Total pages included - 14
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-4347
ROGERS CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 06-0513860
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
P.O. Box 188, One Technology Drive, Rogers, Connecticut 06263-0188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860) 774-9605
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the Registrant's classes of common
stock as of April 29, 2001:
Capital Stock, $1 Par Value - 15,578,360 shares
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ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
April 1, 2001
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income --
Three Months Ended April 1, 2001 and
April 2, 2000 3
Consolidated Balance Sheets --
April 1, 2001 and December 31, 2000 4-5
Consolidated Statements of Cash Flows --
Three Months Ended April 1, 2001 and
April 2, 2000 6
Supplementary Notes 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II - OTHER INFORMATION
Item 5. Other Information 14
Item 6. Reports on Form 8-K 14
SIGNATURES 14
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended:
April 1, 2001 April 2, 2000
Net Sales $ 63,750 $ 63,640
Cost of Sales 43,096 42,493
Selling and Administrative Expenses 10,145 10,185
Research and Development Expenses 3,125 2,929
--------- ---------
Total Costs and Expenses 56,366 55,607
--------- ---------
Operating Income 7,384 8,033
Other Income less Other Charges 2,119 212
Interest Income, Net 99 76
--------- ---------
Income Before Income Taxes 9,602 8,321
Income Taxes:
Federal and Foreign 2,781 2,330
State 100 83
--------- ---------
Net Income $ 6,721 $ 5,908
========= =========
Net Income Per Share (Note E):
Basic $ .44 $ .40
========= =========
Diluted $ .42 $ .37
========= =========
Shares Used in Computing (in thousands) (Note E):
Basic 15,178 14,702
========= =========
Diluted 16,023 15,792
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
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ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
April 1, 2001 December 31, 2000
Current Assets:
Cash and Cash Equivalents $ 9,303 $ 10,100
Accounts Receivable, Net 38,670 35,067
Account Receivable, Joint Ventures 12,394 11,198
Inventories:
Raw Materials 13,689 12,702
In-Process and Finished 17,953 17,721
--------- ---------
Total Inventories 31,642 30,423
Current Deferred Income Taxes 5,000 5,000
Other Current Assets 1,006 1,061
--------- ---------
Total Current Assets 98,015 92,849
--------- ---------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$81,390 and $78,319 92,796 94,199
Investment in Unconsolidated Joint
Ventures 11,387 11,577
Pension Asset 6,427 6,407
Goodwill and Other Intangibles, Net 13,942 14,068
Other Assets 2,708 2,414
--------- ---------
Total Assets $ 225,275 $ 221,514
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
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ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
April 1, 2001 December 31, 2000
Current Liabilities:
Accounts Payable $ 12,068 $ 12,418
Accrued Employee Benefits and
Compensation 8,656 12,830
Accrued Income Taxes Payable 8,300 5,554
Taxes, Other than Federal and Foreign
Income 878 1,643
Other Accrued Liabilities 6,033 6,300
--------- ---------
Total Current Liabilities 35,935 38,745
--------- ---------
Long-Term Debt 9,116 9,116
Noncurrent Deferred Income Taxes 8,513 8,626
Noncurrent Pension Liability 9,676 9,676
Noncurrent Retiree Health Care and Life
Insurance Benefits 5,990 5,990
Other Long-Term Liabilities 3,657 3,548
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000; Issued
Shares 15,564,026 and 15,485,570 15,564 15,486
Additional Paid-In Capital 32,541 32,262
Treasury Stock (382,900 shares) (13,436) (13,436)
Accumulated Other
Comprehensive Income (2,706) (2,203)
Retained Earnings 120,425 113,704
--------- ---------
Total Shareholders' Equity 152,388 145,813
--------- ---------
Total Liabilities and
Shareholders' Equity $ 225,275 $ 221,514
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
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ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Three Months Ended:
April 1, April 2,
2001 2000
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $ 6,721 $ 5,908
Adjustments to Reconcile Net
Income to Net Cash Provided by
(Used in) Operating Activities:
Depreciation and Amortization 3,762 3,225
Expense (Benefit) for Deferred
Income Taxes -- (36)
Equity in Undistributed (Income) Loss
of Unconsolidated Joint Ventures, Net (516) (5)
(Gain) Loss on Dispositions of Assets -- 333
Noncurrent Pension and Postretirement Benefits (2) 41
Other, Net (269) 106
Changes in Operating Assets and
Liabilities:
Accounts Receivable (4,232) (4,124)
Accounts Receivable - Affiliates (1,196) (4,083)
Inventories (1,512) (2,738)
Other Current Assets 32 (265)
Accounts Payable and Accrued Expenses (2,294) 1,219
------- -------
Net Cash Provided by (Used in)
Operating Activities 494 (419)
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital Expenditures (2,674) (4,112)
Investment in Unconsolidated Joint
Ventures and Affiliates 706 882
------- -------
Net Cash (Used in)
Investing Activities (1,968) (3,230)
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 67 109
Repayments of Debt Principal (67) --
Proceeds from Sale of Capital Stock 176 509
------- -------
Net Cash Provided by (Used in)
Financing Activities 176 618
Effect of Exchange Rate Changes on Cash 501 141
------- -------
Net Increase/(Decrease) in Cash and
Cash Equivalents (797) (2,890)
Cash and Cash Equivalents at Beginning of Year 10,100 9,955
------- -------
Cash and Cash Equivalents at End of Quarter $ 9,303 $ 7,065
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
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ROGERS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY NOTES
A. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. For further information, refer to the audited consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 2000.
B. Interest paid during the first three months of 2001 and 2000 was
$342,000 and $113,000, respectively.
C. Income taxes paid were $0 and $70,000 in the first three months of
2001 and 2000, respectively.
D. The components of comprehensive income, net of related tax, for the
three month periods ended April 1, 2001 and April 2, 2000 are as
follows:
Three Months Ended
(Dollars in Thousands)
April 1, 2001 April 2, 2000
Net income $ 6,721 $ 5,908
Foreign currency translation adjustment (504) (489)
--------- ---------
Comprehensive income $ 6,217 $ 5,419
========= =========
Accumulated balances related to each component of Other
Comprehensive Income (Loss) are as follows:
April 1, 2001 December 31, 2000
Foreign currency translation
adjustments $ (837) $ (334)
Minimum pension liability, net
of $1,145 in taxes (1,869) (1,869)
--------- ---------
$ (2,706) $ (2,203)
========= =========
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SUPPLEMENTARY NOTES, CONTINUED
E. The following table sets forth the computation of basic and diluted
earnings per share in conformity with Statement of Financial Accounting
Standards No. 128, "Earnings per Share":
(Dollars in Thousands, Except Per Share Amounts)
April 1, April 2,
2001 2000
Numerator:
Net income $ 6,721 $ 5,908
Denominator:
Denominator for basic earnings per share -
weighted-average shares 15,178 14,702
Effect of stock options 845 1,090
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 16,023 15,792
======= =======
Basic earnings per share $ .44 $ .40
======= =======
Diluted earnings per share $ .42 $ .37
======= =======
F. The Company adopted Statement of Financial Accounting Standards (FAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" in 1998 which changed the way the Company reports
information about its operating segments. Certain reclassifications
were made in 2000 to reflect the way that the business segments are
viewed by top management and the Board of Directors. The prior year
information presented has been restated to reflect these
reclassifications. The quarterly information required by FAS No.
131 is presented below.
High Printed Polymer
Performance Circuit Materials &
Foams Materials Components Total
(Dollars in Millions)
Three Months ended
April 1, 2001
Net Sales $13.8 $27.3 $22.7 $63.8
Operating Income 1.7 4.5 1.2 7.4
Three Months ended
April 2, 2000
Net Sales $14.7 $25.2 $23.7 $63.6
Operating Income 2.6 4.0 1.4 8.0
-8-
SUPPLEMENTARY NOTES, CONTINUED
Inter-segment and inter-area sales, which are generally priced with
reference to costs or prevailing market prices, are not material in
relation to consolidated net sales and have been eliminated from the
sales data in the previous tables.
G. The Company is subject to federal, state, and local laws and
regulations concerning the environment and is currently engaged in
proceedings involving a number of sites under these laws, as a
participant in a group of potentially responsible parties (PRPs).
The Company is currently involved as a PRP in two cases involving
waste disposal sites, both of which are Superfund sites. These
proceedings are at a preliminary stage and it is impossible to
estimate the cost of remediation, the timing and extent of remedial
action which may be required by governmental authorities, and the
amount of liability, if any, of the Company alone or in relation to
that of any other PRPs. The Company also has been seeking to identify
insurance coverage with respect to these matters. Where it has been
possible to make a reasonable estimate of the Company's liability, a
provision has been established. Insurance proceeds have only been
taken into account when they have been confirmed by or received from
an insurance company. Actual costs to be incurred in future periods
may vary from these estimates. Based on facts presently known to it,
the Company does not believe that the outcome of these proceedings
will have a material adverse effect on its financial position.
In addition to the above proceedings, the Company has been actively
working with the Connecticut Department of Environmental Protection
(CT DEP) related to certain polychlorinated biphenyl (PCB)
contamination in the soil beneath a section of cement flooring at its
Woodstock, Connecticut facility. The Company completed clean-up
efforts in 2000 and will be continually monitoring the site for the
next several years. On the basis of estimates prepared by environmental
engineers and consultants, the Company recorded a provision of
approximately $1,600,000 prior to 1998, and based on updated estimates
provided an additional $600,000 in 1998 and $400,000 in 1999 for
costs related to this matter. Prior to 1998, $700,000 was charged
against this provision. In 1998, 1999, and 2000, expenses of
$200,000, $400,000, and $900,000 were charged, respectively against
the provision. The remaining amount in the reserve is primarily for
testing, monitoring, sampling and any minor residual treatment
activity. Management believes, based on facts currently available,
that the balance of this provision is adequate to complete the project.
In this same matter the United States Environmental Protection Agency
(EPA) has alleged that the Company improperly disposed of PCBs. An
administrative law judge found the Company liable for this alleged
disposal and assessed a penalty of approximately $300,000. The Company
reflected this fine in expense in 1998 but disputes the EPA allegations
and has appealed the administrative law judge's findings and penalty
assessment. The original findings were upheld internally by the EPA's
Environmental Appeals Board, and the Company has now placed that
decision on appeal with the District of Columbia Federal Court of
Appeals.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
-9-
SUPPLEMENTARY NOTES, CONTINUED
H. To help widen the distribution and enhance the marketability of the
Company's Capital Stock, the Board of Directors, effected a two-for-one
stock split in the form of a 100% stock dividend on May 12, 2000. All
references in the financial statements to number of shares and per
share amounts have been restated to reflect the increased number of
shares of capital stock outstanding.
I. On August 17, 2000, the Board of Directors authorized the Company to
repurchase up to $2.1 miilion of its common stock. No shares have been
repurchased pursuant to this authority.
J. On February 7, 2001, the Company entered into a definitive agreement
to purchase the Advanced Dielectric Division (ADD) of Tonoga, Inc.
(commonly known as Taconic), which operates facilities in Petersburgh,
New York and Mullingar, Ireland. On May 11, 2001, the Company
announced that active discussions with Taconic to acquire the ADD
business have been suspended and it is not anticipated that the
acquisition will occur.
K. Other income less other charges was $2.1 million in the first quarter
of 2001 compared to $200,000 in the comparable period in 2000. The
increase is due primarily to the performance of Rogers joint ventures,
particularly PLS and Durel. Income from joint ventures was
$1.7 million and royalty income was $800,000 for the first three
months of 2001. During the comparable period in 2000, income from
joint ventures was $200,000 and royalty income was also $200,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales in the first quarter of 2001 were $63.8 million slightly higher
than the $63.6 million sold in the first quarter of 2000. Combined Sales,
which include one half of the sales from three of Rogers 50% owned joint
ventures, were a record $79 million for the quarter, up from the $77
million reported in the first quarter of 2000. Sales of the Company's
products manufactured in Europe were particularly strong, increasing 35%
from the first quarter of 2000. These European sales increases resulted
from the strength in Rogers sales of bus bars, high-frequency laminates
and shielding materials to the electronics market.
High Performance Foam sales were $13.8 million for this year's first
quarter down 6% from quarter one last year. Sales in this segment
suffered from the dramatic weakness in cellphone handsets and lower sales
to the automotive and imaging markets. Some of Rogers other businesses
were affected as well by the slowdown in these markets.
Sales of Printed Circuit Materials for the quarter totaled $27.3 million,
an increase of over 8% compared to the first quarter of 2000. Sales in
this segment of the Company's business were led by high-frequency circuit
laminates, which set a new quarterly record.
Sales of Polymer Materials and Components decreased by over 4% from the
comparable 2000 period. This decline was primarily due to the slowdown
in sales to the automotive market and to the expected year over year
decline in the dampening sleeve business.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
First quarter 2001 net income was $6.7 million and diluted earnings per
share were $.42 both 14% higher than the $5.9 million and $.37 earned in
last year's first three months. This was due mostly to increased income
from joint ventures in 2001.
Manufacturing profit as a percentage of sales was 32% in the first quarter
of 2001 and 33% in the first quarter of 2000. This decrease can be
attributed to the lower sales volumes caused by the dramatic weakness
in cellphone handsets and the slowdown in the automotive and imaging
markets.
Selling and administrative expenses for the first three months of 2001
were approximately the same both in total dollars and as a percentage
of sales as the first quarter of 2000.
Research and development expenses of $3.1 million in the first quarter
2001 were slightly higher than the $2.9 million in the comparable period
in 2000. This increase reflects the costs of additional technical people
added during 2000.
Net interest income for 2001 remained about the same as the comparable
period in 2000.
Other income was $2.1 million in the first quarter of 2001 compared to
$200,000 in the comparable period in 2000. The increase is due primarily
to the performance of Rogers joint ventures. Durel Corporation, Rogers
joint venture with 3M, experienced the full brunt of the large worldwide
cellphone inventory situation which contributed to a very significant 38%
decline in sales from the fourth quarter of 2000. However, increased
sales to the personal digital assistant (PDA) marketplace were a bright
spot. By making significant adjustments in the workforce and other
expenses, Durel was able to remain profitable for the quarter. Rogers
Inoac Corporation (RIC) and Polyimide Laminate Systems (PLS), two of
the Company's other 50% owned joint ventures, had good performances
in the first quarter of 2001. Rogers joint venture in Taiwan, Rogers
Chang Chun Technology (RCCT), is progressing as planned with over 80% of
the new manufacturing facility now complete.
Net cash provided by operating activities in the first three months of
2001 totaled $500,000. This compares with $400,000 used in operations for
the comparable 2000 period. This difference is primarily attributable to
higher net income combined with higher depreciation in the first quarter
of 2001.
In 2001, investments in capital equipment totaled $2.7 million in the first
quarter and are expected to approach $24 million for the year. In 2000
capital expenditures in the first quarter were $4.1 million and they
finished at $22.7 million for the year. In Ghent, Belgium, the Company
broke ground on a new greenfield site that will eventually house Rogers
newest high-frequency laminate manufacturing line. Despite the weakening
economic environment, design-in activities for this family of high-
frequency materials are strong and the Company anticipates the need for
additional capacity before the end of 2001.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Management believes that in the near term internally generated funds plus
available lines of credit will be sufficient to meet the regular needs of
the business. The Company currently has an unsecured multi-currency
revolving credit agreement with two domestic banks and can borrow up to
$75 million, or the equivalent in certain other foreign currencies. The
borrowing at April 1, 2001 was 390.2 millions Belgian francs ($9.1
million) and the interest rate on the loan was 5.31%.
The Company is subject to federal, state, and local laws and regulations
concerning the environment and is currently engaged in proceedings
involving a number of sites under these laws, as a participant in a group
of potentially responsible parties (PRPs).
The Company is currently involved as a PRP in two cases involving waste
disposal sites, both of which are Superfund sites. These proceedings are
at a preliminary stage and it is impossible to estimate the cost of
remediation, the timing and extent of remedial action which may be
required by governmental authorities, and the amount of liability, if
any, of the Company alone or in relation to that of any other PRPs. The
Company also has been seeking to identify insurance coverage with respect
to several of these matters. Where it has been possible to make a
reasonable estimate of the Company's liability, a provision has been
established. Insurance proceeds have only been taken into account when
they have been confirmed by or received from an insurance company. Actual
costs to be incurred in future periods may vary from these estimates.
Based on facts presently known to it, the Company does not believe that
the outcome of these proceedings will have a material adverse effect on
its financial position.
In addition to the above proceedings, the Company has been actively
working with the Connecticut Department of Environmental Protection
(CT DEP) related to certain polychlorinated biphenyl (PCB) contamination
in the soil beneath a section of cement flooring at its Woodstock,
Connecticut facility. The Company completed clean-up efforts in 2000 and
will be continually monitoring the site for the next several years. On the
basis of estimates prepared by environmental engineers and consultants,
the Company recorded a provision of approximately $1,600,000 prior to 1998,
and based on updated estimates provided an additional $600,000 in 1998 and
$400,000 in 1999 for costs related to this matter. Prior to 1998,
$700,000 was charged against this provision. In 1998, 1999, and 2000,
expenses of $200,000, $400,000, and $900,000 were charged, respectively
against the provision. The remaining amount in the reserve is primarily
for testing, monitoring, sampling and any minor residual treatment activity.
Management believes, based on facts currently available, that the balance
of this provision is adequate to complete the project.
In this same matter the United States Environmental Protection Agency
(EPA) has alleged that the Company improperly disposed of PCBs. An
administrative law judge found the Company liable for this alleged
disposal and assessed a penalty of approximately $300,000. The Company
reflected this fine in expense in 1998 but disputes the EPA allegations
and has appealed the administrative law judge's findings and penalty
assessment. The original findings were upheld internally by the EPA's
Environmental Appeals Board, and the Company has now placed that decision
on appeal with the District of Columbia Federal Court of Appeals.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Statements in this report that are not strictly historical may be deemed
to be "forward-looking" statements which should be considered as subject
to the many uncertainties that exist in the Company's operations and
environment. These uncertainties, which include economic conditions,
market demand and pricing, competitive and cost factors, rapid
technological change, new product introductions, and the like, are
incorporated by reference in the Rogers Corporation 2000 Form 10-K filed
with the Securities and Exchange Commission. Such factors could cause
actual results to differ materially from those in the forward-looking
statements.
-13-
PART II - OTHER INFORMATION
Item 5. Other Information
On May 11, 2001, the Company announced that active discussions with
Taconic to acquire their Advanced Dielectric Divisions business
have been suspended and it is not anticipated that the
acquisition will occur.
Item 6. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed for the three
months ended April 1, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROGERS CORPORATION
(Registrant)
\s\FRANK H. ROLAND
Frank H. Roland
Vice President, Finance and
Chief Financial Officer
Dated: May 14, 2001
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