What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-22 · 114 added, 166 removed, 1258 unchanged (18% of the section changed)

20 unchanged sentences

We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Silicone Engineering Ltd.

from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded Silicone Engineering Ltd.

from our audit of internal control over financial reporting.

Silicone Engineering Ltd.

is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 2.0% and 0.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial Reporting

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A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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

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

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

Acquisition of Silicone Engineering Ltd.

- Valuation of Customer Relationships Intangible Asset

As described in Notes 1 and 17 to the consolidated financial statements, on October 8, 2021, the Company acquired Silicone Engineering Ltd.

for a combined purchase price of $172.3 million, net of cash acquired, and its facility.

This acquisition resulted in the recognition of $73.6 million of other intangible assets, including a customer relationships intangible asset of $48.9 million.

As disclosed by management, the customer relationships intangible asset was valued using the multi-period

excess earnings method of the income approach.

Significant assumptions used in the valuation include projected revenues and gross margins, customer attrition rate, and an appropriate discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible asset from the acquisition of Silicone Engineering Ltd.

is a critical audit matter are (i) the significant judgment by management when determining the fair value of the customer relationships intangible asset;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues, customer attrition rate, and discount rate;

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

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

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships intangible asset.

These procedures also included, among others (i) reading the purchase agreement;

(ii) testing management’s process for determining the fair value of the customer relationships intangible asset;

(iii) evaluating the appropriateness of the multi-period excess earnings method;

(iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings method;

and (v) evaluating the reasonableness of the significant assumptions used by management related to projected revenues, customer attrition rate, and discount rate.

Evaluating management’s significant assumptions related to projected revenues and customer attrition rate involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of Silicone Engineering Ltd.;

(ii) the consistency with external market and industry data;

and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings method and (ii) the reasonableness of the discount rate significant assumption.

/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona

February 22, 2022

March 1, 2023

We have served as the Company’s auditor since 2015.

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Asbestos-related liabilities, current portion 4,968 3,841

Finance lease obligations, current portion 498 198

Other accrued liabilities 40,067 37,422

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Asbestos-related liabilities, non-current portion 60,065 64,491

Finance lease obligations, non-current portion 1,295 209

Non-current income tax 9,985 7,131

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Shares issued for vested restricted stock units, net of shares withheld for taxes 69 29 82

Stock options exercised — — 11

Shares issued for employee stock purchase plan 6 14 13

Shares issued to directors 7 10 5

Shares repurchased ( 238 ) — —

Balance, end of period 18,574 18,730 18,677

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Shares issued for vested restricted stock units, net of shares withheld for taxes ( 10,852 ) ( 2,910 ) ( 5,439 )

Stock options exercised — — 333

Shares issued for employee stock purchase plan 944 1,548 1,347

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Equity compensation expense 11,796 16,994 13,532

Shares repurchased ( 24,762 ) — —

Balance, end of period 140,702 163,583 147,961

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Net income 116,629 108,133 49,990

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

Balance, end of period 1,098,454 981,825 873,692

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Asbestos-related provision (benefit) 30 ( 220 ) ( 682 )

(Gain) loss on sale or disposal of property, plant and equipment ( 880 ) 41 756

Loss (gain) on sale or disposal of property, plant and equipment 460 ( 880 ) 41

Impairment charges 65,085 455 639

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

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

Proceeds from insurance claims 7,252 — —

Net cash used in investing activities ( 113,117 ) ( 238,615 ) ( 40,385 )

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Payments of taxes related to net share settlement of equity awards ( 10,783 ) ( 2,881 ) ( 5,357 )

Proceeds from the exercise of stock options, net — — 344

Proceeds from issuance of shares to employee stock purchase plan 950 1,562 1,360

Share repurchases ( 25,000 ) — —

Net cash (used in) provided by financing activities ( 10,104 ) 159,057 ( 104,189 )

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

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

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

AES, EMS and Other.

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Advanced Electronics Solutions

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.

We believe these materials have characteristics that offer performance and other functional advantages in many market applications, which serve to differentiate our products from other commonly available materials.

AES products are sold globally to converters, fabricators, distributors and OEMs.

AES products are sold globally to converters, fabricators, distributors and original equipment manufacturers (OEMs).

Trade names for our AES products include:

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

curamik ® , ROLINX ® , RO4000 ® Series, RO3000 ® Series, RT/duroid ® , CLTE Series ® , TMM ® , AD Series ® , DiClad ® Series, CuClad ® Series, Kappa ® , COOLSPAN ® , TC Series ® , 92ML™, IsoClad ® Series, MAGTREX ® , XTremeSpeed™ RO1200™ Laminates, IM Series™, 2929 Bondply, SpeedWave ® Prepreg, RO4400™/RO4400T™ Series and Radix™.

As of December 31, 2022, our AES operating segment had manufacturing and administrative facilities in Chandler, Arizona;

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We believe these materials have characteristics that offer functional advantages in many market applications, which serve to differentiate our products from other commonly available materials.

EMS products are sold globally to converters, fabricators, distributors and original equipment manufacturers (OEMs).

EMS products are sold globally to converters, fabricators, distributors and OEMs.

Trade names for our EMS products include:

PORON ® , BISCO ® , DeWAL ® , ARLON ® , eSorba ® , Griswold ® , XRD ® , Silicone Engineering and R/bak ® .

As of December 31, 2021, our EMS operating segment had manufacturing and administrative facilities in Moosup, Connecticut;

Rogers, Connecticut;

PORON ® , BISCO ® , DeWAL ® , ARLON ® , eSorba ® , XRD ® , Silicone Engineering and R/bak ® .

As of December 31, 2022, our EMS operating segment had manufacturing and administrative facilities in Rogers, Connecticut;

Woodstock, Connecticut;

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Blackburn, England;

Ansan, South Korea;

Siheung, South Korea;

and Suzhou, China.

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

Translation adjustments for those entities that operate under a local currency are recorded directly to a separate component of shareholders’ equity, while remeasurement adjustments for those entities that operate under the parent’s functional currency are recorded to the income statement as a component of “Other income (expense), net.” Currency transaction gains and losses are reported as income or expense, respectively, in the consolidated statements of operations as a component of “Other income (expense), net.” Such adjustments resulted in gains of $ 3.0 million, gains of $ 0.9 million and losses of $ 0.9 million in 2021, 2020 and 2019, respectively.

Translation adjustments for those entities that operate under a local currency are recorded directly to a separate component of shareholders’ equity, while remeasurement adjustments for those entities that operate under the parent’s functional currency are recorded to the income statement as a component of “Other income (expense), net.” Currency transaction gains and losses are reported as income or expense, respectively, in the consolidated statements of operations as a component of “Other income (expense), net.” Such adjustments resulted in losses of $ 1.7 million, gains of $ 3.0 million and gains of $ 0.9 million in 2022, 2021 and 2020, respectively.

Allowance for Credit Losses

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We amortize capitalized internal use software costs using the straight-line method over the estimated useful lives of the software, generally from three to five years .

Net capitalized software and development costs were $ 28.6 million and $ 0.3 million for the years ended December 31, 2021 and 2020, respectively.

Net capitalized software and development costs were $ 58.9 million and $ 28.6 million as of December 31, 2022 and 2021, respectively.

The December 31, 2022 balance is almost entirely attributable to our planned implementation of a new enterprise resource planning system.

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Upon performing the quantitative assessment, if the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill.

We currently have four reporting units with goodwill:

RF Solutions, EMS, curamik ® and Elastomer Components Division (ECD).

Consistent with historical practice, the annual impairment test on these reporting units was performed as of November 30, 2021.

In 2021, we elected to utilize a qualitative assessment.

The application of the annual goodwill impairment test requires significant judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units and determination of the fair value of each reporting unit.

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

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

The discounted cash flow analysis utilized the discount rates for each of the reporting units ranging from 11.1 % for EMS to 13.6 % for ECD, and terminal growth rates ranging from 3.4 % for EMS to 3.5 % for RF Solutions, curamik ® and ECD.

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

We further believe that the assumptions and rates used in our annual goodwill impairment test are reasonable, but inherently uncertain.

There were no impairment charges resulting from our goodwill impairment assessment for the year ended December 31, 2022.

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Indefinite-lived other intangible assets are evaluated for impairment annually, and between annual impairment assessments if events or changes in circumstances indicate the carrying value may be impaired, by first performing a qualitative assessment to determine whether a quantitative indefinite-lived other intangible asset impairment assessment is necessary.

If it is determined, based on qualitative factors, the fair value of the indefinite-lived other intangible asset may be more likely than not less than its carrying amount or if significant changes to macro-economic factors related to the indefinite-lived other intangible asset have occurred that could materially impact fair value, a quantitative indefinite-lived other intangible asset impairment assessment would be required.

If it is determined, based on qualitative factors, the fair value of the indefinite-lived other intangible asset may be more likely than not less than its

carrying amount or if significant changes to macro-economic factors related to the indefinite-lived other intangible asset have occurred that could materially impact fair value, a quantitative indefinite-lived other intangible asset impairment assessment would be required.

We can elect to forgo the qualitative assessment and perform a quantitative assessment.

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

There were no impairment charges resulting from our indefinite-lived other intangible assets impairment assessment

for the year ended December 31, 2021.

There were no impairment charges resulting from our indefinite-lived other intangible assets impairment assessment for the year ended December 31, 2022.

Our curamik ® reporting unit had an indefinite-lived other intangible asset of $ 4.2 million as of December 31, 2022.

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

There were no impairment charges resulting from our definite-lived other intangible assets impairment analysis for the year ended December 31, 2021.

There were $ 17.9 million of impairment charges resulting from our definite-lived other intangible assets impairment analysis for the year ended December 31, 2022.

Our RF Solutions, EMS and curamik ® reporting units had definite-lived other intangible assets of $ 1.9 million, $ 123.3 million and $ 4.4 million, respectively, as of December 31, 2022.

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When no amount within a range of estimates is more likely to occur than another, we accrue to the low end of the range and disclose the range.

When future liabilities are determined to be reimbursable by insurance coverage, an accrual is recorded for the potential liability and a receivable is recorded for the estimated insurance

reimbursement amount.

When future liabilities are determined to be reimbursable by insurance coverage, an accrual is recorded for the potential liability and a receivable is recorded for the estimated insurance reimbursement amount.

We are exposed to the uncertain nature inherent in such remediation and the possibility that initial estimates will not reflect the final outcome of a matter.

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Revenue recognition does not occur until the product meets the definition of “no alternative use” and therefore, items that have not yet reached that point in the production process are not included in the population of items with over-time revenue recognition.

As appropriate, we record estimated reductions to revenue for customer returns, allowances, and warranty claims.

Provisions for such reductions are made at the time of sale and are typically derived from historical trends and other relevant information.

Earnings Per Share

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

As a result of our pension termination and settlement efforts in late 2019 and the first half of 2020, we have a pension surplus investment balance, which is 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.

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

Available-for-Sale Investment at Fair Value as of December 31, 2022

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

Pension surplus investment (1)

Pension surplus investment Level 1 Level 2 Level 3 Total

$ — $ — $ — $ —

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$ 6,638 $ — $ — $ 6,638

(1) These balances were 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 and 2020, the fair value of these investments approximated their carrying value.

(1) This balance was invested in a money market fund 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 this investment approximated its carrying value.

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

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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 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.

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In 2022, we entered into U.S.

dollar, euro and Korean won forward contracts.

dollar, Korean won, and euro forward contracts.

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

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USD/CNH $ 13,598,684

EUR/USD € 11,444,549

KRW/USD ₩ 7,596,600,000

EUR/USD € 3,756,866

As of December 31, 2022, we had 12 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment.

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

Derivative Instrument Designated as Cash Flow Hedge (2)

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

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(1) Net of taxes of $ 1,926 , $ 2,125 and $ 1,951 for the years ended December 31, 2022, 2021 and 2020, respectively.

(2) Net of taxes of $ 0 , $ 0 and $ 282 for the years ended December 31, 2021, 2020 and 2019, respectively.

The impacts to the consolidated statements of operations related to items reclassified to earnings were as follows:

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Net income $ ( 157 ) $ ( 225 )

Unrealized gains (losses) on derivative instrument (2)

Other income (expense), net $ — $ ( 3,191 )

Income tax (expense) benefit — 715

Net income $ — $ ( 2,476 )

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

For additional details, refer to “Note 11 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan.”

(2) This relates to the derivative instrument designated as a cash flow hedge and held as of the end of the year for each year presented.

Note 5 – Property, Plant and Equipment

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Depreciation expense was $ 29.5 million, $ 29.0 million and $ 29.3 million in 2022, 2021 and 2020, respectively.

Additionally, we recognized $ 47.2 million, $ 0.5 million and $ 0.6 million of impairment charges in 2022, 2021 and 2020, respectively.

For additional information related to the impairment charges, refer to “ Note 15 – Supplemental Financial Information.

Note 6 – Goodwill and Other Intangible Assets

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December 31, 2021 $ 119,567 $ 248,398 $ 2,224 $ 370,189

Acquisition — 107,231 — 107,231

Purchase accounting adjustment — ( 926 ) — ( 926 )

Foreign currency translation adjustment ( 4,215 ) ( 12,683 ) — ( 16,898 )

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Amortization expense was $ 16.4 million, $ 14.3 million and $ 42.1 million in 2022, 2021 and 2020, respectively.

The estimated annual future amortization expense is $ 17.0 million, $ 16.0 million, $ 14.6 million, $ 12.7 million and $ 12.1 million in 2022, 2023, 2024, 2025 and 2026, respectively.

Additionally, in 2022, we impaired $ 17.9 million of customer relationships, technology and trademarks and trade names definite-lived other intangible assets related to our high-performance engineered cellular elastomer business.

For additional information related to the impairment charges, refer to “ Note 15 – Supplemental Financial Information.

” The estimated annual future amortization

expense is $ 13.2 million, $ 12.1 million, $ 10.6 million, $ 10.2 million and $ 9.8 million in 2023, 2024, 2025, 2026 and 2027, respectively.

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

In 2020, our Diversified Silicone Products, Inc.

(DSP) customer relationships and trademarks and trade names definite-lived other intangible assets were both accelerated to be fully amortized by December 31, 2020, causing higher amortization expense.

As part of our ongoing assessment of the useful lives of our definite-lived other intangible assets, we reviewed the deterioration

of our DSP business and identified significant customer attrition, a sustained substantial decrease in net sales, as well as the planned phase-out of the DSP trademark and trade name by December 2020.

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

The weighted average amortization period as of December 31, 2022, by definite-lived other intangible asset class, is presented in the table below:

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Shares reserved for issuance under the Rogers Corporation Global Stock Ownership Plan for Employees (1)

59,611 65,163

Total 1,236,210 1,264,560

(1) This is an employee stock purchase plan within the meaning of Section 432(b) of the Internal Revenue Code of 1986, as amended, that was discontinued as of December 31, 2021, pursuant to the Merger Agreement.

(1) This is an employee stock purchase plan within the meaning of Section 432(b) of the Internal Revenue Code of 1986, as amended, that was suspended as of December 31, 2021, pursuant to the then-pending merger agreement with DuPont.

Share Repurchases

In 2015, we initiated a share repurchase program (the Program) of up to $ 100.0 million of the Company’s capital stock.

We initiated the Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing shareholder value.

The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice.

As of December 31, 2022, $ 24.0 million remained of our $ 100.0 million share repurchase program.

In 2022, we purchased 237,806 shares for a total value of $ 25.0 million.

There were no share repurchases in 2021 or 2020.

Equity Compensation

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Below were the assumptions used in the Monte Carlo calculation for each material award granted in 2021 and 2020:

February 10, 2021 February 12, 2020 June 3, 2019 February 7, 2019

February 10, 2021 February 12, 2020

Expected volatility 51.0 % 41.0 %

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We recognized $ 1.3 million, $ 1.2 million and $ 1.1 million of compensation expense related to deferred stock units in 2022, 2021 and 2020, respectively.

Share Repurchases

In 2015, we initiated a share repurchase program (the Program) of up to $ 100.0 million of the Company’s capital stock.

We initiated the Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing shareholder value.

The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice.

As of December 31, 2021, $ 49.0 million remained of our $ 100.0 million share repurchase program.

There were no share repurchases in 2021, 2020 or 2019.

Note 9 – Debt

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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.

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.

In March 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.

In October 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.

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

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

The base reference rate is the greatest of (a) the prime rate in effect on such day, (b) the NYFRB rate in effect on such day plus ½ of 1%, or (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.

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Our total net leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2022.

In 2022, we borrowed $ 100.0 million under our revolving credit facility for use in various operations.

In 2021, we borrowed $ 190.0 million under our revolving credit facility, which was primarily used to fund our acquisition of Silicone Engineering Limited.

In 2020, we borrowed $ 150.0 million under our revolving credit facility as a precautionary measure of increasing our cash position and preserving our financial flexibility with the uncertainty in the global markets resulting from the COVID-19 pandemic.

In 2019, we did not borrow anything under our revolving credit facility.

In 2022, 2021 and 2020, we made discretionary principal payments on our revolving credit facility of $ 75.0 million, $ 25.0 million and $ 248.0 million, respectively.

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Operating lease right-of-use assets Other long-term assets $ 13,013 $ 17,161

Finance lease obligations, current portion Other accrued liabilities $ 198 $ 4,755

Finance lease obligations, non-current portion Other long-term liabilities $ 209 $ 322

Finance lease obligations, current portion Finance lease obligations, current portion $ 498 $ 198

Finance lease obligations, non-current portion Finance lease obligations, non-current portion $ 1,295 $ 209

Total finance lease obligations $ 1,793 $ 407

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2026 418 ( 45 ) 373 2,057 ( 72 ) 1,985

2027 212 ( 45 ) 167 1,310 ( 3 ) 1,307

Thereafter 164 ( 38 ) 126 4,682 — 4,682

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Pension Plan Termination & Settlement

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

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

In October 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)).

In October 2019, our Chief Executive Officer approved the termination of the Merged Plan.

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

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

In the third quarter of 2021, we recorded a $ 0.5 million pre-tax settlement charge in connection with further settlement efforts for the Merged Plan termination.

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

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In December 2021, we transferred the remaining pension investment balance not initially transferred, to the RESIP trust suspense account.

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

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

As of December 31, 2021, the remaining pension surplus investment balance was approximately $ 6.6 million.

In 2021, $ 0.5 million of the pension surplus investment balance was used for further settlement efforts for the Merged Plan termination.

The funds in the RESIP trust suspense account were used to fund certain employer contributions.

In 2022, we exhausted the pension surplus investment balance.

Plan Assets and Plan Benefit Obligations

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Amount overfunded (underfunded) $ 5,021 $ 4,810 $ ( 1,441 ) $ ( 1,444 )

The decreases in our plan benefit obligations in 2021 and 2020 were primarily driven by benefit payments, partially offset by interest costs and actuarial losses.

The decreases in our plan benefit obligations in 2022 and 2021 were primarily driven by actuarial gains and benefit payments, partially offset by interest costs.

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

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For measurement purposes as of December 31, 2022, we assumed an annual health care cost trend rate of 6.25 % for covered health care benefits for retirees pre-age 65 or post-age 65 .

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

For measurement purposes as of December 31, 2021, we assumed an annual health care cost trend rate of 6.25 % for covered health care benefits for retirees pre-age 65 or post-age 65 .

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We sponsor the RESIP, a 401(k) plan for domestic employees.

Employees can defer an amount they choose, up to the annual IRS limit of $ 19,500 .

In 2022, employees could defer an amount they choose, up to the annual IRS limit of $ 20,500 .

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

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

Unless otherwise indicated by

the participant, the matching dollars are invested in the same funds as the participant’s contributions.

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

RESIP related expense amounted to $ 11.8 million, $ 5.6 million and $ 4.9 million in 2022, 2021 and 2020, respectively.

The increase in expense in 2022 was primarily due to a $ 6.5 million discretionary RESIP contribution related to the previously anticipated merger with DuPont.

Note 12 – Commitments and Contingencies

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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.

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.

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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 U.S., could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded.

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 U.S., 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 the projections of asbestos litigation and corresponding insurance coverage, result in the recognition of expense or income.

We recognized income of $ 0.2 million, income of $ 0.7 million and expense of $ 1.7 million in 2021, 2020 and 2019, respectively.

The benefit recognized in 2021 was primarily due to a favorable change in the indemnity cost assumptions.

We recognized an immaterial amount of expense and an immaterial amount of income in 2022 and 2021, respectively, as well as income of $ 0.7 million in 2020.

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

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

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

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As of December 31, 2022, we had state net operating loss carryforwards totaling $ 7.1 million in various state taxing jurisdictions, which expire between 2023 and 2042, and approximately $ 3.6 million of state research credit carryforwards, which will expire between 2023 and 2040.

We also had $ 4.9 million of federal research and development (R&D) credit carryforwards that begin to expire in 2035.

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

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Our effective income tax rate for 2022 was 16.9 % compared to 14.4 % for 2021.

The 2021 rate decrease was primarily due to the beneficial impact of increased reversals of unrecognized tax positions in China.

The 2022 rate increase was primarily due to the impact of the decrease in the reversals of unrecognized tax positions in China.

We did not make any changes in 2022 to our position on the permanent reinvestment of our historical earnings from foreign operations.

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Included in the balance of unrecognized tax benefits as of December 31, 2022 were $ 7.8 million of tax benefits that, if recognized, would impact the effective tax rate.

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

We believe that it is reasonably possible that a decrease of up to $ 1.2 million in unrecognized tax benefits related to foreign exposures may be necessary within the coming year.

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

Related to the unrecognized tax benefits noted above, as of December 31, 2021 and 2020, we had accrued potential interest and penalties of approximately $ 1.1 million and $ 1.2 million, respectively.

We have recorded a net income tax benefit and expense of $ 0.5 million and $ 0.5 million in 2021 and 2020, respectively.

Related to the unrecognized tax benefits noted above, as of December 31, 2022 and 2021, we had accrued potential interest and penalties of approximately $ 1.1 million.

We are subject to taxation in the U.S.

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

Revenue from Contracts with Customers

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

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

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

As appropriate, we record estimated reductions to revenue for customer returns, allowances, and warranty claims.

Provisions for such reductions are made at the time of sale and are typically derived from historical trends and other relevant information.

We had 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.

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Manufacturing footprint optimization $ 1,114 $ 3,115 $ 12,348

Facility consolidation — — 948

footprint consolidation 363 — —

Restructuring charges 1,477 3,115 12,348

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Impairment Charges

We recognized $ 0.5 million and $ 0.6 million of impairment charges in 2021 and 2020, respectively, primarily related to AES operating segment fixed assets in Belgium.

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

(Isola) asset acquisition.

We recognized $ 65.1 million, $ 0.5 million and $ 0.6 million of impairment charges in 2022, 2021 and 2020, respectively.

The impairment charges in 2022 primarily related to certain AES operating segment equipment-in-process in the U.S.

as well as certain EMS operating segment intangibles and fixed assets related to our high-performance engineered cellular elastomer business in the U.S.

The impairment charges in 2021 and 2020 were both primarily related to AES operating segment fixed assets in Belgium.

The impairment of the equipment-in-process in our AES operating segment was triggered by our decision in November 2022 to exit the Price Road facility in Arizona.

The impairment of certain intangibles and fixed assets related to our high-performance engineered cellular elastomer business in our EMS operating segment was triggered upon committing to a plan in late 2022 to divest ourselves of this business by early 2023 and the subsequent fair valuing of assets and liabilities.

In addition to the impairment charges, we recognized an additional $ 2.6 million accrual against the remaining net assets of the business based on the estimated fair value of the business.

As the high-performance engineered cellular elastomer business met the criteria of held for sale accounting as of December 31, 2022, the remaining $ 4.6 million in assets and $ 3.3 million in liabilities were designated as assets held for sale and liabilities held for sale, respectively, which are captured in the “Other current assets” and “Other accrued liabilities” financial statement line items of our Statements of Financial Position.

The assets are primarily comprised of accounts receivables, contract assets and inventories, while the liabilities are primarily comprised of accounts payables and other accrued liabilities.

On February 17, 2023 we entered into an asset purchase agreement to sell our high-performance engineered cellular elastomer business for a net purchase price of $ 1.8 million.

The business disposition is scheduled to be completed in early March.

Allocation of Restructuring and Impairment Charges to Operating Segments

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Total restructuring and impairment charges $ 66,562 $ 3,570 $ 12,987

Subsequent Event - Restructuring Charges

On February 16, 2023, we announced a reduction in force plan of our global workforce that is expected to be completed in the first half of 2023.

The plan is expected to significantly reduce our manufacturing costs and operating expenses, and are being done in conjunction with other previously announced cost reduction initiatives.

We estimate that we will incur approximately $ 10 million to $ 13 million in pre-tax restructuring charges related to this plan, all of which are expected to be in the form of cash-based expenditures and substantially all of which are expected to be related to employee severance and other termination benefits.

Other Operating (Income) Expense, Net

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Total UTIS fire ( 2,405 ) 6,210 —

Lease income — — ( 989 )

Depreciation on leased assets — — 1,907

Regulatory termination fee, net ( 142,069 ) — —

Loss (gain) on sale or disposal of property, plant and equipment 460 ( 880 ) 41

Indemnity claim settlements from acquisitions — — ( 715 )

Economic incentive grants — — ( 145 )

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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 fixed asset write-offs and inventory charges of $ 1.1 million and $ 0.9 million, respectively, related to property destroyed in the fire in 2021.

Additionally, we recognized a $ 4.7 million contingent liability pertaining to damage to nearby property and 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 $ 2.8 million of fees for various professional services in 2021 in connection with the assessment of the fire and the efforts to rebuild and resume operations.

Further, we incurred $ 2.1 million of compensation and benefits in 2021 for UTIS manufacturing employees, subsequent to the fire.

In connection with the UTIS fire, we have recognized anticipated insurance recoveries of $ 6.9 million in 2021 related to our ongoing insurance claim for property damage and compensation and benefits of hourly employees, less the applicable $ 0.3 million deductible.

In connection with the transitional leaseback of a portion of the facility and certain machinery and equipment acquired from Isola in August 2018, we recognized lease income and related depreciation on leased assets of $ 1.0 million and $ 1.9 million, respectively, in 2019.

In 2019, we recorded a gain of $ 0.7 million for the settlement of indemnity claims related to the Isola asset acquisition.

Commercial production at our new location in Siheung, South Korea commenced in late-January 2023.

In 2022, in connection with the UTIS fire, we recognized insurance recoveries of $ 6.6 million related to our ongoing insurance claim for property damage and compensation and benefits of hourly employees, incurred $ 1.4 million for various professional services and incurred $ 2.4 million for compensation and benefits for UTIS manufacturing employees subsequent to the fire.

In 2021, in connection with the UTIS fire, we recognized fixed asset write-offs and inventory charges of $ 1.1 million and $ 0.9 million, respectively, related to property destroyed in the fire, a $ 4.7 million contingent liability pertaining to damage to nearby property and a $ 0.5 million contingent liability pertaining to our obligations for the fire damage to the building in connection with the underlying lease agreement.

Further, in 2021 we incurred $ 2.8 million of fees for various professional services in connection with the assessment of the fire and the efforts to rebuild and resume operations and $ 2.1 million of compensation and benefits for UTIS manufacturing employees, subsequent to the fire.

In 2021, we also recognized anticipated insurance recoveries of $ 6.9 million related to our ongoing insurance claim for property damage and compensation and benefits of hourly employees, less the applicable $ 0.3 million deductible.

In 2022, we recognized income from a regulatory termination fee of $ 142.1 million, which was net of an incurred transaction-related fee.

For additional information, refer to “Note 16 – Mergers and Acquisitions.”

Interest Expense, Net

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Total interest expense, net $ 9,547 $ 2,536 $ 7,135

Note 16 – Recent Accounting Standards

Recently Adopted Standards Reflected in Our 2021 Financial Statements

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

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

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

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

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

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

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

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

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

Simplifying the Accounting for Income Taxes .

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

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

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

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

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

Note 16 – Mergers and Acquisitions

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As part of the agreement, there is 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 of the holdback period.

In October 2022, we paid back the remaining of the holdback, less an immaterial amount for claims.

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.

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The following table represents the fair values assigned to the acquired assets and liabilities assumed in the transaction.

As of the filing date of this Form 10-K, the purchase accounting and purchase price allocation for the Silicone Engineering transaction are substantially complete, as we continue to refine our valuation of certain acquired assets and liabilities assumed.

As of the filing date of this Form 10-K, the purchase accounting and purchase price allocation for the Silicone Engineering transaction have been completed.

(Dollars in thousands) October 8, 2021

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The estimated annual future amortization expense is $ 5.2 million for 2022, $ 4.7 million for 2023, $ 4.6 million for 2024, $ 4.3 million for 2025, and $ 4.2 million for 2026.

During 2021, we incurred transaction costs of $ 3.9 million related to the Silicone Engineering acquisition, which were recorded within selling, general and administrative (SG&A) expenses in the consolidated statements of operations.

In 2022 and 2021, we incurred transaction costs of $ 0.8 million and $ 3.9 million, respectively related to the Silicone Engineering acquisition, which were recorded within selling, general and administrative (SG&A) expenses in the consolidated statements of operations.

The results of Silicone Engineering have been included in our consolidated financial statements for the period subsequent to the completion of the acquisition on October 8, 2021, through December 31, 2021.

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Net income $ 120,082 $ 47,460

Merger Agreement with DuPont

Terminated 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.

The merger agreement provided 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 merger is subject to receipt of regulatory approvals and satisfactions of other customary conditions.

The merger is expected to close in the second quarter of 2022.

The merger agreement provided both Rogers Corporation and DuPont with a right to terminate the merger agreement if the merger had not closed on or before November 1, 2022.

Consummation of the merger was subject to various customary closing conditions, including regulatory approval by the State Administration for Market Regulation of China (SAMR).

As of November 1, 2022, the parties had not received regulatory approval from SAMR.

On November 1, 2022, the Company received from DuPont a notice of termination of the merger agreement.

Pursuant to the terms of the merger agreement, the Company received a regulatory termination fee from DuPont in the amount of $ 162.5 million, before taxes, and incurred a transaction-related fee of $ 20.4 million.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data