Rogers Corporation has announced financial results for the full year and fourth quarter of 2020.
“Accelerating growth in Advanced Mobility markets, combined with continued improvements in operational execution, drove fourth quarter results above the top end of our guidance,” stated Bruce D. Hoechner, Rogers' President and CEO. “Despite the challenges of the past year, 2020 was a year of substantial progress for Rogers. We advanced our positions in strategic growth markets, achieved sustainable improvements to gross margins, and significantly strengthened our balance sheet. Looking ahead, we remain enthusiastic about the growth outlook in Advanced Mobility, and particularly the EV/HEV market where momentum is accelerating. We are confident that our innovative solutions and deep materials expertise will enable Rogers to continue to play a leading role in the global transition to clean technologies and in other markets across our diversified portfolio.”
Q4 2020 Summary of Results
Net sales of $210.7 million increased 4% versus the prior quarter primarily due to higher sales in the ACS and PES business units. ACS net sales increased due to strong automotive demand for ADAS applications, partially offset by a decline in defense market demand. PES net sales increased in the EV/HEV market, partially offset by a decrease in the industrial power and mass transit markets. EMS net sales increased slightly from continued growth in the EV/HEV market and improved demand in the general industrial and traditional automotive markets, partially offset by a decline in portable electronics market sales. Currency exchange rates favorably impacted total company net sales in the fourth quarter of 2020 by $3.1 million compared to prior quarter net sales.
Gross margin was 38.3%, compared to 37.4% in the prior quarter. The increase in gross margin was due to higher volumes, improved productivity and yields and operational cost savings, partially offset by higher freight costs, commodity price increases and unfavorable product mix.
Selling, general and administrative (SG&A) expenses decreased slightly from the prior quarter to $50.0 million. In line with the Company's expectations, $11.8 million of accelerated intangible amortization expense was incurred related to the DSP business in the fourth quarter, compared to $11.7 million of accelerated expense in the prior quarter.
Restructuring and impairment charges of $3.6 million were recognized in the fourth quarter, compared to $9.4 million in the prior quarter. The charges in both the third and fourth quarters were primarily related to manufacturing footprint optimization plans to better align capacity with end market demand, improve factory utilization and increase cost competitiveness.
GAAP operating margin of 9.5% increased by 510 basis points sequentially primarily due to the improved gross margin and lower restructuring related charges. Adjusted operating margin of 18.4% increased by 110 basis points versus the prior quarter, primarily as a result of improved gross margin.
GAAP earnings per diluted share were $0.81, compared to $0.37 per diluted share in the previous quarter. The increase in GAAP earnings resulted from higher net sales, improved gross margin and lower restructuring related expenses, partially offset by higher tax expense. On an adjusted basis, earnings were $1.58 per diluted share compared to adjusted earnings of $1.45 per diluted share in the prior quarter. The increase in adjusted earnings per diluted share resulted from higher net sales and improved gross margin, partially offset by higher tax expense.
Ending cash and cash equivalents were $191.8 million, an increase of $5.7 million versus the prior quarter. The Company generated strong free cash flow of approximately $40 million in the fourth quarter of 2020. Net cash provided by operating activities of $51.4 million was offset by $35.0 million of principal payments made on the outstanding borrowings under the Company’s revolving credit facility and capital expenditures of $11.4 million. At the end of the fourth quarter of 2020, cash exceeded borrowings by $166.8 million.
Full Year 2020 Summary of Results
Net sales of $802.6 million decreased 11% compared to 2019 due to lower sales in all business units. The decline in net sales were mainly due to impacts on market demand from the COVID-19 pandemic and the effects of trade restrictions on the wireless infrastructure market. Currency exchange rates had an immaterial impact on total company net sales during 2020. ACS net sales decreased in the wireless infrastructure and automotive markets, partially offset by strong growth in the defense market. EMS net sales decreased due to lower demand in the general industrial, mass transit, consumer and automotive markets, partially offset by robust growth in the EV/HEV market and slight growth in the portable electronics market. PES net sales decreased due to lower demand in the industrial power, mass transit and vehicle electrification markets, offset by strong growth in the EV/HEV and renewable energy markets.
Gross margin was 36.4% compared to 35.0% in 2019. The increase in gross margin resulted from operational cost savings, lower freight, duties and tariffs costs, productivity and yield improvements and favorable product mix, partially offset by lower volume, increased inventory reserves and higher COVID-19 related costs.
SG&A expenses increased by $13.6 million to $182.3 million from the prior year, primarily from $27.4 million of accelerated intangible amortization expense associated with the DSP business, partially offset by lower travel and other expense reduction actions.
Restructuring and impairment charges were $13.0 million, compared to $2.5 million in 2019. The charges in 2020 were related to manufacturing footprint optimization plans to better align capacity with end market demand, improve factory utilization and increase cost competitiveness.
GAAP operating margin decreased to 8.4%, from 12.3% in the prior year, primarily due to higher SG&A and restructuring related charges, partially offset by gross margin improvement. Adjusted operating margin was 15.7% and unchanged from 2019.
GAAP earnings per diluted share were $2.67, compared to $2.53 per diluted share, for full year 2019. The increase resulted from lower pension settlement charges in 2020, which was partially offset by higher SG&A, restructuring charges and tax expense. On an adjusted basis, earnings were $5.08 per diluted share for full year 2020, compared to $6.14 per diluted share for full year 2019. The decrease in adjusted earnings was from lower revenue and higher tax expense, partially offset by the improvement in gross margin.
Ending cash and cash equivalents of $191.8 million increased by $24.9 million versus the prior year. The Company generated strong operating cash flow of $165.1 million and free cash flow of $124.7 million in 2020.
As recently announced, a fire caused extensive damage to Rogers' Utis manufacturing facility in S. Korea on February 9th and operations were disrupted. The Company is considering various recovery options and expects to resume production in S. Korea during the fourth quarter of this year. An estimate of the impact of this event is included in the first quarter financial outlook.
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 the company’s growth drivers -- advanced connectivity and advanced mobility 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.