Material Sciences Announces Fourth Quarter, Fiscal 2009 Results
May 14, 2009 9:00:00 AM
Email Story Discuss on ZenoBank
View Additional Profiles- Sales for Quarter and Year Decreased Primarily due to Difficult North American Automotive and Housing Markets
- Restructuring Plans on Track to Save More than $7.6 Million Annually
- Several Noncash Charges Increased Net Loss for Both Periods
- Strong Cash Position with No Long-term Debt
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, 2009.
Net sales for fiscal 2009 were $187.0 million compared with $235.0 million for the prior year, down 20.4 percent. The net loss for the latest year was $33.1 million, equal to $2.41 per diluted common share, versus a loss of $6.5 million, equal to $0.45 per diluted common share, a year ago.
Fiscal 2009: Disappointing Performance but Progress Made on Reducing Costs
"In the second half of our fiscal year, we were hit by unprecedented contractions in the automotive and housing markets, accompanied by softness in the appliance industry, which caused our sales to decline," said Clifford D. Nastas, chief executive officer. "As this situation unfolded, we took a number of actions to bring our costs in line with current opportunities. This included significant reductions in both cost of goods sold as well as selling, general and administrative expenses. We restructured the company's operations, and regrettably needed to reduce both our salaried and hourly workforce by 30 percent. Excluding severance of $1.9 million, these steps saved about $4.4 million during fiscal 2009, and we believe they will allow us to cut more than $7.6 million in annual expenses from our business."
Lower Sales, Noncash Charges Lead to Wider Loss in Fiscal 2009
Sales of acoustical materials, primarily purchased by automotive manufacturers, were off 16.8 percent to $94.1 million for fiscal 2009, versus $113.2 million in fiscal 2008. These declines are consistent with the production cuts experienced by the company's largest customers, as North American automotive production reached its lowest level in 20 years. Brake sales growth into Europe and Asia helped offset some of the decrease.
Coated materials -- sold mainly to appliance, building product and automotive customers -- experienced a 23.7 percent sales decrease, to $92.9 million compared with $121.8 million in fiscal 2008. This resulted from softer housing markets, which negatively affected demand for products sold to appliance and building product customers. In addition, fuel tank sales declined because of the automotive industry downturn.
Gross profit for fiscal 2009 was $11.1 million, down 54.3 percent from $24.3 million in the prior year. As a result, it represented 5.9 percent of sales for the latest year, compared with 10.3 percent in fiscal 2008. Lower product sales and a decrease in scrap metal sales more than offset reductions in overhead spending and quality-related costs, and several positive one-time items.
Selling, general and administrative expenses (SG&A) were $33.9 million, 7.2 percent lower than fiscal 2008's $36.5 million. The main reasons for the improvement were decreases in spending on professional services, insurance, and information technology, and a reduction in personnel.
The Effect of Unusual Items
Material Sciences experienced a number of unusual items--primarily noncash charges--during the year that affected its financial performance. Selling the Morrisville facility resulted in a $0.9 million charge, which was more than offset by the $5.9 million gain on the sale recorded in the fourth quarter. During that quarter, the company tested the value of its long-lived assets and recorded an $8.1 million asset impairment and noncash charge after determining that the value of certain assets used in production and research and development were not fully recoverable. After determining it was unlikely that the company would be able to use all of its deferred tax assets, Material Sciences recorded a $17.5 million valuation reserve, bringing the balance to $22.5 million, and a noncash charge to tax expense of $7.5 million during the year. In fiscal 2009, Material Sciences incurred restructuring expenses of $2.5 million.
The loss from operations was $27.5 million for the latest fiscal year, compared with a $13.6 million loss a year ago. Other income for the latest year was $1.9 million versus $2.7 million, reflecting reduced foreign currency translation gains and a decline in interest income due to lower interest rates. As a result, the fiscal 2009 net loss was $33.1 million, equal to $2.41 per diluted share, versus a $6.5 million loss, equal to 45 cents per share, a year earlier.
Lower Sales Led to Loss in Fourth Quarter
Net sales for the latest quarter were $24.6 million, off 53.7 percent from $53.1 million for the prior-year period. Acoustical materials accounted for 52 percent of sales, with coated metal providing the remaining 48 percent. Gross profit was a loss of $2.4 million in contrast to a gain of $1.1 million in the fiscal 2008 quarter. SG&A, including unusual items mentioned above, increased to $10.8 million from $10.6 million. This led to a loss from operations of $13.2 million compared with last year's quarterly loss of $9.4 million. Other expense of $0.2 million compared with $0.4 million of income a year ago. The net loss for the most recent quarter was $25.5 million, equal to $1.87 per diluted share, versus the prior year quarter's loss of $5.4 million, equal to $0.37 per diluted share.
Financial Condition
Net cash used in operations for fiscal 2009 was $1.8 million compared with cash provided by operations of $12.9 million for the prior year. The latest year's results reflected lower levels of accounts payable and amounts accrued, partially offset by a decrease in inventory and accounts receivable. The company invested $3.7 million in capital improvement projects versus $6.7 million in fiscal 2008.
The cash balance increased by $2.8 million, and the company ended the year with a cash balance of $10.7 million and no long-term debt.
Fiscal 2010: Focus on What can be Controlled
"While no one claims to have much visibility on conditions in our markets--and how these will affect us in the new fiscal year--there are three things we do know," said Nastas. "Softness in the U.S. automotive market is expected to continue at least through this year. The Morrisville facility, which we sold in December, contributed $15 million in sales that we will not see in fiscal 2010. And we believe our current financial condition offers sufficient funding to meet our operational and working capital needs for the foreseeable future.
"While our focus this year will continue to be on controlling costs, we also will be looking to the future. In addition to expanding international sales, we will be working to commercialize promising products such as ElectroBrite(R), Deco Steel(R) and Vivacolor(R). By watching our costs, further improving operations, and finding opportunities to reach new markets with current and new products, Material Sciences can weather the current downturn and be ready to benefit from improvements in its markets when these arrive," Nastas concluded.
Conference Call
Material Sciences will host a conference call to share the results of its fourth quarter and full-year fiscal 2009 results on Thursday, May 14, at 9:00 a.m. Central Time. CEO Nastas 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 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. 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 introduction of new products; 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, now that this is 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
Consolidated Statements of Operations
Material Sciences Corporation and Subsidiaries
(Unaudited)
Three Months Ended For the Years Ended
February 28 or 29, February 28 or 29,
(In thousands, except per share ------------------ ------------------
data) 2009 2008 2009 2008
------------------------------- ---- ---- ---- ----
Net Sales $24,584 $53,086 $187,026 $234,991
Cost of Sales 27,012 51,977 175,941 210,715
------ ------ ------- -------
Gross Profit (2,428) 1,109 11,085 24,276
Selling, General and
Administrative Expenses 8,140 9,233 33,888 36,510
Gain on Sale of Morrisville Assets (5,897) - (5,897) -
Asset Impairment Charges 7,579 1,319 8,092 1,319
Restructuring and Other 929 - 2,511 -
--- --- ----- ---
Income (Loss) from Operations (13,179) (9,443) (27,509) (13,553)
------- ------ ------- -------
Other (Income) Expense, Net:
Gain on Sale of Marketable
Securities - - (841) -
Interest and Dividend Income, Net (86) (114) (248) (421)
Equity (Increase) Decrease in
Results of Joint Venture 112 (73) (252) (330)
Foreign Transaction (Gain) Loss 149 (209) (308) (1,741)
Other (Income) Expense, Net 1 (44) (232) (240)
--- --- ---- ----
Total Other (Income) Expense, Net 176 (440) (1,881) (2,732)
--- ---- ------ ------
Income (Loss) Before Provision
(Benefit) for Income Taxes (13,355) (9,003) (25,628) (10,821)
Provision (Benefit) for Income
Taxes 12,161 (3,625) 7,483 (4,357)
------ ------ ----- ------
Net Income (Loss) $(25,516) $(5,378) $(33,111) $(6,464)
======== ======= ======== =======
Basic Net Income (Loss) Per Share $(1.87) $(0.37) $(2.41) $(0.45)
====== ====== ====== ======
Diluted Net Income (Loss) Per Share $(1.87) $(0.37) $(2.41) $(0.45)
====== ====== ====== ======
Weighted Average Number of Common
Shares Outstanding Used for Basic
Net Income (Loss) Per Share 13,643 14,169 13,716 14,358
Dilutive Shares - - - -
--- --- --- ---
Weighted Average Number of Common
Shares Outstanding Plus Dilutive
Shares 13,643 14,169 13,716 14,358
====== ====== ====== ======
Outstanding Common Stock Options
Having No Dilutive Effect 472 175 472 175
=== === === ===
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
(In thousands, February 28, February 29,
except share data) 2009 2008
------------------- ---- ----
Assets
Current Assets:
Cash and Cash
Equivalents $10,664 $7,913
Short Term Investment - 6,933
Receivables, Less
Reserves of $2,965
and $3,708,
Respectively 13,297 28,547
Income Taxes
Receivable 2,567 3,316
Prepaid Expenses 657 744
Inventories:
Raw Materials 11,401 13,177
Finished Goods 13,256 18,634
Deferred Income Taxes - 3,754
Assets Held for Sale 3,329 3,882
Other Assets - 180
--- ---
Total Current
Assets 55,171 87,080
------ ------
Property, Plant and
Equipment:
Land and Building 40,499 55,511
Machinery and
Equipment 129,301 156,462
Construction in
Progress 210 1,869
--- -----
170,010 213,842
Accumulated
Depreciation (122,264) (146,541)
-------- --------
Net Property, Plant
and Equipment 47,746 67,301
------ ------
Other Assets:
Notes Receivable 4,363 -
Investment in Joint
Venture 2,288 3,094
Deferred Income Taxes - 6,608
Other 471 232
--- ---
Total Other Assets 7,122 9,934
----- -----
Total Assets $110,039 $164,315
======== ========
Liabilities
Current Liabilities:
Accounts Payable $10,442 $22,513
Accrued Payroll
Related Expenses 3,269 4,691
Accrued Expenses 8,284 7,403
Total Current
Liabilities 21,995 34,607
------ ------
Long-term Liabilities:
Pension and
Postretirement
Liabilities 10,574 9,628
Other 3,250 4,948
----- -----
Total Long-term
Liabilities 13,824 14,576
------ ------
Commitments and
Contingencies - -
Shareowners' Equity
Preferred Stock, $1.00 Par
Value; 10,000,000
Shares Authorized;
1,000,000 Designated
Series B Junior
Participating
Preferred; None
Issued - -
Common Stock, $.02 Par Value;
40,000,000 Shares Authorized;
18,977,364 Shares Issued
and 13,605,587 Shares
Outstanding as of
February 28, 2009, and
19,039,817 Shares Issued
and 14,137,566
Shares Outstanding
as of February 29, 2008 380 381
Additional Paid-in
Capital 79,696 79,491
Treasury Stock at Cost,
5,371,777 Shares as of
February 28, 2009, and
4,902,251 Shares
as of February 29,
2008 (56,146) (52,978)
Retained Earnings 55,161 88,272
Accumulated Other
Comprehensive Income
(Loss) (4,871) (34)
------ ---
Total Shareowners'
Equity 74,220 115,132
------ -------
Total Liabilities
and Shareowners'
Equity $110,039 $164,315
======== ========
Consolidated Statements of Cash Flows
Material Sciences Corporation and Subsidiaries
For the years ended
February 28 or 29,
-------------------
(In thousands) 2009 2008 2007
-------------- ---- ---- ----
Cash Flows From:
Operating Activities:
Net Income (Loss) $(33,111) $(6,464) $6,287
Adjustments to Reconcile Net
Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation, Amortization and Accretion 10,671 11,389 10,919
Gain on Sale of Marketable Securities (841) - -
Gain on Sale of Morrisville Assets (5,897) - -
Non-Cash Loss on Impairment
of Fixed Assets 8,092 - -
Non-Cash Loss on Derivative Instruments 2,206 - -
Cash Distribution Received
from Joint Venture 359 - -
Change in Provision for
Deferred Income Taxes 8,142 (3,799) 36
Compensatory Effect of Stock Plans 189 133 94
Loss on Disposal of Assets 421 50 114
Foreign Currency
Transaction Gain (354) (1,741) -
Goodwill Impairment - 1,319 -
Other, Net (252) (329) (145)
Changes in Assets and Liabilities:
Receivables 15,236 19,938 (11,493)
Income Taxes Receivable 1,042 (1,744) 671
Prepaid Expenses 75 435 74
Inventories 6,251 10,749 (1,890)
Accounts Payable (11,212) (17,099) 10,702
Accrued Expenses (2,461) 663 1,165
Other, Net (396) (593) (1,383)
-------------- ---- ---- ------
Net Cash Provided by (Used
in) Continuing Operations (1,840) 12,907 15,151
Net Cash Provided by (Used
in) Discontinued Operations - - (613)
----------------------------------- --- --- ----
Net Cash Provided by (Used
in) Operating Activities (1,840) 12,907 14,538
--------------------------------------- ------ ------ ------
Investing Activities:
Capital Expenditures (3,720) (6,694) (14,707)
Proceeds from Sale of Marketable Securities 6,727 - -
Proceeds from Sale of Morrisville Assets 5,000 - -
Purchases of Short-term investment - (131,500) -
Proceeds from Short-term investment sold - 125,525 -
Proceeds from Exclusivity Agreement 1,250 - -
Transfer of Proceeds from Exclusivity
Agreement to Escrow (1,250) - -
-------------------------------------- ------ --- ---
Net Cash Provided by (Used
in) Investing Activities 8,007 (12,669) (14,707)
--------------------------------------- ----- ------- -------
Financing Activities:
Purchase of Treasury Stock (3,168) (4,221) (2,229)
Issuance of Common Stock 15 157 424
Excess Tax Benefits From Stock Compensation - 30 83
------------------------- --- -- --
Net Cash Provided by (Used
in) Financing Activities (3,153) (4,034) (1,722)
--------------------------------------- ------ ------ ------
Effect of Exchange Rate Changes on Cash (263) 42 (42)
Net Increase (Decrease) in Cash 2,751 (3,754) (1,933)
Cash and Cash Equivalents at
Beginning of Year 7,913 11,667 13,600
----------------------------- ----- ------ ------
Cash and Cash Equivalents at
End of Year $10,664 $7,913 $11,667
----------------------------- ======= ====== =======
Non-Cash Transactions:
Asset Retirement Obligation Established $- $- $11
== == ===
Capital Expenditures in Accounts
Payable at Year End $96 $881 $503
=== ==== ====
Note Received in Sale of
Morrisville Assets $4,654 $- $-
====== == ==
Supplemental Cash Flow Disclosures:
Interest Paid $78 $146 $124
=== ==== ====
Income Taxes Paid $40 $2,052 $1,529
=== ====== ======
SOURCE Material Sciences Corporation
----------------------------------------------
James M. Froisland
Senior Vice President
Chief Financial Officer
Chief Information Officer and Corporate Secretary of Material Sciences Corporation
+1-847-718-8020; or Media
Lynne Franklin of Wordsmith
+1-847-729-5716
for Material Sciences Corporation
News 
Market Data 
Discover 
