Exhibit 99.1
MATERIAL SCIENCES CORPORATION
REPORTS THIRD QUARTER RESULTS
ELK GROVE VILLAGE, IL, JANUARY 10, 2005—Material Sciences Corporation (NYSE:MSC),a leading provider of material-based solutions for electronic, acoustical/thermal and coated metal applications, today reported results for the third quarter and first nine months of fiscal 2005, which ended November 30, 2004.
Quiet Steel Growth and Lower Costs Drives Improved Earnings
Net sales for the third quarter of fiscal 2005 were $67.4 million, up 4.2 percent compared with sales of $64.6 million for the same period a year ago.
Gross profit in the third quarter increased to $15.1 million, or 22.4 percent of sales, from $11.8 million, or 18.2 percent of sales, at this time last year.
Income from continuing operations for the three months was $2.5 million, or $0.17 per diluted share, compared with income from continuing operations of $1.0 million, or $0.07 per diluted share, last year. Income from continuing operations in the third quarter included pretax restructuring charges of $0.4 million.
“Third quarter performance benefited from significant growth in sales of our Quiet Steel material for automotive applications” said Ronald L. Stewart, president and chief executive officer. “We continue to improve our manufacturing operations and have decreased costs significantly including wages, benefits and maintenance spending by $1.6 million for the nine-month period compared with the prior year.
For the first nine months of fiscal 2005, net sales were $200.5 million, up 11.4 percent from $179.9 million at this time last year. The income from continuing operations for the nine months was $1.8 million, or $0.12 per
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January 10, 2005
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diluted share, compared with a loss from continuing operations of $1.0 million, or $0.07 per diluted share, in the year-ago period. The year-to-date amount was affected by the $4.2 million in expense related to the contractual prepayment penalty paid to the holders of the company’s privately placed senior notes issued in 1998. The reduction in debt resulted in a decrease of $0.7 million in interest expense for the third quarter and $1.6 million for the year-to-date period. For the first nine months, the company recorded total expenses of approximately $1.8 million associated with closing its Middletown, Ohio coil coating operation, and other corporate restructuring costs of $0.9 million.
Engineered Materials and Solutions Group (EMS)
Sales of electronic, acoustical/thermal and coated metal products in the third quarter were $67.0 million, up 3.9 percent from $64.5 million at this time last year. Sales for the first nine months were $199.4 million, an 11.0 percent increase from $179.7 million last year.
Sales of acoustical/thermal material-based solutions in the third quarter were $29.0 million, 53.1 percent higher than the $18.9 million in the year-ago period. This was due primarily to a significant increase in shipments of Quiet Steel® for automotive body panels. Sales for the first nine months were $82.8 million, up 59.9 percent from a year ago, due to the increase in Quiet Steel® for automotive body panels, as well as higher sales of noise damping materials for original equipment and aftermarket disc brakes and engine components.
“We added six new applications of Quiet Steel to automotive platforms in the third quarter,” said Stewart. “Sales included new shipments of Quiet Steel for use in the Buick LaCrosse and Allure, Pontiac Pursuit and Grand Prix, Chevrolet Cobalt, and the 2005 Jeep Grand Cherokee.”
Sales of coated metal in the third quarter were $32.3 million, down 16.7 percent compared with $38.8 million reported last year. Lower shipments of coil coated metal for the appliance/HVAC, electrogalvanizing, building products, swimming pool and lighting markets were the main drivers of the decline. Sales for the first nine months were $101.1 million compared with $108.0 million for the same period last year following the general market decline as noted for the quarter. The closing of Middletown resulted in a decline of approximately $3.4 million in third quarter sales and $8.3 million for the nine-month period.
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January 10, 2005
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“Production and sales were affected by the pricing and availability of metal in both the third quarter and the first nine months of fiscal 2005. We expect that this issue will continue through the balance of the fiscal year but to a lesser extent,” said Stewart.
Third quarter sales of electronic material-based solutions were $5.7 million, down 16.1 percent compared with $6.8 million in last year’s third quarter. The decline primarily resulted from the previously announced change in the business model for supplying this market. “As expected, the move to toll processing by our major customers for NRGDamp in the hard disk drive market resulted in lower sales beginning in the third quarter of fiscal 2005,” said Stewart. Sales for the first nine months were down 22.2 percent to $15.5 million based on customer rebalancing of inventory of aluminum-based hard disk drive covers and the shift to toll processing.
Electronic Materials and Devices Group (EMD)
EMD, which includes interface touch controls and sensor solutions, reported third quarter revenue of $0.4 million compared with $0.1 million in the prior year. Revenue consisted primarily of SensaTank™ and SensaSwitch™ shipments to the recreational vehicle market, revenue associated with an exclusive supply agreement with Lear Corporation and nonrecurring engineering revenue. For the first nine months, sales were $1.1 million versus $0.2 million in the first nine months of last year, primarily for the same reasons.
“Management has been reviewing strategic alternatives including active discussions of a full range of business transactions to find another company that will be better able to provide the resources to accelerate the market penetration of field-effect technology. We intend to complete our review as soon as practicable in order to meet our objectives,” said Stewart.
About Material Sciences
Material Sciences Corporation is a leading provider of material-based solutions for electronic, acoustical/thermal and coated metal applications. MSC uses its expertise in materials, which it leverages through relationships and a network of partners, to solve customer-specific problems, overcoming technical barriers and enhancing performance. MSC differentiates itself on the basis of its strong customer orientation, knowledge of materials
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January 10, 2005
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combined with a deep understanding of its markets, and the offer of specific value propositions that define how it will create and share economic value with its customers. The company’s stock is traded on the New York Stock Exchange under the symbol MSC and is included in the Standard & Poor’s SmallCap 600 Index.
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: the company’s ability to successfully implement its restructuring and cost reduction plans and achieve the benefits it expects from these plans, net of estimated severance-related costs; impact of changes in the overall economy; changes in the business environment, including the transportation, building and construction, electronics and durable goods industries; the company’s ability to satisfy in a timely manner the requirements of Section 404 of the Sarbanes Oxley Act of 2002 and the rules and regulations adopted pursuant thereto; competitive factors (including changes in industry capacity); changes in laws, regulations, policies or other activities of governments, agencies and similar organizations (including the ruling under Section 201 of the Trade Act of 1974); the stability of governments and business conditions inside and outside the U.S., which may affect a successful penetration of the company’s products; acts of war or terrorism; acceptance of brake damping materials, engine components and body panel laminate parts by customers in North America and Europe; proceeds and potential impact from the potential sale or idling of facilities or other assets; 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 significant customers of the company; the risk of the successful development, introduction and marketing of new products and technologies, including products based on the touch sensor technology the company has licensed from TST; the anticipated marketing and research and development spending and the license fee payable to TST related to the switch/sensor business; the realization of the future value of the Lear Corporation agreement and other potential transactions involving EMD; facility utilization and product mix at the Walbridge, Ohio facility, including the extent of ISG’s utilization; realization of the tax credit carryforward generated from the sale of Pinole Point Steel and other net operating loss carryforwards; the impact of future warranty expenses; environmental risks, costs, recoveries and penalties associated with the company’s past and present manufacturing
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January 10, 2005
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operations, including any risks, costs and penalties arising out of an enforcement action by the Illinois EPA and Illinois Attorney General related to the company’s Elk Grove Village facility and the Lake Calumet Cluster Site; the successful shift of the company’s supply model for the disk drive market to a toll processing program; and other factors, risks and uncertainties identified in Part II, Item 7 of the company’s Annual Report on Form 10-K/A for the year ended February 29, 2004, as filed with the Securities and Exchange Commission.
MSC undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.
Additional information about Material Sciences is available at www.matsci.com.
MATERIAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
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| | | Three Months Ended November 30,
| | | Nine Months Ended November 30,
| |
| | | 2004
| | | 2003
| | | Percent
Change
| | | 2004
| | | 2003
| | | Percent
Change
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Net Sales | | $ | 67,363 | | | $ | 64,640 | | | 4.2 | % | | $ | 200,481 | | | $ | 179,922 | | | 11.4 | % |
Cost of Sales | | | 52,268 | | | | 52,877 | | | -1.2 | % | | | 156,963 | | | | 150,378 | | | 4.4 | % |
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Gross Profit | | $ | 15,095 | | | $ | 11,763 | | | 28.3 | % | | $ | 43,518 | | | $ | 29,544 | | | 47.3 | % |
Selling, General and Administrative Expenses | | | 10,219 | | | | 9,558 | | | 6.9 | % | | | 32,123 | | | | 28,665 | | | 12.1 | % |
Restructuring and Other Expenses | | | 439 | | | | — | | | NM | | | | 2,650 | | | | 13 | | | 20284.6 | % |
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Income from Operations | | $ | 4,437 | | | $ | 2,205 | | | 101.2 | % | | $ | 8,745 | | | $ | 866 | | | 909.8 | % |
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Other (Income) and Expense: | | | | | | | | | | | | | | | | | | | | | | |
Interest Expense, Net | | $ | 101 | | | $ | 682 | | | -85.2 | % | | $ | 806 | | | $ | 2,205 | | | -63.4 | % |
Equity in Results of Joint Ventures | | | (49 | ) | | | (12 | ) | | 308.3 | % | | | (121 | ) | | | 228 | | | -153.1 | % |
Loss on Early Retirement of Debt | | | — | | | | — | | | NM | | | | 4,205 | | | | — | | | NM | |
Other, Net | | | — | | | | — | | | NM | | | | — | | | | 91 | | | -100.0 | % |
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Total Other Expense, Net | | $ | 52 | | | $ | 670 | | | -92.2 | % | | $ | 4,890 | | | $ | 2,524 | | | 93.7 | % |
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Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes | | $ | 4,385 | | | $ | 1,535 | | | 185.7 | % | | $ | 3,855 | | | $ | (1,658 | ) | | -332.5 | % |
Provision (Benefit) for Income Taxes | | | 1,877 | | | | 582 | | | 222.5 | % | | | 2,079 | | | | (702 | ) | | -396.2 | % |
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Income (Loss) from Continuing Operations | | $ | 2,508 | | | $ | 953 | | | 163.2 | % | | $ | 1,776 | | | $ | (956 | ) | | -285.8 | % |
Discontinued Operations: | | | | | | | | | | | | | | | | | | | | | | |
Loss on Discontinued Operation - Pinole Point Steel (Net of Benefit for Income Taxes of $44, $141, $132 and $313, Respectively) | | | (70 | ) | | | (200 | ) | | -65.0 | % | | | (205 | ) | | | (448 | ) | | -54.2 | % |
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Net Income (Loss) | | $ | 2,438 | | | $ | 753 | | | 223.8 | % | | $ | 1,571 | | | $ | (1,404 | ) | | -211.9 | % |
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Basic Net Income (Loss) Per Share: | | | | | | | | | | | | | | | | | | | | | | |
Income (Loss) from Continuing Operations | | $ | 0.17 | | | $ | 0.07 | | | 142.9 | % | | $ | 0.12 | | | $ | (0.07 | ) | | -271.4 | % |
Loss on Discontinued Operation - Pinole Point Steel | | | — | | | | (0.02 | ) | | -100.0 | % | | | (0.01 | ) | | | (0.03 | ) | | -66.7 | % |
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Basic Net Income (Loss) Per Share | | $ | 0.17 | | | $ | 0.05 | | | 240.0 | % | | $ | 0.11 | | | $ | (0.10 | ) | | -210.0 | % |
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Diluted Net Income (Loss) Per Share: | | | | | | | | | | | | | | | | | | | | | | |
Income (Loss) from Continuing Operations | | $ | 0.17 | | | $ | 0.07 | | | 142.9 | % | | $ | 0.12 | | | $ | (0.07 | ) | | -271.4 | % |
Loss on Discontinued Operation - Pinole Point Steel | | | — | | | | (0.02 | ) | | -100.0 | % | | | (0.01 | ) | | | (0.03 | ) | | -66.7 | % |
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Diluted Net Income (Loss) Per Share | | $ | 0.17 | | | $ | 0.05 | | | 240.0 | % | | $ | 0.11 | | | $ | (0.10 | ) | | -210.0 | % |
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Weighted Average Number of Common Shares Outstanding Used for Basic Net Income (Loss) Per Share | | | 14,363 | | | | 14,036 | | | | | | | 14,281 | | | | 13,959 | | | | |
Dilutive Shares | | | 85 | | | | 140 | | | | | | | 54 | | | | — | | | | |
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Weighted Average Number of Common Shares Outstanding Plus Dilutive Shares | | | 14,448 | | | | 14,176 | | | | | | | 14,335 | | | | 13,959 | | | | |
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MATERIAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| | | | | | | | |
| | | November 30, 2004
| | | February 29, 2004
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Assets | | | | | | | | |
Current Assets: | | | | | | | | |
Cash and Cash Equivalents | | $ | 2,129 | | | $ | 33,483 | |
Restricted Cash | | | — | | | | 3,357 | |
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Total Cash, Cash Equivalents and Restricted Cash | | $ | 2,129 | | | $ | 36,840 | |
Receivables, Less Reserves of $5,107 and $4,185, Respectively | | | 42,070 | | | | 40,386 | |
Income Taxes Receivable | | | 50 | | | | 51 | |
Prepaid Expenses | | | 1,836 | | | | 1,290 | |
Inventories | | | 40,140 | | | | 31,217 | |
Deferred Income Taxes | | | 2,235 | | | | 2,235 | |
Assets Held for Sale | | | 1,394 | | | | 2,281 | |
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Total Current Assets | | $ | 89,854 | | | $ | 114,300 | |
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Property, Plant and Equipment | | $ | 240,584 | | | $ | 237,443 | |
Accumulated Depreciation and Amortization | | | (163,961 | ) | | | (155,696 | ) |
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Net Property, Plant and Equipment | | $ | 76,623 | | | $ | 81,747 | |
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Other Assets: | | | | | | | | |
Investment in Joint Ventures | | $ | 1,548 | | | $ | 1,399 | |
Goodwill | | | 1,319 | | | | 1,319 | |
Deferred Income Taxes | | | 2,796 | | | | 4,655 | |
Other | | | 1,255 | | | | 1,189 | |
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Total Other Assets | | $ | 6,918 | | | $ | 8,562 | |
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Total Assets | | $ | 173,395 | | | $ | 204,609 | |
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Liabilities | | | | | | | | |
Current Liabilities: | | | | | | | | |
Current Portion of Long-Term Debt | | $ | — | | | $ | 36,944 | |
Accounts Payable | | | 24,455 | | | | 20,723 | |
Accrued Payroll Related Expenses | | | 9,586 | | | | 12,154 | |
Accrued Expenses | | | 6,375 | | | | 6,190 | |
Current Liabilities of Discontinued Operation, Net - Pinole Point Steel | | | 450 | | | | 414 | |
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Total Current Liabilities | | $ | 40,866 | | | $ | 76,425 | |
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Long-Term Liabilities: | | | | | | | | |
Long-Term Debt, Less Current Portion | | $ | 7,000 | | | $ | 7,000 | |
Other | | | 9,303 | | | | 9,551 | |
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Total Long-Term Liabilities | | $ | 16,303 | | | $ | 16,551 | |
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Shareowners’ Equity | | | | | | | | |
Preferred Stock | | $ | — | | | $ | — | |
Common Stock | | | 374 | | | | 369 | |
Additional Paid-In Capital | | | 75,048 | | | | 72,387 | |
Treasury Stock at Cost | | | (46,528 | ) | | | (46,528 | ) |
Retained Earnings | | | 84,985 | | | | 83,414 | |
Accumulated Other Comprehensive Income | | | 2,347 | | | | 1,991 | |
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Total Shareowners’ Equity | | $ | 116,226 | | | $ | 111,633 | |
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Total Liabilities and Shareowners’ Equity | | $ | 173,395 | | | $ | 204,609 | |
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MATERIAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
November 30,
| | | Nine Months Ended
November 30,
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| | | 2004
| | | 2003
| | | 2004
| | | 2003
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Cash Flows From: | | | | | | | | | | | | | | | | |
Operating Activities: | | | | | | | | | | | | | | | | |
Net Income (Loss) | | $ | 2,438 | | | $ | 753 | | | $ | 1,571 | | | $ | (1,404 | ) |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: | | | | | | | | | | | | | | | | |
Discontinued Operation, Net - Pinole Point Steel | | | (72 | ) | | | (115 | ) | | | 36 | | | | 10,659 | |
Loss on Discontinued Operation - Pinole Point Steel | | | 70 | | | | 200 | | | | 205 | | | | 448 | |
Depreciation and Amortization | | | 3,020 | | | | 3,729 | | | | 9,040 | | | | 11,266 | |
Provision (Benefit) for Deferred Income Taxes | | | 1,757 | | | | 564 | | | | 1,654 | | | | (1,382 | ) |
Compensatory Effect of Stock Plans | | | 57 | | | | 166 | | | | 179 | | | | 770 | |
Gain on Sale of Assets Held for Sale, Net | | | (625 | ) | | | — | | | | (625 | ) | | | (162 | ) |
Loss on Disposal of Assets | | | 216 | | | | — | | | | 216 | | | | — | |
Other, Net | | | (49 | ) | | | (23 | ) | | | (22 | ) | | | 228 | |
Changes in Assets and Liabilities: | | | | | | | | | | | | | | | | |
Receivables | | | (8,044 | ) | | | (5,771 | ) | | | (1,154 | ) | | | (9,307 | ) |
Income Taxes Receivable | | | — | | | | — | | | | 1 | | | | 586 | |
Prepaid Expenses | | | 597 | | | | 789 | | | | (546 | ) | | | (123 | ) |
Inventories | | | (2,075 | ) | | | (3,154 | ) | | | (8,923 | ) | | | (4,114 | ) |
Accounts Payable | | | 2,059 | | | | 2,662 | | | | 3,732 | | | | (1,853 | ) |
Accrued Expenses | | | 178 | | | | 2,498 | | | | (2,606 | ) | | | (4,159 | ) |
Other, Net | | | 19 | | | | 548 | | | | 62 | | | | (710 | ) |
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Net Cash Provided by (Used in) Operating Activities | | $ | (454 | ) | | $ | 2,846 | | | $ | 2,820 | | | $ | 743 | |
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Investing Activities: | | | | | | | | | | | | | | | | |
Capital Expenditures | | $ | (1,592 | ) | | $ | (1,233 | ) | | $ | (4,098 | ) | | $ | (3,466 | ) |
Acquisition, Net of Cash Acquired | | | — | | | | — | | | | — | | | | (568 | ) |
Proceeds from Sale of Asset | | | 1,137 | | | | — | | | | 1,137 | | | | 679 | |
Investment in Joint Ventures | | | — | | | | — | | | | — | | | | (358 | ) |
Purchases of Marketable Securities | | | — | | | | (48 | ) | | | — | | | | (83 | ) |
Proceeds from Sale of Marketable Securities | | | — | | | | 126 | | | | — | | | | 1,167 | |
Proceeds from Restricted Cash and Cancellation of Letters of Credit | | | — | | | | (1,077 | ) | | | 3,357 | | | | (1,077 | ) |
Other | | | (36 | ) | | | 18 | | | | (113 | ) | | | 29 | |
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Net Cash Provided by (Used in) Investing Activities | | $ | (491 | ) | | $ | (2,214 | ) | | $ | 283 | | | $ | (3,677 | ) |
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Financing Activities: | | | | | | | | | | | | | | | | |
Payments of Debt | | $ | (22,168 | ) | | $ | — | | | $ | (97,162 | ) | | $ | (11,558 | ) |
Proceeds under Line of Credit | | | 21,000 | | | | — | | | | 60,218 | | | | — | |
Payments of Rights Redemption | | | — | | | | 1 | | | | — | | | | (148 | ) |
Issuance of Common Stock | | | 1,577 | | | | 1,229 | | | | 2,487 | | | | 1,560 | |
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Net Cash Provided by (Used in) Financing Activities | | $ | 409 | | | $ | 1,230 | | | $ | (34,457 | ) | | $ | (10,146 | ) |
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Net Increase (Decrease) in Cash | | $ | (536 | ) | | $ | 1,862 | | | $ | (31,354 | ) | | $ | (13,080 | ) |
Cash and Cash Equivalents at Beginning of Period | | | 2,665 | | | | 28,938 | | | | 33,483 | | | | 43,880 | |
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Cash and Cash Equivalents at End of Period | | $ | 2,129 | | | $ | 30,800 | | | $ | 2,129 | | | $ | 30,800 | |
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