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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Materion Corporation | NYSE:MTRN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
3.58 | 3.10% | 118.94 | 119.70 | 116.32 | 116.86 | 177,627 | 01:00:00 |
Materion Corporation (NYSE:MTRN) today reported second quarter 2016 financial results.
SECOND QUARTER 2016 RESULTS
Net sales for the second quarter were $249.8 million, compared to net sales of $235.5 million in the first quarter of 2016 and $276.9 million for the second quarter of 2015. Value-added sales were $153.9 million in the second quarter of 2016, up sequentially 7% from the first quarter of 2016 value-added sales of $143.9 million and down compared to value-added sales of $162.4 million for the second quarter of 2015.
The sequential growth in value-added sales in the second quarter of 2016 compared to the first quarter of 2016 was primarily due to stronger demand from customers in the consumer electronics, industrial components and telecommunications infrastructure markets. New product sales accounted for 11% of total value-added sales in the quarter. The year-over-year decline in value-added sales in the second quarter was due almost entirely to the lack of raw material beryllium hydroxide sales in 2016.
Net income for the second quarter of 2016 was $5.5 million, or $0.27 per share, diluted. This compares to net income of $5.4 million for the first quarter of 2016 and net income of $9.1 million for the second quarter of the prior year. Adjusted earnings for the second quarter of 2016, which excludes due diligence costs for potential acquisitions, a discrete tax benefit and legacy environmental costs, were $0.31 per share, diluted, up 15% above first quarter 2016 earnings of $0.27 per share, diluted.
For the first six months of 2016, net sales were $485.3 million compared to net sales of $566.9 million for the same period of last year. Value-added sales for the first six months of 2016 were $297.8 million, compared to $325.0 million for the same period last year. The 8% year-over-year decline in value-added sales is primarily reflective of the absence of raw material beryllium hydroxide sales and a decrease in product sales into the oil and gas exploration market.
Year-to-date net income was $10.9 million or $0.54 per share, diluted, as compared to $18.1 million or $0.88 per share, diluted, in the comparable period of the prior year. Excluding special items in both periods, earnings for the first half of 2016 were $11.5 million, or $0.57 per share, diluted, as compared to $16.8 million, or $0.82 per share, diluted, for the same period last year. The $5.3 million decrease in year-to-date adjusted earnings is driven by foreign exchange rate impacts, primarily the lack of foreign exchange hedge gains in 2016, and the temporary loss of beryllium hydroxide sales.
CHAIRMAN’S COMMENTS
Richard J. Hipple, Chairman, President and Chief Executive Officer, stated, “The sequential value-added sales and earnings improvement we experienced in the second quarter of 2016 in spite of a difficult global economic environment is encouraging. We anticipate continued sequential growth in the second half of 2016 as we are making progress on both our organic and inorganic growth initiatives.”
BUSINESS SEGMENT REPORTING
Performance Alloys and Composites
Net sales for Performance Alloys and Composites in the second quarter of 2016 were $97.7 million compared to net sales of $107.7 million in the second quarter of 2015 and $90.6 million in the first quarter of 2016. Value-added sales were $83.4 million in the second quarter of 2016, compared to $91.5 million in the second quarter of 2015 and up sequentially 7% or $5.2 million from the first quarter of 2016. The year-over-year decline in sales was driven by the decrease in raw material beryllium hydroxide sales, as segment product sales were flat with the prior year period. The sequential improvement in value-added sales was driven by customers in the consumer electronics and industrial components end markets, particularly in the Asia region.
Operating profit for the second quarter of 2016 was $0.2 million as compared to $9.3 million for the same period last year and down sequentially from the $1.5 million of operating profit recorded in the first quarter of 2016. The reduction in operating profit is due to the lack of foreign exchange hedge gains, the temporary loss of beryllium hydroxide sales, higher operating costs and unfavorable product mix. The poor product mix partially reflects the decrease in sales of oil and gas related products offset by growth in strip product sales in Asia.
Advanced Materials
Advanced Materials’ net sales for the second quarter of 2016 were $113.6 million, which compares to second quarter 2015 net sales of $131.4 million and $108.1 million net sales for the first quarter of 2016. Value-added sales for the second quarter of 2016 were $47.0 million, up 1% compared to the second quarter 2015 value-added sales of $46.7 million and up 12% as compared to the first quarter 2016 value-added sales of $42.1 million. The sequential improvement in value-added sales was primarily driven by strength from customers serving the consumer electronics end market.
Operating profit for the second quarter of 2016 was $7.3 million, flat with the operating profit of $7.4 million in the second quarter of 2015 and up sequentially 40% from the $5.2 million of operating profit in the first quarter of 2016. Operating profit as a percent of value-added sales in the second quarter of 2016 was 16%, up approximately 300 basis points sequentially, as compared to the first quarter of 2016. The sequential improvement is primarily due to increased sales volumes with consumer electronics customers as our strategy to penetrate the broader semiconductor market is gaining traction.
Other
The Other segment includes the operating results of the Precision Coatings group and unallocated corporate costs.
Within the Other segment, Precision Coatings’ net sales for the second quarter of 2016 were $38.5 million, which compares to net sales of $38.3 million for the second quarter of 2015. Value-added sales for the second quarter of 2016 were $25.1 million, compared to value-added sales of $25.2 million for the same period of 2015.
Precision Coatings’ operating profit for the second quarter of 2016 was $2.3 million or 9% of value-added sales, compared to $0.6 million of operating profit recorded in the same period last year. The increase in profits is due to the improved product mix, increased manufacturing yields and realization of restructuring cost savings.
OUTLOOK
The second quarter 2016 consolidated financial results were in-line with our expectations despite the absence of beryllium hydroxide sales. Favorable results in both Advanced Materials and Precision Coatings offset the performance decline in the Performance Alloy and Composites segment. We continue to forecast hydroxide sales in the second half of 2016 in anticipation of completing negotiations with our hydroxide customers.
The relative strength of our end markets remain mixed. Defense remains strong. Our largest end market, consumer electronics, while returning to year-over-year growth in the second quarter, is not anticipated to be as strong as previously forecasted in the second half. Therefore, the combination of reduced hydroxide sales, the softer expected growth in our largest end market, partially offset by enhanced performance in several of our businesses, we are narrowing the full-year adjusted earnings guidance to $1.30 to $1.40 per share, diluted, from the previous annual guidance range of $1.30 to $1.55 per share, diluted.
CONFERENCE CALL
Materion Corporation will host a conference call with analysts at 9:00 a.m. Eastern Time, July 28, 2016. 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 August 12, 2016 by dialing (877) 660-6853 or (201) 612-7415; please reference Conference ID Number 13640503. 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:
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 SubsidiariesConsolidated Statements of Income(Unaudited)
Second Quarter Ended Six Months Ended (In thousands except per share amounts) July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 Net sales $ 249,776 $ 276,855 $ 485,287 $ 566,879 Cost of sales 204,470 225,528 396,624 463,197 Gross margin 45,306 51,327 88,663 103,682 Selling, general, and administrative expense 32,437 34,594 62,924 72,527 Research and development expense 3,171 3,586 6,623 6,934 Other — net 3,921 36 5,807 (2,122 ) Operating profit 5,777 13,111 13,309 26,343 Interest expense — net 512 650 927 1,307 Income before income taxes 5,265 12,461 12,382 25,036 Income tax (benefit) expense (284 ) 3,394 1,465 6,985 Net income $ 5,549 $ 9,067 $ 10,917 $ 18,051 Basic earnings per share: Net income per share of common stock $ 0.28 $ 0.45 $ 0.55 $ 0.90 Diluted earnings per share: Net income per share of common stock $ 0.27 $ 0.44 $ 0.54 $ 0.88 Cash dividends per share $ 0.095 $ 0.090 $ 0.185 $ 0.175 Weighted-average number of shares of common stock outstanding: Basic 20,015 20,153 20,016 20,149 Diluted 20,214 20,499 20,220 20,491Attachment 2
Materion Corporation and SubsidiariesConsolidated Balance Sheets
(Unaudited) (Thousands) July 1, 2016 December 31, 2015 Assets Current assets Cash and cash equivalents $ 20,985 $ 24,236 Accounts receivable 111,752 97,236 Inventories 211,965 211,820 Prepaid expenses 13,663 12,799 Total current assets 358,365 346,091 Long-term deferred income taxes 27,443 25,743 Property, plant and equipment 856,795 833,834 Less allowances for depreciation, depletion and amortization (592,117 ) (570,205 ) Property, plant and equipment—net 264,678 263,629 Intangible assets 10,936 13,389 Other assets 5,760 6,716 Goodwill 86,725 86,725 Total Assets $ 753,907 $ 742,293 Liabilities and Shareholders’ Equity Current liabilities Short-term debt $ 14,823 $ 8,990 Accounts payable 30,213 31,888 Salaries and wages 21,665 27,494 Other liabilities and accrued items 23,355 22,035 Income taxes 4,254 2,373 Unearned revenue 2,953 3,695 Total current liabilities 97,263 96,475 Other long-term liabilities 18,049 18,435 Retirement and post-employment benefits 86,864 92,794 Unearned income 43,661 45,953 Long-term income taxes 1,293 1,293 Deferred income taxes 167 110 Long-term debt 13,884 4,276 Shareholders’ equity 492,726 482,957 Total Liabilities and Shareholders’ Equity $ 753,907 $ 742,293Attachment 3
Materion Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)
Six Months Ended (Thousands) July 1, 2016 July 3, 2015 Cash flows from operating activities: Net income $ 10,917 $ 18,051 Adjustments to reconcile net income to net cash used in operating activities: Depreciation, depletion and amortization 23,497 20,117 Amortization of deferred financing costs in interest expense 281 331 Stock-based compensation expense 1,919 3,357 (Gain) loss on sale of property, plant, and equipment (695 ) 308 Deferred income tax (benefit) expense (1,489 ) 1,931 Changes in assets and liabilities net of acquired assets and liabilities: Decrease (increase) in accounts receivable (13,013 ) (4,622 ) Decrease (increase) in inventory 1,153 2,150 Decrease (increase) in prepaid and other current assets (782 ) (4,037 ) Increase (decrease) in accounts payable and accrued expenses (7,871 ) (16,882 ) Increase (decrease) in unearned revenue (743 ) (283 ) Increase (decrease) in interest and taxes payable 1,310 3,240 Increase (decrease) in long-term liabilities (6,221 ) (1,801 ) Other-net 771 (817 ) Net cash provided by operating activities 9,034 21,043 Cash flows from investing activities: Payments for purchase of property, plant, and equipment (14,326 ) (16,564 ) Payments for mine development (7,806 ) (10,100 ) Proceeds from sale of property, plant, and equipment 827 18 Net cash used in investing activities (21,305 ) (26,646 ) Cash flows from financing activities: Proceeds from issuance of short-term debt 5,805 2,346 Proceeds from issuance of long-term debt 10,000 51,000 Repayment of long-term debt (399 ) (33,110 ) Principal payments under capital lease obligations (425 ) (404 ) Cash dividends paid (3,704 ) (3,523 ) Repurchase of common stock (2,663 ) (2,748 ) Net cash provided by financing activities 8,614 13,561 Effects of exchange rate changes 406 (479 ) Net change in cash and cash equivalents (3,251 ) 7,479 Cash and cash equivalents at beginning of period 24,236 13,150 Cash and cash equivalents at end of period $ 20,985 $ 20,629Attachment 4
Materion Corporation and SubsidiariesReconciliation of Non-GAAP Measure - Value-added Sales(Unaudited)
Second Quarter Ended Six Months Ended (Millions) July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 Net Sales PAC $ 97.7 $ 107.7 $ 188.3 $211.0
AM 113.6 131.4 221.7
281.3
Other 38.5 37.8 75.3
74.6
PC 38.5 38.3 75.3 74.9 Corp — (0.5 ) —(0.3
) Total $ 249.8 $ 276.9 $ 485.3 $ 566.9 Less: Pass-through Metal Cost PAC $ 14.3 $ 16.2 $ 26.7
33.9
AM 66.6 84.7 132.6
182.9
Other 15.0 13.6 28.2
25.1
PC 13.4 13.1 25.6 25.1 Corp 1.6 0.5 2.6 — Total $ 95.9 $ 114.5 $ 187.5 $ 241.9 Value-added Sales (non-GAAP) PAC $ 83.4 $ 91.5 $ 161.6 $ 177.1 AM 47.0 46.7 89.1
98.4
Other 23.5 24.2 47.1
49.5
PC 25.1 25.2 49.7 49.8 Corp (1.6 ) (1.0 ) (2.6 )(0.3
) Total $ 153.9 $ 162.4 $ 297.8 $325.0
Gross Margin% ofVA
% ofVA
% ofVA
% ofVA
PAC $ 16.3 20 % $ 25.5 28 % $ 34.0 21 %$
48.6
27 % AM 19.1 41 % 18.8 40 % 34.9 39 %
39.5
40 % Other 9.9 — 7.0 — 19.8 — %
15.6
— PC 9.5 38 % 7.5 30 % 19.5 39 % 15.8 32 % Corp 0.4 — (0.5 ) — 0.3 — %(0.2
)
— Total $ 45.3 29 % $ 51.3 32 % $ 88.7 30 %$
103.7
32 % Operating Profit% ofVA
% ofVA
% ofVA
% ofVA
PAC $ 0.2 — % $ 9.3 10 % $ 1.7 1 %$
16.1
9 % AM 7.3 16 % 7.4 16 % 12.5 14 %
16.3
17 % Other (1.7 ) — (3.6 ) — (0.9 ) — %
(6.1)
— PC 2.3 9 % 0.6 2 % 6.4 13 % 2.3 5 % Corp (4.0 ) — (4.2 ) — (7.3 ) — %(8.4
)
— Total $ 5.8 4 % $ 13.1 8 % $ 13.3 4 %$
26.3
8 % Second Quarter Ended Six Months Ended (Millions) July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 Special Items PAC $ — $ — $ —$
—
AM — — —
—
Other 2.3 — 2.3
(2.1
) PC — —
—
— Corp 2.3 —
2.3
(2.1 ) Total $ 2.3 $ — $ 2.3$
(2.1
) Operating Profit Excluding Special Items% ofVA
% ofVA
% ofVA
% ofVA
PAC $ 0.2 — % $ 9.3 10 % $ 1.7
1
%
$
16.1
9 % AM 7.3 16 % 7.4 16 % 12.5
14
%
16.3
17 % Other 0.6 — (3.6 ) — 1.4
—
(8.2
) — PC 2.3 9 % 0.6 2 %
6.4
13
%
2.3 5 % Corp (1.7 ) — (4.2 ) —
(5.0
)
—
(10.5 ) — Total $ 8.1 5 % $ 13.1 8 % $ 15.6
5
%
$
24.2
7 % 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 are a non-GAAP 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 SubsidiariesReconciliation of Non-GAAP Measures - Profitability(Unaudited)
Second Quarter Ended Six Months Ended (Millions except per share amounts) July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 GAAP as Reported Net Sales $ 249.8 $ 276.9 $ 485.3 $ 566.9 Gross margin 45.3 51.3 88.7 103.7 Operating profit 5.8 13.1 13.3 26.3 Net income 5.5 9.1 10.9 18.1 EPS - Diluted $ 0.27 $ 0.44 $ 0.54 $ 0.88 Adjustment for Special Items Cost of sales $ — $ — $ — $ — Selling, general, and administrative expense 1.9 — 1.9 1.7 Other-net 0.4 — 0.4 (3.8 ) Total special items $ 2.3 $ — $ 2.3 $ (2.1 ) Special items - net of tax $ 1.5 $ — $ 1.5 $ (1.5 ) Tax Special Item $ (0.9 ) $ — $ (0.9 ) $ 0.2 Non-GAAP Measures - Adjusted Profitability Value-added (VA) sales $ 153.9 $ 162.4 $ 297.8 $ 325.0 Gross margin 45.3 51.3 88.7 103.7 Gross margin % of VA 29.4 % 31.6 % 29.8 % 31.9 % Operating profit 8.1 13.1 15.6 24.2 Operating profit % of VA 5.3 % 8.1 % 5.2 % 7.4 % Net income 6.1 9.1 11.5 16.8 EPS - Diluted $ 0.31 $ 0.44 $ 0.57 $ 0.82 In addition to presenting financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), this earnings release contains financial measures, including gross margin, operating profit, net income and earnings per share, on a non-GAAP basis. As detailed in the above reconciliation, we have adjusted the results for certain special items such as the net recovery from insurance and other litigation claims, legacy environmental costs, merger and acquisition costs, and certain income tax items from the applicable GAAP 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 SubsidiariesValue-added sales by Market(Unaudited)
Second Quarter Ended Six Months Ended (Millions) July 1, 2016 July 3, 2015 % Change July 1, 2016 July 3, 2015 % Change Materion Corporation Consumer Electronics $ 43.6 $ 42.7 2.1%
$ 81.7 $ 87.2 (6.3 )% Industrial Components 23.4 23.3 0.4%
45.2 48.5 (6.8 )% Medical 17.5 17.8 (1.7 )% 35.8 35.5 0.8%
Defense 15.0 11.4 31.6%
29.3 21.0 39.5%
Automotive Electronics 13.6 15.0 (9.3 )% 26.3 30.0 (12.3 )% Telecom Infrastructure 10.2 10.4 (1.9 )% 18.7 19.6 (4.6 )% Energy 7.5 9.1 (17.6 )% 16.4 21.5 (23.7 )% Other 23.1 32.7 (29.4 )% 44.4 61.7 (28.0 )% Total $ 153.9 $ 162.4 (5.2 )% $ 297.8 $ 325.0 (8.4 )% Performance Alloy and Composites Consumer Electronics $ 16.6 $ 16.5 0.6%
$ 31.4 $ 32.4 (3.1 )% Industrial Components 17.1 17.4 (1.7 )% 32.4 35.5 (8.7 )% Medical 1.8 1.7 5.9%
3.6 3.6 —%
Defense 9.6 6.8 41.2%
19.3 11.7 65.0%
Automotive Electronics 13.0 13.7 (5.1 )% 24.9 27.5 (9.5 )% Telecom Infrastructure 7.8 7.7 1.3%
14.0 14.3 (2.1 )% Energy 4.4 5.4 (18.5 )% 10.0 13.7 (27.0 )% Other 13.1 22.3 (41.3 )% 26.0 38.4 (32.3 )% Total $ 83.4 $ 91.5 (8.9 )% $ 161.6 $ 177.1 (8.8 )% Advanced Materials Consumer Electronics $ 21.8 $ 21.7 0.5%
$ 41.1 $ 45.1 (8.9 )% Industrial Components 5.7 5.1 11.8%
10.7 11.4 (6.1 )% Medical 3.0 2.6 15.4%
5.8 5.3 9.4%
Defense 1.7 1.5 13.3%
3.2 3.5 (8.6 )% Automotive Electronics — — —%
— — —%
Telecom Infrastructure 2.4 2.7 (11.1 )% 4.7 5.3 (11.3 )% Energy 3.1 3.7 (16.2 )% 6.4 7.8 (17.9 )% Other 9.3 9.4 (1.1 )% 17.2 20.0 (14.0 )% Total $ 47.0 $ 46.7 0.6%
$ 89.1 $ 98.4 (9.5 )% Other Consumer Electronics $ 5.2 $ 4.5 15.6%
$ 9.2 $ 9.7 (5.2 )% Industrial Components 0.6 0.8 (25.0 )% 2.1 1.6 31.3%
Medical 12.7 13.5 (5.9 )% 26.4 26.6 (0.8 )% Defense 3.7 3.1 19.4%
6.8 5.8 17.2%
Automotive Electronics 0.6 1.3 (53.8 )% 1.4 2.5 (44.0 )% Telecom Infrastructure — — —%
— — —%
Energy — — —%
— — —%
Other 0.7 1.0 (30.0 )% 1.2 3.3 (63.6 )% Total $ 23.5 $ 24.2 (2.9 )% $ 47.1 $ 49.5 (4.8 )%
View source version on businesswire.com: http://www.businesswire.com/news/home/20160728005821/en/
Materion CorporationInvestor Contact:Michael C. Hasychak, 216-383-6823mike.hasychak@materion.comorMedia Contact:Patrick S. Carpenter, 216-383-6835patrick.carpenter@materion.comorhttp://www.materion.comMayfield Hts-g
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