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| MSC > SEC Filings for MSC > Form 10-Q on 13-Jan-2004 | All Recent SEC Filings |
13-Jan-2004
Quarterly Report
The following management's discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the Consolidated Financial Statements and notes thereto and the MD&A included in the Company's Annual Report on Form 10-K for the year ended February 28, 2003, as well as the Company's other filings with the Securities and Exchange Commission.
MSC reports segment information based on how management views its business for evaluating performance and making operating decisions. As a result of the Company's restructuring program in fiscal 2002 and its increase in expense related to field-effect switch/sensors, MSC is reporting results for all periods on the basis of two business segments, MSC Engineered Materials and Solutions Group ("EMS") and MSC Electronic Materials and Devices Group ("EMD"). EMS's electronic material-based solutions consist primarily of coated metal and laminated noise and vibration reducing materials used in the electronics market. EMS's acoustical/thermal material-based solutions consist of layers of metal and other materials used to manage noise, vibration and thermal energy for the automotive, lighting and appliance markets. EMS's coated metal material-based solutions include coil coated and electrogalvanized ("EG") products primarily used in the automotive, building and construction, appliance and lighting markets. EMD's electronic material-based solutions include field-effect technology for sensors, switches and interface solutions in the consumer electronics and transportation markets.
As a result of the sale of substantially all of the assets of the Company's Pinole Point Steel business, including MSC Pinole Point Steel Inc. and MSC Pre Finish Metals (PP) Inc., to Grupo IMSA S.A. de C.V. ("IMSA") and other third parties in the first quarter of fiscal 2003, Pinole Point Steel is reported as a discontinued operation for all periods presented.
The Company is currently in the process of implementing cost reduction and restructuring plans throughout the Company. As part of these plans, the Company has been conducting a fundamental review of its manufacturing structure, procurement, plant performance and operating processes. The Company believes that all of these areas have offered and continue to offer the opportunity for savings. The Company has also been reviewing its metal coating operations from a strategic standpoint to determine whether they are capable of earning a satisfactory return. The
Company believes all assets must be capable of providing an adequate return to shareowners, or the assets will be sold or idled.
RESULTS OF OPERATIONS
Net sales from continuing operations of MSC in the third quarter of fiscal 2004 were $64,640, 4.1% lower than $67,401 in the prior third quarter. Net sales for the nine months ended November 30, 2003 were $179,922 compared with $207,212 for the same period last year, a decrease of 13.2%. MSC's gross profit margin was 18.2%, or $11,763, in the third quarter of fiscal 2004 compared with 17.5%, or $11,808, in the third quarter of fiscal 2003. Gross profit margin for the first nine months of fiscal 2004 was 16.4% or $29,544 versus 18.8% or $39,005 for the first nine months of fiscal 2003. Selling, general and administrative ("SG&A") expenses of $9,558 and $28,665 were 14.8% and 15.9% of net sales in the third quarter and nine-month period of fiscal 2004, respectively, as compared with $10,390 and $30,074 or 15.4% and 14.5%, of net sales in the same periods last year, respectively.
On April 17, 2003, the Chairman, President and Chief Executive Officer resigned and was replaced by a non-executive Chairman of the Board and a new President and Chief Executive Officer. MSC entered into a separation agreement with the former officer, resulting in a pretax charge to earnings of $1,821 in the first quarter of fiscal 2004. Of this amount, $1,543 is scheduled to be paid out over two years and the remainder relates to the executive's non-contributory supplemental pension plan to be paid out in accordance with the plan. The Company recorded additional restructuring expense of $143 during the first quarter of fiscal 2004. Total restructuring expenses for the year-to-date period in fiscal 2004 were $1,964. A total of $565 is recorded as Accrued Payroll Related Expenses and $222 is recorded as Other Long-Term Liabilities in the Consolidated Balance Sheet at November 30, 2003.
During the second quarter of fiscal 2004, the Company curtailed the future retiree health care benefits for certain active employees of the Company resulting in a one-time reduction in operating expenses and improvement in income from continuing operations of $1,951.
The Company is currently in the process of implementing cost reductions and restructuring plans throughout the Company. MSC has consolidated the administrative structure of the Company, combined its sales and marketing departments to improve results by strengthening the depth and talent level of the combined organization and reduced overhead expenses throughout the Company. The Company is also reviewing all operations, including its manufacturing structure, procurement and operating processes. This review is expected to generate additional savings opportunities. These actions resulted in pre-tax savings of approximately $1.7 million in the third quarter of fiscal 2004 and are estimated to result in pre-tax savings of $6.5 million for the full year ending February 29, 2004.
MSC Engineered Materials and Solutions Group
Net sales for EMS decreased 4.2% in the third quarter of fiscal 2004 to $64,506 from $67,299 in the same period last year. For the nine-month period ended November 30, 2003, net sales decreased 13.2% to $179,685 from $207,090 in the same period last year. Sales of electronic-based materials increased 11.5% to $6,772 during the third quarter of fiscal 2004, from $6,074 in the prior year period, and increased 19.9% to $19,906 in the nine-month period of fiscal 2004 from $16,607 in the prior year nine-month period. The increase for both periods was mainly
due to higher shipments of disk drive material. Acoustical/thermal materials sales increased by 26.9% in the third quarter of fiscal 2004 to $18,921, as compared with $14,916 in the third quarter of fiscal 2003. Increased sales of body panel laminate (Quiet Steel ) and engine materials mainly contributed to the increase. Acoustical/thermal materials sales increased 12.3% in the nine-month period ended November 30, 2003, to $51,771 from $46,091 in the same period last year. The increase was mainly due to higher shipments of body panel laminate (Quiet Steel) and engine materials, slightly offset by lower shipments of Specular+ materials to the lighting market. Sales of coated metal materials decreased 16.2% to $38,813 in the third quarter of fiscal 2004 from $46,309 last year. Lower shipments of electrogalvanizing material, due to lower ISG utilization of the Walbridge facility versus BSC's utilization in last year's third quarter, and lower shipments of other automotive and lighting materials, were offset slightly by an increase in materials sold to the appliance and swimming pool markets. For the year-to-date period ended November 30, 2003, sales of $108,008 were 25.2% lower than $144,392 in the same period last fiscal year. The main contributor to the decrease was lower electrogalvanizing sales to Double Eagle Steel Coating Company, whose coating line capabilities were returned to operations after being interrupted between December 2001 and September 2002 as a result of a major fire at its facility. In addition, sales were lower due to the lower Walbridge facility utilization during fiscal 2004, and a decrease in sales of other automotive, building and construction, and lighting materials, offset slightly by an increase in shipments to the appliance and swimming pool markets.
EMS's gross profit margin for the third quarter of fiscal 2004 was 18.0%, or $11,637, compared with 17.5%, or $11,783, in the third quarter of fiscal 2003. Lower sales and customer claims expense in the third quarter were mostly offset by an improved product mix. Gross profit margin for the nine-month period of fiscal 2004 was 16.3% or $29,361, down from 18.8% or $38,980 in the same period of fiscal 2003. The nine-month decrease in gross profit margin was a result of lower sales, lower capacity utilization and higher material costs. In addition, since May 7, 2003, the Company recorded $443 of depreciation expense for the production equipment at the Walbridge, Ohio facility in Cost of Sales rather than as a component of Equity in Results of Joint Ventures.
SG&A expenses of $6,610 were 10.2% of net sales in the third quarter of fiscal 2004 and $20,049, or 11.1% of net sales in the first nine months of fiscal 2004 as compared with $7,830, or 11.6% of net sales in the third quarter last year and $22,021, or 10.6% of net sales for the nine-month period last year. The decrease in the SG&A percentage for both periods was mainly due to lower administrative costs resulting from the Company's implementation of its cost reduction program and lower variable compensation, slightly offset by lower sales and increased investment in marketing and research and development.
MSC Electronic Materials and Devices Group
Sales related to the switch/sensor business were $134 and $237 in the third quarter and first nine months of fiscal 2004, respectively, as compared to $102 and $122 in the same periods last year. Sales for both fiscal 2004 periods consisted mainly of supply agreement revenue generated as the result of the execution of a multi-year exclusive agreement with Lear Corporation for select interior vehicle applications in the automotive and light truck market segments.
EMD's gross profit margin was $126 in the third quarter of fiscal 2004 and $183 for the first nine months of fiscal 2004. The margin reflects the costs associated with initial prototype development offset by non-recurring engineering and supply agreement revenue.
SG&A expenses were $1,310 in the third quarter of fiscal 2004 compared to $1,160 in the third quarter of fiscal 2003. SG&A expenses in the first nine months of fiscal 2004 were $4,021 compared to $2,440 in the same period last year. The increase in SG&A expenses was due to increased expenditures in marketing and sales, engineering and administrative expenses as well as an increase in the minimum royalty amount payable to TouchSensor Technologies, LLC ("TST"). The Company has refocused the spending in its switch/sensor business to emphasize near-term opportunities while continuing to support supply agreement activities associated with longer-term market opportunities. We expect this will result in annual SG&A spending for the switch/sensor business of approximately $5.2 million in fiscal 2004.
Total Other (Income) and Expense, Net
Total other expense, net was $670 in the third quarter of fiscal 2004 as compared with $1,142 in the third quarter of fiscal 2003. For the nine months ended November 30, 2003, total other expense, net was $2,524 as compared with $6,735 in the prior year period. The third quarter variance was mainly due to the Walbridge Coatings Partnership (the "Partnership") loss no longer being recorded as a component of other income effective with the Company's purchase of a 100% controlling interest on May 7, 2003. The nine-month variance was due to loss on early retirement of debt recorded in the second quarter of fiscal 2003 and lower interest expense due to the early retirement and payments of debt as well as the Partnership purchase. The debt payments were required under the terms of the 1998 Notes due to the divestiture of Pinole Point Steel. The year-to-date period of fiscal 2003 included an allocation of consolidated interest expense to Pinole Point Steel (see Note 10). Equity in Results of Joint Ventures was income of $12 versus a loss of $363 for the third quarter of fiscal 2004 and 2003, respectively. For the first nine months of fiscal 2004 and 2003, Equity in Results of Joint Ventures was a loss of $228 and $1,120, respectively. The variance for both periods is due mainly to the purchase of the Company's interest in the Partnership (see Note 1).
Income Taxes
MSC's effective tax rate for continuing operations was 37.9% (provision) for the third quarter of fiscal 2004 versus 48.5% (benefit) for the same period last year. For the first nine months of fiscal 2004, the Company's effective income tax rate was 42.3% (benefit) as compared with 29.7% (provision) in the first nine months of fiscal 2003. The variance in the effective tax rate was due to the amount of income before income taxes relative to tax credits and other permanent items.
General
EMS
On May 7, 2003, ISG purchased substantially all of BSC's assets as part of BSC's bankruptcy proceedings. On the same day, MSC purchased from ISG the remaining 33.5% ownership interest in the Partnership for $3,600. Accordingly, as of such date, the Company has a 100% controlling interest in the Walbridge, Ohio facility. Prior to May 7, 2003, the Company accounted for the Partnership under the equity method. Beginning May 7, 2003, the results of Walbridge Coatings have been consolidated with the results of MSC and are included in the
Consolidated Financial Statements. In conjunction with these transactions, MSC entered into a tolling agreement with ISG to provide EG and other coating and ancillary services to ISG for a period ending on December 31, 2004, and ISG assumed amounts payable by BSC to the Partnership through the expiration date of the tolling agreements. ISG has priority production rights to 25% of the available line time at the Walbridge, Ohio facility, and MSC markets the remaining 75% of the line time. For the first nine months of fiscal 2004, ISG has utilized 28.3% of available line time at the Walbridge facility compared with BSC's utilization of 52.3% in fiscal 2003.
Prior to the Company's acquisition of 100% of the Partnership, the Company completed on May 13, 2002, the purchase of an ownership interest in the Partnership from a subsidiary of LTV Steel Company, Inc. ("LTV") for $3,137. As a result of the purchase, MSC's ownership interest in the Partnership increased to 66.5% and it gained access to an additional 33% of the facility's line time for a total of 37%.
On December 15, 2001, a major fire destroyed an electrogalvanizing facility owned by the Double Eagle Steel Coating Company ("DESCO"), a joint venture between U.S. Steel Corporation and Rouge Steel Company. The Partnership serviced both U.S. Steel Corporation and Rouge Steel Company through September 2002, when the DESCO facility resumed production, in addition to BSC, ISPAT Inland Inc. and other customers with EG and other services in fiscal 2003.
In addition, the Company expects that Walbridge Coatings' sales to ISG for fiscal 2004 will be significantly less than the fiscal 2003 sales to BSC ($37,379). Based upon the loss of DESCO's business, the expected decline in ISG's utilization of the facility, partially offset by increased production of Quiet Steel, the Company anticipates that the Walbridge, Ohio facility will operate at approximately 50% of capacity for the next three months. The Walbridge, Ohio facility's current and future production levels, however, are dependent, in large part, upon economic conditions in the industries that use EG and other coated sheet steel products, including the automotive and appliance industries, the consumption of laminated noise and vibration products and the potential shifting of EG business between electrogalvanizing facilities by major steel producers.
EMD
On January 31, 2002, the Company expanded its electronic material-based solutions by entering into an exclusive license agreement with TST. This agreement provides EMD the right to manufacture, use and sell TST's patented touch sensor technology for sensors, switches and interface solutions in the consumer electronics and transportation markets. Royalty payments to TST, per the license agreement, consist of a certain percentage of net sales of licensed products plus a certain percentage of sublicense profits subject to a minimum annual royalty amount. In general, the exclusive license period ends on February 28, 2006, subject to the Company's right to extend the exclusive license period under certain conditions. As of November 30, 2003, the remaining fiscal 2004 minimum annual royalty amount payable to TST is $750, of which $375 was paid on December 1, 2003.
On August 1, 2003, EMD entered into a supply and joint development agreement with Lear Corporation. This agreement provides Lear the exclusive right to incorporate EMD's field effect technology-based MIRUS™ detector cells into specific interior applications on passenger cars
and light trucks. In consideration of this exclusive supply relationship, Lear has agreed to compensate EMD $1,500 over the initial two years of the agreement. Both parties retain specific rights of termination during the respective agreement terms. The consideration of $1,500 will be amortized into income over a three year period which coincides with the initial period of exclusivity. Under the exclusive supply portion of the agreement, any sales of product would be incremental to the $1,500 of consideration.
Other
On April 16, 2003, the Company's Board of Directors voted to terminate the Company's shareholder rights agreement. The agreement was terminated by redeeming all of the outstanding rights at a price of $0.01 per right, or approximately $148 in the aggregate, payable in cash and recorded as a charge to Shareowners' Equity in the Consolidated Balance Sheets. There was currently one right attached to each outstanding share of common stock. The redemption payment was mailed on or about May 27, 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 has been terminated.
The Company is also party to various legal actions arising in the ordinary course of its business. These legal actions cover a broad variety of claims spanning the Company's entire business. The Company believes that the resolution of these legal actions will not, individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations.
RESULTS OF DISCONTINUED OPERATION
Pinole Point Steel
On May 31, 2002, the Company completed the sale of substantially all of the assets of its Pinole Point Steel business. The Company is in the process of settling the net liabilities of the business. As of November 30, 2003, the Company has received $58,470 related to the disposition and liquidation of the business, consisting of $31,174 of sale proceeds from Grupo IMSA S.A. de C.V. and $27,296 from liquidating the Pinole Point Steel operations. The proceeds from liquidating the Pinole Point Steel operations include an income tax refund of $10,589 received during the second quarter of fiscal 2004 related to the sale of Pinole Point Steel. As of November 30, 2003, there are $827 in net liabilities remaining. The net liabilities consist primarily of accrued expenses not assumed by Grupo IMSA S.A. de C.V. Pinole Point Steel has been reported as a discontinued operation, and the Consolidated Financial Statements have been reclassified to segregate the net assets or liabilities and operating results of the business.
The Company recorded a loss on discontinued operation, net of income taxes, of $200 and $448 for the third quarter and year-to-date period of fiscal 2004 primarily related to workers compensation expenses and settlement of certain customer liabilities.
During the first quarter of fiscal 2003, the Company recorded a favorable adjustment on discontinued operation, net of income taxes, of $3,683 to reduce the previously provided loss on discontinued operation. The adjustment consisted of a favorable change in the estimated proceeds of the sale of $2,436 and a reduction for estimated operating losses of $1,247 due to
higher plant utilization and customers' willingness to accelerate product deliveries prior to the closing of the transaction.
During the second quarter of fiscal 2003, the Company recorded an additional loss on discontinued operation, net of income taxes, of $610 related to increases in previously estimated bad debt expense and product claims expense, and employee expenses related to the collection of accounts receivable and settlement of certain retained liabilities.
During the third quarter of fiscal 2003, the Company recorded an additional loss on sale of discontinued operation, net of income taxes, of $145 related to increases in previously estimated workers compensation expense, product claims expense and bad debt expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with funds generated from operating activities, borrowings under credit facilities and long-term debt instruments and sales of various assets. The Company believes that its cash on hand, cash generated from operations, potential divestures and availability under its credit facility will be sufficient to fund its operations and working capital needs over the next twelve months.
During the third quarter of fiscal 2004, MSC generated $2,846 of cash from operating activities as compared with $9,009 in the third quarter last year. The decrease was primarily due to the increase in receivables and inventories, offset slightly by an increase in accounts payable and higher net income. The primary reason for the aforementioned increase in working capital was due to the purchase of the Partnership interest in fiscal 2004. The working capital is now recorded on MSC's balance sheet versus the Partnership's balance sheet in the prior year. For the nine months ended November 30, 2003, the Company generated $743 of cash from operating activities versus generating $33,944 of cash in the same period last year. The decrease in cash generation was primarily due to the liquidation of the Pinole Point Steel business in fiscal 2003, the decrease in net income, lower cash generated from working capital (due to the Partnership purchase, changes in customer terms and the Company taking more accounts payable discounts) and the curtailment of the future retiree health care benefits. The decrease was somewhat offset by the income tax refund received during the second quarter of fiscal 2004.
In the third quarter and first nine months of fiscal 2004, MSC invested $1,233 and $3,466 in capital improvement projects, respectively, compared to $1,131 and $3,679 in the same periods last year, respectively. There was no capital spending related to discontinued operations in the third quarter and first nine months of fiscal 2004. There was no investment in joint ventures in the third quarter of fiscal 2004 and $358 for the first nine months of fiscal 2004 compared to $108 and $3,562 in the same periods last year, relating to the purchase of LTV's ownership interest in the Partnership.
The 1998 Senior Note agreement requires the Company to adhere to certain agreements including maintenance of consolidated cumulative adjusted net worth of $118,341. As of November 30, 2003, the Company's consolidated cumulative adjusted net worth was $123,433. After discussing the terms and conditions of the Note agreement with the holders, the Company has elected not to seek a modification of the covenants at this time. Based on its current
business, the Company believes that it will remain in compliance with the financial covenants, but there can be no assurance in this regard. Future decisions by the Company as to its business or operations could require the re-negotiation of financial covenants or the prepayment or refinancing of the Notes. Should a prepayment be required, it would be subject to a make whole penalty based on the then current interest rates. As of November 30, 2003, the make-whole penalty would have been approximately $5,099. Based on the Company's cash on hand ($34,157 as of November 30, 2003) and discussions with the Company's current banks, the Company believes it would be able to re-pay or re-finance the Notes if necessary. As of November 30, 2003, $43,945 of the Notes remain outstanding compared to $55,503 at February 28, 2003. On June 2, 2003, the Company made principal debt payments of $11,278 and interest payments of $1,870 related to the 1998 Senior Notes. On December 1, 2003, the Company made interest payments of $1,494 related to the 1998 Senior Notes.
In April 2002, one of the Company's letters of credit for $3,235 was canceled and the related cash collateral was released to the Company. On September 5, 2003, MSC posted a letter of credit for $1,077 to support its position for a customer dispute. As of November 30, 2003, the Company has $3,357 in outstanding letters of credit, all of which are cash collateralized. Other than the $3,357 that was classified as Restricted Cash in the Consolidated Balance Sheets, there are no other restrictions on the Company's use of its cash and cash equivalents under the Company's line of credit facility at times when the Company has no borrowings outstanding and has cash collateralized its obligations. The line of credit is secured by accounts receivable of the Company.
During the first quarter of fiscal 2004, MSC received $679 of proceeds and recorded a gain of $162 related to the sale of vacant real estate near the Company's Morrisville, Pennsylvania facility.
On December 1, 2003, the Company made a minimum annual royalty payment of $375 for the third quarter of fiscal 2004 related to the license agreement with TST which was accrued for at the end of the quarter.
On December 15, 2003, the Company entered into a definitive agreement for the sale of the idled coil coating equipment, located in Elk Grove Village, for $1,400 (net of commission) which will be recorded as a sale of assets when the title transfers to the buyer and the assets have shipped overseas, which is expected to occur during fiscal 2005.
In the normal course of business, the Company is involved in various customer disputes. On September 5, 2003, MSC posted a letter of credit for $1,077 to support its position for one of these customer disputes. The amount of the letter of credit is classified as Restricted Cash in the Consolidated Balance Sheets for the quarter ending November 30, 2003. The cost of the letter of credit is being shared between MSC and the customer. MSC believes the potential outcomes of the various customer disputes will not have a material adverse effect on the Company's financial condition or results of operations.
MSC's capital lease obligation relating to the Walbridge, Ohio facility, expired on June 30, 2003. In the fourth quarter of fiscal 2003, the Company renewed the term of the lease for five years ending June 30, 2008. The extension will be treated as an operating lease.
The Company is party to various legal proceedings in connection with the remediation of certain environmental matters. MSC believes its range of exposure for all known and quantifiable environmental exposures, based on allocations of liability among potentially responsible parties, the most recent estimate of remedial work and other information available, is $900 to $1,600 as of November 30, 2003. Refer to Note 18 for additional information.
Marketing and Sales
As of November 30, 2003, there was one disk drive customer that represented approximately 10% of consolidated net sales on a fiscal 2004 year-to-date basis.
Contractual Obligations
The following table summarizes the contractual obligations the Company has outstanding by fiscal year as of November 30, 2003.
Long-Term
Debt Principal
and Interest Operating Minimum
Obligations Due In Payments Leases Royalties Total
-------------------------- --------------- ----------- ----------- --------
Fiscal 2004 (Three Months) $ 1,494 $ 562 $ 375 $ 2,431
Fiscal 2005 – 2006 17,679 3,310 5,875 26,864
Fiscal 2007 – 2008 15,971 2,132 — 18,103
Fiscal 2009 and Thereafter 20,754 363 — 21,117
-- ------------ -- -------- -- -------- - ------
Total $ 55,898 $ 6,367 $ 6,250 $ 68,515
-- ------------ -- -------- -- -------- - ------
Critical Accounting Policies
The Company has 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 its financial condition or results of operations under different conditions or using different assumptions. The Company's most critical accounting policies are related to the following areas: revenue recognition, accounts receivable reserves, inventory valuation reserves, environmental liabilities and contingencies, long-lived assets, concentrations of credit risks and defined benefit retirement plans. Details regarding the Company's use of these policies and the related estimates are described fully in MSC's Annual Report on Form 10-K for the fiscal year ended February 28, 2003 filed with the Securities and Exchange Commission. There have been no material changes to the Company's critical accounting policies that impacted MSC's financial condition or results of operations in the third quarter of fiscal 2004.
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 set out anticipated results based on management's plans and assumptions. MSC has tried, wherever possible, to identify such statements by using words such as
"anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance in connection with any discussion of future operating or financial performance.
Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Many factors could also cause actual results to be materially different from any future results that may be expressed or implied by the forward-looking statements contained in this Form 10-Q, including, among others:
• The Company's ability to successfully implement its restructuring and cost reduction plans and achieve the benefits it expects from these
plans;
• Impact of changes in the overall economy;
• Changes in the business environment, including the transportation,
building and construction, electronics and durable goods industries;
• Competitive factors (including changes in industry capacity);
• Changes in laws, regulations, policies or other activities of
governments, agencies and similar organizations (including the ruling
under Section 201 of the Trade Act of 1974);
• The favorable environment for companies to make acquisitions,
including regulatory requirements and market values of candidates;
• The stability of governments and business conditions inside and
outside the U.S., which may affect a successful penetration of the
Company's products;
• Acts of war or terrorism;
• Acceptance of brake damping materials, engine components and body
panel laminate parts (Quiet Steel) by the North American
automotive market;
• Proceeds and potential impact from the potential sale or idling of
facilities or other assets;
• Increases in the prices of raw and other material inputs used by the Company;
• The loss, or changes in the operations, financial condition or
results of operations, of one or more significant customers of the
Company;
• The risk of the successful development, introduction and marketing of new products and technologies, including products based on the touch
sensor technology the Company has licensed from TST;
• The anticipated marketing and research and development spending and the license fee payable to TST related to the switch/sensor business;
• The realization of the future value of the Lear agreement;
• Facility utilization and product mix at the Walbridge, Ohio
facility, including the extent of ISG's utilization;
• Realization of the tax credit carryforward generated from the sale
of Pinole Point Steel;
• The impact of future warranty expenses;
• Environmental risks, costs, recoveries and penalties associated with
the Company's past and present manufacturing operations, including
any risks, costs and penalties arising out of an enforcement action
by the Illinois EPA and Attorney General related to the Company's Elk
Grove Village facility or the Lake Calumet Cluster Site;
• Continuation of current interest rates and the potential impact on
potential future early extinguishment of debt; and related make-whole
penalties;
• Other factors, risks and uncertainties identified in Part II, Item 7
of the Company's Annual Report on Form 10-K for the year ended
February 28, 2003, as filed with the Securities and Exchange
Commission.
MSC undertakes 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 impact the Company's financial condition or results of operations. Other sections of this Form 10-Q may include additional factors which could adversely effect the Company's business and financial performance. Moreover, the Company operates in a competitive environment. New risks emerge from time to time and it is not always possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business or to which any factor or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, shareowners should not place undue reliance on forward-looking statements as a prediction of actual results.
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