Total pages included - 12
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4347
ROGERS CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 06-0513860
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
P.O. Box 188, One Technology Drive, Rogers, Connecticut 06263-0188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860) 774-9605
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the Registrant's classes of common
stock as of October 28, 1996:
Capital Stock, $1 Par Value--7,387,457 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
September 29, 1996
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Nine Months Ended September
29, 1996 and October 1, 1995 3
Consolidated Balance Sheets--
September 29, 1996 and December 31, 1995 4-5
Consolidated Statements of Cash Flows--
Nine Months Ended September 29, 1996 and
October 1, 1995 6
Supplementary Notes 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
Three Months Ended: Nine Months Ended:
------------------------- -------------------------
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
------------- ---------- ------------- ----------
Net Sales $ 33,972 $ 32,943 $ 104,334 $ 106,782
Cost of Sales 23,461 23,049 71,023 73,212
Selling and Administrative
Expenses 5,046 5,078 15,821 16,414
Research and Development
Expenses 2,388 2,190 7,109 6,948
---------- ---------- ---------- ----------
Total Costs and Expenses 30,895 30,317 93,953 96,574
---------- ---------- ---------- ----------
Operating Income 3,077 2,626 10,381 10,208
Other Income less Other
Charges 933 524 2,313 1,625
Interest Income, Net 134 112 311 31
---------- ---------- ---------- ----------
Income Before Income Taxes 4,144 3,262 13,005 11,864
Income Taxes Expense:
Federal and Foreign 698 311 2,486 1,523
State 125 125 375 375
---------- ---------- ---------- ----------
Net Income $ 3,321 $ 2,826 $ 10,144 $ 9,966
========== ========== ========== ==========
Net Income Per Share:
Primary $ .43 $ .36 $ 1.34 $ 1.28
========== ========== ========== ==========
Fully Diluted $ .43 $ .36 $ 1.33 $ 1.28
========== ========== ========== ==========
Shares Used in Computing:
Primary 7,711,231 7,787,089 7,588,439 7,783,223
========== ========== ========== ==========
Fully Diluted 7,711,231 7,787,089 7,602,261 7,796,700
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
September 29, 1996 December 31, 1995
------------------ -----------------
Current Assets:
Cash and Cash Equivalents $ 25,016 $ 13,111
Marketable Securities 958 1,565
Accounts Receivable, Net 21,313 18,439
Inventories:
Raw Materials 6,881 5,267
In-Process and Finished 8,082 7,336
Less LIFO Reserve (1,791) (1,791)
-------- --------
Total Inventories 13,172 10,812
Current Deferred Income Taxes 2,560 2,560
Assets Held for Sale, Net of Valuation
Reserves of $513 and $2,032 (Note B) 5,138 8,809
Other Current Assets 606 470
-------- --------
Total Current Assets 68,763 55,766
-------- --------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$58,327 and $53,669 35,800 36,473
Investment in Unconsolidated Joint
Venture 4,892 4,763
Intangible Pension Asset 3,479 3,479
Other Assets 2,287 2,035
-------- --------
Total Assets $115,221 $102,516
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
September 29, 1996 December 31, 1995
------------------ -----------------
Current Liabilities:
Accounts Payable $ 8,084 $ 8,338
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 6,774 8,703
Other Accrued Liabilities 5,249 4,667
Accrued Income Tax Payable 2,131 1,084
Taxes, Other than Federal and
Foreign Income 922 1,020
-------- --------
Total Current Liabilities 23,760 24,412
-------- --------
Long-Term Debt, less Current Maturities 4,200 4,200
Noncurrent Deferred Income Taxes 1,603 1,632
Noncurrent Pension Liability 3,223 3,223
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,192 5,942
Other Long-Term Liabilities 3,321 3,009
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,378,710
and 7,135,090 7,379 7,135
Additional Paid-In Capital 29,166 26,286
Unrealized Gain(Loss) on Marketable
Securities (16) --
Currency Translation Adjustment 2,117 2,545
Retained Earnings 34,276 24,132
-------- --------
Total Shareholders' Equity 72,922 60,098
-------- --------
Total Liabilities and
Shareholders' Equity $115,221 $102,516
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Nine Months Ended:
---------------------------
September 29, October 1,
1996 1995
------------- ----------
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net Income $ 10,144 $ 9,966
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 4,898 4,602
Benefit for Deferred Income Taxes 61 103
Equity in Undistributed Income of
Unconsolidated Joint Ventures, Net (747) (333)
Loss on Disposition of Property, Plant
and Equipment 113 217
Noncurrent Pension and Postretirement
Benefits 1,473 1,065
Other, Net (83) 28
Changes in Operating Assets and
Liabilities Excluding Effects of
Disposition of Assets:
Accounts Receivable (2,881) (4,052)
Inventories (2,452) (1,628)
Prepaid Expenses (161) (97)
Accounts Payable and Accrued
Expenses (1,531) (2,821)
---------- ---------
Net Cash Provided by Operating
Activities 8,834 7,050
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital Expenditures (4,499) (5,373)
Proceeds from Sale of Businesses 2,529 --
Proceeds from Sale of Property, Plant and
Equipment 946 8
Investment in Unconsolidated Joint Ventures
and Affiliates 408 --
Sales of Marketable Securities 607 --
---------- ---------
Net Cash Used in Investing
Activities (9) (5,365)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repayments of Debt Principal -- (2,500)
Proceeds from Sale of Capital Stock 3,124 879
---------- ---------
Net Cash Provided by (Used in)
Financing Activities 3,124 (1,621)
Effect of Exchange Rate Changes on Cash (44) 211
---------- ---------
Net Increase in Cash and Cash Equivalents 11,905 275
Cash and Cash Equivalents at Beginning of
Year 13,111 13,851
---------- ---------
Cash and Cash Equivalents at End of Quarter $ 25,016 $ 14,126
========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY NOTES
A. The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the audited consolidated financial statements
and footnotes thereto included in the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1995.
B. Net Assets Held for Sale consist of land and a building in
Chandler, Arizona, currently being leased to the buyer of the
Flexible Interconnections Division. The land and building in Mesa,
Arizona, which were formerly included in Net Assets Held for Sale,
were sold essentially at book value during the third quarter of
1996.
C. At the end of the first quarter of 1996, the Company could borrow
up to a maximum of $10.0 million under an unsecured revolving
credit arrangement with Fleet National Bank. On April 30, 1996,
the termination date of this agreement was extended from March 31,
1998 until March 31, 1999. In addition, the Company exercised its
unilateral right to reduce the maximum borrowings permitted to $5.0
million. There have been no borrowings under this credit facility
in 1996.
D. Interest paid during the first nine months of 1996 and 1995 was
$500,000 and $800,000, respectively.
E. Income taxes paid were $1,819,000 and $1,168,000 in the first nine
months of 1996 and 1995, respectively.
F. Certain reclassifications were made for 1995 to report results
consistent with 1996 reporting practices.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Third quarter sales of $34.0 million, when adjusted for a divestiture
at the end of 1995 and for currency rate changes, increased 9% over
last year's third quarter sales. Sales in the first nine months of
1996, after adjustments, were modestly ahead of the comparable period
last year.
Due to somewhat softer market conditions, third quarter sales were
below expectations for ENDUR(R) paper handling components in copier and
laser printer applications, for flexible circuit materials used in
personal computers, and for power distribution bus bars in Europe.
Sales of Polymer Products in the third quarter and first nine months
of 1996 were 11% and 5%, respectively, above the comparable periods in
1995. Worldwide sales of PORON(R) urethane foam materials continued
their 1996 record-setting pace at both Rogers and Rogers INOAC
Corporation (RIC), the Company's 50% owned joint venture in Japan.
Increased sales were primarily driven by strong demand in industrial
and printing markets.
On July 30, 1996, the Company announced that it had signed a Letter of
Intent to purchase Dow Corning Corporation's Bisco Products business
based in Elk Grove Village, Illinois. Bisco Products is the leading
manufacturer of silicone foam materials. These silicone foam products
offer high temperature resistance and flame retardant properties for
gasketing, heat shielding and cushioning, primarily in transportation,
electrical, and electronic applications.
On November 7, 1996, the Company announced that it had reached
definitive agreement with Dow Corning to purchase the Bisco Products
business. Pending appropriate approvals, the Company expects that the
transaction will close at the end of the year.
Sales of Electronic Products for the third quarter and first nine
months increased 7% and 1%, respectively, from the comparable 1995
periods, after adjusting for the year-end 1995 divestiture. Sales of
European power-distribution bus bars are at a lower level in 1996 due
to weaker than anticipated demand in power electronics and cellular
telephone base station applications.
Hutchinson Technology Incorporated, the world leader in suspension
assemblies for hard disk drives (HDD's), has selected the Company's
adhesiveless flexible circuit material for a new generation of
assemblies for magneto-resistive drives. This material is
manufactured in Japan for the Company by Mitsui Toatsu Chemicals,
Inc., under a technology license and cooperation agreement.
The Company continues to invest heavily in bringing to market lower-
cost high frequency materials for wireless communications
applications. Management is encouraged by the strong reception these
new microwave materials are receiving, especially the growing family
of RO4000 laminates. To satisfy the demand and meet the Company's
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
price targets, new automated equipment is being installed, capacity is
being expanded, and experienced people are being added to the
organization to spur the growth of these products and solidify the
Company's leadership position in microwave materials.
Compared to the same periods last year, before tax profits rose 27% in
the quarter and 10% for the nine months. Net income and earnings per
share, reflecting a higher income tax rate in 1996, were up 18% and
19% respectively for the quarter and were up slightly for the nine
months. After-tax profits reflect a 16% tax rate in 1995 and a 22%
tax rate in 1996. These rates result from the use in 1995 of the
Company's domestic tax loss carryforwards and the recognition in 1995
and 1996 of a significant amount of domestic tax credit carryforwards.
Manufacturing profit as a percentage of sales in the first nine months
of 1996 and 1995 was 32% and 31%, respectively. Production mix and
production cost improvements in certain domestic product lines offset
a continuing decline in sales price per square foot of high frequency
microwave materials resulting from the ongoing shift of the microwave
business to lower cost commercial applications.
Selling and administrative expenses for the first nine months of 1996
as a percentage of sales were approximately the same as in the
previous year.
Research and development expenses for the first nine months of 1996
were about the same as in the comparable 1995 period. Significant
product and process development activities included the following:
continued process and product development for RO4003 and RO4350 high
frequency circuit materials for commercial applications; process
improvements to enhance performance of RO3003 and RO3010 fluoropolymer
laminates also for commercial applications; process and formulation
support to expand the number of Poron formulations which are both low
outgassing and flame retardant; and improved compounding processes
that result in higher strength phenolic materials.
Year-to-date sales at Durel Corporation, the Company's 50% owned
electroluminescent lamp joint venture with 3M, are running almost 20%
higher than in the comparable period in 1995. Sales records were set
in the third quarter in each major market: automotive, watch and
communication devices. These sales increases have led to improved
profits at Durel despite the high ongoing costs associated with the
patent infringement lawsuit brought by Durel to protect its
proprietary technology.
Net interest income for the first nine months of 1996 increased from
the comparable 1995 period due mainly to lower borrowings and more
interest income from the higher level of cash equivalents and
marketable securities. Average debt outstanding during the first nine
months was $4.8 million compared with $7.1 million for the
corresponding 1995 period.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
As of April 30, 1996, the Company can borrow up to a maximum of $5.0
million under an unsecured revolving credit agreement with Fleet
National Bank. Amounts borrowed under this arrangement are to be paid
in full by March 31, 1999. The one-year extension of the loan
agreement and the reduction in the level of maximum borrowings were
requested by the Company. There have been no borrowings under this
credit facility in 1996.
Other income less other charges was $2.3 million for the first nine
months of 1996 compared with $1.6 million for the same period in 1995.
The primary factor contributing to this increase was higher joint
venture income.
Net cash provided by operating activities in the first nine months of
1996 totaled $8.8 million, compared with $7.1 million in the same 1995
period. The year-to-year increase from 1995 to 1996 is attributable
mainly to increased net income and other working capital changes. In
1996 and 1995, the Company made $1.6 million and $3.6 million
contributions, respectively, to its union pension plan.
Capital expenditures in the first nine months of 1996 and 1995 totaled
$4.5 million and $5.4 million, respectively. Management expects that
spending for 1996, primarily for capacity expansions and new process
equipment, will approximate $7.0 million. It is anticipated that
these expenditures will be financed with internally generated funds.
In June 1996, the Company issued 200,000 shares and received $2.7
million in cash from the exercise of the Company's only outstanding
stock purchase warrants. These warrants had been issued in 1989 in
connection with a research and development arrangement.
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 (PRPs). The
Company has been named as a PRP in six cases involving waste disposal
sites, all of which are Superfund sites. Several of these proceedings
are at a preliminary stage and it is impossible to estimate the cost
of remediation, the timing and extent of remedial action which may be
required by governmental authorities, and the amount of liability, if
any, of the Company alone or in relation to that of any other PRPs.
The Company also has been seeking to identify insurance coverage with
respect to these matters. Where it has been possible to make a
reasonable estimate of the Company's liability, a provision has been
established. Insurance proceeds have only been taken into account
when they have been confirmed by or received from the insurance
company.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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 position.
In addition to the above proceedings, the Company has been actively
working with the Connecticut Department of Environmental Protection
(CT DEP) related to certain polychlorinated biphenyl (PCB)
contamination in the soil beneath a small section of cement flooring
at its East Woodstock, Connecticut facility. The Company is developing
a remediation plan with CT DEP. On the basis of estimates prepared by
the Company's environmental engineers and consultants, the Company
recorded a provision of approximately $0.9 million in 1994 for costs
related to this matter. During 1995 and 1996, $0.5 million was
charged against this provision. Management believes, based on facts
currently available, that the implementation of the aforementioned
remediation will not have a material additional adverse impact on
earnings.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the nine months
ended September 29, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ROGERS CORPORATION
(Registrant)
By s/DONALD F. O'LEARY
Donald F. O'Leary
Authorized Officer
Corporate Controller
Dated: November 8, 1996
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<PAGE>
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