Good morning. My name is Kyle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation second quarter 2015 earnings 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] Thank you. I’d now like to turn the call over to Mr. Bill Tryon, Director of Investor & Public Relations. Sir, you may begin your conference.

Thank you, Kyle. Good morning, everyone, and welcome to the Rogers Corporation second quarter 2015 earnings conference call. The slides for today's call can be found on the Investors section of our website along with the news release that was issued yesterday. Turning to Slide 2. With me here today is 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 note 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 uncertainness 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 is posted in the Investors section of our website. I will now turn the call over to Bruce.

Thank you, Bill. Good morning everyone. In Q2 2015 Rogers achieved strong growth in non-GAAP earnings delivering $0.67 per diluted share, an increase of 15.5% versus Q2 2014. In addition, we achieved record-setting second-quarter net sales for the period of $163.1 million, up 0.3% over Q2 2014. In Q2, organic net sales decreased primarily as a result of a sudden sales decline into the Chinese wireless telecom market. The company believes that the widely reported government actions in China state owned telecom enterprises may have temporarily delayed certain projects. In addition, actions by Chinese circuit fabricators to reduce inventory levels further impacted Rogers’ sales into the sector. We believe this situation is temporary and we expect to see a progressive recovery in organic net sales during the remainder of 2015. During the second quarter our disciplined approach on cost management and operational excellence initiatives helped us maintain strong organic margin performance. Turning to Slide 4. I’d like to review the four elements of our growth strategy. We continue to have confidence in this roadmap which led us to record results in 2014 and has helped us maintain solid profitability during challenging market conditions this quarter. We are building a more market-driven organization through a deep understanding of global growth markets. A good example of this was the Q1 introduction of our new megatrend category: safety and protection. This change was based on our ongoing assessment of market opportunities as well as the growth we've experienced and worldwide demand for innovative solutions in consumer safety and protection. From a customer perspective, we are developing deeper partnerships through cooperative activities, including innovation days and joint development projects with industry leaders. These efforts helped us to uncover customer needs and identify ways that Rogers can help our customers win in a competitive market.…

Thanks, Bruce. Coming to Slide 11, in the second quarter of 2015 we achieved net sales of $163.1 million, up 6.3% compared to the second quarter of 2014. Actual second quarter of 2015 results were within the preliminary results announced on July 9, 2015 but below the original guidance provided on April 29, 2015 due primarily to sudden sales decline into the Chinese wireless telecom market. As previously announced, non-GAAP earnings per diluted share were also below the original guidance range due to the lower volume. However we were pleased with our margins despite the lower organic volume due to operational excellence initiatives and cost management consultants [ph]. Coming to Slide 12, organic sales declined in the quarter by 4.9% and we estimate an unfavorable currency impact of 5.4%. The acquisition of Arlon contributed $25.4 million or 16.5% of additional revenue in the quarter. On Slide 13, we have introduced the waterfall charts to help explain the changes to EPS from Q2 2014 to Q2 2015. Starting with $0.58 of EPS last year this is reduced by the low volume impact to margin of $0.27 partially offset by gross margin improvements of $0.10 due to the continuation of our efforts in operational excellence plus favorable absorption. We also had a favorable benefit from lower commercial expenses of $0.19 due to lower inventive comp relative to 2014 and other discrete items encountered [ph] in the same quarter of 2014. In addition, lower variable costs and controlled spending also reduced commercial expenses. This was further offset by another $0.05 relative to lower joint venture results and increased interest expense due to the debt related to the Arlon acquisition. The tax rate and share dilution had an unfavorable impact of $0.02. Arlon added $0.14 to EPS. This results in a sub-total of $0.67…

Thank you, David and this concludes our prepared remarks. So we will now open the line for Q&A. Kyle?

[Operator Instructions] Your first question comes from the line of Daniel Moore from CJS Securities.

Good morning gentlemen and bear with me as I get used to your new vernacular. Want to hone in on obviously the decline that we saw in Q2 in 4G related circuit material sales to China. Can you describe, Bruce, kind of the monthly sequential trends? You mentioned you’re cautious still in Q3 what you saw in July and what kind of, I guess, what you're seeing are pointing to that, that would lead you to believe that Q2 was in fact the bottom there?

So first of all, it’s very interesting to see what happened in Q2. When we look back at April's numbers, it was within what we had projected in our guidance and then it just fell off the cliff in May and June. As we look forward through the third quarter, we see orders building in our pipeline that our bookings are increasing. So we have confidence that it's recovering. Now the rate of recovery is where we’re somewhat cautious. But as we look forward we know that the buildout will occur. There has been already announcements by one of the three China mobile or China telecom organizations that they are increasing their build for the year. So our sense is that this is increasing, to put a very fine point on it at this point, it's too early for us in order to do that. But we do see that progressively through the quarter and through the rest of the year we see this increasing. I think the interesting thing also is to take a look at where the global LTE 4G -- 4G LTE buildout is. Globally we’re only about 25% built out and specifically when we look at China we’re in the range of 35% to 40%. So we’re very confident about the future of the buildouts here. The question is just what I would term sort of short term spikiness that that’s happened, primarily in our view because of some of the actions that were taken by the Chinese government some of the investigations that went on in the telecom area. So we think we’re through that and now we’re looking forward at the recovery.

And is it fair to characterize that cautious as being embedded into your Q3 guidance?

Yes, I think that would be a fair characterization.

Can you give us a little better sense if I drill into the guidance and David gave us nice color. But what it implies for Arlon in terms of organic growth and then -- as well as your legacy advanced connectivity and elastomeric material segments just on an organic growth basis?

I think Arlon, they are flat, so down a little bit but they are essentially flat, maybe down between 0% and 5%.

And I think on the EMS side, formerly HPF, we’re looking at Q3, it tends to be a high point. We’re being cautious there. Again there is a confluence of design changes that come through in this quarter, how that affects the business is, we’re still determining because it’s a short -- I would say short cycle, let’s say. I think the other thing is as we’ve seen the decrease in demand for handhelds, specifically some of the feature phones where we have content and as the unit volumes go down, we’re somewhat concerned about that. But overall I'd say there's some small upside there that we think will occur.

And just looking at the quarter, we’re intrigued that Arlon held up much better than Rogers’ kind of legacy circuit materials business. Just can you describe, maybe contrast, remind us of the different end markets and what you're seeing and why that business appears to be holding up little bit better at least in the short term?

Yes, in the Arlon ACS component, two major areas -- one is the antennas, the tower antennas, the circuit materials that go into antenna systems. And the second one is military, defense high reliability. Military high reliability is very steady and so we've enjoyed a very consistent performance there. And on the antenna side of the business, that runs in a different cycle, actually somewhat disconnected. While related to base station builds, it's not necessarily directly related. So we continue to see very good results there and as we look forward in Q3, we see what -- looking back on the history of Arlon, we see there's a little bit of seasonality decline in Q3. But generally we see the orders holding up on the antenna side.

And last one, I will jump back in queue. X-by-wire, significant area of growth, anything causing that little bit of a slowdown near term?

I think the order pattern is probably the best way that I would describe it. We don't see any significant change in that market outlook for us and so we’re just looking at how the patterns go. There were some issues I believe with some of the customers moving plant facilities and so forth that kind of caused some spikiness.

Your next question comes from the line of Christopher Butler from Sidoti & Company.

Going back to the China 4G question, if you read the reports coming out of the telecoms in China, they’re still going at 100 miles per hour but we've seen this from you and others that there is this temporary slowdown. Could you give us an idea of how much of this is end market slowdown versus too much inventory in the channel that kind of caught up to you?

So very good question. I think when we look – we have to go back into 2014 and look at what happened there – a huge demand surge in 2014 in the base stations. And so we had really been stretching ourselves, we had 35% growth last year in ACS. And so there was, we believe, building of inventory by the board shops, as they move forward when they could get materials they started building inventory. So that's added to the -- or exacerbated the situation in the supply chain with excess inventory. So as the telecom ordering reduced during Q2, the pullback was accentuated by people also pulling down their inventories in the supply chain that goes into the builds of the base stations. So it was somewhat a double whammy between sort of readjusting the supply chain inventories in the system and then just the orders having dropped off. And so we think we’re back in balance. What we view, though, is – and if you look at some of the announcements from some of the OEMs of the base stations, they were saying that they had a good Q2. We are 3 to 5 months before them in demand. And so the base stations get built based on our circuit materials and so by the time they sell it, it's 3 to 5 months out. So our view is that, that's the way that the value or the supply chain is working for us. So as we start seeing impact and improvements , it will flow through the system over the next five months. So we should look at OEM – at the OEM announcements and you'll see the same.

And you’d indicated that your organic gross margins held up pretty well. Could we assume that sales into the 4G space held up as well even with the softer than normal demand?

Well, what we did there -- the sales into 4G business is really where we had the second quarter decline but what we've done on the margin side is through our process improvements and so forth, we’ve been able to hold margin. We did build a bit of inventory in Q2 which also helped absorption and helped margins as well. But I think I would focus on the fact that even with the volume down somewhat on the circuit materials that go into 4G we were able to maintain the organic side of the house on margins.

Your next question comes from the line of David Cohen from Midwood Capital.

Thanks guys, good morning. My questions actually have been answered.

[Operator Instructions] Your next question comes from the line of Daniel Moore from CJS Securities.

Thank you again. Bruce, you mentioned the long-term goal of 15% growth, combination of organic and acquired, how much of that do you expect to come organically over the next several years?

Again the way that we've categorized or viewed this is -- we've historically had a target of about 10% organic growth. Now we have certainly some headwinds this year between the situation in China, the situation with the currency exchange rates in the euro. But as we look at the markets that we’re in, the tailwinds in our megatrend markets are still very strong. And so we continue to assess and look at what we believe to be a very strong market areas. Overall we’re looking at the 15% between organic and inorganic and over a course of two or three years that's going to fluctuate back and forth between organic and inorganic growth. But we’re still looking at strong markets and the 10% organic is not something that at this point we’re saying is not achievable. But again you do have spikiness here and there.

And then turning quickly to balance sheet, $30 million net cash and growing given a pretty strong cash flow and probably even stronger next year and then you have the Increased liquidity. I know you are looking for acquisitions, maybe you described the pipeline but is there anything that would preclude you from looking both at your own stock and acquisition at the same point given the material decline in the shares over the last couple of months?

So in terms of acquisitions, we have a robust process in place and Bob Daigle is leading that and we continue to be out there seeking synergistic acquisitions that we think will add value, much like Arlon. And that's number one. Number two, there's always a question of what else can we do with our cash in addition to the acquisition approach? So we continue to review the option of share buyback, that’s something that's in front of the board at every meeting. And we continue to discuss that as another approach for the use of cash over the shorter term. But I would refocus just on the acquisition side which is really core to our strategy and where we are as I said working hard to find other good opportunities. Operator Your next question comes from the line of Daniel Locker [ph] from Kalmar Investment.

Glad to be here. Can you talk about or remind us how much revenue in the EMS category now comes from handheld devices?

It’s approximately $25 million annually.

25% of that business.

Yes.

So that’s what, 40 some odd million or so.

Yes, it’s in the range of 40 million.

And as you think going forward with new product and culling of existing content, how would you expect that to track recognizing that you’ve focused on other areas as you talk about the growth opportunities?

Right. We still have a very very good to focus on MID where we think there's opportunities, things like back cushions, ripple pad cushion and so forth for the MID applications. But I would say that will continue to decline over the next 2, 3 years to some steady-state level and at this point it's really hard to project exactly where it will even out. But we continue to work, as I said, on some other application areas in MID where we think we have some uniqueness and then we’re refocusing our efforts on the consumer side as well as industrial side. Yes, this market, the MID market is one that still has some -- a little bit of a decline in front of it for us but again we’re working on the other side of the house to grow that.

And what timeframe would you expect that segment to go organic positive?

I would say we’re talking probably two years – for MID to go positive?

For EMS.

Oh, EMS, we’re looking forward that into 2016 we should start seeing some level of organic increase.

Could you, if you would please, focus a bit on some of the design-in activity, maybe you got to this already in the call and I just wasn't – didn’t note the conversation but if you could talk about some of the design-in activity and some of the things you are most keen on?

So just on a general basis, when we look at the design wins that we've had, or second [ph] wins, in Q1 there were 469, in Q2 we went up to 536. So we’re still on am increasing basis and the overall funnel is increasing as well. We’re almost to 1000 projects that are being evaluated right now. And this is all on the megatrend areas and that's a wide distribution across the 33 megatrends. So we’re confident when we look at the pipeline of projects that we have very good things that have been approved that are expecting, we’re waiting for them to hit into, go into production. So we don't -- that's a great leading indicator in our view, the question is when does it actually come into production – but we don't see any diminishment of designing activity and design wins from the Rogers perspective.

Finally, if you would, we've had tentative focus on a 50% flow-through on revenue both up and down. As you look at the different segments, would the flow-through economics differ based on the segment?

Yeah I think the EMS business has the highest flow through followed by the ACS business and lastly coming to PES depending on the maximum [ph]. End of Q&A

There are no further questions at this time. I will turn the call back over to Bruce.

All right. Thank you, Kyle. In closing, we expect to see progressive improvement in organic sales in the second half of 2015 as the China market stabilizes and inventory levels normalize. We remain confident in our growth strategy which has led us to record results in 2014. Moving forward we will continue to execute the four elements of our strategy, being market driven, innovation leadership, synergistic M&A and operational excellence. Our record second-quarter sales were buoyed by a solid performance from Arlon which is an excellent example of our approach to M&A. The integration continues to exceed our expectations as we finalize the integration and begin to capitalize on opportunities to expand our market reach, broaden our portfolio and deepen customer relationships. Our discipline around operational excellence and cost management helped us maintain consistently strong organic margins in Q2 even in the face of market headwinds. We will maintain focus on driving down costs through operational improvements in our manufacturing operations. In our markets we expect to experience growth in Rogers’ applications for wireless telecommunications, automotive safety systems, rail traction, EV, HEV, energy-efficient motor controls, automotive electrification and safety and protective cushioning. We continue to pursue synergistic acquisition opportunities to leverage our global strengths and broaden the portfolio of solutions that we provide our customers. We believe that many opportunities will adequately exist particularly as we expand our presence across new markets and regions as well as a further diversification of our product portfolio into markets we already serve today. So thank you for joining us on the call today. Have a good day.

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