ROGERS CORP 10-Q

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Position As used herein, the “Company,” “Rogers,” “we,” “us,” “our” and similar terms include Rogers Corporation and its subsidiaries, unless the context indicates otherwise. Forward-Looking Statements This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such statements are generally accompanied by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “seek,” “target” or similar expressions that convey uncertainty as to future events or outcomes. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and the differences between assumed facts and actual results could be material depending upon the circumstances. Where we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and based on assumptions believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur or be achieved or accomplished. Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation: • failure to capitalize on, volatility within, or other adverse changes with respect to our growth drivers, such as delays in adoption or implementation of new technologies; • failure to successfully execute on our long-term growth strategy; • uncertain business, economic and political conditions in the U.S. and abroad, particularly in China, South Korea, Belgium, Germany, England, and Hungary where we maintain significant manufacturing, sales or administrative operations; • the trade policy dynamics between the U.S. and other countries where the Company does business, in particular China, as reflected in tariff impositions and associated countermeasures, as well as the potential for U.S.-China supply chain decoupling; • fluctuations in foreign currency exchange rates; • our ability to develop innovative products and the extent to which they are incorporated into end-user products and systems; • the extent to which end-user products and systems incorporating our products achieve commercial success; • the ability and willingness of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely and cost-effective manner; • business interruptions due to catastrophes or other similar events, such as natural disasters, war, terrorism or public health crises; • the impact of sanctions, export controls and other foreign asset or investment restriction; • failure to realize, or delays in the realization of, anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses; • our ability to attract and retain management and skilled technical personnel; • our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights; • changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate; • failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants; • the outcome of ongoing and future litigation, including our asbestos-related product liability litigation; • changes in environmental laws and regulations applicable to our business; and • disruptions in, or breaches of, our information technology systems. Our forward-looking statements are expressly qualified by these cautionary statements, which you should consider carefully, along with the risks discussed in this section and elsewhere in this report in addition to the section entitled “Risk Factors” in our 27 Annual Report on Form 10-K for the year ended December 31, 2024 (the Annual Report) and our other reports filed with the SEC, any of which could cause actual results to differ materially from historical results or anticipated results. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes that appear elsewhere in this Form 10-Q along with our audited consolidated financial statements and the related notes thereto in our Annual Report. Company Overview and Strategy We design, develop, manufacture and sell high-performance and high-reliability engineered materials and components to meet our customers’ challenges. We operate two strategic operating segments: AES and EMS. Our remaining operations, which represent non-core businesses, are reported in our Other operating segment. We are headquartered in Chandler, Arizona. Our growth and profitability strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence. Our priorities in executing this strategy are focused on driving near-term improvements to profitability and improving the growth outlook for the Company over the next several years by further strengthening our focus on our portfolio and commercial activities, optimizing our global capacity to meet customer demand and driving innovation. As a market-driven organization, we are focused on capitalizing on growth opportunities in multiple end markets. This includes the automotive industry, where there are market opportunities resulting from the continuing trends in vehicle electrification, and ADAS adoption. Other opportunities are driven by the advancement of communication systems in aerospace and defense, the growth of next-generation smartphones in the portable electronics industry, and the continued expansion of renewable energy. In addition to our focus on these markets, we sell into a variety of other markets, including general industrial, wireless infrastructure and mass transit. Our growth strategy is based on addressing trends in these markets and applying our repeatable customer engagement process. Our sales engineers and technical service employees work closely with our customers to understand their complex challenges. They then leverage our innovation and technology capabilities and deep applications expertise to provide unique solutions to customers’ challenges. In addition to these capabilities, our strategy for success is also built on our reputation for high performance and reliability, trusted customer relationships and an expansive product portfolio. Through this strategy we expect to be able to drive further commercial wins, which provide the potential for future growth. This growth strategy includes both organic and inorganic investments from which we strive to ensure high-quality solutions for our customers. Our operational excellence efforts are focused on driving ongoing cost structure improvements to further enhance our profitability. These efforts include focusing on improving yields, throughput, procurement capabilities, and manufacturing processes. We have also taken specific cost improvement actions in recent quarters that have and will benefit our performance. These actions include optimizing our manufacturing footprint,and reducing manufacturing and corporate employees. We continue to review and re-align our manufacturing and engineering footprint in an effort to maintain a leading competitive position globally and to support our customers’ growth initiatives. We seek to enhance our operational and financial performance by investing in research and development, manufacturing and materials efficiencies, and new product initiatives that respond to the needs of our customers. We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business. If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to increase revenues from current levels and further improve profitability. The increase in revenues is expected to come from a combination of organic growth and targeted acquisitions. This outlook is supported by our participation in a number of growth markets and by our competitive positions in these markets. The markets where we see growth opportunities include EV/HEV, ADAS, aerospace and defense, portable electronics, renewable energy, and industrial. Executive Summary The following synopsis and factors should be considered when reviewing our results of operations, financial position and liquidity: • In the second quarter of 2025 as compared to the second quarter of 2024, our net sales decreased approximately 5.3% to $202.8 million, our gross margin decreased approximately 250 basis points to 31.6% from 34.1%, and we had an operating loss of 33.3% compared to an operating margin of 5.3%. • We recognized impairment charges of $71.8 million in the second quarter of 2025 related to our curamik ® reporting unit within our AES operating segment. 28 • We recognized restructuring charges of $4.3 million in the second quarter of 2025 due to our wind down of manufacturing operations for our AES operating segment in our Evergem, Belgium facility and the reduction of our global workforce. • We repurchased 0.4 million shares of our capital stock for $28.1 million in the second quarter of 2025. Results of Operations The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales: Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Gross margin 31.6 % 34.1 % 30.8 % 33.0 % Selling, general and administrative expenses 23.9 % 23.7 % 23.7 % 22.9 % Research and development expenses 3.5 % 4.4 % 3.6 % 4.3 % Restructuring and impairment charges 37.5 % 0.7 % 20.8 % 0.4 % Other operating (income) expense, net — % — % (0.1) % — % Operating income (loss) (33.3) % 5.3 % (17.2) % 5.4 % Equity income in unconsolidated joint ventures — % 0.2 % — % 0.2 % Other income (expense), net (1.1) % 0.2 % (1.0) % 0.1 % Interest income (expense), net 0.2 % (0.1) % 0.2 % (0.2) % Income (loss) before income taxes (34.2) % 5.6 % (18.0) % 5.5 % Income tax (benefit) expense 2.1 % 1.8 % 1.1 % 1.8 % Net income (loss) (36.3) % 3.8 % (19.1) % 3.7 % Net Sales and Gross Margin Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net sales $ 202.8 $ 214.2 $ 393.3 $ 427.6 Gross margin $ 64.0 $ 73.1 $ 121.0 $ 141.3 Percentage of net sales 31.6 % 34.1 % 30.8 % 33.0 % Net sales decreased by 5.3% in the second quarter of 2025 compared to the second quarter of 2024. Our AES and EMS operating segments each had net sales decreases of 5.6%. The decrease in net sales was primarily due to lower net sales in the EV/HEV and wireless infrastructure markets, partially offset by higher net sales in the industrial, aerospace and defense and ADAS markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to changing regional demands. We experienced lower wireless infrastructure net sales as a program for a key customer was launched and completed in 2024. Net sales decreased by 8.0% in the first six months of 2025 compared to the first six months of 2024. Our AES and EMS operating segments had net sales decreases of 10.3% and 4.7%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV and wireless infrastructure markets, partially offset by higher net sales in the ADAS and aerospace and defense markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to changing regional demands. We experienced lower wireless infrastructure net sales as a program for a key customer was launched and completed in 2024. Gross margin as a percentage of net sales decreased approximately 250 basis points to 31.6% in the second quarter of 2025 compared to 34.1% in the second quarter of 2024. Gross margin in the second quarter of 2025 declined due to the utilization headwinds caused by lower volumes and unfavorable mix. Gross margin as a percentage of net sales decreased approximately 220 basis points to 30.8% in the first six months of 2025 compared to 33.0% in the first six months of 2024. Gross margin in the first six months of 2025 declined due to utilization headwinds caused by lower volumes and unfavorable mix. 29 Selling, General and Administrative Expenses Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Selling, general and administrative expenses $ 48.5 $ 50.9 $ 93.0 $ 98.4 Percentage of net sales 23.9 % 23.7 % 23.7 % 22.9 % SG&A expenses decreased 4.7% in the second quarter of 2025 from the second quarter of 2024, primarily due to a $2.7 million decrease in compensation and benefits expense and a $1.9 million decrease in professional services expenses, partially offset by a $1.8 million increase in fixed asset depreciation and software cost amortization expense. SG&A expenses decreased 5.5% in the first six months of 2025 compared to the first six months of 2024, primarily due to a $6.1 million decrease in compensation and benefits expense and a $2.9 million decrease in professional services expenses, partially offset by a $2.8 million increase in fixed asset depreciation and software cost amortization expense. Research and Development Expenses Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Research and development expenses $ 7.0 $ 9.5 $ 14.1 $ 18.4 Percentage of net sales 3.5 % 4.4 % 3.6 % 4.3 % R&D expenses decreased 26.3% in the second quarter of 2025 from the second quarter of 2024 due to a $1.2 million decrease in R&D trials and a $1.0 million decrease in compensation and benefits expense. R&D expenses decreased 23.4% in the first six months of 2025 compared to the first six months of 2024, primarily due to a $1.8 million decrease in compensation and benefits expense and a $1.7 million decrease in R&D trials. The decrease in compensation and benefits expense was largely driven by the cost savings from our exit from our Burlington, Massachusetts Innovation Center facility. Restructuring and Impairment Charges Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Restructuring and impairment charges $ 76.1 $ 1.4 $ 82.0 $ 1.5 Other operating (income) expense, net $ (0.1) $ — $ (0.3) $ — We incurred impairment charges of $71.8 million in the three and six months ended June 30, 2025, related to our curamik ® reporting unit within our AES operating segment. For additional information, refer to “Note 6 – Goodwill and Other Intangible Assets” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q. We incurred restructuring charges of $4.3 million and $10.2 million in the three and six months ended June 30, 2025, respectively, due to our wind down of manufacturing operations for our AES operating segment in our Evergem, Belgium facility and our global reduction in workforce. We incurred restructuring charges of $1.4 million and $1.5 million in the three and six months ended June 30, 2024, respectively, primarily related to our exit from our Burlington, Massachusetts Innovation Center facility and our wind down of manufacturing operations for our AES operating segment in our Evergem, Belgium facility. For additional information, refer to “Note 13 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q. Equity Income in Unconsolidated Joint Ventures Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Equity income in unconsolidated joint ventures $ — $ 0.5 $ — $ 0.8 Prior to November 5, 2024, we had two unconsolidated JVs, each 50% owned: RIC and RIS, at which point, our JV relationships were discontinued resulting in the year-over-year decrease in equity income in those unconsolidated JVs. For additional information, refer to “ Note 15 - Mergers and Acquisitions” to the condensed consolidated financial statements in Part I, Item I of this Form 10-Q. 30 Other Income (Expense), Net Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Other income (expense), net $ (2.2) $ 0.3 $ (3.8) $ 0.7 Other income (expense), net decreased to expense of $2.2 million in the second quarter of 2025 from income of $0.3 million in the second quarter of 2024. The decrease was due to $2.3 million of unfavorable year-over-year changes in impacts from our foreign currency transactions. Other income (expense), net decreased to expense of $3.8 million in the first six months of 2025 from income of $0.7 million in the first six months of 2024. The decrease was due to $4.1 million of unfavorable year-over-year changes in impacts from our foreign currency transactions. Interest Income (Expense), Net Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Interest income (expense), net $ 0.4 $ (0.2) $ 0.7 $ (1.0) Interest income (expense), net, was $0.4 million of income in the second quarter of 2025 compared to $0.2 million of expense in the second quarter of 2024. The year-over-year change was due to higher income on interest-bearing cash accounts. Interest income (expense), net, was $0.7 million of income in the first six months of 2025 compared to $1.0 million of expense in the first six months of 2024. The year-over-year change was due to a lower weighted-average outstanding balance for our borrowings under our revolving credit facility and higher income on interest-bearing cash accounts. Income Taxes Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Income tax (benefit) expense $ 4.3 $ 3.8 $ 4.1 $ 7.6 Effective tax rate (6.2) % 31.9 % (5.8) % 32.3 % The below discussion of the effective tax rate for the periods presented in the condensed consolidated statements of operations is in comparison to the 21% U.S. statutory federal income tax rate. We had a negative tax rate of 6.2% in the second quarter of 2025 due to tax expense on a pre-tax book loss. Our income tax expense for the second quarter of 2025 of $4.3 million was comprised primarily of an increase in the valuation allowance attributable to loss jurisdictions in which no tax benefit is anticipated to be realized. Our effective tax rate was also unfavorably impacted by the $67.3 million goodwill impairment in curamik ® for which no tax benefit is available. During the second quarter of 2024, our effective tax rate was 31.9%. During the second quarter of 2024, our effective tax rate was unfavorably impacted primarily by the mix of income in higher tax jurisdictions. We had a negative tax rate of 5.8% for the six months ended June 30, 2025 due to tax expense on a pre-tax book loss. Our income tax expense for the six months ended June 30, 2025 of $4.1 million was comprised primarily of an increase in the valuation allowance attributable to loss jurisdictions in which no tax benefit is anticipated to be realized. Our effective tax rate was also unfavorably impacted by the $67.3 million goodwill impairment in curamik ® for which no tax benefit is available. For the first six months of 2024, the Company’s effective tax rate on its income before income taxes was 32.3%. The effective rate for the first six months of 2024 was unfavorably impacted by primarily (i) the write-off of deferred tax assets related to stock compensation and, (ii) the mix of income in higher tax rate jurisdictions. 31 Operating Segment Net Sales and Gross Margin Advanced Electronics Solutions Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net sales $ 109.0 $ 115.5 $ 213.2 $ 237.6 Gross margin $ 30.9 $ 36.0 $ 60.0 $ 70.7 Percentage of net sales 28.3 % 31.2 % 28.1 % 29.8 % AES net sales decreased by 5.6% in the second quarter of 2025 compared to the second quarter of 2024. The decrease in net sales over the second quarter of 2024 was primarily driven by lower net sales in the wireless infrastructure and EV/HEV markets, partially offset by higher net sales in the aerospace and defense and ADAS markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to changing regional demands. We experienced lower wireless infrastructure net sales as a program for a key customer was launched and completed in 2024. AES net sales decreased by 10.3% in the first six months of 2025 compared to the first six months of 2024. The decrease in net sales over the first six months of 2024 was primarily driven by lower net sales in the wireless infrastructure and EV/HEV markets, partially offset by higher net sales in the ADAS and aerospace and defense markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to changing regional demands. We experienced lower wireless infrastructure net sales as a program for a key customer was launched and completed in 2024. Our AES operating segment gross margin in the second quarter of 2025 declined primarily due to utilization headwinds caused by significantly lower volumes and non-routine charges for various inventory reserves. As a percentage of net sales, gross margin in the second quarter of 2025 was 28.3% as compared to 31.2% in the second quarter of 2024. Our AES operating segment gross margin in the first six months of 2025 declined primarily due to utilization headwinds caused by significantly lower volumes and unfavorable mix. As a percentage of net sales, gross margin in the first six months of 2025 was 28.1% as compared to 29.8% in the first six months of 2024. Elastomeric Material Solutions Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net sales $ 89.4 $ 94.7 $ 172.0 $ 180.4 Gross margin $ 31.5 $ 35.7 $ 58.2 $ 67.0 Percentage of net sales 35.2 % 37.7 % 33.8 % 37.1 % EMS net sales decreased by 5.6% in the second quarter of 2025 compared to the second quarter of 2024. The decrease in net sales over the second quarter of 2024 was primarily driven by lower net sales in the EV/HEV market, partially offset by higher net sales in general industrial market. EMS net sales decreased by 4.7% in the first six months of 2025 compared to the first six months of 2024. The decrease in net sales over the first six months of 2024 was primarily driven by lower net sales in the EV/HEV and aerospace and defense markets, partially offset by higher net sales in the general industrial market. Our EMS operating segment gross margin in the second quarter of 2025 declined due to unfavorable mix and utilization headwinds caused by lower volumes. As a percentage of net sales, gross margin in the second quarter of 2025 was 35.2% as compared to 37.7% in the second quarter of 2024. Our EMS operating segment gross margin in the first six months of 2025 declined due to unfavorable mix and utilization headwinds caused by lower volumes. As a percentage of net sales, gross margin in the first six months of 2025 was 33.8% as compared to 37.1% in the first six months of 2024. Other Three Months Ended Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net sales $ 4.4 $ 4.0 $ 8.1 $ 9.6 Gross margin $ 1.6 $ 1.4 $ 2.8 $ 3.6 Percentage of net sales 36.4 % 35.0 % 34.6 % 37.5 % 32 Net sales in this segment increased by 10.0% in the second quarter of 2025 from the second quarter of 2024. Our Other operating segment gross margin in the second quarter of 2025 increased due to higher volumes. As a percentage of net sales, gross margin in the second quarter of 2025 was 36.4%, an approximately 140 basis point increase as compared to 35.0% in the second quarter of 2024. Net sales in this segment decreased by 15.6% in the first six months of 2025 from the first six months of 2024. Our Other operating segment gross margin in the six months of 2025 declined due to lower volumes. As a percentage of net sales, gross margin in the six months of 2025 was 34.6%, an approximately 290 basis point decrease as compared to 37.5% in the second quarter of 2024. Liquidity, Capital Resources and Financial Position We believe that our existing sources of liquidity and cash flows that we expect to generate from our operations, together with our available credit facilities, will be sufficient to fund our operations, currently planned capital expenditures and R&D efforts, for at least the next 12 months. We regularly review and evaluate the adequacy of our cash flows, borrowing facilities and banking relationships in an effort to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives. The following table illustrates the location of our cash and cash equivalents by our three major geographic areas: (Dollars in millions) June 30, 2025 December 31, 2024 U.S. $ 69.7 $ 84.7 Europe 38.5 37.4 Asia 49.0 37.7 Total cash and cash equivalents $ 157.2 $ 159.8 Approximately $87.5 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of June 30, 2025. We did not make any changes in the six months ended June 30, 2025 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested. (Dollars in millions) June 30, 2025 December 31, 2024 Key Financial Position Accounts: Cash and cash equivalents $ 157.2 $ 159.8 Accounts receivable, net $ 141.6 $ 135.3 Inventories, net $ 151.2 $ 142.3 Changes in key financial position accounts and other significant changes in our statements of financial position from December 31, 2024 to June 30, 2025 were as follows: • Cash and cash equivalents were $157.2 million as compared to $159.8 million as of December 31, 2024, a decrease of $2.6 million, or 1.6%. This decrease was primarily due to $28.1 million of share repurchases, $17.7 million in capital expenditures, and $1.4 million in tax payments related to net share settlement of equity awards, partially offset by $13.4 million of proceeds from the sale of our Price Road facility and our cash flows provided by operations. • Accounts receivable, net increased 4.7% to $141.6 million as of June 30, 2025 from $135.3 million as of December 31, 2024. The increase from year-end was primarily due to higher net sales at the end of the second quarter of 2025 compared to at the end of 2024. • Inventories, net increased 6.3% to $151.2 million as of June 30, 2025, from $142.3 million as of December 31, 2024, primarily driven by higher levels of raw material and work-in-process inventory, mostly offset by a lower level of finished goods inventory. Six Months Ended (Dollars in millions) June 30, 2025 June 30, 2024 Key Cash Flow Measures: Net cash provided by operating activities $ 25.4 $ 51.0 Net cash used in investing activities $ (3.4) $ (23.5) Net cash used in financing activities $ (29.6) $ (38.4) 33 In 2025, we expect capital spending to be in the range of approximately $30.0 million to $40.0 million. We plan to fund our capital spending in 2025 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary. Restrictions on Payment of Dividends 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 as of June 30, 2025. Contingencies During the second quarter of 2025, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to “Note 9 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies. Critical Accounting Policies Goodwill and Indefinite-Lived Other Intangible Assets Goodwill and 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 goodwill impairment assessment is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than its carrying value 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 value. 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. In recent years, management's annual goodwill impairment assessments have been qualitative assessments for all reporting units. During the second quarter of 2025, changing market competition and supply dynamics impacted our curamik ® reporting unit, which resulted in reduced demand forecasts for short and mid-term net sales and gross margin for the reporting unit, creating a triggering event that required an interim quantitative impairment assessment. The interim quantitative assessment resulted in the recognition of non-cash impairment charges to our curamik ® reporting unit’s goodwill and indefinite-lived other intangible asset of $67.3 million and $4.5 million, respectively, which represent full impairments of each. 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 for which a quantitative assessment is performed. The quantitative goodwill and indefinite-lived other intangible asset impairment assessment performed over the curamik ® reporting unit consisted of a fair value calculation which combined an income approach and a market approach, weighted at 50% each, which was then compared with the reporting unit’s carrying value. The income approach uses the discounted cash flow method, which is based on the present value of future cash flows through a multi-year discounted cash flow analysis. The market approach uses the guideline public company method, which is based on market data using comparable publicly traded company multiples of EBITDA for a group of benchmark companies.From a market participant perspective, considerable weight would be placed on the income approach value because it relies directly on our reporting unit’s forecasted operating results and market-derived rates of return. Similarly, considerable weight would be placed on the market approach because it reflects current market pricing and earnings. Therefore, equal weight was given to the income approach and market approach, since both methods are reasonable methods to use for valuing our reporting units and neither method is more reliable than the other for these circumstances. Determination of 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, future market conditions, and market multiples, among others. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time at which such impairments are recognized. We assessed the assumptions used in the quantitative impairment assessment to be reasonable and consistent with assumptions that would have been used by other market participants. For additional information, refer to “Note 6 – Goodwill and Other Intangible Assets.” 34 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in our exposure to market risk during the second quarter of 2025. For discussion of our exposure to market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk ” contained in our Annual Report.