Total pages included - 15
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 June 30, 2002
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 July 28, 2002:
Capital Stock, $1 Par Value 15,832,046 shares
1
ROGERS CORPORATION AND SUBSIDIARIES
FORM 10-Q
June 30, 2002
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income--
Three Months and Six Months Ended
June 30, 2002 and July 1, 2001 3
Consolidated Balance Sheets--
June 30, 2002 and December 30, 2001 4-5
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 2002 and
July 1, 2001 6
Supplementary Notes 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-14
PART II--OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Reports on Form 8-K 15
SIGNATURES 15
2
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
Three Months Ended: Six Months Ended:
(Unaudited) (Unaudited)
-------------------- -------------------
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
Net Sales $ 57,330 $ 53,162 $111,888 $116,912
Cost of Sales 39,634 37,361 77,949 80,457
Selling and Administrative
Expenses 10,099 9,912 20,208 20,057
Acquisition/Restructuring
Costs -- 1,995 -- 1,995
Research and Development
Expenses 3,640 2,965 7,105 6,090
------- ------- -------- --------
Total Costs and Expenses 53,373 52,233 105,262 108,599
------- ------- -------- --------
Operating Income 3,957 929 6,626 8,313
Other Income less Other Charges 2,173 1,750 4,780 3,869
Interest Income (Expense), Net (89) 26 (186) 125
------- ------- -------- --------
Income Before Income Taxes 6,041 2,705 11,220 12,307
Income Taxes:
Federal and Foreign 1,465 784 2,721 3,569
State 45 27 84 123
-------- -------- --------- --------
Net Income $ 4,531 $ 1,894 $ 8,415 $ 8,615
======== ======== ========= ========
Net Income Per Share (Note E):
Basic $ 0.29 $ 0.12 $ 0.54 $ 0.57
======== ======== ========= ========
Diluted $ 0.28 $ 0.12 $ 0.52 $ 0.54
======== ======== ========= ========
Shares Used in Computing
(Note E):
Basic 15,487,000 15,243,000 15,445,000 15,211,000
Diluted 16,101,000 15,842,000 16,076,000 15,932,000
The accompanying notes are an integral part of the consolidated financial
statements.
3
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
June 30, 2002 December 30, 2001
------------- -----------------
Current Assets:
Cash and Cash Equivalents $ 20,917 $ 20,891
Accounts Receivable, Net 33,323 27,460
Accounts Receivable, Joint Ventures 1,842 5,123
Inventories:
Raw Materials 8,756 10,003
In-Process and Finished 15,923 15,372
--------- ---------
Total Inventories 24,679 25,375
Current Deferred Income Taxes 5,041 5,041
Other Current Assets 1,514 1,026
--------- ---------
Total Current Assets 87,316 84,916
--------- ---------
Property, Plant and Equipment, Net of
Accumulated Depreciation of $98,433
and $90,015 (at June 30, 2002 and
December 30, 2001) 101,696 98,454
Investment in Unconsolidated Joint
Ventures 16,910 16,116
Pension Asset 6,308 6,308
Goodwill and Other Intangibles, Net 22,161 13,588
Other Assets 5,314 4,427
-------- --------
Total Assets $ 239,705 $ 223,809
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
4
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
June 30, 2002 December 30, 2001
------------- -----------------
Current Liabilities:
Accounts Payable $ 10,411 $ 12,009
Accrued Employee Benefits and
Compensation 9,799 6,974
Accrued Income Taxes Payable 8,371 6,337
Taxes, Other than Federal and Foreign
Income 1,120 441
Other Accrued Liabilities 5,189 3,931
--------- ---------
Total Current Liabilities 34,890 29,692
Long-Term Debt 3,980 1,315
Noncurrent Deferred Income Taxes 8,580 8,152
Noncurrent Pension Liability 9,171 12,371
Noncurrent Retiree Health Care and Life
Insurance Benefits 6,052 6,052
Other Long-Term Liabilities 2,422 3,165
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000; Issued
Shares 15,835,854 and 15,739,184
(at June 30, 2002 and December 31, 2001) 15,836 15,739
Additional Paid-In Capital 35,788 35,351
Retained Earnings 137,853 129,438
Accumulated Other Comprehensive Loss (1,727) (4,030)
Treasury Stock (373,940 and 382,900 shares
at June 30, 2002 and December 30, 2001) (13,140) (13,436)
--------- ---------
Total Shareholders' Equity 174,610 163,062
--------- ---------
Total Liabilities and Shareholders' Equity $ 239,705 $ 223,809
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
ROGERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Six Months
Ended:
(Unaudited)
June 30, July 1,
2002 2001
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income $ 8,415 $ 8,615
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 7,175 7,594
Equity in Undistributed Income of Unconsolidated
Joint Ventures, Net (3,755) (1,241)
Noncurrent Pension and Postretirement Benefits (3,026) 226
Other, Net (841) (271)
Changes in Operating Assets and Liabilities:
Accounts Receivable (4,914) 3,265
Accounts Receivable - Joint Ventures 3,282 1,846
Inventories 1,293 (1,499)
Other Current Assets (423) (844)
Accounts Payable and Accrued Expenses 4,987 (1,000)
Net Cash Provided by Operating Activities 12,193 16,691
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures (6,604) (7,705)
Acquisition of Businesses (8,000) --
Investment in Unconsolidated Joint Ventures and
Affiliates 2,962 (1,495)
Net Cash Used in Investing Activities (11,642) (9,200)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from Short and Long-Term Borrowings 3,966 66
Repayments of Debt Principal (2,105) (395)
Repayment of Life Insurance Debt (3,081) --
Disposition of Treasury Stock 214 --
Proceeds from Sale of Capital Stock 524 (31)
Net Cash Used in Financing Activities (482) (360)
Effect of Exchange Rate Changes on Cash (43) 78
Net Increase in Cash and Cash Equivalents 26 7,209
Cash and Cash Equivalents at Beginning of Year 20,891 10,100
Cash and Cash Equivalents at End of Quarter $20,917 $17,309
The accompanying notes are an integral part of the consolidated financial
statements.
6
ROGERS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY NOTES
(Unaudited)
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. All significant intercompany transactions have been
eliminated. 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 30, 2001.
B. Interest paid during the first six months of 2002 and 2001 was
$374,000 and $495,000, respectively.
C. Income taxes paid were $2,000 and $255,000 in the first six months of
2002 and 2001, respectively. The $2,000 payment during the first six
months of 2002 was impacted by prior period overpayments that have
been applied to this year's liability.
D. The components of other comprehensive loss, net of related tax, for
the three and six-month periods ended June 30, 2002 and July 1, 2001
are as follows:
Three Months Six Months
Ended: Ended:
(Dollars In Thousands) June 30, July 1, June 30, July 1,
2002 2001 2002 2001
Net income $ 4,531 $ 1,894 $ 8,415 $ 8,615
Foreign currency translation
adjustments (336) (951) 2,303 (1,455)
------- ------- ------- -------
Comprehensive Income $ 4,195 $ 943 $10,718 $ 7,160
======= ======= ======= =======
Accumulated balances related to each component of Other Comprehensive
Loss are as follows:
June 30, 2002 December 30, 2001
Foreign currency translation
adjustments $ 1,176 $ (1,127)
Change in minimum pension
liability (2,903) (2,903)
-------- --------
$ (1,727) $ (4,030)
======== ========
7
SUPPLEMENTARY NOTES, CONTINUED
(Unaudited)
E. The following table sets forth the computation of basic and diluted
earnings per share in conformity with Statement of Financial Accounting
Standards (FAS) No. 128, "Earnings per Share":
Three Months Six Months
Ended: Ended:
---------------- ----------------
(In Thousands, Except Per Share Amounts) June 30, July 1, June 30, July 1,
2002 2001 2002 2001
---------------- ----------------
Numerator:
Net income $ 4,531 $ 1,894 $ 8,415 $ 8,615
Denominator:
Denominator for basic earnings per
share - Weighted-average shares 15,487 15,243 15,445 15,211
Effect of stock options 614 599 721 631
---------------- ----------------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 16,101 15,842 16,076 15,932
================ ================
Basic earnings per share $ 0.29 $ 0.12 $ 0.54 $ 0.57
================ ================
Diluted earnings per share $ 0.28 $ 0.12 $ 0.52 $ 0.54
================ ================
F. The following table sets forth the information about the Company's
operating segments in conformity with Statement of Financial
Accounting Standards (FAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information":
High Printed Polymer
(Dollars in Millions) Performance Circuit Materials & Total
Foams Materials Components
Three months ended June 30, 2002
Net Sales $17.8 $20.0 $19.5 $ 57.3
Operating Income 2.7 0.3 1.0 4.0
Three months ended July 1, 2001
Net Sales $12.0 $21.6 $19.6 $ 53.2
Operating Income 0.5 0.1 0.3 0.9
Six months ended June 30, 2002
Net Sales $33.5 $39.5 $38.9 $111.9
Operating Income 4.3 0.6 1.7 6.6
Six months ended July 1, 2001
Net Sales $25.8 $48.8 $42.3 $116.9
Operating Income 2.2 4.5 1.6 8.3
Inter-segment 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.
8
SUPPLEMENTARY NOTES, CONTINUED
(Unaudited)
G. 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.
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 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 in 2002 and 2003. 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. No amount has been
charged to the reserves for the first six months of 2002. 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 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. However,
subsequent to the favorable decision by the Court of Appeals in
January 2002, the EPA has continued to pursue this issue and
settlement discussions with the EPA have been more protracted and
difficult than anticipated at the
9
SUPPLEMENTARY NOTES, CONTINUED
(Unaudited)
beginning of the year. Therefore, in the second quarter of 2002, the
Company booked $325,000 for legal and other costs associated with this
matter.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
H. 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 M), 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. However, on January 3, 2002, 8,960
shares of Treasury Stock were used to provide the plan participants
the shares for the initial plan period that was initiated on October
1, 2001 and concluded on December 31, 2001. As of June 30, 2002,
Treasury Stock totals 373,940 shares and is shown at cost on the
balance sheet as a reduction of Shareholders' Equity.
I. 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 of 2001. 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.
J. Other income less other charges was $4,800,000 in the
first half of 2002 compared to $3,900,000 in the same period in 2001.
The increase is primarily due to the performance of Rogers joint
ventures, particularly Durel Corporation and Rogers Inoac Corporation
(RIC), partially offset by lower royalty income and litigation
expenses related to the aforementioned Taconic lawsuit.
K. 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
10
SUPPLEMENTARY NOTES, CONTINUED
(Unaudited)
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 entire amount has been paid as of
June 30, 2002.
L. In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (FAS) No. 141, Business
Combinations, and (FAS) 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 has applied Statements 141 and 142 beginning in the first
quarter of 2002. Application of the nonamortization provisions of
Statement 142 resulted in an increase in net income of $165,000 in the
first half of 2002. Management has conducted the impairment review
for goodwill in accordance with the guidance and provisions of
Statement 142. Based on that assessment, management has deemed that
there has been no impairment. Prospectively, management will conduct
this review annually, as required by the accounting standard.
M. 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.
N. As of December 31, 2001 (the beginning of 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, and
customer lists for portions of the Cellect plastomeric and elastomeric
high performance polyolefin foam business. The acquisition was
accounted for as a purchase. A portion of the purchase price has been
allocated to property, plant and equipment. The remainder of the
purchase price will be allocated to intangible assets based on their
respective fair values at the date of acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales of $57.3 million in the second quarter of 2002 were up 8%,
respectively, from the comparable period in 2001. For the first Half of
2002 net sales were down about 4% due to the decrease in first
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
quarter 2002 net sales compared to 2001. Combined Sales, which includes
one half of the sales from Rogers' four 50% owned joint ventures, were
$73.1 million for the quarter up almost 9% over the same period in 2001.
For the first half of 2002, Combined Sales were $141.8 million down 3% from
the first half of 2001.
High Performance Foam sales were $17.8 million and $33.5 million for this
year's second quarter and first half, up 48% and 30%, respectively, from
the comparable periods in 2001. Revenues in this business segment
increased, in part, due to sales from the newly acquired Cellect product
lines. The PORON urethane foam product line had the best quarter in its
history. Sales strength was broad based with gains from printing and
industrial applications across multiple markets.
The acquisition of Cellect is being integrated into Rogers High Performance
Foams. The product portfolio acquired has increased the variety of
offerings in this segment and has provided Rogers with a lower density and
less expensive product grouping, thus it provides the ability to expand the
Company's market share. In addition, the intellectual property obtained
(18 patents) should enable the Company to develop new products to add to
its High Performance Foams portfolio. However, the acquisition is only
expected to be modestly accretive to earnings in 2002.
Sales of Printed Circuit Materials for the second quarter and first half
totaled $20.0 million and $39.5 million, respectively, decreases of 7% and
19% compared to the second quarter and first half of 2001. High frequency
laminate sales were soft reflecting the continuing weakness in the telecom
infrastructure market. Offsetting this softness was the fact that flexible
materials had their best quarter since the third quarter of 2000. The
improvements being seen in flexible laminates are the result of new
adoptions in cellphones as well as disk drive customers gaining new
business.
Sales of Polymer Materials and Components were $19.5 million and $38.9
million, respectively for the second quarter and first half of 2002, a
decrease of less than 1% and approximately 8%, respectively, from the
comparable 2001 periods. These product lines tend to parallel the general
economic climate. Although sales were flat and significant pricing
pressure continued, through good cost containment and improvements in
efficiency, this group saw improved profitability.
Without the one-time pre-tax charge of $2.0 million in the second quarter
of 2001, the increase in the second quarter 2002 diluted earnings per share
would have been 33% and the decrease in the first half of the year would
have been 17%. Diluted earnings per share for the second quarter of 2002
were $.28, up from $.12 for the comparable period in 2001. For the first
half of 2002, diluted earnings per share were $.52 down from $.54 in 2001.
Manufacturing profit as a percentage of sales in the first six months of
2002 and 2001 was 30% and 31%, respectively. The decrease is the result of
lower revenues and lower margins for the product lines related to the
Cellect acquisition. This decrease was mitigated, however, due to the
continued focus on process improvement and benefits derived from cost
reduction efforts in 2001.
Selling and administrative expenses for the second quarter and first half
of 2002 were up slightly from 2001. As a percentage of sales, selling and
administrative expenses were down in the second quarter, but up for the
first six months compared to 2001. The decrease in the percentage for
the quarter is derived from ongoing cost reduction efforts that began in
2001. The increase in the percentage for the half is due to lower
revenues.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Research and development expense of $7.1 million for the first six months
of 2002 were up from the $6.1 million incurred in the first half of 2001.
The increase is due to the cost of additional technical personnel.
Goodwill for the Company was $22.2 million and $13.6 million at June 30,
2002 and December 30, 2001, respectively. The goodwill relates to varied
acquisitions which have all been consummated within the last six years,
including the recent acquisition of Cellect which occurred during 2002.
Management has conducted the impairment review for goodwill in accordance
with the guidance and provisions of FAS 142. Based on that assessment,
management has deemed that there has been no impairment. Prospectively,
management will conduct this review annually, as required by the accounting
standard.
Net interest income/(expense) decreased in 2002 as compared to 2001 from
$125,000 to ($186,000) for the first six months. The primary reason for
the decrease in income is due to Durel Corporation, one of Rogers' 50%
owned joint ventures, which paid off its loan to Rogers during the first
half of 2002.
Other Income less Other Charges was $4.8 million in the first half of 2002
compared to $3.9 million in the comparable period in 2001. The increase is
due primarily to the better performance of Rogers' joint ventures,
partially offset by reduced royalties and litigation expenses relating to
the Taconic lawsuit. Revenues at Durel Corporation, Rogers' joint venture
with 3M, were over 40% higher for the first half of 2002 compared to the
first half of 2001. A key automotive dashboard backlight and several new
cellphone introductions by a major customer drove Durel's excellent
results. Durel inverter sales also grew significantly as its largest Asian
customer gained market share. Profits at Durel benefited from significant
improvements in yield and efficiencies in the manufacture of
electroluminescent lamps. Profits were also up at Rogers Inoac Corporation
(RIC), Rogers' joint venture with Inoac Corporation, substantially from
last year. RIC is now seeing the full benefit of focusing on its PORON
products after divesting its ENDUR line at the beginning of 2002.
The effective tax rate used in the second quarter of 2002 was 25% as
compared to 30% used in the second quarter of 2001. The tax rate has
benefited primarily from foreign tax credits, research and development
credits, and nontaxable foreign sales income.
Net cash provided by operating activities in the first six months of 2002
totaled $12.2 million. This compares with $16.7 million provided by
operations for the comparable 2001 period. This difference is primarily
attributable to an increase in accounts receivable, voluntary early
contributions to the Company's pension plans, equity in undistributed
income of unconsolidated joint ventures, and lower net income, partially
offset by an increase in accounts payable and accrued expenses and a
decrease in inventories.
In 2002, investments in capital equipment totaled $6.6 million in the first
six months and are expected to approach $26 million for the year. In 2001,
capital expenditures for the first six months were $7.7 million and they
finished at $18 million for the year. The projection for 2002 includes
$10.4 million for the fourth quarter 2002 purchase of a new building
in the Chicago are for the Company's Bisco Materials Unit. The new
facility will house the Company's silicone foams and polyolefin foams
operations.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Management believes that cash on hand, and internally generated funds will
be sufficient to meet the near term, regular needs of the business. In
addition, the Company 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. There were no borrowings
at June 30, 2002 under this agreement.
In September 2001, Rogers N.V., a Belgian subsidiary of the Company, signed
an unsecured revolving credit agreement with a European bank. Under this
arrangement Rogers N.V. now can borrow up to 6.2 million 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 June 30, 2002, Rogers N.V. had borrowings of 4.0
million Euro (US$4.0 million) under this agreement.
During the second quarter of 2002 there were no material developments
relative to environmental matters or other contingencies. Refer to Note G
and Note I for ongoing environmental and contingency matters.
The Company has not had any material recurring costs and capital
expenditures relating to environmental matters, except as specifically
described in the preceding statements.
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 2001 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Previously reported on Form 10-Q filed for the three months ended
March 31, 2002
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
Exhibit 1. Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 2. Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) There were no reports on Form 8-K filed for the three months
ended June 30, 2002.
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/ James M. Rutledge
-----------------------
James M. Rutledge
Vice President, Finance and
Chief Financial Officer
Dated: August 13, 2002
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