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Rogers Corporation 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 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
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.
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.
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 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.