Rogers Reports 2Q19 Results; Sales Up 13% YoY

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Rogers Corporation has announced its financial results for the 2019 second quarter. The company reported 2019 second quarter net sales of $242.9 million, a 1.3% increase compared to 2019 first quarter net sales of $239.8 million and a 13.1% increase compared to 2018 second quarter net sales of $214.7 million. Net sales for the 2019 second quarter were within the Company's previously announced guidance range of $240 to $250 million. Currency exchange rates unfavorably impacted the 2019 second quarter net sales by $0.5 million compared to 2019 first quarter net sales, and by $8.1 million compared to 2018 second quarter net sales.

Second quarter 2019 net income was $24.3 million compared to $28.4 million in the first quarter of 2019 and $17.3 million in the second quarter of 2018. Earnings for 2019 second quarter were $1.30 per diluted share compared to $1.52 per diluted share in the first quarter of 2019 and $0.93 per diluted share in the second quarter of 2018. Earnings per diluted share were at the high end of the Company's previously announced guidance range of $1.16 to $1.31. On an adjusted basis, earnings were $1.64 per diluted share for the 2019 second quarter compared to adjusted earnings of $1.85 per diluted share in the first quarter of 2019 and $1.19 per diluted share in the second quarter of 2018. Adjusted earnings exceeded the high end of the Company's previously announced guidance range of $1.47 to $1.62 per diluted share.

Adjusted EBITDA was $53.1 million, or 21.9% of net sales, for the second quarter of 2019 compared to $53.1 million, or 22.2% of net sales, reported in the first quarter of 2019 and $43.8 million, or 20.4% of net sales, reported in the second quarter of 2018.

Gross margin was 35.3% in the second quarter of 2019 compared to 35.6% in the first quarter of 2019 and 35.7% in the second quarter of 2018. Second quarter 2019 gross margin was within the Company's previously announced guidance range of 35% to 36%. Operating margin was 13.7% in the second quarter of 2019 compared to 13.7% in the first quarter of 2019 and 11.7% in the second quarter of 2018. Adjusted operating margin was 17.2% in the second quarter of 2019 compared to 17.1% in the first quarter of 2019 and 14.8% in the second quarter of 2018.

"We achieved record quarterly revenue and adjusted earnings above the top end of our guidance range in Q2, driven by 5G demand and continued strength in ADAS," stated Bruce D. Hoechner, Rogers’ President and CEO. "We are encouraged by our strong performance, however our cautious near-term outlook is due to uncertainties related to ongoing trade tensions, which could affect the current 5G demand ramp, and continued weakness in industrial and conventional automotive markets. The market outlook for Advanced Connectivity and Advanced Mobility applications remains very strong and we are focused on operational improvements that will allow us to fully capitalize on these significant market opportunities."

Business Segment Discussion:

Advanced Connectivity Solutions (ACS)

Advanced Connectivity Solutions reported 2019 second quarter net sales of $92.5 million, a 15.0% increase compared to 2019 first quarter net sales of $80.5 million and a 21.1% increase compared to 2018 second quarter net sales of $76.4 million. The sequential increase in 2019 second quarter net sales was largely driven by demand for high frequency circuit materials used in 5G and 4G wireless infrastructure and continued strength in advanced driver assistance systems (ADAS). Second quarter 2019 net sales were favorably impacted by $0.1 million due to fluctuations in currency exchange rates compared to 2019 first quarter net sales, but were unfavorably impacted by $2.5 million compared to 2018 second quarter net sales.

Elastomeric Material Solutions (EMS)

Elastomeric Material Solutions reported 2019 second quarter net sales of $93.9 million, a 1.2% increase compared to 2019 first quarter net sales of $92.8 million and an 18.5% increase compared to 2018 second quarter net sales of $79.2 million. The sequential increase in 2019 second quarter net sales was due to strong demand in portable electronics, EV/HEV batteries and mass transit. Fluctuations in currency exchange rates unfavorably impacted net sales by $0.2 million in the 2019 second quarter compared to 2019 first quarter net sales, and by $2.2 million compared to 2018 second quarter net sales.

Power Electronics Solutions (PES)

Power Electronics Solutions reported 2019 second quarter net sales of $51.7 million, a 13.6% decrease compared to 2019 first quarter net sales of $59.8 million and a 3.7% decrease compared to 2018 second quarter net sales of $53.6 million. The 2019 second quarter sequential decrease was primarily due to weaker demand for power semiconductor substrates in industrial and vehicle electrification applications, partially offset by stronger rail and renewable energy demand. Second quarter 2019 net sales were unfavorably impacted by $0.4 million due to fluctuations in currency exchange rates compared to 2019 first quarter net sales and by $3.2 million compared to 2018 second quarter net sales.

Other

Other reported 2019 second quarter net sales of $4.8 million, a 29.4% decrease compared to 2019 first quarter net sales of $6.8 million and a 12.3% decrease compared to 2018 second quarter net sales of $5.4 million. The sequential decrease in 2019 second quarter net sales was due to a last-time buy in the Durel business in the prior quarter.

Balance Sheet and Other Highlights:

Cash Position

Rogers ended the second quarter of 2019 with cash and cash equivalents of $173.1 million, an increase of $5.4 million from $167.7 million at December 31, 2018. The increase in cash resulted primarily from net cash provided by operating activities of $67.5 million, partially offset by capital expenditures of $24.0 million and repayment of debt principle of $33.0 million.

Effective Tax Rate

Rogers' effective tax rate was 22.9% for the second quarter of 2019, compared to 14.2% for the first quarter of 2019. The second quarter effective tax rate was higher due primarily to certain discrete tax benefits realized in the first quarter. The Company expects the effective tax rate for the second half of 2019 to be 24% to 25%.

Financial Outlook

Rogers guides its 2019 third quarter net sales to a range of $225 to $235 million and gross margin to a range of 35% to 36%. Rogers guides its 2019 third quarter earnings to a range of $1.05 to $1.20 per diluted share and adjusted earnings to a range of $1.30 to $1.45 per diluted share.

For the full year 2019, Rogers expects capital expenditures to be in a range of $50 to $60 million.

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.