MTRN - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to the Materion Corporation Year-End 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Shamrock, Vice President, Corporate Controller, Investor Relations. sir. you, Thank

begin. You may

Steve Shamrock

President This and is Vijayvargiya, President, morning. Kelley, Shamrock, and Officer. Steve Relations. With Controller Vice Joe Investor and Jugal Executive Corporate Chief me Financial Chief Good Officer; Vice and today President is

call today's company's will we the as follows. performance move outlook as and the forward Our provide conference Jugal comments XXXX. opening format is for and into on XXXX Vijayvargiya strategic direction

and will Kelley and review detailed we for the results up quarter highlights, Joe financial full the call year Jugal, then questions. open will Following for

forward-looking by of we listed issued made in me Before a statements during based future performance actual let remind begin, section the release earnings expectations. may forward-looking a factors are of outlook this investors materially the those result factors. that in Those the including morning. current any portion, are we company's press contemplated on statements announcement, question-and-answer as this and differ in The variety the that from

Additionally, and profit, current And adjusted comments net it the settlement share in periods GAAP year year comparative special number Jugal for tax for to pension over in and items, non-recurring now, numbers non-cash charges Attachment purposes income are prior certain The turn with the made this per earnings and five remove adjustments. adjustments in regard both I'll reflect comments. press income his release. shown and to morning's operating

Jugal Vijayvargiya

This both full and I'm Earnings a also $XXX sales value-added consecutive today's quarter everyone. bottom call, line welcome, while to fourth quarter a of share to improved top and and per Steve, Thanks, quarter $X.XX by of for eighth the record year. fourth pleased results record. quarter the report the On quarter very million, record growth. represent the fourth grew for XX%, for

quarterly all-time sales, margin. operating and profit delivered operating business value-added for profit records PAC Our

operating greater delivered and of than share, second consecutive record full businesses. an for $X.XX prior X% of record $XXX year a cover including ever, year. PC year double-digit million, For profit time growth. businesses the operating sales PAC reached All the from first on prior from detail three financials. improvement and earnings margins will the we our margins Joe reported growth per XX% for the the earnings additional all-time year, XX% high profit representing of Value-added

me shift Let on provide you update strategy, previous with progress gears calls. and our on a reviewed multi-pillar

we performance-based focus all As pillars transformation, laser-like around excellence, excellence, inorganic a supported a established commercial culture. operational on innovation, growth and by reminder, digital

evidenced the in reduced by step German margins. the our at of cost improvements inventory contributed and efficiency profit years we've by cash flow. Our midst made profitable force X% reviewed. of structure our sales sales us made contributed incidents. sales to improved has by In of global teams we have establishing excellence, enabled creating of delivering the and safety our and just growth. capital focus levels sales with to of Yield the reducing focus record value-added value-based led our And capital, safety most level the operating on operational has results the profit. In This on underperforming consistently strong world-class creating commercial in I significantly rates best substantial essential excellence, priority, aspirations zero achieving in and achieve across mix, in global improving pillars and our force, a our improved been these third while achieving lowering sites X.X%, XX overriding progress to sales our We're a businesses majority our to a addressing significant five-plus pricing, sites efficient to the working facility. history, working With a growth. workforce supporting leading to

of each established increased R&D we pillar, groups We growth. investments and and and eliminate within new This is products. product business make redundancies new our and to continue strategic spending drive As innovation part X%, organic developing efforts us of pipeline commercializing accelerate the fund the technology in units. by global to allowing innovation we'll and to

pillar, the active been evaluating for Within as not just stated But the of opportunities. we've we M&A we've inorganic do M&A. sake doing growth in before, will acquisition

While intent, in M&A we not continue find an fit financial will focus our and did on acquisition strategic that XXXX. we to

Our targets. liquidity flexibility as available give the to flow us potential we continue generation strong and act, cash evaluating

and we're We'll processes platform downtime As associated tools leveraging pillar, and convert better improve to operational to embrace understand tools a This master part competitiveness. opportunities to as be to further and forward, improve cost will our our major digital systems customer to started going pillar efficiency. continue implement sharpener continue of the business leverage improve We've equipment digital standardize and tools. to to and sites support. see data structure and fully ERP we common digital to

the company. With these been throughout driving culture a pillars, we've performance-based

proof results years the cultural taking as quarterly consistent the of last two for serve Our place. transformation

One power to company more forward, units. the that across much uneven, In created individual developing many regions leverage to is intended improvements This the to businesses. regional move busy launched in applies than cases, We will substantial functions, has we line bottom to we One core Materion dividends. entire that I implementation is leader One One senior serve has Materion commenced. effective and Materion addition Materion, to been idea One framework, competencies fully pay business both top as of anticipate unified-focused the organizations Materion. the drive pillar efforts further in creating inconsistent and and performance. Each

objective As a down all leveraging One We on we company doubling the power of the the Materials about surrounding We're Materion. returns. remains each uncertainty pillar delivering high-performing Advanced superior XXXX, fully and read us. same, create our enter

in consecutive we growth earnings third to all However, the the forward aspects delivering committed and company are for moving year. significant

look prior to updates earnings in range, calls. progress a $X.XX forward I on be from providing XX% XX% year. to expect improvement our We the $X.XX to in future to the

Joe to over call the cover details. financial turn to I'll Now,

Joe Kelley

Jugal. on And joining everyone us today. welcome you, to the call Thank

my on assumptions cash fourth the comments quarter and segment, During and and sheet, earnings finally, provide modeling will I comments, brief the outlook cover highlights, XXXX financial balance review by cover full-year XXXX. for profitability flow

we Following my sales for and quarter for Fourth the consecutive adjusted quarter operating was strong open and growth the very Materion, will quarter XXXX marks line value-added eight questions. a remarks, year-over-year in profit. with

our provides driven precious of continued metal into consistent Our sales, is we this growth value-added of XXXX. as costs strategy, delivery it head Fourth momentum were $XXX.X profitable is quarter Jugal referenced. sales set of strategy diversification, pass-through demand the the And by in which impact quarter end execution this XXXX value-added exclude The year the which value-added consumer multi-pillar prior our million, drop-off commercial differentiated X% market electronics. We record record, up success portfolio despite and a versus fourth sales the execution. quarter. in largest product quarter in of fourth fourth exemplifies market

favorable in in demand. sales energy, execution to of infrastructure. inventory telecommunications overall previous demand. was medical and due $XX.X of with of in weaker of customers was due Despite XXXX were our value-added response display related lower new or decrease softness share quarter. electronics, end We in in top wireless and was fourth combination quarters have product the in sales market fourth seven quarters, in value-added growth now product of initiatives other New to the consumer consumer the million portion electronics gains, combined and growth. particularly and in added delivered profit quarter this The end to in strong as consecutive year-over-year demand stronger to end-market consumer $XX.X with in XX value wins sales. markets with markets market, continue performance business of Gross the commercial markets, levels sales year-over-year million, mix to delivered growth XX% six Consistent these sales a rebalance

quarter. points margins Selling, the flat $X.X XX%, year prior a increase the growth. expanded fourth X% gross volume of LIFO profit basis general million, to expense was copper prior performance million, Gross million, $XX.X driven commercial Excluding and improvements inventory administrative over totaled year. and XXX operational the benefit of compared from $XX.X by leveraging sales adjusted to and an profit

efficiency headcount completed the enable levels million efficiencies annually. SG&A approximately I that XX severance our actions location. manufacturing in reduction Materials from of million represents to profit operation reduction fourth relocated in Advanced in of in XX% July both million quarter in These As XXXX. of $XX.X to The $X company related investors in value-added sales, pay our stand-alone XX% we in and reflect Materion incurred operation. totaled The workforce, XXXX percentage a to possible in the facility. Operating German now quarter excess facility savings of a $X.X and employees fourth was of the expense remind restructuring the German a Heraeus will the new periods. approximately legacy cost

$XX an copper adjusted quarter. million, delivered the benefit, XX% was in sales or compared of increase and XXXX. to quarter growth double-digit and operational XX% severance value-added of restructuring, Excluding the second inventory fourth profit initiatives, margins consecutive with profit the operating million operating volume sales, combined adjusted for of Commercial $XX.X LIFO of operating

other to expense. now Moving non-operating

go-forward pension of in on and basis announced, secure we U.S. to October benefits previously costs annuitized As liability a and status. reduce and domestic to requirements of participants payment XXXX, funding our in for XX% approximately pension volatility pension

maximize strengthened of funding the has tax charge fourth and million And to we remaining The status non-cash, retiree combination actions of the liability has settlement XXXX. quarter. result, $XXX overall the a $XX approximately recognized financial XX% reduced The the a year-end savings, has and approximately $XXX company. in obligation been liability from Materion U.S. as of significantly XXXX in the annuitization funded taken million pension benefit of pension position As pension to to defined non-operating of increased the million. the pension

fourth Looking recorded $X.X in of tax at million the benefit of taxes, a XXXX. income we quarter

the on tax was tax slightly U.S. quarter higher effective the reform rate earnings. of strategies, mix items Excluding to our planning legislation historical run the and the discrete tax related than rate impact XX%, based our in from new

a tax of the benefit reform. $XX.X For was million tax included the impact U.S. of the new finalizing year, an from full $X.X million, benefit income which

XXXX previous XX%, share the in change per fourth rate Adjusted adjusted fourth from guidance. impacts tax record earnings $X.XX quarter with was $X.XX the of effective the quarter recorded Excluding totaled of up line the the law full XXXX. our in share XX% special tax of a diluted, and items, per year

record produce and to execution financial differentiated commercial operational results. focus product portfolio continues Our and on

consolidated a million a to Let XXXX and year me on in $XXX record full-year X% up now for comment financial sales second for XXXX, performance. the the Value-added full-year row. briefly XXXX, compared totaled

profit demand, to over points the Full-year Excluding of XX% adjusted the the $XX.X the year grew million of versus sales, stronger to value-added per million, operating percentage in Full-year up due performance $X.XX energy, to commercial base $X.XX and a XXXX XXXX. per Expressed profit X%. $XX compared prior totaled in a industrial operating adjusted basis increase improvements particularly defense earnings share. profit end-markets. and share, which business totaled Heraeus of acquisition, earnings expanded year-over-year X% as adjusted margins adjusted operating XXXX XX% XXXX XXX represents

prior quarter Value-added added sales sales segment. with drilling let and totaled fourth into million of contributor demand. for end-market review due quarter is of wins performance to compared beryllium quarter. to Now, copper growth commercial in XXXX and quarter year-over-year were $XXX.X performance the was for the a and X% fourth me by Higher any Composites. The improvements $X.X Operating Performance and versus both Starting increase $XX.X applications a to profit fourth XXXX the first and in end-market XXXX in million ToughMet up record value products. business new Alloys improved major energy full-year million, the year. sales business in due

the well nearly represents copper This million, of XX%, $XX adjusted and Excluding profit the improvements end-market quarter as stronger greater than the the LIFO commercial operating reflects XX% profit operational as value-added the made double year was across being of a and operating margins sales. amount, second and demand. prior consecutive benefit, business,

portfolio of remain We this and historical contained highly have to of return value-creating excited within profit to margins committed levels, commitment our differentiated profitability the delivering reflective products segment. and this exceeded business we to

to to $XX.X related the XXXX sales quarter display were the profit, requalification of demand the million. facility. in restructuring Materials. workforce and ongoing sales associated the of fourth behind at process been facility million of has us. portion in in relocation with facility. primarily to wireless value-added mix excluding of is German the up decrease is and softer consumer million customer headwinds profit Operating Value-added totaled German compared $X.X passing due X%, Value-added Advanced manufacturing $XX.X due sales severance, million to The compared customer $X.X the fourth quarter timing Looking lower and year. the high-quality of declined electronics XXXX The end-market in relocation all the our The are the prior new audits. to producing largely and inefficiencies volumes, sales associated unfavorable right-sized German operating manufacturing with and adjusted the ramp products product the

XXXX, For the end-market, Materials performance. X% which the was main of for the margin. Advanced total a segment's decreased in delivered this macroeconomic conditions value-added XX% Challenging XXXX profit consumer behind and value-added XX% full-year electronics sales represents driver sales segment over operating the

We to to are historical the levels committed business this XX% margin operating returning range. profit in

finally now Precision profit $X.X of X% of to due in sales million year-over-year Operating was volume compared filter segment improvement and optical quarter XX% value-added million fourth Turning $XX.X primarily the the Fourth more totaled to end-market. Coatings driven for up value-added by quarter stronger than defense fourth compared to Precision the The segment. XXXX, of sales XXXX. $XX.X the manufacturing which the quarter consignment increased Coatings to or million, $X.X were offset in XXXX, precious sales higher cost. metal quarter sales efficiencies, in of in fourth million the

an value-added consistently double-digit segment recorded reported the We due manufacturing Precision XX%, $XX.X X% million products in operating profit to and of in record This optical Coatings delivering full strong our For increase this sales, of an XXXX, filter compared improvements. margin to year margins to XXXX. business. a the performance remain committed performance segment of all-time

prior operations year pension Cash to earnings domestic in our improved to pension our and an capital despite efficiencies. Moving cash due operating compared improved and contributions the now flow working million XXXX stronger plan. balance to cash the We flow improved $XX million sheet to year-over-year $X from fund flow. of incremental

calls, result, our consistently to support strengthened further already and to we previous allocation sheet opportunities, growth inorganic a opportunities including mentioned As on return priorities and organic available solid balance liquidity shareholders. significant growth further capital have

$XX investments cash run flow For $X operations financial $XX depreciation approximately now in million, development million. should should Mine to earnings than XXXX, approximately million modeling And purposes momentum finally, exiting we The in expect outlook to on million. XX% XXXX. for run XXXX, spending XXXX. Annual be capital rate the growth $XX amortization tax should the should XX%. Based and effective $XX from have continue be million. to we profitable greater

remain quarter guiding At specific impact to concludes leveraging $X.XX company earnings XXXX From condition markets macroeconomic and XXXX we our range over these This has performance XXXX and remarks. the improvement be results. focused the XXXX to on multi-pillar share perspective, factors, first XX% quarterly a remained could we to $X.XX executing on uncertain However, our commercial strategy approximately end guidance more drive Based to and quarter operational than we per share, serve. a higher earnings. XX% from a of first full-year level, we are improvements our profitable earnings expect prepared growth. to per XX%

questions. for line the open now will We

Operator

Thank you.

Instructions] [Operator session. question-and-answer a conducting Thank be you. now will We

of Our Jefferies. with proceed first Please question. question Englert comes Martin from with your the line

Martin Englert

see wanted provide some can close electronics. everyone. continued to in color called bit trending that's whether the and this if or then how the is see smartphones, morning, headwinds adjusting I'd displays to in quarter-on-quarter is first out, and be consumer little you more supply headwinds to Good to you around started we're how I getting a half And 'XX? and into when due going of detail maybe the destock the curious, think chain that? bottom know I to see XQ? that you Hi. over you

Jugal Vijayvargiya

Yes.

me to give around some color you try you numbers let Martin, give So, that. then and some

in basically flat company were total, business level, we electronics at consumer the year-over-year. Our

down quarter, about were we fourth However, X%. in the

market the recover And As that about think, just would know, expectation of starting was back maybe and level I Unfortunately, destocking in around that to that QX. the maybe the was really We was there throughout probably everybody see expecting. started the headwinds year, you general year. time. then half to didn't improve start the sales the the destocking to just the

continue As some I face at things electronics going, where to will think look headwinds. we order consumer and we our entry see

is on all, a of low just First QX consumer quarter based seasonality. electronics anyway, very

start headwinds, So, we of recover, and materialize. this continue the caution it will think, year back of There's headwinds, was year, to some well commentary then both there you've the general but it and to And expect maybe into that just QX. half just headwinds I market I will didn't that the got seasonality. want in headwinds for us expectation same that type last as the

make very place, from we're we right weather and So, we at, the as in that happened sure in the of about able cost that market, be standpoint, is to profitability our I thing looking have standpoint, sure right it measures We're I the just great think have well. that positioning our storm, to from very very, year as pricing we're can be to a this making place speak, think, But we diversified. sort cautious. the our market measures

you we've and infrastructure, defense, automotive some And maybe with of in As telecom deal think and and cetera. and the in really et got electronics. I and allows that know, us good consumer industrial positions headwinds medical energy to

X% in sales. year-over-year even hit still our So, increase were overall a in consumer example, electronics X% able QX, was we to for though down value-added

making us, of are value-added trying So, but dealt I head-on it's the sure as to the is that equation side mean, it markets, dealing an through other is as we're more one get basically sales cost for issue that and well with.

Martin Englert

Kind on into year-on-year. delving all Thank the the that. appreciate of you. I detail

for XXXX Can in So, is what on was consumer talk flattish value-added electronics the guide for in factored you sales? about it your group. for

Jugal Vijayvargiya

Yes.

added think, going So, challenging a to environment, I sales. for we're value I see the think,

expect I year, to be to perhaps expect first it the I electronics would perhaps to then be a a very, As in second uptick, in flat, but half of down. half see just year, really we think, the close being And the of indicated, flat. the consumer just maybe could I I slight very

a recovers year be electronics to for the what hopefully if see, saying. as year the reacts see, I market see is progresses right and let's in mean, I'm slight better consumer full So, than the negative But, what is expect would general, let's now. and I

Martin Englert

product across one. price base XXXX the with as Thanks you've I could one seeing last regarding again achieve of able some for your increases that And been discuss price move what and you detail. to you're we maybe if Could the what here? portfolio through

Jugal Vijayvargiya

Yes.

to in the understand And are And where for opportunities of that pricing pricing to important with very for we will providing. this 'XX, on that type that that initiative the a and value-based model the We is right contracts don't experienced for excellence So, have of has still then, commercial 'XX. a pillar. has and our reflect for tell us, we not gone made I value major been I our there But the focused we the 'XX. pricing customers, item sure get what mean, certainly making a some any at thing we significant we've improvements our that planning that we're believe we second that, that and we're that value doesn't through contract-by-contract is a initiative been as new in database we level type are and for and tool us. that, pricing for us of using major have value. looked part customers getting we're you that really

pillar. very commercial general, excellence it's important our a for element in in us So,

Martin Englert

throughout the the Thanks, Okay. robust course results congratulations And on year. the of again.

Operator

line comes question. Marshall question your with of the Sidoti. Edward from next proceed with Our Please

Edward Marshall

Hi, Good morning. gentlemen.

Jugal Vijayvargiya

Hi. morning. Good

Edward Marshall

on to the So, AM. guess, want I start, I

for of get of about talked margins, and the the of also business, maybe guidance there. the XXXX get if so the put kind perspective when as I'm but any then to that to commitment XX% that embedded your revenue margin operating kind for from that range can kind a in can outlook you recovery talked about curious, that timing timing, kind you we you discussion, of to what's and guidance sense that Given the you a

Jugal Vijayvargiya

Yes.

sure little let we And with business are do we're let to to it we're first, can that provide happened start I going and that And just absolutely So and going. that what's where think to off of bit see say that we to getting a make me historical of, margins. back me business color, doing we now committed sort that. everything of

about major, electronics really electronics. consumer a mean for two it, big So, business part in that the One, XX% We consumer 'XX. of hit things there I talked sales are of business. that that roughly that is are business, major right? just it's

type headwind impact. an So, of is certainly to any going have

business of one through And of The inefficiencies transition second over from the thing this that, move our factory general another in Heraeus to Germany. plant we is, number a we did to plant. things, went as one, from

The customers second go glass business is, through to validate we had entire the with with business. the and glass and semi-conductor our thing business customers then and

So, then drop of move a as us that the of the and of headwind those for were result on impact electronics the that, consumer combination major just impacts business. actual items major, is sales cost result sales the of a drop

of that and our on by flavor side just is completed Martin's how electronics Now, kind out made kind as about let actually on did, electronics, a of how we perspective, 'XX, in workforce things. question that into we've as give We of cost restructuring a you in cost complete German third From particular, improvements commented, a operation consumer we a Well, the the see the consumer and of we based see significant I we way. in QX. taking as, that get me market. the

the actual we our sales for have takes back. And And customers very a it the with with glass part, so, the business customers, job. we full glass get third good that qualifying really most we requalified then recovery semiconductor I now based longer. benefit About here that the just say, would sales 'XX. and which we're on done to starting on customers should in that the the realize of is the of And side,

to That's going the going run that's during year. to So, run.

this be that to as continue see, I I every estimate see So, will I quarter as see my it business, would improve.

during Our going at the toward reaching to the quarter. I improve expectation I exit every the into fourth be expect of the in at the point back XX% probably to year the year. is historical it's think quarter, But some and half we're would going that year, XXXX going that we're margins.

Edward Marshall

And by that, confirm guidance, that quarter have that for the embedded just can what just XX% you the me in that you said? for, I'm look is is fourth you curious.

Jugal Vijayvargiya

Yes. I business, mean, we all the estimation mentioned in of The do. sales glass things that is semiconductor, is included really all to business the what the going I I we've to you. say are, just that would our recovery, of what the what

Edward Marshall

it. Got

that one And facility, it that great? impact so if the business the margin revenue quarter, might that and that, the talk from have profit to down and glass or had And would on the the impact about earnings semi, want the you transition maybe facility can the you fourth maybe break German to to on specifically the be transition other.

Jugal Vijayvargiya

Yes. bit little sales I talk about the side. can a

impact. did So, or semiconductor flavor of from we than the give first around based was for some more requalification, sales the out sales don't an Certainly, you side we business. but part and you we side our break there profit all, clearly of the But specifically glass the it. on from I'll know, a that of impact general as had site

to and customers. to get we our more away we impact and now into of more sales qualify that continue 'XX, as as go expect We

So, there was impact. an

would terms improvement a a substantial about third us give run mean, about profit say, In million indicated, 'XX. our I which as of starting impact. I fairly should the a adjusted I $X of we rate impact, is in workforce,

look potential. 'XX associated can with a you to mean, lower hit the you as sales. classify away, course, I in as a right of that hit the want then, that So at and

restructuring, margins. that a of now should substantial was impact feel why exit to year, feel that's able the to full as have the that we back it business. the and the And we with as AM our year during customers overall impact get we historical this So, we be we fairly

Edward Marshall

particular to Got is it. working business the pillar good talk And seems there And follow-up know what, I Could and forth, curious. doing. can, pretty But you to if the that some is think, you've what good now to in margins. profit be right the of is on of color specifically demand results some and part, a business then drive I done driving getting which in I'm margin? about the that the to job so PAC, but market talked to historical second really is, that's levels. you've about I

the I it digits. like of model, looks walk of back As in high-single kind kind

You're already producing above that.

you do So, Thank assume that. to you. on goes some get wanted clarity that margin down? just I

Jugal Vijayvargiya

Yes.

factors So, really, let our me of contributing just in key first is think, the PAC talk some what's about I the business to drive improvement.

we've that that done been perhaps have pricing. excellence evaluating in has a we core correct the shouldn't what So And business. goes the in businesses maybe part first, I standpoint, our really have to wasn't say pricing pillar of commercial been from or a from

go that through sure And so pricing. we making value-based and evaluate

the we that knocking new are business parts I growth mix then we pricing delivered and I mean, on Right? it, wasn't XX% based appropriately of let's just that we market. our at a certainly in and Looking the products price XX%, on door. world, So, that substantial face as that's mean them XX%, that customers' year-over-year have different growth.

doors So, products our factor. force, a was contributing knocking and sales on our promoting

certain operating continued substantial it's side, bottlenecks, us, clearly, sheet the doing fact, firm of work, a the and of are initiatives had improvements. initiatives. for the We operations, a well excellence both element work well. has said, and from operational as as efficiency We've and and that with on done lean work associated cash getting us Operational inventory very a side. So an flow what yields amount was utilized, excellence from and to maybe the lean who with on profit balance us commercial a been very, impact, improvements so outside clients at lot with as we as in important big really excellence I where looking flow player. then cash especially focused a We

the major defense been for that's well. I quite helped way that's improvement. bit mix, been by in mean, good a up So, 'XX. are market really Certainly, energy, as us markets which and two a, the a us were

those, about I 'XX, those your I be less would Yes. go But tailwinds. tailwinds look we challenged of lot want margins, a in we we to this I you would As to way. in the XX% not to business margin, a think that tell to mean, of had I certainly point a 'XX, are that no historical going

So, in mix. particular, the for example,

So same going growth for had. be are year-over-year. really, we energy, XX% example, don't to rate those XX% growth growth on substantial mean, as very type good the and that rates is we us. for defense. rates go really a growth on businesses I big had factor mix of a the are expect We rate, for I us,

think going be that I to is challenged. business This to is So, China. exposed

all environment to And has now. then know, deal a so, have general, China got with. that's overall just we slowdown macro And we as substantial that happening right

in I do, continue that's business the margins. So, this expectation XX% at

as is much we very, assure focused you that expectation driving optimistic are this going as very can possible in on forward. business. think I But I

Edward Marshall

comments, much. your Great. Thanks I all appreciate guys. very

Jugal Vijayvargiya

Ed. Thanks,

Operator

from comes KeyBanc. question. Phil Gibbs your Please question of proceed the next with Our line with

Phil Gibbs

pension come of your then in what that about million the to on what's we If $XX we potential relative the the Question should in had levels 'XX? you be the morning. in Good so, secondarily, contributions Should reduction? terms 'XX in expect And Hi. annuitization. thinking to XXXX? expense down

Jugal Vijayvargiya

profit operating Phil, the you when annuitized annuitization, Yes. at we you was look retirees. what think and our about

payments. of portion so receiving And a those we were annuitized that

expense in operating our profit assumptions. return there rates pension And included in What has discount so have forward. relates on impact as the it will to that asset impact is no the going OP,

at so 'XX, And 'XX when we expense year-over-year flat, profit operating pension included relatively look to in be flat answer. the is should

Phil Gibbs

What about contributions? your expected

Jugal Vijayvargiya

expected year $X is contributions the cash next contributions. of the plan On in million

Phil Gibbs

Okay.

So that's nice.

Jugal Vijayvargiya

up XXXX, year. by In this versus mix year still last

Phil Gibbs

Okay. Got it.

So, change. that's big a

one But had it's to has of for going very your asking fourth between between business right you tariffs on business. just because generally but impact the I particularly, for look all curious And when results, material that speaking, I if PAC, a lot and lot the discussed been of knows strong the tend the potential in about So, out. the supply how and or potential another U.S. customers then a that in China U.S. that quarter that's any has like bucked good. see sort the we from felt, early, tariffs seasonality XXXX China, and reorientation, certainly thing lot a in way know at chain to think, been normal play who we a

Jugal Vijayvargiya

Yes.

'XX, particular, direct occurring, indirect substantial I on I So don't would know, in the there that and we've Phil, a really see that impact say that will full-year for tariffs. order to that based to think in would is impact in material think you started you as tell slowdown the and what we China. in quarter, our I And the fourth for slowdown starting a experienced was what say example, I intake. I But show substantial up

a I not mean, business. XX% is less total business. it's our in very of China, our large than part Now, of

So impact, small, again, smaller it's a an but still impact. of amount

uncertainty that's and how I to out. companies around tariffs, don't the happened, things exactly general market and know think, I settle think, going are So, then countries

quarter, certainly the markets. weakness as had caused you out, and think, the fourth we then you of we that it's growth overall three at see and type experienced just during the in fourth think rates that even had in I first the type of difference. growth in we rates market I quarters the can When quarter, played our the look

probably So, around impact quarter. of the into slowdown, China us, the we do which material in year, the the have us. for enter market the of some I now then I fourth think and with the, impact especially, impact China for can impact large XXXX, to us, as for some And material uncertainty something not it's some really but not tariffs, would again, full some concerns say, a have a on

Operator

with proceed [Operator Instructions] line Marco Capital. of Rodriguez Our question. next with your question comes the Please from Stonegate

Marco Rodriguez

thank taking Good morning. my you for And questions.

Jugal Vijayvargiya

Hi, Marco.

Joe Kelley

Marco Hi,

Marco Rodriguez

various some on Hi, where if specific follow operating on thinking as the here and of here. the of segments. kind guys. questioning up of I for line you're the kind near-term obviously necessarily terms bigger to margins, then commentary on operating far not to some wanted the guidance listening remembering But of of margins margins, your long-term I'm picture correctly as of targeting in just

at if if a looking kind were on of or target, XX, of like VA a mid margin kind you teens, operating You as will, sales you will.

that So number, about kind first, then like, goal. it the there macroeconomic where talk little commentary maybe sounds that of sure hitting is to kind listening here, few years no I'm just XXXX this that just kind call make want a headwinds thinking the event, assuming you try that that bit is to hit to you of about normalized on major a And correctly. the Can maybe in that? of next

Jugal Vijayvargiya

Yes.

have not Materion as long-term I Materials remarks, prepared as don't are a So, on give a high-performing and tell my as superior out we I will in you Advanced projection margins. returns. know, But for and we developing focused company you delivering indicated

were I those words the think I used.

margins. that, And so, and we've is mid-teens also of that approximately stated type

over performance Now, look when we've period. at in the and our done historical we been, I X% the in at of that been at things we last were X% mean XXXX, right? roughly XXXX, in step-up we and we kind X% two-year were where XXXX, that's are have

the What would our say, is so, focused increase, think, would on, for company. a that of And Overall, substantial has to three double-digit I mid-teens say, margins. happened. need all be I that we're I businesses

closed XXXX. going certainly we I it's think X% out time. little a bit I of take at to mean, in

our I mid-teens get getting three to quarter But be 'XX. about to there just sure. going when think business you you, margins. 'XX And aren't we it. the certainly in around you businesses seems I'm to are all with can margins delivering we committed mentioned double-digit So, 'XX, to assure not

Marco Rodriguez

here to the some year That's place helpful. last so. shifting excellence then And Thanks. over or putting of operational been you've that the into

efficiency much a big have maybe If do you more about a improvements more working yield there to bit the make you talk and and How improvements. will? room the little capital can difference, you if

Jugal Vijayvargiya

Yes.

more no improvements make a journey I go say, item, make, operational think, and mean, never-ending is the can improvements. what you it's improvements lean I and matter you in always right? we

as event. So, don't I that, it see something one-time number a it's one,

activity a continuous think we're going and to keep it's at I it.

were biggest I and improvements in of lean journey in impacts our operational think our PAC sort business. the

continuing our and see producing we our forward. AM to move PAC as and got are customers be add journey We our I we business to in on journey business are, more kind facilities PC So, look and of the then this in the a of lot of footprint part rationalization, got we our is which general. products, where where to at lean business

tomorrow. has that to become think of part it. today I not a But that's or

issue the bigger now I efficiency board. and improvements tackling basic across and our just yield think is getting and the blocking right

we see a as to on and I going journey, continue So, it we're this on it. started

Marco Rodriguez

remarks, And maybe your it. the a sales in Got a kind of very creating If force. midst force lastly, sales efficient talk Jugal, could you more or or talked them about little bit you in your prepared the sales force sounds about efficient? to, sort making like beef what there you're up what promotions sort of of make or of what activities of efforts kind

Jugal Vijayvargiya

Yes.

But already, a a XXXX. of of highlight number got just let the we've items. things big couple So, for planned me done things and a of we've number

actually done working we've in sales a are We're one, external we globally. where number of training doing with amount substantial an force training. company So

we've actually training and we training up I done in got sessions Asia. in America. two two a here So, We've North in North America, We've more a coming have conducted think conducted in Europe.

help can't And doing then really add that day, our justice so to and I customers. do to we're mean, how people people the products to of understand technologies end it, to them continue and to provide. at we are not we help our go going effectively, our value our and market customers our if the understand the to that

So, one. And making sure at sales two we can't that's in really right located at people have because sales is the our Number aren't located sitting our customers plants, people that places. are our number our plants.

our located make located where we the customers are sales customers our got are. all are world, to sure and Our people over

we've customer's So, other we thing at got is out make the either their to backyard. get not our if way deliver properly, value-added sales of people but can to the a if then, growth. we right ideally, sure location sales figure type the our And incentivize to sales think people I in

that very So, growth of that the sure delivered of we it value-added so sales making know, profitable type growth. but sake can for deliver can right consistently as dangerous, growth, we the being be is

commercial I that main highlight clearly, part been the So, I noted on. strategy. our excellence a things some of of can we've very is working important the, But go-forward some of

Marco Rodriguez

expectation making sales an efficient? Got force? that of and you there the need the them think grow you just it it. to you Or size more maintain now Is can

Jugal Vijayvargiya

Yes.

I being think it efficient. able more make it's to

important. I think it's very very,

are I product you sure clearly sales think sales, marketing responsibilities understood the you making management, roles you and because have the have and have management. sales, defined of have force outside inside you

the their process. so right And and they our block those of individuals properly tackle. properly making role, skill set can things training all And those capability and are that has one each defined everybody so through then sure understands and

Marco Rodriguez

lot. a time. Appreciate Thanks it. your Got

Operator

now have to no closing over I to we would like Shamrock, comments. floor at time. turn for back you this questions Mr. the further

Steve Shamrock

I available A of be earnings and thank playback Thank fourth our concludes very interest XXX-XXX-XXXX. will for all this on Materion. you. of is call direct website, be to the would in you Thank We this available Shamrock, participating quarter answer call materion.com. questions. this any you This will My company's like is recorded your on Steve to morning call. and follow-up much. number XXXX the

Materion (MTRN) 16 Feb 192018 Q4 Earnings call transcript