<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 August 31, 2000
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 October 11, 2000, there were outstanding 14,326,650 shares of common
stock, $.02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended August 31, 2000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
(a) Financial statements of Material Sciences Corporation and Subsidiaries
2
<PAGE>
Consolidated Statements of Income (Unaudited)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands, except per share data) 2000 1999 2000 1999
------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales (1) $ 129,081 $ 132,466 $ 254,855 $ 257,459
Cost of Sales 106,844 105,681 208,665 206,438
---------- ---------- ---------- ----------
Gross Profit $ 22,237 $ 26,785 $ 46,190 $ 51,021
Selling, General and Administrative Expenses 17,074 16,890 34,488 31,537
---------- ---------- ---------- ----------
Income from Operations $ 5,163 $ 9,895 $ 11,702 $ 19,484
---------- ---------- ---------- ----------
Other (Income) and Expense:
Interest Expense, Net $ 2,446 $ 2,377 $ 4,716 $ 4,794
Equity in Results of Joint Ventures 137 624 138 1,105
Other, Net (26) 59 39 143
---------- ---------- ---------- ----------
Total Other Expense, Net $ 2,557 $ 3,060 $ 4,893 $ 6,042
---------- ---------- ---------- ----------
Income Before Income Taxes $ 2,606 $ 6,835 $ 6,809 $ 13,442
Income Taxes 964 2,529 2,519 4,974
---------- ---------- ---------- ----------
Net Income $ 1,642 $ 4,306 $ 4,290 $ 8,468
========== ========== ========== ==========
Basic Net Income Per Share $ 0.12 $ 0.28 $ 0.30 $ 0.56
========== ========== ========== ==========
Diluted Net Income Per Share $ 0.12 $ 0.28 $ 0.30 $ 0.55
========== ========== ========== ==========
Weighted Average Number of Common Shares Outstanding
Used for Basic Net Income Per Share 14,040 15,124 14,328 15,188
Dilutive Common Stock Options 145 285 172 224
---------- ---------- ---------- ----------
Weighted Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options 14,185 15,409 14,500 15,412
========== ========== ========== ==========
Outstanding Common Stock Options Having No Dilutive Effect 1,273 1,263 1,254 1,309
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
August 31, February 29,
2000 2000
(In thousands) Unaudited Audited
----------------------------------------------------------------- ---------- ------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ - $ 4,223
Receivables:
Trade, Less Reserves of $4,700 and $5,067, Respectively (2) 62,031 58,331
Income Taxes 530 -
Prepaid Expenses 4,722 2,418
Inventories 75,122 60,251
Prepaid Taxes 4,209 4,209
---------- ---------
Total Current Assets $ 146,614 $ 129,432
---------- ---------
Property, Plant and Equipment $ 380,707 $ 373,519
Accumulated Depreciation and Amortization (165,900) (152,417)
---------- ---------
Net Property, Plant and Equipment $ 214,807 $ 221,102
---------- ---------
Other Assets:
Investment in Joint Ventures $ 22,144 $ 20,306
Intangible Assets, Net 22,870 23,980
Other 2,313 2,475
---------- ---------
Total Other Assets $ 47,327 $ 46,761
---------- ---------
Total Assets $ 408,748 $ 397,295
========== =========
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 9,859 $ 2,688
Accounts Payable 60,172 50,667
Accrued Expenses 20,081 27,452
---------- ---------
Total Current Liabilities $ 90,112 $ 80,807
---------- ---------
Long-Term Liabilities:
Deferred Income Taxes $ 21,701 $ 21,486
Long-Term Debt, Less Current Portion 129,472 120,896
Accrued Superfund Liability 2,983 3,014
Other 12,073 12,693
---------- ---------
Total Long-Term Liabilities $ 166,229 $ 158,089
---------- ---------
Shareowners' Equity:
Preferred Stock (3) $ - $ -
Common Stock (4) 352 347
Additional Paid-In Capital 61,106 59,164
Treasury Stock at Cost (5) (34,090) (22,074)
Retained Earnings 125,835 121,545
Accumulated Other Comprehensive Loss (6) (796) (583)
---------- ---------
Total Shareowners' Equity $ 152,407 $ 158,399
---------- ---------
Total Liabilities and Shareowners' Equity $ 408,748 $ 397,295
========== =========
</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 Six Months Ended
August 31, August 31,
(In thousands) 2000 1999 2000 1999
---------------------------------------------------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 1,642 $ 4,306 $ 4,290 $ 8,468
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 7,746 7,675 15,219 15,365
Provision (Benefit) for Deferred Income Taxes (253) 700 215 1,421
Compensatory Effect of Stock Plans 677 1,180 1,368 1,357
Other, Net 47 631 36 1,107
--------- -------- -------- --------
Operating Cash Flow Prior to Changes in Assets and Liabilities $ 9,859 $ 14,492 $ 21,128 $ 27,718
--------- -------- -------- --------
Changes in Assets and Liabilities:
Receivables $ (3,923) $ (1,946) $ (3,700) $ (3,405)
Income Taxes Receivable (530) - (530) 968
Prepaid Expenses (11) 169 (2,304) (1,296)
Inventories (8,796) (3,402) (14,871) (3,376)
Accounts Payable 6,170 7,163 9,505 6,511
Accrued Expenses 3,110 861 (7,371) (1,388)
Other, Net (216) 165 (809) 426
--------- -------- -------- --------
Cash Flow from Changes in Assets and Liabilities $ (4,196) $ 3,010 $(20,080) $ (1,560)
--------- -------- -------- --------
Net Cash Provided by Operating Activities $ 5,663 $ 17,502 $ 1,048 $ 26,158
--------- -------- -------- --------
Investing Activities:
Capital Expenditures, Net $ (2,741) $ (3,901) $ (7,444) $ (7,874)
Investment in Joint Ventures (1,812) (34) (1,976) (102)
Other (139) (38) (161) (746)
--------- -------- -------- --------
Net Cash Used in Investing Activities $ (4,692) $ (3,973) $ (9,581) $ (8,722)
--------- -------- -------- --------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $ 5,900 $(11,000) $ 16,300 $(11,600)
Payments of Debt (427) (413) (553) (568)
Purchase of Treasury Stock (6,730) (3,229) (12,016) (5,570)
Sale of Common Stock - 248 579 1,039
--------- -------- -------- --------
Net Cash Provided by (Used in) Financing Activities $ (1,257) $(14,394) $ 4,310 $(16,699)
--------- -------- -------- --------
Net Increase (Decrease) in Cash $ (286) $ (865) $ (4,223) $ 737
Cash and Cash Equivalents at Beginning of Period 286 2,829 4,223 1,227
--------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ - $ 1,964 $ - $ 1,964
========= ======== ======== ========
</TABLE>
The Changes in Assets and Liabilities for the six months ended August 31, 1999,
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 six months ended August 31, 2000 and 1999 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 2000 Annual Report to Shareowners and
Annual Report on Form 10-K. Certain prior year amounts have been reclassified to
conform with the fiscal 2001 presentation.
(1) During the six months ended August 31, 2000 and 1999, the Company derived
approximately 11.0% and 12.8%, 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 $2,836 as of
August 31, 2000 and $1,686 as of February 29, 2000. Trade receivables also
include amounts due from Innovative Specialty Films, LLC, a joint venture
with Bekaert Corporation, of $394 as of August 31, 2000 and $4 as of
February 29, 2000.
(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; 17,590,287
Shares Issued and 14,273,951 Shares Outstanding as of August 31, 2000 and
17,343,858 Shares Issued and 15,186,310 Shares Outstanding as of
February 29, 2000.
(5) Treasury Stock at Cost; 3,316,336 Shares as of August 31, 2000 and
2,157,548 Shares as of February 29, 2000. On September 23, 1999, MSC's
Board of Directors authorized the repurchase of up to one million shares of
the Company's common stock, of which 468,900 shares were purchased through
February 29, 2000. During the first quarter of fiscal 2001, the Company
purchased 512,700 shares at an average purchase price of $10.31 per share.
The remaining 18,400 shares of this program were purchased during the
second quarter of fiscal 2001 at an average purchase price of $10.05 per
share.
On June 22, 2000, the Company's Board of Directors authorized a new program
to repurchase up to one million shares of the Company's common stock.
Repurchases will be made from time to time in the open market or through
privately negotiated purchases, as the Company may determine. As of
October 11, 2000, 651,088 shares have been repurchased at an average
purchase price of $10.45 per share under this new authorization.
6
<PAGE>
(6) Comprehensive Income:
Three Months Ended Six Months Ended
------------------ ----------------
August 31, August 31,
---------- ----------
2000 1999 2000 1999
------ ------ ------ ------
Net Income $1,642 $4,306 $4,290 $8,468
Other Comprehensive Income:
Foreign Currency Translation
Adjustments (41) (4) (213) 75
------ ------ ------ ------
Comprehensive Income $1,601 $4,302 $4,077 $8,543
====== ====== ====== ======
(7) Business Segments:
The Company reports segment information based on how management
disaggregates its businesses for evaluating performance and making
operating decisions. Management is exploring strategic alternatives for its
hot-dip galvanizing operation ("Pinole Point Steel"), formerly included in
the Coated Products and Services segment, and therefore is disclosing
Pinole Point Steel as a separate segment. The Coated Products and Services
segment now includes the coil coating and electrogalvanizing product
groups. The Company's four segments are: Coated Products and Services,
Pinole Point Steel, Engineered Materials and Specialty Films. Corporate
represents unallocated general corporate expenses. Sales between segments
are recorded at market rates, and the related intercompany profit is
eliminated in consolidation. The net sales on a geographic basis are not
material. Information concerning the Company's business segments in the
second quarter and first six months of fiscal 2001 and 2000 was as follows:
Three Months Ended Six Months Ended
------------------ ----------------
August 31, August 31,
---------- ----------
2000 1999 2000 1999
------ ------ ------ ------
Net Sales
--------------------------------
Coated Products and Services $ 50,351 $ 49,822 $ 98,471 $100,381
Pinole Point Steel 39,194 48,078 79,507 91,637
Engineered Materials 23,888 20,422 45,320 39,529
Specialty Films 17,175 14,941 33,910 27,061
Eliminations (1,527) (797) (2,353) (1,149)
-------- -------- -------- --------
$129,081 $132,466 $254,855 $257,459
======== ======== ======== ========
Income (Loss) Before Income Taxes
---------------------------------
Coated Products and Services $ 4,474 $ 3,936 $ 8,113 $ 10,192
Pinole Point Steel (2,543) 3,114 (2,549) 3,593
Engineered Materials 2,955 3,006 5,860 5,977
Specialty Films 2,964 2,227 6,024 4,101
Corporate and Eliminations (5,244) (5,448) (10,639) (10,421)
-------- -------- -------- --------
$ 2,606 $ 6,835 $ 6,809 $ 13,442
======== ======== ======== ========
7
<PAGE>
(8) As previously reported, on April 9, 1997, a plaintiff claiming to represent
a class of MSC shareowners, who allegedly suffered injury from the
accounting irregularities announced on April 7, 1997, filed a complaint in
the United States District Court for the Northern District of Illinois. The
class purportedly includes shareowners who purchased MSC shares between
April 18, 1996 and April 7, 1997. The plaintiff claimed that the Company
and certain of its current and former officers violated the federal
securities laws and were aware of, or recklessly disregarded, material
misstatements that were made in MSC's publicly filed financial reports.
On May 26, 2000, the parties executed a settlement agreement. The Court
entered an order preliminarily approving the agreement on May 31, 2000 and
ordered that the class be advised of the proposed settlement. On August 1,
2000, the class members were afforded the opportunity to present any
objections at a fairness hearing, at which time the settlement was approved
with no objections, and the case was dismissed. The costs of the settlement
and related legal fees are expected to be covered under the Company's
insurance policies, net of retention (expensed in fiscal 1998).
8
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended August 31, 2000
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
---------------------
Net sales in the second quarter of fiscal 2001 were $129,081, a 2.6% decrease
from $132,466 in the prior year's second quarter. For the first six months of
fiscal 2001, net sales were $254,855 as compared with $257,459 last year, a 1.0%
decrease. Gross profit margin for the second quarter was 17.2% as compared with
20.2% in the same quarter last year. For the year-to-date period, gross profit
margin was 18.1% in fiscal 2001 versus 19.8% in fiscal 2000. The decrease in
gross profit margin was mainly due to continued higher steel costs at Pinole
Point Steel than could be recovered through price increases to customers, lower
sales volume at Pinole Point Steel, as well as an increase in utility costs for
all segments. Selling, general and administrative ("SG&A") expenses were 13.2%
and 13.5% of net sales in the second quarter and first six months of fiscal
2001, respectively, as compared with 12.8% and 12.2% of net sales in the same
periods last year, respectively. The increase in SG&A percentage was due mainly
to planned higher research and development and marketing spending to support new
product and market initiatives for the Engineered Materials and Specialty Films
segments. SG&A expenses for the second quarter of fiscal 2000 included a pro
rata portion of compensation expense totaling approximately $1,300 associated
with the Company's 1998 Long-Term Incentive/Leverage Stock Awards Program.
During the second quarter of fiscal 2001, income before income taxes decreased
61.9% to $2,606 as compared with $6,835 last fiscal year. For the six months
ended August 31, 2000, income before income taxes decreased 49.3% to $6,809 from
$13,442 in the prior year period.
Management is currently exploring strategic alternatives for its hot-dip
galvanizing operation ("Pinole Point Steel"), formerly included in the Coated
Products and Services segment, and therefore is disclosing Pinole Point Steel as
a separate segment. The Company's four principal business segments are Coated
Products and Services, Pinole Point Steel, Engineered Materials and Specialty
Films. The Coated Products and Services segment includes the coil coating and
electrogalvanizing product groups. This segment provides galvanized and
prepainted products and services primarily to the building and construction,
automotive and appliance markets. The Pinole Point Steel segment includes the
hot-dip galvanizing product group. This segment provides galvanized and
prepainted product primarily to the building and construction market. The
Engineered Materials segment includes the laminates and composites product
group. This segment combines layers of metal and other materials designed to
meet specific customer requirements for the automotive, lighting, appliance and
computer disk drive markets. The Specialty Films segment provides solar control
and safety window film, as well as industrial films used in a variety of
products.
9
<PAGE>
Coated Products and Services
Coated Products and Services' second quarter net sales increased 1.1% to $50,351
from $49,822 in the same quarter last year. Net sales for Coated Products and
Services in the first half of fiscal 2001 decreased to $98,471, a 1.9% decrease
from $100,381 last fiscal year. Both periods were affected by a decrease in
electrogalvanizing demand for the automotive market. For the second quarter,
income before income taxes for Coated Products and Services grew to $4,474, a
13.7% increase from $3,936 in the prior year. Higher coil coating sales and an
improved product mix at the electrogalvanizing operation were the primary
contributors to the increase, offset slightly by higher utility costs. For the
six months ended August 31, 2000, income before income taxes decreased 20.4% to
$8,113 as compared with $10,192 for the same period last fiscal year. The
decrease is due mainly to lower sales and higher utility costs. The lower demand
for electrogalvanized material for the automotive market is expected to continue
into the third quarter of this fiscal year.
On July 23, 1999, a subsidiary of Bethlehem Steel Corporation ("BSC") sold a
portion of its ownership interest in Walbridge Coatings ("Partnership") to a
subsidiary of the LTV Corporation ("LTV"). LTV purchased a 16.5% equity interest
in the Partnership from BSC, providing LTV access to 33.0% of the facility's
available line time. This change in ownership will provide MSC with a more
diversified customer base, as well as improve the likelihood of higher facility
utilization. In conjunction with the sale, the Partnership term was extended
from December 31, 2001 to December 31, 2004. The Company maintained its 50%
ownership interest in the Partnership. The Partnership also maintained its long-
term toll processing agreement with ISPAT Inland Inc. (a former partner) which
expires on December 31, 2001.
Pinole Point Steel
Net sales for Pinole Point Steel decreased in the second quarter to $39,194,
18.5% lower than $48,078 in the same quarter last year. For the six-month period
ended August 31, 2000, net sales decreased 13.2% to $79,507 from $91,637 in the
same period last year. Income (loss) before income taxes for the second quarter
declined to a loss of $2,543 versus income of $3,114 in the same quarter last
year, a 181.7% decrease. For the first six months of the fiscal year, income
(loss) before income taxes decreased 170.9% to a loss of $2,549 versus income of
$3,593 for the same period last year. The decrease in sales for both periods is
due mainly to lower demand in the West Coast building and construction market.
Lower shipments of galvanized material and higher material costs than could be
recovered through price increases to customers were the main contributors to the
lower income before income taxes. The reduced margin between the cost of steel
and the price to customers is expected to have a negative impact on the
remainder of fiscal 2001.
Engineered Materials
Sales of Engineered Materials increased 17.0% to $23,888 for the second quarter
of fiscal 2001 as compared with $20,422 in the same quarter last fiscal year.
For the year-to-date period, Engineered Materials' net sales grew to $45,320, a
14.7% increase from $39,529 the same period last year. Higher shipments of Quiet
Steel(R) to the automotive and computer disk drive markets were the main
contributors to the growth. Income before income taxes was $2,955 for the second
quarter versus $3,006 in the second quarter of last year, a 1.7% decrease.
Income before income taxes declined 2.0% for the first six months of fiscal 2001
to $5,860 as compared with $5,977 for the same period last year. The decline was
due to planned higher research and
10
<PAGE>
development and marketing spending for new product and market initiatives, both
domestically and internationally.
During August 2000, a subsidiary of the Company signed a memorandum of
understanding with Tekno S.A., the leading coil coater in Brazil, to retrofit
their existing line with laminating technology for the purpose of manufacturing
constrained layer composites. This line, when installed, will produce Quiet
Steel(R) and disc brake noise damper material for sale and distribution to the
South American market.
During September 2000, a subsidiary of the Company signed a letter of intent to
acquire a European brake damper distributor and stamper. The transaction is
expected to close in early 2001, subject to completion of due diligence. The
transaction has been structured as an earnout with an initial payment of $6,732
or 15 million DEM at closing. The Company has entered into a forward contract
for 15 million DEM to be executed on January 26, 2001.
Specialty Films
Second quarter net sales of Specialty Films materials increased 15.0% to $17,175
in fiscal 2001 as compared with $14,941 in the same quarter last year. Sales for
the six months ended August 31, 2000 increased 25.3% to $33,910 as compared with
$27,061 in the prior fiscal year. Higher shipments of solar control window film
in the U.S. and coating and laminating material contributed to the increase.
Income before income taxes for the second quarter increased 33.1% to $2,964 as
compared with $2,227 last year. For the first six months of fiscal 2001, income
before income taxes was $6,024, a 46.9% increase from $4,101 for the same period
last fiscal year. For both periods, the increase was due to higher sales volume
and improved performance at Innovative Specialty Films, LLC ("ISF"), the joint
venture with Bekaert Corporation, offset slightly by increased spending in
research and development and marketing.
Total Other (Income) and Expense, Net and Income Taxes
Total other (income) and expense, net was expense of $2,557 in the second
quarter of fiscal 2001 as compared with $3,060 of expense for the second quarter
of fiscal 2000. For the year-to-date period, total other (income) and expense,
net was expense of $4,893 in fiscal 2001 as compared with $6,042 last year.
Interest expense, net was relatively flat for both periods. In addition, Equity
in Results of Joint Ventures was expense of $137 and $138 for the second quarter
and first half of fiscal 2001, respectively, and expense of $624 and $1,105 for
the same periods last year, respectively. The change is due to improved
performance at ISF for both periods. MSC's effective income tax rate was 37.0%
in the second quarter and first six months of fiscal 2001 and fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During the second quarter of fiscal 2001, MSC generated $5,663 of cash from
operating activities as compared with $17,502 in the second quarter last year.
The decrease in cash generation is due mainly to higher inventory and accounts
receivable levels and lower net income, partially offset by an increase in
accrued expenses. For the six months ended August 31, 2000, MSC generated $1,048
of cash from operating activities as compared with $26,158 in the same period
last year. The decrease in cash generation is due mainly to higher inventory
levels, a decrease in accrued expenses and lower net income. Earnings before
interest, taxes, depreciation and amortization ("EBITDA") decreased to $12,798
and $26,744 for
11
<PAGE>
the second quarter and first half of fiscal 2001, respectively, as compared with
$16,887 and $33,601 for the same periods last year, respectively. MSC's capital
expenditures during the second quarter and first six months of fiscal 2001 were
$2,741 and $7,444, respectively, as compared with $3,901 and $7,874 in the same
periods last fiscal year.
MSC's total debt increased as of August 31, 2000, to $139,331 from $123,584 as
of February 29, 2000. As of August 31, 2000, the Company maintains a committed
line of credit totaling $90,000. There was $17,000 outstanding under this line
of credit as of August 31, 2000, versus no amount outstanding as of February 29,
2000. The Company has executed letters of credit totaling $4,903 against these
lines, leaving available lines of credit of $68,097 as of August 31, 2000. The
Company also maintains a $10,000 uncommitted line of credit. There was $6,500
outstanding under this line of credit as of August 31, 2000 as compared with
$7,200 as of fiscal year end. 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 expenditures,
acquisitions, stock repurchase program and debt payments.
On September 23, 1999, MSC's Board of Directors authorized the repurchase of up
to one million shares of the Company's common stock, of which 468,900 shares
were purchased through February 29, 2000. During the first quarter of fiscal
2001, the Company purchased 512,700 shares at an average purchase price of
$10.31 per share. The remaining 18,400 shares of this program were purchased
during the second quarter of fiscal 2001 at an average purchase price of $10.05
per share.
On June 22, 2000, MSC's Board of Directors authorized a new program to
repurchase up to one million shares of the Company's common stock. Repurchases
will be made from time to time in the open market or through privately
negotiated purchases, as the Company may determine. As of October 11, 2000,
651,088 shares were purchased under the new program at an average purchase price
of $10.45 per share.
The Company has a capital lease obligation, which was $1,724 as of August 31,
2000, relating to a facility that the Company subleases to the Partnership. In
addition, the Company is contingently responsible for 50% of ISF's financing
requirements. As of August 31, 2000, ISF's debt was zero as compared with $183
as of February 29, 2000.
As previously reported, on April 9, 1997, a plaintiff claiming to represent a
class of MSC shareowners, who allegedly suffered injury from the accounting
irregularities announced on April 7, 1997, filed a complaint in the United
States District Court for the Northern District of Illinois. The class
purportedly includes shareowners who purchased MSC shares between April 18, 1996
and April 7, 1997. The plaintiff claimed that the Company and certain of its
current and former officers violated the federal securities laws and were aware
of, or recklessly disregarded, material misstatements that were made in MSC's
publicly filed financial reports.
On May 26, 2000, the parties executed a settlement agreement. The Court entered
an order preliminarily approving the agreement on May 31, 2000 and ordered that
the class be advised of the proposed settlement. On August 1, 2000, the class
members were afforded the opportunity to present any objections at a fairness
hearing, at which time the settlement was approved with no objections, and the
case was dismissed. The costs of the settlement and related legal fees are
expected to be covered under the Company's insurance policies, net of retention
(expensed in fiscal 1998).
12
<PAGE>
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 29,
2000.
Forward-looking statements contained in this filing are qualified by the
cautionary language described in Part II, Item 7 of the Company's 2000 Annual
Report on Form 10-K, filed with the SEC pursuant to the Securities Exchange Act
of 1934, as amended.
13
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended August 31, 2000
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
On June 22, 2000, the Company held its Annual Meeting of Shareowners.
Michael J. Callahan, Dr. Eugene W. Emmerich, G. Robert Evans, E. F. Heizer,
Jr., Dr. Ronald A. Mitsch, Gerald G. Nadig, Dr. Mary P. Quin and Howard B. Witt,
being eight nominees named in the Company's Proxy Statement, dated May 15, 2000,
were elected at the Annual Meeting to serve as the Board of Directors by a
majority vote of shareowners. The details of the vote were as follows:
Name For Withheld Authority
---- --- ------------------
Michael J. Callahan 12,491,017 1,214,831
Dr. Eugene W. Emmerich 12,018,852 1,686,996
G. Robert Evans 12,473,391 1,232,457
E. F. Heizer, Jr. 12,017,155 1,688,693
Dr. Ronald A. Mitsch 12,487,041 1,218,807
Gerald G. Nadig 12,490,837 1,215,011
Dr. Mary P. Quin 12,486,832 1,219,016
Howard B. Witt 12,492,410 1,213,438
Approved by a majority vote of shareowners was the proposal to amend the
1992 Omnibus Stock Awards Plan for Key Employees to increase the number of
shares of common stock issuable thereunder by 425,000 shares. The Plan provides
incentives to the key employees of the Company through rewards linked to
performance of the Company's common stock. The details of the vote were as
follows:
For Against Abstain
--- ------- -------
9,844,977 3,818,319 42,552
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Approved by a majority vote of shareowners was the proposal to replace the
existing 1996 Option Plan for Non-Employee Directors, which expires February 28,
2001, with the 2001 Compensation Plan for Non-Employee Directors. The Plan
provides incentives to members of the Board of Directors who are not officers
nor employees of the Company through compensation and other awards. The details
of the vote were as follows:
For Against Abstain
--- ------- -------
10,596,377 3,056,780 52,691
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.
15
<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 11th day of October, 2000.
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
16
<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 (1)
(1) Appears only in the electronic filing of this report with the Securities
and Exchange Commission.
17
