EPS Exceeds Top End of Guidance
Rogers Corporation (NYSE:ROG) today announced financial results
for the 2019 third quarter.
The Company reported 2019 third quarter net sales of $221.8
million, an 8.7% decrease compared to 2019 second quarter net sales
of $242.9 million and a 2.2% decrease compared to 2018 third
quarter net sales of $226.9 million. Net sales for the 2019 third
quarter were below the Company's previously announced guidance
range of $225 to $235 million. Currency exchange rates unfavorably
impacted the 2019 third quarter net sales by $1.6 million compared
to 2019 second quarter net sales, and by $4.0 million compared to
2018 third quarter net sales.
Third quarter 2019 net income was $23.4 million compared to
$24.3 million in the second quarter of 2019 and $19.7 million in
the third quarter of 2018. Earnings for 2019 third quarter were
$1.25 per diluted share compared to $1.30 per diluted share in the
second quarter of 2019 and $1.06 per diluted share in the third
quarter of 2018. Earnings per diluted share were above the top end
of the Company's previously announced guidance range of $1.05 to
$1.20. On an adjusted basis, earnings were $1.51 per diluted share
for the 2019 third quarter compared to adjusted earnings of $1.64
per diluted share in the second quarter of 2019 and $1.42 per
diluted share in the third quarter of 2018. Adjusted earnings
exceeded the high end of the Company's previously announced
guidance range of $1.30 to $1.45 per diluted share.
Adjusted EBITDA was $47.4 million, or 21.4% of net sales, for
the third quarter of 2019 compared to $53.1 million, or 21.9% of
net sales, reported in the second quarter of 2019 and $50.2
million, or 22.1% of net sales, reported in the third quarter of
2018.
Gross margin was 35.6% in the third quarter of 2019 compared to
35.3% in the second quarter of 2019 and 34.9% in the third quarter
of 2018. Third quarter 2019 gross margin was within the Company's
previously announced guidance range of 35% to 36%. Operating margin
was 13.5% in the third quarter of 2019 compared to 13.7% in the
second quarter of 2019 and 13.1% in the third quarter of 2018.
Adjusted operating margin was 16.3% in the third quarter of 2019
compared to 17.2% in the second quarter of 2019 and 17.0% in the
third quarter of 2018.
"Rogers' third quarter earnings exceeded the top end of our
guidance range, despite the impact of challenging market conditions
and trade tensions which tempered sales for the quarter," stated
Bruce D. Hoechner, Rogers’ President and CEO. "The solid Q3
earnings resulted from a favorable product mix, gross margin
improvement efforts and efficient management of operating expenses.
For the remainder of the year we anticipate continued weakness in
the industrial and automotive markets and a pause in China 5G
deployments before the expected next wave of deployments in the
first half of 2020. We remain focused on our strategic priorities
and are well positioned to take advantage of the significant growth
opportunities for Advanced Connectivity and Advanced Mobility
applications."
Business segment
discussion
Advanced Connectivity Solutions
(ACS) Advanced Connectivity Solutions reported 2019
third quarter net sales of $79.0 million, a 14.6% decrease compared
to 2019 second quarter net sales of $92.5 million and a 9.9%
increase compared to 2018 third quarter net sales of $71.9 million.
The sequential decrease in 2019 third quarter net sales was largely
driven by lower demand for high frequency circuit materials used in
4G and 5G wireless infrastructure, partially offset by stronger
Aerospace and Defense. Third quarter 2019 net sales were
unfavorably impacted by fluctuations in currency exchange rates of
$0.7 million compared to 2019 second quarter net sales, and by $1.3
million compared to 2018 third quarter net sales.
Elastomeric Material Solutions
(EMS) Elastomeric Material Solutions reported 2019 third
quarter net sales of $94.9 million, a 1.1% increase compared to
2019 second quarter net sales of $93.9 million and a 0.9% decrease
compared to 2018 third quarter net sales of $95.8 million. The
sequential increase in 2019 third quarter net sales was primarily
due to seasonally stronger demand in portable electronics, which
was partially offset by a decline in general industrial.
Fluctuations in currency exchange rates unfavorably impacted net
sales by $0.7 million in the 2019 third quarter compared to 2019
second quarter net sales, and by $1.4 million compared to 2018
third quarter net sales.
Power Electronics Solutions
(PES) Power Electronics Solutions reported 2019 third
quarter net sales of $43.1 million, a 16.5% decrease compared to
2019 second quarter net sales of $51.7 million and a 21.9% decrease
compared to 2018 third quarter net sales of $55.2 million. The 2019
third quarter sequential decrease was primarily due to weaker
demand for power semiconductor substrates across most market
segments. Third quarter 2019 net sales were unfavorably impacted by
fluctuations in currency exchange rates of $0.1 million compared to
2019 second quarter net sales and by $1.2 million compared to 2018
third quarter net sales.
Other Other reported 2019
third quarter net sales of $4.8 million, which was flat compared to
2019 second quarter net sales of $4.8 million and a 19.7% increase
compared to 2018 third quarter net sales of $4.0 million.
Balance sheet and other
highlights
Cash position Rogers ended
the third quarter of 2019 with cash and cash equivalents of $140.7
million, a decrease of $27.0 million from $167.7 million at
December 31, 2018. The decrease in cash resulted primarily from
capital expenditures of $38.8 million and repayment of debt
principal of $98.0 million, partially offset by net cash provided
by operating activities of $115.7 million. The Company ended the
quarter with a net cash position of $10.3 million, compared to a
net debt position of $60.7 million at December 31, 2018.
Effective tax rate Rogers'
effective tax rate was 18.6% for the third quarter of 2019,
compared to 22.9% for the second quarter of 2019. The decrease was
primarily due to geographic profit mix and the reversal of reserves
associated with uncertain tax positions. The Company guides the
2019 full year effective tax rate to be 20% to 22%, with a fourth
quarter effective tax rate of 22% to 24%.
Pension Plan Termination On
October 17, 2019, in connection with the Company’s previously
announced plans, the Company terminated the Rogers Corporation
Defined Benefit Pension Plan, which has sufficient assets to
satisfy all transaction obligations. The Company expects to record
a total non-cash pre-tax settlement charge in connection with the
termination of approximately $52 million to $56 million in the
fourth quarter of 2019, or approximately $2.15 to $2.30 per
share.
Financial outlook Rogers
guides its 2019 fourth quarter net sales to a range of $200 to $210
million and gross margin to a range of 33.0% to 34.0%. The Company
guides to a 2019 fourth quarter loss of ($1.43) to ($1.28) per
share, which is inclusive of a $52 to $56 million non-cash pre-tax
charge associated with the termination of the Rogers Corporation
Defined Benefit Pension Plan. Fourth quarter adjusted earnings is
expected to be in the range of $1.00 to $1.15 per diluted
share.
For the full year 2019, Rogers expects capital expenditures to
be in a range of $50 to $55 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 expense
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 third quarter results will
take place today, Wednesday October 30, 2019 at 5pm ET.
A live webcast and slide presentation will be available under
the investors section of https://www.rogerscorp.com/investors.
To participate, please dial:
1-800-574-8929
Toll-free in the United States
1-973-935-8524
Internationally
The passcode for the live teleconference
is 3080738.
If you are unable to attend, a conference call playback will be
available from October 30, 2019 at approximately 8 pm ET through
November 13, 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 3080738.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET October 31, 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
Nine Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Net sales
$
221,842
$
226,863
$
704,492
$
656,149
Cost of sales
142,975
147,733
454,403
423,741
Gross margin
78,867
79,130
250,089
232,408
Selling, general and administrative
expenses
40,448
39,943
127,349
123,080
Research and development expenses
7,830
7,630
23,282
24,514
Restructuring and impairment charges
580
1,052
2,485
2,015
Other operating (income) expense, net
124
863
1,075
(3,111
)
Operating income
29,885
29,642
95,898
85,910
Equity income in unconsolidated joint
ventures
1,498
1,642
4,077
4,453
Other income (expense), net
(918
)
(680
)
(915
)
(647
)
Interest expense, net
(1,747
)
(2,000
)
(5,723
)
(4,503
)
Income before income tax expense
28,718
28,604
93,337
85,213
Income tax expense
5,331
8,870
17,258
22,014
Net income
$
23,387
$
19,734
$
76,079
$
63,199
Basic earnings per share
$
1.26
$
1.07
$
4.10
$
3.44
Diluted earnings per share
$
1.25
$
1.06
$
4.07
$
3.39
Shares used in computing:
Basic earnings per share
18,581
18,403
18,569
18,360
Diluted earnings per share
18,724
18,678
18,715
18,649
Condensed Consolidated
Statements of Financial Position (Unaudited)
(IN THOUSANDS)
September 30, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
$
140,747
$
167,738
Accounts receivable, less allowance for
doubtful accounts of $1,353 and $1,354
138,532
144,623
Contract assets
24,070
22,728
Inventories
137,908
132,637
Prepaid income taxes
3,761
3,093
Asbestos-related insurance receivables,
current portion
4,138
4,138
Other current assets
9,336
10,829
Total current assets
458,492
485,786
Property, plant and equipment, net of
accumulated depreciation of $333,882 and $317,414
252,393
242,759
Investments in unconsolidated joint
ventures
15,033
18,667
Deferred income taxes
12,166
8,236
Goodwill
260,552
264,885
Other intangible assets, net of
amortization
162,939
177,008
Pension assets
20,236
19,273
Asbestos-related insurance receivables,
non-current portion
60,247
59,685
Other long-term assets
7,660
3,045
Total assets
$
1,249,718
$
1,279,344
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
38,608
$
40,321
Accrued employee benefits and
compensation
31,722
30,491
Accrued income taxes payable
9,642
7,032
Asbestos-related liabilities, current
portion
5,547
5,547
Other accrued liabilities
19,670
23,789
Total current liabilities
105,189
107,180
Borrowings under revolving credit
facility
130,482
228,482
Pension and other postretirement benefits
liabilities
1,739
1,739
Asbestos-related liabilities, non-current
portion
65,104
64,799
Non-current income tax
9,296
8,418
Deferred income taxes
8,556
10,806
Other long-term liabilities
14,718
9,596
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,572 and 18,395 shares issued and
outstanding
18,572
18,395
Additional paid-in capital
135,761
132,360
Retained earnings
852,462
776,403
Accumulated other comprehensive loss
(92,161
)
(78,834
)
Total shareholders' equity
914,634
848,324
Total liabilities and shareholders'
equity
$
1,249,718
$
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, asbestos
litigation-related charges, purchase accounting inventory
adjustments and transition services related to asset acquisition
(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*:
2019
2019
2018
Earnings per diluted share
Q3
Q2
Q3
GAAP earnings per diluted share
$
1.25
$
1.30
$
1.06
Restructuring, severance, impairment and
other related costs
0.05
0.15
0.11
Acquisition and related integration
costs
0.02
0.01
0.04
Purchase accounting inventory
adjustment
—
—
0.02
Transition services, net
0.01
—
0.03
Total discrete items
$
0.08
$
0.16
$
0.19
Earnings per diluted share adjusted for
discrete items
$
1.33
$
1.46
$
1.24
Acquisition intangible amortization
$
0.18
$
0.18
$
0.18
Adjusted earnings per diluted share
$
1.51
$
1.64
$
1.42
Reconciliation of GAAP net income to
adjusted EBITDA*:
2019
2019
2018
(amounts in millions)
Q3
Q2
Q3
Net income
$
23.4
$
24.3
$
19.7
Interest expense, net
1.8
2.0
2.0
Income tax expense
5.3
7.2
8.9
Depreciation
7.6
7.7
8.8
Amortization
4.4
4.4
4.4
Stock-based compensation expense
3.2
3.7
2.7
Restructuring, severance, impairment and
other related costs
1.3
3.7
2.7
Acquisition and related integration
costs
0.5
0.3
0.9
Asbestos-related charges
—
0.1
—
Transition services lease income
(0.1
)
(0.3
)
(0.2
)
Purchase accounting inventory
adjustment
—
—
0.3
Adjusted EBITDA**
$
47.4
$
53.1
$
50.2
*Values in table may not add due to rounding. **Adjusted EBITDA
for the third 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*:
2019
2018
Operating margin
Q3
Q2
Q3
GAAP operating margin
13.5%
13.7%
13.1%
Restructuring, severance, impairment and
other related costs
0.6%
1.5%
1.2%
Acquisition and related integration
costs
0.2%
0.1%
0.4%
Purchase accounting inventory
adjustment
—%
—%
0.1%
Transition services, net
—%
—%
0.3%
Total discrete items
0.8%
1.7%
2.0%
Operating margin adjusted for discrete
items
14.3%
15.4%
15.1%
Acquisition intangible amortization
2.0%
1.8%
1.9%
Adjusted operating margin
16.3%
17.2%
17.0%
*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 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
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2019 fourth quarter:
Guidance Q4 2019
GAAP earnings per diluted share
($1.43) - ($1.28)
Discrete items*
$2.25
Acquisition intangible amortization
$0.18
Adjusted earnings per diluted share
$1.00 - $1.15
*Discrete items includes a $52 million to $56 million non-cash
pre-tax charge associated with the termination of the Rogers
Corporation Defined Benefit Pension Plan.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191030005984/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com
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