Delivers Record Quarterly Revenue; EPS at
Top End of Guidance
Rogers Corporation (NYSE:ROG) today announced financial results
for the 2019 second quarter.
The Company reported 2019 second quarter net sales of $242.9
million, a 1.3% increase compared to 2019 first quarter net sales
of $239.8 million and a 13.1% increase compared to 2018 second
quarter net sales of $214.7 million. Net sales for the 2019 second
quarter were within the Company's previously announced guidance
range of $240 to $250 million. Currency exchange rates unfavorably
impacted the 2019 second quarter net sales by $0.5 million compared
to 2019 first quarter net sales, and by $8.1 million compared to
2018 second quarter net sales.
Second quarter 2019 net income was $24.3 million compared to
$28.4 million in the first quarter of 2019 and $17.3 million in the
second quarter of 2018. Earnings for 2019 second quarter were $1.30
per diluted share compared to $1.52 per diluted share in the first
quarter of 2019 and $0.93 per diluted share in the second quarter
of 2018. Earnings per diluted share were at the high end of the
Company's previously announced guidance range of $1.16 to $1.31. On
an adjusted basis, earnings were $1.64 per diluted share for the
2019 second quarter compared to adjusted earnings of $1.85 per
diluted share in the first quarter of 2019 and $1.19 per diluted
share in the second quarter of 2018. Adjusted earnings exceeded the
high end of the Company's previously announced guidance range of
$1.47 to $1.62 per diluted share.
Adjusted EBITDA was $53.1 million, or 21.9% of net sales, for
the second quarter of 2019 compared to $53.1 million, or 22.2% of
net sales, reported in the first quarter of 2019 and $43.8 million,
or 20.4% of net sales, reported in the second quarter of 2018.
Gross margin was 35.3% in the second quarter of 2019 compared to
35.6% in the first quarter of 2019 and 35.7% in the second quarter
of 2018. Second quarter 2019 gross margin was within the Company's
previously announced guidance range of 35% to 36%. Operating margin
was 13.7% in the second quarter of 2019 compared to 13.7% in the
first quarter of 2019 and 11.7% in the second quarter of 2018.
Adjusted operating margin was 17.2% in the second quarter of 2019
compared to 17.1% in the first quarter of 2019 and 14.8% in the
second quarter of 2018.
"We achieved record quarterly revenue and adjusted earnings
above the top end of our guidance range in Q2, driven by 5G demand
and continued strength in ADAS," stated Bruce D. Hoechner, Rogers’
President and CEO. "We are encouraged by our strong performance,
however our cautious near-term outlook is due to uncertainties
related to ongoing trade tensions, which could affect the current
5G demand ramp, and continued weakness in industrial and
conventional automotive markets. The market outlook for Advanced
Connectivity and Advanced Mobility applications remains very strong
and we are focused on operational improvements that will allow us
to fully capitalize on these significant market opportunities."
Business segment
discussion
Advanced Connectivity Solutions
(ACS)
Advanced Connectivity Solutions reported 2019 second quarter net
sales of $92.5 million, a 15.0% increase compared to 2019 first
quarter net sales of $80.5 million and a 21.1% increase compared to
2018 second quarter net sales of $76.4 million. The sequential
increase in 2019 second quarter net sales was largely driven by
demand for high frequency circuit materials used in 5G and 4G
wireless infrastructure and continued strength in Advanced Driver
Assistance Systems (ADAS). Second quarter 2019 net sales were
favorably impacted by $0.1 million due to fluctuations in currency
exchange rates compared to 2019 first quarter net sales, but were
unfavorably impacted by $2.5 million compared to 2018 second
quarter net sales.
Elastomeric Material Solutions
(EMS) Elastomeric Material Solutions reported 2019
second quarter net sales of $93.9 million, a 1.2% increase compared
to 2019 first quarter net sales of $92.8 million and an 18.5%
increase compared to 2018 second quarter net sales of $79.2
million. The sequential increase in 2019 second quarter net sales
was due to strong demand in portable electronics, EV/HEV batteries
and mass transit. Fluctuations in currency exchange rates
unfavorably impacted net sales by $0.2 million in the 2019 second
quarter compared to 2019 first quarter net sales, and by $2.2
million compared to 2018 second quarter net sales.
Power Electronics Solutions
(PES) Power Electronics Solutions reported 2019 second
quarter net sales of $51.7 million, a 13.6% decrease compared to
2019 first quarter net sales of $59.8 million and a 3.7% decrease
compared to 2018 second quarter net sales of $53.6 million. The
2019 second quarter sequential decrease was primarily due to weaker
demand for power semiconductor substrates in industrial and vehicle
electrification applications, partially offset by stronger rail and
renewable energy demand. Second quarter 2019 net sales were
unfavorably impacted by $0.4 million due to fluctuations in
currency exchange rates compared to 2019 first quarter net sales
and by $3.2 million compared to 2018 second quarter net sales.
Other Other reported 2019
second quarter net sales of $4.8 million, a 29.4% decrease compared
to 2019 first quarter net sales of $6.8 million and a 12.3%
decrease compared to 2018 second quarter net sales of $5.4 million.
The sequential decrease in 2019 second quarter net sales was due to
a last-time buy in the Durel business in the prior quarter.
Balance sheet and other
highlights
Cash position Rogers ended
the second quarter of 2019 with cash and cash equivalents of $173.1
million, an increase of $5.4 million from $167.7 million at
December 31, 2018. The increase in cash resulted primarily from net
cash provided by operating activities of $67.5 million, partially
offset by capital expenditures of $24.0 million and repayment of
debt principle of $33.0 million.
Effective tax rate Rogers'
effective tax rate was 22.9% for the second quarter of 2019,
compared to 14.2% for the first quarter of 2019. The second quarter
effective tax rate was higher due primarily to certain discrete tax
benefits realized in the first quarter. The Company expects the
effective tax rate for the second half of 2019 to be 24% to
25%.
Financial outlook Rogers
guides its 2019 third quarter net sales to a range of $225 to $235
million and gross margin to a range of 35% to 36%. Rogers guides
its 2019 third quarter earnings to a range of $1.05 to $1.20 per
diluted share and adjusted earnings to a range of $1.30 to $1.45
per diluted share.
For the full year 2019, Rogers expects capital expenditures to
be in a range of $50 to $60 million.
About Rogers Corporation
Rogers Corporation (NYSE:ROG) is a global leader in engineered
materials to power, protect, and connect our world. With more than
180 years of materials science experience, Rogers delivers
high-performance solutions that enable the company’s growth
drivers-- advanced connectivity and advanced mobility applications,
as well as other technologies where reliability is critical. Rogers
delivers Power Electronics Solutions for energy-efficient motor
drives, e-Mobility and renewable energy; Elastomeric Material
Solutions for sealing, vibration management and impact protection
in mobile devices, transportation interiors, industrial equipment
and performance apparel; and Advanced Connectivity Solutions for
wireless infrastructure, automotive safety and radar systems.
Headquartered in Arizona (USA), Rogers operates manufacturing
facilities in the United States, China, Germany, Belgium, Hungary,
and South Korea, with joint ventures and sales offices
worldwide.
Safe Harbor Statement This
release contains forward-looking statements, which concern our
plans, objectives, outlook, goals, strategies, future events,
future net sales or performance, capital expenditures, future
restructuring, plans or intentions relating to expansions, business
trends and other information that is not historical information.
All forward-looking statements are based upon information available
to us on the date of this release and are subject to risks,
uncertainties and other factors, many of which are outside of our
control, which could cause actual results to differ materially from
the results discussed in the forward-looking statements. Risks and
uncertainties that could cause such results to differ include:
failure to capitalize on, volatility within, or other adverse
changes with respect to the Company's growth drivers, including
advanced mobility and advanced connectivity, such as delays in
adoption or implementation of new technologies; uncertain business,
economic and political conditions in the United States and abroad,
particularly in China, South Korea, Germany, Hungary and Belgium,
where we maintain significant manufacturing, sales or
administrative operations; the ongoing trade policy dispute between
the United States and China, as well as adverse changes in trade
policy, tariff regulation or other trade restrictions, including
trade restrictions on Huawei Technologies Co., Ltd.; fluctuations
in foreign currency exchange rates; the results of our research and
development efforts; adverse competitive developments, including
the extent to which our products are incorporated into end-user
products and systems and the extent to which those products and
systems achieve commercial success; business development
transactions and related integration considerations, including
failure to realize, or delays in the realization of anticipated
benefits of such transactions; the outcome of ongoing and future
litigation, including our asbestos-related product liability
litigation; inability to obtain raw materials, including
commodities, from single or limited source suppliers in a timely
and cost effective manner; uncertainties with regard to the timing,
expense and cash outlays associated with the termination and
settlement of the Rogers Corporation Defined Benefit Pension Plan;
and changes in laws and regulations applicable to our business. For
additional information about the risks, uncertainties and other
factors that may affect our business, please see our most recent
annual report on Form 10-K and any subsequent reports filed with
the Securities and Exchange Commission, including quarterly reports
on Form 10-Q. Rogers Corporation assumes no responsibility to
update any forward-looking statements contained herein except as
required by law.
Conference call and additional
information
A conference call to discuss the 2019 second quarter results
will take place today, Wednesday July 31, 2019 at 5pm ET.
A live webcast and slide presentation will be available under
the investors section of www.rogerscorp.com/ir.
To participate, please dial:
1-800-574-8929
Toll-free in the United States
1-973-935-8524
Internationally
There is no passcode for the live
teleconference.
If you are unable to attend, a conference call playback will be
available from July 31, 2019 at approximately 8 pm ET through
August 14, 2019 at 11:59 pm ET, by dialing 1-855-859-2056 from the
United States, and 1-404-537-3406 from outside of the US, each with
passcode 6238188.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET August 1, 2019.
Additional information Please contact the Company
directly via email or visit the Rogers website.
Website address: http://www.rogerscorp.com
(Financial statements follow)
Condensed Consolidated
Statements of Operations (Unaudited)
Three Months Ended
Six Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
June 30, 2019
June 30, 2018
June 30, 2019
June 30, 2018
Net sales
$
242,852
$
214,675
$
482,650
$
429,286
Cost of sales
157,024
138,003
311,428
276,007
Gross margin
85,828
76,672
171,222
153,279
Selling, general and administrative
expenses
43,649
42,540
86,901
83,137
Research and development expenses
7,843
8,750
15,452
16,884
Restructuring and impairment charges
1,083
541
1,905
963
Other operating (income) expense, net
40
(383
)
951
(3,974
)
Operating income
33,213
25,224
66,013
56,269
Equity income in unconsolidated joint
ventures
1,742
1,804
2,579
2,811
Other income (expense), net
(1,401
)
(34
)
3
32
Interest expense, net
(2,038
)
(1,292
)
(3,976
)
(2,503
)
Income before income tax expense
31,516
25,702
64,619
56,609
Income tax expense
7,223
8,373
11,927
13,144
Net income
$
24,293
$
17,329
$
52,692
$
43,465
Basic earnings per share
$
1.31
$
0.94
$
2.84
$
2.37
Diluted earnings per share
$
1.30
$
0.93
$
2.82
$
2.33
Shares used in computing:
Basic earnings per share
18,568
18,389
18,562
18,338
Diluted earnings per share
18,730
18,660
18,711
18,635
Condensed Consolidated
Statements of Financial Position (Unaudited)
(IN THOUSANDS)
June 30, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
$
173,068
$
167,738
Accounts receivable, less allowance for
doubtful accounts of $1,215 and $1,354
156,924
144,623
Contract assets
25,573
22,728
Inventories
135,067
132,637
Prepaid income taxes
4,275
3,093
Asbestos-related insurance receivables,
current portion
4,138
4,138
Other current assets
10,814
10,829
Total current assets
509,859
485,786
Property, plant and equipment, net of
accumulated depreciation of $331,553 and $317,414
248,309
242,759
Investments in unconsolidated joint
ventures
17,534
18,667
Deferred income taxes
11,080
8,236
Goodwill
263,804
264,885
Other intangible assets, net of
amortization
167,985
177,008
Pension assets
19,918
19,273
Asbestos-related insurance receivables,
non-current portion
60,247
59,685
Other long-term assets
8,617
3,045
Total assets
$
1,307,353
$
1,279,344
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
42,214
$
40,321
Accrued employee benefits and
compensation
31,798
30,491
Accrued income taxes payable
9,048
7,032
Asbestos-related liabilities, current
portion
5,547
5,547
Other accrued liabilities
24,085
23,789
Total current liabilities
112,692
107,180
Borrowings under revolving credit
facility
195,482
228,482
Pension and other postretirement benefits
liabilities
1,739
1,739
Asbestos-related liabilities, non-current
portion
65,226
64,799
Non-current income tax
8,554
8,418
Deferred income taxes
10,768
10,806
Other long-term liabilities
15,378
9,596
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,559 and 18,395 shares issued and
outstanding
18,559
18,395
Additional paid-in capital
131,836
132,360
Retained earnings
829,075
776,403
Accumulated other comprehensive loss
(81,956
)
(78,834
)
Total shareholders' equity
897,514
848,324
Total liabilities and shareholders'
equity
$
1,307,353
$
1,279,344
Reconciliation of non-GAAP financial
measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures
that are not presented in accordance with generally accepted
accounting principles in the United States of America (“GAAP”):
(1) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition-related intangible assets and discrete items, such as
restructuring, severance, impairments and other related costs,
acquisition and related integration costs, change in foreign
jurisdiction tax regulation on equity awards attributable to a
prior period, asbestos litigation-related charges, transition
services related to the asset acquisition, and gains or losses on
asset dispositions (collectively, “Discrete Items”);
(2) Adjusted EBITDA, which the Company defines as net income
excluding interest expense, income tax expense, depreciation and
amortization, stock-based compensation expense and Discrete Items;
and
(3) Adjusted operating margin, which the Company defines as
operating margin excluding amortization of acquisition-related
intangible assets and Discrete Items.
Management believes each of these measures is useful to
investors because they allow for comparison to the Company’s
performance in prior periods without the effect of items that, by
their nature, tend to obscure the Company’s core operating results
due to potential variability across periods based on the timing,
frequency and magnitude of such items. As a result, management
believes that adjusted earnings per diluted share, adjusted EBITDA
and adjusted operating margin enhance the ability of investors to
analyze trends in the Company’s business and evaluate the Company’s
performance relative to peer companies. However, non-GAAP financial
measures have limitations as analytical tools and should not be
considered in isolation from, or solely as alternatives to,
financial measures prepared in accordance with GAAP. In addition,
these non-GAAP financial measures may differ from similarly named
measures used by other companies. Reconciliations of the
differences between these non-GAAP financial measures and their
most directly comparable financial measures calculated in
accordance with GAAP are set forth below.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share for the second
quarter*:
2019
2019
2018
Earnings per diluted share
Q2
Q1
Q2
GAAP earnings per diluted share
$
1.30
$
1.52
$
0.93
Restructuring, severance, impairment and
other related costs
0.15
0.07
0.09
Acquisition and related integration
costs
0.01
0.02
0.04
Change in foreign jurisdiction tax
regulation on equity awards attributable to a prior period
—
0.02
—
Loss (gain) on sale of long-lived
assets
—
0.01
(0.02
)
Transition services, net
—
0.03
—
Total discrete items
$
0.16
$
0.15
$
0.11
Earnings per diluted share adjusted for
discrete items
$
1.46
$
1.67
$
1.04
Acquisition intangible amortization
$
0.18
$
0.18
$
0.15
Adjusted earnings per diluted share
$
1.64
$
1.85
$
1.19
Reconciliation of GAAP net income to
adjusted EBITDA for the second quarter*:
2019
2019
2018
(amounts in millions)
Q2
Q1
Q2
Net income
$
24.3
$
28.4
$
17.3
Interest expense, net
2.0
1.9
1.3
Income tax expense
7.2
4.7
8.4
Depreciation
7.7
8.5
7.1
Amortization
4.4
4.5
3.8
Stock-based compensation expense
3.7
2.5
3.1
Restructuring, severance, impairment and
other related costs
3.7
1.9
2.2
Acquisition and related integration
costs
0.3
0.5
0.9
Change in foreign jurisdiction tax
regulation on equity awards attributable to a prior period
—
0.5
—
Asbestos-related charges
0.1
—
—
Transition services lease income
(0.3
)
(0.6
)
—
Loss (gain) on sale of long-lived
assets
—
0.3
(0.4
)
Adjusted EBITDA**
$
53.1
$
53.1
$
43.8
*Values in table may not add due to rounding. **Adjusted EBITDA
for the second quarter of 2018 has been recast to reflect the
add-back of stock-based compensation expense.
Reconciliation of GAAP operating margin
to adjusted operating margin for the second quarter*:
2019
2018
Operating margin
Q2
Q1
Q2
GAAP operating margin
13.7
%
13.7
%
11.7
%
Restructuring, severance, impairment and
other related costs
1.5
%
0.8
%
1.0
%
Acquisition and related integration
costs
0.1
%
0.2
%
0.4
%
Change in foreign jurisdiction tax
regulation on equity awards attributable to a prior period
—%
0.2
%
—%
Loss (gain) on sale of long-lived
assets
—%
0.1
%
(0.2
)%
Transition services, net
—%
0.3
%
—%
Total discrete items
1.7
%
1.6
%
1.2
%
Operating margin adjusted for discrete
items
15.4
%
15.3
%
13.0
%
Acquisition intangible amortization
1.8
%
1.8
%
1.8
%
Adjusted operating margin
17.2
%
17.1
%
14.8
%
*Percentages in table may not add due to
rounding.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2019 second quarter:
Guidance Q2 2019
GAAP earnings per diluted share
$1.16 - $1.31
Discrete items
$0.13
Acquisition intangible amortization
$0.18
Adjusted earnings per diluted share
$1.47 - $1.62
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2019 third quarter:
Guidance Q3 2019
GAAP earnings per diluted share
$1.05- $1.20
Discrete items
$0.07
Acquisition intangible amortization
$0.18
Adjusted earnings per diluted share
$1.30 - $1.45
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005917/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: investor.relations@rogerscorp.com
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