Rogers Corporation Reports Second Quarter 2017 Results
Rogers Corporation (NYSE:ROG) today announced financial results for the 2017 second quarter.
The Company reported 2017 second quarter net sales of $201.4 million, which exceeded the Company's previously announced guidance of $190 to $200 million, as well as 2016 second quarter net sales of $157.5 million. Currency exchange rates unfavorably impacted 2017 second quarter net sales by $3.8 million.
Earnings for the 2017 second quarter were $1.13 per diluted share, an increase compared to $0.29 per diluted share in the second quarter of 2016. Earnings per diluted share exceeded the Company's guidance range of $0.98 to $1.08. On an adjusted basis, earnings were $1.33 per diluted share, an increase compared to adjusted earnings of $0.88 per diluted share in the second quarter of 2016. Adjusted earnings exceeded the Company's guidance of $1.16 to $1.26 per diluted share.
Second quarter 2017 net income was $20.9 million, an increase compared to $5.4 million in the second quarter of 2016. Adjusted EBITDA was $46.5 million for the second quarter of 2017, an increase as compared to $29.0 million reported in the second quarter of 2016.
Gross margin was 40.0% in the second quarter of 2017, compared to 38.2% in the second quarter of 2016. Operating margin was 16.3% in the second quarter of 2017, compared to 11.9% in the second quarter of 2016. Adjusted operating margin was 19.1% in the second quarter of 2017, compared to 13.5% in the second quarter of 2016.
Bruce D. Hoechner, President and CEO commented, "The Rogers team delivered exceptional results in Q2, driven by double-digit organic sales growth across our three strategic business units, record gross margins, as well as outstanding contributions from our recent acquisitions. The foundation of our strong performance is our commitment to and execution of our growth strategy: we are in the right global markets; we are creating substantial value as we integrate our synergistic acquisitions and we continue to aggressively implement our enterprise-wide operating efficiency initiatives. While we are pleased with our performance, we believe there are significant opportunities ahead of us."
Business segment discussion
Advanced Connectivity Solutions (ACS)
Advanced
Connectivity Solutions reported 2017 second quarter net sales of $74.3
million, a 10.6% increase compared to 2016 second quarter net sales of
$67.2 million. The increase in 2017 second quarter net sales was largely
driven by growth in high frequency circuit materials for automotive
advanced driver assistance systems (ADAS) and aerospace / defense,
partially offset by lower demand for wireless 4G LTE applications.
Second quarter 2017 net sales were unfavorably impacted by $0.9 million
due to fluctuations in currency exchange rates.
Elastomeric Material Solutions (EMS)
Elastomeric
Material Solutions reported 2017 second quarter net sales of $77.6
million, a 69.5% increase compared to 2016 second quarter net sales of
$45.8 million. The 2017 second quarter included $22.0 million of net
sales from recent acquisitions. On an organic basis, EMS net sales
increased $9.8 million, or 21.5%, on higher demand for general
industrial, portable electronics, automotive and mass transit
applications. Fluctuations in currency exchange rates unfavorably
impacted net sales by $1.0 million in the 2017 second quarter.
Power Electronics Solutions (PES)
Power
Electronics Solutions reported 2017 second quarter net sales of $43.9
million, a 14.4% increase compared to 2016 second quarter net sales of
$38.4 million. The 2017 second quarter increase was primarily due to
broad based demand across markets, including laser diode coolers,
renewable energy, variable frequency motor drives, electric and hybrid
electric vehicles. Second quarter 2017 net sales were unfavorably
impacted by $1.8 million due to fluctuations in currency exchange rates.
Other
Other reported 2017
second quarter net sales of $5.6 million, down $0.5 million compared to
the second quarter of 2016 sales of $6.1 million.
Balance sheet and other highlights
Cash position
Rogers ended the
second quarter of 2017 with cash and cash equivalents of $177.3 million,
a decrease of $50.5 million from $227.8 million at December 31, 2016.
The primary drivers of the lower cash balance were a debt paydown of
approximately $50.1 million in the second quarter of 2017, an
acquisition completed in the first quarter of 2017 for approximately
$60.0 million, partially offset by net cash provided from operating
activities of $64.5 million.
Cash flow
Net cash provided
from operating activities was $64.5 million for the first half of 2017,
an increase compared to $51.3 million in the first half of 2016. The
increase in net cash provided by operating activities was largely driven
by higher 2017 net income, partially offset by a use of working capital.
Capital spending was $9.7 million in the first half of 2017, a decrease
compared to $10.0 million in the first half of 2016.
Effective tax rate
The 2017
second quarter effective tax rate was 33.9%, compared to 71.0% in the
2016 second quarter. The decrease was primarily due to withholding taxes
on off-shore cash movements and the change in our assertion that certain
foreign earnings are permanently reinvested recorded in 2016, partially
offset by a decrease in reversal of reserves associated with uncertain
tax positions.
Financial outlook
Rogers guides
its 2017 third quarter net sales to a range of $193 to $203 million,
including an unfavorable currency exchange rate impact of $2.2 million
versus the 2016 third quarter. Rogers guides its 2017 third quarter
earnings to a range of $1.14 to $1.24 per diluted share. Adjusted
earnings are guided to a range of $1.20 to $1.30 per diluted share.
For the full year 2017, Rogers expects capital expenditures to be in a range of $30 to $35 million.
For the full year 2017, Rogers guides its normalized effective tax rate to a range of 32% to 33%.
About Rogers Corporation
Rogers
Corporation (NYSE:ROG) is a global leader in engineered materials to
power, protect, and connect our world. With more than 180 years of
materials science experience, Rogers delivers high-performance solutions
that enable clean energy, internet connectivity, and safety and
protection applications, as well as other technologies where reliability
is critical. Rogers delivers Power Electronics Solutions for
energy-efficient motor drives, e-Mobility and renewable energy;
Elastomeric Material Solutions for sealing, vibration management and
impact protection in mobile devices, transportation interiors,
industrial equipment and performance apparel; and Advanced Connectivity
Solutions for wireless infrastructure, automotive safety and radar
systems. Headquartered in Arizona (USA), Rogers operates manufacturing
facilities in the United States, China, Germany, Belgium, Hungary, and
South Korea, with joint ventures and sales offices worldwide.
Safe Harbor Statement
This
release contains forward-looking statements, which may concern our
plans, objectives, outlook, goals, strategies, future events, future net
sales or performance, capital expenditures, financing needs, 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 the results discussed in
the forward-looking statements. Risks that could cause such results to
differ include: failure to capitalize on, and volatility within, the
Company's growth drivers, including internet connectivity, clean energy,
and safety and protection, as well as specific market and industry
trends within these growth drivers; business, economic and political
conditions in the United States and abroad, particularly in China, South
Korea, Germany, Hungary and Belgium, where we maintain significant
manufacturing, sales or administrative operations; fluctuations in
foreign currency exchange rates; research and development efforts;
competitive developments; business development transactions and related
integration considerations; the outcome of ongoing and future
litigation, including our asbestos-related product liability litigation;
and changes in laws and regulations applicable to our business. 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 quarterly reports on Forms 10-Q filed
with the Securities and Exchange Commission. Rogers Corporation assumes
no responsibility to update any forward-looking statements contained
herein except as required by law.
Conference call and additional information
A conference call to discuss 2017 second quarter results will be held tomorrow morning on Tuesday August 1, 2017 at 9am ET.
A live webcast and slide presentation will be available under the investors section of www.rogerscorp.com/ir.
To participate, please dial:
1-800-574-8929 | Toll-free in the United States | ||||
1-973-935-8524 | Internationally | ||||
There is no passcode for the live teleconference. | |||||
If you are unable to attend, a conference call playback will be available through August 7, 2017 at 11:59 pm ET, by dialing 1-855-859-2056 from the United States, and 1-404-537-3406 from outside of the US, each with passcode 33539719.
Additionally, a replay of the archived webcast will be available on the Rogers website approximately two hours following the webcast.
Additional information
Please contact the Company directly
via email or visit the Rogers website.
(Financial statements follow)
Condensed Consolidated Statements of Operations (Unaudited) |
|||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
June 30, 2017 |
June 30, 2016 |
June 30, 2017 |
June 30, 2016 |
|||||||||||||
Net sales | $ | 201,424 | $ | 157,489 | $ | 405,252 | $ | 318,056 | |||||||||
Cost of sales | 120,878 | 97,290 | 244,356 | 197,349 | |||||||||||||
Gross margin | 80,546 | 60,199 | 160,896 | 120,707 | |||||||||||||
Selling, general and administrative expenses | 39,567 | 34,369 | 73,731 | 64,229 | |||||||||||||
Research and development expenses | 7,141 | 7,074 | 14,102 | 13,622 | |||||||||||||
Restructuring charges | 1,079 | — | 1,805 | — | |||||||||||||
Gain on sale of long-lived asset | — | — | (942 | ) | — | ||||||||||||
Operating income | 32,759 | 18,756 | 72,200 | 42,856 | |||||||||||||
Equity income in unconsolidated joint ventures | 966 | 708 | 1,976 | 1,321 | |||||||||||||
Other income (expense), net | (185 | ) | 191 | 530 | (356 | ) | |||||||||||
Interest expense, net | (1,947 | ) | (1,115 | ) | (3,195 | ) | (2,236 | ) | |||||||||
Income before income tax expense | 31,593 | 18,540 | 71,511 | 41,585 | |||||||||||||
Income tax expense | 10,697 | 13,163 | 23,583 | 21,280 | |||||||||||||
Net income | 20,896 | 5,377 | 47,928 | 20,305 | |||||||||||||
Basic earnings per share: | $ | 1.15 | $ | 0.30 | $ | 2.65 | $ | 1.13 | |||||||||
Diluted earnings per share: | $ | 1.13 | $ | 0.29 | $ | 2.60 | $ | 1.11 | |||||||||
Shares used in computing: | |||||||||||||||||
Basic | 18,140 | 18,007 | 18,098 | 17,986 | |||||||||||||
Diluted | 18,547 | 18,253 | 18,460 | 18,234 | |||||||||||||
Condensed Consolidated Statements of Financial Position (Unaudited) |
|||||||||
(IN THOUSANDS) | June 30, 2017 | December 31, 2016 | |||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 177,312 | $ | 227,767 | |||||
Accounts receivable, net | 136,993 | 119,604 | |||||||
Inventories | 102,549 | 91,130 | |||||||
Prepaid income taxes | 4,392 | 3,020 | |||||||
Asbestos related insurance receivables | 7,099 | 7,099 | |||||||
Assets held for sale | 2,741 | 871 | |||||||
Other current assets | 10,355 | 8,910 | |||||||
Total current assets | 441,441 | 458,401 | |||||||
Property, plant and equipment, net | 173,363 | 176,916 | |||||||
Investments in unconsolidated joint ventures | 17,949 | 16,183 | |||||||
Deferred income taxes | 19,657 | 14,634 | |||||||
Goodwill | 232,247 | 208,431 | |||||||
Other intangible assets | 167,226 | 136,676 | |||||||
Asbestos related insurance receivables | 41,295 | 41,295 | |||||||
Other long term assets | 5,963 | 3,964 | |||||||
Total assets | $ | 1,099,141 | $ | 1,056,500 | |||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 35,560 | $ | 28,379 | |||||
Accrued employee benefits and compensation | 30,433 | 31,104 | |||||||
Accrued income taxes payable | 12,387 | 10,921 | |||||||
Current portion of lease obligation | 383 | 350 | |||||||
Current portion of long term debt | — | 3,653 | |||||||
Asbestos related liabilities | 7,099 | 7,099 | |||||||
Other accrued liabilities | 21,349 | 19,679 | |||||||
Total current liabilities | 107,211 | 101,185 | |||||||
Borrowings under credit facility | 191,188 | 235,877 | |||||||
Long term lease obligation | 5,207 | 4,993 | |||||||
Pension liability | 8,501 | 8,501 | |||||||
Retiree health care and life insurance benefits | 1,510 | 1,992 | |||||||
Asbestos related liabilities | 44,883 | 44,883 | |||||||
Non-current income tax | 7,302 | 6,238 | |||||||
Deferred income taxes | 11,559 | 13,883 | |||||||
Other long term liabilities | 3,525 | 3,162 | |||||||
Shareholders’ equity | |||||||||
Capital stock | 18,161 | 18,021 | |||||||
Additional paid in capital | 123,575 | 118,678 | |||||||
Retained earnings | 652,009 | 591,349 | |||||||
Accumulated other comprehensive income (loss) | (75,490 | ) | (92,262 | ) | |||||
Total shareholders’ equity | 718,255 | 635,786 | |||||||
Total liabilities and shareholders’ equity | $ | 1,099,141 | $ | 1,056,500 | |||||
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 earnings per diluted share, which the Company defines as earnings per diluted share excluding acquisition-related amortization of intangible assets and discrete items, such as restructuring expenses, certain costs associated with acquisitions, non-recurring tax charges, and gains or losses on asset or business dispositions (collectively, “Discrete Items”);
(2) Adjusted EBITDA, which the Company defines as net income excluding interest expense, net income tax expense, depreciation and amortization, and Discrete Items; and
(3) Adjusted operating margin, which the Company defines as operating margin excluding acquisition-related amortization of intangible assets and Discrete Items.
Management believes each of these measures is 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 the potential variability across periods based on the timing, frequency and magnitude. As a result, management believes that adjusted earnings per diluted share, adjusted EBITDA and adjusted operating margin enhance the ability of investors to analyze trends in the Company’s business and evaluate the Company’s performance relative to peer companies. However, non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or solely as alternatives to, financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from 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 earnings per diluted share to adjusted earnings per diluted share for the Second Quarter:
2017 | 2016 | ||||
Earnings per diluted share | Q2 | Q2 | |||
GAAP earnings per diluted share | $1.13 | $0.29 | |||
Restructuring, severance and other related costs | 0.04 | — | |||
Acquisition related costs | 0.03 | — | |||
Tax expense related to repatriation of earnings from prior years | — | 0.49 | |||
Total Discrete Items | $0.07 | $0.49 | |||
Earnings per diluted share adjusted for Discrete Items | $1.20 | $0.78 | |||
Acquisition intangible amortization | 0.13 | 0.10 | |||
Adjusted earnings per diluted share | $1.33 | $0.88 | |||
Reconciliation of GAAP net income to adjusted EBITDA for the Second Quarter*:
|
||||||
2017 | 2016 | |||||
(amounts in millions) | Q2 | Q2 | ||||
Net income | $20.9 | $5.4 | ||||
Interest expense, net | 1.9 | 1.1 | ||||
Income tax expense (benefit) | 10.7 | 13.2 | ||||
Depreciation | 7.2 | 6.6 | ||||
Amortization | 3.8 | 2.7 | ||||
Restructuring, severance and other related costs | 1.1 | — | ||||
Acquisition related costs | 0.9 | — | ||||
Adjusted EBITDA | $46.5 | $29.0 | ||||
*Percentages in table may not add due to rounding.
Reconciliation of GAAP operating margin to adjusted operating margin for the Second Quarter*:
2017 | 2016 | ||||
Operating margin | Q2 | Q2 | |||
GAAP operating margin | 16.3% | 11.9% | |||
Restructuring, severance and other related costs | 0.5% | —% | |||
Acquisition related costs | 0.5% | —% | |||
Total discrete Items | 1.0% | —% | |||
Operating margin adjusted for Discrete Items | 17.3% | 11.9% | |||
Acquisition intangible amortization | 1.8% | 1.6% | |||
Adjusted operating margin | 19.1% | 13.5% | |||
*Percentages in table may not add due to rounding.
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2017 Second Quarter:
Guidance Q2 2017 |
|||
GAAP earnings per diluted share | $0.98 - $1.08 | ||
Restructuring/other Discrete Items | $0.07 | ||
Acquisition intangible amortization | $0.11 | ||
Adjusted earnings per diluted share | $1.16 - $1.26 | ||
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2017 Third Quarter:
Guidance Q3 2017 |
|||
GAAP earnings per diluted share | $1.14 - $1.24 | ||
Restructuring/other Discrete Items | -$0.07 | ||
Acquisition intangible amortization | $0.13 | ||
Adjusted earnings per diluted share | $1.20 - $1.30 | ||
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