PART I1 - FINANCIAL INFORMATION

~~MATERION CORPORATION AND SUBSIDIARIES~~



~~Item 1.~~	Item 1. Financial Statements

~~The consolidated financial statements of Materion Corporation and its subsidiaries for the third quarter and nine months ended September 29, 2017 are as follows:~~



	~~Consolidated Statements of Income -~~	2
	~~Third quarter and nine months ended September 29, 2017 and September 30, 2016~~

	~~Consolidated Statements of Comprehensive Income -~~	3
	~~Third quarter and nine months ended September 29, 2017 and September 30, 2016~~

	~~Consolidated Balance Sheets -~~	4
	~~September 29, 2017 and December 31, 2016~~

	~~Consolidated Statements of Cash Flows -~~	5
	~~Nine months ended September 29, 2017 and September 30, 2016~~

Materion Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	First Quarter Ended
(Thousands, except per share amounts)	March 31, 2023		April 1, 2022
Net sales	$	442,526	$	449,045
Cost of sales	351,190		373,754
Gross margin	91,336		75,291
Selling, general, and administrative expense	40,336		41,662
Research and development expense	7,621		7,074


Restructuring expense (income)	664		1,076
Other—net	5,775		5,873
Operating profit	36,940		19,606
Other non-operating income—net	(730)		(1,169)
Interest expense—net	7,502		3,735
Income before income taxes	30,168		17,040
Income tax expense	4,580		3,021
Net income	$	25,588	$	14,019
Basic earnings per share:
Net income per share of common stock	$	1.24	$	0.69
Diluted earnings per share:
Net income per share of common stock	$	1.23	$	0.68
Weighted-average number of shares of common stock outstanding:
Basic	20,566		20,464
Diluted	20,887		20,724

Third Quarter Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(Thousands, except per share amounts) 2017 2016 2017 2016
Net sales $ 294,268
$ 249,619
$ 830,779
$ 734,906
Cost of sales 239,065
198,864
678,023
595,488
Gross margin 55,203
50,755
152,756
139,418
Selling, general, and administrative expense 36,415
34,177
108,118
97,101
Research and development expense 3,429
3,237
10,103
9,860
Other—net 3,801
3,190
9,823
8,997
Operating profit 11,558
10,151
24,712
23,460
Interest expense—net 533
490
1,721
1,417
Income before income taxes 11,025
9,661
22,991
22,043
Income tax expense 1,705
1,616
3,308
3,081
Net income $ 9,320
$ 8,045
$ 19,683
$ 18,962
Basic earnings per share:
Net income per share of common stock $ 0.47
$ 0.40
$ 0.98
$ 0.95
Diluted earnings per share:
Net income per share of common stock $ 0.46
$ 0.40
$ 0.97
$ 0.94
Cash dividends per share $ 0.100
$ 0.095
$ 0.295
$ 0.280
Weighted-average number of shares of common stock outstanding:
Basic 20,040
19,957
20,007
19,996
Diluted 20,411
20,192
20,361
20,209

~~The accompanying~~See notes ~~are an integral part of the~~to these consolidated financial statements.

Materion Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	First Quarter Ended
	March 31,		April 1,
(Thousands)	2023		2022
Net income	$	25,588	$	14,019
Other comprehensive (loss) income:
Foreign currency translation adjustment	2,689		(2,047)
Derivative and hedging activity, net of tax	(2,339)		2,270
Pension and post-employment benefit adjustment, net of tax	(67)		(240)
Other comprehensive loss	283		(17)
Comprehensive income	$	25,871	$	14,002

Third Quarter Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(Thousands) 2017 2016 2017 2016
Net income $ 9,320
$ 8,045
$ 19,683
$ 18,962
Other comprehensive income (loss):
Foreign currency translation adjustment 271
467
1,649
2,918
Derivative and hedging activity, net of tax (120 ) 132
(755 ) (489 )
Pension and post-employment benefit adjustment, net of tax 881
673
2,397
2,923
Other comprehensive income 1,032
1,272
3,291
5,352
Comprehensive income $ 10,352
$ 9,317
$ 22,974
$ 24,314

~~The accompanying~~See notes ~~are an integral part of the~~to these consolidated financial statements.

Materion Corporation and Subsidiaries

Consolidated Balance Sheets


	(Unaudited)
	March 31,		Dec. 31,
(Thousands)	2023		2022
Assets
Current assets
Cash and cash equivalents	$	15,243	$	13,101
Accounts receivable, net	207,998		215,211
Inventories, net	434,485		423,080
Prepaid and other current assets	42,128		39,056
Total current assets	699,854		690,448
Deferred income taxes	3,335		3,265
Property, plant, and equipment	1,198,350		1,209,205
Less allowances for depreciation, depletion, and amortization	(728,788)		(760,440)
Property, plant, and equipment, net	469,562		448,765
Operating lease, right-of-use assets	62,352		64,249
Intangible assets, net	140,430		143,219
Other assets	22,183		22,535
Goodwill	320,268		319,498
Total Assets	$	1,717,984	$	1,691,979
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt	$	27,727	$	21,105
Accounts payable	126,866		107,899
Salaries and wages	22,077		35,543
Other liabilities and accrued items	44,186		54,993
Income taxes	4,669		3,928
Unearned revenue	20,292		15,496
Total current liabilities	245,817		238,964
Other long-term liabilities	14,255		12,181
Operating lease liabilities	57,424		59,055
Finance lease liabilities	14,068		13,876
Retirement and post-employment benefits	20,738		20,422
Unearned income	109,883		107,736
Long-term income taxes	812		665
Deferred income taxes	27,511		28,214
Long-term debt	405,482		410,876
Shareholders’ equity
Serial preferred stock (no par value; 5,000 authorized shares, none issued)	—		—
Common stock (no par value; 60,000 authorized shares, issued shares of 27,148 at March 31 and December 31)	297,802		288,100
Retained earnings	792,421		769,418
Common stock in treasury	(231,906)		(220,864)
Accumulated other comprehensive loss	(41,626)		(41,909)
Other equity	5,303		5,245
Total shareholders' equity	821,994		799,990
Total Liabilities and Shareholders’ Equity	$	1,717,984	$	1,691,979

(Unaudited)
Sept. 29, Dec. 31,
(Thousands) 2017 2016
Assets
Current assets
Cash and cash equivalents $ 22,486
$ 31,464
Accounts receivable 125,417
100,817
Inventories 220,223
200,865
Prepaid and other current assets 19,115
12,138
Total current assets 387,241
345,284
Long-term deferred income taxes 40,332
39,409
Property, plant, and equipment 877,002
861,267
Less allowances for depreciation, depletion, and amortization (632,435 ) (608,636 )
Property, plant, and equipment—net 244,567
252,631
Intangible assets 10,771
11,074
Other assets 6,312
5,950
Goodwill 89,720
86,950
Total Assets $ 778,943
$ 741,298
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt $ 767
$ 733
Accounts payable 44,678
32,533
Salaries and wages 30,889
29,885
Other liabilities and accrued items 27,950
21,340
Income taxes 2,953
4,781
Unearned revenue 5,859
1,105
Total current liabilities 113,096
90,377
Other long-term liabilities 18,968
17,979
Retirement and post-employment benefits 92,014
91,505
Unearned income 37,991
41,369
Long-term income taxes 1,593
2,100
Deferred income taxes 279
274
Long-term debt 3,010
3,605
Shareholders’ equity
Serial preferred stock —
—
Common stock 219,817
212,702
Retained earnings 531,683
517,903
Common stock in treasury (161,030 ) (154,399 )
Accumulated other comprehensive loss (82,890 ) (86,181 )
Other equity transactions 4,412
4,064
Total shareholders' equity 511,992
494,089
Total Liabilities and Shareholders’ Equity $ 778,943
$ 741,298

~~The accompanying~~

See the notes ~~are an integral part of the~~to these consolidated financial statements.

Materion Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended
Sept. 29, Sept. 30,
(Thousands) 2017 2016
Cash flows from operating activities:
Net income $ 19,683
$ 18,962
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation, depletion, and amortization 33,444
34,379
Amortization of deferred financing costs in interest expense 670
417
Stock-based compensation expense (non-cash) 4,303
2,880
(Gain) loss on sale of property, plant, and equipment 207
(601 )
Deferred income tax expense (benefit) 1,073
(676 )
Changes in assets and liabilities net of acquired assets and liabilities:
Decrease (increase) in accounts receivable (21,572 ) (19,781 )
Decrease (increase) in inventory (9,953 ) 3,294
Decrease (increase) in prepaid and other current assets (6,077 ) (956 )
Increase (decrease) in accounts payable and accrued expenses 17,991
(2,207 )
Increase (decrease) in unearned revenue 4,746
(2,546 )
Increase (decrease) in interest and taxes payable (2,083 ) 898
Increase (decrease) in long-term liabilities (5,611 ) (9,320 )
Other-net (1,324 ) 2,479
Net cash provided by operating activities 35,497
27,222
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment (17,759 ) (20,052 )
Payments for mine development (620 ) (8,934 )
Payments for acquisition (16,504 ) —
Proceeds from sale of property, plant, and equipment 53
1,366
Net cash used in investing activities (34,830 ) (27,620 )
Cash flows from financing activities:
Proceeds from issuance of short-term debt, net —
3,777
Proceeds from issuance of long-term debt 55,000
10,000
Repayment of long-term debt (55,608 ) (10,517 )
Principal payments under capital lease obligations (644 ) (549 )
Cash dividends paid (5,903 ) (5,601 )
Deferred financing costs (300 ) (1,000 )
Common shares withheld for taxes (2,397 ) (868 )
Repurchase of common stock (1,086 ) (3,798 )
Net cash used in financing activities (10,938 ) (8,556 )
Effects of exchange rate changes 1,293
524
Net change in cash and cash equivalents (8,978 ) (8,430 )
Cash and cash equivalents at beginning of period 31,464
24,236
Cash and cash equivalents at end of period $ 22,486
$ 15,806


	Three Months Ended
	March 31,		April 1,
(Thousands)	2023		2022
Cash flows from operating activities:
Net income	$	25,588	$	14,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	15,092		13,179
Amortization of deferred financing costs in interest expense	424		511
Stock-based compensation expense (non-cash)	2,250		1,699

Deferred income tax (benefit) expense	(52)		401

Changes in assets and liabilities:
Accounts receivable	7,538		(15,045)
Inventory	(12,081)		(28,129)
Prepaid and other current assets	(2,865)		(5)
Accounts payable and accrued expenses	(1,904)		(4,177)
Unearned revenue	254		(343)
Interest and taxes payable	657		1,874
Unearned income due to customer prepayments	7,724		—
Other-net	(4,520)		1,712
Net cash (used in) provided by operating activities	38,105		(14,304)
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment	(30,014)		(18,977)
Proceeds from sale of property, plant, and equipment	212		11

Net cash used in investing activities	(29,802)		(18,966)
Cash flows from financing activities:

Proceeds from borrowings under revolving credit agreement, net	4,600		49,067

Repayment of debt	(3,907)		(3,839)

Principal payments under finance lease obligations	(799)		(686)
Cash dividends paid	(2,571)		(2,520)

Payments of withholding taxes for stock-based compensation awards	(3,614)		(2,717)
Net cash provided by financing activities	(6,291)		39,305
Effects of exchange rate changes	130		(260)
Net change in cash and cash equivalents	2,142		5,775
Cash and cash equivalents at beginning of period	13,101		14,462
Cash and cash equivalents at end of period	$	15,243	$	20,237

~~The accompanying~~

See notes ~~are an integral part of the~~to these consolidated financial statements.

Materion Corporation and Subsidiaries

Consolidated Statements of Shareholders' Equity

(Unaudited)


	Common Shares		Shareholders' Equity
(Thousands, except per share amounts)	Common Shares	Common Shares Held in Treasury	Common Stock		Retained Earnings		Common Stock in Treasury		Accumulated Other Comprehensive Loss		Other Equity		Total
Balance at December 31, 2022	20,543	(6,605)	$	288,100	$	769,418	$	(220,864)	$	(41,909)	$	5,245	$	799,990
Net income	—	—	—		25,588		—		—		—		25,588
Other comprehensive loss	—	—	—		—		—		283		—		283
Cash dividends declared ($0.125 per share)	—	—	—		(2,571)		—		—		—		(2,571)
Stock-based compensation activity	98	98	9,675		(14)		(7,411)		—		—		2,250
Payments of withholding taxes for stock-based compensation awards	(33)	(33)	—		—		(3,614)		—		—		(3,614)
Directors’ deferred compensation	1	1	27		—		(17)		—		58		68
Balance at March 31, 2023	20,609	(6,539)	$	297,802	$	792,421	$	(231,906)	$	(41,626)	$	5,303	$	821,994

Balance at December 31, 2021	20,448	(6,700)	$	271,978	$	693,756	$	(209,920)	$	(40,169)	$	4,795	$	720,440
Net income	—	—	—		14,019		—		—		—		14,019
Other comprehensive loss	—	—	—		—		—		(17)		—		(17)
Cash dividends declared ($0.12 per share)	—	—	—		(2,520)		—		—		—		(2,520)
Stock-based compensation activity	95	95	6,572		—		(4,873)		—		—		1,699
Payments of withholding taxes for stock-based compensation awards	(33)	(33)	—		—		(2,717)		—		—		(2,717)
Directors’ deferred compensation	1	1	39		—		(39)		—		60		60
Balance at April 1, 2022	20,511	(6,637)	$	278,589	$	705,255	$	(217,549)	$	(40,186)	$	4,855	$	730,964

See notes to these consolidated financial statements.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note A — Accounting Policies

~~(Dollars in thousands)~~

Basis of Presentation:~~In management’s opinion, the~~

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 years have been reclassified to conform to the 2017 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 ~~2016~~2022 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 March ~~2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~, which impacts several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement, and the tax effects of exercised or vested awards will be treated as discrete items in the reporting period in which they occur. An entity will also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the reporting period. Excess tax benefits will be classified, along with other income tax cash flows, as an operating activity. In regard to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The ASU, which is required to be applied on a modified retrospective basis, will be effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2016. The Company adopted the new guidance during the first quarter of 2017. An impact of adoption was the recognition of excess tax benefits in Income tax expense rather than Shareholders' equity in 2017. As a result, the Company recognized discrete tax benefits of $129 and $503 in Income tax expense during the third quarter and first nine months of 2017, respectively. The cash flow classification requirements of ASU 2016-09 were applied retrospectively. As a result, for the nine months ended September 30, 2016, cash flows from operating activities increased by $868 with a corresponding decrease to cash flows from financing activities. None of the other provisions in this ASU had a material effect on the Company's consolidated financial statements.

~~New Pronouncements Issued:~~ ~~In August 2017,~~2020, the FASB issued ASU ~~2017-12,~~ ~~Derivatives~~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 ~~Hedging (Topic 815): Targeted Improvements~~exceptions to ~~Accounting for Hedging Activities, which amends~~the U.S. GAAP guidance on contract modifications and ~~simplifies existing guidance~~hedge accounting to ~~allow companies to more accurately present the economic effects of risk management activities in~~ease the financial ~~statements.~~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 ~~ASU~~guidance is ~~effective for fiscal years beginning after~~available immediately and may be implemented in any period prior to the guidance expiration on December ~~15, 2018, including interim periods within those periods, with early adoption permitted.~~31, 2024. The Company ~~is currently evaluating the impact of adopting~~has applied this ~~new~~ guidance ~~on its consolidated financial statements.~~

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,~~ ~~which requires an employer to report the service cost component of net benefit cost~~ in the same line item as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The amendments also allow only the service cost component to be eligible for capitalization. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

~~those periods, with early adoption permitted. The amendments should be applied retrospectively~~accounting for the ~~presentation of service cost and other components of net benefit cost on the income statement and prospectively for the capitalization of service cost and net periodic postretirement benefits~~interest rate swaps discussed in ~~assets. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which eliminates the off-balance-sheet accounting for leases. The new guidance will require lessees to report their operating leases as both an asset and liability on the balance sheet and disclose key information about leasing arrangements. The ASU, which is required to be applied on a modified retrospective basis,Note M. Any additional reference rate reform impacts will be ~~effective~~accounted for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.

~~In May 2014, the FASB issued~~in accordance with ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~, which supersedes previous revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Companies will need to use more judgment2020-04 and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount, and timing of revenue and cash flows arising from contracts. This ASU is effective beginning in fiscal year 2018 and can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. To evaluate the impact of adopting this new guidance on the consolidated financial statements, the Company established a cross-functional implementation team to assess its revenue streams against the requirements of this ASU. In addition, the Company is in the process of identifying and implementing changes to its processes and controls to meet the standard's updated reporting and disclosure requirements. The Company plans to adopt the standard as of the first quarter of 2018 using the modified retrospective approach and will record a cumulative-effect adjustment to equity for open contracts as of January 1, 2018. The Company continues to update its assessment of the impact of the standard and related updates to its consolidated financial statements, and will disclose material impacts, if any.2022-06.

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.

Note B — ~~Acquisitions~~

On February 28, 2017, the Company acquired the target materials business of the Heraeus Group (HTB), of Hanau, Germany, for $16.5 million. This business manufactures precious and non-precious metal target materials for the architectural and automotive glass, electronic display, photovoltaic, and semiconductor markets at facilities in Germany, Taiwan, and the United States. This business operates within the Advanced Materials segment, and the results of operations are included as of the date of acquisition.

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

The Company will make adjustments to the purchase price allocation prior to completion of the measurement period, as necessary. Only items identified as of the acquisition date will be considered for subsequent adjustment. The purchase price allocation for the acquisition is as follows:

(Thousands) Amount
Assets:
Inventories $ 7,221
Prepaid and other current assets 1,107
Long-term deferred income taxes 1,450
Property, plant, and equipment 7,637
Intangible assets 3,236
Goodwill 2,605
Total assets acquired $ 23,256

Liabilities:
Other liabilities and accrued items $ 1,030
Other long-term liabilities 430
Retirement and post-employment benefits 5,292
Total liabilities assumed $ 6,752

Total purchase price $ 16,504

As part of the acquisition, the Company recorded approximately $2.6 million of goodwill. Goodwill was calculated as the excess of the purchase price over the estimated fair values of the tangible net assets and intangible assets acquired. Also, the Company acquired approximately $3.2 million of other intangible assets, which will be amortized using the straight-line method over an average life of about ten years. The following table reports the intangible assets by asset category and useful life:

(Thousands) Value at Acquisition Useful Life
Customer relationships $ 1,861
15 years
Technology 1,375
3 years
Total $ 3,236

~~Note C —~~ Segment Reporting

The Company has the following ~~operating~~reportable segments: Performance ~~Alloys and Composites, Advanced~~Materials, Electronic Materials, Precision ~~Coatings,~~Optics, and Other. The Company’s ~~operating~~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,~~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,~~Materials provides advanced engineered solutions comprised of beryllium and ~~aluminum metal matrix composites,~~non-beryllium containing alloy systems and custom engineered parts in strip, bulk, rod, ~~sheet, foil,~~plate, bar, tube, and ~~a variety of~~other customized ~~forms, beryllia ceramics, and bulk metallic glass materials.~~shapes.

~~Advanced~~

Electronic 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~~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.

The primary measurement used by management to measure the financial performance of each segment is earnings before interest, taxes, depreciation and amortization ("EBITDA"). The below table presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the first quarter of 2023 and 2022:

(Thousands)
Performance
Alloys and
Composites
Advanced Materials Precision Coatings Other Total
Third Quarter 2017
Net sales $ 109,393
$ 157,770
$ 27,105
$ —
$ 294,268
Intersegment sales
54
12,814
—
—
12,868
Value-added sales 90,637
60,391
21,896
(1,542 ) 171,382
Operating profit (loss) 6,786
9,756
1,613
(6,597 ) 11,558
Third Quarter 2016
Net sales $ 103,699
$ 107,250
$ 38,670
$ —
$ 249,619
Intersegment sales 47
21,505
—
—
21,552
Value-added sales 87,247
45,960
25,803
(2,009 ) 157,001
Operating profit (loss) 4,357
8,245
3,432
(5,883 ) 10,151

First Nine Months 2017
Net sales $ 310,487
$ 429,550
$ 90,742
$ —
$ 830,779
Intersegment sales
113
42,508
—
—
42,621
Value-added sales 262,534
169,720
67,810
(3,602 ) 496,462
Operating profit (loss) 12,523
24,873
6,145
(18,829 ) 24,712
First Nine Months 2016
Net sales $ 292,024
$ 328,927
$ 113,955
$ —
$ 734,906
Intersegment sales
226
54,110
—
—
54,336
Value-added sales 248,799
135,019
75,548
(4,573 ) 454,793
Operating profit (loss) 6,103
20,748
9,803
(13,194 ) 23,460


(Thousands)	Three months ended March 31, 2023		Three months ended April 1, 2022
Net sales:
Performance Materials (1)	187,014		149,630
Electronic Materials(1)	228,820		270,836
Precision Optics	26,692		28,579
Other	—		—
Net sales	$	442,526	$	449,045
Segment EBITDA:
Performance Materials	42,770		24,792
Electronic Materials	13,955		12,148
Precision Optics	2,692		2,191
Other	(6,655)		(5,177)
Total Segment EBITDA	$	52,762	$	33,954
Income tax expense	4,580		3,021
Interest expense - net	7,502		3,735
Depreciation, depletion and amortization	15,092		13,179
Net income	$	25,588	$	14,019

~~Intersegment~~(1) Excludes inter-segment sales of $3.1 million for the first quarter of 2023 and $5.5 million for the first quarter of 2022 for Electronic Materials and $0.3 million for the first quarter of 2022 for Performance Materials. Inter-segment sales are eliminated in consolidation.

The following table disaggregates revenue for each segment by end market for the first quarter of 2023 and 2022:


(Thousands)	Performance Materials		Electronic Materials		Precision Optics		Other		Total
First Quarter 2023
End Market
Semiconductor	$	2,590	$	180,616	$	911	$	—	$	184,117
Industrial	38,674		12,969		8,733		—		60,376
Aerospace and defense	30,358		2,077		4,648		—		37,083
Consumer electronics	9,356		187		3,255		—		12,798
Automotive	25,493		1,501		2,608		—		29,602
Energy	13,468		24,951		—		—		38,419
Telecom and data center	16,126		13		—		—		16,139
Other	50,949		6,506		6,537		—		63,992
Total	$	187,014	$	228,820	$	26,692	$	—	$	442,526

First Quarter 2022
End Market
Semiconductor	$	1,800	$	214,922	$	1,327	$	—	$	218,049
Industrial	40,069		15,866		8,434		—		64,369
Aerospace and defense	23,684		2,614		5,145		—		31,443
Consumer electronics	13,002		325		5,312		—		18,639
Automotive	22,235		1,657		2,464		—		26,356
Energy	10,849		29,119		—		—		39,968
Telecom and data center	16,081		45		—		—		16,126
Other	21,910		6,288		5,897		—		34,095
Total	$	149,630	$	270,836	$	28,579	$	—	$	449,045

Note DC — ~~Other-net~~Revenue Recognition

~~Other-net expense~~

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 a 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 March 31, 2023. 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 ~~third quarter and first nine months~~practical expedient at March 31, 2023, the aggregate amount of ~~2017 and 2016 is summarized as follows:~~the transaction price allocated to remaining performance obligations was approximately $70.1 million.

Third Quarter Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(Thousands) 2017 2016 2017 2016
Metal consignment fees $ 2,436
$ 1,665
$ 6,183
$ 4,851
Amortization of intangible assets 1,179
1,148
3,456
3,444
Foreign currency exchange/translation loss (gain) (201 ) 336
(794 ) 977
Fixed asset impairment 114
—
314
—
Cost reduction initiatives 189
—
189
—
Net loss (gain) on disposal of fixed assets 60
94
207
(601 )
Other items 24
(53 ) 268
326
Total $ 3,801
$ 3,190
$ 9,823
$ 8,997

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Contract Balances: The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities:


(Thousands)	March 31, 2023		December 31, 2022		$ change		% change
Accounts receivable, trade	$	208,633	$	215,726	$	(7,093)	(3)	%
Unbilled receivables	13,919		10,765		3,154		29	%
Unearned revenue	20,292		15,496		4,796		31	%

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 related to our receivables were immaterial during the first three months of 2023.

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 $7.5 million of the December 31, 2022 unearned amounts as revenue during the first three months of 2023.

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.

Note D — Other-net

Other-net for the first quarter of 2023 and 2022 is summarized as follows:


	First Quarter Ended
	March 31,		April 1,
(Thousands)	2023		2022
Amortization of intangible assets	$	3,121	$	3,131
Metal consignment fees	2,929		3,011
Foreign currency (gain) loss	(208)		(333)
Net (gain) loss on disposal of fixed assets	5		(11)
Other items	(72)		75
Total	$	5,775	$	5,873

Note E — ~~Restructuring~~

In 2017, the Company completed 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 reduction. Costs associated with these actions within the Other and Precision Coatings segments included severance associated with approximately twenty-three employees and other related costs.

In 2016, the Company initiated a plan to close the Fukuya, Japan service center, which is a part of the Performance Alloys and Composites segment. Costs associated with the plan included severance associated with approximately twelve employees and related facility exit costs.

~~These costs are presented in the Consolidated Statements of Income as follows:~~

Third Quarter Ended Nine Months Ended
(Thousands) Sept. 29, 2017 Sept. 30, 2016 Sept. 29, 2017 Sept. 30, 2016
Cost of sales $ 346
$ —
$ 463
$ —
Selling, general, and administrative (SG&A) expense 127
—
1,259
—
Other-net 189
—
189
—
Total $ 662
$ —
$ 1,911
$ —

Remaining severance payments related to these initiatives of $0.3 million are reflected within Other liabilities and accrued items in the Consolidated Balance Sheets. The Company does not expect to incur additional costs related to these initiatives.

~~Note F —~~ Income Taxes

The ~~Company recorded income tax expense of $1.7 million in the third quarter of 2017, an~~Company's effective tax rate ~~of 15.5% against income before income taxes, and income tax expense of $1.6 million in~~for the ~~third~~first quarter of ~~2016, an~~2023 and 2022 was 15.2% and 17.7%, respectively. The effective tax rate ~~of 16.7% against income before income taxes.~~

Infor the first nine months of 2017, the Company recorded income tax expense of $3.3 million, an effective tax rate of 14.4%, and income tax expense of $3.1 million in the first nine months of 2016, an effective tax rate of 14.0%.

The Company recorded discrete benefits of $0.5 million and $1.3 million, respectively, in the third quarter and first nine months of 2017. Of these amounts, $0.4 million related to the reversal of uncertain tax positions due to a lapse in the statute of limitations in the third quarter of ~~2017. Also, $0.1 million in the third quarter and $0.5 million in the first nine months of 2017 related to the adoption of ASU 2016-09,~~ ~~Improvements to Employee Share-based Payment Accounting.~~

~~The Company recorded discrete items in the first nine months of 2016, resulting in a net tax benefit of~~ ~~$1.0 million, primarily due to international tax planning initiatives.~~

~~Income tax expense in the third quarter and first nine months of both 2017 and 2016~~2023 was lower than the ~~U.S Federal~~ statutory ~~income~~ tax rate ~~of 35%~~ primarily due to the impact of percentage depletion, the foreign ~~rate differential,~~derived intangible income deduction, and research and development ~~credit,~~credits. The effective tax rate for the first quarter of 2023 included a net discrete income tax benefit of $0.5 million, primarily related to excess tax benefits ~~and other items.~~from stock-based compensation awards. The effective tax rate for the first quarter of 2022 included a net discrete income tax benefit of $0.1 million, primarily related to excess tax benefits from stock-based compensation awards.

Government Tax Credits

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law. The IRA, among other provisions, includes a new corporate alternative minimum tax on certain large corporations and new or enhanced federal energy and manufacturing tax credits effective for tax years beginning in 2023. The Company is not subject to the minimum tax as our average annual book profits over the prior three-year period were less than $1 billion. The IRA introduced a new advanced manufacturing production credit (“production credit”), which provides an annual cash benefit for a portion of production costs for the sale of certain minerals produced in the U.S. and sold by a taxpayer during the year.

The IRA affords the Company eligibility to a production credit beginning in 2023, for which the Company expects to recognize cash savings of approximately $8 million for the year ending December 31, 2023. The issuance of guidance and interpretation as to the eligibility for, calculation of, and methods for claiming the production credit remain pending. We will continue to monitor developments related to the production credit from the IRS and US Treasury Department and evaluate the potential impact to the Company’s production credit. The Company will finalize the expected annual production credit impact as further guidance is issued.

The production credit is recorded as a reduction in cost of goods sold as the applicable items are produced and sold. U.S. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. Our accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards, under which we recognize the benefit of tax credits accounted for by applying IAS 20 in pretax income on a systematic basis in line with its recognition of the expenses that the grant is intended to compensate.

Note GF — Earnings Per Share (EPS)

The following table sets forth the computation of basic and diluted EPS:


	First Quarter Ended
	March 31,		April 1,
(Thousands, except per share amounts)	2023		2022
Numerator for basic and diluted EPS:
Net income (loss)	$	25,588	$	14,019
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding	20,566		20,464
Effect of dilutive securities:
Stock appreciation rights	103		97
Restricted stock units	105		106
Performance-based restricted stock units	113		57
Diluted potential common shares	321		260
Denominator for diluted EPS:
Adjusted weighted-average shares outstanding	20,887		20,724
Basic EPS	$	1.24	$	0.69
Diluted EPS	$	1.23	$	0.68

Third Quarter Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(Thousands, except per share amounts) 2017 2016 2017 2016
Numerator for basic and diluted EPS:
Net income $ 9,320
$ 8,045
$ 19,683
$ 18,962
Denominator:
Denominator for basic EPS:
Weighted-average shares outstanding 20,040
19,957
20,007
19,996
Effect of dilutive securities:
Stock appreciation rights 149
70
148
66
Restricted stock units 94
82
95
86
Performance-based restricted stock units 128
83
111
61
Diluted potential common shares 371
235
354
213
Denominator for diluted EPS:

Adjusted weighted-average shares outstanding 20,411
20,192
20,361
20,209
Basic EPS $ 0.47
$ 0.40
$ 0.98
$ 0.95
Diluted EPS $ 0.46
$ 0.40
$ 0.97
$ 0.94

~~Stock appreciation rights (SARs)~~Adjusted weighted-average shares outstanding - diluted exclude securities totaling ~~219,292~~17,902 and ~~982,588~~117,390 for the quarters ended ~~September 29, 2017~~March 31, 2023 and ~~September 30, 2016, respectively,~~April 1, 2022, respectively. These securities are primarily related to restricted stock units (RSUs) and ~~370,917~~stock appreciation rights (SARs) with fair market values and ~~993,418 for~~exercise prices greater than the ~~nine months ended September 29, 2017~~average market price of the Company's common shares and ~~September 30, 2016, respectively,~~ were excluded from the dilution calculation as ~~their~~the effect would have been anti-dilutive.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note HG — Inventories

Inventories on the Consolidated Balance Sheets are summarized as follows:


	March 31,		December 31,
(Thousands)	2023		2022
Raw materials and supplies	$	116,404	$	113,694
Work in process	250,920		249,105
Finished goods	67,161		60,281
Inventories, net	$	434,485	$	423,080

Sept. 29, Dec. 31,
(Thousands) 2017 2016
Raw materials and supplies $ 44,924
$ 36,233
Work in process 181,553
169,327
Finished goods 37,671
38,147
Subtotal $ 264,148
$ 243,707
Less: LIFO reserve balance 43,925
42,842
Inventories $ 220,223
$ 200,865

The ~~liquidation~~Company maintains the majority of ~~last~~the precious metals and copper used in ~~first out (LIFO) inventory layers did not impact cost~~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 ~~sales in~~off-balance sheet precious metals and copper was $367.5 million and $373.1 million as of March 31, 2023 and December 31, 2022, respectively.

Note H — Customer Prepayments

In 2020, the ~~third~~Company entered into an investment agreement and a master supply agreement with a customer to procure equipment to manufacture product for the customer. The customer provided prepayments to the Company to fund the necessary infrastructure improvements and procure the equipment necessary to supply the customer with the desired product. The Company owns, operates and maintains the equipment that is being used to manufacture product for the customer.

Revenue will be recognized as the Company fulfills purchase orders and ships the commercial product to the customer, as product delivery is considered the satisfaction of the performance obligation.

Additionally, during the second quarter of ~~2017 or 2016. In~~2022, the Company entered into an amendment to the investment agreement with the same customer to procure additional equipment to manufacture product for the customer. As of March 31, 2023, the Company has received approximately $29.7 million in prepayments under the terms of this amended agreement, of which $7.7 million was received during the first ~~nine months~~quarter of ~~2017, cost~~2023.

As of ~~sales were increased by $0.2 million. In~~March 31, 2023 and December 31, 2022, $89.0 million and $85.9 million, respectively, of prepayments are classified as Unearned income on the ~~first nine months~~Consolidated Balance Sheets. The prepayments will remain in Unearned income until commercial purchase orders are received for product serviced out of ~~2016, cost~~the equipment, at which time a portion of ~~sales were reduced by $3.2 million.~~the purchase order value related to prepayments will be reclassified to Unearned revenue. As of March 31, 2023 $5.1 million of the prepayments are classified as Unearned revenue.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note I — Pensions and Other Post-employment Benefits

The following is a summary of the net periodic benefit cost for the ~~third~~first quarter of 2023 and ~~first nine months of 2017 and 2016~~2022 for the ~~domestic~~ pension plans ~~(which include the~~as shown below. The Pension Benefits columns aggregate defined benefit pension ~~plan~~plans in the U.S., Germany, Liechtenstein, England, and the U.S. supplemental retirement ~~plans) and~~plans. The Other Benefits columns include the domestic retiree medical and life insurance plan.


	Pension Benefits				Other Benefits
	First Quarter Ended				First Quarter Ended
	March 31,		April 1,		March 31,		April 1,
(Thousands)	2023		2022		2023		2022
Components of net periodic benefit (income) cost
Service cost	$	222	$	318	$	13	$	22
Interest cost	1,973		1,223		68		39
Expected return on plan assets	(2,439)		(2,400)		—		—
Amortization of prior service cost (benefit)	(23)		(20)		(139)		(374)
Amortization of net loss (gain)	(81)		430		(95)		(68)
Total net benefit (income) cost	$	(348)	$	(449)	$	(153)	$	(381)

The Company did not make any contributions to its defined benefit plan in the first quarter of 2023 or 2022.

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.

1113

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Pension Benefits
Other Benefits

Third Quarter Ended
Third Quarter Ended

Sept. 29,
Sept. 30,
Sept. 29,
Sept. 30,
(Thousands)
2017
2016
2017
2016
Components of net periodic benefit cost (benefit)

Service cost
$ 2,106

$ 1,946

$ 23

$ 26
Interest cost
2,372

2,595

99

140
Expected return on plan assets
(3,678 )
(3,488 )
—

—
Amortization of prior service benefit
(42 )
(115 )
(374 )
(374 )
Amortization of net loss
1,623

1,431

—

—
Net periodic benefit cost (benefit)
$ 2,381

$ 2,369

$ (252 )
$ (208 )

Pension Benefits Other Benefits
Nine Months Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(Thousands) 2017 2016 2017 2016
Components of net periodic benefit cost (benefit)
Service cost $ 6,188
$ 5,838
$ 69
$ 77
Interest cost 7,098
7,785
297
422
Expected return on plan assets (11,007 ) (10,464 ) —
—
Amortization of prior service benefit (236 ) (345 ) (1,122 ) (1,122 )
Amortization of net loss 4,821
4,292
—
—
Net periodic benefit cost (benefit) $ 6,864
$ 7,106
$ (756 ) $ (623 )

~~The Company made contributions to the domestic defined benefit pension plan of $8.0 million and $12.0 million in the first nine months of 2017 and 2016, respectively.~~

Beginning in 2017, the Company has elected to use a spot-rate approach to estimate the service and interest cost components of net periodic benefit cost for its defined benefit pension plans. The spot-rate approach applies separate discount rates for each projected benefit payment in the calculation. Historically, the Company used a weighted-average approach to determine the service and interest cost components. The change is being accounted for as a change in estimate and, accordingly, is being applied prospectively. The reduction in service and interest costs for 2017 associated with this change approximated $0.3 million and $0.8 million during the third quarter and first nine months of 2017, respectively, and is expected to total approximately $1.0 million.

Note J — Accumulated Other Comprehensive Income (Loss)

Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the ~~third~~first quarter of 2023 and ~~first nine months of 2017 and 2016~~2022 are as follows:


	Gains and Losses on Cash Flow Hedges
(Thousands)	Foreign Currency		Interest Rate		Precious Metals		Total		Pension and Post-Employment Benefits		Foreign Currency Translation		Total
Balance at December 31, 2022	$	1,243	$	6,055	$	(223)	$	7,075	$	(40,228)	$	(8,756)	$	(41,909)
Other comprehensive income (loss) before reclassifications	(67)		(1,703)		(475)		(2,245)		—		2,689		444
Amounts reclassified from accumulated other comprehensive income (loss)	(35)		(782)		25		(792)		(338)		—		(1,130)
Net current period other comprehensive (loss) income before tax	(102)		(2,485)		(450)		(3,037)		(338)		2,689		(686)
Deferred taxes	(24)		(571)		(103)		(698)		(271)		—		(969)
Net current period other comprehensive (loss) income after tax	(78)		(1,914)		(347)		(2,339)		(67)		2,689		283
Balance at March 31, 2023	$	1,165	$	4,141	$	(570)	$	4,736	$	(40,295)	$	(6,067)	$	(41,626)

Balance at December 31, 2021	$	2,348	$	—	$	72	$	2,420	$	(39,702)	$	(2,887)	$	(40,169)
Other comprehensive (loss) income before reclassifications	153		3,112		(520)		2,745		—		(2,047)		698
Amounts reclassified from accumulated other comprehensive income (loss)	(19)		115		107		203		(1,000)		—		(797)
Net current period other comprehensive (loss) income before tax	134		3,227		(413)		2,948		(1,000)		(2,047)		(99)
Deferred taxes	31		742		(95)		678		(760)		—		(82)
Net current period other comprehensive (loss) income after tax	103		2,485		(318)		2,270		(240)		(2,047)		(17)
Balance at April 1, 2022	$	2,451	$	2,485	$	(246)	$	4,690	$	(39,942)	$	(4,934)	$	(40,186)

Gains and Losses on Cash Flow Hedges
(Thousands) Foreign Currency Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total
Balance at June 30, 2017
$ 1,109

$ 93

$ 1,202

$ (80,842 )
$ (4,282 )
$ (83,922 )
Other comprehensive income (loss) before reclassifications
(324 )
(205 )
(529 )
—

271

(258 )
Amounts reclassified from accumulated other comprehensive income
433

(94 )
339

1,345

—

1,684

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Gains and Losses on Cash Flow Hedges
(Thousands) Foreign Currency Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total
Net current period other comprehensive income (loss) before tax
109

(299 )
(190 )
1,345

271

1,426
Deferred taxes on current period activity
41

(111 )
(70 )
464

—

394
Net current period other comprehensive income (loss) after tax
68

(188 )
(120 )
881

271

1,032
Balance at September 29, 2017
$ 1,177

$ (95 )
$ 1,082

$ (79,961 )
$ (4,011 )
$ (82,890 )

Balance at July 1, 2016 $ 958
$ —
$ 958
$ (74,546 ) $ (3,037 ) $ (76,625 )
Other comprehensive income (loss) before reclassifications (126 ) —
(126 ) —
467
341
Amounts reclassified from accumulated other comprehensive income 336
—
336
1,015
—
1,351
Net current period other comprehensive income (loss) before tax 210
—
210
1,015
467
1,692
Deferred taxes on current period activity 78
—
78
342
—
420
Net current period other comprehensive income (loss) after tax 132
—
132
673
467
1,272
Balance at September 30, 2016 $ 1,090
$ —
$ 1,090
$ (73,873 ) $ (2,570 ) $ (75,353 )

Balance at December 31, 2016
$ 1,837

$ —

$ 1,837

$ (82,358 )
$ (5,660 )
$ (86,181 )
Other comprehensive income (loss) before reclassifications
(1,205 )
30

(1,175 )
—

1,649

474
Amounts reclassified from accumulated other comprehensive income
219

(182 )
37

3,655

—

3,692
Net current period other comprehensive income (loss) before tax
(986 )
(152 )
(1,138 )
3,655

1,649

4,166
Deferred taxes on current period activity
(326 )
(57 )
(383 )
1,258

—

875
Net current period other comprehensive income (loss) after tax
(660 )
(95 )
(755 )
2,397

1,649

3,291
Balance at September 29, 2017
$ 1,177

$ (95 )
$ 1,082

$ (79,961 )
$ (4,011 )
$ (82,890 )

Balance at December 31, 2015 $ 1,579
$ —
$ 1,579
$ (76,796 ) $ (5,488 ) $ (80,705 )
Other comprehensive income (loss) before reclassifications (1,571 ) —
(1,571 ) —
2,918
1,347
Amounts reclassified from accumulated other comprehensive income 793
—
793
3,045
—
3,838
Net current period other comprehensive income (loss) before tax (778 ) —
(778 ) 3,045
2,918
5,185
Deferred taxes on current period activity (289 ) —
(289 ) 122
—
(167 )
Net current period other comprehensive income (loss) after tax (489 ) —
(489 ) 2,923
2,918
5,352
Balance at September 30, 2016 $ 1,090
$ —
$ 1,090
$ (73,873 ) $ (2,570 ) $ (75,353 )

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Reclassifications from accumulated other comprehensive income (loss) of gains and losses on foreign currency cash flow hedges are recorded in ~~Other-net~~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. Reclassifications from accumulated other comprehensive income (loss) of gains and losses on ~~precious metal~~the interest rate cash flow ~~hedges are~~hedge is recorded in ~~Cost of sales~~Interest expense in the Consolidated Statements of Income. Refer to Note M 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 I for additional details on pension and post-employment expenses.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note K — Stock-based Compensation Expense

Stock-based compensation expense, which includes awards settled in shares and in cash, was ~~$1.5~~$2.4 million and ~~$6.2~~$1.8 million in the ~~third~~first quarter of 2023 and ~~first nine months of 2017, respectively, compared to $2.1 million and $4.4 million in the same periods of 2016.~~2022, respectively.

The Company granted ~~97,015~~47,084 SARs to certain employees during the first ~~nine months~~quarter of ~~2017.~~2023. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the ~~nine~~three months ended ~~September 29, 2017~~March 31, 2023 were ~~$35.26~~$113.28 and ~~$10.89,~~$42.27, respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model:



Risk-free interest rate	~~1.92~~4.27	%
Dividend yield	~~1.1~~0.44	%
Volatility	~~34.0~~39.0	%
Expected term (in years)	~~5.6~~		4.5

The Company granted ~~62,185~~47,759 stock-settled ~~restricted stock units (RSUs) and 32,466 cash-settled~~ RSUs to certain employees ~~and non-employee directors~~ during the first ~~nine months~~quarter of ~~2017.~~2023. 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 ~~$34.95~~$113.05 for stock-settled RSUs granted to employees during the ~~nine~~three months ended ~~September 29, 2017. Cash-settled~~March 31, 2023. RSUs are ~~accounted for as liability-based compensation awards and adjusted based on the closing price of Materion’s common stock~~generally expensed over the vesting period of three ~~years.~~years for employees.

The Company granted stock-settled ~~and cash-settled~~ performance-based restricted stock units (PRSUs) to certain employees in the first ~~nine months~~quarter of ~~2017.~~2023. The weighted-average fair value of the stock-settled PRSUs was ~~$30.28~~$154.97 per share and will be expensed over the vesting period of three years. ~~The liability for cash-settled PRSUs is re-measured at fair value each reporting period, and the adjustment to income is recorded accordingly.~~ The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and ~~the~~its total return to shareholders over the vesting period relative to a peer group’s performance over the same period.

At ~~September 29, 2017, unearned~~March 31, 2023, unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately ~~$5.3~~$22.2 million, and is expected to be recognized over the remaining vesting period of the respective grants.

Note L — Fair Value of Financial Instruments

The Company measures and records financial instruments at fair value. A ~~fair value~~ 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.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the financial instruments measured at fair value in the Consolidated Balance Sheets as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016:~~2022:



(Thousands)	Total Carrying Value in the Consolidated Balance Sheets				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				(Thousands)	Total Carrying Value in the Consolidated Balance Sheets				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
	2017		2016		2017		2016		2017		2016		2017		2016			2023		2022		2023		2022		2023		2022		2023		2022
Financial Assets																	Financial Assets
Deferred compensation investments	$	2,149	$	1,734	$	2,149	$	1,734	$	—	$	—	$	—	$	—	Deferred compensation investments	$	3,860	$	3,001	$	3,860	$	3,001	$	—	$	—	$	—	$	—
Foreign currency forward contracts	149		691		—		—		149		691		—		—		Foreign currency forward contracts	385		1,291		—		—		385		1,291		—		—
Interest rate swap																	Interest rate swap	7,175		7,863		—		—		7,175		7,863		—		—
Precious metal swaps	45		—		—		—		45		—		—		—		Precious metal swaps	131		118		—		—		131		118		—		—
Total	$	2,343	$	2,425	$	2,149	$	1,734	$	194	$	691	$	—	$	—	Total	$	11,551	$	12,273	$	3,860	$	3,001	$	7,691	$	9,272	$	—	$	—
Financial Liabilities																	Financial Liabilities
Deferred compensation liability	$	2,149	$	1,734	$	2,149	$	1,734	$	—	$	—	$	—	$	—	Deferred compensation liability	$	3,860	$	3,001	$	3,860	$	3,001	$	—	$	—	$	—	$	—
Foreign currency forward contracts	669		1		—		—		669		1		—		—		Foreign currency forward contracts	741		1,757		—		—		741		1,757		—		—
Interest rate swap																	Interest rate swap	1,797		—		—		—		1,797		—				—
Precious metal swaps	197		—		—		—		197		—		—		—		Precious metal swaps	874		411		—		—		874		411		—		—
Total	$	3,015	$	1,735	$	2,149	$	1,734	$	866	$	1	$	—	$	—	Total	$	7,272	$	5,169	$	3,860	$	3,001	$	3,412	$	2,168	$	—	$	—

The Company uses a market approach to value the assets and liabilities for financial instruments in the table above. Outstanding contracts are valued through models that utilize market observable inputs, including both spot and forward prices, for the same underlying currencies, metals, and ~~metals.~~interest rates. The carrying values of the other working capital items and debt in the Consolidated Balance Sheets approximate fair values as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016.~~2022. The Company's deferred compensation investments and liabilities are based on the fair value of the investments corresponding to the employees’ investment selections, primarily in mutual funds, based on quoted prices in active markets for identical assets. Deferred compensation investments are primarily presented in Other assets. Deferred compensation liabilities are primarily presented in Other long-term liabilities.

Note M — Derivative Instruments and Hedging Activity

The Company uses derivative contracts to hedge ~~portions of its~~exposure to movements in interest rates associated with borrowings, foreign currency exposures, and ~~uses derivatives to hedge a portion of its~~ precious metal and copper exposures. The objectives and strategies for using derivatives in these areas are as follows:

Interest Rate. On March 4, 2022, the Company entered into a $100.0 million interest rate swap to hedge the interest rate risk on the Credit Agreement described in Note O. The swap hedges the change in 1-month Secured Overnight Financial Rate (SOFR) from March 4, 2022 to November 2, 2026. On March 21, 2023, the Company entered into two $50.0 million interest rate swaps to hedge the interest rate risk on the Credit Agreement described in Note O. The swaps hedge the change in 1-month USD-SOFR. The purpose of these hedges is to manage the risk of changes in the monthly interest payments attributable to changes in the benchmark interest rate.

Foreign Currency. The Company sells a portion of its products to overseas customers in their local currencies, primarily the euro and yen. The Company secures foreign currency derivatives, mainly forward contracts and options, to hedge these anticipated sales transactions. The purpose of the hedge program is to protect against the reduction in the dollar value of foreign currency sales from adverse exchange rate movements. Should the dollar strengthen significantly, the decrease in the translated value of the foreign currency sales should be partially offset by gains on

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

the hedge contracts. Depending upon the methods used, the hedge contracts may limit the benefits from a weakening U.S. dollar.

The use of forward contracts locks in a firm rate and eliminates any downside ~~risk~~ from an adverse rate movement as well as any benefit from a favorable rate movement. The Company may from time to time choose to hedge with options or a tandem of options, known as a collar. These hedging techniques can limit or eliminate the downside risk but can allow for some or all of the benefit from a favorable rate movement to be realized. Unlike a forward contract, a premium is paid for an option; collars, which are a combination of a put and call option, may have a net premium but can be structured to be cash neutral. The Company will primarily hedge with forward contracts due to the relationship between the cash outlay and the level of risk.

The use of foreign currency derivative contracts is governed by policies approved by the Audit Committee of the Board of Directors. A team consisting of senior financial managers reviews the estimated exposure levels, as defined by budgets, forecasts, and other internal data, and determines the timing, amounts, and nature of instruments to use to hedge ~~that exposure within the confines of the policy.~~exposures. Management analyzes the effective hedged rates and the actual and projected gains and losses on the hedging transactions against the program objectives, targeted rates, and levels of risk assumed. ~~Hedge~~

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

Foreign currency contracts are typically layered in at different times for a specified exposure period in order to minimize the impact of market rate movements.

Precious Metals. The Company maintains the majority of its precious metal production requirements on consignment in order to reduce its working capital investment and the exposure to metal price movements. When a product containing precious metal ~~product~~ is fabricated and ~~ready for shipment~~delivered to the customer, the metal content is purchased out of consignment atbased on the current market price. The price paid by the Company for the precious metal forms the basis for the price charged to the ~~customer.~~customer for the metal content in the product. This methodology allows for changes in either direction in the market prices of the precious metals used by the Company to be passed through to the customer and reduces the impact that changes in prices could have on the Company's margins and operating profit. The consigned metal is owned by ~~financial institutions~~precious metal consignors that charge the Company ~~a financing fee~~consignment fees based upon the ~~current~~ value of the metal as it fluctuates while on ~~hand.~~consignment. Each precious metal consignor retains title to its consigned precious metal until it is purchased by the Company, and it is the Company’s typical practice to purchase metal out of consignment only after a product containing that metal has been purchased by one of our customers.

In certain instances, a customer may want to ~~establish~~fix the price for the precious metal at the time the sales order is placed rather than at the time of shipment. Setting the sales price at a different date than when the material would be purchased out of consignment potentially creates an exposure to movements in the market price of the metal. Therefore, in these limited situations, the Company may elect to enter into a forward contract to purchase precious metal. The forward contract allows the Company to purchase metal at a fixed price on a specific future date. The price in the forward contract serves as the basis for the price to be charged to the customer. By doing so, the selling price and purchase price are matched, and the Company's price exposure is reduced.

The Company refines precious metal-containing materials for its customers and typically will purchase the refined metal from the customer at current market prices. In limited circumstances, the customer may want to fix the price to be paid at the time of the order as opposed to when the material is refined. The customer may also want to fix the price for a set period of time. The Company may then elect to enter into a hedge contract, either a forward contract or a swap, to fix the price for the estimated quantity of metal to be refined and purchased, thereby reducing the exposure to adverse movements in the price of the metal. The Company may also enter into hedges to mitigate the risk relating to the prices of the metals that we process or refine.

In certain circumstances, the Company also refines metal from the customer and may retain a portion of the refined metal as payment. The Company may elect to enter into a forward contract to sell precious metal to reduce the Company's price ~~exposure.~~exposure in these instances.

The Company may, from time to time, elect to purchase precious metal and hold in inventory rather than on consignment due to potential ~~credit~~consignment line limitations or other factors. These purchases are infrequent and, when made are typically held for a short duration. A forward contract will be secured at the time of the purchase to fix the

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

price to be ~~used~~paid when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was ~~owned.~~owned by the Company.

The Company will only enter into a derivative contract if there is an underlying identified exposure. Contracts are typically held ~~until~~to maturity. The Company does not engage in derivative trading activities and does not use derivatives for speculative purposes. The Company only uses ~~currency~~ hedge contracts that are denominated in the same currency ~~as the underlying exposure and precious metal hedge contracts denominated in the same~~or metal as the underlying exposure.

All derivatives are recorded on the balance sheet at fair value. If ~~the~~a derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in other comprehensive income (OCI) ~~until~~and reclassified into income in the same period or periods during which the hedged ~~item is recognized in~~transaction affects earnings. The ineffective portion of a ~~derivative’s~~derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through income. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The ~~fair values will also be~~derivative assets and liabilities are classified as short-term or long-term depending upon ~~their~~the contract maturity ~~dates.~~

~~Materion Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Unaudited)~~

date.

The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives not designated as hedging instruments (on a gross basis) and the balance sheet classification as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016:~~2022:


	September 29, 2017					December 31, 2016					March 31, 2023				December 31, 2022
(Thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value		(Thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Foreign currency forward contracts										Foreign currency forward contracts
Prepaid and other current assets										Prepaid and other current assets	$	13,277	$	156	$	12,242	$	791
Other liabilities and accrued items										Other liabilities and accrued items	18,054		201		17,061		1,048
Foreign currency forward contracts - euro	$	14,402	$	(11	)	$	—	$	—
Total	$	14,402	$	(11	)	$	—	$	—

These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included $0.2 million and $0.7 million of foreign currency losses ~~relating~~and gains related to ~~these~~ derivatives in the first quarter of ~~$0.5 million~~2023 and ~~$1.1 million during the third quarter~~2022, respectively.

Materion Corporation and ~~first nine months of 2017, respectively.~~Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives designated as cash flow hedges (on a gross basis) and the balance sheet classification as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016:~~2022:


												March 31, 2023
	September 29, 2017					December 31, 2016								Fair Value
(Thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value			(Thousands)	Notional Amount		Prepaid and other current assets		Other assets		Other liabilities and accrued items		Other long-term liabilities
Prepaid expenses
Foreign currency forward contracts - yen	$	2,000	$	59		$	2,418	$	239		Foreign currency forward contracts - yen	$	2,063	$	98	$	—	$	49	$	—
Foreign currency forward contracts - euro	6,829		90			6,493		452			Foreign currency forward contracts - euro	17,129		131		—		491		—
Precious metal swaps	2,148		13			—		—			Precious metal swaps	8,486		131		—		874		—
Interest rate swap											Interest rate swap	200,000		3,725		3,450		—		1,797
Total	10,977		162			8,911		691			Total	$	227,678	$	4,085	$	3,450	$	1,414	$	1,797

Other assets
Precious metal swaps	1,932		32			—		—
Total	1,932		32			—		—
												December 31, 2022
Other liabilities and accrued items
														Fair Value
												Notional Amount		Prepaid and other current assets		Other assets		Other liabilities and accrued items		Other long-term liabilities

Foreign currency forward contracts - yen											Foreign currency forward contracts - yen	$	2,985	$	145	$	—	$	74	$	26
Foreign currency forward contracts - euro	12,689		(658		)	537		(1		)	Foreign currency forward contracts - euro	25,712		355		—		472		137
Precious metal swaps	7,845		(170		)	—		—			Precious metal swaps	8,758		118		—		411		—
Interest rate swap											Interest rate swap	100,000		3,114		4,749		—		—
Total	20,534		(828		)	537		(1		)	Total	$	137,455	$	3,732	$	4,749	$	957	$	163

Other long-term liabilities
Precious metal swaps	1,999		(27		)	—		—
Total	$	35,442	$	(661	)	$	9,448	$	690

All of ~~these~~the contracts summarized above were designated and effective as cash flow hedges. ~~No ineffectiveness expense was recorded~~We expect to reclassify $2.7 million of gains into earnings in the ~~third quarter or first nine~~next 12 months contemporaneously with the earnings effects of ~~2017 or 2016.~~

~~Changes in~~ the ~~fair value~~related forecasted transactions. At March 31, 2023, the maximum term of outstanding cash flow hedges recorded in OCI for the first nine months of 2017 and 2016 totaled decreases of $1.2 million and $1.6 million, respectively. The Company expects to relieve substantially the entire balance in OCI as of September 29, 2017 to the Consolidated Statements of Income within the next 18-month period.derivative instruments that hedge forecasted transactions was approximately four years. Refer to Note J for additional OCI details.

The following table summarizes the amounts reclassified from accumulated other comprehensive income related to the Company’s outstanding derivatives designated as cash flow hedges and associated income statement classification as of the first quarter of 2023 and 2022:


		First Quarter Ended
(Thousands)		March 31, 2023		April 1, 2022
Hedging relationship	Line item
Foreign currency forward contracts	Net sales	$	(35)	$	(19)
Precious metal swaps	Cost of sales	25		107
Interest rate swap	Interest expense - net	(782)		115
Total		$	(792)	$	203

Note N — Contingencies

Legal Proceedings. For general information regarding legal proceedings relating to Chronic Beryllium Disease Claims, refer to Note ~~Q ("Contingencies~~S "Contingencies and Commitments") in the Company's ~~2016~~2022 Annual Report on Form 10-K.

One beryllium case was outstanding as of March 31, 2023. The Company does not expect the resolution of this matter to have a material impact on the consolidated financial statements.

Other Litigation. The Company is party to several pending legal proceedings and claims arising in the normal course of business. The Company records a liability when it is both probable that a liability has been incurred and the amount of the ~~loss can be~~

1819

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matters. To the extent there is a reasonable possibility that the losses could exceed any amounts accrued, the Company will adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.

On October 14, 2020, Garett Lucyk, et al. v. Materion Brush Inc., et. al., case number 20CV0234, a wage and hour purported collective and class action, was filed in the Northern District of Ohio against the Company and its subsidiary, Materion Brush Inc. (collectively, the Company). Plaintiff, a former hourly production employee at the Company's Elmore, Ohio facility, alleges, among other things, that he and other similarly situated employees nationwide are not paid for all time they spend donning and doffing personal protective equipment in violation of the Fair Labor Standards Act and Ohio law. Plaintiff filed a motion for conditional certification, which the Company opposed. On August 2, 2022, the Court conditionally certified a class of employees at the Company’s Elmore facility only and rejected certification of a class across the Company’s other facilities.

In November 2022, the parties reached a settlement for an immaterial amount. The Court preliminarily approved the settlement on March 30, 2023 and set a final approval hearing for July 2023.

Environmental Proceedings. The Company has an active environmental compliance program and records reserves for the probable cost of identified environmental remediation projects. The reserves are established based upon analyses conducted by the Company’s engineers and outside consultants and are adjusted from time to time based upon ongoing studies, the difference between actual and estimated costs, and other factors. The reserves may also be affected by rulings and negotiations with regulatory agencies. The undiscounted reserve balance was ~~$6.1~~$4.4 million and $4.5 millionat ~~September 29, 2017~~March 31, 2023 and ~~$6.0 million at~~ December 31, ~~2016.~~2022, respectively, and is included in Other liabilities and accrued items and Other long-term liabilities on the Consolidated Balance Sheet. Environmental projects tend to be long-term, and the final actual remediation costs may differ from the amounts currently recorded.

Note O — Debt


(Thousands)	March 31, 2023		December 31, 2022
Borrowings under Credit Agreement	$	145,155	$	143,250
Borrowings under the Term Loan Facility	281,250		285,000
Foreign debt	10,366		7,541

Total debt outstanding	436,771		435,791
Current portion of long-term debt	(27,727)		(21,105)
Gross long-term debt	409,044		414,686
Unamortized deferred financing fees	(3,562)		(3,810)
Long-term debt	$	405,482	$	410,876

As of March 31, 2023 and December 31, 2022, the Company had $145.2 million outstanding at an average interest rate of 6.42% and $143.3 million outstanding at an average interest rate of 6.08%, respectively, under its revolving credit facility. The available borrowing capacity under the revolving credit facility as of March 31, 2023 was $186.8 million. The Company has the option to repay or borrow additional funds under the revolving credit facility until the maturity date in 2026. The amended and restated credit agreement governing the revolving credit facility (Credit Agreement) includes covenants subject to a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all of our debt covenants as of March 31, 2023.

The balance outstanding on the term loan facility as of March 31, 2023 and December 31, 2022 was $281.3 million and $285.0 million, respectively.

At both March 31, 2023 and December 31, 2022, there was $46.5 million outstanding against the letters of credit sub-facility.

Materion Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)



Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We are an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications. Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, consumer electronics, ~~industrial components, defense, medical, automotive electronics, telecommunications infrastructure,~~ energy, ~~commercial aerospace, science, services,~~ and ~~appliance.~~telecom and data center.

RESULTS OF OPERATIONS

~~Third~~

First Quarter


	First Quarter Ended
	March 31,			April 1,			$		%
(Thousands, except per share data)	2023			2022			Change		Change
Net sales	$	442,526		$	449,045		$	(6,519)	(1)	%
Value-added sales	298,558			259,124			39,434		15	%
Gross margin	91,336			75,291			16,045		21	%
Gross margin as a % of value-added sales	31		%	29		%
Selling, general, and administrative (SG&A) expense	40,336			41,662			(1,326)		(3)	%
SG&A expense as a % of value-added sales	14		%	16		%
Research and development (R&D) expense	7,621			7,074			547		8	%
R&D expense as a % of value-added sales	3		%	3		%
Restructuring (income) expense	664			1,076			(412)		NM
Other—net	5,775			5,873			(98)		(2)	%
Operating profit	36,940			19,606			17,334		88	%
Other non-operating (income)—net	(730)			(1,169)			439		(38)	%
Interest expense—net	7,502			3,735			3,767		101	%
Income before income taxes	30,168			17,040			13,128		77	%
Income tax expense (benefit)	4,580			3,021			1,559		52	%
Net income	$	25,588		$	14,019		$	11,569	83	%

Diluted earnings per share	$	1.23		$	0.68		$	0.55	81	%

Third Quarter Ended
Sept. 29, Sept. 30, $ %
(Thousands, except per share data) 2017 2016 Change Change
Net sales $ 294,268
$ 249,619
$ 44,649
18 %
Value-added sales 171,382
157,001
14,381
9 %
Gross margin 55,203
50,755
4,448
9 %
Gross margin as a % of value-added sales 32 % 32 % N/A
N/A
Selling, general, and administrative (SG&A) expense
36,415
34,177
2,238
7 %
SG&A expense as a % of value-added sales 21 % 22 % N/A
N/A
Research and development (R&D) expense 3,429
3,237
192
6 %
R&D expense as a % of value-added sales 2 % 2 % N/A
N/A
Other—net 3,801
3,190
611
19 %
Operating profit 11,558

10,151
1,407
14 %
Interest expense—net 533
490
43
9 %
Income before income taxes 11,025
9,661
1,364
14 %
Income tax expense 1,705
1,616
89
6 %
Net income $ 9,320
$ 8,045
$ 1,275
16 %

Diluted earnings per share $ 0.46
$ 0.40
$ 0.06
15 %

~~N/A~~NM = Not ~~Applicable~~Meaningful

Net sales of ~~$294.3~~$442.5 million in the ~~third~~first quarter of ~~2017 were $44.7~~2023 decreased $6.5 million ~~higher than the $249.6~~from $449.0 million ~~recorded~~ in the ~~third~~first quarter of ~~2016. Net~~2022. Increased net sales in the Performance Materials was partially offset by a decrease in net sales in the Electronic Materials and Precision Optics segments. Volume and price increases in the aerospace and defense end market (15%) and incremental sales from the clad strip project of ~~$38.6~~$36.2 million ~~during~~were offset by decreased sales in the ~~third~~semiconductor (16%), industrial (5%) and consumer electronics (31%) end markets when compared to the same period last year. Additionally, there was a $8.9 million year over year decrease in the volume of raw material beryllium hydroxide sales compared to the first quarter of ~~2017 were attributable to~~2022. See Note B - Segment Reporting for additional details on the ~~high performance target materials business of the Heraeus Group (HTB). Changes~~year over year changes in our net sales by segment and market.

The change in precious metal and copper prices ~~negatively~~unfavorably impacted net sales induring the ~~third~~first quarter of ~~2017~~2023 by ~~approximately $2.4 million when compared to the third quarter of 2016.~~$4.8 million.

Value-added sales is a non-GAAP financial measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal ~~prices.~~prices and changes in mix due to customer-supplied material. Internally, we manage our business on this basis, and a reconciliation of net sales, the most directly comparable GAAP financial measure, to value-added sales is included herein. Value-added sales of ~~$171.4~~$298.6 million in the ~~third~~first quarter of ~~2017~~2023 increased ~~$14.4~~$39.4 million, or 9%15%, compared to the ~~third~~first quarter of ~~2016. Value-added~~2022. The increase was driven by increased value-added sales into the aerospace and defense (21%) and automotive (23%) end markets as well as $36.2 million of incremental sales from the ~~HTB acquisition totaled $11.4 million~~clad strip project, slightly offset by a year over year decrease in the ~~third~~volume of raw material beryllium hydroxide sales of $8.9 million compared to the first quarter of ~~2017. Value-added sales~~2022.

Gross margin in the first quarter of 2023 was $91.3 million, which was up 21% compared to the ~~consumer electronics end market, which accounted for 31% of our total value-added sales during the third~~first quarter of 2017, increased $2.9 million from the prior-year period. Also, value-added sales in the industrial components end market increased $4.2 million from the prior-year period. These increases were offset by weakness in the medical end market, which lowered value-added sales by approximately $6.1 million.

~~Gross margin~~ ~~in the third quarter of 2017 was $55.2 million, or $4.4 million higher than the $50.8 million gross margin recorded during the third quarter of 2016.~~2022. Gross margin expressed as a percentage of value-added sales ~~was 32%~~increased to 31% in the ~~third~~first quarter of ~~both 2017 and 2016.~~2023 from 29% in the first quarter of 2022. Gross margin increased from the prior year primarily due to $7.5 million of inventory step up amortization from the HCS-Electronic Material acquisition that was recorded during the first quarter of 2022, that did not recur in 2023. In addition, the production tax credit recorded in the first quarter of 2023 favorably impacted gross margin. See Note E to the Consolidated Financial Statements for further discussion.

SG&A expense was ~~$36.4~~$40.3 million in the ~~third~~first quarter of ~~2017, or $2.2~~2023, compared to $41.7 million ~~higher than the $34.2 million recorded~~ in the ~~third~~first quarter of ~~2016.~~2022. The ~~increase is attributable to~~decrease in SG&A expense from the prior year period was primarily driven by $2.1 million of ~~HTB expenses.~~merger and acquisition costs

related to the acquisition of HCS-Electronic Materials incurred in the first quarter of 2022, that did not recur in 2023. Expressed as a percentage of value-added sales, SG&A expense was 14% and 16% in the first quarter of 2023 and 2022, respectively.

R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications. R&D ~~expense~~spend was ~~flat as a percentage~~3% of value-added sales ~~at approximately 2%~~in both the first quarter of 2023 and 2022.

Restructuring (income) expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the first quarter of 2023, we recorded a combined total of $0.7 million of restructuring charges in our Precision Optics and Electronic Materials segments, compared to $1.1 million of restructuring charges in the ~~third~~first quarter of ~~both 2017~~2022 recorded in our Precision Optics, Electronic Materials and ~~2016.~~Other segments.

Other-net was ~~$3.8~~$5.8 million of expense in the ~~third~~first quarter of ~~2017,~~2023, or a ~~$0.6~~$0.1 million ~~increase~~decrease from the ~~third~~first quarter of ~~2016. Other-net~~2022, primarily driven by a $0.1 million decrease in ~~the third quarter of 2017 included higher~~ metal consignment ~~fees of $0.8 million, as compared to the third quarter of 2016.~~fees. Refer to Note D to the Consolidated Financial Statements for details of the major components within Other-net.

~~Interest~~Other non-operating (income) expense-net ~~was $0.5 million in the third quarter~~includes components of ~~both 2017~~pension and ~~2016.~~

~~Income tax~~post-retirement expensefor the third quarter of 2017 was $1.7 million, compared to $1.6 million in the third quarter of 2016. The effective tax rate for the third quarter of 2017 was 15.5% compared to 16.7% in the prior-year period. The effects of percentage depletion, the foreign rate differential, the research and development credit, discrete benefits, and other ~~items were the primary factors for the difference between the effective and statutory rates in the third quarter of 2017 and 2016.~~than service costs. Refer to Note ~~F to the Consolidated Financial Statements for further details on income taxes.~~

~~Nine Months~~

Nine Months Ended
Sept. 29, Sept. 30, $ %
(Thousands, except per share data) 2017 2016 Change Change
Net sales $ 830,779
$ 734,906
$ 95,873
13 %
Value-added sales 496,462
454,793
41,669
9 %
Gross margin 152,756
139,418
13,338
10 %
Gross margin as a % of value-added sales 31 % 31 % N/A
N/A
SG&A expense
108,118
97,101
11,017
11 %
SG&A expense as a % of value-added sales 22 % 21 % N/A
N/A
R&D expense 10,103
9,860
243
2 %
R&D expense as a % of value-added sales 2 % 2 % N/A
N/A
Other—net 9,823
8,997
826
9 %
Operating profit 24,712
23,460
1,252
5 %
Interest expense—net 1,721
1,417
304
21 %
Income before income taxes 22,991
22,043
948
4 %
Income tax expense 3,308
3,081
227
7 %
Net income $ 19,683
$ 18,962
$ 721
4 %

Diluted earnings per share $ 0.97
$ 0.94
$ 0.03
3 %

~~N/A = Not Applicable~~

~~Net sales~~ of $830.8 million in the first nine months of 2017 were $95.9 million higher than the $734.9 million recorded in the first nine months of 2016. Changes in precious metal and copper prices favorably impacted net sales in the first nine months of 2017 by approximately $6.0 million when compared to the first nine months of 2016. Net sales in the Performance Alloys and Composites segment increased $18.5 million due to higher sales volume, including shipments of raw material beryllium hydroxide. Net sales of $77.9 million during the first nine months of 2017 were attributable to the HTB acquisition. Excluding the HTB acquisition, net sales in the Advanced Materials segment increased $22.7 million due to higher sales volume in the consumer electronics and industrial components end markets. These favorable impacts were offset by lower sales volume in the medical end market in the Precision Coatings segment.

~~Value-added sales~~ of $496.5 million in the first nine months of 2017 increased $41.7 million, or 9% compared to the first nine months of 2016. Value-added sales from the HTB acquisition totaled approximately $24.9 million in the first nine months of 2017. Value-added sales to the consumer electronics end market, which accounted for 30% of our total value-added sales during the first nine months of 2017, increased $9.7 million from the prior-year period. Also, value-added sales in the industrial components end market increased $10.4 million from the prior-year period.

~~Gross margin~~ in the first nine months of 2017 was $152.8 million, or $13.4 million higher than the $139.4 million gross margin recorded during the first nine months of 2016. Gross margin was 31% of value-added sales in the first nine months of both 2017 and 2016.

~~SG&A expense~~ was $108.1 million in the first nine months of 2017, or $11.0 million higher than the $97.1 million recorded in the first nine months of 2016. The increase related to higher incentive compensation and stock-based compensation expense of $8.1 million, which included $1.4 million due to accelerated stock compensation expense associated with the transition of the Company's CEO. Additionally, the increase is attributable to HTB expenses of $4.2 million.

~~R&D expense~~ ~~was flat as a percentage of value-added sales at approximately 2% in the first nine months of both 2017 and 2016.~~

~~Other-net~~ was $9.8 million and $9.0 million of expense in the first nine months of 2017 and 2016, respectively. Other-net in the first nine months of 2017 included higher metal consignment fees of $1.3 million, as compared to the first nine months of 2016. Refer to Note DI to the Consolidated Financial Statements for details of the ~~major components within Other-net.~~components.

Interest expense-net was ~~$1.7~~$7.5 million and $3.7 million in the first ~~nine months~~quarter of ~~2017, or a $0.3~~2023 and 2022, respectively. The increase in interest expense is primarily due to an increase in interest rates compared to the prior year.

Income tax expensefor the first quarter of 2023 was expense of $4.6 million, ~~increase from $1.4~~compared to $3.0 million in the first ~~nine months~~quarter of ~~2016 due to higher average debt outstanding.~~

~~Income tax expensefor the first nine months of 2017 was $3.3 million, compared to $3.1 million in the first nine months of 2016.~~2022. The effective tax rate for the first ~~nine months~~quarter of ~~2017~~2023 and 2022 was ~~14.4% compared to an~~15.2% and 17.7%, respectively. The effective tax rate for the first quarter of ~~14.0% in~~2023 was lower than the ~~prior-year period. The effects~~statutory tax rate primarily due to the impact of percentage depletion, the foreign ~~rate differential, the~~derived intangible income deduction, and research and development ~~credit, discrete benefits, and other items were the primary factors for the difference between the effective and statutory rates in the first nine months of 2017 and 2016. Refer to~~credits. See Note FE to the Consolidated Financial Statements for ~~further details on income taxes.~~additional discussion.

Value-Added Sales - Reconciliation of Non-GAAP Financial Measure

A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the first ~~nine months~~quarter of ~~2017~~2023 and ~~2016~~2022 is as follows:

Third Quarter Ended Nine Months Ended
Sept. 29,
Sept. 30, Sept. 29, Sept. 30,
(Thousands) 2017
2016 2017 2016
Net sales
Performance Alloys and Composites $ 109,393
$ 103,699
$ 310,487
$ 292,024
Advanced Materials 157,770
107,250
429,550
328,927
Precision Coatings 27,105
38,670
90,742
113,955
Other —
—
—
—
Total $ 294,268
$ 249,619
$ 830,779
$ 734,906

Less: pass-through metal costs
Performance Alloys and Composites $ 18,756
$ 16,452
$ 47,953
$ 43,225
Advanced Materials 97,379
61,290
259,830
193,908
Precision Coatings 5,209
12,867
22,932
38,407
Other 1,542
2,009
3,602
4,573
Total $ 122,886
$ 92,618
$ 334,317
$ 280,113

Value-added sales
Performance Alloys and Composites $ 90,637
$ 87,247
$ 262,534
$ 248,799
Advanced Materials 60,391
45,960
169,720
135,019
Precision Coatings 21,896
25,803
67,810
75,548
Other (1,542 ) (2,009 ) (3,602 ) (4,573 )
Total $ 171,382
$ 157,001
$ 496,462
$ 454,793

The cost of gold, silver, platinum, palladium, and copper can be quite volatile. Our pricing policy is to directly pass the cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations. Trends and comparisons of net sales are affected by movements in the market prices of these metals, but changes in net sales due to metal price movements may not have a proportionate impact on our profitability.


	First Quarter Ended
	March 31,		April 1,
(Thousands)	2023		2022
Net sales
Performance Materials	$	187,014	$	149,630
Electronic Materials	228,820		270,836
Precision Optics	26,692		28,579
Other	—		—
Total	$	442,526	$	449,045

Less: pass-through metal costs
Performance Materials	$	19,004	$	20,512
Electronic Materials	124,942		168,604
Precision Optics	22		49
Other	—		756
Total	$	143,968	$	189,921

Value-added sales
Performance Materials	$	168,010	$	129,118
Electronic Materials	103,878		102,232
Precision Optics	26,670		28,530
Other	—		(756)
Total	$	298,558	$	259,124

Internally, management reviews net sales on a value-added basis. Value-added sales is a non-GAAP financial measure that deducts the value of the pass-through metal costs from net sales. Value-added sales allow management to assess the impact of differences in net sales between periods, segments, or markets, and analyze the resulting margins and profitability without the distortion of movements in pass-through metal costs. The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation. We sell other metals and materials that are not considered direct pass-throughs, and these costs are not deducted from net sales when calculating value-added sales. Non-GAAP financial measures, such as value-added sales, have inherent limitations and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile. Our pricing policy is to directly pass the cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations. Trends and comparisons of net sales are affected by movements in the market prices of these metals, but changes in net sales due to metal price movements may not have a proportionate impact on our profitability.

Our net sales are also affected by changes in the use of customer-supplied metal. When we manufacture a precious metal product, the customer may purchase metal from us or may elect to provide its own metal, in which case we process the metal on a toll basis and the metal value does not flow through net sales or cost of sales. In either case, we generally earn our margin based upon our fabrication efforts. The relationship of this margin to net sales can change depending upon whether or not the product was made from our metal or the customer’s metal. The use of value-added sales removes the potential distortion in the comparison of net sales caused by changes in the level of customer-supplied metal.

By presenting information on net sales and value-added sales, it is our intention to allow users of our financial statements to review our net sales with and without the impact of the pass-through metals.

Segment Results

2324

~~Segment Results~~

The Company consists of four reportable segments: Performance ~~Alloys and Composites, Advanced~~Materials, Electronic Materials, Precision ~~Coatings,~~Optics, and Other. The Other reportable segment includes unallocated corporate costs.

The primary measurement used by management to measure the financial performance of each segment is EBITDA. Refer to Note B to the Consolidated Financial Statements for the reconciliation of EBITDA by segment to consolidated net income.

Performance ~~Alloys and Composites~~Materials

~~Third~~First Quarter


	Third Quarter Ended									First Quarter Ended
	Sept. 29,		Sept. 30,		$		%			March 31,		April 1,		$		%
(Thousands)	2017		2016		Change		Change		(Thousands)	2023		2022		Change		Change
Net sales	$	109,393	$	103,699	$	5,694	5	%	Net sales	$	187,014	$	149,630	$	37,384	25	%
Value-added sales	90,637		87,247		3,390		4	%	Value-added sales	168,010		129,118		38,892		30	%
Operating profit	6,786		4,357		2,429		56	%
EBITDA									EBITDA	42,770		24,792		17,978		73	%

Net sales from the Performance ~~Alloys and Composites~~Materials segment of ~~$109.4~~$187.0 million in the ~~third~~first quarter of ~~2017 were 5% higher than~~2023 increased 25% compared to net sales of ~~$103.7~~$149.6 million in the ~~third~~first quarter of ~~2016 primarily~~2022. The increase in sales was due to higher volume in the aerospace and defense (24%), energy (25%) and automotive (14%) end markets as well as $36.2 million of incremental sales from the clad strip project, slightly offset by a $8.9 million year over year decrease in the volume ~~related~~of raw material beryllium hydroxide sales compared to the ~~industrial components, consumer electronics, and automotive electronics end markets. In addition, the impact~~first quarter of ~~higher pass-through metal prices favorably impacted net sales by approximately $1.8 million.~~2022.

Value-added sales of ~~$90.6~~$168.0 million in the ~~third~~first quarter of ~~2017~~2023 were 4%30% higher than value-added sales of ~~$87.2~~$129.1 million in the ~~third~~first quarter of ~~2016.~~2022. The increase in value-added sales was ~~driven by stronger demand~~due to the same factors driving the increase in ~~the aforementioned end markets of industrial components, consumer electronics, and automotive electronics, partially offset by a $3.1 million reduction in raw material beryllium hydroxide~~net sales.

EBITDA for the Performance ~~Alloys and Composites generated operating profit of $6.8~~Materials segment was $42.8 million in the ~~third~~first quarter of ~~2017~~2023 compared to ~~$4.4~~$24.8 million in the ~~third~~first quarter of ~~2016.~~2022. The increase in ~~operating profit~~EBITDA was primarily due to ~~higher~~the same factors driving the increase in net sales ~~volume, favorable product mix,~~as well as a lower merger and ~~productivity improvements.~~acquisition costs of $2.7 million compared to the first quarter of 2022. In addition, we recorded a portion of the expected $8 million annual benefit from the production credit in the first quarter of 2023 which favorably impacted EBITDA. See Note E to the Consolidated Financial Statements for further discussion.

~~Nine Months~~

Electronic Materials

Nine Months Ended
Sept. 29, Sept. 30, $ %
(Thousands) 2017 2016 Change Change
Net sales $ 310,487
$ 292,024
$ 18,463
6 %
Value-added sales 262,534
248,799
13,735
6 %
Operating profit 12,523
6,103
6,420
105 %
First Quarter


	First Quarter Ended
	March 31,		April 1,		$		%
(Thousands)	2023		2022		Change		Change
Net sales	$	228,820	$	270,836	$	(42,016)	(16)	%
Value-added sales	103,878		102,232		1,646		2	%
EBITDA	13,955		12,148		1,807		15	%

Net sales from the ~~Performance Alloys and Composites~~Electronic Materials segment of ~~$310.5~~$228.8 million in the first ~~nine months~~quarter of ~~2017 were 6% higher than~~2023 decreased 16% from net sales of ~~$292.0~~$270.8 million in the first ~~nine months~~quarter of ~~2016~~2022. The decrease in net sales was primarily due to ~~increased demand~~lower precious metal sales volumes in the ~~industrial components~~semiconductor (16%) and ~~consumer electronics~~energy (14%) end markets. ~~The impact of higher~~Additionally, pass-through metal ~~prices favorably impacted~~price reductions reduced net sales by ~~approximately $5.9 million.~~

Value-added sales of $262.5 million in the first nine months of 2017 were 6% higher than value-added sales of $248.8 million in the first nine months of 2016. Stronger demand in the consumer electronics and industrial components end markets increased value-added sales by $11.4$3.6 million compared to the first ~~nine months~~quarter of ~~2016. Also,~~2022.

Despite the ~~increase~~decrease in sales, value-added sales ~~was driven by higher raw material sales of beryllium hydroxide of $2.0 million.~~

~~Performance Alloys and Composites generated operating profit of $12.5~~were up slightly to $103.9 million in the first ~~nine months~~quarter of ~~2017~~2023, compared to ~~$6.1~~value-added sales of $102.2 million in the first ~~nine months~~quarter of ~~2016.~~2022, representing an increase of 2%, due to an increase in non-precious metal sales, primarily in tantalum shipments.

EBITDA for the Electronic Materials segment was $14.0 million in the first quarter of 2023 compared to $12.1 million in the first quarter of 2022. The increase in ~~operating profit was~~EBITDA is primarily due to ~~higher sales volume, favorable product mix, and productivity improvements.~~

~~Advanced~~no HCS-Electronic Materials

~~Third Quarter~~

Third Quarter Ended

Sept. 29,
Sept. 30, $ %
(Thousands)
2017
2016 Change Change
Net sales
$ 157,770

$ 107,250
50,520
47 %
Value-added sales
60,391

45,960
14,431
31 %
Operating profit
9,756

8,245
1,511
18 %

~~Net sales from the Advanced Materials segment of $157.8 million~~ acquisition costs recorded in the ~~third~~current period, compared to $6.0 million recorded in the first quarter of 2017 were 47% higher than net sales of $107.3 million in the third quarter of 2016 due to higher sales volume. Net sales of $38.6 million during the third quarter of 2017 were attributable to our HTB acquisition. Also, net sales increased due to higher sales volume2022. This was partially offset by mix, year over year tantalum costs increases and the impact of lower ~~pass-through metal prices of $4.7 million.~~

Value-added sales of $60.4 million in the third quarter of 2017 were 31% higher than value-added sales of $46.0 million in the third quarter of 2016. This increase included value-added sales of $11.4 million attributable to our HTB acquisition. Also, the increase in value-added sales was driven by higher value-added sales to the consumer electronics end market of $2.2 million due primarily to higher demand.

The Advanced Materials segment generated operating profit of $9.8 million in the third quarter of 2017 compared to $8.3 million in the third quarter of 2016. Operating profit in the third quarter of 2017 was favorably impacted by higher sales volume.

~~Nine Months~~

Nine Months Ended
Sept. 29, Sept. 30, $ %
(Thousands) 2017 2016 Change Change
Net sales $ 429,550
$ 328,927
100,623
31 %
Value-added sales 169,720
135,019
34,701
26 %
Operating profit 24,873
20,748
4,125
20 %

~~Net sales from the Advanced Materials segment of $429.6 million~~production late in the first ~~nine months~~quarter of ~~2017 were 31% higher than net sales of $328.9 million~~2023 resulting in the first nine months of 2016. Net sales of $77.9 million during the first nine months of 2017 were attributable to the HTB acquisition. Also, net sales increased due to a combination of new product sales growth and demand in the consumer electronics and defense end markets.manufacturing cost inefficiencies.

Value-added sales of $169.7 million in the first nine months of 2017 were 26% higher than value-added sales of $135.0 million in the first nine months of 2016. This increase included value-added sales of $24.9 million attributable to our HTB acquisition. The increase in value-added sales was also driven by higher value-added sales to the consumer electronics end market. Value-added sales to the consumer electronics end market, which represents approximately 49% of total segment value-added sales, increased $7.2 million due primarily to higher demand, excluding the HTB acquisition.

The Advanced Materials segment generated operating profit of $24.9 million in the first nine months of 2017 compared to $20.7 million in the first nine months of 2016. As a percentage of value-added sales, operating profit was 15% in the first nine months of both 2017 and 2016. Operating profit in the first nine months of 2017 was favorably impacted by higher sales volume.

Precision ~~Coatings~~Optics

~~Third~~First Quarter


(Thousands)	Third Quarter Ended								(Thousands)	First Quarter Ended
	Sept. 29,		Sept. 30,		$		%			March 31,		April 1,		$		%
	2017		2016		Change		Change			2023		2022		Change		Change
Net sales	$	27,105	$	38,670	(11,565	)	(30	)%	Net sales	$	26,692	$	28,579	$	(1,887)	(7)	%
Value-added sales	21,896		25,803		(3,907	)	(15	)%	Value-added sales	26,670		28,530		(1,860)		(7)	%
Operating profit	1,613		3,432		(1,819	)	(53	)%
EBITDA									EBITDA	2,692		2,191		501		23	%

Net sales from the Precision ~~Coatings~~Optics segment of ~~$27.1~~$26.7 million in the ~~third~~first quarter of ~~2017 were 30% lower than~~2023 decreased 7% compared to net sales of ~~$38.7~~$28.6 million in the ~~third~~first quarter of ~~2016~~2022. The decrease was primarily due to lower sales ~~volume.~~volumes in the consumer electronics end market (39%).

Value-added sales of $21.9 million in the third quarter of 2017 were 15% lower than value-added sales of $25.8 million in the third quarter of 2016. The defense and industrial components end markets increased $1.3 million primarily due to end market demand. This increase was more than offset by a decrease of $4.9 million in the medical end market due to lower volume in the blood glucose test strip segment of the medical end market.

The Precision Coatings segment generated operating profit of $1.6 million in the third quarter of 2017, compared to an operating profit of $3.4 million in the third quarter of 2016. The decrease in operating profit was driven by lower sales volume and $0.4 million of cost reduction initiatives, primarily severance, associated with reducing headcount in Asia and North America.

~~Nine Months~~

(Thousands) Nine Months Ended
Sept. 29, Sept. 30, $ %
2017 2016 Change Change
Net sales $ 90,742
$ 113,955
(23,213 ) (20 )%
Value-added sales 67,810
75,548
(7,738 ) (10 )%
Operating profit 6,145
9,803
(3,658 ) (37 )%

~~Net sales from the Precision Coatings segment of $90.7~~$26.7 million in the first ~~nine months~~quarter of ~~2017 were 20% lower than net~~2023 decreased 7% compared to value-added sales of ~~$114.0~~$28.5 million in the first ~~nine months~~quarter of ~~2016 primarily~~2022. The decrease in value-added sales was due to ~~lower sales volume.~~the same factors driving the decrease in net sales.

~~Value-added sales of $67.8~~EBITDA for the Precision Optics segment was $2.7 million in the first ~~nine months~~quarter of ~~2017 were 10% lower than value-added sales~~2023, compared to EBITDA of ~~$75.5~~$2.2 million in the first ~~nine months~~quarter of ~~2016.~~2022. The ~~defense and industrial components end markets increased $3.6 million~~increase in EBITDA was primarily ~~due to stronger end market demand. This increase was more than offset~~driven by ~~a decrease of $8.4 million in the medical end market due to lower volume in the blood glucose test strip segment of the medical end market.~~

The Precision Coatings segment generated operating profit of $6.1 million in the first nine months of 2017 compared to $9.8 million in the first nine months of 2016. The decrease in operating profit in the first nine months of 2017 versus the comparable period of 2016 was due to lower sales volume,targeted cost reduction initiatives ~~of $0.4 million,~~ and ~~the absence of a gain on the sale of equipment of $0.8 million realized during the first nine months of 2016.~~spend control.

Other

~~Third~~First Quarter


(Thousands)	Third Quarter Ended										(Thousands)	First Quarter Ended
	Sept. 29,			Sept. 30,			$		%			March 31,		April 1,		$		%
	2017			2016			Change		Change			2023		2022		Change		Change
Net sales	$	—		$	—		—		—	%	Net sales	$	—	$	—	$	—	—	%
Value-added sales	(1,542		)	(2,009		)	467		(23	)%	Value-added sales	—		(756)		756		(100)	%
Operating loss	(6,597		)	(5,883		)	(714	)	12	%
EBITDA											EBITDA	(6,655)		(5,177)		(1,478)		29	%

The Other reportable segment in total includes unallocated corporate costs.

Corporate costs ~~of $6.6~~were $6.7 million in the ~~third~~first quarter of ~~2017 increased $0.7 million as~~2023 compared to ~~$5.9~~$5.2 million in the ~~third~~first quarter of ~~2016.~~2022. Corporate costs ~~were 4%~~accounted for 2% of ~~total Company~~Company-wide value-added sales in the ~~third~~first quarter of ~~both 2017~~2023 and ~~2016.~~2022. The increase in corporate costs ~~was primarily due to higher incentive compensation expense associated with value-added sales and profit growth.~~

~~Nine Months~~

(Thousands) Nine Months Ended
Sept. 29, Sept. 30, $ %
2017 2016 Change Change
Net sales $ —
$ —
—
— %
Value-added sales (3,602 ) (4,573 ) 971
(21 )%
Operating loss (18,829 ) (13,194 ) (5,635 ) 43 %

~~Corporate costs of $18.8 million~~ in the first ~~nine months~~quarter of ~~2017 increased $5.6 million as~~2023 compared to ~~$13.2 million in~~ the first ~~nine months~~quarter of ~~2016. As a percent~~2022 is is reflective of ~~total Company value-added sales, corporate~~investments to execute our strategic initiatives and variable costs increased to 4% in the first nine months of 2017 from 3% in the prior-year. The increase in corporate costs was due to higher incentive compensation and stock-based compensation expense of $5.5 million, which included $1.4 million due to accelerated stock compensation expense associated with ~~the transition of the Company's CEO.~~improved financial performance.

FINANCIAL POSITION

Cash Flow

A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:


	Three Months Ended
	March 31,		April 1,		$
(Thousands)	2023		2022		Change
Net cash (used in) provided by operating activities	$	38,105	$	(14,304)	$	52,409
Net cash used in investing activities	(29,802)		(18,966)		(10,836)
Net cash provided by financing activities	(6,291)		39,305		(45,596)
Effects of exchange rate changes	130		(260)		390
Net change in cash and cash equivalents	$	2,142	$	5,775	$	(3,633)

Nine Months Ended
Sept. 29, Sept. 30, $
(Thousands) 2017 2016 Change
Net cash provided by operating activities $ 35,497
$ 27,222
$ 8,275
Net cash used in investing activities (34,830 ) (27,620 ) (7,210 )
Net cash used in financing activities (10,938 ) (8,556 ) (2,382 )
Effects of exchange rate changes 1,293
524
769
Net change in cash and cash equivalents $ (8,978 ) $ (8,430 ) $ (548 )

Net cash provided by operating activitiestotaled ~~$35.5~~$38.1 million in the first ~~nine~~three months of ~~2017 versus $27.2~~2023 compared to net cash used in operating activities of $14.3 million in the ~~comparable~~ prior-year period. Working capital requirements used cash of ~~$13.5~~$6.4 million in the first quarter of 2023 compared to $47.4 million during the first ~~nine~~three months of ~~2017 compared to a use of $18.7 million~~2022. The decrease in ~~the first nine months of 2016. Cash flows~~cash used for ~~accounts receivable were $1.8 million higher than the prior year-period due to the HTB acquisition. Our three-month trailing days sales outstanding (DSO)~~working capital was approximately 40 days at September 29, 2017 versus 41 days at December 31, 2016. Cash flows used for inventory increased $13.2 million primarily within the Performance Alloys and Composites and Advanced Materials segments to respond to anticipated orders and demand. Cash flows from accounts payable and accrued expenses provided cash of approximately $18.0 million compared to a use of $2.2 million in the prior-year period primarily due to ~~a higher accounts payable balance due to the timing of payments~~stronger cash collection and ~~the HTB acquisition.~~continued inventory management.

Net cash used in investing activities was ~~$34.8~~$29.8 million in the first ~~nine months~~quarter of ~~2017~~2023 compared to ~~$27.6~~$19.0 million in the prior-year ~~period, reflecting a $16.5 million payment for the HTB acquisition offset by lower payments for property, plant, and equipment and mine development of $10.6 million.~~period. The increase in cash used in investing activities is due to increased capital expenditures, as expected, to support continued business growth.

Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives. For the full year ~~2017,~~2023, the Company expects payments for property, plant, and equipment to be ~~less than $30.0 million and mine development expenditures to be less than $3.0~~approximately $100 million.

Net cash used inby financing activities totaled ~~$10.9~~$6.3 million in the first ~~nine~~three months of ~~2017 versus $8.6~~2023 compared to net cash provided by financing activities of $39.3 million in the ~~comparable~~ prior-year ~~period~~period. The net financing cash outflow in 2023 was primarily due to ~~a higher amount of common shares withheld for taxes in 2017~~debt repayments, compared to ~~2016.~~financing used to support continued business growth.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the inherent use of estimates and management’s judgment in establishing those estimates. For additional information regarding critical accounting policies, please refer to our 2022 Annual Report on Form 10-K.

Liquidity

We believe cash flow from operations plus the available borrowing capacity and our current cash balance are adequate to support operating requirements, capital expenditures, projected pension plan contributions, the current dividend ~~and share repurchase programs,~~program, environmental remediation projects, and strategic ~~acquisitions.~~acquisitions for at least the next twelve months and for the foreseeable future thereafter. At ~~September 29, 2017,~~March 31, 2023, cash and cash equivalents held by our foreign operations totaled ~~$11.5~~$14.0 million. We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition, or results of operations for the foreseeable future.

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, ~~and debt-to-debt-plus-equity ratio,~~ as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016~~2022 is as follows:


	September 29,			December 31,				March 31,		December 31,
(Thousands)	2017			2016			(Thousands)	2023		2022
Cash and cash equivalents							Cash and cash equivalents	$	15,243	$	13,101
Total outstanding debt	$	4,007		$	4,615		Total outstanding debt	433,209		431,981
Cash	22,486			31,464
Net debt (cash)	(18,479		)	(26,849		)
Net debt							Net debt	$	(417,966)	$	(418,880)
Available borrowing capacity	$	266,405		$	238,886		Available borrowing capacity	$	186,788	$	185,294
Debt-to-debt-plus-equity ratio	1		%	1		%

Net debt ~~(cash)~~ is a non-GAAP financial ~~measure reflecting the Company's current liquidity~~measure. We are providing this information because we believe it is more indicative of our overall financial position. It is also a measure our management uses to assess financing and other decisions. We believe that based on our typical cash flow generated from operations, we can support a higher leverage ratio in future periods. ~~Non-GAAP financial measures, such as net debt (cash), have inherent limitations and should not be considered in isolation, or as a substitute for GAAP financial measures.~~

~~Total outstanding debt decreased $0.6 million compared to December 31, 2016.~~

The available borrowing capacity in the table above represents the additional amounts that could be borrowed under our revolving credit facility and other secured lines existing as of the end of each period depicted. The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts ~~the~~ borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments. The main cause for the increase in the available borrowing capacity at September 29, 2017 as compared to December 31, 2016 was due to increased earnings before interest, income taxes, depreciation and amortization on a trailing 12-month basis.

In ~~2015,~~January 2023, we ~~entered into an amendment to~~amended the agreement governing our $375.0 million revolving credit ~~agreement~~facility (Credit Agreement). Pursuant to the amendment, we transitioned U.S. dollar denominated borrowings from LIBOR to SOFR for both the revolving credit agreement and the term loan and increased the cap on precious metals consignment line from $600 million to $615 million.

The ~~amendment extends~~Company had previously amended and restated the Credit Agreement in connection with the HCS-Electronic Materials acquisition in November 2021. A $300 million delayed draw term loan facility was added to the Credit Agreement and the maturity date of the Credit Agreement was extended from ~~2018~~2024 to ~~2020 and~~2026. Moreover, the Credit Agreement also provides ~~more favorable pricing~~for an uncommitted incremental facility whereby, under certain ~~circumstances. In addition,~~conditions, the ~~amendment~~Company may be able to borrow additional term loans in an aggregate amount not to exceed $150.0 million. The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment ~~borrowing, or leasing~~ of precious metals and copper, and provides enhanced flexibility to finance acquisitions and other strategic initiatives. ~~The~~Borrowings under the Credit Agreement isare secured by substantially all of the assets of the Company and its direct subsidiaries, with the exception of non-mining real property, precious metal, copper and certain other assets.

The Credit Agreement allows usthe Company to borrow money at a premium over ~~LIBOR~~SOFR, following the January 2023 amendment, or ~~the~~ prime rate and at varying maturities. The premium resets quarterly according to the terms and conditions ~~available under~~stipulated in the ~~Credit Agreement.~~

agreement. The Credit Agreement includes restrictive covenants ~~including incurring~~relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases. In addition, the Credit Agreement includes covenants ~~subject~~that limit the Company to a maximum leverage ratio and a minimum ~~fixed charge~~interest coverage ratio. We were in compliance with all of our debt covenants as of ~~September 29, 2017~~March 31, 2023 and December 31, ~~2016.~~2022. Cash on hand ~~does not affect~~up to $25 million can benefit the covenants orand may benefit the borrowing capacity under ~~our debt agreements.~~the Credit Agreement.

In November 2021, we completed the acquisition of HCS-Electronic Materials. The Company financed the purchase price for the HCS-Electronic Materials acquisition with a new $300 million five-year term loan pursuant to its delayed draw term loan facility under the Credit Agreement and $103 million of borrowings under its amended revolving credit facility. The interest rate for the term loan is based on SOFR, following the January 2023 amendment, plus a tiered rate determined by the Company's quarterly leverage ratio.

Portions of our business utilize off-balance sheet consignment arrangements allowing us to ~~finance~~use metal ~~requirements.~~owned by precious metal consignors as we manufacture product for our customers. Metal is purchased from the precious metal consignor and sold to our customer at the time of product shipment. Expansion of business volumes and/or higher metal prices can put pressure on the consignment line limitations from time to time. AsIn August 2022, we entered into a ~~result, we~~precious metals consignment agreement, maturing on August 31, 2025, which replaced the consignment agreements that would have ~~negotiated increases in the available capacity under existing lines, added additional lines, and extended the maturity dates of existing lines in recent years.~~matured on August 27, 2022. The available and unused capacity under the metal ~~financing lines~~consignment agreements expiring in August 2025 totaled approximately ~~$149.3~~$247.5 million as of ~~September 29, 2017.~~March 31, 2023, compared to $241.9 million as of December 31, 2022. The availability is determined by Board approved levels and actual ~~line~~ capacity.

In January 2014, our Board of Directors approved a plan to repurchase up to $50.0 million of our common stock. The timing of the share repurchases will depend on several factors, including market and business conditions, our cash flow, debt levels, and other investment opportunities. There is no minimum quantity requirement to repurchase our common stock for a given year, and the repurchases may be discontinued at any time. ~~In the first nine months of 2017, we repurchased 32,409 shares at a cost of $1.1 million.~~ We did not repurchase any shares under this program in the ~~third~~first quarter of ~~2017.~~2023. Since the approval of the repurchase plan, we have purchased ~~1,082,264~~1,254,264 shares at a total cost of ~~$34.3 million.~~$41.7 million, or an average of $33.23 per share.

~~In the third quarter and first nine months of 2017, we~~We paid cash dividends of ~~$2.0~~$2.6 million ~~and $5.9 million, respectively,~~ on our common ~~stock.~~stock in the first quarter of 2023. We intend to pay a quarterly dividend on an ongoing basis, subject to a determination that the dividend remains in the best interest of our shareholders.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We maintain the majority of the precious metals and portions of the copper we use 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 ~~$300.7~~$367.5 million and $373.1 million as of ~~September 29, 2017, versus $194.8 million as of~~March 31, 2023 and December 31, ~~2016.~~2022, respectively. We were in compliance with all of the covenants contained in the consignment agreements as of ~~September 29, 2017 and December~~March 31, ~~2016.~~2023. For additional information on our contractual and other obligations, refer to our ~~Form 10-K for the year ended December 31, 2016.~~

~~CRITICAL ACCOUNTING POLICIES~~

For additional information regarding critical accounting policies, please refer to our Form 10-K for the year ended December 31, 2016. There have been no material changes to our critical accounting policies subsequent to the issuance of our2022 Annual Report on Form 10-K.

Forward-looking ~~Statements~~

Statements: Portions of the narrative set forth in this document that are not statements of historical or current facts are forward-looking statements. Our actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein:


▪	~~Actual net sales, operating rates, and margins for 2017;~~


▪	~~Our ability to effectively integrate the HTB acquisition;~~


▪	~~The global economy;~~


▪	~~The impact of any U.S. Federal Government shutdowns and sequestrations;~~


▪	The condition of the markets which we serve, whether defined geographically or by segment, with the major market segments being: consumer electronics, industrial components, defense, medical, automotive electronics, telecommunications infrastructure, energy, commercial aerospace, and science;

▪

~~Changes~~ the global economy, including inflationary pressures, potential future recessionary conditions and the impact of tariffs and trade agreements; the impact of any U.S. Federal Government shutdowns or sequestrations; the condition of the markets which we serve, whether defined geographically or by segment; changes in product mix and the financial condition of customers; our success in developing and introducing new products and new product ramp-up rates; our success in passing through the costs of raw materials to customers or otherwise mitigating fluctuating prices for those materials, including the impact of fluctuating prices on inventory values; our success in identifying acquisition candidates and in acquiring and integrating such businesses; the impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions; our success in implementing our strategic plans and the timely and successful start-up and completion of any capital projects; other financial and economic factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal consignment fees, tax rates, exchange rates, interest rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, credit availability, and the impact of the Company’s stock price on the cost of incentive compensation plans; the uncertainties related to the impact of war, terrorist activities, and acts of God; changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations; the conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects; the disruptions in operations from, and other effects of, catastrophic and other extraordinary events including the COVID-19 pandemic and the conflict between Russia and Ukraine; realization of expected financial benefits expected from the Inflation Reduction Act of 2022;and the ~~financial condition of customers;~~


▪	~~Our success in developing and introducing new products and new product ramp-up rates;~~


▪	~~Our success in passing through the costs of raw materials to customers or otherwise mitigating fluctuating prices for those materials, including the impact of fluctuating prices on inventory values;~~


▪	~~Our success in identifying acquisition candidates and in acquiring and integrating such businesses;~~


▪	~~The impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions;~~


▪	~~Our success in implementing our strategic plans and the timely and successful completion and start-up of any capital projects;~~


▪	~~The availability of adequate lines of credit and the associated interest rates;~~

▪

Other financial factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal financing fees, tax rates, exchange rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, and the impact of the Company’s stock price on the cost of incentive compensation plans;


▪	~~The uncertainties related to the impact of war, terrorist activities, and acts of God;~~


▪	~~Changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations;~~


▪	~~The conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects;~~


▪	~~The success of the realignment of our businesses;~~


▪	~~Our ability to strengthen our internal control over financial reporting and disclosure controls and procedures; and~~

~~The~~ risk factors set forth in Part 1, Item 1A of ~~our~~the Company's 2022 Annual Report on Form ~~10-K for the year ended December 31, 2016.~~10-K.



Item 3.			Quantitative and Qualitative Disclosures about Market Risk

For information regarding market risks, refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Annual Report on Form ~~10-K for the year ended December 31, 2016.~~10-K. There have been no material changes in our market risks since the inclusion of this discussion in our 2022 Annual Report on Form 10-K.



Item 4.			Controls and Procedures

a)Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with participation of the Company's management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of disclosure controls and procedures as of ~~September 29, 2017~~March 31, 2023 pursuant to Rule 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as

amended (Exchange Act). Based on that evaluation, management, including the chief executive officer and chief financial officer, concluded that disclosure controls and procedures are effective as of ~~September 29, 2017.~~March 31, 2023.

b)Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended ~~September 29, 2017~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II OTHER INFORMATION



Item 1.			Legal Proceedings

Our subsidiaries and our holding company are subject, from time to time, to a variety of civil and administrative proceedings arising out of our normal operations, including, without limitation, product liability claims, health, safety, and environmental claims, and employment-related actions. Among such proceedings are cases alleging that plaintiffs have contracted, or have been placed at risk of contracting, beryllium sensitization or chronic beryllium disease or other lung conditions as a result of exposure to beryllium (beryllium cases). The plaintiffs in beryllium cases seek recovery under negligence and various other legal theories and demand compensatory and often punitive damages, in many cases of an unspecified sum. Spouses of some plaintiffs claim loss of consortium.

~~The information presented~~

Beryllium Claims

As of March 31, 2023, our subsidiary, Materion Brush Inc., was a defendant in one beryllium case. In Richard Miller v. Dolphin, Inc. et al., case number CV2020-005163, filed in the ~~Legal Proceedings section~~Superior Court of ~~Note N ("Contingencies")~~Arizona, Maricopa County, the Company is one of six named defendants and 100 Doe defendants. The plaintiff alleges that he contracted beryllium disease from exposures to beryllium-containing products supplied to his employer, Karsten Manufacturing Corporation, where he was a production worker, and asserts claims for negligence, strict liability – failure to warn, strict liability – design defect, and fraudulent concealment. The plaintiff seeks general damages, medical expenses, loss of earnings, consequential damages, and punitive damages, and his wife claims loss of consortium. A co-defendant, Dolphin, Inc., filed a cross-claim against the Company for indemnification. On August 12, 2020, the Company moved to dismiss the cross-claim for failure to state a claim upon which relief can be granted. The court denied the motion on October 23, 2020. On December 7, 2020, the Company filed a Petition for Special Action in the Court of Appeals seeking to appeal the denial of the ~~Notes~~motion to ~~Consolidated Financial Statements (Unaudited) is incorporated herein by reference.~~dismiss the cross-claim. The Court of Appeals declined to accept jurisdiction on December 30, 2020. The court entered a scheduling order on September 14, 2021 that did not set a date for trial. Amended scheduling orders were entered on April 8, 2022, August 4, 2022, and November 1, 2022 that likewise did not set a trial date. The Company believes that it has substantive defenses and intends to vigorously defend this suit.

No beryllium cases were filed in the first quarter of 2023.

The Company has insurance coverage, which may respond, subject to an annual deductible.

Other Claims

In November 2022, the parties reached a settlement for an immaterial amount. The Court preliminarily approved the settlement on March 30, 2023 and set a final approval hearing for July 2023.



Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to repurchases of common stock made by us during the three months ended ~~September 29, 2017~~March 31, 2023.

Period
Total Number of Shares Purchased (1)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 through August 4, 2017
895

$ 38.42

—

$ 15,703,744
August 5 through September 1, 2017
401

38.16

—

15,703,744
September 1 through September 29, 2017
1,062

42.88

—

15,703,744
Total
2,358

$ 40.38

—

$ 15,703,744


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 through February 3, 2023	—	$	—	—	$	8,316,239
February 4 through March 3, 2023	26,823	107.67		—	8,316,239
March 4 through March 31, 2023	6,529	111.23		—	8,316,239
Total	33,352	$	108.37	—	$	8,316,239



(1)		~~Includes 895, 401, and 1,062~~Represents shares surrendered to the Company ~~in July, August, and September, respectively,~~ by employees to satisfy tax withholding obligations on ~~equity awards~~stock appreciation rights issued under the Company's stock incentive plan.
(2)
~~(2)~~	On January 14, 2014, we announced that our Board of Directors had authorized the repurchase of up to $50.0 million of our common stock. WeDuring the three months ended March 31, 2023 we did not repurchase any shares under this ~~program during the third quarter of 2017.~~program. As of ~~September 29, 2017, $15.7~~March 31, 2023 $8.3 million may still be purchased under the program.



Item 4.			Mine Safety Disclosures

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this quarterly report on Form 10-Q.



~~Item 6.~~	~~Exhibits~~



~~31.1~~Item 6.			Exhibits

All documents referenced below were filed pursuant to the Exchange Act by Materion Corporation, file number 001-15885, unless otherwise noted.


4.4						Amendment No. 1 dated as of January 13, 2023 to Fourth Amended and Restated Credit Agreement dated as of October 27, 2021, by and among Materion Corporation (the “Company”), Materion Netherlands B.V. (the “Dutch Borrower” and, together with the Company, the “Borrowers”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), under that certain Fourth Amended and Restated Credit Agreement dated as of October 27, 2021 by and among the Company, the Dutch Borrower, the other Foreign Subsidiary Borrowers from time to time party thereto (filed as Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022), incorporated herein by reference.
10.1						Materion and Subsidiaries Management Incentive Plan for the 2023 Plan Year*
10.2						Form of 2023 Performance-Based Restricted Stock Units Agreement under the Materion Corporation 2006 Stock Incentive Plan (As Amended and Restated as of May 3, 2017), covering grants made in 2023*
10.3						Form of 202 3 Restricted Stock Unit Agreement (Stock-Settled) under the Materion Corporation 2006 Stock Incentive Plan (As Amended and Restated as of May 3, 2017), covering grants made in 202 3 *
10.4						Form of 202 3 Appreciation Rights Agreement under the Materion Corporation 2006 Stock Incentive Plan (As Amended and Restated as of May 3, 2017), covering grants made in 202 3 *
31.1						Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a)*
31.2						Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a)*
32						Certifications of Chief Executive Officer and Chief Financial Officer required by 18 U.S.C. Section 1350*
95						Mine Safety Disclosure Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act for the period ended September 29, 2017March 31, 2023
101.INS						XBRL Instance DocumentDocument - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document*
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)

*Submitted electronically herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MATERION CORPORATION

~~MATERION CORPORATION~~

Dated: May 3, 2023

~~Dated: October 26, 2017~~

/s/ ~~Joseph P. Kelley~~ Shelly M. Chadwick

~~Joseph P. Kelley~~Shelly M. Chadwick

Vice President, Finance and Chief Financial Officer

(Principal Financial ~~and Accounting~~ Officer)



Ohio		34-1919973
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~6070 Parkland Blvd., Mayfield Heights, Ohio~~	~~44124~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	MTRN	New York Stock Exchange



~~Large accelerated filer~~ þ			~~Accelerated filer~~ ¨
~~Non-accelerated filer~~ ¨ ~~(Do not check if a smaller reporting company)~~			~~Smaller reporting company~~ ¨
			~~Emerging growth company~~ ¨



ý	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



	Third Quarter Ended				Nine Months Ended
	Sept. 29,		Sept. 30,		Sept. 29,		Sept. 30,
(Thousands, except per share amounts)	2017		2016		2017		2016
Net sales	$	294,268	$	249,619	$	830,779	$	734,906
Cost of sales	239,065		198,864		678,023		595,488
Gross margin	55,203		50,755		152,756		139,418
Selling, general, and administrative expense	36,415		34,177		108,118		97,101
Research and development expense	3,429		3,237		10,103		9,860
Other—net	3,801		3,190		9,823		8,997
Operating profit	11,558		10,151		24,712		23,460
Interest expense—net	533		490		1,721		1,417
Income before income taxes	11,025		9,661		22,991		22,043
Income tax expense	1,705		1,616		3,308		3,081
Net income	$	9,320	$	8,045	$	19,683	$	18,962
Basic earnings per share:
Net income per share of common stock	$	0.47	$	0.40	$	0.98	$	0.95
Diluted earnings per share:
Net income per share of common stock	$	0.46	$	0.40	$	0.97	$	0.94
Cash dividends per share	$	0.100	$	0.095	$	0.295	$	0.280
Weighted-average number of shares of common stock outstanding:
Basic	20,040		19,957		20,007		19,996
Diluted	20,411		20,192		20,361		20,209



(Thousands)	Amount
Assets:
Inventories	$	7,221
Prepaid and other current assets	1,107
Long-term deferred income taxes	1,450
Property, plant, and equipment	7,637
Intangible assets	3,236
Goodwill	2,605
Total assets acquired	$	23,256

Liabilities:
Other liabilities and accrued items	$	1,030
Other long-term liabilities	430
Retirement and post-employment benefits	5,292
Total liabilities assumed	$	6,752

Total purchase price	$	16,504



(Thousands)	Value at Acquisition		Useful Life
Customer relationships	$	1,861	15 years
Technology	1,375		3 years
Total	$	3,236



(Thousands)	Performance Alloys and Composites		Advanced Materials		Precision Coatings		Other			Total
Third Quarter 2017
Net sales	$	109,393	$	157,770	$	27,105	$	—		$	294,268
Intersegment sales	54		12,814		—		—			12,868
Value-added sales	90,637		60,391		21,896		(1,542		)	171,382
Operating profit (loss)	6,786		9,756		1,613		(6,597		)	11,558
Third Quarter 2016
Net sales	$	103,699	$	107,250	$	38,670	$	—		$	249,619
Intersegment sales	47		21,505		—		—			21,552
Value-added sales	87,247		45,960		25,803		(2,009		)	157,001
Operating profit (loss)	4,357		8,245		3,432		(5,883		)	10,151

First Nine Months 2017
Net sales	$	310,487	$	429,550	$	90,742	$	—		$	830,779
Intersegment sales	113		42,508		—		—			42,621
Value-added sales	262,534		169,720		67,810		(3,602		)	496,462
Operating profit (loss)	12,523		24,873		6,145		(18,829		)	24,712
First Nine Months 2016
Net sales	$	292,024	$	328,927	$	113,955	$	—		$	734,906
Intersegment sales	226		54,110		—		—			54,336
Value-added sales	248,799		135,019		75,548		(4,573		)	454,793
Operating profit (loss)	6,103		20,748		9,803		(13,194		)	23,460



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 through August 4, 2017	895	$	38.42	—	$	15,703,744
August 5 through September 1, 2017	401	38.16		—	15,703,744
September 1 through September 29, 2017	1,062	42.88		—	15,703,744
Total	2,358	$	40.38	—	$	15,703,744