-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J9eCt3tqK9vcg1WHyFC5U4e1XVnrme21/wmjlRmktciKhKH1aPRQLorvX4LLZnFV FFcZyhGHN+ZYcs2FVi6N4A== 0000950131-97-006148.txt : 19971014 0000950131-97-006148.hdr.sgml : 19971014 ACCESSION NUMBER: 0000950131-97-006148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971010 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATERIAL SCIENCES CORP CENTRAL INDEX KEY: 0000755003 STANDARD INDUSTRIAL CLASSIFICATION: COATING, ENGRAVING & ALLIED SERVICES [3470] IRS NUMBER: 952673173 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08803 FILM NUMBER: 97694311 BUSINESS ADDRESS: STREET 1: 2300 E PRATT BLVD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007 BUSINESS PHONE: 8474398270 10-Q 1 FORM 10-Q DATED 08/31/1997 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, 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 October 8, 1997, there were outstanding 15,350,855 shares of common stock, $.02 par value. MATERIAL SCIENCES CORPORATION FORM 10-Q For The Quarter Ended August 31, 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 Consolidated Statements of Income (Unaudited) Material Sciences Corporation and Subsidiaries
Three Months Ended Six Months Ended August 31, August 31, (In thousands, except per share data) 1997 1996 1997 1996 - ------------------------------------------ -------- -------- -------- -------- Net Sales (1) $ 70,541 $ 70,420 $143,637 $139,304 Cost of Sales 53,757 51,137 109,262 102,512 -------- -------- -------- -------- Gross Profit $ 16,784 $ 19,283 $ 34,375 $ 36,792 Selling, General and Administrative Expenses 12,937 11,934 26,139 23,398 -------- -------- -------- -------- Income from Operations $ 3,847 $ 7,349 $ 8,236 $ 13,394 -------- -------- -------- -------- Other (Income) and Expense: Interest Income $ (46) $ (69) $ (75) $ (135) Interest Expense 1,045 142 2,058 142 Equity in Results of Partnership 344 595 (158) 481 Other, Net (267) (227) (527) (456) -------- -------- -------- -------- Total Other Expense, Net $ 1,076 $ 441 $ 1,298 $ 32 -------- -------- -------- -------- Income Before Income Taxes $ 2,771 $ 6,908 $ 6,938 $ 13,362 Income Taxes 1,067 2,660 2,672 5,145 -------- -------- -------- -------- Net Income $ 1,704 $ 4,248 $ 4,266 $ 8,217 ======== ======== ======== ======== Net Income Per Common and Common Equivalent Share $ 0.11 $ 0.27 $ 0.28 $ 0.53 ======== ======== ======== ======== Weighted Average Number of Common and Common Equivalent Shares Outstanding 15,485 15,620 15,461 15,586 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 3 Consolidated Balance Sheets Material Sciences Corporation and Subsidiaries
August 31, February 28, 1997 1997 (In thousands) Unaudited Audited - ----------------------------------------------------------------------- ---------- ------------ Assets: Current Assets: Cash and Cash Equivalents $ 1,946 $ 2,116 Receivables: Trade, Less Reserves of $2,556 and $2,271, Respectively (2) 35,087 35,944 Current Portion of Partnership Note 761 767 Income Taxes 1,123 1,249 Prepaid Expenses 3,978 2,791 Inventories 35,248 30,952 Prepaid Taxes 1,186 1,186 -------- -------- Total Current Assets $ 79,329 $ 75,005 -------- -------- Gross Property, Plant and Equipment $255,392 $242,340 Accumulated Depreciation and Amortization (96,638) (87,954) -------- -------- Net Property, Plant and Equipment $158,754 $154,386 -------- -------- Other Assets: Investment in Partnership $ 10,921 $ 10,759 Partnership Note Receivable, Less Current Portion - 374 Intangible Assets, Net 13,869 12,837 Other 482 728 -------- -------- Total Other Assets $ 25,272 $ 24,698 -------- -------- Total Assets $263,355 $254,089 ======== ======== Liabilities: Current Liabilities: Current Portion of Long-Term Debt $ 4,089 $ 3,750 Accounts Payable 22,300 24,092 Accrued Payroll Related Expenses 7,750 9,838 Accrued Expenses 6,602 6,171 -------- -------- Total Current Liabilities $ 40,741 $ 43,851 -------- -------- Long-Term Liabilities: Deferred Income Taxes $ 11,323 $ 11,392 Long-Term Debt, Less Current Portion 63,047 54,761 Accrued Superfund Liability 4,026 4,071 Other 6,822 6,641 -------- -------- Total Long-Term Liabilities $ 85,218 $ 76,865 -------- -------- Shareowners' Equity: Preferred Stock (3) $ - $ - Common Stock (4) 326 325 Additional Paid-In Capital 50,925 50,142 Treasury Stock at Cost (5) (8,545) (7,518) Retained Earnings 94,690 90,424 -------- -------- Total Shareowners' Equity $137,396 $133,373 -------- -------- Total Liabilities and Shareowners' Equity $263,355 $254,089 ======== ========
The accompanying notes are an integral part of these statements. 4 Consolidated Statements of Cash Flows (Unaudited) Material Sciences Corporation and Subsidiaries
Three Months Ended Six Months Ended August 31, August 31, (In thousands) 1997 1996 1997 1996 - ---------------------------------------------------------------------- -------- -------- -------- -------- Cash Flows From: Operating Activities: Net Income $ 1,704 $ 4,248 $ 4,266 $ 8,217 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: Depreciation and Amortization 4,688 3,801 9,368 7,464 Benefit for Deferred Income Taxes (27) (74) (69) (148) Compensatory Effect of Stock Plans (52) 130 31 280 Other, Net 344 595 (160) 481 -------- -------- -------- -------- Operating Cash Flow Prior to Changes in Assets and Liabilities $ 6,657 $ 8,700 $ 13,436 $ 16,294 -------- -------- -------- -------- Changes in Assets and Liabilities: Receivables $ 1,633 $ (2,312) $ (220) $ (6,046) Income Taxes Receivable (1,123) (673) 126 725 Prepaid Expenses (278) 245 (1,146) (94) Inventories (1,633) 47 (2,602) (2,125) Accounts Payable 196 (250) (1,866) (1,315) Accrued Expenses 808 1,141 (1,751) (2,135) Other, Net 48 180 102 (64) -------- -------- -------- -------- Cash Flow from Changes in Assets and Liabilities $ (349) $ (1,622) $ (7,357) $(11,054) -------- -------- -------- -------- Net Cash Provided by Operating Activities $ 6,308 $ 7,078 $ 6,079 $ 5,240 -------- -------- -------- -------- Investing Activities: Capital Expenditures, Net $ (4,726) $(14,051) $(12,921) $(26,492) Acquisitions, Net of Cash Acquired (1,129) - (1,129) (2,489) Investment in Partnership (459) (672) (1,004) (877) Distribution from Partnership 1,374 375 1,374 375 Other Long-Term Assets 149 119 197 289 -------- -------- -------- -------- Net Cash Used in Investing Activities $ (4,791) $(14,229) $(13,483) $(29,194) -------- -------- -------- -------- Financing Activities: Net Proceeds (Payments) Under Lines of Credit $ (1,200) $ 6,500 $(11,300) $ 23,700 Proceeds from Senior Notes - - 20,000 - Payments to Settle Debt (452) (404) (1,192) (844) Purchase of Treasury Stock - - (1,027) - Sale of Common Stock 48 100 753 676 -------- -------- -------- -------- Net Cash Provided by (Used in) Financing Activities $ (1,604) $ 6,196 $ 7,234 $ 23,532 -------- -------- -------- -------- Net Decrease in Cash $ (87) $ (955) $ (170) $ (422) Cash and Cash Equivalents at Beginning of Period 2,033 3,912 2,116 3,379 -------- -------- -------- -------- Cash and Cash Equivalents at End of Period $ 1,946 $ 2,957 $ 1,946 $ 2,957 ======== ======== ======== ======== Supplemental Cash Flow Disclosures: Subordinated Notes Issued for Acquisitions $ 1,117 $ - $ 1,117 $ 1,500 Cash Portion of Acquisitions and Related Costs 1,129 - 1,129 2,489 -------- -------- -------- -------- Total Consideration Paid for Acquisitions $ 2,246 $ - $ 2,246 $ 3,989 ======== ======== ======== ========
The Changes in Assets and Liabilities above for the three months and six months ended August 31, 1997, are net of assets and liabilities acquired. The accompanying notes are an integral part of these statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MATERIAL SCIENCES CORPORATION The data for the three and six months ended August 31, 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 six month periods ending August 31, 1997 and 1996, the Company derived approximately 20.4% and 20.9%, 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 $2,596 at August 31, 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; 16,282,048 Shares Issued and 15,302,400 Shares Outstanding at August 31, 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 August 31, 1997 and 916,748 Shares at February 28, 1997. (6) During the second quarter of fiscal 1998, the Company purchased designated assets of a specialty films distribution business in Australia and the remaining 51% interest of a joint venture in Singapore. Consideration for the purchases, including transaction costs, was $1,117 in subordinated notes ("Notes") and $1,129 in cash. The Notes bear interest at a rate of 9% per annum. The notes mature in three equal installments with the first Note becoming due annually beginning on July 19, 1998. The acquisitions have been accounted for under the purchase method of accounting. 6 Summarized Income Statement Information (Unaudited) Walbridge Coatings, An Illinois Partnership
Three Months Ended Six Months Ended August 31, August 31, (In thousands) 1997 1996 1997 1996 - ---------------------------- ---------- ---------- ---------- ---------- Net Revenues $16,656 $16,317 $34,991 $34,383 Gross Profit 141 342 1,764 1,159 Income (Loss) from Operations (499) (279) 372 (92) Net Income (Loss) (637) (552) 45 (721) 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 MATERIAL SCIENCES CORPORATION FORM 10-Q For the Quarter Ended August 31, 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.
Net Sales Summary Quarter Ended August 31, - --------------------- ------------------------------------------------------------ 1997 1996 ------------------------- ---------------------------- Product Group: Dollars Percent Dollars Percent ----------- ------- ------------ -------- Laminates and Composites $ 14,747 20.9% $ 17,021 24.2% Specialty Films 11,608 16.5% 11,178 15.9% Coil Coating 29,718 42.1% 28,332 40.2% Electrogalvanizing 14,468 20.5% 13,889 19.7% -------- ----- ------- ----- $ 70,541 100.0% $ 70,420 100.0% ======== ===== ======== ===== Six Months Ended August 31, ------------------------------------------------------------ 1997 1996 ------------------------- ---------------------------- Product Group: Dollars Percent Dollars Percent ----------- -------- ------------ -------- Laminates and Composites $ 31,833 22.2% $ 32,479 23.3% Specialty Films 23,018 16.0% 21,327 15.3% Coil Coating 59,445 41.4% 56,446 40.5% Electrogalvanizing 29,341 20.4% 29,052 20.9% -------- ----- -------- ----- $143,637 100.0% $139,304 100.0% ======== ===== ======== =====
RESULTS OF OPERATIONS - --------------------- Net Sales Net sales in the second quarter of fiscal 1998 increased 0.2% over the same period last year. Sales of specialty films increased by 3.8%; coil coating 4.9%; and electrogalvanizing 4.2%. Laminates and composites sales decreased by 13.4% compared to last fiscal year's second quarter. For the six-month period ended August 31, 1997, sales were 3.1% higher than the first six months of last year. Sales of specialty films increased by 7.9%; coil coating 5.3%; and electrogalvanizing 1.0%. Laminates and composites sales decreased by 2.0% compared to the prior year's six months. Laminates and Composites Sales of laminates and composites products decreased 13.4% in the second quarter of fiscal 1998, as compared to the same quarter last year. The decrease was largely due to lower shipments of disc brake noise dampers to the replacement market, as well as a decrease in sales of Specular+(R). These shortfalls were offset, in part, by higher sales of Polycore Composites(R) to both the computer and appliance markets. On a six-month basis, sales in this product group decreased 2.0% for the same prior period. An overall softness in the reflective lighting market is the major contributor to the lower sales of Specular+ for the first half of the year, offset, in part, by higher demand for Polycore Composites in the appliance, automotive, and computer markets. Specialty Films During the second quarter of fiscal 1998, sales of specialty films increased 3.8% over the same period last year. For the first six months, specialty films sales increased 7.9%, as compared to the first six months of last fiscal year. For both periods, the increase was primarily due to higher sales of high performance solar control window film and shipments of sputter coated films for the imaging and printing industries. In addition, during the second quarter, the Company completed the acquisitions of a distribution business in Australia, as well as the remaining 51% interest of a joint venture in Singapore, further strengthening its position in this market. Coil Coating Coil coating sales during the second quarter of fiscal 1998 grew 4.9% over the same quarter last year. The major contributors to the growth were increases in sales to the transportation and building products markets, offset, in part, by lower sales to the swimming pool and appliance markets. For the six months ended August 31, 1997, sales were 5.3% higher than the same period last fiscal year. The increase in sales for the six-month period was due to an increase in the transportation and appliance markets, offset, in part, by lower sales to the swimming pool market. Electrogalvanizing MSC participates in the electrogalvanizing market through Walbridge Coatings (the "Partnership"), a partnership among subsidiaries of MSC, Bethlehem Steel Corporation 9 ("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 20.4% and 20.9% of the Company's net sales in the first six months of fiscal 1998 and 1997, respectively. The profitability for operating the facility was comparable to the Company's overall operating results. 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 second quarter of fiscal 1998 increased 4.2% over the second quarter last year even though volume declined 5.4% to 103,351 tons for the period. A shift in the product mix to higher value-added organically coated materials contributed to the increase in sales which more than offset the decline in volume. The volume reduction was primarily a result of the annual maintenance shutdown taking a planned two weeks as compared to one week in the prior year. For the six months of fiscal 1998, sales increased 1.0% and volume decreased 4.1% to 225,831 tons from 235,416 tons over the same period in the prior fiscal year. Again, the increase in sales and lower volume was due to a change in product mix, as well as the extended maintenance shutdown. The sales and marketing responsibilities of the Partnership are split between Bethlehem and Inland at 76% and 24%, respectively. During the first six months of fiscal 1998, Inland utilized 16.2% 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 on a long-term basis. The Company believes that any short-term disruption in volume that might be caused by a reduction in Inland's line time requirements could eventually be replaced by additional volume from Bethlehem and other customers. Gross Profit The Company's gross profit margin was 23.8% in the second quarter of fiscal 1998 as compared to 27.4% in the same period last year. For the first six months of fiscal 1998, gross profit margin was 23.9% versus 26.4% last year. The decrease in gross profit margin for the quarter and six months was primarily due to inefficiencies and start-up expenses associated with the new coil coating line in Elk Grove Village, Illinois, changes in the product mix, and underabsorption of production costs due to recent capacity additions in our coil coating, laminates and composites, and specialty films areas. 10 Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses were 18.3% of sales in the second quarter of fiscal 1998 as compared to 16.9% of sales for the same period last fiscal year. For the six months ended August 31, 1997, SG&A expenses increased to 18.2% of sales from 16.8% of sales for the same period in fiscal 1997. For the second quarter, the increase in SG&A is largely due to an increase in powder coating development initiatives, as well as the acquisitions of the specialty films distribution business in Australia and the remaining interest in a joint venture in Singapore. On a year to date basis, SG&A was also affected by one-time expenses of approximately $500 incurred for the investigation of previously announced accounting irregularities, in addition to the Company's ongoing strategic marketing efforts. Total Other Expense, Net and Income Taxes Total other expense, net was $1,076 and $1,298 during the second quarter and first six months of fiscal 1998, respectively, versus $441 and $32 for the second quarter and first six months of fiscal 1997. The increase in expense was attributable to an increase in interest expense due to less capitalized interest, higher debt levels, and fixed interest rates that are higher than actual fiscal 1997 variable interest rates. The increase in interest expense was partially offset 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 second quarter and first six months of fiscal 1998 and fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the second quarter of fiscal 1998, MSC generated $6,308 of cash from operating activities compared to $7,078 in the second quarter last year. The decrease in cash generation is due mainly to lower net income, offset, in part, by higher depreciation and amortization and improvements in working capital as compared to last year. For the six months of fiscal 1998, operating activities generated $6,079 of cash versus $5,240 last year. The increase in cash utilization is due mainly to higher depreciation and amortization and improvements in working capital as compared to the prior year, offset, in part by lower net income. MSC's capital expenditures during the second quarter and first six months of fiscal 1998 were $4,726 and $12,921, respectively, versus $14,051 and $26,492, respectively, last fiscal year. Included in the prior fiscal periods was higher spending for the new coil coating facility in Elk Grove Village, Illinois, versus this fiscal year. In the second quarter ended August 31, 1997, the Company purchased designated assets of a specialty films distribution business in Australia and the remaining interest in a joint venture in Singapore for $2,246 in cash and subordinated notes. On a year to date basis, investments were made in the construction of a new coating and laminating line at the San Diego, California facility which was commissioned during the second quarter of fiscal 1998. MSC's total debt increased at August 31, 1997, to $67,136 from $58,511 at fiscal year end due mainly to capital investments, the Company's stock repurchase program, and the acquisitions of the distribution businesses for the specialty films area. As of August 31, 1997, the Company maintains three unsecured lines of credit totaling $75,000. There was $3,700 outstanding under these lines of credit as of August 31, 1997. The Company has executed letters of credit totaling $4,759 against these lines leaving available lines of credit of $66,541 at August 31, 11 1997. On February 15, 1997, MSC authorized the issuance and sale of $50,000 Senior Notes ("Notes"). As of May 31, 1997, the Notes were issued and funded. 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. The Company previously announced the signing of a letter of intent to acquire certain assets of Pinole Point Steel Company and Colorstrip, Inc., which have now merged and are now known as Colorstrip, Inc. Located in San Francisco, California, the combined company operates a hot-dip galvanizing line and produces prepainted metal on its coil coating line. Although the term of the letter of intent has expired, the parties are continuing their discussions. Any transaction is subject to completion of satisfactory due diligence. There can be no assurance that definitive agreements will be executed or that the transaction will be consummated. 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 $4,413 as of August 31, 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 August 31, 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 MATERIAL SCIENCES CORPORATION FORM 10-Q For the Quarter Ended August 31, 1997 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- On July 17, 1997, the Company held its Annual Meeting of Shareowners. Jerome B. Cohen, Roxanne J. Decyk, Eugene W. Emmerich, G. Robert Evans, E. F. Heizer, Jr., J. Frank Leach, Gerald G. Nadig, Irwin P. Pochter, and Howard B. Witt, being nine nominees named in the Company's Proxy Statement, dated June 16, 1997, were elected at the Annual Meeting to serve as the Board of Directors by a majority vote of shareowners. No votes were cast for any other person. The details of the vote were as follows:
Name For Against ---- --- ------- Jerome B. Cohen 12,934,124 1,265,397 Roxanne J. Decyk 12,932,166 1,267,355 Eugene W. Emmerich 12,934,203 1,265,318 G. Robert Evans 13,454,701 744,820 E. F. Heizer, Jr. 12,934,292 1,265,229 J. Frank Leach 13,468,385 731,136 Gerald G. Nadig 13,472,764 726,757 Irwin P. Pochter 12,931,801 1,267,720 Howard B. Witt 13,470,689 728,832
On August 5, 1997, subsequent to the election of the Board of Directors, Mr. J. Frank Leach passed away. The Company does not currently plan to replace Mr. Leach's position on the Board of Directors. Approved by a majority vote of shareowners was the proposal to increase the number of authorized shares of common stock of the Company from 20,000,000 to 40,000,000 which enhances the Company's flexibility in connection with possible future actions such as stock splits, acquisitions, and other corporate matters. The details of the vote were as follows:
For Against Abstain --- ------- ------- 12,202,866 1,933,898 62,757
13 Approved by a majority vote of the 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 150,000 shares. The Plan provides incentives to the key employees of the Company through rewards linked to the performance of the Company's common stock. The details of the vote were as follows:
For Against Abstain --- ------- ------- 7,822,920 6,307,065 69,536
Approved by a majority vote of the shareowners was the proposal to amend the Employee Stock Purchase Plan to increase the aggregate number of shares of the Company's common stock that may be awarded thereunder by 600,000 shares. The Plan provides incentives to participating employees to create value for the Company by giving them direct ownership interest in the Company. The details of the vote were as follows:
For Against Abstain --- ------- ------- 13,391,608 740,769 67,144
Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a)3 Restated Certificate of Incorporation (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. 14 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 8th day of October, 1997. MATERIAL SCIENCES CORPORATION By: /s/ Gerald G. Nadig --------------------------- Gerald G. Nadig President and Chief Executive Officer By: /s/ James J. Waclawik, Sr. --------------------------- James J. Waclawik, Sr. Vice President, Chief Financial Officer and Secretary 15 MATERIAL SCIENCES CORPORATION Quarterly Report on Form 10-Q Index to Exhibits
Sequentially Exhibit Number Description of Exhibit Numbered Page - -------------- ---------------------- ------------- 3 Restated Certificate of Incorporation 27 Financial Data Schedule (1)
(1) Appears only in the electronic filing of this report with the Securities and Exchange Commission. EX-3 2 RESTATED CERTIFICATE OF INCORPORATION CERTIFICATE OF RESTATED CERTIFICATE OF INCORPORATION OF MATERIAL SCIENCES CORPORATION * * * * * James J. Waclawik, Sr., being the Vice President, Chief Financial Officer and Secretary of Material Sciences Corporation, a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: The Corporation filed its original Certificate of Incorporation with the Delaware Secretary of State on September 21, 1982 (as amended, the "Certificate of Incorporation") under the name of M.S.C. Merger Co. SECOND: The Corporation changed its name to Material Sciences Corporation on October 31, 1983 in connection with the filing of a Certificate of Merger, which merged "Material Sciences Corporation," a California corporation, with and into the Corporation. THIRD: The Restated Certificate of Incorporation attached hereto as Exhibit A was duly adopted by the Board of Directors of the Corporation in accordance with Section 245 of the General Corporation. FOURTH: In accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware, approval of the Corporation's stockholders is not required with respect to the adoption of the Restated Certificate of Incorporation. * * * * * IN WITNESS WHEREOF, the undersigned, being the Vice President, Chief Financial Officer and Secretary hereinabove named, for the purpose of restating and integrating the Certificate of Incorporation pursuant to the General Corporation Law of the State of Delaware, under penalty of perjury does hereby declare and certify that is the act and deed of the Corporation and the facts stated herein are true, and accordingly has hereunto signed this Certificate of Restated Certificate of Incorporation this 25th day of September, 1997. MATERIAL SCIENCES CORPORATION, a Delaware Corporation By: /s/ James J. Waclawik, Sr. -------------------------- James J. Waclawik, Sr. Vice President, Chief Financial Officer and Secretary EXHIBIT A RESTATED CERTIFICATE OF INCORPORATION OF MATERIAL SCIENCES CORPORATION Adopted in accordance with Section 245 of the General Corporation Law of the State of Delaware. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this Corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. The name of the corporation is Material Sciences Corporation and the name under which the corporation was originally incorporated is M.S.C. Merger Co. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 21, 1982. -------------- ARTICLE ONE The name of the Corporation is Material Sciences Corporation (hereinafter referred to as the "Corporation"). ARTICLE TWO The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. ARTICLE THREE The nature of the business to be conducted or promoted and the purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 50,000,000 shares, consisting of: 10,000,000 shares of preferred stock of the par value of $1.00 per share ("preferred stock"); and 40,000,000 shares of common stock of the par value of $.02 per share ("common stock"). The designations, voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such stock shall be as follows: I PREFERRED STOCK 1. Shares of preferred stock may be issued in one or more series at such time or times, and for such consideration or considerations, as the Board of Directors may determine. All shares of any one series of preferred stock shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to dates from which dividends thereon may be cumulative. All series shall rank equally and be identical in all respects, except as permitted by the provisions of Section 2 of this Division I. 2. The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of preferred stock in one or more series with such voting powers, designations, preferences and relative, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors, and as are not stated and expressed in this Certificate of Incorporation (or any amendment thereto), including, but not limited to, determination of any of the following: (a) the distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors; (b) the dividend rate or rates on the shares of such series and the preferences, if any, over any other series (or of any other series over such series) with respect to dividends; the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate; (c) the voting powers, full or limited, if any, of the shares of such series, and under what conditions, if any, the shares of such series (alone or together with the shares of one or more other series having similar provisions) shall be entitled to vote separately as a class (i) for the election of one or more directors of the Corporation or (ii) upon other matters; (d) whether the shares of such series shall be redeemable, the limitations and restrictions with respect to such redemptions, the time or times when, the price or prices at -2- which and the manner in which such shares shall be redeemable, including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed; (e) the rights to which the holders of shares of such series shall be entitled, and the preferences, if any, over any other series (or of any other series over such series), upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and, if voluntary, may vary at different dates; (f) whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series, including the price or prices at which the shares may be purchased or redeemed, or to other corporate purposes and the terms and provisions relative to the operation thereof; (g) whether the shares of such series shall be convertible into or exchangeable for shares of stock of any other class or classes, or of any other series of the same class, and, if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of such conversion or exchange; (h) whether the issuance of additional shares of preferred stock shall be subject to restrictions as to issuance, or as to the powers, preferences or other rights of any other series; and (i) any other preferences, privileges and powers, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation, as the same may be amended from time to time. * * * * * The Board of Directors of the Corporation pursuant to the authority vested in it by Article Four, Division I (Preferred Stock) above has designated a series of preferred stock as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series B Junior Participating Preferred Stock" (the "Series B Preferred Stock"), and the number of shares constituting such series shall be 1,000,000. Such number of shares may be increased by resolution of the Board of Directors. -3- Section 2. Dividends and Distributions. --------------------------- (A) (i) Subject to the prior rights of any other series of Preferred Stock ranking prior to the Series B Preferred Stock as to dividends, the holders of shares of Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of May, August, November, and February in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind), of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.02 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. The "Adjustment Number" shall initially be 100. In the event the Corporation shall at any time on or after July 2, 1996 (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock (by reclassification or otherwise) into a greater number of shares of Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such Adjustment Number in effect by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (ii) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in this paragraph (A) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (B) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series B Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or -4- unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a-share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights: (A) Each share of Series B Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the stockholders of the Corporation. (B) Except as otherwise provided herein, in the Corporation's Certificate of Incorporation, as amended, or by-laws, as amended, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any shares of Series B Preferred Stock shall be in arrears in an amount equal to at least six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series B Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, the holders of Preferred Stock (including holders of the Series B Preferred Stock) upon which these or like voting rights have been conferred and are exercisable (the "Voting Preferred Stock") with dividends in arrears in an amount equal to six quarterly dividends thereon voting as a class, irrespective of series, shall have the right to elect two Directors. (ii) During any default period, such voting right of the holders of Series B Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of Series B Preferred Stock as hereinafter provided to increase in certain cases the authorized number of Directors shall be exercised unless the holders of one-third in number of shares of Voting Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Voting Preferred Stock -5- of such voting right. At any meeting at which the holders of Voting Preferred Stock shall initially exercise such voting right during an existing default period, they shall have the right, voting separately as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two Directors or, if such voting right is exercised at an annual meeting, to elect two Directors. If the number of Directors which may be otherwise elected at any annual meeting or a special meeting does not permit the holders of the Voting Preferred Stock to elect two Directors as provided herein, the holders of Voting Preferred Stock, voting separately as a class, shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of Voting Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such default period, the number of Directors shall not be increased or decreased except with the approval of the holders of Voting Preferred Stock voting separately as a class. (iii) Unless the holders of Voting Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Voting Preferred Stock then outstanding may request the calling of a special meeting of the holders of Voting Preferred Stock, which meeting shall thereupon be called by the Chairman and Chief Executive Officer, any Vice President or the Secretary of the Corporation. Notice of any such meeting and of any annual meeting at which holders of Voting Preferred Stock are entitled to specially elect Directors pursuant to this paragraph (C) shall be given to each holder of record of Voting Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such request, or in default of the calling of such meeting within 60 days after such order or request such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Voting Preferred Stock then outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) During any default period after the holders of Voting Preferred Stock shall have exercised their rights to elect Directors voting as a class, (x) the Directors so elected by the holders of Voting Preferred Stock shall continue in effect until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class or classes of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class or classes of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. -6- (v) Immediately upon the expiration of a default period, (x) the right of the holders of Voting Preferred Stock as a class to elect two Directors shall cease, (y) the term of any Directors so elected by the holders of Voting Preferred Stock as a class shall terminate and (z) the number of Directors shall be such number as may be provided for in the Corporation's by-laws, as amended, or the Certificate of Incorporation, as amended, without regard to any increase made pursuant to the provisions of paragraph (C) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Certificate of Incorporation or the by- laws). Any vacancies in the Board of Directors effected by the Provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation dissolution or winding up) to the Series B Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration any shares of any stock ranking on junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock, except the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution liquidation or winding up) to the Series B Preferred Stock; or -7- (iv) purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shams of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shams upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors subject to the conditions and restrictions on issuance set forth in the Certificate of Incorporation. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received the greater of (i) $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, and (ii) an aggregate amount per share equal to the Adjustment Number (as adjusted from time to time pursuant to Section 2(A) hereof) times the aggregate amount to be distributed per share to holders of Common Stock, or (B) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock, securities, cash or other property, then in any such case the shares of Series B Preferred Stock then outstanding shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number (as adjusted from time to time pursuant to Section 2(A) hereof) times the aggregate amount of stock, securities, cash or other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. Section 8. No Redemption. The shares of Series B Preferred Stock shall not be redeemable. -8- Section 9. Ranking. The Series B Preferred Stock shall rank junior to, or pari passu with, all other series of the Corporation's Preferred Stock subsequently issued, with respect to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters. Section 10. Amendment. The Certificate of Incorporation of the Corporation, as heretofore amended, shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class. * * * * * II COMMON STOCK 1. Shares of common stock may be issued in one or more series at such time or times, and for such consideration or considerations, as the Board of Directors shall determine. The Board of Directors is hereby authorized to fix, state and establish, in the resolution or resolutions providing for the issuance of any wholly unissued series of common stock, the relative powers, rights, designations, preferences, qualifications, limitations and restrictions of such series in relation to any other series of common stock at the time outstanding. The Board of Directors is also expressly authorized to fix the number of shares of each such series, but not below the number of shares thereof then outstanding. The authority of the Board of Directors with respect to each series of common stock shall include (without limitation) the determination of the following: (a) the dividend rate on the shares of each series, whether dividends shall be cumulative, and, if so, from which date or dates, the relative rights of priority, if any, with respect to the payment of dividends on the shares of each such series; (b) whether the shares of one or more series shall have voting rights (other than the voting rights provided by law) and, if so, the terms of such voting rights; (c) whether the shares of one or more series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate upon the occurrence of such events as the Board of Directors may prescribe; (d) the rights of the shares of each series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, with respect to the distribution of assets on the shares of each such series; and -9- (e) any other preferences, privileges and powers, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation, as the same may be amended from time to time. 2. Notwithstanding the foregoing, each holder of common stock or any series of common stock shall be entitled to cast, at all elections of directors of the Corporation, as many votes as shall equal the number of votes which such holder would (except for this cumulative voting provision) be entitled to cast for the election of directors with respect to the shares so held, multiplied by the number of directors to be elected by such holder, and such holder may cast all of such votes for a single director or may distribute the votes among two or more of the directors as the holder deems appropriate. * * * * * The Board of Directors of the Corporation pursuant to the authority vested in it by Article Four, Division II (Common Stock) above has designated a series of common stock as follows: Section 1. Designation of Series. There is hereby established a series of common stock, designated Common Stock, which shall have a par value of $.02 per share. Section 2. Number of Shares of Common Stock. The number of shares constituting the Common Stock is fixed at 40,000,000. Section 3. Dividend Provisions. (a) The holders of outstanding shares of Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of assets at the time legally available therefore, dividends at the rate determined by the Board of Directors. (b) The dividends authorized by subparagraph (a) of this Section 3 shall not be cumulative, and no rights shall accrue to the holders of outstanding shares of Common Stock by reason of the fact that such dividends may not have been paid or declared and set aside for payment in any prior fiscal quarter or quarters of the Corporation. Section 4. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of this Corporation, either voluntary or involuntary, the holders of shares of Common Stock shall be entitled to receive an amount per share equal to the sum of (i) $5.00 for each outstanding share of Common Stock and (ii) all declared but unpaid dividends thereon. -10- (b) If the assets available for distribution are, upon the occurrence of an event specified in subparagraph (a) of this Section 4, insufficient to permit the payment to the holders of Common Stock of the full preferential amount to which they are entitled pursuant to such subparagraph, then the entire amount of assets of this Corporation legally available for distribution to the holders of Common Stock shall be distributed ratably among holders of the Common Stock only, in proportion to the number of shares of Common Stock held by each of them. (c) Should any assets remain in this Corporation upon completion of the distributions required by subparagraph (a) of this Section 4, then the holders of Common Stock shall be entitled to a distribution of such remaining assets. (d) The liquidation preferences and rights provided under this Section 4 to the holders of Common Stock by reason of their ownership thereof shall be appropriately adjusted by the Board of Directors in the event of any stock split, stock dividend or similar capital transaction affecting the number of outstanding shares of Common Stock without the Corporation's receipt of consideration therefor. Section 5. Voting Rights. The holder of each share of Common Stock shall have the right to one vote, for each share of Common Stock held, on all matters requiring shareholder approval under the law of this Corporation's state of incorporation. Notwithstanding the foregoing, each holder of shares of Common Stock shall be entitled to cast, at all elections of directors of this Corporation, as many votes as shall equal the number of votes which such holder would (except for this cumulative voting provision) be entitled to cast for the election of directors with respect to the shares so held, multiplied by the number of directors to be elected by such holder, and such holder may cast all of such votes for a single director or may distribute the votes among two or more of the directors as the holder deems appropriate. * * * * * III OTHER PROVISIONS No holder of the capital stock of the Corporation shall have the right as such holder to purchase or subscribe for any security of the Corporation now or hereafter authorized or issued. All such securities may be issued and disposed of by the Board of Directors to such persons, firms, corporations and associations for such lawful considerations, and on such terms, as the Board of Directors in its discretion may determine, without first offering the same, or any part thereof, to the holders of any shares of the capital stock of the Corporation. -11- ARTICLE FIVE No action required to, or which may, be taken at an annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of the stockholders of the Corporation to act by written consent, whether pursuant to Section 228 of the General Corporation Law of the State of Delaware or otherwise, is specifically denied. ARTICLE SIX Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board, in his discretion, and shall be called by the Chairman of the Board or the Secretary at the request in writing of a majority of the directors then holding office, or at the request in writing of stockholders owning at least the number of shares of the Corporation issued and outstanding and entitled to cast a majority of the votes at such meeting. Any such written request shall state the purpose or purposes of the proposed meeting. ARTICLE SEVEN 1. In addition to any affirmative vote required by law or this Certificate of Incorporation, the affirmative vote of the holders of that number of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class (it being understood that for purposes of this Article Seven, each share of Voting Stock shall have the number of votes granted to it pursuant to Article Four of this Certificate of Incorporation), which equals at least the sum of (i) the number of outstanding shares of Voting Stock of the Corporation beneficially owned by a "Related Person" (as defined in this Article Seven) plus (ii) one half of the number of outstanding shares of Voting Stock of the Corporation held by stockholders other than a Related Person, shall be required for the approval or authorization of a "Business Combination" (as defined in this Article Seven) of the Corporation with a Related Person; provided, however, that the foregoing voting requirement shall not be applicable (and only such affirmative vote as is required by law or any other provision of this Certificate of Incorporation shall be applicable) if: (a) the "Continuing Directors" (as defined in this Article Seven) of the Corporation by a majority affirmative vote (i) have expressly approved the acquisition of the outstanding shares of Voting Stock of the Corporation that caused the Related Person involved in the Business Combination to become a Related Person or (ii) have expressly approved the Business Combination; or (b) the Business Combination is solely between the Corporation and another corporation, fifty percent or more of the voting stock of which is owned by the Corporation and none of which is owned by the Related Person; provided that if the Corporation is not the surviving entity, each stockholder of the Corporation receives the same type of -12- consideration in such transaction in proportion to the number of shares owned and the provisions of Articles Five through Seven (inclusive) and Article Eleven hereof are continued in effect or adopted by such surviving corporation as part of its articles of incorporation or certificate of incorporation, as the case may be, without any change; or (c) the Business Combination is a merger or consolidation and the cash or fair market value (as determined by the Continuing Directors) of the property, securities or other consideration to be received per share pursuant to the Business Combination by: (i) holders of shares of the Corporation's common stock, $.02 par value per share and designated by the Board of Directors as "Common Stock" pursuant to a Certificate filed September 30, 1982, is not less than the highest of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Related Person involved in the Business Combination in acquiring any of its holdings of the Corporation's common stock, $.02 par value per share and so designated as "Common Stock", (2) an amount that bears the same percentage relationship to the market price of the Corporation's common stock, $.02 par value per share and so designated as "Common Stock", immediately prior to the announcement of such Business Combination as the highest per share price determined in clause (1) above bears to the market price of the Corporation's common stock, $.02 par value per share and so designated as "Common Stock", immediately prior to the commencement of the acquisition of the Corporation's Voting Stock that caused such Related Person to become a Related Person, or (3) if the Business Combination is announced or effected on or prior to May 31, 1986, $12.63; (ii) holders of shares of any other series of the corporation's common stock is not less than the highest of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Related Person involved in the Business Combination in acquiring any holdings of shares of such series of the Corporation's common stock, (2) in the case of any series which is convertible into shares of the Corporation's common stock, $.02 par value per share and designated by the Board of Directors as "Common Stock" pursuant to a Certificate filed September 30, 1982, a per share price determined by multiplying the per share price applicable to shares of the Corporation's common stock, $.02 par value per share and so designated as "Common Stock", pursuant to subparagraph l(c)(i) of this Article Seven by an amount equal to the number of shares of the Corporation's common stock, $.02 par value per share and so designated as "Common Stock," into which one share of such other series of the Corporation's common stock may be converted, whether or not such conversion is subject to the occurrence of any event, or (3) an amount that bears the same percentage relationship to the market price of shares of such other series of the Corporation's common stock immediately prior to the announcement of such Business Combination as the highest per share price determined in clause (1) above bears to the market price of shares of such other series of the Corporation's common stock immediately prior to the -13- commencement of the acquisition of the Corporation's Voting Stock that caused such Related Person to become a Related Person; and (iii) holders of shares of any other class of Voting Stock is not less than the highest of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Related Person involved in the Business Combination in acquiring any holdings of any such class of Voting Stock, (2) if applicable, the highest preferential amount per share to which the holders of shares of such event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or (3) an amount that bears the same percentage relationship to the market price of shares of any such class of Voting Stock immediately prior to the announcement of such Business Combination as the highest per share price determined in clause (1) above bears to the market price of shares of any such class of Voting Stock immediately prior to the commencement of the acquisition of the Corporation's Voting Stock that caused such Related Person to become a Related Person. Appropriate adjustments shall be made with respect to clauses (i), (ii) and (iii) above for recapitalizations and for stock splits, stock dividends, and like distributions. 2. For the purpose of this Article Seven: (a) The term "Business Combination" shall mean: (i) any merger or consolidation of the Corporation with or into a Related Person; (ii) any sale, lease, exchange, transfer or other disposition, including, without limitation, a mortgage or any other security device, of all or any Substantial Part (as defined in this Article Seven) of the assets of the Corporation (including, without limitation, any voting securities of a subsidiary) or of the assets of a subsidiary of the Corporation, to a Related Person in one transaction or a series of transactions; (iii) any merger or consolidation of a Related Person with or into the Corporation or a subsidiary of the Corporation; (iv) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the Corporation or a subsidiary of the Corporation; (v) the issuance of any securities of the Corporation or a subsidiary of the Corporation to a Related Person; -14- (vi) the acquisition by the Corporation or a subsidiary of the Corporation of any securities issued by a Related Person; (vii) any reclassification of securities, recapitalization or other transaction designed to decrease the number of holders of the Corporations voting securities remaining, if there is a Related Person; (viii) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of the Related Person; or (ix) any agreement, contract or other arrangement providing for any transaction herein described in clauses (i) to (viii) of this definition of Business Combination. (b) The term "Related Person" shall mean and include any individual, corporation, partnership or other person or entity which, together with its "Affiliates" and "Associates" (as those terms are defined as of September 24, 1984, in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1984), in the aggregate, beneficially owns twenty percent or more of the outstanding shares of Voting Stock of the Corporation, and shall mean and include any Affiliate or Associate of such Related Person. (c) The term "Substantial Part" shall mean more than thirty percent of the fair market value of the total assets of the Corporation in question at the end of the Corporations most recent fiscal year ending prior to the time said determination is made. (d) The term "Continuing Director" shall mean a director who was a member of the Board of Directors of the Corporation immediately prior to the time the Related Person involved in a Business Combination became a Related Person. (e) For the purposes of subparagraph l(c) of this Article Seven, the term "other consideration to be received" shall include, without limitation, capital stock of the Corporation retained by its existing public stockholders in the event of a Business Combination in which the Corporation is the surviving corporation. (f) For the purposes of this Article Seven, any corporation, person or other entity shall be deemed to be the beneficial owner of any shares of the Voting Stock of the Corporation: (i) which such corporation, person or other entity beneficially owns, (ii) which such corporation, person or other entity has the right (whether or not such right is immediately exercisable) to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, -15- (iii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (ii) above), (A) by any Affiliate or Associate of such corporation, person or other entity, or (B) by any corporation, person or other entity acting in concert with it, or (iv) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (ii) above), by any corporation, person or other entity with which it or any Affiliate or Associate of it or any corporation, person or other entity acting in concert with it or with any Affiliate or Associate of it, has any agreement, arrangement or understanding with respect to acquiring, holding, voting or disposing of the Voting Stock of the Corporation. For the purposes of this Article Seven, the outstanding shares of any class of stock of the Corporation shall include shares deemed owned by a Related Party through application but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. 3. On the basis of information known to the Corporation, the Continuing Directors, by a majority affirmative vote shall make all determinations to be made under this Article Seven, including whether (i) a corporation, person or other entity beneficially owns more than twenty percent of the outstanding shares of the Voting Stock of the Corporation, or (ii) a corporation, person or other entity has the right to acquire shares of the Voting Stock of the Corporation, or (iii) a corporation, person or other entity is an Affiliate or Associate of another, or (iv) a corporation, person or other entity has any agreement, arrangement or understanding with respect to acquiring, holding voting or disposing of the Voting Stock of the Corporation, or (v) a corporation, person or other entity is acting in concert with any other corporation, person or other entity, or (vi) a per share consideration proposed to be paid meets the conditions of subparagraphs l(c)(i), (ii) and (iii) of this Article Seven; and all such determinations shall be conclusive. 4. The affirmative vote required by this Article Seven is required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise. 5. The provisions set forth at this Article Seven may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of that number of the then outstanding shares of the Voting Stock of the Corporation, voting together as a single class, which equals at least the sum of (i) the number of outstanding shares of Voting Stock of the Corporation beneficially owned by a Related Person plus (ii) one-half of the number of outstanding shares of Voting Stock of the Corporation held by stockholders other than a Related Person. ARTICLE EIGHT The Board of Directors is authorized to make, alter or repeal the By- laws of the Corporation. Election of directors need not be by written ballot. -16- ARTICLE NINE The Corporation shall indemnify any person against any liability arising by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another enterprise, to the fullest extent allowed under the General Corporation Law of the State of Delaware. ARTICLE TEN In addition to any other requirements for amendments to the Certificate of Incorporation, no amendment to the Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of Article Five, Article Six, Article Nine, or this Article Ten, unless the amendment effecting such amendment, alteration, change or repeal shall be approved by the affirmative vote of the holders of that number of the then outstanding shares of the "Voting Stock" (as such term is defined in Article Seven hereof) of the Corporation, voting together as a single class (it being understood that for purposes of this Article Ten, each share of Voting Stock shall have the number of votes granted to it pursuant to Article Four of this Certificate of Incorporation), which equals at least the sum of (i) the number of outstanding shares of Voting Stock of the Corporation beneficially owned by a "Related Person" (as such term is defined and determined in Article Seven hereof) plus (ii) one-half of the number of outstanding shares of Voting Stock of the Corporation held by stockholders other than a Related Person. ARTICLE ELEVEN A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. -17- EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Statements of Income and Consolidated Balance Sheets and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS FEB-28-1998 MAR-01-1997 AUG-31-1997 1,946 0 35,087 2,556 35,248 79,329 255,392 96,638 263,355 40,741 63,047 0 0 326 137,070 263,355 143,637 143,637 109,262 109,262 0 0 2,058 6,938 2,672 4,266 0 0 0 4,266 0.28 0.28
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