Materion Corporation Reports Strong Fourth Quarter and Record

Materion Corporation Reports Strong Fourth Quarter and Record Full-Year 2023 Financial Results and Provides 2024 Outlook

| More MCAD News

Attachment 1

Materion Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

	Fourth Quarter Ended						Year Ended
(In thousands except per share amounts)	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Net sales	$	421,043		$	434,578		$	1,665,187		$	1,757,109
Cost of sales		341,328			336,159			1,316,145			1,413,229
Gross margin		79,715			98,419			349,042			343,880
Selling, general, and administrative expense		39,858			46,672			157,911			169,338
Research and development expense		6,442			6,881			27,540			28,977
Restructuring expense (income)		630			13			3,824			1,573
Other — net		5,145			5,662			23,323			24,237
Operating profit		27,640			39,191			136,444			119,755
Other non-operating (income) expense—net		(569	)		(1,738	)		(2,710	)		(5,250	)
Interest expense — net		8,503			7,580			31,323			21,905
Income before income taxes		19,706			33,349			107,831			103,100
Income tax (benefit) expense		238			4,585			12,129			17,110
Net income	$	19,468		$	28,764		$	95,702		$	85,990
Basic earnings per share:
Net income per share of common stock	$	0.94		$	1.40		$	4.64		$	4.19
Diluted earnings per share:
Net income per share of common stock	$	0.93		$	1.38		$	4.58		$	4.14
Weighted-average number of shares of common stock outstanding:
Basic		20,644			20,537			20,619			20,511
Diluted		20,936			20,790			20,911			20,760

Attachment 2

Materion Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

(Thousands)	December 31, 2023			December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	13,294		$	13,101
Accounts receivable, net		192,747			215,211
Inventories, net		441,597			423,080
Prepaid and other current assets		61,744			39,056
Total current assets		709,382			690,448
Deferred income taxes		4,908			3,265
Property, plant, and equipment		1,281,622			1,209,205
Less allowances for depreciation, depletion, and amortization		(766,939	)		(760,440	)
Property, plant, and equipment—net		514,683			448,765
Operating lease, right-of-use assets		57,645			64,249
Intangible assets		133,571			143,219
Other assets		21,664			22,535
Goodwill		320,873			319,498
Total Assets	$	1,762,726		$	1,691,979
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt	$	38,597		$	21,105
Accounts payable		125,663			107,899
Salaries and wages		25,912			35,543
Other liabilities and accrued items		45,773			54,993
Income taxes		5,207			3,928
Unearned revenue		13,843			15,496
Total current liabilities		254,995			238,964
Other long-term liabilities		13,300			12,181
Operating lease liabilities		53,817			59,055
Finance lease liabilities		13,744			13,876
Retirement and post-employment benefits		26,334			20,422
Unearned income		103,983			107,736
Long-term income taxes		3,815			665
Deferred income taxes		20,109			28,214
Long-term debt		387,576			410,876
Shareholders’ equity		885,053			799,990
Total Liabilities and Shareholders’ Equity	$	1,762,726		$	1,691,979

Attachment 3

Materion Corporation and Subsidiaries
Consolidated Statements of Cash Flows

(Thousands)	December 31, 2023			December 31, 2022
Cash flows from operating activities:
Net income	$	95,702		$	85,990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		61,644			53,436
Amortization of deferred financing costs in interest expense		1,712			1,734
Stock-based compensation expense (non-cash)		10,092			8,813
Amortization of pension and post-retirement costs		(1,318	)		(146	)
(Gain) loss on sale of property, plant, and equipment		20			14
Deferred income tax (benefit) expense		(7,005	)		1,733
Net pension curtailments and settlements		142			(551	)
Changes in assets and liabilities, net of acquired assets and liabilities:
Decrease (increase) in accounts receivable		23,359			(4,377	)
Decrease (increase) in inventory		(18,700	)		(63,986	)
Decrease (increase) in prepaid and other current assets		(22,663	)		(1,604	)
Increase (decrease) in accounts payable and accrued expenses		6,631			12,860
Increase (decrease) in unearned revenue		(17,361	)		207
Increase (decrease) in interest and taxes payable		3,771			154
Increase (decrease) in unearned income due to customer prepayments		16,676			21,942
Other — net		(8,288	)		(261	)
Net cash provided by operating activities		144,414			115,958
Cash flows from investing activities:
Payments for acquisition, net of cash acquired		—			(2,971	)
Payments for purchase of property, plant, and equipment		(110,550	)		(77,608	)
Payments for mine development		(9,326	)		—
Proceeds from sale of property, plant, and equipment		654			850
Net cash used in investing activities		(119,222	)		(79,729	)
Cash flows from financing activities:
Proceeds from (repayment of) borrowings under credit facilities, net		8,065			230
Repayment of debt		(15,415	)		(19,299	)
Principal payments under finance lease obligations		(1,645	)		(2,736	)
Cash dividends paid		(10,621	)		(10,160	)
Payments of withholding taxes for stock-based compensation awards		(5,234	)		(3,593	)
Net cash provided by (used in) financing activities		(24,850	)		(35,558	)
Effects of exchange rate changes		(149	)		(2,032	)
Net change in cash and cash equivalents		193			(1,361	)
Cash and cash equivalents at beginning of period		13,101			14,462
Cash and cash equivalents at end of period	$	13,294		$	13,101

Attachment 4

Materion Corporation and Subsidiaries
Reconciliation of Non-GAAP Measure - Value-added Sales, Operating Profit, and EBITDA
(Unaudited)

	Fourth Quarter Ended					Year Ended
(Millions)	December 31, 2023		December 31, 2022			December 31, 2023		December 31, 2022
Net Sales
Performance Materials	$	201.1	$	197.6		$	755.5	$	671.5
Electronic Materials		193.9		209.3			805.8		971.9
Precision Optics		26.0		27.7			103.9		113.7
Other		—		—			—		—
Total	$	421.0	$	434.6		$	1,665.2	$	1,757.1

Less: Pass-through Metal Cost
Performance Materials	$	15.1	$	20.0		$	66.9	$	82.0
Electronic Materials		116.2		111.5			471.1		559.1
Precision Optics		—		—			0.1		0.1
Other		—		0.1			—		1.5
Total	$	131.3	$	131.6		$	538.1	$	642.7

Value-added Sales (non-GAAP)
Performance Materials	$	186.0	$	177.6		$	688.6	$	589.5
Electronic Materials		77.7		97.8			334.7		412.8
Precision Optics		26.0		27.7			103.8		113.6
Other		—		(0.1	)		—		(1.5	)
Total	$	289.7	$	303.0		$	1,127.1	$	1,114.4

Gross Margin
Performance Materials ⁽¹⁾	$	50.5	$	57.7		$	216.5	$	175.1
Electronic Materials ⁽¹⁾		21.5		31.5			100.4		131.5
Precision Optics ⁽¹⁾		7.7		9.2			32.1		37.3
Other		—		—			—		—
Total ⁽¹⁾	$	79.7	$	98.4		$	349.0	$	343.9
⁽¹⁾ See reconciliation of gross margin to adjusted gross margin in Attachment 8
Note: Quarterly information presented within this document and previously disclosed quarterly information may not equal the total computed for the year due to rounding

	Fourth Quarter Ended						Year Ended
(Millions)	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Operating Profit (Loss)
Performance Materials	$	33.0		$	37.6		$	143.9		$	101.4
Electronic Materials		3.8			12.3			28.6			51.3
Precision Optics		(0.4	)		1.1			(2.0	)		1.9
Other		(8.8	)		(11.8	)		(34.1	)		(34.8	)
Total	$	27.6		$	39.2		$	136.4		$	119.8

Non-Operating (Income) Expense
Performance Materials	$	0.2		$	0.1		$	0.6		$	0.5
Electronic Materials		(0.1	)		—			(0.1	)		—
Precision Optics		—			(0.6	)		(0.6	)		(1.3	)
Other		(0.7	)		(1.2	)		(2.7	)		(4.4	)
Total	$	(0.6	)	$	(1.7	)	$	(2.8	)	$	(5.2	)

Depreciation, Depletion, and Amortization
Performance Materials	$	7.6		$	6.8		$	31.2		$	24.3
Electronic Materials		4.3			4.2			17.0			16.5
Precision Optics		2.6			2.7			11.3			10.5
Other		0.6			0.5			2.1			2.1
Total	$	15.1		$	14.2		$	61.6		$	53.4

Segment EBITDA
Performance Materials	$	40.4		$	44.3		$	174.5		$	125.2
Electronic Materials		8.2			16.5			45.7			67.8
Precision Optics		2.2			4.4			9.9			13.7
Other		(7.5	)		(10.1	)		(29.3	)		(28.3	)
Total	$	43.3		$	55.1		$	200.8		$	178.4

Special Items ⁽²⁾
Performance Materials	$	5.6		$	—		$	6.7		$	6.8
Electronic Materials		2.8			0.6			7.3			8.2
Precision Optics		1.6			(0.4	)		2.8			0.3
Other		—			0.3			0.1			2.3
Total	$	10.0		$	0.5		$	16.9		$	17.6

Adjusted EBITDA Excluding Special Items
Performance Materials	$	46.0		$	44.3		$	181.2		$	132.0
Electronic Materials		11.0			17.1			53.0			76.0
Precision Optics		3.8			4.0			12.7			14.0
Other		(7.5	)		(9.8	)		(29.2	)		(26.0	)
Total	$	53.3		$	55.6		$	217.7		$	196.0

The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium 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 market 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.
⁽²⁾ See additional details of special items in Attachment 5.

Attachment 5

Materion Corporation and Subsidiaries
Reconciliation of Net Sales to Value-added Sales, Net Income to EBITDA and Adjusted EBITDA
(Unaudited)

	Fourth Quarter Ended									Twelve Months Ended
(Millions)	December 31, 2023		% of VA		December 31, 2022			% of VA		December 31, 2023		% of VA		December 31, 2022			% of VA
Net sales	$	421.0			$	434.6				$	1,665.2			$	1,757.1
Pass-through metal cost		131.3				131.6					538.1				642.7
Value-added sales	$	289.7			$	303.0				$	1,127.1			$	1,114.4

Net income	$	19.5	6.7	%	$	28.8		9.5	%	$	95.7	8.5	%	$	86.0		7.7	%
Income tax expense		0.2	0.1	%		4.5		1.5	%		12.2	1.1	%		17.1		1.5	%
Interest expense - net		8.5	2.9	%		7.6		2.5	%		31.3	2.8	%		21.9		2.0	%
Depreciation, depletion and amortization		15.1	5.2	%		14.2		4.7	%		61.6	5.5	%		53.4		4.8	%
Consolidated EBITDA	$	43.3	14.9	%	$	55.1		18.2	%	$	200.8	17.8	%	$	178.4		16.0	%

Special items
Restructuring and cost reduction	$	4.2	1.4	%	$	—		—	%	$	11.1	1.0	%	$	1.5		0.1	%
Pension settlement		0.2	0.1	%		(0.5	)	(0.2	)%		0.2	—	%		(0.5	)	—	%
Additional start up resources and scrap		5.6	1.9	%		—		—	%		5.6	0.5	%		4.1		0.4	%
Merger and acquisition costs		—	—	%		1.0		0.3	%		—	—	%		12.5		1.1	%
Total special items		10.0	3.5	%		0.5		0.2	%		16.9	1.5	%		17.6		1.6	%
Adjusted EBITDA	$	53.3	18.4	%	$	55.6		18.3	%	$	217.7	19.3	%	$	196.0		17.6	%
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, taxes, depreciation, depletion and amortization (EBITDA), net income, and earnings per share, on a non-GAAP basis. As detailed in the above reconciliation and Attachment 6, we have adjusted the results for certain special items such as restructuring and cost reductions (which includes costs associated with temporarily idled facilities as a result of decreased demand), additional start up resources and scrap and merger and acquisition costs. 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
Reconciliation of Net Income to Adjusted Net Income
and Diluted Earnings per Share to Adjusted Diluted Earnings per Share (Unaudited)

	Fourth Quarter Ended											Twelve Months Ended
(Millions)	December 31, 2023			Diluted EPS		December 31, 2022			Diluted EPS			December 31, 2023			Diluted EPS		December 31, 2022			Diluted EPS
Net income and EPS	$	19.5		$	0.93	$	28.8		$	1.38		$	95.7		$	4.58	$	86.0		$	4.14

Special items
Restructuring and cost reduction		4.2					—						11.1					1.5
Additional start up resources and scrap		5.6					—						5.6					4.1
Merger and acquisition costs		—					1.0						—					12.5
Pension settlement		0.2					(0.5	)					0.2					(0.5	)
Provision for income taxes ⁽¹⁾		(2.4	)				(0.8	)					(4.4	)				(3.9	)
Total special items		7.6			0.36		(0.3	)		(0.01	)		12.5			0.60		13.7			0.66
Adjusted net income and adjusted EPS	$	27.1		$	1.29	$	28.5		$	1.37		$	108.2		$	5.17	$	99.7		$	4.80
Acquisition amortization (net of tax)		2.5			0.12		2.4			0.12			9.8			0.47		9.8			0.47
Adjusted net income and adjusted EPS excl. amortization	$	29.6		$	1.41	$	30.9		$	1.49		$	118.0		$	5.64	$	109.5		$	5.27
⁽¹⁾ Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of certain discrete tax items recorded during the respective periods as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income in interim periods.

Attachment 7

Reconciliation of Segment Net sales to Segment Value-added sales and Segment EBITDA to Adjusted Segment EBITDA (Unaudited)
Performance Materials
	Fourth Quarter Ended										Twelve Months Ended
(Millions)	December 31, 2023			% of VA		December 31, 2022			% of VA		December 31, 2023			% of VA		December 31, 2022			% of VA
Net sales	$	201.1				$	197.6				$	755.5				$	671.5
Pass-through metal cost		15.1					20.0					66.9					82.0
Value-added sales	$	186.0				$	177.6				$	688.6				$	589.5

EBITDA	$	40.4		21.7	%	$	44.3		24.9	%	$	174.5		25.3	%	$	125.2		21.2	%
Restructuring and cost reduction		—		—	%		—		—	%		1.1		0.2	%		—		—	%
Additional start up resources and scrap		5.6		3.0	%		—		—	%		5.6		0.8	%		4.1		0.7	%
Merger and acquisition costs		—		—	%		—		—	%		—		—	%		2.7		0.5	%
Adjusted EBITDA	$	46.0		24.7	%	$	44.3		24.9	%	$	181.2		26.3	%	$	132.0		22.4	%

Electronic Materials
	Fourth Quarter Ended										Twelve Months Ended
(Millions)	December 31, 2023			% of VA		December 31, 2022			% of VA		December 31, 2023			% of VA		December 31, 2022			% of VA
Net sales	$	193.9				$	209.3				$	805.8				$	971.9
Pass-through metal cost		116.2					111.5					471.1					559.1
Value-added sales	$	77.7				$	97.8				$	334.7				$	412.8

EBITDA	$	8.2		10.6	%	$	16.5		16.9	%	$	45.7		13.7	%	$	67.8		16.4	%
Restructuring and cost reduction		2.8		3.6	%		—		—	%		7.3		2.2	%		0.8		0.2	%
Merger and acquisition costs		—		—	%		0.6		0.6	%		—		—	%		7.4		1.8	%
Adjusted EBITDA	$	11.0		14.2	%	$	17.1		17.5	%	$	53.0		15.8	%	$	76.0		18.4	%

Precision Optics
	Fourth Quarter Ended										Twelve Months Ended
(Millions)	December 31, 2023			% of VA		December 31, 2022			% of VA		December 31, 2023			% of VA		December 31, 2022			% of VA
Net sales	$	26.0				$	27.7				$	103.9				$	113.7
Pass-through metal cost		—					—					0.1					0.1
Value-added sales	$	26.0				$	27.7				$	103.8				$	113.6

EBITDA	$	2.2		8.5	%	$	4.4		15.9	%	$	9.9		9.5	%	$	13.7		12.1	%
Restructuring and cost reduction		1.4		5.4	%		—		—	%		2.6		2.5	%		0.6		0.5	%
Pension settlement		0.2		0.8	%		(0.5	)	(1.8	)%		0.2		0.2	%		(0.5	)	(0.4	)%
Merger and acquisition costs		—		—	%		0.1		0.4	%		—		—	%		0.2		0.2	%
Adjusted EBITDA	$	3.8		14.7	%	$	4.0		14.4	%	$	12.7		12.2	%	$	14.0		12.3	%

Other
	Fourth Quarter Ended										Twelve Months Ended
(Millions)	December 31, 2023			% of VA		December 31, 2022			% of VA		December 31, 2023			% of VA		December 31, 2022			% of VA
EBITDA	$	(7.5	)			$	(10.1	)			$	(29.3	)			$	(28.3	)
Restructuring and cost reduction		—					—					0.1					0.1
Merger and acquisition costs		—					0.3					—					2.2
Adjusted EBITDA	$	(7.5	)			$	(9.8	)			$	(29.2	)			$	(26.0	)

Attachment 8

Materion Corporation and Subsidiaries
Reconciliation of Non-GAAP Measure - Gross Margin to Adjusted Gross Margin
(Unaudited)

	Fourth Quarter Ended				Twelve Months Ended
(Millions)	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Gross Margin
Performance Materials	$	50.5	$	57.7	$	216.5	$	175.1
Electronic Materials		21.5		31.5		100.4		131.5
Precision Optics		7.7		9.2		32.1		37.3
Other		—		—		—		—
Total	$	79.7	$	98.4	$	349.0	$	343.9

Special Items ⁽¹⁾
Performance Materials	$	5.6	$	—	$	6.4	$	6.7
Electronic Materials		1.5		—		3.9		5.0
Precision Optics		1.0		—		1.3		—
Other		—		—		—		—
Total	$	8.1	$	—	$	11.6	$	11.7

Adjusted Gross Margin
Performance Materials	$	56.1	$	57.7	$	222.9	$	181.8
Electronic Materials		23.0		31.5		104.3		136.5
Precision Optics		8.7		9.2		33.4		37.3
Other		—		—		—		—
Total	$	87.8	$	98.4	$	360.6	$	355.6
⁽¹⁾ Special items impacting gross margin represent restructuring and cost reduction and additional start up resources and scrap in 2023 and merger and acquisition costs in 2022.

« Previous Page 1 | 2 | 3 Next Page »