Total pages included - 12
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 June 29, 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 July 27, 1997:
Capital Stock, $1 Par Value--7,479,287 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
June 29, 1997
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Six Months Ended
June 29, 1997 and June 30, 1996 3
Consolidated Balance Sheets--
June 29, 1997 and December 29, 1996 4-5
Consolidated Statements of Cash Flows--
Six Months Ended June 29, 1997 and
June 30, 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 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: Six Months Ended:
------------------------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------------------------------------
Net Sales $ 45,788 $ 35,424 $ 90,128 $ 70,362
Cost of Sales 32,183 24,145 63,449 47,562
Selling and Administrative
Expenses 6,179 5,362 11,789 10,775
Research and Development
Expenses 2,516 2,303 4,967 4,721
------------------------------------------
Total Costs and Expenses 40,878 31,810 80,205 63,058
------------------------------------------
Operating Income 4,910 3,614 9,923 7,304
Other Income less Other Charges 520 865 934 1,380
Interest Income, Net 194 118 301 177
------------------------------------------
Income Before Income Taxes 5,624 4,597 11,158 8,861
Income Taxes:
Federal and Foreign 1,394 932 2,763 1,788
State 125 125 250 250
------------------------------------------
Net Income $ 4,105 $ 3,540 $ 8,145 $ 6,823
==========================================
Net Income Per Share (Note F):
Primary $ 0.53 $ 0.47 $ 1.05 $ 0.91
==========================================
Fully Diluted $ 0.52 $ 0.47 $ 1.04 $ 0.90
==========================================
Shares Used in Computing
(Note F):
Primary 7,800,540 7,570,330 7,770,490 7,527,044
==========================================
Fully Diluted 7,862,208 7,570,330 7,854,182 7,547,776
==========================================
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 29, 1997 December 29, 1996
------------- -----------------
Current Assets:
Cash and Cash Equivalents $ 22,079 $ 18,675
Marketable Securities 934 956
Accounts Receivable, Net 24,497 21,108
Inventories:
Raw Materials 7,387 6,183
In-Process and Finished 9,663 7,539
Less LIFO Reserve (1,049) (1,049)
-------- --------
Total Inventories 16,001 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 460 1,348
-------- --------
Total Current Assets 71,951 62,725
-------- --------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$60,894 and $57,928 40,308 36,614
Investment in Unconsolidated Joint
Venture 4,902 4,975
Pension Asset 3,851 3,851
Acquisition Escrow -- 8,994
Goodwill and Other Intangibles, Net 8,668 129
Other Assets 2,001 1,939
-------- --------
Total Assets $131,681 $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)
June 29, 1997 December 29, 1996
------------- -----------------
Current Liabilities:
Accounts Payable $ 11,921 $ 9,726
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 6,515 5,880
Accrued Income Taxes Payable 4,550 3,345
Taxes, Other than Federal and Foreign
Income 1,338 1,175
Other Accrued Liabilities 4,203 3,911
--------- --------
Total Current Liabilities 29,127 24,637
--------- --------
Long-Term Debt, less Current Maturities 3,600 3,600
Noncurrent Deferred Income Taxes 315 419
Noncurrent Pension Liability 3,615 3,615
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,342 6,342
Other Long-Term Liabilities 3,680 3,402
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,475,404
and 7,405,961 7,475 7,406
Additional Paid-In Capital 30,210 29,691
Unrealized Loss on Marketable Securities (23) (2)
Currency Translation Adjustment 1,113 2,035
Retained Earnings 46,227 38,082
-------- --------
Total Shareholders' Equity 85,002 77,212
-------- --------
Total Liabilities and
Shareholders' Equity $131,681 $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)
Six Months Ended:
June 29, June 30,
1997 1996
--------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net Income $ 8,145 $ 6,823
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 4,187 3,193
Benefit for Deferred Income Taxes -- 57
Equity in Undistributed (Income) Loss of
Unconsolidated Joint Ventures, Net (473) (192)
Loss on Disposition of Assets 50 50
Noncurrent Pension and Postretirement
Benefits 585 803
Other, Net 124 271
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (3,797) (4,103)
Inventories (2,602) (2,561)
Prepaid Expenses (29) (64)
Accounts Payable and Accrued Expenses 3,525 788
--------------------
Net Cash Provided by Operating Activities 9,715 5,065
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (5,958) (2,868)
Proceeds from Sales of Business -- 2,567
Acquisition of Business (1,294) --
Proceeds from Sale of Property, Plant & Equipment 53 14
Proceeds from Sale of Marketable Securities 22 --
Purchase of Marketable Securities -- (684)
Investment in Unconsolidated Joint Ventures and
Affiliates 386 490
--------------------
Net Cash Provided by (Used in) Investing
Activities (6,791) (481)
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 589 3,026
--------------------
Net Cash Provided by Financing Activities 589 3,026
Effect of Exchange Rate Changes on Cash (109) (43)
--------------------
Net Increase in Cash and Cash Equivalents 3,404 7,567
Cash and Cash Equivalents at Beginning of Year 18,675 13,111
--------------------
Cash and Cash Equivalents at End of Quarter $ 22,079 $ 20,678
====================
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 six months of 1997 and 1996 was $403,000
and $411,000, respectively.
E. Income taxes paid were $1,792,000 and $1,639,000 in the first six 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: Six Months Ended:
---------------------------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
---------------------------------------------
Basic Net Income Per Share $0.55 $0.49 $1.09 $0.95
Shares Used in Computing 7,461,928 7,226,884 7,441,794 7,182,122
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales were $45.8 million in the second quarter and $90.1 million for
the first six months of 1997, up 29% and 28%, respectively, over the
comparable periods in 1996. During the quarter, every operating unit
exceeded 1996 second quarter sales. Combined Sales, which include one-half
of the sales from Rogers two 50% owned joint ventures, were $54.3 million
for the quarter and $106.0 million for the half, both up about 23% over the
same periods in 1996.
These increases reflect progress in development of our geographic sales
base, the introduction of new products, and the integration of our new
silicone foam business. A majority of the sales growth during the first
half is from flexible circuit materials and PORON urethane foams. These
products have had more intensive sales and market development over the past
few years, including focused efforts in Europe and Asia.
Sales of Polymer Products in the second quarter and first half of 1997 were
22% and 24%, respectively, above the levels in the same periods of 1996.
PORON urethane materials had strong and widespread sales gains across
industrial, printing, and consumer market areas. PORON sales networks are
being extended and product lines broadened. Another capacity expansion has
been started at the East Woodstock, Connecticut, plant where capacity was
more than doubled just three years ago. The Elastomer Components Unit in
South Windham, Connecticut, recently began to manufacture several new
components for the leading U.S. based manufacturer of computer printers.
Additionally, about one-fourth of the first half 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.
The Molding Materials business, which had record first half sales in 1996,
topped those sales in 1997 and made good progress on new applications for
high performance phenolic molding compounds. A major capacity expansion at
the Manchester, Connecticut, plant is coming on-line in the third quarter.
Sales of Electronic Products for the second quarter and first six months
increased 29% and 28%, respectively, from the comparable 1996 periods.
Sales of FLEX-I-MID adhesiveless laminate materials to Hutchinson
Technology Incorporated for suspension assemblies used in advanced hard
disk drives continue to increase. Rogers profit margins on these sales are
somewhat lower than the average for Rogers manufactured products, since the
Company presently acts only in a technical sales and distributor capacity
under the partnership arrangement with Mitsui Toatsu Chemicals.
Over the past two years, unit sales of Rogers high frequency laminate
material to the wireless communication market increased substantially but,
because of the transition to lower-priced
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
materials, dollar sales did not reflect the volume growth. However, dollar
sales started to climb during the first half of 1997 and, led by European
demand for our new materials, record sales were achieved. Major
investments are being made at the Chandler, Arizona, plant to increase
manufacturing capability for newer products and to ramp-up to higher
volumes.
Profits before and after tax, and earnings per share for the second quarter
and the first half of 1997 were the highest in Rogers history. Before tax
profits of $5.6 million for the second quarter and $11.2 million for the
first half were up 22% and 26%, respectively, over last year's record
results in the comparable periods. Net income of $4.1 million for the
quarter and $8.2 million for the half, after a 4% higher tax rate in 1997,
rose 16% and 19%, respectively.
Earnings per share for the second quarter this year were $0.53, up from
$0.47 in the same period last year. For the first half of 1997, earnings
per share were $1.05 compared to $0.91 in the initial six-month period a
year ago.
Manufacturing profit as a percentage of sales in the first six 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 9% for the first six 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 5%
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.
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.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Other income less other charges was $.9 million for the first six months of
1997 compared with $1.4 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, achieved record first half sales in 1997 and
profits also improved over the first half a year ago. However, continuing
high costs associated with the patent infringement lawsuit Durel has
brought to protect its proprietary technology continue to significantly
impact profits. The trial originally scheduled for the third quarter of
1997 has been delayed by the court. A new trial date has not yet been
established.
Net cash provided by operating activities amounted to $9.7 million in the
first half of 1997 compared to $5.1 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 $6.0 million and $2.9 million for the first
six 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 $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. 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
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
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 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.
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.
-11-
<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 May
1, 1997. 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 6,858,767 17,941
Leonard M. Baker 6,859,933 16,775
Wallace Barnes 6,858,757 17,951
Harry H. Birkenruth 6,859,761 16,947
Walter E. Boomer 6,861,233 15,475
Mildred S. Dresselhaus 6,860,969 15,739
Donald J. Harper 6,858,415 18,293
Gregory B. Howey 6,859,535 17,173
Leonard R. Jaskol 6,860,213 16,495
William E. Mitchell 6,860,335 16,373
Item 6. Reports on Form 8-K
(b) There were no reports on Form 8-K filed for the three months
ended June 29, 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: August 8, 1997
-12-
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