<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 November 30, 1997
Commission File Number 1-8803
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)
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (847) 439-8270
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 (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 January 12, 1998, there were outstanding 15,347,606 shares of common
stock, $.02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended November 30, 1997
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 Nine Months Ended
November 30, November 30,
(In thousands, except per share data) 1997 1996 1997 1996
- ----------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales (1) $ 75,107 $ 69,658 $ 218,744 $ 208,962
Cost of Sales 57,526 50,920 166,788 153,432
----------- ----------- ----------- -----------
Gross Profit $ 17,581 $ 18,738 $ 51,956 $ 55,530
Selling, General and Administrative
Expenses 12,881 11,629 39,020 35,027
----------- ----------- ----------- -----------
Income from Operations $ 4,700 $ 7,109 $ 12,936 $ 20,503
----------- ----------- ----------- -----------
Other (Income) and Expense:
Interest Income $ (30) $ (54) $ (105) $ (189)
Interest Expense 1,073 178 3,131 320
Equity in Results of Partnership 369 350 211 831
Other, Net (249) (265) (776) (721)
----------- ----------- ----------- -----------
Total Other Expense, Net $ 1,163 $ 209 $ 2,461 $ 241
----------- ----------- ----------- -----------
Income Before Income Taxes $ 3,537 $ 6,900 $ 10,475 $ 20,262
Income Taxes 1,362 2,657 4,034 7,802
----------- ----------- ----------- -----------
Net Income $ 2,175 $ 4,243 $ 6,441 $ 12,460
=========== =========== =========== ===========
Net Income Per Common and Common
Equivalent Share $ 0.14 $ 0.27 $ 0.42 $ 0.80
=========== =========== =========== ===========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 15,499 15,645 15,471 15,594
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
November 30, February 28,
1997 1997
(In thousands) Unaudited Audited
- ----------------------------------------------------- ------------ ------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 3,164 $ 2,116
Restricted Cash 5,000 -
Receivables:
Trade, Less Reserves of $2,644 and $2,271,
Respectively (2) 34,087 35,944
Current Portion of Partnership Note 780 767
Income Taxes 660 1,249
Prepaid Expenses 4,112 2,791
Inventories 35,622 30,952
Prepaid Taxes 1,186 1,186
--------- --------
Total Current Assets $ 84,611 $ 75,005
--------- --------
Gross Property, Plant and Equipment $ 257,494 $242,340
Accumulated Depreciation and Amortization (100,922) (87,954)
--------- --------
Net Property, Plant and Equipment $ 156,572 $154,386
--------- --------
Other Assets:
Investment in Partnership $ 11,166 $ 10,759
Partnership Note Receivable, Less Current Portion - 374
Intangible Assets, Net 14,043 12,837
Other 482 728
--------- --------
Total Other Assets $ 25,691 $ 24,698
--------- --------
Total Assets $ 266,874 $254,089
========= ========
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 3,774 $ 3,750
Accounts Payable 23,325 24,092
Accrued Payroll Related Expenses 8,553 9,838
Accrued Expenses 5,672 6,171
--------- --------
Total Current Liabilities $ 41,324 $ 43,851
--------- --------
Long-Term Liabilities:
Deferred Income Taxes $ 11,288 $ 11,392
Long-Term Debt, Less Current Portion 62,968 54,761
Accrued Superfund Liability 3,968 4,071
Other 7,016 6,641
--------- --------
Total Long-Term Liabilities $ 85,240 $ 76,865
--------- --------
Shareowners' Equity:
Preferred Stock (3) $ - $ -
Common Stock (4) 327 325
Additional Paid-In Capital 51,663 50,142
Treasury Stock at Cost (5) (8,545) (7,518)
Retained Earnings 96,865 90,424
--------- --------
Total Shareowners' Equity $ 140,310 $133,373
--------- --------
Total Liabilities and Shareowners' Equity $ 266,874 $254,089
========= ========
</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 Nine Months Ended
November 30, November 30,
(In thousands) 1997 1996 1997 1996
- ---------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 2,175 $ 4,243 $ 6,441 $ 12,460
Adjustments to Reconcile Net Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization 4,661 3,642 14,029 11,106
Benefit for Deferred Income Taxes (35) (79) (104) (227)
Compensatory Effect of Stock Plans 98 57 129 337
Other, Net 403 338 243 819
--------- ---------- ---------- ----------
Operating Cash Flow Prior to Changes in Assets
and Liabilities $ 7,302 $ 8,201 $ 20,738 $ 24,495
--------- ---------- ---------- ----------
Changes in Assets and Liabilities:
Receivables $ 981 $ 1,882 $ 761 $ (4,164)
Income Taxes Receivable 463 1,035 589 1,760
Prepaid Expenses (134) 154 (1,280) 60
Inventories (374) 142 (2,976) (1,983)
Accounts Payable 1,025 1,286 (841) (29)
Accrued Expenses (127) 1,490 (1,878) (645)
Other, Net (340) (146) (238) (210)
--------- ---------- ---------- ----------
Cash Flow from Changes in Assets and Liabilities $ 1,494 $ 5,843 $ (5,863) $ (5,211)
--------- ---------- ---------- ----------
Net Cash Provided by Operating Activities $ 8,796 $ 14,044 $ 14,875 $ 19,284
--------- ---------- ---------- ----------
Investing Activities:
Capital Expenditures, Net $ (2,136) $ (15,690) $ (15,057) $ (42,182)
Acquisitions, Net of Cash Acquired (75) - (1,204) (2,489)
Escrow for Acquisition 5,000 - 5,000 -
Investment in Partnership (614) (454) (1,618) (1,331)
Distribution from Partnership - - 1,374 375
Other Long-Term Assets - (117) 197 172
--------- ---------- ---------- ----------
Net Cash Provided by (Used in) Investing Activities $ 2,175 $ (16,261) $ (11,308) $ (45,455)
--------- ---------- ---------- ----------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $ (3,300) $ 600 $ (14,600) $ 24,300
Proceeds from Senior Notes - - 20,000 -
Payments to Settle Debt (2,094) (748) (3,286) (1,592)
Purchase of Treasury Stock - - (1,027) -
Sale of Common Stock 641 679 1,394 1,355
--------- ---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities $ (4,753) $ 531 $ 2,481 $ 24,063
--------- ---------- ---------- ----------
Net Increase (Decrease) in Cash $ 6,218 $ (1,686) $ 6,048 $ (2,108)
Cash and Cash Equivalents at Beginning of Period 1,946 2,957 2,116 3,379
--------- ---------- ---------- ----------
Cash and Cash Equivalents at End of Period $ 8,164 $ 1,271 $ 8,164 $ 1,271
========= ========== ========== ==========
Supplemental Cash Flow Disclosures:
Subordinated Notes Issued for Acquisitions $ - $ - $ 1,117 $ 1,500
Cash Portion of Acquisitions and Related Costs 75 - 1,204 2,489
--------- ---------- ---------- ----------
Total Consideration Paid for Acquisitions $ 75 $ - $ 2,321 $ 3,989
========= ========== ========== ==========
</TABLE>
The Changes in Assets and Liabilities above for the three months and nine months
ended November 30, 1997, are net of assets and liabilities acquired.
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 and nine months ended November 30, 1997 and 1996 have not
been audited 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 1997 Annual Report to Shareowners and
Annual Report on Form 10-K. Certain prior year amounts have been reclassified to
conform with the fiscal 1998 presentation.
(1) During the nine month periods ending November 30, 1997 and 1996, the
Company derived approximately 21.0% and 20.7%, respectively, of its sales
from fees billed to the Partnership by a subsidiary of the Company for
operating the Walbridge, Ohio facility.
(2) Includes trade receivables due from the Partnership of $858 at November 30,
1997 and $2,256 at February 28, 1997.
(3) Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000
Designated Series B Junior Participating Preferred; None Issued.
(4) Common Stock, $.02 Par Value; 40,000,000 Shares Authorized; 16,330,254
Shares Issued and 15,350,606 Shares Outstanding at November 30, 1997 and
16,256,132 Shares Issued and 15,339,384 Shares Outstanding at February 28,
1997.
(5) Treasury Stock at Cost; 979,648 Shares at November 30, 1997 and 916,748
Shares at February 28, 1997.
(6) On December 15, 1997, the Company purchased certain assets and assumed
certain liabilities of Colorstrip, Inc., a west coast hot-dipped
galvanizing and coil coating business. Consideration for the purchase,
including transaction costs, was approximately $129,000, which was financed
through a new bank line of credit and a short-term seller note. The Company
intends to refinance its short-term debt by the end of the fiscal year. At
November 30, 1997, the Company had placed $5,000, classified as restricted
cash, in an escrow account related to the acquisition. Located in San
Francisco, California, the operation consists of a 300,000 ton capacity
hot-dipped galvanizing line and coil coating line capable of producing
150,000 tons of prepainted metal. The two facilities will continue to
operate in their current capacities as MSC subsidiaries, serving the
building and construction markets across the western United States. The
acquisition will be accounted for under the purchase method of accounting.
6
<PAGE>
Summarized Income Statement Information (Unaudited)
Walbridge Coatings, An Illinois Partnership
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
(In thousands) 1997 1996 1997 1996
- ----------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Revenues $ 18,498 $ 16,609 $ 53,489 $ 50,992
Gross Profit 390 376 2,154 1,535
Income (Loss) from Operations (250) (249) 122 (341)
Net Income (Loss) (383) (484) (338) (1,205)
</TABLE>
NOTE: The Net Income (Loss) shown above does not directly correlate to the
Equity in Results of Partnership shown in the Company's Statement 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 November 30, 1997
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, specialty films, 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 November 30,
- --------------------- ---------------------------------------------------
1997 1996
---------------------- ----------------------
Product Group: Dollars Percent Dollars Percent
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Laminates and Composites $ 17,288 23.0% $ 17,178 24.7%
Specialty Films 9,426 12.5% 8,047 11.5%
Coil Coating 31,812 42.4% 30,158 43.3%
Electrogalvanizing 16,581 22.1% 14,275 20.5%
--------- -------- --------- -------
$ 75,107 100.0% $ 69,658 100.0%
========= ======== ========= =======
Nine Months Ended November 30,
---------------------------------------------------
1997 1996
--------------------- ----------------------
Product Group: Dollars Percent Dollars Percent
---------- --------- ---------- ----------
Laminates and Composites $ 49,121 22.5% $ 49,657 23.8%
Specialty Films 32,444 14.8% 29,374 14.1%
Coil Coating 91,257 41.7% 86,604 41.4%
Electrogalvanizing 45,922 21.0% 43,327 20.7%
--------- ------- --------- -------
$218,744 100.0% $208,962 100.0%
========= ======= ========= =======
</TABLE>
8
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net Sales
Net sales in the third quarter of fiscal 1998 increased 7.8% over the same
quarter last year. Sales of laminates and composites increased by 0.6%;
specialty films increased by 17.1%; coil coating 5.5%; and electrogalvanizing
16.2%. For the nine-month period ended November 30, 1997, sales were 4.7%
higher than the same period last fiscal year. Sales of specialty films
increased by 10.5%; coil coating 5.4%; and electrogalvanizing 6.0%. Laminates
and composites sales decreased by 1.1% compared to the first nine months of the
prior year.
Laminates and Composites
During the third quarter of fiscal 1998, sales of laminates and composites
increased 0.6% over the same quarter last year. An increase in sales of disc
brake noise dampers and appliance products were partially offset by lower sales
of Polycore Composites(R). For the first nine months, sales in this product
group decreased 1.1% for the same period last year. Lower sales of
Specular+(R), due to general market softness, were offset, in part, by an
increase in sales of disc brake noise damper material to the replacement market
and appliance products.
Specialty Films
Sales of specialty films for the three and nine months ended November 30, 1997,
increased 17.1% and 10.5%, respectively, compared to the same periods last year.
The increase for both periods was due primarily to higher sales of high
performance solar control window films for the automotive aftermarket and
building applications, as well as an increase in shipments of industrial
products to the imaging and printing markets. The acquisitions of the
Australian distribution business and the joint venture in Singapore during the
second quarter have contributed to the growth as well.
Coil Coating
Coil coating sales during the third quarter of fiscal 1998 grew 5.5% over the
third quarter last fiscal year. The growth was mainly due to an increase in
shipments of automotive trim and building products, offset, in part, by lower
sales to the appliance and swimming pool markets. For the nine-month period,
coil coating sales increased 5.4% as compared to the first nine months of last
year. The increase in sales was due to similar fluctuations in the product mix.
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 consists 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 21.0% and 20.7% of the Company's net sales in the first nine months of
fiscal 1998 and 1997, respectively. The profitability for operating the
facility was higher than the Company's overall operating
9
<PAGE>
results due in large part to depreciation related to the significant capital
investments in Elk Grove Village, Middletown and San Diego. Under the equity
method of accounting, the Company includes its portion of the 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. The Company's potential alternatives
upon expiration of the Partnership term in June 1998 include, among other
things, extension of the Partnership, purchase of the facility, or sale of the
facility. The partners are actively discussing the various alternatives. The
Company believes its investment in the Partnership is realizable.
MSC's electrogalvanizing sales in the third quarter of fiscal 1998 increased
16.2% over the third quarter last year. Electrogalvanizing volume grew 7.7% to
124,300 tons for the three months ended November 30, 1997, from the 115,426 tons
reported in the prior fiscal year period. The higher sales and volume is
primarily due to a change in the product mix, as well as, the three day shutdown
due to a lack of substrate in the third quarter of last fiscal year. On a year
to date basis, sales increased 6.0% and volume remained flat at 350,131 tons
compared to 350,842 tons for the same period in the prior fiscal year. The
increase in sales was due to a shift in product mix, while the flatness in
volume was the result of an increase in volume due to lack of substrate in last
year's third quarter, offset, in part, by the extended second quarter
maintenance shutdown.
The sales and marketing responsibilities of the Partnership are split between
Bethlehem and Inland at 76% and 24%, respectively. During the first nine months
of fiscal 1998, Inland utilized 20.4% of available production line time rather
than its full 24% share. Bethlehem and other customers utilized this additional
available line time. In fiscal 1998, the Company expects more production line
time will be utilized by customers other than Bethlehem and Inland. Inland is
reviewing its future involvement in the Partnership, and therefore, there is no
assurance that Inland will utilize its full 24% of available line time for the
remainder of the partnership agreement. The Company believes that any short-
term disruption in volume that might be caused by a reduction in Inland's line
time requirements could eventually be replaced by additional volume from
Bethlehem and other customers.
Gross Profit
The Company's gross profit margin was 23.4% in the third quarter of fiscal 1998
as compared to 26.9% in the same period last year. For the first nine months of
fiscal 1998, gross profit margin was 23.8% versus 26.6% last year. The decrease
in gross profit margin for the three month and year to date periods was
primarily due to underabsorption of production costs due to the recent
significant capacity increases and a shift in the product mix.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were 17.2% of sales in the
third quarter of fiscal 1998 as compared to 16.7% of sales for the same period
last fiscal year. For the nine months ended November 30, 1997, SG&A expenses
were 17.8% of sales versus 16.8% of sales for the same period in fiscal 1997.
For the third quarter and the first nine months, the increase in SG&A is largely
due to continuing development of powder coating technology, as well as the
additional marketing efforts due to the acquisitions of the specialty films
distribution businesses. On a year to date basis, SG&A was also affected by
one-time expenses of
10
<PAGE>
approximately $500 incurred for the investigation of previously announced
accounting irregularities.
Total Other Expense, Net and Income Taxes
Total other expense, net was $1,163 and $2,461 during the third quarter and
first nine months of fiscal 1998, respectively, versus $209 and $241 for the
third quarter and first nine months of fiscal 1997. During both the quarterly
and year to date periods, interest expense has increased over last year due to
higher debt levels, less capitalized interest, and a transition to higher fixed
interest rates versus the variable interest rates of fiscal 1997. For the nine
month period, the higher interest expense was offset, in part, by an increase in
equity in results of partnership due to the Company receiving the profit
allocation on third party sales. MSC's effective income tax rate was
approximately 38.5% during the third quarter and first nine months of fiscal
1998 and fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the third quarter of fiscal 1998, MSC generated $8,796 of cash from
operating activities compared to $14,044 in the same period last fiscal year.
The decrease in cash generation is mainly due to lower net income and higher
receivables and inventory levels, partially offset by higher depreciation and
amortization. For the first nine months, operating activities generated $14,875
of cash versus $19,284 for the same nine-month period last year. A decrease in
net income and higher inventory levels contributed to the reduction in cash
generation which was offset, in part, by higher depreciation and amortization
and lower receivables.
For the three and nine months ended November 30, 1997, MSC invested $2,136 and
$15,057, respectively, compared to $15,690 and $42,182, respectively, in the
prior fiscal year. Fiscal 1997 included higher spending for the new coil coating
facility in Elk Grove Village, Illinois, versus fiscal year 1998. Also, on a
year to date basis for fiscal 1998, the Company strengthened its specialty film
interests by purchasing an Australian distribution business and a Singapore
joint venture, as well as, investing in the construction of a new coating and
laminating line at the San Diego, California facility.
On December 15, 1997, the Company purchased certain assets and assumed certain
liabilities of Colorstrip, Inc., a west coast hot-dipped galvanizing and coil
coating business. Consideration for the purchase, including transaction costs,
was approximately $129,000, which was financed through a new bank line of credit
and a short-term seller note. The Company intends to refinance its short-term
debt by the end of the fiscal year. Located in San Francisco, California, the
operation consists of a 300,000 ton capacity hot-dipped galvanizing line and
coil coating line capable of producing 150,000 tons of prepainted metal. The two
facilities will continue to operate in their current capacities as MSC
subsidiaries, serving the building and construction markets across the western
United States. The acquisition will be accounted for under the purchase method
of accounting.
Total debt for MSC increased at November 30, 1997, to $66,742 from $58,511 at
fiscal year end due mainly to capital investments, the $5,000 escrow required
for the acquisition of Colorstrip, Inc., and the acquisitions of the
distribution businesses for the specialty films area. The Company maintained
three unsecured lines of credit totaling $75,000 as of November 30, 1997. There
was $5,400 outstanding under these lines of credit as of November 30, 1997. The
11
<PAGE>
Company has executed letters of credit totaling $4,757 against these lines
leaving available lines of credit of $64,843 at November 30, 1997. The Company
replaced these lines with a new bank line of credit totaling $140,000 concurrent
with the acquisition of Colorstrip, Inc. The Company financed the acquisition
through utilization of the new bank line of credit and a short-term seller note
of $64,082. There was $65,000 outstanding under this line of credit as of
January 8, 1998. The Company has executed letters of credit totaling $70,740
(of which $66,000 secures the short-term seller note) against this line leaving
an available line of credit of $4,260 at January 8, 1998. The Company intends
to refinance its short-term debt by the end of the fiscal year which would
result in a reduction in the amount available under the bank line of credit.
The Company believes that its cash flow from operations, together with available
financing and cash on hand will be sufficient to fund its working capital needs,
capital expenditure program, and debt amortization.
On April 9, 1997, a plaintiff claiming to represent a class of Material Sciences
Corporation shareowners filed a complaint in the United States District Court
for the Northern District of Illinois. The purported class includes shareowners
who purchased MSC shares between April 18, 1996 and April 7, 1997 and who
allegedly suffered injury as a result of the accounting irregularities announced
on April 7, 1997. The plaintiff claims that the Company and certain of its
officers violated the federal securities laws by making material misstatements
in the Company's publicly filed financial reports. On August 25, 1997, a class
action complaint was filed in the Circuit Court of Cook County, Illinois. The
complaint claims the Company violated the Illinois Consumer Fraud and Deceptive
Practices Act as a result of false, misleading and deceptive representations and
omissions of material facts relating to the Company's financial position during
the period April 18, 1996 to April 6, 1997. The amount of both claims are
uncertain. The Company believes that the claims are without merit and intends
to vigorously defend the lawsuits. However, there can be no assurance with
respect to the outcome of the litigation. No amounts have been provided in the
accompanying financial statements for these claims.
The Company has a capital lease obligation, which was $3,952 as of November 30,
1997, 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 $1,250) of $2,500 in Partnership financing loans
from third parties at November 30, 1997.
MSC continues to participate in the implementation of settlements with the
government for the clean-up of various Superfund sites. For additional
information, refer to MSC's Form 10-K for the fiscal year ended February 28,
1997.
12
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended November 30, 1997
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) 2.1 See the exhibits listed in the Index to Exhibits.
4.1 See the exhibits listed in the Index to Exhibits.
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. On December 30, 1997, the Company filed a
Form 8-K regarding the acquisition of Colorstrip, Inc. and other
matters.
13
<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
undersigned, thereunto duly authorized, in Elk Grove Village, State of Illinois,
on the 12th day of January, 1997.
MATERIAL SCIENCES CORPORATION
By: /s/ Gerald G. Nadig
--------------------------------
Gerald G. Nadig
Chairman, President
and Chief Executive Officer
By: /s/ James J. Waclawik, Sr.
--------------------------------
James J. Waclawik, Sr.
Vice President,
Chief Financial Officer
and Secretary
14
<PAGE>
MATERIAL SCIENCES CORPORATION
Quarterly Report on Form 10-Q
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description of Exhibit Numbered Page
- -------------- ---------------------- -------------
<S> <C> <C>
2.1 Asset Purchase Agreement by and among
Colorstrip, Inc., the Registrant and
MSC Pinole Point Steel Inc. dated as of
November 14, 1997. (1)
4.1 Credit Agreement, dated as of December 12, 1997,
among the Registrant, Bank of America National
Trust and Savings Association, as Agent and
Letter of Credit Issuing Bank, and the other
financial institutions party thereto. (2)
27 Financial Data Schedule (3)
</TABLE>
(1) Incorporated by reference to the Registrant's Form 8-K filed on December
30, 1997 (File No. 1-8803).
(2) Incorporated by reference to the Registrant's Form 8-K filed on December
30, 1997 (File No. 1-8803).
(3) Appears only in the electronic filing of this report with the Securities
and Exchange Commission.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Statement 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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 8,164
<SECURITIES> 0
<RECEIVABLES> 34,087
<ALLOWANCES> 2,644
<INVENTORY> 35,622
<CURRENT-ASSETS> 84,611
<PP&E> 257,494
<DEPRECIATION> 100,922
<TOTAL-ASSETS> 266,874
<CURRENT-LIABILITIES> 41,324
<BONDS> 62,968
0
0
<COMMON> 327
<OTHER-SE> 139,983
<TOTAL-LIABILITY-AND-EQUITY> 266,874
<SALES> 218,744
<TOTAL-REVENUES> 218,744
<CGS> 166,788
<TOTAL-COSTS> 166,788
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,131
<INCOME-PRETAX> 10,475
<INCOME-TAX> 4,034
<INCOME-CONTINUING> 6,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,441
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
