-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J87WfxRkyjEOqbzHajosfM0ohiz9LgV+3Bbbmy+JJcIVhu8yVWpmCF/9/1WZLUDr N8veRJ5VBI3U8g0rA99GXw== 0000084748-99-000009.txt : 19990818 0000084748-99-000009.hdr.sgml : 19990818 ACCESSION NUMBER: 0000084748-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990704 FILED AS OF DATE: 19990817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROGERS CORP CENTRAL INDEX KEY: 0000084748 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 060513860 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04347 FILM NUMBER: 99694300 BUSINESS ADDRESS: STREET 1: P.O. BOX 188 STREET 2: ONE TECHNOLOGY DRIVE CITY: ROGERS STATE: CT ZIP: 06263-0188 BUSINESS PHONE: 860 774-96 10-Q 1 Total pages included - 15 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 4, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4347 ROGERS CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 06-0513860 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 188, One Technology Drive, Rogers, Connecticut 06263-0188 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (860) 774-9605 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the Registrant's classes of common stock as of August 1, 1999: Capital Stock, $1 Par Value-7,617,550 shares -1- ROGERS CORPORATION AND SUBSIDIARIES FORM 10-Q July 4, 1999 INDEX Page No. PART I--FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Consolidated Statements of Income-- Three Months and Six Months Ended July 4, 1999 and July 5, 1998 3 Consolidated Balance Sheets-- July 4, 1999 and January 3, 1999 4-5 Consolidated Statements of Cash Flows-- Six Months Ended July 4, 1999 and July 5, 1998 6 Supplementary Notes 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-14 PART II--OTHER INFORMATION Item 6. Reports on Form 8-K 15 SIGNATURES 15 -2- PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except for Per Share Amounts) Three Months Ended: Six Months Ended: ---------------------- --------------------- July 4, July 5, July 4, July 5, 1999 1998 1999 1998 ---------------------- --------------------- Net Sales $ 62,801 $ 53,389 $ 127,705 $ 111,702 Cost of Sales 46,376 40,242 92,946 82,475 Selling and Administrative Expenses 8,599 7,534 17,452 14,806 Research and Development Expenses 2,519 2,521 5,143 5,132 --------- --------- --------- --------- Total Costs and Expenses 57,494 50,297 115,541 102,413 --------- --------- --------- --------- Operating Income 5,307 3,092 12,164 9,289 Other Income less Other Charges 699 468 307 320 Interest Income, Net 24 131 82 362 --------- --------- --------- --------- Income Before Income Taxes 6,030 3,691 12,553 9,971 Income Taxes: Federal and Foreign 1,649 950 3,475 2,651 State 40 120 40 240 --------- --------- --------- --------- Net Income $ 4,341 $ 2,621 $ 9,038 $ 7,080 ========= ========= ========= ========= Net Income Per Share (Note G): Basic $ 0.57 $ 0.35 $ 1.19 $ 0.93 ========= ========= ========= ========= Diluted $ 0.55 $ 0.33 $ 1.15 $ 0.89 ========= ========= ========= ========= Shares Used in Computing (Note G): Basic 7,606,000 7,595,000 7,610,000 7,591,000 ========= ========= ========= ========= Diluted 7,880,000 7,947,000 7,861,000 7,953,000 ========= ========= ========= ========= The accompanying notes are an integral part of the consolidated financial statements. -3- ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) July 4, 1999 January 3, 1999 ------------ --------------- Current Assets: Cash and Cash Equivalents $ 19,460 $ 9,593 Marketable Securities -- 256 Accounts Receivable, Net 34,385 32,590 Inventories: Raw Materials 8,092 10,392 In-Process and Finished 12,083 12,365 --------- --------- Total Inventories 20,175 22,757 Current Deferred Income Taxes 3,444 3,481 Assets Held for Sale, Net of Valuation Reserves of $492 in each period (Note B) 5,158 5,158 Other Current Assets 683 487 --------- --------- Total Current Assets 83,305 74,322 --------- --------- Property, Plant and Equipment, Net of Accumulated Depreciation of $73,553 and $69,051 78,058 74,811 Investment in Unconsolidated Joint Venture 4,977 5,467 Pension Asset 4,606 4,606 Goodwill and Other Intangibles, Net 14,831 14,935 Other Assets 2,138 2,033 --------- --------- Total Assets $ 187,915 $ 176,174 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. -4- ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in Thousands) July 4, 1999 January 3, 1999 ------------ --------------- Current Liabilities: Accounts Payable $ 14,866 $ 17,766 Current Maturities of Long- Term Debt 600 600 Accrued Employee Benefits and Compensation 8,318 6,577 Accrued Income Taxes Payable 4,508 1,059 Taxes, Other than Federal and Foreign Income 2,013 1,038 Other Accrued Liabilities 7,151 5,265 --------- --------- Total Current Liabilities 37,456 32,305 --------- --------- Long-Term Debt, less Current Maturities 13,687 13,687 Noncurrent Deferred Income Taxes 5,690 5,938 Noncurrent Pension Liability 3,703 3,703 Noncurrent Retiree Health Care and Life Insurance Benefits 6,268 6,268 Other Long-Term Liabilities 3,767 4,042 Shareholders' Equity: Capital Stock, $1 Par Value: Authorized Shares 50,000,000; Issued Shares 7,648,596 and 7,630,466 7,649 7,630 Additional Paid-In Capital 33,477 33,323 Treasury Stock (39,400 and 12,800 shares) (1,088) (423) Accumulated Other Comprehensive Income, Net of Tax (84) 1,348 Retained Earnings 77,390 68,353 --------- --------- Total Shareholders' Equity 117,344 110,231 --------- --------- Total Liabilities and Shareholders' Equity $ 187,915 $ 176,174 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. -5- ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Six Months Ended: July 4, July 5, 1999 1998 ---------- ---------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 9,038 $ 7,080 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 5,995 4,536 Benefit for Deferred Income Taxes (146) -- Equity in Undistributed (Income) Loss of Unconsolidated Joint Ventures, Net (180) 62 Loss on Disposition of Assets 40 51 Noncurrent Pension and Postretirement Benefits 123 1,033 Other, Net (577) 391 Changes in Operating Assets and Liabilities: Accounts Receivable (1,166) (3,070) Inventories 1,976 (759) Prepaid Expenses (242) 79 Accounts Payable and Accrued Expenses 5,449 (1,048) --------- --------- Net Cash Provided by Operating Activities 20,310 8,355 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Capital Expenditures (7,004) (16,907) Acquisition of Business (4,302) -- Proceeds from Sale of Property, Plant & Equipment -- (96) Proceeds from Sale of Marketable Securities 256 (252) Investment in Unconsolidated Joint Ventures and Affiliates 737 333 --------- --------- Net Cash Provided by (Used in) Investing Activities (10,313) (16,922) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from Short and Long-Term Borrowings 399 286 Repayments of Debt Principal -- (269) Acquisition of Treasury Stock (695) (423) Proceeds from Sale of Capital Stock 202 489 --------- --------- Net Cash Provided by (Used in) Financing Activities (94) 83 Effect of Exchange Rate Changes on Cash (35) (226) --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 9,868 (8,710) Cash and Cash Equivalents at Beginning of Year 9,592 18,791 --------- --------- Cash and Cash Equivalents at End of Quarter $ 19,460 $ 10,081 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. -6- ROGERS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY NOTES A. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended January 3, 1999. B. Net Assets Held for Sale consist of land and a building in Chandler, Arizona, currently being leased to the purchaser of the Company's Flexible Interconnections Business in 1993. C. In September 1997 the Company cancelled its $5.0 million unsecured revolving credit agreement with Fleet National Bank and replaced it with an unsecured multi-currency revolving credit agreement, also with Fleet. Under the new arrangement, the Company can borrow up to $15.0 million, or the equivalent in Belgian Francs and/or Japanese Yen. Amounts borrowed under this agreement are to be paid in full by September 19, 2002. The Company borrowed 390,207,039 Belgian Francs under the new arrangement to facilitate the Rogers Induflex acquisition in Belgium in September 1997. D. Interest paid during the first six months of 1999 and 1998 was $558,000 and $593,000, respectively. E. Income taxes paid were $202,000 and $2,170,000 in the first six months of 1999 and 1998, respectively. F. The components of comprehensive income, net of related tax, are as follows: Three Months Ended: Six Months Ended: ------------------ ----------------- (Dollars In Thousands) July 4, July 5, July 4, July 5, 1999 1998 1999 1998 ------------------ ----------------- Net income $ 4,341 $ 2,621 $ 9,038 $ 7,080 Foreign currency translation Adjustments (361) 127 (1,434) (818) Unrealized gains on securities -- (11) 2 (8) ------------------ ----------------- Comprehensive income $ 3,980 $ 2,737 $ 7,606 $ 6,254 ================== ================= G. The following table sets forth the computation of basic and diluted earnings per share in conformity with Statement of Financial Accounting Standards No. 128, "Earnings per Share": -7- SUPPLEMENTARY NOTES, CONTINUED Three Months Six Months (In Thousands, Except Per Share Ended: Ended: Amounts) --------------- --------------- July 4, July 5, July 4, July 5, 1999 1998 1999 1998 ---------------- --------------- Numerator: Net income $4,341 $2,621 $9,038 $7,080 Denominator: Denominator for basic earnings per share - Weighted-average shares 7,606 7,595 7,610 7,591 Effect of stock options 274 352 251 362 ---------------- --------------- Denominator for diluted earnings per Share - adjusted weighted-average Shares and assumed conversions 7,880 7,947 7,861 7,953 ---------------- --------------- Basic earnings per share $ 0.57 $ 0.35 $ 1.19 $ 0.93 ================ =============== Diluted earnings per share $ 0.55 $ 0.33 $ 1.15 $ 0.89 ================ =============== H. The Company's fiscal year begins on the Monday nearest January 1 and ends on the Sunday nearest December 31. The fiscal year ending January 2, 2000 is a 52 week year and the six-month period ending July 4, 1999 is a 26 week half. The fiscal year ended January 3, 1999 was a 53 week year and the six-month period ended July 5, 1998 was a 27 week half. I. The Company adopted Statement of Financial Accounting Standards (FAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1998 which changes the way the Company reports information about its operating segments. The quarterly information required by FAS No. 131 is presented below. Polymer Electronic (Dollars in Millions) Materials Materials Total ------------------------------- Three months ended July 4, 1999 Net Sales $32.4 $30.4 $ 62.8 Operating Income 3.7 1.6 5.3 Three months ended July 5, 1998 Net Sales $26.4 $27.0 $ 53.4 Operating Income 2.3 0.8 3.1 Six months ended July 4, 1999 Net Sales $64.9 $62.8 $127.7 Operating Income 7.8 4.4 12.2 Six months ended July 4, 1998 Net Sales $56.2 $55.5 $111.7 Operating Income 5.0 4.3 9.3 Inter-segment sales, which are generally priced with reference to costs or prevailing market prices, are not material in relation to consolidated net sales and have been eliminated from the sales data in the previous tables. -8- J. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in five cases involving waste disposal sites, all of which are Superfund sites. 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 PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a reserve has been established. Insurance proceeds have only been taken into account when they have been confirmed by or received from the insurance company. Actual costs to be incurred in future periods may vary from these estimates. Based on facts presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial position. In addition to the above proceedings, the Company has been actively working with the Connecticut Department of Environmental Protection (CT DEP) related to certain polychlorinated biphenyl (PCB) contamination in the soil beneath a section of cement flooring at its Woodstock, Connecticut facility. The Company has developed a remediation plan which has been approved by the CT DEP, and it is expected that removal of soil contamination will be completed in 1999. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a reserve of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for costs related to this matter. During 1995, $300,000 was charged against this reserve and $200,000 per year was charged in 1996, 1997 and 1998. Management believes, based on facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. In this same matter the United States Environmental Protection Agency (EPA) has alleged that the Company improperly disposed of PCBs. An administrative law judge found the Company liable for this alleged disposal and assessed a penalty of approximately $300,000. The Company has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. - 9 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales were $62.8 million in the second quarter and $127.7 million for the first six months of 1999, up 18% and 14%, respectively, over the comparable periods in 1998. Combined Sales, which include one- half of the sales from the Company's two 50% owned joint ventures, were $71.6 million for the quarter and $144.0 million for the half, up 17% and 13%, respectively, over the same periods in 1998. Sales of Polymer Materials in the second quarter and first half of 1999 were 23% and 15%, respectively, above the levels in the same periods of 1998. A majority of the second quarter and first half year- to-year volume increases are attributable to acquisitions. Since the beginning of 1997, the Company has made three domestic acquisitions, all of which are in the Polymer Materials segment. The purchases of the Imation dampening sleeve business at the end of September 1998, and of most of the engineered molding compounds business of Cytec Fiberite in January of 1999 have quickly resulted in meaningful contributions to the Company's performance. The integration and improvement of the Bisco silicone foam business acquired at the beginning of 1997 has also reached this stage though it took longer than initially anticipated. In addition, led by strong sales to wireless communications markets, Poron urethane foam materials achieved record second quarter and first half sales. As we move into the second half, increased penetration of foreign markets should further enhance the results of this business. Sales of Electronic Materials for the second quarter and first six months both increased 13% from the comparable 1998 periods. High frequency circuit materials for wireless communications equipment set second quarter and first half sales records. The Company recently completed a new manufacturing facility for these materials in Ghent, Belgium. This extended capability has been well received by European customers. The utilization of the capacity added to our Chandler, Arizona, Microwave Materials Division in 1998 is also meeting our expectations. The Company continued to experience a disparity in demand for its two largest lines of flexible circuit materials for computer markets. Sales of FLEX-I-MIDr adhesiveless laminate materials to Hutchinson Technology Incorporated (HTI), the world leader in suspension assemblies for hard disk drives, are growing rapidly. In contrast, sales of R/flex materials continue to be low. Previously the Company had reported that sales to its largest R/flex materials customer had declined substantially. With the improving situation of this customer, new business success, and the introduction of new flexible circuit materials, the Company expects its R/flex product line to eventually regain its former attractive growth rate. - 10 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Profits before and after tax, and earnings per share for the second quarter and the first half of 1999 were higher than any comparable periods in the Company's history. Net income of $4.3 million for the second quarter and $9.0 million for the second half were up 66% and 28%, respectively from the same periods in 1998. The increase in profits was primarily attributable to higher sales coupled with improved operations, reflecting better utilization of new and existing facilities. Also, 1998 numbers include the results of a disappointing second quarter that was adversely impacted by softness in the domestic computer market and by unfavorable conditions in Southeast Asia. Earnings per share (diluted) for the second quarter this year were $0.55, up from $0.33 in the same period last year. For the first half of 1999, earnings per share (diluted) were $1.15 compared to $0.89 in the initial six-month period a year ago. Manufacturing profit as a percentage of sales in the first six months of 1999 and 1998 was 27% and 26%, respectively. This percentage continues to be held down by the lower margin on the sales of FLEX-I- MID materials to HTI. These materials are produced for the Company by Mitsui Chemicals, Inc. in Japan and carry a lower margin than material that the Company manufactures. Selling and administrative expense for the first six months of 1999 increased in total dollars, but as a percentage of sales were approximately the same as the comparable period in the previous year. The increase in dollars primarily reflects the strengthening of Sales and Marketing capabilities at both the Corporate and Divisional levels, and the continued development of information systems. It also includes higher payroll costs related to bonus accruals and terminations. Research and Development expense was approximately the same in the first six months of 1999 ($ 5,143,000) and 1998 ($5,132,000). Major development activities in circuit materials included process and product improvements to the RO3000T and RO4000r high frequency circuit board materials which are designed for use in high volume, low cost commercial wireless communication applications. These activities included the development of a bondply addition to the RO4000 family that will allow multi-layer circuit boards to be made using RO4000 laminates, as well as the development of materials with improved thermal properties. Flexible circuit materials development efforts focused on the introduction of a new epoxy based adhesive system, R/flex CRYSTALT, on manufacturing improvements designed to significantly improve the dimensional stability of R/flex laminates, and on development of new flexible circuit materials. PORON materials development activities included formulations for industrial, footwear, and healthcare applications; in addition, new thinner adhesive-backed R/bak tapes are being developed for the flexographic printing market. Molding materials development continued to emphasize tougher, more dimensionally stable materials for small electrical motor commutators and integration of the Cytec acquisition technology into the Company. - 11 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Net interest income for 1999 decreased significantly from 1998 due mainly to the lower cash balances over the first six months of 1999. The amount of interest expense that has been capitalized is down in 1999 because of the lower amount of long-term capital spending projects. The 1998 balance also included a refund of interest received from the Internal Revenue Service. Under present arrangements the Company may borrow up to $15.0 million, or the equivalent in Belgian Francs and/or Japanese Yen, under an unsecured multi-currency revolving credit agreement with Fleet National Bank. Amounts borrowed under this agreement are to be repaid in full by September 19, 2002. The Company has borrowed 390 million Belgian Francs under this agreement as of July 4, 1999. Other income less other charges was $0.3 million for the first six months of 1999 and for the same period in 1998. Durel Corporation, the joint venture with 3M in electroluminescent (EL) lamps, had record second quarter and first half sales. This was primarily attributable to increased orders from cellular telephone manufacturers. Additional product capacity is being installed to satisfy the growing demand by the cellular telephone industry for EL lighting systems. Durel returned to profitability in the second quarter, despite continuing high expenses to support the patent infringement lawsuit brought by Durel to protects its proprietary technology. The trial, most recently scheduled to begin in June, has now been postponed until January of 2000 because of the court's backlog. The performance of Rogers Inoac Corporation (RIC), the joint venture with Inoac Corporation, has been hurt by the weakness of the Japanese economy and the loss last year of a major customer in the disk drive industry. The RIC recovery process is progressing as planned, as they focus on marketing their unique products to a broader array of markets. Net cash provided by operating activities in the first six months of 1999 totaled $20.3 million compared with $8.4 million in the comparable 1998 period. This difference was attributable to several factors, among which were higher net income and increased depreciation expense in 1999, as well as a change in the level of Accounts Payable and Accrued Expenses. In 1998 investments in capital equipment reached almost $17 million in the first half and finished at $29 million for the year. In 1999 capital expenditures have been reduced to more traditional levels and the first half totaled $7 million. Management anticipates that capital spending for 1999, primarily for new process equipment and new information systems capability will total about $15 million. It is anticipated that this spending will be financed with internally generated funds. Management expects strong operating cash flow for 1999 and believes that in the near term internally generated funds and its credit facility with Fleet National Bank will be sufficient to meet the needs of its exisiting business. The Company continually reviews and assesses its lending relationships. - 12 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED The year 2000 issue is the result of computer programs using two digits rather than four to define the applicable year. Such software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in systems failures or miscalculations leading to disruptions in a company's activities and operations. If a company, its significant customers, or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on a company's operations. The Company completed a review of its systems and operations, including systems currently being implemented, to identify computer hardware, software, and process control systems that do not properly recognize dates after December 31, 1999, including those linked to third party systems. The Company is now substantially complete with the process of reprogramming or replacing hardware, software, and process control systems as necessary to ensure compliance with year 2000 requirements. The Company is confident that its own internal systems are year 2000 compliant or planned upgrades will be in place. The Company also initiated communications, primarily in the form of questionnaires, with third parties whose computer systems' functionality could directly impact the operations of the Company. The costs of the Company's year 2000 compliance efforts are being funded with cash flows from operations and are being expensed as incurred. In total these costs are not expected to be substantially different from the normal, recurring costs that are incurred for systems development and implementation. Although the Company is not aware of any material operational issues or costs associated with preparing its internal systems for the year 2000, there can be no assurance that the Company will not experience serious unanticipated negative consequences and/or material costs caused by undetected errors or defects in the technology used in its internal operating systems which are composed predominantly of third party software and hardware technology. Non-compliance by any of the Company's major distributors, suppliers, customers, vendors, or financial organizations could result in business disruptions that could have a material adverse effect on the Company's results of operations, liquidity and financial condition. The Company will develop a contingency plan based on its assessment of significant third party compliance. The goal of the contingency plan will be to minimize the Company's exposure to work slowdowns or business disruptions and any adverse effects on the Company's results of operations. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in five cases involving waste disposal sites, all of which are Superfund sites. 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 -13- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a reserve has been established. Insurance proceeds have only been taken into account when they have been confirmed by or received from the insurance company. Actual costs to be incurred in future periods may vary from these estimates. Based on facts presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial position. In addition to the above proceedings, the Company has been actively working with the Connecticut Department of Environmental Protection (CT DEP) related to certain polychlorinated biphenyl (PCB) contamination in the soil beneath a section of cement flooring at its Woodstock, Connecticut facility. The Company has developed a remediation plan which has been approved by the CT DEP, and it is expected that removal of soil contamination will be completed in 1999. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a reserve of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for costs related to this matter. During 1995, $300,000 was charged against this reserve and $200,000 per year was charged in 1996, 1997 and 1998. Management believes, based on facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. In this same matter the United States Environmental Protection Agency (EPA) has alleged that the Company improperly disposed of PCBs. An administrative law judge found the Company liable for this alleged disposal and assessed a penalty of approximately $300,000. The Company has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. The Company has not had any material recurring costs and capital expenditures relating to environmental matters, except as specifically described in the preceding statements. Statements in this report that are not strictly historical may be deemed to be "forward-looking" statements which should be considered as subject to the many uncertainties that exist in the Company's operations and environment. These uncertainties, which include economic conditions, market demand and pricing, competitive and cost factors, and the like, are incorporated by reference in the Rogers Corporation 1998 Form 10-K filed with the Securities and Exchange Commission. Such factors could cause actual results to differ materially from those in the forward-looking statements. -14- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: (27) Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended July 4, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROGERS CORPORATION (Registrant) __________________________________ By s/FRANK H. ROLAND Frank H. Roland Vice President, Finance and Chief Financial Officer Dated: August 17, 1999 -15- EX-27 2
5 1000 6-MOS JAN-02-2000 JUL-04-1999 19460 0 34928 543 20175 83305 151611 73553 187915 37456 0 0 0 7649 109695 187915 127705 127705 92946 115541 (307) 0 (82) 12553 3515 9038 0 0 0 9038 1.19 1.15
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