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Rogers Corporation 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.
Second quarter 2017 highlights, versus second quarter 2016:
- Net sales of $201.4 million, up 27.9%
- Gross margin of 40.0%, a record quarter, up 180 basis points
- Net income of $20.9 million, up 288.6%
- Adjusted EBITDA of $46.5 million, up 60.3%
- Earnings of $1.13 per diluted share, up 282.4%
- Adjusted earnings of $1.33 per diluted share, up 51.1%
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 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
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.
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.
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 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.