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 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 Cost of sales 165,452 145,073 328,324 284,839 Gross margin 86,518 89,833 171,912 179,332 Selling, general and administrative expenses 56,138 44,959 113,843 87,372 Research and development expenses 8,050 7,492 16,310 14,664 Restructuring and impairment charges 677 747 746 2,253 Other operating (income) expense, net ( 1,743 ) 890 ( 2,274 ) 2,105 Operating income 23,396 35,745 43,287 72,938 Equity income in unconsolidated joint ventures 1,800 1,930 3,075 4,111 Other income (expense), net 319 1,239 586 4,207 Interest expense, net ( 1,548 ) ( 404 ) ( 2,617 ) ( 1,011 ) Income before income tax expense 23,967 38,510 44,331 80,245 Income tax expense 6,084 9,855 9,848 20,372 Net income $ 17,883 $ 28,655 $ 34,483 $ 59,873 Basic earnings per share $ 0.95 $ 1.53 $ 1.83 $ 3.20 Diluted earnings per share $ 0.94 $ 1.52 $ 1.82 $ 3.18 Shares used in computing: Basic earnings per share 18,813 18,729 18,797 18,721 Diluted earnings per share 18,992 18,846 18,996 18,810 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 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 Foreign currency translation adjustment ( 33,591 ) 2,758 ( 45,348 ) ( 10,501 ) 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 (loss) $ ( 15,636 ) $ 31,471 $ ( 10,707 ) $ 49,493 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 ) June 30, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents $ 225,332 $ 232,296 Accounts receivable, less allowance for credit losses of $ 1,031 and $ 1,223 176,642 163,092 Contract assets 38,373 36,610 Inventories 171,129 133,384 Prepaid income taxes 3,036 1,921 Asbestos-related insurance receivables, current portion 3,361 3,176 Other current assets 17,823 13,586 Total current assets 635,696 584,065 Property, plant and equipment, net of accumulated depreciation of $ 366,088 and $ 367,850 360,085 326,967 Investments in unconsolidated joint ventures 15,931 16,328 Deferred income taxes 38,021 32,671 Goodwill 351,811 370,189 Other intangible assets, net of amortization 159,978 176,353 Pension assets 5,310 5,123 Asbestos-related insurance receivables, non-current portion 55,516 59,391 Other long-term assets 9,922 27,479 Total assets $ 1,632,270 $ 1,598,566 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 76,840 $ 64,660 Accrued employee benefits and compensation 33,006 48,196 Accrued income taxes payable 5,815 9,632 Asbestos-related liabilities, current portion 4,048 3,841 Other accrued liabilities 35,239 37,620 Total current liabilities 154,948 163,949 Borrowings under revolving credit facility 260,000 190,000 Pension and other postretirement benefits liabilities 1,475 1,618 Asbestos-related liabilities, non-current portion 60,248 64,491 Non-current income tax 9,079 7,131 Deferred income taxes 26,351 29,451 Other long-term liabilities 13,598 23,031 Commitments and contingencies (Note 10 and Note 12) Shareholders’ equity Capital stock - $ 1 par value; 50,000 authorized shares; 18,811 and 18,730 shares issued and outstanding 18,811 18,730 Additional paid-in capital 161,885 163,583 Retained earnings 1,016,308 981,825 Accumulated other comprehensive loss ( 90,433 ) ( 45,243 ) Total shareholders' equity 1,106,571 1,118,895 Total liabilities and shareholders' equity $ 1,632,270 $ 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) `` Six Months Ended June 30, 2022 June 30, 2021 Operating Activities: Net income $ 34,483 $ 59,873 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 22,980 20,997 Equity compensation expense 8,056 8,394 Deferred income taxes ( 8,728 ) 3,881 Equity in undistributed income of unconsolidated joint ventures ( 3,075 ) ( 4,111 ) Dividends received from unconsolidated joint ventures 1,509 1,754 Pension and other postretirement benefits 23 ( 190 ) (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 Provision (benefit) for credit losses 89 ( 342 ) Changes in assets and liabilities: Accounts receivable ( 27,116 ) ( 24,609 ) Proceeds from insurance/government subsidies related to operations 334 148 Contract assets ( 3,964 ) ( 3,710 ) Inventories ( 41,702 ) ( 10,527 ) Pension and postretirement benefit contributions ( 117 ) ( 151 ) Other current assets ( 5,962 ) ( 3,767 ) Accounts payable and other accrued expenses ( 1,976 ) 14,547 Other, net 13,096 3,490 Net cash (used in) provided by operating activities ( 11,676 ) 66,206 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 — Net cash used in investing activities ( 52,243 ) ( 20,701 ) Financing Activities: Proceeds from borrowings under revolving credit facility 70,000 — Repayment of debt principal and finance lease obligations ( 143 ) ( 29,652 ) Payments of taxes related to net share settlement of equity awards ( 10,623 ) ( 2,684 ) Proceeds from issuance of shares to employee stock purchase plan 950 704 Net cash provided by (used in) financing activities 60,184 ( 31,632 ) Effect of exchange rate fluctuations on cash ( 3,229 ) ( 1,713 ) Net (decrease) increase in cash and cash equivalents ( 6,964 ) 12,160 Cash and cash equivalents at beginning of period 232,296 191,785 Cash and cash equivalents at end of period $ 225,332 $ 203,945 Supplemental Disclosures: Accrued capital additions $ 13,527 $ 7,403 Cash paid during the year for: Interest, net of amounts capitalized $ 2,550 $ 964 Income taxes $ 13,426 $ 18,036 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 Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Capital Stock Balance, beginning of period $ 18,803 $ 18,712 $ 18,730 $ 18,677 Shares issued for vested restricted stock units, net of shares withheld for taxes 1 — 68 28 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 Additional Paid-In Capital Balance, beginning of period 157,164 150,004 163,583 147,961 Shares issued for vested restricted stock units, net of shares withheld for taxes ( 126 ) ( 52 ) ( 10,691 ) ( 2,712 ) 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 Balance, end of period 161,885 154,330 161,885 154,330 Retained Earnings Balance, beginning of period 998,425 904,910 981,825 873,692 Net income 17,883 28,655 34,483 59,873 Balance, end of period 1,016,308 933,565 1,016,308 933,565 Accumulated Other Comprehensive Loss Balance, beginning of period ( 56,914 ) ( 32,771 ) ( 45,243 ) ( 19,575 ) Other comprehensive income (loss) ( 33,519 ) 2,816 ( 45,190 ) ( 10,380 ) Balance, end of period ( 90,433 ) ( 29,955 ) ( 90,433 ) ( 29,955 ) Total Shareholders’ Equity $ 1,106,571 $ 1,076,662 $ 1,106,571 $ 1,076,662 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 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 June 30, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total Pension surplus investment (1) $ — $ — $ — $ — 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 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: 8 Derivative Instruments at Fair Value as of June 30, 2022 (Dollars in thousands) Level 1 Level 2 Level 3 Total (1) Foreign currency contracts $ — $ ( 130 ) $ — $ ( 130 ) Copper derivative contracts $ — $ 181 $ — $ 181 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 June 30, 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 June 30, 2022, the notional values of the remaining foreign currency forward contracts were as follows: Notional Values of Foreign Currency Derivatives USD/CNH $ 8,640,104 EUR/USD € 14,213,070 KRW/USD ₩ 7,702,800,000 Commodity 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 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 June 30, 2022, the volume of our copper contracts outstanding was as follows: Volume of Copper Derivatives 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 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 Contracts not designated as hedging instruments Other income (expense), net $ ( 236 ) $ ( 400 ) $ ( 918 ) $ ( 1,222 ) Copper Derivative Contracts Contracts not designated as hedging instruments Other income (expense), net $ ( 1,129 ) $ 1,313 $ ( 798 ) $ 3,860 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 ( 45,348 ) — ( 45,348 ) Amounts reclassified from accumulated other comprehensive loss — 158 158 Net current-period other comprehensive income (loss) ( 45,348 ) 158 ( 45,190 ) Balance as of June 30, 2022 $ ( 80,989 ) $ ( 9,444 ) $ ( 90,433 ) Balance as of December 31, 2020 $ ( 10,571 ) $ ( 9,004 ) $ ( 19,575 ) Other comprehensive income (loss) before reclassifications ( 10,501 ) — ( 10,501 ) Amounts reclassified from accumulated other comprehensive loss — 121 121 Net current-period other comprehensive income (loss) ( 10,501 ) 121 ( 10,380 ) 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. 10 Note 5 – Inventories Inventories, which are valued at the lower of cost or net realizable value, consisted of the following: (Dollars in thousands) June 30, 2022 December 31, 2021 Raw materials $ 80,496 $ 60,208 Work-in-process 43,088 29,078 Finished goods 47,545 44,098 Total inventories $ 171,129 $ 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 ( 5,409 ) ( 12,044 ) — $ ( 17,453 ) 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: 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 Customer relationships $ 191,708 $ 81,086 $ 110,622 $ 198,095 $ 77,870 $ 120,225 Technology 85,282 55,792 29,490 88,445 54,900 33,545 Trademarks and trade names 24,071 9,473 14,598 25,504 8,968 16,536 Covenants not to compete 2,556 1,421 1,135 2,693 1,137 1,556 Total definite-lived other intangible assets 303,617 147,772 155,845 314,737 142,875 171,862 Indefinite-lived other intangible asset 4,133 — 4,133 4,491 — 4,491 Total other intangible assets $ 307,750 $ 147,772 $ 159,978 $ 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 $ 4.2 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 June 30, 2022, by definite-lived other intangible asset class, was as follows: Definite-Lived Other Intangible Asset Class Weighted Average Remaining Amortization Period Customer relationships 7.9 years Technology 3.5 years Trademarks and trade names 2.1 years Covenants not to compete 1.1 years Total definite-lived other intangible assets 6.5 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 Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Numerator: Net income $ 17,883 $ 28,655 $ 34,483 $ 59,873 Denominator: Weighted-average shares outstanding - basic 18,813 18,729 18,797 18,721 Effect of dilutive shares 179 117 199 89 Weighted-average shares outstanding - diluted 18,992 18,846 18,996 18,810 Basic earnings per share $ 0.95 $ 1.53 $ 1.83 $ 3.20 Diluted earnings per share $ 0.94 $ 1.52 $ 1.82 $ 3.18 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 June 30, 2022 and 2021, 226 shares and 1,769 shares were excluded, respectively. Note 8 – Capital Stock and Equity Compensation Equity Compensation Performance-Based Restricted Stock Units 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. 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 six months ended June 30, 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 ( 1,415 ) 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 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. 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 six months ended June 30, 2022 is presented below: Time-Based Restricted Stock Units Awards outstanding as of December 31, 2021 96,989 Awards granted 62,510 Stock issued ( 46,222 ) Awards cancelled ( 2,021 ) 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 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 six months ended June 30, 2022 is presented below: Deferred Stock Units Awards outstanding as of December 31, 2021 9,500 Awards granted 4,800 Stock issued ( 7,450 ) 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 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 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. 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 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 June 30, 2022. 14 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 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- and six-month periods ended June 30, 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- and six-month periods ended June 30, 2022 and 2021. 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. 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 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 Short-term leases expense $ 130 $ 56 $ 252 $ 130 Payments on operating lease obligations $ 699 $ 665 $ 1,568 $ 1,335 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 June 30, 2022 December 31, 2021 Finance lease right-of-use assets Property, plant and equipment, net $ 1,403 $ 389 Operating lease right-of-use assets Other long-term assets $ 6,582 $ 17,161 Finance lease obligations, current portion Other accrued liabilities $ 413 $ 198 Finance lease obligations, non-current portion Other long-term liabilities $ 946 $ 209 Total finance lease obligations $ 1,359 $ 407 Operating lease obligations, current portion Other accrued liabilities $ 2,302 $ 2,810 Operating lease obligations, non-current portion Other long-term liabilities $ 4,825 $ 14,965 Total operating lease obligations $ 7,127 $ 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 June 30, 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 198 ( 50 ) 148 1,415 ( 23 ) 1,392 2023 572 ( 118 ) 454 2,554 ( 438 ) 2,116 2024 384 ( 118 ) 266 1,412 ( 469 ) 943 2025 384 ( 118 ) 266 1,046 ( 487 ) 559 2026 381 ( 118 ) 263 998 ( 445 ) 553 Thereafter 280 ( 215 ) 65 5,888 ( 3,160 ) 2,728 Total lease payments 2,199 ( 737 ) 1,462 13,313 ( 5,022 ) 8,291 Less: Interest ( 179 ) 76 ( 103 ) ( 2,547 ) 1,383 ( 1,164 ) Present Value of Net Future Minimum Lease Payments 2,020 ( 661 ) 1,359 10,766 ( 3,639 ) 7,127 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 4.2 years 6.1 years Weighted Average Discount Rate 3.09 % 4.45 % 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. Note 11 – Pension Benefits and Other Postretirement Benefits Pension and Other Postretirement Benefit Plans 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. 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. There was no remaining balance for the pension surplus investments as of June 30, 2022. 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 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 Service cost $ — $ — $ — $ — $ 10 $ 15 $ 20 $ 30 Interest cost 191 184 382 368 8 6 16 12 Expected return of plan assets ( 340 ) ( 390 ) ( 680 ) ( 780 ) — — — — Amortization of prior service credit — — — — — ( 24 ) — ( 48 ) Amortization of net loss 111 98 222 196 — — — — Net periodic benefit (credit) cost $ ( 38 ) $ ( 108 ) $ ( 76 ) $ ( 216 ) $ 18 $ ( 3 ) $ 36 $ ( 6 ) Employer Contributions 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 and six- months ended June 30, 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 $ 1.9 million of aggregate remediation costs through June 30, 2022, and the accrual for future remediation efforts is $ 0.8 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 six months ended June 30, 2022: Asbestos Claims Claims outstanding as of January 1 543 New claims filed 75 Pending claims concluded (1) ( 77 ) Claims outstanding as of June 30, 2022 541 (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. 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- 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. 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) June 30, 2022 December 31, 2021 Asbestos-related liabilities $ 64,296 $ 68,332 Asbestos-related insurance receivables $ 58,877 $ 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 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 June 30, 2022, we had $ 1.2 million accrued for the payment of interest. 18 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. 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. 19 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 June 30, 2022 Net sales - recognized over time $ 70,636 $ 2,698 $ 4,280 $ 77,614 Net sales - recognized at a point in time 70,529 102,392 1,435 174,356 Total net sales $ 141,165 $ 105,090 $ 5,715 $ 251,970 Operating income $ 8,775 $ 12,601 $ 2,020 $ 23,396 Three Months Ended June 30, 2021 Net sales - recognized over time $ 57,248 $ 3,758 $ 4,761 $ 65,767 Net sales - recognized at a point in time 83,178 85,573 388 169,139 Total net sales $ 140,426 $ 89,331 $ 5,149 $ 234,906 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 20 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 June 30, 2022 United States $ 31,731 $ 44,179 $ 1,145 $ 77,055 Other Americas 998 2,429 199 3,626 Total Americas 32,729 46,608 1,344 80,681 China 41,243 31,398 1,944 74,585 Other APAC 23,382 6,529 762 30,673 Total APAC 64,625 37,927 2,706 105,258 Germany 17,373 7,736 211 25,320 Other EMEA 26,438 12,819 1,454 40,711 Total EMEA 43,811 20,555 1,665 66,031 Total net sales $ 141,165 $ 105,090 $ 5,715 $ 251,970 Three Months Ended June 30, 2021 United States $ 21,824 $ 40,666 $ 1,353 $ 63,843 Other Americas 790 2,815 171 3,776 Total Americas 22,614 43,481 1,524 67,619 China 49,841 27,427 1,026 78,294 Other APAC 25,432 5,410 648 31,490 Total APAC 75,273 32,837 1,674 109,784 Germany 21,651 5,889 217 27,757 Other EMEA 20,888 7,124 1,734 29,746 Total EMEA 42,539 13,013 1,951 57,503 Total net sales $ 140,426 $ 89,331 $ 5,149 $ 234,906 (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. 21 (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 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) June 30, 2022 December 31, 2021 Advanced Electronics Solutions $ 32,653 $ 31,398 Elastomeric Material Solutions 2,080 2,082 Other 3,640 3,130 Total contract assets $ 38,373 $ 36,610 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. 22 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 Six Months Ended (Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Restructuring charges Manufacturing footprint optimization $ 465 $ 747 534 2,253 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 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 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 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 Balance as of December 31, 2021 $ 1,395 Provisions — Payments ( 1,013 ) Foreign currency translation adjustment ( 86 ) Balance as of June 30, 2022 $ 296 23 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 Six Months Ended (Dollars in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 UTIS fire Fixed assets write-offs $ — $ — — 891 Inventory charges ( 1 ) 40 200 320 Professional services 492 1,072 926 1,594 Lease obligations 46 54 278 540 Compensation & benefits 573 600 1,369 844 Other 2 76 13 76 Insurance recoveries ( 2,852 ) ( 359 ) ( 5,042 ) ( 1,478 ) Total UTIS fire ( 1,740 ) 1,483 ( 2,256 ) 2,787 (Gain) loss on sale or disposal of property, plant and equipment ( 3 ) ( 593 ) ( 18 ) ( 682 ) Total other operating (income) expense, net $ ( 1,743 ) $ 890 $ ( 2,274 ) $ 2,105 In early February 2021, there was a fire at our UTIS manufacturing facility in Ansan, South Korea, which manufactures eSorba® polyurethane foams used in portable electronics and display applications. The site was safely evacuated and there were no reported injuries; however, there was extensive damage to the manufacturing site and some damage to nearby property. Operations in South Korea will be disrupted into the first half of 2023. 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 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 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 Line of credit fees 153 291 291 564 Debt issuance amortization costs 179 179 358 358 Interest income ( 179 ) ( 150 ) ( 287 ) ( 345 ) Other 51 79 72 328 Total interest expense, net $ 1,548 $ 404 $ 2,617 $ 1,011 24 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 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. 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 Six Months Ended (Dollars in thousands) June 30, 2021 June 30, 2021 Net sales $ 245,579 $ 484,725 Net income $ 29,940 $ 61,852 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 in the third quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals. 25