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 July 2, 2000
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 30, 2000:
Capital Stock, $1 Par Value-14,954,239 shares
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
July 2, 2000
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Six Months Ended
July 2, 2000 and July 4, 1999 3
Consolidated Balance Sheets--
July 2, 2000 and January 2, 2000 4-5
Consolidated Statements of Cash Flows--
Six Months Ended July 2, 2000 and
July 4, 1999 6
Supplementary Notes 7-10
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: Six Months Ended:
--------------------- --------------------
July 2, July 4, July 2, July 4,
2000 1999 2000 1999
-------- -------- -------- --------
Net Sales $ 61,266 $ 62,801 $124,906 $127,705
Cost of Sales 41,194 46,376 83,687 92,946
Selling and Administrative
Expenses 9,709 8,599 19,894 17,452
Research and Development Expenses 3,246 2,519 6,175 5,143
-------- -------- -------- --------
Total Costs and Expenses 54,149 57,494 109,756 115,541
-------- -------- -------- --------
Operating Income 7,117 5,307 15,150 12,164
Other Income less Other Charges 1,846 699 2,058 307
Interest Income, Net 110 24 186 82
-------- -------- -------- --------
Income Before Income Taxes 9,073 6,030 17,394 12,553
Income Taxes:
Federal and Foreign 2,540 1,649 4,870 3,475
State 91 40 174 40
-------- -------- -------- --------
Net Income $ 6,442 $ 4,341 $ 12,350 $ 9,038
======== ======== ======== ========
Net Income Per Share (Note G):
Basic $ 0.43 $ 0.29 $ 0.84 $ 0.60
======== ======== ======== ========
Diluted $ 0.41 $ 0.28 $ 0.78 $ 0.58
======== ======== ======== ========
Shares Used in Computing (Note G):
Basic 14,814,000 15,212,000 14,758,000 15,219,000
========== ========== ========== ==========
Diluted 15,773,000 15,758,000 15,783,000 15,721,000
========== ========== ========== ==========
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 2, 2000 January 2, 2000
------------ ---------------
Current Assets:
Cash and Cash Equivalents $ 10,838 $ 9,955
Accounts Receivable, Net 43,408 33,884
Inventories:
Raw Materials 10,699 10,566
In-Process and Finished 18,609 12,753
--------- ---------
Total Inventories 29,308 23,319
Current Deferred Income Taxes 4,728 4,728
Other Current Assets 914 661
--------- ---------
Total Current Assets 89,196 72,547
--------- ---------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$80,688 and $75,069 87,543 84,652
Investment in Unconsolidated Joint
Ventures 4,954 5,294
Pension Asset 4,223 4,223
Goodwill and Other Intangibles, Net 14,285 14,510
Other Assets 2,027 2,180
--------- ---------
Total Assets $ 202,228 $ 183,406
========= =========
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 2, 2000 January 2, 2000
------------ ---------------
Current Liabilities:
Accounts Payable $ 13,123 $ 14,855
Accrued Employee Benefits and
Compensation 9,852 10,782
Accrued Income Taxes Payable 8,566 4,341
Taxes, Other than Federal and Foreign
Income 1,816 518
Other Accrued Liabilities 9,306 6,245
-------- --------
Total Current Liabilities 42,663 36,741
-------- --------
Long-Term Debt 9,740 9,740
Noncurrent Deferred Income Taxes 6,253 6,362
Noncurrent Pension Liability 4,215 4,215
Noncurrent Retiree Health Care and Life
Insurance Benefits 5,966 5,966
Other Long-Term Liabilities 3,630 3,965
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000; Issued
Shares 15,302,230 and 15,047,552 15,302 15,430
Additional Paid-In Capital 28,660 27,001
Treasury Stock (382,900 shares) (13,436) (13,436)
Accumulated Other Comprehensive
Income, (Loss) (98) 438
Retained Earnings 99,333 86,984
-------- --------
Total Shareholders' Equity 129,761 116,417
-------- --------
Total Liabilities and
Shareholders' Equity $202,228 $183,406
======== ========
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 2, July 4,
2000 1999
------- -------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $12,350 $ 9,038
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 6,517 5,995
Expense (Benefit) for Deferred Income Taxes 13 (146)
Equity in Undistributed (Income) of
Unconsolidated Joint Ventures, Net (1,238) (180)
Loss on Disposition of Assets 325 40
Noncurrent Pension and Postretirement Benefits 43 123
Other, Net (30) (577)
Changes in Operating Assets and Liabilities:
Accounts Receivable (9,156) (1,166)
Inventories (6,231) 1,976
Prepaid Expenses (276) (242)
Accounts Payable and Accrued Expenses 6,254 5,449
-------- --------
Net Cash Provided by Operating
Activities 8,571 20,310
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital Expenditures (9,776) (7,004)
Acquisition of Business -- (4,302)
Proceeds from Sale of Marketable Securities -- 256
Investment in Unconsolidated Joint Ventures and
Affiliates 882 737
-------- --------
Net Cash (Used in) Investing Activities (8,894) (10,313)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 377 399
Repayments of Debt Principal (306) --
Acquisition of Treasury Stock -- (695)
Proceeds from Sale of Capital Stock 1,045 202
-------- -------
Net Cash Provided by (Used in)
Financing Activities 1,116 (94)
Effect of Exchange Rate Changes on Cash 90 (35)
-------- -------
Net Increase in Cash and Cash Equivalents 883 9,868
Cash and Cash Equivalents at Beginning of Year 9,955 9,592
-------- -------
Cash and Cash Equivalents at End of Quarter $10,838 $19,460
======== =======
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 2, 2000.
B. Under the Company's unsecured multi-currency revolving credit
agreement with Fleet National Bank, the Company can borrow up to $20.0
million, or the equivalent in Belgian Francs and/or Japanese Yen, and
eventually the Euro. Amounts borrowed under this agreement are to be
repaid in full by September 19, 2003. The Company borrowed
390,207,039 Belgian Francs under this arrangement to facilitate the
Rogers Induflex acquisition in Belgium in September 1997.
C. Interest paid during the first six months of 2000 and 1999 was
$442,000 and $558,000, respectively.
D. Income taxes paid were $378,000 and $202,000 in the first six months
of 2000 and 1999, respectively.
E. Rogers 1999 sales to Hutchinson Technology, Inc. by quarter (in
millions) were:
$10.6 in the first quarter; $9.6 in the second quarter; $7.5 in the
third quarter and $3.0 in the fourth quarter.
F. The components of comprehensive income, net of related tax, are as
follows:
Three Months Ended: Six Months Ended:
------------------- ------------------
(Dollars In Thousands) July 2, July 4, July 2 July 4,
2000 1999 2000 1999
-----------------------------------------
Net income $ 6,442 $ 4,341 $12,350 $9,038
Foreign currency translation (47) (361) (536) (1,434)
adjustments
Unrealized gains on securities -- -- -- 2
------------------- -----------------
Comprehensive income $ 6,395 $ 3,980 $11,814 $7,606
=================== =================
Accumulated balances related to each component of Other Comprehensive
Income (Loss) are as follows:
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<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
July 2, 2000 January 2, 2000
------------ ---------------
Foreign currency translation
adjustments $ 53 $ 589
Change in minimum pension liability (151) (151)
------- -------
$ (98) $ 438
======= =======
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":
Three Months Ended: Six Months Ended:
------------------- -----------------
(In Thousands, Except
Per Share Amounts) July 2, July 4, July 2, July 4,
2000 1999 2000 1999
------------------- -----------------
Numerator:
Net income $ 6,442 $4,341 $12,350 $ 9,038
Denominator:
Denominator for basic earnings
per share - 14,814 15,212 14,758 15,219
Weighted-average shares
Effect of stock options 959 546 1,025 502
------------------ -----------------
Denominator for diluted
earnings per Share -
adjusted weighted-average
Shares and assumed
conversions 15,773 15,758 15,783 15,721
================== =================
Basic earnings per share $ 0.43 $ 0.29 $ 0.84 $ 0.60
================== =================
Diluted earnings per share $ 0.41 $ 0.28 $ 0.78 $ 0.58
================== =================
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 July 2, 2000
Net Sales $34.8 $26.5 $61.3
Operating Income 4.0 3.1 7.1
Three months ended July 4, 1999
Net Sales $32.4 $30.4 $62.8
Operating Income 3.7 1.6 5.3
Six months ended July 2, 2000
Net Sales $70.3 $54.6 $124.9
Operating Income 8.2 7.0 15.2
Six months ended July 4, 1999
Net Sales $64.9 $62.8 $127.7
Operating Income 7.8 4.4 12.2
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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 three cases involving
waste disposal sites, all of which are Superfund sites. 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 provision has been established. Insurance proceeds have
only been taken into account when they have been confirmed by or
received from an 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 is actively involved in
the removal of the contaminated soil and expects to complete this in
2000. 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, $600,000 in 1998 and $400,000 in 1999 for
costs related to this matter. During 1995, $300,000 was charged
against this provision and $200,000 per year was charge in 1996, 1997,
and 1998. In 1999, $400,000 was charged and in 2000, through June, an
additional $600,000 has been charged. Management believes, based on
the 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.
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<PAGE>
SUPPLEMENTARY NOTES, 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.
J. To help widen the distribution and enhance the marketability of the
Company's Capital Stock, the Board of Directors, effected a two-for-one
stock split in the form of a 100% stock dividend on May 12, 2000. All
references in the financial statements to number of shares and per
share amounts have been restated to reflect the increased number of
capital shares outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales of $61.3 million in the second quarter and $124.9 million for the
first half of 2000 were down 2%, respectively, from the comparable periods
in 1999. In the second quarter and first half of 1999, Rogers sales
included $9.6 million and $20.2 million of sales of a flexible circuit
board laminate to Hutchinson Technology, Inc. (HTI). In 2000, this
product, which is manufactured by Mitsui Chemicals, Inc. under a Rogers
technology license, is being sold by our new joint venture with Mitsui
Chemicals called Polyimide Laminate Systems (PLS). Since PLS is making
these sales directly, Rogers share of such sales is reported in Combined
Sales rather than in net sales. This change caused second quarter and the
first half of 2000 net sales to be lower than the comparable periods of
1999. Despite this change, commissions and profitability levels for Rogers
on these sales to HTI are expected to remain essentially the same.
Excluding sales to HTI in both the second quarter and first half of 1999
and 2000 would have resulted in increases of 15% and 16%, respectively in
Rogers net sales. On the same basis, Combined Sales which include one-half
of the sales from the Company's 50% owned joint ventures, were $78 million
for the quarter and $155 million for the first half, up 17% and 16%,
respectively, over the same periods in 1999. The Company's favorable 2000
results are primarily attributable to strong sales to the computer and
wireless communication markets. The joint venture's sales to HTI in the
second quarter and first half of 2000 were substantially lower than the
sales made by Rogers to HTI in the comparable periods of 1999. This was
anticipated as HTI has been reducing its inventory of such materials.
Sales of Polymer Materials for the second quarter and first half of the
year increased 7% and 8%, respectively, from the comparable periods of
1999. Contributing to the increase were the continuing strong sales of
silicone and urethane foam materials, primarily to meet demand for wireless
communications and computer applications. Also the first half of 2000
includes sales of the acquired engineered molding compounds business of
Cytec Fiberite for the full period. This business was acquired in late
January of 1999 and the first half of 1999 included results from the date
of acquisition.
Sales of Electronic Materials for the second quarter and first half of 2000
both decreased 13%, respectively, over the comparable periods of 1999. The
decrease in sales is due to the $20.2
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
million of sales to HTI which are now being made directly by Rogers joint
venture, PLS. These sales are now reported in Combined Sales rather than
net sales. Excluding sales to HTI in both
the second quarter and first half of 1999 and 2000, there would have been a
27% and 28% increase in Rogers net sales of Electronic Materials.
Worldwide sales of high frequency circuit materials continue to exceed the
Company's expectations in the second quarter and first half of 2000. Rogers
has become the leading supplier of such materials to the computer and
wireless communications markets. Wireless communication infrastructure,
satellite television receivers and wireless communication antennas are the
current primary uses for these materials.
Profits and earnings per share for the second quarter and the first half of
2000 were the highest of any comparable periods in the Company's history.
Compared with the record second quarter and first half of last year,
earnings rose 48% and 37%, respectively, to $6.4 million and $12.3 million.
Diluted earnings per share for the second quarter this year were $.41, up
from $.28 in the same period last year. For the first half of 2000,
diluted earnings per share were $.78 compared to $.58 in the same six-month
period of 1999. These numbers reflect the two-for-one stock split which
occurred in the second quarter of 2000.
Manufacturing profit as a percentage of sales in the first six months of
2000 and 1999 was 33% and 27%, respectively. This increase continues the
improvement started in 1999 and reflects the attention paid to improving
manufacturing yields over the past several years. New equipment has
produced immediate process improvements with enhanced product flow and
efficiency and increased utilization of equipment has also contributed to
the improvement. This increase also reflects the impact of sales to HTI
now being made directly by PLS. During the first half of 1999, Rogers sold
FLEX-I-MID (R) materials directly to HTI. These materials are produced for
the Company by Mitsui Chemicals, Inc. in Japan and carry a lower margin
than materials that the Company manufactures.
Selling and administrative expenses for the second quarter and first half
of 2000 increased in total dollars and as a percentage of sales from 14% in
the comparable 1999 periods to 16% in 2000. The increase primarily
reflects the continued strengthening of Corporate Sales and Marketing
capabilities along with the continuing development of information systems.
It also includes one time licensing and consulting costs. Rogers Korea,
Inc., a sales and marketing office with warehousing facilities, officially
opened in Seoul, Korea in the second quarter of 2000. This local presence
will allow the Company to more effectively service its growing customer
base where sales increased 117% over last year's second quarter.
Research and Development expenses were 20% higher in the first six months
of 2000, $6.2 million, compared to $5.1 million, for the comparable period
in 1999. Greater R&D emphasis continues to be given to the development of
new product platforms resulting in the creation of product families.
Rogers' program to make Copper-LCP (Liquid Crystal Polymer) film laminates
to be used in flexible circuits where superior electrical and physical
properties are necessary is an example of a new product platform. Steady
progress continued with this program which will remain in the early
development phase during 2000. Major development activities in circuit
materials included improvements to the RO3000 (TM), RO2800 (R) and RO4000 (R)
high frequency
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<PAGE)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
circuit board materials which are designed for use in high volume, low
cost, commercial wireless communication applications. RO4350B (R) material
has been introduced for applications where an improved UL Thermal Index is
required. In constructions of .020 inches or greater, RO4350B has a
thermal index of 125 degrees Celsius or higher. Application of Rogers R&D
capability in fillers has improved processing of fluoropolymer based
laminates for our RO3000 line of products. Manufacturing improvements
designed to significantly improve the dimensional stability and bond of
R/flex laminates continued. PORON materials development activities included
commercialization of a wider range of thin tape materials for the
flexographic printing industry. The first in a series of copper-polyester
film laminates were introduced and found significant use as cellular
telephone antennas.
Corporate R&D emphasis on core capability improvement continued. Greater
resources were applied to adhesion, better understanding of material
dielectric properties and improved flame retardance of several material
families. It is expected that these technical resources will benefit the
development of new products for our circuit materials and high performance
foam product lines.
Net interest income for 2000 increased from 1999 due mainly to the fact
that the Company prepaid a long-term loan in December 1999. This debt
carried a 10.6% interest rate.
Under the Company's unsecured multi-currency revolving credit agreement
with Fleet National Bank, it can borrow up to $20.0 million, or the
equivalent in Belgian Francs and/or Japanese Yen and eventually the Euro.
Amounts borrowed under this agreement must be repaid in full by September
19, 2003. The Company borrowed 390,207,039 Belgian Francs under this
arrangement to facilitate the Rogers Induflex acquisition in Belgium in
September of 1997. The current interest rate on this loan is 4.97%.
Other income less other charges increased by more than $1.7 million when
comparing the first half of 2000 with the comparable 1999 period. Higher
income from joint ventures account for the increase. The increase in joint
venture income is due to the addition of sales income and commissions from
PLS and the strong performance of Durel Corporation, the Company's joint
venture with 3M in electroluminescent lamps, particularly in the second
quarter. Durel Corporation, had record sales, which were 92% higher than
the second quarter and 78% higher than the first half of 1999. These
higher sales, along with lower expenses associated with the Osram Sylvania
litigation, have resulted in a significant increase in Durel's
profitability in the second quarter. Continued penetration of the cellular
telephone handset market is driving this growth and additional capacity
will be brought on line in the third quarter of this year. This follows a
doubling of capacity completed earlier this year. To meet the demand from
this rapidly growing market, Durel has also begun construction of a 75,000
square foot addition to be completed by the first quarter of 2001. In
February of this year, Durel achieved a court victory over Osram Sylvania,
Inc. In that long pending lawsuit, Durel was awarded $49 million of
damages in a jury decision in federal court. Durel had sued Osram Sylvania
for patent infringement. Although Osram Sylvania is appealing the jury's
decision, the February victory moves Durel significantly closer to
successful resolution of this dispute. On April 29, 2000, the
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
court awarded Durel an additional $13 million in interest on the damages of
$49 million awarded earlier.
Profits of Rogers Inoac Corporation, the Company's joint venture with Inoac
Corporation in Japan, improved significantly due to increasing sales of
urethane foams for hand held electronic devices and general overall
economic strength in Southeast Asia.
On June 29, 2000 Rogers signed a joint venture agreement with Chang Chun
Plastics Co., Ltd. (CCP), a $1.1 billion specialty chemical manufacturer.
Combining Rogers leading-edge flexible circuit materials technology with
CCP's outstanding manufacturing capabilities and long established market
position in Taiwan will enable the joint venture to be a leading flexible
circuit materials supplier in Taiwan.
Net cash provided by operating activities in the first six months of 2000
totaled $8.6 million. This compares with $20.3 million in the comparable
1999 period. This difference is attributable to higher accounts receivable
and inventory levels which more than offset increased income, depreciation
and accounts payable levels. Accounts receivable increased primarily due
to sales volume increases and investments in joint ventures. Inventories
have increased to support higher customer demand and in particular at the
Molding Materials Division where we have built inventory in anticipation of
the final move of the Cytec equipment from Winona, Minnesota to Manchester,
Connecticut. The Cytec business and equipment was acquired in late January
1999.
In 2000 investments in capital equipment totaled $9.8 million in the first
half and are expected to approach $25 million for the year. In 1999
capital expenditures in the first half were $7.0 million and they finished
at $13.6 million for the year. This increase in 2000 is directly related
to higher sales of products manufactured by the Company. To satisfy this
growing demand, the Company completed a 50% capacity increase in Arizona
for the RO4000 high frequency circuit materials. The Company has also
begun construction of a building addition in Arizona and is in the process
of acquiring additional acreage in both Arizona and Gent, Belgium.
Management believes that in the near term internally generated funds plus
available lines of credit will be sufficient to meet the regular needs of
the business. The Company continually reviews and assesses it lending
relationships.
The year 2000 issue was the result of computer programs using two digits
rather than four to define the applicable year. The Company completed its
review of systems and operations prior to the end of 1999 and, through July
2, 2000 has not experienced any significant problems related to the year
2000 issue.
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).
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
The Company is currently involved as a PRP in three cases involving waste
disposal sites, all of which are Superfund sites. 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 provision has been established. Insurance
proceeds have only been taken into account when they have been confirmed by
or received from an 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 is actively involved in the removal of the
contaminated soil and expects to complete this in 2000. On the basis o
f 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, $600,000 in 1998 and
$400,000 in 1999 for costs related to this matter. During 1995, $300,000
was charged against this provision and $200,000 per year was charged in 1996,
1997, and 1998. In 1999, $400,000 was charged and in 2000, through June,
an additional $600,000 has been charged. Management believes, based on the
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 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.
On March 16, 2000 Rogers announced that it was filing an application to
list on the New York Stock Exchange (NYSE). On April 18, 2000 Rogers stock
began trading on the NYSE with the same ticker symbol of "ROG".
On March 30, 2000 Rogers announced that its Board of Directors had approved
a two-for-one split of its common stock. The record date for the split was
May 12, 2000 and the distribution date was May 26, 2000. The stock split
was implemented as a 100% stock dividend payable to stockholders. Rogers
now has approximately 15 million shares outstanding.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
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, rapid
technological change, new product introductions, and the like, are
incorporated by reference in the Rogers Corporation 1999 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 2, 2000.
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 10, 2000
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