Rogers Corporation Reports Second Quarter 2019 Results

Delivers Record Quarterly Revenue; EPS at Top End of Guidance

CHANDLER, Ariz.--()--Rogers Corporation (NYSE:ROG) today announced financial results for the 2019 second quarter.

The Company reported 2019 second quarter net sales of $242.9 million, a 1.3% increase compared to 2019 first quarter net sales of $239.8 million and a 13.1% increase compared to 2018 second quarter net sales of $214.7 million. Net sales for the 2019 second quarter were within the Company's previously announced guidance range of $240 to $250 million. Currency exchange rates unfavorably impacted the 2019 second quarter net sales by $0.5 million compared to 2019 first quarter net sales, and by $8.1 million compared to 2018 second quarter net sales.

Second quarter 2019 net income was $24.3 million compared to $28.4 million in the first quarter of 2019 and $17.3 million in the second quarter of 2018. Earnings for 2019 second quarter were $1.30 per diluted share compared to $1.52 per diluted share in the first quarter of 2019 and $0.93 per diluted share in the second quarter of 2018. Earnings per diluted share were at the high end of the Company's previously announced guidance range of $1.16 to $1.31. On an adjusted basis, earnings were $1.64 per diluted share for the 2019 second quarter compared to adjusted earnings of $1.85 per diluted share in the first quarter of 2019 and $1.19 per diluted share in the second quarter of 2018. Adjusted earnings exceeded the high end of the Company's previously announced guidance range of $1.47 to $1.62 per diluted share.

Adjusted EBITDA was $53.1 million, or 21.9% of net sales, for the second quarter of 2019 compared to $53.1 million, or 22.2% of net sales, reported in the first quarter of 2019 and $43.8 million, or 20.4% of net sales, reported in the second quarter of 2018.

Gross margin was 35.3% in the second quarter of 2019 compared to 35.6% in the first quarter of 2019 and 35.7% in the second quarter of 2018. Second quarter 2019 gross margin was within the Company's previously announced guidance range of 35% to 36%. Operating margin was 13.7% in the second quarter of 2019 compared to 13.7% in the first quarter of 2019 and 11.7% in the second quarter of 2018. Adjusted operating margin was 17.2% in the second quarter of 2019 compared to 17.1% in the first quarter of 2019 and 14.8% in the second quarter of 2018.

"We achieved record quarterly revenue and adjusted earnings above the top end of our guidance range in Q2, driven by 5G demand and continued strength in ADAS," stated Bruce D. Hoechner, Rogers’ President and CEO. "We are encouraged by our strong performance, however our cautious near-term outlook is due to uncertainties related to ongoing trade tensions, which could affect the current 5G demand ramp, and continued weakness in industrial and conventional automotive markets. The market outlook for Advanced Connectivity and Advanced Mobility applications remains very strong and we are focused on operational improvements that will allow us to fully capitalize on these significant market opportunities."

Business segment discussion

Advanced Connectivity Solutions (ACS)

Advanced Connectivity Solutions reported 2019 second quarter net sales of $92.5 million, a 15.0% increase compared to 2019 first quarter net sales of $80.5 million and a 21.1% increase compared to 2018 second quarter net sales of $76.4 million. The sequential increase in 2019 second quarter net sales was largely driven by demand for high frequency circuit materials used in 5G and 4G wireless infrastructure and continued strength in Advanced Driver Assistance Systems (ADAS). Second quarter 2019 net sales were favorably impacted by $0.1 million due to fluctuations in currency exchange rates compared to 2019 first quarter net sales, but were unfavorably impacted by $2.5 million compared to 2018 second quarter net sales.

Elastomeric Material Solutions (EMS)
Elastomeric Material Solutions reported 2019 second quarter net sales of $93.9 million, a 1.2% increase compared to 2019 first quarter net sales of $92.8 million and an 18.5% increase compared to 2018 second quarter net sales of $79.2 million. The sequential increase in 2019 second quarter net sales was due to strong demand in portable electronics, EV/HEV batteries and mass transit. Fluctuations in currency exchange rates unfavorably impacted net sales by $0.2 million in the 2019 second quarter compared to 2019 first quarter net sales, and by $2.2 million compared to 2018 second quarter net sales.

Power Electronics Solutions (PES)
Power Electronics Solutions reported 2019 second quarter net sales of $51.7 million, a 13.6% decrease compared to 2019 first quarter net sales of $59.8 million and a 3.7% decrease compared to 2018 second quarter net sales of $53.6 million. The 2019 second quarter sequential decrease was primarily due to weaker demand for power semiconductor substrates in industrial and vehicle electrification applications, partially offset by stronger rail and renewable energy demand. Second quarter 2019 net sales were unfavorably impacted by $0.4 million due to fluctuations in currency exchange rates compared to 2019 first quarter net sales and by $3.2 million compared to 2018 second quarter net sales.

Other
Other reported 2019 second quarter net sales of $4.8 million, a 29.4% decrease compared to 2019 first quarter net sales of $6.8 million and a 12.3% decrease compared to 2018 second quarter net sales of $5.4 million. The sequential decrease in 2019 second quarter net sales was due to a last-time buy in the Durel business in the prior quarter.

Balance sheet and other highlights

Cash position
Rogers ended the second quarter of 2019 with cash and cash equivalents of $173.1 million, an increase of $5.4 million from $167.7 million at December 31, 2018. The increase in cash resulted primarily from net cash provided by operating activities of $67.5 million, partially offset by capital expenditures of $24.0 million and repayment of debt principle of $33.0 million.

Effective tax rate
Rogers' effective tax rate was 22.9% for the second quarter of 2019, compared to 14.2% for the first quarter of 2019. The second quarter effective tax rate was higher due primarily to certain discrete tax benefits realized in the first quarter. The Company expects the effective tax rate for the second half of 2019 to be 24% to 25%.

Financial outlook
Rogers guides its 2019 third quarter net sales to a range of $225 to $235 million and gross margin to a range of 35% to 36%. Rogers guides its 2019 third quarter earnings to a range of $1.05 to $1.20 per diluted share and adjusted earnings to a range of $1.30 to $1.45 per diluted share.

For the full year 2019, Rogers expects capital expenditures to be in a range of $50 to $60 million.

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 the company’s growth drivers-- advanced connectivity and advanced mobility 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 concern our plans, objectives, outlook, goals, strategies, future events, future net sales or performance, capital expenditures, 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 and uncertainties that could cause such results to differ include: failure to capitalize on, volatility within, or other adverse changes with respect to 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; the ongoing trade policy dispute between the United States and China, as well as adverse changes in trade policy, tariff regulation or other trade restrictions, including trade restrictions on Huawei Technologies Co., Ltd.; fluctuations in foreign currency exchange rates; the results of our research and development efforts; adverse competitive developments, including the extent to which our products are incorporated into end-user products and systems and the extent to which those products and systems achieve commercial success; 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; uncertainties with regard to the timing, expense and cash outlays associated with the termination and settlement of the Rogers Corporation Defined Benefit Pension Plan; 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 reports filed with the Securities and Exchange Commission, including quarterly reports on Form 10-Q. 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 the 2019 second quarter results will take place today, Wednesday July 31, 2019 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 July 31, 2019 at approximately 8 pm ET through August 14, 2019 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 6238188.

Additionally, the archived webcast will be available on the Rogers website at approximately 8 pm ET August 1, 2019.

Additional information
Please contact the Company directly via email or visit the Rogers website.

Website address: http://www.rogerscorp.com

(Financial statements follow)

 

Condensed Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended

 

Six Months Ended

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Net sales

$

242,852

 

 

$

214,675

 

 

$

482,650

 

 

$

429,286

 

Cost of sales

 

157,024

 

 

 

138,003

 

 

 

311,428

 

 

 

276,007

 

Gross margin

 

85,828

 

 

 

76,672

 

 

 

171,222

 

 

 

153,279

 

Selling, general and administrative expenses

 

43,649

 

 

 

42,540

 

 

 

86,901

 

 

 

83,137

 

Research and development expenses

 

7,843

 

 

 

8,750

 

 

 

15,452

 

 

 

16,884

 

Restructuring and impairment charges

 

1,083

 

 

 

541

 

 

 

1,905

 

 

 

963

 

Other operating (income) expense, net

 

40

 

 

 

(383

)

 

 

951

 

 

 

(3,974

)

Operating income

 

33,213

 

 

 

25,224

 

 

 

66,013

 

 

 

56,269

 

Equity income in unconsolidated joint ventures

 

1,742

 

 

 

1,804

 

 

 

2,579

 

 

 

2,811

 

Other income (expense), net

 

(1,401

)

 

 

(34

)

 

 

3

 

 

 

32

 

Interest expense, net

 

(2,038

)

 

 

(1,292

)

 

 

(3,976

)

 

 

(2,503

)

Income before income tax expense

 

31,516

 

 

 

25,702

 

 

 

64,619

 

 

 

56,609

 

 

 

 

 

 

 

 

 

Income tax expense

 

7,223

 

 

 

8,373

 

 

 

11,927

 

 

 

13,144

 

Net income

$

24,293

 

 

$

17,329

 

 

$

52,692

 

 

$

43,465

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.31

 

 

$

0.94

 

 

$

2.84

 

 

$

2.37

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

1.30

 

 

$

0.93

 

 

$

2.82

 

 

$

2.33

 

 

 

 

 

 

 

 

 

Shares used in computing:

 

 

 

 

 

 

 

Basic earnings per share

 

18,568

 

 

 

18,389

 

 

 

18,562

 

 

 

18,338

 

Diluted earnings per share

 

18,730

 

 

 

18,660

 

 

 

18,711

 

 

 

18,635

 

 

Condensed Consolidated Statements of Financial Position (Unaudited)

 

(IN THOUSANDS)

June 30, 2019

 

December 31, 2018

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

173,068

 

 

$

167,738

 

Accounts receivable, less allowance for doubtful accounts of $1,215 and $1,354

156,924

 

 

144,623

 

Contract assets

25,573

 

 

22,728

 

Inventories

135,067

 

 

132,637

 

Prepaid income taxes

4,275

 

 

3,093

 

Asbestos-related insurance receivables, current portion

4,138

 

 

4,138

 

Other current assets

10,814

 

 

10,829

 

Total current assets

509,859

 

 

485,786

 

Property, plant and equipment, net of accumulated depreciation of $331,553 and $317,414

248,309

 

 

242,759

 

Investments in unconsolidated joint ventures

17,534

 

 

18,667

 

Deferred income taxes

11,080

 

 

8,236

 

Goodwill

263,804

 

 

264,885

 

Other intangible assets, net of amortization

167,985

 

 

177,008

 

Pension assets

19,918

 

 

19,273

 

Asbestos-related insurance receivables, non-current portion

60,247

 

 

59,685

 

Other long-term assets

8,617

 

 

3,045

 

Total assets

$

1,307,353

 

 

$

1,279,344

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

42,214

 

 

$

40,321

 

Accrued employee benefits and compensation

31,798

 

 

30,491

 

Accrued income taxes payable

9,048

 

 

7,032

 

Asbestos-related liabilities, current portion

5,547

 

 

5,547

 

Other accrued liabilities

24,085

 

 

23,789

 

Total current liabilities

112,692

 

 

107,180

 

Borrowings under revolving credit facility

195,482

 

 

228,482

 

Pension and other postretirement benefits liabilities

1,739

 

 

1,739

 

Asbestos-related liabilities, non-current portion

65,226

 

 

64,799

 

Non-current income tax

8,554

 

 

8,418

 

Deferred income taxes

10,768

 

 

10,806

 

Other long-term liabilities

15,378

 

 

9,596

 

Shareholders’ equity

 

 

 

Capital stock - $1 par value; 50,000 authorized shares; 18,559 and 18,395 shares issued and outstanding

18,559

 

 

18,395

 

Additional paid-in capital

131,836

 

 

132,360

 

Retained earnings

829,075

 

 

776,403

 

Accumulated other comprehensive loss

(81,956

)

 

(78,834

)

Total shareholders' equity

897,514

 

 

848,324

 

Total liabilities and shareholders' equity

$

1,307,353

 

 

$

1,279,344

 

 

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 amortization of acquisition-related intangible assets and discrete items, such as restructuring, severance, impairments and other related costs, acquisition and related integration costs, change in foreign jurisdiction tax regulation on equity awards attributable to a prior period, asbestos litigation-related charges, transition services related to the asset acquisition, and gains or losses on asset dispositions (collectively, “Discrete Items”);

(2) Adjusted EBITDA, which the Company defines as net income excluding interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and Discrete Items; and

(3) Adjusted operating margin, which the Company defines as operating margin excluding amortization of acquisition-related 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 potential variability across periods based on the timing, frequency and magnitude of such items. 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.

 

Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share for the second quarter*:

 

 

2019

2019

2018

Earnings per diluted share

Q2

Q1

Q2

GAAP earnings per diluted share

$

1.30

$

1.52

$

0.93

 

 

 

 

 

Restructuring, severance, impairment and other related costs

 

0.15

 

0.07

 

0.09

 

Acquisition and related integration costs

 

0.01

 

0.02

 

0.04

 

Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period

 

0.02

Loss (gain) on sale of long-lived assets

 

0.01

 

(0.02

)

Transition services, net

 

0.03

Total discrete items

$

0.16

$

0.15

$

0.11

 

 

 

 

 

Earnings per diluted share adjusted for discrete items

$

1.46

$

1.67

$

1.04

 

 

 

 

 

Acquisition intangible amortization

$

0.18

$

0.18

$

0.15

 

 

 

 

 

Adjusted earnings per diluted share

$

1.64

$

1.85

$

1.19

 

 

Reconciliation of GAAP net income to adjusted EBITDA for the second quarter*:

 

 

2019

2019

2018

(amounts in millions)

Q2

Q1

Q2

Net income

$

24.3

 

$

28.4

 

$

17.3

 

 

 

 

 

Interest expense, net

 

2.0

 

 

1.9

 

 

1.3

 

Income tax expense

 

7.2

 

 

4.7

 

 

8.4

 

Depreciation

 

7.7

 

 

8.5

 

 

7.1

 

Amortization

 

4.4

 

 

4.5

 

 

3.8

 

Stock-based compensation expense

 

3.7

 

 

2.5

 

 

3.1

 

Restructuring, severance, impairment and other related costs

 

3.7

 

 

1.9

 

 

2.2

 

Acquisition and related integration costs

 

0.3

 

 

0.5

 

 

0.9

 

Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period

 

0.5

 

Asbestos-related charges

 

0.1

 

Transition services lease income

 

(0.3

)

 

(0.6

)

Loss (gain) on sale of long-lived assets

 

0.3

 

 

(0.4

)

Adjusted EBITDA**

$

53.1

 

$

53.1

 

$

43.8

 

*Values in table may not add due to rounding.
**Adjusted EBITDA for the second quarter of 2018 has been recast to reflect the add-back of stock-based compensation expense.

 

Reconciliation of GAAP operating margin to adjusted operating margin for the second quarter*:

 

 

2019

 

2018

Operating margin

Q2

 

Q1

 

Q2

GAAP operating margin

13.7

%

13.7

%

11.7

%

 

 

 

 

Restructuring, severance, impairment and other related costs

1.5

%

0.8

%

1.0

%

Acquisition and related integration costs

0.1

%

0.2

%

0.4

%

Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period

—%

0.2

%

—%

Loss (gain) on sale of long-lived assets

—%

0.1

%

(0.2

)%

Transition services, net

—%

0.3

%

—%

Total discrete items

1.7

%

1.6

%

1.2

%

Operating margin adjusted for discrete items

15.4

%

15.3

%

13.0

%

 

 

 

 

Acquisition intangible amortization

1.8

%

1.8

%

1.8

%

 

 

 

 

Adjusted operating margin

17.2

%

17.1

%

14.8

%

*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 2019 second quarter:

 

 

Guidance
Q2 2019

GAAP earnings per diluted share

$1.16 - $1.31

 

 

Discrete items

$0.13

 

 

Acquisition intangible amortization

$0.18

 

 

Adjusted earnings per diluted share

$1.47 - $1.62

 

Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2019 third quarter:

 

 

Guidance
Q3 2019

GAAP earnings per diluted share

$1.05- $1.20

 

 

Discrete items

$0.07

 

 

Acquisition intangible amortization

$0.18

 

 

Adjusted earnings per diluted share

$1.30 - $1.45

 

Contacts

Investor contact:
Steve Haymore
Phone: 480-917-6026
Email: investor.relations@rogerscorp.com

Contacts

Investor contact:
Steve Haymore
Phone: 480-917-6026
Email: investor.relations@rogerscorp.com