Rogers Corporation Reports Fourth Quarter and Full Year 2019 Results

Strong First Half Leads Rogers to Record 2019 Revenues

Market Uncertainty Tempering Q1 Outlook

CHANDLER, Ariz. — (BUSINESS WIRE) — February 20, 2020 — Rogers Corporation (NYSE: ROG) today announced financial results for the 2019 fourth quarter and full year.

Full year 2019

The Company reported 2019 net sales of $898.3 million, a 2.2% increase compared to 2018 net sales of $879.1 million. Net sales during 2019 were unfavorably impacted by $20.9 million as a result of currency fluctuations, due to a weaker euro and renminbi. 2019 revenue increased 4.6%, relative to 2018, on a constant currency basis.

Full year 2019 net income was $47.3 million, or $2.53 per diluted share, compared to $87.7 million, or $4.70 per diluted share, for full year 2018. 2019 earnings were inclusive of a $43.9 million, or $2.35 per diluted share, non-cash after-tax pension settlement charge. On an adjusted basis, earnings were $6.14 per diluted share for full year 2019, compared to $5.77 per diluted share for full year 2018.

Adjusted EBITDA was $188.2 million, or 21.0% of net sales for full year 2019, versus $184.8 million, or 21.0% of net sales for full year 2018.

Gross margin was 35.0% in 2019, compared to 35.4% in 2018. Operating margin was 12.3% for full year 2019, compared to 12.8% in the full year of 2018. Adjusted operating margin was 15.7% in the full year of 2019, compared to 15.8% in the full year of 2018.

Fourth quarter 2019

The Company reported 2019 fourth quarter net sales of $193.8 million, a 12.7% decrease compared to 2019 third quarter net sales of $221.8 million and a 13.1% decrease compared to 2018 fourth quarter net sales of $222.9 million. Net sales for the 2019 fourth quarter were below the Company's previously announced guidance range of $200 to $210 million. Currency exchange rates unfavorably impacted the 2019 fourth quarter net sales by $1.1 million compared to 2019 third quarter net sales, and by $2.6 million compared to 2018 fourth quarter net sales.

Fourth quarter 2019 net loss was $(28.8) million, or ($1.55) per share, compared to net income of $23.4 million, or $1.25 per diluted share, in the third quarter of 2019 and $24.5 million, or $1.31 per diluted share, in the fourth quarter of 2018. The fourth quarter 2019 net loss was inclusive of a $43.9 million, or $2.35 per diluted share, non-cash after-tax pension settlement charge. This loss per share exceeded the Company's previously announced guidance of a loss per share ranging from ($1.43) to ($1.28). On an adjusted basis, earnings were $1.14 per diluted share for the 2019 fourth quarter compared to adjusted earnings of $1.51 per diluted share in the third quarter of 2019 and $1.67 per diluted share in the fourth quarter of 2018. Adjusted earnings exceeded the midpoint of the Company's previously announced guidance range of $1.00 to $1.15 per diluted share.

Adjusted EBITDA was $34.5 million, or 17.8% of net sales, for the fourth quarter of 2019 compared to $47.4 million, or 21.4% of net sales, reported in the third quarter of 2019 and $46.7 million, or 20.9% of net sales, reported in the fourth quarter of 2018.

Gross margin was 33.1% in the fourth quarter of 2019 compared to 35.6% in the third quarter of 2019 and 35.2% in the fourth quarter of 2018. Fourth quarter 2019 gross margin was within the Company's previously announced guidance range of 33% to 34%. Operating margin was 7.5% in the fourth quarter of 2019 compared to 13.5% in the third quarter of 2019 and 12.0% in the fourth quarter of 2018. Adjusted operating margin was 11.6% in the fourth quarter of 2019 compared to 16.3% in the third quarter of 2019 and 16.0% in the fourth quarter of 2018.

“For 2019 Rogers reported modest growth in revenue and adjusted earnings, despite challenging market conditions in the second half of the year,” stated Bruce D. Hoechner, Rogers' President and CEO. "Fourth quarter revenues were impacted by expected weakness in industrial and automotive markets and a greater than anticipated slowdown in wireless infrastructure demand. Looking ahead to the first quarter, we have limited visibility across multiple segments due to the still unfolding impact of the coronavirus outbreak, but believe that revenue will be impacted in the range of 7% to 10%. From a strategic growth perspective we remain optimistic regarding the outlook for Advanced Mobility applications and the China 5G wireless infrastructure market.”

Business segment discussion

Advanced Connectivity Solutions (ACS)

Advanced Connectivity Solutions reported 2019 fourth quarter net sales of $64.6 million, a 18.2% decrease compared to 2019 third quarter net sales of $79.0 million and a 10.8% decrease compared to 2018 fourth quarter net sales of $72.5 million. The sequential decrease in 2019 fourth quarter net sales was largely driven by lower demand for high frequency circuit materials used in 4G and 5G wireless infrastructure, partially offset by continued strength in Aerospace and Defense market demand. Fourth quarter 2019 net sales were unfavorably impacted by fluctuations in currency exchange rates of $0.3 million compared to 2019 third quarter net sales, and by $0.5 million compared to 2018 fourth quarter net sales.

Elastomeric Material Solutions (EMS)

Elastomeric Material Solutions reported 2019 fourth quarter net sales of $80.0 million, a 15.7% decrease compared to 2019 third quarter net sales of $94.9 million and a 9.4% decrease compared to 2018 fourth quarter net sales of $88.3 million. The sequential decrease in 2019 fourth quarter net sales was primarily due to a seasonal decline in the portable electronics market and weakness in other markets. Fluctuations in currency exchange rates unfavorably impacted net sales by $0.3 million in the 2019 fourth quarter compared to 2019 third quarter net sales, and by $0.8 million compared to 2018 fourth quarter net sales.

Power Electronics Solutions (PES)

Power Electronics Solutions reported 2019 fourth quarter net sales of $43.9 million, a 1.8% increase compared to 2019 third quarter net sales of $43.1 million and a 22.6% decrease compared to 2018 fourth quarter net sales of $56.8 million. The 2019 fourth quarter sequential increase was primarily due to stronger demand for power semiconductor substrates used in the EV/HEV market, partially offset by lower rail and renewable energy market demand. Fourth quarter 2019 net sales were unfavorably impacted by fluctuations in currency exchange rates of $0.5 million compared to 2019 third quarter net sales and by $1.3 million compared to 2018 fourth quarter net sales.

Other

Other reported 2019 fourth quarter net sales of $5.2 million, a 9.1% increase compared to 2019 third quarter net sales of $4.8 million and a 4.0% decrease compared to 2018 fourth quarter net sales of $5.4 million.

Balance sheet and other highlights

Cash position

Rogers ended the fourth quarter of 2019 with cash and cash equivalents of $166.8 million, a slight decrease of $0.9 million from $167.7 million at December 31, 2018. The decrease in cash resulted from repayment of outstanding borrowings on our revolving credit facility of $105.5 million, capital expenditures of $51.6 million and $7.6 million in tax payments related to net share settlement of equity awards, largely offset by net cash provided by operating activities of $161.3 million. 2019 free cash flow generated was $109.7 million, compared to $19.7 million generated in 2018. The Company ended the year with cash that exceeded borrowings by $43.8 million. Borrowings exceeded cash by $60.7 million at December 31, 2018.

Effective tax rate

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