Materion Corporation (NYSE: MTRN) today reported first quarter
financial results and provided second quarter and full year 2021
earnings guidance.
First Quarter 2021 Highlights
- Net sales were $354.4 million compared to $277.9 million in the
prior year period; value-added sales increased 29% year on year to
a record $198.6 million for the quarter
- Operating profit of $19.7 million; adjusted earnings before
interest and tax expense (EBIT) was $21.4 million, or 10.8% of
value-added sales, compared to $9.9 million in the prior year
period
- Net income of $0.81 per share, diluted; adjusted earnings of
$0.82 per share, up from $0.39 in the prior year period
- Customer funded precision clad engineered strip project remains
on track; completed second quarter of shipments from existing
facility
“I am pleased with our start to 2021, delivering a very strong
quarter as we continue to manage through the pandemic. Our team is
motivated and energized to serve our customers and return to
pre-pandemic levels of performance, as demonstrated by our first
quarter results,” said Jugal Vijayvargiya, President and Chief
Executive Officer.
Mr. Vijayvargiya continued, “Many of our end markets are
expanding, our Optics Balzers acquisition is performing well, and
our organic investments are contributing, resulting in strong top
line growth expectations for the full year. We continue to focus on
building a robust pipeline of opportunities that will create value
for our shareholders in the near, medium and longer term.”
FIRST QUARTER 2021
RESULTS
Net sales for the first quarter of 2021 were $354.4 million,
compared to $277.9 million in the prior year period. Value-added
sales were a quarterly record of $198.6 million, up 29% from the
prior year quarter. Strong performance across several key end
markets, including semiconductor, automotive and industrial drove
the value-added sales growth and more than offset weakness in the
energy end market and reduced sales related to the closure of our
LAC business. In addition, sales were aided by a large order in the
defense market which was expected in the second quarter.
Operating profit for the first quarter was $19.7 million, and
net income was $16.8 million, or $0.81 per diluted share, compared
to an operating loss of $5.6 million and a net loss of $3.9 million
in the prior year period. Excluding special items, adjusted EBIT
was $21.4 million in the first quarter, an increase of $11.5
million versus the prior-year period. Improved sales performance,
favorable mix, and improved operating performance drove the
increase.
Adjusted net income was $16.9 million, or $0.82 per diluted
share, an increase of 111% compared to $0.39 per share in the prior
year period.
OUTLOOK
While a fair amount of uncertainty still exists in the overall
economy, we see strength in our organic pipeline and good
underlying demand across many of our end markets, in particular
semiconductor, automotive, and industrial. Based on current demand
levels, we expect adjusted earnings per diluted share in the second
quarter to be in the range of $0.72 to $0.76 per share, an increase
of 68% from the second quarter of 2020 at the midpoint.
For the full year, we expect adjusted earnings per diluted share
to be in the range of $3.00 to $3.30 per share, an increase of 55%
from the prior year, at the midpoint.
ADJUSTED EARNINGS
GUIDANCE
It is not possible for the Company to identify the amount or
significance of future adjustments associated with potential
insurance and litigation claims, legacy environmental costs,
acquisition and integration costs, certain income tax items, or
other non-routine costs that the Company adjusts in the
presentation of adjusted earnings guidance. These items are
dependent on future events that are not reasonably estimable at
this time. Accordingly, the Company is unable to reconcile without
unreasonable effort the forecasted range of adjusted earnings
guidance for the full year to a comparable GAAP range. However,
items excluded from the Company's adjusted earnings guidance
include the historical adjustments noted in Attachments 4 and 5 to
this press release.
CONFERENCE CALL
Materion Corporation will host an investor conference call with
analysts at 9:00 a.m. Eastern Time, April 29, 2021. The conference
call will be available via webcast through the Company’s website at
www.materion.com or through www.InvestorCalendar.com. Presentation
materials will be available on the company’s website in advance of
the call. By phone, please dial (877) 407-0778. Callers outside the
U.S. can dial (201) 689-8565. A replay of the call will be
available until May 13, 2021 by dialing (877) 481-4010 or (919)
882-2331; please reference replay ID number 39481. The call will
also be archived on the Company’s website.
FORWARD-LOOKING
STATEMENTS
Portions of the narrative set forth in this document that are
not statements of historical or current facts are forward-looking
statements. Our actual future performance may materially differ
from that contemplated by the forward-looking statements as a
result of a variety of factors. These factors include, in addition
to those mentioned elsewhere herein: the ultimate impact of the
COVID-19 pandemic on our business, results of operations, financial
condition, and liquidity; the global economy, including the impact
of tariffs and trade agreements; the impact of any U.S. Federal
Government shutdowns and sequestrations; the condition of the
markets which we serve, whether defined geographically or by
segment; changes in product mix and the financial condition of
customers; our success in developing and introducing new products
and new product ramp-up rates; our success in passing through the
costs of raw materials to customers or otherwise mitigating
fluctuating prices for those materials, including the impact of
fluctuating prices on inventory values; our success in identifying
acquisition candidates and in acquiring and integrating such
businesses, including the integration of Optics Balzers; the impact
of the results of acquisitions on our ability to fully achieve the
strategic and financial objectives related to these acquisitions,
including, without limitation, the acquisition of Optics Balzers
being accretive in the expected timeframe or at all; our success in
implementing our strategic plans and the timely and successful
completion and start-up of any capital projects; other financial
and economic factors, including the cost and availability of raw
materials (both base and precious metals), physical inventory
valuations, metal financing fees, tax rates, exchange rates,
interest rates, pension costs and required cash contributions and
other employee benefit costs, energy costs, regulatory compliance
costs, the cost and availability of insurance, credit availability,
and the impact of the Company’s stock price on the cost of
incentive compensation plans; the uncertainties related to the
impact of war, terrorist activities, and acts of God; changes in
government regulatory requirements and the enactment of new
legislation that impacts our obligations and operations; the
conclusion of pending litigation matters in accordance with our
expectation that there will be no material adverse effects; the
disruptions on operations from, and other effects of, catastrophic
and other extraordinary events including the COVID-19 pandemic; and
the risk factors set forth in Part 1, Item 1A of our 2020 Annual
Report on Form 10-K.
Materion Corporation is headquartered in Mayfield Heights, Ohio.
The Company, through its wholly owned subsidiaries, supplies highly
engineered advanced enabling materials to global markets. Products
include precious and non-precious specialty metals, inorganic
chemicals and powders, specialty coatings, specialty engineered
beryllium alloys, beryllium and beryllium composites, and
engineered clad and plated metal systems.
Attachment 1
Materion Corporation and
Subsidiaries
Consolidated Statements of
Income
(Unaudited)
First Quarter Ended
(In thousands except per share
amounts)
April 2, 2021
March 27, 2020*
Net sales
$
354,386
$
277,946
Cost of sales
287,590
233,376
Gross margin
66,796
44,570
Selling, general, and administrative
expense
36,776
30,744
Research and development expense
6,206
4,185
Impairment charges
—
10,766
Restructuring (income) expense
(378
)
2,164
Other — net
4,474
2,279
Operating profit (loss)
19,718
(5,568
)
Other non-operating income—net
(1,276
)
(944
)
Interest expense — net
761
246
Income (loss) before income
taxes
20,233
(4,870
)
Income tax expense (benefit)
3,466
(992
)
Net income (loss)
$
16,767
$
(3,878
)
Basic earnings per share:
Net income (loss) per share of common
stock
$
0.82
$
(0.19
)
Diluted earnings per share:
Net income (loss) per share of common
stock
$
0.81
$
(0.19
)
Weighted-average number of shares of
common stock outstanding:
Basic
20,374
20,384
Diluted
20,628
20,384
*Prior period has been adjusted to reflect the change in
inventory method, as described in the Company's Quarterly Report on
Form 10-Q for the period ended April 2, 2021.
Attachment 2
Materion Corporation and
Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
(Thousands)
April 2, 2021
December 31, 2020
Assets
Current assets
Cash and cash equivalents
$
18,934
$
25,878
Accounts receivable, net
180,544
166,447
Inventories, net
272,828
250,778
Prepaid and other current assets
22,449
20,896
Total current assets
494,755
463,999
Deferred income taxes
1,932
3,134
Property, plant, and equipment
1,021,174
998,312
Less allowances for depreciation,
depletion, and amortization
(692,101
)
(688,626
)
Property, plant, and equipment—net
329,073
309,686
Operating lease, right-of-use assets
59,826
62,089
Intangible assets, net
51,503
54,672
Other assets
20,791
19,364
Goodwill
140,392
144,916
Total Assets
$
1,098,272
$
1,057,860
Liabilities and Shareholders’
Equity
Current liabilities
Short-term debt
$
1,541
$
1,937
Accounts payable
72,489
55,640
Salaries and wages
22,803
18,809
Other liabilities and accrued items
36,927
40,887
Income taxes
5,102
1,898
Unearned revenue
8,573
7,713
Total current liabilities
147,435
126,884
Other long-term liabilities
17,777
17,002
Operating lease liabilities
54,593
56,761
Finance lease liabilities
18,937
20,539
Retirement and post-employment
benefits
39,662
41,877
Unearned income
92,301
86,761
Deferred income taxes
14,824
15,864
Long-term debt
51,407
36,542
Shareholders’ equity
661,336
655,630
Total Liabilities and Shareholders’
Equity
$
1,098,272
$
1,057,860
Attachment 3
Materion Corporation and
Subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited)
Three Months Ended
(Thousands)
April 2, 2021
March 27, 2020*
Cash flows from operating activities:
Net income (loss)
$
16,767
$
(3,878
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion, and
amortization
8,599
14,274
Amortization of deferred financing costs
in interest expense
182
182
Stock-based compensation expense
(non-cash)
1,473
1,492
Deferred income tax expense (benefit)
382
(1,457
)
Impairment charges
—
10,766
Changes in assets and liabilities:
Accounts receivable
(15,697
)
11,049
Inventory
(23,219
)
(15,718
)
Prepaid and other current assets
(2,107
)
1,127
Accounts payable and accrued expenses
19,224
(13,002
)
Unearned revenue
932
(938
)
Interest and taxes payable
3,164
368
Unearned income due to customer
prepayments
5,890
7,113
Other-net
(140
)
(2,248
)
Net cash provided by operating
activities
15,450
9,130
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment
(31,250
)
(14,789
)
Proceeds from sale of property, plant, and
equipment
575
10
Net cash used in investing
activities
(30,675
)
(14,779
)
Cash flows from financing activities:
Proceeds from borrowings under revolving
credit agreement, net
14,955
—
Repayment of long-term debt
(377
)
(142
)
Principal payments under finance lease
obligations
(675
)
(233
)
Cash dividends paid
(2,338
)
(2,245
)
Repurchase of common stock
—
(6,766
)
Payments of withholding taxes for
stock-based compensation awards
(2,838
)
(2,015
)
Net cash provided by (used in)
financing activities
8,727
(11,401
)
Effects of exchange rate changes
(446
)
(381
)
Net change in cash and cash
equivalents
(6,944
)
(17,431
)
Cash and cash equivalents at beginning
of period
25,878
125,007
Cash and cash equivalents at end of
period
$
18,934
$
107,576
*Prior period has been adjusted to reflect the change in
inventory method, as described in the Company's Quarterly Report on
Form 10-Q for the period ended April 2, 2021.
Attachment 4
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Value-added Sales, Operating Profit, and EBIT
(Unaudited)
First Quarter Ended
(Millions)
April 2, 2021
March 27, 2020*
Net Sales
Performance Alloys and Composites
$
114.1
$
99.1
Advanced Materials
204.7
160.1
Precision Optics
35.6
18.7
Other
—
—
Total
$
354.4
$
277.9
Less: Pass-through Metal Cost
Performance Alloys and Composites
$
13.3
$
15.4
Advanced Materials
141.7
105.6
Precision Optics
—
1.7
Other
0.8
1.2
Total
$
155.8
$
123.9
Value-added Sales (non-GAAP)
Performance Alloys and Composites
$
100.8
$
83.7
Advanced Materials
63.0
54.5
Precision Optics
35.6
17.0
Other
(0.8
)
(1.2
)
Total
$
198.6
$
154.0
Gross Margin
Performance Alloys and Composites
$
29.6
$
20.8
Advanced Materials
23.8
17.8
Precision Optics
13.9
6.0
Other
(0.5
)
—
Total
$
66.8
$
44.6
Operating Profit (Loss)
Performance Alloys and Composites
$
13.5
$
3.5
Advanced Materials
8.9
5.0
Precision Optics
4.6
(9.6
)
Other
(7.3
)
(4.5
)
Total
$
19.7
$
(5.6
)
*Prior period has been adjusted to reflect the change in
inventory method, as described in the Company's Quarterly Report on
Form 10-Q for the period ended April 2, 2021.
First Quarter Ended
(Millions)
April 2, 2021
March 27, 2020*
Special Items
Performance Alloys and Composites
$
—
$
3.6
Advanced Materials
—
0.1
Precision Optics
0.3
10.8
Other
0.1
0.1
Total
$
0.4
$
14.6
Operating Profit (Loss) Excluding
Special Items
Performance Alloys and Composites
$
13.5
$
7.1
Advanced Materials
8.9
5.1
Precision Optics
4.9
1.2
Other
(7.2
)
(4.4
)
Total
$
20.1
$
9.0
Non-Operating (Income) Expense
Performance Alloys and Composites
$
0.1
$
0.2
Advanced Materials
—
—
Precision Optics
(0.2
)
—
Other
(1.2
)
(1.1
)
Total
$
(1.3
)
$
(0.9
)
EBIT Excluding Special Items
Performance Alloys and Composites
$
13.4
$
6.9
Advanced Materials
8.9
5.1
Precision Optics
5.1
1.2
Other
(6.0
)
(3.3
)
Total
$
21.4
$
9.9
*Prior period has been adjusted to reflect the change in
inventory method, as described in the Company's Quarterly Report on
Form 10-Q for the period ended April 2, 2021.
The cost of gold, silver, platinum, palladium, copper,
ruthenium, iridium, rhodium, rhenium, and osmium is passed through
to customers and, therefore, the trends and comparisons of net
sales are affected by movements in the market price of these
metals. Internally, management also reviews net sales on a
value-added basis. Value-added sales is a non-GAAP financial
measure that deducts the value of the pass-through metals sold from
net sales. Value-added sales allows management to assess the impact
of differences in net sales between periods or segments and analyze
the resulting margins and profitability without the distortion of
the movements in pass-through metal prices. The dollar amount of
gross margin and operating profit is not affected by the
value-added sales calculation. During the first quarter of 2021,
the Company added ruthenium, iridium, rhodium, rhenium, and osmium
to its definition of value-added sales as the costs of these
materials are treated as pass-through. Prior period value-added
sales amounts have been recast to reflect this change. The Company
sells other metals and materials that are not considered direct
pass throughs, and these costs are not deducted from net sales to
calculate value-added sales.
The Company’s pricing policy is to pass the cost of these metals
on to customers in order to mitigate the impact of price volatility
on the Company’s results from operations. Value-added information
is being presented since changes in metal prices may not directly
impact profitability. It is the Company’s intent to allow users of
the financial statements to review sales with and without the
impact of the pass-through metals.
Attachment 5
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measures - Profitability
(Unaudited)
First Quarter Ended
(Millions except per share
amounts)
April 2, 2021
March 27, 2020*
GAAP as Reported
Net sales
$
354.4
$
277.9
Operating profit (loss)
19.7
(5.6
)
Non-operating (income) expense
(1.3
)
(0.9
)
Net income (loss)
16.8
(3.9
)
Shares outstanding - Diluted
20,628
20,384
EPS - Diluted
$
0.81
$
(0.19
)
Operating Profit Special Items
Impairment charges
$
—
$
10.8
Non-cash inventory adjustment
—
1.3
Cost reduction initiatives
0.3
2.2
COVID-19 related costs
—
0.2
Merger and acquisition costs
0.1
0.1
Total Operating Profit Special
Items
$
0.4
$
14.6
Operating Profit Special Items - net of
tax
$
0.3
$
11.2
Tax Special Items
(0.2
)
0.7
Special items per diluted share
$
0.01
$
0.58
Non-GAAP Measures - Adjusted
Profitability
Value-added (VA) sales
$
198.6
$
154.0
Operating profit
20.1
9.0
Operating profit % of VA
10.1
%
5.8
%
EBIT
21.4
9.9
EBIT % of VA
10.8
%
6.4
%
Net income
16.9
8.0
EPS - Diluted
$
0.82
$
0.39
*Prior period has been adjusted to reflect the change in
inventory method, as described in the Company's Quarterly Report on
Form 10-Q for the period ended April 2, 2021.
In addition to presenting financial statements prepared in
accordance with U.S. generally accepted accounting principles
(GAAP), this earnings release contains financial measures,
including operating profit, segment operating profit, earnings
before interest and taxes (EBIT), net income, and earnings per
share, on a non-GAAP basis. As detailed in the above reconciliation
and Attachment 4, we have adjusted the results for certain special
items such as non-cash impairment charges, non-cash inventory
adjustments, cost reduction initiatives (i.e., severance), COVID-19
related costs, merger and acquisition costs, and certain discrete
income tax items from the applicable GAAP financial measure.
Internally, management reviews the results of operations without
the impact of these costs in order to assess the profitability from
ongoing activities. We are providing this information because we
believe it will assist investors in analyzing our financial results
and, when viewed in conjunction with the GAAP results, provide a
more comprehensive understanding of the factors and trends
affecting our operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210429005552/en/
Investor Contact: Andrew R. Vento
(216) 383-4098 andrew.vento@materion.com
Media Contact: John G. McCloskey
(216) 383-6835 john.mccloskey@materion.com
https://materion.com Mayfield Hts-g
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