Material Sciences Corporation Reports Higher Sales, Earnings and EBITDA For the Third Quarter
Third Quarter Highlights -- Earnings per share were 30 cents versus 17 cents last year. -- EBITDA rose 12.6 percent to a record third quarter of $16.7 million. -- Operating income as a percent of sales increased to 7.9 percent versus 6.3 percent. -- Free cash flow for the first nine months was $23.8 million. -- Return on average invested capital increased to 5.7 percent versus 2.6 percent last year. -- Debt to total capital improved to 45.0 percent from 48.9 percent at the end of last year. -- "Strategic sourcing" initiative started with Andersen Consulting.
Material Sciences Corporation announced results for the third quarter of fiscal 2000 ended November 30, 1999.
Third quarter net sales were $125.4 million, up 1.9 percent from the $123.1 million reported last year. Income from operations increased by 26.6 percent to $9.9 million from $7.8 million. Net income for the quarter rose 74.4 percent to $4.6 million from $2.6 million last year. Diluted earnings per share were 30 cents compared with 17 cents in last year's third quarter.
For the nine months ended November 30, 1999, net sales were a record $382.9 million, up 7.8 percent from last year's $355.1 million. Income from operations increased by 49.4 percent to a record $29.4 million, while operating margins expanded to 7.7 percent compared with 5.5 percent last year. EBITDA for the nine months was a record $50.3 million, an 18.4 percent improvement over the same period last year. Income before the cumulative effect of the accounting change made in the prior fiscal year rose to $13.0 million, or 85 cents per diluted share, versus $6.3 million, or 41 cents per diluted share for the nine months reported last year.
A Number of Improvements in the Third Quarter
``This was another quarter of continuing improvement,'' said Gerald G. Nadig, chairman, president and chief executive officer. ``Particularly noteworthy are the increases in operating margins and return on average capital invested. We are using our cash flow to pay down debt and repurchase our stock. Total debt has been reduced from a high of $191.0 million in February 1998 to $129.3 million at the end of the third quarter. To date, we have repurchased 172,800 shares under our 1 million share plan, which was approved by the board in late September.
``Third quarter sales and profits were affected as we implemented new management information systems at our Pinole Point Steel and Laminates and Composites subsidiaries. The introduction was particularly troublesome at Pinole Point Steel during September, when dislocations in order entry, manufacturing, and shipping resulted in a shortfall of approximately $6.0 million in sales. I am pleased to report these issues are largely behind us,'' said Nadig.
``As part of our goal to make MSC a more efficient and lower cost producer, we embarked on a 'strategic sourcing' initiative to help reduce operating costs in the area of raw materials and services. We selected Andersen Consulting, a firm with a proven track record in this area, to facilitate the process. We expect to begin to see meaningful results from this effort early next year,'' Nadig added.
``Although our primary focus is to continue improving operating performance and generating steady growth at our existing operations, we also recognize the need to enhance this effort where possible. This led us to expand and refocus the business development practice at MSC. Our overall goal is to identify and make acquisitions and investments in opportunities that can substantially add to shareowner value over time. Work in this area already is underway,'' said Nadig.
A performance review of each business segment follows (dollars in
millions).
Coated Products and Services
Third Quarter Change Nine Months Change
2000 1999 2000 1999
Sales $94.6 $93.4 1.3% $286.6 $267.0 7.4%
Operating Income $8.2 $7.5 9.4% $22.6 $16.3 38.3%
Coated Products and Services, which includes coil coating, hot-dip galvanizing, and electrogalvanizing operations, reported higher sales for the quarter and a 9.4 percent increase in operating income. Increased revenues at the company's coil coating and electrogalvanizing operations were partially offset by lower sales early in the quarter in hot-dip galvanizing, due to the earlier mentioned introduction of a management information system. Margins benefited from lower material costs, improved operating efficiencies, and higher volumes.
Engineered Materials
Third Quarter Change Nine Months Change
2000 1999 2000 1999
Sales $20.1 $19.2 4.6% $59.7 $53.3 11.8%
Operating Income $3.1 $2.4 30.4% $9.1 $5.7 59.8%
Engineered Materials, which includes the laminates and composites business, recorded higher sales and a strong increase in operating income in the quarter. Higher shipments of disc brake noise damping material was the major contributor. Material cost reductions and manufacturing efficiencies continue to be the key contributors to improved operating performance. About 200,000 pounds of Quiet Steel® noise damping metal composites were shipped during the quarter. This material is a preproduction order, which will be fabricated into front dashboard panels for a high-volume sport utility vehicle. Full production is scheduled to begin in early 2000. ``We are extremely excited about the opportunity this initial order holds for the future. Our Quiet Steel® material has been used by the automotive industry for almost 10 years to reduce noise and vibration in the engine compartment. This entry into body parts opens an entirely new market for us, with significant opportunities for growth,'' said Nadig.
Specialty Films
Third Quarter Change Nine Months Change
2000 1999 2000 1999
Sales $11.4 $11.0 3.8% $38.5 $36.5 5.4%
Operating Income $1.5 $0.7 104.7% $6.0 $3.5 69.7%
Specialty Films' sales were up in the quarter due to a 20.2 percent increase in solar control window and safety films. Comparable sales, excluding the joint venture partnership formed with Bekaert Corporation in January 1999, were up 15.3 percent in the quarter and 17.3 percent for nine months. Income from operations in the quarter more than doubled as a result of improved operating efficiencies, higher sales, and royalty income from the joint venture.
Positive Outlook for Next Year
``Looking ahead to next year, we see many reasons to suggest continued growth and improvement in our business,'' said Nadig. ``Demand for the products and services in our core businesses is expected to remain relatively steady. As a result, our facilities should operate at higher capacity levels and become even more productive. We also expect continuing focus on asset management and the 'strategic sourcing' initiative can only improve operating performance. New products and market opportunities in Quiet Steel® for automotive and electronic equipment, sputtered films, and our patented powder coating technology also are expected to contribute in the coming months. Finally, MSC is working on a number of other strategic initiatives that should both strengthen and better position our business in U.S. and international markets where we currently do not participate. While we are pleased with our performance to date, there are many opportunities for improvement, which will add to shareowner value. That is where we will continue to concentrate our efforts.''
Material Sciences Corporation is a technology-based manufacturer of continuously processed coated and specialty engineered materials and services. The company's three principal business segments are Coated Products and Services, Engineered Materials, and Specialty Films. Its materials are sold to a variety of manufacturers and distributors and used across a broad spectrum of industries and products. Founded in 1971 and headquartered near Chicago, MSC operates 11 manufacturing plants in the U.S. and Europe and sells its products around the world.
For further information on Material Sciences by Fax, dial 800-PRO-INFO, ext. MSC. Information about Material Sciences through the Internet is available at: www.matsci.com and www.frbinc.com.