ROGERS CORP

Previous wording

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such statements are generally accompanied by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “seek,” “target” or similar expressions that convey uncertainty as to future events or outcomes. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and the differences between assumed facts and actual results could be material depending upon the circumstances. Where we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and based on assumptions believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur or be achieved or accomplished. Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation:

Current wording

Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such statements are generally accompanied by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “seek,” “target” or similar expressions that convey uncertainty as to future events or outcomes. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and the differences between assumed facts and actual results could be material depending upon the circumstances. Where we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and based on assumptions believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur or be achieved or accomplished. Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation:

Previous wording

If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to return to historical levels of profitability and meaningfully improve revenues from 2023 levels, led by organic growth and complemented by targeted acquisitions. This outlook is supported by our participation in a number of growth markets and by our strong competitive positions in these markets. The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will increase at a compound annual growth rate of between 15% and 20% over the next several years. Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. Across these areas we have secured a number of design wins and have a strong opportunity pipeline, which provides confidence in our growth outlook. Other markets with a good growth trajectory include ADAS, aerospace and defense, portable electronics and renewable energy. Each of these markets is expected to contribute to our growth.

Current wording

If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to return to historical levels of profitability and meaningfully improve revenues from 2023 levels, led by organic growth and complemented by targeted acquisitions. This outlook is supported by our participation in a number of growth markets and by our strong competitive positions in these markets. The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will increase at a compound annual growth rate of between 15% and 20% over the next several years. Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. Across these areas we have secured a number of design wins and have a strong opportunity pipeline. Other markets with a good growth trajectory include ADAS, aerospace and defense, portable electronics and renewable energy. Each of these markets is expected to contribute to our growth.

Previous wording

•In the first quarter of 2024 as compared to the first quarter of 2023, our net sales decreased approximately 12.5% to $213.4 million, our gross margin decreased approximately 70 basis points to 32.0% from 32.7%, and we had an operating income of 5.5% compared to an operating loss of 0.1%, an increase of approximately 560 basis points.

Current wording

•In the second quarter of 2024 as compared to the second quarter of 2023, our net sales decreased approximately 7.2% to $214.2 million, our gross margin decreased approximately 40 basis points to 34.1% from 34.5%, and we had an operating margin of 5.3% compared to an operating income of 12.1%, a decrease of approximately 680 basis points.

Previous wording

Net sales decreased by 12.5% in the first quarter of 2024 compared to the first quarter of 2023. Our AES and EMS operating segments had net sales decreases of 10.2% and 16.1%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV, ADAS and renewable energy markets in our AES operating segment and lower net sales in the general industrial and consumer markets in our EMS operating segment. The decrease was partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets in our AES operating segment and higher net sales in the EV/HEV and aerospace and defense markets in our EMS operating segment. We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjusted to softer end market demand. Foreign currency exchange rate changes year-over-year had an immaterial impact on net sales on a quarter-to-date basis.

Current wording

Net sales decreased by 7.2% in the second quarter of 2024 compared to the second quarter of 2023. Our AES and EMS operating segments had net sales decreases of 11.3% and 0.7%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV, industrial power systems, renewable energy and ADAS markets in our AES operating segment and lower net sales in the general industrial market in our EMS operating segment. The decrease was partially offset by higher net sales in the wireless infrastructure market in our AES operating segment and higher net sales in the EV/HEV market in our EMS operating segment. We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjusted to softer end market demand.

Previous wording

Gross margin as a percentage of net sales decreased approximately 70 basis points to 32.0% in the first quarter of 2024 compared to 32.7% in the first quarter of 2023. Gross margin in the first quarter of 2024 declined due to unfavorable impacts from lower volume and unfavorable mix in our AES and EMS operating segments, as well as unfavorable factory utilization in our AES operating segment. This was partially offset by lower raw material costs, favorable yield performance and lower inventory reserves provisions in our AES and EMS operating segments, as well as favorable impacts in factory utilization from our factory optimization efforts in our EMS operating segment.

Current wording

Gross margin as a percentage of net sales decreased approximately 40 basis points to 34.1% in the second quarter of 2024 compared to 34.5% in the second quarter of 2023. Gross margin in the second quarter of 2024 declined due to unfavorable impacts from lower volume and unfavorable mix in our AES and EMS operating segments, as well as higher inventory reserves provisions in our AES operating segment. This was partially offset by favorable scrap and yield performance and favorable impacts in factory utilization from our factory optimization efforts in our AES and EMS operating segments, as well as lower raw material costs in our EMS operating segment.

Previous wording

SG&A expenses decreased 21.0% in the first quarter of 2024 from the first quarter of 2023, primarily due to a $9.9 million decrease in professional services expense, a $0.9 million decrease in total compensation and benefits and a $0.7 million decrease in recruiting, relocation and training expenses. The decrease in professional services expense was primarily attributable to the non-recurrence of the $7.6 million of non-routine shareholder advisory costs.

Current wording

SG&A expenses decreased 7.4% in the first six months of 2024 from the first six months of 2023, primarily due to an $7.4 million decrease in professional services expense, a $1.2 million decrease in recruiting, relocation and training expenses and a $0.5 million decrease in other intangible asset amortization expense, partially offset by a $1.2 million increase in compensation and benefits expense, a $0.5 million increase in software costs and a $0.5 million increase in fixed asset depreciation expense. The decrease in professional services expense was primarily attributable to the non-recurrence of the $7.6 million of non-routine shareholder advisory costs and $1.0 million of expenses in connection with the sale of our high-performance engineered cellular elastomer business.

Previous wording

R&D expenses decreased 7.3% in the first quarter of 2024 from the first quarter of 2023 due to a $0.6 million decrease in professional services expense and a $0.4 million decrease in total compensation and benefits expense, partially offset by a $0.2 million increase in trial costs for alternative raw materials.

Current wording

R&D expenses increased 4.0% in the first six months of 2024 from the first six months of 2023 due to a $1.1 million increase in trial costs for alternative raw materials and a $0.3 million increase in fixed assets depreciation expense, partially offset by a $0.4 million decrease in professional services expense and a $0.3 million decrease in compensation and benefits expense.

Previous wording

We incurred restructuring charges and related expenses in 2023 associated with the announced reduction of our global workforce along with certain facility consolidation efforts, which were substantially completed as of December 31, 2023. The plans significantly reduced our manufacturing costs and operating expenses. We recognized restructuring charges and related expenses pertaining to these restructuring projects of $10.5 million for the three months ended March 31, 2023. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Current wording

We incurred restructuring charges and related expenses in 2024 and 2023 associated with the announced reduction of our global workforce along with certain facility consolidation efforts, which were substantially completed as of December 31, 2023. The plans significantly reduced our manufacturing costs and operating expenses. We recognized restructuring charges and related expenses pertaining to these restructuring projects of $0.1 million and $0.2 million in the three and six months ended June 30, 2024, respectively, and $3.9 million and $14.4 million in the three and six months ended June 30, 2023, respectively. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Previous wording

With respect to other operating (income) expense, net, we recognized no income and income of $0.2 million in the first quarter of 2024 and 2023, respectively. The impact in the first quarter of 2023 primarily consisted of insurance recoveries, partially offset by professional service costs, from the fire at our UTIS manufacturing facility in Ansan, South Korea. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Current wording

With respect to other operating (income) expense, net, we recognized no income and income of $6.5 million in the second quarter of 2024 and 2023, respectively, and no income and income of $6.7 million in the first six months of 2024 and 2023, respectively. The impact in the second quarter and first six months of 2023 primarily consisted of insurance recoveries, partially offset by professional service costs, from the fire at our UTIS manufacturing facility in Ansan, South Korea. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Previous wording

As of March 31, 2024, we had two unconsolidated joint ventures, each 50% owned: RIC and RIS. Equity income in those unconsolidated joint ventures increased $0.2 million in the first quarter of 2024 from the first quarter of 2023. On a quarter-to-date basis, the increase was due to higher net sales and lower SG&A costs for RIC. The higher net sales for RIC was primarily driven by the portable electronics market in Asia.

Current wording

As of June 30, 2024, we had two unconsolidated joint ventures, each 50% owned: RIC and RIS. Equity income in those unconsolidated joint ventures decreased $0.3 million in the second quarter of 2024 from the second quarter of 2023 and decreased $0.1 million in the first six months of 2024 from the first six months of 2023. On a quarter-to-date basis and a year-to-date basis, the decrease was due to lower net sales and unfavorable operational performance for RIS, partially offset by higher net sales and lower SG&A costs for RIC. The higher net sales for RIC was primarily driven by the portable electronics market in Asia.

Previous wording

Other income (expense), net increased to income of $0.4 million in the first quarter of 2024 from income of $0.1 million in the first quarter of 2023. The increase was due to favorable year-over-year change in impacts from our foreign currency transactions, partially offset by unfavorable year-over-year change in impacts from our foreign currency derivatives.

Current wording

Other income (expense), net increased to income of $0.3 million in the second quarter of 2024 from expense of $0.8 million in the second quarter of 2023. On a quarter-to-date basis, the increase was due to a favorable year-over-year change in impacts from our foreign currency transactions and favorable year-over-year impacts from our copper derivative contracts, partially offset by an unfavorable year-over-year change in impacts from our foreign currency derivatives.

Previous wording

Interest expense, net, decreased by $2.7 million in the first quarter of 2024 from the first quarter of 2023. The decrease on a year-over-year quarter-to-date basis was primarily due to a lower weighted-average outstanding borrowings under our revolving credit facility.

Current wording

Interest expense, net, decreased by $2.6 million in the second quarter of 2024 from the second quarter of 2023, and decreased by $5.3 million in the first six months of 2024 from the first six months of 2023. The decreases on a year-over-year quarter-to-date basis and a year-to-date basis were primarily due to a lower weighted-average outstanding borrowings under our revolving credit facility.

Previous wording

Our effective tax rate was 32.8% in the first quarter of 2024. During the first quarter of 2024, our effective tax rate was unfavorably impacted primarily by the write-off of deferred tax assets related to stock compensation.

Current wording

Our effective tax rate was 31.9% in the second quarter of 2024. During the second quarter of 2024, our effective tax rate was unfavorably impacted primarily by the write-off of deferred tax assets related to stock compensation.

Previous wording

During the first quarter of 2023, our effective tax rate was 3.5%. During the first quarter of 2023, our effective tax rate was unfavorably impacted primarily by an increase in the valuation allowance attributable to loss jurisdictions in which no benefit is anticipated to be realized.

Current wording

During the second quarter of 2023, our effective tax rate was 28.9%. During the first quarter of 2023, our effective tax rate was unfavorably impacted primarily by an increase in the valuation allowance attributable to loss jurisdictions in which no benefit is anticipated to be realized.

Previous wording

AES net sales decreased by 10.2% in the first quarter of 2024 compared to the first quarter of 2023. The decrease in net sales over the first quarter of 2023 was primarily driven by lower net sales in the EV/HEV, ADAS and renewable energy markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to softer end market demand. Foreign currency exchange rate changes year-over-year had an immaterial impact on net sales on a quarter-to-date basis.

Current wording

AES net sales decreased by 11.3% in the second quarter of 2024 compared to the second quarter of 2023. The decrease in net sales over the second quarter of 2023 was primarily driven by lower net sales in the EV/HEV, industrial power systems, renewable energy and ADAS markets, partially offset by higher net sales in the wireless infrastructure market. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to softer end market demand.

Previous wording

We recognized operating income of $4.4 million in the first quarter of 2024 compared to an operating loss of $5.5 million in the first quarter of 2023. The increase in operating income was due to lower raw material costs, favorable yield performance and lower inventory reserves provisions, partially offset by the unfavorable impacts from lower volume and unfavorable mix, as well as unfavorable factory utilization. As a percentage of net sales, the operating income in the first quarter of 2024 was 3.6% compared to an operating loss of 4.1% reported in the first quarter of 2023.

Current wording

We recognized operating income of $7.4 million in the first six months of 2024 compared to operating income of $0.3 million in the first six months of 2023. The increase in operating income was primarily due to a $7.4 million favorable year-over-year change in restructuring charges, as well as lower raw material costs and favorable scrap and yield performance. The increase in operating income was partially offset by unfavorable impacts from lower volume and unfavorable mix as well as unfavorable factory utilization. As a percentage of net sales, operating income in the first six months of 2024 was 3.1% compared to 0.1% of operating income reported in the first six months of 2023.

Previous wording

EMS net sales decreased by 16.1% in the first quarter of 2024 compared to the first quarter of 2023. The decrease in net sales over the first quarter of 2023 was primarily driven by lower net sales in the general industrial and consumer markets, partially offset by higher net sales in the EV/HEV and aerospace and defense markets. Foreign currency exchange rate changes year-over-year had an immaterial impact on net sales on a quarter-to-date basis.

Current wording

EMS net sales decreased by 8.7% in the first six months of 2024 compared to the first six months of 2023. The decrease in net sales over the first six months of 2023 was primarily driven by lower net sales in the general industrial market, partially offset by higher net sales in the EV/HEV market.

Previous wording

Net sales in this segment decreased by 1.8% in the first quarter of 2024 from the first quarter of 2023. Operating income was flat in the first quarter of 2024 compared to the first quarter of 2023. Operating income was primarily driven by unfavorable factory utilization offset by higher volume. As a percentage of net sales, the operating income in the first quarter of 2024 was 35.7% compared to an operating income of 35.1% reported in the first quarter of 2023.

Current wording

Net sales in this segment decreased by 24.5% in the second quarter of 2024 from the second quarter of 2023. Operating income decreased 42.1% in the second quarter of 2024 compared to the second quarter of 2023. The decrease in operating income was primarily driven by unfavorable impacts from lower volume and unfavorable factory utilization. As a percentage of net sales, the operating income in the second quarter of 2024 was 27.5% compared to an operating income of 34.6% reported in the second quarter of 2023.

Previous wording

Approximately $64.7 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of March 31, 2024. We did not make any changes in the three months ended March 31, 2024 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested.

Current wording

Approximately $69.6 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of June 30, 2024. We did not make any changes in the six months ended June 30, 2024 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested.

Previous wording

•Cash and cash equivalents were $116.9 million as compared to $131.7 million as of December 31, 2023, a decrease of $14.8 million, or 11.2%. This decrease was primarily due to $30.0 million in discretionary principal payments on our revolving credit facility, $9.4 million in capital expenditures and $1.1 million in tax payments related to net share settlement of equity awards, partially offset by cash flows provided by operations.

Current wording

•Cash and cash equivalents were $119.9 million as compared to $131.7 million as of December 31, 2023, a decrease of $11.8 million, or 9.0%. This decrease was primarily due to $30.0 million in discretionary principal payments on our revolving credit facility, $23.5 million in capital expenditures, $7.9 million in share repurchases and $1.2 million in tax payments related to net share settlement of equity awards, partially offset by cash flows provided by operations.

Previous wording

•Accounts receivable, net decreased 1.7% to $159.2 million as of March 31, 2024 from $161.9 million as of December 31, 2023. The decrease from year-end was primarily due to a $4.1 million receipt of previously recognized UTIS fire insurance receivables for our business interruption claims, a $1.0 million decrease in our income taxes receivable, partially offset by increases in our receivables due to a higher days sales outstanding at the end of March 31, 2024 compared to December 31, 2023.

Current wording

•Accounts receivable, net decreased 1.2% to $160.0 million as of June 30, 2024 from $161.9 million as of December 31, 2023. The decrease from year-end was primarily due to a $4.1 million receipt of previously recognized UTIS fire insurance receivables for our business interruption claims, a $1.5 million decrease in our income taxes receivable, partially offset by increases in our receivables due to higher net sales at the end of the second quarter of 2024 compared to at the end of 2023.

Previous wording

•Inventories, net decreased 1.7% to $150.9 million as of March 31, 2024, from $153.5 million as of December 31, 2023, primarily driven by decrease in work-in-process and finished good levels partially offset by higher raw materials.

Current wording

•Inventories, net decreased 1.8% to $150.8 million as of June 30, 2024, from $153.5 million as of December 31, 2023, primarily driven by decrease in work-in-process levels and higher inventory reserves provisions, partially offset by higher raw materials and finished goods levels.

Previous wording

In 2024, we expect capital spending to be in the range of approximately $60.0 million to $70.0 million. We plan to fund our capital spending in 2024 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.

Current wording

In 2024, we expect capital spending to be in the range of approximately $55.0 million to $65.0 million. We plan to fund our capital spending in 2024 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.

Previous wording

During the first quarter of 2024, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to “Note 10 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.

Current wording

During the second quarter of 2024, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to “Note 10 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.

Previous wording

There were no material changes in our critical accounting policies during the first quarter of 2024.

Current wording

There were no material changes in our critical accounting policies during the second quarter of 2024.