What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-18 · 40 added, 41 removed, 124 unchanged (40% of the section changed)

4 unchanged sentences

Our businesses are organized under four reportable segments:

Performance Alloys and Composites, Advanced Materials, Precision Optics (formerly called Precision Coatings), and Other.

Performance Alloys and Composites, Advanced Materials, Precision Optics, and Other.

Our Other reportable segment includes unallocated corporate costs.

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Performance Alloys and Composites

Performance Alloys and Composites (PAC) globally 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 hubs globally.

This segment operates the world's largest bertrandite ore mine and refinery, which is located in Utah, providing feedstock hydroxide for its beryllium businesses and external sales.

In addition to the products described below, this segment globally provides engineering and product development services to help our customers and partners with product design, including delivering prototype parts and other data to demonstrate that the products will perform under the specified design conditions.

Performance Alloys and Composites (PAC) 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.

This segment operates the world's largest bertrandite ore mine and refinery, which is located in Utah, providing feedstock hydroxide for its beryllium businesses and external sale.

PAC operates through three global product lines:

Advanced Alloys, Specialty Materials, and Performance Solutions:

Advanced Alloys, Specialty Materials, and Performance Solutions, as described below:

• Advanced Alloys manufactures and globally provides to our customers three upstream (primary) product lines:

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Major end markets for alloyed metals include industrial, automotive, aerospace and defense, energy, and telecom and data center.

Alloyed metals compete 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.

These materials are used in applications that require high stiffness and/or low density or high thermal conductivity and/or high electrical resistance, which 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.

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.

Beryllium hydroxide is produced at our milling operations in Utah from our bertrandite ore mine and purchased beryl ore.

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• Performance Solutions provides engineered end-product technologies to our customers, including near-net shape and finished machined beryllium containing and non-beryllium containing products.

These products and materials are used in applications that require high stiffness and/or low density due to their unique combination of properties.

These products and materials are suitable for applications that require high stiffness and/or low density due to their unique combination of properties.

Performance Solutions provides beryllium metal and beryllium alloy components mainly to the aerospace and defense and energy end markets.

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PAC's products are primarily sold directly from its facilities throughout the United States, Asia, and Europe, as well as distributed internationally through a network of Company-owned service centers, outside distributors, and agents.

This business includes a portion of the electronic materials business (HCS-Electronic Materials) that was acquired in November 2021 from H.C.

Starck Group GmbH.

See Note B to the Consolidated Financial Statements for additional discussion regarding our acquisition of HCS-Electronic Materials.

Advanced Materials

Advanced 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.

These products are used in micro-electromechanical systems and power management integrated circuits, radio frequency devices, storage, display, architectural glass, solar, optical coating, and other applications within the semiconductor, energy, and industrial end markets.

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.

Advanced Materials also has metal recovery operations and in-house refining that allow for the recycling of precious metals.

This business includes a portion of HCS-Electronic Materials.

See Note B to the Consolidated Financial Statements for additional discussion regarding our acquisition of HCS-Electronic Materials.

Advanced Materials products are sold directly from its facilities throughout the United States, Asia, and Europe, as well as through direct sales offices and independent sales representatives throughout the world.

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Precision Optics

The Precision Optics segment included the following businesses at December 31, 2020:

Precision Optics produces sputter-coated precision thin film coatings and optical filter materials.

Based in Westford, Massachusetts, the group has manufacturing facilities in the United States and China.

This business also includes Optics Balzers AG (Optics Balzers), which was acquired in July 2020.

See Note B to the Consolidated Financial Statements for additional discussion regarding our acquisition of Optics Balzers.

Large Area Coatings (LAC) produced high-performance sputter-coated precision flexible thin film materials.

Based in Windsor, Connecticut, the business manufactured and distributed coated and converted thin film material solutions primarily for medical testing and diagnosis applications.

As of December 31, 2020, the LAC business was shut down.

See Note E to the Consolidated Financial Statements for further discussion.

Precision Optics' products are sold directly from its facilities throughout the United States, Europe, and Asia, as well as through direct sales offices and independent sales representatives throughout the world.

Principal competition includes companies such as Viavi Corporation, II-VI, MKS Newport Optics, Alluxa, and a number of smaller regional and national suppliers.

Precision Optics designs and produces precision thin film coatings, optical filters and assemblies.

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, II-VI, MKS Newport Optics, Alluxa, and a number of smaller regional and national suppliers.

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.

The Other segment is comprised of unallocated corporate costs.

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Availability of Raw Materials

The principal raw materials we use are beryllium, aluminum, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, and tin.

The principal raw materials we use are beryllium, tantalum, aluminum, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, and tin.

Ore reserve data can be found in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." The availability of these raw materials, as well as other materials used by us, is adequate and generally not dependent on any one supplier.

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We expect that substantially all of our backlog of orders at December 31, 2021 will be filled over the next 18 months.

On July 17, 2020, the Company acquired 100% of the capital stock of Optics Balzers, an industry leader in thin film optical coatings.

The purchase price for Optics Balzers was $136.1 million, including the assumption of debt.

This business operates within the Precision Optics segment and the results of operations are included as of the date of acquisition.

Refer to Note B to the Consolidated Financial Statements for additional detail on the Company's acquisition.

On November 1, 2021, the Company acquired HCS-Electronic Materials for a purchase price of approximately $395.9 million in cash, on a cash-free, debt-free basis, subject to a customary purchase price adjustment mechanism.

This business operates within the Performance Alloys and Composites and Advanced Materials segments, and the results of operations are included as of the date of acquisition.

Refer to Note B to the Consolidated Financial Statements for additional detail on the acquisition of HCS-Electronic Materials.

Regulatory Matters

We are subject to a variety of laws that regulate the manufacturing, processing, use, handling, storage, transport, treatment, emission, release, and disposal of substances and wastes used or generated in manufacturing.

For decades, we have operated our facilities under applicable standards of inplant and outplant emissions and releases.

For decades, we have operated our

facilities under applicable standards of inplant and outplant emissions and releases.

The inhalation of airborne beryllium particulate may present a health hazard to certain individuals.

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Occupational Safety and Health Administration (OSHA) published a new 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.

Materion was a participant in the development of the new standards, which fundamentally

represent our current health and safety operating practices.

On July 6, 2018, OSHA issued a Direct Final Rule that amended the text of the new standard to clarify OSHA’s intent with respect to certain terms and provisions of the standard, and on December 11, 2018, OSHA issued a Notice of Proposed Rulemaking concerning additional modifications to the standard “to clarify certain provisions and to simplify or improve compliance.” Other government and standard-setting organizations are also reviewing beryllium-related worker safety rules and standards, and will likely make them more stringent.

The development, proposal, or adoption of more stringent standards may affect the buying decisions by the users of beryllium-containing products.

Materion was a participant in the development of the new standards, which fundamentally represent our current health and safety operating practices.

On July 6, 2018, OSHA issued a Direct Final Rule that amended the text of the new standard to clarify OSHA’s intent with respect to certain terms and provisions of the standard, and on December 11, 2018, OSHA issued a Notice of Proposed Rulemaking concerning additional modifications to the standard “to clarify certain provisions and to simplify or improve compliance.” OSHA issued the final beryllium standard incorporating these additional modifications on July 14, 2020.

Other government and standard-setting organizations are also reviewing beryllium-related worker safety rules and standards, and will likely make them more stringent.

The development, proposal, or adoption of more stringent standards may affect the buying decisions of the users of beryllium-containing products.

If the standards are made more stringent and/or our customers or other downstream users decide to reduce their use of beryllium-containing products, our results of operations, liquidity, and financial condition could be materially adversely affected.

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Among our total global employee population, approximately 2,183 were employed in manufacturing.

Our strong employee base, along with their commitment to customer service excellence and uncompromising values, provide the foundation for our Company’s success.

Our strong employee base, along with their commitment to customer service excellence and uncompromising values, provides the foundation for our Company’s success.

Our employees are responsible for upholding our core values, which include working safely and collaboratively, conducting all aspects of business with the highest standards of ethics and integrity, leveraging processes and data to drive continuous improvement, empowering individuals and teams, embracing change, attracting and developing diverse global talent, and partnering for the betterment of the communities where we live and operate.

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We have a strong Environmental, Health, and Safety (EHS) program that focuses on implementing policies and training programs, as well as performing self-audits to ensure our colleagues leave their workplace safely, every day.

On an annual basis, our corporate strategic long-range strategies are 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 reviewed and updated, improvement plans are developed for each global location, progress is tracked, and daily critical safety statistics and metrics are published internally.

Our corporate intranet site is visible to all global employees, where we share detailed descriptions of serious injuries and near misses and their corrective actions, as well as other proactive measures to promote lessons learned and ensure worker safety.

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The COVID-19 pandemic has underscored for us the importance of keeping our employees safe and healthy.

In response to the pandemic, the Company has taken actions aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce so they can more safely and effectively perform their work.

Our health and safety focus is evident in our response to the COVID-19 pandemic around the globe:

In response to the pandemic, the Company has taken actions aligned with the World Health Organization and the Centers for Disease Control and Prevention to protect its workforce so our employees can more safely and effectively perform their work.

Our health and safety focus is evident in our response to the COVID-19 pandemic around the globe, which has included the following:

• adding work from home flexibility;

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• initiating regular communication regarding impacts of the COVID-19 pandemic, including health and safety protocols and procedures;

• implementing temperature screening of employees at all of our manufacturing facilities;

• establishing new physical distancing procedures for employees who need to be onsite;

• providing additional personal protective equipment and cleaning supplies;

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• implementing protocols to address actual and suspected COVID-19 cases and potential exposure;

• prohibiting all domestic and international non-essential travel for all employees;

• giving financial incentives for employees to become vaccinated, including booster shots;

• requiring masks to be worn in all locations where allowed by local law.

We manufacture products which are deemed essential to the critical infrastructure and all production sites have continued operating during the COVID-19 pandemic.

We manufacture products which are deemed essential to critical infrastructure and all production sites have continued operating during the COVID-19 pandemic.

As such, we have invested in creating physically safe work environments for our employees.

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The ERGs provide opportunities for employees to connect, develop, and grow together in a supportive environment.

As of December 31, 2020, we had three ERGs:

ELEVATE (Women), V.E.T.

(veterans and allies of the military), and United Voices of Materion (all ethnic backgrounds).

As of December 31, 2021, we had four ERGs:

ELEVATE (Women);

(veterans and allies of the military);

and United Voices of Materion (all ethnic backgrounds).

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business