CHANDLER, Ariz.--(BUSINESS WIRE)--Rogers Corporation (NYSE:ROG) today announced financial results for the 2017 third quarter.
The Company reported 2017 third quarter net sales of $206.8 million, which exceeded the Company's previously announced guidance of $193 to $203 million, as well as 2016 third quarter net sales of $165.3 million. Currency exchange rates favorably impacted 2017 third quarter net sales by $0.9 million.
Earnings for the 2017 third quarter were $1.37 per diluted share, an increase compared to $0.88 per diluted share in the third quarter of 2016. Earnings per diluted share exceeded the Company's guidance range of $1.14 to $1.24. On an adjusted basis, earnings were $1.41 per diluted share, an increase compared to adjusted earnings of $0.97 per diluted share in the third quarter of 2016. Adjusted earnings exceeded the Company's guidance of $1.20 to $1.30 per diluted share.
Third quarter 2017 net income was $25.5 million, an increase compared to $16.1 million in the third quarter of 2016. Adjusted EBITDA was $50.7 million for the third quarter of 2017, an increase as compared to $34.5 million reported in the third quarter of 2016.
Gross margin was 39.7% in the third quarter of 2017, compared to 37.5% in the third quarter of 2016. Operating margin was 19.1% in the third quarter of 2017, compared to 14.0% in the third quarter of 2016. Adjusted operating margin was 19.5% in the third quarter of 2017, compared to 15.5% in the third quarter of 2016.
Bruce D. Hoechner, President and CEO commented, "In Q3, disciplined execution of our Growth Strategy led to all-time record net sales and Rogers’ fourth consecutive quarter of double-digit organic growth. We saw continued strength in all three of our businesses and across our diverse portfolio of solutions. In addition, our recent acquisitions are performing extremely well. Globally, operational improvements are also contributing to efficiency gains. We look forward to a strong finish in 2017 as we maintain our course and capitalize on the robust tailwinds in many of our key markets."
Business segment discussion
Advanced Connectivity Solutions (ACS)
Advanced
Connectivity Solutions reported 2017 third quarter net sales of $72.7
million, a 11.0% increase compared to 2016 third quarter net sales of
$65.5 million. The increase in 2017 third quarter net sales was largely
driven by growth in high frequency circuit materials for automotive
advanced driver assistance systems (ADAS), aerospace / defense, and
higher demand for wireless 4G LTE applications. Third quarter 2017 net
sales were unfavorably impacted by $0.1 million due to fluctuations in
currency exchange rates.
Elastomeric Material Solutions (EMS)
Elastomeric
Material Solutions reported 2017 third quarter net sales of $82.2
million, a 51.2% increase compared to 2016 third quarter net sales of
$54.4 million. The 2017 third quarter included $20.7 million of net
sales from recent acquisitions. On an organic basis, EMS net sales
increased $7.1 million, or 13.1%, on higher demand for portable
electronics, general industrial, mass transit and electric and hybrid
electric vehicles. Fluctuations in currency exchange rates unfavorably
impacted net sales by $0.1 million in the 2017 third quarter.
Power Electronics Solutions (PES)
Power
Electronics Solutions reported 2017 third quarter net sales of $46.4
million, a 16.7% increase compared to 2016 third quarter net sales of
$39.8 million. The 2017 third quarter increase was primarily due to
broad based demand across markets, including renewable energy, laser
diode coolers, electric and hybrid electric vehicles and variable
frequency motor drives. Third quarter 2017 net sales were favorably
impacted by $1.1 million due to fluctuations in currency exchange rates.
Other
Other reported 2017 third
quarter net sales of $5.4 million, down $0.2 million compared to the
third quarter of 2016 sales of $5.6 million.
Balance sheet and other highlights
Cash position
Rogers ended the
third quarter of 2017 with cash and cash equivalents of $151.0 million,
a decrease of $76.8 million from $227.8 million at December 31, 2016.
The primary drivers of the lower cash balance were year to date debt
paydown of approximately $110.3 million in the second and third quarters
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 $99.9 million.
Cash flow
Net cash provided
from operating activities was $99.9 million for the first nine months of
2017, an increase compared to $94.2 million in the first nine months of
2016. The increase in net cash provided by operating activities was
driven by higher 2017 net income partially offset by a use of working
capital. Capital spending was $17.7 million in the first nine months of
2017, an increase compared to $14.9 million in the first nine months of
2016.
Effective tax rate
The 2017
third quarter effective tax rate was 37.6%, compared to 32.8% in the
2016 third quarter. The increase was primarily due to a change in
valuation allowance associated with deferred tax assets that are capital
in nature and changes in the pretax income mix across jurisdictions with
disparate tax rates, partially offset by excess tax deductions on stock
based compensation recognized in 2017.
Financial outlook
Rogers guides
its 2017 fourth quarter net sales to a range of $200 to $210 million,
including a favorable currency exchange rate impact of $3.4 million
versus the 2016 fourth quarter. Rogers guides its 2017 fourth quarter
earnings to a range of $1.18 to $1.28 per diluted share. Adjusted
earnings are guided to a range of $1.35 to $1.45 per diluted share.
For the full year 2017, Rogers expects capital expenditures to be in a range of $25 to $30 million.
For the full year 2017, Rogers guides its normalized effective tax rate to be approximately 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 third quarter results will be held today on Thursday November 2, 2017 at 5pm 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 from November 2, 2017 at approximately 8pm ET through November 8, 2017 at 11:59pm ET, by dialing 1-855-859-2056 from the United States, and 1-404-537-3406 from outside of the US, each with passcode 90185399.
Additionally, the archived webcast will be available on the Rogers website at approximately 8pm ET November 2, 2017.
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 | Nine Months Ended | |||||||||||||||||||
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
September 30, 2017 |
September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||||
Net sales | $ | 206,783 | $ | 165,259 | $ | 612,035 | $ | 483,314 | ||||||||||||
Cost of sales | 124,595 | 103,330 | 368,951 | 300,678 | ||||||||||||||||
Gross margin | 82,188 | 61,929 | 243,084 | 182,636 | ||||||||||||||||
Selling, general and administrative expenses | 38,615 | 31,489 | 112,346 | 95,718 | ||||||||||||||||
Research and development expenses | 7,411 | 7,294 | 21,512 | 20,916 | ||||||||||||||||
Restructuring and impairment charges | 962 | — | 2,767 | — | ||||||||||||||||
Gain on sale of long-lived asset | (4,387 | ) | — | (5,329 | ) | — | ||||||||||||||
Operating income | 39,587 | 23,146 | 111,788 | 66,002 | ||||||||||||||||
Equity income in unconsolidated joint ventures | 1,384 | 898 | 3,359 | 2,220 | ||||||||||||||||
Other income (expense), net | 1,596 | 676 | 2,126 | 320 | ||||||||||||||||
Interest expense, net | (1,639 | ) | (811 | ) | (4,834 | ) | (3,047 | ) | ||||||||||||
Income before income tax expense | 40,928 | 23,909 | 112,439 | 65,495 | ||||||||||||||||
Income tax expense | 15,396 | 7,844 | 38,979 | 29,125 | ||||||||||||||||
Net income | 25,532 | 16,065 | 73,460 | 36,370 | ||||||||||||||||
Basic earnings per share: | $ | 1.40 | $ | 0.89 | $ | 4.05 | $ | 2.02 | ||||||||||||
Diluted earnings per share: | $ | 1.37 | $ | 0.88 | $ | 3.97 | $ | 2.00 | ||||||||||||
Shares used in computing: | ||||||||||||||||||||
Basic | 18,181 | 17,996 | 18,126 | 17,990 | ||||||||||||||||
Diluted | 18,588 | 18,183 | 18,503 | 18,217 | ||||||||||||||||
Condensed Consolidated Statements of Financial Position (Unaudited) |
||||||||||
(IN THOUSANDS) | September 30, 2017 | December 31, 2016 | ||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 150,993 | $ | 227,767 | ||||||
Accounts receivable, net | 138,506 | 119,604 | ||||||||
Inventories | 114,118 | 91,130 | ||||||||
Prepaid income taxes | 4,383 | 3,020 | ||||||||
Asbestos related insurance receivables | 7,099 | 7,099 | ||||||||
Assets held for sale | 896 | 871 | ||||||||
Other current assets | 9,925 | 8,910 | ||||||||
Total current assets | 425,920 | 458,401 | ||||||||
Property, plant and equipment, net | 174,855 | 176,916 | ||||||||
Investments in unconsolidated joint ventures | 19,340 | 16,183 | ||||||||
Deferred income taxes | 16,007 | 14,634 | ||||||||
Goodwill | 234,587 | 208,431 | ||||||||
Other intangible assets | 164,142 | 136,676 | ||||||||
Asbestos related insurance receivables | 41,295 | 41,295 | ||||||||
Other long term assets | 5,472 | 3,964 | ||||||||
Total assets | $ | 1,081,618 | $ | 1,056,500 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 35,867 | $ | 28,379 | ||||||
Accrued employee benefits and compensation | 34,176 | 31,104 | ||||||||
Accrued income taxes payable | 16,147 | 10,921 | ||||||||
Current portion of lease obligation | 399 | 350 | ||||||||
Current portion of long term debt | — | 3,653 | ||||||||
Asbestos related liabilities | 7,099 | 7,099 | ||||||||
Other accrued liabilities | 20,299 | 19,679 | ||||||||
Total current liabilities | 113,987 | 101,185 | ||||||||
Borrowings under credit facility | 131,188 | 235,877 | ||||||||
Long term lease obligation | 5,277 | 4,993 | ||||||||
Pension liability | 8,501 | 8,501 | ||||||||
Retiree health care and life insurance benefits | 1,971 | 1,992 | ||||||||
Asbestos related liabilities | 44,883 | 44,883 | ||||||||
Non-current income tax | 7,619 | 6,238 | ||||||||
Deferred income taxes | 13,680 | 13,883 | ||||||||
Other long term liabilities | 3,408 | 3,162 | ||||||||
Shareholders’ equity | ||||||||||
Capital stock | 18,218 | 18,021 | ||||||||
Additional paid in capital | 124,665 | 118,678 | ||||||||
Retained earnings | 677,541 | 591,349 | ||||||||
Accumulated other comprehensive income (loss) | (69,320 | ) | (92,262 | ) | ||||||
Total shareholders’ equity | 751,104 | 635,786 | ||||||||
Total liabilities and shareholders’ equity | $ | 1,081,618 | $ | 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 impairments, 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, 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.
**Third quarter 2016 financial measures below include acquisition related costs of $0.4 million that were not adjusted in the third quarter 2016 earnings release. These costs were incurred in conjunction with acquisitions that had not closed as of the earnings release date. Third quarter 2016 amounts below have been updated to adjust for these expenses, consistent with the current year presentation.
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share for the Third Quarter:
2017 | 2016 | |||||
Earnings per diluted share | Q3 | Q3 | ||||
GAAP earnings per diluted share | $1.37 | $0.88 | ||||
Environmental accrual adjustment | — | (0.03) | ||||
Restructuring, severance, impairment and other related costs | 0.03 | 0.01 | ||||
**Acquisition related costs | 0.02 | 0.02 | ||||
Gain on sale of long-lived asset | (0.15) | — | ||||
Total Discrete Items | ($0.10) | $0.00 | ||||
Earnings per diluted share adjusted for Discrete Items | $1.27 | $0.88 | ||||
Acquisition intangible amortization | 0.14 | 0.09 | ||||
Adjusted earnings per diluted share | $1.41 | $0.97 | ||||
Reconciliation of GAAP net income to adjusted EBITDA for the Third Quarter*:
2017 | 2016 | |||||||
(amounts in millions) | Q3 | Q3 | ||||||
Net income | $25.5 | $16.1 | ||||||
Interest expense, net | 1.6 | 0.8 | ||||||
Income tax expense | 15.4 | 7.8 | ||||||
Depreciation | 7.3 | 6.6 | ||||||
Amortization | 3.9 | 2.7 | ||||||
Tax item | — | 0.8 | ||||||
Environmental accrual adjustment | — | (0.9 | ) | |||||
Restructuring, severance, impairment and other related costs | 0.9 | 0.2 | ||||||
**Acquisition related costs | 0.5 | 0.4 | ||||||
Gain on sale of long-lived asset | (4.4 | ) | — | |||||
Adjusted EBITDA | $50.7 | $34.5 | ||||||
*Values in table may not add due to rounding.
Reconciliation of GAAP operating margin to adjusted operating margin for the Third Quarter*:
2017 | 2016 | |||||
Operating margin | Q3 | Q3 | ||||
GAAP operating margin | 19.1% | 14.0% | ||||
Environmental accrual adjustment | —% | (0.5)% | ||||
Restructuring, severance, impairment and other related costs | 0.5% | 0.1% | ||||
**Acquisition related costs | 0.2% | 0.3% | ||||
Gain on sale of long-lived asset | (2.1)% | —% | ||||
Total discrete Items | (1.4)% | (0.1)% | ||||
Operating margin adjusted for Discrete Items | 17.7% | 13.9% | ||||
Acquisition intangible amortization | 1.8% | 1.6% | ||||
Adjusted operating margin | 19.5% | 15.5% | ||||
*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 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 | ||
Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2017 Fourth Quarter:
Guidance Q4 2017 |
|||
GAAP earnings per diluted share | $1.18 - $1.28 | ||
Restructuring/other Discrete Items | $0.04 | ||
Acquisition intangible amortization | $0.13 | ||
Adjusted earnings per diluted share | $1.35 - $1.45 |