ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-1919973 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
6070 Parkland Blvd., Mayfield Hts., Ohio | 44124 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ¨ | Accelerated filer þ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Item 1. | Financial Statements |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26, | Sept. 27, | Sept. 26, | Sept. 27, | |||||||||||||
(Thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net sales | $ | 291,570 | $ | 275,434 | $ | 838,465 | $ | 880,744 | ||||||||
Cost of sales | 236,727 | 230,951 | 688,359 | 741,930 | ||||||||||||
Gross margin | 54,843 | 44,483 | 150,106 | 138,814 | ||||||||||||
Selling, general and administrative expense | 34,823 | 31,804 | 100,768 | 97,910 | ||||||||||||
Research and development expense | 3,243 | 3,190 | 9,473 | 9,901 | ||||||||||||
Other—net | (644 | ) | 4,161 | (3,177 | ) | 9,592 | ||||||||||
Operating profit | 17,421 | 5,328 | 43,042 | 21,411 | ||||||||||||
Interest expense—net | 764 | 715 | 2,132 | 2,356 | ||||||||||||
Income before income taxes | 16,657 | 4,613 | 40,910 | 19,055 | ||||||||||||
Income tax expense (benefit) | 4,217 | (379 | ) | 11,165 | 3,123 | |||||||||||
Net income | $ | 12,440 | $ | 4,992 | $ | 29,745 | $ | 15,932 | ||||||||
Basic earnings per share: | ||||||||||||||||
Net income per share of common stock | $ | 0.61 | $ | 0.24 | $ | 1.45 | $ | 0.78 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Net income per share of common stock | $ | 0.60 | $ | 0.24 | $ | 1.42 | $ | 0.76 | ||||||||
Cash dividends per share | $ | 0.085 | $ | 0.080 | $ | 0.250 | $ | 0.235 | ||||||||
Weighted-average number of shares of common stock outstanding: | ||||||||||||||||
Basic | 20,490 | 20,604 | 20,579 | 20,551 | ||||||||||||
Diluted | 20,827 | 20,931 | 20,927 | 20,874 |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26, | Sept. 27, | Sept. 26, | Sept. 27, | |||||||||||||
(Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income | $ | 12,440 | $ | 4,992 | $ | 29,745 | $ | 15,932 | ||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment | (2,170 | ) | 478 | (1,455 | ) | (2,902 | ) | |||||||||
Derivative and hedging activity, net of tax | 1,480 | (428 | ) | 1,567 | (273 | ) | ||||||||||
Pension and post employment benefit adjustment, net of tax | 540 | 1,232 | 10,465 | 3,670 | ||||||||||||
Net change in accumulated other comprehensive income | (150 | ) | 1,282 | 10,577 | 495 | |||||||||||
Comprehensive income | $ | 12,290 | $ | 6,274 | $ | 40,322 | $ | 16,427 |
Sept. 26, | Dec. 31, | |||||||
(Thousands) | 2014 | 2013 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 19,610 | $ | 22,774 | ||||
Accounts receivable | 126,950 | 113,012 | ||||||
Inventories | 227,286 | 232,800 | ||||||
Prepaid expenses | 17,231 | 16,353 | ||||||
Deferred income taxes | 9,965 | 10,325 | ||||||
Total current assets | 401,042 | 395,264 | ||||||
Long-term deferred income taxes | 5,502 | 5,941 | ||||||
Property, plant, and equipment—cost | 793,983 | 782,879 | ||||||
Less allowances for depreciation, depletion, and amortization | (545,183 | ) | (520,986 | ) | ||||
Property, plant, and equipment—net | 248,800 | 261,893 | ||||||
Intangible assets | 20,046 | 24,248 | ||||||
Other assets | 4,693 | 3,874 | ||||||
Goodwill | 86,725 | 86,725 | ||||||
Total assets | $ | 766,808 | $ | 777,945 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities | ||||||||
Short-term debt | $ | 6,613 | $ | 35,566 | ||||
Accounts payable | 32,158 | 36,556 | ||||||
Other liabilities and accrued items | 59,562 | 54,851 | ||||||
Income taxes | 7,955 | 1,564 | ||||||
Unearned revenue | 1,239 | 479 | ||||||
Total current liabilities | 107,527 | 129,016 | ||||||
Other long-term liabilities | 16,187 | 16,531 | ||||||
Retirement and post-employment benefits | 53,493 | 80,275 | ||||||
Unearned income | 52,970 | 56,490 | ||||||
Long-term income taxes | 1,576 | 1,576 | ||||||
Deferred income taxes | 4,895 | 1,469 | ||||||
Long-term debt | 43,780 | 29,267 | ||||||
Shareholders’ equity | ||||||||
Common stock | 201,030 | 197,576 | ||||||
Retained earnings | 466,047 | 441,518 | ||||||
Common stock in treasury | (134,281 | ) | (118,151 | ) | ||||
Other comprehensive income (loss) | (49,311 | ) | (59,888 | ) | ||||
Other equity transactions | 2,895 | 2,266 | ||||||
Total shareholders' equity | 486,380 | 463,321 | ||||||
Total liabilities and shareholders’ equity | $ | 766,808 | $ | 777,945 |
Nine Months Ended | ||||||||
Sept. 26, | Sept. 27, | |||||||
(Thousands) | 2014 | 2013 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 29,745 | $ | 15,932 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Depreciation, depletion, and amortization | 32,333 | 30,842 | ||||||
Amortization of deferred financing costs in interest expense | 627 | 501 | ||||||
Stock-based compensation expense | 4,123 | 4,103 | ||||||
Changes in assets and liabilities net of acquired assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable | (15,184 | ) | 3,143 | |||||
Decrease (increase) in inventory | (24,148 | ) | (13 | ) | ||||
Decrease (increase) in prepaid and other current assets | (579 | ) | 2,055 | |||||
Decrease (increase) in deferred income taxes | 8 | 249 | ||||||
Increase (decrease) in accounts payable and accrued expenses | 2,315 | (21,216 | ) | |||||
Increase (decrease) in unearned revenue | 760 | (1,082 | ) | |||||
Increase (decrease) in interest and taxes payable | 6,017 | 108 | ||||||
Increase (decrease) in long-term liabilities | (14,976 | ) | 1,152 | |||||
Other-net | (14 | ) | 2,741 | |||||
Net cash provided from operating activities | 21,027 | 38,515 | ||||||
Cash flows from investing activities: | ||||||||
Payments for purchase of property, plant, and equipment | (19,843 | ) | (19,830 | ) | ||||
Payments for mine development | (670 | ) | (4,407 | ) | ||||
Proceeds from sale of property, plant, and equipment | 3,084 | 23 | ||||||
Other investments-net | (2 | ) | 20 | |||||
Net cash used in investing activities | (17,431 | ) | (24,194 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of short-term debt | (291 | ) | (13,263 | ) | ||||
Proceeds from issuance of long-term debt | 33,252 | 70,333 | ||||||
Repayment of long-term debt | (18,739 | ) | (62,789 | ) | ||||
Debt issuance costs | — | (1,554 | ) | |||||
Principal payments under capital lease obligations | (497 | ) | (491 | ) | ||||
Payment of dividends | (5,156 | ) | (4,847 | ) | ||||
Repurchase of common stock | (15,615 | ) | — | |||||
Issuance of common stock under stock option plans | 360 | 1,075 | ||||||
Tax benefit from stock compensation realization | 109 | 1,664 | ||||||
Net cash used in financing activities | (6,577 | ) | (9,872 | ) | ||||
Effect of exchange rate changes | (183 | ) | (348 | ) | ||||
Net change in cash and cash equivalents | (3,164 | ) | 4,101 | |||||
Cash and cash equivalents at beginning of period | 22,774 | 16,056 | ||||||
Cash and cash equivalents at end of period | $ | 19,610 | $ | 20,157 |
(Thousands) | Sept. 26, 2014 | Dec. 31, 2013 | ||||||
Principally average cost: | ||||||||
Raw materials and supplies | $ | 40,845 | $ | 39,201 | ||||
Work in process | 150,140 | 152,645 | ||||||
Finished goods | 36,301 | 40,954 | ||||||
Net inventories | $ | 227,286 | $ | 232,800 |
Pension Benefits | Other Benefits | |||||||||||||||
Third Quarter Ended | Third Quarter Ended | |||||||||||||||
(Thousands) | Sept. 26, 2014 | Sept. 27, 2013 | Sept. 26, 2014 | Sept. 27, 2013 | ||||||||||||
Components of net periodic benefit cost | ||||||||||||||||
Service cost | $ | 1,931 | $ | 2,356 | $ | 34 | $ | 76 | ||||||||
Interest cost | 2,449 | 2,353 | 169 | 311 | ||||||||||||
Expected return on plan assets | (3,013 | ) | (2,996 | ) | — | — | ||||||||||
Amortization of prior service cost (benefit) | (109 | ) | (85 | ) | (374 | ) | 29 | |||||||||
Amortization of net loss | 1,275 | 1,951 | — | — | ||||||||||||
Net periodic benefit cost (benefit) | $ | 2,533 | $ | 3,579 | $ | (171 | ) | $ | 416 | |||||||
Pension Benefits | Other Benefits | |||||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||
(Thousands) | Sept. 26, 2014 | Sept. 27, 2013 | Sept. 26, 2014 | Sept. 27, 2013 | ||||||||||||
Components of net periodic benefit cost | ||||||||||||||||
Service cost | $ | 5,794 | $ | 7,066 | $ | 103 | $ | 229 | ||||||||
Interest cost | 7,345 | 7,060 | 506 | 932 | ||||||||||||
Expected return on plan assets | (9,038 | ) | (8,989 | ) | — | — | ||||||||||
Amortization of prior service cost (benefit) | (326 | ) | (255 | ) | (1,123 | ) | 86 | |||||||||
Amortization of net loss | 3,825 | 5,816 | — | — | ||||||||||||
Net periodic benefit cost | $ | 7,600 | $ | 10,698 | $ | (514 | ) | $ | 1,247 |
(Thousands) | Advanced Material Technologies | Performance Alloys | Beryllium and Composites | Technical Materials | Subtotal | All Other | Total | |||||||||||||||||||||
Third Quarter 2014 | ||||||||||||||||||||||||||||
Sales to external customers | $ | 177,483 | $ | 80,863 | $ | 17,946 | $ | 15,278 | $ | 291,570 | $ | — | $ | 291,570 | ||||||||||||||
Intersegment sales | 1,895 | 473 | 110 | 100 | 2,578 | — | 2,578 | |||||||||||||||||||||
Operating profit (loss) | 7,691 | 6,529 | 992 | 1,445 | 16,657 | 764 | 17,421 | |||||||||||||||||||||
Third Quarter 2013 | ||||||||||||||||||||||||||||
Sales to external customers | $ | 176,294 | $ | 69,578 | $ | 13,685 | $ | 15,877 | $ | 275,434 | $ | — | $ | 275,434 | ||||||||||||||
Intersegment sales | 523 | 443 | 67 | 156 | 1,189 | — | 1,189 | |||||||||||||||||||||
Operating profit (loss) | 4,146 | 4,520 | (3,306 | ) | 1,421 | 6,781 | (1,453 | ) | 5,328 | |||||||||||||||||||
First Nine Months 2014 | ||||||||||||||||||||||||||||
Sales to external customers | $ | 519,793 | $ | 224,289 | $ | 50,041 | $ | 44,342 | $ | 838,465 | $ | — | $ | 838,465 | ||||||||||||||
Intersegment sales | 2,971 | 1,475 | 420 | 319 | 5,185 | — | 5,185 | |||||||||||||||||||||
Operating profit (loss) | 26,790 | 15,307 | 282 | 2,586 | 44,965 | (1,923 | ) | 43,042 | ||||||||||||||||||||
Assets | 280,208 | 275,778 | 147,537 | 22,965 | 726,488 | 40,320 | 766,808 | |||||||||||||||||||||
First Nine Months 2013 | ||||||||||||||||||||||||||||
Sales to external customers | $ | 566,158 | $ | 218,435 | $ | 42,194 | $ | 53,957 | $ | 880,744 | $ | — | $ | 880,744 | ||||||||||||||
Intersegment sales | 2,048 | 1,484 | 200 | 600 | 4,332 | — | 4,332 | |||||||||||||||||||||
Operating profit (loss) | 5,211 | 18,654 | (3,780 | ) | 5,246 | 25,331 | (3,920 | ) | 21,411 | |||||||||||||||||||
Assets | 312,110 | 267,232 | 142,183 | 23,734 | 745,259 | 55,854 | 801,113 |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26 | Sept. 27 | Sept. 26 | Sept. 27 | |||||||||||||
(Thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Foreign currency exchange gain (loss) | $ | 450 | $ | 126 | $ | (25 | ) | $ | 1,271 | |||||||
Amortization of intangible assets | (1,208 | ) | (1,359 | ) | (3,841 | ) | (4,001 | ) | ||||||||
Metal consignment fees | (1,770 | ) | (1,640 | ) | (5,481 | ) | (5,158 | ) | ||||||||
Net gain (loss) on disposal of fixed assets | (225 | ) | (252 | ) | 2,384 | (251 | ) | |||||||||
Recovery from insurance | — | — | 6,750 | — | ||||||||||||
Legal settlement | 4,000 | — | 4,000 | — | ||||||||||||
Other items | (603 | ) | (1,036 | ) | (610 | ) | (1,453 | ) | ||||||||
Total | $ | 644 | $ | (4,161 | ) | $ | 3,177 | $ | (9,592 | ) |
Fair Value Measurements | ||||||||||||||||
(Thousands) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Financial Assets | ||||||||||||||||
Directors’ deferred compensation investments | $ | 381 | $ | 381 | $ | — | $ | — | ||||||||
Foreign currency forward contracts | 2,379 | — | 2,379 | — | ||||||||||||
Total | $ | 2,760 | $ | 381 | $ | 2,379 | $ | — | ||||||||
Financial Liabilities | ||||||||||||||||
Directors’ deferred compensation liability | $ | 381 | $ | 381 | $ | — | $ | — | ||||||||
Foreign currency forward contracts | — | — | — | — | ||||||||||||
Total | $ | 381 | $ | 381 | $ | — | $ | — |
Gains and Losses On Cash Flow Hedges | ||||||||||||||||||||||||
(Thousands) | Foreign Currency | Precious Metals | Total | Pension and Post Employment Benefits | Foreign Currency Translation | Total | ||||||||||||||||||
Accumulated other comprehensive income, as of June 27, 2014 | ||||||||||||||||||||||||
Gross | $ | 31 | $ | — | $ | 31 | $ | (61,597 | ) | $ | 1,002 | $ | (60,564 | ) | ||||||||||
Deferred tax expense (benefit) | (1,390 | ) | — | (1,390 | ) | (10,013 | ) | — | (11,403 | ) | ||||||||||||||
Net | $ | 1,421 | $ | — | $ | 1,421 | $ | (51,584 | ) | $ | 1,002 | $ | (49,161 | ) | ||||||||||
Third quarter 2014 activity | ||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | $ | 2,365 | $ | — | $ | 2,365 | $ | — | $ | (2,170 | ) | $ | 195 | |||||||||||
Amounts reclassified from accumulated other comprehensive income | (17 | ) | — | (17 | ) | 833 | — | 816 | ||||||||||||||||
Net current period other comprehensive income (loss) before tax | 2,348 | — | 2,348 | 833 | (2,170 | ) | 1,011 | |||||||||||||||||
Deferred taxes on current period activity | 868 | — | 868 | 293 | — | 1,161 | ||||||||||||||||||
Net current period other comprehensive income (loss) after tax | $ | 1,480 | $ | — | $ | 1,480 | $ | 540 | $ | (2,170 | ) | $ | (150 | ) | ||||||||||
Accumulated other comprehensive income, as of September 26, 2014 | ||||||||||||||||||||||||
Gross | $ | 2,379 | $ | — | $ | 2,379 | $ | (60,764 | ) | $ | (1,168 | ) | $ | (59,553 | ) | |||||||||
Deferred tax expense (benefit) | (522 | ) | — | (522 | ) | (9,720 | ) | — | (10,242 | ) | ||||||||||||||
Net | $ | 2,901 | $ | — | $ | 2,901 | $ | (51,044 | ) | $ | (1,168 | ) | $ | (49,311 | ) | |||||||||
Accumulated other comprehensive income, as of December 31, 2013 | ||||||||||||||||||||||||
Gross | $ | (87 | ) | $ | (19 | ) | $ | (106 | ) | $ | (77,301 | ) | $ | 287 | $ | (77,120 | ) | |||||||
Deferred tax expense (benefit) | (1,433 | ) | (7 | ) | (1,440 | ) | (15,792 | ) | — | (17,232 | ) | |||||||||||||
Net | $ | 1,346 | $ | (12 | ) | $ | 1,334 | $ | (61,509 | ) | $ | 287 | $ | (59,888 | ) | |||||||||
First nine months of 2014 activity | ||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | $ | 2,357 | $ | — | $ | 2,357 | $ | 14,034 | $ | (1,455 | ) | $ | 14,936 | |||||||||||
Amounts reclassified from accumulated other comprehensive income | 109 | 19 | 128 | 2,503 | — | 2,631 | ||||||||||||||||||
Net current period other comprehensive income (loss) before tax | 2,466 | 19 | 2,485 | 16,537 | (1,455 | ) | 17,567 |
Deferred taxes on current period activity | 911 | 7 | 918 | 6,072 | — | 6,990 | ||||||||||||||||||
Net current period other comprehensive income (loss) after tax | $ | 1,555 | $ | 12 | $ | 1,567 | $ | 10,465 | $ | (1,455 | ) | $ | 10,577 | |||||||||||
Accumulated other comprehensive income, as of September 26, 2014 | ||||||||||||||||||||||||
Gross | $ | 2,379 | $ | — | $ | 2,379 | $ | (60,764 | ) | $ | (1,168 | ) | $ | (59,553 | ) | |||||||||
Deferred tax expense (benefit) | (522 | ) | — | (522 | ) | (9,720 | ) | — | (10,242 | ) | ||||||||||||||
Net | $ | 2,901 | $ | — | $ | 2,901 | $ | (51,044 | ) | $ | (1,168 | ) | $ | (49,311 | ) | |||||||||
Accumulated other comprehensive income, as of June 28, 2013 | ||||||||||||||||||||||||
Gross | $ | 553 | $ | 23 | $ | 576 | $ | (123,789 | ) | $ | 697 | $ | (122,516 | ) | ||||||||||
Deferred tax expense (benefit) | (1,209 | ) | — | (1,209 | ) | (32,091 | ) | — | (33,300 | ) | ||||||||||||||
Net | $ | 1,762 | $ | 23 | $ | 1,785 | $ | (91,698 | ) | $ | 697 | $ | (89,216 | ) | ||||||||||
Third quarter 2013 activity | ||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | $ | (254 | ) | $ | — | $ | (254 | ) | $ | — | $ | 478 | $ | 224 | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (369 | ) | (23 | ) | (392 | ) | 1,895 | — | 1,503 | |||||||||||||||
Net current period other comprehensive income (loss) before tax | (623 | ) | (23 | ) | (646 | ) | 1,895 | 478 | 1,727 | |||||||||||||||
Deferred taxes on current period activity | (218 | ) | — | (218 | ) | 663 | — | 445 | ||||||||||||||||
Net current period other comprehensive income (loss) after tax | $ | (405 | ) | $ | (23 | ) | $ | (428 | ) | $ | 1,232 | $ | 478 | $ | 1,282 | |||||||||
Accumulated other comprehensive income, as of September 27, 2013 | ||||||||||||||||||||||||
Gross | $ | (70 | ) | $ | — | $ | (70 | ) | $ | (121,894 | ) | $ | 1,175 | $ | (120,789 | ) | ||||||||
Deferred tax expense (benefit) | (1,427 | ) | — | (1,427 | ) | (31,428 | ) | — | (32,855 | ) | ||||||||||||||
Net | $ | 1,357 | $ | — | $ | 1,357 | $ | (90,466 | ) | $ | 1,175 | $ | (87,934 | ) | ||||||||||
Accumulated other comprehensive income, as of December 31, 2012 | ||||||||||||||||||||||||
Gross | $ | 253 | $ | 97 | $ | 350 | $ | (127,541 | ) | $ | 4,077 | $ | (123,114 | ) | ||||||||||
Deferred tax expense (benefit) | (1,314 | ) | 34 | (1,280 | ) | (33,405 | ) | — | (34,685 | ) | ||||||||||||||
Net | $ | 1,567 | $ | 63 | $ | 1,630 | $ | (94,136 | ) | $ | 4,077 | $ | (88,429 | ) | ||||||||||
First nine months of 2013 activity | ||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | $ | 618 | $ | — | $ | 618 | $ | — | $ | (2,902 | ) | $ | (2,284 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (941 | ) | (97 | ) | (1,038 | ) | 5,647 | — | 4,609 | |||||||||||||||
Net current period other comprehensive income (loss) before tax | (323 | ) | (97 | ) | (420 | ) | 5,647 | (2,902 | ) | 2,325 | ||||||||||||||
Deferred taxes on current period activity | (113 | ) | (34 | ) | (147 | ) | 1,977 | — | 1,830 | |||||||||||||||
Net current period other comprehensive income (loss) after tax | $ | (210 | ) | $ | (63 | ) | $ | (273 | ) | $ | 3,670 | $ | (2,902 | ) | $ | 495 | ||||||||
Accumulated other comprehensive income, as of September 27, 2013 | ||||||||||||||||||||||||
Gross | $ | (70 | ) | $ | — | $ | (70 | ) | $ | (121,894 | ) | $ | 1,175 | $ | (120,789 | ) | ||||||||
Deferred tax expense (benefit) | (1,427 | ) | — | (1,427 | ) | (31,428 | ) | — | (32,855 | ) | ||||||||||||||
Net | $ | 1,357 | $ | — | $ | 1,357 | $ | (90,466 | ) | $ | 1,175 | $ | (87,934 | ) |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Net sales in the third quarter of 2014 were $291.6 million, a 5.9% increase from net sales in the third quarter of 2013. Shipments to several markets and applications improved in the third quarter of 2014 over the third quarter of 2013, including consumer electronics, medical, and telecommunications infrastructure. |
• | Value-added sales increased 11.8% to $165.6 million in the third quarter of 2014 compared to the third quarter of 2013 and increased $18.2 million or 4.0% for the nine months ended September 26, 2014 compared to the corresponding period in 2013. Value-added sales is a non-GAAP measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in pass-through metal prices. Internally, we manage our business on this basis, and a reconciliation of sales to value-added sales is included herein. |
• | Gross margin was $54.8 million in the third quarter of 2014 compared to $44.5 million in the third quarter of 2013. The increased gross margin represents an approximate 300 basis point margin expansion as a percentage of value-added sales associated with improved sales volume, better product mix, and facility consolidation savings. |
• | Operating profit was $17.4 million in the third quarter of 2014 compared to $5.3 million in the third quarter of 2013. The increased operating profit was driven by the gross margin improvement and a $4.0 million settlement of a legal claim related to our beryllium pebbles facility. |
• | As a result of the aforementioned factors, overall diluted earnings per share increased to $0.60 and $1.42 for the three and nine months ended September 26, 2014, respectively. This increase represents a 150.0% and 86.8% year-over-year improvement as compared to the corresponding periods in 2013. |
• | Approximately 393,000 shares of common stock were repurchased in the third quarter of 2014 for $13.0 million in the aggregate, bringing the year-to-date total to approximately 480,000 shares for a total repurchase price of $15.6 million. |
Third Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
Sept. 26, | Sept. 27, | $ | % | Sept. 26, | Sept. 27, | $ | % | |||||||||||||||||
(Millions, except per share data) | 2014 | 2013 | Change | Change | 2014 | 2013 | Change | Change | ||||||||||||||||
Net Sales | $ | 291.6 | $ | 275.4 | $ | 16.2 | 5.9 | % | $ | 838.5 | $ | 880.7 | $ | (42.2 | ) | (4.8 | )% | |||||||
Value-added sales | 165.6 | 148.1 | 17.5 | 11.8 | % | 470.1 | 451.9 | 18.2 | 4.0 | % | ||||||||||||||
Gross margin | 54.8 | 44.5 | 10.3 | 23.1 | % | 150.1 | 138.8 | 11.3 | 8.1 | % | ||||||||||||||
SG&A expense | 34.8 | 31.8 | 3.0 | 9.4 | % | 100.8 | 97.9 | 2.9 | 3.0 | % | ||||||||||||||
R&D expense | 3.2 | 3.2 | — | — | 9.5 | 9.9 | (0.4 | ) | (4.0 | )% | ||||||||||||||
Other—net | (0.6 | ) | 4.2 | (4.8 | ) | — | (3.2 | ) | 9.6 | (12.8 | ) | — | ||||||||||||
Operating profit | 17.4 | 5.3 | 12.1 | 228.3 | % | 43.0 | 21.4 | 21.6 | 100.9 | % | ||||||||||||||
Interest expense—net | 0.8 | 0.7 | 0.1 | 14.3 | % | 2.1 | 2.4 | (0.3 | ) | (12.5 | )% | |||||||||||||
Income before income taxes | 16.6 | 4.6 | 12.0 | 260.9 | % | 40.9 | 19.0 | 21.9 | 115.3 | % | ||||||||||||||
Income tax expense (benefit) | 4.2 | (0.4 | ) | 4.6 | — | 11.2 | 3.1 | 8.1 | 261.3 | % | ||||||||||||||
Net income | $ | 12.4 | $ | 5.0 | $ | 7.4 | 148.0 | % | $ | 29.7 | $ | 15.9 | $ | 13.8 | 86.8 | % | ||||||||
Diluted earnings per share | $ | 0.60 | $ | 0.24 | $ | 0.36 | 150.0 | % | $ | 1.42 | $ | 0.76 | $ | 0.66 | 86.8 | % |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26, | Sept. 27, | Sept. 26, | Sept. 27, | |||||||||||||
(Millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales | ||||||||||||||||
Advanced Material Technologies | $ | 177.5 | $ | 176.3 | $ | 519.8 | $ | 566.2 | ||||||||
Performance Alloys | 80.9 | 69.6 | 224.3 | 218.4 | ||||||||||||
Beryllium and Composites | 17.9 | 13.7 | 50.0 | 42.2 | ||||||||||||
Technical Materials | 15.3 | 15.9 | 44.3 | 54.0 | ||||||||||||
Total | $ | 291.6 | $ | 275.4 | $ | 838.5 | $ | 880.7 | ||||||||
Less: Pass-through Metal Cost | ||||||||||||||||
Advanced Material Technologies | $ | 106.3 | $ | 108.6 | $ | 313.2 | $ | 364.5 | ||||||||
Performance Alloys | 14.2 | 12.2 | 39.5 | 43.1 | ||||||||||||
Beryllium and Composites | — | — | — | — | ||||||||||||
Technical Materials | 5.5 | 6.6 | 15.8 | 21.3 | ||||||||||||
Total | $ | 126.0 | $ | 127.3 | $ | 368.4 | $ | 428.8 | ||||||||
Value-added Sales | ||||||||||||||||
Advanced Material Technologies | $ | 71.2 | $ | 67.7 | $ | 206.6 | $ | 201.6 | ||||||||
Performance Alloys | 66.7 | 57.4 | 184.8 | 175.4 | ||||||||||||
Beryllium and Composites | 17.9 | 13.7 | 50.0 | 42.2 | ||||||||||||
Technical Materials | 9.8 | 9.3 | 28.6 | 32.7 | ||||||||||||
Total | $ | 165.6 | $ | 148.1 | $ | 470.1 | $ | 451.9 |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26 | Sept. 27 | Sept. 26 | Sept. 27 | |||||||||||||
(Millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales | $ | 177.5 | $ | 176.3 | $ | 519.8 | $ | 566.2 | ||||||||
Value-added sales | 71.2 | 67.7 | 206.6 | 201.6 | ||||||||||||
Operating profit | 7.7 | 4.1 | 26.8 | 5.2 |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26 | Sept. 27 | Sept. 26 | Sept. 27 | |||||||||||||
(Millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales | $ | 80.9 | $ | 69.6 | $ | 224.3 | $ | 218.4 | ||||||||
Value-added sales | 66.7 | 57.4 | 184.8 | 175.4 | ||||||||||||
Operating profit | 6.5 | 4.5 | 15.3 | 18.7 |
(Millions) | Third Quarter Ended | Nine Months Ended | ||||||||||||||
Sept. 26 | Sept. 27 | Sept. 26 | Sept. 27 | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net sales | $ | 17.9 | $ | 13.7 | $ | 50.0 | $ | 42.2 | ||||||||
Value-added sales | 17.9 | 13.7 | 50.0 | 42.2 | ||||||||||||
Operating profit (loss) | 1.0 | (3.3 | ) | 0.3 | (3.8 | ) |
Third Quarter Ended | Nine Months Ended | |||||||||||||||
Sept. 26 | Sept. 27 | Sept. 26 | Sept. 27 | |||||||||||||
(Millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales | $ | 15.3 | $ | 15.9 | $ | 44.3 | $ | 54.0 | ||||||||
Value-added sales | 9.8 | 9.3 | 28.6 | 32.7 | ||||||||||||
Operating profit | 1.4 | 1.4 | 2.6 | 5.2 |
Nine Months Ended | ||||||||||||
Sept. 26, | Sept. 27, | $ | ||||||||||
(Millions) | 2014 | 2013 | Change | |||||||||
Net cash provided from operating activities | $ | 21.0 | $ | 38.5 | $ | (17.5 | ) | |||||
Net cash used in investing activities | (17.4 | ) | (24.2 | ) | 6.8 | |||||||
Net cash used in financing activities | (6.6 | ) | (9.9 | ) | 3.3 | |||||||
Effect of exchange rate changes | (0.2 | ) | (0.3 | ) | 0.1 | |||||||
Net change in cash and cash equivalents | $ | (3.2 | ) | $ | 4.1 | $ | (7.3 | ) |
• | Actual sales, operating rates, and margins for 2014; |
• | Our ability to strengthen our internal control over financial reporting and disclosure controls and procedures; |
• | The global economy; |
• | The impact of the 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: consumer electronics, industrial components, commercial aerospace, defense, science, automotive electronics, medical, energy, and telecommunications infrastructure; |
• | Changes in product mix and the financial condition of our 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 integrating acquired 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 achieving the expected benefits from our facility consolidations; |
• | Our success in implementing our strategic plans and the timely and successful completion and start-up of any capital projects, including the new primary beryllium facility in Elmore, Ohio; |
• | The availability of adequate lines of credit and the associated interest rates; |
• | Other financial factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal financing fees, tax rates, exchange rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, 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 set forth in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||
June 28 through August 1, 2014 | 48,668 | $ | 34.62 | 135,038 | $ | 45,642,433 | ||||||||
August 2 through August 29, 2014 | 287,547 | 32.89 | 422,585 | 36,178,974 | ||||||||||
August 30 through September 26, 2014 | 56,969 | 31.81 | 479,554 | 34,364,564 | ||||||||||
Total | 393,184 | $ | 32.95 | 479,554 | $ | 34,364,564 |
(1) | On January 14, 2014, we announced that our Board of Directors had authorized the repurchase of up to $50,000,000 of our common stock. As of September 26, 2014, $34,364,564 may yet be purchased under the program. |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
10.1 | Amendment No. 8 to the Consignment Agreement dated October 1, 2013 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc. | ||
10.2 | Amendment No. 9 to the Consignment Agreement dated July 23, 2014 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc. | ||
10.3 | Amendment No. 10 to the Consignment Agreement dated September 30, 2014 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc., (filed as Exhibit 10.1 to the Company's Form 8-K filed on October 3, 2014), incorporated herein by reference. | ||
11 | Statement regarding computation of per share earnings. | ||
31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a). | ||
31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a). | ||
32 | Certifications of Chief Executive Officer and Chief Financial Officer required by 18 U.S.C. Section 1350. | ||
95 | Mine Safety Disclosure Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the period ending September 26, 2014. | ||
101.INS | XBRL Instance Document. | ||
101.SCH | XBRL Taxonomy Extension Schema Document. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
MATERION CORPORATION | ||||
Dated: October 30, 2014 | ||||
/s/ John D. Grampa | ||||
John D. Grampa | ||||
Senior Vice President Finance and | ||||
Chief Financial Officer |
10.1 | Amendment No. 8 to the Consignment Agreement dated October 1, 2013 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc., incorporated herein by reference. | |
10.2 | Amendment No. 9 to the Consignment Agreement dated July 23, 2014 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc., incorporated herein by reference. | |
10.3 | Amendment No. 10 to the Consignment Agreement dated September 30, 2014 between Materion Corporation and Canadian Imperial Bank of Commerce and CIBC World Markets Inc., (filed as Exhibit 10.1 to the Company's Form 8-K filed on October 3, 2014), incorporated herein by reference. | |
11 | Statement regarding computation of per share earnings. | |
31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a). | |
31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a). | |
32 | Certifications of Chief Executive Officer and Chief Financial Officer required by 18 U.S.C. Section 1350. | |
95 | Mine Safety Disclosure Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the period ending September 26, 2014. | |
*101.INS | XBRL Instance Document. | |
*101.SCH | XBRL Taxonomy Extension Schema Document. | |
*101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
*101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
*101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
*101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | Submitted electronically herewith. |
CUSTOMERS: | |
MATERION CORPORATION By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNICAL MATERIALS INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION BRUSH INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNOLOGIES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Chief Financial Officer and Secretary | MATERION BREWSTER LLC By: /s/ Michael C. Hasychak Michael C. Hasychak Treasurer |
MATERION PRECISION OPTICS AND THIN FILM COATINGS CORPORATION By: /s/ Gary W. Schiavoni Gary W. Schiavoni Secretary | MATERION LARGE AREA COATINGS LLC By: /s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer |
MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES CORP. By:/s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES LLC By: /s/ Donald G. Klimkowicz Donald G. Klimkowicz Manager |
METAL LENDERS: | |
CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Dominic Sorresso Name: Dominic Sorresso Title: Authorized Signatory | CIBC WORLD MARKETS INC. By: /s/ Dominic Sorresso Name: Dominic Sorresso Title: Authorized Signatory |
Approved Domestic Locations | |
Materion Advanced Materials Technologies and Services Inc. (f/k/a Williams Advanced Materials Inc.) 2978 Main Street Buffalo, New York 14214 | Materion Technical Materials Inc. (f/k/a Technical Materials, Inc.) 5 Wellington Road Lincoln, Rhode Island 02865 |
Materion Advanced Materials Technologies and Services Inc. (f/k/a Williams Advanced Materials Inc.) 2080 Lockport Road Wheatfield, New York 14304 | Materion Large Area Coatings LLC (f/k/a Techni-Met, LLC) 300 Lamberton Road Windsor, Connecticut 06095 |
Materion Brewster LLC (f/k/a Williams Acquisition, LLC) 42 Mt. Ebo Road South Brewster, New York 10509 | Materion Large Area Coatings LLC (f/k/a Techni-Met, LLC) 30 East Newberry Rd. Bloomfield, Connecticut 06002 |
Materion Precision Optics and Thin Film Coatings LLC (f/k/a Thin Film Technology, Inc.) 153 Industrial Way Buellton, CA 93427 | Cerac, inc. (a Materion Advanced Materials Technologies and Services site) 404-407 N. 13th St. and 1316 W. St. Paul St. Milwaukee, Wisconsin 53233 |
Materion Technologies Inc. (f/k/a Zentrix Technologies Inc.) Newburyport Industrial Park 22 Graf Road Newburyport, Massachusetts 01950 | Materion Advanced Materials Technologies and Services Inc. (f/k/a Williams Advanced Materials Inc.) 3500 Thomas Rd, Suite C Santa Clara, California 95054 |
Materion Brush Inc. (f/ka/ Brush Wellman Inc.) 14710 W. Portage River South Rd. Elmore, Ohio 43416-9502 | Materion Brush Inc. (f/ka/ Brush Wellman Inc.) 27555 College Park Drive Warren, Michigan 48088 |
Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 6905 Washington Avenue NE Albuquerque, New Mexico 87109 | Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 5531 Midway Park Place NE Albuquerque, New Mexico 87109 |
Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 5520 Midway Park Place NE Albuquerque, New Mexico 87109 | Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 5941 Midway Park Place NE Albuquerque, New Mexico 87109 |
Materion Advanced Materials Technologies and Services LLC (f/k/a Academy Gallup, LLC) 1257 North Highway 491 Gallup, New Mexico 87301 | |
Approved Foreign Locations | |
Materion Advanced Materials Technologies and Services Far East Pte. Ltd. (f/k/a Williams Advanced Materials Far East PTE Ltd.) 110 Paya Lebar Road #02-01 Singapore Warehouse Singapore 409009 | Materion Czech S.R.O. (f/k/a OMC Scientific, Czech S.R.O) Prumyslova ul. 440 01 Louny Czech Republic |
Materion Advanced Materials Technologies and Services Far East Pte. Ltd. (f/k/a Williams Advanced Materials Far East PTE Ltd.) 10 Arumugan Rd. Lion Industrial Bldg. Singapore Warehouse Singapore 4099957 | Seagate 1 Disc Drive Springtown Industrial Estate Londonderry, Northern Ireland BT48 OBF United Kingdom |
Materion Advanced Materials Technologies and Services Taiwan Co. Ltd. (f/k/a Williams Advanced Materials Technology Taiwan Co., Ltd.) No. 19 Zhongxing 1st St. Luzhu Shiang, Taoyuan County Taiwan, ROC | Materion Advanced Materials Technologies and Services Suzhou Ltd. (f/k/a Williams Advanced Materials (Suzhou) Ltd.) No. 28, Su Tong Road Suzhou Industrial Park China 215021 |
Materion Ireland Holdings Limited (f/k/a OMC Scientific Holdings Limited) Ballysimon Road Limerick, Ireland | Materion Advanced Materials Technologies and Services Inc. (f/k/a Williams Advanced Materials Inc.) – Philippines Bldg. 8365 Argionaut Highway Cubi Pt. Subic Bay Freeport Zone Philippines 2222 |
Materion Advanced Materials Technologies and Services Far East Pte. Ltd. (f/k/a Williams Advanced Materials Far East PTE Ltd.) 28 Woodlands Loop #10-00 Singapore 738308 | |
Approved Refiners / Fabricators | |
Coining of America 280 Midland Avenue Saddle Brook, New Jersey 07663 | Johnson Matthey Limited 130 Glidden Road Brampton, Ontario, Canada L6W 3M8 |
Sigmund Cohn Corp. 121 South Columbus Avenue Mount Vernon, New York 10553 | Johnson Matthey Orchard Road Royston, Hertfordshire, England SG8 5HE |
Sofield Mfg. 2 Main Street Ridgefield Park, New Jersey 07660 | Johnson Matthey 2001 Nolte Drive West Deptford, New Jersey 08066 |
NuTec Metal Joining Products 12999 Plaza Drive Cleveland, Ohio 44193 | Rohm & Haas Electric Materials LLC 272 Buffalo Avenue Freeport, New York 11520 |
BASF Catalysts, LLC 554 Engelhard Drive Seneca, South Carolina 29679 | Sabin Metal Corp. 300 Pantigo Place East Hampton, New York 11937 |
Heraeus Metal Processing, Inc. 13429 Alondra Blvd. Santa Fe Springs, California 90670 | Seagate Technology 7801 Computer Ave. Bloomington, MN 55435 |
Marian, Inc. 1011 East Saint Clair Street Indianapolis, Indiana 46202 | Marian, Inc. 2787 South Freeman Road Monticello, Indiana 47960 |
Mastermelt America LLC 319 Industrial Park Road Sweetwater, Tennessee 37847 (With a value (determined in accordance with Section 2.2 of the Agreement) not in excess of $2,000,000.) | |
Approved Subconsignees and Approved Subconsignee Locations | |
Honeywell 830 Arapaho Road Richardson, Texas 75081 | International Rectifier a Hexfet America Facility 41915 Business Park Drive Temecula, California 92590 |
Triquint Semiconductor 500 W. Renner Road Richardson, Texas 75083-3938 | International Rectifier Cardiff Road Newport South Wales, England NP10 8YJ |
Triquint Semiconductor 2300 N.E. Brookwood Pkwy. Hillsboro, Oregon 97124 | Hewlett Packard 1055 NE Circle Blvd. Chemical Storage Building Corvallis, OR 97330 |
Triquint Semiconductor 1818 Highway 441, S Apopka, Florida 32703 | PPG Industries 400 Park Drive, Works #6 Carlisle, Pennsylvania 17013 |
PPG Industries 7400 Central Freeway Wichita Falls, Texas 76306 | PPG Industries 4004 Fairview Industrial Drive SE, Works #12 Salem, Oregon 97302 |
Cree, Inc. 4600 Silicon Drive Durham, North Carolina 27703 | |
Approved Storage Facility Locations | |
Materion Advanced Materials Technologies and Services Inc. (f/k/a Williams Advanced Materials Inc.) 2978 Main Street Buffalo, New York 14214 | Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 5531 Midway Park Place NE Albuquerque, New Mexico 87109 |
Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 6905 Washington Avenue NE Albuquerque, New Mexico 87109 | Materion Advanced Materials Technologies and Services Corp. (f/k/a Academy Corporation) 5941 Midway Park Place NE Albuquerque, New Mexico 87109 |
Lender | Description | Secured Assets | Amount | ||
Credit Facilities | |||||
JP Morgan Chase | Senior Credit Agreement (including Letters of Credit and Subfacilities) | All assets | N/A | ||
The Bank of Nova Scotia | Revolving Credit Agreement between Materion Brush GmbH and The Bank of Nova Scotia. Facility is secured through a Comfort Letter issued by Materion Corporation | All assets of Brush Wellman GmbH | N/A | ||
Project Financing | |||||
Cleveland-Cuyahoga County Port Authority | Cleveland-Cuyahoga County Port Authority Taxable Development Revenue Bonds (Port of Cleveland Bond Fund) Series 2008A (Brush Wellman Inc. Project) | Infrastructure and equipment purchased with bond proceeds | $5,155,000 | ||
State of Ohio | State of Ohio Department of Development Research and Development Loan (Brush Wellman Inc. Project) | Infrastructure and equipment purchased with state loan proceeds | $ | 5,000,000 | |
Dayton-Montgomery County Port Authority | Open-End Mortgage and Security Agreement, dated as of April 1, 2011, from Materion Brush, Inc. to The Bank of New York Mellon Trust Company, N.A., for the benefit of Dayton-Montgomery County Port Authority | 125,400 square foot facility located at 14710 West Portage River Road, Elmore, Ohio, and all structures additions, improvements, appurtenances and herediments on or with respect to such real estate | $2,000,000 | ||
Toledo-Lucas County Port Authority, Ohio | Open-End Mortgage and Security Agreement, dated as of April 1, 2011, from Materion Brush Inc. to The Bank of New York Mellon Trust Company, N.A., for the benefit of Toledo-Lucas County Port Authority | 125,400 square foot facility located at 14710 West Portage River Road, Elmore, Ohio, and all structures additions, improvements, appurtenances and herediments on or with respect to such real estate | $6,000,000 |
Lender | Description | Secured Assets | Amount | ||
Lorain Port Authority | Variable Rate Demand Industrial Development Revenue Bond, Series 1996, Brush Wellman Project | Lorain, Ohio facility financing | $8,305,000 | ||
Hedge Agreements | |||||
JP Morgan Chase | Foreign Exchange Contracts between JP Morgan Chase and Materion Brush Inc. | All assets | Variable | ||
Fifth Third Bank | Foreign Exchange Contracts between Fifth Third Bank and Materion Brush Inc. | All assets | Variable | ||
Key Bank | Utility Hedge Contracts between Key Bank and Materion Corporation | All assets | Variable | ||
RBS Citizens | Foreign Exchange Contracts between RBS Citizens and Materion Corporation | All assets | Variable | ||
Bank of America, N.A. | Foreign Exchange Contracts between LaSalle Bank N.A. and Materion Brush Inc. | All assets | Variable | ||
Wells Fargo Bank N.A. | Foreign Exchange Contracts between Wells Fargo Bank N.A. and Materion Brush Inc. | All assets | Variable |
Letters of Credit | ||||
JPM Reference Number | Booking Party Name | Beneficiary Name | Outstanding Amount | Issue / Advising Date |
CTCS-328002 | Materion Corporation | State of Wisconsin Department of Health and Family Services | $483,781.00 | June 18, 2007 |
CTCS-623997 | Materion Corporation | The Huntington National Bank | $515,500.00 | June 17, 2008 |
CTCS-626207 | Materion Corporation | The Bank of Nova Scotia | $20,000,000.00 | April 26, 2005 |
CTCS-634321 | Materion Corporation | Zurich American Insurance Company | $1,950,000.00 | February 25, 2004 |
CTCS-634339 | Materion Corporation | Dresdner Bank A.G. | $320,000.00 | April 27, 2004 |
CTCS-634359 | Materion Corporation | Utah Division of Oil, Gas and Mining | $1,398,000.00 | October 21, 2004 |
CTCS-634364 | Materion Corporation | National Union Fire Insurance Co | $173,000.00 | November 5, 2004 |
CTCS-634379 | Materion Corporation | Utah Division of Solid & Hazardous Waste | $90,207.00 | February 23, 2005 |
CTCS-634605 | Materion Corporation | Wells Fargo Bank, N.A. | $8,557,600.00 | March 9, 2004 |
CTCS-639816 | Materion Corporation | Pennsylvania Department of Environmental Protection | $320,000.00 | June 2, 2005 |
CTCS-852654 | Materion Corporation | Bank of America, N.A. | $2,000,000.00 | June 15, 2010 |
CTCS-927360 | Materion Corporation | The Bank of New York Mellon Trust | $800,000.00 | April 19, 2011 |
CTCS-937025 | Materion Corporation | Ohio Bureau Of Workers’ Compensation | $425,000.00 | May 13, 2011 |
CTCS-383405 | Materion Brush Inc. | Sck.Cne Belgium | $64,000.00 | May 16, 2013 |
CUSTOMERS: | |
MATERION CORPORATION By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNICAL MATERIALS INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION BRUSH INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNOLOGIES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Chief Financial Officer and Secretary | MATERION BREWSTER LLC By: /s/ Michael C. Hasychak Michael C. Hasychak Treasurer |
MATERION PRECISION OPTICS AND THIN FILM COATINGS CORPORATION By: /s/ Gary W. Schiavoni Gary W. Schiavoni Secretary | MATERION LARGE AREA COATINGS LLC By: /s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer |
MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES CORP. By:/s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES LLC By: /s/ Donald G. Klimkowicz Donald G. Klimkowicz Manager |
METAL LENDERS: | |
CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Dominic Sorresso Name: Dominic Sorresso Title: Authorized Signatory | CIBC WORLD MARKETS INC. By: /s/ Ian Cays Name: Ian Cays Title: Authorized Signatory |
CUSTOMERS: | |
MATERION CORPORATION By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNICAL MATERIALS INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary | MATERION BRUSH INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Vice President, Treasurer and Secretary |
MATERION TECHNOLOGIES INC. By: /s/ Michael C. Hasychak Michael C. Hasychak Chief Financial Officer and Secretary | MATERION BREWSTER LLC By: Michael C. Hasychak Michael C. Hasychak Treasurer |
MATERION PRECISION OPTICS AND THIN FILM COATINGS CORPORATION By: /s/ Gary W. Schiavoni Gary W. Schiavoni Secretary | MATERION LARGE AREA COATINGS LLC By: /s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer |
MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES CORP. By: /s/ Gary W. Schiavoni Gary W. Schiavoni Asst. Secretary and Asst. Treasurer | MATERION ADVANCED MATERIALS TECHNOLOGIES AND SERVICES LLC By: /s/ Donald G. Klimkowicz Donald G. Klimkowicz Manager |
METAL LENDERS: | |
CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Dominic Sorresso Name: Dominic Sorresso Title: Authorized Signatory | CIBC WORLD MARKETS INC. By: /s/ Ian Cays Name: Ian Cays Title: Authorized Signatory |
Second Quarter Ended | First Half Ended | |||||||||||||||
June 26, | June 28, | June 26, | June 28, | |||||||||||||
(Thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Basic: | ||||||||||||||||
Average shares outstanding | 20,642 | 20,566 | 20,625 | 20,524 | ||||||||||||
Net Income | $ | 9,974 | $ | 4,155 | $ | 17,305 | $ | 10,940 | ||||||||
Per share amount | $ | 0.48 | $ | 0.20 | $ | 0.84 | $ | 0.53 | ||||||||
Diluted: | ||||||||||||||||
Average shares outstanding | 20,642 | 20,566 | 20,625 | 20,524 | ||||||||||||
Dilutive stock securities based on the treasury stock method using average market price | 359 | 303 | 358 | 321 | ||||||||||||
Totals | 21,001 | 20,869 | 20,983 | 20,845 | ||||||||||||
Net Income | $ | 9,974 | $ | 4,155 | $ | 17,305 | $ | 10,940 | ||||||||
Per share amount | $ | 0.47 | $ | 0.20 | $ | 0.82 | $ | 0.52 |
1) | I have reviewed this quarterly report on Form 10-Q of Materion Corporation (the “registrant”); |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Richard J. Hipple | ||||||
Dated: October 30, 2014 | Richard J. Hipple | |||||
Chairman, President and Chief Executive Officer |
1) | I have reviewed this quarterly report on Form 10-Q of Materion Corporation (the “registrant”); |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ John D. Grampa | ||||||
Dated: October 30, 2014 | John D. Grampa | |||||
Senior Vice President Finance and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. |
/s/ Richard J. Hipple |
Richard J. Hipple |
Chairman, President and Chief Executive Officer |
/s/ John D. Grampa |
John D. Grampa |
Senior Vice President Finance and Chief Financial Officer |
(A) | Total number of alleged violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under Section 104 of the Mine Act for which Materion Natural Resources Inc. received a citation from MSHA | 0 |
(B) | Total number of orders issued under Section 104(b) of the Mine Act | 0 |
(C) | Total number of citations and orders for alleged unwarrantable failure by Materion Natural Resources Inc. to comply with mandatory health or safety standards under Section 104(d) of the Mine Act | 0 |
(D) | Total number of alleged flagrant violations under Section 110(b)(2) of the Mine Act | 0 |
(E) | Total number of imminent danger orders issued under Section 107(a) of the Mine Act | 0 |
(F) | Total dollar value of proposed assessments from MSHA under the Mine Act | $0 |
(G) | Total number of mining-related fatalities | 0 |
(H) | Received notice from MSHA of a pattern of violations under Section 104(e) of the Mine Act | No |
(I) | Received notice from MSHA of the potential to have a pattern of violations under Section 104(e) of the Mine Act | No |
(J) | Total number of Legal Actions pending as of the last day of the Reporting Period | 0 |
(K) | Total number of Legal Actions instituted during the Reporting Period | 0 |
(L) | Total number of Legal Actions resolved during the Reporting Period | 0 |
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