What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-19 compared with 2020-02-21 · 389 added, 333 removed, 1032 unchanged (41% of the section changed)

7 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 14 to the consolidated financial statements, the Company changed the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinions

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(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable

assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

8 unchanged sentences

Management estimated the fair value of the curamik® reporting unit using an income approach based on the present value of future cash flows through a five year discounted cash flow analysis.

Determining the fair value is subjective and requires the use of significant estimates and assumptions, including financial projections for net sales, gross margin and operating margin, discount rate, terminal year growth rate and future market conditions, among others.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the curamik ® reporting unit is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit;

this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence over management’s cash flow projections and significant assumptions, including the financial projections for net sales, gross margin, and discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Determining the fair value is subjective and requires the use of significant estimates and assumptions, including financial projections for net sales, gross margin and operating margin, discount rate, terminal growth rate and future market conditions, among others.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the curamik® reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value measurement of the reporting unit;

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions related to financial projections for net sales and gross margin.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimate;

evaluating the appropriateness of the discounted cash flow analysis;

testing the completeness, accuracy, and relevance of underlying data used in the analysis;

and evaluating the reasonableness of the significant assumptions used by management, including the financial projections for net sales, gross margin, and discount rate.

Evaluating the reasonableness of management’s assumptions related to the financial projections for net sales and gross margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow analysis and certain significant assumptions, including the discount rate.

These procedures also included, among others (i) testing management’s process for determining the fair value measurement of the curamik® reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow analysis;

(iii) testing the completeness and accuracy of underlying data used in the analysis;

and (iv) evaluating the reasonableness of significant assumptions used by management related to the financial projections for net sales and gross margin.

Evaluating management’s assumptions related to the financial projections for net sales and gross margin involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Asbestos-Related Liabilities and Insurance Receivables

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Estimates of asbestos-related contingent liabilities and related insurance receivables are based on an independent actuarial analysis and an independent insurance usage analysis, respectively, prepared annually by third parties.

The actuarial analysis contains numerous assumptions, including the number of claims that may be received, the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, average indemnity costs, average defense costs, costs of medical treatment, the financial resources of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards, including potential tort reform.

The insurance usage analysis considers, among other things,

applicable deductibles, retentions and policy limits, the solvency and historical payment experience of various insurance carriers, the likelihood of recovery as estimated by external legal counsel and existing insurance settlements.

The principal considerations for our determination that performing procedures relating to asbestos-related liabilities and insurance receivables is a critical audit matter are there was significant judgment by management when determining the asbestos-related liabilities and insurance receivables;

this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s analyses and significant assumptions, including the number of claims that may be received, type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

The actuarial analysis contains numerous assumptions, including the number of claims that might be received, the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, average indemnity costs, average defense costs, costs of medical treatment, the financial resources of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards, including potential tort reform.

The insurance usage analysis considers, among other things, applicable deductibles, retentions and policy limits, the solvency and historical payment experience of various insurance carriers, the likelihood of recovery as estimated by external legal counsel and existing insurance settlements.

The principal considerations for our determination that performing procedures relating to asbestos-related liabilities and insurance receivables is a critical audit matter are (i) the significant judgment by management when determining the asbestos-

related liabilities and insurance receivables;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the number of claims that might be received, type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the analyses of the asbestos-related liabilities and insurance receivables.

These procedures also included, among others, testing management’s process for developing the estimates;

evaluating the appropriateness of the analyses;

testing the completeness and accuracy of underlying data used in the analyses;

and evaluating the reasonableness of significant assumptions used by management, including the number of claims that may be received, type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates.

Evaluating reasonableness of management’s assumptions involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past asbestos litigation trends and (ii) the consistency with external industry projections.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s analyses and certain significant assumptions, including the number of claims that may be received, the type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates.

These procedures also included, among others (i) testing management’s process for determining the asbestos-related liabilities and insurance receivables estimates;

(ii) evaluating the appropriateness of the actuarial and insurance usage analyses;

(iii) testing the completeness and accuracy of underlying data used in the analyses;

and (iv) evaluating the reasonableness of significant assumptions used by management related to the number of claims that may be received, type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s analyses and significant assumptions related to the number of claims that may be received, the type and severity of the disease alleged by each claimant, average indemnity costs, average defense costs, and dismissal rates.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

Phoenix, Arizona

February 18, 2021

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(Dollars and shares in thousands, except per share amounts) 2020 2019 2018

Net sales $ 802,583 $ 898,260 $ 879,091

Cost of sales 510,763 583,968 568,308

Gross margin 291,820 314,292 310,783

Selling, general and administrative expenses 182,283 168,682 164,046

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Income tax expense 18,544 7,807 22,938

Net income $ 49,990 $ 47,319 $ 87,651

Basic earnings per share $ 2.68 $ 2.55 $ 4.77

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(Dollars in thousands) 2020 2019 2018

Net income $ 49,990 $ 47,319 $ 87,651

Foreign currency translation adjustment 24,907 ( 4,990 ) ( 12,505 )

Pension and other postretirement benefits:

Pension settlement charges, net of tax (Note 4)

Actuarial net loss incurred, net of tax (Note 4)

Pension settlement (benefits) charges, net of tax (Note 4) ( 48 ) 43,934 —

Actuarial net gain (loss) incurred, net of tax (Note 4) 1,255 ( 6,079 ) ( 1,678 )

Amortization of loss, net of tax (Note 4) 244 390 176

1 unchanged sentence

Change in unrealized (loss) gain before reclassifications, net of tax (Note 4) ( 1,504 ) ( 1,171 ) 519

Unrealized (gain) loss reclassified into earnings, net of tax (Note 4)

Unrealized loss (gain) reclassified into earnings, net of tax (Note 4) 2,476 ( 155 ) ( 191 )

Other comprehensive income (loss) 27,330 31,929 ( 13,679 )

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Cash and cash equivalents $ 191,785 $ 166,849

Accounts receivable, less allowance for doubtful accounts of $1,691 and $1,354

Accounts receivable, less allowance for credit losses of $ 1,682 and $ 1,691

134,421 122,285

Contract assets 26,575 22,455

Inventories 102,360 132,859

Prepaid income taxes 2,960 4,524

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Property, plant and equipment, net of accumulated depreciation of $ 365,844 and $ 341,119

272,378 260,246

Investments in unconsolidated joint ventures 15,248 16,461

Deferred income taxes 28,667 17,117

Goodwill 270,172 262,930

Other intangible assets, net of amortization 118,026 158,947

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Other long-term assets 16,254 6,564

Total assets $ 1,264,005 $ 1,273,181

Liabilities and Shareholders’ Equity

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18,677 and 18,577 shares issued and outstanding, respectively

18,677 18,577

Additional paid-in capital 147,961 138,526

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Balance, beginning of period $ 18,577 $ 18,395 $ 18,255

Shares issued for vested restricted stock units, net of cancellations for tax withholding

Shares issued for vested restricted stock units, net of shares withheld for taxes 82 144 117

Stock options exercised — 11 22

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Balance, beginning of period 138,526 132,360 128,933

Shares issued for vested restricted stock units, net of cancellations for tax withholding

Shares issued for vested restricted stock units, net of shares withheld for taxes ( 5,439 ) ( 7,694 ) ( 6,717 )

Stock options exercised — 333 839

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Balance, beginning of period 823,702 776,403 684,540

Net income 49,990 47,319 87,651

Cumulative-effect adjustment for lease accounting — ( 20 ) —

Cumulative-effect adjustment for revenue recognition — — 4,212

Cumulative-effect adjustment for change in accounting for share-based compensation

Balance, end of period 873,692 823,702 776,403

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Operating Activities:

Net income $ 49,990 $ 47,319 $ 87,651

Adjustments to reconcile net income to cash provided by operating activities:

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Impairment charges 639 1,537 1,506

Provision (benefit) for doubtful accounts

Provision (benefit) for credit losses 223 437 236

Changes in assets and liabilities:

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Contract assets ( 4,120 ) 273 ( 22,728 )

Inventories 34,687 ( 1,200 ) ( 19,013 )

Pension and postretirement benefit contributions ( 253 ) ( 103 ) ( 25,354 )

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Accounts payable and other accrued expenses 10,084 ( 9,139 ) ( 7,886 )

Proceeds from insurance related to operations

Other, net 10,072 4,321 991

Net cash provided by operating activities 165,056 161,323 66,820

4 unchanged sentences

Proceeds from the sale of property, plant and equipment, net — 9 1,081

Proceeds from insurance claims

Return of capital from unconsolidated joint ventures — 2,625 —

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Interest, net of amounts capitalized $ 7,251 $ 7,762 $ 7,040

Income taxes $ 29,983 $ 17,593 $ 29,161

The accompanying notes are an integral part of the consolidated financial statements.

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Trade names for our ACS products include:

RO4000 ® Series, RO3000 ® Series, RT/duroid ® , CLTE Series ® , AD Series ® , CuClad ® Series, TMM ® , Kappa ® , XTremeSpeed RO1200 TM Laminates, DiClad ® Series, IsoClad ® Series, COOLSPAN ® , MAGTREX TM , TC Series ® , IM Series TM , 92ML TM , 2929 Bondply and 3001 Bondply Film.

RO4000 ® Series, RO3000 ® Series, RT/duroid ® , CLTE Series ® , TMM ® , AD Series ® , DiClad ® Series, CuClad ® Series, Kappa ® , COOLSPAN ® , TC Series ® , 92ML™, IsoClad ® Series, MAGTREX™, XTremeSpeed RO1200™ Laminates, IM Series™, 2929 Bondply, 3001 Bondply Film and SpeedWave™ Prepreg.

As of December 31, 2020, our ACS operating segment had manufacturing and administrative facilities in Chandler, Arizona;

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Trade names for our EMS products include:

PORON ® , BISCO ® , DeWAL ® , ARLON ® , eSorba ® , Griswold ® , Diversified Silicone Products ® , XRD ® , R/bak ® and HeatSORB™.

PORON ® , BISCO ® , DeWAL ® , ARLON ® , eSorba ® , Griswold ® , XRD ® , R/bak ® and HeatSORB™.

As of December 31, 2020, our EMS operating segment had administrative and manufacturing facilities in Moosup, Connecticut;

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RIC has manufacturing facilities at the INOAC facilities in Nagoya and Mie, Japan, and RIS has manufacturing facilities at Rogers’ facilities in Suzhou, China.

In July 2018, we acquired 100 % of the membership interests in Griswold LLC (Griswold), a manufacturer of a wide range of high-performance engineered cellular elastomer and microcellular polyurethane products and solutions, for an aggregate purchase price of $ 78.0 million , net of cash acquired.

Power Electronics Solutions

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All balance sheet accounts of foreign subsidiaries are translated or remeasured at exchange rates in effect at each year end, and income statement items are translated using the average exchange rates for the year.

Translation adjustments for those entities that operate under a local currency are recorded directly to a separate component of shareholders’ equity, while remeasurement adjustments for those entities that operate under the parent’s functional currency are recorded to the income statement as a component of “Other income (expense), net.” Currency transaction gains and losses are reported as income or expense, respectively, in the consolidated statements of operations as a component of “Other income (expense), net.

” Such adjustments resulted in losses of $ 0.9 million in 2019 , losses of $ 0.7 million in 2018 and gains of $ 0.9 million in 2017 .

Allowance for Doubtful Accounts

The allowance for doubtful accounts is determined based on a variety of factors that affect the potential collectability of the related receivables, including the length of time receivables are past due, customer credit ratings, financial stability of customers, specific one-time events and past customer history.

Allowance for Credit Losses

In 2020, we adopted Accounting Standards Update No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, using the modified retrospective transition method.

Upon adoption, we changed our impairment model to utilize a current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including our accounts receivable.

CECL estimates on accounts receivable are recorded as selling, general and administrative expenses on our consolidated statements of operations.

The cumulative effect adjustment from adoption was immaterial to our consolidated financial statements.

The allowance for credit losses is determined based on a variety of factors that affect the potential collectability of the related receivables, including the length of time receivables are past due, customer credit ratings, financial stability of customers, specific one-time events and past customer history.

In addition, in circumstances where we are made aware of a specific customer’s inability to meet its financial obligations, a specific allowance is established.

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For financial reporting purposes, provisions for depreciation are calculated on a straight-line basis over the following estimated useful lives of the underlying assets:

Property, Plant and Equipment Classification

Estimated Useful Lives

Buildings and improvements

Machinery and equipment

Office equipment

Property, Plant and Equipment Classification Estimated Useful Lives

Buildings and improvements 30 - 40 years

Machinery and equipment 5 - 15 years

Office equipment 3 - 10 years

Software Costs

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We estimated the fair value of our reporting units using an income approach based on the present value of future cash flows through a five-year discounted cash flow analysis.

The discounted cash flow analysis utilized the discount rates for each of the reporting units ranging from 10.30 % for EMS to 11.90 % for ACS, and terminal growth rates ranging from 3.3 % for curamik ® to 4.6 % for ACS.

The discounted cash flow analysis utilized the discount rates for each of the reporting units ranging from 10.5 % for EMS to 13.1 % for ECD, and terminal growth rates ranging from 3.4 % for curamik ® to 4.2 % for ACS.

We believe this approach yields the most appropriate evidence of fair value as our reporting units are not easily compared to other corporations involved in similar businesses.

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Consistent with historical practice, the annual impairment test on these reporting units was performed as of November 30, 2020.

The application of the annual indefinite-lived other intangible asset impairment test requires significant judgment, including the determination of fair value of each indefinite-lived other intangible asset.

The application of the annual indefinite-lived

other intangible asset impairment test requires significant judgment, including the determination of fair value of each indefinite-lived other intangible asset.

Fair value is primarily based on income approaches using discounted cash flow models, which have significant assumptions.

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The recoverability test involves comparing the estimated sum of the undiscounted cash flows for each definite-lived other intangible asset to its respective carrying value.

If a definite-lived other intangible asset’s carrying value

is greater than the sum of its undiscounted cash flows, then the definite-lived other intangible asset’s carrying value is compared to its estimated fair value and an impairment charge is recognized for the excess and charged to operations.

If a definite-lived other intangible asset’s carrying value is greater than the sum of its undiscounted cash flows, then the definite-lived other intangible asset’s carrying value is compared to its estimated fair value and an impairment charge is recognized for the excess and charged to operations.

The application of the recoverability test requires significant judgment, including the identification of the asset group and determination of undiscounted cash flows and fair value of the underlying definite-lived other intangible asset.

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Such assumptions are subject to variability from year to year and are directly impacted by global market conditions.

There were no impairment charges resulting from our definite-lived other intangible assets impairment analysis for the year ended December 31, 2019 .

There were immaterial impairment charges resulting from our definite-lived other intangible assets impairment analysis for the year ended December 31, 2020.

Our ACS, EMS and curamik ® reporting units had definite-lived other intangible assets of $ 3.7 million, $ 101.2 million and $ 8.2 million, respectively, as of December 31, 2020.

The useful life determination for each indefinite-lived other intangible asset is evaluated each reporting period to determine whether events and circumstances support an indefinite useful life.

The useful life determination for each definite-lived other intangible asset is evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Environmental and Product Liabilities

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Based on our credit characteristics as of December 31, 2020, borrowings would generally bear interest at London interbank offered rate (LIBOR) plus 162.5 basis points.

As the current borrowings under the Third Amended Credit Agreement bear interest at adjusted 1-month LIBOR plus 137.5 basis points, we believe the carrying value of our borrowings approximates fair value.

As the current borrowings under the Fourth Amended Credit Agreement bear interest at adjusted 1-month LIBOR plus 162.5 basis points, we believe the carrying value of our borrowings approximates fair value.

For additional information on the calculation of fair value measurements, refer to “Note 2 – Fair Value Measurements.”

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To qualify for hedge accounting treatment, derivatives used for hedging purposes must be designated and deemed effective as a hedge of the identified underlying risk exposure at the inception of the contract.

Accordingly, changes in fair value of the derivative contract must be

highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

Derivatives used to hedge forecasted cash flows associated with interest rates, foreign currency commitments, or forecasted commodity purchases are accounted for as cash flow hedges.

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As of December 31, 2020 and 2019, we recorded a deferred tax liability of $ 2.4 million and $ 1.6 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested.

The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we expect that these undistributed earnings may give rise to an estimated $ 3.5 million of additional tax liabilities as a result of distribution of such earnings.

The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we estimate that, if these undistributed earnings are distributed, they may give rise to an estimated $ 3.8 million of additional tax liabilities.

If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2020 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change.

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Pension and Other Postretirement Benefits

We provide various defined benefit pension plans for our U.S.

employees and we sponsor multiple fully insured or self-funded medical plans and fully insured life insurance plans for retirees.

In 2013, the defined benefit pension plans were frozen, so that future benefits no longer accrue.

We sponsor one material defined benefit pension plan, the Rogers Corporation Employees’ Pension Plan (the Union Plan), which covers certain union employees, and we sponsor multiple fully insured or self-funded medical plans and fully insured life insurance plans for retirees.

The Union Plan was frozen in 2013 so that future benefits no longer accrue.

The costs and obligations associated with these plans are dependent upon various actuarial assumptions used in calculating such amounts.

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We determine these assumptions based on consultation with outside actuaries and investment advisors.

Any changes in these assumptions could have a significant impact on future recognized pension costs, assets and liabilities.

Any changes in these assumptions could have a significant impact on our assets and liabilities.

We review these assumptions periodically throughout the year and update as necessary.

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and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur and report these changes in accumulated other comprehensive loss.

In addition, actuarial losses (gains) that are not immediately recognized as net periodic pension cost (credit) are recognized as a component of accumulated other comprehensive loss (income) and amortized into net periodic pension cost (credit) in future periods.

Additionally, actuarial losses (gains) that are not immediately recognized as net periodic pension cost (credit) are recognized as a component of accumulated other comprehensive loss (income) and amortized into net periodic pension cost (credit) in future periods.

Investments were stated at fair value as of the dates reported.

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Funds in a separate account are not commingled with other Company assets for investment purposes.

Restructuring Activities

We record charges associated with restructuring activities, such as employee termination benefits, which represent a one-time benefit, when management approves and commits to a plan of termination, or over the future service period, if any.

Other costs associated with restructuring activities may include contract termination costs, including costs related to leased facilities to be abandoned or subleased, and facility and employee relocation costs.

Advertising Costs

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• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As a result of our pension termination and settlement efforts in late 2019 and the first half of 2020, we have a pension surplus investment balance, which is now accounted for as an available-for-sale investment as of June 2020.

For additional information regarding this balance, refer to “Note 11 – Pension Benefits and Other Postretirement Benefits.” Available-for-sale investments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, were as follows:

Available-for-Sale Investment at Fair Value as of December 31, 2020

(Dollars in thousands) Level 1 Level 2 Level 3 Total

Pension surplus investment (1)

$ 6,706 $ 2,400 $ — $ 9,106

(1) This balance was invested in funds comprised of short-term cash and fixed income securities, and was recorded in the “Other long-term assets” line item in the condensed consolidated statements of financial position.

As of December 31, 2020, the fair value of this investment approximated its carrying value.

From time to time we enter into various instruments that require fair value measurement, including foreign currency contracts, copper derivative contracts and interest rate swaps.

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Derivative Instruments at Fair Value as of December 31, 2020

(Dollars in thousands)

(Dollars in thousands) Level 1 Level 2 Level 3 Total (1)

Foreign currency contracts $ — $ ( 130 ) $ — $ ( 130 )

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Derivative Instruments at Fair Value as of December 31, 2019

(Dollars in thousands)

(Dollars in thousands) Level 1 Level 2 Level 3 Total (1)

Foreign currency contracts $ — $ ( 6 ) $ — $ ( 6 )

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Interest rate swap contract $ — $ ( 1,254 ) $ — $ ( 1,254 )

(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the consolidated statements of financial position, except the 2019 and 2018 interest rate swap balance, which was recorded in the “Other long-term liabilities” and “Other long-term assets” line items, respectively, in the consolidated statements of financial position.

(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the consolidated statements of financial position, except the 2019 interest rate swap balance, which was recorded in the “Other long-term liabilities” line item.

For additional information on our derivative contracts, refer to “Note 3 – Hedging Transactions and Derivative Financial Instruments.”

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This gain or loss is reclassified into earnings in the same line item of the consolidated statements of operations associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.

As of December 31, 2019 and 2018 , only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge, and the hedge was highly effective.

As of December 31, 2019, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge, and the hedge was highly effective.

Foreign Currency

In 2020, we entered into U.S.

dollar, Korean won, Japanese yen, euro, Chinese yuan and Chinese renminbi forward contracts.

dollar, euro, Korean won and Japanese yen forward contracts.

We entered into these foreign currency forward contracts to mitigate certain global transactional exposures.

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Notional Values of Foreign Currency Derivatives

10,413,450,000

USD/CNH $ 28,766,855

EUR/USD € 8,151,124

KRW/USD ₩ 10,893,500,000

As of December 31, 2020, we had 18 outstanding contracts to hedge exposure related to the purchase of copper in our PES and ACS operating segments.

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Volume of Copper Derivatives

January 2020 - March 2020

202 metric tons per month

April 2020 - June 2020

202 metric tons per month

July 2020 - September 2020

201 metric tons per month

October 2020 - December 2020

201 metric tons per month

January 2021 - March 2021

256 metric tons per month

January 2021 - March 2021 256 metric tons per month

April 2021 - June 2021 256 metric tons per month

July 2021 - September 2021 222 metric tons per month

October 2021 - December 2021 222 metric tons per month

Interest Rates

In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $ 75.0 million of our $ 450.0 million revolving credit facility.

This transaction has been designated as a cash flow hedge and qualifies for hedge accounting treatment.

We terminated the interest rate swap on September 30, 2020.

As a result, we settled the interest rate swap for $ 2.4 million on October 2, 2020, representing the fair value of the interest rate swap on the date of termination.

Both Rogers and the counterparties released each other from all obligation under the interest rate swap agreement, including the obligation to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to the agreed upon notional principal amount of $ 75.0 million.

As a result of the termination of the interest rate swap, there is an offsetting decrease in the forecasted interest expense, net over the remaining term of the now-terminated interest rate swap, which was set to expire in February 2022.

For additional information regarding our revolving credit facility, refer to “ Note 9 – Debt .”

2 unchanged sentences

Years Ended December 31,

(Dollars in thousands)

Financial Statement Line Item

(Dollars in thousands) Financial Statement Line Item 2020 2019 2018

Foreign Currency Contracts

Contracts not designated as hedging instruments

Other income (expense), net

Contracts not designated as hedging instruments Other income (expense), net $ ( 1,981 ) $ ( 779 ) $ ( 333 )

Copper Derivatives Contracts

Contracts not designated as hedging instruments

Other income (expense), net

Contracts not designated as hedging instruments Other income (expense), net $ 3,610 $ ( 716 ) $ ( 2,101 )

Interest Rate Swap Contract

Contract designated as hedging instrument

Other comprehensive income (loss)

Contract designated as hedging instrument Other comprehensive income (loss) $ 1,254 $ ( 1,715 ) $ 420

Note 4 – Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component for each of the fiscal years in the two-year period ended December 31, 2020 were as follows:

(Dollars and accompanying footnotes in thousands)

Foreign Currency Translation Adjustments

Pension and Other Postretirement Benefits (1)

(Dollars and accompanying footnotes in thousands) Foreign Currency Translation Adjustments Pension and Other Postretirement Benefits (1)

Derivative Instrument Designated as Cash Flow Hedge (2)

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Years Ended December 31,

(Dollars in thousands)

Financial Statement Line Item

(Dollars in thousands) Financial Statement Line Item 2020 2019

Amortization/settlement of pension and other postretirement benefits

1 unchanged sentence

Other income (expense), net (1)

( 315 ) ( 504 )

Income tax (expense) benefit 56 9,393

Net income $ ( 196 ) $ ( 44,324 )

Unrealized gains (losses) on derivative instrument (2)

1 unchanged sentence

Income tax (expense) benefit 715 ( 45 )

Net income $ ( 2,476 ) $ 155

(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.

5 unchanged sentences

(Dollars in thousands) 2020 2019

Land and improvements $ 22,589 $ 21,697

Buildings and improvements 155,669 165,968

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Depreciation expense was $ 29.3 million in 2020, $ 31.4 million in 2019 and $ 33.5 million in 2018.

Additionally, we recognized $ 1.5 million of impairment charges in both 2019 and 2018 , respectively, primarily relating to certain assets from the Isola asset acquisition.

Note 6 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the period ending December 31, 2020, by operating segment, were as follows:

(Dollars in thousands)

Advanced Connectivity Solutions

Elastomeric Material Solutions

Power Electronics Solutions

(Dollars in thousands) Advanced Connectivity Solutions Elastomeric Material Solutions Power Electronics Solutions Other Total

December 31, 2019 $ 51,694 $ 142,030 $ 66,982 $ 2,224 $ 262,930

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The changes in the carrying amount of other intangible assets for the two-year period ending December 31, 2020, were as follows:

December 31, 2019

December 31, 2018

(Dollars in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

December 31, 2020 December 31, 2019

(Dollars in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Customer relationships $ 150,863 $ 72,014 $ 78,849 $ 149,317 $ 39,018 $ 110,299

Technology 83,469 53,540 29,929 80,938 45,190 35,748

Trademarks and trade names 12,039 8,149 3,890 11,994 4,361 7,633

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These amounts could vary based on changes in foreign currency exchange rates.

The increase in amortization expense in 2020, and decrease in forecasted amortization expense in future years, were 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.

As part of our ongoing assessment of the useful lives of our definite-lived other intangible assets, we reviewed the deterioration of our DSP business and identified significant customer attrition, a sustained substantial decrease in net sales, as well as the planned phase-out of the DSP trademark and trade name by December 2020.

Based on these events and circumstances, we concluded an adjustment to the remaining useful lives of our DSP customer relationships and trademarks and trade names definite-lived other intangible assets was warranted.

The weighted average amortization period as of December 31, 2020, by definite-lived other intangible asset class, is presented in the table below:

Definite-Lived Other Intangible Asset Class

Weighted Average Remaining Amortization Period

Definite-Lived Other Intangible Asset Class Weighted Average Remaining Amortization Period

Customer relationships 6.10

Technology 3.90

Trademarks and trade names 4.85

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(Dollars and shares in thousands, except per share amounts) 2020 2019 2018

Net income $ 49,990 $ 47,319 $ 87,651

Weighted average shares outstanding - basic 18,681 18,573 18,374

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For 2020, 2019, and 2018, 8,454 , 20,520 and 36,642 shares were excluded, respectively.

No shares were excluded in 2017 .

Note 8 – Capital Stock and Equity Compensation

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Shares reserved for issuance under the Rogers Corporation Global Stock Ownership Plan for Employees 78,678 91,670

Total 1,334,462 1,478,842

Equity Compensation

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Below were the assumptions used in the Monte Carlo calculation for each material award granted in 2020, 2019 and 2018:

February 7, 2019

September 17, 2018

February 8, 2018

February 9, 2017

February 12, 2020 June 3, 2019 February 7, 2019 September 17, 2018 February 8, 2018

Expected volatility 41.0 % 39.7 % 36.7 % 36.6 % 34.8 %

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A summary of activity of the outstanding performance-based restricted stock units for 2020, 2019 and 2018 is presented below:

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

2020 2019 2018

Awards Outstanding Weighted-

Grant Date Fair Value Awards Outstanding Weighted-

Grant Date Fair Value

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Awards granted 87,244 131.99 112,160 114.22 75,760 163.55

Stock issued ( 75,486 ) 111.54 ( 135,032 ) 69.10 ( 81,230 ) 131.72

Awards forfeited ( 7,642 ) 179.89 ( 12,619 ) 152.22 ( 21,298 ) 114.40

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A summary of activity of the outstanding time-based restricted stock units for 2020, 2019 and 2018 is presented below:

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

2020 2019 2018

Awards Outstanding Weighted-

Grant Date Fair Value Awards Outstanding Weighted-

Grant Date Fair Value

1 unchanged sentence

Awards granted 58,807 116.87 62,115 126.92 46,810 143.93

Stock issued ( 50,868 ) 111.16 ( 68,111 ) 81.53 ( 82,921 ) 84.92

Awards forfeited ( 7,482 ) 122.87 ( 9,795 ) 116.52 ( 19,744 ) 112.06

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A summary of activity of the outstanding deferred stock units for 2020, 2019 and 2018 is presented below:

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

Grant Date Fair Value

Awards Outstanding

2020 2019 2018

Awards Outstanding Weighted-

Grant Date Fair Value Awards Outstanding Weighted-

Grant Date Fair Value

1 unchanged sentence

Awards granted 10,400 108.88 5,950 183.40 8,400 108.86

Stock issued ( 5,100 ) 183.40 ( 7,200 ) 108.86 ( 9,250 ) 109.48

Awards outstanding as of December 31 12,450 $ 113.96 7,150 $ 170.89 8,400 $ 108.86

We recognized compensation expense related to deferred stock units of $ 1.1 million, $ 1.1 million and $ 0.9 million, for the years ended December 31, 2020, 2019 and 2018, respectively.

Stock Options

Stock options have previously been granted under various equity compensation plans.

The maximum contractual term for all options was normally 10 years .

As of December 31, 2019 , there were no remaining outstanding stock option awards.

The total intrinsic value of options exercised (i.e., the difference between the market price at time of exercise and the price paid by the individual to exercise the options) was $ 1.6 million , $ 2.4 million and $ 6.0 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

The total amount of cash received from the exercise of these options was $ 0.3 million , $ 0.9 million and $ 3.1 million , for the years ended December 31, 2019 , 2018 and 2017 , respectively.

A summary of the activity under our stock option plans for 2019 , 2018 and 2017 , is presented below:

Exercise Price

Options outstanding, vested and exercisable as of January 1

Options exercised

Options forfeited

Options outstanding, vested and exercisable as of December 31

Note 9 – Debt

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Borrowings may be used to finance working capital needs, for letters of credit and for general corporate purposes in the ordinary course of business, including the financing of permitted acquisitions (as defined in the Third Amended Credit Agreement).

All obligations under the Third Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Third Amended Credit Agreement (the Guarantors).

The obligations are also secured by a Third Amended and Restated Pledge and Security Agreement, dated as of February 17, 2017, entered into by us and the Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of the non-real estate assets of the Guarantors.

All obligations under the Third Amended Credit Agreement were guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Third Amended Credit Agreement (the Guarantors).

The obligations were also secured by a Third Amended and Restated Pledge and Security Agreement, dated as of February 17, 2017, entered into by us and the Guarantors which grante to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of the non-real estate assets of the Guarantors.

These assets included, but were not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.

All revolving loans were due on the maturity date, February 17, 2022.

Borrowings under the Third Amended Credit Agreement could have been made as alternate base rate loans or euro-currency loans.

Alternate base rate loans bore interest that included a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio.

The base reference rate was the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank of New York (NYFRB) Rate in effect on such day plus ½ of 1.0% and (c) the adjusted LIBOR for a one month interest period in dollars on such day (or if such day was not a business day, the immediately preceding business day)

Euro-currency loans bore interest based on adjusted LIBOR plus a spread of 137.5 to 175.0 basis points, depending on our leverage ratio.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Third Amended Credit Agreement, we were required to pay a quarterly fee of 20 to 30 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Third Amended Credit Agreement.

The Third Amended Credit Agreement contained customary representations, warranties, covenants, mandatory prepayments and events of default under which our payment obligations could have been accelerated.

If an event of default occurred, the lenders could have, among other things, terminated their commitments and declared all outstanding borrowings to be immediately due and payable together with accrued interest and fees.

The financial covenants included requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00, subject to an election to increase the maximum leverage ratio to 3.50 to 1.00 for three fiscal quarters in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00.

The Third Amended Credit Agreement generally permitted us to pay cash dividends to our shareholders, provided that (i) no default or event of default had occurred and was continuing or would result from the dividend payment and (ii) our leverage ratio did not exceed 2.75 to 1.00.

If our leverage ratio exceeded 2.75 to 1.00, we could 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 had occurred and was continuing or would result from the payments.

On October 16, 2020, we entered into the Fourth Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A, as administrative agent, and the lenders party thereto (the Fourth Amended Credit Agreement).

The Fourth Amended Credit Agreement amends and restates the Third Amended Credit Agreement, and provides for a revolving credit facility with up to a $ 450.0 million borrowing capacity, with sublimits for multicurrency borrowings, letters of credit and swing-line notes, in addition to a $ 175.0 million accordion feature.

The Fourth Amended Credit Agreement extends the maturity, the date on which all amounts borrowed or outstanding under the Fourth Amended Credit Agreement are due, from February 17, 2022 to March 31, 2024.

All obligations under the Fourth Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Fourth Amended Credit Agreement (the Guarantors).

The obligations are also secured by a Fourth Amended and Restated Pledge and Security Agreement, dated as of October 16, 2020, entered into by us and the Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of our and the Guarantors’ non-real estate assets.

These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.

All revolving loans are due on the maturity date, February 17, 2022 .

Borrowings under the Third Amended Credit Agreement can be made as alternate base rate loans or euro-currency loans.

Alternate base rate loans bear interest that includes a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio.

The base reference rate is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank of New York (NYFRB) Rate in effect on such day plus ½ of 1% and (c) the adjusted LIBOR for a one month interest period in dollars on such day (or if such day is not a business day, the immediately preceding business day) plus 1%.

Borrowings under the Fourth Amended Credit Agreement can be made as alternate base rate loans or euro-currency loans.

Alternate base rate loans bear interest at a base reference rate plus a spread of 62.5 to 100.0 basis points, depending on our leverage ratio.

The base reference rate is the greatest of (a) the prime rate in effect on such day, (b) the NYFRB rate in effect on such day plus ½ of 1%, and (c) the adjusted LIBOR for a one month interest period in dollars on such day (or if such day is not a business day, the immediately preceding business day) plus 1 %.

Euro-currency loans bear interest based on adjusted LIBOR plus a spread of 162.5 to 200.0 basis points, depending on our leverage ratio.

Based on our leverage ratio as of December 31, 2020, the spread was 162.5 basis points.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Third Amended Credit Agreement, we are required to pay a quarterly fee of 20 to 30 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Third Amended Credit Agreement.

The Third Amended Credit Agreement contains customary representations, warranties, covenants, mandatory prepayments and events of default under which our payment obligations may be accelerated.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Fourth Amended Credit Agreement, we are required to pay a quarterly fee of 25 to 35 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Fourth Amended Credit Agreement.

The Fourth Amended Credit Agreement contains customary representations and warranties, covenants, mandatory prepayments and events of default under which our payment obligations may be accelerated.

If an event of default occurs, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees.

The financial covenants include requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00 , subject to an election to increase the maximum leverage ratio to 3.50 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00 .

The Third Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our leverage ratio does not exceed 2.75 to 1.00 .

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 December 31, 2019 .

The financial covenants include requirements to maintain (1) a total net leverage ratio of no more than 3.25 to 1.00, subject to a one-time election to increase the maximum total net leverage ratio to 3.50 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00.

We are permitted to net up to $ 50.0 million of unrestricted domestic cash and cash equivalents against indebtedness in the calculation of the total net leverage ratio.

The Fourth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00.

If our total net 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 total net leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2020.

In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $ 75.0 million of our $ 450.0 million revolving credit facility.

For additional information regarding the interest rate swap, refer to “ Note 3 – Hedging Transactions and Derivative Financial Instruments .”

We are not required to make any quarterly principal payments under the Third Amended Credit Agreement, however, we made discretionary principal payments totaling $ 105.5 million , $ 5.0 million and $ 110.2 million on our revolving credit facility in 2019 ,

2018 and 2017 , respectively.

This transaction was designated as a cash flow hedge and qualified for hedge accounting treatment.

We terminated the interest rate swap on September 30, 2020.

As a result, we settled the interest rate swap for $ 2.4 million on October 2, 2020, representing the fair value of the interest rate swap on the date of termination.

We borrowed $ 150.0 million under our revolving credit facility 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, during the three months ended March 31, 2020.

We did no t borrow anything further under our revolving credit facility for the year ended December 31, 2020.

We were not required to make any quarterly principal payments under the Third Amended Credit Agreement, nor are we required to make any quarterly principal payments under the Fourth Amended Credit Agreement, however, we made discretionary principal payments totaling $ 248.0 million, $ 105.5 million and $ 5.0 million on our revolving credit facility in 2020, 2019 and 2018, respectively.

We had $ 25.0 million in outstanding borrowings under our revolving credit facility as of December 31, 2020.

We incurred interest expense on our outstanding debt, net of the impacts of our interest rate swap, of $ 6.5 million, $ 7.2 million, and $ 6.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

We incurred an unused commitment fee of $ 0.6 million for each of the years ended December 31, 2019 , 2018 and 2017 .

We had $ 1.2 million and $ 1.7 million of outstanding line of credit issuance costs as of December 31, 2019 and 2018 , respectively, which will be amortized over the life of the Third Amended Credit Agreement.

We incurred an unused commitment fee of $ 0.7 million for the year ended December 31, 2020, and $ 0.6 million for the years ended December 31, 2019 and 2018, respectively.

We had $ 2.3 million and $ 1.2 million of outstanding line of credit issuance costs as of December 31, 2020 and 2019, respectively, which will be amortized over the life of the Fourth Amended Credit Agreement.

We recorded amortization expense of $ 0.6 million, $ 0.6 million and $ 0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, related to these deferred costs.

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Under the terms of the lease agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon.

Our finance lease obligation related to this facility was $ 4.5 million and $ 5.0 million as of December 31, 2019 and 2018 , respectively.

Our finance lease obligation related to this facility was $ 4.5 million as of both December 31, 2020 and 2019.

The finance lease right-of-use asset balance for this facility was $ 6.5 million and $ 6.3 million as of December 31, 2020 and 2019, respectively.

Accumulated amortization related to our finance lease right-of-use assets was $ 3.8 million and $ 3.5 million as of December 31, 2019 and December 31, 2018 , respectively.

Accumulated amortization related to our finance lease right-of-use assets was $ 4.5 million and $ 3.8 million as of December 31, 2020 and 2019, respectively.

All other finance lease obligations, finance lease right-of-use assets and accumulated amortization were cumulatively immaterial as of December 31, 2020 and 2019.

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As of December 31,

(Dollars in thousands)

Financial Statement Line Item

Finance lease right-of-use assets

Property, plant and equipment, net

Operating lease right-of-use assets

Other long-term assets

Finance lease obligations, current portion

Other accrued liabilities

Finance lease obligations, non-current portion

Other long-term liabilities

(Dollars in thousands) Financial Statement Line Item 2020 2019

Finance lease right-of-use assets Property, plant and equipment, net $ 7,017 $ 6,280

Operating lease right-of-use assets Other long-term assets $ 4,216 $ 4,656

Finance lease obligations, current portion Other accrued liabilities $ 4,755 $ 400

Finance lease obligations, non-current portion Other long-term liabilities $ 322 $ 4,140

Total finance lease obligations $ 5,077 $ 4,540

Operating lease obligations, current portion

Other accrued liabilities

Operating lease obligations, non-current portion

Other long-term liabilities

Operating lease obligations, current portion Other accrued liabilities $ 2,275 $ 2,343

Operating lease obligations, non-current portion Other long-term liabilities $ 2,219 $ 2,334

Total operating lease obligations $ 4,494 $ 4,677

1 unchanged sentence

The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of December 31, 2020:

(Dollars in thousands)

Leases in Effect

Leases Signed

Leases Not Yet Commenced

Leases in Effect

Finance Operating

(Dollars in thousands) Leases in Effect Leases Signed Less:

Leases Not Yet Commenced Leases in Effect

2021 4,787 2,435 ( 93 ) 2,342

2022 194 1,513 ( 101 ) 1,412

2023 187 788 ( 65 ) 723

2024 — 299 ( 40 ) 259

Thereafter — 42 ( 37 ) 5

Total lease payments 5,168 5,077 ( 336 ) 4,741

Interest ( 91 ) ( 259 ) 12 ( 247 )

Present Value of Net Future Minimum Lease Payments $ 5,077 $ 4,818 $ ( 324 ) $ 4,494

The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments:

Weighted Average Remaining Lease Term

Leases Operating

Weighted Average Remaining Lease Term 0.8 years 2.5 years

Weighted Average Discount Rate 3.07 % 4.57 %

We adopted Accounting Standards Codification (ASC) 842, Leases , in the first quarter of 2019 using the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restatement of comparative periods.

The guidance was applied to all leases that were not completed at the date of implementation.

The adoption primarily affected our consolidated statements of financial position through the recognition of $ 6.2 million of operating lease right-of-use assets and $ 6.2 million of operating lease obligations, as well as an immaterial impact to retained earnings, as of January 1, 2019.

We recognized $ 0.8 million of operating lease right-of-use assets and $ 0.8 million of operating lease obligations for the year ended December 31, 2019 .

The total operating lease right-of use assets and operating lease obligations recognized was $ 7.0 million and $ 7.0 million , respectively, for the year ended December 31, 2019 .

Practical Expedients

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Pension and Other Postretirement Benefit Plans

As of December 31, 2019 , we had two qualified noncontributory defined benefit pension plan, the Rogers Corporation Employees’ Pension Plan (the Union Plan) and 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)), which were frozen and had ceased accruing benefits.

The Merged Plan was terminated and substantially settled in late 2019, with remaining settlement efforts expected to be completed in the first half of 2020.

As of December 31, 2019, we had two qualified noncontributory defined benefit pension plans.

In June 2020, we completed the remaining settlement efforts for 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)), which had been terminated and substantially settled in late 2019.

As of December 31, 2020, only the Union Plan, which was frozen and ceased accruing benefits, remained.

There are no plans to terminate the Union Plan.

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The measurement date for all plans is December 31 st for each respective plan year.

Pension Plan Termination

Officer) and (b) add a lump sum distribution option in connection with the termination of the Merged Plan, if approved.

Pension Plan Termination & Settlement

During the second quarter of 2019, following receipt of a determination letter from the Internal Revenue Service (IRS), the Company amended the Merged Plan to (a) terminate the Merged Plan (subject to discretionary approval by the Company’s Chief Executive Officer) and (b) add a lump sum distribution option in connection with the termination of the Merged Plan, if approved.

The Company subsequently provided participants of the Merged Plan an option to elect either a lump sum distribution or an annuity.

On October 17, 2019, the Company’s Chief Executive Officer approved the termination of the Merged Plan.

A group annuity contract was purchased with an insurance company for all participants who did not elect a lump sum distribution, for $ 123.5 million , with a cash settlement date of October 24, 2019.

The insurance company is responsible for administering and paying pension benefit payments effective January 1, 2020.

The lump sum distributions, which totaled $ 38.9 million , were all paid out prior to December 31, 2019.

On October 17, 2019, the Chief Executive Officer approved the termination of the Merged Plan.

A group annuity contract was purchased with an insurance company for all participants who did not elect a lump sum distribution, for $ 123.3 million, with an initial cash settlement date of October 24, 2019, and a true-up cash settlement date of June 1, 2020.

The insurance company became responsible for administering and paying pension benefit payments effective January 1, 2020.

The lump sum distributions of $ 38.9 million, were all paid out prior to December 31, 2019.

The Merged Plan paid an additional $ 1.3 million of monthly pension benefit payments subsequent to the annuity purchase date during the transition period ending December 31, 2019.

The Merged Plan had sufficient assets to satisfy all transaction obligations.

The Merged Plan had $ 9.0 million of net assets remaining as of December 31, 2019 .

In addition, we recorded a total non-cash pre-tax settlement charge in connection with the termination of the Merged Plan of $ 53.2 million during the fourth quarter of 2019.

This settlement charge consisted of the immediate recognition into expense of the related unrecognized losses within “Accumulated other comprehensive loss” in the consolidated statements of financial position as of the plan termination date.

The settlement charge was recognized in “Pension settlement charges” in the consolidated statements of operations.

We expect to incur an additional non-cash pre-tax settlement charge in connection with the remaining settlement efforts of the Merged Plan of approximately $ 0.7 million during the first half of 2020.

In addition, we recorded a total non-cash pre-tax settlement charge in connection with the termination of the Merged Plan of $ 53.2 million during the fourth quarter of 2019, as well as an immaterial non-cash pre-tax settlement benefit during the second quarter of 2020.

This net settlement charge amount recognized included the immediate recognition into expense of the related unrecognized losses within “Accumulated other comprehensive loss” on the consolidated statements of financial position as of the plan termination date.

The pension settlement charge during the fourth quarter of 2019 and the pension settlement benefit during the second quarter of 2020 were recognized in the “Pension settlement charges” line item in the consolidated statements of operations.

As of December 31, 2020, the remaining pension surplus investment balance was approximately $ 9.1 million.

We plan on using a portion of the funds to pay plan expenses, and moving the remainder funds from the pension trust to a defined contribution plan trust, where they will be used to fund certain employer contributions and pay plan expenses.

On July 27, 2020, we transferred $ 7.4 million of the pension surplus investment balance to a suspense account held within a trust for the Rogers Employee Savings and Investment Plan, a 401(k) plan for domestic employees.

Plan Assets and Plan Benefit Obligations

The following table summarizes the change in plan benefit obligations and changes in plan assets:

Pension Benefits

Other Postretirement Benefits

Pension Benefits Other Postretirement Benefits

(Dollars in thousands) 2020 2019 2020 2019

1 unchanged sentence

Benefit obligation as of January 1 $ 30,300 $ 172,608 $ 1,599 $ 1,803

Service cost — 56 61

Interest cost 908 5,641 40 59

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Benefit payments ( 1,647 ) ( 9,262 ) ( 192 ) ( 273 )

Transfer related to plan termination ( 9,744 ) — — —

Pension settlements 237 ( 162,484 ) — —

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Amount overfunded (underfunded) $ 5,007 $ 12,535 $ ( 1,503 ) $ ( 1,599 )

The decrease in our plan benefit obligations in 2019 was primarily driven by the termination and settlement of our Merged Plan benefit obligations, in addition to actuarial gains and benefit payments, partially offset by interest costs.

The decrease in our benefit obligation in 2018 was primarily driven by actuarial gains and benefit payments made, partially offset by interest costs.

The decreases in our plan benefit obligations in 2020 and 2019 were primarily driven by benefit payments, partially offset by interest costs, actuarial losses and the termination and settlement of our Merged Plan benefit obligations.

Our pension-related balances reflected in the consolidated statements of financial position consisted of the following:

Pension Benefits

Other Postretirement Benefits

As of December 31,

Pension Benefits Other Postretirement Benefits

As of December 31, As of December 31,

(Dollars in thousands) 2020 2019 2020 2019

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The PBO and ABO of plan assets for the other postretirement benefit plans with a PBO or ABO in excess of plan assets were both $ 1.6 million as of December 31, 2019.

The other postretirement benefit plans did not have any plan assets as of December 31, 2019 or 2018 .

The other postretirement benefit plans did no t have any plan assets as of December 31, 2020 or 2019.

Components of Net Periodic Benefit Cost (Credit)

The components of net periodic benefit cost (credit) were as follows:

Pension Benefits

Other Postretirement Benefits

Years Ended December 31,

Pension Benefits Other Postretirement Benefits

Years Ended December 31, Years Ended December 31,

(Dollars in thousands) 2020 2019 2018 2020 2019 2018

Service cost $ — $ — $ 56 $ 61 $ 73

Interest cost 908 5,641 6,758 40 59 62

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Plan Assumptions

Pension Benefits

Other Postretirement Benefits

Pension Benefits Other Postretirement Benefits

2020 2019 2020 2019

Weighted average assumptions used in benefit obligations:

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For measurement purposes as of December 31, 2020, we assumed an annual health care cost trend rate of 6.50 % for covered health care benefits for retirees pre-age 65 or post-age 65 .

The rate was assumed to decrease gradually by 0.25 % annually until reaching 4.50 % and remain at that level thereafter.

The rate was assumed to decrease gradually by 0.25 % annually until

reaching 4.50 % and remain at that level thereafter.

For measurement purposes as of December 31, 2019, we assumed an annual health care cost trend rate of 6.75 % for covered health care benefits for retirees pre-age 65 or post-age 65 .

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To justify our assumptions, we analyzed certain data points related to portfolio performance.

For example, we analyze the actual historical performance of our total plan assets, which has generated a return of approximately 6.32 % over the past 20-year period.

Based on the historical returns and the projected future returns, we determined that a target return of 4.53 % is appropriate for the current portfolio.

1 unchanged sentence

Fair Value of Plan Assets as of December 31, 2020

(Dollars in thousands)

(Dollars in thousands) Level 1 Level 2 Level 3 Total

Fixed income bonds $ — $ 29,896 $ — $ 29,896

Mutual funds 3,535 — — 3,535

Pooled separate accounts — 518 — 518

2 unchanged sentences

Fair Value of Plan Assets as of December 31, 2019

(Dollars in thousands)

(Dollars in thousands) Level 1 Level 2 Level 3 Total

Fixed income bonds $ — $ 27,704 $ — $ 27,704

Mutual funds 3,277 — — 3,277

Pooled separate accounts — 10,516 — 10,516

13 unchanged sentences

The following table sets forth the expected benefit payments to be paid for the pension plans and the other postretirement benefit plans:

Pension Benefits

Other Postretirement Benefits

Pension Benefits Other Postretirement Benefits

2021 $ 1,808 $ 148

2022 $ 1,758 $ 114

2023 $ 1,778 $ 130

2024 $ 1,770 $ 122

2025 $ 1,801 $ 150

2026-2030 $ 8,570 $ 763

Employee Savings and Investment Plan

2 unchanged sentences

Certain eligible participants are also allowed to contribute the maximum catch-up contribution per IRS regulations.

Our matching contribution is 6 % of an eligible employee’s annual pre-tax contribution at a rate of 100 % for the first 1 % of the employee’s salary and 50 % for the next 5 % of the employee’s salary for a total match of 3.5 % .

We match each eligible employee’s annual pre-tax contributions at a rate of 100 % for the first 1 % of the employee’s salary and 50 % for the next 5 % of each employee’s salary for a total match of 3.5 %.

Unless otherwise indicated by the participant, the matching dollars are invested in the same funds as the participant’s contributions.

RESIP related expense amounted to $ 4.4 million in 2019 , $ 5.6 million in 2018 and $ 4.0 million in 2017 , which related solely to our matching contributions.

RESIP related expense amounted to $ 4.9 million in 2020, $ 4.4 million in 2019 and $ 5.6 million in 2018.

Note 12 – Commitments and Contingencies

23 unchanged sentences

The liability projection period covers all current and future indemnity and defense costs through 2064, which represents the expected end of our asbestos liability exposure with no further ongoing claims expected beyond that date.

This conclusion was based on

our history and experience with the claims data, the diminished volatility and consistency of observable claims data, the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants, which is approaching the average life expectancy.

This conclusion was based on our history and experience with the claims data, the diminished volatility and consistency of observable claims data,

the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants, which is approaching the average life expectancy.

To date, the indemnity and defense costs of our asbestos-related product liability litigation have been substantially covered by insurance.

4 unchanged sentences

We expect to continue to exhaust individual primary, excess and umbrella coverages over time, and there is no assurance that such exhaustion will not accelerate due to additional claims, damages and settlements or that coverage will be available as expected.

We are responsible for uninsured indemnity and defense costs, and for the years ended December 31, 2019 and 2018 , we paid $ 0.7 million and $ 1.2 million , respectively, related to such costs.

We are responsible for uninsured indemnity and defense costs, and for the years ended December 31, 2020 and December 31, 2019, we paid $ 0.4 million and $ 0.7 million, respectively, related to such costs.

The amounts recorded for the asbestos-related liability and the related insurance receivables are based on facts known at the time and a number of assumptions.

1 unchanged sentence

Changes recorded in the estimated liability and estimated insurance recovery based on the projections of asbestos litigation and corresponding insurance coverage, result in the recognition of expense or income.

For the years ended December 31, 2019 , 2018 and 2017 , we recognized expense of $ 1.7 million , $ 0.7 million and $ 3.4 million , respectively.

The increase in expense in 2019 compared to 2018 was due to an unfavorable change in the defense cost assumptions and the inclusion of non-mesothelioma cases in the cost projections, partially offset by a corresponding favorable change in our insurance recovery expectations.

The higher expense recognized in 2017 was primarily attributable to the change in the forecast period from 10 years to 40 years , partially offset by a corresponding favorable change in our insurance recovery expectations.

For the year ended December 31, 2020, we recognized income of $ 0.7 million, and for the years ended December 31, 2019 and 2018 expense of $ 1.7 million and $ 0.7 million, respectively.

The benefit recognized in 2020 was primarily due to a favorable change in the defense cost assumptions.

The expense recognized in 2019 was primarily due to an unfavorable change in the defense cost assumptions and the inclusion of non-mesothelioma cases in the cost projections, partially offset by a corresponding favorable change in our insurance recovery expectations.

The expense recognized in 2018 was primarily due to an unfavorable change in the defense cost assumptions.

Our projected asbestos-related claims and insurance receivables were as follows:

10 unchanged sentences

(Dollars in thousands) 2020 2019 2018

Domestic $ ( 4,371 ) $ ( 18,711 ) $ 14,381

International 72,905 73,837 96,208

Total $ 68,534 $ 55,126 $ 110,589

The “Income tax expense” line item in the consolidated statements of operations consisted of:

(Dollars in thousands)

(Dollars in thousands) Current Deferred Total

Domestic $ 5,340 $ ( 11,012 ) $ ( 5,672 )

International 26,610 ( 2,394 ) 24,216

Total $ 31,950 $ ( 13,406 ) $ 18,544

Domestic $ 3,372 $ ( 16,827 ) $ ( 13,455 )

International 21,984 ( 722 ) 21,262

Total $ 25,356 $ ( 17,549 ) $ 7,807

Domestic $ ( 341 ) $ ( 3,007 ) $ ( 3,348 )

International 26,604 ( 318 ) 26,286

Total $ 26,263 $ ( 3,325 ) $ 22,938

Deferred tax assets and liabilities as of December 31, 2020 and 2019, were comprised of the following:

5 unchanged sentences

Operating leases 665 904

Capitalized research and development 14,167 11,343

Other 1,824 2,210

Total deferred tax assets 47,080 43,944

6 unchanged sentences

Operating leases 714 908

Other 2,115 1,803

Total deferred tax liabilities 17,538 21,422

1 unchanged sentence

As of December 31, 2020, we had state net operating loss carryforwards ranging from $ 0.2 million to $ 4.7 million in various state taxing jurisdictions, which expire between 2022 and 2039 and approximately $ 8.4 million of credit carryforwards in Arizona, which will expire between 2021 and 2035.

We also had $ 5.9 million of federal research and development credit carryforwards that begin to expire in 2026.

We believe that it is more likely than not that the benefit from certain of the state net operating loss, state credits and federal research and development credits carryforwards will not be realized.

We also had $ 5.8 million of federal research and development (R&D) credit carryforwards that begin to expire in 2031.

We believe that it is more likely than not that the benefit from certain of the state net operating loss, state R&D credits carryforwards will not be realized.

In recognition of this risk, we have provided a valuation allowance of $ 8.0 million relating to these carryforwards.

2 unchanged sentences

No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions.

In 2020, we released the valuation allowance of $ 5.3 million previously established against our R&D credit carryforwards as a result of our updated analysis, including current year utiliziation and updated future utilization.

We reached this conclusion after considering the availability of taxable income in prior carryback years, tax planning strategies, and the likelihood of future taxable income exclusive of reversing temporary differences and carryforwards in the respective jurisdictions or entities.

Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable.

Differences between forecasted and actual future

operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable.

Income tax expense differs from the amount computed by applying the U.S.

7 unchanged sentences

Unrecognized tax benefits 5,800 543 ( 869 )

Tax Reform — — 209

Equity compensation excess tax deductions ( 791 ) ( 2,902 ) ( 2,238 )

1 unchanged sentence

Distribution related foreign taxes 2,332 1,240 1,916

Executive compensation limitation 900 589 801

Valuation allowance change (excluding U.S.

Tax Reform) ( 5,375 ) ( 2,527 ) 602

Disproportionate tax effect of pension settlement charges — 2,510 —

Other 287 265 715

Income tax expense (benefit) $ 18,544 $ 7,807 $ 22,938

Our effective income tax rate for 2020 was 27.1 % compared to 14.2 % for 2019.

The 2019 rate decrease was primarily due to the impact of changes in valuation allowance against deferred tax assets associated with carried over research and development credits, excess tax deductions on stock-based compensation, and the international provisions from the U.S.

tax reform enacted in 2017.

This decrease was partially offset by a disproportionate tax impact from the non-cash settlement charge in connection with the termination of the Merged Plan, increase in taxes associated with the repatriation of foreign earnings, and increase in current accruals of reserves for uncertain tax positions.

The 2020 rate increase was primarily due to the increase in current year accruals of reserves for uncertain tax positions, the decrease in foreign tax credits available to offset foreign source income, 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 pre-tax mix across jurisdictions with disparate tax rates.

We did not make any changes in 2020 to our position on the permanent reinvestment of our historical earnings from foreign operations.

1 unchanged sentence

As of December 31, 2020 and 2019, we had recorded a deferred tax liability of $ 2.4 million and $ 1.6 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested.

12 unchanged sentences

Also included in the balance of unrecognized tax benefit as of December 31, 2020 were $ 0.4 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

We recognize interest accrued related to unrecognized tax benefit as income tax expense.

Related to the unrecognized tax benefits noted above, at December 31, 2019 and 2018 , we had accrued potential interest and penalties of approximately $ 0.7 million and $ 0.5 million , respectively.

We have recorded a net income tax expense of $ 0.2 million during 2019 , net income tax expense of $ 0.1 million during 2018 and $ 0.9 million net income tax benefit during 2017 .

We recognized interest accrued related to unrecognized tax benefit as income tax expense.

Related to the unrecognized tax benefits noted above, as of December 31, 2020 and 2019, we had accrued potential interest and penalties of approximately $ 1.2

million and $ 0.7 million, respectively.

We have recorded a net income tax expense of $ 0.5 million during December 31, 2020 and net income tax expense of $ 0.2 million during 2019.

We are subject to taxation in the U.S.

11 unchanged sentences

inter-segment sales have been eliminated from the net sales data:

(Dollars in thousands)

Advanced Connectivity Solutions

Elastomeric Material Solutions

Power Electronics Solutions

(Dollars in thousands) Advanced Connectivity Solutions Elastomeric Material Solutions Power Electronics Solutions Other Total

December 31, 2020

Net sales - recognized over time $ 902 $ 10,614 $ 189,140 $ 14,451 $ 215,107

1 unchanged sentence

Total net sales $ 268,699 $ 328,177 $ 189,980 $ 15,727 $ 802,583

Operating income

Operating income (loss) $ 38,202 $ 30,817 $ ( 6,179 ) $ 4,494 $ 67,334

Total assets $ 407,667 $ 504,199 $ 338,419 $ 13,720 $ 1,264,005

Capital expenditures $ 11,849 $ 16,214 $ 11,840 $ 482 $ 40,385

2 unchanged sentences

Equity income in unconsolidated joint ventures $ — $ 4,877 $ — $ — $ 4,877

December 31, 2019

Net sales - recognized over time $ — $ 12,687 $ 197,702 $ 18,112 $ 228,501

1 unchanged sentence

Total net sales $ 316,592 $ 361,603 $ 198,535 $ 21,530 $ 898,260

Operating income

Operating income (loss) $ 48,654 $ 57,080 $ ( 1,437 ) $ 6,184 $ 110,481

Total assets $ 402,398 $ 569,484 $ 278,763 $ 22,536 $ 1,273,181

Capital expenditures $ 22,156 $ 8,550 $ 20,191 $ 700 $ 51,597

2 unchanged sentences

Equity income in unconsolidated joint ventures $ — $ 5,319 $ — $ — $ 5,319

December 31, 2018

Net sales - recognized over time $ — $ 5,788 $ 221,896 $ 16,973 $ 244,657

Net sales - recognized at a point in time $ 294,154 $ 335,576 $ 1,442 $ 3,262 $ 634,434

Total net sales $ 294,154 $ 341,364 $ 223,338 $ 20,235 $ 879,091

Operating income $ 33,827 $ 52,502 $ 19,648 $ 6,734 $ 112,711

Total assets $ 396,075 $ 588,841 $ 273,212 $ 21,216 $ 1,279,344

Capital expenditures $ 61,425 $ 10,917 $ 18,051 $ 156 $ 90,549

4 unchanged sentences

The following table presents net sales by our operating segment operations by geographic area for the years indicated:

(Dollars in thousands)

Net Sales (1)

Region/Country

Advanced Connectivity Solutions

Elastomeric Material Solutions

Power Electronics Solutions

(Dollars in thousands) Net Sales (1)

Region/Country Advanced Connectivity Solutions Elastomeric Material Solutions Power Electronics Solutions Other Total

December 31, 2020

2 unchanged sentences

Total Americas 69,050 136,784 24,715 4,361 234,910

China 115,454 108,161 37,843 2,859 264,317

Other APAC 51,742 43,364 19,088 2,162 116,356

Total APAC 167,196 151,525 56,931 5,021 380,673

Germany 11,452 19,118 59,429 410 90,409

Other EMEA 21,001 20,750 48,905 5,935 96,591

Total EMEA 32,453 39,868 108,334 6,345 187,000

Total net sales $ 268,699 $ 328,177 $ 189,980 $ 15,727 $ 802,583

3 unchanged sentences

Total Americas 67,101 170,126 32,239 5,420 274,886

China 153,127 95,653 40,391 6,086 295,257

Other APAC 60,457 55,402 23,401 2,920 142,180

Total APAC 213,584 151,055 63,792 9,006 437,437

Germany 15,912 13,702 57,761 573 87,948

Other EMEA 19,995 26,720 44,743 6,531 97,989

Total EMEA 35,907 40,422 102,504 7,104 185,937

Total net sales $ 316,592 $ 361,603 $ 198,535 $ 21,530 $ 898,260

3 unchanged sentences

Total Americas 55,765 166,737 38,256 5,300 266,058

China 136,315 101,036 39,781 4,959 282,091

Other APAC 63,318 40,788 28,414 2,892 135,412

Total APAC 199,633 141,824 68,195 7,851 417,503

Germany 18,165 9,907 62,359 584 91,015

Other EMEA 20,591 22,896 54,528 6,500 104,515

Total EMEA 38,756 32,803 116,887 7,084 195,530

Total net sales $ 294,154 $ 341,364 $ 223,338 $ 20,235 $ 879,091

8 unchanged sentences

This application of the new standard resulted in an increase to the January 1, 2018 balance of retained earnings of approximately $ 4.2 million, net of tax.

The Company manufactures some products to customer specifications which are customized to such a degree that it is unlikely that another entity would purchase these products or that we could modify these products for another customer.

These products are deemed to have no alternative use to the Company whereby we have an enforceable right to payment evidenced by contractual termination clauses.

We manufacture some products to customer specifications which are customized to such a degree that it is unlikely that another entity would purchase these products or that we could modify these products for another customer.

These products are deemed to have no alternative use to us whereby we have an enforceable right to payment evidenced by contractual termination clauses.

In accordance with ASC 606, for those circumstances we recognize revenue on an over-time basis.

11 unchanged sentences

Power Electronics Solutions 23,449 19,471

Other 1,489 1,907

Total contract assets $ 26,575 $ 22,455

We did not have any contract liabilities as of December 31, 2020 or 2019.

No impairment losses were recognized for the years ended December 31, 2019 and 2018 on any receivables or contract assets arising from our contracts with customers.

No impairment losses were recognized for the years ended December 31, 2020 or 2019 on any receivables or contract assets arising from our contracts with customers.

Long-Lived Assets by Geographic Area

3 unchanged sentences

United States $ 432,497 $ 469,234

China 48,850 55,078

Germany 133,168 120,869

Other 46,061 36,942

Total long-lived assets $ 660,576 $ 682,123

3 unchanged sentences

Restructuring and Impairment Charges

The components of “Restructuring and impairment charges” were as follows:

The components of “Restructuring and impairment charges” line item in the condensed consolidated statements of operations, were as follows:

Years Ended December 31,

1 unchanged sentence

Restructuring charges

Global headquarters relocation

Manufacturing footprint optimization $ 12,348 $ — $ —

Facility consolidation — 948 1,982

Total restructuring charges

Global headquarters relocation — — 550

Restructuring charges 12,348 948 2,532

Impairment charges

1 unchanged sentence

Other impairment charges 52 — —

Total impairment charges

Impairment charges 639 1,537 1,506

Total restructuring and impairment charges $ 12,987 $ 2,485 $ 4,038

Relocation Charges - Facility Consolidation

Restructuring Charges - Manufacturing Footprint Optimization

During the third quarter of 2020, we commenced manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations, primarily impacting our PES and ACS operating segments, in order to achieve greater cost competitiveness as well as align capacity with end market demand.

We expect the majority of the restructuring activities to be completed by the end of the first half of 2021.

Severance and related benefits activity related to the manufacturing footprint optimization plan is presented in the table below for the year ended December 31, 2020:

(Dollars in thousands) Manufacturing Footprint Optimization Restructuring Severance and Related Benefits

Balance as of December 31, 2019 $ —

Provisions 11,451

Payments ( 819 )

Foreign currency translation adjustment 371

Balance as of December 31, 2020

Restructuring Charges - Facility Consolidation & Global Headquarters Relocation

In 2018, we made the decision to consolidate our Santa Fe Springs, California operations into our facilities in Carol Stream, Illinois and Bear, Delaware.

We recorded $ 0.9 million and $ 2.0 million of expense in 2019 and 2018, respectively, related to the facility consolidation.

Relocation Charges - Global Headquarters Relocation

We recorded $ 0.9 million and $ 2.0 million of restructuring charges in 2019 and 2018, respectively, related to the facility consolidation.

In 2017, we relocated our global headquarters from Rogers, Connecticut to Chandler, Arizona.

We recorded $ 0.6 million and $ 2.8 million of expense in 2018 and 2017, respectively, related to the headquarters relocation.

We recorded $ 0.6 million of restructuring charges in 2018 related to the headquarters relocation.

Impairment Charges

We recognized $ 1.5 million of impairment charges in both 2019 and 2018 pertaining to our ACS operating segment, primarily relating to certain assets in connection with the Isola asset acquisition.

In 2017, we recognized a $ 0.3 million charge related to the impairment of our remaining investment in BrightVolt, Inc.

As this investment did not relate to a specific operating segment, we allocated it ratably among ACS, EMS and PES.

Also in 2017, we recognized a $ 0.5 million impairment charge related to the remaining net book value of an other intangible asset within the ROLINX ® product line in our PES operating segment.

We recognized $ 0.6 million of impairment charges in 2020, primarily related to fixed assets in Belgium pertaining to our ACS operating segment and a building lease in Hungary pertaining to our PES operating segment.

We recognized $ 1.5 million of impairment charges in both 2019 and 2018 pertaining to our ACS operating segment, primarily on certain assets in connection with the Isola USA Corp.

(Isola) asset acquisition.

Allocation of Restructuring and Impairment Charges to Operating Segments

16 unchanged sentences

(Dollars in thousands) 2020 2019 2018

Lease income $ — $ ( 989 ) $ ( 948 )

Depreciation on leased assets — 1,907 3,512

8 unchanged sentences

from January 1, 1999 through December 31, 2004 in violation of the federal antitrust laws.

We also recorded a gain of $ 0.7 million for the settlement

of indemnity claims related to the DSP acquisition and income of $ 0.6 million from economic incentive grants related to the relocation of our global headquarters from Rogers, Connecticut to Chandler, Arizona.

In 2017, we recognized other operating income of $ 5.3 million as a result of the sales of a facility and a parcel of land located in Belgium.

We also recorded a gain of $ 0.7 million for the settlement of indemnity claims related to the DSP acquisition and income of $ 0.6 million from economic incentive grants related to the relocation of our global headquarters from Rogers, Connecticut to Chandler, Arizona.

Interest Expense, Net

8 unchanged sentences

Interest income ( 939 ) ( 1,610 ) ( 804 )

Other 147 46 79

Total interest expense, net $ 7,135 $ 6,869 $ 6,629

1 unchanged sentence

Recently Issued Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred loss model with a new expected loss impairment model that applies to most assets measured at amortized cost and certain other financial instruments, including trade receivables and other receivables.

This ASU is effective for our fiscal year ending December 31, 2020 and for the interim periods within that year.

Early adoption of this update is permitted and it is required to be applied with a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the new guidance is effective.

We expect this new guidance to have an immaterial impact on its consolidated financial statements, however, we are still finalizing our analysis.

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued after reference rate reform.

This ASU provides optional expedients and exceptions to accounting under GAAP for contract modifications that replace a reference rate affected by reference rate reform.

The amendments in this update were effective as of March 12, 2020 and we may elect to apply the amendments to contract modifications or hedging relationships entered into through December 31, 2022.

We adopted this ASU as of the effective date and will utilize the optional expedients to the extent they apply to us.

Our revolving credit facility under the Fourth Amended Credit Agreement, which was entered into on October 16, 2020 and references LIBOR, contains certain provisions for alternative reference rates in the event LIBOR becomes unavailable.

Additionally, we terminated our interest rate swap, which also referenced LIBOR, on September 30, 2020.

As of December 31, 2020, we have no existing contracts or agreements that reference LIBOR, for which there is not an established alternative reference rate in anticipation of the phase out of LIBOR.

As a result, we are unlikely to need to apply this guidance in the future.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

The new guidance also requires the if-converted method be applied for all convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

Adoption of the standard requires using either the modified retrospective or the retrospective approach.

We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

Recently Adopted Standards Reflected in Our 2020 Financial Statements

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans , which modifies the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans.

This ASU is effective for our fiscal year ending December 31, 2020, with early adoption permitted.

ASU 2018-14 is required to be applied on a retrospective basis to all periods presented.

We early adopted this guidance in October 2019.

It did not have a material impact on our consolidated financial statements but it resulted in revised disclosures related to our defined benefit plans.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement .

This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This ASU is effective for our fiscal year ending December 31, 2020 and for the interim periods within that year.

Early adoption is permitted.

ASU 2018-13 is generally required to be applied retrospectively to all periods presented upon their effective date with the exception of certain amendments that should be applied prospectively to the most recent interim or annual period presented in the year of adoption.

We early adopted this guidance in October 2019.

It did not have a material impact on our consolidated financial statements or impact our fair value measurement disclosures.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815):

Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes , which permits the use of the OIS rate based on the SOFR as a U.S.

benchmark interest rate for hedge accounting purposes.

The amendments in this update were effective for the Company on January 1, 2019 and we will apply them to qualifying new or redesignated hedging relationships.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract , which aligns the requirements for capitalizing costs incurred in the implementation of a hosting arrangement that is a service contract

with the requirements for capitalizing costs incurred to develop or obtain internal use software.

We adopted this ASU on January 1, 2019 on a prospective basis and it did not have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

This ASU allows for reclassification of stranded tax effects resulting from U.S.

Tax Reform from accumulated other comprehensive loss to retained earnings but it does not require this reclassification.

We adopted this ASU on January 1, 2019 and elected to not reclassify the stranded tax effects resulting from U.S.

As a result of that election, the adoption of ASU 2018-02 did not have an impact on our consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases , which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The standard requires lessees to classify leases as either finance or operating leases and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today.

ASU 2016-02 supersedes the existing guidance on accounting for leases.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which allowed for an optional transition method for the adoption of Topic 842.

The two permitted transition methods were the modified retrospective approach, which applies the lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We adopted this standard on January 1, 2019 using the optional transition method.

We elected to use the practical expedients that allow us to carry forward the historical lease classification.

For additional information regarding the impact of the adoption of this standard, refer to “ Note 10 – Leases .”

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred loss model with a new expected loss impairment model that applies to certain financial assets measured at amortized cost, including trade and other receivables and contract assets.

We adopted this update in January 2020 using the modified-retrospective approach, and it did not have a material impact on our consolidated financial statements.

Note 17 – Quarterly Results of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

(Dollars in thousands, except per share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 198,810 $ 191,157 $ 201,944 $ 210,672

Gross margin $ 65,630 $ 69,969 $ 75,518 $ 80,703

Net income $ 13,259 $ 14,520 $ 7,006 $ 15,205

Net income per share:

Basic $ 0.71 $ 0.78 $ 0.37 $ 0.82

Diluted $ 0.71 $ 0.78 $ 0.37 $ 0.81

(Dollars in thousands, except per share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 239,798 $ 242,852 $ 221,842 $ 193,768

Gross margin $ 85,394 $ 85,828 $ 78,867 $ 64,203

Net income (loss) $ 28,399 $ 24,293 $ 23,387 $ ( 28,760 )

Net income (loss) per share:

(Dollars in thousands, except per share amounts)

Net income per share:

Basic $ 1.53 $ 1.31 $ 1.26 $ ( 1.55 )

Diluted $ 1.52 $ 1.30 $ 1.25 $ ( 1.55 )

Note 18 – Share Repurchases

9 unchanged sentences

Value of capital stock repurchased $ — $ — $ 2,999

(Dollars in thousands)

Balance at Beginning of Period

Charged to (Reduction of) Costs and Expenses

Taken Against Allowance

Other (Deductions) Recoveries

Balance at End of Period

Allowance for Doubtful Accounts

Note 19 - Subsequent Event

In early February 2021, there was a fire at our UTIS manufacturing facility in Ansan, South Korea.

The site was safely evacuated and there were no reported injuries;

however, there is extensive damage to the manufacturing site.

The source of the fire is currently under investigation.

This facility manufactures eSorba® polyurethane foams used in portable electronics and display applications.

These operations will be disrupted, but it is too early to determine the expected duration of the disruption.

We acquired the UTIS business in 2010, and we employ approximately 50 people at this site.

The UTIS business represented less than 4 % of our annual net sales in 2020.

The impacts of this event on our results of operations, financial position and cash flows are unknown at this time due to the continuing assessment of the extent of the damage to our manufacturing site, the extent of the disruption to our business and the amounts of potential insurance recoveries.

(Dollars in thousands) Balance at Beginning of Period Charged to (Reduction of) Costs and Expenses Taken Against Allowance Other (Deductions) Recoveries Balance at End of Period

Allowance for Credit Losses

December 31, 2020 $ 1,691 $ 223 $ ( 232 ) $ — $ 1,682

1 unchanged sentence

December 31, 2018 $ 1,525 $ 189 $ ( 360 ) $ — $ 1,354

(Dollars in thousands)

Balance at Beginning of Period

Charged to (Reduction of) Costs and Expenses

Taken Against Allowance

Other (Deductions) Recoveries

Balance at End of Period

(Dollars in thousands) Balance at Beginning of Period Charged to (Reduction of) Costs and Expenses Taken Against Allowance Other (Deductions) Recoveries Balance at End of Period

Valuation on Allowance for Deferred Tax Assets

4 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data