Business Wire | Feb 18, 2021 07:53AM EST

Materion Corporation Reports Fourth Quarter and Full-Year 2020 Financial Results and Provides First Quarter 2021 Earnings Guidance

Feb. 18, 2021

MAYFIELD HEIGHTS, Ohio--(BUSINESS WIRE)--Feb. 18, 2021--Materion Corporation (NYSE: MTRN) today reported fourth quarter and full-year 2020 financial results, provided first quarter 2021 earnings guidance, and provided an update on key strategic initiatives.

Fourth Quarter 2020 Highlights

* Net sales were $339.7 million compared to $287.2 million in the third quarter; value-added sales increased 14% sequentially to $190.8 million * Net income of $0.39 per share, diluted; adjusted earnings of $0.70 per share (including a $.06 per share increase from the change to FIFO accounting), up for the third consecutive quarter * Advanced several key strategic initiatives including: Completed full quarter of shipments for the new precision clad engineered strip project Continued Optics Balzers integration, creating a world leader in precision optics Completed closure of LAC business; and Finalized restructuring in PAC to streamline operations and improve cost structure

"Our primary concern throughout the global pandemic has been for the health, safety and well-being of our people, while ensuring the continuity of essential operations to deliver for our customers. We continue to be guided by the recommendations of both national and global healthcare organizations in making important COVID-19 decisions," said Jugal Vijayvargiya, President and Chief Executive Officer.

Mr. Vijayvargiya continued, "I am very pleased with the team's performance in the fourth quarter, as we delivered sales and earnings growth for the third consecutive quarter and continued to execute on our key strategic initiatives. The significant precision clad engineered strip growth opportunity remains on schedule. To date, we have received $58.8 million of prepayments from the customer in support of our new manufacturing facility. In addition, we made meaningful progress on a number of other strategic initiatives that are important for our future."

FOURTH QUARTER 2020 RESULTS

Net sales for the fourth quarter of 2020 were $339.7 million, compared to $280.2 million in the prior year fourth quarter. Fourth quarter value-added sales of $190.8 million were up 14% from the third quarter of 2020. Strong performance in the defense and semiconductor end markets, sales to the new precision clad engineered strip customer and final sales of blood glucose test strip products from our LAC business drove the growth on a sequential basis.

Operating profit for the fourth quarter was $6.8 million, and net income was $8.1 million, or $0.39 per diluted share, compared to an operating loss of $0.6 million and net income of $5.5 million in the third quarter. The fourth quarter operating results include a pretax adjustment of $1.6 million of income related to the Company's decision to change from the last-in, first out (LIFO) method of inventory accounting to the first-in, first out (FIFO) method of inventory accounting. The change was made to reflect more closely the physical flow of goods, to provide more uniformity across a significant majority of the Company's inventory and to improve comparability with peers. Prior quarters were also adjusted to reflect this accounting change (detailed in the attached tables).

Excluding special items (detailed in the attached tables), adjusted earnings before interest and tax expense were $18.7 million in the fourth quarter, an increase of $4.6 million versus the third quarter, $2.9 million of which resulted from the change from LIFO to FIFO inventory accounting. Improved sales performance was the primary driver of the balance of the increase. Adjusted net income was $14.4 million, or $0.70 per diluted share, an increase of 40% compared to $0.50 per share in the third quarter.

FULL-YEAR 2020 RESULTS

Net sales were $1.2 billion, flat versus 2019. Value-added sales of $678.6 million were down 8% from $733.7 million from the prior year. Strong performance in the semiconductor end market and incremental sales related to the acquisition of Optics Balzers were more than offset by reduced demand throughout 2020 in several of our other key end markets due to the ongoing COVID-19 pandemic, particularly in the aerospace and defense, energy, and industrial end markets.

Operating profit for the full year was $8.2 million, and net income was $15.5 million, or $0.75 per diluted share, compared to operating profit of $70.5 million and net income of $53.4 million, or $2.59 per share, in 2019.

Excluding special items (detailed in the attached tables), adjusted earnings before interest and tax expense were $55.4 million in 2020, down from the prior year amount of $85.8 million. The year over year decrease in earnings was primarily driven by lower volume, partially offset by aggressive cost control efforts. Adjusted net income was $41.8 million, or $2.03 per diluted share, as compared to $3.32 per diluted share in 2019.

OUTLOOK

Predicting full year demand levels continues to be extremely challenging with the ongoing COVID-19 pandemic. As a result, we are providing guidance for the first quarter of 2021. Based on current demand levels, we expect adjusted earnings per diluted share in the first quarter to be in the range of $0.58 to $0.62 per share, an increase of over 50% from the first quarter of 2020.

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, February 18, 2021. The conference call will be available via webcast through the Company's website at www.materion.com or through www.InvestorCalendar.com. 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 March 4, 2021 by dialing (877) 481-4010 or (919) 882-2331; please reference replay ID number 39478. 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 2019 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the second quarter 2020.

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)

Fourth Quarter Ended Year Ended

December December December 31, December(In thousands except 31, 31, 31,per share amounts) 2020 2020 2019* 2019*

Net sales $ 339,689 $ 280,161 $ 1,176,274 $ 1,185,424

Cost of sales 283,892 225,679 983,641 922,734

Gross margin 55,797 54,482 192,633 262,690

Selling, general, and 34,671 31,397 133,963 147,164administrative expense

Research and 6,179 5,207 20,283 18,271development expense

Goodwill impairment - - 9,053 11,560charges

Asset impairment (294 ) - 1,419 2,581charges

Restructuring expense 4,093 - 11,237 785

Other - net 4,320 1,829 8,463 11,783

Operating profit 6,828 16,049 8,215 70,546

Other non-operating (1,068 ) (53 ) (3,939 ) 3,431(income) expense-net

Interest expense - net 1,040 177 3,879 1,579

Income before income 6,856 15,925 8,275 65,536taxes

Income tax (benefit) (1,210 ) 1,579 (7,187 ) 12,142expense

Net income $ 8,066 $ 14,346 $ 15,462 $ 53,394

Basic earnings per share:

Net income per share of $ 0.40 $ 0.70 $ 0.76 $ 2.62common stock

Diluted earnings per share:

Net income per share of $ 0.39 $ 0.69 $ 0.75 $ 2.59common stock

Weighted-average numberof shares of common stock outstanding:

Basic 20,328 20,404 20,338 20,365

Diluted 20,606 20,692 20,603 20,655

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

Attachment 2

Materion Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Thousands)

December 31, 2020

December 31, 2019*

Assets

Current assets

Cash and cash equivalents

$

25,878

$

125,007

Accounts receivable, net

166,447

154,751

Inventories, net

250,778

236,253

Prepaid and other current assets

20,896

21,736

Total current assets

463,999

537,747

Deferred income taxes

3,134

1,666

Property, plant, and equipment

998,312

916,965

Less allowances for depreciation, depletion, and amortization

(688,626

)

(684,689

)

Property, plant, and equipment-net

309,686

232,276

Operating lease, right-of-use assets

62,089

23,413

Intangible assets

54,672

6,380

Other assets

19,364

17,937

Goodwill

144,916

79,011

Total Assets

$

1,057,860

$

898,430

Liabilities and Shareholders' Equity

Current liabilities

Short-term debt

$

1,937

$

868

Accounts payable

55,640

43,206

Salaries and wages

18,809

41,167

Other liabilities and accrued items

40,887

32,477

Income taxes

1,898

1,342

Unearned revenue

7,713

3,380

Total current liabilities

126,884

122,440

Other long-term liabilities

14,313

11,560

Operating lease liabilities

56,761

18,091

Finance lease liabilities

20,539

17,424

Retirement and post-employment benefits

41,877

32,466

Unearned income

86,761

32,891

Long-term income taxes

2,689

3,451

Deferred income taxes

15,864

13,104

Long-term debt

36,542

1,260

Shareholders' equity

655,630

645,743

Total Liabilities and Shareholders' Equity

$

1,057,860

$

898,430

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

Attachment 2

Materion Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Thousands) December 31, December 2020 31, 2019*

Assets

Current assets

Cash and cash equivalents $ 25,878 $ 125,007

Accounts receivable, net 166,447 154,751

Inventories, net 250,778 236,253

Prepaid and other current assets 20,896 21,736

Total current assets 463,999 537,747

Deferred income taxes 3,134 1,666

Property, plant, and equipment 998,312 916,965

Less allowances for depreciation, depletion, and (688,626 ) (684,689 )amortization

Property, plant, and equipment-net 309,686 232,276

Operating lease, right-of-use assets 62,089 23,413

Intangible assets 54,672 6,380

Other assets 19,364 17,937

Goodwill 144,916 79,011

Total Assets $ 1,057,860 $ 898,430

Liabilities and Shareholders' Equity

Current liabilities

Short-term debt $ 1,937 $ 868

Accounts payable 55,640 43,206

Salaries and wages 18,809 41,167

Other liabilities and accrued items 40,887 32,477

Income taxes 1,898 1,342

Unearned revenue 7,713 3,380

Total current liabilities 126,884 122,440

Other long-term liabilities 14,313 11,560

Operating lease liabilities 56,761 18,091

Finance lease liabilities 20,539 17,424

Retirement and post-employment benefits 41,877 32,466

Unearned income 86,761 32,891

Long-term income taxes 2,689 3,451

Deferred income taxes 15,864 13,104

Long-term debt 36,542 1,260

Shareholders' equity 655,630 645,743

Total Liabilities and Shareholders' Equity $ 1,057,860 $ 898,430

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

Attachment 3

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Thousands)

2020

2019*

Cash flows from operating activities:

Net income

$

15,462

$

53,394

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, depletion, and amortization

42,384

41,116

Amortization of deferred financing costs in interest expense

790

962

Stock-based compensation expense (non-cash)

5,528

7,170

Amortization of pension and post-retirement costs

(151

)

386

Loss on sale of property, plant, and equipment

466

344

Deferred income tax (benefit) expense

(9,850

)

3,945

Impairment charges

10,472

14,141

Net pension curtailments and settlements

94

3,328

Changes in assets and liabilities, net of acquired assets and liabilities:

Decrease (increase) in accounts receivable

(707

)

(23,933

)

Decrease (increase) in inventory

(1,288

)

20,485

Decrease (increase) in prepaid and other current assets

2,475

869

Increase (decrease) in accounts payable and accrued expenses

(21,877

)

(18,575

)

Increase (decrease) in unearned revenue

2,935

(2,538

)

Increase (decrease) in interest and taxes payable

(157

)

(805

)

Increase (decrease) in unearned income due to customer prepayments

54,103

4,733

Domestic pension plan contributions

-

(4,500

)

Other-net

378

(1,300

)

Net cash provided by operating activities

101,057

99,222

Cash flows from investing activities:

Payments for acquisition, net of cash acquired

(130,715

)

-

Payments for purchase of property, plant, and equipment

(67,274

)

(24,251

)

Payments for mine development

-

(2,277

)

Proceeds from settlement of currency exchange contract

3,249

-

Proceeds from sale of property, plant, and equipment

33

44

Net cash used in investing activities

(194,707

)

(26,484

)

Cash flows from financing activities:

Short-term debt under revolving credit agreement, net

34,000

-

Repayment of long-term debt

(20,634

)

(823

)

Principal payments under finance lease obligations

(2,213

)

(1,200

)

Cash dividends paid

(9,257

)

(8,856

)

Deferred financing costs

-

(2,130

)

Repurchase of common stock

(6,766

)

(199

)

Payments of withholding taxes for stock-based compensation awards

(2,221

)

(4,846

)

Net cash used in financing activities

(7,091

)

(18,054

)

Effects of exchange rate changes

1,612

(322

)

Net change in cash and cash equivalents

(99,129

)

54,362

Cash and cash equivalents at beginning of period

125,007

70,645

Cash and cash equivalents at end of period

$

25,878

$

125,007

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

Attachment 3

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Thousands) 2020 2019*

Cash flows from operating activities:

Net income $ 15,462 $ 53,394

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, depletion, and amortization 42,384 41,116

Amortization of deferred financing costs in 790 962 interest expense

Stock-based compensation expense (non-cash) 5,528 7,170

Amortization of pension and post-retirement costs (151 ) 386

Loss on sale of property, plant, and equipment 466 344

Deferred income tax (benefit) expense (9,850 ) 3,945

Impairment charges 10,472 14,141

Net pension curtailments and settlements 94 3,328

Changes in assets and liabilities, net of acquired assets and liabilities:

Decrease (increase) in accounts receivable (707 ) (23,933 )

Decrease (increase) in inventory (1,288 ) 20,485

Decrease (increase) in prepaid and other current 2,475 869 assets

Increase (decrease) in accounts payable and accrued (21,877 ) (18,575 )expenses

Increase (decrease) in unearned revenue 2,935 (2,538 )

Increase (decrease) in interest and taxes payable (157 ) (805 )

Increase (decrease) in unearned income due to 54,103 4,733 customer prepayments

Domestic pension plan contributions - (4,500 )

Other-net 378 (1,300 )

Net cash provided by operating activities 101,057 99,222

Cash flows from investing activities:

Payments for acquisition, net of cash acquired (130,715 ) -

Payments for purchase of property, plant, and (67,274 ) (24,251 )equipment

Payments for mine development - (2,277 )

Proceeds from settlement of currency exchange 3,249 - contract

Proceeds from sale of property, plant, and 33 44 equipment

Net cash used in investing activities (194,707 ) (26,484 )

Cash flows from financing activities:

Short-term debt under revolving credit agreement, 34,000 - net

Repayment of long-term debt (20,634 ) (823 )

Principal payments under finance lease obligations (2,213 ) (1,200 )

Cash dividends paid (9,257 ) (8,856 )

Deferred financing costs - (2,130 )

Repurchase of common stock (6,766 ) (199 )

Payments of withholding taxes for stock-based (2,221 ) (4,846 )compensation awards

Net cash used in financing activities (7,091 ) (18,054 )

Effects of exchange rate changes 1,612 (322 )

Net change in cash and cash equivalents (99,129 ) 54,362

Cash and cash equivalents at beginning of period 125,007 70,645

Cash and cash equivalents at end of period $ 25,878 $ 125,007

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

Attachment 4

Materion Corporation and Subsidiaries

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

(Unaudited)

Fourth Quarter Ended

Third Quarter Ended

Year Ended

(Millions)

December 31,

2020

December 31,

2019*

September 25,

2020*

December 31,

2020

December 31,

2019*

Net Sales

Performance Alloys and Composites

$

102.3

$

107.2

$

91.2

$

394.2

$

500.2

Advanced Materials

195.0

148.8

165.6

670.9

573.8

Precision Optics

42.4

24.2

30.4

111.2

111.4

Other

-

-

-

-

-

Total

$

339.7

$

280.2

$

287.2

$

1,176.3

$

1,185.4

Less: Pass-through Metal Cost

Performance Alloys and Composites

$

12.3

$

15.9

$

9.3

$

48.9

$

72.1

Advanced Materials

132.6

96.0

108.0

436.9

349.5

Precision Optics

3.6

5.0

2.1

9.3

24.1

Other

0.4

0.8

0.3

2.6

6.0

Total

$

148.9

$

117.7

$

119.7

$

497.7

$

451.7

Value-added Sales (non-GAAP)

Performance Alloys and Composites

$

90.0

$

91.3

$

81.9

$

345.3

$

428.1

Advanced Materials

62.4

52.8

57.6

234.0

224.3

Precision Optics

38.8

19.2

28.3

101.9

87.3

Other

(0.4

)

(0.8

)

(0.3

)

(2.6

)

(6.0

)

Total

$

190.8

$

162.5

$

167.5

$

678.6

$

733.7

Gross Margin

Performance Alloys and Composites

$

20.9

$

28.8

$

16.3

$

82.0

$

151.6

Advanced Materials

20.9

17.1

18.7

73.8

78.6

Precision Optics

13.8

7.0

10.2

37.2

35.8

Other

0.2

1.6

0.1

(0.4

)

(3.3

)

Total

$

55.8

$

54.5

$

45.3

$

192.6

$

262.7

Operating Profit (Loss)

Performance Alloys and Composites

$

3.7

$

13.0

$

(0.4

)

$

13.6

$

73.8

Advanced Materials

6.7

5.4

5.7

22.1

25.1

Precision Optics

1.7

1.6

1.4

(4.4

)

(3.5

)

Other

(5.3

)

(3.9

)

(7.3

)

(23.1

)

(24.9

)

Total

$

6.8

$

16.1

$

(0.6

)

$

8.2

$

70.5

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

Attachment 4

Materion Corporation and Subsidiaries

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

(Unaudited)

Third Fourth Quarter Ended Quarter Year Ended Ended

December December September December December(Millions) 31, 31, 25, 31, 31,

2020 2019* 2020* 2020 2019*

Net Sales

PerformanceAlloys and $ 102.3 $ 107.2 $ 91.2 $ 394.2 $ 500.2 Composites

Advanced 195.0 148.8 165.6 670.9 573.8 Materials

Precision Optics 42.4 24.2 30.4 111.2 111.4

Other - - - - -

Total $ 339.7 $ 280.2 $ 287.2 $ 1,176.3 $ 1,185.4



Less:Pass-through Metal Cost

PerformanceAlloys and $ 12.3 $ 15.9 $ 9.3 $ 48.9 $ 72.1 Composites

Advanced 132.6 96.0 108.0 436.9 349.5 Materials

Precision Optics 3.6 5.0 2.1 9.3 24.1

Other 0.4 0.8 0.3 2.6 6.0

Total $ 148.9 $ 117.7 $ 119.7 $ 497.7 $ 451.7



Value-added Sales (non-GAAP)

PerformanceAlloys and $ 90.0 $ 91.3 $ 81.9 $ 345.3 $ 428.1 Composites

Advanced 62.4 52.8 57.6 234.0 224.3 Materials

Precision Optics 38.8 19.2 28.3 101.9 87.3

Other (0.4 ) (0.8 ) (0.3 ) (2.6 ) (6.0 )

Total $ 190.8 $ 162.5 $ 167.5 $ 678.6 $ 733.7



Gross Margin

PerformanceAlloys and $ 20.9 $ 28.8 $ 16.3 $ 82.0 $ 151.6 Composites

Advanced 20.9 17.1 18.7 73.8 78.6 Materials

Precision Optics 13.8 7.0 10.2 37.2 35.8

Other 0.2 1.6 0.1 (0.4 ) (3.3 )

Total $ 55.8 $ 54.5 $ 45.3 $ 192.6 $ 262.7



Operating Profit (Loss)

PerformanceAlloys and $ 3.7 $ 13.0 $ (0.4 ) $ 13.6 $ 73.8 Composites

Advanced 6.7 5.4 5.7 22.1 25.1 Materials

Precision Optics 1.7 1.6 1.4 (4.4 ) (3.5 )

Other (5.3 ) (3.9 ) (7.3 ) (23.1 ) (24.9 )

Total $ 6.8 $ 16.1 $ (0.6 ) $ 8.2 $ 70.5

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

Fourth Quarter Ended

Third Quarter Ended

Year Ended

(Millions)

December 31,

2020

December 31,

2019*

September 25,

2020*

December 31,

2020

December 31,

2019*

Special Items

Performance Alloys and Composites

$

8.1

$

-

$

9.9

$

25.8

$

-

Advanced Materials

0.5

-

0.1

1.3

-

Precision Optics

2.5

-

1.9

15.5

14.5

Other

(0.3

)

0.5

1.7

0.7

0.9

Total

$

10.8

$

0.5

$

13.6

$

43.3

$

15.4

Operating Profit (Loss) Excluding Special Items

Performance Alloys and Composites

$

11.8

$

13.0

$

9.5

$

39.4

$

73.8

Advanced Materials

7.2

5.4

5.8

23.4

25.1

Precision Optics

4.2

1.6

3.3

11.1

11.0

Other

(5.6

)

(3.4

)

(5.6

)

(22.4

)

(24.0

)

Total

$

17.6

$

16.6

$

13.0

$

51.5

$

85.9

Non-Operating (Income) Expense

Performance Alloys and Composites

$

0.1

$

0.1

$

0.2

$

0.6

$

0.7

Advanced Materials

-

-

-

0.1

-

Precision Optics

(0.1

)

-

(0.2

)

(0.3

)

-

Other

(1.1

)

(0.2

)

(1.1

)

(4.3

)

2.7

Total

$

(1.1

)

$

(0.1

)

$

(1.1

)

$

(3.9

)

$

3.4

Non-Operating (Income) Expense Special Items

Other

$

-

$

-

$

-

$

-

$

3.3

Total

$

-

$

-

$

-

$

-

$

3.3

EBIT Excluding Special Items

Performance Alloys and Composites

$

11.7

$

12.9

$

9.3

$

38.8

$

73.1

Advanced Materials

7.2

5.4

5.8

23.3

25.1

Precision Optics

4.3

1.6

3.5

11.4

11.0

Other

(4.5

)

(3.2

)

(4.5

)

(18.1

)

(23.4

)

Total

$

18.7

$

16.7

$

14.1

$

55.4

$

85.8

*Prior periods have been adjusted to reflect the change in inventory method, as described in the attached press release.

The cost of gold, silver, platinum, palladium, and copper 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. 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.

Fourth Quarter Third Ended Quarter Year Ended Ended

December December September December December(Millions) 31, 31, 25, 31, 31,

2020 2019* 2020* 2020 2019*

Special Items

Performance Alloys and $ 8.1 $ - $ 9.9 $ 25.8 $ - Composites

Advanced Materials 0.5 - 0.1 1.3 -

Precision Optics 2.5 - 1.9 15.5 14.5

Other (0.3 ) 0.5 1.7 0.7 0.9

Total $ 10.8 $ 0.5 $ 13.6 $ 43.3 $ 15.4



Operating Profit (Loss) Excluding Special Items

Performance Alloys and $ 11.8 $ 13.0 $ 9.5 $ 39.4 $ 73.8 Composites

Advanced Materials 7.2 5.4 5.8 23.4 25.1

Precision Optics 4.2 1.6 3.3 11.1 11.0

Other (5.6 ) (3.4 ) (5.6 ) (22.4 ) (24.0 )

Total $ 17.6 $ 16.6 $ 13.0 $ 51.5 $ 85.9



Non-Operating (Income) Expense

Performance Alloys and $ 0.1 $ 0.1 $ 0.2 $ 0.6 $ 0.7 Composites

Advanced Materials - - - 0.1 -

Precision Optics (0.1 ) - (0.2 ) (0.3 ) -

Other (1.1 ) (0.2 ) (1.1 ) (4.3 ) 2.7

Total $ (1.1 ) $ (0.1 ) $ (1.1 ) $ (3.9 ) $ 3.4



Non-Operating (Income) Expense Special Items

Other $ - $ - $ - $ - $ 3.3

Total $ - $ - $ - $ - $ 3.3



EBIT Excluding Special Items

Performance Alloys and $ 11.7 $ 12.9 $ 9.3 $ 38.8 $ 73.1 Composites

Advanced Materials 7.2 5.4 5.8 23.3 25.1

Precision Optics 4.3 1.6 3.5 11.4 11.0

Other (4.5 ) (3.2 ) (4.5 ) (18.1 ) (23.4 )

Total $ 18.7 $ 16.7 $ 14.1 $ 55.4 $ 85.8

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

The cost of gold, silver, platinum, palladium, and copper 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. 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)

Third Fourth Quarter Ended Quarter Year Ended Ended

(Millions except December December September December Decemberper share 31, 31, 25, 31, 31,amounts) 2020 2019* 2020* 2020 2019*

GAAP as Reported

Net sales $ 339.7 $ 280.2 $ 287.2 $ 1,176.3 $ 1,185.4

Operating profit 6.8 16.1 (0.6 ) 8.2 70.5 (loss)

Non-operating (1.1 ) (0.1 ) (1.1 ) (3.9 ) 3.4 (income) expense

Net income 8.1 14.3 5.5 15.5 53.4

Sharesoutstanding - 20,606 20,692 20,592 20,603 20,655 Diluted

EPS - Diluted $ 0.39 $ 0.69 $ 0.27 $ 0.75 $ 2.59



Operating Profit Special Items

Impairment $ (0.3 ) $ - $ - $ 10.5 $ 14.1 charges

Mine development 5.6 - 7.3 12.9 - costs

Forfeiture ofnon-cash (0.6 ) - (1.5 ) (2.1 ) - stock-basedcompensation

Non-cashinventory - - - 1.3 - adjustment

Cost reduction 4.5 - 2.6 11.7 0.8 initiatives

COVID-19 related 0.4 - 0.8 4.1 - costs

Merger and 1.0 0.4 5.5 8.0 0.4 acquisition costs

Foreign currency - - (1.1 ) (3.3 ) - hedge gain

Legacy legal &environmental 0.2 0.1 - 0.2 0.1 costs

Total OperatingProfit Special $ 10.8 $ 0.5 $ 13.6 $ 43.3 $ 15.4 Items

Operating ProfitSpecial Items - $ 8.3 $ 0.4 $ 10.6 $ 33.4 $ 12.7 net of tax

Non-OperatingExpense Special $ - $ - $ - $ - $ 3.3 Items

Non-OperatingExpense Special $ - $ - $ - $ - $ 2.6 Items - net oftax

Tax Special Items $ (2.0 ) $ (1.1 ) $ (5.8 ) $ (7.1 ) $ (0.1 )

Special items per $ 0.31 $ (0.03 ) $ 0.23 $ 1.28 $ 0.73 diluted share



Non-GAAP Measures- Adjusted Profitability

Value-added (VA) $ 190.8 $ 162.5 $ 167.5 $ 678.6 $ 733.7 sales

Operating profit 17.6 16.6 13.0 51.5 85.9

Operating profit 9.2 % 10.2 % 7.8 % 7.6 % 11.7 %% of VA

EBIT 18.7 16.7 14.1 55.4 85.8

EBIT % of VA 9.8 % 10.3 % 8.4 % 8.2 % 11.7 %

Net income 14.4 13.6 10.3 41.8 68.6

EPS - Diluted $ 0.70 $ 0.66 $ 0.50 $ 2.03 $ 3.32

*Prior periods have been adjusted to reflect the change in inventory method, asdescribed in the attached press release.

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, mine development costs, forfeiture of certain non-cash stock-based compensation, non-cash inventory adjustments, cost reduction initiatives (i.e., severance), COVID-19 related costs, merger and acquisition costs, foreign currency hedge gains, legacy legal and environmental 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.

Attachment 6

Materion Corporation and Subsidiaries

Value-added sales by Market

(Unaudited)

Fourth Quarter Ended Year Ended

December December December December(Millions) 31, 31, % Change 31, 31, % Change 2020 2019 2020 2019

Materion Corporation

Semiconductor $ 43.1 $ 35.8 20.4 % $ 161.8 $ 144.2 12.2 %

Industrial 33.9 28.2 20.2 % 124.1 133.1 (6.8 ) %

Aerospace and 24.6 34.8 (29.3 ) 87.0 127.0 (31.5 )Defense % %

Consumer 17.7 15.7 12.7 % 57.6 65.8 (12.5 )Electronics %

Automotive 17.2 13.7 25.5 % 58.1 59.7 (2.7 ) %

Energy 12.1 14.2 (14.8 ) 49.1 70.1 (30.0 ) % %

Telecom and 9.5 9.5 - % 38.2 54.1 (29.4 )Data Center %

Other 32.7 10.6 208.5 % 102.7 79.7 28.9 %

Total $ 190.8 $ 162.5 17.4 % $ 678.6 $ 733.7 (7.5 ) %

PerformanceAlloys and Composites

Semiconductor $ 1.1 $ 0.8 4.2 % $ 4.2 $ 5.2 (19.2 ) %

Industrial 20.1 21.0 (4.3 ) 84.1 96.8 (13.1 ) % %

Aerospace and 19.6 28.1 (30.2 ) 64.2 103.4 (37.9 )Defense % %

Consumer 9.6 10.9 (11.9 ) 45.0 47.3 (4.9 )Electronics % %

Automotive 13.2 11.6 13.8 % 48.8 51.9 (6.0 ) %

Energy 3.3 7.4 (55.4 ) 18.4 36.7 (49.9 ) % %

Telecom and 9.5 9.2 3.3 % 37.7 53.3 (29.3 )Data Center %

Other 13.6 2.3 491.3 % 42.9 33.5 28.1 %

Total $ 90.0 $ 91.3 (1.4 ) $ 345.3 $ 428.1 (19.3 ) % %

Advanced Materials

Semiconductor $ 42.0 $ 34.5 21.7 % $ 157.1 $ 138.4 13.5 %

Industrial 6.4 4.3 48.8 % 21.9 22.0 (0.5 ) %

Aerospace and 0.7 0.9 (22.2 ) 3.2 2.9 10.3 %Defense %

Consumer 0.1 0.1 - % 0.2 0.3 (33.3 )Electronics %

Automotive 1.5 2.0 (25.0 ) 5.8 6.8 (14.7 ) % %

Energy 8.8 6.9 27.5 % 30.6 33.4 (8.4 ) %

Telecom and - 0.3 (100.0 ) 0.5 0.8 (37.5 )Data Center % %

Other 2.9 3.8 (23.7 ) 14.7 19.7 (25.4 ) % %

Total $ 62.4 $ 52.8 18.2 % $ 234.0 $ 224.3 4.3 %

Precision Optics

Semiconductor $ - $ 0.5 (100.0 ) $ 0.5 $ 0.7 (28.6 ) % %

Industrial 7.4 2.9 155.2 % 18.1 14.3 26.6 %

Aerospace and 4.4 5.8 (24.1 ) 19.5 20.7 (5.8 )Defense % %

Consumer 8.1 4.7 72.3 % 21.6 18.2 18.7 %Electronics

Automotive 2.4 0.1 2,300.0 % 3.5 1.0 250.0 %

Energy - - - % - - - %

Telecom and - - - % - - - %Data Center

Other 16.5 5.2 217.3 % 38.7 32.4 19.4 %

Total $ 38.8 $ 19.2 102.1 % $ 101.9 $ 87.3 16.7 %



Eliminations $ (0.4 ) $ (0.8 ) $ (2.6 ) $ (6.0 )

Attachment 7

Quarterly Data LIFO vs. FIFO

(Unaudited)

(Thousands except per share amounts)

First Quarter 2020

Second Quarter 2020

Selected Items

Previously

Reported

As Adjusted

Adjustment

Previously

Reported

As Adjusted

Adjustment

Cost of sales

$

232,371

$

233,376

$

1,005

$

223,378

$

224,513

$

1,135

Gross margin

45,575

44,570

(1,005

)

48,090

46,955

(1,135

)

Operating (loss) profit

(4,563

)

(5,568

)

(1,005

)

8,706

7,571

(1,135

)

(Loss) Income before income taxes

(3,865

)

(4,870

)

(1,005

)

8,298

7,163

(1,135

)

Income tax (benefit) expense

(762

)

(992

)

(230

)

1,620

1,360

(260

)

Net (loss) income

(3,103

)

(3,878

)

(775

)

6,678

5,803

(875

)

Basic earnings per share:

Net (loss) income per share of common stock

$

(0.15

)

$

(0.19

)

$

(0.04

)

$

0.33

$

0.29

$

(0.04

)

Diluted earnings per share:

Net (loss) income per share of common stock

$

(0.15

)

$

(0.19

)

$

(0.04

)

$

0.32

$

0.28

$

(0.04

)

Attachment 7

Quarterly Data LIFO vs. FIFO

(Unaudited)

(Thousands except per share amounts)

First Quarter 2020 Second Quarter 2020

Selected Previously Previously AsItems As Adjusted Adjustment Adjusted Adjustment Reported Reported

Cost of $ 232,371 $ 233,376 $ 1,005 $ 223,378 $ 224,513 $ 1,135 sales

Gross 45,575 44,570 (1,005 ) 48,090 46,955 (1,135 )margin

Operating(loss) (4,563 ) (5,568 ) (1,005 ) 8,706 7,571 (1,135 )profit

(Loss)Incomebefore (3,865 ) (4,870 ) (1,005 ) 8,298 7,163 (1,135 )incometaxes

Incometax (762 ) (992 ) (230 ) 1,620 1,360 (260 )(benefit)expense

Net(loss) (3,103 ) (3,878 ) (775 ) 6,678 5,803 (875 )income

Basicearnings pershare:

Net(loss)income $ (0.15 ) $ (0.19 ) $ (0.04 ) $ 0.33 $ 0.29 $ (0.04 )per shareof commonstock

Dilutedearnings pershare:

Net(loss)income $ (0.15 ) $ (0.19 ) $ (0.04 ) $ 0.32 $ 0.28 $ (0.04 )per shareof commonstock

Third Quarter 2020

Fourth Quarter 2020

Selected Items

Previously

Reported

As Adjusted

Adjustment

As Computed

Under LIFO

As Reported

Difference

Cost of sales

$

240,531

$

241,860

$

1,329

$

285,442

$

283,892

$

(1,550

)

Gross margin

46,640

45,311

(1,329

)

54,247

55,797

1,550

Operating (loss) profit

713

(616

)

(1,329

)

5,278

6,828

1,550

(Loss) Income before income taxes

455

(874

)

(1,329

)

5,306

6,856

1,550

Income tax (benefit) expense

(6,041

)

(6,345

)

(304

)

(1,565

)

(1,210

)

355

Net income

6,496

5,471

(1,025

)

6,871

8,066

1,195

Basic earnings per share:

Net income per share of common stock

$

0.32

$

0.27

$

(0.05

)

$

0.34

$

0.40

$

0.06

Diluted earnings per share:

Net income per share of common stock

$

0.32

$

0.27

$

(0.05

)

$

0.33

$

0.39

$

0.06

Third Quarter 2020 Fourth Quarter 2020

Selected Previously As ComputedItems As Adjusted Adjustment As Reported Difference Reported Under LIFO

Cost of $ 240,531 $ 241,860 $ 1,329 $ 285,442 $ 283,892 $ (1,550 )sales

Gross 46,640 45,311 (1,329 ) 54,247 55,797 1,550 margin

Operating(loss) 713 (616 ) (1,329 ) 5,278 6,828 1,550 profit

(Loss)Incomebefore 455 (874 ) (1,329 ) 5,306 6,856 1,550 incometaxes

Incometax (6,041 ) (6,345 ) (304 ) (1,565 ) (1,210 ) 355 (benefit)expense

Net 6,496 5,471 (1,025 ) 6,871 8,066 1,195 income

Basicearnings pershare:

Netincomeper share $ 0.32 $ 0.27 $ (0.05 ) $ 0.34 $ 0.40 $ 0.06 of commonstock

Dilutedearnings pershare:

Netincomeper share $ 0.32 $ 0.27 $ (0.05 ) $ 0.33 $ 0.39 $ 0.06 of commonstock

First Quarter 2019

Second Quarter 2019

Selected Items

Previously

Reported

As Adjusted

Adjustment

Previously

Reported

As Adjusted

Adjustment

Cost of sales

$

232,129

$

231,835

$

(294

)

$

228,249

$

225,846

$

(2,403

)

Gross margin

69,312

69,606

294

69,594

71,997

2,403

Operating profit

21,387

21,681

294

22,750

25,153

2,403

Income before income taxes

20,676

20,970

294

19,138

21,541

2,403

Income tax expense

3,770

3,837

67

3,598

4,148

550

Net income

16,906

17,133

227

15,540

17,393

1,853

Basic earnings per share:

Net income per share of common stock

$

0.83

$

0.85

$

0.02

$

0.76

$

0.85

$

0.09

Diluted earnings per share:

Net income per share of common stock

$

0.82

$

0.83

$

0.01

$

0.75

$

0.84

$

0.09

First Quarter 2019 Second Quarter 2019

Selected Previously As Previously AsItems Adjusted Adjustment Adjusted Adjustment Reported Reported

Cost of $ 232,129 $ 231,835 $ (294 ) $ 228,249 $ 225,846 $ (2,403 )sales

Gross 69,312 69,606 294 69,594 71,997 2,403 margin

Operating 21,387 21,681 294 22,750 25,153 2,403 profit

Incomebefore 20,676 20,970 294 19,138 21,541 2,403 incometaxes

Incometax 3,770 3,837 67 3,598 4,148 550 expense

Net 16,906 17,133 227 15,540 17,393 1,853 income

Basicearnings pershare:

Netincomeper share $ 0.83 $ 0.85 $ 0.02 $ 0.76 $ 0.85 $ 0.09 of commonstock

Dilutedearnings pershare:

Netincomeper share $ 0.82 $ 0.83 $ 0.01 $ 0.75 $ 0.84 $ 0.09 of commonstock

Third Quarter 2019

Fourth Quarter 2019

Selected Items

Previously

Reported

As Adjusted

Adjustment

Previously

Reported

As Adjusted

Adjustment

Cost of sales

$

240,748

$

239,374

$

(1,374

)

$

225,154

$

225,679

$

525

Gross margin

65,231

66,605

1,374

55,007

54,482

(525

)

Operating profit

6,289

7,663

1,374

16,574

16,049

(525

)

Income before income taxes

5,726

7,100

1,374

16,450

15,925

(525

)

Income tax expense

2,263

2,578

315

1,699

1,579

(120

)

Net income

3,463

4,522

1,059

14,751

14,346

(405

)

Basic earnings per share:

Net income per share of common stock

$

0.17

$

0.22

$

0.05

$

0.72

$

0.70

$

(0.02

)

Diluted earnings per share:

Net income per share of common stock

$

0.17

$

0.22

$

0.05

$

0.71

$

0.69

$

(0.02

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210218005583/en/

CONTACT: Investor Contact: Stephen F. Shamrock (216) 383-4010 stephen.shamrock@materion.com https://materion.com

CONTACT: Media Contact: John G. McCloskey (216) 383-6835 john.mccloskey@materion.com

CONTACT: Mayfield Hts-g