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 April 5, 1998
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 May 3, 1998:
Capital Stock, $1 Par Value-7,599,174 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
April 5, 1998
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months Ended April 5, 1998 and
March 30, 1997 3
Consolidated Balance Sheets--
April 5, 1998 and December 28, 1997 4-5
Consolidated Statements of Cash Flows--
Three Months Ended April 5, 1998 and
March 30, 1997 6
Supplementary Notes 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
PART II--OTHER INFORMATION
Item 6. Reports on Form 8-K 13
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:
----------------------
April 5, March 30,
1998 1997
(14 weeks) (13 weeks)
---------- ----------
Net Sales $ 58,313 $ 44,340
Cost of Sales 42,233 31,266
Selling and Administrative Expenses 7,272 5,610
Research and Development Expenses 2,611 2,451
--------- ---------
Total Costs and Expenses 52,116 39,327
--------- ---------
Operating Income 6,197 5,013
Other Income less Other Charges (148) 414
Interest Income, Net 231 107
--------- ---------
Income Before Income Taxes 6,280 5,534
Income Taxes:
Federal and Foreign 1,696 1,369
State 125 125
--------- ---------
Net Income $ 4,459 $ 4,040
========= =========
Net Income Per Share (Note F):
Basic $ .59 $ .54
========= =========
Diluted $ .56 $ .52
========= =========
Shares Used in Computing (Note F):
Basic 7,586,000 7,422,000
========= =========
Diluted 7,960,000 7,740,000
========= =========
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)
April 5, 1998 December 28, 1997
------------- -----------------
Current Assets:
Cash and Cash Equivalents $ 14,263 $ 18,791
Marketable Securities 3,022 2,764
Accounts Receivable, Net 32,825 28,658
Inventories:
Raw Materials 10,892 10,262
In-Process and Finished 12,881 12,446
Less LIFO Reserve (1,123) (1,123)
-------- --------
Total Inventories 22,650 21,585
Current Deferred Income Taxes 1,940 1,936
Assets Held for Sale, Net of Valuation
Reserves of $492 in each period
(Note B) 5,158 5,158
Other Current Assets 610 591
-------- --------
Total Current Assets 80,468 79,483
-------- --------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$65,809 and $63,856 57,280 52,201
Investment in Unconsolidated Joint
Venture 5,052 5,373
Pension Asset 4,731 4,731
Goodwill and Other Intangibles, Net 14,407 14,500
Other Assets 2,143 2,152
-------- --------
Total Assets $164,081 $158,440
======== ========
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)
April 5, 1998 December 28, 1997
------------- -----------------
Current Liabilities:
Accounts Payable $ 16,399 $ 16,771
Current Maturities of Long-Term Debt 600 600
Accrued Employee Benefits and
Compensation 7,517 8,098
Accrued Income Taxes Payable 5,106 3,628
Taxes, Other than Federal and Foreign
Income 1,221 839
Other Accrued Liabilities 4,434 4,047
-------- --------
Total Current Liabilities 35,277 33,983
-------- --------
Long-Term Debt, less Current Maturities 13,660 13,660
Noncurrent Deferred Income Taxes 2,258 2,311
Noncurrent Pension Liability 3,901 3,900
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,277 6,277
Other Long-Term Liabilities 4,184 3,931
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 25,000,000; Issued
and Outstanding Shares 7,599,174
and 7,543,699 7,599 7,544
Additional Paid-In Capital 31,672 31,097
Unrealized Loss on Marketable Securities (2) (5)
Currency Translation Adjustment 215 1,160
Retained Earnings 59,040 54,582
-------- --------
Total Shareholders' Equity 98,524 94,378
-------- --------
Total Liabilities and
Shareholders' Equity $164,081 $158,440
======== ========
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:
---------------------
April 5, March 30,
1998 1997
--------- ----------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 4,459 $ 4,040
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 2,236 1,933
Equity in Undistributed (Income) Loss of
Unconsolidated Joint Ventures, Net 42 (197)
Loss on Disposition of Assets -- 25
Noncurrent Pension and Postretirement Benefits 531 275
Other, Net 247 20
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (4,493) (4,033)
Inventories (1,217) (594)
Prepaid Expenses (32) (67)
Accounts Payable and Accrued Expenses 771 3,083
-------- --------
Net Cash Provided by Operating Activities 2,544 4,485
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (7,397) (3,065)
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 (258) --
Investment in Unconsolidated Joint Ventures and
Affiliates 333 394
-------- --------
Net Cash Provided by (Used in) Investing
Activities (7,322) (3,906)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 284 1,500
Repayments of Debt Principal (265) (1,500)
Proceeds from Sale of Capital Stock 630 306
-------- --------
Net Cash Provided by Financing Activities 649 306
Effect of Exchange Rate Changes on Cash (399) 131
-------- --------
Net Increase in Cash and Cash Equivalents (4,528) 1,016
Cash and Cash Equivalents at Beginning of Year 18,791 18,675
-------- --------
Cash and Cash Equivalents at End of Quarter $ 14,263 $ 19,691
======== ========
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 28, 1997.
B. Net Assets Held for Sale consist of land and a building in
Chandler, Arizona, currently being leased to the purchaser of the
Company's Flexible Interconnection Business in 1993.
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 under the new arrangement to facilitate the Rogers
Induflex acquisition in Belgium in September 1997.
D. Interest paid during the first three months of 1998 and 1997 was
$231,000 and $92,000, respectively.
E. Income taxes paid (refunded) were $79,634 and $(36,000) in the
first three months of 1998 and 1997, respectively.
F. As of the beginning of 1998, the Company adopted Financial
Accounting Standard Board Statement No. 130 (FAS No. 130),
"Reporting Comprehensive Income". FAS No. 130 establishes new
rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact
on the Company's net income or shareholders' equity. FAS No. 130
requires unrealized gains or losses on the Company's available-for-
sale securities and foreign currency translation adjustments, which
prior to adoption were reported separately in shareholders' equity,
to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of
Statement 130.
During the first quarter of 1998 and 1997, total comprehensive
income amounted to $3.5 million and $3.3 million, respectively.
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<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
G. In 1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS No. 128), "Earnings per Share." FAS No. 128 replaced
the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings
per share, basic earnings per share excludes any dilutive effects
of options, warrants and convertible securities. Diluted earnings
per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods
presented have been restated to conform to the FAS No. 128
requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
(Dollars in Thousands, Except Per Share Amounts) April 5, March 30,
1998 1997
---------------------
Numerator:
Net income $ 4,459 $ 4,040
Denominator:
Denominator for basic earnings per share -
weighted-average shares 7,586 7,422
Effect of stock options 374 318
---------------------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 7,960 7,740
=====================
Basic earnings per share $ .59 $ .54
=====================
Diluted earnings per share $ .56 $ .52
=====================
H. The Company's fiscal year begins on the Monday nearest January 1
and ends on the Sunday nearest December 31. The fiscal year ending
January 3, 1999 is a 53 week year and the quarter ending April 5, 1998
is a 14 week quarter.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales of $58 million in the first quarter of 1998 were the highest
for any quarter in the Company's history, and were up 32% over the
comparable period last year. Combined Sales, which include one-half
of the sales from Rogers two 50% owned joint ventures, grew 27% to $66
million for the quarter. Over 40% of the sales increase for the
quarter was attributable to sales by Induflex, the European flexible
laminates business acquired at the end of the third quarter last year
and sales of a customized FLEX-I-MID(R) material to Hutchinson Technology
Incorporated (HTI).
Sales of Polymer Materials for the first three months increased 17%
from the comparable 1997 period. Continued investments in people and
capacity have resulted in improved service to customers, better
operating metrics, and higher sales. A new application for NITROPHYL(R)
floats for fuel level sensing in propane tanks grew more rapidly than
planned contributing to substantial sales growth at the Elastomer
Components Unit. Sales of domestically manufactured PORON(R) urethane
materials continued their upward climb. The completed expansion of
the Woodstock, Connecticut, warehouse and plant has enabled the Poron
Materials Unit to achieve improvements in customer service, while the
addition of a third PORON production line is proceeding on schedule.
Sales and operating performance of the moldable phenolic composites
business are both improving and benefiting from the major capital
investment made last year to expand capacity.
Sales of Electronic Materials for the first quarter increased 51% over
the same period in 1997. About 60% of this increase is attributed to
the aforementioned sales by Induflex and sales of FLEX-I-MID materials
to HTI. Additionally, sales continue to improve at the Microwave
Materials Division as it successfully targets commercial high
frequency applications in wireless communications. The introduction
of Rogers Express service, a next day shipping policy for some of our
standard products, has been well received. The Division has also
improved its production yields and is doing a better job of pleasing
customers with on-time delivery. The current major expansion project
is on track. The Circuit Materials Division experienced a softer
computer market in the first quarter, slowing sales of traditional
flexible circuit materials.
Europe continues to be a bright spot for sales growth, showing a 37%
increase over the first quarter of last year, even when sales from the
recently acquired Induflex business are not included. Furthermore,
the strength of the U.S. Dollar dampened our reported European sales.
Stated in local currency, Rogers European sales growth, excluding
Induflex sales, was actually 57%. All of Rogers core products are now
stocked in Europe, and Rogers is adding a microwave materials
production facility and expanding its power distribution bus bar
production capability in Belgium.
Profits before and after-tax and earnings per share for the first
three months of 1998 were also the highest for any quarter in Rogers
history. Compared with the first quarter
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
last year, before-tax profits of $6.3 million were up 13%, and net
income of $4.5 million, after a slightly higher tax rate, increased
10%. Diluted earnings per share for the quarter were $.56, up from
$.52 in the first three months of 1997.
Manufacturing profit as a percentage of sales in the first three
months decreased from 29% in 1997 to 28% in 1998. This was primarily
attributable to the lower margin on the sales of customized material
to HTI. This material is produced for Rogers by Mitsui Chemical,
Incorporated in Japan and has a lower margin than material that Rogers
manufactures.
Selling and administrative expenses for the first three months of 1998
increased in total dollars but as a percentage of sales were
approximately the same as the comparable period in the previous year.
The increase in dollars reflects steps taken to develop the internal
organization and information systems to support the Company's drive to
become the first choice of customers worldwide.
Research and Development expense was approximately the same in the
first three months of 1998 and 1997. Major development activities in
Electronic Materials included process and product improvements to the
RO3000(TM) and RO4000(R) high frequency circuit board materials, which are
designed for use in high volume, low cost commercial wireless
communication applications. In flexible circuit materials,
development efforts focused on improved adhesives and improved
processing in our plant and at our customers' facility. Polymer
Materials activity continue to include the commercialization of a slow
rebound PORON urethane material for the foot comfort market, as well
as improvements to a variety of other PORON materials for industrial
and printing applications. New ENDUR(R) component formulations are being
developed to provide improved friction properties and longevity in
document transport applications. Finally, higher strength phenolic
composites were developed for demanding applications in automotive
powertrains and electric motors.
The Company's core technical capabilities in polymers, fillers and
adhesion continued to improve with these specialized technologies now
applied to immediate as well as longer term development tasks.
Net interest income for 1998 increased from 1997 due mainly to a tax
interest refund received from the Internal Revenue Service.
As of September 1997, the Company can borrow up to $15.0 million or
the equivalent in Belgian Francs and/or Japanese Yen under an
unsecured multi-currency revolving credit agreement with Fleet
National Bank. Amounts borrowed under this agreement are to be repaid
in full by September 19, 2002. The Company has borrowed 390 million
Belgian Francs under this agreement as of April 5, 1998.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Other income less other charges decreased by more than $0.5 million
when comparing 1998 first quarter with the comparable 1997 period.
This change is attributable to lower gains on sale of assets and to a
decline in joint venture and royalty income. Rogers INOAC
Corporation, our joint venture with INOAC Corporation, lost a major
customer in the disk drive industry and is working to replace this
business.
Net cash provided by operating activities in the first three months of
1998 totaled $2.5 million compared with $4.5 million in the comparable
1997 period. This decrease is more than accounted for by the change
in level of Accounts Payable.
Investments in capital equipment topped $7 million for the first
quarter of 1998, a steep climb from the $3 million invested in the
first three months of 1997. More than half of this spending is
related to expansion projects in our Microwave Materials Division and
our Poron Materials Unit. Management expects that spending for 1998,
primarily for capacity expansions, new process equipment, and new
information systems capability will total $30 million, nearly double
the amount spent in 1997. It is anticipated that this spending will
be financed with internally generated funds.
Management believes that in the near term internally generated funds
and its credit facility with Fleet National Bank will be sufficient to
meet the needs of the business. The Company continually reviews and
assesses its lending relationships.
The Company has completed an assessment and has modified or replaced
portions of its internally developed software so that its computer
systems will function properly with respect to dates in the year 2000
and thereafter. The Company also uses software purchased from
vendors. Each vendor was contacted and all software packages are year
2000 compliant. The only costs that will be incurred in the future
will be for rigorous testing of the software and these costs are
expected to be insignificant.
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, 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
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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
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 based on updated
estimates provided an additional $700,000 in 1997 for costs related to
this matter. During 1995, $300,000 was charged against this provision
and $200,000 was charged in both 1996 and 1997. Management believes,
based on facts currently available, that the implementation of the
aforementioned remediation will not have a material additional adverse
impact on earnings.
In this same matter, the United States Environmental Protection Agency
(the "EPA") originally sought an administrative penalty of $227,000,
which was later changed to $300,000. The EPA has alleged that the
Company improperly disposed of PCBs. An administrative law judge
found the Company liable for this alleged disposal, but a penalty
hearing has not yet been held. The Company disputes the allegations
and intends to contest the assessment of any penalty.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
(27) Financial Data Schedule
(b)There were no reports on Form 8-K filed for the three
months ended April 5, 1998.
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/DALE S. SHEPHERD
Dale S. Shepherd
Authorized Officer
Vice President, Finance
Chief Financial Officer
Dated: May 19, 1998
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> APR-05-1998
<CASH> 14263
<SECURITIES> 3022
<RECEIVABLES> 32973
<ALLOWANCES> 148
<INVENTORY> 22650
<CURRENT-ASSETS> 80468
<PP&E> 123089
<DEPRECIATION> 65809
<TOTAL-ASSETS> 164081
<CURRENT-LIABILITIES> 35277
<BONDS> 0
0
0
<COMMON> 7599
<OTHER-SE> 90925
<TOTAL-LIABILITY-AND-EQUITY> 164081
<SALES> 58313
<TOTAL-REVENUES> 58313
<CGS> 42233
<TOTAL-COSTS> 52116
<OTHER-EXPENSES> 148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (231)
<INCOME-PRETAX> 6280
<INCOME-TAX> 1821
<INCOME-CONTINUING> 4459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4459
<EPS-PRIMARY> .59<F1>
<EPS-DILUTED> .56
<FN>
<F1>This is basic earnings per share.
</FN>
</TABLE>
