<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1995
Commission File Number l-8803
MATERIAL SCIENCES CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-2673173
(State or other jurisdiction (IRS employer identification
of incorporation or organization) number)
2300 East Pratt Boulevard
Elk Grove Village, Illinois 60007
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (708) 439-8270
Indicate by check mark whether the registrant (l) 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_______________
---------------
As of July 11, 1995, there were outstanding 15,308,791 shares of common stock,
$ .02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended May 31, 1995
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
(a) Financial statements of Material Sciences Corporation and
Subsidiaries
(b) Summarized income statement information for Walbridge Coatings,
An Illinois Partnership
- 2 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended
May 31,
(In thousands, except per share data) 1995 1994
- - --------------------------------------------- ------- -------
<S> <C> <C>
NET SALES(1) $60,406 $58,822
Cost of Sales 43,869 43,772
------- -------
Gross Profit $16,537 $15,050
Selling, General and Administrative
Expenses 8,934 8,824
------- -------
Income from Operations $ 7,603 $ 6,226
------- -------
Other (Income) and Expense:
Interest Income (93) (173)
Interest Expense 46 18
Equity in Results of Partnership (100) (77)
Other, Net (160) (125)
------- -------
Total Other Income, Net $ (307) $ (357)
------- -------
Income Before Income Taxes $ 7,910 $ 6,583
Income Taxes 3,044 2,502
------- -------
NET INCOME $ 4,866 $ 4,081
======= =======
Net Income Per Common and Common Equivalent
Share (2) $ 0.32 $ 0.27
======= =======
Weighted Average Number of Common and
Common Equivalent Shares Outstanding (2) 15,407 15,240
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
May 31, February 28,
(In thousands, except share data) 1995 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS: (Unaudited)
Current Assets:
Cash and Cash Equivalents $ 3,916 $ 5,816
Receivables:
Trade, Less Reserves of $3,508 and
$3,628, Respectively(3) 27,038 24,518
Current Portion of Partnership Note 859 792
Income Taxes - 2,319
Prepaid Expenses 3,778 2,343
Inventories 26,074 23,765
Prepaid Taxes 2,246 2,246
-------- --------
Total Current Assets $ 63,911 $ 61,799
-------- --------
Gross Property, Plant and Equipment $162,855 $158,129
Accumulated Depreciation and Amortization (68,116) (65,216)
-------- --------
Net Property, Plant and Equipment $ 94,739 $ 92,913
-------- --------
Other Assets:
Investment in Partnership $ 11,275 $ 10,917
Partnership Note Receivable,
Less Current Portion 1,871 1,871
Intangible Assets, Net 3,143 3,193
Other 1,649 1,664
-------- --------
Total Other Assets $ 17,938 $ 17,645
-------- --------
TOTAL ASSETS $176,588 $172,357
======== ========
LIABILITIES:
Current Liabilities:
Current Portion of Long-Term Debt $ 1,926 $ 1,903
Accounts Payable 17,677 22,521
Accrued Expenses 11,987 14,669
-------- --------
Total Current Liabilities $ 31,590 $ 39,093
-------- --------
Long-Term Liabilities:
Deferred Income Taxes $ 10,671 $ 10,750
Long-Term Debt, Less Current Portion 12,740 6,933
Accrued Superfund Liability 4,159 4,198
Other 6,089 5,979
-------- --------
Total Long-Term Liabilities $ 33,659 $ 27,860
-------- --------
SHAREHOLDERS' EQUITY:
Preferred Stock(4) $ - $ -
Common Stock(5) 318 317
Additional Paid-In Capital 43,844 42,776
Treasury Stock at Cost(6) (3,380) (3,380)
Retained Earnings 70,557 65,691
-------- --------
Total Shareholders' Equity $111,339 $105,404
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $176,588 $172,357
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended
May 31,
(In thousands) 1995 1994
- - ------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net Income $ 4,866 $ 4,081
Adjustments to Reconcile Net Income to Net
Cash Used In Operating Activities:
Depreciation and Amortization 3,004 2,380
Provision (Benefit) for Deferred
Income Taxes (79) 4
Compensatory Effect of Stock Plans 162 161
Other, Net (100) (77)
-------- --------
Operating Cash Flow Prior to Changes in
Assets and Liabilities $ 7,853 $ 6,549
-------- --------
Changes in Assets and Liabilities:
Receivables (2,587) (4,255)
Income Taxes Receivable 2,319 -
Prepaid Expenses (1,435) (1,198)
Inventories (2,309) 740
Accounts Payable (4,844) (4,076)
Accrued Expenses (2,682) 1,143
Other, Net 71 28
-------- --------
Cash Flow from Changes in Assets and Liabilities $(11,467) $ (7,618)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES $ (3,614) $ (1,069)
-------- --------
INVESTING ACTIVITIES:
Capital Expenditures, Net (4,780) (2,930)
Investment in Partnership (258) (395)
Other Long-Term Assets 15 67
-------- --------
NET CASH USED IN INVESTING ACTIVITIES $ (5,023) $( 3,258)
-------- --------
FINANCING ACTIVITIES:
Proceeds of Debt 20,241 36
Payments to Settle Debt (14,411) (352)
Sale of Common Stock, Net of Repurchase 907 316
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES
$ 6,737 $ -
-------- --------
NET DECREASE IN CASH $ (1,900) $ (4,327)
Cash and Cash Equivalents at Beginning of
Period 5,816 11,930
-------- --------
Cash and Cash Equivalents at End of Period $ 3,916 $ 7,603
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MATERIAL SCIENCES CORPORATION
The data for the three months ended May 31, 1995 and 1994 have not been examined
by independent public accountants but, in the opinion of the Company, reflect
all adjustments (consisting of only normal, recurring adjustments) necessary for
a fair presentation of the information at those dates and for those periods.
The financial information contained in this report should be read in conjunction
with the Company's 1995 Annual Report to Shareholders and Annual Report on Form
10-K. Certain prior year amounts have been reclassified to conform with the
fiscal 1996 presentation.
(1) During the three month periods ending May 31, 1995 and 1994, the Company
derived approximately 23.7% and 21.0%, respectively, of its net sales from
fees billed to the Partnership by a subsidiary of the Company for operating
the Walbridge, Ohio facility.
(2) On June 16, 1994 the Board of Directors of the Company declared a stock
dividend of one-half share per share of the Company's Common Stock, which
was paid on July 28, 1994 to shareholders of record at the close of business
on June 30, 1994. All share and per share data has been restated to
retroactively reflect this stock dividend.
(3) Includes trade receivables due from the Partnership of $1,092 at May 31,
1995 and $799 at February 28, 1995.
(4) Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized, 7,500,000
Designated Series A Junior Participating Preferred; None Issued.
(5) Common Stock, $.02 Par Value; 20,000,000 Shares Authorized; 15,935,264
Shares Issued and 15,246,616 Shares Outstanding at May 31, 1995 and
15,839,074 Shares Issued and 15,150,426 Shares Outstanding at February 28,
1995.
(6) Treasury Stock at Cost; 688,648 Shares at May 31, 1995 and February 28,
1995.
-6-
<PAGE>
SUMMARIZED INCOME STATEMENT INFORMATION (UNAUDITED)
Walbridge Coatings, An Illinois Partnership
<TABLE>
<CAPTION>
Three Months Ended
May 31,
(In thousands) 1995 1994
- - -------------------------------------------------
<S> <C> <C>
Net Revenues $17,256 $15,443
Gross Profit $ 969 $ 1,230
Income from Operations $ 363 $ 645
Net Income (Loss) $ (127) $ 1
</TABLE>
NOTE: The Net Income (Loss) shown above does not directly correlate to the
Equity in results of Partnership shown in the Company's Statements of
Income due to certain contractual allocation requirements of the
Partnership. The Company's primary financial benefit from participation
in the Partnership is in the form of revenues from operating the
Walbridge, Ohio facility. These revenues are included in the Company's
net sales.
- 7 -
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended May 31, 1995
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Material Sciences Corporation ("MSC" or "Company") operates in one business
segment comprised of the following four product groups: laminates and
composites, metallizing and coating, coil coating, and electrogalvanizing. The
following table provides a summary of net sales and the percent of net sales of
MSC's product groups.
<TABLE>
<CAPTION>
Net Sales Summary Quarter Ended May 31,
- - ----------------- --------------------------
1995 1994
-------------------------------------
Product Group: Dollars Percent Dollars Percent
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Laminates and Composites $13,930 23.1% 13,071 22.2%
Metallizing and Coating 5,760 9.5% 7,161 12.2%
Coil Coating 26,394 43.7% 26,251 44.6%
Electrogalvanizing 14,322 23.7% 12,339 21.0%
------- ----- ------- -----
$60,406 100.0% $58,822 100.0%
======= ===== ======= =====
</TABLE>
RESULTS OF OPERATIONS
---------------------
NET SALES
Net sales in the first quarter of fiscal 1996 increased 2.7% over the first
quarter of fiscal 1995. Sales of laminates and composites grew 6.6%; coil
coating 0.5%; and electrogalvanizing 16.1%; while metallizing and coating sales
were down 19.6%.
LAMINATES AND COMPOSITES
Laminates and composites sales during the first quarter grew by 6.6% over the
same period of fiscal 1995. This increase was primarily the result of higher
sales of Polycore Composites(R), due, in part, to new product applications and
market expansion activities. The overall Polycore Composites increase was
offset, in part, by somewhat lower sales of disc brake noise damper material
and Specular+(R).
METALLIZING AND COATING
Sales of metallizing and coating products decreased 19.6% in the first quarter
of fiscal 1996 as compared to the same period in fiscal 1995. This decrease
was due primarily to solar control window film sales, which are usually strong
in warmer weather but were depressed in the first quarter of fiscal 1996 by the
unusually cold and damp spring season in North America. International sales of
solar control window film remained strong during the first quarter.
-8-
<PAGE>
COIL COATING
Coil coating sales were flat compared to the previous year's first quarter.
Customers built up hedge inventories, anticipating that MSC's Middletown, Ohio
facility's 52-day shutdown in last fiscal year's fourth quarter would run
longer than planned. The shutdown was accomplished on schedule but sales were
slowed by customer inventory adjustments, particularly in the areas of
lighting, heating and air conditioning, and fuel tanks.
ELECTROGALVANIZING
MSC participates in the electrogalvanizing market through Walbridge Coatings
(the "Partnership"), a partnership among subsidiaries of MSC, Bethlehem Steel
Corporation ("Bethlehem") and Inland Steel Industries, Inc. ("Inland"). MSC's
net sales for electrogalvanizing consist of various fees charged to the
Partnership for operating the facility. Bethlehem and Inland are primarily
responsible for the sales and marketing activities of the Partnership. The
Company's primary financial benefits from the Partnership are the revenues
billed to Walbridge Coatings for operating the facility. These revenues
represent 23.7% and 21.0% of the Company's net sales in the first quarters of
fiscal 1996 and 1995, respectively. The profitability for operating the
facility is comparable to the Company's overall operating results. Under the
equity method of accounting, the Company includes its portion of the
Partnership net income (loss) in Equity in Results of Partnership shown in the
Consolidated Statements of Income. The amounts do not directly correlate to
the Company's 50% ownership interest due to contractual allocation requirements
of the Partnership agreement.
MSC's electrogalvanizing sales increased 16.1%, while electrogalvanizing volume
increased 5.6% to 120,623 tons in the first quarter of fiscal 1996 from 114,188
tons in the prior fiscal year period. The increase in sales over the previous
fiscal year resulted from a strong demand for new autos and trucks, a
continuing shift to higher value-added electrogalvanized and coil coated
materials, and price increases. MSC increased the capacity of the facility by
approximately 5% in the third quarter of fiscal 1995 which also contributed to
the increase in sales and volume over the prior year's first quarter.
The sales and marketing responsibilities of the Partnership are split between
Bethlehem and Inland at 75% and 25%, respectively. During the first quarter of
fiscal 1996, Inland utilized only 18% of available production line time rather
than its full 25%. Bethlehem and other customers utilized this additional
available line time. Inland is reviewing its future involvement in the
Partnership, and therefore, there is no assurance that Inland will utilize its
full 25% of available line time on a long-term basis. The Company believes
that any short-term disruption in volume that might be caused by a reduction in
Inland's line time requirements could be replaced by additional volume from
Bethlehem and other customers.
GROSS PROFIT
MSC's gross profit margin was 27.4% in the first quarter of fiscal 1996 versus
25.6% in the previous year. This improvement was due to a higher value-added
product mix, improving manufacturing efficiencies, and continuing productivity
gains resulting from capital expenditures.
-9-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses decreased to 14.8% of sales
in the first quarter of fiscal 1996 from 15.0% of sales in the same period last
fiscal year. This decrease was due to larger sales volume over the prior
fiscal year's first quarter and lower administrative costs offset, in part, by
increased expenditures for strategic purposes such as high-growth product
marketing, research and development, and international marketing efforts.
TOTAL OTHER (INCOME) EXPENSE, NET AND INCOME TAXES
Total other (income) expense, net was income of $.3 million in the first
quarter of fiscal 1996 versus income of $.4 million for the first quarter of
fiscal 1995. MSC's effective income tax rate was approximately 38.5% during
the first quarter of fiscal 1996 versus 38.0% in the first quarter of the prior
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During the first quarter of fiscal 1996, MSC's operating activities utilized
$3.6 million of cash versus $1.1 million of cash utilized during the first
quarter last year. The increase in cash utilization is due mainly to increased
seasonal inventory and the payment of certain accrued expenses during the first
three months of fiscal 1996.
MSC's capital expenditures during the first quarter of fiscal 1996 were $4.8
million versus $2.9 million during the same period of fiscal 1995. The cash
flow from investment in partnership, net of distributions, was comparable in
the first quarter of fiscal 1996 to the first quarter of the prior fiscal year.
During the first quarter of fiscal 1996 MSC's long-term debt, less current
portion increased by $5.8 million to $12.7 million due to borrowings on MSC's
unsecured line of credit offset, in part, by normally scheduled debt
amortization. The Company maintains a $25 million unsecured line of credit
which expires August 31, 1997. There was $6.1 million outstanding under this
line of credit at May 31, 1995 versus no balance outstanding at February 28,
1995. The Company has executed letters of credit totalling $4.9 million
against this line leaving an available line of credit of $14.0 million at
May 31, 1995. The Company believes that its cash flow from operations,together
with available financing (including an increase in the line of credit if
required), and cash on hand will be sufficient to fund its working capital
needs, capital expenditure program, and debt amortization.
The Company has a capital lease obligation, which was $8.0 million as of
May 31, 1995, relating to a facility which the Company subleases to the
Partnership. In addition, throughout the term of the Partnership, the Company
is contingently responsible for 50% of the Partnership's financing
requirements, including the Company's share (approximately $5.1 million) of
$10.3 million in Partnership financing loans from third parties at
May 31, 1995.
MSC continues to participate in the implementation of settlements with the
government for clean-up of various Superfund sites. For additional
information, refer to MSC'S Form 10-K for the fiscal year ended February 28,
1995.
-10-
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended May 31, 1995
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a)(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
-11-
<PAGE>
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 under-
signed, thereunto duly authorized, in Elk Grove Village, State of Illinois, on
the 11th day of July, 1995.
MATERIAL SCIENCES CORPORATION
By: /s/ G. Robert Evans
------------------------------
G. Robert Evans
Chairman and Chief Executive Officer
By: /s/ William H. Vrba
-------------------------------
William H. Vrba
Senior Vice President, Chief
Financial Officer, and Secretary
-12-
<PAGE>
MATERIAL SCIENCES CORPORATION
Quarterly Report on Form 10-Q
Index to Exhibits
Sequentially
Exhibit Number Description of Exhibit Numbered Page
- - -------------- ---------------------- -------------
(27) Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statements of Income and Consolidated Balance Sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 3,916
<SECURITIES> 0
<RECEIVABLES> 30,546
<ALLOWANCES> 3,508
<INVENTORY> 26,074
<CURRENT-ASSETS> 63,911
<PP&E> 162,855
<DEPRECIATION> 68,116
<TOTAL-ASSETS> 176,588
<CURRENT-LIABILITIES> 31,590
<BONDS> 12,740
<COMMON> 318
0
0
<OTHER-SE> 111,021
<TOTAL-LIABILITY-AND-EQUITY> 176,588
<SALES> 60,406
<TOTAL-REVENUES> 60,406
<CGS> 43,869
<TOTAL-COSTS> 43,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 7,910
<INCOME-TAX> 3,044
<INCOME-CONTINUING> 4,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,866
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
