MATERION CORP, 10-Q filed on 8/3/2021
Quarterly Report
v3.21.2
Document and Entity Information
6 Months Ended
Jul. 02, 2021
shares
Cover [Abstract]  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Jul. 02, 2021
Document Transition Report false
Entity File Number 001-15885
Entity Registrant Name MATERION CORPORATION
Entity Incorporation, State or Country Code OH
Entity Tax Identification Number 34-1919973
Entity Address, Address Line One 6070 Parkland Blvd
Entity Address, City or Town Mayfield Heights
Entity Address, State or Province OH
Entity Address, Postal Zip Code 44124
City Area Code 216
Local Phone Number 486-4200
Title of 12(b) Security Common Stock, no par value
Trading Symbol MTRN
Security Exchange Name NYSE
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Large Accelerated Filer
Entity Small Business false
Entity Emerging Growth Company false
Entity Shell Company false
Entity Common Stock, Shares Outstanding 20,437,646
Entity Central Index Key 0001104657
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2021
Document Fiscal Period Focus Q2
Amendment Flag false
v3.21.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jul. 02, 2021
Jun. 26, 2020
Jul. 02, 2021
Jun. 26, 2020
Income Statement [Abstract]        
Net sales $ 370,999 $ 271,468 $ 725,385 $ 549,414
Cost of sales 301,418 224,513 589,008 457,889
Gross margin 69,581 46,955 136,377 91,525
Selling, general, and administrative expense 38,060 32,852 74,836 63,596
Research and development expense 6,604 4,502 12,810 8,687
Goodwill impairment charges 0 0 0 9,053
Asset impairment charges 0 0 0 1,713
Restructuring expense (income) 0 2,387 (378) 4,551
Other - net 4,194 (357) 8,668 1,922
Operating profit 20,723 7,571 40,441 2,003
Other non-operating income—net (1,277) (851) (2,553) (1,795)
Interest expense—net 858 1,259 1,619 1,505
Income before income taxes 21,142 7,163 41,375 2,293
Income tax expense 3,274 1,360 6,740 368
Net income $ 17,868 $ 5,803 $ 34,635 $ 1,925
Basic earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.87 $ 0.29 $ 1.70 $ 0.09
Diluted earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.87 $ 0.28 $ 1.68 $ 0.09
Weighted-average number of shares of common stock outstanding:        
Basic (in shares) 20,429 20,317 20,402 20,350
Diluted (in shares) 20,651 20,554 20,647 20,587
v3.21.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 02, 2021
Jun. 26, 2020
Jul. 02, 2021
Jun. 26, 2020
Statement of Comprehensive Income [Abstract]        
Net income $ 17,868 $ 5,803 $ 34,635 $ 1,925
Other comprehensive income (loss):        
Foreign currency translation adjustment 3,193 1,166 (5,664) 293
Derivative and hedging activity, net of tax (273) 347 972 (507)
Pension and post-employment benefit adjustment, net of tax 83 89 247 105
Other comprehensive income (loss) 3,003 1,602 (4,445) (109)
Comprehensive income $ 20,871 $ 7,405 $ 30,190 $ 1,816
v3.21.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jul. 02, 2021
Dec. 31, 2020
Current assets    
Cash and cash equivalents $ 24,345 $ 25,878
Accounts receivable, net 179,326 166,447
Inventories, net 290,739 250,778
Prepaid and other current assets 22,155 20,896
Total current assets 516,565 463,999
Deferred income taxes 1,909 3,134
Property, plant, and equipment 1,052,464 998,312
Less allowances for depreciation, depletion, and amortization (702,903) (688,626)
Property, plant, and equipment, net 349,561 309,686
Operating lease, right-of-use assets 58,833 62,089
Intangible assets, net 50,851 54,672
Other assets 21,724 19,364
Goodwill 142,054 144,916
Total Assets 1,141,497 1,057,860
Current liabilities    
Short-term debt 435 1,937
Accounts payable 80,600 55,640
Salaries and wages 27,505 18,809
Other liabilities and accrued items 36,930 40,887
Income taxes 4,837 1,898
Unearned revenue 10,920 7,713
Total current liabilities 161,227 126,884
Other long-term liabilities 17,477 17,002
Operating lease liabilities 53,736 56,761
Finance lease liabilities 18,410 20,539
Retirement and post-employment benefits 40,001 41,877
Unearned income 95,290 86,761
Deferred income taxes 14,817 15,864
Long-term debt 58,838 36,542
Shareholders’ equity    
Serial preferred stock (no par value; 5,000 authorized shares, none issued) 0 0
Common stock (no par value; 60,000 authorized shares, issued shares of 27,148 at both July 2nd and December 31st) 268,205 258,642
Retained earnings 660,851 631,058
Common stock in treasury (208,854) (199,187)
Accumulated other comprehensive loss (43,084) (38,639)
Other equity 4,583 3,756
Total shareholders' equity 681,701 655,630
Total Liabilities and Shareholders’ Equity $ 1,141,497 $ 1,057,860
v3.21.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Thousands, $ / shares in Thousands
Jul. 02, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
Serial preferred stock, par value (in dollars per share) $ 0 $ 0
Serial preferred stock, shares authorized 5,000 5,000
Serial preferred stock, shares issued 0 0
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized 60,000 60,000
Common stock, shares, issued 27,148 27,148
v3.21.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jul. 02, 2021
Jun. 26, 2020
Cash flows from operating activities:    
Net income $ 34,635 $ 1,925
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation, depletion, and amortization 19,063 23,522
Amortization of deferred financing costs in interest expense 364 364
Stock-based compensation expense (non-cash) 3,512 3,966
Deferred income tax expense (benefit) 367 (723)
Impairment charges 0 10,766
Changes in assets and liabilities:    
Accounts receivable (13,941) 5,331
Inventory (40,651) (18,446)
Prepaid and other current assets (1,718) (7,264)
Accounts payable and accrued expenses 28,403 (7,634)
Unearned revenue 3,246 (257)
Interest and taxes payable 2,868 1,058
Unearned income due to customer prepayments 8,043 26,713
Other-net (126) (2,888)
Net cash provided by operating activities 44,065 36,433
Cash flows from investing activities:    
Payments for purchase of property, plant, and equipment (57,712) (32,034)
Proceeds from sale of property, plant, and equipment 603 33
Net cash used in investing activities (57,109) (32,001)
Cash flows from financing activities:    
Proceeds from borrowings under revolving credit agreement, net 22,500 150,000
Repayment of long-term debt (1,654) (428)
Principal payments under finance lease obligations (1,512) (626)
Cash dividends paid (4,791) (4,582)
Repurchase of common stock 0 (6,766)
Payments of withholding taxes for stock-based compensation awards (3,021) (2,025)
Net cash provided by financing activities 11,522 135,573
Effects of exchange rate changes (11) 56
Net change in cash and cash equivalents (1,533) 140,061
Cash and cash equivalents at beginning of period 25,878 125,007
Cash and cash equivalents at end of period $ 24,345 $ 265,068
v3.21.2
Consolidated Statements of Shareholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Shares
Common Shares Held In Treasury
Common Stock
Retained Earnings
Common Stock In Treasury
Accumulated Other Comprehensive Income (Loss)
Other Equity
Beginning balance (in shares) at Dec. 31, 2019   20,404            
Beginning balances (in Treasury shares) at Dec. 31, 2019     (6,744)          
Beginning balances at Dec. 31, 2019 $ 645,743     $ 249,674 $ 624,954 $ (186,845) $ (45,462) $ 3,422
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 1,925     0 1,925 0 0 0
Other comprehensive income (loss) (109)     0 0 0 (109) 0
Cash dividends declared (4,582)     0 (4,582) 0 0 0
Stock-based compensation activity (in shares)   110 110          
Stock-based compensation activity 4,057     7,037   (2,902) 0 0
Stock-based compensation activity         (78)      
Payments of withholding taxes for stock-based compensation awards (in shares)   (36) (36)          
Payments of withholding taxes for stock-based compensation awards (2,025)     0 0 (2,025) 0 0
Repurchase of shares (in shares)   (158) (158)          
Repurchase of shares (6,766)     0 0 (6,766) 0 0
Directors' deferred compensation (in shares)   2 2          
Directors' deferred compensation 113     45 0 (188) 0 256
Ending balance (in shares) at Jun. 26, 2020   20,322            
Ending balances (in Treasury shares) at Jun. 26, 2020     (6,826)          
Ending balances at Jun. 26, 2020 638,356     256,756 622,219 (198,726) (45,571) 3,678
Beginning balance (in shares) at Mar. 27, 2020   20,310            
Beginning balances (in Treasury shares) at Mar. 27, 2020     (6,838)          
Beginning balances at Mar. 27, 2020 630,769     253,967 618,796 (198,311) (47,173) 3,490
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 5,803     0 5,803 0 0 0
Other comprehensive income (loss) 1,602     0 0 0 1,602 0
Cash dividends declared (2,337)     0 (2,337) 0 0 0
Stock-based compensation activity (in shares)   11 11          
Stock-based compensation activity 2,473     2,775   (259) 0 0
Stock-based compensation activity         (43)      
Payments of withholding taxes for stock-based compensation awards (in shares)   0 0          
Payments of withholding taxes for stock-based compensation awards (10)     0 0 (10) 0 0
Directors' deferred compensation (in shares)   1 1          
Directors' deferred compensation 56     14 0 (146) 0 188
Ending balance (in shares) at Jun. 26, 2020   20,322            
Ending balances (in Treasury shares) at Jun. 26, 2020     (6,826)          
Ending balances at Jun. 26, 2020 638,356     256,756 622,219 (198,726) (45,571) 3,678
Beginning balance (in shares) at Dec. 31, 2020   20,328            
Beginning balances (in Treasury shares) at Dec. 31, 2020     (6,820)          
Beginning balances at Dec. 31, 2020 655,630     258,642 631,058 (199,187) (38,639) 3,756
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 34,635     0 34,635 0 0 0
Other comprehensive income (loss) (4,445)     0 0 0 (4,445) 0
Cash dividends declared (4,791)     0 (4,791) 0 0 0
Stock-based compensation activity (in shares)   152 152          
Stock-based compensation activity 3,512     9,474   (5,911) 0 0
Stock-based compensation activity         (51)      
Payments of withholding taxes for stock-based compensation awards (in shares)   (45) (45)          
Payments of withholding taxes for stock-based compensation awards (3,021)     0 0 (3,021) 0 0
Directors' deferred compensation (in shares)   3 3          
Directors' deferred compensation 181     89 0 (735) 0 827
Ending balance (in shares) at Jul. 02, 2021   20,438            
Ending balances (in Treasury shares) at Jul. 02, 2021     (6,710)          
Ending balances at Jul. 02, 2021 681,701     268,205 660,851 (208,854) (43,084) 4,583
Beginning balance (in shares) at Apr. 02, 2021   20,414            
Beginning balances (in Treasury shares) at Apr. 02, 2021     (6,734)          
Beginning balances at Apr. 02, 2021 661,336     264,940 645,468 (206,845) (46,087) 3,860
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 17,868     0 17,868 0 0 0
Other comprehensive income (loss) 3,003     0 0 0 3,003 0
Cash dividends declared (2,453)     0 (2,453) 0 0 0
Stock-based compensation activity (in shares)   25 25          
Stock-based compensation activity 2,039     3,215   (1,144) 0 0
Stock-based compensation activity         (32)      
Payments of withholding taxes for stock-based compensation awards (in shares)   (2) (2)          
Payments of withholding taxes for stock-based compensation awards (183)     0 0 (183) 0 0
Directors' deferred compensation (in shares)   1 1          
Directors' deferred compensation 91     50 0 (682) 0 723
Ending balance (in shares) at Jul. 02, 2021   20,438            
Ending balances (in Treasury shares) at Jul. 02, 2021     (6,710)          
Ending balances at Jul. 02, 2021 $ 681,701     $ 268,205 $ 660,851 $ (208,854) $ (43,084) $ 4,583
v3.21.2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jul. 02, 2021
Jun. 26, 2020
Jul. 02, 2021
Jun. 26, 2020
Statement of Stockholders' Equity [Abstract]        
Cash dividends declared (per share) $ 0.120 $ 0.115 $ 0.235 $ 0.225
v3.21.2
Accounting Policies
6 Months Ended
Jul. 02, 2021
Accounting Policies [Abstract]  
Accounting Policies Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All adjustments were of a normal and recurring nature. Certain amounts in prior periods have been reclassified to conform to the 2021 consolidated financial statement presentation.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2020 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year.

Business Combinations: The Company records assets acquired and liabilities assumed at the date of acquisition at their respective fair values. Any intangible assets acquired in a business combination are recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

The amounts reflected in Note B to the Consolidated Financial Statements are the results of a preliminary purchase price allocation and will be updated upon completion of the final valuation. The Company is required to complete the purchase price allocation within 12 months of the acquisition date. If such completion of the allocation results in a change in the preliminary values, the measurement period adjustment will be recognized in the period in which the adjustment amount is determined.

Change in Accounting Principle: During the fourth quarter of 2020, the Company elected to change its method for valuing its inventories at locations that previously used the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The Company believes that the FIFO method is preferable as it improves comparability with its most similar peers, it more closely resembles the physical flow of its inventory (i.e., it provides better matching of revenues and expenses), and it results in uniformity across a significant majority of the Company’s inventory. The effects of the change in accounting principle from LIFO to FIFO were retrospectively applied. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated balance sheet as of June 26, 2020 and the consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the three and six months ended June 26, 2020 were adjusted as necessary. For further information, refer to the Company's 2020 Annual Report on Form 10-K.
The following tables reflect the impact to the financial statement line items as a result of the change in accounting principle for the prior periods presented in the accompanying financial statements:

Consolidated Statement of Income

(Thousands except per share amounts)
Second Quarter EndedSix Months Ended
June 26, 2020June 26, 2020
Selected ItemsAs ReportedAs AdjustedAdjustmentAs ReportedAs AdjustedAdjustment
Cost of sales$223,378 $224,513 $1,135 $455,749 $457,889 $2,140 
Gross margin48,090 46,955 (1,135)93,665 91,525 (2,140)
Operating profit8,706 7,571 (1,135)4,143 2,003 (2,140)
Income before income taxes8,298 7,163 (1,135)4,433 2,293 (2,140)
Income tax expense1,620 1,360 (260)858 368 (490)
Net income6,678 5,803 (875)3,575 1,925 (1,650)
Basic earnings per share:
Net income per share of common stock$0.33 $0.29 $(0.04)$0.18 $0.09 $(0.09)
Diluted earnings per share:
Net income per share of common stock$0.32 $0.28 $(0.04)$0.17 $0.09 $(0.08)

Consolidated Statement of Comprehensive Income
(Thousands)
Second Quarter EndedSix Months Ended
June 26, 2020June 26, 2020
Selected ItemsAs ReportedAs AdjustedAdjustmentAs ReportedAs AdjustedAdjustment
Net income$6,678 $5,803 $(875)$3,575 $1,925 $(1,650)
Comprehensive income8,280 7,405 (875)3,466 1,816 (1,650)

Consolidated Statement of Cash Flows
(Thousands)
Six Months Ended
June 26, 2020
Selected ItemsAs ReportedAs AdjustedAdjustment
Net income$3,575 $1,925 $(1,650)
Deferred income tax benefit(234)(723)(489)
Increase in inventory(20,585)(18,446)2,139 

New Pronouncements Adopted: In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing various exceptions, such as the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments in this update also simplify the accounting for income taxes related to income-based franchise taxes and require that an entity reflect enacted tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted the standard on January 1, 2021. The adoption did not materially impact the Company's financial statements or disclosures.

New Accounting Guidance Issued and Not Yet Adopted: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance is intended
to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. The Company is currently assessing which of its various contracts will require an update for a new reference rate, and will determine the timing for implementation of this guidance at the completion of that analysis.No other recently issued or effective ASUs had, or are expected to have, a material effect on the Company's results of operations, financial condition, or liquidity.
v3.21.2
Acquisition
6 Months Ended
Jul. 02, 2021
Business Combinations [Abstract]  
Business Combination Disclosure AcquisitionBusiness acquisitions have been accounted for using the acquisition method, with acquired assets and assumed liabilities recognized at their respective fair values as of the acquisition date. The cost in excess of the net assets of the business acquired is included in goodwill. On July 17, 2020, the Company completed the acquisition of Optics Balzers AG (Optics Balzers), an industry leader in thin film optical coatings. The purchase price for Optics Balzers was $136.1 million, including the assumption of $22.5 million of debt. The transaction was funded with cash on hand. Based on the fair value of assets acquired and liabilities assumed, goodwill of $70.8 million and identifiable intangible assets of $49.3 million were recorded. Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Precision Optics segment and the results of Optics Balzers are not material to our Consolidated Financial Statements. No material measurement period adjustments have been recorded during the second quarter or first six months of 2021. As of July 2, 2021, the purchase price allocation remains preliminary as the Company completes its assessments of income taxes.
v3.21.2
Segment Reporting
6 Months Ended
Jul. 02, 2021
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
 
The Company has the following reportable segments: Performance Alloys and Composites, Advanced Materials, Precision Optics, and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, the Company's chief operating decision maker, in determining how to allocate the Company’s resources and evaluate performance.
Performance Alloys and Composites produces strip and bulk form alloy products, strip metal products with clad inlay and overlay metals, beryllium-based metals, beryllium, and aluminum metal matrix composites, in rod, sheet, foil, and a variety of customized forms, and beryllia ceramics.
Advanced Materials produces advanced chemicals, microelectric packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal preforms, high temperature, and braze materials.
Precision Optics produces thin film coatings, optical filter materials, sputter-coated, and precision-converted thin film materials.
The Other reportable segment includes unallocated corporate costs and assets.
(Thousands)Performance
Alloys and
Composites
Advanced MaterialsPrecision OpticsOtherTotal
Second Quarter 2021
Net sales$125,294 $213,114 $32,591 $ $370,999 
Intersegment sales
10 3,185   3,195 
Operating profit (loss)17,314 8,333 2,626 (7,550)20,723 
Second Quarter 2020
Net sales$101,614 $150,108 $19,746 $ $271,468 
Intersegment sales(213)8,997 8,784 
Operating profit (loss)6,824 4,653 2,091 (5,997)7,571 
First Six Months 2021
Net sales$239,437 $417,758 $68,190 $ $725,385 
Intersegment sales
15 5,872   5,887 
Operating profit (loss)30,805 17,266 7,184 (14,814)40,441 
First Six Months 2020
Net sales$200,681 $310,273 $38,460 $ $549,414 
Intersegment sales18,188 18,190 
Operating profit (loss)10,347 9,703 (7,501)(10,546)2,003 
The following table disaggregates revenue for each segment by end market for the second quarter and first six months of 2021 and 2020:
 (Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision OpticsOtherTotal
Second Quarter 2021
End Market
Semiconductor$1,806 $166,968 $563 $— $169,337 
Industrial30,264 10,687 7,634 — 48,585 
Aerospace and defense19,250 1,660 5,597 — 26,507 
Consumer electronics10,722 266 6,964 — 17,952 
Automotive25,766 1,757 2,107 — 29,630 
Energy4,880 24,216 — — 29,096 
Telecom and data center13,025 39 — — 13,064 
Other19,581 7,521 9,726 — 36,828 
Total$125,294 $213,114 $32,591 $— $370,999 
Second Quarter 2020
End Market
Semiconductor$1,537 $123,908 $232 $— $125,677 
Industrial23,831 8,419 2,574 — 34,824 
Aerospace and defense17,952 1,650 4,119 — 23,721 
Consumer electronics9,956 21 3,404 — 13,381 
Automotive16,415 1,186 — 17,608 
Energy5,590 9,327 — — 14,917 
Telecom and data center12,586 788 — — 13,374 
Other13,747 4,809 9,410 — 27,966 
Total$101,614 $150,108 $19,746 $— $271,468 
 (Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision OpticsOtherTotal
First Six Months 2021
End Market
Semiconductor$2,803 $322,029 $1,034 $— $325,866 
Industrial54,294 23,277 15,009 — 92,580 
Aerospace and defense41,092 3,058 12,173 — 56,323 
Consumer electronics20,766 431 16,424 — 37,621 
Automotive49,273 3,426 4,300 — 56,999 
Energy9,017 51,406 — — 60,423 
Telecom and data center24,368 109 — — 24,477 
Other37,824 14,022 19,250 — 71,096 
Total$239,437 $417,758 $68,190 $— $725,385 
First Six Months 2020
End Market
Semiconductor$2,443 $244,727 $243 $— $247,413 
Industrial47,171 16,781 5,671 — 69,623 
Aerospace and defense32,158 3,077 9,228 — 44,463 
Consumer electronics24,651 138 6,946 — 31,735 
Automotive34,579 3,266 24 — 37,869 
Energy11,019 32,795 — — 43,814 
Telecom and data center22,575 1,658 — — 24,233 
Other26,085 7,831 16,348 — 50,264 
Total$200,681 $310,273 $38,460 $— $549,414 
Intersegment sales are eliminated in consolidation.
v3.21.2
Revenue Recognition
6 Months Ended
Jul. 02, 2021
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block] Revenue Recognition
Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue, in an amount that reflects the consideration to which it expects to be entitled, upon satisfaction of a performance obligation, by transferring control over a product to the customer. Control over the product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product.

Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at July 2, 2021. Remaining performance obligations include non-cancelable purchase orders and customer contracts. The guidance provides certain practical expedients that limit this requirement. As such, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

After considering the practical expedient at July 2, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $78.1 million.
Contract Balances: The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities:
(Thousands)July 2, 2021December 31, 2020$ change% change
Accounts receivable, trade
$169,279 $156,821 $12,458 %
Unbilled receivables
10,682 8,832 1,850 21 %
Unearned revenue
10,920 7,713 3,207 42 %
Accounts receivable, trade represents payments due from customers relating to the transfer of the Company’s products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred relating to our receivables were immaterial during the first six months of 2021.

Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables.

Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $3.2 million of the December 31, 2020 unearned amounts as revenue during the first six months of 2021.

As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers.
v3.21.2
Other-net
6 Months Ended
Jul. 02, 2021
Other Income and Expenses [Abstract]  
Other-net Other-net
Other-net for the second quarter and first six months of 2021 and 2020 is summarized as follows: 
 Second Quarter EndedSix Months Ended
 July 2,June 26,July 2,June 26,
(Thousands)2021202020212020
Metal consignment fees$2,464 $2,037 $4,614 $4,266 
Amortization of intangible assets1,005 106 2,178 294 
Foreign currency (gain) loss(33)(2,486)1,216 (2,548)
Net loss (gain) on disposal of fixed assets24 (364)55 
Other items734 (23)1,024 (145)
Total$4,194 $(357)$8,668 $1,922 
v3.21.2
Restructuring
6 Months Ended
Jul. 02, 2021
Restructuring and Related Activities [Abstract]  
Restructuring and Related Activities Disclosure [Text Block] Restructuring
During 2020, the Company determined it would close its Large Area Coatings (LAC) business (a reporting unit in the Precision Optics segment). The closure was substantially completed by the end of the first quarter of 2021. Income of $0.4 million was recorded in the first quarter of 2021, primarily related to lower than previously estimated facility closure costs that were recorded in 2020.
Remaining severance payments are immaterial and reflected in Salaries and wages in the Consolidated Balance Sheet as of July 2, 2021. Any additional costs related to the closure of this business are expected to be immaterial.
In addition, during 2020, the Company initiated a restructuring plan in its Performance Alloys and Composites segment to close its Warren, Michigan and Fremont, California locations. Costs associated with the plan totaled $2.4 million and
$4.6 million in the second quarter and first six months of 2020, respectively. In the second quarter of 2020, these costs included $0.9 million of severance associated with approximately 60 employees and $1.5 million of facility and other related costs. Included in restructuring charges for the first six months of 2020 was $1.4 million of severance associated with approximately 60 employees and $3.1 million of facility and other related costs.Remaining severance payments of $0.1 million and facility costs of $0.5 million related to these initiatives are reflected within Salaries and wages and Other liabilities and accrued items, respectively, in the Consolidated Balance Sheet and are expected to be substantially paid in the next twelve months.
v3.21.2
Income Taxes
6 Months Ended
Jul. 02, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's effective tax rate for the second quarter of 2021 and 2020 was 15.5% and 19.0%, respectively, and 16.3% and 16.0% in the first six months of 2021 and 2020, respectively. The effective tax rate for each period in 2021 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development credits, and the foreign derived intangible income deduction. The effective tax rate for each period in 2020 was lower than the statutory rate primarily due to the impact of percentage depletion and research and development credits. The effective tax rate for the first six months of 2021 included a net discrete income tax benefit of $0.5 million, primarily related to excess tax benefits from stock-based compensation awards. The effective tax rate for the first six months of 2020 included a net discrete income tax expense of $0.8 million, primarily related to an impairment of goodwill.

On March 11, 2021, President Biden signed the American Rescue Plan (the Rescue Plan) into law. The Rescue Plan, among other things, extends and enhances a number of current-law tax incentives for businesses. While the Company continues to examine the impacts the Rescue Plan may have on its business, it does not expect it will have a material impact to its consolidated financial statements.
v3.21.2
Earnings Per Share
6 Months Ended
Jul. 02, 2021
Earnings Per Share [Abstract]  
Earnings Per Share Earnings Per Share (EPS)
The following table sets forth the computation of basic and diluted EPS:
Second Quarter EndedSix Months Ended
July 2,June 26,July 2,June 26,
(Thousands, except per share amounts)2021202020212020
Numerator for basic and diluted EPS:
Net income$17,868 $5,803 $34,635 $1,925 
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding20,429 20,317 20,402 20,350 
Effect of dilutive securities:
Stock appreciation rights79 36 75 36 
Restricted stock units93 63 108 80 
Performance-based restricted stock units50 138 62 121 
Diluted potential common shares222 237 245 237 
Denominator for diluted EPS:
Adjusted weighted-average shares outstanding20,651 20,554 20,647 20,587 
Basic EPS$0.87 $0.29 $1.70 $0.09 
Diluted EPS$0.87 $0.28 $1.68 $0.09 
Adjusted weighted-average shares outstanding - diluted exclude securities totaling 52,709 and 191,500 for the quarters ended July 2, 2021 and June 26, 2020, respectively and 64,478 and 230,893 for the six months ended July 2, 2021 and June 26, 2020, respectively. These securities are primarily related to restricted stock units and stock appreciation rights with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would have been anti-dilutive.
v3.21.2
Inventories
6 Months Ended
Jul. 02, 2021
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories on the Consolidated Balance Sheets are summarized as follows:
July 2,December 31,
(Thousands)20212020
Raw materials and supplies$67,281 $42,905 
Work in process172,425 156,093 
Finished goods51,033 51,780 
Inventories, net$290,739 $250,778 
The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce its exposure to metal price movements and to reduce its working capital investment. The notional value of off-balance sheet precious metals and copper was $456.3 million and $400.0 million as of July 2, 2021 and December 31, 2020, respectively. Amounts for the year ended December 31, 2020 have been revised to reflect a $44.6 million reclassification out of work in process and into finished goods inventory.
v3.21.2
Customer Prepayments
6 Months Ended
Jul. 02, 2021
Customer Prepayments [Abstract]  
Customer Prepayments Investment Agreement [Text Block] Customer PrepaymentsThe Company entered into investment and master supply agreements with a customer to procure equipment to manufacture product for the customer. The customer is providing prepayments to the Company in the amount of approximately $70 million in the aggregate to enable the Company to purchase and install certain equipment and make necessary infrastructure improvements to supply product to the customer. The Company will own the equipment and be responsible for operating and maintenance costs. The prepayment from the customer will be applied when commercial production of the product is sold and delivered to the customer in connection with a master supply agreement. Accordingly, as of July 2, 2021 and December 31, 2020, $66.9 million and $58.8 million, respectively, of prepayments are classified as Unearned Income in the Consolidated Balance Sheet, of which $2.2 million and $8.0 million, respectively, was received during the second quarter and first six months of 2021.
v3.21.2
Pensions and Other Post-employment Benefits
6 Months Ended
Jul. 02, 2021
Retirement Benefits [Abstract]  
Pensions and Other Post-employment Benefits Pensions and Other Post-employment Benefits
The following is a summary of the net periodic benefit cost for the second quarter and first six months of 2021 and 2020 for the domestic pension plans (which include the defined benefit pension plan and the supplemental retirement plans) and the domestic retiree medical plan.
 Pension BenefitsOther Benefits
 Second Quarter EndedSecond Quarter Ended
July 2,June 26,July 2,June 26,
(Thousands)2021202020212020
Components of net periodic benefit (credit) cost
Service cost$ $— $20 $15 
Interest cost987 1,215 29 53 
Expected return on plan assets(2,234)(2,205) — 
Amortization of prior service cost (benefit) — (375)(374)
Amortization of net loss (gain)417 284 (68)(83)
Net periodic benefit (credit) cost$(830)$(706)$(394)$(389)
Settlements 94  — 
Total net benefit (credit) cost$(830)$(612)$(394)$(389)
 Pension BenefitsOther Benefits
 Six Months EndedSix Months Ended
July 2,June 26,July 2,June 26,
(Thousands)2021202020212020
Components of net periodic benefit (credit) cost
Service cost$ $— $40 $31 
Interest cost1,973 2,429 58 107 
Expected return on plan assets(4,468)(4,410) — 
Amortization of prior service cost (benefit) — (749)(749)
Amortization of net loss (gain)835 568 (137)(166)
Net periodic benefit (credit) cost$(1,660)$(1,413)$(788)$(777)
Settlements 94  — 
Total net benefit (credit) cost$(1,660)$(1,319)$(788)$(777)
The Company did not make any contributions to its domestic defined benefit plan in the second quarter or first six months of 2021 or 2020.
The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in Other non-operating (income) expense.
In May 2019, the Company's Board of Directors approved changes to the U.S. defined benefit pension plan. The Company froze the pay and service amounts used to calculate pension benefits for active participants in the pension plan as of January 1, 2020.
v3.21.2
Accumulated Other Comprehensive Income
6 Months Ended
Jul. 02, 2021
Equity [Abstract]  
Accumulated Other Comprehensive Income Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the second quarter and first six months of 2021 and 2020 are as follows:
Gains and Losses on Cash Flow Hedges
(Thousands)Foreign CurrencyPrecious MetalsCopperTotalPension and Post-Employment BenefitsForeign Currency TranslationTotal
Balance at April 2, 2021$1,462 $320 $280 $2,062 $(43,309)$(4,840)$(46,087)
Other comprehensive income (loss) before reclassifications183 (239)1,145 1,089 — 3,193 4,282 
Amounts reclassified from accumulated other comprehensive income (loss)— 65 (1,507)(1,442)77 — (1,365)
Net current period other comprehensive (loss) income before tax183 (174)(362)(353)77 3,193 2,917 
Deferred taxes42 (40)(82)(80)(6)— (86)
Net current period other comprehensive (loss) income after tax141 (134)(280)(273)83 3,193 3,003 
Balance at July 2, 2021$1,603 $186 $— $1,789 $(43,226)$(1,647)$(43,084)
Balance at March 27, 2020$1,214 $(841)$(330)$43 $(41,330)$(5,886)$(47,173)
Other comprehensive (loss) income before reclassifications(201)(411)426 (186)— 1,166 980 
Amounts reclassified from accumulated other comprehensive income (loss)491 132 631 70 — 701 
Net current period other comprehensive (loss) income before tax(193)80 558 445 70 1,166 1,681 
Deferred taxes(44)18 124 98 (19)— 79 
Net current period other comprehensive (loss) income after tax(149)62 434 347 89 1,166 1,602 
Balance at June 26, 2020$1,065 $(779)$104 $390 $(41,241)$(4,720)$(45,571)
Gains and Losses on Cash Flow Hedges
(Thousands)Foreign CurrencyPrecious MetalsCopperTotalPension and Post-Employment BenefitsForeign Currency TranslationTotal
Balance at December 31, 2020$519 $(170)$468 $817 $(43,473)$4,017 $(38,639)
Other comprehensive income (loss) before reclassifications1,268 502 2,436 4,206 — (5,664)(1,458)
Amounts reclassified from accumulated other comprehensive income (loss)140 (39)(3,041)(2,940)234 — (2,706)
Net current period other comprehensive (loss) income before tax1,408 463 (605)1,266 234 (5,664)(4,164)
Deferred taxes324 107 (137)294 (13)— 281 
Net current period other comprehensive (loss) income after tax1,084 356 (468)972 247 (5,664)(4,445)
Balance at July 2, 2021$1,603 $186 $— $1,789 $(43,226)$(1,647)$(43,084)
Balance at December 31, 2019$1,324 $(452)$25 $897 $(41,346)$(5,013)$(45,462)
Other comprehensive (loss) income before reclassifications(343)(1,234)(352)(1,929)— 293 (1,636)
Amounts reclassified from accumulated other comprehensive income (loss)809 453 1,269 46 — 1,315 
Net current period other comprehensive (loss) income before tax(336)(425)101 (660)46 293 (321)
Deferred taxes(77)(98)22 (153)(59)— (212)
Net current period other comprehensive (loss) income after tax(259)(327)79 (507)105 293 (109)
Balance at June 26, 2020$1,065 $(779)$104 $390 $(41,241)$(4,720)$(45,571)
Reclassifications from accumulated other comprehensive income (loss) of gains and losses on foreign currency cash flow hedges are recorded in Net sales in the Consolidated Statements of Income (Loss). Reclassifications from accumulated other comprehensive income (loss) of gains and losses on precious metal and copper cash flow hedges are recorded in Cost of sales in the Consolidated Statements of Income. Refer to Note O for additional details on cash flow hedges.
Reclassifications from accumulated other comprehensive income (loss) for pension and post-employment benefits are included in the computation of the net periodic pension and post-employment benefit expense. Refer to Note K for additional details on pension and post-employment expenses.
v3.21.2
Stock-based Compensation Expense
6 Months Ended
Jul. 02, 2021
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation Expense Stock-based Compensation Expense
Stock-based compensation expense, which includes awards settled in shares and in cash, was $2.2 million and $3.8 million in the second quarter and first six months of 2021, respectively, compared to $3.1 million and $4.1 million, respectively, in the same periods of 2020.
The Company granted 52,709 stock appreciation rights (SARs) to certain employees during the first six months of 2021. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the six months ended July 2, 2021 were $68.82 and $20.66, respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model:
Risk-free interest rate0.57 %
Dividend yield0.7 %
Volatility37.6 %
Expected term (in years)4.6
The Company granted 55,064 stock-settled restricted stock units (RSUs) to certain employees and 9,904 to non-employee directors during the first six months of 2021. The Company measures the fair value of stock-settled RSUs based on the closing market price of a share of Materion common stock on the date of the grant. The weighted-average fair value per share was $68.44 and $75.77 for stock-settled RSUs granted to employees and non-employee directors, respectively, during the six months ended July 2, 2021. RSUs are generally expensed over the vesting period of three years for employees and one year for non-employee directors.
The Company granted stock-settled performance-based restricted stock units (PRSUs) to certain employees in the first six months of 2021. The weighted-average fair value of the stock-settled PRSUs was $83.78 per share and will be expensed over the vesting period of three years. The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and its total return to shareholders over the vesting period relative to a peer group’s performance over the same period.
At July 2, 2021, unamortized compensation cost related to the unvested portion of all stock-based awards was approximately $12.7 million, and is expected to be recognized over the remaining vesting period of the respective grants.
v3.21.2
Fair Value of Financial Instruments
6 Months Ended
Jul. 02, 2021
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
The Company measures and records financial instruments at fair value. A hierarchy is used for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 — Quoted market prices in active markets for identical assets and liabilities;
Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 — Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect
those that a market participant would use.
The following table summarizes the financial instruments measured at fair value in the Consolidated Balance Sheets as of July 2, 2021 and December 31, 2020: 
  
(Thousands)Total Carrying Value in the Consolidated Balance SheetsQuoted Prices
in  Active
Markets  for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
20212020202120202021202020212020
Financial Assets
Deferred compensation investments$3,881 $3,802 $3,881 $3,802 $ $— $ $— 
Foreign currency forward contracts477 107  — 477 107  — 
Precious metal swaps258 127  — 258 127  — 
Copper swaps 632  —  632  — 
Total$4,616 $4,668 $3,881 $3,802 $735 $866 $ $— 
Financial Liabilities
Deferred compensation liability$3,881 $3,802 $3,881 $3,802 $ $— $ $— 
Foreign currency forward contracts151 1,203  — 151 1,203  — 
Precious metal swaps17 349  — 17 349  — 
Copper swaps 27  —