Materion Corporation (NYSE:MTRN) today reported full-year and
fourth quarter 2019 financial results, provided 2020 earnings
guidance, and announced the date of the Annual Meeting.
Full-Year 2019 Results
- Operating profit was $67.0 million; adjusted operating profit
improved 25% from prior year to a record $82.4 million
- Operating cash flow was a record $99.2 million
- Net income was $2.45 per share, diluted; adjusted earnings per
share were $3.19, an all-time record and the third consecutive year
with earnings growth greater than 30%
Fourth Quarter 2019 Results
- Net sales were $280.2 million compared to $298.1 million in
2018; value-added sales were $162.5 million versus $185.8 million
in 2018
- Operating profit was $16.6 million; adjusted operating profit
was $17.1 million compared to $18.1 million in 2018
- Net income was $0.71 per share, diluted; adjusted earnings per
share were $0.68, the twelfth consecutive quarter of year-over-year
earnings growth
Earnings Guidance
- The Company is providing full-year 2020 adjusted earnings
guidance of $3.15 to $3.30 per share, diluted
“I am very pleased to report another year of exceptional
results, delivering the third consecutive year of greater than 30%
adjusted earnings growth,” stated Jugal Vijayvargiya, President and
Chief Executive Officer. “Our multi-pillar One Materion strategy
continues to gain traction. We will continue to execute this
strategy to deliver long-term profitable growth, even as we
navigate through market cycles and macroeconomic uncertainty.”
FULL-YEAR 2019 RESULTS
Net sales were $1.2 billion, consistent with 2018. Value-added
sales of $733.7 million were relatively flat compared to $739.0
million for the prior year. End market strength and commercial
performance in aerospace and defense partially offset weakness in
the automotive and semiconductor end markets.
Operating profit for the full year was $67.0 million versus
$61.5 million in the prior year. Adjusted operating profit was a
record $82.4 million, up 25% compared to $66.0 million in 2018.
Adjusted operating profit excluded non-cash charges for goodwill
and asset impairments of $14.1 million related to the Large Area
Coatings (LAC) business included in the Precision Coatings segment,
and $1.3 million for restructuring charges and other non-recurring
expenses. As a percentage of value-added sales, adjusted operating
profit was a record 11%.
Net income for 2019 was $50.7 million, or $2.45 per share,
diluted, compared to $20.8 million, or $1.01 per share, diluted, in
the prior year. Excluding non-recurring special items, adjusted net
income for 2019 was a record of $65.9 million, or $3.19 per share,
diluted, an increase of 34% versus the prior year adjusted net
income of $2.38 per share.
FOURTH QUARTER 2019
RESULTS
Net sales for the fourth quarter were $280.2 million, versus
$298.1 million for the prior year. Value-added sales in the fourth
quarter were $162.5 million, compared to $185.8 million in 2018.
Commercial performance initiatives and strong demand in the
aerospace and defense end market was more than offset by weaker
demand in the automotive and telecom and data center end markets,
as well as lower sales of blood glucose test strip products. In
addition, there were no beryllium hydroxide shipments in the fourth
quarter of 2019.
Operating profit for the fourth quarter was $16.6 million,
compared to $14.4 million for the prior year. Adjusted operating
profit for the quarter was $17.1 million, versus $18.1 million in
2018. Adjustments for special, non-recurring items in the quarter
included due diligence expenses for potential acquisitions and
legacy environmental costs. As a percentage of value-added sales,
adjusted operating profit for the quarter was 11%, the sixth
consecutive quarter of double-digit operating profit margins.
Fourth quarter 2019 net income was $14.8 million versus a net
loss of $20.8 million in 2018. The prior-year quarter included a
non-cash, non-operating pension settlement charge of $41.4 million
for annuitizing a portion of U.S. pension obligations. On an
adjusted basis, net income was $14.1 million, or $0.68 per share,
diluted, an increase of 5% versus the prior-year fourth quarter and
the twelfth consecutive quarter of year-over-year earnings
growth.
OUTLOOK
We continue to face challenging conditions impacting several of
the geographies and end markets we serve, including automotive,
industrial, energy, and telecom and data center. We remain focused
on executing our multi-pillar strategy and making the necessary
investments to deliver long-term growth.
Based on the current order entry and outlook, we are providing
full-year 2020 adjusted earnings guidance of $3.15 to $3.30 per
share, diluted.
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.
ANNUAL MEETING
ANNOUNCEMENT
The Company today announced March 16, 2020 as the record date
for shareholders voting at its Annual Meeting to be held on May 13,
2020.
CONFERENCE CALL
Materion Corporation will host an investor conference call with
analysts at 9:00 a.m. Eastern Time, February 13, 2020. 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
February 27, 2020 by dialing (877) 481-4010 or (919) 882-2331;
please reference replay ID number 57375. 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, in particular, the outlook provided above. 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:
- Actual net sales, operating rates, and margins for 2020;
- 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, with the major market segments being:
semiconductor, industrial, aerospace and defense, automotive,
energy, consumer electronics, and telecom and data center.
- 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 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;
and
- The risk factors as set forth in Item 1A of our 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 (Loss)
(Unaudited)
Fourth Quarter Ended
Year Ended
Year Ended
(In thousands except per share
amounts)
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Net sales
$
280,161
$
298,070
$
1,185,424
$
1,207,815
Cost of sales
225,154
232,018
926,280
956,710
Gross margin
55,007
66,052
259,144
251,105
Selling, general, and administrative
expense
31,397
37,682
147,164
153,489
Research and development expense
5,207
3,434
18,271
15,187
Goodwill impairment charges
—
—
11,560
—
Asset impairment charges
—
—
2,581
—
Restructuring expense
—
5,599
785
5,599
Other — net
1,829
4,950
11,783
15,334
Operating profit
16,574
14,387
67,000
61,496
Other non-operating (income)
expense—net
(53
)
41,004
3,431
42,683
Interest expense — net
177
461
1,579
2,471
Income (Loss) before income
taxes
16,450
(27,078
)
61,990
16,342
Income tax expense (benefit)
1,699
(6,250
)
11,330
(4,504
)
Net income (loss)
$
14,751
$
(20,828
)
$
50,660
$
20,846
Basic earnings per share:
Net income (loss) per share of common
stock
$
0.72
$
(1.03
)
$
2.49
$
1.03
Diluted earnings per share:
Net income (loss) per share of common
stock
$
0.71
$
(1.03
)
$
2.45
$
1.01
Weighted-average number of shares of
common stock outstanding:
Basic
20,404
20,249
20,365
20,212
Diluted
20,692
20,249
20,655
20,613
Attachment 2
Materion Corporation and
Subsidiaries
Consolidated Balance
Sheets
(Unaudited)
(Thousands)
December 31, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
$
125,007
$
70,645
Accounts receivable, net
154,751
130,538
Inventories, net
190,390
214,871
Prepaid and other current assets
21,839
23,299
Total current assets
491,987
439,353
Deferred income taxes
1,666
5,616
Property, plant, and equipment
916,965
898,251
Less allowances for depreciation,
depletion, and amortization
(684,689
)
(647,233
)
Property, plant, and equipment—net
232,276
251,018
Operating lease, right-of-use asset
23,413
—
Intangible assets
6,380
6,461
Other assets
17,937
7,236
Goodwill
79,011
90,657
Total Assets
$
852,670
$
800,341
Liabilities and Shareholders’
Equity
Current liabilities
Short-term debt
$
868
$
823
Accounts payable
43,206
49,622
Salaries and wages
41,167
47,501
Other liabilities and accrued items
32,477
33,301
Income taxes
1,342
2,615
Unearned revenue
3,380
5,918
Total current liabilities
122,440
139,780
Other long-term liabilities
11,560
14,764
Operating lease liabilities
18,091
—
Finance lease liabilities
17,424
15,221
Retirement and post-employment
benefits
32,466
38,853
Unearned income
32,891
32,563
Long-term income taxes
3,451
2,993
Deferred income taxes
2,410
195
Long-term debt
1,260
2,066
Shareholders’ equity
610,677
553,906
Total Liabilities and Shareholders’
Equity
$
852,670
$
800,341
Attachment 3
Materion Corporation and
Subsidiaries
Consolidated Statements of
Cash Flows
(Unaudited)
(Thousands)
2019
2018
Cash flows from operating activities:
Net income
$
50,660
$
20,846
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and
amortization
41,116
35,524
Amortization of deferred financing costs
in interest expense
962
1,009
Stock-based compensation expense
(non-cash)
7,170
5,313
Amortization of pension and
post-retirement costs
386
5,551
Loss on sale of property, plant, and
equipment
344
518
Deferred income tax expense (benefit)
2,584
(1,318
)
Impairment charges
14,141
—
Net pension curtailments and
settlements
3,328
41,406
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable
(23,933
)
(7,219
)
Decrease (increase) in inventory
24,031
4,234
Decrease (increase) in prepaid and other
current assets
1,418
1,162
Increase (decrease) in accounts payable
and accrued expenses
(18,575
)
8,820
Increase (decrease) in unearned
revenue
(2,538
)
477
Increase (decrease) in interest and taxes
payable
(805
)
435
Domestic pension plan contributions
(4,500
)
(42,000
)
Other-net
3,433
1,616
Net cash provided by operating
activities
99,222
76,374
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment
(24,251
)
(27,702
)
Payments for mine development
(2,277
)
(6,558
)
Proceeds from sale of property, plant, and
equipment
44
432
Net cash used in investing
activities
(26,484
)
(33,828
)
Cash flows from financing activities:
Repayment of long-term debt
(823
)
(777
)
Principal payments under finance lease
obligations
(1,200
)
(861
)
Cash dividends paid
(8,856
)
(8,389
)
Deferred financing costs
(2,130
)
—
Repurchase of common stock
(199
)
(422
)
Payments of withholding taxes for
stock-based compensation awards
(4,846
)
(3,156
)
Net cash used in financing
activities
(18,054
)
(13,605
)
Effects of exchange rate changes
(322
)
(140
)
Net change in cash and cash
equivalents
54,362
28,801
Cash and cash equivalents at beginning
of period
70,645
41,844
Cash and cash equivalents at end of
period
$
125,007
$
70,645
Attachment 4
Materion Corporation and
Subsidiaries
Reconciliation of Non-GAAP
Measure - Value-added Sales and Operating Profit
(Unaudited)
Fourth Quarter Ended
Year Ended
(Millions)
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Net Sales
Performance Alloys and Composites
$
107.2
$
128.5
$
500.2
$
500.6
Advanced Materials
148.8
138.7
573.8
586.6
Precision Coatings
24.2
30.9
111.4
120.6
Other
—
—
—
—
Total
$
280.2
$
298.1
$
1,185.4
$
1,207.8
Less: Pass-through Metal Cost
Performance Alloys and Composites
$
15.9
$
18.4
$
72.1
$
75.1
Advanced Materials
96.0
85.9
349.5
362.9
Precision Coatings
5.0
6.7
24.1
26.4
Other
0.8
1.3
6.0
4.4
Total
$
117.7
$
112.3
$
451.7
$
468.8
Value-added Sales (non-GAAP)
Performance Alloys and Composites
$
91.3
$
110.1
$
428.1
$
425.5
Advanced Materials
52.8
52.8
224.3
223.7
Precision Coatings
19.2
24.2
87.3
94.2
Other
(0.8
)
(1.3
)
(6.0
)
(4.4
)
Total
$
162.5
$
185.8
$
733.7
$
739.0
Gross Margin
% of VA
% of VA
% of VA
% of VA
Performance Alloys and Composites
$
29.4
32
%
$
38.7
35
%
$
148.4
35
%
$
133.0
31
%
Advanced Materials
17.0
32
%
16.4
31
%
77.9
35
%
79.0
35
%
Precision Coatings
7.0
36
%
10.2
42
%
35.8
41
%
39.1
42
%
Other
1.6
—
0.8
—
(3.0
)
—
—
—
Total
$
55.0
34
%
$
66.1
36
%
$
259.1
35
%
$
251.1
34
%
Operating Profit
% of VA
% of VA
% of VA
% of VA
Performance Alloys and Composites
$
13.6
15
%
$
19.9
18
%
$
70.7
17
%
$
58.8
14
%
Advanced Materials
5.3
10
%
(0.7
)
(1
)%
24.7
11
%
17.6
8
%
Precision Coatings
1.6
8
%
2.4
10
%
(3.5
)
(4
)%
11.5
12
%
Other
(3.9
)
—
(7.2
)
—
(24.9
)
—
(26.4
)
—
Total
$
16.6
10
%
$
14.4
8
%
$
67.0
9
%
$
61.5
8
%
Fourth Quarter Ended
Year Ended
(Millions)
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Special Items
Performance Alloys and Composites
$
—
$
(1.9
)
$
—
$
(1.9
)
Advanced Materials
—
5.6
—
5.6
Precision Coatings
—
—
14.5
—
Other
0.5
—
0.9
0.8
Total
$
0.5
$
3.7
$
15.4
$
4.5
Operating Profit Excluding Special
Items
% of VA
% of VA
% of VA
% of VA
Performance Alloys and Composites
$
13.6
15
%
$
18.0
16
%
$
70.7
17
%
$
56.9
13
%
Advanced Materials
5.3
10
%
4.9
9
%
24.7
11
%
23.2
10
%
Precision Coatings
1.6
8
%
2.4
10
%
11.0
13
%
11.5
12
%
Other
(3.4
)
—
(7.2
)
—
(24.0
)
—
(25.6
)
—
Total
$
17.1
11
%
$
18.1
10
%
$
82.4
11
%
$
66.0
9
%
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)
Fourth Quarter Ended
Year Ended
(Millions except per share
amounts)
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
GAAP as Reported
Net Sales
$
280.2
$
298.1
$
1,185.4
$
1,207.8
Operating profit
16.6
14.4
67.0
61.5
Net income (loss)
14.8
(20.8
)
50.7
20.8
EPS - Diluted
$
0.71
$
(1.03
)
$
2.45
$
1.01
Operating Profit Special Items
Impairment charges
$
—
$
—
$
14.1
$
—
Cost reduction initiatives
—
5.6
0.8
5.6
LIFO inventory adjustment
—
(1.9
)
—
(1.9
)
Acquisition costs
0.4
—
0.4
—
Legacy legal & environmental costs
0.1
—
0.1
0.8
Total Operating Profit Special
Items
$
0.5
$
3.7
$
15.4
$
4.5
Operating Profit Special Items - net of
tax
$
0.4
$
4.1
$
12.7
$
4.7
Other Non-Operating Expense Special
Items - net of tax
$
—
$
31.4
$
2.6
$
31.4
Tax Special Items
$
(1.1
)
$
(1.3
)
$
(0.1
)
$
(7.9
)
Non-GAAP Measures - Adjusted
Profitability
Value-added (VA) sales
$
162.5
$
185.8
$
733.7
$
739.0
Operating profit
17.1
18.1
82.4
66.0
Operating profit % of VA
10.5
%
9.7
%
11.2
%
8.9
%
Net income
14.1
13.4
65.9
49.0
EPS - Diluted
$
0.68
$
0.65
$
3.19
$
2.38
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, 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, cost
reduction initiatives (i.e., severance), certain LIFO inventory
adjustments, merger and acquisition costs, legacy legal and
environmental costs, non-cash pension charges, 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
(Millions)
December 31, 2019
December 31, 2018
% Change
December 31, 2019
December 31, 2018
% Change
Materion Corporation
Semiconductor
$
35.8
$
33.6
6.5
%
$
144.2
$
147.3
(2.1
)%
Aerospace and Defense
34.8
28.0
24.3
%
127.0
103.0
23.3
%
Industrial
28.2
32.0
(11.9
)%
133.1
131.5
1.2
%
Consumer Electronics
15.7
17.2
(8.7
)%
65.8
68.9
(4.5
)%
Energy
14.2
16.7
(15.0
)%
70.1
69.3
1.2
%
Automotive
13.7
18.2
(24.7
)%
59.7
78.1
(23.6
)%
Telecom and Data Center
9.5
14.7
(35.4
)%
54.1
57.3
(5.6
)%
Other
10.6
25.4
(58.3
)%
79.7
83.6
(4.7
)%
Total
$
162.5
$
185.8
(12.5
)%
$
733.7
$
739.0
(0.7
)%
Performance Alloy and
Composites
Semiconductor
$
0.8
$
1.3
(38.5
)%
$
5.2
$
5.0
4.0
%
Aerospace and Defense
28.1
22.2
26.6
%
103.4
81.0
27.7
%
Industrial
21.0
23.5
(10.6
)%
96.8
98.8
(2.0
)%
Consumer Electronics
10.9
12.3
(11.4
)%
47.3
49.7
(4.8
)%
Energy
7.4
9.6
(22.9
)%
36.7
35.7
2.8
%
Automotive
11.6
16.0
(27.5
)%
51.9
69.7
(25.5
)%
Telecom and Data Center
9.2
14.5
(36.6
)%
53.3
56.8
(6.2
)%
Other
2.3
10.7
(78.5
)%
33.5
28.8
16.3
%
Total
$
91.3
$
110.1
(17.1
)%
$
428.1
$
425.5
0.6
%
Advanced Materials
Semiconductor
$
34.5
$
32.1
7.5
%
$
138.4
$
140.8
(1.7
)%
Aerospace and Defense
0.9
0.5
80.0
%
2.9
2.1
38.1
%
Industrial
4.3
5.0
(14.0
)%
22.0
20.0
10.0
%
Consumer Electronics
0.1
0.1
—
%
0.3
0.4
(25.0
)%
Energy
6.9
7.1
(2.8
)%
33.4
33.6
(0.6
)%
Automotive
2.0
2.0
—
%
6.8
7.1
(4.2
)%
Telecom and Data Center
0.3
0.1
200.0
%
0.8
0.5
60.0
%
Other
3.8
5.9
(35.6
)%
19.7
19.2
2.6
%
Total
$
52.8
$
52.8
—
%
$
224.3
$
223.7
0.3
%
Precision Coatings
Semiconductor
$
0.5
$
0.2
150.0
%
$
0.7
$
1.5
(53.3
)%
Aerospace and Defense
5.8
5.2
11.5
%
20.7
20.0
3.5
%
Industrial
2.9
3.5
(17.1
)%
14.3
12.8
11.7
%
Consumer Electronics
4.7
4.8
(2.1
)%
18.2
18.8
(3.2
)%
Energy
—
—
—
%
—
—
—
%
Automotive
0.1
0.3
(66.7
)%
1.0
1.4
(28.6
)%
Telecom and Data Center
—
—
—
%
—
—
—
%
Other
5.2
10.2
(49.0
)%
32.4
39.7
(18.4
)%
Total
$
19.2
$
24.2
(20.7
)%
$
87.3
$
94.2
(7.3
)%
Eliminations
$
(0.8
)
$
(1.3
)
$
(6.0
)
$
(4.4
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200213005441/en/
Investor Contact: Stephen F.
Shamrock (216) 383-4010 stephen.shamrock@materion.com
Media Contact: John G. McCloskey
(216) 383-6835 john.mccloskey@materion.com https://materion.com
Mayfield Hts-g
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