Material Sciences Reports Third Quarter Fiscal 2010 Results

- Sales Continue to Increase on a Consecutive-quarter Basis

- Operating Efficiencies, Cost Reductions and the Year-ago Restructuring Reduce Quarterly Operating and Net Losses Compared with Last year

- Solid Cash Position and No Long-term Debt

Jan 11, 2010, 08:00 ET from Material Sciences Corporation

ELK GROVE VILLAGE, Ill., Jan. 11 /PRNewswire-FirstCall/ -- Material Sciences Corporation (OTC Bulletin Board: MASC), a leading provider of material-based solutions for acoustical and coated applications, today announced results for its third quarter ended November 30, 2009.

Net sales for the latest three months were $39.1 million, 19.3 percent lower than $48.5 million at this time last year. The $2.0 million net loss for third quarter, equal to $0.15 per share, represented a 58.3 percent improvement from the year-ago net loss of $4.8 million, equal to $0.35 per share.

Third Quarter Continues Turnaround

"While 19.3 percent lower quarterly sales may not sound encouraging, it represents a significant improvement from the 45.2 percent decline we saw in our second quarter and 44.3 percent decrease in our first," stated Clifford D. Nastas, chief executive officer. "We also have made important progress in other areas this fiscal year. Gross profit grew 74.9 percent between the first and third quarters, reaching a gross margin of 11.0 percent versus the first quarter's 7.7 percent. And strict control of SG&A spending kept the dollar value of these expenses flat across all three periods. As a result, we cut our quarterly loss in half -- from $0.30 to $0.15 per share -- in the last three quarters."

Lower Cost Structure Trims Quarterly Loss

For the latest three months, sales of acoustical materials -- most often to automotive manufacturers -- were $19.8 million compared with $26.4 million a year ago, off by 25.1 percent. This reflected the continued effects of significantly lower North American automobile production, which reduced demand for nearly all of the company's acoustical applications, including body panels, engines and brakes. This decline is consistent with the reduction in automotive production for vehicles containing Quiet Steel®.

Sales of coated materials -- sold to automotive, building products and appliance customers -- decreased 12.4 percent to $19.4 million from $22.1 million in the year-ago quarter. Sales of fuel tanks increased from a year ago, helped by several factors including the stabilizing of several platforms, partially due to the "cash for clunkers" program, while sales of appliance-related and building products were down due to the soft housing market.

Quarterly gross profit was $4.3 million, a more than six-fold increase from $0.7 million a year ago. This meant gross margin as a percent of sales was 11.0 percent compared with 1.3 percent for the three months last year. The year-ago quarter had $2.3 million in costs associated with selling the Morrisville facility and derivative expenses, which did not recur this year. In addition, the latest period benefited from $4.6 million in operating cost reductions.

Selling, general and administrative expenses (SG&A), at $6.8 million, decreased 9.8 percent from $7.5 million for the last year's three months. This reflected lower headcount and salary-related costs (because of restructurings in the second half of fiscal 2009) and depreciation, totaling $1.3 million, and partially offset by an increase in professional fees and marketing trial expenses.

The $2.4 million quarterly loss from operations, versus last year's $7.5 million loss, represented a 67.4 percent improvement. Other income for the three months was $0.2 million compared with $0.3 million, with the difference reflecting lower foreign currency transaction gains. The net loss for the latest quarter was $2.0 million, equal to $0.15 per common share, compared with last year's third quarter loss of $4.8 million, equal to $0.35 per common share.

Lower Sales Lead to Wider Loss for Nine Months

For the year-to-date, net sales of $102.1 million decreased 37.2 percent from $162.4 million a year ago. This reflected 39.9 percent lower sales for acoustical materials and a 34.4 percent reduction for coated materials. Gross profit was $9.8 million or 9.6 percent of sales, versus $13.5 million or 8.3 percent of sales, for last year's nine months. SG&A was down 25.7 percent, to $20.2 million compared with $27.2 million from the comparable period last year. Other income for the year-to-date was $0.6 million versus $2.1 million, reflecting a one-time gain on the sales of investments a year ago and lower foreign currency transaction gains in the latest period. The net loss was $9.7 million, equal to $0.74 per share, versus last year's loss of $7.6 million, equal to $0.55 per share.

Strong Financial Condition

Net cash provided by operations through November 30, 2009, was $4.5 million, versus a use of cash of $1.4 million a year ago. The greater reductions in inventory and increases in accounts payable more than offset a higher net loss and increased accounts receivable. Through the nine months, the company invested $0.8 million in capital improvement projects in contrast to $3.6 million a year ago.

For the year-to-date, cash remained solid at $14.7 million, $4.1 million higher than the end of the last fiscal year, and the company continued to operate with no long-term debt.

Conference Call

Material Sciences will host a conference call today to share its third quarter results at 9:00 a.m. Central Time. Clifford D. Nastas, chief executive officer, and James M. Froisland, senior vice president, chief financial officer, chief information officer and corporate secretary, will discuss the company's financial performance and answer questions from the financial community.

The company invites interested investors to listen to the presentation, which will be carried live on Material Sciences' Web site: www.matsci.com. A replay of the call will be available on the site for the following 30 days. Those who wish to listen should go to the Web site several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event, or download the correct applications at no charge. A replay will be available on the site about two hours after the call ends.

About Material Sciences

Material Sciences Corporation is a leading provider of material-based solutions for acoustical and coated applications. Material Sciences uses its expertise in materials, which it leverages through relationships and a network of partners, to solve customer-specific problems. The company's stock is traded on the OTC Bulletin Board under the symbol MASC.

This news release contains forward-looking statements that are based on current expectations, forecasts and assumptions. Material Sciences cautions the reader that the following factors could cause its actual outcomes and results to differ materially from those stated or implied in this release: the recent unprecedented deterioration in the overall economy; changes in the business environment, including the transportation, building and construction, electronics and durable goods industries; competitive factors, including domestic and foreign competition for both acoustical and coated applications, pricing acceptance, union activity, as well as changes in industry capacity; changes in laws, regulations, policies or other activities of governments, agencies or similar organizations (including the ruling under Section 201 of the Trade Act of 1974); the stability of governments and business conditions inside and outside of the U.S., which may affect a successful penetration of the company's products; acceptance of brake damping materials, engine components and body panel laminate parts by customers in North America, Asia and Europe, and new product introductions; the continued successful operation of the Application Research Center in Michigan and the Application Development Center in Europe; increases in the prices of raw and other material inputs used by the company, as well as their availability; the loss, or changes in the operations, financial condition, or results of operations, including the bankruptcy or potential bankruptcy of one or more of the company's significant customers; Material Sciences' ability to effectively manage its business objectives including the ability to retain key personnel and maintain good labor relations with its unions; overcapacity in the coil coating industry; shifts in the supply model for its products; the impact of future warranty expenses; environmental risks, costs, recoveries and penalties associated with the company's past and present manufacturing operations; access to credit, which may be limited under its asset-based credit agreement; the company's ability to utilize net operating loss carryforwards; Material Sciences' ability to maintain a stable liquidity trading environment for its common stock, traded on the over-the-counter bulletin board market; 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, 2009, filed with the Securities and Exchange Commission on May 14, 2009, and from time to time in other reports filed with the Securities and Exchange Commission.


            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
     (In thousands, except               November 30,        November 30,
     per share data)                   2009      2008      2009      2008

    Net Sales                        $39,126   $48,484  $102,069  $162,442
    Cost of Sales                     34,814    47,830    92,267   148,929
    Gross Profit                       4,312       654     9,802    13,513
    Selling, General and
     Administrative Expenses           6,750     7,487    20,199    27,203
    Restructuring Expenses                 -       640         -       640
    Loss from Operations              (2,438)   (7,473)  (10,397)  (14,330)
    Other Income, Net:
       Interest Income, Net              (41)      (28)     (184)     (162)
       Equity in Results
        of Joint Venture                (122)     (144)     (288)     (364)
       Other, Net                        (56)     (131)     (142)   (1,531)
         Total Other Income, Net        (219)     (303)     (614)   (2,057)
    Loss Before Benefit for
     Income Taxes                     (2,219)   (7,170)   (9,783)  (12,273)
    (Benefit) for Income Taxes          (236)   (2,406)     (120)   (4,678)
    Net Loss                         $(1,983)  $(4,764)  $(9,663)  $(7,595)

    Basic Net Loss Per Share          $(0.15)   $(0.35)   $(0.74)   $(0.55)

    Diluted Net Loss Per Share        $(0.15)   $(0.35)   $(0.74)   $(0.55)

    Weighted Average Number of
     Common Shares Outstanding
       Used for Basic Net Loss
        Per Share                     12,904    13,655    13,092    13,740
    Dilutive Shares                        -         -         -         -
    Weighted Average Number of
     Common Shares Outstanding
       Plus Dilutive Shares           12,904    13,655    13,092    13,740

    Outstanding Common Stock
     Options Having No
     Dilutive Effect                     459       350       459       350

    Condensed Consolidated Balance Sheets (Unaudited)
    Material Sciences Corporation and Subsidiaries

                                              November 30,      February 28,
    (In thousands)                                2009              2009
    Assets:
      Current Assets:
        Cash and Cash Equivalents               $14,749           $10,664
        Receivables, Less Reserves
         of $1,404 and $2,965, Respectively      21,442            13,297
        Income Taxes Receivable                   1,160             2,567
        Prepaid Expenses                            952               657
        Inventories                              19,239            24,657
        Assets Held for Sale                      3,274             3,329
          Total Current Assets                   60,816            55,171

      Property, Plant and Equipment             172,073           170,010
      Accumulated Depreciation                 (129,136)         (122,264)
          Net Property, Plant and Equipment      42,937            47,746

      Other Assets:
        Notes Receivable                          1,386             4,363
        Investment in Joint Venture               3,199             2,288
        Other                                       604               471
          Total Other Assets                      5,189             7,122

          Total Assets                         $108,942          $110,039

    Liabilities:
      Current Liabilities:
        Accounts Payable                        $20,330           $10,442
        Accrued Payroll Related Expenses          5,149             3,269
        Accrued Expenses                          4,417             8,284
          Total Current Liabilities              29,896            21,995

      Long-Term Liabilities:
        Pension and Postretirement Liabilities    9,907            10,574
        Other                                     2,902             3,250
          Total Long-Term Liabilities            12,809            13,824

    Commitments and Contingencies

    Shareowners' Equity:
      Preferred Stock                                 -                 -
      Common Stock                                  380               380
      Additional Paid-In Capital                 79,853            79,696
      Treasury Stock at Cost                    (56,774)          (56,146)
      Retained Earnings                          45,498            55,161
      Accumulated Other Comprehensive Income     (2,720)           (4,871)
          Total Shareowners' Equity              66,237            74,220

          Total Liabilities and
           Shareowners' Equity                 $108,942          $110,039

    Condensed Consolidated Statements of Cash Flows (Unaudited)
    Material Sciences Corporation and Subsidiaries

                                                    Nine Months Ended
                                                      November 30,
    (In thousands)                               2009              2008

    Cash Flows From:
    Operating Activities:
    Net (Loss)                                  $(9,663)          $(7,595)
    Adjustments to Reconcile Net
     Income (Loss) to Net Cash
        Provided by Operating Activities:
        Gain on Sale of Marketable Securities         -              (841)
        Loss on Disposal of Assets                    -               604
        Depreciation, Amortization
         and Accretion                            6,478             8,121
        Change in Provision for
         Deferred Income Taxes                        -            (4,753)
        Compensatory Effect of Stock Plans          154               162
        Foreign Currency Transaction Gain             -              (354)
        Non-Cash Loss on Derivative Instruments      38               938
        Other, Net                                 (290)             (364)
    Changes in Assets and Liabilities:
        Receivables                              (7,695)           (3,058)
        Income Taxes Receivable                   1,408             1,275
        Prepaid Expenses                           (287)             (540)
        Inventories                               5,744            (1,671)
        Accounts Payable                          9,701             7,871
        Accrued Expenses                         (1,429)           (1,446)
        Other, Net                                  322               274
                Net Cash Provided by
                (Used in) Operating
                Activities                        4,481            (1,377)

    Investing Activities:
    Capital Expenditures                           (831)           (3,594)
    Proceeds from Note Receivable                   944                 -
    Proceeds from Sale of Marketable Securities       -             6,727
    Proceeds from Exclusivity Agreement               -             1,250
    Transfer of Proceeds from
     Exclusivity Agreement                            -            (1,250)
                Net Cash Provided by
                 Investing Activities               113             3,133

    Financing Activities:
    Purchases of Treasury Stock                    (628)           (3,110)
    Issuance of Common Stock                          3                11
                Net Cash Used in
                 Financing Activities              (625)           (3,099)

    Effect of Exchange Rate Changes on Cash         116              (156)

    Net Increase in Cash                          4,085            (1,499)
    Cash and Cash Equivalents at
     Beginning of Period                         10,664             7,913
    Cash and Cash Equivalents
     at End of Period                           $14,749            $6,414

    Non-Cash Transactions:
        Capital Expenditures in Accounts
         Payable at End of  Period                 $187               $93
        Reduction of Note Receivable
         and Warranty Reserve                    $1,862                $-

    Supplemental Cash Flow Disclosures:
        Interest Paid                               $37               $63
        Income Taxes Paid                          $420               $37

SOURCE Material Sciences Corporation



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