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Materion Corp (MTRN) SEC Filing 8-K Material Event for the period ending Thursday, April 28, 2022

Materion Corp

CIK: 1104657 Ticker: MTRN
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Materion Corporation Reports Record Quarterly Results and
Raises Full Year 2022 Outlook
MAYFIELD HEIGHTS, Ohio – April 28, 2022 - Materion Corporation (NYSE: MTRN) today reported first quarter financial results, provided updated 2022 earnings guidance, and shared an update on key strategic initiatives.
First Quarter 2022 Highlights
Net sales were $449.0 million; value-added sales increased year over year to a record $266.8 million, up 34%
Operating profit was $19.6 million; adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was a record at $44.6 million, an increase of 49% and 160-basis point margin expansion year over year
Net income of $0.68 per share, diluted; record adjusted earnings per share (EPS) of $1.20, up 38% year over year; adjusted EPS with acquisition amortization of $1.08, up 32% versus prior year
Awarded significant expansion of precision clad strip business with approximately $40 million up-front customer investment
“I’m extremely proud of our talented team for continuing the momentum with a strong start to 2022, delivering another record quarter, meeting strong end market demand and realizing the benefits of organic outgrowth initiatives and strategic acquisitions,” Jugal Vijayvargiya, Materion President & Chief Executive Officer said. “With our sharp focus on operational excellence and pricing, we were able to deliver record sales and earnings, despite the inflationary environment and other challenges persisting in recent months.”
“We are accelerating our transformation into a leading provider of advanced materials solutions with the first full quarter of sales from the HCS-Electronic Materials acquisition delivering exceptional growth in the fast-growing semiconductor market,” Vijayvargiya continued. “Our broad organic initiatives continue to ramp meaningfully, also contributing strong growth in the quarter, and building solid demand for the future. Our customer-funded precision clad strip plant is nearly complete and on track to contribute meaningfully to our second half results. With the substantial progress so far and exceptional support our team has provided, the customer has made the decision to significantly expand capacity with us and further invest approximately $40 million in our new facility. This award underscores the confidence our customers have in us to support their continued growth and affirms our role as a critical partner in the development of innovative solutions for their most important technical challenges.”
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FIRST QUARTER 2022 RESULTS
Net sales for the first quarter of 2022 were $449.0 million, compared to $354.4 million in the prior year first quarter. Value-added sales of $266.8 million were a quarterly record, up 34% from the prior year. In addition to the benefit of the HCS-Electronic Materials acquisition, value-added sales were up 13% organically, driven by strong performance across several major end markets including semiconductor, energy, aerospace and industrial.
Operating profit for the first quarter was $19.6 million and net income was $14.0 million, or $0.68 per diluted share, compared to an operating profit of $19.7 million and net income of $16.8 million, or $0.81 per diluted share in the prior year period. Excluding acquisition and restructuring related costs as detailed in the attached tables, adjusted EBITDA was $44.6 million in the first quarter, another quarterly record and an increase of 49% versus the prior year period.
Adjusted net income was $24.9 million excluding acquisition amortization, or $1.20 per diluted share, an increase of 38% compared to $0.87 per share in the prior year period.
OUTLOOK
With continued strong end market demand, organic outgrowth resulting from our customer initiatives, and the full year impact of the HCS-Electronic Materials acquisition, we are raising the 2022 adjusted earnings per share guidance to the range of $5.50 to $5.90.
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, April 28, 2022. 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 (888) 506-0062. Calls outside the U.S. can dial (973) 528-0011; please reference participant access code of 741039 if dialing in. A replay of the call will be available until May 12, 2022 by dialing (877) 481-4010 or (919) 882-2331 if international; please reference replay ID number 44227. 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: our ability to achieve the strategic and other objectives related to the acquisition of HCS-Electronic Materials, including any expected synergies; our ability to successfully integrate the HCS-Electronic Materials business and other such acquisitions and achieve the expected results of the acquisition, the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial
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condition, and liquidity; the global economy, including the impact of tariffs and trade agreements; 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 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 consignment 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 Materion’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; and the risk factors set forth in Part 1, Item 1A of our 2021 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.

Investor Contact:                 Media Contact:
John Zaranec                Shannon Bennett
(216) 383-4010                (216) 383-4094
john.zaranec@materion.com         shannon.bennett@materion.com

https://materion.com
Mayfield Hts-g

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Attachment 1
Materion Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

First Quarter Ended
(Thousands, except per share amounts)April 1, 2022April 2, 2021
Net sales$449,045 $354,386 
Cost of sales373,754 287,590 
Gross margin75,291 66,796 
Selling, general, and administrative expense41,662 36,776 
Research and development expense7,074 6,206 
Restructuring expense (income)1,076 (378)
Other — net5,873 4,474 
Operating profit19,606 19,718 
Other non-operating income—net(1,169)(1,276)
Interest expense — net3,735 761 
Income before income taxes17,040 20,233 
Income tax expense3,021 3,466 
Net income$14,019 $16,767 
Basic earnings per share:
Net income per share of common stock$0.69 $0.82 
Diluted earnings per share:
Net income per share of common stock$0.68 $0.81 
Weighted-average number of shares of common stock outstanding:
Basic20,464 20,374 
Diluted20,724 20,628 

























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Attachment 2
Materion Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(Thousands)April 1, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$20,237 $14,462 
Accounts receivable, net237,712 223,553 
Inventories, net386,992 361,115 
Prepaid and other current assets27,971 28,122 
Total current assets672,912 627,252 
Deferred income taxes5,323 5,431 
Property, plant, and equipment1,149,458 1,132,223 
Less allowances for depreciation, depletion, and amortization(732,529)(723,248)
Property, plant, and equipment, net416,929 408,975 
Operating lease, right-of-use assets70,862 63,096 
Intangible assets, net152,922 156,736 
Other assets30,063 27,369 
Goodwill317,897 318,620 
Total Assets$1,666,908 $1,607,479 
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt$15,351 $15,359 
Accounts payable103,438 86,243 
Salaries and wages21,848 37,544 
Other liabilities and accrued items47,793 53,388 
Income taxes5,624 4,205 
Unearned revenue7,407 7,770 
Total current liabilities201,461 204,509 
Other long-term liabilities16,457 14,954 
Operating lease liabilities64,569 57,099 
Finance lease liabilities15,192 16,327 
Retirement and post-employment benefits32,704 33,394 
Unearned income96,971 97,962 
Long-term income taxes1,205 1,190 
Deferred income taxes27,564 27,216 
Long-term debt479,821 434,388 
Shareholders’ equity730,964 720,440 
Total Liabilities and Shareholders’ Equity$1,666,908 $1,607,479 









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Attachment 3

Materion Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
(Thousands)April 1, 2022April 2, 2021
Cash flows from operating activities:
Net income$14,019 $16,767 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization13,179 8,599 
Amortization of deferred financing costs in interest expense511 182 
Stock-based compensation expense (non-cash)
1,699 1,473 
Deferred income tax (benefit) expense401 382 
Changes in assets and liabilities:
Accounts receivable
(15,045)(15,697)
Inventory(28,129)(23,219)
Prepaid and other current assets(5)(2,107)
Accounts payable and accrued expenses(4,177)19,224 
Unearned revenue(343)932 
Interest and taxes payable
1,874 3,164 
Unearned income due to customer prepayments 5,890 
Other-net1,712 (140)
Net cash (used in) provided by operating activities(14,304)15,450 
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment(18,977)(31,250)
Proceeds from sale of property, plant, and equipment11 575 
Net cash used in investing activities(18,966)(30,675)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit agreement, net49,067 14,955 
Repayment of long-term debt(3,839)(377)
Principal payments under finance lease obligations(686)(675)
Cash dividends paid(2,520)(2,338)
Payments of withholding taxes for stock-based compensation awards(2,717)(2,838)
Net cash provided by financing activities39,305 8,727 
Effects of exchange rate changes(260)(446)
Net change in cash and cash equivalents5,775 (6,944)
Cash and cash equivalents at beginning of period14,462 25,878 
Cash and cash equivalents at end of period$20,237 $18,934 

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Attachment 4
Materion Corporation and Subsidiaries
Reconciliation of Non-GAAP Measure - Value-added Sales, Operating Profit, and EBITDA
(Unaudited)
First Quarter Ended
(Millions)April 1, 2022April 2, 2021
Net Sales
Performance Materials(1)
$149.6 $114.1 
Electronic Materials(1)
270.8 204.7 
Precision Optics28.6 35.6 
Other— — 
 Total$449.0 $354.4 
 Less: Pass-through Metal Cost
Performance Materials(1)
$20.5 $13.3 
Electronic Materials(1)
160.9 141.7 
Precision Optics0.1 — 
Other0.7 0.8 
 Total$182.2 $155.8 
 Value-added Sales (non-GAAP)
Performance Materials(1)
$129.1 $100.8 
Electronic Materials(1)
109.9 63.0 
Precision Optics28.5 35.6 
Other(0.7)(0.8)
 Total$266.8 $198.6 
Gross Margin
Performance Materials(1)
$37.3 $29.6 
Electronic Materials(1)
29.5 23.8 
Precision Optics8.5 13.9 
Other— (0.5)
 Total$75.3 $66.8 
(1)The Company changed two segment names during the first quarter of 2022: Performance Alloys and Composites became Performance Materials, and Advanced Materials became Electronic Materials. See further discussion in the Form 10-Q for the period ended April 1, 2022.



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First Quarter Ended
(Millions)April 1, 2022April 2, 2021
Operating Profit
Performance Materials$19.1 $13.5 
Electronic Materials8.0 8.9 
Precision Optics(0.7)4.6 
Other(6.8)(7.3)
Total$19.6 $19.7 
Non-Operating (Income) Expense
Performance Materials$0.2 $0.1 
Electronic Materials— — 
Precision Optics(0.2)(0.2)
Other(1.1)(1.2)
Total$(1.1)$(1.3)
Depreciation, Depletion, and Amortization
Performance Materials$5.9 $3.4 
Electronic Materials4.1 2.0 
Precision Optics2.7 2.7 
Other0.5 0.5 
Total$13.2 $8.6 
Segment EBITDA
Performance Materials$24.8 $16.8 
Electronic Materials12.1 10.9 
Precision Optics2.2 7.5 
Other(5.2)(5.6)
Total$33.9 $29.6 
Special Items
Performance Materials$2.7 $— 
Electronic Materials6.8 — 
Precision Optics0.2 0.3 
Other1.0 0.1 
 Total$10.7 $0.4 
Adjusted EBITDA Excluding Special Items
Performance Materials$27.5 $16.8 
Electronic Materials18.9 10.9 
Precision Optics2.4 7.8 
Other(4.2)(5.5)
 Total$44.6 $30.0 
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 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.
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]
Attachment 5
Materion Corporation and Subsidiaries
Reconciliation of Net sales to Value-added sales, Net Income to EBITDA and Adjusted EBITDA
(Unaudited)
Three Months EndedThree Months Ended
(Millions)April 1, 2022% of VAApril 2, 2021% of VA
Net sales$449.0 $354.4 
Pass-through metal cost182.2 155.8 
Value-added sales$266.8 $198.6 
Net income$14.0 5.2 %$16.8 8.5 %
Income tax expense3.0 1.1 %3.5 1.8 %
Interest expense - net3.7 1.4 %0.7 0.4 %
Depreciation, depletion and amortization13.2 4.9 %8.6 4.3 %
Consolidated EBITDA$33.9 12.7 %$29.6 14.9 %
Special items
Restructuring and cost reduction
$1.1 0.4 %$0.3 0.2 %
Merger and acquisition costs
9.6 3.6 %0.1 0.1 %
Total special items10.7 4.0 %0.4 0.2 %
Adjusted EBITDA$44.6 16.7 %$30.0 15.1 %
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 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 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.















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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)
Three Months EndedDilutedThree Months EndedDiluted
(Millions)April 1, 2022EPSApril 2, 2021EPS
Net income and EPS$14.0 $0.68 $16.8 $0.81 
Special items
Restructuring and cost reduction1.1 0.3 
Merger and acquisition costs9.6 0.1 
Provision for income taxes(1)
(2.3)(0.3)
Total special items8.4 0.40 0.1 0.01
Adjusted net income and adjusted EPS$22.4 $1.08 $16.9 $0.82 
Acquisition amortization (net of tax)2.5 0.12 1.1 0.05 
Adjusted net income and adjusted EPS excl. amortization$24.9 $1.20 $18.0 $0.87 
(1) Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of 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.






















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Attachment 7
Reconciliation of Segment Net sales to Segment Value-added sales and Segment EBITDA to Adjusted Segment EBITDA
(Unaudited)
Performance Materials
Three Months EndedThree Months Ended
(Millions)April 1, 2022% of VAApril 2, 2021% of VA
Net sales$149.6 $114.1 
Pass-through metal cost20.5 13.3 
Value-added sales$129.1 $100.8 
EBITDA$24.8 19.2 %$16.8 16.7 %
Merger and acquisition costs 2.7 2.1 %— — %
Adjusted EBITDA$27.5 21.3 %$16.8 16.7 %
Electronic Materials
Three Months EndedThree Months Ended
(Millions)April 1, 2022% of VAApril 2, 2021% of VA
Net sales$270.8 $204.7 
Pass-through metal cost160.9 141.7 
Value-added sales$109.9 $63.0 
EBITDA$12.1 11.0 %$10.9 17.3 %
Restructuring and cost reduction0.8 0.7 %— — %
Merger and acquisition costs6.0 5.5 %— — %
Adjusted EBITDA$18.9 17.2 %$10.9 17.3 %
Precision Optics
Three Months EndedThree Months Ended
(Millions)April 1, 2022% of VAApril 2, 2021% of VA
Net sales$28.6 $35.6 
Pass-through metal cost$0.1 $— 
Value-added sales$28.5 $35.6 
EBITDA$2.2 7.7 %$7.5 21.1 %
Restructuring and cost reduction0.2 0.6 %0.3 0.8 %
Adjusted EBITDA$2.4 8.3 %$7.8 21.9 %
Other
Three Months EndedThree Months Ended
(Millions)April 1, 2022April 2, 2021
EBITDA$(5.2)$(5.6)
Restructuring and cost reduction0.1 — 
Merger and acquisition costs0.9 0.1 
Adjusted EBITDA$(4.2)$(5.5)
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Ticker: MTRN
CIK: 1104657
Form Type: 8-K Corporate News
Accession Number: 0001104657-22-000070
Submitted to the SEC: Thu Apr 28 2022 7:38:05 AM EST
Accepted by the SEC: Thu Apr 28 2022
Period: Thursday, April 28, 2022
Industry: Metal Forgings And Stampings
Events:
  1. Earnings Release
  2. Financial Exhibit

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