Press Release Details

Materion Corporation Reports Strong Second Quarter Financial Results and Raises Full Year Outlook

August 3, 2021

MAYFIELD HEIGHTS, Ohio--(BUSINESS WIRE)-- Materion Corporation (NYSE: MTRN), a world leader in high performing advanced materials, today reported strong second quarter financial results and raised its 2021 outlook.

Second Quarter 2021 Highlights

  • Net sales were $371.0 million compared to $271.5 million in the prior year period; value-added sales increased 31% year on year to a record $207.9 million for the quarter
  • Operating profit of $20.7 million; adjusted earnings before interest and taxes (EBIT) was $22.1 million, or 10.6% of value-added sales, a 260 basis point margin expansion year-over-year
  • Net income of $0.87 per share, diluted; adjusted earnings of $0.86 per share, an increase of 91% compared to $0.45 in the prior year period
  • Construction of new leading-edge manufacturing facility for customer funded engineered precision clad strip project nears completion; continuing to ship product from existing facility

Full Year 2021 Outlook

  • Full year outlook raised to $3.25 – $3.45, an increase of 65% versus prior year at the midpoint

“We posted exceptional results in the second quarter, with above market revenue growth, meaningful margin expansion and strong earnings,” said Jugal Vijayvargiya, President and Chief Executive Officer. “I am very proud of our team’s focus and dedication to serving our customers’ strong demand while continuing to execute on our key strategic initiatives. Based on our first half performance, continued market strength and a robust organic pipeline, we are increasing our outlook for the remainder of the year.”

SECOND QUARTER 2021 RESULTS

Net sales for the second quarter were $371.0 million, compared to $271.5 million in the prior year period. Value-added sales of $207.9 million were a record for any quarter, up 31% from the prior year quarter. Strong performance across several key end markets, including semiconductor, automotive, industrial, and consumer electronics drove the value-added sales growth.

Operating profit for the second quarter was $20.7 million, and net income was $17.9 million, or $0.87 per diluted share, compared to an operating profit of $7.6 million and net income of $5.8 million in the prior year period. Excluding special items, detailed in the attached tables, adjusted EBIT was $22.1 million in the second quarter, an increase of 73% versus the prior-year period. Strong commercial execution, favorable mix, and improved operating performance drove the increase.

Adjusted net income was $17.8 million, or $0.86 per diluted share, an increase of 91% compared to $0.45 per share in the prior year period.

OUTLOOK

We continue to see strength in our organic pipeline and good underlying demand across our end markets. Based on our first half performance and improved outlook, we expect adjusted earnings per diluted share in the third quarter to be in the range of $0.80 to $0.84 per share, an increase of 64% from the third quarter of 2020 at the midpoint. We are raising full-year 2021 adjusted earnings to $3.25 to $3.45 per diluted share. The midpoint of the revised guidance represents a 65% increase from the prior year.

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, August 3, 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 August 17, 2021 by dialing (877) 481-4010 or (919) 882-2331; please reference replay ID number 39482. 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 2020 Annual Report on Form 10-K.

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)

 

Second Quarter Ended

 

Six Months Ended

(In thousands except per share amounts)

July 2, 2021

 

June 26, 2020*

 

July 2, 2021

 

June 26, 2020*

Net sales

$

370,999

 

 

$

271,468

 

 

$

725,385

 

 

$

549,414

 

Cost of sales

301,418

 

 

224,513

 

 

589,008

 

 

457,889

 

Gross margin

69,581

 

 

46,955

 

 

136,377

 

 

91,525

 

Selling, general, and administrative expense

38,060

 

 

32,852

 

 

74,836

 

 

63,596

 

Research and development expense

6,604

 

 

4,502

 

 

12,810

 

 

8,687

 

Impairment charges

 

 

 

 

 

 

10,766

 

Restructuring expense (income)

 

 

2,387

 

 

(378

)

 

4,551

 

Other — net

4,194

 

 

(357

)

 

8,668

 

 

1,922

 

Operating profit

20,723

 

 

7,571

 

 

40,441

 

 

2,003

 

Other non-operating income—net

(1,277

)

 

(851

)

 

(2,553

)

 

(1,795

)

Interest expense — net

858

 

 

1,259

 

 

1,619

 

 

1,505

 

Income before income taxes

21,142

 

 

7,163

 

 

41,375

 

 

2,293

 

Income tax expense

3,274

 

 

1,360

 

 

6,740

 

 

368

 

Net income

$

17,868

 

 

$

5,803

 

 

$

34,635

 

 

$

1,925

 

Basic earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

0.87

 

 

$

0.29

 

 

$

1.70

 

 

$

0.09

 

Diluted earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

0.87

 

 

$

0.28

 

 

$

1.68

 

 

$

0.09

 

Weighted-average number of shares of common stock outstanding:

 

 

 

 

 

 

 

Basic

20,429

 

 

20,317

 

 

20,402

 

 

20,350

 

Diluted

20,651

 

 

20,554

 

 

20,647

 

 

20,587

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

 

Attachment 2

Materion Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Thousands)

 

July 2, 2021

 

December 31, 2020

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

24,345

 

 

$

25,878

 

Accounts receivable, net

 

179,326

 

 

166,447

 

Inventories, net

 

290,739

 

 

250,778

 

Prepaid and other current assets

 

22,155

 

 

20,896

 

Total current assets

 

516,565

 

 

463,999

 

Deferred income taxes

 

1,909

 

 

3,134

 

Property, plant, and equipment

 

1,052,464

 

 

998,312

 

Less allowances for depreciation, depletion, and amortization

 

(702,903

)

 

(688,626

)

Property, plant, and equipment—net

 

349,561

 

 

309,686

 

Operating lease, right-of-use assets

 

58,833

 

 

62,089

 

Intangible assets, net

 

50,851

 

 

54,672

 

Other assets

 

21,724

 

 

19,364

 

Goodwill

 

142,054

 

 

144,916

 

Total Assets

 

$

1,141,497

 

 

$

1,057,860

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Short-term debt

 

$

435

 

 

$

1,937

 

Accounts payable

 

80,600

 

 

55,640

 

Salaries and wages

 

27,505

 

 

18,809

 

Other liabilities and accrued items

 

36,930

 

 

40,887

 

Income taxes

 

4,837

 

 

1,898

 

Unearned revenue

 

10,920

 

 

7,713

 

Total current liabilities

 

161,227

 

 

126,884

 

Other long-term liabilities

 

17,477

 

 

17,002

 

Operating lease liabilities

 

53,736

 

 

56,761

 

Finance lease liabilities

 

18,410

 

 

20,539

 

Retirement and post-employment benefits

 

40,001

 

 

41,877

 

Unearned income

 

95,290

 

 

86,761

 

Deferred income taxes

 

14,817

 

 

15,864

 

Long-term debt

 

58,838

 

 

36,542

 

Shareholders’ equity

 

681,701

 

 

655,630

 

Total Liabilities and Shareholders’ Equity

 

$

1,141,497

 

 

$

1,057,860

 

 

Attachment 3

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Six Months Ended

(Thousands)

 

July 2, 2021

 

June 26, 2020*

Cash flows from operating activities:

 

 

 

 

Net income

 

$

34,635

 

 

$

1,925

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion, and amortization

 

19,063

 

 

23,522

 

Amortization of deferred financing costs in interest expense

 

364

 

 

364

 

Stock-based compensation expense (non-cash)

 

 

3,512

 

 

3,966

 

Deferred income tax expense (benefit)

 

367

 

 

(723

)

Impairment charges

 

 

 

10,766

 

Changes in assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(13,941

)

 

5,331

 

Inventory

 

(40,651

)

 

(18,446

)

Prepaid and other current assets

 

(1,718

)

 

(7,264

)

Accounts payable and accrued expenses

 

28,403

 

 

(7,634

)

Unearned revenue

 

3,246

 

 

(257

)

Interest and taxes payable

 

 

2,868

 

 

1,058

 

Unearned income due to customer prepayments

 

8,043

 

 

26,713

 

Other-net

 

(126

)

 

(2,888

)

Net cash provided by operating activities

 

44,065

 

 

36,433

 

Cash flows from investing activities:

 

 

 

 

Payments for purchase of property, plant, and equipment

 

(57,712

)

 

(32,034

)

Proceeds from sale of property, plant, and equipment

 

603

 

 

33

 

Net cash used in investing activities

 

(57,109

)

 

(32,001

)

Cash flows from financing activities:

 

 

 

 

Proceeds from borrowings under revolving credit agreement, net

 

22,500

 

 

150,000

 

Repayment of long-term debt

 

(1,654

)

 

(428

)

Principal payments under finance lease obligations

 

(1,512

)

 

(626

)

Cash dividends paid

 

(4,791

)

 

(4,582

)

Repurchase of common stock

 

 

 

(6,766

)

Payments of withholding taxes for stock-based compensation awards

 

(3,021

)

 

(2,025

)

Net cash provided by financing activities

 

11,522

 

 

135,573

 

Effects of exchange rate changes

 

(11

)

 

56

 

Net change in cash and cash equivalents

 

(1,533

)

 

140,061

 

Cash and cash equivalents at beginning of period

 

25,878

 

 

125,007

 

Cash and cash equivalents at end of period

 

$

24,345

 

 

$

265,068

 

*Prior period has been adjusted to reflect the change in inventory method, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

 

Attachment 4

Materion Corporation and Subsidiaries

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

(Unaudited)

 

Second Quarter Ended

 

Six Months Ended

(Millions)

July 2, 2021

 

June 26, 2020*

 

July 2, 2021

 

June 26, 2020*

Net Sales

 

 

 

 

 

 

 

Performance Alloys and Composites

$

125.3

 

 

$

101.6

 

 

$

239.4

 

 

$

200.7

 

Advanced Materials

213.1

 

 

150.1

 

 

417.8

 

 

310.3

 

Precision Optics

32.6

 

 

19.8

 

 

68.2

 

 

38.4

 

Other

 

 

 

 

 

 

 

Total

$

371.0

 

 

$

271.5

 

 

$

725.4

 

 

$

549.4

 

 

 

 

 

 

 

 

 

Less: Pass-through Metal Cost

 

 

 

 

 

 

 

Performance Alloys and Composites

$

16.7

 

 

$

11.8

 

 

$

30.0

 

 

$

27.2

 

Advanced Materials

146.2

 

 

97.9

 

 

287.9

 

 

203.6

 

Precision Optics

 

 

2.0

 

 

 

 

3.7

 

Other

0.2

 

 

0.7

 

 

1.0

 

 

1.9

 

Total

$

163.1

 

 

$

112.4

 

 

$

318.9

 

 

$

236.4

 

 

 

 

 

 

 

 

 

Value-added Sales (non-GAAP)

 

 

 

 

 

 

 

Performance Alloys and Composites

$

108.6

 

 

$

89.8

 

 

$

209.4

 

 

$

173.5

 

Advanced Materials

66.9

 

 

52.2

 

 

129.9

 

 

106.7

 

Precision Optics

32.6

 

 

17.8

 

 

68.2

 

 

34.7

 

Other

(0.2

)

 

(0.7

)

 

(1.0

)

 

(1.9

)

Total

$

207.9

 

 

$

159.1

 

 

$

406.5

 

 

$

313.0

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

Performance Alloys and Composites

$

33.0

 

 

$

24.0

 

 

$

62.6

 

 

$

44.8

 

Advanced Materials

25.0

 

 

16.4

 

 

48.8

 

 

34.2

 

Precision Optics

11.9

 

 

7.1

 

 

25.8

 

 

13.1

 

Other

(0.3

)

 

(0.5

)

 

(0.8

)

 

(0.6

)

Total

$

69.6

 

 

$

47.0

 

 

$

136.4

 

 

$

91.5

 

 

 

 

 

 

 

 

 

Operating Profit (Loss)

 

 

 

 

 

 

 

Performance Alloys and Composites

$

17.3

 

 

$

6.9

 

 

$

30.8

 

 

$

10.4

 

Advanced Materials

8.3

 

 

4.7

 

 

17.2

 

 

9.7

 

Precision Optics

2.6

 

 

2.1

 

 

7.2

 

 

(7.5

)

Other

(7.5

)

 

(6.1

)

 

(14.8

)

 

(10.6

)

Total

$

20.7

 

 

$

7.6

 

 

$

40.4

 

 

$

2.0

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

 

 

Second Quarter Ended

 

Six Months Ended

(Millions)

July 2, 2021

 

June 26, 2020*

 

July 2, 2021

 

June 26, 2020*

Special Items

 

 

 

 

 

 

 

Performance Alloys and Composites

$

 

 

$

4.2

 

 

$

 

 

$

7.8

 

Advanced Materials

 

 

0.6

 

 

 

 

0.7

 

Precision Optics

0.1

 

 

0.3

 

 

0.4

 

 

11.1

 

Other

 

 

(0.8

)

 

0.1

 

 

(0.7

)

Total

$

0.1

 

 

$

4.3

 

 

$

0.5

 

 

$

18.9

 

 

 

 

 

 

 

 

 

Operating Profit (Loss) Excluding Special Items

 

 

 

 

 

 

 

Performance Alloys and Composites

$

17.3

 

 

$

11.1

 

 

$

30.8

 

 

$

18.2

 

Advanced Materials

8.3

 

 

5.3

 

 

17.2

 

 

10.4

 

Precision Optics

2.7

 

 

2.4

 

 

7.6

 

 

3.6

 

Other

(7.5

)

 

(6.9

)

 

(14.7

)

 

(11.3

)

Total

$

20.8

 

 

$

11.9

 

 

$

40.9

 

 

$

20.9

 

 

 

 

 

 

 

 

 

Non-Operating (Income) Expense

 

 

 

 

 

 

 

Performance Alloys and Composites

$

0.2

 

 

$

0.1

 

 

$

0.3

 

 

$

0.3

 

Advanced Materials

 

 

 

 

 

 

 

Precision Optics

(0.2

)

 

 

 

(0.4

)

 

 

Other

(1.3

)

 

(1.0

)

 

(2.5

)

 

(2.1

)

Total

$

(1.3

)

 

$

(0.9

)

 

$

(2.6

)

 

$

(1.8

)

 

 

 

 

 

 

 

 

EBIT Excluding Special Items

 

 

 

 

 

 

 

Performance Alloys and Composites

$

17.1

 

 

$

11.0

 

 

$

30.5

 

 

$

17.9

 

Advanced Materials

8.3

 

 

5.3

 

 

17.2

 

 

10.4

 

Precision Optics

2.9

 

 

2.4

 

 

8.0

 

 

3.6

 

Other

(6.2

)

 

(5.9

)

 

(12.2

)

 

(9.2

)

Total

$

22.1

 

 

$

12.8

 

 

$

43.5

 

 

$

22.7

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

 

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 metal prices. The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation. During the first half of 2021, the Company added ruthenium, iridium, rhodium, rhenium, and osmium to its definition of value-added sales as the costs of these materials are treated as pass-through. Prior period value-added sales amounts have been recast to reflect this change. 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)

 

Second Quarter Ended

 

Six Months Ended

(Millions except per share amounts)

July 2, 2021

 

June 26, 2020*

 

July 2, 2021

 

June 26, 2020*

GAAP as Reported

 

 

 

 

 

 

 

Net sales

$

371.0

 

 

$

271.5

 

 

$

725.4

 

 

$

549.4

 

Operating profit

20.7

 

 

7.6

 

 

40.4

 

 

2.0

 

Non-operating income

(1.3

)

 

(0.9

)

 

(2.6

)

 

(1.8

)

Net income

17.9

 

 

5.8

 

 

34.6

 

 

1.9

 

Shares outstanding - Diluted

20,651

 

 

20,554

 

 

20,647

 

 

20,587

 

EPS - Diluted

$

0.87

 

 

$

0.28

 

 

$

1.68

 

 

$

0.09

 

 

 

 

 

 

 

 

 

Operating Profit Special Items

 

 

 

 

 

 

 

Impairment charges

$

 

 

$

 

 

$

 

 

$

10.8

 

Non-cash inventory adjustment

 

 

 

 

 

 

1.3

 

Cost reduction initiatives

0.1

 

 

2.4

 

 

0.4

 

 

4.6

 

COVID-19 related costs

 

 

2.7

 

 

 

 

2.9

 

Merger and acquisition costs

 

 

1.4

 

 

0.1

 

 

1.5

 

Foreign currency hedge gain

 

 

(2.2

)

 

 

 

(2.2

)

Total Operating Profit Special Items

$

0.1

 

 

$

4.3

 

 

$

0.5

 

 

$

18.9

 

Operating Profit Special Items - net of tax

$

0.1

 

 

$

3.3

 

 

$

0.4

 

 

$

14.5

 

Tax Special Items

$

(0.1

)

 

$

 

 

$

(0.3

)

 

$

0.7

 

Special items per diluted share

$

(0.01

)

 

$

0.17

 

 

$

 

 

$

0.75

 

 

 

 

 

 

 

 

 

Non-GAAP Measures - Adjusted Profitability

 

 

 

 

 

 

 

Value-added (VA) sales

$

207.9

 

 

$

159.1

 

 

$

406.5

 

 

$

313.0

 

Operating profit

20.8

 

 

11.9

 

 

40.9

 

 

20.9

 

Operating profit % of VA

10.0

%

 

7.5

%

 

10.1

%

 

6.7

%

EBIT

22.1

 

 

12.8

 

 

43.5

 

 

22.7

 

EBIT % of VA

10.6

%

 

8.0

%

 

10.7

%

 

7.3

%

Net income

17.8

 

 

9.1

 

 

34.7

 

 

17.1

 

EPS - Diluted

$

0.86

 

 

$

0.45

 

 

$

1.68

 

 

$

0.84

 

*Prior periods have been adjusted to reflect the change in inventory method, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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, non-cash inventory adjustments, cost reduction initiatives (i.e., severance), COVID-19 related costs, merger and acquisition costs, certain foreign currency hedge gains, 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.

 

Investor Contact:
Andrew R. Vento
(216) 383-4098
andrew.vento@materion.com

Media Contact:
Shannon Bennett
(216) 383-4094
shannon.bennett@materion.com

https://materion.com
Mayfield Hts-g

Source: Materion Corporation