Rogers Corporation Reports Q4, Full Year 2021 Results

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Rogers Corporation announced financial results for the full year and fourth quarter of 2021.

“Rogers delivered record full-year revenue and earnings in 2021 led by tremendous growth in EV/HEV market sales,” stated Bruce D. Hoechner, Rogers' President and CEO. “Ongoing supply-chain challenges tempered fourth quarter customer demand and financial results, which is necessitating further commercial actions. The long-term growth outlook in our markets remains strong and we are investing to capitalize on these opportunities, particularly in the EV/HEV market where demand is accelerating. We are very pleased with the progress being made related to DuPont’s proposed acquisition of Rogers, including the recent approval of the transaction by Rogers’ shareholders. We anticipate that the combination with DuPont will provide many compelling benefits for our employees and our customers as together we leverage our expertise in advanced materials to drive new and innovative solutions.”

Q4 2021 Summary of Results

Net sales of $230.5 million decreased 3.3% versus the prior quarter primarily due to the impact of supply chain constraints which reduced customer demand and resulted in lower production levels. The decline was partially offset by the Silicone Engineering acquisition in early October. EMS net sales increased by 1.0% due to strong growth in EV/HEV sales and the Silicone Engineering acquisition. This growth was tempered by lower sales in all other markets as a result of component shortages and labor and supply constraints, which reduced customer demand and lowered production levels. AES net sales decreased by 5.8% due to lower defense, wireless infrastructure and ADAS revenues, partially offset by much higher EV/HEV sales. Component shortages continued to temper customer demand in the ADAS and wireless infrastructure markets. Currency exchange rates unfavorably impacted total company net sales in the fourth quarter of 2021 by $1.1 million compared to prior quarter net sales.

Gross margin was 33.9%, compared to 38.5% in the prior quarter. The decrease in gross margin was primarily related to lower volume, lower throughput due to labor and raw material supply constraints, increased commodity and freight costs and unfavorable product mix. These items were partially offset by yield improvements and commercial actions to address rising input costs.

Selling, general and administrative (SG&A) expenses increased by $10.0 million from the prior quarter to $57.9 million. SG&A expense was higher primarily due to costs associated with the proposed acquisition of Rogers by DuPont and the Silicone Engineering acquisition.

GAAP operating margin of 4.5% decreased by 970 basis points from the prior quarter primarily due to lower gross margin and higher SG&A expenses. Adjusted operating margin of 12.2% decreased by 500 basis points versus the prior quarter.

GAAP earnings per diluted share were $1.22, compared to earnings per diluted share of $1.33 in the previous quarter. The decrease in GAAP earnings was due to a decline in operating income, partially offset by lower tax expense from a change in unrecognized tax positions in China. On an adjusted basis, earnings were $1.92 per diluted share compared to adjusted earnings of $1.64 per diluted share in the prior quarter.

Ending cash and cash equivalents were $232.3 million, an increase of $11.4 million versus the prior quarter. Net cash provided by operating activities of $18.2 million was offset by capital expenditures of $27.7 million. Free cash flow was approximately $(9.5) million in the fourth quarter of 2021.

Full Year 2021 Summary of Results

Net sales of $932.9 million increased by 16.2% compared to 2020, led by robust sales growth in the EV/HEV market for both the AES and EMS business units. AES net sales increased in the EV/HEV, ADAS, clean energy and defense markets. EMS net sales were higher in the EV/HEV, general industrial, and consumer markets, partially offset by lower portable electronics market sales. The Silicone Engineering acquisition contributed to EMS sales in the fourth quarter. Further sales growth in 2021 for both the AES and EMS business units was tempered by lower demand from customers impacted by component shortages and labor and supply constraints which reduced production levels. Currency exchange rates favorably impacted total company net sales in 2021 by $22.3 million compared to the prior year.

Gross margin was 37.4% compared to 36.4% in 2020. The increase in gross margin resulted from higher volume and improved factory utilization, partially offset by an increase in commodity and freight costs and unfavorable product mix.

SG&A expenses increased by $10.9 million from the prior year to $193.2 million, primarily due to higher variable compensation, costs associated with the proposed acquisition of Rogers by DuPont and the Silicone Engineering acquisition, and investments in growth initiatives, partially offset by a decrease in other intangible assets amortization.

Restructuring and impairment charges were $3.6 million, compared to $13.0 million in 2020. The decrease was due to lower charges related to manufacturing footprint optimization plans to better align capacity with end market demand, improve factory utilization and increase cost competitiveness.

GAAP operating margin increased to 12.6% from 8.4% in the prior year, primarily due to the improvement in gross margin, the reduction in operating expenses as a percentage of sales and lower restructuring charges. Adjusted operating margin was 16.4%, compared to 15.7% in 2020.

GAAP earnings per diluted share were $5.73, compared to $2.67 per diluted share, for full year 2020. The increase resulted primarily from higher operating income, lower tax expense from a change in unrecognized tax positions in China and lower interest expense. On an adjusted basis, earnings were $7.20 per diluted share for full year 2021, compared to $5.08 per diluted share for full year 2020.

Ending cash and cash equivalents of $232.3 million increased by $40.5 million versus the prior year. The Company generated operating cash flow of $124.4 million and free cash flow of $53.2 million in 2021.

Transaction with DuPont

As previously announced on November 2, 2021, Rogers has entered into a definitive merger agreement to be acquired by DuPont for $277.00 per share in cash. As a result of the pending acquisition, Rogers will not hold an earnings call or provide forward-looking guidance. Rogers' shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022. The transaction is expected to close by the end of the second quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals.