Press release

Materion Corporation Reports Fourth Quarter and Full-Year 2020 Financial Results and Provides First Quarter 2021 Earnings Guidance

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Materion Corporation (NYSE: MTRN) today reported fourth quarter and full-year 2020 financial results, provided first quarter 2021 earnings guidance, and provided an update on key strategic initiatives.

Fourth Quarter 2020 Highlights

  • Net sales were $339.7 million compared to $287.2 million in the third quarter; value-added sales increased 14% sequentially to $190.8 million
  • Net income of $0.39 per share, diluted; adjusted earnings of $0.70 per share (including a $.06 per share increase from the change to FIFO accounting), up for the third consecutive quarter
  • Advanced several key strategic initiatives including:

    • Completed full quarter of shipments for the new precision clad engineered strip project
    • Continued Optics Balzers integration, creating a world leader in precision optics
    • Completed closure of LAC business; and
    • Finalized restructuring in PAC to streamline operations and improve cost structure

“Our primary concern throughout the global pandemic has been for the health, safety and well-being of our people, while ensuring the continuity of essential operations to deliver for our customers. We continue to be guided by the recommendations of both national and global healthcare organizations in making important COVID-19 decisions,” said Jugal Vijayvargiya, President and Chief Executive Officer.

Mr. Vijayvargiya continued, “I am very pleased with the team’s performance in the fourth quarter, as we delivered sales and earnings growth for the third consecutive quarter and continued to execute on our key strategic initiatives. The significant precision clad engineered strip growth opportunity remains on schedule. To date, we have received $58.8 million of prepayments from the customer in support of our new manufacturing facility. In addition, we made meaningful progress on a number of other strategic initiatives that are important for our future.”

FOURTH QUARTER 2020 RESULTS

Net sales for the fourth quarter of 2020 were $339.7 million, compared to $280.2 million in the prior year fourth quarter. Fourth quarter value-added sales of $190.8 million were up 14% from the third quarter of 2020. Strong performance in the defense and semiconductor end markets, sales to the new precision clad engineered strip customer and final sales of blood glucose test strip products from our LAC business drove the growth on a sequential basis.

Operating profit for the fourth quarter was $6.8 million, and net income was $8.1 million, or $0.39 per diluted share, compared to an operating loss of $0.6 million and net income of $5.5 million in the third quarter. The fourth quarter operating results include a pretax adjustment of $1.6 million of income related to the Company’s decision to change from the last-in, first out (LIFO) method of inventory accounting to the first-in, first out (FIFO) method of inventory accounting. The change was made to reflect more closely the physical flow of goods, to provide more uniformity across a significant majority of the Company’s inventory and to improve comparability with peers. Prior quarters were also adjusted to reflect this accounting change (detailed in the attached tables).

Excluding special items (detailed in the attached tables), adjusted earnings before interest and tax expense were $18.7 million in the fourth quarter, an increase of $4.6 million versus the third quarter, $2.9 million of which resulted from the change from LIFO to FIFO inventory accounting. Improved sales performance was the primary driver of the balance of the increase. Adjusted net income was $14.4 million, or $0.70 per diluted share, an increase of 40% compared to $0.50 per share in the third quarter.

FULL-YEAR 2020 RESULTS

Net sales were $1.2 billion, flat versus 2019. Value-added sales of $678.6 million were down 8% from $733.7 million from the prior year. Strong performance in the semiconductor end market and incremental sales related to the acquisition of Optics Balzers were more than offset by reduced demand throughout 2020 in several of our other key end markets due to the ongoing COVID-19 pandemic, particularly in the aerospace and defense, energy, and industrial end markets.

Operating profit for the full year was $8.2 million, and net income was $15.5 million, or $0.75 per diluted share, compared to operating profit of $70.5 million and net income of $53.4 million, or $2.59 per share, in 2019.

Excluding special items (detailed in the attached tables), adjusted earnings before interest and tax expense were $55.4 million in 2020, down from the prior year amount of $85.8 million. The year over year decrease in earnings was primarily driven by lower volume, partially offset by aggressive cost control efforts. Adjusted net income was $41.8 million, or $2.03 per diluted share, as compared to $3.32 per diluted share in 2019.

OUTLOOK

Predicting full year demand levels continues to be extremely challenging with the ongoing COVID-19 pandemic. As a result, we are providing guidance for the first quarter of 2021. Based on current demand levels, we expect adjusted earnings per diluted share in the first quarter to be in the range of $0.58 to $0.62 per share, an increase of over 50% from the first quarter of 2020.

ADJUSTED EARNINGS GUIDANCE

It is not possible for the Company to identify the amount or significance of future adjustments associated with potential insurance and litigation claims, legacy environmental costs, acquisition and integration costs, certain income tax items, or other non-routine costs that the Company adjusts in the presentation of adjusted earnings guidance. These items are dependent on future events that are not reasonably estimable at this time. Accordingly, the Company is unable to reconcile without unreasonable effort the forecasted range of adjusted earnings guidance for the full year to a comparable GAAP range. However, items excluded from the Company’s adjusted earnings guidance include the historical adjustments noted in Attachments 4 and 5 to this press release.

CONFERENCE CALL

Materion Corporation will host an investor conference call with analysts at 9:00 a.m. Eastern Time, February 18, 2021. The conference call will be available via webcast through the Company’s website at www.materion.com or through www.InvestorCalendar.com. By phone, please dial (877) 407-0778. Callers outside the U.S. can dial (201) 689-8565. A replay of the call will be available until March 4, 2021 by dialing (877) 481-4010 or (919) 882-2331; please reference replay ID number 39478. The call will also be archived on the Company’s website.

FORWARD-LOOKING STATEMENTS

Portions of the narrative set forth in this document that are not statements of historical or current facts are forward-looking statements. Our actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein: the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition, and liquidity; the global economy, including the impact of tariffs and trade agreements; the impact of any U.S. Federal Government shutdowns and sequestrations; the condition of the markets which we serve, whether defined geographically or by segment; changes in product mix and the financial condition of customers; our success in developing and introducing new products and new product ramp-up rates; our success in passing through the costs of raw materials to customers or otherwise mitigating fluctuating prices for those materials, including the impact of fluctuating prices on inventory values; our success in identifying acquisition candidates and in acquiring and integrating such businesses, including the integration of Optics Balzers; the impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions, including, without limitation, the acquisition of Optics Balzers being accretive in the expected timeframe or at all; our success in implementing our strategic plans and the timely and successful completion and start-up of any capital projects; other financial and economic factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal financing fees, tax rates, exchange rates, interest rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, credit availability, and the impact of the Company’s stock price on the cost of incentive compensation plans; the uncertainties related to the impact of war, terrorist activities, and acts of God; changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations; the conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects; the disruptions on operations from, and other effects of, catastrophic and other extraordinary events including the COVID-19 pandemic; and the risk factors set forth in Part 1, Item 1A of our 2019 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the second quarter 2020.

Materion Corporation is headquartered in Mayfield Heights, Ohio. The Company, through its wholly owned subsidiaries, supplies highly engineered advanced enabling materials to global markets. Products include precious and non-precious specialty metals, inorganic chemicals and powders, specialty coatings, specialty engineered beryllium alloys, beryllium and beryllium composites, and engineered clad and plated metal systems.

Attachment 1

Materion Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

Fourth Quarter Ended

 

Year Ended

(In thousands except per share amounts)

December 31,

2020

 

December 31,

2019*

 

December 31,

2020

 

December 31,

2019*

Net sales

$

339,689

 

 

$

280,161

 

 

$

1,176,274

 

 

$

1,185,424

Cost of sales

283,892

 

 

225,679

 

 

983,641

 

 

922,734

Gross margin

55,797

 

 

54,482

 

 

192,633

 

 

262,690

Selling, general, and administrative expense

34,671

 

 

31,397

 

 

133,963

 

 

147,164

Research and development expense

6,179

 

 

5,207

 

 

20,283

 

 

18,271

Goodwill impairment charges

 

 

 

 

9,053

 

 

11,560

Asset impairment charges

(294

)

 

 

 

1,419

 

 

2,581

Restructuring expense

4,093

 

 

 

 

11,237

 

 

785

Other — net

4,320

 

 

1,829

 

 

8,463

 

 

11,783

Operating profit

6,828

 

 

16,049

 

 

8,215

 

 

70,546

Other non-operating (income) expense—net

(1,068

)

 

(53

)

 

(3,939

)

 

3,431

Interest expense — net

1,040

 

 

177

 

 

3,879

 

 

1,579

Income before income taxes

6,856

 

 

15,925

 

 

8,275

 

 

65,536

Income tax (benefit) expense

(1,210

)

 

1,579

 

 

(7,187

)

 

12,142

Net income

$

8,066

 

 

$

14,346

 

 

$

15,462

 

 

$

53,394

Basic earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

0.40

 

 

$

0.70

 

 

$

0.76

 

 

$

2.62

Diluted earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

0.39

 

 

$

0.69

 

 

$

0.75

 

 

$

2.59

Weighted-average number of shares of common stock outstanding:

 

 

 

 

 

 

 

Basic

20,328

 

 

20,404

 

 

20,338

 

 

20,365

Diluted

20,606

 

 

20,692

 

 

20,603

 

 

20,655

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

 

Attachment 2

Materion Corporation and Subsidiaries

Consolidated Balance Sheets

 

 

 

(Unaudited)

 

 

(Thousands)

 

December 31, 2020

 

December 31, 2019*

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

25,878

 

 

$

125,007

 

Accounts receivable, net

 

166,447

 

 

154,751

 

Inventories, net

 

250,778

 

 

236,253

 

Prepaid and other current assets

 

20,896

 

 

21,736

 

Total current assets

 

463,999

 

 

537,747

 

Deferred income taxes

 

3,134

 

 

1,666

 

Property, plant, and equipment

 

998,312

 

 

916,965

 

Less allowances for depreciation, depletion, and amortization

 

(688,626

)

 

(684,689

)

Property, plant, and equipment—net

 

309,686

 

 

232,276

 

Operating lease, right-of-use assets

 

62,089

 

 

23,413

 

Intangible assets

 

54,672

 

 

6,380

 

Other assets

 

19,364

 

 

17,937

 

Goodwill

 

144,916

 

 

79,011

 

Total Assets

 

$

1,057,860

 

 

$

898,430

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Short-term debt

 

$

1,937

 

 

$

868

 

Accounts payable

 

55,640

 

 

43,206

 

Salaries and wages

 

18,809

 

 

41,167

 

Other liabilities and accrued items

 

40,887

 

 

32,477

 

Income taxes

 

1,898

 

 

1,342

 

Unearned revenue

 

7,713

 

 

3,380

 

Total current liabilities

 

126,884

 

 

122,440

 

Other long-term liabilities

 

14,313

 

 

11,560

 

Operating lease liabilities

 

56,761

 

 

18,091

 

Finance lease liabilities

 

20,539

 

 

17,424

 

Retirement and post-employment benefits

 

41,877

 

 

32,466

 

Unearned income

 

86,761

 

 

32,891

 

Long-term income taxes

 

2,689

 

 

3,451

 

Deferred income taxes

 

15,864

 

 

13,104

 

Long-term debt

 

36,542

 

 

1,260

 

Shareholders’ equity

 

655,630

 

 

645,743

 

Total Liabilities and Shareholders’ Equity

 

$

1,057,860

 

 

$

898,430

 

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

 

Attachment 3

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

 

 

 

(Unaudited)

 

 

(Thousands)

 

2020

 

2019*

Cash flows from operating activities:

 

 

 

 

Net income

 

$

15,462

 

 

$

53,394

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

Depreciation, depletion, and amortization

 

42,384

 

 

41,116

 

Amortization of deferred financing costs in interest expense

 

790

 

 

962

 

Stock-based compensation expense (non-cash)

 

5,528

 

 

7,170

 

Amortization of pension and post-retirement costs

 

(151

)

 

386

 

Loss on sale of property, plant, and equipment

 

466

 

 

344

 

Deferred income tax (benefit) expense

 

(9,850

)

 

3,945

 

Impairment charges

 

10,472

 

 

14,141

 

Net pension curtailments and settlements

 

94

 

 

3,328

 

Changes in assets and liabilities, net of acquired assets and liabilities:

 

 

 

 

Decrease (increase) in accounts receivable

 

(707

)

 

(23,933

)

Decrease (increase) in inventory

 

(1,288

)

 

20,485

 

Decrease (increase) in prepaid and other current assets

 

2,475

 

 

869

 

Increase (decrease) in accounts payable and accrued expenses

 

(21,877

)

 

(18,575

)

Increase (decrease) in unearned revenue

 

2,935

 

 

(2,538

)

Increase (decrease) in interest and taxes payable

 

(157

)

 

(805

)

Increase (decrease) in unearned income due to customer prepayments

 

54,103

 

 

4,733

 

Domestic pension plan contributions

 

 

 

(4,500

)

Other-net

 

378

 

 

(1,300

)

Net cash provided by operating activities

 

101,057

 

 

99,222

 

Cash flows from investing activities:

 

 

 

 

Payments for acquisition, net of cash acquired

 

(130,715

)

 

 

Payments for purchase of property, plant, and equipment

 

(67,274

)

 

(24,251

)

Payments for mine development

 

 

 

(2,277

)

Proceeds from settlement of currency exchange contract

 

3,249

 

 

 

Proceeds from sale of property, plant, and equipment

 

33

 

 

44

 

Net cash used in investing activities

 

(194,707

)

 

(26,484

)

Cash flows from financing activities:

 

 

 

 

Short-term debt under revolving credit agreement, net

 

34,000

 

 

 

Repayment of long-term debt

 

(20,634

)

 

(823

)

Principal payments under finance lease obligations

 

(2,213

)

 

(1,200

)

Cash dividends paid

 

(9,257

)

 

(8,856

)

Deferred financing costs

 

 

 

(2,130

)

Repurchase of common stock

 

(6,766

)

 

(199

)

Payments of withholding taxes for stock-based compensation awards

 

(2,221

)

 

(4,846

)

Net cash used in financing activities

 

(7,091

)

 

(18,054

)

Effects of exchange rate changes

 

1,612

 

 

(322

)

Net change in cash and cash equivalents

 

(99,129

)

 

54,362

 

Cash and cash equivalents at beginning of period

 

125,007

 

 

70,645

 

Cash and cash equivalents at end of period

 

$

25,878

 

 

$

125,007

 

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

 

Attachment 4

Materion Corporation and Subsidiaries

Reconciliation of Non-GAAP Measure – Value-added Sales, Operating Profit, and EBIT

(Unaudited)

 

 

Fourth Quarter Ended

 

Third Quarter Ended

 

Year Ended

(Millions)

December 31,

2020

 

December 31,

2019*

 

September 25,

2020*

 

December 31,

2020

 

December 31,

2019*

Net Sales

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

102.3

 

 

$

107.2

 

 

$

91.2

 

 

$

394.2

 

 

$

500.2

 

Advanced Materials

195.0

 

 

148.8

 

 

165.6

 

 

670.9

 

 

573.8

 

Precision Optics

42.4

 

 

24.2

 

 

30.4

 

 

111.2

 

 

111.4

 

Other

 

 

 

 

 

 

 

 

 

Total

$

339.7

 

 

$

280.2

 

 

$

287.2

 

 

$

1,176.3

 

 

$

1,185.4

 

 

 

 

 

 

 

 

 

 

 

Less: Pass-through Metal Cost

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

12.3

 

 

$

15.9

 

 

$

9.3

 

 

$

48.9

 

 

$

72.1

 

Advanced Materials

132.6

 

 

96.0

 

 

108.0

 

 

436.9

 

 

349.5

 

Precision Optics

3.6

 

 

5.0

 

 

2.1

 

 

9.3

 

 

24.1

 

Other

0.4

 

 

0.8

 

 

0.3

 

 

2.6

 

 

6.0

 

Total

$

148.9

 

 

$

117.7

 

 

$

119.7

 

 

$

497.7

 

 

$

451.7

 

 

 

 

 

 

 

 

 

 

 

Value-added Sales (non-GAAP)

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

90.0

 

 

$

91.3

 

 

$

81.9

 

 

$

345.3

 

 

$

428.1

 

Advanced Materials

62.4

 

 

52.8

 

 

57.6

 

 

234.0

 

 

224.3

 

Precision Optics

38.8

 

 

19.2

 

 

28.3

 

 

101.9

 

 

87.3

 

Other

(0.4

)

 

(0.8

)

 

(0.3

)

 

(2.6

)

 

(6.0

)

Total

$

190.8

 

 

$

162.5

 

 

$

167.5

 

 

$

678.6

 

 

$

733.7

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

20.9

 

 

$

28.8

 

 

$

16.3

 

 

$

82.0

 

 

$

151.6

 

Advanced Materials

20.9

 

 

17.1

 

 

18.7

 

 

73.8

 

 

78.6

 

Precision Optics

13.8

 

 

7.0

 

 

10.2

 

 

37.2

 

 

35.8

 

Other

0.2

 

 

1.6

 

 

0.1

 

 

(0.4

)

 

(3.3

)

Total

$

55.8

 

 

$

54.5

 

 

$

45.3

 

 

$

192.6

 

 

$

262.7

 

 

 

 

 

 

 

 

 

 

 

Operating Profit (Loss)

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

3.7

 

 

$

13.0

 

 

$

(0.4

)

 

$

13.6

 

 

$

73.8

 

Advanced Materials

6.7

 

 

5.4

 

 

5.7

 

 

22.1

 

 

25.1

 

Precision Optics

1.7

 

 

1.6

 

 

1.4

 

 

(4.4

)

 

(3.5

)

Other

(5.3

)

 

(3.9

)

 

(7.3

)

 

(23.1

)

 

(24.9

)

Total

$

6.8

 

 

$

16.1

 

 

$

(0.6

)

 

$

8.2

 

 

$

70.5

 

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

 
 

 

Fourth Quarter Ended

 

Third Quarter Ended

 

Year Ended

(Millions)

December 31,

2020

 

December 31,

2019*

 

September 25,

2020*

 

December 31,

2020

 

December 31,

2019*

Special Items

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

8.1

 

 

$

 

 

$

9.9

 

 

$

25.8

 

 

$

 

Advanced Materials

0.5

 

 

 

 

0.1

 

 

1.3

 

 

 

Precision Optics

2.5

 

 

 

 

1.9

 

 

15.5

 

 

14.5

 

Other

(0.3

)

 

0.5

 

 

1.7

 

 

0.7

 

 

0.9

 

Total

$

10.8

 

 

$

0.5

 

 

$

13.6

 

 

$

43.3

 

 

$

15.4

 

 

 

 

 

 

 

 

 

 

 

Operating Profit (Loss) Excluding Special Items

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

11.8

 

 

$

13.0

 

 

$

9.5

 

 

$

39.4

 

 

$

73.8

 

Advanced Materials

7.2

 

 

5.4

 

 

5.8

 

 

23.4

 

 

25.1

 

Precision Optics

4.2

 

 

1.6

 

 

3.3

 

 

11.1

 

 

11.0

 

Other

(5.6

)

 

(3.4

)

 

(5.6

)

 

(22.4

)

 

(24.0

)

Total

$

17.6

 

 

$

16.6

 

 

$

13.0

 

 

$

51.5

 

 

$

85.9

 

 

 

 

 

 

 

 

 

 

 

Non-Operating (Income) Expense

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

0.1

 

 

$

0.1

 

 

$

0.2

 

 

$

0.6

 

 

$

0.7

 

Advanced Materials

 

 

 

 

 

 

0.1

 

 

 

Precision Optics

(0.1

)

 

 

 

(0.2

)

 

(0.3

)

 

 

Other

(1.1

)

 

(0.2

)

 

(1.1

)

 

(4.3

)

 

2.7

 

Total

$

(1.1

)

 

$

(0.1

)

 

$

(1.1

)

 

$

(3.9

)

 

$

3.4

 

 

 

 

 

 

 

 

 

 

 

Non-Operating (Income) Expense Special Items

 

 

 

 

 

 

 

 

Other

$

 

 

$

 

 

$

 

 

$

 

 

$

3.3

 

Total

$

 

 

$

 

 

$

 

 

$

 

 

$

3.3

 

 

 

 

 

 

 

 

 

 

 

EBIT Excluding Special Items

 

 

 

 

 

 

 

 

 

Performance Alloys and Composites

$

11.7

 

 

$

12.9

 

 

$

9.3

 

 

$

38.8

 

 

$

73.1

 

Advanced Materials

7.2

 

 

5.4

 

 

5.8

 

 

23.3

 

 

25.1

 

Precision Optics

4.3

 

 

1.6

 

 

3.5

 

 

11.4

 

 

11.0

 

Other

(4.5

)

 

(3.2

)

 

(4.5

)

 

(18.1

)

 

(23.4

)

Total

$

18.7

 

 

$

16.7

 

 

$

14.1

 

 

$

55.4

 

 

$

85.8

 

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

The cost of gold, silver, platinum, palladium, and copper is passed through to customers and, therefore, the trends and comparisons of net sales are affected by movements in the market price of these metals. Internally, management also reviews net sales on a value-added basis. Value-added sales is a non-GAAP financial measure that deducts the value of the pass-through metals sold from net sales. Value-added sales allows management to assess the impact of differences in net sales between periods or segments and analyze the resulting margins and profitability without the distortion of the movements in pass-through metal prices. The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation. The Company sells other metals and materials that are not considered direct pass throughs, and these costs are not deducted from net sales to calculate value-added sales.

The Company’s pricing policy is to pass the cost of these metals on to customers in order to mitigate the impact of price volatility on the Company’s results from operations. Value-added information is being presented since changes in metal prices may not directly impact profitability. It is the Company’s intent to allow users of the financial statements to review sales with and without the impact of the pass-through metals.

Attachment 5

Materion Corporation and Subsidiaries

Reconciliation of Non-GAAP Measures – Profitability

(Unaudited)

 

 

Fourth Quarter Ended

 

Third Quarter Ended

 

Year Ended

(Millions except per share amounts)

December 31,

2020

 

December 31,

2019*

 

September 25,

2020*

 

December 31,

2020

 

December 31,

2019*

GAAP as Reported

 

 

 

 

 

 

 

 

 

Net sales

$

339.7

 

 

$

280.2

 

 

$

287.2

 

 

$

1,176.3

 

 

$

1,185.4

 

Operating profit (loss)

6.8

 

 

16.1

 

 

(0.6

)

 

8.2

 

 

70.5

 

Non-operating (income) expense

(1.1

)

 

(0.1

)

 

(1.1

)

 

(3.9

)

 

3.4

 

Net income

8.1

 

 

14.3

 

 

5.5

 

 

15.5

 

 

53.4

 

Shares outstanding – Diluted

20,606

 

 

20,692

 

 

20,592

 

 

20,603

 

 

20,655

 

EPS – Diluted

$

0.39

 

 

$

0.69

 

 

$

0.27

 

 

$

0.75

 

 

$

2.59

 

 

 

 

 

 

 

 

 

 

 

Operating Profit Special Items

 

 

 

 

 

 

 

 

 

Impairment charges

$

(0.3

)

 

$

 

 

$

 

 

$

10.5

 

 

$

14.1

 

Mine development costs

5.6

 

 

 

 

7.3

 

 

12.9

 

 

 

Forfeiture of non-cash stock-based compensation

(0.6

)

 

 

 

(1.5

)

 

(2.1

)

 

 

Non-cash inventory adjustment

 

 

 

 

 

 

1.3

 

 

 

Cost reduction initiatives

4.5

 

 

 

 

2.6

 

 

11.7

 

 

0.8

 

COVID-19 related costs

0.4

 

 

 

 

0.8

 

 

4.1

 

 

 

Merger and acquisition costs

1.0

 

 

0.4

 

 

5.5

 

 

8.0

 

 

0.4

 

Foreign currency hedge gain

 

 

 

 

(1.1

)

 

(3.3

)

 

 

Legacy legal & environmental costs

0.2

 

 

0.1

 

 

 

 

0.2

 

 

0.1

 

Total Operating Profit Special Items

$

10.8

 

 

$

0.5

 

 

$

13.6

 

 

$

43.3

 

 

$

15.4

 

Operating Profit Special Items – net of tax

$

8.3

 

 

$

0.4

 

 

$

10.6

 

 

$

33.4

 

 

$

12.7

 

Non-Operating Expense Special Items

$

 

 

$

 

 

$

 

 

$

 

 

$

3.3

 

Non-Operating Expense Special Items – net of tax

$

 

 

$

 

 

$

 

 

$

 

 

$

2.6

 

Tax Special Items

$

(2.0

)

 

$

(1.1

)

 

$

(5.8

)

 

$

(7.1

)

 

$

(0.1

)

Special items per diluted share

$

0.31

 

 

$

(0.03

)

 

$

0.23

 

 

$

1.28

 

 

$

0.73

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measures – Adjusted Profitability

 

 

 

 

 

 

 

 

 

Value-added (VA) sales

$

190.8

 

 

$

162.5

 

 

$

167.5

 

 

$

678.6

 

 

$

733.7

 

Operating profit

17.6

 

 

16.6

 

 

13.0

 

 

51.5

 

 

85.9

 

Operating profit % of VA

9.2

%

 

10.2

%

 

7.8

%

 

7.6

%

 

11.7

%

EBIT

18.7

 

 

16.7

 

 

14.1

 

 

55.4

 

 

85.8

 

EBIT % of VA

9.8

%

 

10.3

%

 

8.4

%

 

8.2

%

 

11.7

%

Net income

14.4

 

 

13.6

 

 

10.3

 

 

41.8

 

 

68.6

 

EPS – Diluted

$

0.70

 

 

$

0.66

 

 

$

0.50

 

 

$

2.03

 

 

$

3.32

 

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

In addition to presenting financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), this earnings release contains financial measures, including operating profit, segment operating profit, earnings before interest and taxes (EBIT), net income, and earnings per share, on a non-GAAP basis. As detailed in the above reconciliation and Attachment 4, we have adjusted the results for certain special items such as non-cash impairment charges, mine development costs, forfeiture of certain non-cash stock-based compensation, non-cash inventory adjustments, cost reduction initiatives (i.e., severance), COVID-19 related costs, merger and acquisition costs, foreign currency hedge gains, legacy legal and environmental costs, and certain discrete income tax items from the applicable GAAP financial measure. Internally, management reviews the results of operations without the impact of these costs in order to assess the profitability from ongoing activities. We are providing this information because we believe it will assist investors in analyzing our financial results and, when viewed in conjunction with the GAAP results, provide a more comprehensive understanding of the factors and trends affecting our operations.

Attachment 6

Materion Corporation and Subsidiaries

Value-added sales by Market

(Unaudited)

 

 

Fourth Quarter Ended

 

 

 

Year Ended

 

 

(Millions)

December 31,

2020

 

December 31,

2019

 

% Change

 

December 31,

2020

 

December 31,

2019

 

% Change

Materion Corporation

 

 

 

 

 

 

 

 

 

 

 

Semiconductor

$

43.1

 

 

$

35.8

 

 

20.4

%

 

$

161.8

 

 

$

144.2

 

 

12.2

%

Industrial

33.9

 

 

28.2

 

 

20.2

%

 

124.1

 

 

133.1

 

 

(6.8

)%

Aerospace and Defense

24.6

 

 

34.8

 

 

(29.3

)%

 

87.0

 

 

127.0

 

 

(31.5

)%

Consumer Electronics

17.7

 

 

15.7

 

 

12.7

%

 

57.6

 

 

65.8

 

 

(12.5

)%

Automotive

17.2

 

 

13.7

 

 

25.5

%

 

58.1

 

 

59.7

 

 

(2.7

)%

Energy

12.1

 

 

14.2

 

 

(14.8

)%

 

49.1

 

 

70.1

 

 

(30.0

)%

Telecom and Data Center

9.5

 

 

9.5

 

 

%

 

38.2

 

 

54.1

 

 

(29.4

)%

Other

32.7

 

 

10.6

 

 

208.5

%

 

102.7

 

 

79.7

 

 

28.9

%

Total

$

190.8

 

 

$

162.5

 

 

17.4

%

 

$

678.6

 

 

$

733.7

 

 

(7.5

)%

Performance Alloys and Composites

 

 

 

 

 

 

 

 

 

 

 

Semiconductor

$

1.1

 

 

$

0.8

 

 

4.2

%

 

$

4.2

 

 

$

5.2

 

 

(19.2

)%

Industrial

20.1

 

 

21.0

 

 

(4.3

)%

 

84.1

 

 

96.8

 

 

(13.1

)%

Aerospace and Defense

19.6

 

 

28.1

 

 

(30.2

)%

 

64.2

 

 

103.4

 

 

(37.9

)%

Consumer Electronics

9.6

 

 

10.9

 

 

(11.9

)%

 

45.0

 

 

47.3

 

 

(4.9

)%

Automotive

13.2

 

 

11.6

 

 

13.8

%

 

48.8

 

 

51.9

 

 

(6.0

)%

Energy

3.3

 

 

7.4

 

 

(55.4

)%

 

18.4

 

 

36.7

 

 

(49.9

)%

Telecom and Data Center

9.5

 

 

9.2

 

 

3.3

%

 

37.7

 

 

53.3

 

 

(29.3

)%

Other

13.6

 

 

2.3

 

 

491.3

%

 

42.9

 

 

33.5

 

 

28.1

%

Total

$

90.0

 

 

$

91.3

 

 

(1.4

)%

 

$

345.3

 

 

$

428.1

 

 

(19.3

)%

Advanced Materials

 

 

 

 

 

 

 

 

 

 

 

Semiconductor

$

42.0

 

 

$

34.5

 

 

21.7

%

 

$

157.1

 

 

$

138.4

 

 

13.5

%

Industrial

6.4

 

 

4.3

 

 

48.8

%

 

21.9

 

 

22.0

 

 

(0.5

)%

Aerospace and Defense

0.7

 

 

0.9

 

 

(22.2

)%

 

3.2

 

 

2.9

 

 

10.3

%

Consumer Electronics

0.1

 

 

0.1

 

 

%

 

0.2

 

 

0.3

 

 

(33.3

)%

Automotive

1.5

 

 

2.0

 

 

(25.0

)%

 

5.8

 

 

6.8

 

 

(14.7

)%

Energy

8.8

 

 

6.9

 

 

27.5

%

 

30.6

 

 

33.4

 

 

(8.4

)%

Telecom and Data Center

 

 

0.3

 

 

(100.0

)%

 

0.5

 

 

0.8

 

 

(37.5

)%

Other

2.9

 

 

3.8

 

 

(23.7

)%

 

14.7

 

 

19.7

 

 

(25.4

)%

Total

$

62.4

 

 

$

52.8

 

 

18.2

%

 

$

234.0

 

 

$

224.3

 

 

4.3

%

Precision Optics

 

 

 

 

 

 

 

 

 

 

 

Semiconductor

$

 

 

$

0.5

 

 

(100.0

)%

 

$

0.5

 

 

$

0.7

 

 

(28.6

)%

Industrial

7.4

 

 

2.9

 

 

155.2

%

 

18.1

 

 

14.3

 

 

26.6

%

Aerospace and Defense

4.4

 

 

5.8

 

 

(24.1

)%

 

19.5

 

 

20.7

 

 

(5.8

)%

Consumer Electronics

8.1

 

 

4.7

 

 

72.3

%

 

21.6

 

 

18.2

 

 

18.7

%

Automotive

2.4

 

 

0.1

 

 

2,300.0

%

 

3.5

 

 

1.0

 

 

250.0

%

Energy

 

 

 

 

%

 

 

 

 

 

%

Telecom and Data Center

 

 

 

 

%

 

 

 

 

 

%

Other

16.5

 

 

5.2

 

 

217.3

%

 

38.7

 

 

32.4

 

 

19.4

%

Total

$

38.8

 

 

$

19.2

 

 

102.1

%

 

$

101.9

 

 

$

87.3

 

 

16.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations

$

(0.4

)

 

$

(0.8

)

 

 

 

$

(2.6

)

 

$

(6.0

)

 

 

 

Attachment 7

Quarterly Data LIFO vs. FIFO

(Unaudited)

 

(Thousands except per share amounts)

 

 

First Quarter 2020

 

Second Quarter 2020

Selected Items

 

Previously

Reported

 

As Adjusted

 

Adjustment

 

Previously

Reported

 

As Adjusted

 

Adjustment

Cost of sales

 

$

232,371

 

 

$

233,376

 

 

$

1,005

 

 

$

223,378

 

$

224,513

 

$

1,135

 

Gross margin

 

45,575

 

 

44,570

 

 

(1,005

)

 

48,090

 

46,955

 

(1,135

)

Operating (loss) profit

 

(4,563

)

 

(5,568

)

 

(1,005

)

 

8,706

 

7,571

 

(1,135

)

(Loss) Income before income taxes

 

(3,865

)

 

(4,870

)

 

(1,005

)

 

8,298

 

7,163

 

(1,135

)

Income tax (benefit) expense

 

(762

)

 

(992

)

 

(230

)

 

1,620

 

1,360

 

(260

)

Net (loss) income

 

(3,103

)

 

(3,878

)

 

(775

)

 

6,678

 

5,803

 

(875

)

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share of common stock

 

$

(0.15

)

 

$

(0.19

)

 

$

(0.04

)

 

$

0.33

 

$

0.29

 

$

(0.04

)

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share of common stock

 

$

(0.15

)

 

$

(0.19

)

 

$

(0.04

)

 

$

0.32

 

$

0.28

 

$

(0.04

)

 

 

Third Quarter 2020

 

Fourth Quarter 2020

Selected Items

 

Previously

Reported

 

As Adjusted

 

Adjustment

 

As Computed

Under LIFO

 

As Reported

 

Difference

Cost of sales

 

$

240,531

 

 

$

241,860

 

 

$

1,329

 

 

$

285,442

 

 

$

283,892

 

 

$

(1,550

)

Gross margin

 

46,640

 

 

45,311

 

 

(1,329

)

 

54,247

 

 

55,797

 

 

1,550

 

Operating (loss) profit

 

713

 

 

(616

)

 

(1,329

)

 

5,278

 

 

6,828

 

 

1,550

 

(Loss) Income before income taxes

 

455

 

 

(874

)

 

(1,329

)

 

5,306

 

 

6,856

 

 

1,550

 

Income tax (benefit) expense

 

(6,041

)

 

(6,345

)

 

(304

)

 

(1,565

)

 

(1,210

)

 

355

 

Net income

 

6,496

 

 

5,471

 

 

(1,025

)

 

6,871

 

 

8,066

 

 

1,195

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.32

 

 

$

0.27

 

 

$

(0.05

)

 

$

0.34

 

 

$

0.40

 

 

$

0.06

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.32

 

 

$

0.27

 

 

$

(0.05

)

 

$

0.33

 

 

$

0.39

 

 

$

0.06

 

 

 

First Quarter 2019

 

Second Quarter 2019

Selected Items

 

Previously

Reported

 

As Adjusted

 

Adjustment

 

Previously

Reported

 

As Adjusted

 

Adjustment

Cost of sales

 

$

232,129

 

$

231,835

 

$

(294

)

 

$

228,249

 

$

225,846

 

$

(2,403

)

Gross margin

 

69,312

 

69,606

 

294

 

 

69,594

 

71,997

 

2,403

 

Operating profit

 

21,387

 

21,681

 

294

 

 

22,750

 

25,153

 

2,403

 

Income before income taxes

 

20,676

 

20,970

 

294

 

 

19,138

 

21,541

 

2,403

 

Income tax expense

 

3,770

 

3,837

 

67

 

 

3,598

 

4,148

 

550

 

Net income

 

16,906

 

17,133

 

227

 

 

15,540

 

17,393

 

1,853

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.83

 

$

0.85

 

$

0.02

 

 

$

0.76

 

$

0.85

 

$

0.09

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.82

 

$

0.83

 

$

0.01

 

 

$

0.75

 

$

0.84

 

$

0.09

 

 

 

Third Quarter 2019

 

Fourth Quarter 2019

Selected Items

 

Previously

Reported

 

As Adjusted

 

Adjustment

 

Previously

Reported

 

As Adjusted

 

Adjustment

Cost of sales

 

$

240,748

 

$

239,374

 

$

(1,374

)

 

$

225,154

 

$

225,679

 

$

525

 

Gross margin

 

65,231

 

66,605

 

1,374

 

 

55,007

 

54,482

 

(525

)

Operating profit

 

6,289

 

7,663

 

1,374

 

 

16,574

 

16,049

 

(525

)

Income before income taxes

 

5,726

 

7,100

 

1,374

 

 

16,450

 

15,925

 

(525

)

Income tax expense

 

2,263

 

2,578

 

315

 

 

1,699

 

1,579

 

(120

)

Net income

 

3,463

 

4,522

 

1,059

 

 

14,751

 

14,346

 

(405

)

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.17

 

$

0.22

 

$

0.05

 

 

$

0.72

 

$

0.70

 

$

(0.02

)

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

$

0.17

 

$

0.22

 

$

0.05

 

 

$

0.71

 

$

0.69

 

$

(0.02

)