Strategic Market Growth and Operational
Execution Drives Strong Financial Results
Rogers Corporation (NYSE:ROG) today announced financial results
for the third quarter of 2020.
“We are encouraged by the growth we saw in many of our strategic
markets as well as our strong operational performance, which
resulted in revenue and gross margin that exceeded the top end of
our guidance expectations,” stated Bruce D. Hoechner, Rogers,
President and CEO. “Q3 sales were driven by strength in the EV/HEV,
ADAS, portable electronics and defense markets. For the fourth
quarter we expect continued strength in these strategic markets,
although visibility to a broader market recovery remains less
clear. We continue to accelerate our efforts to capitalize on the
substantial opportunities in Advanced Mobility markets, while also
focusing on growth opportunities across our strong and diversified
market portfolio.”
Q3 2020 Financial
Overview
GAAP Results
Q3 2020
Q2 2020
Q3 2019
Net Sales ($M)
$201.9
$191.2
$221.8
Gross Margin
37.4%
36.6%
35.6%
Operating Margin
4.4%
11.0%
13.5%
Net Income ($M)
$7.0
$14.5
$23.4
Earnings Per Share
$0.37
$0.78
$1.25
Non-GAAP Results1
Q3 2020
Q2 2020
Q3 2019
Adjusted Operating Margin
17.3%
15.4%
16.3%
Adjusted Net Income ($M)
$27.1
$21.1
$28.2
Adjusted Earnings Per Share
$1.45
$1.13
$1.51
Adjusted EBITDA ($M)
$47.9
$42.5
$47.4
Adjusted EBITDA Margin
23.7%
22.2%
21.4%
Net Sales by Operating Segment (dollars in
millions)
Q3 2020
Q2 2020
Q3 2019
Advanced Connectivity Solutions (ACS)
$63.7
$70.9
$79.0
Elastomeric Material Solutions (EMS)
$86.4
$71.6
$94.9
Power Electronic Solutions (PES)
$47.9
$45.2
$43.1
Other
$3.9
$3.4
$4.8
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
Q3 2020 Summary of
Results
Net sales of $201.9 million increased 5.6% versus the prior
quarter. EMS and PES segment sales increased sequentially and were
partially offset by lower ACS sales. EMS net sales increased in the
portable electronics and EV/HEV battery markets, partially offset
by a decline in mass transit market sales. EMS general industrial
sales were approximately flat sequentially. PES net sales increased
in the EV/HEV and renewable energy markets, partially offset by a
decline in the industrial power and mass transit markets. ACS net
sales decreased in the wireless infrastructure market, partially
offset by higher ADAS sales and strong defense market demand.
Currency exchange rates favorably impacted total company net sales
in the third quarter of 2020 by $2.7 million compared to prior
quarter net sales.
Gross margin was 37.4%, compared to 36.6% in the prior quarter.
The increase in gross margin was due to higher volumes, favorable
mix and operational cost savings.
Selling, general and administrative expenses increased by $8.5
million sequentially to $50.2 million, primarily due to higher
accelerated intangible amortization expense. In line with the
Company's expectations, $11.7 million of accelerated intangible
amortization expense was incurred related to the DSP business in
the third quarter. This compared to $3.9 million of accelerated
expense in the prior quarter. An additional $11.7 million of
accelerated amortization expense is expected to be recognized in
the fourth quarter of 2020.
Restructuring and impairment charges of $9.4 million were
recognized in the third quarter related to manufacturing footprint
optimization plans involving certain Europe and Asia locations.
These changes are planned to better align capacity with end market
demand, improve factory utilization and increase cost
competitiveness. Additional restructuring charges of between $2.5
and $4.5 million are expected in the fourth quarter of 2020.
GAAP operating margin of 4.4% decreased by approximately 660
basis points sequentially due to incremental accelerated intangible
amortization expense of $7.8 million and restructuring related
charges of $9.4 million, partially offset by improved gross margin.
Adjusted operating margin of 17.3% increased by approximately 190
basis points versus the prior quarter, primarily as a result of
improved gross margin.
GAAP earnings per share were $0.37, compared to earnings per
share of $0.78 in the second quarter of 2020. The decrease in GAAP
earnings resulted from higher restructuring related expenses and an
increase in accelerated intangible amortization, partially offset
by higher gross margin and lower tax expense. On an adjusted basis,
earnings were $1.45 per diluted share compared to adjusted earnings
of $1.13 per diluted share in the prior quarter. The increase in
adjusted earnings resulted from the improved gross margin and lower
tax expense.
Ending cash and cash equivalents was $186.1 million, a decrease
of $112.6 million versus the prior quarter. The Company generated
strong free cash flow of $47.9 million in the third quarter of
2020. Net cash provided by operating activities of $58.7 million
was offset by $163.0 million of principal payments made on the
outstanding borrowings under the Company’s revolving credit
facility and capital expenditures of $10.8 million. At the end of
the third quarter of 2020, cash exceeded borrowings by $126.1
million.
Financial
Outlook
Q4 2020
Net Sales ($M)
$195 to $210
Gross Margin
37.0% to 38.0%
Earnings Per Share1
$0.50 to $0.70
Non-GAAP Earnings Per Share2
$1.30 to $1.50
2020
Effective Tax Rate
23% to 24%
Capital Expenditures ($M)
$40 to $45
1 -Includes an expected $11.7 million of
accelerated intangible amortization expense associated with the DSP
business
2- A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
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: the
duration and impacts of the novel coronavirus global pandemic and
efforts to contain its transmission, including the effect of these
factors on our business, suppliers, customers, end users and
economic conditions generally; 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 (U.S.) and abroad, particularly in China,
South Korea, Germany, Hungary and Belgium, where we maintain
significant manufacturing, sales or administrative operations; the
trade policy dynamics between the U.S. and China reflected in trade
agreement negotiations and the imposition of tariffs and other
trade restrictions, including trade restrictions on Huawei
Technologies Co., Ltd.; fluctuations in foreign currency exchange
rates; our ability to develop innovative products and the extent to
which our products are incorporated into end-user products and
systems and the extent to which end-user products and systems
incorporating our products achieve commercial success; the ability
of our sole or limited source suppliers to deliver certain key raw
materials, including commodities, to us in a timely and
cost-effective manner; intense global competition affecting both
our existing products and products currently under development;
business interruptions due to catastrophes or other similar events,
such as natural disasters, war, terrorism or public health crises;
failure to realize, or delays in the realization of anticipated
benefits of acquisitions and divestitures due to, among other
things, the existence of unknown liabilities or difficulty
integrating acquired businesses; our ability to attract and retain
management and skilled technical personnel; our ability to protect
our proprietary technology from infringement by third parties
and/or allegations that our technology infringes third party
rights; changes in effective tax rates or tax laws and regulations
in the jurisdictions in which we operate; failure to comply with
financial and restrictive covenants in our credit agreement or
restrictions on our operational and financial flexibility due to
such covenants; the outcome of ongoing and future litigation,
including our asbestos-related product liability litigation;
changes in environmental laws and regulations applicable to our
business; and disruptions in, or breaches of, our information
technology systems. 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 results for the third quarter
of 2020 will take place today, Thursday, October 29, 2020 at 5pm
ET.
A live webcast of the event and the accompanying presentation
can be accessed on the Rogers Corporation website at
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 9474445.
If you are unable to attend, a conference call playback will be
available from October 29, 2020 at approximately 8 pm ET through
November 13, 2020 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 9474445.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET October 30, 2020.
Additional information
Please contact the Company directly via email or visit the
Rogers website.
(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,
2020
September 30,
2019
September 30,
2020
September 30,
2019
Net sales
$
201,944
$
221,842
$
591,911
$
704,492
Cost of sales
126,426
142,975
380,794
454,403
Gross margin
75,518
78,867
211,117
250,089
Selling, general and administrative
expenses
50,230
40,448
132,254
127,349
Research and development expenses
7,085
7,830
22,185
23,282
Restructuring and impairment charges
9,413
580
9,413
2,485
Other operating (income) expense, net
(4
)
124
(96
)
1,075
Operating income
8,794
29,885
47,361
95,898
Equity income in unconsolidated joint
ventures
937
1,498
3,177
4,077
Pension settlement charges
—
—
(55
)
—
Other income (expense), net
1,446
(918
)
1,294
(915
)
Interest expense, net
(3,553
)
(1,747
)
(6,539
)
(5,723
)
Income before income tax expense
7,624
28,718
45,238
93,337
Income tax expense
618
5,331
10,453
17,258
Net income
$
7,006
$
23,387
$
34,785
$
76,079
Basic earnings per share
$
0.37
$
1.26
$
1.86
$
4.10
Diluted earnings per share
$
0.37
$
1.25
$
1.86
$
4.07
Shares used in computing:
Basic earnings per share
18,688
18,581
18,678
18,569
Diluted earnings per share
18,713
18,724
18,695
18,715
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PAR VALUE)
September 30,
2020
December 31,
2019
Assets
Current assets
Cash and cash equivalents
$
186,123
$
166,849
Accounts receivable, less allowance for
doubtful accounts of $1,366 and $1,691
138,611
122,285
Contract assets
22,061
22,455
Inventories
109,733
132,859
Prepaid income taxes
3,406
4,524
Asbestos-related insurance receivables,
current portion
4,292
4,292
Other current assets
10,217
10,838
Total current assets
474,443
464,102
Property, plant and equipment, net of
accumulated depreciation of $370,164 and $341,119
266,104
260,246
Investments in unconsolidated joint
ventures
12,755
16,461
Deferred income taxes
26,907
17,117
Goodwill
265,781
262,930
Other intangible assets, net of
amortization
132,818
158,947
Pension assets
4,337
12,790
Asbestos-related insurance receivables,
non-current portion
74,024
74,024
Other long-term assets
14,871
6,564
Total assets
$
1,272,040
$
1,273,181
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
35,886
$
33,019
Accrued employee benefits and
compensation
35,991
29,678
Accrued income taxes payable
6,235
10,649
Asbestos-related liabilities, current
portion
5,007
5,007
Other accrued liabilities
23,237
21,872
Total current liabilities
106,356
100,225
Borrowings under revolving credit
facility
60,000
123,000
Pension and other postretirement benefits
liabilities
1,654
1,567
Asbestos-related liabilities, non-current
portion
80,540
80,873
Non-current income tax
15,509
10,423
Deferred income taxes
9,497
9,220
Other long-term liabilities
11,460
13,973
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,676 and 18,577 shares issued and
outstanding
18,676
18,577
Additional paid-in capital
145,010
138,526
Retained earnings
858,487
823,702
Accumulated other comprehensive loss
(35,149
)
(46,905
)
Total shareholders' equity
987,024
933,900
Total liabilities and shareholders'
equity
$
1,272,040
$
1,273,181
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 net income, which the Company defines as net income
excluding amortization of acquisition intangible assets and
discrete items, such as acquisition and related integration costs,
environmental accrual adjustment, gains or losses on the sale or
disposal of property, plant and equipment, pension settlement
charges, restructuring, severance, impairment and other related
costs, and the related income tax effect on these items
(collectively, “discrete items”), and transition services, net;
(2) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition intangible assets, discrete items, transition services,
net and the impact of including dilutive securities divided by
adjusted weighted average shares outstanding - diluted;
(3) Adjusted EBITDA, which the Company defines as net income
excluding interest expense, net, income tax expense, depreciation
and amortization, stock-based compensation expense, transition
services lease income and discrete items;
(4) Adjusted operating margin, which the Company defines as
operating margin excluding acquisition-related amortization of
intangible assets, discrete items excluding pension settlement
charges, and transition services, net;
(5) Free cash flow, which the Company defines as net cash
provided by operating activities less non-acquisition capital
expenditures.
Management believes adjusted net income, adjusted earnings per
diluted share, adjusted EBITDA and adjusted operating margin are
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 these measures enhance the ability of
investors to analyze trends in the Company’s business and evaluate
the Company’s performance relative to peer companies. Management
also believes free cash flow is useful to investors as an
additional way of viewing the Company's liquidity and provides a
more complete understanding of factors and trends affecting the
Company's cash flows. 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 net income to
adjusted net income:
(amounts in millions)
2020
2019
Net income
Q3
Q2
Q3
GAAP net income
$
7.0
$
14.5
$
23.4
Acquisition and related integration
costs
0.1
0.4
0.5
Environmental accrual adjustment
—
(0.2
)
—
Loss on sale or disposal of property,
plant and equipment
—
0.1
—
Restructuring, severance, impairment and
other related costs
10.7
0.6
1.3
Transition services, net
—
—
0.1
Acquisition intangible amortization
15.4
7.5
4.4
Income tax effect of non-GAAP adjustments
and intangible amortization
(6.1
)
(1.9
)
(1.5
)
Adjusted net income
$
27.1
$
21.1
$
28.2
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share*:
2020
2019
Earnings per diluted share
Q3
Q2
Q3
GAAP earnings per diluted share
$
0.37
$
0.78
$
1.25
Acquisition and related integration
costs
0.01
0.02
0.02
Environmental accrual adjustment
—
(0.01
)
—
Restructuring, severance, impairment and
other related costs
0.43
0.02
0.05
Transition services, net
—
—
0.01
Total discrete items
$
0.44
$
0.04
$
0.08
Earnings per diluted share adjusted for
discrete items
$
0.81
$
0.82
$
1.33
Acquisition intangible amortization
$
0.64
$
0.31
$
0.18
Adjusted earnings per diluted share
$
1.45
$
1.13
$
1.51
*Values in table may not add due to
rounding.
Reconciliation of GAAP net income to
adjusted EBITDA*:
2020
2019
(amounts in millions)
Q3
Q2
Q3
GAAP Net income
$
7.0
$
14.5
$
23.4
Interest expense, net
3.6
1.8
1.8
Income tax expense
0.6
6.4
5.3
Depreciation
7.3
7.4
7.6
Amortization
15.4
7.6
4.4
Stock-based compensation expense
3.3
3.9
3.2
Acquisition and related integration
costs
0.1
0.4
0.5
Environmental accrual adjustment
—
(0.2
)
—
Loss on sale or disposal of property,
plant and equipment
—
0.1
—
Restructuring, severance, impairment and
other related costs
10.6
0.6
1.3
Transition services lease income
—
—
(0.1
)
Adjusted EBITDA
$
47.9
$
42.5
$
47.4
*Values in table may not add due to
rounding.
Reconciliation of GAAP operating margin
to adjusted operating margin*:
2020
2019
Operating margin
Q3
Q2
Q3
GAAP operating margin
4.4
%
11.0
%
13.5
%
Acquisition and related integration
costs
0.1
%
0.2
%
0.2
%
Environmental accrual adjustment
0.0
%
(0.1
%)
0.0
%
Restructuring, severance, impairment and
other related costs
5.3
%
0.3
%
0.6
%
Total discrete items
5.3
%
0.5
%
0.8
%
Operating margin adjusted for discrete
items
9.7
%
11.5
%
14.3
%
Acquisition intangible amortization
7.6
%
3.9
%
2.0
%
Adjusted operating margin
17.3
%
15.4
%
16.3
%
*Percentages in table may not add due to
rounding.
Reconciliation of net cash provided by
operating activities to free cash flow*:
2020
2019
(amounts in millions)
Q3
Q2
Q3
Net cash provided by operating
activities
$
58.7
$
46.3
$
48.2
Non-acquisition capital expenditures
(10.8
)
(7.0
)
(14.8
)
Free cash flow
$
47.9
$
39.3
$
33.4
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2020 third quarter:
Guidance
Q3 2020
GAAP earnings per diluted share
$0.19 - $0.39
Discrete items
$0.08
Acquisition intangible amortization*
$0.63
Adjusted earnings per diluted share
$0.90 - $1.10
*Includes an expected $11.7 million of
accelerated intangible amortization expense associated with the DSP
business
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the 2020 fourth quarter:
Guidance
Q4 2020
GAAP earnings per diluted share
$0.50 - $0.70
Discrete items
$0.17
Acquisition intangible amortization*
$0.63
Adjusted earnings per diluted share
$1.30 - $1.50
*Includes an expected $11.7 million of
accelerated intangible amortization expense associated with the DSP
business
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029006104/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com
Website address: http://www.rogerscorp.com
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