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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-04-29 · 217 added, 109 removed, 153 unchanged (68% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are an integrated producer of high-performance advanced engineered materials used in a variety of electrical, electronic, thermal, and structural applications.

We are an integrated producer of high-performance advanced engineered materials used in a variety of electronic, thermal, and structural applications.

Our products are sold into numerous end markets, including semiconductor, industrial, aerospace and defense, automotive, consumer electronics, energy, and telecom and data center.

RESULTS OF OPERATIONS

First Quarter

First Quarter Ended

April 3, March 28, $ %

Second Quarter

Second Quarter Ended

July 3, June 27, $ %

(Thousands, except per share data) 2026 2025 Change Change

15 unchanged sentences

Interest expense—net 7,526 8,230 (704) (9) %

Income before income taxes 20,906 20,944 (38) NM

Income before income taxes 44,502 29,156 15,346 53 %

Income tax expense 5,744 4,016 1,728 43 %

1 unchanged sentence

Diluted earnings per share $ 1.84 $ 1.21 $ 0.63 52 %

NM = Not Meaningful

Net sales of $549.8 million in the first quarter of 2026 increased $129.5 million from $420.3 million in the first quarter of 2025.

An increase in net sales in the Electronic Materials and Precision Optics segments were partially offset by decreased net sales in the Performance Materials segment.

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $132.6 million when compared to the prior year period.

At the Company level, increases in the semiconductor (69%) and energy (27%) end markets were partially offset by a decrease in the consumer electronics (37%) and life sciences (113%) end markets, primarily driven by the increases in precious metal pricing.

Additionally, there was a $2.9 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first quarter of 2025.

Net sales of $613.9 million in the second quarter of 2026 increased $182.2 million from $431.7 million in the second quarter of 2025.

The increase in net sales was primarily attributable to the Electronic Materials segment.

The increase in net sales in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $94.6 million when compared to the prior year period.

At the Company level, this was driven by volume increases in the energy (106%), semiconductor (59%), and aerospace and defense (40%) end markets.

Additionally, there was a $5.9 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2025.

See Note C to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.

Value-added sales is a non-GAAP financial measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal prices and changes in mix due to customer-supplied material.

Value-added sales is a non-GAAP financial measure that removes the impact of pass-through precious metal market costs and allows for analysis without the distortion of the movement or volatility in precious metal market prices and changes in mix due to customer-supplied material.

Internally, we manage our business on this basis, and a reconciliation of net sales, the most directly comparable GAAP financial measure, to value-added sales is included herein.

Value-added sales of $261.8 million in the first quarter of 2026 increased $2.4 million, or 1%, compared to the first quarter of 2025.

The increase was driven by volume increase in the aerospace and defense (12%) and semiconductor (7%) end markets partially offset by a sales volume decrease in the consumer electronics (44%) end market.

Additionally, there was a $2.9 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first quarter of 2025.

Gross margin in the first quarter of 2026 was $81.8 million, an increase of 7% compared to the first quarter of 2025.

Gross margin expressed as a percentage of net sales was 15% in the first quarter of 2026 and 18% in the first quarter of 2025.

Gross margin expressed as a percentage of value-added sales increased to 31% in the first quarter of 2026 from 29% in the first quarter of 2025.

Gross margin as a percentage of value-added sales increased due to product mix, manufacturing efficiencies and the increase in hydroxide sales, which favorably impacted margins in the first quarter of 2026 compared to the same period in 2025.

SG&A expense was $36.2 million in the first quarter of 2026, compared to $35.4 million in the first quarter of 2025.

The increase in SG&A expense was primarily due to higher stock compensation expense and the timing of incentive compensation accruals due to year to date performance.

Expressed as a percentage of net sales, SG&A expense decreased from 8% in the first quarter of 2025 to 7% in the first quarter of 2026, primarily due to the impact of precious metal pricing on net sales.

Expressed as a percentage of value-added sales, SG&A expense was 14% in both the first quarter of 2026 and 2025.

R&D expense consists primarily of direct personnel costs for pre-production evaluation and testing of new products, prototypes, and applications.

R&D spend was 1% and 2% of net sales in the first quarter of 2026 and 2025, respectively.

R&D spend was 2% and 3% of value-added sales in the first quarter of 2026 and 2025, respectively.

Value-added sales of $308.2 million in the second quarter of 2026 increased $39.2 million, or 15%, compared to the second quarter of 2025.

Volume increases in the aerospace and defense (39%) and semiconductor (23%) end markets were partially offset by decreases in the consumer electronics (17%) end market.

Additionally, there was a $5.9 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the second quarter of 2025.

Gross margin in the second quarter of 2026 was $104.3 million, an increase of 26% compared to the second quarter of 2025.

Gross margin expressed as a percentage of net sales was 17% in the second quarter of 2026 and 19% in the second quarter of 2025.

Gross margin expressed as a percentage of value-added sales was 34% in second quarter of 2026, compared to 31% in the second quarter of 2025.

Gross margin as a percentage of value-added sales increased due to product mix, manufacturing efficiencies and the increase in hydroxide sales, which favorably impacted margins in the second quarter of 2026 compared to the same period in 2025.

SG&A expense was $42.3 million in the second quarter of 2026, compared to $35.0 million in the second quarter of 2025.

The increase in SG&A expense was primarily due to timing of the incentive compensation accruals due to year to date performance.

Expressed as a percentage of net sales, SG&A expense was 7% of net sales in the second quarter of 2026 and 8% in the second quarter of 2025.

Expressed as a percentage of value-added sales, SG&A expense was 14% and 13% in the second quarter of 2026 and 2025, respectively.

R&D expense consists primarily of direct personnel costs for product innovation including pre-production development, evaluation, and testing of new products, prototypes, and applications to deliver new high performing advanced materials to our customers.

R&D expense accounted for 1% of net sales in both the second quarter of 2026 and 2025.

R&D expense accounted for 2% of value-added sales in both the second quarter of 2026 and 2025.

Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.

In the first quarter of 2026, we recorded a combined total of $2.3 million of restructuring charges across all segments, compared to $2.0 million of restructuring charges across all segments in the first quarter of 2025.

Other-net was $9.0 million of expense in the first quarter of 2026, or a $4.0 million increase from the first quarter of 2025, impacted by a $3.9 million increase in metal consignment fees due to the increase in precious metal prices.

Refer to Note F to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income) expense-net includes components of pension and post-retirement expense other than service costs.

We recorded a combined total of $0.3 million and $0.5 million of restructuring charges across all segments in the second quarter of 2026 and 2025, respectively.

Refer to Note F to the Consolidated Financial Statements for details.

Other-net was $3.4 million of expense in the second quarter of 2026, or a decrease of $0.5 million from the second quarter of 2025.

Refer to Note E to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs.

Refer to Note K to the Consolidated Financial Statements for details of the components.

Interest expense-net was $7.6 million and $6.9 million in the first quarter of 2026 and 2025, respectively.

The increase in interest expense is primarily due to an increase in borrowings compared to the prior year period.

Income tax expense for the first quarter of 2026 was expense of $1.5 million, compared to $3.2 million in the first quarter of 2025.

The effective tax rate for the first quarter of 2026 and 2025 was 7.3% and 15.5%, respectively.

The effective tax rate for the first quarter of 2026 is lower than the statutory tax rate primarily due to the impact of the foreign-derived deduction eligible income, excess tax benefits from stock-based compensation awards and percentage depletion.

The effective tax rate for the first quarter of 2025 was lower than the statutory tax rate primarily due to the impact of percentage depletion, the foreign-derived intangible income deduction, and the advanced manufacturing production credit.

The effective tax rate for the first three months of 2026 included a net discrete income tax benefit of $1.6 million primarily from stock-based compensation awards.

The effective tax rate for the first three months of 2025 included a net discrete income tax expense of $0.1 million.

Interest expense-net was $7.5 million and $8.2 million in the second quarter of 2026 and 2025, respectively.

The decrease in interest expense was primarily due to a decrease in interest rates compared to the prior year period.

Income tax expense for the second quarter of 2026 was $5.7 million, compared to $4.0 million in the second quarter of 2025.

The Company's effective tax rate for the second quarter of 2026 and 2025 was 12.9% and 13.8%, respectively.

The effective tax rate for the second quarter of 2026 is lower than the statutory tax rate primarily due to the impact of the foreign-derived deduction eligible income, and excess tax benefits from stock-based compensation awards.

The effective tax rate for the second quarter of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit.

See Note G to the Consolidated Financial Statements for additional discussion.

Six Months Ended

July 3, June 27, $ %

(Thousands, except per share data) 2026 2025 Change Change

Net sales $ 1,163,730 $ 851,988 $ 311,742 37 %

Value-added sales 569,978 528,316 41,662 8 %

Gross margin 186,177 158,837 27,340 17 %

Gross margin as a % of net sales 16 % 19 %

Gross margin as a % of value-added sales 33 % 30 %

SG&A expense 78,521 70,484 8,037 11 %

SG&A expense as a % of net sales 7 % 8 %

SG&A expense as a % of value-added sales 14 % 13 %

R&D expense 12,719 12,918 (199) (2) %

R&D expense as a % of net sales 1 % 2 %

R&D expense as a % of value-added sales 2 % 2 %

Restructuring expense 2,619 2,517 102 4 %

Other—net 12,432 8,904 3,528 40 %

Operating profit 79,886 64,014 15,872 25 %

Other non-operating (income)—net (627) (1,233) 606 (49) %

Interest expense—net 15,104 15,147 (43) — %

Income before income taxes 65,409 50,100 15,309 31 %

Income tax expense 7,277 7,262 15 — %

Net income $ 58,132 $ 42,838 $ 15,294 36 %

Diluted earnings per share $ 2.76 $ 2.05 $ 0.71 35 %

Net sales of $1,163.7 million in the first six months of 2026 increased $311.7 million from $852.0 million in the first six months of 2025.

The increase in net sales was primarily attributable to the Electronic Materials segment.

The increase in the Electronic Materials segment was primarily due to higher precious metal pass through costs, increasing net sales by approximately $227.3 million when compared to the prior year period.

At the Company level, a volume increase in the semiconductor (64%), energy (60%) and aerospace and defense (29%) end markets were partially offset by a volume decrease in the consumer electronics (17%) end market.

Additionally, there was a $8.8 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.

See Note C to the Consolidated Financial Statements for additional details on the year over year changes in our net sales by segment and market.

Value-added sales of $570.0 million in the first six months of 2026 increased $41.7 million, or 8%, compared to the first six months of 2025.

Volume increases in the aerospace and defense (26%) and semiconductor (20%) end markets were partially offset by a volume decreases in the consumer electronics (29%) end market.

Additionally, there was a $8.8 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the same period in the prior year.

Gross margin in the first six months of 2026 was $186.2 million, an increase of 17% compared to the first six months of 2025.

Gross margin expressed as a percentage of net sales was 16% in the first six months of 2026 and 19% in the first six months of 2025.

Gross margin expressed as a percentage of value-added sales increased to 33% in the first six months of 2026 from 30% in the first six months of 2025.

Gross margin as a percentage of value-added sales increased due to product mix, manufacturing efficiencies and the increase in hydroxide sales, which favorably impacted margins in the first six months of 2026 compared to the same period in 2025.

SG&A expense was $78.5 million in the first six months of 2026, compared to $70.5 million in the first six months of 2025.

The increase in SG&A expense was primarily due to timing of incentive compensation accruals due to year to date performance.

Expressed as a percentage of net sales, SG&A expense was 7% and 8% in the first six months of 2026 and 2025, respectively.

Expressed as a percentage of value-added sales, SG&A expense was 14% in the first six months of 2026 and 13% in the first six months of 2025.

R&D expense accounted for 1% of net sales in the first six months of 2026 and 2% in the first six months of 2025.

R&D expense accounted for 2% of value-added sales in both the first six months of 2026 and 2025.

Restructuring expense consists primarily of cost reduction actions taken in order to reduce our fixed cost structure.

In the first six months of 2026, we recorded a combined total of $2.6 million of restructuring charges across all segments, compared to $2.5 million of restructuring charges across all segments in the first six months of 2025.

Refer to Note F to the Consolidated Financial Statements for details.

Other-net was $12.4 million of expense in the first six months of 2026, or a $3.5 million increase from the first six months of 2025.

Refer to Note E to the Consolidated Financial Statements for details of the major components within Other-net.

Other non-operating (income)-net includes components of pension and post-retirement expense other than service costs.

Refer to Note K to the Consolidated Financial Statements for details of the components.

Interest expense-net was $15.1 million in both the first six months of 2026 and 2025, respectively.

Income tax expense was $7.3 million for both the first half of 2025 and 2026.

The Company's effective tax rate for the first six months of 2026 and 2025 was 11.1% and 14.5%, respectively.

The effective tax rate for the first six months of 2026 is lower than the statutory tax rate primarily due to the impact of the foreign-derived deduction eligible income and excess tax benefits from stock-based compensation awards.

The effective tax rate for the first six months of 2025 is lower than the statutory tax rate primarily due to the impact of percentage depletion and the advanced manufacturing production credit.

See Note G to the Consolidated Financial Statements for additional discussion.

Value-Added Sales - Reconciliation of Non-GAAP Financial Measure

A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the first quarter of 2026 and 2025 is as follows:

First Quarter Ended

April 3, March 28,

A reconciliation of net sales to value-added sales, a non-GAAP financial measure, for each reportable segment and for the total Company for the second quarter and first six months of 2026 and 2025 is as follows:

Second Quarter Ended Six Months Ended

July 3, June 27, July 3, June 27,

(Thousands) 2026 2025 2026 2025

2 unchanged sentences

Precision Optics 30,776 24,453 61,571 46,001

Other — — — —

Total $ 613,906 $ 431,658 $ 1,163,730 $ 851,988

3 unchanged sentences

Precision Optics 35 42 92 104

Other — — — —

Total $ 305,718 $ 162,688 $ 593,752 $ 323,672

3 unchanged sentences

Precision Optics 30,741 24,411 61,479 45,897

Other — — — —

Total $ 308,188 $ 268,970 $ 569,978 $ 528,316

18 unchanged sentences

The Other reportable segment includes unallocated corporate costs.

The primary measurement used by management to measure the financial performance of each segment is EBITDA.

Refer to Note C to the Consolidated Financial Statements for the reconciliation of EBITDA by segment to consolidated net income.

Performance Materials

First Quarter

First Quarter Ended

April 3, March 28, $ %

Second Quarter

Second Quarter Ended

July 3, June 27, $ %

(Thousands) 2026 2025 Change Change

2 unchanged sentences

EBITDA 48,302 41,094 7,208 18 %

Net sales from the Performance Materials segment of $155.7 million in the first quarter of 2026 decreased 11% compared to net sales of $174.0 million in the first quarter of 2025.

The decrease in sales was due to lower sales volumes in the consumer electronics (48%) end market.

This decrease was partially offset by a year over year increase in the volume of raw material beryllium hydroxide sales totaling $2.9 million.

The decrease in the consumer electronics end market reflects lower volumes due to a controlled ramp of production during the first quarter of 2026 from the quality issue that occurred in the fourth quarter of 2025 with a large precision clad strip customer within the Performance Materials segment.

The Company continues to work closely with our customer, ensuring processes and procedures implemented in the fourth quarter of 2025 reduce the risk of future occurrences.

Value-added sales of $139.5 million in the first quarter of 2026 were 13% lower than value-added sales of $160.0 million in the first quarter of 2025.

The decrease in value-added sales was due to the same factors driving the decrease in net sales.

EBITDA for the Performance Materials segment was $23.8 million in the first quarter of 2026 compared to $40.7 million in the first quarter of 2025.

The decrease was primarily driven by lower sales volumes and an incremental $3.5 million of additional net costs related to the quality issue described above.

These costs included capacity-related charges and expenses incurred to reimburse customers for incremental shipping and related tariff costs associated with procuring substitute materials necessary to meet their demand requirements.

Partially offsetting these impacts were the reversal of previously reserved material costs, and lower SG&A expenses in the first quarter of 2026 compared to the same period in 2025.

In addition, the increase in hydroxide sales favorably impacted margins.

Net sales from the Performance Materials segment of $207.9 million in the second quarter of 2026 increased 14% compared to net sales of $182.8 million in the second quarter of 2025.

The increase in sales was due to higher sales volumes in the aerospace and defense (40%) end market.

Additionally, there was a year over year increase in the volume of raw material beryllium hydroxide sales totaling $5.9 million.

This was partially offset by lower sales volumes in the consumer electronics (18%) end market.

The decrease in the consumer electronics end market reflects lower volumes resulting from a controlled production ramp during the second quarter of 2026 as part of ongoing operational alignment with a large precision clad strip customer.

The Company continues to collaborate closely with this customer to ensure stable and reliable production performance.

Value-added sales of $190.0 million in the second quarter of 2026 were 13% higher than value-added sales of $168.5 million in the second quarter of 2025.

The increase in value-added sales was due to the same factors driving the increase in net sales.

EBITDA for the Performance Materials segment was $48.3 million in the second quarter of 2026 compared to $41.1 million in the second quarter of 2025.

The increase was primarily driven by incremental margin from higher sales volumes and strong price/mix.

This was offset by lower margins resulting from reduced sales volumes during the controlled production ramp described above.

Six Months Ended

July 3, June 27, $ %

(Thousands) 2026 2025 Change Change

Net sales $ 363,614 $ 356,765 $ 6,849 2 %

Value-added sales 329,485 328,557 928 — %

EBITDA 72,103 81,767 (9,664) (12) %

Net sales from the Performance Materials segment of $363.6 million in the first six months of 2026 increased 2% compared to net sales of $356.8 million in the first six months of 2025.

The increase in sales was due to higher sales volumes in the aerospace and defense (22%) end market.

Additionally, there was a $8.8 million year over year increase in the volume of raw material beryllium hydroxide sales compared to the first six months of 2025.

This was partially offset by lower sales volumes in the consumer electronics (31%) end market.

The decrease in the consumer electronics end market over the first six months reflects lower volumes resulting from a controlled production ramp during the second quarter of 2026 as part of ongoing operational alignment with a large precision clad strip customer.

The Company continues to collaborate closely with this customer to ensure stable and reliable production performance.

Value-added sales of $329.5 million in the first six months of 2026 were flat year over year.

EBITDA for the Performance Materials segment was $72.1 million in the first six months of 2026 compared to $81.8 million in the first six months of 2025.

The decrease was driven by lower sales volumes to our large precision clad customer and an incremental $3.5 million of additional net costs related to the controlled production ramp described above.

These incremental costs included capacity-related charges and expenses incurred to reimburse customers for incremental shipping and related tariff costs associated with procuring substitute materials necessary to meet their demand requirements.

Additionally, there were higher raw material costs and manufacturing inefficiencies that further increased cost in the period.

Partially offsetting these impacts were the increases in hydroxide sales that favorably impacted margins.

Electronic Materials

First Quarter

First Quarter Ended

April 3, March 28, $ %

Second Quarter

Second Quarter Ended

July 3, June 27, $ %

(Thousands) 2026 2025 Change Change

2 unchanged sentences

EBITDA 27,832 17,601 10,231 58 %

Net sales from the Electronic Materials segment of $363.4 million in the first quarter of 2026 increased 62% from net sales of $224.8 million in the first quarter of 2025.

The increase in net sales was due to higher pass-through metal pricing, accounting for an increase of $132.6 million compared to the first quarter of 2025.

These increases were partially offset by a decrease in sales volumes in the life sciences end market (246%) due to the exit of low margin business.

Value-added sales of $91.6 million in the first quarter of 2026 were 18% higher than value-added sales of $77.8 million in the first quarter of 2025.

The increase in value-added sales was primarily driven by volume increases in the semiconductor end market noted above.

EBITDA for the Electronic Materials segment was $25.5 million in the first quarter of 2026 compared to $11.1 million in the first quarter of 2025.

EBITDA in the first quarter of 2026 was favorably impacted by $9.7 million of incremental margin from higher sales volumes, as well as the favorable impact of operational and manufacturing efficiencies.

This was partially offset by $3.1 million of higher consignment fees due to the increases in the price of precious metals.

Net sales from the Electronic Materials segment of $375.2 million in the second quarter of 2026 increased by 67% compared to net sales of $224.4 million in the second quarter of 2025.

The increase in net sales was due to higher pass-through metal pricing and sales volumes in the semiconductor and energy end markets.

Higher pass-through metal pricing contributed $94.6 million compared to the second quarter of 2025.

Value-added sales of $87.4 million in the second quarter of 2026 increased 15% compared to value-added sales of $76.0 million in the second quarter of 2025.

The increase in value-added sales was primarily driven by a volume increase in the semiconductor (18%) end market.

EBITDA for the Electronic Materials segment was $27.8 million in the second quarter of 2026 compared to $17.6 million in the second quarter of 2025.

EBITDA in the second quarter of 2026 benefited from incremental margin driven by higher sales volumes, strong price/mix, as well as favorable operational and manufacturing efficiencies.

Six Months Ended

July 3, June 27, $ %

(Thousands) 2026 2025 Change Change

Net sales $ 738,545 $ 449,222 $ 289,323 64 %

Value-added sales 179,014 153,862 25,152 16 %

EBITDA 53,362 28,679 24,683 86 %

Net sales from the Electronic Materials segment of $738.5 million in the first six months of 2026 increased by 64% compared to net sales of $449.2 million in the first six months of 2025.

The increase in net sales was due to higher pass-through metal pricing and sales volumes in the semiconductor and energy end markets.

Higher pass-through metal pricing contributed $227.3 million compared to the first six months of 2025.

Value-added sales of $179.0 million in the first half of 2026 increased 16% compared to value-added sales of $153.9 million in the first half of 2025.

The increase in value-added sales was primarily driven by volume increases in the semiconductor (18%) end market.

EBITDA for the Electronic Materials segment was $53.4 million in the first six months of 2026 compared to $28.7 million in the first six months of 2025.

EBITDA in the first six months of 2026 benefited from incremental margin driven by higher sales volumes, strong price/mix, as well as favorable operational and manufacturing efficiencies.

Precision Optics

First Quarter

(Thousands) First Quarter Ended

April 3, March 28, $ %

Second Quarter

(Thousands) Second Quarter Ended

July 3, June 27, $ %

2026 2025 Change Change

1 unchanged sentence

Value-added sales 30,741 24,411 6,330 26 %

EBITDA 4,674 (1,482) 6,156 NM

Net sales from the Precision Optics segment of $30.8 million in the first quarter of 2026 increased 43% compared to net sales of $21.5 million in the first quarter of 2025.

The increase was primarily due to higher sales volumes in the aerospace and defense (61%), life sciences (41%) and industrial (22%) end markets.

Value-added sales of $30.7 million in the first quarter of 2026 increased 43% compared to value-added sales of $21.5 million in the first quarter of 2025.

EBITDA 6,604 2,099 4,505 215 %

Net sales from the Precision Optics segment of $30.8 million in the second quarter of 2026 increased 26% compared to net sales of $24.5 million in the second quarter of 2025.

The increase was primarily due to higher sales volumes in the semiconductor (206%), industrial (37%) and aerospace and defense (34%) end markets.

Value-added sales of $30.7 million in the second quarter of 2026 increased 26% compared to value-added sales of $24.4 million in the second quarter of 2025.

The increase in value-added sales was due to the same factors driving the increase in net sales.

EBITDA for the Precision Optics segment was $4.7 million in the first quarter of 2026, compared to a loss of $1.5 million in the first quarter of 2025.

The increase in EBITDA was primarily driven by favorable impacts of volume/mix of $5.4 million and manufacturing efficiencies, partially offset by an increase in incentive compensation expense due to year to date performance.

First Quarter

(Thousands) First Quarter Ended

April 3, March 28, $ %

EBITDA for the Precision Optics segment was $6.6 million in the second quarter of 2026 compared to $2.1 million in the second quarter of 2025.

The increase in EBITDA was primarily driven by favorable impacts of higher volume, strong price/mix and manufacturing efficiencies, partially offset by an increase in incentive compensation expense due to year to date performance.

(Thousands) Six Months Ended

July 3, June 27, $ %

2026 2025 Change Change

2 unchanged sentences

EBITDA 11,277 617 10,660 1,728 %

Net sales from the Precision Optics segment of $61.6 million in the first half of 2026 increased 34% compared to net sales of $46.0 million in the first half of 2025.

The increase was primarily due to higher sales volumes in the semiconductor (169%), aerospace and defense (46%), and industrial (29%) end markets.

Value-added sales of $61.5 million in the first half of 2026 increased 34% compared to value-added sales of $45.9 million in the first half of 2025.

The increase in value-added sales was due to the same factors driving the increase in net sales.

EBITDA for the Precision Optics segment was $11.3 million in the first six months of 2026 compared to $0.6 million in the first six months of 2025.

The increase in EBITDA was primarily driven by favorable of higher volume, strong price/mix and manufacturing efficiencies, partially offset by an increase in incentive compensation expense due to year to date performance.

Second Quarter

(Thousands) Second Quarter Ended

July 3, June 27, $ %

2026 2025 Change Change

Net sales $ — $ — $ — — %

Value-added sales — — — — %

EBITDA (11,522) (5,899) (5,623) 95 %

The Other reportable segment in total includes unallocated corporate costs.

Corporate costs were $7.1 million in the first quarter of 2026 compared to $5.9 million in the first quarter of 2025.

Corporate costs were 1% of Company-wide net sales in the first quarter of 2026 and 2025.

Corporate costs were 3% and 2% of Company-wide value-added sales in the first quarter of 2026 and 2025, respectively.

The increase in corporate costs were due to $0.4 million of higher stock compensation expense and $0.4 million of higher restructuring costs in the first quarter of 2026 compared to the same period in 2025.

Corporate costs were $11.5 million in the second quarter of 2026 compared to $5.9 million in the second quarter of 2025.

Corporate costs were 2% and 1% of Company-wide net sales in the second quarter of 2026 and 2025, respectively.

Corporate costs were 4% of Company-wide value-added sales in both the second quarter of 2026 and 2025.

The increase in corporate

costs were primarily due to higher stock compensation and incentive compensation expense due to increased Company performance.

(Thousands) Six Months Ended

July 3, June 27, $ %

2026 2025 Change Change

Net sales $ — $ — $ — — %

Value-added sales — — — — %

EBITDA (18,615) (11,769) (6,846) 58 %

Corporate costs were $18.6 million in the first half of 2026 compared to $11.8 million in the first half of 2025.

Corporate costs were 2% and 1% of Company-wide net sales in the first six months of 2026 and 2025, respectively.

Corporate costs were 3% and 2% of Company-wide value-added sales in the first six months of 2026 and 2025, respectively.

The increase in corporate costs were primarily due to higher stock compensation and incentive compensation expense due to increased Company performance.

FINANCIAL POSITION

A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:

Three Months Ended

April 3, March 28, $

Six Months Ended

July 3, June 27, $

(Thousands) 2026 2025 Change

Net cash (used in) provided by operating activities $ (4,307) $ 15,502 $ (19,809)

Net cash provided by operating activities $ 70,506 $ 65,442 $ 5,064

Net cash (used in) investing activities (31,479) (34,912) 3,433

Net cash provided by financing activities 22,381 3,478 18,903

Net cash (used in) financing activities (32,115) (36,377) 4,262

Effects of exchange rate changes (606) 1,725 (2,331)

Net change in cash and cash equivalents $ 6,306 $ (4,122) $ 10,428

Net cash (used in) provided by operating activities was a usage of $4.3 million in the first three months of 2026 compared to net cash provided by operating activities of $15.3 million in the prior-year period.

The unfavorable change in cash use in operating activities was primarily driven by an increase in accounts receivables and accounts payables due to timing and the increase in the price of precious metal, resulting in a net use of cash of $8.7 million in the first quarter of 2026 compared a net use of cash of $5.7 million in the same period in the prior year.

Increases in inventory to support business growth resulted in a use of cash of $28.9 million in the first quarter of 2026 compared to cash provided by the sale of inventory of $0.4 million in the same period in the prior year.

Net cash used in investing activities was $15.3 million in the first quarter of 2026 compared to $20.7 million in the prior-year period.

The decrease in cash used in investing activities is due to lower mine development costs offset by higher capital expenditures in the first quarter of 2026 compared to the first quarter of 2025.

Net cash provided by operating activities totaled $70.5 million in the first six months of 2026 versus $65.4 million in the prior-year period.

The $5.1 million increase was primarily driven by an increase in accounts payable and accrued expenses of $41.4 million, due to continued working capital management and timing of payments.

These cash inflows were offset by an increase in inventory of $22.0 million to support sales growth, in addition to an increase in accounts receivable of $38.2 million, due to timing of cash collections and higher sales when compared to prior year.

Net cash used in investing activities was $31.5 million in the first six months of 2026 compared to $34.9 million in the prior-year period.

The decrease in cash used in investing activities is due to a decrease in mine development costs offset by higher capital expenditures.

Capital expenditures are made primarily for new product development, replacing and upgrading equipment, infrastructure investments, and implementing information technology initiatives.

For the full year 2026, the Company expects payments for property, plant, and equipment to be approximately $100 million.

Net cash provided by financing activities totaled $22.4 million in the first three months of 2026 compared to net cash provided by financing activities of $3.5 million in the prior-year period.

The increase in borrowings in the first three months of 2026 from the same period in the prior year was a result of an increase in accounts receivables and accounts payables due to a significant increase in the price of precious metals and an increase in inventory to support business growth.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the inherent use of estimates and management’s judgment in establishing those estimates.

For additional information regarding critical accounting policies, please refer to our 2025 Annual Report on Form 10-K.

Net cash used in financing activities totaled $32.1 million in the first six months of 2026 and compared to $36.4 million in the comparable prior-year period.

The net financing cash outflow in the first six months of 2026 was primarily driven by debt repayments, made possible by increased cash levels resulting from the Company's ongoing working capital initiatives.

We believe cash flow from operations plus the available borrowing capacity and our current cash balance are adequate to support operating requirements, capital expenditures, projected pension plan contributions, the current dividend program, environmental remediation projects, and strategic acquisitions for at least the next twelve months and for the foreseeable future thereafter.

At April 3, 2026, cash and cash equivalents held by our foreign operations totaled $15.4 million.

At July 3, 2026, cash and cash equivalents held by our foreign operations totaled $19.0 million.

We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition, or results of operations for the foreseeable future.

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of April 3, 2026 and December 31, 2025 is as follows:

April 3, December 31,

A summary of key data relative to our liquidity, including outstanding debt, cash, and available borrowing capacity, as of July 3, 2026 and December 31, 2025 is as follows:

July 3, December 31,

(Thousands) 2026 2025

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The available borrowing capacity in the table above represents the additional amounts that could be borrowed under our revolving credit facility and other secured lines existing as of the end of each period depicted.

The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments.

The applicable debt covenants have been taken into account when determining the available borrowing capacity, including the covenant that restricts

borrowing capacity to a multiple of the twelve-month trailing earnings before interest, income taxes, depreciation and amortization, and other adjustments.

In June 2025, the Company entered into a Fifth Amended and Restated Credit Agreement (Credit Agreement).

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In addition, the Credit Agreement includes covenants that limit the Company to a maximum leverage ratio and a minimum interest coverage ratio.

We were in compliance with all of our debt covenants as of April 3, 2026 and December 31, 2025.

We were in compliance with all of our debt covenants as of July 3, 2026 and December 31, 2025.

Cash on hand up to $35.0 million can benefit the covenants and may benefit the borrowing capacity under the Credit Agreement.

3 unchanged sentences

In August 2025, we entered into a precious metals consignment agreement, maturing on August 31, 2028, which replaced the consignment agreements that would have matured on August 31, 2025.

The available and unused capacity under the metal consignment agreements expiring in August 2028 totaled approximately $270.3 million as of April 3, 2026, compared to $173.8 million as of December 31, 2025.

The available and unused capacity under the metal consignment agreements expiring in August 2028 totaled approximately $344.4 million as of July 3, 2026, compared to $173.8 million as of December 31, 2025.

In January 2014, our Board of Directors approved a plan to repurchase up to $50.0 million of our common stock.

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There is no minimum quantity requirement to repurchase our common stock for a given year, and the repurchases may be discontinued at any time.

We paid cash dividends of $2.9 million on our common stock in the first quarter of 2026.

We paid cash dividends of $3.0 million and $5.9 million on our common stock in the second quarter and first six months of 2026, respectively.

We intend to pay a quarterly dividend on an ongoing basis, subject to a determination that the dividend remains in the best interest of our shareholders.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

OFF-BALANCE SHEET ARRANGEMENTS AND CASH OBLIGATIONS

We maintain the majority of the precious metals and portions of the copper and nickel we use 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, copper and nickel was $579.7 million and $526.2 million as of April 3, 2026 and December 31, 2025, respectively.

We were in compliance with all of the covenants contained in the consignment agreements as of April 3, 2026.

The notional value of off-balance sheet precious metals, copper and nickel was $505.6 million and $526.2 million as of July 3, 2026 and December 31, 2025, respectively.

We were in compliance with all of the covenants contained in the consignment agreements as of July 3, 2026.

For additional information on our contractual and other obligations, refer to our 2025 Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

For additional information regarding critical accounting policies, please refer to our 2025 Annual Report on Form 10-K.

Forward-looking Statements:

24 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis