MATERION CORP, 10-Q filed on 10/22/2020
Quarterly Report
v3.20.2
Document and Entity Information
 9 Months Ended
Sep. 25, 2020
shares
Document and Entity Information [Abstract]  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Sep. 25, 2020
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 20,327,254
Entity Central Index Key 0001104657
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2020
Document Fiscal Period Focus Q3
Amendment Flag false
v3.20.2
Consolidated Statements of Income - USD ($)
shares in Thousands
 3 Months Ended 9 Months Ended
Sep. 25, 2020
Sep. 27, 2019
Sep. 25, 2020
Sep. 27, 2019
Income Statement [Abstract]        
Net sales $ 287,171,000 $ 305,979,000 $ 836,585,000 $ 905,263,000
Cost of sales 240,531,000 240,748,000 696,280,000 701,126,000
Gross margin 46,640,000 65,231,000 140,305,000 204,137,000
Selling, general, and administrative expense 35,696,000 35,812,000 99,292,000 115,767,000
Research and development expense 5,417,000 5,262,000 14,104,000 13,064,000
Goodwill impairment charges 0 11,560,000 9,053,000 11,560,000
Asset impairment charges 0 2,581,000 1,713,000 2,581,000
Restructuring expense 2,593,000 785,000 7,144,000 785,000
Other - net 2,221,000 2,942,000 4,143,000 9,954,000
Operating profit 713,000 6,289,000 4,856,000 50,426,000
Other non-operating (income) expense - net (1,076,000) 127,000 (2,871,000) 3,484,000
Interest Expense-net 1,334,000 436,000 2,839,000 1,402,000
Income before income taxes 455,000 5,726,000 4,888,000 45,540,000
Income tax (benefit) expense (6,041,000) 2,263,000 (5,183,000) 9,631,000
Net income $ 6,496,000 $ 3,463,000 $ 10,071,000 $ 35,909,000
Basic earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.32 $ 0.17 $ 0.50 $ 1.76
Diluted earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.32 $ 0.17 $ 0.49 $ 1.74
Weighted-average number of shares of common stock outstanding:        
Basic (in shares) 20,325 20,401 20,342 20,351
Diluted (in shares) 20,592 20,677 20,595 20,645
v3.20.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 25, 2020
Sep. 27, 2019
Sep. 25, 2020
Sep. 27, 2019
Statement of Comprehensive Income [Abstract]        
Net income $ 6,496 $ 3,463 $ 10,071 $ 35,909
Other comprehensive income (loss):        
Foreign currency translation adjustment 3,076 (463) 3,369 (627)
Derivative and hedging activity, net of tax (315) 82 (822) 9
Pension and post-employment benefit adjustment, net of tax 29 501 134 14,994
Net current period other comprehensive (loss) income after tax 2,790 120 2,681 14,376
Comprehensive income $ 9,286 $ 3,583 $ 12,752 $ 50,285
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 25, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 117,754 $ 125,007
Accounts receivable, net 150,454 154,751
Inventories, net 211,700 190,390
Prepaid and other current assets 24,515 21,839
Total current assets 504,423 491,987
Deferred income taxes 5,156 1,666
Property, plant, and equipment 987,902 916,965
Less allowances for depreciation, depletion, and amortization (693,223) (684,689)
Property, plant, and equipment, net 294,679 232,276
Operating lease right-of-use assets 62,235 23,413
Intangible assets 54,449 6,380
Other assets 20,754 17,937
Goodwill 143,118 79,011
Total Assets 1,084,814 852,670
Current liabilities    
Short-term Debt 122,216 868
Accounts payable 56,524 43,206
Salaries and wages 24,853 41,167
Other liabilities and accrued items 42,238 32,477
Income taxes 1,435 1,342
Unearned revenue 4,360 3,380
Total current liabilities 251,626 122,440
Other long-term liabilities 10,057 11,560
Operating lease liabilities 56,891 18,091
Finance lease liabilities 20,540 17,424
Retirement and post-employment benefits 40,208 32,466
Unearned income 72,632 32,891
Long-term income taxes 3,365 3,451
Deferred income taxes 11,340 2,410
Long-term debt 6,374 1,260
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 September 25 and December 31) 257,019 249,674
Retained earnings 592,980 589,888
Common stock in treasury (199,185) (186,845)
Accumulated other comprehensive loss (42,781) (45,462)
Other equity 3,748 3,422
Total shareholders' equity 611,781 610,677
Total Liabilities and Shareholders’ Equity $ 1,084,814 $ 852,670
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Thousands, $ / shares in Thousands
Sep. 25, 2020
Dec. 31, 2019
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
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
 9 Months Ended
Sep. 25, 2020
Sep. 27, 2019
Cash flows from operating activities:    
Net income $ 10,071,000 $ 35,909,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation, depletion, and amortization 32,042,000 31,955,000
Amortization of deferred financing costs in interest expense 547,000 720,000
Stock-based compensation expense (non-cash) 3,989,000 5,230,000
Deferred income tax expense (benefit) (5,187,000) 5,725,000
Net pension curtailments and settlements 94,000 3,296,000
Impairment charges 10,766,000 14,141,000
Changes in assets and liabilities, net of acquired assets and liabilities:    
Decrease (increase) in accounts receivable 13,899,000 (36,146,000)
Decrease (increase) in inventory (9,883,000) 22,089,000
Decrease (increase) in prepaid and other current assets (686,000) (416,000)
Increase (decrease) in accounts payable and accrued expenses (9,759,000) (14,114,000)
Increase (decrease) in unearned revenue (298,000) (728,000)
Increase (decrease) in interest and taxes payable 143,000 (1,499,000)
Increase (decrease) in unearned income due to customer prepayments 40,385,000 0
Domestic pension plan contributions 0 (4,500,000)
Other-net (6,679,000) (2,126,000)
Net cash provided by operating activities 79,444,000 59,536,000
Cash flows from investing activities:    
Payments for acquisition, net of cash acquired (130,715,000) 0
Payments for purchase of property, plant, and equipment (46,285,000) (18,193,000)
Payments for mine development 0 1,903,000
Derivative, Cash Received on Hedge (3,249,000) 0
Proceeds from sale of property, plant, and equipment 35,000 17,000
Net cash used in investing activities (173,716,000) (20,079,000)
Cash flows from financing activities:    
Short-term debt under revolving credit agreement, net 120,000,000 0
Repayment of long-term debt (16,357,000) (599,000)
Principal payments under finance lease obligations 1,440,000 894,000
Cash dividends paid (6,920,000) (6,612,000)
Repurchase of common stock (6,766,000) (199,000)
Payments of withholding taxes for stock-based compensation awards (2,212,000) (4,832,000)
Deferred financing costs 0 (2,018,000)
Net cash provided by (used in) financing activities 86,305,000 (15,154,000)
Effects of exchange rate changes 714,000 (422,000)
Net change in cash and cash equivalents (7,253,000) 23,881,000
Cash and cash equivalents at beginning of period 125,007,000 70,645,000
Cash and cash equivalents at end of period $ 117,754,000 $ 94,526,000
v3.20.2
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, 2018   20,242            
Beginning balances (in Treasury shares) at Dec. 31, 2018     (6,906)          
Beginning balances at Dec. 31, 2018 $ 553,906     $ 234,704 $ 548,374 $ (175,426) $ (58,234) $ 4,488
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 35,909     0 35,909 0 0 0
Other comprehensive income (loss) 11,080     0 0 0 11,080 0
Net pension curtailments and settlements 3,296     0 0 0 (3,296) 0
Cumulative Effect of Accounting Change (179)     0 (179) 0 0 0
Cash dividends declared (6,612)     0 (6,612) 0 0 0
Stock-based compensation activity (in shares)   252 252          
Stock-based compensation activity 5,230     12,882 (83) (7,569) 0 0
Payments of withholding taxes for stock-based compensation awards (in shares)   (89) (89)          
Payments of withholding taxes for stock-based compensation awards (4,832)     0 0 (4,832) 0 0
Repurchase of shares (in shares)   (5) (5)          
Repurchase of shares (199)     0 0 (199) 0 0
Directors' deferred compensation 197     65 0 562 0 (430)
Stock Issued During Period Value Directors Deferred Compensation, Shares   3 3          
Ending balance (in shares) at Sep. 27, 2019   20,403            
Ending balances (in Treasury shares) at Sep. 27, 2019     (6,745)          
Ending balances at Sep. 27, 2019 597,796     247,651 577,409 (187,464) (43,858) 4,058
Beginning balance (in shares) at Jun. 28, 2019   20,399            
Beginning balances (in Treasury shares) at Jun. 28, 2019     (6,749)          
Beginning balances at Jun. 28, 2019 594,785     245,785 576,211 (187,224) (43,978) 3,991
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 3,463     0 3,463 0 0 0
Other comprehensive income (loss) 120     0 0 0 120 0
Cash dividends declared (2,244)     0 (2,244) 0 0 0
Stock-based compensation activity (in shares)   5 5          
Stock-based compensation activity 1,689     1,836 (21) (126) 0 0
Payments of withholding taxes for stock-based compensation awards (in shares)   (2) (2)          
Payments of withholding taxes for stock-based compensation awards (69)     0 0 (69) 0 0
Directors' deferred compensation 52     30 0 (45) 0 67
Stock Issued During Period Value Directors Deferred Compensation, Shares   1 1          
Ending balance (in shares) at Sep. 27, 2019   20,403            
Ending balances (in Treasury shares) at Sep. 27, 2019     (6,745)          
Ending balances at Sep. 27, 2019 597,796     247,651 577,409 (187,464) (43,858) 4,058
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 610,677     249,674 589,888 (186,845) (45,462) 3,422
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 10,071     0 10,071 0 0 0
Other comprehensive income (loss) 2,681     0 0 0 2,681 0
Net pension curtailments and settlements 94              
Cash dividends declared (6,920)     0 (6,920) 0 0 0
Stock-based compensation activity (in shares)   117 117          
Stock-based compensation activity 4,080     7,272 (59) (3,133) 0 0
Payments of withholding taxes for stock-based compensation awards (in shares)   (39) (39)          
Payments of withholding taxes for stock-based compensation awards (2,212)     0 0 (2,212) 0 0
Repurchase of shares (in shares)   (158) (158)          
Repurchase of shares (6,766)     0 0 (6,766) 0 0
Directors' deferred compensation 170     73 0 (229) 0 326
Stock Issued During Period Value Directors Deferred Compensation, Shares   3 3          
Ending balance (in shares) at Sep. 25, 2020   20,327            
Ending balances (in Treasury shares) at Sep. 25, 2020     (6,821)          
Ending balances at Sep. 25, 2020 611,781     257,019 592,980 (199,185) (42,781) 3,748
Beginning balance (in shares) at Jun. 26, 2020   20,322            
Beginning balances (in Treasury shares) at Jun. 26, 2020     (6,826)          
Beginning balances at Jun. 26, 2020 604,940     256,756 588,803 (198,726) (45,571) 3,678
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 6,496     0 6,496 0 0 0
Other comprehensive income (loss) 2,790     0 0 0 2,790 0
Cash dividends declared (2,338)     0 (2,338) 0 0 0
Stock-based compensation activity (in shares)   7 7          
Stock-based compensation activity 23     235 19 (231) 0 0
Payments of withholding taxes for stock-based compensation awards (in shares)   (3) (3)          
Payments of withholding taxes for stock-based compensation awards (187)     0 0 (187) 0 0
Directors' deferred compensation 57     28 0 (41) 0 70
Stock Issued During Period Value Directors Deferred Compensation, Shares   1 1          
Ending balance (in shares) at Sep. 25, 2020   20,327            
Ending balances (in Treasury shares) at Sep. 25, 2020     (6,821)          
Ending balances at Sep. 25, 2020 $ 611,781     $ 257,019 $ 592,980 $ (199,185) $ (42,781) $ 3,748
v3.20.2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
 3 Months Ended 9 Months Ended
Sep. 25, 2020
Sep. 27, 2019
Sep. 25, 2020
Sep. 27, 2019
Statement of Stockholders' Equity [Abstract]        
Cash dividends declared (per share) $ 0.115 $ 0.110 $ 0.340 $ 0.325
v3.20.2
Accounting Policies
 9 Months Ended
Sep. 25, 2020
Accounting Policies [Abstract]  
Accounting Policies Accounting Policies
Basis of Presentation: In management’s opinion, 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 2020 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 2019 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 the 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.

New Pronouncements Adopted: In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses. This ASU requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. The Company adopted this guidance as of January 1, 2020, and the adoption did not have a material effect on the Company’s consolidated financial statements. Accounts receivable were net of an allowance for credit losses of $0.7 million and $0.4 million at September 25, 2020 and December 31, 2019, respectively. The change in the allowance for credit losses includes expense and net write-offs, none of which is significant.
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.
v3.20.2
Acquisition
 9 Months Ended
Sep. 25, 2020
Business Combinations [Abstract]  
Business Combination Disclosure AcquisitionOn July 17, 2020, the Company acquired 100% of the capital stock 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 debt. The transaction was funded with cash on hand, including a portion of the $150.0 million borrowed under our revolving credit facility during the first half of 2020. This business will operate within the Precision Coatings segment, and the results of operations are included as of the date of acquisition. The combination of Materion and Optics Balzers creates a premier optical thin film coating solutions provider with a highly complementary geographic, product, and end market portfolio.
The preliminary purchase price allocation for the acquisition is as follows:

(Thousands)July 17, 2020
Assets:
Cash and cash equivalents$5,390 
Accounts receivable8,594 
Inventories10,170 
Prepaid and other current assets937 
Property, plant, and equipment 46,743 
Operating lease, right-of-use assets13,357 
Intangible assets48,600 
Goodwill71,510 
Total assets acquired$205,301 
Liabilities:
Short-term debt$600 
Accounts payable2,851 
Salaries and wages4,392 
Other liabilities and accrued items4,178 
Income taxes61 
Unearned revenue1,259 
Operating lease liabilities12,355 
Finance lease liabilities2,574 
Retirement and post-employment benefits6,586 
Unearned income1,835 
Long-term income taxes181 
Deferred income taxes10,366 
Long-term debt21,958 
Total liabilities assumed$69,196 
Net assets acquired$136,105 

Assets acquired and liabilities assumed are recognized at their respective fair values as of the acquisition date. These preliminary estimates are based on available information and will be revised during the measurement period, not to exceed 12 months, as third-party valuations are finalized, additional information becomes available, and as additional analysis is performed. Such revisions are not expected to have a material impact on the Company's results of operations and financial position.

The Company's consolidated financial statements include the results of operations of Optics Balzers from the acquisition date through September 25, 2020. The amount of Net sales and operating results attributable to the acquisition during this period were not material.

Acquisition-related transaction and integration costs totaled $4.7 million and $6.1 million in the third quarter and first nine months of 2020, respectively. These costs are included in selling, general, and administrative expense in the Consolidated Statements of Income.
As part of the acquisition, the Company recorded approximately $71.5 million of goodwill in its Precision Coatings segment. Goodwill was calculated as the excess of the purchase price over the estimated fair values of the tangible net assets and intangible assets acquired and primarily attributable to the synergies expected to arise after the acquisition dates. The goodwill is not expected to be deductible for U.S. tax purposes.

The following table reports the intangible assets by asset category and accumulated amortization from the closing date through September 25, 2020:
(Thousands)Value at AcquisitionAccumulated AmortizationWeighted Average Life
Customer relationships$39,300 $(420)18 years
Technology4,200 (162)5 years
Licenses and other5,100 (196)5 years
Total$48,600 $(778)
v3.20.2
Segment Reporting
 9 Months Ended
Sep. 25, 2020
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
 
The Company has the following reportable segments: Performance Alloys and Composites, Advanced Materials, Precision Coatings, 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, beryllia ceramics, and bulk metallic glass materials.
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 braze materials, and ultra-fine wire.
Precision Coatings 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 CoatingsOtherTotal
Third Quarter 2020
Net sales$91,203 $165,582 $30,386 $— $287,171 
Intersegment sales
— 6,602 — — 6,602 
Operating profit (loss)721 5,920 1,421 (7,349)713 
Third Quarter 2019
Net sales$130,704 $147,650 $27,625 $— $305,979 
Intersegment sales— 17,161 ——17,161 
Operating profit (loss)18,780 6,202 (11,198)(7,495)6,289 
First Nine Months 2020
Net sales$291,884 $475,855 $68,846 $— $836,585 
Intersegment sales
2 24,790 — — 24,792 
Operating profit (loss)13,756 15,075 (6,080)(17,895)4,856 
First Nine Months 2019
Net sales$393,048 $424,913 $87,302 $— $905,263 
Intersegment sales15 53,634 — — 53,649 
Operating profit (loss)57,066 19,421 (5,184)(20,877)50,426 
The following table disaggregates revenue for each segment by end market for the third quarter and first nine months of 2020 and 2019, respectively:
 (Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision CoatingsOtherTotal
Third Quarter 2020
End Market
Semiconductor$983 $131,380 $1,008 $— $133,371 
Industrial21,630 9,967 4,976 — 36,573 
Aerospace and Defense14,740 1,687 4,867 — 21,294 
Consumer Electronics11,074 78 6,550 — 17,702 
Automotive14,077 1,477 1,059 — 16,613 
Energy5,825 16,693 — — 22,518 
Telecom and Data Center10,452 500 — — 10,952 
Other12,422 3,800 11,926 — 28,148 
Total$91,203 $165,582 $30,386 $— $287,171 
Third Quarter 2019
End Market
Semiconductor$1,220 $107,883 $— $— $109,103 
Industrial28,353 8,302 3,365 — 40,020 
Aerospace and Defense27,653 1,779 5,303 — 34,735 
Consumer Electronics18,399 395 5,613 — 24,407 
Automotive16,071 3,012 296 — 19,379 
Energy10,629 20,911 — — 31,540 
Telecom and Data Center14,964 835 — — 15,799 
Other13,415 4,533 13,048 — 30,996 
Total$130,704 $147,650 $27,625 $— $305,979 
(Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision CoatingsOtherTotal
First Nine Months 2020
End Market
Semiconductor$3,426 $376,107 $1,251 $— $380,784 
Industrial68,801 26,748 10,647 — 106,196 
Aerospace and Defense46,898 4,764 14,095 — 65,757 
Consumer Electronics35,725 216 13,496 — 49,437 
Automotive48,656 4,743 1,083 — 54,482 
Energy16,844 49,488 — — 66,332 
Telecom and Data Center33,027 2,158 — — 35,185 
Other38,507 11,631 28,274 — 78,412 
Total$291,884 $475,855 $68,846 $— $836,585 
First Nine Months 2019
End Market
Semiconductor$4,489 $314,607 $205 $— $319,301 
Industrial83,368 23,934 11,358 — 118,660 
Aerospace and Defense80,774 4,397 14,924 — 100,095 
Consumer Electronics54,617 1,100 13,530 — 69,247 
Automotive53,348 6,035 882 — 60,265 
Energy33,026 59,136 — — 92,162 
Telecom and Data Center50,800 1,749 — — 52,549 
Other32,626 13,955 46,403 — 92,984 
Total$393,048 $424,913 $87,302 $— $905,263 

Intersegment sales are eliminated in consolidation.
v3.20.2
Revenue Recognition
 9 Months Ended
Sep. 25, 2020
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 September 25, 2020. 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 September 25, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $27.6 million.
Contract Balances: The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities:
(Thousands)September 25, 2020December 31, 2019$ change% change
Accounts receivable, trade
$142,363 $141,168 $1,195 1 %
Unbilled receivables
8,364 13,583 (5,219)(38)%
Unearned revenue
4,360 3,380 980 29 %
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 third quarter and first nine months of 2020.

Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are normally 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 unearned amounts as revenue during the first nine months of 2020.

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.
v3.20.2
Other-net
 9 Months Ended
Sep. 25, 2020
Other Income and Expenses [Abstract]  
Other-net Other-net
Other-net for the third quarter and first nine months of 2020 and 2019 is summarized as follows: 
 Third Quarter EndedNine Months Ended
 September 25,September 27,September 25September 27,
(Thousands)2020201920202019
Metal consignment fees$2,317 $1,936 $6,583 $7,252 
Amortization of intangible assets907 375 1,201 1,133 
Foreign currency (gain) loss(1,029)469 (3,577)853 
Net loss on disposal of fixed assets19 1 74 143 
Other items7 161 (138)573 
Total$2,221 $2,942 $4,143 $9,954 
v3.20.2
Restructuring
 9 Months Ended
Sep. 25, 2020
Restructuring and Related Activities [Abstract]  
Restructuring and Related Activities Disclosure [Text Block] Restructuring
During the third quarter of 2020, the Company concluded that it intends to close the Large Area Coatings (LAC) business (a reporting unit in the Precision Coatings segment) and as a result only the fixed assets of the LAC business are classified as held for sale. Any closure costs are expected to be immaterial. At September 25, 2020, fixed assets totaling $0.8 million were classified as held for sale and reflected within Prepaid and other current assets in the Consolidated Balance Sheet. No additional impairment charges were recorded during the third quarter of 2020.
In addition, in the third quarter of 2020, the Company completed cost reduction actions in order to align costs with commensurate business levels in its Precision Coatings segment. These actions were accomplished through elimination of vacant positions, consolidation of roles, and staff reductions. Costs associated with these actions totaled $0.4 million and included severance associated with approximately 28 employees and other related costs, all of which was paid during the third quarter of 2020.
During 2020, the Company initiated a restructuring plan in its Performance Alloys and Composites (PAC) segment to close its Warren, Michigan and Fremont, California locations. Costs associated with the plan totaled $2.2 million and $6.8 million in the third quarter and first nine months of 2020, respectively. In the third quarter of 2020, these costs included $0.4 million of severance and $1.6 million of facility and other related costs. Included in restructuring charges for the first nine months of 2020 was $1.8 million of severance associated with approximately 60 employees and $4.4 million of facility and other related costs.
Remaining severance payments of $1.1 million and facility costs of $0.4 million related to these initiatives are reflected within Salaries and wages and Other liabilities and accrued items, respectively, in the Consolidated Balance Sheets. The Company expects to incur additional costs related to these initiatives of approximately $2.5 million in the remainder of 2020.
In the third quarter of 2019, the Company initiated a restructuring plan in its LAC business to reduce headcount, idle certain machinery and equipment, and exit a facility in Windsor, Connecticut. Costs associated with this plan totaled $0.3 million and included severance and related costs for approximately 19 employees.
In addition, in the third quarter of 2019, the Company completed other cost reduction actions in order to align costs with commensurate business levels. These actions were accomplished through elimination of vacant positions, consolidation of roles, and staff reductions. Costs associated with these actions totaled $0.5 million within the Other segment and included severance associated with approximately seven employees and other related costs.
v3.20.2
Income Taxes
 9 Months Ended
Sep. 25, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's effective tax rate for the third quarter of 2020 and 2019 was (1,327.7)% and 39.5%, respectively, and (106.0)% and 21.1% for the first nine months of 2020 and 2019, respectively.
The effective tax rate for the third quarter and first nine months of 2020 differed from the statutory tax rate primarily due to the impact of percentage depletion and the research and development credit, and the recognition of discrete tax benefits. The effective tax rate for the first nine months of 2020 included a net discrete income tax benefit of $3.8 million, primarily related to the release of a valuation allowance. The effective tax rate for the first nine months of 2019 included a net discrete income tax expense of $1.3 million, primarily related to an impairment of goodwill and return to provision tax expense adjustments.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations.  While the Company continues to examine the impacts the CARES Act may have on its business, it does not expect it will have a material impact to its consolidated financial statements.
On July 9, 2020, the U.S. Treasury Department issued final tax regulations related to the foreign-derived intangible income and global intangible low-taxed income (GILTI) provisions. Also, on July 20, 2020, the U.S. Treasury Department released final tax regulations permitting a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign tax. The Company has determined the new legislation does not have a material impact to its consolidated financial statements.
v3.20.2
Earnings Per Share
 9 Months Ended
Sep. 25, 2020
Earnings Per Share [Abstract]  
Earnings Per Share Earnings Per Share (EPS)
The following table sets forth the computation of basic and diluted EPS:
Third Quarter EndedNine Months Ended
September 25,September 27,September 25,September 27,
(Thousands, except per share amounts)2020201920202019
Numerator for basic and diluted EPS:
Net income$6,496 $3,463 $10,071 $35,909 
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding20,325 20,401 20,342 20,351 
Effect of dilutive securities:
Stock appreciation rights46 59 39 80 
Restricted stock units77 75 90 73 
Performance-based restricted stock units144 142 124 141 
Diluted potential common shares267 276 253 294 
Denominator for diluted EPS:
Adjusted weighted-average shares outstanding20,592 20,677 20,595 20,645 
Basic EPS$0.32 $0.17 $0.50 $1.76 
Diluted EPS$0.32 $0.17 $0.49 $1.74 
Adjusted weighted-average shares outstanding-diluted excludes securities totaling 114,335 and 70,562 for the quarters ended September 25, 2020 and September 27, 2019, respectively, and 164,447 and 127,759 for the nine months ended September 25, 2020 and September 27, 2019, respectively. These securities 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.
v3.20.2
Inventories
 9 Months Ended
Sep. 25, 2020
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories on the Consolidated Balance Sheets are summarized as follows:
September 25,December 31,
(Thousands)20202019
Raw materials and supplies$46,776 $35,612 
Work in process184,348 177,780 
Finished goods27,839 25,506 
Subtotal$258,963 $238,898 
Less: LIFO reserve balance47,263 48,508 
Inventories$211,700 $190,390 
The liquidation of last in, first out (LIFO) inventory layers did not impact cost of sales in the third quarter of 2020 and increased cost of sales by $0.1 million in the first nine months of 2020. LIFO liquidation decreased cost of sales by $0.5 million and $0.4 million in the third quarter and first nine months of 2019, respectively.
The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce our exposure to metal price movements and to reduce our working capital investment. The notional value of off-balance sheet precious metals and copper was $382.8 million and $309.3 million as of September 25, 2020 and December 31, 2019, respectively.
v3.20.2
Mine Development
 9 Months Ended
Sep. 25, 2020
Extractive Industries [Abstract]  
Mine Development Mine DevelopmentMine development costs at the Company's open pit surface mine include drilling, infrastructure, and other related costs to delineate an ore body, and the removal of overburden to initially expose an ore body. Historically, the Company’s mine development costs involved the development of a new source of ore, and, as such, mine development costs incurred were capitalized during the pre-production phase of a mine and amortized into inventory as the ore was extracted. In the third quarter of 2020, the Company expanded a mine to further develop an ore body. Since the pre-production phase ended when ore was first extracted from this mine, the Company recognized approximately $7.3 million of mine development costs in the third quarter of 2020 as a component of cost of sales. The Company expects to incur additional period costs as a component of cost of sales related to mine development of approximately $6.0 million in the fourth quarter of 2020 related to the same mine.
v3.20.2
Goodwill
 9 Months Ended
Sep. 25, 2020
Goodwill Disclosure [Abstract]  
Goodwill Goodwill
A summary of changes in goodwill by reportable segment is as follows:
(Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision CoatingsTotal
Balance at December 31, 2019$1,899 $50,190 $26,922 $79,011 
Acquisition— — 71,510 71,510 
Impairment charge— — (9,053)(9,053)
Other— 173 1,477 1,650 
Balance at September 25, 2020$1,899 $50,363 $90,856 $143,118 
Goodwill is reviewed annually for impairment or more frequently if impairment indicators arise. The Company conducts its annual goodwill impairment assessment as of the first day of the fourth quarter, or more frequently under certain circumstances. Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the operating segment.
v3.20.2
Customer Prepayments
 9 Months Ended
Sep. 25, 2020
Customer Prepayments [Abstract]  
Customer Prepayments Investment Agreement [Text Block] Customer PrepaymentsThe Company entered into an investment agreement with a customer to procure equipment to manufacture product for the customer. The customer will make 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 September 25, 2020, $45.1 million of prepayments are classified as Unearned Income in the Consolidated Balance Sheet, of which $13.7 million were received during the third quarter of 2020, and the liability is expected to be settled as commercial shipments are made.
v3.20.2
Leases
 9 Months Ended
Sep. 25, 2020
Leases [Abstract]  
Leases of Lessee Disclosure LeasesThe Company leases warehouse and manufacturing real estate, and manufacturing and computer equipment under operating leases with lease terms ranging up to 25 years. Several operating lease agreements contain options to extend the lease term and/or options for early termination. The lease term consists of the non-cancelable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option. The weighted average remaining lease term for the Company's operating and finance leases as of September 25, 2020 was 12.98 years and 16.29 years, respectively.
The discount rate implicit within the leases is generally not determinable, and, therefore, the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for leases is determined based on the lease term in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rate used to measure the Company's operating and finance lease liabilities as of September 25, 2020 was 6.52% and 4.86%, respectively.

The components of operating and finance lease cost for the third quarter and first nine months of 2020 and 2019 were as follows:
Third Quarter EndedNine Months Ended
(Thousands)September 25, 2020September 27, 2019September 25, 2020September 27, 2019
Components of lease expense
Operating lease cost$3,008 $2,449 $7,540 $7,452 
Finance lease cost
Amortization of right-of-use assets601 353 1,302 1,063 
Interest on lease liabilities266 256 748 778 
Total lease cost$3,875 $3,058 $9,590 $9,293 

Operating lease expense amounted to $3.0 million and $7.5 million during the third quarter and first nine months of 2020, respectively, compared to $2.4 million and $7.5 million, respectively, during the same periods of 2019. The Company straight-lines its expense of fixed payments for operating leases over the lease term and expenses the variable lease payments in the period incurred. These variable lease payments are not included in the calculation of right-of-use assets or lease liabilities.
Supplemental balance sheet information related to the Company's operating and finance leases as of September 25, 2020 and December 31, 2019 was as follows:
September 25,December 31,
(Thousands)20202019
Supplemental balance sheet information
Operating Leases
Operating lease right-of-use assets
$62,235 $23,413 
Other liabilities and accrued items6,781 6,542 
Operating lease liabilities56,891 18,091 
Finance Leases
Property, plant, and equipment
$34,500 $26,069 
Allowances for depreciation, depletion, and amortization
(7,045)(3,570)
Finance lease assets, net$27,455 $22,499 
Other liabilities and accrued items$2,700 $1,265 
Finance lease liabilities20,540 17,424 
Total principal payable on finance leases$23,240 $18,689 

Future maturities of the Company's lease liabilities as of September 25, 2020 are as follows:
FinanceOperating
(Thousands)LeasesLeases
2020$935 $2,728 
20213,735 10,275 
20223,723 8,813 
20232,455 8,371 
20241,530 6,494 
2025 and thereafter 22,372 58,992 
Total lease payments34,750 95,673 
Less amount of lease payment representing interest11,510 32,001 
Total present value of lease payments
$23,240 $63,672 

Supplemental cash flow information related to leases for the first nine months of 2020 and 2019 were as follows:
Nine Months Ended
(Thousands)September 25, 2020September 27, 2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$11,406 $11,763 
Operating cash flows from finance leases748 778 
Financing cash flows from finance leases1,440 894 
v3.20.2
Pensions and Other Post-employment Benefits
 9 Months Ended
Sep. 25, 2020
Retirement Benefits [Abstract]  
Pensions and Other Post-employment Benefits Pensions and Other Post-employment Benefits
The following is a summary of the net periodic benefit cost for the third quarter and first nine months of 2020 and 2019 for the domestic pension plans (which include the defined benefit pension plan and the supplemental retirement plans) and the domestic retiree medical plan.
 Pension BenefitsOther Benefits
 Third Quarter EndedThird Quarter Ended
September 25,September 27,September 25,September 27,
(Thousands)2020201920202019
Components of net periodic benefit (income) cost
Service cost$— $1,359 $14 $18 
Interest cost1,215 1,500 53 100 
Expected return on plan assets(2,206)(2,134)— — 
Amortization of prior service cost (benefit)— 120 (374)(374)
Amortization of net loss (gain)284 762 (83)(24)
Total net benefit (income) cost$(707)$1,607 $(390)$(280)

Pension BenefitsOther Benefits
Nine Months EndedNine Months Ended
September 25,September 27,September 25,September 27,
(Thousands)202020192020