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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 333-49957-01

Eagle-Picher Holdings, Inc.

I.R.S. Employer Identification

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

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:     None

* EAGLE-PICHER HOLDINGS, INC. IS FILING THIS REPORT VOLUNTARILY IN ORDER TO COMPLY WITH THE REQUIREMENTS OF THE TERMS OF ITS 9 3/8% SENIOR SUBORDINATED NOTES AND 11 3/4% SERIES B CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND IS NOT REQUIRED TO FILE THIS REPORT PURSUANT TO EITHER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes o          No þ (See explanatory note immediately above.)

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

     The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was zero.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    Yes o         No þ

     930,500 shares of common capital stock, $.01 par value each, were outstanding at February 25, 2003

TABLE OF ADDITIONAL REGISTRANTS

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PART I

Item 1.     Business

      Eagle-Picher Holdings, Inc. is a diversified manufacturer of products for automotive, defense and aerospace applications in addition to other industrial arenas. Today, we are organized into three strategic business units, or our reportable business segments. These are our Automotive Segment, our Technologies Segment, and our Filtration and Minerals Segment.

Automotive Segment

      Our Automotive Segment consists of our Hillsdale and Wolverine divisions. Together these two divisions produce systems, components and raw materials for passenger cars, trucks, vans and sport utility vehicles. These products are sold to major automotive manufacturers and their suppliers in North America, Europe and Asia. The Automotive Segment’s products can be broken down into two product categories: Hillsdale Precision Machined Components and Wolverine Rubber-Coated Metal Products. The following table sets forth the percentage of our consolidated Net Sales contributed by each product category:

      Hillsdale Precision Machined Components. The largest of our divisions, the Hillsdale division is a provider of noise, vibration and harshness solutions to the worldwide automotive market. The Hillsdale division also supplies complex machined components and systems for engine, transmission, axle/ driveline and chassis/ suspension applications. The Hillsdale division’s expertise runs from product design and development, through prototypes and testing, launch and production. Widely recognized as North America’s leading torsional vibration damper manufacturer with custom rubber compounding and manufacturing capabilities, the Hillsdale division’s product line also includes transmission oil pumps, vibration dampening devices and a variety of other products that are precision machined from castings and forgings. The Hillsdale division is skilled at working with a wide range of metals, including magnesium, aluminum, steel, gray iron and nodular iron. Its products are manufactured in facilities located in the United States, Mexico and the United Kingdom. The Hillsdale division, through its Tech Center located in Hillsdale, Michigan, offers technical, cost-effective solutions for today’s demanding customer applications. The market for precision machined components has many competitors, including a few strong and well-positioned competitors and the original equipment manufacturers (“OEMs”) themselves. The Hillsdale division competes in this market primarily on the basis of quality, price, delivery and service. The Hillsdale division currently has several programs underway, including Lean Manufacturing, expansion of manufacturing operations in Mexico, Advanced Product Quality and Planning, and value engineering initiatives to improve its cost and quality positions.

      Wolverine Rubber Coated Metal Products. Our Wolverine division pioneered and perfected the technology to produce rubber coated paper and metal using the line coating process. In this process, bulk rolls of metal or paper run through a “coating line,” which prepares the material for coating, applies specially formulated and proprietary rubber and other compounds to the material in precise thicknesses, and dries and cures the coated material to bond the compound to the metal or paper and achieve the sealing, heat resistance, durability and precise thickness characteristics required for the intended application. These coated materials are impervious to fluid penetration and can withstand high compression loads, making these materials ideal for applications where high temperature and pressure create a requirement for close tolerances, exceptional sealing characteristics and durability. Typical applications include sealing systems (i.e. gaskets) for engines, transmissions and compressors. These materials are also used as a noise suppressant for brakes, a product in

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      The Automotive Segment distributes its products primarily through internal sales personnel located in offices in North America, Japan and Europe. Generally, competitive conditions for the Automotive Segment are characterized by intense pricing pressures from major customers and by an emphasis on quality, delivery and service.

      The Automotive Segment’s largest customer in fiscal year 2002 was Honda, who accounted for $84.2 million or 12.1% of our consolidated net sales. No other customer accounted for 10% or more of consolidated net sales.

Technologies Segment

      The Technologies Segment is a diverse group of businesses with a broad spectrum of technologies and capabilities. The following indicates the percentage of revenues for our Technologies businesses compared to our consolidated revenues:

     Power Group

      The Power Group is a major supplier of batteries and power systems components for aerospace, defense and telecommunications applications. It has been providing the aerospace and defense industries with high quality, reliable batteries for more than 50 years. Its batteries have been on every United States’ manned space flight, and its silver zinc batteries provided the power for the safe return to earth of the famed Apollo 13 flight crew. Its nickel hydrogen batteries power more than 85% of the United States’ most advanced communications and surveillance satellites as well as items such as the Hubble Telescope and the International Space Station. Other batteries manufactured by the Power Group serve as launch batteries in booster rockets and support a variety of military applications, including missile guidance, seat ejection and weapons systems. It also manufactures a line of batteries sold commercially for use in items such as industrial fire and burglary alarm panels, telecommunications backup, remote global positioning units, animal tracking and incarceration bracelets.

      Over 90% of the Power Group’s revenue comes from military or space applications. Major customers include Raytheon, Lockheed Martin and Boeing. SAFT, a subsidiary of Alcatel, is our primary competitor. The Power Group is looking to expand its presence in the commercial market through joint ventures, licensing, and other technology development initiatives. These new market opportunities presently include high performance lead-acid batteries, implantable medical device batteries, super fast battery chargers, and long life batteries for remote applications, such as coastal buoys and remote monitoring stations. The Power

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     Specialty Materials Group (SMG) Business

      The SMG business manufactures and tests high purity specialty material compounds for a wide range of services and products. For example, they are a major source for high purity isotopically enriched boron compounds and isotopically purified zinc, both of which are used in nuclear power plants. They also refine rare metals, such as high purity germanium and germanium compounds. These products serve several markets, including fiber optic cable, plastics, semiconductors, infrared thermal imaging and substrates for satellite solar cell arrays. SMG has recently introduced the use of boron as a nuclear waste containment material, named BondAids^TM. It is undergoing testing with the U.S. Department of Energy. SMG also manufactures industrial chemicals and a wide range of super clean containers, which meet strict EPA protocols for environmental sampling. Our primary customers in the SMG business include utility companies for boron-related products, and telecom and semi-conducting companies for our Germanium-based products. Our primary competitors are Umicore and General Electric.

     Chemsyn Business

      The Chemsyn business manufactures drug active ingredients for pharmaceutical companies, principally in small batches for clinical trials and low volume prescription drugs. Chemsyn’s primary customers are Wyeth, Immunogen and Celgene and it has numerous small competitors in a highly fragmented market.

Filtration and Minerals Segment

      The Filtration and Minerals Segment is recognized as a world leader in the mining, process technology and marketing of diatomaceous earth and perlite filter aids. This segment comprised 11.8% of our net sales in 2002, 11.5% in 2001, and 10.4% in 2000.

      Diatomaceous earth, or diatomite, is a non-metallic material that is odorless, tasteless and highly stable. With its natural honeycomb structure, strength and low bulk density, diatomite is an ideal medium for filtration applications. Perlite is a mineral of volcanic origin, also with natural qualities that make it valuable as a filter aid. These products are used in a variety of industrial and commercial applications, including liquid solid separation in food and beverage, chemical, pharmaceutical and wastewater industries and as catalyst carriers and for liquid waste solidification. This segment is second to Allegheny Corporation in the sale of filter aid products made using diatomaceous earth, perlite and cellulose. Filtration and Minerals sells its filter aid products under the trademark CELATOM® both directly and through distributors to many customers.

      This segment also produces industrial absorbents, functional fillers and soil amendments and conditioners. It is the world’s number one producer of granular diatomite absorbent products known as FLOOR DRY^TM, as well as AXIS® and PLAY BALL!® soil amendments and conditioners. In the North American market for industrial absorbents, this segment has a variety of competitors due to a number of other materials, such as clay, which are also used for this purpose.

      The Filtration and Minerals Segment serves over 35 markets and more than 2,000 customers around the globe with its various products. Shipments to these customers worldwide place this segment among the top ten container shippers from ports along the West Coast of the United States.

      Filtration and Minerals competes using a “value-chain” strategy based on price, service and quality as well as technical support provided to filter aid customers. The intent is to shift the buying decision from a commodity-oriented “dollars/ton” to a specialty materials “value-in-use” model. This is a unique approach in an industry that has historically been dominated by a major supplier. Filtration and Minerals is also looking to penetrate new high-growth markets, such as potable water filtration, biotech and industrial filtration.

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      The segment operates four mines and three processing facilities in the United States. The sales offices located in the United States and Europe market diatomite, perlite and cellulose directly and through distributors in North America, Europe, Asia, Africa and the Middle East.

Other Information

      Corporate Structure. We are a majority-owned subsidiary of Granaria Industries, B.V. of The Netherlands. Our corporate headquarters is located in Phoenix, Arizona with operations in 11 U.S. states, Mexico, Canada, the United Kingdom and Germany. We were founded in 1843 as a manufacturer of paint pigments which were marketed under the brand name Eagle White Lead. In 1876, the Picher family of Joplin, Missouri formed the Picher Lead Mining Company. The two firms merged in 1916 forming the Eagle-Picher Lead Company. In 1966, we were renamed Eagle-Picher Industries, Inc. to reflect ongoing diversification into other industries.

      Recent Acquisitions and Divestures. During 2002, we sold certain assets and liabilities of our Precision Products business in our Technologies Segment to a group of former employees and divisional management personnel. We received approximately $3.1 million in proceeds and recorded a $2.8 million loss on the sale.

      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 lease the facility to the buyer for a five year term. The buyer has an option to buy the facility for $2.5 million, increasing $0.1 million per year over the term. We also retained approximately $2.3 million of raw materials inventory, which the buyer was required to purchase within one year. The buyer failed to purchase 25%, or approximately $0.6 million, of the inventory. We intend to pursue collection actions. Finally, we retained approximately $0.9 million of accounts receivable. The Net Assets of Operations to be Sold at November 30, 2002 are primarily the remaining balance of the inventory as the liabilities associated with this transaction have been transferred to the Accrued Divestitures reserve at November 30, 2002. The measurement date to account for the Machinery Segment as a discontinued operation was March 1, 2001. Accordingly, the results of the Machinery Segment’s operations have been reported separately as a discontinued operation in the accompanying financial statements. Net sales from discontinued operations were $65.1 million in 2001 and $82.6 million in 2000. During 2001, we recorded provisions totaling $30.4 million, net of an income tax benefit of $6.1 million. This provision included estimated losses and costs to be incurred in connection with the disposition of the Machinery Segment, including $5.7 million in expected losses during the phase out period from March 1, 2001 to December 14, 2001. An operating loss of $1.7 million, net of a $0.9 million tax benefit, was incurred in the first quarter of 2001.

      During 2000, as part of our previously announced program to focus management, technical and financial resources on core businesses, we completed the sale of our Ross Aluminum Foundries, Fluid Systems, Michigan Automotive Research Corporation, Rubber Molding, and Cincinnati Industrial Machinery divisions for aggregate net proceeds of $85.0 million.

      On June 30, 2000, our Technologies Segment acquired the stock of BlueStar Battery Systems Corporation for $4.9 million in cash. Immediately following the transaction the name of the corporation was changed to Eagle-Picher Energy Products Corp. (“EPEP”). EPEP manufactures batteries using lithium based technology, which is of strategic importance to the battery manufacturing operations in our Technologies Segment. Substantially all of EPEP’s products are sold to the United States Army, a branch of the military previously not counted among the significant customers of the Technologies Segment.

      On December 1, 1999, our Technologies Segment acquired the depleted zinc distribution business (the “DZ Business”) of Isonics Corporation (“Isonics”) for approximately $8.2 million.

      Our Hillsdale Division acquired Carpenter Enterprises Limited (“Carpenter”) as of March 1, 1999 for a purchase price of approximately $73.0 million. Carpenter is a supplier of precision machined components to

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      Raw Materials. The prices of our raw materials are subject to volatility. Our principal raw materials are rubber, steel, zinc, nickel, germanium, boron, and aluminum. With the exception of germanium, these raw materials are commodities that are widely available. We believe that the germanium supply available to us will be sufficient to satisfy our requirements for 2003. Although we have alternate sources for most of our raw materials, our policy is to establish arrangements with select vendors based upon price, quality and delivery terms. We are also looking to further diversify our supplier base and increase the percentage of our materials purchased in lower cost regions, such as Asia, Mexico, and Eastern Europe. In addition, due to their manufacturing processes, our Filtration and Minerals Segment and our Wolverine Rubber-Coated Metal Products division are heavy consumers of natural gas.

      Intellectual Property. We own or license a number of patents, primarily in the United States. Many of our products incorporate a wide variety of technological innovations, some of which are protected by individual patents. Many of these innovations are treated as trade secrets with programs in place to protect these trade secrets. No one patent or group of related patents is material to our business. We also have numerous trademarks, including the Eagle-Picher name.

      Backlog. Our backlog was $131.1 million at November 30, 2002, $134.4 million at November 30, 2001 and $134.6 million at November 30, 2000. We expect our order backlog outstanding at November 30, 2002 to be filled during fiscal 2003. As is customary in the automotive industry, we enter into blanket purchase orders with our customers with respect to specific product orders. From time to time, the customer, depending on their needs, will provide us with releases on a blanket purchase order for a specified amount of products. As a result, the backlog for the Automotive Segment is not significant.

      Government Contracts. Our Technologies Segment has contracts with the U.S. Government that have standard termination provisions. The U.S. Government retains the right to terminate the contracts at its convenience. However, if contracts are terminated, we are entitled to be reimbursed for allowable costs and profits through the date of the contract termination. U.S. Government contracts are also subject to reduction or modification in the event of changes in Government requirements or budgetary constraints. During 2002, approximately 54.4% of our Technologies Segment’s sales were directly with the U.S Government or with other companies where the U.S. Government was the end customer.

      Research and Development. We spent approximately $9.8 million in 2002, $10.4 million in 2001 and $11.7 million in 2000 on research and development activities, primarily for the development of new products or the improvement of existing products.

      Employees. As of November 30, 2002, we employed approximately 3,800 persons. A portion of our employees are represented by labor organizations. We believe that our relations with our employees are generally good.

      Environmental Matters. 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

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      We had total expenditures for environmental compliance and remediation of $10.0 million in 2002, $9.1 million in 2001, and $11.3 million in 2000. We estimate that we will spend $12.8 million during 2003. As of November 30, 2002, we had $17.7 million accrued for sold divisions or businesses related to legal and environmental matters, and believe such reserves to be adequate under the current circumstances. In addition, we have $2.4 million recorded in other accrued liabilities related to environmental liabilities for our on-going businesses.

      Financial Information about Foreign and Domestic Operations and Export Sales. Financial information about Foreign and Domestic Operations and Export Sales is included in our financial statements (see Notes O and H of the financial statements).

Item 2.     Properties

      Our principal fixed assets consist of our manufacturing, processing and storage facilities, and our transportation and plant vehicles. Substantially all of our owned properties and assets are pledged as collateral under our syndicated senior credit agreement. The following sets forth selected information regarding our manufacturing and processing facilities:

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(1)	In addition to the facilities listed, our Filtration and Minerals Segment has office space in Reno, Nevada, and mining locations in Nevada, Oregon and California.

      We own or lease additional office space, including our corporate headquarters in Phoenix, Arizona as well as our former corporate headquarters in Cincinnati, Ohio. We also have sales offices in Europe and Asia, and warehouse space for certain of our operations.

      Our properties are adequate and suitable for our business and generally have capacity for expansion of existing buildings on owned real estate. Plants range in size from 420,000 square feet of floor space to under 50,000 square feet and generally are located away from large urban centers. Substantially all of our buildings have been well maintained, and are in sound operating condition.

      Mining. Our Filtration and Minerals Segment owns and leases diatomaceous earth and perlite mining locations as well as numerous claims in Nevada, Oregon and California (collectively, “mining properties”). Our owned and leased mining properties, including those not currently being mined, comprise a total of approximately 10,500 acres in Storey, Lyon, Pershing and Churchill Counties in Nevada and 5,000 acres in Malhuer and Harney Counties in Oregon, as well as rights on 2,500 acres not currently being mined in Siskiyou County in California. We continually evaluate potential mining properties, and additional mining properties may be acquired in the future. The Filtration and Minerals Segment extracts diatomaceous earth and perlite through open-pit mining using a combination of bulldozers, wheel type tractor scrapers, excavators and articulated trucks. The extracted materials are carried by truck to separate processing facilities. A total of approximately 374,000 tons of diatomaceous earth and perlite were extracted by our mining properties in Nevada and Oregon in 2002. On average, we have extracted a total of approximately 423,000 tons of diatomaceous earth and perlite from our Nevada and Oregon properties each year for the past six years. As ore deposits are depleted, we reclaim the land in accordance with plans approved by the relevant Federal, state and local regulators. The following mining properties are of major significance to our mining operations.

Nevada. Our diatomaceous earth mining operations in Nevada commenced in 1945 in Storey County. We commenced perlite-mining operations in Churchill County in 1993. We extracted a total of approximately 223,000 tons of diatomaceous earth and perlite from our Nevada mining properties in 2002 and, on average, extracted a total of approximately 266,000 tons of diatomaceous earth and perlite from our Nevada mining properties each year for the past six years, or approximately 60% of our total diatomaceous earth and perlite production (and including 100% of our perlite production). Approxi-

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	mately 265 acres in Storey County, where mining activities commenced 57 years ago, and approximately 62 acres in the Counties of Lyon and Churchill are actively being mined by us for diatomaceous earth. Diatomaceous earth from Storey, Churchill and Lyon mining properties is processed at the Clark Station, Nevada facility. We believe our diatomaceous earth reserves in the Counties of Storey, Churchill and Lyon, including mining properties not actively being mined, are in excess of 30 years at current levels of extraction based upon estimates prepared by our mining and exploration personnel. Diatomaceous earth extractions from the Pershing mining properties, which commenced more than 42 years ago, are processed at the Lovelock, Nevada facility. Approximately 975 acres are actively being mined for diatomaceous earth in Pershing. We believe our diatomaceous earth reserves in Pershing, including mining properties not actively being mined, to be in excess of 15 years at the current level of extraction based on estimates prepared by our mining and exploration personnel. Beginning in 1993, we have actively mined approximately 25 acres in Churchill County for perlite, which is processed at the Lovelock, Nevada facility. We believe our perlite reserves in Churchill County, including mining properties not actively mined, are in excess of 30 years at the current level of extraction based upon estimates prepared by our mining and exploration personnel.
	Oregon. We commenced mining diatomaceous earth in Oregon in 1985 at our mining properties in Harney and Malhuer Counties. Approximately 88 acres in Harney County and 80 acres in Malhuer County are actively being mined. Diatomaceous earth extracted from these mines is processed at our Vale, Oregon facility. We extracted approximately 151,000 tons of diatomaceous earth from the Harney County and Malhuer County mining properties during 2002 and on average, have extracted approximately 158,000 tons of diatomaceous earth each year for the past six years from these mining properties, or approximately 40% of our total diatomaceous earth and perlite production. We believe our diatomaceous earth reserves in Harney County and Malhuer County, including mining properties not actively being mined, are in excess of 30 years at the current level of extraction based on estimates prepared by our mining and exploration personnel.

Item 3.     Legal Proceedings

      As a result of sales prior to 1971 of asbestos-containing insulation materials, Eagle-Picher Industries, Inc. became the target of numerous lawsuits seeking damages for illness resulting from exposure to asbestos. By the end of 1990, we had paid hundreds of millions of dollars to asbestos litigation plaintiffs and their lawyers. In January 1991, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code as a direct consequence of cash shortfalls attributable to pending asbestos litigation liabilities. On November 29, 1996, we emerged from bankruptcy as a reorganized company. The bankruptcy court issued permanent injunction which precludes holders of present and future asbestos-related or lead-related personal injury claims from pursuing their claims against us. Consequently, we have no further liability in connection with such asbestos-related or lead-related personal injury claims. Instead, those claims will be channeled to the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust (the “PI Trust”) which is an independently administered qualified settlement trust established to resolve and satisfy those claims. Under the terms of our bankruptcy reorganization, all of the outstanding common stock of the former Eagle-Picher Industries, Inc. was cancelled and newly issued common stock of the reorganized entity was contributed to the PI Trust, together with certain notes and cash. On February 24, 1998, we acquired the reorganized entity from the PI Trust for $702.5 million. A final distribution of approximately $10.9 million was made by us to the PI Trust and all other eligible unsecured claimants in June 2001.

      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

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      On May 8, 1997, Caradon Doors and Windows, Inc. (“Caradon”), filed a suit against us in the United States District Court for the Northern District of Georgia alleging breach of contract, negligent misrepresentation, and contributory infringement and seeking contribution and indemnification in the amount of approximately $20.0 million. This suit arose out of patent infringement litigation between Caradon and Therma-Tru Corporation extending over the 1989-1996 time period, the result of which was for Caradon to be held liable for patent infringement. In June 1997, we filed a motion with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, seeking an order that Caradon’s claims had been discharged by our bankruptcy and enjoining Caradon from pursuing its lawsuit. On December 24, 1997, the Bankruptcy Court held that Caradon’s claims had been discharged and enjoined Caradon from pursuing its lawsuit. Caradon appealed the Bankruptcy Court’s decision to the United States District Court for the Southern District of Ohio, and on February 3, 1999, the District Court reversed on the grounds that the Bankruptcy Court had not done the proper factual analysis and remanded the matter back to the Bankruptcy Court. The Bankruptcy Court held a hearing on this matter on September 24 and 25, 2001, and on May 9, 2002 again held that Caradon’s claims had been discharged and enjoined Caradon from pursuing the Caradon Suit. Caradon has again appealed this decision to the District Court. We intend to contest this suit vigorously and do not believe that the resolution of this suit will have a material adverse effect on our financial condition, results of operations or cash flows.

      As previously reported, last year our former President and Chief Executive Officer, Andries Ruijssenaars, filed a lawsuit against us, certain of our directors, and ABN AMRO Bank in the U.S. District Court for the Southern District of Ohio, Western Division. Mr. Ruijssenaars claimed that we were obligated to purchase his shares of our common stock for approximately $4.7 million rather than $2.8 million as we claimed. Mr. Ruijssenaars’ lawsuit also challenged a 2001 amendment to our Supplemental Executive Retirement Plan which changed the determination of benefits under the SERP, and claimed that we were obligated to purchase an annuity for his additional SERP benefit accrued after 2000 and reimburse him for the tax consequences. In the fourth quarter of 2002 we finalized a settlement of the lawsuit, agreeing to pay Mr. Ruijssenaars $3.8 million in December 2002 for his stock and recognize his SERP benefits under the pre-2001 amendment, but not to purchase an annuity or reimburse any taxes. Granaria Holdings B.V., our controlling common shareholder, and ABN AMRO Bank, N.V., the agent under our senior credit facility and the indirect holder of approximately 37.5% of our common stock, each guaranteed 50% of Mr. Ruijssenaars unfunded SERP payments.

      On December 1, 1999, our Technologies Segment acquired the depleted zinc distribution business (the “DZ Business”) of Isonics Corporation (“Isonics”) for approximately $8.2 million, payable $6.7 million at closing and $1.5 million in three installments of $500,000 each payable on the first three anniversaries of the closing. In connection with the purchase of the DZ Business, we agreed to sell 200 kg of isotopically purified silicon-28 to Isonics. Due to various factors, we did not deliver any silicon-28 to Isonics. Isonics asserted a claim against us for $75.0 million in arbitration for the failure to deliver silicon-28. On July 24, 2002, we paid $2.5 million to Isonics to settle all claims among us and Isonics including the remaining installment payments totaling $1.5 million for the DZ business, and the parties signed mutual general releases.

      On October 30, 2001, GMAC Business Credit, LLC (GMAC) and Eagle Trim, Inc. filed a lawsuit in the United States District Court for the Eastern District of Michigan, Southern Division, against us arising out of the sale of our former automotive interior trim division to Eagle Trim. In connection with that sale, we guaranteed to GMAC, which funded the acquisition, that approximately $3.9 million of receivables relating to tooling purchased by us on behalf of customers would be paid by November 2001. Eagle Trim ceased operations during 2001. At that time, Eagle Trim and GMAC alleged that approximately $2.7 million of the tooling receivables had not been collected and did not exist at the time of the sale. On September 30, 2002, we

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      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.

Item 4.     Submission of Matters to a Vote of Security Holders

      None.

PART II

      Not Applicable.

All prior year figures have been restated to exclude discontinued operations. See Note C in our financial statements.

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(A)	Includes net sales attributed to Divested Divisions in our Automotive Segment of $42.8 million in 2000, $130.0 million in 1999, $112.7 million in the nine months ended November 30, 1998, and $37.1 million in the three months ended February 28, 1998.

As discussed in Note Q to the consolidated financial statements in Item 8, during the fourth quarter of 2002 we restated prior years financial statements to reflect the appropriate adoption of EITF 00-10, “Accounting for Shipping and Handling Fees and Costs.” 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 impact of this restatement on the financial statements was to increase net sales and cost of products sold by $16.3 million in 2001, $15.5 million 2000, $16.0 million in 1999, $12.5 million in the nine months ended November 30, 1998, and $2.5 million in the three months ended February 28, 1998.

(B)	Operating income is not indicative of trends as the results for the nine months ended November 30, 1998 (subsequent to the acquisition) and those of the Predecessor (subsequent to the bankruptcy reorganization, but before the acquisition) were derived using different bases of accounting.

	The following items also materially affect the comparability of data.
	In fiscal 1999, we recorded a non-cash provision of $21.4 million, primarily related to the impairment of asset values for certain of our divisions that we held for sale, which was recognized because the expected net realizable value of these divisions was estimated to be insufficient to recover their carrying value. These divisions were sold in fiscal 2000.
	In fiscal 2000, we settled claims against a former insurer regarding environmental remediation costs and received $16.0 million which was recorded as income. Additionally, we completed the sale of various divisions primarily in our Automotive Segment for aggregate net proceeds of approximately $85.0 million and an aggregate gain on sale of $17.1 million, which was reduced by various provisions of $14.0 million for items relating to divisions sold in prior years, to a net gain of $3.1 million.
	In fiscal 2001, we recorded $14.1 million in restructuring charges related to our Technologies Segment’s operations and the relocation of our corporate headquarters to Phoenix, Arizona. Also, during 2001, we recorded additional costs of $2.1 million related to divisions sold in prior years.
	In fiscal 2002, we recorded approximately $5.9 million in restructuring charges primarily related to exiting our Gallium business within our Technologies Segment. In addition, fiscal 2002 included approximately $6.5 million of losses related to divisions sold in prior years, and a $3.1 million loss for an insurance receivable primarily related to inventories damaged in a fire during the third quarter of 2001 at our Missouri bulk pharmaceutical manufacturing plant.

(C)	Excluded from interest expense is $3.3 million in 2001, $3.4 million in 2000, $3.6 million in 1999, $2.8 million in the nine months ended November 30, 1998, and $2.8 million in the three months ended February 28, 1998 which has been allocated to discontinued operations.
(D)	Includes 11.75% Cumulative Redeemable Exchangeable Preferred Stock (“Preferred Stock”) of $138.0 million in 2002, $123.1 million in 2001, $109.8 million in 2000, and $98.0 million 1999, which was issued to finance the acquisition.
(E)	EBITDA (earnings before interest, income taxes, depreciation and amortization) is presented because we believe it is an indicator of our ability to service and incur debt. EBITDA, as defined herein, may not be comparable to similarly titled measures reported by other companies and should not be construed as an alternative to operating income, as determined by Generally Accepted Accounting Principles (“GAAP”), as an indicator of our operating performance, or to cash flows from operating activities, as determined by GAAP, or as a measure of liquidity. Funds depicted by EBITDA are not available for our discretionary use to the extent they are required for debt service and other commitments. Included in EBITDA are amounts contributed by Divested Divisions in our Automotive Segment of $3.4 million in

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	2000, $9.2 million in 1999, $10.5 million in the nine months ended November 30, 1998, and $4.0 million in the three months ended February 28, 1998.
(F)	For purposes of determining the ratio of earnings to fixed charges and preferred stock dividends, “earnings” consist of income from continuing operations before provision (benefit) for income taxes and fixed charges. “Fixed charges” consist of interest expense (including amortization of deferred financing costs) and approximately 30% of rental expense, representing that portion of rental expense deemed representative of the interest factor. Earnings were insufficient to cover fixed charges and preferred stock dividends by $49.1 million in 2002, $45.2 million in 2001, $24.6 million in 1999, and $31.9 million in the nine months ended November 30, 1998.

      As discussed in Note Q to our financial statements, the accompanying 2001 and 2000 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.

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:

      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 above in Item 3 of this report, 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 may be required to pay as if such claims had been resolved in our bankruptcy and therefore our liability is paid at approximately 37%.

      We had total expenditures for environmental compliance and remediation of $10.0 million in 2002, $9.1 million in 2001, and $11.3 million in 2000. We estimate that we will spend $12.8 million during 2003. As of November 30, 2002, we had $17.7 million accrued for sold divisions or businesses related to legal and

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      We review 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 will 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 we will not recognize an impairment charge related to the adoption of this accounting standard in 2003. These impairment tests require us to forecast our future cash flows, which requires significant judgment. As of November 30, 2002, we have $163.9 million of goodwill and $183.4 million of property, plant, and equipment (our primary long-lived asset), recorded on the balance sheet.

      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 (see Note Q to the consolidated financial statements included in Item 8). 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.

      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 $0.9 million at November 30, 2001. 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.

      We sponsor pension plans covering substantially all employees who meet 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 one-percentage-point increase in this estimate would increase the expense by

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      We are a defendant in numerous litigation and regulatory matters including those involving environmental law, employment law and patent law, as discussed in Note M to the 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.

      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. The accounting for restructuring costs and asset impairments requires us to record provisions and charges when we have a formal and committed plan. Our policies, as supported by current authoritative guidance, require us to continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. As management continues 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.

      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. The valuation allowance provision was approximately $15.0 million for the year ended November 30, 2002, and the total valuation allowance at November 30, 2002 is approximately $21.5 million. Our gross deferred tax assets at November 30, 2002 are approximately $58.7 million, and our gross deferred tax liabilities at November 30, 2002 are approximately $26.4 million.

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      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 of foreign forward exchange contracts and had $90.0 million of interest rate swap contracts to hedge our foreign currency and interest rate risks.

      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, 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 financial statements for the years ended November 30, 2002, 2001, and 2000 for additional financial information by segment. All references herein to years are to our fiscal year ending November 30 unless otherwise indicated (in thousands of dollars).

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2002 Compared to 2001

      Sales in our Automotive Segment increased $8.7 million, or 2.0%, to $435.9 million in 2002 from $427.2 million in 2001. In our Hillsdale division, our net sales increased $3.5 million, or 1.0%, in 2002 compared to 2001. As we have previously announced, we are exploring strategic alternatives for our Hillsdale U.K. Automotive operation including the possible sale of all or a portion of its assets and liabilities, as a result of decreased volume with its largest customer, Fiat. Excluding our Hillsdale U.K. Automotive operation, our Hillsdale division’s net sales increased $8.5 million, or 2.5%, to $342.6 million in 2002 from $334.1 million in 2001. This increase is a result of increased North American automotive builds in 2002 compared to 2001. Our Wolverine division’s sales increased $5.3 million, or 7.2%, to $79.4 million in 2002 from $74.1 million in 2001. This increase was a result of the increased North American automotive build in 2002 compared to 2001, as well as the initial penetration in the United States aftermarket business.

      Operating income increased $1.4 million, or 16.3%, to $10.0 million in 2002 from $8.6 million in 2001. This improved performance resulted primarily from slightly higher sales volumes, improved sales mix, and productivity improvements. Unusual expenses, totaling $1.8 million in 2002 were incurred for severance, recruiting and relocation related to strengthening the Automotive Segment’s management team and workforce-related consulting fees that further dampened our profitability. An additional $1.1 million in depreciation expense was recorded in the second quarter of 2002 related to adjustments to bring the estimated useful lives of certain equipment within this segment in line with estimated periods of active production.

      Sales in our Technologies Segment decreased $21.6 million, or 10.8%, to $178.7 million in 2002 from $200.3 million in 2001. Excluding sales from our Precision Products business, which we divested in July 2002, this segment’s sales decreased $14.9 million, or 7.8%. Sales in the Power Group increased $3.8 million, or 3.8%, during 2002 compared to 2001, which was offset by a decrease of $18.2 million, or 24.1%, in our Specialty Materials Group. Within the Specialty Materials Group, the demand for Germanium and Gallium-based products, which are sold to the telecommunications, fiber optics and semiconductor markets, was significantly impacted by the extremely weak demand in these markets which led to our decision to exit the Gallium business. Germanium and Gallium sales decreased $21.8 million, or 59.1%, in 2002 compared to 2001, which were partially offset by an increase of $5.5 million, or 33.5%, in sales of enriched Boric acid products sold to nuclear power reactor facilities.

      Operating results decreased $3.4 million to an operating loss of $1.9 million in 2002 from operating income of $1.5 million in 2001. The decrease in 2002 operating results included provisions of $15.7 million in special charges, detailed in (a) to (d) below, versus $8.7 million of restructuring charges recorded in our 2001 earnings. These 2002 special charges, detailed below, impact the comparability with 2001. The following items detail the $15.7 million of special charges in 2002:

	a.	$5.7 million of legal expenses and legal settlement charges recorded in Selling and Administrative expenses during the first half of 2002 as described in Item 3 of this report;

	b.	$3.1 million loss for an insurance receivable primarily related to inventories damaged in a fire during the third quarter of 2001 at our Missouri bulk pharmaceutical manufacturing plant.

	c.	$1.4 million in expense for business consulting fees to develop a strategy for our Power Group business;

	d.	$5.5 million charge in Restructuring expense in the second quarter of 2002 associated with our decision to exit our Gallium-based specialty material business due to continued soft demand from customers in the telecommunications and semi-conductor markets. The $5.5 million restructuring charge during the second quarter of 2002 included an inventory write-down of $2.9 million, representing the estimated loss incurred from the liquidation of current inventory. An additional

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		$2.4 million was recorded in other accrued liabilities primarily related to the estimated loss of inventory to be purchased under a firm purchase commitment. Finally, a $0.2 million asset impairment charge was recorded against property, plant and equipment.

      Sales in our Filtration and Minerals Segment increased $0.1 million, or 0.1%, to $82.1 million in 2002 from $82.0 million in 2001. The sales increase during 2002 was primarily the result of improved pricing and sales mix, partially offset by decreased volumes.

      Operating income increased $3.4 million, or 72.3%, to $8.1 million in 2002 from $4.7 million in 2001. Improved profitability was primarily attributable to lower energy costs, favorable product mix and pricing, improved production efficiencies and favorable foreign currency exchange rates due to the strengthening of the Euro during 2002.

      Net Sales. Net sales of $696.8 million in 2002 decreased $12.0 million, or 1.7%, from $708.8 million in 2001. Excluding the sale in July 2002 of our Precision Products business included in our Technologies Segment, our net sales decreased $5.2 million, or 0.7%, in 2002 compared to 2001. This decrease was primarily driven by declines in our Technologies Segment’s Specialty Materials Group ($18.2 million), due primarily to weak demand in the telecommunications, fiber optics, and semiconductor markets, and our Hillsdale U.K. Automotive operation ($5.0 million), due primarily to low volumes with our primary U.K. customer, Fiat. These decreases were partially offset by sales increases in our North American automotive business and our Technologies Segment’s Power Group.

      Cost of Products Sold (exclusive of depreciation). Our gross margins increased 2.7 points to 21.6% in 2002 from 18.9% in 2001. The improved sales mix primarily related to increased sales in our Technologies Segment’s Power Group and our Automotive Segment’s Wolverine operation, and productivity improvements in all our businesses contributed to the increased gross margins. Our Technologies Segment was also favorably impacted by the restructuring actions initiated in the fourth quarter of 2001, while our Filtration and Minerals Segment benefited from improved pricing and significantly lower energy costs, which were high in 2001 when the Western United States experienced an energy crisis.

      Selling and Administrative. Selling and administrative expenses increased $10.9 million, or 21.4%, to $61.9 million in 2002 from $51.0 million in 2001. The increased costs in 2002 were primarily related to:

	a.	$6.0 million of legal expenses and legal settlement charges recorded in Selling and Administrative expenses during the first half of 2002 as described in Item 3 of this report;

	b.	$1.4 million in our Technologies Segment for business consulting fees to develop a strategy for our Power Group business;

	c.	$3.7 million in severance (excluding management compensation — special), recruiting, relocation costs, and workforce-related consulting fees as we continued our investment in strengthening our leadership team, and

	d.	$1.2 million in increased compensation costs related to a recently adopted long-term bonus plan for certain corporate and divisional management executives.

      Depreciation and Amortization. Depreciation and amortization expenses increased $4.9 million, or 8.3%, to $64.0 million in 2002 from $59.1 million in 2001. The increase is primarily attributable to higher depreciation costs as a result of capital expenditures in 2001, primarily for new automotive programs, and an adjustment for an additional $1.1 million in expense in the second quarter of 2002 to bring the estimated useful lives of certain equipment in the Automotive Segment in line with estimated periods of active production on existing automotive programs.

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      Restructuring. During 2002, we recorded $5.9 million of restructuring expense, which was primarily related to our announcement on May 31, 2002 to exit our Gallium business in our Technologies Segment due to the downturn in the fiber-optic, telecommunication and semiconductor markets. This resulted in a $5.5 million charge recorded in restructuring expense during the second quarter of 2002. This charge primarily represents the liquidation of existing inventories and an accrual for inventory to be purchased under firm purchase commitments.

      Divestitures. All amounts recorded in divestitures expense relate to operations that were sold or that were divested prior to November 30, 2002. During 2002, we completed the sale of our Precision Products business in our Technologies Segment to a group of former employees and divisional management personnel. We recorded in the second quarter of 2002 a $2.8 million loss on this sale. Also, during the second quarter of 2002, we recorded $3.2 million in accruals related to costs for certain litigation issues and environmental remediation costs. The remaining amounts related to workmen’s compensation claims for employees of our sold divisions, and additional accruals related to litigation and environmental remediation costs. The amounts recorded in 2001 related to costs of divestitures in previous years.

      Management Compensation — Special. These expenses primarily relate to the separation of officer employment and the settlement with our former Chief Executive Officer. During 2002, we separated five officers (three in our Automotive Segment, one in our Corporate Segment and one in our Technologies Segment) at a cost of $1.4 million, and finalized a settlement with our former Chief Executive Officer as described in Item 3 of this report. During 2001, we separated three officers in the Corporate Segment that aggregated $3.1 million.

      Insurance Related Losses. During the second quarter 2002, we recorded a $3.1 million loss for an insurance receivable primarily related to inventories damaged in a fire during the third quarter 2001 at our Missouri bulk pharmaceutical manufacturing plant. We have recorded this charge to fully reserve the receivable because the insurance underwriter is contesting the coverage on these assets. We are disputing the insurance carrier’s position and are vigorously pursuing efforts to collect on our claims, but the recovery of our claim is uncertain at this time.

      Interest Expense. Interest expense was $41.1 million in 2002 and $40.1 million in 2001 (not including interest allocated to discontinued operations in 2001 of $3.3 million). Also 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, our 2002 interest expense was $39.6 million, a decrease of 8.8% or $3.8 million from 2001 (including interest allocated to discontinued operations in 2001). The decrease in interest expense is due to lower interest rates and lower debt levels.

      Income (Loss) from Continuing Operations Before Taxes. Loss from continuing operations before taxes increased $2.3 million, or 7.2%, to $34.2 million in 2002 from $31.9 million in 2001. The following items represent charges by segment that affect the comparability between loss from continuing operations before taxes for 2002 and 2001. All of these items are excluded from calculating compliance with our debt covenants

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      In addition, during 2002, we incurred $1.4 million of expense in our Technologies Segment for business consulting fees to develop a strategy for our Power Group and $3.7 million in severance, recruiting, relocation and workforce-related consulting projects as we have continued our investment in strengthening our leadership team.

      Income Taxes (Benefit). Income tax provision was $2.6 million in 2002 compared to a benefit of $10.0 million in 2001. Differences in the income taxes recorded primarily relate to recording a tax benefit during 2001 on losses, to the extent those losses could be carried back to prior fiscal years, and a refund could be obtained from the taxing authority. For any amounts in excess of the carry back amounts, we have elected to provide a valuation allowance as it is more likely than not that some or all of the deferred tax assets will not be realized. Accordingly, there is no tax benefit recorded during 2002. The provision in 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 our losses.

      Discontinued Operations. Throughout 2001, we accounted for our former Machinery Segment as a discontinued operation and prior periods have been restated to conform to the discontinued operations presentation. On December 14, 2001, we completed the sale of our Machinery Segment as of November 30, 2001. Accordingly, there is no effect on our operations in 2002. See Note C in our financial statements.

      Net Loss. The net loss decreased $17.2 million, or 31.9%, to $36.8 million in 2002 from $54.0 million in 2001. The decrease in net loss is the result of the items discussed above.

      Preferred stock dividend accretion of $14.9 million in 2002 increased our net loss of $36.8 million to a net loss applicable to common shareholders of $51.7 million. In 2001, preferred stock dividend accretion of $13.3 million increased the net loss of $54.0 million to a net loss applicable to common shareholders of $67.3 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 $18.0 million related to the phase-out of an automotive transmission pump program in our Hillsdale Division, as well as our decision to explore strategic alternatives with our Hillsdale U.K. Automotive operation, which had sales of $10.0 million in 2002. These strategic alternatives with our Hillsdale U.K. Automotive operation include the possible sale of all or a portion of its assets and liabilities.

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      We are projecting 2003 EBITDA to be in the range of approximately $99.0 million to $103.0 million and our Credit Agreement EBITDA (as defined under Liquidity and Capital Resources, below) to be approximately $102.0 million to $106.0 million. Credit Agreement EBITDA in 2003 excludes approximately $3.0 million of non-cash provisions related to our long-term bonus program. The projected EBITDA improvement, despite anticipated lower sales, reflects improved sales mix, cost reduction and productivity initiatives, which more than offset 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. On the basis of these projections, we believe we will be in compliance with all covenants under our various credit facilities during 2003.

2001 Compared to 2000

      Sales in our Automotive Segment decreased 6.4% to $427.2 million in 2001 from $456.4 million in 2000 (excluding Divested Divisions). The decline in our sales was principally attributed to reduced demand for our products. North American car and light truck build for 2001 was reported at 15.9 million units, down more than 10% from the 2000 build, reported at 17.7 million units. The decline in volumes was partially offset by new product launches. In addition, North American production by the U.S.-based original equipment manufacturers (OEMs — General Motors, Ford and Chrysler) declined on a percentage basis more than North American production by non-U.S. based OEMs, and our Automotive Segment has a higher percentage of sales in North America to non-U.S. based OEMs than North American production in general.

      Operating income decreased $19.5 million to $8.6 million in 2001 from $28.1 million in 2000. Reduced profitability was primarily the result of lower volumes, $4.5 million in new program launch costs in our precision machined components business, an increase in depreciation of $3.3 million caused by capital expenditures placed in service during 2001 and 2000 primarily related to new programs, pricing reductions of $2.8 million, and higher workers compensation expense. Although in 2000 we had projected declining sales, offsetting cost reductions could not be achieved in a timely manner. In particular, high fixed costs in our Automotive Segment severely impact profitability in the event of a decrease in sales. Capital expenditures for the Automotive Segment were $28.0 million in 2001 compared to $34.2 million in 2000. These capital expenditures were related to a significant number of new product launches in our Hillsdale operation and the acquisition of a new rubber coating line in our Wolverine operation.

      Sales in our Technologies Segment increased 4.6% to $200.3 million in 2001 from $191.4 million in 2000. Slightly more than half of the increase is attributable to the sales of Eagle-Picher Energy Products Corporation, which was acquired by us in June 2000. Other increases were attributable to sales of specialty materials used in fiber-optic applications along with certain aerospace battery programs. Additionally, volumes of bulk pharmaceutical products increased in 2001 resulting from added capacity at a recent plant expansion. These increases were offset by lower demands for lead based products sold as chemical agents and lead-acid batteries. A decline in orders from telecommunications customers also had a negative impact on our electronics assembly products. Additionally, we experienced a fire at our Harrisonville, Missouri bulk pharmaceutical chemical processing plant in August 2001. We estimate we lost sales in 2001 of approximately $1.5 million from the fire. This plant was restored to full operation in December 2001.

      Operating income decreased 90.1% to $1.5 million in 2001 from $15.1 million in 2000. Reduced profitability was primarily a result of an $8.7 million restructuring charge taken in the fourth quarter of 2001. Three plants were impacted by this restructuring charge. They are located in Seneca, Missouri; Grove, Oklahoma and Colorado Springs, Colorado. These plants will be closed once final customer orders are completed and shipped. Asset impairment charges of approximately $3.6 million were recorded to bring these facilities to their estimated net realizable value. Approximately 100 employees, primarily manufacturing labor from these locations, will be provided severance based upon their length of service totaling approximately $1.6 million. Other shutdown costs, estimated to be $3.5 million, are primarily non-cash and relate to

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      Sales in our Filtration and Minerals Segment increased 1.7% to $82.0 million in 2001 from $80.6 million in 2000 despite a decrease in the total volume of products sold. Volume decreases were due to the rationalization of existing business and general economic weakness. Revenue increased because of volume increases in higher value-added products, a general price increase, and an energy surcharge that was in effect for part of the year to defray a portion of the increase in natural gas and electricity costs experienced nationwide. At the end of 2001, we also implemented an aggressive price improvement program directed toward improving margins.

      Operating income decreased 2.1% to $4.7 million in 2001 from $4.8 million in 2000. This decrease was primarily caused by increased natural gas costs of $2.8 million and power cost increases of $0.4 million. The increases in energy costs were partially mitigated through the use of alternative fuels, energy conservation measures, and energy surcharges to our customers. Additionally, penalties of $0.5 million and legal and consultant costs of $0.4 million were incurred in the settlement of regulatory claims for violating gaseous emission permits in Nevada and Oregon. Settlements have been reached in both jurisdictions and we are in compliance with current permits and interim orders.

      Net Sales. Sales decreased 8.0% to $708.8 million in 2001 from $770.5 million in 2000, or 2.6% or $18.9 million excluding sales from Divested Divisions in 2000. The decline in sales was principally attributed to reduced demand for our products in the Automotive Segment from automobile manufacturers. These decreases were partially offset by gains in our Technologies Segment.

      Cost of Products Sold (exclusive of depreciation). Gross margins decreased to 18.9% in 2001 from 20.9% in 2000 largely as a result of poor overhead absorption due to lower volumes, particularly in the Automotive Segment, as well as new product launch costs in the Automotive Segment.

      Selling and Administrative. Selling and administrative expenses decreased 13.9% or $8.2 million from 2000 to 2001. The Divested Divisions accounted for $4.8 million of the reduction. As a percentage of sales, selling and administrative expenses declined from 7.7% in 2000 to 7.2% in 2001.

      Depreciation and Amortization. Depreciation expense increased $1.3 million and amortization expense increased $0.4 million. The increase in depreciation expense is primarily attributable to capital expenditures in the Automotive Segment.

      Management Compensation — Special. Management compensation — special is severance primarily related to the separation from employment for officers. This aggregated $3.1 million in 2001 for three senior executives and $1.6 million in 2000 for one senior executive.

      Insurance Related Loss (Gains). During 2000, we settled claims against a former insurer regarding environmental remediation costs for $16.0 million and received such proceeds in the first quarter of 2000.

      Restructuring. During the fourth quarter of 2001 we announced a restructuring of our Technologies Segment and a restructuring and relocation of our corporate headquarters to Phoenix, Arizona. We recorded a charge of $14.1 million. Approximately $5.4 million related to facilities, $5.0 million related to involuntary severance of approximately 165 employees and $3.7 million related to other costs to exit business activities.

      In the facilities charge, approximately $3.6 million is non-cash adjustments to write-down the carrying value of the three Technologies plants to their estimated net realizable value and abandoning primarily machinery and equipment at these locations. The affected plants are located in Seneca, Missouri; Grove,

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      Approximately 100 employees in our Technologies Segment will be provided approximately $1.6 million in severance based upon their length of service. Approximately 40 employees at our former corporate headquarters located in Cincinnati will be provided approximately $3.2 million in severance based upon length of service. The remaining 25 employees in various locations will be provided approximately $0.2 million in severance based upon length of service.

      The $3.7 million in other shutdown costs is primarily non-cash and relate to inventory.

      Divestitures. During 2001, we incurred additional costs of $2.1 million related to Divested Divisions which were sold in prior years. During 2000, as part of our previously announced program to focus management, technical and financial resources on our core businesses, we completed the sale of our Ross Aluminum Foundries, Fluid Systems, MARCO, Rubber Molding and Cincinnati Industrial Machinery divisions for aggregate net proceeds of $85.0 million and realized an aggregate gain on the sale of these divisions of $17.1 million, which was reduced for provisions of $14.0 million for items relating to divisions sold in prior years, to a net gain of $3.1 million.

      Interest expense. Interest expense was $40.1 million in 2001 (not including interest allocated to discontinued operations of $3.3 million) and $44.0 million in 2000 (not including interest allocated to discontinued operations of $3.4 million), a decrease of $3.9 million. The decrease in interest expense is due to lower interest rates in 2001 and lower debt balances in 2001 as a result of the application of proceeds from the sales of divisions and the insurance settlement received in 2000.

      Income (Loss) from Continuing Operations Before Taxes. Income (loss) from Continuing Operations Before Taxes was $(31.9) million in 2001 and $18.4 million in 2000. The following items are significant differences between Income (Loss) from Continuing Operations Before Taxes for 2001 and 2000:

	•	A restructuring charge of $14.1 million principally related to our Technologies Segment and Headquarters relocation during 2001;
	•	Provisions for Management Compensation — Special of $3.1 million in 2001 versus $1.6 million in 2000;
	•	Income of $16.0 million from an insurance settlement in 2000;
	•	Gain on the sale of the Divested Divisions of $3.1 million in 2000;
	•	In 2001, recognition of additional costs of $2.1 million related to environmental and litigation matters associated with divisions divested in prior years. See Note C in our financial statements.
	•	An increase in Other Income of $3.8 million in 2001 primarily due to gains in foreign currency transactions of $0.5 million in 2001 versus a loss of $1.4 million in 2000 and an increase in royalty income of $0.9 million in 2001 versus 2000.
	•	Loss before tax of Divested Divisions, before the gain on the sale of such divisions, in 2000 of $4.3 million.
	•	Operating income decreases in 2001 of $13.5 million in our Technologies Segment and $19.5 million in our Automotive Segment, and
	•	A decrease in headquarters operating expenses of $1.7 million, excluding the insurance settlement proceeds in 2000 and the restructuring charge in 2001.

      Income Taxes (Benefit). Income taxes (benefit) were $(10.0) million in 2001 and $9.1 million in 2000. The sale of the Divested Divisions and the income from the insurance settlement in 2000 affect comparability

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      Discontinued Operations. Throughout 2001, we accounted for our former Machinery Segment as a discontinued operation and prior periods have been restated to conform to the discontinued operations presentation. On December 14, 2001, we completed the sale of our Machinery Segment. See Note C in our financial statements.

      Net Income (Loss). Net income (loss) for 2001 was $(54.0) million and $5.6 million in 2000. The significant items are discussed in the Income (Loss) from Continuing Operations Before Taxes and Discontinued Operations sections above.

      Preferred stock dividend accretion of $13.3 million in 2001 increased net loss of $54.0 million to a net loss applicable to common shareholders of $67.3 million. In 2000, preferred stock dividend accretion of $11.8 million reduced net income of $5.6 million to a net loss applicable to common shareholders of $6.2 million.

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 November 30, 2002, we had $56.3 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 November 30, 2002, we could only incur an additional $39.3 million of indebtedness.

      At November 30, 2002, 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 2002 Compared to 2001 in 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 special purpose entity which is an important element of our liquidity, capital resources, and credit risk management with major customers, will terminate upon the expiration of our senior credit agreement unless the senior credit agreement is refinanced.

      Operating Activities. Net cash provided by operating activities during 2002 was $81.9 million compared to $67.5 million during 2001, which includes $67.2 million of non-cash depreciation and amortization expense in 2002 and $62.8 million in 2001. The majority of the increase in reported cash from operating activities was $46.5 million which was received 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. A decrease in our inventory provided $4.7 million, a decrease in accounts payable used $2.7 million and a decrease in accrued liabilities used $5.9 million. The use of cash as a result of the decrease in accrued liabilities is primarily related to spending on restructuring and environmental activities. Also, during 2002 we received approximately $5.2 million of net operating loss tax refunds, and we expect to receive a similar amount during 2003.

      Investing Activities. Investing activities used $6.6 million in cash during 2002 compared to $36.8 million used in 2001. During 2002, $6.9 million was provided by proceeds from the sale of our Construction Equipment Division, which represented our former Machinery Segment, and $3.1 million was provided by proceeds from the sale of our Precision Products business. Capital expenditures amounted to $17.3 million during 2002 compared to $36.5 million during 2001. 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.

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      Financing Activities. Financing activities used $69.6 million during 2002 compared to $17.6 million during 2001. During 2002, we used $34.7 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 and Precision Products resulted in a $34.7 million decline in our long-term debt during 2002.

      During 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, Eagle-Picher 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, Eagle-Picher 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. We account for the securitization of these sold receivables in accordance with SFAS No. 140. Under this guidance, at the time the receivables are sold, the balances are removed from our financial statements. For purposes of determining outstanding debt under our Credit Agreement, as discussed below in Capitalization, we include the debt outstanding on EPFC.

      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 service totaled $77.5 million. At November 30, 2002, the outstanding balance of the interest sold to the financial institution recorded on EPFC was $46.5 million. The effective interest rate as of November 30, 2002 in the securitization was approximately 2.55%.

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

      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 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 Eagle-Picher Holdings, Inc. and EPFC,

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      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.

      Our capitalization consisted of the following at November 30 (in thousands of dollars):

      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

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      At November 30, 2002, we had $42.2 million in outstanding letters of credit under the Facility, which together with borrowings of $121.5 million, made our available borrowing capacity $56.3 million. However, due to various financial covenant limitations under the Credit Agreement, we could only incur an additional $39.3 million of indebtedness at November 30, 2002. 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 determining outstanding debt under our Credit Agreement, we include the debt outstanding on EPFC, our off-balance sheet special purpose entity. See Accounts Receivable Asset-Backed Securitization above for a detailed discussion of EPFC. We are in compliance with all covenants at November 30, 2002.

      Our Credit Agreement borrowings decreased during 2002 primarily due to scheduled principal payments, proceeds from the sale of assets which were used to permanently reduce principal, and the creation of EPFC. See Accounts Receivable Asset-Backed Securitization above for a detailed discussion of EPFC.

      Accounts Receivable Loan Agreement. Prior to the formation of EPFC, we had an accounts receivable loan agreement, whereby we sold certain of our trade receivables to a wholly-owned, consolidated subsidiary, Eagle-Picher Acceptance Corporation. The receivables were then used as security for loans made under a separate revolving credit facility. This accounts receivable loan agreement was paid-off with the formation of EPFC. See Accounts Receivable Asset-Backed Securitization above for a discussion of EPFC.

      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 November 30, 2002. 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 $14.9 million during 2002 as a result of mandatory dividend accretion. Commencing March 1, 2003, dividends on our Cumulative Redeemable Exchangeable Preferred Stock become 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 elect our entire Board of Directors.

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      Shareholders’ Deficit. Our shareholders’ deficit increased due to our $36.8 million net loss during 2002, and the accretion of the preferred stock dividend discussed above.

      The following table lists our contractual cash obligations as of November 30, 2002 (in million of dollars):

      For a discussion of our long-term debt and preferred stock, and their related provisions, see the Capitalization section above. For long-term debt and preferred stock in the above table, we have included only principal payments on long-term debt and the maturity redemption amount on the preferred stock (interest expense and preferred stock cash dividends are excluded). Included in long-term debt is primarily our Credit Agreement and Senior Subordinated Notes. The Credit Agreement’s interest is based on variable rates and therefore the amount is not determinable. The Senior Subordinated Notes require semi-annual interest payments of approximately $10.3 million through 2008. Commencing March 1, 2003, the preferred stock’s dividends become cash payable at 11.75% per annum; the first semiannual dividend payment of $8.3 million is due September 1, 2003. Thereafter, annual dividend payments on the preferred stock are $16.7 million. In addition, our Accounts Receivable Asset-Backed Securitization, EPFC, which is described above, expires at the earlier of a) the maturity of our Credit Agreement, or b) assuming we are able to refinance our Credit Agreement, the fourth quarter of 2004.

      We have an advisory and consulting agreement with a related party, Granaria Holdings B.V., our controlling common shareholder, which requires an annual management fee of $1.8 million plus out-of-pocket expenses. The agreement terminates on February 24, 2008. Included in the above table is the annual $1.8 million management fee, excluding out-of-pocket expenses, as the out-of-pocket costs vary from year to year.

      During 2002, we settled a lawsuit with GMAC and Eagle Trim, Inc. (a business we divested in 1998) whereby we are required to pay $5.4 million to GMAC, payable $1.7 million by December 5, 2002, $1.5 million, payable in monthly installments from January 2003 through June 2003, and $2.2 million payable in monthly installments from July 2003 through October 2005, plus interest at 4.5% per annum.

      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 $17.7 million in our Accrued Divestitures Reserve at November 30, 2002 related to environmental and legal matters for sold divisions or businesses, and $2.4 million is recorded in Other Accrued Liabilities related to on-going businesses. There can be no assurances that environmental laws and regulations will not become more stringent in the future or that we will not incur significant costs in the future to comply

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      The following table lists our other commercial commitments as of November 30, 2002 (in million of dollars):

      We are the guarantor on the lease of a building of our former Transicoil subsidiary which was sold in 1997. We believe the likelihood of being liable for the lease is remote. The original term of the lease expires in 2005; however, there are two five-year renewal terms that we have also guaranteed. The rent for the two five-year renewal terms is based upon the Consumer Price Index, at the time of renewal, should Transicoil not exercise its purchase option on the building. The amount of the guarantee for the current lease has been included in the table above; however, any potential commitments related to the two five-year renewals have not been disclosed in the table above as the buyer’s intent is unknown at this time.

      The stand-by letters of credit are required by various governmental regulatory agencies and support our obligations for certain environmental remediation, industrial revenue bonds, workers compensation and mining reclamation activities. Although the letters of credit expire by their terms within one year, the obligations they support extend into the future and it is expected that these letters of credit will be renewed annually.

      In addition, we are engaged in various litigation matters as further described in Item 3 of this report. It is not possible to quantify an estimate of the cost of such litigation matters at this time and accordingly they have not been included as an other commercial commitment.

      Our senior secured credit facility has several financial covenants which are based on EBITDA as defined in the credit agreement. EBITDA is defined in the credit agreement (“Credit Agreement EBITDA”) as earnings before interest expense, income taxes, depreciation and amortization, determined (A) without giving effect to (i) any extraordinary gains or losses but with giving effect to gains or losses from sales of assets sold in the ordinary course of business, (ii) any impact from the LIFO method of inventory accounting, (iii) any non-cash charge other than routine recurring non-cash charges that result in an accrual of a reserve for cash charges in any future period deducted in determining consolidated net income for such period, (iv) amounts paid to present or future officers or employees in connection with their separation from employment, up to a limit (together with any compensation expense incurred in connection with the acquisition of us by Granaria Industries, Inc.) of $43.2 million (of which $5.1 million remained unused as of November 30, 2002), (v) a $16.0 million gain from the receipt of insurance proceeds in 2000, (vi) the loss from the sale of our former Machinery Segment and the loss from operations of the Machinery Segment in 2001, and (B) with giving effect to proforma pre-acquisition consolidated EBITDA attributable to businesses acquired during the year.

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      The following adjustments have been made to our EBITDA to arrive at Credit Agreement EBITDA: