Strong Growth In EV And Other Strategic
Markets Drives Continued Sales Improvement Supply Chain Challenges
Temper Margins And EPS
Rogers Corporation (NYSE:ROG) today announced financial results
for the second quarter of 2021.
“Rogers achieved continued sales improvement in the second
quarter driven by growth in EV/HEV, clean energy and other
strategic markets,” stated Bruce D. Hoechner, Rogers' President and
CEO. “Global supply chain challenges impacted our second quarter
results more than anticipated and margins and earnings were below
our prior guidance expectations. We are addressing these recent
challenges as we continue to navigate this dynamic environment. We
are executing on our market strategy and the outlook for Advanced
Mobility remains robust, led by the accelerating transition to
electric and hybrid electric vehicles. We continue to significantly
increase our investments in new capacity and capabilities to
capitalize on the growth opportunities across our market
portfolio.”
Financial Overview
GAAP Results
Q2 2021
Q1 2021
Q2 2020
Net Sales ($M)
$234.9
$229.3
$191.2
Gross Margin
38.2%
39.0%
36.6%
Operating Margin
15.2%
16.2%
11.0%
Net Income ($M)
$28.7
$31.2
$14.5
Diluted Earnings Per Share
$1.52
$1.66
$0.78
Non-GAAP Results1
Q2 2021
Q1 2021
Q2 2020
Adjusted Operating Margin
17.4%
19.0%
15.4%
Adjusted Net Income ($M)
$32.5
$36.0
$21.1
Adjusted Earnings Per Diluted
Share
$1.72
$1.92
$1.13
Adjusted EBITDA ($M)
$55.8
$59.8
$42.5
Adjusted EBITDA Margin
23.8%
26.1%
22.2%
Free Cash Flow ($M)
$11.9
$32.9
$39.3
Net Sales by Operating Segment
(dollars in millions)
Q2 2021
Q1 2021
Q2 2020
Advanced Electronics Solutions
(AES)2
$140.4
$131.9
$116.2
Elastomeric Material Solutions
(EMS)
$89.3
$91.8
$71.6
Other
$5.1
$5.5
$3.4
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
2 - The AES business segment was formed in
the first quarter of 2021 through the combination of the Advanced
Connectivity Solutions (ACS) and Power Electronics Solutions (PES)
businesses. Prior period consolidated financial statements have
been reclassified to conform to the current year presentation.
Q2 2021 Summary of
Results
Net sales of $234.9 million increased 2.5% versus the prior
quarter from higher sales in the AES business unit. AES net sales
increased primarily due to strong demand for EV/HEV applications
and higher clean energy, defense and wireless infrastructure market
sales, partially offset by a decline in sales for ADAS
applications. Demand remained strong in the EMS business, but net
sales decreased compared to the prior quarter primarily due to
lower production levels from supply constraints and the previously
announced disruption to the Company's manufacturing facility in
South Korea. The lower production levels contributed to the decline
in portable electronics market sales, and tempered growth in
industrial market sales. EV/HEV sales declined slightly, compared
to strong first quarter sales. Currency exchange rates unfavorably
impacted total company net sales in the second quarter of 2021 by
$0.8 million compared to prior quarter net sales.
Gross margin was 38.2%, compared to 39.0% in the prior quarter.
The decrease in gross margin was primarily due to the impact of
supply constraints, raw material price increases and unfavorable
product mix, partially offset by higher volumes.
Selling, general and administrative (SG&A) expenses
increased by $2.5 million from the prior quarter to $45.0 million.
The increase in SG&A expense was due to higher performance
based compensation costs and reinvestment initiatives.
GAAP operating margin of 15.2% decreased by 100 basis points
from the prior quarter primarily due to lower gross margin and
higher SG&A expenses, partially offset by lower restructuring
charges. Adjusted operating margin of 17.4% decreased by 160 basis
points versus the prior quarter.
GAAP earnings per diluted share were $1.52, compared to earnings
per diluted share of $1.66 in the previous quarter. The decrease in
GAAP earnings primarily resulted from lower operating income and
other income, partially offset by lower tax expense. On an adjusted
basis, earnings were $1.72 per diluted share compared to adjusted
earnings of $1.92 per diluted share in the prior quarter.
Ending cash and cash equivalents were $203.9 million, an
increase of $4.8 million versus the prior quarter. The Company
generated free cash flow of approximately $11.9 million in the
second quarter of 2021. Net cash provided by operating activities
of $29.7 million was offset by $4.0 million of principal payments
made on the remaining outstanding borrowings under the Company’s
revolving credit facility and capital expenditures of $17.8
million.
Financial
Outlook
Q3 2021
Net Sales ($M)
$235 to $245
Gross Margin
38.5% to 39.5%
Earnings Per Share
$1.50 to $1.65
Adjusted Earnings Per Share1
$1.70 to $1.85
2021
Effective Tax Rate
24% - 25%
Capital Expenditures ($M)
$70 to $80
1 - 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. Rogers delivers
innovative solutions to help our customers solve their toughest
material challenges. Rogers’ advanced electronic and elastomeric
materials are used in applications for EV/HEV, automotive safety
and radar systems, mobile devices, renewable energy, wireless
infrastructure, energy-efficient motor drives, industrial equipment
and more. Headquartered in Chandler, Arizona, Rogers operates
manufacturing facilities in the United States, Asia and Europe,
with 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
those indicated by 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 and distribute vaccines,
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. (Huawei);
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 and willingness 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 second quarter
of 2021 will take place today, Thursday, July 29, 2021 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.
An audio replay of the conference call will be available from
July 29, 2021 at approximately 8 pm ET through August 5, 2021 at
11:59 pm ET, by dialing 1-888-203-1112 from the United States, and
entering the replay passcode of 9771089.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET on July 29, 2021.
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
Six Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
June 30, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Net sales
$
234,906
$
191,157
$
464,171
$
389,967
Cost of sales
145,073
121,188
284,839
254,368
Gross margin
89,833
69,969
179,332
135,599
Selling, general and
administrative expenses
44,959
41,694
87,372
82,024
Research and development
expenses
7,492
7,295
14,664
15,100
Restructuring and impairment
charges
747
—
2,253
—
Other operating (income) expense,
net
890
(112
)
2,105
(92
)
Operating income
35,745
21,092
72,938
38,567
Equity income in unconsolidated
joint ventures
1,930
1,022
4,111
2,240
Pension settlement charges
—
(55
)
—
(55
)
Other income (expense), net
1,239
634
4,207
(152
)
Interest expense, net
(404
)
(1,779
)
(1,011
)
(2,986
)
Income before income tax
expense
38,510
20,914
80,245
37,614
Income tax expense
9,855
6,394
20,372
9,835
Net income
$
28,655
$
14,520
$
59,873
$
27,779
Basic earnings per share
$
1.53
$
0.78
$
3.20
$
1.49
Diluted earnings per share
$
1.52
$
0.78
$
3.18
$
1.49
Shares used in computing:
Basic earnings per share
18,729
18,676
18,721
18,673
Diluted earnings per share
18,846
18,681
18,810
18,686
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PAR VALUE)
June 30, 2021
December 31, 2020
Assets
Current assets
Cash and cash equivalents
$
203,945
$
191,785
Accounts receivable, less
allowance for doubtful accounts of $1,319 and $1,682
157,471
134,421
Contract assets
30,285
26,575
Inventories
110,761
102,360
Prepaid income taxes
2,904
2,960
Asbestos-related insurance
receivables, current portion
2,986
2,986
Other current assets
16,773
13,088
Total current assets
525,125
474,175
Property, plant and equipment,
net of accumulated depreciation of $364 and $366
282,543
272,378
Investments in unconsolidated
joint ventures
16,904
15,248
Deferred income taxes
25,986
28,667
Goodwill
267,192
270,172
Other intangible assets, net of
amortization
111,404
118,026
Pension assets
5,694
5,278
Asbestos-related insurance
receivables, non-current portion
63,807
63,807
Other long-term assets
14,821
16,254
Total assets
$
1,313,476
$
1,264,005
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
53,471
$
35,987
Accrued employee benefits and
compensation
43,915
41,708
Accrued income taxes payable
5,177
8,558
Asbestos-related liabilities,
current portion
3,615
3,615
Other accrued liabilities
20,844
21,641
Total current liabilities
127,022
111,509
Borrowings under revolving credit
facility
—
25,000
Pension and other postretirement
benefits liabilities
1,658
1,612
Asbestos-related liabilities,
non-current portion
69,469
69,620
Non-current income tax
16,930
16,346
Deferred income taxes
9,537
8,375
Other long-term liabilities
12,198
10,788
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,722 and 18,677 shares issued and
outstanding
18,722
18,677
Additional paid-in capital
154,330
147,961
Retained earnings
933,565
873,692
Accumulated other comprehensive
loss
(29,955
)
(19,575
)
Total shareholders' equity
1,076,662
1,020,755
Total liabilities and
shareholders' equity
$
1,313,476
$
1,264,005
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 operating margin, which the Company defines as
operating margin excluding acquisition-related amortization of
intangible assets and discrete items, such as acquisition and
related integration costs, environmental accrual adjustments, gains
or losses on the sale or disposal of property, plant and equipment,
restructuring, severance, impairment and other related costs, UTIS
fire charges, and the related income tax effect on these items
(collectively, “discreteitems”);
(2) Adjusted net income, which the Company defines as net income
excluding amortization of acquisition intangible assets and
discrete items;
(3) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition intangible assets, and discrete items divided by
adjusted weighted average shares outstanding - diluted;
(4) Adjusted EBITDA, which the Company defines as net income
excluding interest expense, net, income tax expense, depreciation
and amortization, stock-based compensation expense, and discrete
items;
(5) Adjusted EBITDA Margin, which the Company defines as the
percentage that results from dividing Adjusted EBITDA by total net
sales;
(6) Free cash flow, which the Company defines as net cash
provided by operating activities less non-acquisition capital
expenditures.
Management believes adjusted operating margin, adjusted net
income, adjusted earnings per diluted share, adjusted EBITDA and
adjusted EBITDA 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 as alternatives to, financial
measures prepared in accordance with GAAP. In addition, these
non-GAAP financial measures may differ from, and should not be
compared to, 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 operating margin
to adjusted operating margin*:
2021
2020
Operating margin
Q2
Q1
Q2
GAAP operating margin
15.2
%
16.2
%
11.0
%
Acquisition and related
integration costs
—
%
—
%
0.2
%
Environmental accrual
adjustment
—
%
—
%
(0.1
)%
Gain on sale or disposal of
property, plant and equipment
(0.3
)%
—
%
—
%
Restructuring, severance,
impairment and other related costs
0.4
%
0.8
%
0.3
%
UTIS fire charges
0.6
%
0.6
%
—
%
Total discrete items
0.8
%
1.4
%
0.5
%
Operating margin adjusted for
discrete items
16.0
%
17.6
%
11.5
%
Acquisition intangible
amortization
1.3
%
1.4
%
3.9
%
Adjusted operating margin
17.4
%
19.0
%
15.4
%
*Percentages in table may not add due to
rounding.
Reconciliation of GAAP net income to adjusted net
income:
(amounts in millions)
2021
2020
Net income
Q2
Q1
Q2
GAAP net income
$
28.7
$
31.2
$
14.5
Acquisition and related
integration costs
$
—
$
—
$
0.4
Environmental accrual
adjustment
$
—
$
—
$
(0.2
)
Gain on sale or disposal of
property, plant and equipment
$
(0.6
)
$
(0.1
)
$
0.1
Restructuring, severance,
impairment and other related costs
$
1.0
$
1.9
$
0.6
Acquisition intangible
amortization
$
3.1
$
3.1
$
7.5
UTIS fire charges
$
1.5
$
1.3
$
—
Income tax effect of non-GAAP
adjustments and intangible amortization
$
(1.2
)
$
(1.5
)
$
(1.9
)
Adjusted net income
$
32.5
$
36.0
$
21.1
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per diluted share to
adjusted earnings per diluted share*:
2021
2020
Earnings per diluted
share
Q2
Q1
Q2
GAAP earnings per diluted
share
$
1.52
$
1.66
$
0.78
Acquisition and related
integration costs
—
—
0.02
Environmental accrual
adjustment
—
—
(0.01
)
Gain on sale or disposal of
property, plant and equipment
(0.02
)
—
—
Restructuring, severance,
impairment and other related costs
0.04
0.08
0.02
UTIS fire charges
0.06
0.05
—
Total discrete items
$
0.08
$
0.13
$
0.04
Earnings per diluted share
adjusted for discrete items
$
1.60
$
1.79
$
0.82
Acquisition intangible
amortization
$
0.13
$
0.13
$
0.31
Adjusted earnings per diluted
share
$
1.72
$
1.92
$
1.13
*Values in table may not add due to
rounding.
Reconciliation of GAAP net income to
adjusted EBITDA*:
2021
2020
(amounts in millions)
Q2
Q1
Q2
GAAP Net income
$
28.7
$
31.2
$
14.5
Interest expense, net
0.4
0.6
1.8
Income tax expense
9.9
10.5
6.4
Depreciation
7.5
7.2
7.4
Amortization
3.1
3.1
7.6
Stock-based compensation
expense
4.4
4.0
3.9
Acquisition and related
integration costs
—
—
0.4
Environmental accrual
adjustment
—
—
(0.2
)
Gain on sale or disposal of
property, plant and equipment
(0.6
)
(0.1
)
0.1
Restructuring, severance,
impairment and other related costs
0.9
1.9
0.6
UTIS fire charges
1.5
1.3
—
Adjusted EBITDA
$
55.8
$
59.8
$
42.5
*Values in table may not add due to
rounding.
Calculation of adjusted EBITDA margin*:
2021
2020
Q2
Q1
Q2
Adjusted EBITDA (in millions)
$
55.8
$
59.8
$
42.5
Divided by Total Net Sales (in
millions)
234.9
229.3
191.2
Adjusted EBITDA Margin
23.8
%
26.1
%
22.2
%
*Values in table may not add due to
rounding
Reconciliation of net cash provided by
operating activities to free cash flow*:
2021
2020
(amounts in millions)
Q2
Q1
Q2
Net cash provided by operating
activities
$
29.7
$
36.5
$
46.3
Non-acquisition capital
expenditures
(17.8
)
(3.6
)
(7.0
)
Free cash flow
$
11.9
$
32.9
$
39.3
*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 2021 second quarter:
Guidance Q2 2021
GAAP earnings per diluted
share
$1.58 - $1.73
Discrete items
$0.09
Acquisition intangible
amortization
$0.13
Adjusted earnings per diluted
share
$1.80 - $1.95
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share guidance for
the third quarter of 2021:
Guidance Q3 2021
GAAP earnings per diluted
share
$1.50 - $1.65
Discrete items
$0.07
Acquisition intangible
amortization
$0.13
Adjusted earnings per diluted
share
$1.70 - $1.85
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729006069/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com
Website address: http://www.rogerscorp.com
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