What changed in this filing

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Item 1. Financial Statements

2021-04-30 compared with 2020-10-30 · 214 added, 292 removed, 481 unchanged (51% of the section changed)

3 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Net sales $ 229,265 $ 198,810

7 unchanged sentences

Equity income in unconsolidated joint ventures 2,181 1,218

Pension settlement charges — — ( 55 ) —

Other income (expense), net 2,968 ( 786 )

12 unchanged sentences

(Dollars in thousands)

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Net income $ 31,218 $ 13,259

1 unchanged sentence

Pension and other postretirement benefits:

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

Actuarial net gain incurred, net of tax (Note 4) 3 — 629 —

Amortization of loss, net of tax (Note 4) 63 66

1 unchanged sentence

Change in unrealized loss before reclassifications, net of tax (Note 4) — ( 1,249 )

Unrealized loss (gain) reclassified into earnings, net of tax (Note 4) 2,810 ( 32 ) 2,476 ( 188 )

Unrealized gain reclassified into earnings, net of tax (Note 4) — ( 67 )

Other comprehensive income (loss) ( 13,196 ) ( 8,144 )

4 unchanged sentences

(Dollars and shares in thousands, except par value )

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets

Cash and cash equivalents $ 199,109 $ 191,785

Accounts receivable, less allowance for doubtful accounts of $ 1,366 and $ 1,691

Accounts receivable, less allowance for credit losses of $ 1,310 and $ 1,682

144,049 134,421

44 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Operating Activities:

6 unchanged sentences

Dividends received from unconsolidated joint ventures 1,754 1,785

Pension settlement benefits ( 63 ) —

Pension and other postretirement benefits ( 79 ) ( 50 )

Asbestos-related charges — 67

Loss on sale or disposal of property, plant and equipment 49 278

Impairment charges 386 1,537

Provision (benefit) for doubtful accounts ( 63 ) 16

(Gain) loss on sale or disposal of property, plant and equipment ( 89 ) 20

UTIS fire fixed asset and inventory write-offs 1,171 —

Provision (benefit) for credit losses ( 345 ) 128

Changes in assets and liabilities:

9 unchanged sentences

Capital expenditures ( 3,602 ) ( 11,160 )

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

Return of capital from unconsolidated joint ventures — 2,625

Net cash used in investing activities ( 3,602 ) ( 11,160 )

3 unchanged sentences

Payments of taxes related to net share settlement of equity awards ( 2,632 ) ( 4,997 )

Proceeds from the exercise of stock options, net — 344

Proceeds from issuance of shares to employee stock purchase plan 704 664

Net cash provided by (used in) financing activities ( 67,033 ) ( 104,010 )

Net cash (used in) provided by financing activities ( 23,181 ) 145,571

Effect of exchange rate fluctuations on cash ( 2,414 ) ( 1,616 )

Net increase (decrease) in cash and cash equivalents 19,274 ( 26,991 )

Net increase in cash and cash equivalents 7,324 141,428

Cash and cash equivalents at beginning of period 191,785 166,849

9 unchanged sentences

(Dollars and shares in thousands)

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Capital Stock

1 unchanged sentence

Shares issued for vested restricted stock units, net of shares withheld for taxes 28 79

Stock options exercised — 1 — 11

Shares issued for employee stock purchase plan 7 6

Shares issued to directors — 2 — 12

Balance, end of period 18,712 18,662

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Shares issued for vested restricted stock units, net of shares withheld for taxes ( 2,660 ) ( 5,076 )

Stock options exercised — 16 — 333

Shares issued for employee stock purchase plan 697 658

Shares issued to directors — ( 2 ) — ( 12 )

Equity compensation expense 4,006 3,127

3 unchanged sentences

Net income 31,218 13,259

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

Balance, end of period 904,910 836,961

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Refer to the discussion below for our restructuring activities significant accounting policy.

We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of September 30, 2020 and through the date of this report.

The accounting matters assessed included, but were not limited to, our allowance for doubtful accounts, equity compensation, the carrying value of our goodwill, other intangible assets as well as other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.

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.

Through the fourth quarter of 2020, we operated three strategic operating segments:

Advanced Connectivity Solutions (ACS), Elastomeric Material Solutions (EMS) and Power Electronics Solutions (PES), with the remaining operations, which represented our non-core businesses, being reported in a fourth operating segment, the Other operating segment.

In the first quarter of 2021, we completed the realignment of our strategic business segments to reflect the combination of our ACS and PES businesses resulting in a new strategic business segment, Advanced Electronics Solutions (AES).

The combination of these two complementary businesses with capabilities in both high power and high frequency applications is expected to enhance our overall value proposition to customers in multiple high-growth markets.

As a result of our organizational and reporting structure changes, we re-evaluated the chief operating decision maker’s review and assessment of the Company’s operating performance for purposes of performance monitoring and resource allocation.

We determined, based on the financial data utilized by the chief operating decision maker to assess segment performance and allocate resources among the Company’s strategic business segments, that we now have three operating segments under this new organizational and reporting structure:

AES, EMS and Other.

Reported results for the AES operating segment prior to 2021 represent the aggregation of the results for our former ACS and PES operating segments.

Note 2 – Fair Value Measurements

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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 September 30, 2020

Available-for-Sale Investment at Fair Value as of March 31, 2021

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

1 unchanged sentence

$ 6,417 $ 2,389 $ — $ 8,806

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 September 30, 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.

As of March 31, 2021, the fair value of these investments approximated its carrying value.

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

Derivative instruments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, were as follows:

Derivative Instruments at Fair Value as of September 30, 2020

Derivative Instruments at Fair Value as of March 31, 2021

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

1 unchanged sentence

Copper derivative contracts $ — $ 6,076 $ — $ 6,076

Interest rate swap contract $ — $ — $ — $ —

Derivative Instruments at Fair Value as of December 31, 2020

2 unchanged sentences

Copper derivative contracts $ — $ 4,785 $ — $ 4,785

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 condensed consolidated statements of financial position, except the 2019 interest rate swap balance, which was recorded in the “Other long-term liabilities” line item.

(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the condensed consolidated statements of financial position.

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

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We are exposed to certain risks related to our ongoing business operations.

The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk, commodity pricing risk (primarily related to copper) and interest rate risk.

The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk and commodity pricing risk (primarily related to copper).

We do not use derivative instruments for trading or speculative purposes.

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The time value valuation model incorporates changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date.

• Interest Rates – The fair value of interest rate swap instruments is derived by comparing the present value of the interest rate forward curve against the present value of the swap rate, relative to the notional amount of the swap.

The net value represents the estimated amount we would receive or pay to terminate the agreements.

Settlement amounts for an “in the money” swap would be adjusted down to compensate the counterparties for cost of funds, and the adjustment is directly related to the counterparties’ credit ratings.

The guidance for the accounting and disclosure of derivatives and hedging transactions requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the condensed consolidated statements of financial position.

1 unchanged sentence

For derivative instruments that are designated and qualify for hedge accounting treatment as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) in the condensed consolidated statements of comprehensive income (loss).

This gain or loss is reclassified into earnings in the same line item of the condensed 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 September 30, 2019, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge, and the hedge was highly effective.

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

Foreign Currency

During the three months ended September 30, 2020, we entered into U.S.

dollar, euro, and Korean won forward contracts.

During the three months ended March 31, 2021, we entered into U.S.

dollar, Korean won, and euro forward contracts.

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

These contracts do not qualify for hedge accounting treatment.

As a result, any fair value adjustments required on these contracts are recorded in “Other (expense) income, net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.

As of September 30, 2020, the notional values of the remaining foreign currency forward contracts were as follows:

As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.

As of March 31, 2021, the notional values of the remaining foreign currency forward contracts were as follows:

Notional Values of Foreign Currency Derivatives

USD/CNH $ 20,477,033

EUR/USD € 9,430,781

KRW/USD ₩ 11,317,100,000

As of September 30, 2020, we had 21 outstanding contracts to hedge exposure related to the purchase of copper in our Power Electronics Solutions (PES) and Advanced Connectivity Solutions (ACS) operating segments.

EUR/USD € 6,788,458

As of March 31, 2021, we had 14 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment.

These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment.

As of September 30, 2020, the volume of our copper contracts outstanding was as follows:

As of March 31, 2021, the volume of our copper contracts outstanding was as follows:

Volume of Copper Derivatives

October 2020 - December 2020 201 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

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 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.

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.”

October 2021 - December 2021 222 metric tons per month

January 2022 - March 2022 213 metric tons per month

Effects on Financial Statements

The impacts from our derivative instruments on the statement of operations and statements of comprehensive income (loss) were as follows:

Three Months Ended Nine Months Ended

(Dollars in thousands) Financial Statement Line Item September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

(Dollars in thousands) Financial Statement Line Item March 31, 2021 March 31, 2020

Foreign Currency Contracts

Contracts not designated as hedging instruments Other (expense) income, net $ ( 823 ) $ 181 $ ( 1,378 ) $ ( 406 )

Contracts not designated as hedging instruments Other income (expense), net $ ( 822 ) $ ( 528 )

Copper Derivative Contracts

Contracts not designated as hedging instruments Other (expense) income, net $ 1,238 $ ( 543 ) $ 1,067 $ ( 1,008 )

Contracts not designated as hedging instruments Other income (expense), net $ 2,547 $ ( 1,135 )

Interest Rate Swap

8 unchanged sentences

Net current-period other comprehensive income (loss) ( 13,259 ) 63 — ( 13,196 )

Balance as of September 30, 2020 $ ( 25,474 ) $ ( 9,675 ) $ — $ ( 35,149 )

Balance as of March 31, 2021 $ ( 23,830 ) $ ( 8,941 ) $ — $ ( 32,771 )

Balance as of December 31, 2019 $ ( 35,478 ) $ ( 10,455 ) $ ( 972 ) $ ( 46,905 )

2 unchanged sentences

Net current-period other comprehensive income (loss) ( 6,894 ) 66 ( 1,316 ) ( 8,144 )

Balance as of September 30, 2019 $ ( 42,750 ) $ ( 48,215 ) $ ( 1,196 ) $ ( 92,161 )

(1) Net of taxes of $ 2,154 and $ 2,368 as of September 30, 2020 and December 31, 2019, respectively.

Net of taxes of $ 9,851 and $ 9,984 as of September 30, 2019 and December 31, 2018, respectively.

(2) Net of taxes of $ 0 and $ 282 as of September 30, 2020 and December 31, 2019, respectively.

Net of taxes of $ 329 and $( 106 ) as of September 30, 2019 and December 31, 2018, respectively.

Balance as of March 31, 2020 $ ( 42,372 ) $ ( 10,389 ) $ ( 2,288 ) $ ( 55,049 )

(1) Net of taxes of $ 1,940 and $ 1,951 as of March 31, 2021 and December 31, 2020, respectively.

Net of taxes of $ 2,349 and $ 2,368 as of March 31, 2020 and December 31, 2019, respectively.

(2) Net of taxes of $ 0 as of both March 31, 2021 and December 31, 2020.

Net of taxes of $ 656 and $ 282 as of March 31, 2020 and December 31, 2019, respectively.

Note 5 – Inventories

Inventories, which are valued at the lower of cost or net realizable value, consisted of the following:

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

(Dollars in thousands) March 31, 2021 December 31, 2020

Raw materials $ 47,197 $ 44,976

4 unchanged sentences

The changes in the net carrying amount of goodwill by operating segment were as follows:

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

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

December 31, 2020 $ 124,927 $ 143,021 $ 2,224 $ 270,172

Foreign currency translation adjustment ( 3,075 ) ( 660 ) — $ ( 3,735 )

September 30, 2020 $ 51,694 $ 141,854 $ 70,009 $ 2,224 $ 265,781

March 31, 2021 $ 121,852 $ 142,361 $ 2,224 $ 266,437

Other Intangible Assets

The gross and net carrying amounts, as well as the accumulated amortization of other intangible assets were as follows:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

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

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In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations.

Amortization expense was $ 15.4 million and $ 4.4 million for the three months ended September 30, 2020 and 2019, respectively, and was $ 26.7 million and $ 13.3 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortization expense was $ 3.1 million and $ 3.7 million for the three months ended March 31, 2021 and 2020, respectively.

The estimated future amortization expense is $ 9.3 million for the remainder of 2021 and $ 11.8 million, $ 11.3 million, $ 10.0 million and $ 8.5 million for 2022, 2023, 2024 and 2025, respectively.

The increase in amortization expense for the three and nine months ended September 30, 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 September 30, 2020, by definite-lived other intangible asset class, was as follows:

The weighted average amortization period as of March 31, 2021, by definite-lived other intangible asset class, was as follows:

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

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The following table sets forth the computation of basic and diluted earnings per share:

(Dollars and shares in thousands, except per share amounts) Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

(Dollars and shares in thousands, except per share amounts) Three Months Ended

March 31, 2021 March 31, 2020

Net income $ 31,218 $ 13,259

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Anti-dilutive shares are excluded from the calculation of diluted shares and diluted earnings per share.

For the three months ended September 30, 2020 and 2019, 32,501 shares and 3,173 shares were excluded, respectively.

For the three months ended March 31, 2021 and 2020, 44,792 shares and 127,106 shares were excluded, respectively.

Note 8 – Capital Stock and Equity Compensation

1 unchanged sentence

Performance-Based Restricted Stock Units

As of September 30, 2020, we had performance-based restricted stock units from 2020, 2019, and 2018 outstanding.

As of March 31, 2021, we had performance-based restricted stock units from 2021, 2020, 2019 and 2018 outstanding.

These awards generally cliff vest at the end of a three-year measurement period.

However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed during the measurement period.

However, employees whose employment terminates

during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed during the measurement period, except as noted below in Chief Executive Officer’s 2021 Equity Award Grants .

Participants are eligible to be awarded shares ranging from 0 % to 200 % of the original award amount, based on certain defined performance measures.

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The following table sets forth the assumptions used in the Monte Carlo calculation for each material award granted in 2021 and 2020:

February 12, 2020 June 3, 2019 February 7, 2019

February 10, 2021 February 12, 2020

Expected volatility 51.0 % 41.0 %

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therefore, a dividend yield of 0 % was used in the Monte Carlo simulation valuation model.

A summary of activity of the outstanding performance-based restricted stock units for the nine months ended September 30, 2020 is presented below:

A summary of activity of the outstanding performance-based restricted stock units for the three months ended March 31, 2021 is presented below:

Performance-Based

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Stock issued —

Awards forfeited ( 5,866 )

Awards outstanding as of September 30, 2020 112,835

We recognized $ 1.6 million and $ 1.5 million of compensation expense for performance-based restricted stock units for the three months ended September 30, 2020 and 2019, respectively.

We recognized $ 4.3 million and $ 3.5 million of compensation expense for performance-based restricted stock units for the nine months ended September 30, 2020 and 2019, respectively.

Awards cancelled ( 20,493 )

Awards outstanding as of March 31, 2021 129,136

We recognized $ 2.1 million and $ 1.5 million of compensation expense for performance-based restricted stock units for the three months ended March 31, 2021 and 2020, respectively.

Time-Based Restricted Stock Units

As of September 30, 2020, we had time-based restricted stock unit awards from 2020, 2019, 2018 and 2017 outstanding.

As of March 31, 2021, we had time-based restricted stock unit awards from 2021, 2020, 2019 and 2018 outstanding.

The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date.

Each time-based restricted stock unit represents a right to receive one share of Rogers’ capital stock at the end of the vesting period.

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We account for forfeitures as they occur.

A summary of activity of the outstanding time-based restricted stock units for the nine months ended September 30, 2020 is presented below:

A summary of activity of the outstanding time-based restricted stock units for the three months ended March 31, 2021 is presented below:

Restricted Stock Units

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Stock issued ( 43,078 )

Awards forfeited ( 4,962 )

Awards outstanding as of September 30, 2020 106,110

We recognized $ 1.5 million and $ 1.5 million of compensation expense for time-based restricted stock units for the three months ended September 30, 2020 and 2019, respectively.

We recognized $ 4.6 million and $ 4.4 million of compensation expense for time-based restricted stock units for the nine months ended September 30, 2020 and 2019, respectively.

Awards cancelled ( 627 )

Awards outstanding as of March 31, 2021 103,610

We recognized $ 1.8 million and $ 1.5 million of compensation expense for time-based restricted stock units for the three months ended March 31, 2021 and 2020, respectively.

Chief Executive Officer’s 2021 Equity Award Grants

The terms of the performance-based and time-based restricted stock unit awards granted to our Chief Executive Officer (CEO), Bruce Hoechner, in February 2021 were modified from the standard language provisions from prior year awards to allow for accelerated vesting of the full awards provided certain criteria are met.

Accounting Standards Codification (ASC) Topic 718:

Compensation—Stock Compensation requires companies that allow for accelerated vesting of employees’ unvested equity upon retirement to recognize the expense from the date of grant to the date the employee becomes eligible to retire – regardless of whether or not the employee actually retires when he or she is eligible to.

As a result, the $ 4.0 million of expense related to the awards granted on February 10, 2021 to our CEO, which provide for immediate vesting upon retirement, will be expensed from the date of the grant, February 10, 2021, through his retirement eligibility date, November 9, 2021.

Deferred Stock Units

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The fair value of the award is determined by the market value of the underlying stock price at the grant date.

A summary of activity of the outstanding deferred stock units for the nine months ended September 30, 2020 is presented below:

A summary of activity of the outstanding deferred stock units for the three months ended March 31, 2021 is presented below:

Deferred Stock Units

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Stock issued —

Awards outstanding as of September 30, 2020 11,450

We recognized no compensation expense related to deferred stock units for the three months ended September 30, 2020 and 2019, respectively.

We recognized $ 1.0 million and $ 1.1 million of compensation expense for the nine months ended September 30, 2020 and 2019, respectively.

Awards outstanding as of March 31, 2021 12,450

We recognized no compensation expense related to deferred stock units for each of the three-month periods ended March 31, 2021 and 2020, respectively.

Note 9 – Debt

In February 2017, we entered into a secured five-year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Third Amended Credit Agreement), which increased the principal amount of our revolving credit facility to up to $ 450.0 million borrowing capacity, with sublimits for multicurrency borrowings, letters of credit and swing-line notes, and provided an additional $ 175.0 million accordion feature.

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.

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 at 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 %.

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

Based on our leverage ratio as of September 30, 2020, the spread was 137.5 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.

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 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 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 September 30, 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.

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 three and nine months ended September 30, 2020.

We are not required to make any quarterly principal payments under the Third Amended Credit Agreement.

However, for the three and nine months ended September 30, 2020, we made $ 163.0 million and $ 213.0 million of discretionary principal payments on our revolving credit facility, respectively.

We had $ 60.0 million in outstanding borrowings under our revolving credit facility as of September 30, 2020.

We incurred interest expense on our outstanding debt, net of the impacts of our interest rate swap, of $ 3.4 million and $ 1.8 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.3 million and $ 6.1 million for the nine months ended September 30, 2020, and 2019, respectively.

We incurred immaterial unused commitment fees for each of the three- and nine-month periods ended September 30, 2020 and 2019.

We had $ 0.7 million and $ 1.2 million of outstanding line of credit issuance costs as of September 30, 2020 and December 31, 2019, respectively, which will be amortized over the life of the Third Amended Credit Agreement.

We recognized an immaterial amount of amortization expense for each of the three- and nine-month periods ended September 30, 2020 and 2019, related to these deferred costs.

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).

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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 %.

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 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 on March 31, 2021, 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 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.

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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 March 31, 2021.

We did no t borrow anything under the Fourth Amended Credit Agreement for the three months ended March 31, 2021.

During the three months ended March 31, 2020, we borrowed $ 150.0 million under the Third Amended Credit Agreement (prior to its restatement) 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.

We are not required to make any quarterly principal payments under the Fourth Amended Credit Agreement.

We made $ 21.0 million of discretionary principal payments on our revolving credit facility for the three months ended March 31, 2021.

We had $ 4.0 million and $ 25.0 million in outstanding borrowings under our revolving credit facility as of March 31, 2021 and December 31, 2020, respectively.

We had $ 2.1 million and $ 2.3 million of outstanding line of credit issuance costs as of March 31, 2021 and December 31, 2020, respectively, which will be amortized over the life of the Fourth Amended Credit Agreement.

Note 10 - Leases

We have a finance lease obligation related to our manufacturing facility in Eschenbach, Germany.

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 $ 4.4 million and $ 4.5 million as of September 30, 2020 and December 31, 2019, respectively.

The finance lease right-of-use asset balance for this facility was $ 6.3 million and $ 6.3 million as of September 30, 2020 and December 31, 2019, respectively.

Accumulated amortization related to this finance lease right-of-use asset was $ 4.2 million and $ 3.8 million as of September 30, 2020 and December 31, 2019, respectively.

The aggregate of all other finance lease obligations, finance lease right-of-use assets and related accumulated amortization, were immaterial as of September 30, 2020 and December 31, 2019.

Amortization expense related to our finance lease right-of-use assets, which is primarily included in the “Cost of sales” line item of the condensed consolidated statements of operations, was immaterial for each of the three- and nine-month periods ended September 30, 2020 and 2019.

Interest expense related to our finance lease obligations, which is included in the “Interest expense, net” line item of the condensed consolidated statements of operations, was immaterial for each of the three- and nine-month periods ended September 30, 2020 and 2019.

Payments made on the principal portion of our finance lease obligations were immaterial for each of the three- and nine-month periods ended September 30, 2020 and 2019.

Under the terms of the lease agreement, we have an option to purchase the property upon the expiration of the lease on June 30, 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.

We expect to exercise this purchase option.

Our finance lease obligation related to this facility was $ 4.2 million and $ 4.5 million as of March 31, 2021 and December 31, 2020, respectively.

The finance lease right-of-use asset balance for this facility was $ 6.2 million and $ 6.5 million as of March 31, 2021 and December 31, 2020, respectively.

Accumulated amortization related to this finance lease right-of-use asset was $ 4.3 million and $ 4.5 million as of March 31, 2021 and December 31, 2020, respectively.

The aggregate of all other finance lease obligations, finance lease right-of-use assets and related accumulated amortization, were immaterial as of March 31, 2021 and December 31, 2020.

Payments made on the principal portion of our finance lease obligations were immaterial for each of the three-month periods ended March 31, 2021 and 2020.

We have operating leases primarily related to building space and vehicles.

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The exercise of lease renewal options is at our sole discretion.

account for lease components separately from non-lease components.

We account for lease components separately from non-lease components.

The incremental borrowing rate represents our ability to borrow on a collateralized basis over a similar lease term.

Our expenses and payments for operating leases were as follows:

Three Months Ended Nine Months Ended

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

Three Months Ended

(Dollars in thousands) March 31, 2021 March 31, 2020

Operating leases expense $ 681 $ 728

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Our assets and liabilities balances related to finance and operating leases reflected in the condensed consolidated statements of financial position were as follows:

(Dollars in thousands) Location in Statements of Financial Position September 30, 2020 December 31, 2019

(Dollars in thousands) Location in Statements of

Financial Position March 31, 2021 December 31, 2020

Finance lease right-of-use assets Property, plant and equipment, net $ 6,618 $ 7,017

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Net Future Minimum Lease Payments

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 September 30, 2020:

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 March 31, 2021:

Finance Operating

(Dollars in thousands) Leases Signed Less:

Leases Not Yet Commenced Total Leases Leases Signed Less:

Leases Not Yet Commenced Total Leases

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

Leases Not Yet Commenced Leases in Effect

2021 4,308 1,818 ( 52 ) 1,766

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Pension and Other Postretirement Benefit Plans

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 September 30, 2020, only the Rogers Corporation Employees’ Pension Plan (the Union Plan), which was frozen and ceased accruing benefits, remained.

There are no plans to terminate the Union Plan.

As of March 31, 2021, we had one qualified noncontributory defined benefit pension plan, the Rogers Corporation Employees’ Pension Plan (the Union Plan), which was frozen and ceased accruing benefits in 2013.

Additionally, we sponsor other postretirement benefit plans, including multiple fully insured or self-funded medical plans and life insurance plans for certain retirees.

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

Pension Plan Termination & Settlement

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

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

On October 17, 2019, our 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.

Pension Termination Surplus Funds

On October 17, 2019, our Chief Executive Officer approved the termination of the Rogers Corporation Defined Benefit Pension Plan (following its merger with the Hourly Employees Pension Plan of Arlon LLC, Microwave Material and Silicone Technologies Divisions, Bear, Delaware (collectively, the Merged Plan)).

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

A group annuity contract was purchased with an insurance company for all participants who did not elect a lump sum distribution.

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

Lump sum distributions of $ 38.9 million were 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.

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 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 was recognized in the “Pension settlement charges” line item in the consolidated statements of operations, and the pension settlement benefit during the second quarter of 2020 was recognized in the “Pension settlement charges” line item in the condensed consolidated statements of operations.

As of September 30, 2020, the remaining pension surplus investment balance was approximately $ 9.3 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.

Upon completion of the pension termination and settlement processes for the Merged Plan, we had a $ 9.7 million remaining pension surplus investment balance.

In July 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 (RESIP), a 401(k) plan for domestic employees.

The investment balance not transferred to the trust suspense account will be used to pay any final plan expenses, after which the remainder of these funds will be moved to the RESIP trust suspense account.

The funds in the RESIP trust suspense account have been, and will continue to be, used to fund certain employer contributions.

In the second quarter of 2021, we will use $ 0.9 million of the pension surplus investment balance to pay a discretionary contribution to RESIP eligible employees, which was recognized to expense in the first quarter of 2021.

As of March 31, 2021, the combined remaining pension surplus investment balance was approximately $ 8.8 million.

Components of Net Periodic Benefit (Credit) Cost

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Pension Benefits Other Postretirement Benefits

Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30,

Three Months Ended Three Months Ended

March 31, March 31,

(Dollars in thousands) 2021 2020 2021 2020

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Amortization of net loss 98 114 — —

Settlement benefit — — ( 63 ) — — — — —

Net periodic benefit (credit) cost $ ( 108 ) $ ( 48 ) $ ( 3 ) $ ( 1 )

Employer Contributions

There were no required or voluntary contributions made to our Merged Plan for the three and nine-month periods ended September 30, 2020 and 2019.

Additionally, there were no required or voluntary contributions made to our Union Plan for the three and nine-month periods ended September 30, 2020 and 2019, and we are no t required to make additional contributions to this plan for the remainder of 2020.

As there is no funding requirement for the other postretirement benefit plans, we funded these benefit payments as incurred, which were immaterial for each of the three and nine-month periods ended September 30, 2020 and 2019, using cash from operations.

There were no required or voluntary contributions made to the Union Plan or the Merged Plan for the three months ended March 31, 2021 and 2020.

Additionally, we are no t required to make additional contributions to the Union Plan for the remainder of 2021.

As there is no funding requirement for the other postretirement benefit plans, we funded these benefit payments as incurred, which were immaterial for each of the three-month periods ended March 31, 2021 and 2020, using cash from operations.

Note 12 – Commitments and Contingencies

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Remediation activities on the site are ongoing and are recorded as reductions to the accrual as they are incurred.

We incurred $ 1.7 million of aggregate remediation costs through September 30, 2020, and the accrual for future remediation efforts is $ 1.0 million.

We incurred $ 1.7 million of aggregate remediation costs through March 31, 2021, and the accrual for future remediation efforts is $ 0.9 million.

We, like many other industrial companies, have been named as a defendant in a number of lawsuits filed in courts across the country by persons alleging personal injury from exposure to products containing asbestos.

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Most of the claims filed against us involve numerous defendants, sometimes as many as several hundred.

The following table summarizes the change in number of asbestos claims outstanding for the nine months ended September 30, 2020:

The following table summarizes the change in number of asbestos claims outstanding for the three months ended March 31, 2021:

Asbestos Claims

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Pending claims concluded (1)

Claims outstanding as of September 30, 2020

(1) For the nine months ended September 30, 2020, 103 claims were dismissed and 19 claims were settled.

Settlements totaled approximately $ 5.4 million for the nine months ended September 30, 2020.

Claims outstanding as of March 31, 2021

(1) For the three months ended March 31, 2021, 37 claims were dismissed and 2 claims were settled.

Settlements totaled approximately $ 0.1 million for the three months ended March 31, 2021.

Impact on Financial Statements

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As of the filing date for this report, the agreement has not been terminated, and no carrier had informed us it intended to terminate the agreement.

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 we incurred an immaterial amount of expenses for each of the three- and nine-month periods ended September 30, 2020 and 2019, respectively, related to such costs.

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 we incurred an immaterial amount of expenses for each of the three months ended March 31, 2021 and 2020, 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.

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

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

(Dollars in thousands) March 31, 2021 December 31, 2020

Asbestos-related liabilities $ 73,174 $ 73,235

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Note 13 – Income Taxes

Our effective income tax rate was 8.1 % and 18.6 % for the three months ended September 30, 2020 and 2019, respectively.

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

Our effective income tax rate was 23.1 % and 18.5 % for the nine months ended September 30, 2020 and 2019, respectively.

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

The total amount of unrecognized tax benefits as of September 30, 2020 was $ 14.9 million, of which $ 14.5 million would affect our effective tax rate if recognized.

Our effective income tax rate was 25.2 % and 20.6 % for the three months ended March 31, 2021 and 2020, respectively.

The increase from the first quarter of 2020 was primarily due to the decrease in the current quarter valuation allowance release and

decrease in current quarter reversals of unrecognized tax benefits.

The total amount of unrecognized tax benefits as of March 31, 2021 was $ 14.3 million, of which $ 13.8 million would affect our effective tax rate if recognized.

Additionally, the balance of unrecognized tax benefits as of March 31, 2021 also included $ 0.5 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense.

As of September 30, 2020, we had $ 1.1 million accrued for the payment of interest.

As of March 31, 2021, we had $ 1.3 million accrued for the payment of interest.

We are subject to taxation in the U.S.

and various state and foreign jurisdictions.

With few exceptions, we are no longer subject to examinations by tax authorities for years prior to 2015.

Our tax years from 2016 through 2020 are subject to examination by the tax authorities.

With few exceptions, we are no longer subject to U.S.

federal, state, local and foreign examinations by tax authorities for the years before 2016.

Note 14 – Operating Segment Information

Our reporting structure is comprised of the following strategic operating segments:

ACS, Elastomeric Material Solutions (EMS) and PES.

The remaining operations, which represent our non-core businesses, are reported in the Other operating segment.

We believe this structure aligns our external reporting presentation with how we currently manage and view our business internally.

Our ACS operating segment designs, develops, manufactures and sells circuit materials and solutions enabling high-performance and high-reliability connectivity for applications in wireless infrastructure (e.g., power amplifiers, antennas and small cells), automotive (e.g., ADAS, telematics and thermal solutions), aerospace and defense (e.g.

antenna systems, communication systems and phased array radar systems), connected devices (e.g., mobile internet devices and thermal solutions) and wired infrastructure (e.g., computing and IP infrastructure) markets.

Our AES operating segment designs, develops, manufactures and sells circuit materials, ceramic substrate materials, busbars and cooling solutions for applications in electric and hybrid electric vehicles (EV/HEV), wireless infrastructure (i.e., power amplifiers, antennas and small cells), automotive (i.e., advanced driver assistance systems (ADAS), telematics and thermal solutions), aerospace and defense (i.e., antenna systems, communication systems and phased array radar systems), mass transit, clean energy (i.e., variable frequency drives, renewable energy), connected devices (i.e., mobile internet devices and thermal solutions) and wired infrastructure (i.e., computing and IP infrastructure) markets.

Our EMS operating segment designs, develops, manufactures and sells engineered material solutions for a wide variety of applications and markets.

These include polyurethane and silicone materials used in cushioning, gasketing and sealing, and vibration management applications for general industrial, portable electronics, automotive, electric and hybrid electric vehicles (EV/HEV), mass transit, aerospace and defense, footwear and impact mitigation and printing markets;

customized silicones used in flex heater and semiconductor thermal applications for general industrial, portable electronics, automotive, EV/HEV,

mass transit, aerospace and defense and medical markets;

These include polyurethane and silicone materials used in cushioning, gasketing and sealing, and vibration management applications for general industrial, portable electronics, automotive, EV/HEV, mass transit, aerospace and defense, footwear and impact mitigation and printing markets;

customized silicones used in flex heater and semiconductor thermal applications for general industrial, portable electronics, automotive, EV/HEV, mass transit, aerospace and defense and medical markets;

polytetrafluoroethylene and ultra-high molecular weight polyethylene materials used in wire and cable protection, electrical insulation, conduction and shielding, hose and belt protection, vibration management, cushioning, gasketing and sealing, and venting applications for general industrial, automotive, EV/HEV and aerospace and defense markets.

Our PES operating segment designs, develops, manufactures and sells ceramic substrate materials, busbars and cooling solutions for a variety of applications in EV/HEV, mass transit, clean energy (i.e.

variable frequency drives, renewable energy), general industrial, aerospace and defense and wired infrastructure markets.

We sell our ceramic substrate materials and cooling solutions under the curamik ® trade name and our busbars under the ROLINX ® trade name.

Our Other operating segment consists of elastomer components for applications in general industrial market, as well as elastomer floats for level sensing in fuel tanks, motors, and storage tanks applications in the general industrial and automotive markets.

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

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

Three Months Ended September 30, 2020

Net sales - recognized over time $ 219 $ 2,612 $ 47,827 $ 3,568 $ 54,226

Net sales - recognized at a point in time 63,495 83,832 100 291 147,718

Total net sales $ 63,714 $ 86,444 $ 47,927 $ 3,859 $ 201,944

Operating income (loss) $ 4,981 $ 7,372 $ ( 4,691 ) $ 1,132 $ 8,794

Three Months Ended September 30, 2019

Net sales - recognized over time $ — $ 3,429 $ 42,906 $ 4,504 $ 50,839

Net sales - recognized at a point in time 78,983 91,511 225 284 171,003

Total net sales $ 78,983 $ 94,940 $ 43,131 $ 4,788 $ 221,842

Operating income (loss) $ 13,778 $ 17,995 $ ( 3,358 ) $ 1,470 $ 29,885

Nine Months Ended September 30, 2020

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

Three Months Ended March 31, 2021

Net sales - recognized over time $ 54,814 $ 2,687 $ 5,212 $ 62,713

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Total net sales $ 131,892 $ 91,849 $ 5,524 $ 229,265

Operating income (loss) $ 26,067 $ 21,884 $ ( 3,929 ) $ 3,339 $ 47,361

Nine Months Ended September 30, 2019

Operating income $ 14,849 $ 20,077 $ 2,267 $ 37,193

Three Months Ended March 31, 2020

Net sales - recognized over time $ 46,401 $ 2,827 $ 3,650 $ 52,878

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Total net sales $ 111,274 $ 83,526 $ 4,010 $ 198,810

Operating income (loss) $ 45,301 $ 46,752 $ ( 976 ) $ 4,821 $ 95,898

Operating income $ 4,778 $ 11,517 $ 1,180 $ 17,475

Net sales by operating segment and by geographic area were as follows:

(Dollars in thousands) Net Sales (1)

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

Three Months Ended September 30, 2020

United States $ 18,058 $ 29,733 $ 5,901 $ 980 $ 54,672

Other Americas 497 2,517 36 144 3,194

Total Americas 18,555 32,250 5,937 1,124 57,866

China 26,641 34,016 11,229 754 72,640

Other APAC 11,588 11,150 4,633 530 27,901

Total APAC 38,229 45,166 15,862 1,284 100,541

Germany 1,973 5,450 12,074 99 19,596

Other EMEA 4,957 3,578 14,054 1,352 23,941

Total EMEA 6,930 9,028 26,128 1,451 43,537

Total net sales $ 63,714 $ 86,444 $ 47,927 $ 3,859 $ 201,944

Three Months Ended September 30, 2019

United States $ 17,671 $ 41,232 $ 8,115 $ 1,237 $ 68,255

Other Americas 807 2,452 11 271 3,541

Total Americas 18,478 43,684 8,126 1,508 71,796

China 37,398 26,461 7,642 908 72,409

Other APAC 13,813 14,385 6,269 675 35,142

Total APAC 51,211 40,846 13,911 1,583 107,551

Germany 4,251 3,868 10,528 171 18,818

Other EMEA 5,043 6,542 10,566 1,526 23,677

Total EMEA 9,294 10,410 21,094 1,697 42,495

Total net sales $ 78,983 $ 94,940 $ 43,131 $ 4,788 $ 221,842

(1) Net sales are allocated to countries based on the location of the customer.

The table above lists individual countries with 10% or more of net sales for the periods indicated.

(Dollars in thousands) Net Sales (1)

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

Nine Months Ended September 30, 2020

Region/Country Advanced Electronics Solutions Elastomeric Material Solutions Other Total

Three Months Ended March 31, 2021

United States $ 23,797 $ 37,732 $ 672 $ 62,201

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Total net sales $ 131,892 $ 91,849 $ 5,524 $ 229,265

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

United States $ 22,625 $ 38,567 $ 979 $ 62,171

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Contract assets by operating segment were as follows:

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

Advanced Connectivity Solutions $ 186 $ —

(Dollars in thousands) March 31, 2021 December 31, 2020

Advanced Electronics Solutions $ 27,486 $ 24,199

Elastomeric Material Solutions 1,102 887

Power Electronics Solutions 19,132 19,471

Other 2,348 1,489

Total contract assets $ 30,936 $ 26,575

We did not have any contract liabilities as of September 30, 2020 or December 31, 2019.

No impairment losses were recognized for either of the three or nine-month periods ended September 30, 2020 and 2019, respectively, on any receivables or contract assets arising from our contracts with customers.

We did not have any contract liabilities as of March 31, 2021 or December 31, 2020.

No impairment losses were recognized for the three-month periods ended March 31, 2021 and 2020, respectively, on any receivables or contract assets arising from our contracts with customers.

Note 15 – Supplemental Financial Information

Restructuring and Impairment Charges

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

Three Months Ended Nine Months Ended

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

The components of “Restructuring and impairment charges” line item in the condensed consolidated statements of operations, which contains restructuring charges and related expenses, as well as impairment charges, were as follows:

Three Months Ended

(Dollars in thousands) March 31, 2021 March 31, 2020

Restructuring charges

Impairment charges 386 581 386 1,537

Manufacturing footprint optimization 1,506 —

Total restructuring charges 1,506 —

Total restructuring and impairment charges $ 1,506 $ —

Our PES, ACS and EMS operating segments incurred $ 6.3 million, $ 2.9 million and $ 0.2 million of restructuring and impairment charges, respectively, for the three and nine months ended September 30, 2020.

Restructuring Charges

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.

Our AES and EMS operating segments incurred $ 1.5 million and an immaterial amount of restructuring and impairment charges, respectively, for the three months ended March 31, 2021.

Restructuring Charges & Related Expenses - 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 AES operating segment, 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 activity related to the manufacturing footprint optimization plan is presented in the table below for the nine months ended September 30, 2020:

We incurred restructuring charges and related expenses of $ 1.5 million for the three months ended March 31, 2021, of which $ 0.5 million related to severance and related benefits.

Severance and related benefits activity related to the manufacturing footprint optimization plan is presented in the table below for the three months ended March 31, 2021:

(Dollars in thousands) Manufacturing Footprint Optimization Restructuring Severance

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Foreign currency translation adjustment ( 438 )

Balance as of September 30, 2020 $ 8,671

In 2018, we made the decision to consolidate our Santa Fe Springs, California operations into our facilities in Carol Stream, Illinois and Bear, Delaware, which was completed as of December 31, 2019.

We recorded immaterial expense and $ 0.9 million of expense for the three and nine months ended September 30, 2019, respectively, related to this facility consolidation.

Impairment Charges

We recognized $ 0.4 million of impairment charges, primarily related to fixed assets in Belgium, for the three and nine months ended September 30, 2020.

We recognized $ 0.6 million and $ 1.5 million in impairment charges on certain assets in connection with the Isola USA Corp.

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

Balance as of March 31, 2021 $ 10,294

Other Operating (Income) Expense, Net

The components of “Other operating (income) expense, net” line item in the condensed consolidated statements of operations, were as follows:

Three Months Ended Nine Months Ended

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

Lease income $ — $ ( 57 ) $ — $ ( 932 )

Depreciation on leased assets — 179 — 1,729

Loss on sale or disposal of property, plant and equipment ( 4 ) 2 49 278

Economic incentive grants — — ( 145 ) —

Three Months Ended

(Dollars in thousands) March 31, 2021 March 31, 2020

Fixed assets write-offs 891 —

Inventory charges 280 —

Professional services 522 —

Lease obligations 486 —

Compensation & benefits 244 —

Insurance recoveries ( 1,119 ) —

Total UTIS fire 1,304 —

(Gain) loss on sale or disposal of property, plant and equipment ( 89 ) 20

Total other operating (income) expense, net $ 1,215 $ 20

In connection with the transitional leaseback of a portion of the facility and certain machinery and equipment acquired from Isola in August 2018, we recognized lease income of $ 0.1 million and $ 0.9 million for the three and nine months ended September 30, 2019, respectively, and related depreciation on leased assets of $ 0.2 million and $ 1.7 million, respectively, for the three and nine months ended September 30, 2019.

In early February 2021, there was a fire at our UTIS manufacturing facility in Ansan, South Korea, which manufactures eSorba® polyurethane foams used in portable electronics and display applications.

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

however, there was extensive damage to the manufacturing site and some damage to nearby property.

The cause of the fire is still under investigation.

Operations at this facility will be disrupted into at least late 2021.

We are currently evaluating alternative facility options.

We recognized fixed asset write-offs and inventory charges of $ 0.9 million and $ 0.3 million, respectively, related to property destroyed in the fire for the three months ended March 31, 2021.

Additionally, we recognized a $ 0.5 million contingent liability pertaining to our obligations for the fire damage to the building in connection with the underlying lease agreement.

We have incurred $ 0.5 million of fees for various professional services for the three months ended March 31, 2021, in connection with the assessment of the fire and the efforts to rebuild and resume operations.

Further, we incurred $ 0.2 million of compensation and benefits for UTIS manufacturing employees, subsequent to the fire, for the three months ended March 31, 2021.

In connection with the UTIS fire, we have recognized anticipated insurance recoveries of $ 1.1 million related to our ongoing insurance claim for property damage and compensation and benefits of hourly employees, less the applicable $ 0.3 million deductible, for the three months ended March 31, 2021.

Based on the facts and circumstances known to us as of our filing, while we are aware of other potential liabilities, we are unable presently to estimate the probability or amount of any further contingent liabilities associated with damages to nearby property or other potential costs due to the fire at our UTIS manufacturing facility.

As such, no further reserves have been established at this time.

We will continue to re-assess as additional information becomes available.

Interest Expense, Net

The components of “Interest expense, net” line item in the condensed consolidated statements of operations, were as follows:

Three Months Ended Nine Months Ended

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

Three Months Ended

(Dollars in thousands) March 31, 2021 March 31, 2020

Interest on revolving credit facility $ 101 $ 1,079

4 unchanged sentences

Interest income ( 195 ) ( 320 )

Other 22 20 49 39

Total interest expense, net $ 608 $ 1,207

Note 16 – Recent Accounting Standards

Recently Issued Standards

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

Recently Adopted Standards Reflected in Our 2021 Financial Statements

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 condensed consolidated financial statements.

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 adopted this standard in January 2021, and it did not have a material effect on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

Under ASU 2019-12, the new guidance removes certain exceptions to the general principles in Topic 740.

The new guidance also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 is effective for our annual reporting periods beginning after December 15, 2020.

The transition method (retrospective, modified retrospective, or prospective approach) related to this standard depends on the applicable guidance, and all amendments for which there is no transition guidance specified, are to be applied on a prospective basis.

We adopted this standard in January 2021, and it did not have a material effect on our condensed consolidated financial statements.

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

What changed 10-Q

Item 1. Financial Statements