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 September 28, 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 October 26, 1997:
Capital Stock, $1 Par Value-7,504,608 shares
-1-
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
September 28, 1997
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Nine Months Ended
September 28, 1997 and September 29, 1996 3
Consolidated Balance Sheets--
September 28, 1997 and December 29, 1996 4-5
Consolidated Statements of Cash Flows--
Nine Months Ended September 28, 1997 and
September 29, 1996 6
Supplementary Notes 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
-2-
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
<CAPTION>
Three Months Ended: Nine Months Ended:
---------------------------------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 47,752 $ 33,972 $ 137,880 $ 104,334
Cost of Sales 33,359 23,461 96,808 71,023
Selling and Administrative Expenses 6,387 5,046 18,176 15,821
Research and Development Expenses 2,441 2,388 7,408 7,109
------------------------------------------------------
Total Costs and Expenses 42,187 30,895 122,392 93,953
------------------------------------------------------
Operating Income 5,565 3,077 15,488 10,381
Other Income less Other Charges 205 933 1,139 2,313
Interest Income, Net 172 134 473 311
------------------------------------------------------
Income Before Income Taxes 5,942 4,144 17,100 13,005
Income Taxes:
Federal and Foreign 1,479 698 4,242 2,486
State 125 125 375 375
------------------------------------------------------
Net Income $ 4,338 $ 3,321 $ 12,483 $ 10,144
======================================================
Net Income Per Share (Note F):
Primary $ .55 $ .43 $ 1.60 $ 1.34
======================================================
Fully Diluted $ .55 $ .43 $ 1.57 $ 1.33
======================================================
Shares Used in Computing (Note F):
Primary 7,883,425 7,711,231 7,808,135 7,588,439
======================================================
Fully Diluted 7,945,992 7,711,231 7,937,188 7,602,261
======================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
September 28, 1997 December 29, 1996
-------------------------------------
Current Assets:
Cash and Cash Equivalents $ 20,613 $ 18,675
Marketable Securities 710 956
Accounts Receivable, Net 28,691 21,108
Inventories:
Raw Materials 7,922 6,183
In-Process and Finished 9,707 7,539
Less LIFO Reserve (1,049) (1,049)
--------- ---------
Total Inventories 16,580 12,673
Current Deferred Income Taxes 2,814 2,807
Assets Held for Sale, Net of Valuation
Reserves of $492 in each period
(Note B) 5,168 5,158
Other Current Assets 3,692 1,348
--------- ---------
Total Current Assets 78,268 62,725
--------- ---------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$61,729 and $57,928 42,296 36,614
Investment in Unconsolidated Joint
Venture 5,110 4,975
Pension Asset 3,851 3,851
Acquisition Escrow 7,634 8,994
Goodwill and Other Intangibles, Net 8,455 129
Other Assets 2,002 1,939
--------- ---------
Total Assets $ 147,616 $ 119,227
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
September 28, 1997 December 29, 1996
-------------------------------------
Current Liabilities:
Accounts Payable $ 12,245 $ 9,726
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 5,470 5,880
Accrued Income Taxes Payable 6,089 3,345
Taxes, Other than Federal and Foreign
Income 1,041 1,175
Other Accrued Liabilities 4,190 3,911
--------- ---------
Total Current Liabilities 29,635 24,637
--------- ---------
Long-Term Debt, less Current Maturities 14,359 3,600
Noncurrent Deferred Income Taxes 302 419
Noncurrent Pension Liability 3,615 3,615
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,342 6,342
Other Long-Term Liabilities 3,841 3,402
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,498,353
and 7,405,961 7,498 7,406
Additional Paid-In Capital 30,429 29,691
Unrealized Gain (Loss) on Marketable
Securities 5 (2)
Currency Translation Adjustment 1,025 2,035
Retained Earnings 50,565 38,082
--------- ---------
Total Shareholders' Equity 89,522 77,212
--------- ---------
Total Liabilities and
Shareholders' Equity $ 147,616 $ 119,227
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Nine Months Ended:
----------------------------
September 28, September 29,
1997 1996
----------------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 12,483 $ 10,144
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 5,668 4,898
Benefit for Deferred Income Taxes -- 61
Equity in Undistributed Income of Unconsolidated
Joint Ventures, Net (803) (747)
Loss on Disposition of Property, Plant & Equipment 75 113
Noncurrent Pension and Postretirement Benefits 939 1,473
Other, Net 427 (83)
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (7,985) (2,881)
Inventories (3,206) (2,452)
Prepaid Expenses (141) (161)
Accounts Payable and Accrued Expenses 3,790 (1,531)
--------- ---------
Net Cash Provided by Operating Activities 11,247 8,834
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (9,721) (4,499)
Proceeds from Sales of Business -- 2,529
Acquisition of Business (1,294) --
Acquisition Escrow (10,759) --
Proceeds from Sale of Property, Plant & Equipment 57 946
Proceeds from Sale of Marketable Securities 247 607
Investment in Unconsolidated Joint Ventures 386 408
--------- ---------
Net Cash Used in Investing Activities (21,084) (9)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 12,259 --
Repayments of Debt Principal (1,500) --
Proceeds from Sale of Capital Stock 830 3,124
--------- ---------
Net Cash Provided by Financing Activities 11,589 3,124
Effect of Exchange Rate Changes on Cash 186 (44)
--------- ---------
Net Increase in Cash and Cash Equivalents 1,938 11,905
Cash and Cash Equivalents at Beginning of Year 18,675 13,111
--------- ---------
Cash and Cash Equivalents at End of Quarter $ 20,613 $ 25,016
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-6-
<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. In September 1997 the Company cancelled its $5.0 million unsecured
revolving credit agreement with Fleet National Bank and replaced it
with an unsecured multi-currency revolving credit agreement, also
with Fleet. Under the new arrangement, the Company can borrow up
to $15.0 million, or the equivalent in Belgian Francs and/or
Japanese Yen. Amounts borrowed under this agreement are to be paid
in full by September 19, 2002. The Company borrowed 390,207,039
Belgian Francs (the equivalent of U.S. $10,759,000 as of September
28, 1997) under the new arrangement to facilitate the Rogers
Induflex acquisition in Belgium.
D. Interest paid during the first nine months of 1997 and 1996 was
approximately $500,000 in each period.
E. Income taxes paid were $1,953,000 and $1,819,000 in the first nine
months of 1997 and 1996, respectively.
F. Basic Net Income Per Share, as defined in Statement of Financial
Accounting Standards No. 128, was as follows:
Quarter Ended: Nine Months Ended:
---------------------------- ----------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
---------------------------- ----------------------------
Basic Net Income
Per Share $0.58 $0.45 $1.67 $1.40
Shares Used in
Computing 7,488,331 7,375,041 7,457,307 7,246,428
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales were $47.8 million in the third quarter and $137.9 million
for the first nine months of 1997, up 41% and 32%, respectively, over
the comparable periods in 1996. Every operating unit exceeded 1996
sales for the third quarter and nine months. Combined Sales, which
include one half of the sales from Rogers two 50% owned joint
ventures, were $56.1 million for the quarter and $162.1 million for
the first nine months, up 32% and 26%, respectively, over the same
periods last year.
Sales gains this quarter were led by significant increases in flexible
circuit laminates sold from the recently expanded circuit materials
operation in Chandler, Arizona for hard disk drive, notebook computer,
and cellular telephone applications. In addition, sales continued to
increase for FLEX-I- MID(R) adhesiveless laminate materials supplied to
Rogers by Mitsui Chemicals Inc. (formerly Mitsui Toatsu Chemicals) and
sold to Hutchinson Technology Incorporated for suspension assemblies
used in advanced hard disk drives.
Sales of Polymer Products in the third quarter and first nine months
of 1997 were 30% and 26%, respectively, above the levels in the same
periods of 1996. The High Performance Elastomers Division continued
its solid performance. Worldwide sales of PORON(R) urethane materials
increased significantly for consumer, industrial and hard disk drive
applications. The third quarter also reflected substantial sales
contributions from the Elastomer Components Unit in South Windham,
Connecticut, where ENDUR(R) components are manufactured for high
performance copiers and printers. Additionally, about one-fifth of
the first nine months sales increase for all products and
approximately 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 complete the integration of the Bisco
Materials Unit into the PORON high performance elastomers business.
Sales of Electronic Products for the third quarter and first nine
months increased 54% and 41%, respectively, from the comparable 1996
periods. Led by strong European demand, the Microwave Materials
Division in Chandler, Arizona, continued to make solid gains in sales
of high frequency laminate materials for communication applications,
with dollar sales attaining record levels for the first nine months of
1997. Sales of RO4000(R) and RO3000(TM) high frequency materials, targeted
to commercial wireless applications, both grew significantly. To
better serve European customers, Rogers has committed to begin
manufacturing high frequency laminates at Rogers N.V. in Gent,
Belgium.
To further broaden the products offered by the Circuit Materials
Division, Rogers signed an agreement with Nippon Polytech Corporation
of Tokyo, Japan, for the distribution of photoimageable covercoat and
soldermask products. The agreement provides for
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
exclusive distribution rights in the U.S. and non-exclusive
distribution rights in Europe, along with a technology transfer and
rights to produce these materials. Selling photoimageable covercoats
with high performance flexible circuit materials improves Rogers
ability to support customers who need to fabricate flexible circuits
with fine pattern resolution.
Before tax profits were up 43% in the third quarter and 31% for the
nine months compared with the same periods last year. Net income rose
31% for the quarter and 23% for the nine months, and earnings per
share were up 28% and 19%, respectively. These record results were
achieved despite a higher income tax rate in 1997. Earnings per share
for the third quarter and nine months were $0.55 and $1.60
respectively, up from $0.43 and $1.34 for the same periods last year.
Manufacturing profit as a percentage of sales in the first nine months
of 1997 and 1996 was 30% and 32%, respectively. The decrease from
1996 to 1997 reflects the integration costs related to Bisco and the
continuing start-up costs and high early stage processing costs
associated with the Company's newer commercial high frequency laminate
materials. It also reflects a decline in average sales price per
square foot for laminates as the microwave business shifts to lower-
priced wireless communication applications.
Selling and administrative expense increased 15% for the first nine
months of 1997, but declined as a percentage of sales from 15% in 1996
to 13% in 1997.
Research and development expense for the first half of 1997 increased
4% from the comparable 1996 period. 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
component 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.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
On September 30, 1997, Rogers acquired UCB Induflex N.V. of Gent,
Belgium, from UCB SA. Induflex manufactures thin aluminum and copper
laminates for electromagnetic and radio frequency interference
shielding, primarily in telecommunication and data communication
applications. Induflex sales for 1997 are estimated to be about
$11million. This acquisition expands the product range Rogers offers
its computer and communication customers, complementing the high
frequency and flexible circuit laminates that Rogers now sells. This
business also extends Rogers capabilities in high speed lamination and
slitting. The new business, Rogers Induflex N.V., will continue to
operate in Gent, Belgium, which is also the location of Rogers N.V.
and the base of Rogers European operations.
In September 1997 the Company cancelled its $5.0 million unsecured
revolving credit agreement with Fleet National Bank and replaced it
with an unsecured multi-currency revolving credit agreement, also with
Fleet. Under it, the Company can borrow up to $15.0 million, or the
equivalent in Belgian Francs and/or Japanese Yen. Amounts borrowed
under this agreement are to be paid in full by September 19, 2002.
The Company borrowed 390,207,039 Belgian Francs (U.S. $10,759,000 as
of September 28, 1997) under the new arrangement to facilitate the
Rogers Induflex acquisition in Belgium.
Other income less other charges was $1.1 million for the first nine
months of 1997 compared with $2.3 million for the same period in 1996.
This decline was primarily the result of lower royalty income.
Sales of PORON materials and ENDUR components continued to grow at
Rogers INOAC Corporation (RIC), the company's 50% owned joint venture
in Japan, despite continuing economic weakness in Japan.
Durel Corporation, the 50% owned joint venture with 3M in
electroluminescent lamps, is increasing production on several new
custom lamp systems for the world's largest manufacturer of pagers.
Durel is continuing to shift its new business focus towards wireless
communication applications, gaining sales in this market while sales
for a major automotive lamp program are winding down. The patent
infringement lawsuit brought by Durel continues, with a trial now
expected in the second quarter of 1998.
Net cash provided by operating activities amounted to $11.2 million in
the first nine months of 1997 compared to $8.8 million for the same
period in 1996. The primary factor contributing to the year-to-year
increase from 1996 to 1997 is higher earnings.
Capital expenditures totaled $9.7 million and $4.5 million for the
first nine 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
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
spending is expected to more than double the $6.3 million spent in
1996. To satisfy growing demand, major capacity expansions are
underway or have been completed recently at four of Rogers seven
domestic manufacturing plants. These expansions include major
capacity increases for microwave materials used in commercial
applications and for high performance elastomer products. Both
expansions will be completed in 1998. Additionally, a new production
line for molding materials was completed during 1997. 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 and added an additional
provision of $275,000 in 1997 for costs related to this matter. To
date, approximately $600,000 has been 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.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
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.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the three
months ended September 28, 1997.
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 7, 1997
-13-
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 20613
<SECURITIES> 710
<RECEIVABLES> 28839
<ALLOWANCES> 148
<INVENTORY> 16580
<CURRENT-ASSETS> 78268
<PP&E> 104025
<DEPRECIATION> 61729
<TOTAL-ASSETS> 147616
<CURRENT-LIABILITIES> 29635
<BONDS> 0
0
0
<COMMON> 7498
<OTHER-SE> 82024
<TOTAL-LIABILITY-AND-EQUITY> 147616
<SALES> 137880
<TOTAL-REVENUES> 137880
<CGS> 96808
<TOTAL-COSTS> 122392
<OTHER-EXPENSES> (1139)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (473)
<INCOME-PRETAX> 17100
<INCOME-TAX> 4617
<INCOME-CONTINUING> 12483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.57
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