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Materion Corporation Reports Record Third Quarter 2023 Results

Materion Corporation (NYSE: MTRN) today reported third quarter financial results and affirmed the midpoint of the 2023 earnings guidance.

Third Quarter 2023 Highlights

  • Net sales were $403.1 million; value-added sales1 were $270.5 million
  • Strong third quarter operating profit of $36.5 million versus $29.1 million in the prior year; record third quarter adjusted EBITDA2 of $55.4 million versus $48.8 million in the prior year, an increase of 14%
  • Record third quarter net income of $1.27 per share, diluted, and record adjusted earnings of $1.51 per share
  • Affirmed full year earnings outlook midpoint of $5.80 per share, a 10% increase year over year

Growth Highlights

  • Announced multiple new opportunities in space & defense, accelerating the organic growth pipeline
  • Outperformed adjusted EBITDA margin target of 20% for second consecutive quarter
  • Delivered twelfth consecutive quarter of adjusted EBITDA and adjusted EPS growth

“As a result of the outstanding efforts and dedication of our global team, we delivered another quarter of record earnings, raising the bar for operational excellence and delivering critical products and solutions for our customers,” Jugal Vijayvargiya, Materion President and CEO said.

“Our unique capabilities and exceptional technical expertise continue to unlock new organic growth opportunities aligned with global megatrends,” Vijayvargiya said. “These commercial wins and new partnerships have helped offset the impact of softness in some of our end markets, while seeding the pipeline for long-term sustainable growth.”

THIRD QUARTER 2023 RESULTS

Net sales for the quarter were $403.1 million, compared to $428.2 million in the prior year period. Value-added sales were $270.5 million for the quarter, down 5% from prior year due to continued semiconductor market softness, partially offset by strength in aerospace & defense, telecom & data center and precision clad strip.

Operating profit for the quarter was $36.5 million and net income was $26.6 million, or $1.27 per diluted share, compared to operating profit of $29.1 million and net income of $20.0 million, or $0.96 per diluted share in the prior year period.

Excluding special items3 primarily related to the targeted cost improvement initiatives, adjusted EBITDA was $55.4 million in the quarter, compared to $48.8 million in the prior year period. The increase was driven mainly by strong price/mix and operational performance.

Adjusted net income was $31.6 million excluding acquisition amortization, or $1.51 per diluted share, an increase of 15% compared to $1.31 per share in the prior year period.

OUTLOOK

With accelerating contributions from our megatrend-aligned organic pipeline, coupled with strong operational performance, we remain confident in our ability to execute and deliver another year of record results. Despite the slower than expected market recovery, we are narrowing the range and affirming the midpoint of our full-year adjusted earnings per share guidance in the range of $5.70 to $5.90, an increase of 10% at the midpoint versus 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 through 9 to this press release.

CONFERENCE CALL

Materion Corporation will host an investor conference call with analysts at 9:00 a.m. Eastern Time, November 1, 2023. The conference call will be available via webcast through the Company’s website at www.materion.com. By phone, please dial (888) 506-0062. Calls outside the U.S. can dial (973) 528-0011; please reference participant access code of 841062. A replay of the call will be available until November 15, 2023 by dialing (877) 481-4010 or (919) 882-2331 if international; please reference replay ID number 46840. The call will also be archived on the Company’s website.

FOOTNOTES

1 Value-added sales deducts the impact of pass-through metals from net sales

2 EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization

3 Details of the special items can be found in Attachments 4 through 9

ABOUT MATERION

Materion Corporation is a global leader in advanced materials solutions for high-performance industries including semiconductor, industrial, aerospace & defense, energy and automotive. With nearly 100 years of expertise in specialty engineered alloy systems, inorganic chemicals and powders, precious and non-precious metals, beryllium and beryllium composites, and precision filters and optical coatings, Materion partners with customers to enable breakthrough solutions that move the world forward. Headquartered in Mayfield Heights, Ohio, the company employs more than 3,500 talented people worldwide, serving customers in more than 60 countries.

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 global economy, including inflationary pressures, potential future recessionary conditions and the impact of tariffs and trade agreements; the impact of any U.S. Federal Government shutdowns or 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; the impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions; our success in implementing our strategic plans and the timely and successful start-up and completion 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 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 in operations from, and other effects of, catastrophic and other extraordinary events including outbreaks from infectious diseases and the conflict between Russia and Ukraine and other hostilities; realization of expected financial benefits expected from the Inflation Reduction Act of 2022; and the risk factors set forth in Part 1, Item 1A of the Company's 2022 Annual Report on Form 10-K.

Attachment 1

 

Materion Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 

 

Third Quarter Ended

 

Nine Months Ended

(In thousands except per share amounts)

September 29,

2023

 

September 30,

2022

 

September 29,

2023

 

September 30,

2022

Net sales

$

403,067

 

 

$

428,191

 

 

$

1,244,144

 

 

$

1,322,531

 

Cost of sales

 

314,131

 

 

 

345,448

 

 

 

974,817

 

 

 

1,077,070

 

Gross margin

 

88,936

 

 

 

82,743

 

 

 

269,327

 

 

 

245,461

 

Selling, general, and administrative expense

 

38,806

 

 

 

38,958

 

 

 

118,053

 

 

 

122,666

 

Research and development expense

 

6,322

 

 

 

7,430

 

 

 

21,098

 

 

 

22,096

 

Restructuring expense (income)

 

1,077

 

 

 

484

 

 

 

3,194

 

 

 

1,560

 

Other — net

 

6,211

 

 

 

6,774

 

 

 

18,178

 

 

 

18,575

 

Operating profit

 

36,520

 

 

 

29,097

 

 

 

108,804

 

 

 

80,564

 

Other non-operating income—net

 

(685

)

 

 

(1,175

)

 

 

(2,141

)

 

 

(3,512

)

Interest expense — net

 

7,678

 

 

 

5,888

 

 

 

22,820

 

 

 

14,325

 

Income before income taxes

 

29,527

 

 

 

24,384

 

 

 

88,125

 

 

 

69,751

 

Income tax expense

 

2,963

 

 

 

4,432

 

 

 

11,891

 

 

 

12,525

 

Net income

$

26,564

 

 

$

19,952

 

 

$

76,234

 

 

$

57,226

 

Basic earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

1.29

 

 

$

0.97

 

 

$

3.70

 

 

$

2.79

 

Diluted earnings per share:

 

 

 

 

 

 

 

Net income per share of common stock

$

1.27

 

 

$

0.96

 

 

$

3.65

 

 

$

2.76

 

Weighted-average number of shares of common stock outstanding:

 

 

 

 

 

 

 

Basic

 

20,640

 

 

 

20,526

 

 

 

20,611

 

 

 

20,502

 

Diluted

 

20,905

 

 

 

20,780

 

 

 

20,891

 

 

 

20,756

 

 

 

 

 

 

 

 

 

 

Attachment 2

 

Materion Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

 

(Thousands)

 

September 29, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

16,401

 

 

$

13,101

 

Accounts receivable, net

 

 

186,177

 

 

 

215,211

 

Inventories, net

 

 

452,042

 

 

 

423,080

 

Prepaid and other current assets

 

 

54,972

 

 

 

39,056

 

Total current assets

 

 

709,592

 

 

 

690,448

 

Deferred income taxes

 

 

3,214

 

 

 

3,265

 

Property, plant, and equipment

 

 

1,252,455

 

 

 

1,209,205

 

Less allowances for depreciation, depletion, and amortization

 

 

(755,626

)

 

 

(760,440

)

Property, plant, and equipment—net

 

 

496,829

 

 

 

448,765

 

Operating lease, right-of-use assets

 

 

57,747

 

 

 

64,249

 

Intangible assets, net

 

 

134,594

 

 

 

143,219

 

Other assets

 

 

27,186

 

 

 

22,535

 

Goodwill

 

 

319,435

 

 

 

319,498

 

Total Assets

 

$

1,748,597

 

 

$

1,691,979

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Short-term debt

 

$

38,634

 

 

$

21,105

 

Accounts payable

 

 

93,096

 

 

 

107,899

 

Salaries and wages

 

 

27,971

 

 

 

35,543

 

Other liabilities and accrued items

 

 

40,425

 

 

 

54,993

 

Income taxes

 

 

2,001

 

 

 

3,928

 

Unearned revenue

 

 

15,078

 

 

 

15,496

 

Total current liabilities

 

 

217,205

 

 

 

238,964

 

Other long-term liabilities

 

 

11,558

 

 

 

12,181

 

Operating lease liabilities

 

 

54,111

 

 

 

59,055

 

Finance lease liabilities

 

 

13,279

 

 

 

13,876

 

Retirement and post-employment benefits

 

 

20,089

 

 

 

20,422

 

Unearned income

 

 

109,076

 

 

 

107,736

 

Long-term income taxes

 

 

1,155

 

 

 

665

 

Deferred income taxes

 

 

27,795

 

 

 

28,214

 

Long-term debt

 

 

422,361

 

 

 

410,876

 

Shareholders’ equity

 

 

871,968

 

 

 

799,990

 

Total Liabilities and Shareholders’ Equity

 

$

1,748,597

 

 

$

1,691,979

 

 

 

 

 

 

 

Attachment 3

 

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

(Thousands)

 

September 29, 2023

 

September 30, 2022

Cash flows from operating activities:

 

 

 

 

Net income

 

$

76,234

 

 

$

57,226

 

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

 

 

 

 

Depreciation, depletion, and amortization

 

 

46,524

 

 

 

39,223

 

Amortization of deferred financing costs in interest expense

 

 

1,284

 

 

 

1,310

 

Stock-based compensation expense (non-cash)

 

 

7,578

 

 

 

5,997

 

Deferred income tax expense (benefit)

 

 

(149

)

 

 

1,825

 

Changes in assets and liabilities:

 

 

 

 

Accounts receivable

 

 

27,832

 

 

 

(20,964

)

Inventory

 

 

(30,868

)

 

 

(64,832

)

Prepaid and other current assets

 

 

(16,175

)

 

 

(3,019

)

Accounts payable and accrued expenses

 

 

(25,533

)

 

 

(1,785

)

Unearned revenue

 

 

(12,398

)

 

 

(2,191

)

Interest and taxes payable

 

 

(1,730

)

 

 

(1,741

)

Unearned income due to customer prepayments

 

 

16,676

 

 

 

17,501

 

Other-net

 

 

(4,770

)

 

 

5,654

 

Net cash provided by operating activities

 

 

84,505

 

 

 

34,204

 

Cash flows from investing activities:

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

(85,251

)

 

 

(54,236

)

Payments for mine development

 

 

(9,326

)

 

 

 

Proceeds from sale of property, plant, and equipment

 

 

417

 

 

 

827

 

Payments for acquisition, net of cash acquired

 

 

 

 

 

(2,971

)

Net cash used in investing activities

 

 

(94,160

)

 

 

(56,380

)

Cash flows from financing activities:

 

 

 

 

Proceeds from borrowings under credit facilities, net

 

 

39,649

 

 

 

55,735

 

Repayment of long-term debt

 

 

(11,579

)

 

 

(11,761

)

Principal payments under finance lease obligations

 

 

(1,297

)

 

 

(1,985

)

Cash dividends paid

 

 

(7,937

)

 

 

(7,584

)

Payments of withholding taxes for stock-based compensation awards

 

 

(5,101

)

 

 

(3,056

)

Net cash provided by financing activities

 

 

13,735

 

 

 

31,349

 

Effects of exchange rate changes

 

 

(780

)

 

 

(2,953

)

Net change in cash and cash equivalents

 

 

3,300

 

 

 

6,220

 

Cash and cash equivalents at beginning of period

 

 

13,101

 

 

 

14,462

 

Cash and cash equivalents at end of period

 

$

16,401

 

 

$

20,682

 

 
 

Attachment 4

 

Materion Corporation and Subsidiaries

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

(Unaudited)

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

September 30, 2022

 

September 29, 2023

 

September 30, 2022

Net Sales

 

 

 

 

 

 

 

Performance Materials

$

184.6

 

$

169.4

 

 

$

554.4

 

$

473.9

 

Electronic Materials

 

192.3

 

 

230.8

 

 

 

611.8

 

 

762.6

 

Precision Optics

 

26.2

 

 

28.0

 

 

 

77.9

 

 

86.0

 

Other

 

 

 

 

 

 

 

 

 

Total

$

403.1

 

$

428.2

 

 

$

1,244.1

 

$

1,322.5

 

 

 

 

 

 

 

 

 

Less: Pass-through Metal Cost

 

 

 

 

 

 

 

Performance Materials

$

15.7

 

$

20.6

 

 

$

51.9

 

$

62.0

 

Electronic Materials

 

116.8

 

 

123.9

 

 

 

354.8

 

 

447.7

 

Precision Optics

 

0.1

 

 

 

 

 

0.1

 

 

0.1

 

Other

 

 

 

0.2

 

 

 

 

 

1.3

 

Total

$

132.6

 

$

144.7

 

 

$

406.8

 

$

511.1

 

 

 

 

 

 

 

 

 

Value-added Sales (non-GAAP)

 

 

 

 

 

 

 

Performance Materials

$

168.9

 

$

148.8

 

 

$

502.5

 

$

411.9

 

Electronic Materials

 

75.5

 

 

106.9

 

 

 

257.0

 

 

314.9

 

Precision Optics

 

26.1

 

 

28.0

 

 

 

77.8

 

 

85.9

 

Other

 

 

 

(0.2

)

 

 

 

 

(1.3

)

Total

$

270.5

 

$

283.5

 

 

$

837.3

 

$

811.4

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

Performance Materials(1)

$

57.4

 

$

41.1

 

 

$

166.1

 

$

117.4

 

Electronic Materials(1)

 

23.1

 

 

31.9

 

 

 

78.9

 

 

100.0

 

Precision Optics(1)

 

8.4

 

 

9.8

 

 

 

24.3

 

 

28.1

 

Other

 

 

 

 

 

 

 

 

 

Total(1)

$

88.9

 

$

82.8

 

 

$

269.3

 

$

245.5

 

(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

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

September 30, 2022

 

September 29, 2023

 

September 30, 2022

Operating Profit/(Loss)

 

 

 

 

 

 

 

Performance Materials

$

38.9

 

 

$

22.9

 

 

$

110.9

 

 

$

63.8

 

Electronic Materials

 

6.0

 

 

 

12.8

 

 

 

24.8

 

 

 

39.0

 

Precision Optics

 

0.3

 

 

 

0.8

 

 

 

(1.6

)

 

 

0.8

 

Other

 

(8.7

)

 

 

(7.4

)

 

 

(25.3

)

 

 

(23.0

)

Total

$

36.5

 

 

$

29.1

 

 

$

108.8

 

 

$

80.6

 

 

 

 

 

 

 

 

 

Non-Operating (Income)/Expense

 

 

 

 

 

 

 

Performance Materials

$

0.2

 

 

$

0.1

 

 

$

0.4

 

 

$

0.4

 

Electronic Materials

 

 

 

 

 

 

 

 

 

 

 

Precision Optics

 

(0.2

)

 

 

(0.2

)

 

 

(0.6

)

 

 

(0.6

)

Other

 

(0.7

)

 

 

(1.1

)

 

 

(2.0

)

 

 

(3.3

)

Total

$

(0.7

)

 

$

(1.2

)

 

$

(2.2

)

 

$

(3.5

)

 

 

 

 

 

 

 

 

Depreciation, Depletion, and Amortization

 

 

 

 

 

 

 

Performance Materials

$

7.7

 

 

$

6.1

 

 

$

23.6

 

 

$

17.5

 

Electronic Materials

 

4.1

 

 

 

4.0

 

 

 

12.7

 

 

 

12.3

 

Precision Optics

 

2.8

 

 

 

2.6

 

 

 

8.7

 

 

 

7.9

 

Other

 

0.5

 

 

 

0.4

 

 

 

1.5

 

 

 

1.5

 

Total

$

15.1

 

 

$

13.1

 

 

$

46.5

 

 

$

39.2

 

 

 

 

 

 

 

 

 

Segment EBITDA

 

 

 

 

 

 

 

Performance Materials

$

46.4

 

 

$

28.9

 

 

$

134.1

 

 

$

80.9

 

Electronic Materials

 

10.1

 

 

 

16.8

 

 

 

37.5

 

 

 

51.3

 

Precision Optics

 

3.3

 

 

 

3.6

 

 

 

7.7

 

 

 

9.3

 

Other

 

(7.5

)

 

 

(5.9

)

 

 

(21.8

)

 

 

(18.2

)

Total

$

52.3

 

 

$

43.4

 

 

$

157.5

 

 

$

123.3

 

 

 

 

 

 

 

 

 

Special Items(2)

 

 

 

 

 

 

 

Performance Materials

$

0.1

 

 

$

4.1

 

 

$

1.1

 

 

$

6.8

 

Electronic Materials

 

2.9

 

 

 

0.4

 

 

 

4.5

 

 

 

7.6

 

Precision Optics

 

0.1

 

 

 

0.4

 

 

 

1.2

 

 

 

0.7

 

Other

 

 

 

 

0.5

 

 

 

0.1

 

 

 

2.0

 

Total

$

3.1

 

 

$

5.4

 

 

$

6.9

 

 

$

17.1

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Excluding Special Items

 

 

 

 

 

 

 

Performance Materials

$

46.5

 

 

$

33.0

 

 

$

135.2

 

 

$

87.7

 

Electronic Materials

 

13.0

 

 

 

17.2

 

 

 

42.0

 

 

 

58.9

 

Precision Optics

 

3.4

 

 

 

4.0

 

 

 

8.9

 

 

 

10.0

 

Other

 

(7.5

)

 

 

(5.4

)

 

 

(21.7

)

 

 

(16.2

)

Total

$

55.4

 

 

$

48.8

 

 

$

164.4

 

 

$

140.4

 

 

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)

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

 

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

Net sales

$

403.1

 

 

 

$

428.2

 

 

 

$

1,244.1

 

 

 

$

1,322.5

 

 

Pass-through metal cost

 

132.6

 

 

 

 

144.7

 

 

 

 

406.8

 

 

 

 

511.1

 

 

Value-added sales

$

270.5

 

 

 

$

283.5

 

 

 

$

837.3

 

 

 

$

811.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

26.6

 

9.8

%

 

$

20.0

 

7.1

%

 

$

76.2

 

9.1

%

 

$

57.2

 

7.0

%

Income tax expense

 

3.0

 

1.1

%

 

 

4.4

 

1.6

%

 

 

11.9

 

1.4

%

 

 

12.6

 

1.6

%

Interest expense - net

 

7.6

 

2.8

%

 

 

5.9

 

2.1

%

 

 

22.9

 

2.7

%

 

 

14.3

 

1.8

%

Depreciation, depletion and amortization

 

15.1

 

5.6

%

 

 

13.1

 

4.6

%

 

 

46.5

 

5.6

%

 

 

39.2

 

4.8

%

Consolidated EBITDA

$

52.3

 

19.3

%

 

$

43.4

 

15.3

%

 

$

157.5

 

18.8

%

 

$

123.3

 

15.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and cost reduction

$

3.1

 

1.1

%

 

$

0.4

 

0.1

%

 

$

6.9

 

0.8

%

 

$

1.5

 

0.2

%

Additional start up resources and scrap

 

 

%

 

 

4.1

 

1.4

%

 

 

 

%

 

 

4.1

 

0.5

%

Merger and acquisition costs

 

 

%

 

 

0.9

 

0.3

%

 

 

 

%

 

 

11.5

 

1.4

%

Total special items

 

3.1

 

1.1

%

 

 

5.4

 

1.9

%

 

 

6.9

 

0.8

%

 

 

17.1

 

2.1

%

Adjusted EBITDA

$

55.4

 

20.5

%

 

$

48.8

 

17.2

%

 

$

164.4

 

19.6

%

 

$

140.4

 

17.3

%

 

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)

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

Diluted EPS

 

September 30, 2022

 

Diluted EPS

 

September 29, 2023

 

Diluted EPS

 

September 30, 2022

 

Diluted EPS

Net income and EPS

$

26.6

 

 

$

1.27

 

$

20.0

 

 

$

0.96

 

$

76.2

 

 

$

3.65

 

$

57.2

 

 

$

2.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and cost reduction

 

3.1

 

 

 

 

 

0.4

 

 

 

 

 

6.9

 

 

 

 

 

1.5

 

 

 

Additional start up resources and scrap

 

 

 

 

 

 

4.1

 

 

 

 

 

 

 

 

 

 

4.1

 

 

 

Merger and acquisition costs

 

 

 

 

 

 

0.9

 

 

 

 

 

 

 

 

 

 

11.5

 

 

 

Provision for income taxes(1)

 

(0.6

)

 

 

 

 

(0.5

)

 

 

 

 

(2.1

)

 

 

 

 

(3.1

)

 

 

Total special items

 

2.5

 

 

 

0.12

 

 

4.9

 

 

 

0.23

 

 

4.8

 

 

 

0.23

 

 

14.0

 

 

 

0.67

Adjusted net income and adjusted EPS

$

29.1

 

 

$

1.39

 

$

24.9

 

 

$

1.19

 

$

81.0

 

 

$

3.88

 

$

71.2

 

 

$

3.43

Acquisition amortization (net of tax)

 

2.5

 

 

 

0.12

 

 

2.4

 

 

 

0.12

 

 

7.4

 

 

 

0.35

 

 

7.3

 

 

 

0.35

Adjusted net income and adjusted EPS excl. amortization

$

31.6

 

 

$

1.51

 

$

27.3

 

 

$

1.31

 

$

88.4

 

 

$

4.23

 

$

78.5

 

 

$

3.78

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

 

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

Net sales

$

184.6

 

 

 

 

$

169.4

 

 

 

 

$

554.4

 

 

 

 

$

473.9

 

 

 

Pass-through metal cost

 

15.7

 

 

 

 

 

20.6

 

 

 

 

 

51.9

 

 

 

 

 

62.0

 

 

 

Value-added sales

$

168.9

 

 

 

 

$

148.8

 

 

 

 

$

502.5

 

 

 

 

$

411.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

$

46.4

 

 

27.5

%

 

$

28.9

 

 

19.4

%

 

$

134.1

 

 

26.7

%

 

$

80.9

 

 

19.6

%

Restructuring and cost reduction

 

0.1

 

 

%

 

 

 

 

%

 

 

1.1

 

 

0.2

%

 

 

 

 

%

Additional start up resources and scrap

 

 

 

%

 

 

4.1

 

 

2.8

%

 

 

 

 

%

 

 

4.1

 

 

1.0

%

Merger and acquisition costs

 

 

 

%

 

 

 

 

%

 

 

 

 

%

 

 

2.7

 

 

0.7

%

Adjusted EBITDA

$

46.5

 

 

27.5

%

 

$

33.0

 

 

22.2

%

 

$

135.2

 

 

26.9

%

 

$

87.7

 

 

21.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronic Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

 

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

Net sales

$

192.3

 

 

 

 

$

230.8

 

 

 

 

$

611.8

 

 

 

 

$

762.6

 

 

 

Pass-through metal cost

 

116.8

 

 

 

 

 

123.9

 

 

 

 

 

354.8

 

 

 

 

 

447.7

 

 

 

Value-added sales

$

75.5

 

 

 

 

$

106.9

 

 

 

 

$

257.0

 

 

 

 

$

314.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

$

10.1

 

 

13.4

%

 

$

16.8

 

 

15.7

%

 

$

37.5

 

 

14.6

%

 

$

51.3

 

 

16.3

%

Restructuring and cost reduction

 

2.9

 

 

3.8

%

 

 

 

 

%

 

 

4.5

 

 

1.8

%

 

 

0.8

 

 

0.3

%

Merger and acquisition costs

 

 

 

%

 

 

0.4

 

 

0.4

%

 

 

 

 

%

 

 

6.8

 

 

2.2

%

Adjusted EBITDA

$

13.0

 

 

17.2

%

 

$

17.2

 

 

16.1

%

 

$

42.0

 

 

16.3

%

 

$

58.9

 

 

18.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Precision Optics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

 

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

Net sales

$

26.2

 

 

 

 

$

28.0

 

 

 

 

$

77.9

 

 

 

 

$

86.0

 

 

 

Pass-through metal cost

 

0.1

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

 

 

0.1

 

 

 

Value-added sales

$

26.1

 

 

 

 

$

28.0

 

 

 

 

$

77.8

 

 

 

 

$

85.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

$

3.3

 

 

12.6

%

 

$

3.6

 

 

12.9

%

 

$

7.7

 

 

9.9

%

 

$

9.3

 

 

10.8

%

Restructuring and cost reduction

 

0.1

 

 

0.4

%

 

 

0.4

 

 

1.4

%

 

 

1.2

 

 

1.5

%

 

 

0.6

 

 

0.7

%

Merger and acquisition costs

 

 

 

%

 

 

 

 

%

 

 

 

 

%

 

 

0.1

 

 

0.1

%

Adjusted EBITDA

$

3.4

 

 

13.0

%

 

$

4.0

 

 

14.3

%

 

$

8.9

 

 

11.4

%

 

$

10.0

 

 

11.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

 

September 29, 2023

 

% of VA

 

September 30, 2022

 

% of VA

EBITDA

$

(7.5

)

 

 

 

$

(5.9

)

 

 

 

$

(21.8

)

 

 

 

$

(18.2

)

 

 

Restructuring and cost reduction

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

 

 

0.1

 

 

 

Merger and acquisition costs

 

 

 

 

 

 

0.5

 

 

 

 

 

 

 

 

 

 

1.9

 

 

 

Adjusted EBITDA

$

(7.5

)

 

 

 

$

(5.4

)

 

 

 

$

(21.7

)

 

 

 

$

(16.2

)

 

 

 

Attachment 8

 

Materion Corporation and Subsidiaries

Reconciliation of Non-GAAP Measure - Gross Margin to Adjusted Gross Margin

(Unaudited)

 

 

Third Quarter Ended

 

Nine Months Ended

(Millions)

September 29, 2023

 

September 30, 2022

 

September 29, 2023

 

September 30, 2022

Gross Margin

 

 

 

 

 

 

 

Performance Materials

$

57.4

 

$

41.1

 

$

166.1

 

$

117.4

Electronic Materials

 

23.1

 

 

31.9

 

 

78.9

 

 

100.0

Precision Optics

 

8.4

 

 

9.8

 

 

24.3

 

 

28.1

Other

 

 

 

 

 

 

 

Total

$

88.9

 

$

82.8

 

$

269.3

 

$

245.5

 

 

 

 

 

 

 

 

Special Items (1)

 

 

 

 

 

 

 

Performance Materials

$

 

$

4.1

 

$

0.7

 

$

6.7

Electronic Materials

 

1.8

 

 

 

 

2.4

 

 

5.0

Precision Optics

 

0.1

 

 

 

 

0.4

 

 

Other

 

 

 

 

 

 

 

Total

$

1.9

 

$

4.1

 

$

3.5

 

$

11.7

 

 

 

 

 

 

 

 

Adjusted Gross Margin

 

 

 

 

 

 

 

Performance Materials

$

57.4

 

$

45.2

 

$

166.8

 

$

124.1

Electronic Materials

 

24.9

 

 

31.9

 

 

81.3

 

 

105.0

Precision Optics

 

8.5

 

 

9.8

 

 

24.7

 

 

28.1

Other

 

 

 

 

 

 

 

Total

$

90.8

 

$

86.9

 

$

272.8

 

$

257.2

 

(1) Special items impacting gross margin represent restructuring and cost reduction in 2023 and merger and acquisition costs in 2022.

 

Attachment 9

 

Materion Corporation and Subsidiaries

Reconciliation of Adjusted Earnings per Share to GAAP Earnings per Share for

Full Year 2023 Outlook and Year Ended December 31, 2022

(Unaudited)

 

 

Forecasted Full Year Ended December 31, 2023

 

 

 

Low End Earnings

per Share

 

High End Earnings

per Share

 

Year Ended

December 31, 2022

 

 

 

 

 

 

GAAP diluted earnings per share

$

5.00

 

$

5.20

 

$

4.14

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

Restructuring, cost reduction and other special items, net (1)

 

0.23

 

 

0.23

 

 

0.66

Acquisition amortization, net

 

0.47

 

 

0.47

 

 

0.47

Adjusted diluted earnings per share

$

5.70

 

$

5.90

 

$

5.27

 

(1) 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.

 

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