A message from Bruce Hoechner, CEO, Rogers Corporation:

Read the corporate financials news release: Rogers Corporation Reports 2014 Second Quarter Results.

Screen shot 2013-11-01 at 10.53.55 AMI would like to start by offering some insights regarding Rogers’ 2014 second-quarter results. The momentum we have gained over the past several quarters continues. We achieved strong top-line performance and continued to improve our gross margins and operating profit.

In addition, we continue to see the benefits of the decisive actions taken over the past two years, which has helped us improve operational efficiencies, pricing capabilities, and capacity utilization. Given our strong top-line growth, we believe the time is right to accelerate our investments in our business systems and processes, which we call the Rogers work smart initiative, and enhance investments in our M&A evaluation activities.

While these investments will affect our near-term S&A expenses, we are confident they will enable us to scale the Company more efficiently and effectively to support our growth and profit objectives. Our very strong first-half performance in revenue growth also drove a significant increase to bonus accruals in Q2. We have adjusted these bonus accruals based upon our current belief in strength of our businesses.

In Q2, we saw robust demand in our megatrend categories of Internet connectivity and clean energy, as well as substantial sales increases in safety and protection applications, such as automotive safety sensors, consumer impact protection. In particular, we experienced strong demand for applications in telecom infrastructure, x-by-wire, energy-efficient motor drives, and automotive safety sensors. Thanks to strong market demand, dedicated employees, and operational improvements we achieved our sixth consecutive quarter of year-over-year quarterly sales growth in Q2.

Rogers’ overall and printed circuit materials individually achieved all-time record quarterly sales. I’m pleased to note that all three of our business segments contributed to year-over-year sales growth in Q2.

Screen shot 2014-07-31 at 4.46.45 PMRogers sales grew by 15.9% in Q2 to an all-time quarterly record of $153.5 million. In addition, we improved gross margins to 37.2% from 33.9% and operating margins to 10.6% from 10.1% on a non-GAAP basis. As I mentioned, the printed circuit materials business segment achieved an all-time quarterly sales record with sales up 34.9% over Q2 2013. This was driven primarily by the global growth of 4G LTE wireless infrastructure in base station power amps as well as wireless antenna, automotive safety sensor applications, and Internet connectivity applications for handheld devices.

Overall, this performance was the result of robust market demand and continued dedication and hard work from our printed circuit materials team.

The power electronics solutions business segment achieved sales growth of 5.2% over the second quarter of 2013. Strong demand in energy-efficient motor drives, rail traction, and x-by-wire was tempered by lower demand in the laser diode market as well as specific EV/HEV applications due to customer internal supply-chain constraints.

High performance foams sales grew 7.2% versus Q2 2013. Increased demand for consumer impact protection, HEV battery applications, and mass transit vibration management was partially offset by relatively flat demand in general industrial and mobile Internet devices.

Megatrends

For the second quarter, 63% of Rogers sales were in our strategic megatrend categories as we continued to provide our customers with engineered materials solutions to support their robust growth in these areas of increasing global demand.

In the clean energy category, sales were up 11.2% over Q2 2013, with increased demand for power modules used in energy-efficient motor drives and automotive x-by-wire systems. The ongoing global buildout of the wireless telecom infrastructure contributed to an impressive 51.3% growth in year-over-year revenues in support of Internet connectivity. We continue to benefit from the increase in 4G LTE base station deployment around the world, especially in China.

We also experienced an increase in orders from one major mobile Internet device OEM for high-frequency circuit materials in applications that improve wireless connectivity. Overall, demand for these applications continues to remain very robust.

Rogers sales in the mass transit category grew 9.2% over Q2 2013 with increased demand across all major segments. Beyond our strategic megatrend categories, demand for radar-based automotive safety systems drove growth for Rogers printed circuit materials business. We believe we will benefit from further adoptions around the world as governments increase their mandate for automotive safety measures and as consumers become increasingly aware of the safety advantages of such systems.

Higher sales of impact protection materials into the consumer markets also drove growth in safety and protection applications. Overall, safety and protection applications were a significant contributor with growth of 38% over Q2 2013.

Innovation

In terms of growth enablers, our team in the Rogers Innovation Center is taking shape and a number of new R&D projects are now underway, which we believe offer exciting opportunities for our customers. The unique partnership Rogers has with Northeastern University is enabling us to apply emerging technologies to commercial opportunities in a timely and cost-effective way.

At the end of the second quarter in our targeted megatrend categories of clean energy, Internet connectivity, and mass transit we were tracking a cumulative total of 834 major design opportunities, which is an increase of more than 11% from Q2 2013. Also in Q2, there were 475 opportunities in the design-in phase of the selling process, up from 425 in Q2 of 2013. During the quarter we moved 31 megatrend opportunities from design into production. Keeping our pipeline of opportunities growing is a helpful indicator of our future business growth.

Our R&D, marketing, and new business development teams are collaborating with customers to develop engineered solutions to address real global market needs, enabling a new generation of technologies. We are balancing a long-term and short-term approach to building a robust sales pipeline that we will continuously refill as we convert projects into sales.

Our collaboration with customers is not limited to our R&D efforts. We are in the midst of a cultural transition to ingrain market-driven or outside-in behavior across the Company. Globally we are conducting workshops and challenging all employees to find and adopt the best practices of global organizations to improve processes and serve our customers better. This includes more outreach to our customers to learn what they need so we can be their partner of choice.

As we have discussed, Rogers is actively pursuing an acquisition strategy that is aligned with our current businesses. Our business processes and systems optimization projects, the Rogers Work Smart Initiative, are preparing us for integrating potential acquisitions through standardized systems and processes. We remain committed to our investments in operational improvements across the organization. Here, too, we are taking an outside-in view, ensuring these improvements reflect industry best practices across all departments.

Read the full transcript here.

View the accompanying presentation here.

 

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