JurisdictionTable of IRS Employer Incorporation or Commission File Identification Name Organization Number Number ---- ------------ ------ ------ Eagle-Picher Industries, Inc. Ohio 333-49957 31-0268670 Daisy Parts, Inc. Michigan 333-49957-02 38-1406772 Eagle-Picher Development Co., Inc. Delaware 333-49957-03 31-1215706 Eagle-Picher Far East, Inc. Delaware 333-49957-04 31-1235685 Eagle-Picher Minerals, Inc. Nevada 333-49957-06 31-1188662 Eagle-Picher Technologies, LLC Delaware 333-49957-09 31-1587660 Hillsdale Tool & Manufacturing Co. Michigan 333-49957-07 38-0946293 EPMR Corporation (f/k/a Michigan Automotive Research Corp.) Michigan 333-49957-08 38-2185909Contents

~~PART~~SECURITIES I.AND ~~FINANCIAL~~EXCHANGE INFORMATION Page Number Item 1. Financial Statements Condensed Consolidated Statements of Income (Loss) (Unaudited).... 4 Condensed Consolidated Balance Sheets (Unaudited)................. 5 Condensed Consolidated Statements of Cash Flows (Unaudited)....... 7 Notes to Condensed Consolidated Financial Statements (Unaudited).. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 23 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 31 Item 4. Controls and Procedures............................................. 32 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................... 33 Signatures................................................................... 34 Certifications............................................................... 43COMMISSION

~~Three Months Ended Nine Months Ended August 31 August 31~~Washington, ----------------------- --------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Net Sales $ 169,053 $ 169,520 $ 509,729 $ 517,676 --------- --------- --------- --------- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 131,617 139,673 397,943 417,300 Selling and administrative 14,295 13,054 49,210 37,925 Depreciation 11,926 11,250 34,257 32,882 Amortization of intangibles 4,214 4,135 12,734 12,240 Restructuring -- -- 2,998 -- Divestitures 161 -- 6,131 500 Management compensation - special 524 609 2,905 2,498 Insurance related losses -- -- 3,100 -- Other (83) 107 (305) (162) --------- --------- --------- --------- 162,654 168,828 508,973 503,183 --------- --------- --------- --------- Operating Income 6,399 692 756 14,493 Interest expense (9,632) (9,920) (31,935) (30,170) Other income (expense), net 412 1,600 1,388 2,439 --------- --------- --------- --------- Loss from Continuing Operations Before Taxes (2,821) (7,628) (29,791) (13,238) Income Taxes (Benefit) 750 (2,525) 1,955 (4,300) --------- --------- --------- --------- Loss from Continuing Operations (3,571) (5,103) (31,746) (8,938) Discontinued Operations: Loss from operations of discontinued segment, net of income taxes (benefit) of $(900) -- -- -- (1,657) Loss on disposal of business segment including provisions of $1,733 and $4,138 for operating losses during phase-out periods, net of income tax benefits of $2,000 and $11,800 -- (5,500) -- (23,700) --------- --------- --------- --------- Net Loss $ (3,571) $ (10,603) $ (31,746) $ (34,295) ========= ========= ========= ========= Loss Applicable to Common Shareholders $ (7,289) $ (13,921) $ (42,695) $ (44,065) ========= ========= ========= ========= Comprehensive Income (Loss) $ (3,468) $ (12,180) $ (30,300) $ (36,769) ========= ========= ========= ========= Basic Loss per Share to Common Shareholders: Loss from continuing operations $ (7D.~~57) $ (8~~C.~~58)~~ $ (44.22) $ (19.02) Discontinued operations net loss -- (5.60) -- (25.79) --------- --------- --------- --------- Net Loss $ (7.57) $ (14.18) $ (44.22) $ (44.81) ========= ========= ========= =========20549

~~August 31 November 30 ASSETS 2002 2001~~ Form 10-------- -------- CURRENT ASSETS Cash and cash equivalents $ 12,575 $ 24,620 Receivables, net 60,234 100,052 Inventories: Raw materials and supplies 25,059 24,737 Work in process 28,002 32,038 Finished goods 14,820 18,569 -------- -------- 67,881 75,344 Net assets held for sale 1,753 3,258 Prepaid expenses 12,071 15,122 Deferred income taxes 24,287 24,287 -------- -------- Total current assets 178,801 242,683 -------- -------- PROPERTY, PLANT AND EQUIPMENT 359,001 352,883 Less accumulated depreciation 165,719 136,128 -------- -------- Net property, plant and equipment 193,282 216,755 GOODWILL, net of accumulated amortization of $69,492 and $57,624, respectively 167,894 179,762 OTHER ASSETS 87,023 86,711 -------- -------- Total Assets $627,000 $725,911 ======== ======== LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 71,584 $ 86,297 Long-term debt - current portion 20,966 41,957 Other accrued liabilities 81,006 73,025 -------- -------- Total current liabilities 173,556 201,279 LONG-TERM DEBT - less current portion 358,831 401,169 DEFERRED INCOME TAXES 7,088 6,277 OTHER LONG-TERM LIABILITIES 28,553 27,755 -------- -------- Total Liabilities 568,028 636,480 -------- -------- 11-3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK; 50,000 shares authorized; 14,191 issued and outstanding shares 134,035 123,086 -------- --------Q

~~August 31 November 30 2002 2001 --------- --------- SHAREHOLDERS' EQUITY~~ (~~DEFICIT)~~Mark ~~Common stock, voting - $.01 par value each: 1,000,000 shares authorized and issued 10 10 Additional paid-in capital 99,991 99,991 Accumulated deficit (166,088~~One) ~~(123,393)~~x ~~Other~~QUARTERLY ~~comprehensive~~REPORT ~~loss~~PURSUANT ~~(4,284)~~TO ~~(5,730)~~SECTION ~~Treasury~~13 ~~Stock,~~OR ~~at cost: 36,500 and 27,750 shares~~ 15(~~4,692~~d)OFTHE ~~(4,533)~~SECURITIES ~~---------~~EXCHANGE ~~---------~~ACT ~~Total~~OF ~~Shareholders' Deficit (75,063) (33,655) --------- --------- Total Liabilities and Shareholders' Deficit $ 627,000 $ 725,911 ========= =========~~1934

~~Nine~~For ~~Months~~the ~~Ended~~quarterly ~~August~~period 31ended ~~2002 2001 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(31~~February 28,~~746)~~ $(34,295) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 49,344 47,611 Provision for discontinued operations -- 23,700 Loss on divestitures 6,131 500 Deferred income taxes 811 -- Changes in assets and liabilities, net of effect of non cash loss on divestitures: Sale of receivables (see Note F) 40,975 -- Receivables (3,573) (7,840) Inventories 2,323 2,899 Prepaid expenses 3,025 (1,268) Other assets (4,736) (4,569) Accounts payable (13,325) 13,055 Accrued liabilities 3,823 (5,317) Other -- (2,084) -------- -------- Net cash provided by operating activities 53,052 32,392 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of divisions 8,917 -- Capital expenditures (12,611) (34,874) Proceeds from sale of property and equipment and other 639 (966) -------- -------- Net cash used in investing activities (3,055) (35,840) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt (22,579) (14,322) Net borrowings (repayments) under revolving credit agreements (40,750) 26,765 Acquisition of treasury stock (159) (1,692) Other -- 1,432 -------- -------- Net cash provided by (used in) financing activities (63,488) 12,183 -------- -------- NET CASH PROVIDED BY DISCONTINUED OPERATIONS -- 1,027 -------- -------- Effect of exchange rates on cash 1,446 (2,474) -------- --------2003

Nine Months Ended August 31 2002 2001 -------- -------- Net increase (decrease) in cash and cash equivalents (12,045) 7,288 Cash and cash equivalents, beginning of period 24,620 7,467 -------- -------- Cash and cash equivalents, end of period $ 12,575 $ 14,755 ======== ======== Supplemental cash flow information: Cash paid during the nine months ended August 31: Interest paid $ 23,209 $ 23,135 ======== ======== Income taxes paid (refunded), net $ (4,835) $ (1,695) ======== ========OR

~~FACILITIES~~o ~~SEVERANCE~~TRANSITION ~~OTHER~~REPORT ~~TOTAL~~PURSUANT ~~--------~~TO ~~--------~~SECTION ~~--------~~13 ~~--------~~OR Original Charges $ 5,425 $ 5,044 $ 3,694 $ 14,163 Amounts offset against asset values (3,575) -- (3,000) (6,575) Amounts utilized -- (202) -- (202) -------- -------- -------- -------- Balance at November 30, 2001 1,850 4,842 694 7,386 Amounts utilized (201) (1,670) (276) (2,147) Amounts added/(reversed) -- (2,664) 180 (2,484) New restructuring (exiting the Gallium business) -- 15 ~~5,467 5,482 Amounts offset against asset values -- --~~ (~~3,143~~d) ~~(3,143)~~OFTHE ~~--------~~SECURITIES ~~--------~~EXCHANGE ~~--------~~ACT ~~--------~~OF Balance at May 31, 2002 1,649 523 2,922 5,094 Amounts utilized (160) (80) (209) (449) Amounts offset against asset values -- -- (732) (732) -------- -------- -------- -------- Balance at August 31, 2002 $ 1,489 $ 443 $ 1,981 $ 3,913 ======== ======== ======== ========1934

~~Three~~For ~~Months~~the ~~Ended~~transition ~~Nine~~period Months Ended August 31 August 31 ---------------------- ---------------------- 2002 2001 2002 2001 --------- --------- --------- --------- (In thousands of dollars) Net Sales Precision Machined Components $ 84,690 $ 86,498 $ 267,566 $ 264,269 Rubber Coated Metal Products 21,196 17,996 58,552 55,763 --------- --------- --------- --------- Automotive 105,886 104,494 326,118 320,032 Special Purpose Batteries 27,768 25,674 76,450 73,472 Specialty Materials 14,130 18,912 44,025 57,855 Precision Products - divested July 17, 2002 832 2,238 3,435 8,476 Other Technologies Products 3,097 1,857 10,277 9,205 --------- --------- --------- --------- Technologies 45,827 48,681 134,187 149,008 Minerals 17,340 16,345 49,424 48,636 --------- --------- --------- --------- Total $ 169,053 $ 169,520 $ 509,729 $ 517,676 ========= ========= ========= ========= Income (Loss) from Continuing Operations Before Taxes: Automotive $ (4,622) $ (5,885) $ (9,078) $ (9,271) Technologies 1,364 (1,814) (14,646) (2,711) Minerals 932 (51) 3,865 (348) Divested Operations (161) -- (6,131) (500) Corporate (334) 122 (3,801) (408) --------- --------- --------- --------- Total $ (2,821) $ (7,628) $ (29,791) $ (13,238) ========= ========= ========= ========= EBITDA Automotive $ 11,122 $ 9,173 $ 37,497 $ 35,601 Technologies 8,014 5,577 6,361 19,215 Minerals 3,013 2,152 10,151 6,160 Divested Operations (161) -- (6,131) (500) Corporate 963 775 1,257 1,578 --------- --------- --------- --------- Total $ 22,951 $ 17,677 $ 49,135 $ 62,054 ========= ========= ========= ========= to .

~~Three~~Commission ~~Months~~file ~~Ended~~number ~~Nine Months Ended August 31 August 31~~ 333-49957----------------- ------------------ 2002 2001 2002 2001 ------- ------- ------- ------- (In thousands of dollars) Depreciation and Amortization: Automotive $11,133 $ 9,982 $31,737 $29,365 Technologies 3,548 3,803 10,823 11,166 Minerals 1,327 1,466 4,075 4,206 Corporate 132 134 356 385 ------- ------- ------- ------- Total $16,140 $15,385 $46,991 $45,122 ======= ======= ======= ======= Interest Expense: Automotive $ 4,611 $ 5,076 $14,838 $15,507 Technologies 3,102 3,588 10,184 10,760 Minerals 754 737 2,211 2,302 Corporate/Intersegment 1,165 519 4,702 1,601 ------- ------- ------- ------- Total $ 9,632 $ 9,920 $31,935 $30,170 ======= ======= ======= =======01

~~August~~EaglePicher 31Holdings, November 30, 2002 2001 -------- --------- Identifiable Assets: Automotive $ 293,829 $ 334,414 Technologies 170,276 206,033 Minerals 50,031 51,997 Corporate/Intersegment 112,864 133,467 ------- --------- $ 627,000 $ 725,911 ========= =========Inc.

~~GUARANTORS~~A ~~----------------------------~~Delaware ~~NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC~~Corporation I.R.S. ~~GUARANTORS~~Employer ~~SUBSIDIARIES ELIMINATIONS TOTAL --------- --------- --------- --------- --------- --------- Net Sales: Customers $~~ Identification No. 13~~,492 $~~ -- $ 132,359 $ 23,202 $ -- $ 169,053 Intercompany 4,914 -- 4,108 -- (9,022) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 10,907 -- 110,706 19,026 (9,022) 131,617 Selling and administrative 6,059 -- 6,173 1,963 100 14,295 Intercompany charges (3,064) -- 2,660 504 (100) -- Depreciation 1,592 -- 9,144 1,190 -- 11,926 Amortization of intangibles 935 -- 2,947 332 -- 4,214 Other 4,124 -- (3,629) 107 -- 602 --------- --------- --------- --------- --------- --------- Total 20,553 -- 128,001 23,122 (9,022) 162,654 --------- --------- --------- --------- --------- --------- Operating Income (Loss) (2,147) -- 8,466 80 -- 6,399 Other Income (Expense) Interest expense (2,826) -- (5,838) (1,387) 419 (9,632) Other income (expense), net 701 -- (176) 306 (419) 412 Equity in earnings (loss) of consolidated subsidiaries 701 (3,571) 436 -- 2,434 -- --------- --------- --------- --------- --------- --------- Income (Loss) from Continuting (3,571) (3,571) 2,888 (1,001) 2,434 (2,821) Operations Before Taxes Income Taxes (Benefit) -- -- -- 750 -- 750 --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations (3,571) (3,571) 2,888 (1,751) 2,434 (3,571) Discontinued Operations -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- Net Income (Loss) $ (3,571) $ (3,571) $ 2,888 $ (1,751) $ 2,434 $ (3,571) ========= ========= ========= ========= ========= =========3989553

~~GUARANTORS~~11201 ~~-------------------------~~North ~~NON-GUARANTORS~~Tatum ~~EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC~~Blvd. ~~GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- --------- --------- --------- --------- --------- Net Sales: Customers $ 11~~Suite 110,~~536~~ ~~$ -- $ 137~~Phoenix,~~332~~ $Arizona 20,652 $ -- $ 169,520 Intercompany 4,522 -- 3,099 -- (7,621) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 9,890 -- 120,215 16,981 (7,413) 139,673 Selling and administrative 5,208 4 5,966 1,965 (89) 13,054 Intercompany charges (1,642) -- 1,618 (65) 89 -- Depreciation 950 -- 9,427 873 -- 11,250 Amortization of intangibles 936 -- 2,846 353 -- 4,135 Other 630 -- 112 (26) -- 716 --------- --------- --------- --------- --------- --------- Total 15,972 4 140,184 20,081 (7,413) 168,828 --------- --------- --------- --------- --------- --------- Operating Income (Loss) 86 (4) 247 571 (208) 692 Other Income (Expense): Interest expense (2,482) -- (8,923) (344) 1,829 (9,920) Other income (expense) 438 -- 2,349 73 (1,260) 1,600 Equity in earnings (loss) of -- consolidated subsidiaries (6,416) (10,599) (390) -- 17,405 -- --------- --------- --------- --------- --------- --------- Income (Loss) from Continuting (8,374) (10,603) (6,717) 300 17,766 (7,628) Operations Before Taxes Income Taxes (Benefit) (3,275) -- 7 743 -- (2,525) --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations (5,099) (10,603) (6,724) (443) 17,766 (5,103) Discontinued Operations (5,500) -- -- 40 (40) (5,500) --------- --------- --------- --------- --------- --------- Net Income (Loss) $ (10,599) $ (10,603) $ (6,724) $ (403) $ 17,726 $ (10,603) ========= ========= ========= ========= ========= =========85028

~~GUARANTORS~~Registrant’s ~~---------------------------~~telephone ~~NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS~~number, ~~INC.~~including ~~GUARANTORS~~area ~~SUBSIDIARIES ELIMINATIONS TOTAL --------- --------- --------- --------- --------- --------- Net Sales~~code: ~~Customers $ 38,192 $~~ 602-923- $ 404,608 $ 66,929 $ -- $ 509,729 Intercompany 12,524 -- 10,465 4 (22,993) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 29,559 -- 337,294 54,083 (22,993) 397,943 Selling and administrative 18,228 2 24,936 6,044 -- 49,210 Intercompany charges (8,924) -- 7,642 1,282 -- -- Depreciation 3,506 -- 27,935 2,816 -- 34,257 Amortization of intangibles 2,801 -- 9,048 885 -- 12,734 Other 1,048 -- 13,674 107 -- 14,829 --------- --------- --------- --------- --------- --------- Total 46,218 2 420,529 65,217 (22,993) 508,973 --------- --------- --------- --------- --------- --------- Operating Income (Loss) 4,498 (2) (5,456) 1,716 -- 756 Other Income (Expense): Interest expense (9,151) -- (19,894) (4,267) 1,377 (31,935) Other income (expense), net 1,462 -- 628 675 (1,377) 1,388 Equity in earnings (loss) of consolidated subsidiaries (28,553) (31,744) 1,604 -- 58,693 -- --------- --------- --------- --------- --------- --------- Income (Loss) from Continuting (31,744) (31,746) (23,118) (1,876) 58,693 (29,791) Operations Before Taxes Income Taxes (Benefit) -- -- 12 1,943 -- 1,955 --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations (31,744) (31,746) (23,130) (3,819) 58,693 (31,746) Discontinued Operations -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- Net Income (Loss) $ (31,744) $ (31,746) $ (23,130) $ (3,819) $ 58,693 $ (31,746) ========= ========= ========= ========= ========= =========7200

~~GUARANTORS~~Former ------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- --------- --------- --------- --------- --------- Net Sales: Customers $ 36,320 $ -- $ 414,713 $ 66,643 $ -- $ 517,676 Intercompany 11,892 -- 10,620 1 (22,513) -- Operating Costs and Expenses: Cost of products sold (exclusive of depreciation) 28,453 -- 357,427 53,933 (22,513) 417,300 Selling and administrative 16,021 4 16,051 6,113 (264) 37,925 Intercompany charges (4,963) -- 4,861 (162) 264 -- Depreciation 3,105 -- 27,120 2,657 -- 32,882 Amortization of intangibles 2,800 -- 8,372 1,068 -- 12,240 Other 2,867 -- 12 (43) -- 2,836 --------- --------- --------- --------- --------- --------- Total 48,283 4 413,843 63,566 (22,513) 503,183 --------- --------- --------- --------- --------- --------- Operating Income (Loss) (71) (4) 11,490 3,078 -- 14,493 Other Income (Expense): Interest expense (7,442) -- (27,104) (1,375) 5,751 (30,170) Other income (expense) 1,343 -- 5,835 1,012 (5,751) 2,439 Equity in earnings (loss) of consolidated subsidiaries (9,322) (34,291) 311 -- 43,302 -- --------- --------- --------- --------- --------- --------- Income (Loss) from Continuting (15,492) (34,295) (9,468) 2,715 43,302 (13,238) Operations Before Taxes Income Taxes (Benefit) (6,558) -- (8) 2,266 -- (4,300) --------- --------- --------- --------- --------- --------- Income (Loss) from Continuing Operations (8,934) (34,295) (9,460) 449 43,302 (8,938) Discontinued Operations (25,357) -- -- 67 (67) (25,357) --------- --------- --------- --------- --------- --------- Net Income (Loss) $ (34,291) $ (34,295) $ (9,460) $ 516 $ 43,235 $ (34,295) ========= ========= ========= ========= ========= =========Name

~~GUARANTORS~~ Eagle-~~----------------------~~Picher ~~NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS~~Holdings, ~~INC~~Inc. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- --------- --------- --------- --------- --------- ASSETS Cash and cash equivalents $ 7,898 $ 1 $ 606 $ 4,070 $ -- $ 12,575 Receivables, net 3,731 -- 36,273 20,230 -- 60,234 Intercompany accounts receivable 2,514 -- 5,224 123 (7,861) -- Inventories 1,788 -- 52,495 13,598 -- 67,881 Net assets held for sale 1,753 -- -- -- -- 1,753 Prepaid expenses (193) -- 7,929 4,335 -- 12,071 Deferred income taxes 24,287 -- -- -- -- 24,287 --------- --------- --------- --------- --------- --------- Total current assets 41,778 1 102,527 42,356 (7,861) 178,801 PROPERTY, PLANT AND EQUIPMENT, net 25,653 -- 137,261 30,368 -- 193,282 Investment in Subsidiaries 48,636 63,326 17,662 -- (129,624) -- GOODWILL, net 35,998 -- 111,720 20,176 -- 167,894 OTHER ASSETS 72,093 -- 22,052 11,757 (18,879) 87,023 --------- --------- --------- --------- --------- --------- Total Assets $ 224,158 $ 63,327 $ 391,222 $ 104,657 $(156,364) $ 627,000 ========= ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Accounts payable $ 12,474 $ -- $ 53,909 $ 5,201 $ -- $ 71,584 Intercompany accounts payable -- -- -- 8,027 (8,027) -- Long-term debt - current portion 16,523 -- -- 4,443 -- 20,966 Other accrued liabilities 51,021 -- 23,409 6,576 -- 81,006 --------- --------- --------- --------- --------- --------- Total current liabilities 80,018 -- 77,318 24,247 (8,027) 173,556 LONG-TERM DEBT - less current portion 358,831 -- -- 9,389 (9,389) 358,831 DEFERRED INCOME TAXES 7,088 -- -- -- -- 7,088 OTHER LONG-TERM LIABILITIES 27,116 22 107 1,308 -- 28,553 --------- --------- --------- --------- --------- --------- Total Liabilities 473,053 22 77,425 34,944 (17,416) 568,028 Intercompany Accounts (297,274) -- 264,566 34,585 (1,877) -- Preferred Stock -- 134,035 -- -- -- 134,035 Shareholders' Equity (Deficit) 48,379 (70,730) 49,231 35,128 (137,071) (75,063) --------- --------- --------- --------- --------- --------- Total Liabilities and Shareholders' Equity (Deficit) $ 224,158 $ 63,327 $ 391,222 $ 104,657 $(156,364) $ 627,000 ========= ========= ========= ========= ========= =========

~~GUARANTORS~~EAGLEPICHER ~~-------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER~~ HOLDINGS, INC. ~~GUARANTORS~~IS ~~SUBSIDIARIES~~FILING ~~ELIMINATIONS~~THIS ~~TOTAL~~REPORT ~~---------~~VOLUNTARILY ~~---------~~IN ~~---------~~ORDER ~~---------~~TO ~~---------~~COMPLY WITH ~~---------~~THE ~~ASSETS~~REQUIREMENTS ~~Cash~~OF ~~and~~THE ~~cash~~TERMS ~~equivalents~~OF $ITS ~~17,145~~9 ~~$ 1 $ 471 $ 6,936 $ 67 $ 24,620 Receivables, net (18,238) -- 103,168 15,122 -- 100,052 Intercompany accounts receivable 46,674 --~~ 3~~,559~~/8% 65SENIOR ~~(50,298)~~SUBORDINATED --NOTES ~~Inventories~~AND 11 3/4~~,129~~% --SERIES ~~59,704~~B ~~12,882~~CUMULATIVE ~~(1,371)~~EXCHANGEABLE ~~75,344~~PREFERRED ~~Net~~STOCK ~~assets~~AND ~~held~~IS ~~for~~NOT ~~sale~~REQUIRED ~~3,610~~TO FILE --THIS --REPORT ~~5,954~~PURSUANT ~~(6,306)~~TO ~~3,258~~EITHER ~~Prepaid~~SECTION ~~expenses~~13 ~~6,948~~OR ~~-- 6,152 2,887 (865)~~ 15~~,122 Deferred income taxes 24,287 -- -- -- -- 24,287 --------- --------- --------- --------- --------- --------- Total current assets 84,555 1 173,054 43,846~~ (~~58,773~~d) ~~242,683~~OF ~~Property,~~THE ~~Plant~~SECURITIES EXCHANGE &ACT ~~Equipment,~~OF net 28,733 -- 157,653 30,401 (32) 216,755 Investment in Subsidiaries 83,571 95,169 16,058 -- (194,798) -- Goodwill, net 41,939 -- 120,969 19,994 (3,140) 179,762 Other Assets 73,049 -- 13,789 10,719 (10,846) 86,711 --------- --------- --------- --------- --------- --------- Total Assets $ 311,847 $ 95,170 $ 481,523 $ 104,960 $(267,589) $ 725,911 ========= ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Accounts payable $ 16,156 $ -- $ 62,171 $ 7,970 $ -- $ 86,297 Intercompany accounts payable 76 -- 48 7,404 (7,528) -- Long-term debt - current portion 25,569 -- 14,250 9,430 (7,292) 41,957 Other accrued liabilities 42,059 -- 26,363 4,602 1 73,025 --------- --------- --------- --------- --------- --------- Total current liabilities 83,860 -- 102,832 29,406 (14,819) 201,279 Long-term Debt - less current portion 401,169 -- 42,452 -- (42,452) 401,169 Deferred Income Taxes 9,362 -- -- -- (3,085) 6,277 Other Long-Term Liabilities 25,911 19 1,000 825 -- 27,755 --------- --------- --------- --------- --------- --------- Total Liabilities 520,302 19 146,284 30,231 (60,356) 636,480 Intercompany Accounts (288,578) -- 262,878 35,782 (10,082) -- Preferred Stock -- 123,086 -- -- -- 123,086 Shareholders' Equity (Deficit) 80,123 (27,935) 72,361 38,947 (197,151) (33,655) --------- --------- --------- --------- --------- --------- Total Liabilities and Shareholders' Equity (Deficit) $ 311,847 $ 95,170 $ 481,523 $ 104,960 $(267,589) $ 725,911 ========= ========= ========= ========= ========= =========1934

~~GUARANTORS~~Indicate ~~-----------------------~~by ~~NON-GUARANTORS~~check ~~EAGLE-PICHER~~mark ~~SUBSIDIARY~~whether ~~FOREIGN~~the ~~ISSUER~~registrant ~~HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------------------- ------------- ---------- ----- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income~~ (~~Loss~~1) has ~~$(31,744)~~filed ~~$(31,746)~~all ~~$(23,130)~~reports required ~~$ (3,819) $ 58,693 $(31,746) Adjustments~~ to ~~reconcile~~be ~~net~~filed ~~income (loss) to cash provided~~ by ~~(used~~Section 13 ~~in)~~or ~~operating activities: Equity in earnings~~ 15(~~loss~~d) of ~~consolidated~~the ~~subsidiaries~~Securities ~~28,553~~Exchange ~~31,744~~Act (1,604) -- (58,693) -- Depreciation and amortization 8,660 -- 36,983 3,701 -- 49,344 Divestitures 3,325 -- 2,806 -- -- 6,131 Deferred income taxes 811 -- -- -- -- 811 Changes in assets and liabilities, net of 1934 ~~effect~~during ofthe ~~non~~preceding cash loss on divestitures 23,119 161 57,765 (8,414) (44,119) 28,512 -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 32,724 159 72,820 (8,532) (44,119) 53,052 -------- -------- -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of divisions 6,100 -- 2,817 -- -- 8,917 Capital expenditures (894) -- (10,029) (1,688) -- (12 months,~~611)~~ ~~Proceeds from sale of property~~ and ~~equipment and other 639 -- -- -- -- 639 -------- -------- -------- -------- -------- -------- Net cash provided by~~ (~~used in~~2) has ~~investing~~been ~~activities~~subject ~~5,845~~to --such ~~(7,212)~~filing requirements ~~(1,688)~~for --the ~~(3,055)~~past -------- -------- -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt (22,770) -- -- 191 -- (22,579) Net borrowings(repayments)under revolving credit agreements (40,750) -- -- -- -- (40,750) Acquisition of treasury stock -- (159) -- -- -- (159) Other -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities (63,520) (159) -- 191 -- (63,488) -------- -------- -------- -------- -------- -------- Effect of exchange rates on cash -- -- -- 1,446 -- 1,446 -------- -------- -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents (24,951) -- 65,608 (8,583) (44,119) (12,045) -------- -------- -------- -------- -------- -------- Intercompany accounts 15,704 -- (65,473) 5,717 44,052 -- Cash and cash equivalents, beginning of period 17,145 1 471 6,936 67 24,620 -------- -------- -------- -------- -------- -------- Cash and cash equivalents, end of period $ 7,898 $ 1 $ 606 $ 4,070 $ -- $ 12,575 ======== ======== ======== ======== ======== ========90 days.

~~GUARANTORS~~Yes ~~-----------------------~~o ~~NON-GUARANTORS~~No ~~EAGLE-PICHER~~x ~~SUBSIDIARY~~(See ~~FOREIGN~~explanatory ~~ISSUER~~note ~~HOLDINGS,~~immediately ~~INC~~above. ~~GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------- -------- -------- -------- -------- Cash Flows From Operating Activities: Net Income (Loss~~) $(34,291) $(34,295) $ (9,460) $ 516 $ 43,235 $(34,295) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Equity (loss) in earnings of consolidated subsidiaries 9,342 34,291 (311) -- (43,322) -- Depreciation and amortization 8,070 -- 35,816 3,725 -- 47,611 Provision for discontinued operations 23,700 -- -- -- -- 23,700 Divestitures 500 -- -- -- -- 500 Changes in assets and liabilities, net of effect of non cash loss on divestitures (1,595) 4 (13,789) 4,608 5,648 (5,124) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 5,726 -- 12,256 8,849 5,561 32,392 -------- -------- -------- -------- -------- -------- Cash Flows From Investing Activities: Capital expenditures (7,013) -- (16,602) (11,259) -- (34,874) Proceeds from sale of property and equipment and other 1,578 -- -- (2,544) -- (966) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (5,435) -- (16,602) (13,803) -- (35,840) -------- -------- -------- -------- -------- -------- Cash Flows From Financing Activities: Reduction of long-term debt (14,322) -- -- -- -- (14,322) Borrowings (repayments) on revolving credit agreement 30,340 -- (2,000) (1,575) -- 26,765 Acquisition of treasury stock -- (1,692) -- -- -- (1,692) Other 1,625 -- -- (193) -- 1,432 -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities 17,643 (1,692) (2,000) (1,768) -- 12,183 -------- -------- -------- -------- -------- -------- Net cash provided by discontinued operations 1,027 -- -- -- -- 1,027 -------- -------- -------- -------- -------- -------- Effect on exchange rates on cash -- -- -- (2,474) -- (2,474) -------- -------- -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents 18,961 (1,692) (6,346) (9,196) 5,561 7,288 Intercompany accounts (10,506) -- 6,347 10,986 (6,827) -- Cash and cash equivalents, beginning of period 1,297 1 539 4,313 1,317 7,467 -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,752 $ (1,691) $ 540 $ 6,103 $ 51 $ 14,755 ======== ======== ======== ======== ======== ========

~~2002~~Indicate 2001 ---- ---- Amounts (in millions) a. Management compensation- special $2.3 $2.5 Corporate b. Management compensation- special 0.4 Technologies c. Management compensation- special 0.2 - Automotive d. Divestitures 6.1 0.5 Divested Divisions e. Restructuring- exiting of the Gallium business 5.5 - Technologies f. Restructuring- reversal of the fourth quarter 2001 expense related to severance payments made by ~~the~~check ~~pension~~mark ~~plan~~whether ~~(1.2) - Technologies g. Restructuring- reversal of~~ the ~~fourth~~registrant ~~quarter~~is ~~2001~~an ~~expense~~accelerated ~~related~~filer ~~to severance payments to be paid by the pension plan~~ (~~1.5)~~as defined -in ~~Corporate~~Exchange h.Act ~~Selling and administrative~~Rule 12b- legal and settlement costs 5.7 - Technologies i. Selling and administrative - legal and settlement costs 0.6 - Corporate j. Insurance related losses 3.1 - Technologies k. Depreciation adjustment related to equipment useful lives 1.1 - Automotive ------------- --------- Total $ 22.3 $ 3.0 ============= =========2)

~~Three~~Yes ~~months~~o ~~ended~~No Nine months ended August 31, 2002 August 31,2002 ------------------ ----------------- Earnings from continuing operations before income taxes, interest, depreciation, and amortization: $23.0 $49.1 Restructuring charges - 3.0 Losses from sale of divisions - Divestitures .2 6.1 Management compensation - special .5 2.9 Insurance related losses - 3.1 LIFO provision .1 .3 Other non-cash, non-recurring items - 6.7 ----- ----- Credit Agreement EBITDA $23.8 $71.2 ===== =====x

~~Financial Covenant August 31~~930,500 ~~2002~~shares ~~------------------~~of ~~---------------~~common ~~Leverage~~capital ~~Ratio~~stock, ~~- Required equal or less than 5~~$.0001 ~~Leverage~~par ~~Ratio~~value -each, ~~Actual~~were ~~4.41~~outstanding at ~~Interest~~April 14, Coverage Ratio - Required equal to or greater than 2.00 Interest Coverage Ratio - Actual 2.46 Fixed Charges Coverage Ratio - Required equal to or greater than 1.25 Fixed Charges Coverage Ratio - Actual 1.572003

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements.
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EX-10.66
EX-10.67
EX-12.1

TABLE OF ADDITIONAL REGISTRANTS

Jurisdiction

IRS Employer

Incorporation or

Commission

Identification

Names

Former Names

Organization

File Number

Number

EaglePicher Incorporated

Eagle-Picher Industries, Inc

Ohio

333-49957

31-0268670

Daisy Parts, Inc.

N/A

Michigan

333-49957-02

38-1406772

EaglePicher Development Co., Inc.

Eagle-Picher Development Co.,Inc

Delaware

333-49957-03

31-1215706

EaglePicher Far East, Inc.

Eagle-Picher Far East, Inc

Delaware

333-49957-04

31-1235685

EaglePicher Filtration and Minerals, Inc.

Eagle-Picher Minerals, Inc

Nevada

333-49957-06

31-1188662

EaglePicher Technologies, LLC

Eagle-Picher Technologies, LLC

Delaware

333-49957-09

31-1587660

Hillsdale Tool & Manufacturing Co.

N/A

Michigan

333-49957-07

38-0946293

EPMR Corporation (f/k/a Michigan
Automotive Research Corp.)

N/A

Michigan

333-49957-08

38-2185909

TABLE OF CONTENTS


				Page
				Number

		PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets				3
	Condensed Consolidated Statements of Income (Loss)				4
	Condensed Consolidated Statements of Cash Flows				5
	Notes to Condensed Consolidated Financial Statements				6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations					19
Item 3. Quantitative and Qualitative Disclosures About Market Risk					30
Item 4. Controls and Procedures					31
			PART II. OTHER INFORMATION
Item 1. Legal Proceedings					31
Item 6. Exhibits and Reports on Form 8-K					31
Signatures					32
Certifications					41
Exhibit Index					43

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

EaglePicher Holdings, Inc.

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


		November 30,			February 28,
		2002			2003

ASSETS
Current Assets:
	Cash and cash equivalents	$	31,522		$	32,290
	Receivables, net		23,704			24,373
	Retained interest in EaglePicher Funding Corporation, net		29,400			29,409
	Costs and estimated earnings in excess of billings		16,942			20,142
	Inventories		54,718			54,447
	Net assets of operations to be sold		643			494
	Prepaid expenses and other assets		15,667			18,861
	Deferred income taxes		10,798			10,798

			183,394			190,814
Property, Plant and Equipment, net			183,405			176,524
Goodwill, net			163,940			163,940
Prepaid Pension			54,796			54,613
Other Assets, net			27,506			25,777

		$	613,041		$	611,668

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
	Accounts payable	$	85,055		$	74,987
	Current portion of long-term debt		18,625			150,393
	Compensation and employee benefits		21,044			18,385
	Billings in excess of costs and estimated earnings		944			1,048
	Accrued divestiture reserve		17,662			15,198
	Other accrued liabilities		37,653			37,955

			180,983			297,966
Long-Term Debt, net of current portion			355,100			233,600
Postretirement Benefits Other Than Pensions			17,635			17,476
Other Long-Term Liabilities			8,928			9,506

			562,646			558,548

11.75% Cumulative Redeemable Exchangeable Preferred Stock			137,973			141,910

Commitments and Contingencies Shareholders’ Equity (Deficit):
	Common stock		10			10
	Additional paid-in capital		99,991			99,991
	Accumulated deficit		(175,112	)		(177,881	)
	Accumulated other comprehensive loss		(4,376	)		(2,819	)
	Treasury stock		(8,091	)		(8,091	)

			(87,578	)		(88,790	)

		$	613,041		$	611,668

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

EaglePicher Holdings, Inc.

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


		2002			2003

Net Sales		$	163,229		$	170,310

Operating Costs and Expenses:
	Cost of products sold (exclusive of depreciation)		129,772			133,112
	Selling and administrative		13,482			14,551
	Depreciation and amortization of intangibles		11,038			11,607
	Goodwill amortization		3,956			—
	Loss from divestitures		125			—

			158,373			159,270

Operating Income			4,856			11,040
	Interest expense		(11,081	)		(9,409	)
	Other income, net		403			433

Income (Loss) Before Taxes			(5,822	)		2,064
	Income Taxes		385			896

Net Income (Loss)			(6,207	)		1,168
Preferred Stock Dividends Accreted			3,512			3,937

Loss Applicable to Common Shareholders		$	(9,719	)	$	(2,769	)

Basic and Diluted Net Loss per Share Applicable to Common Shareholders		$	(10.04	)	$	(2.98	)

Weighted Average Number of Common Shares			968,417			930,500

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

EaglePicher Holdings, Inc.

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


					2002			2003

Cash Flows From Operating Activities:
	Net income (loss)				$	(6,207	)	$	1,168
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization				15,649			12,390
		Loss from divestitures				125			—
		Changes in assets and liabilities:
				Sale of receivables, net (See Note F)		43,775			—
				Receivables and retained interest in EaglePicher Funding Corporation, net		2,897			(678	)
				Inventories		5,507			271
				Prepaid expenses		171			(3,194	)
				Other assets		(1,323	)		126
				Accounts payable		(9,527	)		(10,068	)
				Accrued liabilities		6,332			(4,717	)
				Other, net		(7,118	)		(2,883	)

			Net cash provided by (used in) operating activities			50,281			(7,585	)

Cash Flows From Investing Activities:
	Proceeds from sales of divisions					6,300			—
	Proceeds from the sale of property and equipment, and other, net					—			329
	Capital expenditures					(5,106	)		(3,903	)
	Other, net					122			—

			Net cash provided by (used in) investing activities			1,316			(3,574	)

Cash Flows From Financing Activities:
	Reduction of long-term debt					(12,800	)		(4,232	)
	Net borrowings (repayments) under revolving credit agreements					(36,088	)		14,500
	Acquisition of treasury stock					156			—

			Net cash (used in) provided by financing activities			(48,732	)		10,268

Effect of Exchange Rates on Cash						151			1,659

Net Increase in Cash and Cash Equivalents						3,016			768
Cash and Cash Equivalents, beginning of period						24,620			31,522

Cash and Cash Equivalents, end of period					$	27,636		$	32,290

Supplemental Cash Flow Information:
	Interest paid				$	5,003		$	3,068

	Income taxes paid (refunded), net				$	267		$	—

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

EaglePicher Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS

Our 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 month periods ended February 28, 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 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 impacts to the financial statements for the three months ended February 28, 2002 was an increase in Net Sales and Cost of Products Sold by $3.9 million. In addition, certain amounts in 2002 have been reclassified to conform to the 2003 financial statement presentation.

Inventories

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


	2002		2003

Raw materials and supplies	$	25,365	$	28,124
Work-in-process		14,058		13,331
Finished goods		15,295		12,992

	$	54,718	$	54,447

Comprehensive Income (Loss)

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


	2002			2003

Net income (loss)	$	(6,207	)	$	1,168
Gain (loss) on interest rate swap agreements		45			545
Gain (loss) on forward foreign currency contracts		323			(647	)
Change in currency translation adjustment		(217	)		1,659

	$	(6,056	)	$	2,725

B. 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, 2003 (in thousands of dollars):


Reporting Unit	Segment	Amount

Hillsdale Division	Automotive	$	34,816
Wolverine Division	Automotive		47,268
Power Group	Technologies		44,486
Specialty Materials Group	Technologies		31,398
Pharmaceutical Services (formerly ChemSyn)	Technologies		2,929
Filtration and Minerals	Filtration and Minerals		3,043

		$	163,940

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.

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


		2002			2003

Reported Net Income (Loss)		$	(6,207	)	$	1,168
	Goodwill amortization		3,956			—

As Adjusted Net Income (Loss)		$	(2,251	)	$	1,168

Reported Basic and Diluted Net Income (Loss) per Share Applicable to Common Shareholders		$	(10.04	)	$	2.98
	Goodwill amortization		4.09			—

As Adjusted Basic and Diluted Net Income (Loss) per Share Applicable to Common Shareholders		$	(5.95	)	$	2.98

C. 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 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. 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 on our financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or disposal 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.

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”) “Guarantor’s Accounting and Disclosure requirements 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 45 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 June 15, 2003. The related disclosure requirements are 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, 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. 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 the Technologies Segment as a result of the elimination of certain product lines in the Power Group business.

In May 2002, we announced we would exit the Gallium business in our Technologies Segment due to the downturn in the fiber-optic, telecommunication and semiconductor markets, the primary markets for our Gallium products. This action resulted in a $5.5 million charge to restructuring expense.

The remaining balance of $2.2 million as of February 28, 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):


								Other
		Facilities			Severance			Costs			Total

Balance at November 30, 2002		$	1,629		$	314		$	1,340		$	3,283
	Amounts spent		(271	)		(55	)		(745	)		(1,071	)

Balance at February 28, 2003		$	1,358		$	259		$	595		$	2,212

E. 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 need to be recorded.

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


Balance at November 30, 2002		$	17,662
	Amounts spent		(2,464	)

Balance at February 28, 2003		$	15,198

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. The buyer failed to purchase approximately $400,000 of the inventory. We are pursuing collection actions. The Net Assets of Operations to be Sold at November 30, 2002 and February 28, 2003 are primarily the remaining balance of the inventory, as the liabilities associated with this transaction, totaling $2.9 million and representing primarily environmental liabilities, had been transferred to the Accrued Divestitures reserve at November 30, 2002.


F.		ACCOUNTS RECEIVABLE ASSET-BACKED SECURITIZATION (QUALIFYING SPECIAL PURPOSE ENTITY)

During the first quarter of 2002, we entered into an agreement with a major U.S. 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. The agreement provides for the continuation of the program on a revolving basis until the earlier of a) the maturity of our senior credit facility, or b) assuming we are able to refinance our senior credit facility, the fourth quarter of 2004.

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 Credit Agreement, we include the debt outstanding on 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 are included in Interest Expense in the accompanying condensed consolidated statements of income (loss) for the three-months ended February 28, 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, 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 carried at fair value, which is estimated as its net realizable value due to the short duration of the receivables 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, 2002, we sold, outside of the initial sale, $109.0 million of accounts receivable to EPFC. During the same period, EPFC collected $104.5 million of cash that was reinvested in new securitizations. At February 28, 2003, our interest in EPFC, including a service fee receivable, was $29.4 million and the revolving pool of receivables that we serviced totaled $75.0 million. At February 28, 2003, the outstanding balance of the interest sold to the financial institution recorded on EPFC’s financial statements was $43.8 million. During the three months ended February 28, 2003, we sold $138.6 million of accounts receivable to EPFC. During the same period, EPFC collected $130.9 million of cash that was reinvested in new securitizations. The effective interest rate as of February 28, 2003 in the securitization was approximately 2.5%.

G. 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. 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. 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.

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.

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.

H. 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-months ended February 28, 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-months ended February 28, 2002 has been restated to conform to the new presentation (in thousands of dollars).


		2002			2003

Net Sales
Hillsdale Division		$	85,834		$	83,282
Wolverine Division			17,648			20,718

	Automotive		103,482			104,000

Power Group			22,870			32,283
Precision Products- divested July 17, 2002			1,215			—
Specialty Materials Group			13,031			13,219
Pharmaceutical Services (formerly ChemSyn)			3,405			1,902

	Technologies		40,521			47,404

Filtration and Minerals			19,226			18,906

		$	163,229		$	170,310

Operating Income (Loss)
Automotive		$	3,516		$	5,141
Technologies			668			8,046
Filtration and Minerals			1,306			(111	)
Divested Divisions			(125	)		—
Corporate/ Intersegment			(509	)		(2,036	)

		$	4,856		$	11,040


		2002		2003

Depreciation and Amortization of Intangibles
Automotive	$	9,801	$	8,946
Technologies		3,659		1,616
Filtration and Minerals		1,420		1,258
Corporate/ Intersegment		114		(213	)

	$	14,994	$	11,607

I. SUBSEQUENT EVENT

In April 2003, we reached an agreement in principle for the sale 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 operations of our Hillsdale U.K. Automotive operation and expect to incur $1.5 million to $2.0 million of shutdown costs during 2003. In addition to the shutdown costs, we believe we will realize a loss of approximately $2.0 million to $3.0 million during the second quarter of 2003 related to this sale. We also believe we will realize net cash proceeds from the sale of this operation of $1.5 million to $2.0 million (including the $1.1 million above related to the sale of the operation) during 2003. We will account for this sale as a Discontinued Operation when we file our second quarter of 2003 Form 10-Q. During the year ended November 30, 2002, our Hillsdale U.K. Automotive operation had $13.9 million in revenues, 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.

J. SUBSIDIARY GUARANTORS AND NON-GUARANTORS

Our Credit Agreement and the 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 domestic 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 are subject to restrictions on the payment of dividends under the terms of both the Credit Agreement and the Senior Subordinated Notes. The following supplemental condensed combining financial statements present information regarding EPI, as the Issuer, the Subsidiary Guarantors and Non-Guarantor Subsidiaries.

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


				Guarantors
										Non-Guarantors
				EaglePicher			Subsidiary			Foreign
	Issuer			Holdings, Inc.			Guarantors			Subsidiaries		Eliminations			Total

ASSETS
Current Assets:
Cash and cash equivalents	$	27,694		$	1		$	(4,895	)	$	7,902	$	820		$	31,522
Receivables and retained interest, net		2,535			—			31,472			19,097		—			53,104
Costs and estimated earnings in excess of billings		—			—			16,942			—		—			16,942
Intercompany accounts receivable		1,997			—			6,228			2,037		(10,262	)		—
Inventories		3,957			—			39,394			13,283		(1,916	)		54,718
Net assets of operations to be sold		643			—			—			—		—			643
Prepaid expenses		7,840			—			4,755			4,686		(1,614	)		15,667
Deferred income taxes		10,798			—			—			—		—			10,798

		55,464			1			93,896			47,005		(12,972	)		183,394
Property, Plant and Equipment, net		24,016			—			129,052			30,337		—			183,405
Investment in Subsidiaries		239,864			58,509			18,286			—		(316,659	)		—
Goodwill, net		37,339			—			116,586			13,154		(3,139	)		163,940
Prepaid Pension		54,796			—			—			—		—			54,796
Other Assets		14,296			(8,091	)		21,744			11,070		(11,513	)		27,506

	$	425,775		$	50,419		$	379,564		$	101,566	$	(344,283	)	$	613,041

LIABILITIES AND SHAREHOLDERS’ EQUITY(DEFICIT)
Current Liabilities:
Accounts payable	$	15,398		$	—		$	53,151		$	15,686	$	820		$	85,055
Intercompany accounts payable		3,171			—			5,887			1,184		(10,242	)		—
Long-term debt-current portion		18,625			—			—			—		—			18,625
Other accrued liabilities		46,313			—			25,128			5,862		—			77,303

		83,507			—			84,166			22,732		(9,422	)		180,983
Long-term Debt, less current portion		355,100			—			—			11,491		(11,491	)		355,100
Postretirement Benefits Other Than Pensions		17,635			—			—			—		—			17,635
Deferred Income Taxes		—			—			—			—		—			—
Other Long-term Liabilities		8,687			—			—			216		25			8,928

		464,929			—			84,166			34,439		(20,888	)		562,646
Intercompany Accounts		(282,707	)		24			269,573			23,930		(10,820	)		—
Preferred Stock		—			137,973			—			—		—			137,973
Shareholders’ Equity(Deficit)		243,553			(87,578	)		25,825			43,197		(312,575	)		(87,578	)

	$	425,775		$	50,419		$	379,564		$	101,566	$	(344,283	)	$	613,041

EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF FEBRUARY 28, 2003
(in thousands of dollars)


				Guarantors
									Non-Guarantors
				EaglePicher			Subsidiary		Foreign
	Issuer			Holdings, Inc.			Guarantors		Subsidiaries		Eliminations			Total

ASSETS
Current Assets:
Cash and cash equivalents	$	19,714		$	1		$	2,178	$	10,397	$	—		$	32,290
Receivables and retained interest, net		2,427			—			30,187		21,168		—			53,782
Costs and estimated earnings in excess of billings		—			—			17,485		2,657		—			20,142
Intercompany accounts receivable		2,783			—			5,863		132		(8,778	)		—
Inventories		4,353			—			39,219		12,917		(2,042	)		54,447
Net assets of operations to be sold		494			—			—		—		—			494
Prepaid expenses		9,163			—			5,813		3,885		—			18,861
Deferred income taxes		10,798			—			—		—		—			10,798

		49,732			1			100,745		51,156		(10,820	)		190,814
Property, Plant and Equipment, net		23,761			—			121,671		31,092		—			176,524
Investment in Subsidiaries		237,685			61,229			17,467		1		(316,382	)		—
Goodwill, net		37,339			—			116,586		13,154		(3,139	)		163,940
Prepaid Pension		54,613			—			—		—		—			54,613
Other Assets		22,517			(8,091	)		22,868		13,082		(24,599	)		25,777

	$	425,647		$	53,139		$	379,337	$	108,485	$	(354,940	)	$	611,668

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	13,310		$	—		$	52,473	$	9,204	$	—		$	74,987
Intercompany accounts payable		—			—			124		8,453		(8,577	)		—
Long-term debt - current portion		150,393			—			—		—		—			150,393
Other accrued liabilities		44,136			—			21,920		6,530		—			72,586

		207,839			—			74,517		24,187		(8,577	)		297,966
Long-term Debt, less current portion		233,600			—			—		12,941		(12,941	)		233,600
Postretirement Benefits Other Than Pensions		17,476			—			—		—		—			17,476
Other Long-term Liabilities		7,861			—			131		1,514		—			9,506

		466,776			—			74,648		38,642		(21,518	)		558,548
Intercompany Accounts		(286,286	)		19			281,711		25,902		(21,346	)		—
Preferred Stock		—			141,910			—		—		—			141,910
Shareholders’ Equity (Deficit)		245,157			(88,790	)		22,978		43,941		(312,076	)		(88,790	)

	$	425,647		$	53,139		$	379,337	$	108,485	$	(354,940	)	$	611,668

EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED FEBRUARY 28, 2002
(in thousands of dollars)


					Guarantors
											Non-Guarantors
					EaglePicher			Subsidiary			Foreign
		Issuer			Holdings, Inc.			Guarantors			Subsidiaries			Eliminations			Total

Net Sales:
	Customers	$	11,635		$	—		$	130,645		$	20,949		$	—		$	163,229
	Intercompany		3,623			—			2,826			2			(6,451	)		—

			15,258			—			133,471			20,951			(6,451	)		163,229

Operating Costs and Expenses:
	Cost of products sold (exclusive of depreciation)		8,512			—			110,775			16,936			(6,451	)		129,772
	Selling and administrative		6,295			—			5,317			1,917			(47	)		13,482
	Intercompany charges		(2,650	)		—			2,466			137			47			—
	Depreciation and amortization		1,147			—			9,125			766			—			11,038
	Goodwill amortization		934			—			2,775			247			—			3,956
	Divestitures		125			—			—			—			—			125

			14,363			—			130,458			20,003			(6,451	)		158,373

Operating Income (Loss)			895			—			3,013			948			—			4,856
Other Income (Expense):
	Interest (expense) income		(2,931	)		—			(7,522	)		(1,273	)		645			(11,081	)
	Other income (expense), net		478			—			404			166			(645	)		403
	Equity in earnings (losses) of consolidated subsidiaries		(4,070	)		(6,207	)		579			—			9,698			—

Income (Loss) Before Taxes			(5,628	)		(6,207	)		(3,526	)		(159	)		9,698			(5,822	)
Income Taxes			—			—			12			373			—			385

Net Income (Loss)		$	(5,628	)	$	(6,207	)	$	(3,538	)	$	(532	)	$	9,698		$	(6,207	)

EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED FEBRUARY 28, 2003
(in thousands of dollars)


					Guarantors
											Non-Guarantors
					EaglePicher			Subsidiary			Foreign
		Issuer			Holdings, Inc.			Guarantors			Subsidiaries			Eliminations			Total

Net Sales:
	Customers	$	12,714		$	—		$	128,647		$	28,949		$	—		$	170,310
	Intercompany		4,516			—			4,450			314			(9,280	)		—

			17,230			—			133,097			29,263			(9,280	)		170,310

Operating Costs and Expenses:
	Cost of products sold (exclusive of depreciation)		11,085			—			107,192			24,114			(9,279	)		133,112
	Selling and administrative		6,399			1			6,144			2,007			—			14,551
	Intercompany charges		(1,656	)		—			1,615			41			—			—
	Depreciation and amortization		947			—			9,260			1,400			—			11,607

			16,775			1			124,211			27,562			(9,279	)		159,270

Operating Income (Loss)			455			(1	)		8,886			1,701			(1	)		11,040
Other Income (Expense):
	Interest (expense) income		3,273			—			(12,653	)		(29	)		—			(9,409	)
	Other income (expense), net		55			—			420			(42	)		—			433
	Equity in earnings (losses) of consolidated subsidiaries		(2,179	)		1,169			510			—			500			—

Income (Loss) Before Taxes			1,604			1,168			(2,837	)		1,630			499			2,064
Income Taxes			—			—			10			886			—			896

Net Income (Loss)		$	1,604		$	1,168		$	(2,847	)	$	744		$	499		$	1,168

EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28, 2002
(in thousands of dollars)


					Guarantors
											Non-Guarantors
					EaglePicher			Subsidiary			Foreign
		Issuer			Holdings, Inc.			Guarantors			Subsidiaries			Eliminations			Total

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(5,628	)	$	(6,207	)	$	(3,538	)	$	(532	)	$	9,698		$	(6,207	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
	Equity in (earnings) loss of consolidated subsidiaries		4,070			6,207			(579	)		—			(9,698	)		—
	Depreciation and amortization		2,891			—			11,745			1,013			—			15,649
	Loss from Divestitures		125			—			—			—			—			125
	Changes in assets and liabilities, net of effect of non-cash items		36,959			312			59,229			(2,990	)		(52,796	)		40,714

			38,417			312			66,857			(2,509	)		(52,796	)		50,281

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of divisions			6,300			—			—			—			—			6,300
Capital expenditures			(232	)		—			(4,608	)		(266	)		—			(5,106	)
Other			5			—			1,401			(1,284	)		—			122

			6,073			—			(3,207	)		(1,550	)		—			1,316

CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt			(12,800	)		—			(42,452	)		—			42,452			(12,800	)
Net borrowings (repayments) under revolving credit agreements			(22,000	)		—			(14,246	)		158			—			(36,088	)
Other			—			(312	)		483			(15	)		—			156

			(34,800	)		(312	)		(56,215	)		143			42,452			(48,732	)

Effect of exchange rates on cash			—			—			—			151			—			151

Net increase (decrease) in cash and cash equivalents			9,690			—			7,435			(3,765	)		(10,344	)		3,016
Intercompany accounts			(6,113	)		—			(6,452	)		2,288			10,277			—
Cash and cash equivalents, beginning of period			17,145			1			471			6,936			67			24,620

Cash and cash equivalents, end of period		$	20,722		$	1		$	1,454		$	5,459		$	—		$	27,636

EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28, 2003
(in thousands of dollars)


					Guarantors
											Non-Guarantors
					EaglePicher			Subsidiary			Foreign
		Issuer			Holdings, Inc.			Guarantors			Subsidiaries			Eliminations			Total

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	1,604		$	1,168		$	(2,847	)	$	744		$	499		$	1,168
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
	Equity in (earnings) loss of consolidated subsidiaries		2,179			(1,169	)		(510	)		—			(500	)		—
	Depreciation and amortization		1,730			—			9,260			1,400						12,390
	Changes in assets and liabilities, net of effect of non-cash items		(30,577	)		24			(393	)		(1,133	)		10,936			(21,143	)

			(25,064	)		23			5,510			1,011			10,935			(7,585	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(422	)		—			(2,437	)		(1,044	)		—			(3,903	)
Proceeds from sale of property and equipment, and other, net			—			—			329			—			—			329

			(422	)		—			(2,108	)		(1,044	)		—			(3,574	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt			(4,232	)		—			—			—			—			(4,232	)
Net borrowings (repayments) under revolving credit agreements			14,500			—			—			—			—			14,500

			10,268			—			—			—			—			10,268

Effect of exchange rates on cash			—			—			—			1,659			—			1,659

Net increase (decrease) in cash and cash equivalents			(15,218	)		23			3,402			1,626			10,935			768
Intercompany accounts			7,238			(23	)		3,671			869			(11,755	)		—
Cash and cash equivalents, beginning of period			27,694			1			(4,895	)		7,902			820			31,522

Cash and cash equivalents, end of period		$	19,714		$	1		$	2,178		$	10,397		$	—		$	32,290

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Critical Accounting Policies

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that our critical accounting policies, which involve a higher degree of judgments, estimates and complexity, are as follows:

Environmental Reserves

We are subject to extensive and evolving Federal, state and local environmental laws and regulations. Compliance with such laws and regulations can be costly. Governmental authorities may enforce these laws and regulations with a variety of enforcement measures, including monetary penalties and remediation requirements. We have policies and procedures in place to ensure that our operations are conducted in compliance with such laws and regulations and with a commitment to the protection of the environment.

We are involved in various stages of investigation and remediation related to environmental remediation projects at a number of sites as a result of past and present operations, including currently-owned and formerly-owned plants. Also, we have received notice that we may have liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as a potentially responsible party at a number of sites (“Superfund Sites”).

The ultimate cost of site remediation is difficult to predict given the uncertainties regarding the extent of the required remediation, the interpretation of applicable laws and regulations and alternative remediation methods. Based on our experience with environmental remediation matters, we have accrued reserves for our best estimate of remediation costs, and we do not believe that remediation activities will have a material adverse impact on our financial condition, results of operations or cash flows. In addition, in the course of our bankruptcy described in Item 3 of our Form 10-K for the year ended November 30, 2002, filed on March 3, 2003, we obtained an agreement with the U.S. Environmental Protection Agency and the states of Arizona, Michigan and Oklahoma whereby we are limited in our responsibility for environmental sites not owned by us that allegedly arise from pre-bankruptcy activities. We retain all of our defenses, legal or factual, at such sites. However, if we are found liable at any of these sites, we would only be required to pay as if such claims had been resolved in our bankruptcy and therefore our liability is paid at approximately 37%.

As of November 30, 2002, we had $17.7 million accrued for sold divisions or businesses related to legal and environmental matters, and $2.4 million recorded in other accrued liabilities related to environmental liabilities for our on-going businesses. As of February 28, 2003, we had $15.2 million accrued for sold divisions or businesses related to legal and environmental matters, and $2.2 million recorded in other accrued liabilities related to environmental liabilities for our on-going businesses. We believe such reserves to be adequate under the current circumstances.

Impairment of Long-Lived Assets, including Goodwill

We review for impairment the carrying value of our long-lived assets held for use and assets to be disposed of. For all assets excluding goodwill, the carrying value of a long-lived asset is considered impaired if the sum of the undiscounted cash flows is greater than the carrying value of the asset. If this occurs, an impairment charge is recorded for the amount by which the carrying value of the long-lived assets exceeds its fair value. Effective December 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” Under this new accounting standard, we no longer amortize our goodwill and will be required to complete an annual impairment test. We have determined that we have six reporting units, as defined in SFAS No. 142, within our three reportable business segments. We have completed our initial impairment test required by this accounting standard and have determined there was no impairment charge related to the adoption of this accounting standard on December 1, 2002. These impairment tests require us to forecast our future cash flows, which requires significant judgment. As of November 30, 2002 and February 28, 2003, we had recorded $163.9 million of goodwill. In addition as of November 30, 2002, we had recorded $183.4 million of property, plant, and equipment, net (our primary long-lived asset), and as of February 28, 2003 we had recorded $176.5 million of property, plant, and equipment, net.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, and collectibility is reasonably assured. Generally, all of these conditions are met at the time we ship our products to our customers. Net Sales and Cost of Products Sold include transportation costs. 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.

Under the percentage-of-completion method, contract costs include direct material, labor costs, and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Selling and administrative expenses are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes to job performance, job conditions, and estimated profitability may result in revisions to contract revenue and costs and are recognized in the period in which the revisions are made. We provided for estimated losses on uncompleted contracts of $0.5 million at November 30, 2002 and February 28, 2003. The percentage of completion method requires a higher degree of judgment and use of estimates than other revenue recognition methods. The primary judgments and estimates involved include our ability to accurately estimate the contracts’ percent complete and the reasonableness of the estimated costs to complete as of each financial reporting period.

Pension and Postretirement Benefit Plan Assumptions

We sponsor pension plans covering substantially all employees who meet certain eligibility requirements. We also sponsor postretirement benefit plans that make health care and life insurance benefits available for certain employees. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense and liability related to these plans. These factors include key assumptions, such as discount rate, expected return on plan assets, rate of increase of health care costs and rate of future compensation increases. In addition, our actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate these factors. The actuarial assumptions we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension or postretirement benefits expenses we have recorded or may record in the future. Assuming a constant employee base, the most important estimate associated with our post retirement plan is the assumed health care cost trend rate. As of November 30, 2002, a 100 basis point increase in this estimate would increase the expense by approximately $0.2 million. A similar analysis for the expense associated with our pension plans is more difficult due to the variety of assumptions; plan types and regulatory requirements for these plans around the world. However, for example, our U.S. plans, which represent approximately 90% of the consolidated projected benefit obligation at November 30, 2002, a 25 basis point change in the discount rate, would change the annual pension expense by approximately $0.8 million, and the annual post-retirement expense by approximately $0.1 million. Additionally, a 25 basis point change in the expected return on plan assets would change the pension expense by approximately $0.6 million.

Legal Contingencies

We are a defendant in numerous litigation and regulatory matters including those involving environmental law, employment law and patent law, as discussed in Note G to the condensed consolidated financial statements. As required by SFAS No. 5, we determine whether an estimated loss from a loss contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We analyze our litigation and regulatory matters based on available information to assess potential liability. We develop our views on estimated losses in consultation with outside counsel and environmental experts handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should these matters result in an adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such judgment or settlement occurs.

Estimates Used Relating to Restructuring, Divestitures and Asset Impairments

Over the last several years we have engaged in significant restructuring actions and divestitures, which have required us to develop formalized plans as they relate to exit activities. These plans have required us to utilize significant estimates related to

salvage values of assets that were made redundant or obsolete. In addition, we have had to record estimated expenses for severance and other employee separation costs, lease cancellation and other exit costs. Given the significance of, and the timing of the execution of such actions, this process is complex and involves periodic reassessments of estimates made at the time the original decisions were made. Our policies, as supported by current authoritative guidance, require us to continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. As we continue to evaluate the business, there may be supplemental charges for new plan initiatives as well as changes in estimates to amounts previously recorded as payments are made or actions are completed.

Income Taxes and Tax Valuation Allowances

We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in our balance sheets, as well as operating loss and tax credit carryforwards. We follow very specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance sheet and provide necessary valuation allowances as required. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. If we continue to operate at a loss in certain jurisdictions, as we have in the United States, or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to increase the valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results.

Risk Management Activities

We are exposed to market risk including changes in interest rates, currency exchange rates and commodity prices. We use derivative instruments to manage our interest rate and foreign currency exposures. We do not use derivative instruments for speculative or trading purposes. Generally, we enter into hedging relationships such that changes in the fair values or cash flows of items and transactions being hedged are expected to be offset by corresponding changes in the values of the derivatives. Accounting for derivative instruments is complex, as evidenced by the significant interpretations of the primary accounting standard, and continues to evolve. As of November 30, 2002 we had $13.5 million and at February 28, 2003 we had $12.9 million of foreign forward exchange contracts. In addition, at November 30, 2002 and February 28, 2003, we had $90.0 million of interest rate swap contracts to hedge our interest rate risks.

Other Significant Accounting Policies

Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless important to an understanding of our financial statements. See Note B to the consolidated financial statements, Summary of Significant Accounting Policies, included in our Form 10-K for the year ended November 30, 2002, filed on March 3, 2003, which discusses accounting policies that must be selected by us when there are acceptable alternatives.

Results of Operations

The following summary financial information about our industry segment data is presented to gain a better understanding of the narrative discussion below about our business segments. See Note O in our Form 10-K for the year ended November 30, 2002, filed on March 3, 2003, for additional financial information by segment. All references herein to years are to the three-months ended February 28 unless otherwise indicated (in thousands of dollars).

As discussed in Note Q to our financial statements for the year ended November 30, 2002, the accompanying 2002 financial statements have been restated to reflect the appropriate adoption of EITF 00-10 which resulted in an increase to Net Sales and Cost of Products Sold for transportation costs billed to our customers. This restatement had no impact on operating income, net income or cash flows. The following discussion and analysis gives effect to the restatement.


		2002			2003			Variance			%

Net Sales
Hillsdale Division		$	85,834		$	83,282		$	(2,552	)		(3.0	)
Wolverine Division			17,648			20,718			3,070			17.4

	Automotive		103,482			104,000			518			0.5

Power Group			22,870			32,283			9,413			41.2
Precision Products- divested July 17, 2002			1,215			—			(1,215	)		(100.0	)
Specialty Materials Group			13,031			13,219			188			1.4
Pharmaceutical Services (formerly ChemSyn)			3,405			1,902			(1,503	)		(44.1	)

	Technologies		40,521			47,404			6,883			17.0

Filtration and Minerals			19,226			18,906			(320	)		(1.7	)

		$	163,229		$	170,310		$	7,081			4.3

Operating Income (Loss)
Automotive		$	3,516		$	5,141		$	1,625			46.2
Technologies			668			8,046			7,378			1,104.5
Filtration and Minerals			1,306			(111	)		(1,417	)		(108.5	)
Divested Divisions			(125	)		—			125			100.0
Corporate/ Intersegment			(509	)		(2,036	)		(1,527	)		(300.0	)

		$	4,856		$	11,040		$	6,184			127.3

Automotive Segment

Sales in our Automotive Segment increased $0.5 million, or 0.5%, to $104.0 million in 2003 from $103.5 million in 2002. The Wolverine division sales increased $3.1 million, or 17.4%, due primarily to an 11% volume increase as a result of increased penetration of the aftermarket and small engine markets, and favorable foreign currency as a result of the strengthening of the Euro. Approximately 38.8% of the Wolverine division’s sales are from Europe. Partially offsetting the Wolverine division’s sales increase was a $2.6 million, or 3.0%, decline in our Hillsdale division’s sales due to (a) a $2.8 million decline in transmission pump sales related to a program phase-out, and (b) a $1.3 million decline in sales of our Hillsdale U.K. Automotive operation, which is in the process of being sold. These decreases are partially offset by a modest increase in North American sales due to the increase in automotive builds in 2003 compared to 2002. The pending sale of the Hillsdale U.K. Automotive operation is discussed in Note I of Item 1 of this report. We anticipate that the net charge to our earnings related to this divestiture will be approximately $3.5 million to $5.0 million in 2003, with net cash proceeds of approximately $1.5 million to $2.0 million.

Operating income increased $1.6 million, or 46.2%, to $5.1 million in 2003 from $3.5 million in 2002. This improved performance was primarily due to a $0.9 million reduction in depreciation and amortization expense due to the elimination of $2.0 million of goodwill amortization expense in 2003 compared to 2002 (due to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, which no longer requires the amortization of goodwill), which was partially offset by a $1.1 million increase in tooling amortization expenses. The remaining $0.7 million of operating income improvement was primarily due to favorable foreign currency exchange rates. Productivity improvements and improved sales mix were largely offset by price decreases ($0.9 million) and higher wage and benefit costs in unionized facilities ($0.8 million).

Technologies Segment

Sales in our Technologies Segment increased $6.9 million, or 17.0%, to $47.4 million in 2003 from $40.5 million in 2002. Excluding sales from our Precision Products business, which we divested in July 2002, this segment’s sales increased $8.1 million, or 20.6%. Sales in the Power Group increased $9.4 million, or 41.2%, during 2003 compared to 2002, which was partially offset by a decrease of $1.5 million in our Pharmaceutical Services businesses. The increase in our Power Group sales is primarily related to new programs, improved pricing, and increased spending in our defense power business, as well as a $1.0 million, or 43%, increase in our commercial power sales, as a result of new initiatives in the commercial market. Decreased sales in our Pharmaceutical Services business is the result of lower sales to our larger customers and short-term operational issues. Sales increased $0.2 million in our Specialty Materials Group due primarily to continued strong demand for enriched Boron related

products which increased $2.2 million, or 50.7%, partially offset by the continued decline of Germanium and the exiting of our Gallium-based products sold to the telecommunications, fiber optics, and semiconductor markets.

Operating income increased $7.4 million to $8.0 million in 2003 from $0.6 million in 2002. This improved performance resulted primarily from operational improvements of $5.5 million related to higher sales volumes, productivity initiatives, improved sales mix and pricing, as well as $1.2 million of lower legal expenses and settlement charges in 2003 compared to 2002. In addition, the elimination of $1.9 million of goodwill amortization expense during 2003 compared to 2002 due to our adoption of SFAS No. 142, Goodwill and Other Intangible Assets, contributed to the improved performance.

Filtration and Minerals Segment

Sales in our Filtration and Minerals Segment decreased $0.3 million, or 1.7%, to $18.9 million in 2003 from $19.2 million in 2002.

Operating results decreased $1.4 million to a loss of $0.1 million in 2003 from income of $1.3 million in 2002. The decreased earnings were due to severance and recruiting costs of $0.5 million related to restructuring the segment’s management team and additional freight costs of $0.8 million largely related to the resolution of disputed freight claims with a former carrier.

Company Discussion

Net Sales. Net sales increased $7.1 million, or 4.3%, to $170.3 million in 2003 from $163.2 million in 2002. Excluding the sale in July 2002 of our Precision Products business included in our Technologies Segment, our net sales increased $8.3 million, or 5.1%, in 2003 compared to 2002. This increase was primarily driven by a $9.4 million increase in our Technologies Segment’s Power Group due primarily to new programs, improved pricing, and increased spending in our defense power business, as well as a $1.0 million, or 43%, increase in our commercial power sales, as a result of new initiatives in the commercial market, and a $3.1 million increase in our Automotive Segment’s Wolverine division due primarily to the penetration of the aftermarket and small engine markets. These increases were partially offset by reduced sales of $2.6 million in our Automotive Segment’s Hillsdale division due to the continued phase out of an automotive transmission pump program and lower sales at our Hillsdale U.K. Automotive operation, which is in the process of being sold.

Cost of Products Sold (exclusive of depreciation). Our gross margins increased by $3.7 million from $33.5 million in 2002 to $37.2 million in 2003 as a result of higher volumes, improved sales mix, and productivity improvements. Our gross margin increased 1.3 points to 21.8% in 2003 from 20.5% in 2002, despite a negative impact of $0.5 million (0.3 points) in pension costs. The margin rate improvement was primarily a result of productivity improvements in our Automotive and Technologies Segments.

Selling and Administrative. Selling and administrative expenses increased $1.1 million, or 7.9%, to $14.6 million in 2003 from $13.5 million in 2002. The increase is primarily attributable to $0.7 million for increased compensation costs related to our long-term and annual management bonus plans, higher insurance costs, wage increases, and increased selling costs due to higher sales volumes.

Goodwill Amortization. Due to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, no goodwill amortization expense was recorded 2003 while 2002 included $3.9 million of goodwill amortization expense. This new accounting standard required that we cease the amortization of goodwill, effective December 1, 2002, and complete an annual impairment test to determine if an impairment charge has occurred. We have completed our initial impairment test as required by this accounting standard and have determined that our goodwill was not impaired at the time of we adopted this accounting standard.

Interest Expense. Interest expense was $11.1 million in 2002 and $9.4 million in 2003. Included in interest expense in 2002 are $1.5 million in fees and other costs, primarily related to our accounts receivable asset-backed securitization (see Accounts Receivable Asset-Backed Securitization under Liquidity and Capital Resources). Excluding these $1.5 million in fees and other costs in 2002, our 2002 interest expense was $9.6 million. This represents a decrease of 2.1%, or $0.2 million, in 2003 compared to 2002. The decrease in interest expense is due to lower interest rates and lower debt levels.

Income (Loss) Before Taxes. Income (Loss) Before Taxes improved $7.9 million in 2003 to income of $2.1 million in 2003 compared to a loss of $5.8 million in 2002. This improvement is primarily related to:

	a.		$3.7 million of higher gross margin due to increased sales volume and a 1.3 point gross margin rate improvement for the reasons discussed above,

	b.		$3.9 million of goodwill amortization expense in 2002 which we are no longer required to expense with the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, on December 1, 2002,

	c.		$1.5 million of additional interest expense in 2002 related to our accounts receivable asset-backed securitization (see Accounts Receivable Asset-Backed Securitization under Liquidity and Capital Resources), and

	d.		$1.1 million increase in Selling and Administrative expense, as discussed above.

Income Taxes. Income tax provision was $0.9 million in 2003 compared to $0.4 million in 2002. The provision in 2003 and 2002 relates to the allocation of income and loss between the United States and foreign jurisdictions and represents the estimated tax that will be due in certain jurisdictions where no tax benefit can be assured from utilizing previous losses. There is no U.S. Federal or state net tax benefit or provision recorded during 2002 and 2003.

Net Income (Loss). The net income (loss) improved $7.4 million to net income of $1.2 million in 2003 from a net loss of $6.2 million in 2002. The improved net income (loss) is the result of the items discussed above.

Preferred stock dividend accretion of $3.9 million in 2003 decreased our net income of $1.2 million to a net loss applicable to common shareholders of $2.8 million. In 2002, preferred stock dividend accretion of $3.5 million increased the net loss of $6.2 million to a net loss applicable to common shareholders of $9.7 million.

Company Outlook. Projected sales for 2003 are estimated to be in the range of $670.0 million to $700.0 million compared to $696.8 million in 2002. The 2003 sales range is primarily attributed to the current uncertainty regarding industry forecasted automotive builds for 2003. Also, the sales estimate for 2003 reflects the anticipated decrease in sales of approximately $15.0 million related to the phase-out of an automotive transmission pump program in our Hillsdale Division, as well as our decision to sell our Hillsdale U.K. Automotive operation, which will have approximately $10.0 million less sales in 2003 compared to 2002.

We are projecting 2003 Operating Income to be in the range of $53.5 million to $57.5 million. This amount includes $45.0 million of depreciation and amortization of intangibles, and excludes $0.5 million of non-operating income. These Operating Income estimates also include $3.0 million of expense related to non-cash provisions for our long-term bonus program, which are added back to Operating Income for purposes of determining our debt covenant calculations. In 2002, our Operating Income was $5.3 million, which included $64.0 million in depreciation and amortization of intangibles expense, and excluded $1.6 million of non-operating income. This projected improved Operating Income, despite lower sales, primarily reflects:

	a.		the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, which eliminated the amortization of goodwill, effective December 1, 2002 (approximately $16.0 million)

	b.		a reduction of special charges of approximately $26.0 million in 2002 related to legal expenses and legal settlements, divestitures, restructuring expenses and other unusual charges,

	c.		improved sales mix in our Technologies and Automotive Segments, and improved pricing in our Technologies Segment,

	d.		cost reductions and productivity initiatives across all businesses,

	e.		an approximate $4.8 million increase in our pension expense, from $3.8 million of income in 2002 (excluding special termination benefits incurred in 2002) to an estimated $1.0 million of expense in 2003, and

	f.		approximately $2.0 million in increased compensation costs related to our long-term and annual management bonus plans.

On the basis of these projections, we believe we will be in compliance with all covenants under our various credit facilities during 2003.

Liquidity and Capital Resources

Our cash flows from operations and availability under our credit facilities are considered adequate to fund our short-term

capital needs. As of February 28, 2003, we had $43.8 million unused under our senior credit agreement. However, due to various financial covenant limitations under our senior credit agreement measured at the end of each quarter, on February 28, 2003, we could only incur an additional $39.9 million of indebtedness.

At February 28, 2003, we were in compliance with all our debt covenants. Also, based on our projections for 2003, we expect to remain in compliance with all covenants. Our senior secured credit agreement expires in February 2004. We will need to replace or extend this facility before that date. Although there are no guarantees this can be accomplished, based on the projections described in the Company Outlook section under the Results of Operations above and discussion with potential lenders, we believe we can obtain a new credit facility sufficient to meet our long-term capital requirements. As described below under Accounts Receivable Asset-Backed Securitization, our qualifying special purpose entity, which is an important element of our liquidity and capital resources will terminate upon the expiration of our senior credit agreement unless the senior credit agreement is refinanced.

All references herein to years are to the three-months ended February 28 unless otherwise indicated.

Cash Flows

Operating Activities. Net cash used in operating activities during 2003 was $7.6 million compared to net cash provided by operating activities of $50.3 million in 2002, which includes $43.8 million as a result of selling certain of our receivables to an unconsolidated qualifying special purpose entity, as discussed below in Accounts Receivable Asset-Backed Securitization. The remaining difference between 2003 and 2002 operating activities is primarily the use of cash for our accrued liabilities of $4.7 million in 2003, compared to a source of cash of $6.3 million in accrued liabilities in 2002. This change is primarily related to 2003 spending on restructuring and legal settlement matters which were expensed during 2002. Approximately $8.0 million of 2002 litigation settlements were paid in the first quarter of 2003.

Investing Activities. Investing activities used $3.6 million in cash during 2003 compared to providing $1.3 million in 2002. During 2002, $6.3 million was provided by proceeds from the sale of our Construction Equipment Division, which represented our former Machinery Segment, which was offset by capital expenditures of $5.1 million in 2002. During 2003, our net cash used in investing activities was primarily for capital expenditures. We expect our capital expenditures during 2003 will be approximately $22.0 million to $25.0 million, with the largest increase in our Technologies Segment.

Financing Activities. Financing activities provided $10.3 million during 2003 compared to using $48.7 million during 2002. During 2002, we used $36.1 million to reduce our revolving credit facility, primarily from proceeds associated with the sale of our receivables to an unconsolidated qualifying special purpose entity, as discussed below under Accounts Receivable Asset-Backed Securitization. Both regularly scheduled debt payments and the proceeds from the sale of CED resulted in a $12.8 million decline in our long-term debt during 2002. During 2003, we used $14.5 million under our revolving credit facility to pay off $4.2 million of long-term debt, and to fund our capital expenditures and reductions in accounts payable and accrued liabilities.

Accounts Receivable Asset-Backed Securitization (Qualifying Special Purpose Entity)

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 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 Credit Agreement, we include the debt outstanding on EPFC.

We believe that EPFC is an important element of our ability to manage our liquidity, capital resources and credit risk with certain major customers.

Accounts Receivable Asset-Backed Securitization (Qualifying Special Purpose Entity) Financial Covenants

EPFC has two financial covenants contained in its asset-backed securitization agreement. They are a minimum fixed charge coverage ratio (the ratio of total EBITDA (earnings before interest, taxes, depreciation and amortization) minus capital expenditures to the sum of interest expense, scheduled payments of principal on debt, cash income taxes, and cash dividends, all as defined in the agreement), and a minimum EBITDA (as defined in the agreement) amount. These ratios and amounts are calculated based on the financial statement amounts of EaglePicher Holdings, Inc. and EPFC, which is not consolidated in our financial statements as EPFC is an off balance sheet qualifying special purpose entity.

As of February 28, 2003, we were in compliance with the covenant calculations described above. Additionally, based on the required calculations, we could have had $30.6 million less in EBITDA (as calculated above) minus actual capital expenditures, or $22.5 million more of interest expense, scheduled payments of principal on debt, cash income taxes, and cash dividends, and continued to remain in compliance with EPFC’s financial covenants.

In the event that EPFC failed to meet one of the financial covenants listed above, we would not be required to buy back any receivables from EPFC that had not been collected; however, we would no longer be able to sell any future receivables to EPFC. In addition, if EPFC fails to meet one of these financial covenants, we would be in default under our senior credit facility. This could have a significant impact on our liquidity and capital resources. We believe that based on our projected 2003 results, EPFC will remain in compliance with its financial debt covenants; however, there is no assurance this will occur.

Capitalization

Our capitalization, which excludes the debt of our off-balance sheet qualifying special purpose entity, consisted of the following at (in thousands of dollars):


		November 30,			February 28,
		2002			2003

Credit Agreement:
	Revolving credit facility, due February 27, 2004	$	121,500		$	136,000
	Term loan, due 2003		16,925			12,693
Senior Subordinated Notes, 9.375% interest, due 2008			220,000			220,000
Industrial Revenue Bonds, 1.8% to 2.2% interest, due 2005			15,300			15,300

			373,725			383,993
Preferred Stock			137,973			141,910
Shareholders’ Deficit			(87,578	)		(88,790	)

		$	424,120		$	437,113

Credit Agreement. We have a syndicated senior secured loan facility (“Credit Agreement”) providing an original term loan (“Term Loan”) of $75.0 million, as amended, and a $220.0 million revolving credit facility (“Facility”). The Facility and the Term Loan bear interest, at our option, at LIBOR rate plus 2.75%, or the bank’s prime rate plus 1.5%. Interest is generally payable quarterly on the Facility and Term Loan. We have entered into interest rate swap agreements to manage our variable interest rate exposure.

At February 28, 2003, we had $40.2 million in outstanding letters of credit under the Facility, which together with borrowings of $136.0 million, made our available borrowing capacity $43.8 million. However, due to various financial covenant limitations under the Credit Agreement, we could only incur an additional $39.9 million of indebtedness at February 28, 2003. The Credit Agreement also contains certain fees. There are fees for letters of credit equal to 2.75% per annum for all issued letters of credit, and there is a commitment fee on the Facility equal to 0.5% per annum of the unused portion of the Facility. If we meet or fail to meet certain financial benchmarks, the interest rate spreads on the borrowing, the commitment fees and the fees for letters of credit may be reduced or increased.

The Credit Agreement is secured by our capital stock, the capital stock of our domestic United States subsidiaries, a certain portion of the capital stock of our foreign subsidiaries, and substantially all other property of our United States subsidiaries. Additionally, the Credit Agreement is guaranteed by us and certain of our subsidiaries.

The Credit Agreement contains covenants that restrict our ability to declare dividends or redeem capital stock, incur additional debt or liens, alter existing debt agreements, make loans or investments, form 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 meet certain minimum financial ratios. For purposes of calculating our debt compliance under our Credit Agreement, we include the debt outstanding on EPFC, our off-balance sheet qualifying special purpose entity. See Accounts Receivable Asset-Backed Securitization above for a detailed discussion of EPFC. Also, see Credit Agreement Financial Covenants below for a summary of the debt covenant requirements. We were in compliance with all covenants at February 28, 2003.

Senior Subordinated Notes. Our Senior Subordinated Notes, due in 2008, require semi-annual interest payments on September 1 and March 1. The Senior Subordinated Notes, which are unsecured, are redeemable at our option, in whole or in part, any time after February 28, 2003 at set redemption prices. We are required to offer to purchase the Senior Subordinated Notes at a set redemption price should there be a change in control. The Senior Subordinated 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 February 28, 2003. The Senior Subordinated Notes are guaranteed by us and certain of our subsidiaries.

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 Facility described above.

Preferred Stock. Our preferred stock increased $3.9 million during 2003 as a result of mandatory dividend accretion. Commencing March 1, 2003, dividends on our Cumulative Redeemable Exchangeable Preferred Stock became cash payable at 11.75% per annum; the first semiannual dividend payment of $8.3 million is due September 1, 2003. If we do not pay cash dividends on the preferred stock, then holders of the preferred stock become entitled to elect a majority of our Board of Directors. Dakruiter S.A., a company controlled by Granaria Holdings B.V., our controlling common shareholder, holds a majority of our preferred stock, and therefore Granaria Holdings B.V. would continue to be able to elect our entire Board of Directors.

Granaria Holdings B.V. and certain executive officers have agreed to buy the 69,500 shares of our Common Stock held in our Treasury for $13.00 per share, or a total price of $0.9 million. This transaction is expected to be completed in the second quarter of 2003. In addition, Granaria Holdings B.V. and certain executive officers have agreed to purchase for $13.00 per share any future common stock re-purchases by us.

Shareholders’ Deficit. Our shareholders’ deficit increased in 2003 primarily due to the required accretion of our preferred stock discussed above, which was partially offset by our comprehensive income of $2.7 million.

Credit Agreement Financial Covenants

There are three financial covenants contained in our senior secured credit agreement. They are a leverage ratio (the ratio of total debt less cash on the balance sheet to EBITDA, as defined in the agreement), an interest coverage ratio (the ratio of EBITDA, as defined in the agreement, to interest expense) and a fixed charge coverage ratio (the ratio of EBITDA, as defined in the agreement, to the sum of interest expense plus required principal payments plus cash dividends paid plus income taxes paid). For purposes of determining outstanding debt under our Credit Agreement, we include the debt outstanding on EPFC, our off-balance sheet qualifying special purpose entity. See Accounts Receivable Asset-Backed Securitization above for a detailed discussion of EPFC.

As of February 28, 2003, we were in compliance with the covenant calculations described above. Additionally, for purposes of the leverage ratio defined above, we could have had $15.2 million less in EBITDA, or $72.2 million more in total debt less cash on the balance sheet and continued to remain in compliance with the Credit Agreement’s financial covenants.

As discussed above under Accounts Receivable Asset-Backed Securitization (Qualifying Special Purpose Entity) Financial Covenants, as of February 28, 2003, we were in compliance with the covenants in our securitization Additionally, based on the required calculations of the securitization, we could have had $30.6 million less in EBITDA (as calculated above in accordance with the securitization) minus actual capital expenditures, or $22.5 million more of interest expense, scheduled payments of principal on debt, cash income taxes, and cash dividends, and continued to remain in compliance with the securitization’s financial covenants.

The following table presents the required ratios and the actual ratios.


						Minimum
				Minimum		Fixed Charge
		Maximum		Interest		Coverage
		Leverage Ratio		Coverage Ratio		Ratio
		(not more than)		(not less than)		(not less than)

November 30, 2002
	Required		4.75		2.00		1.25
	Actual		4.02		2.63		1.65
February 28, 2003
	Required		4.75		2.25		1.35
	Actual		4.02		2.75		1.74
May 31, 2003
	Required		4.50		2.25		1.35
August 31, 2003
	Required		4.25		2.25		1.40
November 30, 2003
	Required		4.25		2.50		1.40

Based on our projections for 2003, which are described under the Company Outlook section under the Results of Operations above, we expect to remain in compliance with all covenants. However, any adverse changes in actual results from projections, along with the contractual tightening of the covenants under the Credit Agreement, would place us at risk of not being able to comply with all of the covenants of the Credit Agreement. In the event we cannot comply with the terms of the Credit Agreement as currently written, it would be necessary for us to obtain a waiver or renegotiate our loan covenants, and there can be no assurance that such negotiations will be successful. In addition, EPFC would be in default under our accounts receivable asset-backed securitization, described above, and we would need to obtain a waiver. Any agreements to amend the covenants and/or obtain waivers would likely require us to pay a fee and increase the interest rate payable under the Credit Agreement. The amount of such fee and increase in interest rate would be determined in the negotiations of the amendment.

Contractual Obligations and Other Commercial Commitments

We have included a summary of our Contractual Obligations and Other Commercial Commitments in our annual report on Form 10-K for the year ended November 30, 2002, filed on March 3, 2003. There have been no material changes to the summary provided in that report.

Earnings to Fixed Charges and Preferred Stock Dividends

During 2003, our earnings were insufficient to cover fixed charges and preferred stock dividends by $1.9 million, and in 2002, our earnings were insufficient to cover fixed charges and preferred stock dividends by $9.3 million. This improvement is primarily related to our improved operating performance, and our adoption of SFAS No. 142 on December 1, 2002, which no longer requires us to recognize goodwill amortization expense.

Recently Released or Adopted Accounting Standards

In June 2001, the FASB issued SFAS No. 142, “Goodwill and Intangible Assets” and effective December 1, 2002, we adopted this standard. This standard addresses goodwill and other intangible assets that have indefinite useful lives and, as such, prescribes that these assets will not be amortized, but rather tested, at least annually, for impairment. This standard also provides specific guidance on performing the annual impairment test for goodwill and intangibles with indefinite lives. Under this new accounting standard, we no longer amortize our goodwill and are required to complete an annual impairment test. We have had approximately $16.0 million of goodwill amortization per year that is no longer recognized as expense. We have determined that we have six reporting units, as defined in SFAS No. 142, within our three reportable business segments. We have completed our initial impairment test as of December 1, 2002 and determined that no impairment charge exists.

operations.

Forward Looking Statements

This report contains statements which, to the extent that they are not statements of historical fact, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934. The words “estimate,” “anticipate,” “project,” “intend,” “believe,” “expect,” and similar expressions are intended to identify forward-looking statements. Forward looking statements in this report include, but are not limited to, any statements under the “Company Outlook” heading. Such forward-looking information involves risks and uncertainties that could cause actual results to differ materially from those expressed in any such forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to maintain existing relationships with customers, demand for our products, our ability to successfully implement productivity improvements and/or cost reduction initiatives, our ability to develop, market and sell new products, our ability to obtain raw materials, increased government regulation or changing regulatory policies resulting in conditions, acquisitions and divestitures, technological developments and changes in the competitive environment in which we operate. Persons reading this report are cautioned that such forward-looking statements are only predictions and that actual events or results may differ materially.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have included a summary of our Quantitative and Qualitative Disclosure About Market Risk in our annual report on Form 10-K for the year ended November 30, 2002, filed on March 3, 2003. There have been no material changes to the summary provided in that report.

Item 4. Controls and Procedures

Our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures within 90 days of the filing of this report as required by the rules of the Securities and Exchange Commission. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that all material information required to be filed in this report has been made known to them in a timely manner. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date our Chief Executive Officer and our Chief Financial Officer completed their evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Note G regarding Legal Matters contained in Part I, Item 1 of this report, which is incorporated by reference in this Part II, as its Item 1.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:


10.66	—	EaglePicher Incorporated (formerly Eagle-Picher Industries, Inc.)2002 Long-term Bonus Program

10.67	—	Amended and Restated Executive Employment Agreement dated December 1, 2002 between EaglePicher Incorporated and John W. Weber

12.1	—	Ratios of Earnings to Fixed Charges and Preferred Stock Dividends

(b) Reports on Form 8-K

	•		Form 8-K, filed January 16, 2003, concerning our press release dated January 16, 2003

	•		Form 8-K, filed January 31, 2003, concerning our press release dated January 31, 2003

	•		Form 8-K, filed March 4, 2003, concerning our press release dated March 3, 2003

SIGNATURES

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