Operating Performance Drives Further Gross
Margin and Earnings Improvement
Rogers Corporation (NYSE:ROG) today announced financial results
for the third quarter of 2023.
"We continued our strong operating performance in the third
quarter as we increased gross margin to over 35%, which drove
stronger earnings and operating cash flow," stated Colin Gouveia,
Rogers' President and CEO. "This marks the third consecutive
quarter of gross margin improvement and delivers on the margin
commitments we made previously. We are pleased with our progress
thus far and remain committed to further improving our cost
structure with our operational excellence initiatives. Third
quarter sales were nearly flat compared to the prior quarter as
global economic conditions remained challenging and customer
inventory destocking continued. We are pleased with the strong
progress we have made so far this year. We have significantly
improved our margin and cost structure, bolstered the organization
with new talent, secured important design wins, and are moving
forward with targeted investments in fast growing markets."
Financial Overview
GAAP Results
Q3 2023
Q2 2023
Q3 2022
Net Sales ($M)
$229.1
$230.8
$247.2
Gross Margin
35.1%
34.5%
31.6%
Operating Margin
11.8%
12.1%
7.5%
Net Income (Loss) ($M)
$19.0
$17.9
$14.8
Net Income (Loss) Margin
8.3%
7.7%
6.0%
Diluted Earnings Per Share
$1.02
$0.96
$0.78
Net Cash Provided by Operating Activities
($M)
$42.0
$15.7
$13.5
Non-GAAP Results1
Q3 2023
Q2 2023
Q3 2022
Adjusted Operating Margin
14.3%
13.4%
10.8%
Adjusted Net Income ($M)
$23.2
$20.0
$21.2
Adjusted Earnings Per Diluted Share
$1.24
$1.07
$1.11
Adjusted EBITDA ($M)
$45.4
$43.7
$39.7
Adjusted EBITDA Margin
19.8%
18.9%
16.0%
Free Cash Flow ($M)
$35.3
$4.2
$(20.3)
Net Sales by Operating Segment (dollars in
millions)
Q3 2023
Q2 2023
Q3 2022
Advanced Electronics Solutions (AES)
$126.4
$130.2
$130.6
Elastomeric Material Solutions (EMS)
$98.0
$95.3
$111.0
Other
$4.8
$5.3
$5.6
1 - A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
Q3 2023 Summary of
Results
Net sales of $229.1 million decreased 0.7% versus the prior
quarter resulting from lower sales in the AES business unit,
partially offset by higher EMS business unit sales. AES net sales
decreased by 2.9% primarily related to lower EV/HEV, aerospace and
defense (A&D) and ADAS sales. EMS net sales increased by 2.8%
primarily from higher portable electronics and A&D sales,
partially offset by lower general industrial sales. Currency
exchange rates unfavorably impacted total company net sales in the
third quarter of 2023 by $0.7 million compared to the prior
quarter.
Gross margin improved to 35.1% compared to 34.5% in the prior
quarter due to procurement cost savings and favorable product mix,
partially offset by the decline in sales volume.
Selling, general and administrative (SG&A) expenses
decreased by $1.8 million from the prior quarter to $44.3 million.
The lower SG&A expense was due primarily to a decrease in
variable compensation costs, partially offset by higher
professional service fees.
GAAP operating margin of 11.8% decreased from 12.1% in the prior
quarter. The lower operating margin was due to a decrease in other
operating income, partially offset by the improvement in gross
margin and lower SG&A and restructuring and impairment charges.
Adjusted operating margin of 14.3% increased by 90 basis points
versus the prior quarter.
GAAP earnings per diluted share were $1.02 compared to earnings
per diluted share of $0.96 in the previous quarter. The increase in
GAAP earnings per diluted share was due to an increase in other
income and lower interest expense. On an adjusted basis, earnings
were $1.24 per diluted share compared to adjusted earnings of $1.07
per diluted share in the prior quarter.
Ending cash and cash equivalents were $126.5 million, a decrease
of $15.0 million versus the prior quarter. Net cash provided by
operating activities in the third quarter was $42.0 million,
capital expenditures were $6.7 million and a principal payment of
$50 million was made on the outstanding borrowings under the
Company’s revolving credit facility.
Financial Outlook
Q4 2023
Net Sales ($M)
$215 to $225
Gross Margin
34.0% to 35.0%
Earnings Per Diluted Share
$0.71 to $0.91
Adjusted Earnings Per Diluted Share1
$0.90 to $1.10
2023
Capital Expenditures ($M)
$55 to $65
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 third quarter
will take place today, Thursday, October 26, 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
Nine Months Ended
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Net sales
$
229,148
$
247,231
$
703,816
$
747,467
Cost of sales
148,788
169,167
464,138
497,491
Gross margin
80,360
78,064
239,678
249,976
Selling, general and administrative
expenses
44,336
50,653
150,549
164,496
Research and development expenses
7,827
9,140
25,511
25,450
Restructuring and impairment charges
1,921
373
16,361
1,119
Other operating (income) expense, net
(846
)
(578
)
(7,507
)
(2,852
)
Operating income
27,122
18,476
54,764
61,763
Equity income in unconsolidated joint
ventures
641
1,162
1,559
4,237
Other income (expense), net
761
977
9
1,563
Interest expense, net
(2,328
)
(2,942
)
(8,627
)
(5,559
)
Income before income tax expense
26,196
17,673
47,705
62,004
Income tax expense (benefit)
7,161
2,835
14,311
12,683
Net income
$
19,035
$
14,838
$
33,394
$
49,321
Basic earnings per share
$
1.02
$
0.79
$
1.79
$
2.62
Diluted earnings per share
$
1.02
$
0.78
$
1.79
$
2.60
Shares used in computing:
Basic earnings per share
18,627
18,818
18,619
18,804
Diluted earnings per share
18,685
18,999
18,668
18,997
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PAR VALUE)
September 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
126,455
$
235,850
Accounts receivable, less allowance for
doubtful accounts of $1,147 and $1,007
185,750
177,413
Contract assets
46,476
38,853
Inventories
157,073
182,402
Prepaid income taxes
3,337
4,042
Asbestos-related insurance receivables,
current portion
3,881
3,881
Other current assets
31,825
17,426
Total current assets
554,797
659,867
Property, plant and equipment, net of
accumulated depreciation of $391,898 and $381,584
341,696
358,415
Investments in unconsolidated joint
ventures
10,346
14,082
Deferred income taxes
58,922
50,649
Goodwill
352,214
352,365
Other intangible assets, net of
amortization
124,496
133,724
Pension assets
5,523
5,251
Asbestos-related insurance receivables,
non-current portion
55,926
55,926
Other long-term assets
16,946
15,935
Total assets
$
1,520,866
$
1,646,214
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
46,852
$
57,342
Accrued employee benefits and
compensation
33,778
34,158
Accrued income taxes payable
7,018
5,504
Asbestos-related liabilities, current
portion
4,968
4,968
Finance lease obligations, current
portion
345
498
Other accrued liabilities
23,176
40,067
Total current liabilities
116,137
142,537
Borrowings under revolving credit
facility
80,000
215,000
Pension and other postretirement benefits
liabilities
1,618
1,501
Asbestos-related liabilities, non-current
portion
59,739
60,065
Finance lease obligations, non-current
portion
1,147
1,295
Non-current income tax
9,560
9,985
Deferred income taxes
23,720
23,557
Other long-term liabilities
18,333
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
148,992
140,702
Retained earnings
1,131,848
1,098,454
Accumulated other comprehensive loss
(88,844
)
(85,264
)
Total shareholders' equity
1,210,612
1,172,466
Total liabilities and shareholders'
equity
$
1,520,866
$
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 (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 by (used in) 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
Q3
Q2
Q3
GAAP operating margin (%)
11.8
%
12.1
%
7.5
%
Acquisition and divestiture related
costs:
Dispositions
(0.3
)%
—
%
—
%
Loss/(gain) on sale or disposal of
assets
(0.1
)%
(0.2
)%
—
%
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
1.0
%
2.0
%
0.5
%
Non-routine shareholder advisory costs
—
%
—
%
—
%
(Income) costs associated with terminated
merger
0.6
%
0.7
%
1.4
%
UTIS fire (recovery)/charges
(0.3
)%
(2.6
)%
(0.2
)%
Total discrete items
1.0
%
(0.1
)%
1.7
%
Operating margin adjusted for discrete
items
12.8
%
12.0
%
9.2
%
Acquisition intangible amortization
1.5
%
1.4
%
1.7
%
Adjusted operating margin
14.3
%
13.4
%
10.8
%
*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
Q3
Q2
Q3
GAAP net income (loss)
$
19.0
$
17.9
$
14.8
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
—
0.1
Acquisition intangible amortization
3.4
3.3
4.1
Dispositions
(0.7
)
0.1
—
Loss/(gain) on sale or disposal of
assets
(0.2
)
(0.5
)
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
2.3
4.6
1.3
Non-routine shareholder advisory costs
—
0.1
—
(Income) costs associated with terminated
merger
1.4
1.5
3.4
UTIS fire (recovery)/charges
(0.7
)
(5.9
)
(0.6
)
Income tax effect of non-GAAP adjustments
and intangible amortization
(1.4
)
(1.0
)
(2.0
)
Adjusted net income
$
23.2
$
20.0
$
21.2
*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
Q3
Q2
Q3
GAAP earnings per diluted share
$
1.02
$
0.96
$
0.78
Acquisition and divestiture related
costs:
Dispositions
(0.03
)
—
—
Loss/(gain) on sale or disposal of
assets
(0.01
)
(0.02
)
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
0.09
0.18
0.05
Non-routine shareholder advisory costs
—
—
—
(Income) costs associated with terminated
merger
0.06
0.06
0.14
UTIS fire (recovery)/charges
(0.03
)
(0.25
)
(0.02
)
Total discrete items
$
0.09
$
(0.01
)
$
0.17
Earnings per diluted share adjusted for
discrete items
1.11
0.94
0.95
Acquisition intangible amortization
$
0.13
$
0.13
$
0.16
Adjusted earnings per diluted share
$
1.24
$
1.07
$
1.11
*Values in table may not add due to
rounding.
Reconciliation of GAAP net income to adjusted
EBITDA*:
2023
2022
(amounts in millions)
Q3
Q2
Q3
GAAP net income (loss)
$
19.0
$
17.9
$
14.8
Interest expense, net
2.3
2.8
2.9
Income tax expense (benefit)
7.2
7.3
2.8
Depreciation
8.1
10.4
7.3
Amortization
3.4
3.3
4.1
Stock-based compensation expense
3.8
5.0
3.5
Acquisition and divestiture related
costs:
Acquisition and related integration
costs
—
—
0.1
Dispositions
(0.7
)
0.1
—
Loss/(gain) on sale or disposal of
assets
(0.2
)
(0.5
)
—
Restructuring, business realignment and
other cost saving initiatives:
Restructuring, severance, impairment and
other related costs
2.3
2.3
1.3
Non-routine shareholder advisory costs
—
0.1
—
(Income) costs associated with terminated
merger
0.9
1.0
3.4
UTIS fire (recovery)/charges
(0.7
)
(5.9
)
(0.6
)
Adjusted EBITDA
$
45.4
$
43.7
$
39.7
*Values in table may not add due to
rounding.
Calculation of adjusted EBITDA margin*:
2023
2022
Q3
Q2
Q3
Adjusted EBITDA (in millions)
$
45.4
$
43.7
$
39.7
Divided by Total Net Sales (in
millions)
229.1
230.8
247.2
Adjusted EBITDA Margin
19.8
%
18.9
%
16.0
%
*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)
Q3
Q2
Q3
Net cash provided by (used in) operating
activities
$
42.0
$
15.7
$
13.5
Non-acquisition capital expenditures
(6.7
)
(11.5
)
(33.8
)
Free cash flow
$
35.3
$
4.2
$
(20.3
)
*Values in table may not add due to
rounding.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share guidance for the 2023 fourth
quarter:
Guidance Q4
2023
GAAP earnings per diluted share
$0.71 to $0.91
Discrete items
$0.06
Acquisition intangible amortization
$0.13
Adjusted earnings per diluted share
$0.90 - $1.10
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026013423/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com
Website address: https://www.rogerscorp.com
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