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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: February 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to _________
Commission file number: 1-8803
MATERIAL SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2673173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-439-8270
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.02 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[_]
The aggregate market value of the voting stock of the registrant held by
shareowners (not including any voting stock owned by directors or officers of
the registrant (such exclusion shall not be deemed an admission that any such
person is an affiliate of the registrant)) of the registrant was approximately
$250,197,000 at April 26, 1996 (based on the closing sale price on the New York
Stock Exchange on such date, as reported by The Wall Street Journal Midwest
Edition).
At April 26, 1996, the registrant had outstanding an aggregate of
15,396,750 shares of its Common Stock.
Documents Incorporated by Reference
Portions of the following documents are incorporated herein by reference
into the indicated Part of this Form 10-K:
Part of Form 10-K
Document into which incorporated
-------- -----------------------
Registrant's 1996 annual Parts I, II, IV
report to shareowners
Registrant's proxy Part III
statement for the Annual
Meeting of Shareowners to
be held on June 20, 1996
PART I
ITEM 1. BUSINESS
- ------ --------
Introduction
- ------------
Material Sciences Corporation (unless otherwise indicated by the context,
including its subsidiaries, "MSC" or the "Company") develops, manufactures, and
markets continuously processed, coated, and laminated materials. These materials
are divided into four product groups: laminates and composites; specialty films
(the new name for metallizing and coating); coil coating; and
electrogalvanizing. The Company's materials are used in motor vehicles, building
products, appliances, office equipment, furniture, lighting products, packaging,
and a wide range of other products. MSC develops proprietary value-added
materials and processes to meet specific customer and market requirements and
believes it has achieved product or technological leadership in each of its four
product groups.
Customers generally benefit from the energy savings and environmental
advantages of MSC's manufacturing processes and products. In the laminates and
composites product group, and the specialty films product group, the Company is
primarily a manufacturer and marketer of its own proprietary products. In the
coil coating product group and electrogalvanizing product group, MSC generally
acts as a "toll coater" by processing its customers' metal for a fee, without
taking ownership of the metal.
Headquartered near Chicago, the Company, through its MSC Pre Finish Metals
Inc., f/k/a Pre Finish Metals Incorporated ("PFM"), MSC Specialty Films Inc.,
f/k/a/ Deposition Technologies, Inc. ("MSCSF"), MSC Laminates and Composites
Inc. ("MSCLC"), and MSC Walbridge Coatings Inc., f/k/a Pre Finish Metal (EG)
Incorporated ("MSCWC") subsidiaries, operates seven manufacturing plants. PFM
operates two facilities in Elk Grove Village, Illinois, one facility in
Morrisville, Pennsylvania, and one facility in Middletown, Ohio. MSCWC, a
subsidiary of PFM, operates a facility in Walbridge, Ohio on behalf of Walbridge
Coatings, an Illinois Partnership (the "Partnership"), formed among MSCWC,
Inland Steel Industries, Inc. ("Inland") and Bethlehem Steel Corporation
("Bethlehem" or "BSC"). MSCSF operates a thin film sputter-deposition
metallizing, coating, and laminating facility in San Diego, California. MSCLC
operates one facility in Elk Grove Village, Illinois, in conjunction with PFM.
Additional information concerning certain transactions and events is
incorporated herein by reference to Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's 1996 annual
report, which is incorporated herein by reference.
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MSC, a Delaware corporation, was founded in 1971 and has been a publicly
traded company since 1984. The principal executive offices of the Company are
located at 2300 East Pratt Boulevard, Elk Grove Village, Illinois 60007, and its
telephone number at that address is (847) 439-8270.
Laminates and Composites
- ------------------------
Laminates and composites combine layers of steel or other metals with
layers of polymers or other materials to achieve specific properties, such as
noise and vibration reduction, thermal insulation or high reflectivity in
lighting. These products consist of functionally engineered materials that are
designed to meet specific customer requirements. Products in this group largely
result from the Company's research and development efforts and the proprietary
equipment and processes designed and implemented by its engineering and
manufacturing organizations. The Company supplies its laminates and composites
to a variety of markets both in the United States and internationally. The
majority of these products are used in the automotive, lighting, and appliance
industries. The major products in this product group are Polycore Composites(R),
disc brake noise dampers, and Specular+(R).
Polycore Composites are multilayer composites consisting of various metals,
adhesives, and other components, typically consisting of metal outer skins
surrounding a thin viscoelastic core material. Polycore Composites are
engineered to meet a variety of needs. The Company believes it is a leader in
developing and manufacturing continuously processed coated materials that reduce
noise and create thermal barriers. The automotive industry is the largest market
for metal composites, which are being used to replace solid sheet metal parts,
including oil pans, valve covers, front engine covers and heat shields. Polycore
Composites are also being evaluated for use in dash panels, floor pans, and
other internal components in order to help reduce road noise. Polycore
Composites are also found in a number of other products, including lawn mower
engines, air conditioners, computer disk drive covers, and appliances, and
numerous other uses are under evaluation.
The disc brake noise damper market developed as manufacturers moved to
asbestos-free brake linings. The increased brake noise these linings produce can
be virtually eliminated by the composite materials pioneered by the Company. The
Company believes it has a 50% share of the domestic disc brake noise dampers
original equipment market. The Company also believes it is a significant
supplier to the emerging domestic aftermarket, which it estimates will grow to
be at least three times as large as the domestic original equipment market. Disc
brake noise damper sales for the 1996 fiscal year set another record as a result
of increased sales to General Motors Corporation ("General Motors"), Ford Motor
2
Company and Chrysler Corporation, and due to further penetration into the disc
brake aftermarket.
Specular+, a laminate of silver-sputtered coated film and sheet metal, was
developed by the Company for the growing high reflective fluorescent lighting
market. Because pure silver offers unsurpassed reflectivity and precise light
control, Specular+ produces virtually the same amount of light with only half
the bulbs of a typical white painted fixture. The result is a significant
reduction in the cost of electricity for lighting.
The market for laminate and composite materials is competitive, both
domestically and internationally. There are competitors in each product market
served by the Company, some of which have greater resources than the Company.
The Company believes, however, that its technology, product development
capability, technical support, and customer service place it in a strong
competitive position in this market.
Specialty Films
- ---------------
The Company uses sputter-deposition technology to metallize wide rolls of
flexible substrates, generally consisting of thin polymeric films. In the
sputter-deposition process, a target material is disintegrated, in a vacuum
chamber by ion bombardment, into its component atoms or molecules, which are
then deposited onto the surface of the base material to be coated. Such base
material (commonly called the substrate or flexible web) can be polymeric film,
foil, fabric, or paper.
Sputter-deposition permits the use of a wide range of target materials,
singly or in combination (including metals, metal alloys and metal oxides), some
of which cannot be applied in any other way. This flexibility allows formation
of composites of metals, dielectrics, and semiconductors. Sputter-coated,
flexible polymeric substrates may be designed to have specific properties,
including energy reflectance, transmission, absorption and electrical
conductance. After the sputtering process, these materials are often further
enhanced with other coatings, adhesives, and films, resulting in a multilayer
laminate.
The Company's specialty films sales consist principally of solar control
and safety window films for use in the automotive aftermarket and building
applications. The Company sells these products through SGI and four independent
distributors. The Company believes there are significant growth opportunities in
the building market, since there is currently low market penetration and
industrial, commercial, and residential building owners are becoming more
familiar with the benefits of solar control and safety window films. Solar
control window films can lower energy bills year-round by reducing heat
penetration in the summer and
3
retaining residual warmth in the winter. They also reject ultraviolet light,
thereby eliminating the damage it causes. In commercial environments, window
film generally improves productivity by reducing glare and heat generation.
Safety films offer security by making glass shatter-resistant.
This product group includes the silver-sputtered, coated film used in
Specular+, although intercompany sales of such film are excluded from this
product group's sales. The Company has developed other products for the high
reflective fluorescent lighting market. In addition, the Company participates in
the microwaveable food packaging market with its Insceptor(R) film products that
offer precise control of heating, browning and crisping of food during the
cooking process. The Company has established agreements with rigid and flexible
packaging companies to supply certain customers in the domestic market. This
product group also includes security seals, which are used in tamper-evident
packaging and anti-counterfeit measures.
In September 1995, MSC acquired all of the outstanding capital stock of
Solar-Gard International, Inc. ("SGI"). Headquartered in Largo, Florida, SGI was
the largest independent distributor of professionally installed solar control
window film products in the world prior to the acquisition. It was also MSC's
largest distributor, with a relationship going back to 1980. SGI had eight
wholly owned distribution centers across the United States, one center in each
of Canada and England, and a joint venture operation in Singapore at the time of
acquisition and subsequent to the acquisition, SGI has expanded in California
(two distribution centers) and Florida (Latin American export center). SGI
currently distributes products in over sixty countries.
During the first quarter of fiscal 1997, the Company entered into an
agreement to purchase certain assets of a distributor of solar control and
safety window film products with operations primarily in the Western United
States and throughout the world. The Company anticipates this transaction will
be completed during the first quarter of fiscal 1997.
MSC believes that there are four major domestic companies producing
competitive specialty film materials in addition to the Company. Some of these
competitors have greater resources than the Company, including patented
technology. The Company competes on the basis of a number of factors, including
product performance and quality, completeness of product offering, new product
development capabilities, service, and price. The Company believes that it is
competitive in these areas.
4
Coil Coating
- ------------
The Company believes that coil coating is the most environmentally safe and
energy-efficient method available for applying paint and other coatings to
metal. This continuous, highly automated, high-speed process applies coatings to
wide coils of metal. In the process, sheet metal is unwound from a coil,
cleaned, chemically treated, coated, oven-cured, and rewound into coils for
shipment to manufacturers that fabricate the coated metal into finished products
that are sold into a variety of industrial and commercial markets. The coatings
are designed to produce both protective and decorative finishes. Through
techniques such as printing, embossing and striping, special finishing effects
can also be created. The finished product (i.e. prepainted or coil coated metal)
is a versatile material capable of being drawn, formed, bent, bolted, riveted,
chemically bonded and welded. The Company generally acts as a "toll coater" by
processing coils for steel mills, or their customers, without taking ownership
of the metal. The Company charges by weight or surface area processed.
The Company's coil coated products are used by manufacturers in building
products, heating and air conditioning, fuel tanks, lighting, truck trailer,
above-ground swimming pools, and other products. The Company's strategy in its
coil coating business has been to produce high-volume competitive coated
products at low cost, as well as to identify, develop and produce specialty
niche products meeting specific customer requirements. The Company also offers
proprietary products such as Weldrite(R), a weldable coating; Enduratex(R), an
embossed plastisol coated material capable of being stained to simulate the look
of wood; and ER6, a patented high temperature non-stick coating designed for
bakeware and cookware products.
Coil coating technology reduces the environmental impact of painting and
reduces manufacturers' energy needs. In coil coating processes, over 95% of the
coating material is applied, in contrast with the significant waste from
"overspray" typical in post-fabrication painting. The energy required to cure
coil coated metal is substantially less than that required by other coating
methods. These savings are achieved because of high-speed material processing
and because 90% to 95% of the coatings' volatile organic compounds are recycled
back into the curing ovens and used as fuel.
Manufacturers that use prepainted materials can eliminate or significantly
reduce on-site post paint lines and the associated compliance with complex
environmental and other regulations. Prepainted materials facilitate the
adoption of just-in-time and continuous process manufacturing techniques which
can result in improvements to work in process inventory, plant utilization, and
productivity. Since prepainted metal is cleaned, treated and painted while flat,
the result is a more uniform and higher quality
5
finished part than can be achieved by even the best post-fabrication painting
operation. There are no hidden areas where paint is difficult to reach and where
corrosion can begin after the product has been marketed. As a result, companies
using prepainted material generally benefit from lower manufacturing costs and
improved product quality. Use of prepainted metal may, however, require product
design or fabrication changes and more stringent handling procedures during
manufacturing.
The coil coating process competes with other methods of producing coated
sheet metal, principally post-fabrication finishing methods such as spraying,
dipping and brushing. The Company believes that coil coating accounts for
approximately 10% of all the sheet metal now being coated. The Company expects
that, although there can be no assurance in this regard, the market penetration
of coil coated metal will increase as a result of more stringent environmental
regulation and the energy efficiency, quality, and cost advantages provided by
prepainted metal as compared to post-fabrication painting, particularly in high-
volume manufacturing operations. The Company estimates that there are
approximately 85 companies operating coil coating lines in North America. The
Company believes it is one of the largest coil coaters, with approximately 14%
of the total tons processed in the United States in calendar 1995. Competition
in the coil coating industry is heavily influenced by geography, due to the high
costs involved in transporting sheet metal coils. Within geographic areas, coil
coaters compete on the basis of quality, price, customer service, technical
support, and product development capability.
Electrogalvanizing
- ------------------
Electrogalvanized ("EG") steel is the primary corrosion resistant steel
product used in automobile and light truck bodies. Significant domestic demand
for EG steel started in 1985 and is estimated to have been 3.4 million tons in
calendar 1995. The Company believes that demand will continue to grow as
automobile manufacturers respond to consumer demands for longer warranty
protection against rust and, to a lesser extent, due to increased applications
for EG steel in the appliance and other non-automotive industries.
MSC participates in the electrogalvanizing market through its 50% financial
interest in and role as operator of the Partnership. The term of the Partnership
ends on June 30, 1998. Through the Partnership, MSC electrogalvanizes zinc and
zinc-alloy coatings and applies organic coatings onto sheet metal. There is
growing demand by the automotive industry for a full complement of products such
as zinc-nickel, zinc-nickel with a thin organic coating, and other organic
coated zinc-nickel products such as fuel tanks that offer additional protection
against corrosion. As a result, a shift from
6
pure zinc to differentiated materials has commenced. These newer materials are
particularly in demand by Japanese automakers in the United States -- currently
among the end-use customers for the Partnership's services. The Partnership's
facility is the only facility in North America capable of meeting, in a single
pass through its line, the demand for this full complement of products.
Sales to the Partnership represented 23%, 22% and 24% of MSC's net sales in
fiscal 1996, 1995 and 1994, respectively. MSC's net sales for electrogalvanizing
consists of various fees charged to the Partnership for operating the facility.
Such fees are the predominant financial return to MSC from its participation in
the Partnership. There are both fixed fees (for selling, general and
administrative expenses, a portion of the financing, taxes, and insurance) and
variable fees based on production volumes (for the balance of the financing,
operating expenses, and profit). The Company pays the actual costs of operating
the facility, so the overall profitability of its participation in the
Partnership depends on its skill and efficiency. The operating expense portion
of the variable fee is based on standard costs, which may be adjusted to reflect
matters beyond the Company's control, upon agreement of the partners or informal
arbitration. The fees charged to Bethlehem and Inland by the Partnership for
services fund the standard operating costs of the Partnership (including the
Company's per ton profit allowance) and, at a defined contractual production
volume, all of the Partnership's financing costs. At lesser levels of
production, the Company is obligated to fund a portion (not to exceed 50%) of
the Partnership's financing costs.
Bethlehem and Inland are two of the major suppliers of sheet steel to the
U.S. automobile industry. The orders for the Partnership's toll coating services
are primarily and independently generated by Bethlehem and Inland for their
respective customers, although the Partnership may also accept orders from
outside parties to the extent of available capacity and production schedules.
Historically, third party sales have not been significant. The sales and
marketing responsibilities of the Partnership are currently split between
Bethlehem and Inland at 77% and 23%, respectively. In addition to Bethlehem's
historic production at the facility, BSC transferred its in-house
electrogalvanizing production from its Burns Harbor facility to the Partnership
in fiscal 1996. During fiscal 1996, Inland utilized only 10% of available line
time; Bethlehem and other customers utilized the balance of Inland's available
line time. Inland is reviewing its future involvement in the Partnership, and
therefore, there is no assurance that Inland will utilize its full 23% 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 continued reduction in
Inland's line time requirements could be replaced by additional volume from
Bethlehem and other customers.
7
Bethlehem and Inland have rights to purchase all the facility's production
for the 12-year life of the Partnership. 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.
Competition in the production and sale of electrogalvanized steel for the
automotive industry comes from other steel companies that, either directly or
through joint ventures, produce electrogalvanized steel on eight manufacturing
lines in the United States, including Inland's other facility. Limited
quantities of electrogalvanized steel also are imported from foreign steel
suppliers. The Company believes the Partnership's line is well-positioned to
serve the current and expected end-users of electrogalvanized steel. The Company
is unable to determine the effect, if any, on the market resulting from the
existence of excess capacity, the entrance of additional capacity, improved
galvanizing technology or the substitution of other materials.
International
- -------------
The Company believes that significant opportunities exist internationally,
particularly for the Company's disc brake noise damper products, Polycore
Composites, Specular+, and solar control and safety window film. As a percent of
net sales, direct export sales represented 8%, 8% and 7% in fiscal 1996, 1995
and 1994, respectively.
The Company has certain distribution agreements and licensing and royalty
agreements with agents and companies in Europe, Latin America, and the Far East
that cover disc brake noise dampers, Polycore Composites, and lighting products.
These agreements provide the Company with opportunities for market expansion in
those geographic areas.
Approximately 38% of the specialty films' products are sold to export
markets directly or through domestic distributors. The Company believes that
export shipments will continue to grow with the acquisition of SGI and as
emerging markets increasingly realize the energy saving and ultraviolet light
blocking benefits this product provides.
The Company is pursuing a variety of other business relationships,
including direct sales, distribution agreements, licensing, and other forms of
partnering, to increase its international sales and expand its international
presence.
8
Marketing and Sales
- -------------------
The Company markets its laminates and composites and coil coating products,
services and technologies primarily through its in-house sales organization and
also through independent distributors, agents and licensees. The Company focuses
its sales efforts on manufacturers, but also sells to steel mills and their
intermediaries, metal service centers, and metal brokers. Bethlehem and Inland
are the primary marketing partners for electrogalvanized steel. The Company
sells its specialty films' products primarily through SGI and to other domestic
and international distributors. All of the Company's selling activities are
supported by technical service departments that aid the customer in the choice
of available materials and their use in the customer's manufacturing process.
The Company estimates that customers in the transportation industry were
the end-users for approximately 53%, 52% and 52% of MSC's net sales in fiscal
1996, 1995 and 1994, respectively. The Company's direct sales to General Motors
were in excess of 5% during each of the last three fiscal years. In addition,
the Company believes that it has significant indirect sales to General Motors in
its coil coating and electrogalvanizing product groups. Due to concentration in
the automobile industry, the Company believes that sales to other individual
automobile companies, including indirect sales, are significant.
On June 30, 1993, the Company acquired the assets of a coil paint facility
owned by AK Steel Corporation ("AKS"), in Middletown, Ohio. The Company also
entered into a tolling agreement in which MSC agrees to provide AKS with coil
coating and other ancillary services from the facility of up to approximately
75% of the facility's capacity for 10 years. The balance of capacity is being
marketed by the Company's sales force and shifting production from other MSC
plants that, at times, reach their capacity. AKS represented 8%, 10% and 8% of
MSC's net sales in fiscal 1996, 1995 and 1994, respectively.
The Company's backlog of orders as of February 29, 1996, was approximately
$49.9 million, all of which is expected to be filled during the remainder of the
current fiscal year. The Company's backlog was approximately $43.6 million as of
February 28, 1995.
MSC is generally not dependant on any one source for raw materials or
purchased components essential to its business, and it is believed that such raw
materials and components will be available in adequate quantities to meet
anticipated production schedules.
9
MSC believes that its business, in the aggregate, is not seasonal. Certain
of its products, however, sell more heavily in some seasons than in others.
Environmental Matters
- ---------------------
The Company is subject to federal, state and local environmental laws. As a
result of these laws, the Company has incurred, and will continue to incur in
the future, significant capital expenditures and operating costs and charges.
The Company is involved in two Superfund sites located in Gary and Kingsbury,
Indiana. Although the ultimate cost of the Company's share of necessary cleanup
expenses is not yet known, the Company believes that it is adequately reserved
for environmental matters given the information currently available. See Note 6
of the Notes to the Consolidated Financial Statements entitled "Environmental
and Legal Matters," on pages 28 and 29 of the annual report, which is
incorporated by reference herein. The Company cannot predict the impact of new
or changed laws or regulations.
The Company believes it operates its facilities and conducts its business
in all material respects in accordance with all environmental laws presently
applicable to its facilities. The Company spent approximately $0.7 million in
fiscal 1996, and has budgeted approximately $1.1 million during fiscal 1997, for
maintenance or installation of environmental controls at the Elk Grove Village,
Illinois; Walbridge, Ohio; Morrisville, Pennsylvania; Middletown, Ohio; and San
Diego, California facilities. See Item 3 "Legal Proceedings" below.
Research and Development
- ------------------------
Management estimates that it spent approximately $6.7 million in fiscal
1996, $5.4 million in fiscal 1995 and $4.0 million in fiscal 1994 for product
and process development activities.
While it considers its various patents, licenses and trademarks to be
important, it does not believe that the loss of any individual patent, license,
or trademark would have a material adverse effect upon its business.
Employees
- ---------
At February 29, 1996, the Company had 882 full-time employees. Of these,
approximately 611 were engaged in manufacturing, 116 in marketing and sales, 103
in administrative and clerical positions, and 52 in process and product
development.
The employees at the San Diego, California; Walbridge, Ohio; and SGI
facilities are not represented by a union. Hourly manufacturing employees at Elk
Grove Village, Illinois;
10
Morrisville, Pennsylvania; and Middletown, Ohio, are covered by separate union
contracts expiring in February 2002, November 2000, and October 1997,
respectively. The Company believes that its relations with its employees are
good.
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-----------------------------------
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of April 26, 1996 are as follows:
Position and
Name Age Year First Elected
---- --- ------------------
G. Robert Evans...............64 Chairman and Chief Executive Officer, MSC
since July 1991; previously Chairman,
President, and Chief Executive Officer,
MSC since February 1991.
Gerald G. Nadig...............51 President and Chief Operating Officer, MSC
since July 1991; previously President
and Chief Operating Officer, PFM since
1990; previously Executive Vice President,
PFM since 1989.
William H. Vrba...............64 Senior Vice President, Chief Financial
Officer, and Secretary, MSC since
July 1991.
Frank D. Graziano.............63 Senior Vice President, Technology, MSC
since July 1991; previously Senior
Vice President, Research and Development,
PFM since 1990; previously Senior Vice
President, Marketing, Research and
Development, PFM since 1988.
Anton F. Vitzthum.............61 Senior Vice President, Manufacturing, MSC
since March, 1994; previously Senior
Vice President, Operations, PFM since
1990; previously Vice President,
Manufacturing, PFM since 1984.
Frank J. Lazowski, Jr. .......56 Vice President, Human Resources, MSC since
July 1991; previously Vice President,
Human Resources PFM since 1988.
Robert J. Mataya..............53 Vice President, Business Planning and
Development, MSC since July 1991;
previously
12
Vice President, Business Planning
and Development, PFM since 1990;
previously Vice President, Marketing,
PFM since 1986.
James J. Waclawik, Sr. .......37 Vice President and Controller, MSC
since July 1991; previously Vice
President and Controller, PFM since
1989; previously Controller PFM
since 1988.
David A. Fletcher.............42 President and Chief Operating
Officer,MSCSF since September 1993;
previously Vice President, Research
and Development, MSCSF since 1989.
During the past five years, Messrs. Evans, Nadig, Vrba, Graziano, Vitzthum,
Lazowski, Mataya, Waclawik, and Fletcher have been employed in management
capacities by the Company.
Mr. Evans serves as a director of Consolidated Freightways, Inc.,
Fiberboard Corporation, and Swift Energy Company.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
-----------------------------------
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ITEM 2. PROPERTIES
- ------- ----------
The Company owns or leases facilities with an aggregate of approximately
1,126,000 square feet of space. The Company considers all of such facilities to
be in good operating condition. In addition to the principal physical properties
used by the Company in its manufacturing operations as summarized in the table
below, the Company leases numerous sales and administrative offices pursuant to
short term leases.
Approximate
Area in Lease Expiration
Location Square Feet (or Ownership)
- -------- ----------- -----------------
Elk Grove Village, Illinois
Plant No. 1 58,000 Owner
Elk Grove Village, Illinois
Plant No. 2 205,000 Owner
Elk Grove Village, Illinois
Plant No. 3 152,000 Owner
Morrisville, Pennsylvania 121,000 Owner
Middletown, Ohio 170,000 Owner
San Diego, California 65,000 February 2002
Walbridge, Ohio 311,000 June 2003/(1)/
- -------------------
(1) The lease is renewable, at the Company's option, for additional periods
totaling 25 years. Since April 1, 1986, this facility has been subleased to the
Partnership and the sublease is scheduled to expire on June 30, 1998 (see
"Electrogalvanizing").
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
See Note 6 of the Notes to Consolidated Financial Statements entitled
"Environmental and Legal Matters," on pages 28 and 29 of the annual report,
which is incorporated by reference herein. In May 1996, the lawsuit with a
former distributor of solar control and safety window film referenced in Note 6
was settled and the lawsuit was dismissed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS
- ------ --------------------------------------------------
There were no matters submitted to the Company's security owners during the
fourth quarter of fiscal 1996.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
- ------ AND RELATED SHAREOWNER MATTERS
-----------------------------------------
The Company's Common Stock, $.02 par value, is listed on the New York Stock
Exchange under the symbol "MSC." The table below sets forth, by fiscal quarter,
the high and low sales prices of the Company's Common Stock during its past two
fiscal years. Sales prices for the first quarter of fiscal 1995 have been
retroactively adjusted to give effect to the one-half share per share dividend
declared and paid in the second quarter of fiscal 1995.
Fiscal Fiscal
Year Quarter High Low
------ ------- ------ -------
1996 1st 19 3/4 15 1/2
2nd 22 3/8 16 3/4
3rd 19 3/8 12 1/8
4th 15 12 5/8
Fiscal Fiscal
Year Quarter High Low
------- ------- ------ ------
1995 1st 17 3/4 14 3/8
2nd 17 1/2 14 7/8
3rd 17 1/4 14 1/8
4th 17 1/8 13 3/4
There were 1,143 owners of record of the Company's Common Stock at the
close of business on April 26, 1996. MSC has not paid cash dividends other than
a nominal amount in lieu of fractional shares in connection with stock
dividends. Management currently anticipates that all earnings will be retained
for development of the Company's business. If business circumstances should
change, the Board of Directors may declare, and instruct the Company to pay,
cash dividends.
15
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
Reference is made to the information found under the caption "Selected
Financial Data" on pages 34 and 35 of the annual report, which is incorporated
by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Reference is made to the information found under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 20 through 23 of the annual report, which is incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
(a) The Consolidated Statements of Income for the years ended February 29,
1996, February 28, 1995 and February 28, 1994, Consolidated Balance Sheets as of
February 29, 1996 and February 28, 1995, Consolidated Statements of Cash Flows
for the years ended February 29, 1996, February 28, 1995 and February 28, 1994,
Notes to Consolidated Financial Statements and the Report of Independent Public
Accountants, set forth on pages 24 through 33 and page 19 of the annual report,
are incorporated by reference herein.
(b) The unaudited selected quarterly financial data which is referred to in
Item 8(a) above and is set forth in Note 14 of the Notes to Consolidated
Financial Statements under the caption "Summary of Quarterly Data (Unaudited)"
on page 33 of the annual report is incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Reference is made to the information found under the caption "Election of
Directors" on pages 2 through 4 of the Company's proxy statement for the 1996
annual meeting of shareowners (the "proxy statement"), all of which is
incorporated by reference herein, for information on the directors of the
Company. Reference is made to Part I of this report for information on the
executive officers of the Company.
16
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Reference is made to the information under the captions "Compensation of
Executive Officers", "Compensation and Organization Committee Report", "MSC
Performance Graph", "Employment and Other Agreements", and "Employee and Other
Plans" on pages 7 through 14 of the proxy statement, all of which is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
- ------- HOLDERS AND MANAGEMENT
----------------------------------------
Reference is made to the information set forth on pages 5 and 6 of the
proxy statement, all of which is incorporated by reference herein, except that
the table on page 5 is hereby amended to reflect that as of April 26, 1996 (i)
the number of shares beneficially owned by A.F. Vitzthum is 91,550 shares for a
total of 113,475 and (ii) the number of shares beneficially owned by all
officers and directors as a group is 699,648 shares for a total of 1,183,423,
which represents 7.7% of the Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
There were no relationships or related transactions requiring disclosure in
fiscal 1996.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
-----------------------------------
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
- ------- REPORTS ON FORM 8-K
--------------------------------------------
(A) FINANCIAL STATEMENTS AND SCHEDULES OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by
reference to pages 24 through 33 and page 19 of the Company's
annual report.
(i) Consolidated Statements of Income for the years ended
February 28 or 29, 1996, 1995 and 1994
(ii) Consolidated Balance Sheets - February 29, 1996 and
February 28, 1995
(iii) Consolidated Statements of Cash Flows for the years
ended February 28 or 29, 1996, 1995 and 1994
(iv) Notes to Consolidated Financial Statements
(v) Report of Independent Public Accountants
II Supplemental Schedules
----------------------
(i) Report of Independent Public Accountants with respect to
Supplemental Schedules to the Financial Statements
(ii) Schedule II - Reserve for Receivable Allowances and
Deferred Tax Asset Valuation Allowance
All other schedules have been omitted, since the required information is
not significant, is included in the financial statements or the notes thereto,
or is not applicable.
18
(c) EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
2(a) Parent Agreement dated as of October 15, 1984, by and among Bethlehem
Steel Corporation, Inland Steel Company, Pre Finish Metals
Incorporated and Material Sciences Corporation.(1)
2(b) Partnership Agreement dated as of August 30, 1984, by and among EGL
Steel Inc., Inland Steel Electrogalvanizing Corporation and Pre
Finish Metals (EG) Incorporated.(1)
2(c) Amendment No. 1 to the Partnership Agreement dated as of August 30,
1984.(2)
2(d) Amendment No. 2 to the Partnership Agreement dated as of August 30,
1984.(2)
2(e) Operating Agreement dated as of October 15, 1984, by and between Pre
Finish Metals (EG) Incorporated and Walbridge Coatings, An Illinois
Partnership.(1)
2(f) Coating Agreement dated as of October 15, 1984, by and between
Bethlehem Steel Corporation and Walbridge Coatings, An Illinois
Partnership.(1)
2(g) Coating Agreement dated as of October 15, 1984, by and between Inland
Steel Company and Walbridge Coatings, An Illinois Partnership.(1)
2(h) Amendments to Definitive Agreements dated as of March 31, 1986, among
EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Pre Finish Metals Incorporated and Material Sciences
Corporation.(6)
2(i) Further Amendments to Definitive Agreements dated as of July 24,
1986, among EGL Steel Inc., Inland Steel Electrogalvanizing
Corporation, Pre Finish Metals (EG) Incorporated, Bethlehem Steel
Corporation, Inland Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences Corporation.(3)
19
Exhibit
Number Description of Exhibit
- ------- ----------------------
2(j) Further Amendments to Definitive Agreements dated as of April 23,
1992, among EGL Steel Inc., Inland Steel Electrogalvanizing
Corporation, Pre Finish Metals (EG) Incorporated, Bethlehem Steel
Corporation, Inland Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences Corporation.(7)
3(a) Registrant's Certificate of Incorporation, as amended.(1)
3(b) Amendment to Registrant's Certificate of Incorporation.(2)
3(c) Amendment to Registrant's Certificate of Incorporation.(4)
3(d) Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock.(4)
3(e) Registrant's By-laws, as amended.(6)
4(a) Credit Agreement dated as of September 1, 1994, between Material
Sciences Corporation and Bank of America Illinois.(5)
4(b) First Amendment to Rights Agreement dated as of April 21, 1994 by and
between Material Sciences Corporation and Mellon Securities Trust
Company.(9)
4(c) First Amendment to Credit Agreement dated as of September 5, 1995, by
and between Material Sciences Corporation and Bank of America
Illinois.
4(d) Money Market Demand Note (Fixed and Floating Rate Corporation) dated
December 20, 1995 executed by Material Sciences Corporation in favor
of The Northern Trust Company in the aggregate principal amount of
$25,000,000.
20
Exhibit
Number Description of Exhibit
- ------- ----------------------
There are omitted certain instruments with respect to long-term debt,
the total amount of securities authorized under each of which does not
exceed 10% of the total assets of the registrant and its subsidiaries
on a consolidated basis. A copy of each such instrument will be
furnished to the Commission upon request.
10(a) Material Sciences Corporation Stock Purchase Plan. (1)
10(b) Material Sciences Corporation Supplemental Pension Plan.(1)
10(c) Material Sciences Corporation Employee Stock Purchase Plan.(6)
10(d) Material Sciences Corporation 1985 Stock Option Plan for Key
Employees.(6)
10(e) Material Sciences Corporation 1985 Stock Option Plan for Directors.(6)
10(f) Material Sciences Corporation 1992 Omnibus Stock Awards Plan for Key
Employees.(7)
10(g) Employment Agreement effective February 27, 1991, between Material
Sciences Corporation and G. Robert Evans.(6)
10(h) Material Sciences Corporation 1991 Stock Option Plan for Directors.(6)
10(i) Material Sciences Corporation Directors Deferred Compensation Plan.(6)
10(j) Material Sciences Corporation 1996 Stock Option Plan for Non-Employee
Directors.
10(k) Deferred Compensation Plan of Material Sciences Corporation and
Certain Participating Subsidiaries.(6)
21
Exhibit
Number Description of Exhibit
- ------- ----------------------
10(l) Lease and Agreement dated as of December 1, 1980, between Line 6 Corp.
and Pre Finish Metals Incorporated, relating to Walbridge, Ohio
facility.(1)
10(m) First Amendment to Lease and Agreement dated as of May 30, 1986,
between Corporate Property Associates and Corporate Property
Associates 2 and Pre Finish Metals Incorporated.(3)
10(n) Sublease dated as of May 30, 1986, between Pre Finish Metals
Incorporated and Walbridge Coatings, An Illinois Partnership.(3)
10(o) Lease Guaranty dated as of May 30, 1986, from Material Sciences
Corporation to Corporate Property Associates and Corporate Property
Associates 2.(3)
10(p) Note Purchase Agreement dated as of May 30, 1986, between Material
Sciences Corporation and Creditanstalt-Bankverein (New York
Branch).(3)
10(q) Agreement dated as of May 30, 1986, between Material Sciences
Corporation and Corporate Property Associates and Corporate Property
Associates 2.(3)
10(r) Term Loan Agreement dated as of July 23, 1986, among Walbridge
Coatings, An Illinois Partnership, Creditanstalt-Bankverein (New York
Branch) and The Toledo Trust Company, including the related guaranties
by Material Sciences Corporation and Pre Finish Metals
Incorporated.(3)
10(s) Amendment No. 1 to Term Loan Agreement dated as of March 31, 1987,
among Walbridge Coatings, An Illinois Partnership, Creditanstalt-
Bankverein (New York Branch) and The Toledo Trust Company.(3)
22
Exhibit
Number Description of Exhibit
- ------- ----------------------
10(t) Amended and Restated Credit Facility Agreement dated as of July
23, 1986, between Walbridge Coatings, An Illinois Partnership,
and Creditanstalt-Bankverein, including the related guaranties by
Material Sciences Corporation and Pre Finish Metals
Incorporated.(3)
10(u) Amendment and Consent Agreement dated as of April 23, 1992, among
Walbridge Coatings, An Illinois Partnership, Bethlehem Steel
Corporation, EGL Steel, Inc., Inland Steel Industries, Inc.,
Inland Steel Company, Inland Steel Electrogalvanizing
Corporation, Material Sciences Corporation, Pre Finish Metals
Incorporated, Pre Finish Metals (EG) Incorporated, and
Creditanstalt-Bankverein, amending the Term Loan Agreement dated
as of July 23, 1986, as amended on March 31, 1987, and amending
the Amended and Restated Credit Facility Agreement dated as of
July 23, 1986, including the related guaranties by Material
Sciences Corporation and Pre Finish Metals Incorporated.(7)
10(v) Form of Standstill Agreement dated as of January 29, 1986, among
Material Sciences Corporation, Richard L. Burns and Joyce
Burns.(6)
10(w) Rights Agreement dated as of June 17, 1986, between Material
Sciences Corporation and Continental Illinois National Bank and
Trust Company of Chicago.(6)
10(x) Form of Indemnification Agreement between Material Sciences
Corporation and each of its officers and directors.(7)
10(y) Supplemental Retirement Agreement dated as of December 28, 1992
between Material Sciences Corporation and William H. Vrba.(8)
10(aa) Letter Agreement dated as of May 8, 1991 between Material
Sciences Corporation and William H. Vrba. (8)
23
Exhibit
Number Description of Exhibit
- ------- ----------------------
11 Computation of net income per share.
13 Annual Report to Shareowners. (Except as specifically
incorporated herein by reference, this document shall not be
deemed "filed" as a part of this Form 10-K Annual Report.)
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.(10)
_______________
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 2-93414), which was declared effective on
November 27, 1984.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-00828), which was filed on October 11, 1985.
(3) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1989 (File No. 1-8803).
(4) Incorporated by reference to the Registrant's Form 8-A dated June 17, 1986
(File No. 1-8803).
(5) Incorporated by reference to the Registrant's Form 10-Q Quarterly Report
for the Quarter Ended August 31, 1994 (File No. 1-8803).
(6) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1991 (File No. 1-8803).
(7) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 29, 1992 (File No. 1-8803).
24
(8) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1993 (File No. 1-8803).
(9) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1994 (File No. 1-8803).
(10) Appears only in the electronic filing of this report with the Securities
and Exchange Commission.
(d) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
-----------------------------------
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MATERIAL SCIENCES CORPORATION
By: /s/ G. Robert Evans
-----------------------------------------
G. Robert Evans
Chairman and Chief Executive Officer
Date: May 28, 1996
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed by the following persons in the capacities indicated on May 28,
1996.
Signature Title
--------- -----
/s/ G. Robert Evans Chairman and Chief Executive
- -------------------------- Officer, and Director (Principal
G. Robert Evans Executive Officer)
/s/ William H. Vrba Senior Vice President, Chief
- -------------------------- Financial Officer, and Secretary
William H. Vrba (Principal Financial Officer)
/s/ James J. Waclawik, Sr. Vice President and Controller
- -------------------------- (Principal Accounting Officer)
James J. Waclawik, Sr.
/s/ Jerome B. Cohen Director
- --------------------------
Jerome B. Cohen
/s/ Roxanne J. Decyk Director
- --------------------------
Roxanne J. Decyk
/s/ Eugene W. Emmerich Director
- --------------------------
Eugene W. Emmerich
/s/ E. F. Heizer, Jr. Director
- --------------------------
E. F. Heizer, Jr.
/s/ J. Frank Leach Director
- --------------------------
J. Frank Leach
/s/ Gerald G. Nadig Director
- --------------------------
Gerald G. Nadig
/s/ Irwin P. Pochter Director
- --------------------------
Irwin P. Pochter
26
EXHIBIT INDEX
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
------- REPORTS ON FORM 8-K
--------------------------------------------
(a) FINANCIAL STATEMENTS AND SCHEDULES OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by
reference to pages 24 through 33 and page 19 of the Company's
annual report.
(i) Consolidated Statements of Income for the years ended
February 28 or 29, 1996, 1995 and 1994
(ii) Consolidated Balance Sheets -February 29, 1996 and
February 28, 1995
(iii) Consolidated Statements of Cash Flows for the years
ended February 28 or 29, 1996, 1995 and 1994
(iv) Notes to Consolidated Financial Statements
(v) Report of Independent Public Accountants
II Supplemental Schedules
(i) Report of Independent Public Accountants with respect to
Supplemental Schedules to the Financial Statements
(ii) Schedule II - Reserve for Receivable Allowances and
Deferred Tax Asset Valuation Allowance
All other schedules have been omitted, since the required information
is not significant, is included in the financial statements or the notes
thereto, or is not applicable.
28
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO EXHIBITS
===============================================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
===============================================================================
2(a) Parent Agreement dated as of
October 15, 1984, by and among
Bethlehem Steel Corporation, Inland
Steel Company, Pre Finish Metals
Incorporated and Material Sciences
Corporation.(1)
- -------------------------------------------------------------------------------
2(b) Partnership Agreement dated as of
August 30, 1984, by and among EGL
Steel Inc., Inland Steel
Electrogalvanizing Corporation and
Pre Finish Metals (EG)
Incorporated.(1)
- -------------------------------------------------------------------------------
2(c) Amendment No. 1 to the Partnership
Agreement dated as of August 30,
1984.(2)
- -------------------------------------------------------------------------------
2(d) Amendment No. 2 to the Partnership
Agreement dated as of August 30,
1984.(2)
- -------------------------------------------------------------------------------
2(e) Operating Agreement dated as of
October 15, 1984, by and between
Pre Finish Metals (EG) Incorporated
and Walbridge Coatings, An Illinois
Partnership.(1)
- -------------------------------------------------------------------------------
2(f) Coating Agreement dated as of
October 15, 1984, by and between
Bethlehem Steel Corporation and
Walbridge Coatings, An Illinois
Partnership.(1)
- -------------------------------------------------------------------------------
2(g) Coating Agreement dated as of
October 15, 1984, by and between
Inland Steel Company and Walbridge
Coatings, An Illinois
Partnership.(1)
- -------------------------------------------------------------------------------
2(h) Amendments to Definitive Agreements
dated as of March 31, 1986, among
EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated,
Bethlehem Steel Corporation, Inland
Steel Company, Pre Finish Metals
Incorporated and Material Sciences
Corporation.(6)
- -------------------------------------------------------------------------------
29
=============================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
- -------------------------------------------------------------
2(i) Further Amendments to Definitive
Agreements dated as of July 24,
1986, among EGL Steel Inc., Inland
Steel Electrogalvanizing
Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel
Corporation, Inland Steel Company,
Inland Steel Industries, Inc.,Pre
Finish Metals Incorporated and
Material Sciences Corporation.(3)
- -------------------------------------------------------------
2(j) Further Amendments to Definitive
Agreements dated as of April 23,
1992, among EGL Steel Inc., Inland
Steel Electrogalvanizing
Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel
Corporation, Inland Steel Company,
Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and
Material Sciences Corporation.(7)
- -------------------------------------------------------------
3(a) Registrant's Certificate of
Incorporation, as amended.(1)
- -------------------------------------------------------------
3(b) Amendment to Registrant's
Certificate of Incorporation.(2)
- -------------------------------------------------------------
3(c) Amendment to Registrant's
Certificate of Incorporation.(4)
- -------------------------------------------------------------
3(d) Certificate of Designation,
Preferences and Rights of Series A
Junior Participating Preferred
Stock.(4)
- -------------------------------------------------------------
3(e) Registrant's By-laws, as
amended.(6)
- -------------------------------------------------------------
4(a) Credit Agreement dated as of
September 1, 1994 between Material
Sciences Corporation and Bank of
America Illinois.(5)
- -------------------------------------------------------------
4(b) First Amendment to Rights Agreement
dated as of April 21, 1994 by and
between Material Sciences
Corporation and Mellon Securities
Trust Company.(9)
- -------------------------------------------------------------
4(c) First Amendment to Credit Agreement
dated as of September 25, 1995 by
and between Material Sciences
Corporation and Bank of America
Illinois
- -------------------------------------------------------------
4(d) Money Market Demand Note (Fixed and
Floating Rate Corporation) dated
December 20, 1995 executed by
Material Sciences Corporation in
favor of The Northern Trust Company
in the aggregate principal amount
of $25,000,000.
- -------------------------------------------------------------
30
=============================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
- -------------------------------------------------------------
There are omitted certain
instruments with respect to long-
term debt, the total amount of
securities authorized under each of
which does not exceed 10% of the
total assets of the registrant and
its subsidiaries on a consolidated
basis. A copy of each such
instrument will be furnished to the
Commission upon request.
- -------------------------------------------------------------
10(a) Material Sciences Corporation Stock
Purchase Plan. (1)
- -------------------------------------------------------------
10(b) Material Sciences Corporation
Supplemental Pension Plan.(1)
- -------------------------------------------------------------
10(c) Material Sciences Corporation
Employee Stock Purchase Plan.(6)
- -------------------------------------------------------------
10(d) Material Sciences Corporation 1985
Stock Option Plan for Key
Employees.(6)
- -------------------------------------------------------------
10(e) Material Sciences Corporation 1985
Stock Option Plan for Directors.(6)
- -------------------------------------------------------------
10(f) Material Sciences Corporation 1992
Omnibus Stock Awards Plan for Key
Employees(7).
- -------------------------------------------------------------
10(g) Employment Agreement effective
February 27, 1991, between Material
Sciences Corporation and G. Robert
Evans.(6)
- -------------------------------------------------------------
10(h) Material Sciences Corporation 1991
Stock Option Plan for Directors.(6)
- -------------------------------------------------------------
10(i) Material Sciences Corporation
Directors Deferred Compensation
Plan.(6)
- -------------------------------------------------------------
10(j) Material Sciences Corporation 1996
Stock Option Plan for Non-Employee
Directors.
- -------------------------------------------------------------
10(k) Deferred Compensation Plan of
Material Sciences Corporation and
Certain Participating
Subsidiaries.(6)
- -------------------------------------------------------------
31
=============================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
- -------------------------------------------------------------
10(l) Lease and Agreement dated as of
December 1, 1980, between Line 6
Corp. and Pre Finish Metals
Incorporated, relating to
Walbridge, Ohio facility.(1)
- -------------------------------------------------------------
10(m) First Amendment to Lease and
Agreement dated as of May 30, 1986,
between Corporate Property
Associates and Corporate Property
Associates 2 and Pre Finish Metals
Incorporated.(3)
- -------------------------------------------------------------
10(n) Sublease dated as of May 30, 1986,
between Pre Finish Metals
Incorporated and Walbridge
Coatings, An Illinois
Partnership.(3)
- -------------------------------------------------------------
10(o) Lease Guaranty dated as of May 30,
1986, from Material Sciences
Corporation to Corporate Property
Associates and Corporate Property
Associates 2.(3)
- -------------------------------------------------------------
10(p) Note Purchase Agreement dated as of
May 30, 1986, between Material
Sciences Corporation and
Creditanstalt-Bankverein (New York
Branch).(3)
- -------------------------------------------------------------
10(q) Agreement dated as of May 30, 1986,
between Material Sciences
Corporation and Corporate Property
Associates and Corporate Property
Associates 2.(3)
- -------------------------------------------------------------
10(r) Term Loan Agreement dated as of
July 23, 1986, among Walbridge
Coatings, An Illinois Partnership,
Creditanstalt-Bankverein (New York
Branch) and The Toledo Trust
Company, including the related
guaranties by Material Sciences
Corporation and Pre Finish Metals
Incorporated.(3)
- -------------------------------------------------------------
10(s) Amendment No. 1 to Term Loan
Agreement dated as of March 31,
1987, among Walbridge Coatings, An
Illinois Partnership,
Creditanstalt-Bankverein (New York
Branch) and The Toledo Trust
Company.(3)
- -------------------------------------------------------------
10(t) Amended and Restated Credit
Facility Agreement dated as of
July 23, 1986, between Walbridge
Coatings, An Illinois Partnership,
and Creditanstalt-Bankverein,
including the related guaranties by
Material Sciences Corporation and
Pre Finish Metals Incorporated.(3)
- -------------------------------------------------------------
32
=============================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
- -------------------------------------------------------------
10(u) Amendment and Consent Agreement
dated as of April 23, 1992, among
Walbridge Coatings, An Illinois
Partnership, Bethlehem Steel
Corporation, EGL Steel, Inc.,
Inland Steel Industries, Inc.,
Inland Steel Company, Inland Steel
Electrogalvanizing Corporation,
Material Sciences Corporation, Pre
Finish Metals Incorporated, Pre
Finish Metals (EG) Incorporated,
and Creditanstalt-Bankverein,
amending the Term Loan Agreement
dated as of July 23, 1986, as
amended on March 31, 1987, and
amending the Amended and Restated
Credit Facility Agreement dated as
of July 23, 1986, including the
related guaranties by Material
Sciences Corporation and Pre Finish
Metals Incorporated.(7)
- -------------------------------------------------------------
10(v) Form of Standstill Agreement dated
as of January 29, 1986, among
Material Sciences Corporation,
Richard L. Burns and Joyce
Burns.(6)
- -------------------------------------------------------------
10(w) Rights Agreement dated as of
June 17, 1986, between Material
Sciences Corporation and
Continental Illinois National Bank
and Trust Company of Chicago.(6)
- -------------------------------------------------------------
10(x) Form of Indemnification Agreement
between the Company and each of its
officers and directors.(7)
- -------------------------------------------------------------
10(y) Supplemental Retirement Agreement
dated as of December 28, 1992
between Material Sciences
Corporation and William H. Vrba.(8)
- -------------------------------------------------------------
10(aa) Letter Agreement dated as of May 8,
1991 between Material Sciences
Corporation and William H. Vrba.(8)
- -------------------------------------------------------------
11 Computation of net income per
share.
- -------------------------------------------------------------
13 Annual Report to Shareowners.
(Except as specifically
incorporated herein by reference,
this document shall not be deemed
"filed" as a part of this Form 10-K
Annual Report.)
- -------------------------------------------------------------
21 Subsidiaries of the Registrant.
- -------------------------------------------------------------
23 Consent of Arthur Andersen LLP.
- -------------------------------------------------------------
33
=============================================================
Sequentially
Exhibit Numbered
Number Description of Exhibit Page*
- ------ ---------------------- ----
- -------------------------------------------------------------
27 Financial Data Schedule.(10)
=============================================================
- --------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 2-93414), which was declared effective on
November 27, 1984.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-00828), which was filed on October 11, 1985.
(3) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1989 (File No. 1-8803).
(4) Incorporated by reference to the Registrant's Form 8-A dated June 17, 1986
(File No. 1-8803).
(5) Incorporated by reference to the Registrant's Form 10-Q Quarterly Report
for the Quarter Ended August 31, 1994 (File No. 1-8803).
(6) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1991 (File No. 1-8803).
(7) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 29, 1992 (File No. 1-8803).
(8) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1993 (File No. 1-8803).
(9) Incorporated by reference to the Registrant's Form 10-K Annual Report for
the Fiscal Year Ended February 28, 1994 (File No. 1-8803).
(10) Appears only in the electronic filing of this report with the Securities
and Exchange Commission.
34
MATERIAL SCIENCES CORPORATION
Supplemental Schedules
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO SUPPLEMENTAL SCHEDULES
TO THE FINANCIAL STATEMENTS
To Material Sciences Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Material Sciences
Corporation 1996 Annual Report to Shareowners incorporated by reference in this
Form 10-K, and have issued our report thereon dated April 17, 1996. Our audits
were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The supplemental financial statement
schedule is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. The supplemental
financial statement schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 17, 1996
SCHEDULE II
-----------
MATERIAL SCIENCES CORPORATION AND SUBSIDIARIES
RESERVE FOR RECEIVABLE ALLOWANCES AND DEFERRED TAX ASSET VALUATION ALLOWANCE
(in thousands)
Additions
----------------------------------------------
Balance at Charged to Charged Reclassifications Deductions Balance at
beginning costs and to other and from end of
of year expenses accounts Acquisition reserve year
---------- ---------- --------- ----------------- ---------- ----------
1994
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Receivable Allowances $ 2,541 $ 5,461 $ - $ - $ 4,500 $ 3,502
Deferred Tax Asset
Valuation Allowance 1,620 - - - 1,620
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Total $ 4,161 $ 5,461 $ - $ - $ 4,500 $ 5,122
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1995
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Receivable Allowances $ 3,502 $ 4,123 $ - $ - $ 3,997 $ 3,628
Deferred Tax Asset
Valuation Allowance 1,620 - - - 1,620 -
---------- ---------- --------- ----------------- ---------- ----------
Total $ 5,122 $ 4,123 $ - $ - $ 5,617 $ 3,628
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1996
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Receivable Allowances $ 3,628 $ 6,612 $ - $ 1,934 $ 7,767 $ 4,407
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The activity in the Receivable Allowances account includes the Company's bad
debt, claim and scrap allowances.