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 August 31, 2013

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

incorporation or organization)

 

(IRS employer

identification number)

2200 East Pratt Boulevard  
Elk Grove Village, Illinois   60007
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (847) 439-2210

 

 

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 1, 2013, there were 10,322,055 outstanding shares of common stock, $0.02 par value.

 

 

 


MATERIAL SCIENCES CORPORATION

FORM 10-Q

For the Quarter Ended August 31, 2013

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

(a) Condensed financial statements of Material Sciences Corporation and Subsidiaries

 

2


Condensed Consolidated Statements of Operations (Unaudited)

Material Sciences Corporation and Subsidiaries

 

     Three Months Ended     Six Months Ended  
     August 31,     August 31,  

(In thousands, except per share data)

   2013      2012     2013      2012  

Net Sales

   $ 27,553       $ 29,927      $ 56,273       $ 64,761   

Cost of Sales

     21,553         23,374        44,185         49,653   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross Profit

     6,000         6,553        12,088         15,108   

Selling, General and Administrative Expenses

     4,577         4,985        9,477         10,443   

Gain on Sale of Assets

     —           3,216        —           3,216   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from Operations

     1,423         4,784        2,611         7,881   
  

 

 

    

 

 

   

 

 

    

 

 

 

Other Income, Net:

          

Interest Income, Net

     14         12        23         6   

Equity in Results of Joint Venture

     78         67        116         115   

Rental Income

     64         348        93         629   

Other, Net

     11         (40     47         (34
  

 

 

    

 

 

   

 

 

    

 

 

 

Total Other Income, Net

     167         387        279         716   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from Operations Before Provision for Income Taxes

     1,590         5,171        2,890         8,597   

Provision for Income Taxes

     576         1,918        507         3,126   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net Income

   $ 1,014       $ 3,253      $ 2,383       $ 5,471   
  

 

 

    

 

 

   

 

 

    

 

 

 

Basic Net Income Per Share

   $ 0.10       $ 0.31      $ 0.23       $ 0.53   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted Net Income Per Share

   $ 0.10       $ 0.31      $ 0.23       $ 0.52   
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted Average Number of Common Shares Outstanding

          

Used for Basic Net Income Per Share

     10,271         10,332        10,244         10,393   

Dilutive Shares

     162         119        163         117   
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted Average Number of Common Shares Outstanding

          

Plus Dilutive Shares

     10,433         10,451        10,407         10,510   
  

 

 

    

 

 

   

 

 

    

 

 

 

Outstanding Common Stock Options Having No Dilutive Effect

     304         407        280         412   
  

 

 

    

 

 

   

 

 

    

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Material Sciences Corporation and Subsidiaries

 

     Three Months Ended     Six Months Ended  
     August 31,     August 31,  
     2013     2012     2013     2012  

Net Income

   $ 1,014      $ 3,253      $ 2,383      $ 5,471   

Other Comprehensive Income:

        

Foreign Currency Translation Adjustments

     (110     (92     (187     (1,036

Pension/Postretirement Adjustments, Net of Benefit for Income Taxes of $55, $82, $149 and $143, Respectively

     152        133        241        232   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

   $ 1,056      $ 3,294      $ 2,437      $ 4,667   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Condensed Consolidated Balance Sheets

Material Sciences Corporation and Subsidiaries

 

     August 31,     February 28,  

(In thousands)

   2013     2013  
     (unaudited)     (audited)  

Assets:

    

Current Assets:

    

Cash and Cash Equivalents

   $ 38,470      $ 37,508   

Restricted Cash

     1,123        —     

Receivables, Less Reserves and Allowances of $523 and $489, Respectively

     16,924        17,675   

Income Taxes Receivable

     55        1,392   

Prepaid Expenses

     1,054        554   

Inventories

     24,176        24,944   

Short Term Deferred Tax Assets

     3,925        4,191   
  

 

 

   

 

 

 

Total Current Assets

     85,727        86,264   
  

 

 

   

 

 

 

Property, Plant and Equipment

     123,449        120,586   

Accumulated Depreciation

     (93,427     (91,426
  

 

 

   

 

 

 

Net Property, Plant and Equipment

     30,022        29,160   
  

 

 

   

 

 

 

Other Assets:

    

Investment in Joint Venture

     2,209        2,394   

Long Term Deferred Tax Assets

     8,697        9,147   

Other

     215        141   
  

 

 

   

 

 

 

Total Other Assets

     11,121        11,682   
  

 

 

   

 

 

 

Total Assets

   $ 126,870      $ 127,106   
  

 

 

   

 

 

 

Liabilities:

    

Current Liabilities:

    

Accounts Payable

   $ 11,960      $ 11,061   

Accrued Payroll Related Expenses

     2,609        2,594   

Accrued Expenses

     4,352        5,799   
  

 

 

   

 

 

 

Total Current Liabilities

     18,921        19,454   
  

 

 

   

 

 

 

Long-Term Liabilities:

    

Pension and Postretirement Liabilities

     5,511        7,344   

Long-Term Incentives

     1,594        2,652   

Other

     2,615        2,720   
  

 

 

   

 

 

 

Total Long-Term Liabilities

     9,720        12,716   
  

 

 

   

 

 

 

Commitments and Contingencies

     —          —     

Shareowners’ Equity:

    

Preferred Stock

     —          —     

Common Stock

     383        381   

Additional Paid-In Capital

     81,943        81,089   

Treasury Stock at Cost

     (76,756     (76,756

Retained Earnings

     95,429        93,046   

Accumulated Other Loss

     (2,770     (2,824
  

 

 

   

 

 

 

Total Shareowners’ Equity

     98,229        94,936   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 126,870      $ 127,106   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Condensed Consolidated Statements of Cash Flows (Unaudited)

Material Sciences Corporation and Subsidiaries

 

     Six Months Ended  
     August 31,  

(In thousands)

   2013     2012  

Cash Flows From:

    

Operating Activities:

    

Net Income

   $ 2,383      $ 5,471   

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

    

Depreciation, Amortization and Accretion

     1,962        2,450   

Equity in Results of Joint Venture

     (116     (115

Deferred Income Taxes

     567        2,884   

Gain on Sales of Assets

     —          (3,216

Compensatory Effect of Stock Plans

     401        292   

Changes in Assets and Liabilities:

    

Receivables

     772        2,015   

Income Taxes Receivable

     1,367        (1,489

Prepaid Expenses

     (500     (429

Inventories

     792        (1,134

Accounts Payable

     1,641        (1,152

Accrued Expenses

     (1,466     (904

Pension and Postretirement Liabilities

     (1,833     (692

Other, Net

     (754     (93
  

 

 

   

 

 

 

Net Cash Provided by Operating Activities

     5,216        3,888   
  

 

 

   

 

 

 

Investing Activities:

    

Capital Expenditures

     (3,536     (2,060

Restricted Cash

     (1,123     —     

Investment in Research Entity

     (105     —     

Proceeds from Sale of Assets

     —          9,180   
  

 

 

   

 

 

 

Net Cash Provided by (Used In) Investing Activities

     (4,764     7,120   
  

 

 

   

 

 

 

Financing Activities:

    

Purchases of Treasury Stock

     —          (1,999

Issuance of Common Stock

     455        3   
  

 

 

   

 

 

 

Net Cash Provided by ( Used In) Financing Activities

     455        (1,996
  

 

 

   

 

 

 

Effect of Exchange Rate Changes on Cash

     55        (48

Net Increase in Cash and Cash Equivalents

     962        8,964   

Cash and Cash Equivalents at Beginning of Period

     37,508        28,201   
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Period

   $ 38,470      $ 37,165   
  

 

 

   

 

 

 

Non-Cash Transactions:

    

Capital Expenditures in Accounts Payable at End of Period

   $ 424      $ 634   

Treasury Stock Purchases in Accrued Liabilities at Period-End

   $ —        $ 14   

Supplemental Cash Flow Disclosures:

    

Interest Paid

   $ 12      $ 16   

Income Taxes Paid (Refunded), Net

   $ (1,415   $ 1,827   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

MATERIAL SCIENCES CORPORATION and SUBSIDIARIES

The financial information as of August 31, 2013, and for the three and six months ended August 31, 2013 and 2012, has not been audited by our independent registered public accounting firm. In the opinion of Material Sciences Corporation and Subsidiaries (the “Company,” “we,” “our,” “us” or “MSC”), the information reflects all adjustments (consisting of only normal, recurring adjustments) necessary for a fair presentation of the information at that date and for those periods. The financial information contained in this report should be read in conjunction with the Company’s Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission on May 6, 2013, for the fiscal year ended February 28, 2013. A reclassification has been made to the prior years’ consolidated financial statements to conform to the 2014 presentation—“Pension and Postretirement Liabilities” was reclassified from “Other, Net” in the Condensed Consolidated Statements of Cash Flows.

 

(1) Joint Venture. In November 2000, a subsidiary of MSC formed a joint venture with Tekno S.A. (“Tekno”) for the manufacture and sale of Quiet Steel® and disc brake noise damping material for the South American market. The Company includes its portion of the joint venture’s results in the Condensed Consolidated Statements of Operations under Equity in Results of Joint Venture. The Equity in Results of Joint Venture was income of $78,000 and $116,000 for the three and six months ended August 31, 2013, respectively, compared with $67,000 and $115,000 for the three and six months ended August 31, 2012.

 

(2) Preferred Stock. Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000 Designated Series B Junior Participating Preferred; None Issued.

 

(3) Common Stock. Common Stock, $0.02 Par Value; 40,000,000 Shares Authorized; 19,140,186 Shares Issued and 10,316,014 Shares Outstanding as of August 31, 2013, and 19,058,923 Shares Issued and 10,198,121 Shares Outstanding as of February 28, 2013.

 

(4) Treasury Stock. The Company’s Board of Directors authorized the repurchase of 1,000,000 shares of the Company’s common stock on September 14, 2011, and again on September 27, 2012. The shares may be repurchased from time-to-time on the open market, subject to market conditions and other factors, and generally will be funded with internally generated cash. The Company did not repurchase any shares under the September 2011 or September 2012 authorizations during the six months ended August 31, 2013. At August 31, 2013, there were 364,476 shares available for purchase under the September 2011 authorization and 1,000,000 shares available for purchase under the September 2012 authorization.

 

     Shares      Cost of Shares
Purchased
(in thousands)
     Average Price
per Share
 

Treasury Stock as of February 28, 2013

     8,824,172       $ 76,756       $ 8.70   

Repurchases During the Six Months Ended August 31, 2013

     —           —        
  

 

 

    

 

 

    

Treasury Stock as of August 31, 2013

     8,824,172       $ 76,756       $  8.70   
  

 

 

    

 

 

    

 

7


On February 15, 2013, the Company entered into a written trading plan to purchase up to 364,476 shares under Rule 10b5-1 of the Exchange Act as part of the existing share repurchase program. The plan will expire on February 15, 2014, or when all the shares have been repurchased, whichever occurs first.

 

(5) Commodity Contracts. MSC is exposed to certain risks related to ongoing business operations. We use derivative instruments with the objective of managing our financial and operational exposure arising from these risks: primarily commodity price risk. From time-to-time in the ordinary course of business, the Company enters into purchase contracts for procuring nickel carbonate, zinc shot and natural gas, which are commodities used in our manufacturing processes. MSC maintains a commodity forward purchase policy. This policy seeks to ensure that, at any time, the majority of the expected consumption over the next 12 months is secured under a purchase contract at a pre-determined price. When MSC enters into these contracts, it applies the Normal Purchase/Normal Sale election, which excludes the contracts from being accounted for as derivative instruments at fair value for as long as they qualify for the election.

At August 31, 2013, we did not have any commodity contracts that we accounted for at fair value.

 

(6) Cash, Cash Equivalents and Restricted Cash. The Company maintains its cash balances in interest-bearing bank accounts and highly liquid investments with maturities of three months or less. At August 31, 2013, MSC had $27.0 million of U.S. Treasury bills and $11.5 million of cash.

We have issued two letters of credit in connection with our Midco environmental liability and a workers’ compensation insurance obligation. The Midco letter of credit is $1.0 million and the insurance letter of credit is $0.1 million. The letters of credit are secured by restricted cash deposited with JPMorgan Chase Bank. At August 31, 2013, we had restricted cash of $1.1 million.

 

(7) Inventory. Inventories consist of the following:

 

(in thousands)    August 31, 2013      February 28, 2013  

Raw Materials

   $ 9,230       $ 8,802   

Finished Goods

     14,946         16,142   
  

 

 

    

 

 

 

Total Inventories

   $  24,176       $  24,944   
  

 

 

    

 

 

 

 

(8) Long-Term Incentives. The Long-Term Incentives balances of $1.6 million and $2.7 million at August 31, 2013, and February 28, 2013, respectively, consisted entirely of Phantom Stock Liability. Phantom Stock Liability represents the value of long-term phantom stock units held by members of the Board of Directors. The units were awarded each quarter from June 2004 through June 2012 and are redeemed in cash after five years at the average of the closing prices for the preceding 30 trading days. The liability is adjusted to the current market value each quarter.

 

8


We also carry a current liability of $1.4 million (at the August 31, 2013 market value) for phantom stock units which will be redeemed within one year. This liability is included in Accrued Expenses within Current Liabilities.

 

(9) Significant Customers. Due to the concentration in the automotive industry, management believes that sales to individual automotive customers—both Tier 1 and Tier 2 (including US Steel)—are significant. The following table shows sales to the Company’s major customers as a percentage of consolidated net sales for the three and six months ended August 31, 2013 and 2012.

 

     % of Consolidated
Net Sales for the
Three Months Ended
August 31,
    % of Consolidated
Net Sales for the
Six Months Ended
August 31,
 

Customer

   2013     2012     2013     2012  

Chrysler

     19     21     20     20

US Steel

     14     15     13     15

The following table shows gross accounts receivable from these significant customers as a percentage of total consolidated gross accounts receivable as of August 31, 2013, and February 28, 2013.

 

     % of Consolidated Gross Accounts
Receivable
 

Customer

   August 31, 2013     February 28, 2013  

Chrysler

     18     18

US Steel

     7     12

 

(10) Income Taxes. The Company evaluates its deferred income taxes on a quarterly basis to determine if valuation allowances are required, in full or in part. This includes considering available positive and negative evidence, such as past operating results, the existence of cumulative losses in the most recent fiscal years and our forecast of future taxable income on a jurisdiction-by-jurisdiction basis. In determining future taxable income, we review the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. At August 31, 2013, MSC had valuation allowance relating to certain state net operating losses.

The Company estimates that it is reasonably possible that the total amount of unrecognized tax benefits of $0.5 million at August 31, 2013, will significantly change during the next 12 months. The estimated range is a decrease of zero to $0.2 million.

For the three and six months ended August 31, 2013, MSC’s effective income tax rate for continuing operations was 36.2% and 17.5%, respectively, compared with 37.1% and 36.4%, respectively in the same periods last year. The lower rate in the six-month period ended August 31, 2013, was primarily due to filing amended returns to claim foreign tax credits.

 

(11) Retirement and Savings Plans. The Company has one defined contribution retirement plan qualifying under the Internal Revenue Code Section 401(k): The Material Sciences Savings & Investment Plan (the “SIP”). All MSC employees can elect to participate in the SIP.

 

9


MSC also has non-contributory defined benefit pension plans, all of which are frozen, and other postretirement plans for certain of its employees. The following table provides the components of net periodic benefit cost for the Company’s defined benefit plans and other post-retirement plans.

 

     Pension Benefits     Other Benefits  
(in thousands)    Three Months Ended August 31,  
     2013     2012     2013     2012  

Service Cost

   $ —        $ —        $ 6      $ 6   

Interest Cost

     137        146        19        19   

Amortization of Unrecognized Prior Service Cost

     —          —          (69     (69

Expected Return on Plan Assets

     (163     (143     —          —     

Amortization of Net Loss

     150        164        50        49   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Net Periodic Benefit Cost

   $ 124      $ 167      $ 6      $ 5   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Pension Benefits     Other Benefits  
(in thousands)    Six Months Ended August 31,  
     2013     2012     2013     2012  

Service Cost

   $ —        $ —        $ 11      $ 11   

Interest Cost

     273        291        38        39   

Amortization of Unrecognized Prior Service Cost

     —          —          (138     (138

Expected Return on Plan Assets

     (326     (285     —          —     

Amortization of Net Loss

     299        327        101        98   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Net Periodic Benefit Cost

   $ 246        333      $ 12      $ 10   
  

 

 

   

 

 

   

 

 

   

 

 

 

MSC previously disclosed in the notes to its financial statements for the year ended February 28, 2013, that it expected to contribute $3.1 million—including $1.1 million of required minimum contributions and $2.0 million of additional contributions—toward its qualified and nonqualified defined benefit pension plans and $0.1 million toward its other post-retirement benefit plans other than pension plans in fiscal 2014. As of August 31, 2013, $1.6 million of contributions/payments have been made toward the pension plans and less than $0.2 million of net contributions/payments have been made to the other post-retirement plans, which is higher than expected due to higher than normal health care claims for certain retirees.

 

(12) Equity and Compensation Plans. The Company has one active equity award plan, the Material Sciences Corporation 2012 Incentive Compensation Plan (“2012 Plan”). There are 2,130,789 shares authorized under the 2012 Plan to provide stock options, restricted stock and other equity awards under various programs to both employees and non-employee directors. Non-qualified stock options generally vest over three years from the date of grant and expire between five and 10 years from the date of grant. Restricted stock awards generally vest over three to five years from the date of grant.

 

10


The Company also has one inactive equity award plan, the Material Sciences Corporation 2001 Compensation Plan for Non-Employee Directors (“2001 Directors Plan”). The 2001 Directors Plan expired on February 29, 2004, and no additional grants will be made under the plan. There were 3,537 stock options outstanding and exercisable under this plan at August 31, 2013.

Stock option activity during fiscal years 2012 and 2013 is listed below.

 

    In March 2012, 200,000 options with a Black-Scholes value of $4.24 were granted.

 

    In March 2013, 100,000 options with a Black-Scholes value of $4.70 were granted.

 

    In May 2013, 67,680 options were exercised.

There were 720,458 stock options outstanding, of which 220,458 were exercisable, at August 31, 2013.

In March 2013, the Company issued 2,100 shares of restricted stock in lieu of salary increases, which will vest over one year. In March 2012, MSC issued 5,900 shares of restricted stock in lieu of salary increases, of which 5,754 have vested and 146 were forfeited.

In May 2012, MSC issued 10,000 shares of restricted stock, which will vest over three years, to our CEO for meeting performance objectives in fiscal 2012.

In September 2012, MSC began making quarterly grants of restricted stock to the non-employee directors of the Company. Each grant to a director represents the number of shares of our common stock equal to the quotient of $8,500 divided by the closing sale price of our common stock on the day preceding the grant date. The shares will vest on the third anniversary of the grant date. Restricted shares granted are listed below:

 

Grant Date

   Fiscal 2014      Fiscal 2013  

March 1

     5,028         —     

June 1

     6,069         —     

September 1

     —           5,754   

December 1

     —           5,676   

 

(13) Segments. MSC operates in one segment based on how the Chief Operating Decision Maker views its business for evaluating performance and making operating decisions. The Company provides material-based solutions for acoustical and coated applications. The acoustical material-based solutions include multilayer composites consisting of metals, polymers, rubber and other coated materials used to manage noise and vibration. The coated metal material-based solutions include painted, electrogalvanized (“EG”), rubber and film coatings that provide protective, decorative and functional performance. The coatings are applied to coiled metal of various widths and thicknesses. MSC’s material-based solutions are designed to meet specific customer requirements for the transportation, appliance, building products, lighting and electronics markets. Some customers purchase products from several different product categories.

 

11


We use a significant level of shared assets, and share resources for sales, general and administrative expense, and management across each of our product categories. Capital projects—whether for cost savings or generating incremental revenue—are evaluated individually based on estimated economic returns (e.g., net present value, return on investment), not based on related product line or geographic location. We use a centralized functional management structure, and share administration and production resources, to deliver individual products that, together, provide solutions to our customers.

 

    

Three Months Ended August 31,

   

Six Months Ended August 31,

 
     2013     2012     2013     2012  
($ in thousands)    $      %     $      %     $      %     $      %  

Acoustical

     17,942         65        19,360         65        36,363         65        39,283         61   

Coated

     9,611         35        10,567         35        19,910         35        25,478         39   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Net Sales

   $ 27,553         100   $ 29,927         100   $ 56,273         100   $ 64,761         100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Net sales of our domestic and foreign units are presented in the table below. No one foreign country comprised greater than 10% of consolidated net sales for any period presented.

 

($ in thousands)    Three Months Ended
August 31,
     Six Months Ended
August 31,
 
     2013      2012      2013      2012  

Domestic Net Sales

   $ 23,073       $ 26,228       $ 47,107       $ 56,752   

Foreign Net Sales

     4,480         3,699         9,166         8,009   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Net Sales

   $ 27,553       $ 29,927       $ 56,273       $ 64,761   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(14) Commitments and Contingencies. MSC is a party to various legal proceedings in connection with the remediation of certain environmental matters. The Company’s environmental accruals were approximately $1.1 million as of August 31, 2013, and $1.2 million as of February 28, 2013. Management does not believe that the outcome of its environmental legal proceedings will have a material adverse effect on its financial statements, given the accruals recorded as of August 31, 2013, and, where applicable, taking into account contributions from other potentially responsible parties. There are, however, a number of uncertainties. These include, without limitation, the eventual final cost of site cleanup, the discretionary authority of federal and state regulatory authorities in bringing enforcement actions and other factors that could affect the Company’s exposure.

On October 4, 2013, the Company received a letter from the electric utility serving its Walbridge, Ohio facility alleging that the facility had exceeded power consumption limits during a declared Emergency Curtailment Event (i.e., a period of time in which the utility can require that certain customers reduce electricity demand to avoid over-stressing the utility’s distribution or transmission infrastructure) in September 2013 (the “Emergency Curtailment Event”). Pursuant to the terms of its agreement with the utility, the Company has agreed to reduce its use of energy provided by the utility during an Energy Curtailment Event, subject to specified procedures, terms and conditions included in such agreement, in exchange for the utility’s issuance of program credits to the Company, which credits reduce the facility’s monthly payments for usage to the utility. In connection with the alleged failure by the Company to meet its obligations regarding the Emergency Curtailment Event, in October 2013 the utility assessed a penalty to the Company of approximately $2.4 million, substantially all of which represents a forfeiture of program credits issued to the Company during the prior 12 months. The Company plans to administratively challenge (i.e. appeal) the penalty at the Public Utilities Commission of Ohio and seek the elimination of the amount of such penalty. While the Company believes it has reasonable grounds to challenge the penalty assessed by the utility, there can be no assurance that the penalty will be eliminated, or reduced in any material respect. If the Company does not prevail in having the payment of the penalty withdrawn or significantly reduced, this would have a material adverse effect on the Company’s results of operations, financial position and cash flows.

MSC is also a party to various legal actions and customer disputes arising in the ordinary course of its business. These legal actions and customer disputes cover a broad variety of claims spanning MSC’s entire business. The Company believes that the resolution of these legal actions and customer disputes will not, individually or in the aggregate, have a material adverse effect on its results of operations, financial position or cash flows.

 

(15) Restructuring. During fiscal 2012, MSC recognized approximately $0.6 million in employee termination benefit and related expenses. All of the benefits were fully paid as of the end of the second quarter of fiscal 2013. There was no restructuring accrual as of August 31, 2013.

 

12


(16) Sale of Elk Grove Village Building. In April 2011, after receiving authorization from the Board of Directors, management committed to a plan to sell the building located at 2200 East Pratt Boulevard in Elk Grove Village, Illinois (the “Facility”). This building houses our corporate offices and housed our coil coating assets before they were sold in April 2010.

On July 23, 2012, MSC began leasing a portion of the Facility to Main Steel Polishing Company, Inc. The lease includes approximately 240,000 square feet of the 280,000 square foot Facility. MSC entered into this lease to enhance the attractiveness of the Facility to potential buyers.

On August 31, 2012, MSC sold the Facility to Torburn Partners, Inc. (“Torburn”) for cash. The net proceeds from the sale were approximately $9.2 million, which reflects all selling costs and the executory costs related to the lease discussed above. The Company recognized a gain of approximately $3.2 million on the sale. MSC entered into a four-year lease with Torburn under which MSC continues to occupy approximately 35,000 square feet of office space in the Facility to house its corporate and domestic operations.

 

13


MATERIAL SCIENCES CORPORATION and SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related notes, included in Item 1 of this Form 10-Q, and the audited Consolidated Financial Statements and related notes and the MD&A included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2013, filed on May 6, 2013 (“Form 10-K”), as well as the Company’s other filings with the Securities and Exchange Commission.

Executive Summary

Material Sciences Corporation and its subsidiaries (the “Company,” “MSC,” “we,” “our” or “us”) design, manufacture and market material-based solutions for acoustical and coated applications. The acoustical material-based solutions include multilayer composites consisting of metals, polymers, rubber and other coated materials used to manage noise and vibration. The coated metal material-based solutions include painted, electrogalvanized (“EG”), rubber and film coatings that provide protective, decorative and functional performance. The coatings are applied to coiled metal of various widths and thicknesses. MSC’s material-based solutions are designed to meet specific customer requirements for the transportation, appliance, building products, lighting and electronics markets. Some customers purchase products from several different product categories. The Company uses a significant level of shared assets, and share resources for sales, general and administrative expense, and management across each of our product categories.

We continue our efforts to expand existing relationships in Asia through our sales offices in Korea, Malaysia and China, and have an ongoing relationship with Hae Won Steel in Korea and Federal Iron Works in Malaysia for the production of our products.

As a part of our strategic planning process, management evaluates the strategic position, growth and economic value potential of our businesses with the objective of creating additional value for our shareholders. This planning process includes a review of organic growth opportunities, potential sales of assets, acquisitions of products or businesses, strategic partnerships, and optimum capital allocation. As a result of this process, during the second quarter of fiscal 2014, we entered into an exclusive licensing agreement with, and began investing in, Productive Research LLC, which owns proprietary technology surrounding lightweight metal composites.

Separately, we also received our first customer approvals to provide EG coatings for advanced high-strength steel. As we discussed in our Form 10-K, vehicle manufacturers are considering the use of high-strength steel as a means of achieving weight-reduction in their vehicles.

Results of Operations

Here is a summary of our consolidated financial performance:

 

     Three Months Ended
August 31,
    Six Months Ended
August 31,
 
($ in thousands)    2013     2012     %
Variance
    2013     2012     %
Variance
 

Net Sales

   $ 27,553      $ 29,927        (7.9 )%    $ 56,273      $ 64,761        (13.1 )% 

Gross Profit

   $ 6,000      $ 6,553        (8.4 )%    $ 12,088      $ 15,108        (20.0 )% 

% of Net Sales

     21.8     21.9       21.5     23.3  

Selling, General and Administrative

   $ 4,577      $ 4,985        (8.2 )%    $ 9,477      $ 10,443        (9.3 )% 

% of Net Sales

     16.6     16.7       16.8     16.1  

 

14


Sales

 

($ in thousands)    Net Sales for the Three Months Ended August 31,  

Application

   2013      2012      $ Variance     % Variance  

Acoustical

   $ 17,942       $ 19,360       ($ 1,418     (7.3 )% 

Coated

     9,611         10,567         (956     (9.0 )% 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 27,553       $ 29,927       ($ 2,374     (7.9 )% 
  

 

 

    

 

 

    

 

 

   

 

 

 

 

($ in thousands)    Net Sales for the Six Months Ended August 31,  

Application

   2013      2012      $ Variance     % Variance  

Acoustical

   $ 36,363       $ 39,283       ($ 2,920     (7.4 )% 

Coated

     19,910         25,478         (5,568     (21.9 )% 
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 56,273       $ 64,761       ($ 8,488     (13.1 )% 
  

 

 

    

 

 

    

 

 

   

 

 

 

Comparison of Results of Operations for the Three Months Ended August 31, 2013 and 2012

Net sales in the quarter ended August 31, 2013 were $27.6 million, a decrease of $2.4 million from the prior fiscal year quarter.

Acoustical sales decreased $1.4 million from the prior year quarter. Body panel Quiet Steel® sales for the quarter declined $0.7 million due to lower vehicle builds at Chrysler, Nissan and General Motors. Sales of engine-related products declined $0.5 million due to lower shipments of OE automotive products, mainly the result of end-of-life programs and lower vehicle and Class 8 truck production versus fiscal 2013. Brake sales were lower by $0.1 million primarily due to weaker aftermarket and OE brake sales in the North American market, partially offset by stronger OE brake sales in Europe and brake sales in Asia. Other acoustical sales, net of returns and allowances, decreased $0.1 million due to lower scrap sales related to lower production volumes.

Sales of coated products declined by $1.0 million. Fuel tank sales decreased by $1.2 million from the prior year; $0.9 million due to the continued conversion to plastic fuel tanks at Ford, and the remaining decline due to lower shipments of other fuel tank applications. Electrobrite® sales declined $0.2 million due to lower shipments of appliance related products. These declines were partially offset by an increase of $0.6 million of EG sales —due to stronger shipments to one mill customer, partially offset by lower shipments to another mill customer which lost business to a competitor. Aluminum pretreatment sales, used in automotive applications, increased $0.2 million. Other coated sales, net of returns and allowances, declined by $0.4 million, driven primarily by a decline in other coated product sales and lower scrap sales due to lower production volumes.

 

15


Gross Profit

Second quarter gross profit was $6.0 million or 21.8% of net sales for fiscal year 2014 compared with $6.6 million or 21.9% of net sales for fiscal year 2013. The primary cause of the lower gross profit was our lower sales in both the acoustical and coated product groups.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses for the three months ended August 31, 2013, were $4.6 million, or 16.6% of net sales, compared with $5.0 million, or 16.7% of net sales, in the same period last year. SG&A expenses in the second quarter of fiscal 2014 were lower by $0.4 million due to lower director stock incentive expense—based on stock price—and lower management incentive expenses, partially offset by higher professional services expenses.

Gain on Sale of Assets

On August 31, 2012, MSC sold the Elk Grove Village Plant #7 to Torburn Partners, Inc. for cash. The net proceeds from the sale were approximately $9.2 million. The Company recognized a gain of approximately $3.2 million on the sale.

Total Other Income, Net

Total other income, net was $0.2 million for the three months ended August 31, 2013, and $0.4 million for the three months ended August 31, 2012. A decrease in rental income due to the sale of the Elk Grove Village building was partially offset by increases in foreign exchange and joint venture income.

Income Taxes

The Company evaluates its deferred income taxes on a quarterly basis to determine if valuation allowances are required, in full or in part. This includes considering available positive and negative evidence, such as past operating results, the existence of cumulative losses in the most recent fiscal years and our forecast of future taxable income on a jurisdiction-by-jurisdiction basis. In determining future taxable income, we review the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. At August 31, 2013, MSC had a valuation allowance relating to certain state net operating losses. The Company estimates that it is reasonably possible that the total amount of unrecognized tax benefits of $0.5 million at August 31, 2013, will significantly change during the next 12 months. The estimated range is a decrease of zero to $0.2 million.

For the three months ended August 31, 2013, MSC’s effective income tax rate for continuing operations was 36.2% compared with 37.1% in the same period last year.

Comparison of Results of Operations for the Six Months Ended August 31, 2013 and 2012

Net sales in the six months ended August 31, 2013, were $56.3 million, a decrease of $8.5 million from the prior fiscal year period.

Acoustical sales decreased $2.9 million from the prior year period. Body panel Quiet Steel sales declined $1.1 million due to lower vehicle builds at Chrysler, Nissan and General Motors. Sales of engine related products declined $1.3 million due to lower shipments of OE automotive products, mainly the result of end-of-life programs and lower vehicle and Class 8 truck production versus fiscal 2013. Brake sales were lower by $0.6 million primarily due to weaker aftermarket and OE brake sales in the North American market, partially offset by higher OE brake sales in Europe and increased brake sales in Asia. Other acoustical sales, net of returns and allowances, increased $0.1 million driven by higher sales of disk drive-related products.

 

16


Sales of coated products decreased $5.6 million. Fuel tank sales decreased by $2.7 million from the prior year, primarily due to the continued conversion to plastic fuel tanks at Ford. Sales of EG material declined $2.7 million, principally due to lower sales to one of our steel mill customers, which lost sales to a competitor. Electrobrite sales declined $0.2 million due to lower shipments of appliance-related products. These declines were partially offset by an increase of $1.0 million of aluminum pretreatment sales used in automotive applications. Other coated sales, net of returns and allowances, declined by $1.0 million, driven by a decline of $0.5 million in other coated product sales and a decrease of $0.5 million in scrap sales due to lower production volumes.

Gross Profit

Gross profit for the six months ended August 31, 2013, was $12.1 million, or 21.5% of net sales, compared to $15.1 million, or 23.3% or net sales, for the same period in fiscal year 2013. The decline of $3.0 million was primarily due to lower sales and the higher operating cost associated with lower facility utilization. In addition, scrap sales declined due to lower production volume.

Selling, General and Administrative Expenses

SG&A expenses were $9.5 million, or 16.8% of net sales, for the six months ended August 31, 2013, compared to $10.4 million, or 16.1% of net sales, in the same period last year. The decrease in expenses was principally due to lower management incentive expenses and director stock incentive expenses—based on stock price—as well as lower facility expenses due to the sale of the Elk Grove Village building and lower product development costs. These decreases were partially offset by higher employee-related expenses from higher staffing levels in sales and marketing, and higher professional services expenses.

Gain on Sale of Assets

On August 31, 2012, MSC sold the Elk Grove Village Plant #7 to Torburn Partners, Inc. for cash. The net proceeds from the sale were approximately $9.2 million. The Company recognized a gain of approximately $3.2 million on the sale.

Total Other Income, Net

Total other income, net for the six months ended August 31, 2013, was $0.3 million compared with $0.7 million in the same period of fiscal 2013. The decrease was primarily due to lower rental income due to the sale of the Elk Grove Village building, partially offset by foreign exchange gains.

Income Taxes

The Company estimates that it is reasonably possible that the total amount of unrecognized tax benefits of $0.5 million at August 31, 2013, will significantly change during the next 12 months. The estimated range is a decrease of zero to $0.2 million.

For the six months ended August 31, 2013, MSC’s effective income tax rate for continuing operations was 17.5%, compared with 36.4% in the same period last year. The lower rate in the period ended August 31, 2013, was primarily due to filing amended returns to claim foreign tax credits.

 

17


Liquidity and Capital Resources

We have historically financed our operations with funds generated from operating activities, borrowings under credit facilities and sales of various assets. We believe that our cash on hand and cash generated from operations will be sufficient to fund our operations and meet our working capital needs for the foreseeable future.

During the first six months of fiscal 2014, we generated $5.1 million of cash from operating activities compared with $3.9 million during the first six months of last fiscal year. The increase was primarily because:

 

    We generated $0.8 million in cash by reducing inventory during the first six months of fiscal 2014 because we began the year with higher inventory levels. We used $1.1 million of cash increasing inventory in the same prior year period, resulting in a $1.9 million increase in cash when comparing the two periods.

 

    Cash generated from accounts payable was $1.6 million in the first six months of fiscal 2014, compared with cash used of $1.2 million in the prior year period. The change of $2.7 million is due to normal changes in accounts payable related to changes in production activities.

 

    Income taxes receivable decreased $1.4 million in the first six months of fiscal 2014 principally due to the receipt of an income tax refund of $1.5 million. In the first six months of fiscal 2013, income taxes receivable increased $1.5 million, resulting in a $2.9 million increase in cash generated when comparing the two periods. The tax refund was principally due to the tax loss on the sale of the Elk Grove Village building.

These increases were partially offset by:

 

    Net income after adjustment for noncash items decreased $2.6 million from the prior year period.

 

    Cash generated from accounts receivable activities in the current year period was $1.2 million less than in the prior year period due to reduced sales in the current period.

 

    Accrued expenses and other net assets and liabilities caused a $2.5 million decrease in cash due to higher payments of management incentives, payment of a previously accrued workers’ compensation claim, higher contributions to defined benefit pension plans, and a reduction in phantom stock liability.

In the first six months of fiscal 2014, we invested $3.5 million in capital improvement projects, compared with $2.1 million in the same period last year. The increase was primarily attributable to additional investments for production equipment at our Walbridge, Ohio facility to broaden our production capabilities and improve efficiency. We invested $1.1 million in restricted cash to support two letters of credit. We also made an initial quarterly equity investment of $0.1 million in Productive Research LLC that owns proprietary technology surrounding lightweight metal composites for use in the transportation industry—the investment is included in Other under Other Assets in the Condensed Consolidated Balance Sheets. In fiscal 2013, we generated $9.2 million from the sale of our Elk Grove Village building.

In the first six months of fiscal 2014, we did not repurchase any of our common stock compared with $2.0 million of repurchases in the prior year period. In May 2013, key employees exercised approximately 68,000 stock options, generating approximately $0.5 million of cash.

 

18


Our Board of Directors authorized the repurchase of 1,000,000 shares of the Company’s common stock on September 14, 2011 and again on September 27, 2012. The shares may be repurchased from time-to-time on the open market, subject to market conditions and other factors, and generally will be funded with internally generated cash. The Company did not repurchase any shares under the September 2011 or September 2012 authorizations during the three months ended August 31, 2013. At August 31, 2013, there were 364,476 shares available for purchase under the September 2011 authorization and 1,000,000 shares available for purchase under the September 2012 authorization.

MSC is a party to various legal proceedings in connection with the remediation of certain environmental matters. The Company’s environmental reserves were approximately $1.1 million at August 31, 2013, and $1.2 million at February 28, 2013. Refer to Note 14 of the Notes to the Condensed Consolidated Financial Statements entitled “Commitments and Contingencies” for additional information.

On October 4, 2013, the Company received a letter from the electric utility serving its Walbridge, Ohio facility alleging that the facility had exceeded power consumption limits during a declared Emergency Curtailment Event (i.e., a period of time in which the utility can require that certain customers reduce electricity demand to avoid over-stressing the utility’s distribution or transmission infrastructure) in September 2013 (the “Emergency Curtailment Event”). Pursuant to the terms of its agreement with the utility, the Company has agreed to reduce its use of energy provided by the utility during an Energy Curtailment Event, subject to specified procedures, terms and conditions included in such agreement, in exchange for the utility’s issuance of program credits to the Company, which credits reduce the facility’s monthly payments for usage to the utility. In connection with the alleged failure by the Company to meet its obligations regarding the Emergency Curtailment Event, in October 2013 the utility assessed a penalty to the Company of approximately $2.4 million, substantially all of which represents a forfeiture of program credits issued to the Company during the prior 12 months. The Company plans to administratively challenge (i.e. appeal) the penalty at the Public Utilities Commission of Ohio and seek the elimination of the amount of such penalty. While the Company believes it has reasonable grounds to challenge the penalty assessed by the utility, there can be no assurance that the penalty will be eliminated, or reduced in any material respect. If the Company does not prevail in having the payment of the penalty withdrawn or significantly reduced, this would have a material adverse effect on the Company’s results of operations, financial position and cash flows.

Contractual Obligations

As of August 31, 2013, there were no significant changes to the contractual obligations table presented in our Form 10-K.

Critical Accounting Policies

We have identified significant accounting policies that—as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved—could result in material changes to our financial condition or results of operations under different conditions or using different assumptions. Our most critical accounting policies, to which there have been no changes, are related to the following areas: revenue recognition, allowance for doubtful accounts, inventory, long-lived assets, income taxes, environmental reserves and defined benefit retirement plans. Details on our use of these policies and the related estimates are described fully in our Form 10-K.

Cautionary Statement Concerning Forward-Looking Statements

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors and shareowners can better understand a company’s future prospects and make informed investment decisions. This Form 10-Q contains forward-looking statements that include, without limitation, information about our anticipated results based on our plans and assumptions. We have tried, wherever possible, to identify these statements by using words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “will,” “plans,” “believes” and similar words and terms in connection with any discussion of future operating or financial performance.

Achievement of future results is subject to risks, uncertainties and assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from what we anticipate, estimate or project in this Form 10-Q. Many of the factors that could cause this are discussed in detail in Part I, Item 1A, “Risk Factors” of our Form 10-K.

 

19


We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. This discussion of potential risks and uncertainties is by no means complete but is designed to highlight important factors that may affect our financial condition or results of operations. Other sections of this Form 10-Q may include additional factors that could have an adverse impact on our business and financial performance. In addition, we operate in a competitive environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all these risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those in any forward-looking statements. Given this situation, stockholders should not place undue reliance on forward-looking statements as a prediction of actual results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the assessment of our sensitivity to market risk since the presentation in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on May 6, 2013, for the fiscal year ended February 28, 2013.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. MSC maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our controls and procedures also ensure this information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions on required disclosure. MSC periodically reviews the design and effectiveness of its disclosure controls and internal control over financial reporting. The Company makes modifications to improve the design and effectiveness of its disclosure controls and internal control over financial reporting, and may take other corrective actions if its reviews identify a need for these.

There are inherent limitations to the effectiveness of any system of disclosure controls and internal control over financial reporting, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of MSC’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, management concluded that MSC’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Changes in internal control over financial reporting. During the quarter ended August 31, 2013, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

20


The required certifications of our principal executive and financial officers are included as exhibits to this Quarterly Report on Form 10-Q. The disclosures in this Item 4 contain information on the evaluation of our disclosure controls and procedures and changes in internal control over financial reporting referred to in those certifications. For a more complete understanding of the matters covered by the certifications, these should be read in conjunction with Item 9A of the Company’s 2013 Annual Report on Form 10-K filed with the SEC on May 6, 2013.

 

21


MATERIAL SCIENCES CORPORATION

FORM 10-Q

For the Quarter Ended August 31, 2013

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

MSC is party to various legal actions arising in the ordinary course of its business. These legal actions cover a broad variety of claims spanning our entire business. We believe that the resolution of these legal actions will not, individually or in the aggregate, have a material adverse effect on the Company’s financial statements. See Note 14 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations, cash flows, and liquidity, and the market price of our common stock. Item 1A of our Annual Report on Form 10-K for the year ended February 28, 2013, includes a detailed discussion of the risk factors we believe still exist in our business. In addition to those factors, other risks and uncertainties may have a material adverse effect on our business, financial condition, and/or operating results, cash flows and liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

  (a) None

 

  (b) None

 

  (c) Our Board of Directors authorized the repurchase of 1,000,000 shares of the Company’s common stock on September 14, 2011 and again on September 27, 2012. The shares may be repurchased from time-to-time on the open market, subject to market conditions and other factors, and generally will be funded with internally generated cash. The Company did not repurchase any shares under the September 2011 or September 2012 authorizations during the six months ended August 31, 2013. At August 31, 2013, there were 364,476 shares available for purchase under the September 2011 authorization and 1,000,000 shares available for purchase under the September 2012 authorization.

On February 15, 2013, the Company entered into a written trading plan to purchase up to 364,476 shares under Rule 10b5-1 of the Exchange Act as part of the existing share repurchase program. The plan will expire on February 15, 2014, or when all the shares have been repurchased, whichever occurs first.

Item 6. Exhibits

Reference is made to the attached Index to Exhibits.

 

22


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, on the 10th day of October 2013.

 

MATERIAL SCIENCES CORPORATION
  By:   /s/ Clifford D. Nastas
   

Clifford D. Nastas

Chief Executive Officer

  By:   /s/ James D. Pawlak
    James D. Pawlak
    Vice President, Chief Financial
Officer, Corporate Controller and
Corporate Secretary

 

23


MATERIAL SCIENCES CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended August 31, 2013

Index to Exhibits

 

Exhibit Number

  

Description of Exhibit

  31.1    Rule 13a-14(a)/ 15(d)-14(a) Certification of Chief Executive Officer.
  31.2    Rule 13a-14(a)/ 15(d)-14(a) Certification of Chief Financial Officer.
  32    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101    The following data from the Material Sciences Corporation Quarterly Report on Form 10-Q for the quarter ended August 31, 2013, formatted in eXtensible Business Reporting Language (XBRL®): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) the related notes. (1)

 

(1) This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.