A message from Bruce Hoechner, CEO, Rogers Corporation:
Read the corporate financials news release: Rogers Corporation Reports 2013 First Quarter Results
During the first quarter of 2013, Rogers continued to see positive impacts from our transforming initiatives that began in 2012. Building off our streamlining results in 2012, we expect to achieve an annualized cost savings in 2013 of approximately $20 million and we continue to seek further opportunities for cost savings. A portion of these savings are being reinvested in growth enabling initiatives in Sales, Marketing, and Research and Development, as well into improving our infrastructure capabilities in Information Technology and Operations.
A key indicator of our progress is the improvement in our gross margins in Q1 2013 to 33% from 30.3% in Q1 2012, reflecting our improved operating discipline. Looking forward, we expect that, as sales increase through the rest of year, our streamlining savings will hold and our gross margins will continue to improve. We have a very positive outlook for Rogers’ full year, both on the top line and bottom line.
Our megatrend focus areas of Internet Growth, Clean Technology, and Mass Transit drove 55% of net sales in the quarter with applications in automotive and industrial also adding to our growth engine.
We are seeing robust growth in Wireless Telecom Infrastructure. Sales for our printed circuit materials in this market were up about 12% for the quarter vs. Q1 2012. We believe we are seeing the much anticipated ramping of 4G installations around the world. This is good news for Rogers where, in this segment, we have greater than 90% market share in High Frequency circuit board technology used in 4G base station applications.
In Mobile Internet Devices, sales were essentially flat in the category due to seasonal inventory adjustments. Specifically in tablets, growth was moderated by a market shift in the quarter to smaller format tablets and continued supply chain yield improvements. We continue to be confident in our leadership position in sealing and impact protection for handheld electronics and are developing and launching new, innovative materials to address the needs of next generation platforms.
In Clean Technology markets, sales were up 4% over Q1 2012, and up 14% over last quarter. We generated strong growth in power electronics solutions in Hybrid Electric Vehicles and modest gains in Solar and Smart Grid applications, offsetting lower growth for industrial variable frequency drives. However, we have seen a significant increase in backorders and are ramping up production to meet what we believe is increased, sustainable demand as industrial capital spending increases.
In Mass Transit, with sales 6% below Q1 of last year, we anticipate improvement in demand when the Chinese government implements its announced investments in rail infrastructure. Based upon our assessment of the Chinese Ministry of Rail plans, we expect to see demand in this sector increase as we move through 2013.
In addition to our opportunities in the Megatrends, growing adoption of automotive safety sensors continues to be a bright spot for Rogers. For these radar-based safety applications, Rogers generated significant growth year-over-year (79%) and quarter-over-quarter (51%) in high frequency printed circuit materials. We continue to be the leading provider of circuit materials technology to support both the 24GHz and 77GHz designs.
Across our markets, particularly in Asia and North America, growing consumer confidence is helping to drive demand for Rogers’ products in a wide variety of consumer and industrial applications, from sports protective gear to automotive and industrial gasketing and sealing.
We grew our pipeline of design opportunities by 10% for the quarter vs. Q1 2012, diversified across our markets. At the end of the first quarter, we were tracking a cumulative total of 749 major design opportunities of which 425 have already been designed in. At the same time, we moved more than twice the number of opportunities from design into production vs. the same quarter of last year (37 in Q1 2013) vs, 16 in Q1 2012). We believe this is a strong indicator of our future growth opportunities.
Business Segment Performance
Our net sales were $126 million, up 5% over last year’s first quarter.
Our Printed Circuit Materials business generated approximately 11% growth due to strong performance in wireless infrastructure and auto safety sensor applications. We expect this momentum to carry forward throughout the year as service providers, particularly in North America and Asia, continue to invest in additional 4G capacity.
The High Performance Foams business was up 5% with growth in consumer and industrial applications, offsetting flat demand in mobile Internet devices for the quarter.
Our Power Electronics Solutions segment was down slightly vs. Q1 of last year, but up 5% over last quarter with Hybrid Electric Vehicle applications driving our growth. Although demand was still below Q1 2012 for Variable Frequency Drives and Rail propulsion system applications, both segments showed modest sequential improvement over Q4 of 2012. While European markets remain soft, we continue to see indications of growing customer confidence in the power electronics arena as infrastructure and capital spending starts to make a comeback in Asia and North America.
We entered 2013 in an environment of continued global economic uncertainty. We cannot control the external environment but we are aggressively managing Rogers to ensure we perform well in the short term and build a foundation that provides sustainable top line and bottom line growth for years to come. We are encouraged by our continued progress in cost streamlining and our Q1 improvements in gross margin. We are confident in our strategies and our ability to execute, and believe that, as 2013 unfolds, we will see our markets improve. We believe that the long anticipated build out in 4G infrastructure is here and will help drive strong results for our Printed Circuit Materials business. We see positive signs of recovery in the markets for our Power Electronics materials and are confident in the continued market leadership of our High Performance Foams business. With our portfolio diversified across many markets, we have demonstrated our ability to perform well in the face of changing economic and market dynamics.
As global economies get moving again, demand is increasing for better ways to power, protect, and connect our world – and Rogers is a leader in unique, innovative materials solutions to address these challenges. We see many opportunities for growth ahead in 2013 and beyond and remain focused on delivering value to our customers and consistent results for our shareholders.
Transmission lines are akin to electronic roadways, routing signals along different paths of a printed circuit board (PCB). At RF/microwave frequencies, circuit designers often create PCBs based on three popular planar transmission line approaches: microstrip, stripline, or coplanar waveguide (CPW). Each uses circuit-board materials in a different way, with different results in terms of insertion-loss performance. By getting a grasp on the insertion-loss mechanisms for these different transmission-line formats, circuit designers can better match the mechanical and electrical characteristics of their circuit substrates to their intended applications and transmission lines when choosing PCB materials.
Achieving low loss in an RF/microwave circuit is more critical for some applications than for others, and many excellent low-loss commercial PCB materials such as RO4350B™ laminates from Rogers Corporation are available to help optimize a circuit’s loss performance. But the choice of transmission line for a design can also impact the insertion-loss performance of that circuit. The insertion loss of a PCB’s transmission lines is actually the sum of a number of contributing losses, such as losses attributed to the conductors, to the dielectric material, and due to radiation from the PCB. Microwave transmission lines can also suffer leakage losses, although these tend to be associated more with semiconductors than with PCB materials.
Conductor losses are related to the type of metal (and possible finish on the conductor metal) in the PCB’s conductor layer as well as the operating frequency. Signal propagation at higher frequencies tends to use less of the conductor’s metal as the frequencies increase, with signal “skin depth” becoming very shallow at the highest operating frequencies and only the outer surface of the conductor used for signal propagation at the highest frequencies.
An ideal electrical conductor would exhibit minimal resistance and high conductivity for signals of interest. Of course, real conductors do exhibit loss and have imperfections, including surface roughness, which can contribute significantly to a conductor loss. At RF/microwave frequencies, a rough conductor surface represents a longer propagation path than a smoother conductor surface, with higher loss. A PCB’s dielectric loss is related to the material properties of the circuit substrate, in particular its dissipation factor (Df). Selecting circuit materials with low Df can help minimize this component of transmission-line insertion loss.
Radiation loss is due to energy passed by a PCB’s transmission lines into the surrounding environment. This insertion-loss component can be affected by a number of factors, including the choice of transmission-line topology, the PCB’s dielectric constant, the operating frequency, even the circuit-board thickness. It tends to decrease with thinner PCB materials and for circuit materials with higher dielectric constants. Radiation losses are most noticeable at junctions in a circuit, including impedance transitions and signal launch areas, such as the transition from a transmission line to a coaxial connector’s center pin. Of the three popular RF/microwave transmission-line formats, microstrip is particularly susceptible to radiation loss.
Each of the transmission-line technologies suffers some insertion loss, no matter how good the PCB material. Understanding how loss occurs for the different transmission-line approaches can help guide a circuit designer when choosing a PCB material for a given loss budget. As mentioned, microstrip can suffer more from radiation loss than stripline or CPW, requiring additional shielding for some microstrip circuits. But microstrip is the most popular of the three transmission-line formats, since it is the simplest and least expensive to fabricate. It is basically a metal conductor on the top of a dielectric layer with a metal ground plane on the bottom of the dielectric layer. Factors that can influence performance include the type and weight of the metal for the conductor and ground plane, the width of the conductor lines, the relative permittivity or dielectric constant of the dielectric material, and the thickness of the dielectric layer.
In contrast, stripline transmission lines are sandwiched between top and bottom dielectric layers, which in turn have metal ground planes on the top and bottom of the dielectric materials. Plated through holes (PTHs) are machined through the metal and dielectric layers to electrically connect the top and bottom ground planes. Stripline presents difficulties in adding discrete circuit elements and active devices, which require viaholes to connect components on the outside of the circuit to the internal circuitry and transmission lines. This is in contrast to the simplicity of top-mounting components on a microstrip board. CPW circuits offer the simplicity of top-mounting components, since these circuits are formed with top-layer conductors surrounded by a top-layer ground plane, and with an additional bottom-layer ground plane separated by a dielectric layer. As with stripline, the top and bottom ground planes are electrically linked by PTHs machined through the substrate material. The additional ground planes help improve electrical performance but also add size, complexity, and cost to the stripline and CPW circuits compared to microstrip circuits, which are among the tradeoffs that circuit designers must weigh when choosing a transmission-line format for a particular circuit application.
How does the choice of PCB material impact the insertion loss of one of these high-frequency circuits? The loss characteristics of a microstrip circuit, for example, will change for different thicknesses of the same PCB material. A free personal computer (PC) software tool, MWI-2010, available for download from the Technology Support Hub on the Rogers Corp. web site, can show the influence of a circuit material on transmission-line loss. MWI-2010 contains models of different circuit board materials, permitting designers to explore the impact of different material parameters on performance.
The software was used to analyze the impact of substrate thickness on microstrip transmission-line loss, modeling simple 50-Ω microstrip transmission-line circuits on three different thicknesses (6.6, 10, and 20 mils) of RO4350B circuit material. The material has a process dielectric constant of 3.48 at 10 GHz and low dielectric loss, with Df of 0.0037 at 10 GHz. For microstrip transmission lines, the software shows that the insertion loss is the least for the thickest circuit board, with conductor and dielectric losses that were relatively low and similar in value. The thinnest circuit board had the highest insertion loss, with conductor loss the dominant of the three loss components. Conductor loss can be somewhat diminished by choosing a PCB material with smooth conductor metal, such as RO4000® LoPro™ circuit material from Rogers Corp. The dielectric loss changed little with the three thicknesses of RO4350B laminate, indicating it is an electrically stable PCB substrate.
When loss is critical for a circuit, a low-loss circuit material can help achieve design goals by minimizing dielectric losses. And conductor and radiation losses can be controlled through choice of transmission-line technology, although that choice will also depend on a number of other factors, such as required circuit size, complexity, and cost.
Do you have a design or fabrication question? John Coonrod and Joe Davis are available to help. Log in to the Rogers Technology Support Hub and “Ask an Engineer” today.
A message from Bruce Hoechner, CEO, Rogers Corporation:
We announced our third quarter earnings on November 5th, a week later than planned due to Hurricane Sandy. We weathered the great storm well in Connecticut although thousands are still without power. My sincere thanks to all our employees who made sure that our customers saw as little interruption as possible due to this crisis. Our thoughts are with those folks who were severely impacted by the storm. Rogers has already donated $20,000 to the Red Cross storm relief effort and we are investigating how else we can help.
For the third quarter of 2012, our businesses generated net sales of $130.2 million, a decrease of 11.6% from last year’s third quarter. The majority of the decline was in our Power Electronics segment reporting a 35% decline. This segment was hard hit due to markets it serves such as industrial motor controls, driven by capital investment, and renewable energy markets that rely on governmental infrastructure investment.
We believe these markets have bottomed out and we will begin to see improvements in demand by the second half of 2013. In comparison with the results for Q3-2011, High Performance Foams was down 3.5%, while Printed Circuit Materials achieved a 1% increase for the quarter. Sequentially, however, we achieved an overall 3% net sales improvement versus the second quarter of 2012, with both High Performance Foams and Printed Circuit Materials reporting strong growth at 10.9% and 7.2%, respectively. Power Electronics Solutions declined 11.4% versus last quarter.
Although we expect our commitment to the megatrend focus areas of Clean Technology, Internet and Mass Transit to help accelerate the Company?s growth over the next few years, economic and market dynamics impacted results in the third quarter. These megatrends drove 53% of net sales in the quarter, down from 60% in Q3 of 2011. Hardest hit was our Clean Technology megatrend category where the ongoing slowdown in capital and infrastructure spending continues to impact demand for our power electronics solutions for industrial motor drive and wind energy applications. However, we have seen a significant increase in demand for our power distribution systems into several projects in the automotive market. In Mass Transit, we have not yet seen the rebound in rail investment in Europe and China that we expect will drive demand for our Power Distribution Systems products.
As for the Internet megatrend, in Mobile Internet Devices, our High Performance Foams business continues to be a market leader in cushioning and sealing for tablet computer applications, but timing of tablet model changes left inventory in the supply chain, preventing it from being a stronger quarter. Sales were strong for our PORON® XRD® cushioning materials for mobile device cases, also used in sports impact apparel. In Internet Infrastructure, our Printed Circuit Materials business showed strong growth in products that enable the latest smart antenna technologies. Sales for base station power amplifier applications were up vs. last quarter, a sign we believe indicates that the highly anticipated wireless infrastructure build is beginning to ramp. On the wired network side, our recently launched Theta® high speed digital product has won several qualifications but development of demand has been slower than previously anticipated. We have put our capacity expansion for that product on hold for now as we work to align capacity with our latest view of market timing.
Despite the difficulties we face in the global economy, we exit the third quarter with strong growth, quarter on quarter, in two of our largest businesses and we believe that all of our businesses have strong growth prospects as we look toward the future. Rogers remains focused on improving our execution, identifying new growth opportunities, and managing the areas that are within our control. As technology leaders in our key markets, we are seeing positive indicators of continued growth in our High Performance Foams and Printed Circuit Materials businesses. In Power Electronics Solutions, we are not seeing a rebound yet but we are aligning our cost structure so that Rogers will be in a strong position to deliver even greater value to our customers and shareholders in the years to come.