Materion Corporation

11/04/2026 | Press release | Distributed by Public on 11/04/2026 14:03

Quarterly Report for Quarter Ending October 2, 2026 (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
October 2, September 26, $ %
(Thousands, except per share data) 2026 2025 Change Change
Net sales $ 567,290 $ 444,808 $ 122,482 28 %
Value-added sales 313,662 263,949 49,713 19 %
Gross margin 103,701 86,123 17,578 20 %
Gross margin as a % of net sales 18 % 19 %
Gross margin as a % of value-added sales 33 % 33 %
Selling, general, and administrative (SG&A) expense 42,525 38,256 4,269 11 %
SG&A expense as a % of net sales 7 % 9 %
SG&A expense as a % of value-added sales 14 % 14 %
Research and development (R&D) expense 6,505 6,548 (43) (1) %
R&D expense as a % of net sales 1 % 1 %
R&D expense as a % of value-added sales 2 % 2 %
Restructuring expense 92 212 (120) (57) %
Other-net 4,172 6,164 (1,992) (32) %
Operating profit 50,407 34,943 15,464 44 %
Other non-operating (income)-net (370) (711) 341 (48) %
Interest expense-net 6,605 7,544 (939) (12) %
Income before income taxes 44,172 28,110 16,062 57 %
Income tax expense 5,840 2,698 3,142 116 %
Net income $ 38,332 $ 25,412 $ 12,920 51 %
Diluted earnings per share $ 1.81 $ 1.22 $ 0.59 48 %
Net sales of $567.3 million in the third quarter of 2026 increased $122.5 million from $444.8 million in the third quarter of 2025. The increase was primarily driven by higher sales in the Electronic Materials segment, while also reflecting growth in both Performance Materials and Precision Optics. The increase in net sales in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $57.3 million when compared to the prior-year period. At the Company level, this was driven by volume increases in the aerospace and defense (45%), semiconductor (35%), and industrial (17%) end markets. Sales to telecommunications and data center applications, which are included within the other end market, increased 139% compared to the prior-year period. These increases were partially offset by a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales within the other end market compared to the third quarter of 2025. 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 of $313.7 million in the third quarter of 2026 increased $49.7 million, or 19%, compared to the third quarter of 2025. Volume increases in the aerospace and defense (42%), and semiconductor (40%) end markets were partially offset by a decrease in the automotive (30%) end market. Value-added sales to telecommunications and data center applications, which are included within the other end market, increased 71% compared to the prior-year period. This increase was partially offset by a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales, also included within the other end market, compared to the third quarter of 2025.
Gross margin in the third quarter of 2026 was $103.7 million, an increase of 20% compared to the third quarter of 2025. Gross margin expressed as a percentage of net sales was 18% and 19% in the third quarter of 2026 and 2025, respectively. Gross margin expressed as a percentage of value-added sales was 33% in both the third quarter of 2026 and 2025. Gross margin as a percentage of value-added sales remained flat in both the third quarter of 2026 and 2025.
SG&A expense was $42.5 million in the third quarter of 2026, compared to $38.3 million in the third quarter of 2025. 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 7% and 9% in the third quarter of 2026 and 2025, respectively. Expressed as a percentage of value-added sales, SG&A expense was 14% in both the third quarter of 2026 and 2025.
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 1% of net sales in both the third quarter of 2026 and 2025. R&D expense accounted for 2% of value-added sales in both the third quarter of 2026 and 2025.
Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. We recorded a combined total of $0.1 million and $0.2 million of restructuring charges across all segments in the third quarter of 2026 and 2025, respectively. Refer to Note E to the Consolidated Financial Statements for details.
Other-net was $4.2 million of expense in the third quarter of 2026, or a $2.0 million decrease from the third quarter of 2025. 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-net was $6.6 million and $7.5 million in the third quarter of 2026 and 2025, respectively. The decrease in interest expense is primarily due to a decrease in interest rates and borrowings compared to the prior-year period.
Income tax expense for the third quarter of 2026 was $5.8 million, compared to $2.7 million in the third quarter of 2025. The effective tax rate for the third quarter of 2026 and 2025 was 13.2% and 9.6%, respectively. The effective tax rate for the third quarter of 2026 is lower than the statutory tax rate primarily due to the impact of the foreign-derived deduction eligible income, percentage depletion and foreign tax credit. The effective tax rate for the third quarter of 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. See Note G to the Consolidated Financial Statements for additional discussion.
Nine Months
Nine Months Ended
October 2, September 26, $ %
(Thousands, except per share data) 2026 2025 Change Change
Net sales $ 1,731,021 $ 1,296,796 $ 434,225 33 %
Value-added sales 883,640 792,265 91,375 12 %
Gross margin 289,879 244,960 44,919 18 %
Gross margin as a % of net sales 17 % 19 %
Gross margin as a % of value-added sales 33 % 31 %
SG&A expense 121,047 108,740 12,307 11 %
SG&A expense as a % of net sales 7 % 8 %
SG&A expense as a % of value-added sales 14 % 14 %
R&D expense 19,224 19,466 (242) (1) %
R&D expense as a % of net sales 1 % 2 %
R&D expense as a % of value-added sales 2 % 2 %
Restructuring expense 2,711 2,729 (18) (1) %
Other-net 16,605 15,068 1,537 10 %
Operating profit 130,292 98,957 31,335 32 %
Other non-operating (income)-net (997) (1,944) 947 (49) %
Interest expense-net 21,709 22,691 (982) (4) %
Income before income taxes 109,580 78,210 31,370 40 %
Income tax expense 13,116 9,960 3,156 32 %
Net income $ 96,464 $ 68,250 $ 28,214 41 %
Diluted earnings per share $ 4.57 $ 3.27 $ 1.30 40 %
Net sales of $1,731.0 million in the first nine months of 2026 increased $434.2 million from $1,296.8 million in the first nine months of 2025. The increase was primarily driven by higher sales in the Electronic Materials segment, while also reflecting growth in both Performance Materials and Precision Optics. The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $284.5 million when compared to the prior-year period. At the Company level, a volume increase in the semiconductor (54%), energy (46%), aerospace and defense (35%), and industrial (17%) end markets were partially offset by a volume decrease in the consumer electronics (12%) end market. Sales to telecommunications and data center applications, which are included within the other end market, increased 88% compared to the prior-year period. Additionally, there was a $4.9 million year over year increase in the volume of raw material beryllium hydroxide sales, also included within the other end market, 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 $883.6 million in the first nine months of 2026 increased $91.4 million, or 12%, compared to the first nine months of 2025. Volume increases in the aerospace and defense (31%), semiconductor (26%), and industrial (11%) end markets were partially offset by a volume decrease in the consumer electronics (21%) end market. Value-added sales to telecommunications and data center applications, which are included within the other end market, increased 42% compared to the prior-year period. Additionally, there was a $4.9 million year over year increase in the volume of raw material beryllium hydroxide sales within the other end market compared to the same period in the prior-year.
Gross margin in the first nine months of 2026 was $289.9 million, an increase of 18% compared to the first nine months of 2025, respectively. Gross margin expressed as a percentage of net sales was 17% and 19% in the first nine months of 2026 and 2025. Gross margin expressed as a percentage of value-added sales increased to 33% in the first nine months of 2026 from 31% in the first nine months of 2025. Gross margin as a percentage of value-added sales increased due to product mix, manufacturing efficiencies and the increase in hydroxide sales, which favorably impacted margins in the first nine months of 2026 compared to the same period in 2025.
SG&A expense was $121.0 million in the first nine months of 2026, compared to $108.7 million in the first nine months of 2025. 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 7%, and 8% in the first nine months of 2026 and
2025, respectively. Expressed as a percentage of value-added sales, SG&A expense was 14% in both the first nine months of 2026 and 2025.
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 1% and 2% of net sales in the first nine months of 2026 and 2025, respectively. R&D expense accounted for 2% of value-added sales in both the first nine months of 2026 and 2025.
Restructuring (income) expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure. In the first nine months of both 2026 and 2025, we recorded a combined total of $2.7 million of restructuring charges across all segments. Refer to Note E to the Consolidated Financial Statements for details.
Other-net was $16.6 million of expense in the first nine months of 2026, or a $1.5 million increase from the first nine months of 2025. 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-net was $21.7 million and $22.7 million in the first nine months of 2026 and 2025, 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 2026 was $13.1 million, compared to $10.0 million in the nine months of 2025. The Company's effective tax rate for the first nine months of 2026 and 2025 was 12.0% and 12.7%, respectively. The effective tax rate for the first nine months of 2026 includes a net discrete income tax benefit of $6.8 million, primarily consisting of excess tax benefits from stock-based compensation awards, release of a valuation allowance previously recorded against the deferred tax assets of one of the Company's foreign subsidiaries, and prior-year return-to-provision adjustments. 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. 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 2026 and 2025 is as follows:
Third Quarter Ended Nine Months Ended
October 2, September 26, October 2, September 26,
(Thousands) 2026 2025 2026 2025
Net sales
Performance Materials $ 198,978 $ 170,787 $ 562,592 $ 527,552
Electronic Materials 336,608 246,837 1,075,154 696,059
Precision Optics 31,704 27,184 93,275 73,185
Other - - - -
Total $ 567,290 $ 444,808 $ 1,731,021 $ 1,296,796
Less: pass-through metal costs
Performance Materials $ 20,317 $ 13,681 $ 54,446 $ 41,889
Electronic Materials 233,167 167,137 792,699 462,497
Precision Optics 144 41 236 145
Other - - - -
Total $ 253,628 $ 180,859 $ 847,381 $ 504,531
Value-added sales
Performance Materials $ 178,661 $ 157,106 $ 508,146 $ 485,663
Electronic Materials 103,441 79,700 282,455 233,562
Precision Optics 31,560 27,143 93,039 73,040
Other - - - -
Total $ 313,662 $ 263,949 $ 883,640 $ 792,265
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
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
October 2, September 26, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 198,978 $ 170,787 $ 28,191 17 %
Value-added sales 178,661 157,106 21,555 14 %
EBITDA 42,508 36,911 5,597 15 %
Net sales from the Performance Materials segment of $199.0 million in the third quarter of 2026 increased 17% compared to net sales of $170.8 million in the third quarter of 2025. The increase in sales was due to higher sales volumes in the aerospace and defense (49%) end market. Sales to telecommunications and data center applications, included within the other end market, increased 76% compared to the prior-year period. This increase was partially offset by a $3.8 million year over year decrease in the volume of raw material beryllium hydroxide sales, also included within the other end market.
Value-added sales of $178.7 million in the third quarter of 2026 were 14% higher than value-added sales of $157.1 million in the third quarter of 2025. The increase in value-added sales was due to the same factors driving the increase in net sales.
EBITDA for the Performance Materials segment was $42.5 million in the third quarter of 2026, compared to $36.9 million in the third quarter of 2025. The increase was primarily driven by incremental margin from higher sales volume and price, partially offset by mix.
Nine Months
Nine Months Ended
October 2, September 26, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 562,592 $ 527,552 $ 35,040 7 %
Value-added sales 508,146 485,663 22,483 5 %
EBITDA 114,611 118,678 (4,067) (3) %
Net sales from the Performance Materials segment of $562.6 million in the first nine months of 2026 increased 7% compared to net sales of $527.6 million in the first nine months of 2025. The increase in sales was due to higher sales volumes in the aerospace and defense (21%) end market. Sales to telecommunications and data center applications, which are included within the other end market, increased 47% compared to the prior-year period. Additionally, there was a $4.9 million year over year increase in the volume of raw material beryllium hydroxide sales in the other end market compared to the first nine months of 2025. This was partially offset by lower sales volumes in the consumer electronics (22%) end market. The decrease in the consumer electronics end market over the first nine months primarily reflects lower volumes resulting from a controlled production ramp during the first half of 2026 as part of ongoing operational alignment with a large precision clad strip customer. During the third quarter, production and shipment levels returned to normal, reflecting stabilization of operations and improved demand fulfillment.
Value-added sales of $508.1 million in the first nine months of 2026 were 5% higher than value-added sales of $485.7 million in the first nine months of 2025. The increase in value-added sales was due to the same factors driving the increase in net sales.
EBITDA for the Performance Materials segment was $114.6 million in the first nine months of 2026 compared to $118.7 million in the first nine months of 2025. The decrease was primarily driven by incremental charges incurred in the first half of 2026 related to operational stabilization efforts, and higher overall costs for a large precision clad strip customer.
Electronic Materials
Third Quarter
Third Quarter Ended
October 2, September 26, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 336,608 $ 246,837 $ 89,771 36 %
Value-added sales 103,441 79,700 23,741 30 %
EBITDA 33,136 20,925 12,211 58 %
Net sales from the Electronic Materials segment of $336.6 million in the third quarter of 2026 were 36% higher than net sales of $246.8 million in the third quarter of 2025. The increase in net sales was due to higher pass-through metal pricing and sales volumes in the semiconductor end market. Higher pass-through metal pricing contributed $57.3 million compared to the third quarter of 2025.
Value-added sales of $103.4 million in the third quarter of 2026 increased 30% compared to value-added sales of $79.7 million in the third quarter of 2025. The increase in value-added sales was primarily driven by a volume increase in the semiconductor (37%) end market.
EBITDA for the Electronic Materials segment was $33.1 million in the third quarter of 2026 compared to $20.9 million in the third quarter of 2025. EBITDA in the third quarter of 2026 benefited from incremental margin driven by higher sales volumes and strong price/mix.
Nine Months
Nine Months Ended
October 2, September 26, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 1,075,154 $ 696,059 $ 379,095 54 %
Value-added sales 282,455 233,562 48,893 21 %
EBITDA 86,497 49,604 36,893 74 %
Net sales from the Electronic Materials segment of $1,075.2 million in the first nine months of 2026 were 54% higher than net sales of $696.1 million in the first nine months of 2025. The increase in net sales was due to higher pass-through metal pricing and sales volumes in the semiconductor and energy end markets. Higher pass-through metal pricing contributed $284.5 million compared to the first nine months of 2025.
Value-added sales of $282.5 million in the first nine months of 2026 increased 21% compared to value-added sales of $233.6 million in the first nine months of 2025. The increase in value-added sales was primarily driven by volume increases in the semiconductor (25%) end market.
EBITDA for the Electronic Materials segment was $86.5 million in the first nine months of 2026 compared to $49.6 million in the first nine months of 2025. EBITDA in the first nine months of 2026 benefited from incremental margin driven by higher sales volumes, and strong price/mix, as well as favorable operational and manufacturing efficiencies.
Precision Optics
Third Quarter
(Thousands) Third Quarter Ended
October 2, September 26, $ %
2026 2025 Change Change
Net sales $ 31,704 $ 27,184 $ 4,520 17 %
Value-added sales 31,560 27,143 4,417 16 %
EBITDA 5,473 3,231 2,242 69 %
Net sales from the Precision Optics segment of $31.7 million in the third quarter of 2026 increased 17% compared to net sales of $27.2 million in the third quarter of 2025. The increase was primarily due to higher sales volumes in the semiconductor (155%), aerospace and defense (18%) and industrial (13%) end markets.
Value-added sales of $31.6 million in the third quarter of 2026 increased 16% compared to value-added sales of $27.1 million in the third quarter of 2025. 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 $5.5 million in the third quarter of 2026 compared to $3.2 million in the third quarter of 2025. The increase in EBITDA was primarily driven by favorable impacts of higher volume, strong price/mix and manufacturing efficiencies.
Nine Months
(Thousands) Nine Months Ended
October 2, September 26, $ %
2026 2025 Change Change
Net sales $ 93,275 $ 73,185 $ 20,090 27 %
Value-added sales 93,039 73,040 19,999 27 %
EBITDA 16,750 3,848 12,902 335 %
Net sales from the Precision Optics segment of $93.3 million in the first nine months of 2026 increased 27% compared to net sales of $73.2 million in the first nine months of 2025. The increase was primarily due to higher sales volumes in the semiconductor (163%), aerospace and defense (35%), and industrial (23%) end markets.
Value-added sales of $93.0 million in the first nine months of 2026 increased 27% compared to value-added sales of $73.0 million in the first nine months of 2025. 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 $16.8 million in the first nine months of 2026 compared to $3.8 million in the first nine months of 2025. The increase in EBITDA was primarily driven by favorable impacts of higher volume, strong price/mix and manufacturing efficiencies.
Other
Third Quarter
(Thousands) Third Quarter Ended
October 2, September 26, $ %
2026 2025 Change Change
Net sales $ - $ - $ - - %
Value-added sales - - - - %
EBITDA (10,621) (7,909) (2,712) 34 %
The Other reportable segment in total includes unallocated corporate costs.
Corporate costs were $10.6 million in the third quarter of 2026 compared to $7.9 million in the third quarter of 2025. Corporate costs were 2% of Company-wide net sales in both the third quarter of 2026 and 2025. Corporate costs were 3% of Company-wide value-added sales in both the third quarter of 2026 and 2025. The increase in corporate costs was primarily due to higher stock compensation and incentive compensation expense due to strong Company performance.
Nine Months
(Thousands) Nine Months Ended
October 2, September 26, $ %
2026 2025 Change Change
Net sales $ - $ - $ - - %
Value-added sales - - - - %
EBITDA (29,236) (19,678) (9,558) 49 %
Corporate costs were $29.2 million in the first nine months of 2026 compared to $19.7 million in the first nine months of 2025. Corporate costs were 2% of Company-wide net sales in both the first nine months of 2026 and 2025. Corporate costs were 3% and 2% of Company-wide value-added sales in the first nine months of 2026 and 2025, respectively. The increase in corporate costs was primarily due to higher stock compensation and incentive compensation expense due to strong Company performance.
FINANCIAL POSITION
Cash Flow
A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:
Nine Months Ended
October 2, September 26, $
(Thousands) 2026 2025 Change
Net cash provided by operating activities $ 142,693 $ 83,724 $ 58,969
Net cash (used in) investing activities (57,882) (77,261) 19,379
Net cash (used in) financing activities (82,870) (8,417) (74,453)
Effects of exchange rate changes (218) 1,652 (1,870)
Net change in cash and cash equivalents $ 1,723 $ (302) $ 2,025
Net cash provided by operating activities totaled $142.7 million in the first nine months of 2026 versus $83.7 million in the prior-year period. In addition to the $31.3 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 timing of quarter-end payments related to payables and accruals. This resulted in incremental cash flow of $38.4 million, when comparing to the first nine months of 2025. Additionally, prepaids and other current assets decreased $0.4 million in the first nine months of 2026, compared to an increase of $21.1 million in the first nine months of 2025, generating $19.8 million in operating cash flow. This was primarily due to a $3.3 million decrease in unbilled receivables in the first nine months of 2026, compared to a $14.9 million increase in the prior-year period. These cash inflows were partially offset by an increase in accounts receivable of $46.7 million to support sales growth in the first nine months of 2026, compared to a decrease of $1.7 million in the first nine months of 2025, resulting in a cash outflow of $48.5 million. The remaining cash inflow was driven by a $9.3 million increase in unearned income compared to the prior nine month period, in addition to various other favorable working capital activity.
Net cash used in investing activities was $57.9 million in the first nine months of 2026 compared to $77.3 million in the comparable prior-year period. The decrease in cash used in investing activities is due to the business acquisition in 2025, and a decrease in mine development costs, offset by higher capital expenditures. Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives. For the full year 2026, the Company expects payments for property, plant, and equipment to be approximately $75 million.
Net cash used in financing activities totaled $82.9 million in the first nine months of 2026 and compared to $8.4 million in the comparable prior-year period. The net financing cash outflow in the first nine months of 2026 was primarily driven by debt repayments, made possible by increased cash levels resulting from the Company's ongoing working capital initiatives.
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 October 2, 2026, cash and cash equivalents held by our foreign operations totaled $14.3 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, as of October 2, 2026 and December 31, 2025 is as follows:
October 2, December 31,
(Thousands) 2026 2025
Cash and cash equivalents $ 15,404 $ 13,681
Total outstanding debt 397,049 458,793
Net debt $ (381,645) $ (445,112)
Available borrowing capacity $ 275,682 $ 223,675
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 borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments.
In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement). 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 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 credit 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 October 2, 2026 and December 31, 2025. 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 $260.1 million as of October 2, 2026, compared to $173.8 million as of December 31, 2025.
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 $3.0 million and $9.0 million on our common stock in the third quarter and first nine months of 2026, 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 and nickel 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 and nickel was $589.9 million and $526.2 million as of October 2, 2026 and December 31, 2025, respectively. We were in compliance with all of the covenants contained in the consignment agreements as of October 2, 2026. For additional information on our material cash obligations, refer to our 2025 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 2025 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; 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 geopolitical conflicts such as the conflict between Russia and Ukraine and the conflict between the United States and Iran; realization of financial benefits expected from the Inflation Reduction Act of 2022; and the risk factors set forth in Part 1, Item 1A of the Company's 2025 Annual Report on Form 10-K.
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