Materion Corporation · NYSE:MTRN
Materion — Brush Engineered Materials — November 2005 Investor Conference
32 slides from Materion's conference presentation, Oct 31, 2005
Slide 1: Investor Presentation November 2-3, 2005
Investor Presentation November 2-3, 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements These slides contain (and the accompanying oral discussion will contain) "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that could ca
Slide 3: Management Team
Gordon D. Harnett - Chairman and CEO Chairman and CEO since 1991 Richard J. Hipple - President and COO President and COO since 2005 John D. Grampa - Vice President and CFO Vice President and CFO since 1999 Daniel A. Skoch - Senior Vice President, Administration Senior Vice President since July 2000
Slide 4: Overview
Company: Brush Engineered Materials Inc. founded 1931, publicly traded since 1956 NYSE Ticker: BW Shares Outstanding: Approximately 19.3 million at 9/30/05 Market Cap: Approximately $305 million at 9/30/05 Component of: S&P Super Composite 1500 Russell 2000 S&P Small Cap 600 Annual Revenue: Approxim
Slide 5: Investment Highlights
Investment Highlights Global Leader in High Performance Engineered Materials Unique Status as Fully Integrated Provider of Beryllium-Containing Products Broad Metallurgical Capabilities in Precious and Non-precious Metals Global Sales and Distribution Network Sales Based on End User Specifications S
Slide 6: Corporate Overview
Corporate Overview Leading global provider of high performance engineered materials Our engineered materials enable our customers' high performance products to be made stronger, smaller and lighter with significantly enhanced overall thermal, electrical and mechanical properties Product applications
Slide 7: Brush Engineered Materials - Major Business Units
Brush Engineered Materials - Major Business Units WAM Other TMI Be Products Alloy East 0.37 0.07 0.09 0.08 0.39 West North WAM PVD Targets Electronic Packaging 37% Alloy Electronic Connectors Industrial Components 39% Be Products Defense/Aerospace Specialty Products 8% TMI Automatic Connectors Telec
Slide 8: Corporate Overview
Corporate Overview Beryllium is a key raw material in many of our products. It is stiffer than steel, lighter than aluminum and possesses other unique mechanical and thermal properties Precious metals and other metals are also an important part of our product mix Operate manufacturing, service and d
Slide 9: Global Sales and Distribution Network
Global Sales and Distribution Network Operations in the U.S. and ten foreign locations Recent expansion to Taiwan, China and Korea International sales are 33% and growing ?-------------- Asia / Pacific ------------? ? ---------------- Europe -------------- ? ? - Exports from USA -? Singapore Korea H
Slide 10: Sales Based on End User Specifications
Sales Based on End User Specifications Component Fabrication Connector Manufacturing Sourcing Demand Generator Distribution Sales Marketing Brush Engineered Materials Specifications Products
Slide 11: Fully Integrated Beryllium Producer
Fully Integrated Beryllium Producer Beryllium and beryllium alloys are critical to many high performance applications Strong Lightweight Good formability Operate the only active bertrandite ore mine in the developed world 7,500 acres in Juab County, Utah Approximately 100 years of proven reserves Be
Slide 12: Strong Value Proposition in Served Markets
Strong Value Proposition in Served Markets (Formability, Conductivity, Stress Relax) $ per Pound $0 $10 Performance Parameter High Low Traditional Copper- Beryllium Alloys 390 Brush 60 Alloy 174 CuNiSi HS Phos Bronze Phos Bronze Brass Brush Value Proposition Unique, high-performance materials Techni
Slide 13: Broad Metallurgical and Significant Technical Capabilities
Broad Metallurgical and Significant Technical Capabilities Comprehensive product line High purity / proprietary PVD targets Micro-electronic packaging materials Strong end use markets Data storage Optical media Industry leading service and support Global sales and applications support "Best-in-class
Slide 14: Global Leader in High Performance Engineered Materials (2004 Revenue)
Global Leader in High Performance Engineered Materials Note: Total 2004 revenues were $496.3 million Handsets PDAs DVDs 2004 Revenue by Segment 2004 Revenue by Market Applications Routers Servers Connectors Plastic Molds X-Ray Windows Shielding Bushings Bearings Notebook Computers Lasers Switches Fi
Slide 15: Global Leader in High Performance Engineered Materials (YTD 2005 Revenue)
Global Leader in High Performance Engineered Materials Note: Total YTD 2005 revenues were $400.6 million Handsets PDAs DVDs Hard Drives Q3 2005 YTD Revenue by Segment Q3 2005 YTD Revenue by Market Applications Routers Servers Connectors Semiconductors Plastic Molds X-Ray Windows Shielding Bushings B
Slide 16: Metal Systems Group
Metal Systems Group (YTD Q3 2005 Sales: $232 million) $37.1 million; 9% Engineered material systems, including clad, plated and electron beam welded metals used in demanding connector applications Combines precious and non-precious metals in strip form for use in complex electrical components for te
Slide 17: Metal Systems Group: Beryllium Products and Brush Resources
Metal Systems Group (YTD Q3 2005 Sales: $232 million) $33.8 million; 8% Pure beryllium and aluminum-beryllium composites for high-performance applications, principally for aerospace and defense applications where stiffness, strength, lightweight, dimensional stability and reflectivity are critical $
Slide 18: Microelectronics Group
Microelectronics Group (YTD Q3 2005 Sales: $169 million) Williams Advanced Materials (WAM) $149.6 million; 37% Precious metal and specialty alloys for high reliability applications Products include precious and non-precious metal vapor deposition targets, frame lid assemblies, clad and precious meta
Slide 19: Positive Global Market Trends
Positive Global Market Trends Electronic component manufacturers are being driven by end user demands to produce products that are smaller, lighter and faster Increased electronic component performance characteristics require materials that have enhanced mechanical, electrical and thermal properties
Slide 20: Capacity to Support Profitable Market Growth
Capacity to Support Profitable Market Growth $160 million invested between 1996 and 2001 Operating with significant available excess capacity Significant productivity gains in recent years Capital spending in 2002, 2003 and 2004 averaged $7 million per year, depreciation in 2004 was approximately $2
Slide 21: Annual Revenue: Historical
Annual Revenue: Historical In 2001, the telecommunications and computer market declined; In 2003, our revenue growth began to return to historical rates 2000 2001 2002 2003 2004 2005 564 473 373 401 496 529 Growth % 24% -16% -21% +8% +24% +4-8%
Slide 22: Annual Operating Profit (Loss) Compared to Revenue: Historical
Annual Operating Profit (Loss) Compared to Revenue: Historical ($ in millions) While this revenue decline resulted in operating losses, on-going performance improvement initiatives added to profitability as revenue returned to historical levels 2000 2001 2002 2003 2004 O.P. Revenue $23 ($14) ($23) (
Slide 23: Financial and Operational Initiatives
Financial and Operational Initiatives Expanding and diversifying the revenue base to lower volatility New products New applications Improving margins through increased operating efficiency Six Sigma and Lean Manufacturing Reducing overhead costs Reducing debt Positioning for global market growth and
Slide 24: Expand and Diversify Revenue Base
Expand and Diversify Revenue Base New Products Alloy 390 - Telecom & Auto PM Plated Strip - Telecom & Auto Toughmet - Bushings & Bearings MoldMax XL - Plastic Molds Welded Tube - Oil & Gas Silver DVD Alloy (Silx) - DVD Visi-Lid - Telecom & Military New End Use Markets Alloy Heavy Equipment Oil & Gas
Slide 25: Improve Margins
Improve Margins Historical Gross Margin Trends Margin % Sales ($MM) Margins have improved through cost reduction and productivity improvement initiatives 2000 2001 2002 2003 2004 0.21 0.14 0.13 0.18 0.22 564 473 373 401 496
Slide 26: Increase Operating Efficiency
Increase Operating Efficiency Improved distribution inventory turns 29% Improved manufacturing inventory turns 16% Raised yields 7% Shipped 13% more pounds per manufacturing employee Reduce mill distribution operating cost by 3% Reduce strip rework by 28% Reduced unplanned equipment downtime 45% Imp
Slide 27: Reduce Debt Obligations
Reduce Debt Obligations Total Debt Total debt obligations have fallen over 50% from 2000 levels $12.1 $13.1 26% Off-Balance Sheet Leases $58.3 $72.5 $128.4 Balance Sheet Debt and AEP Lease 3Q05 2004 2000 ($ in millions) $70.4 $85.6 $146.3 Total Debt to Debt plus Equity 36% $17.9 21%
Slide 28: Beryllium Health and Safety
Beryllium Health and Safety Improved worker protection programs in place Rates of sensitization down among new workers CBD litigation claims have declined to 15 cases Strong focus on regulations related to beryllium exposure Brush has continued to make progress on issues related to beryllium health
Slide 29: Quarterly Revenue: Historical
Quarterly Revenue: Historical ($ in millions) Brush generated YOY sales growth in eleven consecutive quarters Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 143.9 147.2 145.5 128.2 106.2 92.4 89.6 100.8 93.5 89.6 99.5 101.8 94.2 105.6 125.9 128.6 125.8 116 130.4 134.7 135.6 2000 2001
Slide 30: YTD Q-3 2005
YTD Q-3 2005 Eleven consecutive quarters of year over year sales growth Sales up 5% to $401 million Good, but not up to our expectations Weaker shipments to computer and telecom, automotive and defense limited our growth Down approximately 11% vs prior year Hurt margins by 2 pts Stronger conditions
Slide 31: Q-3 2005 Results and Outlook
Q-3 2005 Results and Outlook YTD ... hurt by weaker computer & telecom, automotive and defense markets. Also hurt by material cost increases. Helped by new product initiatives Fourth Quarter Outlook ... while automotive and defense remain uncertain, our other markets are gaining momentum Consumer el
Slide 32: Strategic Highlights
Strategic Highlights Markets served offer strong, global organic growth Global market expansion adds to opportunities New products and new levels of service for new and existing markets adds to growth Niche oriented product offerings bring higher margins Augmenting product offerings via bolt on acqu
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