ROGERS CORP 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 238 ) To the Board of Directors and Shareholders of Rogers Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial position of Rogers Corporation and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing under Item 8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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; 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 30 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Asbestos-Related Liabilities and Insurance Recoverables As described in Notes 1 and 10 to the consolidated financial statements, the Company's consolidated asbestos-related liabilities and asbestos-related insurance recoverables balances were $ 57.5 million and $ 52.3 million, respectively, as of December 31, 2024. Management reviews the asbestos-related projections annually in the fourth quarter of each year unless facts and circumstances materially change during the year, at which time management would analyze these projections. Management recognizes a liability for asbestos-related contingencies that are probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos-related matters, management records asbestos-related insurance recoverables that are deemed probable. Management's estimates of asbestos-related contingent liabilities and related insurance recoverables are based on a claim projection analysis and an insurance usage analysis, respectively, prepared annually by third parties. The claim projection analysis contains numerous assumptions, including the 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. The insurance usage analysis considers, among other things, applicable deductibles, retentions and policy limits, the solvency and historical payment experience of various insurance carriers, the likelihood of recovery as estimated by external legal counsel and existing insurance settlements. The principal considerations for our determination that performing procedures relating to asbestos-related liabilities and insurance recoverables is a critical audit matter are (i) the significant judgement by management when determining the asbestos-related liabilities and insurance recoverables; (ii) a high degree of auditor judgement, subjectivity, and effort in performing procedures and evaluating management's 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 used in the claim projection analysis; 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 analyses of the asbestos-related liabilities and insurance recoverables. These procedures also included, among others (i) testing management's process for determining the asbestos-related liabilities and insurance recoverables estimates; (ii) evaluating the appropriateness of the claim projection and insurance usage analyses; (iii) testing the completeness and accuracy of the underlying data used in the analyses; and (iv) evaluating the reasonableness of significant assumptions used by management 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. 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. /s/ PricewaterhouseCoopers LLP Phoenix, Arizona February 26, 2025 We have served as the Company’s auditor since 2015. 31 ROGERS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For each of the fiscal years in the three-year period ended December 31, 2024 (Dollars and shares in millions, except per share amounts) 2024 2023 2022 Net sales $ 830.1 $ 908.4 $ 971.2 Cost of sales 553.0 601.3 650.2 Gross margin 277.1 307.1 321.0 Selling, general and administrative expenses 193.4 202.3 218.8 Research and development expenses 34.6 35.7 35.2 Restructuring and impairment charges 24.1 16.9 66.6 Other operating (income) expense, net 0.1 ( 33.1 ) ( 144.0 ) Operating income 24.9 85.3 144.4 Equity income in unconsolidated joint ventures 1.4 1.8 4.4 Other income (expense), net 8.8 ( 0.7 ) 1.1 Interest expense, net ( 0.8 ) ( 10.1 ) ( 9.5 ) Income before income tax expense 34.3 76.3 140.4 Income tax expense 8.2 19.7 23.8 Net income $ 26.1 $ 56.6 $ 116.6 Basic earnings per share $ 1.40 $ 3.04 $ 6.21 Diluted earnings per share $ 1.40 $ 3.03 $ 6.15 Shares used in computing: Basic earnings per share 18.6 18.6 18.8 Diluted earnings per share 18.6 18.7 19.0 The accompanying notes are an integral part of the consolidated financial statements. 32 ROGERS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For each of the fiscal years in the three-year period ended December 31, 2024 (Dollars in millions) 2024 2023 2022 Net income $ 26.1 $ 56.6 $ 116.6 Foreign currency translation adjustment ( 29.9 ) 18.8 ( 40.0 ) Pension and other postretirement benefits: Actuarial net gain (loss) incurred, net of tax (Note 2) 0.7 ( 0.4 ) ( 0.2 ) Pension settlement charges, net of tax (Note 2) — 0.1 — Amortization of loss, net of tax (Note 2) 0.3 0.3 0.2 Other comprehensive income (loss) ( 28.9 ) 18.8 ( 40.0 ) Comprehensive income (loss) $ ( 2.8 ) $ 75.4 $ 76.6 The accompanying notes are an integral part of the consolidated financial statements. 33 ROGERS CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31, (Dollars and share amounts in millions, except par value of capital stock) 2024 2023 Assets Current assets Cash and cash equivalents $ 159.8 $ 131.7 Accounts receivable, less allowance for credit losses of $ 1.5 and $ 1.1 135.3 161.9 Contract assets 23.7 45.2 Inventories, net 142.3 153.5 Asbestos-related insurance recoverables, current portion 4.3 4.3 Other current assets 28.5 30.3 Total current assets 493.9 526.9 Property, plant and equipment, net of accumulated depreciation of $ 390.8 and $ 385.7 365.1 366.3 Operating lease right-of-use assets 24.1 18.9 Goodwill 357.6 359.8 Other intangible assets, net of amortization 110.3 123.9 Asbestos-related insurance recoverables, non-current portion 48.0 52.2 Investments in unconsolidated joint ventures — 11.1 Deferred income taxes 61.5 49.7 Other long-term assets 20.6 8.4 Total assets $ 1,481.1 $ 1,517.2 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 48.1 $ 50.3 Accrued employee benefits and compensation 41.5 31.1 Accrued income taxes payable 7.7 2.0 Operating lease obligations, current portion 4.0 3.5 Asbestos-related liabilities, current portion 5.4 5.5 Other accrued liabilities 16.8 24.0 Total current liabilities 123.5 116.4 Borrowings under revolving credit facility — 30.0 Operating lease obligations, non-current portion 20.6 15.4 Asbestos-related liabilities, non-current portion 52.1 56.0 Non-current income tax 5.7 7.2 Deferred income taxes 18.0 22.9 Other long-term liabilities 9.6 10.3 Commitments and contingencies (Note 6 and Note 10) Shareholders’ equity Capital stock - $ 1 par value; 50.0 authorized shares; 18.5 and 18.6 shares issued and outstanding, respectively 18.5 18.6 Additional paid-in capital 147.3 151.8 Retained earnings 1,181.1 1,155.0 Accumulated other comprehensive loss ( 95.3 ) ( 66.4 ) Total shareholders' equity 1,251.6 1,259.0 Total liabilities and shareholders' equity $ 1,481.1 $ 1,517.2 The accompanying notes are an integral part of the consolidated financial statements. 34 ROGERS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For each of the fiscal years in the three-year period ended December 31, 2024 (Dollars and share amounts in millions) 2024 2023 2022 Capital Stock Balance, beginning of period $ 18.6 $ 18.6 $ 18.7 Shares issued for vested restricted stock units, net of shares withheld for taxes 0.1 — 0.1 Shares issued for employee stock purchase plan — — — Shares repurchased ( 0.2 ) — ( 0.2 ) Other capital stock activity — — — Balance, end of period 18.5 18.6 18.6 Additional Paid-In Capital Balance, beginning of period 151.8 140.7 163.6 Shares issued for vested restricted stock units, net of shares withheld for taxes ( 1.5 ) ( 3.2 ) ( 10.9 ) Shares issued for employee stock purchase plan 1.5 — — Equity compensation expense 15.1 14.3 11.8 Shares repurchased ( 19.6 ) — ( 24.8 ) Other additional paid-in capital activity — — 1.0 Balance, end of period 147.3 151.8 140.7 Retained Earnings Balance, beginning of period 1,155.0 1,098.4 981.8 Net income 26.1 56.6 116.6 Balance, end of period 1,181.1 1,155.0 1,098.4 Accumulated Other Comprehensive Loss Balance, beginning of period ( 66.4 ) ( 85.2 ) ( 45.2 ) Other comprehensive income (loss) ( 28.9 ) 18.8 ( 40.0 ) Balance, end of period ( 95.3 ) ( 66.4 ) ( 85.2 ) Total Shareholders’ Equity $ 1,251.6 $ 1,259.0 $ 1,172.5 The accompanying notes are an integral part of the consolidated financial statements. 35 ROGERS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For each of the fiscal years in the three-year period ended December 31, 2024 (Dollars in millions) 2024 2023 2022 Operating Activities: Net income $ 26.1 $ 56.6 $ 116.6 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 49.4 51.1 45.9 Equity compensation expense 15.1 14.3 11.8 Deferred income taxes ( 17.3 ) ( 3.6 ) ( 20.6 ) Equity in undistributed income of unconsolidated joint ventures ( 1.4 ) ( 1.8 ) ( 4.4 ) Dividends received from unconsolidated joint ventures 2.5 4.3 4.7 Gain on JV Separation Agreement transactions ( 7.7 ) — — Gain on sale of business — ( 0.7 ) — (Gain) loss on sale or disposal of property, plant and equipment 0.1 ( 2.6 ) 0.5 Impairment charges 7.9 — 65.1 Other non-cash charges, net 2.5 0.6 0.4 Changes in assets and liabilities: Accounts receivable 19.0 ( 10.8 ) ( 32.3 ) Proceeds from insurance related to operations 4.1 25.6 1.2 Contract assets 20.2 ( 5.9 ) ( 3.9 ) Inventories, net 7.5 28.3 ( 51.6 ) Other current assets 2.8 4.2 ( 6.3 ) Accounts payable and other accrued expenses 4.0 ( 26.6 ) ( 8.8 ) Other, net ( 7.7 ) ( 1.6 ) 11.2 Net cash provided by operating activities 127.1 131.4 129.5 Investing Activities: Capital expenditures ( 56.1 ) ( 57.0 ) ( 116.8 ) Acquisition of business, net of cash received — — ( 3.6 ) Disposition of business — 1.7 — Net cash from JV Separation Agreement transactions 8.1 — — Proceeds from the sale of marketable equity securities 1.5 — — Purchases of marketable equity securities ( 0.5 ) — — Proceeds from the sale of property, plant and equipment, net 1.4 5.6 — Proceeds from insurance claims — 1.8 7.3 Net cash used in investing activities ( 45.6 ) ( 47.9 ) ( 113.1 ) Financing Activities: Proceeds from borrowings under revolving credit facility — — 100.0 Repayment of debt principal and finance lease obligations ( 30.4 ) ( 185.4 ) ( 75.3 ) Line of credit issuance costs — ( 1.7 ) — Payments of taxes related to net share settlement of equity awards ( 1.4 ) ( 3.2 ) ( 10.8 ) Proceeds from issuance of shares to employee stock purchase plan 1.5 — 1.0 Share repurchases ( 19.8 ) — ( 25.0 ) Net cash used in financing activities ( 50.1 ) ( 190.3 ) ( 10.1 ) Effect of exchange rate fluctuations on cash ( 3.3 ) 2.6 ( 2.7 ) Net increase (decrease) in cash and cash equivalents 28.1 ( 104.2 ) 3.6 Cash and cash equivalents at beginning of period 131.7 235.9 232.3 Cash and cash equivalents at end of period $ 159.8 $ 131.7 $ 235.9 Supplemental Disclosures: Accrued capital additions $ 8.4 $ 5.9 $ 6.7 Cash paid during the year for: Interest, net of amounts capitalized $ 1.7 $ 10.4 $ 9.7 Income taxes, net of refunds $ 19.5 $ 6.9 $ 60.8 The accompanying notes are an integral part of the consolidated financial statements. 36 ROGERS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Basis of Presentation, Organization and Summary of Significant Accounting Policies As used herein, the terms “Company,” “Rogers,” “we,” “us,” “our” and similar terms mean Rogers Corporation and its consolidated subsidiaries, unless the context indicates otherwise. Principles of Consolidation The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, after elimination of intercompany balances and transactions. The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Organization Our reporting structure is comprised of three operating segments: AES, EMS and Other. Advanced Electronics Solutions Our AES operating segment designs, develops, manufactures and sells circuit materials, ceramic substrate materials, busbars and cooling solutions for applications in EV/HEV, automotive (e.g., ADAS), aerospace and defense (e.g., antenna systems, communication systems and phased array radar systems), renewable energy (e.g., wind and solar), wireless infrastructure (e.g., power amplifiers, antennas and small cells), mass transit, industrial (e.g., variable frequency drives), connected devices (e.g., mobile internet devices and thermal solutions) and wired infrastructure (e.g., computing and internet protocol 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. 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 ® , IsoClad ® Series, MAGTREX ® , IM Series™, 2929 Bondply, SpeedWave ® Prepreg, RO4400™/RO4400T™ Series and Radix™. As of December 31, 2024, our AES operating segment had manufacturing and administrative facilities in Chandler, Arizona; Rogers, Connecticut; Bear, Delaware; Eschenbach, Germany; Suzhou, China; Budapest, Hungary; Evergem, Belgium; and Apodoca, Mexico. Elastomeric Material Solutions Our EMS operating segment designs, develops, manufactures and sells engineered material solutions for a wide variety of applications and markets. These include polyurethane and silicone materials used in cushioning, gasketing and sealing, and vibration management applications for EV/HEV, general industrial, portable electronics, automotive, mass transit, aerospace and defense, footwear and impact mitigation markets; customized silicones used in flex heater and semiconductor thermal applications for EV/HEV, general industrial, portable electronics, automotive, mass transit, aerospace and defense and medical markets; polytetrafluoroethylene and ultra-high molecular weight polyethylene materials used in wire and cable protection, electrical insulation, conduction and shielding, hose and belt protection, vibration management, cushioning, gasketing and sealing, and venting applications for EV/HEV, general industrial, automotive and aerospace and defense markets. 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 OEMs. Trade names for our EMS products include: PORON ® , BISCO ® , DeWAL ® , ARLON ® , eSorba ® , XRD ® , Silicone Engineering and R/bak ® . As of December 31, 2024, our EMS operating segment had manufacturing and administrative facilities in Rogers, Connecticut; Woodstock, Connecticut; Bear, Delaware; Carol Stream, Illinois; Narragansett, Rhode Island; Evergem, Belgium; Blackburn, England; Siheung, South Korea; and Suzhou, China. Other Our Other operating segment consists of elastomer components for applications in the general industrial market, as well as elastomer floats for level sensing in fuel tanks, motors, and storage tanks applications in the general industrial and automotive markets. We sell our elastomer components under our ENDUR ® trade name and our floats under our NITROPHYL ® trade name. Summary of Significant Accounting Policies Cash and Cash Equivalents Highly liquid investments with original maturities of three months or less are considered cash and cash equivalents. These investments are stated at cost, which approximates fair value. 37 Foreign Currency 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 in the “Other income (expense), net” line item in the consolidated statements of operations. Currency transaction gains and losses are recorded as income or expense, respectively, in the “Other income (expense), net” line item in the consolidated statements of operations. For the financial statement impacts, refer to Other Income (Expense), net table in “ Note 14 – Supplemental Financial Information. ” Accounts Receivable Our accounts receivable, net of allowance for credit losses line item in the consolidated statements of financial position include trade receivables, insurance receivables, tax receivables and other miscellaneous receivables. Allowance for Credit Losses The allowance for credit losses is determined based on a variety of factors that affect the potential collectability of the related receivables, including the length of time receivables are past due, customer credit ratings, financial stability of customers, specific one-time events and past customer history. In addition, in circumstances where we are made aware of a specific customer’s inability to meet its financial obligations, a specific allowance is established. The majority of accounts are individually evaluated on a regular basis and appropriate reserves are established as deemed appropriate based on the criteria previously mentioned. The remainder of the reserve is based on our estimates and takes into consideration historical trends, market conditions and the composition of our customer base. Inventories Inventories are stated at the lower of cost or net realizable value with costs determined primarily on a first-in, first-out basis. We record allowances for estimated losses due to excess, obsolete and slow-moving inventory that is determined for groups of products based on purchases in the recent past and/or expected future demand, as well as market conditions, design cycles and other economic factors. Abnormal amounts of idle facility expense and waste are not capitalized in inventory. The allocation of fixed production overheads to the inventory cost is based on the normal capacity of the production facilities. Property, Plant and Equipment Property, plant and equipment are stated on the basis of cost. For financial reporting purposes, provisions for depreciation are calculated on a straight-line basis over the following estimated useful lives of the underlying assets: Property, Plant and Equipment Classification Estimated Useful Lives Buildings and improvements 30 - 40 years Machinery and equipment 5 - 15 years Office equipment 3 - 10 years Software Costs We capitalize certain internal and external costs of computer software developed or obtained for internal use, principally related to software coding, software configuration, designing system interfaces and installation and testing of the software. 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 . Our capitalized software and development costs contained in “Property, plant and equipment, net” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Capitalized software $ 13.8 $ 17.4 Accumulated amortization ( 12.7 ) ( 11.0 ) Software in-process 57.5 55.7 Capitalized software, net $ 58.6 $ 62.1 38 The December 31, 2024 and 2023 balances were almost entirely attributable to our new ERP system still in development, for which useful lives will be determined upon implementation/completion of the project. Additionally, we had a $ 6.0 million net balance as of December 31, 2024 related to our cloud computing arrangements, which was contained in “Other long-term assets” and “Other current assets” line items in the consolidated statements of financial position. Leases We determine whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. We use an incremental borrowing rate representative of our ability to borrow on a collateralized basis over a similar lease term. Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. We have elected the following policy elections on adoption: separating lease and non-lease components, exclusion of short-term leases on the balance sheet and recognition of lease payments for short-term leases in the consolidated statements of operations on a straight-line basis. Goodwill and Other Intangible Assets We have made acquisitions over the years that included the recognition of intangible assets. Intangible assets are classified into three categories: (1) goodwill; (2) other intangible assets with definite lives subject to amortization; and (3) other intangible assets with indefinite lives not subject to amortization. Other intangible assets can include items such as trademarks and trade names, licensed technology, customer relationships and covenants not to compete, among other things. Each definite-lived other intangible asset is amortized over its respective economic useful life using the economic attribution method. Goodwill is 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 goodwill impairment assessment is necessary. If it is determined, based on qualitative factors, the fair value of the reporting unit may be more likely than not less than its carrying amount or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment assessment would be required. We can elect to forgo the qualitative assessment and perform a quantitative assessment. The quantitative assessment compares the fair value of a reporting unit with its carrying amount. The application of the quantitative assessment requires significant judgment, including the 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. When performing the quantitative assessment, we have historically 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. 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. Consistent with historical practice, the annual impairment test on these reporting units was performed as of November 30, 2024. In 2024, we elected to utilize a qualitative assessment. There were no impairment charges resulting from our goodwill impairment assessment for the year ended December 31, 2024. Our RF Solutions, EMS, curamik ® and ECD reporting units had allocated goodwill of $ 51.7 million, $ 241.7 million, $ 62.0 million and $ 2.2 million, respectively, as of December 31, 2024. 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. We can elect to forgo the qualitative assessment and perform a quantitative assessment. The quantitative assessment compares the fair value of the indefinite-lived other intangible asset with its carrying amount. The application of the quantitative assessment requires significant judgment, including determining the fair value of each indefinite-lived other intangible asset. Fair value is primarily based on income approaches using discounted cash flow models, which have significant assumptions. 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 39 for the year ended December 31, 2024. Our curamik ® reporting unit had an indefinite-lived other intangible asset of $ 4.1 million as of December 31, 2024. Definite-lived other intangible assets are tested for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. The recoverability test involves comparing the estimated sum of the undiscounted cash flows for each definite-lived other intangible asset to its respective carrying value. If a definite-lived other intangible asset’s carrying value is greater than the sum of its undiscounted cash flows, then the definite-lived other intangible asset’s carrying value is compared to its estimated fair value and an impairment charge is recognized for the excess and charged to operations. The application of the recoverability test requires significant judgment, including the identification of the asset group and determination of undiscounted cash flows and fair value of the underlying definite-lived other intangible asset. Determination of undiscounted cash flows requires the use of significant estimates and assumptions, including certain financial projections. Fair value is primarily based on income approaches using discounted cash flow models, which have significant assumptions. 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, 2024. Our EMS and curamik ® reporting units had definite-lived other intangible assets of $ 104.0 million and $ 2.2 million, respectively, as of December 31, 2024. The useful life determination for each indefinite-lived other intangible asset is evaluated each reporting period to determine whether events and circumstances support an indefinite useful life. The useful life determination for each definite-lived other intangible asset is evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. Pension and Other Postretirement Benefits We sponsor one material defined benefit pension plan, the Union Plan, which covers certain union employees, and we sponsor multiple fully insured or self-funded medical plans and fully insured life insurance plans for retirees. The Union Plan was frozen in 2013 so that future benefits no longer accrue. The costs and obligations associated with these plans are dependent upon various actuarial assumptions used in calculating such amounts. These assumptions include discount rates, long-term rates of return on plan assets, mortality rates, and other factors. The assumptions used in these models are determined as follows: (i) the discount rate used is based on the PruCurve bond index; (ii) the long-term rate of return on plan assets is determined based on historical portfolio results, market conditions and our expectations of future returns; and (iii) the mortality rate is based on a mortality projection that estimates current longevity rates and their impact on the long-term plan obligations. We determine these assumptions based on consultation with outside actuaries and investment advisors. Any changes in these assumptions could have a significant impact on our assets and liabilities. We review these assumptions periodically throughout the year and update as necessary. We are required, as an employer, to: (a) recognize in the consolidated statements of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and a plan’s obligations that determine our funded status as of the end of the year; and (c) recognize changes in the funded status of a defined benefit plan in the year in which the changes occur and report these changes in accumulated other comprehensive loss. Additionally, actuarial losses (gains) that are not immediately recognized as net periodic pension cost (credit) are recognized as a component of accumulated other comprehensive loss (income) and amortized into net periodic pension cost (credit) in future periods. Investments were stated at fair value as of the dates reported. Securities traded on a national securities exchange were valued at the last reported sales price on the last business day of the plan year. Fixed-income bonds were valued using price evaluations provided by independent pricing services. The fair value of the guaranteed deposit account was determined through discounting expected future investment cash flow from both investment income and repayment of principal for each investment purchased. The estimated fair values of the participation units owned by the plan in pooled separate accounts were based on quoted redemption values and adjusted for management fees and asset charges, as determined by the recordkeeper, on the last business day of the relevant plan year. Pooled separate accounts are accounts established solely for the purpose of investing the assets of one or more plans. Funds in a separate account are not commingled with other Company assets for investment purposes. Environmental and Product Liabilities We accrue for our environmental investigation, remediation, operating and maintenance costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. For environmental matters, the most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each individual site, including existing technology, current laws and regulations and prior remediation experience. For sites with multiple potential responsible parties, we consider our likely proportionate share of the anticipated remediation costs and the ability of the other parties to fulfill their obligations in establishing a provision for those costs. 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 40 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. We review our asbestos-related projections annually in the fourth quarter of each year unless facts and circumstances materially change during the year, at which time we would analyze these projections. We believe the assumptions made on the potential exposure and expected insurance coverage are reasonable at the present time, but are subject to uncertainty based on the actual future outcome of our asbestos litigation. Our estimates of asbestos-related contingent liabilities and asbsestos-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. Furthermore, any predictions with respect to these assumptions are subject to even greater uncertainty as the projection period lengthens. The insurance usage analysis considers, among other things, applicable deductibles, retentions and policy limits, the solvency and historical payment experience of various insurance carriers, the likelihood of recovery as estimated by external legal counsel and existing insurance settlements. We believe the assumptions used in our models for determining our potential exposure and related insurance coverage are reasonable at the present time, but such assumptions are inherently uncertain. Given the inherent uncertainty in making projections, we plan to re-examine periodically the assumptions used in the projections of current and future asbestos claims, and we will update them, if needed, based on our experience, changes in the assumptions underlying our models, and other relevant factors, such as changes in the tort system. Our accrued asbestos liabilities may not approximate our actual asbestos-related indemnity and defense costs, and our accrued insurance recoveries may not be realized. We believe that it is reasonably possible that we may incur additional charges for our asbestos liabilities and defense costs in the future that could exceed existing reserves and insurance recoveries. Fair Value Measurements The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Fair Value of Financial Instruments Management believes that the carrying values of financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the maturities of these instruments. The fair value of our borrowings under our revolving credit facility are determined using discounted cash flows based upon our estimated current interest cost for similar type borrowings or current market value, which falls under Level 2 of the fair value hierarchy. Based on our credit characteristics as of December 31, 2024, borrowings would generally bear interest at SOFR plus 162.5 basis points. As the current borrowings under the Fifth Amended Credit Agreement bear interest at adjusted 1-month SOFR plus 162.5 basis points, we believe the carrying value of our borrowings approximates fair value. Derivative Financial Instruments and Hedging Transactions We are exposed to certain risks related to our ongoing business operations, and, from time to time, we manage these risk exposures by utilizing derivative financial instruments. We do not utilize derivative financial instruments for trading or speculative purposes. The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk and commodity pricing risk (primarily related to copper). To qualify for hedge accounting treatment, derivatives used for hedging purposes must be designated and deemed effective as a hedge of the identified underlying risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract. 41 For those derivative instruments that qualify for hedge accounting treatment, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument are recorded as a component of “Other comprehensive income (loss)” in the consolidated statements of comprehensive income, with the derivative hedging instrument impacts being reclassified to earnings when the hedged item impacts earnings. For those derivative instruments that do not qualify for hedge accounting treatment, any related gains and losses are recognized as a component of “Other income (expense), net” line item in the consolidated statements of operations. For additional information, refer to “Note 3 – Derivatives and Hedging.” Concentration of Credit and Investment Risk We extend credit on an uncollateralized basis to almost all customers. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the large number and general dispersion of accounts that constitute our customer base. We routinely perform credit evaluations on our customers. As of December 31, 2024 and 2023, there were no customers that individually accounted for more than 10% of total accounts receivable. We did no t experience significant credit losses on customers’ accounts in 2024, 2023 or 2022. We are subject to credit and market risk by using derivative instruments. If a counterparty fails to fulfill its performance obligations under a derivative contract, our credit risk will equal the fair value of the derivative instrument. We seek to minimize counterparty credit (or repayment) risk by entering into derivative transactions with major financial institutions with investment grade credit ratings. We invest excess cash principally in investment grade government securities and time deposits. We have established guidelines relative to diversification and maturities in order to maintain safety and liquidity. These guidelines are periodically reviewed and modified to reflect changes in market conditions. Income Taxes We are subject to income taxes in the U.S. and in numerous foreign jurisdictions. We account for income taxes following ASC 740, Income Taxes , recognizing deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of a deferred tax asset will not be realized. We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained by the taxing authorities. If this threshold is not met, no tax benefit of the uncertain position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement. We recognize interest and penalties within the “Income tax expense” line item in the consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line item in the consolidated statements of financial position. Revenue Recognition Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. We recognize revenue when all of the following criteria are met: (1) we have entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. The majority of our shipping terms permit us to recognize revenue at point of shipment. Some shipping terms require the goods to be cleared through customs or be received by the customer before title passes. In those instances, revenue is not recognized until either the customer has received the goods or they have passed through customs, depending on the circumstances. Shipping and handling costs are treated as fulfillment costs. Sales tax or VAT are excluded from the measurement of the transaction price. 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 the Company 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. 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. 42 Earnings Per Share Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Equity Compensation Equity compensation mainly consists of expense related to restricted stock units and deferred stock units. Performance-based restricted stock unit compensation expense is based on achievement of both market and service conditions. The fair value of these awards is determined based on a Monte Carlo simulation valuation model on the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period with no changes for final projected payout of the awards. Time-based restricted stock unit compensation expense is based on the achievement of only service conditions. The fair value of these awards is determined based on the market value of the underlying stock price on the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. Deferred stock units, which are granted to non-management directors, are fully vested on the date of grant and the related shares are generally issued on the 13 -month anniversary of the grant date unless the director elects to defer the receipt of those shares. The fair value of these awards is determined based on the market value of the underlying stock price on the grant date. The compensation related to these grants is expensed immediately on the date of grant. Business Combination Purchase Price Allocation The application of the acquisition method requires the allocation of the purchase price amongst the acquisition date fair values of identifiable assets acquired and liabilities assumed in a business combination. Fair values are determined using the income approach, market approach and/or cost approach depending on the nature of the asset or liability being valued and the reliability of available information. The income approach estimates fair value by discounting associated lifetime expected future cash flows to their present value and relies on significant assumptions regarding future revenues, expenses, working capital levels and discount rates. The market approach estimates fair value by analyzing recent actual market transactions for similar assets or liabilities. The cost approach estimates fair value based on the expected cost to replace or reproduce the asset or liability and relies on assumptions regarding the occurrence and extent of any physical, functional and/or economic obsolescence. Restructuring Activities We record charges associated with restructuring activities, such as employee termination benefits, when management approves and commits to a plan of termination, or over the future service period, if any. Other costs associated with restructuring activities may include contract termination costs, including costs related to leased facilities to be abandoned or subleased, and facility and employee relocation costs. Advertising Costs Advertising costs are expensed as incurred and included in the "Selling, general and administrative expenses” line item of the consolidated statements of operations, amounted to $ 2.8 million, $ 3.5 million, and $ 3.3 million in 2024, 2023 and 2022, respectively. Reclassification Certain reclassifications have been made in the 2023 and 2022 financial statements and notes to conform to the 2024 presentation. 43 Note 2 – Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss by component for each of the fiscal years in the two-year period ended December 31, 2024 were as follows: (Dollars in millions) Foreign Currency Translation Adjustments Pension and Other Postretirement Benefits (1) Total Balance as of December 31, 2022 $ ( 75.6 ) $ ( 9.6 ) $ ( 85.2 ) Other comprehensive income (loss) before reclassifications 18.8 ( 0.4 ) 18.4 Amounts reclassified to earnings — 0.4 0.4 Net other comprehensive income (loss) for period 18.8 — 18.8 Balance as of December 31, 2023 ( 56.8 ) ( 9.6 ) ( 66.4 ) Other comprehensive income (loss) before reclassifications ( 26.9 ) 0.7 ( 26.2 ) Amounts reclassified to earnings ( 3.0 ) 0.3 ( 2.7 ) Net other comprehensive income (loss) for period ( 29.9 ) 1.0 ( 28.9 ) Balance as of December 31, 2024 $ ( 86.7 ) $ ( 8.6 ) $ ( 95.3 ) (1) Net of taxes of $ 1.5 million, $ 1.8 million and $ 1.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. The reclassification of impacts to the consolidated statements of operations for our pension and other postretirement benefits amortization and settlements in 2024 and 2023 were as follows: (Dollars in millions) Financial Statement Line Item 2024 2023 Settlement charges (1) Other income (expense), net $ — $ ( 0.1 ) Amortization of loss (1) Other income (expense), net ( 0.5 ) ( 0.4 ) Income tax (expense) benefit Income tax (expense) benefit 0.2 0.1 Net income Net income $ ( 0.3 ) $ ( 0.4 ) (1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost (credit). For additional details, refer to “Note 8 – Postretirement Benefits.” Note 3 – Derivatives and Hedging Derivatives The valuation of our derivative contracts used to manage their respective risks is described below: • Foreign Currency – The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics. • Commodity – The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models, which are collectively a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate and volatility. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. The time value valuation model incorporates changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date. As of December 31, 2024, we did not have any derivative contracts that qualified for hedge accounting treatment. Derivative instrument gains and losses are recorded as income or expense in the “Other income (expense), net” line item in the consolidated statements of operations. For the financial statement impacts, refer to Other Income (Expense), net table in “ Note 14 – Supplemental Financial Information. ” Foreign Currency In 2024, we entered into U.S. dollar, euro, South Korean won, Hungarian forint and Japanese yen forward contracts. We entered into these foreign currency forward contracts to mitigate certain global transactional exposures. These contracts do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in the “Other income (expense), net” line item in the consolidated statements of operations in the period in which the adjustment occurred. 44 As of December 31, 2024, the notional values of these foreign currency forward contracts were as follows: Notional Values of Foreign Currency Derivatives USD/CNH $ 38,324,088 KRW/USD ₩ 4,412,250,000 JPY/EUR ¥ 500,000,000 HUF/EUR Ft 700,000,000 USD/EUR $ 1,500,000 Commodity As of December 31, 2024, we had 12 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment. These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in the “Other income (expense), net” line item in the consolidated statements of operations in the period in which the adjustment occurred. As of December 31, 2024, the volumes of our copper contracts outstanding were as follows: Volume of Copper Derivatives January 2025 - March 2025 69 metric tons per month April 2025 - June 2025 69 metric tons per month July 2025 - September 2025 69 metric tons per month October 2025 - December 2025 69 metric tons per month Note 4 – Balance Sheet Items Restricted Cash Our restricted cash balance, which was subject to contractual restrictions and not readily available, was recorded in the “Cash and cash equivalents” line item in the consolidated statements of financial position, and served as collateral for letters of credit related to our environmental and workers’ compensation liabilities. This arrangement was terminated in the third quarter of 2024. Our restricted cash balance as of December 31, 2023 was as follows: (Dollars in millions) 2024 2023 Restricted cash $ — $ 2.2 Accounts Receivable The “Accounts receivable, less allowance for credit losses” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Accounts receivable - trade $ 123.6 $ 143.2 Accounts receivable - other 11.7 18.7 Total accounts receivable $ 135.3 $ 161.9 45 Contract Assets 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. Revenue is recognized in advance of billing to the customer in these circumstances as billing is typically performed at the time of shipment to the customer. The unbilled revenue is included in the “Contract assets” line item in the consolidated statements of financial position. We did not have any contract liabilities as of December 31, 2024 or 2023. No impairment losses were recognized in 2024, 2023 or 2022 on any contract assets arising from our contracts with customers. Our contract assets by operating segment as of December 31, 2024 and 2023, were as follows: (Dollars in millions) 2024 2023 Advanced Electronics Solutions $ 18.9 $ 41.4 Elastomeric Material Solutions 0.7 0.4 Other 4.1 3.4 Total contract assets $ 23.7 $ 45.2 Contract assets decreased 46 % to $ 23.7 million as of December 31, 2024, from $ 45.2 million as of December 31, 2023, mainly attributable to the decrease of contract assets in our AES operating segment, which was driven by a decline in the global EV market as well as a decrease of customer orders due to inventory overstocking. Inventories The “Inventories, net” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Raw materials $ 62.7 $ 71.5 Work-in-process 41.7 45.6 Finished goods 37.9 36.4 Total inventories, net $ 142.3 $ 153.5 Accounts Payable The “Accounts payable” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Accounts payable - trade $ 45.6 $ 46.3 Accounts payable - other 2.5 4.0 Total accounts payable $ 48.1 $ 50.3 Long-Lived Assets by Geographic Area Our long-lived assets (1) by geographic area, as of December 31, 2024 and 2023, were as follows: (Dollars in millions) 2024 2023 U.S. $ 375.5 $ 384.1 England 159.6 166.7 Germany 136.4 148.9 China 107.6 83.4 Other 78.0 85.8 Total long-lived assets $ 857.1 $ 868.9 (1) Long-lived assets are based on the location of the asset and are comprised of goodwill, other intangible assets, property, plant and equipment and right-of-use assets. Countries with 10% or more of long-lived assets have been disclosed. 46 Note 5 – Property, Plant and Equipment The “Property, plant and equipment, net” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Land and improvements $ 16.1 $ 16.8 Buildings and improvements 189.3 177.2 Machinery and equipment 367.6 343.0 Office equipment 69.1 70.7 Property plant and equipment, gross 642.1 607.7 Accumulated depreciation ( 390.8 ) ( 385.7 ) Property, plant and equipment, net 251.3 222.0 Construction in process 113.8 144.3 Total property, plant and equipment, net $ 365.1 $ 366.3 The depreciation expense and impairment charges related to property, plant and equipment in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Depreciation expense $ 37.0 $ 37.7 $ 29.5 Impairment charges $ 7.9 $ — $ 47.2 For additional information related to the impairment charges, refer to “ Note 14 – Supplemental Financial Information .” Note 6 – Leases Finance Leases We have finance leases primarily related to manufacturing equipment. Noncash activities involving finance lease right-of-use assets obtained in exchange for lease liabilities was $ 0.1 million, $ 0.1 million and $ 1.7 million for 2024, 2023 and 2022, respectively. Our expenses and payments for finance leases in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Amortization expense of finance lease right-of-use assets $ 0.5 $ 0.6 $ 0.4 Interest expense on finance lease obligations $ ( 0.1 ) $ ( 0.1 ) $ — Payments on finance lease obligations $ 0.4 $ 0.4 $ 0.3 Operating Leases We have operating leases primarily related to manufacturing and R&D facilities, as well as vehicles. Our new leases relate to facility expansion in 2024, 2023 and 2022. Noncash activities involving operating lease right-of-use assets obtained in exchange for lease liabilities was $ 6.0 million, $ 9.6 million and $ 8.6 million for 2024, 2023 and 2022, respectively. Our expenses and payments for operating leases in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Operating leases expense $ 5.3 $ 4.1 $ 2.8 Short-term leases expense $ 0.8 $ 0.7 $ 0.6 Payments on operating lease obligations $ 4.9 $ 4.0 $ 3.1 47 Lease Balances in Statements of Financial Position The assets and liabilities balances related to finance and operating leases reflected in the consolidated statements of financial position, as of December 31, 2024 and 2023, were as follows: (Dollars in millions) Financial Statement Line Item 2024 2023 Finance lease right-of-use assets Property, plant and equipment, net $ 1.1 $ 1.5 Operating lease right-of-use assets Operating lease right-of-use assets $ 24.1 $ 18.9 Finance lease obligations, current portion Other accrued liabilities $ 0.4 $ 0.4 Finance lease obligations, non-current portion Other long-term liabilities $ 0.8 $ 1.1 Total finance lease obligations $ 1.2 $ 1.5 Operating lease obligations, current portion Operating lease obligations, current portion $ 4.0 $ 3.5 Operating lease obligations, non-current portion Operating lease obligations, non-current portion $ 20.6 $ 15.4 Total operating lease obligations $ 24.6 $ 18.9 Net Future Minimum Lease Payments The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of December 31, 2024: Finance Operating (Dollars in millions) Leases Signed Less: Leases Not Yet Commenced Leases in Effect Leases Signed Less: Leases Not Yet Commenced Leases in Effect 2025 $ 1.5 $ ( 1.0 ) $ 0.5 $ 5.3 $ — $ 5.3 2026 1.6 ( 1.2 ) 0.4 4.6 — 4.6 2027 1.4 ( 1.2 ) 0.2 3.9 — 3.9 2028 1.3 ( 1.2 ) 0.1 3.1 — 3.1 2029 1.3 ( 1.2 ) 0.1 3.1 — 3.1 Thereafter 3.6 ( 3.6 ) — 10.7 — 10.7 Total lease payments 10.7 ( 9.4 ) 1.3 30.7 — 30.7 Less: Interest ( 1.6 ) 1.5 ( 0.1 ) ( 6.1 ) — ( 6.1 ) Present Value of Net Future Minimum Lease Payments $ 9.1 $ ( 7.9 ) $ 1.2 $ 24.6 $ — $ 24.6 The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments: 2024 2023 Weighted Average Remaining Lease Term Finance leases 3.4 years 4.0 years Operating leases 7.3 years 7.0 years Weighted Average Discount Rate Finance leases 4.33 % 4.14 % Operating leases 5.63 % 5.35 % 48 Note 7 – Goodwill and Other Intangible Assets Goodwill The changes in the carrying amount of goodwill for the period ended December 31, 2024, by operating segment, were as follows: (Dollars in millions) Advanced Electronics Solutions Elastomeric Material Solutions Other Total December 31, 2023 $ 117.7 $ 239.9 $ 2.2 $ 359.8 Acquisition — 5.0 — 5.0 Foreign currency translation adjustment ( 4.1 ) ( 3.1 ) — ( 7.2 ) December 31, 2024 $ 113.6 $ 241.8 $ 2.2 $ 357.6 Other Intangible Assets The “Other intangible assets, net” line item in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: 2024 2023 (Dollars in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 175.9 $ 96.1 $ 79.8 $ 177.9 $ 90.0 $ 87.9 Technology 75.6 60.6 15.0 77.4 58.1 19.3 Trademarks and trade names 19.1 7.7 11.4 19.4 7.4 12.0 Covenants not to compete — — — 1.3 0.9 0.4 Total definite-lived other intangible assets 270.6 164.4 106.2 276.0 156.4 119.6 Indefinite-lived other intangible asset 4.1 — 4.1 4.3 — 4.3 Total other intangible assets $ 274.7 $ 164.4 $ 110.3 $ 280.3 $ 156.4 $ 123.9 In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations. The amortization expense and impairment charges related to other intangible assets in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Amortization expense $ 12.4 $ 13.4 $ 16.4 Impairment charges $ — $ — $ 17.9 For additional information related to the impairment charges, refer to “ Note 14 – Supplemental Financial Information .” The estimated annual future amortization expense is $ 10.7 million, $ 10.3 million, $ 10.0 million, $ 7.7 million and $ 7.3 million in 2025, 2026, 2027, 2028 and 2029, respectively. These amounts could vary based on changes in foreign currency exchange rates. The weighted average amortization period as of December 31, 2024, by definite-lived other intangible asset class, were as follows: Definite-Lived Other Intangible Asset Class Weighted Average Remaining Amortization Period Customer relationships 7.0 years Technology 3.1 years Trademarks and trade names 9.3 years Total definite-lived other intangible assets 6.7 years 49 Note 8 – Postretirement Benefits Pension Plan As of December 31, 2024, we had one qualified noncontributory defined benefit pension plan: the Union Plan. The measurement date for the plan is December 31 st for each respective plan year. Plan Assets and Plan Benefit Obligations The following table summarizes the change in Union Plan assets and changes in benefit obligations: (Dollars in millions) 2024 2023 Change in plan assets: Fair value of plan assets as of January 1 $ 26.7 $ 26.3 Actual return on plan assets 0.4 1.9 Settlements — ( 0.3 ) Employer contributions — 0.3 Benefit payments ( 1.7 ) ( 1.5 ) Fair value of plan assets as of December 31 $ 25.4 $ 26.7 Change in plan benefit obligations: Fair value of plan benefit obligations as of January 1 $ 21.4 $ 21.3 Interest cost 1.0 1.1 Actuarial (gain) loss ( 1.7 ) 0.8 Settlements — ( 0.3 ) Benefit payments ( 1.7 ) ( 1.5 ) Fair value of plan benefit obligations as of December 31 $ 19.0 $ 21.4 Amount overfunded $ 6.4 $ 5.3 The decrease in our pension plan benefit obligations in 2024 was primarily driven by actuarial gains and benefit payments, partially offset by interest costs. The increase in our pension plan benefit obligations in 2023 was primarily driven by actuarial losses and interest costs, partially offset by benefit payments and settlements. The Union Plan balances reflected in the consolidated statements of financial position, as of December 31, 2024 and 2023, consisted of the following: (Dollars in millions) 2024 2023 Assets & Liabilities: Non-current assets $ 6.4 $ 5.3 Net assets $ 6.4 $ 5.3 Accumulated Other Comprehensive Loss: Net actuarial loss $ ( 10.4 ) $ ( 11.6 ) Accumulated other comprehensive loss $ ( 10.4 ) $ ( 11.6 ) The PBO, ABO, and fair value of plan assets for the Union Plan, which has plan assets in excess of its PBO or ABO as of December 31, 2024 and 2023, were as follows: (Dollars in millions) 2024 2023 Projected benefit obligation $ 19.0 $ 21.5 Accumulated benefit obligation $ 19.0 $ 21.5 Fair value of plan assets $ 25.4 $ 26.7 50 Components of Net Periodic Benefit Cost (Credit) The components of the Union Plan’s net periodic benefit cost (credit) in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Interest cost $ 1.0 $ 1.1 $ 0.7 Expected return of plan assets ( 1.3 ) ( 1.4 ) ( 1.3 ) Amortization of net loss 0.5 0.5 0.4 Settlement — 0.1 — Net periodic benefit cost (credit) $ 0.2 $ 0.3 $ ( 0.2 ) Plan Assumptions The key plan assumptions for the Union Plan utilized in our annual plan measurement as of December 31, 2024 and 2023, were as follows: 2024 2023 Weighted average assumptions used in benefit obligations: Discount rate 5.50 % 4.75 % Weighted average assumptions used in net periodic benefit costs: Discount rate 4.75 % 5.25 % Expected long-term rate of return on assets 5.22 % 5.59 % The Union Plan is invested with the objective of achieving a total rate of return over the long-term that is sufficient to fund future pension obligations. In managing these assets and our investment strategy, we consider future cash contributions to the plan as well as the potential of the portfolio underperforming the market. We set asset allocation target ranges based on current funding status and future projections in order to mitigate the portfolio performance risk while maintaining its funded status. Fixed income securities comprise a substantial percentage of our plan assets portfolio. As of December 31, 2024 and 2023, we held approximately 90 % fixed income and short-term cash securities and 10 % equity securities in our portfolio. In determining our investment strategy and calculating the net benefit cost, we utilized an expected long-term rate of return on plan assets, which was developed based on several factors, including the plans’ asset allocation targets, the historical and projected performance on those asset classes, as well as the plan’s current asset composition. To justify our assumptions, we analyzed certain data points related to portfolio performance. Based on the historical returns and the projected future returns, we determined that a target return of 5.20 % is appropriate for the current portfolio. The following table presents the fair value of the pension plan net assets by asset category and level, within the fair value hierarchy, as of December 31, 2024 and 2023: Fair Value of Plan Assets as of December 31, 2024 (Dollars in millions) Level 1 Level 2 Level 3 Total Fixed income bonds $ — $ 21.6 $ — $ 21.6 Mutual funds 2.8 — — 2.8 Pooled separate accounts — — — — Guaranteed deposit account — — 1.0 1.0 Total plan assets at fair value $ 2.8 $ 21.6 $ 1.0 $ 25.4 Fair Value of Plan Assets as of December 31, 2023 (Dollars in millions) Level 1 Level 2 Level 3 Total Fixed income bonds $ 0.2 $ 22.3 $ — $ 22.5 Mutual funds 3.0 — — 3.0 Pooled separate accounts — 0.1 — 0.1 Guaranteed deposit account — — 1.1 1.1 Total plan assets at fair value $ 3.2 $ 22.4 $ 1.1 $ 26.7 51 Cash Flows We were not required to make any contributions to our qualified noncontributory defined benefit pension plan in 2024 and 2023. We made expected benefit payments for our qualified noncontributory defined benefit pension plan through the utilization of plan assets in 2024 and 2023. The benefit payments are based on the same assumptions used to measure our benefit obligations as of December 31, 2024. The following table sets forth the expected benefit payments to be paid for the Union Plan: (Dollars in millions) Pension Benefits 2025 $ 1.7 2026 $ 1.7 2027 $ 1.7 2028 $ 1.6 2029 $ 1.6 2030-2034 $ 7.3 Employee Savings and Investment Plan We sponsor the RESIP, a 401(k) plan for domestic employees. In 2024, employees could defer an amount they choose, up to the annual IRS limit of $23,000. 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. RESIP related expense amounted to $ 5.1 million, $ 4.6 million and $ 11.8 million in 2024, 2023 and 2022, respectively. The higher expense in 2022 was primarily due to a $ 6.5 million discretionary RESIP contribution related to the previously anticipated merger with DuPont. Deferred Compensation Plan We sponsor a non-qualified deferred compensation plan, which provides specified deferred compensation benefits to a certain group of select employees. The deferred compensation plan is funded through a rabbi trust, which are ultimately invested in accordance with each plan participants’ selections from pre-approved funds. As of December 31, 2024 and 2023, our deferred compensation plan primarily consisted of marketable securities, which includes mutual funds and fixed income funds. Marketable securities are recorded at fair value. The following table summarizes, by major security type, our marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy: Fair Value of Deferred Compensation Plan as of December 31, 2024 (Dollars in millions) Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 1 Securities: Mutual funds $ 4.6 $ 0.5 $ — $ 5.1 Level 2 Securities: Fixed income funds $ 0.2 $ — $ — $ 0.2 Total $ 4.8 $ 0.5 $ — $ 5.3 Fair Value of Deferred Compensation Plan as of December 31, 2023 (Dollars in millions) Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 1 Securities: Mutual funds $ 5.1 $ 0.2 $ ( 0.1 ) $ 5.2 Level 2 Securities: Fixed income funds $ 0.4 $ — $ — $ 0.4 Total $ 5.5 $ 0.2 $ ( 0.1 ) $ 5.6 Note 9 – Debt On March 24, 2023, we entered into the Fifth Amended Credit Agreement which amends and restates the Fourth Amended Credit Agreement, and provides for (1) a revolving credit facility with up to $ 450.0 million of revolving loans, with sub-limits for multicurrency borrowings, letters of credit and swing-line notes, and (2) a $ 225.0 million expansion feature. Borrowings may be used to finance working capital needs, for letters of credit and for general corporate purposes in the ordinary course of 52 business, including the financing of permitted acquisitions (as defined in the Fifth Amended Credit Agreement). The Fifth Amended Credit Agreement extended the maturity, the date on which all amounts borrowed or outstanding under the Fifth Amended Credit Agreement are due, from March 31, 2024 to March 24, 2028. All obligations under the Fifth Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Fifth Amended Credit Agreement (the Guarantors). The obligations are also secured by a Fifth Amended and Restated Pledge and Security Agreement, dated as of March 24, 2023, 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 the non-real estate assets of ours and the Guarantors. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries. Borrowings under the Fifth Amended Credit Agreement bear interest based on one of two options. Alternate base rate loans will bear interest at a rate that includes a base reference rate plus a spread of 62.5 to 100.0 basis points, depending on our leverage ratio. The base reference rate will be the greater of the (1) prime rate, (2) federal funds effective rate plus 50.0 basis points, and (3) one-month Term SOFR plus 110.0 basis points. Loans bearing an interest rate determined by reference to the Adjusted Term SOFR Rate, the Adjusted Euro Interbank Offered Rate, or the Adjusted Tokyo Interbank Offered Rate (each as defined in the Fifth Amended Credit Agreement) will bear interest based on the screen rate plus a spread of 162.5 to 200.0 basis points, depending on our leverage ratio. Based on our leverage ratio as of December 31, 2024, the spread was 162.5 basis points. In addition to interest payable on the principal amount of indebtedness outstanding, we incur an annual fee of 25.0 to 35.0 basis points (based upon our leverage ratio), paid quarterly, of the unused amount of the lenders’ commitments under the Fifth Amended Credit Agreement. The Fifth Amended Credit Agreement contains customary representations and warranties, covenants, mandatory prepayments and events of default under which the Company’s payment obligations may be accelerated. The financial covenants include a requirement to maintain (1) a total net leverage ratio of no more than 3.25 to 1.00, subject to a one-time election to increase the maximum total net leverage ratio to 3.75 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00. We are permitted to net up to $ 50.0 million of unrestricted domestic cash and cash equivalents in the calculation of the total net leverage ratio. The Fifth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $ 20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 and our interest coverage ratio was greater than or equal to 3.00 to 1.00 as of December 31, 2024. Our new borrowings under our revolving credit facility and discretionary principal payments on our revolving credit facility in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 New borrowings $ — $ — $ 100.0 Discretionary principal payments 30.0 185.0 75.0 We had no outstanding borrowings under our revolving credit facility as of December 31, 2024, and $ 30.0 million as of December 31, 2023. We had $ 1.6 million and $ 2.1 million of outstanding line of credit issuance costs as of December 31, 2024 and 2023, respectively, which will be amortized over the life of the Fifth Amended Credit Agreement. Note 10 – Commitments and Contingencies Legal & Environmental We are currently engaged in the following legal and environmental proceedings: Asbestos Products Litigation Overview We, like many other industrial companies, have been named as a defendant in a number of lawsuits filed in courts across the U.S. by persons alleging personal injury from exposure to products containing asbestos. We have never mined, milled, manufactured or marketed asbestos; rather, we made and provided to industrial users a limited number of products that contained encapsulated asbestos, but we stopped manufacturing these products in the late 1980s. Most of the claims filed against us involve numerous defendants, sometimes as many as several hundred. In virtually all of the cases against us, the plaintiffs are seeking unspecified damages above a jurisdictional minimum against multiple defendants who may have manufactured, sold or used asbestos-containing products to which the plaintiffs were allegedly exposed and from which they 53 purportedly suffered injury. Most of these cases are being litigated in Maryland, Illinois, Missouri and New York; however, we are also defending cases in other states. We continue to vigorously defend these cases, primarily on the basis of the plaintiffs’ inability to establish compensable loss as a result of exposure to our products. The indemnity and defense costs of our asbestos-related product liability litigation to date have been substantially covered by insurance. The following table summarizes the change in number of asbestos claims outstanding during 2024, 2023 and 2022: 2024 2023 2022 Claims outstanding as of January 1 506 537 543 New claims filed 150 136 129 Pending claims dismissed ( 107 ) ( 155 ) ( 119 ) Pending claims settled ( 26 ) ( 12 ) ( 16 ) Claims outstanding as of December 31 523 506 537 The total indemnity settlements for asbestos claims in 2024, 2023 and 2022 were as follows: (Dollars in millions) 2024 2023 2022 Settlements $ 11.5 $ 4.5 $ 2.4 Impacts on Financial Statements We recognize a liability for asbestos-related contingencies that are probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos-related matters, we record asbestos-related insurance recoverables that are deemed probable. The liability projection period covers all current and future indemnity and defense costs through 2064, which represents the expected end of our asbestos liability exposure with no further ongoing claims expected beyond that date. This conclusion was based on our history and experience with the claims data, the diminished volatility and consistency of observable claims data, the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants, which is approaching the average life expectancy. To date, the indemnity and defense costs of our asbestos-related product liability litigation have been substantially covered by insurance. Although we have exhausted coverage under some of our insurance policies, we believe that we have applicable primary, excess and/or umbrella coverage for claims arising with respect to most of the years during which we manufactured and marketed asbestos-containing products. In addition, we have entered into a cost sharing agreement with most of our primary, excess and umbrella insurance carriers to facilitate the ongoing administration and payment of claims covered by the carriers. The cost sharing agreement may be terminated by any party, but will continue until a party elects to terminate it. As of the filing date for this report, the agreement has not been terminated, and no carrier had informed us it intended to terminate the agreement. We expect to continue to exhaust individual primary, excess and umbrella coverages over time, and there is no assurance that such exhaustion will not accelerate due to additional claims, damages and settlements or that coverage will be available as expected. The amounts recorded for the asbestos-related liability and the related insurance recoverables 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. The full extent of our financial exposure to asbestos-related litigation remains very difficult to estimate and could include both compensatory and punitive damage awards. The uninsured indemnity and defense costs in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Uninsured indemnity and defense costs $ 1.3 $ 0.4 $ 0.6 The 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 in the "Selling, general and administrative expenses” line item of the consolidated statements of operations. The net impact of the changes in estimated liability and estimated insurance recovery in 2024, 2023 and 2022, were as follows: 54 (Dollars in millions) 2024 2023 2022 Change in estimates of liability and insurance recovery $ 1.4 $ 0.2 $ — Our projected asbestos-related claims and insurance recoverables as of December 31, 2024 and 2023 were as follows: (Dollars in millions) 2024 2023 Asbestos-related liabilities $ 57.5 $ 61.5 Asbestos-related insurance recoverables $ 52.3 $ 56.5 Environmental Voluntary Corrective Action Program Our location in Rogers, Connecticut is part of the Connecticut Voluntary Corrective Action Program. As part of this program, we partnered with the Connecticut Department of Energy and Environmental Protection to determine the corrective actions to be taken at the site related to contamination issues. We evaluated this matter and completed internal due diligence work related to the site in the fourth quarter of 2015. Remediation activities on the site are ongoing and are recorded as reductions to the accrual as they are incurred. We have incurred aggregate remediation costs of $ 2.0 million through December 31, 2024, and the accrual for future remediation efforts is $ 0.7 million. Other Matters In addition to the above issues, the nature and scope of our business brings us in regular contact with the general public and a variety of businesses and government agencies. Such activities inherently subject us to the possibility of litigation, including other production liability and environmental matters, commercial disputes, intellectual property matters, personal injury claims, tax claims and employment matters, which are defended and handled in the ordinary course of business. Although the outcome of no legal matter can be predicted with certainty, it is the opinion of management that facts known at the present time do not indicate that such litigation, either individually or in the aggregate, will have a material adverse effect on our business, results of operations, cash flows or financial position. Note 11 – Earnings Per Share Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. The following table sets forth the computation of basic and diluted earnings per share: (Dollars and shares in millions, except per share amounts) 2024 2023 2022 Numerator: Net income $ 26.1 $ 56.6 $ 116.6 Denominator: Weighted average shares outstanding - basic 18.6 18.6 18.8 Effect of dilutive shares — 0.1 0.2 Weighted average shares outstanding - diluted 18.6 18.7 19.0 Basic earnings per share $ 1.40 $ 3.04 $ 6.21 Diluted earnings per share $ 1.40 $ 3.03 $ 6.15 Dilutive shares are calculated using the treasury stock method and primarily include unvested restricted stock units. Anti-dilutive shares are excluded from the calculation of diluted shares and diluted earnings per share. For 2024, 2023 and 2022, less than 0.1 million shares were excluded each year . Note 12 – Capital Stock and Equity Compensation Capital Stock Our 2019 Long-Term Equity Compensation Plan, which was approved by our shareholders in May 2019, permits the granting of restricted stock units and certain other forms of equity awards to officers and other key employees. Under this plan, we also grant each non-management director deferred stock units, which permit non-management directors to receive, at a later date, one share of Rogers capital stock for each deferred stock unit, with no payment of any consideration by the director at the time the shares were received. 55 Shares of capital stock reserved for possible future issuance as of December 31, 2024 and 2023, were as follows: 2024 2023 Shares reserved for issuance under outstanding restricted stock unit awards 328,957 248,055 Deferred compensation to be paid in stock, including deferred stock units 11,900 8,100 Additional shares reserved for issuance under Rogers Corporation 2019 Long-Term Equity Compensation Plan 486,947 842,046 Shares reserved for issuance under the Rogers Corporation Employee Stock Purchase Plan 43,716 59,611 Total 871,520 1,157,812 Share Repurchases In 2015, we initiated a share repurchase program of up to $ 100.0 million of our capital stock to mitigate the dilutive effects of stock options exercises and vesting of restricted stock units granted by the Company, in addition to enhancing shareholder value. In 2024, the Board of Directors authorized an additional $ 100.0 million to be used for share repurchases. Our share repurchase program has no expiration date and may be suspended or discontinued at any time without notice. There were 0.2 million shares repurchased for a total value of $ 19.8 million in 2024, using cash from operations and cash on hand. There were no shares repurchased in 2023. There were 0.2 million shares repurchased for a total value of $ 25.0 million in 2022, using cash from operations and cash on hand. As of December 31, 2024, $ 104.2 million remained available to purchase under our share repurchase program. (Dollars in millions, except shares and per share amounts) Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs March 1, 2024 to March 31, 2024 1,500 $ 109.92 1,500 $ 23.8 April 1, 2024 to April 30, 2024 70,893 $ 108.79 70,893 $ 116.2 December 1, 2024 to December 31, 2024 116,045 $ 103.58 116,045 $ 104.2 Equity Compensation Equity Compensation Expense The components of equity compensation expense in 2024, 2023 and 2022, were as follows: (Dollars in millions) 2024 2023 2022 Performance-based restricted stock units $ 6.0 $ 3.7 $ 2.3 Time-based restricted stock units 7.3 9.2 8.2 Deferred stock units 1.3 1.3 1.3 Other 0.5 0.1 — Total equity compensation expense $ 15.1 $ 14.3 $ 11.8 As of December 31, 2024, there was total unrecognized compensation cost related to unvested performance-based restricted stock units and unvested time-based restricted stock units of $ 8.7 million and $ 8.5 million, respectively, which are expected to be recognized over a weighted average period of 0.8 years and 0.9 years, respectively. Performance-Based Restricted Stock Units As of December 31, 2024, we had performance-based restricted stock units from 2024 and 2023 outstanding. These awards generally cliff vest at the end of a three-year measurement period. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed during the measurement period. Participants are eligible to be awarded shares ranging from 0 % to 200 % of the original award amount, based on certain defined performance measures. The outstanding awards have one measurement criteria: the three-year total shareholder return on our capital stock as compared to that of a specified group of peer companies. The total shareholder return measurement criteria of the awards is considered a market condition. As such, the fair value of this measurement criteria is determined on the grant date using a Monte Carlo simulation valuation model. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period with no changes for final projected payout of the awards. We account for forfeitures as they occur. 56 Below were the assumptions used in the Monte Carlo calculation for each material award granted in 2024 and 2023: February 19, 2024 February 13, 2024 February 9, 2023 Expected volatility 46.3 % 46.2 % 53.2 % Expected term (in years) 2.9 years 2.9 years 2.9 years Risk-free interest rate 4.35 % 4.35 % 4.08 % Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility. Expected term – We use the vesting period of the award to determine the expected term assumption for the Monte Carlo simulation valuation model. Risk-free interest rate – We use an implied “spot rate” yield on U.S. Treasury Constant Maturity rates as of the grant date for our assumption of the risk-free interest rate. Expected dividend yield – We do not currently pay dividends on our capital stock; therefore, a dividend yield of 0 % was used in the Monte Carlo simulation valuation model. A summary of activity of the outstanding performance-based restricted stock units for 2024, 2023 and 2022 is presented below: 2024 2023 2022 Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards outstanding as of January 1 73,528 $ 247.55 65,513 $ 201.18 114,554 $ 196.23 Awards granted 79,700 152.53 50,551 241.47 26,819 176.33 Stock issued — — ( 8,775 ) 147.58 ( 60,053 ) 179.72 Awards forfeited/cancelled ( 44,122 ) 225.74 ( 33,761 ) 174.43 ( 15,807 ) 204.69 Awards outstanding as of December 31 109,106 $ 186.96 73,528 $ 247.55 65,513 $ 201.18 Time-Based Restricted Stock Units As of December 31, 2024, we had time-based restricted stock unit awards from 2024, 2023 and 2022 outstanding. The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed subsequent to the last grant anniversary date. Each time-based restricted stock unit represents a right to receive one share of Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. We account for forfeitures as they occur. A summary of activity of the outstanding time-based restricted stock units for 2024, 2023 and 2022 is presented below: 2024 2023 2022 Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards outstanding as of January 1 100,999 $ 171.43 124,284 $ 194.60 96,989 $ 157.49 Awards granted 72,971 116.14 67,734 148.85 96,620 219.60 Stock issued ( 38,795 ) 184.97 ( 62,251 ) 173.52 ( 48,253 ) 183.00 Awards forfeited/cancelled ( 24,430 ) 141.73 ( 28,768 ) 213.84 ( 21,072 ) 223.90 Awards outstanding as of December 31 110,745 $ 136.77 100,999 $ 171.43 124,284 $ 194.60 Deferred Stock Units We grant deferred stock units to non-management directors. These awards are fully vested on the date of grant and the related shares are generally issued on the 13 -month anniversary of the grant date unless the individual elects to defer the receipt of those shares. Each deferred stock unit results in the issuance of one share of Rogers’ capital stock. The grant of deferred stock units is typically done annually during the second quarter of each year. The fair value of the award is determined by the market value of the underlying stock price at the grant date. 57 A summary of activity of the outstanding deferred stock units for 2024, 2023 and 2022 is presented below: 2024 2023 2022 Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards Outstanding Weighted- Average Grant Date Fair Value Awards outstanding as of January 1 8,100 $ 161.90 6,850 $ 232.51 9,500 $ 173.82 Awards granted 10,950 119.91 8,100 161.90 4,800 272.12 Stock issued ( 7,150 ) 161.89 ( 6,850 ) 232.51 ( 7,450 ) 183.20 Awards outstanding as of December 31 11,900 $ 123.27 8,100 $ 161.9 6,850 $ 232.51 Note 13 – Operating Segment and Geographic Information Our reporting structure is comprised of the following strategic operating segments: AES and EMS. Our remaining operations, which represent our non-core businesses, are reported in the Other operating segment. We believe this structure aligns our external reporting presentation with how we currently manage and view our business internally. Our CODM is the Chief Executive Officer of Rogers Corporation. The CODM uses gross margin as a reported segment profit or loss measure to evaluate the performance of each business segment, and then leverages this information to decide where to allocate resources and assess how well each segment is performing financially, considering factors like revenue, inventory, and significant expenses specific to that segment. 58 Operating Segment Information The following table presents a disaggregation of revenue from contracts with customers and other pertinent financial information, for the periods indicated; inter-segment sales have been eliminated from the net sales data: (Dollars in millions) Advanced Electronics Solutions Elastomeric Material Solutions Other Total December 31, 2024 Net sales - recognized over time $ 169.4 $ 5.3 $ 16.5 $ 191.2 Net sales - recognized at a point in time $ 282.8 $ 355.6 $ 0.5 $ 638.9 Total net sales $ 452.2 $ 360.9 $ 17.0 $ 830.1 Cost of sales $ 319.6 $ 222.4 $ 11.0 $ 553.0 Gross margin $ 132.6 $ 138.5 $ 6.0 $ 277.1 Inventories, net $ 77.8 $ 62.8 $ 1.7 $ 142.3 Depreciation expense $ 17.5 $ 8.7 $ 0.7 $ 26.9 December 31, 2023 Net sales - recognized over time $ 234.1 $ 19.6 $ 15.8 $ 269.5 Net sales - recognized at a point in time $ 275.6 $ 359.4 $ 3.9 $ 638.9 Total net sales $ 509.7 $ 379.0 $ 19.7 $ 908.4 Cost of sales $ 352.1 $ 237.0 $ 12.2 $ 601.3 Gross margin $ 157.6 $ 142.0 $ 7.5 $ 307.1 Inventories, net $ 86.7 $ 64.6 $ 2.2 $ 153.5 Depreciation expense $ 17.7 $ 8.5 $ 0.7 $ 26.9 December 31, 2022 Net sales - recognized over time $ 227.0 $ 15.9 $ 16.4 $ 259.3 Net sales - recognized at a point in time $ 303.2 $ 404.1 $ 4.6 $ 711.9 Total net sales $ 530.2 $ 420.0 $ 21.0 $ 971.2 Cost of sales $ 358.7 $ 278.4 $ 13.1 $ 650.2 Gross margin $ 171.5 $ 141.6 $ 7.9 $ 321.0 Inventories, net $ 97.3 $ 81.7 $ 3.4 $ 182.4 Depreciation expense $ 16.6 $ 7.8 $ 0.7 $ 25.1 59 Operating Segment Net Sales by Geographic Area The following table presents net sales by our operating segment operations by geographic area for the years indicated: (Dollars in millions) Net Sales (1) Region/Country Advanced Electronics Solutions Elastomeric Material Solutions Other Total December 31, 2024 U.S. $ 80.8 $ 136.5 $ 3.6 $ 220.9 Other Americas 4.2 15.5 0.5 20.2 Total Americas 85.0 152.0 4.1 241.1 China 140.0 99.2 4.8 244.0 Other APAC 90.9 30.1 2.4 123.4 Total APAC 230.9 129.3 7.2 367.4 Germany 74.9 26.7 0.6 102.2 Other EMEA 61.4 52.9 5.1 119.4 Total EMEA 136.3 79.6 5.7 221.6 Total net sales $ 452.2 $ 360.9 $ 17.0 $ 830.1 December 31, 2023 U.S. $ 81.1 $ 155.4 $ 3.9 $ 240.4 Other Americas 3.6 13.7 0.3 17.6 Total Americas 84.7 169.1 4.2 258.0 China 144.6 93.0 4.3 241.9 Other APAC 88.3 31.7 5.6 125.6 Total APAC 232.9 124.7 9.9 367.5 Germany 95.2 28.3 0.5 124.0 Other EMEA 96.9 56.9 5.1 158.9 Total EMEA 192.1 85.2 5.6 282.9 Total net sales $ 509.7 $ 379.0 $ 19.7 $ 908.4 December 31, 2022 U.S. $ 122.7 $ 169.4 $ 4.5 $ 296.6 Other Americas 6.6 15.4 0.3 22.3 Total Americas 129.3 184.8 4.8 318.9 China 154.4 121.7 7.4 283.5 Other APAC 75.2 31.4 2.7 109.3 Total APAC 229.6 153.1 10.1 392.8 Germany 78.7 30.4 1.1 110.2 Other EMEA 92.6 51.7 5.0 149.3 Total EMEA 171.3 82.1 6.1 259.5 Total net sales $ 530.2 $ 420.0 $ 21.0 $ 971.2 (1) Net sales are allocated to countries based on the location of the customer. The table above lists individual countries with 10% or more of net sales for the periods indicated. 60 Note 14 – Supplemental Financial Information Restructuring and Impairment Charges The components of the “ Restructuring and impairment charges ” line item in the consolidated statements of operations were as follows: (Dollars in millions) 2024 2023 2022 Restructuring charges Manufacturing footprint consolidation $ 12.2 $ — $ — R&D facility exit 1.4 — — Global workforce reduction 2.3 8.8 — Facility consolidations 0.3 8.1 0.4 Manufacturing footprint optimization — — 1.1 Total restructuring charges 16.2 16.9 1.5 Impairment charges Fixed assets impairment charges 7.9 — 47.2 Other impairment charges — — 17.9 Total impairment charges 7.9 — 65.1 Total restructuring and impairment charges $ 24.1 $ 16.9 $ 66.6 Restructuring Charges - Manufacturing Footprint Consolidation On June 6, 2024, we announced our intent to consolidate our high frequency circuit material manufacturing operations, impacting our Evergem, Belgium facility. We anticipate the plan to be completed in the second half of 2025. The plan is expected to significantly reduce our manufacturing costs and operating expenses. We estimate this will improve operating income between $ 7.0 million and $ 9.0 million annually. We expect to incur approximately $ 22.0 million to $ 28.0 million in pre-tax restructuring charges related to this plan, the majority of which are expected to be in the form of cash-based expenditures related to employee severance and other termination benefits. Most of the non-cash expenditures will be in the form of accelerated depreciation. The restructuring may be considered by the Belgian authorities to be an exit of a business, which could subject Rogers to an additional charge in 2025 incurred at the time of exit. We incurred $ 12.2 million of restructuring charges related to this plan as of December 31, 2024, of which $ 9.7 million were cash-based expenditures in the form of severance and other termination benefits and $ 2.3 million were non-cash expenditures in the form of accelerated depreciation. Severance and related benefits activity related to the manufacturing footprint consolidation plan is presented in the table below as of December 31, 2024: (Dollars in thousands) Manufacturing Footprint Consolidation Restructuring Severance and Related Benefits Balance as of December 31, 2023 $ — Provisions 9.7 Payments — Foreign currency translation adjustment ( 0.5 ) Balance as of December 31, 2024 $ 9.2 61 Restructuring Charges - R&D Facility Exit On June 13, 2024, we announced that our Burlington, Massachusetts Innovation Center facility would be closed by the end of 2024. We incurred $ 1.4 million in pre-tax restructuring charges as of December 31, 2024, of which $ 0.6 million were cash-based expenditures in the form of severance and other termination benefits and $ 0.7 million were non-cash expenditures in the form of accelerated depreciation. Restructuring Charges - Global Workforce Reduction In November 2024, we announced a plan to reduce our global workforce that was substantially completed in the fourth quarter of 2024. We incurred $ 2.3 million in pre-tax restructuring charges related to this plan, all of which were cash-based expenditures in the form of employee severance and other termination benefits. In February 2023, we announced a plan to reduce our global workforce that was completed in late 2023. The plan significantly reduced our manufacturing costs and operating expenses. We incurred $ 8.8 million in pre-tax restructuring charges related to this plan, all of which were cash-based expenditures in the form of employee severance and other termination benefits. Restructuring Charges - Facility Consolidations In late 2022 and early 2023, we announced our intention to exit certain facilities in the U.S. and Asia. The plan significantly reduced our manufacturing costs and operating expenses. We incurred $ 8.3 million in pre-tax restructuring charges to-date related to these facility consolidations, of which $ 0.3 million was incurred in 2024 while $ 8.1 million was incurred in 2023, the majority of which were non-cash expenditures in the form of accelerated depreciation. As part of our facility consolidations plan, in February 2023, we entered into an asset purchase agreement to sell our high-performance engineered cellular elastomer business in our EMS operating segment for a purchase price of $ 1.8 million. The first phase of the deal, which pertained to the net assets other than the land and building, was completed in late March 2023, while the second phase, which pertained to the sale of the land and building, was completed in early September 2023. Of the $ 1.8 million purchase price, $ 1.0 million and $ 0.8 million were allocated to the first and second phases of the deal, respectively. The first phase of the deal included $ 3.7 million in assets and $ 3.1 million in liabilities. The assets were primarily comprised of accounts receivable, contract assets and inventories, while the liabilities were primarily comprised of accounts payable and other accrued liabilities, along with the previously recognized accrual against the net assets of the business based on the estimated fair value of the business in December 2022. We incurred $ 1.2 million of selling costs in 2023, which were recorded in “Selling, general and administrative expenses” in our consolidated statements of operations. As of December 31, 2024, and as of December 31, 2023, we included $ 13.1 million of assets held for sale within the “Other current assets” financial statement line item of our consolidated statements of financial position, representing the land and building at our Price Road facility in Chandler, Arizona. We expect the sale of this facility to be completed in early 2025. In September 2023, we entered into an agreement to sell one of our Suzhou, China facilities, which had a carrying value of $ 3.0 million, for $ 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. The net impact of this transaction was recorded in the “Other operating (income) expense, net” line item in the consolidated statements of operations. Restructuring Charges - Manufacturing Footprint Optimization During the third quarter of 2020, we commenced manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations, primarily impacting our AES operating segment, in order to achieve greater cost competitiveness as well as align capacity with end market demand. The majority of the restructuring activities were completed in the first half of 2021. We incurred restructuring charges and related expenses of $ 1.1 million in 2022. Impairment Charges We recognized $ 7.9 million and $ 65.1 million of impairment charges in 2024 and 2022, 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 intangible assets and fixed assets related to our high-performance engineered cellular elastomer business in the U.S. 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 charges in 2024 were primarily related to our new ERP system still in development. 62 Allocation of Restructuring and Impairment Charges to Operating Segments The following table summarizes the allocation of restructuring and impairment charges to our operating segments: (Dollars in millions) 2024 2023 2022 Advanced Electronics Solutions Allocated restructuring charges $ 13.8 $ 10.7 $ 1.1 Allocated impairment charges 4.7 — 40.5 Elastomeric Material Solutions Allocated restructuring charges 2.4 6.2 0.4 Allocated impairment charges 3.2 — 24.6 Total restructuring and impairment charges $ 24.1 $ 16.9 $ 66.6 Other Operating (Income) Expense, Net The components of the “Other operating (income) expense, net” line item in the consolidated statements of operations were as follows: (Dollars in millions) 2024 2023 2022 UTIS fire Inventory charges $ — $ — $ 0.2 Professional services — 0.9 1.4 Lease obligations — — 0.4 Compensation & benefits — — 2.4 Other — — ( 0.2 ) Insurance recoveries — ( 31.4 ) ( 6.6 ) Total UTIS fire — ( 30.5 ) ( 2.4 ) Regulatory termination fee, net — — ( 142.1 ) Loss (gain) on sale or disposal of property, plant and equipment 0.1 ( 2.6 ) 0.5 Total other operating (income) expense, net $ 0.1 $ ( 33.1 ) $ ( 144.0 ) In early February 2021, there was a fire at our UTIS manufacturing facility in Ansan, South Korea, which manufactures eSorba® polyurethane foams used in portable electronics and display applications. The site was safely evacuated and there were no reported injuries; however, there was extensive damage to the manufacturing site and some damage to nearby property. Commercial production at a new location in Siheung, South Korea commenced in late-January 2023. In 2023, in connection with the UTIS fire, we recognized insurance recoveries of $ 31.4 million related to our business interruption and property damage insurance claims and incurred $ 0.9 million for various professional services. 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 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.” Other Income (Expense), Net The components of the “Other income (expense), net” line item in the consolidated statements of operations were as follows: (Dollars in millions) 2024 2023 2022 Foreign currency translation impacts $ 1.7 $ ( 1.1 ) $ 1.7 Foreign currency derivative impacts ( 0.2 ) 1.0 ( 0.3 ) Copper derivative impacts ( 0.4 ) ( 0.6 ) ( 0.8 ) Gain on JV Separation Agreement transactions 7.7 — — Other — — 0.5 Total other income (expense), net $ 8.8 $ ( 0.7 ) $ 1.1 63 Interest Expense, Net The components of the “Interest expense, net” line item in the consolidated statements of operations were as follows: (Dollars in millions) 2024 2023 2022 Interest on revolving credit facility $ 0.5 $ 9.6 $ 9.0 Line of credit fees 1.1 0.8 0.5 Debt issuance amortization costs 0.5 0.7 0.7 Interest income ( 1.4 ) ( 1.2 ) ( 0.7 ) Other 0.1 0.2 — Total interest expense, net $ 0.8 $ 10.1 $ 9.5 Note 15 – Income Taxes The “Income before income tax expense” line item in the consolidated statements of operations consisted of: (Dollars in millions) 2024 2023 2022 Domestic $ ( 13.9 ) $ 9.1 $ 58.4 Foreign 48.2 67.2 82.0 Total $ 34.3 $ 76.3 $ 140.4 The “Income tax expense” line item in the consolidated statements of operations consisted of: (Dollars in millions) Current Deferred Total 2024 Domestic $ 2.7 $ ( 6.9 ) $ ( 4.2 ) Foreign 22.8 ( 10.4 ) 12.4 Total $ 25.5 $ ( 17.3 ) $ 8.2 2023 Domestic $ 0.4 $ ( 0.6 ) $ ( 0.2 ) Foreign 22.9 ( 3.0 ) 19.9 Total $ 23.3 $ ( 3.6 ) $ 19.7 2022 Domestic $ 26.8 $ ( 18.8 ) $ 8.0 Foreign 17.6 ( 1.8 ) 15.8 Total $ 44.4 $ ( 20.6 ) $ 23.8 64 Deferred tax assets and liabilities as of December 31, 2024 and 2023, were comprised of the following: (Dollars in millions) 2024 2023 Deferred tax assets Accrued employee benefits and compensation $ 8.7 $ 7.7 Net operating loss carryforwards 16.4 11.8 Tax credit carryforwards 7.0 6.7 Reserves and accruals 8.4 5.7 Operating leases 2.2 3.6 Capitalized research and development 30.4 25.6 Other 14.6 6.9 Total deferred tax assets 87.7 68.0 Less deferred tax asset valuation allowance ( 12.5 ) ( 11.4 ) Total deferred tax assets, net of valuation allowance 75.2 56.6 Deferred tax liabilities Depreciation and amortization 24.8 17.7 Postretirement benefit obligations 1.0 0.7 Unremitted earnings 1.3 1.5 Operating leases 2.6 4.1 Other 2.0 5.8 Total deferred tax liabilities 31.7 29.8 Net deferred tax asset (liability) $ 43.5 $ 26.8 As of December 31, 2024, we had state net operating loss carryforwards totaling $ 13.2 million in various state taxing jurisdictions, which expire between 2025 and 2044, and approximately $ 3.8 million of state research credit carryforwards, which will expire between 2025 and 2041. We also had a $ 1.7 million federal R&D credit carryforward that will expire in 2043. We believe that it is more likely than not that the benefit from certain of the state net operating losses and state R&D credits carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $ 2.1 million relating to these carryforwards. We currently have approximately $ 2.3 million of foreign tax credits that begin to expire in 2028. As of December 31, 2024, we had foreign net operating loss carryforwards totaling $ 60.8 million. Germany losses totaled $ 12.2 million and can be carried forward indefinitely. Luxembourg losses totaled $ 29.3 million, of which $ 4.0 million will expire between 2034 and 2040, and the rest will be carried forward indefinitely. We believe it is more likely than not that these losses will expire unused, and have provided a valuation allowance for all Luxembourg net operating loss carryforwards. China losses totaled $ 14.8 million, which expire between 2025 and 2029. We believe it is more likely than not that some of these losses will expire unused, and have provided a valuation allowance for a portion of China net operating loss carryforwards. South Korea losses totaled $ 4.5 million, which expire between 2036 and 2038. We had a valuation allowance of $ 12.5 million as of December 31, 2024 and $ 11.4 million as of December 31, 2023, against certain deferred tax assets, primarily carryforwards expected to expire unused and deferred tax assets that are capital in nature. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable. 65 Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows: (Dollars in millions) 2024 2023 2022 Tax expense at Federal statutory income tax rate $ 7.2 $ 16.0 $ 29.5 Impact of foreign operations 2.8 4.0 1.5 Foreign source income, net of tax credits ( 2.7 ) ( 2.3 ) ( 6.5 ) State tax, net of federal impact 0.9 ( 0.5 ) 6.9 Deferred tax adjustment — 1.2 — Unrecognized tax benefits ( 1.5 ) ( 0.2 ) 1.9 Equity compensation 1.7 0.3 ( 3.0 ) General business credits ( 1.6 ) ( 2.4 ) ( 0.8 ) Distribution related foreign taxes 1.4 1.1 1.5 Executive compensation limitation 0.9 0.9 2.9 Valuation allowance change ( 0.8 ) 0.7 ( 6.9 ) JV separation non-taxable ( 1.5 ) — — Taxable currency fluctuations 1.0 — — Other 0.4 0.9 ( 3.2 ) Income tax expense $ 8.2 $ 19.7 $ 23.8 Our effective income tax rate for 2024 was 23.9 % compared to 25.8 % for 2023. The 2024 rate decrease 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. We did not make any changes in 2024 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2024 and 2023, we had recorded a deferred tax liability of $ 1.3 million and $ 1.5 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we estimate that, if these undistributed earnings are distributed, they may give rise to an estimated $ 1.9 million of additional tax liabilities. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2024 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate. Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2024 and 2023, were as follows: (Dollars in millions) 2024 2023 2022 Beginning balance as of January 1 $ 8.5 $ 8.9 $ 6.6 Gross increases - current period tax positions 0.2 1.1 3.4 Gross increases - tax positions in prior periods — — 0.2 Gross decreases - tax positions in prior periods — ( 0.5 ) ( 0.2 ) Foreign currency exchange — 0.1 ( 0.1 ) Settlements and remeasurements ( 1.8 ) 0.1 ( 1.0 ) Lapse of statute of limitations ( 0.1 ) ( 1.2 ) — Ending balance as of December 31 $ 6.8 $ 8.5 $ 8.9 Included in the balance of unrecognized tax benefits as of December 31, 2024 were $ 5.2 million of tax benefits that, if recognized, would impact the effective tax rate. 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, 2024 and 2023, we had accrued potential interest and penalties of approximately $ 1.3 million and $ 1.4 million, respectively. 66 We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2020 through 2024 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2020. Note 16 – Mergers and Acquisitions Joint Venture Separation Agreement On October 29, 2024, we entered into a JV Separation Agreement with INOAC with an effective date of November 5, 2024, in which INOAC acquired our 50 % ownership shares of RIC, we acquired INOAC’s 50 % ownership shares of RIS, and we sold the property, plant and equipment constituting RIS Production Line 1 to INOAC. The combined transaction resulted in a net payment to us from INOAC of $ 4.9 million. The definitive agreement terminated all other agreements previously entered into in connection with the RIC and RIS JV relationships. In connection with the combined transactions, we recognized a gain of $ 7.7 million, which was recorded in “Other income (expense), net” line item in our consolidated statements of operations. This was comprised of a $ 2.6 million remeasurement gain on our previously owned 50 % share of RIS, a $ 2.2 million gain on our disposition of our 50 % ownership of RIC, as well as $ 1.4 million and $ 1.6 million reclassifications of historical cumulative translation adjustments for RIC and RIS, respectively, to pre-tax income, from accumulated other comprehensive income (loss). Our 50 % ownership interests in RIS had estimated fair value of $ 5.5 million. The acquisition of INOAC’s shares of RIS has been accounted for in accordance with applicable purchase accounting guidance. We recorded goodwill primarily related to the expected synergies from combining operations, which is not deductible for tax purposes. The valuation methodology used to fair value our previously held equity investment in RIS was the discounted cash flow approach. Key inputs used in valuing RIS included projected future cash flows, a discount rate reflecting the cost of capital and cost of debt, and a terminal growth rate representing the asset's value beyond the explicit forecast period. The valuation methodology used to fair value the property, plant and equipment constituting RIS Production Line 1 was the indirect cost method of the cost approach. Key inputs used in valuing the property, plant and equipment constituting RIS Production Line 1 included the estimated replacement cost and the related physical depreciation, functional obsolescence, and economic obsolescence of the property, plant, and equipment. If the JV Separation Agreement had been executed and effective January 1, 2023, the $ 7.7 million gain on the transactions would have been shifted from the fourth quarter of 2024 to the first quarter of 2023, with no other significant impacts. As of the filing date of this Annual Report on Form 10-K, the purchase accounting and purchase price allocation for the RIS acquisition transaction are considered preliminary as we continue to refine our valuation of certain acquired assets and liabilities assumed. The following table represents the fair values assigned to the acquired assets and liabilities assumed in the transaction: 67 (Dollars in millions) November 5, 2024 Assets Cash and cash equivalents $ 4.5 Accounts receivable 1.1 Property, plant and equipment 3.3 Goodwill 5.0 Other assets 0.1 Total assets 14.0 Liabilities Accounts payable 0.6 Other accrued liabilities 2.0 Deferred income taxes 0.4 Total liabilities 3.0 Fair value of net assets acquired $ 11.0 Terminated Merger Agreement with DuPont On November 1, 2021, we entered into a definitive merger agreement to be acquired by DuPont de Nemours, Inc. in an all-cash transaction. Our shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022. Consummation of the merger was subject to various customary closing conditions, including regulatory approval by the State Administration for Market Regulation of China, and either party had the right to terminate the merger agreement if the merger had not closed on or before November 1, 2022. As of November 1, 2022, the parties had not received regulatory approval from State Administration for Market Regulation of China and on that date, DuPont de Nemours, Inc. issued a notice of termination of the merger agreement. Pursuant to the terms of the merger agreement, we received a regulatory termination fee in the amount of $ 162.5 million, before taxes, and incurred a transaction-related fee of $ 20.4 million. Note 17 - Recent Accounting Standards Recently Adopted Standards Reflected in 2024 Financial Statements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 enhances segment reporting under Topic 280 by expanding the breadth and frequency of segment disclosures. This amendment will improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted ASU 2023-07 in our 2024 10-K using the retrospective approach. Recently Issued Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption of the standard will be applied on a prospective basis and retrospective application to all periods presented is permitted. We will adopt ASU 2023-09 in our 2025 10-K using a prospective transition method. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements and accompanying notes. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require new disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense captions. The ASU is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. Adoption should be applied either prospectively to financial statements issued after the effective date, or retrospectively to any or all prior periods presented in the financial statements. We will adopt ASU 2024-03 in our 2026 10-K using a prospective transition method. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements and accompanying notes. 68 SCHEDULE II (Dollars in millions) Balance at Beginning of Period Charged to (Reduction of) Costs and Expenses Taken Against Allowance Other (Deductions) Recoveries Balance at End of Period Allowance for Credit Losses December 31, 2024 $ 1.1 $ 0.9 $ ( 0.3 ) $ ( 0.2 ) $ 1.5 December 31, 2023 $ 1.0 $ 0.4 $ — $ ( 0.3 ) $ 1.1 December 31, 2022 $ 1.2 $ 0.2 $ ( 0.4 ) $ — $ 1.0 (Dollars in millions) Balance at Beginning of Period Charged to (Reduction of) Costs and Expenses Taken Against Allowance Other (Deductions) Recoveries Balance at End of Period Inventory Reserves December 31, 2024 $ 22.0 $ 18.5 $ ( 14.0 ) $ ( 3.3 ) $ 23.2 December 31, 2023 $ 17.0 $ 14.0 $ ( 5.1 ) $ ( 3.9 ) $ 22.0 December 31, 2022 $ 16.4 $ 8.2 $ ( 4.6 ) $ ( 3.0 ) $ 17.0 (Dollars in millions) Balance at Beginning of Period Charged to (Reduction of) Costs and Expenses Taken Against Allowance Other (Deductions) Recoveries Balance at End of Period Valuation on Allowance for Deferred Tax Assets December 31, 2024 $ 11.4 $ 1.1 $ — $ — $ 12.5 December 31, 2023 $ 2.8 $ 0.7 $ 7.9 $ — $ 11.4 December 31, 2022 $ 9.8 $ 0.4 $ ( 7.3 ) $ — $ 2.8 69 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.