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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-27 · 81 added, 88 removed, 150 unchanged (53% of the section changed)

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Financial Statements and Supplementary Data.”

The discussion of the comparison of our 2022 and 2021 results was previously disclosed within the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023 , and has been omitted from this section pursuant to Instruction 1 to Item 303(b) of Regulation S-K.

The discussion of the comparison of our 2023 and 2022 results was previously disclosed within the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024 and has been omitted from this section pursuant to Instruction 1 to Item 303(b) of Regulation S-K, except the Operating Segment Net Sales and Gross Margin section, which has been recast due to changes resulting from the adoption of ASU 2023-07:

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

Company Overview and Strategy

Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers’ demanding challenges.

We design, develop, manufacture and sell high-performance and high-reliability engineered materials and components to meet our customers’ challenges.

We operate two strategic operating segments:

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

We have a history of innovation and have established Innovation Centers for our R&D activities in Chandler, Arizona;

Burlington, Massachusetts;

Eschenbach, Germany;

and Suzhou, China.

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

We are headquartered in Chandler, Arizona.

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(1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence.

Our priorities in executing this strategy are focused on driving near-term improvements to profitability and improving the growth outlook for the Company over the next several years by further strengthening our focus on commercial activities, expanding capacity to meet customer demand and driving innovation.

As a market-driven organization, we are focused on capitalizing on growth opportunities in the increasing electrification of vehicles, including EV/HEV, and increasing use of ADAS in the automotive industry, the advancement of communication systems in aerospace and defense, the growth of 5G smartphones in the portable electronics industry, and in renewable energy.

Our priorities in executing this strategy are focused on driving near-term improvements to profitability and improving the growth outlook for the Company over the next several years by further strengthening our focus on our portfolio and commercial activities, optimizing our global capacity to meet customer demand and driving innovation.

As a market-driven organization, we are focused on capitalizing on growth opportunities in several different end markets.

This includes the automotive industry, where there are market opportunities resulting from the increasing electrification of vehicles, and in the expanding use of ADAS.

Other opportunities are driven by the advancement of communication systems in aerospace and defense, the growth of next-generation smartphones in the portable electronics industry, and the continued expansion of renewable energy.

In addition to our focus on these markets, we sell into a variety of other markets, including general industrial, wireless infrastructure and mass transit.

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They then leverage our innovation and technology capabilities and deep applications expertise to provide unique solutions to customers’ challenges.

In addition to these capabilities, our strategy for success as a manufacturer of engineered materials and components is also built on our reputation for high performance and reliability solutions, trusted customer relationships, a broad product portfolio and custom design capabilities.

In addition to these capabilities, our strategy for success is also built on our reputation for high performance and reliability, trusted customer relationships and an expansive product portfolio.

Through this strategy we expect to be able to drive further commercial wins, which provide the potential for higher growth in the future.

We have also expanded our capabilities through organic investment and acquisitions and strive to ensure high quality solutions for our customers.

Our operational excellence efforts are focused on driving significant near-term enhancements to our profitability and ongoing cost structure improvements.

These efforts include focusing on improving yields, throughput, procurement capabilities and manufacturing processes and selectively adding strategic new hires to achieve better performance.

We have also taken specific cost improvement actions in the fourth quarter of 2022 through the end of 2023 that have benefited subsequent quarters.

These actions include optimizing our manufacturing footprint, divesting non-core product lines and reductions to manufacturing and corporate employees.

This growth strategy is enabled by both organic and inorganic investments from which we strive to ensure high-quality solutions for our customers.

Our operational excellence efforts are focused on driving ongoing cost structure improvements to further enhance our profitability.

These efforts include focusing on improving yields, throughput, procurement capabilities, and manufacturing processes.

We have also taken specific cost improvement actions in recent quarters that have and will benefit our performance.

These actions include optimizing our manufacturing footprint, divesting non-core product lines and reducing manufacturing and corporate employees.

We continue to review and re-align our manufacturing and engineering footprint in an effort to maintain a leading competitive position globally and to support our customers’ growth initiatives.

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We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business.

If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to return to historical levels of profitability and meaningfully improve revenues from 2023 levels, led by organic growth and complemented by targeted acquisitions.

This outlook is supported by our participation in a number of growth markets and by our strong competitive positions in these markets.

If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to meaningfully increase revenues from current levels and further improve profitability.

The increase in revenues is expected to come from a combination of organic growth and targeted acquisitions.

This outlook is supported by our participation in a number of growth markets and by our competitive positions in these markets.

The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will increase at a compound annual growth rate of between 10% and 15% over the next several years.

Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth.

In each of these areas we have secured a number of design wins and have a strong opportunity pipeline, which provides confidence in our growth outlook.

Other markets with a good growth trajectory include ADAS, aerospace and defense, portable electronics and renewable energy.

Each of these markets is expected to contribute to our growth.

Within the EV/HEV market, we believe our advanced battery cell pads and ceramic substrates provide multiple content opportunities to capitalize on this growth.

Other markets with good growth trajectories include ADAS, aerospace and defense, portable electronics and renewable energy.

Executive Summary

The following key highlights and factors should be considered when reviewing our results of operations, financial position and liquidity:

• In 2023 as compared to 2022, our net sales decreased by 6.5% to $908.4 million, our gross margin increased 70 basis points to 33.8% from 33.1%, and operating income as a percentage of net sales decreased 550 basis points to 9.4% from 14.9%.

• We recognized restructuring charges of $16.9 million in 2023 related to our reduction in global workforce and facility consolidation plans.

• In 2023, we recognized insurance recoveries of $31.4 million related to our business interruption and property damage insurance claims and incurred $0.9 million of charges for various professional services in connection with the 2021 UTIS fire.

• On September 22, 2023, we entered into asset purchase agreement to sell of one of our Suzhou, China facilities for a purchase price of $6.8 million, resulting in a pre-tax gain of $1.9 million, inclusive of selling and disposal costs.

The sale was completed in December 2023.

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

The sale was completed in September 2023.

• In 2024 as compared to 2023, our net sales decreased by 8.6% to $830.1 million, our gross margin decreased 40 basis points to 33.4% from 33.8%, and operating income as a percentage of net sales decreased 640 basis points to 3.0% from 9.4%.

• We entered into and executed the JV Separation Agreement with INOAC, which resulted in gains of $7.7 million recorded in Other income (expense), net.

• We recognized restructuring charges of $16.2 million in 2024 primarily related to our manufacturing footprint consolidation plan and our reduction in global workforce plan.

• We recognized impairment charges of $7.9 million in 2024, primarily related to our new ERP system still in development.

• We made $30.0 million of discretionary principal payments on our revolving credit facility in 2024.

• We repurchased 0.2 million shares of our capital stock for $19.8 million in 2024.

Results of Operations

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Our AES and EMS operating segments had net sales decreases of 11.3% and 4.8%, respectively.

The decrease in net sales was primarily due to lower net sales in the power interconnects EV/HEV, aerospace and defense, wireless infrastructure and portable electronics markets in our AES operating segment and lower net sales in the general industrial, consumer, portable electronics and EV/HEV markets in our EMS operating segment.

These decreases in net sales were partially offset by higher net sales in the power substrates EV/HEV, renewable energy and ADAS markets in our AES operating segment and higher net sales in the aerospace and defense market in our EMS operating segment.

Net sales were unfavorably impacted by foreign currency impacts of $3.3 million, or 0.3%, due to the depreciation in value of the Chinese renminbi relative to the U.S.

dollar, partially offset by the appreciation in value of the euro relative to the U.S.

Gross margin as a percentage of net sales increased 70 basis points to 33.8% in 2023 compared to 33.1% in 2022.

Gross margin in 2023 improved due to lower freight, duties and tariffs costs, lower raw material costs and favorable factory cost optimization efforts in our AES and EMS operating segments.

This was partially offset by lower volume and unfavorable mix, as well as higher inventory reserves provisions and unfavorable yield performance in our AES and EMS operating segments.

The decrease in net sales was primarily due to lower net sales in the EV/HEV, industrial, ADAS and renewable energy markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets.

We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjusted to softer end market demand and we experienced lower industrial net sales in our EMS operating segment primarily due to the non-recurrence of a one-time bulk purchase by a customer in 2023.

Gross margin in 2024 declined due to lower volume and unfavorable mix, partially offset by reduction in manufacturing spend, scrap and yield improvements and lower inventory reserves provisions.

Gross margin as a percentage of net sales decreased 40 basis points to 33.4% in 2024 compared to 33.8% in 2023.

Selling, General and Administrative Expenses

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Percentage of net sales 23.3 % 22.2 %

SG&A expenses decreased 7.5% in 2023 from 2022, primarily due to a $11.4 million decrease in compensation and benefits, a $3.8 million decrease in professional services expense and a $3.0 million decrease in other intangible asset amortization expense, partially offset by a $1.0 million increase in fixed asset depreciation expense and $0.5 million increase in travel expenses.

The decrease in compensation and benefits was primarily due to the $6.5 million discretionary RESIP contribution in 2022 and a $3.3 million decrease in the impact for retention awards issued in connection with the terminated DuPont merger.

The decrease in professional services expense was due to a $6.3 million decrease in expenses incurred related to the terminated merger with DuPont, a $0.7 million decrease in expenses incurred related to our acquisition of Silicone Engineering as well as an overall general reduction of professional service expenses across general and administrative departments, offset by $7.6 million of expenses related to non-routine shareholder advisory costs and $1.1 million of expenses in connection with the sale of our high-performance engineered cellular elastomer business in 2023.

SG&A expenses decreased 4.4% in 2024 from 2023, primarily due to a $9.5 million decrease in professional services expense, partially offset by the non-recurrence of the $0.7 million gain on the sale of our high-performance engineered cellular elastomer business in 2023.

The decrease in professional services expense was primarily attributable to the non-recurrence of the $7.6 million of non-routine shareholder advisory costs and the $1.1 million of expenses in connection with the sale of our high-performance engineered cellular elastomer business, both of which were incurred in 2023.

Research and Development Expenses

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Percentage of net sales 4.2 % 3.9 %

R&D expenses increased 1.4% in 2023 from 2022, primarily due to a $1.8 million increase in trial costs for alternative raw materials, partially offset by a $1.0 million decrease in professional services expense and a $0.2 million decrease in compensation and benefits expense.

R&D expenses decreased 3.1% in 2024 from 2023, primarily due to a $1.0 million decrease in compensation and benefits and a $0.8 million decrease in professional services expense, partially offset by a $0.7 million increase in trial costs for alternative raw materials.

Restructuring and Impairment Charges and Other Operating (Income) Expense, Net

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We recognized $16.2 million and $16.9 million of restructuring charges in 2024 and 2023, respectively.

The restructuring charges in 2024 were related to manufacturing footprint consolidation efforts, which impacted our Evergem, Belgium facility, along with the reduction in global workforce plan announced in November 2024 and the R&D facility exit plan announced in June 2024.

The restructuring charges in 2023 were related to the reduction in global workforce and facility consolidation plans announced in February 2023.

The restructuring charges in 2022 were related to the manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations.

We recognized $65.1 million of 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.

With respect to other operating (income) expense, net, we recognized income of $33.1 million and income of $144.0 million in 2023 and 2022, respectively.

We recognized $7.9 million of impairment charges in 2024, which were primarily related to our new ERP system still in development.

With respect to other operating (income) expense, net, we recognized expense of $0.1 million and income of $33.1 million in 2024 and 2023, respectively.

The income recognized in 2023 was primarily related to insurance recoveries from the fire at our UTIS manufacturing facility in Ansan, South Korea.

The income recognized in 2022 was primarily related to the DuPont merger termination fee less costs incurred, as well as the impacts from the fire at our UTIS manufacturing facility in Ansan, South Korea.

For additional information, refer to “ Note 14 – Supplemental Financial Information ” to “Item 8.

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Equity income in unconsolidated joint ventures $ 1.4 $ 1.8

As of December 31, 2023, we had two unconsolidated joint ventures, each 50% owned:

Equity income in those unconsolidated joint ventures decreased 59.1% in 2023 from 2022 due to lower net sales for RIC and RIS, which was primarily driven by the portable electronics market in Asia, as well as a change in the business model for RIS to subcontracting manufacturing in the second half of 2023.

Up until November 5, 2024, we had two unconsolidated JVs, each 50% owned:

Equity income in those unconsolidated JVs decreased 22.2% in 2024 from 2023 due to lower net sales for RIC and RIS, which was primarily driven by the portable electronics market in Asia, a change in the business model for RIS to subcontracting manufacturing in the second half of 2023, as well as the discontinuation of the JV relationships in November 2024.

For additional information, refer to “Note 16 – Mergers and Acquisitions” to “Item 8.

Financial Statements and Supplementary Data.”

Other Income (Expense), Net

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Other income (expense), net $ 8.8 $ (0.7)

Other income (expense), net decreased to $0.7 million of expense in 2023 compared to $1.1 million of income in 2022.

The decrease was due to unfavorable year-over-year change in impacts from our foreign currency transactions, partially offset by the favorable year-over-year change in impacts from our foreign currency derivatives and copper derivative contracts.

Other income (expense), net increased to $8.8 million of income in 2024 compared to $0.7 million of expense in 2023.

The increase was due to the recognition of $7.7 million of gains in connection to the execution of the JV Separation Agreement with INOAC, as well as a favorable year-over-year change in impacts from our foreign currency transactions, partially offset by an unfavorable year-over-year change in impacts from our foreign currency derivatives.

Interest Expense, Net

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Interest expense, net $ (0.8) $ (10.1)

Interest expense, net, increased by $0.6 million in 2023 from 2022, primarily due to a higher weighted-average interest rate, partially offset by a lower weighted-average outstanding balance for our borrowings under our revolving credit facility.

Interest expense, net, decreased by $9.3 million in 2024 from 2023, due to a lower weighted-average outstanding balance for our borrowings under our revolving credit facility.

Income Tax Expense

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Our effective income tax rate for 2024 was 23.9% compared to 25.8% for 2023.

The increase from 2022 was primarily due to the impact of the decrease in the reversals of unrecognized tax positions in 2022 that did not reoccur in 2023.

Operating Segment Net Sales and Operating Income

The decrease from 2023 was primarily due to the (i) release of valuation allowance against certain NOLs, (ii) JV Separation which did not have a corresponding tax gain and (iii) favorable releases of uncertain tax positions, offset by (iv) increased non-deductible equity compensation.

Operating Segment Net Sales and Gross Margin

Advanced Electronics Solutions

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Net sales $ 452.2 $ 509.7 $ 530.2

Operating income $ 2.6 $ 77.1

Gross margin $ 132.6 $ 157.6 $ 171.5

Percentage of net sales 29.3 % 30.9 % 32.3 %

Our AES operating segment net sales decreased by 11.3% in 2024 compared to 2023.

The decrease in net sales was primarily driven by lower net sales in the EV/HEV, industrial power systems, ADAS and renewable energy markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets.

We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to softer end market demand.

Our AES operating segment net sales decreased by 3.9% in 2023 compared to 2022.

The decrease in net sales was primarily driven by lower net sales in the power interconnects EV/HEV, aerospace and defense, wireless infrastructure and portable electronics markets, partially offset by higher net sales in the power substrates EV/HEV, renewable energy and ADAS markets.

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dollar, partially offset by the depreciation in value of Chinese renminbi relative to the U.S.

Operating income decreased by 96.6% in 2023 from 2022.

The decrease in operating income was primarily due to unfavorable year-over-year changes in shared service operating expense allocations and a $9.6 million unfavorable year-over-year change in restructuring charges, as well as, lower volumes and unfavorable mix, unfavorable yield performance and higher inventory reserves provisions.

The decrease in operating income was partially offset by a $40.5 million favorable year-over-year change in impairment charges and a $1.8 million net gain on the sale of one of our Suzhou, China facilities, as well as lower freight, duties and tariffs costs, lower raw material costs and favorable factory optimization efforts.

As a percentage of net sales, operating income in 2023 was 0.5% as compared to 14.5% in 2022.

The unfavorable changes in shared service expense allocations were driven by the merger termination fee less costs incurred related to the terminated DuPont merger in 2022 not recurring, as well as non-routine shareholder advisory costs incurred in 2023, partially offset by favorable year-over-year changes in costs associated with the terminated DuPont merger, including compensation and benefits costs as well as professional services expenses.

In 2022, our AES operating segment recognized impairment charges of $40.5 million.

In 2023 and 2022, our AES operating segment recognized restructuring charges and related expenses of $10.7 million and $1.1 million, respectively.

For additional information related to restructuring and impairment charges, as well as the sale of one of our Suzhou, China facilities, refer to “Note 14 – Supplemental Financial Information” to “Item 8.

Financial Statements and Supplementary Data.”

Our AES operating segment gross margin in 2024 declined due to lower volume and unfavorable mix, which was partially offset by lower manufacturing spend.

As a percentage of net sales, gross margin in 2024 was 29.3% as compared to 30.9% in 2023.

Our AES operating segment gross margin in 2023 declined due to lower volumes and unfavorable mix, unfavorable yield performance and higher inventory reserves provisions, which was partially offset by lower freight, duties and tariffs costs, lower raw material costs and favorable factory optimization efforts.

As a percentage of net sales, gross margin in 2023 was 30.9% as compared to 32.3% in 2022.

Elastomeric Material Solutions

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Net sales $ 360.9 $ 379.0 $ 420.0

Operating income $ 76.1 $ 60.4

Gross margin $ 138.5 $ 142.0 $ 141.6

Percentage of net sales 38.4 % 37.5 % 33.7 %

Our EMS operating segment net sales decreased by 4.8% in 2024 compared to 2023.

The decrease in net sales was primarily driven by lower net sales in the industrial market, partially offset by higher net sales in the EV/HEV market.

We experienced lower industrial net sales primarily due to the non-recurrence of a one-time bulk purchase by a customer in 2023.

Our EMS operating segment net sales decreased by 9.8% in 2023 compared to 2022.

The decrease in net sales was primarily driven by lower net sales in the general industrial, consumer, portable electronics and EV/HEV markets, partially offset by higher net sales in the aerospace and defense market.

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dollar, partially offset by the appreciation in value of the euro relative to the U.S.

Operating income increased by 26.0% in 2023 from 2022.

The increase in operating income was primarily due to a $28.0 million favorable year-over-year change in charges/benefits related to the UTIS fire and a $24.6 million favorable year-over-year change in impairment charges, as well as lower freight, duties and tariffs costs, lower raw material costs and favorable

factory optimization efforts.

The increase in operating income was partially offset by unfavorable year-over-year changes in shared service operating expense allocations and a $5.8 million unfavorable year-over-year change in restructuring charges, as well as lower volumes, unfavorable yield performance and higher inventory reserves provisions.

As a percentage of net sales, operating income in 2023 was 20.1% as compared to 14.4% in 2022.

In 2022, our EMS operating segment recognized impairment charges of $24.6 million.

In 2023 and 2022, our EMS operating segment recognized restructuring charges and related expenses of $6.2 million and $0.4 million, respectively.

For additional information related to restructuring and impairment charges, as well as UTIS fire charges/benefits, refer to “ Note 14 – Supplemental Financial Information ” to “Item 8.

Financial Statements and Supplementary Data.”

Our EMS operating segment gross margin in 2024 improved due to scrap and yield improvements and lower inventory reserves provisions, which was partially offset by lower volume and unfavorable mix.

As a percentage of net sales, gross margin in 2024 was 38.4% as compared to 37.5% in 2023.

Our EMS operating segment gross margin in 2023 improved due to lower freight, duties and tariffs costs, lower raw material costs and favorable factory optimization efforts, which was partially offset by lower volumes, unfavorable yield performance and higher inventory reserves provisions.

As a percentage of net sales, gross margin in 2023 was 37.5% as compared to 33.7% in 2022.

(Dollars in millions) 2024 2023 2022

Net sales $ 17.0 $ 19.7 $ 21.0

Operating income $ 6.6 $ 6.9

Gross margin $ 6.0 $ 7.5 $ 7.9

Percentage of net sales 35.3 % 38.1 % 37.6 %

Net sales in our Other operating segment decreased by 13.7% in 2024 from 2023.

Our Other operating segment gross margin in 2024 declined due to unfavorable impacts from lower volume and unfavorable factory utilization.

As a percentage of net sales, gross margin in 2024 was 35.3%, an approximately 280 basis point decrease as compared to 38.1% in 2023.

Net sales in our Other operating segment decreased by 6.2% in 2023 from 2022.

Net sales were unfavorably impacted by foreign currency fluctuations of $0.4 million, or 2.0%, due to the depreciation in value of Chinese renminbi relative to the U.S.

Our Other operating segment operating income decreased by 4.3% in 2023 from 2022.

The decrease in operating income was primarily driven by lower volume and unfavorable factory utilization, partially offset by lower freight, duties and tariffs costs.

As a percentage of net sales, operating income in 2023 was 33.5%, an approximately 60 basis point increase as compared to 32.9% in 2022.

Our Other operating segment gross margin improved in 2023 due to lower freight, duties and tariffs costs, partially offset by lower volume and unfavorable factory utilization.

As a percentage of net sales, gross margin in 2023 was 38.1%, an approximately 50 basis point increase as compared to 37.6% in 2022.

Liquidity, Capital Resources and Financial Position

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(Dollars in millions) 2024 2023

United States $ 60.0 $ 120.0

$ 84.7 $ 60.0

Europe 37.4 37.6

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Significant changes in our statement of financial position accounts from December 31, 2023 to December 31, 2024 were as follows:

• Cash and cash equivalents were $131.7 million as compared to $235.9 million as of December 31, 2022, a decrease of $104.2 million, or 44.2%.

This decrease was primarily due to $185.0 million in discretionary principal payments on our revolving credit facility, $57.0 million in capital expenditures and $3.2 million in tax payments related to net share settlement of equity awards, partially offset by $131.4 million of net cash flow provided by operations.

• Cash and cash equivalents were $159.8 million as compared to $131.7 million as of December 31, 2023, an increase of $28.1 million, or 21.3%.

This increase was primarily due to $127.1 million of net cash flow provided by operations, partially offset by $56.1 million in capital expenditures, $30.0 million in discretionary principal payments on our revolving credit facility, $19.8 million in share repurchases and $1.4 million in tax payments related to net share settlement of equity awards.

• Accounts receivable, net decreased 16.4% to $135.3 million as of December 31, 2024, from $161.9 million as of December 31, 2023.

The decrease was primarily due to a $15.4 million decrease in our income taxes receivable as well as lower net sales at the end of 2023 compared to at the end of 2022, partially offset by the recognition of $4.1 million in UTIS fire insurance receivables for our business interruption claims.

• Inventories, net decreased 15.8% to $153.5 million as of December 31, 2023, from $182.4 million as of December 31, 2022, primarily driven by a reduction in finished goods stock and raw materials, as well as a $7.5 million increase in inventory reserves provisions.

• Borrowings under revolving credit facility decreased to $30.0 million as of December 31, 2023, from $215.0 million as of December 31, 2022.

The decrease was due to $185.0 million in discretionary principal payments on our revolving credit facility made in 2023.

The decrease from year-end was primarily due to lower net sales at the end of 2024 compared to at the end of 2023 and lower days sales outstanding, as well as a $4.1 million receipt of previously recognized UTIS fire insurance receivables for our business interruption claims.

• Inventories, net decreased 7.3% to $142.3 million as of December 31, 2024, from $153.5 million as of December 31, 2023, primarily driven by lower raw materials and work-in-process levels, combined with higher inventory reserves provisions, partially offset by higher finished goods levels.

• Borrowings under revolving credit facility were nil as of December 31, 2024, compared to $30.0 million as of December 31, 2023.

The decrease was due to $30.0 million in discretionary principal payments on our revolving credit facility made in early 2024.

For additional information regarding this facility, as well as the Fifth Amended Credit Agreement, refer to “Note 9 – Debt” to “Item 8.

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We plan to fund our capital spending in 2025 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.

Excluding $1.6 million of inventory purchase commitments, there are no contractual obligations requiring material cash requirements in 2024 and beyond, excluding those already noted, including those related to our outstanding borrowings under our revolving credit facility, our operating and finance lease obligations and our pension benefit and other postretirement benefit obligations, which are discussed in “Note 9 – Debt ,” “ Note 6 – Leases” and “ Note 8 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan,” to “Item 8.

Excluding $3.0 million of inventory purchase commitments, there are no contractual obligations requiring material cash requirements in 2025 and beyond, excluding those already noted, including those related to our outstanding borrowings under our revolving credit facility, our operating and finance lease obligations and our pension benefit and other postretirement benefit obligations, which are discussed in “Note 9 – Debt,” “Note 6 – Leases” and “Note 8 – Postretirement Benefits,” to “Item 8.

Financial Statements and Supplementary Data,” respectively.

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GAAP, which require management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances and believe that appropriate reserves have been established using on reasonable methodologies and appropriate assumptions based on facts and circumstances that are known;

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances and believe that appropriate reserves have been established using reasonable methodologies and appropriate assumptions based on facts and circumstances that are known;

however, actual results may differ from these estimates under different assumptions or conditions.

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We endeavor to maintain insurance coverage with reasonable deductible levels to protect us from potential exposures to product liability claims.

Any liability associated with such claims is based on management’s best estimate of the potential claim value, while insurance receivables associated with related claims are not recorded until verified by the insurance carrier.

For asbestos-related claims, we recognize projected asbestos liabilities and related insurance receivables, with any difference between the liability and related insurance receivable recognized as an expense in the consolidated statements of operations.

Our estimates of asbestos-related contingent liabilities and related insurance receivables are based on a claim projection analysis and an insurance usage analysis prepared annually by third parties.

Any liability associated with such claims is based on management’s best estimate of the potential claim value, while insurance recoverables associated with related claims are not recorded until verified by the insurance carrier.

For asbestos-related claims, we recognize projected asbestos liabilities and related insurance recoverables, with any difference between the liability and related insurance recoverable recognized as an expense in the consolidated statements of operations.

Our estimates of asbestos-related contingent liabilities and related insurance recoverables are based on a claim projection analysis and an insurance usage analysis prepared annually by third parties.

The claim projection analysis contains numerous assumptions, including number of claims that might be received, the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, average indemnity costs, average defense costs, costs of medical treatment, the financial resources of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards, including potential tort reform.

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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 7. Management’s Discussion and Analysis