MATERION Corp 10-Q

Item 1. Financial Statements Materion Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Third Quarter Ended Nine Months Ended (Thousands, except per share amounts) September 26, 2025 September 27, 2024 September 26, 2025 September 27, 2024 Net sales $ 444,808 $ 436,715 $ 1,296,796 $ 1,247,868 Cost of sales 358,685 355,777 1,051,836 1,014,859 Gross margin 86,123 80,938 244,960 233,009 Selling, general, and administrative expense 38,256 35,009 108,740 104,454 Research and development expense 6,548 7,868 19,466 22,712 Restructuring expense 212 1,493 2,729 6,161 Other—net 6,164 5,309 15,068 14,112 Operating profit 34,943 31,259 98,957 85,570 Other non-operating (income)—net ( 711 ) ( 642 ) ( 1,944 ) ( 1,925 ) Interest expense—net 7,544 8,839 22,691 25,920 Income before income taxes 28,110 23,062 78,210 61,575 Income tax expense 2,698 768 9,960 6,836 Net income $ 25,412 $ 22,294 $ 68,250 $ 54,739 Basic earnings per share: Net income per share of common stock $ 1.23 $ 1.07 $ 3.29 $ 2.64 Diluted earnings per share: Net income per share of common stock $ 1.22 $ 1.07 $ 3.27 $ 2.61 Weighted-average number of shares of common stock outstanding: Basic 20,731 20,749 20,763 20,723 Diluted 20,883 20,920 20,893 20,935 See notes to these consolidated financial statements. 2 Materion Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) Third Quarter Ended Nine Months Ended September 26, September 27, September 26, September 27, (Thousands) 2025 2024 2025 2024 Net income $ 25,412 $ 22,294 $ 68,250 $ 54,739 Other comprehensive income (loss): Foreign currency translation adjustment ( 903 ) 7,579 9,308 2,030 Derivative and hedging activity, net of tax ( 435 ) ( 4,452 ) ( 2,414 ) ( 2,606 ) Pension and post-employment benefit adjustment, net of tax ( 161 ) ( 62 ) 893 ( 298 ) Other comprehensive loss ( 1,499 ) 3,065 7,787 ( 874 ) Comprehensive income $ 23,913 $ 25,359 $ 76,037 $ 53,865 See notes to these consolidated financial statements. 3 Materion Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) September 26, December 31, (Thousands) 2025 2024 Assets Current assets Cash and cash equivalents $ 16,411 $ 16,713 Accounts receivable, net 195,289 193,793 Inventories, net 467,329 441,299 Prepaid and other current assets 97,296 72,419 Total current assets 776,325 724,224 Deferred income taxes 2,975 2,964 Property, plant, and equipment 1,380,432 1,315,586 Less allowances for depreciation, depletion, and amortization ( 841,102 ) ( 804,781 ) Property, plant, and equipment, net 539,330 510,805 Operating lease, right-of-use assets 63,648 64,449 Intangible assets, net 108,059 109,312 Other assets 22,362 22,140 Goodwill 280,474 263,738 Total Assets $ 1,793,173 $ 1,697,632 Liabilities and Shareholders’ Equity Current liabilities Short-term debt $ 10,166 $ 34,274 Accounts payable 139,789 105,901 Salaries and wages 23,685 20,939 Other liabilities and accrued items 43,897 47,523 Income taxes 2,324 4,906 Unearned revenue 15,783 13,191 Total current liabilities 235,644 226,734 Other long-term liabilities 12,059 12,013 Operating lease liabilities 61,385 62,626 Finance lease liabilities 13,418 12,404 Retirement and post-employment benefits 27,038 26,411 Unearned income 56,990 75,769 Long-term income taxes 2,135 1,818 Deferred income taxes 3,153 3,242 Long-term debt 446,772 407,734 Shareholders’ equity Serial preferred stock (no par value; 5,000 authorized shares, none issued) — — Common stock (no par value; 60,000 authorized shares, issued shares of 27,148 at both September 26 th and December 31 st ) 349,247 336,136 Retained earnings 908,691 849,111 Common stock in treasury ( 277,103 ) ( 261,880 ) Accumulated other comprehensive loss ( 53,259 ) ( 61,046 ) Other equity 7,003 6,560 Total shareholders' equity 934,579 868,881 Total Liabilities and Shareholders’ Equity $ 1,793,173 $ 1,697,632 See the notes to these consolidated financial statements. 4 Materion Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 26, September 27, (Thousands) 2025 2024 Cash flows from operating activities: Net income $ 68,250 $ 54,739 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 51,551 51,291 Amortization of deferred financing costs in interest expense 1,647 1,286 Stock-based compensation expense (non-cash) 8,520 7,715 Deferred income tax expense (benefit) ( 43 ) ( 9 ) Changes in assets and liabilities: Accounts receivable 1,701 ( 21,921 ) Inventory ( 21,980 ) ( 34,215 ) Prepaid and other current assets ( 21,089 ) ( 24,646 ) Accounts payable and accrued expenses 21,532 3,704 Unearned revenue ( 13,142 ) ( 17,568 ) Interest and taxes payable ( 1,550 ) ( 3,233 ) Other-net ( 11,673 ) ( 5,579 ) Net cash provided by operating activities 83,724 11,564 Cash flows from investing activities: Payments for purchase of property, plant, and equipment ( 38,741 ) ( 50,730 ) Payments for mine development ( 19,952 ) ( 10,376 ) Proceeds from sale of property, plant, and equipment 932 561 Payments for acquisition, net of cash acquired ( 19,500 ) — Net cash used in investing activities ( 77,261 ) ( 60,545 ) Cash flows from financing activities: Proceeds from borrowings under credit facilities, net 30,574 91,057 Repayment of long-term debt ( 16,609 ) ( 22,694 ) Principal payments under finance lease obligations ( 456 ) ( 567 ) Cash dividends paid ( 8,608 ) ( 8,295 ) Deferred financing costs ( 2,935 ) — Repurchase of common stock ( 7,843 ) — Payments of withholding taxes for stock-based compensation awards ( 2,540 ) ( 6,575 ) Net cash provided by financing activities ( 8,417 ) 52,926 Effects of exchange rate changes 1,652 635 Net change in cash and cash equivalents ( 302 ) 4,580 Cash and cash equivalents at beginning of period 16,713 13,294 Cash and cash equivalents at end of period $ 16,411 $ 17,874 See notes to these consolidated financial statements. 5 Materion Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited) Common Shares Shareholders' Equity (Thousands, except per share amounts) Common Shares Common Shares Held in Treasury Common Stock Retained Earnings Common Stock in Treasury Accumulated Other Comprehensive Loss Other Equity Total Balance at June 27, 2025 20,727 6,421 $ 345,666 $ 886,247 $ ( 276,447 ) $ ( 51,760 ) $ 6,939 $ 910,645 Net income — — — 25,412 — — — 25,412 Other comprehensive income — — — — — ( 1,499 ) — ( 1,499 ) Cash dividends declared ($ 0.140 per share) — — — ( 2,903 ) — — — ( 2,903 ) Stock-based compensation activity 8 ( 8 ) 3,557 ( 65 ) ( 409 ) — — 3,083 Repurchase of common stock — — — — — Payments of withholding taxes for stock-based compensation awards ( 2 ) 2 — — ( 203 ) — — ( 203 ) Directors’ deferred compensation — — 24 — ( 44 ) — 64 44 Balance at September 26, 2025 20,733 6,415 $ 349,247 $ 908,691 $ ( 277,103 ) $ ( 53,259 ) $ 7,003 $ 934,579 Balance at June 28, 2024 20,747 6,401 $ 328,836 $ 881,284 $ ( 258,583 ) $ ( 50,887 ) $ 6,435 $ 907,085 Net income — — — 22,294 — — — 22,294 Other comprehensive income — — — — — 3,065 — 3,065 Cash dividends declared ($ 0.135 per share) — — — ( 2,802 ) — — — ( 2,802 ) Stock-based compensation activity 5 ( 5 ) 2,774 ( 12 ) ( 381 ) — — 2,381 Payments of withholding taxes for stock-based compensation awards ( 1 ) 1 — — ( 173 ) — — ( 173 ) Directors’ deferred compensation — — 36 — ( 54 ) — 63 45 Balance at September 27, 2024 $ 20,751 $ 6,397 $ 331,646 $ 900,764 $ ( 259,191 ) $ ( 47,822 ) $ 6,498 $ 931,895 6 Common Shares Shareholders' Equity (Thousands, except per share amounts) Common Shares Common Shares Held in Treasury Common Stock Retained Earnings Common Stock in Treasury Accumulated Other Comprehensive Loss Other Equity Total Balance at December 31, 2024 20,764 6,384 $ 336,136 $ 849,111 $ ( 261,880 ) $ ( 61,046 ) $ 6,560 $ 868,881 Net income — — — 68,250 — — — 68,250 Other comprehensive loss — — — — — 7,787 — 7,787 Cash dividends declared ($ 0.415 per share) — — — ( 8,608 ) — — — ( 8,608 ) Stock-based compensation activity 97 ( 97 ) 13,041 ( 62 ) ( 4,459 ) — — 8,520 Repurchase of common stock ( 100 ) 100 — — ( 7,843 ) — — ( 7,843 ) Payments of withholding taxes for stock-based compensation awards ( 29 ) 29 — — ( 2,540 ) — — ( 2,540 ) Directors’ deferred compensation 1 ( 1 ) 70 — ( 381 ) — 443 132 Balance at September 26, 2025 20,733 6,415 $ 349,247 $ 908,691 $ ( 277,103 ) $ ( 53,259 ) $ 7,003 $ 934,579 Balance at December 31, 2023 20,646 6,502 $ 309,492 $ 854,334 $ ( 237,746 ) $ ( 46,948 ) $ 5,921 $ 885,053 Net income — — — 54,739 — — — 54,739 Other comprehensive loss — — — — — ( 874 ) — ( 874 ) Cash dividends declared ($ 0.400 per share) — — — ( 8,295 ) — — — ( 8,295 ) Stock-based compensation activity 154 ( 154 ) 22,058 ( 14 ) ( 14,329 ) — — 7,715 Payments of withholding taxes for stock-based compensation awards ( 50 ) 50 — — ( 6,575 ) — — ( 6,575 ) Directors’ deferred compensation 1 ( 1 ) 96 — ( 541 ) — 577 132 Balance at September 27, 2024 20,751 6,397 331,646 900,764 ( 259,191 ) ( 47,822 ) 6,498 931,895 See notes to these consolidated financial statements. 7 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note A — Accounting Policies Basis of Presentation: The accompanying consolidated financial statements of Materion Corporation and its subsidiaries (referred to herein as the Company, our, we, or us) contain all of the adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. All material adjustments were of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's 2024 Annual Report on Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. New Accounting Guidance Issued and Not Yet Adopted: In December 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740) . This ASU updates current income tax disclosure requirements to require disclosures of specific categories of information within the effective tax rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. This ASU will be effective for the annual period ending December 31, 2025. Adoption of this ASU will result in additional disclosure, but it will not impact the Company’s consolidated financial position, results of operations or cash flows. In November 2024, the FASB issued a final ASU to require disaggregated disclosure of income statement expenses. This new standard requires public business entities to provide detailed disclosures in the notes to financial statements disaggregating specific expense categories, including employee compensation, depreciation, and intangible asset amortization, as well as certain other disclosures to provide enhanced transparency into the nature and function of expenses. This guidance is effective for annual periods beginning in the Company’s fiscal year 2027 and interim periods following annual adoption, with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-internal-use software (Subtopic 350-40): Targeted Improvements to the Accounting for internal-use software . The amendments in this update make targeted improvements to Subtopic 350-40, Intangibles-Goodwill and Other-internal-use software to increase the operability of the recognition guidance considering different methods of software development. The ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its condensed consolidated financial statements and related disclosures. Note B — Acquisition On July 9, 2025, the Company completed the acquisition of certain manufacturing assets for tantalum solutions in Dangjin City, South Korea, from Konasol Co., Ltd., a Korean manufacturer serving the semiconductor and adjacent markets. This strategic investment expands the Company’s global footprint with a facility in Asia to better serve semiconductor customers in that region. The total purchase price was approximately $ 19.5 million, which was paid in cash on the date of acquisition. The acquisition and related fees and expenses were funded through available cash and borrowings under the Company's revolving credit facility. Acquisition-related transaction and integration costs totaled $ 1.7 million in 2025. These costs are included in selling, general, and administrative expenses in the Consolidated Statements of Income. The Company accounted for the transaction as a business combination using the acquisition method of accounting and a third-party valuation appraisal, and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The operating results are included within Materion’s Electronic Materials segment. Pro forma financial information has not been presented, as revenue and expenses related to the acquisition do not have a material impact on the Company’s consolidated financial statements. The total purchase price was allocated to identifiable assets and liabilities based upon the preliminary estimates of fair value at the date of the acquisition, which primarily included PP&E and a developed technology intangible asset of $ 2.1 million. To 8 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill and approximated $ 14.9 million. The goodwill is deductible for Korean tax purposes. The fair values of the acquired intangible asset is determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. These assumptions are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible, but no later than the end of the third quarter of 2026. Note C — Segment Reporting The Company has the following reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, the Company's CODM, in determining how to allocate the Company’s resources and evaluate performance. 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. Electronic Materials produces advanced chemicals, microelectric packaging, precious metal, non-precious metal, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal preforms and high temperature braze materials. Precision Optics produces thin film coatings, optical filter materials, sputter-coated, and precision-converted thin film materials. The Other reportable segment includes unallocated corporate costs and assets. The primary measurement used by management to measure the financial performance of each segment is earnings before interest, taxes, depreciation and amortization (EBITDA). The below table presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for the third quarter and first nine months of 2025 and 2024: 9 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Third quarter ended September 26, 2025 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 170,787 $ 246,837 $ 27,184 $ — $ 444,808 Less: Cost of sales 125,909 213,746 18,892 138 358,685 Selling, general and administrative expense 14,228 10,731 4,896 8,401 38,256 Other segment items (2) 4,018 5,878 2,442 ( 125 ) 12,213 Plus: Segment depreciation, depletion and amortization 10,279 4,443 2,277 505 17,504 Segment EBITDA $ 36,911 $ 20,925 $ 3,231 $ ( 7,909 ) $ 53,158 Income tax expense 2,698 Interest expense - net 7,544 Depreciation, depletion and amortization 17,504 Net Income $ 25,412 Third quarter ended September 27, 2024 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 177,376 $ 236,906 $ 22,433 $ — $ 436,715 Less: Cost of sales 125,587 213,503 16,602 85 355,777 Selling, general and administrative expense 14,046 9,728 4,941 6,294 35,009 Other segment items (2) 3,655 5,893 3,824 656 14,028 Plus: Segment depreciation, depletion and amortization 10,714 4,527 2,895 457 18,593 Segment EBITDA $ 44,802 $ 12,309 $ ( 39 ) $ ( 6,578 ) $ 50,494 Income tax expense 768 Interest expense - net 8,839 Depreciation, depletion and amortization 18,593 Net Income $ 22,294 10 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) First nine months ended September 26, 2025 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 527,552 $ 696,059 $ 73,185 $ — $ 1,296,796 Less: Cost of sales 385,435 611,969 54,211 221 1,051,836 Selling, general and administrative expense 42,451 30,475 13,598 22,216 108,740 Other segment items (2) 10,889 16,982 8,720 ( 1,272 ) 35,319 Plus: Segment depreciation, depletion and amortization 29,901 12,971 7,192 1,487 51,551 Segment EBITDA $ 118,678 $ 49,604 $ 3,848 $ ( 19,678 ) $ 152,452 Income tax expense 9,960 Interest expense - net 22,691 Depreciation, depletion and amortization 51,551 Net Income $ 68,250 First nine months ended September 27, 2024 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 533,534 $ 641,564 $ 72,770 $ — $ 1,247,868 Less: Cost of sales 392,935 568,010 53,810 104 1,014,859 Selling, general and administrative expense 41,344 29,443 15,460 18,207 104,454 Other segment items (2) 10,938 17,634 10,825 1,663 41,060 Plus: Segment depreciation, depletion and amortization 27,576 13,641 8,622 1,452 51,291 Segment EBITDA $ 115,893 $ 40,118 $ 1,297 $ ( 18,522 ) $ 138,786 Income tax expense 6,836 Interest expense - net 25,920 Depreciation, depletion and amortization 51,291 Net Income $ 54,739 11 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (1) Excludes inter-segment sales of $ 1.0 million and $ 1.6 million for the third quarter of 2025 and 2024, respectively, and $ 5.6 million and $ 4.8 million for the first nine months of 2025 and 2024, respectively, for Electronic Materials. There were no material inter-segment sales for Performance Materials or Precision Optics in 2025 or 2024. Inter-segment sales are eliminated in consolidation. (2) Other segment items for each reportable segment include: • Research and development expense • Restructuring expense • Other operating expense - primarily comprised of metal consignment fees, intangible amortization and foreign currency (gains)/losses as further detailed in Note F • Non-operating expenses primarily related to pension costs The following table disaggregates revenue for each segment by end market for the third quarter and first nine months of 2025 and 2024: (Thousands) Performance Materials Electronic Materials Precision Optics Other Total Third Quarter 2025 End Market Semiconductor $ 2,005 $ 205,821 $ 1,120 $ — $ 208,946 Industrial 31,141 9,020 6,656 — 46,817 Aerospace and defense 40,326 2,357 8,298 — 50,981 Consumer electronics 48,206 416 4,027 — 52,649 Automotive 15,206 669 1,628 — 17,503 Energy 8,448 19,619 — — 28,067 Life sciences 2,465 6,497 5,097 — 14,059 Other 22,990 2,438 358 — 25,786 Total $ 170,787 $ 246,837 $ 27,184 $ — $ 444,808 Third Quarter 2024 End Market Semiconductor $ 2,097 $ 198,790 $ 798 $ — $ 201,685 Industrial 33,494 7,352 6,254 — 47,100 Aerospace and defense 44,940 975 5,126 — 51,041 Consumer electronics 49,131 172 4,006 — 53,309 Automotive 18,123 1,724 1,780 — 21,627 Energy 12,819 20,810 — — 33,629 Life sciences 2,602 4,780 4,264 — 11,646 Other 14,170 2,303 205 — 16,678 Total $ 177,376 $ 236,906 $ 22,433 $ — $ 436,715 12 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Thousands) Performance Materials Electronic Materials Precision Optics Other Total First Nine Months 2025 End Market Semiconductor $ 7,390 $ 579,064 $ 2,690 $ — $ 589,144 Industrial 93,424 27,779 18,678 — 139,881 Aerospace and defense 126,382 6,137 21,812 — 154,331 Consumer electronics 149,913 1,682 10,343 — 161,938 Automotive 48,243 3,211 4,774 — 56,228 Energy 37,388 53,002 — — 90,390 Life sciences 7,323 18,886 14,042 — 40,251 Other 57,489 6,298 846 — 64,633 Total $ 527,552 $ 696,059 $ 73,185 $ — $ 1,296,796 First Nine Months 2024 End Market Semiconductor $ 6,059 $ 533,312 $ 1,877 $ — $ 541,248 Industrial 91,765 25,466 19,399 — 136,630 Aerospace and defense 129,011 4,260 16,980 — 150,251 Consumer electronics 166,797 309 11,272 — 178,378 Automotive 54,190 5,367 5,459 — 65,016 Energy 30,191 53,480 — — 83,671 Life sciences 8,166 13,071 17,289 — 38,526 Other 47,355 6,299 494 — 54,148 Total $ 533,534 $ 641,564 $ 72,770 $ — $ 1,247,868 Note D — Revenue Recognition Net sales consist primarily of revenue from the sale of precious and non-precious specialty metals, beryllium and copper-based alloys, beryllium composites, and other products into numerous end markets. The Company requires an agreement with a customer that creates enforceable rights and performance obligations. The Company generally recognizes revenue in an amount that reflects the consideration to which it expects to be entitled upon satisfaction of a performance obligation by transferring control over a product to the customer. Control over a product is generally transferred to the customer when the Company has a present right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards of ownership, and/or the customer has accepted the product. Transaction Price Allocated to Future Performance Obligations: Accounting Standards Codification (ASC) 606, " Revenue from Contracts with Customers " , requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at September 26, 2025. Remaining performance obligations include non-cancelable purchase orders and customer contracts. The guidance provides certain practical expedients that limit this requirement. As such, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. After considering the practical expedient at September 26, 2025 and September 27, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 21.5 million and $ 39.9 million, respectively. 13 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Contract Balances : The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities: (Thousands) September 26, 2025 December 31, 2024 $ change % change Accounts receivable, trade $ 196,222 $ 194,562 $ 1,660 1 % Unbilled receivables 50,319 34,950 15,369 44 % Unearned revenue 15,783 13,191 2,592 20 % Accounts receivable, trade represents payments due from customers relating to the transfer of the Company’s products and services. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded. Impairment losses (bad debt) incurred related to our receivables were immaterial during the third quarter and first nine months of 2025 and 2024. In the fourth quarter of 2024, the Company entered into a factoring agreement to sell certain receivables to a third-party financial institution. The transfer of the receivables constitute purchases and sales of receivables resulting in a reduction of trade receivables on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows. The Company sold $ 20.5 million of receivables in the third quarter of 2025 and a total of $ 59.4 million of receivables in the first nine months of 2025. The Company recorded a loss on sale of $ 0.2 million and $ 0.6 million for the third quarter and first nine months of 2025, respectively. The Company sold $ 48.9 million of receivables in the fourth quarter of 2024 and recorded a loss on sale of $ 0.7 million. Total receivables sold under this program amount to $ 108.3 million. Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are generally billed and collected within one year. Billings made on contracts are recorded as a reduction of unbilled receivables. Unearned revenue is recorded for consideration received from customers in advance of satisfaction of the related performance obligations. The Company recognized approximately $ 10.1 million of the December 31, 2024 short-term unearned amounts as revenue during the first nine months of 2025. As a practical expedient, the Company does not adjust the promised amount of consideration for the effects of a significant financing component because the period between the transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less. The Company does not include extended payment terms in its contracts with customers. Note E — Restructuring In fiscal year 2024, the Company announced restructuring plans that were both designed to reduce costs and expenses in response to macroeconomic conditions and operating performance at the time the actions were announced. These actions impacted all three of our business segments as well as Corporate. When completed, the restructuring programs are expected to result in the reduction in annual cost of sales and operating expenses. In 2025, the Company continued to implement restructuring actions, primarily in our Precision Optics segment. In connection with these actions, we recorded restructuring expenses of $ 0.2 million and $ 2.7 million in the three and nine months ended September 26, 2025, respectively, and $ 1.5 million and $ 6.2 million in the three and nine months ended September 27, 2024, respectively, all of which were associated with workforce reduction, including severance and other personnel-related costs. We expect to substantially complete the remaining restructuring activities by the end of fiscal year 2025. The activity in the accrued balances incurred in relation to restructuring during the nine months ended September 26, 2025, and September 27, 2024, were as follows: 14 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Reduction in Force (Thousands) Performance Materials Electronic Materials Precision Optics Other Consolidated Balance at December 31, 2024 $ 56 $ 293 $ 60 $ 408 $ 817 Additional Charges 481 789 1,428 31 2,729 Cash Payments ( 537 ) ( 1,067 ) ( 1,457 ) ( 325 ) ( 3,386 ) Balance at September 26, 2025 $ — $ 15 $ 31 $ 114 $ 160 Reduction in Force (Thousands) Performance Materials Electronic Materials Precision Optics Other Consolidated Balance at December 31, 2023 $ 2 $ 388 $ — $ — $ 390 Additional Charges 1,441 1,804 1,198 1,718 6,161 Cash Payments ( 1,270 ) ( 2,019 ) ( 755 ) ( 1,154 ) ( 5,198 ) Balance at September 27, 2024 $ 173 $ 173 $ 443 $ 564 $ 1,353 Note F — Other-net Other-net for the third quarter and first nine months of 2025 and 2024 is summarized as follows: Third Quarter Ended Nine Months Ended September 26, September 27, September 26, September 27, (Thousands) 2025 2024 2025 2024 Amortization of intangible assets $ 2,699 $ 3,217 $ 8,394 $ 9,227 Metal consignment fees 3,186 1,978 7,860 5,896 Foreign currency (gain) loss 492 717 ( 459 ) 1,251 Other items ( 213 ) ( 603 ) ( 727 ) ( 2,262 ) Total $ 6,164 $ 5,309 $ 15,068 $ 14,112 Note G — Income Taxes The Company's effective tax rate for the third quarter of 2025 and 2024 was 9.6 % and 3.3 %, respectively, and 12.7 % and 11.1 % for the first nine months of 2025 and 2024, respectively. The effective tax rate for 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion, the advanced manufacturing production credit, and the foreign derived intangible income deduction. The effective tax rate for 2024 was lower than the statutory tax rate primarily due to the impact of percentage depletion, research and development and production tax credits, and the foreign derived intangible income deduction. The effective tax rate for the first nine months of 2025 includes a net discrete income tax benefit of $ 0.7 million, primarily consisting of prior year return-to-provision adjustments recorded. The effective tax rate for the first nine months of 2024 included a nominal amount of discrete income tax expense primarily consisting of $ 1.0 million of excess tax benefits from stock-based compensation awards offset by a $ 1.1 million valuation allowance recorded against deferred tax assets that are not likely to be realized for one of the Company’s foreign subsidiaries. One Big Beautiful Bill Act On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law in the U.S. The OBBBA includes a broad range of tax provisions affecting businesses including extending permanently, with modification, certain business and international tax provisions enacted as part of the Tax Cuts and Jobs Act of 2017 and accelerating the phase-out of certain Inflation Reduction Act tax incentives. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in future years. The Company recognized the income tax effects of the OBBBA in its third quarter of 2025, the impact of which was not material. 15 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Government Tax Credits Pursuant to The Inflation Reduction Act of 2022 (IRA), the Company is eligible for the Advanced Manufacturing Production Credit (production credit). 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. The Company records the production credit as a reduction in cost of goods sold as the applicable items are produced and sold. U.S. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. Our accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance , under IFRS Accounting Standards. We recognize the benefit of the production credit by applying IAS 20 in pretax income on a systematic basis in line with its recognition of the expenses that the grant is intended to compensate. Pillar Two The Organization for Economic Co-operation and Development (OECD) introduced rules to establish a global minimum corporate tax rate, commonly referred to as Pillar Two. Numerous foreign countries have enacted legislation to implement the Pillar Two rules or are expected to enact similar legislation. Pillar Two legislation enacted in jurisdictions the Company operates in is not expected to have a material impact on its effective tax rate or consolidated results of operations, financial position, or cash flows in 2025. We will continue to evaluate the impact of Pillar Two legislation on the current and future reporting periods. Note H — Earnings Per Share (EPS) The following table sets forth the computation of basic and diluted EPS: Third Quarter Ended Nine Months Ended September 26, September 27, September 26, September 27, (Thousands, except per share amounts) 2025 2024 2025 2024 Numerator for basic and diluted EPS: Net income $ 25,412 $ 22,294 $ 68,250 $ 54,739 Denominator: Denominator for basic EPS: Weighted-average shares outstanding 20,731 20,749 20,763 20,723 Effect of dilutive securities: Stock appreciation rights 49 75 40 83 Restricted stock units 52 44 45 61 Performance-based restricted stock units 51 52 45 68 Diluted potential common shares 152 171 130 212 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 20,883 20,920 20,893 20,935 Basic EPS $ 1.23 $ 1.07 $ 3.29 $ 2.64 Diluted EPS $ 1.22 $ 1.07 $ 3.27 $ 2.61 Adjusted weighted-average shares outstanding - diluted exclude securities totaling 158,282 and 148,038 for the quarters ended September 26, 2025 and September 27, 2024, respectively, and 149,694 and 110,555 for the nine months ended September 26, 2025 and September 27, 2024, respectively. These securities are primarily related to restricted stock units (RSUs) and stock appreciation rights (SARs) with fair market values and exercise prices greater than the average market price of the Company's common shares and were excluded from the dilution calculation as the effect would have been anti-dilutive. 16 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note I — Inventories Inventories on the Consolidated Balance Sheets are summarized as follows: September 26, December 31, (Thousands) 2025 2024 Raw materials and supplies $ 102,297 $ 100,208 Work in process 304,988 278,065 Finished goods 60,044 63,026 Inventories, net $ 467,329 $ 441,299 The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce its exposure to metal market price movements and to reduce its working capital investment. The notional value of off-balance sheet precious metals and copper was $ 493.8 million and $ 381.6 million as of September 26, 2025 and December 31, 2024, respectively. Note J — Customer Prepayments In 2020, the Company entered into an investment agreement and a master supply agreement with a customer to procure equipment to manufacture product for the customer. The customer provided prepayments to the Company to fund the necessary infrastructure improvements and procure the equipment necessary to supply the customer with the desired product. The Company owns, operates and maintains the equipment that is being used to manufacture product for the customer. Revenue will be recognized as the Company fulfills purchase orders and ships the commercial product to the customer, as product delivery is considered the satisfaction of the performance obligation. Additionally, during the second quarter of 2022, the Company entered into an amendment to the investment agreement with the same customer to procure additional equipment to manufacture product for the customer. In 2023, the Company received the remaining prepayments related to this amendment, the total of which approximated $ 38.6 million. As of September 26, 2025 and December 31, 2024, $ 46.4 million and $ 60.9 million, respectively, of prepayments are classified as Unearned income on the Consolidated Balance Sheets. The prepayments will remain in Unearned income until commercial purchase orders are received for product serviced out of the equipment, at which time a portion of the purchase order value related to prepayments will be reclassified to Unearned revenue. As of September 26, 2025 $ 3.0 million of the prepayments are classified as Unearned revenue. 17 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note K — Pensions and Other Post-employment Benefits The following is a summary of the net periodic benefit cost for the third quarter and first nine months ended September 26, 2025 and September 27, 2024, respectively, for the pension plans as shown below. The Pension Benefits column aggregates defined benefit pension plans in the U.S., Germany, Liechtenstein, England, and the U.S. supplemental retirement plans. The Other Benefits column includes the domestic retiree medical and life insurance plan. Pension Benefits Other Benefits Third Quarter Ended Third Quarter Ended September 26, September 27, September 26, September 27, (Thousands) 2025 2024 2025 2024 Components of net periodic benefit (credit) cost Service cost $ 315 $ 279 $ 11 $ 12 Interest cost 1,932 1,916 58 58 Expected return on plan assets ( 2,539 ) ( 2,541 ) — — Amortization of prior service (benefit) cost ( 23 ) ( 22 ) — — Amortization of net loss (gain) 90 32 ( 87 ) ( 87 ) Net periodic benefit (credit) cost $ ( 225 ) $ ( 336 ) $ ( 18 ) $ ( 17 ) Pension Benefits Other Benefits Nine Months Ended Nine Months Ended September 26, September 27, September 26, September 27, (Thousands) 2025 2024 2025 2024 Components of net periodic benefit (credit) cost Service cost $ 909 $ 813 $ 33 $ 37 Interest cost 5,769 5,728 174 175 Expected return on plan assets ( 7,575 ) ( 7,600 ) — — Amortization of prior service (benefit) cost ( 67 ) ( 64 ) — — Amortization of net loss (gain) 269 96 ( 262 ) ( 262 ) Net periodic benefit (credit) cost $ ( 695 ) $ ( 1,027 ) $ ( 55 ) $ ( 50 ) The Company did no t make any contributions to its domestic defined benefit plan in the third quarter or first nine months of 2025 or 2024. The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in Other non-operating (income) expense. Note L — Accumulated Other Comprehensive Income (Loss) Changes in the components of accumulated other comprehensive income, including the amounts reclassified, for the third quarter and first nine months of 2025 and 2024 are as follows: 18 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Gains and Losses on Cash Flow Hedges (Thousands) Foreign Currency Interest Rate Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total Balance at June 27, 2025 $ 1,316 $ 1,888 $ 2 $ 3,206 $ ( 53,648 ) $ ( 1,318 ) $ ( 51,760 ) Other comprehensive income (loss) before reclassifications 118 122 — 240 — ( 903 ) ( 663 ) Amounts reclassified from accumulated other comprehensive income (loss) ( 9 ) ( 797 ) — ( 806 ) ( 164 ) — ( 970 ) Net current period other comprehensive (loss) income before tax 109 ( 675 ) — ( 566 ) ( 164 ) ( 903 ) ( 1,633 ) Deferred taxes 24 ( 155 ) — ( 131 ) ( 3 ) — ( 134 ) Net current period other comprehensive (loss) income after tax 85 ( 520 ) — ( 435 ) ( 161 ) ( 903 ) ( 1,499 ) Balance at September 26, 2025 $ 1,401 $ 1,368 $ 2 $ 2,771 $ ( 53,809 ) $ ( 2,221 ) $ ( 53,259 ) Balance at June 28, 2024 $ 1,718 $ 5,709 $ ( 323 ) $ 7,104 $ ( 48,894 ) $ ( 9,097 ) $ ( 50,887 ) Other comprehensive (loss) income before reclassifications ( 695 ) ( 3,805 ) ( 148 ) ( 4,648 ) — 7,579 2,931 Amounts reclassified from accumulated other comprehensive income (loss) ( 135 ) ( 1,294 ) 295 ( 1,134 ) ( 77 ) — ( 1,211 ) Net current period other comprehensive (loss) income before tax ( 830 ) ( 5,099 ) 147 ( 5,782 ) ( 77 ) 7,579 1,720 Deferred taxes ( 191 ) ( 1,173 ) 34 ( 1,330 ) ( 15 ) — ( 1,345 ) Net current period other comprehensive (loss) income after tax ( 639 ) ( 3,926 ) 113 ( 4,452 ) ( 62 ) 7,579 3,065 Balance at September 27, 2024 $ 1,079 $ 1,783 $ ( 210 ) $ 2,652 $ ( 48,956 ) $ ( 1,518 ) $ ( 47,822 ) 19 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Gains and Losses on Cash Flow Hedges (Thousands) Foreign Currency Interest Rate Precious Metals Total Pension and Post-Employment Benefits Foreign Currency Translation Total Balance at December 31, 2024 $ 1,638 $ 3,545 $ 2 $ 5,185 $ ( 54,702 ) $ ( 11,529 ) $ ( 61,046 ) Other comprehensive income (loss) before reclassifications ( 206 ) ( 473 ) — ( 679 ) 1,553 9,308 10,182 Amounts reclassified from accumulated other comprehensive income (loss) ( 103 ) ( 2,354 ) — ( 2,457 ) ( 290 ) — ( 2,747 ) Net current period other comprehensive (loss) income before tax ( 309 ) ( 2,827 ) — ( 3,136 ) 1,263 9,308 7,435 Deferred taxes ( 72 ) ( 650 ) — ( 722 ) 370 — ( 352 ) Net current period other comprehensive (loss) income after tax ( 237 ) ( 2,177 ) — ( 2,414 ) 893 9,308 7,787 Balance at September 26, 2025 $ 1,401 $ 1,368 $ 2 $ 2,771 $ ( 53,809 ) $ ( 2,221 ) $ ( 53,259 ) Balance at December 31, 2023 $ 1,201 $ 4,156 $ ( 99 ) $ 5,258 $ ( 48,658 ) $ ( 3,548 ) $ ( 46,948 ) Other comprehensive income (loss) before reclassifications 177 774 ( 708 ) 243 — 2,030 2,273 Amounts reclassified from accumulated other comprehensive income (loss) ( 335 ) ( 3,856 ) 564 ( 3,627 ) ( 266 ) — ( 3,893 ) Net current period other comprehensive (loss) income before tax ( 158 ) ( 3,082 ) ( 144 ) ( 3,384 ) ( 266 ) 2,030 ( 1,620 ) Deferred taxes ( 36 ) ( 709 ) ( 33 ) ( 778 ) 32 — ( 746 ) Net current period other comprehensive (loss) income after tax ( 122 ) ( 2,373 ) ( 111 ) ( 2,606 ) ( 298 ) 2,030 ( 874 ) Balance at September 27, 2024 $ 1,079 $ 1,783 $ ( 210 ) $ 2,652 $ ( 48,956 ) $ ( 1,518 ) $ ( 47,822 ) Reclassifications from accumulated other comprehensive income (loss) of gains and losses on foreign currency cash flow hedges are recorded in Net sales in the Consolidated Statements of Income. Reclassifications from accumulated other comprehensive income (loss) of gains and losses on precious metal and copper cash flow hedges are recorded in Cost of sales in the Consolidated Statements of Income. Reclassifications from accumulated other comprehensive income (loss) of gains and losses on the interest rate cash flow hedge is recorded in Interest expense in the Consolidated Statements of Income. Refer to Note O for additional details on cash flow hedges. Reclassifications from accumulated other comprehensive income (loss) for pension and post-employment benefits are included in the computation of the net periodic pension and post-employment benefit expense. Refer to Note K for additional details on pension and post-employment expenses. 20 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note M — Stock-based Compensation Expense Stock-based compensation expense, which includes awards settled in shares and in cash, was $ 3.2 million and $ 8.8 million in the third quarter and first nine months of 2025, respectively, compared to $ 2.4 million and $ 7.7 million, respectively, in the same periods of 2024. The Company granted 55,546 SARs to certain employees during the first nine months of 2025. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the nine months ended September 26, 2025 were $ 87.36 and $ 26.33 , respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model: Risk-free interest rate 3.97 % Dividend yield 0.62 % Volatility 29.4 % Expected term (in years) 4.7 The Company granted 4,946 and 109,819 stock-settled RSUs to certain employees during the third quarter and first nine months of 2025, respectively. The Company measures the fair value of stock-settled RSUs based on the closing market price of a share of Materion common stock on the date of the grant. The weighted-average fair value per share was $ 106.43 and $ 88.79 for stock-settled RSUs granted to employees during the third quarter and nine months ended September 26, 2025, respectively. RSUs are generally expensed over the vesting period of three years for employees. The Company granted stock-settled performance-based restricted stock units (PRSUs) to certain employees in the first nine months of 2025. The weighted-average fair value of the stock-settled PRSUs was $ 106.34 per share and will be expensed over the vesting period of three years . The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and its total return to shareholders over the vesting period relative to a peer group’s performance over the same period. At September 26, 2025, unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately $ 19.5 million, and is expected to be recognized over the remaining vesting period of the respective grants. Note N — Fair Value of Financial Instruments The Company measures and records financial instruments at fair value. A hierarchy is used for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 — Quoted market prices in active markets for identical assets and liabilities; Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3 — Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use. 21 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following table summarizes the financial instruments measured at fair value in the Consolidated Balance Sheets as of September 26, 2025 and December 31, 2024: (Thousands) Total Carrying Value in the Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) 2025 2024 2025 2024 2025 2024 2025 2024 Financial Assets Deferred compensation investments $ 7,066 $ 6,050 $ 7,066 $ 6,050 $ — $ — $ — $ — Foreign currency forward contracts 412 1,671 — — 412 1,671 — — Interest rate swap 2,112 4,603 — — 2,112 4,603 — — Precious metal swaps — — — — — — — — Total $ 9,590 $ 12,324 $ 7,066 $ 6,050 $ 2,524 $ 6,274 $ — $ — Financial Liabilities Deferred compensation liability $ 7,066 $ 6,050 $ 7,066 $ 6,050 $ — $ — $ — $ — Foreign currency forward contracts 488 1,033 — — 488 1,033 — — Interest Rate Swap 336 — 336 — — Precious metal swaps — — — — — — — — Total $ 7,890 $ 7,083 $ 7,066 $ 6,050 $ 824 $ 1,033 $ — $ — The Company uses a market approach to value the assets and liabilities for financial instruments in the table above. Outstanding contracts are valued through models that utilize market observable inputs, including both spot and forward prices, for the same underlying currencies, metals, and interest rates. The carrying values of the other working capital items and debt in the Consolidated Balance Sheets approximate fair values as of September 26, 2025 and December 31, 2024. The Company's deferred compensation investments and liabilities are based on the fair value of the investments corresponding to the employees’ investment selections, primarily in mutual funds, based on quoted prices in active markets for identical assets. Deferred compensation investments are primarily presented in Other assets. Deferred compensation liabilities are primarily presented in Other long-term liabilities. Note O — Derivative Instruments and Hedging Activity The Company uses derivative contracts to hedge exposure to movements in interest rates associated with borrowings, foreign currency exposures, and precious metal exposures. The objectives and strategies for using derivatives in these areas are as follows: Interest Rate. On March 4, 2022, the Company entered into a $ 100.0 million interest rate swap to hedge the interest rate risk on the Credit Agreement described in Note Q. The swap hedges the change in 1-month Secured Overnight Financial Rate (SOFR) from March 4, 2022 to November 2, 2026. On March 21, 2023, the Company entered into two $ 50.0 million interest rate swaps to hedge the interest rate risk on the Credit Agreement described in Note Q. The swaps hedge the change in 1-month USD-SOFR. The purpose of these hedges is to manage the risk of changes in the monthly interest payments attributable to changes in the benchmark interest rate. Foreign Currency. The Company sells a portion of its products to overseas customers in their local currencies, primarily the euro and yen. The Company secures foreign currency derivatives, mainly forward contracts and options, to hedge these anticipated sales transactions. The purpose of the hedge program is to protect against the reduction in the dollar value of foreign currency sales from adverse exchange rate movements. Should the dollar strengthen significantly, the decrease in the translated value of the foreign currency sales should be partially offset by gains on 22 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) the hedge contracts. Depending upon the methods used, the hedge contracts may limit the benefits from a weakening U.S. dollar. The use of forward contracts locks in a firm rate and eliminates any downside from an adverse rate movement as well as any benefit from a favorable rate movement. The Company may from time to time choose to hedge with options or a tandem of options, known as a collar. These hedging techniques can limit or eliminate the downside risk but can allow for some or all of the benefit from a favorable rate movement to be realized. Unlike a forward contract, a premium is paid for an option; collars, which are a combination of a put and call option, may have a net premium but can be structured to be cash neutral. The Company will primarily hedge with forward contracts due to the relationship between the cash outlay and the level of risk. The use of foreign currency derivative contracts is governed by policies approved by the Audit Committee of the Board of Directors. A team consisting of senior financial managers reviews the estimated exposure levels, as defined by budgets, forecasts, and other internal data, and determines the timing, amounts, and nature of instruments to use to hedge exposures. Management analyzes the effective hedged rates and the actual and projected gains and losses on the hedging transactions against the program objectives, targeted rates, and levels of risk assumed. Foreign currency contracts are typically layered in at different times for a specified exposure period in order to minimize the impact of market rate movements. Precious Metals. The Company maintains the majority of its precious metal production requirements on consignment in order to reduce its working capital investment and the exposure to metal price movements. When a product containing precious metal is fabricated and delivered to the customer, the metal content is purchased out of consignment based on the current market price. The price paid by the Company for the precious metal forms the basis for the price charged to the customer for the metal content in the product. This methodology allows for changes in either direction in the market prices of the precious metals used by the Company to be passed through to the customer and reduces the impact changes in prices could have on the Company's margins and operating profit. The consigned metal is owned by precious metal consignors that charge the Company consignment fees based upon the value of the metal as it fluctuates while on consignment. Each precious metal consignor retains title to its consigned precious metal until it is purchased by the Company, and it is the Company’s typical practice to purchase metal out of consignment only after a product containing that metal has been purchased by one of our customers. In certain instances, a customer may want to fix the price for the precious metal at the time the sales order is placed rather than at the time of shipment. Setting the sales price at a different date than when the material would be purchased out of consignment potentially creates an exposure to movements in the market price of the metal. Therefore, in these limited situations, the Company may elect to enter into a forward contract to purchase precious metal. The forward contract allows the Company to purchase metal at a fixed price on a specific future date. The price in the forward contract serves as the basis for the price to be charged to the customer. By doing so, the selling price and purchase price are matched, and the Company's price exposure is reduced. The Company refines precious metal-containing materials for its customers and typically will purchase the refined metal from the customer at current market prices. In limited circumstances, the customer may want to fix the price to be paid at the time of the order as opposed to when the material is refined. The customer may also want to fix the price for a set period of time. The Company may then elect to enter into a hedge contract, either a forward contract or a swap, to fix the price for the estimated quantity of metal to be refined and purchased, thereby reducing the exposure to adverse movements in the price of the metal. The Company may also enter into hedges to mitigate the risk relating to the prices of the metals that we process or refine. In certain circumstances, the Company also refines metal from the customer and may retain a portion of the refined metal as payment. The Company may elect to enter into a forward contract to sell precious metal to reduce the Company's price exposure in these instances. The Company may, from time to time, elect to purchase precious metal and hold in inventory rather than on consignment due to potential credit line limitations or other factors. These purchases are infrequent and, when made are typically held for a short duration. A forward contract will be secured at the time of the purchase to fix the price to be paid when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was owned by the Company. 23 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The Company will only enter into a derivative contract if there is an underlying identified exposure. Contracts are typically held to maturity. The Company does not engage in derivative trading activities and does not use derivatives for speculative purposes. The Company only uses hedge contracts that are denominated in the same currency or metal as the underlying exposure. All derivatives are recorded on the balance sheet at fair value. If a derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in other comprehensive income (OCI) and reclassified into income in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through income. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The derivative assets and liabilities are classified as short-term or long-term depending upon the contract maturity date. The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives not designated as hedging instruments (on a gross basis) and the balance sheet classification as of September 26, 2025 and December 31, 2024: September 26, 2025 December 31, 2024 (Thousands) Notional Amount Fair Value Notional Amount Fair Value Foreign currency forward contracts Prepaid and other current assets $ 28,817 $ 412 $ 24,532 $ 1,365 Other liabilities and accrued items 35,956 483 45,679 1,031 These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included $ 0.1 million and $ 2.1 million of foreign currency losses related to derivatives in the third quarter and first nine months of 2025, respectively, compared to $ 0.2 million of foreign currency losses and $ 0.2 million of foreign currency gains in the third quarter and first nine months of 2024, respectively. 24 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following table summarizes the notional amount and the fair value of the Company’s outstanding derivatives designated as cash flow hedges (on a gross basis) and balance sheet classification as of September 26, 2025 and December 31, 2024: September 26, 2025 Fair Value (Thousands) Notional Amount Prepaid and other current assets Other assets Other liabilities and accrued items Other long-term liabilities Foreign currency forward contracts - yen $ 229 $ — $ — $ 5 $ — Foreign currency forward contracts - euro — — — — — Precious metal swaps — — — — — Interest rate swap 200,000 1,873 239 233 103 Total $ 200,229 $ 1,873 $ 239 $ 238 $ 103 December 31, 2024 Fair Value Notional Amount Prepaid and other current assets Other assets Other liabilities and accrued items Other long-term liabilities Foreign currency forward contracts - yen $ 1,427 $ 70 $ — $ 2 $ — Foreign currency forward contracts - euro 5,955 236 — — — Precious metal swaps — — — — — Interest rate swap 200,000 2,701 1,902 — — Total $ 207,382 $ 3,007 $ 1,902 $ 2 $ — All of the contracts summarized above were designated and effective as cash flow hedges. We expect to reclassify $ 1.6 million of net gains into earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. At September 26, 2025, the maximum term of derivative instruments that hedge forecasted transactions was approximately four years . Refer to Note L for further details related to OCI. The following table summarizes the amounts reclassified from accumulated other comprehensive income relating to the Company’s outstanding derivatives designated as cash flow hedges and associated income statement classification as of the third quarter and first nine months of 2025 and 2024: Third Quarter Ended (Thousands) September 26, 2025 September 27, 2024 Hedging relationship Line item Foreign currency forward contracts Net sales $ ( 9 ) $ ( 135 ) Precious metal swaps Cost of sales — 295 Interest rate swap Interest expense - net ( 797 ) ( 1,294 ) Total $ ( 806 ) $ ( 1,134 ) 25 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Nine Months Ended (Thousands) September 26, 2025 September 27, 2024 Hedging relationship Line item Foreign currency forward contracts Net sales $ ( 103 ) $ ( 335 ) Precious metal swaps Cost of sales — 564 Interest rate swap Interest expense - net ( 2,354 ) ( 3,856 ) Total $ ( 2,457 ) $ ( 3,627 ) Note P — Contingencies Legal Proceedings . The Company is party to several pending legal proceedings and claims arising in the normal course of business. The Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matters. To the extent there is a reasonable possibility that the losses could exceed any amounts accrued, the Company will adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. Environmental Proceedings. The Company has an active environmental compliance program and records reserves for the probable cost of identified environmental remediation projects. The reserves are established based upon analyses conducted by the Company’s engineers and outside consultants and are adjusted from time to time based upon ongoing studies, the difference between actual and estimated costs, and other factors. The reserves may also be affected by rulings and negotiations with regulatory agencies. The undiscounted reserve balance was $ 3.5 million and $ 4.6 million at September 26, 2025 and December 31, 2024, respectively, and is included in Other liabilities and accrued items and Other long-term liabilities on the Consolidated Balance Sheet. Environmental projects tend to be long-term, and the final actual remediation costs may differ from the amounts currently recorded. Note Q — Debt (Thousands) September 26, 2025 December 31, 2024 Borrowings under Credit Agreement $ 230,125 $ 198,875 Borrowings under the Term Loan Facility 223,594 240,000 Overdraft Sweep Facility 2,921 123 Foreign debt 2,250 4,901 Total debt outstanding 458,890 443,899 Current portion of long-term debt ( 10,166 ) ( 34,274 ) Gross long-term debt 448,724 409,625 Unamortized deferred financing fees ( 1,952 ) ( 1,891 ) Long-term debt $ 446,772 $ 407,734 In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement). The Credit Agreement refinanced the revolving credit facility and term loan facility provided under Materion's previous Fourth Amended and Restated Credit Agreement, dated October 27, 2021 (as amended). Among other things, the Credit Agreement provides for a $ 450 million senior secured revolving credit facility (Revolving Credit Facility) and a $ 225 million senior secured term loan facility (Term Loan Facility and, together with the Revolving Credit Facility, Credit Facilities). The Term Loan Facility was fully drawn on June 26, 2025. The Credit Facilities mature on June 26, 2030. 26 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) As of September 26, 2025 and December 31, 2024, the Company had $ 230.1 million outstanding at an average interest rate of 5.70 % and $ 198.9 million outstanding at an average interest rate of 6.27 %, respectively, under its revolving credit facility. The available borrowing capacity under the Revolving Credit Facility as of September 26, 2025 was approximately $ 214.2 million. The Company has the option to repay or borrow additional funds under the Revolving Credit Facility until the maturity date in 2030. In connection with the Revolving Credit Facility, the administrative agent provides the Company with an overdraft sweep facility that the Company uses on a daily basis for short-term cash needs. As of September 26, 2025, the overdraft sweep facility had a balance of $ 2.9 million. The overdraft sweep facility allows for an additional $ 30.0 million of liquidity. The Credit Agreement includes covenants subject to a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all of our debt covenants as of September 26, 2025. The balance outstanding on the term loan facility as of September 26, 2025 and December 31, 2024 was $ 223.6 million and $ 240.0 million, respectively. At September 26, 2025 and December 31, 2024, there was $ 5.7 million and $ 7.1 million, respectively, outstanding against the letters of credit sub-facility.