Materion Corporation

Greetings. Welcome to Materion's third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If any of which require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Steve Shamrock, Interim Chief Financial Officer. Thank you. You may begin.

Good morning. This is Steve Shamrock, Interim Chief Financial Officer. With me today is Jugal Vijayvargiya, President and Chief Executive Officer. Our format for today's conference call is as follows. Jugal Vijayvargiya will provide an update on COVID-19 and key strategic initiatives. Following Jugal, I will review detailed financial results for the quarter, and then we will open up the call for questions. Before we begin, let me remind investors that any forward-looking statements made in this announcement, including those in the Outlook sections, and during the question and answer portion are based on current expectations. The company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning. Additionally, comments with regard to earnings before interest and taxes, net income, and earnings per share reflect the adjusted gap numbers shown in attachment number five in this morning's press release. The adjustments are made in the prior year period for comparative purposes and remove special items, non-cash charges, and certain income tax adjustments. And now, I'll turn it over to Jugal for his comments.

Thanks, Steve, and welcome, everyone. I hope all of you and your loved ones continue to remain healthy and safe during these unprecedented times. Today, I'll first review the impact of COVID-19. and follow that up with an update on our key strategic initiatives. Health and safety of our people continues to remain our overriding priority. We continue to take input from all available sources to ensure appropriate measures are taken to protect our people around the world. A majority of our office employees are working from home and all of our factories are operating. As you would expect, we continue to experience the impact of COVID-19 in a number of our key end markets, particularly in aerospace, energy, and industrial. Despite very challenging market conditions, we delivered sequential earnings growth for the second consecutive quarter, and all three of our businesses reported double digit profit margins. Semiconductor sales continued on a positive trajectory with sequential and year-over-year growth led by commercial performance initiatives related to new products and stronger demand. We have actively managed our costs in response to the downturn. Sequentially, earnings increased 12% with a sales increase of 4%. I will now transition and review some of our key strategic initiatives. I'm excited to report consolidated quarterly financial results, which include Optics Balsers for the first time. The combination with Optics Balsers creates the world's leading thin film optical coatings provider with a highly complementary geographic, product, and end market portfolio. Our teams are fully engaged with integration activities which are going very well and according to plan. Our commercial teams are starting to work together on identifying synergistic customer opportunities in support of our overall growth objectives. Our engineered class trip project, which I announced earlier this year, remains unscheduled. As a reminder, we entered into a business arrangement with a new customer to expand our manufacturing capacity for a highly engineered clad strip product which will be used in a next generation model of an existing product. The total investment of the project is expected to be approximately $85 million, with the customer pre-funding approximately $70 million. In September, we received an additional $14 million from the customer for a total of $45 million In support of this program, we are actively working to establish a new leading-edge manufacturing facility for future product supply. In addition, we're making good progress on negotiating a long-term supply agreement and expect to finalize in the fourth quarter. We are also on track for shipping product in the fourth quarter from our existing facilities. Lastly, I will provide a quick update on the PAC Facility Consolidation Project. This project remains on schedule to complete all activities by year end. We completed the closure of the Detroit Michigan Service Center in the second quarter. In the third quarter, we shut down production at our Fremont, California location. We expect to complete relocation and installation activity in the fourth quarter. In closing, I want to sincerely thank our global team who is persevering through this pandemic with a determination and focus to drive and turn on forward on our transformation into an advanced materials business. Now, I'll turn the call over to Steve to cover the financials.