Rogers
Corporation (NYSE:ROG) today announced financial results for the
2019 first quarter.
The Company reported 2019 first quarter net sales of $239.8 million, a
7.6% increase compared to 2018 fourth quarter net sales of $222.9
million and an 11.7% increase compared to 2018 first quarter net sales
of $214.6 million. Net sales for the 2019 first quarter exceeded the
high-end of the Company’s previously announced guidance range of $220 to
$230 million. Currency exchange rates favorably impacted the 2019 first
quarter net sales by $0.2 million compared to 2018 fourth quarter net
sales, but had an unfavorable impact of $6.1 million compared to 2018
first quarter net sales.
First quarter 2019 net income was $28.4 million compared to $24.5
million in the fourth quarter of 2018 and $26.1 million in the first
quarter of 2018. Earnings for 2019 first quarter were $1.52 per diluted
share compared to $1.31 per diluted share in the fourth quarter of 2018
and $1.40 per diluted share in the first quarter of 2018. Earnings per
diluted share exceeded the Company’s previously announced guidance range
of $0.97 to $1.12. On an adjusted basis, earnings were $1.85 per diluted
share for the 2019 first quarter compared to adjusted earnings of $1.67
per diluted share in the fourth quarter of 2018 and $1.48 per diluted
share in the first quarter of 2018. Adjusted earnings exceeded the
Company’s previously announced guidance range of $1.25 to $1.40 per
diluted share.
Adjusted EBITDA was $53.1 million, or 22.2% of net sales, for the first
quarter of 2019 compared to $46.7 million, or 20.9% of net sales,
reported in the fourth quarter of 2018 and $44.1 million, or 20.6% of
net sales, reported in the first quarter of 2018. Beginning in the first
quarter of 2019 the Company modified its definition of adjusted EBITDA
to add-back stock-based compensation expense. This adjustment has been
applied retrospectively to all periods presented.
Gross margin was 35.6% in the first quarter of 2019 compared to 35.2% in
the fourth quarter of 2018 and 35.7% in the first quarter of 2018. First
quarter 2019 gross margin exceeded the mid-point of the Company’s
previously announced guidance range of 35% to 36%. Operating margin was
13.7% in the first quarter of 2019 compared to 12.0% in the fourth
quarter of 2018 and 14.5% in the first quarter of 2018. Adjusted
operating margin was 17.1% in the first quarter of 2019 compared to
16.0% in the fourth quarter of 2018 and 15.4% in the first quarter of
2018.
“Our record Q1 revenue and earnings performance exceeded our
expectations due to strong tailwinds in Advanced Connectivity and
Advanced Mobility applications. In particular, meaningful 5G demand
began to ramp during the quarter and ADAS returned to strong sequential
growth. Demand for specific EV/HEV applications also continued to be
strong,” stated Bruce D. Hoechner, Rogers’ President and CEO. “We remain
focused on capacity expansions and operational improvements in order to
capitalize on these opportunities and deliver increased revenues and
profitability. We are seeing the results of our targeted strategy and
believe we are extremely well positioned to take advantage of the
significant market opportunities ahead.”
Business segment discussion
Advanced Connectivity Solutions (ACS)
Advanced
Connectivity Solutions reported 2019 first quarter net sales of $80.5
million, an 11.0% increase compared to 2018 fourth quarter net sales of
$72.5 million and a 9.6% increase compared to 2018 first quarter net
sales of $73.5 million. The sequential increase in 2019 first quarter
net sales was largely driven by growth in high frequency circuit
materials for 5G and 4G wireless infrastructure and Advanced Driver
Assistance Systems (ADAS). First quarter 2019 net sales were favorably
impacted by $0.4 million due to fluctuations in currency exchange rates
compared to 2018 fourth quarter net sales, but had an unfavorable impact
of $1.8 million compared to 2018 first quarter net sales.
Elastomeric Material Solutions (EMS)
Elastomeric
Material Solutions reported 2019 first quarter net sales of $92.8
million, a 5.1% increase compared to 2018 fourth quarter net sales of
$88.3 million and an 18.8% increase compared to 2018 first quarter net
sales of $78.1 million. The sequential increase in 2019 first quarter
net sales was due to strong demand in automotive and mass transit and
growth in general industrial applications. Fluctuations in currency
exchange rates favorably impacted net sales by $0.2 million in the 2019
first quarter compared to 2018 fourth quarter net sales, but had an
unfavorable impact of $1.5 million compared to 2018 first quarter net
sales.
Power Electronics Solutions (PES)
Power
Electronics Solutions reported 2019 first quarter net sales of $59.8
million, a 5.4% increase compared to 2018 fourth quarter net sales of
$56.8 million and a 3.6% increase compared to 2018 first quarter net
sales of $57.7 million. The 2019 first quarter sequential increase was
primarily due to higher demand for power semiconductor substrates for
EV/HEV applications and renewable energy applications. First quarter
2019 net sales were unfavorably impacted by $0.4 million due to
fluctuations in currency exchange rates compared to 2018 fourth quarter
net sales and by $2.7 million compared to 2018 first quarter net sales.
Other
Other reported 2019 first
quarter net sales of $6.8 million, a 24.1% increase compared to 2018
fourth quarter net sales of $5.4 million and a 26.0% increase compared
to 2018 first quarter net sales of $5.4 million. The sequential increase
in 2019 first quarter net sales was due to a last-time buy in the Durel
business.
Balance sheet and other highlights
Cash position
Rogers ended the
first quarter of 2019 with cash and cash equivalents of $162.1 million,
a decrease of $5.6 million from $167.7 million at December 31, 2018. The
primary drivers of the lower cash balance were capital expenditures of
$12.6 million and repayment of debt principal of $5.0 million.
Effective tax rate
Rogers’
effective tax rate was 14.2% for the first quarter of 2019, compared to
3.6% for the fourth quarter of 2018. The lower effective tax rate for
the fourth quarter of 2018 was due primarily to the implementation of
tax strategies which significantly lowered our foreign taxes and
facilitated the reversal of reserves associated with uncertain tax
positions. The first quarter effective tax rate was lower than our
expected tax rate of 27% to 28% due to a change in the forecasted
geographic mix of pretax income as well as certain discrete tax benefits
realized in the first quarter. The Company expects the 2019 effective
tax rate to be 25% to 26% before any discrete tax items.
Financial outlook
Rogers guides
its 2019 second quarter net sales to a range of $240 to $250 million and
gross margin to a range of 35% to 36%. Rogers guides its 2019 second
quarter earnings to a range of $1.16 to $1.31 per diluted share and
adjusted earnings to a range of $1.47 to $1.62 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 clean energy, internet connectivity, and safety and
protection 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; fluctuations in foreign currency exchange rates; the
results of our research and development efforts; adverse competitive
developments; 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 2019 first quarter results will take place
today, Tuesday, April 30, 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 April 30, 2019 at approximately 8 pm ET through May 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 4795925.
Additionally, the archived webcast will be available on the Rogers
website at approximately 8 pm ET May 1, 2019.
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 | ||||||||||||
| (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
March 31, |
March 31, |
||||||||||
| Net sales | $ | 239,798 | $ | 214,611 | ||||||||
| Cost of sales | 154,404 | 138,005 | ||||||||||
| Gross margin | 85,394 | 76,606 | ||||||||||
| Selling, general and administrative expenses | 43,252 | 40,597 | ||||||||||
| Research and development expenses | 7,609 | 8,134 | ||||||||||
| Restructuring and impairment charges | 822 | 422 | ||||||||||
| Other operating (income) expense, net | 911 | (3,591 | ) | |||||||||
| Operating income | 32,800 | 31,044 | ||||||||||
| Equity income in unconsolidated joint ventures | 837 | 1,007 | ||||||||||
| Other income (expense), net | 1,404 | 66 | ||||||||||
| Interest expense, net | (1,938 | ) | (1,210 | ) | ||||||||
| Income before income tax expense | 33,103 | 30,907 | ||||||||||
| Income tax expense | 4,704 | 4,771 | ||||||||||
| Net income | $ | 28,399 | $ | 26,136 | ||||||||
| Basic earnings per share | $ | 1.53 | $ | 1.43 | ||||||||
| Diluted earnings per share | $ | 1.52 | $ | 1.40 | ||||||||
| Shares used in computing: | ||||||||||||
| Basic earnings per share | 18,557 | 18,288 | ||||||||||
| Diluted earnings per share | 18,692 | 18,610 | ||||||||||
|
Condensed Consolidated Statements of Financial Position |
||||||||||
| (IN THOUSANDS) | March 31, 2019 | December 31, 2018 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 162,074 | $ | 167,738 | ||||||
|
Accounts receivable, less allowance for doubtful accounts of $1,184 and $1,354 |
160,696 | 144,623 | ||||||||
| Contract assets | 27,315 | 22,728 | ||||||||
| Inventories | 133,242 | 132,637 | ||||||||
| Prepaid income taxes | 3,190 | 3,093 | ||||||||
| Asbestos-related insurance receivables, current portion | 4,138 | 4,138 | ||||||||
| Other current assets | 13,255 | 10,829 | ||||||||
| Total current assets | 503,910 | 485,786 | ||||||||
|
Property, plant and equipment, net of accumulated depreciation of $323,623 and $317,414 |
244,911 | 242,759 | ||||||||
| Investments in unconsolidated joint ventures | 15,799 | 18,667 | ||||||||
| Deferred income taxes | 11,316 | 8,236 | ||||||||
| Goodwill | 263,251 | 264,885 | ||||||||
| Other intangible assets, net of amortization | 172,234 | 177,008 | ||||||||
| Pension assets | 19,596 | 19,273 | ||||||||
| Asbestos-related insurance receivables, non-current portion | 59,685 | 59,685 | ||||||||
| Other long-term assets | 8,692 | 3,045 | ||||||||
| Total assets | $ | 1,299,394 | $ | 1,279,344 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable | $ | 43,481 | $ | 40,321 | ||||||
| Accrued employee benefits and compensation | 26,984 | 30,491 | ||||||||
| Accrued income taxes payable | 8,720 | 7,032 | ||||||||
| Asbestos-related liabilities, current portion | 5,547 | 5,547 | ||||||||
| Other accrued liabilities | 23,633 | 23,789 | ||||||||
| Total current liabilities | 108,365 | 107,180 | ||||||||
| Borrowings under revolving credit facility | 223,482 | 228,482 | ||||||||
| Pension and other postretirement benefits liabilities | 1,739 | 1,739 | ||||||||
| Asbestos-related liabilities, non-current portion | 64,672 | 64,799 | ||||||||
| Non-current income tax | 7,712 | 8,418 | ||||||||
| Deferred income taxes | 11,151 | 10,806 | ||||||||
| Other long-term liabilities | 13,951 | 9,596 | ||||||||
| Shareholders’ equity | ||||||||||
|
Capital stock – $1 par value; 50,000 authorized shares; 18,546 and 18,395 shares issued and outstanding |
18,546 | 18,395 | ||||||||
| Additional paid-in capital | 128,417 | 132,360 | ||||||||
| Retained earnings | 804,782 | 776,403 | ||||||||
| Accumulated other comprehensive loss | (83,423 | ) | (78,834 | ) | ||||||
| Total shareholders’ equity | 868,322 | 848,324 | ||||||||
| Total liabilities and shareholders’ equity | $ | 1,299,394 | $ | 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 acquisition-related amortization of
intangible assets and discrete items, such as restructuring expenses,
asbestos litigation-related charges, gain from antitrust litigation
settlement, acquisition and related integration costs, change in foreign
jurisdiction tax regulation on equity awards attributable to a prior
period, transition services related to the asset acquisition, and gains
or losses on asset or business 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 acquisition-related amortization of 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 |
|||||||||||||||||
| 2019 | 2018 | ||||||||||||||||
| Earnings per diluted share | Q1 | Q4 | Q1 | ||||||||||||||
| GAAP earnings per diluted share | $ | 1.52 | $ | 1.31 | $ | 1.40 | |||||||||||
| Restructuring, severance, impairment and other related costs | 0.07 | 0.11 | 0.06 | ||||||||||||||
| Acquisition and related integration costs | 0.02 | 0.02 | 0.02 | ||||||||||||||
|
Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period |
0.02 | — | — | ||||||||||||||
| Gain from antitrust litigation settlement | — | (0.06 | ) | (0.15 | ) | ||||||||||||
| Loss on sale of long-lived assets | 0.01 | — | — | ||||||||||||||
| Asbestos related charges | — | 0.03 | — | ||||||||||||||
| Transition services, net | 0.03 | 0.08 | — | ||||||||||||||
| Total discrete items | $ | 0.15 | $ | 0.18 | ($0.07 | ) | |||||||||||
| Earnings per diluted share adjusted for discrete items | $ | 1.67 | $ | 1.49 | $ | 1.33 | |||||||||||
| Acquisition intangible amortization | 0.18 | 0.18 | 0.15 | ||||||||||||||
| Adjusted earnings per diluted share | $ | 1.85 | $ | 1.67 | $ | 1.48 | |||||||||||
|
Reconciliation of GAAP net income to adjusted EBITDA for the |
|||||||||||||||||
| 2019 | 2018 | ||||||||||||||||
| (amounts in millions) | Q1 | Q4 | Q1 | ||||||||||||||
| Net income | $ | 28.4 | $ | 24.5 | $ | 26.1 | |||||||||||
| Interest expense, net | 1.9 | 2.1 | 1.2 | ||||||||||||||
| Income tax expense | 4.7 | 0.9 | 4.8 | ||||||||||||||
| Depreciation | 8.5 | 10.3 | 7.3 | ||||||||||||||
| Amortization | 4.5 | 4.4 | 3.8 | ||||||||||||||
| Stock-based compensation expense | 2.5 | 2.7 | 2.7 | ||||||||||||||
| Restructuring, severance, impairment and other related costs | 1.9 | 2.7 | 1.4 | ||||||||||||||
| Acquisition and related integration costs | 0.5 | 0.4 | 0.4 | ||||||||||||||
|
Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period |
0.5 | — | — | ||||||||||||||
| Gain from antitrust litigation settlement | — | (1.3 | ) | (3.6 | ) | ||||||||||||
| Asbestos-related charges | — | 0.7 | — | ||||||||||||||
| Loss on sale of long-lived assets | 0.3 | — | — | ||||||||||||||
| Transition services lease income | (0.6 | ) | (0.7 | ) | — | ||||||||||||
| Adjusted EBITDA** | $ | 53.1 | $ | 46.7 | $ | 44.1 | |||||||||||
|
*Values in table may not add due to rounding. |
|
**Adjusted EBITDA has been retrospectively restated for all |
|
Reconciliation of GAAP operating margin to adjusted |
||||||||||||
| 2019 | 2018 | |||||||||||
| Operating margin | Q1 | Q4 | Q1 | |||||||||
| **GAAP operating margin | 13.7 | % | 12.0 | % | 14.5 | % | ||||||
| Restructuring, severance, impairment and other related costs | 0.8 | % | 1.2 | % | 0.7 | % | ||||||
| Acquisition and related integration costs | 0.2 | % | 0.2 | % | 0.2 | % | ||||||
|
Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period |
0.2 | % | — | % | — | % | ||||||
| Asbestos-related charges | — | % | 0.3 | % | — | % | ||||||
| Gain from antitrust litigation settlement | — | % | (0.6 | )% | (1.7 | )% | ||||||
| Loss on sale of long-lived assets | 0.1 | % | — | % | — | % | ||||||
| Transition services, net | 0.3 | % | 0.9 | % | — | % | ||||||
| Total discrete Items | 1.6 | % | 2.0 | % | (0.8 | )% | ||||||
| Operating margin adjusted for discrete items | 15.3 | % | 14.0 | % | 13.6 | % | ||||||
| Acquisition intangible amortization | 1.8 | % | 2.0 | % | 1.8 | % | ||||||
| Adjusted operating margin | 17.1 | % | 16.0 | % | 15.4 | % | ||||||
|
*Percentages in table may not add due to rounding. |
||||||||||||
|
Reconciliation of GAAP earnings per diluted share to |
|
|
Guidance |
|
| GAAP earnings per diluted share | $0.97 – $1.12 |
| Discrete items | $0.10 |
| Acquisition intangible amortization | $0.18 |
| Adjusted earnings per diluted share | $1.25 – $1.40 |
|
Reconciliation of GAAP earnings per diluted share to |
|
|
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 |
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