Press Release Details

MAYFIELD HEIGHTS, Ohio--(BUSINESS WIRE)-- Materion Corporation (NYSE:MTRN) today reported second quarter 2015 financial results.

• Second quarter 2015 GAAP earnings were $0.43 per share, diluted. This compares to second quarter 2014 GAAP earnings of $0.47 per share, diluted, and represents a 19% improvement over the second quarter 2014 adjusted earnings of $0.36 per share, diluted.
• Second quarter 2015 results reflect the fifth consecutive quarter of year-over-year value-added sales and adjusted operating profit growth.
• Net sales for the second quarter of 2015 were $276.9 million. Value-added sales were $162.4 million, up 4% compared to value-added sales in the prior-year period, excluding the negative impact of foreign exchange rates.
• Operating profit for the second quarter 2015 was $12.8 million, an increase of 20% over the $10.7 million of adjusted operating profit recorded in the prior-year second quarter.
• Based on increasingly more volatile markets and slowing economic conditions, especially in China, the Company is revising its previously announced annual 2015 adjusted earnings forecast range to $1.65 to $1.85 per share from $1.80 to $2.00 per share, diluted.

SECOND QUARTER 2015 RESULTS

Net sales for the second quarter were $276.9 million, compared to net sales of $288.0 million for the second quarter of 2014. Value-added sales grew 2% to $162.4 million compared to value-added sales of $159.6 million for the second quarter of 2014. Excluding the negative year-over-year impact from foreign exchange rates, value-added sales grew 4% over the second quarter of 2014.

The growth in value-added sales in the second quarter of 2015 compared to the same period of last year was due primarily to stronger demand from customers in the defense, industrial components, automotive electronics and telecommunications infrastructure markets. New product value-added sales grew 44% over the prior-year comparable period and represented 11% of total second quarter 2015 value-added sales.

Operating profit for the second quarter of 2015 was $12.8 million, a 20% increase over the prior-year second quarter adjusted operating profit of $10.7 million. Adjusted operating profit margin, expressed as a percent of value-added sales, expanded by 120 basis points to 7.9% from the 2014 second quarter level. The margin improvement is a result of leveraging the higher sales volume and an improved product mix.

Net income for the second quarter of 2015 was $8.9 million, or $0.43 per share, diluted. This compares to net income of $10.0 million, or $0.47 per share, diluted, for the second quarter of the prior year. Excluding the net insurance settlement benefit recorded in the second quarter of 2014, earnings were up 19% compared to the second quarter 2014 adjusted earnings of $0.36 per share, diluted.

For the first six months of 2015, net sales were $566.9 million compared to net sales of $546.9 million for the same period of last year. Value-added sales for the first six months of 2015 were $325.0 million, up 7% compared to $304.5 million for the same period last year. Excluding the negative impact of foreign exchange rates, first half 2015 value-added sales grew 9% over the first half of 2014. Year-to-date net income was $18.5 million as compared to $17.3 million in the comparable period of the prior year. Excluding special items in both periods, adjusted earnings grew 31% year over year, from $0.64 per share, diluted, in the first half of 2014, to $0.84 per share, diluted, in the first half of 2015.

CHAIRMAN'S COMMENTS

Richard J. Hipple, Chairman, President and Chief Executive Officer, stated, "I am pleased with the quarter and our team's ability to deliver the fifth consecutive quarter of meaningful year-over-year value-added sales and earnings growth. Our strategy of pursuing organic growth through new product introductions and solving our customers' challenges with advanced materials is working. Despite our successes over the past several quarters, we are cautious about the current volatility in the global market, particularly the continued strength of the U.S. dollar, the greater than expected drop in oil and gas exploration, the recent slowdown in the telecommunications infrastructure 4G build out in China, and what the unknown impact may be of ongoing economic weakness in China. We are revising our annual earnings estimate to reflect these changing market and economic conditions. We remain committed to strategies to deliver greater than GDP organic value-added sales growth and margin expansion and remain confident in our long-term earnings growth outlook."

BUSINESS SEGMENT REPORTING

Performance Alloys and Composites

Net sales for Performance Alloys and Composites in the second quarter of 2015 were $107.7 million compared to net sales of $109.6 million in the second quarter of 2014. Value-added sales were $91.5 million in the second quarter of 2015, up $1.6 million, or 2%, compared to $89.9 million in the second quarter of 2014. Excluding the impact of foreign exchange rates, value-added sales increased 5% in the second quarter of 2015 over the prior-year period. Stronger value-added sales in the defense and industrial components end markets offset the declines in the energy and medical end markets.

Operating profit for the second quarter of 2015 was $9.3 million, up 48% over the prior-year operating profit of $6.3 million. Expressed as a percentage of value-added sales, operating profit margins expanded 320 basis points over the prior year to 10.2% in the second quarter of 2015. The margin expansion was driven by successes with our value-added growth strategy, improved product mix and our lean six-sigma program.

Advanced Materials

Advanced Materials' net sales for the second quarter of 2015 were $131.4 million, which compares to second quarter of 2014 net sales of $145.0 million. Value-added sales for the second quarter of 2015 were $46.7 million, up 4% compared to the second quarter 2014 value-added sales of $45.0 million. The improvement in the second quarter value-added sales compared to the same period last year was driven primarily by strength from customers serving the energy markets, particularly the solar market, the medical and telecommunications infrastructure end markets.

Operating profit for the second quarter of 2015 was $7.4 million, up 4% over an adjusted operating profit of $7.1 million in the second quarter of 2014. Operating profit as a percent of value-added sales for the second quarter of 2015 was 15.8%, comparable to the prior-year period.

Other

The Other segment includes the operating results of the Precision Coatings group and unallocated corporate costs.

Within the Other segment, Precision Coatings' net sales for the second quarter of 2015 were $38.3 million, which compares to net sales of $34.1 million for the second quarter of 2014. Value-added sales for the second quarter of 2015 were $25.2 million, compared to value-added sales of $24.9 million for the same period of 2014. Stronger sales to customers serving the medical and defense markets was offset in part by weaker demand in the consumer electronics end market, particularly the projector display market.

Precision Coatings' operating profit for the second quarter of 2015 was $0.6 million, or 2.4% of value-added sales, which is comparable to the second quarter of 2014 adjusted operating profit.

OUTLOOK

Despite the solid sales and earnings performance in the second quarter of 2015 and the solid five quarters of growth momentum we have delivered, global market and economic conditions are changing. China demand is clearly slowing, particularly in the telecommunications infrastructure 4G build out. Based on this change, coupled with the greater than previously expected drop-off in the oil and gas market and the continued strength of the U.S. dollar, the Company is revising its 2015 adjusted earnings forecast range to $1.65 to 1.85 per share. This represents a range that is flat to 12% above 2014 adjusted earnings of $1.65 per share, diluted.

CONFERENCE CALL

Materion Corporation will host a conference call with analysts at 9:00 a.m. Eastern Time, July 30, 2015. 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 August 14, 2015 by dialing (877) 660-6853 or (201) 612-7415; please reference Conference ID Number 13612965. 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, in particular, the outlook provided above. 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:

• Actual net sales, operating rates and margins for 2015;
• Our ability to strengthen our internal control over financial reporting and disclosure controls and procedures;
• The global economy;
• 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, with the major market segments being: consumer electronics, industrial components, medical, automotive electronics, energy, telecommunications infrastructure, defense, commercial aerospace, and science;
• 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 integrating acquired businesses;
• The impact of the results of acquisitions on our ability to achieve fully the strategic and financial objectives related to these acquisitions;
• Our success in implementing our strategic plans and the timely and successful completion and start-up of any capital projects;
• The availability of adequate lines of credit and the associated interest rates;
• Other financial factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal financing fees, tax rates, exchange rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, 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 success of the realignment of our businesses; and
• The risk factors as set forth in Item 1A of our Form 10-K for the year ended December 31, 2014.

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.