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Rogers Corporation has announced financial results for the third quarter of 2015.
For the third quarter of 2015 net sales were $160.4 million with net earnings of $0.67 per diluted share. The acquired Arlon business contributed $27.8 million of net sales and earnings of $0.19 per diluted share for the quarter. The Company incurred charges of $0.10 per diluted share for discrete tax adjustments and $0.02 per diluted share of restructuring severance charges in the third quarter of 2015. Exclusive of these impacts, non-GAAP net earnings were $0.79 per diluted share. Net sales were slightly below and non-GAAP net earnings exceeded the Company’s guidance provided on July 29, 2015. Net sales for the third quarter of 2014 were $163.1 million with net earnings of $1.09 per diluted share.
The Company sustained a year-over-year quarterly net sales decline of 1.6%. Organic sales declined 14.1% on a currency adjusted basis from the same quarter of the prior year. Fluctuations in currency exchange rates from the third quarter of 2014 unfavorably impacted organic sales by 4.6%. Arlon contributed 17.1% of incremental net sales for the quarter. The decline in quarterly net sales from the prior year negatively impacted overall operating performance. As a result, the Company realized a benefit during the quarter from a reduction in incentive compensation accruals, which was substantially offset by discrete charges related to certain tax and restructuring severance charges identified above.
Bruce D. Hoechner, President and CEO, commented, “Rogers’ earnings in the third quarter exceeded our guidance despite weaker demand across our businesses. Sales were impacted by the general slowdown in global economies. Rogers continues to benefit from our focus on the key elements of our growth strategy, particularly the strong execution of our operational excellence initiatives, which has helped us maintain margin and profitability performance. We are very pleased with the performance of the Arlon business, which has consistently exceeded our revenue and profit targets. Confidence remains positive in the medium to long-term in our key megatrend markets, and we believe the Company is well-positioned to capitalize on the opportunities ahead when the global markets recover. In the interim, we will closely manage our businesses to mitigate the impact of current economic conditions.”
Business Segment Discussion
Advanced Connectivity Solutions (ACS)
Advanced Connectivity Solutions reported third quarter of 2015 net sales of $66.2 million, a 4.4% increase compared to third quarter of 2014 net sales of $63.4 million. Organic sales declined 20.3% on a currency adjusted basis from the same quarter of the prior year. Fluctuations in currency exchange rates unfavorably impacted net sales in the third quarter by approximately $0.9 million or 1.5% as compared with the third quarter of 2014. Net sales include $16.6 million from the acquired Arlon business in the third quarter of 2015. Weaker demand in the 4G LTE basestation supply chain primarily in China more than offset strong growth in circuit materials used in automotive Advanced Driver Assistance Systems and aerospace and defense applications.
Elastomeric Material Solutions (EMS)
Elastomeric Material Solutions reported third quarter of 2015 net sales of $46.8 million, a 0.2% increase compared to third quarter 2014 net sales of $46.7 million. Organic sales declined by 10.5% on a currency adjusted basis from the same quarter of the prior year. Fluctuations in currency exchange rates unfavorably impacted net sales in the third quarter by approximately $1.0 million or 2.1% as compared with the third quarter of 2014. Net sales include $6.0 million from the acquired Arlon business in the third quarter of 2015. Third quarter results were impacted by the continued decline in elastomeric materials in portable electronics partially offset by increases in mass transit and automotive applications.
Power Electronics Solutions (PES)
Power Electronics Solutions reported third quarter of 2015 net sales of $36.6 million, a 21.3% decrease compared to third quarter of 2014 net sales of $46.5 million. Sales decreased by 9.7% on a currency adjusted basis from the same quarter of the prior year. Net sales were unfavorably impacted by approximately $5.4 million or 11.6% due to fluctuations in currency exchange rates as compared with the third quarter of 2014. General weakness in power electronics end markets driven by a slowdown in infrastructure investments negatively impacted sales in this segment.
Other
Net sales of other products reported for the third quarter of 2015 were $10.9 million, an increase of 66.4% compared to the third quarter of 2014 net sales of $6.5 million. This increase was driven by Arlon related sales of $5.2 million in the third quarter of 2015.
Operational Highlights
Rogers ended the third quarter of 2015 with cash and cash equivalents of $192.6 million, a decrease of $44.8 million, or 18.9%, from $237.4 million at December 31, 2014. Net cash provided by operating activities was $45.6 million for the first three quarters of 2015 compared to $57.5 million for the first three quarters of 2014. Capital expenditures were approximately $7.3 million and $21.6 million for the quarter and nine months ended September 30, 2015, respectively.
The Company’s gross margin was 37.1% in the third quarter of 2015 compared to 39.6% for the third quarter of 2014. Non-GAAP operating margin was 14.7% and GAAP operating margin was 14.4% for the third quarter of 2015 compared to 17.4% (GAAP) for the third quarter of 2014.
The Company’s 2015 third quarter effective tax rate was 43.5%. The tax rate was unfavorably impacted by discrete tax charges related to the finalization of 2014 income tax returns and changes in the earnings mix on a global jurisdictional basis.
Share Repurchase Program
As previously announced, during the third quarter of 2015 the Company initiated a share repurchase program of up to $100 million of shares of the Company’s capital stock. In conjunction with this program, during the third quarter of 2015, the Company repurchased 678,300 shares at an aggregate cost of $37.5 million.
Outlook
Rogers projects its fourth quarter of 2015 net sales will be between $145 to $155 million and net earnings of between $0.53 and $0.63 per diluted share. Included in the fourth quarter of 2015 net sales guidance is the unfavorable impact of approximately $4.7 million due to currency exchange rates.
For the full year of 2015, Rogers expects capital expenditures to be in the range of $30 to $33 million and its effective tax rate to be approximately 32%.
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, safety and protection applications as well as other technologies where reliability is critical. Rogers delivers Power Electronics Solutions for energy-efficient motor drives, vehicle electrification and alternative 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 Connecticut (USA), Rogers operates manufacturing facilities in the United States, China, Germany, Belgium, Hungary, and South Korea, with joint ventures and sales offices worldwide.
