Material Sciences Announces Fourth Quarter and Fiscal 2008 Results- Fiscal 2008 Net Sales Declined 10.4 Percent Due to Continued Weakness in Automotive and Building Industries- Received Commitments for Six New Quiet Steel(R) Applications From Non-American Automakers During the Fiscal Year- Recorded Fiscal 2008 Net Loss of $6.0 Million, Equal to Loss of $0.42 per Diluted Share, vs. Net Income of $6.1...- Restated Fiscal 2008 Quarterly Results to Reflect $1.7 Million Currency Gain
ELK GROVE VILLAGE, Ill., May 14 /PRNewswire-FirstCall/ -- Material Sciences Corporation , a leading provider of material-based solutions for acoustical and coated applications, today reported results for the fourth quarter and year ended February 29, 2008. Net sales for fiscal 2008 were $235.2 million, a decline of 10.4 percent from $262.6 million in fiscal 2007. The company recorded a loss from continuing operations of $6.0 million, or $0.42 per diluted common share, compared with income of $6.1 million, or $0.42 per diluted common share, in the prior year. "Persistent weakness in the automotive and building industries significantly impacted our financial results in fiscal 2008," said Clifford D. Nastas, chief executive officer for Material Sciences. "We expect that the weakness in these segments will continue through fiscal 2009, if not longer. "Despite these significant market challenges, we achieved a number of important milestones in transforming MSC into a more efficient and diversified global provider of acoustical and coated metal solutions. In fiscal 2008, we completed our first sales to Japanese and Korean automakers selling Quiet Steel(R) into six new applications; commercialized several innovative products outside the automotive industry; continued to expand our global reach by opening three new offices in Asia; and again posted double-digit growth in European brake sales, which partially offset weakness in North America," Nastas said. Fiscal 2008 Review Sales of acoustical materials, which are primarily to automotive manufacturers, decreased 13.1 percent to $113.4 million in fiscal 2008 from $130.5 million in fiscal 2007. While the Company launched many new acoustical programs in fiscal 2008, the volume associated with these programs was not sufficient to offset the decline in automotive production. Sales of coated materials, which are mainly to appliance, building products and automotive customers, decreased 7.8 percent to $121.8 million in fiscal 2007 from $132.2 million in fiscal 2007. The change was mainly due to a decrease in appliance and electro-galvanized sales, which was partially offset by increased furniture and fixtures and gas tank sales. Appliance sales declined primarily due to extreme softness in new home construction. Gas tank sales increased due to higher sales volume and the pass-through of higher raw material costs in the product pricing. As a result of the decline in sales, particularly the decrease in sales of higher margin acoustical products, gross profit in fiscal 2008 decreased to $24.9 million from $41.7 million in the prior year. Gross margin declined to 10.6 percent in fiscal 2008 compared with 15.9 percent in fiscal 2007, as improvements in overhead spending, quality costs, fees from the operating agreement with our partner in Korea, Hae Won, and other one-time fees were insufficient to negate the effect of lower sales on profit margins. Selling, general and administrative expenses were $36.3 million in fiscal 2008 compared with $33.7 million in the prior year, primarily due to investment in personnel; an increase in depreciation expense for the company's Application Research Center and a new ERP system; increased travel to support the company's international expansion and increased bad debt expense versus fiscal 2007. Currency Gain, Other Income and Goodwill Impairment In fiscal 2008, the Company identified an error in the recognition of foreign currency gains related to intercompany debt. The Company had not recognized in earnings the foreign currency effect of the intercompany debt, owed by its European subsidiary, when the subsidiary began repaying the debt. The debt was previously considered a permanent investment by the company in its subsidiary and the foreign currency translation effect of this dollar-denominated debt was recorded as a component of Other Comprehensive Income. As a result of the repayments made during fiscal 2008, the intercompany debt was no longer considered permanent and the related foreign currency gains were recorded as Other Income in the Statement of Operations. In total, MSC recognized $1.7 million of foreign currency gain for fiscal 2008, due to this change. As a result, MSC will restate the first three fiscal quarters of 2008 and will present the effects of the restatement on the fiscal quarters of 2008 in Note 17, Selected Quarterly Results of Operations (Unaudited), in the company's Form 10-K. The company's Total Other Income for fiscal 2008 was $2.7 million compared with $1.0 million in fiscal 2007. The increase was due to the currency gain described above and an increase in income from the joint venture with Tekno S.A. in Brazil compared with fiscal 2007. The company performed its annual impairment test of goodwill in the fourth quarter. Due to the deterioration in its operating results and stock price in the fourth quarter of fiscal 2008, the company determined that its goodwill was impaired. As a result, it recorded an impairment charge of $1.3 million, eliminating the goodwill balance at year end. Fourth Quarter Results For the three months ended February 29, 2008, net sales declined 9.5 percent to $53.3 million from $58.9 million in the fourth quarter of fiscal 2007. The decrease in sales is due to the persistent declines in production at North American automotive manufacturers as well as the slowdown in the construction market. Acoustical sales were $24.2 million, a decline of 18.2 percent from $29.6 million in sales in the fourth quarter of fiscal 2007. Coated sales were nearly flat at $29.1 million in the fourth quarter of 2008 versus $29.3 million in last year's quarter. Gross profit declined by 83.3 percent to $1.3 million during the quarter from $7.9 million in the fourth quarter of 2007, driven primarily by the decreased sales in higher margin acoustical sales and absence of the favorable claim settlements of $2.8 million in the fourth quarter of 2007. The company recorded a loss from continuing operations of $5.1 million for the fourth quarter, equal to $0.36 per diluted share, compared to net income of $1.3 million, equal to $0.09 per diluted common share, in the prior year. Conference Call Material Sciences will host a conference call to review its fourth quarter and full-year fiscal 2008 results on Wednesday, May 14, 2008, at 9:00 a.m. CT. 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 recent financial performance and respond to questions from the financial community. The company invites interested investors to listen to the presentation, which will be carried live on the Internet at the company's Web site: http://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. About Material Sciences Material Sciences Corporation is a leading provider of material-based solutions for acoustical and coated applications. MSC 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 New York Stock Exchange under the symbol MSC. This news release contains forward-looking statements that are based on current expectations, forecasts and assumptions. MSC cautions the reader that the following factors could cause its actual outcomes and results to differ materially from those stated or implied in the forward-looking statements: 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 domestic and foreign competition for both acoustical and coated applications 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; 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 availability; the loss, or changes in the operations, financial condition or results of operations, of one or more of the Company's significant customers; our ability to retain key personnel; overcapacity in the coil coating industry; shifts in the supply model for our products; the impact of future warranty expenses; environmental risks, costs, recoveries and penalties associated with the Company's past and present manufacturing operations; 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, 2007, filed with the Securities and Exchange Commission on May 11, 2007 and from time to time in other reports filed with the Securities and Exchange Commission. Additional information about Material Sciences is available at http://www.matsci.com.
COMPANY CONTACT: MEDIA CONTACT:
James M. Froisland Katie Wood Znameroski
Senior Vice President, Chief Financial Officer, Edelman
Chief Information Officer and Corporate Secretary 312-240-2827
847-718-8020
Material Sciences Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended Twelve Months Ended
(In thousands, except per share February 28 or 29, February 28 or 29,
data) 2008 2007 2008 2007
Net Sales $53,315 $58,897 $235,220 $262,627
Cost of Sales 52,002 51,046 210,278 220,901
Gross Profit 1,313 7,851 24,942 41,726
Selling, General and Administrative
Expenses 9,037 7,924 36,314 33,669
Restructuring Expenses 1,319 -- 1,319 592
Income (Loss) from Operations (9,043) (73) (12,691) 7,465
Other (Income) and Expense:
Interest (Income) Expense, Net (114) (219) (421) (728)
Equity in Results of Joint Venture (73) (52) (330) (145)
Foreign Currency Transaction Gain (209) -- (1,741) --
Other, Net (40) 2 (163) (97)
Total Other Income, Net (436) (269) (2,655) (970)
Income (Loss) from Continuing
Operations Before Provision
(Benefit) for Income Taxes (8,607) 196 (10,036) 8,435
Provision (Benefit) for Income Taxes (3,469) (1,131) (4,046) 2,311
Income (Loss) from Continuing
Operations (5,138) 1,327 (5,990) 6,124
Net Income (Loss) $(5,138) $1,327 $(5,990) $6,124
Basic Net Income (Loss) Per Share $(0.36) $0.09 $(0.42) $0.42
Diluted Net Income (Loss) Per Share $(0.36) $0.09 $(0.42) $0.42
Weighted Average Number of Common
Shares Outstanding
Used for Basic Net Income (Loss)
Per Share 14,169 14,531 14,358 14,616
Dilutive Shares -- 7 -- 6
Weighted Average Number of Common
Shares Outstanding Plus Dilutive
Shares 14,169 14,538 14,358 14,622
Material Sciences Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
February 29, February 28,
(In thousands) 2008 2007
Assets:
Current Assets:
Cash and Cash Equivalents $7,913 $11,667
Short Term Investment 5,834 --
Receivables, Less Reserves of
$3,708 and $4,020, Respectively 28,547 48,121
Income Taxes Receivable 3,316 1,665
Prepaid Expenses 744 1,168
Inventories 31,811 42,174
Deferred Income Taxes 3,754 2,204
Assets Held For Sale 3,882 --
Total Current Assets 85,801 106,999
Property, Plant and Equipment 213,842 245,570
Accumulated Depreciation and Amortization (146,566) (170,666)
Net Property, Plant and Equipment 67,276 74,904
Other Assets:
Investment in Joint Venture 3,094 2,363
Goodwill -- 1,319
Deferred Income Taxes 6,811 1,592
Other 232 192
Total Other Assets 10,137 5,466
Total Assets $163,214 $187,369
Liabilities:
Current Liabilities:
Accounts Payable $22,319 $39,251
Accrued Payroll Related Expenses 4,691 5,414
Accrued Expenses 7,338 7,114
Current Liabilities of Discontinued
Operation -- Pinole Point Steel -- 66
Total Current Liabilities 34,348 51,845
Long-Term Liabilities:
Other14,189 9,191
Total Long-Term Liabilities 14,189 9,191
Commitments and Contingencies
Shareowners' Equity:
Preferred Stock -- --
Common Stock 381 381
Additional Paid-In Capital 79,491 79,171
Treasury Stock at Cost (52,978) (48,757)
Retained Earnings 88,173 94,255
Accumulated Other Comprehensive Income (390) 1,283
Total Shareowners' Equity 114,677 126,333
Total Liabilities and Shareowners'
Equity $163,214 $187,369
Material Sciences Corporation and Subsidiaries
Condensed Consolidated Statements
of Cash Flows
Twelve Months Ended
February 28 or 29,
(In thousands) 2008 2007
Cash Flows From:
Operating Activities:
Net Income (Loss) $(5,990) $6,124
Adjustments to Reconcile Net Income
(Loss) to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 11,414 10,919
Provision for Deferred Income Taxes (253) 36
Compensatory Effect of Stock Plans 133 94
Loss on Disposal of Asset 50 114
Foreign Currency Transaction Gain (1,741) --
Other, Net 990 (145)
Changes in Assets and Liabilities:
Receivables 19,938 (11,493)
Income Taxes Receivable (5,610) 671
Prepaid Expenses 435 74
Inventories 10,654 (1,890)
Accounts Payable (17,469) 10,854
Accrued Expenses 580 1,052
Other, Net (224) (1,259)
Net Cash Provided by Continuing
Operations 12,907 15,151
Net Cash Provided by (Used in)
Discontinued Operations -- (613)
Net Cash Provided by Operating
Activities 12,907 14,538
Investing Activities:
Capital Expenditures (6,694) (14,707)
Purchases of Short-term investment (131,500) --
Proceeds from Short-term investment sold 125,525 --
Net Cash Used in Investing
Activities (12,669) (14,707)
Financing Activities:
Purchases of Treasury Stock (4,221) (2,229)
Issuance of Common Stock 157 424
Excess Tax Benefits from Stock Compensation 30 83
Net Cash Used in Financing
Activities (4,034) (1,722)
Effect of Exchange Rate Changes on Cash 42 (42)
Net Decrease in Cash (3,754) (1,933)
Cash and Cash Equivalents at Beginning
of Period 11,667 13,600
Cash and Cash Equivalents at End of Period $7,913 $11,667
Material Sciences Corporation
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