Rogers Corp (ROG) 2014 Q4 法說會逐字稿

Good morning. My name is Kyle and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Rogers Corporation fourth-quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks they'll be a question and answer session.

(Operator Instructions)

Thank you and Mr. Tryon, you may begin your conference.

Thank you, Kyle. Good morning, everyone and thank you for joining us.

The slides for today's call can be found on the investor section of our website, along with the news release that was issued yesterday.

Turning to slide 2. On the call today will be Bruce Hoechner, President and CEO; David Mathieson, Vice President, Finance and CFO; and Bob Daigle, Senior Vice president and CTO.

Please turn to slide 3. Before we begin, 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 Rogers' operations and 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.

Also, the discussions during this conference call may include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which can be found in the investor section of our website.

I will now turn the call over to Bruce.

Thank you, Bill. Good morning, everyone.

I am pleased to report that Rogers achieved record fourth-quarter sales to finish an outstanding year. We attribute our strong performance in 2014 to favorable tailwinds in our global growth markets. As well as our focus on critical elements of Rogers' profitable growth strategy.

Three years ago, we began to transform Rogers by introducing initiatives to streamline the organization. While increasing our investments in R&D, marketing, and operational improvements. Throughout 2014, we saw those efforts pay off. In addition, we are particularly pleased with our recent acquisition of Arlon. Which is a great fit with our stated M&A vision. Our approach is delivering profitable growth. We believe that the strength in our key megatrend markets will continue to drive strong revenue and profit performance into the future.

Turning to slide 4, I would like to remind you of our strategic roadmap for delivering consistent, profitable growth. There are four critical elements to our strategy. We take a market-driven approach across the Company. We are developing deeper partnerships with our customers through cooperative activities. Including innovation days and joint development projects. These efforts help us uncover customer needs and identify ways that Rogers can help our customers win in a competitive market.

In addition, we continue to expand our outside-in focus. Understanding and internalizing key market and industry trends and dynamics. We are accelerating our investment in technology innovation. Opening our new Rogers Innovation Center at Northeastern University in March of 2014. Now fully staffed and operational, the dedicated Rogers R&D team at the center is working with university researchers, as well as Rogers divisional R&D teams, to enable the development of solutions that solve market challenges.

Also in 2014, we completed a comprehensive refresh of our product development or stage gate process. In order to accelerate the commercialization of new technologies and to standardize our approach across all three business segments. Rogers renewed commitment to R&D lead to a 400% increase in the number of patents we filed in 2014.

Our recent acquisition of Arlon is directly aligned with our synergistic M&A approach. We will discuss this in greater detail on the next slide.

The final element of our strategy is operational excellence. Where we are implementing continuous improvement methodologies in manufacturing to increase yields and improve our efficiency around supply and demand planning. A great example of our progress comes from our Printed Circuit Materials segment, where yield improvements and throughput increases resulted in more than $5 million in cost savings in 2014. Arlon has strong expertise in this area and we expect to make even more progress here as we combine our organizations.

At the bottom of this slide, you'll see our interim three-year financial goals, which serve as a checkpoint in our long-term plan. Shortly, we'll discuss our performance against these goals in 2014.

Turning to slide 5, I'd like to review Arlon's fit with our M&A strategy. From a technology perspective, adding Arlon's capabilities will serve to strengthen the technology leadership position our Printed Circuit Materials business already has in the marketplace. By combining the portfolios and expertise of the Arlon and Rogers' teams, Rogers can provide a broader range of solutions for customers requiring high frequency and high reliability materials for advanced communications, networks, and systems.

On the silicone side, the Arlon portfolio includes a broad range of capabilities and products that Rogers did not previously possess. For our High Performance Foams business, we see this as essentially a bolt-on opportunity. Adding new product lines, markets, and customers.

Combining Arlon and Rogers will significantly expand our opportunities across a wide range of strategic growing markets. In particular, the communications infrastructure opportunities for connectivity solutions continues to expand with new technology demands continuously emerging and the need for innovative solutions growing. For example, there is still significant opportunity in mobile infrastructure for high frequency materials beyond 2015.

While China is well underway in the 4G LTE rollout, many parts of the world are just starting the first wave of large coverage deployments. In addition, once LTE capacity is in place, there is the second phase, in which capacity is added by increasing power amplifier capacity in existing base stations, as well as by adding small sales to enhance coverage of the macro base stations, all utilizing Rogers current materials.

In addition to the technology and market opportunities we see with Arlon, we believe Arlon will help us advance our financial goals. Providing significant opportunities to leverage our global supply chain, shared services, and operations to maximize our growth and profitability. We have a robust integration plan with work streams that include representation from both organizations. They are working to ensure continued excellent customer support during the integration, identifying and capturing new opportunities, as well as a goal to fully integrate Arlon into Rogers by the end of the year.

Turning to slide 6. I'd like to review our operating highlights with a focus on the full year. David will review Q4 in greater detail later in the call. As previously mentioned, we set an all-time fourth quarter sales record to end the year with all-time record annual revenues of $610.9 million. A 13.7% improvement over full year 2013, surpassing our stated annual goal of 10% organic sales growth.

In addition, our commitment to operational excellence helped us to attain gross margin improvements. For the full year, we achieved 38.3% in gross margin, an increase of 340 basis points as compared to the full year 2013. In addition, full-year operating margin was 14.4% non-GAAP. An improvement of 290 basis points over 2013, and, on track to our stated three-year goal of 15%.

Return on invested capital in 2014 was 12.6%, an increase of 360 basis points over 2013. This result is tracking well towards our stated three-year goal of 15% ROIC. We also delivered strong earnings at $3.38 non-GAAP EPS. Which is a 29.5% increase over 2013.

Turning to slide 7, you will see our fourth-quarter highlights by business segment. For the third consecutive quarter, all three of our business segments delivered sales growth, led again by PCM. In Q4, PCM achieved 18.1% growth in sales over the prior year. We continue to see significant demand for wireless infrastructure, as well as automotive safety radar applications for advanced driver assistance systems. This strong growth offset lower demand in mobile internet device antenna and satellite TV applications, where customers reduced year-end inventory levels.

In addition to the mobile infrastructure demand that we discussed previously, we also see significant opportunities in the category of automotive radar systems. This market is expected to continue very rapid growth in 2014 to 2020. With a compounded annual growth rate of more than 30%, from less than 20 million units in 2014 to nearly 96 million units in 2020. Automotive safety radar accounts for approximately 10% of PCM sales today.

In the Power Electronic Solutions segment we achieved record fourth-quarter sales with an increase of 3.2% compared to the prior year, even with the impact of the decline in the Euro. This growth was based on strong demand in rail propulsion and EV/HEV applications, offsetting weaker demand in certain renewable energy applications.

As we look ahead to 2015 and beyond, we see continued opportunities for Rogers' unique solutions in energy-efficient motor drives, which comprise approximately 40% of PES sales. In 2015 alone, this market is projected to grow 10% to 15%.

In addition, the vehicle electrification market, which is about 11% of the PES business, is expected to have a compound annual growth rate of roughly 15% through 2019. We do want to mention that anticipated fluctuations in exchange rates will likely affect our year-over-year comparisons in the PES business in 2015.

In Q4, our High Performance Foams segment grew year-over-year sales 4.4%, based on higher demand in general industrial, mass transportation, battery applications for HEVs and consumer comfort and impact protection applications. This offset slightly weaker demand in portable electronics applications. As some customers managed their year-end inventory levels more closely. We expect continued fluctuations in portable electronics sales from quarter to quarter. As design models evolve and inventory adjustments occur.

Our HPF business has updated its strategy and is intensifying its focus on general industrial applications, which now represent roughly 25% of HPF sales. In addition, we are continuing to expand our efforts in the high-growth Consumer Comfort and Impact Protection segment to accelerate our market penetration. We see opportunities for sales and profitability growth at HPF through geographic expansion of these offerings. Particularly, into Europe and China.

Turning to slide 8, you will see an overview of net sales performance by market. For the fourth quarter, 61% of our sales were in our strategic megatrend categories. We saw significant growth in the mass transit category, and, more moderate gains in internet connectivity, due in part to the very strong comparative quarter of Q4, 2013.

Sales were essentially fact in clean energy. In internet connectivity, we continue to see significant demand for wireless base station applications. Mass transit increased 23% overall, based primarily on demand in rail propulsion applications, specifically in Europe and China, as well as sales growth in rail interior foam applications. Our flat performance in the clean energy category was due in part to the very strong comparative quarter of Q4, 2013. As well as lower demand for certain energy applications during Q4, 2014.

As markets evolve, Rogers will adapt with agility in order to make sure that we are directing our attention to the megatrends that are the most important to the Company's objectives. In recent years, Rogers has experienced significant growth in worldwide demand for innovative solutions for safety and protection. Going forward, safety and protection would become a key megatrend focus for Rogers. Mass transit will continue to be of strategic importance to Rogers. And, those applications will be primarily realigned within our clean energy megatrend.

We believe our megatrend design opportunity pipeline is a helpful indicator of future sales growth prospects, and, in Q4 it continued to strengthen. We had 873 opportunities under evaluation in Q4, 2014. Up from 722 in Q4, 2013. We also moved 82 projects into production this quarter, which was in line with Q4, 2013.

I will now turn the call over to David, who will report our Q4 results in greater detail as well as additional financial highlights. David.

Thanks, Bruce.

On slide 10, as reported in the press release, we achieved earnings from continuing operations, excluding special charges of $0.89 per diluted share on record fourth quarter net sales of $147.7 million up 8.4% from the 2013 fourth quarter.

We estimate sales were negatively impacted by the decline in the Euro by approximately $3.7 million. Non-GAAP earnings from continuing operations exceeded guidance of $0.64 to $0.76 due to margin improvement as a result of operational efficiencies, favorable, absorption, product mix, improved yields and low international expenses.

Growth in the fourth quarter was driven by Printed Circuit Materials which, grew 18.1%, with strong demand for circuit materials in the wireless infrastructure market. Power Electronics was up 3.2%, and, we had our third consecutive quarter of growth in High Performance Foams, causing a 4.4% increase in net sales. Gross margins come in at 39.5%, up 220 basis points from prior-year gross margins of 37.3%, driven by 100 basis points improvement from incremental volume and 120 basis points from operational efficiencies.

On slide 11, our S&A decreased this quarter from 22.1% to 21.3% of sales. S&A came in at $31.5 million for the fourth quarter of 2014. This amount includes $1.2 million of expense for the Rogers Work Smart business we discussed previously.

The increase in S&A over the prior period is primarily due to increases in sales and marketing activities and other S&A-related costs. Research and development expenses were $5.6 million or 3.8% in the fourth quarter of 2014, compared to the $4.8 million or 3.5% experienced in the fourth quarter of 2013. The higher percentage and gross spending is primarily related to the innovation center investment.

On slide 12, 2014 fourth quarter non-GAAP operating profit margin of 14.4% improved by 270 basis points, compared to the non-GAAP operating profit of 11.7% for the fourth quarter of 2013. This result was due to the strength of gross margin increases and improvement in commercial expenses.

Our diluted earnings per share of $0.89, excluding special charges in the fourth quarter of 2014 increased by 9.9% from the $0.81, excluding special charges in the fourth quarter of 2013 with operating income adding $0.24, offset by a higher tax charge of $0.12 and by share count dilution of $0.04. As discussed when we issued guidance for the fourth quarter, Q4, 2013 had a nonrecurring event resulting in a discrete tax benefit, resulting in a lower tax rate when compared to the 2014 fourth quarter.

Our diluted earnings per share exclude special charges of $0.25. Related to a non-cash tax charge associated with the cash repatriation of $40 million from Europe, which, was used to partially fund the acquisition of Arlon and to bolster our cash position in the USC, as we are scheduled to pay $35 million of our term loan in July of next year.

This was a use or lose it opportunity where you're allowed to repatriate current year foreign earnings in the current year. We executed back in December and transferred the euros at 124 to the dollar.

The second special charge of the Company offered certain eligible former employees a cash offer to buy out their deferred pension fund, which resulted in an $0.18 non-cash charge. Additionally, we incurred $0.08 due to acquisition costs related to Arlon and $0.01 related to an impairment charge from an investment in SolarCore.

On slide 13, PCM achieved record fourth-quarter sales of $57.5 million, up 18.1% from Q4, 2013, and operating income improved by 43%. The sales increase was driven by growth in wireless infrastructure and automotive safety radar detection applications, while profitability was favorably impacted by strong operating leverage on the incremental sales volumes.

On slide 14, growth in energy-efficient motor applications, mass transit, and electric vehicle applications in the Power Electronic Solutions business was offset by lower demand in certain renewable energy applications. Sales were up 3.2% and operating income increased from $0.3 million to $0.8 million in the quarter, due to the profit contribution on the increase in sales, yield improvement programs, and better product mix.

On slide 15, High Performance Foams grew 4.4% in the quarter, driven by strong demand in HEV, mass transportation, general industrial, and consumer comfort and impact protection. Offset by lower demand into current -- portable electronics, which is mobile internet devices and Future Foam applications. Operating income of $4.4 million was down 6.4% in the quarter. Primarily due to an increased investment of sales, marketing, and R&D expenses to support future expansion. Partially offset by the increase in net sales.

On slide16. We continued to generate cash and pay down our debt. Cash flow from operations for the twelve months was $85.2 million with capital expenditures of $28.8 million and we repaid debt including leases of $17.8 million. We ended the quarter with a cash balance of $237.4 million and a debt balance of $60 million.

On slide 17, excluding the newly acquired Arlon business, guidance for the first quarter of 2015 is for our revenues to be in the range of $148 million to $153 million and for net income to be in the range of $0.67 to $0.75 a diluted share. For our newly acquired Arlon business, post-acquisition Quarter One guidance is for revenue to be in the range of $18 million to $20 million and net income from continuing operations per diluted share of $0.13 to $0.16 per diluted share. This excludes projected specific charges related to the Arlon integration costs of $0.10 to $0.12 per diluted share.

Also excluded from this guidance is any impact from purchase accounting. We just don't have those numbers at this time. At the midpoint, our Q1 revenue guidance excluding Arlon, represents organic sales growth of 6% over Q1, 2014. However, the Company expects sales will be negatively impacted by approximately $5 million due to the decline in the value of the euro on a year-over-year basis, bringing sales growth down to 2.7% over Q1, 2014.

Including Arlon at the midpoint of our guidance, our sales increased by 15.6%, which, also includes the $5 million sales reduction from the euro decline. Excluding the newly acquired Arlon business, guidance for the EPS has a midpoint of $0.71 per diluted share. This guidance shows a decline of $0.08 per diluted share, compared to the non-GAAP EPS in Q1, 2014.

This guidance is due to several reasons, including, firstly, $0.10 improvement from better margin due to yield increases and other operational efficiency projects and, volume excluding currency impact, offset by secondly, $0.10 investment and growth opportunities with $0.06 per diluted share related to the continued investment in sales and marketing for market and geographic expansion and investment in the Work Smart initiatives, and $0.04 per diluted share of incremental R&D expense, attributable primarily to the ramp-up of activity of a newly established innovation center, roughly $0.06 of negative currency impact due to the depreciation of the Euro, and finally, $0.02 per diluted share of incremental tax expense as a Q1, 2015 tax rate is forecasted to be approximately 2.4% this month, higher than Q1, 2014. Now including Arlon, but before integration costs, the EPS range for the total Company is $0.80 to $0.91 for Q1, 2015, which had a midpoint of $0.85.5, is an increase of 8%.

This completes my commentary and I will now turn the call back over to Bruce.

Thank you, David. I will now go to Kyle for our Q&A portion of the call.

(Operator Instructions)

Daniel Moore, CJS Securities.

Good morning, and thanks for taking the questions.

Hi, Dan.

Bruce, you alluded to this -- or started to talk about it -- perhaps you could give a little bit more color on your outlook for 4G specifically, for the next one to two years, with the addition of Arlon? Your leverage to wireless infrastructure has even increased a bit -- the potential for upgrading or retrofitting current base stations? And then, beyond that, maybe -- is it too early to start thinking about the bridge to 5G and Rogers's positioning there?

Great question. Thanks, Dan. Let me just start off by saying: We believe that, going into 2015 and beyond, that 4G LTE buildout will continue.

So, if we look specifically at China, where, certainly in 2014 there was a significant buildout of their LTE -- 4G LTE base stations. We're seeing continued strength there. The China Mobile folks are going to add about 300,000 base stations in 2014 -- or 2015. And we also are seeing China Unicom and China Telecom moving forward more on their 4G LTE buildout as well.

So, we see China continuing to build out, not only base stations, but on antenna systems. And with the Arlon acquisition, that gives us a much greater position on the antenna side of the market. So, we anticipate, again, a very good 2015 as we move forward, if we look over in China.

If we look over in India -- India has announced 100,000 new base stations coming in for 4G LTE. That, again, is just the beginning of their rollout there. We've also see Vodafone in Europe, and around the world, increasing their investments in their infrastructure. So, we see this continuing, certainly for multiple years, just on the 4G LTE rollout. If we -- and again, building on that with the antenna systems as well.

If we also look towards other areas in AC -- in PCM -- the blind-spot detection; I mentioned in my prepared remarks the significant growth trajectory that we'll be seeing there over the next several years. And that market is just really in its infancy. So, again, strength going forward in that area.

So, I think, then we start looking forward to the 5G situation. And I'm going to ask Bob Daigle to talk about the work that we're doing there, and how we see that rolling forward.

Yes. So, Dan, it's Bob Daigle. So, what we're seeing with 5G is we're -- as we did with the 4G LTE rollout, we got engaged very early on with the design community to make sure we won programs. And we are winning programs in the small cell area, and in what we think will be 5G. There's obviously a lot of work that needs to do to establish the standards. So, we think that's a ways out.

But again, as we've talked about, we see LTE in terms of the initial rollout of base stations, as probably in the third or the fourth inning. We see a lot of incremental demand that's bridging between LTE and 5G just being expansion. As we talked about, when they deploy the base stations, we get some content in the power amps, in case -- some cases, the transceiver receiver.

Now, the antennas, and with Arlon, a much bigger part of the antenna market. So, we get that incremental business as they continue to expand capacity. And I think we're going to start to see the small cells start to come into play and evolve into a bigger piece of the Business.

And then again, I think we've said this before, Dan. I, at least -- the way I keep thinking about it -- I keep going back to the bandwidth consumption out there. And you look at the Cisco data where they're still -- I mean, every projection I've seen, and they've tended to be a bit conservative about it, Cisco, is 80%-plus compounded annual growth rate for data demand over the next five years. We still see that as being the key driver. As consumers continue to consume bandwidth, that's going to drive the need for continued infrastructure investments and capacity expansion.

Thanks, Bob.

Very helpful. And just a quick follow-up: In terms of just looking at the Q4 energy-efficient motor drives -- a little bit of a pause. What caused that? And maybe what's your outlook for 2015?

In that case, again, our PES business is -- has been negatively affected the most of all of our businesses by the foreign exchange -- by the euro. And so, that impact was about $2.7 million on sales for PES in Q4. So, that's really what you see -- the effect -- partially the effect on the variable frequency drives and overall in that business.

But as we move forward, we see a lot of very strong opportunity and demand for the PES business -- again, in the variable frequency drives; the x-by-wire. And, absent the euro situation, we would be looking at an 8% to 10% growth trajectory for that business in 2015.

Again, as I mentioned in my remarks, the concern there is a little bit on the euro -- where that's going. If it goes to parity, I mean, that's another 15% reduction in that currency. That'll have an effect on us. But in terms of the volume demand -- we see volume demand being very strong, as we've seen over the last couple of years in those sectors.

Very helpful. And, Bruce, just a clarification, and I'll jump back in queue: You mentioned auto radar is 10% of PCM -- gave a few other stats. Is that on a pro forma basis, or is that pre-Arlon?

That is pre-Arlon.

Okay. Thank you. I'll jump back in queue.

Avinash Kant, DA Davidson.

Good morning, Bruce, David, Bob, and Bill.

Hi, Avinash. Good morning.

My first question was on some of the timeline. You talk about the improvements in operating margins. And you've given us a three-year timeline on the model. Where do you think you will get to by the end of this year, given the Arlon acquisition just took place?

So, one of the things -- if you look at our history, right? And you look over the last couple of years, I think pretty much every quarter we've seen improvements in our gross margins. And part of that has to do with pricing. But a lot of that has to do with our operational efficiencies and scrap reduction, throughput, and so forth.

As we look forward in 2015, we're looking at still improvements there. Too early to tell what we're going to get out of the Arlon folks. But they have quite a robust lean manufacturing and Six Sigma systems. So, we're looking to leverage that into the rest of our -- into the rest of Rogers as we move forward.

You might care, David, to comment on the margin.

Yes, we've seen good margin improvement throughout the year, this year. Our yield has been steadily improving, and that is the gift that keeps on giving for us. So, we would expect to continue to improve in our -- in those yields and our gross margin, Avinash.

Okay. So, David, the guidance that you had given for Q4 at the end of Q3 -- on that front, if you look at the gross margins and the operating margins for Q4, they came in much better than expected.

Yes, they did.

Could you give us some of the -- where the upside came from?

Well, again, it's yield improvement. We are steadily improving our yield. And you can see, that was a very good, very strong quarter for us -- for the fourth quarter. It matched -- almost matched -- phenomenal margins that we come up with the [same] volume that we usually get seasonally in the third quarter.

So, we are very pleased with our progress on yields. And as I said, normally you wouldn't go backwards on yields. So, we are confident we will continue to make improvements.

Yes.

We've done a lot to add people in the divisions -- in PCM and high performance foams -- to really focus on operational excellence, and that's beginning to pay off.

And also, on revenue front, if I look at the guidance in March, excluding the Arlon, it looks like you're guiding up a little. Of course, that's, I would -- would you say that's better than seasonal? And where is it coming from, again? If you look at the segments, which segments do you think are outperforming seasonally in the March quarter compared to December?

Yes, so, Avinash, it's Bob Daigle. So, again, the strength we see going into the first quarter is, again, in the printed circuit materials area. And again, it's not so much a seasonal, as it is the market dynamics are very favorable for our circuit material business: wireless infrastructure, automotive radar. So, again, I think that's our star.

Yes, I just -- just a comment: I think, in Q1, in the PCM business, we've tempered a little bit of our numbers there. We are continuing to add capacity. And in China this quarter, in Q1, we had to take a shutdown to tie in our fourth press that went into Suzhou. And so, what happened there is we had to increase lead times to our customers.

So, the demand is still there. We've had to push out some of the orders, in order to make sure that we've got enough capacity online, as we project forward to see the growth coming in the rest of 2015.

Okay. And then, final question: Of course, we have looked at some of the numbers that came out from pre-acquisition of Arlon, in terms of operating margins and everything. Going forward -- as you go forward with the acquisition, what kind of cost synergies do you think from this acquisition going forward?

So, the strategic intent with Arlon is really around technology and market footprint, and access to new markets and broader markets. We don't see necessarily huge cost synergies. What we see are opportunities to move some of the Arlon products through a very extensive network that Rogers has, particularly in Europe and Asia. So, there could be some cost synergies -- back office and so forth. But it's -- we don't see that as the major driver here.

The major driver's really growth, and access to new technology. And our ability to root that out there, through our capabilities globally, and building on our relationships, and the relationships that Arlon has with their customer base. So, it's really a growth play, not a cost savings.

Perfect. Thank you so much.

(Operator Instructions)

Chris Butler, Sidoti.

Hi, good morning, everyone.

Good morning, Chris.

Just staying with Arlon: Can you give us an update on how their year ended -- what the final numbers were? Are they close to where they were when you made the deal?

Arlon is -- for the fourth quarter, was under Handy & Harman. And Handy & Harman will release that data on their timeline. I'm not sure. I think it's sometime in February. But it's not released yet. So, we can't comment on any performance of Arlon in Q4.

And as you are discussing your strategy, you are talking about continual improvement. It sounds like you have a number of investments that are being made to upgrade R&D capability -- new products. Do you have any cost savings investments that you're planning for 2015, please?

So, in cost savings -- first, we have really intensified our focus on operational efficiency and effectiveness, as well as supply chain. And so, in the fourth quarter of last year, of 2014, we hired a new Vice President of Supply Chain and Process Excellence, Gustavo Araujo. And he brings to Rogers many years of experience. And he is now driving on the procurement side, focusing -- particularly now with the Arlon acquisition -- working with our suppliers to make sure that we're getting the best possible deals given our size and strength.

And also, on the process excellence side, we've added a number of process excellence engineers. With Arlon, we're getting a number of very strong folks there that we're going to, most likely, deploy broadly at Rogers to drive projects. So, we have quite a robust approach here on the process excellence, and driving cost savings at our manufacturing and in our supply chain.

I appreciate your time.

Thanks.

Daniel Moore, CJS Securities.

Thank you again. I may be digging too deep in the weeds, but printed circuit materials, in Q4, declined by about $6 million sequentially in revenue. Operating income declined by $7 million. Was there a mix issue, or some other reason why profitability might have declined a little bit more than revenue on a sequential basis?

What we believe is that third quarter was certainly a peak in terms of demand. And so, as we moved into the fourth quarter, demand was just somewhat lower. And I think that's really the effect that you're seeing. It's not necessarily any structural change in the marketplace, or anything that we believe is happening that would cause us to be concerned from a move-forward perspective.

Yes. And we've also been focused on adding new capacity. So, it was a lot of effort putting in to bringing on a new treater, for example.

Right.

Got it. Very helpful. And there must be some -- or I assume there's a reasonable amount of customer overlap between Arlon and Rogers. Have you had time to gauge the reaction by customers that -- by the common customers that you do have, regarding the acquisition?

I would say, almost universally, the response from our customer base and Arlon's customer base has been very, very positive. I think they -- the customers are very comfortable with Rogers and with our capabilities, and particularly when we think about developing new products and innovation. Arlon's a very -- was a very strong company in terms of production manufacturing and bringing products to market. But I think what customers are seeing is the innovation capability that Rogers brings, and our engineers around the world that sit with the engineers -- the design engineers at the OEMs -- and really identify how we can solve their problems.

So, this is a very positive thing from the customer perspective, particularly where Arlon had less coverage in Europe and in parts of Asia. And that's where we have quite a lot of strength, particularly in Asia.

Okay. And I'd be remiss if I didn't try, David: Do you have even a reasonably wide range of what we should be thinking about in terms of expected impact of purchase accounting? And if not, when would you expect to have that updated?

We will definitely have that for the next quarter, but it's too early to say. We don't even have, really, all the numbers yet; so, good try.

And the accretion that you did give was for a partial quarter, correct, not for the full quarter?

Yes. That's a very good point. We acquired Arlon on the 22nd of January. So, it's just over two months.

Okay. Very good. Thank you again.

Thanks, Dan. All right.

There are no further questions at this time. I turn it back to Bruce for closing statements.

All right. Thank you, Kyle. In closing, we are extremely pleased with the year we had in 2014, which is a continuation of the success we've achieved since we began our transformational efforts nearly three years ago. We believe that market indicators point to additional growth in several of our key categories, including wireless telecommunications infrastructure, automotive safety sensors, consumer comfort and impact protection, and energy efficient power applications. We will leverage key learnings from Arlon as we integrate our Organizations, and continue to focus on manufacturing operational improvements.

In addition, we will maintain rigor around improvements to our business systems and processes to help us efficiently and cost effectively scale the Company as we grow. We believe that our four strategic elements -- market-driven, technology innovation, synergistic M&A, and operational excellence -- represent a solid go-forward plan, and will lead to sustained growth in 2015 and beyond.

Thank you for joining us on today's call. Have a great day.

This concludes today's conference call. You may now disconnect.