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 September 29, 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 October 27, 2002:
Capital Stock, $1 Par Value-15,832,122 shares
1
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
FORM 10-Q
September 29, 2002
INDEX
Page No.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Statements of Income--
Three Months and Nine Months Ended
September 29, 2002 and September 30, 2001 3
Balance Sheets--
September 29, 2002 and December 30, 2001 4-5
Statements of Cash Flows--
Nine Months Ended September 29, 2002 and
September 30, 2001 6
Supplementary Notes 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-14
Item 4. Controls and Procedures 14
PART II--OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 15
Certifications Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 16-18
2
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENTS OF INCOME
Third quarter ended September 29, 2002 (Unaudited)
(Amounts in Thousands Except for Per Share Amounts)
Three Months Ended Nine Months Ended
------------------ -----------------
2002 2001 2002 2001
------------------ -----------------
Net Sales $ 56,034 $ 51,031 $167,922 $167,943
Cost of Sales 38,571 35,239 116,520 115,696
Selling and Administrative
Expenses 9,568 9,591 29,776 29,648
Acquisition/Restructuring
Costs -- -- -- 1,995
Research and Development
Expenses 3,417 3,333 10,522 9,423
-------- ------- -------- --------
Total Costs and Expenses 51,556 48,163 156,818 156,762
-------- ------- -------- --------
Operating Income 4,478 2,868 11,104 11,181
Other Income less Other
Charges 2,435 1,663 7,215 5,532
Interest Income (Expense), Net (71) 68 (257) 193
-------- -------- -------- --------
Income Before Income Taxes 6,842 4,599 18,062 16,906
Income Taxes (2,072) (1,380) (4,877) (5,072)
-------- -------- -------- --------
Net Income $ 4,770 $ 3,219 $ 13,185 $ 11,834
======== ======== ======== ========
Net Income Per Share (Note E):
Basic $ 0.31 $ 0.21 $ 0.85 $ 0.78
======== ======== ======== ========
Diluted $ 0.30 $ 0.20 $ 0.82 $ 0.74
======== ======== ======== ========
Shares Used in Computing (Note E):
Basic 15,516 15,299 15,460 15,240
======== ======== ======== ========
Diluted 15,896 15,885 16,003 15,917
======== ======== ======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
3
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
September 29, 2002 December 30, 2001
Current Assets:
Cash and Cash Equivalents $ 27,656 $ 20,891
Accounts Receivable, Net 34,837 27,460
Accounts Receivable, Joint Ventures 2,121 5,123
Inventories:
Raw Materials 8,110 10,003
In-Process and Finished 14,364 15,372
--------- ---------
Total Inventories 22,474 25,375
Current Deferred Income Taxes 5,041 5,041
Other Current Assets 2,475 1,026
--------- ---------
Total Current Assets 94,604 84,916
--------- ---------
Property, Plant and Equipment,
Net of Accumulated Depreciation
of $101,931 and $90,015 (September
29, 2002 and December 30, 2001) 99,946 98,454
Investment in Unconsolidated
Joint Ventures 19,388 16,116
Pension Asset 6,308 6,308
Goodwill and Other Intangibles, Net 22,158 13,588
Other Assets 5,420 4,427
--------- ---------
Total Assets $ 247,824 $ 223,809
========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
4
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
September 29, 2002 December 30, 2001
Current Liabilities:
Accounts Payable $ 9,785 $ 12,009
Accrued Employee Benefits
and Compensation 11,757 6,974
Accrued Income Taxes Payable 10,255 6,337
Taxes, Other than Federal and
Foreign Income 412 441
Other Accrued Liabilities 5,528 3,931
--------- ---------
Total Current Liabilities 37,737 29,692
Long-Term Debt 3,920 1,315
Noncurrent Deferred Income Taxes 8,522 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 2,497 3,165
Shareholders' Equity:
Capital Stock, $1 Par Value:
Authorized Shares 50,000,000;
Issued Shares 15,832,122 and
15,739,184 (September 29, 2002
and December 30, 2001) 15,832 15,739
Additional Paid-In Capital 35,736 35,351
Retained Earnings 142,624 129,438
Accumulated Other Comprehensive Loss (1,496) (4,030)
Treasury Stock (360,487 and 382,900
shares at September 29, 2002 and
December 30, 2001) (12,771) (13,436)
--------- ---------
Total Shareholders' Equity 179,925 163,062
--------- ---------
Total Liabilities and Shareholders'
Equity $ 247,824 $ 223,809
========= =========
The accompanying notes are an integral part of the financial statements.
5
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Nine Months Ended (Unaudited)
September 29, September 30,
2002 2001
------------- -------------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 13,185 $ 11,834
Adjustments to Reconcile Net
Income to Net Cash
Provided by (Used in) Operating
Activities:
Depreciation and Amortization 11,033 10,958
Equity in Undistributed Income
of Unconsolidated Joint
Ventures, Net (6,233) (1,965)
Noncurrent Pension and
Postretirement Benefits (3,026) 294
Other, Net (925) (166)
Changes in Operating Assets and
Liabilities:
Accounts Receivable (6,699) 5,228
Accounts Receivable -
Joint Ventures 3,002 4,329
Inventories 3,527 2,786
Other Current Assets (1,392) (111)
Accounts Payable and Accrued
Expenses 7,684 (2,959)
--------- ---------
Net Cash Provided by Operating
Activities 20,156 30,228
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures (8,762) (12,168)
Acquisition of Businesses (8,000) --
Investment in Unconsolidated
Joint Ventures and Affiliates 2,962 (1,495)
--------- ---------
Net Cash Used in Investing
Activities (13,800) (13,663)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from Short and Long-Term
Borrowings 4,443 66
Repayments of Debt Principal (2,362) (9,116)
Repayment of Life Insurance Debt (3,081) --
Disposition of Treasury Stock 582 --
Proceeds from Sale of Capital Stock 525 268
--------- ---------
Net Cash Provided by (Used in)
Financing Activities 107 (8,782)
Effect of Exchange Rate Changes on Cash 302 404
--------- ---------
Net Increase in Cash and Cash Equivalents 6,765 8,187
Cash and Cash Equivalents at
Beginning of Year 20,891 10,100
--------- ---------
Cash and Cash Equivalents at
End of Quarter $ 27,656 $ 18,287
========= =========
The accompanying notes are an integral part of the
consolidated financials statements.
6
ROGERS CORPORATION AND CONSOLIDATED AFFILIATES
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.
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 nine months of 2002 and 2001 was
$180,770 and $574,000, respectively.
C. Income taxes paid were $0 and $497,000 in the first nine months
of 2002 and 2001, respectively.
D. Comprehensive income/(loss), net of related tax for the three
and nine-month periods ended September 29, 2002 and
September 30, 2001, was as follows:
Three Months Ended: Nine Months Ended:
------------------- ------------------
(Dollars In Thousands) 2002 2001 2002 2001
------------------- ------------------
Net income $ 4,770 $ 3,219 $13,185 $11,834
Foreign currency
translation adjustments 232 2,103 2,534 647
------------------- ------------------
Comprehensive income $ 5,002 $ 5,322 $15,719 $12,481
=================== ==================
Accumulated balances related to components of Other Comprehensive
Income/(Loss) are as follows:
(Dollars In Thousands) September 29, 2002 December 30, 2001
------------------ -----------------
Foreign currency
translation adjustments $ 1,407 $(1,127)
Change in minimum pension
liability (2,903) (2,903)
-------- --------
$(1,496) $(4,030)
======== ========
7
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" for the periods ending September 29, 2002 and September
30, 2001 respectively:
Three Months Ended: Nine Months Ended:
------------------- ------------------
(In Thousands, Except
Per Share Amounts) 2002 2001 2002 2001
------------------- ------------------
Numerator:
Net income $ 4,770 $ 3,219 $ 13,185 $ 11,834
Denominator:
Denominator for basic
earnings per share -
Weighted-average shares 15,516 15,299 15,460 15,240
Effect of stock options 380 586 543 677
------------------- ------------------
Denominator for diluted
earnings per share -
adjusted weighted-
average shares and
assumed conversions 15,896 15,885 16,003 15,917
=================== ==================
Basic earnings per share $ 0.31 $ 0.21 $ 0.85 $ 0.78
=================== ==================
Diluted earnings per share $ 0.30 $ 0.20 $ 0.82 $ 0.74
=================== ==================
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 Sept 29, 2002
Net Sales $16.0 $21.3 $18.7 $ 56.0
Operating Income 1.7 2.1 0.7 4.5
Three months ended Sept 30, 2001
Net Sales $12.3 $20.2 $18.5 $ 51.0
Operating Income 1.1 1.2 0.6 2.9
Nine months ended Sept 29, 2002
Net Sales $49.5 $60.8 $57.6 $167.9
Operating Income 6.0 2.7 2.4 11.1
Nine months ended Sept 30, 2001
Net Sales $38.1 $69.0 $60.8 $167.9
Operating Income 3.3 5.7 2.2 11.2
Inter-segment sales, which are generally priced with reference to costs
or prevailing market prices, have been eliminated from the sales data
in the previous table.
8
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 as described below.
The Company is 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 not possible to
estimate the remediation cost, 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 any other
PRPs. The Company 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 incurred in future periods may vary from these estimates.
The Company does not believe 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. In 2002, $130,000 had been
charged against this provision in the first nine months. The
remaining amount in the reserve is primarily for testing,
monitoring, sampling and any minor residual treatment activity.
Management believes 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 by the EPA's
Environmental Appeals Board. In turn, the Company filed an appeal with
the District of Columbia Federal Court of Appeals in 2000. In January
2002, the Court of Appeals reversed the decision. As a result, the
$300,000 reserve for the fine was taken into income in 2001 as the
Company felt confident in its position to defend future attempts to
impose any fines. 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 originally anticipated. Therefore, in the second
quarter of 2002, the Company recorded $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.
9
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 quarter-end, neither authorization
had been used to repurchase stock. As of September 29, 2002, Treasury
Stock totals 360,487 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.
As previously disclosed, 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). In September 2002, a confidential settlement
agreement concerning all matters raised in this litigation was
negotiated and entered into. The settlement had no material
impact on the current period results.
J. Other income less other charges was $7,200,000 in the first nine months
of 2002 compared to $5,500,000 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).
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 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 September 29, 2002.
L. In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (FAS) No. 141,
Business Combiniations, 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 $248,000 in the
first nine months 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 form 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. As such, the purchase
price has been allocated to property, plant and equipment and
intangible assets based on their respective fair values at the
date of acquisition.
O. On September 20, 2002, the Company announced the signing of an
agreement to sell the assets of its Moldable Composites Division to
the Perstorp Group. Under the terms of the agreement, Rogers will
receive approximately $21 million for the business assets excluding
the intellectual property and a 5-year royalty stream from the
intellectual property license. The transaction is scheduled to close
in November. However, as of September 29, 2002, there were certain
matters as a part of the agreement which had to be resolved to the
satisfaction of both parties to conclude the transaction, including
such items as environmental studies and various governmental consents.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales of $56.0 million in the third quarter of 2002 were up 10%,
from the comparable period in 2001. Combined Sales, which include
one-half of the sales from Rogers 50% owned joint ventures, were $73.0
million for the quarter, up 11% over the same period in 2001. Net
sales for the first nine months of 2002 were $167.9 million and
combined sales for the nine month period in 2002 were $214.8 million.
While net and combined sales were up for the quarter, sales were
relatively flat for the nine month comparable period due to record
sales volumnes in the first quarter of 2001.
High Performance Foam sales were $16.0 million and $49.5 million for
this year's third quarter and first nine months, up 30%, respectively
from the comparable periods in 2001. Revenues in this business
segment increased, in part, due to sales from the newly acquired
product lines from Cellect. Sales are also up due to strengthening
in various industrial markets.
The acquisition of Cellect is being integrated into Rogers High Performance
Foams business. 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
should enable the Company to develop new products to add to its High
Performance Foams portfolio. The acquisition is expected to
be modestly accretive to earnings in 2002.
Sales of Printed Circuit Materials for the third quarter and first
nine months totaled $21.3 million and $60.8 million, respectively,
and increase of 5% and a decrease of 12% compared to the third
quarter and first nine months of 2001. As compared to sales in the
third quarter of 2001, sales growth in this segment was driven
primarily by increased market share and demand for rigid high
frequency printed circuit materials used in satellite television
systems. Sales growth was also driven by increased activity for
flexible circuit materials used in cellular telephones and hard
disk drives. The strength in these segments of the electronics
market overcame continued weakness in wireless infrastructure for
the third quarter comparison, but not for the year to date
comparison, as first quarter 2001 was a record quarter for sales
volumes.
Sales of Other Polymer Materials and Components were $18.7 million and $57.6
million, respectively for the third quarter and first nine months of 2002,
an increase of 1% and decrease of 5%, respectively, from the comparable 2001
periods. These product lines tend to parallel the general economic climate.
Although sales were relatively flat for the comparable periods and
significant pricing pressure has continued, through good cost containment
efforts and improvements in productivity, this group continues to see
improved profitability.
Diluted earnings per share for the third quarter of 2002 were $.30, up from
$.20 for the comparable period in 2001. For the first nine months of 2002,
diluted earnings per share were $.82 up from $.74 in 2001. Diluted earnings
per share increased 50% in the third quarter as compared to the comparable
period in 2001.
12
Manufacturing profit as a percentage of sales in the first
nine months of 2002 and 2001 was 31%, respectively. Although
the company is deriving benefits from cost reduction and
continued focus on process improvements, lower margins
related to the products acquired from Cellect, which are
currently being toll manufactured, have mitigated the
positive benefits to date.
Selling and administrative expenses for the third quarter and first nine
months of 2002 remained the same as compared to 2001. As a percentage of
sales, selling and administrative expenses were down in the third quarter,
but were the same for the first nine months compared to 2001. The
decrease for the quarter is derived from ongoing cost reduction
efforts that began in 2001.
Research and development expense of $10.5 million for the first
nine months of 2002 was up from the $9.4 million incurred in
the first nine months of 2001. The increase is due to the
cost of additional technical personnel commensurate with the
continuing increased focus on new product and market development.
Net interest income/(expense) decreased in 2002 as compared to 2001 from
$193,000 to ($257,000) for the first nine months. The primary reason for
the decrease in income was a reduction in loans to the joint ventures.
Other income was $7.2 million in the first nine months of 2002 compared to
$5.5 million in the comparable period in 2001. The increase is due primarily
to the better performance of Rogers' joint ventures.
Revenues at Durel Corporation, Rogers' joint venture with 3M, were over 40%
higher for the first nine months of 2002 compared to the comparable period
in 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 substantially from last year at Rogers Inoac
Corporation (RIC), Rogers' joint venture with Inoac Corporation.
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 was adjusted to 27% for the year in the third
quarter of 2002 as compared to 30% used for the first nine months 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 nine months of
2002 totaled $20.2 million. This compares with $30.2 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, and
equity in undistributed income of unconsolidated joint ventures,
partially offset by higher net income, an increase in accounts
paybable and accrued expenses, and a decrease in inventories.
Investments in capital equipment totaled $8.8 million in the first
nine months of 2002 and are expected to approach $24 million for the full
year. In 2001, captial expenditures in the first nine months were
$12.2 million and they finished at $18 million for the year. The
projection for 2002 includes $12.6 million for the fourth quarter
2002 purchase of a new building in the Chicago area for the
Company's Bisco Materials Unit. The new facility will house the
Company's silicone foams and polyolefin foams operations.
Management believes that cash on hand, and internally generated funds
will be sufficient to meet near term, regular needs of the business.
In addition, the Company has an unsecured multi-currency revolving
credit agreement with two domestic banks and at the end of the quarter
could have borrowed up to $75 million, or equivalent in certain
other foreign currencies. After assessing the Company's financial
needs, the Company unilaterally reduced this facility to $50 million
in October. There were no borrowings at September 29, 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. The rate of
interest charged on outstanding loans is based on the Libor plus 25 basis
points. At September 29, 2002 Rogers N.V. had borrowings of 3.9 million
Euro (US$3.9 million) under this agreement.
Goodwill for the Company was $22.2 million and $13.6 million at
September 29, 2002 and December 30, 2001, repsectively. The
goodwill relates to various acquisitions, which have all been
consummated within the last six years, including the acquisition
of various product lines from Cellect in 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.
During the third quarter of 2002 there were no material developments
relative to environmental matters or other contingencies (Refer to footnotes
G and I for further discussion). In addition, 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.
ITEM 4. CONTROLS AND PROCEDURES
(a.) Our Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Exchange Act) as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"). Based on such
evaluation, such officers have concluded that, as of the
Evaluation Date, our disclosure controls and procedures are
effective in alerting our management on a timely basis to material
information required to be disclosed in our reports filed under
the Exchange Act.
(b.) There have been no significant changes in our internal controls
or in other factors that could significantly affect such controls
since the Evaluation Date.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed, 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). In September 2002, a confidential settlement
agreement concerning all matters raised in this litigation was
negotiated and entered into. The settlement had no material
impact on the current period results.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K during the quarter ended September 29, 2002
A form 8-K was filed on September 20, 2002, under item 5 (Other
Events), incorporating by reference the Company's September 20, 2002
press release with respect to the signing of the agreement to sell
the assets of its Moldable Composites Business and an agreement to
license the associated intellectual property.
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
November 13, 2002
15
ROGERS CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
- -------------
I, Walter E. Boomer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rogers
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
16
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Walter E. Boomer
--------------------
Walter E. Boomer
Chairman of the Board of Directors and Chief Executive Officer
November 13, 2002
- --------------------------------------------------------------------------
CERTIFICATION
- -------------
I, James M. Rutledge, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rogers
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
17
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ James M. Rutledge
- ---------------------
James M. Rutledge
Vice President, Finance, Chief Financial Officer
November 13, 2002
18