Material Sciences Corporation (MSC) has reported net sales of $48.5 million for the third quarter of fiscal 2009, down 25.5%, compared with the net sales of $65.1 million in the year-ago quarter. It has also reported a net loss of $4.8 million, or $0.35 loss per share, for the third quarter of fiscal 2009, compared with the net income of $1.1 million, or $0.08 per share, in the year-ago quarter.

The automotive and housing industries worsened considerably during the third quarter, negatively affecting sales in MSC’s two main sectors, said Clifford D. Nastas, chief executive officer for MSC. We expect demand from companies in these industries will remain weak through fiscal 2010, if not longer.

To realign our cost structure with current market conditions, we implemented a restructuring plan in the third quarter that generated cost savings of $1.4 million during that period. As business conditions continued to worsen during the quarter, we implemented a second restructuring program in the fourth quarter. These actions will generate a combined annual savings of $7.6 million, excluding restructuring charges, Nastas said.

Nastas added, Illustrating customers’ appreciation of our products’ technical capabilities and the continued strength of the Quiet Steel brand, Quiet Steel will again be featured prominently at the North American International Auto Show as a top technology on Ford’s all-new, 2009 F-150 truck and in Chrysler’s sales literature for its Stow ‘N Go minivan tubs.

Results of Operations, Third Quarter Sales, Gross Profit and Income:

Sales of acoustical materials, which are primarily to automotive manufacturers, decreased 17.5% to $26.4 million in the third quarter of fiscal 2009 from $32.0 million in the third quarter of fiscal 2008. Sharp decreases in production at automotive manufacturers reduced demand for MSC’s engine, brakes, and body panel laminate on various automotive models. These declines were partially offset by continued growth in aftermarket brake sales in the US and original equipment brake sales in Europe.

Sales of coated materials, which are mainly to appliance, building product and automotive customers, decreased 33.2% to $22.1 million in the third quarter from $33.1 million in the third quarter of fiscal 2008. Weakness in the housing and automotive industries caused significant declines in sales of building and fuel tank products.

Gross profit was $0.7 million in the third quarter compared with $9.0 million in the prior period. Gross margin decreased to 1.3% in the third quarter from 13.9% in the third quarter of fiscal 2008. The $8.3 million decline in gross profit includes charges of $1.4 million related to the sale of the company’s Morrisville facility and a loss on derivative instruments relating to commodity purchase contracts of $0.9 million. The remaining $6.0 million is primarily due to unfavorable operating efficiencies relating to reduced sales volume and lower scrap steel sales.

Selling, general and administrative expenses were $7.5 million in the third quarter compared with $8.4 million in the third quarter of fiscal 2008. The decrease is mainly a result of the company’s restructuring actions and spending reduction programs implemented during the quarter. These savings were partially offset by a higher bad debt expense relating to a customer bankruptcy and a charge of $0.5 million during the third quarter of fiscal 2009 relating to the sale of the company’s Morrisville facility.

The company incurred restructuring expenses of $0.6 million in the third quarter. The company recorded a loss from operations for the third quarter of $7.5 million compared with income of $0.7 million in the third quarter of fiscal 2008. It recorded other income of $0.3 million versus $1.2 million in the comparable period, mainly due to lower foreign exchange and lower interest income due to lower interest rates.

Net cash used in operations was $1.4 million for the first nine months of fiscal 2009, compared with cash provided by operations of $6.2 million in the same period last year. Capital expenditures were $3.6 million for the first nine months of fiscal 2009 versus $4.8 million in the comparable period.

Sale of Morrisville, Pennsylvania Production Facility:

On December 1, 2008, MSC sold the land, building and production assets located at its Morrisville facility for $9.1 million. In the third quarter, the company recorded a total cost of $1.9 million of which $1.4 million was in cost of goods sold, mainly for the write-down of inventory and software associated with the facility, and reserves for certain product warranties, and $0.5 million was selling, general and administrative expenses for legal and employee termination benefits. The company expects to record a gain on the sale of approximately $5.9 million in the fourth quarter and will receive quarterly payments beginning December 2009 on a five-year promissory note of $4.1 million with an annual interest rate of 7%. Additionally, the buyer may purchase up to $1.0 million of inventory during the fourth quarter.