Document Rj0zZOoXx0zDj9jLkz00V8gRX

THE EAGLE-PICHER COMPANY TO OUR SHAREHOLDERS: Not. profit, of The Eagle-Picher Company for the fiscal year ended November 30, 1.952 amounted to $4,035,643, equivalent to $4.08 per share, compared with $3,703,807. or $3.74 per share, for the preceding year. Net sales for the 1952 fiscal year were $81,893,007 in comparison with $82,086,318 for 1951. As at November 30, 1952, net current, assets were $25,176,975, an increase of $6,551,220 over tile corresponding figure of $18,625,755 at, No vember 30, 4951. Net. worth at. November 30, 1952 was $28,898,443, or $29.21 per share, an alltime high, and compared with $26,398,195, or $26.68 pet: share, at the end of the previous fiscal year. All per share figures quoted herein, for both the 1952 and 1951 fiscal years, are computed on the - basis: of 989-, 177 shares outstanding at November 30, If),52. A ew Arlirilies Before reviewing the results for 1952, it is pertinent to consider certain important steps taken since the close of the preceding fiscal year which have resulted in a substantia! rearrangement: of tlie Company's activities. For a number of years, The Eagle-Picher Com pany has been strengthening its cash position with the ultimate goal of expanding and diversify ing its business and assuring and increasing its earning power. At the same time, a careful study and analysis of existing operations revealed thaL certain segments of the business were failing to earn an adequate return on invested capital or did not have future prospects indicating such return, and hence were logical, sources of funds for new undertakings. Your management investi gated many possible fields for expansion and sub jected them to rigid tests, including return on investment, growth possibilities and. in the case of companies, already 'established,", the quality of management. During the past year, we have entered into two major new activities which appear to fulfill these specifications. In July 1952, the Company offered to purchase all of the common stock of Tint Ohio Rubber Company for approximately $8,0()0,()0(). At No vember 30, 1952, 99% of this stock had been acquired and since then, all of the remaining stock has been purchased. The Ohio Rubber Company common stock is now owned 100'; by your Company. The Ohio Rubber Company is a leading manu facturer of molded and extruded rubber products' which are sold principally to the automotive, farm equipment and toy industries. In addition, the company is making tank tracks for the defense effort. Its management is recognized as outstand ing and the company appears to have unusual growth possibilities. For its fiscal year ended: .September 30, 1951, The Ohio Rubber Company had net sales of $32,740,000 and net profit of $1,824,000. Opera tions for the fiscal year ended September 30, 1952 were adversely affected bv a four-months strike in its own plants and. subsequently, by the steel strike which curtailed activities of its principal customers. Nevertheless, its sales for the year amounted to $28,692,000 and net profit to $1,404,000. Sales and earnings of the company currently are running at. a rate which would indi cate considerably better results for 1953. The accounts and results of operations of The Ohio Rubber Company have been consolidated with those of the parent company since July 1. For tlu* five months ended November .`>0. 1952. The Ohio Rubber Company had sales of $12,143,364 and net profit of $650,654. During the year, it was determined that the recovery of sulphur from the Company's sulphide zinc ores and the production of sulphuric acid would prove profitable provided an assured outlet could he .obtained for the acid. Subsequently, a contract was signed covering the sale of 85'', of the proposed acid product ion fora period of five years. 'Hie Defense Production Administration then granted The Magic-Richer Company a certificate of necessity approving accelerated depreciation on a substantial part of the cost of the required plant facilities. Construction of the plants, involving capital: expenditures in excess of $<1,000,000, is now in progress at Galena. Kansas, with comple tion 'scheduled for the early part of 1954. The purchase of The Ohio Rubber Company and the construction of the acid and complementary plants will not, necessitate tin increase of our capital stock. It; was considered preferable to re arrange the Company's long-term debt, as is ex plained later,' and, as an integral part of the program, to discontinue operations of the Metallic Products Division and the Paint; and Varnish Division. This liquidation is being accomplished at a rapid pace and should be concluded at an early date. The Metallic Products Division operated sec ondary lead smelters and plants manufacturing lead pipe, roof flanges, solders, alloys and other products sold principally to the plumbing and .construction industries. For years, this has been a very competitive industry, earning a low rate of return on invested capital. The Paint and Varnish Division manufactured mixed paints,.varnishes and enamels, Tt was a -minor factor in an industry composed principally of'important customers of-the Company. The Metallic Products Division and the Paint and Varnish Division had net sales aggregating $17,082,000 and $11,360,000 for the fiscal years ended November 30,1951 and November 30,1952, respectively. The combined operations of these divisions resulted in a net loss in each of those two years. It is easier for the management of a company to expand its operations than to liquidate parts of its business. We are confident, however, that, the reasons for dissolution of the two divisions were com{K`ifiiig ami Dial the more profitable utilization of the money invested in their operation.-- will prove beneficial. Salt's Net sales of $81 to;3,<r61 for ihe ilsea! year elided November 30, 1952 fell jus! short of those for the preceding year, aggregating $82,086,318, which represented a new high for ail time. Sales during the second half of 1952 were ma terially higher than those* for the first naif of the year but neither period furnished a good indica tion of probable sales volume for the present year. Consolidated sales for 1953 will show a net increase over 1952 arising from inclusion of a full year's operations of The Ohio Rubber. Company,-less the sales of the discontinued divisions discussed above, but allowance must, be made for variations in physical volume and prices in the two years. At present, lead and zinc prices, and consequently those for pigments'and oxides, are substantially below a year ago. Kamitigs Net profit after taxes for the fiscal year ended November 30, 1952 was $4,035,643, equivalent to $4.08. per share, compared, with $3,703,807, or $3.74 per share for the preceding year. Net; profit before taxes for 1952 declined to $4,323,643 from $9,503,807 for 1951. However, this was more than offset by lower provision for Federal and State taxes on income. Not only was the Federal normal tax and surtax substantially smaller in 1952 but, in addition, the Company received an excess profits tax carry-back credit of $820,000. Moreover, examination and final review of the Company's income tax returns re sulted in an over-provision for taxes of $500,000 for the years 1946 to 1949, inclusive. This amount has been restored to income by its deduction from the 1952 tax provision. Balance Sheet Current, assets at .November 30, 1952 amounted to $32,730,475, including $10,737,780 of cash and governments, and current liabilities were $7,553,500, a ratio of 4.33 to 1. Working capital of $25,176,975 was the largest in the Company's history and represented an increase of $6,551,220 over that of a year ago. -4 - Total inventories at November. 30, 1952 were .$13,716,435 compared with $7,729,498 a year earlier, an increase of $5,986,937. The Ohio Rublier Company accounted for $4,700,234 of this in crease; in addition, the metal content of zinc in ventories at November 30, 1952 was higher than at November 30, 1951. Investments in and advances to. foreign sub sidiaries were reduced bv $978,621, the reduction being largely due to the repayment of advances by Mexican subsidiaries. Long-term debt at November 30.1952 amounted to $14,250,000, including $675,000 due within one year and classified .as a current, liability, as com pared with $7,500,000 a year ago. In September; 1.952, the Company rearranged its long-term bor rowings from the Metropolitan Life Insurance Company and The Mutual Life Insurance Com pany of New York. It paid its 3% Notes, due September 1, 1967, then outstanding in the prin cipal amount of $7,500,000, and substituted there for $12,500,000 of 3%% Notes due serially until September 1, 1972;'thereby-. .increasing working capital by $5,000,000. The $1,750,000 of 4L,% Mortgage Notes outstanding are obligations of The Ohio Rubber Company. Capital stocks of subsidiary company, amount ing to $2,052,573 at November 30, .1952, consisted of the preferred stock of The Ohio Rubber Com pany at the call [trice plus an insignificant amount in respect of the few shares of common stock of that company not yet purchased at the fiscal year end. Dividends The regular quarterly dividend of 30 cents per share was maintained during 1952 and an extra of 30 cents [ter share was [laid in December, making total disbursements of $1.50 [ter share for the calendar year. This was the same cash distribu tion made in 1951 and 1950; in addition to which a .10% stock dividend was paid in December, 1951. Outlook The inauguration of the new administration has given rise to a better feeling on the part of business men. It is hoped and believed that government, economy will now receive more than lip service and that tax reduction will be a primary objective after the country'.- -ah-ly ha- 5*-t-n a--ur.-<i an*1 the budget has been balanced. A tendency haalready been -hown to relax government regula tions and controls, anti labor-management rela tions may Ik - improved a- inflationary [>re-sureIcssen and both parties meet at the bargaining table on more equal terms. The free enterprise system is recognized as the cornerstone of, our economy.and its contribution to the genera! wel fare and defense of our country is being more widely acknowledged. Economists'generally look for a continued high level of business activityduring 1953, sustained in an important part by huge Government ex penditures for national defense and large capital expenditures by corporations for new plant facili ties. These two factors will lose their actual and relative force at some point in the future, perhaps not too far removed, but the outcome need not be a severe recession if Government and business prepare beforehand and avoid excesses in the meantime. During the latter part of 1952 and to date in 1953, lead and zinc markets have been depressed in sympathy with the weakness in the London market which developed in anticipation and after removal of restrictions on private dealings abroad. It is diflicuit to say how long and to what extent, this will prove a depressant on our prices but domestic consumption of both metals is generally satisfactory and stocks are not unduly burden some. It seems reasonable to expect firming price tendencies in these metals. Furthermore, a more plentiful supply of certain raw materials, such as aluminum, and a high level of demand in various industries for products manufactured by the Company appear as favorable factors in 1953. A year ago we stated our belief that earnings of your Company would' be satisfactory for 1952. We are of the same opinion with respect to 1953. Our productive facilities and activities have been expanded and further diversified, our financial position is strong, and we have a skilled and loyal team of workers. Jo h l M. Bo w l by Chairman Cin c in n a t i, Oh io Fe b r u a r y 13, 1953 T. Sp e n c e r Sh o r e President THE EAG LE-PI CHER COMPANY j < Vi\su.i!i.vn:ii Jl.vi.A\< i-; Sums v Assi'/rs 1 !):>2 MTKHKNT ASSKTS: : :l,S,,- (iovernnionf ol>Ii";jt;il cosi (Market value 2,3 1 1 ,.72 1 a f November 30, 10,72) .. . Accounts and miles reeeivalile. ... /a'.v.v; Allowance for doiililI'll] rcrcivabh s. Inventories ill' raw materials, work in process. '.finished products and supplies (Noli* 1): Ores, inelals and melal hearing products,,. . Ol her products, merelinudise for resale ami manu facturing materials and supplies. .... .... . . . To t a i, .('rnurc.vr An s k t n . . .3.70,807 7 ..j 7.*>,(>>({ 8 8.42.7.408 2.312.872 8.270,200 1.3.7 10.4.3.7 32.780,47.7 1 !)> 1 $ 7,70.7,04.7 040,0.7;7 8 7,!)81.0.72 1.242.082 7.424.000 3.!).3!),(i().3 3,78!).80;7 7,720,408 24.328,172 OTIIKK ASSKTS: Repair parts ami maintenance supplies. ........................ Investment in and advances lo associated company and sundry seenrilies...a l. or below- cost . ... . Miseellaneons aeenunts and advances . . 1,118,087 317.327 `27:5. 1.70!),44.3 1.171,1711 33.7,404 .30,3,02.3 1.870..700 IXVKSTMKXT IX AND AOVAXCKS TO KOHKICX SURKIDIAIUKS NOT ('OXSOIdl)ATKl) (Note 2): Mexican subsidiaries: . Canadian subsidiaries . ... .. . 02.7.703 002.302 l,318,l;7;7 1 ,;708,770 008,000 THORKRTY..PLANT AND KQI 1TM KN'T (Xole 3). Mining lands and leases: nulls, smellers and fabricating plants: railroad and oilier properties................................ Allowance for depletion, depreciation. etc............... 40,0 1.7.3.7 7 .3.3,122.0.00 1 0.40.3,018 42,2(i.7..302 .31,102,0.70 I 1.102,400 I'ATKNTS. OOOmVIKL. etc..................................................... 1 PRKRAII) AX1) DKFKHHKD CHAKCKS: fulfil C':V. Prepaid freight, insuranee. ele................................................... Miscellaneous deferred charges ............................................ 223,7 14 48!).,S] 2 713.5.70 $.72,004,048 1 10.7..703 .730,080 09,7,07.3 840,203,021 Thc accompanying notes are ;in into; - - -j AN D DOMESTIC SUBSIDIARIES AS AT XoVKMHKK 00, 1052 AM) 15)51 U\HILITIKS 11)52 1!)A1 (TRRKNT LIARILITIKS: Accounts pa vable... Dividends pavablc. Purchase monev oblijjalinn . ..................... Accrued: liabilities: . Wanes ami salaries. ........ 'Paxes oilier than Federal taxes on income. . . .... Other .......................... .............................: . . $ I.PiO.oOS 082,121 1554,(524 Federal taxes on income ,... J.cxx: F. S. (iovernment obligations. Lonn-lernidebt -- current portion . . 2,028,:540 2,028,040 To t a i, ('rmtK.VT Lia imi.it ik s ............ $ 5,401.1K51 (510,021 1,857,248 (575,000 7,550,500 $ 2,oi(;.ono 5(i( 1.(157 KI8.000 8 574,(540 010,824 702,072 7.120,080 (5,000,050 I ,(580.50(5 10(5.(524 5.702.417 LONC-TF.RM I>FAST (Note 4): .Votes, payable serially September 1, 1050 to September 1, 15>~v2 .............. .................................... 4'/)'(\ Mortfraiie note of subsidiary company, payable $40,750 quarterly through September 1, 10(54. . . . !i'j Notes, payable serially September 1,: 1050 to September 1, 1 i)(!7................ : ... . . . . Lrxx: Payments due within one year 12.500,000 1,750,000 14,250,000 <575,000 10,575,000 - 7,500,000 7,500,000 7.500,000 . RKSKRYKS FOR SFLIMNSCRAXCK: W orkmen's compensation .......... Fire-and tornado.. ........ . ............ ...... 70(5,201 148,841 885,102 551.055 141,(557 (500,0 1 2 CAPITAL STOCKS OF SCRSIDIARY COMPANY .. 2.052,570 ST<)CKIK)L1 >KRS' HQI'ITY: Capital stock : - par value $10.00 per share: : Authorized................................. 1,500,000 shares issued and outstnndinf; . OS!), 177 shares Surplus: Capital surplus (Note 5)......................................................... Karned surplus (Note 4) 0.801,770 2,7(5:5.(548 1(5,2 Pi,025 28,808,4 50 $52,0(54.(548 0,000.000 2,050,202 15,047.0(50 2(5.008.105 $40,200.(524 ilogral |)arl of this balance sheet. THE 'EAGLE-PiCHERV COMPANY' AND DOMESTIC SUBSIDIARIES STATK.M F.N'TS OF ('<>N.SOMI>ATKI> PHOFJT ,\\I) FOSS \ \ l> KAICNKO SUtl'I.I S VICARS KM)KI> XoVICMHICIi .`JO, Ubp' AM) I!*.) I I.0.>2 XFT S.W.FS....................................................................... PRODIVTIOX AM) MAXlTACTfRI-XG COSTS............................................................................ GROSS OPKRATIXG PROFIT lion and dcprceia 1 inn . . . before dcplc, .... ........... 10 X PFXSFS: ''A' Sol!ins'; .-XvCv.V'. A.,. '.-.A. _< . Tradie, warehousing and shipping. . G ei ier;d and ad minis! ra live...... . - $ 2,056,157 01.9,808 . . 2.988,890 XFT OPFRATIXC IXrO.MF l.efnre dcplc1 inn a m l depreciation ....................... OTIIFR IXCOMF........................................................... IXTFRFST FXPFXSF: Long-term debt . . .... . . . ... . . . ...... . . . ( >1 Ilf!*.................. . . . .C. s . ..C , . . . . . DFPLKTIOX, I)FPRF(TATIOX,ele.; .Provision for depict ion and depreciation .... Fxploratiou and prospecting expenses and loss nr .gain on disposition of eapilal assets. ... Xel provision for loss on future disposal of certain plant properties .. .. . .................. XFT PROFIT before Federal and Stale (axes on iueonu*............ .... FF.DF.UAf. AX1) STATF. TAXF.S OX IXCOME: Federal normal lax and surtax' and slate (axes: . . Federal--excess profils taxes (the 1952 credit resulted from a carry-hack of unused excess profits (ax credit.).......... ........... Over-provision of taxes on -income, prior years-. . XFT PHOF-IT FOlt VFAH...................................... FARXF1) Sl'RPLLS RFGIXXIXG OF VFAH. ................................................................. 887.819 51.494 1.028.128 252,199 <>00.000 1.008,000 (tt-'tl.OOO) (500,000) ('llAlUiKS TO FAHXF1) SCRPLl'S: Gash dividends paid and accrued . ... . . . c SLoek dividend (note 5). . Fxccsw of cost of stocks -of - consolidated sub sidiaries over book values thereof at, dates of acquisition.................................................................... FARXFI) SCRPLl'S FXI) OF YFAR (Noted).............................................................................. l ,585,895 1,005,180 *h i.K98.o o 7 08.070.295 18,222.772 0.289.110 0,909.050 254,002 7,1 87,088 oss.72:i 0.798,905 2.475.022 4.020,04.9 288,000 4.005,040 15,047,900 h l o s o .o o o .`$,140,581 *16,`248.025 19.71 SS2.0S6..-; i s 65.0Ci5,S9S 17.020.420 * 2,252,151 782.144 2.017.951 5.65^,249 225.018) 5.2! 11 1,497.202 8.S5,(i!)0 11,868.171 248.729 ,11.616.900 280.201 11.8H0.699 1,882.892 9.508,8(17.' 4.900,000 900.000 1.870.657 5.800.000 8.708.807 14.801.681 18,505.488 1.786,818 8,157.475 *L>,047.<)68 The accompany ini' notes are ;ui integral part of this statement. ( ) Donnies deduction. THE EAGLE-PICHER COMPANY AND DOMESTIC SUBSIDIARIES NOTKS TO ITN'A.VCIAIj STATEMENTS 'NOVEMBER :i0, l')`)2 : No t e .1 ^ Ores, metals and metal bearing products: Under the base-stock method of inventory valuation, adopted at November 30, 1949,-basic quantities of lead and zinc are valued at fixed firices based on 6.5 cents per fiound for lead (New York) and 5 cents per fiound for zinc (Mast St. Louis). At- November 30, 1952, basic quantifies were 12,300 tons of each metal compared with 15,000 tons of lead and 10,000 tons of zinc at November 30, 1951; t his shift in basic quantities has had no material effect on operations for the year. The remainder of the inventory of metal content is priced at the lower of average cost or market. Other products have been valued at average and standard costs, or lower, which ap proximate replacement market;/ . ': No t h 2 The equity-of-The- Kagle-Picher-Company in foreign subsidiaries not con solidated has-.increased -$1,503,873 since dates of acquisition as a result of profits, losses, dividend distribut ions and reorganization of the Canadian companies. The increase during i he year ended November- 30, 1952 aggregated $495,942. .No t h 3 On July 14, 1952 (as of July 1, .1952) The Eagie-Picher Company acquired substantially all of the outstanding common stock of The Ohio Rubber Company. Cost-of the latter's stock was-approximately $3,600,000 in excess of book value of its net assets; this excess has been allocated to property, plant'-.and. .equipment in the consolidated financial statements which results in stating these assets at values which closely approximate original cost when first used in operations, less depreciation to date. The statement of consolidated profit and loss includes operations of this subsidiary from July 1 to November 30, 1952; for this period the acquired company had net sales of $12,143,364 and net profit of $650,654. No t h 4 Under the provisions of the loan agreements pertaining to the 3:* j '.> notes due September 1, 1972, the company is required to prepay on September 1 of each of the years 1953 to 1957, inclusive, the amount of $500,000 and varying amounts thereafter to maturity. The 4!.J, mortgage notes maturing September 1, 1964 are secured by a mortgage* covering property of a subsidiary company. The 3:4.|.% notes contain a covenant which, so long as any of the notes remain outstand ing, restricts the amount which may be declared as dividends (other than those* payable* in stock of the company) or applied in the purchase, redemption or-retirement of the company's capital stock. At-November 30, 1952 the amount not so restricted was $4,725,044. No t e 5 - On December. 10, 1951 a slock'dividend was paid by the-issuance* of 89,177 shares of the company's capital stock and the distribution of $20,657 in cash in lieu of the issuance* of fractional shares totaling 823 shares. The charge against earned surplus with respect to the 89,177 shares so issued was $1,605,186, representing $18 per share. Capital stock was credited at the par value of $10 per share, or $891,770, and the balance of $713,416 was credited to capital surplus. No t e 6 --A portion of the company's sales for the years ended November 30, 1951 and 1.952 is subject to renegotiation under the Renegotiation Act of 1951. No provision has been made for possible refunds, since it appears that renegotiation will have no material effect on the financial statements as of November 30, 1952, . . " 1 ` * *** ' 11 .... ........:v COMPARATIVE HIGHLIGHTS I'OII TIIK YKAHS KNDKI) Nl)'. KMUKIt 80 10.72 1 '1.71 10.70 Xet Salt's ................................... | ! Xet Profit before Income Taxes! SALKS KARXIXGS -.Federal and Stale rue. Taxes.l TAXKS Xei Prcdil.-for.Vear:. . D1Y1DKXDS Xet Profit per Share* . ............> - Dividends per Share. .... $81,808,0(17 4,;t-2:i,(54:i 288.000 4,08,7,(148 4. OH Cat) 882,08(1,.'IIS 0,508.807 i .7,800,000 ....: 8,708,807 j.-' ' 8.74 ! I . .70* $(10,128,00.8 (1.800,20(1 8.470.000 '2,020,20(1 2.0(1 I.70 Current Assets. ... ...... I'ltOM Current Liabilities; . TIIK Working Capital..... AKAH-KXD RALAXCK. SIIKKT Fixed Assets, Xet . ...... . (fther.Tangible Assets. , Long-Term Debt.; . . Xet Worth............ $82,780,47.7 2.7,17(1,07.7 1(1,408.018 ! i 8.741.15.7-. 1 S..77.7,000 28,808.448 ! .824,828,172 .7,702,417 -18.02,7,75.7 11.102,400 4.808.040 -V 7 ..700,000 2(1.808,10.7 $21,(184,70.7 (1.148,48.7 1.7,48(1.220 1-1.825.(118 5.710.540' 7.581.01.7 24.441.8041 .Ratio - of' Current Assets to; OTIIKR Current Liabilities...... . . SALIKXT FA( rs Xet Worth per Share*. . .... Dividends Paid and Aceriied ; Karnings Retained in business : < 4.:i8 $ 2!). 21 si ,,7;?,7.;i!V7 $2,500,248 1 ; i ... 4.2(1 . \ $ 2(1. (IS 81.870,(1.77 $2,888.1.70 8.72 $ 24.71 $1,880,017 $1,580,870 `Based c>ird)SJM77 shares prestMilly Avjtstnmling - fAfter deduction of of intangible assets + Plus 10% in stock P