MTRN 10-Q
MATERION Corp (MTRN)
10-Q
2025-07-30
For: 2025-06-27
View Original
Added on
April 07, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 10-Q
(Mark One)
For the quarterly period ended June 27, 2025
OR
For the transition period from to
Commission file number 001-15885
(Exact name of Registrant as specified in charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(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 | ||||||
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. Yes þ 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). Yes þ 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.
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 June 27, 2025: 20,726,917 .
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Materion Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Second Quarter Ended | Six Months Ended | |||||||||||||||||||||||||
| (Thousands, except per share amounts) | June 27, 2025 | June 28, 2024 | June 27, 2025 | June 28, 2024 | ||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||
| Gross margin | ||||||||||||||||||||||||||
| Selling, general, and administrative expense | ||||||||||||||||||||||||||
| Research and development expense | ||||||||||||||||||||||||||
| Restructuring expense | ||||||||||||||||||||||||||
| Other—net | ||||||||||||||||||||||||||
| Operating profit | ||||||||||||||||||||||||||
| Other non-operating income—net | ( | ( | ( | ( | ||||||||||||||||||||||
| Interest expense—net | ||||||||||||||||||||||||||
| Income before income taxes | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Basic earnings per share: | ||||||||||||||||||||||||||
| Net income per share of common stock | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted earnings per share: | ||||||||||||||||||||||||||
| Net income per share of common stock | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average number of shares of common stock outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
See notes to these consolidated financial statements.
2
Materion Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
| Second Quarter Ended | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ||||||||||||||||||||||||
| Derivative and hedging activity, net of tax | ( | ( | ( | |||||||||||||||||||||||
| Pension and post-employment benefit adjustment, net of tax | ( | ( | ( | |||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||||||||||||
See notes to these consolidated financial statements.
3
Materion Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| June 27, | Dec. 31, | |||||||||||||
| (Thousands) | 2025 | 2024 | ||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Inventories, net | ||||||||||||||
| Prepaid and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Property, plant, and equipment | ||||||||||||||
| Less allowances for depreciation, depletion, and amortization | ( | ( | ||||||||||||
| Property, plant, and equipment, net | ||||||||||||||
| Operating lease, right-of-use assets | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Other assets | ||||||||||||||
| Goodwill | ||||||||||||||
| Total Assets | $ | $ | ||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||
| Current liabilities | ||||||||||||||
| Short-term debt | $ | $ | ||||||||||||
| Accounts payable | ||||||||||||||
| Salaries and wages | ||||||||||||||
| Other liabilities and accrued items | ||||||||||||||
| Income taxes | ||||||||||||||
| Unearned revenue | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Finance lease liabilities | ||||||||||||||
| Retirement and post-employment benefits | ||||||||||||||
| Unearned income | ||||||||||||||
| Long-term income taxes | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Long-term debt | ||||||||||||||
| Shareholders’ equity | ||||||||||||||
Serial preferred stock (no par value; | ||||||||||||||
Common stock (no par value; | ||||||||||||||
| Retained earnings | ||||||||||||||
| Common stock in treasury | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Other equity | ||||||||||||||
| Total shareholders' equity | ||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||||||||
See the notes to these consolidated financial statements.
4
Materion Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||||||||
| June 27, | June 28, | |||||||||||||
| (Thousands) | 2025 | 2024 | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation, depletion, and amortization | ||||||||||||||
| Amortization of deferred financing costs in interest expense | ||||||||||||||
| Stock-based compensation expense (non-cash) | ||||||||||||||
| Deferred income tax expense (benefit) | ( | |||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | |||||||||||||
| Inventory | ( | |||||||||||||
| Prepaid and other current assets | ( | ( | ||||||||||||
| Accounts payable and accrued expenses | ( | |||||||||||||
| Unearned revenue | ( | ( | ||||||||||||
| Interest and taxes payable | ( | ( | ||||||||||||
| Other-net | ( | |||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Payments for purchase of property, plant, and equipment | ( | ( | ||||||||||||
| Payments for mine development | ( | ( | ||||||||||||
| Proceeds from sale of property, plant, and equipment | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from borrowings under credit facilities, net | ( | |||||||||||||
| Repayment of long-term debt | ( | ( | ||||||||||||
| Principal payments under finance lease obligations | ( | ( | ||||||||||||
| Cash dividends paid | ( | ( | ||||||||||||
| Deferred financing costs | ( | |||||||||||||
| Repurchase of common stock | ( | |||||||||||||
| Payments of withholding taxes for stock-based compensation awards | ( | ( | ||||||||||||
| Net cash provided by/(used in) financing activities | ( | |||||||||||||
| Effects of exchange rate changes | ( | |||||||||||||
| Net change in cash and cash equivalents | ( | |||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
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 March 28, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | ( | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Payments of withholding taxes for stock-based compensation awards | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Directors’ deferred compensation | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 27, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Balance at March 29, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | ( | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Payments of withholding taxes for stock-based compensation awards | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Directors’ deferred compensation | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 28, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
6
| 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, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | ( | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Payments of withholding taxes for stock-based compensation awards | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Directors’ deferred compensation | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 27, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | ( | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Payments of withholding taxes for stock-based compensation awards | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Directors’ deferred compensation | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 28, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
See notes to these consolidated financial statements.
7
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.
New Accounting Guidance Issued and Not Yet Adopted:
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). This ASU updates current income tax disclosure requirements to require disclosures of specific categories of information within the effective tax rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. This ASU will be effective for the annual period ending December 31, 2025. Adoption of this ASU will result in additional disclosure, but it will not impact the Company’s consolidated financial position, results of operations or cash flows.
In November 2024, the FASB issued a final ASU to require disaggregated disclosure of income statement expenses. This new standard requires public business entities to provide detailed disclosures in the notes to financial statements disaggregating specific expense categories, including employee compensation, depreciation, and intangible asset amortization, as well as certain other disclosures to provide enhanced transparency into the nature and function of expenses. This guidance is effective for annual periods beginning in the Company’s fiscal year 2027 and interim periods following annual adoption, with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.
Note B — Segment Reporting
The Company has the following reportable segments: Performance Materials, Electronic 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 Materials provides advanced engineered solutions comprised of beryllium and non-beryllium containing alloy systems and custom engineered parts in strip, bulk, rod, plate, bar, tube, and other customized shapes.
Electronic 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 and braze materials.
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.
The primary measurement used by management to measure the financial performance of each segment is earnings before interest, taxes, depreciation and amortization (EBITDA). The below table presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the second quarter and first six months of 2025 and 2024:
8
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Second quarter ended June 27, 2025 | ||||||||||||||||||||||||||||||||
| Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||||||
Net sales (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||||||||||||||||||
Other segment items (2) | ( | |||||||||||||||||||||||||||||||
| Plus: | ||||||||||||||||||||||||||||||||
| Segment depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Segment EBITDA | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| Interest expense - net | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||||||
Second quarter ended June 28, 2024 | ||||||||||||||||||||||||||||||||
| Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||||||
Net sales (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||||||||||||||||||
Other segment items (2) | ||||||||||||||||||||||||||||||||
| Plus: | ||||||||||||||||||||||||||||||||
| Segment depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Segment EBITDA | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| Interest expense - net | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||||||
9
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
First six months ended June 27, 2025 | ||||||||||||||||||||||||||||||||
| Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||||||
Net sales (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||||||||||||||||||
Other segment items (2) | ( | |||||||||||||||||||||||||||||||
| Plus: | ||||||||||||||||||||||||||||||||
| Segment depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Segment EBITDA | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| Interest expense - net | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||||||
First six months ended June 28, 2024 | ||||||||||||||||||||||||||||||||
| Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||||||
Net sales (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||||||||||||||||||
Other segment items (2) | ||||||||||||||||||||||||||||||||
| Plus: | ||||||||||||||||||||||||||||||||
| Segment depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Segment EBITDA | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||||||||
| Interest expense - net | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||||||
10
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(1) Excludes inter-segment sales of $2.0 million and $1.7 million for the second quarter of 2025 and 2024, respectively, and $4.6 million and $3.2 million for the first six months of 2025 and 2024, respectively, for Electronic Materials. There were no material inter-segment sales for Performance Materials or Precision Optics in 2025 or 2024. Inter-segment sales are eliminated in consolidation.
(2) Other segment items for each reportable segment include:
•Research and development expense
•Restructuring expense
•Other operating expense - primarily comprised of metal consignment fees, intangible amortization and foreign currency (gains)/losses as further detailed in Note E
•Non-operating expenses primarily related to pension costs
The following table disaggregates revenue for each segment by end market for the second quarter and first six months of 2025 and 2024:
| (Thousands) | Performance Materials | Electronic Materials | Precision Optics | Other | Total | |||||||||||||||||||||||||||
| Second Quarter 2025 | ||||||||||||||||||||||||||||||||
| End Market | ||||||||||||||||||||||||||||||||
| Semiconductor | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||
| Aerospace and defense | ||||||||||||||||||||||||||||||||
| Consumer electronics | ||||||||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||
| Life sciences | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Second Quarter 2024 | ||||||||||||||||||||||||||||||||
| End Market | ||||||||||||||||||||||||||||||||
| Semiconductor | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||
| Aerospace and defense | ||||||||||||||||||||||||||||||||
| Consumer electronics | ||||||||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||
| Life sciences | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
11
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
| (Thousands) | Performance Materials | Electronic Materials | Precision Optics | Other | Total | |||||||||||||||||||||||||||
| First Six Months 2025 | ||||||||||||||||||||||||||||||||
| End Market | ||||||||||||||||||||||||||||||||
| Semiconductor | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||
| Aerospace and defense | ||||||||||||||||||||||||||||||||
| Consumer electronics | ||||||||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||
| Life sciences | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| First Six Months 2024 | ||||||||||||||||||||||||||||||||
| End Market | ||||||||||||||||||||||||||||||||
| Semiconductor | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||
| Aerospace and defense | ||||||||||||||||||||||||||||||||
| Consumer electronics | ||||||||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||
| Life sciences | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Note C — 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 a 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.
After considering the practical expedient at June 27, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $27.9 million.
12
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) | June 27, 2025 | December 31, 2024 | $ change | % change | ||||||||||||||||||||||
Accounts receivable, trade | $ | $ | $ | % | ||||||||||||||||||||||
Unbilled receivables | % | |||||||||||||||||||||||||
Unearned revenue | % | |||||||||||||||||||||||||
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 related to our receivables were immaterial during the second quarter and first six months of 2025.
In the fourth quarter of 2024, the Company entered into a factoring agreement to sell certain receivables to a third-party financial institution. The transfer of the receivables constitute purchases and sales of receivables resulting in a reduction of trade receivables on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows. The Company sold $22.9 million of receivables in the second quarter of 2025 and a total of $38.9 million of receivables in the first six months of 2025. The Company recorded a loss on sale of $0.2 million and $0.4 million for the second quarter and first sixth months of 2025, respectively. The Company sold $48.9 million of receivables in the fourth quarter of 2024 and recorded a loss on sale of $0.7 million. Total receivables sold under this program amount to $87.8 million
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 $0.7 million and $9.9 million of the December 31, 2024 unearned amounts as revenue during the second quarter and first six months of 2025, respectively.
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 D — Other-net
Other-net for the second quarter and first six months of 2025 and 2024 is summarized as follows:
| Second Quarter Ended | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Amortization of intangible assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Metal consignment fees | ||||||||||||||||||||||||||
| Foreign currency (gain) loss | ( | ( | ||||||||||||||||||||||||
| Other items | ( | ( | ( | ( | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
13
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note E — Restructuring
In fiscal year 2024, we announced restructuring plans that were both designed to reduce costs and expenses in response to macroeconomic conditions and current operating performance. These actions impact all three of our business segments as well as Corporate. When completed, the restructuring programs are expected to result in the reduction in annual cost of sales and operating expenses.
In 2025, the Company continued to implement restructuring actions, primarily in our Precision Optics segment. In connection with these actions, we recorded restructuring expenses of $0.5 million and $2.5 million in the three and six months ended June 27, 2025, respectively, and $3.0 million and $4.7 million in the three and six months ended June 28, 2024, respectively, all of which were associated with workforce reduction, including severance and other personnel-related costs. We expect to substantially complete the remaining restructuring activities by the end of fiscal year 2025.
The activity in the accrued balances incurred in relation to restructuring during the six months ended June 27, 2025, and June 28, 2024, were as follows:
| Reduction in Force | |||||||||||||||||||||||||||||
| (Thousands) | Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Additional Charges | |||||||||||||||||||||||||||||
| Cash Payments | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
Balance at June 27, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Reduction in Force | |||||||||||||||||||||||||||||
| (Thousands) | Performance Materials | Electronic Materials | Precision Optics | Other | Consolidated | ||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Additional Charges | |||||||||||||||||||||||||||||
| Cash Payments | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
Balance at June 28, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Note F — Income Taxes
The Company's effective tax rate for the second quarter of 2025 and 2024 was 13.8 % and 20.4 %, respectively, and 14.5 % and 15.8 % for the first six months of 2025 and 2024, respectively. The effective tax rate for 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit. The effective tax rate for the 2024 periods was lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction. The effective tax rate for the first six months of 2025 includes net discrete income tax expense of $0.6 million, primarily consisting of $0.2 million expense for stock-based compensation awards and $0.4 million expense for unrecognized tax benefits recorded. The effective tax rate for the first six months of 2024 included a net discrete income tax benefit of $0.2 million, which primarily consisted of $1.0 million of excess tax benefits from stock-based compensation awards offset by a $1.1 million valuation allowance recorded against deferred tax assets that were not likely to be realized for one of the Company’s foreign subsidiaries.
Government Tax Credits
Pursuant to The Inflation Reduction Act of 2022 (IRA), the Company is eligible for the Advanced Manufacturing Production Credit (production credit). The production credit provides an annual cash benefit for a portion of the production costs for the sale of certain critical minerals produced in the U.S. and sold during the year. The Company records the production credit as a reduction in cost of goods sold as the applicable items are produced and sold. U.S. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. Our accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting
14
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Standards. We recognize the benefit of the production credit by applying IAS 20 in pretax income on a systematic basis in line with its recognition of the expenses that the grant is intended to compensate.
Pillar Two
The Organization for Economic Co-operation and Development (OECD) introduced rules to establish a global minimum corporate tax rate, commonly referred to as Pillar Two. Numerous foreign countries have enacted legislation to implement the Pillar Two rules or are expected to enact similar legislation. Pillar Two legislation enacted in jurisdictions the Company operates in is not expected to have a material impact on its effective tax rate or consolidated results of operations, financial position, or cash flows in 2025. We will continue to evaluate the impact of Pillar Two legislation on the current and future reporting periods.
Note G — Earnings Per Share (EPS)
The following table sets forth the computation of basic and diluted EPS:
| Second Quarter Ended | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands, except per share amounts) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Numerator for basic and diluted EPS: | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Denominator for basic EPS | ||||||||||||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||||||||||||
| Stock appreciation rights | ||||||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||||
| Performance-based restricted stock units | ||||||||||||||||||||||||||
| Diluted potential common shares | ||||||||||||||||||||||||||
| Denominator for diluted EPS: | ||||||||||||||||||||||||||
| Adjusted weighted-average shares outstanding | ||||||||||||||||||||||||||
| Basic EPS | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted EPS | $ | $ | $ | $ | ||||||||||||||||||||||
Adjusted weighted-average shares outstanding - diluted exclude securities totaling 320,477 and 137,252 for the quarters ended June 27, 2025 and June 28, 2024, respectively, and securities totaling 146,804 and 95,392 for the six months ended June 27, 2025 and June 28, 2024, respectively. These securities are primarily related to restricted stock units (RSUs) and stock appreciation rights (SARs) with fair market values and exercise prices greater than the average market price of the Company's common stock and were excluded from the dilution calculation as the effect would have been anti-dilutive.
15
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note H — Inventories
Inventories on the Consolidated Balance Sheets are summarized as follows:
| June 27, | December 31, | |||||||||||||
| (Thousands) | 2025 | 2024 | ||||||||||||
| Raw materials and supplies | $ | $ | ||||||||||||
| Work in process | ||||||||||||||
| Finished goods | ||||||||||||||
| Inventories, net | $ | $ | ||||||||||||
Note I — Customer Prepayments
In 2020, the Company entered into an investment agreement and a master supply agreement with a customer to procure equipment to manufacture product for the customer. The customer provided prepayments to the Company to fund the necessary infrastructure improvements and procure the equipment necessary to supply the customer with the desired product. The Company owns, operates and maintains the equipment that is being used to manufacture product for the customer.
Revenue will be recognized as the Company fulfills purchase orders and ships the commercial product to the customer, as product delivery is considered the satisfaction of the performance obligation.
Additionally, during the second quarter of 2022, the Company entered into an amendment to the investment agreement with the same customer to procure additional equipment to manufacture product for the customer. In 2023, the Company received the remaining prepayments related to this amendment, the total of which approximated $38.6 million.
As of June 27, 2025 and December 31, 2024, $49.8 million and $60.9 million, respectively, of prepayments are classified as Unearned income on the Consolidated Balance Sheets. The prepayments will remain in Unearned income until commercial purchase orders are received for product serviced out of the equipment, at which time a portion of the purchase order value related to prepayments will be reclassified to Unearned revenue. As of June 27, 2025 and December 31, 2024, $4.8 million and $4.3 million of the prepayments are classified as Unearned revenue.
16
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note J — Pensions and Other Post-employment Benefits
The following is a summary of the net periodic benefit cost for the second quarter and first six months ended June 27, 2025 and June 28, 2024, respectively, for the pension plans as shown below. The Pension Benefits column aggregates defined benefit pension plans in the U.S., Germany, Liechtenstein, England, and the U.S. supplemental retirement plans. The Other Benefits column includes the domestic retiree medical and life insurance plan.
| Pension Benefits | Other Benefits | |||||||||||||||||||||||||
| Second Quarter Ended | Second Quarter Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Components of net periodic benefit (credit) cost | ||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service (benefit) cost | ( | ( | ||||||||||||||||||||||||
| Amortization of net loss (gain) | ( | ( | ||||||||||||||||||||||||
| Net periodic benefit (credit) cost | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Pension Benefits | Other Benefits | |||||||||||||||||||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Components of net periodic benefit (credit) cost | ||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service (benefit) cost | ( | ( | ||||||||||||||||||||||||
| Amortization of net loss (gain) | ( | ( | ||||||||||||||||||||||||
| Net periodic benefit (credit) cost | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The Company did no
Note K — Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the second quarter and first six months of 2025 and 2024 are as follows:
17
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
| Gains and Losses on Cash Flow Hedges | |||||||||||||||||||||||||||||||||||||||||
| (Thousands) | Foreign Currency | Interest Rate | Precious Metals | Total | Pension and Post-Employment Benefits | Foreign Currency Translation | Total | ||||||||||||||||||||||||||||||||||
Balance at March 28, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income before tax | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| Deferred taxes | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income after tax | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
Balance at June 27, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Balance at March 29, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income before tax | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Deferred taxes | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income after tax | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
Balance at June 28, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
18
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
| Gains and Losses on Cash Flow Hedges | ||||||||||||||||||||||||||||||||||||||||||||
| (Thousands) | Foreign Currency | Interest Rate | Precious Metals | Total | Pension and Post-Employment Benefits | Foreign Currency Translation | Total | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income before tax | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Deferred taxes | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income after tax | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income before tax | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Deferred taxes | ( | |||||||||||||||||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income after tax | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
Balance at June 28, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
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. 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. Reclassifications from accumulated other comprehensive income (loss) of gains and losses on the interest rate cash flow hedge is recorded in Interest expense in the Consolidated Statements of Income. Refer to Note N for additional details on cash flow hedges.
19
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note L — Stock-based Compensation Expense
Stock-based compensation expense, which includes awards settled in shares and in cash, was $2.6 million and $5.6 million in the second quarter and first six months of 2025, respectively, compared to $2.7 million and $5.3 million, respectively, in the same periods of 2024.
The Company granted 55,546 SARs to certain employees during the first six months of 2025. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the six months ended June 27, 2025 were $87.36 and $26.33 , 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 | % | |||||||
| Dividend yield | % | |||||||
| Volatility | % | |||||||
| Expected term (in years) | ||||||||
The Company granted 104,873 stock-settled RSUs to certain employees during the first six months of 2025. 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 $87.74 for stock-settled RSUs granted to employees during the six months ended June 27, 2025. 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 six months of 2025. The weighted-average fair value of the stock-settled PRSUs was $106.34 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.
Note M — 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.
20
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 June 27, 2025 and December 31, 2024:
| (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) | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred compensation investments | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Financial Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred compensation liability | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
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, metals, and interest rates. The carrying values of the other working capital items and debt in the Consolidated Balance Sheets approximate fair values as of June 27, 2025 and December 31, 2024. 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 N — Derivative Instruments and Hedging Activity
The Company uses derivative contracts to hedge exposure to movements in interest rates associated with borrowings, foreign currency exposures, and precious metal and copper exposures. The objectives and strategies for using derivatives in these areas are as follows:
Interest Rate. On March 4, 2022, the Company entered into a $100.0 million interest rate swap to hedge the interest rate risk on the Credit Agreement described in Note P. The swap hedges the change in 1-month Secured Overnight Financial Rate (SOFR) from March 4, 2022 to November 2, 2026. On March 21, 2023, the Company entered into two $50.0 million interest rate swaps to hedge the interest rate risk on the Credit Agreement described in Note P. The swaps hedge the change in 1-month USD-SOFR. The purpose of these hedges is to manage the risk of changes in the monthly interest payments attributable to changes in the benchmark interest rate.
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
21
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
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 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 nature of 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 product containing precious metal is fabricated and delivered to the customer, the metal content is purchased out of consignment based on the current market price. The price paid by the Company for the precious metal forms the basis for the price charged to the customer for the metal content in the product. 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 precious metal consignors that charge the Company consignment fees based upon the value of the metal as it fluctuates while on consignment. Each precious metal consignor retains title to its consigned precious metal until it is purchased by the Company, and it is the Company’s typical practice to purchase metal out of consignment only after a product containing that metal has been purchased by one of our customers.
In certain instances, a customer may want to fix 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 out of consignment 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 refined and 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 that 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 in these instances.
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 infrequent and, when made 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 paid when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was owned by the Company.
22
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
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.
All derivatives are recorded on the balance sheet at fair value. If a 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) and reclassified into income in the same period or periods during which the hedged transaction affects 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 derivative assets and liabilities are classified as short-term or long-term depending upon the contract maturity date.
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 the balance sheet classification as of June 27, 2025 and December 31, 2024:
| June 27, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (Thousands) | Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||
| Prepaid and other current assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Other liabilities and accrued items | ||||||||||||||||||||||||||
These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included $1.5 million and $2.0 million of foreign currency losses in the second quarter and first six months of 2025, respectively, compared to $0.1 million of foreign currency losses and $0.4 million of foreign currency gains in the second quarter and first six months of 2024, respectively.
23
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
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 June 27, 2025 and December 31, 2024:
| June 27, 2025 | ||||||||||||||||||||||||||||||||
| Fair Value | ||||||||||||||||||||||||||||||||
| (Thousands) | Notional Amount | Prepaid and other current assets | Other assets | Other liabilities and accrued items | Other long-term liabilities | |||||||||||||||||||||||||||
| Foreign currency forward contracts - yen | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Foreign currency forward contracts - euro | ||||||||||||||||||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Fair Value | ||||||||||||||||||||||||||||||||
| Notional Amount | Prepaid and other current assets | Other assets | Other liabilities and accrued items | Other long-term liabilities | ||||||||||||||||||||||||||||
| Foreign currency forward contracts - yen | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Foreign currency forward contracts - euro | ||||||||||||||||||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
All of the contracts summarized above were designated and effective as cash flow hedges. We expect to reclassify $2.0 million of net gains into earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. At June 27, 2025, the maximum term of derivative instruments that hedge forecasted transactions was approximately four years . Refer to Note K for further details related to OCI.
The following table summarizes the amounts reclassified from accumulated other comprehensive income relating to the Company’s outstanding derivatives designated as cash flow hedges and associated income statement classification as of the second quarter and first six months of 2025 and 2024:
| Second Quarter Ended | ||||||||||||||||||||
| (Thousands) | June 27, 2025 | June 28, 2024 | ||||||||||||||||||
| Hedging relationship | Line item | |||||||||||||||||||
| Foreign currency forward contracts | $ | ( | $ | ( | ||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||
| Interest rate swap | ( | ( | ||||||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||
24
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
| Six Months Ended | ||||||||||||||||||||
| (Thousands) | June 27, 2025 | June 28, 2024 | ||||||||||||||||||
| Hedging relationship | Line item | |||||||||||||||||||
| Foreign currency forward contracts | $ | ( | $ | ( | ||||||||||||||||
| Precious metal swaps | ||||||||||||||||||||
| Interest rate swap | ( | ( | ||||||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||
Note O — Contingencies
Legal Proceedings. 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.
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 $4.4 million and $4.6 million at June 27, 2025 and December 31, 2024, respectively, and is included in Other liabilities and accrued items and Other long-term liabilities on the Consolidated Balance Sheet. Environmental projects tend to be long-term, and the final actual remediation costs may differ from the amounts currently recorded.
Note P — Debt
| (Thousands) | June 27, 2025 | December 31, 2024 | ||||||||||||
| Borrowings under Credit Agreement | $ | $ | ||||||||||||
| Borrowings under the Term Loan Facility | ||||||||||||||
| Overdraft Sweep Facility | ||||||||||||||
| Foreign debt | ||||||||||||||
| Total debt outstanding | ||||||||||||||
| Current portion of long-term debt | ( | ( | ||||||||||||
| Gross long-term debt | ||||||||||||||
| Unamortized deferred financing fees | ( | ( | ||||||||||||
| Long-term debt | $ | $ | ||||||||||||
In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement). The Credit Agreement refinances the revolving credit facility and term loan facility provided under Materion's previous Fourth Amended and Restated Credit Agreement, dated October 27, 2021 (as amended). Among other things, the Credit Agreement provides for a $450 million senior secured revolving credit facility (the "Revolving Credit Facility") and a $225 million senior secured term loan facility (the "Term Loan Facility" and, together with the Revolving Credit Facility, the "Credit Facilities"). The Term Loan Facility was fully drawn on June 26, 2025. The Credit Facilities mature on June 26, 2030.
As of June 27, 2025 and December 31, 2024, the Company had $187.6 million outstanding at an average interest rate of 5.82 % and $198.9 million outstanding at an average interest rate of 6.27 %, respectively, under its revolving credit facility.
25
Materion Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The available borrowing capacity under the revolving credit facility as of June 27, 2025 was $256.7 million. The Company has the option to repay or borrow additional funds under the revolving credit facility until the maturity date in 2030. In connection with the revolving credit facility, the administrative agent provides the Company with an overdraft sweep facility that the Company uses on a daily basis for short-term cash needs. As of June 27, 2025, there was $11.9 million outstanding on the overdraft sweep facility. The amended and restated credit agreement governing the revolving credit facility and the term loan facility (Credit Agreement) includes covenants subject to a maximum leverage ratio and a minimum interest coverage ratio. We were in compliance with all of our debt covenants as of June 27, 2025.
The balance outstanding on the term loan facility as of June 27, 2025 and December 31, 2024 was $225 million and $240 million, respectively.
At June 27, 2025 and December 31, 2024, there was $5.7 million and $7.1 million, respectively, outstanding against the letters of credit sub-facility.
Note Q — Subsequent Events
On July 9, 2025 the Company completed the acquisition of certain manufacturing assets for tantalum solutions in Dangjin City, South Korea, from Konasol, a Korean manufacturer serving the semiconductor and adjacent markets. The total purchase price was approximately $19 million. The acquisition and related fees and expenses were funded through available cash and drawings on the Company's revolving credit 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 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.
26
RESULTS OF OPERATIONS
Second Quarter
| Second Quarter Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands, except per share data) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 431,658 | $ | 425,866 | $ | 5,792 | 1 | % | ||||||||||||||||||
| Value-added sales | 268,970 | 279,833 | (10,863) | (4) | % | |||||||||||||||||||||
| Gross margin | 82,658 | 80,859 | 1,799 | 2 | % | |||||||||||||||||||||
| Gross margin as a % of net sales | 19 | % | 19 | % | ||||||||||||||||||||||
| Gross margin as a % of value-added sales | 31 | % | 29 | % | ||||||||||||||||||||||
| Selling, general, and administrative (SG&A) expense | 35,039 | 33,601 | 1,438 | 4 | % | |||||||||||||||||||||
| SG&A expense as a % of net sales | 8 | % | 8 | % | ||||||||||||||||||||||
| SG&A expense as a % of value-added sales | 13 | % | 12 | % | ||||||||||||||||||||||
| Research and development (R&D) expense | 6,413 | 7,702 | (1,289) | (17) | % | |||||||||||||||||||||
| R&D expense as a % of net sales | 1 | % | 2 | % | ||||||||||||||||||||||
| R&D expense as a % of value-added sales | 2 | % | 3 | % | ||||||||||||||||||||||
| Restructuring expense | 479 | 3,048 | (2,569) | n.m. | ||||||||||||||||||||||
| Other—net | 3,908 | 4,446 | (538) | (12) | % | |||||||||||||||||||||
| Operating profit | 36,819 | 32,062 | 4,757 | 15 | % | |||||||||||||||||||||
| Other non-operating (income)—net | (567) | (640) | 73 | (11) | % | |||||||||||||||||||||
| Interest expense—net | 8,230 | 8,802 | (572) | (6) | % | |||||||||||||||||||||
| Income before income taxes | 29,156 | 23,900 | 5,256 | 22 | % | |||||||||||||||||||||
| Income tax expense | 4,016 | 4,864 | (848) | (17) | % | |||||||||||||||||||||
| Net income | $ | 25,140 | $ | 19,036 | $ | 6,104 | 32 | % | ||||||||||||||||||
| Diluted earnings per share | $ | 1.21 | $ | 0.91 | $ | 0.30 | 33 | % | ||||||||||||||||||
Net sales of $431.7 million in the second quarter of 2025 increased $5.8 million from $425.9 million in the second quarter of 2024. The increase in net sales was primarily attributable to the Electronic Materials segment. The increase in net sales in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $38.0 million when compared to the prior year period. At the Company level, volume decreases in the consumer electronics (11%) and semiconductor (4%) end markets were partially offset by volume increases in the aerospace and defense (6%) and energy (4%) end markets. Additionally, there was a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024. See Note B to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.
Value-added sales is a non-GAAP financial measure that removes the impact of pass-through precious metal market costs and allows for analysis without the distortion of the movement or volatility in precious metal market 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 $269.0 million in the second quarter of 2025 decreased $10.9 million, or 4%, compared to the second quarter of 2024. Volume decreases in the consumer electronics (12%) and semiconductor (4%) end markets were partially offset by increases in the aerospace and defense (5%) and energy (9%) end markets. Additionally, there was a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024.
Gross margin in the second quarter of 2025 was $82.7 million, an increase of 2% compared to the second quarter of 2024. Gross margin expressed as a percentage of net sales was 19% in both the second quarter of 2025 and 2024. Gross margin expressed as a percentage of value-added sales was 31% in second quarter of 2025, compared to 29% in the second quarter of 2024. The increase in gross margins is primarily due to improved manufacturing performance in 2025. Additionally in the second quarter of the prior year, the Company incurred significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility, resulting in lower margins.
27
SG&A expense was $35.0 million in the second quarter of 2025, compared to $33.6 million in the second quarter of 2024. The increase in SG&A expense was primarily due to timing of the incentive compensation accruals due to year to date performance. Expressed as a percentage of net sales, SG&A expense was 8% of net sales in both the second quarter of 2025 and 2024. Expressed as a percentage of value-added sales, SG&A expense was 13% and 12% in the second quarter of 2025 and 2024, respectively.
R&D expense consists primarily of direct personnel costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers. R&D expense accounted for 1% of net sales in the second quarter of 2025 and 2% of net sales in the second quarter of 2024. R&D expense accounted for 2% of value-added sales in the second quarter of 2025 and 3% of value-added sales in the second quarter of 2024. The decrease was driven by project timing.
Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the second quarter of 2025, we recorded a combined total of $0.5 million of restructuring charges in our Performance Materials, Electronic Materials and Precision Optics segments. In the second quarter of 2024, we incurred restructuring costs across all segments due to the Company's efforts to realign its cost structure. Refer to Note E to the Consolidated Financial Statements for details.
Other-net was $3.9 million of expense in the second quarter of 2025, or a decrease of $0.5 million from the second quarter of 2024. Refer to Note D to the Consolidated Financial Statements for details of the major components within Other-net.
Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs. Refer to Note J to the Consolidated Financial Statements for details of the components.
Interest expense-net was $8.2 million and $8.8 million in the second quarter of 2025 and 2024, respectively. The decrease in interest expense was primarily due to a decrease in interest rates and decreased borrowings compared to the prior year period.
Income tax expense for the second quarter of 2025 was $4.0 million, compared to $4.9 million in the second quarter of 2024. The Company's effective tax rate for the second quarter of 2025 and 2024 was 13.8% and 20.4%, respectively. The effective tax rate for the second quarter of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit. The effective tax rate for the second quarter of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction. See Note F to the Consolidated Financial Statements for additional discussion.
28
Six Months
| Six Months Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands, except per share data) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 851,988 | $ | 811,153 | $ | 40,835 | 5 | % | ||||||||||||||||||
| Value-added sales | 528,316 | 537,681 | (9,365) | (2) | % | |||||||||||||||||||||
| Gross margin | 158,837 | 152,071 | 6,766 | 4 | % | |||||||||||||||||||||
| Gross margin as a % of net sales | 19 | % | 19 | % | ||||||||||||||||||||||
| Gross margin as a % of value-added sales | 30 | % | 28 | % | ||||||||||||||||||||||
| SG&A expense | 70,484 | 69,445 | 1,039 | 1 | % | |||||||||||||||||||||
| SG&A expense as a % of net sales | 8 | % | 9 | % | ||||||||||||||||||||||
| SG&A expense as a % of value-added sales | 13 | % | 13 | % | ||||||||||||||||||||||
| R&D expense | 12,918 | 14,844 | (1,926) | (13) | % | |||||||||||||||||||||
| R&D expense as a % of net sales | 2 | % | 2 | % | ||||||||||||||||||||||
| R&D expense as a % of value-added sales | 2 | % | 3 | % | ||||||||||||||||||||||
| Restructuring expense | 2,517 | 4,668 | (2,151) | (46) | % | |||||||||||||||||||||
| Other—net | 8,904 | 8,803 | 101 | 1 | % | |||||||||||||||||||||
| Operating profit | 64,014 | 54,311 | 9,703 | 18 | % | |||||||||||||||||||||
| Other non-operating (income)—net | (1,233) | (1,283) | 50 | (4) | % | |||||||||||||||||||||
| Interest expense—net | 15,147 | 17,081 | (1,934) | (11) | % | |||||||||||||||||||||
| Income before income taxes | 50,100 | 38,513 | 11,587 | 30 | % | |||||||||||||||||||||
| Income tax expense | 7,262 | 6,068 | 1,194 | 20 | % | |||||||||||||||||||||
| Net income | $ | 42,838 | $ | 32,445 | $ | 10,393 | 32 | % | ||||||||||||||||||
| Diluted earnings per share | $ | 2.05 | $ | 1.55 | $ | 0.50 | 32 | % | ||||||||||||||||||
Net sales of $852.0 million in the first six months of 2025 increased $40.8 million from $811.2 million in the first six months of 2024. The increase in net sales was primarily attributable to the Electronic Materials segment. The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $78.5 million when compared to the prior year period. At the Company level, a volume decrease in the consumer electronics (13%) end market was partially offset by a volume increase in the energy (25%) end market. Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year. See Note B to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.
Value-added sales of $528.3 million in the first six months of 2025 decreased $9.4 million, or 2%, compared to the first six months of 2024. A volume decrease in the consumer electronics (14%) end market was partially offset by a volume increase in the energy (28%) end market. Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.
Gross margin in the first six months of 2025 was $158.8 million, an increase of 4% compared to the first six months of 2024. Gross margin expressed as a percentage of net sales was 19% in the first six months of 2025 and 2024. Gross margin expressed as a percentage of value-added sales increased to 30% in the first six months of 2025 from 28% in the first six months of 2024. Despite the impact of lower sales volumes in the first six months of 2025, the Company experiences improved manufacturing performance, resulting in favorable margins in 2025. The lower gross margin in the first six months of 2024 was impacted by the significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility.
SG&A expense was $70.5 million in the first six months of 2025, compared to $69.4 million in the first six months of 2024. The increase in SG&A expense was primarily due to timing of incentive compensation accruals due to year to date performance. Expressed as a percentage of net sales, SG&A expense was 8% and 9% in the first six months of 2025 and 2024, respectively. Expressed as a percentage of value-added sales, SG&A expense was 13% in the first six months of 2025 and 2024.
29
R&D expense consists primarily of direct personnel costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers. R&D expense accounted for 2% of net sales in the first six months of 2025 and 2024. R&D expense accounted for 2% of value-added sales in the first six months of 2025 and 3% of value-added sales in the first six months of 2024. The decrease was driven by project timing.
Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the first six months of 2025, we recorded a combined total of $2.5 million of restructuring charges in our Performance Materials, Electronic Materials and Precision Optics segments. In the first six months of 2024, we recorded a combined total of $4.7 million of restructuring charges in our Performance Materials, Electronic Materials, Precision Optics and Other segments. Refer to Note E to the Consolidated Financial Statements for details.
Other-net was $8.9 million of expense in the first six months of 2025, or a $0.1 million increase from the first six months of 2024. Refer to Note D to the Consolidated Financial Statements for details of the major components within Other-net.
Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs. Refer to Note J to the Consolidated Financial Statements for details of the components.
Interest expense-net was $15.1 million and $17.1 million in the first six months of 2025 and 2024, respectively. The decrease in interest expense is primarily due to an decrease in interest rates and borrowings compared to the prior year period.
Income tax expense for the first half of 2025 was $7.3 million, compared to $6.1 million in the first half of 2024. The Company's effective tax rate for the first six months of 2025 and 2024 was 14.5% and 15.8%, respectively. The effective tax rate for the first six months of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit. The effective tax rate for the first six months of 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion and the foreign derived intangible income deduction. The effective tax rate for the first six months of 2025 includes net discrete income tax expense of $0.6 million, primarily consisting of $0.2 million expense for stock-based compensation awards and $0.4 million expense for unrecognized tax benefits recorded. The effective tax rate for the first six months of 2024 included a net discrete income tax benefit of $0.2 million, which primarily consisted of $1.0 million of excess tax benefits from stock-based compensation awards offset by a $1.1 million valuation allowance recorded against deferred tax assets that were not likely to be realized for one of the Company’s foreign subsidiaries. See Note F to the Consolidated Financial Statements for additional discussion.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law in the U.S. The OBBBA includes a broad range of tax provisions affecting businesses including extending permanently, with modification, certain business and international tax provisions enacted as part of the Tax Cuts and Jobs Act of 2017 and expanding certain Inflation Reduction Act tax incentives while accelerating the phase-out of others. Key provisions of the OBBBA relevant to our operations include the phase-out of the advanced manufacturing production credit beginning in 2031, the immediate expensing of certain capital expenditures and domestic research and development expenses beginning in 2025, adjustments to interest expense limitations, and changes to various U.S international tax provisions. The Company is still evaluating the impact of the OBBBA on our consolidated financial statements. We expect to reflect the effects of the OBBBA in our financial statements for the quarter ending September 26, 2025, in accordance with the ASC 740.
Value-Added Sales - Reconciliation of Non-GAAP Financial Measure
30
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 second quarter and first six months of 2025 and 2024 is as follows:
| Second Quarter Ended | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | June 27, | June 28, | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Net sales | ||||||||||||||||||||||||||
| Performance Materials | $ | 182,778 | $ | 187,513 | $ | 356,765 | $ | 356,158 | ||||||||||||||||||
| Electronic Materials | 224,427 | 212,687 | 449,222 | 404,658 | ||||||||||||||||||||||
| Precision Optics | 24,453 | 25,666 | 46,001 | 50,337 | ||||||||||||||||||||||
| Other | — | — | — | — | ||||||||||||||||||||||
| Total | $ | 431,658 | $ | 425,866 | $ | 851,988 | $ | 811,153 | ||||||||||||||||||
| Less: pass-through metal costs | ||||||||||||||||||||||||||
| Performance Materials | $ | 14,268 | $ | 14,444 | $ | 28,208 | $ | 27,515 | ||||||||||||||||||
| Electronic Materials | 148,378 | 131,545 | 295,360 | 245,886 | ||||||||||||||||||||||
| Precision Optics | 42 | 44 | 104 | 71 | ||||||||||||||||||||||
| Other | — | — | — | — | ||||||||||||||||||||||
| Total | $ | 162,688 | $ | 146,033 | $ | 323,672 | $ | 273,472 | ||||||||||||||||||
| Value-added sales | ||||||||||||||||||||||||||
| Performance Materials | $ | 168,510 | $ | 173,069 | $ | 328,557 | $ | 328,643 | ||||||||||||||||||
| Electronic Materials | 76,049 | 81,142 | 153,862 | 158,772 | ||||||||||||||||||||||
| Precision Optics | 24,411 | 25,622 | 45,897 | 50,266 | ||||||||||||||||||||||
| Other | — | — | — | — | ||||||||||||||||||||||
| Total | $ | 268,970 | $ | 279,833 | $ | 528,316 | $ | 537,681 | ||||||||||||||||||
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 precious metal market 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 market 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 market 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.
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.
Segment Results
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The Company consists of four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
Performance Materials
Second Quarter
| Second Quarter Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 182,778 | $ | 187,513 | $ | (4,735) | (3) | % | ||||||||||||||||||
| Value-added sales | 168,510 | 173,069 | (4,559) | (3) | % | |||||||||||||||||||||
| EBITDA | 41,094 | 40,415 | 679 | 2 | % | |||||||||||||||||||||
Net sales from the Performance Materials segment of $182.8 million in the second quarter of 2025 decreased 3% compared to net sales of $187.5 million in the second quarter of 2024. The decrease in net sales was due to lower sales volumes in the consumer electronics (11%) end market and a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2024, partially offset by increased volumes in the energy (38%) and aerospace and defense (3%) end markets.
Value-added sales of $168.5 million in the second quarter of 2025 were 3% lower than value-added sales of $173.1 million in the second quarter of 2024. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
EBITDA for the Performance Materials segment was $41.1 million in the second quarter of 2025 compared to $40.4 million in the second quarter of 2024. Despite lower sales volumes, EBITDA was favorably impacted by production efficiencies in the second quarter of 2025. Additionally, there were higher costs associated with the production ramp of the precision clad strip facility in the second quarter of 2024 that did not recur in 2025.
Six Months
| Six Months Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 356,765 | $ | 356,158 | $ | 607 | — | % | ||||||||||||||||||
| Value-added sales | 328,557 | 328,643 | (86) | — | % | |||||||||||||||||||||
| EBITDA | 81,767 | 71,091 | 10,676 | 15 | % | |||||||||||||||||||||
Net sales from the Performance Materials segment of $356.8 million in the first six months of 2025 were relatively flat year over year. The decrease in sales volumes in the consumer electronics (14%) end market was partially offset by increased volumes in the energy (67%) end market when compared to the first six months of 2024. Additionally, there was a $2.5 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first six months of 2024.
Value-added sales of $328.6 million in the first six months of 2025 were were relatively flat year over year. The change in value-added sales was due to the same factors driving the change in net sales.
EBITDA for the Performance Materials segment was $81.8 million in the first six months of 2025 compared to $71.1 million in the first six months of 2024. EBITDA was favorably impacted by production efficiencies in the first six months of 2025. Additionally, there were higher costs associated with the production ramp of the precision clad strip facility in the first six months of 2024 that did not recur in 2025.
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Electronic Materials
Second Quarter
| Second Quarter Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 224,427 | $ | 212,687 | $ | 11,740 | 6 | % | ||||||||||||||||||
| Value-added sales | 76,049 | 81,142 | (5,093) | (6) | % | |||||||||||||||||||||
| EBITDA | 17,601 | 13,456 | 4,145 | 31 | % | |||||||||||||||||||||
Net sales from the Electronic Materials segment of $224.4 million in the second quarter of 2025 increased by 6% compared to net sales of $212.7 million in the second quarter of 2024. The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $38.0 million compared to the second quarter of 2024. This increase was partially offset by lower volume of precious metal sales and a decrease in sales volumes in the energy (16%) and semiconductor (5%) end markets.
Value-added sales of $76.0 million in the second quarter of 2025 decreased 6% compared to value-added sales of $81.1 million in the second quarter of 2024. The decrease in value-added sales was due a decrease in sales volumes in the energy (32%) and semiconductor (5%) end markets.
EBITDA for the Electronic Materials segment was $17.6 million in the second quarter of 2025 compared to $13.5 million in the second quarter of 2024. Despite lower sales, EBITDA was favorably impacted by production efficiencies in the second quarter of 2025 and a $0.9 million reduction in restructuring expense when compared to the second quarter of 2024.
Six Months
| Six Months Ended | ||||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| (Thousands) | 2025 | 2024 | Change | Change | ||||||||||||||||||||||
| Net sales | $ | 449,222 | $ | 404,658 | $ | 44,564 | 11 | % | ||||||||||||||||||
| Value-added sales | 153,862 | 158,772 | (4,910) | (3) | % | |||||||||||||||||||||
| EBITDA | 28,679 | 27,809 | 870 | 3 | % | |||||||||||||||||||||
Net sales from the Electronic Materials segment of $449.2 million in the first six months of 2025 increased by 11% compared to net sales of $404.7 million in the first six months of 2024. The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $78.5 million compared to the first six months of 2024, partially offset by a lower volume of precious metal sales.
Value-added sales of $153.9 million in the first half of 2025 decreased 3% compared to value-added sales of $158.8 million in the first half of 2024. The decrease in value-added sales was due a decrease in sales volumes in the energy (27%) end market.
EBITDA for the Electronic Materials segment was $28.7 million in the first six months of 2025 compared to $27.8 million in the first six months of 2024. Despite decreased sales volumes, EBITDA increased slightly as a result of production efficiencies in the first six months of 2025, partially offset by $1.6 million of incremental costs related to the wind-down of the refinery at the Company's Albuquerque, New Mexico facility.
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Precision Optics
Second Quarter
| (Thousands) | Second Quarter Ended | |||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| 2025 | 2024 | Change | Change | |||||||||||||||||||||||
| Net sales | $ | 24,453 | $ | 25,666 | $ | (1,213) | (5) | % | ||||||||||||||||||
| Value-added sales | 24,411 | 25,622 | (1,211) | (5) | % | |||||||||||||||||||||
| EBITDA | 2,099 | 1,589 | 510 | 32 | % | |||||||||||||||||||||
Net sales from the Precision Optics segment of $24.5 million in the second quarter of 2025 decreased 5% compared to net sales of $25.7 million in the second quarter of 2024. The decrease was primarily due to lower sales volumes in the life sciences end market (22%).
Value-added sales of $24.4 million in the second quarter of 2025 decreased 5% compared to value-added sales of $25.6 million in the second quarter of 2024. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
EBITDA for the Precision Optics segment was $2.1 million in the second quarter of 2025 compared to $1.6 million in the second quarter of 2024. Despite lower sales volumes, various cost control initiatives implemented in 2024 and throughout 2025 drove the increase in EBITDA when comparing the second quarter of 2025 to the second quarter of 2024.
Six Months
| (Thousands) | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| 2025 | 2024 | Change | Change | |||||||||||||||||||||||
| Net sales | $ | 46,001 | $ | 50,337 | $ | (4,336) | (9) | % | ||||||||||||||||||
| Value-added sales | 45,897 | 50,266 | (4,369) | (9) | % | |||||||||||||||||||||
| EBITDA | 617 | 1,336 | (719) | (54) | % | |||||||||||||||||||||
Net sales from the Precision Optics segment of $46.0 million in the first half of 2025 decreased 9% compared to net sales of $50.3 million in the first half of 2024. The decrease was primarily due to lower sales volumes in the life sciences end market (31%).
Value-added sales of $45.9 million in the first half of 2025 decreased 9% compared to value-added sales of $50.3 million in the first half of 2024. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
EBITDA for the Precision Optics segment was $0.6 million in the first six months of 2025 compared to $1.3 million in the first six months of 2024. The decrease in EBITDA was primarily driven by a $0.7 million increase in restructuring expense in the first six months of 2025 compared to the first six months of 2024.
Other
Second Quarter
| (Thousands) | Second Quarter Ended | |||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| 2025 | 2024 | Change | Change | |||||||||||||||||||||||
| Net sales | $ | — | $ | — | $ | — | — | % | ||||||||||||||||||
| Value-added sales | — | — | — | — | % | |||||||||||||||||||||
| EBITDA | (5,899) | (6,245) | 346 | (6) | % | |||||||||||||||||||||
The Other reportable segment in total includes unallocated corporate costs.
Corporate costs were $5.9 million in the second quarter of 2025 compared to $6.2 million in the second quarter of 2024. Corporate costs were 1% of Company-wide net sales in the second quarter of 2025 and 2024. Corporate costs were 2% of Company-wide value-added sales in the second quarter of 2025 and 2024. Corporate costs remained relatively consistent with the prior year period due to continued cost control initiatives implemented throughout 2024 and into 2025.
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Six Months
| (Thousands) | Six Months Ended | |||||||||||||||||||||||||
| June 27, | June 28, | $ | % | |||||||||||||||||||||||
| 2025 | 2024 | Change | Change | |||||||||||||||||||||||
| Net sales | $ | — | $ | — | $ | — | — | % | ||||||||||||||||||
| Value-added sales | — | — | — | — | % | |||||||||||||||||||||
| EBITDA | (11,769) | (11,944) | 175 | (1) | % | |||||||||||||||||||||
Corporate costs were $11.8 million in the first half of 2025 compared to $11.9 million in the first half of 2024. Corporate costs were 1% of Company-wide net sales in the first six months of 2025 and 2024. Corporate costs were 2% of Company-wide value-added sales in the first six months of 2025 and 2024. Corporate costs remained relatively consistent with the prior year period due to continued cost control initiatives implemented throughout 2024 and into 2025.
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FINANCIAL POSITION
Cash Flow
A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:
| Six Months Ended | ||||||||||||||||||||
| June 27, | June 28, | $ | ||||||||||||||||||
| (Thousands) | 2025 | 2024 | Change | |||||||||||||||||
| Net cash provided by operating activities | $ | 65,442 | $ | 6,477 | $ | 58,965 | ||||||||||||||
| Net cash (used in) investing activities | (34,912) | (48,260) | 13,348 | |||||||||||||||||
| Net cash (used in)/provided by financing activities | (36,377) | 46,200 | (82,577) | |||||||||||||||||
| Effects of exchange rate changes | 1,725 | (613) | 2,338 | |||||||||||||||||
| Net change in cash and cash equivalents | $ | (4,122) | $ | 3,804 | $ | (7,926) | ||||||||||||||
Net cash provided by operating activities totaled $65.4 million in the first six months of 2025 versus $6.5 million in the prior-year period. In addition to the $9.7 million increase in operating income, the increase in cash provided by operating activities was favorably impacted by the Company’s continued working capital initiatives, specifically efforts focused around inventory management. In the prior year the Company saw inventory levels rise through the first half of 2024 to support organic growth. Throughout 2025, the Company has focused on maintaining reduced inventory levels consistent with the levels achieved at December 31, 2024. This resulted in incremental cash flow of approximately $24.4 million. Additionally, there was a net cash inflow of $4.2 million in the first six months of 2025 compared to a usage of $20.9 million in the first six months of 2024 for payables and accruals due to continued focus on working capital and timing of quarter-end payments. Lastly, there was a decrease in prepaid assets in the first six months of 2025 compared to an increase in the first six months of 2024, resulting in an increase in operating cash flow of $12.7 million, when comparing the first six months of 2025 to the first six months of 2024. The change is primarily due to timing of of payments on annual renewals.
Net cash used in investing activities was $34.9 million in the first six months of 2025 compared to $48.3 million in the prior-year period. The decrease in cash used in investing activities is due to a decrease in capital expenditures.
Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives. For the full year 2025, the Company expects payments for property, plant, and equipment to be approximately $70 million.
Net cash used in financing activities totaled $36.4 million in the first six months of 2025 and compared to net cash provided by financing activities of $46.2 million in the comparable prior-year period. The net financing cash outflow in the first six months of 2025 was primarily driven by debt repayments, made possible by increased cash levels resulting from the Company's ongoing working capital initiatives and lower capital spend, compared to an inflow in the prior year used to support business growth.
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 for at least the next twelve months and for the foreseeable future thereafter. At June 27, 2025, cash and cash equivalents held by our foreign operations totaled $11.6 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.
Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $22.8 million. At June 27, 2025, the Company had borrowings outstanding of $2.0 million, which reduced the aggregate availability under these facilities to $20.8 million.
36
A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of June 27, 2025 and December 31, 2024 is as follows:
| June 27, | December 31, | |||||||||||||
| (Thousands) | 2025 | 2024 | ||||||||||||
| Cash and cash equivalents | $ | 12,591 | $ | 16,713 | ||||||||||
| Total outstanding debt | 425,577 | 442,008 | ||||||||||||
| Net debt | $ | (412,986) | $ | (425,295) | ||||||||||
| Available borrowing capacity | $ | 256,704 | $ | 168,997 | ||||||||||
Net debt 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 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, depletion and amortization, and other adjustments.
In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement). The Credit Agreement refinances the revolving credit facility and term loan facility provided under Materion's previous Fourth Amended and Restated Credit Agreement, dated October 27, 2021 (as amended). Among other things, the Credit Agreement provides for a $450 million senior secured revolving credit facility (the "Revolving Credit Facility") and a $225 million senior secured term loan facility (the "Term Loan Facility" and, together with the Revolving Credit Facility, the "Credit Facilities"). The Term Loan Facility was fully drawn on June 26, 2025. The Credit Facilities mature on June 26, 2030.
The Credit Agreement also provides for an uncommitted incremental facility whereby, subject to the satisfaction of certain conditions, the Company may be able to borrow additional term loans in an aggregate amount not to exceed $250.0 million. The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals, copper, nickel and tantalum, 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, precious metal and certain other assets.
The Credit Agreement allows the Company to borrow money at a premium over SOFR, or prime rate and at varying maturities. The Credit Agreement includes restrictive covenants relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases. In addition, the Credit Agreement includes covenants that limit the Company to a maximum leverage ratio and a minimum interest coverage ratio. We were in compliance with all of our debt covenants as of June 27, 2025 and December 31, 2024. Cash on hand up to $35 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement.
Portions of our business utilize off-balance sheet consignment arrangements allowing us to use metal owned by precious metal consignors as we manufacture product for our customers. Metal is purchased from the precious metal consignor and sold to our customer at the time of product shipment. Expansion of business volumes and/or higher metal prices can put pressure on the consignment line limitations from time to time. In August 2022, we entered into a precious metals consignment agreement, maturing on August 31, 2025, which replaced the consignment agreements that would have matured on August 27, 2022. The available and unused capacity under the metal consignment agreements expiring in August 2025 totaled approximately $235.7 million as of June 27, 2025, compared to $233.4 million as of December 31, 2024. The availability is determined by Board approved levels and actual 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 repurchased 100,000 shares under this program in the second
37
quarter of 2025, for a total cost of $7.8 million. Since the approval of the repurchase plan, we have purchased 1,354,264 shares at a total cost of $49.5 million.
We paid cash dividends of $2.9 million and $5.7 million on our common stock in the second quarter and first six months of 2025, respectively. 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 CASH 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 $379.3 million and $381.6 million as of June 27, 2025 and December 31, 2024, respectively. We were in compliance with all of the covenants contained in the consignment agreements as of June 27, 2025. For additional information on our material cash obligations, refer to our 2024 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 2024 Annual Report on Form 10-K.
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, including changes in tax regulations or guidance promulgated pursuant to the new legislation implemented in the One Big Beautiful Bill Act; 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 of infectious diseases and the conflict between Russia and Ukraine; 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 2024 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 2024 Annual Report on Form 10-K. There have been no material changes in our market risks since the inclusion of this discussion in our 2024 Annual Report on Form 10-K.
38
| 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 June 27, 2025 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 June 27, 2025.
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 June 27, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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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.
The information presented in the Legal Proceedings section of Note O ("Contingencies") of the Notes to Consolidated Financial Statements (Unaudited) is incorporated herein by reference.
| 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 the Company during the three months ended June 27, 2025.
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||||||||||||
| March 29 through May 2, 2025 | — | $ | — | — | $ | 8,316,239 | ||||||||||||||||||||
| May 3 through May 30, 2025 | 100,000 | 78.44 | 100,000 | 472,674 | ||||||||||||||||||||||
| May 31 through June 27, 2025 | — | — | — | 472,674 | ||||||||||||||||||||||
| Total | 100,000 | $ | 78.44 | 100,000 | $ | 472,674 | ||||||||||||||||||||
| (1) | On January 14, 2014, the Company announced that its Board of Directors had authorized the repurchase of up to $50.0 million of its common stock. During the three months ended June 27, 2025, the Company repurchased 100,000 shares under this program. As of June 27, 2025, $0.5 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.
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Item 5. Other Information
During the quarter ended June 27, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted terminated
| Item 6. | Exhibits | ||||
All documents referenced below were filed pursuant to the Exchange Act by Materion Corporation, file number 001-15885, unless otherwise noted.
| 4.1 | Fifth Amended and Restated Credit Agreement, dated as of June 26, 2025, by and among Materion Corporation, the foreign subsidiary borrowers party thereto from time to time, the financial institutions party thereto as lenders, JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank National Association and Bank of America, N.A., as co-syndication agents, KeyBank National Association and PNC Bank, National Association, as co-documentation agents, and JPMorgan Chase Bank, N.A., Wells Fargo Securities, LLC and BofA Securities, Inc., as joint bookrunners and joint lead arrangers (filed as Exhibit 10.1 to the Company's 8-K filed on June 26, 2025), incorporated herein by reference. | |||||||
| 10.1 | Materion Corporation 2025 Equity and Incentive Compensation Plan (filed as Exhibit 4.3 to the Company's form S-8 filed on May 7, 2025), incorporated herein by reference. | |||||||
| 31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a)* | |||||||
| 31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a)* | |||||||
| 32 | Certifications of Chief Executive Officer and Chief Financial Officer required by 18 U.S.C. Section 1350* | |||||||
| 95 | ||||||||
| 101.INS | 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* | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments) | |||||||
*Submitted electronically herewith.
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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: July 30, 2025 | ||||||||||||||
/s/ Shelly M. Chadwick | ||||||||||||||
| Shelly M. Chadwick | ||||||||||||||
| Vice President, Finance and Chief Financial Officer | ||||||||||||||
| (Principal Financial Officer) | ||||||||||||||
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