Operating Performance Drives Continued
Margin and Earnings Improvement
Rogers Corporation (NYSE:ROG) today announced financial results
for the second quarter of 2023.
“We continued to execute on our profitability improvement plans
in the second quarter which drove gross margin and earnings per
share results that exceeded the mid-point of our guidance,” stated
Colin Gouveia, Rogers' President and CEO. “We are pleased with the
progress we have made thus far, and we remain intently focused on
driving additional margin and earnings improvement in the coming
quarters. Challenging market conditions tempered sales for the
second quarter, but with our strong technology portfolio we remain
extremely well positioned to benefit as demand improves. We
continue to execute on our strategy to achieve our long-term growth
targets, including the recent announcement that we are expanding
our power substrate capacity to capitalize on the accelerating
demand for silicon carbide devices in EV and renewable energy
markets."
Financial Overview
GAAP Results
Q2 2023
Q1 2023
Q2 2022
Net Sales ($M)
$230.8
$243.8
$252.0
Gross Margin
34.5%
32.7%
34.3%
Operating Margin
12.1%
(0.1%)
9.3%
Net Income (Loss) ($M)
$17.9
$(3.5)
$17.9
Net Income (Loss) Margin
7.7%
(1.4)%
7.1%
Diluted Earnings Per Share
$0.96
$(0.19)
$0.94
Net Cash Provided by Operating Activities
($M)
$15.7
$1.8
$2.0
Non-GAAP Results1
Q2 2023
Q1 2023
Q2 2022
Adjusted Operating Margin
13.4%
10.5%
12.1%
Adjusted Net Income ($M)
$20.0
$16.2
$23.2
Adjusted Earnings Per Diluted Share
$1.07
$0.87
$1.22
Adjusted EBITDA ($M)
$43.7
$35.1
$45.4
Adjusted EBITDA Margin
18.9%
14.4%
18.0%
Free Cash Flow ($M)
$4.2
$(14.6)
$(22.9)
Net Sales by Operating Segment (dollars in
millions)
Q2 2023
Q1 2023
Q2 2022
Advanced Electronics Solutions (AES)
$130.2
$135.9
$141.2
Elastomeric Material Solutions (EMS)
$95.3
$102.2
$105.1
Other
$5.3
$5.7
$5.7
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
Q2 2023 Summary of
Results
Net sales of $230.8 million decreased 5.3% versus the prior
quarter resulting from lower sales in both the AES and EMS business
units. AES net sales decreased by 4.2% primarily related to lower
EV/HEV and ADAS sales, partially offset by higher aerospace and
defense (A&D) and industrial revenues. EMS net sales decreased
by 6.7% primarily from lower general industrial and consumer
revenues, partially offset by higher portable electronics and
A&D market sales. Currency exchange rates favorably impacted
total company net sales in the second quarter of 2023 by $0.7
million compared to prior quarter net sales.
Gross margin improved to 34.5% compared to 32.7% in the prior
quarter due to improved factory productivity, lower material costs,
a decrease in logistics costs and favorable product mix, partially
offset by lower sales volume.
Selling, general and administrative (SG&A) expenses
decreased by $14.0 million from the prior quarter to $46.1 million.
The lower SG&A expense was due primarily to a decrease in
professional service fees and variable compensation costs.
GAAP operating margin of 12.1% increased from (0.1)% in the
prior quarter. The higher operating margin was due to the
improvement in gross margin, lower SG&A, lower restructuring
and impairment charges and an increase in other operating income.
Adjusted operating margin of 13.4% increased by 300 basis points
versus the prior quarter.
GAAP earnings per diluted share were $0.96 compared to earnings
per diluted share of $(0.19) in the previous quarter. The increase
in GAAP earnings per diluted share was due to higher operating
income, partially offset by an increase in tax expense. On an
adjusted basis, earnings were $1.07 per diluted share compared to
adjusted earnings of $0.87 per diluted share in the prior
quarter.
Ending cash and cash equivalents were $141.5 million, a decrease
of $52.3 million versus the prior quarter. Net cash provided by
operating activities in the second quarter was $15.7 million,
capital expenditures were $11.5 million and a principal payment of
$60 million was made on the outstanding borrowings under the
Company’s revolving credit facility.
Financial Outlook
Q3 2023
Net Sales ($M)
$230 to $240
Gross Margin
34.0% to 35.0%
Earnings Per Diluted Share
$1.20 to $1.40
Adjusted Earnings Per Diluted Share1
$1.05 to $1.25
2023
Capital Expenditures ($M)
$65 to $75
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
Conference call and additional
Information
A conference call to discuss the results for the first quarter
will take place today, Thursday, August 03, 2023 at 5:00 pm ET. A
live webcast of the event and the accompanying presentation can be
accessed on the Rogers Corporation website at
https://www.rogerscorp.com/investors.
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 regarding 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. Other risks and uncertainties that could cause such
results to differ include: the duration and impacts of the
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 or
risks arising from the terminated DuPont Merger; 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. 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, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net sales
$
230,821
$
251,970
$
474,668
$
500,236
Cost of sales
151,204
165,452
315,350
328,324
Gross margin
79,617
86,518
159,318
171,912
Selling, general and administrative
expenses
46,128
56,138
106,213
113,843
Research and development expenses
8,098
8,050
17,684
16,310
Restructuring and impairment charges
3,939
677
14,440
746
Other operating (income) expense, net
(6,442
)
(1,743
)
(6,661
)
(2,274
)
Operating income
27,894
23,396
27,642
43,287
Equity income in unconsolidated joint
ventures
842
1,800
918
3,075
Other income (expense), net
(757
)
319
(752
)
586
Interest expense, net
(2,837
)
(1,548
)
(6,299
)
(2,617
)
Income before income tax expense
25,142
23,967
21,509
44,331
Income tax expense (benefit)
7,278
6,084
7,150
9,848
Net income
$
17,864
$
17,883
$
14,359
$
34,483
Basic earnings per share
$
0.96
$
0.95
$
0.77
$
1.83
Diluted earnings per share
$
0.96
$
0.94
$
0.77
$
1.82
Shares used in computing:
Basic earnings per share
18,627
18,813
18,615
18,797
Diluted earnings per share
18,683
18,992
18,659
18,996
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PAR VALUE)
June 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
141,452
$
235,850
Accounts receivable, less allowance for
doubtful accounts of $1,003 and $1,007
186,700
177,413
Contract assets
42,223
38,853
Inventories
169,675
182,402
Prepaid income taxes
3,724
4,042
Asbestos-related insurance receivables,
current portion
3,881
3,881
Other current assets
35,124
17,426
Total current assets
582,779
659,867
Property, plant and equipment, net of
accumulated depreciation of $380,363 and $381,584
346,335
358,415
Investments in unconsolidated joint
ventures
12,760
14,082
Deferred income taxes
60,165
50,649
Goodwill
358,641
352,365
Other intangible assets, net of
amortization
130,551
133,724
Pension assets
5,432
5,251
Asbestos-related insurance receivables,
non-current portion
55,926
55,926
Other long-term assets
15,788
15,935
Total assets
$
1,568,377
$
1,646,214
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
51,233
$
57,342
Accrued employee benefits and
compensation
33,591
34,158
Accrued income taxes payable
7,616
5,504
Asbestos-related liabilities, current
portion
4,968
4,968
Finance lease obligations, current
portion
355
498
Other accrued liabilities
20,817
40,067
Total current liabilities
118,580
142,537
Borrowings under revolving credit
facility
130,000
215,000
Pension and other postretirement benefits
liabilities
1,579
1,501
Asbestos-related liabilities, non-current
portion
59,884
60,065
Finance lease obligations, non-current
portion
1,253
1,295
Non-current income tax
9,450
9,985
Deferred income taxes
24,443
23,557
Other long-term liabilities
17,571
19,808
Shareholders’ equity
Capital stock - $1 par value; 50,000
authorized shares; 18,616 and 18,574 shares issued and
outstanding
18,616
18,574
Additional paid-in capital
145,219
140,702
Retained earnings
1,112,813
1,098,454
Accumulated other comprehensive loss
(71,031
)
(85,264
)
Total shareholders' equity
1,205,617
1,172,466
Total liabilities and shareholders'
equity
$
1,568,377
$
1,646,214
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, dispositions, gains or losses on the
sale or disposal of property, plant and equipment, restructuring,
severance, impairment and other related costs, non-routine
shareholder advisory costs, (income) costs associated with
terminated merger, UTIS fire and recovery charges and the related
income tax effect on these items (collectively, “discrete
items”);
(2) Adjusted net income, which the Company defines as net income
(loss) excluding amortization of acquisition intangible assets,
pension settlement charges and discrete items;
(3) Adjusted earnings per diluted share, which the Company
defines as earnings per diluted share excluding amortization of
acquisition intangible assets, pension settlement charges and
discrete items, divided by adjusted weighted average shares
outstanding - diluted;
(4) Adjusted EBITDA, which the Company defines as net income
(loss) excluding interest expense, net, income tax expense
(benefit), depreciation and amortization, stock-based compensation
expense, pension settlement charges 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 (used) 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*:
2023
2022
Operating margin
Q2
Q1
Q2
GAAP operating margin
12.1
%
(0.1
)%
9.3
%
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
%
—
%
0.1
%
Dispositions
—
%
0.5
%
—
%
Loss/(gain) on sale or disposal of
assets
(0.2
)%
—
%
—
%
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
2.0
%
4.9
%
0.4
%
Non-routine shareholder advisory costs
—
%
3.1
%
—
%
(Income) costs associated with terminated
merger
0.7
%
0.8
%
1.4
%
UTIS fire (recovery)/charges
(2.6
)%
(0.1
)%
(0.7
)%
Total discrete items
(0.1
)%
9.2
%
1.1
%
Operating margin adjusted for discrete
items
12.0
%
9.1
%
10.4
%
Acquisition intangible amortization
1.4
%
1.4
%
1.7
%
Adjusted operating margin
13.4
%
10.5
%
12.1
%
*Percentages in table may not add due to
rounding.
Reconciliation of GAAP net income to adjusted net
income*:
(amounts in millions)
2023
2022
Net income
Q2
Q1
Q2
GAAP net income (loss)
$
17.9
$
(3.5
)
$
17.9
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
0.1
0.1
Acquisition intangible amortization
3.3
3.3
4.2
Dispositions
0.1
1.2
—
Loss/(gain) on sale or disposal of
assets
(0.5
)
—
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
4.6
11.9
1.0
Non-routine shareholder advisory costs
0.1
7.6
—
(Income) costs associated with terminated
merger
1.5
1.9
3.4
UTIS fire (recovery)/charges
(5.9
)
(0.2
)
(1.7
)
Income tax effect of non-GAAP adjustments
and intangible amortization
(1.0
)
(6.1
)
(1.7
)
Adjusted net income
$
20.0
$
16.2
$
23.2
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share*:
2023
2022
Earnings per diluted share
Q2
Q1
Q2
GAAP earnings per diluted share
$
0.96
$
(0.19
)
$
0.94
Acquisition and divestiture related
costs:
Dispositions
—
0.05
—
Loss/(gain) on sale or disposal of
assets
(0.02
)
—
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
0.18
0.49
0.04
Non-routine shareholder advisory costs
—
0.31
—
(Income) costs associated with terminated
merger
0.06
0.08
0.14
UTIS fire (recovery)/charges
(0.25
)
(0.01
)
(0.07
)
Impact of including dilutive
securities(a)
—
—
—
Total discrete items
$
(0.01
)
$
0.92
$
0.11
Earnings per diluted share adjusted for
discrete items
0.94
0.73
1.05
Acquisition intangible amortization
$
0.13
$
0.14
$
0.17
Adjusted earnings per diluted share
$
1.07
$
0.87
$
1.22
*Values in table may not add due to
rounding.
(a)This represents the dilutive effect of
awards under equity compensation plans. Refer to the table below
for the effect on adjusted weighted average shares outstanding -
diluted.
The following table reconciles weighted
average shares outstanding - diluted under US GAAP to adjusted
weighted average shares outstanding - diluted used in the
calculation of adjusted diluted EPS:
2023
2022
(Shares in thousands)
Q2
Q1
Q2
Weighted average shares outstanding -
diluted
18,683
18,604
18,992
Dilutive effect of awards under equity
compensation plans
—
32
—
Adjusted weighted average shares
outstanding - diluted
18,683
18,636
18,992
Reconciliation of GAAP net income to adjusted
EBITDA*:
2023
2022
(amounts in millions)
Q2
Q1
Q2
GAAP net income (loss)
$
17.9
$
(3.5
)
$
17.9
Interest expense, net
2.8
3.5
1.5
Income tax expense (benefit)
7.3
(0.1
)
6.1
Depreciation
10.4
11.3
8.0
Amortization
3.3
3.3
4.2
Stock-based compensation expense
5.0
2.1
4.9
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
0.1
0.1
Dispositions
0.1
1.2
—
Loss/(gain) on sale or disposal of
assets
(0.5
)
—
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
2.3
8.6
1.0
Non-routine shareholder advisory costs
0.1
7.6
—
(Income) costs associated with terminated
merger
1.0
1.3
3.4
UTIS fire (recovery)/charges
(5.9
)
(0.2
)
(1.7
)
Adjusted EBITDA
$
43.7
$
35.1
$
45.4
*Values in table may not add due to
rounding.
Calculation of adjusted EBITDA margin*:
2023
2022
Q2
Q1
Q2
Adjusted EBITDA (in millions)
$
43.7
$
35.1
$
45.4
Divided by Total Net Sales (in
millions)
230.8
243.8
252.0
Adjusted EBITDA Margin
18.9
%
14.4
%
18.0
%
*Values in table may not add due to
rounding.
Reconciliation of net cash provided by (used in) operating
activities to free cash flow*:
2023
2022
(amounts in millions)
Q2
Q1
Q2
Net cash provided by (used in) operating
activities
$
15.7
$
1.8
$
2.0
Non-acquisition capital expenditures
(11.5
)
(16.4
)
(25.0
)
Free cash flow
$
4.2
$
(14.6
)
$
(22.9
)
*Values in table may not add due to
rounding. Net cash provided by operating activities includes
regulatory termination fee net of fees and taxes received in Q4
2022.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share guidance for the 2023 third
quarter:
Guidance Q3
2023
GAAP earnings per diluted share
$1.20 to $1.40
Discrete items*
$(0.28)
Acquisition intangible amortization
$0.13
Adjusted earnings per diluted share
$1.05 - $1.25
*Discrete items includes expected net gain
on assets held for sale
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803017559/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com
Website address: https://www.rogerscorp.com
Rogers (NYSE:ROG)
Historical Stock Chart
From Apr 2024 to May 2024
Rogers (NYSE:ROG)
Historical Stock Chart
From May 2023 to May 2024