Material Sciences Announces First Quarter Fiscal 2008 Results

- First Quarter 2008 Net Sales Declined 19.9 Percent

- Net Loss of $0.3 Million ($0.02 per diluted share) versus Net Income of $2.3 Million in First Quarter of Fiscal 2007 ($0.15 per diluted share)

- Closed First Agreement with Transplant Manufacturer and Launched Nineteen New Quiet Steel(R) Applications During Quarter

ELK GROVE VILLAGE, Ill., July 6, 2007 -- Material Sciences Corporation , a leading provider of material-based solutions for acoustical and coated applications, today reported results for the first quarter of fiscal 2008, ended May 31, 2007.

Net sales for the first quarter of fiscal 2008 declined 19.9 percent to $60.7 million from $75.8 million in the first quarter of fiscal 2007. The company recorded a net loss of $0.3 million, or $0.02 per diluted common share, compared with net income of $2.3 million, or $0.15 per diluted common share, in the first quarter of fiscal 2007.

"Production cuts at the three largest North American automobile manufacturers stretched into calendar year 2007 and hurt Materials Sciences' first quarter sales, as did weakness in the residential and commercial construction markets," said Clifford D. Nastas, chief executive officer for Material Sciences. "We expect this slowdown in the U.S. auto market will continue throughout this fiscal year.

"Our progress in winning new customers and developing new markets in the United States and abroad has helped to balance continued weakness in the domestic auto sector. For example, European brake sales increased approximately 47 percent, partially offsetting the weakness in domestic and other acoustical sales.

"We closed MSC's first contract with a transplant manufacturer this quarter, a milestone in our efforts to diversify our customer base. Our two research centers in Michigan and Germany will further spur sales by showing customers how our products and expertise can solve their noise and vibration problems," Nastas added.

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

In the first quarter, acoustical sales decreased 20.3 percent to $31.2 million from $39.2 million in the first quarter of fiscal 2007, mainly due to weakness in the domestic automotive industry. The decline in sales of body panel laminate, which decreased 21.0 percent during the quarter to $17.4 million from $22.0 million in the comparable period, is due to continued production cuts at domestic automakers and the timing of orders related to a product launch planned for July at one of the company's largest customers.

Sales in the brake market during the quarter decreased 27.9 percent to $6.7 million in the first quarter from $9.3 million in the comparable period, primarily due to softness in the auto industry and an overall reduction in the quantity of inventory carried by customers. These declines were partially offset by the previously mentioned growth in the European brake market. Disk drive sales declined 93.3 percent to $0.1 million from the first quarter of fiscal 2007 due to a change in disk drive design methodology at the company's largest customer in this sector.

Coated sales declined 19.5 percent in the first quarter to $29.5 million from $36.6 million in the prior period. Sales of automotive gas tanks were impacted by the previously mentioned softness in the automotive sector, decreasing 17.1 percent to $10.8 million from $13.0 million. Clutch plate sales for the quarter declined 98.5 percent to less than $0.1 million from $1.1 million, as the company's largest customer in this segment transitioned to a new in-house process, eliminating the need for coated products. Sales of building products for the quarter decreased 33.6 percent to $4.0 million from $6.0 million in the first quarter of fiscal 2007, as weakness in the housing market continued to negatively impact sales.

Gross profit in the first quarter was $9.7 million compared with $13.1 million in the first quarter of fiscal year 2007. Gross profit as a percent of sales decreased to 16.0 percent of sales versus 17.3 percent of sales in the comparable period. The decline in net sales, particularly the decline of higher margin acoustical products, contributed to the majority of the decrease in gross profit and gross margin percentage. Additionally, secondary sales in the quarter were $0.2 million lower than the comparable period and the company experienced quality issues related to inventory, which reduced gross profit by $0.2 million. These factors were partially offset by $0.5 million in favorable fixed production spending, mainly due to contract negotiation and health care costs in last year's quarter, and $0.4 million in improved raw material costs, as lower steel costs helped to offset the rising cost of zinc and nickel compared with the first quarter of fiscal 2007.

Selling, general and administrative expenses were $10.3 million in the first quarter, an increase of 19.5 percent from $8.6 million in last year's quarter. The increase is primarily due to investment in human resources, marketing and product development to expand the company's product and customer base and increase its market share, along with higher outside professional fees relating to audit and legal services.

Material Sciences recorded a loss from operations for the first quarter of $0.6 million compared with a profit of $3.9 million in the last year, due to the factors listed above.

Conference Call

Material Sciences will host a conference call to review the first quarter fiscal 2008 results on Friday, July 6, 2007, at 9:00 a.m. Central Daylight Time. Clifford D. Nastas, chief executive officer, and James M. Froisland, senior vice president, chief financial officer, chief information officer and corporate secretary, will discuss the company's recent financial performance and respond to questions from the financial community.

The company invites interested investors to listen to the presentation, which will be carried live on the Internet at the company's Web site: http://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. 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.