<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, 1999
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, 2000, there were outstanding 15,355,611 shares of common
stock, $.02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended November 30, 1999
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 Nine Months Ended
November 30, November 30,
(In thousands, except per share data) 1999 1998 1999 1998
- ----------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales (1) $125,441 $123,053 $382,900 $355,093
Cost of Sales 99,671 100,022 306,109 292,255
--------- --------- --------- ---------
Gross Profit $ 25,770 $ 23,031 $ 76,791 $ 62,838
Selling, General and Administrative
Expenses (9) 15,903 15,236 47,440 43,192
--------- --------- --------- ---------
Income from Operations $ 9,867 $ 7,795 $ 29,351 $ 19,646
--------- --------- --------- ---------
Other (Income) and Expense:
Interest Income $ (166) $ (16) $ (256) $ (420)
Interest Expense 2,246 2,801 7,130 9,176
Equity in Results of Joint Ventures 477 667 1,582 1,107
Other, Net 66 88 209 (405)
--------- --------- --------- ---------
Total Other Expense, Net $ 2,623 $ 3,540 $ 8,665 $ 9,458
--------- --------- --------- ---------
Income Before Income Taxes and Cumulative Effect of
Accounting Change $ 7,244 $ 4,255 $ 20,686 $ 10,188
Income Taxes 2,680 1,638 7,654 3,922
--------- --------- --------- ---------
Income Before Cumulative Effect of Accounting Change $ 4,564 $ 2,617 $ 13,032 $ 6,266
Cumulative Effect of Accounting Change, Net (6) - - - 2,207
--------- --------- --------- ---------
Net Income (7) $ 4,564 $ 2,617 $ 13,032 $ 4,059
========= ========= ========= =========
Basic Net Income Per Share:
Income Before Cumulative Effect of Accounting Change
Per Share $ 0.30 $ 0.17 $ 0.86 $ 0.41
Cumulative Effect of Accounting Change Per Share - - - 0.14
--------- --------- --------- ---------
Basic Net Income Per Share $ 0.30 $ 0.17 $ 0.86 $ 0.27
========= ========= ========= =========
Diluted Net Income Per Share:
Income Before Cumulative Effect of Accounting Change
Per Share $ 0.30 $ 0.17 $ 0.85 $ 0.41
Cumulative Effect of Accounting Change Per Share - - - 0.14
--------- --------- --------- ---------
Diluted Net Income Per Share $ 0.30 $ 0.17 $ 0.85 $ 0.27
========= ========= ========= =========
Weighted Average Number of Common Shares Outstanding
Used for Basic Net Income Per Share 15,054 15,380 15,144 15,333
Dilutive Common Stock Options 157 46 255 63
--------- --------- --------- ---------
Weighted Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options 15,211 15,426 15,399 15,396
========= ========= ========= =========
Outstanding Common Stock Options Having No Dilutive Effect 1,222 1,767 1,259 1,418
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
November 30, February 28,
1999 1999
(In thousands) Unaudited Audited
- ------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 2,987 $ 1,227
Receivables:
Trade, Less Reserves of $4,934 and $5,233, Respectively (2) 57,042 52,029
Income Taxes - 968
Prepaid Expenses 3,046 2,180
Inventories 58,410 52,166
Prepaid Taxes 4,889 4,889
-------------- -------------
Total Current Assets $ 126,374 $ 113,459
-------------- -------------
Property, Plant and Equipment $ 372,058 $ 360,865
Accumulated Depreciation and Amortization (147,162) (126,384)
-------------- -------------
Net Property, Plant and Equipment $ 224,896 $ 234,481
-------------- -------------
Other Assets:
Investment in Joint Ventures $ 19,758 $ 20,829
Intangible Assets, Net 23,951 24,411
Other 2,421 2,141
-------------- -------------
Total Other Assets $ 46,130 $ 47,381
-------------- -------------
Total Assets $ 397,400 $ 395,321
============== =============
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 2,671 $ 2,429
Accounts Payable 51,297 47,920
Accrued Payroll Related Expenses 14,731 13,891
Accrued Expenses 8,277 8,660
-------------- -------------
Total Current Liabilities $ 76,976 $ 72,900
-------------- -------------
Long-Term Liabilities:
Deferred Income Taxes $ 20,578 $ 18,434
Long-Term Debt, Less Current Portion 126,615 140,000
Accrued Superfund Liability 3,020 3,087
Other 12,476 11,968
-------------- -------------
Total Long-Term Liabilities $ 162,689 $ 173,489
-------------- -------------
Shareowners' Equity:
Preferred Stock (3) $ - $ -
Common Stock (4) 347 336
Additional Paid-In Capital 58,276 54,663
Treasury Stock at Cost (5) (18,285) (10,491)
Retained Earnings 117,862 104,830
Accumulated Other Comprehensive Income (7) (465) (406)
-------------- -------------
Total Shareowners' Equity $ 157,735 $ 148,932
-------------- -------------
Total Liabilities and Shareowners' Equity $ 397,400 $ 395,321
============== =============
</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) 1999 1998 1999 1998
- -------------------------------------------------------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 4,564 $ 2,617 $ 13,032 $ 4,059
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 7,423 7,828 22,788 23,586
Provision for Deferred Income Taxes 723 80 2,144 336
Cumulative Effect of Accounting Change, Net - - - 2,207
Compensatory Effect of Stock Plans 399 405 1,756 409
Other, Net 460 667 1,567 982
-------- ------- -------- --------
Operating Cash Flow Prior to Changes in Assets and $13,569 $11,597 $ 41,287 $ 31,579
Liabilities -------- ------- -------- --------
Changes in Assets and Liabilities:
Receivables $(1,142) $ 1,472 $ (4,547) $ 3,593
Income Taxes Receivable - - 968 2,391
Prepaid Expenses 430 613 (866) (425)
Inventories (2,212) (579) (5,588) 5,309
Accounts Payable (3,430) (3,867) 3,081 (4,356)
Accrued Expenses 1,762 442 374 1,452
Other, Net (25) (708) 401 3,030
-------- ------- -------- --------
Cash Flow from Changes in Assets and Liabilities $(4,617) $(2,627) $ (6,177) $ 10,994
-------- ------- -------- --------
Net Cash Provided by Operating Activities $ 8,952 $ 8,970 $ 35,110 $ 42,573
-------- ------- -------- --------
Investing Activities:
Capital Expenditures, Net $(3,415) $(2,851) $(11,289) $(10,235)
Acquisition, Net of Cash Acquired (922) - (922) -
Investment in Joint Ventures (556) (85) (658) (1,320)
Distribution from Joint Ventures - - - 900
Other, Net 69 94 (677) (748)
-------- -------- -------- --------
Net Cash Used in Investing Activities $(4,824) $(2,842) $(13,546) $(11,403)
-------- ------- -------- --------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $ 200 $(5,100) $(11,400) $ 33,300
Payments of Debt (1,910) (1,781) (2,478) (67,944)
Purchase of Treasury Stock (2,224) - (7,794) -
Sale of Common Stock 829 544 1,868 1,212
-------- ------- -------- --------
Net Cash Used in Financing Activities $(3,105) $(6,337) $(19,804) $(33,432)
-------- ------- -------- --------
Net Increase (Decrease) in Cash $ 1,023 $ (209) $ 1,760 $ (2,262)
Cash and Cash Equivalents at Beginning of Period 1,964 1,572 1,227 3,625
-------- ------- -------- --------
Cash and Cash Equivalents at End of Period $ 2,987 $ 1,363 $ 2,987 $ 1,363
======== ======= ======== ========
Supplemental Cash Flow Disclosures:
Notes Issued for Acquisition $ 600 $ - $ 600 $ -
Cash Portion of Acquisition and Related Costs 922 - 922 -
-------- ------- -------- --------
Total Consideration Paid for Acquisition $ 1,522 $ - $ 1,522 $ -
======== ======= ======== ========
</TABLE>
The Changes in Assets and Liabilities for the three and nine months ended
November 30, 1999 and 1998, 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, 1999 and 1998 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 1999 Annual Report to Shareowners and
Annual Report on Form 10-K. Certain prior year amounts have been reclassified to
conform with the fiscal 2000 presentation.
(1) During the nine months ended November 30, 1999 and 1998, the Company
derived approximately 13.1% and 12.0%, 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 $3,455 as of
November 30, 1999 and $1,897 as of February 28, 1999. Trade receivables
also include amounts due from Innovative Specialty Films, LLC of $380 as
of November 30, 1999 and $452 as of February 28, 1999.
(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; 17,327,025
Shares Issued and 15,465,577 Shares Outstanding as of November 30, 1999
and 16,783,084 Shares Issued and 15,571,336 Shares Outstanding as of
February 28, 1999.
(5) Treasury Stock at Cost; 1,861,448 Shares as of November 30, 1999 and
1,211,748 Shares as of February 28, 1999. On December 20, 1996, the
Company's Board of Directors authorized the repurchase of up to one
million shares of the Company's common stock, of which 523,100 shares
were purchased through February 28, 1999. During the first six months of
fiscal 2000, the Company completed this program by repurchasing the
remaining 476,900 shares of the one million authorization at an average
purchase price of $11.68 per share.
On September 23, 1999, 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 January 12, 2000, 285,100 shares have been repurchased at an average
purchase price of $12.36 under this new program.
(6) In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which the Company adopted effective March 1, 1998.
The SOP requires costs of start-up activities and organization costs to
be expensed as incurred. The effect of the adoption of SOP 98-5 was to
record a non-cash charge of $2,207, net of taxes, for the cumulative
6
<PAGE>
effect of a change in accounting principle to expense costs that had
previously been capitalized prior to March 1, 1998.
(7) Comprehensive Income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
November 30, November 30,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $4,564 $2,617 $13,032 $4,059
Other Comprehensive Income:
Foreign Currency Translation (134) 277 (59) (247)
Adjustments ------ ------ ------- ------
Comprehensive Income $4,430 $2,894 $12,973 $3,812
====== ====== ======= ======
</TABLE>
(8) Business Segments:
The Company reports segment information based on how management
disaggregates its businesses for evaluating performance and making
operating decisions. The Company's three segments are: Coated Products
and Services, Engineered Materials and Specialty Films. Corporate
represents unallocated general corporate expenses. The net sales on a
geographic basis are not material. Information concerning the Company's
business segments in the third quarter and first nine months of fiscal
2000 and 1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
November 30, November 30,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales
---------
Coated Products and Services $ 94,589 $ 93,393 $286,607 $266,974
Engineered Materials 20,125 19,241 59,654 53,339
Specialty Films 11,397 10,975 38,458 36,474
Eliminations (670) (556) (1,819) (1,694)
-------- -------- -------- --------
$125,441 $123,053 $382,900 $355,093
======== ======== ======== ========
Income from Operations
----------------------
Coated Products and Services $ 8,154 $ 7,453 $ 22,579 $ 16,330
Engineered Materials 3,096 2,375 9,080 5,682
Specialty Films 1,472 719 5,985 3,527
Corporate and Eliminations (2,855) (2,752) (8,293) (5,893)
-------- -------- -------- --------
$ 9,867 $ 7,795 $ 29,351 $ 19,646
======== ======== ======== ========
</TABLE>
(9) The Company recognized a pro rata portion of compensation expense
totaling approximately $1,300 during the second quarter of fiscal 2000
related to the 1998 Long-Term Incentive/Leverage Stock Awards Program
(see Note 11 in the Company's 1999 Annual Report to Shareowners).
(10) On September 28, 1999, the Company reached a settlement agreement with
the Securities and Exchange Commission ("SEC") related to the SEC's
investigation of accounting irregularities announced in 1997. Under the
settlement agreement, MSC consents to a cease and desist order while
neither admitting nor denying the SEC's findings. The Company also agreed
to send certain personnel for continuing education.
7
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended November 30, 1999
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 third quarter of fiscal 2000 increased 1.9% to $125,441 from
$123,053 in the same period last fiscal year. For the first nine months of
fiscal 2000, net sales grew 7.8% to $382,900 compared with $355,093 in fiscal
1999. All business segments contributed to the increase in net sales for both
periods. Gross profit margin for the third quarter was 20.5% as compared with
18.7% in the same quarter last year. For the nine-month period, gross profit
margin increased to 20.1% in fiscal 2000 versus 17.7% in fiscal 1999. The
improvement in gross profit margin was the result of growth in sales volume,
lower material costs, favorable product mix, as well as improved manufacturing
efficiencies. Selling, general and administrative ("SG&A") expenses were 12.7%
of net sales for the third quarter of fiscal 2000 versus 12.4% of net sales in
the same period last year. The increase in SG&A percentage is due to higher
variable compensation expense as a result of improved Company performance. For
the first nine months, SG&A expenses were 12.4% of net sales compared with 12.2%
for the first nine months of fiscal 1999. For the year-to-date period, the
increase was due mainly to the pro rata portion of compensation expense
recognized in the second quarter of fiscal 2000, as described in the following
paragraph, as well as increases in variable compensation expense, partially
offset by an increase in the sales volume. During the third quarter of fiscal
2000, income from operations increased 26.6% to $9,867 as compared with $7,795
last fiscal year. For the nine months ended November 30, 1999, income from
operations improved 49.4% to $29,351 from $19,646 in the prior year period.
The Company recognized a pro rata portion of compensation expense totaling
approximately $1,300 during the second quarter of fiscal 2000 related to the
1998 Long-Term Incentive/Leverage Stock Awards Program (see Note 11 in the
Company's 1999 Annual Report to Shareowners).
The Company's three principal business segments are Coated Products and
Services, Engineered Materials and Specialty Films. The Coated Products and
Services segment includes the coil coating, hot-dip galvanizing and
electrogalvanizing product groups. This segment provides galvanized and
prepainted products and services primarily to the building and construction,
automotive and appliance markets. 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,
8
<PAGE>
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.
Coated Products and Services
Third quarter net sales for Coated Products and Services increased 1.3% to
$94,589 from $93,393 in the same quarter last year. Net sales for the period
were effected by the implementation of a new management information system at
the Company's Pinole Point Steel subsidiary, offset by significantly higher
shipments of appliance and automotive materials. Net sales for Coated Products
and Services in the first nine months of the fiscal year grew 7.4% to $286,607
compared with $266,974 last fiscal year. The increase for the year-to-date
period is mainly due to significantly higher shipments to the automotive,
building and construction and appliance markets. For the third quarter, income
from operations for Coated Products and Services improved 9.4% to $8,154 from
$7,453 in the prior year. Higher sales volumes of value-added materials, lower
material costs and improved operating efficiencies offset the previously
mentioned system implementation difficulties at Pinole Point Steel. For the
period ended November 30, 1999, income from operations increased to $22,579, a
38.3% increase from $16,330 in the prior year-to-date period. Increases in sales
volume, including significant sales to ISPAT Inland Inc. in the first quarter of
fiscal 2000, lower material costs (which may be impacted in the future by a
decision in the pending steel industry anti-dumping litigation), favorable
product mix and improved operating efficiencies were the primary contributors to
the increase, slightly offset by the effects of electrical power curtailments in
the second quarter of fiscal 2000 and recent system implementation issues.
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 full utilization
of the facility. 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.
Engineered Materials
Sales in the third quarter of Engineered Materials increased 4.6% to $20,125
compared with $19,241 last fiscal year. For the year-to-date period, Engineered
Materials' net sales grew to $59,654, an 11.8% increase from $53,339 last year.
Significantly higher shipments of brake damper materials to both the original
equipment manufacturer ("OEM") and replacement markets contributed to the
growth. Income from operations for the third quarter improved 30.4% to $3,096
versus $2,375 in the prior year's third quarter. For the first nine months of
fiscal 2000, income from operations increased to $9,080, a 59.8% improvement
from $5,682 in the same period last year. Improvements in income from operations
for both periods were mainly due to favorable product mix, material cost
reductions and improved operating efficiencies.
9
<PAGE>
Specialty Films
Sales of Specialty Films materials for the third quarter increased 3.8% to
$11,397 in fiscal 2000 compared with $10,975 in the same period last year.
Higher shipments of window film in both domestic and international markets
contributed to the increase. Sales for the nine months ended November 30, 1999
increased 5.4% to $38,458 compared with $36,474 in the prior fiscal year.
Increased sales of window film along with coated and laminated films contributed
to the growth. On October 15, 1998, a subsidiary of the Company and Bekaert
Corporation formed the joint venture, Innovative Specialty Films, LLC ("ISF"),
for the research and development, manufacture and sale of sputtered film.
Comparable sales for the third quarter and first nine months of the year,
excluding sputtered film sales made through the ISF joint venture, increased
15.3% and 17.3%, respectively, versus the prior year periods. Income from
operations for Specialty Films for the third quarter increased 104.7% to $1,472
as compared with $719 last year. For the nine-month period of fiscal 2000,
income from operations was $5,985, a 69.7% increase from $3,527 last fiscal
year. Higher sales volume, improved operating efficiencies, as well as royalty
income as a result of the ISF agreement contributed to the increase for both
periods.
Total Other (Income) and Expense, Net and Income Taxes
Total other (income) and expense, net was expense of $2,623 in the third quarter
of fiscal 2000 compared with $3,540 of expense for the third quarter of fiscal
1999. For the year-to-date period, total other (income) and expense, net was
expense of $8,665 in fiscal 2000 compared with $9,458 last year. Interest
expense decreased $555 and $2,046 for the third quarter and first nine months,
respectively, due to significantly lower debt levels, and to a lesser extent,
favorable changes in variable interest rates. During the second quarter of
fiscal 1999, the Company recorded $318 of interest income related to amended tax
returns. During the third quarter of fiscal 2000, the Company recorded $153 of
interest income related to the Revenue Agent Revenue of fiscal years 1993 and
1994. In addition, the Company's three-year statute of limitations has expired
for fiscal 1995 and 1996 for federal income tax purposes. The Company is
currently analyzing its income tax reserve position based on these two events
for income tax purposes and anticipates a decrease in income tax expense in the
fourth quarter of fiscal 2000. Equity in Results of Joint Ventures was expense
of $477 and $1,582 for the third quarter and first nine months of fiscal 2000,
respectively, and expense of $667 and $1,107 for the same periods last year,
respectively. The change is due to a decline in third party sales (other than
ISPAT Inland Inc.) by the Partnership, terminations of certain Partnership
revenues from BSC and ISPAT Inland Inc. after certain financing matured on June
30, 1998 and expenses related to the ISF joint venture commencing operations in
January 1999. MSC's effective income tax rate was 37.0% in the third quarter and
first nine months of fiscal 2000 compared with 38.5% in the same periods of
fiscal 1999, primarily due to the benefit of state income tax credits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the third quarter of fiscal 2000, MSC generated $8,952 of cash flow from
operating activities, relatively flat with $8,970 in the third quarter last
year. For the nine months ended November 30, 1999, MSC generated $35,110 of cash
from operating activities compared with $42,573 in the same period last year.
The decrease in cash generation is due mainly to increases in working capital as
a result of higher volumes, as well as the system
10
<PAGE>
implementation difficulties mentioned earlier. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") increased to $16,747 and $50,348 for
the third quarter and first nine months of fiscal 2000, respectively, compared
with $14,868 and $42,530 for the same periods last year, respectively. MSC's
capital expenditures during the third quarter and first nine months of fiscal
2000 were $3,415 and $11,289, respectively, compared with $2,851 and $10,235 in
the same periods last fiscal year.
MSC's total debt decreased $13,143 to $129,286 as of November 30, 1999, compared
with $142,429 as of fiscal 1999 year end. As of November 30, 1999, the Company
maintains a committed line of credit totaling $90,000. There was $10,000
outstanding under this line of credit as of November 30, 1999, versus $14,200 as
of February 28, 1999. The Company has executed letters of credit totaling $4,740
against these lines, leaving available lines of credit of $75,260 as of November
30, 1999. The Company also maintains a $10,000 uncommitted line of credit. There
was $2,800 outstanding under this line of credit as of November 30, 1999, as
compared with $10,000 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, stock
repurchase program and debt amortization.
On December 20, 1996, the Company's Board of Directors authorized the repurchase
of up to one million shares of the Company's common stock, of which 523,100
shares were purchased through February 28, 1999. During the first six months of
fiscal 2000, the Company completed this program by repurchasing the remaining
476,900 shares of the one million authorization at an average purchase price of
$11.68 per share.
On September 23, 1999, 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 January 12,
2000, 285,100 shares have been repurchased at an average purchase price of
$12.36 under this new program.
The Company has a capital lease obligation, which was $2,085 as of November 30,
1999, 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 November 30, 1999, ISF's debt was $56 compared with $2,736
as of February 28, 1999.
On September 28, 1999, the Company reached a settlement agreement with the
Securities and Exchange Commission ("SEC") related to the SEC's investigation of
accounting irregularities announced in 1997. Under the settlement agreement, MSC
consents to a cease and desist order while neither admitting nor denying the
SEC's findings. The Company also agreed to send certain personnel for continuing
education.
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,
1999.
Forward-looking statements contained in this filing are qualified by the
cautionary language described in Part II, Item 7 of the Company's 1999 Annual
Report on Form 10-K, filed with the SEC pursuant to the Securities Exchange Act
of 1934, as amended.
11
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended November 30, 1999
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Paragraph 5 on page 12 of this report is hereby incorporated by
reference.
Item 5. Other Information
- -------------------------
On December 16, 1999, the Board of Directors increased the number of
directorships under the Company's By-Laws from six to eight and elected three
new members to serve on the Company's Board of Directors: Michael J. Callahan,
Ronald A. Mitsch and Mary P. Quin.
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.
12
<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, 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
13
<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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 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> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,987
<SECURITIES> 0
<RECEIVABLES> 57,042
<ALLOWANCES> 4,934
<INVENTORY> 58,410
<CURRENT-ASSETS> 126,374
<PP&E> 372,058
<DEPRECIATION> 147,162
<TOTAL-ASSETS> 397,400
<CURRENT-LIABILITIES> 76,976
<BONDS> 126,615
347
0
<COMMON> 0
<OTHER-SE> 157,388
<TOTAL-LIABILITY-AND-EQUITY> 397,400
<SALES> 382,900
<TOTAL-REVENUES> 382,900
<CGS> 306,109
<TOTAL-COSTS> 306,109
<OTHER-EXPENSES> 47,440
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,130
<INCOME-PRETAX> 20,686
<INCOME-TAX> 7,654
<INCOME-CONTINUING> 13,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,032
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.85
</TABLE>
