Improved Financial Performance Driven by
Higher Demand and Cost Actions
Rogers Corporation (NYSE:ROG) today announced financial results
for the first quarter of 2023.
“First quarter sales and gross margin exceeded the high end of
our guidance as a result of improved market demand and continued
execution of our cost improvement plans,” stated Colin Gouveia,
Rogers' President and CEO. “Sales in the ADAS, general industrial
and renewable energy markets all contributed to the higher revenue
versus the prior quarter. While we are pleased with the improved
profitability in the first quarter, we remain intently focused on
realizing the full benefit of the previously announced cost
improvement actions, including achieving 34% gross margin in the
second quarter. As outlined at our recent Investor Day, we will
continue to execute on the Restore phase of our multi-year strategy
as we also focus on leveraging our innovative technologies and
application expertise to drive towards our 2025 growth
targets."
Financial Overview
GAAP Results
Q1 2023
Q4 2022
Q1 2022
Net Sales ($M)
$243.8
$223.7
$248.3
Gross Margin
32.7%
31.8%
34.4%
Operating Margin1
(0.1%)
37.0%
8.0%
Net Income (Loss) ($M)1
$(3.5)
$67.3
$16.6
Net Income (Loss) Margin1
(1.4)%
30.1%
6.7%
Diluted Earnings Per Share1
$(0.19)
$3.58
$0.87
Net Cash Used by Operating Activities1
$1.8
$127.6
$(13.7)
Non-GAAP Results2
Q1 2023
Q4 2022
Q1 2022
Adjusted Operating Margin
10.5%
9.3%
14.5%
Adjusted Net Income ($M)
$16.2
$19.5
$29.1
Adjusted Earnings Per Diluted Share
$0.87
$1.04
$1.53
Adjusted EBITDA ($M)
$35.1
$27.8
$47.2
Adjusted EBITDA Margin
14.4%
12.5%
19.0%
Free Cash Flow ($M)
$(14.6)
$97.8
$(42.0)
Net Sales by Operating Segment (dollars in
millions)
Q1 2023
Q4 2022
Q1 2022
Advanced Electronics Solutions (AES)
$135.9
$125.3
$133.2
Elastomeric Material Solutions (EMS)
$102.2
$93.7
$110.2
Other
$5.7
$4.7
$4.9
1 - Q4 2022 includes receipt of a regulatory termination fee 2 -
A reconciliation of GAAP to non-GAAP measures is provided in the
schedules included below
Q1 2023 Summary of
Results
Net sales of $243.8 million increased 9.0% versus the prior
quarter resulting from higher ADAS, general industrial and
renewable energy market revenues, and favorable currency exchange
rate fluctuations. AES net sales increased by 8.4% primarily
related to higher ADAS and renewable energy revenues and favorable
currency exchange rates, partially offset by lower EV/HEV revenues
following strong fourth quarter sales. EMS net sales increased by
9.1% primarily from stronger general industrial revenues, partially
offset by lower portable electronics market revenues. Currency
exchange rates favorably impacted total company net sales in the
first quarter of 2023 by $6.0 million compared to prior quarter net
sales.
Gross margin improved to 32.7%, compared to 31.8% in the prior
quarter due to higher sales volumes, improved factory utilization
and lower logistics costs, partially offset by unfavorable product
mix.
Selling, general and administrative (SG&A) expenses
increased by $5.8 million from the prior quarter to $60.1 million.
The higher SG&A expense was due primarily to an increase in
professional service fees, variable compensation costs and sales
and marketing expenses.
GAAP operating margin of (0.1)% decreased from 37.0% in the
prior quarter. The decline in operating margin was due to lower
other operating income and an increase in SG&A, partially
offset by a reduction in restructuring and impairment charges.
Other operating income decreased significantly due to the receipt
of a $142.1 million regulatory termination fee, net of transaction
expenses in the fourth quarter. Restructuring and impairment
charges declined to $10.5 million in the first quarter from $65.4
million in the prior quarter. Adjusted operating margin of 10.5%
increased by 120 basis points versus the prior quarter.
GAAP earnings per diluted share were $(0.19), compared to
earnings per diluted share of $3.58 in the previous quarter. The
decrease in GAAP earnings per diluted share was due to lower
operating income, partially offset by a decrease in tax expense. On
an adjusted basis, earnings were $0.87 per diluted share compared
to adjusted earnings of $1.04 per diluted share in the prior
quarter.
Ending cash and cash equivalents were $193.7 million, a decrease
of $42.7 million versus the prior quarter. First quarter net cash
used in operating activities was $1.8 million. Also in the quarter,
the Company had capital expenditures of $16.4 million and made a
principal payment of $25.0 million on the outstanding borrowings
under the Company’s revolving credit facility.
Financial Outlook
Q2 2023
Net Sales ($M)
$235 to $245
Gross Margin
33.5% to 34.5%
Earnings Per Share
$0.65 to $0.85
Non-GAAP Earnings Per Share1
$0.95 to $1.15
2023
Capital Expenditures ($M)
$65 to $75
1 - A reconciliation of GAAP to non-GAAP measures is provided in
the schedules included below
Conference call and additional
Information
A conference call to discuss the results for the first quarter
will take place today, Thursday, April 27, 2023 at 5:00 pm 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.
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
Statements included in this release that are not a description
of historical facts are forward-looking statements. Words or
phrases such as “believe,” “may,” “could,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,”
“should,” “would” or similar expressions are intended to identify
forward-looking statements, and are based on Rogers’ current
beliefs and expectations. This release contains forward-looking
statements regarding 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. Other 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; continuing disruptions to global supply
chains and our ability, or the ability of our suppliers, to obtain
necessary product components; 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, the United Kingdom, 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, including the ongoing conflict between Russia and Ukraine,
terrorism or public health crises; the impact of sanctions, export
controls and other foreign asset or investment restrictions;
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 or
risks arising from the terminated DuPont Merger; changes in
environmental laws and regulations applicable to our business; and
disruptions in, or breaches of, our information technology systems.
Should any risks and uncertainties develop into actual events,
these developments could have a material adverse effect on the
Company. 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.
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
March 31, 2023
March 31, 2022
Net sales
$
243,847
$
248,266
Cost of sales
164,146
162,872
Gross margin
79,701
85,394
Selling, general and administrative
expenses
60,085
57,705
Research and development expenses
9,586
8,260
Restructuring and impairment charges
10,501
69
Other operating (income) expense, net
(219
)
(531
)
Operating income
(252
)
19,891
Equity income in unconsolidated joint
ventures
76
1,275
Other income (expense), net
5
267
Interest expense, net
(3,462
)
(1,069
)
Income before income tax expense
(3,633
)
20,364
Income tax expense (benefit)
(128
)
3,764
Net income
$
(3,505
)
$
16,600
Basic earnings per share
$
(0.19
)
$
0.88
Diluted earnings per share
$
(0.19
)
$
0.87
Shares used in computing:
Basic earnings per share
18,604
18,780
Diluted earnings per share
18,604
18,999
Condensed Consolidated Statements of
Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PAR VALUE)
March 31, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
193,724
$
235,850
Accounts receivable, less allowance for
doubtful accounts of $1,099 and $1,007
174,620
177,413
Contract assets
46,746
38,853
Inventories
177,089
182,402
Prepaid income taxes
3,908
4,042
Asbestos-related insurance receivables,
current portion
3,881
3,881
Other current assets
11,913
17,426
Total current assets
611,881
659,867
Property, plant and equipment, net of
accumulated depreciation of $392,217 and $381,584
361,527
358,415
Investments in unconsolidated joint
ventures
12,841
14,082
Deferred income taxes
57,991
50,649
Goodwill
355,867
352,365
Other intangible assets, net of
amortization
132,233
133,724
Pension assets
5,342
5,251
Asbestos-related insurance receivables,
non-current portion
55,926
55,926
Other long-term assets
17,919
15,935
Total assets
$
1,611,527
$
1,646,214
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
52,156
$
57,342
Accrued employee benefits and
compensation
37,207
34,158
Accrued income taxes payable
4,553
5,504
Asbestos-related liabilities, current
portion
4,968
4,968
Finance lease obligations, current
portion
380
498
Other accrued liabilities
28,214
40,067
Total current liabilities
127,478
142,537
Borrowings under revolving credit
facility
190,000
215,000
Pension and other postretirement benefits
liabilities
1,540
1,501
Asbestos-related liabilities, non-current
portion
59,996
60,065
Finance lease obligations, non-current
portion
1,323
1,295
Non-current income tax
9,204
9,985
Deferred income taxes
24,026
23,557
Other long-term liabilities
19,702
19,808
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,609 and 18,574 shares issued and
outstanding
18,609
18,574
Additional paid-in capital
140,214
140,702
Retained earnings
1,094,949
1,098,454
Accumulated other comprehensive loss
(75,514
)
(85,264
)
Total shareholders' equity
1,178,258
1,172,466
Total liabilities and shareholders'
equity
$
1,611,527
$
1,646,214
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, which are acquisition and
related integration costs, gains or losses on the sale or disposal
of property, plant and equipment, restructuring, severance,
impairment and other related costs, non-routine shareholder
advisory costs, UTIS fire and recovery charges, (income) costs
associated with terminated merger, and the related income tax
effect on these items (collectively, “discrete items”);
(2) Adjusted net income (loss), which the Company defines as net
income excluding amortization of acquisition intangible assets,
pension settlement charges and discrete items;
(3) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition intangible assets, pension settlement charges and
discrete items divided by adjusted weighted average shares
outstanding - diluted;
(4) Adjusted EBITDA, which the Company defines as net income
(loss) excluding interest expense, net, income tax expense,
depreciation and amortization, stock-based compensation expense,
pension settlement charges 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 (used) 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*:
2023
2022
Operating margin
Q1
Q4
Q1
GAAP operating margin
(0.1
) %
37.0
%
8.0
%
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
%
0.1
%
0.2
%
Dispositions
0.5
%
1.4
%
—
%
Loss/(gain) on sale or disposal of
assets
—
%
0.2
%
—
%
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
4.9
%
30.7
%
0.2
%
Non-routine shareholder advisory costs
3.1
%
—
%
—
%
(Income) costs associated with terminated
merger
0.8
%
(62.0
) %
4.6
%
UTIS fire (recovery)/charges
(0.1
) %
0.2
%
(0.2
) %
Total discrete items
9.2
%
(29.4
) %
4.8
%
Operating margin adjusted for discrete
items
9.1
%
7.6
%
12.8
%
Acquisition intangible amortization
1.4
%
1.7
%
1.7
%
Adjusted operating margin
10.5
%
9.3
%
14.5
%
*Percentages in table may not add due to
rounding.
Reconciliation of GAAP net income to adjusted net
income*:
(amounts in millions)
2023
2022
Net income
Q1
Q4
Q1
GAAP net income (loss)
$
(3.5
)
$
67.3
$
16.6
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
0.1
0.1
0.5
Acquisition intangible amortization
3.3
3.8
4.3
Dispositions
1.2
3.2
—
Loss/(gain) on sale or disposal of
assets
—
0.5
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
11.9
68.6
0.5
Non-routine shareholder advisory costs
7.6
—
—
(Income) costs associated with terminated
merger
1.9
(138.6
)
11.5
UTIS fire (recovery)/charges
(0.2
)
0.4
(0.5
)
Asbestos-related charges
—
0.1
—
Income tax effect of non-GAAP adjustments
and intangible amortization
(6.1
)
14.1
(3.7
)
Adjusted net income
$
16.2
$
19.5
$
29.1
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share*:
2023
2022
Earnings per diluted share
Q1
Q4
Q1
GAAP earnings per diluted share
$
(0.19
)
$
3.58
$
0.87
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
—
0.02
Dispositions
0.05
0.13
—
Loss/(gain) on sale or disposal of
assets
—
0.02
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
0.49
2.81
0.02
Non-routine shareholder advisory costs
0.31
—
—
(Income) costs associated with terminated
merger
0.08
(5.67
)
0.47
UTIS fire (recovery)/charges
(0.01
)
0.02
(0.02
)
Asbestos-related charges
—
—
—
Impact of including dilutive
securities(a)
—
—
—
Total discrete items
$
0.92
$
(2.69
)
$
0.49
Earnings per diluted share adjusted for
discrete items
0.73
0.89
1.36
Acquisition intangible amortization
$
0.14
$
0.15
$
0.17
Adjusted earnings per diluted share
$
0.87
$
1.04
$
1.53
*Values in table may not add due to
rounding.
(a)This represents the dilutive effect of
awards under equity compensation plans. Refer to the table below
for the effect on adjusted weighted average shares outstanding -
diluted.
The following table reconciles weighted average shares
outstanding - diluted under US GAAP to adjusted weighted average
shares outstanding - diluted used in the calculation of adjusted
diluted EPS:
2023
2022
(Shares in thousands)
Q1
Q4
Q1
Weighted average shares outstanding -
diluted
18,604
18,820
18,999
Dilutive effect of awards under equity
compensation plans
32
0
0
Adjusted weighted average shares
outstanding - diluted
18,636
18,820
18,999
Reconciliation of GAAP net income to adjusted
EBITDA*:
2023
2022
(amounts in millions)
Q1
Q4
Q1
GAAP net income (loss)
$
(3.5
)
$
67.3
$
16.6
Interest expense, net
3.5
4.0
1.1
Income tax expense (benefit)
(0.1
)
11.1
3.8
Depreciation
11.3
7.7
6.4
Amortization
3.3
3.8
4.3
Stock-based compensation expense
2.1
0.2
3.2
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
0.1
0.1
0.5
Dispositions
1.2
3.2
—
Loss/(gain) on sale or disposal of
assets
—
0.5
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
8.6
68.1
0.5
Non-routine shareholder advisory costs
7.6
—
—
(Income) costs associated with terminated
merger
1.3
(138.6
)
11.5
UTIS fire (recovery)/charges
(0.2
)
0.4
(0.5
)
Asbestos-related charges
—
0.1
—
Adjusted EBITDA
$
35.1
$
27.8
$
47.2
*Values in table may not add due to
rounding.
Calculation of adjusted EBITDA margin*:
2023
2022
Q1
Q4
Q1
Adjusted EBITDA (in millions)
$
35.1
$
27.8
$
47.2
Divided by Total Net Sales (in
millions)
243.8
223.7
248.3
Adjusted EBITDA Margin
14.4
%
12.5
%
19.0
%
*Values in table may not add due to
rounding.
Reconciliation of net cash provided by (used in) operating
activities to free cash flow*:
2023
2022
(amounts in millions)
Q1
Q4
Q1
Net cash provided by (used in) operating
activities
$
1.8
$
127.6
(13.7
)
Non-acquisition capital expenditures
(16.4
)
(29.8
)
(28.2
)
Free cash flow
$
(14.6
)
$
97.8
(42.0
)
*Values in table may not add due to
rounding. Net cash provided by operating activities includes
regulatory termination fee net of fees and taxes received in Q4
2022.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share guidance for the 2023 second
quarter:
Guidance
Q2 2023
GAAP earnings per diluted share
$0.65 to $0.85
Discrete items
$0.16
Acquisition intangible amortization
$0.14
Adjusted earnings per diluted share
$0.95 - $1.15
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230427005662/en/
Investors: Steve Haymore Phone: 480-917-6026 Email:
stephen.haymore@rogerscorporation.com
Website address: https://www.rogerscorp.com
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