☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-15885
MATERION CORPORATION
(Exact name of Registrant as specified in charter)
Ohio
34-1919973
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
6070 Parkland Blvd., Mayfield Heights, Ohio44124
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(216)-486-4200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value
MTRN
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesþ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
Number of Shares of Common Stock, without par value, outstanding at April 2, 2021: 20,413,705.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Materion Corporation and Subsidiaries
Consolidated Statements of Income (Loss)
(Unaudited)
First Quarter Ended
(Thousands, except per share amounts)
April 2, 2021
March 27, 2020*
Net sales
$
354,386
$
277,946
Cost of sales
287,590
233,376
Gross margin
66,796
44,570
Selling, general, and administrative expense
36,776
30,744
Research and development expense
6,206
4,185
Goodwill impairment charges
—
9,053
Asset impairment charges
—
1,713
Restructuring (income) expense
(378)
2,164
Other—net
4,474
2,279
Operating profit (loss)
19,718
(5,568)
Other non-operating income—net
(1,276)
(944)
Interest expense—net
761
246
Income (loss) before income taxes
20,233
(4,870)
Income tax expense (benefit)
3,466
(992)
Net income (loss)
$
16,767
$
(3,878)
Basic earnings per share:
Net income (loss) per share of common stock
$
0.82
$
(0.19)
Diluted earnings per share:
Net income (loss) per share of common stock
$
0.81
$
(0.19)
Weighted-average number of shares of common stock outstanding:
Basic
20,374
20,384
Diluted
20,628
20,384
*Amounts for the period ended March 27, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
See notes to these consolidated financial statements.
2
Materion Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
First Quarter Ended
April 2,
March 27
(Thousands)
2021
2020*
Net income (loss)
$
16,767
$
(3,878)
Other comprehensive (loss) income:
Foreign currency translation adjustment
(8,857)
(873)
Derivative and hedging activity, net of tax
1,245
(854)
Pension and post-employment benefit adjustment, net of tax
164
16
Other comprehensive loss
(7,448)
(1,711)
Comprehensive income (loss)
$
9,319
$
(5,589)
*Amounts for the period ended March 27, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
See notes to these consolidated financial statements.
3
Materion Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
April 2,
Dec. 31,
(Thousands)
2021
2020
Assets
Current assets
Cash and cash equivalents
$
18,934
$
25,878
Accounts receivable, net
180,544
166,447
Inventories, net
272,828
250,778
Prepaid and other current assets
22,449
20,896
Total current assets
494,755
463,999
Deferred income taxes
1,932
3,134
Property, plant, and equipment
1,021,174
998,312
Less allowances for depreciation, depletion, and amortization
(692,101)
(688,626)
Property, plant, and equipment, net
329,073
309,686
Operating lease, right-of-use assets
59,826
62,089
Intangible assets, net
51,503
54,672
Other assets
20,791
19,364
Goodwill
140,392
144,916
Total Assets
$
1,098,272
$
1,057,860
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt
$
1,541
$
1,937
Accounts payable
72,489
55,640
Salaries and wages
22,803
18,809
Other liabilities and accrued items
36,927
40,887
Income taxes
5,102
1,898
Unearned revenue
8,573
7,713
Total current liabilities
147,435
126,884
Other long-term liabilities
17,777
17,002
Operating lease liabilities
54,593
56,761
Finance lease liabilities
18,937
20,539
Retirement and post-employment benefits
39,662
41,877
Unearned income
92,301
86,761
Deferred income taxes
14,824
15,864
Long-term debt
51,407
36,542
Shareholders’ equity
Serial preferred stock (no par value; 5,000 authorized shares, none issued)
—
—
Common stock (no par value; 60,000 authorized shares, issued shares of 27,148 at April 2 and December 31)
264,940
258,642
Retained earnings
645,468
631,058
Common stock in treasury
(206,845)
(199,187)
Accumulated other comprehensive loss
(46,087)
(38,639)
Other equity
3,860
3,756
Total shareholders' equity
661,336
655,630
Total Liabilities and Shareholders’ Equity
$
1,098,272
$
1,057,860
See the notes to these consolidated financial statements.
4
Materion Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
April 2,
March 27
(Thousands)
2021
2020*
Cash flows from operating activities:
Net income (loss)
$
16,767
$
(3,878)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, and amortization
8,599
14,274
Amortization of deferred financing costs in interest expense
182
182
Stock-based compensation expense (non-cash)
1,473
1,492
Deferred income tax expense (benefit)
382
(1,457)
Impairment charges
—
10,766
Changes in assets and liabilities:
Accounts receivable
(15,697)
11,049
Inventory
(23,219)
(15,718)
Prepaid and other current assets
(2,107)
1,127
Accounts payable and accrued expenses
19,224
(13,002)
Unearned revenue
932
(938)
Interest and taxes payable
3,164
368
Unearned income due to customer prepayments
5,890
7,113
Other-net
(140)
(2,248)
Net cash provided by operating activities
15,450
9,130
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment
(31,250)
(14,789)
Proceeds from sale of property, plant, and equipment
575
10
Net cash used in investing activities
(30,675)
(14,779)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit agreement, net
14,955
—
Repayment of long-term debt
(377)
(142)
Principal payments under finance lease obligations
(675)
(233)
Cash dividends paid
(2,338)
(2,245)
Repurchase of common stock
—
(6,766)
Payments of withholding taxes for stock-based compensation awards
(2,838)
(2,015)
Net cash provided by (used in) financing activities
8,727
(11,401)
Effects of exchange rate changes
(446)
(381)
Net change in cash and cash equivalents
(6,944)
(17,431)
Cash and cash equivalents at beginning of period
25,878
125,007
Cash and cash equivalents at end of period
$
18,934
$
107,576
*Amounts for the period ended March 27, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
See notes to these consolidated financial statements.
5
Materion Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Unaudited)
Common Shares
Shareholders' Equity
(Thousands, except per share amounts)
Common Shares
Common Shares Held in Treasury
Common Stock
Retained Earnings*
Common Stock in Treasury
Accumulated Other Comprehensive Loss
Other Equity
Total*
Balance at December 31, 2020
20,328
(6,820)
$
258,642
$
631,058
$
(199,187)
$
(38,639)
$
3,756
$
655,630
Net income
—
—
—
16,767
—
—
—
16,767
Other comprehensive loss
—
—
—
—
—
(7,448)
—
(7,448)
Cash dividends declared ($0.115 per share)
—
—
—
(2,338)
—
—
—
(2,338)
Stock-based compensation activity
127
127
6,259
(19)
(4,767)
—
—
1,473
Payments of withholding taxes for stock-based compensation awards
(43)
(43)
—
—
(2,838)
—
—
(2,838)
Directors’ deferred compensation
2
2
39
—
(53)
—
104
90
Balance at April 2, 2021
20,414
(6,734)
$
264,940
$
645,468
$
(206,845)
$
(46,087)
$
3,860
$
661,336
Balance at December 31, 2019
20,404
(6,744)
$
249,674
$
624,954
$
(186,845)
$
(45,462)
$
3,422
$
645,743
Net loss
—
—
—
(3,878)
—
—
—
(3,878)
Other comprehensive loss
—
—
—
—
—
(1,711)
—
(1,711)
Cash dividends declared ($0.11 per share)
—
—
—
(2,245)
—
—
—
(2,245)
Stock-based compensation activity
99
99
4,262
(35)
(2,643)
—
—
1,584
Payments of withholding taxes for stock-based compensation awards
(36)
(36)
—
—
(2,015)
—
—
(2,015)
Repurchase of shares
(158)
(158)
—
—
(6,766)
—
—
(6,766)
Directors’ deferred compensation
1
1
31
—
(42)
—
68
57
Balance at March 27, 2020
20,310
(6,838)
$
253,967
$
618,796
$
(198,311)
$
(47,173)
$
3,490
$
630,769
*Amounts for the period ended March 27, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
See notes to these consolidated financial statements.
6
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note A — Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All adjustments were of a normal and recurring nature. Certain amounts in prior periods have been reclassified to conform to the 2021 consolidated financial statement presentation.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2020 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year.
Business Combinations: The Company records assets acquired and liabilities assumed at the date of acquisition at their respective fair values. Any intangible assets acquired in a business combination are recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
The amounts reflected in Note B to the Consolidated Financial Statements are the results of a preliminary purchase price allocation and will be updated upon completion of the final valuation. The Company is required to complete the purchase price allocation within 12 months of the acquisition date. If such completion of the allocation results in a change in the preliminary values, the measurement period adjustment will be recognized in the period in which the adjustment amount is determined.
Change in Accounting Principle: During the fourth quarter of 2020, the Company elected to change its method for valuing its inventories at locations that previously used the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The Company believes that the FIFO method is preferable as it improves comparability with its most similar peers, it more closely resembles the physical flow of its inventory (i.e., it provides better matching of revenues and expenses), and it results in uniformity across a significant majority of the Company’s inventory. The effects of the change in accounting principle from LIFO to FIFO were retrospectively applied. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated balance sheets as of March 27, 2020 and the consolidated statements of income (loss), comprehensive income (loss), shareholders’ equity, and cash flows for the three months ended March 27, 2020 were adjusted as necessary. For further information, refer to the Company's 2020 Annual Report on Form 10-K.
7
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The following tables reflect the impact to the financial statement line items as a result of the change in accounting principle for the prior periods presented in the accompanying financial statements:
Consolidated Statement of Income
(Thousands except per share amounts)
First Quarter Ended
March 27, 2020
Selected Items
As Reported
As Adjusted
Adjustment
Cost of sales
$
232,371
$
233,376
$
1,005
Gross margin
45,575
44,570
(1,005)
Operating loss
(4,563)
(5,568)
(1,005)
Loss before income taxes
(3,865)
(4,870)
(1,005)
Income tax (benefit)
(762)
(992)
(230)
Net loss
(3,103)
(3,878)
(775)
Basic earnings per share:
Net loss per share of common stock
$
(0.15)
$
(0.19)
$
(0.04)
Diluted earnings per share:
Net loss per share of common stock
$
(0.15)
$
(0.19)
$
(0.04)
Consolidated Statement of Comprehensive Income (Loss)
(Thousands)
First Quarter Ended
March 27, 2020
Selected Items
As Reported
As Adjusted
Adjustment
Net loss
$
(3,103)
$
(3,878)
$
(775)
Comprehensive loss
(4,814)
(5,589)
(775)
Consolidated Statement of Cash Flow
(Thousands)
Three Months Ended
March 27, 2020
Selected Items
As Reported
As Adjusted
Adjustment
Net loss
$
(3,103)
$
(3,878)
$
(775)
Deferred income tax benefit
(1,227)
(1,457)
(230)
Decrease (increase) in inventory
(16,723)
(15,718)
1,005
New Pronouncements Adopted: In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing various exceptions, such as the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments in this update also simplify the accounting for income taxes related to income-based franchise taxes and require that an entity reflect enacted tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted the standard on January 1, 2021. The adoption did not materially impact the Company's financial statements or disclosures.
New Accounting Guidance Issued and Not Yet Adopted:In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance is intended
8
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. The Company is currently assessing which of its various contracts will require an update for a new reference rate, and will determine the timing for implementation of this guidance at the completion of that analysis.
No other recently issued or effective ASUs had, or are expected to have, a material effect on the Company's results of operations, financial condition, or liquidity.
Note B — Acquisition
Business acquisitions have been accounted for using the acquisition method, with acquired assets and assumed liabilities recognized at their respective fair values as of the acquisition date. The cost in excess of the net assets of the business acquired is included in goodwill.
On July 17, 2020, the Company completed the acquisition of Optics Balzers AG (Optics Balzers), an industry leader in thin film optical coatings. The purchase price for Optics Balzers was $136.1 million, including the assumption of $22.5 million of debt. The transaction was funded with cash on hand. Based on the fair value of assets acquired and liabilities assumed, goodwill of $70.8 million and identifiable intangible assets of $49.3 million were recorded. Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Precision Optics segment and the results of Optics Balzers are not material to our Consolidated Financial Statements. No material measurement period adjustments have been recorded during the first quarter of 2021. As of April 2, 2021, the purchase price allocation remains preliminary as the Company completes its assessments of income taxes.
Note C — Segment Reporting
The Company has the following reportable segments: Performance Alloys and Composites, Advanced Materials, Precision Optics, and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, the Company's chief operating decision maker, in determining how to allocate the Company’s resources and evaluate performance.
Performance Alloys and Composites produces strip and bulk form alloy products, strip metal products with clad inlay and overlay metals, beryllium-based metals, beryllium, and aluminum metal matrix composites, in rod, sheet, foil, and a variety of customized forms, beryllia ceramics, and bulk metallic glass materials.
Advanced Materials produces advanced chemicals, microelectric packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal preforms, high temperature braze materials, and ultra-fine wire.
Precision Optics produces thin film coatings, optical filter materials, sputter-coated, and precision-converted thin film materials.
The Other reportable segment includes unallocated corporate costs and assets.
(Thousands)
Performance Alloys and Composites
Advanced Materials
Precision Optics
Other
Total
First Quarter 2021
Net sales
$
114,143
$
204,644
$
35,599
$
—
$
354,386
Intersegment sales
5
2,687
—
—
2,692
Operating profit (loss)
13,491
8,933
4,558
(7,264)
19,718
First Quarter 2020
Net sales
$
99,067
$
160,165
$
18,714
$
—
$
277,946
Intersegment sales
215
9,191
—
—
9,406
Operating profit (loss)
3,523
5,050
(9,592)
(4,549)
(5,568)
9
The following table disaggregates revenue for each segment by end market for the first quarter of 2021 and 2020:
(Thousands)
Performance Alloys and Composites
Advanced Materials
Precision Optics
Other
Total
First Quarter 2021
End Market
Semiconductor
$
997
$
155,061
$
471
$
—
$
156,529
Industrial
24,030
12,590
7,375
—
43,995
Aerospace and defense
21,842
1,398
6,576
—
29,816
Consumer electronics
10,044
165
9,460
—
19,669
Automotive
23,507
1,669
2,193
—
27,369
Energy
4,137
27,190
—
—
31,327
Telecom and data center
11,343
70
—
—
11,413
Other
18,243
6,501
9,524
—
34,268
Total
$
114,143
$
204,644
$
35,599
$
—
$
354,386
First Quarter 2020
End Market
Semiconductor
$
906
$
120,819
$
11
$
—
$
121,736
Industrial
23,340
8,362
3,097
—
34,799
Aerospace and defense
14,206
1,426
5,109
—
20,741
Consumer electronics
14,695
118
3,541
—
18,354
Automotive
18,163
2,080
17
—
20,260
Energy
5,429
23,468
—
—
28,897
Telecom and data center
9,989
871
—
—
10,860
Other
12,339
3,021
6,939
—
22,299
Total
$
99,067
$
160,165
$
18,714
$
—
$
277,946
Intersegment sales are eliminated in consolidation.
Note D — Revenue Recognition
Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue, in an amount that reflects the consideration to which it expects to be entitled, upon satisfaction of a performance obligation, by transferring control over a product to the customer. Control over the product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product.
Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at April 2, 2021. Remaining performance obligations include non-cancelable purchase orders and customer contracts. The guidance provides certain practical expedients that limit this requirement. As such, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
After considering the practical expedient at April 2, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $81.9 million.
10
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Contract Balances: The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities:
(Thousands)
April 2, 2021
December 31, 2020
$ change
% change
Accounts receivable, trade
$
166,411
$
156,821
$
9,590
6
%
Unbilled receivables
13,895
8,832
5,063
57
%
Unearned revenue
8,573
7,713
860
11
%
Accounts receivable, trade represents payments due from customers relating to the transfer of the Company’s products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred relating to our receivables were immaterial during the first quarter of 2021.
Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables.
Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $2.4 million of the December 31, 2020 unearned amounts as revenue during the first three months of 2021.
As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers.
Note E — Other-net
Other-net for the first quarter of 2021 and 2020 is summarized as follows:
First Quarter Ended
April 2,
March 27
(Thousands)
2021
2020
Metal consignment fees
$
2,150
$
2,229
Amortization of intangible assets
1,173
188
Foreign currency loss (gain)
1,249
(62)
Net (gain) loss on disposal of fixed assets
(388)
46
Other items
290
(122)
Total
$
4,474
$
2,279
Note F — Restructuring
During 2020, the Company determined it would close its Large Area Coatings (LAC) business (a reporting unit in the Precision Optics segment). The closure was substantially completed by the end of the first quarter of 2021. Income of $0.4 million was recorded in 2021 primarily related to lower than previously estimated facility closure costs that were recorded in 2020.
Remaining severance payments of $0.2 million are reflected in Salaries and wages in the Consolidated Balance Sheet as of April 2, 2021 and are expected to be substantially paid by the end of 2021. Any additional costs related to the closure of this business are expected to be immaterial.
11
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
In addition, during 2020, the Company initiated a restructuring plan in its Performance Alloys and Composites segment to close its Warren, Michigan and Fremont, California locations. Costs associated with the plan totaled $2.2 million in the first quarter of 2020 and included $0.5 million of severance associated with approximately 63 employees and $1.3 million of facility and other related costs. This plan was substantially complete by the end of 2020.
Remaining severance payments of $0.2 million and facility costs of $0.5 million related to these initiatives are reflected within Salaries and wages and Other liabilities and accrued items, respectively, in the Consolidated Balance Sheets and are expected to be substantially paid by the end of the second quarter of 2021.
Note G — Income Taxes
The Company's effective tax rate for the first quarter of 2021 and 2020 was 17.1% and 20.4%, respectively. The effective tax rate for the first quarter of 2021 was lower than the statutory tax rate primarily due to the impact of percentage depletion and research and development credits. The effective tax rate for the first three months of 2021 included a net discrete income tax benefit of $0.3 million, primarily related to excess tax benefits from stock-based compensation awards. The effective tax rate for the first quarter of 2020 included a net discrete income tax expense of $0.2 million, primarily related to an impairment of goodwill and excess tax benefits from stock-based compensation awards.
On March 11, 2021, President Biden signed the American Rescue Plan (the Plan) into law. The Plan, among other things, extends and enhances a number of current-law tax incentives for businesses. While the Company continues to examine the impacts the Plan may have on its business, it does not expect it will have a material impact to its consolidated financial statements.
Note H — Earnings Per Share (EPS)
The following table sets forth the computation of basic and diluted EPS:
First Quarter Ended
April 2,
March 27
(Thousands, except per share amounts)
2021
2020
Numerator for basic and diluted EPS:
Net income (loss)
$
16,767
$
(3,878)
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding
20,374
20,384
Effect of dilutive securities:
Stock appreciation rights
72
—
Restricted stock units
108
—
Performance-based restricted stock units
74
—
Diluted potential common shares
254
—
Denominator for diluted EPS:
Adjusted weighted-average shares outstanding
20,628
20,384
Basic EPS
$
0.82
$
(0.19)
Diluted EPS
$
0.81
$
(0.19)
Adjusted weighted-average shares outstanding - diluted exclude securities totaling 63,627 and 302,573 for the quarters ended April 2, 2021 and March 27, 2020, respectively. These securities are primarily related to restricted stock units and stock appreciation rights with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would have been anti-dilutive.
12
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Additionally, adjusted weighted-average shares outstanding - diluted for the three months ended March 27, 2020 exclude the dilutive effect of approximately 239,000 shares, primarily related to restricted stock units and stock appreciation rights, as their inclusion would have been anti-dilutive due to the Company's net loss.
Note I — Inventories
Inventories on the Consolidated Balance Sheets are summarized as follows:
April 2,
December 31,
(Thousands)
2021
2020
Raw materials and supplies
$
59,384
$
42,905
Work in process
164,497
156,093
Finished goods
48,947
51,780
Inventories, net
$
272,828
$
250,778
The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce its exposure to metal price movements and to reduce its working capital investment. The notional value of off-balance sheet precious metals and copper was $411.9 million and $400.0 million as of April 2, 2021 and December 31, 2020, respectively. Amounts for the year ended December 31, 2020 have been revised to reflect a $44.6 million reclassification out of work in process and into finished goods inventory.
Note J — Customer Prepayments
The Company entered into investment and master supply agreements with a customer to procure equipment to manufacture product for the customer. The customer is providing prepayments to the Company in the amount of approximately $70 million in the aggregate to enable the Company to purchase and install certain equipment and make necessary infrastructure improvements to supply product to the customer. The Company will own the equipment and be responsible for operating and maintenance costs. The prepayment from the customer will be applied when commercial production of the product is sold and delivered to the customer in connection with a master supply agreement. Accordingly, as of April 2, 2021 and December 31, 2020, $64.7 million and $58.8 million, respectively, of prepayments are classified as Unearned Income in the Consolidated Balance Sheet, of which $5.9 million was received during the first quarter of 2021.
Note K — Pensions and Other Post-employment Benefits
The following is a summary of the net periodic benefit cost for the first quarter of 2021 and 2020 for the domestic pension plans (which include the defined benefit pension plan and the supplemental retirement plans) and the domestic retiree medical plan.
Pension Benefits
Other Benefits
First Quarter Ended
First Quarter Ended
April 2,
March 27
April 2,
March 27
(Thousands)
2021
2020
2021
2020
Components of net periodic benefit (income) cost
Service cost
$
—
$
—
$
20
$
15
Interest cost
986
1,215
29
53
Expected return on plan assets
(2,234)
(2,205)
—
—
Amortization of prior service cost (benefit)
—
—
(374)
(374)
Amortization of net loss (gain)
418
284
(69)
(83)
Total net benefit (income) cost
$
(830)
$
(706)
$
(394)
$
(389)
The Company did not make any contributions to its domestic defined benefit plan in the first quarter of 2021 or 2020.
13
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in Other non-operating (income) expense.
In May 2019, the Company's Board of Directors approved changes to the U.S. defined benefit pension plan. The Company froze the pay and service amounts used to calculate pension benefits for active participants in the pension plan as of January 1, 2020.
Note L — Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the first quarter of 2021 and 2020 are as follows:
Gains and Losses on Cash Flow Hedges
(Thousands)
Foreign Currency
Precious Metals
Copper
Total
Pension and Post-Employment Benefits
Foreign Currency Translation
Total
Balance at December 31, 2020
$
519
$
(170)
$
468
$
817
$
(43,473)
$
4,017
$
(38,639)
Other comprehensive income (loss) before reclassifications
1,085
741
1,291
3,117
—
(8,857)
(5,740)
Amounts reclassified from accumulated other comprehensive income (loss)
140
(104)
(1,534)
(1,498)
157
—
(1,341)
Net current period other comprehensive (loss) income before tax
1,225
637
(243)
1,619
157
(8,857)
(7,081)
Deferred taxes
282
147
(55)
374
(7)
—
367
Net current period other comprehensive (loss) income after tax
943
490
(188)
1,245
164
(8,857)
(7,448)
Balance at April 2, 2021
$
1,462
$
320
$
280
$
2,062
$
(43,309)
$
(4,840)
$
(46,087)
Balance at December 31, 2019
$
1,324
$
(452)
$
25
$
897
$
(41,346)
$
(5,013)
$
(45,462)
Other comprehensive (loss) income before reclassifications
(142)
(823)
(778)
(1,743)
—
(873)
(2,616)
Amounts reclassified from accumulated other comprehensive income (loss)
(1)
318
321
638
(24)
—
614
Net current period other comprehensive (loss) income before tax
(143)
(505)
(457)
(1,105)
(24)
(873)
(2,002)
Deferred taxes
(33)
(116)
(102)
(251)
(40)
—
(291)
Net current period other comprehensive (loss) income after tax
(110)
(389)
(355)
(854)
16
(873)
(1,711)
Balance at March 27, 2020
$
1,214
$
(841)
$
(330)
$
43
$
(41,330)
$
(5,886)
$
(47,173)
Reclassifications from accumulated other comprehensive income (loss) of gains and losses on foreign currency cash flow hedges are recorded in Net sales in the Consolidated Statements of Income (Loss). Reclassifications from accumulated other comprehensive income (loss) of gains and losses on precious metal and copper cash flow hedges are recorded in Cost of sales in the Consolidated Statements of Income. Refer to Note O for additional details on cash flow hedges.
Reclassifications from accumulated other comprehensive income (loss) for pension and post-employment benefits are included in the computation of the net periodic pension and post-employment benefit expense. Refer to Note K for additional details on pension and post-employment expenses.
14
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note M — Stock-based Compensation Expense
Stock-based compensation expense, which includes awards settled in shares and in cash, was $1.6 million and $1.0 million in the first quarter of 2021 and 2020, respectively.
The Company granted 52,709 stock appreciation rights (SARs) to certain employees during the first quarter of 2021. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the three months ended April 2, 2021 were $68.82 and $20.66, respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model:
Risk-free interest rate
0.57
%
Dividend yield
0.7
%
Volatility
37.6
%
Expected term (in years)
4.6
The Company granted 53,199 stock-settled restricted stock units (RSUs) to certain employees during the first quarter of 2021. The Company measures the fair value of stock-settled RSUs based on the closing market price of a share of Materion common stock on the date of the grant. The weighted-average fair value per share was $68.49 for stock-settled RSUs granted to employees during the three months ended April 2, 2021. RSUs are generally expensed over the vesting period of three years for employees.
The Company granted stock-settled performance-based restricted stock units (PRSUs) to certain employees in the first quarter of 2021. The weighted-average fair value of the stock-settled PRSUs was $83.78 per share and will be expensed over the vesting period of three years. The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and its total return to shareholders over the vesting period relative to a peer group’s performance over the same period.
At April 2, 2021, unamortized compensation cost related to the unvested portion of all stock-based awards was approximately $13.8 million, and is expected to be recognized over the remaining vesting period of the respective grants.
Note N — Fair Value of Financial Instruments
The Company measures and records financial instruments at fair value. A hierarchy is used for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 — Quoted market prices in active markets for identical assets and liabilities;
Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 — Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect
those that a market participant would use.
15
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the financial instruments measured at fair value in the Consolidated Balance Sheets as of April 2, 2021 and December 31, 2020:
(Thousands)
Total Carrying Value in the Consolidated Balance Sheets
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
2021
2020
2021
2020
2021
2020
2021
2020
Financial Assets
Deferred compensation investments
$
3,802
$
3,802
$
3,802
$
3,802
$
—
$
—
$
—
$
—
Foreign currency forward contracts
299
107
—
—
299
107
—
—
Precious metal swaps
418
127
—
—
418
127
—
—
Copper swaps
550
632
—
—
550
632
—
—
Total
$
5,069
$
4,668
$
3,802
$
3,802
$
1,267
$
866
$
—
$
—
Financial Liabilities
Deferred compensation liability
$
3,802
$
3,802
$
3,802
$
3,802
$
—
$
—
$
—
$
—
Foreign currency forward contracts
685
1,203
—
—
685
1,203
—
—
Precious metal swaps
3
349
—
—
3
349
—
—
Copper swaps
188
27
—
—
188
27
—
—
Total
$
4,678
$
5,381
$
3,802
$
3,802
$
876
$
1,579
$
—
$
—
The Company uses a market approach to value the assets and liabilities for financial instruments in the table above. Outstanding contracts are valued through models that utilize market observable inputs, including both spot and forward prices, for the same underlying currencies and metals. The carrying values of the other working capital items and debt in the Consolidated Balance Sheets approximate fair values as of April 2, 2021 and December 31, 2020. The Company's deferred compensation investments and liabilities are based on the fair value of the investments corresponding to the employees’ investment selections, primarily in mutual funds, based on quoted prices in active markets for identical assets. Deferred compensation investments are primarily presented in Other assets. Deferred compensation liabilities are primarily presented in Other long-term liabilities.
Note O — Derivative Instruments and Hedging Activity
The Company uses derivative contracts to hedge portions of its foreign currency exposures and uses derivatives to hedge a portion of its precious metal and copper exposures. The objectives and strategies for using derivatives in these areas are as follows:
Foreign Currency. The Company sells a portion of its products to overseas customers in their local currencies, primarily the euro and yen. The Company secures foreign currency derivatives, mainly forward contracts and options, to hedge these anticipated sales transactions. The purpose of the hedge program is to protect against the reduction in the dollar value of foreign currency sales from adverse exchange rate movements. Should the dollar strengthen significantly, the decrease in the translated value of the foreign currency sales should be partially offset by gains on the hedge contracts. Depending upon the methods used, the hedge contracts may limit the benefits from a weakening U.S. dollar.
The use of forward contracts locks in a firm rate and eliminates any downside from an adverse rate movement as well as any benefit from a favorable rate movement. The Company may from time to time choose to hedge with options or a tandem of options, known as a collar. These hedging techniques can limit or eliminate the downside risk but can allow for some or all of the benefit from a favorable rate movement to be realized. Unlike a forward contract, a premium is paid for an option; collars, which are a combination of a put and call option, may have a net premium but
16
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
can be structured to be cash neutral. The Company will primarily hedge with forward contracts due to the relationship between the cash outlay and the level of risk.
The use of foreign currency derivative contracts is governed by policies approved by the Audit Committee of the Board of Directors. A team consisting of senior financial managers reviews the estimated exposure levels, as defined by budgets, forecasts, and other internal data, and determines the timing, amounts, and instruments to use to hedge exposures. Management analyzes the effective hedged rates and the actual and projected gains and losses on the hedging transactions against the program objectives, targeted rates, and levels of risk assumed. Foreign currency contracts are typically layered in at different times for a specified exposure period in order to minimize the impact of market rate movements.
Precious Metals. The Company maintains the majority of its precious metal production requirements on consignment in order to reduce its working capital investment and the exposure to metal price movements. When a precious metal product is fabricated and ready for shipment to the customer, the metal is purchased out of consignment at the current market price. The price paid by the Company forms the basis for the price charged to the customer. This methodology allows for changes in either direction in the market prices of the precious metals used by the Company to be passed through to the customer and reduces the impact changes in prices could have on the Company's margins and operating profit. The consigned metal is owned by financial institutions that charge the Company a financing fee based upon the current value of the metal on hand.
In certain instances, a customer may want to establish the price for the precious metal at the time the sales order is placed rather than at the time of shipment. Setting the sales price at a different date than when the material would be purchased potentially creates an exposure to movements in the market price of the metal. Therefore, in these limited situations, the Company may elect to enter into a forward contract to purchase precious metal. The forward contract allows the Company to purchase metal at a fixed price on a specific future date. The price in the forward contract serves as the basis for the price to be charged to the customer. By doing so, the selling price and purchase price are matched, and the Company's price exposure is reduced.
The Company refines precious metal-containing materials for its customers and typically will purchase the refined metal from the customer at current market prices. In limited circumstances, the customer may want to fix the price to be paid at the time of the order as opposed to when the material is refined. The customer may also want to fix the price for a set period of time. The Company may then elect to enter into a hedge contract, either a forward contract or a swap, to fix the price for the estimated quantity of metal to be purchased, thereby reducing the exposure to adverse movements in the price of the metal. The Company may also enter into hedges to mitigate the risk relating to the prices of the metals which we process or refine.
In certain circumstances, the Company also refines metal from the customer and may retain a portion of the refined metal as payment. The Company may elect to enter into a forward contract to sell precious metal to reduce the Company's price exposure.
The Company may from time to time elect to purchase precious metal and hold in inventory rather than on consignment due to potential credit line limitations or other factors. These purchases are typically held for a short duration. A forward contract will be secured at the time of the purchase to fix the price to be used when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was owned.
Copper. The Company also uses copper in its production processes. When possible, fluctuations in the purchase price of copper are passed on to customers in the form of price adders or reductions. While over time the Company's price exposure to copper is generally in balance, there can be a lag between the change in the Company's cost and the pass-through to its customers, resulting in higher or lower margins in a given period. To mitigate this impact, the Company hedges a portion of this pricing risk.
The Company will only enter into a derivative contract if there is an underlying identified exposure. Contracts are typically held to maturity. The Company does not engage in derivative trading activities and does not use derivatives for speculative purposes. The Company only uses hedge contracts that are denominated in the same currency or metal as the underlying exposure.
17
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
All derivatives are recorded on the balance sheet at fair value. If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in other comprehensive income (OCI) until the hedged item is recognized in earnings. The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through income. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The fair values will also be classified as short-term or long-term depending upon their maturity dates.
The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives not designated as hedging instruments (on a gross basis) and balance sheet classification as of April 2, 2021 and December 31, 2020:
April 2, 2021
December 31, 2020
(Thousands)
Notional Amount
Fair Value
Notional Amount
Fair Value
Foreign currency forward contracts
Prepaid expenses
$
4,261
$
45
$
62,012
$
107
Other liabilities and accrued items
63,062
509
7,695
55
These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included $1.6 million and $0.6 million of foreign currency gains related to derivatives in the first quarter of 2021 and 2020, respectively.
The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives designated as cash flow hedges (on a gross basis) and balance sheet classification as of April 2, 2021 and December 31, 2020:
April 2, 2021
December 31, 2020
(Thousands)
Notional Amount
Fair Value
Notional Amount
Fair Value
Prepaid expenses
Foreign currency forward contracts - yen
$
2,887
$
108
$
—
$
—
Foreign currency forward contracts - euro
12,818
129
—
—
Precious metal swaps
4,568
418
2,155
127
Copper swaps
6,533
550
6,225
632
Total
26,806
1,205
8,380
759
Other assets
Foreign currency forward contracts - yen
111
2
—
—
Foreign currency forward contracts - euro
1,202
15
—
—
Total
1,313
17
—
—
Other liabilities and accrued items
Foreign currency forward contracts - yen
—
—
2,668
59
Foreign currency forward contracts - euro
2,179
176
17,611
1,089
Precious metal swaps
515
3
4,964
349
Copper swaps
4,254
188
2,445
27
Total
6,948
367
27,688
1,524
Total
$
35,067
$
855
$
36,068
$
765
All of these contracts were designated and effective as cash flow hedges. The Company expects to relieve substantially the entire balance in OCI as of April 2, 2021 to the Consolidated Statements of Income within the next 15-month period. Refer to Note L for additional OCI details.
18
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes the amounts reclassified from accumulated other comprehensive income relating to the hedging relationship of the Company’s outstanding derivatives designated as cash flow hedges and income statement classification as of the first quarter of 2021 and 2020:
First Quarter Ended
(Thousands)
April 2, 2021
March 27, 2020
Hedging relationship
Line item
Foreign currency forward contracts
Net sales
$
140
$
(1)
Precious metal swaps
Cost of sales
(104)
318
Copper swaps
Cost of sales
(1,534)
321
Total
$
(1,498)
$
638
Note P — Contingencies
Legal Proceedings. For general information regarding legal proceedings relating to Chronic Beryllium Disease Claims, refer to Note T ("Contingencies and Commitments") in the Company's 2020 Annual Report on Form 10-K.
Two beryllium cases were outstanding as of April 2, 2021. The Company does not expect the resolution of these matters to have a material impact on the consolidated financial statements.
Other Litigation. The Company is party to several pending legal proceedings and claims arising in the normal course of business. The Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matters. To the extent there is a reasonable possibility that the losses could exceed any amounts accrued, the Company will adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.
On October 14, 2020, Garett Lucyk, et al. v. Materion Brush Inc., et. al., case number 20CV0234, a wage and hour purported collective and class action, was filed in the Northern District of Ohio against the Company and its subsidiary, Materion Brush Inc. (collectively, the Company). Plaintiff, a former hourly production employee at the Company's Elmore, Ohio facility, alleges that he and other similarly situated employees nationwide are not paid for all time they spend donning and doffing personal protective equipment in violation of the Fair Labor Standards Act and Ohio law. Plaintiff also alleges the Company failed to include all remuneration he and others received for premium and bonus pay when computing overtime pay. The case is currently in the preliminary stages. The Company believes that it has substantive defenses and intends to vigorously defend this suit.
Environmental Proceedings. The Company has an active environmental compliance program and records reserves for the probable cost of identified environmental remediation projects. The reserves are established based upon analyses conducted by the Company’s engineers and outside consultants and are adjusted from time to time based upon ongoing studies, the difference between actual and estimated costs, and other factors. The reserves may also be affected by rulings and negotiations with regulatory agencies. The undiscounted reserve balance was $5.4 million and $5.5 millionat April 2, 2021 and December 31, 2020, respectively. Environmental projects tend to be long-term, and the final actual remediation costs may differ from the amounts currently recorded.
19
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note Q — Debt
(Thousands)
April 2, 2021
December 31, 2020
Borrowings under Credit Agreement
$
48,955
$
34,000
Foreign debt
2,880
3,157
Fixed rate industrial development revenue bonds
1,113
1,322
Total debt outstanding
52,948
38,479
Current portion of long-term debt
(1,541)
(1,937)
Long-term debt
$
51,407
$
36,542
As of April 2, 2021 and December 31, 2020, the Company had $49.0 million and $34.0 million, respectively, outstanding against its revolving credit facility with average interest rates of 1.88% and 1.65% at April 2, 2021 and December 31, 2020, respectively. The remaining borrowing capacity under the revolving credit facility as of April 2, 2021 and December 31, 2020 was $250.4 million and $245.8 million, respectively.The Company has the option to repay or borrow additional funds under the revolving credit facility until the maturity date in 2024. The Credit Agreement includes covenants subject to a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all of our debt covenants as of April 2, 2021.
At both April 2, 2021 and December 31, 2020, there was $48.1 million outstanding against the letters of credit sub-facility.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
We are an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications. Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, consumer electronics, energy, and telecom and data center.
Coronavirus (COVID-19) First Quarter 2021 Update
The significant macroeconomic impact of the ongoing COVID-19 pandemic impacted several of our end markets throughout 2020 primarily in the first half of the year in the form of reduced demand, particularly in the consumer electronics, automotive, energy, aerospace and defense, and industrial end markets. During the first quarter of 2021, we began to see improvements in demand as global government-imposed restrictions continued to be lifted and many country vaccination programs gained momentum. However, the world continues to be impacted by the COVID-19 pandemic and the impact on our operations and the markets we serve is fluid and will depend largely on future developments, including the availability and effectiveness of vaccines globally, new information which may emerge concerning the severity of the pandemic and actions by government authorities to contain the pandemic or mitigate its economic, public health, and other impacts. These developments are constantly evolving and cannot be accurately predicted. We continue to invest in the business, people, and strategies necessary to achieve our long-term priorities as we focus on driving profitable growth. We have continued to operate during the course of the COVID-19 pandemic in all our production facilities, having taken the recommended public health measures to ensure worker and workplace safety.
20
RESULTS OF OPERATIONS
First Quarter
First Quarter Ended
April 2,
March 27
$
%
(Thousands, except per share data)
2021
2020
Change
Change
Net sales
$
354,386
$
277,946
$
76,440
28
%
Value-added sales
198,582
153,971
44,611
29
%
Gross margin
66,796
44,570
22,226
50
%
Gross margin as a % of value-added sales
34
%
29
%
Selling, general, and administrative (SG&A) expense
36,776
30,744
6,032
20
%
SG&A expense as a % of value-added sales
19
%
20
%
Research and development (R&D) expense
6,206
4,185
2,021
48
%
R&D expense as a % of value-added sales
3
%
3
%
Impairment charges
—
10,766
(10,766)
NM
Restructuring (income) expense
(378)
2,164
(2,542)
NM
Other—net
4,474
2,279
2,195
96
%
Operating profit (loss)
19,718
(5,568)
25,286
NM
Other non-operating (income)—net
(1,276)
(944)
(332)
35
%
Interest expense—net
761
246
515
209
%
Income (loss) before income taxes
20,233
(4,870)
25,103
NM
Income tax expense (benefit)
3,466
(992)
4,458
NM
Net income (loss)
$
16,767
$
(3,878)
$
20,645
NM
Diluted earnings per share
$
0.81
$
(0.19)
$
1.00
NM
NM = Not Meaningful
Net sales of $354.4 million in the first quarter of 2021 increased $76.5 million from $277.9 million in the first quarter of 2020. Net sales increased in all of our segments primarily due to increased volumes, as well as due to sales attributable to our Optics Balzers acquisition, which was completed during the third quarter of 2020. The change in precious metal and copper prices favorably impacted net sales during the first quarter of 2021 by $18.6 million.
Value-added sales is a non-GAAP financial measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal prices and changes in mix due to customer-supplied material. Internally, we manage our business on this basis, and a reconciliation of net sales, the most directly comparable GAAP financial measure, to value-added sales is included herein. Value-added sales of $198.6 million in the first quarter of 2021 increased $44.6 million, or 29%, compared to the first quarter of 2020. The increase is primarily driven by increased value-added sales into the semiconductor, aerospace and defense, and automotive end markets, as well as value-added sales from our Optics Balzers acquisition.
Gross margin in the first quarter of 2021 was $66.8 million, which was up 50% compared to the first quarter of 2020. Gross margin expressed as a percentage of value-added sales increased to 34% in the first quarter of 2021 from 29% in the first quarter of 2020. The increase was primarily driven by increased sales volumes in 2021. In addition, gross margin in the first quarter of 2020 included a $1.3 million charge to reserve for slow moving and excess inventory related to the oil and gas industry.
SG&A expense was $36.8 million in the first quarter of 2021, compared to $30.7 million in the first quarter of 2020. The increase in SG&A expense for the first quarter of 2021 was primarily driven by increased variable compensation expense. Expressed as a percentage of value-added sales, SG&A expense was 19% and 20% in the first quarter of 2021 and 2020, respectively.
R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications. R&D expense accounted for 3% of value-added sales in the first quarter of both 2021 and 2020.
21
Impairment charges includes non-recurring charges relating to goodwill and other assets recorded in the first quarter of 2020 in our Precision Optics segment.
Restructuring (income) expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. During the first quarter of 2021, we substantially completed the closure of our LAC business and recorded $0.4 million of income related to lower than expected facility closure costs that were recorded in 2020.
In the first quarter of 2020, we recorded $2.2 million of restructuring charges in our Performance Alloys and Composites segment related to the closure of our Warren, Michigan and Fremont, California facilities. Refer to Note F to the Consolidated Financial Statements for additional discussion.
Other-net was $4.5 million of expense in the first quarter of 2021, or a $2.2 million increase from the first quarter of 2020, which was primarily driven by $1.3 million of increased foreign exchange losses and $1.0 million of increased intangible asset amortization expense, related to the acquisition of Optics Balzers in July 2020. Refer to Note E to the Consolidated Financial Statements for details of the major components within Other-net.
Other non-operating (income) expense-net includes components of pension and post-retirement expense other than service costs. Refer to Note K to the Consolidated Financial Statements for details of the components.
Interest expense-net was $0.8 million and $0.2 million in the first quarter of 2021 and 2020, respectively. The increase in interest expense is primarily due to reduced interest income from investments in money market accounts, as well as increased borrowings under our revolving credit facility.
Income tax expense (benefit)for the first quarter of 2021 was expense of $3.5 million, compared to a benefit of $1.0 million in the first quarter of 2020. The effective tax rate for the first quarter of 2021 and 2020 was 17.1% and 20.4%, respectively. The effective tax rate for the first quarter of 2021 was lower than the statutory tax rate primarily due to the impact of percentage depletion and research and development credits. See Note G to the Consolidated Financial Statements for additional discussion.
22
Value-Added Sales - Reconciliation of Non-GAAP Financial Measure
A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the first quarter of 2021 and 2020 is as follows:
First Quarter Ended
April 2,
March 27
(Thousands)
2021
2020
Net sales
Performance Alloys and Composites
$
114,143
$
99,067
Advanced Materials
204,644
160,165
Precision Optics
35,599
18,714
Other
—
—
Total
$
354,386
$
277,946
Less: pass-through metal costs
Performance Alloys and Composites
$
13,311
$
15,352
Advanced Materials
141,695
105,672
Precision Optics
34
1,725
Other
764
1,226
Total
$
155,804
$
123,975
Value-added sales
Performance Alloys and Composites
$
100,832
$
83,715
Advanced Materials
62,949
54,493
Precision Optics
35,565
16,989
Other
(764)
(1,226)
Total
$
198,582
$
153,971
Internally, management 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 metal costs from net sales. Value-added sales allow management to assess the impact of differences in net sales between periods, segments, or markets, and analyze the resulting margins and profitability without the distortion of movements in pass-through metal costs. The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation. We sell other metals and materials that are not considered direct pass-throughs, and these costs are not deducted from net sales when calculating value-added sales. Non-GAAP financial measures, such as value-added sales, have inherent limitations and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile. Our pricing policy is to directly pass the cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations. Trends and comparisons of net sales are affected by movements in the market prices of these metals, but changes in net sales due to metal price movements may not have a proportionate impact on our profitability. During the first quarter of 2021, we added ruthenium, iridium, rhodium, rhenium, and osmium to our definition of value-added sales as the costs of these materials are treated as pass-through and the business use and price volatility of these materials has increased in recent periods. Prior period value-added sales amounts have been recast to reflect this change.
Our net sales are also affected by changes in the use of customer-supplied metal. When we manufacture a precious metal product, the customer may purchase metal from us or may elect to provide its own metal, in which case we process the metal on a toll basis and the metal value does not flow through net sales or cost of sales. In either case, we generally earn our margin based upon our fabrication efforts. The relationship of this margin to net sales can change depending upon whether or not the product was made from our metal or the customer’s metal. The use of value-added sales removes the potential distortion in the comparison of net sales caused by changes in the level of customer-supplied metal.
By presenting information on net sales and value-added sales, it is our intention to allow users of our financial statements to review our net sales with and without the impact of the pass-through metals.
23
Segment Results
The Company consists of four reportable segments: Performance Alloys and Composites, Advanced Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
Performance Alloys and Composites
First Quarter
First Quarter Ended
April 2,
March 27
$
%
(Thousands)
2021
2020
Change
Change
Net sales
$
114,143
$
99,067
$
15,076
15
%
Value-added sales
100,832
83,715
17,117
20
%
Operating profit
13,491
3,523
9,968
283
%
Net sales from the Performance Alloys and Composites segment of $114.1 million in the first quarter of 2021 increased 15% compared to net sales of $99.1 million in the first quarter of 2020. The increase was due to sales related to our new precision clad engineered strip project, as well as increased sales into the aerospace and defense and automotive end markets.
Value-added sales of $100.8 million in the first quarter of 2021 were 20% higher than value-added sales of $83.7 million in the first quarter of 2020. The increase in value-added sales was due to the same factors driving the increase in net sales.
Performance Alloys and Composites generated operating profit of $13.5 million in the first quarter of 2021 compared to $3.5 million in the first quarter of 2020. The increase in operating profit was primarily due to increased sales volumes. Operating profit for the first quarter of 2020 included restructuring charges of $2.2 million related to the closure of our Warren, Michigan and Fremont, California facilities, as well as a $1.3 million charge to reserve for slow moving and excess inventory related to the oil and gas industry.
Advanced Materials
First Quarter
First Quarter Ended
April 2,
March 27
$
%
(Thousands)
2021
2020
Change
Change
Net sales
$
204,644
$
160,165
44,479
28
%
Value-added sales
62,949
54,493
8,456
16
%
Operating profit
8,933
5,050
3,883
77
%
Net sales from the Advanced Materials segment of $204.6 million in the first quarter of 2021 were 28% higher than net sales of $160.2 million in the first quarter of 2020. The increase in net sales was primarily due to increased volumes, as well as the impact of higher pass-through metal prices of $19.7 million.
Value-added sales of $62.9 million in the first quarter of 2021 increased 16% compared to value-added sales of $54.5 million in the first quarter of 2020. The increase was primarily driven by increased value-added sales into the semiconductor end market.
The Advanced Materials segment generated operating profit of $8.9 million in the first quarter of 2021 compared to $5.1 million in the first quarter of 2020. The increase in operating profit is due to increased sales volumes partially offset by increased variable compensation expense.
24
Precision Optics
First Quarter
(Thousands)
First Quarter Ended
April 2,
March 27
$
%
2021
2020
Change
Change
Net sales
$
35,599
$
18,714
16,885
90
%
Value-added sales
35,565
16,989
18,576
109
%
Operating profit (loss)
4,558
(9,592)
14,150
NM
NM = Not Meaningful
Net sales from the Precision Optics segment of $35.6 million in the first quarter of 2021 increased 90% compared to net sales of $18.7 million in the first quarter of 2020. The increase was primarily due to sales attributable to our Optics Balzers acquisition, partially offset by lower sales related to our LAC reporting unit, whose closure was finalized in the first quarter of 2021, and projection display products.
Value-added sales of $35.6 million in the first quarter of 2021 increased 109% compared to value-added sales of $17.0 million in the first quarter of 2020. The increase in value-added sales was due to the same factors driving the increase in net sales.
The Precision Optics segment generated an operating profit of $4.6 million in the first quarter of 2021, compared to an operating loss of $9.6 million in the first quarter of 2020. The operating profit in the first quarter of 2021 was driven by increased sales volumes, as well as our Optics Balzers acquisition. The operating loss in the first quarter of 2020 included a goodwill impairment charge of $9.1 million and an other assets impairment charge of $1.7 million related to our LAC reporting unit.
Other
First Quarter
(Thousands)
First Quarter Ended
April 2,
March 27
$
%
2021
2020
Change
Change
Net sales
$
—
$
—
—
—
%
Value-added sales
(764)
(1,226)
462
(38)
%
Operating loss
(7,264)
(4,549)
(2,715)
60
%
The Other reportable segment in total includes unallocated corporate costs.
Corporate costs were $7.3 million in the first quarter of 2021 compared to $4.5 million in the first quarter of 2020. Corporate costs accounted for 4% and 3% of Company-wide value-added sales in the first quarter of 2021 and 2020, respectively. The increase in corporate costs in the first quarter of 2021 compared to the first quarter of 2020 is primarily related to increased variable compensation expenses.
25
FINANCIAL POSITION
Cash Flow
A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:
Three Months Ended
April 2,
March 27
$
(Thousands)
2021
2020
Change
Net cash provided by operating activities
$
15,450
$
9,130
$
6,320
Net cash used in investing activities
(30,675)
(14,779)
(15,896)
Net cash provided by (used in) financing activities
8,727
(11,401)
20,128
Effects of exchange rate changes
(446)
(381)
(65)
Net change in cash and cash equivalents
$
(6,944)
$
(17,431)
$
10,487
Net cash provided by operating activities totaled $15.5 million in the first three months of 2021 versus $9.1 million in the prior-year period. The increase in operating cash flow was primarily due to increased net income of $20.6 million. In addition, working capital requirements used cash of $19.7 million and $17.7 million during the first three months of 2021 and 2020, respectively. Cash flows used in accounts receivable were $26.7 million higher than in the prior-year period. Three-month trailing days sales outstanding was approximately 43 days at April 2, 2021 and 41 days at December 31, 2020. Cash flows used for inventory were $23.2 million in the first quarter of 2021, compared to a use of $15.7 million of cash in the prior-year period. Cash flows provided by accounts payable and accrued expenses were $19.2 million compared to the prior-year period use of cash of $13.0 million.
Net cash used in investing activities was $31.3 million in the first quarter of 2021 compared to $14.8 million in the prior-year period due increased capital expenditures, primarily related to investments in new equipment funded by customer prepayments. See Note J to the Consolidated Financial Statements for additional discussion.
Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives. For the full year 2021, the Company expects payments for property, plant, and equipment to be approximately $100.0 million.
Net cash provided by financing activities totaled $8.7 million in the first three months of 2021 versus $11.4 million used in financing activities in the comparable prior-year period. The increase is primarily due to increased net borrowings of $15.0 million under our revolving credit facility in the first quarter of 2021, partially offset by payments made for taxes withheld on stock-based compensation awards and dividends.
Liquidity
We believe cash flow from operations plus the available borrowing capacity and our current cash balance are adequate to support operating requirements, capital expenditures, projected pension plan contributions, the current dividend program, environmental remediation projects, and strategic acquisitions. At April 2, 2021, cash and cash equivalents held by our foreign operations totaled $17.1 million. We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition, or results of operations for the foreseeable future.
A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of April 2, 2021 and December 31, 2020 is as follows:
April 2,
December 31,
(Thousands)
2021
2020
Cash and cash equivalents
$
18,934
$
25,878
Total outstanding debt
52,960
38,506
Net debt
$
(34,026)
$
(12,628)
Available borrowing capacity
$
250,418
$
245,772
Net (debt) cash is a non-GAAP financial measure. We are providing this information because we believe it is more indicative of our overall financial position. It is also a measure our management uses to assess financing and other decisions. We
26
believe that based on our typical cash flow generated from operations, we can support a higher leverage ratio in future periods.
The available borrowing capacity in the table above represents the additional amounts that could be borrowed under our revolving credit facility and other secured lines existing as of the end of each period depicted. The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts the borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments.
In 2019, we amended and restated the agreement governing our $375.0 million revolving credit facility (Credit Agreement). The maturity date of the Credit Agreement was extended from 2020 to 2024, and the Credit Agreement provides more favorable interest rates under certain circumstances. In addition, the Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment, borrowing, or leasing of precious metals and copper, and provides enhanced flexibility to finance acquisitions and other strategic initiatives. Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company and its direct subsidiaries, with the exception of non-mining real property and certain other assets.
The Credit Agreement allows the Company to borrow money at a premium over LIBOR or a prime rate and at varying maturities. The premium resets quarterly according to the terms and conditions available under the agreement. The Credit Agreement includes restrictive covenants relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases. In addition, the Credit Agreement includes covenants subject to a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all of our debt covenants as of April 2, 2021. Cash on hand does not affect the covenants or the borrowing capacity under our debt agreements.
Portions of our business utilize off-balance sheet consignment arrangements to finance metal requirements. Expansion of business volumes and/or higher metal prices can put pressure on the consignment line limitations from time to time. In 2019, we entered into a precious metals consignment agreement, maturing on August 27, 2022, which replaced the consignment agreement that would have matured on September 30, 2019. The available and unused capacity under the metal financing lines expiring in August 2022 totaled approximately $38.1 million as of April 2, 2021, compared to $50.0 million as of December 31, 2020. The availability is determined by Board approved levels and actual line capacity.
In January 2014, our Board of Directors approved a plan to repurchase up to $50.0 million of our common stock. The timing of the share repurchases will depend on several factors, including market and business conditions, our cash flow, debt levels, and other investment opportunities. There is no minimum quantity requirement to repurchase our common stock for a given year, and the repurchases may be discontinued at any time. We did not repurchase any shares under this program in the first quarter of 2021. Since the approval of the repurchase plan, we have purchased 1,254,264 shares at a total cost of $41.7 million.
We paid cash dividends of $2.3 million on our common stock in the first quarter of 2021. We intend to pay a quarterly dividend on an ongoing basis, subject to a determination that the dividend remains in the best interest of our shareholders.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We maintain the majority of the precious metals and portions of the copper we use in production on a consignment basis in order to reduce our exposure to metal price movements and to reduce our working capital investment. The notional value of off-balance sheet precious metals and copper was $411.9 million and $400.0 million as of April 2, 2021 and December 31, 2020, respectively. We were in compliance with all of the covenants contained in the consignment agreements as of April 2, 2021. For additional information on our contractual obligations, refer to our 2020 Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the inherent use of estimates and management’s judgment in establishing those estimates. For additional information regarding critical accounting policies, please refer to our 2020 Annual Report on Form 10-K.
27
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 the Company's 2020 Annual Report on Form 10-K.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
For information regarding market risks, refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2020 Annual Report on Form 10-K. There have been no material changes in our market risks since the inclusion of this discussion in our 2020 Annual Report on Form 10-K.
28
Item 4.
Controls and Procedures
a)Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation under the supervision and with participation of the Company's management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of disclosure controls and procedures as of April 2, 2021 pursuant to Rule 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on that evaluation, management, including the chief executive officer and chief financial officer, concluded that disclosure controls and procedures are effective as of April 2, 2021.
b)Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended April 2, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
29
PART II OTHER INFORMATION
Item 1.
Legal Proceedings
Our subsidiaries and our holding company are subject, from time to time, to a variety of civil and administrative proceedings arising out of our normal operations, including, without limitation, product liability claims, health, safety, and environmental claims, and employment-related actions. Among such proceedings are cases alleging that plaintiffs have contracted, or have been placed at risk of contracting, beryllium sensitization or chronic beryllium disease or other lung conditions as a result of exposure to beryllium (beryllium cases). The plaintiffs in beryllium cases seek recovery under negligence and various other legal theories and demand compensatory and often punitive damages, in many cases of an unspecified sum. Spouses of some plaintiffs claim loss of consortium.
Beryllium Claims
As of April 2, 2021, our subsidiary, Materion Brush Inc., was a defendant in two beryllium cases. During 2020, one beryllium case was filed. In Richard Miller v. Dolphin, Inc. et al., case number CV2020-005163, filed in the Superior Court of Arizona, Maricopa County, the Company is one of six named defendants and 100 Doe defendants. The plaintiff alleges that he contracted beryllium disease from exposures to beryllium-containing products supplied to his employer, Karsten Manufacturing Corporation, where he was a production worker, and asserts claims for negligence, strict liability – failure to warn, strict liability – design defect, and fraudulent concealment. The plaintiff seeks general damages, medical expenses, loss of earnings, consequential damages, and punitive damages. A co-defendent, Dolphin, Inc., filed a cross-claim against the Company for indemnification. On August 12, 2020, the Company moved to dismiss the cross-claim for failure to state a claim upon which relief can be granted. The court denied the motion on October 23, 2020. On December 7, 2020, the Company filed a Petition for Special Action in the Court of Appeals seeking to appeal the motion to dismiss the cross-claim. The Court of Appeals declined to accept jurisdiction on December 30, 2020. The Company believes that it has substantive defenses and intends to vigorously defend this suit.
In 2019, one beryllium case was filed. In Ronald Dwayne Manning v. Arconic Inc. et al., case number 19CI000219, filed in the Superior Court of the State of California, Tehama County, and later removed to the United States District Court, Eastern District of California (Sacramento Division), case number 2:19-CV-02202-MCE-DMC, the Company is one of four named defendants and 120 Doe defendants. The plaintiff alleges that he contracted beryllium disease from exposures to beryllium-containing products during his employment as an auto mechanic, welder, sprinkler installer, and movie projector operator, and asserts claims for negligence, strict liability, fraudulent concealment, and breach of implied warranties. The plaintiff seeks economic damages, non-economic damages, consequential damages, and punitive damages. The Company believes that it has substantive defenses and intends to vigorously defend this suit.
The Company has insurance coverage, which may respond, subject to an annual deductible.
Other Claims
On October 14, 2020, Garett Lucyk, et al. v. Materion Brush Inc., et. al., case number 20CV0234, a wage and hour purported collective and class action, was filed in the Northern District of Ohio against the Company and its subsidiary, Materion Brush Inc. (collectively, the Company). Plaintiff, a former hourly production employee at the Company's Elmore, Ohio facility, alleges that he and other similarly situated employees nationwide are not paid for all time they spend donning and doffing personal protective equipment in violation of the Fair Labor Standards Act and Ohio law. Plaintiff also alleges the Company failed to include all remuneration he and others received for premium and bonus pay when computing overtime pay. The case is currently in the preliminary stages. The Company believes that it has substantive defenses and intends to vigorously defend this suit.
30
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to repurchases of common stock made by us during the three months ended April 2, 2021.
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 through February 5, 2021
145
$
68.73
—
$
8,316,239
February 6 through March 5, 2021
42,543
66.48
—
8,316,239
March 6 through April 2, 2021
—
—
—
8,316,239
Total
42,688
$
66.49
—
$
8,316,239
(1)
Includes 145 and 42,543 shares surrendered to the Company in January and February, respectively, by employees to satisfy tax withholding obligations on equity awards issued under the Company's stock incentive plan.
(2)
On January 14, 2014, we announced that our Board of Directors had authorized the repurchase of up to $50.0 million of our common stock. During the three months ended April 2, 2021, we did not repurchase any shares under this program. As of April 2, 2021, $8.3 million may still be purchased under the program.
Item 4.
Mine Safety Disclosures
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this quarterly report on Form 10-Q.
31
Item 6.
Exhibits
All documents referenced below were filed pursuant to the Exchange Act by Materion Corporation, file number 001-15885, unless otherwise noted.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)
*Submitted electronically herewith.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MATERION CORPORATION
Dated: April 29, 2021
/s/ Shelly M. Chadwick
Shelly M. Chadwick
Vice President, Finance and Chief Financial Officer
