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 1, 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 October 29, 2000:
Capital Stock, $1 Par Value-15,084,074 shares
1
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ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
October 1, 2000
INDEX
-----
Page No.
--------
PART I--FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Nine Months Ended
October 1, 2000 and October 3, 1999 3
Consolidated Balance Sheets--
October 1, 2000 and January 2, 2000 4-5
Consolidated Statements of Cash Flows--
Nine Months Ended October 1, 2000 and
October 3, 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
----------
2
<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 1, October 3, October 1, October 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Sales $ 62,357 $ 61,076 $ 187,263 $ 188,781
Cost of Sales 41,662 42,711 125,349 135,657
Selling and
Administrative
Expenses 10,026 9,657 29,920 27,109
Research and
Development
Expenses 2,942 2,529 9,117 7,672
---------- ---------- ---------- ----------
Total Costs
and Expenses 54,630 54,897 164,386 170,438
---------- ---------- ---------- ----------
Operating Income 7,727 6,179 22,877 18,343
Other Income less
Other Charges 1,938 138 3,996 445
Interest Income,
Net 104 83 290 165
---------- ---------- ---------- ----------
Income Before
Income Taxes 9,769 6,400 27,163 18,953
Income Taxes:
Federal and
Foreign 2,735 1,695 7,606 5,170
State 98 97 271 137
---------- ---------- ---------- ----------
Net Income $ 6,936 $ 4,608 $ 19,286 $ 13,646
========== ========== ========== ==========
Net Income Per
Share (Note G):
Basic $ 0.46 $ 0.30 $ 1.30 $ 0.90
========== ========== ========== ==========
Diluted $ 0.44 $ 0.29 $ 1.22 $ 0.87
========== ========== ========== ==========
Shares Used in
Computing
(in thousands)
(Note G):
Basic 14,955 15,270 14,832 15,200
========== ========== ========== ==========
Diluted 15,830 15,904 15,807 15,746
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
October 1, 2000 January 2, 2000
--------------- ---------------
Current Assets:
Cash and Cash Equivalents $ 7,754 $ 9,955
Accounts Receivable, Net 38,062 33,601
Accounts Receivable, Joint Ventures 8,154 283
Inventories:
Raw Materials 11,218 10,566
In-Process and Finished 17,200 12,753
---------- ----------
Total Inventories 28,418 23,319
Current Deferred Income Taxes 4,728 4,728
Other Current Assets 1,194 661
---------- ----------
Total Current Assets 88,310 72,547
---------- ----------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$82,853 and $75,069 93,025 84,652
Investment in Unconsolidated Joint
Ventures 5,930 5,294
Pension Asset 4,223 4,223
Goodwill and Other Intangibles, Net 14,165 14,510
Other Assets 2,028 2,180
---------- ----------
Total Assets $ 207,681 $ 183,406
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
October 1, 2000 January 2, 2000
--------------- ---------------
Current Liabilities:
Accounts Payable $ 12,569 $ 14,855
Accrued Employee Benefits and
Compensation 11,667 10,782
Accrued Income Taxes Payable 10,501 4,341
Taxes, Other than Federal
and Foreign Income 1,079 518
Other Accrued Liabilities 6,534 6,245
---------- ----------
Total Current Liabilities 42,350 36,741
---------- ----------
Long-Term Debt 9,740 9,740
Noncurrent Deferred Income Taxes 6,099 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 3,785 3,965
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000;
Issued Shares 15,452,003 and
15,047,552 15,452 15,430
Additional Paid-In Capital 28,071 27,001
Treasury Stock (382,900 shares) (13,436) (13,436)
Accumulated Other Comprehensive
Income,(Loss) (830) 438
Retained Earnings 106,269 86,984
---------- ----------
Total Shareholders' Equity 135,526 116,417
---------- ----------
Total Liabilities and
Shareholders' Equity $ 207,681 $ 183,406
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Nine Months Ended:
---------------------
October 1, October 3,
2000 1999
---------------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $ 19,286 $ 13,646
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 9,615 8,784
Expense (Benefit) for Deferred Income Taxes 13 (331)
Equity in Undistributed (Income)
of Unconsolidated Joint Ventures, Net (2,724) (819)
Loss on Disposition of Assets 333 56
Noncurrent Pension and Postretirement
Benefits 78 125
Other, Net 202 (220)
Changes in Operating Assets and Liabilities:
Accounts Receivable (12,374) (2,704)
Inventories (5,726) 1,677
Prepaid Expenses (587) (124)
Accounts Payable and Accrued Expenses 6,549 6,976
--------- ---------
Net Cash Provided by Operating Activities 14,665 27,066
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital Expenditures (18,633) (9,971)
Acquisition of Business -- (4,302)
Proceeds from Sale of Marketable Securities -- 256
Investment in Unconsolidated Joint Ventures
and Affiliates 834 737
--------- ---------
Net Cash (Used in) Investing Activities (17,799) (13,280)
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 1,604 (16)
Repayments of Debt Principal (1,685) (759)
Acquisition of Treasury Stock -- (4,932)
Proceeds from Sale of Capital Stock 368 395
--------- ---------
Net Cash Provided by (Used in) Financing
Activities 287 (5,312)
Effect of Exchange Rate Changes on Cash 646 101
--------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents (2,201) 8,575
Cash and Cash Equivalents at Beginning of Year 9,955 9,592
--------- ---------
Cash and Cash Equivalents at End of Quarter $ 7,754 $ 18,167
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
6
<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 nine months of 2000 and 1999 was $683,000
and $895,000, respectively.
D. Income taxes paid were $554,000 and $804,000 in the first nine 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: Nine Months Ended:
----------------------- ----------------------
(Dollars In Thousands) October 1, October 3, October 1, October 3,
2000 1999 2000 1999
------------------------------------------------
Net income $ 6,936 $ 4,608 $ 19,286 $ 13,646
Foreign currency
translation adjustments (732) 1,362 (1,268) (72)
Unrealized gains on
securities -- -- -- 2
----------------------- ----------------------
Comprehensive income $ 6,204 $ 5,970 $ 18,018 $ 13,576
======================= ======================
Accumulated balances related to each component of Other Comprehensive Income
(Loss) are as follows:
7
<PAGE>
SUPPLEMENTARY NOTES, CONTINUED
October 1, 2000 January 2, 2000
--------------- ---------------
Foreign currency translation adjustments $ (679) $ 589
Change in minimum pension liability (151) (151)
-------- --------
$ (830) $ 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: Nine Months Ended:
---------------------- ---------------------
(In Thousands, Except Per October 1, October 3, October 1, October 3,
Share Amounts) 2000 1999 2000 1999
---------------------- ---------------------
Numerator:
Net income $ 6,936 $ 4,608 $ 19,286 $ 13,646
Denominator:
Denominator for basic
earnings per share -
Weighted-average shares 14,955 15,270 14,832 15,200
Effect of stock options 875 634 975 546
---------------------- ---------------------
Denominator for diluted
earnings per Share -
adjusted weighted-average
Shares and assumed
conversions 15,830 15,904 15,807 15,746
====================== =====================
Basic earnings per share $ 0.46 $ 0.30 $ 1.30 $ 0.90
====================== =====================
Diluted earnings per share $ 0.44 $ 0.29 $ 1.22 $ 0.87
====================== =====================
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 1, 2000
Net Sales $33.0 $29.4 $62.4
Operating Income 4.5 3.2 7.7
Three months ended October 3, 1999
Net Sales $31.2 $29.9 $61.1
Operating Income 3.7 2.5 6.2
Nine months ended October 1, 2000
Net Sales $103.3 $84.0 $187.3
Operating Income 12.6 10.3 22.9
Nine months ended October 3, 1999
Net Sales $96.1 $92.7 $188.8
Operating Income 11.5 6.8 18.3
8
<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 charged in 1996, 1997, and 1998.
In 1999, $400,000 was charged and in 2000, through September, an additional
$700,000 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.
9
<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.
K. On August 17, 2000, the Board of Directors authorized the Company to
repurchase up to $2,000,000 of its common stock. No shares have been
repurchased pursuant to this authority.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales of $62.4 million in the third quarter and $187.3 million for the
first nine months of 2000 were up 2% and down 1%, respectively, from the
comparable periods in 1999. In the third quarter and first nine months of
1999, Rogers sales included $7.5 million and $27.7 million, respectively 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, LLC (PLS). Since PLS
is making these sales directly, Rogers share of such sales is reported in
Combined Sales rather than in net sales. Despite this change, third quarter
sales were slightly higher than the third quarter of 1999, but for the first
nine months of 2000 net sales remained lower than the comparable period in 1999.
Commissions and profitability levels for Rogers on these sales to HTI are not
expected to change. If 1999 reported were restated to eliminate sales to HTI
both the third quarter and the first nine months of 2000 would reflect 16%
increases over the comparable periods in 1999. On the same basis, Combined
Sales which include one-half of the sales from the Company's other 50% owned
joint ventures, were $76.9 million for the quarter and $228 million for the
first nine months, up 21% and 22%, respectively, over the same periods in 1999.
These results were achieved even with the normal seasonality in Europe and Asia
that the Company usually experiences in the third quarter and despite the
decrease in value of certain European currencies which reduced reported sales
and profits. The Company's favorable 2000 results are primarily attributable
to strong sales to the computer and wireless communication markets. PLS sales
to HTI in the third quarter and first nine months 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 third quarter and first nine months of the
year increased 6% and 7%, 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 nine months of 2000
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
include 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 nine months of 1999 included results from the date of
acquisition.
Sales of Electronic Materials for the third quarter and first nine months of
2000 decreased 2% and 9%, respectively, over the comparable periods of 1999.
The decrease in sales is due to the $27.7 million of sales to HTI in 1999,
which in 2000 are being made directly by Rogers joint venture, PLS. These
sales are now reported in Combined Sales rather than net sales. Restating
1999 to eliminate sales to HTI in both the third quarter and first nine
months would result in a 31% and 29% increase, respectively in Rogers net
sales of Electronic Materials. Worldwide sales of high frequency circuit
materials continue to exceed the Company's expectations in the third quarter
and first nine months 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 third quarter and the first nine months
of 2000 were the highest of any comparable periods in the Company's history.
Compared with the record third quarter and first nine months of last year, net
income rose 51% and 41%, respectively, to $6.9 million and $19.3 million.
Diluted earnings per share for the third quarter this year were $.44, up from
$.29 in the same period last year. For the first nine months of 2000, diluted
earnings per share were $1.22 compared to $.87 in the same nine-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 nine months of 2000
and 1999 was 33% and 28%, 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 nine months of 1999, Rogers sold FLEX-I-MID(r) materials directly to
HTI. These materials were 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 third quarter of 2000 increased just
slightly in both total dollars and as a percentage of sales compared to the
third quarter of 1999. For the first nine months of 2000 selling and
administrative expenses increased in total dollars and as a percentage of sales
from 14% in the comparable 1999 period 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.
Included in the nine month period of 2000 were 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.
Rogers Technologies Singapore, Inc., a sales and marketing office with
warehousing facilities, officially opened in Singapore in the third quarter of
2000. The local
11
(PAGE)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
presence provided by these operations allows the Company to more effectively
service its growing customer base in these areas.
Research and Development expenses were almost 20% higher in the first nine
months of 2000, $9.1 million, compared to $7.7 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) and RO4000(r) high frequency circuit board
materials which are designed for use in high volume, low cost, commercial
wireless communication applications. RO4000 development efforts were
concentrated on improved copper/dielectric bond and new bond-ply materials.
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. Development efforts designed to expand Rogers
polyester/copper flexible circuit materials continued.
Corporate R&D emphasis on core capability improvement also 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 5.20%.
Other income less other charges increased by more than $3.5 million when
comparing the first nine months of 2000 with the comparable 1999 period. Higher
income from joint ventures accounts 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 and third
quarters. Durel Corporation had record sales, which were over 70% higher than
the third quarter and 76% higher than the first nine months of 1999. These
higher sales, along with
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
lower expenses associated with the Osram Sylvania litigation, have resulted in
a significant increase in Durel's profitability in the second and third
quarters. Continued penetration of the cellular telephone handset market is
driving this growth. Durel has doubled manufacturing capacity since the
beginning of 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 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 nine months of 2000
totaled $14.7 million. This compares with $27.1 million in the comparable 1999
period. This difference is attributable to higher accounts receivable and
inventory levels in 2000 which more than offset increased income and
depreciation. Accounts receivable increased primarily due to sales volume
increases and advances to 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 $18.6 million in the first
nine months and are expected to approach $25 million for the year. In 1999
capital expenditures in the first nine months were $10 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 has acquired 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 its lending relationships.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
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 October 1, 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).
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 charged in 1996, 1997, and 1998. In 1999, $400,000 was charged and in 2000,
through September, an additional $700,000 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
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.
On August 17, 2000, the Board of Directors authorized the Company to repurchase
up to $2,000,000 of its common stock. No shares have been repurchased pursuant
to this authority.
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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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 1, 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: November 14, 2000
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