-----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, N4l7vuPzC6XdCIdrAEjBdgKEoAUtthZi+IhmG9RlDi0xfLYLCT11Gpffe3S5WdWU ORsCinBZHuTsTKn919WTrw== 0000950131-98-000162.txt : 19980114 0000950131-98-000162.hdr.sgml : 19980114 ACCESSION NUMBER: 0000950131-98-000162 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980113 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: 98505578 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 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1997 Commission File Number 1-8803 MATERIAL SCIENCES CORPORATION (Exact name of Registrant as specified in its charter) Delaware 95-2673173 (State or other jurisdiction (IRS employer identification of incorporation or organization) number) 2200 East Pratt Boulevard Elk Grove Village, Illinois 60007 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (847) 439-8270 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- As of January 12, 1998, there were outstanding 15,347,606 shares of common stock, $.02 par value. MATERIAL SCIENCES CORPORATION FORM 10-Q For The Quarter Ended November 30, 1997 PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ---------------------------- (a) Financial statements of Material Sciences Corporation and Subsidiaries (b) Summarized income statement information for Walbridge Coatings, An Illinois Partnership 2 Consolidated Statements of Income (Unaudited) Material Sciences Corporation and Subsidiaries
Three Months Ended Nine Months Ended November 30, November 30, (In thousands, except per share data) 1997 1996 1997 1996 - ----------------------------------------------- ----------- ----------- ----------- ----------- Net Sales (1) $ 75,107 $ 69,658 $ 218,744 $ 208,962 Cost of Sales 57,526 50,920 166,788 153,432 ----------- ----------- ----------- ----------- Gross Profit $ 17,581 $ 18,738 $ 51,956 $ 55,530 Selling, General and Administrative Expenses 12,881 11,629 39,020 35,027 ----------- ----------- ----------- ----------- Income from Operations $ 4,700 $ 7,109 $ 12,936 $ 20,503 ----------- ----------- ----------- ----------- Other (Income) and Expense: Interest Income $ (30) $ (54) $ (105) $ (189) Interest Expense 1,073 178 3,131 320 Equity in Results of Partnership 369 350 211 831 Other, Net (249) (265) (776) (721) ----------- ----------- ----------- ----------- Total Other Expense, Net $ 1,163 $ 209 $ 2,461 $ 241 ----------- ----------- ----------- ----------- Income Before Income Taxes $ 3,537 $ 6,900 $ 10,475 $ 20,262 Income Taxes 1,362 2,657 4,034 7,802 ----------- ----------- ----------- ----------- Net Income $ 2,175 $ 4,243 $ 6,441 $ 12,460 =========== =========== =========== =========== Net Income Per Common and Common Equivalent Share $ 0.14 $ 0.27 $ 0.42 $ 0.80 =========== =========== =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding 15,499 15,645 15,471 15,594 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 3
Consolidated Balance Sheets Material Sciences Corporation and Subsidiaries November 30, February 28, 1997 1997 (In thousands) Unaudited Audited - ----------------------------------------------------- ------------ ------------ Assets: Current Assets: Cash and Cash Equivalents $ 3,164 $ 2,116 Restricted Cash 5,000 - Receivables: Trade, Less Reserves of $2,644 and $2,271, Respectively (2) 34,087 35,944 Current Portion of Partnership Note 780 767 Income Taxes 660 1,249 Prepaid Expenses 4,112 2,791 Inventories 35,622 30,952 Prepaid Taxes 1,186 1,186 --------- -------- Total Current Assets $ 84,611 $ 75,005 --------- -------- Gross Property, Plant and Equipment $ 257,494 $242,340 Accumulated Depreciation and Amortization (100,922) (87,954) --------- -------- Net Property, Plant and Equipment $ 156,572 $154,386 --------- -------- Other Assets: Investment in Partnership $ 11,166 $ 10,759 Partnership Note Receivable, Less Current Portion - 374 Intangible Assets, Net 14,043 12,837 Other 482 728 --------- -------- Total Other Assets $ 25,691 $ 24,698 --------- -------- Total Assets $ 266,874 $254,089 ========= ======== Liabilities: Current Liabilities: Current Portion of Long-Term Debt $ 3,774 $ 3,750 Accounts Payable 23,325 24,092 Accrued Payroll Related Expenses 8,553 9,838 Accrued Expenses 5,672 6,171 --------- -------- Total Current Liabilities $ 41,324 $ 43,851 --------- -------- Long-Term Liabilities: Deferred Income Taxes $ 11,288 $ 11,392 Long-Term Debt, Less Current Portion 62,968 54,761 Accrued Superfund Liability 3,968 4,071 Other 7,016 6,641 --------- -------- Total Long-Term Liabilities $ 85,240 $ 76,865 --------- -------- Shareowners' Equity: Preferred Stock (3) $ - $ - Common Stock (4) 327 325 Additional Paid-In Capital 51,663 50,142 Treasury Stock at Cost (5) (8,545) (7,518) Retained Earnings 96,865 90,424 --------- -------- Total Shareowners' Equity $ 140,310 $133,373 --------- -------- Total Liabilities and Shareowners' Equity $ 266,874 $254,089 ========= ========
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 Nine Months Ended November 30, November 30, (In thousands) 1997 1996 1997 1996 - ---------------------------------------------------- ---------- ---------- ---------- ---------- Cash Flows From: Operating Activities: Net Income $ 2,175 $ 4,243 $ 6,441 $ 12,460 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: Depreciation and Amortization 4,661 3,642 14,029 11,106 Benefit for Deferred Income Taxes (35) (79) (104) (227) Compensatory Effect of Stock Plans 98 57 129 337 Other, Net 403 338 243 819 --------- ---------- ---------- ---------- Operating Cash Flow Prior to Changes in Assets and Liabilities $ 7,302 $ 8,201 $ 20,738 $ 24,495 --------- ---------- ---------- ---------- Changes in Assets and Liabilities: Receivables $ 981 $ 1,882 $ 761 $ (4,164) Income Taxes Receivable 463 1,035 589 1,760 Prepaid Expenses (134) 154 (1,280) 60 Inventories (374) 142 (2,976) (1,983) Accounts Payable 1,025 1,286 (841) (29) Accrued Expenses (127) 1,490 (1,878) (645) Other, Net (340) (146) (238) (210) --------- ---------- ---------- ---------- Cash Flow from Changes in Assets and Liabilities $ 1,494 $ 5,843 $ (5,863) $ (5,211) --------- ---------- ---------- ---------- Net Cash Provided by Operating Activities $ 8,796 $ 14,044 $ 14,875 $ 19,284 --------- ---------- ---------- ---------- Investing Activities: Capital Expenditures, Net $ (2,136) $ (15,690) $ (15,057) $ (42,182) Acquisitions, Net of Cash Acquired (75) - (1,204) (2,489) Escrow for Acquisition 5,000 - 5,000 - Investment in Partnership (614) (454) (1,618) (1,331) Distribution from Partnership - - 1,374 375 Other Long-Term Assets - (117) 197 172 --------- ---------- ---------- ---------- Net Cash Provided by (Used in) Investing Activities $ 2,175 $ (16,261) $ (11,308) $ (45,455) --------- ---------- ---------- ---------- Financing Activities: Net Proceeds (Payments) Under Lines of Credit $ (3,300) $ 600 $ (14,600) $ 24,300 Proceeds from Senior Notes - - 20,000 - Payments to Settle Debt (2,094) (748) (3,286) (1,592) Purchase of Treasury Stock - - (1,027) - Sale of Common Stock 641 679 1,394 1,355 --------- ---------- ---------- ---------- Net Cash Provided by (Used in) Financing Activities $ (4,753) $ 531 $ 2,481 $ 24,063 --------- ---------- ---------- ---------- Net Increase (Decrease) in Cash $ 6,218 $ (1,686) $ 6,048 $ (2,108) Cash and Cash Equivalents at Beginning of Period 1,946 2,957 2,116 3,379 --------- ---------- ---------- ---------- Cash and Cash Equivalents at End of Period $ 8,164 $ 1,271 $ 8,164 $ 1,271 ========= ========== ========== ========== Supplemental Cash Flow Disclosures: Subordinated Notes Issued for Acquisitions $ - $ - $ 1,117 $ 1,500 Cash Portion of Acquisitions and Related Costs 75 - 1,204 2,489 --------- ---------- ---------- ---------- Total Consideration Paid for Acquisitions $ 75 $ - $ 2,321 $ 3,989 ========= ========== ========== ==========
The Changes in Assets and Liabilities above for the three months and nine months ended November 30, 1997, are net of assets and liabilities acquired. The accompanying notes are an integral part of these statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MATERIAL SCIENCES CORPORATION The data for the three and nine months ended November 30, 1997 and 1996 have not been audited by independent public accountants but, in the opinion of the Company, reflect all adjustments (consisting of only normal, recurring adjustments) necessary for a fair presentation of the information at those dates and for those periods. The financial information contained in this report should be read in conjunction with the Company's 1997 Annual Report to Shareowners and Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform with the fiscal 1998 presentation. (1) During the nine month periods ending November 30, 1997 and 1996, the Company derived approximately 21.0% and 20.7%, respectively, of its sales from fees billed to the Partnership by a subsidiary of the Company for operating the Walbridge, Ohio facility. (2) Includes trade receivables due from the Partnership of $858 at November 30, 1997 and $2,256 at February 28, 1997. (3) Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000 Designated Series B Junior Participating Preferred; None Issued. (4) Common Stock, $.02 Par Value; 40,000,000 Shares Authorized; 16,330,254 Shares Issued and 15,350,606 Shares Outstanding at November 30, 1997 and 16,256,132 Shares Issued and 15,339,384 Shares Outstanding at February 28, 1997. (5) Treasury Stock at Cost; 979,648 Shares at November 30, 1997 and 916,748 Shares at February 28, 1997. (6) On December 15, 1997, the Company purchased certain assets and assumed certain liabilities of Colorstrip, Inc., a west coast hot-dipped galvanizing and coil coating business. Consideration for the purchase, including transaction costs, was approximately $129,000, which was financed through a new bank line of credit and a short-term seller note. The Company intends to refinance its short-term debt by the end of the fiscal year. At November 30, 1997, the Company had placed $5,000, classified as restricted cash, in an escrow account related to the acquisition. Located in San Francisco, California, the operation consists of a 300,000 ton capacity hot-dipped galvanizing line and coil coating line capable of producing 150,000 tons of prepainted metal. The two facilities will continue to operate in their current capacities as MSC subsidiaries, serving the building and construction markets across the western United States. The acquisition will be accounted for under the purchase method of accounting. 6 Summarized Income Statement Information (Unaudited) Walbridge Coatings, An Illinois Partnership
Three Months Ended Nine Months Ended November 30, November 30, (In thousands) 1997 1996 1997 1996 - ----------------------------------------------- ----------- ----------- ----------- ----------- Net Revenues $ 18,498 $ 16,609 $ 53,489 $ 50,992 Gross Profit 390 376 2,154 1,535 Income (Loss) from Operations (250) (249) 122 (341) Net Income (Loss) (383) (484) (338) (1,205)
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 November 30, 1997 PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Material Sciences Corporation ("MSC" or "Company") operates in one business segment comprised of the following four product groups: laminates and composites, specialty films, coil coating and electrogalvanizing. The following table provides a summary of net sales and the percent of net sales of MSC's product groups.
Net Sales Summary Quarter Ended November 30, - --------------------- --------------------------------------------------- 1997 1996 ---------------------- ---------------------- Product Group: Dollars Percent Dollars Percent ---------- ---------- ---------- ---------- Laminates and Composites $ 17,288 23.0% $ 17,178 24.7% Specialty Films 9,426 12.5% 8,047 11.5% Coil Coating 31,812 42.4% 30,158 43.3% Electrogalvanizing 16,581 22.1% 14,275 20.5% --------- -------- --------- ------- $ 75,107 100.0% $ 69,658 100.0% ========= ======== ========= ======= Nine Months Ended November 30, --------------------------------------------------- 1997 1996 --------------------- ---------------------- Product Group: Dollars Percent Dollars Percent ---------- --------- ---------- ---------- Laminates and Composites $ 49,121 22.5% $ 49,657 23.8% Specialty Films 32,444 14.8% 29,374 14.1% Coil Coating 91,257 41.7% 86,604 41.4% Electrogalvanizing 45,922 21.0% 43,327 20.7% --------- ------- --------- ------- $218,744 100.0% $208,962 100.0% ========= ======= ========= =======
8 RESULTS OF OPERATIONS - --------------------- Net Sales Net sales in the third quarter of fiscal 1998 increased 7.8% over the same quarter last year. Sales of laminates and composites increased by 0.6%; specialty films increased by 17.1%; coil coating 5.5%; and electrogalvanizing 16.2%. For the nine-month period ended November 30, 1997, sales were 4.7% higher than the same period last fiscal year. Sales of specialty films increased by 10.5%; coil coating 5.4%; and electrogalvanizing 6.0%. Laminates and composites sales decreased by 1.1% compared to the first nine months of the prior year. Laminates and Composites During the third quarter of fiscal 1998, sales of laminates and composites increased 0.6% over the same quarter last year. An increase in sales of disc brake noise dampers and appliance products were partially offset by lower sales of Polycore Composites(R). For the first nine months, sales in this product group decreased 1.1% for the same period last year. Lower sales of Specular+(R), due to general market softness, were offset, in part, by an increase in sales of disc brake noise damper material to the replacement market and appliance products. Specialty Films Sales of specialty films for the three and nine months ended November 30, 1997, increased 17.1% and 10.5%, respectively, compared to the same periods last year. The increase for both periods was due primarily to higher sales of high performance solar control window films for the automotive aftermarket and building applications, as well as an increase in shipments of industrial products to the imaging and printing markets. The acquisitions of the Australian distribution business and the joint venture in Singapore during the second quarter have contributed to the growth as well. Coil Coating Coil coating sales during the third quarter of fiscal 1998 grew 5.5% over the third quarter last fiscal year. The growth was mainly due to an increase in shipments of automotive trim and building products, offset, in part, by lower sales to the appliance and swimming pool markets. For the nine-month period, coil coating sales increased 5.4% as compared to the first nine months of last year. The increase in sales was due to similar fluctuations in the product mix. Electrogalvanizing MSC participates in the electrogalvanizing market through Walbridge Coatings (the "Partnership"), a partnership among subsidiaries of MSC, Bethlehem Steel Corporation ("Bethlehem") and Inland Steel Industries, Inc. ("Inland"). MSC's net sales for electrogalvanizing consists of various fees charged to the Partnership for operating the facility. Bethlehem and Inland are primarily responsible for the sales and marketing activities of the Partnership. The Company's primary financial benefits from the Partnership are the revenues billed to Walbridge Coatings for operating the facility. These revenues represent 21.0% and 20.7% of the Company's net sales in the first nine months of fiscal 1998 and 1997, respectively. The profitability for operating the facility was higher than the Company's overall operating 9 results due in large part to depreciation related to the significant capital investments in Elk Grove Village, Middletown and San Diego. Under the equity method of accounting, the Company includes its portion of the Partnership shown in the Consolidated Statements of Income. The amounts do not directly correlate to the Company's 50% ownership interest due to contractual allocation requirements of the Partnership agreement. The Company's potential alternatives upon expiration of the Partnership term in June 1998 include, among other things, extension of the Partnership, purchase of the facility, or sale of the facility. The partners are actively discussing the various alternatives. The Company believes its investment in the Partnership is realizable. MSC's electrogalvanizing sales in the third quarter of fiscal 1998 increased 16.2% over the third quarter last year. Electrogalvanizing volume grew 7.7% to 124,300 tons for the three months ended November 30, 1997, from the 115,426 tons reported in the prior fiscal year period. The higher sales and volume is primarily due to a change in the product mix, as well as, the three day shutdown due to a lack of substrate in the third quarter of last fiscal year. On a year to date basis, sales increased 6.0% and volume remained flat at 350,131 tons compared to 350,842 tons for the same period in the prior fiscal year. The increase in sales was due to a shift in product mix, while the flatness in volume was the result of an increase in volume due to lack of substrate in last year's third quarter, offset, in part, by the extended second quarter maintenance shutdown. The sales and marketing responsibilities of the Partnership are split between Bethlehem and Inland at 76% and 24%, respectively. During the first nine months of fiscal 1998, Inland utilized 20.4% of available production line time rather than its full 24% share. Bethlehem and other customers utilized this additional available line time. In fiscal 1998, the Company expects more production line time will be utilized by customers other than Bethlehem and Inland. Inland is reviewing its future involvement in the Partnership, and therefore, there is no assurance that Inland will utilize its full 24% of available line time for the remainder of the partnership agreement. The Company believes that any short- term disruption in volume that might be caused by a reduction in Inland's line time requirements could eventually be replaced by additional volume from Bethlehem and other customers. Gross Profit The Company's gross profit margin was 23.4% in the third quarter of fiscal 1998 as compared to 26.9% in the same period last year. For the first nine months of fiscal 1998, gross profit margin was 23.8% versus 26.6% last year. The decrease in gross profit margin for the three month and year to date periods was primarily due to underabsorption of production costs due to the recent significant capacity increases and a shift in the product mix. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses were 17.2% of sales in the third quarter of fiscal 1998 as compared to 16.7% of sales for the same period last fiscal year. For the nine months ended November 30, 1997, SG&A expenses were 17.8% of sales versus 16.8% of sales for the same period in fiscal 1997. For the third quarter and the first nine months, the increase in SG&A is largely due to continuing development of powder coating technology, as well as the additional marketing efforts due to the acquisitions of the specialty films distribution businesses. On a year to date basis, SG&A was also affected by one-time expenses of 10 approximately $500 incurred for the investigation of previously announced accounting irregularities. Total Other Expense, Net and Income Taxes Total other expense, net was $1,163 and $2,461 during the third quarter and first nine months of fiscal 1998, respectively, versus $209 and $241 for the third quarter and first nine months of fiscal 1997. During both the quarterly and year to date periods, interest expense has increased over last year due to higher debt levels, less capitalized interest, and a transition to higher fixed interest rates versus the variable interest rates of fiscal 1997. For the nine month period, the higher interest expense was offset, in part, by an increase in equity in results of partnership due to the Company receiving the profit allocation on third party sales. MSC's effective income tax rate was approximately 38.5% during the third quarter and first nine months of fiscal 1998 and fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the third quarter of fiscal 1998, MSC generated $8,796 of cash from operating activities compared to $14,044 in the same period last fiscal year. The decrease in cash generation is mainly due to lower net income and higher receivables and inventory levels, partially offset by higher depreciation and amortization. For the first nine months, operating activities generated $14,875 of cash versus $19,284 for the same nine-month period last year. A decrease in net income and higher inventory levels contributed to the reduction in cash generation which was offset, in part, by higher depreciation and amortization and lower receivables. For the three and nine months ended November 30, 1997, MSC invested $2,136 and $15,057, respectively, compared to $15,690 and $42,182, respectively, in the prior fiscal year. Fiscal 1997 included higher spending for the new coil coating facility in Elk Grove Village, Illinois, versus fiscal year 1998. Also, on a year to date basis for fiscal 1998, the Company strengthened its specialty film interests by purchasing an Australian distribution business and a Singapore joint venture, as well as, investing in the construction of a new coating and laminating line at the San Diego, California facility. On December 15, 1997, the Company purchased certain assets and assumed certain liabilities of Colorstrip, Inc., a west coast hot-dipped galvanizing and coil coating business. Consideration for the purchase, including transaction costs, was approximately $129,000, which was financed through a new bank line of credit and a short-term seller note. The Company intends to refinance its short-term debt by the end of the fiscal year. Located in San Francisco, California, the operation consists of a 300,000 ton capacity hot-dipped galvanizing line and coil coating line capable of producing 150,000 tons of prepainted metal. The two facilities will continue to operate in their current capacities as MSC subsidiaries, serving the building and construction markets across the western United States. The acquisition will be accounted for under the purchase method of accounting. Total debt for MSC increased at November 30, 1997, to $66,742 from $58,511 at fiscal year end due mainly to capital investments, the $5,000 escrow required for the acquisition of Colorstrip, Inc., and the acquisitions of the distribution businesses for the specialty films area. The Company maintained three unsecured lines of credit totaling $75,000 as of November 30, 1997. There was $5,400 outstanding under these lines of credit as of November 30, 1997. The 11 Company has executed letters of credit totaling $4,757 against these lines leaving available lines of credit of $64,843 at November 30, 1997. The Company replaced these lines with a new bank line of credit totaling $140,000 concurrent with the acquisition of Colorstrip, Inc. The Company financed the acquisition through utilization of the new bank line of credit and a short-term seller note of $64,082. There was $65,000 outstanding under this line of credit as of January 8, 1998. The Company has executed letters of credit totaling $70,740 (of which $66,000 secures the short-term seller note) against this line leaving an available line of credit of $4,260 at January 8, 1998. The Company intends to refinance its short-term debt by the end of the fiscal year which would result in a reduction in the amount available under the bank line of credit. The Company believes that its cash flow from operations, together with available financing and cash on hand will be sufficient to fund its working capital needs, capital expenditure program, and debt amortization. On April 9, 1997, a plaintiff claiming to represent a class of Material Sciences Corporation shareowners filed a complaint in the United States District Court for the Northern District of Illinois. The purported class includes shareowners who purchased MSC shares between April 18, 1996 and April 7, 1997 and who allegedly suffered injury as a result of the accounting irregularities announced on April 7, 1997. The plaintiff claims that the Company and certain of its officers violated the federal securities laws by making material misstatements in the Company's publicly filed financial reports. On August 25, 1997, a class action complaint was filed in the Circuit Court of Cook County, Illinois. The complaint claims the Company violated the Illinois Consumer Fraud and Deceptive Practices Act as a result of false, misleading and deceptive representations and omissions of material facts relating to the Company's financial position during the period April 18, 1996 to April 6, 1997. The amount of both claims are uncertain. The Company believes that the claims are without merit and intends to vigorously defend the lawsuits. However, there can be no assurance with respect to the outcome of the litigation. No amounts have been provided in the accompanying financial statements for these claims. The Company has a capital lease obligation, which was $3,952 as of November 30, 1997, relating to a facility which the Company subleases to the Partnership. In addition, throughout the term of the Partnership, the Company is contingently responsible for 50% of the Partnership's financing requirements, including the Company's share (approximately $1,250) of $2,500 in Partnership financing loans from third parties at November 30, 1997. MSC continues to participate in the implementation of settlements with the government for the clean-up of various Superfund sites. For additional information, refer to MSC's Form 10-K for the fiscal year ended February 28, 1997. 12 MATERIAL SCIENCES CORPORATION FORM 10-Q For the Quarter Ended November 30, 1997 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) 2.1 See the exhibits listed in the Index to Exhibits. 4.1 See the exhibits listed in the Index to Exhibits. 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter for which this report is filed. On December 30, 1997, the Company filed a Form 8-K regarding the acquisition of Colorstrip, Inc. and other matters. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Elk Grove Village, State of Illinois, on the 12th day of January, 1997. MATERIAL SCIENCES CORPORATION By: /s/ Gerald G. Nadig -------------------------------- Gerald G. Nadig Chairman, President and Chief Executive Officer By: /s/ James J. Waclawik, Sr. -------------------------------- James J. Waclawik, Sr. Vice President, Chief Financial Officer and Secretary 14 MATERIAL SCIENCES CORPORATION Quarterly Report on Form 10-Q Index to Exhibits
Sequentially Exhibit Number Description of Exhibit Numbered Page - -------------- ---------------------- ------------- 2.1 Asset Purchase Agreement by and among Colorstrip, Inc., the Registrant and MSC Pinole Point Steel Inc. dated as of November 14, 1997. (1) 4.1 Credit Agreement, dated as of December 12, 1997, among the Registrant, Bank of America National Trust and Savings Association, as Agent and Letter of Credit Issuing Bank, and the other financial institutions party thereto. (2) 27 Financial Data Schedule (3)
(1) Incorporated by reference to the Registrant's Form 8-K filed on December 30, 1997 (File No. 1-8803). (2) Incorporated by reference to the Registrant's Form 8-K filed on December 30, 1997 (File No. 1-8803). (3) Appears only in the electronic filing of this report with the Securities and Exchange Commission. EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Statement of Income and Consolidated Balance Sheets and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS FEB-28-1998 MAR-01-1997 NOV-30-1997 8,164 0 34,087 2,644 35,622 84,611 257,494 100,922 266,874 41,324 62,968 0 0 327 139,983 266,874 218,744 218,744 166,788 166,788 0 0 3,131 10,475 4,034 6,441 0 0 0 6,441 0.42 0.42
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