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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2003

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________.

Commission file number 333-49957-01

EaglePicher Holdings, Inc.

A Delaware Corporation
I.R.S. Employer IdentificationNo. 13-3989553


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

Registrants telephone number, including area code:602-652-9600

EAGLEPICHER 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 Exchange 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 x (See explanatory note immediately above.)

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

Yes o No x

1,000,000 shares of common capital stock, $0.01 par value each, were issued and
outstanding at July 9, 2003

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TABLE OF ADDITIONAL REGISTRANTS

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

TABLE OF CONTENTS




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



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TABLE OF CONTENTS

|               |  |                                                                                       |    |                                                      |    |        |   | 
|-------------- |  | ------------------------------------------------------------------------------------- | -- | ---------------------------------------------------- | -- | ------ | - | 
|               |  |                                                                                       |    |                                                      |    | Page  
|               |  |                                                                                       |    |                                                      |    | Number
|               |  |                                                                                       |    |                                                      |    |       
|               |  |                                                                                       |    | PART I. FINANCIAL INFORMATION                        |    |        |   | 
|Item 1.        |  | Financial Statements (unaudited)                                                      |    |                                                      |    |       
|               |  |                                                                                       |    | Condensed Consolidated Balance Sheets                |    |        | 3 | 
|               |  |                                                                                       |    | Condensed Consolidated Statements of Income (Loss)   |    |        | 4 | 
|               |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows      |    |        | 5 | 
|               |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements |    |        | 6 | 
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |                                                      | 24 |       
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                                      | 43 |       
|Item 4.        |  | Controls and Procedures                                                               |    |                                                      | 43 |       
|               |  |                                                                                       |    | PART II. OTHER INFORMATION                           |    |        |   | 
|Item 1.        |  | Legal Proceedings                                                                     |    |                                                      | 43 |       
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |    |                                                      | 43 |       
|Signatures     |  |                                                                                       | 44 |                                                     
|Certifications |  |                                                                                       | 53 |                                                     
|Exhibit Index  |  |                                                                                       | 55 |                                                     

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements.




EaglePicher Holdings, Inc.

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

|                                                          |                                                            |                                                |         |              |   |              |         |          |   | 
|--------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------------- | ------- | ------------ | - | ------------ | ------- | -------- | - | 
|                                                          |                                                            |                                                |         | November 30, |   |              |         |         
|                                                          |                                                            |                                                |         | 2002         |   | May 31, 2003
|                                                          |                                                            |                                                |         |              |   |             
|                                                          |                                                            | ASSETS                                         |         |              |   |              |         |          |   | 
|Current Assets:                                           |                                                            |                                                |         |              |   |              |         |         
|                                                          | Cash and cash equivalents                                  |                                                | $       | 31,522       |   |              | $       | 13,508   |  
|                                                          | Receivables, net                                           |                                                |         | 21,473       |   |              |         | 23,568   |  
|                                                          | Retained interest in Eagle-Picher Funding Corporation, net |                                                |         | 29,400       |   |              |         | 49,540   |  
|                                                          | Insurance claim receivable                                 |                                                |         |             |   |              |         | 5,198    |  
|                                                          | Costs and estimated earnings in excess of billings         |                                                |         | 16,942       |   |              |         | 20,307   |  
|                                                          | Inventories                                                |                                                |         | 54,118       |   |              |         | 55,065   |  
|                                                          | Assets of discontinued operations                          |                                                |         | 9,974        |   |              |         | 6,951    |  
|                                                          | Prepaid expenses and other assets                          |                                                |         | 15,437       |   |              |         | 10,348   |  
|                                                          | Deferred income taxes                                      |                                                |         | 10,798       |   |              |         | 10,798   |  
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            |                                                | 189,664 |              |   |              | 195,283 |         
|Property, Plant and Equipment, net                        |                                                            |                                                | 177,135 |              |   |              | 164,705 |         
|Goodwill                                                  |                                                            |                                                | 163,940 |              |   |              | 163,940 |         
|Prepaid Pension                                           |                                                            |                                                | 54,796  |              |   |              | 54,108  |         
|Other Assets, net                                         |                                                            |                                                | 27,506  |              |   |              | 30,214  |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            | $                                              | 613,041 |              |   | $            | 608,250 |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            | LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |         |              |   |              |         |          |   | 
|Current Liabilities:                                      |                                                            |                                                |         |              |   |              |         |         
|                                                          | Accounts payable                                           |                                                | $       | 83,621       |   |              | $       | 80,636   |  
|                                                          | Current portion of long-term debt                          |                                                |         | 18,625       |   |              |         | 137,162  |  
|                                                          | Compensation and employee benefits                         |                                                |         | 20,208       |   |              |         | 15,741   |  
|                                                          | Billings in excess of costs and estimated earnings         |                                                |         | 944          |   |              |         | 950      |  
|                                                          | Accrued divestiture reserve                                |                                                |         | 17,662       |   |              |         | 13,572   |  
|                                                          | Liabilities of discontinued operations                     |                                                |         | 3,417        |   |              |         | 2,713    |  
|                                                          | Other accrued liabilities                                  |                                                |         | 36,506       |   |              |         | 31,746   |  
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            |                                                | 180,983 |              |   |              | 282,520 |         
|Long-Term Debt, net of current portion                    |                                                            |                                                | 355,100 |              |   |              | 233,600 |         
|Postretirement Benefits Other Than Pensions               |                                                            |                                                | 17,635  |              |   |              | 18,266  |         
|Other Long-Term Liabilities                               |                                                            |                                                | 8,928   |              |   |              | 10,433  |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            |                                                | 562,646 |              |   |              | 544,819 |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|11.75% Cumulative Redeemable Exchangeable Preferred Stock |                                                            |                                                | 137,973 |              |   |              | 146,079 |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|Commitments and Contingencies                             |                                                            |                                                |         |              |   |              |         |         
|Shareholders Equity (Deficit):                           |                                                            |                                                |         |              |   |              |         |         
|                                                          | Common stock                                               |                                                |         | 10           |   |              |         | 10       |  
|                                                          | Additional paid-in capital                                 |                                                |         | 99,991       |   |              |         | 92,803   |  
|                                                          | Accumulated deficit                                        |                                                |         | (175,112     | ) |              |         | (174,364 | )
|                                                          | Accumulated other comprehensive loss                       |                                                |         | (4,376       | ) |              |         | (1,097   | )
|                                                          | Treasury stock                                             |                                                |         | (8,091       | ) |              |         |         |  
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            |                                                | (87,578 | )            |   |              | (82,648 | )       
|                                                          |                                                            |                                                |         |              |   |              |         |          |  
|                                                          |                                                            | $                                              | 613,041 |              |   | $            | 608,250 |         
|                                                          |                                                            |                                                |         |              |   |              |         |          |  

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

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EaglePicher Holdings, Inc.




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

|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |         |       |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------- | -------------------------- | ------ | ------------------------ | ------- | ------- | ----- | ---- | ------- | ------- | ------ | - | ------- | ------- | ----- | -
|                                                                                 |                                                                                                   |                                          |         | Three Months Ended May 31, |        | Six Months Ended May 31,
|                                                                                 |                                                                                                   |                                          |         |                            |        |                         
|                                                                                 |                                                                                                   |                                          |         | 2002                       |        | 2003                     |         | 2002    |       | 2003
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |     
|Net Sales                                                                        |                                                                                                   | $                                        | 181,878 |                            |        | $                        | 178,709 |         |       | $    | 340,555 |         |        | $ | 345,610 |        
|Operating Costs and Expenses:                                                    |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|                                                                                 | Cost of products sold (exclusive of depreciation)                                                 |                                          |         | 141,137                    |        |                          |         | 135,974 |       |      |         | 267,253 |        |   |         | 266,285 |      
|                                                                                 | Selling and administrative                                                                        |                                          |         | 20,681                     |        |                          |         | 15,669  |       |      |         | 33,797  |        |   |         | 29,797  |      
|                                                                                 | Depreciation and amortization                                                                     |                                          |         | 12,035                     |        |                          |         | 11,112  |       |      |         | 22,864  |        |   |         | 22,458  |      
|                                                                                 | Goodwill amortization                                                                             |                                          |         | 3,956                      |        |                          |         |        |       |      |         | 7,912   |        |   |         |        |      
|                                                                                 | Restructuring                                                                                     |                                          |         | 2,998                      |        |                          |         |        |       |      |         | 2,998   |        |   |         |        |      
|                                                                                 | Management compensation- special                                                                  |                                          |         | 2,381                      |        |                          |         | 424     |       |      |         | 2,381   |        |   |         | 424     |      
|                                                                                 | Insurance related losses (gains)                                                                  |                                          |         | 3,100                      |        |                          |         | (5,736  | )     |      |         | 3,100   |        |   |         | (5,736  | )    
|                                                                                 | Loss from divestitures                                                                            |                                          |         | 5,845                      |        |                          |         |        |       |      |         | 5,970   |        |   |         |        |      
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|                                                                                 |                                                                                                   |                                          | 192,133 |                            |        |                          | 157,443 |         |       |      | 346,275 |         |        |   | 313,228 |        
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Operating Income (Loss)                                                          |                                                                                                   |                                          | (10,255 | )                          |        |                          | 21,266  |         |       |      | (5,720  | )       |        |   | 32,382  |        
|                                                                                 | Interest expense                                                                                  |                                          |         | (10,915                    | )      |                          |         | (9,043  | )     |      |         | (21,696 | )      |   |         | (18,146 | )    
|                                                                                 | Other income (expense), net                                                                       |                                          |         | 467                        |        |                          |         | (251    | )     |      |         | 918     |        |   |         | 73      |      
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Income (Loss) from Continuing Operations Before Taxes                            |                                                                                                   |                                          | (20,703 | )                          |        |                          | 11,972  |         |       |      | (26,498 | )       |        |   | 14,309  |        
|                                                                                 | Income taxes                                                                                      |                                          |         | (820                       | )      |                          |         | (1,150  | )     |      |         | (1,205  | )      |   |         | (2,046  | )    
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Income (Loss) from Continuing Operations                                         |                                                                                                   |                                          | (21,523 | )                          |        |                          | 10,822  |         |       |      | (27,703 | )       |        |   | 12,263  |        
|Discontinued Operations:                                                         |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|                                                                                 | Loss from operations of discontinued
businesses, net of zero (benefit) provision
for income taxes |                                          |         | (445                       | )      |                          |         | (158    | )     |      |         | (472    | )      |   |         | (431    | )    
|                                                                                 | Loss on disposal of discontinued business,
net of $600 benefit from income taxes                  |                                          |         |                           |        |                          |         | (2,978  | )     |      |         |        |        |   |         | (2,978  | )    
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Net Income (Loss)                                                                |                                                                                                   |                                          | (21,968 | )                          |        |                          | 7,686   |         |       |      | (28,175 | )       |        |   | 8,854   |        
|                                                                                 | Preferred stock dividends accreted or accrued                                                     |                                          |         | (3,719                     | )      |                          |         | (4,169  | )     |      |         | (7,231  | )      |   |         | (8,106  | )    
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Income (Loss) Applicable to Common Shareholders                                  |                                                                                                   | $                                        | (25,687 | )                          |        | $                        | 3,517   |         |       | $    | (35,406 | )       |        | $ | 748     |        
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Basic and Diluted Net Income (Loss) per Share
Applicable to Common Shareholders: |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|                                                                                 |                                                                                                   | Income (Loss) from Continuing Operations |         | $                          | (26.17 | )                        |         | $       | 6.98  |      |         | $       | (36.14 | ) |         | $       | 4.41  |  
|                                                                                 |                                                                                                   | Loss from Discontinued Operations        |         |                            | (0.46  | )                        |         |         | (3.29 | )    |         |         | (0.49  | ) |         |         | (3.62 | )
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|                                                                                 |                                                                                                   | Net Income (Loss)                        |         | $                          | (26.63 | )                        |         | $       | 3.69  |      |         | $       | (36.63 | ) |         | $       | 0.79  |  
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        
|Weighted Average Number of Common Shares                                         |                                                                                                   |                                          | 964,500 |                            |        |                          | 953,667 |         |       |      | 966,458 |         |        |   | 942,083 |        
|                                                                                 |                                                                                                   |                                          |         |                            |        |                          |         |         |       |      |         |         |        |   |         |        

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

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EaglePicher Holdings, Inc.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended May 31, 2002 and 2003
(unaudited) (in thousands of dollars)

|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |        |         |         |  
|------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------------------------------------- | ------ | ------- | ------- | ------ | ------ | ------- | ------- | -
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        | 2002    |         | 2003  
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |       
|Cash Flows From Operating Activities:                  |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |       
|                                                       | Net income (loss)                                                                                  |                                                                   | $                                                   | (28,175                                                                 | )      |         | $       | 8,854  |       
|                                                       | Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |                                                                   |                                                     |                                                                         |        |         |         |        |       
|                                                       |                                                                                                    | Depreciation and amortization                                     |                                                     |                                                                         | 32,028 |         |         |        | 24,024 |        
|                                                       |                                                                                                    | Loss from divestitures                                            |                                                     |                                                                         | 5,970  |         |         |        |       |        
|                                                       |                                                                                                    | Provisions from discontinued operations                           |                                                     |                                                                         |       |         |         |        | 2,978  |        
|                                                       |                                                                                                    | Insurance related losses (gains)                                  |                                                     |                                                                         | 3,100  |         |         |        | (5,736 | )      
|                                                       |                                                                                                    | Changes in assets and liabilities, net of effect of divestitures: |                                                     |                                                                         |        |         |         |        |        |        
|                                                       |                                                                                                    |                                                                   |                                                     | Sale of receivables, net (See Note H)                                   |        |         | 52,350  |        |        |         |        |  
|                                                       |                                                                                                    |                                                                   |                                                     | Retained interest in Eagle-Picher
Funding Corporation, net (See Note H) |        |         |        |        |        |         | (20,140 | )
|                                                       |                                                                                                    |                                                                   |                                                     | Receivables, net                                                        |        |         | (2,820  | )      |        |         | (1,557  | )
|                                                       |                                                                                                    |                                                                   |                                                     | Inventories                                                             |        |         | 8,508   |        |        |         | (947    | )
|                                                       |                                                                                                    |                                                                   |                                                     | Accounts payable                                                        |        |         | (1,879  | )      |        |         | (2,985  | )
|                                                       |                                                                                                    |                                                                   |                                                     | Accrued liabilities                                                     |        |         | (4,822  | )      |        |         | (12,717 | )
|                                                       |                                                                                                    |                                                                   |                                                     | Other, net                                                              |        |         | (2,684  | )      |        |         | (3,615  | )
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|                                                       |                                                                                                    |                                                                   | Net cash provided by (used in) operating activities |                                                                         |        | 61,576  |         |        |        | (11,841 | )      
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Cash Flows From Investing Activities:                  |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |       
|                                                       | Proceeds from the sale of property and equipment                                                   |                                                                   |                                                     |                                                                        |        |         |         | 1,155  |       
|                                                       | Capital expenditures                                                                               |                                                                   |                                                     | (8,516                                                                  | )      |         |         | (8,808 | )     
|                                                       | Other, net                                                                                         |                                                                   |                                                     | 1,082                                                                   |        |         |         |       |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|                                                       |                                                                                                    |                                                                   | Net cash used in investing activities               |                                                                         |        | (7,434  | )       |        |        | (7,653  | )      
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Cash Flows From Financing Activities:                  |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |       
|                                                       | Reduction of long-term debt                                                                        |                                                                   |                                                     | (18,566                                                                 | )      |         |         | (8,463 | )     
|                                                       | Net borrowings (repayments) under revolving credit agreements                                      |                                                                   |                                                     | (43,946                                                                 | )      |         |         | 5,500  |       
|                                                       | Proceeds from issuance of treasury stock                                                           |                                                                   |                                                     |                                                                        |        |         |         | 903    |       
|                                                       | Other, net                                                                                         |                                                                   |                                                     | (788                                                                    | )      |         |         |       |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|                                                       |                                                                                                    |                                                                   | Net cash used in financing activities               |                                                                         |        | (63,300 | )       |        |        | (2,060  | )      
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Net Cash Provided by (Used in) Discontinued Operations |                                                                                                    |                                                                   | 5,306                                               |                                                                         |        |         | (874    | )     
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Effect of Exchange Rates on Cash                       |                                                                                                    |                                                                   | 1,320                                               |                                                                         |        |         | 4,414   |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Net Decrease in Cash and Cash Equivalents              |                                                                                                    |                                                                   | (2,532                                              | )                                                                       |        |         | (18,014 | )     
|Cash and Cash Equivalents, beginning of period         |                                                                                                    |                                                                   | 24,620                                              |                                                                         |        |         | 31,522  |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Cash and Cash Equivalents, end of period               |                                                                                                    | $                                                                 | 22,088                                              |                                                                         |        | $       | 13,508  |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|Supplemental Cash Flow Information:                    |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |       
|                                                       | Interest paid                                                                                      |                                                                   | $                                                   | 19,832                                                                  |        |         | $       | 18,008 |       
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       
|                                                       | Income taxes refunded, net                                                                         |                                                                   | $                                                   | (4,801                                                                  | )      |         | $       | (4,282 | )     
|                                                       |                                                                                                    |                                                                   |                                                     |                                                                         |        |         |         |        |       

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

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EaglePicher Holdings, Inc.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

A.     BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been omitted pursuant to such rules and regulations, although we believe that
the disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with our financial
statements and notes thereto for the fiscal year ended November 30, 2002
presented in our Form 10-K, filed with the SEC on March 3, 2003.

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

In the fourth quarter of fiscal 2002, we restated our financial statements
to reflect the appropriate adoption of EITF 00-10, Accounting for Shipping and
Handling Fees and Costs, which we should have adopted in 2001. EITF 00-10
states that all amounts billed to a customer in a sale transaction related to
shipping and handling represent revenues earned for the goods provided and
should be classified as revenue. Prior to the adoption of EITF 00-10, some of
the costs billed to our customers for shipping and handling (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 to the
financial statements for the three months ended May 31, 2002 was an increase in
Net Sales and Cost of Products Sold by $4.1 million. The impact to the
financial statements for the six months ended May 31, 2002 was an increase in
Net Sales and Cost of Products Sold by $8.0 million. In addition, certain
amounts in 2002 have been reclassified to conform to the 2003 financial
statement presentation.

As discussed in Note G to these financial statements, the accompanying
2002 financial statements have been restated to reflect our Hillsdale U.K.
Automotive operation as a discontinued business. Our Hillsdale U.K. Automotive
operation was sold on June 11, 2003.

B.     INVENTORIES

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

|                           |  |      |        |      |  |   |        | 
|-------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                           |  | 2002 |        | 2003
|                           |  |      |        |     
|Raw materials and supplies |  | $    | 25,365 |      |  | $ | 26,320 | 
|Work-in-process            |  |      | 14,058 |      |  |   | 17,226 | 
|Finished goods             |  |      | 14,695 |      |  |   | 11,519 | 
|                           |  |      |        |      |  |   |        | 
|                           |  | $    | 54,118 |      |  | $ | 55,065 | 
|                           |  |      |        |      |  |   |        | 

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C.     COMPREHENSIVE INCOME (LOSS)

During the three and six months ended May 31, 2002 and 2003 our
comprehensive income (loss) was as follows (in thousands of dollars):

|                                           |  |                            |         |                          |  |      |        |      |  |   |         |   |  |   |        |  
|------------------------------------------ |  | -------------------------- | ------- | ------------------------ |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                           |  | Three Months Ended May 31, |         | Six Months Ended May 31,
|                                           |  |                            |         |                         
|                                           |  | 2002                       |         | 2003                     |  | 2002 |        | 2003
|                                           |  |                            |         |                          |  |      |        |     
|Net income (loss)                          |  | $                          | (21,968 | )                        |  | $    | 7,686  |      |  | $ | (28,175 | ) |  | $ | 8,854  |  
|Gain on interest rate swap agreements      |  |                            | 421     |                          |  |      | 907    |      |  |   | 466     |   |  |   | 1,452  |  
|Loss on forward foreign currency contracts |  |                            | (696    | )                        |  |      | (1,890 | )    |  |   | (373    | ) |  |   | (2,537 | )
|Change in currency translation adjustment  |  |                            | 1,467   |                          |  |      | 2,755  |      |  |   | 1,250   |   |  |   | 4,364  |  
|                                           |  |                            |         |                          |  |      |        |      |  |   |         |   |  |   |        |  
|                                           |  | $                          | (20,776 | )                        |  | $    | 9,458  |      |  | $ | (26,832 | ) |  | $ | 12,133 |  
|                                           |  |                            |         |                          |  |      |        |      |  |   |         |   |  |   |        |  

D.     GOODWILL

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

|                                           |  |                         |  |        |        |   |         | 
|------------------------------------------ |  | ----------------------- |  | ------ | ------ | - | ------- | 
|Reporting Unit                             |  | Segment                 |  | Amount
|                                           |  |                         |  |       
|Hillsdale Division                         |  | Automotive              |  | $      | 34,816 |  
|Wolverine Division                         |  | Automotive              |  |        | 47,268 |  
|Power Group                                |  | Technologies            |  |        | 44,486 |  
|Specialty Materials Group                  |  | Technologies            |  |        | 31,398 |  
|Pharmaceutical Services
(formerly ChemSyn) |  | Technologies            |  |        | 2,929  |  
|Filtration and Minerals                    |  | Filtration and Minerals |  |        | 3,043  |  
|                                           |  |                         |  |        |        |   |         | 
|                                           |  |                         |  |        |        | $ | 163,940 | 
|                                           |  |                         |  |        |        |   |         | 

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

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

|                                                                                        |  |   |                            |   |                          |   |       |  |      |   |         |   |  |   |      |  | 
|--------------------------------------------------------------------------------------- |  | - | -------------------------- | - | ------------------------ | - | ----- |  | ---- | - | ------- | - |  | - | ---- |  | 
|                                                                                        |  |   | Three Months Ended May 31, |   | Six Months Ended May 31,
|                                                                                        |  |   |                            |   |                         
|                                                                                        |  |   | 2002                       |   | 2003                     |   | 2002  |  | 2003
|                                                                                        |  |   |                            |   |                          |   |       |  |     
|Reported Income (Loss) Applicable to
Common Shareholders                                |  | $ | (25,687                    | ) |                          | $ | 3,517 |  |      | $ | (35,406 | ) |  | $ | 748  | 
|Goodwill amortization                                                                   |  |   | 3,956                      |   |                          |   |      |  |      |   | 7,912   |   |  |   |     | 
|                                                                                        |  |   |                            |   |                          |   |       |  |      |   |         |   |  |   |      | 
|As Adjusted Income (Loss) Applicable
to Common Shareholders                             |  | $ | (21,731                    | ) |                          | $ | 3,517 |  |      | $ | (27,494 | ) |  | $ | 748  | 
|                                                                                        |  |   |                            |   |                          |   |       |  |      |   |         |   |  |   |      | 
|Reported Basic and Diluted Income
(Loss) per share Applicable to
Common Shareholders    |  | $ | (26.63                     | ) |                          | $ | 3.69  |  |      | $ | (36.63  | ) |  | $ | 0.79 | 
|Goodwill amortization per share                                                         |  |   | 4.10                       |   |                          |   |      |  |      |   | 8.19    |   |  |   |     | 
|                                                                                        |  |   |                            |   |                          |   |       |  |      |   |         |   |  |   |      | 
|As Adjusted Basic and Diluted Income
(Loss) per share Applicable to
Common Shareholders |  | $ | (22.53                     | ) |                          | $ | 3.69  |  |      | $ | (28.44  | ) |  | $ | 0.79 | 
|                                                                                        |  |   |                            |   |                          |   |       |  |      |   |         |   |  |   |      | 

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E.     RECENTLY RELEASED OR ADOPTED ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets and depreciated over their estimated useful life while the
liability is accreted to its expected obligation amount upon retirement. We
adopted SFAS No. 143 on December 1, 2002. The adoption did not have a material
impact on our financial condition or results of operations.

In September 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed of. The primary difference is that goodwill and certain
intangibles with indefinite lives have been removed from the scope of SFAS No.
144, as they are covered by SFAS No. 142, as described in Note D above. It
also broadens the presentation of discontinued operations to include a
component of an entity rather than a segment of a business. A component of an
entity comprises operations and cash flows that can clearly be distinguished
operationally and for financial accounting purposes from the rest of the
entity. We adopted SFAS No. 144 on December 1, 2002 and accounted for the sale
of our Hillsdale U.K. Automotive operation as discussed in Note G in accordance
with this statement.

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

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

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

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

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financial
statements. The adoption of FIN 45 did not have a material impact on our
financial condition or results of operations.

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

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

F.     RESTRUCTURING

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

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

The remaining balance of $1.4 million as of May 31, 2003, is included in
Other Accrued Liabilities in our balance sheets. An analysis of the
facilities, severance and other costs incurred related to restructuring
reserves since November 30, 2002 is as follows (in thousands of dollars):

|                             |  |            |       |           |  |             |      |       |  |   |        |   |  |   |        |  
|---------------------------- |  | ---------- | ----- | --------- |  | ----------- | ---- | ----- |  | - | ------ | - |  | - | ------ | -
|                             |  | Facilities |       | Severance |  | Other Costs |      | Total
|                             |  |            |       |           |  |             |      |      
|Balance at November 30, 2002 |  | $          | 1,629 |           |  | $           | 314  |       |  | $ | 1,340  |   |  | $ | 3,283  |  
|Amounts spent                |  |            | (666  | )         |  |             | (162 | )     |  |   | (1,043 | ) |  |   | (1,871 | )
|                             |  |            |       |           |  |             |      |       |  |   |        |   |  |   |        |  
|Balance at May 31, 2003      |  | $          | 963   |           |  | $           | 152  |       |  | $ | 297    |   |  | $ | 1,412  |  
|                             |  |            |       |           |  |             |      |       |  |   |        |   |  |   |        |  

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G.     DIVESTITURES AND DISCONTINUED OPERATIONS

Divestitures

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

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

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

|                             |               |   |        |        |  
|---------------------------- | ------------- | - | ------ | ------ | -
|Balance at November 30, 2002 |               | $ | 17,662 |       
|                             | Amounts spent |   |        | (4,090 | )
|                             |               |   |        |       
|Balance at May 31, 2003      |               | $ | 13,572 |       
|                             |               |   |        |       

Discontinued Operations

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

During the second quarter of 2003, we reached an agreement in principle
for the sale of certain assets at our Hillsdale U.K. Automotive operation (a
component of our Automotive Segment) for cash of $1.1 million. This sale
closed on June 11, 2003. In addition, we will be winding down the remaining
operations of our Hillsdale U.K. Automotive operation during 2003.
Accordingly, effective May 31, 2003, upon receipt of authority from our Board
of Directors, we discontinued the operations of our Hillsdale U.K. Automotive
operation and restated all prior period financial statements. In addition, in
the second quarter of 2003, we recognized a Loss on Disposal of Business of
$3.0 million, which is net of a $600,000 tax benefit related to this sale. At
May 31, 2003, the remaining balance in Assets of Discontinued Operations was
primarily accounts receivable, inventory and fixed assets, and the remaining
balance in Liabilities of Discontinued Operations was primarily accounts
payable and accrued liabilities. We expect to incur the following shutdown
costs during 2003 which have not been accrued as of May 31, 2003 related to our
Hillsdale U.K. Automotive operation (in thousands of dollars):

|                              |  |   |       | 
|----------------------------- |  | - | ----- | 
|One-time termination benefits |  | $ | 642   | 
|Contract termination costs    |  |   | 100   | 
|Facility closure and other    |  |   | 420   | 
|                              |  |   |       | 
|                              |  | $ | 1,162 | 
|                              |  |   |       | 

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

During the first quarter of 2002, we entered into an agreement with a
major U.S. financial institution to sell an interest in certain receivables
through an unconsolidated qualifying special purpose entity, 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,
EaglePicher Acceptance Corporation. This agreement provides for the sale of
certain receivables to EPFC, which in turn sells an interest in a revolving
pool of receivables to the financial institution. EPFC has no recourse against
us for failure of the debtors to pay when due. The agreement provides for the
continuation of the program on a revolving basis until the earlier of a) the
maturity of our senior credit facility, or b) assuming we are able to refinance
our senior credit facility, the fourth quarter of 2004.

We account for the securitization of these sold receivables in accordance
with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilitiesa Replacement of FASB Statement No. 125.
Under this guidance, at the time the receivables are sold, the balances are
removed from our financial statements. For purposes of calculating our debt
covenant compliance under our Credit Agreement, we include the debt outstanding
on EPFC.

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

At November 30, 2002, our interest in EPFC was $29.4 million and the
revolving pool of receivables that we serviced totaled $77.5 million. At
November 30, 2002, the outstanding balance of the interest sold to the
financial institution recorded on EPFCs financial statements was $46.5
million. During the three months ended May 31, 2002, we sold, outside of the
initial sale, $165.4 million of accounts receivable to EPFC, and during the
same period, EPFC collected $153.5 million of cash that was reinvested in new
securitizations. During the six months ended May 31, 2002, we sold, outside of
the initial sale, $274.5 million of accounts receivable to EPFC, and during the
same period, EPFC collected $258.0 million of cash that was reinvested in new
securitizations.

As of May 31, 2003, we reduced the amount due to the financial institution
by EPFC, and as a result our cash and cash equivalents balance decreased and
our retained interest in Eagle-Picher Funding Corporation increased from
November 30, 2002. At May 31, 2003, our interest in EPFC was $49.5 million and
the revolving pool of receivables that we serviced totaled $77.2 million. At
May 31, 2003, the outstanding balance of the interest sold to the financial
institution recorded on EPFCs financial statements was $26.2 million. During
the three months ended May 31, 2003, we sold $147.0 million of accounts
receivable to EPFC, and during the same period, EPFC collected $140.0 million
of cash that was reinvested in new securitizations. During the six months
ended May 31, 2003, we sold $285.6 million of accounts receivable to EPFC, and
during the same period, EPFC collected $270.9 million of cash that was
reinvested in new securitizations. The effective interest rate for the six
month period ended May 31, 2003 in the securitization was approximately 2.5%.

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|I. |  | INSURANCE RELATED LOSSES (GAINS)
|-- |  | --------------------------------

In the second quarter of 2002, we recorded a provision of $3.1 million
primarily related to a dispute with an insurance carrier over the coverage on a
fire during 2001 at our Harrisonville, Missouri bulk pharmaceutical plant.

In the second quarter of 2003, we recorded a $5.7 million gain primarily
related to the settlement of a claim with our insurance carrier over the
coverage on a fire during 2002 at our Seneca, Missouri non-operating facility.



|J. |  | SHAREHOLDERS EQUITY (DEFICIT)
|-- |  | ------------------------------

During the second quarter of 2003, we sold to our controlling common
shareholder, Granaria Holdings B.V.; Bert Iedema, one of our directors and an
executive officer of Granaria Holdings B.V.; and certain of our executive
officers the 69,500 shares of common stock held in our Treasury for $13.00 per
share, or $0.9 million. In connection with this stock issuance, we
reclassified the balance in our Treasury, or $7.2 million, to Additional Paid
in Capital in our accompanying balance sheets.



|K. |  | LEGAL MATTERS
|-- |  | -------------

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

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

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

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|L. |  | BUSINESS SEGMENT INFORMATION
|-- |  | ----------------------------

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

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

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

Sales between segments were not material.

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

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|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------------------------------------------- | ------------ | - | -------------------------- | ------- | ------------------------ | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                |              |   | Three Months Ended May 31, |         | Six Months Ended May 31,
|                                                                |              |   |                            |         |                         
|                                                                |              |   | 2002                       |         | 2003                     |   | 2002    |         | 2003
|                                                                |              |   |                            |         |                          |   |         |         |     
|Net Sales                                                       |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Hillsdale Division                                              |              | $ | 93,524                     |         |                          | $ | 85,064  |         |      | $ | 174,806 |         |  | $ | 164,937 |        
|Wolverine Division                                              |              |   | 19,707                     |         |                          |   | 23,189  |         |      |   | 37,355  |         |  |   | 43,907  |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|                                                                | Automotive   |   |                            | 113,231 |                          |   |         | 108,253 |      |   |         | 212,161 |  |   |         | 208,844 | 
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Power Group                                                     |              |   | 25,173                     |         |                          |   | 34,097  |         |      |   | 47,800  |         |  |   | 66,137  |        
|Precision Products- divested July 17, 2002                      |              |   | 1,388                      |         |                          |   |        |         |      |   | 2,603   |         |  |   |        |        
|Specialty Materials Group                                       |              |   | 17,501                     |         |                          |   | 13,211  |         |      |   | 30,775  |         |  |   | 26,672  |        
|Pharmaceutical Services (formerly ChemSyn)                      |              |   | 3,776                      |         |                          |   | 3,383   |         |      |   | 7,181   |         |  |   | 5,286   |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|                                                                | Technologies |   |                            | 47,838  |                          |   |         | 50,691  |      |   |         | 88,359  |  |   |         | 98,095  | 
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Filtration and Minerals                                         |              |   | 20,809                     |         |                          |   | 19,765  |         |      |   | 40,035  |         |  |   | 38,671  |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|                                                                |              | $ | 181,878                    |         |                          | $ | 178,709 |         |      | $ | 340,555 |         |  | $ | 345,610 |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Operating Income (Loss)                                         |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Automotive                                                      |              | $ | 3,898                      |         |                          | $ | 6,696   |         |      | $ | 7,093   |         |  | $ | 11,913  |        
|Technologies                                                    |              |   | (8,626                     | )       |                          |   | 14,976  |         |      |   | (7,955  | )       |  |   | 23,022  |        
|Filtration and Minerals                                         |              |   | 3,589                      |         |                          |   | 1,621   |         |      |   | 4,895   |         |  |   | 1,510   |        
|Divested Divisions                                              |              |   | (5,845                     | )       |                          |   |        |         |      |   | (5,970  | )       |  |   |        |        
|Corporate/ Intersegment                                         |              |   | (3,271                     | )       |                          |   | (2,027  | )       |      |   | (3,783  | )       |  |   | (4,063  | )      
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|                                                                |              | $ | (10,255                    | )       |                          | $ | 21,266  |         |      | $ | (5,720  | )       |  | $ | 32,382  |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Depreciation and Amortization (excluding
Goodwill amortization) |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|Automotive                                                      |              | $ | 9,056                      |         |                          | $ | 8,588   |         |      | $ | 16,887  |         |  | $ | 17,273  |        
|Technologies                                                    |              |   | 1,712                      |         |                          |   | 1,895   |         |      |   | 3,467   |         |  |   | 3,511   |        
|Filtration and Minerals                                         |              |   | 1,253                      |         |                          |   | 1,268   |         |      |   | 2,599   |         |  |   | 2,526   |        
|Corporate                                                       |              |   | 14                         |         |                          |   | (639    | )       |      |   | (89     | )       |  |   | (852    | )      
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        
|                                                                |              | $ | 12,035                     |         |                          | $ | 11,112  |         |      | $ | 22,864  |         |  | $ | 22,458  |        
|                                                                |              |   |                            |         |                          |   |         |         |      |   |         |         |  |   |         |        



|M. |  | SUBSEQUENT EVENTS
|-- |  | -----------------

We
are currently negotiating a new senior secured credit facility in the
approximate amount of $275.0 million to replace our current
credit facility, which provided for an original term loan of
$75.0 million, as amended, and a $220.0 million revolving
facility.

In July 2003, we also announced the commencement of a cash tender offer
and consent solicitation for our 9 3/8% Senior Subordinated Notes Due 2008 (the
Notes). We are seeking to acquire any and all of our approximately $220.0
million of Notes outstanding. The consent solicitation seeks consent of the
holders of the Notes to amend the indenture governing the Notes to eliminate
certain of the restrictive covenants and other contractual obligations. The
tender offer and consent solicitation are being made in accordance with and
subject to the terms and conditions stated in EaglePicher Incorporateds Offer
to Purchase and Consent Solicitation Statement dated July 9, 2003. EaglePicher
Incorporated intends to finance the tender offer and consent solicitation with
the proceeds of its offering of approximately $220.0 million aggregate
principal amount of senior unsecured notes pursuant to Rule 144A and Regulation
S under the Securities Act of 1933, as amended (the Securities Act), together
with other funds. The securities to be offered have not been offered or sold
in the United States, absent registration or an applicable exemption from such
registration requirements. There is no assurance that this offering will be
successful.

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|N. |  | SUBSIDIARY GUARANTORS AND NON-GUARANTORS
|-- |  | ----------------------------------------

Our Credit Agreement and the Senior Subordinated Notes were issued by our
wholly owned subsidiary, EaglePicher Incorporated (EPI), and are guaranteed
on a full, unconditional, and joint and several basis by us and certain of our
wholly-owned domestic subsidiaries (Subsidiary Guarantors). We have
determined that full financial statements and other disclosures concerning EPI
or the Subsidiary Guarantors would not be material to investors, and such
financial statements are not presented. EPI and the Subsidiary Guarantors are
subject to restrictions on the payment of dividends under the terms of both the
Credit Agreement and the Senior Subordinated Notes. The following supplemental
condensed combining financial statements present information regarding EPI, as
the Issuer, the Subsidiary Guarantors and Non-Guarantor Subsidiaries.

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

|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|-------------------------------------------------- |  | ------ | -------- | -------------- |  | ----------- | ------- | -------------- |  | ------------ | ------- | ----- |  | - | ------- |  |  | - | -------- | - |  | - | ------- | -
|                                                   |  |        |          |                |  | Guarantors  |         |                |  |              |         |       |  |   |         |  |  |  
|                                                   |  |        |          |                |  |             |         | Non-Guarantors |  |              |         |       |  |   |         | 
|                                                   |  |        |          |                |  | EaglePicher |         | Subsidiary     |  | Foreign      |         |       |  |   |         |  |  |  
|                                                   |  | Issuer |          | Holdings, Inc. |  | Guarantors  |         | Subsidiaries   |  | Eliminations |         | Total
|                                                   |  |        |          |                |  |             |         |                |  |              |         |      
|ASSETS                                             |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Current Assets:                                    |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Cash and cash equivalents                          |  | $      | 27,694   |                |  | $           | 1       |                |  | $            | (4,895  | )     |  | $ | 7,902   |  |  | $ | 820      |   |  | $ | 31,522  |  
|Receivables and retained interest, net             |  |        | 2,535    |                |  |             |        |                |  |              | 31,472  |       |  |   | 16,866  |  |  |   |         |   |  |   | 50,873  |  
|Costs and estimated earnings in excess of billings |  |        |         |                |  |             |        |                |  |              | 16,942  |       |  |   |        |  |  |   |         |   |  |   | 16,942  |  
|Intercompany accounts receivable                   |  |        | 1,997    |                |  |             |        |                |  |              | 6,228   |       |  |   | 2,037   |  |  |   | (10,262  | ) |  |   |        |  
|Inventories                                        |  |        | 3,957    |                |  |             |        |                |  |              | 39,394  |       |  |   | 12,683  |  |  |   | (1,916   | ) |  |   | 54,118  |  
|Assets of discontinued operations                  |  |        | 643      |                |  |             |        |                |  |              |        |       |  |   | 9,331   |  |  |   |         |   |  |   | 9,974   |  
|Prepaid expenses and other assets                  |  |        | 7,840    |                |  |             |        |                |  |              | 4,755   |       |  |   | 4,456   |  |  |   | (1,614   | ) |  |   | 15,437  |  
|Deferred income taxes                              |  |        | 10,798   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 10,798  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 55,464   |                |  |             | 1       |                |  |              | 93,896  |       |  |   | 53,275  |  |  |   | (12,972  | ) |  |   | 189,664 |  
|Property, Plant and Equipment, net                 |  |        | 24,016   |                |  |             |        |                |  |              | 129,052 |       |  |   | 24,067  |  |  |   |         |   |  |   | 177,135 |  
|Investment in Subsidiaries                         |  |        | 239,864  |                |  |             | 58,509  |                |  |              | 18,286  |       |  |   |        |  |  |   | (316,659 | ) |  |   |        |  
|Goodwill                                           |  |        | 37,339   |                |  |             |        |                |  |              | 116,586 |       |  |   | 13,154  |  |  |   | (3,139   | ) |  |   | 163,940 |  
|Prepaid Pension                                    |  |        | 54,796   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 54,796  |  
|Other Assets, net                                  |  |        | 14,296   |                |  |             | (8,091  | )              |  |              | 21,744  |       |  |   | 11,070  |  |  |   | (11,513  | ) |  |   | 27,506  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  | $      | 425,775  |                |  | $           | 50,419  |                |  | $            | 379,564 |       |  | $ | 101,566 |  |  | $ | (344,283 | ) |  | $ | 613,041 |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)     |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Current Liabilities:                               |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Accounts payable                                   |  | $      | 15,398   |                |  | $           |        |                |  | $            | 53,151  |       |  | $ | 14,252  |  |  | $ | 820      |   |  | $ | 83,621  |  
|Intercompany accounts payable                      |  |        | 3,171    |                |  |             |        |                |  |              | 5,887   |       |  |   | 1,184   |  |  |   | (10,242  | ) |  |   |        |  
|Current portion of long-term debt                  |  |        | 18,625   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 18,625  |  
|Liabilities of discontinued operations             |  |        |         |                |  |             |        |                |  |              |        |       |  |   | 3,417   |  |  |   |         |   |  |   | 3,417   |  
|Other accrued liabilities                          |  |        | 46,313   |                |  |             |        |                |  |              | 25,128  |       |  |   | 3,879   |  |  |   |         |   |  |   | 75,320  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 83,507   |                |  |             |        |                |  |              | 84,166  |       |  |   | 22,732  |  |  |   | (9,422   | ) |  |   | 180,983 |  
|Long-term Debt, net of current portion             |  |        | 355,100  |                |  |             |        |                |  |              |        |       |  |   | 11,491  |  |  |   | (11,491  | ) |  |   | 355,100 |  
|Postretirement Benefits Other Than Pensions        |  |        | 17,635   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 17,635  |  
|Other Long-term Liabilities                        |  |        | 8,687    |                |  |             |        |                |  |              |        |       |  |   | 216     |  |  |   | 25       |   |  |   | 8,928   |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 464,929  |                |  |             |        |                |  |              | 84,166  |       |  |   | 34,439  |  |  |   | (20,888  | ) |  |   | 562,646 |  
|Intercompany Accounts                              |  |        | (282,707 | )              |  |             | 24      |                |  |              | 269,573 |       |  |   | 23,930  |  |  |   | (10,820  | ) |  |   |        |  
|Preferred Stock                                    |  |        |         |                |  |             | 137,973 |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 137,973 |  
|Shareholders Equity (Deficit)                     |  |        | 243,553  |                |  |             | (87,578 | )              |  |              | 25,825  |       |  |   | 43,197  |  |  |   | (312,575 | ) |  |   | (87,578 | )
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  | $      | 425,775  |                |  | $           | 50,419  |                |  | $            | 379,564 |       |  | $ | 101,566 |  |  | $ | (344,283 | ) |  | $ | 613,041 |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  

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EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF MAY 31, 2003
(in thousands of dollars)

|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|-------------------------------------------------- |  | ------ | -------- | -------------- |  | ----------- | ------- | -------------- |  | ------------ | ------- | ----- |  | - | ------- |  |  | - | -------- | - |  | - | ------- | -
|                                                   |  |        |          |                |  | Guarantors  |         |                |  |              |         |       |  |   |         |  |  |  
|                                                   |  |        |          |                |  |             |         | Non-Guarantors |  |              |         |       |  |   |         | 
|                                                   |  |        |          |                |  | EaglePicher |         | Subsidiary     |  | Foreign      |         |       |  |   |         |  |  |  
|                                                   |  | Issuer |          | Holdings, Inc. |  | Guarantors  |         | Subsidiaries   |  | Eliminations |         | Total
|                                                   |  |        |          |                |  |             |         |                |  |              |         |      
|ASSETS                                             |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Current Assets:                                    |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Cash and cash equivalents                          |  | $      | 5,520    |                |  | $           | 1       |                |  | $            | 483     |       |  | $ | 7,504   |  |  | $ |         |   |  | $ | 13,508  |  
|Receivables and retained interest, net             |  |        | 5,737    |                |  |             |        |                |  |              | 46,457  |       |  |   | 20,914  |  |  |   |         |   |  |   | 73,108  |  
|Insurance claim receivable                         |  |        |         |                |  |             |        |                |  |              | 5,198   |       |  |   |        |  |  |   |         |   |  |   | 5,198   |  
|Costs and estimated earnings in excess of billings |  |        |         |                |  |             |        |                |  |              | 17,596  |       |  |   | 2,711   |  |  |   |         |   |  |   | 20,307  |  
|Intercompany accounts receivable                   |  |        | 2,118    |                |  |             |        |                |  |              | 6,535   |       |  |   | 820     |  |  |   | (9,473   | ) |  |   |        |  
|Inventories                                        |  |        | 5,368    |                |  |             |        |                |  |              | 38,019  |       |  |   | 14,395  |  |  |   | (2,717   | ) |  |   | 55,065  |  
|Assets of discontinued operations                  |  |        | 182      |                |  |             |        |                |  |              |        |       |  |   | 6,769   |  |  |   |         |   |  |   | 6,951   |  
|Prepaid expenses and other assets                  |  |        | 1,707    |                |  |             |        |                |  |              | 5,131   |       |  |   | 3,510   |  |  |   |         |   |  |   | 10,348  |  
|Deferred income taxes                              |  |        | 10,798   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 10,798  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 31,430   |                |  |             | 1       |                |  |              | 119,419 |       |  |   | 56,623  |  |  |   | (12,190  | ) |  |   | 195,283 |  
|Property, Plant and Equipment, net                 |  |        | 22,759   |                |  |             |        |                |  |              | 116,229 |       |  |   | 25,717  |  |  |   |         |   |  |   | 164,705 |  
|Investment in Subsidiaries                         |  |        | 241,335  |                |  |             | 67,366  |                |  |              | 19,459  |       |  |   |        |  |  |   | (328,160 | ) |  |   |        |  
|Goodwill                                           |  |        | 37,339   |                |  |             |        |                |  |              | 116,586 |       |  |   | 13,154  |  |  |   | (3,139   | ) |  |   | 163,940 |  
|Prepaid Pension                                    |  |        | 54,108   |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 54,108  |  
|Other Assets, net                                  |  |        | 19,457   |                |  |             | (7,214  | )              |  |              | 22,426  |       |  |   | 19,844  |  |  |   | (24,299  | ) |  |   | 30,214  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  | $      | 406,428  |                |  | $           | 60,153  |                |  | $            | 394,119 |       |  | $ | 115,338 |  |  | $ | (367,788 | ) |  | $ | 608,250 |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)     |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Current Liabilities:                               |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|Accounts payable                                   |  | $      | 16,450   |                |  | $           |        |                |  | $            | 55,830  |       |  | $ | 8,356   |  |  | $ |         |   |  | $ | 80,636  |  
|Intercompany accounts payable                      |  |        |         |                |  |             |        |                |  |              | 802     |       |  |   | 8,661   |  |  |   | (9,463   | ) |  |   |        |  
|Current portion of long-term debt                  |  |        | 137,162  |                |  |             |        |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 137,162 |  
|Liabilities of discontinued operations             |  |        |         |                |  |             |        |                |  |              |        |       |  |   | 2,713   |  |  |   |         |   |  |   | 2,713   |  
|Other accrued liabilities                          |  |        | 35,838   |                |  |             |        |                |  |              | 19,508  |       |  |   | 6,663   |  |  |   |         |   |  |   | 62,009  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 189,450  |                |  |             |        |                |  |              | 76,140  |       |  |   | 26,393  |  |  |   | (9,463   | ) |  |   | 282,520 |  
|Long-term Debt, net of current portion             |  |        | 233,600  |                |  |             |        |                |  |              |        |       |  |   | 9,982   |  |  |   | (9,982   | ) |  |   | 233,600 |  
|Postretirement Benefits Other Than Pensions        |  |        | 17,425   |                |  |             |        |                |  |              |        |       |  |   | 841     |  |  |   |         |   |  |   | 18,266  |  
|Other Long-term Liabilities                        |  |        | 9,765    |                |  |             |        |                |  |              |        |       |  |   | 668     |  |  |   |         |   |  |   | 10,433  |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  |        | 450,240  |                |  |             |        |                |  |              | 76,140  |       |  |   | 37,884  |  |  |   | (19,445  | ) |  |   | 544,819 |  
|Intercompany Accounts                              |  |        | (273,800 | )              |  |             | 904     |                |  |              | 263,283 |       |  |   | 33,399  |  |  |   | (23,786  | ) |  |   |        |  
|Preferred Stock                                    |  |        |         |                |  |             | 146,079 |                |  |              |        |       |  |   |        |  |  |   |         |   |  |   | 146,079 |  
|Shareholders Equity (Deficit)                     |  |        | 229,988  |                |  |             | (86,830 | )              |  |              | 54,696  |       |  |   | 44,055  |  |  |   | (324,557 | ) |  |   | (82,648 | )
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  
|                                                   |  | $      | 406,428  |                |  | $           | 60,153  |                |  | $            | 394,119 |       |  | $ | 115,338 |  |  | $ | (367,788 | ) |  | $ | 608,250 |  
|                                                   |  |        |          |                |  |             |         |                |  |              |         |       |  |   |         |  |  |   |          |   |  |   |         |  

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##### Table of Contents



EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MAY 31, 2002
(in thousands of dollars)

|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------- | ------- | -------------- | - | ----------- | ------- | -------------- | - | ------------ | ------- | ----- | - | ------ | ------ | - | - | ------ | ------ | - | - | ------- | ------- | -
|                                                      |                                                          |   |         |         |                |   | Guarantors  |         |                |   |              |         |       |   |        |        |   |   |       
|                                                      |                                                          |   |         |         |                |   |             |         | Non-Guarantors |   |              |         |       |   |        |        |  
|                                                      |                                                          |   |         |         |                |   | EaglePicher |         | Subsidiary     |   | Foreign      |         |       |   |        |        |   |   |       
|                                                      |                                                          |   | Issuer  |         | Holdings, Inc. |   | Guarantors  |         | Subsidiaries   |   | Eliminations |         | Total
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |      
|Net Sales:                                            |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|                                                      | Customers                                                |   | $       | 13,065  |                |   | $           |        |                |   | $            | 149,556 |       |   | $      | 19,257 |   |   | $      |       |   |   | $       | 181,878 |  
|                                                      | Intercompany                                             |   |         | 3,987   |                |   |             |        |                |   |              | 3,531   |       |   |        | 2      |   |   |        | (7,520 | ) |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|                                                      |                                                          |   | 17,052  |         |                |   |            |         |                |   | 153,087      |         |       |   | 19,259 |        |   |   | (7,520 | )      |   |   | 181,878 |        
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|Operating Costs and Expenses:                         |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |         | 10,140  |                |   |             |        |                |   |              | 123,411 |       |   |        | 15,106 |   |   |        | (7,520 | ) |   |         | 141,137 |  
|                                                      | Selling and administrative                               |   |         | 5,867   |                |   |             | 2       |                |   |              | 13,231  |       |   |        | 1,634  |   |   |        | (53    | ) |   |         | 20,681  |  
|                                                      | Intercompany charges                                     |   |         | (3,210  | )              |   |             |        |                |   |              | 2,516   |       |   |        | 641    |   |   |        | 53     |   |   |         |        |  
|                                                      | Depreciation and amortization                            |   |         | 765     |                |   |             |        |                |   |              | 10,571  |       |   |        | 699    |   |   |        |       |   |   |         | 12,035  |  
|                                                      | Goodwill amortization                                    |   |         | 934     |                |   |             |        |                |   |              | 2,775   |       |   |        | 247    |   |   |        |       |   |   |         | 3,956   |  
|                                                      | Management compensation-special                          |   |         | 2,381   |                |   |             |        |                |   |              |        |       |   |        |       |   |   |        |       |   |   |         | 2,381   |  
|                                                      | Insurance related losses                                 |   |         |        |                |   |             |        |                |   |              | 3,100   |       |   |        |       |   |   |        |       |   |   |         | 3,100   |  
|                                                      | Restructuring                                            |   |         | (2,483  | )              |   |             |        |                |   |              | 5,481   |       |   |        |       |   |   |        |       |   |   |         | 2,998   |  
|                                                      | Loss from Divestitures                                   |   |         | 3,039   |                |   |             |        |                |   |              | 2,806   |       |   |        |       |   |   |        |       |   |   |         | 5,845   |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|                                                      |                                                          |   | 17,433  |         |                |   | 2           |         |                |   | 163,891      |         |       |   | 18,327 |        |   |   | (7,520 | )      |   |   | 192,133 |        
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|Operating Income (Loss)                               |                                                          |   | (381    | )       |                |   | (2          | )       |                |   | (10,804      | )       |       |   | 932    |        |   |   |       |        |   |   | (10,255 | )      
|Other Income (Expense):                               |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|                                                      | Interest (expense) income                                |   |         | (3,394  | )              |   |             |        |                |   |              | (6,534  | )     |   |        | (1,300 | ) |   |        | 313    |   |   |         | (10,915 | )
|                                                      | Other income (expense), net                              |   |         | 283     |                |   |             |        |                |   |              | 400     |       |   |        | 97     |   |   |        | (313   | ) |   |         | 467     |  
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |         | (15,742 | )              |   |             | (21,966 | )              |   |              | 589     |       |   |        |       |   |   |        | 37,119 |   |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | (19,234 | )       |                |   | (21,968     | )       |                |   | (16,349      | )       |       |   | (271   | )      |   |   | 37,119 |        |   |   | (20,703 | )      
|Income Taxes                                          |                                                          |   |        |         |                |   |            |         |                |   |             |         |       |   | (820   | )      |   |   |       |        |   |   | (820    | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|Income (Loss) from Continuing Operations              |                                                          |   | (19,234 | )       |                |   | (21,968     | )       |                |   | (16,349      | )       |       |   | (1,091 | )      |   |   | 37,119 |        |   |   | (21,523 | )      
|Discontinued Operations                               |                                                          |   |        |         |                |   |            |         |                |   |             |         |       |   | (445   | )      |   |   |       |        |   |   | (445    | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        
|Net Income (Loss)                                     |                                                          | $ | (19,234 | )       |                | $ | (21,968     | )       |                | $ | (16,349      | )       |       | $ | (1,536 | )      |   | $ | 37,119 |        |   | $ | (21,968 | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |        |        |   |   |         |        

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##### Table of Contents



EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MAY 31, 2003
(in thousands of dollars)

|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |   |         |  
|----------------------------------------------------- |  | -------------------------------------------------------- | ------ | ------ | ------ | -------------- | ----- | ----------- | ----- | -------------- | ------- | ------------ | ------- | ----- | ------ | - | ------ | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                                      |  |                                                          |        |        |        |                |       | Guarantors  |       |                |         |              |         |       |        |   |        |   |         |  
|                                                      |  |                                                          |        |        |        |                |       |             |       | Non-Guarantors |         |              |         |       |        |   |        |  
|                                                      |  |                                                          |        |        |        |                |       | EaglePicher |       | Subsidiary     |         | Foreign      |         |       |        |   |        |   |         |  
|                                                      |  |                                                          |        | Issuer |        | Holdings, Inc. |       | Guarantors  |       | Subsidiaries   |         | Eliminations |         | Total
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |      
|Net Sales:                                            |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Customers                                                |        | $      | 14,212 |                |       | $           |      |                |         | $            | 136,690 |       |        | $ | 27,807 |   |         | $ |        |   |         | $ | 178,709 |  
|                                                      |  | Intercompany                                             |        |        | 6,340  |                |       |             |      |                |         |              | 3,964   |       |        |   | 1,027  |   |         |   | (11,331 | ) |         |   |        |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  |                                                          | 20,552 |        |        |                |      |             |       |                | 140,654 |              |         |       | 28,834 |   |        |   | (11,331 | ) |         |   | 178,709 |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Operating Costs and Expenses:                         |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Cost of products sold (exclusive of depreciation)        |        |        | 12,564 |                |       |             |      |                |         |              | 110,757 |       |        |   | 23,503 |   |         |   | (10,850 | ) |         |   | 135,974 |  
|                                                      |  | Selling and administrative                               |        |        | 6,661  |                |       |             | 2     |                |         |              | 7,219   |       |        |   | 1,787  |   |         |   |        |   |         |   | 15,669  |  
|                                                      |  | Intercompany charges                                     |        |        | (1,797 | )              |       |             |      |                |         |              | 1,718   |       |        |   | 79     |   |         |   |        |   |         |   |        |  
|                                                      |  | Management compensation  special                        |        |        | 100    |                |       |             |      |                |         |              | 324     |       |        |   |       |   |         |   |        |   |         |   | 424     |  
|                                                      |  | Insurance related losses (gains)                         |        |        | 724    |                |       |             |      |                |         |              | (6,460  | )     |        |   |       |   |         |   |        |   |         |   | (5,736  | )
|                                                      |  | Depreciation and amortization                            |        |        | 530    |                |       |             |      |                |         |              | 9,186   |       |        |   | 1,396  |   |         |   |        |   |         |   | 11,112  |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  |                                                          | 18,782 |        |        |                | 2     |             |       |                | 122,744 |              |         |       | 26,765 |   |        |   | (10,850 | ) |         |   | 157,443 |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Operating Income (Loss)                               |  |                                                          | 1,770  |        |        |                | (2    | )           |       |                | 17,910  |              |         |       | 2,069  |   |        |   | (481    | ) |         |   | 21,266  |  
|Other Income (Expense):                               |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Interest (expense) income                                |        |        | (9,043 | )              |       |             |      |                |         |              |        |       |        |   |       |   |         |   |        |   |         |   | (9,043  | )
|                                                      |  | Other income (expense), net                              |        |        | (793   | )              |       |             |      |                |         |              | 528     |       |        |   | 14     |   |         |   |        |   |         |   | (251    | )
|                                                      |  | Equity in earnings (losses) of
consolidated subsidiaries |        |        | 3,650  |                |       |             | 7,688 |                |         |              | 663     |       |        |   |       |   |         |   | (12,001 | ) |         |   |        |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Income (Loss) from Continuing Operations Before Taxes |  |                                                          | (4,416 | )      |        |                | 7,686 |             |       |                | 19,101  |              |         |       | 2,083  |   |        |   | (12,482 | ) |         |   | 11,972  |  
|Income Taxes                                          |  |                                                          | (208   | )      |        |                |      |             |       |                | (36     | )            |         |       | (906   | ) |        |   |        |   |         |   | (1,150  | )
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Income (Loss) From Continuing Operations              |  |                                                          | (4,624 | )      |        |                | 7,686 |             |       |                | 19,065  |              |         |       | 1,177  |   |        |   | (12,482 | ) |         |   | 10,822  |  
|Discontinued Operations                               |  |                                                          | (434   | )      |        |                |      |             |       |                |        |              |         |       | (2,702 | ) |        |   |        |   |         |   | (3,136  | )
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Net Income (Loss)                                     |  | $                                                        | (5,058 | )      |        | $              | 7,686 |             |       | $              | 19,065  |              |         | $     | (1,525 | ) |        | $ | (12,482 | ) |         | $ | 7,686   |  
|                                                      |  |                                                          |        |        |        |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  

19



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##### Table of Contents



EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
SIX MONTHS ENDED MAY 31, 2002
(in thousands of dollars)

|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------- | ------- | -------------- | - | ----------- | ------- | -------------- | - | ------------ | ------- | ----- | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                      |                                                          |   |         |         |                |   | Guarantors  |         |                |   |              |         |       |   |        |        |   |   |        
|                                                      |                                                          |   |         |         |                |   |             |         | Non-Guarantors |   |              |         |       |   |        |        |  
|                                                      |                                                          |   |         |         |                |   | EaglePicher |         | Subsidiary     |   | Foreign      |         |       |   |        |        |   |   |        
|                                                      |                                                          |   | Issuer  |         | Holdings, Inc. |   | Guarantors  |         | Subsidiaries   |   | Eliminations |         | Total
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |      
|Net Sales:                                            |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Customers                                                |   | $       | 24,700  |                |   | $           |        |                |   | $            | 280,201 |       |   | $      | 35,654 |   |   | $       |        |   |   | $       | 340,555 |  
|                                                      | Intercompany                                             |   |         | 7,610   |                |   |             |        |                |   |              | 6,357   |       |   |        | 4      |   |   |         | (13,971 | ) |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      |                                                          |   | 32,310  |         |                |   |            |         |                |   | 286,558      |         |       |   | 35,658 |        |   |   | (13,971 | )       |   |   | 340,555 |        
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|Operating Costs and Expenses:                         |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |         | 18,652  |                |   |             |        |                |   |              | 234,186 |       |   |        | 28,386 |   |   |         | (13,971 | ) |   |         | 267,253 |  
|                                                      | Selling and administrative                               |   |         | 12,162  |                |   |             | 2       |                |   |              | 18,548  |       |   |        | 3,185  |   |   |         | (100    | ) |   |         | 33,797  |  
|                                                      | Intercompany charges                                     |   |         | (5,860  | )              |   |             |        |                |   |              | 4,982   |       |   |        | 778    |   |   |         | 100     |   |   |         |        |  
|                                                      | Depreciation and amortization                            |   |         | 1,912   |                |   |             |        |                |   |              | 19,696  |       |   |        | 1,256  |   |   |         |        |   |   |         | 22,864  |  
|                                                      | Goodwill amortization                                    |   |         | 1,868   |                |   |             |        |                |   |              | 5,550   |       |   |        | 494    |   |   |         |        |   |   |         | 7,912   |  
|                                                      | Management compensation-special                          |   |         | 2,381   |                |   |             |        |                |   |              |        |       |   |        |       |   |   |         |        |   |   |         | 2,381   |  
|                                                      | Insurance related losses                                 |   |         |        |                |   |             |        |                |   |              | 3,100   |       |   |        |       |   |   |         |        |   |   |         | 3,100   |  
|                                                      | Restructuring                                            |   |         | (2,483  | )              |   |             |        |                |   |              | 5,481   |       |   |        |       |   |   |         |        |   |   |         | 2,998   |  
|                                                      | Loss from divestitures                                   |   |         | 3,164   |                |   |             |        |                |   |              | 2,806   |       |   |        |       |   |   |         |        |   |   |         | 5,970   |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      |                                                          |   | 31,796  |         |                |   | 2           |         |                |   | 294,349      |         |       |   | 34,099 |        |   |   | (13,971 | )       |   |   | 346,275 |        
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|Operating Income (Loss)                               |                                                          |   | 514     |         |                |   | (2          | )       |                |   | (7,791       | )       |       |   | 1,559  |        |   |   |        |         |   |   | (5,720  | )      
|Other Income (Expense):                               |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Interest (expense) income                                |   |         | (6,325  | )              |   |             |        |                |   |              | (14,056 | )     |   |        | (2,273 | ) |   |         | 958     |   |   |         | (21,696 | )
|                                                      | Other income (expense), net                              |   |         | 761     |                |   |             |        |                |   |              | 804     |       |   |        | 311    |   |   |         | (958    | ) |   |         | 918     |  
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |         | (19,812 | )              |   |             | (28,173 | )              |   |              | 1,168   |       |   |        |       |   |   |         | 46,817  |   |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | (24,862 | )       |                |   | (28,175     | )       |                |   | (19,875      | )       |       |   | (403   | )      |   |   | 46,817  |         |   |   | (26,498 | )      
|Income Taxes                                          |                                                          |   |        |         |                |   |            |         |                |   | (12          | )       |       |   | (1,193 | )      |   |   |        |         |   |   | (1,205  | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|Income (Loss) from Continuing Operations              |                                                          |   | (24,862 | )       |                |   | (28,175     | )       |                |   | (19,887      | )       |       |   | (1,596 | )      |   |   | 46,817  |         |   |   | (27,703 | )      
|Discontinued Operations                               |                                                          |   |        |         |                |   |            |         |                |   |             |         |       |   | (472   | )      |   |   |        |         |   |   | (472    | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        
|Net Income (Loss)                                     |                                                          | $ | (24,862 | )       |                | $ | (28,175     | )       |                | $ | (19,887      | )       |       | $ | (2,068 | )      |   | $ | 46,817  |         |   | $ | (28,175 | )      
|                                                      |                                                          |   |         |         |                |   |             |         |                |   |              |         |       |   |        |        |   |   |         |         |   |   |         |        

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EAGLEPICHER HOLDINGS, INC.
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS)
SIX MONTHS ENDED MAY 31, 2003
(in thousands of dollars)

|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |   |         |  
|----------------------------------------------------- |  | -------------------------------------------------------- | ------- | ------ | ------- | -------------- | ----- | ----------- | ----- | -------------- | ------- | ------------ | ------- | ----- | ------ | - | ------ | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                                      |  |                                                          |         |        |         |                |       | Guarantors  |       |                |         |              |         |       |        |   |        |   |         |  
|                                                      |  |                                                          |         |        |         |                |       |             |       | Non-Guarantors |         |              |         |       |        |   |        |  
|                                                      |  |                                                          |         |        |         |                |       | EaglePicher |       | Subsidiary     |         | Foreign      |         |       |        |   |        |   |         |  
|                                                      |  |                                                          |         | Issuer |         | Holdings, Inc. |       | Guarantors  |       | Subsidiaries   |         | Eliminations |         | Total
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |      
|Net Sales:                                            |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Customers                                                |         | $      | 26,926  |                |       | $           |      |                |         | $            | 265,337 |       |        | $ | 53,347 |   |         | $ |        |   |         |   | 345,610 |  
|                                                      |  | Intercompany                                             |         |        | 10,856  |                |       |             |      |                |         |              | 8,414   |       |        |   | 1,341  |   |         |   | (20,611 | ) |         |   |        |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  |                                                          | 37,782  |        |         |                |      |             |       |                | 273,751 |              |         |       | 54,688 |   |        |   | (20,611 | ) |         |   | 345,610 |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Operating Costs and Expenses:                         |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Cost of products sold (exclusive of depreciation)        |         |        | 23,649  |                |       |             |      |                |         |              | 217,949 |       |        |   | 44,816 |   |         |   | (20,129 | ) |         |   | 266,285 |  
|                                                      |  | Selling and administrative                               |         |        | 13,060  |                |       |             | 3     |                |         |              | 13,363  |       |        |   | 3,371  |   |         |   |        |   |         |   | 29,797  |  
|                                                      |  | Intercompany charges                                     |         |        | (3,453  | )              |       |             |      |                |         |              | 3,333   |       |        |   | 120    |   |         |   |        |   |         |   |        |  
|                                                      |  | Management compensation  special                        |         |        | 100     |                |       |             |      |                |         |              | 324     |       |        |   |       |   |         |   |        |   |         |   | 424     |  
|                                                      |  | Insurance related losses (gains)                         |         |        | 724     |                |       |             |      |                |         |              | (6,460  | )     |        |   |       |   |         |   |        |   |         |   | (5,736  | )
|                                                      |  | Depreciation and amortization                            |         |        | 1,477   |                |       |             |      |                |         |              | 18,446  |       |        |   | 2,535  |   |         |   |        |   |         |   | 22,458  |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  |                                                          | 35,557  |        |         |                | 3     |             |       |                | 246,955 |              |         |       | 50,842 |   |        |   | (20,129 | ) |         |   | 313,228 |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Operating Income (Loss)                               |  |                                                          | 2,225   |        |         |                | (3    | )           |       |                | 26,796  |              |         |       | 3,846  |   |        |   | (482    | ) |         |   | 32,382  |  
|Other Income (Expense):                               |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|                                                      |  | Interest (expense) income                                |         |        | (18,146 | )              |       |             |      |                |         |              |        |       |        |   |       |   |         |   |        |   |         |   | (18,146 | )
|                                                      |  | Other income (expense), net                              |         |        | (738    | )              |       |             |      |                |         |              | 948     |       |        |   | (137   | ) |         |   |        |   |         |   | 73      |  
|                                                      |  | Equity in earnings (losses) of
consolidated subsidiaries |         |        | 1,471   |                |       |             | 8,857 |                |         |              | 1,173   |       |        |   |       |   |         |   | (11,501 | ) |         |   |        |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Income (Loss) from Continuing Operations Before
Taxes |  |                                                          | (15,188 | )      |         |                | 8,854 |             |       |                | 28,917  |              |         |       | 3,709  |   |        |   | (11,983 | ) |         |   | 14,309  |  
|Income Taxes                                          |  |                                                          | (208    | )      |         |                |      |             |       |                | (46     | )            |         |       | (1,792 | ) |        |   |        |   |         |   | (2,046  | )
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Income (Loss) From Continuing Operations              |  |                                                          | (15,396 | )      |         |                | 8,854 |             |       |                | 28,871  |              |         |       | 1,917  |   |        |   | (11,983 | ) |         |   | 12,263  |  
|Discontinued Operations                               |  |                                                          | (434    | )      |         |                |      |             |       |                |        |              |         |       | (2,975 | ) |        |   |        |   |         |   | (3,409  | )
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  
|Net Income (Loss)                                     |  | $                                                        | (15,830 | )      |         | $              | 8,854 |             |       | $              | 28,871  |              |         | $     | (1,058 | ) |        | $ | (11,983 | ) |         | $ | 8,854   |  
|                                                      |  |                                                          |         |        |         |                |       |             |       |                |         |              |         |       |        |   |        |   |         |   |         |   |         |  

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EAGLEPICHER HOLDINGS, INC
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 2002
(in thousands of dollars)

|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |        | 
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | ------- | ------ | -------------- | - | ----------- | ------ | -------------- | - | ------------ | ------ | ----- | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------ | 
|                                                                                               |                                                                    |   |         |        |                |   | Guarantors  |        |                |   |              |        |       |   |        |        |   |   |        
|                                                                                               |                                                                    |   |         |        |                |   |             |        | Non-Guarantors |   |              |        |       |   |        |        |  
|                                                                                               |                                                                    |   |         |        |                |   | EaglePicher |        | Subsidiary     |   | Foreign      |        |       |   |        |        |   |   |        
|                                                                                               |                                                                    |   | Issuer  |        | Holdings, Inc. |   | Guarantors  |        | Subsidiaries   |   | Eliminations |        | Total
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net income (loss)                                                                              |                                                                    | $ | (24,862 | )      |                | $ | (28,175     | )      |                | $ | (19,887      | )      |       | $ | (2,068 | )      |   | $ | 46,817  |         |   | $ | (28,175 | )     
|Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities: |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Equity in (earnings) loss of consolidated
subsidiaries             |   |         | 19,812 |                |   |             | 28,173 |                |   |              | (1,168 | )     |   |        |       |   |   |         | (46,817 | ) |   |         |       | 
|                                                                                               | Depreciation and amortization                                      |   |         | 5,385  |                |   |             |       |                |   |              | 24,892 |       |   |        | 1,751  |   |   |         |        |   |   |         | 32,028 | 
|                                                                                               | Loss from Divestitures                                             |   |         | 3,164  |                |   |             |       |                |   |              | 2,806  |       |   |        |       |   |   |         |        |   |   |         | 5,970  | 
|                                                                                               | Insurance related losses                                           |   |         |       |                |   |             |       |                |   |              | 3,100  |       |   |        |       |   |   |         |        |   |   |         | 3,100  | 
|                                                                                               | Changes in assets and liabilities, net of effect
of non-cash items |   |         | 44,016 |                |   |             | 162    |                |   |              | 54,875 |       |   |        | (3,389 | ) |   |         | (47,011 | ) |   |         | 48,653 | 
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | 47,515  |        |                |   | 160         |        |                |   | 64,618       |        |       |   | (3,706 | )      |   |   | (47,011 | )       |   |   | 61,576  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Capital expenditures                                                                           |                                                                    |   | (251    | )      |                |   |            |        |                |   | (7,494       | )      |       |   | (771   | )      |   |   |        |         |   |   | (8,516  | )     
|Other                                                                                          |                                                                    |   | 268     |        |                |   |            |        |                |   | 1,675        |        |       |   | (861   | )      |   |   |        |         |   |   | 1,082   |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | 17      |        |                |   |            |        |                |   | (5,819       | )      |       |   | (1,632 | )      |   |   |        |         |   |   | (7,434  | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Reduction of long-term debt                                                                    |                                                                    |   | (18,520 | )      |                |   |            |        |                |   | (42,452      | )      |       |   | (46    | )      |   |   | 42,452  |         |   |   | (18,566 | )     
|Net borrowings (repayments) under revolving
credit agreements                                  |                                                                    |   | (30,500 | )      |                |   |            |        |                |   | (13,522      | )      |       |   | 76     |        |   |   |        |         |   |   | (43,946 | )     
|Other                                                                                          |                                                                    |   |        |        |                |   | (160        | )      |                |   | 658          |        |       |   | (1,286 | )      |   |   |        |         |   |   | (788    | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | (49,020 | )      |                |   | (160        | )      |                |   | (55,316      | )      |       |   | (1,256 | )      |   |   | 42,452  |         |   |   | (63,300 | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net Cash (Used In) Provided by Discontinued Operations                                         |                                                                    |   | 6,300   |        |                |   |            |        |                |   |             |        |       |   | (994   | )      |   |   |        |         |   |   | 5,306   |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Effect of exchange rates on cash                                                               |                                                                    |   |        |        |                |   |            |        |                |   |             |        |       |   | 1,320  |        |   |   |        |         |   |   | 1,320   |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net increase (decrease) in cash and
cash equivalents                                           |                                                                    |   | 4,812   |        |                |   |            |        |                |   | 3,483        |        |       |   | (6,268 | )      |   |   | (4,559  | )       |   |   | (2,532  | )     
|Intercompany accounts                                                                          |                                                                    |   | (4,671  | )      |                |   |            |        |                |   | (3,514       | )      |       |   | 3,693  |        |   |   | 4,492   |         |   |   |        |       
|Cash and cash equivalents,
beginning of period                                                 |                                                                    |   | 17,145  |        |                |   | 1           |        |                |   | 471          |        |       |   | 6,936  |        |   |   | 67      |         |   |   | 24,620  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       
|Cash and cash equivalents,
end of period                                                       |                                                                    | $ | 17,286  |        |                | $ | 1           |        |                | $ | 440          |        |       | $ | 4,361  |        |   | $ |        |         |   | $ | 22,088  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |                |   |              |        |       |   |        |        |   |   |         |         |   |   |         |       

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##### Table of Contents



EAGLEPICHER HOLDINGS, INC
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 2003
(in thousands of dollars)

|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |         |  
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | ------- | ------- | -------------- | - | ----------- | ----- | -------------- | - | ------------ | ------- | ----- | - | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                               |                                                                    |   |         |         |                |   | Guarantors  |       |                |   |              |         |       |   |        |         |   |   |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       | Non-Guarantors |   |              |         |       |   |        |         |  
|                                                                                               |                                                                    |   |         |         |                |   | EaglePicher |       | Subsidiary     |   | Foreign      |         |       |   |        |         |   |   |        
|                                                                                               |                                                                    |   | Issuer  |         | Holdings, Inc. |   | Guarantors  |       | Subsidiaries   |   | Eliminations |         | Total
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Net income (loss)                                                                              |                                                                    | $ | (15,830 | )       |                | $ | 8,854       |       |                | $ | 28,871       |         |       | $ | (1,058 | )       |   | $ | (11,983 | )       |   | $ | 8,854   |        
|Adjustments to reconcile net income (loss) to cash provided
by (used in) operating activities: |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|                                                                                               | Equity in (earnings) loss of consolidated
subsidiaries             |   |         | 1,471   |                |   |             | 8,857 |                |   |              | 1,173   |       |   |        |        |   |   |         | (11,501 | ) |   |         |        |  
|                                                                                               | Depreciation and amortization                                      |   |         | 3,043   |                |   |             |      |                |   |              | 18,446  |       |   |        | 2,535   |   |   |         |         |   |   |         | 24,024  |  
|                                                                                               | Provision for discontinued operations                              |   |         | 434     |                |   |             |      |                |   |              |        |       |   |        | 2,544   |   |   |         |        |   |   |         | 2,978   |  
|                                                                                               | Insurance related losses (gains)                                   |   |         | 724     |                |   |             |      |                |   |              | (6,460  | )     |   |        |        |   |   |         |        |   |   |         | (5,736  | )
|                                                                                               | Changes in assets and liabilities, net of effect
of non-cash items |   |         | (16,990 | )              |   |             | (877  | )              |   |              | (23,837 | )     |   |        | (11,375 | ) |   |         | 11,118  |   |   |         | (41,961 | )
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|                                                                                               |                                                                    |   | (27,148 | )       |                |   | 16,834      |       |                |   | 18,193       |         |       |   | (7,354 | )       |   |   | (12,366 | )       |   |   | (11,841 | )      
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Capital expenditures                                                                           |                                                                    |   | (1,199  | )       |                |   |            |       |                |   | (4,367       | )       |       |   | (3,242 | )       |   |   |        |         |   |   | (8,808  | )      
|Proceeds from sale of property and equipment                                                   |                                                                    |   |        |         |                |   |            |       |                |   | 1,155        |         |       |   |       |         |   |   |        |         |   |   | 1,155   |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|                                                                                               |                                                                    |   | (1,199  | )       |                |   |            |       |                |   | (3,212       | )       |       |   | (3,242 | )       |   |   |        |         |   |   | (7,653  | )      
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Reduction of long-term debt                                                                    |                                                                    |   | (8,463  | )       |                |   |            |       |                |   |             |         |       |   |       |         |   |   |        |         |   |   | (8,463  | )      
|Net borrowings (repayments) under revolving
credit agreements                                  |                                                                    |   | 5,500   |         |                |   |            |       |                |   |             |         |       |   |       |         |   |   |        |         |   |   | 5,500   |        
|Proceeds from issuance of treasury stock                                                       |                                                                    |   | 903     |         |                |   |            |       |                |   |             |         |       |   |       |         |   |   |        |         |   |   | 903     |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|                                                                                               |                                                                    |   | (2,060  | )       |                |   |            |       |                |   |             |         |       |   |       |         |   |   |        |         |   |   | (2,060  | )      
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Net cash used in discontinued operations                                                       |                                                                    |   |        |         |                |   |            |       |                |   |             |         |       |   | (874   | )       |   |   |        |         |   |   | (874    | )      
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Effect of exchange rates on cash                                                               |                                                                    |   |        |         |                |   |            |       |                |   |             |         |       |   | 4,414  |         |   |   |        |         |   |   | 4,414   |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Net increase (decrease) in cash and
cash equivalents                                           |                                                                    |   | (30,407 | )       |                |   | 16,834      |       |                |   | 14,981       |         |       |   | (7,056 | )       |   |   | (12,366 | )       |   |   | (18,014 | )      
|Intercompany accounts                                                                          |                                                                    |   | 8,233   |         |                |   | (16,834     | )     |                |   | (9,603       | )       |       |   | 6,658  |         |   |   | 11,546  |         |   |   |        |        
|Cash and cash equivalents,
beginning of period                                                 |                                                                    |   | 27,694  |         |                |   | 1           |       |                |   | (4,895       | )       |       |   | 7,902  |         |   |   | 820     |         |   |   | 31,522  |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        
|Cash and cash equivalents,
end of period                                                       |                                                                    | $ | 5,520   |         |                | $ | 1           |       |                | $ | 483          |         |       | $ | 7,504  |         |   | $ |        |         |   | $ | 13,508  |        
|                                                                                               |                                                                    |   |         |         |                |   |             |       |                |   |              |         |       |   |        |         |   |   |         |         |   |   |         |        

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

Critical Accounting Policies

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

Environmental Reserves

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

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

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

As of November 30, 2002, we had $17.7 million accrued primarily for sold
divisions or businesses related to legal and environmental remediation matters,
and $2.4 million recorded in other accrued liabilities related to environmental
remediation matters for our on-going businesses. As of May 31, 2003, we had
$13.6 million accrued primarily for sold divisions or businesses related to
legal and environmental remediation matters, and $1.6 million recorded in other
accrued liabilities related to environmental remediation matters for our
on-going businesses. We believe such reserves to be adequate under the current
circumstances.

Impairment of Long-Lived Assets, including Goodwill

We review for impairment the carrying value of our long-lived assets held
for use and assets to be disposed of. For all assets excluding goodwill, the
carrying value of a long-lived asset is considered impaired if the sum of the
undiscounted cash flows is less than the carrying value of the asset. If this
occurs, an impairment charge is recorded for the amount by which the carrying
value of the long-lived assets exceeds its fair value. Effective December 1,
2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. Under
this new accounting standard, we no longer amortize our goodwill and will be
required to complete an annual impairment test. We have determined that we
have six reporting units, as defined in SFAS No. 142, within our three
reportable business segments. We have completed our initial impairment test
required by this accounting standard and have determined there was no
impairment charge related to the adoption of this accounting standard on
December 1, 2002. These impairment tests require us to forecast our future cash
flows, which requires significant judgment. As of November 30, 2002 and May
31, 2003, we had recorded $163.9 million of

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goodwill. In addition as of November 30, 2002, we had recorded $177.1 million
of property, plant, and equipment, net (our primary long-lived asset), and as
of May 31, 2003 we had recorded $164.7 million of property, plant, and
equipment, net.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed and determinable, and collectibility is
reasonably assured. Generally, all of these conditions are met at the time we
ship our products to our customers. Net Sales and Cost of Products Sold
include transportation costs. For certain products sold under fixed-price
contracts and subcontracts with various United States Government agencies and
aerospace and defense contractors, we utilize the percentage-of-completion
method of accounting. When we use the percentage-of-completion method, we
measure our percent complete based on total costs incurred to date as compared
to our best estimate of total costs to be incurred.

Under the percentage-of-completion method, contract costs include direct
material, labor costs, and those indirect costs related to contract
performance, such as indirect labor, supplies, tools and repairs. Selling and
administrative expenses are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes to job performance, job conditions, and
estimated profitability may result in revisions to contract revenue and costs
and are recognized in the period in which the revisions are made. We provided
for estimated losses on uncompleted contracts of $0.5 million at November 30,
2002 and May 31, 2003. The percentage of completion method requires a higher
degree of judgment and use of estimates than other revenue recognition methods.
The primary judgments and estimates involved include our ability to accurately
estimate the contracts percent complete and the reasonableness of the
estimated costs to complete as of each financial reporting period.

Pension and Postretirement Benefit Plan Assumptions

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

Deferred Stripping Costs

In our Filtration and Minerals Segment, we generally charge our mining
costs to Cost of Products Sold as sales are incurred. However, we defer and
amortize certain mining costs on a units-of-production basis over the estimated
life of the particular section of a mine, based on estimated recoverable cubic
yards of ore in that section. These mining costs, which are commonly referred
to as deferred stripping costs, are incurred in mining activities that are
normally associated with the removal of waste rock. The deferred stripping
accounting method is generally accepted in the mining industry where mining
operations have diverse grades and waste-to-ore ratios; however industry
practice does vary. By deferring stripping costs, we match the costs of
production when the sale of diatomaceous earth occurs with an appropriate
amount of waste removal cost. If we were to expense deferred stripping costs
as incurred, there could be

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greater volatility in our period-to-period operating results. Deferred
stripping costs recorded in our accompanying balance sheets totaled $3.7
million at November 30, 2002 and $5.7 million at May 31, 2003.

Legal Contingencies

We are a defendant in numerous litigation and regulatory matters including
those involving environmental law, employment law and patent law, as discussed
in Notes K and G to the condensed consolidated financial statements in Item 1
of this report. As required by SFAS No. 5, we determine whether an estimated
loss from a loss contingency should be accrued by assessing whether a loss is
deemed probable and can be reasonably estimated. We analyze our litigation and
regulatory matters based on available information to assess potential
liability. We develop our views on estimated losses in consultation with
outside counsel and environmental experts handling our defense in these
matters, which involves an analysis of potential results, assuming a
combination of litigation and settlement strategies. Should these matters
result in an adverse judgment or be settled for significant amounts, they could
have a material adverse effect on our results of operations, cash flows and
financial position in the period or periods in which such judgment or
settlement occurs.

Estimates Used Relating to Restructuring, Divestitures and Asset
Impairments

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

Income Taxes and Tax Valuation Allowances

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

Risk Management Activities

We are exposed to market risk including changes in interest rates,
currency exchange rates and commodity prices. We use derivative instruments to
manage our interest rate and foreign currency exposures. We do not use
derivative instruments for speculative or trading purposes. Generally, we
enter into hedging relationships such that changes in the fair values or cash
flows of items and transactions being hedged are expected to be offset by
corresponding changes in the values of the derivatives. Accounting for
derivative instruments is complex, as evidenced by the significant
interpretations of the primary accounting standard, and continues to evolve.
As of November 30, 2002 we had a notional amount of $13.5 million and at May
31, 2003 we had a notional amount of $23.6 million of foreign forward

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exchange contracts. In addition, at November 30, 2002 and May 31, 2003, we had
notional amounts of $90.0 million of interest rate swap contracts to hedge our
interest rate risks. The impact of a 1.0% increase in interest rates would
result in additional interest expense of approximately $0.7 million on an
annual basis.

Other Significant Accounting Policies

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

Results of Operations

The following summary financial information about our industry segment
data is presented to gain a better understanding of the narrative discussion
below about our business segments. See Note O in our Form 10-K for the year
ended November 30, 2002, filed on March 3, 2003, for additional financial
information by segment.

As discussed in Note Q to our financial statements for the year ended
November 30, 2002, the accompanying 2002 financial information has 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.

As discussed in Note G to our financial statements in Item 1 of this
report, the accompanying 2002 financial information has been restated to
reflect our Hillsdale U.K. Automotive operation as a discontinued business.
The operation was sold on June 11, 2003. The following discussion and analysis
gives effect to the restatement (in thousands of dollars).

|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |      |  
|------------------------------------------ | ------------ | - | -------------------------- | ------- | ---- | - | -------- | ------- | - | - | ------ | ------ | - |  | ------ | ---- | -
|                                           |              |   | Three Months Ended May 31,
|                                           |              |   |                           
|                                           |              |   | 2002                       |         | 2003 |   | Variance |         | %
|                                           |              |   |                            |         |      |   |          |         |  
|Net Sales                                  |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|Hillsdale Division                         |              | $ | 93,524                     |         |      | $ | 85,064   |         |   | $ | (8,460 | )      |   |  | (9.1   | )   
|Wolverine Division                         |              |   | 19,707                     |         |      |   | 23,189   |         |   |   | 3,482  |        |   |  | 17.7   |     
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           | Automotive   |   |                            | 113,231 |      |   |          | 108,253 |   |   |        | (4,978 | ) |  |        | (4.4 | )
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|Power Group                                |              |   | 25,173                     |         |      |   | 34,097   |         |   |   | 8,924  |        |   |  | 35.5   |     
|Precision Products-divested July 17, 2002  |              |   | 1,388                      |         |      |   |         |         |   |   | (1,388 | )      |   |  | (100.0 | )   
|Specialty Materials Group                  |              |   | 17,501                     |         |      |   | 13,211   |         |   |   | (4,290 | )      |   |  | (24.5  | )   
|Pharmaceutical Services (formerly ChemSyn) |              |   | 3,776                      |         |      |   | 3,383    |         |   |   | (393   | )      |   |  | (10.4  | )   
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           | Technologies |   |                            | 47,838  |      |   |          | 50,691  |   |   |        | 2,853  |   |  |        | 6.0  |  
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|Filtration and Minerals                    |              |   | 20,809                     |         |      |   | 19,765   |         |   |   | (1,044 | )      |   |  | (5.0   | )   
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           |              | $ | 181,878                    |         |      | $ | 178,709  |         |   | $ | (3,169 | )      |   |  | (1.7   | )   
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|Operating Income (Loss)                    |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|Automotive                                 |              | $ | 3,898                      |         |      | $ | 6,696    |         |   | $ | 2,798  |        |   |  | 71.8   |     
|Technologies                               |              |   | (8,626                     | )       |      |   | 14,976   |         |   |   | 23,602 |        |   |  | N/A    |     
|Filtration and Minerals                    |              |   | 3,589                      |         |      |   | 1,621    |         |   |   | (1,968 | )      |   |  | (54.8  | )   
|Divested Divisions                         |              |   | (5,845                     | )       |      |   |         |         |   |   | 5,845  |        |   |  | 100.0  |     
|Corporate/Intersegment                     |              |   | (3,271                     | )       |      |   | (2,027   | )       |   |   | 1,244  |        |   |  | 38.0   |     
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           |              | $ | (10,255                    | )       |      | $ | 21,266   |         |   | $ | 31,521 |        |   |  | N/A    |     
|                                           |              |   |                            |         |      |   |          |         |   |   |        |        |   |  |        |     

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|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |      |  
|------------------------------------------ | ------------ | - | ------------------------ | ------- | ---- | - | -------- | ------- | - | - | ------ | ------ | - |  | ------ | ---- | -
|                                           |              |   | Six Months Ended May 31,
|                                           |              |   |                         
|                                           |              |   | 2002                     |         | 2003 |   | Variance |         | %
|                                           |              |   |                          |         |      |   |          |         |  
|Net Sales                                  |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|Hillsdale Division                         |              | $ | 174,806                  |         |      | $ | 164,937  |         |   | $ | (9,869 | )      |   |  | (5.7   | )   
|Wolverine Division                         |              |   | 37,355                   |         |      |   | 43,907   |         |   |   | 6,552  |        |   |  | 17.5   |     
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           | Automotive   |   |                          | 212,161 |      |   |          | 208,844 |   |   |        | (3,317 | ) |  |        | (1.6 | )
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|Power Group                                |              |   | 47,800                   |         |      |   | 66,137   |         |   |   | 18,337 |        |   |  | 38.4   |     
|Precision Products-divested July 17, 2002  |              |   | 2,603                    |         |      |   |         |         |   |   | (2,603 | )      |   |  | (100.0 | )   
|Specialty Materials Group                  |              |   | 30,775                   |         |      |   | 26,672   |         |   |   | (4,103 | )      |   |  | (13.3  | )   
|Pharmaceutical Services (formerly ChemSyn) |              |   | 7,181                    |         |      |   | 5,286    |         |   |   | (1,895 | )      |   |  | (26.4  | )   
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           | Technologies |   |                          | 88,359  |      |   |          | 98,095  |   |   |        | 9,736  |   |  |        | 11.0 |  
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|Filtration and Minerals                    |              |   | 40,035                   |         |      |   | 38,671   |         |   |   | (1,364 | )      |   |  | (3.4   | )   
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           |              | $ | 340,555                  |         |      | $ | 345,610  |         |   | $ | 5,055  |        |   |  | 1.5    |     
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|Operating Income (Loss)                    |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|Automotive                                 |              | $ | 7,093                    |         |      | $ | 11,913   |         |   | $ | 4,820  |        |   |  | 68.0   |     
|Technologies                               |              |   | (7,955                   | )       |      |   | 23,022   |         |   |   | 30,977 |        |   |  | N/A    |     
|Filtration and Minerals                    |              |   | 4,895                    |         |      |   | 1,510    |         |   |   | (3,385 | )      |   |  | (69.2  | )   
|Divested Divisions                         |              |   | (5,970                   | )       |      |   |         |         |   |   | 5,970  |        |   |  | 100.0  |     
|Corporate/Intersegment                     |              |   | (3,783                   | )       |      |   | (4,063   | )       |   |   | (280   | )      |   |  | (7.4   | )   
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     
|                                           |              | $ | (5,720                   | )       |      | $ | 32,382   |         |   | $ | 38,102 |        |   |  | N/A    |     
|                                           |              |   |                          |         |      |   |          |         |   |   |        |        |   |  |        |     

Automotive Segment

Sales in our Automotive Segment decreased $5.0 million, or 4.4%, to $108.3
million in the second quarter of 2003 from $113.2 million in the second quarter
of 2002, and decreased $3.3 million, or 1.6%, to $208.8 million in the first
six months of 2003 from $212.2 million in the first six months of 2002.

In the second quarter of 2003, our Wolverine divisions sales increased
$3.5 million, or 17.7%, and in the first six month of 2003, they increased $6.6
million, or 17.5%. These increases are due primarily to an approximate 10%
year over year volume increase despite lower North American
automotive production levels, driven by increased penetration of the
aftermarket and small engine markets, and new programs with original equipment
manufacturers through Federal Mogul and Taiho. The balance of the increase was
favorable foreign currency as a result of the strengthening of the Euro.
Approximately 38% of our Wolverine divisions sales are from Europe.

Offsetting our Wolverine divisions sales increase was a decrease in our
Hillsdale divisions sales during the second quarter of 2003 of $8.5 million,
or 9.1%, and a decrease in the first six months of 2003 of $9.9 million, or
5.7%. Our Hillsdale divisions sales were lower due to (a) a $3.5 million
decline in the second quarter of 2003 ($6.3 million in the first six months of
2003) in transmission pump sales related to a Ford Company program phase-out,
(b) price decreases of $0.9 million, or 1.0%, in the second quarter of 2003
($1.7 million, or 1.0%,, in the first six months of 2003), and (c) $4.1
million, or 4.4%, decline in the second quarter of 2003 ($1.9 million, or 1.0%,
in the first six months of 2003) in volume related to other mature program
phase outs and reduced North American automotive builds. These volume declines
related to the North American automotive build are below the industry estimated
averages of approximately 7-8% in the second quarter of 2003 (3-4% in the first
six months of 2003) due to our strong position with Japanese automotive
manufacturers which represent approximately 35% of our Hillsdale divisions
sales, and a strong presence on General Motors light truck platforms.

Operating income increased $2.8 million, or 71.8%, to $6.7 million in the
second quarter of 2003 from $3.9 million in the second quarter of 2002, and
increased $4.8 million, or 68.0%, to $11.9 million in the first six months of
2003 from $7.1 million in the first six months of 2002. In the second quarter
of 2003, this improved performance was primarily due to the following
favorable/(unfavorable) items:



| | a. |  | $2.3 million reduction in costs due to productivity
improvements;
| | -- |  | -----------------------------------------------------------------
|
| | b. |  | ($0.9) million in price decreases;                               

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| | c. |  | $2.0 million reduction in goodwill amortization expense in
2003 compared to 2002 (due to the adoption of SFAS No. 142, Goodwill
and Other Intangible Assets, which no longer requires the
amortization of goodwill);
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | d. |  | $0.3 million less depreciation expenses; and                                                                                                                                                                        
|
| | e. |  | ($0.9) million in higher operating costs, primarily energy
costs, and wage and benefits expenses at our unionized facilities.                                                                                       

Also in the second quarter of 2003, the impact on margins due to decreased
volumes was offset by favorable sales mix and favorable foreign currency as a
result of the strengthening of the Euro.

In the first six months of 2003, this improved performance was primarily
due to the following favorable/(unfavorable) items:



| | a. |  | $4.4 million reduction in costs due to productivity
improvements;                                                                                                                                                         
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | $1.4 million increase in margin due primarily to favorable
sales mix and favorable foreign currency as a result of the
strengthening of the Euro, partially offset by decreases in sales
volume in our Hillsdale division;
|
| | c. |  | ($1.7) million in price decreases;                                                                                                                                                                                        
|
| | d. |  | $4.0 million of reduction in goodwill amortization expense in
2003 compared to 2002 (due to the adoption of SFAS No. 142, Goodwill
and Other Intangible Assets, which no longer requires the
amortization of goodwill);   
|
| | e. |  | ($0.9) million more depreciation expenses;                                                                                                                                                                                
|
| | f. |  | ($1.0) million increase in energy costs; and                                                                                                                                                                              
|
| | g. |  | ($1.4) million in higher operating costs, primarily related
to wage and benefits expenses at our unionized facilities.                                                                                                    

Technologies Segment

Sales in our Technologies Segment increased $2.9 million, or 6.0%, to
$50.7 million in the second quarter of 2003 from $47.8 million in the second
quarter of 2002, and increased $9.7 million, or 11.0%, to $98.1 million in the
first six months of 2003 from $88.4 million in the first six months of 2002.
Excluding sales from our Precision Products business, which we divested in July
2002, this segments sales increased $4.2 million, or 9.1% in the second
quarter of 2003, and increased $12.3 million, or 14.4% in the first six months
of 2003.

Sales in the Power Group increased $8.9 million, or 35.5%, in the second
quarter of 2003, and $18.3 million, or 38.4%, in the first six months of 2003.
The increase in our Power Group sales is primarily related to new programs,
improved pricing, and increased defense spending, as well as an increase of
$0.6 million, or 24.7%, in the second quarter of 2003 (and a $1.6 million, or
33.2%, in the first six months of 2003) in our commercial power sales, as a
result of new sales initiatives in the commercial market. Partially offsetting
the strong increase in our Power Group sales were declines in our Specialty
Materials Group and our Pharmaceutical Services businesses. In our Specialty
Materials Group, sales decreased $4.3 million in the second quarter of 2003 and
$4.1 million in the first six months of 2003. The second quarter decrease was
due to (a) $3.7 million decrease in enriched Boron related products due to the
timing of customer orders and (b) $0.6 million decrease primarily related to
decreased Germanium based products due to the weak telecommunications, fiber
optics, and semiconductor markets. The decrease in our Specialty Materials
Groups sales in the first six months of 2003 was due to (a) $1.7 million
decrease in enriched Boron related products due to the timing of customer
orders, (b) $2.0 million decrease related to decreased Germanium based products
due to the weak telecommunications, fiber optics, and semiconductor markets and
(c) $0.4 million of less product sales for products exited as part of our
restructuring announced in November 2001. In addition, Pharmaceutical Services
sales decreased $0.4 million in the second quarter of 2003 and $1.9 million in
the first six months of 2003 due to a cancellation of a drug program with one
of its largest customers, and a general softening in the market.

Operating income improved $23.6 million to income of $15.0 million in the
second quarter of 2003 from a loss of $8.6 million in the second quarter of
2002, and improved $31.0 million to income of $23.0 million in the first six
months of 2003 from a loss of $8.0 million in the first six months of 2002.
Included in the second quarter of 2002

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amounts were the following unusual items:



| | a. |  | $4.5 million of legal expenses and legal settlement charges
($5.7 million in the first six months of 2002) recorded in Selling
and Administrative expenses as described in Item 3 of our Form 10-K
for the year ended November 30, 2002;                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 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. |  | $5.5 million charge in Restructuring expense 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 included an inventory write-down of $2.9
million, representing the estimated loss incurred from the
liquidation of current inventory. An additional $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; and
|
| | d. |  | $1.2 million of income related to the reversal of a portion
of our fourth quarter 2001 Restructuring expense related to
severance payments made by the pension plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

The following favorable items totaling $11.7 million in the second quarter
of 2003 (and $17.9 million in the first six months of 2003) contributed to the
improvement in operating income:



| | a. |  | $1.3 million in the second quarter of 2003 ($3.6 million in
the first six months of 2003) related to productivity initiatives;                                                                                                                       
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | $2.0 million in the second quarter of 2003 ($4.0 million in
the first six months of 2003) related to increased volumes,
favorable sales mix, and improved pricing;                                                                                   
|
| | c. |  | $1.9 million in the second quarter of 2003 ($3.8 million in
the first six months of 2003) of less goodwill amortization expense
due to our adoption of SFAS No. 142, Goodwill and Other Intangible
Assets, on December 1, 2002; and                  
|
| | d. |  | $6.5 million insurance gain in the second quarter of 2003 and
the first six months of 2003 primarily related to the settlement of
a claim with our insurance carrier over the coverage on a fire which
occurred at one of our facilities during 2002.

Filtration and Minerals Segment

Sales in our Filtration and Minerals Segment decreased $1.0 million, or
5.0%, to $19.8 million in the second quarter of 2003 from $20.8 million in the
second quarter of 2002, and decreased $1.4 million, or 3.4%, to $38.7 million
in the first six months of 2003 from $40.0 million in the first six months of
2002. These decreased results were due primarily to lower volumes, which were
partially offset by favorable foreign currency as a result of the strengthening
of the Euro. During the fourth quarter of 2002, we were, but are no longer,
exploring the possible sale of our Filtration and Minerals business. This
potential sale diverted a significant amount of divisional management attention
from operational focus, which has had a negative impact on 2003 performance.
In the past two months, new divisional leadership has been put in place,
including a divisional president.

Operating income decreased $2.0 million, or 54.8%, to $1.6 million in the
second quarter of 2003 from $3.6 million in the second quarter of 2002, and
decreased $3.4 million, or 69.2%, to $1.5 million in the first six months of
2003 from $4.9 million in the first six months of 2002. These decreased
earnings are due to lower volumes, severance and recruiting costs related to
restructuring the segments management team and additional freight costs
largely related to the resolution of disputed freight claims with a former
carrier, which were partially offset by favorable foreign currency as a result
of the strengthening of the Euro.

Company Discussion

Net Sales.Net Sales decreased $3.2 million, or 1.7%, to $178.7 million
in the second quarter of 2003 from $181.9 million in the second quarter of
2002, and increased $5.1 million, or 1.5%, to $345.6 million in the first six
months of 2003 from $340.6 million in the first six months of 2002. Excluding
sales from our Precision Products

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business within our Technologies Segment, which we divested in July 2002, net
sales decreased $1.8 million, or 1.0%, in the second quarter of 2003, and
increased $7.7 million, or 2.3%, in the first six months of 2003.

In the second quarter of 2003, the decrease was due to sales decreases of
9.1% in our Automotive Segments Hillsdale business and 5.0% in our Filtration
and Minerals Segment, partially offset by strong increases of 17.7% in our
Automotive Segments Wolverine business and 35.5% in our Technologies Segments
Power Group. See above for a discussion of the individual segments results.
In the first six months of 2003, the increase was due to strong increases of
17.5% in our Automotive Segments Wolverine business and 38.4% in our
Technologies Segments Power Group, partially offset by decreases of 5.7% in
our Automotive Segments Hillsdale business and 3.4% in our Filtration and
Minerals Segment. See above for a discussion of the individual segments
results.

Cost of Products Sold (exclusive of depreciation). Costs of products sold
decreased $5.2 million, or 3.7%, to $136.0 million in the second quarter of
2003 from $141.1 million in the second quarter of 2002, and decreased $1.0
million, or 0.4%, to $266.3 million in the first six months of 2003 from $267.3
million in the first six months of 2002. Our gross margins increased $2.0
million to $42.7 million in the second quarter of 2003 from $40.7 million in
the second quarter of 2002, and the gross margin percentage increased 1.5
points to 23.9% from 22.4%, despite an increase of $1.2 million (0.7 points) in
pension costs, and a $0.5 million increase as a result of higher energy costs.
Our gross margins increased $6.0 million to $79.3 million in the first six
months of 2003 from $73.3 million in the first six months of 2002, and the
gross margin percentage increased 1.5 points to 23.0% from 21.5%, despite an
increase of $2.0 million (0.6 points) in pension costs, and a $0.7 million
increase as a result of higher energy costs. These margin rate improvements
are primarily the result of productivity improvements in our Automotive and
Technologies Segments, improved sales mix and price increases in our
Technologies Segment, improved sales mix in our Automotive Segment, and
favorable foreign currency as a result of the strengthening of the Euro in the
Automotive and Filtration and Minerals Segments.

Selling and Administrative.Selling and administrative expense decreased
$5.0 million, or 24.2%, to $15.7 million in the second quarter of 2003 from
$20.7 million in the second quarter of 2002, and decreased $4.0 million, or
11.8%, to $29.8 million in the first six months of 2003 from $33.8 million in
the first six months of 2002. These decreases were primarily due to $4.8
million of legal expenses and legal settlement charges included in the second
quarter of 2002 ($6.3 million in the first six months of 2002) as described in
Item 3 of our Form 10-K for the year ended November 30, 2002. In addition,
selling and administrative expense also increased $0.3 million in the second
quarter of 2003 and $1.0 million in the first six months of 2003 due to
increased compensation costs related to our long-term bonus plan.

Goodwill Amortization.Due to the adoption of SFAS No. 142, Goodwill and
Other Intangible Assets, no goodwill amortization expense was recorded in 2003
while 2002 included $4.0 million of goodwill amortization expense in the second
quarter of 2002 and $7.9 million in the first six months of 2002. This new
accounting standard required that we cease the amortization of goodwill,
effective December 1, 2002, and complete an annual impairment test to determine
if an impairment charge has occurred. We have completed our initial impairment
test as required by this accounting standard and have determined that our
goodwill was not impaired at the time we adopted this accounting standard.

Restructuring.On May 31, 2002 we announced we would 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 to Restructuring expense during the second quarter of 2002. We
also reduced the amounts previously expensed and accrued as Restructuring
expense in 2001 by $2.5 million primarily to reflect severance payments made
from our over-funded pension plan at November 30, 2001 to eligible employees.

Management Compensation  Special. Management compensation- special
expenses of $2.4 million in the second quarter of 2002 and $0.4 million in the
second quarter of 2003 relate to compensation for former officers upon their
separation of employment. In 2002, these amounts related to two (2) former
officers and in 2003, these amounts related to three (3) former officers.

Insurance Related Losses/ (Gains). During the second quarter of 2002, we
recorded 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

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bulk pharmaceutical manufacturing plant. We 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. In the second quarter of 2003, we recorded a $5.7
million gain primarily related to the settlement of a claim with our insurance
carrier over the coverage on a fire during 2002 at our Seneca, Missouri
non-operating facility.

Loss from Divestitures.During 2002, we recorded approximately $3.2
million in additional accruals for costs related to certain litigation issues
and environmental remediation related to operations divested prior to November
30, 2001. In addition, during 2002 we signed a letter of intent to sell
certain assets and liabilities of our Precision Products business in our
Technologies segment to a group of employees and management personnel. We
recorded a $2.8 million loss on sale, which was completed in July 2002.

Interest Expense.Interest expense was $10.9 million in the second
quarter of 2002 and $9.0 million in the second quarter of 2003 (not including
$0.3 million in the second quarter of 2002 and 2003 which was allocated to
discontinued operations). Interest expense was $21.7 million in the first six
months of 2002 and $18.1 million in the first six months of 2003 (not including
$0.6 million in first six months of 2002 and 2003 which was allocated to
discontinued operations). Also included in the first six months of 2002, but
not the second quarter of 2002, was $1.5 million in fees and other costs,
primarily related to establishing our accounts receivable asset-backed facility
(see Accounts Receivable Asset-Backed Securitization under Liquidity and
Capital Resources). Our year over year reduced interest expense is due to
lower interest rates and lower debt levels.

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Income (Loss) from Continuing Operations Before Taxes. Income (Loss) from
Continuing Operations Before Taxes improved $32.7 million in the second quarter
of 2003 to income of $12.0 million, and improved $40.8 million in the first six
months of 2003 to income of $14.3 million. These changes were primarily the
result of the following decreases in operating costs and expenses (in thousands
of dollars):

|                                                                       |  |            |        |           |  |   |        | 
|---------------------------------------------------------------------- |  | ---------- | ------ | --------- |  | - | ------ | 
|                                                                       |  | Second     |        | First Six
|                                                                       |  | Quarter of |        | Months of
|                                                                       |  | 2003       |        | 2003     
|                                                                       |  |            |        |          
|a. Management compensation-special                                     |  | $          | 1,957  |           |  | $ | 1,957  | 
|b. Loss from divestitures                                              |  |            | 5,845  |           |  |   | 5,970  | 
|c. Restructuring                                                       |  |            | 2,998  |           |  |   | 2,998  | 
|d. Legal and Settlement costs (included in Selling and Administrative) |  |            | 4,800  |           |  |   | 6,250  | 
|e. Insurance related losses (gains)                                    |  |            | 8,836  |           |  |   | 8,836  | 
|f. Depreciation adjustment related to equipment useful lives           |  |            | 1,100  |           |  |   | 1,100  | 
|g. Goodwill amortization                                               |  |            | 3,956  |           |  |   | 7,912  | 
|                                                                       |  |            |        |           |  |   |        | 
|                                                                       |  | $          | 29,492 |           |  | $ | 35,023 | 
|                                                                       |  |            |        |           |  |   |        | 

The remaining improvements of $3.2 million in the second quarter of 2003
and $5.8 million in the first six months of 2003 are primarily related to
productivity initiatives, improved pricing, favorable sales mix, and lower
interest expense. The impact of foreign currency gains on a consolidated basis
is not material as the gains in our operating segments are offset by losses at
the Corporate Segment as a result of foreign currency forward contract hedges.

Income Taxes.Income tax provision was $0.8 million in the second quarter
of 2002 compared to $1.2 million in the second quarter of 2003. Income tax
provision was $1.2 million in the first six months of 2002 compared to $2.0
million in the first six months of 2003 (not including a $0.6 million tax
benefit in the second quarter of 2003 which was allocated to discontinued
operations). The provision in 2002 and 2003 relates to the allocation of income
and loss between the United States and foreign jurisdictions and primarily
represents the estimated tax that will be due in certain jurisdictions where no
tax benefit can be assured from utilizing previous losses. There is no U.S.
Federal net tax benefit or provision recorded during 2002 and 2003.

Discontinued Operations.During the second quarter of 2003, we accounted
for our Hillsdale U.K. Automotive operation as a discontinued operation and
restated our prior period financial statements to conform to the discontinued
operations presentation. The Hillsdale U.K. Automotive operation was sold on
June 11, 2003. See Note G in our financial statements in Item 1 of this
report.

Net Income (Loss).Net Income (Loss) improved $29.7 million in the second
quarter of 2003 to income of $7.7 million, and improved $37.0 million in the
first six months of 2003 to income of $8.9 million as a result of the items
discussed above.

Company Outlook.Projected sales for 2003 are estimated to be in the range
of $690.0 million to $700.0 million compared to $682.8 million in 2002, which
is restated to exclude our Hillsdale U.K. Automotive operation, which was
accounted for as a discontinued operation in the second quarter of 2003. The
sales estimate for 2003 reflects the anticipated decrease in sales of
approximately $15.0 million related to the phase-out of a Ford Company
automotive transmission pump program in our Hillsdale Division and the current
uncertainty regarding industry forecasted automotive builds for 2003.

We are projecting 2003 Operating Income to be in the range of $59.2
million to $63.2 million, which excludes the insurance gain of $5.7 million
that we recorded in the second quarter of 2003. This amount includes $45.0
million of depreciation and amortization, and excludes $0.5 million of
non-operating income. These Operating Income estimates also include $3.0
million of expense related to non-cash provisions for our long-term bonus
program, which for purposes of determining our debt covenant calculations are
added back to Operating Income.

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

Liquidity and Capital Resources

Our cash flows from operations and availability under our credit
facilities are considered adequate to fund our short-term capital needs. As of
May 31, 2003, we had $71.5 million unused under our various credit facilities.
However, due to various financial covenant limitations under our senior credit
agreement measured at the end of each quarter, on May 31, 2003, we could only
incur an additional $66.8 million of indebtedness.

We
are currently negotiating a new senior secured credit facility in the
approximate amount of $275.0 million to replace our current
credit facility, which provided for an original term loan of
$75.0 million, as amended, and a $220.0 million revolving
facility.

In July 2003, we also announced the commencement of a cash tender offer
and consent solicitation for our 9 3/8% Senior Subordinated Notes Due 2008 (the
Notes). We are seeking to acquire any and all of our approximately $220.0
million of Notes outstanding. The consent solicitation seeks consent of the
holders of the Notes to amend the indenture governing the Notes to eliminate
certain of the restrictive covenants and other contractual obligations. The
tender offer and consent solicitation are being made in accordance with and
subject to the terms and conditions stated in EaglePicher Incorporateds Offer
to Purchase and Consent Solicitation Statement dated July 9, 2003. EaglePicher
Incorporated intends to finance the tender offer and consent solicitation with
the proceeds of its offering of approximately $220.0 million aggregate
principal amount of senior unsecured notes pursuant to Rule 144A and Regulation
S under the Securities Act of 1933, as amended (the Securities Act), together
with other funds. The securities to be offered have not been offered or sold
in the United States, absent registration or an applicable exemption from such
registration requirements. There is no assurance that this offering will be
successful.

At May 31, 2003, we were in compliance with all of our debt covenants. We
expect to remain in compliance with our debt covenants for the remainder of
fiscal year 2003. Our senior secured credit facility matures in February 2004,
by which time we must either refinance this credit facility or extend its
maturity date. Although we are currently negotiating a new credit facility, as
described above, we can make no assurances that we can successfully refinance
or extend the maturity date of our senior secured credit facility. However,
even if we do not consummate the new credit facility we are currently
negotiating, we believe we can obtain a new credit facility on terms and
conditions that are sufficient to meet our long-term capital requirements based
upon discussions with potential lenders and the projections described in the
Company Outlook section under the Results of Operations above.

Our Accounts Receivable Asset-Backed Securitization, as described below,
also is an important element in managing our liquidity and capital resources.
The Accounts Receivable Asset Backed-Securitization will terminate upon the
maturity date of our senior secured credit facility unless we refinance our
senior secured credit facility, in which case it will mature in the fourth
quarter of 2004.

During the second quarter of 2003, we sold to our controlling common
shareholder, Granaria Holdings B.V.; Bert Iedema, one of our directors and an
executive officer of Granaria Holdings B.V.; and certain of our executive
officers the 69,500 shares of common stock held in our Treasury for $13.00 per
share, or $0.9 million.

Cash Flows

All references herein to years are to the six-months ended May 31 unless
otherwise indicated.

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Operating Activities.Operating activities used $11.8 million in cash
during 2003 compared to providing $61.6 million in 2002. In 2002, cash flows
from operating activities were impacted by our net loss of $28.2 million, which
was offset by non-cash charges of $32.0 million from depreciation and
amortization, $6.0 million from losses from divestitures, and $3.1 million from
insurance related losses, which results in cash sources of $12.9 million
compared to a similarly calculated amount in 2003 of $30.2 million. The 2003
amount of $30.2 million, an improvement of $17.3 million over 2002, is
comprised of our net income of $8.9 million, and non-cash charges of $24.0
million from depreciation and amortization, $3.0 million from provisions from
discontinued operations, and $5.7 million from insurance related gains. The
cash flow for 2002 was also increased by $48.7 million due to changes in
certain assets and liabilities, resulting in net cash provided by operating
activities of $61.6 million primarily due to $52.4 million of proceeds from the
sale of receivables to our unconsolidated qualifying special purpose entity
(see Accounts Receivable Asset-Backed Securitization below). The cash flow for
2003 was reduced by $42.0 million due to changes in certain assets and
liabilities, resulting in net cash used in operating activities of $11.8
million, primarily due to $20.1 million of payments to reduce the amounts
outstanding under our accounts receivable asset-backed facility (see Accounts
Receivable Asset-Backed Securitization below), approximately $12.0 million for
payments on restructuring and legal matters which were expensed in 2002, and
other working capital uses, primarily increases in accounts receivable and
inventory and decreases in accounts payable.

Investing Activities.Investing activities used $7.7 million in cash
during 2003 compared to using $7.4 million in 2002. These amounts primarily
relate to capital expenditures. We expect our capital expenditures during 2003
will be approximately $20.0 million to $25.0 million, with the largest increase
in our Technologies Segment.

Financing Activities.Financing activities used $2.1 million during 2003
compared to using $63.3 million during 2002. During 2002, we used $43.9
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. Also during 2002, regularly scheduled debt
payments and divestitures resulted in an $18.6 million decline in our long-term
debt. During 2003, $5.5 million was provided by our revolving credit facility
to pay off $8.5 million of long-term debt, and to fund our capital expenditures
and reductions in accounts payable and accrued liabilities. During the second
quarter of 2003, we sold to our controlling common shareholder, Granaria
Holdings B.V.; Bert Iedema, one of our directors and an executive officer of
Granaria Holdings B.V.; and certain of our executive officers the 69,500 shares
of common stock held in our Treasury for $13.00 per share, or $0.9 million.

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

During the first quarter of 2002, we entered into an agreement with a major U.S. financial institution to sell an interest in certain receivables
through an unconsolidated qualifying special purpose entity, 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,
EaglePicher Acceptance Corporation. This agreement provides for the sale of
certain receivables to EPFC, which in turn sells an interest in a revolving
pool of receivables to the financial institution. EPFC has no recourse against
us for failure of the debtors to pay when due. The agreement provides for the
continuation of the program on a revolving basis until the earlier of a) the
maturity of our senior credit facility, or b) assuming we are able to refinance
our senior credit facility, the fourth quarter of 2004.

We account for the securitization of these sold receivables in accordance
with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilitiesa Replacement of FASB Statement No. 125.
Under this guidance, at the time the receivables are sold, the balances are
removed from our financial statements. For purposes of calculating our debt
covenant compliance under our Credit Agreement, we include the debt outstanding
on EPFC.

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

At November 30, 2002, our interest in EPFC was $29.4 million and the
revolving pool of receivables that we serviced totaled $77.5 million. At
November 30, 2002, the outstanding balance of the interest sold to the
financial institution recorded on EPFCs financial statements was $46.5
million.

As of May 31, 2003, we reduced the amount due to the financial institution
by EPFC, and as a result our cash and cash equivalents balance decreased and
our retained interest in Eagle-Picher Funding Corporation increased from
November 30, 2002. At May 31, 2003, our interest in EPFC was $49.5 million and
the revolving pool of receivables that we serviced totaled $77.2 million. At
May 31, 2003, the outstanding balance of the interest sold to the financial
institution recorded on EPFCs financial statements was $26.2 million. The
effective interest rate for the six month period ended May 31, 2003 in the
securitization was approximately 2.5%.

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

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

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

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As of May 31, 2003, we were in compliance with the covenant calculations
described above. Additionally, based on the required calculations, we could
have had $60.7 million less in EBITDA (as calculated above) minus actual
capital expenditures, or $70.6 million more of interest expense, scheduled
payments of principal on debt, cash income taxes, and cash dividends, and
continued to remain in compliance with EPFCs financial covenants.

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

Capitalization

Our capitalization, which excludes the debt of $46.5 million at November
30, 2002 and $26.2 million at May 31, 2003 of our off-balance sheet qualifying
special purpose entity, consisted of the following at (in thousands of
dollars):

|                                                          |                                                  |   |                   |         |              |   |         |         | 
|--------------------------------------------------------- | ------------------------------------------------ | - | ----------------- | ------- | ------------ | - | ------- | ------- | 
|                                                          |                                                  |   | November 30, 2002 |         | May 31, 2003
|                                                          |                                                  |   |                   |         |             
|Credit Agreement:                                         |                                                  |   |                   |         |              |   |         |        
|                                                          | Revolving credit facility, due February 27, 2004 |   | $                 | 121,500 |              |   | $       | 127,000 | 
|                                                          | Term loan, due 2003                              |   |                   | 16,925  |              |   |         | 8,462   | 
|Senior Subordinated Notes, 9.375% interest, due 2008      |                                                  |   | 220,000           |         |              |   | 220,000 |        
|Industrial Revenue Bonds, 1.8% to 2.2% interest, due 2005 |                                                  |   | 15,300            |         |              |   | 15,300  |        
|                                                          |                                                  |   |                   |         |              |   |         |        
|                                                          |                                                  |   | 373,725           |         |              |   | 370,762 |        
|Preferred Stock                                           |                                                  |   | 137,973           |         |              |   | 146,079 |        
|Shareholders Deficit                                     |                                                  |   | (87,578           | )       |              |   | (82,648 | )      
|                                                          |                                                  |   |                   |         |              |   |         |        
|                                                          |                                                  | $ | 424,120           |         |              | $ | 434,193 |        
|                                                          |                                                  |   |                   |         |              |   |         |        

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

At May 31, 2003, we had $40.4 million in outstanding letters of credit
under the Facility, which together with borrowings of $127.0 million, made our
available borrowing capacity $52.6 million. The Credit Agreement also contains
certain fees. There are fees for letters of credit equal to 2.75% per annum
for all issued letters of credit, and there is a commitment fee on the Facility
equal to 0.5% per annum of the unused portion of the Facility. If we meet or
fail to meet certain financial benchmarks, the interest rate spreads on the
borrowing, the commitment fees and the fees for letters of credit may be
reduced or increased.

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

The Credit Agreement contains covenants that restrict our ability to
declare dividends or redeem capital stock, incur additional debt or liens,
alter existing debt agreements, make loans or investments, form joint ventures,
undergo a change in control or engage in mergers, acquisitions or asset sales.
These covenants also limit the annual amount of capital expenditures and
require us to meet certain minimum financial ratios.

For purposes of calculating our debt compliance under our Credit
Agreement, we include the debt outstanding on EPFC, our off-balance sheet
qualifying special purpose entity. See Accounts Receivable Asset-Backed
Securitization above

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for a detailed discussion of EPFC. Also, see Credit Agreement Financial
Covenants below for a summary of the debt covenant requirements. We were in
compliance with all covenants at May 31, 2003.

We
are currently negotiating a new senior secured credit facility in the
approximate amount of $275.0 million to replace our current
credit facility, which provided for an original term loan of
$75.0 million, as amended, and a $220.0 million revolving
facility.

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 May 31, 2003. The Senior Subordinated Notes are
guaranteed by us and certain of our subsidiaries.

In July 2003, we also announced the commencement of a cash tender offer
and consent solicitation for our 9 3/8% Senior Subordinated Notes Due 2008 (the
Notes). We are seeking to acquire any and all of our approximately $220.0
million of Notes outstanding. The consent solicitation seeks consent of the
holders of the Notes to amend the indenture governing the Notes to eliminate
certain of the restrictive covenants and other contractual obligations. The
tender offer and consent solicitation are being made in accordance with and
subject to the terms and conditions stated in EaglePicher Incorporateds Offer
to Purchase and Consent Solicitation Statement dated July 9, 2003. EaglePicher
Incorporated intends to finance the tender offer and consent solicitation with
the proceeds of its offering of approximately $220.0 million aggregate
principal amount of senior unsecured notes pursuant to Rule 144A and Regulation
S under the Securities Act of 1933, as amended (the Securities Act), together
with other funds. The securities to be offered have not been offered or sold
in the United States, absent registration or an applicable exemption from such
registration requirements. There is no assurance that this offering will be
successful.

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 $8.1 million during 2003
as a result of mandatory dividend accretion and the accrual for preferred
dividends. Commencing March 1, 2003, dividends on our Cumulative Redeemable
Exchangeable Preferred Stock became cash payable at 11.75% per annum; the first
semiannual dividend payment of $8.3 million is due September 1, 2003. If we do
not pay cash dividends on the preferred stock, then holders of the preferred
stock become entitled to elect a majority of our Board of Directors. Dakruiter
S.A. and Harbourgate B.V., both companies controlled by Granaria Holdings B.V.,
our controlling common shareholder, hold approximately 78% of our preferred
stock, and therefore Granaria Holdings B.V. would continue to be able to elect
our entire Board of Directors.

Shareholders Deficit.Our shareholders deficit improved in 2003
primarily due to our comprehensive income of $12.1 million and the issuance of
common shares from our Treasury of $0.9 million, which was partially offset by
the accrual and accretion of preferred stock dividends of $8.1 million.

Credit Agreement EBITDA

In our senior credit facility, we have certain financial covenants, as
discussed below in Credit Agreement Financial Covenants, which we believe are
significant and material in the context of our capital structure. We believe
these financial covenants are a material piece of information for the readers
of our reports. To support our readers understanding of these financial
covenants and our compliance with them, we have provided below a reconciliation
from Generally Accepted

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Accounting Principles (GAAP) Net Income (Loss) to Credit Agreement EBITDA. For
purposes of calculating our credit agreement financial covenants, Credit
Agreement EBITDA is based on the last twelve months of operating results, which
is summarized below.

Our senior secured credit facility has several financial covenants which
are based on Credit Agreement EBITDA as defined. Credit Agreement EBITDA is
defined in the credit agreement 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,
(v) a $16.0 million gain from the receipt of insurance proceeds in 2000, (vi)
the loss from disposal of discontinued operations, and (B) with giving effect to
proforma pre-acquisition consolidated EBITDA attributable to businesses
acquired during the year.

The following is a reconciliation from Net Income (Loss) to our Credit
Agreement EBITDA (in thousands of dollars):

|                                    |                                              |                                                |        |               |        |          |        |          |        |         |        |     |        |   |        |         |        | 
|----------------------------------- | -------------------------------------------- | ---------------------------------------------- | ------ | ------------- | ------ | -------- | ------ | -------- | ------ | ------- | ------ | --- | ------ | - | ------ | ------- | ------ | 
|                                    |                                              |                                                |        | Quarter Ended
|                                    |                                              |                                                |        |              
|                                    |                                              |                                                |        | August        |        | November |        | February |        | May 31,
|                                    |                                              |                                                |        | 31, 2002      |        | 30, 2002 |        | 28, 2003 |        | 2003   
|                                    |                                              |                                                |        |               |        |          |        |          |        |        
|Net Income (Loss)                   |                                              | $                                              | (3,571 | )             |        | $        | (5,086 | )        |        | $       | 1,168  |     |        | $ | 7,686  |        
|                                    |                                              | Loss from discontinued business, net           |        |               | 902    |          |        |          | 228    |         |        |     | 273    |   |        |         | 158    | 
|                                    |                                              | Loss on disposal of discontinued
business, net |        |               |       |          |        |          |       |         |        |     |       |   |        |         | 2,978  | 
|                                    |                                              | Income taxes                                   |        |               | 750    |          |        |          | 646    |         |        |     | 896    |   |        |         | 1,150  | 
|                                    |                                              | Interest expense                               |        |               | 9,378  |          |        |          | 8,948  |         |        |     | 9,103  |   |        |         | 9,043  | 
|                                    |                                              | Depreciation and amortization                  |        |               | 15,991 |          |        |          | 16,354 |         |        |     | 11,346 |   |        |         | 11,112 | 
|                                    | Restructuring expense                        |                                                |        |              |        |          |        | 2,900    |        |         |        |    |        |   |        |        |       
|                                    | Loss from divestitures                       |                                                |        | 161           |        |          |        | 366      |        |         |        |    |        |   |        |        |       
|                                    | Management compensation  special            |                                                |        | 524           |        |          |        | 552      |        |         |        |    |        |   |        | 424     |       
|                                    | Severance                                    |                                                |        | 18            |        |          |        | 191      |        |         |        |    |        |   |        |        |       
|                                    | Long-term bonus and share
appreciation plans |                                                |        | 450           |        |          |        | 420      |        |         |        | 600 |        |   |        | 700     |       
|                                    | Insurance related losses (gains)             |                                                |        |              |        |          |        |         |        |         |        |    |        |   |        | (5,736  | )     
|                                    | LIFO provision (benefit)                     |                                                |        | 105           |        |          |        | (1,272   | )      |         |        |    |        |   |        |        |       
|                                    | Legal and litigation costs                   |                                                |        |              |        |          |        | (200     | )      |         |        |    |        |   |        |        |       
|                                    | EBITDA impact from discontinued
operations   |                                                |        | (415          | )      |          |        | 292      |        |         |        | 294 |        |   |        | 403     |       
|                                    |                                              |                                                |        |               |        |          |        |          |        |         |        |     |        |   |        |        
|Quarterly Credit Agreement EBITDA   |                                              | $                                              | 24,293 |               |        | $        | 24,339 |          |        | $       | 23,680 |     |        | $ | 27,918 |        
|                                    |                                              |                                                |        |               |        |          |        |          |        |         |        |     |        |   |        |        
|Last Twelve Months Credit Agreement |                                              |                                                |        |               |        |          |        |          |        |         |        |     |        |   |        |        
|                                    | EBITDA                                       |                                                |        |               |        |          |        |          |        |         |        |     |        |   | $      | 100,230 |       
|                                    |                                              |                                                |        |               |        |          |        |          |        |         |        |     |        |   |        |        

Credit Agreement EBITDA 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 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 Credit Agreement EBITDA are
not available for our discretionary use to the extent they are required for
debt service and other commitments.

Credit Agreement Financial Covenants

There are three financial covenants contained in our senior secured credit
agreement. They are a leverage ratio (the ratio of total debt less cash on the
balance sheet to Credit Agreement EBITDA, as defined in the agreement and as
calculated above under Credit Agreement EBITDA), an interest coverage ratio
(the ratio of Credit Agreement EBITDA to interest

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expense) and a fixed charge coverage ratio (the ratio of Credit Agreement
EBITDA to the sum of interest expense plus required principal payments plus
cash dividends paid plus income taxes paid). For purposes of determining
outstanding debt under our Credit Agreement, we include the debt outstanding on
EPFC, our off-balance sheet qualifying special purpose entity. See Accounts
Receivable Asset-Backed Securitization above for a detailed discussion of EPFC.

As of May 31, 2003, we were in compliance with the covenant calculations
described above. Additionally, for purposes of the leverage ratio defined
above, we could have had $14.8 million less in Credit Agreement EBITDA, or
$66.8 million more in total debt less cash on the balance sheet and continued
to remain in compliance with the Credit Agreements financial covenants.

As discussed above under our Accounts Receivable Asset-Backed
Securitization (Qualifying Special Purpose Entity) Financial Covenants, as of
May 31, 2003, we were in compliance with the covenants in our securitization
Additionally, based on the required calculations of the securitization, we
could have had $60.7 million less in EBITDA (as calculated above in accordance
with the securitization) minus actual capital expenditures, or $70.6 million
more of interest expense, scheduled payments of principal on debt, cash income
taxes, and cash dividends, and continued to remain in compliance with the
securitizations financial covenants.

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

|                  |          |  |                 |      |                 |  |                 |      |              |  |         |      | 
|----------------- | -------- |  | --------------- | ---- | --------------- |  | --------------- | ---- | ------------ |  | ------- | ---- | 
|                  |          |  |                 |      |                 |  |                 |      |              |  | Minimum
|                  |          |  |                 |      |                 |  | Minimum         |      | Fixed Charge
|                  |          |  | Maximum         |      | Interest        |  | Coverage       
|                  |          |  | Leverage Ratio  |      | Coverage Ratio  |  | Ratio          
|                  |          |  | (not more than) |      | (not less than) |  | (not less than)
|                  |          |  |                 |      |                 |  |                
|November 30, 2002 |          |  |                 |      |                 |  |                 |      |              |  |         |     
|                  | Required |  |                 | 4.75 |                 |  |                 | 2.00 |              |  |         | 1.25 | 
|                  | Actual   |  |                 | 4.02 |                 |  |                 | 2.63 |              |  |         | 1.65 | 
|February 28, 2003 |          |  |                 |      |                 |  |                 |      |              |  |         |     
|                  | Required |  |                 | 4.75 |                 |  |                 | 2.25 |              |  |         | 1.35 | 
|                  | Actual   |  |                 | 4.02 |                 |  |                 | 2.75 |              |  |         | 1.74 | 
|May 31, 2003      |          |  |                 |      |                 |  |                 |      |              |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |              |  |         | 1.35 | 
|                  | Actual   |  |                 | 3.83 |                 |  |                 | 2.93 |              |  |         | 1.84 | 
|August 31, 2003   |          |  |                 |      |                 |  |                 |      |              |  |         |     
|                  | Required |  |                 | 4.25 |                 |  |                 | 2.25 |              |  |         | 1.40 | 
|November 30, 2003 |          |  |                 |      |                 |  |                 |      |              |  |         |     
|                  | Required |  |                 | 4.25 |                 |  |                 | 2.50 |              |  |         | 1.40 | 

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

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Contractual Obligations and Other Commercial Commitments

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

Earnings to Fixed Charges and Preferred Stock Dividends

During the second quarter of 2003, our ratio of earnings to fixed charges
and preferred stock dividends was 1.57x, and in the second quarter of 2002, our
earnings were insufficient to cover fixed charges and preferred stock dividends
by $24.4 million. During the first six months of 2003, our ratio of earnings
to fixed charges and preferred stock dividends was 1.23x, and during the first
six months of 2002, our earnings were insufficient to cover fixed charges and
preferred stock dividends by $33.7 million. These improvements are primarily
related to our improved operating performance, and our adoption of SFAS No. 142
on December 1, 2002, which no longer requires us to recognize goodwill
amortization expense.

Recently Released or Adopted Accounting Standards

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets and depreciated over their estimated useful life while the
liability is accreted to its expected obligation amount upon retirement. We
adopted SFAS No. 143 on December 1, 2002. The adoption did not have a material
impact on our financial condition or results of operations.

In September 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed of. The primary difference is that goodwill and certain
intangibles with indefinite lives have been removed from the scope of SFAS No.
144, as they are covered by SFAS No. 142, Goodwill and other Intangible
Assets. It also broadens the presentation of discontinued operations to
include a component of an entity rather than a segment of a business. A
component of an entity comprises operations and cash flows that can clearly be
distinguished operationally and for financial accounting purposes from the rest
of the entity. We adopted SFAS No. 144 on December 1, 2002 and accounted for
the sale of our Hillsdale U.K. Automotive operation in accordance with this
statement.

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

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

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This statement is effective for financial instruments entered into or
modified after May 31, 2003, except for mandatorily redeemable financial

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instruments. Mandatorily redeemable financial instruments are subject to
the provisions of this statement beginning on January 1, 2004. We do not expect
the adoption of this statement will have a material impact on our financial
condition or results of operations.

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

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

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

Forward Looking Statements

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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




Item 4. Controls and Procedures.

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




PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

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




Item 6. Exhibits and Reports on Form 8-K.



|(a) |  | Exhibits:
|--- |  | ---------

|     |  |   |  |                                                                  
|---- |  | - |  | -----------------------------------------------------------------
|12.1 |  |  |  | Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends



|(b) |  | Reports on Form 8-K:
|--- |  | --------------------



| |  |  | Form 8-K, filed April 14, 2003, concerning our press release
dated April 14, 2003
| | - |  | ---------------------------------------------------------------------------------

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------
| |  | EAGLEPICHER HOLDINGS, INC.                                                                                                 
|
| |  |                                                                                                                            
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

DATE: July 9, 2003

44



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------
| |  | EAGLEPICHER INCORPORATED                                                                                                   
|
| |  |                                                                                                                            
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

DATE: July 9, 2003

45



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | DAISY PARTS, INC.                                                                       
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | EAGLEPICHER DEVELOPMENT CO., INC.                                                       
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | EAGLEPICHER FAR EAST, INC.                                                              
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

48



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | EAGLEPICHER FILTRATION AND MINERALS, INC.                                               
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

49



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------
| |  | EAGLEPICHER TECHNOLOGIES, LLC                                                                                   
|
| |  |                                                                                                                 
|
| |  | /s/ Bradley J. Waters
Bradley J. Waters
Vice President and Chief Financial Officer
(Principal Financial Officer)

DATE July 9, 2003

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | HILLSDALE TOOL & MANUFACTURING CO.                                                      
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | EPMR CORPORATION                                                                        
|
| |  |                                                                                         
|
| |  | /s/ Thomas R. Pilholski
Thomas R. Pilholski
Vice President
(Principal Financial Officer)

DATE: July 9, 2003

52



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CERTIFICATIONS

I, John H. Weber, President and Chief Executive Officer, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of EaglePicher Holdings,
Inc. , EaglePicher Incorporated, Daisy Parts, Inc., EaglePicher Development
Co., Inc., EaglePicher Far East, Inc., EaglePicher Filtration and Minerals,
Inc., EaglePicher Technologies, LLC, Hillsdale Tool & Manufacturing Co. and
EPMR Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                                       |  |                   
|---------------------------------------------------------------------- |  | ------------------
|/s/ JOHN H. WEBER
John H. Weber, President and Chief Executive Officer |  | Date: July 9, 2003

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I, Thomas R. Pilholski, Senior Vice President and Chief Financial Officer,
certify that:

1.     I have reviewed this quarterly report on Form 10-Q of EaglePicher Holdings,
Inc. , EaglePicher Incorporated, Daisy Parts, Inc., EaglePicher Development
Co., Inc., EaglePicher Far East, Inc., EaglePicher Filtration and Minerals,
Inc., EaglePicher Technologies, LLC, Hillsdale Tool & Manufacturing Co. and
EPMR Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                                                               |  |                   
|---------------------------------------------------------------------------------------------- |  | ------------------
|/s/ THOMAS R. PILHOLSKI
Thomas R. Pilholski, Senior Vice President
and Chief Financial Officer |  | Date: July 9, 2003

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EXHIBIT INDEX

|        |  |   |  |                                                                  
|------- |  | - |  | -----------------------------------------------------------------
|Exhibit |  |   |  |                                                                  
|Number  |  |   |  |                                                                  
|        |  |   |  |                                                                  
|12.1    |  |  |  | Ratios of Earnings to Fixed Charges and Preferred Stock Dividends

55