MATERION Corp 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Statements Page Management’s Report on Internal Control over Financial Reporting 37 Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 38 Consolidated Statements of Income for the Years Ended December 31, 2025, 2024, and 2023 42 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024, and 2023 43 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024, and 2023 44 Consolidated Balance Sheets as of December 31, 2025 and 2024 45 Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2025, 2024, and 2023 46 Notes to Consolidated Financial Statements 47 Schedule II - Valuation and Qualifying Accounts 91 36 Management’s Report on Internal Control over Financial Reporting The management of Materion Corporation and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Materion Corporation and subsidiaries’ internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Materion Corporation and subsidiaries’ management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, it used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria) in Internal Control - Integrated Framework (2013). Based on our assessment we believe that, as of December 31, 2025, the Company’s internal control over financial reporting is effective. The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report. 37 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Materion Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Materion Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 12, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 38 Reconciliation of Precious Metals Consignment Inventory Description of the Matter At December 31, 2025, the notional value of the Company’s off-balance sheet precious metals was $526.2 million. As discussed in Note J to the consolidated financial statements, the Company uses estimates to measure the precious metal content within various refinement streams which can vary over time based upon the input materials, yield rates, and other process parameters. Auditing the reconciliation of precious metals consignment inventory is complex due to the highly detailed nature of the inventory reconciliation and the amount of information that is obtained from third parties. The Company performs physical inventory procedures to verify the existence of inventory. The precious metals inventory reconciliation includes estimates based on assumed recovery percentages developed from actual historical data and other analyses, the total estimated volume of solutions and other materials within the refinery, and other factors. The reconciliation of precious metals consignment inventory presents the resulting calculated weight of the precious metals generated from these estimates within the Company’s refine operations. This calculated weight may differ from what the Company’s records indicate should be on hand, which would then result in an adjustment to pre-tax income. How we addressed the matter in our audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s reconciliation of the precious metals consignment inventory process. This included controls over management's review of certain inputs into and underlying the reconciliation. To test the Company’s reconciliation of the precious metals physical consignment inventory, our procedures included, among others, evaluating the inputs and data used to determine the total value of the precious metal, which was identified through the physical inventory. We observed the physical inventory process, tested inventory activity from the date of observation through December 31, 2025, evaluated the underlying data used in the reconciliation, and confirmed certain consigned inventory held with the third parties. We assessed the historical accuracy of management’s estimates, which are based on assumed recovery percentages developed from actual historical data and other analyses, the total estimated volume of solutions and other materials within the refinery, and other factors and assessed the historical accuracy of management’s analysis to evaluate the inputs that were most significant to the calculated weight of the precious metal inventory. 39 Precision Optics Goodwill Impairment Evaluation Description of the matter At December 31, 2025, the Company had goodwill of $280.7 million, of which $33.1 million related to the Precision Optics reporting unit. As discussed in Notes A and N to the consolidated financial statements, goodwill is tested for impairment annually as of the first day of the fourth fiscal quarter, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below carrying value. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company determines the qualitative assessment is not sufficient to conclude on whether it is more likely than not that the fair value is less than the carrying value, a quantitative impairment test is performed. The Company may also elect to bypass the qualitative assessment and perform a quantitative test for any or all reporting units. As part of the quantitative assessment, the Company determines the fair value of the reporting units using a discounted cash method as well as a market approach. Auditing the Company’s quantitative impairment assessment of the Precision Optics reporting unit was complex and judgmental due to the significant estimation required in determining the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions such as changes in the discount rate, revenue growth rates, and EBITDA margin, which are affected by expectations about future market or economic conditions. How we addressed the matter in our audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s Precision Optics reporting unit goodwill impairment process, including controls over the significant assumptions discussed above. To test the estimated fair value of the Company’s Precision Optics reporting unit, our audit procedures included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the revenue growth rates and EBTIDA margin used by management to current industry and economic trends, recent historical performance, and other relevant factors. We performed sensitivity analyses of significant assumptions described above to evaluate the changes in fair value that would result from changes in the assumptions. In addition, we involved our valuation specialists to assist with our evaluation of the methodology applied and evaluating the reasonableness of the discount rate used by the Company in the determination of the fair value for the Company’s Precision Optics reporting unit. /s/ Ernst & Young LLP We have served as the Company’s auditor since at least 1958, but we are unable to determine the specific year. Cleveland, Ohio February 12, 2026 40 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Materion Corporation Opinion on Internal Control Over Financial Reporting We have audited Materion Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Materion Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 12, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Cleveland, Ohio February 12, 2026 41 Materion Corporation and Subsidiaries Years Ended December 31, 2025, 2024, & 2023 Consolidated Statements of Income (Thousands except per share amounts) 2025 2024 2023 Net sales $ 1,786,550 $ 1,684,739 $ 1,665,187 Cost of sales 1,477,924 1,358,754 1,316,145 Gross margin 308,626 325,985 349,042 Selling, general, and administrative expense 143,057 145,588 157,911 Research and development expense 25,941 29,028 27,540 Goodwill impairment — 56,067 — Long-lived asset impairment — 17,134 — Loss on asset disposal — 6,412 — Restructuring expense (Note E) 3,155 6,848 3,824 Other — net (Note F) 26,677 17,685 23,323 Operating profit 109,796 47,223 136,444 Other non-operating (income) expense — net (Note P) ( 2,437 ) ( 2,443 ) ( 2,710 ) Interest expense — net (Note G) 30,692 34,764 31,323 Income before income taxes 81,541 14,902 107,831 Income tax expense (Note H) 6,718 9,014 12,129 Net income $ 74,823 $ 5,888 $ 95,702 Basic earnings per share: Net income per share of common stock $ 3.61 $ 0.28 $ 4.64 Diluted earnings per share: Net income per share of common stock $ 3.58 $ 0.28 $ 4.58 Weighted-average number of shares of common stock outstanding: Basic 20,755 20,732 20,619 Diluted 20,912 20,928 20,911 The accompanying notes are an integral part of the consolidated financial statements. 42 Materion Corporation and Subsidiaries Years Ended December 31, 2025, 2024, and 2023 Consolidated Statements of Comprehensive Income (Thousands) 2025 2024 2023 Net income $ 74,823 $ 5,888 $ 95,702 Other comprehensive income: Foreign currency translation adjustment 11,082 ( 7,981 ) 5,208 Derivative and hedging activity, net of tax expense (benefit) of $( 860 ), $( 21 ), and $( 543 ), respectively ( 2,878 ) ( 73 ) ( 1,817 ) Pension and post-employment benefit adjustment, net of tax expense (benefit) of $ 413 , $( 876 ), and $( 1,208 ), respectively 2,261 ( 6,044 ) ( 8,430 ) Other comprehensive income (loss) 10,465 ( 14,098 ) ( 5,039 ) Comprehensive income $ 85,288 $ ( 8,210 ) $ 90,663 The accompanying notes are an integral part of the consolidated financial statements. 43 Materion Corporation and Subsidiaries Years Ended December 31, 2025, 2024, and 2023 Consolidated Statements of Cash Flows (Thousands) 2025 2024 2023 Cash flows from operating activities: Net income $ 74,823 $ 5,888 $ 95,702 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 69,074 68,676 61,644 Amortization of deferred financing costs in interest expense 1,887 1,714 1,712 Stock-based compensation expense (non-cash) 10,925 10,560 10,092 Amortization of pension and post-retirement costs ( 154 ) ( 307 ) ( 1,318 ) Loss on sale of property, plant, and equipment 282 1,201 20 Deferred income tax (benefit) expense ( 5,103 ) ( 16,598 ) ( 7,005 ) Impairment charges — 73,201 — Loss on asset disposal — 6,412 — Net pension curtailments and settlements 230 — 142 Changes in assets and liabilities, net of acquired assets and liabilities: Decrease (increase) in accounts receivable ( 25,790 ) ( 3,723 ) 23,359 Decrease (increase) in inventory ( 13,303 ) ( 468 ) ( 18,700 ) Decrease (increase) in prepaid and other current assets ( 15,101 ) ( 11,345 ) ( 22,663 ) Increase (decrease) in accounts payable and accrued expenses 33,517 ( 15,757 ) 6,631 Increase (decrease) in unearned revenue ( 15,204 ) ( 24,692 ) ( 17,361 ) Increase (decrease) in interest and taxes payable 663 ( 2,619 ) 3,771 Increase (decrease) in unearned income due to customer prepayments — — 16,676 Other — net ( 13,503 ) ( 4,326 ) ( 8,288 ) Net cash provided by operating activities 103,243 87,817 144,414 Cash flows from investing activities: Payments for acquisition, net of cash acquired ( 19,500 ) — — Payments for purchase of property, plant, and equipment ( 53,279 ) ( 68,649 ) ( 110,550 ) Payments for mine development ( 26,288 ) ( 12,159 ) ( 9,326 ) Proceeds from sale of property, plant, and equipment 932 1,203 654 Net cash used in investing activities ( 98,135 ) ( 79,605 ) ( 119,222 ) Cash flows from financing activities: Proceeds from (repayments of) borrowings under credit facilities, net 33,890 45,692 8,065 Repayment of debt ( 18,177 ) ( 30,342 ) ( 15,415 ) Principal payments under finance lease obligations ( 604 ) ( 683 ) ( 1,645 ) Cash dividends paid ( 11,510 ) ( 11,087 ) ( 10,621 ) Deferred financing costs ( 2,935 ) ( 156 ) — Repurchase of common stock ( 7,843 ) — — Payments of withholding taxes for stock-based compensation awards ( 2,642 ) ( 7,610 ) ( 5,234 ) Net cash used in financing activities ( 9,821 ) ( 4,186 ) ( 24,850 ) Effects of exchange rate changes 1,681 ( 607 ) ( 149 ) Net change in cash and cash equivalents ( 3,032 ) 3,419 193 Cash and cash equivalents at beginning of period 16,713 13,294 13,101 Cash and cash equivalents at end of period $ 13,681 $ 16,713 $ 13,294 The accompanying notes are an integral part of the consolidated financial statements. 44 Materion Corporation and Subsidiaries December 31, 2025 and 2024 Consolidated Balance Sheets (Thousands) 2025 2024 Assets Current assets Cash and cash equivalents (Note A) $ 13,681 $ 16,713 Accounts receivable (Note A) 222,916 193,793 Inventories, net (Notes A and J) 461,231 441,299 Prepaid and other current assets 91,692 72,419 Total current assets 789,520 724,224 Deferred income taxes (Notes A and H) 7,727 2,964 Property, plant, and equipment (Notes A and K) 1,376,703 1,315,586 Less allowances for depreciation, depletion, and amortization ( 841,245 ) ( 804,781 ) Property, plant, and equipment — net 535,458 510,805 Operating lease, right-of-use asset (Note M) 62,036 64,449 Intangible assets (Notes A and M) 105,874 109,312 Other assets (Note P) 21,529 22,140 Goodwill (Notes A and N) 280,657 263,738 Total Assets $ 1,802,801 $ 1,697,632 Liabilities and Shareholders’ Equity Current liabilities Short-term debt (Note O) $ 22,445 $ 34,274 Accounts payable 148,642 105,901 Salaries and wages 19,312 20,939 Other liabilities and accrued items 45,445 47,523 Income taxes (Notes A and H) 5,054 4,906 Unearned revenue (Note D) 12,685 13,191 Total current liabilities 253,583 226,734 Other long-term liabilities 12,556 12,013 Operating lease liabilities (Note M) 60,568 62,626 Finance lease liabilities (Note M) 13,384 12,404 Retirement and post-employment benefits (Note P) 23,931 26,411 Unearned income (Notes A and L) 55,862 75,769 Long-term income taxes (Notes A and H) 532 1,818 Deferred income taxes (Notes A and H) 2,760 3,242 Long-term debt (Note O) 436,348 407,734 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 for both 2025 and 2024) 351,901 336,136 Retained earnings 912,361 849,111 Common stock in treasury ( 6,413 shares for 2025 and 6,384 shares for 2024) ( 277,473 ) ( 261,880 ) Accumulated other comprehensive loss (Note Q) ( 50,581 ) ( 61,046 ) Other equity 7,069 6,560 Total shareholders’ equity 943,277 868,881 Total Liabilities and Shareholders’ Equity $ 1,802,801 $ 1,697,632 The accompanying notes are an integral part of the consolidated financial statements. 45 Materion Corporation and Subsidiaries Years Ended December 31, 2025, 2024, and 2023 Consolidated Statements of Shareholders’ Equity Common Shares Shareholders' Equity (Thousands) Common Shares Common Shares Held in Treasury Common Stock Retained Earnings Common Stock In Treasury Accumulated Other Comprehensive Income (Loss) Other Equity Total Balance at December 31, 2022 20,543 6,605 $ 288,100 $ 769,418 $ ( 220,864 ) $ ( 41,909 ) $ 5,245 $ 799,990 Net income — — — 95,702 — — — 95,702 Other comprehensive income — — — — — ( 5,039 ) — ( 5,039 ) Cash dividends declared ($ 0.515 per share) — — — ( 10,621 ) — — — ( 10,621 ) Stock-based compensation activity 150 ( 150 ) 21,289 ( 165 ) ( 11,032 ) — — 10,092 Payments for withholding taxes for stock-based compensation awards ( 49 ) 49 — — ( 5,234 ) — — ( 5,234 ) Directors’ deferred compensation 2 ( 2 ) 103 — ( 616 ) — 676 163 Balance at December 31, 2023 20,646 6,502 $ 309,492 $ 854,334 $ ( 237,746 ) $ ( 46,948 ) $ 5,921 $ 885,053 Net income — — — 5,888 — — — 5,888 Other comprehensive income — — — — — ( 14,098 ) — ( 14,098 ) Cash dividends declared ($ 0.535 per share) — — — ( 11,087 ) — — — ( 11,087 ) Stock-based compensation activity 175 ( 175 ) 26,519 ( 24 ) ( 15,935 ) — — 10,560 Payments for withholding taxes for stock-based compensation awards ( 59 ) 59 — — ( 7,610 ) — — ( 7,610 ) Directors’ deferred compensation 2 ( 2 ) 125 — ( 589 ) — 639 175 Balance at December 31, 2024 20,764 6,384 $ 336,136 $ 849,111 $ ( 261,880 ) $ ( 61,046 ) $ 6,560 $ 868,881 Net income — — 74,823 — — — 74,823 Other comprehensive income — — — — 10,465 — 10,465 Cash dividends declared ($ 0.555 per share) — — ( 11,510 ) — — — ( 11,510 ) Stock-based compensation activity 99 ( 99 ) 15,665 ( 63 ) ( 4,677 ) — — 10,925 Repurchase of common stock ( 100 ) 100 ( 7,843 ) ( 7,843 ) Payments for withholding taxes for stock-based compensation awards ( 29 ) 29 — — ( 2,642 ) — — ( 2,642 ) Directors’ deferred compensation 1 ( 1 ) 100 — ( 431 ) — 509 178 Balance at December 31, 2025 20,735 6,413 $ 351,901 $ 912,361 $ ( 277,473 ) $ ( 50,581 ) $ 7,069 $ 943,277 The accompanying notes are an integral part of the consolidated financial statements. 46 Materion Corporation and Subsidiaries Notes to Consolidated Financial Statements Note A — Significant Accounting Policies Organization: Materion Corporation (the Company) is a holding company with subsidiaries that have operations in the United States, Europe, and Asia. These operations manufacture advanced engineered materials used in a variety of end markets, including semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and life sciences. The Company has four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. Other includes unallocated corporate costs. Refer to Note C for additional segment details. The Company distributes its products through a combination of company-owned facilities and independent distributors and agents. Business Combinations: The Company records assets acquired and liabilities assumed at the date of acquisition at their respective fair values. Intangible assets acquired in a business combination are recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Consolidation: The Consolidated Financial Statements include the accounts of Materion Corporation and its subsidiaries. All of the Company’s subsidiaries were wholly owned as of December 31, 2025. Intercompany accounts and transactions are eliminated in consolidation. Cash Equivalents: All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. Accounts Receivable: An allowance for doubtful accounts is maintained for the expected losses resulting from the inability of customers to pay amounts due. The Company considers the current market conditions and credit losses related to the Company's trade receivables based on the macroeconomic environment, geographic considerations, and other expected market trends. Additionally, the allowance is based upon identified delinquent accounts, customer payment patterns, and other analyses of historical data and trends. Accounts receivable were net of an allowance for credit losses of $ 0.8 million at December 31, 2025 and December 31, 2024. The change in the allowance for credit losses includes expense and net write-offs, neither of which were material in 2025 or 2024. The Company extends credit to customers based upon their financial condition, and collateral is not generally required. During 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 a total of $ 59.4 million of receivables in 2025. The Company recorded a loss on sale of $ 0.6 million for 2025. The Company sold $ 48.9 million of receivables in 2024 and recorded a loss on sale of $ 0.7 million. Total receivables sold under this program amount to $ 108.3 million. Inventories: Inventories are stated at net realizable value. The associated inventory reserve was $ 0.2 million and $ 0.1 million at December 31, 2025 and 2024, respectively. All of the Company's inventories, including raw materials, manufacturing supplies inventory as well as international (outside the U.S.) inventories, have been valued using the first-in, first-out (FIFO) method as of December 31, 2025 and 2024, except for its bertrandite ore mine which values inventory using a weighted average cost method. 47 Property, Plant, and Equipment: Property, plant, and equipment is stated on the basis of cost. Depreciation is computed -principally by the straight-line method. The depreciable lives that are used in computing the annual provision for depreciation by class of asset are primarily as follows: Years Land improvements 10 to 20 Buildings 20 to 40 Leasehold improvements Life of lease Machinery and equipment 3 to 30 Furniture and fixtures 4 to 10 Automobiles and trucks 3 to 8 Research equipment 3 to 10 Computer hardware 3 to 10 Computer software 3 to 10 An asset acquired under a finance lease will be recorded at the lesser of the present value of the projected lease payments or the fair value of the asset and will be depreciated in accordance with the above schedule. Leasehold improvements will be depreciated over the life of the improvement if it is shorter than the life of the lease. Repair and maintenance costs are expensed as incurred. On October 20, 2024, the Company entered into an agreement to sell the assets of the large area target manufacturing operations at the Company’s Albuquerque facility (“Target assets”) as a part of its portfolio management strategy. The transaction subsequently closed on October 25, 2024. In addition, the Company completed the wind down of its refinery operations at the Albuquerque facility. This resulted in a loss on asset disposal of $ 6.4 million, which was recorded in the fourth quarter of 2024. The target assets were a part of the Electronic Materials segment. Mineral Resources and Mine Development: Property acquisition costs are capitalized as mineral resources on the balance sheet and are depleted using the units-of-production method based upon total estimated recoverable proven reserves of the beryllium-bearing bertrandite ore body. The Company uses beryllium pounds as the unit of accounting measure, and depletion expense is recorded on a pro-rata basis based upon the amount of beryllium pounds extracted as a percentage of total estimated beryllium pounds contained in all ore bodies. Mine development costs at our open pit surface mines include drilling, infrastructure, other related costs to delineate an ore body and the removal of overburden to initially expose an ore body. When costs are incurred before mineralization is classified as proven and probable reserves are expensed. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as proven and probable reserves. All other drilling and related costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory costs and then included as a component of costs applicable to sales. The cost of removing overburden and waste materials to access the ore body at an open-pit mine prior to the production phase are referred to as "development costs." Development costs are capitalized during the development of an open-pit mine and are capitalized at each pit. These costs are amortized as the ore is extracted using the units-of-production method based upon total estimated recoverable proven reserves for the individual pit. The Company uses beryllium pounds as the unit of accounting measure for recording amortization. To the extent that the aforementioned costs benefit an entire ore body, the costs are amortized over the estimated useful life of the ore body. Costs incurred to access specific ore blocks or areas that only provide benefit over the life of that area are amortized over the estimated life of that specific ore block area. Goodwill and Other Intangible Assets: Goodwill is reviewed annually for impairment or more frequently if impairment indicators arise. The Company conducts its annual goodwill impairment assessment as of the first day of the fourth quarter, or more frequently under certain circumstances. For the purpose of the goodwill impairment assessment, the Company has the option to perform a qualitative assessment (commonly referred to as "step zero") to determine whether further quantitative analysis of impairment of goodwill is necessary or a quantitative assessment ("step one") where the Company estimates the fair value of each reporting unit using a discounted cash flow method (income approach) as well as a market approach. Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the operating segment. Intangible assets with finite lives are amortized using the straight-line method or effective interest method, as applicable, over the periods estimated to be benefited, which is generally 20 years or less. Finite-lived intangible assets are also reviewed for impairment if facts and circumstances warrant. 48 During the fourth quarter of fiscal 2024, the Company's annual goodwill impairment test indicated the carrying value of the Precision Optics reporting unit exceeded its estimated fair value as of the measurement date of October 1, 2024. As a result, the Company recognized a goodwill impairment charge in the fourth quarter of fiscal 2024 of $ 56.1 million, which was recorded in "Goodwill Impairment" in the accompanying Consolidated Statements of Income in the Precision Optics segment. As previously disclosed, on September 25, 2024, the Company announced the appointment of a new President of its Precision Optics reporting unit. As a part of the transition into this role, the new President undertook an extensive review of the business and its short-term and long-term strategic initiatives, concurrent with the Company’s annual strategic planning process. These changes combined with current operating results resulted in adjustments to the forecast for the Precision Optics reporting unit based on more conservative views of business with key strategic partners. There were no goodwill impairments recorded during fiscal 2025. Long-Lived Asset Impairment: Management performs impairment tests of long-lived assets, including property and equipment, whenever an event occurs or circumstances change that indicate that the carrying value may not be recoverable or the useful life of the asset has changed. Upon indications of impairment, assets and liabilities are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The asset group would be considered impaired when the estimated future undiscounted cash flows generated by the asset group are less than its carrying value. If such undiscounted cash flows indicate that the carrying value of the asset group is not recoverable, impairment losses are measured by comparing the estimated fair value of the asset group to its carrying amount. Given the continued losses at the Company’s Malaysia facility and the change in leadership in the Precision Optics segment as discussed above, the Company determined that there were indicators of impairment in the fourth quarter of 2024. Accordingly, the Company performed a recoverability analysis that indicated the Malaysia asset group was not recoverable. The Company estimated the fair value of the asset group using the discounted cash flow method (income approach) and compared the estimated fair value to the current carrying value. As a result of this analysis, the Company fully impaired $ 10.1 million of its customer-related intangible asset and recorded a partial impairment of $ 7.0 million related to the facility’s property plant and equipment. These long-lived asset impairments are presented within the " Long-lived Asset Impairment " line item within the accompanying Consolidated Statements of Income in the Precision Optics segment. There were no long-lived asset impairments recorded during fiscal 2025. Derivatives: The Company recognizes all derivatives on the balance sheet at fair value. If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in other comprehensive income, a component of shareholders’ equity, until the hedged item is recognized in earnings. If the derivative is designated as a fair value hedge, changes in fair value are offset against the change in the fair value of the hedged asset, liability, or commitment through earnings. The ineffective portion of a derivative’s change in fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in its fair value are adjusted through the income statement. Asset Retirement Obligation: The Company records a liability to recognize the legal obligation to remove an asset at the time the asset is acquired or when the legal liability arises. The liability is recorded for the present value of the ultimate obligation by discounting the estimated future cash flows using a credit-adjusted risk-free interest rate. The liability is accreted over time, with the accretion charged to expense within Other-net. An asset equal to the fair value of the liability is recorded concurrent with the liability and depreciated over the life of the underlying asset. Unearned Income: Expenditures for capital equipment to be reimbursed under government contracts are recorded in property, plant, and equipment, while the reimbursements for those expenditures are recorded in unearned income, a liability on the balance sheet. When the assets subject to reimbursement are placed in service, the total cost is depreciated over the useful lives, and the unearned income liability is reduced and credited to cost of sales on the Consolidated Statements of Income ratably with the annual depreciation expense. Also included in Unearned Income as of December 31, 2025 and 2024, are $ 47.5 million and $ 60.9 million, respectively, of customer prepayments. See Note L for additional discussion. Unearned revenue: The Company records cash consideration from customers in advance of the shipment of the goods, which is a liability on our Consolidated Balance Sheets. This contract liability is subsequently reversed and the revenue, cost of sales, and gross margin are recorded when the Company has transferred control of the product to the customer. The related inventory also remains on our balance sheet until these revenue recognition criteria are met. Advanced billings are typically made in association with products with long manufacturing times and/or products paid relating to contracts with the government. 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. 49 Stock-based Compensation: The Company recognizes stock-based compensation expense based on the grant date fair value of the award over the period during which an employee is required to provide service in exchange for the award. Stock-based awards include performance-based restricted stock units (PRSUs), restricted stock units (RSUs), and stock appreciation rights (SARs). The fair value of PRSUs and RSUs is primarily based on the closing market price of a share of the Company's common stock on the date of grant, modified as appropriate to take into account the features of such grants. SARs are granted with an exercise price equal to the closing price of the Company's common shares on the date of grant. The fair value of SARs is determined using a Black-Scholes option-pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate, and the expected dividend yield. The portion of the PRSU awards that are valued based on the Company's total shareholder return as compared to peers is valued using Monte Carlo simulations, which incorporates assumptions regarding the expected volatility, the expected correlation, and the risk-free interest rate. See Note R for additional information about stock-based compensation. Capitalized Interest: Interest expense associated with active capital asset construction is capitalized and amortized over the future useful lives of the related assets. Income Taxes: The Company uses the liability method in measuring the provision for income taxes and recognizing deferred tax assets and liabilities on the balance sheet. The Company will record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized, as warranted by current facts and circumstances. The Company applies a more-likely-than-not recognition threshold for all tax uncertainties and will record a liability for those tax benefits that have a less than 50% likelihood of being sustained upon examination by the taxing authorities. Net Income Per Share: Basic earnings per share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive common stock equivalents as appropriate using the treasury stock method. New Pronouncements 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. The Company adopted the new guidance on a prospective basis and has included the additional required disclosures in Note H. New Accounting Guidance Issued and Not Yet Adopted: 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 the ASU 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. In December 2025, the FASB issued 2025‑10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities . The ASU establishes comprehensive U.S. GAAP guidance for the recognition, measurement, and presentation of government grants received by business entities. The amendments incorporate principles similar to those in IAS 20 and are intended to reduce diversity in practice by providing a consistent framework for accounting for monetary and tangible nonmonetary government grants. The ASU is effective for fiscal years beginning after December 15, 2028, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that the adoption of the ASU will have on its condensed consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-scope improvements. The amendments clarify the scope, form, and content of interim financial statement disclosures and improve the navigability of Topic 270 without changing existing interim reporting requirements. The Company is currently evaluating the impact that the adoption of the ASU will have on its condensed consolidated financial statements and related disclosures. 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 interim financial reporting and related disclosures. 50 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 $ 1.8 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 property, plant and equipment, and a developed technology intangible asset of $ 2.1 million. To 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 value 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 and Geographic Information The Company has the following operating segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Company’s operating 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 Chief Operating Decision Maker (CODM), in determining how to allocate the Company’s resources and evaluate performance. The segments are determined based on several factors, including the availability of discrete financial information and the Company’s organizational and management structure. 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, microelectronics 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 measure used by the CODM in evaluating segment performance is EBITDA. The table below presents financial information for each segment and a reconciliation of EBITDA to Net Income (the most directly comparable GAAP financial measure) for 2025, 2024 and 2023: 51 Year Ended December 31, 2025 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 675,871 $ 1,009,965 $ 100,714 $ — $ 1,786,550 Less: Cost of sales 516,892 888,713 72,085 234 1,477,924 Selling, general and administrative expense 54,551 42,083 18,998 27,425 143,057 Other segment items (2) 17,407 25,595 11,306 ( 972 ) 53,336 Plus: Segment depreciation, depletion and amortization 40,142 17,563 9,373 1,996 69,074 Segment EBITDA $ 127,163 $ 71,137 $ 7,698 $ ( 24,691 ) $ 181,307 Income tax expense 6,718 Interest expense - net 30,692 Depreciation, depletion and amortization 69,074 Net Income $ 74,823 Year Ended December 31, 2024 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 744,503 $ 845,746 $ 94,490 $ — $ 1,684,739 Less: Cost of sales 541,346 746,187 71,199 22 1,358,754 Selling, general and administrative expense 57,368 40,623 20,662 26,935 145,588 Goodwill impairment — — 56,067 — 56,067 Long-lived asset impairment — — 17,134 — 17,134 Loss on asset disposal — 6,412 — — 6,412 Other segment items (2) 14,192 23,125 13,742 59 51,118 Plus: Segment depreciation, depletion and amortization 37,679 18,044 11,017 1,936 68,676 Segment EBITDA $ 169,276 $ 47,443 $ ( 73,297 ) $ ( 25,080 ) $ 118,342 Income tax expense 9,014 Interest expense - net 34,764 Depreciation, depletion and amortization 68,676 Net Income $ 5,888 52 Year Ended December 31, 2023 Performance Materials Electronic Materials Precision Optics Other Consolidated Net sales (1) $ 755,547 $ 805,751 $ 103,889 $ — $ 1,665,187 Less: Cost of sales 539,007 705,301 71,804 33 1,316,145 Selling, general and administrative expense 59,624 45,346 20,510 32,431 157,911 Other segment items (2) 13,592 26,397 12,999 ( 1,011 ) 51,977 Plus: Segment depreciation, depletion and amortization 31,147 17,040 11,284 2,173 61,644 Segment EBITDA $ 174,471 $ 45,747 $ 9,860 $ ( 29,280 ) $ 200,798 Income tax expense 12,129 Interest expense - net 31,323 Depreciation, depletion and amortization 61,644 Net Income $ 95,702 (1) Excludes inter-segment sales of $ 8.7 million, $ 5.9 million and $ 9.2 million for Electronic Materials for 2025, 2024 and 2023, respectively. Inter-segment sales for Performance Materials were less than $ 0.1 million in 2025, 2024 and 2023. 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 Other geographic information includes the following: (Thousands) 2025 2024 2023 Net sales United States $ 579,164 $ 720,449 $ 815,408 Asia 576,517 508,332 406,123 Europe 570,584 431,315 422,018 All other 60,285 24,643 21,638 Total $ 1,786,550 $ 1,684,739 $ 1,665,187 Property, plant, and equipment, net by country deployed United States $ 465,604 $ 444,751 $ 435,296 All other 69,854 66,054 79,387 Total $ 535,458 $ 510,805 $ 514,683 International sales include sales from international operations and direct exports from our U.S. operations. No individual country, other than the United States, accounted for 10% or more of the Company’s net sales for the years presented. In fiscal 2025, no customers accounted for more than 10 percent of our net sales. In fiscal 2024 and 2023, one customer in our Performance Materials segment accounted for approximately ten percent of our net sales. 53 No individual country other than the United States accounted for 10% or more of the Company's net property, plant and equipment as of December 31, 2025 or December 31, 2024. The CODM does not regularly review segment assets to make decisions regarding the allocation of resources, and, as such the Company has not included assets for each reportable segment. The following table disaggregates revenue for each segment by end market for 2025, 2024 and 2023: (Thousands) Performance Materials Electronic Materials Precision Optics Other Total 2025 End Market Semiconductor $ 10,964 $ 852,790 $ 3,893 $ — $ 867,647 Industrial 127,724 38,397 26,201 — 192,322 Aerospace and Defense 174,783 8,535 30,502 — 213,820 Consumer Electronics 150,275 4,489 14,090 — 168,854 Automotive 66,740 4,075 6,146 — 76,961 Energy 56,147 67,578 — — 123,725 Life Sciences 9,405 18,523 18,855 — 46,783 Other 79,833 15,578 1,027 — 96,438 Total $ 675,871 $ 1,009,965 $ 100,714 $ — $ 1,786,550 2024 End Market Semiconductor $ 8,342 $ 705,625 $ 2,794 $ — $ 716,761 Industrial 127,743 33,521 25,439 — 186,703 Aerospace and Defense 192,074 5,240 22,643 — 219,957 Consumer Electronics 227,595 397 14,635 — 242,627 Automotive 71,471 6,668 6,740 — 84,879 Energy 41,649 68,830 — — 110,479 Life Sciences 10,243 17,937 21,886 — 50,066 Other 65,386 7,528 353 — 73,267 Total $ 744,503 $ 845,746 $ 94,490 $ — $ 1,684,739 2023 End Market Semiconductor $ 13,734 $ 645,113 $ 2,529 $ — $ 661,376 Industrial 147,321 33,915 29,277 — 210,513 Aerospace and Defense 144,708 6,198 25,039 — 175,945 Consumer Electronics 220,898 944 15,296 — 237,138 Automotive 85,178 6,653 9,189 — 101,020 Energy 49,055 91,140 — — 140,195 Life Sciences 8,798 15,265 22,199 — 46,262 Other 85,855 6,523 360 — 92,738 Total $ 755,547 $ 805,751 $ 103,889 $ — $ 1,665,187 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 the product is generally transferred to the customer when the 54 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. Shipping and Handling Costs : The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill its promise to transfer the associated products. Accordingly, customer payments for shipping and handling costs are recorded as a component of net sales, and related costs are recorded as a component of cost of sales. Taxes Collected from Customers and Remitted to Governmental Authorities : Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Product Warranty : Substantially all of the Company’s customer contracts contain a warranty that provides assurance that the purchased product will function as expected and in accordance with certain specifications. The warranty is intended to safeguard the customer against existing defects and does not provide any incremental service to the customer. Transaction Price Allocated to Future Performance Obligations: ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied at December 31, 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 December 31, 2025, 2024 and 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximate l y $ 21.9 million, $ 39.3 million and $ 54.2 million, respectively. Contract Costs : The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs primarily relate to sales commissions, which are included in selling, general, and administrative expenses. Contract Balances : The timing of revenue recognition, billings, and cash collections resulted in the following contract assets and contract liabilities: (Thousands) December 31, 2025 December 31, 2024 $ change % change Accounts receivable, trade $ 223,763 $ 194,562 $ 29,201 15 % Unbilled receivables 46,548 34,950 11,598 33 % Unearned revenue 12,685 13,191 ( 506 ) ( 4 ) % 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 relating to our receivables were immaterial during 2025 and 2024. Unbilled receivables represent expenditures on contracts, plus applicable profit margin, not yet billed. Unbilled receivables are normally 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 $ 10.4 million of the December 31, 2024 unearned amounts as revenue during 2025. The Company recognized approximately $ 11.3 million of the December 31, 2023 unearned amounts as revenue during 2024. 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. 55 Note E — Restructuring Summary of Restructuring Plans . In fiscal years 2025, 2024, and 2023, we announced restructuring plans that were both designed to reduce costs and expenses in response to macroeconomic conditions and current operating performance. These actions impacted all three of our business segments as well as Corporate. The restructuring programs are expected to result in the reduction in annual cost of sales and operating expenses. Fiscal Year 2025 Plan In 2025, the Company continued to implement restructuring actions, primarily in our Precision Optics, Electronic Materials, Performance Materials and Other segments. In connection with these actions, we recorded restructuring expenses of $ 3.2 million, all of which were associated with workforce reduction, including severance and other personnel-related costs. These actions were substantially completed as of December 31, 2025. Fiscal Year 2024 Plan The 2024 Plan was designed to further reduce costs and expenses in response to current macroeconomic conditions and to right size the cost structure within our business segments as well as eliminate excess corporate costs. In connection with this Plan, the Company recorded restructuring expenses of $ 6.8 million in fiscal year 2024. Of these charges, $ 6.7 million were associated with workforce reduction, including severance and other personnel-related costs. While the majority of the workforce reduction was completed in fiscal year 2024, the Company completed the remaining restructuring activities in fiscal year 2025. Fiscal Year 2023 Plan In the fourth quarter of fiscal year 2023, the Company initiated a restructuring plan designed to reduce costs and expenses in response to macroeconomic conditions. The plan primarily related to a reduction in force across the three business segments. Of the $ 3.8 million in charges, $ 3.4 million related to workforce reduction actions. The activity in the accrued balances incurred in relation to restructuring during the years ended December 31, 2023, December 31, 2024, and December 31, 2025 were as follows: Reduction in Force (Thousands) Performance Materials Electronic Materials Precision Optics Other Consolidated Balance at December 31, 2022 $ — $ — $ — $ — $ — Additional Charges 375 2,199 745 76 $ 3,395 Cash Payments ( 373 ) ( 1,811 ) ( 745 ) ( 76 ) $ ( 3,005 ) Balance at December 31, 2023 $ 2 $ 388 $ — $ — $ 390 Additional Charges 1,549 2,034 1,258 1,905 6,746 Cash Payments ( 1,495 ) ( 2,129 ) ( 1,198 ) ( 1,497 ) ( 6,319 ) Balance at December 31, 2024 $ 56 $ 293 $ 60 $ 408 $ 817 Additional Charges 481 1,067 1,576 31 3,155 Cash Payments ( 537 ) ( 1,277 ) ( 1,577 ) ( 430 ) ( 3,821 ) Balance at December 31, 2025 $ — $ 83 $ 59 $ 9 $ 151 56 Note F — Other-net Other-net is summarized for 2025, 2024, and 2023 as follows: (Income) Expense (Thousands) 2025 2024 2023 Metal consignment fees $ 13,678 $ 7,865 $ 10,596 Amortization of intangible assets 11,013 12,134 12,876 Foreign currency loss (gain) 301 ( 26 ) 218 Other items 1,685 ( 2,288 ) ( 367 ) Total other-net $ 26,677 $ 17,685 $ 23,323 Note G — Interest Expense-net The following chart summarizes the interest incurred, capitalized, and paid in 2025, 2024, and 2023: (Thousands) 2025 2024 2023 Interest incurred, net $ 31,738 $ 37,751 $ 34,366 Less: Capitalized interest 1,046 2,987 3,043 Total net expense $ 30,692 $ 34,764 $ 31,323 Interest paid $ 29,552 $ 35,922 $ 32,044 Amortization of deferred financing costs within interest expense was $ 1.9 million in 2025 and $ 1.7 million in 2024, and 2023. Note H — Income Taxes Income (loss) before income taxes and income tax expense (benefit) are comprised of the following: (Thousands) 2025 2024 2023 Income (loss) before income taxes: Domestic $ 63,872 $ 75,963 $ 94,589 Foreign 17,669 ( 61,061 ) 13,242 Total income (loss) before income taxes $ 81,541 $ 14,902 $ 107,831 Income tax expense: Current income tax expense (benefit): Domestic $ 7,667 $ 19,258 $ 12,962 Foreign 4,154 6,354 6,172 Total current $ 11,821 $ 25,612 $ 19,134 Deferred income tax (benefit) expense: Domestic $ ( 3,968 ) $ ( 14,107 ) $ ( 4,926 ) Foreign ( 1,135 ) ( 2,491 ) ( 2,079 ) Total deferred $ ( 5,103 ) $ ( 16,598 ) $ ( 7,005 ) Total income tax expense (benefit) $ 6,718 $ 9,014 $ 12,129 We adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the U.S. federal statutory income tax amount and rate to our actual global effective income tax amount and rate for the year ended December 31, 2025: 57 2025 Amount Percent U.S. federal statutory rate $ 17,124 21.0 % State and local income taxes, net of federal tax effect 1 240 0.3 Foreign tax effects China Changes in valuation allowance ( 1,009 ) ( 1.2 ) Other ( 256 ) ( 0.3 ) Germany Trade tax 1,081 1.3 Other ( 285 ) ( 0.3 ) Other foreign jurisdictions ( 225 ) ( 0.3 ) Effect of changes in tax laws or rates enacted in the current period — — Effect of cross-border tax laws Foreign derived intangible income deduction ( 1,938 ) ( 2.4 ) Other 736 0.9 Tax credits Research and development tax credits ( 1,337 ) ( 1.6 ) Other credits ( 17 ) — Changes in valuation allowances — — Nontaxable or nondeductible items Depletion ( 3,870 ) ( 4.8 ) Impact of nonrefundable credits ( 3,055 ) ( 3.7 ) Other 1,380 1.7 Changes in unrecognized tax benefits ( 1,133 ) ( 1.4 ) Other adjustment Other ( 718 ) ( 1.0 ) Effective tax rate 6,718 8.2 % 1 The state that contributes to the majority of the tax effect in this category is California. The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax rate to the actual global effective income tax rate for the years ended December 31, 2024 and December 31, 2023. 2024 2023 U.S. federal statutory rate 21.0 % 21.0 % State and local income taxes, net of federal tax effect 6.3 0.7 Effect of excess of percentage depletion over cost depletion ( 26.6 ) ( 3.4 ) Foreign derived intangible income deduction ( 35.3 ) ( 8.6 ) Research and development tax credit ( 5.6 ) ( 0.8 ) Impact of foreign operations ( 4.8 ) ( 0.4 ) Adjustment to unrecognized tax benefits 5.4 2.7 Equity compensation ( 13.0 ) ( 1.8 ) Non-deductible officers' compensation 14.7 2.0 Valuation allowance 19.7 0.8 Impact of refundable credits ( 17.5 ) ( 1.6 ) Goodwill impairment 97.1 — Other items ( 0.9 ) 0.7 Effective tax rate 60.5 % 11.3 % 58 The Company’s income tax expense was $ 6.7 million, $ 9.0 million and $ 12.1 million and the Company’s effective tax rate was 8.2 %, 60.5 % and 11.3 % for the years ended December 31, 2025, December 31, 2024 and December 31, 2023, respectively. In 2025, the effective tax rate is lower than the U.S. statutory tax rate primarily due to percentage depletion, nontaxable credits and the foreign-derived intangible income deduction. In 2024, the effective tax rate is higher than the U.S. statutory tax rate primarily due to the impairment of non-deductible goodwill in the Precision Optics reporting unit. In 2023, the effective tax rate is lower than the U.S. statutory tax rate primarily due to a foreign-derived intangible income deduction optimization project completed, percentage depletion and excess tax benefits for stock compensation. Deferred tax assets and (liabilities) are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and (liabilities) recorded in the Consolidated Balance Sheets consist of the following: December 31, (Thousands) 2025 2024 Asset (liability) Post-employment benefits other than pensions $ 848 $ 1,339 Other reserves 686 1,812 Deferred compensation 4,703 4,626 Environmental reserves 988 1,418 Inventory 8,712 8,191 Research expenditures 17,247 14,182 Revenue recognition 21,643 19,937 Lease liabilities 11,935 13,637 Interest expense carryforward 7,154 11,668 Pensions 1,082 1,762 Accrued compensation expense 1,736 2,144 Net operating loss, capital loss and credit carryforwards 11,459 10,822 Subtotal 88,193 91,538 Valuation allowance ( 7,227 ) ( 8,892 ) Total deferred tax assets 80,966 82,646 Depreciation ( 41,089 ) ( 43,390 ) Lease assets ( 11,194 ) ( 12,877 ) Amortization ( 23,467 ) ( 25,220 ) Unrealized gains ( 249 ) ( 1,437 ) Total deferred tax liabilities ( 75,999 ) ( 82,924 ) Net deferred tax assets/(liabilities) $ 4,967 $ ( 278 ) The Company had deferred income tax assets offset with a valuation allowance for certain foreign and state net operating losses, state investment and research and development tax credit carryforwards, and deferred tax assets that are not likely to be realized for certain of the Company's controlled foreign corporations. The Company intends to maintain a valuation allowance on these deferred tax assets until a realization event occurs to support reversal of all or a portion of the allowance. In evaluating the realizability of deferred tax assets, management considers all available positive and negative evidence each reporting period. During the fourth quarter of 2025, a China entity achieved three-year cumulative profitability. Management concluded that this objective evidence supports the future realization of the related deferred tax assets and released a $ 1.0 million valuation allowance, resulting in a corresponding income tax benefit. Additionally, during the fourth quarter of 2025, $ 1.6 million of U.S. capital loss carryforwards expired. The Company reversed the associated deferred tax asset and offsetting valuation allowance, resulting in no impact to the effective tax rate or income tax expense. At December 31, 2025, for income tax purposes, the Company had foreign net operating loss carryforwards of $ 39.4 million that do not expire, and $ 20.2 million that expire in calendar years 2027 through 2040. The Company had state net operating loss carryforwards of $ 14.0 million that expire in calendar years 2026 through 2041 and state tax credits of $ 4.5 million that expire in calendar years 2026 through 2040. A valuation allowance of $ 7.2 million has been provided against certain foreign net operating loss carryforwards, state net operating losses, and state tax credits due to uncertainty of their realization. 59 The Company files income tax returns in the U.S. federal jurisdiction, and in various state, local, and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal examinations for years before 2019, state and local examinations for years before 2021, and foreign examinations for tax years before 2020. We operate under a tax holiday in Malaysia, which is effective through July 31, 2027. The tax holiday is conditional upon our meeting certain employment, sales, and investment thresholds. The Company did not have a tax benefit from the tax holiday in 2025. A reconciliation of the Company’s unrecognized tax benefits for the year-to-date periods ended December 31, 2025 and 2024 is as follows: (Thousands) 2025 2024 Balance at January 1 $ 4,320 $ 3,763 Additions to tax provisions related to the current year 17 292 Additions to tax positions related to prior years 394 535 Reduction to tax positions related to prior years ( 237 ) ( 165 ) Lapses on statutes of limitations ( 1,022 ) ( 105 ) Balance at December 31 $ 3,472 $ 4,320 Included in the balance of unrecognized tax benefits, including interest and penalties, as of December 31, 2025 and December 31, 2024 are $ 3.5 million and $ 4.3 million, respectively, of tax benefits that would affect the Company’s effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying Consolidated Statements of Income. Accrued interest and penalties are included on the related tax liability line in the Consolidated Balance Sheets. The amount of interest and penalties, net of the related tax benefit, recognized in earnings was immaterial during 2025, 2024, and 2023. As of December 31, 2025 and 2024, accrued interest and penalties, net of the related tax benefit, were immaterial. We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025: Year Ended (In Millions) 2025 Federal Taxes $ 1,400 State Taxes: California 520 Minnesota 386 Other state jurisdictions 427 Foreign Taxes: Germany 1,704 Singapore 828 Japan 660 Taiwan 508 Netherlands 361 Other foreign jurisdictions 204 Total cash taxes paid $ 6,998 Income taxes paid during the years ended December 31, 2024 and December 31, 2023 were approximately $ 11.5 million and $ 7.5 million, respectively. As of December 31, 2025, the Company has not provided for deferred taxes on undistributed earnings from non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested. It is not practicable to estimate the amount of income and withholding taxes that might be payable if these earnings were remitted. 60 One Big Beautiful Bill 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 2025. The most significant impact in 2025 is the Company’s ability to utilize additional interest expense carryforward under the new interest limitation provisions of the OBBBA. 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 did not 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 future reporting periods. Note I — Earnings Per Share The following table sets forth the computation of basic and diluted EPS: (Thousands except per share amounts) 2025 2024 2023 Numerator for basic and diluted EPS: Net income $ 74,823 $ 5,888 $ 95,702 Denominator: Denominator for basic EPS: Weighted-average shares outstanding 20,755 20,732 20,619 Effect of dilutive securities: Stock appreciation rights 47 78 85 Restricted stock units 55 58 92 Performance-based restricted stock units 55 60 115 Diluted potential common shares 157 196 292 Denominator for diluted EPS: Adjusted weighted-average shares outstanding 20,912 20,928 20,911 Basic EPS $ 3.61 $ 0.28 $ 4.64 Diluted EPS $ 3.58 $ 0.28 $ 4.58 Equity awards covering shares of common stock totaling 148,174 in 2025, 107,370 in 2024, and 39,473 in 2023 were excluded from the diluted EPS calculation as their effect would have been anti-dilutive. 61 Note J — Inventories, net Inventories in the Consolidated Balance Sheets are summarized as follows: December 31, (Thousands) 2025 2024 Raw materials and supplies $ 108,040 $ 100,208 Work in process 298,695 278,065 Finished goods 54,496 63,026 Inventories, net $ 461,231 $ 441,299 Inventory balances are presented net of an excess and obsolete reserve totaling $ 32.3 million and $ 19.7 million at December 31, 2025 and December 31, 2024, respectively. The Company maintains the majority of the precious metals and copper used in production on a consignment basis in order to reduce our exposure to metal price movements and to reduce our working capital investment. The notional value of off-balance sheet precious metals and copper was $ 526.2 million as of December 31, 2025 versus $ 381.6 million as of December 31, 2024. The Company takes and records the results of a physical inventory count of its precious metals on a periodic basis. The Company's precious metal operations include a refinery that processes precious metal-containing scrap and other materials from its customers, as well as its own internally generated scrap. The Company also outsources portions of its refining requirements to other vendors, particularly 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. The determination of the weight of the precious metal content within the refine streams as part of a physical inventory count requires the use of estimates and calculations based upon assumed recovery percentages developed from actual historical data and other analyses, the total estimated volumes of solutions and other materials within the refinery, and other factors. The resulting calculated weight of the precious metals in the Company's refine operations may differ, in either direction, from what its records indicate that the Company should have on hand, which would then result in an adjustment to its pre-tax income in the period when the physical inventory was taken, and the related estimates were made. Note K — Property, Plant, and Equipment Property, plant, and equipment on the Consolidated Balance Sheets is summarized as follows: December 31, (Thousands) 2025 2024 Land $ 26,095 $ 26,566 Buildings 241,310 237,820 Machinery and equipment 912,305 832,932 Software 46,759 46,268 Construction in progress 94,393 123,625 Allowances for depreciation ( 822,610 ) ( 782,244 ) Subtotal 498,252 484,967 Finance leases 34,117 31,292 Allowances for depreciation ( 12,422 ) ( 10,036 ) Subtotal 21,695 21,256 Mineral resources 4,979 4,979 Mine development 16,745 12,104 Allowances for amortization and depletion ( 6,213 ) ( 12,501 ) Subtotal 15,511 4,582 Property, plant, and equipment — net $ 535,458 $ 510,805 The Company received $ 63.5 million from the U.S. Department of Defense (DoD), in previous periods, for reimbursement of the DoD's share of the cost of equipment. This amount was recorded in property, plant, and equipment and the reimbursements 62 are reflected in Unearned income on the Consolidated Balance Sheets. The equipment was placed in service during 2012, and its full cost is being depreciated in accordance with Company policy. The unearned income liability is being reduced ratably with the depreciation expense recorded over the life of the equipment. Unearned income was redu ced by $ 4.5 million in 2025, and $ 4.4 million in both 2024 and 2023 , and credited to cost of sales in the Consolidated Statements of Incom e, offsetting the impact of the depreciation expense on the associated equipment on the Company's cost of sales and gross margin. The unamortized unearned income balance was $ 1.8 million and $ 6.3 million at December 31, 2025 and December 31, 2024, respectively. We recorded depreciation and depletion expense of $ 45.2 million in 2025, $ 45.1 million in 2024, and $ 41.6 million in 2023. Depreciation, depletion, and amortization as shown on the Consolidated Statement of Cash Flows is net of the reduction in the unearned income liability in 2025, 2024, and 2023. As of December 31, 2025 and December 31, 2024, capital expenditures in accounts payable were $ 5.4 million and $ 3.0 million, respectively. Note L — 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 December 31, 2025 and 2024, $ 47.5 million and $ 60.9 million, respectively, of prepayments are classified as Unearned income on the Consolidated Balance Sheet. 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 December 31, 2025 and 2024, $ 2.4 million and $ 4.3 million, respectively, of prepayments are classified as Unearned revenue. Note M — Leasing Arrangements The Company leases warehouse and manufacturing real estate, and manufacturing and computer equipment under operating leases with lease terms ranging up to 25 years. Several operating lease agreements contain options to extend the lease term and/or options for early termination. The lease term consists of the non-cancelable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option. As of December 31, 2025 , we had no material leases that had yet to commence. The discount rate implicit within the leases is generally not determinable, and, therefore, the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for leases is determined based on the lease term over which lease payments are made, adjusted for the impact of collateral. The components of operating and finance lease cost for 2025 and 2024 were as follows: (Thousands) 2025 2024 Components of lease expense Operating lease cost $ 15,173 $ 14,588 Finance lease cost Amortization of right-of-use assets 1,253 1,162 Interest on lease liabilities 742 685 Total lease cost $ 17,168 $ 16,435 63 The Company straight-lines its expense of fixed payments for operating leases over the lease term and expenses the variable lease payments in the period incurred. These variable lease payments are not included in the calculation of right-of-use assets or lease liabilities. Supplemental balance sheet information related to the Company's operating and finance leases as of December 31, 2025 and 2024 is as follows: (Thousands, except lease term and discount rate) 2025 2024 Supplemental balance sheet information Operating Leases Operating lease right-of-use assets $ 62,036 $ 64,449 Other liabilities and accrued items 6,961 7,249 Operating lease liabilities 60,568 62,626 Finance Leases Property, plant, and equipment $ 34,117 $ 31,292 Allowances for depreciation, depletion, and amortization ( 12,422 ) ( 10,036 ) Finance lease assets, net $ 21,695 $ 21,256 Other liabilities and accrued items $ 622 $ 552 Finance lease liabilities 13,384 12,404 Total principal payable on finance leases $ 14,006 $ 12,956 Weighted Average Remaining Lease Term Operating leases 11.16 11.83 Finance leases 16.73 17.54 Weighted Average Discount Rate Operating leases 6.38 % 6.34 % Finance leases 5.31 % 5.25 % Future maturities of the Company's lease liabilities as of December 31, 2025 are as follows: Finance Operating (Thousands) Leases Leases 2026 1,336 11,015 2027 1,336 9,002 2028 1,288 8,884 2029 1,222 8,123 2030 1,222 7,742 2031 and thereafter 14,661 49,957 Total lease payments 21,065 94,723 Less amount of lease payment representing interest 7,059 27,194 Total present value of lease payments $ 14,006 $ 67,529 Supplemental cash flow information related to leases was as follows: 64 (Thousands) 2025 2024 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 20,711 $ 19,842 Operating cash flows from finance leases 742 685 Financing cash flows from finance leases 604 683 Right-of-use assets obtained in exchange for lease obligations: Operating leases 4,942 20,740 Finance leases — — Note N — Intangible Assets and Goodwill Intangible Assets The cost and accumulated amortization of intangible assets subject to amortization as of December 31, 2025 and 2024, is as follows: 2025 2024 (Thousands) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Customer relationships $ 98,141 $ ( 41,435 ) $ 56,706 $ 97,428 $ ( 37,960 ) $ 59,468 Technology 46,200 ( 20,186 ) 26,014 43,588 ( 16,415 ) $ 27,173 Licenses and other 36,785 ( 17,231 ) 19,554 36,234 ( 15,182 ) $ 21,052 Total $ 181,126 $ ( 78,852 ) $ 102,274 $ 177,250 $ ( 69,557 ) $ 107,693 Amortization expense f or 2025, 2024, and 2023 was $ 11.0 million, $ 12.1 million, and $ 12.9 million , respectively. Intangible assets also includes deferred costs relating to the Company's revolving credit and consignments lines of $ 3.6 million and $ 1.6 million at December 31, 2025 and 2024, respectively. Estimated amortization e xpense for each of the five succeeding years is as follows: Amortization (Thousands) Expense 2026 10,135 2027 10,033 2028 10,033 2029 10,033 2030 10,033 Goodwill The balance of goodwill at December 31, 2025 and 2024 was $ 280.7 million and $ 263.7 million, respectively. 65 A summary of changes in goodwill by reportable segment is as follows: (Thousands) Performance Materials Electronic Materials Precision Optics Total Balance at December 31, 2023 $ 26,157 $ 206,673 $ 88,043 $ 320,873 Acquisition — — — — Impairment charge — — ( 56,067 ) ( 56,067 ) Currency translation and other — ( 373 ) ( 695 ) ( 1,068 ) Balance at December 31, 2024 $ 26,157 $ 206,300 $ 31,281 $ 263,738 Acquisition — 14,893 — 14,893 Impairment charge — — — — Currency translation and other — 237 1,789 2,026 Balance at December 31, 2025 $ 26,157 $ 221,430 $ 33,070 $ 280,657 Due to historical results combined with the partial impairment charge recognized in 2024 within the Precision Optics reporting unit, the Company elected to perform a quantitative annual impairment assessment for the Precision Optics reporting unit's goodwill as of October 1, 2025 and a qualitative impairment test for the Performance Materials and Electronic Materials reporting units. As discussed in Note A, the Company's annual goodwill impairment test indicated the carrying value of the Precision Optics reporting unit exceeded its estimated fair value as of the measurement date of October 1, 2024. As a result, the Company recognized a goodwill impairment charge in the fourth quarter of fiscal 2024 of $ 56.1 million which was recorded in "Goodwill Impairment" in the accompanying Consolidated Statements of Income in the Precision Optics segment. Based on the testing performed for the Precision Optics reporting unit as of October 1, 2025, the Company determined that the estimated fair value exceeded its carrying value; therefore no impairment charge was necessary. 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. If any of our reporting units do not meet our long range plan estimates or our discount rate increase significantly, we could be required to perform an interim goodwill impairment analysis or recognize charges in future periods. Any impairment charges that the Company may take in the future could be material to its consolidated results of operations and financial condition. The Company's accumulated goodwill impairment losses were $ 76.7 million as of December 31, 2025 and 2024. Accumulated impairment losses were from the closure of the LAC reporting unit which was closed as of December 31, 2020 and the Precision Optics charge taken in the fourth quarter of 2024. Note O — Debt Long-term debt in the Consolidated Balance Sheets is summarized as follows: December 31, (Thousands) 2025 2024 Borrowings under Credit Agreement with average interest rate of 5.26 % at December 31, 2025 and 6.27 % at December 31, 2024 $ 221,125 $ 198,875 Borrowings under the Term Loan Facility 222,188 240,000 Overdraft Sweep Facility 15,659 123 Foreign debt 1,670 4,901 Total long-term debt outstanding 460,642 443,899 Current portion of long-term debt ( 22,445 ) ( 34,274 ) Gross long-term debt $ 438,197 $ 409,625 Unamortized deferred financing fees ( 1,849 ) ( 1,891 ) Long-term debt $ 436,348 $ 407,734 66 Maturities on long-term debt instruments as of December 31, 2025 are as follows: (Thousands) 2026 22,445 2027 8,664 2028 11,476 2029 11,307 2030 406,750 2031 and thereafter — Total $ 460,642 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. The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals and copper, and provides enhanced flexibility to finance acquisitions and other strategic initiatives. Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company and its direct subsidiaries, with the exception of non-mining real property, precious metals, copper and certain other assets. The Credit Agreement allows the Company to borrow money at a premium over SOFR, following the January 2023 amendment, or prime rate and at varying maturities. The premium resets quarterly according to the terms and conditions available under the agreement. The Credit Agreement includes restrictive covenants relating to restrictions on additional indebtedness, acquisitions, dividends, and stock repurchases. In addition, the Credit Agreement includes covenants subject to a maximum leverage ratio and a minimum interest coverage ratio. We were in compliance with all of our debt covenants as of December 31, 2025 and December 31, 2024. Cash on hand up to $ 35 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement. At December 31, 2025 and 2024, there was $ 443.3 million and $ 438.9 million outstanding under the Credit Agreement, respectively. At December 31, 2025 and December 31, 2024, there was $ 5.2 million and $ 7.1 million letters of credit outstanding against the credit sub-facility, respectively. The Company pays a variable commitment fee that may reset quarterly ( 0.200 % as of December 31, 2025) on the available and unborrowed amounts under the revolving credit line. The available borrowings under the individual existing credit lines totaled $ 223.7 million as of December 31, 2025. 67 Note P — Pensions and Other Post-Employment Benefits The obligation and funded status of the Company’s pension and other post-employment benefit plans are 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 (Thousands) 2025 2024 2025 2024 Change in benefit obligation Benefit obligation at beginning of year $ 176,718 $ 181,588 $ 4,666 $ 4,900 Service cost 1,209 1,077 4 50 Interest cost 7,686 7,631 152 234 Net pension curtailments and settlements ( 4,447 ) — — — Actuarial (gain) loss 1,303 ( 3,976 ) 62 ( 113 ) Benefit payments ( 7,365 ) ( 6,678 ) ( 337 ) ( 405 ) Plan amendments — — ( 1,555 ) — Foreign currency exchange rate changes and other 7,054 ( 2,924 ) — — Benefit obligation at end of year 182,158 176,718 2,992 4,666 Change in plan assets Fair value of plan assets at beginning of year 161,808 169,679 — — Plan settlements ( 3,318 ) — — — Actual return on plan assets 11,447 ( 914 ) — — Employer contributions 719 697 — — Employee contributions 769 750 — — Benefit payments from fund ( 7,440 ) ( 6,724 ) — — Foreign currency exchange rate changes and other 4,278 ( 1,680 ) — — Fair value of plan assets at end of year 168,263 161,808 — — Funded status at end of year $ ( 13,895 ) $ ( 14,910 ) $ ( 2,992 ) $ ( 4,666 ) Amounts recognized in the Consolidated Balance Sheets consist of: Other assets $ 7,365 $ 7,258 $ — $ — Other liabilities and accrued items ( 617 ) ( 554 ) ( 434 ) ( 575 ) Retirement and post-employment benefits ( 20,643 ) ( 21,614 ) ( 2,558 ) ( 4,091 ) Net amount recognized $ ( 13,895 ) $ ( 14,910 ) $ ( 2,992 ) $ ( 4,666 ) The following amounts are included within accumulated other comprehensive loss at December 31, 2025 and 2024 : Pension Benefits Other Benefits (Thousands) 2025 2024 2025 2024 Amounts recognized in other comprehensive income (before tax) consist of: Net actuarial loss (gain) $ 57,882 $ 59,623 $ ( 6,310 ) $ ( 5,262 ) Net prior service cost (credit) ( 334 ) ( 449 ) — — Net transition obligation/(asset) — — — — Net amount recognized $ 57,548 $ 59,174 $ ( 6,310 ) $ ( 5,262 ) 68 The following table provides information regarding the accumulated benefit obligation: Pension Benefits Other Benefits (Thousands) 2025 2024 2025 2024 Additional information Accumulated benefit obligation for all defined benefit pension plans $ 181,286 $ 175,818 $ — $ — For defined benefit pension plans with benefit obligations in excess of plan assets: Aggregate benefit obligation 50,062 48,979 — — Aggregate fair value of plan assets 28,900 26,827 — — For defined benefit pension plans with accumulated benefit obligations in excess of plan assets: Aggregate accumulated benefit obligation 49,296 48,106 — — Aggregate fair value of plan assets 28,900 26,827 — — The following table summarizes components of net benefit cost: Pension Benefits Other Benefits (Thousands) 2025 2024 2023 2025 2024 2023 Net benefit cost Service cost $ 1,209 $ 1,077 $ 842 $ 4 $ 50 $ 51 Interest cost 7,686 7,631 7,874 152 234 273 Expected return on plan assets ( 10,094 ) ( 10,127 ) ( 9,685 ) — — — Amortization of prior service credit ( 90 ) ( 85 ) ( 83 ) ( 95 ) — ( 556 ) Recognized net actuarial loss (gain) 359 127 ( 300 ) ( 328 ) ( 349 ) ( 379 ) Net periodic benefit (credit) cost ( 930 ) ( 1,377 ) ( 1,352 ) ( 267 ) ( 65 ) ( 611 ) Net pension curtailments and settlements 230 — 142 — — — Total net benefit (credit) cost $ ( 700 ) $ ( 1,377 ) $ ( 1,210 ) $ ( 267 ) $ ( 65 ) $ ( 611 ) Components of net periodic benefit cost, other than service cost, are included in Other non-operating (income) expense in the Consolidated Statements of Income. Additionally, Pension Benefit Guaranty Corporation premiums are reported within expected return on plan assets. 69 The following table summarizes amounts recognized in other comprehensive income (OCI). Note any gains or losses and prior service costs or credits that have not been recognized as a component of net periodic benefit costs are recorded as a component of other comprehensive income, net of deferred taxes. The Company elects to recognize actuarial gains/(losses) using the corridor approach. Pension Benefits Other Benefits (Thousands) 2025 2024 2023 2025 2024 2023 Change in other comprehensive income OCI at beginning of year $ 59,174 $ 52,491 $ 42,422 $ ( 5,262 ) $ ( 5,499 ) $ ( 6,129 ) Increase (decrease) in OCI: Recognized during year — prior service cost (credit) 90 85 83 95 — 556 Recognized during year — net actuarial (losses) gains ( 359 ) ( 127 ) 300 328 349 379 Occurring during year — prior service cost 24 — — — — — Occurring during year — net actuarial losses (gains) ( 1,127 ) 6,725 9,828 84 ( 112 ) ( 305 ) Other adjustments ( 254 ) — ( 142 ) ( 1,555 ) — — Foreign currency exchange rate changes — — — — — — OCI at end of year $ 57,548 $ 59,174 $ 52,491 $ ( 6,310 ) $ ( 5,262 ) $ ( 5,499 ) In determining the projected benefit obligation and the net benefit cost, as of a December 31 measurement date, the Company used the following assumptions: Pension Benefits Other Benefits 2025 2024 2023 2025 2024 2023 Assumptions used to determine benefit obligations at fiscal year end Discount rate 1.19 % - 5.47 % 0.86 % - 5.72 % 1.31 % - 5.19 % 5.17 % 5.65 % 5.20 % Rate of compensation increase 1.50 % - 3.00 % 1.50 % - 3.00 % 1.75 % - 3.00 % N/A 3.50 % 3.50 % Assumptions used to determine net cost for the fiscal year Discount rate 0.86 % - 5.72 % 1.31 % - 5.19 % 2.16 % - 5.54 % 5.65 % 5.20 % 5.52 % Expected long-term return on plan assets 4.50 % - 5.75 % 3.90 % - 5.75 % 1.90 % - 5.25 % N/A N/A N/A Rate of compensation increase 1.50 % - 3.00 % 1.75 % - 3.00 % 1.75 % - 3.00 % 3.50 % 3.50 % 3.50 % Discount Rate. The discount rate used to determine the present value of the projected and accumulated benefit obligation at the end of each year is established based upon the available market rates for high quality, fixed income investments whose maturities match the plan’s projected cash flows. The Company uses a spot-rate approach to estimate the service and interest cost components of net periodic benefit cost for its defined benefit pension plans. The spot-rate approach applies separate discount rates for each projected benefit payment in the calculation. Expected Long-Term Return on Plan Assets. Management establishes the domestic expected long-term rate of return assumption by reviewing historical trends and analyzing the current and projected market conditions in relation to the plan’s asset allocation and risk management objectives. Consideration is given to both recent plan asset performance as well as plan asset performance over various long-term periods of time, with an emphasis on the assumption being a prospective, long-term rate of return. Management consults with and considers the opinions of its outside investment advisers and actuaries when establishing the rate and reviews assumptions with the Audit Committee of the Board of Directors. 70 Rate of Compensation Increase. The rate of compensation increase assumption is no longer applicable for the domestic defined benefit due to the Company freezing the plan effective January 1, 2020. The rate of compensation assumption to determine the benefit obligation and net cost for the domestic retiree medical plan was 3.5 % in both 2025 and 2024. Assumptions for the defined benefit pension plans in Germany, Liechtenstein, and England are determined separately from the U.S. plan assumptions, based on historical trends and current and projected market conditions in each respective country. One plan in Germany is unfunded. Assumed health care trend rates at fiscal year end 2025 2024 Health care trend rate assumed for next year 7.50 % 6.75 % Rate that the trend rate gradually declines to (ultimate trend rate) 5.00 % 5.00 % Year that the rate reaches the ultimate trend rate 2036 2032 Plan Assets The following tables present the fair values of the Company’s defined benefit pension plan assets as of December 31, 2025 and 2024 by asset category. The Company has some investments that are valued using net asset value (NAV) as the practical expedient and have not been classified in the fair value hierarchy. Refer to Note S for definitions of the fair value hierarchy. December 31, 2025 (Thousands) Total Level 1 Level 2 Level 3 Cash $ 2,130 $ 2,130 $ — $ — Equity securities (a) 28,020 28,020 — — Fixed-income securities (b) 10,620 10,620 — — Other types of investments: Real estate fund (c) 4,113 4,113 — — Total 44,883 44,883 — — Investments measured at NAV: (d) Pooled investment fund (e) 120,346 Multi-strategy hedge funds (f) 105 Alternatives 2,929 Private equity funds — Total assets at fair value $ 168,263 December 31, 2024 (Thousands) Total Level 1 Level 2 Level 3 Cash $ 2,797 $ 2,797 $ — $ — Equity securities (a) 28,212 28,212 — — Fixed-income securities (b) 10,293 10,293 — — Other types of investments: Real estate fund (c) 4,187 4,187 — — Total 45,489 45,489 — — Investments measured at NAV: (d) Pooled investment fund (e) 113,513 Multi-strategy hedge funds (f) 101 Alternatives 2,687 Private equity funds 18 Total assets at fair value $ 161,808 (a) Equity securities are primarily comprised of corporate stock and mutual funds directly held by the plans. Equity securities are valued using the closing price reported on the active market on which the individual securities are traded. (b) Fixed income securities are primarily comprised of governmental and corporate bonds directly held by the plans. Governmental and corporate bonds are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded. 71 (c) Includes a mutual fund that typically invests at least 80 % of its assets in equity and debt securities of companies in the real estate industry or related industries or in companies which own significant real estate assets at the time of investment. (d) Certain assets that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. (e) Pooled investment fund consists of various investment types including equity investments covering a range of geographies and including investment managers that hold long and short positions, property investments, and other multi-strategy funds which combine a range of different credit, equity, and macro-orientated ideas and dynamically allocate funds across asset classes. (f) Includes a fund that invests in a broad portfolio of hedge funds. The Company’s domestic defined benefit pension plan investment strategy, as approved by the Nominating, Governance and Corporate Responsibility Committee of the Board of Directors, is to employ an allocation of investments that will generate returns equal to or better than the projected long-term growth of pension liabilities so that the plan will be self-funding. The return objective is to maximize investment return to achieve and maintain a 100 % funded status over time, taking into consideration required cash contributions. The allocation of investments is designed to maximize the advantages of diversification while mitigating the risk and overall portfolio volatility to achieve the return objective. Risk is defined as the annual variability in value and is measured in terms of the standard deviation of investment return. Under the Company’s investment policies, allowable investments include domestic equities, international equities, fixed income securities, cash equivalents, and alternative securities (which include real estate, private venture capital investments, hedge funds, and tactical asset allocation). Ranges, in terms of a percentage of the total assets, are established for each allowable class of security. Derivatives may be used to hedge an existing security or as a risk reduction strategy. Current asset allocation guidelines are to invest 0 % to 40 % in equity securities, 60 % to 90 % in fixed income securities and cash, and up to 20 % in alternative securities. Management reviews the asset allocation on a quarterly or more frequent basis and makes revisions as deemed necessary. None of the plan assets noted above are invested in the Company’s common stock. Cash Flows Employer Contributions. The Company does not expect to contribute to its domestic defined benefit pension plan in 2026. All plan participants with an accrued benefit may elect an immediate payout in lieu of their future monthly annuity if the lump sum amount does not exceed $ 100,000 . Estimated Future Benefit Payments. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Other Benefits (Thousands) Pension Benefits Gross Benefit Payment Net of Medicare Part D Subsidy 2026 9,391 442 442 2027 10,436 402 402 2028 11,625 362 362 2029 11,851 293 293 2030 12,217 260 260 2031 through 2035 60,765 957 957 Other Benefit Plans In addition to the plans shown above, the Company also has certain foreign subsidiaries with accrued unfunded pension and other post-employment arrangements. The liability for these arrangements was $ 0.5 million at December 31, 2025 and $ 0.4 million at December 31, 2024, and was included in retirement and post-employment benefits on the Consolidated Balance Sheets. The Company also sponsors defined contribution plans available to substantially all U.S. employees. The Company’s annual defined contribution expense, including the expense for the enhanced defined contribution plan, was $ 12.3 million in 2025, $ 13.2 million in 2024, and $ 13.6 million in 2023. 72 Note Q — Accumulated Other Comprehensive (Loss) Income Changes in the components of accumulated other comprehensive (loss) income, including amounts reclassified out, for 2025, 2024, and 2023, and the balances in accumulated other comprehensive (loss) income as of December 31, 2025, 2024, and 2023 are as follows: Gains and Losses On Cash Flow Hedges Pension and Post- Employment Benefits Foreign Currency Translation (Thousands) Foreign Currency Interest Rate Precious Metals Total Total Balance at December 31, 2022 $ 1,243 $ 6,055 $ ( 223 ) $ 7,075 $ ( 40,228 ) $ ( 8,756 ) $ ( 41,909 ) Other comprehensive income (loss) before reclassifications ( 19 ) 2,046 ( 140 ) 1,887 ( 8,462 ) 5,208 ( 1,367 ) Amounts reclassified from accumulated other comprehensive income ( 35 ) ( 4,513 ) 301 ( 4,247 ) ( 1,176 ) — ( 5,423 ) Other comprehensive income (loss) before tax ( 54 ) ( 2,467 ) 161 ( 2,360 ) ( 9,638 ) 5,208 ( 6,790 ) Deferred taxes on current period activity ( 12 ) ( 568 ) 37 ( 543 ) ( 1,208 ) — ( 1,751 ) Other comprehensive income (loss) after tax ( 42 ) ( 1,899 ) 124 ( 1,817 ) ( 8,430 ) 5,208 ( 5,039 ) Balance at December 31, 2023 $ 1,201 $ 4,156 $ ( 99 ) $ 5,258 $ ( 48,658 ) $ ( 3,548 ) $ ( 46,948 ) Balance at December 31, 2023 $ 1,201 $ 4,156 $ ( 99 ) $ 5,258 $ ( 48,658 ) $ ( 3,548 ) $ ( 46,948 ) Other comprehensive income (loss) before reclassifications 840 4,093 ( 808 ) 4,125 ( 6,613 ) ( 7,981 ) ( 10,469 ) Amounts reclassified from accumulated other comprehensive income ( 273 ) ( 4,886 ) 940 ( 4,219 ) ( 307 ) — ( 4,526 ) Other comprehensive income (loss) before tax 567 ( 793 ) 132 ( 94 ) ( 6,920 ) ( 7,981 ) ( 14,995 ) Deferred taxes on current period activity 130 ( 182 ) 31 ( 21 ) ( 876 ) — ( 897 ) Other comprehensive income (loss) after tax 437 ( 611 ) 101 ( 73 ) ( 6,044 ) ( 7,981 ) ( 14,098 ) Balance at December 31, 2024 $ 1,638 $ 3,545 $ 2 $ 5,185 $ ( 54,702 ) $ ( 11,529 ) $ ( 61,046 ) Balance at December 31, 2024 $ 1,638 $ 3,545 $ 2 5,185 $ ( 54,702 ) $ ( 11,529 ) $ ( 61,046 ) Other comprehensive income (loss) before reclassifications ( 197 ) ( 410 ) — ( 607 ) 2,598 11,082 13,073 Amounts reclassified from accumulated other comprehensive income ( 104 ) ( 3,027 ) — ( 3,131 ) 76 — ( 3,055 ) Other comprehensive income (loss) before tax ( 301 ) ( 3,437 ) — ( 3,738 ) 2,674 11,082 10,018 Deferred taxes on current period activity ( 69 ) ( 791 ) — ( 860 ) 413 — ( 447 ) Other comprehensive income (loss) after tax ( 232 ) ( 2,646 ) — ( 2,878 ) 2,261 11,082 10,465 Balance at December 31, 2025 $ 1,406 $ 899 $ 2 $ 2,307 $ ( 52,441 ) $ ( 447 ) $ ( 50,581 ) Reclassifications of gains and losses on foreign currency cash flow hedges from accumulated other comprehensive income are recorded in Net sales in the Consolidated Statements of Income while gains and losses on precious metal cash flow hedges are recorded in Cost of sales in the Consolidated Statements of Income. Refer to Note S for additional details on cash flow hedges. Reclassifications from accumulated other comprehensive income for interest rate swaps are recorded in interest expense. Refer to Note G for additional details on interest expense. Reclassifications from accumulated other comprehensive income for pension and post-employment benefits are included in the computation of the net periodic pension and post-employment benefit expense. Refer to Note P for additional details on pension and other post-employment expenses. 73 Note R — Stock-based Compensation The Company operates a single equity incentive plan known as the Materion 2025 Equity and Incentive Compensation Plan (“2025 Plan”). This plan was established to replace two prior stock incentive plans: the 2006 Stock Incentive Plan and the 2006 Non-Employee Director Equity Plan. Approved by shareholders, the 2025 Plan became effective in May 2025, at which point any remaining common shares available for issuance under the previous plans were transferred to the 2025 plan. The 2025 Plan authorizes the granting of various equity awards, including option rights, stock appreciation rights (SARs), performance-restricted shares, performance shares, performance units, restricted shares, and restricted stock units (RSUs). Stock-based compensation expense, which includes awards settled in shares and in cash and is recognized as a component of selling, general, and administrative (SG&A) expenses, was $ 11.2 million, $ 10.6 million, and $ 10.5 million in 2025, 2024, and 2023, respectively. The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based awards vest or are exercised. The Company recognized less than $ 0.1 million of tax benefits in 2025, compared to $ 2.0 million in 2024 and 2023, relating to the issuance of common stock for the exercise/vesting of equity awards. The following sections provide information on awards settled in shares. SARs. The Company grants SARs to certain employees. Upon exercise of vested SARs, the participant will receive a number of shares of common stock equal to the spread (the difference between the market price of the Company’s common shares at the time of exercise and the strike price established on the grant date) divided by the common share price. The strike price of the SARs is equal to the market value of the Company’s common shares on the day of the grant. The number of SARs available to be issued is established by plans approved by the shareholders. The vesting period and the life of the SARs are established at the time of grant. The exercise of the SARs is generally satisfied by the issuance of treasury shares. SARs vest in equal installments annually over three years . SARs expire in seven years . The following table summarizes the Company's SARs activity during 2025: (Shares in thousands) Number of SARs Weighted- average Exercise Price Per Share Aggregate Intrinsic Value (thousands) Weighted- average Remaining Term (Years) Outstanding at December 31, 2024 232 $ 85.86 Granted 55 87.36 Exercised ( 29 ) 72.73 Cancelled ( 15 ) 109.67 Outstanding at December 31, 2025 243 $ 86.24 Vested and expected to vest as of December 31, 2025 243 86.24 9,611 3.4 Exercisable at December 31, 2025 159 77.21 7,605 2.3 A summary of the status and changes of shares subject to SARs and the related average price per share follows: (Shares in thousands) Number of SARs Weighted- average Grant Date Fair Value Nonvested as of December 31, 2024 81 $ 44.89 Granted 55 26.33 Vested ( 40 ) 41.52 Cancelled ( 12 ) 41.40 Nonvested as of December 31, 2025 84 $ 37.98 As of December 31, 2025, $ 1.7 million of expense with respect to non-vested SARs has yet to be recognized as expense over a weighted-average period of approximately 20 months. The total fair value of shares vested during 2025, 2024, and 2023 was $ 1.6 million, $ 1.4 million, and $ 1.0 million, respectively. The weighted-average grant date fair value for 2025, 2024, and 2023 was $ 26.33 , $ 50.46 , and $ 42.27 , respectively. The fair value will be amortized to compensation cost on a straight-line basis over the vesting period of three years , or earlier if the employee is retirement eligible and continued vesting is approved by the Board of Directors as defined in the Plan. Stock-based compensation expense relating to SARs was $ 1.5 million in 2025 and 2024 and $ 1.3 million in 2023. 74 The total intrinsic value of stock options exercised during 2025, 2024, and 2023 was $ 0.9 million, $ 3.2 million and $ 3.6 million, respectively. The fair value of the SARs was estimated on the grant date using the Black-Scholes pricing model with the following assumptions: 2025 2024 2023 Risk-free interest rate 3.97 % 4.17 % 4.27 % Dividend yield 0.6 % 0.4 % 0.4 % Volatility 29.4 % 38.3 % 39.0 % Expected lives (in years) 4.7 4.6 4.5 The risk-free rate of return was based on U.S. Treasury yields with a maturity equal to the expected life of the award. The dividend yield was based on the Company's historical dividend rate and stock price. The expected volatility of stock was derived by referring to changes in the Company's historical common stock prices over a time-frame similar to the expected life of the award. In addition to considering the vesting period and contractual term of the award for the expected life assumption, the Company analyzes actual historical exercise experience for previously granted awards. RSUs - Employees. The Company may grant RSUs to employees of the Company. These units constitute an agreement to deliver shares of common stock to the participant at the end of the vesting period, which is defined at the date of the grant, and are forfeited should the holder’s employment terminate during the restriction period. The fair market value of the RSUs is determined on the date of the grant and is amortized over the vesting period. The annual employee grants vest in three equal annual installments on the anniversary of the grant date. The fair value of RSUs settled in stock is based on the closing stock price on the date of grant. The weighted-average grant date fair value for 2025, 2024, and 2023 was $ 89.57 , $ 133.74 , and $ 110.14 , respectively. Cash-settled RSUs are accounted for as liability-based compensation awards and adjusted based on the closing price of Materion’s common stock over the vesting period of three years . Stock-based compensation expense relating to stock-settled RSUs was $ 5.7 million in 2025, $ 5.2 million in 2024, and $ 4.6 million in 2023. The unamortized compensation cost on the outstanding RSUs was $ 8.8 million as of December 31, 2025 and is expected to be recognized over a weighted-average period of 23 months. The total fair value of shares that vested during 2025 was $ 5.2 million, compared to $ 6.5 million in 2024 and $ 3.6 million in 2023. The following table summarizes the stock-settled RSU activity during 2025: (Shares in thousands) Number of Shares Weighted- average Grant Date Fair Value Outstanding at December 31, 2024 114 $ 110.93 Granted 112 89.12 Vested ( 51 ) 101.91 Forfeited ( 26 ) 105.27 Outstanding at December 31, 2025 149 $ 98.54 RSUs - Non-Employee Directors. In 2025, 2024, and 2023, 15,968 , 9,200 , and 9,184 RSUs, respectively, with a one-year vesting period, were granted to certain non-employee members of the Board of Directors. The weighted-average grant date fair value of these RSUs was $ 75.66 , $ 115.72 , and $ 105.54 in 2025, 2024, and 2023, respectively. The Company recognized $ 1.2 million of expense related to these awards in 2025, compared to $ 1.1 million of expense in 2024 and $ 0.9 million of expense in 2023. At December 31, 2025, $ 0.4 million of expense with respect to non-vested RSU awards granted to the Board of Directors has yet to be recognized and will be amortized into expense over a weighted-average period of approximately four months . Long-term Incentive Plans. Under the long-term incentive compensation plans, executive officers and selected other employees receive restricted stock unit awards based upon the Company’s performance over the defined period, typically three years . Total units earned for grants made in 2025, 2024, and 2023 may vary between 0 % and 200 % of the units granted based on the attainment of performance targets during the related three-year period. All grants will be settled in Materion common 75 shares and are equity classified. Vesting of performance-based awards is contingent upon the attainment of threshold performance objectives. The following table summarizes the activity related to performance-based RSUs during 2025: (Shares in thousands) Number of Shares Weighted- average Grant Date Fair Value Outstanding at December 31, 2024 108 $ 136.42 Granted 43 103.75 Vested ( 30 ) 101.02 Forfeited ( 14 ) 137.88 Outstanding at December 31, 2025 107 $ 135.25 Compensation expense is based upon the performance projections for the plan period of three years , the percentage of requisite service rendered, and the fair market value of the Company’s common shares on the date of grant. The offset to the compensation expense for the portion of the award to be settled in shares is recorded within shareholders’ equity and was $ 2.7 million for 2025, $ 2.8 million for 2024, and $ 3.3 million for 2023. Directors' Deferred Compensation. Non-employee directors may defer all or part of their compensation into the Company’s common stock. The fair value of the deferred shares is determined at the share acquisition date and is recorded within shareholders’ equity. At December 31, 2025, shareholders’ equity included 0.1 million shares related to this plan. Note S — Fair Value Information and Derivative 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 upon 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. 76 The following table summarizes the financial instruments measured at fair value on the Consolidated Balance Sheets at December 31, 2025 and 2024: Fair Value Measurements (Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Other Significant Unobservable Inputs (Level 3) December 31, 2025 Financial Assets Deferred compensation investments $ 7,175 $ 7,175 $ — $ — Foreign currency forward contracts 80 — 80 — Interest rate swaps 1,491 — 1,491 — Precious metal swaps — — — — Total $ 8,746 $ 7,175 $ 1,571 $ — Financial Liabilities Deferred compensation liability $ 7,175 $ 7,175 $ — $ — Foreign currency forward contracts 490 — 490 — Interest rate swaps 325 — 325 — Precious metal swaps — — — — Total $ 7,990 $ 7,175 $ 815 $ — December 31, 2024 Financial Assets Deferred compensation investments $ 6,050 $ 6,050 $ — $ — Foreign currency forward contracts 1,671 — 1,671 — Interest rate swaps 4,603 — 4,603 — Precious metal swaps — — — — Total $ 12,324 $ 6,050 $ 6,274 $ — Financial Liabilities Deferred compensation liability $ 6,050 $ 6,050 $ — $ — Foreign currency forward contracts 1,033 — 1,033 — Interest rate swaps — — — — Precious metal swaps — — — — Total $ 7,083 $ 6,050 $ 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 and metals. 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. Due to the nature of fair value calculations for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable estimate of it s fair value. As noted below, the Company entered into interest rate swaps to hedge the interest rate risk on the fixed rate portion of the Credit Agreement. The net fair value of the interest rate swaps were $ 1.2 million as of December 31, 2025, and were determined using level 2 inputs. The total of the outstanding amount on the fixed rate debt and the fair value of the interest rate swaps approximate the total fair value of the fixed rate debt as of December 31, 2025. The carrying values of the other working capital items in the Consolidated Balance Sheets approximate fair values at December 31, 2025 and 2024. The Company uses derivative contracts to hedge portions of its foreign currency exposures and may also use derivatives to hedge a portion of its precious metal and interest expense fluctuations. The objectives and strategies for using derivatives in these areas are as follows: 77 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 O. The swap hedges the change in 1-month 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 O. 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 in 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 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 risk 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. 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 that 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 consignment 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. 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 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. 78 The use of derivatives is governed by policies adopted by the Audit and Risk Committee of the Board of Directors. 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 the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in OCI until the hedged item is recognized in 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 fair values will also be classified as short-term or long-term depending upon their maturity dates. 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 balance sheet classification as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 (Thousands) Notional Amount Fair Value Notional Amount Fair Value Foreign currency forward contracts Prepaid expenses $ 6,240 $ 76 $ 24,532 $ 1,365 Other liabilities and accrued items 56,174 489 45,679 1,031 These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included foreign currency losses related to these derivatives of $ 2.5 million in 2025, compared to $ 0.4 million of foreign currency gains in 2024. 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 at December 31, 2025 and 2024: December 31, 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 $ 579 $ 3 $ — $ — $ — Foreign currency forward contracts - euro — — — — — Precious metal swaps — — — — — Interest rate swaps 200,000 1,491 — 325 — Total $ 200,579 $ 1,494 $ — $ 325 $ — 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 swaps 200,000 2,701 1,902 — — Total $ 207,382 $ 3,007 $ 1,902 $ 2 $ — All of these contracts were designated and effective as cash flow hedges. No ineffectiveness expense was recorded in 2025, 2024, or 2023. The fair value of derivative contracts recorded in accumulated other comprehensive income (loss) totaled $ 1.2 million and $ 4.9 million as of December 31, 2025 and December 31, 2024, respectively. Deferred gains of $ 1.2 million at December 31, 2025 are expected to be reclassified to earnings within the next 18-month period. 79 The following table summarizes the pre-tax amounts reclassified from accumulated other comprehensive income relating to the hedging relationship of the Company’s outstanding derivatives designated as cash flow hedges and income statement classification for years ended December 31, 2025 and 2024: (Thousands) 2025 2024 2023 Hedging relationship Line item Foreign currency forward contracts Net sales $ ( 104 ) $ ( 273 ) $ ( 35 ) Precious metal swaps Cost of sales — 940 301 Interest rate swaps Interest expense - net ( 3,027 ) ( 4,886 ) ( 4,513 ) Total $ ( 3,131 ) $ ( 4,219 ) $ ( 4,247 ) The derivative activity in the table above is reflected in cash flows from operating activities. Note T — Contingencies and Commitments Environmental Proceedings The Company has an active program for environmental compliance that includes the identification of environmental projects and estimating the impact on the Company’s financial performance and available resources. Environmental expenditures that relate to current operations, such as wastewater treatment and control of airborne emissions, are either expensed or capitalized as appropriate. The Company records reserves for the probable costs for identified environmental remediation projects. The Company’s environmental engineers perform routine ongoing analyses of the remediation sites and will use outside consultants to assist in their analyses from time to time. Reserve accruals are based upon their analyses and are established based on the reasonably estimable loss or range of loss. The accruals are revised for the results of ongoing studies, changes in strategies, inflation, and for differences between actual and projected costs. The accruals may also be affected by rulings and negotiations with regulatory agencies. The timing of payments often lags the accrual, as environmental projects typically require a number of years to complete. The environmental reserves recorded represent the Company's best estimate of what is reasonably possible and cover existing or currently foreseen projects based upon current facts and circumstances. For sites where the investigative work and work plan development are substantially complete, the Company does not believe that it is reasonably possible that the cost to resolve environmental matters will be materially different than what has been accrued. For sites that are in the preliminary stages of investigation, the ultimate loss contingencies cannot be reasonably determined at the present time. As facts and circumstances change, the ultimate cost may be revised, and the recording of additional costs may be material in the period in which the additional costs are accrued. The Company does not believe that the ultimate liability for environmental matters will have a material impact on its financial condition or liquidity due to the nature of known environmental matters and the extended period of time over which environmental remediation normally takes place. The undiscounted reserve balance at the beginning of the year, the amounts expensed and paid, and the balance at December 31, 2025 and 2024 are as follows: (Thousands) 2025 2024 Reserve balance at beginning of year $ 4,571 $ 4,556 Expensed 401 550 Paid ( 2,499 ) ( 535 ) Reserve balance at end of year $ 2,473 $ 4,571 Ending balance recorded in: Other liabilities and accrued items $ 1,043 $ 2,481 Other long-term liabilities 1,430 2,090 The majority of expenses in both 2025 and 2024 was for various remediation projects at the Elmore, Ohio plant site. 80 Asset Retirement Obligations The Company has asset retirement obligations related to its mine in Utah, as well as for certain leased facilities where the Company is contractually obligated to restore the facility back to its original condition at the end of the lease. The following represents a roll forward of the Company's asset retirement obligation liabilities for the years ended December 31, 2025 and 2024: (Thousands) 2025 2024 Asset retirement obligation at beginning of period $ 2,846 $ 2,648 Accretion expense 199 198 Asset retirement obligation at end of period $ 3,045 $ 2,846 These obligations are reflected in Other long-term liabilities on the Consolidated Balance Sheet. Other The Company is subject to various legal or other proceedings that relate to the ordinary course of its business. The Company believes that the resolution of these proceedings, individually or in the aggregate, will not have a material adverse impact upon the Company’s consolidated financial statements. At December 31, 2025, the Company had outstanding letters of credit totaling $ 69.3 million related to workers’ compensation, consigned precious metal guarantees, environmental remediation issues, and other matters. 81 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.