-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XX/qml9Mhpf2Y8waahXyjEqfB8fW3YFL81eYe5+ETMMHUAX3eFEhxkT+J5Z4pa86 N1O4s016OMZ3dXlweLQ6cQ== 0000084748-94-000012.txt : 19940404 0000084748-94-000012.hdr.sgml : 19940404 ACCESSION NUMBER: 0000084748-94-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19940102 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROGERS CORP CENTRAL INDEX KEY: 0000084748 STANDARD INDUSTRIAL CLASSIFICATION: 3679 IRS NUMBER: 060513860 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-04347 FILM NUMBER: 94519697 BUSINESS ADDRESS: STREET 1: ONE TECHNOLOGY DR STREET 2: P.O. BOX 188 CITY: ROGERS STATE: CT ZIP: 06263-0188 BUSINESS PHONE: 2037749605 10-K 1 ROGERS CORPORATION 1993 ANNUAL REPORT ON FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 1994 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 Exact name of Registrant as specified in its charter: ROGERS CORPORATION State or other jurisdiction of I.R.S. Employer incorporation or organization: Identification No.: Massachusetts 06-0513860 Address of principal executive offices: One Technology Drive Rogers, Connecticut 06263 Registrant's telephone number, including area code: (203) 774-9605 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Capital Stock, American Stock Exchange $1 Par Value Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 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 periods 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 aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 1, 1994: Capital Stock, $1 Par Value--$91,708,790 ---------------------------------------- The number of shares outstanding of the Registrant's classes of capital stock as of February 1, 1994: Capital Stock, $1 Par Value--3,227,126 shares --------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's annual report to shareholders for the fiscal year ended January 2, 1994 are incorporated by reference into Parts I and II. Portions of the proxy statement for the Registrant's 1994 annual meeting of shareholders to be held April 28, 1994, are incorporated by reference into Part III. TABLE OF CONTENTS PART I Item Page 1. Business 1 2. Properties 7 3. Legal Proceedings 7 4. Submission of Matters to a Vote of Security Holders 7 PART II 5. Market for the Registrant's Capital Stock and Related Stockholder Matters 8 6. Selected Financial Data 8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 8. Financial Statements and Supplementary Data 8 9. Changes in and Disagreements with Auditors on Accounting and Financial Disclosure 8 PART III 10. Directors and Executive Officers of the Registrant 9 11. Executive Compensation 9 12. Security Ownership of Certain Beneficial Owners and Management 9 13. Certain Relationships and Related Transactions 9 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 10 Signatures 11 PART I Item 1. BUSINESS a. General Development of Business Rogers Corporation, founded in 1832, is one of the oldest, publicly traded companies in continuous operation. Rogers adapted its products over the years to meet changing market needs, moving from specialty paperboard to transformer boards for electrical insulation, and to fiber-reinforced plastic molding materials. By 1958, the business consisted of three Connecticut plants, mostly producing paperboard and molding materials, with sales of approximately $5,000,000. From the late 1950's through the 1980's, Rogers and its wholly owned subsidiaries (the Company) continued to extend its capabilities in polymer materials and moved into electronic components and into global markets. Rogers specialized polymers were used as dielectric layers in electronic circuit boards. Its sheet elastomer materials became important as cushion insoles in footwear, as plate backer materials in flexographic printing, and in a range of industrial applications. Many uses for molded elastomer components were found in office machines. Moldable composites were developed for electrical and automotive applications. The Company's strategy in the 1980's was to concentrate a substantial portion of its development, manufacturing and marketing resources on electronic components. Rogers largest single business in the 1980's was component products for computers and disk drives. In 1992, under new leadership, Rogers began a process of refocusing its business on its core competencies in specialty polymer composite materials, and on the application of these material technologies to identified market needs. These materials operations were the core activities responsible for the Company's strong growth in the 1960's and 1970's, and provided most of the company's profits in the 1980's. These profits were often offset by substantial losses in the Company's electronic components businesses. The Company has now divested its major electronic components businesses. The Circuit Components Division was divested in 1992 and the flexible interconnections business which included a joint venture, Smartflex Systems, was divested in 1993. Additionally, in February 1994 the Company concluded an agreement to sell its U.S. power distribution components business. The Company's organization has been restructured and research and development efforts related to electronic components, such as multi-chip modules, have been halted. Resources have been shifted to Rogers remaining core businesses, Polymer Products and Electronic Products (formerly Interconnection Products), with refocused R&D efforts, investment in increased capacity for growing product lines, and intensified sales and marketing activities outside the U.S. In the Polymer Products Group, the Company has been concentrating on high performance elastomer materials and components, and on moldable composites. In the Electronic Products Group, it has shifted its focus to high frequency circuit materials, high frequency circuits, and flexible circuit materials. b., d. Business Segment Financial and Geographic Information Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth on pages 33-34 in "Note O" of the Registrant's annual report to shareholders for the year ended January 2, 1994 furnished to the Commission pursuant to Rule 14a-3(b) under the Securities Exchange Act of 1934, as amended (the "Act"). c. Description of Business Rogers manufactures polymer composite materials and components, which it markets around the world. Rogers is a recognized leader in high performance elastomer materials and components for office equipment, foot comfort, printing, industrial and other applications; in circuit materials for high frequency and computer applications; in high frequency circuits; and, in moldable composite materials for electrical and automotive applications. The Company has two business segments, Polymer Products and Electronic Products: 1 (1)(a) POLYMER PRODUCTS Rogers Polymer Products include materials and components designed for use in office equipment, footwear, printing, automotive, electrical and other industrial applications where the high performance properties of Rogers materials can give special mechanical, environmental, or other advantages. The major product lines in the Polymer Products business segment are: - - PORON(Registered Trademark) high performance elastomer materials which have excellent compression set resistance, outstanding shock absorption, and low outgassing. Substantial recent sales growth created the need for increased capacity. A new production line, housed in a major expansion of the East Woodstock, CT, facility, which doubles capacity, came on-line during the first quarter of 1994. PORON materials are based on Rogers proprietary cellular elastomer technology and include: Industrial grade PORON and PORON S cellular urethane and silicone materials, sold through a fabricator network to manufacturers of gaskets, vibration dampening components, shock absorbing products, and other components used in appliances, automobiles, office equipment, disk drives, and other products. PORON and PORON PERMAFRESH(Registered Trademark) cushion insole materials, sold directly and through sales representatives to manufacturers of footwear and footwear products. R/bak(Registered Trademark) compressible printing plate backing materials for flexographic printing, sold through specialized distributors as a part of the printing system for corrugated boxes, labels, bags, and other packaging. PORON medical materials for the podiatric market, sold through specialized distributors and to manufacturers of podiatric products and devices. - - High Performance Elastomer Components include ENDUR(Registered Trademark) molded elastomers and NITROPHYL(Registered Trademark) floats. The Willimantic Division, which custom manufactures these finished parts and assemblies, is certified to the ISO-9002 international standard for quality production systems. Components based on Rogers elastomer materials technology include: ENDUR and ENDUR-C components are rollers, belts and other molded shapes used to control the movement of paper and other materials in copiers, mail processing equipment, automated teller machines, and in computer peripherals. ENDUR-C LE conductive components, which feature a material formulation that raises the electrical conductivity of the components, are replacing existing technologies that are environmentally unacceptable. ENDUR fuser rollers are used in copiers to adhere toner to paper. NITROPHYL floats are mainly sold to manufacturers of automotive and other industrial devices for fuel and other liquid level sensing. NITROPHYL-M floats, introduced in early 1994, have greater resistance to methanol fuel mixtures. - - Moldable Composites. The Company makes thermosetting polymer composites, which are sold as customized molding materials. Each phenolic, epoxy or diallyl phthalate compound is engineered to perform to predetermined specifications when molded for a specific end use. The high strength, heat resistance, and dimensional stability of Rogers moldable composites, usually reinforced with glass fibers, makes them desirable for a variety of high performance applications. Rogers sells glass reinforced phenolic components, which are used by the automotive industry to replace "under-the-hood" metal parts. Current applications include components for fuel and transmission systems. Rogers also sells phenolic, diallyl phthalate, and epoxy moldable composites for use as electrical insulating materials in a large variety of applications in the electronics, automotive, appliance and electrical industries. 2 Rogers Molding Materials Division is registered to ISO-9001, the international standard for quality design, development and production systems. The first domestic facility for recycling molded phenolic material was installed in the Manchester, CT, plant in 1993. Using this proprietary technology, Rogers can sell recyclable composites, an important factor in the world automotive market. Major licensees are Vyncolit N.V. for Europe, and Otalite Co., Ltd. for Japan. Although there have been gains in market share, and sales of some products are growing, overall sales of molding materials have been flat, and the Company is actively seeking to expand its range of products and capabilities. Joint Ventures related to Polymer Products: Rogers INOAC Corporation. The Company owns 50% of Rogers INOAC Corporation (RIC), located in Nagoya, Japan. The other partner in this venture, INOAC Corporation, is a large, diversified, technically competent company with operations throughout the world. RIC manufactures high performance elastomer products based on Rogers PORON materials and ENDUR components technology. RIC markets these products in Japan and in various Southeast Asian countries. The unique qualities of Rogers elastomer products have allowed this joint venture to lead in certain market segments, such as for applications in facsimile ma- chines and hard disk drives. A new facility in Japan's Mie Prefecture for PORON materials was started in 1993, and is expected to be on-line during Q1 1994. Sales for RIC are not included in Rogers financial statements. Durel Corporation. Durel Corporation was formed in 1988 with 3M Corporation and Rogers Corporation as 50/50 partners. Based in Tempe, Arizona, Durel Corporation develops and markets advanced electroluminescent (EL) lamps used to provide cool, uniform illumination of displays and keypads in low light environments. DUREL(Registered Trademark) 3 lamps are being sold to prominent manufacturers of electronic devices and consumer goods, to illuminate pagers, watches, and other devices. The automotive grade product, which has achieved design ready status at certain domestic automotive manufacturers, is being designed into 1995 and later models for a variety of applications. In 1993, Durel sales tripled and it was the first year of profits for Durel. Sales for Durel are not included in Rogers financial statements, and because of Durel's prior losses, profits are also not yet reflected. Excluding joint venture activity, the backlog of orders believed to be firm for the Company's Polymer Products was $11,539,000 at the end of fiscal year 1993, $11,071,000 at the end of fiscal year 1992, and $11,606,000 at the end of fiscal year 1991. The order backlog at year-end is generally filled within the following year. The manufacture of Polymer Products requires a wide variety of raw materials. While occasional delays are experienced in obtaining timely deliveries of some items, these delays have not materially affected operations. The Company employed an average of 459 people in Polymer Products operations during 1993. The Company believes that its Polymer Products business is not seasonal. (1)(b) ELECTRONIC PRODUCTS The Company is a technology leader in high frequency and high performance circuit materials. These dielectric materials are based on Rogers core capabilities in highly filled polymer composites, and are developed for specific market applications. Electronic Products include high frequency materials and circuits, flexible circuit materials, and bus bars. The major product lines in the Electronic Products business segment are: - - High Frequency Circuit Materials. Rogers high frequency circuit board materials are used in wireless communications systems for demanding military and commercial applications. The specialized properties of Rogers materials are important to the accuracy and reliability of the circuits, and of the end use equipment. Applications for these Rogers materials include global positioning systems (GPS), cellular telephone base stations, telecommunica- tions satellites, aircraft collision avoidance systems, magnetic resonance imaging (MRI) systems for medical scanning, missile guidance and high performance radar systems. To reduce costs and provide greater focus, Rogers' two circuit materials divisions were combined into one unit in 1993. 3 Rogers major high frequency circuit board materials include RT/duroid(Registered Trademark), TMM(Registered Trademark), and the new RO3000(Trademark) brand materials. Rogers believes that overall sales of these materials will be relatively flat in the next year or two, as the Company continues to convert its sales base from military to non-military customers. Sales of the new RO3003 and TMM high frequency circuit material product lines should contribute significantly to the Company's success in commercial markets. Major products are described more fully below: RT/duroid high frequency materials, a family of proprietary laminate products based on filled polytetrafluoroethylene polymer dielectrics. RT/duroid materials are used mostly for commercial, industrial, and defense oriented microwave frequency applications. Significant improvements have been made in the performance characteristics of RT/duroid 5000 and 6000 series of materials. A newer product, RT/duroid 6002 microwave material, enables complex and high reliability multilayer microwave assemblies to be made. TMM temperature stable high frequency materials, which are highly filled polymer composites. Introduced in 1991, these circuit board materials found immediate applications in receive/send antennas for wireless communications equipment. Production capacity was increased in 1992, and again in 1993 when improvements were also made to the production process, allowing a significant price reduction for these improved materials. RO3003 high frequency circuit board material, the first of a lower price line of products for commercial applications. Introduced in early 1994, the material was developed for use in commercial wireless communications applications. ULTRALAM(Registered Trademark) microwave laminates, which are made of glass fabric reinforced fluoropolymer dielectric material, and intended for special purpose use in high frequency commercial and military applications. - - High Frequency Circuits. Rogers Soladyne Division custom fabricates complex multilayer, stripline and microstrip circuits for defense and commercial applications. The Division is seeking to increase the amount of its commercial and industrial business, because military spending for defense electronics is expected to be reduced somewhat. - - Flexible Circuit Materials. Rogers is a leader in flexible circuit material systems for high performance printed wiring boards for personal computers, disk drives and portable computers. These materials use Rogers proprietary adhesive and coating technology. Sold mostly to specialized fabricators, the range of material systems includes R/Flex(Registered Trademark) flexible materials, FLEX-I-MID(Registered Trademark) all-polyimide materials, and BEND/flex(Registered Trademark) formable circuit materials. Sales of flexible circuit materials increased last year, and are expected to show steady growth. There has been positive response in the market to Rogers withdrawal from the flexible circuit fabrication business, and sales efforts in Europe have been intensified. The range of products include: R/flex flexible material systems, which are polyimide based films with phenolic butyryl, epoxy or acrylic adhe- sive. Several R/flex systems are flame retardant. R/flex 410 laminates, a line of flexible circuit materials, was purchased by Rogers in 1993 from AlliedSignal Laminate Systems. These flexible circuit materials are used mostly for disk drive and computer applications. BEND/flex(Registered Trademark) formable circuit materials offer greater rigidity for the mounting of components on the circuit. Several of the BEND/flex materials systems are flame retardant. 4 FLEX-I-MID all polyimide materials, introduced in 1993, allow the fabrication of multilayer circuits, free of non- polyimide adhesive layers. The products are manufactured by Mitsui Toatsu Chemical Inc. of Tokyo, Japan. Rogers and Mitsui Toatsu entered into an agreement in 1990 for a joint market development effort in North and South America and Europe for flexible circuit materials using adhesiveless laminate technology developed by Mitsui Toatsu. RO2800(Registered Trademark) printed circuit material, a ceramic filled fluoropolymer film, is being used by several major computer and wireless communications customers to develop multi-chip module laminate (MCM-L) fabrication technology. In 1992, Rogers discontinued its MCM-L fabricated component development effort and is using its technology to promote the sale of its materials. The MCM-L fabrication technology has been non-exclusively licensed to a major corporation for further development of the process using Rogers material system. The market for low cost MCM-L electronic packaging is expected to increase dramatically in coming years. - - Bus Bars. Voltage distribution bus bars are passive electronic components used for compact and efficient voltage delivery and power control. Rogers bus bars business, which was started in the 1960s, has developed differently in the U.S. and in Europe. In February 1994, the Company concluded an agreement to sell its U.S. power distribution business, which depends mostly on mainframe computer applications, to Methode Electronics, Inc., a manufacturer of bus bar products based in Chicago, Illinois. The European business, based at the ISO-9001 certified Rogers - Mektron N.V. plant in Gent, Belgium, sells only a small amount to the mainframe computer industry. Other markets have been developed for high performance power distribution in telecommunications, motor controls for electric trams, subways, and trains, and for control systems for large electrical equipment. The European business is profitable, and will be retained by Rogers. The backlog of orders believed to be firm for the Company's Electronic Products was $11,374,000 at the end of fiscal year 1993, $19,987,000 at the end of fiscal year 1992, and $24,160,000 at the end of fiscal year 1991. The decrease from 1992 to 1993 is because of the sale of the flexible interconnections business. The order backlog at year-end is generally filled within the following year. The manufacture of Electronic Products requires a wide variety of raw materials. While occasional delays are experienced in obtaining timely deliveries of some items, these delays have not materially affected operations. The Company employed an average of 645 people in the Electronic Products operations during 1993 (excluding employees of the divested business). The Company believes that its Electronic Products business is not seasonal. (2) The Company markets its products throughout the United States, and sells in foreign markets directly, through distributors and agents, and through its 50% owned joint venture. Approximately 94% of the Company's net sales are sold through its own domestic and foreign sales forces. In 1993, 60% of total sales were to the electronics industry. (3) There are no firms which compete broadly with the Company across its range of product lines, but there is competition in each segment of the Company's business in both domestic and foreign markets. Competition comes from firms of all sizes and types, many of which are larger and have greater resources than the Company. The Company's emphasis on technical products has limited its competitors to companies with the capability for pursuing these specialty areas. The general absence of sufficiently meaningful, independent statistics makes it impractical, in the Company's opinion, to quantify its competitive position in the markets served. The Company's products were sold to approximately 2,200 customers in 1993. Although the loss of all the sales made to one of the Company's major customers would require a period of adjustment during which the business of a segment might be adversely affected, the Company believes that such adjustment could be made over a period of time. The Company also believes that its business relationships with the major customers within each of its segments are generally favorable, and that it is in a good position to respond promptly to variations in customer requirements, so that the possibility of losing all the business of any major customer as to any product line is unlikely, and the possibility of losing it as to all the products is remote. 5 The Company has a considerable number of domestic and foreign patents and licenses and has additional patent applications on file related to both segments of its business. While the patents, which are of varying duration, provide protection and, in some cases, result in license royalties, the protection is generally not of overriding importance, and the Company's segments would not be materially affected by the expiration of any of them. The Company feels that its patents have generally been valuable only in combination with its equipment, skills and market position. The Company also owns a number of registered and unregistered trademarks which it believes to be of importance. During its fiscal year 1993, the Company spent $6,743,000 on research and development activities, compared to $8,196,000 in 1992 and $9,589,000 in 1991. These amounts mainly represent the cost of the Corporate research and development effort in Rogers, Connecticut, and do not include development and engineering activities in the divisions, which approximated an additional $3,500,000 in 1993, $4,000,000 in 1992, and $5,000,000 in 1991. During fiscal year 1993, the Company spent $1.3 million on capital equipment necessary to comply with federal, state, and local environmental protection, health and safety regulations. Management estimates that 1994 capital expenditures needed for compliance with current environmental, health, and safety regulations will amount to approximately $0.5 million. These capital expenditures will be depreciated on a straight-line basis over a period of from 8 to 13 years. 6 Item 2. PROPERTIES The Company's properties are owned except as noted below. The Company considers that its properties are well-maintained and in good operating condition. Adequate land is available for foreseeable future requirements at each of the Company's owned plants. These properties are listed below. Owned Leased Floor Owned Floor Space Land Space (Sq. Ft.) (Acres) (Sq. Ft.) Polymer Products Manchester, Connecticut 166,000 26 -- South Windham, Connecticut 88,000 30 -- East Woodstock, Connecticut 81,000 24 -- Electronic Products Chandler, Arizona 242,000 43 -- Mesa, Arizona 68,000 9 -- San Diego, California -- -- 37,000 Rogers, Connecticut 312,000 113 -- Ghent, Belgium 85,000 4 -- Agua Prieta, Sonora, Mexico -- -- 55,000 Tokyo, Japan -- -- 1,500 Corporate (R&D, Admin. & Other) Rogers, Connecticut 106,000 2 -- Item 3. LEGAL PROCEEDINGS 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, usually as a participant in a group of potentially responsible parties. Several of 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 responsible parties. The Company also has been seeking to identify insurance coverage with respect to these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a provision has been made. Actual cost 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 condition. The Company is not involved in any other litigation which management believes will materially and adversely affect its financial condition or results of operations. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 7 PART II Item 5. MARKET FOR THE REGISTRANT'S CAPITAL STOCK AND RELATED STOCKHOLDER MATTERS Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth under the caption "Capital Stock Market Prices" on page 36, under the caption "Restriction on Payment of Dividends" in Note I on page 28, and under the caption "Dividend Policy" in the "Management's Discussion and Analysis" on page 40 of the 1993 annual report to shareholders. Item 6. SELECTED FINANCIAL DATA Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth under the caption "Selected Financial Data" on page 17 of the 1993 annual report to shareholders, but specifically excluding from said incorporation by reference the information contained therein and set forth under the subcaption "Other Data." Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth under the caption "Management's Discussion and Analysis" on pages 37 through 40 of the 1993 annual report to shareholders. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth on pages 18 through 35 and under the caption "Quarterly Results of Operations (Unaudited)" on page 36 of the 1993 annual report to shareholders. Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 8 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information with respect to the Directors of the Registrant set forth under the caption "Nominees for Director" on page 4 of the Registrant's definitive proxy statement dated March 23, 1994, for its 1994 annual meeting of shareholders filed pursuant to Section 14(a) of the Act. EXECUTIVE OFFICERS OF THE COMPANY Served in this capacity Name Title since Age Harry H. Birkenruth President and Chief Executive Officer 1992 62 Aarno A. Hassell Vice President, Circuit Materials Group 1988 54 Robert D. Wachob Vice President, Sales and Marketing 1990 47 Robert M. Soffer Treasurer and Assistant Secretary 1987 46 Clerk 1992 All officers hold office until the first meeting of the Board of Directors following the annual meeting of shareholders or until successors are elected. There are no family relationships between or among executive officers and directors of the Company. Mr. Birkenruth, Mr. Hassell, and Mr. Soffer have held executive office with the Company for the past five years as their principal occupation. Mr. Birkenruth was Senior Vice President, Polymer Products Group until August 1990 and Executive Vice President until April 1992. Mr. Hassell and Mr. Soffer served in the offices listed above for the past five years. Mr. Wachob was elected to the office of Vice President, Sales and Marketing in October 1990 after serving as Director of Marketing since July 1984. Mr. Soffer was elected as Clerk in February 1992. Item 11. EXECUTIVE COMPENSATION Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information set forth under the captions "Executive Compensation" on pages 8 through 14 of the Registrant's definitive proxy statement, dated March 23, 1994, for its 1994 annual meeting of shareholders filed pursuant to Section 14(a) of the Act. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information with respect to Security Ownership of Certain Beneficial Owners and Management set forth under the captions "Stock Ownership of Management" on page 5 and "Beneficial Ownership of More than Five Percent of the Corporation's Stock" on page 6 of the Registrant's definitive proxy statement, dated March 23, 1994, for its 1994 annual meeting of shareholders filed pursuant to Section 14(a) of the Act. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G to Form 10-K, there is hereby incorporated by this reference thereto the information with respect to certain relationships and related transactions included under the caption "Other Arrangements and Payments" on page 15 of the Registrant's definitive proxy statement, dated March 23, 1994, for its 1994 annual meeting of shareholders filed pursuant to Section 14(a) of the Act. 9 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2) - The response to this portion of Item 14 is submitted as a separate section of this report. See Page F-1. (3) - The response to this portion of Item 14 is submitted as a separate section of this report. See Exhibit Index on Page F-5. (b) No reports on Form 8-K were filed for the three months ended January 2, 1994. (c) Exhibits - The response to this portion of Item 14 is submitted as a separate section of this report. See Exhibit Index on Page F-5. (d) Financial Statement Schedules - The response to this portion of Item 14 is submitted as a separate section of this report. See Index on Page F-1. UNDERTAKING For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statements on Form S-8 Nos. 2-84992, 33-14347, 33-15119, 33-21121, 33-26177, 33-38219, and 33- 44087: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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/DONALD F. O'LEARY Donald F. O'Leary Assistant Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. By s/HARRY H. BIRKENRUTH President (Principal Harry H. Birkenruth Executive Officer) and Director By s/LEONID V. AZAROFF Director Leonid V. Azaroff By s/WALLACE BARNES Director Wallace Barnes By s/MILDRED S. DRESSELHAUS Director Mildred S. Dresselhaus By s/DONALD J. HARPER Director Donald J. Harper By s/LEONARD R. JASKOL Director Leonard R. Jaskol By s/D. BRUCE MERRIFIELD Director D. Bruce Merrifield By s/WILLIAM R. THURSTON Director William R. Thurston March 31, 1994 11 ANNUAL REPORT ON FORM 10-K ITEM 14(a)(1) and (2), (c) and (d) INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS FINANCIAL STATEMENT SCHEDULES FISCAL YEAR ENDED JANUARY 2, 1994 ROGERS CORPORATION ROGERS, CONNECTICUT FORM 10-K--ITEM 14(a)(1) AND (2) ROGERS CORPORATION AND SUBSIDIARIES INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Rogers Corporation and subsidiaries, included in the Annual Report of the Registrant to its shareholders for the fiscal year ended January 2, 1994, are incorporated by reference in Item 8: Consolidated Balance Sheets--January 2, 1994 and January 3, 1993 Consolidated Statements of Operations and Retained Earnings (Deficit)--Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 Consolidated Statements of Cash Flows--Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 Notes to Consolidated Financial Statements--January 2, 1994 The following consolidated financial statement schedules of Rogers Corporation and consolidated subsidiaries are included in Item 14(d): Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation of Property, Plant and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Schedule X - Supplementary Income Statement Information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. The following financial statements and schedules and Report of Independent Auditors are filed as Exhibit 29a to this report: Rogers Inoac Corporation (a 50/50 joint venture) Report of Independent Auditors Balance Sheets--October 31, 1993 and 1992 Statements of Income and Retained Earnings--Fiscal years ended October 31, 1993 and 1992, and Eleven Months Ended October 31, 1991 Statements of Cash Flows--Fiscal years ended October 31, 1993 and 1992, and Eleven Months Ended October 31, 1991 Notes to Financial Statements - October 31, 1993 Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings F-1 SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES (Dollars in Thousands)
Balance at Additions Other Balance at Beginning at Cost Retire- Changes- Add End Classification of Period ments (Deduct) of Period Year ended January 2, 1994 Land $ 841 $ 0 $ 0 $ 74 $ 915 Buildings and improvements 28,800 1,609 873 (514) 29,022 Machinery and equipment 47,532 3,572 2,890 (175) 48,039 Office equipment 10,155 832 994 (128) 9,865 Installations in process 668 2,569 0 0 3,237 -------- ------- ------ --------- -------- $ 87,996 $ 8,582 $4,757 $ (743) $ 91,078 ======== ======= ====== ========= ======== Year ended January 3, 1993 Land $ 1,133 $ 0 $ 50 $ (242) $ 841 Buildings and improvements 44,432 2,310 2,110 (15,832) 28,800 Machinery and equipment 72,682 5,393 5,015 (25,528) 47,532 Office equipment 11,845 1,312 963 (2,039) 10,155 Installations in process 2,366 46 80 (1,664) 668 -------- ------- ------ --------- -------- $132,458 $ 9,061 $8,218 $(45,305) $ 87,996 ======== ======= ====== ========= ======== Year ended December 29, 1991: Land $ 1,302 $ 0 $ 52 $ (117) $ 1,133 Buildings and improvements 45,634 2,730 1,405 (2,527) 44,432 Machinery and equipment 77,340 7,857 5,752 (6,763) 72,682 Office equipment 12,181 1,808 1,346 (798) 11,845 Installations in process 3,091 (685) 0 (40) 2,366 -------- -------- ------ --------- -------- $139,548 $11,710 $8,555 $(10,245) $132,458 ======== ======== ====== ========= ======== Additions principally relate to expansion of manufacturing facilities, purchases of new equipment and replacements for existing equipment. Included in 1992 are $40.1 million of fixed assets which were related to the sale of the Flexible Interconnections Division and $4.5 million related to the liquidation of other assets. Also included in 1991 are $9.8 million of fixed assets which were related to the sale of the Circuit Components Division. In 1993 a reclassification was made for land previously reported in Assets Held for Sale. Also included in each year are changes due to the effect of exchange rate changes on translating property, plant and equipment of foreign subsidiaries in accordance with FASB Statement No. 52, "Foreign Currency Translation." Net change during the year.
F-2 SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES (Dollars in Thousands)
Additions Balance at Charged to Other Balance at Beginning Costs and Retire- Changes-Add End Description of Period Expenses ments (Deduct) of Period Year ended January 2, 1994: Buildings and improvements $13,162 $ 1,568 $ 805 $ (307) $13,618 Machinery and equipment 32,259 3,844 2,561 (128) 33,414 Office equipment 7,071 1,162 902 (92) 7,239 ------- ------- ------ --------- ------- $52,492 $ 6,574 $4,268 $ (527) $54,271 ======= ======= ====== ========= ======= Year ended January 3, 1993: Buildings and improvements $18,954 $ 8,414 $1,138 $(13,068) $13,162 Machinery and equipment 45,345 16,580 4,285 (25,381) 32,259 Office equipment 7,970 2,065 952 (2,012) 7,071 ------- ------- ------ --------- ------- $72,269 $27,059 $6,375 $(40,461) $52,492 ======= ======= ====== ========= ======= Year ended December 29, 1991: Buildings and improvements $17,848 $ 2,398 $ 637 $ (655) $18,954 Machinery and equipment 47,819 7,264 4,295 (5,443) 45,345 Office equipment 8,236 1,457 1,183 (540) 7,970 ------- ------- ------ --------- ------- $73,903 $11,119 $6,115 $ (6,638) $72,269 ======= ======= ====== ========= ======= Included in 1992 is $16.4 million of costs related to the sale of the Flexible Interconnections Division and the liquidation of other assets. These costs were included in the 1992 Cost Reduction Charge. Included in 1992 is $38.5 million of accumulated depreciation which is related to assets being held for the sale of the Flexible Interconnections Division and $1.6 million related to the liquidation of other assets. Included in 1991 is $6.4 million of accumulated depreciation which is related to assets held for sale of the Circuit Components Division. Also included in each year are changes due to the effect of exchange rate changes on translating accumulated depreciation of foreign subsidiaries in accordance with FASB Statement No. 52, "Foreign Currency Translation." The annual provisions for depreciation have been computed on a straight-line basis over the estimated useful lives of the assets, which average 14 years for buildings and improvements, 8 years for machinery and equipment, and 5 years for office equipment.
F-3 SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES (Dollars in Thousands)
Additions Additions Balance at Charged to Charged to Other Balance at Beginning Costs and Other Accts Deductions End Description of Period Expenses Describe Describe of Period Year ended January 2, 1994: Deducted from asset accounts: Net realizable value allowance for assets held for sale $17,805 $ -- $ -- $16,272 $ 1,533 Year ended January 3, 1993: Deducted from asset accounts: Net realizable value allowance for assets held for sale $ -- $17,805 $ -- $ -- $17,805 Provision for write down of assets to net realizable value included in the 1992 Cost Reduction Charge. Allowance of $17.1 million applicable to assets sold during 1993, net of increase in allowance of $0.8 million for remaining assets.
F-4 SCHEDULE IX - SHORT-TERM BORROWINGS ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES (Dollars in Thousands)
Weighted Weighted Average Maximum Average Average Interest Amount Amount Interest Balance at Rate at Outstanding Outstanding Rate During Category of Aggregate End of End of During the During the the Period Short-Term Borrowings Period Period Period Period Year ended January 2, 1994: Notes payable to banks $ 0 -- $ 1,033 $ 339 7.44% Year ended January 3, 1993: Notes payable to banks $ 3,552 5.86% $ 8,537 $ 6,217 5.48% Year ended December 29, 1991: Notes payable to banks $ 8,000 6.38% $ 8,000 $ 3,066 7.41% Most of the Company's short-term borrowings in 1993 were under foreign credit arrangements, while most borrowings in 1992 and 1991 were under domestic revolving credit arrangements. These arrangements are reviewed periodically for renewal. The average amount outstanding during the period was computed by dividing the total of semi-monthly outstanding principal balances by 24. The weighted average interest rate during the period was computed by dividing the actual interest expense by the average short-term borrowings outstanding.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES (Dollars in Thousands) Charged to Costs Item and Expenses Year ended January 2, 1994: Maintenance and repairs $2,794 Year ended January 3, 1993: Maintenance and repairs $3,819 Year ended December 29, 1991: Maintenance and repairs $4,041 Amounts for depreciation and amortization of intangible assets, pre- operating costs and similar deferrals, taxes other than on payroll and income, royalties and advertising costs are not presented as such amounts by individual category are less than 1% of total revenues. F-5 FORM 10-K--ITEM 14(c) EXHIBIT INDEX ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES The following exhibits to the consolidated financial statements of Rogers Corporation and subsidiaries are included in Item 14(c): Page ---- Exhibit 3a - Restated Articles of Organization filed with the Secretary of the Commonwealth of Massachusetts on April 6, 1966. (Exhibit 3a) Exhibit 3b - Articles of Amendment filed with the Secretary of the Commonwealth of Massachusetts on August 10, 1966. (Exhibit 3b) Exhibit 3c - Articles of Merger of Parent and Subsidiary Corporations filed with the Secretary of the Commonwealth of Massachusetts on December 31, 1975. (Exhibit 3c) Exhibit 3d - Articles of Amendment filed with the Secretary of the Commonwealth of Massachusetts on March 29, 1979. (Exhibit 3d) Exhibit 3e - Articles of Amendment filed with the Secretary of the Commonwealth of Massachusetts on March 29, 1979. (Exhibit 3e) Exhibit 3f - Articles of Amendment filed with the Secretary of the Commonwealth of Massachusetts on April 2, 1982. (Exhibit 3f) Exhibit 3g - Articles of Merger of Parent and Subsidiary Corporations filed with the Secretary of the Commonwealth of Massachusetts on December 31, 1984. (Exhibit 3g) Exhibit 3h - Articles of Amendment filed with the Secretary of the Commonwealth of Massachusetts on March 31, 1988. (Exhibit 3h) Exhibit 3i - By-Laws of the Company as amended on March 28, 1991 and September 10, 1991. Exhibit 4a - Long-Term Debt Instruments - includes Agreement to furnish to the Securities and Exchange Commission a copy of any instrument defining the rights of holders of long-term debt of the Company and all of its subsidiaries. F-7 [EX-1 of filing] Exhibit 4b - Shareholders' Rights Plan adopted on March 20, 1987. (Exhibit 4b) Exhibit 10a - Rogers Corporation Incentive Stock Option Plan (1979, as amended July 9, 1987). (Exhibit 10c) Exhibit 10b - Description of the Company's Life Insurance Program. (Exhibit K) Exhibit 10c - Rogers Corporation Annual Incentive Compensation Plan (1988, as amended February 24, 1994). F-11 [EX-5 of filing] Exhibit 10d - Rogers Corporation Stock Option Plan (1988, as amended December 17, 1988). (Exhibit 10d) Exhibit 10e - Rogers Corporation Stock Option Plan (1990). (Exhibit 10e) Exhibit 10f - Rogers Corporation Deferred Compensation Plan (1983). (Exhibit O) Exhibit 10g - Rogers Corporation Deferred Compensation Plan (1986). (Exhibit 10e) Exhibit 11 - Statement Re: Computation of Per Share Earnings. F-8 [EX-2 of filing] Exhibit 13 - Rogers Corporation 1993 Annual Report to Shareholders F-18 [EX-6 of filing] [Note: Pages F18-F35 and F60-F61 are not required to be filed. They were sequentially numbered, because the entire bound Annual Report was submitted in the conforming paper copy.] Exhibit 22 - Subsidiaries of the Registrant. F-9 [EX-3 of filing] Exhibit 23 - Consent of Independent Auditors. F-10 [EX-4 of filing] Exhibit 29a - Rogers Inoac Corporation Audited Financial Statements. F-62 [EX-7 of filing] Exhibit 29b - Smartflex Systems 1992 and 1991 Financial Statements. Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1980 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1984 (File No. 1-4347). Incorporated by reference to Report on Form 8-K dated March 20, 1987 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1988 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1989 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1990 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-4347). Incorporated by reference to the indicated Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1993 (File No. 1-4347). F-6 EX-1 2 EXHIBIT 1 - ROGERS CORP. 1993 ANNUAL REPORT 10-K EXHIBIT 4a - LONG-TERM DEBT INSTRUMENTS (Dollars in Thousands) The total amount of securities authorized under any long-term debt instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. As of January 2, 1994, the long-term debt of the Company was as follows: 10.5% Senior Notes due 1994-1998 $ 3,125 10.6% Senior Notes due 1994-2003 6,000 10.5% Convertible Subordinated Notes due 1995-1997 4,500 Term Note with interest at 4.9% due 1994-2000 3,637* Other 68 -------- 17,330 Less current maturities (3,140) -------- $14,190 ======== * Prepaid in full on February 1, 1994. The Company agrees to furnish on request to the Securities and Exchange Commission a copy of any instrument defining the rights of holders of long-term debt of the Registrant and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. F-7 EX-2 3 EXHIBIT 2 - ROGERS CORP. 1993 ANNUAL REPORT 10-K EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Year Ended January 2, January 3, December 29, 1994 1993 1991 1. Net income (loss) $ 6,670,000 $(32,666,000) $(2,320,000) ============ ============= ============ 2. Weighted average number of shares outstanding during period 3,122,658 3,094,419 3,081,351 3. Net effect of dilutive stock options - based on the treasury stock method using average market price 67,221 5,127 8,513 ----------- ----------- ----------- 4. Total weighted average number of shares and capital equivalent shares assumed outstanding 3,189,879 3,099,546 3,089,864 5. Additional net shares, issuable when market value at year-end exceeds average market value during year 60,578 1,473 292 ----------- ---------- ---------- 6. Shares assumed outstanding for computation of fully diluted earnings per share 3,250,457 3,101,019 3,090,156 ============ ========== ========== Net income (loss) per capital share (1 / 2) $ 2.14 $ (10.56) $ (.75) ============ ============= ============ Net income (loss) per capital share and capital share equivalent (1 / 4) $ 2.09 $ (10.54) $ (.75) ============ ============= ============ Net income (loss) per capital share assuming full dilution (1 / 6) $ 2.05 $ (10.53) $ (.75) ============ ============= ============ F-8 EX-3 4 EXHIBIT 3 - ROGERS CORP. 1993 ANNUAL REPORT 10-K EXHIBIT 22 - SUBSIDIARIES OF THE REGISTRANT Percentage of Voting Jurisdiction Securities of Incorporation Company Owned or Organization ------- ---------- ---------------- Rogers L-K Corp. 100% Delaware Rogers Japan Inc. 100% Delaware R/MAT, Inc. 100% Connecticut TL Properties, Inc. 100% Arizona Rogers Foreign Sales Corporation 100% Virgin Islands Rogers-Mektron N.V. 100% Belgium Rogers-Mektron GmbH 100% Germany Rogers-Mektron LTD. 100% England Rogers-Mektron S.A. 100% France Rogers Mexicana, S. A. de C. V. 100% Mexico * Rogers Inoac Corporation 50% Japan * Durel Corporation 50% Delaware * These entities are unconsolidated joint ventures and accordingly are not consolidated in the consolidated financial statements of Rogers Corporation. F-9 EX-4 5 EXHIBIT 4 - ROGERS CORP. 1993 ANNUAL REPORT 10-K EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Rogers Corporation of our report dated February 9, 1994, included in the 1993 Annual Report to Shareholders of Rogers Corporation. Our audits also included the financial statement schedules of Rogers Corporation listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Registration Statements (Form S-8 Nos. 2-84992, 33-15119, 33-21121, 33-26177, 33-38219, 33-14347 and 33-44087) pertaining to various stock option and employee savings plans of Rogers Corporation of our report dated February 9, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form 10-K) of Rogers Corporation. ERNST & YOUNG Providence, Rhode Island March 25, 1994 F-10 EX-5 6 EXHIBIT 5 - ROGERS CORP. 1993 ANNUAL REPORT 10-K ROGERS CORPORATION ANNUAL INCENTIVE COMPENSATION PLAN (The "Plan") Plan Year: 1.1 Fiscal year of Rogers Corporation Participants: 2.1 Those managers and professionals who directly affect the profitability of the Company are eligible for nomination as Participants in this Plan. Participants for each Plan Year must be approved by the President. Sales Engineers, Regional Sales Managers, and any other employees who are eligible for commissions or similar incentive compensation plans are excluded from this Plan. Target Award 3.1 Upon achievement of targeted financial goals, Opportunity: Participants will be eligible for a specified Target Award. Target Awards by Participant group are as follows: Target Award As a Percent of Position Salary ---------------------------------------------------- CEO 50% Group Heads, Corporate 30% - 40% Vice Presidents Division Heads, Equivalent 20% - 30% Corporate Executives Participating Division 10% - 20% and Corporate Reports Basic Award 4.1 Each Plan Year, a set percentage of the Determinant: Participant's Target award will be determined by Corporate performance and another set percentage will be determined by Division/Group performance. In general, those Participants whose actions affect the entire Company will have a higher Corporate performance weighting while those whose actions have a greater impact on an individual Division/Group will have a higher Division/Group performance weighting. 1 F-11 4.2 Performance weights by Participant group are as follows: Corporate Division/Group Position Performance Performance ---------------------------------------------------- CEO/Corp. 100% 0% Officers, Steer- ing Comm. Members who are not Group Heads Corporate Reports 50% 50% Group Heads/ Division Heads 40%-70% 60%-30% Division Reports 30% 70% A. Corporate Performance 4.3 The Corporate portion of a Participant's annual incentive award is based on Return on Equity and After Tax Profit excluding bonuses earned under this Plan. Performance goals will be established at the beginning of each Plan Year and expressed in an award schedule that prescribes the percentage of Corporate Target Award paid out at each level of performance achievement. (See Matrix "A") B. Division/Group Performance 4.4 The Divisional (or, where applicable, Group) portion of a Participant's annual incentive award is based on a combination of the Division's or Group's Operating Profit The 50% Division/Group Performance portion for each Corporate Report will be determined by multiplying 50% of his or her Target Award by the ratio obtained by dividing all bonus dollars related to Divisional Performance paid to all Division Heads and Division Reports by the bonus dollars related to Divisional Performance that would have been paid to all Division Heads and Division Reports if every Division had achieved the Operating Profit and RONA contained in its plan for the year. For purposes of this Plan, Operating Profit exludes corporate charges. 2 F-12 and Return on Net Assets (RONA) , excluding bonuses earned under this Plan. Performance goals will be established at the beginning of each Plan Year and expressed in an award schedule that prescribes the percentage of the Division/Group Target Award paid out at each level of performance achievement. (See Matrix "B") 4.5 Calculations of the actual percentage of Corporate and Division Target Awards will be made by interpolating between points on the Performance Measurement Schedule Matrices. C. Establishment of Award Schedule 4.6 Each Division will prepare an annual plan. After approval or revision by the President, the annual plan will indicate the Division's goals relative to its Plan performance factors -- Operating Profit and RONA. By February 15th of the Plan Year each Division will obtain the President's agreement on the 1 to 3 most important non-financial objectives (quantified to the degree practicable) for the Division to accomplish during that Plan Year. 4.7 Soon after the end of the Plan Year, the President will evaluate how well each Division accomplished its key non-financial objective(s) and recommend a number, 1 to 3, where 3 represents significant over- achievement, 2 represents reasonable achievement, and 1 represents significant failure. If this rating on achievement of key objectives is a 3 or 1, the awards for that Division will be increased or decreased by 25%, respectively. The rating for a Group will be the average, rounded to the nearest whole number, of the ratings assigned to the Divisions comprising that Group. D. Profit Improvement Adjustment For Divisions with a planned loss, budgeted, rather than actual Plan Year, year-end assets will be used to calculate RONA. See Footnotes 2 and 3 above. 3 F-13 4.8 After the bonus pool is initially calculated, it will be adjusted as follows. 4.8.1 If a Division, whose prior year's performance is less than $1 million of controllable profit , does not exceed the prior year's controllable profit by at least $200,000, that Division's bonus pool for the current Plan Year will be reduced by 20%. 4.8.2 If a Division, whose prior year's performance is $1 million or more of controllable profit , does not exceed the prior year's controllable profit by at least $200,000 or 10%, whichever is higher, that Division's bonus pool for the current Plan Year will be reduced by 20%. 4.8.3 If the Corporation's net income is less than 10% above the previous year, the Corporate portion of the bonus pool for the current Plan Year will be reduced by 20%. Personal 5.1 After the award is initially calculated, a Performance further adjustment can be made based on Multiplier: individual performance. This adjustment is a multiplier with a minimum of .5 and a maximum of 1.5, which is applied to the initially calculated award. When the award for a unit is less than 50% of that unit's Target Award, individual awards can be adjusted by the individuals listed below without regard for the .5/1.5 range. 5.2 Annual incentive plan multipliers will be determined as follows: The President will determine the Group and Corporate Heads' multipliers. The Group Head and the President will determine the Division Managers' multipliers. The President will determine the controllable profit suitable for comparison between the two years. See Footnote 5 above. 4 F-14 The Corporate Head and President will determine the Corporate Reports' multipliers. The Division Manager and the Group Head will determine all other individual bonus multipliers. 5.3 For the Corporation as a whole, the average multiplier may not exceed 1.0. 5.4 Managers are encouraged to develop a clear and well-communicated set of individual objectives and job responsibilities for the purpose of determining this individual performance adjustment. These include but are not limited to: Achievement of key individual objectives, Administrative cost control, Adherence to TQC principles. Minimum 6.1 The President has the right to eliminate the Personal total annual incentive award for any Performance Participant whose performance level is deemed to be unsatisfactory, regardless of the organization's financial performance. Presidential 7.1 A special award pool will be established Performance by assigning to it an additional amount Award equal to 3% of the amount generated for Participants. This pool may be used at the discretion of the President for special individual awards to employees, whether Participants or not, who have achieved extraordinary performance during the Plan Year. Award 8.1 The annual bonus award for any Limitation : Participant will be limited to 200% of the Target Award. 8.2 Except as noted below, the maximum incentive bonus pool including the Presidential Performance Award and payments made to non- Participants under this Plan will be limited to 13% of pre-tax income, excluding bonuses earned under this Plan, up to the budgeted profit for the company. If the calculation of awards indicates that these limits will be exceeded, awards will be reduced proportionally to conform to the limit. 5 F-15 8.3 If any Division would have received 100% or more of the Division portion of their Target Awards and the above 13% limit causes a reduction in earned awards, the following shall apply. 8.3.1 The reductions of those Divisions' portions of the Target Awards will be restored and Corporate Reports' awards increased accordingly. (This does not apply to any Steering Committee members.) 8.3.2 The total of such restored and increased amounts shall not exceed $250,000. If necessary, reductions will be made proportionally. Input of Extra- 9.1 In comparing actual performance against ordinary and Non- the performance goals, management may exclude recurring Items: from such comparison any extraordinary or nonrecurring gains, losses, charges, or credits which appear on the Company's books and records as it deems appropriate. 9.2 An extraordinary or nonrecurring item may include, without limiting the generality of the foregoing, an item in the Company's financial statements reflecting a change in an accounting rule or methodology, tax law, or actuarial assumption, not taken into consideration in the establishment of performance goals. This type of adjustment must be approved by the Compensation and Organization Committee of the Board of Directors. Less Than 10.1 An individual who is made a Participant in Full-Year Plan the Plan after the beginning of the Plan Participation: Year, but before October 1st of that year,may receive a pro-rated award based on the number of full weeks of eligibility during the Plan Year. 10.2 If a Participant's employment is terminated during a Plan Year because of death, disability, or normal retirement, a tentative award will be determined based on performance as of the end of the Plan Year. The final award will be prorated by multiplying the tentative award by the number of full weeks of employment divided by fifty-two. 10.3 If a Participant's employment is terminated involuntarily, not for cause, "at the pleasure of the Company," the Participant will be paid a prorated bonus. 6 F-16 Form and Timing 11.1 All awards will be paid in Of Payment cash, less withholding requirements,as soon as possible following the end of the Plan Year. However, the President may request authorization from the Board of Directors to pay a portion of the earned awards before the end of the Plan Year. 11.2 A Participant may irrevocably elect to defer all or part of an eventual award that may be earned during the Plan Year. The total amount or any percentage thereof may be deferred until the time of death, disability, retirement, or voluntary or involuntary termination of Rogers' employment. Administration: 12.1 A management incentive compensation committee, named by the President, will review all elements and goals of the Plan each year. Plan changes will be presented to the Compensation and Organization Committee of the Board for approval. Bonus Opportunity 13.1 For each Division or Corporate Department Non-Participants: that earns an award under this Plan, a pool will be created for distribution to non-Participants in that Division or Corporate Department only. Such pool will be equal to 1.0% of the aggregate, annual salaries of the non-Participants, exempt from the payment of overtime, in that Division or Corporate Department at the end of the Plan Year, adjusted up or down proportionally to the award earned divided by the Target Award in that Division or Corporate Department. The Division Manager and Group Head or the Corporate Department Vice-President will determine the recipients and amounts of such bonuses subject to the approval of the President. These bonuses are intended for non- Participants who have made significant contributions to the success of the Division or Corporate Department during the Plan Year; this bonus pool is not intended for distribution to all non- Participants in the unit. Any undistributed funds from this pool will be returned to the Company and may not be distributed to other units. Approved by the Compensation and Organization Committee of the Board of Directors February 24, 1994. aicp.rev 2-16-94 7 F-17 EX-6 7 EXHIBIT 6 - ROGERS CORP. 1993 ANNUAL REPORT 10-K SELECTED FINANCIAL DATA (Dollars in Thousands, Except Per Share Amounts) - ----------
1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- SALES AND INCOME - ---------- Net Sales $123,168 $172,361 $182,352 $190,319 $174,948 Cost Reduction Charges -- (26,602) (2,774) (7,075) -- Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change 6,716 (28,005) (3,403) (3,632) 2,232 Cumulative Effect of Change in Accounting for Postretirement Benefits -- (6,241) -- -- -- Net Income (Loss) 6,670 (32,666) (2,320) (2,447) 1,607 PER SHARE DATA - ---------- Income (Loss) Before Cumulative Effect of Accounting Change* 2.09 (8.54) (.75) (.80) .53 Cumulative Effect of Change in Accounting for Postretirement Benefits* -- (2.02) -- -- -- Net Income (Loss) 2.09 (10.56) (.75) (.80) .53 Cash Dividends Declared -- -- .09 .12 .12 Book Value 8.66 6.15 16.85 17.84 18.20 FINANCIAL POSITION (YEAR-END) - ---------- Current Assets 36,842 56,028 55,769 57,608 58,826 Current Liabilities 23,683 33,532 35,226 37,294 32,569 Ratio of Current Assets to Current Liabilities 1.6 to 1 1.7 to 1 1.6 to 1 1.5 to 1 1.8 to 1 Working Capital 13,159 22,496 20,543 20,314 26,257 Property, Plant and Equipment - Net 36,807 35,504 60,189 65,645 62,381 Total Assets 81,837 97,746 122,674 129,472 126,681 Long-Term Debt less Current Maturities 14,190 24,197 26,336 27,526 30,647 Shareholders' Equity 27,891 19,083 51,983 54,859 55,763 Long-Term Debt as a Percentage of Shareholders' Equity 51% 127% 51% 50% 55% OTHER DATA - ---------- Depreciation and Amortization 6,691 10,928 11,702 11,184 10,604 Research and Development Expenses 6,743 8,196 9,589 8,644 8,345 Capital Expenditures 8,582 9,061 11,710 13,601 11,425 Number of Employees (Average) 1,104 2,512 2,989 3,213 3,152 Sales per Employee 112 69 61 59 56 Number of Shares Outstanding at Year-End 3,222,461 3,100,649 3,084,659 3,075,288 3,063,219 - ---------- Based on weighted average number of shares and share equivalents outstanding for 1993 and 1989, and based on weighted average number of shares outstanding for 1992, 1991 and 1990. After the deduction of outside funding for the multichip module development project of $1,698 and $604 in 1990 and 1989, respectively. Excludes employees of divested businesses.
17 F-36 CONSOLIDATED BALANCE SHEETS - ---------- January 2, January 3, (Dollars in Thousands) 1994 1993 ---------- ------------ ASSETS - ---------- CURRENT ASSETS: Cash and Cash Equivalents $ 4,533 $ 5,356 Accounts Receivable 15,008 14,811 Inventories: Raw Materials 3,432 3,852 In-Process and Finished 5,404 6,104 Less LIFO Reserve (808) (707) --------- --------- Total Inventories 8,028 9,249 Current Deferred Income Taxes 1,820 6,384 Net Assets Held for Sale (Note B) 6,785 19,569 Prepaid Expenses 668 659 --------- --------- Total Current Assets 36,842 56,028 --------- --------- Property, Plant and Equipment, Net of Accumulated Depreciation of $54,271 and $52,492 36,807 35,504 Investments in Unconsolidated Joint Ventures 3,051 2,299 Intangible Pension Asset 3,295 2,003 Other Assets 1,842 1,912 --------- --------- Total Assets $ 81,837 $ 97,746 ========= ========= 18 F-37 LIABILITIES AND SHAREHOLDERS' EQUITY - ---------- CURRENT LIABILITIES: Accounts Payable $ 7,679 $ 7,617 Notes Payable to Banks -- 3,552 Notes Payable to Unconsolidated Joint Ventures -- 991 Current Maturities of Long-Term Debt 3,140 6,640 Accrued Employee Benefits and Compensation 5,296 5,411 Accrued Cost Reduction Charges (Note B) 2,222 5,300 Accrued Interest 542 884 Other Accrued Liabilities 3,258 1,925 Taxes, Other than Federal and Foreign Income 1,546 1,212 --------- --------- Total Current Liabilities 23,683 33,532 --------- --------- Long-Term Debt, less Current Maturities 14,190 24,197 Noncurrent Deferred Income Taxes 2,055 6,568 Noncurrent Pension Liability 5,660 6,066 Noncurrent Retiree Health Care and Life Insurance Benefits 6,122 6,062 Other Long-Term Liabilities 2,236 2,238 SHAREHOLDERS' EQUITY: Capital Stock, $1 Par Value: Authorized Shares 10,000,000; Issued and Outstanding Shares 3,222,461 and 3,100,649 3,222 3,101 Additional Paid-In Capital 22,558 20,117 Equity Translation Adjustment 1,193 1,617 Retained Earnings (Deficit) 918 (5,752) --------- --------- Total Shareholders' Equity 27,891 19,083 --------- --------- Total Liabilities and Shareholders' Equity $ 81,837 $ 97,746 ========= ========= - ---------- The accompanying notes are an integral part of the consolidated financial statements. 19 F-38 CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) - ----------
1993 1992 1991 (Dollars in Thousands, Except Per Share Amounts) (52 Weeks) (53 Weeks) (52 Weeks) ------------------------------------- Net Sales $123,168 $172,361 $182,352 Cost of Sales 89,294 140,869 145,717 Selling and Administrative Expenses 18,787 22,084 25,322 Research and Development Expenses 6,743 8,196 9,589 Cost Reduction Charges (Note B) -- 26,602 2,774 ------------------------------------ Total Costs and Expenses 114,824 197,751 183,402 ------------------------------------ Operating Income (Loss) 8,344 (25,390) (1,050) Other Income less Other Charges 988 460 896 Interest Expense - Net 2,616 3,075 3,249 ------------------------------------ Income (Loss) Before Income Taxes (Benefit) and Cumulative Effect of Accounting Change 6,716 (28,005) (3,403) Income Taxes (Benefit) 46 (1,580) (1,083) ------------------------------------ Income (Loss) Before Cumulative Effect of Accounting Change 6,670 (26,425) (2,320) Cumulative Effect of Change in Accounting for Postretirement Benefits (Note G) -- (6,241) -- ------------------------------------- Net Income (Loss) 6,670 (32,666) (2,320) Retained Earnings (Deficit) at Beginning of Year (5,752) 27,007 29,604 Cash Dividends -- 93 277 ------------------------------------- Retained Earnings (Deficit) at End of Year $ 918 $ (5,752) $ 27,007 ===================================== Income (Loss) per Share: Primary: Average Shares Outstanding and Common Stock Equivalents 3,189,879 3,094,419 3,081,351 Income (Loss) Before Cumulative Effect of Accounting Change $ 2.09 $ (8.54) $ (.75) Cumulative Effect of Accounting Change -- (2.02) -- ------------------------------------- Income (Loss) Per Share $ 2.09 $ (10.56) $ (.75) ===================================== Fully Diluted: Average Shares Outstanding and Common Stock Equivalents 3,250,457 3,094,419 3,081,351 Income (Loss) Before Cumulative Effect of Accounting Change $ 2.05 $ (8.54) $ (.75) Cumulative Effect of Accounting Change -- (2.02) -- ------------------------------------- Income (Loss) Per Share $ 2.05 $ (10.56) $ (.75) ===================================== The accompanying notes are an integral part of the consolidated financial statements.
20 F-39 CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) - ----------
1993 1992 1991 (52 weeks) (53 weeks) (52 weeks) ---------- ---------- ---------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income (Loss) $ 6,670 $(32,666) $ (2,320) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 6,691 10,928 11,702 Benefit for Deferred Income Taxes -- (1,919) (2,391) Equity in Undistributed (Income) Loss of Unconsolidated Joint Ventures - Net 103 (49) (678) Accrued Cost Reduction Charges -- 25,447 29 Cumulative Effect of Accounting Change -- 6,662 -- (Gain) Loss on Disposition of Assets 87 (142) 567 Other - Net (559) 2,731 1,609 Changes in Operating Assets and Liabilities Excluding Effects of Acquisition and Disposition of Assets: Accounts Receivable (573) 1,276 5,546 Accounts Receivable from Unconsolidated Joint Ventures (712) (2,584) 498 Inventories 1,116 1,060 1,353 Prepaid Expenses (30) 1 (115) Accounts Payable and Accrued Expenses (868) (4,993) (4,229) ----------------------------------------- Net Cash Provided by Operating Activities 11,925 5,752 11,571 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: - ---------- Capital Expenditures (8,582) (9,061) (11,710) Proceeds from Sale of Businesses 10,899 4,985 1,553 Proceeds from Sale of Property, Plant and Equipment 179 963 141 Investment in Unconsolidated Joint Ventures -- (35) -- ----------------------------------------- Net Cash Provided by (Used in) Investing Activities 2,496 (3,148) (10,016) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: - ---------- Proceeds from Short- and Long-Term Borrowings 6,956 5,991 4,500 Repayments of Debt Principal (19,951) (5,470) (5,235) Net Increase in Borrowings (Repayments) of Revolving Lines of Credit (3,534) (4,387) 1,702 Proceeds from Sale of Capital Stock 1,063 293 208 Dividends Paid -- (93) (370) ----------------------------------------- Net Cash Provided by (Used in) Financing Activities (15,466) (3,666) 805 ----------------------------------------- Effect of Exchange Rate Changes on Cash 222 (253) (78) ----------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (823) (1,315) 2,282 Cash and Cash Equivalents at Beginning of Year 5,356 6,671 4,389 ----------------------------------------- Cash and Cash Equivalents at End of Year $ 4,533 $ 5,356 $ 6,671 ========================================= - ---------- The accompanying notes are an integral part of the consolidated financial statements.
21 F-40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ---------- NOTE A-ACCOUNTING POLICIES - ---------- PRINCIPLES OF CONSOLIDATION: - ---------- The consolidated financial statements include the accounts of Rogers Corporation and its wholly-owned subsidiaries (the Company), after elimination of significant intercompany accounts and transactions. CASH EQUIVALENTS: - ---------- Cash equivalents are generally comprised of highly liquid investments with an original maturity of three months or less. These investments are stated at cost, which approximates market value. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES: - ---------- The Company accounts for its investments in and advances to unconsolidated joint ventures, all of which are 50% owned, using the equity method. RELATED PARTY TRANSACTIONS: - ---------- Sales to unconsolidated joint ventures are made on terms similar to those prevailing with unrelated customers, except that for each joint venture, payments to its owners may be deferred depending on the joint venture's availability of funds, with payment priority given to parties other than the owners of the venture. FOREIGN CURRENCY TRANSLATION: - ---------- All balance sheet accounts of foreign subsidiaries are translated at rates of exchange in effect at each year-end, and income statement items are translated at the average exchange rates for the year. Resulting translation adjustments are made directly to a separate component of shareholders' equity. Currency transaction adjustments are reported as income or expense. INVENTORIES: - ---------- Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method was used for determining the cost of approximately 39% of total Company inventories at January 2, 1994, 32% at January 3, 1993, and 22% at December 29, 1991. The cost of the remaining portion of the inventories was principally determined on the basis of standard costs, which approximate actual costs. PROPERTY, PLANT AND EQUIPMENT: - ---------- Property, plant and equipment is stated on the basis of cost, including capitalized interest. For financial reporting purposes, provisions for depreciation are calculated on a straight-line basis over the estimated useful lives of the assets. OTHER ASSETS: - ---------- Purchased patents, licensed technology and other intangibles included in other assets are capitalized and amortized on a straight-line basis over their estimated useful lives, generally ranging from 2 to 17 years. PENSIONS: - ---------- The Company has noncontributory defined benefit plans covering substantially all U.S. employees. Plans covering salaried employees provide benefits based on salary, years of service and age, while those covering hourly employees provide benefits of stated amounts for each year of credited service with adjustments depending on age. The Company's funding policy for all plans is to contribute amounts sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Company may determine to be appropriate from time to time. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: - ---------- In 1992 the Company adopted Statement of Financial Accounting Standards No. 106 (FAS 106), "Employers' Accounting for Postretirement Benefits Other than Pensions," using the immediate recognition transition option. This standard requires employers to recognize the expected cost of providing postretirement benefits, such as health and life insurance, during the years that the employees render service. Prior to 1992, the Company recognized these benefit costs as a charge to income when claims were paid. The Company continues to fund these postretirement benefits on a pay-as-you-go basis. 22 F-41 INCOME TAXES: - ---------- In the first quarter of 1993, the Company implemented the provisions of Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of FAS 109 changed the Company's method of accounting for income taxes from the deferred method (Accounting Principles Board Opinion 11) to the liability method. The liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. As permitted under FAS 109, the Company has elected not to restate prior years' financial statements. No provision is made for income taxes on undistributed earnings of foreign subsidiaries because such earnings are substantially reinvested in those companies for an indefinite period. NET INCOME (LOSS) PER SHARE: - ---------- Net income per share is computed based on the weighted average number of shares of capital stock and capital stock equivalents outstanding during each year, while net loss per share is based only on the weighted average number of shares of capital stock. Capital stock equivalents are additional shares which may be issued upon the exercise of dilutive stock options using the average market price of the Company's capital stock during the year. Conversion of the convertible subordinated notes (see Note I) is not assumed in the computation of fully diluted net income (loss) per share because such conversion is antidilutive. NOTE B-COST REDUCTION CHARGES - ---------- During the fourth quarter of 1992, as part of a strategy to refocus and build further on its existing specialty polymer composite materials businesses, the Company identified restructuring measures that resulted in a pretax charge of $26.6 million. The major component, $22.4 million, of this charge was primarily for asset writedowns and employee severance costs related to the divestiture of the Company's flexible interconnections business, including the 50% interest in a related joint venture, Smartflex Systems. This divestiture was completed on June 28, 1993 and the Company received a total of $10.9 million from the sale. Also included in the 1992 pretax charge was $4.2 million of costs associated with streamlining the U.S. sales force, consolidating European sales and administrative functions, the reduction and consolidation of certain corporate functions in the United States, restructuring the Power Distribution Division, and adjustments of certain assets to net realizable value. At January 2, 1994, assets held for sale at net realizable value were $6.8 million, primarily consisting of the land and building being leased to the buyer of the flexible interconnections business. During the fourth quarter of 1991, the Company announced that in response to the continuing recession-induced downturn in sales, it was taking a number of cost reduction actions. These actions consisted of reductions of salaried personnel and the divestiture of the Circuit Components Division, completed near the end of the first quarter of 1992. This, together with other product line pruning and various asset writedowns, resulted in a pretax charge of $2.8 million. NOTE C-INVENTORIES - ---------- Certain inventories, amounting to $2,515,000 at January 2, 1994, and $2,212,000 at January 3, 1993, are valued at the lower of cost, determined by the last-in, first-out method, or market. NOTE D-PROPERTY, PLANT AND EQUIPMENT - ---------- January 2, January 3, (Dollars in Thousands) 1994 1993 ---------- ---------- Land $ 915 $ 841 Buildings and improvements 29,022 28,800 Machinery and equipment 48,039 47,532 Office equipment 9,865 10,155 Installations in process 3,237 668 ---------- ---------- 91,078 87,996 Less accumulated depreciation (54,271) (52,492) ---------- ---------- $ 36,807 $ 35,504 ========== ========== 23 F-42 Depreciation expense was $6,574,000 in 1993, $10,609,000 in 1992, and $11,119,000 in 1991. Included in 1992 and 1991 was depreciation expense on assets of the flexible interconnections business which was sold in 1993. Interest costs incurred during the years 1993, 1992, and 1991 were $3,016,000, $3,585,000, and $3,615,000, respectively, of which $126,000, $29,000, and $68,000, respectively, have been capitalized as part of the cost of new plant and equipment. NOTE E-SUMMARIZED FINANCIAL INFORMATION OF UNCONSOLIDATED JOINT VENTURES AND RELATED PARTY TRANSACTIONS - ---------- The following tables summarize combined financial information of the Company's unconsolidated joint ventures which are accounted for by the equity method. Amounts presented include the financial information reported by: Rogers INOAC Corporation, located in Japan, and Durel Corporation, located in Arizona, both of which are Polymer Products ventures. Each of these ventures is 50% owned by the Company. Additionally, 1992 and 1991 financial information for Smartflex Systems and 1991 financial information for Rogers Coselbra Industrial, Ltda. has been included in the following tables. The Company disposed of its interest in Smartflex Systems, located in California, as of the beginning of 1993. Its interest in Rogers Coselbra, located in Brazil, was disposed of as of the beginning of 1992. The difference between the Company's investment in unconsolidated joint ventures and its one-half interest in the underlying shareholders' equity of the joint ventures is due primarily to a deficit in shareholders' equity of one of the joint ventures. This also results in a difference between the Company's income (loss) from unconsolidated joint ventures and its one-half share of the income of those joint ventures. January 2, January 3, (Dollars in Thousands) 1994 1993 ---------- ---------- Current Assets $ 13,760 $ 23,172 Noncurrent Assets 3,359 1,903 Current Liabilities 9,204 15,839 Noncurrent Liabilities 3,362 2,562 Shareholders' Equity 4,553 6,674 Year Ended ---------------------------------------------- January 2, January 3, December 29, (Dollars in Thousands) 1994 1993 1991 ---------- ---------- ------------ Net Sales $ 41,538 $ 70,088 $ 59,187 Gross Profit 10,218 10,536 8,234 Net Income 3,208 1,973 766 Sales to unconsolidated joint ventures amounted to $363,000 in 1993, $10,945,000 in 1992, and $8,499,000 in 1991. The significant decrease in 1993 is a result of the exclusion of sales to Smartflex Systems. Loans from unconsolidated joint ventures amounting to $1,955,000 in 1993 and $991,000 in 1992 have been repaid in full during 1993. NOTE F-PENSIONS - ----------- The Company has three noncontributory defined benefit plans covering substantially all U.S. employees. The discount rate assumptions used to develop pension expense were 8.25% in each year presented. The expected long-term rate of investment return assumptions were 9.5% for the salaried pension plan and 9.0% for the remaining two plans in each year presented. As a result of the divestiture of the flexible interconnections business (see Note B), the Company recognized a curtailment gain of $1,361,000 as part of the 1992 cost reduction charge. 24 F-43 Net pension cost consisted of the following components:
(Dollars in Thousands) 1993 1992 1991 --------- --------- --------- Service cost (benefits earned during the period) $ 1,132 $ 1,369 $ 1,202 Plus: Interest cost on projected benefit obligation 2,754 2,667 2,579 Less: Actual return on plan assets (2,900) (2,690) (4,672) Plus: Net amortization and deferral (276) (491) 1,692 --------- --------- --------- Net pension cost $ 710 $ 855 $ 801 ========= ========= =========
The following table sets forth the funded status of the plans and amounts recognized in the Company's consolidated balance sheets:
(Dollars in Thousands) January 2, 1994 January 3, 1993 ---------------------------- ---------------------------- Plans Whose Plan Whose Plans Whose Plan Whose Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets ---------------------------- ---------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $ 21,916 $ 8,792 $ 20,984 $ 6,131 ============================ ============================ Accumulated benefit obligation $ 22,686 $ 8,928 $ 21,205 $ 6,192 ============================ ============================ Projected benefit obligation $ (30,603) $ (8,928) $ (30,001) $ (6,192) Plan assets at fair value 29,521 5,187 29,809 3,922 ---------------------------- ---------------------------- Projected benefit obligation in excess of plan assets (1,082) (3,741) (192) (2,270) Unrecognized net (gain) loss 880 2,008 (237) 858 Unrecognized prior service cost 1,174 1,319 999 1,003 Unrecognized net (asset) obligation, net of amortization (3,357) (32) (3,866) 142 Adjustment required to recognize minimum liability -- (3,295) -- (2,003) ---------------------------- ---------------------------- Net pension liability $ (2,385) $ (3,741) $ (3,296) $ (2,270) ============================ ============================ The net pension liability is included in the following balance sheet accounts: Other assets $ -- $ -- $ 274 $ -- Accrued employee benefits and compensation -- (662) -- -- Noncurrent pension liability (2,385) (3,079) (3,570) (2,270) ---------------------------- ---------------------------- Net pension liability $ (2,385) $ (3,741) $ (3,296) $ (2,270) ============================ ============================
Also included in the noncurrent pension liability is an additional pension liability of $196,000 and $226,000 in 1993 and 1992, respectively. The discount rate used in determining the present value of benefit obligations was 7.5% for 1993 and 8.25% for 1992. The long-term annual rate of increase in compensation levels assumption was 5.0% in 1993 and 5.5% in 1992. Plan assets consist of group annuity contracts with major insurance companies and investments in equities and short- and long-term debt instruments managed by various investment managers. NOTE G-POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS - ---------- In addition to the Company's noncontributory defined benefit pension plans, the Company sponsors three unfunded defined benefit health care and life insurance plans for retirees. The plan for full-time U.S. salaried employees provides medical and dental benefits to employees with a credited service period of ten years beginning on or after age 45. These employees also receive life insurance benefits if they retire before 1998. The plan for U.S. unionized hourly employees provides medical and life insurance benefits to employees 25 F-44 who have a credited service period of ten years on or after age 60 or 15 years on or after age 62, depending on the local union. The plan for nonunion U.S. hourly employees provides life insurance benefit to employees who retire before 1998 with a credited service period of years on or after age 60. Only the union hourly plan is contributory. All medical and dental plans contain deductible and coinsurance cost-sharing features. As indicated in Note A, the Company changed its method of accounting for postretirement benefits other than pensions in 1992 to conform with Statement of Financial Accounting Standards No. 106 (FAS 106), "Employers' Accounting for Postretirement Benefits Other than Pensions." The Company elected to immediately recognize the accumulated liability, measured as of December 30, 1991. This resulted in a one-time after-tax charge (no tax benefit was attributable) of $6,241,000, or $2.02 per share. Aside from the one-time effect of this adjustment, adoption of FAS 106 was not material to 1992 financial results. Postretirement benefit costs for 1991, which were recorded on a cash basis, have not been restated. Net periodic postretirement benefit cost includes the following components: 1993 1992 ---------- ----------- Service cost $ 340 $ 394 Interest cost 478 522 Amortization of unrecognized net gain (9) -- ---------- ----------- Net periodic postretirement benefit cost $ 809 $ 916 ========== =========== The discount rate assumption used to develop postretirement benefit expense was 8.25% in 1993 and 1992. The actuarial and recorded liabilities for these three plans, none of which have been funded, were as follows: January 2, January 3, (Dollars in Thousands) 1994 1993 ---------- ----------- Accumulated postretirement benefit obligation: Retirees $ (3,209) $ (3,403) Fully eligible active plan participants (718) (930) Other active plan participants (1,826) (2,209) ---------- ----------- Accumulated postretirement benefit obligation (5,753) (6,542) Unrecognized net gain (869) (120) ---------- ----------- Accrued postretirement benefit liability $ (6,622) $ (6,662) ========== =========== Net periodic postretirement benefit liability of $6,622,000 in 1993 and $6,662,000 in 1992 consists of a noncurrent liability of $6,122,000 and $6,062,000, respectively, and a current postretirement benefit liability of $500,000 and $600,000, respectively, which is included in accrued employee benefits and compensation. The annual assumed rate of increase in the per capita cost of covered health benefits is 11% for 1994 and 13% for 1993 (15% assumed for 1992) and is assumed to decrease by approximately one percentage point each year to 5.5% in 2000 and remain at that level thereafter. The health care cost trend rate assumption has the following effect on the amounts reported: increasing the assumed health care cost trend rates by one percentage point in each future year would increase the accumulated postretirement benefit obligation for health benefits as of the beginning of 1994 by approximately $399,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1993 by $81,000. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5% for 1993 and 8.25% for 1992. Pay-as-you-go postretirement benefit costs other than pensions for 1991 were $421,000. As a result of the divestiture of the flexible interconnections business (see Note B), the Company recognized a curtailment gain of $419,000 as part of the 1992 cost reduction charge. 26 F-45 NOTE H-EMPLOYEE SAVINGS AND INVESTMENT PLANS - ---------- The Company has three Employee Savings and Investment Plans (RESIP I, II, and III) which meet the requirements contained in Section 401(k) of the Internal Revenue Code. All regular U.S. salaried employees with at least one year of service are eligible to participate in RESIP I, most other regular U.S. employees with at least one year of service who are not members of collective bargaining units are eligible to participate in RESIP II, and members of some of the Company's collective bargaining units are eligible to participate in RESIP III. With the exception of the Company match, the plans are essentially identical and are designed to encourage the Company's U.S. employees to save for retirement. Contributions to the plans as well as earnings thereon benefit from tax deferral. Participating employees generally may contribute up to 18% of their salaries and wages. An employee's elective pretax contribution for which a tax deferral is available is limited to the maximum allowed under the Internal Revenue Code. To further encourage employee savings in RESIP I and II, the Company matched employees' contributions up to 4% of participating employees' annual compensation at a rate of 12.5% in 1993, 1992, and 1991. RESIP related expense amounted to $177,000 in 1993, $210,000 in 1992, and $219,000 in 1991, including Company matching contributions of $100,000, $125,000, and $120,000, respectively. NOTE I-DEBT - ---------- LONG-TERM DEBT: January 2, January 3, (Dollars in Thousands) 1994 1993 ----------------------- 10.5% Senior Notes due 1994-1998 $ 3,125 $ 3,750 10.6% Senior Notes due 1994-2003 6,000 6,000 7.25% Industrial Development Bonds -- 1,040 7.63% Industrial Development Bonds -- 1,458 10.5% Convertible Subordinated Notes due 1995-1997 4,500 7,500 Term Note with interest at a maximum of 75 basis points above prime -- 1,250 Secured Note with interest at prime -- 2,450 Term Note with interest at prime plus .25% -- 4,688 Term Note with interest at 4.9% due 1994-2000 3,637 -- Mortgages payable at interest rates ranging from 8% to 11.625% -- 1,398 Other 68 1,303 ----------------------- 17,330 30,837 Less current maturities (3,140) (6,640) ----------------------- $ 14,190 $ 24,197 ======================= In 1993 the Company entered into a $25 million revolving credit and term loan arrangement with Fleet Bank, N.A. Using the proceeds from the sale of the flexible interconnections business and proceeds from the Fleet facility, the Company paid off a portion of its outstanding debt. Also, the Company renegotiated agreements with other lenders with respect to certain of its debt. Under the terms of the Fleet agreement, the Company received a $5 million term note, which had been reduced to $3.6 million by January 2, 1994 and then prepaid in full on February 1, 1994. The Company may borrow up to a maximum of $15 million under a revolving credit arrangement. Amounts borrowed under this arrangement are to be repaid in full on April 14, 1996. Repayments on the revolving credit facility are necessary to the extent the Company's collateral decreases to a level which does not support borrowings under the facility, although this is not likely. Interest is payable monthly at a rate no greater than prime plus .75 percentage points on amounts outstanding under the revolving credit facility. In addition there are administrative fees associated with the arrangement, as well as a commitment fee of 0.25% per annum on any unborrowed funds which are available under the revolving credit facility. At year-end 1993, there were no borrowings under this revolving credit arrangement. Borrowings under the term loan and the revolving credit facility are secured by virtually all of the Company's assets other than real properties and intellectual property. 27 F-46 At January 2, 1994, the convertible subordinated notes are convertible into capital stock of the Company at $22 per share (subject to antidilution provisions) at the option of the lender anytime through January 1, 1997. The Company may, however, force the conversion of the notes into capital stock (in $50,000 multiples) without premium in whole or in part, providing that the average of the closing prices for the sixty consecutive business days preceding the date of prepayment is 140% of the conversion price, or $30.80. On December 30, 1993, $1,500,000 of the debentures were converted into 68,181 shares of capital stock. MATURITIES: - ---------- Required long-term debt principal repayments during the four years after 1994 are: 1995, $2,736,000; 1996, $2,737,000; 1997, $2,738,000; and 1998, $1,227,000. INTEREST PAID: - ---------- Interest paid during the years 1993, 1992, and 1991 was $3,358,000, $3,636,000, and $3,669,000, respectively. NOTES PAYABLE TO BANKS: - ---------- There were no notes payable to banks outstanding as of January 2, 1994. At January 3, 1993, notes payable to banks amounted to $3,552,000. This consisted of $3,000,000 from a fully utilized revolving credit arrangement with a domestic bank and $552,000 from borrowings of one of the Company's foreign subsidiaries with a foreign credit facility. There are no compensating balance requirements. NOTES PAYABLE TO UNCONSOLIDATED JOINT VENTURES: - ---------- A $991,000 loan from one of the Company's unconsolidated joint ventures was outstanding on January 3, 1993. No such loans were outstanding on January 2, 1994. PLEDGED ASSETS: - ---------- At January 2, 1994, collateral for long-term debt consisted of personal property and equipment totalling $18,182,000 and current assets amounting to $19,693,000. RESTRICTION ON PAYMENT OF DIVIDENDS: - ---------- Certain covenants of the Company's loan agreements restrict the payment of dividends based upon a specified level of retained earnings. At January 2, 1994, the level of retained earnings was not sufficient to permit the declaration or payment of dividends. NOTE J-INCOME TAXES - ---------- Consolidated income (loss) before income taxes (benefit) and cumulative effect of accounting change consists of: (Dollars in Thousands) 1993 1992 1991 ----------------------------------- Domestic $ 5,980 $ (25,887) $ (1,742) Foreign 736 (2,118) (1,661) ----------------------------------- $ 6,716 $ (28,005) $ (3,403) =================================== The income tax expense (benefit) before cumulative effect of accounting change in the consolidated statements of operations consists of: (Dollars in Thousands) Current Deferred Total ----------------------------------- 1993: Federal $ (90) $ -- $ (90) Foreign (6) -- (6) State 142 -- 142 ----------------------------------- $ 46 $ -- $ 46 =================================== 28 F-47 1992: Federal $ 203 $ (1,771) $ (1,568) Foreign 65 (148) (83) State 71 -- 71 ---------------------------------- $ 339 $ (1,919) $ (1,580) ================================== 1991: Federal $ 947 $ (1,615) $ (668) Foreign 136 (776) (640) State 225 -- 225 ---------------------------------- $ 1,308 $ (2,391) $ (1,083) ================================== As indicated in Note A, in the first quarter of 1993 the Company implemented the provisions of Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of FAS 109 changed the Company's method of accounting for income taxes from the deferred method to the liability method. The liability method requires the recognition of deferred tax assets and liabilities for temporary differences between the net book value and the tax basis of other assets and liabilities. The deferred tax impact of these temporary differences is measured using enacted statutory tax rates applicable to the year that the temporary differences are expected to be realized for tax purposes. FAS 109 also provides specific rules for recording valuation allowances for potentially unrealizable deferred tax assets. Under the deferred method, deferred taxes were recognized using the tax rate applicable to the year of calculation and were not adjusted for subsequent changes in tax rates. The deferred method did not impose specific requirements for recording deferred tax asset valuation allowances. The adoption of FAS 109 resulted in a reduction to both the Company's current deferred tax asset and its noncurrent deferred tax liability of approximately $2.5 million as of January 4, 1993. The net adjustment to the Company's consolidated balance sheet did not have a material impact on the Company's consolidated statement of operations and retained earnings. As permitted under FAS 109, the Company has elected not to restate prior years' financial statements. Deferred tax assets and liabilities as of January 2, 1994 are comprised of the following: (Dollars in Thousands) January 2, 1994 ---------- Deferred Tax Assets: Accruals Not Currently Deductible for Tax Purposes: Accrued Employee Benefits and Compensation $ 2,439 Accrued Postretirement Benefits 2,354 Other Accrued Liabilities and Reserves 982 Tax Loss Carryovers 3,885 Tax Credit Carryforwards 2,714 Accounts Receivable 985 Other 479 --------- Total Deferred Tax Assets 13,838 Less Deferred Tax Asset Valuation Allowance 10,095 --------- Net Deferred Tax Assets 3,743 Deferred Tax Liabilities: Depreciation & Amortization 3,743 --------- Total Deferred Tax Liabilities 3,743 --------- Net Deferred Tax Liability $ 0 ========= 29 F-48 Income tax expense (benefit) differs from the amount computed by applying the U.S. statutory federal income tax rate to income (loss) before income tax expense (benefit) and cumulative effect of accounting change. The reasons for this difference are as follows:
(Dollars in Thousands) 1993 1992 1991 -------------------------------- Tax expense (benefit) at statutory rate $ 2,283 $ (9,522) $ (1,157) State income taxes, net of federal benefit 92 47 148 Statutory rate differences, foreign and domestic 37 (81) (114) Research and development tax credit -- -- (76) Nontaxable Foreign Sales Corporation income (59) (30) (59) Nondeductible portion of travel and entertainment expenses 25 65 78 Foreign deductions, credits, and research and investment incentives -- (16) (202) Losses producing no tax benefit 58 6,879 137 Tax loss carryovers (707) (72) -- Change in deferred tax valuation allowance (1,663) -- -- U.S. tax on foreign earnings -- 1,104 138 Other (20) 46 24 ------------------------------- Income tax expense (benefit) $ 46 $ (1,580) $ (1,083) ===============================
The $1,663,000 decrease in the deferred tax asset valuation allowance for the current year relates primarily to the recognition for tax purposes in 1993 of certain accrued cost reduction expenses which were recognized for financial reporting purposes in prior years. At January 2, 1994, the Company had a U.S. net operating loss carryforward of approximately $6,000,000 which expires in the year 2008. The Company also has foreign net operating loss carryforwards of approximately $4,000,000. Under the applicable foreign tax laws, these net operating loss carryforwards have an indefinite carryforward period. The utilization of U.S. and foreign net operating loss carryforwards is dependent upon the future taxable earnings of the Company's U.S. operations and each of the applicable foreign subsidiaries, respectively. At January 2, 1994, the Company had Alternative Minimum Tax Credit carryforwards of approximately $1,200,000 and General Business Credit carryforwards of approximately $1,500,000. The use of these tax credit carryforwards is limited to future taxable earnings of the Company. The Alternative Minimum Tax Credit carryforwards have an indefinite carryforward period. The Company's General Business Credit carryforwards expire in annual increments of between $100,000 and $250,000 beginning in 1998 and ending in the year 2008. Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries. These earnings could become subject to additional tax if they were remitted as dividends, if foreign earnings were lent to the Company or a U.S. affiliate, or if the Company should sell its stock in the subsidiaries. It is not practical to estimate the amount of additional tax that might be payable on foreign earnings; however, the Company believes that U.S. foreign tax credits would largely eliminate any U.S. tax and offset any foreign tax. Undistributed foreign earnings, before available tax credits and deductions, amounted to $3,359,000 at January 2, 1994, $2,582,000 at January 3, 1993, and $6,087,000 at December 29, 1991. Income taxes paid (refunded) were $(193,000), $(352,000), and $1,523,000, in 1993, 1992, and 1991, respectively. 30 F-49 NOTE K-SHAREHOLDERS' EQUITY AND STOCK OPTIONS - ---------- Changes in shareholders' equity are shown below:
Capital Stock Additional Equity Retained (Number Paid-In Translation Earnings (Dollars in Thousands) of Shares) Capital Adjustment (Deficit) ------------------------------------------------------ Balance at December 30, 1990 3,075,288 $19,641 $ 2,539 $ 29,604 ------------------------------------------------------ Net loss for 1991 (2,320) Cash dividends declared (277) Stock options exercised 733 46 RESIP shares issued 8,638 153 Translation adjustment for 1991 (488) ------------------------------------------------------ Balance at December 29, 1991 3,084,659 19,840 2,051 27,007 ------------------------------------------------------ Net loss for 1992 (32,666) Cash dividends declared (93) RESIP shares issued 15,990 277 Translation adjustment for 1992 (434) ------------------------------------------------------ Balance at January 3, 1993 3,100,649 20,117 1,617 (5,752) ------------------------------------------------------ Net income for 1993 6,670 Stock options exercised 38,655 785 RESIP shares issued 12,727 184 Conversion of convertible subordinated notes into capital stock 68,181 1,432 Stock granted to officers 6,000 125 Shares reacquired and cancelled (3,751) (85) Translation adjustment for 1993 (424) ------------------------------------------------------ Balance at January 2, 1994 3,222,461 $ 22,558 $ 1,193 $ 918 ====================================================== The dollar amount of the capital stock ($1 par value) is equal to the above indicated number of shares.
Under the terms of the Company's 1979 incentive stock option plan, each of the options for the purchase of capital stock was granted to officers and other key employees at a price not less than the market value of the capital stock as of the date of grant. Options are exercisable within a period of ten years from the date of grant. Options granted prior to 1987 are exercisable only if no previous option issued to that individual is still outstanding. The Company does not intend to grant further options under the 1979 plan. In 1988 the Company adopted a new stock option plan, which permits the granting of incentive stock options and nonqualified stock options to officers and other key employees. Additionally, nonqualified stock options can be granted to directors. Incentive stock option grants must be at a price no less than the market value of the capital stock as of the date of grant. Nonqualified stock options for officers and other key employees must be granted at a price equal to at least 50% of the market value of the capital stock as of the date of grant. To date, all options granted to officers and other key employees have been at a price equal to the market value of the capital stock as of the date of grant. Under certain conditions, nonemployee directors and director emeriti may receive nonqualified stock options at a discounted exercise price in lieu of a corresponding amount of directors' fees. Currently existing options issued under the plan are exercisable within a period of ten years from the date of grant. In 1990 the Company adopted another stock option plan which only permits the granting of nonqualified stock options to key employees who are not officers or directors. In other respects, the 1990 plan is essentially the same as the one established in 1988. 31 F-50 Average Number Option Aggregate of Shares Price (000s) ------------------------------- Outstanding at December 30, 1990 314,251 $ 23.55 $ 7,400 Granted 81,914 18.22 1,492 Exercised 733 17.50 13 Cancelled 12,550 28.59 359 Expired 2,000 24.94 50 ------------------------------- Outstanding at December 29, 1991 380,882 22.24 8,470 Granted 105,468 17.44 1,839 Cancelled 91,930 22.87 2,102 Expired 1,500 16.25 24 ------------------------------- Outstanding at January 3, 1993 392,920 20.83 8,183 Granted 205,468 17.98 3,695 Exercised 38,655 20.19 780 Cancelled 68,500 21.82 1,495 Expired 27,000 29.18 788 ------------------------------- Outstanding at January 2, 1994 464,233 $ 18.99 $ 8,815 ------------------------------- All officer and other key employee options outstanding at December 30, 1984, were exercisable as of that date, and employee options granted after 1984 become exercisable in increments beginning after two years from the date of grant, unless otherwise approved by the Board of Directors. Nonemployee director and director emeritus options become exercisable on the first anniversary of the date of grant. The options outstanding on January 2, 1994, expire on various dates, beginning March 26, 1994, and ending on April 26, 2003. Options outstanding at January 2, 1994, included 167,524 which were exercisable (170,890 at January 3, 1993). At January 2, 1994, a total of 5,778,375 shares of capital stock was reserved for possible future issuance: 246,819 shares for conversion of the Company's convertible subordinated notes (234,375 shares at January 3, 1993); 464,233 shares for options granted (392,920 shares at January 3, 1993); 160,014 shares for options as yet ungranted (99,982 shares at January 3, 1993); 56,891 shares for the Company's Employee Savings and Investment Plans (69,618 shares at January 3, 1993); 100,000 shares (exercisable at $27 per share during the period from June 30, 1993 through June 29, 1996) for conversion of the warrant issued to PaineWebber R&D Partners II in connection with the research and development arrangement (100,000 shares at January 3, 1993); 4,500,418 shares for the Company's Shareholders' Rights Plan (3,997,544 at January 3, 1993); and 250,000 shares for the Company's 1994 Stock Compensation Plan. NOTE L-LEASES - ---------- The Company's principal noncancellable operating lease obligations are for buildings and vehicles. The leases generally provide that the Company pay maintenance costs. The lease periods range from one to five years and include purchase or renewal provisions at the Company's option. The Company also has leases that are cancellable with minimal notice. Lease expense was $1,469,000 in 1993, $1,895,000 in 1992, and $1,917,000 in 1991. Future minimum lease payments under noncancellable operating leases at January 2, 1994, aggregate $2,746,000. Of this amount, annual minimum payments are $707,000, $389,000, $306,000, $308,000, and $313,000 for years 1994 through 1998, respectively. 32 F-51 NOTE M-FOREIGN OPERATIONS - ---------- The net assets of wholly-owned foreign subsidiaries were $6,941,000 at January 2, 1994, and $6,766,000 at January 3, 1993. Net income (loss) of these foreign subsidiaries was $820,000 in 1993, $(1,961,000) in 1992, and $(702,000) in 1991, including net currency transaction gains (losses) of $(38,000) in 1993, $225,000 in 1992, and $(30,000) in 1991. NOTE N-CONTINGENCIES - ---------- 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, usually as a participant in a group of potentially responsible parties. Several of 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 responsible parties. The Company also has been seeking to identify insurance coverage with respect to these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a provision has been made. Actual cost 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 condition. In addition to the environmental issues, the nature and scope of the Company's business bring it into regular contact with the general public and a variety of businesses and government agencies. Such activities inherently subject the Company to litigation which is defended and handled in the ordinary course of business. The Company has established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse effect on the financial position of the Company. NOTE O-BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION - ---------- The presentation of business segment information for the years 1991-1993 is generally reflective of the Company's current internal reporting structure and has been divided into two segments: (1) Polymer Products, which consists primarily of high performance elastomer materials and components, and moldable composites; and (2) Electronic Products, which consists primarily of high frequency materials and computer circuit materials. The Electronic Products Group was referred to as the Interconnection Products Group in 1991 and 1992. Products from the former group also included interconnection circuits and components; however, these product lines were sold as part of the 1993 sale of the flexible interconnections business. The Company markets its products throughout the United States and in foreign markets directly and through distributors and agents. Approximately 94% of the Company's net sales are sold through its own domestic and foreign sales forces. In 1993, approximately 60% of total sales were to the electronics industry. Sales to one unaffiliated customer, consisting of 14 different products, accounted for approximately 7% of sales in 1993, 15% in 1992, and 23% in 1991. At January 2, 1994, the electronics industry accounted for approximately 57% of total accounts receivable due from customers. Accounts receivable due from customers located within the United States and Mexico accounted for 73% of the total accounts receivable owed to the Company at the end of 1993. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Receivables are generally due within 30 days. Credit losses relating to customers have been minimal and have been within management's expectations. 33 F-52 BUSINESS SEGMENT INFORMATION
(Dollars in Thousands) 1993 1992 1991 ------------------------------------ Net sales: Polymer Products $ 66,238 $ 62,396 $ 56,691 Electronic Products 56,930 109,965 125,661 ------------------------------------ Total $ 123,168 $ 172,361 $ 182,352 ==================================== Income (loss) before income taxes (benefit) and cumulative effect of accounting change: Polymer Products $ 8,755 $ 5,136 $ 2,621 Electronic Products 1,044 (28,069) (2,962) Unallocated corporate expenses (mainly interest expense - net) (3,083) (5,072) (3,062) ------------------------------------- Total $ 6,716 $ (28,005) $ (3,403) ===================================== Capital expenditures: Polymer Products $ 6,534 $ 2,772 $ 3,169 Electronic Products 2,048 6,289 8,541 ------------------------------------ Total $ 8,582 $ 9,061 $ 11,710 ==================================== Depreciation: Polymer Products $ 2,224 $ 2,753 $ 2,748 Electronic Products 4,350 7,856 8,371 ------------------------------------ Total $ 6,574 $ 10,609 $ 11,119 ==================================== Assets: Polymer Products $ 36,717 $ 35,479 $ 34,833 Electronic Products 38,767 50,527 78,073 Unallocated corporate assets (mainly cash and investments) 6,353 11,740 9,768 ------------------------------------ Total $ 81,837 $ 97,746 $ 122,674 ==================================== GEOGRAPHIC INFORMATION (Dollars in Thousands) North America Europe Total -------------------------------------- 1993: Net sales $ 108,324 $ 14,844 $ 123,168 Income (loss) before income taxes (benefit) 5,980 736 6,716 Assets 72,046 9,791 81,837 ====================================== 1992: Net sales $ 157,142 $ 15,219 $ 172,361 Loss before income tax benefit and cumulative effect of accounting change (25,887) (2,118) (28,005) Assets 87,345 10,401 97,746 ====================================== 1991: Net sales $ 167,020 $ 15,332 $ 182,352 Loss before income taxes (1,742) (1,661) (3,403) Assets 109,446 13,228 122,674 ====================================== The allocation of the cumulative effect of accounting change in 1992 is $2.9 million for Polymer Products and $3.3 million for Electronic Products. Includes an allocation of $1.8 million and $0.2 million in 1992 and 1991, respectively, related to the cost reduction charges. Includes an allocation of $24.8 million and $2.6 million in 1992 and 1991, respectively, related to the cost reduction charges. Includes undistributed earnings of a previously owned unconsolidated joint venture of $0.8 million and $0.3 million in 1992 and 1991, respectively. Includes an investment in a previously owned unconsolidated joint venture of $3.0 million and $2.2 million in 1992 and 1991, respectively. Includes an allocation of $25.1 million and $2.7 million in 1992 and 1991, respectively, to North America and $1.5 million and $0.1 million in 1992 and 1991, respectively, to Europe related to the $26.6 million and $2.8 million cost reduction charges.
The principal operations of the Company are located in North America (United States and Mexico) and Europe. Inter-segment and inter-area 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 above data. 34 F-53 REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS - ---------- Board of Directors and Shareholders Rogers Corporation - ---------- We have audited the accompanying consolidated balance sheets of Rogers Corporation and subsidiaries as of January 2, 1994 and January 3, 1993, and the related consolidated statements of operations and retained earnings (deficit) and cash flows for each of the three fiscal years in the period ended January 2, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rogers Corporation and subsidiaries at January 2, 1994 and January 3, 1993, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 2, 1994, in conformity with generally accepted accounting principles. As discussed in Notes J and G to the financial statements, respectively, in 1993 the Company changed its method of accounting for income taxes and in 1992 the Company changes its method of accounting for postretirement benefits other than pensions. ERNST & YOUNG Providence, Rhode Island February 9, 1994 35 F-54 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - ---------- (Dollars in Thousands, Except Per Share Amounts) Net Manufacturing Net Net Income(Loss) Quarter Sales Profit Income(Loss) Per Share - -------------------------------------------------------------------------- 1993 Fourth $ 29,138 $ 7,538 $ 1,705 $ .52 Third 30,312 8,491 1,712 .53 Second 30,939 8,282 1,612 .51 First 32,779 9,563 1,641 .53 - -------------------------------------------------------------------------- 1992 Fourth* $ 46,847 $ 8,367 $ (26,489) $ (8.56) Third 43,389 7,528 (148) (.05) Second 40,325 7,468 123 .04 First** 41,800 8,129 (6,152) (1.99) - -------------------------------------------------------------------------- * Fourth quarter 1992 net loss includes a nonrecurring cost reduction charge of $26,602, of which the major portion was a disposal of the flexible interconnections business (see Note B). ** First quarter 1992 net loss includes cumulative effect of change in accounting for postretirement benefits other than pensions of $(6,241), or $(2.02) per share. CAPITAL STOCK MARKET PRICES - ---------- The Company's capital stock is traded on the American and Pacific Stock Exchanges. The following table sets forth the composite high and low prices during each quarter of the last two years on a per share basis. At March 1, 1994, there were 1,310 shareholders of record. 1993 1992 - -------------------------------------------------------------------- Quarter High Low High Low - -------------------------------------------------------------------- Fourth $29 $24-3/4 $ 15 $ 12 Third 27 19-3/8 16 11-1/2 Second 23-3/8 16 17-1/8 13-7/8 First 18-7/8 12-5/8 17-3/4 15-1/8 36 F-55 MANAGEMENT'S DISCUSSION AND ANALYSIS CONSOLIDATED SALES AND OPERATIONS - 1993 TO 1992 In 1993 sales were $123.2 million compared with $172.4 million for 1992. The decline was primarily related to divestiture of the flexible interconnections business which was completed June 28, 1993 (see Note B). Led by a substantial increase in high performance elastomer products, sales of the Company's core specialty polymer composite materials and components grew 10% in 1993. These gains were partially offset by decreases in the domestic power distribution component sales which have dropped by almost $10.0 million in the past two years. Higher sales of PORON materials necessitated production line expansions in both the U.S. and Japan which more than doubled capacity. A 10,000 square foot expansion is being added to the Willimantic Division to support the continuing growth in sales of ENDUR components for office equipment. Net income in 1993 was $6.7 million, or $2.09 per share, compared to a net loss of $32.7 million in 1992. The loss in 1992 included a fourth quarter restructuring charge of $26.6 million and an additional $6.6 million charge related to the adoption of Statement of Financial Accounting Standards No. 106 (FAS 106), "Employers' Accounting for Postretirement Benefits Other than Pensions." The financial results in 1993 exclude the sales and earnings of the divested flexible interconnections business for the full year. This divestiture, coupled with improved sales and performance in Rogers' continuing businesses, was the major reason for the higher profits in 1993. In February 1994, the Company concluded an agreement to sell its U.S. power distribution business to Methode Electronics, Inc., a manufacturer of bus bar products based in Chicago, Illinois. In addition to an initial cash payment, the Company will receive royalties on sales for five years. Methode will integrate this business into its own facilities, and the Company will sell separately the production equipment and the building in Mesa, Arizona. Transfer of operations to Methode is planned to be complete before mid-1994. Reserves for reorganizing this business were established in 1992 and 1993. Manufacturing profit in 1993 was 28% of net sales, compared with 18% in 1992. This increase results primarily from divestiture of the flexible interconnections business, which operated with poor margins and at a substantial loss in 1992, and from improved profit margins in continuing businesses. Selling and administrative expense decreased 15% from 1992 to 1993. However, because of much lower total sales, these expenses increased from 13% of sales in 1992 to 15% in 1993. Research and development expense decreased 18% from 1992, and was approximately 5% of sales in both years. Significant product and process developments during 1993 included: lower cost processing of composite fluoropolymer laminates which resulted in the introduction of RO3003 for the commercial microwave market; the development of other low cost laminates designed for the commercial microwave market; improved process equipment for improved ENDUR-C LE conductive elastomer materials; PORON S-2000 silicone products using proprietary process technology; and, faster-curing moldable phenolic composite compounds. Net interest expense in 1993 was 15% lower than in 1992 primarily because of lower borrowing. Proceeds from the sale of the flexible interconnections business, combined with improved levels of cash from operations, permitted debt to be reduced from $35.4 million in 1992 to $17.3 million in 1993. Unless interest rates increase substantially, management expects 1994 interest expense will continue to decline. In the first quarter of 1993, the Company implemented the provisions of Statement of Financial Accounting Standards No. 109 (FAS 109) "Accounting for Income Taxes." The adoption of FAS 109 resulted in decreases in the Company's current deferred tax asset and its noncurrent deferred tax liability of approximately $2.5 million. These reductions were due mainly to the effect of lower prior United States Federal Income Tax statutory rates and to FAS 109's requirements for recording deferred tax asset valuation allowances. The net adjustment to the Company's consolidated balance sheet did not have a material impact on the Company's consolidated statement of operations and retained earnings. 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, usually as a participant in a group of potentially responsible parties. Several of 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 37 F-56 governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other responsible parties. The Company also has been seeking to identify insurance coverage with respect to these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a provision has been made. Actual cost 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 condition. CONSOLIDATED SALES AND OPERATIONS - 1992 TO 1991 Net sales of $172.4 million were down 5% from the prior year volume of $182.4 million. The 5% decline resulted from an 11% reduction in sales of flexible circuits, substantially lower sales of power distribution components for large mainframe computers, and the fall off from the sales surge in early 1991 related to the Gulf War. Sales of continuing products, after adjusting for the effect of the anticipated divestiture of the flexible interconnections business and the 1992 divestiture of the Circuit Components Division, were approximately $118.0 million in both years. The 1992 net loss was $32.7 million after a fourth quarter pretax restructuring charge of $26.6 million, and an additional $6.6 million charge related to the adoption of FAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This compares to a 1991 net loss of $2.3 million, which included a pretax restructuring charge of $2.8 million. Effective the beginning of 1992, the Company adopted FAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This accounting standard requires employers to recognize the expected cost of providing postretirement benefits, such as health and life insurance, during the years employees render service. The Company elected to immediately recognize the accumulated liability resulting in a one-time non-cash charge of $6.2 million, or $2.02 per share. In addition to this cumulative effect, the Company's 1992 costs for postretirement benefits increased $400,000 as a result of adopting this standard. Manufacturing profit in 1992 was 18% of net sales, compared with 20% in 1991. This decline was primarily a result of the reduced sales volume in 1992, coupled with a reduction in inventory levels. Selling and administrative expense decreased 13% and research and development costs were 15% lower in 1992 than in 1991. These decreases were more than double the rate of sales decline and resulted from a concentrated effort to reduce salaried personnel and lower expenses. Significant product and process developments during the year included: new microwave laminate products specifically designed to address the needs of the growing commercial microwave market; first commercial sales of ultra thin films of highly filled fluoropolymers; new cellular silicone materials to add to our line of urethane products; enhancements to ENDUR-C LE elastomer components which improve conductivity and durability; and expanded prototyping capability and recycling capability of molded phenolic materials. Net interest expense in 1992 was 5% lower than in 1991 primarily because of increased interest income resulting from federal and state tax audit refunds for the years 1981-1987. RESTRUCTURING/COST REDUCTION CHARGES During 1992, it was decided that the Company's strategy should be one of building further on its existing specialty polymer composite material businesses. Actions were taken during 1992 and early 1993 to begin to implement this strategy. The major element of this strategy was to withdraw from the business of producing and selling custom designed flexible circuits and multimetal layer tape automated bonding components. As of the end of 1992, the Company shut down the Micro Interconnections unit which produced the multimetal layer tape automated bonding components, and a letter of intent was signed for the divestiture of the Flexible Interconnections Division (FID), the Company's largest division, to a limited partnership managed by Ampersand Ventures, a venture capital firm based in Wellesley, Massachusetts. The divestiture, which included the Company's 50% interest in a related joint venture, Smartflex Systems, was completed in June 1993. The costs associated with these two actions amounted to $22.4 million and consisted primarily of a writedown of assets, employee severance at both the divisional and corporate staff levels, professional fees, and other related expenses. These represented the major components of the 1992 restructuring charge. 38 F-57 In addition, several other steps were taken to set the new strategic direction of the Company and to improve its operations and future profitability. These steps added $4.2 million to the charge and included costs associated with various asset writedowns, streamlining the U.S. sales group, consolidating the European sales and administrative functions, restructuring the Power Distribution Division, and the reduction and consolidation of certain corporate functions in the U.S. The Company also absorbed cost reduction charges of $2.8 million and $7.1 million in 1991 and 1990, respectively. The 1991 charge included a reduction of approximately 4% of salaried personnel and the divestment of the Company's Circuit Components Division which was completed in 1992. The 1990 charge included a reduction in the salaried work force through early retirement incentives and terminations as well as the divestitures of the keyboard business along with its manufacturing facility in France and the sale of the printing plate matrix product line of the Molding Materials Division. During 1993, 1992 and 1991, $19.3 million, $6.2 million, and $2.7 million, respectively, were charged against these reserves and the Company believes the net balance in the accrued cost reduction reserve of $2.2 million, coupled with the valuation reserve in assets held for sale of $1.5 million at January 2, 1994, are adequate for the completion of the restructuring actions. The majority of this remaining accrued reserve relates to workforce reduction costs. The total employee population has decreased by approximately 65% since 1990 primarily as a result of these cost reduction programs. When the disposition of assets held for sale and the payment of the cost reduction liabilities (as both appear on our January 2, 1994 Balance Sheet) are completed, it is expected that there will be a net increase in cash of approximately $5.0 million. SEGMENT SALES AND OPERATIONS Sales in the Polymer Products business segment increased 6%, 10% and 5% in 1993, 1992 and 1991, respectively. Two divisions in this business segment, Poron and Willimantic, recorded record sales in both 1992 and 1993. The continuing growth in sales of PORON materials was due to a variety of factors, including expanded product offerings, strong support to distributors, and more intensive market development activities in Europe. The Willimantic sales gain came from new applications for ENDUR elastomer components and strengthening demand for NITROPHYL floats in the automotive industry. Shipments in 1991 increased for similar reasons with notable growth in sales of fuser rolls. These segment sales increases have led to improved operating profits in all three years. The Polymer Products business segment generated operating profits of $8.8 million in 1993, $6.9 million in 1992, and $2.8 million in 1991, before the allocation of cost reduction charges of $1.8 million and $0.2 million in 1992 and 1991, respectively. Electronic Products (formerly Interconnection Products) business segment revenues decreased 48% in 1993. This decrease was primarily attributable to the divestiture of the flexible interconnections business. Excluding these sales from 1992, the business segment experienced a 3% sales increase in 1993. In 1992, sales declined 12% from 1991. About one-third of that change resulted from the 1992 divestiture of the Circuit Components Division with the balance due to lower flexible circuit and power distribution component sales. Electronic Products sales had decreased 8% in 1991. European sales stated in local currencies, net of the divestiture of the keyboard business, increased 3% in 1993 and decreased 1% and 25% in 1992 and 1991, respectively. Translated into U.S. currency, these sales declined 2%, 4% and 26% in 1993, 1992 and 1991, respectively. The Electronic Products business segment showed operating income of $1.0 million in 1993. This followed losses of $3.3 million in 1992 and $0.4 million in 1991, before the allocation of cost reduction charges of $24.8 million and $2.6 million, respectively. The higher operating income in 1993 was caused mainly by elimination of the losses of the divested flexible interconnections business whose results were not included as part of 1993. This segment was also benefitted by higher sales of flexible laminate materials in 1993 and was negatively impacted by a decline in volume of microwave materials for military uses and by a decrease in U.S. power distribution component sales. Sale of this power distribution business to Methode Electronics, Inc. was agreed upon in February 1994. In addition to the cost reduction charges, profits were impacted in 1992 and 1991 by lower sales in both years and lower joint venture income in 1991. 39 F-58 BACKLOG The Company's backlog of firm orders was $22.9 million at January 2, 1994, $31.1 million at January 3, 1993 and $35.8 million at December 29, 1991. Excluding the backlog for the flexible interconnections business in 1992 of $9.2 million, the Company's backlog increased slightly in 1993. The decrease in 1992 is partially a reflection of business conditions, product line changes, and continuing efforts to reduce cycle times which create shorter lead times and reduce outstanding backlogs. INFLATION In general, the Company attempts to recover inflation-related increases in operating costs through higher prices and efficiency improvements. Since desired selling prices and prices that the market will accept result from a variety of interrelated factors - many of which change frequently - it is not possible to quantify the Company's success in meeting this goal. Normally, however, a combination of expense reductions, productivity and yield improvements, and higher prices does permit recovery of inflationary increases in manufacturing costs. The Company also has partially recognized the effect of inflation on cost of sales by adopting the LIFO method of costing inventory within certain divisions. The effect of adopting this method is to charge current inventory replacement costs to cost of sales. As a result, year-end inventory balances are stated below current costs by $0.8 million in 1993, $0.7 million in 1992, and $1.0 million in 1991. SOURCES OF LIQUIDITY AND CAPITAL Cash provided by the Company's operating activities amounted to $11.9 million in 1993, $5.8 million in 1992, and $11.6 million in 1991. Capital expenditures in 1993 were $8.6 million compared with $9.1 million and $11.7 million in 1992 and 1991, respectively. No capital spending is included in 1993 for the divested flexible interconnections business. If capital spending in 1992 is adjusted to exclude spending for flexible interconnections activities, then 1993 would show an increase due mainly to the expansions in the Poron and Willimantic divisions. The decreased level of 1992 spending from 1991 reflects the Company's efforts to contain expenditures in line with the lower sales level. The capital spending program in 1993 was exceeded by cash generated from the Company's operating activities. Spending in 1992 and 1991 was financed primarily by cash generated from the Company's operating activities and proceeds from the sale of businesses. For 1994, capital spending is expected to be about the same as in 1993, and will focus on new process equipment, capacity expansions, cost reductions and quality improvements. It is anticipated that this spending will be financed with internally generated funds. During 1993 the Company renegotiated, repaid or refinanced most of its existing debt (see Note I). At January 2, 1994, the Company was not using any of its revolving credit facility capacity with its domestic bank (see Note I). European operations have unused lines of credit with local banks that permit borrowing in various currencies. There are no significant restrictions on the remittance of funds by the Company's foreign subsidiaries to the United States. Among the provisions of the Company's loan agreements relating to long-term debt are restrictions on the Company and its subsidiaries with respect to additional borrowings, loans to other than subsidiaries, payment of dividends, transactions in capital stock, asset acquisitions and dispositions, and lease commitments. These agreements also impose financial covenants requiring the Company to maintain certain levels of working capital and net worth, and specified leverage ratios. Management believes that in the near term, internally generated funds plus long-term and short-term financing will be sufficient to meet the needs of the business. The Company continually reviews and assesses its lending relationships and needs. DIVIDEND POLICY Through 1991, the Board of Directors continued a practice of paying a small cash dividend, while reinvesting most of the Company's cash flow in the business. In mid-February 1992, the Board of Directors voted to discontinue cash dividends. At present, the Company expects to maintain a policy of emphasizing longer-term growth of capital rather than immediate dividend income. 40 F-59 EX-7 8 EXHIBIT 7 - ROGERS CORP. 1993 ANNUAL REPORT 10-K Audited Financial Statements and Other Financial Information Rogers Inoac Corporation October 31, 1993 F-62 ROGERS INOAC CORPORATION INDEX TO THE FINANCIAL STATEMENTS COVERED BY REPORT OF INDEPENDENT AUDITORS Financial Statements: Report of Independent Auditors Balance sheets at October 31, 1993 and 1992 Statements of income and retained earnings for the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 Statements of cash flows for the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 Notes to financial statements Schedule number -------- Financial Statement Schedules: Valuation and qualifying accounts for the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 VIII Short-term borrowings for the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 IX All other schedules have been omitted, as permitted by the rules and regulations of the Securities and Exchange Commission, as the required information is presented either in the financial statements or the notes thereto, or as the schedule is not applicable. F-63 Report of Independent Auditors The Board of Directors and the Shareholders Rogers Inoac Corporation We have audited the balance sheets of Rogers Inoac Corporation as of October 31, 1993 and 1992, and the related statements of income and retained earnings and cash flows for each of the two years in the period ended October 31, 1993 and the eleven months ended October 31,1991. Our audits also included the financial statement schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and the schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rogers Inoac Corporation at October 31, 1993 and 1992, and the results of its operations and its cash flows for the each of two years in the period ended October 31, 1993 and the eleven months ended October 31, 1991 in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. Tokyo, Japan December 22, 1993 F-64 Rogers Inoac Corporation Balance Sheets October 31, 1993 1992 --------------------------- (Thousands of yen) Assets Current assets: Cash and cash equivalents 534,356 403,831 Receivables: Trade receivables 4,385 32,130 Due from affiliates (Note 4) 343,101 353,023 ------------------------------ 347,486 385,153 Less allowance for doubtful accounts (2,000) (5,713) ------------------------------ 345,486 379,440 Inventories: Merchandise and finished goods 64,037 44,844 Work in process 48,941 82,915 Raw materials 79,607 98,624 ------------------------------ 192,585 226,383 Deferred income taxes (Note 3) 7,574 19,766 Prepaid expenses and other current assets 2,574 535 ------------------------------ Total current assets 1,082,575 1,029,955 Plant and equipment: Buildings and improvements 9,783 8,803 Machinery and equipment 183,920 170,311 Vehicles 4,006 4,006 Furniture and fixtures 29,171 25,501 Construction in progress (Note 8) 39,571 0 ------------------------------ 266,451 208,621 Accumulated depreciation (140,702) (109,181) ------------------------------ 125,749 99,440 Other assets 1,241 1,148 ------------------------------ Total assets 1,209,565 1,130,543 ============================== F-65 October 31, 1993 1992 ----------------------------- (Thousands of yen) Liabilities and shareholders' equity Current liabilities: Trade payables 69,495 80,447 Due to affiliates (Note 4) 235,780 260,852 Income taxes payable (Note 3) 87,925 138,984 Accrued expenses and other liabilities 31,305 27,841 ------------------------------ Total current liabilities 424,505 508,124 Shareholders' equity Common stock, par value 50,000 yen per share: Authorized - 3,200 shares; Issued and outstanding - 880 shares 44,000 44,000 Legal reserve (Note 7) 11,000 11,000 Retained earnings (Notes 2 and 7) 730,060 567,419 ------------------------------ Total shareholders' equity 785,060 622,419 Commitments (Note 8) ------------------------------ Total liabilities and shareholders' equity 1,209,565 1,130,543 ============================== See notes to financial statements. F-66 Rogers Inoac Corporation Statements of Income And Retained Earnings Eleven Months ended Year Ended October 31, October 31, 1993 1992 1991 ------------------------------------------ (Thousands of yen) Net sales (Note 4) 3,568,764 3,590,199 3,013,607 Interest income (Note 4) 16,499 11,037 10,298 Other income 4,542 9,308 2,689 ------------------------------------------ 3,589,805 3,610,544 3,026,594 Costs and expenses (Notes 4 and 6): Cost of products sold 2,895,112 2,857,145 2,406,264 Selling, general and administrative expenses 315,057 321,212 267,601 Interest expense (Note 5) 1,232 101 936 Other 0 5 18 ------------------------------------------ 3,211,401 3,178,463 2,674,819 ----------------------------------------- Income before income taxes 378,404 432,081 351,775 Income taxes (Note 3): Current 192,571 242,400 194,220 Deferred (credit) 12,192 (7,023) (2,667) ------------------------------------------ 204,763 235,377 191,553 ------------------------------------------ Net income (Note 2) 173,641 196,704 160,222 Retained earnings at beginning of period (Note 2) 567,419 384,715 240,493 Cash dividends (11,000) (11,000) (11,000) Transfer to legal reserve -- (3,000) (5,000) ------------------------------------------ Retained earnings at end of period (Notes 2 and 7) 730,060 567,419 384,715 ========================================== Amounts per common share (Note 9): Net income 197.32 223.53 182.07 Cash dividends 12.50 12.50 12.50 See notes to financial statements. F-67 Rogers Inoac Corporation Statements of Cash Flows Eleven Months ended Year Ended October 31, October 31, 1993 1992 1991 ---------------------------------------- (Thousands of yen) Operating activities Net income 173,641 196,704 160,222 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31,571 30,400 25,035 Provision for deferred income taxes 12,192 (7,023) (2,667) Changes in operating assets and liabilities: Receivables 33,954 (74,946) (54,665) Inventories 33,798 (12,295) 3,819 Prepaid expenses and other current assets (2,039) (125) 3,324 Trade payables and due to affiliates (36,025) 52,273 39,937 Accrued expenses and other liabilities and income taxes payable (47,594) 25,343 21,086 ---------------------------------------- Net cash provided by operating activities 199,498 210,331 196,091 Investing activities Purchases of plant and equipment (57,829) (48,360) (16,306) Increase in other assets (144) 0 (257) ---------------------------------------- Net cash used in investing activities (57,973) (48,360) (16,563) Financing activities Repayment of long-term debt 0 (3,350) (23,650) Dividends paid (11,000) (11,000) (11,000) ---------------------------------------- Net cash used in financing activities (11,000) (14,350) (34,650) ---------------------------------------- Increase in cash and cash equivalents 130,525 147,621 144,878 Cash and cash equivalents at beginning of period 403,831 256,210 111,332 --------------------------------------- Cash and cash equivalents at end of period 534,356 403,831 256,210 ======================================= See notes to financial statements. F-68 Rogers Inoac Corporation Notes to Financial Statements October 31, 1993 1 Significant Account Policies Basis of Financial Statements The Company was incorporated under the Commercial Code of Japan in January 1984, and is owned 50% by Rogers Corporation (a U.S. corporation) and 50% by Inoac Corporation (a Japanese corporation). Until 1990, the Company's fiscal year end for the purpose of the Commercial Code of Japan was December 31 and for the purpose of reporting to Rogers Corporation was November 30. In 1991, the fiscal year end was changed to October 31 for both reporting purposes. The Company maintains its official accounting records and prepares its financial statements for domestic purposes in yen in accordance with Japanese accounting practices. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States and differ from those issued for domestic purposes in Japan. Accordingly, the financial statements reflect adjustments not recorded in the Company's official accounting records. These adjustments are explained in Note 2 to the financial statements. Cash and Cash Equivalents For the purpose of the statements of cash flow, the Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories are valued at the lower of cost (first-in, first-out method) or market. Plant and Equipment Plant and equipment is stated on the basis of cost. Depreciation is computed by the declining-balance method over the estimated useful lives of the respective assets. F-69 Rogers Inoac Corporation Notes to Financial Statements (continued) Income Taxes The Company computes and records current income taxes payable based upon its determination of taxable income which is different from pretax accounting income. The differences relate principally to the adjustments required to conform the accompanying financial statements to accounting principles generally accepted in the United States. Deferred income taxes arising from temporary differences are not recognized in the official accounting records; however, they are included in the adjustments explained in Note 2 to the financial statements. The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in the year ended October 31, 1993. The effect of this change on net income in the years presented is not material. 2 Adjustments Not Reflected in the Official Accounting Records The following adjustments, not reflected in the official accounting records, have been made to conform the Company's Japanese yen-based financial statements to accounting principles generally accepted in the United States (U.S. GAAP):
Retained Retained earnings at Net income earnings beginning Appropria- for the at end of of period tions period period --------------------------------------------------------- (Thousands of Yen) Year ended October 31, 1993: As recorded in the official accounting records 465,035 16,000 160,786 609,821 Japanese GAAP adjustments: Income tax provision 98,000 0 19,000 117,000 --------------------------------------------------------- Per Japanese GAAP 563,035 16,000 179,786 726,821 U.S. GAAP adjustments: Accrued compensated absences (10,382) 0 (1,933) (12,315) Accrued directors' bonuses (5,000) (5,000) (5,000) (5,000) Prepaid expenses 0 0 12,980 12,980 Deferred income taxes 19,766 0 (12,192) 7,574 ---------------------------------------------------------- 4,384 (5,000) (6,145) 3,239 ---------------------------------------------------------- As adjusted to U.S. GAAP 567,419 11,000 173,641 730,060 ==========================================================
F-70 Rogers Inoac Corporation Notes to Financial Statements (continued) 3 Income Taxes Income taxes include corporation, enterprise, and inhabitants' taxes which, in the aggregate, resulted in a statutory tax rate of approximately 52.3% for 1993, 1992 and 1991. The Company made income tax payments of 243,630 thousand yen, 209,855 thousand yen and 176,174 thousand yen during 1993, 1992 and 1991, respectively. For the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991, the differences between the statutory income tax rate and the effective tax rates are reconciled as follows: Eleven months ended Year ended October 31, October 31, 1993 1992 1991 ------------------------------------------ (Thousands of yen) Statutory income tax rate 52.3% 52.3% 52.3% Tax effect of: Expenses not deductible for tax purposes 1.0 0.9 1.3 Other 0.8 1.3 0.9 ------------------------------------------ PEffective tax rates 54.1% 54.5% 54.5% ========================================= Net deferred tax assets and liabilities as of October 31, 1993 and 1992 were as follows: 1993 1992 ------------------------- (Thousands of yen) Deferred tax assets 14,363 19,766 Deferred tax liabilities (6,789) 0 ------------------------ 7,574 19,766 ======================== Temporary differences at October 31, 1993 and 1992 mainly consisted of accrued expenses that gave rise to deferred tax assets, and prepaid expenses that gave rise to deferred tax liabilities. The total tax effect of these temporary differences is recognized in the statements of income and retained earnings. F-71 Rogers Inoac Corporation Notes to Financial Statements (continued) 4 Transactions with Affiliates A substantial portion of the Company's business is conducted through its Japanese parent, Inoac Corporation ("Inoac") and its subsidiaries, which purchase the Company's products for resale. Inoac also provided certain services to the Company for which it charged a management service fee. Balances due from and due to affiliates at October 31, 1993 and 1992, and transactions with affiliates for the years ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 are as follows: October 31, 1993 1992 -------------------------- (Thousands of yen) Due from: Inoac and its subsidiaries and affiliates 343,101 353,023 ========================== Due to: Inoac and its subsidiaries and affiliates 234,122 260,213 Rogers Corporation 1,658 639 ------------------------- 235,780 260,852 ========================= Eleven months ended Year ended October 31, October 31, 1993 1992 1991 ------------------------------------------- (Thousands of yen) Inoac and its subsidiaries and affiliates: Sales to 3,450,295 3,517,731 2,998,288 Purchases from 1,423,172 1,419,962 1,096,223 Management service fee 53,591 59,993 47,103 Plant and office rent 49,501 47,736 43,758 Purchases of equipment 5,611 0 3,500 Subcontractors' fee 352,746 423,080 305,656 Rogers Corporation: Commission income 819 4,113 2,265 Sales commission 7,340 9,496 11,464 Interest income 7,079 0 0 F-72 Rogers Inoac Corporation Notes to Financial Statements (continued) 5 Interest Paid Interest paid for the year ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991 amounted to 1,232 thousand yen, 101 thousand yen and 936 thousand yen, respectively. 6 Pension Cost All employees of the Company are seconded from its Japanese parent, Inoac, and are covered by Inoac's pension plan and Inoac bears the ultimate pension obligation for these employees. The Company reimburses Inoac for the current pension cost for these employees. Amounts charged to the Company by Inoac for its pension plan for the years ended October 31, 1993 and 1992, and the eleven months ended October 31, 1991 amounted to 5,050 thousand yen, 5,076 thousand yen and 4,263 thousand yen, respectively. A director of the Company, who is also a director of Inoac, is not covered by the pension plan. Payments of termination benefits to the directors are at the discretion of the shareholders of the Company and are not determinable in advance of a resolution by the shareholders covering such payments. Consequently, no provision for the directors' termination benefits has been included in the accompanying financial statements. 7 Retained Earnings and Legal Reserve The amount of retained earnings available for distribution to the shareholders is based on the financial statements prepared under the Commercial Code of Japan. The Commercial Code of Japan provides that a legal reserve be appropriated until such reserve equals 25% of stated capital (common stock). The legal reserve is not available for dividends, but may be used to reduce a deficit by resolution of the shareholders or may be capitalized by resolution of the Board of Directors. The amount of unrestricted retained earnings available at October 31, 1993 for dividends was approximately 609,821 thousand yen. F-73 Rogers Inoac Corporation Notes to Financial Statements (Continued) 8 Commitments The Company leases certain equipment under leases which are noncancelable. Future minimum payments, by year and in the aggregate, for equipment under noncancelable operating leases with terms of one year or more consisted of the following at October 31, 1993: Thousands of yen ---------------- 1994 2,306 1995 868 1996 474 1997 63 ----------- 3,711 =========== For the year ended October 31, 1993 and 1992 and the eleven months ended October 31, 1991, total rental expense for all operating leases amounted to 53,865 thousand yen, 53,715 thousand yen and 55,282 thousand yen, respectively. Under its capital expenditure program, the Company has estimated that a total expenditure of 314,500 thousand yen, of which 39,571 thousand yen was expended as of October 31, 1993, will be required for a new plant facility which will be completed by the end of January 1994. 9 Amounts per Share The computation of net income per share is based on the weighted average number of shares (880 shares) of common stock outstanding during each period. Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective periods. F-74 SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS ROGERS INOAC CORPORATION
Additions -------------------- Balance at Charged to Charged Balance beginning of costs and to other at end Description period expenses accounts Deductions of period - ------------------------------- ------------ ---------- -------- ---------- --------- (Yen) Year ended October 31, 1993: Deducted from asset accounts: Allowance for doubtful accounts 5,713,994 0 0 3,713,994 2,000,000 Year ended October 31, 1992: Deducted from asset accounts: Allowance for doubtful accounts 3,719,716 1,994,278 0 0 5,713,994 Eleven months ended October 31, 1991: Deducted from asset accounts: Allowance for doubtful accounts 1,200,000 2,519,716 0 0 3,719,716
F-75 SCHEDULE IX SHORT-TERM BORROWINGS ROGERS INOAC CORPORATION
Average amount Weighted Balance at Weighted Maximum amount outstanding average interest Category of Aggregate end of average outstanding during during the rate during the short-term borrowings period interest rate the period period period - -------------------------------- --------- ------------- ------------------ -------------- ---------------- (Yen) Year ended October 31, 1993: Overdraft from bank 0 4.389% 80,000,000 26,666,667 4.618% Year ended October 31, 1992 Eleven months ended October 31, 1991 Notes payable to bank represent borrowings under line-of-credit arrangements which have no termination date but are reviewed annually for renewal. The average amount outstanding during the period was computed by dividing the total of the month-end outstanding principal balances by 12. The weighted average interest rate during the period was computed by dividing the actual interest expense by the monthly average short-term debt outstanding during the period. There were no short-term borrowings outstanding during the periods ended October 31, 1991 and 1992.
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