Materion Corporation (NYSE: MTRN), a world leader in high
performance advanced materials, today reported record second
quarter financial results, affirmed 2022 earnings guidance and
shared an update on key strategic initiatives.
Second Quarter 2022 Highlights
- Net sales were $445.3 million; value-added sales increased 33%
year over year to a record $277.2 million
- Operating profit was $31.9 million; adjusted earnings before
interest, taxes, depreciation, depletion and amortization (EBITDA)
was a record $47.0 million, an increase of 44% and a 120-basis
point margin expansion year over year
- Net income of $1.12 per share, diluted; adjusted earnings per
share (EPS) of $1.28, an all-time record, up 41% year over
year
Recent Organic Growth Developments
- Established a new advanced chemicals facility to accelerate
growth in semiconductor and electric vehicle applications
- Leading EV battery customer is funding $6M to establish a
prototype line to produce advanced chemicals for their
next-generation battery solutions
- Materion and Kairos jointly commissioned a Molten Salt
Purification Plant for use in clean energy production
“Our global team delivered an exceptional first half of the year
with another record quarter of value-added sales and earnings,”
Jugal Vijayvargiya, Materion President & Chief Executive
Officer said. “Our organic outgrowth initiatives and strategic
acquisitions combined with strong end market demand are
accelerating the transformation of our company into a leading
provider of advanced materials solutions.”
“Our relentless focus on commercial excellence, strong customer
partnerships and investments in R&D are coming together as
planned resulting in a fantastic pipeline of opportunities that
will continue to deliver above market growth,” Vijayvargiya
continued. “Our substantial organic initiatives, coupled with the
HCS-Electronic Materials acquisition, which continues to exceed
expectations, strengthened our performance during the quarter and
enhances our ability to deliver on several exciting opportunities
ahead of us.”
SECOND QUARTER 2022 RESULTS
Net sales for the second quarter of 2022 were $445.3 million,
compared to $371.0 million in the prior year period. Value-added
sales of $277.2 million were a quarterly record, up 33% from the
prior year. In addition to the benefit of the HCS-Electronic
Materials acquisition, value-added sales were up 12% organically,
driven by strong performance across several major end markets
including semiconductor, industrial, aerospace and energy.
Operating profit for the second quarter was $31.9 million and
net income was $23.3 million, or $1.12 per diluted share, compared
to operating profit of $20.7 million and net income of $17.9
million, or $0.87 per diluted share in the prior year period.
Excluding acquisition and restructuring related costs as detailed
in the attached tables, adjusted EBITDA was $47.0 million in the
second quarter, another quarterly record and an increase of 44%
versus the prior year period.
Adjusted net income was $26.4 million excluding acquisition
amortization, or $1.28 per diluted share, an increase of 41%
compared to $0.91 per share in the prior year period.
OUTLOOK
While we continue to monitor various macroeconomic factors that
could intensify headwinds, we remain confident in our full year
outlook with the strength of our order book, organic outgrowth
resulting from our customer initiatives, and the full year impact
of the HCS-Electronic Materials acquisition. As a result, we are
affirming the 2022 adjusted earnings per share guidance in the
range of $5.50 to $5.90.
ADJUSTED EARNINGS GUIDANCE
It is not possible for the Company to identify the amount or
significance of future adjustments associated with potential
insurance and litigation claims, legacy environmental costs,
acquisition and integration costs, certain income tax items, or
other non-routine costs that the Company adjusts in the
presentation of adjusted earnings guidance. These items are
dependent on future events that are not reasonably estimable at
this time. Accordingly, the Company is unable to reconcile without
unreasonable effort the forecasted range of adjusted earnings
guidance for the full year to a comparable GAAP range. However,
items excluded from the Company's adjusted earnings guidance
include the historical adjustments noted in Attachments 4 through 7
to this press release.
CONFERENCE CALL
Materion Corporation will host an investor conference call with
analysts at 9:00 a.m. Eastern Time, August 3, 2022. The conference
call will be available via webcast through the Company’s website at
www.materion.com. By phone, please dial (888) 506-0062. Calls
outside the U.S. can dial (973) 528-0011; please reference
participant access code of 380484. A replay of the call will be
available until August 17, 2022 by dialing (877) 481-4010 or (919)
882-2331 if international; please reference replay ID number 44231.
The call will also be archived on the Company’s website.
FORWARD-LOOKING STATEMENTS
Portions of the narrative set forth in this document that are
not statements of historical or current facts are forward-looking
statements. Our actual future performance may materially differ
from that contemplated by the forward-looking statements as a
result of a variety of factors. These factors include, in addition
to those mentioned elsewhere herein: our ability to achieve the
strategic and other objectives related to the acquisition of
HCS-Electronic Materials, including any expected synergies; our
ability to successfully integrate the HCS-Electronic Materials
business and other such acquisitions and achieve the expected
results of the acquisition, the ultimate impact of the COVID-19
pandemic on our business, results of operations, financial
condition, and liquidity; the global economy, including
inflationary pressures, potential future recessionary conditions,
and the impact of tariffs and trade agreements; the condition of
the markets which we serve, whether defined geographically or by
segment; changes in product mix and the financial condition of
customers; our success in developing and introducing new products
and new product ramp-up rates; our success in passing through the
costs of raw materials to customers or otherwise mitigating
fluctuating prices for those materials, including the impact of
fluctuating prices on inventory values; our success implementing
our strategic plans and the timely and successful completion and
start-up of any capital projects; other financial and economic
factors, including the cost and availability of raw materials (both
base and precious metals), physical inventory valuations, metal
consignment fees, tax rates, exchange rates, interest rates,
pension costs and required cash contributions and other employee
benefit costs, energy costs, regulatory compliance costs, the cost
and availability of insurance, credit availability, and the impact
of the Materion’s stock price on the cost of incentive compensation
plans; the uncertainties related to the impact of war, terrorist
activities, and acts of God; changes in government regulatory
requirements and the enactment of new legislation that impacts our
obligations and operations; the conclusion of pending litigation
matters in accordance with our expectation that there will be no
material adverse effects; the disruptions on operations from, and
other effects of, catastrophic and other extraordinary events; and
the risk factors set forth in Part 1, Item 1A of our 2021 Annual
Report on Form 10-K.
Materion Corporation is headquartered in Mayfield Heights, Ohio.
The Company, through its wholly owned subsidiaries, supplies highly
engineered advanced enabling materials to global markets. Products
include precious and non-precious specialty metals, inorganic
chemicals and powders, specialty coatings, specialty engineered
beryllium alloys, beryllium and beryllium composites, and
engineered clad and plated metal systems.
Attachment 1
Materion Corporation and
Subsidiaries
Consolidated Statements of
Income
(Unaudited)
Second Quarter Ended
Six Months Ended
(In thousands except per share
amounts)
July 1, 2022
July 2, 2021
July 1, 2022
July 2, 2021
Net sales
$
445,295
$
370,999
$
894,340
$
725,385
Cost of sales
357,868
301,418
731,622
589,008
Gross margin
87,427
69,581
162,718
136,377
Selling, general, and administrative
expense
42,047
38,060
83,708
74,836
Research and development expense
7,592
6,604
14,666
12,810
Restructuring expense (income)
—
—
1,076
(378
)
Other — net
5,928
4,194
11,801
8,668
Operating profit
31,860
20,723
51,467
40,441
Other non-operating income—net
(1,168
)
(1,277
)
(2,337
)
(2,553
)
Interest expense — net
4,701
858
8,437
1,619
Income before income taxes
28,327
21,142
45,367
41,375
Income tax expense
5,072
3,274
8,093
6,740
Net income
$
23,255
$
17,868
$
37,274
$
34,635
Basic earnings per share:
Net income per share of common stock
$
1.13
$
0.87
$
1.82
$
1.70
Diluted earnings per share:
Net income per share of common stock
$
1.12
$
0.87
$
1.80
$
1.68
Weighted-average number of shares of
common stock outstanding:
Basic
20,517
20,429
20,491
20,402
Diluted
20,723
20,651
20,743
20,647
Attachment 2
Materion Corporation and
Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
(Thousands)
July 1, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
32,175
$
14,462
Accounts receivable, net
222,811
223,553
Inventories, net
422,376
361,115
Prepaid and other current assets
29,606
28,122
Total current assets
706,968
627,252
Deferred income taxes
5,018
5,431
Property, plant, and equipment
1,164,273
1,132,223
Less allowances for depreciation,
depletion, and amortization
(739,776
)
(723,248
)
Property, plant, and equipment—net
424,497
408,975
Operating lease, right-of-use assets
68,045
63,096
Intangible assets, net
148,364
156,736
Other assets
30,228
27,369
Goodwill
319,994
318,620
Total Assets
$
1,703,114
$
1,607,479
Liabilities and Shareholders’
Equity
Current liabilities
Short-term debt
$
15,333
$
15,359
Accounts payable
113,708
86,243
Salaries and wages
22,239
37,544
Other liabilities and accrued items
49,148
53,388
Income taxes
1,700
4,205
Unearned revenue
8,097
7,770
Total current liabilities
210,225
204,509
Other long-term liabilities
15,846
14,954
Operating lease liabilities
62,474
57,099
Finance lease liabilities
14,360
16,327
Retirement and post-employment
benefits
30,992
33,394
Unearned income
108,126
97,962
Long-term income taxes
1,206
1,190
Deferred income taxes
28,766
27,216
Long-term debt
481,965
434,388
Shareholders’ equity
749,154
720,440
Total Liabilities and Shareholders’
Equity
$
1,703,114
$
1,607,479
Attachment 3
Materion Corporation and
Subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited)
Six Months Ended
(Thousands)
July 1, 2022
July 2, 2021
Cash flows from operating activities:
Net income
$
37,274
$
34,635
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and
amortization
26,070
19,063
Amortization of deferred financing costs
in interest expense
780
364
Stock-based compensation expense
(non-cash)
3,694
3,512
Deferred income tax expense (benefit)
1,966
367
Changes in assets and liabilities:
Accounts receivable
(2,566
)
(13,941
)
Inventory
(67,304
)
(40,651
)
Prepaid and other current assets
(2,462
)
(1,718
)
Accounts payable and accrued expenses
8,897
28,403
Unearned revenue
(141
)
3,246
Interest and taxes payable
(1,765
)
2,868
Unearned income due to customer
prepayments
13,059
8,043
Other-net
3,913
(126
)
Net cash provided by operating
activities
21,415
44,065
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment
(37,730
)
(57,712
)
Proceeds from sale of property, plant, and
equipment
105
603
Payments for acquisition, net of cash
acquired
(2,971
)
—
Net cash used in investing
activities
(40,596
)
(57,109
)
Cash flows from financing activities:
Proceeds from borrowings under revolving
credit agreement, net
52,794
22,500
Proceeds from issuance of long-term
debt
2,059
Repayment of long-term debt
(7,177
)
(1,654
)
Principal payments under finance lease
obligations
(1,334
)
(1,512
)
Cash dividends paid
(5,112
)
(4,791
)
Payments of withholding taxes for
stock-based compensation awards
(2,812
)
(3,021
)
Net cash provided by financing
activities
38,418
11,522
Effects of exchange rate changes
(1,524
)
(11
)
Net change in cash and cash
equivalents
17,713
(1,533
)
Cash and cash equivalents at beginning
of period
14,462
25,878
Cash and cash equivalents at end of
period
$
32,175
$
24,345
Attachment 4
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Value-added Sales, Operating Profit, and EBITDA
(Unaudited)
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
July 2, 2021
July 1, 2022
July 2, 2021
Net Sales
Performance Materials (1)
$
154.9
$
125.3
$
304.5
$
239.4
Electronic Materials (1)
261.0
213.1
531.8
417.8
Precision Optics
29.4
32.6
58.0
68.2
Other
—
—
—
—
Total
$
445.3
$
371.0
$
894.3
$
725.4
Less: Pass-through Metal Cost
Performance Materials (1)
$
20.9
$
16.7
$
41.4
$
30.0
Electronic Materials (1)
$
146.8
146.2
$
307.7
287.9
Precision Optics
$
—
—
$
0.1
—
Other
$
0.4
0.2
$
1.1
1.0
Total
$
168.1
$
163.1
$
350.3
$
318.9
Value-added Sales (non-GAAP)
Performance Materials (1)
$
134.0
$
108.6
$
263.1
$
209.4
Electronic Materials (1)
114.2
66.9
224.1
129.9
Precision Optics
29.4
32.6
57.9
68.2
Other
(0.4
)
(0.2
)
(1.1
)
(1.0
)
Total
$
277.2
$
207.9
$
544.0
$
406.5
Gross Margin
Performance Materials (1)
$
39.0
$
33.0
$
76.3
$
62.6
Electronic Materials (1)
38.6
25.0
68.1
48.8
Precision Optics
9.8
11.8
18.3
25.8
Other
—
(0.3
)
—
(0.8
)
Total
$
87.4
$
69.5
$
162.7
$
136.4
(1)The Company changed two segment names
during the first quarter of 2022: Performance Alloys and Composites
became Performance Materials, and Advanced Materials became
Electronic Materials. See further discussion in the Form 10-Q for
the period ended April 1, 2022.
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
July 2, 2021
July 1, 2022
July 2, 2021
Operating Profit
Performance Materials
$
21.8
$
17.3
$
40.9
$
30.8
Electronic Materials
18.2
8.3
26.2
17.2
Precision Optics
0.7
2.6
—
7.2
Other
(8.8
)
(7.5
)
(15.6
)
(14.8
)
Total
$
31.9
$
20.7
$
51.5
$
40.4
Non-Operating (Income)/Expense
Performance Materials
$
0.1
$
0.2
$
0.3
$
0.3
Electronic Materials
—
—
—
—
Precision Optics
(0.2
)
(0.2
)
(0.4
)
(0.4
)
Other
(1.1
)
(1.3
)
(2.2
)
(2.5
)
Total
$
(1.2
)
$
(1.3
)
$
(2.3
)
$
(2.6
)
Depreciation, Depletion, and
Amortization
Performance Materials
$
5.5
$
5.2
$
11.4
$
8.6
Electronic Materials
4.2
2.1
8.3
4.1
Precision Optics
2.6
2.7
5.3
5.4
Other
0.6
0.5
1.1
1.0
Total
$
12.9
$
10.5
$
26.1
$
19.1
Segment EBITDA
Performance Materials
27.2
22.3
52.0
39.1
Electronic Materials
22.4
10.4
34.5
21.3
Precision Optics
3.5
5.5
5.7
13.0
Other
(7.1
)
(5.7
)
(12.3
)
(11.3
)
Total
46.0
32.5
79.9
62.1
Special Items
Performance Materials
$
—
$
—
$
2.7
$
—
Electronic Materials
0.4
—
7.2
—
Precision Optics
0.1
0.1
0.3
0.4
Other
0.5
—
1.5
0.1
Total
$
1.0
$
0.1
$
11.7
$
0.5
Adjusted EBITDA Excluding Special
Items
Performance Materials
27.2
22.3
54.7
39.1
Electronic Materials
22.8
10.4
41.7
21.3
Precision Optics
3.6
5.6
6.0
13.4
Other
(6.6
)
(5.7
)
(10.8
)
(11.2
)
Total
47.0
32.6
91.6
62.6
The cost of gold, silver, platinum, palladium, copper,
ruthenium, iridium, rhodium, rhenium, and osmium is passed through
to customers and, therefore, the trends and comparisons of net
sales are affected by movements in the market price of these
metals. Internally, management also reviews net sales on a
value-added basis. Value-added sales is a non-GAAP financial
measure that deducts the value of the pass-through metals sold from
net sales. Value-added sales allows management to assess the impact
of differences in net sales between periods or segments and analyze
the resulting margins and profitability without the distortion of
the movements in pass-through market metal prices. The dollar
amount of gross margin and operating profit is not affected by the
value-added sales calculation. The Company sells other metals and
materials that are not considered direct pass throughs, and these
costs are not deducted from net sales to calculate value-added
sales.
The Company’s pricing policy is to pass the cost of these metals
on to customers in order to mitigate the impact of price volatility
on the Company’s results from operations. Value-added information
is being presented since changes in metal prices may not directly
impact profitability. It is the Company’s intent to allow users of
the financial statements to review sales with and without the
impact of the pass-through metals.
Attachment 5
Materion Corporation and
Subsidiaries
Reconciliation of Net Sales to
Value-added Sales, Net Income to EBITDA and Adjusted EBITDA
(Unaudited)
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
% of VA
July 2, 2021
% of VA
July 1, 2022
% of VA
July 2, 2021
% of VA
Net sales
$
445.3
$
371.0
$
894.3
$
725.4
Pass-through metal cost
168.1
$
163.1
350.3
318.9
Value-added sales
$
277.2
$
207.9
$
544.0
$
406.5
Net income
$
23.3
8.4
%
17.9
8.6
%
$
37.3
6.9
%
$
34.6
8.5
%
Income tax expense
5.1
1.8
%
3.3
1.6
%
8.1
1.5
%
6.8
1.7
%
Interest expense - net
4.7
1.7
%
0.8
0.4
%
8.4
1.5
%
1.6
0.4
%
Depreciation, depletion and
amortization
12.9
4.7
%
10.5
5.1
%
26.1
4.8
%
19.1
4.7
%
Consolidated EBITDA
$
46.0
16.6
%
$
32.5
15.6
%
$
79.9
14.7
%
$
62.1
15.3
%
Special items
Restructuring and cost reduction
$
—
—
%
$
0.1
—
%
$
1.1
0.2
%
0.4
0.1
%
Merger and acquisition costs
1.0
0.4
%
—
—
%
10.6
1.9
%
0.1
—
%
Total special items
1.0
0.4
%
0.1
—
%
11.7
2.2
%
0.5
0.1
%
Adjusted EBITDA
$
47.0
17.0
%
$
32.6
15.7
%
$
91.6
16.8
%
$
62.6
15.4
%
In addition to presenting financial statements prepared in
accordance with U.S. generally accepted accounting principles
(GAAP), this earnings release contains financial measures,
including operating profit, segment operating profit, earnings
before earnings before interest, taxes, depreciation, depletion and
amortization (EBITDA), net income, and earnings per share, on a
non-GAAP basis. As detailed in the above reconciliation and
Attachment 6, we have adjusted the results for certain special
items such as restructuring and cost reductions and merger and
acquisition costs. Internally, management reviews the results of
operations without the impact of these costs in order to assess the
profitability from ongoing activities. We are providing this
information because we believe it will assist investors in
analyzing our financial results and, when viewed in conjunction
with the GAAP results, provide a more comprehensive understanding
of the factors and trends affecting our operations.
Attachment 6
Materion Corporation and
Subsidiaries
Reconciliation of Net Income
to Adjusted Net Income
and Diluted Earnings per Share
to Adjusted Diluted Earnings per Share (Unaudited)
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
Diluted EPS
July 2, 2021
Diluted EPS
July 1, 2022
Diluted EPS
July 2, 2021
Diluted EPS
Net income and EPS
$
23.3
$
1.12
$
17.9
$
0.87
$
37.3
$
1.80
$
34.6
$
1.68
Special items
Restructuring and cost reduction
—
0.1
1.1
0.4
Merger and acquisition costs
1.0
—
10.6
0.1
Provision for income taxes(1)
(0.3
)
(0.2
)
(2.6
)
(0.4
)
Total special items
0.7
0.04
(0.1
)
(0.01
)
9.1
0.44
0.1
—
Adjusted net income and adjusted EPS
$
24.0
$
1.16
$
17.8
$
0.86
$
46.4
$
2.24
$
34.7
$
1.68
Acquisition amortization (net of tax)
2.4
0.12
1.0
0.05
4.9
0.23
2.1
0.10
Adjusted net income and adjusted EPS excl.
amortization
$
26.4
$
1.28
$
18.8
$
0.91
$
51.3
$
2.47
$
36.8
$
1.78
(1) Provision for income taxes includes
the net tax impact on pre-tax adjustments (listed above), the
impact of certain discrete tax items recorded during the respective
periods as well as other adjustments to reflect the use of one
overall effective tax rate on adjusted pre-tax income in interim
periods.
Attachment 7
Reconciliation of Segment Net
sales to Segment Value-added sales and Segment EBITDA to Adjusted
Segment EBITDA (Unaudited)
Performance Materials
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
% of VA
July 2, 2021
% of VA
July 1, 2022
% of VA
July 2, 2021
% of VA
Net sales
$
154.9
$
125.3
$
304.5
$
239.4
Pass-through metal cost
20.9
16.7
41.4
30.0
Value-added sales
$
134.0
$
108.6
$
263.1
$
209.4
EBITDA
$
27.2
20.3
%
$
22.3
20.5
%
$
52.0
19.8
%
$
39.1
18.7
%
Merger and acquisition costs
—
—
%
—
—
%
2.7
1.0
%
—
—
%
Adjusted EBITDA
$
27.2
20.3
%
$
22.3
20.5
%
$
54.7
20.8
%
$
39.1
18.7
%
Electronic Materials
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
% of VA
July 2, 2021
% of VA
July 1, 2022
% of VA
July 2, 2021
% of VA
Net sales
$
261.0
$
213.1
$
531.8
$
417.8
Pass-through metal cost
146.8
146.2
307.7
287.9
Value-added sales
$
114.2
$
66.9
$
224.1
$
129.9
EBITDA
$
22.4
19.6
%
$
10.4
15.5
%
$
34.5
15.4
%
$
21.3
16.4
%
Restructuring and cost reduction
—
—
%
—
—
%
0.8
0.4
%
—
—
%
Merger and acquisition costs
0.4
0.4
%
—
—
%
6.4
2.9
%
—
—
%
Adjusted EBITDA
$
22.8
20.0
%
$
10.4
15.5
%
$
41.7
18.6
%
$
21.3
16.4
%
Precision Optics
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
% of VA
July 2, 2021
% of VA
July 1, 2022
% of VA
July 2, 2021
% of VA
Net sales
$
29.4
$
32.6
$
58.0
$
68.2
Pass-through metal cost
—
—
0.1
—
Value-added sales
$
29.4
$
32.6
$
57.9
$
68.2
EBITDA
$
3.5
11.9
%
$
5.5
16.9
%
$
5.7
9.8
%
$
13.0
19.1
%
Restructuring and cost reduction
—
—
%
0.1
0.3
%
0.2
0.3
%
0.4
0.6
%
Merger and acquisition costs
0.1
0.3
%
—
—
%
0.1
0.2
%
—
—
%
Adjusted EBITDA
$
3.6
12.2
%
$
5.6
17.2
%
$
6.0
10.4
%
$
13.4
19.6
%
Other
Second Quarter Ended
Six Months Ended
(Millions)
July 1, 2022
% of VA
July 2, 2021
% of VA
July 1, 2022
% of VA
July 2, 2021
% of VA
EBITDA
$
(7.1
)
$
(5.7
)
$
(12.3
)
$
(11.3
)
Restructuring and cost reduction
—
—
0.1
—
Merger and acquisition costs
0.5
—
1.4
0.1
Adjusted EBITDA
$
(6.6
)
$
(5.7
)
$
(10.8
)
$
(11.2
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220802006169/en/
Investor Contact: Kyle Kelleher
(216) 383-4931 kyle.kelleher@materion.com Media Contact: Shannon Bennett (216) 383-4094
shannon.bennett@materion.com https://materion.com Mayfield
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