UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported)
November
1, 2018
ROGERS
CORPORATION
(Exact
name of registrant as specified in its charter)
Massachusetts |
1-4347 |
06-0513860 |
(State or other jurisdiction of incorporation |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
2225 West Chandler Blvd., Chandler, Arizona 85224 |
(Address of principal executive offices) (Zip Code) |
(480)
917-6000
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
⃞
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
⃞
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
⃞
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞
Item 2.02 Results of Operations and Financial Condition
Item 7.01 Regulation FD Disclosure
In a press release dated November 1, 2018, the Company announced its third quarter 2018 results and provided guidance for the fourth quarter of 2018. A copy of the press release is furnished herewith as Exhibit 99.1. The Company will also host a conference call and webcast on November 1, 2018 to discuss its results of operations.
All information in this Form 8-K and the Exhibit attached hereto, including guidance or any other forward-looking statements, speaks as of November 1, 2018, and the Company undertakes no duty to update this information to reflect subsequent events, actual results or changes in the Company’s expectations, unless required by law.
The information in Items 2.02 and 7.01 of this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
Description |
Press release, dated November 1, 2018, issued by Rogers Corporation |
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 hereunto duly authorized.
ROGERS CORPORATION |
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By: |
/s/ Michael M. Ludwig |
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Michael M. Ludwig |
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Senior Vice President, Chief Financial Officer and |
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Treasurer |
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Date: November 1, 2018 |
Exhibit 99.1
Rogers Corporation Reports Third Quarter 2018 Results
Rogers Delivers Record Revenue with Strong Sequential Earnings Performance
CHANDLER, Ariz.--(BUSINESS WIRE)--November 1, 2018--Rogers Corporation (NYSE:ROG) today announced financial results for the 2018 third quarter.
The Company reported 2018 third quarter net sales of $226.9 million, which was within the Company's previously announced guidance of $220 to $230 million. Q3 2018 net sales increased $12.2 million (+5.7%) over Q2 2018 net sales and $20.1 million (+9.7%) over Q3 2017 net sales. Currency exchange rates negatively impacted 2018 third quarter net sales by $4.2 million compared to the 2018 second quarter but had favorable impact of $0.8 million on 2018 third quarter revenues compared to the 2017 third quarter.
Gross margin was 34.9% in the third quarter of 2018, compared to 35.7% in the second quarter of 2018 and 39.7% in the third quarter of 2017. Q3 2018 gross margin was lower than our guidance of 37%. GAAP operating margin was 13.1% in the third quarter of 2018, compared to 11.7% in the second quarter of 2018 and 19.0% in the third quarter of 2017. Adjusted operating margin was 17.0% in Q3 2018, compared to 14.8% in Q2 2018 and 19.4% in Q3 2017.
Third quarter 2018 GAAP net income was $19.7 million, compared to $17.3 million in the second quarter of 2018 and $25.5 million in the third quarter of 2017.
GAAP earnings for the 2018 third quarter were $1.06 per diluted share, compared to $0.93 per diluted share in the second quarter of 2018 and $1.37 per diluted share in the third quarter of 2017. Q3 GAAP earnings per diluted share were within the Company's guidance of $0.97 to $1.12. On an adjusted basis, earnings were $1.42 per diluted share for the 2018 third quarter, compared to adjusted diluted earnings per share of $1.19 for the second quarter and $1.41 per diluted share for the 2017 third quarter. Adjusted earnings were above the Company's guidance of $1.25 to $1.40 per diluted share.
Adjusted EBITDA was $47.5 million for the third quarter of 2018, compared to $40.7 million for the second quarter and $50.7 million reported in the third quarter of 2017.
“We were pleased with the strong organic revenue growth in Rogers’ PES and EMS businesses, as well as our overall earnings performance in the quarter,” stated Bruce D. Hoechner, Rogers’ President and Chief Executive Officer. “However, market weakness in 4G LTE and Advanced Driver Assistance Systems applications led to lower than expected demand in our ACS business that unfavorably impacted gross margin. While there is still more work to do, we continue to make progress on our operational excellence initiatives to drive profitability. Our outlook remains positive as we anticipate the transition in wireless telecommunications infrastructure from 4G to 5G, as well as strength in demand for Advanced Mobility applications, including ADAS and EV/HEV.”
Business segment discussion
Advanced Connectivity Solutions (ACS)
Advanced
Connectivity Solutions reported 2018 third quarter net sales of $71.9
million, a decrease of $4.5 million (-5.9%) compared to the 2018 second
quarter and a decrease of $0.8 million (-1.2%) compared to 2017 third
quarter net sales. Third quarter 2018 saw lower than expected revenues
from Advanced Driver Assistance Systems (ADAS) applications as supply
chain volatility increased due to platform migrations to higher
frequencies and European car manufacturers work through new regulatory
standards. In addition, the business experienced continued softness in
demand for wireless 4G LTE applications in anticipation of the
transition to 5G. Third quarter 2018 net sales were negatively impacted
by $1.3 million due to fluctuations in currency exchange rates compared
to the second quarter of 2018, but were favorably impacted by $0.1
million compared to the third quarter of 2017.
Elastomeric Material Solutions (EMS)
Elastomeric
Material Solutions reported 2018 third quarter net sales of $95.8
million, an increase of $16.6 million (+21.0%) compared to the 2018
second quarter and an increase of $13.6 million (+16.5%) compared to
2017 third quarter net sales. Strong organic growth was driven by demand
in automotive, portable electronics and general industrial applications.
Segment revenue also benefited from the recently acquired Griswold
business. Third quarter 2018 net sales were negatively impacted by $1.4
million due to fluctuations in currency exchange rates compared to the
2018 second quarter but were favorably impacted by $0.3 million compared
to the 2017 third quarter.
Power Electronics Solutions (PES)
Power Electronics
Solutions reported 2018 third quarter net sales of $55.2 million, an
increase of $1.6 million (+3.0%) compared to the 2018 second quarter and
an increase of $8.8 million (+19.0%) compared to 2017 third quarter net
sales of $46.4 million. The business continues to benefit from
accelerating demand in electric and hybrid electric vehicles. Third
quarter 2018 net sales were negatively impacted by $1.5 million due to
fluctuations in currency exchange rates compared to the second quarter
of 2018 but were favorably impacted by $0.4 million compared to the
third quarter of 2017.
Other
Other reported 2018 third quarter net sales of
$4.0 million which decreased $1.4 million (-26.2%) compared to both the
second quarter 2018 and third quarter of 2017 net sales. The change was
primarily driven by the timing of revenue recognition under the new
standard.
Balance sheet and other highlights
Cash position
Rogers ended the third quarter of 2018
with cash and cash equivalents of $149.6 million, a decrease of $31.6
million from $181.2 million at December 31, 2017. This decrease was
primarily due to $78.6 million paid for the Griswold acquisition, net of
cash, $36.6 million in capital expenditures, $43.4 million paid for the
Isola asset acquisition, and $25.0 million in pension contributions in
anticipation of the proposed termination of the Rogers Corporation
Defined Benefit Pension Plan, along with $6.5 million in tax payments
related to net share settlement of equity awards and $3.0 million in
repurchases of capital stock. This activity was partially offset by
$102.5 million in borrowings under our revolving credit facility, of
which $82.5 million and $20.0 million were used to fund the Griswold
acquisition and the voluntary pension plan contribution, respectively,
and by cash generated by operations.
Effective tax rate
Rogers' effective income tax rate
was 31.0% for the third quarter of 2018, compared to 32.6% in the second
quarter of 2018 and 37.6% for the third quarter of 2017. The decrease
was primarily due to a lower U.S. effective tax rate, as a result of
U.S. tax reform and geographic profit mix, partially offset by an
increase in current year accruals for uncertain tax positions.
Financial outlook
Rogers guides its 2018 fourth quarter
net sales to a range of $215 to $225 million and gross margin in the
range of 35% to 36%. Rogers guides its 2018 fourth quarter earnings to a
range of $0.84 to $0.99 per diluted share. Adjusted earnings are guided
to a range of $1.20 to $1.35 per diluted share.
Rogers guides 2018 full year capital spending to be in the range of $45 to $55 million. In addition, the business invested an incremental $43.4 million for the Isola asset acquisition.
Rogers guides the 2018 full year effective tax rate to be 26-28%, with a fourth quarter effective tax rate of 30-31%.
About Rogers Corporation
Rogers Corporation (NYSE:ROG)
is a global leader in engineered materials to power, protect, and
connect our world. With more than 180 years of materials science
experience, Rogers delivers high-performance solutions that enable clean
energy, internet connectivity, and safety and protection applications,
as well as other technologies where reliability is critical. Rogers
delivers Power Electronics Solutions for energy-efficient motor drives,
e-Mobility and renewable energy; Elastomeric Material Solutions for
sealing, vibration management and impact protection in mobile devices,
transportation interiors, industrial equipment and performance apparel;
and Advanced Connectivity Solutions for wireless infrastructure,
automotive safety and radar systems. Headquartered in Arizona (USA),
Rogers operates manufacturing facilities in the United States, China,
Germany, Belgium, Hungary, and South Korea, with joint ventures and
sales offices worldwide.
Safe Harbor Statement
This release contains
forward-looking statements, which may concern our plans, objectives,
outlook, goals, strategies, future events, future net sales or
performance, capital expenditures, financing needs, future
restructuring, plans or intentions relating to expansions, business
trends and other information that is not historical information. All
forward-looking statements are based upon information available to us on
the date of this release and are subject to risks, uncertainties and
other factors, many of which are outside of our control, which could
cause actual results to differ materially from the results discussed in
the forward-looking statements. Risks that could cause such results to
differ include: failure to capitalize on, and volatility within, the
Company's growth drivers, including advanced mobility and advanced
connectivity, such as delays in adoption or implementation of new
technologies; uncertain business, economic and political conditions in
the United States and abroad, particularly in China, South Korea,
Germany, Hungary and Belgium, where we maintain significant
manufacturing, sales or administrative operations; changes in trade
policy, tariff regulation or other trade restrictions; fluctuations in
foreign currency exchange rates; research and development efforts;
competitive developments; business development transactions and related
integration considerations, including failure to realize, or delays in
the realization of anticipated benefits of such transactions; the
outcome of ongoing and future litigation, including our asbestos-related
product liability litigation; inability to obtain raw materials,
including commodities, from single or limited source suppliers in a
timely and cost effective manner; and changes in laws and regulations
applicable to our business. For additional information about the risks,
uncertainties and other factors that may affect our business, please see
our most recent annual report on Form 10-K and any subsequent quarterly
reports on Forms 10-Q filed with the Securities and Exchange Commission.
Rogers Corporation assumes no responsibility to update any
forward-looking statements contained herein except as required by law.
Conference call and additional information
A conference call to discuss 2018 third quarter results today on Thursday November, 01 2018 at 5pm ET.
A live webcast and slide presentation will be available under the investors section of www.rogerscorp.com/ir.
To participate, please dial:
1-800-574-8929 Toll-free in the United States
1-973-935-8524 Internationally
There is no passcode for the live teleconference.
If you are unable to attend, a conference call playback will be available from November 1, 2018 at approximately 8 pm ET through November 7, 2018 at 11:59 pm ET, by dialing 1-855-859-2056 from the United States, and 1-404-537-3406 from outside of the US, each with passcode 8097939.
Additionally, the archived webcast will be available on the Rogers website at approximately 8 pm ET November 11, 2018.
Additional information
Please contact the Company directly via
email or visit the Rogers website.
(Financial statements follow)
Condensed Consolidated Statements of Operations (Unaudited) |
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Three Months Ended | Nine Months Ended | |||||||||||||||||||
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
September 30, |
September 30, |
September 30, |
September 30, |
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Net sales | $ | 226,863 | $ | 206,783 | $ | 656,149 | $ | 612,035 | ||||||||||||
Cost of sales | 147,733 | 124,595 | 423,741 | 368,951 | ||||||||||||||||
Gross margin | 79,130 | 82,188 | 232,408 | 243,084 | ||||||||||||||||
Selling, general and administrative expenses | 39,943 | 39,010 | 123,080 | 113,590 | ||||||||||||||||
Research and development expenses | 7,630 | 7,411 | 24,514 | 21,512 | ||||||||||||||||
Restructuring and impairment charges | 1,052 | 962 | 2,015 | 2,767 | ||||||||||||||||
Other operating (income) expense, net | 863 | (4,387 | ) | (3,111 | ) | (5,329 | ) | |||||||||||||
Operating income | 29,642 | 39,192 | 85,910 | 110,544 | ||||||||||||||||
Equity income in unconsolidated joint ventures | 1,642 | 1,384 | 4,453 | 3,359 | ||||||||||||||||
Other income (expense), net | (680 | ) | 1,991 | (647 | ) | 3,370 | ||||||||||||||
Interest expense, net | (2,000 | ) | (1,639 | ) | (4,503 | ) | (4,834 | ) | ||||||||||||
Income before income tax expense | 28,604 | 40,928 | 85,213 | 112,439 | ||||||||||||||||
Income tax expense | 8,870 | 15,396 | 22,014 | 38,979 | ||||||||||||||||
Net income | $ | 19,734 | $ | 25,532 | $ | 63,199 | $ | 73,460 | ||||||||||||
Basic earnings per share | $ | 1.07 | $ | 1.40 | $ | 3.44 | $ | 4.05 | ||||||||||||
Diluted earnings per share | $ | 1.06 | $ | 1.37 | $ | 3.39 | $ | 3.97 | ||||||||||||
Shares used in computing: | ||||||||||||||||||||
Basic earnings per share | 18,403 | 18,181 | 18,360 | 18,126 | ||||||||||||||||
Diluted earnings per share | 18,678 | 18,588 | 18,649 | 18,503 | ||||||||||||||||
Please note for adoption of ASU 2017-07, Rogers has reclassified third quarter and year to date 2017 pension and OPEB income, in the amounts of $395 and $1,244 thousand, respectively, from Selling, general and administrative expense to Other income (expense), net, in the condensed consolidated statements of operations above.
Condensed Consolidated Statements of Financial Position (Unaudited) |
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(IN THOUSANDS) | September 30, 2018 | December 31, 2017 | ||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 149,556 | $ | 181,159 | ||||||
Accounts receivable, less allowance for doubtful accounts of $1,143 and $1,525 | 155,706 | 140,562 | ||||||||
Contract assets | 20,260 | — | ||||||||
Inventories | 125,885 | 112,557 | ||||||||
Prepaid income taxes | 2,820 | 3,087 | ||||||||
Current portion of asbestos-related insurance receivables | 5,682 | 5,682 | ||||||||
Assets held for sale | — | 896 | ||||||||
Other current assets | 12,416 | 10,580 | ||||||||
Total current assets | 472,325 | 454,523 | ||||||||
Property, plant and equipment, net of accumulated depreciation of $308,126 and $289,909 | 241,504 | 179,611 | ||||||||
Investments in unconsolidated joint ventures | 17,812 | 18,324 | ||||||||
Deferred income taxes | 4,478 | 6,008 | ||||||||
Goodwill | 266,304 | 237,107 | ||||||||
Other intangible assets, net of amortization | 181,618 | 160,278 | ||||||||
Asbestos-related insurance receivables | 63,511 | 63,511 | ||||||||
Other long-term assets | 21,873 | 5,772 | ||||||||
Total assets | $ | 1,269,425 | $ | 1,125,134 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 39,999 | $ | 36,116 | ||||||
Accrued employee benefits and compensation | 27,598 | 39,394 | ||||||||
Accrued income taxes payable | 9,189 | 6,408 | ||||||||
Current portion of capital lease obligations | 436 | 579 | ||||||||
Current portion of asbestos-related liabilities | 5,682 | 5,682 | ||||||||
Other accrued liabilities | 24,686 | 25,629 | ||||||||
Total current liabilities | 107,590 | 113,808 | ||||||||
Borrowings under credit facility | 233,482 | 130,982 | ||||||||
Non-current portion of capital lease obligations | 4,786 | 5,873 | ||||||||
Pension liability | 268 | 8,720 | ||||||||
Retiree health care and life insurance benefits | 1,685 | 1,685 | ||||||||
Asbestos-related liabilities | 69,560 | 70,500 | ||||||||
Non-current income tax | 10,707 | 12,823 | ||||||||
Deferred income taxes | 10,936 | 10,706 | ||||||||
Other long-term liabilities | 4,028 | 3,464 | ||||||||
Shareholders’ equity | ||||||||||
Capital Stock - $1 par value; 50,000 authorized shares; 18,390 and 18,255 shares issued and outstanding | 18,390 | 18,255 | ||||||||
Additional paid-in capital | 129,659 | 128,933 | ||||||||
Retained earnings | 751,951 | 684,540 | ||||||||
Accumulated other comprehensive loss | (73,617 | ) | (65,155 | ) | ||||||
Total shareholders' equity | 826,383 | 766,573 | ||||||||
Total liabilities and shareholders' equity | $ | 1,269,425 | $ | 1,125,134 | ||||||
Reconciliation of non-GAAP financial measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”):
(1) Adjusted earnings per diluted share, which the Company defines as earnings per diluted share excluding acquisition-related amortization of intangible assets and discrete items, such as restructuring expenses, acquisition and related integration costs, transition services related to asset acquisition, and gains or losses on asset or business dispositions (collectively, “Discrete Items”);
(2) Adjusted EBITDA, which the Company defines as net income excluding interest expense, income tax expense, depreciation and amortization, and Discrete Items; and
(3) Adjusted operating margin, which the Company defines as operating margin excluding acquisition-related amortization of intangible assets and Discrete Items.
Management believes each of these measures is useful to investors because they allow for comparison to the Company’s performance in prior periods without the effect of items that, by their nature, tend to obscure the Company’s core operating results due to the potential variability across periods based on the timing, frequency and magnitude. As a result, management believes that adjusted earnings per diluted share, adjusted EBITDA and adjusted operating margin enhance the ability of investors to analyze trends in the Company’s business and evaluate the Company’s performance relative to peer companies. However, non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or solely as alternatives to, financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from similarly named measures used by other companies. Reconciliations of the differences between these non-GAAP financial measures and their most directly comparable financial measures calculated in accordance with GAAP are set forth below.
**2017 financial measures below have been adjusted for the adoption of ASU 2017-07, and has reclassified pension and OPEB income from selling, general and administrative expense to other income (expense), net.
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share for the third quarter*: |
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2018 | 2017 | |||||||
Earnings per diluted share | Q3 | Q3 | ||||||
GAAP earnings per diluted share | $1.06 | $1.37 | ||||||
Restructuring, severance, impairment and other related costs | 0.11 | 0.03 | ||||||
Acquisition and related integration costs | 0.04 | 0.02 | ||||||
Loss (gain) on sale of long-lived assets | — | (0.15 | ) | |||||
Purchase accounting inventory adjustment | 0.02 | — | ||||||
Transition services, net | 0.03 | — | ||||||
Total discrete items | $0.19 | ($0.10 | ) | |||||
Earnings per diluted share adjusted for discrete items | $1.24 | $1.27 | ||||||
Acquisition intangible amortization | 0.18 | 0.14 | ||||||
Adjusted earnings per diluted share | $1.42 | $1.41 |
Reconciliation of GAAP net income to adjusted EBITDA for the third quarter*: |
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2018 | 2017 | |||||||
(amounts in millions) | Q3 | Q3 | ||||||
Net income | $19.7 | $25.5 | ||||||
Interest expense, net | 2.0 | 1.6 | ||||||
Income tax expense | 8.9 | 15.4 | ||||||
Depreciation | 8.8 | 7.3 | ||||||
Amortization | 4.4 | 3.9 | ||||||
Restructuring, severance, impairment and other related costs | 2.7 | 0.9 | ||||||
Acquisition and related integration costs | 0.9 | 0.5 | ||||||
Loss (gain) on sale of long-lived assets | — | (4.4 | ) | |||||
Purchase accounting inventory adjustment | 0.3 | — | ||||||
Transition services lease income | (0.2 | ) | — | |||||
Adjusted EBITDA | $47.5 | $50.7 | ||||||
*Values in table may not add due to rounding.
Reconciliation of GAAP operating margin to adjusted operating margin for the third quarter*: |
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2018 | 2017 | |||||
Operating margin | Q3 | Q3 | ||||
**GAAP operating margin | 13.1% | 19.0% | ||||
Restructuring, severance, impairment and other related costs | 1.2% | 0.5% | ||||
Acquisition and related integration costs | 0.4% | 0.2% | ||||
Loss (gain) on sale of long-lived assets | —% | (2.1)% | ||||
Purchase accounting inventory adjustment | 0.1% | —% | ||||
Transition services, net | 0.3% | —% | ||||
Total discrete Items | 2.0% | (1.4)% | ||||
Operating margin adjusted for discrete items | 15.1% | 17.6% | ||||
Acquisition intangible amortization | 1.9% | 1.8% | ||||
Adjusted operating margin | 17.0% | 19.4% | ||||
*Percentages in table may not add due to rounding.
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2018 third quarter: |
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Guidance |
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GAAP earnings per diluted share | $0.97 - $1.12 | ||
Discrete items | $0.13 | ||
Acquisition intangible amortization | $0.15 | ||
Adjusted earnings per diluted share | $1.25 - $1.40 |
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2018 fourth quarter: |
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Guidance |
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GAAP earnings per diluted share | $0.84 - $0.99 | ||
Discrete items | $0.18 | ||
Acquisition intangible amortization | $0.18 | ||
Adjusted earnings per diluted share | $1.20 - $1.35 |
CONTACT:
Investor contact:
Rogers Corporation
Mike
Ludwig, 480-917-6073
investor.relations@rogerscorp.com
http://www.rogerscorp.com