MATERION CORP, 10-Q filed on 11/2/2021
Quarterly Report
v3.21.2
Cover
9 Months Ended
Oct. 01, 2021
shares
Cover [Abstract]  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Oct. 01, 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 20,439,191
Entity Central Index Key 0001104657
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2021
Document Fiscal Period Focus Q3
Amendment Flag false
v3.21.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Oct. 01, 2021
Sep. 25, 2020
Oct. 01, 2021
Sep. 25, 2020
Income Statement [Abstract]        
Net sales $ 388,028 $ 287,171 [1] $ 1,113,413 $ 836,585 [1]
Cost of sales 313,715 241,860 [1] 902,723 699,749 [1]
Gross margin 74,313 45,311 [1] 210,690 136,836 [1]
Selling, general, and administrative expense 43,195 35,696 [1] 118,031 99,292 [1]
Research and development expense 6,354 5,417 [1] 19,164 14,104 [1]
Goodwill impairment charges 0 0 [1] 0 9,053 [1]
Asset impairment charges 0 0 [1] 0 1,713 [1]
Restructuring (income) expense 0 2,593 [1] (378) 7,144 [1]
Other—net 3,604 2,221 [1] 12,272 4,143 [1]
Operating profit (loss) 21,160 (616) [1] 61,601 1,387 [1]
Other non-operating income—net (1,279) (1,076) [1] (3,832) (2,871) [1]
Interest expense—net 861 1,334 [1] 2,480 2,839 [1]
Income (Loss) before income taxes 21,578 (874) [1] 62,953 1,419 [1]
Income tax expense (benefit) 3,422 (6,345) [1] 10,162 (5,977) [1]
Net income $ 18,156 [1] $ 5,471 [2] $ 52,791 [1] $ 7,396 [2],[3]
Basic earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.89 $ 0.27 [1] $ 2.59 $ 0.36 [1]
Diluted earnings per share:        
Net income per share of common stock (in dollars per share) $ 0.88 $ 0.27 [1] $ 2.56 $ 0.36 [1]
Weighted-average number of shares of common stock outstanding:        
Basic (in shares) 20,439 20,325 [1] 20,414 20,342 [1]
Diluted (in shares) 20,657 20,592 [1] 20,659 20,595 [1]
[1] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[2] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[3] Amounts for the period ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
v3.21.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Oct. 01, 2021
Sep. 25, 2020
[2]
Oct. 01, 2021
Sep. 25, 2020
[2]
Statement of Comprehensive Income [Abstract]        
Net income $ 18,156 [1] $ 5,471 $ 52,791 [1] $ 7,396 [3]
Other comprehensive (loss) income:        
Foreign currency translation adjustment (2,029) 3,076 (7,693) 3,369
Derivative and hedging activity, net of tax 439 (315) 1,411 (822)
Pension and post-employment benefit adjustment, net of tax 121 29 368 134
Other comprehensive (loss) income (1,469) 2,790 (5,914) 2,681
Comprehensive income $ 16,687 $ 8,261 $ 46,877 $ 10,077
[1] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[2] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[3] Amounts for the period ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
v3.21.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Oct. 01, 2021
Dec. 31, 2020
Current assets    
Cash and cash equivalents $ 18,009 $ 25,878
Accounts receivable, net 190,601 166,447
Inventories, net 311,745 250,778
Prepaid and other current assets 36,138 20,896
Total current assets 556,493 463,999
Deferred income taxes 1,908 3,134
Property, plant, and equipment 1,069,592 998,312
Less allowances for depreciation, depletion, and amortization (715,158) (688,626)
Property, plant, and equipment, net 354,434 309,686
Operating lease, right-of-use assets 56,556 62,089
Intangible assets, net 49,012 54,672
Other assets 23,269 19,364
Goodwill 140,990 144,916
Total Assets 1,182,662 1,057,860
Current liabilities    
Short-term debt 529 1,937
Accounts payable 71,576 55,640
Salaries and wages 37,168 18,809
Other liabilities and accrued items 54,749 40,887
Income taxes 439 1,898
Unearned revenue 8,308 7,713
Total current liabilities 172,769 126,884
Other long-term liabilities 17,572 17,002
Operating lease liabilities 52,177 56,761
Finance lease liabilities 17,285 20,539
Retirement and post-employment benefits 39,216 41,877
Unearned income 93,061 86,761
Deferred income taxes 14,118 15,864
Long-term debt 79,036 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 October 1st and December 31st) 269,716 258,642
Retained earnings 676,527 631,058
Common stock in treasury (208,952) (199,187)
Accumulated other comprehensive loss (44,553) (38,639)
Other equity 4,690 3,756
Total shareholders' equity [1] 697,428 655,630
Total Liabilities and Shareholders’ Equity $ 1,182,662 $ 1,057,860
Serial preferred stock, shares authorized (in shares) 5,000,000 5,000,000
Serial preferred stock, par value (in dollars per share) $ 0 $ 0
Serial preferred stock, shares issued (in shares) 0 0
Common stock, shares authorized (in shares) 60,000,000 60,000,000
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares, issued (in shares) 27,148,000 27,148,000
[1] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
v3.21.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Oct. 01, 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 (in shares) 5,000,000 5,000,000
Serial preferred stock, shares issued (in shares) 0 0
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized (in shares) 60,000,000 60,000,000
Common stock, shares, issued (in shares) 27,148,000 27,148,000
v3.21.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Oct. 01, 2021
Sep. 25, 2020
[2]
Cash flows from operating activities:    
Net income $ 52,791 [1] $ 7,396 [3]
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation, depletion, and amortization 32,478 32,042
Amortization of deferred financing costs in interest expense 546 547
Stock-based compensation expense (non-cash) 4,924 3,989
Deferred income tax benefit (263) (5,981)
Impairment charges 0 10,766
Changes in assets and liabilities, net of acquired assets and liabilities:    
Accounts receivable (26,041) 13,899
Inventory (62,353) (6,414)
Prepaid and other current assets (7,020) (686)
Accounts payable 14,863 6,281
Accrued expenses 20,451 (16,040)
Unearned revenue 650 (298)
Interest and taxes payable (1,504) 143
Unearned income due to customer prepayments 9,022 40,385
Other-net 1,974 (6,585)
Net cash provided by operating activities 40,518 79,444
Cash flows from investing activities:    
Payments for acquisition, net of cash acquired 0 (130,715)
Payments for purchase of property, plant, and equipment (77,640) (46,285)
Proceeds from settlement of currency exchange contract 0 3,249
Proceeds from sale of property, plant, and equipment 686 35
Net cash used in investing activities (76,954) (173,716)
Cash flows from financing activities:    
Proceeds from borrowings under revolving credit agreement, net 43,010 120,000
Repayment of long-term debt (1,803) (16,357)
Principal payments under finance lease obligations (2,152) (1,440)
Cash dividends paid (7,243) (6,920)
Repurchase of common stock 0 (6,766)
Payments of withholding taxes for stock-based compensation awards (3,033) (2,212)
Net cash provided by financing activities 28,779 86,305
Effects of exchange rate changes (212) 714
Net change in cash and cash equivalents (7,869) (7,253)
Cash and cash equivalents at beginning of period 25,878 125,007
Cash and cash equivalents at end of period $ 18,009 $ 117,754
[1] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[2] Amounts for the period ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[3] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
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 Loss
Other Equity
Beginning balance (in shares) at Dec. 31, 2019   20,404            
Beginning balances (in shares) at Dec. 31, 2019     (6,744)          
Beginning balances at Dec. 31, 2019 $ 645,743 [1]     $ 249,674 $ 624,954 [2] $ (186,845) $ (45,462) $ 3,422
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 7,396 [3],[4]       7,396 [2]      
Other comprehensive income (loss) 2,681 [1]           2,681  
Cash dividends declared (6,920) [1]       (6,920) [2]      
Stock-based compensation activity (in shares)   117 117          
Stock-based compensation activity 4,080 [1]     7,272   (3,133)    
Stock-based compensation activity [2]         (59)      
Payments of withholding taxes for stock-based compensation awards (in shares)   (39)            
Payments of withholding taxes for stock-based compensation awards (2,212) [1]   $ (39)     (2,212)    
Repurchase of shares (in shares)   (158) (158)          
Repurchase of shares (6,766) [1]         (6,766)    
Directors' deferred compensation (in shares)   3 3          
Directors' deferred compensation 170 [1]     73   (229)   326
Ending balance (in shares) at Sep. 25, 2020   20,327            
Ending balances (in shares) at Sep. 25, 2020     (6,821)          
Ending balances at Sep. 25, 2020 644,172 [1]     257,019 625,371 [2] (199,185) (42,781) 3,748
Beginning balance (in shares) at Jun. 26, 2020   20,322            
Beginning balances (in shares) at Jun. 26, 2020     (6,826)          
Beginning balances at Jun. 26, 2020 638,356 [1]     256,756 622,219 [2] (198,726) (45,571) 3,678
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 5,471 [4]       5,471 [2]      
Other comprehensive income (loss) 2,790 [1]           2,790  
Cash dividends declared (2,338) [1]       (2,338) [2]      
Stock-based compensation activity (in shares)   7 7          
Stock-based compensation activity 23 [1]     235   (231)    
Stock-based compensation activity [2]         19      
Payments of withholding taxes for stock-based compensation awards (in shares)   (3)            
Payments of withholding taxes for stock-based compensation awards (187) [1]   $ (3)     (187)    
Directors' deferred compensation (in shares)   1 1          
Directors' deferred compensation 57 [1]     28   (41)   70
Ending balance (in shares) at Sep. 25, 2020   20,327            
Ending balances (in shares) at Sep. 25, 2020     (6,821)          
Ending balances at Sep. 25, 2020 644,172 [1]     257,019 625,371 [2] (199,185) (42,781) 3,748
Beginning balance (in shares) at Dec. 31, 2020   20,328            
Beginning balances (in shares) at Dec. 31, 2020     (6,820)          
Beginning balances at Dec. 31, 2020 655,630 [1]     258,642 631,058 [2] (199,187) (38,639) 3,756
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 52,791 [1]       52,791 [2]      
Other comprehensive income (loss) (5,914) [1]           (5,914)  
Cash dividends declared (7,243) [1]       (7,243) [2]      
Stock-based compensation activity (in shares)   152 152          
Stock-based compensation activity 4,924 [1]     10,932   (5,929)    
Stock-based compensation activity [2]         (79)      
Payments of withholding taxes for stock-based compensation awards (in shares)   (45)            
Payments of withholding taxes for stock-based compensation awards (3,033) [1]   $ (45)     (3,033)    
Directors' deferred compensation (in shares)   4 4          
Directors' deferred compensation 273 [1]     142   (803)   934
Ending balance (in shares) at Oct. 01, 2021   20,439            
Ending balances (in shares) at Oct. 01, 2021     (6,709)          
Ending balances at Oct. 01, 2021 697,428 [1]     269,716 676,527 [2] (208,952) (44,553) 4,690
Beginning balance (in shares) at Jul. 02, 2021   20,438            
Beginning balances (in shares) at Jul. 02, 2021     (6,710)          
Beginning balances at Jul. 02, 2021 681,701 [1]     268,205 660,851 [2] (208,854) (43,084) 4,583
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 18,156 [1]       18,156 [2]      
Other comprehensive income (loss) (1,469) [1]           (1,469)  
Cash dividends declared (2,452) [1]       (2,452) [2]      
Stock-based compensation activity 1,412 [1]     1,458   (18)    
Stock-based compensation activity [2]         (28)      
Payments of withholding taxes for stock-based compensation awards (12) [1]         (12)    
Directors' deferred compensation (in shares)   1 1          
Directors' deferred compensation 92 [1]     53   (68)   107
Ending balance (in shares) at Oct. 01, 2021   20,439            
Ending balances (in shares) at Oct. 01, 2021     (6,709)          
Ending balances at Oct. 01, 2021 $ 697,428 [1]     $ 269,716 $ 676,527 [2] $ (208,952) $ (44,553) $ 4,690
[1] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[2] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[3] Amounts for the period ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
[4] Amounts for the periods ended September 25, 2020 have been adjusted to reflect the change in inventory accounting method, as described in Note A to the Consolidated Financial Statements in the Company's 2020 Annual Report on Form 10-K.
v3.21.2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Oct. 01, 2021
Sep. 25, 2020
Oct. 01, 2021
Sep. 25, 2020
Statement of Stockholders' Equity [Abstract]        
Cash dividends declared (in dollars per share) $ 0.12 $ 0.115 $ 0.355 $ 0.34
v3.21.2
Accounting Policies
9 Months Ended
Oct. 01, 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.

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 September 25, 2020 and the consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the three and nine months ended September 25, 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)
Third Quarter EndedNine Months Ended
September 25, 2020September 25, 2020
Selected ItemsAs ReportedAs AdjustedAdjustmentAs ReportedAs AdjustedAdjustment
Cost of sales$240,531 $241,860 $1,329 $696,280 $699,749 $3,469 
Gross margin46,640 45,311 (1,329)140,305 136,836 (3,469)
Operating profit (loss)713 (616)(1,329)4,856 1,387 (3,469)
Income (Loss) before income taxes455 (874)(1,329)4,888 1,419 (3,469)
Income tax benefit(6,041)(6,345)(304)(5,183)(5,977)(794)
Net income6,496 5,471 (1,025)10,071 7,396 (2,675)
Basic earnings per share:
Net income per share of common stock$0.32 $0.27 $(0.05)$0.50 $0.36 $(0.14)
Diluted earnings per share:
Net income per share of common stock$0.32 $0.27 $(0.05)$0.49 $0.36 $(0.13)

Consolidated Statement of Comprehensive Income
(Thousands)
Third Quarter EndedNine Months Ended
September 25, 2020September 25, 2020
Selected ItemsAs ReportedAs AdjustedAdjustmentAs ReportedAs AdjustedAdjustment
Net income$6,496 $5,471 $(1,025)$10,071 $7,396 $(2,675)
Comprehensive income9,286 8,261 (1,025)12,752 10,077 (2,675)

Consolidated Statement of Cash Flows
(Thousands)
Nine Months Ended
September 25, 2020
Selected ItemsAs ReportedAs AdjustedAdjustment
Net income$10,071 $7,396 $(2,675)
Deferred income tax benefit(5,187)(5,981)(794)
Increase in inventory(9,883)(6,414)3,469 

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
9 Months Ended
Oct. 01, 2021
Business Combinations [Abstract]  
Acquisition 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 the Company's Precision Optics segment and the results of Optics Balzers are not material to the Company's Consolidated Financial Statements. No material measurement period adjustments have been recorded during the third quarter or first nine months of 2021, and as of October 1, 2021, the purchase price allocation is complete.
v3.21.2
Segment Reporting
9 Months Ended
Oct. 01, 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
Third Quarter 2021
Net sales$136,096 $220,723 $31,209 $ $388,028 
Intersegment sales
32 3,036   3,068 
Operating profit (loss)20,928 9,281 3,329 (12,378)21,160 
Third Quarter 2020
Net sales$91,203 $165,582 $30,386 $ $287,171 
Intersegment sales— 6,602 6,602 
Operating (loss) profit(437)5,749 1,421 (7,349)(616)
First Nine Months 2021
Net sales$375,533 $638,481 $99,399 $ $1,113,413 
Intersegment sales
47 8,908   8,955 
Operating profit (loss)51,733 26,547 10,513 (27,192)61,601 
First Nine Months 2020
Net sales$291,884 $475,855 $68,846 $ $836,585 
Intersegment sales24,790 24,792 
Operating profit (loss)9,910 15,452 (6,080)(17,895)1,387 
The following table disaggregates revenue for each segment by end market for the third quarter and first nine months of 2021 and 2020:
 (Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision OpticsOtherTotal
Third Quarter 2021
End Market
Semiconductor$3,163 $173,689 $630 $— $177,482 
Industrial31,521 10,479 8,296 — 50,296 
Aerospace and defense19,129 1,622 5,652 — 26,403 
Consumer electronics9,717 530 7,788 — 18,035 
Automotive28,922 1,719 2,571 — 33,212 
Energy7,524 27,081 — — 34,605 
Telecom and data center14,980 31 — — 15,011 
Other21,140 5,572 6,272 — 32,984 
Total$136,096 $220,723 $31,209 $— $388,028 
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 
 (Thousands)Performance Alloys and CompositesAdvanced MaterialsPrecision OpticsOtherTotal
First Nine Months 2021
End Market
Semiconductor$5,966 $495,718 $1,664 $— $503,348 
Industrial85,815 33,756 23,305 — 142,876 
Aerospace and defense60,221 4,680 17,825 — 82,726 
Consumer electronics30,483 961 24,212 — 55,656 
Automotive78,195 5,145 6,871 — 90,211 
Energy16,541 78,487 — — 95,028 
Telecom and data center39,348 140 — — 39,488 
Other58,964 19,594 25,522 — 104,080 
Total$375,533 $638,481 $99,399 $— $1,113,413 
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 
Intersegment sales are eliminated in consolidation.
v3.21.2
Revenue Recognition
9 Months Ended
Oct. 01, 2021
Revenue from Contract with Customer [Abstract]  
Revenue Recognition 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 October 1, 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 October 1, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $81.0 million.
Contract Balances: The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities:
(Thousands)October 1, 2021December 31, 2020$ change% change
Accounts receivable, trade
$176,766 $156,821 $19,945 13 %
Unbilled receivables
12,450 8,832 3,618 41 %
Unearned revenue
8,308 7,713 595 %

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 nine 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 $5.6 million of the December 31, 2020 unearned amounts as revenue during the first nine 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
9 Months Ended
Oct. 01, 2021
Other Income and Expenses [Abstract]  
Other-net Other-net
Other-net for the third quarter and first nine months of 2021 and 2020 is summarized as follows: 
 Third Quarter EndedNine Months Ended
 October 1,September 25,October 1,September 25,
(Thousands)2021202020212020
Metal consignment fees$2,243 $2,317 $6,857 $6,583 
Amortization of intangible assets1,283 907 3,461 1,201 
Foreign currency loss (gain)380 (1,029)1,596 (3,577)
Net loss (gain) on disposal of fixed assets81 19 (283)74 
Other items(383)641 (138)
Total$3,604 $2,221 $12,272 $4,143 
v3.21.2
Restructuring
9 Months Ended
Oct. 01, 2021
Restructuring and Related Activities [Abstract]  
Restructuring 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 October 1, 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 $2.2 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.
v3.21.2
Income Taxes
9 Months Ended
Oct. 01, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's effective tax rate for the third quarter of 2021 and 2020 was 15.9% and 726.0%, respectively, and 16.1% and (421.2)% in the first nine 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 the third quarter of 2020 was higher than the statutory tax rate primarily due to the release of a significant valuation allowance, which generated a tax benefit on a loss for the period. The effective tax rate for the first nine months of 2020 was lower than the statutory tax rate primarily due to the release of a significant valuation allowance, which generated a tax benefit on income for the period. The effective tax rate for the first nine months of 2021 included a net discrete income tax benefit of $0.9 million, primarily related to excess tax benefits from stock-based compensation awards and return to provision adjustments recorded. 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.

Given the Company’s recent history of foreign earnings, management believes that there is a reasonable possibility that, within the next twelve months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance recorded against the deferred tax assets held by its German subsidiaries will be reversed. The reversal would result in an income tax benefit for the quarterly and annual period in which the Company releases the valuation allowance. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company actually achieves.

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 (EPS)
9 Months Ended
Oct. 01, 2021
Earnings Per Share [Abstract]  
Earnings Per Share (EPS) Earnings Per Share (EPS)
The following table sets forth the computation of basic and diluted EPS:
Third Quarter EndedNine Months Ended
October 1,September 25,October 1,September 25,
(Thousands, except per share amounts)2021202020212020
Numerator for basic and diluted EPS:
Net income$18,156 $5,471 $52,791 $7,396 
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding20,439 20,325 20,414 20,342 
Effect of dilutive securities:
Stock appreciation rights72 46 73 39 
Restricted stock units94 77 113 90 
Performance-based restricted stock units52 144 59 124 
Diluted potential common shares218 267 245 253 
Denominator for diluted EPS:
Adjusted weighted-average shares outstanding20,657 20,592 20,659 20,595 
Basic EPS$0.89 $0.27 $2.59 $0.36 
Diluted EPS$0.88 $0.27 $2.56 $0.36 
Adjusted weighted-average shares outstanding - diluted exclude securities totaling 55,598 and 114,335 for the quarters ended October 1, 2021 and September 25, 2020, respectively and 56,319 and 164,447 for the nine months ended October 1, 2021 and September 25, 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
9 Months Ended
Oct. 01, 2021
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories on the Consolidated Balance Sheets are summarized as follows:
October 1,December 31,
(Thousands)20212020
Raw materials and supplies$79,937 $42,905 
Work in process179,616 156,093 
Finished goods52,192 51,780 
Inventories, net$311,745 $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 $452.9 million and $400.0 million as of October 1, 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
9 Months Ended
Oct. 01, 2021
Customer Prepayments [Abstract]  
Customer Prepayments 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 October 1, 2021 and December 31, 2020, $67.9 million and $58.8 million, respectively, of prepayments were classified as Unearned income in the Consolidated Balance Sheet, of which $1.0 million and $9.0 million, respectively, was received during the third quarter and first nine months of 2021.
v3.21.2
Pensions and Other Post-employment Benefits
9 Months Ended
Oct. 01, 2021
Retirement Benefits [Abstract]  
Pensions and Other Post-employment Benefits Pensions and Other Post-employment Benefits
The following is a summary of the net periodic benefit credit for the third quarter and first nine months of 2021 and 2020 for the domestic pension plans (which include the defined benefit pension plan and the supplemental retirement plans) and the domestic retiree medical plan.
 Pension BenefitsOther Benefits
 Third Quarter EndedThird Quarter Ended
October 1,September 25,October 1,September 25,
(Thousands)2021202020212020
Components of net periodic benefit (credit) cost
Service cost$ $— $20 $14 
Interest cost986 1,215 29 53 
Expected return on plan assets(2,234)(2,206) — 
Amortization of prior service cost (benefit) — (374)(374)
Amortization of net loss (gain)418 284 (69)(83)
Total net benefit (credit) cost$(830)$(707)$(394)$(390)
 Pension BenefitsOther Benefits
 Nine Months EndedNine Months Ended
October 1,September 25,October 1,September 25,
(Thousands)2021202020212020
Components of net periodic benefit (credit) cost
Service cost$ $— $60 $45 
Interest cost2,959 3,644 87 160 
Expected return on plan assets(6,702)(6,616) — 
Amortization of prior service cost (benefit) — (1,123)(1,123)
Amortization of net loss (gain)1,253 852 (206)(249)
Net periodic benefit (credit) cost$(2,490)$(2,120)$(1,182)$(1,167)
Settlements 94  — 
Total net benefit (credit) cost$(2,490)$(2,026)$(1,182)$(1,167)
The Company did not make any contributions to its domestic defined benefit plan in the third quarter or first nine months of 2021 or 2020.
The Company reports the service cost component of net periodic benefit credit in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit credit 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 (Loss)
9 Months Ended
Oct. 01, 2021
Equity [Abstract]  
Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the third quarter and first nine 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 July 2, 2021$1,603 $186 $— $1,789 $(43,226)$(1,647)$(43,084)
Other comprehensive income (loss) before reclassifications625 30 663 — (2,029)(1,366)
Amounts reclassified from accumulated other comprehensive income (loss)(2)(83)(8)(93)114 — 21 
Net current period other comprehensive (loss) income before tax623 (53)— 570 114 (2,029)(1,345)
Deferred taxes143 (12)— 131 (7)— 124 
Net current period other comprehensive (loss) income after tax480 (41)— 439 121 (2,029)(1,469)
Balance at October 1, 2021$2,083 $145 $— $2,228 $(43,105)$(3,676)$(44,553)
Balance at June 26, 2020$1,065 $(779)$104 $390 $(41,241)$(4,720)$(45,571)
Other comprehensive (loss) income before reclassifications(520)(617)182 (955)— 3,076 2,121 
Amounts reclassified from accumulated other comprehensive income (loss)191 710 (353)548 (11)— 537 
Net current period other comprehensive (loss) income before tax(329)93 (171)(407)(11)3,076 2,658 
Deferred taxes(76)22 (38)(92)(40)— (132)
Net current period other comprehensive (loss) income after tax(253)71 (133)(315)29 3,076 2,790 
Balance at September 25, 2020$812 $(708)$(29)$75 $(41,212)$(1,644)$(42,781)
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 reclassifications1,893 532 2,444 4,869 — (7,693)(2,824)
Amounts reclassified from accumulated other comprehensive income (loss)138 (122)(3,049)(3,033)348 — (2,685)
Net current period other comprehensive (loss) income before tax2,031 410 (605)1,836 348 (7,693)(5,509)
Deferred taxes467 95 (137)425 (20)— 405 
Net current period other comprehensive (loss) income after tax1,564 315 (468)1,411 368 (7,693)(5,914)
Balance at October 1, 2021$2,083 $145 $— $2,228 $(43,105)$(3,676)$(44,553)
Balance at December 31, 2019$1,324 $(452)$25 $897 $(41,346)$(5,013)$(45,462)
Other comprehensive (loss) income before reclassifications(863)(1,851)(170)(2,884)— 3,369 485 
Amounts reclassified from accumulated other comprehensive income (loss)198 1,519 100 1,817 34 — 1,851 
Net current period other comprehensive (loss) income before tax(665)(332)