Rogers Delivers Record Revenue with Strong
Sequential Earnings Performance
Rogers Corporation (NYSE:ROG) today announced financial results
for the 2018 third quarter.
The Company reported 2018 third quarter net sales of $226.9
million, which was within the Company's previously announced
guidance of $220 to $230 million. Q3 2018 net sales increased $12.2
million (+5.7%) over Q2 2018 net sales and $20.1 million (+9.7%)
over Q3 2017 net sales. Currency exchange rates negatively impacted
2018 third quarter net sales by $4.2 million compared to the 2018
second quarter but had favorable impact of $0.8 million on 2018
third quarter revenues compared to the 2017 third quarter.
Gross margin was 34.9% in the third quarter of 2018, compared to
35.7% in the second quarter of 2018 and 39.7% in the third quarter
of 2017. Q3 2018 gross margin was lower than our guidance of 37%.
GAAP operating margin was 13.1% in the third quarter of 2018,
compared to 11.7% in the second quarter of 2018 and 19.0% in the
third quarter of 2017. Adjusted operating margin was 17.0% in Q3
2018, compared to 14.8% in Q2 2018 and 19.4% in Q3 2017.
Third quarter 2018 GAAP net income was $19.7 million, compared
to $17.3 million in the second quarter of 2018 and $25.5 million in
the third quarter of 2017.
GAAP earnings for the 2018 third quarter were $1.06 per diluted
share, compared to $0.93 per diluted share in the second quarter of
2018 and $1.37 per diluted share in the third quarter of 2017. Q3
GAAP earnings per diluted share were within the Company's guidance
of $0.97 to $1.12. On an adjusted basis, earnings were $1.42 per
diluted share for the 2018 third quarter, compared to adjusted
diluted earnings per share of $1.19 for the second quarter and
$1.41 per diluted share for the 2017 third quarter. Adjusted
earnings were above the Company's guidance of $1.25 to $1.40 per
diluted share.
Adjusted EBITDA was $47.5 million for the third quarter of 2018,
compared to $40.7 million for the second quarter and $50.7 million
reported in the third quarter of 2017.
“We were pleased with the strong organic revenue growth in
Rogers’ PES and EMS businesses, as well as our overall earnings
performance in the quarter,” stated Bruce D. Hoechner, Rogers’
President and Chief Executive Officer. “However, market weakness in
4G LTE and Advanced Driver Assistance Systems applications led to
lower than expected demand in our ACS business that unfavorably
impacted gross margin. While there is still more work to do, we
continue to make progress on our operational excellence initiatives
to drive profitability. Our outlook remains positive as we
anticipate the transition in wireless telecommunications
infrastructure from 4G to 5G, as well as strength in demand for
Advanced Mobility applications, including ADAS and EV/HEV.”
Business segment
discussion
Advanced Connectivity Solutions
(ACS)Advanced Connectivity Solutions reported 2018 third
quarter net sales of $71.9 million, a decrease of $4.5 million
(-5.9%) compared to the 2018 second quarter and a decrease of $0.8
million (-1.2%) compared to 2017 third quarter net sales. Third
quarter 2018 saw lower than expected revenues from Advanced Driver
Assistance Systems (ADAS) applications as supply chain volatility
increased due to platform migrations to higher frequencies and
European car manufacturers work through new regulatory standards.
In addition, the business experienced continued softness in demand
for wireless 4G LTE applications in anticipation of the transition
to 5G. Third quarter 2018 net sales were negatively impacted by
$1.3 million due to fluctuations in currency exchange rates
compared to the second quarter of 2018, but were favorably impacted
by $0.1 million compared to the third quarter of 2017.
Elastomeric Material Solutions
(EMS)Elastomeric Material Solutions reported 2018 third
quarter net sales of $95.8 million, an increase of $16.6 million
(+21.0%) compared to the 2018 second quarter and an increase of
$13.6 million (+16.5%) compared to 2017 third quarter net sales.
Strong organic growth was driven by demand in automotive, portable
electronics and general industrial applications. Segment revenue
also benefited from the recently acquired Griswold business. Third
quarter 2018 net sales were negatively impacted by $1.4 million due
to fluctuations in currency exchange rates compared to the 2018
second quarter but were favorably impacted by $0.3 million compared
to the 2017 third quarter.
Power Electronics Solutions
(PES)Power Electronics Solutions reported 2018 third
quarter net sales of $55.2 million, an increase of $1.6 million
(+3.0%) compared to the 2018 second quarter and an increase of $8.8
million (+19.0%) compared to 2017 third quarter net sales of $46.4
million. The business continues to benefit from accelerating demand
in electric and hybrid electric vehicles. Third quarter 2018 net
sales were negatively impacted by $1.5 million due to fluctuations
in currency exchange rates compared to the second quarter of 2018
but were favorably impacted by $0.4 million compared to the third
quarter of 2017.
OtherOther reported 2018
third quarter net sales of $4.0 million which decreased $1.4
million (-26.2%) compared to both the second quarter 2018 and third
quarter of 2017 net sales. The change was primarily driven by the
timing of revenue recognition under the new standard.
Balance sheet and other
highlights
Cash positionRogers ended
the third quarter of 2018 with cash and cash equivalents of $149.6
million, a decrease of $31.6 million from $181.2 million at
December 31, 2017. This decrease was primarily due to $78.6
million paid for the Griswold acquisition, net of cash, $36.6
million in capital expenditures, $43.4 million paid for the Isola
asset acquisition, and $25.0 million in pension contributions in
anticipation of the proposed termination of the Rogers Corporation
Defined Benefit Pension Plan, along with $6.5 million in tax
payments related to net share settlement of equity awards and $3.0
million in repurchases of capital stock. This activity was
partially offset by $102.5 million in borrowings under our
revolving credit facility, of which $82.5 million and $20.0 million
were used to fund the Griswold acquisition and the voluntary
pension plan contribution, respectively, and by cash generated by
operations.
Effective tax rateRogers'
effective income tax rate was 31.0% for the third quarter of 2018,
compared to 32.6% in the second quarter of 2018 and 37.6% for the
third quarter of 2017. The decrease was primarily due to a lower
U.S. effective tax rate, as a result of U.S. tax reform and
geographic profit mix, partially offset by an increase in current
year accruals for uncertain tax positions.
Financial outlookRogers
guides its 2018 fourth quarter net sales to a range of $215 to $225
million and gross margin in the range of 35% to 36%. Rogers guides
its 2018 fourth quarter earnings to a range of $0.84 to $0.99 per
diluted share. Adjusted earnings are guided to a range of $1.20 to
$1.35 per diluted share.
Rogers guides 2018 full year capital spending to be in the range
of $45 to $55 million. In addition, the business invested an
incremental $43.4 million for the Isola asset acquisition.
Rogers guides the 2018 full year effective tax rate to be
26-28%, with a fourth quarter effective tax rate of 30-31%.
About Rogers
CorporationRogers Corporation (NYSE:ROG) is a global
leader in engineered materials to power, protect, and connect our
world. With more than 180 years of materials science experience,
Rogers delivers high-performance solutions that enable clean
energy, internet connectivity, and safety and protection
applications, as well as other technologies where reliability is
critical. Rogers delivers Power Electronics Solutions for
energy-efficient motor drives, e-Mobility and renewable energy;
Elastomeric Material Solutions for sealing, vibration management
and impact protection in mobile devices, transportation interiors,
industrial equipment and performance apparel; and Advanced
Connectivity Solutions for wireless infrastructure, automotive
safety and radar systems. Headquartered in Arizona (USA), Rogers
operates manufacturing facilities in the United States, China,
Germany, Belgium, Hungary, and South Korea, with joint ventures and
sales offices worldwide.
Safe Harbor StatementThis
release contains forward-looking statements, which may concern our
plans, objectives, outlook, goals, strategies, future events,
future net sales or performance, capital expenditures, financing
needs, future restructuring, plans or intentions relating to
expansions, business trends and other information that is not
historical information. All forward-looking statements are based
upon information available to us on the date of this release and
are subject to risks, uncertainties and other factors, many of
which are outside of our control, which could cause actual results
to differ materially from the results discussed in the
forward-looking statements. Risks that could cause such results to
differ include: failure to capitalize on, and volatility within,
the Company's growth drivers, including advanced mobility and
advanced connectivity, such as delays in adoption or implementation
of new technologies; uncertain business, economic and political
conditions in the United States and abroad, particularly in China,
South Korea, Germany, Hungary and Belgium, where we maintain
significant manufacturing, sales or administrative operations;
changes in trade policy, tariff regulation or other trade
restrictions; fluctuations in foreign currency exchange rates;
research and development efforts; competitive developments;
business development transactions and related integration
considerations, including failure to realize, or delays in the
realization of anticipated benefits of such transactions; the
outcome of ongoing and future litigation, including our
asbestos-related product liability litigation; inability to obtain
raw materials, including commodities, from single or limited source
suppliers in a timely and cost effective manner; and changes in
laws and regulations applicable to our business. For additional
information about the risks, uncertainties and other factors that
may affect our business, please see our most recent annual report
on Form 10-K and any subsequent quarterly reports on Forms 10-Q
filed with the Securities and Exchange Commission. Rogers
Corporation assumes no responsibility to update any forward-looking
statements contained herein except as required by law.
Conference call and additional
information
A conference call to discuss 2018 third quarter results today on
Thursday November, 01 2018 at 5pm ET.
A live webcast and slide presentation will be available under
the investors section of www.rogerscorp.com/ir.
To participate, please dial:
1-800-574-8929 Toll-free in the United
States
1-973-935-8524 Internationally
There is no passcode for the live
teleconference.
If you are unable to attend, a conference call playback will be
available from November 1, 2018 at approximately 8 pm ET through
November 7, 2018 at 11:59 pm ET, by dialing 1-855-859-2056 from the
United States, and 1-404-537-3406 from outside of the US, each with
passcode 8097939.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET November 11, 2018.
Additional informationPlease contact the Company directly
via email or visit the Rogers website.
(Financial statements follow)
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended
Nine Months Ended (DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Net sales
$ 226,863 $ 206,783
$ 656,149
$ 612,035 Cost of sales
147,733 124,595
423,741 368,951 Gross margin
79,130
82,188
232,408 243,084 Selling, general and administrative
expenses
39,943 39,010
123,080 113,590 Research and
development expenses
7,630 7,411
24,514 21,512
Restructuring and impairment charges
1,052 962
2,015
2,767 Other operating (income) expense, net
863
(4,387 )
(3,111 ) (5,329 ) Operating income
29,642 39,192
85,910 110,544 Equity income in
unconsolidated joint ventures
1,642 1,384
4,453 3,359
Other income (expense), net
(680 ) 1,991
(647
) 3,370 Interest expense, net
(2,000 ) (1,639
)
(4,503 ) (4,834 ) Income before income tax expense
28,604 40,928
85,213 112,439 Income tax
expense
8,870 15,396
22,014
38,979 Net income
$ 19,734 $ 25,532
$ 63,199 $ 73,460
Basic earnings per share
$ 1.07
$ 1.40
$ 3.44 $ 4.05
Diluted earnings per share
$
1.06 $ 1.37
$ 3.39 $ 3.97
Shares used in computing: Basic earnings per share
18,403 18,181
18,360 18,126 Diluted earnings per
share
18,678 18,588
18,649 18,503
Please note for adoption of ASU 2017-07, Rogers has reclassified
third quarter and year to date 2017 pension and OPEB income, in the
amounts of $395 and $1,244 thousand, respectively, from Selling,
general and administrative expense to Other income (expense), net,
in the condensed consolidated statements of operations above.
Condensed Consolidated Statements of
Financial Position (Unaudited)
(IN THOUSANDS)
September 30,
2018 December 31, 2017
Assets Current assets Cash and
cash equivalents
$ 149,556 $ 181,159 Accounts
receivable, less allowance for doubtful accounts of $1,143 and
$1,525
155,706 140,562 Contract assets
20,260 —
Inventories
125,885 112,557 Prepaid income taxes
2,820 3,087 Current portion of asbestos-related insurance
receivables
5,682 5,682 Assets held for sale
— 896
Other current assets
12,416 10,580 Total
current assets
472,325 454,523 Property, plant and
equipment, net of accumulated depreciation of $308,126 and $289,909
241,504 179,611 Investments in unconsolidated joint ventures
17,812 18,324 Deferred income taxes
4,478 6,008
Goodwill
266,304 237,107 Other intangible assets, net of
amortization
181,618 160,278 Asbestos-related insurance
receivables
63,511 63,511 Other long-term assets
21,873 5,772 Total assets
$
1,269,425 $ 1,125,134
Liabilities and
Shareholders’ Equity Current liabilities Accounts payable
$ 39,999 $ 36,116 Accrued employee benefits and
compensation
27,598 39,394 Accrued income taxes payable
9,189 6,408 Current portion of capital lease obligations
436 579 Current portion of asbestos-related liabilities
5,682 5,682 Other accrued liabilities
24,686
25,629 Total current liabilities
107,590 113,808
Borrowings under credit facility
233,482 130,982 Non-current
portion of capital lease obligations
4,786 5,873 Pension
liability
268 8,720 Retiree health care and life insurance
benefits
1,685 1,685 Asbestos-related liabilities
69,560 70,500 Non-current income tax
10,707 12,823
Deferred income taxes
10,936 10,706 Other long-term
liabilities
4,028 3,464 Shareholders’ equity Capital Stock -
$1 par value; 50,000 authorized shares; 18,390 and 18,255 shares
issued and outstanding
18,390 18,255 Additional paid-in
capital
129,659 128,933 Retained earnings
751,951
684,540 Accumulated other comprehensive loss
(73,617
) (65,155 ) Total shareholders' equity
826,383
766,573 Total liabilities and shareholders' equity
$
1,269,425 $ 1,125,134
Reconciliation of non-GAAP financial
measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures
that are not presented in accordance with generally accepted
accounting principles in the United States of America (“GAAP”):
(1) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding acquisition-related
amortization of intangible assets and discrete items, such as
restructuring expenses, acquisition and related integration costs,
transition services related to asset acquisition, and gains or
losses on asset or business dispositions (collectively, “Discrete
Items”);
(2) Adjusted EBITDA, which the Company defines as net income
excluding interest expense, income tax expense, depreciation and
amortization, and Discrete Items; and
(3) Adjusted operating margin, which the Company defines as
operating margin excluding acquisition-related amortization of
intangible assets and Discrete Items.
Management believes each of these measures is useful to
investors because they allow for comparison to the Company’s
performance in prior periods without the effect of items that, by
their nature, tend to obscure the Company’s core operating results
due to the potential variability across periods based on the
timing, frequency and magnitude. As a result, management believes
that adjusted earnings per diluted share, adjusted EBITDA and
adjusted operating margin enhance the ability of investors to
analyze trends in the Company’s business and evaluate the Company’s
performance relative to peer companies. However, non-GAAP financial
measures have limitations as analytical tools and should not be
considered in isolation from, or solely as alternatives to,
financial measures prepared in accordance with GAAP. In addition,
these non-GAAP financial measures may differ from similarly named
measures used by other companies. Reconciliations of the
differences between these non-GAAP financial measures and their
most directly comparable financial measures calculated in
accordance with GAAP are set forth below.
**2017 financial measures below have been adjusted for the
adoption of ASU 2017-07, and has reclassified pension and OPEB
income from selling, general and administrative expense to other
income (expense), net.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share for the third
quarter*:
2018
2017
Earnings per diluted share
Q3 Q3 GAAP earnings per diluted share
$1.06 $1.37 Restructuring, severance, impairment and
other related costs
0.11 0.03 Acquisition and related
integration costs
0.04 0.02 Loss (gain) on sale of
long-lived assets
— (0.15 ) Purchase accounting inventory
adjustment
0.02 — Transition services, net
0.03 — Total discrete items
$0.19 ($0.10 ) Earnings per
diluted share adjusted for discrete items
$1.24 $1.27 Acquisition
intangible amortization
0.18 0.14
Adjusted earnings per diluted share
$1.42 $1.41
Reconciliation of GAAP net income to
adjusted EBITDA for the third quarter*:
2018
2017 (amounts in millions)
Q3
Q3 Net income
$19.7 $25.5 Interest expense,
net
2.0 1.6 Income tax expense
8.9 15.4 Depreciation
8.8 7.3 Amortization
4.4 3.9 Restructuring,
severance, impairment and other related costs
2.7 0.9
Acquisition and related integration costs
0.9 0.5 Loss
(gain) on sale of long-lived assets
— (4.4 ) Purchase
accounting inventory adjustment
0.3 — Transition
services lease income
(0.2 )
— Adjusted EBITDA
$47.5
$50.7
*Values in table may not add due to rounding.
Reconciliation of GAAP operating margin
to adjusted operating margin for the third quarter*:
2018 2017
Operating margin Q3 Q3
**GAAP operating margin
13.1%
19.0% Restructuring, severance, impairment and other related
costs
1.2% 0.5% Acquisition and related integration costs
0.4% 0.2% Loss (gain) on sale of long-lived assets
—%
(2.1)% Purchase accounting inventory adjustment
0.1% —%
Transition services, net
0.3% —%
Total discrete Items
2.0% (1.4)%
Operating margin adjusted for discrete items
15.1% 17.6% Acquisition intangible
amortization
1.9% 1.8%
Adjusted operating margin
17.0%
19.4%
*Percentages in table may not add due to rounding.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2018 third quarter:
GuidanceQ3 2018
GAAP earnings per diluted share
$0.97 - $1.12
Discrete items
$0.13 Acquisition intangible
amortization
$0.15 Adjusted
earnings per diluted share
$1.25 - $1.40
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2018 fourth quarter:
GuidanceQ4 2018
GAAP earnings per diluted share
$0.84 - $0.99
Discrete items
$0.18 Acquisition intangible
amortization
$0.18 Adjusted
earnings per diluted share
$1.20 - $1.35
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version on businesswire.com: https://www.businesswire.com/news/home/20181101005957/en/
Investor contact:Rogers CorporationMike Ludwig,
480-917-6073investor.relations@rogerscorp.comhttp://www.rogerscorp.com
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