Total pages included - 13
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
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 April 27, 1997:
Capital Stock, $1 Par Value--7,444,310 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 30, 1997
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months Ended March 30, 1997 and
March 31, 1996 3
Consolidated Balance Sheets--
March 30, 1997 and December 29, 1996 4-5
Consolidated Statements of Cash Flows--
Three Months Ended March 30, 1997 and
March 31, 1996 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. Reports on Form 8-K 12
SIGNATURES 13
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended:
-----------------------
March 30, March 31,
1997 1996
-----------------------
Net Sales $ 44,340 $ 34,938
Cost of Sales 31,266 23,417
Selling and Administrative Expenses 5,610 5,413
Research and Development Expenses 2,451 2,418
-----------------------
Total Costs and Expenses 39,327 31,248
-----------------------
Operating Income 5,013 3,690
Other Income less Other Charges 414 515
Interest Income, Net 107 59
-----------------------
Income Before Income Taxes 5,534 4,264
Income Taxes:
Federal and Foreign 1,369 856
State 125 125
-----------------------
Net Income $ 4,040 $ 3,283
=======================
Net Income Per Share (Note F):
Primary $ .52 $ .44
=======================
Fully Diluted $ .52 $ .44
=======================
Shares Used in Computing (Note F):
Primary 7,740,440 7,483,903
=======================
Fully Diluted 7,756,471 7,525,358
=======================
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)
March 30, 1997 December 29, 1996
-------------- -----------------
Current Assets:
Cash and Cash Equivalents $ 19,691 $ 18,675
Marketable Securities 946 956
Accounts Receivable, Net 24,809 21,108
Inventories:
Raw Materials 6,585 6,183
In-Process and Finished 8,521 7,539
Less LIFO Reserve (1,049) (1,049)
--------- ---------
Total Inventories 14,057 12,673
Current Deferred Income Taxes 2,812 2,807
Assets Held for Sale, Net of Valuation
Reserves of $492 in each period
(Note B) 5,168 5,158
Other Current Assets 501 1,348
--------- ---------
Total Current Assets 67,984 62,725
--------- ---------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$59,746 and $57,928 39,412 36,614
Investment in Unconsolidated Joint
Venture 4,765 4,975
Pension Asset 3,851 3,851
Acquisition Escrow -- 8,994
Goodwill and Other Intangibles, Net 8,715 129
Other Assets 2,065 1,939
--------- ---------
Total Assets $ 126,792 $ 119,227
========= =========
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)
March 30, 1997 December 29, 1996
Current Liabilities:
Accounts Payable $ 12,884 $ 9,726
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 4,831 5,880
Accrued Income Taxes Payable 4,660 3,345
Taxes, Other than Federal and Foreign
Income 1,361 1,175
Other Accrued Liabilities 4,134 3,911
--------- ---------
Total Current Liabilities 28,470 24,637
--------- ---------
Long-Term Debt, less Current Maturities 3,600 3,600
Noncurrent Deferred Income Taxes 345 419
Noncurrent Pension Liability 3,615 3,615
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,342 6,342
Other Long-Term Liabilities 3,584 3,402
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,436,911
and 7,405,961 7,437 7,406
Additional Paid-In Capital 29,967 29,691
Unrealized Loss on Marketable Securities (12) (2)
Currency Translation Adjustment 1,322 2,035
Retained Earnings 42,122 38,082
--------- ---------
Total Shareholders' Equity 80,836 77,212
--------- ---------
Total Liabilities and
Shareholders' Equity $ 126,792 $ 119,227
========= =========
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)
Three Months Ended:
---------------------
March 30, March 31,
1997 1996
---------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 4,040 $ 3,283
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 1,933 1,651
Benefit for Deferred Income Taxes -- 42
Equity in Undistributed (Income) Loss of
Unconsolidated Joint Ventures, Net (197) 385
Loss on Disposition of Assets 25 25
Noncurrent Pension and Postretirement Benefits 275 382
Other, Net 20 207
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (4,033) (3,044)
Inventories (594) (648)
Prepaid Expenses (67) (92)
Accounts Payable and Accrued Expenses 3,083 981
--------- ---------
Net Cash Provided by Operating Activities 4,485 3,172
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (3,065) (1,475)
Proceeds from Sales of Business -- 2,567
Acquisition of Business (1,294) --
Proceeds from Sale of Property, Plant and Equipment 49 --
Proceeds from Sale of Marketable Securities 10 --
Purchase of Marketable Securities -- (989)
Investment in Unconsolidated Joint Ventures and
Affiliates 394 --
--------- ---------
Net Cash Provided by (Used in) Investing
Activities (3,906) 103
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 1,500 --
Repayments of Debt Principal (1,500) --
Proceeds from Sale of Capital Stock 306 24
--------- ---------
Net Cash Provided by Financing Activities 306 24
Effect of Exchange Rate Changes on Cash 131 (293)
--------- ---------
Net Increase in Cash and Cash Equivalents 1,016 3,006
Cash and Cash Equivalents at Beginning of Year 18,675 13,111
--------- ---------
Cash and Cash Equivalents at End of Quarter $ 19,691 $ 16,117
========= =========
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 29, 1996.
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. 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. No borrowings have been made
under this credit facility.
D. Interest paid during the first three months of 1997 and 1996 was
$92,000 and $75,000, respectively.
E. Income taxes paid (refunded) were $(36,000) and $39,000 in the
first three months of 1997 and 1996, respectively.
F. Basic Net Income Per Share, as defined in Statement of Financial
Accounting Standards No. 128, was $0.54 and $0.46 for the first
quarters of 1997 and 1996, respectively. The number of shares used
in computing Basic Earnings Per Share was 7,421,661 and 7,137,360,
respectively.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
First quarter sales of $44.3 million were 27% higher than the
comparable period in 1996. Combined Sales, which include one half of
the sales from Rogers two 50% owned joint ventures, were $51.7
million, 24% higher than the first quarter of 1996. Adjusted for
currency changes, the sales gains were 29% and 28% respectively.
Sales of Polymer Products in the first three months of 1997 were 26%
above the comparable period in 1996. Sales of PORON urethane foams
rose substantially in the first quarter, compared with the same period
a year ago, reflecting increased demand from industrial, printing and
consumer markets. Orders have been climbing for new PORON urethane
foams which offer performance advantages in automotive and electronics
applications. Additionally, about one-fourth of the first three
months total sales increase for all products and almost one-half of
the increase for Polymer Products is attributable to the January 1,
1997 acquisition of the Bisco Products silicone foam materials
business from Dow Corning Corporation. As expected, the initial
profit contribution from Bisco is modest as required changes are made
to integrate the Bisco Materials Unit into the PORON high performance
elastomers business. The Molding Materials Division achieved record
sales in the quarter and is making good progress on new adoptions for
high performance phenolic compounds. Capacity expansion plans for
this division remain on track for a 1997 mid-year start-up.
Sales of Electronic Products for the first quarter increased 28% over
the same period in 1996. Significant sales gains were achieved in
flexible circuit materials, most notably the FLEX-I-MIDr adhesiveless
laminate materials sold to Hutchinson Technology Incorporated for the
new generation of suspension assemblies used with magneto-resistive
heads in hard disk drives. Rogers profit margins on these materials
are lower than the average for Rogers manufactured products. The
Company acts in a technical sales and distributor capacity for FLEX-I-
MID laminates under a partnership arrangement with Mitsui Toatsu
Chemicals, Inc. in Japan. This arrangement includes a technology
license from Rogers.
Sales of high frequency laminates to the wireless communication market
are continuing to rise rapidly in terms of units but, because of the
ongoing transition to lower-priced, higher-volume applications, dollar
sales growth is increasing at a more moderate pace. Major investments
and expenses are being incurred as the Company continues to make
product improvements and put into place the necessary processes,
manufacturing capacity and organization needed for this fast growing
market.
Profits, before and after tax, and earnings per share, were the
highest for any quarter in Rogers history. Compared with the first
three months of 1996, before tax profits were up 30%, and net income,
after a 4% higher tax rate in 1997, climbed 23%. Earnings per share
for the quarter rose to 52 cents, up from 44 cents in the same period
last year.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Manufacturing profit as a percentage of sales in the first three
months of 1997 and 1996 was 29% and 33%, respectively. The decrease
from 1996 to 1997 reflects the continuing start-up costs and high
early stage processing costs associated with the Company's newer
commercial high frequency laminate materials. Also, as mentioned
above, there are lower profit margins on the FLEX-I-MID adhesiveless
laminate materials sold to Hutchinson Technology Incorporated and the
initial profit contribution from the Bisco Materials Unit is modest.
Selling and administrative expense increased slightly but as a
percentage of net sales was 13% in 1997 compared with 15% in the first
three months of 1996.
Research and development expense was approximately the same in the
first quarters of 1997 and 1996. Significant product and process
development activities included: process and product development for
RO4003 and RO4350 high frequency circuit materials for commercial
applications with particular emphasis on improved high volume
manufacturing processes; process and product improvements to enhance
performance of RO3003 and RO3010 fluoropolymer laminates; process and
formulation support directed towards PORON formulations which are low
outgassing and flame retardant; improved molding materials; and ENDUR
product development and application testing to support its use in new
printer applications. Core technical capabilities in polymers,
fillers, and adhesion are continuing to be strengthened through added
organizational focus and new analytical equipment and facilities.
Net interest income for 1997 increased slightly from 1996 due mainly
to the interest earned on the higher level of cash equivalents and
marketable securities and to lower borrowings.
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. No borrowings have been made under this
credit facility.
Other income less other charges was $.4 million for the first three
months of 1997 compared with $.5 million for the same period in 1996.
This decline was primarily the result of lower royalty income.
Durel Corporation, our 50% owned joint venture with 3M in
electroluminescent lamps, had lower results than in the final three
months of 1996, but sales and profits improved over the first quarter
a year ago. There are continuing high costs associated with the
patent infringement lawsuit Durel has brought to protect its
proprietary technology. A trial date has now been set in the third
quarter of this year.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Net cash provided by operating activities amounted to $4.5 million in
the first quarter of 1997 compared to $3.2 million for the same period
in 1996. Primary factors contributing to the year-to-year increase
from 1996 to 1997 include higher earnings and a higher level of trade
accounts payable.
Capital expenditures totaled $3.1 million and $1.5 million for the
first three months of 1997 and 1996, respectively. Capital spending
was exceeded by cash generated from the Company's operating activities
in both periods. For the full year 1997, capital spending is expected
to more than double the amount spent in 1996. In 1997, major
expansions will be made in commercial microwave equipment and
facilities, along with capacity increases in high performance
elastomer products and a new production line for molding materials.
It is anticipated that this spending will be financed with internally
generated funds.
Management believes that in the near term, internally generated funds
will be sufficient to meet the needs of the business. The Company
continually reviews and assesses its lending relationships.
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 is currently involved as a PRP in four 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. Actual costs 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 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
environmental engineers and consultants, the Company recorded a
provision of approximately $900,000 in 1994 for costs related to this
matter. To date, approximately $550,000 has been
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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.
On March 31, 1997, Harry H. Birkenruth became Chairman of the Board of
Directors after having served as President and CEO of the Company
since April 1992. Mr. Birkenruth announced his intention to retire
from full-time service to the Company next year.
Also on March 31, 1997, Walter E. Boomer succeeded Mr. Birkenruth as
President and CEO. Mr. Boomer is a retired General and Vice
Commandant of the US Marine Corps, the second highest position in the
Corps, and was Commanding General of all Marine forces in Desert
Storm. He retired from the Corps in 1994 and became Senior Vice
President and Chief Project Management Officer of McDermott
International, Inc. in August of that year. From February 1995 to
October 1996 he was President of the Babcock & Wilcox Power Generation
Group and Executive Vice President of McDermott International, Inc.,
which is the parent corporation of Babcock & Wilcox.
Statements in this report that are not strictly historical are
"forward-looking" statements which should be considered as subject to
the many uncertainties that exist in the Company's operations and
environment. These uncertainties, which include economic conditions,
market demand and pricing, competitive and cost factors, and the like,
are incorporated by reference in the Rogers Corporation 1996 Form 10-K
filed with the Securities and Exchange Commission. Such factors could
cause actual results to differ materially from those in the forward-
looking statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K
On January 15, 1997, Registrant filed a Current Report on
Form 8-K, dated December 31, 1996, with respect to the
acquisition of Bisco Products from a wholly owned subsidiary
of Dow Corning Corporation. The items reported in such
Current Report were Item 2 (Acquisition or Disposition of
Assets) and Item 7 (Financial Statements and Exhibits). The
following financial statements were filed:
(i) Purchase and Sale of Assets Agreement
(ii) List of Schedules to the Purchase and Sale of Assets
Agreement
(iii) List of Exhibits to the Purchase and Sale of Assets
Agreement
On February 26, 1997, Registrant filed a Current Report
on Form 8-K, dated February 26, 1997, with respect to the
registrant's adoption of a new Shareholder Rights Plan. The
items reported in such Current Report were Item 5 (Other
Events) and Item 7 (Financial Statements and Exhibits). The
following exhibit was filed:
(i) Registrant's press release dated February 26, 1997.
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<PAGE>
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: May 7, 1997
-13-
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