Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
We are an integrated producer of high-performance advanced engineered materials used in a variety of 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.
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RESULTS OF OPERATIONS
Second Quarter
Second Quarter Ended
July 3, June 27, $ %
(Thousands, except per share data) 2026 2025 Change Change
Net sales $ 613,906 $ 431,658 $ 182,248 42 %
Value-added sales 308,188 268,970 39,218 15 %
Gross margin 104,342 82,658 21,684 26 %
Gross margin as a % of net sales 17 % 19 %
Gross margin as a % of value-added sales 34 % 31 %
Selling, general, and administrative (SG&A) expense 42,321 35,039 7,282 21 %
SG&A expense as a % of net sales 7 % 8 %
SG&A expense as a % of value-added sales 14 % 13 %
Research and development (R&D) expense 6,562 6,413 149 2 %
R&D expense as a % of net sales 1 % 1 %
R&D expense as a % of value-added sales 2 % 2 %
Restructuring expense 324 479 (155) (32) %
Other—net 3,424 3,908 (484) (12) %
Operating profit 51,711 36,819 14,892 40 %
Other non-operating (income)—net (317) (567) 250 (44) %
Interest expense—net 7,526 8,230 (704) (9) %
Income before income taxes 44,502 29,156 15,346 53 %
Income tax expense 5,744 4,016 1,728 43 %
Net income $ 38,758 $ 25,140 $ 13,618 54 %
Diluted earnings per share $ 1.84 $ 1.21 $ 0.63 52 %
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 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 $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.
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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. 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 $7.5 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.
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Six Months
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.
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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 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.
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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 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
Net sales
Performance Materials $ 207,949 $ 182,778 $ 363,614 $ 356,765
Electronic Materials 375,181 224,427 738,545 449,222
Precision Optics 30,776 24,453 61,571 46,001
Other — — — —
Total $ 613,906 $ 431,658 $ 1,163,730 $ 851,988
Less: pass-through metal costs
Performance Materials $ 17,948 $ 14,268 $ 34,129 $ 28,208
Electronic Materials 287,735 148,378 559,531 295,360
Precision Optics 35 42 92 104
Other — — — —
Total $ 305,718 $ 162,688 $ 593,752 $ 323,672
Value-added sales
Performance Materials $ 190,001 $ 168,510 $ 329,485 $ 328,557
Electronic Materials 87,446 76,049 179,014 153,862
Precision Optics 30,741 24,411 61,479 45,897
Other — — — —
Total $ 308,188 $ 268,970 $ 569,978 $ 528,316
Internally, management reviews net sales on a value-added basis. Value-added sales is a non-GAAP financial measure that deducts the value of the pass-through metal costs from net sales. Value-added sales allow management to assess the impact of differences in net sales between periods, segments, or markets, and analyze the resulting margins and profitability without the distortion of movements in pass-through metal costs. The dollar amount of gross margin and operating profit is not affected by the value-added sales calculation. We sell other metals and materials that are not considered direct pass-throughs, and these costs are not deducted from net sales when calculating value-added sales. Non-GAAP financial measures, such as value-added sales, have inherent limitations and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
The cost of gold, silver, platinum, palladium, copper, ruthenium, iridium, rhodium, rhenium, and osmium can be quite volatile. Our pricing policy is to directly pass the cost of these metals on to the customer in order to mitigate the impact of metal price volatility on our results from operations. Trends and comparisons of net sales are affected by movements in the market prices of these metals, but changes in net sales due to metal price movements may not have a proportionate impact on our profitability.
Our net sales are also affected by changes in the use of customer-supplied metal. When we manufacture a precious metal product, the customer may purchase metal from us or may elect to provide its own metal, in which case we process the metal on a toll basis and the metal value does not flow through net sales or cost of sales. In either case, we generally earn our margin based upon our fabrication efforts. The relationship of this margin to net sales can change depending upon whether or not the product was made from our metal or the customer’s metal. The use of value-added sales removes the potential distortion in the comparison of net sales caused by changes in the level of customer-supplied metal.
By presenting information on net sales and value-added sales, it is our intention to allow users of our financial statements to review our net sales with and without the impact of the pass-through metals.
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Segment Results
The Company consists of four reportable segments: Performance Materials, Electronic Materials, Precision Optics, and Other. The Other reportable segment includes unallocated corporate costs.
Performance Materials
Second Quarter
Second Quarter Ended
July 3, June 27, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 207,949 $ 182,778 $ 25,171 14 %
Value-added sales 190,001 168,510 21,491 13 %
EBITDA 48,302 41,094 7,208 18 %
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
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.
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Electronic Materials
Second Quarter
Second Quarter Ended
July 3, June 27, $ %
(Thousands) 2026 2025 Change Change
Net sales $ 375,181 $ 224,427 $ 150,754 67 %
Value-added sales 87,446 76,049 11,397 15 %
EBITDA 27,832 17,601 10,231 58 %
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
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.
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Precision Optics
Second Quarter
(Thousands) Second Quarter Ended
July 3, June 27, $ %
2026 2025 Change Change
Net sales $ 30,776 $ 24,453 $ 6,323 26 %
Value-added sales 30,741 24,411 6,330 26 %
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 $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.
Six Months
(Thousands) Six Months Ended
July 3, June 27, $ %
2026 2025 Change Change
Net sales $ 61,571 $ 46,001 $ 15,570 34 %
Value-added sales 61,479 45,897 15,582 34 %
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.
Other
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 $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
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costs were primarily due to higher stock compensation and incentive compensation expense due to increased Company performance.
Six Months
(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.
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FINANCIAL POSITION
Cash Flow
A summary of cash flows provided by (used in) operating, investing, and financing activities is as follows:
Six Months Ended
July 3, June 27, $
(Thousands) 2026 2025 Change
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 (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 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 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.
Liquidity
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 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 July 3, 2026 and December 31, 2025 is as follows:
July 3, December 31,
(Thousands) 2026 2025
Cash and cash equivalents $ 19,987 $ 13,681
Total outstanding debt 440,688 458,793
Net debt $ (420,701) $ (445,112)
Available borrowing capacity $ 232,679 $ 223.675
Net debt is a non-GAAP financial measure. We are providing this information because we believe it is more indicative of our overall financial position. It is also a measure our management uses to assess financing and other decisions. We believe that based on our typical cash flow generated from operations, we can support a higher leverage ratio in future periods.
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
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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). 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 also provides for an uncommitted incremental facility whereby, subject to the satisfaction of certain conditions, the Company may be able to borrow additional term loans in an aggregate amount not to exceed $250 million. The Credit Agreement provides the Company and its subsidiaries with additional capacity to enter into facilities for the consignment of precious metals, copper, nickel and tantalum, 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 metal and certain other assets.
The Credit Agreement allows the Company to borrow money at a premium over SOFR or prime rate and at varying maturities. The premium resets quarterly according to the terms and conditions stipulated in the credit 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 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 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.
Portions of our business utilize off-balance sheet consignment arrangements allowing us to use metal owned by precious metal consignors as we manufacture product for our customers. Metal is purchased from the precious metal consignor and sold to our customer at the time of product shipment. Expansion of business volumes and/or higher metal prices can put pressure on the consignment line limitations from time to time. 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 $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. We repurchased 100,000 shares under this program in the second quarter of 2025 for a total cost of $7.8 million. Since the approval of the repurchase plan, we have purchased 1,354,264 shares at a total cost of $49.5 million. In October 2025, we announced that our Board of Directors had approved a new plan to repurchase up to $50.0 million of our common stock, replacing the plan approved in 2014. The timing of the share repurchases will depend on several factors, including market and business conditions, our cash flow, debt levels, and other investment opportunities. 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 $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 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 $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.
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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.
Forward-looking Statements: Portions of the narrative set forth in this document that are not statements of historical or current facts are forward-looking statements. Our actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein: the global economy, including inflationary pressures, potential future recessionary conditions and the impact of tariffs and trade agreements; the impact of any U.S. Federal Government shutdowns or sequestrations; the condition of the markets which we serve, whether defined geographically or by segment; changes in product mix and the financial condition of customers; our success in developing and introducing new products and new product ramp-up rates; our success in passing through the costs of raw materials to customers or otherwise mitigating fluctuating prices for those materials, including the impact of fluctuating prices on inventory values; our success in identifying acquisition candidates and in acquiring and integrating such businesses; the impact of the results of acquisitions on our ability to fully achieve the strategic and financial objectives related to these acquisitions; our success in implementing our strategic plans and the timely and successful start-up and completion of any capital projects; other financial and economic factors, including the cost and availability of raw materials (both base and precious metals), physical inventory valuations, metal consignment fees, tax rates, exchange rates, interest rates, pension costs and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, the cost and availability of insurance, credit availability, and the impact of the Company’s stock price on the cost of incentive compensation plans; the uncertainties related to the impact of war, terrorist activities, and acts of God; changes in government regulatory requirements and the enactment of new legislation that impacts our obligations and operations; the conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects; the disruptions in operations from, and other effects of, catastrophic and other extraordinary events including geopolitical conflicts such as the conflict between Russia and Ukraine and the conflict between the United States and Iran; realization of financial benefits expected from the Inflation Reduction Act of 2022; and the risk factors set forth in Part 1, Item 1A of the Company's 2025 Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For information regarding market risks, refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2025 Annual Report on Form 10-K. There have been no material changes in our market risks since the inclusion of this discussion in our 2025 Annual Report on Form 10-K.
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