A message from Bruce Hoechner, CEO, Rogers Corporation:
Read the corporate financials news release: Rogers Corporation Reports 2014 Third Quarter Results.
Rogers had another terrific quarter: sales, margins and earnings all exceeded guidance. In Q3, we achieved an all-time quarterly sales record of $163.1M, up 14.2% over the prior year, out-performing our target of 10% sales growth. In addition, our commitment to improving our operational efficiency led to an all-time quarterly record in gross margin of 39.6%, an improvement of 380 basis points.
We also achieved a record operating margin of 17.4%, a 410 basis points improvement compared to the prior year measure and a 300 basis point improvement over the prior year on a non-GAAP basis. This operating margin performance surpassed our goal of 15%.
Overall, we had an outstanding Q3, delivering Earnings per Diluted Share of $1.09, the highest in the company’s 182-year history on a comparable non-GAAP basis. The third quarter of 2014 also marks our seventh consecutive quarter of year-over-year sales growth.
Before we turn to our Business Segment highlights, I want step back to review our company’s progress to this point. In 2012, we began what we called our transformational journey. Our goal: to enable Rogers to deliver consistently strong revenue and profit growth. 2013 was a watershed year.
We established our five-year strategy – defining our long-term goals of 10%-plus organic sales growth, operating margin of greater than 15%, improving our operational proficiency and actively pursuing synergistic M&A opportunities. Also in 2013, we embarked on specific cost-reduction programs and operational excellence efforts, as well as value in use pricing strategies.
In the second half of 2013, our streamlining, operational excellence efforts and market-driven focus began to pay off. We began 2014 building on that momentum, delivering improvements across many key performance metrics. I believe our focus on operational excellence, our participation in select, higher growth global markets and our innovative market-driven solutions, will drive continued strong performance into the future.
For this quarter, all three business segments contributed to our growth, led by Printed Circuit Materials (or PCM).
Our PCM business segment provides our customers with innovative, unique Printed Circuit Board laminate materials with exceptional electrical performance and tailored properties. This was another record quarter for PCM with a 34.5% increase in sales over the year prior. PCM is having an incredible year.
This quarter, our business results were driven by significant demand for 4G/LTE wireless infrastructure power amps (up 39%), wireless antenna (up 75%), as well as automotive safety sensor applications (up 34%) and applications in portable electronics for improved internet connectivity (up 17%). As we look forward, we see strong growth drivers for the 4G/LTE market area. The recent Chinese government approval to expand the 4G/LTE mixed domain trial to 24 new cities in addition to the original 16 cities, heightens expectations for the 4G/LTE base station build out in 2015 by China Unicom and China Telecom. In addition, China Mobile will continue to add to their 4G/LTE network. We are starting to see 4G/LTE demand growing in markets beyond China, such as India and Europe.
In automotive safety systems, we are at the early stages of this growth market with only about 5% worldwide of new car production equipped with this capability. Clearly the strong consumer demand for this feature will accelerate broader adoption of this technology.
In the Power Electronic Solutions (or PES) segment, we offer high efficiency power module substrates and highly engineered busbars to meet the ongoing trend of greater electrification and automation. Our exceptional engineering design skills are used extensively by our customers to to support their complex design needs. The third quarter sales increase for PES was led by strong demand in EV/HEV vehicles (up 10.8%), rail propulsion (up 32.1%), energy-efficient motor control applications (up 10.3%) and vehicle electrification (x-by-wire) applications (up 10.2%). These increases more than offset lower demand in laser diode (down 33.4%) and certain renewable energy applications (down 13.0%). As we look forward, we see continued opportunities for unique solutions in clean energy, specifically in the HEV/EV, motor control and automotive electrification applications as well as rail.
Our High Performance Foams (or HPF) segment provides specially engineered impact cushioning and sealing materials for high-reliability applications where unique performance characteristics are required. In Q3, HPF sales increased 5.1% primarily due to higher demand in general industrial (up 12%), battery applications for hybrid and all electric vehicles (up 40%), and consumer comfort and impact protection applications (up 22%). Growth in these areas offset lower demand in portable electronics applications (down 8%). We see additional opportunities for growth in our HPF product lines through geographic expansion in Asia and Europe as well as in the rapidly growing consumer application areas.
The diversity of Rogers’ three core business segments helps to moderate the impact of unfavorable business performance in any one market sector. We saw this play out over the past 18 months, as sales in HPF were negatively impacted by design modifications in certain portable electronics applications. As a company, we were able to counter-balance this sales decline by sales gains made by PCM as well as through our strong sales growth in other HPF segments such as consumer comfort and impact protection and general industrial applications.
For the third quarter, 61% of Rogers’ sales were in our strategic megatrend categories, again reinforcing our belief that we are focused on the right markets that show strong sustainable global demand. We saw strong growth in both Internet Connectivity and Mass Transit categories, while we remained essentially flat in Clean Energy.
In Internet Connectivity, we continue to see significant demand for high frequency circuit materials to support wireless base station and antenna applications in connection with the previously mentioned global 4G/LTE infrastructure buildout. In addition, we experienced continued demand for high frequency circuit materials in applications that improve wireless connectivity in portable electronics.
In Mass Transit, we experienced a 20% increase overall, based primarily on demand in rail propulsion applications, specifically in Europe and China.
Our flat performance in the Clean Energy category was due in part to the very strong comparator quarter of Q3 2013, as well as lower demand for laser diode and certain renewable energy applications during Q3 2014. This lower demand was offset by strong growth in hybrid electric and all-electric vehicles, mass transit, energy efficient motor control applications and vehicle electrification (x-by-wire) applications.
Beyond our strategic megatrend categories, we continue to build momentum in radar-based automotive safety systems, where we had a 34% sales increase over Q3 2013. In addition, we continue to see solid growth in the consumer comfort and impact protection category, which was up 22%. We believe our Megatrend Design Opportunity Pipeline is a helpful indicator of future sales growth prospects. And in Q3, it continued to strengthen. We had 859 opportunities under evaluation in Q3 2014, up from 671 in Q3 2013 and up from 834 in Q2 2014. We also moved 45 projects into production this quarter.
Rogers’ core strength is our ability to provide engineered materials solutions for the most demanding applications and highly specialized designs. We marry this strength with a focus on applications in higher growth markets, which are driven by the megatrends of Internet Connectivity, Clean Energy and Mass Transit. There are four critical elements to our strategy:
We take a market-driven approach across the company. Our employees are actively engaged in understanding customer and market needs and aligning our actions to deliver differentiated value for our customers. Our scientists, engineers, marketers, manufacturing, supply chain and commercial teams regularly collaborate with key customers and industry contacts in order to fully understand current requirements, as well as future needs. Our goal it to ensure Rogers is providing highly valued products and services with the right performance at the right time.
As our investment in the Rogers Innovation Center at Northeastern University demonstrates, we are creatively and cost-effectively developing innovative technologies to meet market demand. We continue to increase our investment in R&D, as well as enhancing our stage gate process to enable greater speed to market on products that we believe will have a significant impact.
Our third element is synergistic M&A, where we are targeting companies that are aligned with one or more of our current businesses. Our objective is to enhance our market reach and technology platform capabilities.
The final element of our strategy is our operational excellence, where we are implementing continuous improvement approaches through Lean, Six Sigma, Kaizen and other leading methodologies. These efforts have already led to improved manufacturing yields and greater efficiency and effectiveness of our supply and demand planning capabilities in manufacturing.
We are starting efforts to gain further efficiencies in our work processes, particularly in our finance organization, through our IT systems improvements. And we are working to standardize those processes across divisions and locations in order to more efficiently and cost-effectively scale the company as we grow.
As previously mentioned, in Q3 2014, we outperformed our 10% sales growth goal, as well as our 15% operating margin goal. We don’t report quarterly ROIC data, but we will review our annual ROIC results for 2014 when we report our annual earnings in early 2015.
We believe we have a winning, sustainable approach that – as we have seen – is already yielding strong results.
Stripline is one of the transmission-line options facing high-frequency circuit designers, especially for circuits where minimal electromagnetic (EM) radiation is important. Stripline can be thought of as a flat conductor suspended between two ground planes, with dielectric material separating the conductor from the ground planes. The configuration results in less EM radiation than circuits with microstrip transmission lines, with greater isolation between adjacent circuit traces compared to microstrip, but in a buried configuration that is more difficult to fabricate and service than microstrip. In spite of the challenges, the high performance possible has encouraged designers to implement high-frequency multilayer stripline constructions in extremely compact configurations. The choice of printed-circuit-board (PCB) material can contribute a great deal to the success of a single-layer or multilayer stripline circuit assembly.
Stripline circuits can be assembled in numerous forms, including as balanced, offset, and suspended stripline versions. The characteristics of the circuit-board material, such as its dielectric constant (Dk), can contribute much to the performance and behavior of these different stripline versions. Stripline circuits have even been fabricated with different dielectric materials (with their different Dk values) on either side of the conductor, for added design flexibility.
Ground and signal paths in stripline are typically created by forming plated viaholes through the conductive and dielectric materials, and the use of plated viaholes also lends itself to forming signal paths in multilayer circuit constructions. The EM fields within a stripline circuit assembly are strongly contained near the center conductor and the top and bottom ground planes of each layer, and it is important to closely match the top and bottom ground planes to the same potential to prevent propagation of any unwanted parallel-plate modes between the two ground planes.
Ideally, high-frequency EM signals are contained entirely within a stripline PCB, with no leakage or emissions and with excellent shielding against spurious signals.
Stripline is considered a transverse-electromagnetic (TEM) medium in contrast to microstrip, which is a quasi-TEM medium. Most stripline designs aim for a characteristic impedance of 50 Ω, which is determined by the width of the conductive strip, the thickness of the circuit substrate material, and the dielectric constant of the substrate material. For a 50-Ω characteristic impedance, and a given thickness of circuit dielectric material, a stripline circuit will employ a narrower conductive strip than a microstrip circuit, and it will suffer greater loss through the dielectric material than microstrip, which uses the lossless air above the circuit in part for its signal propagation. For a comparison of stripline and microstrip, please visit the December 20, 2010 ROG Blog: “Microstrip Versus Stripline: How To Make The Choice.”
In terms of selecting circuit materials for stripline, a smooth copper conductor surface is important for minimizing loss and the condition of the copper conductor is often overlooked when assessing the loss characteristics of a PCB. A copper conductor with rough surface will exhibit more loss than a copper conductor with smooth surface, so circuit materials intended for low-loss circuits should include smooth copper conductor surfaces. Since stripline has four copper-substrate interfaces, in addition, there is the opportunity for the roughness of the copper surface to be inconsistent across the different interfaces, resulting in differences in the conductor loss characteristics across the circuit board. Particularly in thin stripline circuits (where the ground-to-ground plane separation is 20 mils or less), copper conductor surface roughness can be a major contributor to the insertion loss of the circuit.
Stripline circuit fabricators may pay great attention to using a substrate with smooth conductive copper for the circuitry but may use a copper foil with much rougher surface for the other conductive layer. The rougher surface helps achieve increased bond strength when bonding the different circuit layers, resulting in a reliable multilayer circuit assembly. Unfortunately, it sacrifices some of the electrical performance possible through the use of the smoothest possible surfaces for all copper surfaces.
This difference in the surface roughness of the copper layers can impact the performance of offset stripline circuit assemblies, where the signal is not in the geometric center of the cross-sectional view of a circuit board. In such an assembly, the surface roughness of the copper plane that is closest to the signal plane will have the greatest effect on the circuit’s electrical performance. If this copper layer has the rougher surface, it can have an impact on the loss of the circuit. Even if the circuitry is fabricated on a copper layer with extremely smooth surface, the presence of another copper layer with rougher copper surface that is closer to the signal plane can override any benefits from the smooth copper surface used for the circuitry.
Stripline circuits are generally thought to be nondispersive in nature, but this may not always be the case. Circuits that incorporate a bonding layer with Dk that is different than the rest of the stripline structure may exhibit dispersive characteristics. To achieve a nondispersive circuit structure, the Dk should be fairly close throughout the stripline circuit. As examples, the RT/duroid® 6002 or RO3003™ circuit laminates are closely matched in Dk with the 2929 bondply materials, all from Rogers Corp. This consistency in Dk throughout a stripline circuit structure based on these materials will minimize dispersion.
The variations in stripline circuits include offset stripline and suspended stripline. Offset stripline can be formed by gluing together two stripline substrates of unequal heights. Suspended stripline makes use of air as part of the dielectric material, supporting pure TEM mode propagation. It is usually a circuit suspended within a metallic structure, with the entire structure enclosed. For low loss, suspended stripline technology has been used with the same conductive circuit pattern on both sides of the circuit assembly, electrically connected by plated viaholes. The entire assembly is then protected within a metallic enclosure with air cavities top and bottom serving as air substrates, where the lids are the ground planes. Suspended stripline circuits are capable of wide bandwidths with low loss and minimal spurious radiation, but assembly can also be complex and expensive.
In terms of propagation speed, stripline in its various forms will be slower than microstrip. That is, the propagation time through a microstrip circuit will be a fraction of the propagation time required for a similar stripline circuit on the same substrate material. Microstrip benefits from the use of air as a dielectric while stripline’s propagation characteristics are based solely on the dielectric material surrounding the signal trace. Propagation delays will increase in both cases with increased value of Dk for the dielectric material.
Stripline circuits in their various forms represent numerous design tradeoffs, including the difficulty of assembling, accessing, and testing stripline’s buried circuit traces versus the benefits of minimal signal leakage and only minor effects from external interference. Stripline may suffer somewhat higher losses than a microstrip circuit fabricated on a similar circuit material, but the stripline circuits will also be less affected by external interference signals and will exhibit less radiation of its own.
Download the ROG Mobile app to access Rogers’ calculators, including the popular Microwave Impedance simulation tool, literature, technical papers, and the ability to order samples of the company’s high performance printed circuit board materials.
Do you have a design or fabrication question? Rogers Corporation’s experts are available to help. Log in to the Rogers Technology Support Hub and “Ask an Engineer” today.
Rogers Corporation (NYSE: ROG) plans to release results for its 2014 third quarter after the close of trading on Tuesday, October 28, 2014. A copy of the announcement will be available on the Rogers website at http://www.rogerscorp.com/news.
All interested parties are invited to participate in Rogers’ quarterly teleconference to be held on Wednesday, October 29 at 9:00 am ET. Bruce D. Hoechner, President and CEO, and members of senior management will review the results and respond to questions.
To participate in the teleconference please call 1-800-574-8929, toll-free in the U.S., or 1-973-935-8524, outside the U.S. There is no pass code for the teleconference.
For interested parties who do not wish to ask questions, the call is being webcast live by Thomson Reuters and may be accessed through a link on the Rogers web site at http://www.rogerscorp.com/ir.
A slide presentation will be made available prior to the start of the call. The slide presentation may be accessed on the Rogers Corporation website under the Investor Relations section.
If you are unable to participate during the live teleconference, the call will be archived until Wednesday, November 5, 2014. The audio archive can be accessed by calling 1-855-859-2056 in the U.S. or 1-404-537-3406 outside the U.S. The pass code for the audio replay is 98226626. To access the archived audio online, please visit the Investor Relations section of the Rogers website and select the webcast link.
|Technical Education Webinar Series|
|Title: High Frequency Materials and Characterization up to Millimeter Wave Frequencies
Date: October 23, 2014
Time: 8am PT/ 11am ET/ 3pm UTC
Sponsored by: Rogers Corp.
Presented by: John Coonrod, Sr. Market Development Engineer, Rogers Corporation, Advanced Circuit Materials Division
Microwave circuit designers have many powerful tools. However most are strongly dependent on the accuracy of the input data. High frequency printed circuit board (PCB) material properties are often assumed to be very simple, but understanding the details can increase model accuracy and minimize design time.Those familiar with high frequency behavior of circuit materials realize the term for relative permittivity of “dielectric constant” is a misnomer and is not a constant. The dielectric constant of any PCB material will vary with frequency. Additionally wave propagation properties can be altered by a relationship of substrate thickness to copper surface roughness and this can vary the dielectric constant as perceived by circuit performance, even when using homogenous material.This webinar will give a simple overview of common test methods used to determine the dielectric constant for high frequency materials, followed by a description of methods that are best for characterizing material properties for microwave modeling and design.Agenda:
Why join this webcast?
The Rogers Corporation Board of Directors has appointed Helene Simonet to serve as a member of the Company’s Board. This addition fills a vacancy on the Board due to a recent director retirement. Ms. Simonet will be a member of the Audit Committee.
Since April 2002, Ms. Simonet has served as the Executive Vice President and Chief Financial Officer of Coherent, Inc. (NASDAQ: COHR). Coherent is a leading global supplier of photonics technology products and solutions for a wide range of commercial and scientific research applications. Prior to joining Coherent in 1999, Ms. Simonet had previously spent more than twenty years in senior finance positions at Raychem Corporation.
“We are very pleased to have Helene join the Rogers Board of Directors,” said Bruce Hoechner, President and Chief Executive Officer of Rogers Corporation. “Her extensive background with global technology companies, as well as her finance leadership, makes her an excellent addition to our Board.”