Material Sciences Reports Results for the Fourth Quarter, Fiscal 2010

ELK GROVE VILLAGE, Ill., May 14 /PRNewswire-FirstCall/ -- Material Sciences Corporation (OTC Bulletin Board: MASC), a leading provider of material-based solutions for acoustical and coated applications, today reported results for the fourth quarter and fiscal year ended February 28, 2010.

Net sales for the latest year were $137.8 million, off 26.3 percent compared with $187.0 million in the prior fiscal year. The net loss for fiscal 2010 was $11.6 million, equal to $0.89 per share, a 64.9 percent reduction from the net loss of $33.1 million, equal to $2.41 per share, for fiscal 2009.

Fiscal 2010: Focus on Operational Improvements Reduces Loss

"Unprecedented softness in the automotive, housing, commercial construction and appliance markets in fiscal 2010 made it unrealistic to expect we could maintain sales at the prior-year's level," explained Clifford D. Nastas, chief executive officer. "So we focused on the areas under our control. This began by reviewing every aspect of our operations for opportunities to cut costs, increase efficiencies, and dispose of assets that could not generate a good level of return. As a result—despite lower sales—gross profit increased 45.2 percent; selling, general and administrative expenses were 21.7 percent lower, and our operating loss was cut by 54.7 percent between the two years."

"In addition, after the close of the year, we sold some of our coil coating assets, which had served a commodity segment of the metal coating industry.  Our board of directors is evaluating several options for the cash proceeds we received from this transaction, including investment in new areas that have the opportunity to really drive profitable growth for our shareholders," Nastas said.

Lower Sales, Significantly Smaller Loss in Fiscal Year

Sales of acoustical materials—most often to automotive manufacturers—were $66.9 million, down 29.0 percent from $94.1 million in fiscal 2009. Lower body panel, engine and original equipment (OE) brake sales reflected the softness seen in the North American automotive market—which only produced 8.5 million vehicles during calendar year 2009.  However, several new customer developments with Asian automakers led to a more than three-fold increase of brakes sales into China.

Sales of coated materials decreased 23.6 percent to $70.9 million for the latest year versus $92.9 million for the prior 12 months. Continued weakness in the appliance/HVAC, building products, lighting and automotive fuel tank markets drove sales lower.

Fiscal 2010 gross profit grew to $16.1 million, or 11.7 percent of sales, from the prior year's $11.1 million, or 5.9 percent of sales. Lower sales and a decline in scrap metal sales were more than offset by a reduction in quality-related costs, manufacturing performance improvements, and cuts in overhead expenses.

Selling, general and administrative expenses (SG&A) experienced a reduction to $26.5 million from the prior-year's $33.9 million. Due to lower sales in the latest year, SG&A represented 19.3 percent of sales compared with fiscal 2009's 18.1 percent. The main reasons for the improvement in actual expense were lower headcount-related costs (as a result of fiscal 2009 restructurings), reduced spending on professional fees, and a reduction in depreciation expense (due to a write-down in corporate asset values in the fourth quarter of fiscal 2009).

The loss from operations for the latest year was $12.5 million, which included $1.6 million in restructuring expense and $0.4 million in asset impairment expense. This loss was a $15.1 million improvement over the prior-year's $27.5 million operating loss. Other income totaled $0.7 in fiscal 2010, compared with $1.9 million, primarily because the prior year included a gain of $0.8 million from the sale of marketable securities. The net loss for fiscal 2010 was $11.6 million, equal to $0.89 per share, an improvement from a $33.1 million loss, equal to $2.41 per share in fiscal 2009.  Fiscal 2009 results included unusual items, when compared to fiscal 2010, for asset impairment expense ($8.1 million), deferred tax valuation reserve expense ($17.5 million) and the gain on sale of the Morrisville facility ($5.9 million).

Higher Sales, Lower Loss in Fourth Quarter

Net sales for the latest quarter rose 45.4 percent to $35.7 million from $24.6 million for last year's fourth quarter. Strong automotive sales in both acoustical and coated materials led the way with higher sales in OE brakes, body panel, engine, fuel tank and electrogalvanized products. Gross profit reached $6.3 million compared with a loss of $2.4 million for the fiscal 2009 quarter. SG&A for the latest three months was $6.3 million versus last year's $8.1 million. In addition, the company took a restructuring expense charge of $1.6 million in the fourth quarter due to additional workforce reduction efforts and $0.4 million for asset impairment expense.  This led to a quarterly loss from operations of $2.1 million, down significantly from a loss of $13.2 million in the fourth quarter of fiscal 2009. Other income of $0.1 million compared with an expense of $0.2 million for last year's quarter. As a result, the fourth quarter net loss was $2.0 million, equal to $0.16 per share, versus last year's net loss of $25.5 million, equal to $1.87 per share. Fiscal 2009 fourth quarter results included unusual items, when compared to fiscal 2010, for asset impairment expense ($7.6 million), deferred tax valuation reserve expense ($17.5 million) and the gain on sale of the Morrisville facility ($5.9 million).

Financial Condition Provides Flexibility

Net cash provided by operations for the latest year was $2.8 million, compared with a use of cash of $1.8 million in fiscal 2009. The fiscal 2010 operating losses were more than offset by cash generated from $4.9 million of inventory reduction and $2.0 million in tax refunds. The company invested $1.1 million in capital improvements compared with $3.7 million for fiscal 2009.

Material Sciences ended fiscal 2010 with a cash balance of $12.9 million—a $2.2 million increase from the prior year—and continued to have no long-term debt.

Fiscal 2011: Improving Markets and Growth Opportunities

"Fiscal 2010 was a renaissance year for Material Sciences. We are beginning to see improvements in our core markets—particularly automotive—and increasing demand for new products such as Electrobrite®, Vivacolor® and rubber coated materials. In addition, our costs are lower, product quality is higher, and our global manufacturing and customer support model give us a competitive edge. The actions we took in fiscal 2010 have put us in a good place to capitalize on this situation, and a strong cash position will allow us to continue investing in new technologies. We believe all this will translate into more new business wins and better financial performance in fiscal 2011," Nastas concluded.

Conference Call

Material Sciences will host a conference call to share the results of its fourth quarter and full-year fiscal 2010 results on Friday, May 14, at 9:00 a.m. Central Time. CEO Nastas and James D. Pawlak, vice president and chief financial officer, 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 the company's 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.

About Material Sciences

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

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, 2010, filed with the Securities and Exchange Commission, and from time to time in other reports filed with the Securities and Exchange Commission.

SOURCE Material Sciences Corporation

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