Materion Corporation

10/30/2025 | Press release | Distributed by Public on 10/30/2025 15:12

Quarterly Report for Quarter Ending September 26, 2025 (Form 10-Q)

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 electronic, thermal, and structural applications. Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, consumer electronics, energy, and telecom and data center.
RESULTS OF OPERATIONS
Third Quarter
Third Quarter Ended
September 26, September 27, $ %
(Thousands, except per share data) 2025 2024 Change Change
Net sales $ 444,808 $ 436,715 $ 8,093 2 %
Value-added sales 263,949 263,828 121 - %
Gross margin 86,123 80,938 5,185 6 %
Gross margin as a % of net sales 19 % 19 %
Gross margin as a % of value-added sales 33 % 31 %
Selling, general, and administrative (SG&A) expense 38,256 35,009 3,247 9 %
SG&A expense as a % of net sales 9 % 8 %
SG&A expense as a % of value-added sales 14 % 13 %
Research and development (R&D) expense 6,548 7,868 (1,320) (17) %
R&D expense as a % of net sales 1 % 2 %
R&D expense as a % of value-added sales 2 % 3 %
Restructuring expense 212 1,493 (1,281) (86) %
Other-net 6,164 5,309 855 16 %
Operating profit 34,943 31,259 3,684 12 %
Other non-operating (income)-net (711) (642) (69) 11 %
Interest expense-net 7,544 8,839 (1,295) (15) %
Income before income taxes 28,110 23,062 5,048 22 %
Income tax expense 2,698 768 1,930 251 %
Net income $ 25,412 $ 22,294 $ 3,118 14 %
Diluted earnings per share $ 1.22 $ 1.07 $ 0.15 14 %
Net salesof $444.8 million in the third quarter of 2025 increased $8.1 million from $436.7 million in the third quarter of 2024. An increase in net sales in the Electronic Materials and Precision Optics segments were partially offset by a decrease in the Performance Materials segment.
The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $48.5 million when compared to the prior year period, partially offset by a decrease in volume of precious metal sales of $27.5 million driven by. The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024. Sales volumes for the Performance Materials segment were unfavorably impacted by equipment downtime. At the Company level, a decrease in the energy (17%) end market was partially offset by a $4.8 million increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year. See Note C to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.
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 precious metal market 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 in the third quarter of 2025 was relatively flat with the third quarter of 2024. Volume decreases were impacted by equipment downtime in the Performance Materials segment as well as a decrease in the energy (24%) end market. These decreases were partially offset by a $4.8 million year over year increase in raw material beryllium hydroxide sales compared to the third quarter of 2024.
Gross margin in the third quarter of 2025 was $86.1 million, an increase of 6% compared to the third quarter of 2024. Gross margin expressed as a percentage of net sales was 19% in both the third quarter of 2025 and 2024. Gross margin expressed as a percentage of value-added sales was 33% in the third quarter of 2025 compared to 31% in the third quarter of 2024. The increase in gross margin is primarily due to favorable mix, primarily in the Electronic Materials segment, partially offset by production inefficiencies in the Performance Materials segment.
SG&A expensewas $38.3 million in the third quarter of 2025, compared to $35.0 million in the third quarter of 2024. The increase in SG&A expense was primarily due to timing of incentive compensation accruals due to year to date performance. Expressed as a percentage of net sales, SG&A expense was 9% and 8% in the third quarter of 2025 and 2024, respectively. Expressed as a percentage of value-added sales, SG&A expense was 14% and 13% in the third quarter of 2025 and 2024, respectively.
R&D expenseconsists primarily of direct personnel and material costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers. R&D expense accounted for 1% and 2% of net sales in the third quarter of 2025 and 2024, respectively. R&D expense accounted for 2% and 3% of value-added sales in the third quarter of of 2025 and 2024, respectively. The decrease was driven by project timing.
Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the third quarter of 2025, we recorded $0.2 million of restructuring charges primarily in our Electronic Materials segment. In the third quarter of 2024, we recorded $1.5 million of restructuring charges across all segments. See Note E to the Consolidated Financial Statements for further discussion.
Other-net was $6.2 million of expense in the third quarter of 2025, or a $0.9 million increase from the third quarter of 2024. Refer to Note F to the Consolidated Financial Statements for details of the major components within Other-net.
Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs. Refer to Note K to the Consolidated Financial Statements for details of the components.
Interest expense-netwas $7.5 million and $8.8 million in the third quarter of 2025 and 2024, respectively. The decrease in interest expense is primarily due to an decrease in interest rates and borrowings compared to the prior year period.
Income tax expense for the third quarter of 2025 was $2.7 million, compared to $0.8 million in the third quarter of 2024. The effective tax rate for the third quarter of 2025 and 2024 was 9.6% and 3.3%, respectively. The effective tax rate for 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion, the advanced manufacturing production credit, and the foreign derived intangible income deduction. The effective tax rate for 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction. See Note G to the Consolidated Financial Statements for additional discussion.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law in the U.S. The OBBBA includes a broad range of tax provisions affecting businesses including extending permanently, with modification, certain business and international tax provisions enacted as part of the Tax Cuts and Jobs Act of 2017 and accelerating the phase-out of certain Inflation Reduction Act tax incentives. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in future years.
We have evaluated the impact of the OBBBA on our consolidated financial statements, including the effects on our annual effective tax rate, deferred tax assets and liabilities, and cash flows. Based on our analysis, we expect there to be a positive impact on cash flow in 2025 and future years, primarily driven by the changes to the limitation on the deductibility of interest expense in the OBBBA. We do not expect the OBBBA to have a material impact on our annual effective tax rate in 2025.
Nine Months
Nine Months Ended
September 26, September 27, $ %
(Thousands, except per share data) 2025 2024 Change Change
Net sales $ 1,296,796 $ 1,247,868 $ 48,928 4 %
Value-added sales 792,265 801,509 (9,244) (1) %
Gross margin 244,960 233,009 11,951 5 %
Gross margin as a % of net sales 19 % 19 %
Gross margin as a % of value-added sales 31 % 29 %
SG&A expense 108,740 104,454 4,286 4 %
SG&A expense as a % of net sales 8 % 8 %
SG&A expense as a % of value-added sales 14 % 13 %
R&D expense 19,466 22,712 (3,246) (14) %
R&D expense as a % of net sales 2 % 2 %
R&D expense as a % of value-added sales 2 % 3 %
Restructuring (income) expense 2,729 6,161 (3,432) (56) %
Other-net 15,068 14,112 956 7 %
Operating profit 98,957 85,570 13,387 16 %
Other non-operating (income)-net (1,944) (1,925) (19) 1 %
Interest expense-net 22,691 25,920 (3,229) (12) %
Income before income taxes 78,210 61,575 16,635 27 %
Income tax expense 9,960 6,836 3,124 46 %
Net income $ 68,250 $ 54,739 $ 13,511 25 %
Diluted earnings per share $ 3.27 $ 2.61 $ 0.66 25 %
Net salesof $1,296.8 million in the first nine months of 2025 increased $48.9 million from $1,247.9 million in the first nine months of 2024. Increases in net sales in the Electronic Materials and Precision Optics segments were partially offset by a decrease in the Performance Materials segment. The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $127.0 million when compared to the prior year period, partially offset by a decrease in precious metal sales of $58.6 million. The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.
At the Company level, a volume decreases in the consumer electronics (9%) end market was partially offset by a volume increase in the energy (8%) end market. Additionally, there was a $7.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year. See Note C to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.
Value-added sales of $792.3 million in the first nine months of 2025 decreased $9.2 million, or 1%, compared to the first nine months of 2024. The decrease in value-added sales was impacted by a $10.5 million decrease in sales in the first nine months of 2025 compared to the same period in the prior year due to the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024. Additionally, there was a volume decrease in the consumer electronics (11%) end market, which was partially offset by an increase in the energy (8%) end market. In addition, there was a $7.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.
Gross margin in the first nine months of 2025 was $245.0 million, an increase of 5% compared to the first nine months of 2024. Gross margin expressed as a percentage of net sales was 19% in the first nine months of 2025 and 2024. Gross margin expressed as a percentage of value-added sales increased to 31% in the first nine months of 2025 from 29% in the first nine months of 2024. Despite the impact of lower sales volumes in the first nine months of 2025, the Company experienced improved manufacturing performance, resulting in favorable margins in 2025. Gross margin in the first nine months of 2024
was unfavorably impacted by the significant pre-production costs and manufacturing inefficiencies associated with the ramp of the wide area clad facility.
SG&A expensewas $108.7 million in the first nine months of 2025, compared to $104.5 million in the first nine months of 2024. The increase in SG&A expense was primarily due to timing of incentive compensation accruals due to year to date performance. Expressed as a percentage of net sales, SG&A expense was 8% in the first nine months of 2025 and 2024, respectively. Expressed as a percentage of value-added sales, SG&A expense was 14% and 13% in the first nine months of 2025 and 2024, respectively.
R&D expense consists primarily of direct personnel and material costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers. R&D expense accounted for 2% of net sales in the first nine months of both 2025 and 2024. R&D expense accounted for 2% and 3% of value-added sales in the first nine months of 2025 and 2024, respectively.
Restructuring (income) expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the first nine months of 2025, we recorded a combined total of $2.7 million of restructuring charges in our Electronic Materials, Precision Optics, Performance Materials and Other segments. In the first nine months of 2024, we recorded a combined total of $6.2 million of restructuring charges primarily in our Precision Optics, Electronic Materials, Performance Materials and Other segments. Refer to Note E to the Consolidated Financial Statements for details.
Other-net was $15.1 million of expense in the first nine months of 2025, or a $1.0 million increase from the first nine months of 2024. Refer to Note F to the Consolidated Financial Statements for details of the major components within Other-net.
Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs. Refer to Note K to the Consolidated Financial Statements for details of the components.
Interest expense-netwas $22.7 million and $25.9 million in the first nine months of 2025 and 2024, respectively. The decrease in interest expense is primarily due to an decrease in interest rates and borrowings compared to the prior year period.
Income tax expense for the first nine months of 2025 was $10.0 million, compared to $6.8 million in the nine months of 2024. The Company's effective tax rate for the first nine months of 2025 and 2024 was 12.7% and 11.1%, respectively. The effective tax rate for the first nine months of 2025 includes a net discrete income tax benefit of $0.7 million, primarily consisting of prior year return-to-provision adjustments recorded. The effective tax rate for the first nine months of 2024 included a nominal amount of discrete income tax expense primarily consisting of $1.0 million of excess tax benefits from stock-based compensation awards offset by a $1.1 million valuation allowance recorded against deferred tax assets that are not likely to be realized for one of the Company's foreign subsidiaries. See Note G to the Consolidated Financial Statements for 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 third quarter and first nine months of 2025 and 2024 is as follows:
Third Quarter Ended Nine Months Ended
September 26, September 27, September 26, September 27,
(Thousands) 2025 2024 2025 2024
Net sales
Performance Materials $ 170,787 $ 177,376 $ 527,552 $ 533,534
Electronic Materials 246,837 236,906 696,059 641,564
Precision Optics 27,184 22,433 73,185 72,770
Other - - - -
Total $ 444,808 $ 436,715 $ 1,296,796 $ 1,247,868
Less: pass-through metal costs
Performance Materials $ 13,681 $ 13,768 $ 41,889 $ 41,283
Electronic Materials 167,137 159,067 462,497 404,953
Precision Optics 41 52 145 123
Other - - - -
Total $ 180,859 $ 172,887 $ 504,531 $ 446,359
Value-added sales
Performance Materials $ 157,106 $ 163,608 $ 485,663 $ 492,251
Electronic Materials 79,700 77,839 233,562 236,611
Precision Optics 27,143 22,381 73,040 72,647
Other - - - -
Total $ 263,949 $ 263,828 $ 792,265 $ 801,509
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 precious metal market 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 market 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 market 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
The Company consists of four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
Performance Materials
Third Quarter
Third Quarter Ended
September 26, September 27, $ %
(Thousands) 2025 2024 Change Change
Net sales $ 170,787 $ 177,376 $ (6,589) (4) %
Value-added sales 157,106 163,608 (6,502) (4) %
EBITDA 36,911 44,802 (7,891) (18) %
Net sales from the Performance Materials segment of $170.8 million in the third quarter of 2025 decreased 4% compared to net sales of $177.4 million in the third quarter of 2024. The decrease in sales was due to lower sales volumes in the energy (34%), aerospace and defense (10%) and automotive (16%) end markets primarily due to equipment downtime. These decreases were partially offset by a $4.8 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the third quarter of 2024.
Value-added sales of $157.1 million in the third quarter of 2025 were 4% lower than value-added sales of $163.6 million in the third quarter of 2024. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
EBITDA for the Performance Materials segment was $36.9 million in the third quarter of 2025, compared to $44.8 million in the third quarter of 2024. The decrease in EBITDA was driven by lower sales volumes as a result of equipment down time.
Nine Months
Nine Months Ended
September 26, September 27, $ %
(Thousands) 2025 2024 Change Change
Net sales $ 527,552 $ 533,534 $ (5,982) (1) %
Value-added sales 485,663 492,251 (6,588) (1) %
EBITDA 118,678 115,893 2,785 2 %
Net sales from the Performance Materials segment of $527.6 million in the first nine months of 2025 decreased 1% compared to net sales of $533.5 million in the first nine months of 2024. The decrease in sales was due to lower sales volumes in the consumer electronics (10%) and automotive (11%) end markets. These decreases were partially offset by increased volumes in the energy (24%) end market. Additionally, there was a $7.2 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first nine months of 2024.
Value-added sales of $485.7 million in the first nine months of 2025 were 1% lower than value-added sales of $492.3 million in the first nine months of 2024. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
EBITDA for the Performance Materials segment was $118.7 million in the first nine months of 2025 compared to $115.9 million in the first nine months of 2024. The unfavorable impacts of lower sales volumes were partially offset by manufacturing efficiencies and improved margins for the first nine months of 2025 compared to the first nine months of 2024. Additionally, there were higher costs associated with the production ramp of the precision clad strip facility in the first nine months of 2024 that did not recur in 2025, driving the increase in EBITDA.
Electronic Materials
Third Quarter
Third Quarter Ended
September 26, September 27, $ %
(Thousands) 2025 2024 Change Change
Net sales $ 246,837 $ 236,906 $ 9,931 4 %
Value-added sales 79,700 77,839 1,861 2 %
EBITDA 20,925 12,309 8,616 70 %
Net sales from the Electronic Materials segment of $246.8 million in the third quarter of 2025 were 4% higher than net sales of $236.9 million in the third quarter of 2024. The increase in net sales was primarily due to higher precious metal pass through costs, which increased net sales by $48.5 million compared to the third quarter of 2024. This was partially offset by a decrease in precious metal sales of $27.5 million in the third quarter of 2025 compared to the third quarter of 2024. The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.
Value-added sales of $79.7 million in the third quarter of 2025 increased 2% compared to value-added sales of $77.8 million in the third quarter of 2024. Overall sales volumes were relatively flat in the third quarter of 2025 compared to the third quarter of 2024, consistent with value-added sales.
EBITDA for the Electronic Materials segment was $20.9 million in the third quarter of 2025 compared to $12.3 million in the third quarter of 2024. EBITDA was impacted by favorable price/mix and production efficiencies in the third quarter of 2025, compared to the same period in the prior year.
Nine Months
Nine Months Ended
September 26, September 27, $ %
(Thousands) 2025 2024 Change Change
Net sales $ 696,059 $ 641,564 $ 54,495 8 %
Value-added sales 233,562 236,611 (3,049) (1) %
EBITDA 49,604 40,118 9,486 24 %
Net sales from the Electronic Materials segment of $696.1 million in the first nine months of 2025 were 8% higher than net sales of $641.6 million in the first nine months of 2024. The increase in net sales was primarily due to higher precious metal pass through costs, increasing net sales by approximately $127.0 million when compared to the prior year period, partially offset by a decrease in precious metal sales of $58.6 million. The decrease in precious metal sales was primarily due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024. Additionally, there were lower sales volumes in the automotive (40%) end market in the first nine months of 2025, compared to the same period in the prior year.
Value-added sales of $233.6 million in the first nine months of 2025 decreased 1% compared to value-added sales of $236.6 million in the first nine months of 2024. The decrease in value-added sales was driven by decreased sales volumes in the energy (19%) end markets as well as decrease in sales volumes due to the impact of the divestiture of the target business in Albuquerque, New Mexico that occurred in the fourth quarter of 2024.
EBITDA for the Electronic Materials segment was $49.6 million in the first nine months of 2025 compared to $40.1 million in the first nine months of 2024. EBITDA was impacted by favorable price/mix and production efficiencies in the first nine months of 2025, compared to the same period in the prior year.
Precision Optics
Third Quarter
(Thousands) Third Quarter Ended
September 26, September 27, $ %
2025 2024 Change Change
Net sales $ 27,184 $ 22,433 $ 4,751 21 %
Value-added sales 27,143 22,381 4,762 21 %
EBITDA 3,231 (39) 3,270 n.m.
Net sales from the Precision Optics segment of $27.2 million in the third quarter of 2025 increased 21% compared to net sales of $22.4 million in the third quarter of 2024. The increase was primarily due to higher sales volumes in the aerospace and defense end market (62%).
Value-added sales of $27.1 million in the third quarter of 2025 increased 21% compared to value-added sales of $22.4 million in the third quarter of 2024. The increase in value-added sales was due to the same factors driving the increase in net sales.
EBITDA for the Precision Optics segment was $3.2 million in the third quarter of 2025 compared to a slight loss in the third quarter of 2024. The increase in EBITDA was due to the impact of higher sales volumes as well as the various cost control initiatives implemented in 2024 and throughout 2025.
Nine Months
(Thousands) Nine Months Ended
September 26, September 27, $ %
2025 2024 Change Change
Net sales $ 73,185 $ 72,770 $ 415 1 %
Value-added sales 73,040 72,647 393 1 %
EBITDA 3,848 1,297 2,551 197 %
Net sales from the Precision Optics segment of $73.2 million in the first nine months of 2025 increased 1% compared to net sales of $72.8 million in the first nine months of 2024. The increase was primarily due to higher sales volumes in the aerospace and defense (28%) end market.
Value-added sales of $73.0 million in the first nine months of 2025 increased 1% compared to value-added sales of $72.6 million in the first nine months of 2024. The increase in value-added sales was due to the same factors driving the increase in net sales.
EBITDA for the Precision Optics segment was $3.8 million in the first nine months of 2025 compared to $1.3 million in the first nine months of 2024. The increase in EBITDA was due to the impact of the various cost control initiatives implemented in 2024 and throughout 2025.
Other
Third Quarter
(Thousands) Third Quarter Ended
September 26, September 27, $ %
2025 2024 Change Change
Net sales $ - $ - $ - - %
Value-added sales - - - - %
EBITDA (7,909) (6,578) (1,331) 20 %
The Other reportable segment in total includes unallocated corporate costs.
Corporate costs were $7.9 million in the third quarter of 2025 compared to $6.6 million in the third quarter of 2024. Corporate costs as a percent of Company-wide value-added sales increased from 2% in the third quarter of 2024 to 3% in the third quarter of 2025. The increase in corporate costs in the third quarter of 2025 compared to the third quarter of 2024 is primarily driven by changes in variable-based compensation and incentives.
Nine Months
(Thousands) Nine Months Ended
September 26, September 27, $ %
2025 2024 Change Change
Net sales $ - $ - $ - - %
Value-added sales - - - - %
EBITDA (19,678) (18,522) (1,156) 6 %
Corporate costs were $19.7 million in the first nine months of 2025 compared to $18.5 million in the first nine months of 2024. Corporate costs were 2% of Company-wide value-added sales in the first nine months of both 2025 and 2024. The increase in corporate costs was driven by changes in variable-based compensation and incentives. This increase was partially offset by a decrease in corporate expenses due to continued cost control initiatives implemented throughout 2024 and into 2025.
FINANCIAL POSITION
Cash Flow
A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:
Nine Months Ended
September 26, September 27, $
(Thousands) 2025 2024 Change
Net cash provided by operating activities $ 83,724 $ 11,564 $ 72,160
Net cash (used in) investing activities (77,261) (60,545) (16,716)
Net cash (used in)/provided by financing activities (8,417) 52,926 (61,343)
Effects of exchange rate changes 1,652 635 1,017
Net change in cash and cash equivalents $ (302) $ 4,580 $ (4,882)
Net cash provided by operating activities totaled $83.7 million in the first nine months of 2025 versus $11.6 million in the prior year period. In addition to the $13.4 million increase in operating income, the increase in cash provided by operating activities was favorably impacted by the Company's continued working capital initiatives, specifically efforts focused around cash collection, which resulted in incremental cash flow of $23.6 million, and timing of quarter-end payments related to payables and accruals, which resulted in incremental cash flow of $17.8 million. Further, throughout 2025, the Company has focused on maintaining reduced inventory levels consistent with the levels achieved at December 31, 2024. This resulted in incremental cash flow of approximately $12.2 million, when comparing to the first nine months of 2024. Lastly, there was a smaller increase in prepaid assets in the first nine months of 2025 compared to the increase in the first nine months of 2024, primarily due to an increase in prepaid taxes in the prior year, resulting in an increase in operating cash flow of $3.6 million.
Net cash used in investing activitieswas $77.3 million in the first nine months of 2025 compared to $60.5 million in the prior year period. The increase in cash used is primarily due to the July 2025 acquisition of certain manufacturing assets for tantalum solutions from Konasol, Co., Ltd., a Korean manufacturer serving the semiconductor and adjacent market, resulting in a $19.5 million outflow. Refer to Note B for additional detail. Additionally, the usage related to payments for mine development increased $9.6 million, offset by a lower decrease in cash used for capital expenditures of $12.0 million, when compared to the first nine months of 2024.
Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives. For the full year 2025, the Company expects payments for property, plant, and equipment to be approximately $70 million.
Net cash used in financing activities totaled $8.4 million in the first nine months of 2025 and compared to net cash provided by financing activities of $52.9 million in the comparable prior year period. The net financing cash outflow in the first nine months of 2025 was primarily driven by debt repayments, made possible by increased cash levels resulting from the Company's ongoing working capital initiatives and lower capital spend, compared to an inflow in the prior year used to support business growth.
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 program, environmental remediation projects, and strategic acquisitions for at least the next twelve months and for the foreseeable future thereafter. At September 26, 2025, cash and cash equivalents held by our foreign operations totaled $15.0 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.
Other sources of liquidity include uncommitted short-term lines of credit for certain of the Company's foreign subsidiaries, which currently provide for borrowings of up to $22.8 million. At September 26, 2025, the Company had borrowings outstanding of $1.3 million, which reduced the aggregate availability under these facilities to $21.5 million.
A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of September 26, 2025 and December 31, 2024 is as follows:
September 26, December 31,
(Thousands) 2025 2024
Cash and cash equivalents $ 16,411 $ 16,713
Total outstanding debt 456,938 442,008
Net debt $ (440,527) $ (425,295)
Available borrowing capacity $ 214,194 $ 168,997
Net debt is a non-GAAP financial 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.
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, depletion and amortization, and other adjustments.
In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement). The Credit Agreement refinances the revolving credit facility and term loan facility provided under Materion's previous Fourth Amended and Restated Credit Agreement, dated October 27, 2021 (as amended). Among other things, the Credit Agreement provides for a $450 million senior secured revolving credit facility (Revolving Credit Facility) and a $225 million senior secured term loan facility (Term Loan Facility and, together with the Revolving Credit Facility, Credit Facilities). The Term Loan Facility was fully drawn on June 26, 2025. The Credit Facilities mature on June 26, 2030.
The Credit Agreement also provides for an uncommitted incremental facility whereby, subject to the satisfaction of certain conditions, the Company may be able to borrow additional term loans in an aggregate amount not to exceed $250.0 million. The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals, copper, nickel and tantalum, and provides enhanced flexibility to finance acquisitions and other strategic initiatives. Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company and its direct subsidiaries, with the exception of non-mining real property, precious metal and certain other assets.
The Credit Agreement allows the Company to borrow money at a premium over SOFR or prime rate and at varying maturities. The premium resets quarterly according to the terms and conditions stipulated in the agreement. The Credit Agreement includes restrictive covenants relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases. In addition, the Credit Agreement includes covenants that limit the Company to a maximum leverage ratio and a minimum interest coverage ratio. We were in compliance with all of our debt covenants as of September 26, 2025 and December 31, 2024. Cash on hand up to $35.0 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement.
Portions of our business utilize off-balance sheet consignment arrangements allowing us to use metal 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. In August 2025, we entered into a precious metals consignment agreement, maturing on August 31, 2028, which replaced the consignment agreements that would have matured on August 31, 2025. The available and unused capacity under the metal consignment agreements expiring in August 2028 totaled approximately $121.2 million as of September 26, 2025, compared to $233.4 million as of December 31, 2024. The availability is determined by Board approved levels and actual capacity.
In January 2014, our Board of Directors approved a plan to repurchase up to $50.0 million of our common stock. We repurchased 100,000 shares under this program in the second quarter of 2025, for a total cost of $7.8 million. Since the approval of the repurchase plan, we have purchased 1,354,264 shares at a total cost of $49.5 million. In October 2025, we announced that our Board of Directors had approved a new plan to repurchase up to $50.0 million of our common stock,
replacing the plan approved in 2014. 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.
We paid cash dividends of $2.9 million and $8.6 million on our common stock in the third quarter and first nine months of 2025, respectively. 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 CASH 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 $493.8 million and $381.6 million as of September 26, 2025 and December 31, 2024, respectively. We were in compliance with all of the covenants contained in the consignment agreements as of September 26, 2025. For additional information on our material cash obligations, refer to our 2024 Annual Report on Form 10-K.
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 2024 Annual Report on Form 10-K.
Forward-looking 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: 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, including changes in tax regulations or guidance promulgated pursuant to the new legislation implemented in the One Big Beautiful Bill Act; 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 outbreaks of infectious diseases and the conflict between Russia and Ukraine; realization of expected financial benefits expected from the Inflation Reduction Act of 2022; the amount and timing of any repurchases of our shares; and the risk factors set forth in Part 1, Item 1A of the Company's 2024 Annual Report on Form 10-K.
Materion Corporation published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 21:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]