10th October 2007 - Material Sciences Announces Second Quarter Fiscal 2008 Results

Material Sciences Corporation, a leading provider of material-based solutions for acoustical and coated applications, today reported results for the second quarter of fiscal 2008, ended August 31, 2007.

"Continued production cuts at the three largest North American automobile manufacturers hurt Material Sciences' second quarter sales, as did continued weakness in the housing market," said Clifford D. Nastas, chief executive officer for Material Sciences. "We expect this slowdown in the U.S. auto market will continue at least through the balance of this fiscal year.

"Our program to expand our customer base and develop new markets in the United States and abroad bore fruit during the quarter and helped balance the continued weakness in domestic demand. We achieved double-digit growth in European brake sales during the second quarter. This quarter we also posted our first sale to a Japanese automotive manufacturer, made our first acoustical product sale to a customer in China, and shipped equipment to Hae Won Steel that will enable production of Quiet Steel(R) and other decorative laminate products in Korea later this fiscal year," Nastas added.

Results of Operations -- Second Quarter Sales, Gross Profit and Income

In the second quarter, acoustical sales decreased 18.3 percent to $26 million from $31.9 million in the second quarter of fiscal 2007, mainly due to weakness in the U.S. automotive industry. This decline is consistent with the lower production of vehicles containing Quiet Steel platforms at our largest automotive customers.

Coated sales declined 15.0 percent in the second quarter to $30.1 million from $35.4 million in the prior period. The decline in sales of coated metal products is a reflection of the weak housing industry. Almost all coated metal segments were down versus fiscal 2007 with the exception of automotive fuel tanks, in which new platform closes increased sales by 15 percent.

Gross profit in the second quarter was $4.9 million compared with $13.3 million in the second quarter of fiscal year 2007, and gross profit as a percent of sales decreased to 8.8 percent versus 19.8 percent in the comparable period. The decrease in gross profit and gross margin was primarily due to a significant reduction in sales that, combined with a less-favorable sales mix, reduced gross profit by $7.2 million. In addition, lower secondary sales of $0.9 million, the impact of a one-time mark-to-contract gain of $0.6 million in the prior year's quarter, and $0.2 million higher depreciation due to the implementation of an ERP system, were partially offset by favorable labor and overhead spending. The company also recorded a charge to its cost of sales of $0.5 million to correct an inventory-related error for the first quarter of fiscal 2008, which is immaterial to the current and prior fiscal quarter and the fiscal year.

Selling, general and administrative expenses in the second quarter were flat at $8.6 million compared to the second quarter of fiscal 2007. Increases due to higher bad debt expense and higher depreciation expense were offset by lower incentive expenses and professional fees.

Material Sciences recorded a loss from operations for the second quarter of $3.7 million compared with a profit of $4.7 million in the last year, due to the factors listed above.

About Material Sciences

Material Sciences Corporation is a leading provider of material-based solutions for acoustical and coated applications. MSC 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 New York Stock Exchange under the symbol MSC.

Additional information about Material Sciences is available at http://www.matsci.com