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, 2001
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:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ..................................................... 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000. ......................................................... 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 ................................................ 3
Notes to Financial Statements and Schedules ......................................... 4
SUPPLEMENTAL SCHEDULES:
Schedule I - Schedule of Assets Held at End of Year ................................. 10
Schedule II - Schedule of Nonexempt Transactions for the
Year Ended December 31, 2001 .......................................... 11
(b) Exhibits:
Exhibit 23.1 - Consent of Independent Public Accountants.
Exhibit 99.1 - Letter from Material Sciences Corporation Savings
and Investment Plan to the Commission regarding
representations to Material Sciences Corporation Savings
and Investment Plan from Arthur Andersen LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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.
Chicago, Illinois
May 21, 2002
1
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2001 and 2000
(Employer Identification Number 95-2673173, Plan Number 003)
2001 2000
----------- ------------
ASSETS:
Investments (Note 3) $37,951,044 $44,390,192
Contributions receivable-
Employer 205,613 21,621
Participant 108,096 126,370
LIABILITIES:
Excess contributions payable - (11,320)
----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS $38,264,753 $44,526,863
=========== ============
The accompanying notes are an integral part of these statements.
2
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2001
(Employer Identification Number 95-2673173, Plan Number 003)
ADDITIONS:
Contributions-
Participant $ 3,926,320
Employer 1,799,783
Investment income-
Dividends and interest 1,349,846
------------
Total additions 7,075,949
------------
DEDUCTIONS:
Benefits paid to participants (3,768,552)
Net depreciation in fair value of investments (Note 3) (6,147,735)
Administrative expenses (11,675)
------------
Total deductions (9,927,962)
------------
Net decrease before transfer activity (2,852,013)
TRANSFERS TO OTHER PLAN (Note 9) (3,410,097)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 44,526,863
------------
End of year $38,264,753
------------
The accompanying notes are an integral part of this statement.
3
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
December 31, 2001 and 2000
(Employer Identification Number 95-2673173, Plan Number 003)
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") was the trustee of the Plan as of December 31, 2001 and
2000. In addition, the Trustee performs additional record-keeping tasks
for the Plan.
Contributions
The Plan allows participants to contribute 1% to 14% of their
compensation, as defined by the Plan document, to their pre-tax and
after-tax accounts. The combined pre-tax and after-tax contributions up
to 6% of the participant's compensation are designated as "Basic
Contributions". Any contribution in excess of the 6% of participant's
compensation is designated as "Supplemental Contributions". The
combined pre-tax and after-tax contributions cannot exceed 14% of the
participant's compensation.
Effective April 1, 2000, the Company's matching contributions increased
from 50% to 60% of the eligible participant's Basic Contributions,
except for MSC Pre Finish Metals (EGV) Inc.'s Union and MSC Laminates
and Composites Inc.'s Union, which remained at 50%.
4
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of both the Company's contribution and
Plan earnings. Participants share in the earnings of the Plan based on
the ratio of each participant's equity to the total participants'
equity. 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.
Vesting and Forfeitures
Participants vest in the Company's contribution and related earnings at
the rate of 20% per year for each full year of participation and are
100% vested after five years. 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
2001, $33,996 in forfeitures 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 or a life annuity.
Loans and Distributions to Participants
Participants may borrow as much as 50% 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. The interest rate is prime plus 1%. 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%
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.
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.
5
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.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
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 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,
2001 and 2000, 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, 2001 and 2000 the average yield and crediting
interest rates for the CCT were approximately 6%.
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.
The Plan provides for investments that, in general, are exposed to
various risks such as interest rate, credit and overall market
volatility risk. 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 affect the amounts reported in the Statements of Net
Assets Available for Benefits.
Administrative Expenses
The Company pays all administrative expenses of the Plan, except for
certain investment management charges, distribution and loan processing
fees.
6
Payment of Benefits
Benefits are recorded when paid.
Reclassifications
Certain amounts were reclassified to conform to the current year's
presentation.
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets as of December 31, 2001 and 2000:
2001 2000
----------- -----------
George Putnam Fund $5,633,839 $5,982,483
Putnam Growth & Income Fund 7,561,968 9,036,025
Putnam Global Growth Fund 1,961,836 3,007,162
Putnam Voyager Fund 6,578,556 9,861,661
Putnam OTC & Emerging Growth Fund 2,436,967 3,046,885
Putnam Stable Value Fund 7,617,590 7,221,461
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
depreciated in value by $6,147,735 as follows:
Mutual funds $(6,613,488)
Common stock 465,753
-----------
$(6,147,735)
===========
4. TAX STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated March 3, 1995, 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.
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.
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
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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.
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31
-------------------------------
2001 2000
--------------- ---------------
Net assets available for benefits per the
financial statements $38,264,753 $44,526,863
Amounts allocated to withdrawing
participants (120,414) (38,757)
--------------- ---------------
Net assets available for benefits per the
Form 5500 $38,144,339 $44,488,106
=============== ===============
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500 at December 31, 2001:
Benefits paid to participants per the financial
statements $3,768,552
Add- Amounts allocated to withdrawing participants
at Plan year-end 120,414
Less- Amounts allocated to withdrawing participants
previous year's Plan year-end (38,757)
----------
Benefits paid to participants per the Form 5500 $3,850,209
==========
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31, but not yet paid as of that date.
8. NONEXEMPT TRANSACTIONS
During the Plan year ended December 31, 2000, there was a deemed loan
made to the Company when an employee 401(k) contribution of $21,656 was
not remitted to the Plan on a timely basis. The Company remitted the
contribution to the Plan on July 27, 2001 and intends to repay the Plan
for the interest incurred on the loan in 2002. This transaction is
detailed on the schedule of nonexempt transactions in the accompanying
supplemental schedules.
9. TRANSFER TO OTHER PLAN
Effective June 29, 2001, the Company sold substantially all of the
assets of its Specialty Films segment ("SFI"). The participants of the
SFI division were spun off from this Plan. Assets were transferred on
October 1, 2001 to the Innovative Specialty Films, LLC Savings &
Investment Plan in the amount of $3,410,097.
8
10. SUBSEQUENT EVENT
Effective February 17, 2002, the Company increased the MSC Pre Finish
Metals (EGV) Inc.'s Union and MSC Laminates and Composites Inc.'s Union matching
contributions from 50% to 60% of the eligible participant's Basic Contributions.
9
Schedule I
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2001
(Employer Identification Number 95-2673173, Plan Number 003)
(e)Current
(a) (b) Identity of Issuer (c)Description of Investment Value
----- ---------------------------- ---------------------------------- ------------
* Putnam Fiduciary Trust Co. George Putnam Fund $ 5,633,839
* Putnam Fiduciary Trust Co. International Growth Fund 965,819
* Putnam Fiduciary Trust Co. Growth & Income Fund 7,561,968
* Putnam Fiduciary Trust Co. Global Growth Fund 1,961,836
* Putnam Fiduciary Trust Co. Voyager Fund 6,578,556
* Putnam Fiduciary Trust Co. Stable Value Fund 7,617,590
* Putnam Fiduciary Trust Co. OTC & Emerging Growth Fund 2,436,967
* Putnam Fiduciary Trust Co. S&P 500 Index Fund 1,704,375
Neuberger & Berman Genesis Trust Fund 96,935
* Material Sciences Corporation stock
1,483,972
* Loan Fund (interest rates ranging from
low-- 6% to high--10%) 1,909,187
----------
Total investments $37,951,044
===========
*Represents a party-in-interest transaction.
The accompanying notes are an integral part of this schedule.
10
Schedule II
MATERIAL SCIENCES CORPORATION
SAVINGS AND INVESTMENT PLAN
SCHEDULE OF NONEXEMPT TRANSACTIONS
For the Year Ended December 31, 2001
(Employer Identification Number 95-2673173, Plan Number 003)
Relationship of
Plan, Employer Description of Transaction,
or Other Including (i) Interest
Identity of Party Party in Maturity Date, Rate of Interest, (d) Amount Incurred
Involved Interest Collateral, Par or Maturity Value Loaned on Loan
----------------- --------------- --------------------------------- ---------- ------------
Material Sciences Plan sponsor Lending of monies from the Plan to
Corporation the Plan sponsor (contributions not
remitted to the Plan on time) as
follows:
Deemed loan occurred March 4, 2000,
maturity $26,378, with interest at
various rates $21,656 $4,722
========== ============
The accompanying notes are an integral part of this schedule.
11
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 31st day of May, 2002.
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
Exhibit Index
-------------
Exhibit No. Description
----------- ------------------------------------------------------------
23.1 Consent of Independent Public Accountants
99.1 Letter from Material Sciences Corporation Savings and
Investment Plan to the Commission regarding representations
to Material Sciences Corporation Savings and Investment Plan
from Arthur Andersen LLP.