What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-31 compared with 2020-05-01 · 211 added, 118 removed, 141 unchanged (70% of the section changed)

42 unchanged sentences

More specifically, in addition to the impact of COVID-19 discussed below, the key medium- to long-term trends currently affecting our business include the increasing use of advanced driver assistance systems (ADAS) and increasing electrification of vehicles, including electric and hybrid electric vehicles (EV/HEV), in the automotive industry and new technology adoption in the telecommunications industry, including next generation wireless infrastructure.

In addition to our focus on advanced mobility and advanced connectivity in the automotive and telecommunications industries, we sell into a variety of other markets including general industrial, portable electronics, connected devices, aerospace and defense, mass transit and renewable energy.

In addition to our focus on advanced mobility and advanced connectivity in the automotive and telecommunications industries, we sell into a variety of other markets including general industrial, connected devices, aerospace and defense, mass transit and renewable energy.

Our sales and marketing approach is based on addressing these trends, while our strategy focuses on factors for success as a manufacturer of engineered materials and components:

7 unchanged sentences

The global COVID-19 pandemic has affected and continues to affect Rogers’ business and operations.

In response to the outbreak, Rogers prioritized the safety and well-being of its employees—including implementing social distancing initiatives in its facilities, expanding personal protective equipment usage, enhancing plant hygiene processes, and extending employee benefits, which increased our expenses in the quarter—while at the same time taking actions to preserve business continuity.

In response to the outbreak, Rogers prioritized the safety and well-being of its employees—including implementing social distancing initiatives in its facilities, providing remote working arrangements for certain employees, expanding personal protective equipment usage, enhancing plant hygiene processes, and extending employee benefits, which increased our expenses in the quarter—while at the same time taking actions to preserve business continuity.

Our non-manufacturing employees have transitioned seamlessly to remote working arrangements and are maintaining effective collaboration, both internally and with our customers.

Our China business and operations were the first to be impacted by the virus, with the government temporarily suspending our operations, as well as the operations of most Chinese business, including our Chinese customers and suppliers, at the beginning of February.

We resumed production in mid-February and reached full production capacity by early-March.

and European businesses were first impacted later in the quarter, and the impact continued through the quarter and continues through the date of this filing.

and European businesses were first impacted later in the first quarter, and the impact continued through the first and second quarter and continues through the date of this filing.

In both the U.S.

and Europe, we generally maintained operations at close to normal levels, with the additional employee safety precautions implemented at our facilities.

We do not believe these additional precautions in the aggregate, had a material impact on our financial performance during the quarter.

In the U.S., exemptions from state-level “shelter in place” directives with respect to numerous sectors, including the Communications, Healthcare and Public Health, Defense Industrial Base, Critical Manufacturing and Information Technology sectors, have largely enabled us to continue our operations.

We do not believe these additional precautions in the aggregate, had a material impact on our financial performance during the first and second quarter.

Our operations were not affected by any material shortages, as our inventory and supply chain met our manufacturing requirements.

Demand was uneven in the quarter amongst the various markets we serve.

5G and 4G wireless infrastructure demand in China increased late in the first quarter 2020, while automotive demand was adversely impacted late in the quarter globally, on a sequential quarter basis.

We expect some of the demand will be deferred into the second quarter or later during this calendar year, while other demand is likely lost.

Global demand was broadly impacted in the second quarter by the COVID-19 pandemic.

Automotive and certain industrial markets were especially affected by factory shutdowns and supply chain disruptions.

Demand improved in some markets, such as aerospace and defense and wireless infrastructure.

Geographically, China demand was stronger than other regions resulting from the resumption of 5G wireless infrastructure deployments and restrictions related to COVID-19 being eased earlier than other regions.

We expect that the COVID-19 pandemic will have a continuing but uncertain impact on our business and operations in the short- and medium-term.

Due to the above circumstances and as described generally in this Form 10-Q, our results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year.

Due to the above circumstances and as described generally in this Form 10-Q, our results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

Executive Summary

The following key highlights and factors should be considered when reviewing our results of operations, financial position and liquidity:

• In the first quarter of 2020 as compared to the first quarter of 2019, our net sales decreased 17.1% to $198.8 million, our gross margin decreased approximately 260 basis points to 33.0% from 35.6%, and operating income decreased approximately 490 basis points to 8.8% from 13.7%.

• We incurred approximately $0.7 million of incremental costs due to the COVID-19 pandemic in the first quarter of 2020, primarily related to employee compensation and benefits.

• In the second quarter of 2020 as compared to the second quarter of 2019, our net sales decreased 21.3% to $191.2 million, our gross margin increased approximately 130 basis points to 36.6% from 35.3%, and operating income decreased approximately 270 basis points to 11.0% from 13.7%.

In the first half of 2020 as compared to the first half of 2019, our net sales decreased 19.2% to $390.0 million, our gross margin decreased approximately 70 basis points to 34.8% from 35.5%, and operating income decreased approximately 380 basis points to 9.9% from 13.7%.

• We borrowed $150.0 million under our revolving credit facility during the first quarter of 2020 as a precautionary measure in order to increase our cash position and preserve financial flexibility given current uncertainty in the global markets resulting from the COVID-19 pandemic, partially offset by a $50.0 million discretionary principal payment on our revolving credit facility during the second quarter of 2020.

We made an additional $125.0 million discretionary principal payment on July 29, 2020, bringing our outstanding borrowings under our revolving credit facility to $98.0 million as of our filing date.

• We incurred incremental transaction costs of $3.3 million in the second quarter of 2020 and $4.0 million in the first half of 2020, due to COVID-19 pandemic.

These costs primarily consist of temporary additional benefits established under our dependent care, premium pay and sick pay programs in response to the COVID-19 pandemic, as well as additional safety supplies.

A substantial portion of the additional benefits under these programs expired in mid-June.

We expect significantly lower costs associated with the remaining additional benefits, as well as safety supplies, during the second half of 2020.

• We recognized an additional $3.9 million of amortization expense in the second quarter of 2020, and will recognize an additional $11.7 million of amortization expense each quarter, for the third and fourth quarters of 2020, due to the acceleration of amortization expense related to our Diversified Silicone Products, Inc.

(DSP) customer relationships and trademarks and trade names definite-lived other intangible assets, which were both accelerated to be fully amortized by December 31, 2020.

Results of Operations

The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales:

Three Months Ended

March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

3 unchanged sentences

Restructuring and impairment charges — % 0.4 % — % 0.4 %

Other operating expense, net — % 0.4 %

Other operating (income) expense, net — % — % — % 0.2 %

Operating income 11.0 % 13.7 % 9.9 % 13.7 %

6 unchanged sentences

Net Sales and Gross Margin

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales $ 191,157 $ 242,852 $ 389,967 $ 482,650

1 unchanged sentence

Percentage of net sales 36.6 % 35.3 % 34.8 % 35.5 %

Net sales decreased by 17.1% in the first quarter of 2020 compared to the first quarter of 2019.

Our PES, ACS and EMS operating segments had net sales decreases of 21.9%, 19.8% and 10.0%, respectively.

The decrease in net sales was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure markets in our ACS operating segment, lower net sales in the portable electronics, general industrial and EV/HEV markets in our EMS operating segment and lower net sales in the variable frequency drives and mass transit markets in our PES operating segment.

Net sales were unfavorably impacted by foreign currency impacts of $2.6 million, or 1.1%, due to the depreciation in value of the euro, Chinese renminbi and Korean won relative to the U.S.

In our ACS operating segment, we anticipate lower net sales in the 4G and 5G wireless infrastructure markets year-

over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis.

However, on a sequential quarter basis, we experienced net sales growth in the 4G and 5G wireless infrastructure markets, and we anticipate this growth to continue into the second quarter of 2020 as a result of China’s planned 5G deployments.

In our EMS operating segment, we anticipate lower net sales in the portable electronics, automotive and EV/HEV markets year-over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis due to the impact from the COVID-19 pandemic.

On a sequential quarter basis, we anticipate lower net sales in the general industrial, portable electronics and automotive markets due to the impacts from the COVID-19 pandemic.

The lower net sales in variable frequency drives market in our PES operating segment was due to a slowdown in industrial automation demand combined with customer inventory rebalancing, which began in mid-2019, and has continued through the first quarter of 2020.

We anticipate lower net sales in the vehicle electrification and EV/HEV markets on a sequential quarter basis due to the impacts from the COVID-19 pandemic on the automotive industry.

Gross margin as a percentage of net sales decreased approximately 260 basis points to 33.0% in the first quarter of 2020 compared to 35.6% in the first quarter of 2019.

Gross margin in the first quarter of 2020 was unfavorably impacted by lower volume and unfavorable product mix in our ACS and PES operating segments, unfavorable absorption of fixed overhead costs in our PES and ACS operating segments and an increase in inventory reserve provisions in our PES and EMS operating segments.

This was partially offset by favorable productivity performance in our PES, EMS and ACS operating segments, yield improvements, lower freight, duties and tariffs costs in our ACS and PES operating segments, as well as lower fixed overhead costs in our EMS operating segment.

The COVID-19 pandemic impacted our gross margin with $0.6 million of incremental costs, primarily related to employee compensation and benefits.

Net sales decreased by 21.3% in the second quarter of 2020 compared to the second quarter of 2019.

Our EMS, ACS and PES operating segments had net sales decreases of 23.7%, 23.3% and 12.5%, respectively.

The decrease in net sales was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure and automotive markets in our ACS operating segment, lower net sales in the portable electronics, general industrial, consumer and mass transit markets in our EMS operating segment and lower net sales in the mass transit, variable frequency drives and vehicle electrification markets in our PES operating segment.

The decrease in net sales was partially offset by higher net sales in the aerospace and defense market in our ACS operating segment.

Net sales were unfavorably impacted by foreign currency impacts of $3.3 million, or 1.3%, due to the depreciation in value of the Chinese renminbi, euro and Korean won relative to the U.S.

Net sales decreased by 19.2% in the first half of 2020 compared to the first half of 2019.

Our ACS, EMS and PES operating segments had net sales decreases of 21.7%, 16.9% and 17.5%, respectively.

The decrease in net sales was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure and automotive markets in our ACS operating segment, lower net sales in the portable electronics, general industrial, consumer and mass transit markets in our EMS operating segment and lower net sales in the variable frequency drives, mass transit and vehicle electrification markets in our PES operating segment.

The decrease in net sales was partially offset by higher net sales in the aerospace and defense market in our ACS operating segment.

Net sales were unfavorably impacted by foreign currency impacts of $5.8 million, or 1.2%, due to the depreciation in value of the Chinese renminbi, euro and Korean won relative to the U.S.

The lower net sales in the 4G and 5G wireless infrastructure markets in our ACS operating segment reflected the cumulative effect of the pause in the 5G deployments in China due to the impacts from the COVID-19 pandemic, the waning of 4G infrastructure spending by telecommunications companies in anticipation of 5G, as well as the impacts of the trade restrictions on Huawei, increased competition and design changes by telecommunications equipment original equipment manufacturers (OEMs), which reduced our materials content in 5G base stations.

The lower net sales in the automotive market was largely due to the impacts of COVID-19 pandemic.

of the first half of 2020.

The lower net sales in vehicle electrification market in our PES operating segment was due to the COVID-19 impacts on the automotive sector.

In our ACS operating segment, we anticipate lower net sales in the 4G and 5G wireless infrastructure and automotive markets year-over-year in the third quarter of 2020, on both a quarter-to-date and year-to-date basis, while we anticipate high net sales in the aerospace and defense market year-over-year on a quarter-to-date and year-to-date basis.

On a sequential quarter basis, we experienced net sales growth in the 4G and 5G wireless infrastructure markets, however we anticipate net sales to decline into the third quarter of 2020 as a result of lower volumes, as more than half of the expected 2020 5G base station installations were completed in the first half of 2020, and from reductions in our material content used in 5G base stations.

The effects of trade tensions, lower 5G base station content and the ongoing decline in 4G deployments are creating a great deal of uncertainty around our outlook for wireless infrastructure.

As a result, we believe the growth opportunity in wireless infrastructure is substantially reduced going forward.

In our EMS operating segment, we anticipate lower net sales in the portable electronics and general industrial markets year-over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis due to the impact from the COVID-19 pandemic.

On a sequential quarter basis, we anticipate higher net sales in the portable electronics market primarily due to seasonality in the third quarter of 2020.

On a sequential quarter basis, we experienced net sales growth in the EV/HEV market in the second quarter of 2020, and we anticipate this growth to continue into the third quarter of 2020 as a result of stronger demand in Europe.

In our PES operating segment, we anticipate lower net sales in the mass transit year-over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis due to the impact from the COVID-19 pandemic.

On a sequential quarter basis, we anticipate higher net sales in the EV/HEV market primarily due to manufacturing disruptions subsiding and stronger demand.

Gross margin as a percentage of net sales increased approximately 130 basis points to 36.6% in the second quarter of 2020 compared to 35.3% in the second quarter of 2019.

Gross margin in the second quarter of 2020 was favorably impacted by lower freight, duties and tariffs costs in our ACS and EMS operating segments, including the recognition of a $3.3 million expected recovery of previous duty taxes paid due to a change in Chinese tariff regulations in our ACS operating segment, as well as favorable product mix in our ACS, EMS and PES operating segments, yield improvements and favorable productivity performance in our PES operating segment and lower fixed overhead costs in our EMS and PES operating segments.

This was partially offset by lower volume and unfavorable absorption of fixed overhead costs in our ACS, EMS and PES operating segments, as well as unfavorable productivity performance in our ACS operating segment and an increase in inventory reserve provision in our EMS operating segment.

Gross margin as a percentage of net sales decreased approximately 70 basis points to 34.8% in the first half of 2020 compared to 35.5% in the first half of 2019.

Gross margin in the first half of 2020 was unfavorably impacted by lower volume and unfavorable absorption of fixed overhead costs in our ACS, EMS and PES operating segments, an increase in inventory reserve provision in our EMS operating segment, as well as unfavorable productivity performance and higher fixed overhead costs in our ACS operating segment.

This was partially offset by lower freight, duties and tariffs costs in our ACS, EMS and PES operating segments, including the recognition of a $3.3 million expected recovery of previous duty taxes paid due to a change in Chinese tariff regulations in our ACS operating segment, as well as yield improvements and favorable productivity performance in our PES operating segment, lower fixed overhead costs in our EMS and PES operating segments and favorable product mix in our EMS operating segment.

We incurred incremental transaction costs associated with the temporary additional benefits established under our dependent care, premium pay and sick pay programs in response to the COVID-19 pandemic, as well as additional safety supplies.

These costs impacted our gross margin by approximately $3.0 million and $3.6 million on a quarter-to-date basis and year-to-date basis, respectively.

A substantial portion of the additional benefits under these programs expired in mid-June.

We expect significantly lower gross margin impacts associated with the remaining additional benefits, as well as safety supplies, during the second half of 2020.

Selling, General and Administrative Expenses

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Selling, general and administrative expenses $ 41,694 $ 43,649 $ 82,024 $ 86,901

Percentage of net sales 21.8 % 18.0 % 21.0 % 18.0 %

Selling, general and administrative (SG&A) expenses decreased 6.8% in the first quarter of 2020 from the first quarter of 2019, primarily due to a $0.8 million decrease in other intangible assets amortization, a $0.5 million decrease in professional services, a $0.3 million decrease in depreciation, a $0.2 million decrease in software costs, a $0.1 million decrease in travel and entertainment expenses, a $0.1 million decrease in total compensation and benefits and a $0.1 million decrease in environmental charges.

Selling, general and administrative (SG&A) expenses decreased 4.5% in the second quarter of 2020 from the second quarter of 2019, primarily due to a $2.3 million decrease in total compensation and benefits, a $2.0 million decrease in travel and entertainment expenses, a $0.7 million decrease in advertising expenses, a $0.5 million decrease in depreciation, a $0.4 million decrease in software costs, a $0.4 million decrease in recruiting/relocation/training expenses and a $0.4 million decrease in environmental charges, partially offset by a $3.1 million increase in other intangible assets amortization and a $1.8 million increase in professional services.

SG&A expenses decreased 5.6% in the first half of 2020 from the first half of 2019, primarily due to a $2.4 million decrease in total compensation and benefits, a $2.1 million decrease in travel and entertainment expenses, a $0.9 million decrease in advertising expenses, a $0.8 million decrease in depreciation, a $0.6 million decrease in software costs, a $0.6 million decrease in recruiting/relocation/training expenses and a $0.5 million decrease in environmental charges, partially offset by a $2.3 million increase in other intangible assets amortization and a $1.3 million increase in professional services.

The increase in amortization expense for the three and six months ended June 30, 2020 was due to the acceleration of amortization expense related to our DSP customer relationships and trademarks and trade names definite-lived other intangible assets, which were both accelerated to be fully amortized by December 31, 2020 due to an adjustment to their remaining useful lives.

We recognized an additional $3.9 million of amortization expense in the second quarter of 2020, and will recognize an additional $11.7 million of amortization expense each quarter, for the third and fourth quarters of 2020.

The increases in amortization expense in 2020 are offset by decreases in forecasted amortization expense in future years.

For additional information, refer to “Note 6 – Goodwill and Other Intangible Assets” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

The decrease in travel and entertainment and recruiting/relocation/training expenses, on both a quarter-to-date and year-to-date basis, was primarily driven by the impacts of COVID-19.

Research and Development Expenses

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Research and development expenses $ 7,295 $ 7,843 $ 15,100 $ 15,452

Percentage of net sales 3.8 % 3.2 % 3.9 % 3.2 %

R&D expenses increased 2.6% in the first quarter of 2020 from the first quarter of 2019 due to increases in total compensation and benefits as well as professional services.

Restructuring and Impairment Charges and Other Operating Expense, Net

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

R&D expenses decreased 7.0% in the second quarter of 2020 from the second quarter of 2019 due to decreases in laboratory expenses as well as travel and entertainment expenses, partially offset by increases in total compensation and benefits as well as professional services.

R&D expenses decreased 2.3% in the first half of 2020 from the first half of 2019 due to decreases in laboratory expenses as well as travel and entertainment expenses, partially offset by increases in total compensation and benefits as well as professional services.

Restructuring and Impairment Charges and Other Operating (Income) Expense, Net

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Restructuring and impairment charges $ — $ 1,083 $ — $ 1,905

Other operating expense, net $ 20 $ 911

Other operating (income) expense, net $ (112) $ 40 $ (92) $ 951

We incurred restructuring charges associated with the consolidation of our Santa Fe Springs, California operations with the Company’s facilities in Carol Stream, Illinois and Bear, Delaware.

We recognized no restructuring charges in the first quarter of 2020, and we recognized $0.8 million of restructuring charges related to our facility consolidation in the first quarter of 2019.

We recognized no restructuring charges in the second quarter of 2020, and we recognized $0.1 million of restructuring charges related to our facility consolidation in the second quarter of 2019.

We recognized no restructuring charges in the first half of 2020, and we recognized $0.9 million of restructuring charges related to our facility consolidation in the first half of 2019.

We recognized $0.9 million and $1.0 million in impairment charges on certain assets in connection with the Isola USA Corp.

(Isola) asset acquisition for the three and six months ended June 30, 2019, respectively.

With respect to other operating (income) expense, net, we recognized income of $0.1 million from economic incentive grants related to the physical relocation of our global headquarters from Rogers, Connecticut to Chandler, Arizona, for the three and six months ended June 30, 2020.

In connection with the transitional leaseback of a portion of the facility and certain machinery and equipment acquired from Isola in August 2018, we recognized lease income of $0.3 million and $0.9 million for the three

and six months ended June 30, 2019, respectively, and related depreciation on leased assets of $0.4 million and $1.6 million, respectively, for the three and six months ended June 30, 2019.

Equity Income in Unconsolidated Joint Ventures

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Equity income in unconsolidated joint ventures $ 1,022 $ 1,742 $ 2,240 $ 2,579

As of March 31, 2020, we had two unconsolidated joint ventures, each 50% owned:

As of June 30, 2020, we had two unconsolidated joint ventures, each 50% owned:

Rogers INOAC Corporation (RIC) and Rogers INOAC Suzhou Corporation (RIS).

Equity income in those unconsolidated joint ventures increased 45.5% in the first quarter of 2020 from the first quarter of 2019.

The increase was due to higher net sales for RIC, favorable foreign currency impacts for RIS and improved operational performance for both RIS and RIC, partially offset by lower net sales for RIS.

Other (Expense) Income, Net

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Equity income in those unconsolidated joint ventures decreased 41.3% in the second quarter of 2020 from the second quarter of 2019, and decreased 13.1% in the first half of 2020 from the first half of 2019.

On a quarter-to-date basis, the decrease was due to lower net sales due to the COVID-19 pandemic, as well as declines in operational performance for both RIS and RIC.

On a year-to-date basis, the decrease was due to lower net sales in RIS due to the COVID-19 pandemic and declines in operational performance for both RIS and RIC.

Pension Settlement Charges and Other (Expense) Income, Net

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Pension settlement charges $ (55) $ — $ (55) $ —

Other (expense) income, net $ 634 $ (1,401) $ (152) $ 3

Other (expense) income, net decreased to $0.8 million in the first quarter of 2020 compared to $1.4 million in the first quarter of 2019.

On a quarter-to-date basis, the increase in expense was due to unfavorable impacts from our copper derivative contracts and foreign currency transactions, as well as lower net periodic benefit credits associated with our defined benefit plans, partially offset by favorable impacts from our foreign currency derivative contracts.

In the second quarter of 2020, we recorded an immaterial pre-tax settlement charge in connection with the remaining settlement efforts for the termination of the Rogers Corporation Defined Benefit Pension Plan (following its merger with the Hourly Employees Pension Plan of Arlon LLC, Microwave Material and Silicone Technologies Divisions, Bear, Delaware (collectively, the Merged Plan)).

For additional information, refer to “Note 11 – Pension Benefits and Other Postretirement Benefits.”

Other (expense) income, net increased to income of $0.6 million in the second quarter of 2020 from expense of $1.4 million in the second quarter of 2019.

On a quarter-to-date basis, the increase was due to favorable impacts from our copper derivative contracts and foreign currency transactions, partially offset by lower net periodic benefit credits associated with our defined benefit plans and unfavorable impacts from our foreign currency derivative contracts.

Other (expense) income, net decreased to expense of $0.2 million in the first half of 2020 from a nominal amount of income in the first half of 2019.

On a year-to-date basis, the decrease was due to lower net periodic benefit credits associated with our defined benefit plans, partially offset by favorable impacts from our copper derivative contracts and foreign currency transactions.

Interest Expense, Net

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Interest expense, net $ (1,779) $ (2,038) $ (2,986) $ (3,976)

Interest expense, net, decreased by 37.7% in the first quarter of 2020 from the first quarter of 2019, due to lower interest expense on borrowings under our revolving credit facility, which was mainly attributable to a lower weighted-average outstanding balance for the first quarter of 2020 compared to the first quarter of 2019.

Due to the $150.0 million of borrowings under our revolving credit facility late in the first quarter of 2020, we expect interest expense, net to increase in the second quarter of 2020 from the second quarter of 2019.

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Interest expense, net, decreased by 12.7% in the second quarter of 2020 from the second quarter of 2019, and decreased by 24.9% in the first half of 2020 from the first half of 2019.

The decrease, on both a quarter-to-date and year-to-date basis, was primarily due to lower interest expense on borrowings under our revolving credit facility, which was mainly attributable to a lower weighted-average interest rate year-over-year.

The decrease, on both a quarter-to-date and year-to-date basis, was partially offset by unfavorable changes in our interest rate swap settlements.

We expect interest expense, net to decrease on both a quarter-to-date and year-to-date basis in the third quarter of 2020 from the third quarter of 2019 due to an anticipated lower weighted-average interest rate on and an anticipated lower weighted-average outstanding balance for our borrowings under our revolving credit facility.

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Income tax expense $ 6,394 $ 7,223 $ 9,835 $ 11,927

Effective tax rate 30.6 % 22.9 % 26.1 % 18.5 %

Our effective income tax rate was 20.6% and 14.2% for the three months ended March 31, 2020 and 2019, respectively.

The increase from the first quarter of 2019 was primarily due to the decrease in current quarter reversals of reserves for uncertain tax positions and the decrease in excess tax deductions on stock-based compensation, partially offset by the beneficial impact of changes in valuation allowance against deferred tax assets associated with carried over research and development credits.

Our effective income tax rate was 30.6% and 22.9% for the three months ended June 30, 2020 and 2019, respectively.

The increase from the second quarter of 2019 was primarily due to the increase in current quarter accruals of reserves for uncertain tax positions and higher tax impact on unremitted foreign earnings and profits, partially offset by the beneficial impact of changes in valuation allowance related to R&D credits, pretax mix across jurisdictions with disparate tax rates and the

international provisions from the U.S.

tax reform enacted in 2017.

Our effective income tax rate was 26.1% and 18.5% for the six months ended June 30, 2020 and 2019, respectively.

The increase from the first half of 2019 was primarily due to the increase in current quarter accruals of reserves for uncertain tax positions, the decrease in excess tax deductions on stock-based compensation and higher tax impact on unremitted foreign earnings and profits, partially offset by the beneficial impact of changes in valuation allowance related to R&D credits and pretax mix across jurisdictions with disparate tax rates.

Operating Segment Net Sales and Operating Income

Advanced Connectivity Solutions

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales $ 70,940 $ 92,529 $ 135,493 $ 172,999

Operating income $ 15,624 $ 18,458 $ 21,086 $ 31,522

ACS net sales decreased by 19.8% in the first quarter of 2020 compared to the first quarter of 2019.

The decrease in net sales over the first quarter of 2019 was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure markets, which reflected the cumulative effect of the pause in the 5G deployments in China due to the impacts from the COVID-19 pandemic, the waning of 4G infrastructure spending by telecommunications companies in anticipation of 5G, as well as the impacts of the trade restrictions on Huawei.

We anticipate lower net sales in the 4G and 5G wireless infrastructure markets year-over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis.

Net sales were

unfavorably impacted by $0.6 million, or 0.7%, due to the depreciation in value of the Chinese renminbi and euro relative to the U.S.

Operating income decreased by 58.2% in the first quarter of 2020 from the first quarter of 2019.

As a percentage of net sales, operating income in the first quarter of 2020 was 8.5%, an approximately 770 basis point decrease as compared to the 16.2% reported in the first quarter of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable product mix, higher fixed overhead costs, unfavorable absorption of fixed overhead costs, partially offset by lower freight, duties and tariffs costs, favorable productivity performance and yield improvements.

ACS net sales decreased by 23.3% in the second quarter of 2020 compared to the second quarter of 2019.

The decrease in net sales over the second quarter of 2019 was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure markets, as well as the automotive market, partially offset by higher net sales in the aerospace and defense market.

Net sales were unfavorably impacted by $1.2 million, or 1.2%, due to the depreciation in value of the Chinese renminbi and euro relative to the U.S.

ACS net sales decreased by 21.7% in the first half of 2020 compared to the first half of 2019.

The decrease in net sales over the first half of 2019 was primarily driven by significantly lower net sales in the 4G and 5G wireless infrastructure markets, as well as the automotive market, partially offset by higher net sales in the aerospace and defense market.

Net sales were unfavorably impacted by $1.7 million, or 1.0%, due to the depreciation in value of the Chinese renminbi and euro relative to the U.S.

The lower net sales in the automotive market was largely due to the impacts of COVID-19 pandemic.

On a sequential quarter basis, we experienced net sales growth in the 4G and 5G wireless infrastructure markets, however we anticipate net sales to continue into the third quarter of 2020 as a result of lower volumes and customers’ procurement of materials in the second quarter of 2020 in preparation for China’s planned 5G deployments in the second half 2020.

Operating income decreased by 15.4% in the second quarter of 2020 from the second quarter of 2019.

As a percentage of net sales, operating income in the second quarter of 2020 was 22.0%, an approximately 210 basis point increase as compared to the 19.9% reported in the second quarter of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable absorption of fixed overhead costs and unfavorable productivity performance, partially offset by lower freight, duties and tariffs costs, including the recognition of a $3.3 million expected recovery of previous duty taxes paid due to a change in Chinese tariff regulations, and favorable product mix.

Operating income decreased by 33.1% in the first half of 2020 from the first half of 2019.

As a percentage of net sales, operating income in the first half of 2020 was 15.6%, an approximately 260 basis point decrease as compared to the 18.2% reported in the first half of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable absorption of fixed overhead costs, unfavorable productivity performance and higher fixed overhead costs, partially offset by lower freight, duties and tariffs costs, including the recognition of a $3.3 million expected recovery of previous duty taxes paid due to a change in Chinese tariff regulations.

The incremental direct costs associated with the temporary additional benefits established under our dependent care, premium pay and sick pay programs in response to the COVID-19 pandemic, as well as the additional safety supplies, impacted ACS operating income by approximately $1.3 million and $1.5 million on a quarter-to-date basis and year-to-date basis, respectively.

Elastomeric Material Solutions

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales $ 71,626 $ 93,894 $ 155,152 $ 186,656

Operating income $ 2,995 $ 15,326 $ 14,512 $ 28,757

EMS net sales decreased by 10.0% in the first quarter of 2020 compared to the first quarter of 2019.

The decrease in net sales over the first quarter of 2019 was primarily driven by lower net sales in the portable electronics, general industrial and EV/HEV markets.

We anticipate lower net sales in the portable electronics, automotive and EV/HEV markets year-over-year in the second quarter of 2020, on both a quarter-to-date and year-to-date basis due to the impact from the COVID-19 pandemic.

On a sequential quarter basis, we anticipate lower net sales in the general industrial, portable electronics and automotive markets due to the impacts from the COVID-19 pandemic.

EMS net sales decreased by 23.7% in the second quarter of 2020 compared to the second quarter of 2019.

The decrease in net sales over the second quarter of 2019 was primarily driven by lower net sales in the portable electronics, general industrial, consumer and mass transit markets.

Net sales were unfavorably impacted by $1.1 million, or 1.1%, due to the depreciation in value of the Chinese renminbi, Korean won and euro relative to the U.S.

Operating income decreased by 14.3% in the first quarter of 2020 from the first quarter of 2019.

As a percentage of net sales, first quarter of 2020 operating income was 13.8%, an approximately 70 basis point decrease as compared to the 14.5% reported in the first quarter of 2019.

The decrease in operating income was primarily due to lower volume and an increase in inventory reserve provision, partially offset by favorable productivity performance and lower fixed overhead costs.

EMS net sales decreased by 16.9% in the first half of 2020 compared to the first half of 2019.

The decrease in net sales over the first half of 2019 was primarily driven by lower net sales in the portable electronics, general industrial, consumer and mass transit markets.

Net sales were unfavorably impacted by $1.9 million, or 1.0%, due to the depreciation in value of the Chinese renminbi, Korean won and euro relative to the U.S.

On a sequential quarter basis, we anticipate higher net sales in the portable electronics market primarily due to seasonality in the third quarter of 2020.

Operating income decreased by 80.5% in the second quarter of 2020 from the second quarter of 2019.

As a percentage of net sales, second quarter of 2020 operating income was 4.2%, an approximately 1,210 basis point decrease as compared to the 16.3% reported in the second quarter of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable absorption of fixed overhead costs and an increase in inventory reserve provision, partially offset by favorable product mix, lower freight, duties and tariffs costs and lower fixed overhead costs.

As a result of the acceleration of amortization expense related to the DSP customer relationships and trademarks and trade names definite-lived other intangible assets, we recognized an additional $3.9 million of amortization expense in the second quarter of 2020.

Operating income decreased by 49.5% in the first half of 2020 from the first half of 2019.

As a percentage of net sales, second quarter of 2020 operating income was 9.4%, an approximately 600 basis point decrease as compared to the 15.4% reported in the first half of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable absorption of fixed overhead costs and an increase in inventory reserve provision, partially offset by lower fixed overhead costs, favorable product mix and lower freight, duties and tariffs costs.

The incremental direct costs associated with the temporary additional benefits established under our dependent care, premium pay and sick pay programs in response to the COVID-19 pandemic, as well as the additional safety supplies, impacted EMS operating income by approximately $1.3 million and $1.5 million on a quarter-to-date basis and year-to-date basis, respectively.

The increases in amortization expense in 2020 are offset by decreases in forecasted amortization expense in future years.

For additional information, refer to “Note 6 – Goodwill and Other Intangible Assets” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Power Electronics Solutions

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales $ 45,220 $ 51,662 $ 91,941 $ 111,476

Operating income (loss) $ 1,446 $ (1,884) $ 762 $ 2,383

PES net sales decreased by 21.9% in the first quarter of 2020 from the first quarter of 2019.

The decrease in net sales over the first quarter of 2019 was primarily driven by lower net sales in variable frequency drives, mass transit and vehicle electrification markets.

The lower net sales in variable frequency drives market was due to a slowdown in industrial automation demand combined with customer inventory rebalancing, which began in mid-2019, and has continued through the first quarter of 2020.

We anticipate lower net sales in the vehicle electrification and EV/HEV markets on a sequential quarter basis due to the impacts from the COVID-19 pandemic on the automotive industry.

PES net sales decreased by 12.5% in the second quarter of 2020 from the second quarter of 2019.

The decrease in net sales over the second quarter of 2019 was primarily driven by lower net sales in mass transit, variable frequency drives and vehicle

electrification markets.

Net sales were unfavorably impacted by foreign currency fluctuations of $1.0 million, or 1.9%, due to the depreciation in value of the euro and Chinese renminbi relative to the U.S.

Operating income decreased by 116.0% in the first quarter of 2020 from the first quarter of 2019.

As a percentage of net sales, the first quarter of 2020 operating loss was 1.5% as compared to the 7.1% for operating income reported in the first quarter of 2019.

The decrease in operating income was primarily due to lower volume, unfavorable product mix, unfavorable absorption of fixed overhead costs and an increase in inventory reserve provision, partially offset by favorable productivity performance, yield improvements and lower freight costs.

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

PES net sales decreased by 17.5% in the first half of 2020 from the first half of 2019.

The decrease in net sales over the first half of 2019 was primarily driven by lower net sales in variable frequency drives, mass transit and vehicle electrification markets.

Net sales were unfavorably impacted by foreign currency fluctuations of $2.1 million, or 1.9%, due to the depreciation in value of the euro and Chinese renminbi relative to the U.S.

The lower net sales in vehicle electrification market in our PES operating segment was due to the COVID-19 impacts on the automotive sector.

On a sequential quarter basis, we anticipate higher net sales in the EV/HEV market primarily due to manufacturing disruptions subsiding and stronger demand.

Operating income increased by 176.8% in the second quarter of 2020 from the second quarter of 2019.

As a percentage of net sales, the second quarter of 2020 operating income was 3.2% as compared to the 3.6% for operating loss reported in the second quarter of 2019.

The increase in operating income was primarily due yield improvements, favorable product mix, favorable productivity performance and lower fixed overhead costs, partially offset by lower volume.

Operating income decreased by 68.0% in the first half of 2020 from the first half of 2019.

As a percentage of net sales, the first half of 2020 operating income was 0.8% as compared to the 2.1% for operating income reported in the first half of 2019.

The decrease in operating income was primarily due to lower volume and unfavorable absorption of fixed overhead costs, partially offset by yield improvements, favorable productivity performance, lower freight costs and lower fixed overhead costs.

The incremental transaction costs associated with the temporary additional benefits established under our dependent care, premium pay and sick pay programs in response to the COVID-19 pandemic, as well as the additional safety supplies, impacted PES operating income/loss by approximately $0.6 million and $0.8 million on a quarter-to-date basis and year-to-date basis, respectively.

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Net sales $ 3,371 $ 4,767 $ 7,381 $ 11,519

Operating income $ 1,027 $ 1,313 $ 2,207 $ 3,351

Net sales in this segment decreased by 40.6% in the first quarter of 2020 from the first quarter of 2019.

The decrease in net sales over the first quarter of 2019 was primarily driven by a non-recurring last time buy in the Durel business in the first quarter of 2019, as well as lower demand in the automotive market partially resulting from the COVID-19 pandemic.

were unfavorably impacted by foreign currency fluctuations of $0.1 million, or 0.9%, due to the depreciation in value of the Chinese renminbi relative to the U.S.

Operating income decreased 42.1% in the first quarter of 2020 compared to the first quarter of 2019.

The decrease in operating income was primarily driven by lower volume and unfavorable absorption of fixed overhead costs.

As a percentage of net sales, first quarter of 2020 operating income was 29.4%, an 80 basis point decrease as compared to the 30.2% reported in the first quarter of 2019.

Net sales in this segment decreased by 29.3% in the second quarter of 2020 from the second quarter of 2019.

The decrease in net sales over the second quarter of 2019 was primarily driven by lower demand in the automotive market partially resulting from the COVID-19 pandemic.

Net sales were unfavorably impacted by foreign currency fluctuations of $0.1 million, or 1.2%, due to the depreciation in value of the Chinese renminbi relative to the U.S.

Net sales in this segment decreased by 35.9% in the first half of 2020 from the first half of 2019.

The decrease in net sales over the first half of 2019 was primarily driven by a non-recurring last time buy in the Durel business in the first quarter of 2019, as well as lower demand in the automotive market partially resulting from the COVID-19 pandemic.

Net sales were unfavorably impacted by foreign currency fluctuations of $0.1 million, or 1.0%, due to the depreciation in value of the Chinese renminbi relative to the U.S.

Operating income decreased 21.8% in the second quarter of 2020 compared to the second quarter of 2019.

The decrease in operating income was primarily driven by lower volume and unfavorable absorption of fixed overhead costs, partially offset by lower fixed overhead costs.

As a percentage of net sales, second quarter of 2020 operating income was 30.5%, a 300 basis point increase as compared to the 27.5% reported in the second quarter of 2019.

Operating income decreased 34.1% in the first half of 2020 compared to the first half of 2019.

The decrease in operating income was primarily driven by lower volume and unfavorable absorption of fixed overhead costs, partially offset by lower fixed overhead costs.

As a percentage of net sales, the first half of 2020 operating income was 29.9%, an 80 basis point increase as compared to the 29.1% reported in the first half of 2019.

Liquidity, Capital Resources and Financial Position

We believe that our existing sources of liquidity and cash flows that we expect to generate from our operations, together with our available credit facilities, will be sufficient to fund our operations, currently planned capital expenditures, research and development efforts and our debt service commitments, for at least the next 12 months.

We regularly review and evaluate the adequacy of our cash flows, borrowing facilities and banking relationships in an effort to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives.

We regularly review and evaluate the

adequacy of our cash flows, borrowing facilities and banking relationships in an effort to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives.

The following table illustrates the location of our cash and cash equivalents by our three major geographic areas:

(Dollars in thousands) March 31, 2020 December 31, 2019

(Dollars in thousands) June 30, 2020 December 31, 2019

United States $ 186,551 $ 39,354

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Approximately $112.2 million of our cash and cash equivalents were held by non-U.S.

subsidiaries as of March 31, 2020.

We did not make any changes in the three months ended March 31, 2020 to our position on the permanent reinvestment of our earnings from foreign operations.

subsidiaries as of June 30, 2020.

We did not make any changes in the six months ended June 30, 2020 to our position on the permanent reinvestment of our earnings from foreign operations.

With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested.

(Dollars in thousands )

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Key Financial Position Accounts:

3 unchanged sentences

Borrowings under revolving credit facility $ 223,000 $ 123,000

Changes in key financial position accounts and other significant changes in our statements of financial position from December 31, 2019 to March 31, 2020 were as follows:

• Accounts receivable, net increased 17.9% to $144.2 million as of March 31, 2020, from $122.3 million as of December 31, 2019.

The increase from year-end was primarily due to higher net sales at the end of the first quarter 2020 compared to at the end of the 2019.

• Inventories decreased 4.0% to $127.5 million as of March 31, 2020, from $132.9 million as of December 31, 2019, primarily driven by primarily driven by reduced inventory reserves associated with the timing of volumes produced versus sold relative to the prior quarter.

• Borrowings under revolving credit facility increased 122.0% to $273.0 million as of March 31, 2020, from $123.0 million as of December 31, 2019, as a result of $150.0 million in borrowings under our revolving credit facility during the first quarter of 2020 as a precautionary measure in order to increase our cash position and preserve financial flexibility given current uncertainty in the global markets resulting from the COVID-19 pandemic.

Changes in key financial position accounts and other significant changes in our statements of financial position from December 31, 2019 to June 30, 2020 were as follows:

• Accounts receivable, net increased 5.2% to $128.7 million as of June 30, 2020, from $122.3 million as of December 31, 2019.

The increase from year-end was primarily due to the recognition of a $3.3 million receivable related to the expected recovery of previous duty taxes paid due to a change in Chinese tariff regulations, an increase in our income taxes receivable, as well as an increase to our days sales outstanding, partially offset by lower net sales at the end of the second quarter of 2020 compared to at the end of 2019.

• Inventories decreased 6.1% to $124.7 million as of June 30, 2020, from $132.9 million as of December 31, 2019, primarily driven by primarily driven by an increase in inventory reserve provision within the EMS operating segment and a reduction of capitalized variances associated with the timing of volumes produced versus sold relative to the end of 2019.

• Borrowings under revolving credit facility increased 81.3% to $223.0 million as of June 30, 2020, from $123.0 million as of December 31, 2019, as a result of $150.0 million in borrowings under our revolving credit facility during the first quarter of 2020 as a precautionary measure in order to increase our cash position and preserve financial flexibility given current uncertainty in the global markets resulting from the COVID-19 pandemic.

This increase was partially offset by a $50.0 million discretionary principal payment on our revolving credit facility during the second quarter of 2020.

Borrowings under revolving credit facility decreased to $98.0 million as of our filing date as a result of the $125.0 million discretionary principal payment on our revolving credit facility, on July 29, 2020.

For additional information regarding this facility and the Third Amended Credit Agreement, refer to “Note 9 – Debt” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Three Months Ended

(Dollars in thousands) March 31, 2020 March 31, 2019

Six Months Ended

(Dollars in thousands) June 30, 2020 June 30, 2019

Key Cash Flow Measures:

2 unchanged sentences

Net cash provided by (used in) financing activities $ 95,442 $ (39,699)

As of March 31, 2020, cash and cash equivalents were $308.3 million as compared to $166.8 million as of December 31, 2019, an increase of $141.4 million, or 84.8%.

As of June 30, 2020, cash and cash equivalents were $298.7 million as compared to $166.8 million as of December 31, 2019, an increase of $131.9 million, or 79.0%.

This increase was primarily due to the $150.0 million in borrowings under our revolving credit facility during the first quarter of 2020, supplemented by cash flows generated by operations.

This increase was partially offset by $11.2 million in capital expenditures and $5.0 million in tax payments related to net share settlement of equity awards.

This increase was partially offset by a $50.0 million discretionary principal payment on our revolving credit facility during the second quarter of 2020, $18.2 million in capital expenditures and $5.0 million in tax payments related to net share settlement of equity awards.

Restrictions on Payment of Dividends

1 unchanged sentence

If our leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments.

Our leverage ratio did not exceed 2.75 to 1.00 as of March 31, 2020.

Our leverage ratio did not exceed 2.75 to 1.00 as of June 30, 2020.

Contingencies

During the first quarter of 2020, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters.

During the second quarter of 2020, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters.

Refer to “Note 12 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.

Off-Balance Sheet Arrangements

As of March 31, 2020, we did not have any off-balance sheet arrangements that have or are, in the opinion of management, reasonably likely to have a current or future material effect on our results of operations or financial position.

As of June 30, 2020, we did not have any off-balance sheet arrangements that have or are, in the opinion of management, reasonably likely to have a current or future material effect on our results of operations or financial position.

Critical Accounting Policies

There were no material changes in our critical accounting policies during the first quarter of 2020.

There were no material changes in our critical accounting policies during the second quarter of 2020.

Recent Accounting Pronouncements

1 unchanged sentence

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our exposure to market risk during the first quarter of 2020.

There have been no material changes in our exposure to market risk during the second quarter of 2020 .

For discussion of our exposure to market risk, refer to “Item 7A.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis