Total pages included - 16 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 October 3, 1999 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 31, 1999: Capital Stock, $1 Par Value-7,528,885 shares -1- ROGERS CORPORATION AND SUBSIDIARIES FORM 10-Q October 3, 1999 INDEX Page No. PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Consolidated Statements of Income-- Three Months and Nine Months Ended October 3, 1999 and October 4, 1998 3 Consolidated Balance Sheets-- October 3, 1999 and January 3, 1999 4 - 5 Consolidated Statements of Cash Flows-- Nine Months Ended October 3, 1999 and October 4,1999 6 Supplementary Notes 7 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 15 PART II - OTHER INFORMATION Item 6. Reports on Form 8-K 16 SIGNATURES 16 -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: Nine Months Ended: -------------------- -------------------- October 3, October 4, October 3, October 4, 1999 1998 1999 1998 -------------------- -------------------- Net Sales $ 61,076 $ 51,319 $ 188,781 $ 163,021 Cost of Sales 42,711 38,409 135,657 120,884 Selling and Administrative Expenses 9,657 6,432 27,109 21,238 Research and Development Expenses 2,529 2,933 7,672 8,065 -------------------- -------------------- Total Costs and Expenses 54,897 47,774 170,438 150,187 -------------------- -------------------- Operating Income 6,179 3,545 18,343 12,834 Other Income less Other Charges 138 19 445 339 Interest Income, Net 83 230 165 592 -------------------- -------------------- Income Before Income Taxes 6,400 3,794 18,953 13,765 Income Taxes: Federal and Foreign 1,695 981 5,170 3,632 State 97 120 137 360 -------------------- -------------------- Net Income $ 4,608 $ 2,693 $ 13,646 $ 9,773 ==================== ==================== Net Income Per Share (Note F): Basic $ 0.60 $ 0.36 $ 1.80 $ 1.29 ==================== ==================== Diluted $ 0.58 $ 0.34 $ 1.73 $ 1.23 ==================== ==================== Shares Used in Computing (Note F): Basic 7,635,000 7,593,000 7,600,000 7,591,000 ==================== ==================== Diluted 7,952,000 7,837,000 7,873,000 7,914,000 ==================== ==================== The accompanying notes are an integral part of the consolidated financial statements. -3- ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) October 3, 1999 January 3, 1999 Current Assets: Cash and Cash Equivalents $ 18,167 $ 9,593 Marketable Securities -- 256 Accounts Receivable, Net 36,561 32,590 Inventories: Raw Materials 8,934 10,392 In-Process and Finished 11,757 12,365 Total Inventories 20,691 22,757 Current Deferred Income Taxes 3,444 3,481 Other Current Assets 584 487 -------- -------- Total Current Assets 79,447 69,164 -------- -------- Property, Plant and Equipment, Net of Accumulated Depreciation of $76,672 and $69,051 78,591 74,811 Investment in Unconsolidated Joint Venture 5,145 5,467 Pension Asset 4,606 4,606 Goodwill and Other Intangibles, Net 14,629 14,935 Other Assets 7,182 7,191 -------- -------- Total Assets $189,600 $176,174 ======== ======== 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) October 3, 1999 January 3, 1999 Current Liabilities: Accounts Payable $ 14,330 $ 17,766 Current Maturities of Long-Term Debt 600 600 Accrued Employee Benefits and Compensation 10,321 6,577 Accrued Income Taxes Payable 5,225 1,059 Taxes, Other than Federal and Foreign Income 1,816 1,038 Other Accrued Liabilities 6,183 5,265 -------- -------- Total Current Liabilities 38,475 32,305 -------- -------- Long-Term Debt, less Current Maturities 12,172 13,687 Noncurrent Deferred Income Taxes 5,775 5,938 Noncurrent Pension Liability 3,703 3,703 Noncurrent Retiree Health Care and Life Insurance Benefits 6,268 6,268 Other Long-Term Liabilities 3,937 4,042 Shareholders' Equity: Capital Stock, $1 Par Value: Authorized Shares 50,000,000; Issued Shares 7,672,156 and 7,630,466 7,672 7,630 Additional Paid-In Capital 33,677 33,323 Treasury Stock (162,900 and 12,800 shares) (5,355) (423) Accumulated Other Comprehensive Income, Net of Tax 1,278 1,348 Retained Earnings 81,998 68,353 -------- -------- Total Shareholders' Equity 119,270 110,231 -------- -------- Total Liabilities and Shareholders' Equity $189,600 $176,174 ======== ======== 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) Nine Months Ended: October 3, October 4, 1999 1998 CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 13,646 $ 9,773 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 8,784 6,983 Expense (Benefit) for Deferred Income Taxes (331) -- Equity in Undistributed (Income) Loss of Unconsolidated Joint Ventures, Net (819) (118) Noncurrent Pension and Postretirement Benefits 125 1,034 Other, Net (164) 156 Changes in Operating Assets and Liabilities Excluding Effects of Disposition of Assets: Accounts Receivable (2,704) (3,269) Inventories 1,677 2,659 Prepaid Expenses (124) (107) Accounts Payable and Accrued Expenses 6,976 292 --------- --------- Net Cash Provided by Operating Activities 27,066 17,403 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Capital Expenditures (9,971) (25,410) Acquisition of Business (4,302) (2,250) Proceeds from Sale of Property, Plant & Equipment -- (97) Proceeds from Sale of Marketable Securities 256 1,395 Investment in Unconsolidated Joint Ventures and Affiliates 737 333 --------- --------- Net Cash Used in Investing Activities (13,280) (26,029) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from Short and Long-Term Borrowings (16) 290 Repayments of Debt Principal (759) (603) Acquisition of Treasury Stock (4,932) (423) Proceeds from Sale of Capital Stock 395 592 --------- --------- Net Cash Used in Financing Activities (5,312) (144) Effect of Exchange Rate Changes on Cash 101 (604) --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 8,575 (9,374) Cash and Cash Equivalents at Beginning of Year 9,592 18,791 --------- --------- Cash and Cash Equivalents at End of Quarter $ 18,167 $ 9,417 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. -6- ROGERS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY NOTES A. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10- Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended January 3, 1999. B. In September 1997 the Company cancelled its $5.0 million unsecured revolving credit agreement with Fleet National Bank and replaced it with an unsecured multi-currency revolving credit agreement, also with Fleet. Under this amended arrangement, the Company can borrow up to $20.0 million, or the equivalent in Belgian Francs and/or Japanese Yen. Amounts borrowed under this agreement are to be paid in full by September 19, 2003. The Company borrowed 390,207,039 Belgian Francs under the new arrangement to facilitate the Rogers Induflex acquisition in Belgium in September 1997. C. Interest paid during the first nine months of 1999 and 1998 was $895,000 and $794,000, respectively. D. Income taxes paid were $804,000 and $2,230,000 in the first nine months of 1999 and 1998, respectively. E. The components of comprehensive income, net of related tax, are as follows: Three Months Ended: Nine Months Ended: ---------------------- ---------------------- (Dollars In Thousands) October 3, October 4, October 3, October 4, 1999 1998 1999 1998 ---------------------- ---------------------- Net Income $ 4,608 $ 2,693 $ 13,646 $ 9,773 Foreign currency translation Adjustments 1,362 842 (72) 24 Unrealized gains on securities -- 13 2 5 ---------------------- ---------------------- Comprehensive income $ 5,970 $ 3,548 $ 13,576 $ 9,802 ====================== ====================== Accumulated balances related to each component of Other Comprehensive Income (Loss) are as follows: October 3, 1999 January 3, 1999 --------------- --------------- Foreign currency translation adjustments $ 1,200 $ 1,272 Unrealized loss on marketable securities -- (2) Change in minimum pension liability 78 78 ------- ------- Accumulated balance $ 1,278 $ 1,348 ======= ======= -7- SUPPLEMENTARY NOTES, CONTINUED F. The following table sets forth the computation of basic and diluted earnings per share in conformity with Statement of Financial Accounting Standards No. 128, "Earnings per Share": Three Months Ended: Nine Months Ended: --------------------- ---------------------- (In Thousands, Except Per Share October 3, October 4, October 3, October 4, Amounts) 1999 1998 1999 1998 --------------------- ---------------------- Numerator: Net income $ 4,608 $ 2,693 $ 13,646 $ 9,773 Denominator: Denominator for basic earnings per share - Weighted-average shares 7,635 7,593 7,600 7,591 Effect of stock options 317 244 273 323 Denominator for diluted earnings per share - adjusted Weighted-average shares and assumed conversions 7,952 7,837 7,873 7,914 Basic earnings per share $ 0.60 $ 0.36 $ 1.80 $ 1.29 Diluted earnings per share $ 0.58 $ 0.34 $ 1.73 $ 1.23 G. The Company's fiscal year begins on the Monday nearest January 1 and ends on the Sunday nearest December 31. The fiscal year ending January 2, 2000 is a 52 week year and the nine-month period ending October 3, 1999 included 39 weeks. The fiscal year ended January 3, 1999 was a 53 week year and the nine-month period ended October 4, 1998 included 40 weeks. H. The Company adopted Statement of Financial Accounting Standards (FAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1998 which changes the way the Company reports information about its operating segments. The quarterly information required by FAS No. 131 is presented below. Polymer Electronic (Dollars in Millions) Materials Materials Total --------- ---------- ------- Three months ended October 3, 1999 Net Sales $31.2 $29.9 $ 61.1 Operating Income 3.7 2.5 6.2 Three months ended October 4, 1998 Net Sales $24.6 $26.7 $ 51.3 Operating Income 1.9 1.6 3.5 Nine months ended October 3, 1999 Net Sales $96.1 $92.7 $188.8 Operating Income 11.5 6.8 18.3 Nine months ended October 4, 1998 Net Sales $80.8 $82.2 $163.0 Operating Income 6.9 5.9 12.8 -8- SUPPLEMENTARY NOTES, CONTINUED 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. I. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in five cases involving waste disposal sites, all of which are Superfund sites. Several of these proceedings are at a preliminary stage and it is impossible to estimate the cost of remediation, the timing and extent of remedial action which may be required by governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a reserve 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 has developed a remediation plan which has been approved by the CT DEP, and it is expected that removal of soil contamination will be completed in the first half of 2000. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a reserve of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for costs related to this matter. During 1995, $300,000 was charged against this reserve and $200,000 per year was charged in 1996, 1997 and 1998. Management believes, based on facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. 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 has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales were $61.1 million in the third quarter and $188.8 million for the first nine months of 1999, up 19% and 16%, respectively, over the comparable periods in 1998. Combined Sales, which include one-half of the sales from Rogers two 50% owned joint ventures, were $70.9 million for the quarter and $214.9 million for the nine month period, up 21% and 16%, respectively, over the same periods in 1998. Sales of Polymer Materials in the third quarter were 27% higher than the third quarter of 1998. Sales for the first nine months of 1999 were 19% above the same period of 1998. A majority of the third quarter and nine months year-to-year volume increases are attributable to acquisitions. Since the beginning of 1997, the Company has made three domestic acquisitions, all of which are in the Polymer Materials segment. The purchases of the Imation dampening sleeve business at the end of September, 1998, and of most of the engineered molding compounds business of Cytec Fiberite in January, 1999, have resulted in meaningful contributions to the Company's performance in 1999. The integration and improvement of the Bisco silicone foam business acquired at the beginning of 1997 has also reached this stage, though it took longer than initially anticipated. In addition, Poron urethane foam materials achieved record third quarter and first nine month sales, led by strong sales to wireless communications markets. Sales of Electronic Materials for the third quarter and first nine months increased 12% and 13%, respectively, from the comparable 1998 periods. High frequency circuit material sales for wireless communications applications were at record levels for the quarter and the first nine months of the year. Sales to the consumer electronics market were particularly strong reflecting anticipated demand during the upcoming holiday season. Manufacturing capacity in both Ghent, Belgium and Chandler, Arizona was used to satisfy this demand and for the fourth year in a row, a capacity expansion is planned for the year 2000 at the Chandler, Arizona facility. The industry continues to gain understanding of the superior performance of the Company's RO3000(TM) and RO4000(R) high frequency circuit materials, helping drive production to new highs. Sales of R/flex(R) materials that the Company manufactures continue to be at disappointing levels reflecting the softness in demand still being experienced by its major customer for such flexible materials. Third quarter sales of FLEX-I-MID(R) adhesiveless laminate materials to Hutchinson Technology Incorporated (HTI) were substantially above last year's third quarter levels, but lower than 1999 second quarter performance. The decline reflects greater utilization by the customer of its inventories. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Profits before and after tax, and earnings per share for the third quarter and the first nine months of 1999 were higher than any comparable periods in the Company's history. Net income of $4.6 million for the third quarter and $13.6 million for the first nine months were up 70% and 39% respectively from the same periods in 1998. The increase in profits was primarily attributable to higher, and in many cases, record sales in almost all of the Company's businesses, coupled with improved operations, reflecting better utilization of manufacturing facilities. Also, 1998 numbers include the results of disappointing second and third quarters that were adversely impacted by depressed conditions in Southeast Asia and in the computer disk drive industry. Earnings per share (diluted) for the third quarter this year were $0.58, up from $0.34 in the same period last year. For the first nine months of 1999, earnings per share (diluted) were $1.73 compared to $1.23 in the initial nine-month period a year ago. Manufacturing profit as a percentage of sales in the first nine months of 1999 and 1998 was 28% and 26%, respectively. This percentage continues to be held down by the lower margin on the sales of FLEX-I-MID(R) materials to HTI. Such materials are produced for the Company by Mitsui Chemicals Inc. in Japan and carry a lower margin than material that the Company manufactures. Rogers and Mitsui continue to be enthusiastic about this kind of specialty adhesiveless laminate and in early October signed an agreement to form a 50/50 joint venture to sell and eventually manufacture an all-polyimide flexible circuit board laminate. The new company, called Polyimide Laminate Systems, will be located in a plant to be constructed in Chandler, Arizona, thereby providing a second manufacturing facility to meet the growing needs for the product supplied to HTI. Selling and administrative expenses for the first nine months of 1999 increased in total dollars and as a percentage of sales. The increase primarily reflects the strengthening of Sales and Marketing capabilities at both the Corporate and Divisional levels, and the continued development of information systems. It also includes higher payroll costs related to bonus accruals and terminations. Research and Development expense was $7.7 million in the first nine months of 1999 compared to $8.1 million in the same period in 1998. Major development activities in circuit materials included process and product improvements to the RO3000(TM) and RO4000(R) high frequency circuit board materials which are designed for use in high volume, low cost commercial wireless communication applications. These activities included the development of a bondply addition to the RO4000 family that will allow multi-layer circuit boards to be made using RO4000 laminates, as well as the development of materials with improved thermal properties. Flexible circuit materials development efforts focused on the introduction of a new epoxy based adhesive system, R/flex CRYSTAL(TM), on manufacturing improvements designed to significantly improve the dimensional stability of R/flex laminates, and on development of new flexible circuit materials. PORON materials development activities included formulations for industrial, -11- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED footwear, and healthcare applications; in addition, new thinner adhesive- backed R/bak tapes are being developed for the flexographic printing market. Molding materials development continued to emphasize tougher, more dimensionally stable materials for small electrical motor commutators and integration of the Cytec acquisition technology into the Company. Net interest income for 1999 decreased significantly from 1998 due mainly to the lower cash balances over the first nine months of 1999. The amount of interest expense that has been capitalized is down in 1999 because of the lower amount of long-term capital spending projects. The 1998 balance also included a refund of interest received from the Internal Revenue Service. Under present arrangements the Company may borrow up to $20.0 million, or the equivalent in Belgian Francs and/or Japanese Yen, under an unsecured multi-currency revolving credit agreement with Fleet National Bank. Amounts borrowed under this agreement are to be repaid in full by September 19, 2003. The Company has borrowed 390 million Belgian Francs under this agreement as of October 3, 1999. Other income less other charges was $0.4 million for the first nine months of 1999 and $0.3 million for the same period in 1998. Durel Corporation, the joint venture with 3M in electroluminescent (EL) lamps, had record third quarter and nine month sales. Such results are primarily due to growing demand for the joint venture's products in cellular telephone applications. Installation of additional manufacturing capacity has begun in order to continue to meet this growing demand. Durel achieved significant profits in the third quarter, but fourth quarter earnings will be hurt by increased litigation costs associated with the patent infringement lawsuit brought by Durel. The trial is still expected to start in January. The performance of Rogers Inoac Corporation (RIC), the joint venture with Inoac Corporation, continues to improve. RIC's business had been hurt by the Japanese economy and the loss last year of a major customer. Net cash provided by operating activities in the first nine months of 1999 totaled $27.1 million compared with $17.4 million in the comparable 1998 period. This difference was attributable to several factors, among which were higher net income and increased depreciation expense in 1999, as well as a change in the level of Accounts Payable and Accrued Expenses which is primarily related to higher income taxes payable and increased bonus accruals. In 1998 investments in capital equipment reached $25.4 million in the first nine months and finished at $29 million for the year. In 1999 capital expenditures have been reduced to more traditional levels and the first nine month period totaled $10 million. Management anticipates that capital spending for 1999, primarily for new process equipment and new information systems capability will total about $15 million. It is anticipated that this spending will be financed with internally generated funds. -12- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED On August 19th, the Company's Board of Directors approved a stock repurchase program for up to $13 million of the Company's outstanding shares. Since that time, approximately 345,000 shares have been repurchased. The full benefit of these repurchases on earnings per share calculations will first be seen in 2000. The Company's strong financial performance has created an excellent balance sheet that enables the Company to fund internal growth and its acquisition strategy as well as to repurchase stock. Management expects strong operating cash flow for 1999 and believes that in the near term internally generated funds and its credit facility with Fleet National Bank will be sufficient to meet the needs of its existing business. The Company continually reviews and assesses its lending relationships. The year 2000 issue is the result of computer programs using two digits rather than four to define the applicable year. Such software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in systems failures or miscalculations leading to disruptions in a company's activities and operations. If a company, its significant customers, or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on a company's operations. The Company completed a review of its systems and operations, including systems currently being implemented, to identify computer hardware, software, and process control systems that do not properly recognize dates after December 31, 1999, including those linked to third party systems. The Company is now substantially complete with the process of reprogramming or replacing hardware, software, and process control systems as necessary to ensure compliance with year 2000 requirements. The Company is confident that its own internal systems are year 2000 compliant or planned upgrades will be in place before the end of 1999. The Company also initiated communications, primarily in the form of questionnaires, with third parties whose computer systems' functionality could directly impact the operations of the Company. The costs of the Company's year 2000 compliance efforts are being funded with cash flows from operations and are being expensed as incurred. In total these costs are not expected to be substantially different from the normal, recurring costs that are incurred for systems development and implementation. Although the Company is not aware of any material operational issues or costs associated with preparing its internal systems for the year 2000, there can be no assurance that the Company will not experience serious unanticipated negative consequences and/or material costs caused by undetected errors or defects in the technology used in its internal operating systems which are composed predominantly of third party software and hardware technology. -13- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Non-compliance by any of the Company's major distributors, suppliers, customers, vendors, or financial organizations could result in business disruptions that could have a material adverse effect on the Company's results of operations, liquidity and financial condition. The Company is developing a contingency plan based on its assessment of significant third party compliance. The goal of the contingency plan, which is substantially complete, is to minimize the Company's exposure to work slowdowns or business disruptions and any adverse effects on the Company's results of operations. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in five cases involving waste disposal sites, all of which are Superfund sites. Several of these proceedings are at a preliminary stage and it is impossible to estimate the cost of remediation, the timing and extent of remedial action which may be required by governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a reserve 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 has developed a remediation plan which has been approved by the CT DEP, and it is expected that removal of soil contamination will be completed in the first half of 2000. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a reserve of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for costs related to this matter. During 1995, $300,000 was charged against this reserve and $200,000 per year was charged in 1996, 1997 and 1998. Management believes, based on facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. 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 has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. -14- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED 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, and the like, are incorporated by reference in the Rogers Corporation 1998 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. -15- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: (27) Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended October 3, 1999. 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) __________________________________ By s/FRANK H. ROLAND Frank H. Roland Vice President, Finance and Chief Financial Officer Dated: November 15, 1999 -16-