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| 8-K - MATERIAL SCIENCES CORPORATION 8-K - MATERIAL SCIENCES CORP | a50726017.htm |
Exhibit 99.1
Material Sciences Announces Fiscal 2014 Second Quarter Financial Results
Second Quarter Highlights
- Revenue down on lower vehicle builds versus fiscal 2013 and delayed new platform launches
- Received first new customer approvals for EG coating advanced high-strength steel
- Signed exclusive licensing agreement with Productive Research LLC to commercialize proprietary lightweight metal composites for the transportation industry
- Cash position remains strong at $38.5 million
ELK GROVE VILLAGE, Ill.--(BUSINESS WIRE)--October 10, 2013--Material Sciences Corporation (NASDAQ: MASC), a leading provider of material-based solutions for acoustical and coated applications, today reported financial results for the fiscal 2014 second quarter ended August 31, 2013.
“Our top-line results were under pressure as certain vehicles containing our mainstream technologies experienced reduced sales volumes versus the same period last year. In addition, several new business wins scheduled to begin shipping earlier this year have been delayed due to customers choosing to defer the introduction of the target platforms by several months. These delays have nothing to do with Material Sciences or our readiness to support the programs,” said Clifford Nastas, Material Sciences’ Chief Executive Officer. “We continue to prudently control spending, and selectively invest in new technologies to maintain profitability during this transient period of stagnating sales. We continue to enjoy increasing international sales as we grow our market share within the brake industry. Sales to international customers in the fiscal 2014 second quarter and first half increased 21.1 percent and 14.4 percent, respectively. International sales represented over 16.0 percent of our sales volume during the second quarter. With our facilities operating at approximately 30 percent of full-time capacity, Material Sciences is well positioned to achieve profitable growth as we work to increase sales.”
Fiscal 2014 Second Quarter Results
Net sales for the fiscal 2014 second quarter declined 7.9 percent to $27.6 million versus $29.9 million for the same period last year.
Acoustical sales decreased $1.4 million to $17.9 million from $19.4 million for the prior fiscal year quarter. The primary drivers for the 7.3 percent decrease were lower Quiet Steel® sales for body panel and engine related applications.
Sales of coated products declined approximately $1.0 million to $9.6 million from $10.6 million for the prior fiscal year quarter. The 9.0 percent decline in coated sales was due primarily to lower shipments of fuel tank products, and to a lesser extent, lower Electrobrite® sales. These declines were partially offset by an increase in electro-galvanized (EG) sales.
Gross profit, as a percentage of fiscal 2014 second quarter net sales, was 21.8 percent compared to 21.9 percent for the fiscal 2013 second quarter.
For the fiscal 2014 second quarter, selling, general and administrative expenses (“SG&A”), as a percentage of net sales, were 16.6 percent compared to 16.7 percent of net sales in the same period last year. SG&A was $4.6 million for the fiscal 2014 second quarter and $5.0 million for the fiscal 2013 second quarter.
For the three months ended August 31, 2013, the Company’s effective income tax rate was 36.2 percent compared to 37.1 percent in the same period last year.
Net income for the fiscal 2014 second quarter was $1.0 million, or $0.10 per diluted share, compared with $3.3 million, or $0.31 per diluted share, in the fiscal 2013 second quarter. As reflected in the table below, adjusting net income for a normalized effective tax rate and gain on sales of assets, fiscal 2013 second quarter adjusted net income was $1.3 million, or $0.12 per diluted share.
Fiscal 2014 First Half Results
Net sales for the fiscal 2014 first half declined 13.1 percent to $56.3 million versus $64.8 million for the same period last year. Acoustical sales decreased $2.9 million and coated products were lower by $5.6 million compared to the prior year period.
Gross profit, as a percentage of fiscal 2014 first half net sales, was 21.5 percent compared to 23.3 percent for the same period in fiscal 2013. The primary reasons for the lower gross profit were the decline in sales and a reduction in facility utilization.
SG&A expenses were $9.5 million, or 16.8 percent of net sales for the fiscal 2014 first half, compared to $10.4 million, or 16.1 percent of net sales for the same period last fiscal year.
For the six months ended August 31, 2013, the Company’s effective income tax rate was 17.5 percent, compared to 36.4 percent in the same period last year. The lower rate in the period ended August 31, 2013, was primarily due to filing amended returns to claim foreign tax credits.
Net income for the fiscal 2014 first half was $2.4 million, or $0.23 per diluted share compared with $5.5 million, or $0.52 per diluted share in the fiscal 2013 first half. As reflected in the table below, adjusting net income for a normalized effective tax rate and gain on sales of assets, fiscal 2014 first half adjusted net income was $1.9 million, or $0.18 per diluted share, compared to adjusted net income of $3.4 million, or $0.33 per diluted share in the prior year period.
Net income comparisons for the second quarter and first half--as reported and as adjusted for unusual items--are presented in the table below (in thousands, except per share):
| * See GAAP to Non-GAAP Reconciliations Note Below | Second Quarter | First Half | ||||||||||||
| FY 2014 | FY 2013 | FY 2014 | FY 2013 | |||||||||||
| Income Before Provision for Income Taxes | $ | 1,590 | $ | 5,171 | $ | 2,890 | $ | 8,597 | ||||||
| Adjustments (Reflects Non-GAAP Measures): | ||||||||||||||
| Gain on Sale of Assets | - | (3,216 | ) | - | (3,216 | ) | ||||||||
| Total Income Adjustments | - | (3,216 | ) | - | (3,216 | ) | ||||||||
| Adjusted Income Before Provision for Income Taxes | $ | 1,590 | $ | 1,955 | $ | 2,890 | $ | 5,381 | ||||||
| Adjusted Provision for Income Taxes (1) | 576 | 704 | 1,040 | 1,937 | ||||||||||
| Adjusted Net Income | $ | 1,014 | $ | 1,251 | $ | 1,850 | $ | 3,444 | ||||||
| Adjusted Net Income Per Diluted Share | $ | 0.10 | $ | 0.12 | $ | 0.18 | $ | 0.33 | ||||||
(1) A normalized tax rate provision would be approximately 36.0 percent after adjusting for non-recurring tax items. All periods presented are using the 36.0 percent tax rate provision for comparison purposes.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the fiscal 2014 second quarter and first half, compared to last year's comparable periods, are presented in the table below (in thousands):
| ** See EBITDA Definition Below | Second Quarter | First Half | ||||||||||||||
| FY 2014 | FY 2013 | FY 2014 | FY 2013 | |||||||||||||
| Income Before Provision for Income Taxes | $ | 1,590 | $ | 5,171 | $ | 2,890 | $ | 8,597 | ||||||||
| Less Interest Income | (14 | ) | (12 | ) | (23 | ) | (6 | ) | ||||||||
| Plus Depreciation | 929 | 1,151 | 1,962 | 2,450 | ||||||||||||
| Plus Compensatory Effect of Stock Plans | 210 | 154 | 401 | 292 | ||||||||||||
| EBITDA | $ | 2,715 | $ | 6,464 | $ | 5,230 | $ | 11,333 | ||||||||
| Total Income Adjustments | - | (3,216 | ) | - | (3,216 | ) | ||||||||||
| Adjusted EBITDA | $ | 2,715 | $ | 3,248 | $ | 5,230 | $ | 8,117 | ||||||||
The Company’s balance sheet remains strong with $38.5 million in unrestricted cash as of August 31, 2013. During the first six months of fiscal 2014, the Company generated $5.2 million of cash from operating activities compared with $3.9 million during the same period last year. For the six month period ended August 31, 2013, the Company invested $3.5 million in capital improvement projects, compared with $2.1 million in the same period last year. In addition, the Company invested $0.1 million in Productive Research LLC.
“Our strong cash position of $38.5 million continues to allow us to continue to invest in and develop mass reduction solutions designed to help our customers comply with new CAFÉ requirements. During the second quarter, Material Sciences entered into an exclusive licensing agreement and began investing in Productive Research LLC, which is a company that owns proprietary technology surrounding lightweight metal composites. Material Sciences brings extensive innovative knowledge in the areas of composite development and continuous metal processing to this partnership to jointly develop cost effective lightweight materials that are both stampable and weldable. In addition, efforts to qualify Walbridge Coatings as an approved processing location for EG coating advanced high-strength steel are progressing as we received our first customer approvals. All of these activities and accomplishments positions Material Sciences to benefit from positive trends emerging in the transportation industry,” Mr. Nastas concluded.
Conference Call
Material Sciences will host a conference call to present its fiscal 2014 second quarter results today, Thursday, October 10, 2013 at 9:00 a.m. Central Time, or 10:00 a.m. Eastern Time. Clifford Nastas, Chief Executive Officer, and James Pawlak, Vice President and Chief Financial Officer, will discuss the Company's financial and operating performance and answer questions from the financial community.
To participate in the conference call, please dial 1-877-407-0784 several minutes before the conference call begins. International participants should dial 1-201-689-8560. An audio replay will be available for one week following the call at 1-877-870-5176 for domestic callers and 1-858-384-5517 for international access. The replay identification number for this conference is 10000384.
Investors also may access a live webcast of the call on the Company's website: www.matsci.com. A replay of the call will be available on the site for 30 days following the call.
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. Its stock is traded on the NASDAQ Capital Market under the symbol MASC.
Forward Looking Statements
Except for the historical and present factual information contained here, the matters set forth in this release, including statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," "potential" and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on currently available information and are subject to various risks, uncertainties and other factors that could cause the Company's actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, Material Sciences undertakes no obligation to update these factors or to publicly announce the results of any of the forward-looking statements contained here to reflect future events, developments, or changed circumstances or for any other reason. These risks and uncertainties, the outcome of which could materially and adversely affect the Company's financial condition and operations, include, but are not limited to, the following: the loss, or changes in the operations, financial condition, or results of operations of one or more of Material Sciences' significant customers or suppliers; uncertainty in the industries in which it operates--most significantly the automotive industry, which generates the majority of the Company’s sales; the Company's ability to respond to competitive factors--including domestic and foreign competition for both acoustical and coated applications, and pricing pressures; the rate of acceptance of its acoustical products for brake shims, engine components and body panel parts by vehicle manufacturers in North America, Europe and Asia; changes in vehicle production levels or the loss of business with respect to a vehicle model for which it is a significant supplier; the Company’s ability to provide cost-effective solutions to our customers’ mass reduction challenges; supply shortages or price increases in raw material, energy and commodities; labor disputes involving Material Sciences or its significant customers or suppliers; the Company's ability to retain key personnel; environmental and other risks, costs, recoveries and penalties associated with 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, 2013, filed with the Securities and Exchange Commission, and from time to time in other reports filed with the Securities and Exchange Commission.
* GAAP to Non-GAAP Reconciliations
Material Sciences presents these reconciliations of Generally Accepted Accounting Principles (GAAP) to non-GAAP earnings to provide a better understanding of its operating results--separate from the financial impact of unusual and one-time transactions. Using only the non-GAAP earnings measures to analyze earnings would have material limitations. This occurs because calculations are based on management's subjective determinations on the nature and classification of events and circumstances that investors may find material. The Company compensates for these limitations by using both GAAP and non-GAAP earnings measures to analyze results. Management believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations, separate from items that may have a disproportionate positive or negative impact on financial results in any period.
** EBITDA Definition
EBITDA is a non-GAAP calculation, although it is based on numbers included in income statements based on GAAP. Management believes that EBITDA is an important metric used by investors and analysts to review Material Sciences' historical results. It should be considered as an addition -- not as an alternative -- to net income or operating income as an indicator of the Company's operating performance, or operating cash flows for measuring liquidity.
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 | Six Months Ended | |||||||||||||||
| August 31, | August 31, | |||||||||||||||
| (In thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Net Sales | $ | 27,553 | $ | 29,927 | $ | 56,273 | $ | 64,761 | ||||||||
| Cost of Sales | 21,553 | 23,374 | 44,185 | 49,653 | ||||||||||||
| Gross Profit | 6,000 | 6,553 | 12,088 | 15,108 | ||||||||||||
| Selling, General and Administrative Expenses | 4,577 | 4,985 | 9,477 | 10,443 | ||||||||||||
| Gain on Sale of Assets | - | 3,216 | - | 3,216 | ||||||||||||
| Income from Operations | 1,423 | 4,784 | 2,611 | 7,881 | ||||||||||||
| Other Income, Net: | ||||||||||||||||
| Interest Income, Net | 14 | 12 | 23 | 6 | ||||||||||||
| Equity in Results of Joint Venture | 78 | 67 | 116 | 115 | ||||||||||||
| Rental Income | 64 | 348 | 93 | 629 | ||||||||||||
| Other, Net | 11 | (40 | ) | 47 | (34 | ) | ||||||||||
| Total Other Income, Net | 167 | 387 | 279 | 716 | ||||||||||||
| Income from Operations Before Provision for Income Taxes | 1,590 | 5,171 | 2,890 | 8,597 | ||||||||||||
| Provision for Income Taxes | 576 | 1,918 | 507 | 3,126 | ||||||||||||
| Net Income | $ | 1,014 | $ | 3,253 | $ | 2,383 | $ | 5,471 | ||||||||
| Basic Net Income Per Share | $ | 0.10 | $ | 0.31 | $ | 0.23 | $ | 0.53 | ||||||||
| Diluted Net Income Per Share | $ | 0.10 | $ | 0.31 | $ | 0.23 | $ | 0.52 | ||||||||
|
Weighted Average Number of Common Shares Outstanding Used for Basic Net Income Per Share |
10,271 | 10,332 | 10,244 | 10,393 | ||||||||||||
| Dilutive Shares | 162 | 119 | 163 | 117 | ||||||||||||
|
Weighted Average Number of Common Shares Outstanding Plus Dilutive Shares |
10,433 | 10,451 | 10,407 | 10,510 | ||||||||||||
| Outstanding Common Stock Options Having No Dilutive Effect | 304 | 407 | 280 | 412 | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| Material Sciences Corporation and Subsidiaries | ||||||||||
| August 31, | February 28, | |||||||||
| (In thousands) | 2013 | 2013 | ||||||||
| (unaudited) | (audited) | |||||||||
| Assets: | ||||||||||
| Current Assets: | ||||||||||
| Cash and Cash Equivalents | $ | 38,470 | $ | 37,508 | ||||||
| Restricted Cash | 1,123 | - | ||||||||
| Receivables, Less Reserves and Allowances of $523 and $489, Respectively | 16,924 | 17,675 | ||||||||
| Income Taxes Receivable | 55 | 1,392 | ||||||||
| Prepaid Expenses | 1,054 | 554 | ||||||||
| Inventories | 24,176 | 24,944 | ||||||||
| Short Term Deferred Tax Assets | 3,925 | 4,191 | ||||||||
| Total Current Assets | 85,727 | 86,264 | ||||||||
| Property, Plant and Equipment | 123,449 | 120,586 | ||||||||
| Accumulated Depreciation | (93,427 | ) | (91,426 | ) | ||||||
| Net Property, Plant and Equipment | 30,022 | 29,160 | ||||||||
| Other Assets: | ||||||||||
| Investment in Joint Venture | 2,209 | 2,394 | ||||||||
| Long Term Deferred Tax Assets | 8,697 | 9,147 | ||||||||
| Other | 215 | 141 | ||||||||
| Total Other Assets | 11,121 | 11,682 | ||||||||
| Total Assets | $ | 126,870 | $ | 127,106 | ||||||
| Liabilities: | ||||||||||
| Current Liabilities: | ||||||||||
| Accounts Payable | $ | 11,960 | $ | 11,061 | ||||||
| Accrued Payroll Related Expenses | 2,609 | 2,594 | ||||||||
| Accrued Expenses | 4,352 | 5,799 | ||||||||
| Total Current Liabilities | 18,921 | 19,454 | ||||||||
| Long-Term Liabilities: | ||||||||||
| Pension and Postretirement Liabilities | 5,511 | 7,344 | ||||||||
| Long-Term Incentives | 1,594 | 2,652 | ||||||||
| Other | 2,615 | 2,720 | ||||||||
| Total Long-Term Liabilities | 9,720 | 12,716 | ||||||||
| Commitments and Contingencies | - | - | ||||||||
| Shareowners' Equity: | ||||||||||
| Preferred Stock | - | - | ||||||||
| Common Stock | 383 | 381 | ||||||||
| Additional Paid-In Capital | 81,943 | 81,089 | ||||||||
| Treasury Stock at Cost | (76,756 | ) | (76,756 | ) | ||||||
| Retained Earnings | 95,429 | 93,046 | ||||||||
| Accumulated Other Loss | (2,770 | ) | (2,824 | ) | ||||||
| Total Shareowners' Equity | 98,229 | 94,936 | ||||||||
| Total Liabilities and Equity | $ | 126,870 | $ | 127,106 | ||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
| Material Sciences Corporation and Subsidiaries | ||||||||||
| Six Months Ended | ||||||||||
| August 31, | ||||||||||
| (In thousands) | 2013 | 2012 | ||||||||
| Cash Flows From: | ||||||||||
| Operating Activities: | ||||||||||
| Net Income | $ | 2,383 | $ | 5,471 | ||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||||
| Depreciation, Amortization and Accretion | 1,962 | 2,450 | ||||||||
| Equity in Results of Joint Venture | (116 | ) | (115 | ) | ||||||
| Deferred Income Taxes | 567 | 2,884 | ||||||||
| Gain on Sales of Assets | - | (3,216 | ) | |||||||
| Compensatory Effect of Stock Plans | 401 | 292 | ||||||||
| Changes in Assets and Liabilities: | ||||||||||
| Receivables | 772 | 2,015 | ||||||||
| Income Taxes Receivable | 1,367 | (1,489 | ) | |||||||
| Prepaid Expenses | (500 | ) | (429 | ) | ||||||
| Inventories | 792 | (1,134 | ) | |||||||
| Accounts Payable | 1,641 | (1,152 | ) | |||||||
| Accrued Expenses | (1,466 | ) | (904 | ) | ||||||
| Pension and Postretirement Liabilities | (1,833 | ) | (692 | ) | ||||||
| Other, Net | (754 | ) | (93 | ) | ||||||
| Net Cash Provided by Operating Activities | 5,216 | 3,888 | ||||||||
| Investing Activities: | ||||||||||
| Capital Expenditures | (3,536 | ) | (2,060 | ) | ||||||
| Restricted Cash | (1,123 | ) | - | |||||||
| Investment in Research Entity | (105 | ) | - | |||||||
| Proceeds from Sale of Assets | - | 9,180 | ||||||||
| Net Cash Provided by (Used In) Investing Activities | (4,764 | ) | 7,120 | |||||||
| Financing Activities: | ||||||||||
| Purchases of Treasury Stock | - | (1,999 | ) | |||||||
| Issuance of Common Stock | 455 | 3 | ||||||||
|
Net Cash Provided by (Used In) Financing Activities |
455 | (1,996 | ) | |||||||
| Effect of Exchange Rate Changes on Cash | 55 | (48 | ) | |||||||
| Net Increase in Cash and Cash Equivalents | 962 | 8,964 | ||||||||
| Cash and Cash Equivalents at Beginning of Period | 37,508 | 28,201 | ||||||||
| Cash and Cash Equivalents at End of Period | $ | 38,470 | $ | 37,165 | ||||||
CONTACT:
Company Contact
Material Sciences Corporation
James
D. Pawlak, Vice President, Chief Financial Officer, 847-439-2210
OR
Media
Contact
SM Berger & Company
Stanley Berger or Andrew
Berger, 216-464-6400