Rogers Reports Q2 2018 Results; Revenue Up 17.1%


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Rogers Corporation announced financial results for the 2018 second quarter. The Company reported 2018 second quarter net sales of $214.7 million, which was within the Company's previously announced guidance of $210 to $220 million, and an increase of 6.6% compared to 2017 second quarter net sales of $201.4 million. Currency exchange rates favorably impacted 2018 second quarter net sales by $8.4 million due to strengthening in the Euro and Renminbi.

Earnings for the 2018 second quarter were $0.93 per diluted share, compared to $1.13 per diluted share in the second quarter of 2017. Earnings per diluted share were below the Company's guidance of $1.10 to $1.25. On an adjusted basis, earnings were $1.19 per diluted share, compared to adjusted earnings of $1.33 per diluted share in the second quarter of 2017. Adjusted earnings were below the Company's guidance of $1.25 to $1.40 per diluted share.

Second quarter 2018 net income was $17.3 million, compared to $20.9 million in the second quarter of 2017. Adjusted EBITDA was $40.7 million for the second quarter of 2018, compared to $46.5 million reported in the second quarter of 2017.

Gross margin was 35.7% in the second quarter of 2018, compared to 40.0% in the second quarter of 2017. Operating margin was 11.7% in the second quarter of 2018, compared to 16.0% in the second quarter of 2017. Adjusted operating margin was 14.8% in the second quarter of 2018, compared to 18.8% in the second quarter of 2017.

"Rogers achieved revenue growth across much of the business; however, margins were below our expectations in the quarter primarily due to additional costs for capacity and activities to reduce cost structure," stated Bruce D. Hoechner, Rogers' President and CEO. "We are turning the corner on near-term operating challenges. We are executing well on our strategy, as demonstrated by our recent synergistic acquisition of Griswold, and our ongoing substantial investments in capacity and multi-site readiness, in preparation for the significant growth opportunities in 5G wireless, advanced driver assistance systems, and electric and hybrid electric vehicles. Rogers is well positioned to achieve the performance targets outlined in our 2020 vision." 

Business Segment Discussion

Advanced Connectivity Solutions (ACS)

 

Advanced Connectivity Solutions reported 2018 second quarter net sales of $76.4 million, a 2.7% increase compared to 2017 second quarter net sales of $74.3 million. The increase in 2018 second quarter net sales was largely driven by aerospace and defense and automotive advanced driver assistance systems (ADAS) revenues, partially offset by lower demand in portable electronics and wireless 4G LTE applications. Second quarter 2018 net sales were favorably impacted by $1.9 million due to fluctuations in currency exchange rates.

Elastomeric Material Solutions (EMS)

Elastomeric Material Solutions reported 2018 second quarter net sales of $79.2 million, a 2.1% increase compared to 2017 second quarter net sales of $77.6 million. EMS net sales increased on portable electronics, consumer, automotive and mass transit revenues, partially offset by lower general industrial and other applications. Fluctuations in currency exchange rates favorably impacted net sales by $2.0 million in the 2018 second quarter.

Power Electronics Solutions (PES)

Power Electronics Solutions reported 2018 second quarter net sales of $53.6 million, a 22.2% increase compared to 2017 second quarter net sales of $43.9 million. 2018 second quarter net sales increased due to broad based demand across markets, including particular strength in electric and hybrid electric vehicles, renewable energy, mass transit and variable frequency drives. Second quarter 2018 net sales were favorably impacted by $4.3 million due to fluctuations in currency exchange rates.

Other

Other reported 2018 second quarter net sales of $5.4 million, a decrease of 2.8% compared to the second quarter of 2017 sales of $5.6 million.

Balance Sheet and Other Highlights

Cash Position

Rogers ended the second quarter of 2018 with cash and cash equivalents of $174.7 million, a decrease of $6.5 million from $181.2 million at December 31, 2017. The primary drivers of the lower cash balance were capital spending of $20.2 million, tax payments related to vested equity awards of $6.4 million, and share repurchases of $3.0 million, partially offset by $22.8 million of net cash provided by operating activities.

Cash Flow

 

Net cash provided from operating activities of $22.8 million in the first half of 2018, a decrease compared to 2017. The decrease in net cash provided by operating activities was primarily driven by the use of working capital and lower net income. Capital spending was $20.2 million in the first half of 2018, an increase compared to $9.7 million in 2017.

Effective Tax Rate

Rogers' effective income tax rate was 32.6% for the second quarter of 2018, compared to 33.9% for the second quarter of 2017. The decrease was primarily due to a lower U.S. effective tax rate, as a result of U.S. tax reform and geographic profit mix, partially offset by an increase in current year accruals for uncertain tax positions.

Financial Outlook

Rogers guides its 2018 third quarter net sales to a range of $220 to $230 million. Rogers guides its 2018 third quarter earnings to a range of $0.97 to $1.12 per diluted share, excluding the impact of purchase accounting related to the acquisition of Griswold. Adjusted earnings are guided to a range of $1.25 to $1.40 per diluted share.

Rogers guides 2018 full year capital spending to be in the range of $50 to $60 million.

Rogers guides the 2018 full year effective tax rate to be 25-27%, with a third quarter effective tax rate of 30-31%. 

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.

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