ROGERS CORP 10-Q

Item 1. Financial Statements ROGERS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars and shares in thousands, except per share amounts) Three Months Ended March 31, 2022 March 31, 2021 Net sales $ 248,266 $ 229,265 Cost of sales 162,872 139,766 Gross margin 85,394 89,499 Selling, general and administrative expenses 57,705 42,413 Research and development expenses 8,260 7,172 Restructuring and impairment charges 69 1,506 Other operating (income) expense, net ( 531 ) 1,215 Operating income 19,891 37,193 Equity income in unconsolidated joint ventures 1,275 2,181 Other income (expense), net 267 2,968 Interest expense, net ( 1,069 ) ( 607 ) Income before income tax expense 20,364 41,735 Income tax expense 3,764 10,517 Net income $ 16,600 $ 31,218 Basic earnings per share $ 0.88 $ 1.67 Diluted earnings per share $ 0.87 $ 1.66 Shares used in computing: Basic earnings per share 18,780 18,712 Diluted earnings per share 18,999 18,774 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 ROGERS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2022 March 31, 2021 Net income $ 16,600 $ 31,218 Foreign currency translation adjustment ( 11,757 ) ( 13,259 ) Pension and other postretirement benefits: Amortization of loss, net of tax (Note 4) 86 63 Other comprehensive income (loss) ( 11,671 ) ( 13,196 ) Comprehensive income $ 4,929 $ 18,022 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 ROGERS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (Dollars and shares in thousands, except par value ) March 31, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents $ 182,144 $ 232,296 Accounts receivable, less allowance for credit losses of $ 798 and $ 1,223 173,387 163,092 Contract assets 39,177 36,610 Inventories 152,150 133,384 Prepaid income taxes 2,898 1,921 Asbestos-related insurance receivables, current portion 3,176 3,176 Other current assets 23,597 13,586 Total current assets 576,529 584,065 Property, plant and equipment, net of accumulated depreciation of $ 365,671 and $ 367,850 349,681 326,967 Investments in unconsolidated joint ventures 15,508 16,328 Deferred income taxes 32,521 32,671 Goodwill 364,684 370,189 Other intangible assets, net of amortization 169,977 176,353 Pension assets 5,274 5,123 Asbestos-related insurance receivables, non-current portion 59,391 59,391 Other long-term assets 19,697 27,479 Total assets $ 1,593,262 $ 1,598,566 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 74,916 $ 64,660 Accrued employee benefits and compensation 34,382 48,196 Accrued income taxes payable 1,384 9,632 Asbestos-related liabilities, current portion 3,841 3,841 Other accrued liabilities 46,643 37,620 Total current liabilities 161,166 163,949 Borrowings under revolving credit facility 190,000 190,000 Pension and other postretirement benefits liabilities 1,638 1,618 Asbestos-related liabilities, non-current portion 64,250 64,491 Non-current income tax 8,205 7,131 Deferred income taxes 27,739 29,451 Other long-term liabilities 22,786 23,031 Commitments and contingencies (Note 10 and Note 12) Shareholders’ equity Capital stock - $ 1 par value; 50,000 authorized shares; 18,803 and 18,730 shares issued and outstanding 18,803 18,730 Additional paid-in capital 157,164 163,583 Retained earnings 998,425 981,825 Accumulated other comprehensive loss ( 56,914 ) ( 45,243 ) Total shareholders' equity 1,117,478 1,118,895 Total liabilities and shareholders' equity $ 1,593,262 $ 1,598,566 The accompanying notes are an integral part of the condensed consolidated financial statements. 5 ROGERS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) `` Three Months Ended March 31, 2022 March 31, 2021 Operating Activities: Net income $ 16,600 $ 31,218 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 10,724 10,325 Equity compensation expense 3,202 4,006 Deferred income taxes ( 2,013 ) 1,570 Equity in undistributed income of unconsolidated joint ventures ( 1,275 ) ( 2,181 ) Dividends received from unconsolidated joint ventures 1,509 1,754 Pension and other postretirement benefits 29 ( 79 ) (Gain) loss on sale or disposal of property, plant and equipment ( 15 ) ( 89 ) UTIS fire fixed asset and inventory write-offs 201 1,171 Provision (benefit) for credit losses ( 142 ) ( 345 ) Changes in assets and liabilities: Accounts receivable ( 14,384 ) ( 11,397 ) Proceeds from insurance/government subsidies related to operations 334 — Contract assets ( 3,121 ) ( 4,361 ) Inventories ( 19,935 ) ( 6,894 ) Pension and postretirement benefit contributions ( 24 ) ( 147 ) Other current assets ( 11,099 ) ( 6,132 ) Accounts payable and other accrued expenses ( 4,809 ) 17,967 Other, net 10,495 135 Net cash (used in) provided by operating activities ( 13,723 ) 36,521 Investing Activities: Capital expenditures ( 28,249 ) ( 3,602 ) Proceeds from insurance claims 2,262 — Net cash used in investing activities ( 25,987 ) ( 3,602 ) Financing Activities: Repayment of debt principal and finance lease obligations ( 146 ) ( 21,253 ) Payments of taxes related to net share settlement of equity awards ( 10,498 ) ( 2,632 ) Proceeds from issuance of shares to employee stock purchase plan 950 704 Net cash used in financing activities ( 9,694 ) ( 23,181 ) Effect of exchange rate fluctuations on cash ( 748 ) ( 2,414 ) Net (decrease) increase in cash and cash equivalents ( 50,152 ) 7,324 Cash and cash equivalents at beginning of period 232,296 191,785 Cash and cash equivalents at end of period $ 182,144 $ 199,109 Supplemental Disclosures: Accrued capital additions $ 14,021 $ 2,814 Cash paid during the year for: Interest, net of amounts capitalized $ 1,068 $ 607 Income taxes $ 7,600 $ 9,337 The accompanying notes are an integral part of the condensed consolidated financial statements. 6 ROGERS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (Dollars and shares in thousands) Three Months Ended March 31, 2022 March 31, 2021 Capital Stock Balance, beginning of period $ 18,730 $ 18,677 Shares issued for vested restricted stock units, net of shares withheld for taxes 67 28 Shares issued for employee stock purchase plan 6 7 Balance, end of period 18,803 18,712 Additional Paid-In Capital Balance, beginning of period 163,583 147,961 Shares issued for vested restricted stock units, net of shares withheld for taxes ( 10,565 ) ( 2,660 ) Shares issued for employee stock purchase plan 944 697 Equity compensation expense 3,202 4,006 Balance, end of period 157,164 150,004 Retained Earnings Balance, beginning of period 981,825 873,692 Net income 16,600 31,218 Balance, end of period 998,425 904,910 Accumulated Other Comprehensive Loss Balance, beginning of period ( 45,243 ) ( 19,575 ) Other comprehensive income (loss) ( 11,671 ) ( 13,196 ) Balance, end of period ( 56,914 ) ( 32,771 ) Total Shareholders’ Equity $ 1,117,478 $ 1,040,855 The accompanying notes are an integral part of the condensed consolidated financial statements. 7 ROGERS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 – Basis of Presentation As used herein, the terms “Company,” “Rogers,” “we,” “us,” “our” and similar terms mean Rogers Corporation and its consolidated subsidiaries, unless the context indicates otherwise. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for their fair presentation in accordance with GAAP. All significant intercompany balances and transactions have been eliminated. Interim results are not necessarily indicative of results for a full year. For further information regarding our accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Refer to the discussion below for our restructuring activities significant accounting policy. Note 2 – Fair Value Measurements The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • 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 March 31, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total Pension surplus investment (1) $ 6,278 $ — $ — $ 6,278 Available-for-Sale Investment at Fair Value as of December 31, 2021 (Dollars in thousands) Level 1 Level 2 Level 3 Total Pension surplus investment (1) $ 6,638 $ — $ — $ 6,638 (1) This balance was invested in funds comprised of short-term cash and fixed income securities, and was recorded in the “Other current assets” and the “Other long-term assets” line items in the condensed consolidated statements of financial position as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 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: 8 Derivative Instruments at Fair Value as of March 31, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total (1) Foreign currency contracts $ — $ ( 101 ) $ — $ ( 101 ) Copper derivative contracts $ — $ 1,154 $ — $ 1,154 Derivative Instruments at Fair Value as of December 31, 2021 (Dollars in thousands) Level 1 Level 2 Level 3 Total (1) Foreign currency contracts $ — $ ( 16 ) $ — $ ( 16 ) Copper derivative contracts $ — $ 1,344 $ — $ 1,344 (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.” Note 3 – Hedging Transactions and Derivative Financial Instruments 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 and commodity pricing risk (primarily related to copper). We do not use derivative instruments for trading or speculative purposes. The valuation of derivative contracts used to manage each of these risks is described below: • Foreign Currency – The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics. • Commodity – The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models, which are collectively a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate and volatility. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. 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. 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. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies for hedge accounting treatment as defined under the applicable accounting guidance. 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. Foreign Currency During the three months ended March 31, 2022, we entered into U.S. dollar, euro, and Korean won 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 income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred. 9 As of March 31, 2022, the notional values of the remaining foreign currency forward contracts were as follows: Notional Values of Foreign Currency Derivatives USD/CNH $ 16,431,974 EUR/USD € 11,687,382 KRW/USD ₩ 7,325,880,000 Commodity As of March 31, 2022, we had 11 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 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, 2022, the volume of our copper contracts outstanding was as follows: Volume of Copper Derivatives April 2022 - June 2022 168 metric tons per month July 2022 - September 2022 69 metric tons per month October 2022 - December 2022 138 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 (Dollars in thousands) Financial Statement Line Item March 31, 2022 March 31, 2021 Foreign Currency Contracts Contracts not designated as hedging instruments Other income (expense), net $ ( 682 ) $ ( 822 ) Copper Derivative Contracts Contracts not designated as hedging instruments Other income (expense), net $ 331 $ 2,547 Note 4 – Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss by component were as follows: (Dollars and accompanying footnotes in thousands) Foreign Currency Translation Adjustments Pension and Other Postretirement Benefits (1) Total Balance as of December 31, 2021 $ ( 35,641 ) $ ( 9,602 ) $ ( 45,243 ) Other comprehensive income (loss) before reclassifications ( 11,757 ) — ( 11,757 ) Amounts reclassified from accumulated other comprehensive loss — 86 86 Net current-period other comprehensive income (loss) ( 11,757 ) 86 ( 11,671 ) Balance as of March 31, 2022 $ ( 47,398 ) $ ( 9,516 ) $ ( 56,914 ) Balance as of December 31, 2020 $ ( 10,571 ) $ ( 9,004 ) $ ( 19,575 ) Other comprehensive income (loss) before reclassifications ( 13,259 ) — ( 13,259 ) Amounts reclassified from accumulated other comprehensive loss — 63 63 Net current-period other comprehensive income (loss) ( 13,259 ) 63 ( 13,196 ) Balance as of March 31, 2021 $ ( 23,830 ) $ ( 8,941 ) $ ( 32,771 ) (1) Net of taxes of $ 2,100 and $ 2,125 as of March 31, 2022 and December 31, 2021, respectively. Net of taxes of $ 1,940 and $ 1,951 as of March 31, 2021 and December 31, 2020, respectively. 10 Note 5 – Inventories Inventories, which are valued at the lower of cost or net realizable value, consisted of the following: (Dollars in thousands) March 31, 2022 December 31, 2021 Raw materials $ 70,684 $ 60,208 Work-in-process 39,100 29,078 Finished goods 42,366 44,098 Total inventories $ 152,150 $ 133,384 Note 6 – Goodwill and Other Intangible Assets Goodwill The changes in the net carrying amount of goodwill by operating segment were as follows: (Dollars in thousands) Advanced Electronics Solutions Elastomeric Material Solutions Other Total December 31, 2021 $ 119,567 $ 248,398 $ 2,224 $ 370,189 Purchase accounting adjustment — ( 925 ) — ( 925 ) Foreign currency translation adjustment ( 1,446 ) ( 3,134 ) — $ ( 4,580 ) March 31, 2022 $ 118,121 $ 244,339 $ 2,224 $ 364,684 Other Intangible Assets The gross and net carrying amounts, as well as the accumulated amortization of other intangible assets were as follows: March 31, 2022 December 31, 2021 (Dollars in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 196,426 $ 79,822 $ 116,604 $ 198,095 $ 77,870 $ 120,225 Technology 87,609 55,885 31,724 88,445 54,900 33,545 Trademarks and trade names 25,130 9,243 15,887 25,504 8,968 16,536 Covenants not to compete 2,656 1,289 1,367 2,693 1,137 1,556 Total definite-lived other intangible assets 311,821 146,239 165,582 314,737 142,875 171,862 Indefinite-lived other intangible asset 4,395 — 4,395 4,491 — 4,491 Total other intangible assets $ 316,216 $ 146,239 $ 169,977 $ 319,228 $ 142,875 $ 176,353 In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations. Amortization expense was $ 4.3 million and $ 3.1 million for the three months ended March 31, 2022 and 2021, respectively. The estimated future amortization expense is $ 12.6 million for the remainder of 2022 and $ 15.8 million, $ 14.4 million, $ 12.6 million and $ 12.0 million for 2023, 2024, 2025 and 2026, respectively. The weighted average amortization period as of March 31, 2022, by definite-lived other intangible asset class, was as follows: Definite-Lived Other Intangible Asset Class Weighted Average Remaining Amortization Period Customer relationships 8.0 years Technology 3.6 years Trademarks and trade names 2.2 years Covenants not to compete 1.2 years Total definite-lived other intangible assets 6.6 years 11 Note 7 – Earnings Per Share Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. 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 March 31, 2022 March 31, 2021 Numerator: Net income $ 16,600 $ 31,218 Denominator: Weighted-average shares outstanding - basic 18,780 18,712 Effect of dilutive shares 219 62 Weighted-average shares outstanding - diluted 18,999 18,774 Basic earnings per share $ 0.88 $ 1.67 Diluted earnings per share $ 0.87 $ 1.66 Dilutive shares are calculated using the treasury stock method and primarily include unvested restricted stock units. Anti-dilutive shares are excluded from the calculation of diluted shares and diluted earnings per share. For the three months ended March 31, 2022 and 2021, 32,500 shares and 44,792 shares were excluded, respectively. Note 8 – Capital Stock and Equity Compensation Equity Compensation Performance-Based Restricted Stock Units As of March 31, 2022, we had performance-based restricted stock units from 2022, 2021 and 2020 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, 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. The outstanding awards have one measurement criterion: the three-year total shareholder return (TSR) on our capital stock as compared to that of a specified group of peer companies. The TSR measurement criterion of the awards is considered a market condition. As such, the fair value of this measurement criterion was determined on the grant date using a Monte Carlo simulation valuation model. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period with no changes for final projected payout of the awards. We account for forfeitures as they occur. The following table sets forth the assumptions used in the Monte Carlo calculation for each material award granted in 2021: February 10, 2021 Expected volatility 51.0 % Expected term (in years) 2.9 Risk-free interest rate 0.18 % Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility. Expected term – We use the vesting period of the award to determine the expected term assumption for the Monte Carlo simulation valuation model. Risk-free interest rate – We use an implied “spot rate” yield on U.S. Treasury Constant Maturity rates as of the grant date for our assumption of the risk-free interest rate. Expected dividend yield – We do not currently pay dividends on our capital stock; therefore, a dividend yield of 0 % was used in the Monte Carlo simulation valuation model. 12 A summary of activity of the outstanding performance-based restricted stock units for the three months ended March 31, 2022 is presented below: Performance-Based Restricted Stock Units Awards outstanding as of December 31, 2021 114,554 Awards granted 26,819 Stock issued ( 60,053 ) Awards cancelled ( 465 ) Awards outstanding as of March 31, 2022 80,855 We recognized $ 1.1 million and $ 2.1 million of compensation expense for performance-based restricted stock units for the three months ended March 31, 2022 and 2021, respectively. Time-Based Restricted Stock Units As of March 31, 2022, we had time-based restricted stock unit awards from 2022, 2021, 2020 and 2019 outstanding. The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date. 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 subsequent to the last grant anniversary date, except as noted below in Chief Executive Officer’s 2021 Equity Award Grants . Each time-based restricted stock unit represents a right to receive one share of Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. We account for forfeitures as they occur. A summary of activity of the outstanding time-based restricted stock units for the three months ended March 31, 2022 is presented below: Time-Based Restricted Stock Units Awards outstanding as of December 31, 2021 96,989 Awards granted 62,050 Stock issued ( 44,884 ) Awards cancelled ( 621 ) Awards outstanding as of March 31, 2022 113,534 We recognized $ 2.1 million and $ 1.8 million of compensation expense for time-based restricted stock units for the three months ended March 31, 2022 and 2021, 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 retire. As a result, the $ 4.0 million of expense in 2021 related to the awards granted on February 10, 2021 to our CEO, which provide for immediate vesting upon retirement, were expensed from the date of the grant, February 10, 2021, through his retirement eligibility date, November 9, 2021. Deferred Stock Units We grant deferred stock units to non-management directors. These awards are fully vested on the date of grant and the related shares are generally issued on the 13 -month anniversary of the grant date unless the individual elects to defer the receipt of those shares. Each deferred stock unit results in the issuance of one share of Rogers’ capital stock. The grant of deferred stock units is typically done annually during the second quarter of each year. The fair value of the award is determined by the market value of the underlying stock price at the grant date. 13 A summary of activity of the outstanding deferred stock units for the three months ended March 31, 2022 is presented below: Deferred Stock Units Awards outstanding as of December 31, 2021 9,500 Awards granted — Stock issued ( 1,000 ) Awards outstanding as of March 31, 2022 8,500 We recognized no compensation expense for deferred stock units for the three months ended March 31, 2022 and 2021, respectively. Note 9 – Debt 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. 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 Fourth Amended Credit Agreement). 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. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that immediately after December 31, 2021, publication of most Euro, Swiss Franc, Japanese Yen and Pound Sterling Libor settings will permanently cease. On October 15, 2021, Rogers Corporation and JPMorgan Chase Bank, N.A. entered into an amendment (Amendment No 1) to the Fourth Amended Credit Agreement to adopt a new benchmark interest rate to replace the discontinued Libor reference rates. Borrowings under the Fourth Amended Credit Agreement can be made as alternate base rate loans, euro-currency loans, or RFR 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. RFR loans bears interest based upon the Sterling Overnight Index Average (SONIA) plus 0.0326 % plus a spread of 162.5 to 200.0 basis points. Based on our leverage ratio as of December 31, 2021, the spread was 162.5 basis points. In addition to interest payable on the principal amount of indebtedness outstanding, we incur an annual fee of 25 to 35 basis points (based upon our leverage ratio), paid quarterly, 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 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 14 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, 2022. We did no t borrow anything under the Fourth Amended Credit Agreement for the three months ended March 31, 2022, and 2021. We are not required to make any quarterly principal payments under the Fourth Amended Credit Agreement. We made no payments for the three months ended March 31, 2022 and $ 21.0 million of discretionary principal payments on our revolving credit facility for the three months ended March 31, 2021, respectively. We had $ 190.0 million outstanding borrowings under our revolving credit facility as of March 31, 2022, and $ 190.0 million as of December 31, 2021. We had $ 1.4 million and $ 1.6 million of outstanding line of credit issuance costs as of March 31, 2022 and December 31, 2021, respectively, which will be amortized over the life of the Fourth Amended Credit Agreement. Note 10 - Leases 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-month periods ended March 31, 2022 and 2021. 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-month periods ended March 31, 2022 and 2021. Payments made on the principal portion of our finance lease obligations were immaterial for each of the three- and nine-month periods ended March 31, 2022 and 2021, excluding the $ 5.0 million net cash payment to exercise the Eschenbach, Germany manufacturing facility purchase option. We have operating leases primarily related to building space and vehicles. Renewal options are included in the lease term to the extent we are reasonably certain to exercise the option. The exercise of lease renewal options is at our sole discretion. 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 (Dollars in thousands) March 31, 2022 March 31, 2021 Operating leases expense $ 692 $ 681 Short-term leases expense $ 122 $ 74 Payments on operating lease obligations $ 869 $ 670 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 March 31, 2022 December 31, 2021 Finance lease right-of-use assets Property, plant and equipment, net $ 320 $ 389 Operating lease right-of-use assets Other long-term assets $ 17,007 $ 17,161 Finance lease obligations, current portion Other accrued liabilities $ 192 $ 198 Finance lease obligations, non-current portion Other long-term liabilities $ 68 $ 209 Total finance lease obligations $ 260 $ 407 Operating lease obligations, current portion Other accrued liabilities $ 2,723 $ 2,810 Operating lease obligations, non-current portion Other long-term liabilities $ 14,155 $ 14,965 Total operating lease obligations $ 16,878 $ 17,775 15 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 March 31, 2022: Finance Operating (Dollars in thousands) Leases Signed Less: Leases Not Yet Commenced Leases in Effect Leases Signed Less: Leases Not Yet Commenced Leases in Effect 2022 314 ( 259 ) 55 2,562 ( 53 ) 2,509 2023 594 ( 395 ) 199 2,691 ( 76 ) 2,615 2024 404 ( 395 ) 9 1,659 ( 71 ) 1,588 2025 404 ( 395 ) 9 1,351 ( 41 ) 1,310 2026 402 ( 395 ) 7 1,336 ( 9 ) 1,327 Thereafter 293 ( 293 ) — 11,263 ( 4 ) 11,259 Total lease payments 2,411 ( 2,132 ) 279 20,862 ( 254 ) 20,608 Less: Interest ( 146 ) 127 ( 19 ) ( 3,742 ) 12 ( 3,730 ) Present Value of Net Future Minimum Lease Payments 2,265 ( 2,005 ) 260 17,120 ( 242 ) 16,878 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: Finance Leases Operating Leases Weighted Average Remaining Lease Term 1.9 years 11.0 years Weighted Average Discount Rate 3.78 % 3.61 % Subsequent Event - Lease Termination In April 2022, we successfully negotiated the termination of lease signed for the facility in South Korea, which went into effect in October 2021, in exchange for an approximately $ 0.4 million settlement fee. The termination of this lease reduces our operating lease right-of-use assets and lease liabilities by approximately $ 9.2 million each. Note 11 – Pension Benefits and Other Postretirement Benefits Pension and Other Postretirement Benefit Plans As of March 31, 2022, 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 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. 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 and December 2021, we transferred $ 9.2 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. In December 2021, we transferred the remaining pension investment balance not initially transferred, to the RESIP trust suspense account. 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. As of March 31, 2022, the remaining pension surplus investment balance was approximately $ 6.3 million. 16 Components of Net Periodic Benefit (Credit) Cost The components of net periodic benefit (credit) cost were as follows: Pension Benefits Other Postretirement Benefits Three Months Ended Three Months Ended March 31, March 31, (Dollars in thousands) 2022 2021 2022 2021 Service cost $ — $ — $ 10 $ 15 Interest cost 191 184 8 6 Expected return of plan assets ( 340 ) ( 390 ) — — Amortization of prior service credit — — — ( 24 ) Amortization of net loss 111 98 — — Net periodic benefit (credit) cost $ ( 38 ) $ ( 108 ) $ 18 $ ( 3 ) Employer Contributions There were no required or voluntary contributions made to the Union Plan or the Merged Plan for each of the three months ended March 31, 2022 and 2021. Additionally, we are no t required to make additional contributions to the Union Plan for the remainder of 2022. 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 months ended March 31, 2022 and 2021, using cash from operations. Note 12 – Commitments and Contingencies We are currently engaged in the following material environmental and legal proceedings: Voluntary Corrective Action Program Our location in Rogers, Connecticut is part of the Connecticut Voluntary Corrective Action Program (VCAP). As part of this program, we partnered with the Connecticut Department of Energy and Environmental Protection (CT DEEP) to determine the corrective actions to be taken at the site related to contamination issues. We evaluated this matter and completed internal due diligence work related to the site in the fourth quarter of 2015. Remediation activities on the site are ongoing and are recorded as reductions to the accrual as they are incurred. We incurred $ 1.8 million of aggregate remediation costs through March 31, 2022, and the accrual for future remediation efforts is $ 0.9 million. Asbestos Overview 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. We have never mined, milled, manufactured or marketed asbestos; rather, we made and provided to industrial users a limited number of products that contained encapsulated asbestos, but we stopped manufacturing these products in the late 1980s. 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 three months ended March 31, 2022: Asbestos Claims Claims outstanding as of January 1 543 New claims filed 48 Pending claims concluded (1) ( 30 ) Claims outstanding as of March 31, 2022 561 (1) For the three months ended March 31, 2022, 26 claims were dismissed and 4 claims were settled. Settlements totaled approximately $ 0.7 million for the three months ended March 31, 2022. 17 Impact on Financial Statements We recognize a liability for asbestos-related contingencies that are probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos-related matters, we record asbestos-related insurance receivables that are deemed probable. 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. To date, the indemnity and defense costs of our asbestos-related product liability litigation have been substantially covered by insurance. Although we have exhausted coverage under some of our insurance policies, we believe that we have applicable primary, excess and/or umbrella coverage for claims arising with respect to most of the years during which we manufactured and marketed asbestos-containing products. In addition, we have entered into a cost sharing agreement with most of our primary, excess and umbrella insurance carriers to facilitate the ongoing administration and payment of claims covered by the carriers. The cost sharing agreement may be terminated by any party, but will continue until a party elects to terminate it. 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-month periods ended March 31, 2022 and 2021, 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. However, projecting future events, such as the number of new claims to be filed each year, the average cost of disposing of such claims, the length of time it takes to dispose of such claims, coverage issues among insurers and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded. Changes recorded in the estimated liability and estimated insurance recovery based on projections of asbestos litigation and corresponding insurance coverage, result in the recognition of expense or income. Our projected asbestos-related liabilities and insurance receivables were as follows: (Dollars in thousands) March 31, 2022 December 31, 2021 Asbestos-related liabilities $ 68,091 $ 68,332 Asbestos-related insurance receivables $ 62,567 $ 62,567 General In addition to the above issues, the nature and scope of our business brings us in regular contact with the general public and a variety of businesses and government agencies. Such activities inherently subject us to the possibility of litigation, including environmental and product liability matters that are defended and handled in the ordinary course of business. We have established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation will have a material adverse impact on our results of operations, financial position or cash flows. Note 13 – Income Taxes Our effective income tax rate was 18.5 % and 25.2 % for the three months ended March 31, 2022 and 2021, respectively. The decrease from the first quarter of 2021 was primarily due to the beneficial impact of a decrease in current quarter accruals of reserves for uncertain tax positions, as well as the increase in the windfall tax benefits associated with stock compensation. The total amount of unrecognized tax benefits as of March 31, 2022 was $ 7.0 million, of which $ 6.4 million would affect our effective tax rate if recognized. Additionally, the balance of unrecognized tax benefits as of March 31, 2022 also included $ 0.6 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 March 31, 2022, we had $ 1.2 million accrued for the payment of interest. We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2018 through 2022 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 2018. 18 Note 14 – Operating Segment Information Our reporting structure is comprised of the following strategic operating segments: AES and EMS. The remaining operations, which represent our non-core businesses, are reported in the Other operating segment. 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, 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 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. We sell our elastomer components under our ENDUR ® trade name and our floats under our NITROPHYL ® trade name. The following table presents a disaggregation of revenue from contracts with customers and other pertinent financial information, for the periods indicated; inter-segment sales have been eliminated from the net sales data: (Dollars in thousands) Advanced Electronics Solutions Elastomeric Material Solutions Other Total Three Months Ended March 31, 2022 Net sales - recognized over time $ 70,486 $ 3,046 $ 4,373 $ 77,905 Net sales - recognized at a point in time 62,667 107,194 500 170,361 Total net sales $ 133,153 $ 110,240 $ 4,873 $ 248,266 Operating income $ 1,304 $ 16,997 $ 1,590 $ 19,891 Three Months Ended March 31, 2021 Net sales - recognized over time $ 54,814 $ 2,687 $ 5,212 $ 62,713 Net sales - recognized at a point in time 77,078 89,162 312 166,552 Total net sales $ 131,892 $ 91,849 $ 5,524 $ 229,265 Operating income $ 14,849 $ 20,077 $ 2,267 $ 37,193 19 Net sales by operating segment and by geographic area were as follows: (Dollars in thousands) Net Sales (1) Region/Country Advanced Electronics Solutions Elastomeric Material Solutions Other Total Three Months Ended March 31, 2022 United States $ 29,207 $ 45,389 $ 843 $ 75,439 Other Americas 973 2,587 168 3,728 Total Americas 30,180 47,976 1,011 79,167 China 36,079 30,987 1,814 68,880 Other APAC 20,097 6,716 508 27,321 Total APAC 56,176 37,703 2,322 96,201 Germany 20,553 8,738 270 29,561 Other EMEA 26,244 15,823 1,270 43,337 Total EMEA 46,797 24,561 1,540 72,898 Total net sales $ 133,153 $ 110,240 $ 4,873 $ 248,266 Three Months Ended March 31, 2021 United States $ 23,797 $ 37,732 $ 672 $ 62,201 Other Americas 594 2,494 216 3,304 Total Americas 24,391 40,226 888 65,505 China 58,423 27,831 1,393 87,647 Other APAC 23,372 9,288 720 33,380 Total APAC 81,795 37,119 2,113 121,027 Germany 5,163 10,276 134 15,573 Other EMEA 20,543 4,228 2,389 27,160 Total EMEA 25,706 14,504 2,523 42,733 Total net sales $ 131,892 $ 91,849 $ 5,524 $ 229,265 (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. Revenue from Contracts with Customers We have contract assets primarily related to unbilled revenue for revenue recognized related to products that are deemed to have no alternative use whereby we have the right to payment. Revenue is recognized in advance of billing to the customer in these circumstances as billing is typically performed at the time of shipment to the customer. The unbilled revenue is included in contract assets on the condensed consolidated statements of financial position. Contract assets by operating segment were as follows: (Dollars in thousands) March 31, 2022 December 31, 2021 Advanced Electronics Solutions $ 33,224 $ 31,398 Elastomeric Material Solutions 2,616 2,082 Other 3,337 3,130 Total contract assets $ 39,177 $ 36,610 We did not have any contract liabilities as of March 31, 2022 or December 31, 2021. No impairment losses were recognized for the three-month periods ended March 31, 2022 and 2021, respectively, on any receivables or contract assets arising from our contracts with customers. 20 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, which contains restructuring charges and related expenses, as well as impairment charges, were as follows: Three Months Ended (Dollars in thousands) March 31, 2022 March 31, 2021 Restructuring charges Manufacturing footprint optimization $ 69 $ 1,506 Total restructuring charges 69 1,506 Total restructuring and impairment charges $ 69 $ 1,506 Our AES and EMS operating segments both incurred an immaterial amount of restructuring and impairment charges for the three months ended March 31, 2022. 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. The majority of the restructuring activities were completed in the first half of 2021. We incurred an immaterial amount of restructuring charges and related expenses for the three months ended March 31, 2022, including 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, 2022: (Dollars in thousands) Manufacturing Footprint Optimization Restructuring Severance Balance as of December 31, 2021 $ 1,395 Provisions — Payments ( 26 ) Foreign currency translation adjustment ( 26 ) Balance as of March 31, 2022 $ 1,343 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 (Dollars in thousands) March 31, 2022 March 31, 2021 UTIS fire Fixed assets write-offs $ — $ 891 Inventory charges 201 280 Professional services 434 522 Lease obligations 232 486 Compensation & benefits 796 244 Other 11 — Insurance recoveries ( 2,190 ) ( 1,119 ) Total UTIS fire ( 516 ) 1,304 (Gain) loss on sale or disposal of property, plant and equipment ( 15 ) ( 89 ) Total other operating (income) expense, net $ ( 531 ) $ 1,215 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 21 were no reported injuries; however, there was extensive damage to the manufacturing site and some damage to nearby property. Operations in South Korea will be disrupted into the first half of 2023. We recognized additional insurance recoveries of $ 2.2 million for the three months ended March 31, 2022 as a result of an initial $ 2.5 million insurance payout related to our property damage claims. This was partially offset by incurred expenses of $ 0.4 million for various professional services, $ 0.8 million for compensation and benefits for UTIS manufacturing employees subsequent to the fire, $ 0.2 million for related to obligations under our manufacturing facility lease agreement and $ 0.2 million of inventory charges for the three months ended March 31, 2022. 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 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. Interest Expense, Net The components of “Interest expense, net” line item in the condensed consolidated statements of operations, were as follows: Three Months Ended (Dollars in thousands) March 31, 2022 March 31, 2021 Interest on revolving credit facility $ 839 $ 101 Line of credit fees 138 273 Debt issuance amortization costs 179 179 Interest income ( 108 ) ( 195 ) Other 21 249 Total interest expense, net $ 1,069 $ 607 Note 16 – Mergers and Acquisitions Acquisition of Silicone Engineering Ltd. On October 8, 2021, we acquired Silicone Engineering Ltd. (Silicone Engineering), a leading European manufacturer of silicone material solutions based in Blackburn, England, for a combined purchase price of $ 172.3 million for the company, net of cash acquired, and its facility. As part of the agreement, there was a $ 4.1 million holdback, upon which we can issue claims against until six months after the close of the acquisition, at which point in time the holdback amount, less any holdback claims, is paid to the previous owners of Silicone Engineering. In April 2022, we paid $ 1.3 million of the holdback in exchange for a 6-month extension. Substantially all of our $ 190.0 million in borrowings under our existing credit facility in October 2021 were used to fund the transaction, with the remaining amounts being used for general corporate purposes. Silicone Engineering expands our existing advanced silicones platform in our EMS operating segment and provides us a European Center of Excellence to service customers requiring premium silicone solutions for applications in the EV/HEV, industrial, medical and other markets. Pro-Forma Financial Information The following unaudited pro forma financial information presents the combined results of operations of Rogers and Silicone Engineering as if the Silicone Engineering acquisition had occurred on January 1, 2020. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the Silicone Engineering acquisition been completed as of January 1, 2020 and should not be taken as indicative of our future consolidated results of operations. Three Months Ended (Dollars in thousands) March 31, 2021 Net sales $ 239,146 Net income $ 31,912 22 Merger Agreement with DuPont On November 1, 2021, we entered into a definitive merger agreement to be acquired by DuPont de Nemours, Inc. (DuPont) in an all-cash transaction at a price of $ 277.00 per share of the Company’s capital stock. The merger agreement provides for the acquisition of Rogers Corporation by DuPont through the merger of Cardinalis Merger Sub, Inc., a wholly owned subsidiary of DuPont, with and into Rogers Corporation, with Rogers Corporation surviving the merger as a wholly owned subsidiary of DuPont. Company shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022. The transaction is expected to close late in the second quarter or early in the third quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals. 23