##### Table of Contents



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 August 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 9-3/4% SENIOR 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 stock, $0.01 par value each, were issued and
outstanding at October 9, 2003

1



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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                   
|EXHIBIT INDEX                
|EX-10.68                     
|EX-10.69                     
|EX-10.70                     
|EX-10.71                     
|EX-10.72                     
|EX-10.73                     
|EX-10.74                     
|Ex-12.1                      
|EX-31.1                      
|EX-31.2                      
|EX-32.1                      
|Ex-32.2                      



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##### Table of Contents



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 & Minerals, Inc.                                 |  | Nevada       |  |             | 333-49957-06 |                  |  |            | 31-1188662 |               
|EaglePicher Technologies, LLC                                           |  | Delaware     |  |             | 333-49957-09 |                  |  |            | 31-1587660 |               
|EaglePicher Automotive, Inc.
(f/k/a 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

|                              |  |  |    |                                                                                       |  |  |                                                      |  |        |   | 
|----------------------------- |  |  | -- | ------------------------------------------------------------------------------------- |  |  | ---------------------------------------------------- |  | ------ | - | 
|                              |  |  |    |                                                                                       |  |  |                                                      |  | 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 |  |  | 27                                                   | 
|Item 3.                       |  |  |    | Quantitative and Qualitative Disclosures About Market
Risk                            |  |  | 48                                                   | 
|Item 4.                       |  |  |    | Controls and
Procedures                                                               |  |  | 48                                                   | 
|PART II. OTHER INFORMATION    |  |  |   
|Item 1.                       |  |  |    | Legal
Proceedings                                                                     |  |  | 48                                                   | 
|Item 6.                       |  |  |    | Exhibits and Reports on Form
8-K                                                      |  |  | 48                                                   | 
|Signatures                    |  |  | 50 |                                                                                      
|Exhibit
Index                 |  |  | 59 |                                                                                      

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements.

EaglePicher Holdings, Inc.




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

|                                                          |                                                           |                                                |         |          |              |   |            |          |   |  | 
|--------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------- | ------- | -------- | ------------ | - | ---------- | -------- | - |  | 
|                                                          |                                                           |                                                |         |          | November 30, |   | August 31,
|                                                          |                                                           |                                                |         |          | 2002         |   | 2003      
|                                                          |                                                           |                                                |         |          |              |   |           
|                                                          |                                                           |                                                | ASSETS  |          |              |   |            |          |   |  | 
|Current Assets:                                           |                                                           |                                                |         |          |              |   |            |         
|                                                          | Cash and cash equivalents                                 |                                                | $       | 31,522   |              |   | $          | 23,981   |  
|                                                          | Receivables, net                                          |                                                |         | 19,979   |              |   |            | 26,036   |  
|                                                          | Retained interest in EaglePicher Funding
Corporation, net |                                                |         | 29,400   |              |   |            | 66,487   |  
|                                                          | Insurance claim receivable                                |                                                |         |         |              |   |            | 5,198    |  
|                                                          | Costs and estimated earnings in excess of
billings        |                                                |         | 16,942   |              |   |            | 25,986   |  
|                                                          | Inventories                                               |                                                |         | 49,204   |              |   |            | 54,154   |  
|                                                          | Assets of discontinued operations                         |                                                |         | 28,899   |              |   |            | 9,177    |  
|                                                          | Prepaid expenses and other assets                         |                                                |         | 15,363   |              |   |            | 9,666    |  
|                                                          | Deferred income taxes                                     |                                                |         | 10,798   |              |   |            | 10,798   |  
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           |                                                | 202,107 |          |              |   | 231,483    |         
|Property, Plant and Equipment, net                        |                                                           |                                                | 173,658 |          |              |   | 154,416    |         
|Goodwill                                                  |                                                           |                                                | 159,640 |          |              |   | 159,640    |         
|Prepaid Pension                                           |                                                           |                                                | 54,796  |          |              |   | 55,609     |         
|Other Assets, net                                         |                                                           |                                                | 22,840  |          |              |   | 26,609     |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           | $                                              | 613,041 |          |              | $ | 627,757    |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           | LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |         |          |              |   |            |          |   | 
|Current Liabilities:                                      |                                                           |                                                |         |          |              |   |            |         
|                                                          | Accounts payable                                          |                                                | $       | 83,178   |              |   | $          | 60,523   |  
|                                                          | Current portion of long-term debt                         |                                                |         | 18,625   |              |   |            | 3,200    |  
|                                                          | Compensation and employee benefits                        |                                                |         | 19,889   |              |   |            | 16,095   |  
|                                                          | Billings in excess of costs and estimated earnings        |                                                |         | 944      |              |   |            | 1,864    |  
|                                                          | Accrued divestiture reserve                               |                                                |         | 17,662   |              |   |            | 10,535   |  
|                                                          | Liabilities of discontinued operations                    |                                                |         | 4,305    |              |   |            | 1,305    |  
|                                                          | Other accrued liabilities                                 |                                                |         | 36,380   |              |   |            | 23,341   |  
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           |                                                | 180,983 |          |              |   | 116,863    |         
|Long-Term Debt, net of current portion                    |                                                           |                                                | 355,100 |          |              |   | 421,782    |         
|Postretirement Benefits Other Than Pensions               |                                                           |                                                | 17,635  |          |              |   | 17,402     |         
|Other Long-Term Liabilities                               |                                                           |                                                | 8,928   |          |              |   | 10,652     |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           |                                                | 562,646 |          |              |   | 566,699    |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|11.75% Cumulative Redeemable Exchangeable Preferred
Stock |                                                           |                                                | 137,973 |          |              |   | 150,247    |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|Commitments and Contingencies                             |                                                           |                                                |         |          |              |   |            |         
|Shareholders Equity (Deficit):                           |                                                           |                                                |         |          |              |   |            |         
|                                                          | Common stock                                              |                                                |         | 10       |              |   |            | 10       |  
|                                                          | Additional paid-in capital                                |                                                |         | 99,991   |              |   |            | 92,803   |  
|                                                          | Accumulated deficit                                       |                                                |         | (175,112 | )            |   |            | (182,758 | )
|                                                          | Accumulated other comprehensive income (loss)             |                                                |         | (4,376   | )            |   |            | 756      |  
|                                                          | Treasury stock                                            |                                                |         | (8,091   | )            |   |            |         |  
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           |                                                | (87,578 | )        |              |   | (89,189    | )       
|                                                          |                                                           |                                                |         |          |              |   |            |          |  
|                                                          |                                                           | $                                              | 613,041 |          |              | $ | 627,757    |         
|                                                          |                                                           |                                                |         |          |              |   |            |          |  

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

3



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EaglePicher Holdings, Inc.




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

|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | - | ----------------------------- | ------- | ---------------------------- | - | --------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                        |                                                                                                   |   | Three Months Ended August 31, |         | Nine Months Ended August 31,
|                                                                        |                                                                                                   |   |                               |         |                             
|                                                                        |                                                                                                   |   | 2002                          |         | 2003                         |   | 2002      |         | 2003
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |     
|Net Sales                                                               |                                                                                                   | $ | 167,352                       |         |                              | $ | 165,844   |         |      | $ | 499,742 |         |   | $ | 504,930 |        
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Operating Costs and Expenses:                                           |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        | Cost of products sold (exclusive of depreciation)                                                 |   |                               | 130,101 |                              |   |           | 127,001 |      |   |         | 390,330 |   |   |         | 387,605 |  
|                                                                        | Selling and administrative                                                                        |   |                               | 14,246  |                              |   |           | 15,615  |      |   |         | 50,424  |   |   |         | 45,836  |  
|                                                                        | Depreciation and amortization                                                                     |   |                               | 11,830  |                              |   |           | 12,768  |      |   |         | 34,321  |   |   |         | 34,798  |  
|                                                                        | Goodwill amortization                                                                             |   |                               | 3,846   |                              |   |           |        |      |   |         | 11,538  |   |   |         |        |  
|                                                                        | Restructuring                                                                                     |   |                               |        |                              |   |           |        |      |   |         | 2,998   |   |   |         |        |  
|                                                                        | Insurance related losses (gains)                                                                  |   |                               |        |                              |   |           | (2,774  | )    |   |         | 3,100   |   |   |         | (8,510  | )
|                                                                        | Loss from divestitures                                                                            |   |                               | 161     |                              |   |           |        |      |   |         | 6,131   |   |   |         |        |  
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        |                                                                                                   |   | 160,184                       |         |                              |   | 152,610   |         |      |   | 498,842 |         |   |   | 459,729 |        
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Operating Income                                                        |                                                                                                   |   | 7,168                         |         |                              |   | 13,234    |         |      |   | 900     |         |   |   | 45,201  |        
|                                                                        | Interest expense                                                                                  |   |                               | (8,610  | )                            |   |           | (9,249  | )    |   |         | (28,596 | ) |   |         | (25,941 | )
|                                                                        | Other income (expense), net                                                                       |   |                               | 413     |                              |   |           | (600    | )    |   |         | 1,331   |   |   |         | (527    | )
|                                                                        | Write-off of deferred financing costs                                                             |   |                               |        |                              |   |           | (6,327  | )    |   |         |        |   |   |         | (6,327  | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Income (Loss) from Continuing Operations Before                         |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        | Taxes                                                                                             |   |                               | (1,029  | )                            |   |           | (2,942  | )    |   |         | (26,365 | ) |   |         | 12,406  |  
|                                                                        | Income taxes                                                                                      |   |                               | (750    | )                            |   |           | (804    | )    |   |         | (1,955  | ) |   |         | (2,850  | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Income (Loss) from Continuing Operations                                |                                                                                                   |   | (1,779                        | )       |                              |   | (3,746    | )       |      |   | (28,320 | )       |   |   | 9,556   |        
|Discontinued Operations:                                                |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        | Loss from operations of discontinued businesses, net of zero
(benefit) provision for income taxes |   |                               | (1,792  | )                            |   |           | (213    | )    |   |         | (3,426  | ) |   |         | (1,683  | )
|                                                                        | Loss on disposal of discontinued business, net of
$600 benefit and zero benefit for income taxes  |   |                               |        |                              |   |           | (267    | )    |   |         |        |   |   |         | (3,245  | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Net Income (Loss)                                                       |                                                                                                   |   | (3,571                        | )       |                              |   | (4,226    | )       |      |   | (31,746 | )       |   |   | 4,628   |        
|                                                                        | Preferred stock dividends accreted or accrued                                                     |   |                               | (3,718  | )                            |   |           | (4,168  | )    |   |         | (10,949 | ) |   |         | (12,274 | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Loss Applicable to Common Shareholders                                  |                                                                                                   | $ | (7,289                        | )       |                              | $ | (8,394    | )       |      | $ | (42,695 | )       |   | $ | (7,646  | )      
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Basic and Diluted Net Loss per Share Applicable to
Common Shareholders: |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        | Loss from Continuing Operations                                                                   |   | $                             | (5.71   | )                            |   | $         | (7.91   | )    |   | $       | (40.67  | ) |   | $       | (2.83   | )
|                                                                        | Loss from Discontinued Operations                                                                 |   |                               | (1.86   | )                            |   |           | (0.48   | )    |   |         | (3.55   | ) |   |         | (5.12   | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|                                                                        | Net Loss                                                                                          |   | $                             | (7.57   | )                            |   | $         | (8.39   | )    |   | $       | (44.22  | ) |   | $       | (7.95   | )
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        
|Weighted Average Number of Common Shares                                |                                                                                                   |   | 963,500                       |         |                              |   | 1,000,000 |         |      |   | 965,472 |         |   |   | 961,389 |        
|                                                                        |                                                                                                   |   |                               |         |                              |   |           |         |      |   |         |         |   |   |         |        

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
Nine Months Ended August 31, 2002 and 2003
(unaudited) (In thousands of dollars)

|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |          |        |         |         |  
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------ | ------- | ------- | -------- | ------ | ------- | ------- | -
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        | 2002    |         | 2003    
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Cash Flows From Operating Activities:                                   |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        | Net income (loss)                                                                                  |                                                   | $                                                                 | (31,746                                                                                                        | )      |         | $       | 4,628    |       
|                                                                        | Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |                                                   |                                                                   |                                                                                                                |        |         |         |          |       
|                                                                        |                                                                                                    |                                                   | Depreciation and amortization                                     |                                                                                                                |        | 47,858  |         |          |        | 37,084  |        
|                                                                        |                                                                                                    |                                                   | Loss from divestitures                                            |                                                                                                                |        | 6,131   |         |          |        |        |        
|                                                                        |                                                                                                    |                                                   | Provisions from discontinued operations                           |                                                                                                                |        |        |         |          |        | 3,245   |        
|                                                                        |                                                                                                    |                                                   | Deferred income taxes                                             |                                                                                                                |        | 811     |         |          |        |        |        
|                                                                        |                                                                                                    |                                                   | Insurance related losses (gains)                                  |                                                                                                                |        | 3,100   |         |          |        | (3,312  | )      
|                                                                        |                                                                                                    |                                                   | Write-off of deferred financing costs                             |                                                                                                                |        |        |         |          |        | 6,327   |        
|                                                                        |                                                                                                    |                                                   | Changes in assets and liabilities, net of effect of divestitures: |                                                                                                                |        |         |         |          |        |         |        
|                                                                        |                                                                                                    |                                                   |                                                                   | Sale of receivables, net (See Note I)                                                                          |        |         | 40,975  |          |        |         |        |  
|                                                                        |                                                                                                    |                                                   |                                                                   | Retained interest in EaglePicher Funding Corporation, net
(See Note I)                                         |        |         |        |          |        |         | (37,087 | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Receivables, net                                                                                               |        |         | (4,233  | )        |        |         | (6,057  | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Insurance claim receivable                                                                                     |        |         |        |          |        |         | (5,198  | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Costs and estimated earnings in excess of billings and
billings in excess of costs and estimated earnings,
net |        |         | (5,012  | )        |        |         | (8,124  | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Inventories                                                                                                    |        |         | (3,298  | )        |        |         | (4,950  | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Accounts payable                                                                                               |        |         | (10,738 | )        |        |         | (22,655 | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Accrued liabilities                                                                                            |        |         | 553     |          |        |         | (20,648 | )
|                                                                        |                                                                                                    |                                                   |                                                                   | Other, net                                                                                                     |        |         | 1,997   |          |        |         | 941     |  
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    |                                                   | Net cash provided by (used in) operating activities               |                                                                                                                |        | 46,398  |         |          |        | (55,806 | )      
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Cash Flows From Investing Activities:                                   |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        | Proceeds from the sale of property and equipment                                                   |                                                   |                                                                   | 639                                                                                                            |        |         |         | 1,068    |       
|                                                                        | Capital expenditures                                                                               |                                                   |                                                                   | (11,823                                                                                                        | )      |         |         | (10,758  | )     
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    |                                                   | Net cash used in investing activities                             |                                                                                                                |        | (11,184 | )       |          |        | (9,690  | )      
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Cash Flows From Financing Activities:                                   |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        | Redemption of senior subordinated notes                                                            |                                                   |                                                                   |                                                                                                               |        |         |         | (209,500 | )     
|                                                                        | Reduction of long-term debt                                                                        |                                                   |                                                                   | (22,782                                                                                                        | )      |         |         | (16,925  | )     
|                                                                        | Net repayments under revolving credit agreements                                                   |                                                   |                                                                   | (40,750                                                                                                        | )      |         |         | (121,500 | )     
|                                                                        | Proceeds from issuance of treasury stock                                                           |                                                   |                                                                   |                                                                                                               |        |         |         | 903      |       
|                                                                        | Payments for acquisition of treasury stock                                                         |                                                   |                                                                   | (159                                                                                                           | )      |         |         |         |       
|                                                                        | Proceeds from the New Credit Agreement and issuance of Senior Unsecured
Notes                      |                                                   |                                                                   |                                                                                                               |        |         |         | 398,000  |       
|                                                                        | Payment of deferred financing costs                                                                |                                                   |                                                                   |                                                                                                               |        |         |         | (9,708   | )     
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    |                                                   | Net cash provided by (used in) financing activities               |                                                                                                                |        | (63,691 | )       |          |        | 41,270  |        
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Net Cash Provided by Discontinued Operations                            |                                                                                                    |                                                   | 14,371                                                            |                                                                                                                |        |         | 13,961  |         
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Effect of Exchange Rates on Cash                                        |                                                                                                    |                                                   | 2,061                                                             |                                                                                                                |        |         | 2,724   |         
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Net Decrease in Cash and Cash Equivalents                               |                                                                                                    |                                                   | (12,045                                                           | )                                                                                                              |        |         | (7,541  | )       
|Cash and Cash Equivalents, beginning of period                          |                                                                                                    |                                                   | 24,620                                                            |                                                                                                                |        |         | 31,522  |         
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Cash and Cash Equivalents, end of period                                |                                                                                                    | $                                                 | 12,575                                                            |                                                                                                                |        | $       | 23,981  |         
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Supplemental Disclosure of Non-Cash Investing and Financing Activities: |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    | Equipment acquisitions financed by capital leases |                                                                   | $                                                                                                              |       |         |         | $        | 1,169  |        
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|Supplemental Cash Flow Information:                                     |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    | Interest paid                                     |                                                                   | $                                                                                                              | 23,209 |         |         | $        | 28,246 |        
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         
|                                                                        |                                                                                                    | Income taxes refunded, net                        |                                                                   | $                                                                                                              | 4,835  |         |         | $        | 3,859  |        
|                                                                        |                                                                                                    |                                                   |                                                                   |                                                                                                                |        |         |         |         

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 nine
month periods ended August 31, 2002 and 2003. Results of operations for interim
periods are not necessarily indicative of results to be expected for an entire
year.

In the fourth quarter of fiscal 2002, we restated our financial statements
to reflect the appropriate adoption of EITF 00-10, Accounting for Shipping and
Handling Fees and Costs, which we should have adopted in 2001. EITF 00-10
states that all amounts billed to a customer in a sale transaction related to
shipping and handling represent revenues earned for the goods provided and
should be classified as revenue. Prior to the adoption of EITF 00-10, some of
the costs billed to our customers for shipping and handling (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 August 31, 2002 was an increase
in Net Sales and Cost of Products Sold by $3.9 million. The impact to the
financial statements for the nine months ended August 31, 2002 was an increase
in Net Sales and Cost of Products Sold by $11.9 million. In addition, certain
amounts in 2002 have been reclassified to conform to the 2003 financial
statement presentation.

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

B.      INVENTORIES

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

|                           |  |      |        |      |  |   |        | 
|-------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                           |  | 2002 |        | 2003
|                           |  |      |        |     
|Raw materials and supplies |  | $    | 24,522 |      |  | $ | 26,491 | 
|Work-in-process            |  |      | 10,680 |      |  |   | 14,613 | 
|Finished goods             |  |      | 14,002 |      |  |   | 13,050 | 
|                           |  |      |        |      |  |   |        | 
|                           |  | $    | 49,204 |      |  | $ | 54,154 | 
|                           |  |      |        |      |  |   |        | 

C.      REVENUE RECOGNITION

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

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

|                                                   |  |      |          |      |  |   |          |  
|-------------------------------------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                                                   |  | 2002 |          | 2003
|                                                   |  |      |          |     
|Costs incurred on uncompleted contracts            |  | $    | 115,476  |      |  | $ | 159,035  |  
|Estimated earnings                                 |  |      | 21,664   |      |  |   | 38,437   |  
|                                                   |  |      |          |      |  |   |          |  
|                                                   |  |      | 137,140  |      |  |   | 197,472  |  
|Less: billings to date                             |  |      | (121,142 | )    |  |   | (173,350 | )
|                                                   |  |      |          |      |  |   |          |  
|                                                   |  | $    | 15,998   |      |  | $ | 24,122   |  
|                                                   |  |      |          |      |  |   |          |  
|Costs and estimated earnings in excess of
billings |  | $    | 16,942   |      |  | $ | 25,986   |  
|Billings in excess of costs and estimated
earnings |  |      | (944     | )    |  |   | (1,864   | )
|                                                   |  |      |          |      |  |   |          |  
|                                                   |  | $    | 15,998   |      |  | $ | 24,122   |  
|                                                   |  |      |          |      |  |   |          |  

D.      COMPREHENSIVE INCOME (LOSS)

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

|                                                  |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |       |  
|------------------------------------------------- |  | ----------------------------- | ------ | ---------------------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ----- | -
|                                                  |  | Three Months Ended August 31, |        | Nine Months Ended August 31,
|                                                  |  |                               |        |                             
|                                                  |  | 2002                          |        | 2003                         |  | 2002 |        | 2003
|                                                  |  |                               |        |                              |  |      |        |     
|Net income (loss)                                 |  | $                             | (3,571 | )                            |  | $    | (4,226 | )    |  | $ | (31,746 | ) |  | $ | 4,628 |  
|Gain (loss) on interest rate swap agreements      |  |                               | (660   | )                            |  |      | 1,172  |      |  |   | (194    | ) |  |   | 2,624 |  
|Gain (loss) on foreign currency forward contracts |  |                               | (48    | )                            |  |      | 2,321  |      |  |   | (421    | ) |  |   | (216  | )
|Change in currency translation adjustment         |  |                               | 793    |                              |  |      | (1,640 | )    |  |   | 2,061   |   |  |   | 2,724 |  
|                                                  |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |       |  
|                                                  |  | $                             | (3,486 | )                            |  | $    | (2,373 | )    |  | $ | (30,300 | ) |  | $ | 9,760 |  
|                                                  |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |       |  

E.       GOODWILL

On December 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets. The ratable amortization of goodwill and other intangible
assets with indefinite lives was replaced with an annual test for impairment.
Accordingly, we ceased amortization of goodwill on December 1, 2002. We have
determined that we have six reporting units, as defined in SFAS No. 142, within
our three reportable business segments. The following goodwill amounts by
reporting unit were recorded as of November 30, 2002 and August 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            |  |        | 27,098 |  
|Pharmaceutical Services
(formerly ChemSyn) |  | Technologies            |  |        | 2,929  |  
|Filtration and Minerals                    |  | Filtration and Minerals |  |        | 3,043  |  
|                                           |  |                         |  |        |        |   |         | 
|                                           |  |                         |  |        |        | $ | 159,640 | 
|                                           |  |                         |  |        |        |   |         | 

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

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

|                                                                               |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ----------------------------- | ------ | ---------------------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                               |  | Three Months Ended August 31, |        | Nine Months Ended August 31,
|                                                                               |  |                               |        |                             
|                                                                               |  | 2002                          |        | 2003                         |  | 2002 |        | 2003
|                                                                               |  |                               |        |                              |  |      |        |     
|Reported Loss Applicable to Common Shareholders                                |  | $                             | (7,289 | )                            |  | $    | (8,394 | )    |  | $ | (42,695 | ) |  | $ | (7,646 | )
|Goodwill amortization                                                          |  |                               | 3,846  |                              |  |      |       |      |  |   | 11,538  |   |  |   |       |  
|                                                                               |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |        |  
|As Adjusted Loss Applicable to Common Shareholders                             |  | $                             | (3,443 | )                            |  | $    | (8,394 | )    |  | $ | (31,157 | ) |  | $ | (7,646 | )
|                                                                               |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |        |  
|Reported Basic and Diluted Loss per share Applicable to
Common Shareholders    |  | $                             | (7.57  | )                            |  | $    | (8.39  | )    |  | $ | (44.22  | ) |  | $ | (7.95  | )
|Goodwill amortization per share                                                |  |                               | 4.00   |                              |  |      |       |      |  |   | 11.95   |   |  |   |       |  
|                                                                               |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |        |  
|As Adjusted Basic and Diluted Loss per share Applicable to
Common Shareholders |  | $                             | (3.57  | )                            |  | $    | (8.39  | )    |  | $ | (32.27  | ) |  | $ | (7.95  | )
|                                                                               |  |                               |        |                              |  |      |        |      |  |   |         |   |  |   |        |  

F.      RECENTLY RELEASED OR ADOPTED ACCOUNTING STANDARDS

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

In September 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed of. The primary difference is that goodwill and certain
intangibles with indefinite lives have been removed from the scope of SFAS No.
144, as they are covered by SFAS No. 142. 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 and the sale of certain assets of our Germanium-based business in our
Technologies Segment, as discussed in Note H, in accordance with this
statement.

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

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

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

In November 2002, the FASB issued Interpretation No. 45 (FIN 45)
Guarantors Accounting and Disclosure 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 this interpretation did not have a material impact on our financial
condition or results of operations.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46)
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entitys activities or entitled to receive a majority of the entitys residual
returns. FIN 46 applies to variable interest entities created after January 31,
2003, and to variable interest entities in which an enterprise obtains an
interest in after that date. A public entity with a variable interest in a
variable interest entity created before February 1, 2003, shall apply the
provisions of this interpretation (other than the transition disclosure
provisions in paragraph 26) to that entity no later than the beginning of the
first interim or annual reporting period beginning after December 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 for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
are evaluating the impact EITF 00-21 will have on us, but do not expect it to
have a material impact on our financial condition or results of operations.

G.      RESTRUCTURING

During 2001, we recorded asset write-downs and other charges totaling
$14.1 million in connection with a restructuring plan (the Plan) announced in
November 2001. The Plan primarily relocated our corporate headquarters from
Cincinnati, Ohio to Phoenix, Arizona and closed three plants in 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 our Gallium
based business in our Technologies Segment due to the downturn in the
fiber-optic, telecommunication and semiconductor markets, the primary markets
for

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

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

|                             |               |   |            |      |           |   |       |      |       |   |       |        |   |   |       |        |  
|---------------------------- | ------------- | - | ---------- | ---- | --------- | - | ----- | ---- | ----- | - | ----- | ------ | - | - | ----- | ------ | -
|                             |               |   |            |      |           |   |       |      |       |   | Other |        |   |   |      
|                             |               |   | Facilities |      | Severance |   | Costs |      | Total
|                             |               |   |            |      |           |   |       |      |      
|Balance at November 30, 2002 |               | $ | 1,629      |      |           | $ | 314   |      |       | $ | 1,340 |        |   | $ | 3,283 |       
|                             | Amounts spent |   |            | (786 | )         |   |       | (280 | )     |   |       | (1,215 | ) |   |       | (2,281 | )
|                             |               |   |            |      |           |   |       |      |       |   |       |        |   |   |       |       
|Balance at August 31, 2003   |               | $ | 843        |      |           | $ | 34    |      |       | $ | 125   |        |   | $ | 1,002 |       
|                             |               |   |            |      |           |   |       |      |       |   |       |        |   |   |       |       

H.      DIVESTITURES AND DISCONTINUED OPERATIONS

Divestitures

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

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

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

|                             |               |   |        |        |  
|---------------------------- | ------------- | - | ------ | ------ | -
|Balance at November 30, 2002 |               | $ | 17,662 |       
|                             | Amounts spent |   |        | (7,127 | )
|                             |               |   |        |       
|Balance at August 31, 2003   |               | $ | 10,535 |       
|                             |               |   |        |       

Discontinued Operations

Effective December 14, 2001, we sold certain 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 August 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. The 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 in the second quarter of 2003, upon receipt of authority
from our Board of Directors, we discontinued the operations of our Hillsdale
U.K. Automotive operation and restated all prior period financial statements.
We have included in Loss from Operations of Discontinued Businesses in our
Statements of Income (Loss) $902,000 for the three months ended August 31,
2002, $1.4 million for the nine months ended August 31, 2002, and $431,000 for
the nine months ended August 31, 2003. In addition, in the second quarter of
2003, we recognized a Loss on Disposal of Business of $3.0 million, which is
net of a $600,000 tax benefit related to this sale, and

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

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

At August 31, 2003, the remaining balance in Assets of Discontinued
Operations was primarily accounts receivable, inventory, and property, plant,
and equipment related to our Hillsdale U.K. Automotive operation and an
insurance receivable related to an entity that was supposed to provide a source
of Germanium for the sale of certain assets within our Germanium-based
business. The balance in Liabilities of Discontinued Operations was primarily
accounts payable and accrued liabilities related to our Hillsdale U.K.
Automotive operation.



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

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

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

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

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

At November 30, 2002, our interest in EPFC 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 August 31, 2002, we sold $147.5
million of accounts receivable to EPFC, and during the same period, EPFC
collected $145.0 million of cash that was reinvested in new securitizations.
During the nine months ended August 31, 2002, we sold, outside of the initial
sale, $422.0 million of accounts receivable to EPFC, and during the same
period, EPFC collected $403.0 million of cash that was reinvested in new
securitizations.

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

J.      INSURANCE RELATED LOSSES (GAINS)

In the second quarter of 2002, we recorded a provision of $3.1 million
primarily related to a dispute with an insurance carrier over the coverage on a
fire during 2001 at our Harrisonville, Missouri bulk pharmaceutical plant.
During the third quarter of 2003, we recorded a $2.8 million gain related to
the settlement of this claim.

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

K.      SHAREHOLDERS EQUITY (DEFICIT)

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

L.       LEGAL MATTERS

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

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

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

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

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M.      BUSINESS SEGMENT INFORMATION

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

|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |         | 
|------------------------------------------ | ------------ | - | ----------------------------- | ------- | ---------------------------- | - | ------- | ------ | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                           |              |   | Three Months Ended August 31, |         | Nine Months Ended August 31,
|                                           |              |   |                               |         |                             
|                                           |              |   | 2002                          |         | 2003                         |   | 2002    |        | 2003
|                                           |              |   |                               |         |                              |   |         |        |     
|Net Sales                                  |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Hillsdale Division                         |              | $ | 82,269                        |         |                              | $ | 74,660  |        |      | $ | 257,072 |         |  | $ | 239,597 |        
|Wolverine Division                         |              |   | 21,196                        |         |                              |   | 22,957  |        |      |   | 58,552  |         |  |   | 66,864  |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|                                           | Automotive   |   |                               | 103,465 |                              |   |         | 97,617 |      |   |         | 315,624 |  |   |         | 306,461 | 
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Power Group                                |              |   | 27,768                        |         |                              |   | 38,047  |        |      |   | 75,568  |         |  |   | 104,187 |        
|Precision Products- divested
July 17, 2002 |              |   | 832                           |         |                              |   |        |        |      |   | 3,435   |         |  |   |        |        
|Specialty Materials Group                  |              |   | 10,915                        |         |                              |   | 9,386   |        |      |   | 33,526  |         |  |   | 29,534  |        
|Pharmaceutical Services
(formerly ChemSyn) |              |   | 3,097                         |         |                              |   | 1,407   |        |      |   | 10,278  |         |  |   | 6,690   |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|                                           | Technologies |   |                               | 42,612  |                              |   |         | 48,840 |      |   |         | 122,807 |  |   |         | 140,411 | 
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Filtration and Minerals                    |              |   | 21,275                        |         |                              |   | 19,387  |        |      |   | 61,311  |         |  |   | 58,058  |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|                                           |              | $ | 167,352                       |         |                              | $ | 165,844 |        |      | $ | 499,742 |         |  | $ | 504,930 |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Operating Income (Loss)                    |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Automotive                                 |              | $ | 2,073                         |         |                              | $ | 4,252   |        |      | $ | 9,166   |         |  | $ | 16,165  |        
|Technologies                               |              |   | 5,078                         |         |                              |   | 6,248   |        |      |   | (3,425  | )       |  |   | 28,855  |        
|Filtration and Minerals                    |              |   | 1,811                         |         |                              |   | 1,929   |        |      |   | 6,706   |         |  |   | 3,439   |        
|Divested Divisions                         |              |   | (161                          | )       |                              |   |        |        |      |   | (6,131  | )       |  |   |        |        
|Corporate/Intersegment                     |              |   | (1,633                        | )       |                              |   | 805     |        |      |   | (5,416  | )       |  |   | (3,258  | )      
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|                                           |              | $ | 7,168                         |         |                              | $ | 13,234  |        |      | $ | 900     |         |  | $ | 45,201  |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Depreciation and Amortization              |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|Automotive                                 |              | $ | 10,982                        |         |                              | $ | 8,259   |        |      | $ | 31,512  |         |  | $ | 25,532  |        
|Technologies                               |              |   | 3,232                         |         |                              |   | 3,802   |        |      |   | 9,914   |         |  |   | 6,885   |        
|Filtration and Minerals                    |              |   | 1,327                         |         |                              |   | 1,276   |        |      |   | 4,075   |         |  |   | 3,802   |        
|Corporate                                  |              |   | 135                           |         |                              |   | (569    | )      |      |   | 358     |         |  |   | (1,421  | )      
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        
|                                           |              | $ | 15,676                        |         |                              | $ | 12,768  |        |      | $ | 45,859  |         |  | $ | 34,798  |        
|                                           |              |   |                               |         |                              |   |         |        |      |   |         |         |  |   |         |        

N.       RELATED PARTY TRANSACTIONS

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

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

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

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

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

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

O.      11.75% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK

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

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P.     LONG-TERM DEBT

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

|                                                                               |                                                           |   |         |         |      |   |         |         | 
|------------------------------------------------------------------------------ | --------------------------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                                                               |                                                           |   | 2002    |         | 2003
|                                                                               |                                                           |   |         |         |     
|New Credit Agreement:                                                          |                                                           |   |         |         |      |   |         |        
|                                                                               | New revolving credit
facility                             |   | $       |        |      |   | $       |        | 
|                                                                               | New term
loan                                             |   |         |        |      |   |         | 150,000 | 
|Former Credit Agreement:                                                       |                                                           |   |         |         |      |   |         |        
|                                                                               | Former revolving
credit facility,
paid off in August
2003 |   |         | 121,500 |      |   |         |        | 
|                                                                               | Former term loan,
paid off in August
2003                 |   |         | 16,925  |      |   |         |        | 
|Senior Unsecured Notes, 9.75% interest, due 2013,
net of $1.9 million
discount |                                                           |   |        |         |      |   | 248,013 |        
|Senior Subordinated Notes, 9.375% interest, due
2008                           |                                                           |   | 220,000 |         |      |   | 10,500  |        
|Industrial Revenue Bonds, 1.8% to 2.2% interest,
due 2005                      |                                                           |   | 15,300  |         |      |   | 15,300  |        
|Other                                                                          |                                                           |   |        |         |      |   | 1,169   |        
|                                                                               |                                                           |   |         |         |      |   |         |         | 
|                                                                               |                                                           |   | 373,725 |         |      |   | 424,982 |        
|Less: current
portion                                                          |                                                           |   | (18,625 | )       |      |   | (3,200  | )      
|                                                                               |                                                           |   |         |         |      |   |         |         | 
|Long-term debt, net of current
portion                                         |                                                           | $ | 355,100 |         |      | $ | 421,782 |        
|                                                                               |                                                           |   |         |         |      |   |         |         | 

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

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 2,175   | 
|2004       |  |   | 3,650   | 
|2005       |  |   | 13,650  | 
|2006       |  |   | 1,869   | 
|2007       |  |   | 1,500   | 
|Thereafter |  |   | 402,138 | 
|           |  |   |         | 
|           |  | $ | 424,982 | 
|           |  |   |         | 

New Credit Agreement

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

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

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

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

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

In addition to regularly scheduled payments on the New Credit Agreement,
we are required to make mandatory prepayments equal to 50.0% of annual excess
cash flow, as defined in the New Credit Agreement, beginning with our fiscal
year ending November 30, 2004. The net proceeds from the sale of assets
(subject to certain conditions), the net proceeds of certain new debt issuance,
and 50.0% of the net proceeds of any equity securities issuance are also
subject to mandatory prepayments on the New Credit Agreement.

Former Credit Agreement

We had a syndicated senior secured loan facility (Former Credit
Agreement) which provided for an original term loan (Former Term Loan) of
$75.0 million, as amended, and a $220.0 million revolving credit facility
(Former Facility). We paid off the Former Credit Agreement with the proceeds
from our New Credit Agreement and Senior Unsecured Notes in August 2003. The
Former Facility and the Former Term Loan bore interest, at our option, at LIBOR
plus 275 basis points, or the banks prime rate plus 150 basis points.
Interest was generally payable quarterly on the Former Facility and Former Term
Loan. The Former Credit Agreement also contained certain fees.

Senior Unsecured Notes

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

Senior Subordinated Notes

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

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Industrial Revenue Bonds

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

Subsidiary Guarantors and Non-Guarantors

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

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

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

|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |        | 
|---------------------------------------------- | -------------------------------------------------- | - | -------- | ------ | -------------- | - | ----------- | - | ------------ | - | -------------- | ------ | ----- | - | ------- | ------ |  | - | -------- | ------- | - | - | ------- | ------ | 
|                                               |                                                    |   |          |        |                |   | Guarantors  |   |              |   |                |        |       |   |         |        |  |   |         
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |         
|                                               |                                                    |   |          |        |                |   | EaglePicher |   | Subsidiary   |   | Non-Guarantors |        |       |   |         |        |  |   |         
|                                               |                                                    |   | 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  |                |   |             |  |              |   |                | 29,978 |       |   |         | 16,866 |  |   |          |        |   |   |         | 49,379 | 
|                                               | 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  |                |   |             |  |              |   |                | 34,480 |       |   |         | 12,683 |  |   |          | (1,916  | ) |   |         | 49,204 | 
|                                               | Assets of discontinued operations                  |   |          | 643    |                |   |             |  |              |   |                | 18,925 |       |   |         | 9,331  |  |   |          |        |   |   |         | 28,899 | 
|                                               | Prepaid expenses and other assets                  |   |          | 7,840  |                |   |             |  |              |   |                | 4,681  |       |   |         | 4,456  |  |   |          | (1,614  | ) |   |         | 15,363 | 
|                                               | Deferred income taxes                              |   |          | 10,798 |                |   |             |  |              |   |                |       |       |   |         |       |  |   |          |        |   |   |         | 10,798 | 
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |        | 
|                                               |                                                    |   | 55,464   |        |                |   | 1           |   |              |   | 106,339        |        |       |   | 53,275  |        |  |   | (12,972  | )       |   |   | 202,107 |       
|Property, Plant and Equipment, net             |                                                    |   | 24,016   |        |                |   |            |   |              |   | 125,575        |        |       |   | 24,067  |        |  |   |         |         |   |   | 173,658 |       
|Investment in Subsidiaries                     |                                                    |   | 239,864  |        |                |   | 58,509      |   |              |   | 18,286         |        |       |   |        |        |  |   | (316,659 | )       |   |   |        |       
|Goodwill                                       |                                                    |   | 37,339   |        |                |   |            |   |              |   | 112,286        |        |       |   | 13,154  |        |  |   | (3,139   | )       |   |   | 159,640 |       
|Prepaid Pension                                |                                                    |   | 54,796   |        |                |   |            |   |              |   |               |        |       |   |        |        |  |   |         |         |   |   | 54,796  |       
|Other Assets, net                              |                                                    |   | 14,296   |        |                |   | (8,091      | ) |              |   | 17,078         |        |       |   | 11,070  |        |  |   | (11,513  | )       |   |   | 22,840  |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |        | 
|                                               |                                                    | $ | 425,775  |        |                | $ | 50,419      |   |              | $ | 379,564        |        |       | $ | 101,566 |        |  | $ | (344,283 | )       |   | $ | 613,041 |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |        | 
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |       
|Current Liabilities:                           |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |       
|                                               | Accounts payable                                   |   | $        | 15,398 |                |   | $           |  |              |   | $              | 52,708 |       |   | $       | 14,252 |  |   | $        | 820     |   |   | $       | 83,178 | 
|                                               | 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             |   |          |       |                |   |             |  |              |   |                | 888    |       |   |         | 3,417  |  |   |          |        |   |   |         | 4,305  | 
|                                               | Other accrued liabilities                          |   |          | 46,313 |                |   |             |  |              |   |                | 24,683 |       |   |         | 3,879  |  |   |          |        |   |   |         | 74,875 | 
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |         |   |   |         |        | 
|                                               |                                                    |   | 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          |   |              |   | 267,578        |        |       |   | 25,925  |        |  |   | (10,820  | )       |   |   |        |       
|Preferred Stock                                |                                                    |   |         |        |                |   | 137,973     |   |              |   |               |        |       |   |        |        |  |   |         |         |   |   | 137,973 |       
|Shareholders Equity (Deficit)                 |                                                    |   | 243,553  |        |                |   | (87,578     | ) |              |   | 27,820         |        |       |   | 41,202  |        |  |   | (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 AUGUST 31, 2003
(in thousands of dollars)

|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|---------------------------------------------- | -------------------------------------------------- | - | -------- | ------ | -------------- | - | ----------- | - | ------------ | - | -------------- | ------ | ----- | - | ------- | ------ |  | - | -------- | ------ | - | - | ------- | ------ | 
|                                               |                                                    |   |          |        |                |   | Guarantors  |   |              |   |                |        |       |   |         |        |  |   |         
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |         
|                                               |                                                    |   |          |        |                |   | EaglePicher |   | Subsidiary   |   | Non-Guarantors |        |       |   |         |        |  |   |         
|                                               |                                                    |   | Issuer   |        | Holdings, Inc. |   | Guarantors  |   | Subsidiaries |   | Eliminations   |        | Total
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |      
|ASSETS                                         |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |       
|Current Assets:                                |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |       
|                                               | Cash and cash equivalents                          |   | $        | 10,836 |                |   | $           | 1 |              |   | $              | 487    |       |   | $       | 12,657 |  |   | $        |       |   |   | $       | 23,981 | 
|                                               | Receivables and retained interest, net             |   |          | 5,421  |                |   |             |  |              |   |                | 64,987 |       |   |         | 22,115 |  |   |          |       |   |   |         | 92,523 | 
|                                               | Insurance claim receivable                         |   |          |       |                |   |             |  |              |   |                | 5,198  |       |   |         |       |  |   |          |       |   |   |         | 5,198  | 
|                                               | Costs and estimated earnings in excess of billings |   |          |       |                |   |             |  |              |   |                | 20,206 |       |   |         | 5,780  |  |   |          |       |   |   |         | 25,986 | 
|                                               | Intercompany accounts receivable                   |   |          | 1,859  |                |   |             |  |              |   |                | 7,141  |       |   |         | 634    |  |   |          | (9,634 | ) |   |         |       | 
|                                               | Inventories                                        |   |          | 5,298  |                |   |             |  |              |   |                | 39,095 |       |   |         | 11,949 |  |   |          | (2,188 | ) |   |         | 54,154 | 
|                                               | Assets of discontinued operations                  |   |          | 182    |                |   |             |  |              |   |                | 4,080  |       |   |         | 4,915  |  |   |          |       |   |   |         | 9,177  | 
|                                               | Prepaid expenses and other assets                  |   |          | 1,169  |                |   |             |  |              |   |                | 4,891  |       |   |         | 3,606  |  |   |          |       |   |   |         | 9,666  | 
|                                               | Deferred income taxes                              |   |          | 10,798 |                |   |             |  |              |   |                |       |       |   |         |       |  |   |          |       |   |   |         | 10,798 | 
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|                                               |                                                    |   | 35,563   |        |                |   | 1           |   |              |   | 146,085        |        |       |   | 61,656  |        |  |   | (11,822  | )      |   |   | 231,483 |       
|Property, Plant and Equipment, net             |                                                    |   | 22,288   |        |                |   |            |   |              |   | 107,033        |        |       |   | 25,095  |        |  |   |         |        |   |   | 154,416 |       
|Investment in Subsidiaries                     |                                                    |   | 273,910  |        |                |   | 63,191      |   |              |   | 23,246         |        |       |   | (134    | )      |  |   | (360,213 | )      |   |   |        |       
|Goodwill                                       |                                                    |   | 37,339   |        |                |   |            |   |              |   | 112,286        |        |       |   | 13,154  |        |  |   | (3,139   | )      |   |   | 159,640 |       
|Prepaid Pension                                |                                                    |   | 55,609   |        |                |   |            |   |              |   |               |        |       |   |        |        |  |   |         |        |   |   | 55,609  |       
|Other Assets, net                              |                                                    |   | 11,219   |        |                |   | 2,620       |   |              |   | 22,097         |        |       |   | 34,376  |        |  |   | (43,703  | )      |   |   | 26,609  |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|                                               |                                                    | $ | 435,928  |        |                | $ | 65,812      |   |              | $ | 410,747        |        |       | $ | 134,147 |        |  | $ | (418,877 | )      |   | $ | 627,757 |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |       
|Current Liabilities:                           |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |       
|                                               | Accounts payable                                   |   | $        | 11,967 |                |   | $           |  |              |   | $              | 39,550 |       |   | $       | 9,006  |  |   | $        |       |   |   | $       | 60,523 | 
|                                               | Intercompany accounts payable                      |   |          |       |                |   |             |  |              |   |                | 626    |       |   |         | 9,011  |  |   |          | (9,637 | ) |   |         |       | 
|                                               | Current portion of long-term debt                  |   |          | 3,200  |                |   |             |  |              |   |                |       |       |   |         |       |  |   |          |       |   |   |         | 3,200  | 
|                                               | Liabilities of discontinued operations             |   |          |       |                |   |             |  |              |   |                |       |       |   |         |        |  |   |          |       |   |   |         |       | 
|                                               | Other accrued liabilities                          |   |          | 26,265 |                |   |             |  |              |   |                | 18,062 |       |   |         | 8,813  |  |   |          |       |   |   |         | 53,140 | 
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|                                               |                                                    |   | 41,432   |        |                |   |            |   |              |   | 58,238         |        |       |   | 26,830  |        |  |   | (9,637   | )      |   |   | 116,863 |       
|Long-term Debt, net of current portion         |                                                    |   | 434,522  |        |                |   |            |   |              |   | 785            |        |       |   | 12,938  |        |  |   | (26,463  | )      |   |   | 421,782 |       
|Postretirement Benefits Other Than Pensions    |                                                    |   | 17,402   |        |                |   |            |   |              |   |               |        |       |   |         |        |  |   |         |        |   |   | 17,402  |       
|Other Long-term Liabilities                    |                                                    |   | 9,220    |        |                |   |            |   |              |   |               |        |       |   | 1,432   |        |  |   |         |        |   |   | 10,652  |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|                                               |                                                    |   | 502,576  |        |                |   |            |   |              |   | 59,023         |        |       |   | 41,200  |        |  |   | (36,100  | )      |   |   | 566,699 |       
|Intercompany Accounts                          |                                                    |   | (318,653 | )      |                |   | 10,789      |   |              |   | 287,913        |        |       |   | 46,599  |        |  |   | (26,648  | )      |   |   |        |       
|Preferred Stock                                |                                                    |   |         |        |                |   | 150,247     |   |              |   |               |        |       |   |        |        |  |   |         |        |   |   | 150,247 |       
|Shareholders Equity (Deficit)                 |                                                    |   | 252,005  |        |                |   | (95,224     | ) |              |   | 63,811         |        |       |   | 46,348  |        |  |   | (356,129 | )      |   |   | (89,189 | )     
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 
|                                               |                                                    | $ | 435,928  |        |                | $ | 65,812      |   |              | $ | 410,747        |        |       | $ | 134,147 |        |  | $ | (418,877 | )      |   | $ | 627,757 |       
|                                               |                                                    |   |          |        |                |   |             |   |              |   |                |        |       |   |         |        |  |   |          |        |   |   |         |        | 

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

|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------ | ------ | -------------- | - | ----------- | ------ | ------------ | - | -------------- | ------- | ----- | - | ------ | ------ |  | - | ------ | ------ | - | - | ------- | ------- | -
|                                                      |                                                          |   |        |        |                |   | Guarantors  |        |              |   |                |         |       |   |        |        |  |   |       
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |       
|                                                      |                                                          |   |        |        |                |   | EaglePicher |        | Subsidiary   |   | Non-Guarantors |         |       |   |        |        |  |   |       
|                                                      |                                                          |   | Issuer |        | Holdings, Inc. |   | Guarantors  |        | Subsidiaries |   | Eliminations   |         | Total
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |      
|Net Sales:                                            |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |        
|                                                      | Customers                                                |   | $      | 13,492 |                |   | $           |       |              |   | $              | 133,079 |       |   | $      | 20,781 |  |   | $      |       |   |   | $       | 167,352 |  
|                                                      | Intercompany                                             |   |        | 4,914  |                |   |             |       |              |   |                | 4,108   |       |   |        |       |  |   |        | (9,022 | ) |   |         |        |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|                                                      |                                                          |   | 18,406 |        |                |   |            |        |              |   | 137,187        |         |       |   | 20,781 |        |  |   | (9,022 | )      |   |   | 167,352 |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|Operating Costs and Expenses:                         |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |        | 10,907 |                |   |             |       |              |   |                | 111,535 |       |   |        | 16,681 |  |   |        | (9,022 | ) |   |         | 130,101 |  
|                                                      | Selling and administrative                               |   |        | 5,976  |                |   |             |       |              |   |                | 6,595   |       |   |        | 1,575  |  |   |        | 100    |   |   |         | 14,246  |  
|                                                      | Intercompany charges                                     |   |        | (3,064 | )              |   |             |       |              |   |                | 2,660   |       |   |        | 504    |  |   |        | (100   | ) |   |         |        |  
|                                                      | Depreciation and amortization                            |   |        | 1,593  |                |   |             |       |              |   |                | 9,195   |       |   |        | 1,042  |  |   |        |       |   |   |         | 11,830  |  
|                                                      | Goodwill amortization                                    |   |        | 934    |                |   |             |       |              |   |                | 2,665   |       |   |        | 247    |  |   |        |       |   |   |         | 3,846   |  
|                                                      | Other                                                    |   |        | 161    |                |   |             |       |              |   |                |        |       |   |        |       |  |   |        |       |   |   |         | 161     |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|                                                      |                                                          |   | 16,507 |        |                |   |            |        |              |   | 132,650        |         |       |   | 20,049 |        |  |   | (9,022 | )      |   |   | 160,184 |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|Operating Income (Loss)                               |                                                          |   | 1,899  |        |                |   |            |        |              |   | 4,537          |         |       |   | 732    |        |  |   |       |        |   |   | 7,168   |        
|Other Income (Expense):                               |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |        
|                                                      | Interest (expense) income                                |   |        | (8,610 | )              |   |             |       |              |   |                |        |       |   |        |       |  |   |        |       |   |   |         | (8,610  | )
|                                                      | Other income (expense), net                              |   |        | 701    |                |   |             |       |              |   |                | (176    | )     |   |        | 307    |  |   |        | (419   | ) |   |         | 413     |  
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |        | 701    |                |   |             | (3,571 | )            |   |                | 436     |       |   |        |       |  |   |        | 2,434  |   |   |         |        |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | (5,309 | )      |                |   | (3,571      | )      |              |   | 4,797          |         |       |   | 1,039  |        |  |   | 2,015  |        |   |   | (1,029  | )      
|Income Taxes                                          |                                                          |   |       |        |                |   |            |        |              |   |               |         |       |   | 750    |        |  |   |       |        |   |   | 750     |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|Income (Loss) from Continuing Operations              |                                                          |   | (5,309 | )      |                |   | (3,571      | )      |              |   | 4,797          |         |       |   | 289    |        |  |   | 2,015  |        |   |   | (1,779  | )      
|Discontinued Operations                               |                                                          |   |       |        |                |   |            |        |              |   | (890           | )       |       |   | (902   | )      |  |   |       |        |   |   | (1,792  | )      
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  
|Net Income (Loss)                                     |                                                          | $ | (5,309 | )      |                | $ | (3,571      | )      |              | $ | 3,907          |         |       | $ | (613   | )      |  | $ | 2,015  |        |   | $ | (3,571  | )      
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |  |   |        |        |   |   |         |         |  

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##### Table of Contents



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

|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------ | ------ | -------------- | - | ----------- | ------ | ------------ | - | -------------- | ------- | ----- | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                      |                                                          |   |        |        |                |   | Guarantors  |        |              |   |                |         |       |   |        |        |   |   |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |        
|                                                      |                                                          |   |        |        |                |   | EaglePicher |        | Subsidiary   |   | Non-Guarantors |         |       |   |        |        |   |   |        
|                                                      |                                                          |   | Issuer |        | Holdings, Inc. |   | Guarantors  |        | Subsidiaries |   | Eliminations   |         | Total
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |      
|Net Sales:                                            |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Customers                                                |   | $      | 13,680 |                |   | $           |       |              |   | $              | 120,681 |       |   | $      | 31,483 |   |   | $       |        |   |   | $       | 165,844 |  
|                                                      | Intercompany                                             |   |        | 4,495  |                |   |             |       |              |   |                | 4,242   |       |   |        | 754    |   |   |         | (9,491  | ) |   |         |        |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 18,175 |        |                |   |            |        |              |   | 124,923        |         |       |   | 32,237 |        |   |   | (9,491  | )       |   |   | 165,844 |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Operating Costs and Expenses:                         |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |        | 11,139 |                |   |             |       |              |   |                | 99,968  |       |   |        | 25,867 |   |   |         | (9,973  | ) |   |         | 127,001 |  
|                                                      | Selling and administrative                               |   |        | 4,829  |                |   |             | 1      |              |   |                | 9,141   |       |   |        | 1,644  |   |   |         |        |   |   |         | 15,615  |  
|                                                      | Intercompany charges                                     |   |        | (1,516 | )              |   |             |       |              |   |                | 1,463   |       |   |        | 53     |   |   |         |        |   |   |         |        |  
|                                                      | Insurance related losses (gains)                         |   |        |       |                |   |             |       |              |   |                | (2,774  | )     |   |        |       |   |   |         |        |   |   |         | (2,774  | )
|                                                      | Depreciation and amortization                            |   |        | 617    |                |   |             |       |              |   |                | 10,730  |       |   |        | 1,421  |   |   |         |        |   |   |         | 12,768  |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 15,069 |        |                |   | 1           |        |              |   | 118,528        |         |       |   | 28,985 |        |   |   | (9,973  | )       |   |   | 152,610 |        
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Operating Income (Loss)                               |                                                          |   | 3,106  |        |                |   | (1          | )      |              |   | 6,395          |         |       |   | 3,252  |        |   |   | 482     |         |   |   | 13,234  |        
|Other Income (Expense):                               |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Interest (expense) income                                |   |        | (9,199 | )              |   |             | (50    | )            |   |                |        |       |   |        |       |   |   |         |        |   |   |         | (9,249  | )
|                                                      | Other income (expense), net                              |   |        | (881   | )              |   |             |       |              |   |                | 116     |       |   |        | 165    |   |   |         |        |   |   |         | (600    | )
|                                                      | Write-off of deferred financing fees                     |   |        | (6,327 | )              |   |             |       |              |   |                |        |       |   |        |       |   |   |         |        |   |   |         | (6,327  | )
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |        | 32,575 |                |   |             | (4,175 | )            |   |                | 3,787   |       |   |        | (134   | ) |   |         | (32,053 | ) |   |         |        |  
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | 19,274 |        |                |   | (4,226      | )      |              |   | 10,298         |         |       |   | 3,283  |        |   |   | (31,571 | )       |   |   | (2,942  | )      
|Income Taxes                                          |                                                          |   | (191   | )      |                |   |            |        |              |   |               |         |       |   | (613   | )      |   |   |        |         |   |   | (804    | )      
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Income (Loss) From Continuing Operations              |                                                          |   | 19,083 |        |                |   | (4,226      | )      |              |   | 10,298         |         |       |   | 2,670  |        |   |   | (31,571 | )       |   |   | (3,746  | )      
|Discontinued Operations                               |                                                          |   |       |        |                |   |            |        |              |   | 271            |         |       |   | (751   | )      |   |   |        |         |   |   | (480    | )      
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Net Income (Loss)                                     |                                                          | $ | 19,083 |        |                | $ | (4,226      | )      |              | $ | 10,569         |         |       | $ | 1,919  |        |   | $ | (31,571 | )       |   | $ | (4,226  | )      
|                                                      |                                                          |   |        |        |                |   |             |        |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  

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##### Table of Contents



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

|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------- | ------- | -------------- | - | ----------- | ------- | ------------ | - | -------------- | ------- | ----- | - | ------ | ------ |  | - | ------- | ------- | - | - | ------- | ------- | -
|                                                      |                                                          |   |         |         |                |   | Guarantors  |         |              |   |                |         |       |   |        |        |  |   |        
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |        
|                                                      |                                                          |   |         |         |                |   | EaglePicher |         | Subsidiary   |   | Non-Guarantors |         |       |   |        |        |  |   |        
|                                                      |                                                          |   | Issuer  |         | Holdings, Inc. |   | Guarantors  |         | Subsidiaries |   | Eliminations   |         | Total
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |      
|Net Sales:                                            |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |        
|                                                      | Customers                                                |   | $       | 38,192  |                |   | $           |        |              |   | $              | 405,115 |       |   | $      | 56,435 |  |   | $       |        |   |   | $       | 499,742 |  
|                                                      | Intercompany                                             |   |         | 12,524  |                |   |             |        |              |   |                | 10,465  |       |   |        | 4      |  |   |         | (22,993 | ) |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 50,716  |         |                |   |            |         |              |   | 415,580        |         |       |   | 56,439 |        |  |   | (22,993 | )       |   |   | 499,742 |        
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|Operating Costs and Expenses:                         |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |         | 29,559  |                |   |             |        |              |   |                | 338,697 |       |   |        | 45,067 |  |   |         | (22,993 | ) |   |         | 390,330 |  
|                                                      | Selling and administrative                               |   |         | 20,609  |                |   |             | 2       |              |   |                | 25,053  |       |   |        | 4,760  |  |   |         |        |   |   |         | 50,424  |  
|                                                      | Intercompany charges                                     |   |         | (8,924  | )              |   |             |        |              |   |                | 7,642   |       |   |        | 1,282  |  |   |         |        |   |   |         |        |  
|                                                      | Depreciation and amortization                            |   |         | 3,505   |                |   |             |        |              |   |                | 28,518  |       |   |        | 2,298  |  |   |         |        |   |   |         | 34,321  |  
|                                                      | Goodwill amortization                                    |   |         | 2,802   |                |   |             |        |              |   |                | 7,995   |       |   |        | 741    |  |   |         |        |   |   |         | 11,538  |  
|                                                      | Other                                                    |   |         | 4,807   |                |   |             |        |              |   |                | 7,422   |       |   |        |       |  |   |         |        |   |   |         | 12,229  |  
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 52,358  |         |                |   | 2           |         |              |   | 415,327        |         |       |   | 54,148 |        |  |   | (22,993 | )       |   |   | 498,842 |        
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|Operating Income (Loss)                               |                                                          |   | (1,642  | )       |                |   | (2          | )       |              |   | 253            |         |       |   | 2,291  |        |  |   |        |         |   |   | 900     |        
|Other Income (Expense):                               |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |        
|                                                      | Interest (expense) income                                |   |         | (28,596 | )              |   |             |        |              |   |                |        |       |   |        |       |  |   |         |        |   |   |         | (28,596 | )
|                                                      | Other income (expense), net                              |   |         | 1,462   |                |   |             |        |              |   |                | 628     |       |   |        | 618    |  |   |         | (1,377  | ) |   |         | 1,331   |  
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |         | (28,553 | )              |   |             | (31,744 | )            |   |                | 1,604   |       |   |        |       |  |   |         | 58,693  |   |   |         |        |  
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | (57,329 | )       |                |   | (31,746     | )       |              |   | 2,485          |         |       |   | 2,909  |        |  |   | 57,316  |         |   |   | (26,365 | )      
|Income Taxes                                          |                                                          |   |        |         |                |   |            |         |              |   | (12            | )       |       |   | (1,943 | )      |  |   |        |         |   |   | (1,955  | )      
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|Income (Loss) from Continuing Operations              |                                                          |   | (57,329 | )       |                |   | (31,746     | )       |              |   | 2,473          |         |       |   | 966    |        |  |   | 57,316  |         |   |   | (28,320 | )      
|Discontinued Operations                               |                                                          |   |        |         |                |   |            |         |              |   | (2,052         | )       |       |   | (1,374 | )      |  |   |        |         |   |   | (3,426  | )      
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  
|Net Income (Loss)                                     |                                                          | $ | (57,329 | )       |                | $ | (31,746     | )       |              | $ | 421            |         |       | $ | (408   | )      |  | $ | 57,316  |         |   | $ | (31,746 | )      
|                                                      |                                                          |   |         |         |                |   |             |         |              |   |                |         |       |   |        |        |  |   |         |         |   |   |         |         |  

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##### Table of Contents



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

|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|----------------------------------------------------- | -------------------------------------------------------- | - | ------ | ------- | -------------- | - | ----------- | ----- | ------------ | - | -------------- | ------- | ----- | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                      |                                                          |   |        |         |                |   | Guarantors  |       |              |   |                |         |       |   |        |        |   |   |        
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |        
|                                                      |                                                          |   |        |         |                |   | EaglePicher |       | Subsidiary   |   | Non-Guarantors |         |       |   |        |        |   |   |        
|                                                      |                                                          |   | Issuer |         | Holdings, Inc. |   | Guarantors  |       | Subsidiaries |   | Eliminations   |         | Total
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |      
|Net Sales:                                            |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Customers                                                |   | $      | 40,606  |                |   | $           |      |              |   | $              | 379,494 |       |   | $      | 84,830 |   |   | $       |        |   |   | $       | 504,930 |  
|                                                      | Intercompany                                             |   |        | 15,351  |                |   |             |      |              |   |                | 12,656  |       |   |        | 2,095  |   |   |         | (30,102 | ) |   |         |        |  
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 55,957 |         |                |   |            |       |              |   | 392,150        |         |       |   | 86,925 |        |   |   | (30,102 | )       |   |   | 504,930 |        
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Operating Costs and Expenses:                         |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Cost of products sold (exclusive of depreciation)        |   |        | 34,788  |                |   |             |      |              |   |                | 312,236 |       |   |        | 70,683 |   |   |         | (30,102 | ) |   |         | 387,605 |  
|                                                      | Selling and administrative                               |   |        | 17,989  |                |   |             | 4     |              |   |                | 22,828  |       |   |        | 5,015  |   |   |         |        |   |   |         | 45,836  |  
|                                                      | Intercompany charges                                     |   |        | (4,969  | )              |   |             |      |              |   |                | 4,796   |       |   |        | 173    |   |   |         |        |   |   |         |        |  
|                                                      | Insurance related gains                                  |   |        | 724     |                |   |             |      |              |   |                | (9,234  | )     |   |        |       |   |   |         |        |   |   |         | (8,510  | )
|                                                      | Depreciation and amortization                            |   |        | 2,094   |                |   |             |       |              |   |                | 28,748  |       |   |        | 3,956  |   |   |         |        |   |   |         | 34,798  |  
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|                                                      |                                                          |   | 50,626 |         |                |   | 4           |       |              |   | 359,374        |         |       |   | 79,827 |        |   |   | (30,102 | )       |   |   | 459,729 |        
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Operating Income (Loss)                               |                                                          |   | 5,331  |         |                |   | (4          | )     |              |   | 32,776         |         |       |   | 7,098  |        |   |   |        |         |   |   | 45,201  |        
|Other Income (Expense):                               |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |        
|                                                      | Interest (expense) income                                |   |        | (25,891 | )              |   |             | (50   | )            |   |                |        |       |   |        |       |   |   |         |        |   |   |         | (25,941 | )
|                                                      | Other income (expense), net                              |   |        | (1,619  | )              |   |             |      |              |   |                | 1,064   |       |   |        | 28     |   |   |         |        |   |   |         | (527    | )
|                                                      | Write-off of Deferred Financing Fees                     |   |        | (6,327  | )              |   |             |      |              |   |                |        |       |   |        |       |   |   |         |        |   |   |         | (6,327  | )
|                                                      | Equity in earnings (losses) of
consolidated subsidiaries |   |        | 34,046  |                |   |             | 4,682 |              |   |                | 4,960   |       |   |        | (134   | ) |   |         | (43,554 | ) |   |         |        |  
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Income (Loss) from Continuing Operations Before Taxes |                                                          |   | 5,540  |         |                |   | 4,628       |       |              |   | 38,800         |         |       |   | 6,992  |        |   |   | (43,554 | )       |   |   | 12,406  |        
|Income Taxes                                          |                                                          |   | (399   | )       |                |   |            |       |              |   | (46            | )       |       |   | (2,405 | )      |   |   |        |         |   |   | (2,850  | )      
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Income (Loss) From Continuing Operations              |                                                          |   | 5,141  |         |                |   | 4,628       |       |              |   | 38,754         |         |       |   | 4,587  |        |   |   | (43,554 | )       |   |   | 9,556   |        
|Discontinued Operations                               |                                                          |   |       |         |                |   |            |       |              |   | (768           | )       |       |   | (4,160 | )      |   |   |        |         |   |   | (4,928  | )      
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  
|Net Income (Loss)                                     |                                                          | $ | 5,141  |         |                | $ | 4,628       |       |              | $ | 37,986         |         |       | $ | 427    |        |   | $ | (43,554 | )       |   | $ | 4,628   |        
|                                                      |                                                          |   |        |         |                |   |             |       |              |   |                |         |       |   |        |        |   |   |         |         |   |   |         |         |  

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

|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |        | 
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | ------- | ------ | -------------- | - | ----------- | ------ | ------------ | - | -------------- | ------ | ----- | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------ | 
|                                                                                               |                                                                    |   |         |        |                |   | Guarantors  |        |              |   |                |        |       |   |        |        |   |   |        
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |        
|                                                                                               |                                                                    |   |         |        |                |   | EaglePicher |        | Subsidiary   |   | Non-Guarantors |        |       |   |        |        |   |   |        
|                                                                                               |                                                                    |   | Issuer  |        | Holdings, Inc. |   | Guarantors  |        | Subsidiaries |   | Eliminations   |        | Total
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net income (loss)                                                                              |                                                                    | $ | (57,329 | )      |                | $ | (31,746     | )      |              | $ | 421            |        |       | $ | (408   | )      |   | $ | 57,316  |         |   | $ | (31,746 | )     
|Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities: |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Equity in (earnings) loss of consolidated subsidiaries             |   |         | 28,553 |                |   |             | 31,744 |              |   |                | (1,604 | )     |   |        |       |   |   |         | (58,693 | ) |   |         |       | 
|                                                                                               | Depreciation and amortization                                      |   |         | 8,660  |                |   |             |       |              |   |                | 36,075 |       |   |        | 3,123  |   |   |         |        |   |   |         | 47,858 | 
|                                                                                               | Loss from divestitures                                             |   |         | 3,325  |                |   |             |       |              |   |                | 2,806  |       |   |        |       |   |   |         |        |   |   |         | 6,131  | 
|                                                                                               | Deferred income taxes                                              |   |         | 811    |                |   |             |       |              |   |                |       |       |   |        |       |   |   |         |        |   |   |         | 811    | 
|                                                                                               | Insurance related loss                                             |   |         |       |                |   |             |       |              |   |                | 3,100  |       |   |        |       |   |   |         |        |   |   |         | 3,100  | 
|                                                                                               | Changes in assets and liabilities, net of effect
of non-cash items |   |         | 23,119 |                |   |             | 161    |              |   |                | 53,261 |       |   |        | (8,463 | ) |   |         | (47,834 | ) |   |         | 20,244 | 
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | 7,139   |        |                |   | 159         |        |              |   | 94,059         |        |       |   | (5,748 | )      |   |   | (49,211 | )       |   |   | 46,398  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Capital expenditures                                                                           |                                                                    |   | (894    | )      |                |   |            |        |              |   | (9,988         | )      |       |   | (941   | )      |   |   |        |         |   |   | (11,823 | )     
|Other                                                                                          |                                                                    |   | 639     |        |                |   |            |        |              |   |               |        |       |   |       |        |   |   |        |         |   |   | 639     |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | (255    | )      |                |   |            |        |              |   | (9,988         | )      |       |   | (941   | )      |   |   |        |         |   |   | (11,184 | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Reduction of long-term debt                                                                    |                                                                    |   | (22,770 | )      |                |   |            |        |              |   |               |        |       |   | (12    | )      |   |   |        |         |   |   | (22,782 | )     
|Net borrowings (repayments) under revolving
credit agreements                                  |                                                                    |   | (40,750 | )      |                |   |            |        |              |   |               |        |       |   |       |        |   |   |        |         |   |   | (40,750 | )     
|Acquisition of treasury stock                                                                  |                                                                    |   |        |        |                |   | (159        | )      |              |   |               |        |       |   |       |        |   |   |        |         |   |   | (159    | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|                                                                                               |                                                                    |   | (63,520 | )      |                |   | (159        | )      |              |   |               |        |       |   | (12    | )      |   |   |        |         |   |   | (63,691 | )     
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net Cash (Used In) Provided by Discontinued Operations                                         |                                                                    |   | 6,100   |        |                |   |            |        |              |   | 8,188          |        |       |   | 83     |        |   |   |        |         |   |   | 14,371  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Effect of exchange rates on cash                                                               |                                                                    |   |        |        |                |   |            |        |              |   |               |        |       |   | 2,061  |        |   |   |        |         |   |   | 2,061   |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Net increase (decrease) in cash and
cash equivalents                                           |                                                                    |   | (50,536 | )      |                |   |            |        |              |   | 92,259         |        |       |   | (4,557 | )      |   |   | (49,211 | )       |   |   | (12,045 | )     
|Intercompany accounts                                                                          |                                                                    |   | 41,289  |        |                |   |            |        |              |   | (92,124        | )      |       |   | 1,691  |        |   |   | 49,144  |         |   |   |        |       
|Cash and cash equivalents,
beginning of period                                                 |                                                                    |   | 17,145  |        |                |   | 1           |        |              |   | 471            |        |       |   | 6,936  |        |   |   | 67      |         |   |   | 24,620  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       
|Cash and cash equivalents,
end of period                                                       |                                                                    | $ | 7,898   |        |                | $ | 1           |        |              | $ | 606            |        |       | $ | 4,070  |        |   | $ |        |         |   | $ | 12,575  |       
|                                                                                               |                                                                    |   |         |        |                |   |             |        |              |   |                |        |       |   |        |        |   |   |         |         |   |   |         |       

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

|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |          |  
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | -------- | ------- | -------------- | - | ----------- | ------- | ------------ | - | -------------- | ------- | ----- | - | ------- | ------- | - | - | ------- | ------ |  | - | -------- | -------- | -
|                                                                                               |                                                                    |   |          |         |                |   | Guarantors  |         |              |   |                |         |       |   |         |         |   |   |        
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |        
|                                                                                               |                                                                    |   |          |         |                |   | EaglePicher |         | Subsidiary   |   | Non-Guarantors |         |       |   |         |         |   |   |        
|                                                                                               |                                                                    |   | Issuer   |         | Holdings, Inc. |   | Guarantors  |         | Subsidiaries |   | Eliminations   |         | Total
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |      
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Net income (loss)                                                                              |                                                                    | $ | 5,141    |         |                | $ | 4,628       |         |              | $ | 37,986         |         |       | $ | 427     |         |   | $ | (43,554 | )      |  | $ | 4,628    |         
|Adjustments to reconcile net income (loss) to cash provided
by (used in) operating activities: |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|                                                                                               | Equity in (earnings) loss of consolidated subsidiaries             |   |          | (34,046 | )              |   |             | (4,682  | )            |   |                | (4,960  | )     |   |         | 134     |   |   |         | 43,554 |  |   |          |         |  
|                                                                                               | Depreciation and amortization                                      |   |          | 4,380   |                |   |             |        |              |   |                | 28,748  |       |   |         | 3,956   |   |   |         |       |  |   |          | 37,084   |  
|                                                                                               | Provision for discontinued operations                              |   |          |        |                |   |             |        |              |   |                | (484    | )     |   |         | 3,729   |   |   |         |       |  |   |          | 3,245    |  
|                                                                                               | Insurance related gain                                             |   |          |        |                |   |             |        |              |   |                | (3,312  | )     |   |         |        |   |   |         |       |  |   |          | (3,312   | )
|                                                                                               | Write-off of Deferred Financing Costs                              |   |          | 6,327   |                |   |             |        |              |   |                |        |       |   |         |        |   |   |         |       |  |   |          | 6,327    |  
|                                                                                               | Changes in assets and liabilities, net of effect
of non-cash items |   |          | (21,504 | )              |   |             | (10,711 | )            |   |                | (75,956 | )     |   |         | (22,617 | ) |   |         | 27,010 |  |   |          | (103,778 | )
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|                                                                                               |                                                                    |   | (39,702  | )       |                |   | (10,765     | )       |              |   | (17,978        | )       |       |   | (14,371 | )       |   |   | 27,010  |        |  |   | (55,806  | )       
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Capital expenditures                                                                           |                                                                    |   | (1,815   | )       |                |   |            |         |              |   | (5,638         | )       |       |   | (3,305  | )       |   |   |        |        |  |   | (10,758  | )       
|Proceeds from sale of property and equipment                                                   |                                                                    |   |         |         |                |   |            |         |              |   | 1,068          |         |       |   |        |         |   |   |        |        |  |   | 1,068    |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|                                                                                               |                                                                    |   | (1,815   | )       |                |   |            |         |              |   | (4,570         | )       |       |   | (3,305  | )       |   |   |        |        |  |   | (9,690   | )       
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Reduction of long-term debt                                                                    |                                                                    |   | (226,425 | )       |                |   |            |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | (226,425 | )       
|Net borrowings (repayments) under revolving
credit agreements                                  |                                                                    |   | (121,500 | )       |                |   |            |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | (121,500 | )       
|Proceeds from the New Credit Agreement and issuance of Senior
Unsecured Notes                  |                                                                    |   | 398,000  |         |                |   |            |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | 398,000  |         
|Payment of deferred financing costs                                                            |                                                                    |   | (9,708   | )       |                |   |            |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | (9,708   | )       
|Proceeds from issuance of treasury stock                                                       |                                                                    |   |         |         |                |   | 903         |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | 903      |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|                                                                                               |                                                                    |   | 40,367   |         |                |   | 903         |         |              |   |               |         |       |   |        |         |   |   |        |        |  |   | 41,270   |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Net cash used in discontinued operations                                                       |                                                                    |   |         |         |                |   |            |         |              |   | 14,835         |         |       |   | (874    | )       |   |   |        |        |  |   | 13,961   |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Effect of exchange rates on cash                                                               |                                                                    |   |         |         |                |   |            |         |              |   |               |         |       |   | 2,724   |         |   |   |        |        |  |   | 2,724    |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Net increase (decrease) in cash and
cash equivalents                                           |                                                                    |   | (1,150   | )       |                |   | (9,862      | )       |              |   | (7,713         | )       |       |   | (15,826 | )       |   |   | 27,010  |        |  |   | (7,541   | )       
|Intercompany accounts                                                                          |                                                                    |   | (15,708  | )       |                |   | 9,862       |         |              |   | 13,095         |         |       |   | 20,581  |         |   |   | (27,830 | )      |  |   |         |         
|Cash and cash equivalents,
beginning of period                                                 |                                                                    |   | 27,694   |         |                |   | 1           |         |              |   | (4,895         | )       |       |   | 7,902   |         |   |   | 820     |        |  |   | 31,522   |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         
|Cash and cash equivalents,
end of period                                                       |                                                                    | $ | 10,836   |         |                | $ | 1           |         |              | $ | 487            |         |       | $ | 12,657  |         |   | $ |        |        |  | $ | 23,981   |         
|                                                                                               |                                                                    |   |          |         |                |   |             |         |              |   |                |         |       |   |         |         |   |   |         |        |  |   |          |         

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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 amended, 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 August 31, 2003, we had
$10.5 million accrued primarily for sold divisions or businesses related to
legal and environmental remediation matters, and $1.7 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 we are
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 require
significant judgment. As of November 30, 2002 and
August 31, 2003, we had recorded $159.6

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million of goodwill. In addition as of
November 30, 2002, we had recorded $173.7 million of property, plant, and
equipment, net (our primary long-lived asset), and as of August 31, 2003 we had
recorded $154.4 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. 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 $0.4 million at August 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 annual 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 United States 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 annual pension expense by
approximately $0.6 million.

We are currently evaluating our assumptions regarding discount rates and
rates of investment return to be used to determine the funded status of our
pension plans as of November 30, 2003 and the related pension expense for 2004.
Based on the significant decline in interest rates since November 2002, our
discount rate, used to calculate the present value of pension liabilities, will
decrease from 6.95% at November 30, 2002 to a currently estimated range of
6.00% to 6.25% as of November 30, 2003. This decrease in discount rates will
increase our pension benefit obligation amounts as of November 30, 2003 and may
result in the plan being underfunded, as opposed to our overfunded position as
of November 30, 2002.

If the plan is determined to be underfunded by any amount, we will be
required to write-off approximately
95%

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of our intangible prepaid pension asset of $55.6 million as of August
31, 2003 by a non-cash charge to other comprehensive income (OCI), resulting
in an increased deficit in our stockholders equity. There is also a potential
that we may need to record a non-cash charge to OCI to establish a pension
liability for the underfunded amount. In addition, at the recommendation of our
actuary, we are considering whether to adopt a more recently issued actuarial
mortality table, which would also have the impact of increasing our unfunded
liability by approximately $13.0 million.

The write-off to OCI of the prepaid pension asset, the accrual for the
unfunded liability, and the accrual for the potential additional liability
relating to the new mortality table are all non-cash items that are required
under United States generally accepted accounting principles (GAAP). The
accounting treatment under GAAP is different from the funding requirements
mandated by the Employee Retirement Income Security Act of 1974 (ERISA).
Accordingly, we do not expect these non-cash charges to OCI to impact the need
for potential cash contributions to our pension plans for the next several
years. Under the pension funding assumptions currently being evaluated, we do
not anticipate a requirement for any cash contributions during the next several
years. However, at our discretion, we may make voluntary contributions from
time to time, based on our cash position and overall financial status, and the
potential to further strengthen the funded status of the plans over the long
term.

Deferred Stripping Costs

In our Filtration and Minerals Segment, we generally charge our mining
costs to Cost of Products Sold as sales occur. 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 greater volatility in our period-to-period operating results. Deferred
stripping costs are included in Other Assets, net in our accompanying balance
sheets and totaled $3.7 million at November 30, 2002 and $5.8 million at August
31, 2003.

Legal Contingencies

We are a defendant in various litigation and regulatory matters, certain
of which are discussed in Notes H and L 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.

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

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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 August
31, 2003 we had a notional amount of $15.6 million of foreign forward exchange
contracts. In addition, at November 30, 2002 and August 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 H to the condensed consolidated financial statements
in Item 1 of this report, the accompanying 2002 financial statements have been
restated to reflect our Hillsdale U.K. Automotive operation and certain
operations of our Germanium-based business in our Technologies Segment as
discontinued businesses. The following discussion and analysis gives effect to
the restatement (in thousands of dollars).

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|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |      |  
|------------------------------------------ | ------------ | - | ----------------------------- | ------- | ---- | - | -------- | ------ | - | - | ------ | ------ | - |  | ------ | ---- | -
|                                           |              |   | Three Months Ended August 31,
|                                           |              |   |                              
|                                           |              |   | 2002                          |         | 2003 |   | Variance |        | %
|                                           |              |   |                               |         |      |   |          |        |  
|Net Sales                                  |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|Hillsdale Division                         |              | $ | 82,269                        |         |      | $ | 74,660   |        |   | $ | (7,609 | )      |   |  | (9.3   | )   
|Wolverine Division                         |              |   | 21,196                        |         |      |   | 22,957   |        |   |   | 1,761  |        |   |  | 8.3    |     
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|                                           | Automotive   |   |                               | 103,465 |      |   |          | 97,617 |   |   |        | (5,848 | ) |  |        | (5.7 | )
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|Power Group                                |              |   | 27,768                        |         |      |   | 38,047   |        |   |   | 10,279 |        |   |  | 37.0   |     
|Precision Products-
divested July 17,
2002 |              |   | 832                           |         |      |   |         |        |   |   | (832   | )      |   |  | (100.0 | )   
|Specialty Materials
Group                  |              |   | 10,915                        |         |      |   | 9,386    |        |   |   | (1,529 | )      |   |  | (14.0  | )   
|Pharmaceutical
Services (formerly
ChemSyn) |              |   | 3,097                         |         |      |   | 1,407    |        |   |   | (1,690 | )      |   |  | (54.6  | )   
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|                                           | Technologies |   |                               | 42,612  |      |   |          | 48,840 |   |   |        | 6,228  |   |  |        | 14.6 |  
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|Filtration and Minerals                    |              |   | 21,275                        |         |      |   | 19,387   |        |   |   | (1,888 | )      |   |  | (8.9   | )   
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|                                           |              | $ | 167,352                       |         |      | $ | 165,844  |        |   | $ | (1,508 | )      |   |  | (0.9   | )   
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|Operating Income (Loss)                    |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|Automotive                                 |              | $ | 2,073                         |         |      | $ | 4,252    |        |   | $ | 2,179  |        |   |  | 105.1  |     
|Technologies                               |              |   | 5,078                         |         |      |   | 6,248    |        |   |   | 1,170  |        |   |  | 23.0   |     
|Filtration and Minerals                    |              |   | 1,811                         |         |      |   | 1,929    |        |   |   | 118    |        |   |  | 6.5    |     
|Divested Divisions                         |              |   | (161                          | )       |      |   |         |        |   |   | 161    |        |   |  | N/A    |     
|Corporate/Intersegment                     |              |   | (1,633                        | )       |      |   | 805      |        |   |   | 2,438  |        |   |  | N/A    |     
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     
|                                           |              | $ | 7,168                         |         |      | $ | 13,234   |        |   | $ | 6,066  |        |   |  | 84.6   |     
|                                           |              |   |                               |         |      |   |          |        |   |   |        |        |   |  |        |     

|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |      |  
|------------------------------------------ | ------------ | - | ---------------------------- | ------- | ---- | - | -------- | ------- | - | - | ------- | ------ | - |  | ------- | ---- | -
|                                           |              |   | Nine Months Ended August 31,
|                                           |              |   |                             
|                                           |              |   | 2002                         |         | 2003 |   | Variance |         | %
|                                           |              |   |                              |         |      |   |          |         |  
|Net Sales                                  |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|Hillsdale Division                         |              | $ | 257,072                      |         |      | $ | 239,597  |         |   | $ | (17,475 | )      |   |  | (6.8    | )   
|Wolverine Division                         |              |   | 58,552                       |         |      |   | 66,864   |         |   |   | 8,312   |        |   |  | 14.2    |     
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|                                           | Automotive   |   |                              | 315,624 |      |   |          | 306,461 |   |   |         | (9,163 | ) |  |         | (2.9 | )
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|Power Group                                |              |   | 75,568                       |         |      |   | 104,187  |         |   |   | 28,619  |        |   |  | 37.9    |     
|Precision Products-
divested July 17,
2002 |              |   | 3,435                        |         |      |   |         |         |   |   | (3,435  | )      |   |  | (100.0  | )   
|Specialty Materials
Group                  |              |   | 33,526                       |         |      |   | 29,534   |         |   |   | (3,992  | )      |   |  | (11.9   | )   
|Pharmaceutical
Services (formerly
ChemSyn) |              |   | 10,278                       |         |      |   | 6,690    |         |   |   | (3,588  | )      |   |  | (34.9   | )   
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|                                           | Technologies |   |                              | 122,807 |      |   |          | 140,411 |   |   |         | 17,604 |   |  |         | 14.3 |  
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|Filtration and Minerals                    |              |   | 61,311                       |         |      |   | 58,058   |         |   |   | (3,253  | )      |   |  | (5.3    | )   
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|                                           |              | $ | 499,742                      |         |      | $ | 504,930  |         |   | $ | 5,188   |        |   |  | 1.0     |     
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|Operating Income (Loss)                    |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|Automotive                                 |              | $ | 9,166                        |         |      | $ | 16,165   |         |   | $ | 6,999   |        |   |  | 76.4    |     
|Technologies                               |              |   | (3,425                       | )       |      |   | 28,855   |         |   |   | 32,280  |        |   |  | N/A     |     
|Filtration and Minerals                    |              |   | 6,706                        |         |      |   | 3,439    |         |   |   | (3,267  | )      |   |  | (48.7   | )   
|Divested Divisions                         |              |   | (6,131                       | )       |      |   |         |         |   |   | 6,131   |        |   |  | N/A     |     
|Corporate/Intersegment                     |              |   | (5,416                       | )       |      |   | (3,258   | )       |   |   | 2,158   |        |   |  | 39.8    |     
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     
|                                           |              | $ | 900                          |         |      | $ | 45,201   |         |   | $ | 44,301  |        |   |  | 4,922.3 |     
|                                           |              |   |                              |         |      |   |          |         |   |   |         |        |   |  |         |     

Automotive Segment

Sales in our Automotive Segment decreased $5.8 million, or 5.7%, from
$103.5 million in the third quarter of 2002 to $97.6 million in the third
quarter of 2003, and decreased $9.1 million, or 2.9%, from $315.6 million in
the first nine months of 2002 to $306.5 million in the first nine months of
2003.

In the third quarter of 2003, our Wolverine divisions sales increased
$1.8 million, or 8.3%, and in the first nine
months of 2003, they increased $8.3 million, or 14.2%. These increases
are due to year over year volume increases (1.4% in the third quarter of 2003
and 7.0% in the first nine months of 2003) despite lower overall North American

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automotive production levels and favorable foreign currency as a result of
the strengthening of the Euro. Approximately 38% of our Wolverine divisions
sales are European.These volume increases in the third quarter were driven by
increased gasket material sales and new programs with original equipment
manufacturers. The volume increases in the nine-month period were driven by
increased gasket material sales, the penetration of the aftermarket and small
engine markets, and new programs with original equipment manufacturers.

Offsetting our Wolverine divisions sales increase was a decrease in our
Hillsdale divisions sales during the third quarter of 2003 of $7.6 million, or
9.3%, and a decrease in the first nine months of 2003 of $17.5 million, or
6.8%. The lower Hillsdale sales are attributed to the decrease in overall
North American light vehicle production levels in 2003 and the phase-out of
three programs. The decision to not select Hillsdale on the successor
platforms for these three programs was made well before the current management
team joined in 2002.

The overall North American light vehicle production levels are estimated
to have decreased approximately 4% in both the third quarter and first nine
months of 2003. The sales decreases for the three program phase-outs were $2.6
million during the third quarter of 2003 and $9.6 million in the first nine
months of 2003 for a Ford Motor Company transmission pump, $2.3 million during
the third quarter of 2003 and $8.6 million in the first nine months of 2003 for
a General Motors connecting rod program, and $2.8 million during the third
quarter of 2003 and $9.0 million in the first nine months of 2003 for an Acura
knuckle program. In total, these three programs resulted in decreased sales of
$7.7 million during the third quarter of 2003 (9.4% of net sales) and $27.2
million in the first nine months of 2003 (10.6% of net sales). Partially
offsetting the above program losses were $3.3 million of new program sales in
the third quarter of 2003 and $10.1 million in the first nine months of 2003,
primarily related to a new technology transmission filter program ($1.5 million
in the third quarter of 2003 and $4.4 million in the first nine months of 2003)
and a Mitsubishi knuckle program ($0.8 million in the third quarter of 2003 and
$3.2 million in the first nine months of 2003).

Hillsdales favorable customer/platform mix compared to the industry
composite sales performance also contributed to partially offsetting the
approximate 4% overall North American light vehicle production decreases.
Approximately 35% of Hillsdale sales are to U.S. operations of Japanese
automakers and 18% are related to General Motors light trucks and SUVs, which
continue to outperform the overall industry growth rate.

Operating income increased $2.2 million, or 105.1%, from $2.1 million in
the third quarter of 2002 to $4.3 million in the third quarter of 2003, and
increased $7.0 million, or 76.4%, from $9.2 million in the first nine months of
2002 to $16.2 million in the first nine months of 2003. In the third quarter
of 2003, this improved performance was primarily due to the following
favorable/(unfavorable) items:



| | a. |  | $2.5 million reduction in costs due to productivity
improvements;                                                                                                                                                     
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | ($0.5) million in price decreases;                                                                                                                                                                                    
|
| | c. |  | ($0.5) million decrease in margin related to reduced volumes
discussed above, partially offset by favorable sales mix and
favorable foreign currency as a result of the strengthening of the
Euro;                    
|
| | d. |  | ($1.1) million of increased costs related to the power outage
affecting the Midwest and East Coast of the United States in August
2003, a supplier related quality issue, and start-up costs on a new
Visteon program;
|
| | e. |  | $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);  
|
| | f. |  | ($0.2) million of higher operating costs, primarily higher
energy and wage and benefits expenses at our unionized facilities,
partially offset by lower depreciation.                                                 

In the first nine months of 2003, the $7.0 million improvement in
operating income was primarily due to the following favorable/(unfavorable)
items:



| | a. |  | $6.9 million reduction in costs due to productivity and cost
improvements;                                                                                                                                            
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | ($2.2) million in price decreases;                                                                                                                                                                                    
|
| | c. |  | ($0.4) decrease in margin associated with the volume changes
discussed above, partially offset by favorable sales mix and
favorable foreign currency as a result of the strengthening of the
Euro;                    
|
| | d. |  | ($1.6) million of increased costs related to the power outage
affecting the Midwest and East Coast of the United States in August
2003, a supplier related quality issue, and start-up costs on a new
Visteon program;

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| | e. |  | $6.0 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);
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | f. |  | ($1.7) million in higher operating costs, primarily related
to higher energy, and wage and benefits expenses at our unionized
facilities.                                                                           

Technologies Segment

Sales in our Technologies Segment increased $6.2 million, or 14.6%, from
$42.6 million in the third quarter of 2002 to $48.8 million in the third
quarter of 2003, and increased $17.6 million, or 14.3%, from $122.8 million in
the first nine months of 2003 to $140.4 million in the first nine months of
2003. Excluding sales from our Precision Products business, which we divested
in July 2002, this segments sales increased $7.1 million, or 16.9%, in the
third quarter of 2003, and increased $21.0 million, or 17.6%, in the first nine
months of 2003.

Sales in the Power Group increased $10.3 million, or 37.0%, in the third
quarter of 2003, and $28.6 million, or 37.9%, in the first nine months of 2003.
The increase in our Power Group sales is primarily related to new contracts,
improved pricing, and increased defense spending. Particularly strong growth
in both the third quarter of 2003 and the first nine months of 2003 were in
batteries sales to Boeing Corporation, the CECOM (Communications Electronic
Command) mobile communications program, and customer funded product development
contracts.

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 $1.5 million, or
14.0%, in the third quarter of 2003 and $4.0 million, or 11.9%, in the first
nine months of 2003 due to decreases in boron sales, which are generally larger
value orders that are not consistent in timing. In our Pharmaceutical Services
business, sales decreased $1.7 million, or 54.6%, in the third quarter of 2003,
and $3.6 million, or 34.9%, in the first nine months of 2003. A fire in third
quarter of 2001 disrupted operations at our primary pharmaceutical facility and
resulted in customer concerns as to the potential impact on quality and
sourcing capability. This led to the non-renewal of some contracts and general
softening in orders due to customer concerns. Recently, a Federal Drug
Administration (FDA) quality audit was successfully completed with very
favorable results, which have been communicated to our customers. We have
recently seen new orders being placed by customers that were lost after the
disruptive impact of the fire.

Operating income increased $1.2 million, or 23.0%, from $5.1 million in
the third quarter of 2002 to $6.2 million in the third quarter of 2003. In
addition, operating income improved $32.3 million to income of $28.9 million in
the first nine months of 2003 from a loss of $3.4 million in the first nine
months of 2002.

Included in the 2002 amounts were the following unusual items, which
impact the comparability of the 2002 and 2003 operating income by ($1.1)
million for the third quarter of 2003 and $12.0 million for the first nine
months of 2003.



| | a. |  | $5.7 million of legal expenses and legal settlement charges
recorded in the first six months of 2002 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 recorded in the
second quarter of 2002 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 recorded in the
second quarter of 2002 associated with our decision to exit our
Gallium-based specialty material business due to continued soft
demand from customers in the telecommunications and semi-conductor
markets. The $5.5 million restructuring charge 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;
|
| | d. |  | $0.4 million of officer severance compensation during the
third quarter of 2002 included in Selling and Administrative
expense;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | e. |  | $1.2 million of income recorded in the second quarter of 2002
related to the reversal of a portion of our fourth quarter 2001
Restructuring expense for severance payments made by our pension
plan; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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| | f. |  | $1.5 million of income from an inventory adjustment during
the third quarter of 2002 to adjust inventory values to equal actual
physical counts.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

Included in the 2003 amounts were the following unusual items, which
impact the comparability of the 2002 and 2003 operating income by $0.4 million
for the third quarter of 2003 and $10.6 million for the first nine months of
2003.



| | a. |  | $1.8 million of expense for environmental and legal issues,
primarily related to our Colorado Springs facility;                                                                                                                 
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | $2.1 million of depreciation expense as we accelerated our
depreciation schedule for businesses that we are exiting or
restructuring;                                                                                           
|
| | c. |  | $0.4 million related to a reserve on receivables from Loral
Corporation, a customer who has filed for bankruptcy;                                                                                                               
|
| | d. |  | $2.8 million of insurance gains in the third quarter of 2003
and $9.2 million in the first nine months of 2003 related to the
settlement of fire insurance claims; and                                                          
|
| | e. |  | $1.9 million in the third quarter of 2003 and $5.7 million in
the first nine 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

In addition, the following favorable/ (unfavorable) items with a net
favorable total of $1.9 million in the third quarter of 2003 and $9.7 million
in the first nine months of 2003 contributed to the improvement in operating
income:



| | a. |  | $2.4 million in the third quarter of 2003 ($6.0 million in
the first nine months of 2003) related to productivity initiatives;                                                                                                
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | $1.8 million in the third quarter of 2003 ($5.8 million in
the first nine months of 2003) related to increased volumes and
improved pricing;                                                                                  
|
| | c. |  | ($1.6) million in the third quarter of 2003 and the first
nine months of 2003 for increased selling costs primarily related to
infrastructure investments made to launch our commercial power
products growth initiatives; and
|
| | d. |  | ($0.7) million in the third quarter of 2003 and ($0.5) in the
first nine months of 2003 for other general net cost increases.                                                                                                 

Filtration and Minerals Segment

Sales in our Filtration and Minerals Segment decreased $1.9 million, or
8.9%, from $21.3 million in the third quarter of 2002 to $19.4 million in the
third quarter of 2003, and decreased $3.3 million, or 5.3%, from $61.3 million
in the first nine months of 2002 to $58.1 million in the first nine months of
2003. These decreases were due primarily to lower volumes, a change from
acting as a principal to an agent for the sale of product to a large
distributor, and a reduction in average selling prices. 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. During 2003, a new divisional
leadership team has been put in place, including a divisional president.

Operating income increased $0.1 million, or 6.5%, from $1.8 million in the
third quarter of 2002 to $1.9 million in the third quarter of 2003, and
decreased $3.3 million, or 48.7%, from $6.7 million in the first nine months of
2002 to $3.4 million in the first nine months of 2003. During the third
quarter of 2003, lower volumes, lower average selling prices and higher energy
costs were offset by favorable foreign currency as a result of the
strengthening of the Euro and productivity savings. During the first nine
months of 2003, decreased earnings were due to lower volumes and average
selling prices, higher 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. These
negative factors were partially offset by favorable foreign currency as a
result of the strengthening of the Euro.

Company Discussion

Net Sales.Net Sales decreased $1.5 million, or 0.9%, from $167.4 million
in the third quarter of 2002 to $165.8 million in the third quarter of 2003,
and increased $5.2 million, or 1.0%, from $499.7 million in the first nine
months of

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2002 to $504.9 million in the first nine months of 2003. Excluding sales from
our Precision Products business within our Technologies Segment, which we
divested in July 2002, net sales decreased $0.7 million, or 0.4%, in the third
quarter of 2003, and increased $8.6 million, or 1.7%, in the first nine months
of 2003.

In the third quarter of 2003, the decrease was due to sales decreases of
9.3% in our Automotive Segments Hillsdale business and 8.9% in our Filtration
and Minerals Segment, partially offset by strong increases of 37.0% in our
Technologies Segments Power Group and 8.3% in our Automotive Segments
Wolverine business. See above for a discussion of the individual segments
results. In the first nine months of 2003, the increase was due to strong
increases of 37.9% in our Technologies Segments Power Group and 14.2% in our
Automotive Segments Wolverine business, partially offset by decreases of 6.8%
in our Automotive Segments Hillsdale business and 5.3% 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 $3.1 million, or 2.4%, from $130.1 million in the third quarter of
2002 to $127.0 in the third quarter of 2003, and decreased $2.7 million, or
0.7%, from $390.3 million in the first nine months of 2002 to $387.6 million in
the first nine months of 2003. Our gross margins increased $1.6 million from
$37.3 million in the third quarter of 2002 to $38.8 million in the third
quarter of 2003, and the gross margin percentage increased 1.1 points from
22.3% to 23.4%, despite an increase in energy costs. Our gross margins
increased $7.9 million from $109.4 million in the first nine months of 2002 to
$117.3 million in the first nine months of 2003, and the gross margin
percentage increased 1.3 points from 21.9% to 23.2%, despite an increase in
energy costs. These margin rate improvements are primarily the result of
productivity improvements in our Automotive and Technologies Segments, 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 expenses of $14.2
million in the third quarter of 2002 increased $1.4 million or 9.6% to $15.6
million in the third quarter of 2003. Selling and administrative expenses of
$50.4 million in the first nine months of 2002 decreased $4.6 million, or 9.1%,
to $45.8 million in the first nine months of 2003. The increased expenses
during the third quarter of 2003 are primarily related to the following
favorable/(unfavorable) items:



| | a. |  | $1.6 million in reduced
officer severance and Supplemental Executive Retirement Plan expense in 2003
compared to 2002;                        
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | ($0.3) million in increased compensation costs related to our
long-term bonus plan;                                                           
|
| | c. |  | ($2.1) million of increased expenses related to environmental
and legal matters;                                                              
|
| | d. |  | ($1.6) million of increased investment in the development of
our commercial power products growth initiatives within our
Technologies Segment;
|
| | e. |  | $0.7 million in lower consulting costs; and                                                                                                   
|
| | f. |  | $0.3 million in other lower selling and administrative costs.                                                                                 

The decreased expenses during the first nine months of 2003 are primarily
related to the following favorable/(unfavorable) items:



| | a. |  | $4.2 million of deceased expenses related to environmental
and legal matters;                                                                     
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | $3.6 million in reduced
officer severance and Supplemental Executive Retirement Plan expense in 2003
compared to 2002;                            
|
| | c. |  | ($1.5) million in increased compensation costs related to our
long-term bonus plan;                                                               
|
| | d. |  | ($1.6) million of increased investment in the development of
our commercial power products growth initiatives within our
Technologies Segment; and
|
| | e. |  | ($0.1) million in higher other selling and administrative
costs.                                                                                  

Depreciation and Amortization.Depreciation and amortization expense of
$11.8 million in the third quarter of 2002 increased $0.9 million, or 7.7%, to
$12.8 million in the third quarter of 2003. Depreciation and amortization
expense of $34.3 in the first nine months of 2002 increased $0.5 million, or
1.4%, to $34.8 million in the first nine months of 2003. During the third
quarter of 2003, the increased depreciation expense was primarily related to
our Automotive Segment recognizing $1.5 million of less depreciation expense
which was more than offset by an increase of
$2.1 million of depreciation expense in our Technologies Segment to
accelerate depreciation charges for equipment to bring it in line with active
production lives. During the first nine months of 2003, the increased
depreciation expense was

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not significant compared to 2002.

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 $3.8 million of goodwill amortization expense in the third
quarter of 2002 and $11.5 million in the first nine 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 in 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.

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
bulk pharmaceutical manufacturing plant. We recorded this charge to fully
reserve the receivable because the insurance underwriter was contesting the
coverage on these assets. We were disputing the insurance carriers position
and were vigorously pursuing efforts to collect on our claims. In the third
quarter of 2003, we recorded a $2.8 million gain related to our final
settlement with this insurance carrier. In addition, 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 $8.6 million in the third quarter
of 2002 and $9.2 million in the third quarter of 2003 (not including $1.0
million in the third quarter of 2002 and $0.2 million in the third quarter of
2003 which was allocated to discontinued operations). Interest expense was
$28.6 million in the first nine months of 2002 and $25.9 million in the first
nine months of 2003 (not including $3.3 million in first nine months of 2002
and $2.3 million in first nine months of 2003 which was allocated to
discontinued operations). Also included in the first six months of 2002 was
$1.5 million in fees and other costs, primarily related to establishing our
accounts receivable asset-backed securitization (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
average debt levels.

Other Income (Expense), Net.Other income (expense), net decreased $1.0
million from income of $0.4 million in the third quarter of 2002 to expense of
$0.6 million in the third quarter of 2003, and decreased $1.9 million from
income of $1.3 million in the first nine months of 2002 to expense of $0.5
million in the first nine months of 2003. These decreases are primarily
related to losses on foreign currency forward contract hedges in the Corporate
Segment which are entered into to offset foreign currency exposures in the
operating segments.

Write-off of Deferred Financing Costs.During the third quarter of 2003,
we wrote off $6.3 million of deferred financing costs in connection with the
retirement of our former senior secured credit facility and the redemption of
95% of our senior subordinated notes. See the Capitalization section below for
details on the refinancing of our capital structure.

Income (Loss) from Continuing Operations Before Taxes. Loss from
Continuing Operations Before Taxes increased $1.9 million from $1.0 million in
the third quarter of 2002 to $2.9 million in the third quarter of 2003. In the
first nine months of 2003, the Income (Loss) from Continuing Operations Before
Taxes improved $38.8 million from a loss of $26.4 million in 2002 to income of
$12.4 million in 2003. These changes were primarily the result of the

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following favorable/ (unfavorable) unusual items (in thousands of dollars):

|                                                                                      |  |            |        |            |  |   |        |  
|------------------------------------------------------------------------------------- |  | ---------- | ------ | ---------- |  | - | ------ | -
|                                                                                      |  | Third      |        | First Nine
|                                                                                      |  | Quarter of |        | Months of 
|                                                                                      |  | 2003       |        | 2003      
|                                                                                      |  |            |        |           
|a. Lower officer
severance and Supplemental Executive Retirement Plan expense in
2003 |  | $          | 1,624  |            |  | $ | 3,579  |  
|b. Loss from
divestitures                                                             |  |            | 161    |            |  |   | 6,131  |  
|c. Restructuring                                                                      |  |            |       |            |  |   | 2,998  |  
|d. Legal and
environmental
matters                                                    |  |            | (2,100 | )          |  |   | 4,150  |  
|e. Insurance related
gains in 2003 and
losses in 2002                                 |  |            | 2,774  |            |  |   | 11,610 |  
|f. Write-off of
deferred financing
costs in 2003                                      |  |            | (6,327 | )          |  |   | (6,327 | )
|g. Goodwill
amortization expense
(no longer amortized
in 2003)                        |  |            | 3,846  |            |  |   | 11,538 |  

Income
Taxes.Income tax provision was $0.8 million in the third quarters
of 2002 and 2003. Income tax provision was $2.0 million in the first nine
months of 2002 compared to $2.9 million in the first nine 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.
During the third quarter of 2003, we accounted for the sale of certain assets of
our Germanium-based business in our Technologies Segment as a discontinued
operation. Accordingly, we have restated our prior period financial statements
to conform to the discontinued operations presentation. See Note H in our
financial statements in Item 1 of this report.

Net Income (Loss).Net Loss increased $0.7 million from $3.6 million in
the third quarter of 2002 to $4.2 million in the third quarter of 2003, and
improved $36.3 million from a Net Loss of $31.7 in the first nine months of
2002 to Net Income of $4.6 million in the first nine months of 2003 as a result
of the items discussed above.

Company Outlook.Projected sales for 2003 are estimated to be in the range
of $665.0 million to $675.0 million compared to $668.1 million in 2002, which
is restated to exclude our Hillsdale U.K. Automotive operation and certain
operations of our Germanium-based business in our Technologies Segment, which
have been divested and accounted for as discontinued operations during 2003.
The sales estimate for 2003 reflects the current and continued decrease in
Hillsdale revenues primarily related to program phase-outs, and reduced
automotive builds in 2003 compared to 2002, partially offset by growth in our
Power Group, primarily related to new contracts, improved pricing, and
increased defense spending.

We are projecting 2003 Operating Income to be in the range of $59.0
million to $61.0 million, which includes insurance gains of $8.5 million and
expenses for environmental and legal matters of $2.1 million in the first nine
months of 2003. This amount also includes $45.0 million of depreciation and
amortization.

The decreases in sales and operating income from our second quarter of
2003 outlook (excluding the income from insurance gains and incremental
expenses associated with environmental and legal matters provided for in the
third quarter of 2003) was primarily due to the sale of certain assets in our
Germanium-based business in July 2003. The outlook has been restated to
exclude the results of this divested business. Excluding this divestiture, the
insurance gains, and the environmental and legal matter costs, our earnings
outlook is consistent with our prior outlook.

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

We are currently evaluating our assumptions regarding discount rates and
rates of investment return to be used
to determine the funded status of our pension plans as of November 30,
2003 and the related pension expense for 2004. Based on the significant
decline in interest rates since November 2002, our discount rate, used to
calculate the present

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value of pension liabilities, will decrease from 6.95% at November 30,
2002 to a currently estimated range of 6.00% to 6.25% as of November 30, 2003.
This decrease in discount rates will increase our pension benefit obligation
amounts as of November 30, 2003 and may result in the plan being underfunded,
as opposed to our overfunded position as of November 30, 2002.

If the plan is determined to be underfunded by any amount, we will be
required to write-off approximately 95% of our intangible prepaid pension asset
of $55.6 million as of August 31, 2003 by a non-cash charge to other
comprehensive income (OCI), resulting in an increased deficit in our
stockholders equity. There is also a potential that we may need to record a
non-cash charge to OCI to establish a pension liability for the underfunded
amount. In addition, at the recommendation of our actuary, we are considering
whether to adopt a more recently issued actuarial mortality table, which would
also have the impact of increasing our unfunded liability by approximately
$13.0 million.

The write-off to OCI of the prepaid pension asset, the accrual for the
unfunded liability, and the accrual for the potential additional liability
relating to the new mortality table are all non-cash items that are required
under United States generally accepted accounting principles (GAAP). The
accounting treatment under GAAP is different from the funding requirements
mandated by the Employee Retirement Income Security Act of 1974 (ERISA).
Accordingly, we do not expect these non-cash charges to OCI to impact the need
for potential cash contributions to our pension plans for the next several
years. Under the pension funding assumptions currently being evaluated, we do
not anticipate a requirement for any cash contributions during the next several
years. However, at our discretion, we may make voluntary contributions from
time to time, based on our cash position and overall financial status, and the
potential to further strengthen the funded status of the plans over the long
term.

Liquidity and Capital Resources

Our cash flows from operations and availability under our various credit
facilities are considered adequate to fund our short-term and long-term capital
needs. As of August 31, 2003, we had $123.9 million unused under our various
credit facilities. However, due to various financial covenant limitations
under our New Credit Agreement (as defined below under Capitalization) measured
at the end of each quarter, on August 31, 2003, we could only incur an
additional $47.3 million of indebtedness.

In August 2003, we entered into the New Credit Agreement which provides
for an original term loan of $150.0 million and a revolving credit facility of
$125.0 million. The proceeds of the New Term Loan were used to repay our prior
credit agreement. In addition, we issued $250.0 million of Senior Unsecured
Notes due 2013 and completed a tender offer for 95% of our existing Senior
Subordinated Notes due 2008. These refinancings are expected to provide us
sufficient liquidity and capital resources to operate our business into the
future. See the Capitalization Section below for additional details on the New
Credit Agreement and the Senior Unsecured Notes.

At August 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.

Cash Flows

All references herein to years are to the nine-months ended August 31
unless otherwise indicated.

Operating Activities.Operating activities used $55.8 million in cash
during 2003 compared to providing $46.4 million in 2002. In 2002, cash flows
from operating activities were impacted by our net loss of $31.7 million, which
was offset by non-cash charges of $47.9 million from depreciation and
amortization, $6.1 million from losses from divestitures, $0.8 million from
deferred income tax adjustments, and $3.1 million from insurance related
losses, which results in cash sources of $26.2 million compared to a similarly
calculated amount in 2003 of $47.9 million. The 2003 amount of $47.9 million,
an improvement of $21.7 million over 2002, is comprised of our net income of
$4.6 million, and non-cash charges of $37.1 million from depreciation and
amortization, $3.2 million from provisions from discontinued operations, and
$6.3 million from the write-off of deferred financing costs, partially offset
by non-cash insurance gains of $3.3 million.

The cash flow for 2002 was also increased by $20.2 million due to changes
in certain assets and liabilities,

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resulting in net cash provided by operating activities of $46.4 million,
primarily due to $41.0 million of proceeds from the sale of receivables to our
accounts receivable asset-backed securitization (see Accounts Receivable
Asset-Backed Securitization below), which was partially offset primarily by
decreases in accounts payable and uses of cash for other working capital needs.

The cash flow for 2003 was reduced by $103.7 million due to changes in
certain assets and liabilities, resulting in net cash used in operating
activities of $55.8 million. This was primarily due to:



| | a. |  | $37.1 million of payments to reduce the amounts outstanding
under our accounts receivable asset-backed securitization (see
Accounts Receivable Asset-Backed Securitization below);                                                                               
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | approximately $14.0 million for payments on restructuring and
legal matters which were expensed in 2002;                                                                                                                                                         
|
| | c. |  | $22.7 million reduction in accounts payable, primarily to
obtain discounts from vendors on early payment options and to
shorten payment terms for two major suppliers, as a result of our
increased liquidity from our August 2003 capital structure
refinancing;
|
| | d. |  | $5.2 million increase in an insurance receivable for an
insurance claim that we expect to collect in the fourth quarter of
2003;                                                                                                                                 
|
| | e. |  | $8.1 million increase in production on long-term defense
contracts where costs are incurred before shipments or milestone
billings are made and collected; and                                                                                                   
|
| | f. |  | $4.5 million reduction in accrued interest expense due to the
timing of the interest payments as a result of our August 2003
capital structure refinancing.                                                                                                      

Investing Activities.Investing activities used $9.7 million in cash
during 2003 compared to using $11.2 million in 2002. These amounts primarily
relate to capital expenditures. We expect our capital expenditures during 2003
will be approximately $15.0 million to $20.0 million.

Financing Activities.Financing activities provided $41.3 million of cash
during 2003 compared to using $63.7 million during 2002. During 2002, we used
$40.8 million to reduce our revolving credit facility, primarily from proceeds
associated with the sale of our receivables to our accounts receivable
asset-backed securitization, as discussed below under Accounts Receivable
Asset-Backed Securitization. Also during 2002, regularly scheduled debt
payments and divestitures resulted in a $22.8 million decline in our long-term
debt. During 2003, we completed a tender offer on our senior subordinated
notes and issued new senior unsecured notes. In addition, we paid off our
former credit agreement and issued a new credit agreement. For a detailed
discussion of these transactions and the conditions of the new instruments, see
the Capitalization section below. Accordingly, during 2003, we used $347.9
million of cash to redeem our senior subordinated notes and pay-off our former
credit agreement, and we received $388.3 million, net of financing costs, of
cash for the issuance of the new senior unsecured notes and the new credit
agreement. In addition, during 2003, we sold to our controlling common
shareholder, Granaria Holdings B.V., Bert Iedema, one of our directors and an
executive officer of Granaria Holdings B.V., and two of our executive officers
the 69,500 shares of common stock held in our Treasury for $13.00 per share, or
$0.9 million.

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Capitalization

Our capitalization, which excludes the obligations of $46.5 million at
November 30, 2002 and zero at August 31, 2003 of our accounts receivable
asset-backed securitization, consisted of the following at November 30, 2002
and August 31, 2003 (in thousands of dollars):

|                                                                               |                                                           |   |         |         |      |   |         |         | 
|------------------------------------------------------------------------------ | --------------------------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                                                               |                                                           |   | 2002    |         | 2003
|                                                                               |                                                           |   |         |         |     
|New Credit Agreement:                                                          |                                                           |   |         |         |      |   |         |        
|                                                                               | New revolving credit facility                             |   | $       |        |      |   | $       |        | 
|                                                                               | New term loan                                             |   |         |        |      |   |         | 150,000 | 
|Former Credit Agreement:                                                       |                                                           |   |         |         |      |   |         |        
|                                                                               | Former revolving credit facility,
paid off in August 2003 |   |         | 121,500 |      |   |         |        | 
|                                                                               | Former term loan, paid off in August
2003                 |   |         | 16,925  |      |   |         |        | 
|Senior Unsecured Notes, 9.75% interest, due 2013,
net of $1.9 million discount |                                                           |   |        |         |      |   | 248,013 |        
|Senior Subordinated Notes, 9.375% interest, due
2008                           |                                                           |   | 220,000 |         |      |   | 10,500  |        
|Industrial Revenue Bonds, 1.8% to 2.2% interest,
due 2005                      |                                                           |   | 15,300  |         |      |   | 15,300  |        
|Other                                                                          |                                                           |   |        |         |      |   | 1,169   |        
|                                                                               |                                                           |   |         |         |      |   |         |         | 
|                                                                               |                                                           |   | 373,725 |         |      |   | 424,982 |        
|Preferred Stock                                                                |                                                           |   | 137,973 |         |      |   | 150,247 |        
|Shareholders Deficit                                                          |                                                           |   | (87,578 | )       |      |   | (89,189 | )      
|                                                                               |                                                           |   |         |         |      |   |         |        
|                                                                               |                                                           | $ | 424,120 |         |      | $ | 486,040 |        
|                                                                               |                                                           |   |         |         |      |   |         |        

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

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

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

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

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The New 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 or invest in
joint ventures, undergo a change in control or engage in mergers, acquisitions
or asset sales. These covenants also limit the annual amount of capital
expenditures and require us to meet certain minimum financial ratios. For
purposes of determining outstanding debt under our New Credit Agreement, we
include the outstanding obligations of EPFC, our off-balance sheet special
purpose entity (see Note I, for a detailed discussion of EPFC). We are in
compliance with all covenants at August 31, 2003.

In addition to regularly scheduled payments on the New Credit Agreement,
we are required to make mandatory prepayments equal to 50.0% of annual excess
cash flow, as defined in the New Credit Agreement, beginning with our fiscal
year ending November 30, 2004. The net proceeds from the sale of assets
(subject to certain conditions), the net proceeds of certain new debt issuance,
and 50.0% of the net proceeds of any equity securities issuance are also
subject to mandatory prepayments on the New Credit Agreement.

Former Credit Agreement.We had a syndicated senior secured loan facility
(Former Credit Agreement) which provided for an original term loan (Former
Term Loan) of $75.0 million, as amended, and a $220.0 million revolving credit
facility (Former Facility). We paid off the Former Credit Agreement with the
proceeds from our New Credit Agreement and Senior Unsecured Notes in August
2003. The Former Facility and the Former Term Loan bore interest, at our
option, at LIBOR plus 275 basis points, or the banks prime rate plus 150 basis
points. Interest was generally payable quarterly on the Former Facility and
Former Term Loan. The Former Credit Agreement also contained certain fees.

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

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

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

Preferred Stock.Our preferred stock increased $12.3 million during 2003
as a result of accretion of the liquidation preference and the accrual for
preferred dividends. The liquidation preference of the Preferred Stock was
fully accreted to $141.9 million in the aggregate at March 1, 2003. Commencing
March 1, 2003, dividends on our Preferred Stock became cash payable at 11.75%
per annum of the liquidation preference if and when declared by the Board of
Directors; the first semiannual dividend payment of $8.3 million was due
September 1, 2003. The New Credit Agreement and the Senior Unsecured Notes
contain financial covenants that currently prohibit us from paying dividends on
the preferred stock. Our Board of Directors did not declare a cash dividend as
of September 1, 2003. If we do not pay cash dividends on the preferred stock,
then holders of the preferred stock may become entitled to elect a majority of
our Board of Directors. Dakruiter S.A. and Harbourgate B.V., both companies
controlled by Granaria Holdings B.V., our controlling common shareholder, hold
approximately 78% of our preferred stock, and therefore Granaria Holdings B.V.
would continue to be able to elect our entire Board of Directors. The election
of a majority of the directors is the only remedy of holders of the preferred
stock for a failure to pay cash dividends. Unpaid dividends are cumulative but
do not bear interest.

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Shareholders Deficit.Our shareholders deficit increased $1.6 million
during 2003 primarily due to our comprehensive income of $9.8 million and the
issuance of common shares from our Treasury of $0.9 million, which was more
than offset by the accretion and accrual of preferred stock dividends of $12.3
million.

We are currently evaluating our assumptions regarding discount rates and
rates of investment return to be used to determine the funded status of our
pension plans as of November 30, 2003 and the related pension expense for 2004.
Based on the significant decline in interest rates since November 2002, our
discount rate, used to calculate the present value of pension liabilities, will
decrease from 6.95% at November 30, 2002 to a currently estimated range of
6.00% to 6.25% as of November 30, 2003. This decrease in discount rates will
increase our pension benefit obligation amounts as of November 30, 2003 and may
result in the plan being underfunded, as opposed to our overfunded position as
of November 30, 2002.

If the plan is determined to be underfunded by any amount, we will be
required to write-off approximately 95% of our intangible prepaid pension asset
of $55.6 million as of August 31, 2003 by a non-cash charge to other
comprehensive income (OCI), resulting in an increased deficit in our
stockholders equity. There is also a potential that we may need to record a
non-cash charge to OCI to establish a pension liability for the underfunded
amount. In addition, at the recommendation of our actuary, we are considering
whether to adopt a more recently issued actuarial mortality table, which would
also have the impact of increasing our unfunded liability by approximately
$13.0 million.

The write-off to OCI of the prepaid pension asset, the accrual for the
unfunded liability, and the accrual for the potential additional liability
relating to the new mortality table are all non-cash items that are required
under United States generally accepted accounting principles (GAAP). The
accounting treatment under GAAP is different from the funding requirements
mandated by the Employee Retirement Income Security Act of 1974 (ERISA).
Accordingly, we do not expect these non-cash charges to OCI to impact the need
for potential cash contributions to our pension plans for the next several
years. Under the pension funding assumptions currently being evaluated, we do
not anticipate a requirement for any cash contributions during the next several
years. However, at our discretion, we may make voluntary contributions from
time to time, based on our cash position and overall financial status, and the
potential to further strengthen the funded status of the plans over the long
term.

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

During the first quarter of 2002, we entered into an agreement with a
major United States financial institution to sell an interest in certain
receivables through an unconsolidated qualifying special purpose entity,
EaglePicher Funding Corporation (EPFC). Initially $47.0 million of proceeds
from this new facility were used primarily to payoff amounts outstanding under
our prior 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. In the third quarter of 2003,
we amended this agreement to extend the receivables program until the earlier
of (a) 90 days prior to the maturity of our New Credit Agreement or (b) January
2008.

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

In conjunction with the initial transaction during 2002, we sold $82.5
million of receivables to EPFC, and we incurred charges of $1.5 million, which
were included in Interest Expense in the accompanying condensed consolidated
statements of income (loss) for the nine-months ended August 31, 2002. We
continue to service sold receivables and receive a monthly servicing fee from
EPFC of approximately 1% per annum of the receivable pools average balance.
As this servicing fee approximates our cost to service, no servicing asset or
liability has been recorded at November 30, 2002 or August 31, 2003. We retain
an interest in a portion of the receivables transferred, representing an over
collateralization on the securitization. Our involvement with both this over
collateralization interest and the transferred

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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 August 31, 2003, we reduced the amount due to the financial
institution by EPFC. Accordingly, our interest in EPFC was $66.5 million and
the revolving pool of receivables that we serviced totaled $67.9 million. At
August 31, 2003, the outstanding balance of the interest sold to the financial
institution recorded on EPFCs financial statements was zero. The effective
interest rate for the nine month period ended August 31, 2003 in the
securitization was approximately 2.58%.

Credit Agreement EBITDA

In our New Credit Agreement, we have certain financial covenants, as
discussed below in Credit Agreement and Accounts Receivable Asset-Backed
Securitization Financial Covenants, which we believe are significant and
material in the context of our capital structure. Credit Agreement EBITDA is
defined as earnings before interest, income taxes, depreciation, amortization,
and certain non-cash items, as defined in the New Credit Agreement. 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 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.

Credit Agreement EBITDA is also presented herein because we believe it is
a useful supplement to net income. We use this measurement as part of our
evaluation of core operating results and underlying trends and therefore
believe it is a key measure of our performance. However, Credit Agreement
EBITDA, which does not represent operating income or net cash provided by
operating activities, as those items are defined by GAAP, should not be
considered by readers as an alternative to operating income or cash flow from
operations or indicative of whether cash flows will be sufficient to fund our
future cash requirements. 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. In addition, Credit Agreement EBITDA may differ
from and may not be comparable to similarly titled measures used by other
companies.

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

|                                           |                                                      |   |                   |        |                   |   |              |        |                 |   |        |        |  |   |         |        |  
|------------------------------------------ | ---------------------------------------------------- | - | ----------------- | ------ | ----------------- | - | ------------ | ------ | --------------- | - | ------ | ------ |  | - | ------- | ------ | -
|                                           |                                                      |   | Quarter Ended    
|                                           |                                                      |   |                  
|                                           |                                                      |   | November 30, 2002 |        | February 28, 2003 |   | May 31, 2003 |        | August 31, 2003
|                                           |                                                      |   |                   |        |                   |   |              |        |                
|Net Income (Loss)                          |                                                      | $ | (5,086            | )      |                   | $ | 1,168        |        |                 | $ | 7,686  |        |  | $ | (4,226  | )     
|                                           | Loss from discontinued
business, net                 |   |                   | 1,366  |                   |   |              | 928    |                 |   |        | 542    |  |   |         | 213    |  
|                                           | Loss on disposal of
discontinued business,
net       |   |                   |       |                   |   |              |       |                 |   |        | 2,978  |  |   |         | 267    |  
|                                           | Income taxes                                         |   |                   | (17    | )                 |   |              | 896    |                 |   |        | 1,150  |  |   |         | 804    |  
|                                           | Interest expense                                     |   |                   | 8,216  |                   |   |              | 8,373  |                 |   |        | 8,319  |  |   |         | 9,249  |  
|                                           | Depreciation and
amortization                        |   |                   | 16,043 |                   |   |              | 11,114 |                 |   |        | 10,916 |  |   |         | 12,768 |  
|                                           | Restructuring
expense                                |   |                   | 2,900  |                   |   |              |       |                 |   |        |       |  |   |         |       |  
|                                           | Loss from
divestitures                               |   |                   | 366    |                   |   |              |       |                 |   |        |       |  |   |         |       |  
|                                           | Long-term bonus and
share appreciation
plans expense |   |                   | 420    |                   |   |              | 600    |                 |   |        | 700    |  |   |         | 700    |  
|                                           | Pension plan expense
(income), net                   |   |                   | (1,795 | )                 |   |              | 177    |                 |   |        | 505    |  |   |         | (1,500 | )
|                                           | Write-off of deferred
financing costs                |   |                   |       |                   |   |              |       |                 |   |        |       |  |   |         | 6,327  |  
|                                           | Other, net                                           |   |                   | (200   | )                 |   |              |       |                 |   |        |       |  |   |         | (415   | )
|                                           | EBITDA impact from
discontinued
operations           |   |                   | 860    |                   |   |              | 601    |                 |   |        | 939    |  |   |         | 100    |  
|                                           |                                                      |   |                   |        |                   |   |              |        |                 |   |        |        |  |   |         |       
|Quarterly Credit
Agreement EBITDA          |                                                      | $ | 23,073            |        |                   | $ | 23,857       |        |                 | $ | 33,735 |        |  | $ | 24,287  |       
|                                           |                                                      |   |                   |        |                   |   |              |        |                 |   |        |        |  |   |         |       
|Last Twelve Months
Credit Agreement
EBITDA |                                                      |   |                   |        |                   |   |              |        |                 |   |        |        |  | $ | 104,952 |       
|                                           |                                                      |   |                   |        |                   |   |              |        |                 |   |        |        |  |   |         |       

Credit Agreement and Accounts Receivable Asset-Backed Securitization
Financial Covenants

There are three financial covenants contained in our New Credit Agreement
and the Accounts Receivable Asset-Backed Securitization, as amended. They are
a leverage ratio (the ratio of total debt, including the obligations of our
accounts receivable asset-backed securitization, to Credit Agreement EBITDA),
an interest coverage ratio (the ratio of Credit Agreement EBITDA to interest
expense) and a fixed charge coverage ratio (the ratio of Credit Agreement
EBITDA minus capital expenditures to the sum of interest expense plus scheduled
principal payments plus cash dividends paid plus income taxes paid), all as
defined in the New Credit Agreement and the Accounts Receivable Asset-Backed
Securitization, as amended. As of August 31, 2003, we were in compliance with
the covenant calculations described above.

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The following table presents the required ratios under our New Credit
Agreement and the actual ratios at August 31, 2003.

|                  |          |  |                 |      |                 |  |                 |      |       |  |         |      | 
|----------------- | -------- |  | --------------- | ---- | --------------- |  | --------------- | ---- | ----- |  | ------- | ---- | 
|                  |          |  |                 |      |                 |  |                 |      |       |  | Minimum
|                  |          |  |                 |      |                 |  | Minimum         |      | Fixed
|                  |          |  | Maximum         |      | Interest        |  | Charge Coverage
|                  |          |  | Leverage Ratio  |      | Coverage Ratio  |  | Ratio          
|                  |          |  | (not more than) |      | (not less than) |  | (not less than)
|                  |          |  |                 |      |                 |  |                
|August 31, 2003   |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |       |  |         | 1.25 | 
|                  | Actual   |  |                 | 4.05 |                 |  |                 | 3.07 |       |  |         | 1.69 | 
|November 30, 2003 |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |       |  |         | 1.25 | 
|February 28, 2004 |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |       |  |         | 1.25 | 
|May 31, 2004,     |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |       |  |         | 1.25 | 
|August 31, 2004   |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.50 |                 |  |                 | 2.25 |       |  |         | 1.25 | 
|November 30, 2004 |          |  |                 |      |                 |  |                 |      |       |  |         |     
|                  | Required |  |                 | 4.25 |                 |  |                 | 2.35 |       |  |         | 1.25 | 

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 New Credit Agreement, may place us at risk of not being able to comply with
all of the covenants of the New Credit Agreement. In the event we cannot
comply with the terms of the New 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 may need to obtain a waiver. Any
agreements to amend the covenants and/or obtain waivers may likely require us
to pay a fee and increase the interest rate payable under the New Credit
Agreement. The amount of such fee and increase in interest rate would be
determined in the negotiations of the amendment.

Contractual Obligations and Other Commercial Commitments

We have
updated our
long-term debt commitments as a result of the refinancing discussed above.
Accordingly, we are updating our Contractual Obligations table since the filing
of our Form 10-K for the year ended November 30, 2002, filed on March 3, 2003.
There have been no material changes to our Other Commercial Commitments table
as disclosed in our Form 10-K for the year ended November 30, 2002, filed on
March 3, 2003.

|                              |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |      |      |  |  |   |     |  |  |   |     |  |  |        |       | 
|----------------------------- | --------------------------- |  | ----- | ----- | ---- |  | ----------------------------- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | --- |  |  | - | --- |  |  | ------ | ----- | 
|                              |                             |  |       |       |      |  | Payments by Fiscal Period End
|                              |                             |  |       |       |      |  |                              
|                              |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |      |      |  |  |   |     |  |  |   |     |  |  | Beyond
|                              |                             |  | Total |       | 2003 |  | 2004                          |      | 2005 |  | 2006 |      | 2007 |  | 2007
|                              |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |     
|Contractual Cash Obligations: |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |      |      |  |  |   |     |  |  |   |     |  |  |        |      
|                              | Long-term Debt              |  | $     | 425.0 |      |  | $                             | 2.2  |      |  | $    | 3.6  |      |  | $    | 13.7 |  |  | $ | 1.9 |  |  | $ | 1.5 |  |  | $      | 402.1 | 
|                              | Operating Lease
Commitments |  |       | 21.6  |      |  |                               | 5.5  |      |  |      | 5.0  |      |  |      | 3.3  |  |  |   | 2.6 |  |  |   | 2.4 |  |  |        | 2.8   | 
|                              | Preferred Stock             |  |       | 150.2 |      |  |                               |     |      |  |      |     |      |  |      |     |  |  |   |    |  |  |   |    |  |  |        | 150.2 | 
|                              | Advisory Agreement          |  |       | 9.4   |      |  |                               | 1.8  |      |  |      | 1.8  |      |  |      | 1.8  |  |  |   | 1.8 |  |  |   | 1.8 |  |  |        | 0.4   | 
|                              | GMAC Legal
Settlement       |  |       | 5.4   |      |  |                               | 3.6  |      |  |      | 0.9  |      |  |      | 0.9  |  |  |   |    |  |  |   |    |  |  |        |      | 
|                              | Environmental
Liability     |  |       | 5.6   |      |  |                               | 2.7  |      |  |      | 1.7  |      |  |      | 0.4  |  |  |   | 0.4 |  |  |   | 0.4 |  |  |        |      | 
|                              |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |      |      |  |  |   |     |  |  |   |     |  |  |        |       | 
|                              |                             |  | $     | 617.2 |      |  | $                             | 15.8 |      |  | $    | 13.0 |      |  | $    | 20.1 |  |  | $ | 6.7 |  |  | $ | 6.1 |  |  | $      | 555.5 | 
|                              |                             |  |       |       |      |  |                               |      |      |  |      |      |      |  |      |      |  |  |   |     |  |  |   |     |  |  |        |       | 

45



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Our 11.75% Cumulative Redeemable Exchangeable Preferred Stock is scheduled
for redemption on March 1, 2008. However, if we do not redeem the Preferred
Stock, the only remedy of holders is to elect a majority of our board of
directors. Holders of the Preferred Stock do not have a right to obtain a
judgment against us for the redemption amount or to obtain equitable relief
requiring us to redeem the Preferred Stock. We have included in the above
table the current Preferred Stock balance on our balance sheet but have
excluded any future dividend accruals or payments.

Earnings to Fixed Charges and Preferred Stock Dividends

During the third quarter of 2003, our earnings were insufficient to cover
fixed charges and preferred stock dividends by $7.1 million, and during the
third quarter of 2002, our earnings were insufficient to cover fixed charges
and preferred stock dividends by $4.7 million. The deterioration of our fixed
charge ratio was primarily due to the write-off of deferred financings costs in
the third quarter of 2003, partially offset by improved operating performance
and our adoption of SFAS No. 142 on December 1, 2002, which no longer requires
us to recognize goodwill amortization expense. During the first nine months of
2003, our ratio of earnings to fixed charges and preferred stock dividends was
1.00x, and during the first nine months of 2002, our earnings were insufficient
to cover fixed charges and preferred stock dividends by $37.3 million. These
improvements are primarily related to our improved operating performance, and
our adoption of SFAS No. 142 on December 1, 2002.

Recently Released or Adopted Accounting Standards

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

In September 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which superceded SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed of. The primary difference is that goodwill and certain
intangibles with indefinite lives have been removed from the scope of SFAS No.
144, as they are covered by SFAS No. 142. 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 and the sale of certain assets of our Germanium-based business in our
Technologies Segment 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 did not have a material impact
on our financial condition or results of operations.

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

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

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measures
certain financial instruments with characteristics of both liabilities and
equity. This statement is effective for financial instruments entered into or
modified after May 31, 2003, except for mandatorily redeemable financial
instruments. Mandatorily redeemable financial instruments are subject to the
provisions of this statement beginning on January 1, 2004. We have not
completed our evaluation of the impact, if any, the adoption of this
statement
will have on our financial condition or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45)
Guarantors Accounting and Disclosure 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 this interpretation did not have a material impact on our financial
condition or results of operations.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46)
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entitys activities or entitled to receive a majority of the entitys residual
returns. FIN 46 applies to variable interest entities created after January 31,
2003, and to variable interest entities in which an enterprise obtains an
interest in after that date. A public entity with a variable interest in a
variable interest entity created before February 1, 2003, shall apply the
provisions of this interpretation (other than the transition disclosure
provisions in paragraph 26) to that entity no later than the beginning of the
first interim or annual reporting period beginning after December 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 for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
are evaluating the impact EITF 00-21 will have on us, but do not expect it to
have a material impact on our financial condition or results of operations.

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 as of the end of the period covered by 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.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

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




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

(a)  Exhibits:

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.68 - |  | Purchase Agreement dated as of July 31, 2003 between EaglePicher
Incorporated and UBS Securities LLC, ABN AMRO Incorporated, Banc One
Capital Markets, Inc., Harris Nesbitt Corp. and PNC Capital Markets,
Inc.                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.69 - |  | Registration Rights Agreement dated as of August 7, 2003 between
EaglePicher Incorporated, certain of its subsidiaries and UBS
Securities LLC, ABN AMRO Incorporated, Banc One Capital Markets, Inc.,
Harris Nesbitt Corp. and PNC Capital Markets, Inc.                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.70 - |  | Indenture dated as of August 7, 2003 between EaglePicher
Incorporated, certain of its subsidiaries and Wells Fargo Bank,
National Association, as trustee.                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.71 - |  | Credit Agreement dated as of August 7, 2003 among EaglePicher
Holdings, Inc., EaglePicher Incorporated, certain of its subsidiaries,
Harris Trust and Savings Bank, as administrative agent, ABN AMRO
Incorporated and UBS Securities LLC, as co-syndication agents, Bank
One, NA and PNC Bank, National Association, as co-documentation agents,
GE Capital Corporation, as collateral agent, and various lenders party
thereto.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.72 - |  | Guarantee and Collateral Agreement dated as of August 7, 2003
among EaglePicher Holdings, Inc., EaglePicher Incorporated, certain of
its subsidiaries and Harris Trust and Savings Bank, as administrative
agent.                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.73 - |  | Amendment No. 3 to Receivables Purchase and Servicing Agreement
dated a of August 7, 2003 among EaglePicher Incorporated, certain of
its subsidiaries, EaglePicher Funding Corporation and General Electric
Capital Corporation.                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.74 - |  | Amended and Restated Executive Employment Agreement dated as of
April 9, 2003 between EaglePicher Incorporated and John H. Weber.                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|12.1 -  |  | Ratios of Earnings to Fixed Charges and Preferred Stock Dividends                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|31.1 -  |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as Amended                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|31.2 -  |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as Amended                                                                                                                                                                                                                                                                                                                            

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|       |  |                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------
|32.1 - |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|       |  |                                                                                                                       
|32.2 - |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

(b)  Reports on Form 8-K:



| |  |  | Form 8-K, filed July 14, 2003 concerning our press releases
dated July 9, 2003 and July 11, 2003                                                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Form 8-K, filed July 22, 2003 concerning our press release
dated July 21, 2003 and certain sections included in our preliminary
offering memorandum for the sale of senior notes
|
| |  |  | Form 8-K, filed July 24, 2003 concerning our press releases dated July 23, 2003                                                                                                 
|
| |  |  | Form 8-K, filed August 5, 2003 concerning our press release dated August 4, 2003                                                                                                
|
| |  |  | Form 8-K, filed August 8, 2003 concerning our press release dated August 7, 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 HOLDINGS, INC.                       
| |  |                                                  
| |  | /s/ Thomas R. Pilholski                          
| |  |                                                  
| |  | Thomas R. Pilholski                              
| |  | Senior Vice President and Chief Financial Officer
| |  | (Principal Financial Officer)                    

DATE: October 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 INCORPORATED                         
| |  |                                                  
| |  | /s/ Thomas R. Pilholski                          
| |  |                                                  
| |  | Thomas R. Pilholski                              
| |  | Senior Vice President and Chief Financial Officer
| |  | (Principal Financial Officer)                    

DATE: October 9, 2003

51



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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: October 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: October 9, 2003

53



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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: October 9, 2003

54



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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 & MINERALS, INC.     
| |  |                                             
| |  | /s/ Thomas R. Pilholski

Thomas R. Pilholski
| |  | Vice President                              
| |  | (Principal Financial Officer)               

DATE: October 9, 2003

55



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##### Table of Contents



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 October 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 AUTOMOTIVE INC. (F/K/A HILLSDALE TOOL &
MANUFACTURING CO.)
| |  |                                                                       
| |  | /s/ Thomas R. Pilholski

Thomas R. Pilholski                          
| |  | Vice President                                                        
| |  | (Principal Financial Officer)                                         

DATE: October 9, 2003

57



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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 (F/K/A MICHIGAN AUTOMOTIVE RESEARCH CORP.)
| |  |                                                            
| |  | /s/ Thomas R. Pilholski

Thomas R. Pilholski               
| |  | Vice President                                             
| |  | (Principal Financial Officer)                              

DATE: October 9, 2003

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Number  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.68 - |  | Purchase Agreement dated as of July 31, 2003 between EaglePicher
Incorporated and UBS Securities LLC, ABN AMRO Incorporated, Banc One
Capital Markets, Inc., Harris Nesbitt Corp. and PNC Capital Markets,
Inc.                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.69 - |  | Registration Rights Agreement dated as of August 7, 2003 between
EaglePicher Incorporated, certain of its subsidiaries and UBS
Securities LLC, ABN AMRO Incorporated, Banc One Capital Markets, Inc.,
Harris Nesbitt Corp. and PNC Capital Markets, Inc.                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.70 - |  | Indenture dated as of August 7, 2003 between EaglePicher
Incorporated, certain of its subsidiaries and Wells Fargo Bank,
National Association, as trustee.                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.71 - |  | Credit Agreement dated as of August 7, 2003 among EaglePicher
Holdings, Inc., EaglePicher Incorporated, certain of its subsidiaries,
Harris Trust and Savings Bank, as administrative agent, ABN AMRO
Incorporated and UBS Securities LLC, as co-syndication agents, Bank
One, NA and PNC Bank, National Association, as co-documentation agents,
GE Capital Corporation, as collateral agent, and various lenders party
thereto.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.72 - |  | Guarantee and Collateral Agreement dated as of August 7, 2003
among EaglePicher Holdings, Inc., EaglePicher Incorporated, certain of
its subsidiaries and Harris Trust and Savings Bank, as administrative
agent.                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.73 - |  | Amendment No. 3 to Receivables Purchase and Servicing Agreement
dated a of August 7, 2003 among EaglePicher Incorporated, certain of
its subsidiaries, EaglePicher Funding Corporation and General Electric
Capital Corporation.                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.74 - |  | Amended and Restated Executive Employment Agreement dated as of
April 9, 2003 between EaglePicher Incorporated and John H. Weber.                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|12.1 -  |  | Ratios of Earnings to Fixed Charges and Preferred Stock Dividends                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|31.1 -  |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as Amended                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|31.2 -  |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as Amended                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|32.1 -  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|32.2 -  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                           

59