Greetings and welcome to the Materion Corporation third quarter 2013 earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mike Hasychak. Thank you, sir. You may begin.

Good morning. This is Mike Hasychak, Vice President, Treasurer, and Secretary. With me today is Dick Hipple, President, Chairman and CEO; John Grampa, Senior Vice President, Finance and Chief Financial Officer; and Jim Marrotte, Vice President and Corporate Controller. Our format for today’s conference call is as follows. John Grampa will comment on the third quarter 2013 results and the outlook, and Dick Hipple will give a market update. Thereafter, we will open up for teleconference call for questions. A recorded playback of this call will be available until November 8, by dialing area code 877-660-6853 or area code 201-612-7415, conference id number is 100466. The call will also be archived on the company’s website, materion.com. To access the replay, click on Events and Presentations on the Investor Relations page. Any forward-looking statements made in this announcement, including those in the outlook section, 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 issued this morning. Now, I’ll turn it over to John Grampa for comments.

Thank you, Mike. Good morning, everyone, and thank you for taking the time to join us this morning. As I normally do I will begin with a review of sales, earnings and operating margins. That will be followed by a review of the changes in business levels by key markets. Here I will compare the third quarter of 2013 to the third quarter of the prior year as well as sequentially to the second quarter of the current year. Then following brief comments on the balance sheet and cash flow, I will review the previously announced initiatives to reduce cost and improve margins. I will conclude with a review of the outlook for the remainder of the year. Throughout my remarks I will reference and expand a bit further where appropriate on the conditions outlined in our October 7th release, those being the conditions that led to the weaker than initially expected third quarter. For those on the call that are unfamiliar with our reporting, I want to bring your attention to the non-GAAP value-added sales and margin reporting by segment that is included in the press release. This is a supplement to the usual GAAP-based reporting and includes a reconciliation to GAAP, also included other related comparisons to the third quarter of the prior year and the second quarter of the current year. We began providing this information with our first quarter earnings release. The additional data and related metrics are very relevant because in our businesses the cost of gold, silver, platinum, palladium and copper are for the more part pass through to customers. And as a result movements in the price of these five pass-through metals can noticeably influence reported sales and margins expressed as a percentage of sales while usually having a limited effect on margin…

Thank you, John. We were certainly buffeted by a myriad of issues in the third quarter. And as John explained, the combination of delay in shipments and extended summer maintenance outage in software markets resulted in performance well below our expectations. As compared to last year, the markets are showing strength for automotive, medical and energy and weaker the flat markets versus last year were industrial components, consumer electronics, defense and science and telecom. This year, we are seeing a different seasonal sales pattern with the fourth quarter being stronger than the third quarter. Bookings were weaker than expected at the beginning of the third quarter and bookings improved later in the quarter setting us up for a stronger fourth quarter. Taking a look at individual markets, there were a lot of puts and takes across different applications in our consumer electronics portfolio across divisions. But we found a fairly flat market as compared to last year. Inside this market we have seen very strong growth of our LED phosphorous for lighting applications and ongoing expansion of our applications in smartphones and tablets with our camera stabilization materials. Counter balancing that growth or scripting actions and lower pricing in our precious metal applications in the semiconductor space. Plus a disk drive application reached end of life. Overall, this market was flat year-to-year excluding the end of life program and bookings are now picking up. The energy market was up 13% versus last year, but was down sequentially and expected short term seasonal pattern. Bookings are now increasing in this market. Defense and Science was down 16% versus last year reflecting the delayed shipments. A fairer look would be a flat market eliminating delayed shipment impact. Shipments will be up next quarter as we expected delayed shipments for the third quarter…

Thank you. (Operator Instructions) And our first question comes from the line of Martin Engler with Jefferies & Company. Please proceed with your question. Martin Engler - Jefferies & Company: Do you have any other more thoughts on ’14, any more details that you can provide right now?

What kind of details specifically, we don’t have a lot of detail obviously in front of us, but what do you have in mind. Martin Engler - Jefferies & Company: Sure. I did note here about laid any CapEx plans that you have or if you have any expectations as far as in earnings range at this point.

No, it would be a little bit premature, we think to provide an earnings range we do have some tailwinds developing as we noted in the discussion about the cost reductions and the impact of that we'll have on year over year comparisons. So that gives us a nice lift. I think the largest factor relative to 2014 is really what markets do and economies in general do and we'll have a better sense for that as we turn the corner at year end. From a capital perspective, this year we're running a little wider than target, roughly between $30 million and $35 million in CapEx versus our earlier expectations that maybe we would push closer to $40 million. But what we bring $30 million and $35 million in CapEx this year. And I think that's $35 million to $40 million or $35 million to $45 million might be the right number to consider for 2014. I can at least provide you that inside. Hopefully that helps. Martin Engler - Jefferies & Company: Sure. And as I understand that the other consolidation is there is one other facility that you're looking at right now, correct?

I'm not sure, what you are asking? Martin Engler - Jefferies & Company: Sure.

Are we looking at another facility? No we haven't disclosed what we have in mind there, if that's what you are asking. Martin Engler - Jefferies & Company: Okay. So the incrementals that you are expecting from the charges in the fourth quarter that was going to be from product to find rationalization as well as a facility or is it you didn’t break it out in any more detail on that?

No, we did not. And that’s one of the things we cannot comment on at this time. Martin Engler - Jefferies & Company: Sure. And if I could one last question there. D&A quarter-to-quarter had stepped up some, what should I think is that a good run rate on a go forward basis?

On our depreciation and amortization? In the $40 million to $45 million annual rate. Martin Engler - Jefferies & Company: Okay, excellent. Thank you.

Our next question comes from the line of Avinash Kant with D. A. Davidson. Please proceed with your question. Avinash Kant – D. A. Davidson: Good morning, Dick, John and Mike.

Good morning.

Good morning.

A few questions. So just trying to reconcile when you hit your pre-release on October 7th, you talked about Q3 EPS most likely coming in at $0.20 and you had comments related to Q4 where you said that is going to be above the $0.43 that you have seen before. Looks like, if I look at the full year guidance that you have at this point that is based on operating basis, looks like since that released something shifted from Q4 to Q3, am I right in my understanding?

No I wouldn’t, I would not assume that. I think we've got a stronger Q3 because of the effective tax rate. So maybe a couple of pennies in the tax rate did move from one quarter to the other as we identified the lower rate. But we still expect the fourth quarter to obviously be one of the strongest if not be strongest quarter of the year. And so you can infer from the $1.40 to $1.45 versus a $1 year-to-date that we're looking at $0.40 to $0.45 in the fourth quarter and I did grow the cautious in it, above $0.43 will be the strongest of the year. And I did draw the caution into the conversation relative to defense push-outs, those could always occur.

So maybe incrementally you are a little bit more cautious than the defense push-outs for the Q4?

Well, I wouldn’t say incrementally, I would say that we have certainly seen that happened over and over against the sequestration began and we don’t have any confidence that that is going to end, but the defense business is lumpy orders as you well know and high margin. And if anything occurs and we do have a couple of big shipments scheduled for the fourth quarter. If anything occurs to delay those late in the fourth quarter, if anything occurs to delay those we would have negligible heading.

Now one other question, so on the cost cutting initiatives that you have taken, we see you had taken an earlier [reference] really to those kind of when you add roughly $0.20 to earnings and now the new one most likely another $0.30. So we are looking at kind of $0.50 in earnings growth just from cost cutting initiatives in 2014. What kind of revenue levels or business levels do you need to be add to realize those benefits?

Well, let me just clarify something. The $0.20 from what we discussed a year ago, we anticipated of course this year $0.10 of cost and $0.10 of benefit. As this year 2013 is unfolded, the cost was a little bit lower than what we had estimated then. So we actually have a benefit in the 2013 numbers from those initiatives that we took up a year ago, costs were a little bit lower and the benefits did began. So year-over-year the number isn’t 50, year-over-year the number is closer to 40 from all of those initiatives.

Okay.

Now relative to demand levels, the way I would think about it is that we’re going to realize those at even at current demand levels, that’s additive to current demand level. So if business grows significantly we pick up additional leverage even further from a margin perspective.

But if the business were to be down you may not realize this $0.40, right?

If the business were to be down, there may be lower margins, I mean that $0.40 might be there because those costs are gone but on a relative basis will be better.

Exactly, but okay, yes. But I am think…

As a whole idea to make the company more efficient.

Right. And also if you could give us a little bit of an idea about the value-added sales in some of the key segments like consumers electronics in the quarter, what percentage of sales was that and maybe you can breakdown maybe the top three or those segments and the consumer electronics, industrial components and automotives?

As a percent of our total value-added sales?

Value-added sales in the quarter, yeah. If you had all that will be great but whatever you can.

Yeah. We can give you that roughly. As you know it will be in the next update that we put out on the web which will happen in the next few days, but we can give you rough estimate and I think you are going to see there is not significant change there.

Consumer electronics value-added sales were about 28% of our total in the quarter, that’s been fairly consistent over the last year and half or so. Industrial components and commercial aerospace is our second biggest market at around 17% and then we are looking at automotive, medical and expense are all around in the 10%, 11% range.

And just final and I wanted to make sure I checked it. You said the value-added operating margins in the quarter were 4%?

Yes.

And the gross margin was 30.3%?

Yes.

Thank you so much.

Our next question comes from the line of Ed Marshall with Sidoti. Please proceed with your question. Ed Marshall - Sidoti & Company: So the first question is that, I don’t know if I missed it, but the book to bill on AMT, and I am particularly interested in the consumer electronics piece of the business?

We do not have that information available Ed and particularly by market. Ed Marshall - Sidoti & Company: Okay, did you see a pick up like you normally was in the September timeframe for the December bill, consolidated bill?

The consumer electronics in general, yes. Ed Marshall - Sidoti & Company: Okay, was it on par with say last year or was it stronger than last year?

You know actually that’s a great question. In general terms, the order book lifted the last six weeks about the same percentage as lifted a year ago, in this case about 18% to 20% life in the last six weeks compared to the first four and five weeks of the quarter. That’s again coming off of a low base. Last year the base wasn't like that low. So I'd say in general terms compared to a year ago, although we have the lift, I would say in general that the market conditions aren't strong. Ed Marshall - Sidoti & Company: Or not as strong, okay.

It’s not as strong. And I think if you looked at some of the news releases coming out from the semiconductor guys and the supply chain that feeds into consumer electronics, the sky works of the world, they are all lowering estimates for their fourth quarter from where they have them just three months ago. And sometimes we're a little bit of a leading indicator there and we saw some fall off in that order rate and signal, but obviously on October 7. So I think what we're seeing we are confident that we've got the business that will help get us to our fourth quarter numbers, but they I think are signaling weaker markets. Ed Marshall - Sidoti & Company: And then you talked about shipment delays surrounding defense and nuclear markets and I think you quantified it as saying 40% of the fall-off?

It's about $3.5 million of value-added sales and about $0.06 a share was the impact. Ed Marshall - Sidoti & Company: Yeah. But it looks like on that, you said on the delta change when the sequential change was about 40% was attributable to the shipment delays. And that's about $12.5 million and I guess conceivably though that would be running through both AMT and beryllium segments?

Yeah. Ed Marshall - Sidoti & Company: Do you know what the break and I guess that 3.5, is that the beryllium piece and the remaining piece is the AMT?

So that 3.5 is the value add, the sales piece would be much higher than that. Ed Marshall - Sidoti & Company: So 12.5 is what the delta comes out (inaudible).

I don't have the sales number in front of me, but I think the majority of that would be that. Ed Marshall - Sidoti & Company: And that 3.5 would run through both businesses and do you know the split between the two?

It’s roughly one-third or two-thirds. Ed Marshall – Sidoti & Company: One-third AMT, two-thirds beryllium?

No, the other way, one-third beryllium, two-thirds AMT. Ed Marshall - Sidoti & Company: Okay. So about 1.2 million push out on the beryllium piece?

Yeah, maybe a little bit higher and it’s roughly those numbers, roughly that kind of a change 40, 60, 30 one-third, two-thirds in that range. Ed Marshall - Sidoti & Company: And how long was the shutdown versus expectations?

Well, historically, we have shutdown in the summer for a longer period of time scheduled longer period of time. We had planned to be down for about a week for some maintenance in August and that extended for a couple of weeks.

Just we got into a maintenance situation where the repairs grew as we opened up the equipment versus expectations, so it took a couple of extra weeks to get that up and running.

Given the lower demand levels we took the opportunity to do some other things while we were down for maintenance. Ed Marshall – Sidoti & Company: Okay. The push-outs and as we look kind of the September quarter and that’s usually one of the defense department has its big budget push, it seems as though that some suppliers had some big orders in the September, the fourth quarter of the U.S. fiscal year. And does it concern you at all that you had push-outs? I mean what’s really happening there, is it more of just a timing delay or is it something more that we should be paying attention to as it looks like the normal budget push did happen this year?

Yeah. I would say there is nothing at this point in time that I recall in the near term giving me any concerns. In other words that you might have things flown between quarters, but they’ll ship. I’m not worried about anything that we have in our book getting cancelled which is the most important issue at this point. Ed Marshall – Sidoti & Company: And how long that book run to? Just I mean it’s pretty short lead time, right for quarters?

Well, our longest lead times are in our Beryllium and Composites business for defense. So that we have a pretty good outlook I would give of six to nine months we have a pretty good view of that. Ed Marshall – Sidoti & Company: Okay. And then so as we look kind of fourth quarter I mean, even if you add that $1.5 million sales back or even if it’s slightly more than that for Beryllium and Composites, what would be operating margin look like in that business because even if that whole $3.5 million doesn’t look like you make up kind of get to where you were in Q2. So, but then I guess some of that was the slowdown on the maintenance as well in the quarter?

We had, go ahead. Ed Marshall – Sidoti & Company: I mean when we look at the business I think the guidance for the, the longer term guidance was $6 million in operating income going to $8 million in operating income overtime and the run rate would be there in Q4 for that $6 million. Do you kind of still hold to that expectation for both the fourth quarter and even to 2014 or has that changed slightly based on what's going on in that business?

I think that the $6 million to $8 million is the swing number and that’s back when we had the non-sequestration kind of levels forecasted in the business. If you look at the near-term, the second quarter wasn’t normally high compared to the first quarter of this year due to some of the push out that occurred in the first quarter making it into the second quarter shipment schedule. The third quarter was affected by the fall off in the demand, the push out, the higher cost that we talked about from the use of purchased materials which in effect also affected the yields. So we throw off that loss that you see in the third quarter. Coming ahead in the fourth quarter those factors should be behind us and we should back to breakeven level at a minimum in that business. Again push outs become a question for us, but we should be back to where that business is not to kind of believe that it was the past six to seven quarters. Looking into 2014 and beyond, yeah, we think again we believe and expect we’ll expect with business levels returning we’ll start to see some of the historic profit levels in that unit. Question really becomes that as you know when do we get the volume now, because we’re passing through a point where production capacity and the quality of the output is not the drag on the earnings, it’s the volume. Ed Marshall – Sidoti & Company: And you mentioned in the previous question about the D&A cost, I think there was $2 million layered in sequentially and I guess that’s a $0.07 drag to earnings. Is that a portion of the Beryllium business coming online and as you ramp up that business that new D&A kind of layers in or where is that coming from? I mean just considerably I would assume that you’re cutting fixed cost or facility cost that D&A should be drop at all?

That additional D&A, well that’s in my amortization and that’s the timing coming through when we’re deploying ore out of the ground at our Utah mine. It’s probably related to the Beryllium plant. The depreciation and all the other fixed cost associated with running the pebble plant have been in our P&L since the fourth quarter of last year. Ed Marshall – Sidoti & Company: So it’s a drawdown I’d say useful like on the mines that’s what you’re saying?

It’s the cost of the ore that we’re pulling out of the ground. Ed Marshall – Sidoti & Company: Right. And then finally what was the discrete item in the quarter, you said in the tax rate. Could you quantify that?

We quantified the discrete items at about $0.03 share and Jim, you want to comment on specific.

Yeah, there were probably actually several items probably the biggest two we finalized our 2012 federal tax return and the liability lower than what we had estimated in the last year based on some of the work we had done during the current year. There was also an adjustment to our tax reserves that we had put in place due to the exploration of the factory goes our limitation. Ed Marshall – Sidoti & Company: Okay, thanks.

You are welcome.

Our next question comes from the line of Marco Rodriguez with Stonegate Securities. Please proceed with your question.

Good morning, guys. Thank you for taking my questions.

Good morning.

Good morning. Most of my questions have actually been asked and answered, but just a couple of follow-ups here. The first item [instead] some of your answers to previous question in regard to the benefit of EPS I think was about $0.50 benefit to EPS in 2014. But did I hear it correctly that $0.10 of the previous one was recognized in ‘13 so it’s going to be just a $0.40 increase in ‘14 versus ‘13?

No, we’re saying that tailwind year-over-year would now be about $0.40 as we’ve have seen lower cost and more benefit in ‘13 than we originally anticipated.

Okay, got it. And then in regard to the restructuring efforts you are taking here, I believe also you had implemented a procurement strategy that you are going to be implementing across the company. Is that part of the August benefit or is that, will that be something incremental once it’s complete?

Well, that's ongoing and has been for a year and half and it's incremental quarter-after-quarter as we projected, it's not part of the $0.40.

Got it, okay. And then in terms of the timing, if I heard you correctly, again in Q1 ‘14 would you see that whole benefit of the $0.40, is that correct?

It will ramp.

It will largely be there in the first quarter.

Largely, I think we'll see full impact in the second, first quarter will be transition.

Okay. And then in regards to the weak macroeconomic conditions, has that brought any other interesting M&A candidates to you guys. Can you talk a little bit about that?

I'm not sure I understood the question, can you try again?

Sure. So given the weak economic conditions, I'm just wondering if there are some competitors out there that are struggling a little bit more than usual and hence might be able to more open to being acquired?

Well, I don't know the specific answer to that question, the sort of a flow of opportunities and primary focus of ours to grow our EPS organically, as well as through acquisitions. I think the opportunities are there and they’re as strong as they've ever been. But I don’t foresee anything right now that’s eminent, but the flow is good.

Okay. And then lastly here just wanted to make sure I understood on the Beryllium plant, probably you’ve given all the issues that are a swing in the federal government that $6 million to $8 million operating income run rate that you guys were expecting in Q4 kind of sounds like there might be a little bit any question now just obviously given what’s going on with the government, did I understand you guys correctly?

I mean it’s all going to be, yeah obviously it’s all going to be a function of what the volume going to that plant is going to be and so that’s still yet to be determined.

Got it.

But from where we are, we’ll have a significant improvement just simply for the fact of the fundamentals, better operations and lower costs that we have from the facility.

Got it, okay. And last quick question is kind of a housekeeping item here. If I look this now correctly, it looked like on the operating expense side sequentially the other expenses kind of ticked up pretty significantly from the $3 million level to the $4 million level, what was kind of driving that?

The main item there was that we renewed our consigned metal agreement and we had obviously a bank fees associated with that renewing those agreements out for three years, so there was close to [$1.75] million of bank fees associated with debt renewal.

One-time.

One-time. Okay got it, thanks a lot guys.

Thank you. (Operator Instructions). Our next question comes from the line of Brad Evans with Heartland. Please proceed with your question.

Gentlemen, good morning.

Good morning.

You all know and been a large shareholder of the company, we have a great deal of confidence in the team. That’s the first point I want to make. And the second point, I want to make is that we have a great deal of confidence in the business over the long term. Notwithstanding short term volatility within the business that either be company specific or macro driven. So but I want to put that on the table, so we are definitely on the same team, we have a lot of confidence whether the company is headed. But just listening to this conference call, it just drives sort of the point that Materion is an incredibly volatile and difficult business to understand and whether the market conditions be favorable or hostile. The level of complexity in the business is never going to change, it’s hard to understand. I think, my god, in some instances you have correlation to gold, gold mining stock, that’s just told you how the market that is a hard from understand exactly how you create value for shareholders. So we understand the market has been turbulent, some of the opacity and difficulty in understanding the business is somewhat self produced, we have to be clear about that and that's because of the rebranding and we are now into another restructuring program. So if a market has a hard time digesting that and understanding what does exactly is happening underneath the surface when you conduct your multiple restructuring programs. So we appreciate your effort to cut cost, but we have to understand that does create some concern with the street generally speaking. And then the last thing I would just tell you is that the M&A that you have transacted several years ago, those transactions still I don’t think are being reflected in the value of the company. So Materion is a stronger engine that is running on two or three cylinders today, there is a lot of upside from an earnings perspective, you guys are cash flow machines which we absolutely love, your cash flow are great, the earnings have been volatile, there is a lot of upside in earnings, we see it, we know it’s there. And for that reason we urge you to continue on your path of maintaining a fiscally responsible balance sheet with no debt, we applaud for your balance sheet, we applaud you for the dividends, but we think right now the best use of free cash flow gentlemen is for you be buying back stock and perhaps doing it aggressively. The market is having a hard time understanding your business. It’s not valued relatively to its intrinsic value. M&A activity is going off in extremely high multiples, you are very depressed at 6.5 times next year’s EBITDA. We urge you to buy back stock and I think it’s the best thing you could do for your long-term shareholders and that’s really all I had.

Okay. Well, Brad, thanks for your comments. And we appreciate your comments and you have been open about them on a regular basis so we respect that. As you know capital deployment options are reviewed with our board on a regular basis and that we’ve openly shared our view and the position of our board on the choices in the past as you have expressed your views. As the company is transformed, been grown overtime and we have pretty much, as you indicated, we have grown our cash flow. And if our cash flow is developed, our first priority was to create and maintain that strong balance sheet that we do have. And we do continue to focus on just that. Our second priority has always been to deploy our capitals toward the growth and to generate the additional EPS that we have generated from operating resources principally. And this will include investing in accretive augmentations of our technologies and our markets to add the product portfolio and the best of the technologies that we today have which in the end is validated less volatility and not necessarily more as time is going on. And those truly are our priorities. I mean we believe to deploy capital for operating EPS growth is the best over the long haul. And our successful overtime has allowed us to take that one additional step that you have also added saying that distributing cash to the shareholders in the form of a regular healthy quarterly dividend and hopefully we can continue to increase on an annual basis. And we added a dividend just six quarters ago and we’ve increased it $0.01. As you know we are not debt free, we do have $88 million of debt. And we do not have excess cash to deploy at this time and nor do we believe it’s appropriate to level up to buy back shares aggressively at this time. Our primary focus continuous to be to grow the EPS organically and through acquisitions. And the opportunities in both areas are as strong today as they have ever been. And at least for the near term, I don’t foresee any change in this strategy in the company. We appreciate your comments about the things that we've done. And we are going to continue to work hard to move that multiple up and return to shareholders what they deserve for their investments.

Yeah. I think just to be clear, I mean we would not advocate in that investment business organically to drive future growth and I think tuck-in acquisitions overtime make a lot of sense. But the pay off cashed acquisitions is not reflected in your earnings today nor is the underlying earnings power of the business. So we would argue that for you right now that the looking at acquisitions on a large scale as probably potentially shareholder value destructive and the opportunity to just grow to leverage the earnings power, the existing assets will drive significant shareholder value. And if you can meaningfully move the denominator in that earnings per share calculation meaning shrink the share count, the free cash flow, switch your assets and be very mindful on how you deploy capital on a CapEx basis, you can drive a lot of shareholder value. So our opinions are changed. I think the buyback of some magnitude makes a lot of sense for a long term shareholder. So we'll agree to disagree here, but you have a lot of opportunity to grow shareholder value, if you deploy capital appropriately. Thanks a lot.

Okay. Thank you.

And our next question comes from the line of Rob Amman with RK Capital. Please proceed with your question.

Yes. Just curious what the estimated tax rate will be the full year basis, will it be around this kind of 22% level, we've seen here?

The rate in the fourth quarter will be 24% to 25%. And then I think for now from planning purposes I would suggest the rate in 2014 might be 29% or 30%.

Great. Thank you.

Okay. And it seems we have no further questions at this time. I’d like to turn the floor back over for any closing comments.

Sure. This is Mike Hasychak. We’d like to thank all of you for participating on the call this morning. I’ll be around the remainder of the day to answer any further questions. My direct dialing number is area code 216 the number is 3836823. Thank you very much.

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.