Rogers Corporation (NYSE:ROG) today announced financial results
for the second quarter of 2022.
“Rogers continued to deliver solid revenue growth in the second
quarter led by sales in the EV/HEV, defense and portable
electronics markets,” stated Bruce D. Hoechner, Rogers' President
and CEO. “Supply challenges and COVID-related demand disruptions in
China tempered further sales growth and impacted gross margins.
Inflationary pressures continued in Q2, but our commercial actions
are mitigating rising raw material input costs. Longer-term, we
continue to be very encouraged by the outlook for our growth
markets, especially in the EV/HEV space, where demand remains
robust and our investments to capitalize on the long-term growth
opportunity are on track. We continue to look forward to the
combination with DuPont and the many benefits this will provide to
our employees, customers and other stakeholders.”
Financial
Overview
GAAP Results
Q2 2022
Q1 2022
Q2 2021
Net Sales ($M)
$252.0
$248.3
$234.9
Gross Margin
34.3%
34.4%
38.2%
Operating Margin
9.3%
8.0%
15.2%
Net Income ($M)
$17.9
$16.6
$28.7
Net Income Margin
7.1%
6.7%
12.2%
Diluted Earnings Per Share
$0.94
$0.87
$1.52
Net Cash Provided by Operating
Activities
$2.0
$(13.7)
$29.7
Non-GAAP Results1
Q2 2022
Q1 2022
Q2 2021
Adjusted Operating Margin
12.1%
14.5%
17.4%
Adjusted Net Income ($M)
$23.2
$29.1
$32.5
Adjusted Earnings Per Diluted Share
$1.22
$1.53
$1.72
Adjusted EBITDA ($M)
$45.4
$47.2
$55.8
Adjusted EBITDA Margin
18.0%
19.0%
23.8%
Free Cash Flow ($M)
$(22.9)
$(42.0)
$11.9
Net Sales by Operating Segment (dollars in
millions)
Q2 2022
Q1 2022
Q2 2021
Advanced Electronics Solutions (AES)
$141.2
$133.2
$140.4
Elastomeric Material Solutions (EMS)
$105.1
$110.2
$89.3
Other
$5.7
$4.9
$5.1
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
Q2 2022 Summary of Results
Net sales of $252.0 million increased 1.5% versus the prior quarter
resulting from commercial actions and higher demand in the EV/HEV,
portable electronics and defense markets. Further sales growth
continued to be tempered by lower demand from the downstream
impacts of COVID restrictions in China, component shortages and
availability of certain raw materials. AES net sales increased by
6.0% from growth in the EV/HEV and defense markets, partially
offset by lower industrial market revenues. EMS net sales decreased
by 4.7% resulting from lower industrial and EV/HEV revenues,
partially offset by higher portable electronics market demand.
Currency exchange rates unfavorably impacted total company net
sales in the second quarter of 2022 by $4.0 million compared to
prior quarter net sales.
Gross margin was 34.3%, compared to 34.4% in the prior quarter.
The slight decrease in gross margin was primarily driven by lower
throughput, resulting from raw material supply constraints. The
decline in gross margin was partially offset by higher volume and
commercial actions.
Selling, general and administrative (SG&A) expenses
decreased by $1.6 million from the prior quarter to $56.1 million.
SG&A expenses declined due to lower costs associated with
DuPont's proposed acquisition of Rogers and a decline in
employee-related costs, partially offset by increased professional
service fees.
GAAP operating margin of 9.3% increased by 130 basis points from
the prior quarter, primarily due to lower SG&A expenses and an
increase in other operating income. Adjusted operating margin of
12.1% decreased by 240 basis points versus the prior quarter.
GAAP earnings per diluted share were $0.94, compared to earnings
per diluted share of $0.87 in the previous quarter. The increase in
GAAP earnings was due to higher operating income, partially offset
by an increase in tax expense. On an adjusted basis, earnings were
$1.22 per diluted share compared to adjusted earnings of $1.53 per
diluted share in the prior quarter.
Ending cash and cash equivalents were $225.3 million, an
increase of $43.2 million versus the prior quarter. In the second
quarter, proceeds from borrowings under the Company's revolving
credit facility were $70.0 million, capital expenditures were $25.0
million and net cash provided by operating activities was $2.0
million. Working capital increased in the second quarter due to
additional inventory for new production facilities and replenishing
safety stock.
Transaction with DuPont As
previously announced on November 2, 2021, Rogers has entered into a
definitive merger agreement to be acquired by DuPont for $277.00
per share in cash. As a result of the pending acquisition, Rogers
will not hold an earnings call or provide forward-looking guidance.
Rogers' shareholders approved the merger agreement at a special
shareholder meeting held on January 25, 2022. The transaction is
expected to close in the third quarter of 2022, subject to the
satisfaction of other customary closing conditions, including
receipt of certain regulatory approvals.
About Rogers Corporation
Rogers Corporation (NYSE:ROG) is a global leader in engineered
materials to power, protect and connect our world. Rogers delivers
innovative solutions to help our customers solve their toughest
material challenges. Rogers’ advanced electronic and elastomeric
materials are used in applications for EV/HEV, automotive safety
and radar systems, mobile devices, renewable energy, wireless
infrastructure, energy-efficient motor drives, industrial equipment
and more. Headquartered in Chandler, Arizona, Rogers operates
manufacturing facilities in the United States, Asia and Europe,
with sales offices worldwide.
Safe Harbor Statement
Statements included in this release that are not a description of
historical facts are forward-looking statements. Words or phrases
such as “believe,” “may,” “could,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would”
or similar expressions are intended to identify forward-looking
statements, and are based on Rogers’ current beliefs and
expectations. This release contains forward-looking statements,
which concern the planned acquisition of Rogers by DuPont de
Nemours, Inc. (the “DuPont Merger”), our plans, objectives,
outlook, goals, strategies, future events, future net sales or
performance, capital expenditures, future restructuring, plans or
intentions relating to expansions, business trends and other
information that is not historical information. All forward-looking
statements are based upon information available to us on the date
of this release and are subject to risks, uncertainties and other
factors, many of which are outside of our control, which could
cause actual results to differ materially from those indicated by
the forward-looking statements. Rogers’ actual future results may
differ materially from Rogers’ current expectations due to the
risks and uncertainties inherent in its business and risks relating
to the DuPont Merger. These risks include, but are not limited to:
uncertainties as to the timing and structure of the DuPont Merger;
the possibility that various closing conditions for the transaction
may not be satisfied or waived, including that a governmental
entity may prohibit, delay or refuse to grant approval for the
consummation of the DuPont Merger; the risk that management’s time
and attention is diverted on transaction related issues; the risk
that Rogers is unable to retain key personnel; the effects of
disruptions caused by the transaction making it more difficult to
maintain relationships with employees, customers, vendors and other
business partners; and the risk that stockholder litigation in
connection with the DuPont Merger may result in significant costs
of defense, indemnification and liability. Other risks and
uncertainties that could cause such results to differ include: the
duration and impacts of the novel coronavirus global pandemic and
efforts to contain its transmission and distribute vaccines,
including the effect of these factors on our business, suppliers,
customers, end users and economic conditions generally; continuing
disruptions to global supply chains and our ability, or the ability
of our suppliers, to obtain necessary product components; failure
to capitalize on, volatility within, or other adverse changes with
respect to the Company's growth drivers, including advanced
mobility and advanced connectivity, such as delays in adoption or
implementation of new technologies; uncertain business, economic
and political conditions in the United States (U.S.) and abroad,
particularly in China, South Korea, Germany, the United Kingdom,
Hungary and Belgium, where we maintain significant manufacturing,
sales or administrative operations; the trade policy dynamics
between the U.S. and China reflected in trade agreement
negotiations and the imposition of tariffs and other trade
restrictions, including trade restrictions on Huawei Technologies
Co., Ltd. (Huawei); fluctuations in foreign currency exchange
rates; our ability to develop innovative products and the extent to
which our products are incorporated into end-user products and
systems and the extent to which end-user products and systems
incorporating our products achieve commercial success; the ability
and willingness of our sole or limited source suppliers to deliver
certain key raw materials, including commodities, to us in a timely
and cost-effective manner; intense global competition affecting
both our existing products and products currently under
development; business interruptions due to catastrophes or other
similar events, such as natural disasters, war, including the
ongoing conflict between Russia and Ukraine, terrorism or public
health crises; the impact of sanctions, export controls and other
foreign asset or investment restrictions; failure to realize, or
delays in the realization of anticipated benefits of acquisitions
and divestitures due to, among other things, the existence of
unknown liabilities or difficulty integrating acquired businesses;
our ability to attract and retain management and skilled technical
personnel; our ability to protect our proprietary technology from
infringement by third parties and/or allegations that our
technology infringes third party rights; changes in effective tax
rates or tax laws and regulations in the jurisdictions in which we
operate; failure to comply with financial and restrictive covenants
in our credit agreement or restrictions on our operational and
financial flexibility due to such covenants; the outcome of ongoing
and future litigation, including our asbestos-related product
liability litigation; changes in environmental laws and regulations
applicable to our business; and disruptions in, or breaches of, our
information technology systems. Should any risks and uncertainties
develop into actual events, these developments could have a
material adverse effect on the Company or the DuPont Merger. For
additional information about the risks, uncertainties and other
factors that may affect our business, please see our most recent
annual report on Form 10-K and any subsequent reports filed with
the Securities and Exchange Commission, including quarterly reports
on Form 10-Q. Rogers Corporation assumes no responsibility to
update any forward-looking statements contained herein except as
required by law.
(Financial statements follow)
Condensed Consolidated
Statements of Operations (Unaudited)
Three Months Ended
Six Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net sales
$
251,970
$
234,906
$
500,236
$
464,171
Cost of sales
165,452
145,073
328,324
284,839
Gross margin
86,518
89,833
171,912
179,332
Selling, general and administrative
expenses
56,138
44,959
113,843
87,372
Research and development expenses
8,050
7,492
16,310
14,664
Restructuring and impairment charges
677
747
746
2,253
Other operating (income) expense, net
(1,743
)
890
(2,274
)
2,105
Operating income
23,396
35,745
43,287
72,938
Equity income in unconsolidated joint
ventures
1,800
1,930
3,075
4,111
Other income (expense), net
319
1,239
586
4,207
Interest expense, net
(1,548
)
(404
)
(2,617
)
(1,011
)
Income before income tax expense
23,967
38,510
44,331
80,245
Income tax expense
6,084
9,855
9,848
20,372
Net income
$
17,883
$
28,655
$
34,483
$
59,873
Basic earnings per share
$
0.95
$
1.53
$
1.83
$
3.20
Diluted earnings per share
$
0.94
$
1.52
$
1.82
$
3.18
Shares used in computing:
Basic earnings per share
18,813
18,729
18,797
18,721
Diluted earnings per share
18,992
18,846
18,996
18,810
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PAR VALUE)
June 30, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
225,332
$
232,296
Accounts receivable, less allowance for
doubtful accounts of $1,031 and $1,223
176,642
163,092
Contract assets
38,373
36,610
Inventories
171,129
133,384
Prepaid income taxes
3,036
1,921
Asbestos-related insurance receivables,
current portion
3,361
3,176
Other current assets
17,823
13,586
Total current assets
635,696
584,065
Property, plant and equipment, net of
accumulated depreciation of $366,088 and $367,850
360,085
326,967
Investments in unconsolidated joint
ventures
15,931
16,328
Deferred income taxes
38,021
32,671
Goodwill
351,811
370,189
Other intangible assets, net of
amortization
159,978
176,353
Pension assets
5,310
5,123
Asbestos-related insurance receivables,
non-current portion
55,516
59,391
Other long-term assets
9,922
27,479
Total assets
$
1,632,270
$
1,598,566
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
76,840
$
64,660
Accrued employee benefits and
compensation
33,006
48,196
Accrued income taxes payable
5,815
9,632
Asbestos-related liabilities, current
portion
4,048
3,841
Other accrued liabilities
35,239
37,620
Total current liabilities
154,948
163,949
Borrowings under revolving credit
facility
260,000
190,000
Pension and other postretirement benefits
liabilities
1,475
1,618
Asbestos-related liabilities, non-current
portion
60,248
64,491
Non-current income tax
9,079
7,131
Deferred income taxes
26,351
29,451
Other long-term liabilities
13,598
23,031
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,811 and 18,730 shares issued and
outstanding
18,811
18,730
Additional paid-in capital
161,885
163,583
Retained earnings
1,016,308
981,825
Accumulated other comprehensive loss
(90,433
)
(45,243
)
Total shareholders' equity
1,106,571
1,118,895
Total liabilities and shareholders'
equity
$
1,632,270
$
1,598,566
Reconciliation of non-GAAP financial
measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures
that are not presented in accordance with generally accepted
accounting principles in the United States of America (“GAAP”):
(1) Adjusted operating margin, which the Company defines as
operating margin excluding acquisition-related amortization of
intangible assets and discrete items, which are acquisition and
related integration costs, gains or losses on the sale or disposal
of property, plant and equipment, restructuring, severance,
impairment and other related costs, UTIS fire and recovery charges,
costs associated with the proposed DuPont acquisition, and the
related income tax effect on these items (collectively, “discrete
items”);
(2) Adjusted net income, which the Company defines as net income
excluding amortization of acquisition intangible assets and
discrete items;
(3) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition intangible assets, and discrete items divided by
adjusted weighted average shares outstanding - diluted;
(4) Adjusted EBITDA, which the Company defines as net income
excluding interest expense, net, income tax expense, depreciation
and amortization, stock-based compensation expense, and discrete
items;
(5) Adjusted EBITDA Margin, which the Company defines as the
percentage that results from dividing Adjusted EBITDA by total net
sales;
(6) Free cash flow, which the Company defines as net cash
provided by operating activities less non-acquisition capital
expenditures.
Management believes adjusted operating margin, adjusted net
income, adjusted earnings per diluted share, adjusted EBITDA and
adjusted EBITDA margin are useful to investors because they allow
for comparison to the Company’s performance in prior periods
without the effect of items that, by their nature, tend to obscure
the Company’s core operating results due to potential variability
across periods based on the timing, frequency and magnitude of such
items. As a result, management believes that these measures enhance
the ability of investors to analyze trends in the Company’s
business and evaluate the Company’s performance relative to peer
companies. Management also believes free cash flow is useful to
investors as an additional way of viewing the Company's liquidity
and provides a more complete understanding of factors and trends
affecting the Company's cash flows. However, non-GAAP financial
measures have limitations as analytical tools and should not be
considered in isolation from, or as alternatives to, financial
measures prepared in accordance with GAAP. In addition, these
non-GAAP financial measures may differ from, and should not be
compared to, similarly named measures used by other companies.
Reconciliations of the differences between these non-GAAP financial
measures and their most directly comparable financial measures
calculated in accordance with GAAP are set forth below.
Reconciliation of GAAP operating margin
to adjusted operating margin*:
2022
2021
Operating margin
Q2
Q1
Q2
GAAP operating margin
9.3 %
8.0 %
15.2 %
Acquisition and related integration
costs
0.1 %
0.2 %
— %
Gain on sale or disposal of property,
plant and equipment
— %
— %
(0.3) %
Restructuring, severance, impairment and
other related costs
0.4 %
0.2 %
0.4 %
UTIS fire (recovery)/charges
(0.7) %
(0.2) %
0.6 %
Costs associated with the proposed DuPont
acquisition
1.4 %
4.6 %
— %
Total discrete items
1.1 %
4.8 %
0.8 %
Operating margin adjusted for discrete
items
10.4 %
12.8 %
16.0 %
Acquisition intangible amortization
1.7 %
1.7 %
1.3 %
Adjusted operating margin
12.1 %
14.5 %
17.4 %
*Percentages in table may not add due to
rounding.
Reconciliation of GAAP net income to
adjusted net income:
(amounts in millions)
2022
2021
Net income
Q2
Q1
Q2
GAAP net income
$
17.9
$
16.6
$
28.7
Acquisition and related integration
costs
0.1
0.5
—
Gain on sale or disposal of property,
plant and equipment
—
—
(0.6
)
Restructuring, severance, impairment and
other related costs
1.0
0.5
1.0
UTIS fire (recovery)/charges
(1.7
)
(0.5
)
1.5
Costs associated with the proposed DuPont
acquisition
3.4
11.5
—
Acquisition intangible amortization
4.2
4.3
3.1
Income tax effect of non-GAAP adjustments
and intangible amortization
(1.7
)
(3.7
)
(1.2
)
Adjusted net income
$
23.2
$
29.1
$
32.5
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per
diluted share to adjusted earnings per diluted share*:
2022
2021
Earnings per diluted share
Q2
Q1
Q2
GAAP earnings per diluted share
$
0.94
$
0.87
$
1.52
Acquisition and related integration
costs
—
0.02
—
Gain on sale or disposal of property,
plant and equipment
—
—
(0.02
)
Restructuring, severance, impairment and
other related costs
0.04
0.02
0.04
UTIS fire (recovery)/charges
(0.07
)
(0.02
)
0.06
Costs associated with the proposed DuPont
acquisition
0.14
0.47
—
Total discrete items
$
0.11
$
0.49
$
0.08
Earnings per diluted share adjusted for
discrete items
1.05
1.36
1.60
Acquisition intangible amortization
$
0.17
$
0.17
$
0.13
Adjusted earnings per diluted share
$
1.22
$
1.53
$
1.72
*Values in table may not add due to
rounding.
Reconciliation of GAAP net income to
adjusted EBITDA*:
2022
2021
(amounts in millions)
Q2
Q1
Q2
GAAP Net income
$
17.9
$
16.6
$
28.7
Interest expense, net
1.5
1.1
0.4
Income tax expense
6.1
3.8
9.9
Depreciation
8.0
6.4
7.5
Amortization
4.2
4.3
3.1
Stock-based compensation expense
4.9
3.2
4.4
Acquisition and related integration
costs
0.1
0.5
—
Gain on sale or disposal of property,
plant and equipment
—
—
(0.6
)
Restructuring, severance, impairment and
other related costs
1.0
0.5
0.9
UTIS fire (recovery)/charges
(1.7
)
(0.5
)
1.5
Costs associated with the proposed DuPont
acquisition
3.4
11.5
—
Adjusted EBITDA
$
45.4
$
47.2
$
55.8
*Values in table may not add due to
rounding.
Calculation of adjusted EBITDA
margin*:
2022
2021
Q2
Q1
Q2
Adjusted EBITDA (in millions)
$
45.4
$
47.2
$
55.8
Divided by Total Net Sales (in
millions)
252.0
248.3
234.9
Adjusted EBITDA Margin
18.0
%
19.0
%
23.8
%
*Values in table may not add due to
rounding.
Reconciliation of net cash provided by
operating activities to free cash flow*:
2022
2021
(amounts in millions)
Q2
Q1
Q2
Net cash provided by operating
activities
$
2.0
$
(13.7
)
$
29.7
Non-acquisition capital expenditures
(25.0
)
(28.2
)
(17.8
)
Free cash flow
$
(22.9
)
$
(42.0
)
$
11.9
*Values in table may not add due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005984/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com Website
address: http://www.rogerscorp.com
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