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Rogers Corporation announced financial results for the first quarter of 2022.
“Rogers delivered solid first quarter revenue growth driven by EV/HEV, ADAS and industrial market sales,” stated Bruce D. Hoechner, Rogers' President and CEO. “Underlying market demand continues to be strong, although further sales growth and margin improvement in the first quarter was tempered by global supply challenges and COVID impacts in China. The outlook for Advanced Mobility and other growth markets remains robust and our investments to capitalize on the long-term growth, particularly in the EV/HEV market where demand is accelerating, remain on track. We continue to look forward to the combination with DuPont and the many compelling benefits we expect it will provide for our employees, customers and other stakeholders.”
Q1 2022 Summary of Results
Net sales of $248.3 million increased 7.7% versus the prior quarter primarily due to higher EV/HEV, ADAS and industrial market volumes and commercial actions. Further sales growth was tempered by lower demand from customers dealing with COVID impacts and component shortages. Additionally, labor and raw material constraints moderated manufacturing levels for certain products. EMS net sales increased by 11.5% resulting from higher EV/HEV and industrial market sales and the Silicone Engineering acquisition. This increase was partially offset by lower portable electronics revenues from COVID impacts. AES net sales increased by 4.7% due to strong EV/HEV revenues and improved ADAS volumes, partially offset by lower wireless infrastructure revenues. Currency exchange rates unfavorably impacted total company net sales in the first quarter of 2022 by $1.3 million compared to prior quarter net sales.
Gross margin was 34.4%, compared to 33.9% in the prior quarter. The increase in gross margin was primarily driven by higher volume and commercial actions, partially offset by unfavorable product mix and lower yields.
Selling, general and administrative (SG&A) expenses decreased by $0.2 million from the prior quarter to $57.7 million. SG&A expense declined due to lower depreciation and amortization expense, which was primarily offset by an increase in costs associated with the proposed acquisition of Rogers by DuPont.
GAAP operating margin of 8.0% increased by 350 basis points from the prior quarter primarily due to the improvement in gross margin and lower SG&A expenses. Adjusted operating margin of 14.5% increased by 230 basis points versus the prior quarter.
GAAP earnings per diluted share were $0.87, compared to earnings per diluted share of $1.22 in the previous quarter. The decrease in GAAP earnings was due to higher tax expense from a change in unrecognized tax positions in China in Q4, partially offset by the improvement in operating income. On an adjusted basis, earnings were $1.53 per diluted share compared to adjusted earnings of $1.92 per diluted share in the prior quarter.
Ending cash and cash equivalents were $182.1 million, a decrease of $50.2 million versus the prior quarter. Net cash used in operating activities was $13.7 million, compared to net cash provided by operating activities of $18.2 million in Q4. Operating cash flow declined versus the prior quarter primarily due to an increase in working capital, resulting from higher sales and additional inventory for new production facilities and building safety stock. Capital expenditures were $28.2 million in the first quarter compared to $27.7 million in the prior quarter.
Transaction with DuPont
As previously announced on November 2, 2021, Rogers has entered into a definitive merger agreement to be acquired by DuPont for $277.00 per share in cash. As a result of the pending acquisition, Rogers will not hold an earnings call or provide forward-looking guidance. Rogers' shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022. The transaction is expected to close late in the second quarter or early in the third quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals.