UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________ to _____________
Commission file number: 1-8803
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Material Sciences Corporation
Savings and Investment Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive offices:
Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
TABLE OF CONTENTS
(a) Financial Statements:
INDEPENDENT AUDITORS' REPORT............................................................. 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS................................................. 2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2002 and 2001.......................................................... 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002................................................ 4
Notes to Financial Statements....................................................... 5
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of
Year) as of December 31, 2002....................................................... 10
All other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted
because they are not applicable.
(b) Exhibits:
Exhibit 23.1 - Consent of Independent Auditors.
Exhibit 23.2 - Notice Regarding Consent of Arthur Andersen LLP
Exhibit 99.1 - Certifications pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
INDEPENDENT AUDITORS' REPORT
To the Material Sciences Corporation Retirement Plan Committee:
We have audited the accompanying statement of net assets available for benefits
of Material Sciences Corporation Savings and Investment Plan (the "Plan") as of
December 31, 2002 and the related statement of changes in net assets available
for benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of the Plan for the year ended December 31, 2001 were audited by
other auditors who have ceased operations. The other auditor's report, dated May
21, 2002, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such 2002 financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2002 and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audit was conducted for the purpose of forming an opinion on the basic 2002
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2002 is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but it is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This schedule is the responsibility of
the Plan's management. Such schedule has been subjected to the auditing
procedures applied in our audit of the basic 2002 financial statements and, in
our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
May 20, 2003
(June 23, 2003 as to the second paragraph of Note 7)
-1-
The following report is a copy of a report previously issued by Arthur Andersen
LLP and has not been reissued by Arthur Andersen LLP.
To the Retirement Plan Committee of
Material Sciences Corporation
Savings and Investment Plan:
We have audited the accompanying statements of net assets available for benefits
of MATERIAL SCIENCES CORPORATION SAVINGS AND INVESTMENT PLAN as of December 31,
2001 and 2000, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2001. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Material
Sciences Corporation Savings and Investment Plan as of December 31, 2001 and
2000, and the changes in net assets available for benefits for the year ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
at end of the year and nonexempt transactions are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
May 21, 2002
-2-
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------
2002 2001
ASSETS:
Participant-directed investments (Note 3) $ 35,256,568 $ 37,951,044
------------- -------------
Receivables:
Employer contributions 128,894 205,613
Participant contributions 44,332 108,096
------------- -------------
Total receivables 173,226 313,709
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 35,429,794 $ 38,264,753
============= =============
See notes to financial statements.
-3-
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
--------------------------------------------------------------------------------
ADDITIONS:
Contributions:
Participant contributions $ 3,413,753
Employer contributions 1,193,647
Dividends and interest 884,655
--------------
Total additions 5,492,055
--------------
DEDUCTIONS:
Benefits paid to participants (2,889,465)
Net depreciation in fair value of investments (Note 3) (5,432,149)
Administrative expenses (5,400)
--------------
Total deductions (8,327,014)
--------------
DECREASE IN NET ASSETS (2,834,959)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 38,264,753
--------------
End of year $ 35,429,794
==============
See notes to financial statements.
-4-
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF THE PLAN
The following description of the Material Sciences Corporation Savings and
Investment Plan (the "Plan") provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended.
General--The Plan was established on January 1, 1976, as a defined
contribution savings and investment plan. Employees of Material Sciences
Corporation ("MSC") and its subsidiaries (collectively, the "Company") are
eligible to participate as of their date of hire (as defined in the Plan
agreement).
Plan Administration--The Retirement Plan Committee, consisting of current
employees of the Company, administers the Plan. Putnam Fiduciary Trust
Company (the "Trustee") is the trustee of the Plan. In addition, the
Trustee performs additional record keeping tasks for the Plan.
Contributions--Effective July 1, 2002, participant's maximum yearly
contribution increased from 14 percent to 50 percent. Each year,
participants may contribute up to 50 percent of their pretax annual
compensation, as defined in the Plan, subject to certain Internal Revenue
Code limitations. The combined pre-tax and after-tax contributions up to 6
percent of the participant's compensation are designated as "Basic
Contributions." Any contribution in excess of the 6 percent of
participant's compensation is designated as "Supplemental Contributions."
The combined pre-tax and after-tax contributions cannot exceed 50 percent
of the participant's compensation.
The Company contributes, in cash, 60 percent of the first six percent of
base compensation that a participant contributes to the Plan. Additional
amounts may be contributed at the discretion of the Company's board of
directors. No such additional discretionary contributions were made for
the year ended December 31, 2002.
Participant Accounts--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
contribution, the Company's matching contribution, and allocations of
Company discretionary contributions and Plan earnings, and charged with
withdrawals and an allocation of Plan losses. Earnings include interest,
dividends, realized gains or losses on sales of investments and the net
change in unrealized appreciation or depreciation of investments. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
-5-
Investment Options--Participants may direct the investments of their total
account balances into seven mutual funds, two common collective trust
funds ("CCT"), and a Company stock fund currently available in the Plan.
Vesting and Forfeitures--Participants are vested immediately in their
contributions plus actual earnings thereon. Vesting in the Company's
matching contribution portion of their accounts is based on years of
continuous service. A participant is 100 percent vested after five years
of credited service. Upon termination of employment, any amounts not
vested are forfeited and are applied toward future Company matching
contributions. Contributions made by the participants and the related
earnings are fully vested and not subject to forfeiture. In 2002,
forfeitures were $118,984 and were used to reduce the Company's matching
contribution.
Payment of Benefits--Upon retirement, death, disability or termination of
service, a participant may elect to receive a lump-sum distribution equal
to his or her vested account balance.
Loans and Distributions to Participants--Participants may borrow as much
as 50 percent of their vested account balance, or $50,000 (whichever is
less). The minimum loan amount is $1,000. Most loans must be repaid within
five years. The loan period is extended to 15 years if the loan proceeds
were used to purchase a primary residence. Loans are secured by the
balance in the participant's account. The interest rate is prime plus 1
percent. Participants may request a distribution of their after-tax funds,
including their vested Company match. In addition, hardship distributions
are permitted if certain criteria are met. Such withdrawals, however, are
subject to a 10 percent excise tax if the participant is less than 59 1/2
years of age and the withdrawal does not qualify for exemption under the
Internal Revenue Code ("IRC") regulations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements have been
prepared on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates. The Plan investments, in general, are exposed
to various risks, such as interest rate, credit, and overall market
volatility. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the financial statements.
Investment Valuation and Income Recognition--The investments of the Plan,
except for the Putnam Stable Value Fund, are stated at fair value. Shares
of registered investment companies are valued at quoted market prices,
which represent the net asset value of shares
-6-
held by the Plan at year-end. The Company stock is valued at its quoted
market price. Participant loans are valued at cost, which approximates
fair value.
The Plan's interest in the Putnam Stable Value Fund, at December 31, 2002
and 2001, is a CCT. The Plan owns shares in this CCT, which, in turn holds
shares in the underlying securities. The Putnam Stable Value Fund holds
investments in guaranteed investment contracts. These investment contracts
provide for benefit-responsive withdrawals at contract value. These
investments are valued at contract value, which approximates fair values,
as determined by the Trustee (that being contract value representing
investing principal plus accrued interest thereon). At December 31, 2002
and 2001, the crediting interest rates for the CCT were approximately 6
percent, and the average yield for the year ended December 31, 2002 was
approximately 6 percent.
Purchases and sales of securities are recorded on a trade date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date. Net realized and unrealized appreciation
(depreciation) is recorded in the accompanying Statement of Changes in Net
Assets Available for Benefits, as net appreciation (depreciation) in fair
value of investments.
Administrative Expenses--The Company pays all administrative expenses of
the Plan, except for certain investment management charges, distribution,
and loan processing fees.
Payment of Benefits--Benefit payments to participants are recorded upon
distribution. There were no participants who have elected to withdraw from
the plan but have not yet been paid at December 31, 2002 and 2001.
3. INVESTMENTS
The following presents investments that represent five percent or more of
the Plan's net assets as of December 31, 2002 and 2001:
2002 2001
George Putnam Fund $ 5,167,252 $ 5,633,839
Putnam Growth & Income Fund 5,701,092 7,561,968
Putnam Global Growth Fund - 1,961,836
Putnam Voyager Fund 4,826,060 6,578,556
Putnam OTC & Emerging Growth Fund - 2,436,967
Loan Fund 1,935,788 -
Putnam Stable Value Fund 10,335,053 7,617,590
-7-
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value by $5,432,149 as follows:
Mutual funds:
Putnam Voyager Fund $(1,769,576)
Putnam Growth and Income Fund (1,538,066)
Putnam OTC and Emerging Growth Fund (775,685)
Putnam George Putnam Fund (678,906)
Putnam Global Equity Fund (434,650)
Putnam S&P 500 Index Fund (371,370)
Putnam International Growth Fund (168,846)
Neuberger & Berman Genesis Trust Fund (68,760)
Oakmark International Fund (41,110)
ABN AMRO Veredus Aggressive Growth Fund (26,728)
-----------
Total mutual funds (5,873,697)
Common stock 441,548
-----------
Net depreciation of investments $(5,432,149)
===========
4. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated July 30, 2002, that the Plan is designed in accordance with
applicable IRC. Although the Plan has been amended since receiving the
determination letter, the plan administrator believes that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC and the Plan and related trust
continue to be tax-exempt. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
5. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Putnam
Fiduciary Trust Co., the Trustee as defined by the Plan; therefore, these
transactions qualify as party-in-interest transactions.
At December 31, 2002 the Plan held 84,816 shares of the common stock of
Material Sciences Corporation, the Plan's sponsor. During the year ended
December 31, 2002, the Plan recorded no dividend income related to such
stock.
6. PLAN TERMINATION
Although the Company has not expressed any intent to discontinue its
contributions or terminate the Plan, it may do so at any time, subject to
ERISA. In the event of termination, the Plan provides that the assets of
the Plan shall be allocated among the participants and beneficiaries of
the Plan in the order and amounts provided for in the Plan document, and
that all participants shall become fully vested on their Company
contribution accounts at that time.
-8-
7. SUBSEQUENT EVENTS
On April 16, 2003, the Company's Board of Directors voted to terminate
the Company's shareholder rights agreement. The agreement will be
terminated by redeeming all of the outstanding rights at a price of $0.01
per right, payable in cash. There is currently one right attached to each
outstanding share of common stock. The redemption payment will be mailed
on or about May 16, 2003 to shareowners of record on April 28, 2003. As a
result of the redemption, the rights cannot become exercisable, and the
shareholder rights agreement will be terminated. This subsequent event
has no material effect on the Plan's financial statements.
Effective July 1, 2003, the Company will contribute, in cash, 35% of the
first 6% of base compensation that a particular participant contributes
to the Plan, a decrease from 60% for the period January 1, 2003 through
June 30, 2003.
******
-9-
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i--
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
--------------------------------------------------------------------------------
Current
Identity of Issuer Description of Investment Value
* Putnam Fiduciary Trust Co. George Putnam Fund $ 5,167,252
International Growth Fund 907,834
Growth & Income Fund 5,701,092
Global Growth Fund 1,302,701
Voyager Fund 4,826,060
Stable Value Fund 10,335,053
OTC & Emerging Growth Fund 1,728,540
S&P 500 Index Fund 1,209,594
Oakmark Oakmark International Fund 185,157
ABN AMRO Veredus Aggressive Growth Fund 67,524
Neuberger & Berman Genesis Trust Fund 792,449
* Material Sciences Corporation Material Sciences Corporation Stock 1,097,524
* Loans to participants Interest rates ranging from lowest 6%; highest 10%
maturing from 2002 to 2007 1,935,788
-----------
Total investments $35,256,568
===========
* Represents a party in interest.
-10-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized on this 30/th/ day of June, 2003.
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
By: Material Sciences Corporation,
Plan Administrator
By: /s/ James J. Waclawik, Sr.
-------------------------------------------
James J. Waclawik, Sr.
Vice President, Chief Financial Officer
and Secretary
By: /s/ John M. Klepper
-------------------------------------------
John M. Klepper
Vice President, Human Resources
Exhibit Index
Exhibit No. Description
--------------------- ----------------------------------------------------------
23.1 Consent of Independent Auditors.
23.2 Notice Regarding Consent of Arthur Andersen LLP.
99.1 Certifications pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.