CONSOLIDATED BALANCE SHEETS
December 30, December 31,
(Dollars in Thousands) 2001 2000
------------ ----------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 20,891 $ 10,100
Accounts Receivable, Less Allowance for
Doubtful Accounts of $1,363 and $1,804 27,460 35,067
Accounts Receivable, Joint Ventures 5,123 11,198
Inventories:
Raw Materials 10,003 12,702
In-Process and Finished 16,805 19,145
Less LIFO Reserve (1,433) (1,424)
---------- ----------
Total Inventories 25,375 30,423
Current Deferred Income Taxes 5,041 5,000
Other Current Assets 1,026 1,061
---------- ----------
Total Current Assets 84,916 92,849
---------- ----------
Property, Plant and Equipment, Net of
Accumulated Depreciation of
$90,015 and $78,319 98,454 94,199
Investments in Unconsolidated
Joint Ventures 16,116 11,577
Penison Assets 6,308 6,407
Goodwill and Other Intangible Assets 13,588 14,068
Other Assets 4,427 2,414
----------- ----------
Total Assets $ 223,809 $ 221,514
=========== ==========
24
December 30, December 31,
(Dollars in Thousands) 2001 2000
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 12,009 $ 12,418
Accrued Employee Benefits
and Compensation 6,974 12,830
Accrued Income Taxes Payable 6,337 5,554
Taxes, Other than Federal
and Foreign Income 441 1,643
Other Accrued Liabilities 3,931 6,300
---------- ---------
Total Current Liabilities 29,692 38,745
---------- ---------
Long-Term Debt 1,315 9,116
Noncurrent Deferred Income Taxes 8,152 8,626
Noncurrent Pension Liability 12,371 9,676
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,052 5,990
Other Long-Term Liabilities 3,165 3,548
Shareholders' Equity:
Capital Stock, $1 Par Value (Notes A & H):
Authorized Shares 50,000,000; Issued
Shares 15,739,184 and 15,485,570 15,739 15,486
Additional Paid-In Capital 35,351 32,262
Retained Earnings 129,438 113,704
Accumulated Other Comprehensive
Income (Loss),
Net of Tax (Note H) (4,030) (2,203)
Treasury Stock
(382,900 shares for both years)(Note A) (13,436) (13,436)
---------- ---------
Total Shareholders' Equity 163,062 145,813
---------- ---------
Total Liabilities and Shareholders'
Equity $ 223,809 $ 221,514
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
25
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
2001 2000 1999
---------- ---------- ----------
Net Sales $ 216,037 $ 248,215 $ 247,839
Cost of Sales 149,179 165,710 175,964
Selling and Administrative
Expenses 39,247 40,529 36,735
Acquistion/Restructuring
Costs (Notes I & K) 1,995 -- --
Research and Development
Expenses 12,570 12,493 10,791
---------- -------- --------
Total Costs and Expenses 202,991 218,732 223,490
---------- -------- --------
Operating Income 13,046 29,483 24,349
Other Income less
Other Charges 7,953 7,838 1,626
Interest Income (Expense), Net (20) 313 (98)
---------- --------- --------
Income Before Income Taxes 20,979 37,634 25,877
Income Taxes 5,245 10,914 7,246
---------- --------- --------
Net Income $ 15,734 $ 26,720 $ 18,631
========== ========= ========
Net Income Per Share (Notes A & H):
Basic $ 1.03 $ 1.79 $ 1.24
---------- --------- --------
Diluted $ .98 $ 1.69 $ 1.19
---------- --------- --------
Shares Used in Computing (Notes A & H):
Basic 15,274,479 14,896,227 15,055,034
---------- ---------- ----------
Diluted 16,001,965 15,848,736 15,642,844
---------- ---------- ----------
The accompanying notes are an integral part of the consolidated
financial statements.
26
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in
Thousands, Accumulated
Except Other Com-
Capital Additional prehensive Share-
Stock Capital Paid-In Retained Income Treasury holders'
Amounts) Stock Capital Earnings (Loss) Stock Equity
----------------------------------------------------------
Balance at
January 3,
1999 $15,248,132 $ 25,705 $ 68,353 $ 1,348 $ (423) $110,231
----------------------------------------------------------
Comprehensive
Income:
Net Income for
1999 18,631 18,631
Other
Comprehensive
Income (Loss) (910) (910)
-----------
Total
Comprehensive
Income 17,721
Stock Options
Exercised 171,778 781 953
Stock Issued
to Directors 15,468 283 299
Shares Reacquired
and Cancelled (17,726) (206) (224)
Tax Benefit on
Stock Options
Exercised 450 450
Treasury Stock
Acquisitions
(370,100 Shares) (13,013) (13,013)
Stock Split
Impact on
Treasury Stock (370,100) 370
----------------------------------------------------------
Balance at
January 2,
2000 $15,047,552 $ 27,383 $ 86,984 $ 438 $(13,436) $116,417
----------------------------------------------------------
Comprehensive
Income:
Net Income
for 2000 26,720 26,720
Other
Comprehensive
Income(Loss) (2,641) (2,641)
--------
Total
Comprehensive
Income 24,079
Stock Options
Exercised 513,511 3,120 3,633
Stock Issued
to Directors 12,993 1,000 1,013
Shares Reacquired
and Cancelled (88,486) (2,848) (2,936)
Tax Benefit on
Stock Options
Exercised 3,607 3,607
----------------------------------------------------------
Balance at
December 31,
2000 $15,485,570 $ 32,262 $113,704 $(2,203) $(13,436)$145,813
----------------------------------------------------------
Comprehensive
Income:
Net Income
for 2001 15,734 15,734
Other
Comprehensive
Income(Loss) (1,827) (1,827)
-------
Total
Comprehensive
Income 13,907
Stock Options
Exercised 307,051 2,519 2,826
Stock Issued
to Directors 11,571 459 470
Shares Reacquired
and Cancelled (65,008) (2,032) (2,097)
Tax Benefit on
Stock Options
Exercised 2,143 2,143
----------------------------------------------------------
Balance at
December 30,
2001 $15,739,184 $ 35,351 $129,438 $(4,030) $(13,436) $163,062
==========================================================
The number of shares is equal to the dollar amount of the capital stock
($1 par value).
The accompanying notes are an integral part of the consolidated financial
statements.
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES: 2001 2000 1999
-------------------------------------------
Net Income $ 15,734 $ 26,720 $ 18,631
Adjustments to Reconcile
Net Income
to Cash Provided by Operating
Activities:
Depreciation and Amortization 13,712 12,507 10,375
(Benefit) Expense for Deferred
Income Taxes (395) 3,299 (577)
Equity in Undistributed Income of
Unconsolidated Joint
Ventures, Net (3,123) (5,945) (1,897)
(Gain) Loss on Disposition
of Assets (103) 546 304
Noncurrent Pension and Postretirement
Benefits 1,489 1,215 441
Other, Net (584) 376 247
Changes in Operating Assets and
Liabilities Excluding Effects of
Acquisition and Disposition
of Assets:
Accounts Receivable 13,158 (11,946) 264
Inventories 4,771 (7,465) (1,261)
Prepaid Expenses 14 (436) (233)
Accounts Payable and
Accrued Expenses (5,658) 4,843 6,203
------------------------------------------
Net Cash Provided by
Operating
Activities 39,015 23,714 32,497
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital Expenditures (18,032) (22,744) (13,621)
Acquisition of Businesses (2,000) (252) (4,302)
Proceeds from Sale of Property,
Plant and Equipment 225 83 118
Proceeds from Sale of Marketable
Securities -- -- 256
Investment in Unconsolidated Joint Ventures
and Affiliates (1,417) (1,592) 737
------------------------------------------
Net Cash Used in
Investing
Activities (21,224) (24,505) (16,812)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds (Repayments) from Short- and
Long-Term Borrowings 1,830 296 (16)
Repayments of Debt Principal (9,733) -- (3,369)
Acquisition of Treasury Stock -- -- (13,013)
Proceeds from Sale of
Capital Stock - Net 729 697 729
------------------------------------------
Net Cash Provided by (Used in)
Financing Activities (7,174) 993 (15,669)
Effect of Exchange Rate
Changes on Cash 174 (57) 346
------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 10,791 145 362
Cash and Cash Equivalents at Beginning
of Year 10,100 9,955 9,593
------------------------------------------
Cash and Cash Equivalents
at End of Year $ 20,891 $ 10,100 $ 9,955
==========================================
The accompanying notes are an integral part of the consolidated financial
statements.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-ACCOUNTING POLICIES
ORGANIZATION:
Rogers Corporation manufactures specialty materials, which are sold to
targeted markets around the world. These specialty materials are grouped
into three distinct business segments (see Note J). High Performance Foams
include urethane foams and silicone materials. These foams are sold
principally to manufacturers in the communications, computer, imaging,
transportation, and consumer markets. Printed Circuit Materials include
circuit board laminates for high frequency printed circuits, flexible
circuit board laminates for flexible interconnections, and industrial
laminates for shielding of radio and electromagnetic interference. Printed
Circuit Materials are sold principally to printed circuit board manufacturers
and equipment manufacturers for applications in the computer, communications,
and consumer markets. Polymer Materials and Components are composed of
elastomer components, moldable composite materials, nitrophyl floats,
nonwoven materials, and bus bars for power distribution. Polymer Materials
and Components are sold principally to the imaging, transportation, consumer
and communications markets.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Rogers
Corporation and its wholly-owned subsidiaries (the Company), after
elimination of significant intercompany accounts and transactions.
CASH EQUIVALENTS:
Highly liquid investments with original maturities of three months
or less are considered cash equivilents. These investments are stated
at cost, which approximates market value.
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES:
The Company accounts for its investments in and advances to unconsolidated
joint ventures, all of which are 50% owned, using the equity method.
RELATED PARTY TRANSACTIONS:
Sales to unconsolidated joint ventures are made on terms similar to those
prevailing with unrelated customers. However, payment terms for amounts
owed by the joint ventures may be extended.
FOREIGN CURRENCY TRANSLATION:
All balance sheet accounts of foreign subsidiaries are translated at
rates of exchange in effect at each year-end, and income statement
items are translated at the average exchange rates for the year.
Resulting translation adjustments are made directly to a separate
component of shareholders' equity. Currency transaction adjustments
are reported as income or expense.
INVENTORIES:
Inventories are valued at the lower of cost or market. Certain
inventories, amounting to $8,720,000 at December 30, 2001, and
$11,095,000 at December 31, 2000, or 34% and 36% of total Company
inventories in the respective periods, are valued at the lower of
cost, determined by the last-in, first-out (LIFO) method or market.
The cost of the remaining portion of the inventories was determined
principally on the basis of standard costs, which approximate actual
first-in, first-out (FIFO) costs.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated on the basis of cost,
including capitalized interest. For financial reporting purposes,
provisions for depreciation are calculated on a straight-line basis
over the following estimated useful lives of the assets:
Years
--------
Buildings 20 -- 45
Building improvements 10 -- 25
Machinery and equipment 5 -- 15
Office equipment 3 -- 10
29
INTANGIBLE ASSETS:
Goodwill, representing the excess of the cost over the net tangible
and identifiable assets of acquired businesses, is stated at cost.
Goodwill is being amortized on a straight-line method over periods
ranging from 10-40 years. Amortization charges to operations amounted
to $765,000 in 2001 and $851,000 in 2000.
Purchased patents and licensed technology are capitalized and amortized
on a straight-line basis over their estimated useful lives, generally
from 2 to 17 years.
When events and circumstances so indicate, all long-lived assets are
assessed for recoverability based upon cash flow forecasts. Based on
its most recent analysis, the Company believes that no material impairment
of intangible assets or long-lived assets exists at December 30, 2001.
INCOME TAXES:
The Company recognizes income taxes under the liability method. No
provision is made for U.S. income taxes on the undistributed earnings
of consolidated foreign subsidiaries because such earnings are
substantially reinvested in those companies for an indefinite period.
Provision for the tax consequences of distributions, if any, from
consolidated foreign subsidiaries is recorded in the year the distribution
is declared.
REVENUE RECOGNITION:
Revenue is recognized when goods are shipped.
NET INCOME PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per share:
(Dollars in Thousands, Except Per Share Amounts)
2001 2000 1999
--------------------------------------------
Numerator:
Net income $ 15,734 $ 26,720 $ 18,631
Denominator:
Denominator for basic earnings
per share weighted-average
shares 15,274,479 14,896,227 15,055,034
Effect of stock options 727,486 952,509 587,810
--------------------------------------------
Denominator for diluted
earnings per share - adjusted
weighted-average shares and
assumed conversions 16,001,965 15,848,736 15,642,844
============================================
Basic earnings per share $ 1.03 $ 1.79 $ 1.24
============================================
Diluted earnings per share $ .98 $ 1.69 $ 1.19
============================================
STOCK SPLIT:
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. Treasury Stock was not
doubled. All references in the financial statements to the number of shares
and per share amounts have been restated to reflect the increased number of
capital shares outstanding.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
ADVERTISING COSTS:
Advertising is expensed as incurred and amounted to $1,694,000, $2,128,000,
and $1,901,000 for 2001, 2000 and 1999, respectively.
TREASURY STOCK:
From time to time the Company's Board of Directors authorizes the repurchase,
at management's discretion, of shares of the Company's capital stock. The
most recent regular authorization was approved on August 17, 2000 and provided
for the repurchase of up to an aggregate of $2,000,000 in market value of such
stock. On October 24, 2001, the Company's Board of Directors authorized, at
management's discretion, the repurchase of shares of the Company's capital
stock in order to provide participants in the Rogers Corporation Global
Stock Ownership Plan For Employees (see Note H), an employee stock purchase
plan, with shares of such stock. This is just one of the ways shares can be
provided to plan participants. At year-end, neither authorization had been
used to repurchase stock. Treasury Stock totals 382,900 shares and is
shown at cost on the balance sheet as a reduction of Shareholders' Equity.
30
RECLASSIFICATIONS:
Certain reclassifications have been made to the 2000 financial statements
to conform to the 2001 presentation.
NEW ACCOUNTING STANDARDS:
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Statement 141 also includes guidance on
the initial recognition and measurement of goodwill and other intangible
assets arising from business combinations completed after June 30, 2001.
Statement 142 prohibits the amortization of goodwill and intangible assets
with indefinite useful lives. Statement 142 requires that these assets
be reviewed for impairment at least annually. Intangible assets with
finite lives will continue to be amortized over their estimated
useful lives.
The Company will apply Statements 141 and 142 beginning in the first
quarter of 2002. Application of the nonamortization provisions of
Statement 142 is expected to result in an increase in net income of
$331,000 in 2002. The Company does not expect any impairment of intangible
assets upon the adoption of Statement 142.
NOTE B-PROPERTY, PLANT AND EQUIPMENT
December 30, December 31,
(Dollars in Thousands) 2001 2000
---------- -----------
Land $ 5,265 $ 5,709
Buildings and improvements 60,839 58,118
Machinery and equipment 94,484 89,711
Office equipment 16,209 15,442
Installations in process 11,672 3,538
---------- ----------
188,469 172,518
Accumulated depreciation (90,015) (78,319)
---------- ----------
$ 98,454 94,199
========== ==========
Depreciation expense was $12,947,000 in 2001, $11,656,000 in 2000, and
$9,750,000 in 1999. Interest costs incurred during the years 2001, 2000,
and 1999 were $1,070,000, $1,080,000, and $1,423,000, respectively, of
which $57,000 in 2001, $457,000 in 2000, and $506,000 in 1999 were
capitalized as part of the cost of plant and equipment additions.
NOTE C-SUMMARIZED FINANCIAL INFORMATION OF UNCONSOLIDATED JOINT VENTURES
AND RELATED PARTY TRANSACTIONS
The Company has four joint ventures, each 50% owned, which are accounted for
by the equity method. Equity income of $3,123,000, $5,945,000 and $1,897,000
for 2001, 2000 and 1999, respectively, is included in other income less other
charges on the consolidated statements of income. Each of the joint ventures
is described below:
Fiscal
Joint Venture Location Business Segment Year-End
- ------------------------------------------------------------------------------
Durel Corporation U.S. Polymer Materials
and Components December 31
Rogers Inoac Corporation Japan High Performance Foams
(RIC) /Polymer Materials
and Components October 31
Polyimide Laminate
Systems, LLC (PLS) U.S. Printed Circuit
Materials December 31
Rogers Chang Chun
Technology Co. Ltd. Taiwan Printed Circuit
(RCCT) Materials December 31 Fiscal
The summarized financial information for these joint ventures is included in the
following tables. Note that there is a difference between the Company's
investment in unconsolidated joint ventures and its one-half interest in
the underlying shareholders' equity of the joint ventures due primarily
to three factors. First, the Company's major initial contribution to two
joint ventures was technology that was valued differently by the joint
ventures than it was on the Company's books. Secondly, one of the joint
ventures had a negative retained earnings balance. Lastly, the translation
of foreign currency at current rates differs from that at historical rates.
Correspondingly, there is a difference between the Company's recorded income
from unconsolidated joint ventures and a 50% share of the income of those
joint ventures.
December 30, December 31,
(Dollars in Thousands) 2001 2000
----------- ----------
Current Assets $ 39,843 $ 48,808
Noncurrent Assets 33,213 26,312
Current Liabilities 25,309 32,403
Noncurrent Liabilities 11,344 14,646
Shareholders' Equity 36,403 28,071
Year Ended
-----------------------------------------------
December 30, December 31, January 2,
(Dollars in Thousands) 2001 2000 2000
-----------------------------------------------
Net Sales $ 121,763 $ 138,006 $ 73,411
Gross Profit 33,050 39,809 20,909
Net Income 5,928 11,608 4,049
Other Information:
(Dollars in Thousands)
2001 2000 1999
--------------------------------------
Commissions Income from
PLS $3,811 $3,430 $ --
50% Loan Guarantee for
Durel Corporation 3,877 4,286 4,636
Loan to Durel Corporation 5,000 6,500 500
The Company believes that Durel Corporation, which has a 50% loan guarantee
will be able to meet its obligations under the financing arrangement and
accordingly no payments will be required and no losses will be incurred
under this guarantee by the Company.
Terms for the loan to Durel Corporation: Borrowings must be made in
increments of $250,000, may not exceed $8,000,000 in the aggregate,
will be at the prime rate of interest, and any amounts repaid by Durel
may subsequently be re-borrowed during the term of the loan arrangement.
The arrangement expires in September of 2002, unless extended at the sole
discretion of the Company.
Sales made to unconsolidated joint ventures were immaterial in all years
presented above.
NOTE D-PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS
PENSIONS:
The Company has two qualified noncontributory defined benefit pension
plans covering substantially all U.S. employees. The Company also has
established a nonqualified unfunded noncontributory defined benefit
pension plan to restore certain retirement benefits that might otherwise
be lost due to limitations imposed by federal law on qualified pension
plans. In addition, the Company sponsors three unfunded defined benefit
health care and life insurance plans for retirees. The following provides
a reconciliation of benefit obligations, plan assets, and funded status of
the plans:
32
Other
Pension Benefits Postretirement Benefits
(Dollars ----------------------------------------------------------
in Thousands) 2001 2000 1999 2001 2000 1999
----------------------------------------------------------
Components of net periodic
benefits cost:
Service
cost $ 2,120 $ 1,641 $ 1,853 $ 282 $ 228 $ 218
Interest
cost 4,897 4,643 4,257 359 331 264
Expected
return
on plan
assets (5,819) (5,644) (5,359) -- -- --
Amortizations
and
deferrals 509 485 524 (92) (117) (152)
Amortization of
transition
asset (199) (352) (335) -- -- --
----------------------------------------------------------
Net periodic
benefit
costs $ 1,508 $ 773 $ 940 $ 549 $ 442 $ 330
==========================================================
Change in plan assets:
Fair value of
plan assets
January 1 $63,304 $61,383 $58,211 $ -- $ -- $ --
Actual return
on plan
assets 4,943 4,724 5,760 -- -- --
Employer
contributions 381 356 268 486 518 632
Benefit
payments (3,468) (3,160) (2,856) (486) (518) (632)
---------------------------------------------------------
Fair value of
plan assets
December
31 $65,160 $63,303 $61,383 $ -- $ -- $ --
==========================================================
Change in benefit obligation:
Benefit obligation
at
January 1 $66,867 $56,555 $63,548 $ 4,332 $ 3,395 $ 5,288
Service cost 2,120 1,641 1,853 282 228 218
Interest cost 4,897 4,643 4,257 359 332 264
Actuarial losses
(gains) 2,483 5,271 (10,247) 1,167 895 (1,743)
Benefit
payments (3,468) (3,160) (2,856) (486) (518) (632)
Plan
amendments 1,189 1,917 -- -- -- --
----------------------------------------------------------
Benefit obligation
at December
31 $74,088 $66,867 $56,555 $ 5,654 $ 4,332 $ 3,395
==========================================================
Reconciliation of funded status:
Funded status $(8,929) (3,564) $ 4,828 $(5,654) $(4,332) $(3,395)
Unrecognized net
gain/(loss) 4,506 1,304 (4,888) (899) (2,158) (3,171)
Unrecognized prior
service cost 3,848 3,168 1,736 -- -- --
Unrecognized
transition
asset (670) (1,025) (1,376) -- -- --
-----------------------------------------------------------
Prepaid/(accrued) benefit
cost at
December 31 $(1,245) $ (117) $ 300 $(6,553) $(6,490) $(6,566)
===========================================================
Amounts recognized in the Balance Sheet
consist of:
Prepaid benefit
cost $ 2,752 $ 3,638 $ 4,223 $ -- $ -- $ --
Accrued benefit
liability (12,235) (9,538) (4,157) (6,553) (6,490) (6,566)
Intangible
asset 3,556 2,769 83 -- -- --
Deferred tax
asset 1,779 1,145 -- -- -- --
Accumulated other
comprehensive
income 2,903 1,869 151 -- -- --
-----------------------------------------------------------
Net amount recognized
at
December 31 $(1,245) $ (117) $ 300 $(6,553) $(6,490) $(6,566)
===========================================================
In accordance with FASB Statement No. 87, the Company has recorded an additional
minimum pension liability for underfunded plans of $8,238,000 and $5,783,000 for
2001 and 2000, respectively, representing the excess of unfunded accumulated
benefit obligations over previously recorded pension liabilities. A
corresponding amount is recognized as an intangible asset except to the
extent that these additional liabilities exceed related unrecognized prior
service cost and net transition obligation, in which case the increase
in liabilities is charged directly to shareholders' equity, net of taxes.
Other
Pension Benefits Postretirement Benefits
---------------------------------------------
Assumptions as
of December 31: 2001 2000 2001 2000
---------------------------------------------
Discount rate 7.25% 7.50% 7.25% 7.50%
Rate of compensation
increase 4.00% 4.00% -- --
The expected long-term rates of investment return were assumed to be 9.00%
for the pension plan covering unionized hourly employees and 9.50% for the
other pension plan in each year presented.
33
The Company has two pension plans with accumulated benefit obligations
in excess of plan assets in both 2001 and 2000. Amounts applicable are:
(Dollars in Thousands)
2001 2000
---------------------------
Projected benefit obligation $18,240 $15,649
Accumulated benefit obligation 17,831 15,427
Fair value of plan assets 11,888 12,667
OTHER POSTRETIREMENT BENEFITS:
The assumed health care cost trend rate of increase was 4.5% for
2000 - 2001 and it was increased to 9.5% for 2002. The rate was assumed
to decrease gradually to 5.0% for 2008 and remain at that level
thereafter. The health care cost trend rate assumption has the
following effect on the amounts reported: increasing the assumed
health care cost trend rates by one percentage point for each future
year would increase the accumulated postretirement benefit obligation
as of the beginning of 2002 by $276,000 and the aggregate of service
cost and interest cost components of net periodic postretirement
benefit cost for fiscal 2001 by $61,000; decreasing the assumed rates
by one percentage point would decrease the accumulated postretirement
benefit obligation at the beginning of 2002 by $260,000 and the
aggregate of service cost and interest cost components of net
periodic postretirement benefit cost for fiscal 2001 by $55,000.
NOTE E-EMPLOYEE SAVINGS AND INVESTMENT PLAN
The Company sponsors the Rogers Employee Savings and Investment Plan
(RESIP) for domestic employees. The plan allows such employees to
contribute up to 18% of their compensation through payroll deductions.
Currently up to 5% of an eligible employee's annual pre-tax contribution
is matched at a rate of 50% by the Company. In 2001 and 2000, 100% of the
Company's matching contribution was invested in Company stock. RESIP
related expense amounted to $934,000 in 2001, $859,000 in 2000, and
$723,000 in 1999, including Company matching contributions of $903,000,
$813,000, and $703,000, respectively.
NOTE F-DEBT
LONG-TERM DEBT:
The Company has an unsecured multi-currency revolving credit agreement
with two domestic banks and can borrow up to $75,000,000, or the equivalent
in certain other foreign currencies. Amounts borrowed under this agreement
are to be paid in full by December 8, 2005. The rate of interest charged
on outstanding loans can, at the Company's option and subject to certain
restrictions, be based on the prime rate or at rates from 50 to 112.5
basis points over a Eurocurrency loan rate. The spreads over the
Eurocurrency rate are based on the Company's leverage ratio. Under the
arrangement, the ongoing commitment fee varies from 30.0 to 37.5 basis
points of the maximum amount that can be borrowed, net of any outstanding
borrowings and the maximum amount that beneficiaries may draw under
outstanding letters of credit. There were no borrowings pursuant to this
arrangement at December 30, 2001. The loan agreement contains restrictive
covenants primarily related to total indebtedness, interest expense,
capital expenditures and net worth. The Company is in compliance
with these covenants.
The Company had designated 390,200,000 million Belgian francs as a
hedge of its net investment in a foreign subsidiary in Belgium
($9,100,000 at December 31, 2000). On July 6, 2001, the Company
repaid the debt at the then current Belgian franc rate, amounting to
$8,200,000 million. During the years 2001 and 2000, the Company
recorded $900,000 and $600,000, respectively, of net gains related
to the hedge in other comprehensive income.
In September 2001, Rogers NV, a Belgian subsidiary of the Company,
signed an unsecured revolving credit agreement with a European bank.
Under this arrangement Rogers NV now can borrow up to 6,200,000 Euro.
Amounts borrowed under this agreement are to be repaid in full by
May 1, 2005. The rate of interest charged on outstanding loans is
based on the Euribor plus 25 basis points. At December 30, 2001,
Rogers NV had borrowings of 1,487,361 Euro ($1,315,000) under
this agreement.
INTEREST PAID:
Interest paid during the years 2001, 2000, and 1999, was
$1,050,000, $1,132,000, and $1,523,000, respectively.
34
RESTRICTION ON PAYMENT OF DIVIDENDS:
Pursuant to the multi-currency revolving credit loan agreement,
the Company cannot make a cash dividend payment if a default or
event of default has occurred and is continuing or shall result
from the cash dividend payment.
NOTE G-INCOME TAXES
Consolidated income before income taxes consists of:
(Dollars in Thousands)
2001 2000 1999
-----------------------------
Domestic $13,144 $30,263 $21,523
International 7,835 7,371 4,354
-----------------------------
$20,979 $37,634 $25,877
=============================
The income tax expense (benefit) in the consolidated statements
of income consists of:
(Dollars in Thousands)
Current Deferred Total
------------------------------------
2001:
Federal $ 3,029 $ (1,093) $ 1,936
International 1,951 1,533 3,484
State 26 (201) (175)
------------------------------------
$ 5,006 $ 239 $ 5,245
====================================
2000:
Federal $ 5,050 $ 2,507 $ 7,557
International 2,665 299 2,964
State (100) 493 393
------------------------------------
$ 7,615 $ 3,299 $ 10,914
====================================
1999:
Federal $ 6,365 $ (1,074) $ 5,291
International 1,338 408 1,746
State 120 89 209
------------------------------------
$ 7,823 $ (577) $ 7,246
====================================
Deferred tax assets and liabilities as of December 30, 2001 and
December 31, 2000, respectively, are comprised of the following:
(Dollars in Thousands)
December 30, December 31,
2001 2000
------------ ------------
Deferred tax assets:
Accruals not currently
deductible for tax purposes:
Accrued employee benefits
and compensation $ 4,655 $ 3,610
Accrued postretirement
benefits 2,021 1,964
Other accrued liabilities
and reserves 2,699 2,553
Tax credit carry-forwards 3,232 654
--------------------------------
Total deferred tax assets 12,607 8,781
Less deferred tax asset
valuation allowance 384 759
--------------------------------
Net deferred tax assets 12,223 8,022
--------------------------------
Deferred tax liabilities:
Depreciation and amortization 14,141 11,287
Investments in joint ventures, net 1,064 235
Other 129 126
--------------------------------
Total deferred tax liabilities 15,334 11,648
--------------------------------
Net deferred tax liability $(3,111) $(3,626)
================================
Deferred taxes are classified on the consolidated balance sheet
at December 30, 2001 and December 31, 2000 as a net short-term
deferred tax asset of $5,041,000 and $5,000,000, respectively,
and a net long-term deferred tax liability of $8,152,000 and $8,626,000,
respectively.
35
Income tax expense differs from the amount computed by applying
the United States Federal statutory income tax rate to income before
income tax expense. The reasons for this difference are as follows:
(Dollars in Thousands)
2001 2000 1999
--------------------------------
Tax expense at Federal statutory
income tax rate $ 7,342 $13,172 $ 9,056
Net U.S. tax (foreign tax credit)
on foreign earnings (1,058) (799) 1,552
General business credits (400) (537) (446)
Nontaxable foreign sales
company income (1,213) (861) (424)
State income taxes, net
of Federal benefit 102 256 136
Valuation allowance (375) (294) (2,274)
Other 847 (23) (354)
---------------------------------
Income tax expense $ 5,245 $10,914 $ 7,246
=================================
The tax credit carry-forwards consist of general business credits of
$1,145,000 that begin to expire in 2016, foreign tax credits of
$1,355,000 that begin to expire in 2007, and alternative minimum tax
credits of $732,000 that have no expiration date.
The deferred tax asset valuation allowance decreased by $375,000 and
$294,000 during 2001 and 2000, respectively. The decreases resulted
primarily from the Company's utilization of foreign tax credits on
undistributed profits from its Japanese joint venture. The deferred
tax asset valuation allowance decreased for the same reason by
$2,274,000 during 1999.
Undistributed foreign earnings, on which United States income tax
had not been provided, before available tax credits and deductions,
amounted to $19,569,000 at December 30, 2001, $15,429,000 at
December 31, 2000, and $10,956,000 at January 2, 2000.
Income taxes paid were $2,918,000, $3,598,000, and $4,795,000, in
2001, 2000, and 1999, respectively.
NOTE H-SHAREHOLDERS' EQUITY AND STOCK OPTIONS
Components of Other Comprehensive Income (Loss) consist of the
following:
(Dollars in Thousands)
2001 2000 1999
-----------------------------------
Foreign currency
translation adjustments $ (793) $ (923) $ (683)
Change in unrealized gains
on marketable securities -- -- 2
Change in minimum pension liability,
net of $634 and $1,053
in taxes in 2001 and 2000 (1,034) (1,718) (299)
------------------------------------
Other comprehensive income (loss) $(1,827) $(2,641) $ (910)
====================================
Accumulated balances related to each component of Other Comprehensive
Income (Loss) are as follows:
(Dollars in Thousands)
December 30, December 31,
2001 2000
---------------------------------
Foreign currency translation
adjustments $(1,127) $ (334)
Minimum pension liability, net
of $1,779 and $1,145
in taxes in 2001 and 2000 (2,903) (1,869)
---------------------------------
Accumulated balance $(4,030) $(2,203)
=================================
Under various plans the Company may grant stock options to officers and
other key employees at exercise prices that range as low as 50% of the
fair market value of the Company's stock as of the date of grant. To
date virtually all such options have been granted at an exercise price
equal to the fair market value of the Company's stock as of the date
of grant. In general, regular employee options become exercisable
over a four-year period from the grant date and expire ten years after
the date of grant. Stock option grants are also made to non-employee
directors, generally on a semi-annual basis. For such stock options,
the exercise price is equal to the fair market value of the Company's
stock and they are immediately exercisable and expire ten years after
the date of grant. Stock grants in lieu of cash compensation are also
made to non-employee directors.
36
Shares of capital stock reserved for possible future issuance
are as follows:
December 30, December 31,
2000 2001
-----------------------------------
Shareholder Rights Plan 20,385,363 19,949,400
Stock options 3,824,145 4,141,519
Rogers Employee Savings and
Investment Plan 169,044 169,044
Rogers Corporation Global
Stock Ownership Plan For
Employees 500,000 --
Long-Term Enhancement Plan 115,308 119,625
Stock to be issued in lieu of
deferred compensation 37,682 33,642
-----------------------------------
Total 25,031,542 24,413,230
===================================
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123 (FAS No. 123), "Accounting
for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized in the financial statements for the stock option plans.
Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards in
2001, 2000, and 1999 consistent with the provisions of FAS No. 123,
the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
(Dollars in Thousands, Except Per Share Amounts)
2001 2000 1999
-----------------------------------------------
Net income As Reported $15,734 $26,720 $18,631
Pro Forma 12,769 24,234 17,207
-----------------------------------------------
Basic earnings
per share As Reported $ 1.03 $ 1.79 $ 1.24
Pro Forma .84 1.63 1.15
-----------------------------------------------
Diluted earnings
per share As Reported $ .98 $ 1.69 $ 1.19
Pro Forma .80 1.62 1.11
-----------------------------------------------
The effects on pro forma net income and earnings per share of
expensing the estimated fair value of stock options are not necessarily
representative of the effects on reported net income for future years,
due to such things as the vesting period of the stock options, and the
potential for issuance of additional stock options in future years.
An average vesting period of three years was used for the assumption
regarding stock options issued in 2001, 2000, and 1999. Regular
options granted to officers and other key employees usually become
exercisable in one-third increments beginning on the second anniversary
of the grant date.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants:
2001 2000 1999
------------------------------
Risk-free interest rate 4.67% 5.14% 6.42%
Dividend yield 0% 0% 0%
Volatility factor 33.6% 33.2% 30.6%
Weighted-average expected life 6.1 years 6.1 years 5.8 years
A summary of the status of the Company's stock option program at
year-end 2001, 2000, and 1999, and changes during the years ended on
those dates is presented below:
2001 2000 1999
--------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Stock Options Shares Price Shares Price Shares Price
-------------------------------------------------------------
Outstanding at
beginning
of year 2,357,214 $17.12 2,518,850 $12.00 2,380,646 $10.91
Granted 270,809 33.24 429,479 32.56 356,320 17.69
Exercised (307,051) 9.19 (513,511) 6.94 (171,778) 6.03
Cancelled (6,151) 22.84 (77,604) 5.12 (46,338) 19.77
-------------------------------------------------------------
Outstanding at
end of year 2,314,821 $20.04 2,357,214 $17.12 2,518,850 $12.00
=============================================================
Options
exercisable at
end of year 1,668,843 1,496,710 1,864,032
=============================================================
Weighted-average fair
value of
options granted
during year $13.97 $13.97 $ 7.31
=============================================================
38
The following table summarizes information about stock options outstanding at
December 30, 2001:
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/30/01 Life in Years Price at 12/30/01 Price
- ------------------------------------------------------------------------------
$3 to $11 241,950 2.4 $ 7.86 241,950 $ 7.86
$12 to $28 1,441,433 6.1 $15.92 1,196,028 $15.89
$29 to $43 631,438 9.1 $34.11 230,865 $34.02
------------------------------------------------------------
$3 to $43 2,314,821 6.5 $20.04 1,668,843 $17.23
============================================================
In 2001, shareholders approved the Rogers Corporation Global Stock Ownership
Plan For Employees, an employee stock purchase plan. The plan provides for
the issuance of up to 500,000 shares of Company stock. Shares may be
purchased by participating employees through payroll deductions that are
made during prescribed offering periods with the actual purchases made at
the end of each offering period. Currently, shares may be purchased at 85%
of the stock's closing price at the beginning or end of each offering period,
whichever is lower and other rules have been established for participation
in the plan.
NOTE I-COMMITMENTS AND CONTINGENCIES
LEASES:
The Company's principal noncancellable operating lease obligations are
for building space and vehicles. The leases generally provide that the
Company pay maintenance costs. The lease periods range from one to
five years and include purchase or renewal provisions at the Company's
option. The Company also has leases that are cancellable with minimal
notice. Lease expense was $1,320,000 in 2001, $1,084,000 in 2000, and
$1,076,000 in 1999.
Future minimum lease payments under noncancellable operating leases at
December 30, 2001, aggregate $3,347,000. Of this amount, annual minimum
payments are $1,028,000, $868,000, $485,000, $384,000, and $326,000 for
years 2002 through 2006, respectively.
CONTINGENCIES:
The Company is subject to federal, state, and local laws and regulations
concerning the environment and is currently engaged in proceedings
related to such matters.
The Company is currently involved as a potentially responsible party (PRP)
in two cases involving waste disposal sites, both of which are Superfund
sites. These proceedings are at a stage where it is still not possible
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. In the past, when 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 the
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,
monitored the site in 2001, and will continue to monitor the site for
the next two years. On the basis of estimates prepared by environmental
engineers and consultants, the Company recorded a provision of
$2,200,000 prior to 1999 and based on updated estimates provided an
additional $400,000 in 1999 for costs related to this matter. Prior to
1999, $900,000 was charged against this provision. In 1999, 2000, and
2001 expenses of $400,000, $900,000, and $100,000 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.
38
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 disputed the EPA allegations
and 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 placed that decision on appeal with the
District of Columbia Federal Court of Appeals in 2000. In early January
of 2002, the Company was informed that the Court of Appeals reversed the
decision. As a result of this favorable decision, the $300,000 reserve
for the fine was taken into income in 2001 as the Company intends to
vigorously resist any future attempts by the government to impose
a substantial fine.
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 had been suspended
and it was not anticipated that the acquisition would occur. Accordingly,
$1,500,000 in costs associated with this potential acquisition were
written off during the second quarter. On October 23, 2001, the Company
terminated the acquisition agreement.
On October 24, 2001, a breach of contract lawsuit was filed against the
Company in the United States District Court for the District of
Connecticut seeking damages in the amount of $25,000,000 or more, as
well as specific performance and attorneys' fees (Tonoga, Ltd., d/b/a
Taconic Plastics Ltd., Tonoga, Inc., Andrew G. Russell, and
James M. Russell v. Rogers Corporation). The complaint alleges that the
Company breached its agreement to purchase Taconic's Advanced Dielectric
Division. The Company believes that several conditions precedent to a
closing contained in the relevant agreement were not satisfied by
Taconic, and that the litigation is without merit. The Company intends
to vigorously defend the lawsuit.
In addition to the above issues, the nature and scope of the Company's
business bring it in regular contact with the general public and a variety
of businesses and government agencies. Such activities inherently subject
the Company to the possibility of litigation that is defended and handled
in the ordinary course of business. The Company has established accruals
for matters for which management considers a loss to be probable and
reasonably estimable. It is the opinion of management that facts known
at the present time do not indicate that such litigation, after taking
into account insurance coverage and the aforementioned accruals, will
have a material adverse effect on the financial position of the Company.
NOTE J-BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company's eight business units and four joint ventures have separate
management teams and infrastructures that in most cases offer different
products and services. The business units and joint ventures have been
aggregated into three reportable segments: High Performance Foams,
Printed Circuit Materials, and Polymer Materials and Components. 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.
High Performance Foams: This segment consists of two business units
and 50% of one joint venture. The products produced by these operations
consist primarily of high-performance urethane and silicone foams that
are designed to perform to predetermined specifications where
combinations of properties are needed to satisfy rigorous mechanical
and environmental requirements. These materials are sold worldwide
and for the most part are sold to fabricators and original equipment
manufacturers.
Printed Circuit Materials: There are two business units and two
joint ventures in this segment. Laminate materials used in electronics
equipment for transmitting, receiving, and controlling electrical
signals are the products produced by these operations. These products
tend to be proprietary materials which provide highly specialized
electrical and mechanical properties to meet the demands imposed
by increasing speed, complexity, and power in analog, digital, and
microwave equipment. These materials are fabricated, coated and/or
customized as necessary to meet customer demands and are sold worldwide.
39
Polymer Materials and Components: This segment is comprised of four
business units, one joint venture and 50% of another joint venture.
The products produced by these operations consist primarily of molded
elastomer components, reinforced plastics, power distribution components
and nonwoven materials. These products have been engineered to provide
special performance characteristics to suit a wide range of markets
and applications. These products are sold worldwide to a varied
customer base.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on operating income of the respective business units.
The principal manufacturing operations of the Company are located in
the United States and Europe. The Company markets its products
throughout the United States and sells in foreign markets directly,
through distributors and agents, and through its 50% owned joint ventures
in Asia. In 2001, approximately 57% of total sales were to the
electronics industry. Approximately 34% of the Company's sales of
products manufactured by U.S. divisions were made to customers
located in foreign countries. This includes sales to Europe of 17%,
sales to Asia of 15%, and sales to Canada of 1%.
At December 30, 2001, the electronics industry accounted for approximately
63% of the total accounts receivable due from customers. Accounts
receivable due from customers located within the United States accounted
for 71% of the total accounts receivable owed to the Company at the end
of 2001. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not require
collateral. Receivables are generally due within 30 days. Credit losses
relating to customers have been minimal and have been within management's
expectations.
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 reported in the following tables.
BUSINESS SEGMENT INFORMATION
(Dollars in
Thousands) High Printed Polymer
Performance Circuit Materials and
Foams Materials * Components Total
--------------------------------------------------------
2001:
Net sales $ 49,745 $ 88,342 $ 77,950 $ 216,037
Operating income 4,583 6,170 2,293 13,046
Total assets 44,908 101,539 77,362 223,809
Capital expenditures 955 15,242 1,835 18,032
Depreciation 2,165 6,152 4,630 12,947
Joint venture equity
income (loss) 1,557 (428) 1,994 3,123
========================================================
2000:
Net sales $ 58,877 $ 100,701 $ 88,637 $ 248,215
Operating income 11,191 12,189 6,103 29,483
Total assets 44,171 93,809 83,534 221,514
Capital expenditures 1,185 15,122 6,437 22,744
Depreciation 2,106 5,306 4,244 11,656
Joint venture equity
income 994 -- 4,951 5,945
========================================================
1999:
Net sales $ 51,364 $ 105,897 $ 90,578 $ 247,839
Operating income 7,758 7,468 9,123 24,349
Total assets 44,418 73,979 65,009 183,406
Capital expenditures 1,508 5,459 6,654 13,621
Depreciation 1,869 4,136 3,745 9,750
Joint venture equity
income 342 -- 1,555 1,897
========================================================
* Beginning in January 2000, sales of a specialty flexible circuit board
laminate sold to Hutchinson Technology, Inc. (HTI) are reported in the
Polyimide Laminate Systems, LLC joint venture. Sales of $30,700,000 in
1999 were included in net sales in the Printed Circuit Materials business
segment.
40
Information relating to the Company's operations by geographic area is as
follows:
Europe
United (primarily
(Dollars in Thousands) States Belgium) Total
----------------------------------------------
2001:
Net sales $ 170,124 $ 45,913 $ 216,037
Long-lived assets 90,129 26,340 116,469
==============================================
2000:
Net sales $ 197,954 $ 50,261 $ 248,215
Long-lived assets 91,333 19,347 110,680
==============================================
1999:
Net sales $ 202,505 $ 45,334 $ 247,839
Long-lived assets 83,258 18,084 101,342
==============================================
Net sales are attributed to the business unit making the sale. Long-lived
assets are attributed to the location of the asset.
The net assets of wholly-owned foreign subsidiaries were $23,691,000 at
December 30, 2001, and $19,698,000 at December 31, 2000. Net income of these
foreign subsidiaries was $4,819,000 in 2001, $4,399,000 in 2000, and
$2,600,000 in 1999, including net currency transaction gains (losses) of
$117,000 in 2001, $61,000 in 2000, and $(51,000) in 1999.
NOTE K - RESTRUCTURING COSTS
In the second quarter of 2001, the Company incurred a restructuring charge
in the amount of $500,000. This amount primarily consists of $300,000 in
severance benefits for the termination of 19 employees in the Printed Circuit
Materials segment and $200,000 in costs associated with the merging of two
business units within the segment. All 19 of these employees were terminated
during the second quarter. The balance in the accrual at December 30, 2001
was $25,000.
NOTE L - SUBSEQUENT EVENTS
As of December 31, 2001 (fiscal year 2002), the Company acquired certain
assets of the high performance foam business of Cellect LLC for approximately
$10,000,000 in cash, plus a potential earn out in five years based upon
performance. These assets included intellectual property rights, machinery and
equipment, inventory, and customer lists for portions of the Cellect
plastomeric and elastomeric high performance polyolefin foam business.
The acquisition will be accounted for as a purchase; accordingly, the
purchase price will be allocated to the underlying assets based on their
respective fair values at the date of acquisition.
Other assets at December 30, 2001 included a $2,000,000 advance payment
relating to this acquisition.
41
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors and Shareholders
Rogers Corporation
We have audited the accompanying consolidated balance sheets of Rogers
Corporation and subsidiaries as of December 30, 2001 and December 31, 2000,
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the three fiscal years in the period ended
December 30, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rogers
Corporation and subsidiaries at December 30, 2001 and December 31, 2000,
and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended December 30, 2001, in
conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Providence, Rhode Island
February 1, 2002