property owners filed suit against us and the same co-defendant in Colorado state court, which was subsequently removed to Federal District Court in Colorado. This lawsuit seeks unspecified damages to provide for remediation of the groundwater contamination as well as unspecified punitive damages. The owner of the adjacent facility, which is upgradient from our facility, is operating a remediation system aimed at chlorinated solvents in the groundwater originating from its facility under a compliance order on consent with the Colorado Department of Public Health and Environment (“CDPHE”). We are operating a remediation system for nitrates in the groundwater originating from our facility, also under a compliance order on consent with CDPHE. We do not believe that nitrates in groundwater materially affect any of the properties related to the plaintiffs in these lawsuits. Neither the United States Environmental Protection Agency nor the CDPHE has ever required us to undertake a cleanup for chlorinated solvents. We intend to contest these lawsuits vigorously and do not believe that these lawsuits will result in a material adverse effect on our financial position, results of operation or cash flows.

     In addition, we are involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course of our business. In our opinion, the ultimate liability resulting from all claims, individually or in the aggregate, will not materially affect our financial position, results of operations or cash flows.

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H.M.      BUSINESS SEGMENT INFORMATION

     Our Automotive Segment provides mechanical and structural parts and raw materials for passenger cars, trucks, vans and sport utility vehicles for original equipment manufacturers and replacement markets. Resources are concentrated in serving the North American, European and Pacific Rim markets. Our Hillsdale operation is a precision-machined components business, and our Wolverine operation is a rubber coated metal products business.

     Our Technologies Segment is a diverse group of businesses with a broad spectrum of technologies and capabilities. It is a major supplier of batteries and power systems components for aerospace, defense and telecommunications applications. In addition, it produces high-purity specialty material compounds and rare metals, industrial chemicals, bulk pharmaceuticals and super-clean containers, which meet strict EPA protocols, for environmental sampling. This segment serves the commercial aerospace, nuclear, telecommunication electronics and other industrial markets globally. Some of these products are also used in defense applications.

     Our Filtration and Minerals Segment mines and refines diatomaceous earth products, which are used globally in high purity filtration applications, primarily by the food and beverage industry. These products are also used as industrial absorbents.

     Sales between segments were not material.

     The following data represents financial information about our reportable business segments for the three-monthsthree months and nine months ended February 28,August 31, 2002 and 2003. During 2002, we elected to modify our internal methodology of allocating certain expenses from the corporate segment to the operating segments. In the following tables, the financial information for the three-monthsthree and nine months ended February 28,August 31, 2002 has been restated to conform to the new presentation (in thousands of dollars).

11N.RELATED PARTY TRANSACTIONS

     On February 24, 1998 we entered into an advisory and consulting agreement with Granaria Holdings B.V., our controlling common stockholder, pursuant to which we pay Granaria Holdings B.V. (or such of its affiliates as it may direct) an annual management fee of $1.75 million. The agreement terminates on the earlier of February 24, 2008 or the end of the fiscal year in which Granaria Holdings B.V. and its affiliates, in the aggregate, beneficially owns less than 10% of our outstanding common stock.

     During 2002, we paid $800,000, which is included in Other Assets, in our balance sheets to a start-up technology manufacturing company for the exclusive right to manufacture the start-up company’s battery technology. During the third quarter of 2003, we converted this exclusive right to manufacture into a 6.0% interest in such start-up company. In addition, an entity affiliated with Granaria Holdings, B.V., our controlling common shareholder, invested $1,975,000 (including $75,000 from Mr. Bert Iedema, one of our directors) for a 14.8125% interest, and Thomas R. Pilholski, our Senior Vice President and Chief Financial Officer invested $200,000 for a 1.5% interest. In addition, John H. Weber, our President and Chief Executive Officer, invested $20,000 and David G. Krall, our Senior Vice President

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and General Counsel, invested $5,000. Mr. Weber and Mr. Krall received less than 1% interest for their investments. In September 2003, we paid an additional $426,667 to this start-up technology manufacturing company for an incremental 2.7560% interest (our total interest in this entity is 8.7560%). Granaria Holdings B.V. through an affiliate invested an additional $1,053,333 for an incremental 6.8038% interest (including $36,744 from Mr. Iedema), and Mr. Pilholski invested an additional $106,667 for an incremental 0.6890% interest. Mr. Weber invested an additional $10,667 and Mr. Krall invested an additional $2,667. Mr. Weber and Mr. Krall continue to own less than 1%. We, the affiliates of Granaria Holdings B.V., and Messrs. Weber, Pilholski and Krall will also receive a priority distribution of 60% of the any cash distributed until they have received three times their total investment. In addition, Noel Longuemare, a director of our wholly-owned subsidiary, EaglePicher Technologies, LLC, holds a 4.2687% interest in this start-up company.

     Granaria Holdings, B.V., our controlling common shareholder, controls approximately 78% of our outstanding 11-3/4% Cumulative Redeemable Exchangeable Preferred Stock.

     On August 31, 2003, Bert Iedema, one of our directors and an executive officer of Granaria Holdings, B.V., our controlling common shareholder, purchased 5,000 shares of our common stock from one of our former officers.

     Certain of our directors and current and former officers have entered into a voting trust agreement with Granaria Holdings, B.V., our controlling common shareholder, pursuant to which Granaria Holdings B.V. is the voting trustee and holder of record of the shares of our common stock that are beneficially owned by these directors and officers. These directors and officers also have executed a shareholders agreement, which, among other things, contains transfer restrictions regarding the directors’ and officers’ ability to transfer their beneficial interests in our common stock.

I.O.      SUBSEQUENT EVENT11.75% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK

     In AprilWe have outstanding 14,191 shares of our 11.75% Cumulative Redeemable Exchangeable Preferred Stock. The Preferred Stock had an initial liquidation preference at February 24, 1998 of $5,637.70 per share which accreted during the first five years after issuance at 11.75% per annum, compounded semiannually, ultimately reaching $10,000 per share on March 1, 2003. Commencing March 1, 2003, dividends on our Preferred Stock became cash payable in arrears, semiannually, at 11.75% per annum of the liquidation preference if and when declared by the Board of Directors; the first semiannual dividend payment of $8.3 million was due September 1, 2003. The New Credit Agreement and the Senior Unsecured Notes contain financial covenants that currently prohibit us from paying dividends on the preferred stock. Our Board of Directors did not declare a cash dividend as of September 1, 2003. If we do not pay cash dividends on the preferred stock, then holders of the preferred stock may become entitled to elect a majority of our Board of Directors. Dakruiter S.A. and Harbourgate B.V., both companies controlled by Granaria Holdings B.V., our controlling common shareholder, hold approximately 78% of our preferred stock, and therefore Granaria Holdings B.V. would continue to be able to elect our entire Board of Directors. The election of a majority of the directors is the only remedy of holders of the preferred stock for a failure to pay cash dividends. Unpaid dividends are cumulative but do not bear interest.

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P.     LONG-TERM DEBT

     Long-term debt consisted of the following at November 30, 2002 and August 31, 2003 (in thousands of dollars):

     Aggregate maturities of long-term debt by each of our fiscal year ends are as follows at August 31, 2003 (in thousands of dollars):

New Credit Agreement

     We have a syndicated senior secured loan facility (“New Credit Agreement”) providing an original term loan (“New Term Loan”) of $150.0 million and a $125.0 million revolving credit facility (“New Facility”). The New Facility and the New Term Loan bear interest, at our option, at a rate equal to (i) LIBOR plus 350 basis points or (ii) an Alternate Base Rate (which is equal to the highest of (a) the agent’s prime rate, (b) the Federal funds effective rate plus 50 basis points, or (c) the base CD rate plus 100 basis points) plus 250 basis points. Interest is generally payable quarterly on the New Facility and New Term Loan. We have entered into interest rate swap agreements to manage our variable interest rate exposure. The New Credit Agreement also contains certain fees. There are fees for letters of credit equal to 3.5% per annum for all issued letters of credit, and there is a commitment fee on the New Facility equal to 0.5% per annum of the unused portion of the New Facility. If we meet certain financial benchmarks, the interest rate spreads on the borrowing, the commitment fees and the fees for letters of credit may be reduced.

     The New Term Loan will mature upon the earlier of (i) August 7, 2009, (ii) 180 days prior to the maturity of our Senior Subordinated Notes if more than $5.0 million of aggregate principal amount of Senior Subordinated Notes are outstanding, or (iii) 180 days prior to the mandatory redemption of our 11.75% Cumulative Redeemable Exchangeable Preferred Stock (“Preferred Stock”) if more than $5.0 million of its aggregate liquidation preference remains outstanding. The New Facility will mature upon the earlier of (i) August 7, 2008, (ii) 180 days prior to the maturity of our Senior Subordinated Notes if more than $5.0 million of aggregate principal amount of Senior Subordinated Notes are outstanding, or (iii) 180 days prior to the mandatory redemption of our Preferred Stock if more than $5.0 million of its aggregate liquidation preference remains outstanding. Our Senior Subordinated Notes mature, and our Preferred Stock is scheduled for mandatory redemption on March 1, 2008.

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     At August 31, 2003, we reachedhad $40.4 million in outstanding letters of credit under the New Facility, which together with borrowings of zero, made our available borrowing capacity of $84.6 million. However, due to various financial covenant limitations under the New Credit Agreement, we could only incur an agreement in principle foradditional $47.3 million of indebtedness at August 31, 2003.

     The New Credit Agreement is secured by our capital stock, the salecapital stock of certain assets at our Hillsdale U.K. Automotive operation for cash of $1.1 million. In addition, we will be winding down the remaining operationssubstantially all of our Hillsdale U.K. Automotive operationdomestic United States subsidiaries, a certain portion of the capital stock of our foreign subsidiaries, and expectsubstantially all other assets of our United States subsidiaries. Additionally, the New Credit Agreement is guaranteed by us and certain of our United States subsidiaries.

     The New Credit Agreement contains covenants that restrict our ability to declare dividends or redeem capital stock, incur $1.5 millionadditional debt or liens, alter existing debt agreements, make loans or investments, form or invest in joint ventures, undergo a change in control or engage in mergers, acquisitions or asset sales. These covenants also limit the annual amount of capital expenditures and require us to $2.0 millionmeet certain minimum financial ratios. For purposes of shutdown costs duringdetermining outstanding debt under our New Credit Agreement, we include the outstanding obligations of EPFC, our off-balance sheet special purpose entity (see Note I, for a detailed discussion of EPFC). We are in compliance with all covenants at August 31, 2003.

     In addition to regularly scheduled payments on the shutdown costs,New Credit Agreement, we believe we will realize a lossare required to make mandatory prepayments equal to 50.0% of approximately $2.0 million to $3.0 million duringannual excess cash flow, as defined in the second quarter of 2003 related to this sale. We also believe we will realizeNew Credit Agreement, beginning with our fiscal year ending November 30, 2004. The net cash proceeds from the sale of this operationassets (subject to certain conditions), the net proceeds of $1.5 million to $2.0 million (including the $1.1 million above related to the salecertain new debt issuance, and 50.0% of the operation) duringnet proceeds of any equity securities issuance are also subject to mandatory prepayments on the New Credit Agreement.

Former Credit Agreement

     We had a syndicated senior secured loan facility (“Former Credit Agreement”) which provided for an original term loan (“Former Term Loan”) of $75.0 million, as amended, and a $220.0 million revolving credit facility (“Former Facility”). We paid off the Former Credit Agreement with the proceeds from our New Credit Agreement and Senior Unsecured Notes in August 2003. We will account for this sale as a Discontinued Operation when we fileThe Former Facility and the Former Term Loan bore interest, at our second quarter of 2003 Form 10-Q. Duringoption, at LIBOR plus 275 basis points, or the year ended November 30, 2002, our Hillsdale U.K. Automotive operation had $13.9 million in revenues,bank’s prime rate plus 150 basis points. Interest was generally payable quarterly on the Former Facility and as of November 30, 2002, had $11.5 million in total assets, which were comprised of primarily inventory, accounts receivable, and property, plant and equipment. During the three months ended February 28, 2003, the Hillsdale U.K. Automotive operation had $3.4 million in revenues.Former Term Loan. The Former Credit Agreement also contained certain fees.

J.SUBSIDIARY GUARANTORS AND NON-GUARANTORSSenior Unsecured Notes

     In August 2003, we issued $250.0 million 9.75% Senior Unsecured Notes, due 2013, at a price of 99.2% of par to yield 9.875%. Accordingly, the net proceeds before issuance costs were $248.0 million. The discount is being amortized over the life of the Senior Unsecured Notes. The Senior Unsecured Notes require semi-annual interest payments on September 1 and March 1, beginning on March 1, 2004. The Senior Unsecured Notes are redeemable at our option, in whole or in part, any time after September 1, 2008 at set redemption prices. We are required to offer to purchase the Senior Unsecured Notes at a set redemption price should there be a change in control. The Senior Unsecured Notes contain covenants which restrict or limit our ability to declare or pay dividends, incur additional debt or liens, issue stock, engage in affiliate transactions, undergo a change in control or sell assets. We are in compliance with these covenants at August 31, 2003. The Senior Unsecured Notes are guaranteed by us and certain of our subsidiaries (see “Subsidiary Guarantors and Non-Guarantors” below).

Senior Subordinated Notes

     Our Credit AgreementSenior Subordinated Notes require semi-annual interest payments on September 1 and March 1. In connection with the issuance of the Senior Unsecured Notes in August 2003, as described above, we repurchased 95% of the outstanding senior subordinated notes at par and executed a supplemental indenture on our Senior Subordinated Notes which eliminated substantially all of the restrictive covenants in the Senior Subordinated Notes which remain outstanding. We continue to be required to make interest payments on the Senior Subordinated Notes and will be required to pay the remaining aggregate principal amount outstanding at maturity in 2008.

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Industrial Revenue Bonds

     Our industrial revenue bonds require monthly interest payments at variable interest rates based on the market for similar issues and are secured by letters of credit issued under the New Facility described above.

Subsidiary Guarantors and Non-Guarantors

     Our Senior Unsecured Notes and Senior Subordinated Notes were issued by our wholly owned subsidiary, EaglePicher Incorporated (“EPI”), and are guaranteed on a full, unconditional, and joint and several basis by us and certain of our wholly-owned domesticUnited States subsidiaries (“Subsidiary Guarantors”). We have 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. EPI and the Subsidiary Guarantors areis subject to restrictions on the payment of dividends under the terms of both the New Credit Agreement and the Senior SubordinatedUnsecured Notes. The following supplemental condensed combining financial statements present information regarding EPI, as the Issuer, the Subsidiary Guarantors and Non-Guarantor Subsidiaries. We only accrue interest income and expense on intercompany loans once a year in our fourth fiscal quarter.

12     As part of executing the supplemental indenture to the Senior Subordinated Notes, as described above, we removed all reporting obligations to those note holders. Accordingly, effective with the issuance of our August 31, 2003 financial statements, we have only included supplemental guarantor and non-guarantor financial statements for Subsidiary Guarantors of the Senior Unsecured Notes. Therefore, the enclosed supplemental condensed combining financial statements may not be comparable from one period to the next. There are only minor differences between the presentation of these two sets of guarantor and non-guarantor financial statements.

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EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF NOVEMBER 30, 2002
(in thousands of dollars)