Total pages included - 15
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 July 4, 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 August 1, 1999:
Capital Stock, $1 Par Value-7,617,550 shares
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<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
July 4, 1999
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Six Months Ended
July 4, 1999 and July 5, 1998 3
Consolidated Balance Sheets--
July 4, 1999 and January 3, 1999 4-5
Consolidated Statements of Cash Flows--
Six Months Ended July 4, 1999 and
July 5, 1998 6
Supplementary Notes 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
PART II--OTHER INFORMATION
Item 6. Reports on Form 8-K 15
SIGNATURES 15
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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:
---------------------- ---------------------
July 4, July 5, July 4, July 5,
1999 1998 1999 1998
---------------------- ---------------------
Net Sales $ 62,801 $ 53,389 $ 127,705 $ 111,702
Cost of Sales 46,376 40,242 92,946 82,475
Selling and Administrative
Expenses 8,599 7,534 17,452 14,806
Research and Development
Expenses 2,519 2,521 5,143 5,132
--------- --------- --------- ---------
Total Costs and Expenses 57,494 50,297 115,541 102,413
--------- --------- --------- ---------
Operating Income 5,307 3,092 12,164 9,289
Other Income less Other
Charges 699 468 307 320
Interest Income, Net 24 131 82 362
--------- --------- --------- ---------
Income Before Income Taxes 6,030 3,691 12,553 9,971
Income Taxes:
Federal and Foreign 1,649 950 3,475 2,651
State 40 120 40 240
--------- --------- --------- ---------
Net Income $ 4,341 $ 2,621 $ 9,038 $ 7,080
========= ========= ========= =========
Net Income Per Share
(Note G):
Basic $ 0.57 $ 0.35 $ 1.19 $ 0.93
========= ========= ========= =========
Diluted $ 0.55 $ 0.33 $ 1.15 $ 0.89
========= ========= ========= =========
Shares Used in Computing
(Note G):
Basic 7,606,000 7,595,000 7,610,000 7,591,000
========= ========= ========= =========
Diluted 7,880,000 7,947,000 7,861,000 7,953,000
========= ========= ========= =========
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)
July 4, 1999 January 3, 1999
------------ ---------------
Current Assets:
Cash and Cash Equivalents $ 19,460 $ 9,593
Marketable Securities -- 256
Accounts Receivable, Net 34,385 32,590
Inventories:
Raw Materials 8,092 10,392
In-Process and Finished 12,083 12,365
--------- ---------
Total Inventories 20,175 22,757
Current Deferred Income Taxes 3,444 3,481
Assets Held for Sale, Net of
Valuation Reserves of $492
in each period (Note B) 5,158 5,158
Other Current Assets 683 487
--------- ---------
Total Current Assets 83,305 74,322
--------- ---------
Property, Plant and Equipment,
Net of Accumulated
Depreciation of $73,553 and
$69,051 78,058 74,811
Investment in Unconsolidated Joint
Venture 4,977 5,467
Pension Asset 4,606 4,606
Goodwill and Other Intangibles, Net 14,831 14,935
Other Assets 2,138 2,033
--------- ---------
Total Assets $ 187,915 $ 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)
July 4, 1999 January 3, 1999
------------ ---------------
Current Liabilities:
Accounts Payable $ 14,866 $ 17,766
Current Maturities of Long-
Term Debt 600 600
Accrued Employee Benefits and
Compensation 8,318 6,577
Accrued Income Taxes Payable 4,508 1,059
Taxes, Other than Federal and
Foreign Income 2,013 1,038
Other Accrued Liabilities 7,151 5,265
--------- ---------
Total Current Liabilities 37,456 32,305
--------- ---------
Long-Term Debt, less Current
Maturities 13,687 13,687
Noncurrent Deferred Income Taxes 5,690 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 3,767 4,042
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000;
Issued Shares 7,648,596 and
7,630,466 7,649 7,630
Additional Paid-In Capital 33,477 33,323
Treasury Stock (39,400 and
12,800 shares) (1,088) (423)
Accumulated Other Comprehensive
Income, Net of Tax (84) 1,348
Retained Earnings 77,390 68,353
--------- ---------
Total Shareholders' Equity 117,344 110,231
--------- ---------
Total Liabilities and
Shareholders' Equity $ 187,915 $ 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)
Six Months Ended:
July 4, July 5,
1999 1998
---------- ----------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $ 9,038 $ 7,080
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization 5,995 4,536
Benefit for Deferred Income Taxes (146) --
Equity in Undistributed (Income) Loss
of Unconsolidated Joint Ventures, Net (180) 62
Loss on Disposition of Assets 40 51
Noncurrent Pension and Postretirement
Benefits 123 1,033
Other, Net (577) 391
Changes in Operating Assets and
Liabilities:
Accounts Receivable (1,166) (3,070)
Inventories 1,976 (759)
Prepaid Expenses (242) 79
Accounts Payable and Accrued Expenses 5,449 (1,048)
--------- ---------
Net Cash Provided by Operating
Activities 20,310 8,355
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital Expenditures (7,004) (16,907)
Acquisition of Business (4,302) --
Proceeds from Sale of Property, Plant &
Equipment -- (96)
Proceeds from Sale of Marketable Securities 256 (252)
Investment in Unconsolidated Joint Ventures
and Affiliates 737 333
--------- ---------
Net Cash Provided by (Used in)
Investing Activities (10,313) (16,922)
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 399 286
Repayments of Debt Principal -- (269)
Acquisition of Treasury Stock (695) (423)
Proceeds from Sale of Capital Stock 202 489
--------- ---------
Net Cash Provided by (Used in)
Financing Activities (94) 83
Effect of Exchange Rate Changes on Cash (35) (226)
--------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 9,868 (8,710)
Cash and Cash Equivalents at Beginning
of Year 9,592 18,791
--------- ---------
Cash and Cash Equivalents at End of Quarter $ 19,460 $ 10,081
========= =========
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. 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 Interconnections 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 six months of 1999 and 1998 was
$558,000 and $593,000, respectively.
E. Income taxes paid were $202,000 and $2,170,000 in the first six
months of 1999 and 1998, respectively.
F. The components of comprehensive income, net of related tax, are
as follows:
Three Months Ended: Six Months Ended:
------------------ -----------------
(Dollars In Thousands) July 4, July 5, July 4, July 5,
1999 1998 1999 1998
------------------ -----------------
Net income $ 4,341 $ 2,621 $ 9,038 $ 7,080
Foreign currency translation
Adjustments (361) 127 (1,434) (818)
Unrealized gains on securities -- (11) 2 (8)
------------------ -----------------
Comprehensive income $ 3,980 $ 2,737 $ 7,606 $ 6,254
================== =================
G. 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":
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<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
Three Months Six Months
(In Thousands, Except Per Share Ended: Ended:
Amounts) --------------- ---------------
July 4, July 5, July 4, July 5,
1999 1998 1999 1998
---------------- ---------------
Numerator:
Net income $4,341 $2,621 $9,038 $7,080
Denominator:
Denominator for basic earnings
per share -
Weighted-average shares 7,606 7,595 7,610 7,591
Effect of stock options 274 352 251 362
---------------- ---------------
Denominator for diluted earnings per
Share - adjusted weighted-average
Shares and assumed conversions 7,880 7,947 7,861 7,953
---------------- ---------------
Basic earnings per share $ 0.57 $ 0.35 $ 1.19 $ 0.93
================ ===============
Diluted earnings per share $ 0.55 $ 0.33 $ 1.15 $ 0.89
================ ===============
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 2, 2000 is a 52 week year and the six-month period
ending July 4, 1999 is a 26 week half. The fiscal year ended
January 3, 1999 was a 53 week year and the six-month period ended
July 5, 1998 was a 27 week half.
I. 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 July 4, 1999
Net Sales $32.4 $30.4 $ 62.8
Operating Income 3.7 1.6 5.3
Three months ended July 5, 1998
Net Sales $26.4 $27.0 $ 53.4
Operating Income 2.3 0.8 3.1
Six months ended July 4, 1999
Net Sales $64.9 $62.8 $127.7
Operating Income 7.8 4.4 12.2
Six months ended July 4, 1998
Net Sales $56.2 $55.5 $111.7
Operating Income 5.0 4.3 9.3
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.
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<PAGE>
J. 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 1999. 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 $62.8 million in the second quarter and $127.7 million
for the first six months of 1999, up 18% and 14%, respectively, over
the comparable periods in 1998. Combined Sales, which include one-
half of the sales from the Company's two 50% owned joint ventures,
were $71.6 million for the quarter and $144.0 million for the half, up
17% and 13%, respectively, over the same periods in 1998.
Sales of Polymer Materials in the second quarter and first half of
1999 were 23% and 15%, respectively, above the levels in the same
periods of 1998. A majority of the second quarter and first half 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 of 1999 have quickly resulted in meaningful
contributions to the Company's performance. 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, led by strong sales to
wireless communications markets, Poron urethane foam materials
achieved record second quarter and first half sales. As we move into
the second half, increased penetration of foreign markets should
further enhance the results of this business.
Sales of Electronic Materials for the second quarter and first six
months both increased 13% from the comparable 1998 periods. High
frequency circuit materials for wireless communications equipment set
second quarter and first half sales records. The Company
recently completed a new manufacturing facility for these materials in
Ghent, Belgium. This extended capability has been well received by
European customers. The utilization of the capacity added to our
Chandler, Arizona, Microwave Materials Division in 1998 is also
meeting our expectations.
The Company continued to experience a disparity in demand for its two
largest lines of flexible circuit materials for computer markets.
Sales of FLEX-I-MIDr adhesiveless laminate materials to Hutchinson
Technology Incorporated (HTI), the world leader in suspension
assemblies for hard disk drives, are growing rapidly. In contrast,
sales of R/flex materials continue to be low. Previously the Company
had reported that sales to its largest R/flex materials customer had
declined substantially. With the improving situation of this
customer, new business success, and the introduction of new flexible
circuit materials, the Company expects its R/flex product line to
eventually regain its former attractive growth rate.
- 10 -
<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 second
quarter and the first half of 1999 were higher than any comparable
periods in the Company's history. Net income of $4.3 million for the
second quarter and $9.0 million for the second half were up 66% and
28%, respectively from the same periods in 1998. The increase in
profits was primarily attributable to higher sales coupled with
improved operations, reflecting better utilization of new and existing
facilities. Also, 1998 numbers include the results of a disappointing
second quarter that was adversely impacted by softness in the domestic
computer market and by unfavorable conditions in Southeast Asia.
Earnings per share (diluted) for the second quarter this year were
$0.55, up from $0.33 in the same period last year. For the first half
of 1999, earnings per share (diluted) were $1.15 compared to $0.89 in
the initial six-month period a year ago.
Manufacturing profit as a percentage of sales in the first six months
of 1999 and 1998 was 27% and 26%, respectively. This percentage
continues to be held down by the lower margin on the sales of FLEX-I-
MID materials to HTI. These materials are produced for the Company by
Mitsui Chemicals, Inc. in Japan and carry a lower margin than material
that the Company manufactures.
Selling and administrative expense for the first six months of 1999
increased in total dollars, but as a percentage of sales were
approximately the same as the comparable period in the previous year.
The increase in dollars primarily reflects the strengthening of Sales
and Marketing capabilities at both the Corporate and Divisional
levels, and the continued development of information systems. It also
includes higher payroll costs related to bonus accruals and
terminations.
Research and Development expense was approximately the same in the
first six months of 1999 ($ 5,143,000) and 1998 ($5,132,000). Major
development activities in circuit materials included process and
product improvements to the RO3000T and RO4000r 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 CRYSTALT, 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, 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.
- 11 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Net interest income for 1999 decreased significantly from 1998 due
mainly to the lower cash balances over the first six 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 $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 July 4, 1999.
Other income less other charges was $0.3 million for the first six
months of 1999 and for the same period in 1998.
Durel Corporation, the joint venture with 3M in electroluminescent
(EL) lamps, had record second quarter and first half sales. This was
primarily attributable to increased orders from cellular telephone
manufacturers. Additional product capacity is being installed to
satisfy the growing demand by the cellular telephone industry for EL
lighting systems. Durel returned to profitability in the second
quarter, despite continuing high expenses to support the patent
infringement lawsuit brought by Durel to protects its proprietary
technology. The trial, most recently scheduled to begin in June, has
now been postponed until January of 2000 because of the court's
backlog. The performance of Rogers Inoac Corporation (RIC), the joint
venture with Inoac Corporation, has been hurt by the weakness of the
Japanese economy and the loss last year of a major customer in the
disk drive industry. The RIC recovery process is progressing as
planned, as they focus on marketing their unique products to a broader
array of markets.
Net cash provided by operating activities in the first six months of
1999 totaled $20.3 million compared with $8.4 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.
In 1998 investments in capital equipment reached almost $17 million in
the first half and finished at $29 million for the year. In 1999
capital expenditures have been reduced to more traditional levels and
the first half totaled $7 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.
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 exisiting business. The Company continually reviews and
assesses its lending relationships.
- 12 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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.
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.
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 will develop a contingency plan based on its assessment of
significant third party compliance. The goal of the contingency plan
will be 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
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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 1999.
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.
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.
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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 July 4, 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: August 17, 1999
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<PAGE>
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