Materion Corp. Files Q2 2024 10-Q

TL;DR

Materion's Q2 2024 10-Q is in. Check financials for latest performance.

AI Summary

Materion Corp. filed its 10-Q for the period ending June 28, 2024. The filing details financial performance and operational updates for the company, which is involved in metal forging and stampings. Specific financial figures and operational highlights are presented within the report.

Why It Matters

This filing provides investors and analysts with the latest financial health and operational performance of Materion Corp., crucial for understanding its market position and future prospects.

Risk Assessment

Risk Level: medium — As a publicly traded company, Materion Corp. is subject to market fluctuations and industry-specific risks detailed in its SEC filings.

Key Players & Entities

• MATERION Corp (company) — Filer
• 6070 PARKLAND BLVD. (location) — Business Address
• MAYFIELD HTS. (location) — Business Address City
• OH (location) — Business Address State
• 44124 (location) — Business Address Zip
• BRUSH ENGINEERED MATERIALS INC (company) — Former Company Name
• 20000131 (date) — Date of Name Change
• 20240628 (date) — Report Period End Date
• 20240806 (date) — Filing Date

FAQ

Filing Documents

• mtrn-20240628.htm (10-Q) — 1697KB
• mtrn-ex311_2024q210q.htm (EX-31.1) — 18KB
• mtrn-ex312_2024q210q.htm (EX-31.2) — 18KB
• mtrn-ex32_2024q210q.htm (EX-32) — 7KB
• mtrn-ex95_2024q210q.htm (EX-95) — 13KB
• 0001104657-24-000116.txt ( ) — 8194KB
• mtrn-20240628.xsd (EX-101.SCH) — 37KB
• mtrn-20240628_cal.xml (EX-101.CAL) — 72KB
• mtrn-20240628_def.xml (EX-101.DEF) — 165KB
• mtrn-20240628_lab.xml (EX-101.LAB) — 520KB
• mtrn-20240628_pre.xml (EX-101.PRE) — 365KB
• mtrn-20240628_htm.xml (XML) — 1699KB

Financial Statements

Item 1. Financial Statements Materion Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Second Quarter Ended Six Months Ended (Thousands, except per share amounts) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023 Net sales $ 425,866 $ 398,551 $ 811,153 $ 841,076 Cost of sales 345,007 309,496 659,082 660,685 Gross margin 80,859 89,055 152,071 180,391 Selling, general, and administrative expense 33,601 38,911 69,445 79,247 Research and development expense 7,702 7,154 14,844 14,776 Restructuring expense (income) 3,048 1,454 4,668 2,118 Other—net 4,446 6,192 8,803 11,966 Operating profit 32,062 35,344 54,311 72,284 Other non-operating income—net ( 640 ) ( 726 ) ( 1,283 ) ( 1,456 ) Interest expense—net 8,802 7,641 17,081 15,142 Income before income taxes 23,900 28,429 38,513 58,598 Income tax expense 4,864 4,347 6,068 8,928 Net income $ 19,036 $ 24,082 $ 32,445 $ 49,670 Basic earnings per share: Net income per share of common stock $ 0.92 $ 1.17 $ 1.57 $ 2.41 Diluted earnings per share: Net income per share of common stock $ 0.91 $ 1.15 $ 1.55 $ 2.38 Weighted-average number of shares of common stock outstanding: Basic 20,741 20,625 20,710 20,596 Diluted 20,914 20,896 20,937 20,892 See notes to these consolidated financial statements. 2 Materion Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) Second Quarter Ended Six Months Ended June 28, June 30, June 28, June 30, (Thousands) 2024 2023 2024 2023 Net income $ 19,036 $ 24,082 $ 32,445 $ 49,670 Other comprehensive income (loss): Foreign currency translation adjustment ( 1,089 ) ( 743 ) ( 5,549 ) 1,946 Derivative and hedging activity, net of tax ( 414 ) 3,180 1,846 841 Pension and post-employment benefit adjustment, net of tax ( 63 ) ( 254 ) ( 236 ) ( 321 ) Other comprehensive income (loss) ( 1,566 ) 2,183 ( 3,939 ) 2,466 Comprehensive income $ 17,470 $ 26,265 $ 28,506 $ 52,136 See notes to these consolida

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. Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications had no effect on the reported results of operations, cash flows or financial position. Specifically, the net sales related to the previously disclosed precision clad strip project have been reclassified from the other end market to the consumer electronics end market within Note B. 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 th

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the second quarter and first six months of 2024 and 2023: (Thousands) Second Quarter 2024 Second Quarter 2023 First Six Months Ended 2024 First Six Months Ended 2023 Net sales: Performance Materials (1) $ 187,513 $ 182,771 $ 356,158 $ 369,785 Electronic Materials (1) 212,687 190,730 404,658 419,549 Precision Optics 25,666 25,050 50,337 51,742 Other — — — — Net sales 425,866 398,551 811,153 841,076 Segment EBITDA: Performance Materials $ 40,415 $ 44,925 $ 71,091 $ 87,695 Electronic Materials 13,456 13,394 27,809 27,349 Precision Optics 1,589 1,701 1,336 4,393 Other ( 6,245 ) ( 7,598 ) ( 11,944 ) ( 14,253 ) Total Segment EBITDA 49,215 52,422 88,292 105,184 Income tax expense 4,864 4,347 6,068 8,928 Interest expense - net 8,802 7,641 17,081 15,142 Depreciation, depletion and amortization 16,513 16,352 32,698 31,444 Net income $ 19,036 $ 24,082 $ 32,445 $ 49,670 (1) Excludes inter-segment sales of $ 1.7 million and $ 1.0 million for the second quarter of 2024 and 2023, respectively, and $ 3.2 million and $ 4.1 million for the first six months of 2024 and 2023, respectively, for Electronic Materials. There were no material inter-segment sales for Performance Materials in 2024 or 2023. Inter-segment sales are eliminated in consolidation. The following table disaggregates revenue for each segment by end market for the second quarter and first six months of 2024 and 2023: 9 Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) (Thousands) Performance Materials Electronic Materials Precision Optics Other Total Second Quarter 2024 End Market Semiconductor $ 1,300 $ 178,099 $ 754 $ — $ 180,153 Industrial 31,136 8,617 6,320 — 46,073 Aerospace and defense 42,500 1,677 5,979 — 50,156 Consumer electronics 64,367 27 4,150 — 68,544 Automotive 18,177 2,411 1,491 — 22,079 Energy 9,055 15,724 — — 24,779 Telecom and data center 8,202 32 — — 8,234 Other 12,776 6,100 6,972 — 25,848 Total $ 187,513 $ 212,687 $ 25,666 $ — $ 425,866 Second Quarter 2023 End Market Semiconductor $ 4,411 $ 155,356 $ 745 $ — $ 160,512 Industrial 39,615 4,175 6,713 — 50,503 Aerospace and defense 31,438 1,491 5,998 — 38,927 Consumer electronics 48,763 195 3,566 — 52,524 Automotive 21,813 1,718 1,876 — 25,407 Energy 12,117 21,810 — — 33,927 Telecom and data center 17,413 45 — — 17,458 Other 7,201 5,940 6,152 — 19,293 Total $ 182,771 $ 190,730 $ 25,050 $ — $ 398,551 10 Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) (Thousands) Performance Materials Electronic Materials Precision Optics Other Total First Six Months 2024 End Market Semiconductor $ 3,962 $ 334,522 $ 1,079 $ — $ 339,563 Industrial 58,272 18,114 13,144 — 89,530 Aerospace and defense 84,071 3,286 11,854 — 99,211 Consumer electronics 119,599 137 7,266 — 127,002 Automotive 36,067 3,643 3,679 — 43,389 Energy 17,372 32,670 — — 50,042 Telecom and data center 20,984 56 — — 21,040 Other 15,831 12,230 13,315 41,376 Total $ 356,158 $ 404,658 $ 50,337 $ — $ 811,153 First Six Months 2023 End Market Semiconductor $ 7,001 $ 335,972 $ 1,656 $ — $ 344,629 Industrial 79,390 17,144 15,445 — 111,979 Aerospace and defense 61,796 3,568 10,647 — 76,011 Consumer electronics 104,473 382 6,822 — 111,677 Automotive 47,306 3,219 4,484 — 55,009 Energy 25,584 46,761 — — 72,345 Telecom and data center 33,538 58 — — 33,596 Other 10,697 12,445 12,688 — 35,830 Total $ 369,785 $ 419,549 $ 51,742 $ — $ 841,076 Note C — Revenue Recognition Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue in an amount that reflects the consideration to which it expects to be entitled upon satisfaction of a performance obligation by transferring control over a product to the customer. Control over a product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product. Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification 606, Revenue from

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) June 28, 2024 December 31, 2023 $ change % change Accounts receivable, trade $ 186,071 $ 193,345 $ ( 7,274 ) ( 4 ) % Unbilled receivables 30,770 29,524 1,246 4 % Unearned revenue 15,857 13,843 2,014 15 % 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 second quarter 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. Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $ 13.1 million of the December 31, 2023 unearned amounts as revenue during the first six 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 — Other-net Other-net for the second quarter and first six months of 2024 and 2023 is summarized as follows: Second Quarter Ended Six Months Ended June 28, June 30, June 28, June 30, (Thousands) 2024 2023 2024 2023 Amortization of intangi

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) Note F — Income Taxes The Company's effective tax rate for the second quarter of 2024 and 2023 was 20.4 % and 15.3 %, respectively, and 15.8 % and 15.2 % in the first six months of 2024 and 2023, respectively. The effective tax rate for 2024 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction. The effective tax rate for 2023 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction. The effective tax rate for the first six months of 2024 includes a net discrete income tax benefit of $ 0.2 million, primarily consisting of $ 1.0 million of excess tax benefits from stock-based compensation awards offset by a $ 1.1 million valuation allowance recorded against deferred tax assets that are not likely to be realized for one of the Company's foreign subsidiaries. The effective tax rate for the first six months of 2023 included a net discrete income tax benefit of $ 1.0 million, 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 Treas

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: Second Quarter Ended Six Months Ended June 28, June 30, June 28, June 30, (Thousands, except per share amounts) 2024 2023 2024 2023 Numerator for basic and diluted EPS: Net income $ 19,036 $ 24,082 $ 32,445 $ 49,670 Denominator: Denominator for basic EPS Weighted-average shares outstanding 20,741 20,625 20,710 20,596 Effect of dilutive securities: Stock appreciation rights 78 91 86 93 Restricted stock units 43 77 68 91 Performance-based restricted stock units 52 103 73 112 Diluted potential common shares 173 271 227 296 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 20,914 20,896 20,937 20,892 Basic EPS $ 0.92 $ 1.17 $ 1.57 $ 2.41 Diluted EPS $ 0.91 $ 1.15 $ 1.55 $ 2.38 Adjusted weighted-average shares outstanding - diluted exclude securities totaling 137,252 and 47,084 for the quarters ended June 28, 2024 and June 30, 2023, respectively, and totaling 95,392 and 69,716 for the six months ended June 28, 2024 and June 30, 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 stock 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: June 28, December 31, (Thousands) 2024 2023 Raw materials and supplies $ 137,806 $ 117,693 Work in process 257,248 268,717 Finished goods 67,909 55,187 Inventories, net $ 462,963 $ 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 mar