Material Sciences Announces Fiscal 2012 Third Quarter Financial Results - Third Quarter Sales Rise 12.9 Percent over the Same Period a year ago to $34.0 Million

- Gross Profit Expands 4.9 Percentage Points to 27.4 Percent of Sales

- Earnings per Share were $0.34 Compared with $0.13 in Prior Period

- Net Income was $3.7 Million and EBITDA was $5.3 Million

- Cash Position Remains Strong at $28.3 Million

- $4.5 Million in Stock Repurchased During the Third Quarter

ELK GROVE VILLAGE, Ill., Jan. 12, 2012  /PRNewswire/ -- Material Sciences Corporation (NASDAQ: MASC), a leading provider of material-based solutions for acoustical and coated metal applications, today reported financial results for the fiscal 2012 third quarter and nine months ended November 30, 2011.

Net sales for the fiscal 2012 third quarter increased 12.9 percent to $34.0 million versus $30.1 million for the same period last year.  Net income for the fiscal 2012 third quarter increased 118.0 percent to $3.7 million, or $0.34 per diluted share compared with $1.7 million, or $0.13 per diluted share in the prior-year period.

Clifford Nastas, Material Sciences' Chief Executive Officer, said, "I am very pleased with the third quarter's operating and financial performance.  The strategies we created to improve our cost structure and streamline our operations are paying off.  Higher coated material product sales enhanced our overall sales during the quarter offsetting a decline in acoustical product sales.  The $0.8 million increase in ElectroBrite® sales during the quarter further demonstrates the market's acceptance of this highly innovative product, and I am encouraged with its future potential as well as other new products we are currently developing.  The Company's balance sheet and operating cash flows continue to provide us with internal sources of funding to invest in our operations, support our new product development efforts, and reward shareholders through our stock repurchase program." 

Acoustical sales for the fiscal 2012 third quarter were $16.5 million versus $17.7 million for the prior-year period, down 6.8 percent.  The decline in acoustical sales was due primarily to lower body panel laminate sales to General Motors and Ford, and decreased sales to appliance manufacturing customers.  This decline was partially offset by an increase in original equipment brake sales. 

Sales of coated materials for the fiscal 2012 third quarter increased 41.0 percent to $17.5 million from $12.4 million for last year's third quarter.  The increase in coated material sales is attributed to strong demand for automotive electrogalvanized products, as well as ElectroBrite®, a stainless steel alternative for the appliance market. These increases were partially offset by a decrease in fuel tank sales to Ford. 

Gross profit, as a percentage of fiscal 2012 third quarter sales, improved to 27.4 percent, from 22.5 percent for the third quarter last year. The significant improvement in fiscal 2012 third-quarter gross margin was mainly the result of higher sales, an improved product mix and stronger facility utilization driven by higher electrogalvanized volume.

For the fiscal 2012 third quarter, selling, general and administrative expenses (SG&A), as a percentage of sales, were 16.5 percent compared to 18.5 percent for the fiscal 2011 third quarter.  SG&A was $5.6 million for both the fiscal 2012 and fiscal 2011 third quarters. 

Income from operations was $3.7 million for the fiscal 2012 third quarter, compared to $1.2 million for the fiscal 2011 third quarter.  Total other income for the fiscal 2012 third quarter was $0.5 million, compared to $0.4 million for the same quarter last fiscal year.  For the three months ended November 30, 2011, the Company's effective income tax provision was an expense of 10.3 percent compared with a benefit of 4.5 percent in the same period last year. 

The low effective tax rates in both fiscal 2011 and fiscal 2012 are due to the utilization of deferred tax assets, principally net operating losses and alternative minimum tax credits, while maintaining a full deferred tax valuation allowance.  The Company evaluates its deferred tax assets on a quarterly basis to determine if a valuation allowance is required, in full or in part.  This includes considering available positive and negative evidence, such as, past operating results and our forecast of future taxable income on a jurisdiction-by-jurisdiction basis.  Based on this evidence and current operating trends, the Company may reverse all or substantially all of its remaining deferred tax asset valuation allowance in the fourth quarter of fiscal 2012.

Net sales for the first nine months of fiscal 2012 were $104.5 million, down 1.2 percent from $105.7 million for the same period last year. After removing $7.4 million in prior-year period coil coating sales, which did not recur in fiscal 2012 due to the April 2010 asset sale, comparable revenues were up $6.2 million or 6.3 percent. Gross profit, as a percentage of sales, was 25.3 percent, compared to 21.6 percent in the same period last fiscal year.  

SG&A as a percentage of sales for the first nine months of fiscal 2012 was 15.2 percent, compared to 15.0 percent for the same period last fiscal year.  SG&A was $15.9 million for the fiscal 2012 nine months, versus $15.8 million for the same period in fiscal 2011.

Income from operations for the first nine months of fiscal 2012 included restructuring costs of $0.3 million. Income from operations for the fiscal 2011 nine months included a gain on the sale of the Middletown facility of $1.9 million plus several items related to the April 2010 coil coating asset sale: gain on sale of assets of $4.7 million, asset impairment charges of $3.7 million, shutdown costs of $1.0 million and restructuring costs of $1.1 million. Other income for the fiscal 2012 nine months was $1.3 million, compared to $1.1 million for the same period last year. Year-to-date net income comparisons for the two fiscal years--as reported and as adjusted for those unusual items--are presented in the table below (in thousands, except per share):


 

* See GAAP to Non-GAAP Reconciliations Note Below

Nine Months

 

FY 2012

FY 2011

Net Income Reported

$ 10,904

$ 9,653

Net Income Per Diluted Share Reported

$ 0.93

$ 0.74

Adjustments (Reflects Non-GAAP Measures):

 

 

   Gain on Sale of Assets

-

(6,639)

   Asset Impairment Charges

-

3,720

   Shutdown Costs

-

1,014

   Restructuring Costs

345

1,145

Income from Operations Adjustments

345

(760)

 

 

 

Adjusted Net Income (1)

$ 11,250

$ 8,836

Adjusted Net Income Per Diluted Share

$ 0.96

$ 0.68

 

 

 

(1) Adjusted net income assumes the same income tax provision rate used for that period.

 

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter and the first nine months of fiscal 2012, compared to last year's same periods--as reported and as adjusted -- are presented in the table below (in thousands):

 

** See EBITDA Definitions Note Below

Third Quarter

 

Nine Months

 

FY 2012

FY 2011

 

FY 2012

FY 2011

Income from Operations Before Taxes

$ 4,154

$ 1,636

 

$ 11,589

$   9,868

Less Interest Income

(3)

(19)

 

(35)

(60)

Plus Depreciation

1,196

1,216

 

3,679

4,339

EBITDA

5,347

2,833

 

$ 15,233

$ 14,147

Income from Operations Adjustments

-

-

 

345

(760)

Adjusted EBITDA

5,347

2,833

 

$ 15,578

$ 13,387

 

Net cash provided by operating activities at November 30, 2011 was $14.9 million compared with $8.6 million for the first nine months of last year. Capital expenditures for the fiscal 2012 nine months totaled $5.5 million compared with $1.4 million for last year's nine months, primarily for facility upgrades. In the prior year period, the Company received $14.1 million from selling some of its coil coating assets and $1.7 million from a note receivable on a prior asset sale--neither of which recurred in the current period.

Material Sciences invested $16.9 million to repurchase approximately 2.35 million shares or 18 percent of its outstanding common stock in the first nine months of fiscal 2012. It ended the period with $28.3 million in cash and there were 10,542,659 shares outstanding at December 30, 2011.

"For fiscal 2012, Material Sciences has enjoyed strong demand for electrogalvanized products as our steel mill partners have lacked the captive capacity to meet their coating needs," Nastas said. "Cash flow generated from an estimated $11.0 million of opportunistic sales this fiscal year has helped Material Sciences maintain a strong cash position while funding investments in multiple strategic initiatives and aggressively repurchasing our shares on the open market.

"As we move into fiscal 2013, the outlook for opportunistic galvanizing sales is being clouded.  Our largest customer in this market that accounted for substantially all of these opportunistic sales has lost business to a competitive mill that possesses ample captive coating capacity. While fluctuating demand for galvanized products is expected to create more modest revenue comparisons over the next year, I am confident that the Company is well positioned for long-term growth due to the numerous strategic initiatives that Material Sciences has undertaken to develop and diversify our revenue base, keep our operations competitive, and enhance our infrastructure to make it easier for customers globally to do business with Material Sciences."

Conference Call

Material Sciences will host a conference call to present its third quarter results today, Thursday, January 12, 2012 at 9:00 a.m. Central Time. Clifford Nastas, Chief Executive Officer, and James Pawlak, Vice President and Chief Financial Officer, will discuss the Company's financial and operating performance and answer questions from the financial community. 

To participate in the conference call, please dial 877-407-0784 several minutes before the conference call begins. International participants should dial 201-689-8560. An audio replay will be available for one week at 877-870-5176 for domestic callers and 858-384-5517 for international access. The replay identification number for this conference is 386090.

Investors also may access a live webcast of the call on the Company's website: www.matsci.com. A replay of the call will be available on the site for the following 30 days.

About Material Sciences

Material Sciences Corporation is a leading provider of material-based solutions for acoustical and coated metal applications. The Company uses its expertise in materials, which it leverages through relationships and a network of partners, to solve customer-specific problems. Its stock is traded on the NASDAQ Capital Market under the symbol MASC.

Forward Looking Statements

Except for the historical and present factual information contained here, the matters set forth in this release, including statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," "potential" and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on currently available information and are subject to various risks, uncertainties and other factors that could cause the Company's actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, Material Sciences undertakes no obligation to update these factors or to publicly announce the results of any of the forward-looking statements contained here to reflect future events, developments, or changed circumstances or for any other reason. These risks and uncertainties, the outcome of which could materially and adversely affect the Company's financial condition and operations, include, but are not limited to, the following: uncertainty in the global economy and in the industries in which it operates--including the transportation, building and construction, electronics and durable goods industries; the Company's ability to respond to competitive factors--including domestic and foreign competition for both acoustical and coated applications, and pricing pressures; changes in vehicle production levels or the loss of business with respect to a vehicle model for which it is a significant supplier; supply shortages or price increases in raw material, energy and commodity costs; the loss, or changes in the operations, financial condition, or results of operations of one or more of Material Sciences' significant customers or suppliers; its ability to attract new customers for brake damping materials, engine components and body panel laminate parts by customers in North America, Asia and Europe, and to introduce new products; overcapacity in its industries; shifts in the supply model for the Company's products; labor disputes involving Material Sciences or its significant customers or suppliers; changes in laws, regulations, policies or other activities of governments, agencies or similar organizations; the Company's ability to effectively manage its business objectives including its ability to retain key personnel; environmental risks, costs, recoveries and penalties associated with past and present manufacturing operations; access to credit, which is limited under its asset-based credit agreement; Material Sciences' ability to utilize net operating loss carry-forwards; and other factors, risks and uncertainties identified in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended February 28, 2011, filed with the Securities and Exchange Commission, and from time to time in other reports filed with the Securities and Exchange Commission.

* GAAP to Non-GAAP Reconciliations

Material Sciences presents these reconciliations of Generally Accepted Accounting Principles (GAAP) to non-GAAP earnings to provide a better understanding of its operating results--separate from the financial impact of unusual and one-time transactions. Using only the non-GAAP earnings measures to analyze earnings would have material limitations. This occurs because calculations are based on management's subjective determinations on the nature and classification of events and circumstances that investors may find material. The Company compensates for these limitations by using both GAAP and non-GAAP earnings measures to analyze results. Management believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations, separate from items that may have a disproportionate positive or negative impact on financial results in any period.

** EBITDA Definition

EBITDA and Adjusted EBTIDA are non-GAAP calculations, although they are based on numbers included in income statements based on GAAP. Management believes that EBITDA and Adjusted EBITDA are important metrics used by investors and analysts to review Material Sciences' historical results. They should be considered as additions -- not as alternatives -- to net income or operating income as an indicator of the Company's operating performance, or operating cash flows for measuring liquidity. Adjusted EBITDA includes adjustments for gain on sale of assets, impairment charges, shutdown costs and restructuring expenses. Companies may define Adjusted EBITDA differently and, as a result, Material Sciences' measures of Adjusted EBITDA may not be directly comparable to measures used by other companies.

Additional information about Material Sciences is available at www.matsci.com.

FINANCIAL TABLES FOLLOW

 

Condensed Consolidated Statements of Operations (Unaudited)

Material Sciences Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

November 30,

 

November 30,

 

 

 

 

 

 

 

 

 

(In thousands, except per share data)

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Net Sales

 

$            34,009

 

$            30,120

 

$           104,462

 

$           105,708

Cost of Sales 

 

$            24,702

 

23,335

 

77,982

 

82,851

Gross Profit

 

9,307

 

6,785

 

26,480

 

22,857

   Selling, General and Administrative Expenses

 

$              5,614

 

5,587

 

15,890

 

15,841

   Asset Impairment Charges

 

$                      -

 

-

 

-

 

3,720

   Gain on Sale of Assets

 

$                      -

 

-

 

-

 

(6,639)

   Restructuring

 

$                      -

 

-

 

345

 

1,145

Income from Operations

 

3,693

 

1,198

 

10,245

 

8,790

Other Income, Net:

 

 

 

 

 

 

 

 

   Interest Income, Net

 

$                     3

 

19

 

35

 

60

   Equity in Results of Joint Venture

 

$                 198

 

119

 

461

 

327

   Rental Income

 

$                 283

 

252

 

827

 

660

   Other Income (Loss), Net

 

$                  (23)

 

48

 

21

 

31

     Total Other Income, Net

 

461

 

438

 

1,344

 

1,078

Income from Operations Before 

 

 

 

 

 

 

 

 

   Provision (Benefit) for Income Taxes

 

$              4,154

 

1,636

 

11,589

 

9,868

Provision (Benefit) for Income Taxes 

 

$                 428

 

(73)

 

685

 

215

Net Income

 

$              3,726

 

$              1,709

 

$            10,904

 

$              9,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Net Income Per Share

 

$                0.35

 

$                0.13

 

$                0.94

 

$                0.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Net Income Per Share

 

$                0.34

 

$                0.13

 

$                0.93

 

$                0.74

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding

 

 

 

 

 

 

 

 

   Used for Basic Net Income Per Share

 

10,786

 

12,909

 

11,605

 

12,907

Dilutive Shares

 

87

 

89

 

91

 

51

Weighted Average Number of Common Shares Outstanding

 

 

 

 

 

 

 

 

   Plus Dilutive Shares

 

10,873

 

12,998

 

11,696

 

12,958

 

 

 

 

 

 

 

 

 

Outstanding Common Stock Options Having No Dilutive Effect

 

339

 

257

 

324

 

260

 

 

 

 

 

 

 

 

 

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

 

 

Condensed Consolidated Balance Sheets

Material Sciences Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

November 30,

 

February 28,

(In thousands)

 

2011

 

2011

 

 

(unaudited)

 

 

Assets:

 

 

 

 

  Current Assets:

 

 

 

 

    Cash and Cash Equivalents

 

$          28,311

 

$        35,629

    Receivables, Less Reserves and Allowances of $509 and $420, Respectively

 

18,075

 

22,581

    Income Taxes Receivable

 

321

 

616

    Prepaid Expenses

 

835

 

428

    Inventories

 

22,727

 

20,906

      Total Current Assets

 

70,269

 

80,160

 

 

 

 

 

  Property, Plant and Equipment

 

124,705

 

118,937

  Accumulated Depreciation

 

(91,959)

 

(88,461)

      Net Property, Plant and Equipment 

 

32,746

 

30,476

 

 

 

 

 

  Other Assets:

 

 

 

 

    Investment in Joint Venture

 

3,644

 

3,152

    Other

 

164

 

142

      Total Other Assets

 

3,808

 

3,294

 

 

 

 

 

      Total Assets 

 

$         106,823

 

$      113,930

 

 

 

 

 

Liabilities:

 

 

 

 

  Current Liabilities:

 

 

 

 

    Accounts Payable

 

$          13,377

 

$        15,126

    Accrued Payroll Related Expenses

 

3,181

 

2,718

    Accrued Expenses

 

5,715

 

6,093

      Total Current Liabilities

 

22,273

 

23,937

 

 

 

 

 

  Long-Term Liabilities:

 

 

 

 

    Pension and Postretirement Liabilities

 

6,072

 

7,015

    Other

 

5,547

 

4,780

      Total Long-Term Liabilities

 

11,619

 

11,795

 

 

 

 

 

Commitments and Contingencies

 

-

 

-

 

 

 

 

 

Shareowners' Equity:

 

 

 

 

  Preferred Stock

 

-

 

-

  Common Stock

 

380

 

380

  Additional Paid-In Capital

 

80,360

 

80,004

  Treasury Stock at Cost

 

(73,659)

 

(56,885)

  Retained Earnings 

 

66,489

 

55,585

  Accumulated Other Comprehensive Loss

 

(639)

 

(886)

      Total Shareowners' Equity 

 

72,931

 

78,198

 

 

 

 

 

      Total Liabilities and Equity

 

$         106,823

 

$      113,930

 

 

 

 

 

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

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) 

Material Sciences Corporation and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

November 30,

 

 

 

 

 

(In thousands)

 

2011

 

2010

 

 

 

 

 

Cash Flows From:

 

 

 

 

Operating Activities:

 

 

 

 

Net Income

 

$        10,904

 

$          9,653

Adjustments to Reconcile Net Income to Net Cash 

 

 

 

 

    Provided by Operating Activities:

 

 

 

 

    Gain on Sale of Fixed Assets

 

-

 

(6,639)

    Loss on Impairment of Fixed Assets

 

-

 

3,720

    Depreciation, Amortization and Accretion 

 

3,679

 

4,339

    Compensatory Effect of Stock Plans

 

221

 

167

    Other, Net

 

(509)

 

(583)

Changes in Assets and Liabilities:

 

 

 

 

    Receivables

 

4,451

 

2,333

    Income Taxes Receivable

 

295

 

427

    Prepaid Expenses

 

(411)

 

(203)

    Inventories

 

(1,883)

 

1,244

    Accounts Payable

 

(2,213)

 

(3,731)

    Accrued Expenses

 

158

 

(1,307)

    Other, Net

 

242

 

(812)

            Net Cash Provided by Operating Activities

 

14,934

 

8,608

 

 

 

 

 

Investing Activities:

 

 

 

 

Capital Expenditures

 

(5,457)

 

(1,374)

Proceeds from Sale of Assets

 

-

 

14,089

Proceeds from Note Receivable

 

-

 

1,732

            Net Cash Provided by (Used In) Investing Activities

 

(5,457)

 

14,447

 

 

 

 

 

Financing Activities:

 

 

 

 

Purchases of Treasury Stock

 

(16,879)

 

-

Issuance of Common Stock

 

135

 

15

            Net Cash Provided by (Used in) Financing Activities

 

(16,744)

 

15

 

 

 

 

 

Effect of Exchange Rate Changes on Cash

 

(51)

 

(19)

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

(7,318)

 

23,051

Cash and Cash Equivalents at Beginning of Period

 

35,629

 

12,866

Cash and Cash Equivalents at End of Period

 

$        28,311

 

$        35,917

 

 

 

 

 

Non-Cash Investing and Financing Transactions:

 

 

 

 

    Capital Expenditures in Accounts Payable at End of  Period

 

$         1,410

 

$             243

    Treasury Stock Purchases in Accrued Liabilities at Period-End

 

$                6

 

$                 -

 

 

 

 

 

Supplemental Cash Flow Disclosures: 

 

 

 

 

    Interest Paid

 

$              27

 

$               27

    Income Taxes Paid (Refunded), Net

 

$            326

 

$            (141)

 

 

 

 

 

 

 

 

 

 

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

 

SOURCE Material Sciences Corporation



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