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Edited Transcript of MTRN earnings conference call or presentation 28-Apr-17 1:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Materion Corp Earnings Call

MAYFIELD HEIGHTS May 1, 2017 (Thomson StreetEvents) -- Edited Transcript of Materion Corp earnings conference call or presentation Friday, April 28, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph P. Kelley

Materion Corporation - CFO and VP of Finance

* Jugal K. Vijayvargiya

Materion Corporation - CEO, President and Director

* Richard J. Hipple

Materion Corporation - Executive Chairman

* Stephen F. Shamrock

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Conference Call Participants

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* Edward Marshall

Sidoti & Company, LLC - Research Analyst

* Marco Andres Rodriguez

Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Materion Corporation First Quarter 2017 Earnings Conference Call. (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 at Investor Relations for Materion Corporation. Thank you, Mr. Shamrock. You may begin.

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Stephen F. Shamrock, [2]

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Good morning. This is Steve Shamrock, Vice President Corporate Controller and Investor Relations. With me today is Dick Hipple, Executive Chairman; Jugal Vijayvargiya, President and Chief Executive Officer; and Joe Kelley, Chief Financial Officer. Our format for today's conference call is as follows: Dick and Jugal will provide opening remarks and comment on key strategic initiatives. Following Dick and Jugal's remarks, Joe will review the financial results for the quarter and the outlook. Following Joe, we will open up the call for questions.

Before we begin, let me remind investors that 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 we issued this morning. Additionally, comments with regard to operating profit, net income and earnings per share reflect the adjusted numbers shown in attachments 4 and 5 in this morning's press release. The adjustments made in the current year for comparative purposes remove nonrecurring items such as CEO transition costs, acquisition and integration costs, cost structure realignment actions and legacy environmental matters.

And now, I will turn the call over to Dick.

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Richard J. Hipple, Materion Corporation - Executive Chairman [3]

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This is a special occasion for me as it marks the final time I'll join this call as a regular participant after 43 consecutive quarters. As most of you know, Materion completed a planned and orderly leadership succession in March. After nearly 11 years as President and Chief Executive Officer, those responsibilities have been handed to my successor, Jugal Vijayvargiya. I'm staying on as Materion's Executive Chairman to support Jugal in this transition until my retirement from the company within a year. Jugal joined us from Delphi Automotive where he had a successful 26-year international career. Most recently, he was President of Delphi's Electronics & Safety segment, a $3 billion global business headquartered in Germany. Jugal has a terrific combination of integrity, proven strong commercial M&A and operational experience, and a passion to grow the business. I believe you will find him to be an outstanding leader and committed steward of this organization. Thank you for your interest and support in Materion and for the encouragement and goodwill you have always shown the executive team and me. I take tremendous pride and personal satisfaction in knowing how well you will be served with Jugal at the helm supported by the great culture of the Materion employees.

I will now turn the microphone over to Jugal.

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Jugal K. Vijayvargiya, Materion Corporation - CEO, President and Director [4]

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Thank you, Dick, for those introductory comments and for your valuable role in acclimating me to Materion. Let me extend a very warm welcome to all of you on the phone. I'm very excited to have joined the Materion team and for the opportunity to follow Dick in leading this great company to its next level of long-term success.

During my time at Delphi, I had the privilege to serve in a number of leadership roles in Europe and North America. Those experiences include delivering profitable growth across multiple product lines, global customers and regions by identifying and harnessing market trends. There are numerous areas where my background dovetails with Materion. Materion is an organization with highly differentiated technologies and products, dispersed across a global manufacturing base. It has evolved and transformed from legacy businesses to an innovative leader in advanced materials. Materion is deeply engaged in multiple global markets, be it consumer electronics, industrial, defense or automotive.

During my short tenure here, I've been highly impressed with the quality and passion of our people. The vital role that our advanced materials play in improving the world, the proud and consequential history of the organization and most importantly, the bright promise for Materion's future. Materion has many compelling strengths that make me very confident in what lies ahead. These include a rich and differentiated product portfolio, diversity across a number of long-term growth markets, an organization that is universally recognized for its innovation in material design, a company well-placed with strong market positions and significant competitive advantages and an unlevered balance sheet to support organic and inorganic growth.

There will be more to report in subsequent calls, but for today, I'd like to provide a glimpse into my priorities for Materion in the months and years to come. Materion is in the business to provide innovative solutions for our customers. With this goal in mind, there are 4 key focus areas I would like to highlight: First, is operational excellence in everything we do by working safely, smartly and more efficiently. For this, we'll expand on our successful lean Six Sigma principles and other proven operational measures. Operational excellence is at the core of the plan. Without this, we'll not be able to satisfy customers, suppliers, shareholders or our people. Second, is commercial excellence in finding new applications and creative ways to capture more value from unique and differentiated technologies and materials. This involves how the company heightens the speed of execution to better serve our very demanding and deserving customers.

Next is innovation excellence, the hallmark of Materion and the lifeblood of our future. Focus will be to identify trends that combine with our unique technological capabilities, will drive growth and position the company for stronger, long-term success. Relentless new product and application development remain critical to markets and customers, resulting in sustained organic growth.

And finally, focus must be on inorganic growth excellence, swiftly and smartly. One only has to compare today's Materion with the markedly different enterprise it was just 10 years ago, to see the precedent and potential that has already been established. With our balance sheet, complementary technologies and well-established industry leadership, Materion can continue to attract new and exciting possibilities inorganically for results that cannot be achieved by organic growth alone.

To anchor these priorities, we're building a performance-based mindset and culture throughout the organization. There is a heightened emphasis on challenging ourselves on target setting, ownership, accountability and teamwork, while embracing the change that is ahead of us. These priorities will lead Materion to deliver for all of our stakeholders: customers; partners; shareholders; and our people. During my visits to our facilities and meeting with my new colleagues, I've become even more convinced that we can build on our past successes and accelerate long-term sustainable growth, and with it, much greater financial performance.

Let me now briefly comment on the quarter. Beyond the growth and value-added sales quarter-on-quarter and sequentially, I'm pleased to inform you that we delivered an EPS of $0.29 a share, that's $0.02 higher than the same period last year and $0.01 better than the previous quarter. I'm also able to confirm our previously announced earnings guidance of $1.45 to $1.60 per share for the year.

Again, I appreciate your interest in Materion and look forward to joining you on future calls and investor events. Now I'll turn the call over to Joe.

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [5]

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Thank you, Jugal, and good morning to everyone joining us on the call. My comments today will cover first quarter 2017 financial highlights, a review of profitability by segment, brief comments on the balance sheet, cash flow and modeling assumptions and the earnings outlook for 2017.

Starting with the financial highlights. The first quarter of 2017, we reported year-over-year growth in both top line value-added sales and adjusted operating profit for the first time in the past 7 quarters. First quarter 2017 adjusted earnings exceeded our internal forecast and earnings guidance provided to the Street.

First quarter 2017 value-added sales of $149 million increased approximately 4% versus the prior year first quarter value-added sales of $143.9 million. The Heraeus acquisition, late in the first quarter of 2017, accounted for $2.9 million of value-added sales growth, while the base historical business value-added sales grew 2% over the prior year period. As a reminder to investors, value-added sales removes the impact of pass-through precious metal cost.

The company continued to experience positive momentum with new product value-added sales, which totaled $20.3 million in the quarter and grew 22% over the prior year first quarter. A modest recovery in end market demand also continued, particularly in our 2 largest end markets, Consumer Electronics and Industrial Components. These favorable trends were largely offset by decreased sales into the medical and defense end markets. As you may remember, it was mentioned on the year-end earnings call that Materion's largest medical customer began to transition from a legacy product to a next-generation product in the fourth quarter of 2016. This product transition continued during the first quarter of 2017, negatively impacting year-over-year value-added sales in the medical end market.

As for sales in the defense end market, although defense sales in the first quarter of 2017 were solid in historical terms at $12.9 million, this represents approximately a 10% decrease from the prior year first quarter, which saw very strong defense sales. As a reminder to investors, the timing of sales in the defense end market can vary quarter-to-quarter related to large government programs, particularly with respect to high-purity beryllium sales.

While value-added sales grew year-over-year and sequentially in the first quarter of 2017, the changing sales mix was unfavorable, leading to a slight deterioration in gross margin.

Selling, general and administrative expense increased $3.1 million over the prior year first quarter of $30.5 million. Excluding nonrecurring costs related to the CEO transition, cost-reduction initiatives, and the acquisition and integration cost, adjusted SG&A expense was down approximately $1 million or 3% versus the 2016 first quarter and down 6% sequentially from the adjusted fourth quarter 2016.

Operating profit totaled $3.4 million in the first quarter of 2017. Adjusted operating profit, excluding special items, was $7.7 million, a 3% improvement from the $7.5 million recorded in the prior year first quarter and a 7% improvement from the $7.2 million of adjusted operating profit recorded in the fourth quarter of 2016. The growth in adjusted operating profit was due to sales growth and cost-reduction initiatives, offset partially by unfavorable product mix. Net income for the first quarter of 2017 was $3.1 million or $0.15 per share diluted. On an adjusted basis, excluding the nonrecurring cost, first quarter 2017 earnings were $0.29 per share, up 7% versus $0.27 per share in the first quarter of 2016. The first quarter 2017 effective tax rate was negative 4%, as 2 timing issues related to executive and share-based stock compensation were recorded in the quarter. The full year 2017 effective tax rate is forecasted to be in the range of 18% to 20%. Please note, the adjusted first quarter 2017 earnings per share of $0.29 is reflective of an effective tax rate of approximately 19%, comparable to the forecasted full year effective tax rate.

Now a review of our first quarter 2017 performance by business segments. Starting first with Advanced Materials. This segment delivered value-added sales in the first quarter of 2017 totaling $47.3 million, a 12% increase over the $42.1 million recorded in the first quarter of 2016. Excluding sales related to acquisition, value-added sales increased 5% versus the first quarter of 2016. End market demand was strong across most of the segment's major end markets. Adjusted operating profit for the first quarter of 2017, excluding acquisition and integration costs, was $7.4 million or 16% of value-added sales compared to $5.2 million or 12% of value-added sales during the prior year period. This significant 42% improvement in adjusted operating profit was due to a combination of higher sales volumes and improved product mix. This business continues to perform well. The favorable outlook for the consumer electronics end market and continued integration of the Heraeus business should serve to further bolster growth in the segment. We are now approximately 60 days into the integration of the global Heraeus business. And we are pleased to report that customer, employee and operations integration initiatives are progressing on schedule. Management continues to be very excited about how this acquisition strengthens the commercial and technical capability of our Advanced Materials business.

Now a review of Performance Alloy and Composites. First quarter 2017 value-added sales were $79.2 million, a 1% increase from $78.2 million in the first quarter of 2016. The modest year-over-year sales increase is reflective of continued growth in strip product sales, primarily in the electronic connector market in Asia, offset by reduced sales of high-purity beryllium products in defense and science applications.

Adjusted operating profit in the first quarter of 2017, excluding special items related to the closure of the Japan service center was $700,000 compared to $1.5 million in the first quarter of 2016. The decrease in profitability was driven primarily by unfavorable product mix as low high-purity beryllium sales were offset by higher copper beryllium strip product sales. The results of this business segment in the first quarter of 2017 were disappointing. However, looking at the current order book and actions already initiated, both sales and profitability for the segment are forecasted to sequentially improve each quarter as we move through the remainder of the year. The business segment is on track to close the service center in Fukaya, Japan, at the end of the second quarter, which is expected to generate approximately $2 million of annualized savings. From a top line perspective, continued actions to improve product pricing and appropriately capture the value provided to customers are being taken. The company remains focused on maintaining a robust pipeline of new products to drive growth and improved mix.

Additionally, the return of consistent raw material beryllium hydroxide sales is forecasted to resume later in 2017. As a result of the combination of all these factors and actions, quarterly value-added sales and operating profit margins for this segment are forecasted to consistently improve during 2017.

Turning now to Precision Coatings. This segment recorded value-added sales of $23.3 million in the first quarter of 2017. This compares to $24.6 million of value-added sales in the same period last year. The decrease in value-added sales is due primarily to lower sales volume into the medical end market. As previously referenced, a significant customer began a product transition to a next-generation product late in the fourth quarter of 2016. This product shift has negatively impacted value-added sales the past 2 quarters.

Operating profit for the Precision Coatings segment totaled $2.2 million or 9% of value-added sales in the first quarter of 2017 compared to $4.1 million in the first quarter of 2016. The decrease in segment operating profit was due primarily to lower sales volume of precision-coated products for blood glucose testing and unfavorable sales mix.

I remind investors that the Precision Coatings segment has delivered 4 consecutive years of improving profits and the first quarter of 2016 was the peak level of profitability. Full year 2016 profit margins as a percentage of value-added sales finished at 12%. This segment is forecasting to, again, deliver double-digit profitability in 2017.

Turning now to the balance sheet and cash flow. The company ended the first quarter of 2017 with a net debt position of $16 million, $2 million below the prior year net debt level. Materion continues to have significant available liquidity to support meaningful organic growth opportunities, further inorganic strategic growth and consistently return cash to shareholders through a combination of dividends and share buybacks. Cash flow from operations in the first quarter of 2017 was negative $16.8 million, which was consistent with the prior year first quarter cash use, due to normal seasonal investments in working capital and the timing of cash payments for annual accruals.

Cash flow from investing activities includes the $16.4 million cash investment associated with the Heraeus acquisition. This amount is approximately $13 million shy of the agreed purchase price because of working capital levels and assumed liabilities transferred at closing.

For financial modeling purposes, in 2017, cash flow from operations will run approximately $50 million to $60 million. Capital spending should run approximately $25 million to $30 million, mine development investments should be less than $3 million, annual depreciation and amortization should run approximately $43 million to $45 million and an effective tax rate of approximately 18% to 20% should be assumed.

And finally, now the earnings outlook for the remainder of 2017. Based on our first quarter performance and the current order entry rate, the company confirms the full year 2017 earnings guidance range of $1.45 to $1.60 per share. The midpoint of this range represents a 15% increase over 2016 adjusted earnings. The substantial sequential improvement in quarterly profitability implied by this annual guidance is driven by increased sales volume, supported by the current order entry rate, contribution from the Heraeus acquisition, resuming sales of raw material beryllium hydroxide and cost-savings initiatives.

Looking specifically at the second quarter 2017 earnings, we're forecasting a sequential earnings increase of approximately 25% to 35% compared to the first quarter of 2017 adjusted earnings.

This concludes the review of the financial performance and my prepared remarks. The line will now open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Edward Marshall with Sidoti & Company.

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Edward Marshall, Sidoti & Company, LLC - Research Analyst [2]

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So just to clarify the 25% to 35% sequential improvement 2Q to 1Q EPS, were you referring to the GAAP or the pro forma number?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [3]

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That's an adjusted earnings number, Ed.

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Edward Marshall, Sidoti & Company, LLC - Research Analyst [4]

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Okay. Anything to report? I know you're forecasting that the hydroxide shipments will improve throughout the year. Is there anything to report from a customer level that gives you that confidence? Just the continued discussions? Or do you think that they're running low on the particular stockpile and therefore, will need to repurchase?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [5]

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Yes, Ed, you're familiar with the situation. We had about 30-plus years of a long-term consistent supply agreement in place that ended in 2015. Since then, we've been negotiating to renew a long-term contract. Last year, we had one spot shipment in Q3. We had nothing in Q4, nothing in Q1 of this year. But I can tell you that we have continued to make good progress in our negotiations. Our forecast as it was last quarter and our forecast now includes the assumption that hydroxide sales resume later here in 2015. So there has been, I'd call it, positive development and momentum in negotiations in the first quarter here, and we feel good about our forecast in the future.

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Edward Marshall, Sidoti & Company, LLC - Research Analyst [6]

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As I look at the Coatings division itself, and I look at -- and I see revenue down about 9%. I thought the medical test strip was a larger portion of that business. But I see that the decline in the operating income is much stronger than the decline in revenue. And I'm trying to get this -- I'm trying to get the sense as to kind of the mix there and what might be occurring in the division. If you can kind of get a little granular for a second and just give us some idea?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [7]

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You bet. So first of all, I'll remind you in Q1 of 2016, this business delivered operating profit at 17% of value-added sales, which was a record. And in fact, that quarter, I said it was the perfect mix and volume with -- mainly like our Opto-Ceramic Phosphor Wheel had very high volumes. Our blood glucose test strip and the particular products that we serve there were a very favorable mix. And so it was kind of an ideal situation in Q1. That being said, in 2016, margins in this business improved to 12% return on value-added sales, which is the fourth consecutive quarter of improving. So when you look at the year-over-year decrease, it's a 9% operating profit compared to 17% or $4.1 million, as you referenced the number, is a pretty tough comparison. But to answer your specific question, yes, it was the customer transition in blood glucose test strip, but also on the optical coatings side, it was unfavorable mix that we had this month -- sorry, this quarter compared to last quarter when you look at the Phosphor Wheel and the Opto-Ceramic Phosphor Wheel and the mix shift in overall projector display, I would say.

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Edward Marshall, Sidoti & Company, LLC - Research Analyst [8]

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Got it. And is there a price compression too on the test strip as you -- as you shift to maybe a more competitive situation in sharing volume?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [9]

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It -- the price pressure, I'd tell you, and the top line revenue as they go from a gold to a less gold-containing product from a revenue standpoint, there will be some benefits and --- to the customer and some decrease in our results. But from a value-added standpoint, there should not be a significant pressure. So the main headwind is volume as you go from 100% share to 50% or approximately 50% share. And so, what's going to offset that volume is the growth and expansion with other customers in the blood glucose test strip market.

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Operator [10]

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Our next question comes from the line of Marco Rodriguez with Stonegate Capital Markets.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst [11]

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Dick, congratulations on your current retirement and Jugal, also congratulations for coming on in. I was wondering, Jugal, if maybe you could talk a little bit more about your -- kind of your priorities. I mean, you outlined 4 steps or 4 focus points that seem to make sense here. But you also talked about a performance-based culture that, I guess I'm kind of curious about it. If you can maybe kind of talk a little bit more about that in detail and if this is kind of changing some mentalities, if you will, across Materion?

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Jugal K. Vijayvargiya, Materion Corporation - CEO, President and Director [12]

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Well, first of all, thanks for your question, Marco. And I would say that I don't think it's something that's changing across Materion. I think Materion has done an excellent job of making sure that the right things are being done in the business over the last several years. But as we come on board and as we look at these priorities, what we need to make sure is that everyone within the company understands what our priorities are and is able to relate to what their role in those priorities is. And then, they can then take those items that they have to deliver on and actually deliver on those items. And I think that's what a good performance-based mindset and good performance-based culture does, is that you understand what is expected of you. You understand if that expectation is something that can be delivered on. And then, you develop the right plans to do it. So I think it's more I would say associated with making sure that the 4 priorities that we -- that I've outlined are priorities that we can roll out effectively across Materion. And then -- and then have the right mindset and culture to deliver on those. And I'm confident that we'll be able to do that. I've had the pleasure so far to visit 4 plants on the East Coast. I'm going to be doing more plant visits here; in fact, after these --- after this call here in the Midwest area and then we've got a trip lined up on the West Coast and Asia. And so far, all my visits have been extremely positive in terms of what the people are looking for and I think what they want to be able to accomplish. So I expect that we're going to be -- we're going to be really focused on these 4 priorities with a really strong performance-based mindset and culture. And we're -- you've seen the results from this quarter, which are very positive results. The team has done an outstanding job of making sure that the earnings come through and the growth has come through. And we're very focused on making sure that the same happens for the upcoming quarters. And that's why we're confirming the guidance. We're making sure that you understand what we're going to deliver and then we deliver on it.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst [13]

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Got you. I appreciate that. Moving into some of the segment reporting here, kind of following up on the Precision Coating questions earlier. Can you talk a little bit more here -- you're talking about the profitability, I guess, maintaining that double-digit profitability. You were at 12% operating margin on VA sales last year. Obviously, you're just shy of 10% this quarter. You've got some volume headwinds, presumably, I'm assuming as well, maybe some margin headwind as well on the gross margin side. Can you just talk a little bit more? Are you really just going to be picking up volume to kind of get that? Or are you going to be stripping out more costs?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [14]

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Yes, let me be clear. I mean, so in Q1, we did 9%. And I don't know that from a Q1 forward, there's significant volume headwind. Q1 is reflective of a transitionary period, with this particular blood glucose test strip product line specifically. And so, I --- we don't forecast or anticipate what I'd call a volume headwind going forward. We are -- have shipped the next-generation product. And so, I really think going forward from here, it's not a volume headwind, maybe even a little bit of a volume tailwind as we get later in the year, if you look at some of the seasonality of our optical coating business in particular, and it's a mix improvement going forward.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst [15]

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And the --- so your forecast from what your gross margin on VA sales. Obviously, the Q1 compare year-over-year -- you highlighted the fact it was a tough compare. But looking at the last 3 quarters of fiscal '16, still fairly solid gross margins on VA sales. Are you kind of forecasting similar type rates? Or are they going to change somewhat?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [16]

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Yes. We will be similar. So last year, we did 39% on the full year. This year was soft at 36%. If you go back to Q4, it's 34%. So this transition has impacted the margins, Q4, Q1. And we anticipate to be recovered by the second half of 2017 back to historical margins of the 38% to 40% type range.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst [17]

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Got you. And then switching here to the Performance Alloys. I'm not sure I caught all of it, but I think that there were some mix issues that arose in the quarter. Can you just talk a little bit about that? And expectations of mix going forward?

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Joseph P. Kelley, Materion Corporation - CFO and VP of Finance [18]

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Yes. So I'll make some brief comments. The mix issue here was the high-purity beryllium into the defense, and we had a very strong quarter in Q4. So if you are looking sequentially or even if you look year-over-year, that was down. That is, again, not systematic [sic] [symptomatic] of lost market share. It is simply timing of delivery of some of these larger defense orders. You can see that in our defense end-market sales, which were down both sequentially and year-over-year for the segment. So that -- that mix negatively impacted this particular business. Also, the telecom infrastructure for this business, which is mainly undersea repeater housing, that was down. That's also a high margin. All of that was offset, because you saw the value-added sales grow with expansion of our lower margin copper beryllium strip product line, and that was primarily in the Asia market for electronic connectors. But big picture, the profit improvement plan in PAC, it is working and it's little bit discouraging. It's hard to see in these Q1 results because of that mix shift in beryllium. But if you go specifically to the copper beryllium business, that business itself had sequential $2 million improvement in profitability Q4 to Q1, as we have been initiating pricing improvement initiatives, mix improvement initiatives within copper beryllium, and also some of our cost-savings initiatives, although the Japan action, we made a lot of progress in restructuring the Japan service center, that won't be complete until the end of Q2. But that will deliver going forward, $2 million of annualized benefit. And then, there is a volume pickup. We commented on the order entry rates. The order entry rate in our Performance Alloys business has been strong the first half of the year. And that's partially as the oil and gas market starts to come back a little bit. But as we commented, industrial and consumer electronics also have some positive momentum in our current order entry rate. So we are making progress in the profitability improvement plan within the PAC business. It's just a little bit disguised because our high-margin beryllium business was down in the quarter, although it's not forecasted to be down for the full year. It will have a heavy back half of the year, similar to what it had in '14 and in '16.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research and Senior Research Analyst [19]

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Got it. And then a last quick question. Just circling back around here on the beryllium hydroxide. I believe you guys are -- you talked about earlier as far as forecasting some -- some revenue or some shipments there. I heard your response to the prior question there, but just wondering if maybe I can ask somewhat differently here. Do you have actual orders or orders are coming? Or is it more of kind of just like a feeling indications of interest, if you will?

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Jugal K. Vijayvargiya, Materion Corporation - CEO, President and Director [20]

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Marc, let me take that on. I think the discussions that Joe mentioned earlier, we've been having discussions with our customer base, and those discussions are progressing very well. And as he indicated, we have in our plans to resume shipments here in the second half of the year, but I think that's something that we'll be able to hopefully communicate to you more down the road.

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Operator [21]

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There are no further questions at this time.

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Jugal K. Vijayvargiya, Materion Corporation - CEO, President and Director [22]

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Okay. So let me make a couple of summary comments here. So first, I'd like to thank Dick for his outstanding leadership that he's provided to the company for 43 consecutive quarters. That's just phenomenal. So Dick, thank you very much for that.

And I'd like to thank, of course, the folks that have dialed in and participated on the call. I look forward to joining you for the quarters to come ahead. And I can assure you that we are focused and committed on the business. As you've seen here in the first quarter, with the results that we've delivered and the confirming -- the outlook that we've provided to you here for the rest of the year. So thank you. Thank you, again.

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Stephen F. Shamrock, [23]

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Thank you, as well. This is Steve Shamrock, and this concludes our first quarter 2017 earnings call. A reported playback of this call will be available on the company's website, materion.com. We would like to thank you for participating on the call this morning and your interest in Materion. I will be available to answer any follow-up questions. My direct dial number is 216-383-4010. Thank you very much.

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Operator [24]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.