Materion Corp Files 10-Q for Period Ending March 29, 2024

TL;DR

<b>Materion Corp filed its quarterly 10-Q report for the period ending March 29, 2024.</b>

AI Summary

MATERION Corp (MTRN) filed a Quarterly Report (10-Q) with the SEC on May 2, 2024. Materion Corp reported financial results for the period ending March 29, 2024. The filing is a 10-Q, indicating a quarterly report. The company's fiscal year ends on December 31. Materion Corp is incorporated in Ohio. The company's previous name was Brush Engineered Materials Inc., with a name change effective January 31, 2000.

Why It Matters

For investors and stakeholders tracking MATERION Corp, this filing contains several important signals. This 10-Q filing provides investors with an update on Materion Corp's financial performance and position during the first quarter of 2024. Understanding the details within this report is crucial for assessing the company's operational health, revenue trends, and potential risks moving forward.

Risk Assessment

Risk Level: low — MATERION Corp shows low risk based on this filing. The filing is a standard quarterly report (10-Q) and does not contain immediate red flags or significant negative disclosures.

Analyst Insight

Review the detailed financial statements and segment performance within the 10-Q to identify any emerging trends or specific areas of concern.

Key Numbers

• 2024-03-29 — Report Period End Date (Conformed Period of Report)
• 2024-05-02 — Filing Date (Filed As Of Date)
• 1231 — Fiscal Year End (Fiscal Year End)
• 341919973 — IRS Number (IRS Number)

Key Players & Entities

• MATERION Corp (company) — Filer
• 6070 PARKLAND BLVD. (address) — Business Address
• MAYFIELD HTS. (location) — Business Address City
• OH (location) — Business Address State
• BRUSH ENGINEERED MATERIALS INC (company) — Former Company Name

FAQ

Industry Context

Materion Corp operates in the advanced materials sector, providing high-performance engineered materials used in various demanding applications.

Regulatory Implications

The filing is made under the Securities Exchange Act of 1934, requiring public companies to submit regular financial disclosures.

What Investors Should Do

1. Analyze revenue by segment for Q1 2024.
2. Review balance sheet changes from the previous fiscal year.
3. Examine any disclosed risk factors or management discussion and analysis.

Key Dates

• 2024-03-29: Period End Date — Marks the end of the reporting period for the 10-Q filing.
• 2024-05-02: Filing Date — Date the 10-Q report was officially submitted to the SEC.

Year-Over-Year Comparison

This is the first 10-Q filing for the fiscal year 2024, following the 2023 annual report (10-K).

Filing Documents

• mtrn-20240329.htm (10-Q) — 1165KB
• ex101materionandsubsidiari.htm (EX-10.1) — 45KB
• ex102formof2024performance.htm (EX-10.2) — 119KB
• mtrn-ex311_2024q110q.htm (EX-31.1) — 18KB
• mtrn-ex312_2024q110q.htm (EX-31.2) — 18KB
• mtrn-ex32_2024q110q.htm (EX-32) — 7KB
• mtrn-ex95_2024q110q.htm (EX-95) — 13KB
• image_1a.jpg (GRAPHIC) — 416KB
• 0001104657-24-000066.txt (&nbsp;) — 7279KB
• mtrn-20240329.xsd (EX-101.SCH) — 36KB
• mtrn-20240329_cal.xml (EX-101.CAL) — 68KB
• mtrn-20240329_def.xml (EX-101.DEF) — 166KB
• mtrn-20240329_lab.xml (EX-101.LAB) — 500KB
• mtrn-20240329_pre.xml (EX-101.PRE) — 357KB
• mtrn-20240329_htm.xml (XML) — 1153KB

Financial Statements

Item 1. Financial Statements Materion Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) First Quarter Ended (Thousands, except per share amounts) March 29, 2024 March 31, 2023 Net sales $ 385,287 $ 442,526 Cost of sales 314,075 351,190 Gross margin 71,212 91,336 Selling, general, and administrative expense 35,844 40,336 Research and development expense 7,142 7,621 Restructuring expense (income) 1,620 664 Other—net 4,357 5,775 Operating profit 22,249 36,940 Other non-operating income—net ( 643 ) ( 730 ) Interest expense—net 8,279 7,502 Income before income taxes 14,613 30,168 Income tax expense 1,204 4,580 Net income $ 13,409 $ 25,588 Basic earnings per share: Net income per share of common stock $ 0.65 $ 1.24 Diluted earnings per share: Net income per share of common stock $ 0.64 $ 1.23 Weighted-average number of shares of common stock outstanding: Basic 20,679 20,566 Diluted 20,973 20,887 See notes to these consolidated financial statements. 2 Materion Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) First Quarter Ended March 29, March 31, (Thousands) 2024 2023 Net income $ 13,409 $ 25,588 Other comprehensive (loss) income: Foreign currency translation adjustment ( 4,460 ) 2,689 Derivative and hedging activity, net of tax 2,260 ( 2,339 ) Pension and post-employment benefit adjustment, net of tax ( 173 ) ( 67 ) Other comprehensive loss ( 2,373 ) 283 Comprehensive income $ 11,036 $ 25,871 See notes to these consolidated financial statements. 3 Materion Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) March 29, Dec. 31, (Thousands) 2024 2023 Assets Current assets Cash and cash equivalents $ 13,104 $ 13,294 Accounts receivable, net 188,282 192,747 Inventories, net 466,574 441,597 Prepaid and other current assets 71,748 61,744 Total current assets 739,708 709,382 Deferred income taxes 4,751 4,908 Property, plant, and equ

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note A — Accounting Policies Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All adjustments were of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2023 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Recently Issued Accounting Standards: In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07 "Improvements to Reportable Segment Disclosures (Topic 280)". This ASU updates current reportable segment disclosure requirements to require disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. This ASU will be effective for the annual period ending December 31, 2024. Adoption of this ASU will result in additional disclosure, but it will not impact the Company's consolidated financial position, results of operations or cash flows. In December 2023, the FASB issued ASU No. 2023-09 "Improvements to Income Tax Disclosures (Topic 740)". This ASU updates current income tax disclosure requirements to require disclosures of specific categories of information within the effective tax

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Contract Balances : The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities: (Thousands) March 29, 2024 December 31, 2023 $ change % change Accounts receivable, trade $ 189,110 $ 193,345 $ ( 4,235 ) ( 2 ) % Unbilled receivables 32,991 29,524 3,467 12 % Unearned revenue 14,793 13,843 950 7 % Accounts receivable, trade represents payments due from customers relating to the transfer of the Company's products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred related to our receivables were immaterial during the first three months of 2024. Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables. Unbilled receivables are included within the prepaid and other current assets line item on the Consolidated Balance Sheet. Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $ 6.9 million of the December 31, 2023 unearned amounts as revenue during the first three months of 2024. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers. Note D — Restructuring The Company implemented various restructuring initiatives across the Performance Materials, Electronic

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note F — Income Taxes The Company's effective tax rate for the first quarter of 2024 and 2023 was 8.2 % and 15.2 %, respectively. The effective tax rate for the first quarter of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion, the foreign derived intangible income deduction, and excess tax benefits from stock-based compensation awards. The effective tax rate for the first quarter of 2024 and 2023 included a net discrete income tax benefit of $ 1.2 million and $ 0.5 million, respectively, primarily related to excess tax benefits from stock-based compensation awards. Government Tax Credits Pursuant to The Inflation Reduction Act of 2022 (IRA), the Company is eligible for the Advanced Manufacturing Production Credit ("production credit") beginning in 2023. The production credit provides an annual cash benefit for a portion of the production costs for the sale of certain critical minerals produced in the U.S. and sold during the year. On December 15, 2023, the U.S. Treasury Department published proposed regulations on the production credit that include clarifying guidance regarding the definition of production costs in the computation of the production credit. Although the proposed guidance is not authoritative and is subject to change in the regulatory review process, the guidance indicates that the Treasury Department may implement a narrower definition of eligible production costs in the final regulations. The ultimate amount of the benefit that the Company is entitled to receive in connection with the production credit will depend on the final regulations issued on the production credit. The Company records the production credit as a reduction in cost of goods sold as the applicable items are produced and sold. U.S. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. Our accountin

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note G — Earnings Per Share (EPS) The following table sets forth the computation of basic and diluted EPS: First Quarter Ended March 29, March 31, (Thousands, except per share amounts) 2024 2023 Numerator for basic and diluted EPS: Net income (loss) $ 13,409 $ 25,588 Denominator: Denominator for basic EPS: Weighted-average shares outstanding 20,679 20,566 Effect of dilutive securities: Stock appreciation rights 93 103 Restricted stock units 91 105 Performance-based restricted stock units 110 113 Diluted potential common shares 294 321 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 20,973 20,887 Basic EPS $ 0.65 $ 1.24 Diluted EPS $ 0.64 $ 1.23 Adjusted weighted-average shares outstanding - diluted exclude securities totaling 71,285 and 17,902 for the quarters ended March 29, 2024 and March 31, 2023, respectively. These securities are primarily related to restricted stock units (RSUs) and stock appreciation rights (SARs) with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would have been anti-dilutive. Note H — Inventories Inventories on the Consolidated Balance Sheets are summarized as follows: March 29, December 31, (Thousands) 2024 2023 Raw materials and supplies $ 138,049 $ 117,693 Work in process 263,352 268,717 Finished goods 65,173 55,187 Inventories, net $ 466,574 $ 441,597 The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce its exposure to metal price movements and to reduce its working capital investment. The notional value of off-balance sheet precious metals and copper was $ 332.1 million and $ 351.5 million as of March 29, 2024 and December 31, 2023, respectively. 12 Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note I — Customer Prepayments In 2020, the Company entered into an investment agreement and a master supply agreement with a customer to procure equipment to manufacture product for the customer. The customer provided prepayments to the Company to fund the necessary infrastructure improvements and procure the equipment necessary to supply the customer with the desired product. The Company owns, operates and maintains the equipment that is being used to manufacture product for the customer. Revenue will be recognized as the Company fulfills purchase orders and ships the commercial product to the customer, as product delivery is considered the satisfaction of the performance obligation. Additionally, during the second quarter of 2022, the Company entered into an amendment to the investment agreement with the same customer to procure additional equipment to manufacture product for the customer. In 2023 the Company received the remaining prepayment related to this amendment, the total of which approximated $ 38.6 million. As of March 29, 2024 and December 31, 2023, $ 77.9 million and $ 84.7 million, respectively, of prepayments are classified as Unearned income on the Consolidated Balance Sheets. The prepayments will remain in Unearned income until commercial purchase orders are received for product serviced out of the equipment, at which time a portion of the purchase order value related to prepayments will be reclassified to Unearned revenue. As of March 29, 2024 $ 7.5 million of the prepayments are classified as Unearned revenue. Note J — Pensions and Other Post-employment Benefits The following is a summary of the net periodic benefit (income)/cost for the first quarter of 2024 and 2023 for the pension plans as shown below. The Pension Benefits columns aggregate defined benefit pension plans in the U.S., Germany, Liechtenstein, England, and the U.S. supplemental retirement plans. The Other Benefit

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note K — Accumulated Other Comprehensive Income (Loss) Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the first quarter of 2024 and 2023 are as follows: Gains and Losses on Cash Flow Hedges (Thousands) Foreign Currency Interest Rate Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total Balance at December 31, 2023 $ 1,201 $ 4,156 $ ( 99 ) $ 5,258 $ ( 48,658 ) $ ( 3,548 ) $ ( 46,948 ) Other comprehensive income (loss) before reclassifications 665 3,840 ( 333 ) 4,172 — ( 4,460 ) ( 288 ) Amounts reclassified from accumulated other comprehensive income (loss) — ( 1,262 ) 26 ( 1,236 ) ( 111 ) — ( 1,347 ) Net current period other comprehensive (loss) income before tax 665 2,578 ( 307 ) 2,936 ( 111 ) ( 4,460 ) ( 1,635 ) Deferred taxes 153 593 ( 70 ) 676 62 — 738 Net current period other comprehensive (loss) income after tax 512 1,985 ( 237 ) 2,260 ( 173 ) ( 4,460 ) ( 2,373 ) Balance at March 29, 2024 $ 1,713 $ 6,141 $ ( 336 ) $ 7,518 $ ( 48,831 ) $ ( 8,008 ) $ ( 49,321 ) Balance at December 31, 2022 $ 1,243 $ 6,055 $ ( 223 ) $ 7,075 $ ( 40,228 ) $ ( 8,756 ) $ ( 41,909 ) Other comprehensive (loss) income before reclassifications ( 67 ) ( 1,703 ) ( 475 ) ( 2,245 ) — 2,689 444 Amounts reclassified from accumulated other comprehensive income (loss) ( 35 ) ( 782 ) 25 ( 792 ) ( 338 ) — ( 1,130 ) Net current period other comprehensive (loss) income before tax ( 102 ) ( 2,485 ) ( 450 ) ( 3,037 ) ( 338 ) 2,689 ( 686 ) Deferred taxes ( 24 ) ( 571 ) ( 103 ) ( 698 ) ( 271 ) — ( 969 ) Net current period other comprehensive (loss) income after tax ( 78 ) ( 1,914 ) ( 347 ) ( 2,339 ) ( 67 ) 2,689 283 Balance at March 31, 2023 $ 1,165 $ 4,141 $ ( 570 ) $ 4,736 $