Materion Corporation (MTRN)

MTRN 
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Materion Corporation (MTRN)

Q1 2013 Earnings Call

April 25, 2013 10:00 AM ET

Executives

Michael Hasychak – VP, Treasurer, and Secretary

John Grampa – SVP-Finance and CFO

Dick Hipple – Chairman, President and CEO

Jim Marrotte – VP and Corporate Controller

Analysts

Avinash Kant – D.A. Davidson

Martin Engler – Jefferies

Edward Marshall – Sidoti & Company

Marco Rodriguez – Stonegate Securities

Mark Parr – KeyBanc Capital Markets

Presentation

Operator

Greetings and welcome to the Materion Corporation First Quarter 2013 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)

It is now my pleasure to introduce your host, Michael Hasychak, Vice President, Treasurer, and Secretary for Materion Corporation. Thank you. Mr. Hasychak you may begin.

Michael Hasychak

Good morning. This is Mike Hasychak. With me today is Dick Hipple, President, Chairman and CEO; John Grampa, Senior Vice President, Finance and Chief Financial Officer; and Jim Marrotte, Vice President and Corporate Controller.

Our format for today’s conference call is as follows. John Grampa will comment on the first quarter 2013 results and the outlook, and Dick Hipple will give a market update. Thereafter, we will open up the teleconference call for questions. A recorded playback of this call will be available until May 9 by dialing area code 877. The number is 660-6853 or you can dial 201, 612-7415, the conference id number is 411602. The call will also be archived on the Company’s website, materion.com. To access the replay, click on Events and Presentations on the Investor Relations page.

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

And now, I’ll turn over the call to John Grampa for comments.

John Grampa

Thank you, Mike. Good morning everyone, and thank you for taking the time to join us this morning. Today’s agenda is similar to that of our past calls. I will review the results for the quarter and then I will review the outlook. Following my comments Dick Hipple will review the current state of our key markets, and provide his perspective on certain specific key new product initiatives and there is a lot of good news to report on these initiatives. Following Dick, we will open the call for your questions.

As I normally do I will cover sales, earnings, and margins. I will also review the key changes in business levels by market, comparing the first quarter of 2013 to the first quarter of the prior year, as well as sequentially to the fourth quarter. I will also provide an update on the facility consolidation initiatives and the physical inventory adjustment announced on February 13. I will follow these with the review of margins and brief comments on the balance sheet to cash flow, as well as the outlook for the remainder of the year.

Before I began though, I want to call your attention to the non-GAAP value added sales and margins reporting by segment that is now included in the press release along with the usual GAAP reporting. As many of you already know we are providing these additional insights because in our businesses the cost of gold, silver, platinum, palladium and copper are generally pass-through the customers and movements in their prices can influence reported sales and margins expressed as a percent of sales without affecting margin dollars and underlying profitability.

We analyze our business on a value added sales and margin basis internally. Value added sales is a non-GAAP measure that deducts the cost of these five pass-through metals from sales and removes the potential distortion in the interpretation of business level and profit margin changes that can be caused by changes in these metal values.

Value added sales, gross margins, and operating profit margin expresses as a percent of value added sales and the related reconciliation to the GAAP numbers are included in the press release by a segment along with the related comparison in the first quarter of the prior year and the fourth quarter for sequential comparison purposes. We believe this information in the form provided is useful to our investors.

In my briefing this morning, comments on business level to margins will be in value added terms. Gross margins and operating profit margins will be expressed as a percent of value added sales and changes in business level for the company in total as well as by market will also be expressed in this context.

Let’s begin with review of the 16 points highlighted at the beginning of the release. Sales for the first quarter were $299.2 million, down $54.5 million or 15% from first quarter 2012 levels. Here in lies the great example of why value added sales reporting is so relevant. Value added sales for the quarter were about $151.3 million, down only $6 million dollars or 4%. Comparing sequentially to the fourth quarter of last year business levels were flat in value added terms as oppose to being down 2% on a GAAP basis.

Net income for the first quarter was up 11% from prior year levels and EPS was $0.33 per share, in line with the estimates we provided earlier. This compares to the $0.30 per share for the first quarter of the prior year and sequentially to $0.12 per share in the fourth quarter.

Read the rest of this transcript for free on seekingalpha.com