Total pages included - 13
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 June 30, 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 July 29, 1996:
Capital Stock, $1 Par Value--7,376,206 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
June 30, 1996
INDEX
Page No.
--------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Six Months Ended
June 30, 1996 and July 2, 1995 3
Consolidated Balance Sheets--
June 30, 1996 and December 31, 1995 4-5
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1996 and
July 2, 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 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Reports on Form 8-K 13
SIGNATURES 13
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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: Six Months Ended:
-------------------------------------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
-------------------------------------------------
Net Sales $ 35,424 $ 37,422 $ 70,362 $ 73,839
Cost of Sales 24,145 25,255 47,562 50,163
Selling and Administrative
Expenses 5,362 5,671 10,775 11,336
Research and Development
Expenses 2,303 2,354 4,721 4,758
-------------------------------------------------
Total Costs and Expenses 31,810 33,280 63,058 66,257
-------------------------------------------------
Operating Income 3,614 4,142 7,304 7,582
Other Income less Other
Charges 865 347 1,380 1,101
Interest Income (Expense),
Net 118 (46) 177 (81)
-------------------------------------------------
Income Before Income Taxes 4,597 4,443 8,861 8,602
Income Taxes:
Federal and Foreign 932 630 1,788 1,212
State 125 125 250 250
-------------------------------------------------
Net Income $ 3,540 $ 3,688 $ 6,823 $ 7,140
=================================================
Net Income Per Share:
Primary $ 0.47 $ 0.47 $ 0.91 $ 0.92
=================================================
Fully Diluted $ 0.47 $ 0.47 $ 0.90 $ 0.92
=================================================
Shares Used in Computing:
Primary 7,570,330 7,799,838 7,527,044 7,781,032
=================================================
Fully Diluted 7,570,330 7,812,494 7,547,776 7,801,248
=================================================
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)
June 30, 1996 December 31, 1995
-----------------------------------
Current Assets:
Cash and Cash Equivalents $ 20,678 $ 13,111
Marketable Securities 2,249 1,565
Accounts Receivable, Net 22,151 18,439
Inventories:
Raw Materials 6,648 5,267
In-Process and Finished 8,423 7,336
Less LIFO Reserve (1,791) (1,791)
---------------------------
Total Inventories 13,280 10,812
Current Deferred Income Taxes 2,560 2,560
Assets Held for Sale, Net of Valuation
Reserves of $2,032 in each period
(Note B) 6,242 8,809
Other Current Assets 514 470
---------------------------
Total Current Assets 67,674 55,766
---------------------------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$56,717 and $53,669 35,877 36,473
Investment in Unconsolidated Joint
Venture 4,643 4,763
Intangible Pension Asset 3,479 3,479
Other Assets 1,963 2,035
---------------------------
Total Assets $113,636 $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)
June 30, 1996 December 31, 1995
--------------- -----------------
Current Liabilities:
Accounts Payable $ 9,031 $ 8,338
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 8,354 8,703
Other Accrued Liabilities 5,092 4,667
Accrued Income Taxes Payable 1,534 1,084
Taxes Other than Federal and Foreign
Income 1,233 1,020
-------- --------
Total Current Liabilities 25,844 24,412
-------- --------
Long-Term Debt, less Current Maturities 4,200 4,200
Noncurrent Deferred Income Taxes 1,606 1,632
Noncurrent Pension Liability 3,223 3,223
Noncurrent Retiree Health Care and Life
Insurance Benefits 5,942 5,942
Other Long-Term Liabilities 3,309 3,009
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,368,806
and 7,135,090 7,369 7,135
Additional Paid-In Capital 29,079 26,286
Unrealized Gain(Loss) on Marketable
Securities (17) --
Currency Translation Adjustment 2,126 2,545
Retained Earnings 30,955 24,132
-------- --------
Total Shareholders' Equity 69,512 60,098
-------- --------
Total Liabilities and
Shareholders' Equity $113,636 $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)
Six Months Ended:
--------------------
June 30, July 2,
1996 1995
--------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 6,823 $ 7,140
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 3,193 3,265
Benefit for Deferred Income Taxes 57 135
Equity in Undistributed Income of Unconsolidated
Joint Ventures, Net (192) (395)
Loss on Disposition of Assets 50 186
Noncurrent Pension and Postretirement Benefits 803 710
Other, Net 271 521
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (4,103) (3,741)
Inventories (2,561) (912)
Prepaid Expenses (64) 18
Accounts Payable and Accrued Expenses 788 1,708
--------------------
Net Cash Provided by Operating Activities 5,065 8,635
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (2,868) (3,598)
Proceeds from Sale of Business 2,567 --
Proceeds from Sales of Property, Plant & Equipment 14 --
Investment in Unconsolidated Joint Ventures & Affiliates 490 --
Purchase of Marketable Securities (684) --
--------------------
Net Cash Used in Investing Activities (481) (3,598)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Repayments of Debt Principal -- (2,500)
Proceeds from Sale of Capital Stock 3,026 718
--------------------
Net Cash Provided by (Used in) Financing
Activities 3,026 (1,782)
Effect of Exchange Rate Changes on Cash (43) 243
--------------------
Net Increase in Cash and Cash Equivalents 7,567 3,498
Cash and Cash Equivalents at Beginning of Year 13,111 13,851
--------------------
Cash and Cash Equivalents at End of Quarter $ 20,678 $ 17,349
====================
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 and the land and building in
Mesa, Arizona, related to the divested business of the Power
Distribution Division.
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 six months of 1996 and 1995 was
$411,000 and $680,000, respectively.
E. Income taxes paid were $1,639,000 and $483,000 in the first six
months of 1996 and 1995, respectively.
F. To help widen the distribution and enhance the marketability of the
Company's capital stock, the Board of Directors in 1995 effected a
two-for-one stock split in the form of a 100% stock dividend on
July 7, 1995. All references in the financial statements to number
of shares and per share amounts of the Company's capital stock have
been retroactively restated to reflect the increased number of
capital shares outstanding.
G. 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
Net sales were $35.4 million in the second quarter and $70.4 million
for the first six months, both about the same as in the corresponding
periods last year after adjustments for the divestiture made at the
end of 1995 and for currency rate changes.
Although first-half 1996 sales were 11% above the adjusted level in
the last half of 1995, sales did not increase from last year's
comparable period, primarily because of slower growth in the computer
market and lower sales of two product lines, power distribution
components for cellular telephone base stations in Europe and ENDURr
paper handling components. Both product lines are expected to show
gains over last year in the second half.
Sales of Polymer Products in the second quarter and first half of 1996
were 5% and 2%, respectively, above the levels in the same periods in
1995. In these periods, worldwide sales of PORONr urethane foam
materials were at record levels for both Rogers and Rogers INOAC
Corporation (RIC), the Company's 50% owned joint venture with the
INOAC Corporation in Japan. Sales of PORON urethane materials for
industrial applications, computer disk drives, and compressible
printing plate mounting products were particularly strong.
The Molding Materials Division also posted record sales for the
quarter and for the first half. The Company is intensifying
activities in foreign markets for the division's glass fiber-
reinforced phenolic molding materials and, last month, approved a
substantial increase in manufacturing capacity to come on line next
year.
The above mentioned record sales were partially offset by decreased
sales in the Elastomer Components Unit. Sales of floats have been
affected by slowness in the automotive industry and inventory
corrections are being made by a large customer of Endurr paper
handling components.
Sales of Electronic Products for the second quarter and first six
months decreased 7% and 2%, respectively, from the comparable 1995
periods, after adjusting for the year-end 1995 divestiture. Sales of
European bus bars are at a lower level in 1996 due to inventory
corrections by several customers and the weaker demand for power
distribution components for cellular telephone base stations.
Demand continues to increase for Rogers commercial high frequency
laminate materials for wireless communications applications. As
expected, this growth is more significantly reflected in units than in
dollars, as we develop more high volume applications and, in some
cases, replace our own higher-priced materials. A significant number
of new applications are in the prototype and early production stage
for the Company's RO4000 materials which offer high frequency
performance, along with the ease of fabrication of conventional
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
printed circuit board materials. In June, the Company introduced the
second product in the RO4000 materials family, RO4350 laminate, a
flame retardant grade.
Sales of flexible circuit materials were up in the second quarter and
first half despite a decline in sales to parts of the disk drive
market, and long-term trends remain quite favorable. Installation of
the new flexible laminate production line has been completed as
scheduled, and the line will become operational in the third quarter.
Before-tax profits of $4.6 million for the second quarter and $8.9
million for the first half were the highest in Rogers history, up
about 3% over last year's record results in the comparable periods.
Net income of $3.5 million for the quarter, and $6.8 million for the
half, was down slightly from last year in both periods because of the
higher tax rate of 23% in 1996, compared to 17% in 1995.
Based on a slightly lower number of shares, earnings per share for the
second quarter of 1996 were $0.47, the same as in the comparable
quarter last year. For the first half of 1996, earnings per share
were $0.91, compared to $0.92 in the initial six-month period a year
ago.
Manufacturing profit as a percentage of sales in the first six months
was 32% in both 1995 and 1996. Production cost improvements in
certain domestic product lines and higher inventories offset a
continuing decline in sales price per square foot of high frequency
microwave materials resulting from the ongoing shift of microwave
business to lower cost commercial applications.
Selling and administrative expenses for the first six months of 1996
as a percentage of sales were approximately the same as in the
previous year.
Research and development expenses for the first half of 1996 were
similar to 1995 expenses for the comparable period. Significant
product and process development activities included the following:
continued process and product development for RO4003 and RO4350 high
frequency circuit materials; process improvement effort to enhance
performance of RO3003 and RO3010 fluoropolymer laminates; 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.
Durel Corporation, the Company's 50% owned joint venture with 3M,
achieved record sales for its electroluminescent lamps and inverters
in the second quarter. The strong sales and continuing improvements
in manufacturing effectiveness led to a solid profit performance
despite the ongoing high costs associated with the patent infringement
lawsuit brought by Durel to protect its proprietary technology.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Net interest income was recognized for the first half of 1996 compared
to net interest expense in the corresponding 1995 period. This
increase in earnings was due to lower borrowings. Total debt
outstanding at June 30, 1996, was $4.8 million compared with $7.9
million at July 2, 1995.
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 was
requested by the Company. There have been no borrowings under this
credit facility in 1996.
Other income less other charges was $1.4 million for the first six
months of 1996 compared with $1.1 million for the same period in 1995.
The somewhat lower amount in 1995 resulted primarily from a penalty of
$180,000 for the prepayment of debt which was included in 1995
charges.
Net cash provided by operating activities in the first half of 1996
totaled $5.1 million, compared with $8.6 million in the same 1995
period. The year-to-year decrease from 1995 to 1996 is primarily
attributable to higher levels of inventories and accounts receivable.
Capital expenditures in the first six months of 1996 and 1995 totaled
$2.9 million and $3.6 million, respectively. Management expects that
spending for 1996, primarily for capacity expansions and new process
equipment, will approximate $8.0 million. It is anticipated that
these expenditures will be financed with internally generated funds.
In June, the Company issued 200,000 shares and received $2.7 million
in cash through 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 4. Submission of Matters to a Vote of Security Holders
The Registrant held its Annual Meeting of Stockholders
on April 16, 1996. The following members were elected to the
Company's Board of Directors to hold office in the ensuing
year:
Nominee In Favor Withheld
-------------------------------------------------
Leonid V. Azaroff 6,696,393 2,272
Leonard M. Baker 6,696,611 2,054
Wallace Barnes 6,696,195 2,470
Harry H. Birkenruth 6,695,435 3,230
Mildred S. Dresselhaus 6,696,535 2,130
Donald J. Harper 6,695,395 3,270
Gregory B. Howey 6,696,613 2,052
Leonard R. Jaskol 6,339,711 358,954
William E. Mitchell 6,695,613 3,052
Item 5. Other Information
On July 30, 1996, the Company announced that it had
signed a Letter of Intent with a subsidiary of Dow Corning
Corporation to purchase its Bisco Products business. This
agreement is expected to lead to a final purchase agreement
before the end of the year. This acquisition would initially
add less than 10% to the Company's sales.
Bisco Products, based in Elk Grove Village, Illinois, is
the leading manufacturer of silicone foam products. Bisco's
silicone foams, which offer high temperature resistance and
flame retardant properties, are used for gasketing, heat
shielding, and cushioning, particularly in transportation,
electric, and electronic applications.
Bisco has been owned by a subsidiary of Dow Corning
Corporation since 1991. The Company plans to continue Bisco
Products' operations in Elk Grove Village as part of its High
Performance Elastomers Division.
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<PAGE>
PART II - OTHER INFORMATION, CONTINUED
Item 6. Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the six months
ended June 30, 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)
Donald F. O'Leary
By s/DONALD F. O'LEARY
Donald F. O'Leary
Authorized Officer
Corporate Controller
Dated: August 5, 1996
-13-
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