Rogers Corp (ROG) 2010 Q3 法說會逐字稿

Good morning. My name is Wes and I will be your conference operator today. At this time I would like to welcome everyone to the Rogers Corporation third-quarter conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions) I will now turn the conference over to Mr. Bob Wachob. Please go ahead, sir.

Good morning, ladies and gentlemen. With me today are Dennis Loughran, Chief Financial Officer; Deb Granger, Vice President of Corporate Compliance and Controls; Robert Soffer, Vice President and Secretary; Ron Pelletier, Corporate Controller; and Bill Tryon, Manager of Investor and Public Relations.

First, Dennis will dispense with the formalities and then we will get right down to business.

Thank you, Bob. I would like to point out to all our listeners that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Roger's operations environment. These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement.

I will now turn it back over to Bob.

Thanks, Dennis. Q3 turned out just as we predicted. How often does that happen? Most of our markets were strong during the quarter, although, as we said in the release, our customers in the High Performance Foams market are admitting that they built some inventory and will need to work it off. But we expect that will be a one quarter event or less.

As we mentioned to you in the past, we are currently focusing on three significant market trends. They are growth of the Internet, expansion of mass transit, and investment in sustainable energy. Everywhere we look we see evidence of the continuing growth of these megatrends.

One example is that mobile Internet devices are now expected to grow 55% in 2010 versus the original expectation of 22%. Tablet type devices are being introduced by a large number of suppliers and are expected to reach 100 million units per year by 2014, up from 13.6 million in 2010. In September four of the 3G spectrum winners in India announced the awarding of contracts for base stations.

Now these are just a couple of the good news events positively affecting the megatrends. Specifically for Rogers, we are also having considerable success as 41% of our sales year-to-date are into these megatrends. With 2010 growth in excess of 35% year-over-year we now have 573 active customer opportunities with a significant increase during Q3 alone.

For the year we have won 60% to 70% of the customer opportunities, with 50% of them already in production. By all measures Q3 was very successful for Rogers.

Importantly, one of the new application areas for us, base station antennas, now have four programs in production. These antenna programs are with customers located in China, Korea, and the US. Additionally, an electric vehicle application has now gone to production with anticipated first-year sales of about $1 million.

We are now in the process of starting up and qualifying the printed circuit material facility in Suzhou, China, which will add $30 million to $40 million of capacity and $12 million to $16 million of gross margin when fully operational. The full complement of hourly and salaried personnel are in place and have been trained. For the next two quarters we will have additional wage, salary, utility, and material expense connected with the start-up but with little corresponding revenue.

When fully qualified by our customers, we will be able to significantly reduce costs in the US and European operations and we will be in a great position to deal with the expected growth in 4G and other high frequency circuit applications around the world. We also expect a significant reduction in our finished goods inventory once our new Suzhou operation is in full production.

Also in Suzhou, our floats product line has been in two rented buildings a few miles from what is now our main campus. We are in the middle of consolidating this float operation with its 300 employees into some vacant space on the main campus. This should greatly improve workforce flexibility as we will double the hourly staff at this location.

We expect full production of this product line will resume by the end of November. In the meantime, we are shipping from inventory that was built in preparation for this move.

The equipment has begun to arrive at our new power distribution systems North American operation which is located in one of our Chandler, Arizona, facilities. We expect that start up and customer qualification will take two quarters leading to first production shipments in Q2 2011. There are significant opportunities in North America for these products within hybrid electric and electric vehicles, variable frequency motor drives, and mass transit that can only be addressed with local manufacturing.

Finally, we are pulling into Q4 $2 million of capital spending associated with our digital initiative as a very large OEM has prequalified our Theta digital laminate. We are now providing a considerable amount of material chose in printed circuit board shop so they may test and qualify our material in their process by building a significant number of printed circuit boards for final qualification to the OEM specifications.

This is really good news as it's -- a success through this phase of the process will put us six months ahead of our planned timeline.

We are focusing our resources on where we see the best opportunities. So far in 2010 we have added 12 business development and marketing people to the megatrend effort, all of this bodes well for the future growth of Rogers. In the meantime, we continue to work to prepare ourselves to meet the growing needs of our customers while striving to strike a balance between short-term profits and long-term growth.

I will now turn the call over to Dennis for the details of the third quarter.

Thank you, Bob. Good morning again to everyone. In the third quarter of 2010 we continued this year's excellent improvement over 2009 levels, however, at a more subdued rate of change as we compared to last year's second half when our recovery started to gain traction.

Operating leverage continues to be the major positive story for Rogers as we utilize more available capacity to generate gross margins well above previous year levels. Third-quarter 2010 sales of $101.3 million represented an increase of $20.3 million above last year's recession impacted levels with all of our business segments performing at improved levels. High performance phones and printed circuit materials continued their strong pace for 2010, contributing over 75% of the year-over-year growth leading the way to Rogers's overall 25.1% increase in sales.

Rogers reported a profit of $0.55 per diluted share for the third quarter of 2010 compared to a profit of $0.40 per share for the same period in 2009. The quarter-over-quarter increase of $0.15 per diluted share continues this year's trend of improvement driven primarily by improved sales and operating leverage. Those factors also contributed to our third-quarter 2010 gross margin of 36.4%.

Margins for the third quarter of 2009 were 30.4%. Similar to our overall earnings, this improvement was driven primarily by the positive impact of our significant operating leverage and higher production levels combined with the favorable sales mix as most of our increase came from two of our three core strategic businesses -- high performance foams and printed circuit materials.

Selling and administrative expenses for the third quarter of 2010 and 2009 were $20.8 million and $16.4 million, respectively. The increase of $4.4 million in SG&A expense was attributable primarily to the inclusion of performance-based compensation costs of approximately $4 million in 2010 that were not incurred in 2009 as well as approximately $0.4 million in increased costs associated with our higher sales volumes. We expect our SG&A to be in the range of $22 million for the final quarter of 2010.

Research and development expenses were $4.8 million or 4.7% of sales in the third quarter of 2010 as compared to $3.8 million or 4.7% of sales in the third quarter of 2009. With R&D expected to be in the range of 6% for the fourth quarter, our average for 2010 will be just above 5%. That lower-than-targeted level is primarily a result of rapid recovery in sales this year outpacing planned project expenditures. We continue to target a long-term level of R&D spending at 6% of sales.

Rogers 50% owned joint ventures had third-quarter sales totaling $28 million compared to $30.4 million in the third quarter of 2009. The 2009 figure included $5.5 million of sales from our former 50/50 joint venture, PLS, which became a wholly-owned subsidiary on March 31, 2010, and is now included in our consolidated results. Therefore, the 2010 result actually represents an increase of $3.1 million.

As mentioned in the press release, in October the Company consummated the sale of its position in the 50/50 joint venture with Chang Chun Plastics Company or RCCT.

Overall equity income in our unconsolidated joint ventures in the third quarter of 2010 was $2.4 million as compared to $2.3 million for the third quarter of 2009.

Other income and expense, which includes income from royalties, commissions, and other fees, less other expenses, amounted to a loss of $0.8 million in the third quarter of 2010 compared to income of $0.3 million in last year's third quarter. The net decline is primarily related to a net unfavorable foreign exchange impact of $0.4 million due to the depreciation of the US dollar against the euro as well as the exclusion of PLS commission income of $0.6 million from these results, as they are now included in our consolidated operating profit as previously mentioned.

The effective tax rate for the third quarter of 2010 was 30.7%. This rate was negatively impacted by a mix of earnings to hire tax jurisdictions. For the full-year 2010 we believe our tax rate will be in the range of 26%, higher than our previous estimates due mostly to more earnings being generated in higher tax regions than previously anticipated.

Rogers ended the third quarter with a cash and short-term investment position of $53.2 million as compared to $44.8 million at the end of the second quarter of 2010. During the quarter we had redeemed at par approximately $2.4 million of auction rate securities leaving a par value of $37.8 million outstanding as of the end of the quarter.

Capital expenditures were approximately $3.7 million in the quarter. For 2010 we expect capital expenditures to be approximately $15 million, down slightly from our previous estimate as a result of changes in project timelines as we near year-end.

Our balance sheet responded to increased operating levels during the quarter with a net increase in working capital of approximately $9.5 million related primarily to higher accounts receivable and inventory. In accounts receivable days sales outstanding stayed relatively stable at 58.5 days compared to 57.2 days at the end of the previous quarter. Inventories increased by $1.8 million during the quarter to $46.6 million with the increase primarily in support of higher sales levels in 3Q. We improved our inventory tracking metric to approximately 9.7 weeks of supply.

Overall, our current assets ended the quarter at 3.5 times current liabilities and we continue to have no outstanding long-term debt and have no current needs to borrow. This concludes my remarks and I will now turn the call back over to Bob Wachob.

Thanks, Dennis. Now we will entertain any questions you might have.

(Operator Instructions) Fred Buonocore, CJS Securities.

Good morning. First thing I wanted to ask about is your gross margin, certainly an impressive year-over-year expansion, and I just wanted to think about the sequential from Q2 to 23 if it had dipped a little bit and see if you could talk about that. And talk to us about gross margin expectations as we move forward over the next few quarters given these initiatives that you have underway. Thank you.

Sure, Fred. Quarter-over-quarter we had a significant inventory build during Q2 as sales were growing from about $83 million to [$96 million something]. As we anticipated, there wouldn't be that much growth in the third quarter and therefore we build much less inventory. The whole gross margin can be explained by that change in inventory build.

Going forward, I expect we are going to -- our goal for a long time has been 35% or better and I expect we will try and stay there.

Okay, so should we think about that 38% level as probably more towards the higher end or kind of reaching if we --?

Yes, because I believe we have built about $7 million worth of finished goods inventory in the second quarter. I wouldn't expect to do that again unless we have really fast growth. It's one of these situations where the faster you grow the faster you are going to grow earnings because you have to build inventory to support the growth.

Of course, that makes sense.

One of the things we are trying to do is by starting up the printed circuit materials business in China is going to put us in a position to be able to lower that finished good inventory and to respond much quicker to our customers, because today it takes six weeks to respond because we must build it and then put it on a boat. It takes approximately six weeks to get to China.

So we have to keep these large inventories and guess what our customers are going to use, which causes significant variability quarter to quarter because if they buy a whole lot more they deplete that inventory and then we have to build it back up. It contributes to volatility in a way that you don't see it unless you look at inventory.

Okay. And then secondly, if we look collectively -- you quantify it a little bit for the initiative in Suzhou for the antenna material production. If we take that collectively with your other operation in Arizona that you are building out and the work on the high-speed digital application, if we put all that together how much impact do you think that has maybe on a per-share impact or maybe a gross margin impact to your Q4 expectation? In other words, how much cost related to those is built into your Q4 guidance?

And then the flipside of that, if you could give us a sense for how much benefit we start to see in 2011 from those initiatives being completed or started at least in Q4. Thank you.

Sure. Fred, it's those three initiatives are probably costing about $0.05 a share in the fourth quarter and probably in the first quarter also. As we go forward, the printed circuit material alone is between $30 million and $40 million worth of capacity, which would add between $12 million and $16 million worth of gross margin whenever we fill that capacity. So the start-up costs are rather minor compared with the potential benefits.

Initially, the biggest benefit will be a transfer of existing production from both Europe and the US, and therefore a significant cost reduction. Then, of course, we will be in a great position to deal with the growth that we expect to come in the latter part of 2011 and 2012 and 2013 from the 4G initiatives.

Power distribution solutions; we will have capacity for about $10 million worth of production and that by itself could add $3 million worth of gross margin. And of course the digital, the digital is a $400 million, $500 million opportunity out there in 2014 and 2015. Who knows where we end up? $50 million, $60 million, $100 million? It's in that range but it's out in 2014 and 2015 because qualification comes first.

Then we will get designed into a small program. And when we do well we will get designed into a larger program and when we do well we will get designed into a very large program.

So this is a long-term strategy. It's not something that is going to have a big positive in six months but it's the things you need to do if you want to grow in the future.

Okay, thank you very much. I will get back in line.

Avinash Kant, DA Davidson.

Good morning, everyone. A few questions. If you could talk a little bit about the high speed digital opportunity and give us some idea about, first, what is the product and then who is the competition and what is your position right now in that situation?

We currently have no position in the digital. Although we sell $3 million or $4 million worth of the RO4000 product, it's rather minor.

Theta is proving out to be, that is our product in partnership with Hitachi, that product is proving to be one of the most reliable and highest temperature stability products in the market. That is why we are getting approved. The competition is Panasonic with a product called MEGTRON 4 and then to a much lesser degree people like Park Electrochemical with their [N13] I believe and iSolar with some product also; neither one of which deal very well with the no lead solder, lead-free solder, which has to operate at much higher temperatures.

So we think we are in a pretty good position here. And, of course, we are working in partnership with Hitachi to develop the next generation product which will be able to function at much higher speeds; switching speeds 10 billion bits per second, 10 Gb. And that will be definitely the leading product.

I see.

Hitachi, on the other hand, has a very significant position in this marketplace with a wide range of products. So that is one of the reasons that we are in partnership with them is they have a presence. In Japan they are the dominant player. They needed us to break into the US and the Chinese marketplace and of course Europe also.

So the current market size is how much?

Current market size is around $250 million. We expect it to grow in the $500 million range by 2015.

I see, I see. And do you have an idea of when we would you know about the (inaudible) qualification?

If all goes well, the end of this year.

End of the year, okay. And, Dennis, could you give us some idea what the gross margin that we should be thinking about for Q4?

We are looking at a 1% to 2% impact due to the start-up costs off of 3Q as a base.

So 1% to 2% lower than Q3, right?

The midpoint of our range, yes.

All right. And this should stay at these levels, you said, in Q1 also?

We believe we have got a similar kind of start-up activity for those operations that Bob mentioned in the first quarter.

Okay. And then how about the tax rate going forward, how should we think of it in Q4 and 2011?

As I stated in the thing, about 26% for the year and I think that is about 28% for the quarter. It's a very volatile situation due to our differences in earnings and tax rates in our three regions. Certainly we try to project as best we can.

But knowing, as we have described in the past, that we have an effective tax strategy that limits our tax to effectively zero in Europe and having written off our deferred taxes in the US, our net loss, operating loss position in the US does have the impact of reducing the denominator on a taxable base in China 22%. So when that mix of earnings between China and the US changes even $1 million we get a swing like you saw in this quarter. So we think we are mid to high 20%s as a tax rate, plus or minus, like you said, 2% to 3% given volatility in a quarter. That is the best I can do right now.

For the next year you mean? So is that -- you started (inaudible) about 26% to 28% is that --?

Exactly.

That still stays the same, right?

Yes.

And what was the depreciation and amortization in the quarter?

$4.1 million.

Okay. And should we expect much change going forward in that, in terms of your CapEx (multiple speakers)?

In the fourth quarter about the same. As you look into next year we obviously have assets coming off and assets going on but with a $15 million CapEx a slight increase next year. I don't know the exact number but there would be an increase because of capitalization of stuff we are spending this year. And with the laminate facility coming on stream in China.

So would the CapEx for 2011 also be impacted by these initiatives and how should we think of 2011 CapEx?

We have always said our maintenance CapEx is in the $12 million to $13 million range. We will finish in the first quarter the laminate facility and these other things so you might have a couple of million dollars of excess on a quarterly basis in the first quarter. But then we don't really have that much growth CapEx going forward so we are thinking in the mid-teens is probably a decent starting point for thinking about 2011.

With Q1 being the high point it looks like?

I think so.

Right. And if you could comment a little bit more about the initiatives, the three key initiatives that you have been focusing on. How is growth in those initiatives in the current quarter and how do you see that landscape panning out going forward?

In the three megatrend areas, as I said, we had year-to-date we are having about a 35% year-over-year increase. It was a little more than that in the third quarter as our year-to-date sales reached 41% of the total versus 40% of the total at the end of Q2.

Okay, perfect. Thank you so much, Bob.

Jiwon Lee, Sidoti & Co.

Thank you and good morning. Just wanted to kind of go back, Bob, and ask about the high performance foam sales. With the particular OEM that you highlighted in the press release wonder how much of the revenue was shaved from your fourth-quarter guidance. And outside of that particular OEM how is the overall demand?

Overall, that OEM is doing just fine. This was all related to a strike in India at a big EMS supplier which caused the OEM to bring 30 to 45 days of finished goods inventory into India from China, which boosted the latter part of Q2 and Q3 by about $2 million. We expect that will be worked off during this quarter. But otherwise there is -- that OEM is doing just fine and we are doing just fine with them.

Okay, well, that is helpful. And if you could talk a little bit about Utis and the acquisition that you made in Korea earlier this year, how that business is trending compared to your previous expectations.

Of course, that is fully integrated inside of high-performance foams but in general we are very pleased with the acquisition and the progress. As we have mentioned, we increased the capacity of one of the machines by 50%. We wouldn't do that if we weren't optimistic about the future.

Okay. And kind of going back to some of the opportunities, these long-term trends and whatnot, whether or not there has been some changes in your expectations with a particular focus on the auto side with the hybrid batteries and what not.

We are very pleased with the progress on the battery side and also with the thermal management systems products and the power distribution products in the electric vehicles. We have a rapidly increasing number of opportunities we are working on.

Of course, as you know, automotive is a very long-term situation. You get awarded a contract at least two years before it goes to production and you began working four years or more on it. Having one gone to production we feel pretty good about that.

Then, as I said, we think it will be $1 million but who knows? I mean this particular OEM has announced at various times that they are going to make 10,000, 20,000, and 40,000. I pick 10,000 but we will have to see.

Okay. And lastly for me, the digital materials that you are working on with Hitachi, are the competitors that you listed earlier are they all sort of in it to qualify with them? Could you sort of clarify?

No. This particular OEM, they have one product qualified and we will be the second. I must say, the first product qualified happens to be Hitachi in Japan so this is considered two separate products.

Okay, that is helpful. Thanks.

Shawn Severson, ThinkEquity.

Good morning. Bob, could you kind of talk about what transpired over the last couple of months as you look to the business? It seems like you have pulled ahead, obviously, some of the capacity expansion and some of the opportunities. Just what changed over the last couple of months to make this happen now versus kind of more even spending plan throughout the fourth quarter and the first quarter?

The printed circuit material area, it has become clear to us that there is going to be more spending for 4G in 2011 than we thought. This seems to be an application -- unlike 3G which took them a decade to build that out, this one seems to be being pulled forward pretty quickly. AT&T announced recently that they intend to have 4G in place by mid-year for 75 million people, whereas previously they had said nothing about that. So we see this being pulled forward more quickly.

In the digital area the main event was that a competitor had a major qualification failure and therefore the OEM did an evaluation of our Theta material, which is pretty much the Hitachi material, and decided that we and Hitachi could be their sources, dual sources. And so that has pulled that ahead quite a bit.

In the Power Distribution System, the main activity here is a large number of our customers, both European and Japanese, are winning contracts for light rail in the US. However, those contracts require that they have US content and therefore they would like to buy from us but we need to make it here. So we are in a big hurry to be able to satisfy that need before it goes away.

If we get it, we start-up on time, then we get a nice business and it will continue, because these things are generally long-term. Three- to five-year kind of programs.

Great, thank you. That was helpful. In terms of the SG&A leverage, could you just talk about that a bit going forward? How should we plan for that in terms of incentive comp and sort of the structure of the sales force through 2011?

When you look at incentive comp we always budget at a target level and so next year -- targeting next year we would probably end up having less incentive comp in next year's projected numbers going forward because we have exceeded sales and profit targets that we had said at the beginning of this year. Our underlying SG&A costs in the $20 million range are at reduced levels from our restructuring last year and we expect that to go forward at modest levels.

When Bob mentions headcount increases focused solely on the high, the megatrend markets and a lot of that is moving people within the Company because we are trying to maintain net headcount increases at the minimal levels we can. But overhead, back room, support headcount are flat so we have got merit increases and other inflationary things offset by whatever cost improvements we can. So we expect modest to low increase in base SG&A in the target incentive comp for next year.

So think of it as $20 million to $21 million a quarter.

Okay, thanks. And just last question. Bob, in terms of the overall market, how are you -- how is it progress for you? How are you feeling about the in-market trends? And aside from some tougher comps and the deceleration in the actual rates, but what is your sense over the last couple of months and the outlook through the end of the year for general demand and economic conditions aside from program specific stuff?

I would say in the fourth quarter we think general demand continues to increase slightly but at a much lower rate than it was early in the year. We, like it seems most other people, see things a little slower in the fourth quarter.

Yes and is that -- and just kind of from inventories refilling, getting back from the depths of last year, has it just been more of a rapid fill through the first half of the year and now we are entering into more normalized rates of growth without having inventory adjustments influencing the business as much?

Right, exactly. In fact, we are a good case in point if you look at our inventories, because we grew sales so fast during Q1 and Q2 we had a significant increase in finished goods inventory. Now that has slowed significantly in the third quarter and we expect it to probably stay flat in the fourth. And I would say that is the situation with our customers also, except for those few cases where they have built too much.

Great, thank you.

(Operator Instructions) Dana Walker, Kalmar Investments.

I was wondering if my star had already fallen because it wasn't registering. Good morning.

Let's start with PLS and [Flex]. With the sale of [Flex] and the coming to end of life on PLS, how is that going to affect your revenue? And what, if any, implications might it have for the bottom line?

PLS will be a decrease next year of $13 million and in this fourth quarter about a $2 million decrease from the third quarter. And profitability; that made about $2 million.

RCCT, it made a little money this year. They lost a lot of money in 2008 and 2009. We weren't excited about the long-term prospects and that is why we decided to take our money and run.

Will there be anything obvious, though, in your headcounts or beyond what you have just described?

I think, as I have mentioned in the past, PLS had 1.5 people devoted to it so that is not a big change. And there was no one -- well, a few of us were involved but we are all going to stay here so there is really no change for either one because of those two going away.

Let's move on to antennas. With the four programs that you are now describing how does the antenna market appear to be sizing, opportunity wise, compared to how you may have thought it would look a year to two years ago?

I think it's turning out a little bigger than we thought and we are having a little more rapid progress than we thought we would. We seem to be getting million-dollar programs, each one is at least $1 million and some of which are considerably more than that, and these last for quite a while. They are not just a one quarter type of thing.

Have we seen that in your revenue yet?

No. Those are all third-quarter events except for one. The one that has been ongoing is the 4G build out here in the United States and we are the sole source there and that is worth in excess of $1 million a year. The other ones are brand new. We will see some of that revenue in the fourth quarter but it's pretty much evenly spread over, at least as far as I can see, four quarters.

Are you comfortable describing an annualized revenue opportunity addressing that demand?

Well, we believe that out in the 2014/2015 area that we could be in the $30 million range for antennas.

And it would progress ratably from now until then?

Yes. Now there is probably -- there will probably be some step changes as people make their decisions on 4G.

Given the build out of 4G, though, where you are describing an acceleration of activity, is that going to lead to a burst of activity in pursuit of antenna demand that will then fall off a lot or will that be a different curve?

I think the burst of activity will probably be 2 to 2.5 years worth of activity. Then it will take -- it will go down but I really don't know how much, probably 20%, 30%. And then beyond that it all depends upon subscriber growth or data usage.

If the data usage continues to grow at almost 100% a year, they will be having to stick more antennas on those towers all the time. And that is where the business becomes much more stable is once we are driven by data usage versus -- in the initial phases there is all kinds of firsts going on as they decide to build out 20 cities. There is a mad rush to make it happen and then nothing.

For a simple guy like myself, though, would the power amplifier demand precede the antenna demand in some [ways]?

Yes, yes, absolutely because they typically can have four power amplifiers per base station. When they first set them up they put one, but they have a full set of antennas. So then you must fill that the base station, all four slots, and then you will put in another one and more antennas.

All right. And when you were describing digital opportunity five years from now, I presume that given that there seems to be an acceleration of interest that you would expect some ratable level of development between now and then. It's not just going to be a $50 million business?

No, no. It probably goes $2 million, $10 million, $20 million, $30 million, $40 million kind of thing; the kind of growth I would expect.

Aside from the fact that a competitor had a quality issue, how would (multiple speakers)?

Qualification issue. It wasn't the quality; their product didn't pass so it's pretty much game over. They will qualify two and then they will be done. They are not interested. Good news for us as long as we pass.

As long as you pass. Are there any notable differences in your product versus the competitor's product?

Yes, we have much better high temperature stability and therefore they are able to get a higher yield on the 50 layer boards with some of the other materials.

Moving to a different topic, you have -- I am going to use an acronym, ACOs, for these active customer opportunities.

Wow, that is a new one, okay.

You have got a lot of them. To what degree did you measure this precisely before or is this a new metric within? And to what degree do you consider whatever track record you have of monitoring that count that that translates?

This metric was first used in mid-December of 2009 as I was trying to convince the Board that we really did have a lot of activity going on in the three megatrends. They were a little skeptical. And we have been tracking that ever since.

I believe we are doing a really good job of being able to keep track of all these. We have these individual salespeople provide an update each quarter on the activities, which ones are still active. We do pay them when one of these goes into production so they are very diligent about telling us when something has gone to production, as you might imagine.

The specification wins; maybe they are not quite as there because it doesn't mean any money in their pockets so we could be possibly be undercounting those. All told, the 573 is associated with the megatrends and we have about 1,300, 1,400 total opportunities that we are tracking with the sales force. And we do try -- as I mentioned, we think we are winning 60% to 70%. I am really happy with that; that can continue.

Two last questions. One, if we think about your joint ventures that are primarily supporting the foam business, to what degree is their focus on the megatrends similar to your own? And thus, are they likely to scale in the same way that you would expect to scale as Rogers alone?

Interesting question. I have to think about this as a Japanese-centric joint venture and therefore they respond more to what is going on in Japan. The joint venture partner has a huge number of foams and is headquartered in the same city as Toyota, so there is a very close relationship there but little relationship with the other players as is typical in Japan.

They often, outside of Japan, are the second source to us at big US OEMs where they need to have two sources. So they qualify us and our joint venture as if we were separate. We like because Rogers gets it all. So to that extent, outside of Japan, I believe that they will participate in the megatrends also.

Would you like to be working more closely on their development process, their sales and marketing development process than you are?

Yes, and I will be talking about that next week when I am there.

Final question relates to the electric vehicle market. Can you just -- you have talked about what you believe your content could be per vehicle. Could you talk about how your content on awards won thus far compares to the hypothetical?

Yes. One vehicle we have $100 in the battery. Another vehicle in the power distribution area we actually have [200-and-some-dollars], which is probably a little higher than we thought. And the other ones, we are still working on all those.

But it's, in general, similar to initially maybe larger than we thought. But when it's significantly larger it's unlikely to stay that way through the life of the product.

My recollection is that you have described content opportunity up to $400.

Yes, and I believe that is still the case because the TMS alone is between $100 and $150 in the applications that they have.

But when you cite $100 and $200 on these two are these apples-and-apples or apples-and-oranges?

No, they happen to be different companies. In one case, we are in the battery and they have chosen not to use a TMS product but instead to use copper as their heatsink and not to use busbars. In another case they have chosen to use busbars but are using cylindrical batteries at the moment which doesn't require that you have a cushioning material. But I don't think that most people are going to end up with a cylindrical type of batteries.

In Europe it has been -- TMS has been adopted and that same Tier 1 that rejected us for the busbars as being too expensive, but as their selected source failed to be able to comprehend the electrical issues we have now become the supplier of choice, although we don't have an order yet. So it varies. In no case do we have everything in one car so far, but I always hope that one day we will do that.

Thanks for the update.

Fred Buonocore, CJS Securities.

A quick follow-up. You have given us a lot of different interesting points in terms of product lines and markets that appear to have some pretty tremendous potential, but putting it all together I guess is the challenge, even for you.

Given all that, do you care to give us a sense for what you think may be a revenue growth rate or a revenue level that would be achievable for 2011 would be?

I tell you, Fred, I tried that once at the beginning of this year and --.

I remember that.

Yes, and our collective accuracy here leaves something to be desired, which makes me hesitant to talk about anything more than the next quarter.

Okay. Do you think you can grow revenues next year?

Yes, absolutely.

That is a start.

Yes, that is a start.

And then secondly, in terms of pricing, Apple, for instance, when they reported several weeks ago had gotten dumped because people weren't happy with some gross margin compression that they were seeing and there may be some concern that they would be out pressuring all their suppliers and trying to cut costs that way. Are you starting to get more pressure from some of the larger OEMs that your product is going to from a pricing perspective or is that kind of a perpetual state of life for you?

No, we are really not seeing a whole lot of price pressure. Mostly because, if you think about it, you have devices that cost a couple hundred dollars and we have $0.20. They just don't get to us.

When you see the price pressures, if you are Tier 1 then you get it for sure. In some cases we are Tier 3 and Tier 4; they just never get to us and we like that. We do have some price pressure on the raw material side but so far we were able to reduce our costs about the same as the cost increases we are absorbing on the raw materials.

Okay, thank you. That is helpful.

[Ralph Reese], private investor.

Good morning. I have been a shareholder for decades in this company and have a very low basis. Current calculations show a large part of return to shareholders over an extended period of time is from dividends. Management has become millionaires with stock options and the owner of the business has gotten nothing. I think a dividend is a necessity; some funds can't even buy equity that don't pay dividends.

As I have said before, Ralph, at least twice a year our Board considers whether or not a dividend is appropriate and they will continue to do that.

They have done that for 30 years.

Good news is you apparently have made quite a bit of money as you said you have a very low cost basis.

Not really, compound interest plays a part here. All right, thank you.

At this time I am showing no further questions. I will turn the conference over to Mr. Bob Wachob for any closing remarks.

Thank you. In closing I would like to remind all of you that we have laid the foundation for faster growth and increased profitability. We will continue to invest in new product developments and look for opportunities to diversify into new markets while continuing to focus on the three megatrends.

Goodbye, everyone. Thank you.

Ladies and gentlemen, that concludes the Rogers Corporation third-quarter conference call. We appreciate your time. You may now disconnect.