Total pages included - 16
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 October 3, 1999
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 31, 1999:
Capital Stock, $1 Par Value-7,528,885 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
October 3, 1999
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Nine Months Ended
October 3, 1999 and October 4, 1998 3
Consolidated Balance Sheets--
October 3, 1999 and January 3, 1999 4 - 5
Consolidated Statements of Cash Flows--
Nine Months Ended October 3, 1999 and
October 4,1999 6
Supplementary Notes 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 15
PART II - OTHER INFORMATION
Item 6. Reports on Form 8-K 16
SIGNATURES 16
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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: Nine Months Ended:
-------------------- --------------------
October 3, October 4, October 3, October 4,
1999 1998 1999 1998
-------------------- --------------------
Net Sales $ 61,076 $ 51,319 $ 188,781 $ 163,021
Cost of Sales 42,711 38,409 135,657 120,884
Selling and Administrative
Expenses 9,657 6,432 27,109 21,238
Research and Development
Expenses 2,529 2,933 7,672 8,065
-------------------- --------------------
Total Costs and Expenses 54,897 47,774 170,438 150,187
-------------------- --------------------
Operating Income 6,179 3,545 18,343 12,834
Other Income less Other
Charges 138 19 445 339
Interest Income, Net 83 230 165 592
-------------------- --------------------
Income Before Income Taxes 6,400 3,794 18,953 13,765
Income Taxes:
Federal and Foreign 1,695 981 5,170 3,632
State 97 120 137 360
-------------------- --------------------
Net Income $ 4,608 $ 2,693 $ 13,646 $ 9,773
==================== ====================
Net Income Per Share (Note F):
Basic $ 0.60 $ 0.36 $ 1.80 $ 1.29
==================== ====================
Diluted $ 0.58 $ 0.34 $ 1.73 $ 1.23
==================== ====================
Shares Used in Computing (Note F):
Basic 7,635,000 7,593,000 7,600,000 7,591,000
==================== ====================
Diluted 7,952,000 7,837,000 7,873,000 7,914,000
==================== ====================
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)
October 3, 1999 January 3, 1999
Current Assets:
Cash and Cash Equivalents $ 18,167 $ 9,593
Marketable Securities -- 256
Accounts Receivable, Net 36,561 32,590
Inventories:
Raw Materials 8,934 10,392
In-Process and Finished 11,757 12,365
Total Inventories 20,691 22,757
Current Deferred Income Taxes 3,444 3,481
Other Current Assets 584 487
-------- --------
Total Current Assets 79,447 69,164
-------- --------
Property, Plant and Equipment,
Net of Accumulated Depreciation
of $76,672 and $69,051 78,591 74,811
Investment in Unconsolidated Joint
Venture 5,145 5,467
Pension Asset 4,606 4,606
Goodwill and Other Intangibles, Net 14,629 14,935
Other Assets 7,182 7,191
-------- --------
Total Assets $189,600 $176,174
======== ========
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)
October 3, 1999 January 3, 1999
Current Liabilities:
Accounts Payable $ 14,330 $ 17,766
Current Maturities of Long-Term
Debt 600 600
Accrued Employee Benefits and
Compensation 10,321 6,577
Accrued Income Taxes Payable 5,225 1,059
Taxes, Other than Federal and
Foreign Income 1,816 1,038
Other Accrued Liabilities 6,183 5,265
-------- --------
Total Current Liabilities 38,475 32,305
-------- --------
Long-Term Debt, less Current
Maturities 12,172 13,687
Noncurrent Deferred Income Taxes 5,775 5,938
Noncurrent Pension Liability 3,703 3,703
Noncurrent Retiree Health Care
and Life Insurance Benefits 6,268 6,268
Other Long-Term Liabilities 3,937 4,042
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000;
Issued Shares 7,672,156 and
7,630,466 7,672 7,630
Additional Paid-In Capital 33,677 33,323
Treasury Stock (162,900 and
12,800 shares) (5,355) (423)
Accumulated Other Comprehensive
Income, Net of Tax 1,278 1,348
Retained Earnings 81,998 68,353
-------- --------
Total Shareholders' Equity 119,270 110,231
-------- --------
Total Liabilities and
Shareholders' Equity $189,600 $176,174
======== ========
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)
Nine Months Ended:
October 3, October 4,
1999 1998
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $ 13,646 $ 9,773
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 8,784 6,983
Expense (Benefit) for Deferred Income Taxes (331) --
Equity in Undistributed (Income) Loss of
Unconsolidated Joint Ventures, Net (819) (118)
Noncurrent Pension and Postretirement
Benefits 125 1,034
Other, Net (164) 156
Changes in Operating Assets and Liabilities
Excluding Effects of Disposition of Assets:
Accounts Receivable (2,704) (3,269)
Inventories 1,677 2,659
Prepaid Expenses (124) (107)
Accounts Payable and Accrued Expenses 6,976 292
--------- ---------
Net Cash Provided by Operating
Activities 27,066 17,403
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital Expenditures (9,971) (25,410)
Acquisition of Business (4,302) (2,250)
Proceeds from Sale of Property, Plant & Equipment -- (97)
Proceeds from Sale of Marketable Securities 256 1,395
Investment in Unconsolidated Joint Ventures
and Affiliates 737 333
--------- ---------
Net Cash Used in Investing
Activities (13,280) (26,029)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from Short and Long-Term Borrowings (16) 290
Repayments of Debt Principal (759) (603)
Acquisition of Treasury Stock (4,932) (423)
Proceeds from Sale of Capital Stock 395 592
--------- ---------
Net Cash Used in Financing
Activities (5,312) (144)
Effect of Exchange Rate Changes on Cash 101 (604)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 8,575 (9,374)
Cash and Cash Equivalents at Beginning of Year 9,592 18,791
--------- ---------
Cash and Cash Equivalents at End of Quarter $ 18,167 $ 9,417
========= =========
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 January 3, 1999.
B. 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 this amended arrangement, the Company can borrow up to
$20.0 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, 2003. The Company borrowed 390,207,039 Belgian Francs
under the new arrangement to facilitate the Rogers Induflex
acquisition in Belgium in September 1997.
C. Interest paid during the first nine months of 1999 and 1998 was
$895,000 and $794,000, respectively.
D. Income taxes paid were $804,000 and $2,230,000 in the first nine
months of 1999 and 1998, respectively.
E. The components of comprehensive income, net of related tax, are as
follows:
Three Months Ended: Nine Months Ended:
---------------------- ----------------------
(Dollars In Thousands) October 3, October 4, October 3, October 4,
1999 1998 1999 1998
---------------------- ----------------------
Net Income $ 4,608 $ 2,693 $ 13,646 $ 9,773
Foreign currency translation
Adjustments 1,362 842 (72) 24
Unrealized gains on securities -- 13 2 5
---------------------- ----------------------
Comprehensive income $ 5,970 $ 3,548 $ 13,576 $ 9,802
====================== ======================
Accumulated balances related to each component of Other Comprehensive
Income (Loss) are as follows:
October 3, 1999 January 3, 1999
--------------- ---------------
Foreign currency translation
adjustments $ 1,200 $ 1,272
Unrealized loss on marketable
securities -- (2)
Change in minimum pension
liability 78 78
------- -------
Accumulated balance $ 1,278 $ 1,348
======= =======
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<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
F. The following table sets forth the computation of basic and diluted
earnings per share in conformity with Statement of Financial Accounting
Standards No. 128, "Earnings per Share":
Three Months Ended: Nine Months Ended:
--------------------- ----------------------
(In Thousands, Except Per Share October 3, October 4, October 3, October 4,
Amounts) 1999 1998 1999 1998
--------------------- ----------------------
Numerator:
Net income $ 4,608 $ 2,693 $ 13,646 $ 9,773
Denominator:
Denominator for basic earnings
per share - Weighted-average
shares 7,635 7,593 7,600 7,591
Effect of stock options 317 244 273 323
Denominator for diluted earnings
per share - adjusted
Weighted-average shares and
assumed conversions 7,952 7,837 7,873 7,914
Basic earnings per share $ 0.60 $ 0.36 $ 1.80 $ 1.29
Diluted earnings per share $ 0.58 $ 0.34 $ 1.73 $ 1.23
G. 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 2, 2000 is a 52 week year and the nine-month period ending
October 3, 1999 included 39 weeks. The fiscal year ended January 3,
1999 was a 53 week year and the nine-month period ended October 4,
1998 included 40 weeks.
H. The Company adopted Statement of Financial Accounting Standards (FAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" in 1998 which changes the way the Company reports
information about its operating segments. The quarterly information
required by FAS No. 131 is presented below.
Polymer Electronic
(Dollars in Millions) Materials Materials Total
--------- ---------- -------
Three months ended October 3, 1999
Net Sales $31.2 $29.9 $ 61.1
Operating Income 3.7 2.5 6.2
Three months ended October 4, 1998
Net Sales $24.6 $26.7 $ 51.3
Operating Income 1.9 1.6 3.5
Nine months ended October 3, 1999
Net Sales $96.1 $92.7 $188.8
Operating Income 11.5 6.8 18.3
Nine months ended October 4, 1998
Net Sales $80.8 $82.2 $163.0
Operating Income 6.9 5.9 12.8
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<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
Inter-segment sales, which are generally priced with reference to
costs or prevailing market prices, are not material in relation to
consolidated net sales and have been eliminated from the sales data in
the previous tables.
I. 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 five 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 several of these matters. Where it
has been possible to make a reasonable estimate of the Company's
liability, a reserve 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
Woodstock, Connecticut facility. The Company has developed a
remediation plan which has been approved by the CT DEP, and it is
expected that removal of soil contamination will be completed in the
first half of 2000. On the basis of estimates prepared by
environmental engineers and consultants, the Company recorded a
reserve of approximately $900,000 in 1994, and based on updated
estimates provided an additional $700,000 in 1997 and $600,000 in 1998
for costs related to this matter. During 1995, $300,000 was charged
against this reserve and $200,000 per year was charged in 1996, 1997
and 1998. 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
(EPA) has alleged that the Company improperly disposed of PCBs. An
administrative law judge found the Company liable for this alleged
disposal and assessed a penalty of approximately $300,000. The
Company has reflected this fine in expense in 1998 but disputes the
EPA allegations and has appealed the administrative law judge's
findings and penalty assessment.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales were $61.1 million in the third quarter and $188.8 million for
the first nine months of 1999, up 19% and 16%, respectively, over the
comparable periods in 1998. Combined Sales, which include one-half of the
sales from Rogers two 50% owned joint ventures, were $70.9 million for the
quarter and $214.9 million for the nine month period, up 21% and 16%,
respectively, over the same periods in 1998.
Sales of Polymer Materials in the third quarter were 27% higher than the
third quarter of 1998. Sales for the first nine months of 1999 were 19%
above the same period of 1998. A majority of the third quarter and nine
months year-to-year volume increases are attributable to acquisitions.
Since the beginning of 1997, the Company has made three domestic
acquisitions, all of which are in the Polymer Materials segment. The
purchases of the Imation dampening sleeve business at the end of September,
1998, and of most of the engineered molding compounds business of Cytec
Fiberite in January, 1999, have resulted in meaningful contributions to the
Company's performance in 1999. The integration and improvement of the Bisco
silicone foam business acquired at the beginning of 1997 has also reached
this stage, though it took longer than initially anticipated. In addition,
Poron urethane foam materials achieved record third quarter and first nine
month sales, led by strong sales to wireless communications markets.
Sales of Electronic Materials for the third quarter and first nine months
increased 12% and 13%, respectively, from the comparable 1998 periods. High
frequency circuit material sales for wireless communications applications
were at record levels for the quarter and the first nine months of the year.
Sales to the consumer electronics market were particularly strong reflecting
anticipated demand during the upcoming holiday season. Manufacturing
capacity in both Ghent, Belgium and Chandler, Arizona was used to satisfy
this demand and for the fourth year in a row, a capacity expansion is
planned for the year 2000 at the Chandler, Arizona facility. The industry
continues to gain understanding of the superior performance of the Company's
RO3000(TM) and RO4000(R) high frequency circuit materials, helping drive
production to new highs.
Sales of R/flex(R) materials that the Company manufactures continue to be
at disappointing levels reflecting the softness in demand still being
experienced by its major customer for such flexible materials. Third
quarter sales of FLEX-I-MID(R) adhesiveless laminate materials to
Hutchinson Technology Incorporated (HTI) were substantially above last
year's third quarter levels, but lower than 1999 second quarter
performance. The decline reflects greater utilization by the customer of
its inventories.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Profits before and after tax, and earnings per share for the third quarter
and the first nine months of 1999 were higher than any comparable periods
in the Company's history. Net income of $4.6 million for the third quarter
and $13.6 million for the first nine months were up 70% and 39%
respectively from the same periods in 1998. The increase in profits was
primarily attributable to higher, and in many cases, record sales in almost
all of the Company's businesses, coupled with improved operations,
reflecting better utilization of manufacturing facilities. Also, 1998
numbers include the results of disappointing second and third quarters that
were adversely impacted by depressed conditions in Southeast Asia and in
the computer disk drive industry.
Earnings per share (diluted) for the third quarter this year were $0.58, up
from $0.34 in the same period last year. For the first nine months of
1999, earnings per share (diluted) were $1.73 compared to $1.23 in the
initial nine-month period a year ago.
Manufacturing profit as a percentage of sales in the first nine months of
1999 and 1998 was 28% and 26%, respectively. This percentage continues to
be held down by the lower margin on the sales of FLEX-I-MID(R) materials to
HTI. Such materials are produced for the Company by Mitsui Chemicals Inc.
in Japan and carry a lower margin than material that the Company
manufactures. Rogers and Mitsui continue to be enthusiastic about this
kind of specialty adhesiveless laminate and in early October signed an
agreement to form a 50/50 joint venture to sell and eventually manufacture
an all-polyimide flexible circuit board laminate. The new company, called
Polyimide Laminate Systems, will be located in a plant to be constructed in
Chandler, Arizona, thereby providing a second manufacturing facility to
meet the growing needs for the product supplied to HTI.
Selling and administrative expenses for the first nine months of 1999
increased in total dollars and as a percentage of sales. The increase
primarily reflects the strengthening of Sales and Marketing capabilities at
both the Corporate and Divisional levels, and the continued development of
information systems. It also includes higher payroll costs related to
bonus accruals and terminations.
Research and Development expense was $7.7 million in the first nine months
of 1999 compared to $8.1 million in the same period in 1998. Major
development activities in circuit 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. These activities included the
development of a bondply addition to the RO4000 family that will allow
multi-layer circuit boards to be made using RO4000 laminates, as well as
the development of materials with improved thermal properties. Flexible
circuit materials development efforts focused on the introduction of a new
epoxy based adhesive system, R/flex CRYSTAL(TM), on manufacturing
improvements designed to significantly improve the dimensional stability of
R/flex laminates, and on development of new flexible circuit materials.
PORON materials development activities included formulations for
industrial,
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
footwear, and healthcare applications; in addition, new thinner adhesive-
backed R/bak tapes are being developed for the flexographic printing
market. Molding materials development continued to emphasize tougher, more
dimensionally stable materials for small electrical motor commutators and
integration of the Cytec acquisition technology into the Company.
Net interest income for 1999 decreased significantly from 1998 due mainly
to the lower cash balances over the first nine months of 1999. The amount
of interest expense that has been capitalized is down in 1999 because of
the lower amount of long-term capital spending projects. The 1998 balance
also included a refund of interest received from the Internal Revenue
Service.
Under present arrangements the Company may borrow up to $20.0 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, 2003. The Company has borrowed 390 million Belgian Francs under this
agreement as of October 3, 1999.
Other income less other charges was $0.4 million for the first nine months
of 1999 and $0.3 million for the same period in 1998.
Durel Corporation, the joint venture with 3M in electroluminescent (EL)
lamps, had record third quarter and nine month sales. Such results are
primarily due to growing demand for the joint venture's products in
cellular telephone applications. Installation of additional manufacturing
capacity has begun in order to continue to meet this growing demand. Durel
achieved significant profits in the third quarter, but fourth quarter
earnings will be hurt by increased litigation costs associated with the
patent infringement lawsuit brought by Durel. The trial is still expected
to start in January. The performance of Rogers Inoac Corporation (RIC),
the joint venture with Inoac Corporation, continues to improve. RIC's
business had been hurt by the Japanese economy and the loss last year of a
major customer.
Net cash provided by operating activities in the first nine months of 1999
totaled $27.1 million compared with $17.4 million in the comparable 1998
period. This difference was attributable to several factors, among which
were higher net income and increased depreciation expense in 1999, as well
as a change in the level of Accounts Payable and Accrued Expenses which is
primarily related to higher income taxes payable and increased bonus
accruals.
In 1998 investments in capital equipment reached $25.4 million in the first
nine months and finished at $29 million for the year. In 1999 capital
expenditures have been reduced to more traditional levels and the first
nine month period totaled $10 million. Management anticipates that capital
spending for 1999, primarily for new process equipment and new information
systems capability will total about $15 million. It is anticipated that
this spending will be financed with internally generated funds.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
On August 19th, the Company's Board of Directors approved a stock
repurchase program for up to $13 million of the Company's outstanding
shares. Since that time, approximately 345,000 shares have been
repurchased. The full benefit of these repurchases on earnings per share
calculations will first be seen in 2000. The Company's strong financial
performance has created an excellent balance sheet that enables the Company
to fund internal growth and its acquisition strategy as well as to
repurchase stock.
Management expects strong operating cash flow for 1999 and 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 its existing
business. The Company continually reviews and assesses its lending
relationships.
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Such software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in systems failures or miscalculations leading to
disruptions in a company's activities and operations. If a company, its
significant customers, or suppliers fail to make necessary modifications
and conversions on a timely basis, the year 2000 issue could have a
material adverse effect on a company's operations.
The Company completed a review of its systems and operations, including
systems currently being implemented, to identify computer hardware,
software, and process control systems that do not properly recognize dates
after December 31, 1999, including those linked to third party systems.
The Company is now substantially complete with the process of
reprogramming or replacing hardware, software, and process control systems
as necessary to ensure compliance with year 2000 requirements. The Company
is confident that its own internal systems are year 2000 compliant or
planned upgrades will be in place before the end of 1999. The Company
also initiated communications, primarily in the form of questionnaires,
with third parties whose computer systems' functionality could directly
impact the operations of the Company.
The costs of the Company's year 2000 compliance efforts are being funded
with cash flows from operations and are being expensed as incurred. In
total these costs are not expected to be substantially different from the
normal, recurring costs that are incurred for systems development and
implementation.
Although the Company is not aware of any material operational issues or
costs associated with preparing its internal systems for the year 2000,
there can be no assurance that the Company will not experience serious
unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in its internal
operating systems which are composed predominantly of third party software
and hardware technology.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Non-compliance by any of the Company's major distributors, suppliers,
customers, vendors, or financial organizations could result in business
disruptions that could have a material adverse effect on the Company's
results of operations, liquidity and financial condition. The Company is
developing a contingency plan based on its assessment of significant third
party compliance. The goal of the contingency plan, which is substantially
complete, is to minimize the Company's exposure to work slowdowns or
business disruptions and any adverse effects on the Company's results of
operations.
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 five 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
several of these matters. Where it has been possible to make a reasonable
estimate of the Company's liability, a reserve 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 Woodstock, Connecticut
facility. The Company has developed a remediation plan which has been
approved by the CT DEP, and it is expected that removal of soil
contamination will be completed in the first half of 2000. On the basis of
estimates prepared by environmental engineers and consultants, the Company
recorded a reserve of approximately $900,000 in 1994, and based on updated
estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for
costs related to this matter. During 1995, $300,000 was charged against
this reserve and $200,000 per year was charged in 1996, 1997 and 1998.
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 (EPA)
has alleged that the Company improperly disposed of PCBs. An
administrative law judge found the Company liable for this alleged disposal
and assessed a penalty of approximately $300,000. The Company has
reflected this fine in expense in 1998 but disputes the EPA allegations and
has appealed the administrative law judge's findings and penalty
assessment.
-14-
<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 may be deemed to
be "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 1998 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.
-15-
<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 October 3, 1999.
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/FRANK H. ROLAND
Frank H. Roland
Vice President, Finance
and Chief Financial Officer
Dated: November 15, 1999
-16-
<PAGE>
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