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What changed in MATERION Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MATERION Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+205 added−186 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-15)

Top changes in MATERION Corp's 2024 10-K

205 paragraphs added · 186 removed · 163 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeLikewise, we have implemented career development programs in other key professional functional areas. We are committed to identifying and developing the talents of our next generation of leaders. Our robust and fully integrated talent and succession-planning process supports the development of our talent pipeline for critical roles in operations management, commercial excellence and engineering.
Biggest changeOur robust and fully integrated talent and succession-planning process supports the development of our talent pipeline for critical roles in operations management, commercial excellence, and engineering. We have maintained our campus recruitment initiatives to ensure a strong pipeline of talent into the organization. Additionally, Company development programs have been designed to target and accelerate key leadership and functional skill sets.
These products are used in high-performance logic, advanced memory high-performance logic, advanced memory, micro-electromechanical systems and power management integrated circuits, radio frequency devices, data storage, display, architectural glass, solar, optical coating, and other applications within the semiconductor, energy, and industrial end markets. Electronic Materials also has metal recovery operations and in-house refining that allow for the recycling of precious metals.
These products are used in high-performance logic, advanced memory, micro-electromechanical systems and power management integrated circuits, radio frequency devices, data storage, display, architectural glass, solar, optical coating, and other applications within the semiconductor, energy, and industrial end markets. Electronic Materials also has metal recovery operations and in-house refining that allow for the recycling of precious metals.
Occupational Safety and Health Administration (OSHA) published a final standard for workplace exposure to beryllium that, among other things, lowered the permissible exposure by a factor of ten and established new requirements for respiratory protection, personal protective clothing and equipment, medical surveillance, hazard communication, and record- 4 keeping.
Occupational Safety and Health Administration (OSHA) published a final standard for workplace exposure to beryllium that, among other things, lowered the permissible exposure by a factor of ten and established new requirements for respiratory protection, personal protective clothing and equipment, medical surveillance, hazard communication, and record-keeping.
Diversity and Inclusion As part of our human capital management initiatives to attract, develop, and retain diverse global talent, we track and report internally on key talent metrics including workforce demographics, critical role pipeline data, and diversity hiring analytics.
Diversity and Inclusion 5 As part of our human capital management initiatives to attract, develop, and retain diverse global talent, we track and report internally on key talent metrics including workforce demographics, critical role pipeline data, and diversity hiring analytics.
Key competitors include NGK Insulators, Wieland Electric, Inc., Aurubis Stolberg GmbH, Diehl Metall Stiftung & Co. KG, Nippon Mining, Wickeder Group, Heraeus Inc., AMI Doduco, Inc., and other North American continuous strip and plating companies. • Performance Solutions provides engineered end-product technologies to our customers, including near-net shape and finished machined beryllium containing and non-beryllium containing products.
Key competitors include NGK Insulators, Wieland Electric, Inc., Aurubis Stolberg GmbH, Diehl Metall Stiftung & Co. KG, Nippon Mining, Proterial Ltd.,Wickeder Group, Heraeus Inc., AMI Doduco, Inc., and other North American continuous strip and plating companies. • Performance Solutions provides engineered end-product technologies to our customers, including near-net shape and finished machined beryllium containing and non-beryllium containing products.
Item 1. BUSINESS THE COMPANY Materion Corporation (referred to herein as the Company, our, we, or us), through its wholly owned subsidiaries, is an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications with $1.7 billion in net sales in 2023. The Company was incorporated in Ohio in 1931.
Item 1. BUSINESS THE COMPANY Materion Corporation (referred to herein as the Company, our, we, or us), through its wholly owned subsidiaries, is an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications with $1.7 billion in net sales in 2024. The Company was incorporated in Ohio in 1931.
Our SupremEX TM products offer the industry’s highest quality aluminum silicon carbide metal matrix composite formulation, well suited for a wide range of applications from high performance engine components and aerospace structural components to high-stiffness consumer electronic components. Direct competitors include IBC Advanced Alloys, NGK Metals, CBL Ceramics Limited, and CoorsTek, Inc.
Our SupremEX TM products offer the industry’s highest quality aluminum silicon carbide metal matrix composite formulation, well suited for a wide range of applications from high performance engine components and aerospace structural components to high-stiffness consumer electronic components. Direct competitors include IBC Advanced Alloys, NGK Metals, ATI Specialty Metals, CBL Ceramics Limited, and CoorsTek, Inc.
The inhalation of airborne beryllium particulate may present a health hazard to certain individuals. In 2018, the U.S.
The inhalation of airborne beryllium particulate may present a health hazard to certain individuals. 4 In 2018, the U.S.
Our precision cladding and plating capabilities allow for precious metal or other base metals to be applied in continuous strip form, only where it is needed, reducing the material cost to our customers as well as providing design flexibility and 2 performance. Major end markets include consumer electronics, telecom and data center, automotive, aerospace and defense, industrial, and energy.
Our precision cladding and plating capabilities allow for precious metal or other base metals to be applied in continuous strip form, only where it is needed, reducing the material cost to our customers as well as providing design flexibility and 2 performance. Major end markets include consumer electronics, life sciences, automotive, aerospace and defense, industrial, and energy.
Electronic Materials Electronic Materials produces advanced chemicals, microelectronics packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal pre-forms, high temperature braze materials, and ultra-pure wire.
Electronic Materials Electronic Materials produces advanced chemicals, microelectronics packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal pre-forms and high temperature braze materials.
Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center. SEGMENT INFORMATION Our businesses are organized under four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. Our Other reportable segment includes unallocated corporate costs. Additional information regarding our segments and business is presented below.
Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences. SEGMENT INFORMATION Our businesses are organized under four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. Our Other reportable segment includes unallocated corporate costs. Additional information regarding our segments and business is presented below.
Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate its business successfully. We employed approximately 3,404 people globally as of December 31, 2023.
Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate its business successfully. We employed approximately 3,037 people globally as of December 31, 2024.
Backlog The backlog of unshipped orders as of December 31, 2023, 2022, and 2021 was $573.4 million, $576.2 million, and $541.1 million, respectively. Backlog is generally represented by purchase orders that may be terminated under certain conditions. We expect that substantially all of our backlog of orders at December 31, 2023 will be filled over the next 18 months.
Backlog The backlog of unshipped orders as of December 31, 2024, 2023, and 2022 was $537.6 million, $573.4 million, and $576.2 million, respectively. Backlog is generally represented by purchase orders that may be terminated under certain conditions. We expect that substantially all of our backlog of orders at December 31, 2024 will be filled over the next 18 months.
We also have onsite medical teams at two key manufacturing sites to provide medical testing for employees to determine any potential exposure to beryllium, of which Materion is a leading global supplier.
We also have onsite medical staff at three key manufacturing sites to provide medical testing for employees to determine any potential exposure to beryllium, of which Materion is a leading global supplier.
Performance Materials Performance Materials provides advanced engineered solutions comprised of beryllium and non-beryllium containing alloy systems and custom engineered parts in strip, bulk, rod, plate, bar, tube, and other customized shapes produced at manufacturing facilities located throughout the United States and Europe and sold through distribution global hubs.
Performance Materials Performance Materials provides advanced engineered solutions comprised of beryllium and non-beryllium containing alloy systems and custom engineered metal solutions in the forms of strip, bulk, rod, plate, bar, tube, and many specialized custom shapes produced at manufacturing facilities located throughout the United States and Europe and sold through distribution global hubs.
On an annual basis, our corporate long-range strategies are critically analyzed, reviewed and updated, improvement plans are developed for each global location, progress is tracked, and daily critical safety statistics and metrics are published internally.
On an annual basis, our corporate long-range strategies are critically analyzed, reviewed and updated and then improvement plans are developed. Progress of improvement plans is tracked, and daily critical safety statistics and metrics are published internally.
Approximately 800 customers purchase our products throughout the semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center end markets. In fiscal year 2023, one customer accounted for approximately ten percent of our net sales. Prior to this, no single customer accounted for ten percent or more of our net sales.
Approximately 800 customers purchase our products throughout the semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences end markets. In fiscal year 2024 and 2023, one customer in our Performance Materials segment accounted for approximately ten percent of our net sales. Prior to this, no single customer accounted for ten percent or more of our net sales.
While our product and market development efforts allow us to capture new applications, we may lose existing applications and customers from time to time due to the rapid change in technologies and other factors. 3 Precision Optics Precision Optics designs and produces precision thin film coatings, optical filters and assemblies.
While our product and market development efforts allow us to capture new applications, we may lose existing applications and customers from time to time due to the rapid change in technologies and other factors. Precision Optics Precision Optics is a designer and manufacturer of advanced optical components, including precision thin-film coatings, optical filters, and assemblies.
Approximately 473 were in the Asia–Pacific region, 454 were in the Europe, the Middle East, and Africa (EMEA) region, and 2,477 were in the North America region. Among our total global employee population, approximately 2,224 were employed in manufacturing.
Approximately 341 were in the Asia–Pacific region, 444 were in the Europe, the Middle East, and Africa (EMEA) region, and 2,252 were in the North America region. Among our total global employee population, approximately 2,005 were employed in manufacturing.
Health and Safety The health, safety, and well-being of our employees is our highest priority and is a Materion core value. We have a strong Environmental, Health, and Safety (EHS) program based on the ISO 45000 management system.
Health and Safety The environment, health, safety, and well-being of our employees is our highest priority and is a Materion core value. We have a strong and mature Environmental, Health, and Safety (EHS) program based on the 45001 standard.
Applications for alloyed metals products include oil & gas drilling and production components, bearings, bushings, welding electrodes, plastic injection or metal die casting mold tooling, and electrical or electronic connectors. Major end markets for alloyed metals include industrial, automotive, aerospace and defense, energy, and telecom and data center.
Applications for alloyed metals products include oil & gas drilling and production components, bearings, bushings, welding electrodes, plastic injection or metal die casting mold tooling, and electrical or electronic connectors. Major end markets for alloyed metals include industrial, automotive, aerospace and defense, energy, and life sciences. Alloyed metals competes with companies around the world that produce alloys with similar properties.
Alloyed metals competes with companies around the world that produce alloys with similar properties. High performance beryllium products are primarily beryllium metal products, which may also be alloys or other mixtures with aluminum and may be beryllium oxide. The materials are manufactured in billet, ingot, plate, sheet, powder, and customized shape forms.
High performance beryllium products are primarily beryllium metal products, which may also be alloys or other mixtures with aluminum and may be beryllium oxide. The materials are manufactured in billet, ingot, plate, sheet, powder, and customized shape forms. These materials are used in applications that require high stiffness and/or low density or high thermal conductivity and/or high electrical resistance.
To attract a global workforce, we strive to create and embed a culture where employees can bring their authentic selves to work and feel a genuine sense of belonging.
To attract a global workforce, we strive to create and embed a culture where employees can bring their authentic selves to work and feel a genuine sense of belonging. Our employee resource groups (ERGs) are Company-sponsored groups of global employees that support and promote the specific mutual objectives of both the employees and the Company.
By providing employees with wide-ranging development programs, opportunities, and paths to success, we empower them to realize their full potential. Our development activities provide further opportunities to retain employees and build upon critical capabilities.
Talent Development We continue to provide professional development and training for all global employees. By providing employees with wide-ranging development opportunities and paths to success, we empower them to realize their full potential. Our development activities support our goal to develop and retain employees while building a strong foundation on their critical capabilities.
These materials are used in applications that require high stiffness and/or low density or high thermal conductivity and/or high electrical resistance. The properties are provided from the unique combination of material properties, or in applications requiring specific interactions with sub-atomic, high-energy particles, or in applications requiring strong affinity for oxygen such as in the manufacture of primary aluminum and magnesium.
The properties are provided from the unique combination of material properties, or in applications requiring specific interactions with sub-atomic, high-energy particles, or in applications requiring strong affinity for oxygen such as in the manufacture of primary aluminum and magnesium. Beryllium hydroxide is produced at our milling operations in Utah from our bertrandite ore mine and purchased beryl ore.
Key competitors include NGK Insulators, IBC Advanced Alloys Corp., Ningxia Orient Tantalum Industry Co., Ltd., Le Bronze Alloys, Minotti Metals, SA, KME AG & Co.
The hydroxide is used primarily as a raw material input for beryllium-containing alloys and, to a lesser extent, beryllium products. Key competitors include NGK Insulators, IBC Advanced Alloys Corp., Ningxia Orient Tantalum Industry Co., Ltd., Le Bronze Alloys, Minotti Metals, SA, KME AG & Co.
As of December 31, 2023, we had four ERGs: ELEVATE (Women); V.E.T. (veterans and allies of the military); LGBTQ+; and United Voices of Materion (all ethnic backgrounds).
The ERGs serve as platforms for employees to network, learn, develop, and grow in a supportive environment that emphasizes our commitment to diversity and inclusion. As of December 31, 2024, we had four ERGs: ELEVATE (Women); V.E.T. (veterans and allies of the military); LGBTQ+; and United Voices of Materion (all ethnic backgrounds).
We strongly encourage employees to build development plans in partnership with their managers and supervisors, providing both ongoing and specific opportunities for two-way communication and corresponding action. Apprenticeship programs have been implemented in some of our large plant sites, and we continue to introduce similar programs throughout the Company.
We strongly encourage employees to build development plans in partnership with their managers and supervisors, providing both ongoing and specific opportunities for two-way communication and corresponding action. We offer formalized mentoring, development plans, and stretch assignments for employees who are engaged in career development programs.
OTHER GENERAL INFORMATION Products We are committed to providing high-quality, innovative, and reliable products that will enable our customers’ technologies and fuel their own technological breakthroughs and growth. Our products include precious and non-precious specialty metals, inorganic chemicals and powders, specialty coatings, specialty engineered beryllium and copper-based alloys, beryllium composites, ceramics, and engineered clad and plated metal systems.
Our products include precious and non-precious specialty metals, inorganic chemicals and powders, specialty coatings, specialty engineered beryllium and copper-based alloys, beryllium composites, ceramics, and engineered clad and plated metal systems.
We perform self-audits to ensure sustainability of our processes and systems to create an environment where our colleagues leave their workplace safely, every day. We continue to invest in safety improvements such as capital improvements, new safety technology, safety controls, and engineering ergonomic solutions.
To ensure sustainability we conduct self-audits of our processes and systems to create an environment where our colleagues leave their workplace safely, every day. Capital investments to reduce the risk of injury, chemical exposure, business interruption and property loss are integrated into the annual capital plan.
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Beryllium hydroxide is produced at our milling operations in Utah from our bertrandite ore mine and purchased beryl ore. The hydroxide is used primarily as a raw material input for beryllium-containing alloys and, to a lesser extent, beryllium products.
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These critical components are essential for enabling cutting-edge technologies across diverse end markets, including aerospace and defense, automotive, consumer electronics, semiconductor, medical, and industrial applications. With manufacturing facilities strategically located in Europe, Asia, and the United States, Precision Optics ensures a global reach and efficient delivery of its products.
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Headquartered in Westford, Massachusetts, the business has manufacturing facilities in Europe, Asia and the United States and its products are sold directly from these facilities, as well as through direct sales offices and independent sales representatives throughout the world. Principal competition includes Viavi Corporation, Coherent Corporation, MKS Newport Optics, Alluxa, and a number of smaller regional and national suppliers.
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Distribution channels include direct sales from manufacturing facilities, as well as through direct sales offices and a network of independent sales representatives worldwide. Precision Optics competes in a dynamic market with larger diversified technology companies, smaller specialized firms, and international competitors.
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While our product and market development efforts allow us to capture new applications, we may lose existing applications and customers from time to time due to the rapid change in technologies and other factors. Other The Other segment is comprised of unallocated corporate costs.
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The Company differentiates itself through a combination of factors: 3 • Technological Expertise and Innovation: Continuous investment in R&D drives the development of advanced coatings and optical solutions, maintaining a competitive edge. • Customer Focus: Building strong partnerships with customers allows Precision Optics to understand their unique needs and deliver tailored solutions that exceed expectations. • Manufacturing Excellence: State-of-the-art manufacturing facilities and rigorous quality control processes ensure consistent product quality and reliability.
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Our future focus is the integration of human operating performance concepts into our EHS process which is proven to further reduce the risk of serious injuries. We will be significantly enhancing our training programs through the implementation of a new learning management system emphasizing increased hazard recognition skills and typical regulatory compliance requirements.
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While Precision Optics actively pursues new applications and markets, it recognizes the inherent challenges of operating in a rapidly evolving technological landscape. The Company adapts to changing market demands and proactively addresses potential disruptions to maintain its position as a leading provider of advanced optical components.
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Our employee resource groups (ERGs) are Company-sponsored groups of global employees that support and promote the specific mutual objectives of both the employees and the Company, with emphasis on the inclusion, diversity, and professional 5 development of employees. The ERGs provide opportunities for employees to connect, develop, and grow together in a supportive environment.
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Principal competition includes Viavi Corporation, Coherent Corporation, MKS Newport Optics, Alluxa, and a number of smaller regional and national suppliers. Other The Other segment is comprised of unallocated corporate costs. OTHER GENERAL INFORMATION Products We are committed to providing high-quality, innovative, and reliable products that will enable our customers’ technologies and fuel their own technological breakthroughs and growth.
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Our focus continues to be on the recruitment of diverse candidates as well as the development of our internal cadres of diverse leaders so that they can advance their careers and move into leadership positions throughout the Company. Talent Development We continue to prioritize professional development and training for all global employees.
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We began a new chapter in Materion’s longstanding effort to reduce the risk of injuries in 2023 with the integration of human operating performance concepts and a concerted focus on identifying and controlling high energy sources such as electrical, hydraulic, steam and chemical energy.
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We have continued to grow our campus recruitment initiatives while building programs that develop and grow our early career talent. Additionally, Company development programs have been designed to target and accelerate key leadership and functional skill sets.
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All factory leadership received detailed training on the model as well as the operations staff receiving basic training on the concepts last year. In 2024, we experienced a 20 percent improvement in our injury frequency rate and lowered our severity rate to one of the lowest in the primary nonferrous industry.
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A new interactive learning management system increasing operator hazard recognition skills was deployed as well. Performance improvement was also due in part to a large increase in safety conversations between operators and supervision as well as a campaign to dramatically increase near miss reporting.
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Apprenticeship programs have been implemented in some of our largest plant sites, and we continue to develop a path for apprenticeship program expansion throughout the Company. Likewise, we have implemented career development programs and tools in other key professional functional areas. We are committed to identifying and developing the talents of our next generation of leaders.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, we have experienced customers building inventory in anticipation of increased demand, whereas in other periods, we experienced decreased demand because our customers had excess inventory. Risks Relating to Our Business and Operations A portion of our revenue is derived from the sale of defense-related products through various contracts and subcontracts.
Biggest changeAlso, in times when growth rates in our markets are lower, or negative, there may be temporary inventory adjustments by our customers that may negatively affect our business . For example, we have experienced customers building inventory in anticipation of increased demand, whereas in other periods, we experienced decreased demand because our customers had excess inventory.
The Company has taken steps to protect our computer systems; however, there is always a risk of successful intrusions or attacks, and any intrusions or attacks could pose a risk of undetected data loss or theft that could later be used to harm the Company.
The Company has taken steps to protect our computer systems and data; however, there is always a risk of successful intrusions or attacks, and any intrusions or attacks could pose a risk of undetected data loss or theft that could later be used to harm the Company.
Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us 11 or our industry could harm us. We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, financial position or cash flows.
Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could harm us. We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, financial position or cash flows.
Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.
Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced 12 emission allowances or additional restrictions on production or operations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.
If our customers use substitutes for beryllium-containing materials in their products, the demand for beryllium-containing products may decrease, which could reduce our sales. Our long and variable sales and development cycle makes it difficult for us to predict if and when a new product will be sold to customers.
If our customers use substitutes for beryllium-containing materials in their products, the demand for beryllium-containing products may decrease, which could reduce our sales. 7 Our long and variable sales and development cycle makes it difficult for us to predict if and when a new product will be sold to customers.
Bertrandite ore mining is also subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, reclamation and restoration of mining properties, the discharge of materials into the environment, and the effects that mining has on groundwater quality and availability.
Bertrandite ore 13 mining is also subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, reclamation and restoration of mining properties, the discharge of materials into the environment, and the effects that mining has on groundwater quality and availability.
Future requirements could impose on us significant additional 12 costs or obligations with respect to our extraction, milling, and processing of ore. If we fail to comply with present and future environmental laws and regulations, we could be subject to liabilities or our operations could be interrupted.
Future requirements could impose on us significant additional costs or obligations with respect to our extraction, milling, and processing of ore. If we fail to comply with present and future environmental laws and regulations, we could be subject to liabilities or our operations could be interrupted.
In the conduct of our business, we collect, use, transmit, store, and report data on information systems owned by the Company or hosted by third parties, and interact with customers, vendors, and employees.
In the conduct of our business, we collect, use, transmit, store, and report data on information systems owned by the Company or support or hosted by third parties, and interact with customers, vendors, and employees.
Prevailing economic 13 conditions and financial, business, competitive, legislative, regulatory and other factors, many of which are beyond our control, affect our ability to make these payments.
Prevailing economic conditions and financial, business, competitive, legislative, regulatory and other factors, many of which are beyond our control, affect our ability to make these payments.
As a result, our business, financial condition and results of operations could be materially adversely affected. Risks Related to Legal, Compliance and Regulatory Matters 10 We conduct our sales and distribution operations on a worldwide basis and are subject to the risks associated with doing business outside the United States.
As a result, our business, financial condition and results of operations could be materially adversely affected. Risks Related to Legal, Compliance and Regulatory Matters 11 We conduct our sales and distribution operations on a worldwide basis and are subject to the risks associated with doing business outside the United States.
Cyber attacks, vulnerabilities, and disruptions impacting those systems could result in the loss, theft, or disclosure of confidential, proprietary, or personal information and could also interrupt or damage our operations, harm our reputation, and subject us to legal claims.
Cyber attacks, vulnerabilities, and disruptions impacting those systems could result in the loss, theft, or disclosure of confidential, proprietary, or personal information or intellectual property and could also interrupt or damage our operations, harm our reputation, and subject us to legal claims.
Our property damage and business interruption insurance may not cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all. A security incident impacting customer, employee, supplier, or Company information, or Company systems or infrastructure, may have a material adverse effect on our business, financial condition, and results of operations.
Our property damage and business interruption insurance may not cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all. 9 A cybersecurity incident impacting customer, employee, supplier, or Company information, or Company systems or infrastructure, may have a material adverse effect on our business, financial condition, and results of operations.
Unexpected events and natural disasters at our mine or manufacturing facilities could increase the cost of operating our business. A portion of our production costs at our mine are fixed regardless of current operating levels. Our operating levels are subject to conditions beyond our control that may increase the cost of mining for varying lengths of time.
Unexpected events and natural disasters at our mine or manufacturing facilities could increase the cost of operating our business. A portion of our production costs at our mine an manufacturing facilities are fixed regardless of current operating levels. Our operating levels are subject to conditions beyond our control that may increase the cost of products for varying lengths of time.
Increased global information technology (IT) security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks, as well as those of third parties who we rely on, and risk the confidentiality, availability, and integrity of our data.
Increased global information technology (IT) security threats and in some instances, more sophisticated and targeted computer crime pose a risk to the security of our systems and networks, as well as those of third parties who we rely on, and risk the confidentiality, availability, and integrity of our data and systems.
These security threats exist with respect to the IT systems of our lenders, suppliers, consultants, advisers, and other third parties with whom we conduct business.
These cybersecurity threats exist with respect to the IT systems of our lenders, suppliers, consultants, advisers, and other third parties with whom we conduct business.
We sell to customers outside of the United States from our domestic and international operations. Revenue from international operations (principally Europe and Asia) accounted for approximately 51% in 2023, 51% in 2022, and 47% in 2021 of Net sales. We anticipate that international shipments will account for a significant portion of our sales for the foreseeable future.
We sell to customers outside of the United States from our domestic and international operations. Revenue from international operations (principally Europe and Asia) accounted for approximately 57% in 2024 and 51% in 2023 and 2022, respectively of Net sales. We anticipate that international shipments will account for a significant portion of our sales for the foreseeable future.
We operate in markets driven by rapidly changing technology and evolving customer specifications and industry standards. Next-generation solutions may quickly render an existing product obsolete and unmarketable. For example, for many years thermal and mechanical performance have been at the forefront of device packaging for wireless communications infrastructure devices.
The markets for our products are experiencing rapid changes in technology. We operate in markets driven by rapidly changing technology and evolving customer specifications and industry standards. Next-generation solutions may quickly render an existing product obsolete and unmarketable. For example, for many years thermal and mechanical performance have been at the forefront of device packaging for wireless communications infrastructure devices.
We protect our sensitive, confidential, or proprietary information as well as personal data, our facilities, and information technology systems, but we and third parties upon whom we rely to host or protect our data, facilities, and IT systems may be vulnerable to future security incidents.
We protect our sensitive, confidential, or proprietary information as well as personal data, our facilities, and IT systems, but we and third parties upon whom we rely to host or protect our data, facilities, and IT systems may be vulnerable to cybersecurity threats and future cybersecurity incidents.
Some of our facilities are interdependent. For instance, our manufacturing facility in Elmore, Ohio relies on our mining operation for its supply of beryllium hydroxide used in production of most of its beryllium-containing materials.
For instance, our manufacturing facility in Elmore, Ohio relies on our mining operation for its supply of beryllium hydroxide used in production of most of its beryllium-containing materials.
These covenants could adversely affect our business by limiting our ability to plan for or react to market conditions or to meet our capital needs, as well as adversely affect our ability to pursue our growth and acquisition strategies, and other strategic initiatives. Adverse business conditions could impact our ability to generate cash and service our indebtedness.
These covenants could adversely affect our business by limiting our ability to plan for or react to market conditions or to meet our capital needs, as well as adversely affect our ability to pursue our growth and acquisition strategies, and other strategic initiatives.
Data privacy breaches and the evolving global governmental regulation relating to data privacy could adversely affect our results of operations and profitability.
Data privacy compliance and breaches and the evolving global governmental regulations relating to data privacy and cybersecurity could adversely affect our results of operations and profitability.
A substantial number of our customers are in the semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center end markets.
A substantial number of our customers are in the semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences end markets.
In 2019, the Company's Board of Directors approved changes to the U.S. defined benefit pension plan. The Company froze the pay and service amounts used to calculate the pension benefits for active participants as of January 1, 2020. The Company has defined benefit pension plans in other non-U.S. locations.
The Company froze the pay and service amounts used to calculate the pension benefits for active participants as of January 1, 2020. The Company has 10 defined benefit pension plans in other non-U.S. locations.
Because we manufacture products that contain precious metals, we maintain a significant amount of precious metals at certain of our manufacturing facilities. Accordingly, we are subject to the risk of precious metal shortages resulting from employee error or theft. In the past, we have had precious metal shortages resulting from theft and employee error, which could reoccur in the future.
Because we manufacture products that contain precious metals, we maintain a significant amount of precious metals at certain of our manufacturing facilities. Accordingly, we are subject to the risk of precious metal shortages resulting from employee error or theft.
In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
Each of these end markets is cyclical in nature, influenced by a combination of factors which could have a negative impact on our business, including, among other things, periods of economic growth or recession, inflation, rising interest rates and the strength or weakness of the U.S. dollar, the strength of the semiconductor, automotive electronics, and oil and gas industries, the rate of construction of telecommunications infrastructure equipment, and government spending on defense. 6 Also, in times when growth rates in our markets are lower, or negative, there may be temporary inventory adjustments by our customers that may negatively affect our business .
Each of these end markets is cyclical in nature, influenced by a combination of factors which could have a negative impact on our business, including, among other things, periods of economic growth or recession, inflation, tariffs, rising interest rates and the strength or weakness of the U.S. dollar, the strength of the semiconductor, automotive electronics, and oil and gas industries, the rate of construction of telecommunications infrastructure equipment, and government spending on defense.
While we maintain controls to prevent theft, including physical security measures, if our controls do not operate effectively or are designed ineffectively, our profitability could be adversely affected, including any charges that we might incur as a result of the shortage of our inventory and by costs associated with increased security, preventative measures, and insurance.
In the past, we have had precious metal shortages resulting from theft and employee error, which could reoccur in the future. 8 While we maintain controls to prevent theft, including physical security measures, if our controls do not operate effectively or are designed ineffectively, our profitability could be adversely affected, including any charges that we might incur as a result of the shortage of our inventory and by costs associated with increased security, preventative measures, and insurance.
The interpretation and application of data protection laws may be interpreted and applied in a manner that is inconsistent with our data practices.
Similarly, our role as a subcontractor to government contractors. The interpretation and application of data protection laws may be interpreted and applied in a manner that is inconsistent with our data practices.
Furthermore, significant reductions to defense spending could occur over the next several years due to government spending cuts, which could have a significant adverse impact on us. For example, high-margin defense application delays and/or push-outs may adversely impact our results of operations, including quarterly earnings. The markets for our products are experiencing rapid changes in technology.
If cancellations were to occur, it would result in a reduction in our revenue. Furthermore, significant reductions to defense spending could occur over the next several years due to government spending cuts, which could have a significant adverse impact on us. For example, high-margin defense application delays and/or push-outs may adversely impact our results of operations, including quarterly earnings.
Our ability to pay interest on our debt and to satisfy our other debt obligations depends in part upon our future financial and operating performance and that of our subsidiaries, and upon our ability to renew or refinance borrowings.
Adverse business conditions could impact our ability to generate cash and service our indebtedness. 14 Our ability to pay interest on our debt and to satisfy our other debt obligations depends in part upon our future financial and operating performance and that of our subsidiaries, and upon our ability to renew or refinance borrowings.
Risks Relating to Economic Conditions The businesses of many of our customers are subject to significant fluctuations as a result of the cyclical nature of their industries and their sensitivity to general economic conditions, which could adversely affect their demand for our products and reduce our sales and profitability.
If any of the following risks occur, our business, results of operations, or financial condition could be negatively impacted. 6 Risks Relating to Economic Conditions The businesses of many of our customers are subject to significant fluctuations as a result of the cyclical nature of their industries and their sensitivity to general economic conditions, which could adversely affect their demand for our products and reduce our sales and profitability.
In the event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, our business, financial condition, and operating results could be materially and adversely affected. Item 1B. UNRESOLVED STAFF COMMENTS None.
In the event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, our business, financial condition, and operating results could be materially and adversely affected. Our restructuring efforts may not have the intended effects.
Any failure, or perceived failure, to comply with our data protection or privacy-related legal obligations may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition. 9 Our defined benefit pension plans and other post-employment benefit plans are subject to financial market risks that could adversely impact our financial performance.
Any failure, or perceived failure, to comply with our data protection or privacy-related legal obligations may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition.
Because we do not control the consigned inventory, we may not be able to access the inventory to meet our forecasted needs, which could adversely impact our results of operations. 8 We have a limited number of manufacturing facilities, and damage to those facilities, or to critical pieces of equipment in these facilities, could interrupt our operations, increase our costs of doing business, and impair our ability to deliver our products on a timely basis.
We have a limited number of manufacturing facilities, and damage to those facilities, or to critical pieces of equipment in these facilities, could interrupt our operations, increase our costs of doing business, and impair our ability to deliver our products on a timely basis. Some of our facilities are interdependent.
If we lost one or more of these major customers, or if one or more major customers significantly decreased its orders for our products, our business, results of operations and financial condition could be materially and adversely impacted. In fiscal year 2023, one customer accounted for approximately ten percent of our net sales.
Although the Company serves a diverse customer base, a portion of our sales is concentrated amongst a limited number of customers. If we lost one or more of these major customers, or if one or more major customers significantly decreased its orders for our products, our business, results of operations and financial condition could be materially and adversely impacted.
The availability and prices of some raw materials we use in our manufacturing operations fluctuate, and increases in raw material costs can adversely affect our operating results and our financial condition. 7 We manufacture advanced engineered materials using various precious and non-precious metals, including beryllium, tantalum, aluminum, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, tin, iridium, rhodium, niobium, hafnium, and tungsten.
We manufacture advanced engineered materials using various precious and non-precious metals, including beryllium, tantalum, aluminum, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, tin, iridium, rhodium, niobium, hafnium, and tungsten.
Some of the reasons for cancellation include, but are not limited to, budgetary constraints or re-appropriation of government funds, timing of contract awards, violations of legal or regulatory requirements, and changes in political agenda. If cancellations were to occur, it would result in a reduction in our revenue.
A portion of these customers operate under contracts with the U.S. Government, which are vulnerable to termination at any time, for convenience or default. Some of the reasons for cancellation include, but are not limited to, budgetary constraints or re-appropriation of government funds, timing of contract awards, violations of legal or regulatory requirements, and changes in political agenda.
In addition, these failures would make it difficult to plan future capital expenditure needs and could cause us to fail to meet our cash flow requirements.
In addition, these failures would make it difficult to plan future capital expenditure needs and could cause us to fail to meet our cash flow requirements. The availability and prices of some raw materials we use in our manufacturing operations fluctuate, and increases in raw material costs can adversely affect our operating results and our financial condition.
Despite our security measures, the IT systems and infrastructure of the Company and third parties who host or secure our data may be vulnerable to customer viruses, cyber-attacks, security breaches caused by employee error or malfeasance, and exploitable third-party software vulnerabilities or other disruptions.
Despite our security measures, the IT systems and infrastructure of the Company and third parties who host or secure our data may be vulnerable to customer viruses, cyber-attacks, harmful malware or ransomware, denial-of-services attacks and other attacks, which may affect business continuity and threaten the availability, confidentiality and integrity of our systems and information.
These contracts may be suspended, canceled, or delayed, which could have an adverse impact on our revenues. In 2023, 14% of our value-added sales were to customers in the aerospace and defense end market. A portion of these customers operate under contracts with the U.S. Government, which are vulnerable to termination at any time, for convenience or default.
Risks Relating to Our Business and Operations A portion of our revenue is derived from the sale of defense-related products through various contracts and subcontracts. These contracts may be suspended, canceled, or delayed, which could have an adverse impact on our revenues. In 2024, 19% of our value-added sales were to customers in the aerospace and defense end market.
The consignors retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment.
The consignors retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment. Because we do not control the consigned inventory, we may not be able to access the inventory to meet our forecasted needs, which could adversely impact our results of operations.
Our business may be impacted by external factors that we may not be able to control.
In fiscal year 2024 and 2023, one Performance Material customer accounted for approximately ten percent of our net sales. Our business may be impacted by external factors that we may not be able to control.
The risks discussed below are not the only risks that we may experience. If any of the following risks occur, our business, results of operations, or financial condition could be negatively impacted.
The risks discussed below are not the only risks that we may experience.
Any such threat could compromise our networks and those of third parties and the information stored there could be accessed, publicly disclosed, lost, or stolen. Attacks impacting our systems or data could interrupt or damage our operations or harm our reputation, resulting in a loss of sales, operating profits, and assets.
Cybersecurity threat actors also may attempt to exploit vulnerabilities through in software including that is software commonly used by companies in cloud-based services and bundled software. Any such threat or incident could compromise our networks and those of third parties and the information stored there could be accessed, publicly disclosed, lost, or stolen.
Removed
Our success is dependent upon our relationships with certain key customers. Although the Company serves a diverse customer base, a portion of our sales is concentrated amongst a limited number of customers.
Added
In the conduct of our business, we also are in the process of preparing for a Level 2 Cybersecurity Maturity Model Certification (CMMC), including by engaging an external third party to audit our information security standards against CMMC requirements.
Removed
We may hedge our currency transactions to mitigate the impact of currency price volatility on our earnings; however, hedging activities may not be successful. For example, hedging activities may not cover the Company’s net euro and yen exposure, which could have an unfavorable impact on our results of operations.
Added
Cybersecurity incidents can also include employee or personnel failures, fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient.
Added
A cybersecurity incident and any attacks impacting our systems or data could interrupt or damage our operations or harm our reputation, resulting in a loss of sales, operating profits, and assets, including major disruptions to business operations, loss of intellectual property, release of confidential information, alteration or corruption of data or systems, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, commercial litigation, administrative, and civil or criminal investigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity.
Added
Although we maintain a cyber insurance policy, there is no guarantee that such coverage will be sufficient to address costs, liabilities and damages we may incur in connection with a cybersecurity incident or that such coverage will continue to be available on commercially reasonable terms or at all.
Added
Our defined benefit pension plans and other post-employment benefit plans are subject to financial market risks that could adversely impact our financial performance. In 2019, the Company's Board of Directors approved changes to the U.S. defined benefit pension plan.
Added
Specifically, the Inflation Reduction Act of 2022 may be subject to change by future presidential administrations, including the Trump administration. It is not possible at this time to determine whether such actions will be taken and the impact they may have on the Company. Our success is dependent upon our relationships with certain key customers.
Added
For example, the Trump administration has proposed to significantly increase tariffs on foreign imports into the United States, particularly from Canada, China and Mexico.
Added
Other effects of these changes, including impacts on the price of raw materials, responsive actions from governments and the opportunity for competitors to establish a presence in markets where we participate, could also have significant impacts on our financial results.
Added
We cannot predict what further action may be taken with respect to tariffs or trade relations between the U.S. and other governments, and any further changes in U.S. or international trade policy could have an adverse impact on our business. In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws.
Added
We have implemented restructuring and other actions to reduce structural costs, improve operational efficiency and position the Company for long-term profitable growth. However, there is no assurance that these efforts, or that any other actions that we have taken or may take in the future, will be sufficient to counter any future economic or industry disruptions.
Added
We cannot provide assurance that we will not incur future restructuring charges or impairment charges, or that we will achieve all of the anticipated benefits from the restructuring actions we have taken or plan to take in the future.
Added
If we are unable to retain our qualified management and employees, our business may be negatively affected. 15 Our ability to provide high quality products and services depends in part on our ability to retain our skilled personnel in the areas of management, product engineering, servicing and sales.
Added
Competition for such personnel is intense, and our competitors can be expected to attempt to hire our management and skilled employees from time to time. In addition, our restructuring activities and strategies for growth have placed, and are expected to continue to place, increased demands on our management’s skills and resources.
Added
If we are unable to retain our management team and professional personnel, our customer relationships and level of technical expertise could be negatively affected, which may materially and adversely affect our business. Any interruption of our workforce, including interruptions due to our restructuring initiatives, unionization efforts, changes in labor relations or shortages of appropriately skilled individuals could affect our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe full Board attends one of the Audit and Risk Committee meetings at which information technology and cyber risk are discussed. Additionally, at least annually, the full Board attends a cybersecurity training from external experts and reviews and discusses our technology strategy with the Chief Information Officer and approves our technology strategic plan.
Biggest changeAdditionally, at least annually, the full Board attends a cybersecurity training from external experts and reviews and discusses our technology strategy with the Chief Information Officer and approves our technology strategic plan. 16 Our senior leadership is responsible for identifying, assessing and managing our exposure to risk, including cybersecurity risks.
In order to respond to potential cybersecurity threats, we maintain policies, 14 procedures and systems that provide for controls on detecting and addressing cybersecurity threats, including a formal incident response plan. We also maintain business continuity and disaster recovery capabilities, which we test regularly.
In order to respond to potential cybersecurity threats, we maintain policies, procedures and systems that provide for controls on detecting and addressing cybersecurity threats, including a formal incident response plan. We also maintain business continuity and disaster recovery capabilities, which we test regularly.
As of the date of the filing of this Form 10-K, we are not aware of and do not believe that any such attempts that have occurred since the beginning of 2023 that have had a material effect, or are reasonably likely to have a material effect, on our business, operations, or financial condition.
As of the date of the filing of this Form 10-K, we are not aware of and do not believe that any such attempts that have occurred since the beginning of 2024 that have had a material effect, or are reasonably likely to have a material effect, on our business, operations, or financial condition.
See “Risks Relating to Our Business and Operations – A security incident impacting customer, employee, supplier, or Company information, or Company systems or infrastructure, may have a material adverse effect on our business, financial condition, and results of operations. ” in “Risk Factors” on page 9 of this Form 10-K.
See “Risks Relating to Our Business and Operations – A cybersecurity incident impacting customer, employee, supplier, or Company information, or Company systems or infrastructure, may have a material adverse effect on our business, financial condition, and results of operations. ” in “Risk Factors” on page 10 of this Form 10-K.
Prior to joining Materion, Mr. Holt served as Chief Information Officer at Chart Industries as well as other IT-focused positions at TechnOptics, Accuride Corporation and Navistar. 15
Prior to joining Materion, Mr. Holt served as Chief Information Officer at Chart Industries as well as other IT-focused positions at TechnOptics, Accuride Corporation and Navistar. 17
Our senior leadership is responsible for identifying, assessing and managing our exposure to risk, including cybersecurity risks. Our cybersecurity program is led by our Chief Information Officer, who is responsible for assessing and managing material risks from cybersecurity threats, including monitoring the prevention, detection, mitigation and remediation of cybersecurity threats.
Our cybersecurity program is led by our Chief Information Officer, who is responsible for assessing and managing material risks from cybersecurity threats, including monitoring the prevention, detection, mitigation and remediation of cybersecurity threats. Our Chief Information Officer reports directly to our Chief Executive Officer.
Removed
Our Chief Information Officer reports directly to our Chief Executive Officer.
Added
The full Board attends two of the Audit and Risk Committee meetings at which information technology and cyber risk are discussed.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeInformation as of December 31, 2023, with respect to our facilities that are owned or leased, and the respective segments in which they are included, is set forth below: Location Owned or Leased Approximate Number of Square Feet Corporate and Administrative Offices Mayfield Heights, Ohio (1)(2) Leased 79,100 Manufacturing Facilities Albuquerque, New Mexico (2) Owned/Leased 13,000/63,200 Alzenau, Germany (2) Leased 136,400 Balzers, Lichtenstein (3) Leased 83,400 Brewster, New York (2) Leased 75,000 Buffalo, New York (2) Owned 110,000 Delta, Utah (1) Owned 100,800 Elmore, Ohio (1) Owned/Leased 681,000/191,000 Farnborough, England (1) Leased 10,000 Jena, Germany (3) Owned 102,700 Limerick, Ireland (2) Leased 23,000 Lincoln, Rhode Island (1) Owned/Leased 166,500/27,100 Lorain, Ohio (1) Owned 55,000 Milwaukee, Wisconsin (2) Owned/Leased 106,000/150,000 Newton, MA (1,2) Owned/Leased 125,000/69,900 Penang, Malaysia (3) Leased 68,000 Reading, Pennsylvania (1) Owned/Leased 128,800/287,000 Santa Clara, California (2) Leased 5,800 Shanghai, China (3) Leased 101,400 Singapore (1)(2) Leased 24,500 Subic Bay, Philippines (2) Leased 5,000 Taoyuan City, Taiwan (2) Leased 32,500 Tucson, Arizona (1) Owned 53,000 Tyngsboro, Massachusetts (3) Leased 38,000 Westford, Massachusetts (3) Leased 78,000 Wheatfield, New York (2) Owned 35,000 Service, Sales, and Distribution Centers Suzhou, China (2) Leased 400 Elmhurst, Illinois (1) Leased 28,000 Eschborn, Germany (3) Leased 500 Seoul, Korea (2) Leased 2,200 Shanghai, China (1) Leased 5,000 Stuttgart, Germany (1) Leased 49,000 Tokyo, Japan (1) Leased 5,400 (1) Performance Materials (2) Electronic Materials (3) Precision Optics 16 Mine Property The Company holds certain mineral rights on 7,443.5 acres at the Spor Mountain Mining Properties in Juab County, Utah, from which the beryllium-bearing ore, bertrandite, is mined by the open pit method.
Biggest changeInformation as of December 31, 2024, with respect to our facilities that are owned or leased, and the respective segments in which they are included, is set forth below: Location Owned or Leased Approximate Number of Square Feet Corporate and Administrative Offices Mayfield Heights, Ohio (1)(2) Leased 79,100 Manufacturing Facilities Albuquerque, New Mexico (2) Owned/Leased 13,000/23,460 Alzenau, Germany (2) Leased 136,400 Balzers, Lichtenstein (3) Leased 83,400 Brewster, New York (2) Leased 75,000 Buffalo, New York (2) Owned 110,000 Delta, Utah (1) Owned 100,800 Elmore, Ohio (1) Owned/Leased 681,000/191,000 Farnborough, England (1) Leased 10,000 Jena, Germany (3) Owned 102,700 Limerick, Ireland (2) Leased 23,000 Lincoln, Rhode Island (1) Owned/Leased 166,500/27,100 Lorain, Ohio (1) Owned 55,000 Milwaukee, Wisconsin (2) Owned/Leased 106,000/150,000 Newton, MA (1,2) Owned/Leased 125,000/110,800 Penang, Malaysia (3) Leased 68,000 Reading, Pennsylvania (1) Owned/Leased 128,800/287,000 Santa Clara, California (2) Leased 5,800 Shanghai, China (3) Leased 101,400 Singapore (1)(2) Leased 24,500 Subic Bay, Philippines (2) Leased 5,000 Taoyuan City, Taiwan (2) Leased 32,500 Tucson, Arizona (1) Owned 53,000 Tyngsboro, Massachusetts (3) Leased 38,000 Westford, Massachusetts (3) Leased 78,000 Wheatfield, New York (2) Owned 35,000 Service, Sales, and Distribution Centers Elmhurst, Illinois (1) Leased 28,000 Eschborn, Germany (3) Leased 500 Seoul, Korea (2) Leased 2,200 Shanghai, China (1) Leased 5,000 Stuttgart, Germany (1) Leased 49,000 Tokyo, Japan (1) Leased 5,400 (1) Performance Materials (2) Electronic Materials (3) Precision Optics 18 Mine Property The Company holds certain mineral rights on 7,443.5 acres at the Spor Mountain Mining Properties in Juab County, Utah, from which the beryllium-bearing ore, bertrandite, is mined by the open pit method.
Because there have been no material changes to the Company’s reserves or resources in 2023, it is not filing a TRS as an exhibit to this Form 10-K. Mine Exploration Status The Spor Mountain Mine has been in production since 1968. Over the years, seven different mining areas have been identified.
Because there have been no material changes to the Company’s reserves or resources in 2024, it is not filing a TRS as an exhibit to this Form 10-K. Mine Exploration Status The Spor Mountain Mine has been in production since 1968. Over the years, seven different mining areas have been identified.
Item 2. PROPERTIES We operate manufacturing plants, service and distribution centers, and other facilities throughout the world. During 2023, we made effective use of our productive capacities at our principal facilities. We believe that the quality and production capacity of our facilities is sufficient to maintain our competitive position for the foreseeable future.
Item 2. PROPERTIES We operate manufacturing plants, service and distribution centers, and other facilities throughout the world. During 2024, we made effective use of our productive capacities at our principal facilities. We believe that the quality and production capacity of our facilities is sufficient to maintain our competitive position for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe plaintiffs in beryllium cases seek recovery under negligence and various other legal theories and demand compensatory and often punitive damages, in many cases of an unspecified sum. Spouses of some plaintiffs claim loss of consortium. Beryllium Claims As of December 31, 2023 there were no pending beryllium cases.
Biggest changeThe plaintiffs in beryllium cases seek recovery under negligence and various other legal theories and demand compensatory and often punitive damages, in many cases of an unspecified sum. Spouses of some plaintiffs claim loss of consortium. Beryllium Claims As of December 31, 2024 there were no pending beryllium cases.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Form 10-K. 17 PART II
Biggest changeItem 4. MINE SAFETY DISCLOSURES Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Form 10-K. 19 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (2) September 30 through November 3, 2023 — $ — — $ 8,316,239 November 4 through December 1, 2023 1,181 $ 113.11 — 8,316,239 December 2 through December 31, 2023 2 $ 114.93 — 8,316,239 Total 1,183 $ 113.11 — $ 8,316,239 (1) Represents shares surrendered to the Company by employees to satisfy tax withholding obligations on stock appreciation rights issued under the Company's stock incentive plan.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (1) September 28 through November 1, 2024 — $ — — $ 8,316,239 November 2 through November 29, 2024 — $ — — 8,316,239 November 30 through December 31, 2024 — $ — — 8,316,239 Total — $ — — $ 8,316,239 (1) On January 14, 2014, we announced that our Board of Directors authorized the repurchase of up to $50.0 million of our common stock; this Board authorization does not have an expiration date.
Share Repurchases The following table presents information with respect to repurchases of common stock made by us during the three months ended December 31, 2023.
Share Repurchases The following table presents information with respect to repurchases of common stock made by us during the three months ended December 31, 2024.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company's common shares are listed on the New York Stock Exchange under the symbol “MTRN”. As of January 31, 2024, there were 627 shareholders of record.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company's common shares are listed on the New York Stock Exchange under the symbol “MTRN”. As of January 31, 2025, there were 592 shareholders of record.
During the three months ended December 31, 2022, we did not repurchase any shares under this program. 18 Performance Graph The following graph sets forth the cumulative shareholder return on our common shares as compared to the cumulative total return of the Russell 2000 Index, the S&P SmallCap 600 Index, and the S&P SmallCap 600 Materials Index, as Materion Corporation is a component of these indices. 2019 2020 2021 2022 2023 Materion Corporation $ 133 $ 144 $ 207 $ 199 $ 295 Russell 2000 125 148 168 132 152 S&P SmallCap 600 121 132 166 137 156 S&P SmallCap 600 - Materials 119 144 169 155 186 The above graph assumes that the value of our common shares and each index was $100 on December 31, 2018 and that all applicable dividends were reinvested. 19
During the three months ended December 31, 2024, we did not repurchase any shares under this program. 20 Performance Graph The following graph sets forth the cumulative shareholder return on our common shares as compared to the cumulative total return of the Russell 2000 Index, the S&P SmallCap 600 Index, and the S&P SmallCap 600 Materials Index, as Materion Corporation is a component of these indices. 2020 2021 2022 2023 2024 Materion Corporation $ 108 $ 156 $ 150 $ 222 $ 170 Russell 2000 118 135 106 121 134 S&P SmallCap 600 110 137 113 129 138 S&P SmallCap 600 - Materials 121 142 132 157 157 The above graph assumes that the value of our common shares and each index was $100 on December 31, 2019 and that all applicable dividends were reinvested. 21
Removed
(2) On January 14, 2014, we announced that our Board of Directors authorized the repurchase of up to $50.0 million of our common stock; this Board authorization does not have an expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+17 added−12 removed80 unchanged
Biggest changeRESULTS OF OPERATIONS (Thousands except per share data) 2023 2022 2021 Net sales $ 1,665,187 $ 1,757,109 $ 1,510,644 Value-added sales 1,127,071 1,114,411 829,572 Gross margin 349,042 343,880 283,762 Gross margin as a % of Value-added sales 31 % 31 % 34 % Selling, general, and administrative (SG&A) expense 157,911 169,338 163,777 SG&A expense as a % of Value-added sales 14 % 15 % 20 % Research and development (R&D) expense 27,540 28,977 26,575 R&D expense as a % of Value-added sales 2 % 3 % 3 % Restructuring expense 3,824 1,573 (438) Other — net 23,323 24,237 16,737 Operating profit 136,444 119,755 77,111 Other non-operating (income) expense — net (2,710) (5,250) (5,115) Interest expense — net 31,323 21,905 4,901 Income before income taxes 107,831 103,100 77,325 Income tax expense (benefit) 12,129 17,110 4,851 Net income 95,702 85,990 72,474 Diluted earnings per share 4.58 4.14 3.50 2023 Compared to 2022 Net sales of $1,665.2 million in 2023 decreased $91.9 million from $1,757.1 million in 2022.
Biggest changeRESULTS OF OPERATIONS (Thousands except per share data) 2024 2023 2022 Net sales $ 1,684,739 $ 1,665,187 $ 1,757,109 Value-added sales 1,097,577 1,127,071 1,114,411 Gross margin 325,985 349,042 343,880 Gross margin as a % of Net sales 19 % 21 % 20 % Gross margin as a % of Value-added sales 30 % 31 % 31 % Selling, general, and administrative (SG&A) expense 145,588 157,911 169,338 SG&A expense as a % of Net sales 9 % 9 % 10 % SG&A expense as a % of Value-added sales 13 % 14 % 15 % Research and development (R&D) expense 29,028 27,540 28,977 R&D expense as a % of Net sales 2 % 2 % 2 % R&D expense as a % of Value-added sales 3 % 2 % 3 % Restructuring expense 6,848 3,824 1,573 Goodwill impairment 56,067 — — Long-lived asset impairment 17,134 — — Loss on asset disposal 6,412 — — Other — net 17,685 23,323 24,237 Operating profit 47,223 136,444 119,755 Other non-operating (income) expense — net (2,443) (2,710) (5,250) Interest expense — net 34,764 31,323 21,905 Income before income taxes 14,902 107,831 103,100 Income tax expense (benefit) 9,014 12,129 17,110 Net income 5,888 95,702 85,990 Diluted earnings per share 0.28 4.58 4.14 2024 Compared to 2023 Net sales of $1,684.7 million in 2024 increased $19.5 million from $1,665.2 million in 2023.
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. Our net sales are also affected by changes in the use of customer-supplied metal.
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. 26 Our net sales are also affected by changes in the use of customer-supplied metal.
All samples are tested with a berylometer. b. The berylometer calibration procedures are verified through comparison with the beryllium production from the mill for the same ores. c. The lab and field berylometers are calibrated on site each shift. d. Materion follows industry standard procedures for calibrating its field and laboratory berylometers each shift that they are utilized. e.
All samples are tested with a berylometer. b. The berylometer calibration procedures are verified through comparison with the beryllium production from the mill for the same ores. c. The lab and field berylometers are calibrated on site each shift. 31 d. Materion follows industry standard procedures for calibrating its field and laboratory berylometers each shift that they are utilized. e.
Resource models are reconciled to production data regularly. 29 f. Materion has been producing ore at the Spor Mountain Mine for over 45 years and has mined and processed materials from a range of pits from the property. It is considered that Materion has adequate data to support its milling practices.
Resource models are reconciled to production data regularly. f. Materion has been producing ore at the Spor Mountain Mine for over 45 years and has mined and processed materials from a range of pits from the property. It is considered that Materion has adequate data to support its milling practices.
The Company used a 32 discount rate in the mid-teens and a terminal growth rate of low single digits. The market approach requires several assumptions including sales and EBITDA multiples for comparable companies that operate in the same markets as the reporting unit.
The Company used a discount rate in the mid-teens and a terminal growth rate of low single digits. The market approach requires several assumptions including sales and EBITDA multiples for comparable companies that operate in the same markets as the reporting unit.
The following represents our indicated and inferred ore mineral resources, exclusive of mineral reserves, as of December 31, 2023 and December 31, 2022: Indicated Inferred As of December 31, 2023 Tonnage (in thousands) 1,504 2,630 Grade (% beryllium) 0.128 % 0.345 % Beryllium pounds (in millions) 38.38 18.12 As of December 31, 2022 Tonnage (in thousands) 1,504 2,630 Grade (% beryllium) 0.128 % 0.345 % Beryllium pounds (in millions) 38.38 18.12 Mineral Reserves A mineral reserve is an estimate of tonnage and grade, or quality, of indicated and measured mineral resources that, in the opinion of a qualified person, can be the basis of an economically viable project.
The following represents our indicated and inferred ore mineral resources, exclusive of mineral reserves, as of December 31, 2024 and December 31, 2023: Indicated Inferred As of December 31, 2024 Tonnage (in thousands) 1,504 2,630 Grade (% beryllium) 0.128 % 0.345 % Beryllium pounds (in millions) 38.38 18.12 As of December 31, 2023 Tonnage (in thousands) 1,504 2,630 Grade (% beryllium) 0.128 % 0.345 % Beryllium pounds (in millions) 38.38 18.12 Mineral Reserves A mineral reserve is an estimate of tonnage and grade, or quality, of indicated and measured mineral resources that, in the opinion of a qualified person, can be the basis of an economically viable project.
The Company’s reporting units each provide their forecast of results for the next five years. These forecasts form the basis for the information used in the discounted cash flow model.
The Company’s reporting units each provide their forecast of results for the next five years. These forecasts form the basis for 34 the information used in the discounted cash flow model.
Since the approval of the repurchase plan, we have purchased 1,254,264 shares at a total cost of $41.7 million, or an average of $33.23 per share. Material Future Cash Obligations The following table summarizes our material future obligations with respect to debt and associated interest as of December 31, 2023.
Since the approval of the repurchase plan, we have purchased 1,254,264 shares at a total cost of $41.7 million, or an average of $33.23 per share. Material Future Cash Obligations The following table summarizes our material future obligations with respect to debt and associated interest as of December 31, 2024.
Management believes the future sales growth and EBITDA margins in the long range plan and the discount rate used in the valuations requires significant use of judgment.
Management believes the future sales growth and EBITDA margins in the long range plan, terminal growth rate and the discount rate used in the valuations requires significant use of judgment.
See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our results for 2022 compared to 2021. Segment Disclosures The Company has four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our results for 2023 compared to 2022. Segment Disclosures The Company has four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
We were in compliance with all of our debt covenants as of December 31, 2023 and December 31, 2022. Cash on hand up to $25 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement. In November 2021, we completed the acquisition of HCS-Electronic Materials.
We were in compliance with all of our debt covenants as of December 31, 2024 and December 31, 2023. Cash on hand up to $25 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement. In November 2021, we completed the acquisition of HCS-Electronic Materials.
The term "measured mineral resource" is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. 28 The term “indicated resources” means resources for which quantity and grade or quality can be estimated on the basis of adequate geological evidence and sampling.
The term "measured mineral resource" is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. 30 The term “indicated resources” means resources for which quantity and grade or quality can be estimated on the basis of adequate geological evidence and sampling.
As of October 1, 2023, based on the quantitative assessments for the Electronic Materials reporting unit, the estimated fair value was substantially in excess of the carrying value. Additionally, for the Performance Materials reporting unit, there were no indicators of impairment based on the qualitative analysis performed.
As of October 1, 2024, based on the quantitative assessments for the Electronic Materials reporting unit, the estimated fair value was substantially in excess of the carrying value. Additionally, for the Performance Materials reporting unit, there were no indicators of impairment based on the qualitative analysis performed.
There is no minimum number of common shares required to be repurchased in a given year, and the repurchases may be discontinued at any time. We did not repurchase any shares in 2022 or 2023.
There is no minimum number of common shares required to be repurchased in a given year, and the repurchases may be discontinued at any time. We did not repurchase any shares in 2023 or 2024.
Item 7. 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 electrical, electronic, thermal, and structural applications. Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center.
Item 7. 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 electrical, electronic, thermal, and structural applications. Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences.
We also compared our market capitalization as of October 1, 2023 to the carrying value of our equity and considering an implied control premium, we noted no impairment indicators or triggering events.
We also compared our market capitalization as of October 1, 2024 to the carrying value of our equity and considering an implied control premium, we noted no other impairment indicators or triggering events.
If management forms a judgment that a particular customer’s financial condition has deteriorated but decides to deliver products or services to the customer, we will defer recognizing revenue relating to products sold to that customer until it is probable that we will collect substantially all of the consideration to which we are entitled, which typically coincides with the collection of cash. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the products that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the product is separately identifiable from other promises in the contract. 30 Certain of the Company’s contracts with customers may contain multiple performance obligations.
If management forms a judgment that a particular customer’s financial condition has deteriorated but decides to deliver products or services to the customer, we will defer recognizing revenue relating to products sold to that customer until it is probable that we will collect substantially all of the consideration to which we are entitled, which typically coincides with the collection of cash. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the products that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product either on its own or together with other 32 resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the product is separately identifiable from other promises in the contract.
Refer to Item 7A “Quantitative and Qualitative Disclosures about Market Risk.” The notional value of off-balance sheet precious metals and copper was $351.5 million as of December 31, 2023 versus $373.1 million as of December 31, 2022. We were in compliance with all of the covenants contained in the consignment agreements as of December 31, 2023 and December 31, 2022.
Refer to Item 7A “Quantitative and Qualitative Disclosures about Market Risk.” The notional value of off-balance sheet precious metals and copper was $381.6 million as of December 31, 2024 versus $351.5 million as of December 31, 2023. We were in compliance with all of the covenants contained in the consignment agreements as of December 31, 2024 and December 31, 2023.
At December 31, 2023, cash and cash equivalents held by our foreign operations totaled $12.6 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 the results of operations for the foreseeable future.
At December 31, 2024, cash and cash equivalents held by our foreign operations totaled $15.7 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 the results of operations for the foreseeable future.
During the fourth quarter of 2023, the Company considered sales multiples in the low single digits and EBITDA multiples in the range high single digits to low double digits.
During the fourth quarter of 2024, the Company considered sales multiples in the low single digits and EBITDA multiples in the range high single digits to mid double digits.
You are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic value.
You are cautioned that, except for that portion of mineral resources classified as mineral reserves, mineral resources do not have to demonstrate economic value.
Other non-operating (income) expense-net includes components of pension and post-retirement income other than service costs. Refer to Note O of the Consolidated Financial Statements for details of the components of net periodic benefit costs. Interest expense - net was $31.3 million in 2023 and $21.9 million in 2022.
Other non-operating (income) expense-net includes components of pension and post-retirement income other than service costs. Refer to Note O of the Consolidated Financial Statements for details of the components of net periodic benefit costs. Interest expense - net was $34.8 million in 2024 and $31.3 million in 2023.
The available and unused capacity under the metal consignment agreements expiring in August 2025 totaled approximately $263.5 million as of December 31, 2023, compared to $241.9 million as of December 31, 2022. The availability is determined by Board approved levels and actual capacity. The availability is determined by Board approved levels and actual capacity.
The available and unused capacity under the metal consignment agreements expiring in August 2025 totaled approximately $233.4 million as of December 31, 2024, compared to $263.5 million as of December 31, 2023. The availability is determined by Board approved levels and actual capacity.
The following represents our ore mineral reserves: Proven Probable Total As of December 31, 2023 Tonnage (in thousands) 7,598 962 8,560 Grade (% beryllium) 0.245 % 0.258 % 0.246 % Beryllium pounds (in millions) 37.21 4.97 42.18 As of December 31, 2022 Tonnage (in thousands) 7,678 962 8,640 Grade (% beryllium) 0.245 % 0.258 % 0.246 % Beryllium pounds (in millions) 37.57 4.97 42.54 Internal Controls Disclosure Under subpart 1305 of Regulation S-K, management has included information regarding the internal controls that the Company used in determining the mineral resource and reserve estimation efforts.
The following represents our ore mineral reserves: Proven Probable Total As of December 31, 2024 Tonnage (in thousands) 7,475 962 8,437 Grade (% beryllium) 0.245 % 0.258 % 0.246 % Beryllium pounds (in millions) 36.58 4.97 41.55 As of December 31, 2023 Tonnage (in thousands) 7,598 962 8,560 Grade (% beryllium) 0.245 % 0.258 % 0.246 % Beryllium pounds (in millions) 37.21 4.97 42.18 Internal Controls Disclosure Under subpart 1305 of Regulation S-K, management has included information regarding the internal controls that the Company used in determining the mineral resource and reserve estimation efforts.
(Thousands of Pounds of Beryllium) 2023 2022 2021 Domestic ore 405 382 386 Purchased ore — — — Unyielded total 405 382 386 Annual yield 89 % 90 % 91 % Beryllium produced 362 344 353 % of mill capacity 56 % 53 % 55 % 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.
(Thousands of Pounds of Beryllium) 2024 2023 2022 Domestic ore 507 405 382 Non-domestic ore — — — Unyielded total 507 405 382 Annual yield 82 % 89 % 90 % Beryllium produced 418 362 344 % of mill capacity 65 % 56 % 53 % 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.
Goodwill within the Electronic Materials segment totaled $206.7 million as of December 31, 2023. Within the Precision Optics segment, goodwill totaled $88.0 million. The remaining $26.2 million is related to the Performance Materials segment.
Goodwill within the Electronic Materials segment totaled $206.3 million as of December 31, 2024. Within the Precision Optics segment, goodwill totaled $31.3 million. The remaining $26.2 million is related to the Performance Materials segment.
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. 25 FINANCIAL POSITION Cash Flow A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows: (Thousands) 2023 2022 2021 Net cash provided by operating activities $ 144,414 $ 115,958 $ 90,241 Net cash (used in) investing activities (119,222) (79,729) (494,269) Net cash provided by (used in) financing activities (24,850) (35,558) 393,006 Effects of exchange rate changes (149) (2,032) (394) Net change in cash and cash equivalents $ 193 $ (1,361) $ (11,416) Net cash provided by operating activities totaled $144.4 million in 2023 versus $116.0 million in 2022.
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. 27 FINANCIAL POSITION Cash Flow A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows: (Thousands) 2024 2023 2022 Net cash provided by operating activities $ 87,817 $ 144,414 $ 115,958 Net cash (used in) investing activities (79,605) (119,222) (79,729) Net cash provided by (used in) financing activities (4,186) (24,850) (35,558) Effects of exchange rate changes (607) (149) (2,032) Net change in cash and cash equivalents $ 3,419 $ 193 $ (1,361) Net cash provided by operating activities totaled $87.8 million in 2024 versus $144.4 million in 2023.
The increase in interest expense in 2023 compared to 2022 was primarily due to an increase in interest rates compared to the prior year. Income tax expense (benefit) for 2023 was $12.1 million of expense compared to $17.1 million of expense in 2022.
The increase in interest expense in 2024 compared to 2023 was primarily due to an increase in borrowings compared to the prior year. Income tax expense (benefit) for 2024 was $9.0 million of expense compared to $12.1 million of expense in 2023.
Due to the recent downturn in the semi-conductor market impacting the Electronic Materials reporting unit and recent results for the Precision Optics reporting unit, the Company elected to perform a quantitative annual impairment assessment for the Electronic Materials and Precision Optics reporting units' goodwill as of October 1, 2023 and a qualitative impairment test for the Performance Materials reporting unit.
Due to the slower than expected semiconductor market recovery impacting the Electronic Materials reporting unit and recent results for the Precision Optics reporting unit, the Company elected to perform a quantitative annual impairment assessment for the Electronic Materials and Precision Optics reporting units' goodwill as of October 1, 2024 and a qualitative impairment test for the Performance Materials reporting unit.
A summary of key data relative to our liquidity, including the outstanding debt, cash balances, and available borrowing capacity, as of December 31, 2023 and December 31, 2022 is as follows: December 31, (Thousands) 2023 2022 Cash and cash equivalents $ 13,294 $ 13,101 Total outstanding debt 426,173 431,981 Net (debt) cash (412,879) (418,880) Available borrowing capacity $ 178,734 $ 185,294 Net (debt) cash is a non-GAAP financial measure.
A summary of key data relative to our liquidity, including the outstanding debt, cash balances, and available borrowing capacity, as of December 31, 2024 and December 31, 2023 is as follows: December 31, (Thousands) 2024 2023 Cash and cash equivalents $ 16,713 $ 13,294 Total outstanding debt 442,008 426,173 Net (debt) cash (425,295) (412,879) Available borrowing capacity $ 168,997 $ 178,734 Net (debt) cash is a non-GAAP financial measure.
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 $1,127.1 million in 2023 increased $12.7 million compared to $1,114.4 million in 2022.
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 $1,097.6 million in 2024 decreased $29.5 23 million compared to $1,127.1 million in 2023.
We intend to pay a quarterly dividend on an ongoing basis, subject to a continuing strong capital structure and a determination that the dividend remains in the best interest of our shareholders.
In May 2024, the Board of Directors declared an increase in our quarterly dividend from $0.13 to $0.135 per share. We intend to pay a quarterly dividend on an ongoing basis, subject to a continuing strong capital structure and a determination that the dividend remains in the best interest of our shareholders.
Precision Optics (Thousands) 2023 2022 2021 Net sales $ 103,889 $ 113,682 $ 131,954 Value-added sales 103,788 113,580 131,815 EBITDA 9,860 13,753 25,854 2023 Compared to 2022 Net sales from the Precision Optics segment were $103.9 million in 2023, a decrease of 9% compared to net sales of $113.7 million in 2022.
Precision Optics (Thousands) 2024 2023 2022 Net sales $ 94,490 $ 103,889 $ 113,682 Value-added sales 94,295 103,788 113,580 EBITDA (73,297) 9,860 13,753 2024 Compared to 2023 Net sales from the Precision Optics segment were $94.5 million in 2024, a decrease of 9% compared to net sales of $103.9 million in 2023.
Billings in advance of the shipments allow us to collect cash earlier than billing at the time of the shipment and, therefore, the collected cash can be used to reduce our investment in working capital.
Billings in advance of 33 the shipments allow us to collect cash earlier than billing at the time of the shipment and, therefore, the collected cash can be used to reduce our investment in working capital. Refer to Note C of the Consolidated Financial Statements for additional details on our contract balances.
Value-Added Sales - Reconciliation of Non-GAAP Financial Measure 24 A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the Company in total for 2023, 2022, and 2021 is as follows: (Thousands) 2023 2022 2021 Net sales Performance Materials $ 755,547 $ 671,525 $ 511,874 Electronic Materials 805,751 971,902 866,816 Precision Optics 103,889 113,682 131,954 Other — — — Total $ 1,665,187 $ 1,757,109 $ 1,510,644 Less: pass-through metal costs Performance Materials $ 66,994 $ 81,994 $ 71,442 Electronic Materials 471,021 559,119 607,825 Precision Optics 101 102 139 Other — 1,483 1,666 Total $ 538,116 $ 642,698 $ 681,072 Value-added sales Performance Materials $ 688,553 $ 589,531 $ 440,432 Electronic Materials 334,730 412,783 258,991 Precision Optics 103,788 113,580 131,815 Other — (1,483) (1,666) Total $ 1,127,071 $ 1,114,411 $ 829,572 The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile.
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 Company in total for 2024, 2023, and 2022 is as follows: (Thousands) 2024 2023 2022 Net sales Performance Materials $ 744,503 $ 755,547 $ 671,525 Electronic Materials 845,746 805,751 971,902 Precision Optics 94,490 103,889 113,682 Other — — — Total $ 1,684,739 $ 1,665,187 $ 1,757,109 Less: pass-through metal costs Performance Materials $ 56,473 $ 66,994 $ 81,994 Electronic Materials 530,494 471,021 559,119 Precision Optics 195 101 102 Other — — 1,483 Total $ 587,162 $ 538,116 $ 642,698 Value-added sales Performance Materials $ 688,030 $ 688,553 $ 589,531 Electronic Materials 315,252 334,730 412,783 Precision Optics 94,295 103,788 113,580 Other — — (1,483) Total $ 1,097,577 $ 1,127,071 $ 1,114,411 The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile.
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. 26 In January 2023, we amended the agreement governing our $375.0 million revolving credit facility and term loan facility (Credit Agreement).
The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts 28 borrowing capacity to a multiple of the twelve-month trailing adjusted earnings before interest, income taxes, depreciation and amortization, and other adjustments.
The precious metal content within these various refine streams may be in solutions, sludges, and other non-homogeneous forms and can vary over time based upon the input materials, yield rates, and other process parameters.
We also outsource portions of our refining requirements to other vendors, particularly for those materials with longer processing times. The precious metal content within these various refine streams may be in solutions, sludges, and other non-homogeneous forms and can vary over time based upon the input materials, yield rates, and other process parameters.
Pursuant to the amendment, we transitioned U.S. dollar denominated borrowings from LIBOR to SOFR for both the revolving credit agreement and the term loan and increased the cap on precious metals consignment line from $550 million to $615 million. The Company had previously amended and restated the Credit Agreement in connection with the HCS-Electronic Materials acquisition in November 2021.
In January 2023, we amended the agreement governing our $375.0 million revolving credit facility and term loan facility (Credit Agreement). Pursuant to the amendment, we transitioned U.S. dollar denominated borrowings from LIBOR to SOFR for both the revolving credit agreement and the term loan and increased the cap on precious metals consignment line from $550 million to $615 million.
Performance Materials (Thousands) 2023 2022 2021 Net sales $ 755,547 $ 671,525 $ 511,874 Value-added sales 688,553 589,531 440,432 EBITDA 174,471 125,227 89,028 2023 Compared to 2022 Net sales from the Performance Materials segment of $755.5 million in 2023 increased 13% compared to 2022.
Performance Materials (Thousands) 2024 2023 2022 Net sales $ 744,503 $ 755,547 $ 671,525 Value-added sales 688,030 688,553 589,531 EBITDA 169,276 174,471 125,227 2024 Compared to 2023 24 Net sales from the Performance Materials segment of $744.5 million in 2024 decreased 1% compared to 2023.
R&D expense was $27.5 million in 2023, a decrease of 5% compared to 2022. R&D costs as a percentage of value-added sales decreased from 3% in 2022 to 2% in 2023. 22 Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.
R&D costs as a percentage of net sales remained flat at 2% in 2024 and 2023 but as a percent of value-added sales increased from 2% in 2023 to 3% in 2024. Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.
A $300 million delayed draw term loan facility was added to the Credit Agreement and the maturity date of the Credit Agreement was extended from 2024 to 2026.
The Company had previously amended and restated the Credit Agreement in connection with the HCS-Electronic Materials acquisition in November 2021. A $300 million delayed draw term loan facility was added to the Credit Agreement and the maturity date of the Credit Agreement was extended from 2024 to 2026.
The decrease in income tax expense in 2023 compared to 2022 was primarily due to the favorable impacts of the foreign derived intangible income deduction and the non-taxable production credit, partially offset by the impact of adjustments to unrecognized tax benefits. Refer to Note G to the Consolidated Financial Statements for further details on income taxes.
The decrease in income tax expense in 2024 compared to 2023 was primarily due to lower pre-tax income and more favorable impacts of the production credit and depletion in 2024. Refer to Note G to the Consolidated Financial Statements for further details on income taxes.
In 2023, we recorded a combined total of $3.8 million of restructuring charges across all segments. Other-net totaled expense of $23.3 million and $24.2 million in 2023 and 2022, respectively. The decrease Other-net was primarily driven by a decrease in metal consignment fees. Refer to Note E to the Consolidated Financial Statements for the major components within Other-net.
There were no material asset disposals in 2023. Other-net totaled expense of $17.7 million and $23.3 million in 2024 and 2023, respectively. The decrease Other-net was primarily driven by a decrease in metal consignment fees. Refer to Note E to the Consolidated Financial Statements for the major components within Other-net.
Electronic Materials (Thousands) 2023 2022 2021 Net sales $ 805,751 $ 971,902 $ 866,816 Value-added sales 334,730 412,783 258,991 EBITDA 45,747 67,806 44,852 2023 Compared to 2022 Net sales from the Electronic Materials segment of $805.8 million in 2023 were 17% lower than net sales of $971.9 million in 2022.
Electronic Materials (Thousands) 2024 2023 2022 Net sales $ 845,746 $ 805,751 $ 971,902 Value-added sales 315,252 334,730 412,783 EBITDA 47,443 45,747 67,806 2024 Compared to 2023 Net sales from the Electronic Materials segment of $845.7 million in 2024 was 5% higher than net sales of $805.8 million in 2023.
Value-added sales of $688.6 million in 2023 were 17% higher than value-added sales of $589.5 million in 2022. The increase in value-added sales was driven by the same factors driving the increase in net sales. EBITDA for the Performance Materials segment was $174.5 million in 2023 compared to $125.2 million in 2022.
The decrease in value-added sales was driven by the same factors driving the decrease in net sales. EBITDA for the Performance Materials segment was $169.3 million in 2024 compared to $174.5 million in 2023.
The decrease in EBITDA was driven by decreased volumes, partially offset by targeted cost control initiatives implemented in 2023. Other (Thousands) 2023 2022 2021 Net sales $ — $ — $ — Value-added sales — (1,483) (1,666) EBITDA (29,280) (28,345) (33,371) 2023 Compared to 2022 The Other reportable segment in total includes unallocated corporate costs.
Other (Thousands) 2024 2023 2022 Net sales $ — $ — $ — Value-added sales — — (1,483) EBITDA (25,080) (29,280) (28,345) 2024 Compared to 2023 The Other reportable segment in total includes unallocated corporate costs. Corporate costs of $25.1 million in 2024 decreased from $29.3 million in 2023.
Volume decreases in the semiconductor (20%) and industrial (9%) end markets were offset by an increase in the aerospace and defense end market (36%) and incremental sales from the clad strip project of $90.7 million. 21 Gross margin was $349.0 million in 2023, a 2% increase from $343.9 million in 2022.
Volume decreases in the industrial (16%), energy (23%) and automotive (19%) end markets were partially offset by an increase in the aerospace and defense (28%) end market. Gross margin was $326.0 million in 2024, a 7% decrease from $349.0 million in 2023. Gross margin expressed as a percentage of net sales was 19% in 2024 and 21% in 2023.
The decrease in value-added sales was due to the same factors driving the decrease in net sales. EBITDA for the Electronic Materials segment was $45.7 million in 2023 compared to $67.8 million in 2022.
Value-added sales of $315.3 million decreased 6% compared to value-added sales of $334.7 million in 2023. The decrease in value-added sales was due to the sales volume decrease noted above. EBITDA for the Electronic Materials segment was $47.4 million in 2024 compared to $45.7 million in 2023.
Value-added sales of $103.8 million in 2023 decreased 9% compared to value-added sales of $113.6 million in 2022. The decrease in value-added sales was due to the same factors driving the decrease in net sales. EBITDA for the Precision Optics segment was $9.9 million in 2023 compared to $13.8 million in 2022.
The decrease was primarily due to lower sales volumes in the industrial (13%), automotive (27%) and aerospace and defense (10%) end markets. Value-added sales of $94.3 million in 2024 decreased 9% compared to value-added sales of $103.8 million in 2023. The decrease in value-added sales was due to the same factors driving the decrease in net sales.
Corporate costs of $29.3 million in 2023 increased $0.9 million as compared to $28.3 million in 2022. Corporate costs were 3% of total Company value-added sales in both 2023 and 2022.
Corporate costs were 2 and 3% of total Company value-added sales in 2024 and 2023, respectively.
Our precious metal operations include a refinery that processes precious metal-containing scrap and other materials from our customers, as well as our own internally generated scrap. We also outsource portions of our refining requirements to other vendors, particularly for those materials with longer processing times.
Precious Metal Physical Inventory Counts We take and record the results of a physical inventory count of our precious metals on a periodic basis. Our precious metal operations include a refinery that processes precious metal-containing scrap and other materials from our customers, as well as our own internally generated scrap.
The decrease in SG&A expense for 2023 was primarily due to various cost savings initiatives in 2023. Expressed as a percentage of value-added sales, SG&A expense decreased from 15% in 2022 to 14% in 2023. R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications.
R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications. R&D expense was $29.0 million in 2024, an increase of 5% compared to 2023.
Dividends per common share increased 4% to $0.515 per share in 2023. Total dividend payments to common shareholders were $10.6 million in 2023 and $10.2 million in 2022. In May 2023, the Board of Directors declared an increase in our quarterly dividend from $0.125 to $0.13 per share.
The decrease in 2024 compared to 2023 is a result of an increase in draws on our credit facilities, offset by increased repayments of our long-term debt in 2024. Dividends per common share increased 4% to $0.535 per share in 2024. Total dividend payments to common shareholders were $11.1 million in 2024 and $10.6 million in 2023.
The increase in net sales was due to incremental sales from the clad strip project of $90.7 million and increased volumes in the aerospace and defense end market (31%). This increase was offset by decreased volumes in the industrial (11%) and automotive (9%) end markets.
The decrease in sales was due to lower sales volumes in the industrial (13%) and automotive (16%) end markets. These decreases were partially offset by increased volumes in the aerospace and defense (33%) end market. Value-added sales of $688.0 million in 2024 decreased slightly from value-added sales of $688.6 million in 2023, consistent with the decrease in net sales.
Gross margin expressed as a percentage of value-added sales was 31% in 2023 and 2022, respectively.
Gross margin expressed as a percentage of value-added sales was 30% in 2024 and 31% in 2023. Gross margin decreased from the prior year primarily due to impact of lower volumes and related unabsorbed costs in the first half of 2024.
The increase in cash used in investing activities is due to increased planned capital expenditures and mine development to support continued business growth. Net cash used in financing activities decreased $10.7 million from 2022. The decrease in 2023 compared to 2022 is a result of an increase in debt repayments in 2023.
The decrease in cash used in investing activities is due to decreased capital expenditures concurrent with the decrease in cash flow provided by operating activities. Net cash used in financing activities decreased $20.7 million from 2023.
This was partially offset by cash outflows due to an increase in unbilled receivables of $18.6 million, a decrease in unearned revenue of $17.6 million and a decrease in customer prepayments of $5.3 million. Net cash used in investing activities was $119.2 million in 2023 compared to $79.7 million in 2022.
Lastly , the decrease in unearned revenue due to an increase in shipments for customers which prepaid had an unfavorable impact to operating cash flow $7.3 million when compared to the prior year. Net cash used in investing activities was $79.6 million in 2024 compared to $119.2 million in 2023.
A decrease in net sales in the Electronic Materials and Precision Optics segments was partially offset by increased net sales in the Performance Materials segment.
An increase in net sales in the Electronic Materials was partially offset by decreased net sales in the Performance Materials and Precision Optics segments. The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $79.5 million when compared to the prior year.
(Millions) 2024 2025 2026 2027 2028 There- after Total Debt (1) $ 38.6 $ 30.4 $ 359.6 $ 0.2 $ 0.2 $ 0.1 $ 429.1 Interest payments on debt (2) $ 17.6 $ 14.2 $ 10.6 $ — $ — $ — $ 42.4 Total $ 56.2 $ 44.6 $ 370.2 $ 0.2 $ 0.2 $ 0.1 $ 471.5 (1) Refer to Note N to the Consolidated Financial Statements. 27 (2) These amounts represent future interest payments related to our total debt, excluding any interest payments to be made on borrowings under our Credit Agreement.
(2) These amounts represent future interest payments related to our total debt, excluding any interest payments to be made on borrowings under our Credit Agreement.
The decrease in net sales was primarily due to lower sales volumes in the semiconductor (18%) end market. This was partially offset by the impact of pass-through metal price fluctuations, which increased net sales by $10.4 million compared to 2022. 23 Value-added sales of $334.7 million decreased 19% compared to value-added sales of $412.8 million in 2022.
The increase in net sales was primarily due to higher precious metal pass through costs, increasing net sales by approximately $79.5 million when compared to the prior year. This increase was partially offset by a decrease in sales volumes in the energy end market (24%).
Volume decreases in the semiconductor (17%), industrial (14%) and consumer electronics (19%) end markets were partially offset by an increase the aerospace and defense (32%) end market, as well as incremental sales from the clad strip project of $90.7 million.
Additionally, volume decreases in the energy (21%), industrial (11%) and automotive (16%) end markets were partially offset by a volume increase in the aerospace and defense (25%) end market.
The increase in net cash provided by operating activities was driven by an increase in operating income of $16.7 million. Additionally, there was an increase in cash provided by working capital of $66.8 million. The favorable working capital inflow was driven by the Company's continued working capital initiatives throughout 2023.
The decrease in net cash provided by operating activities was primarily driven by working capital outflows in 2024 compared to 2023.
Removed
See Note B to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market. The change in precious metal and copper prices, which are passed on to the customer as discussed in the value-added sales section below, favorably impacted net sales by $6.2 million in 2023 compared to 2022.
Added
Additionally, gross margin was unfavorably impacted by higher costs associated with the production ramp of the precision clad strip facility. SG&A expense totaled $145.6 million in 2024 as compared to $157.9 million in 2023. The decrease in SG&A expense for 2024 was primarily due to various cost savings initiatives throughout 2024.
Removed
Although gross margin as a percent of value-added sales remained consistent with prior year, 2023 gross margin was favorably impacted by the production credit recorded in 2023, which was partially offset by unfavorable mix as well as the impact of lower volumes, primarily in the Electronic Materials segment.
Added
In 2024, we recorded a combined total of $6.8 million of restructuring charges across all segments compared to $3.8 million in 2023. See Note D of the Consolidated Financial Statements for further details of restructuring activities. Goodwill impairment was $56.1 million in 2024. There were no goodwill impairments recorded in 2023.
Removed
The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022. The IRA, among other provisions, includes a new Advanced Manufacturing Production Credit (“production credit”) effective on January 1, 2023.
Added
The impairment charges were recorded in the Precision Optics reporting unit in the fourth quarter of 2024 as a result of the Company's annual goodwill impairment testing. Refer to Note A to the Consolidated Financial Statements for additional discussion. Long-lived asset impairment was $17.1 million in 2024 related to the Company’s Malaysia facility in the Precision Optics segment.
Removed
The production credit provides an annual cash benefit for a portion of the production costs for the sale of certain critical minerals produced in the U.S. and sold during the year. On December 15, 2023, the U.S.
Added
There were no long-lived asset impairments recorded in 2023. Refer to Note A to the Consolidated Financial Statements for additional discussion. Loss on asset disposal was $6.4 million in 2024 due to the sale of the Company's Large Area Target business at its Albuquerque, New Mexico facility and wind-down of the related refinery in the fourth quarter of 2024.
Removed
Treasury Department published proposed regulations on the production credit that include clarifying guidance regarding the definition of production costs in the computation of the production credit.
Added
The decrease in EBITDA was primarily driven by the impact unfavorable price/mix as well as the impact of lower volumes and related unabsorbed costs in the first half of 2024. Additionally, EBITDA was unfavorably impacted in 2024 by higher costs associated with the production ramp of the precision clad strip facility.
Removed
Although the proposed guidance is not authoritative and is subject to change in the regulatory review process, the guidance indicates that the Treasury Department may implement a narrower definition of eligible production costs in the final regulations. Accordingly, the Company recorded an $8 million benefit to cost of goods sold related to the production credit.
Added
This was partially offset by incremental benefit from the Advanced Manufacturing Production Credit (production credit) recorded in 2024 compared to 2023. See Note G of the Consolidated Financial Statements for further discussion regarding the accounting for the production credit.
Removed
The ultimate amount of the benefit that the Company is entitled to receive in connection with the production credit will depend on the final regulations issued on the production credit. See Footnote G for further discussion regarding the accounting for the production credit. SG&A expense totaled $157.9 million in 2023 as compared to $169.3 million in 2022.
Added
Despite the decrease in value-added sales and the $6.4 million loss on disposal recorded in 2024 related to the sale of the Target business at the Company's Albuquerque facility, EBITDA increased due to the impact of various targeted cost control initiatives implemented in 2023 and throughout 2024.
Removed
The increase in EBITDA was primarily due to the same factors driving the increase in net sales as well as the benefit from the production credit and operational efficiencies.
Added
See Note A of the Consolidated Financial Statements for further discussion of the sale of the Target business.
Removed
The decrease in EBITDA was due to decreased sales volumes, partially offset by decreases in manufacturing and SG&A expenses as a result of various targeted cost control initiatives implemented in 2023 as well as lower merger and acquisition costs of $7.4 million incurred in the prior year period that did not recur in 2023.
Added
EBITDA for the Precision Optics segment was a loss of $73.3 million in 2024 compared to income of $9.9 million in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+1 added−0 removed23 unchanged
Biggest changeWe have a program in place to closely monitor the credit worthiness and financial condition of our key providers of financial services, including our bank group and insurance carriers, as well as the credit worthiness of customers and vendors, and have various contingency plans in place. 34 Our bank lines are established with a number of different banks in order to mitigate our exposure to any one financial institution.
Biggest changeWe have a program in place to closely monitor the credit worthiness and financial condition of our key providers of financial services, including our bank group and insurance carriers, as well as the credit worthiness of customers and vendors, and have various contingency plans in place.
We attempt to minimize these fluctuations and the exposure to higher costs by utilizing fixed price agreements of set durations, when deemed appropriate, obtaining competitive bidding between regional energy suppliers, and other methods. Economy. We are exposed to changes in global economic conditions and the potential impact those changes may have on various facets of our business.
We attempt to minimize these fluctuations and the exposure to higher costs by utilizing fixed price agreements of set durations, when deemed appropriate, obtaining competitive bidding between regional energy suppliers, and other methods. 36 Economy. We are exposed to changes in global economic conditions and the potential impact those changes may have on various facets of our business.
The financial statement impact of the risk from rising metal prices impacting our consignment availability cannot be estimated at the present time. 33 In certain circumstances, we may elect to fix the price of precious metals for a customer for a stated quantity over a specified period of time.
The financial statement impact of the risk from rising metal prices impacting our consignment availability cannot be estimated at the present time. In certain circumstances, we may elect to fix the price of precious metals for a customer for a stated quantity over a specified period of time.
If we were in a significant precious metal ownership position, we might elect to use derivative financial instruments to hedge the potential price exposure. The cost to finance and potentially hedge the purchased inventory may also be higher than the consignment fee.
If 35 we were in a significant precious metal ownership position, we might elect to use derivative financial instruments to hedge the potential price exposure. The cost to finance and potentially hedge the purchased inventory may also be higher than the consignment fee.
We did not record any material lower of cost or net realizable value charges in 2023, 2022, or 2021 as a result of market price fluctuations of metals in our inventories. Interest rates. We are exposed to changes in interest rates on our cash balances and borrowings under our Credit Agreement.
We did not record any material lower of cost or net realizable value charges in 2024, 2023, or 2022 as a result of market price fluctuations of metals in our inventories. Interest rates. We are exposed to changes in interest rates on our cash balances and borrowings under our Credit Agreement.
At December 31, 2023, we did not have a material amount of such hedge contracts outstanding. Copper. We also use copper in our production processes. When possible, fluctuations in the purchase price of copper are passed on to customers in the form of price adders or reductions.
At December 31, 2024, we did not have a material amount of such hedge contracts outstanding. Copper. We also use copper in our production processes. When possible, fluctuations in the purchase price of copper are passed on to customers in the form of price adders or reductions.
Should the market cost of copper increase by 20% from the price as of December 31, 2023, the additional pre-tax cost to us as a result of an increase in the consignment fee would be approximately $0.4 million on an annual basis.
Should the market cost of copper increase by 20% from the price as of December 31, 2024, the additional pre-tax cost to us as a result of an increase in the consignment fee would be approximately $0.4 million on an annual basis.
We may manage this interest rate exposure by maintaining a combination of short-term and long-term debt and variable and fixed rate instruments. We may also use interest rate swaps to fix the interest rate on variable rate obligations, as we deem appropriate. As of December 31, 2023 the net fair value of our interest rate swaps were $5.4 million.
We may manage this interest rate exposure by maintaining a combination of short-term and long-term debt and variable and fixed rate instruments. We may also use interest rate swaps to fix the interest rate on variable rate obligations, as we deem appropriate. As of December 31, 2024 the net fair value of our interest rate swaps were $4.6 million.
Should the market price of precious metals that we have on consignment increase by 20% from the prices on December 31, 2023, the additional pre-tax cost to us as a result of an increase in the consignment fee would be approximately $1.1 million on an annual basis.
Should the market price of precious metals that we have on consignment increase by 20% from the prices on December 31, 2024, the additional pre-tax cost to us as a result of an increase in the consignment fee would be approximately $0.8 million on an annual basis.
A decrease in the value of the dollar would result in larger margins but potentially a loss on the contract, depending upon the method used to hedge the exposure. Our current policy limits our hedges to 80% or less of the forecasted exposure. The notional value of outstanding currency contracts was $84.8 million as of December 31, 2023.
A decrease in the value of the dollar would result in larger margins but potentially a loss on the contract, depending upon the method used to hedge the exposure. Our current policy limits our hedges to 80% or less of the forecasted exposure. The notional value of outstanding currency contracts was $77.6 million as of December 31, 2024.
If the dollar weakened 10% against the currencies we have hedged from the December 31, 2023 exchange rates, the reduced gain and/or increased loss on the outstanding contracts as of December 31, 2023 would reduce 2023 pre-tax profits by approximately $4.7 million.
If the dollar weakened 10% against the currencies we have hedged from the December 31, 2024 exchange rates, the reduced gain and/or increased loss on the outstanding contracts as of December 31, 2024 would reduce 2025 pre-tax profits by approximately $3.3 million.
All of the banks in our bank group had credit in good standing as of December 31, 2023. The financial statement impact from the risk of one or more of the banks in our bank group reducing our lines due to their insolvency or other causes cannot be estimated at the present time. 35
The financial statement impact from the risk of one or more of the banks in our bank group reducing our lines due to their insolvency or other causes cannot be estimated at the present time. 37
Added
Our bank lines are established with a number of different banks in order to mitigate our exposure to any one financial institution. All of the banks in our bank group had credit in good standing as of December 31, 2024.

Other MTRN 10-K year-over-year comparisons