What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-04-29 · 164 added, 113 removed, 567 unchanged (33% of the section changed)

3 unchanged sentences

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

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Net sales $ 251,970 $ 234,906 $ 500,236 $ 464,171

21 unchanged sentences

(Dollars in thousands)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Net income $ 17,883 $ 28,655 $ 34,483 $ 59,873

1 unchanged sentence

Pension and other postretirement benefits:

Actuarial net gain incurred, net of tax (Note 4) ( 15 ) — ( 15 ) —

Amortization of loss, net of tax (Note 4) 87 58 173 121

Other comprehensive income (loss) ( 33,519 ) 2,816 ( 45,190 ) ( 10,380 )

Comprehensive income $ 4,929 $ 18,022

Comprehensive income (loss) $ ( 15,636 ) $ 31,471 $ ( 10,707 ) $ 49,493

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

2 unchanged sentences

(Dollars and shares in thousands, except par value )

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets

47 unchanged sentences

(Dollars in thousands)

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

Operating Activities:

8 unchanged sentences

(Gain) loss on sale or disposal of property, plant and equipment ( 18 ) ( 682 )

Impairment charges 212 —

UTIS fire fixed asset and inventory write-offs 200 1,211

11 unchanged sentences

Investing Activities:

Acquisition of business, net of cash received ( 1,300 ) —

Capital expenditures ( 53,205 ) ( 21,415 )

Proceeds from the sale of property, plant and equipment, net — 714

Proceeds from insurance claims 2,262 —

1 unchanged sentence

Financing Activities:

Proceeds from borrowings under revolving credit facility 70,000 —

Repayment of debt principal and finance lease obligations ( 143 ) ( 29,652 )

1 unchanged sentence

Proceeds from issuance of shares to employee stock purchase plan 950 704

Net cash used in financing activities ( 9,694 ) ( 23,181 )

Net cash provided by (used in) financing activities 60,184 ( 31,632 )

Effect of exchange rate fluctuations on cash ( 3,229 ) ( 1,713 )

11 unchanged sentences

(Dollars and shares in thousands)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Capital Stock

2 unchanged sentences

Shares issued for employee stock purchase plan — — 6 7

Shares issued to directors 7 10 7 10

Balance, end of period 18,811 18,722 18,811 18,722

3 unchanged sentences

Shares issued for employee stock purchase plan — — 944 697

Shares issued to directors ( 7 ) ( 10 ) ( 7 ) ( 10 )

Equity compensation expense 4,854 4,388 8,056 8,394

28 unchanged sentences

• 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.

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

At the end of April, 2022, the entirety of the balance was paid out as a one-time discretionary contribution to all participants of the Rogers Employees Savings Investment Plan.

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

Available-for-Sale Investment at Fair Value as of June 30, 2022

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

5 unchanged sentences

$ 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.

(1) This balance was invested in funds comprised of short-term cash and fixed income securities, and was recorded in the “Other long-term assets” line item in the condensed consolidated statements of financial position as of December 31, 2021.

The fair value of these investments approximated its carrying value as of December 31, 2021.

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 March 31, 2022

Derivative Instruments at Fair Value as of June 30, 2022

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

22 unchanged sentences

Foreign Currency

During the three months ended March 31, 2022, we entered into U.S.

During the three months ended June 30, 2022, we entered into U.S.

dollar, euro, and Korean won forward contracts.

2 unchanged sentences

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 notional values of the remaining foreign currency forward contracts were as follows:

As of June 30, 2022, the notional values of the remaining foreign currency forward contracts were as follows:

Notional Values of Foreign Currency Derivatives

2 unchanged sentences

KRW/USD ₩ 7,702,800,000

As of March 31, 2022, we had 11 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment.

As of June 30, 2022, we had 12 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 March 31, 2022, the volume of our copper contracts outstanding was as follows:

As of June 30, 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 69 metric tons per month

January 2023 - March 2023 69 metric tons per month

April 2023 - June 2023 69 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

Three Months Ended Six Months Ended

(Dollars in thousands) Financial Statement Line Item June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Foreign Currency Contracts

9 unchanged sentences

Net current-period other comprehensive income (loss) ( 45,348 ) 158 ( 45,190 )

Balance as of March 31, 2022 $ ( 47,398 ) $ ( 9,516 ) $ ( 56,914 )

Balance as of June 30, 2022 $ ( 80,989 ) $ ( 9,444 ) $ ( 90,433 )

Balance as of December 31, 2020 $ ( 10,571 ) $ ( 9,004 ) $ ( 19,575 )

2 unchanged sentences

Net current-period other comprehensive income (loss) ( 10,501 ) 121 ( 10,380 )

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.

Balance as of June 30, 2021 $ ( 21,072 ) $ ( 8,883 ) $ ( 29,955 )

(1) Net of taxes of $ 2,081 and $ 2,125 as of June 30, 2022 and December 31, 2021, respectively.

Net of taxes of $ 1,923 and $ 1,951 as of June 30, 2021 and December 31, 2020, respectively.

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

(Dollars in thousands) June 30, 2022 December 31, 2021

Raw materials $ 80,496 $ 60,208

8 unchanged sentences

Foreign currency translation adjustment ( 5,409 ) ( 12,044 ) — $ ( 17,453 )

March 31, 2022 $ 118,121 $ 244,339 $ 2,224 $ 364,684

June 30, 2022 $ 114,158 $ 235,429 $ 2,224 $ 351,811

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

June 30, 2022 December 31, 2021

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

7 unchanged sentences

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.

Amortization expense was $ 4.2 million and $ 3.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 8.5 million and $ 6.3 million for the six months ended June 30, 2022 and 2021, respectively.

The estimated future amortization expense is $ 8.1 million for the remainder of 2022 and $ 15.4 million, $ 14.0 million, $ 12.2 million and $ 11.6 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:

The weighted average amortization period as of June 30, 2022, by definite-lived other intangible asset class, was as follows:

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

8 unchanged sentences

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

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

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Net income $ 17,883 $ 28,655 $ 34,483 $ 59,873

6 unchanged sentences

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.

For the three months ended June 30, 2022 and 2021, 226 shares and 1,769 shares were excluded, respectively.

Note 8 – Capital Stock and Equity Compensation

1 unchanged sentence

Performance-Based Restricted Stock Units

As of March 31, 2022, we had performance-based restricted stock units from 2022, 2021 and 2020 outstanding.

As of June 30, 2022, we had performance-based restricted stock units from 2021 and 2020 outstanding.

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

18 unchanged sentences

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 three months ended March 31, 2022 is presented below:

A summary of activity of the outstanding performance-based restricted stock units for the six months ended June 30, 2022 is presented below:

Performance-Based

4 unchanged sentences

Awards cancelled ( 1,415 )

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.

Awards outstanding as of June 30, 2022 79,905

We recognized $ 1.1 million and $ 1.1 million of compensation expense for performance-based restricted stock units for the three months ended June 30, 2022 and 2021, respectively.

We recognized $ 2.2 million and $ 3.2 million of compensation expense for performance-based restricted stock units for the six months ended June 30, 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.

As of June 30, 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.

4 unchanged sentences

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:

A summary of activity of the outstanding time-based restricted stock units for the six months ended June 30, 2022 is presented below:

Restricted Stock Units

3 unchanged sentences

Awards cancelled ( 2,021 )

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.

Awards outstanding as of June 30, 2022 111,256

We recognized $ 2.5 million and $ 1.9 million of compensation expense for time-based restricted stock units for the three months ended June 30, 2022 and 2021, respectively.

We recognized $ 4.6 million and $ 3.7 million of compensation expense for time-based restricted stock units for the six months ended June 30, 2022 and 2021, respectively.

Chief Executive Officer’s 2021 Equity Award Grants

9 unchanged sentences

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 three months ended March 31, 2022 is presented below:

A summary of activity of the outstanding deferred stock units for the six months ended June 30, 2022 is presented below:

Deferred Stock Units

2 unchanged sentences

Stock issued ( 7,450 )

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.

Awards outstanding as of June 30, 2022 6,850

We recognized $ 1.3 million compensation expense for deferred stock units for the three and six months ended June 30, 2022 and $ 1.2 million of compensation expense for the three and six months ended June 30, 2021.

Note 9 – Debt

9 unchanged sentences

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.

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.

3 unchanged sentences

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.

Based on our leverage ratio as of June 30, 2022, 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.

4 unchanged sentences

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, 2022.

We did no t borrow anything under the Fourth Amended Credit Agreement for the three months ended March 31, 2022, and 2021.

Our total net leverage ratio did not exceed 2.75 to 1.00 as of June 30, 2022.

We borrowed $ 70.0 million under the Fourth Amended Credit Agreement for the three and six months ended June 30, 2022.

There were no borrowings for the three and six months ended June 30, 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.

We made no payments for the three and six months ended June 30, 2022, and $ 4.0 million and $ 25.0 million of discretionary principal payments on our revolving credit facility for the for the three and six months ended June 30, 2021, respectively.

We had $ 260.0 million outstanding borrowings under our revolving credit facility as of June 30, 2022, and $ 190.0 million as of December 31, 2021.

We had $ 1.3 million and $ 1.6 million of outstanding line of credit issuance costs as of June 30, 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.

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

4 unchanged sentences

Our expenses and payments for operating leases were as follows:

Three Months Ended

(Dollars in thousands) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Operating leases expense $ 552 $ 779 $ 1,244 $ 1,460

3 unchanged sentences

(Dollars in thousands) Location in Statements of

Financial Position March 31, 2022 December 31, 2021

Financial Position June 30, 2022 December 31, 2021

Finance lease right-of-use assets Property, plant and equipment, net $ 1,403 $ 389

7 unchanged sentences

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:

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 June 30, 2022:

Finance Operating

15 unchanged sentences

Weighted Average Discount Rate 3.09 % 4.45 %

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.

In April 2022, we successfully negotiated the termination of a 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.

1 unchanged sentence

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.

As of June 30, 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.

10 unchanged sentences

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.

There was no remaining balance for the pension surplus investments as of June 30, 2022.

Components of Net Periodic Benefit (Credit) Cost

1 unchanged sentence

Pension Benefits Other Postretirement Benefits

Three Months Ended Three Months Ended

March 31, March 31,

Three Months Ended Six Months Ended Three Months Ended Six Months Ended

June 30, June 30, June 30, June 30,

(Dollars in thousands) 2022 2021 2022 2021 2022 2021 2022 2021

6 unchanged sentences

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.

There were no required or voluntary contributions made to the Union Plan or the Merged Plan for each of the three and six- months ended June 30, 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.

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 six- months ended June 30, 2022 and 2021, using cash from operations.

Note 12 – Commitments and Contingencies

5 unchanged sentences

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.

We incurred $ 1.9 million of aggregate remediation costs through June 30, 2022, and the accrual for future remediation efforts is $ 0.8 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.

2 unchanged sentences

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:

The following table summarizes the change in number of asbestos claims outstanding for the six months ended June 30, 2022:

Asbestos Claims

2 unchanged sentences

Pending claims concluded (1)

Claims outstanding as of March 31, 2022

(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.

Claims outstanding as of June 30, 2022

(1) For the six months ended June 30, 2022, 67 claims were dismissed and 10 claims were settled.

Settlements totaled approximately $ 1.5 million for the six months ended June 30, 2022.

Impact on Financial Statements

9 unchanged sentences

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

We are responsible for uninsured indemnity and defense costs, and 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.

We are responsible for uninsured indemnity and defense costs, and we incurred an immaterial amount of expenses for each of the three- and six-month periods ended June 30, 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.

2 unchanged sentences

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

(Dollars in thousands) March 31, 2022 December 31, 2021

(Dollars in thousands) June 30, 2022 December 31, 2021

Asbestos-related liabilities $ 64,296 $ 68,332

5 unchanged sentences

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.

Our effective income tax rate was 25.4 % and 25.6 % for the three months ended June 30, 2022 and 2021, respectively.

The decrease from the second quarter of 2021 was primarily due to the beneficial impact of a decrease in current quarter accruals of reserves for uncertain tax positions.

Our effective income tax rate was 22.2 % and 25.4 % for the six months ended June 30, 2022 and 2021, respectively.

The decrease from the first half of 2021 was primarily due to the decrease in the current quarter accruals of reserves of unrecognized tax benefits, as well as the increase in the excess tax benefits associated with stock compensation windfalls.

The total amount of unrecognized tax benefits as of June 30, 2022 was $ 7.3 million, of which $ 6.7 million would affect our effective tax rate if recognized.

Additionally, the balance of unrecognized tax benefits as of June 30, 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.

As of June 30, 2022, we had $ 1.2 million accrued for the payment of interest.

We are subject to taxation in the U.S.

16 unchanged sentences

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Net sales - recognized over time $ 70,636 $ 2,698 $ 4,280 $ 77,614

2 unchanged sentences

Operating income $ 8,775 $ 12,601 $ 2,020 $ 23,396

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Net sales - recognized over time $ 57,248 $ 3,758 $ 4,761 $ 65,767

2 unchanged sentences

Operating income $ 18,288 $ 15,637 $ 1,820 $ 35,745

Six Months Ended June 30, 2022

Net sales - recognized over time $ 141,122 $ 5,744 $ 8,653 $ 155,519

Net sales - recognized at a point in time 133,196 209,586 1,935 344,717

Total net sales $ 274,318 $ 215,330 $ 10,588 $ 500,236

Operating income $ 10,079 $ 29,598 $ 3,610 $ 43,287

Six Months Ended June 30, 2021

Net sales - recognized over time $ 112,062 $ 6,445 $ 9,973 $ 128,480

Net sales - recognized at a point in time 160,256 174,735 700 335,691

Total net sales $ 272,318 $ 181,180 $ 10,673 $ 464,171

Operating income $ 33,137 $ 35,714 $ 4,087 $ 72,938

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

1 unchanged sentence

Region/Country Advanced Electronics Solutions Elastomeric Material Solutions Other Total

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

United States $ 31,731 $ 44,179 $ 1,145 $ 77,055

8 unchanged sentences

Total net sales $ 141,165 $ 105,090 $ 5,715 $ 251,970

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

United States $ 21,824 $ 40,666 $ 1,353 $ 63,843

10 unchanged sentences

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 Electronics Solutions Elastomeric Material Solutions Other Total

Six Months Ended June 30, 2022

United States $ 60,938 $ 89,568 $ 1,988 $ 152,494

Other Americas 1,971 5,016 367 7,354

Total Americas 62,909 94,584 2,355 159,848

China 77,322 62,385 3,758 143,465

Other APAC 43,479 13,245 1,270 57,994

Total APAC 120,801 75,630 5,028 201,459

Germany 37,926 16,474 481 54,881

Other EMEA 52,682 28,642 2,724 84,048

Total EMEA 90,608 45,116 3,205 138,929

Total net sales $ 274,318 $ 215,330 $ 10,588 $ 500,236

Six Months Ended June 30, 2021

United States $ 45,621 $ 78,398 $ 2,025 $ 126,044

Other Americas 1,384 5,309 387 7,080

Total Americas 47,005 83,707 2,412 133,124

China 108,264 55,258 2,419 165,941

Other APAC 48,804 14,698 1,368 64,870

Total APAC 157,068 69,956 3,787 230,811

Germany 26,814 16,165 351 43,330

Other EMEA 41,431 11,352 4,123 56,906

Total EMEA 68,245 27,517 4,474 100,236

Total net sales $ 272,318 $ 181,180 $ 10,673 $ 464,171

Revenue from Contracts with Customers

3 unchanged sentences

Contract assets by operating segment were as follows:

(Dollars in thousands) March 31, 2022 December 31, 2021

(Dollars in thousands) June 30, 2022 December 31, 2021

Advanced Electronics Solutions $ 32,653 $ 31,398

2 unchanged sentences

Total contract assets $ 38,373 $ 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.

We did not have any contract liabilities as of June 30, 2022 or December 31, 2021.

No impairment losses were recognized for the three or six-month periods ended June 30, 2022 and 2021, respectively, on any receivables or contract assets arising from our contracts with customers.

Note 15 – Supplemental Financial Information

1 unchanged sentence

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

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Restructuring charges

1 unchanged sentence

Total restructuring charges 465 747 534 2,253

Impairment charges

Fixed asset impairment charges 212 — 212 —

Total impairment charges 212 — 212 —

Total restructuring and impairment charges $ 677 $ 747 $ 746 $ 2,253

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.

Our AES operating segment incurred $ 0.7 million and $ 0.7 million of restructuring and impairment charges, respectively, for the three and six months ended June 30, 2022, while our EMS operating segment incurred an immaterial amount of restructuring and impairment charges for the three and six months ended June 30, 2022.

Our AES operating segment incurred $ 0.7 million and $ 2.3 million of restructuring and impairment charges, respectively, for the three and six months ended June 30, 2021, while our EMS operating segment incurred an immaterial amount of restructuring and impairment charges for the three and six months ended June 30, 2021.

Restructuring Charges & Related Expenses - Manufacturing Footprint Optimization

1 unchanged sentence

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:

We incurred an immaterial amount of restructuring charges and related expenses for the three and six months ended June 30, 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 six months ended June 30, 2022:

(Dollars in thousands) Manufacturing Footprint Optimization Restructuring Severance

2 unchanged sentences

Foreign currency translation adjustment ( 86 )

Balance as of March 31, 2022 $ 1,343

Balance as of June 30, 2022 $ 296

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

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Fixed assets write-offs $ — $ — — 891

3 unchanged sentences

Compensation & benefits 573 600 1,369 844

Other 2 76 13 76

Insurance recoveries ( 2,852 ) ( 359 ) ( 5,042 ) ( 1,478 )

3 unchanged sentences

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;

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.

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.

We recognized additional insurance recoveries of $ 2.9 million and $ 5.0 million for the three and six months ended June 30, 2022, respectively, as a result of an initial $ 2.5 million insurance payout related to our property damage claims and $ 2.5 million of additional in-process payouts communicated by the insurer.

This was partially offset by incurred expenses of $ 0.5 million and $ 0.9 million for various professional services, $ 0.6 million and $ 1.4 million for compensation and benefits for UTIS manufacturing employees subsequent to the fire, an immaterial amount and $ 0.3 million for expenses related to obligations under our manufacturing facility lease agreement and an immaterial amount and $ 0.2 million of inventory charges for the three and six months ended June 30, 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 six months ended June 30, 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.

We incurred $ 1.1 million and $ 1.6 million of fees for various professional services for the three and six months ended June 30, 2021, respectively, in connection with the assessment of the fire and the efforts to rebuild and resume operations.

Further, we incurred $ 0.6 million and $ 0.8 million of compensation and benefits for UTIS manufacturing employees, subsequent to the fire, for the three and six months ended June 30, 2021.

In connection with the UTIS fire, we recognized anticipated insurance recoveries of $ 0.4 million and $ 1.5 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 and six months ended June 30, 2021, respectively.

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

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest on revolving credit facility $ 1,344 $ 5 $ 2,183 $ 106

2 unchanged sentences

Interest income ( 179 ) ( 150 ) ( 287 ) ( 345 )

Other 51 79 72 328

Total interest expense, net $ 1,548 $ 404 $ 2,617 $ 1,011

3 unchanged sentences

(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.

As part of the agreement, there was a $ 4.1 million holdback, upon which we could issue claims against until six months after the close of the acquisition, at which point in time the holdback amount, less any holdback claims, be 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 of the holdback period.

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.

3 unchanged sentences

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

Three Months Ended Six Months Ended

(Dollars in thousands) June 30, 2021 June 30, 2021

Net sales $ 245,579 $ 484,725

5 unchanged sentences

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.

The transaction is expected to close in the third quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals.

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