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
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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
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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.
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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
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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:
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(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
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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
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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
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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
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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.
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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
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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
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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.
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
(Dollars in Thousands)
<CAPTION>
Balance at Additions Other Balance at
Beginning at Cost Retire- Changes- Add End
Classification of Period <F1> ments (Deduct)<F2> of Period
<S> <C> <C> <C> <C> <C>
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<F3> 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<F3> 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)<F3> 0 (40) 2,366
-------- -------- ------ --------- --------
$139,548 $11,710 $8,555 $(10,245) $132,458
======== ======== ====== ========= ========
<FN>
<F1> Additions principally relate to expansion of manufacturing facilities, purchases of
new equipment and replacements for existing equipment.
<F2> 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."
<F3> Net change during the year.
</TABLE>
F-2
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
(Dollars in Thousands)
<CAPTION>
Additions
Balance at Charged to Other Balance at
Beginning Costs and Retire- Changes-Add End
Description of Period Expenses<F1> ments (Deduct)<F2> of Period
<S> <C> <C> <C> <C> <C>
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
======= ======= ====== ========= =======
<FN>
<F1> 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.
<F2> 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.
</TABLE>
F-3
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
(Dollars in Thousands)
<CAPTION>
Additions Additions
Balance at Charged to Charged to Other Balance at
Beginning Costs and Other Accts Deductions End
Description of Period Expenses<F1> Describe Describe of Period
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994:
Deducted from asset accounts:
Net realizable value
allowance for assets held
for sale $17,805 $ -- $ -- $16,272<F2> $ 1,533
Year ended January 3, 1993:
Deducted from asset accounts:
Net realizable value
allowance for assets held
for sale $ -- $17,805<F1> $ -- $ -- $17,805
<FN>
<F1> Provision for write down of assets to net realizable value included in the 1992 Cost
Reduction Charge.
<F2> Allowance of $17.1 million applicable to assets sold during 1993, net of increase in
allowance of $0.8 million for remaining assets.
</TABLE>
F-4
<PAGE>
<TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
ROGERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
(Dollars in Thousands)
<CAPTION>
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 <F2> <F3>
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994:
Notes payable to banks <F1> $ 0 -- $ 1,033 $ 339 7.44%
Year ended January 3, 1993:
Notes payable to banks <F1> $ 3,552 5.86% $ 8,537 $ 6,217 5.48%
Year ended December 29, 1991:
Notes payable to banks <F1> $ 8,000 6.38% $ 8,000 $ 3,066 7.41%
<FN>
<F1> 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.
<F2> The average amount outstanding during the period was computed by dividing the total
of semi-monthly outstanding principal balances by 24.
<F3> The weighted average interest rate during the period was computed by dividing the
actual interest expense by the average short-term borrowings outstanding.
</TABLE>
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
<PAGE>
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) <F6>
Exhibit 3b - Articles of Amendment filed with the Secretary of the
Commonwealth of Massachusetts on August 10, 1966.
(Exhibit 3b) <F6>
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) <F6>
Exhibit 3d - Articles of Amendment filed with the Secretary of the
Commonwealth of Massachusetts on March 29, 1979.
(Exhibit 3d) <F6>
Exhibit 3e - Articles of Amendment filed with the Secretary of the
Commonwealth of Massachusetts on March 29, 1979.
(Exhibit 3e) <F6>
Exhibit 3f - Articles of Amendment filed with the Secretary of the
Commonwealth of Massachusetts on April 2, 1982. (Exhibit 3f) <F6>
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) <F6>
Exhibit 3h - Articles of Amendment filed with the Secretary of the
Commonwealth of Massachusetts on March 31, 1988. (Exhibit 3h)<F6>
Exhibit 3i - By-Laws of the Company as amended on March 28, 1991 and
September 10, 1991. <F8>
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) <F3>
Exhibit 10a - Rogers Corporation Incentive Stock Option Plan (1979, as
amended July 9, 1987). (Exhibit 10c) <F4>
Exhibit 10b - Description of the Company's Life Insurance Program.
(Exhibit K) <F1>
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) <F5>
Exhibit 10e - Rogers Corporation Stock Option Plan (1990). (Exhibit 10e) <F7>
Exhibit 10f - Rogers Corporation Deferred Compensation Plan (1983).
(Exhibit O) <F2>
Exhibit 10g - Rogers Corporation Deferred Compensation Plan (1986).
(Exhibit 10e) <F4>
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. <F9>
<F1> 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).
<F2> 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).
<F3> Incorporated by reference to Report on Form 8-K dated March 20, 1987
(File No. 1-4347).
<F4> 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).
<F5> 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).
<F6> 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).
<F7> 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).
<F8> 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).
<F9> 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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% <F1>
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 <F2>
<F1> 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.
<F2> For purposes of this Plan, Operating Profit exludes corporate charges.
2
F-12
<PAGE>
and Return on Net Assets (RONA) <F3>, 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.<F4> 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
<F3> For Divisions with a planned loss, budgeted, rather than actual Plan
Year, year-end assets will be used to calculate RONA.
<F4> See Footnotes 2 and 3 above.
3
F-13
<PAGE>
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 <F5>, 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 <F6>, 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.
<F5> The President will determine the controllable profit suitable
for comparison between the two years.
<F6> See Footnote 5 above.
4
F-14
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
- ----------
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
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)<F1> 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<F2> 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<F3> 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
- ----------
<FN>
<F1>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.
<F2>After the deduction of outside funding for the multichip module development project of
$1,698 and $604 in 1990 and 1989, respectively.
<F3>Excludes employees of divested businesses.
</TABLE>
17
F-36
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
- ----------
<CAPTION>
1993 1992 1991
(Dollars in Thousands, Except Per Share Amounts) (52 Weeks) (53 Weeks) (52 Weeks)
-------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
20
F-39
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
- ----------
<CAPTION>
1993 1992 1991
(52 weeks) (53 weeks) (52 weeks)
---------- ---------- ----------
<S> <C> <C> <C>
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.
</TABLE>
21
F-40
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
Net pension cost consisted of the following components:
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
<TABLE>
The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets:
<CAPTION>
(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
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
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)
============================ ============================
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
--------------------------------
<S> <C> <C> <C>
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)
===============================
</TABLE>
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
<PAGE>
NOTE K-SHAREHOLDERS' EQUITY AND STOCK OPTIONS
- ----------
<TABLE>
Changes in shareholders' equity are shown below:
<CAPTION>
Capital
Stock Additional Equity Retained
(Number Paid-In Translation Earnings
(Dollars in Thousands) of Shares) Capital Adjustment (Deficit)
------------------------------------------------------
<S> <C> <C> <C> <C>
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.
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
BUSINESS SEGMENT INFORMATION
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
------------------------------------
<S> <C> <C> <C>
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:<F1>
Polymer Products <F2> $ 8,755 $ 5,136 $ 2,621
Electronic Products <F3><F4> 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 <F5> 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 <F6> (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 <F6> (1,742) (1,661) (3,403)
Assets 109,446 13,228 122,674
======================================
<F1>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.
<F2>Includes an allocation of $1.8 million and $0.2 million in 1992 and 1991, respectively, related to the cost
reduction charges.
<F3>Includes an allocation of $24.8 million and $2.6 million in 1992 and 1991, respectively, related to the cost
reduction charges.
<F4>Includes undistributed earnings of a previously owned unconsolidated joint venture of $0.8 million and $0.3
million in 1992 and 1991, respectively.
<F5>Includes an investment in a previously owned unconsolidated joint venture of $3.0 million and $2.2 million in
1992 and 1991, respectively.
<F6>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.
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
Audited Financial Statements
and
Other Financial Information
Rogers Inoac Corporation
October 31, 1993
F-62
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
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):
<CAPTION>
Retained Retained
earnings at Net income earnings
beginning Appropria- for the at end of
of period tions period period
---------------------------------------------------------
(Thousands of Yen)
<S> <C> <C> <C> <C>
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
==========================================================
</TABLE>
F-70
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
ROGERS INOAC CORPORATION
<CAPTION>
Additions
--------------------
Balance at Charged to Charged Balance
beginning of costs and to other at end
Description period expenses accounts Deductions of period
- ------------------------------- ------------ ---------- -------- ---------- ---------
(Yen)
<S>
Year ended October 31, 1993: <C> <C> <C> <C> <C>
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
</TABLE>
F-75
<PAGE>
<TABLE>
SCHEDULE IX
SHORT-TERM BORROWINGS
ROGERS INOAC CORPORATION
<CAPTION>
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 <F2> period <F3>
- -------------------------------- --------- ------------- ------------------ -------------- ----------------
(Yen)
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1993:
Overdraft from bank <F1> 0 4.389% 80,000,000 26,666,667 4.618%
Year ended October 31, 1992 <F4>
Eleven months ended October 31,
1991 <F4>
<FN>
<F1> Notes payable to bank represent borrowings under line-of-credit arrangements which have no termination date but
are reviewed annually for renewal.
<F2> The average amount outstanding during the period was computed by dividing the total of the month-end outstanding
principal balances by 12.
<F3> 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.
<F4> There were no short-term borrowings outstanding during the periods ended October 31, 1991 and 1992.
</TABLE>
F-76
<PAGE>
