Rogers Corporation Q Earnings Call Nov. 3, 2016

Transcription

1 Rogers Corporation Q Earnings Call Nov. 3, 2016

2 Introductions Bruce Hoechner President & Chief Executive Officer Janice Stipp Vice President, Finance & Chief Financial Officer Bob Daigle Senior Vice President & Chief Technology Officer 2

3 Forward Looking and Cautionary Statements Safe Harbor Statement This presentation contains forward-looking statements, which may concern our plans, objectives, outlook, goals, strategies, future events, future net sales or performance, capital expenditures, financing needs, future restructuring, plans or intentions relating to expansions, business trends and other information that is not historical information. All forward-looking statements are based upon information available to us on the date of this release and are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Risks that could cause such results to differ include: volatility within the Internet Connectivity, Clean Energy, and Safety and Protection megatrends on which our business is focused, as well as specific market and industry trends within these megatrends; business, economic and political conditions in the United States and abroad, particularly in China, South Korea, Germany, Hungary and Belgium, where we maintain significant manufacturing, sales or administrative operations; fluctuations in foreign currency exchange rates; research and development efforts; competitive developments; business development transactions; the outcome of ongoing and future litigation, including our asbestos-related product liability litigation; and changes in laws and regulations applicable to our business. For additional information about the risks, uncertainties and other factors that may affect our business, please see our most recent annual report on Form 10-K and any subsequent quarterly reports on Forms 10-Q filed with the Securities and Exchange Commission. Rogers Corporation assumes no responsibility to update any forward-looking statements contained herein except as required by law. Non-GAAP Information This presentation includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States of America ( GAAP ): (1) Adjusted earnings per diluted share, which the Company defines as earnings per diluted share excluding acquisition-related amortization of intangible assets and discrete items, such as restructuring expenses, certain costs associated with acquisitions, and gains or losses on asset or business dispositions (collectively, Discrete Items ); (2)Adjusted EBITDA, which the company defines as net income excluding interest expense, net income tax expense, depreciation and amortization, and Discrete Items; and (3) Adjusted operating margin, which the Company defines as operating margin excluding acquisition-related amortization of intangible assets and Discrete Items. Management believes each of these measures is useful to investors because they allow for comparison to the Company s performance in prior periods without the effect of items that, by their nature, tend to obscure the Company s core operating results due to the potential variability across periods based on the timing, frequency and magnitude. As a result, management believes that adjusted earnings per diluted share, adjusted EBITDA and adjusted operating margin enhance the ability of investors to analyze trends in the Company s business and evaluate the Company s performance relative to peer companies. However, non-gaap financial measures have limitations as analytical tools and should not be considered in isolation from, or solely as alternatives to, financial measures prepared in accordance with GAAP. In addition, these non-gaap financial measures may differ from similarly named measures used by other companies. Reconciliations of the differences between these non-gaap financial measures and their most directly comparable financial measures calculated in accordance with GAAP are set forth at the end of this document. 3

4 Q Summary Results ($ in millions, except EPS) Q Q Variance Net Sales $165.3 $160.4 $4.9 Growth % 3.1% Operating Income $23.1 $23.2 ($0.1) Operating Margin % 14.0% 14.5% (50bps) Adjusted Operating Income* $25.1 $26.6 ($1.5) Adjusted Operating Margin %* 15.2% 16.6% (140bps) Net Income $16.1 $12.5 $3.6 Net Income as a Percent of Net Sales 9.7% 7.8% 190bps Adjusted EBITDA** $34.1 $32.5 $1.6 Adjusted EBITDA %** 20.6% 20.3% 30bps EPS $0.88 $0.67 $0.21 Adjusted EPS* $0.95 $0.89 $0.06 * Adjusted for acquisition intangible amortization and Discrete Items. See reconciliation tables on slides 22 & 24, as applicable. ** Adjusted for Discrete items. See reconciliation table on slide 23. 4

5 Strategy for Sustainable Growth Our Focus Global leader in engineered materials solutions to power, protect, connect our world Our Strategy Market-Driven Organization Innovation Leadership Synergistic M&A Operational Excellence A Winning Team: Top Talent, Engaged Employees, Performance Culture Our 3-Year Goals Revenue Growth Profitability Returns >15% CAGR >15% Op. Margin >15% ROIC* * ROIC goal is based on net income excluding interest expense and net income tax expense 5

6 Market Outlook Internet Connectivity Mobile Data Traffic 45% CAGR through 2021 Ericsson, Feb Commodities Positive - Megatrends Clean Energy Emobility 28% CAGR through 2020* Supportive policies in China *IHS June 2016 Neutral Exchange rates (Euro/CNY) Safety & Protection Automotive Safety Systems 29% CAGR through 2026 ABI Research, April 2016 Inflation Global political and economic uncertainty affecting worldwide GDP growth Challenges Selective pricing pressure Wireless telecom and Industrial capital spending 6

7 Advanced Connectivity Solutions (ACS) Q Q Variance Revenue $65.5 $66.2 $(0.7) Growth % (1.0%) Operating Income $7.6 $12.0 $(4.4) Operating Margin % 11.6% 18.1% (650bps) Adj. Op. Income* $8.1 $13.4 $(5.3) Adj. Op. Margin %* 12.3% 20.3% (800bps) Strategy Maintain strong leadership position in applications for automotive safety systems and wireless telecom. Continue developing the next generation of 4.5G and 5G wireless infrastructure. * Adjusted for acquisition-intangible amortization and other Discrete Items. See reconciliation table on slide 25 7

8 Elastomeric Material Solutions (EMS) Q Q Variance Revenue $54.4 $46.8 $7.6 Growth % 16.3% Operating Income $10.9 $8.2 $2.7 Operating Margin % 20.1% 17.4% 270bps Adj. Op. Income* $11.5 $9.2 $2.3 Adj. Op. Margin %* 21.2% 19.6% 160bps Strategy Expand geographic penetration in automotive, transportation and general industrial applications. Broaden portfolio of materials and next generation applications (e.g., cushioning materials for OLED displays in portable electronics). * Adjusted for acquisition-intangible amortization and other Discrete Items. See reconciliation table on slide 26 8

9 Power Electronics Solutions (PES) Q Q Variance Revenue $39.8 $36.6 $3.2 Growth % 8.8% Operating Income $2.8 $1.1 $1.7 Operating Margin % 7.0% 3.0% 400bps Adj. Op. Income* $3.6 $2.0 $1.6 Adj. Op. Margin %* 8.9% 5.6% 330bps Strategy Maintain leadership position in applications for energy efficient motor drives and renewable energy. Provide enabling solutions to increase penetration and content in emerging emobility applications. * Adjusted for acquisition-intangible amortization and other Discrete Items. See reconciliation table on slide 27 9

10 Financial Highlights Janice Stipp, VP Finance and Chief Financial Officer 10

11 Q Summary Results ($ in millions, except EPS) Q Q Variance Net Sales $165.3 $160.4 $4.9 Growth % 3.1% Operating Income $23.1 $23.2 ($0.1) Operating Margin % 14.0% 14.5% (50bps) Adjusted Operating Income* $25.1 $26.6 ($1.5) Adjusted Operating Margin %* 15.2% 16.6% (140bps) Net Income $16.1 $12.5 $3.6 Net Income as a Percent of Net Sales 9.7% 7.8% 190bps Adjusted EBITDA** $34.1 $32.5 $1.6 Adjusted EBITDA %** 20.6% 20.3% 30bps EPS $0.88 $0.67 $0.21 Adjusted EPS* $0.95 $0.89 $0.06 * Adjusted for acquisition intangible amortization and Discrete Items. See reconciliation tables on slides 22 & 24, as applicable. ** Adjusted for Discrete items. See reconciliation table on slide

12 Q Revenue Bridge $ % -0.9% -3.2% $11.6 $1.5 $ % 3.1% $140 $160.4 $165.3 $165.3 $100 Q Revenue Volume & Other Currency Acquisition / Divestiture Q Revenue Q3 revenue exceeded guidance of $150M - $160M 12

13 Q Adjusted Operating Income* Bridge $ % -14.3% 2.6% $1.6 $0.7 $ % $ % $26.6 $25.1 $20 Q Adj. Op. Income* Volume & Other Performance SG&A R&D Q Adj. Op. Income* * Adjusted for acquisition intangible amortization and other Discrete Items. See reconciliation table on slide

14 Q Adjusted EBITDA* Bridge $ % -9.5% +2.1% $0.7 $1.8 $3.1 $ % +6.8% +4.9% $2.2 $32.5 $34.1 $20 Q Adj. EBITDA* Volume & Other Performance SG&A R&D Misc. Inc/Exp Q Adj. EBITDA* * Adjusted for interest expense, net income tax expense, depreciation and amortization, and Discrete Items. See reconciliation table on slide

15 Q Adjusted EPS* Bridge $1.35 $ % $ % $ % $ % $ % $ % $ % $0.95 $0.75 Q Adj. EPS* Volume & Other Performance SG&A R&D Misc.Inc/Exp Share Dilution Q Adj. EPS* Q3 Adjusted EPS of $0.95, exceeded guidance of $ $0.79 * Adjusted for acquisition intangible amortization and other Discrete Items. See reconciliation table on slide

16 Q Segment Revenue $100 Q Change ACS -1.0% EMS 16.3% PES 8.8% $50 $66.2 $65.5 $46.8 $54.4 $36.6 $39.8 $0 ACS EMS PES Q Q

17 Q Segment Adjusted Operating Income* $20 Adjusted Operating Margin Q Q ACS 20.3% 12.3% EMS 19.6% 21.2% PES 5.6% 8.9% $10 $13.4 $8.1 $9.2 $11.5 $3.6 $0 $2.0 ACS EMS PES Q Q * Adjusted for acquisition intangible amortization and other Discrete Items. See reconciliation table on slides 25, 26 and

18 Q3 YTD Cash Utilization $350 Cash Provided by Operating Activities Cash Used In Investing Activities Cash Used In Financing Activities $94.2M $14.9M $108.9M $97.1 $12.3 $102.6 $300 $250 $14.9 $200 $18.3 $150 $ /31/2015 Cash Adj. EBITDA* Working Capital $211.4 Debt Repayment $196.5 CapEx $178.2 Cash Taxes Paid $8.0 $3.0 $6.4 $170.2 $167.2 $167.2 Share Repurchase $173.5 Interest, net Other 9/30/2016 Cash * Adjusted for interest expense, net income tax expense, depreciation and amortization, and Discrete Items. See reconciliation table on slide

19 Q Guidance ($ in millions, except EPS) Revenue $155M - $165M EPS $ $0.71 Adjusted EPS* $ $0.86 * Adjusted for acquisition intangible amortization and Discrete Items. See reconciliation table on slide

20 Q&A 20

21 Appendix 21

22 Q Adjusted Operating Income & Operating Margin Reconciliation Q3-16 (%) Q3-16 ($) Q3-15 (%) Q3-15 ($) Operating Margin & Operating Income 14.0% $ % $23.2 Restructuring, Severance and Other Related Costs 0.1% $ % $0.5 Environmental Accrual Adjustment (0.5)% ($0.9) - - Operating Margin & Operating Income, adjusted for Discrete Items 13.6% $ % $23.7 Acquisition Intangible Amortization 1.6% $ % $2.9 Adjusted Operating Margin & Operating Income 15.2% $ % $

23 Q Adjusted EBITDA Reconciliation YTD Q3-16 ($) Q3-16 (%) Q3-16 ($) Q3-15 (%) Q3-15 ($) Net Income $ % $ % $12.5 Interest $ % $ % $1.1 Income Tax Expense $ % $ % $9.6 Depreciation $ % $ % $5.9 Amortization $ % $ % $2.8 Restructuring, Severance and Other Related Costs $ % $ % $0.6 Environmental Accrual Adjustment ($0.9) (0.5)% ($0.9) - - Tax Item $ % $ Loss on Sale of Business $0.2 Adjusted EBITDA $ % $ % $

24 Q Adjusted EPS Reconciliation Q3-16 ($) Q3-15 ($) Earnings per Diluted Share $0.88 $0.67 Restructuring, Severance and Other Related Costs $0.01 $0.02 Environmental Accrual Adjustment Tax Discrete Items Integration Costs ($0.03) $ Total Discrete Items ($0.02) $0.12 Earnings per Diluted Share, adjusted for Discrete Items $0.86 $0.79 Acquisition Intangible Amortization $0.09 $0.10 Adjusted Earnings per Diluted Share $0.95 $

25 Q ACS Adj. Op. Income & Operating Margin Reconciliation Q3-16 (%) Q3-16 ($) Q3-15 (%) Q3-15 ($) Operating Margin & Operating Income (ACS) 11.6% $ % $12.0 Restructuring, Severance and Other Related Costs 0.1% $ % $0.1 Environmental Accrual Adjustment (0.6)% $(0.4) - - Operating Margin & Operating Income, adjusted for Discrete Items 11.1% $ % $12.1 Acquisition Intangible Amortization 1.2% $ % $1.3 Adjusted Operating Margin & Operating Income 12.3% $ % $

26 Q EMS Adj. Op. Income & Operating Margin Reconciliation Q3-16 (%) Q3-16 ($) Q3-15 (%) Q3-15 ($) Operating Margin & Operating Income (EMS) 20.1% $ % $8.2 Restructuring, Severance and Other Related Costs - - (0.1)% ($0.1) Environmental Accrual Adjustment (0.3)% ($0.2) - - Operating Margin & Operating Income, adjusted for Discrete Items 19.8% $ % $8.1 Acquisition Intangible Amortization 1.4% $ % $1.1 Adjusted Operating Margin & Operating Income 21.2% $ % $9.2 26

27 Q PES Adj. Op. Income & Operating Margin Reconciliation Q3-16 (%) Q3-16 ($) Q3-15 (%) Q3-15 ($) Operating Margin & Operating Income (PES) 7.0% $ % $1.1 Restructuring, Severance and Other Related Costs % $0.5 Environmental Accrual Adjustment (0.5)% ($0.2) - - Operating Margin & Operating Income, adjusted for Discrete Items 6.5% $ % $1.6 Acquisition Intangible Amortization 2.4% $ % $0.4 Adjusted Operating Margin & Operating Income 8.9% $ % $2.0 27

28 Q Guidance Reconciliation Q4-16 ($) Guidance Q4-16 earnings per diluted share $0.61- $0.71 Add back adjustments: Restructuring/Other Expenses $0.06 Acquisition Intangible Amortization $0.09 Guidance Q4-16 Adjusted earnings per diluted share $ $

29 29