-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AfPhmQSvdV197kYnFABdctGpFAm6bvjOWhccf8/SLITfGWrrf5zQ9IMxk/chemDF v9BUTU6OFTcAulYJctK+jg== /in/edgar/work/0000084748-00-000020/0000084748-00-000020.txt : 20001115 0000084748-00-000020.hdr.sgml : 20001115 ACCESSION NUMBER: 0000084748-00-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001001 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROGERS CORP CENTRAL INDEX KEY: 0000084748 STANDARD INDUSTRIAL CLASSIFICATION: [2821 ] IRS NUMBER: 060513860 STATE OF INCORPORATION: MA FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04347 FILM NUMBER: 763976 BUSINESS ADDRESS: STREET 1: P.O. BOX 188 STREET 2: ONE TECHNOLOGY DRIVE CITY: ROGERS STATE: CT ZIP: 06263-0188 BUSINESS PHONE: 860 774-96 10-Q 1 0001.txt Total pages included - 16 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 1, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4347 ROGERS CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 06-0513860 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 188, One Technology Drive, Rogers, Connecticut 06263-0188 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (860) 774-9605 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the Registrant's classes of common stock as of October 29, 2000: Capital Stock, $1 Par Value-15,084,074 shares 1 ROGERS CORPORATION AND SUBSIDIARIES FORM 10-Q October 1, 2000 INDEX ----- Page No. -------- PART I--FINANCIAL INFORMATION - ----------------------------- Item 1. Financial Statements (Unaudited): Consolidated Statements of Income-- Three Months and Nine Months Ended October 1, 2000 and October 3, 1999 3 Consolidated Balance Sheets-- October 1, 2000 and January 2, 2000 4-5 Consolidated Statements of Cash Flows-- Nine Months Ended October 1, 2000 and October 3, 1999 6 Supplementary Notes 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-15 PART II--OTHER INFORMATION - -------------------------- Item 6. Reports on Form 8-K 16 SIGNATURES 16 - ---------- 2 PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except for Per Share Amounts) Three Months Ended: Nine Months Ended: ------------------------- -------------------------- October 1, October 3, October 1, October 3, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Sales $ 62,357 $ 61,076 $ 187,263 $ 188,781 Cost of Sales 41,662 42,711 125,349 135,657 Selling and Administrative Expenses 10,026 9,657 29,920 27,109 Research and Development Expenses 2,942 2,529 9,117 7,672 ---------- ---------- ---------- ---------- Total Costs and Expenses 54,630 54,897 164,386 170,438 ---------- ---------- ---------- ---------- Operating Income 7,727 6,179 22,877 18,343 Other Income less Other Charges 1,938 138 3,996 445 Interest Income, Net 104 83 290 165 ---------- ---------- ---------- ---------- Income Before Income Taxes 9,769 6,400 27,163 18,953 Income Taxes: Federal and Foreign 2,735 1,695 7,606 5,170 State 98 97 271 137 ---------- ---------- ---------- ---------- Net Income $ 6,936 $ 4,608 $ 19,286 $ 13,646 ========== ========== ========== ========== Net Income Per Share (Note G): Basic $ 0.46 $ 0.30 $ 1.30 $ 0.90 ========== ========== ========== ========== Diluted $ 0.44 $ 0.29 $ 1.22 $ 0.87 ========== ========== ========== ========== Shares Used in Computing (in thousands) (Note G): Basic 14,955 15,270 14,832 15,200 ========== ========== ========== ========== Diluted 15,830 15,904 15,807 15,746 ========== ========== ========== ========== The accompanying notes are an integral part of the consolidated financial statements. 3 ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) October 1, 2000 January 2, 2000 --------------- --------------- Current Assets: Cash and Cash Equivalents $ 7,754 $ 9,955 Accounts Receivable, Net 38,062 33,601 Accounts Receivable, Joint Ventures 8,154 283 Inventories: Raw Materials 11,218 10,566 In-Process and Finished 17,200 12,753 ---------- ---------- Total Inventories 28,418 23,319 Current Deferred Income Taxes 4,728 4,728 Other Current Assets 1,194 661 ---------- ---------- Total Current Assets 88,310 72,547 ---------- ---------- Property, Plant and Equipment, Net of Accumulated Depreciation of $82,853 and $75,069 93,025 84,652 Investment in Unconsolidated Joint Ventures 5,930 5,294 Pension Asset 4,223 4,223 Goodwill and Other Intangibles, Net 14,165 14,510 Other Assets 2,028 2,180 ---------- ---------- Total Assets $ 207,681 $ 183,406 ========== ========== The accompanying notes are an integral part of the consolidated financial statements. 4 ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in Thousands) October 1, 2000 January 2, 2000 --------------- --------------- Current Liabilities: Accounts Payable $ 12,569 $ 14,855 Accrued Employee Benefits and Compensation 11,667 10,782 Accrued Income Taxes Payable 10,501 4,341 Taxes, Other than Federal and Foreign Income 1,079 518 Other Accrued Liabilities 6,534 6,245 ---------- ---------- Total Current Liabilities 42,350 36,741 ---------- ---------- Long-Term Debt 9,740 9,740 Noncurrent Deferred Income Taxes 6,099 6,362 Noncurrent Pension Liability 4,215 4,215 Noncurrent Retiree Health Care and Life Insurance Benefits 5,966 5,966 Other Long-Term Liabilities 3,785 3,965 Shareholders' Equity: Capital Stock, $1 Par Value: Authorized Shares 50,000,000; Issued Shares 15,452,003 and 15,047,552 15,452 15,430 Additional Paid-In Capital 28,071 27,001 Treasury Stock (382,900 shares) (13,436) (13,436) Accumulated Other Comprehensive Income,(Loss) (830) 438 Retained Earnings 106,269 86,984 ---------- ---------- Total Shareholders' Equity 135,526 116,417 ---------- ---------- Total Liabilities and Shareholders' Equity $ 207,681 $ 183,406 ========== ========== The accompanying notes are an integral part of the consolidated financial statements. 5 ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Nine Months Ended: --------------------- October 1, October 3, 2000 1999 --------------------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 19,286 $ 13,646 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 9,615 8,784 Expense (Benefit) for Deferred Income Taxes 13 (331) Equity in Undistributed (Income) of Unconsolidated Joint Ventures, Net (2,724) (819) Loss on Disposition of Assets 333 56 Noncurrent Pension and Postretirement Benefits 78 125 Other, Net 202 (220) Changes in Operating Assets and Liabilities: Accounts Receivable (12,374) (2,704) Inventories (5,726) 1,677 Prepaid Expenses (587) (124) Accounts Payable and Accrued Expenses 6,549 6,976 --------- --------- Net Cash Provided by Operating Activities 14,665 27,066 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Capital Expenditures (18,633) (9,971) Acquisition of Business -- (4,302) Proceeds from Sale of Marketable Securities -- 256 Investment in Unconsolidated Joint Ventures and Affiliates 834 737 --------- --------- Net Cash (Used in) Investing Activities (17,799) (13,280) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from Short and Long-Term Borrowings 1,604 (16) Repayments of Debt Principal (1,685) (759) Acquisition of Treasury Stock -- (4,932) Proceeds from Sale of Capital Stock 368 395 --------- --------- Net Cash Provided by (Used in) Financing Activities 287 (5,312) Effect of Exchange Rate Changes on Cash 646 101 --------- --------- Net (Decrease) Increase in Cash and Cash Equivalents (2,201) 8,575 Cash and Cash Equivalents at Beginning of Year 9,955 9,592 --------- --------- Cash and Cash Equivalents at End of Quarter $ 7,754 $ 18,167 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. 6 ROGERS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY NOTES A. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended January 2, 2000. B. Under the Company's unsecured multi-currency revolving credit agreement with Fleet National Bank, the Company can borrow up to $20.0 million, or the equivalent in Belgian Francs and/or Japanese Yen, and eventually the Euro. Amounts borrowed under this agreement are to be repaid in full by September 19, 2003. The Company borrowed 390,207,039 Belgian Francs under this arrangement to facilitate the Rogers Induflex acquisition in Belgium in September 1997. C. Interest paid during the first nine months of 2000 and 1999 was $683,000 and $895,000, respectively. D. Income taxes paid were $554,000 and $804,000 in the first nine months of 2000 and 1999, respectively. E. Rogers 1999 sales to Hutchinson Technology, Inc. by quarter (in millions) were: $10.6 in the first quarter; $9.6 in the second quarter; $7.5 in the third quarter and $3.0 in the fourth quarter. F. The components of comprehensive income, net of related tax, are as follows: Three Months Ended: Nine Months Ended: ----------------------- ---------------------- (Dollars In Thousands) October 1, October 3, October 1, October 3, 2000 1999 2000 1999 ------------------------------------------------ Net income $ 6,936 $ 4,608 $ 19,286 $ 13,646 Foreign currency translation adjustments (732) 1,362 (1,268) (72) Unrealized gains on securities -- -- -- 2 ----------------------- ---------------------- Comprehensive income $ 6,204 $ 5,970 $ 18,018 $ 13,576 ======================= ====================== Accumulated balances related to each component of Other Comprehensive Income (Loss) are as follows: 7 SUPPLEMENTARY NOTES, CONTINUED October 1, 2000 January 2, 2000 --------------- --------------- Foreign currency translation adjustments $ (679) $ 589 Change in minimum pension liability (151) (151) -------- -------- $ (830) $ 438 ======== ======== G. The following table sets forth the computation of basic and diluted earnings per share in conformity with Statement of Financial Accounting Standards No. 128, "Earnings per Share": Three Months Ended: Nine Months Ended: ---------------------- --------------------- (In Thousands, Except Per October 1, October 3, October 1, October 3, Share Amounts) 2000 1999 2000 1999 ---------------------- --------------------- Numerator: Net income $ 6,936 $ 4,608 $ 19,286 $ 13,646 Denominator: Denominator for basic earnings per share - Weighted-average shares 14,955 15,270 14,832 15,200 Effect of stock options 875 634 975 546 ---------------------- --------------------- Denominator for diluted earnings per Share - adjusted weighted-average Shares and assumed conversions 15,830 15,904 15,807 15,746 ====================== ===================== Basic earnings per share $ 0.46 $ 0.30 $ 1.30 $ 0.90 ====================== ===================== Diluted earnings per share $ 0.44 $ 0.29 $ 1.22 $ 0.87 ====================== ===================== H. The Company adopted Statement of Financial Accounting Standards (FAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1998 which changes the way the Company reports information about its operating segments. The quarterly information required by FAS No. 131 is presented below. Polymer Electronic (Dollars in Millions) Materials Materials Total - -------------------------------------------------------------------------- Three months ended October 1, 2000 Net Sales $33.0 $29.4 $62.4 Operating Income 4.5 3.2 7.7 Three months ended October 3, 1999 Net Sales $31.2 $29.9 $61.1 Operating Income 3.7 2.5 6.2 Nine months ended October 1, 2000 Net Sales $103.3 $84.0 $187.3 Operating Income 12.6 10.3 22.9 Nine months ended October 3, 1999 Net Sales $96.1 $92.7 $188.8 Operating Income 11.5 6.8 18.3 8 SUPPLEMENTARY NOTES, CONTINUED Inter-segment sales, which are generally priced with reference to costs or prevailing market prices, are not material in relation to consolidated net sales and have been eliminated from the sales data in the previous tables. I. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in three cases involving waste disposal sites, all of which are Superfund sites. These proceedings are at a preliminary stage and it is impossible to estimate the cost of remediation, the timing and extent of remedial action which may be required by governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a provision has been established. Insurance proceeds have only been taken into account when they have been confirmed by or received from an insurance company. Actual costs to be incurred in future periods may vary from these estimates. Based on facts presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial position. In addition to the above proceedings, the Company has been actively working with the Connecticut Department of Environmental Protection (CT DEP) related to certain polychlorinated biphenyl (PCB) contamination in the soil beneath a section of cement flooring at its Woodstock, Connecticut facility. The Company is actively involved in the removal of the contaminated soil and expects to complete this in 2000. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a provision of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997, $600,000 in 1998 and $400,000 in 1999 for costs related to this matter. During 1995, $300,000 was charged against this provision and $200,000 per year was charged in 1996, 1997, and 1998. In 1999, $400,000 was charged and in 2000, through September, an additional $700,000 has been charged. Management believes, based on the facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. In this same matter the United States Environmental Protection Agency (EPA) has alleged that the Company improperly disposed of PCBs. An administrative law judge found the Company liable for this alleged disposal and assessed a penalty of approximately $300,000. The Company has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. 9 SUPPLEMENTARY NOTES, CONTINUED The Company has not had any material recurring costs and capital expenditures relating to environmental matters, except as specifically described in the preceding statements. J. To help widen the distribution and enhance the marketability of the Company's Capital Stock, the Board of Directors, effected a two-for-one stock split in the form of a 100% stock dividend on May 12, 2000. All references in the financial statements to number of shares and per share amounts have been restated to reflect the increased number of capital shares outstanding. K. On August 17, 2000, the Board of Directors authorized the Company to repurchase up to $2,000,000 of its common stock. No shares have been repurchased pursuant to this authority. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales of $62.4 million in the third quarter and $187.3 million for the first nine months of 2000 were up 2% and down 1%, respectively, from the comparable periods in 1999. In the third quarter and first nine months of 1999, Rogers sales included $7.5 million and $27.7 million, respectively of sales of a flexible circuit board laminate to Hutchinson Technology, Inc. (HTI). In 2000, this product, which is manufactured by Mitsui Chemicals, Inc. under a Rogers technology license, is being sold by our new joint venture with Mitsui Chemicals called Polyimide Laminate Systems, LLC (PLS). Since PLS is making these sales directly, Rogers share of such sales is reported in Combined Sales rather than in net sales. Despite this change, third quarter sales were slightly higher than the third quarter of 1999, but for the first nine months of 2000 net sales remained lower than the comparable period in 1999. Commissions and profitability levels for Rogers on these sales to HTI are not expected to change. If 1999 reported were restated to eliminate sales to HTI both the third quarter and the first nine months of 2000 would reflect 16% increases over the comparable periods in 1999. On the same basis, Combined Sales which include one-half of the sales from the Company's other 50% owned joint ventures, were $76.9 million for the quarter and $228 million for the first nine months, up 21% and 22%, respectively, over the same periods in 1999. These results were achieved even with the normal seasonality in Europe and Asia that the Company usually experiences in the third quarter and despite the decrease in value of certain European currencies which reduced reported sales and profits. The Company's favorable 2000 results are primarily attributable to strong sales to the computer and wireless communication markets. PLS sales to HTI in the third quarter and first nine months of 2000 were substantially lower than the sales made by Rogers to HTI in the comparable periods of 1999. This was anticipated as HTI has been reducing its inventory of such materials. Sales of Polymer Materials for the third quarter and first nine months of the year increased 6% and 7%, respectively, from the comparable periods of 1999. Contributing to the increase were the continuing strong sales of silicone and urethane foam materials, primarily to meet demand for wireless communications and computer applications. Also, the first nine months of 2000 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED include sales of the acquired engineered molding compounds business of Cytec Fiberite for the full period. This business was acquired in late January of 1999 and the first nine months of 1999 included results from the date of acquisition. Sales of Electronic Materials for the third quarter and first nine months of 2000 decreased 2% and 9%, respectively, over the comparable periods of 1999. The decrease in sales is due to the $27.7 million of sales to HTI in 1999, which in 2000 are being made directly by Rogers joint venture, PLS. These sales are now reported in Combined Sales rather than net sales. Restating 1999 to eliminate sales to HTI in both the third quarter and first nine months would result in a 31% and 29% increase, respectively in Rogers net sales of Electronic Materials. Worldwide sales of high frequency circuit materials continue to exceed the Company's expectations in the third quarter and first nine months of 2000. Rogers has become the leading supplier of such materials to the computer and wireless communications markets. Wireless communication infrastructure, satellite television receivers and wireless communication antennas are the current primary uses for these materials. Profits and earnings per share for the third quarter and the first nine months of 2000 were the highest of any comparable periods in the Company's history. Compared with the record third quarter and first nine months of last year, net income rose 51% and 41%, respectively, to $6.9 million and $19.3 million. Diluted earnings per share for the third quarter this year were $.44, up from $.29 in the same period last year. For the first nine months of 2000, diluted earnings per share were $1.22 compared to $.87 in the same nine-month period of 1999. These numbers reflect the two-for-one stock split which occurred in the second quarter of 2000. Manufacturing profit as a percentage of sales in the first nine months of 2000 and 1999 was 33% and 28%, respectively. This increase continues the improvement started in 1999 and reflects the attention paid to improving manufacturing yields over the past several years. New equipment has produced immediate process improvements with enhanced product flow and efficiency and increased utilization of equipment has also contributed to the improvement. This increase also reflects the impact of sales to HTI now being made directly by PLS. During the first nine months of 1999, Rogers sold FLEX-I-MID(r) materials directly to HTI. These materials were produced for the Company by Mitsui Chemicals, Inc. in Japan and carry a lower margin than materials that the Company manufactures. Selling and administrative expenses for the third quarter of 2000 increased just slightly in both total dollars and as a percentage of sales compared to the third quarter of 1999. For the first nine months of 2000 selling and administrative expenses increased in total dollars and as a percentage of sales from 14% in the comparable 1999 period to 16% in 2000. The increase primarily reflects the continued strengthening of Corporate Sales and Marketing capabilities along with the continuing development of information systems. Included in the nine month period of 2000 were one time licensing and consulting costs. Rogers Korea, Inc., a sales and marketing office with warehousing facilities, officially opened in Seoul, Korea in the second quarter of 2000. Rogers Technologies Singapore, Inc., a sales and marketing office with warehousing facilities, officially opened in Singapore in the third quarter of 2000. The local 11 (PAGE) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED presence provided by these operations allows the Company to more effectively service its growing customer base in these areas. Research and Development expenses were almost 20% higher in the first nine months of 2000, $9.1 million, compared to $7.7 million, for the comparable period in 1999. Greater R&D emphasis continues to be given to the development of new product platforms resulting in the creation of product families. Rogers program to make Copper-LCP (Liquid Crystal Polymer) film laminates to be used in flexible circuits where superior electrical and physical properties are necessary is an example of a new product platform. Steady progress continued with this program which will remain in the early development phase during 2000. Major development activities in circuit materials included improvements to the RO3000(tm) and RO4000(r) high frequency circuit board materials which are designed for use in high volume, low cost, commercial wireless communication applications. RO4000 development efforts were concentrated on improved copper/dielectric bond and new bond-ply materials. Application of Rogers R&D capability in fillers has improved processing of fluoropolymer based laminates for our RO3000 line of products. Manufacturing improvements designed to significantly improve the dimensional stability and bond of R/flex laminates continued. PORON materials development activities included commercialization of a wider range of thin tape materials for the flexographic printing industry. Development efforts designed to expand Rogers polyester/copper flexible circuit materials continued. Corporate R&D emphasis on core capability improvement also continued. Greater resources were applied to adhesion, better understanding of material dielectric properties and improved flame retardance of several material families. It is expected that these technical resources will benefit the development of new products for our circuit materials and high performance foam product lines. Net interest income for 2000 increased from 1999 due mainly to the fact that the Company prepaid a long-term loan in December 1999. This debt carried a 10.6% interest rate. Under the Company's unsecured multi-currency revolving credit agreement with Fleet National Bank, it can borrow up to $20.0 million, or the equivalent in Belgian Francs and/or Japanese Yen and eventually the Euro. Amounts borrowed under this agreement must be repaid in full by September 19, 2003. The Company borrowed 390,207,039 Belgian Francs under this arrangement to facilitate the Rogers Induflex acquisition in Belgium in September of 1997. The current interest rate on this loan is 5.20%. Other income less other charges increased by more than $3.5 million when comparing the first nine months of 2000 with the comparable 1999 period. Higher income from joint ventures accounts for the increase. The increase in joint venture income is due to the addition of sales income and commissions from PLS and the strong performance of Durel Corporation, the Company's joint venture with 3M in electroluminescent lamps, particularly in the second and third quarters. Durel Corporation had record sales, which were over 70% higher than the third quarter and 76% higher than the first nine months of 1999. These higher sales, along with 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED lower expenses associated with the Osram Sylvania litigation, have resulted in a significant increase in Durel's profitability in the second and third quarters. Continued penetration of the cellular telephone handset market is driving this growth. Durel has doubled manufacturing capacity since the beginning of this year. To meet the demand from this rapidly growing market, Durel has also begun construction of a 75,000 square foot addition to be completed by the first quarter of 2001. In February of this year, Durel achieved a court victory over Osram Sylvania, Inc. In that long pending lawsuit, Durel was awarded $49 million of damages in a jury decision in federal court. Durel had sued Osram Sylvania for patent infringement. Although Osram Sylvania is appealing the jury's decision, the February victory moves Durel significantly closer to successful resolution of this dispute. On April 29, 2000, the court awarded Durel an additional $13 million in interest on the damages of $49 million awarded earlier. Profits of Rogers Inoac Corporation, the Company's joint venture with Inoac Corporation in Japan, improved significantly due to increasing sales of urethane foams for hand held electronic devices and general overall economic strength in Southeast Asia. On June 29, 2000 Rogers signed a joint venture agreement with Chang Chun Plastics Co., Ltd. (CCP), a $1.1 billion specialty chemical manufacturer. Combining Rogers leading-edge flexible circuit materials technology with CCP's outstanding manufacturing capabilities and long established market position in Taiwan will enable the joint venture to be a leading flexible circuit materials supplier in Taiwan. Net cash provided by operating activities in the first nine months of 2000 totaled $14.7 million. This compares with $27.1 million in the comparable 1999 period. This difference is attributable to higher accounts receivable and inventory levels in 2000 which more than offset increased income and depreciation. Accounts receivable increased primarily due to sales volume increases and advances to joint ventures. Inventories have increased to support higher customer demand and in particular at the Molding Materials Division where we have built inventory in anticipation of the final move of the Cytec equipment from Winona, Minnesota to Manchester, Connecticut. The Cytec business and equipment was acquired in late January 1999. In 2000 investments in capital equipment totaled $18.6 million in the first nine months and are expected to approach $25 million for the year. In 1999 capital expenditures in the first nine months were $10 million and they finished at $13.6 million for the year. This increase in 2000 is directly related to higher sales of products manufactured by the Company. To satisfy this growing demand, the Company completed a 50% capacity increase in Arizona for the RO4000 high frequency circuit materials. The Company has also begun construction of a building addition in Arizona and has acquired additional acreage in both Arizona and Gent, Belgium. Management believes that in the near term internally generated funds plus available lines of credit will be sufficient to meet the regular needs of the business. The Company continually reviews and assesses its lending relationships. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED The year 2000 issue was the result of computer programs using two digits rather than four to define the applicable year. The Company completed its review of systems and operations prior to the end of 1999 and, through October 1, 2000 has not experienced any significant problems related to the year 2000 issue. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in three cases involving waste disposal sites, all of which are Superfund sites. These proceedings are at a preliminary stage and it is impossible to estimate the cost of remediation, the timing and extent of remedial action which may be required by governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a provision has been established. Insurance proceeds have only been taken into account when they have been confirmed by or received from an insurance company. Actual costs to be incurred in future periods may vary from these estimates. Based on facts presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial position. In addition to the above proceedings, the Company has been actively working with the Connecticut Department of Environmental Protection (CT DEP) related to certain polychlorinated biphenyl (PCB) contamination in the soil beneath a section of cement flooring at its Woodstock, Connecticut facility. The Company is actively involved in the removal of the contaminated soil and expects to complete this in 2000. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a provision of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997, $600,000 in 1998 and $400,000 in 1999 for costs related to this matter. During 1995, $300,000 was charged against this provision and $200,000 per year was charged in 1996, 1997, and 1998. In 1999, $400,000 was charged and in 2000, through September, an additional $700,000 has been charged. Management believes, based on the facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. In this same matter the United States Environmental Protection Agency (EPA) has alleged that the Company improperly disposed of PCBs. An administrative law judge found the Company liable for this alleged disposal and assessed a penalty of approximately $300,000. The Company reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. The Company has not had any material recurring costs and capital expenditures relating to environmental matters, except as specifically described in the preceding statements. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED On March 16, 2000 Rogers announced that it was filing an application to list on the New York Stock Exchange (NYSE). On April 18, 2000 Rogers stock began trading on the NYSE with the same ticker symbol of "ROG". On March 30, 2000 Rogers announced that its Board of Directors had approved a two-for-one split of its common stock. The record date for the split was May 12, 2000 and the distribution date was May 26, 2000. The stock split was implemented as a 100% stock dividend payable to stockholders. Rogers now has approximately 15 million shares outstanding. On August 17, 2000, the Board of Directors authorized the Company to repurchase up to $2,000,000 of its common stock. No shares have been repurchased pursuant to this authority. Statements in this report that are not strictly historical may be deemed to be "forward-looking" statements which should be considered as subject to the many uncertainties that exist in the Company's operations and environment. These uncertainties, which include economic conditions, market demand and pricing, competitive and cost factors, rapid technological change, new product introductions, and the like, are incorporated by reference in the Rogers Corporation 1999 Form 10-K filed with the Securities and Exchange Commission. Such factors could cause actual results to differ materially from those in the forward-looking statements. 15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: (27) Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended October 1, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROGERS CORPORATION (Registrant) __________________________________ By s/FRANK H. ROLAND Frank H. Roland Vice President, Finance and Chief Financial Officer Dated: November 14, 2000 16 EX-27 2 0002.txt
5 1000 9-MOS DEC-31-2000 OCT-01-2000 7754 0 47172 955 28418 88310 175878 82853 207681 42350 0 0 0 15452 120075 207681 187264 187264 125350 39037 3996 0 299 27163 7877 19286 0 0 0 19286 1.30 1.22
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