falsedesktopROG2020-09-30000008474820000044{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "TABLE OF CONTENTS\t\t\t\nPart I - Financial Information\t\t\t\n\tItem 1.\tCondensed Consolidated Financial Statements (Unaudited):\t\n\t\tCondensed Consolidated Statements of Operations\t3\n\t\tCondensed Consolidated Statements of Comprehensive Income (Loss)\t4\n\t\tCondensed Consolidated Statements of Financial Position\t5\n\t\tCondensed Consolidated Statements of Cash Flows\t6\n\t\tCondensed Consolidated Statements of Shareholders' Equity\t7\n\t\tNotes to Condensed Consolidated Financial Statements\t8\n\tItem 2.\tManagement's Discussion and Analysis of Results of Operations and Financial Position\t25\n\tItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t39\n\tItem 4.\tControls and Procedures\t39\nPart II - Other Information\t\t\t\n\tItem 1.\tLegal Proceedings\t40\n\tItem 1A.\tRisk Factors\t40\n\tItem 6.\tExhibits\t40\n\t\tSignatures\t41\n", "q10k_tbl_2": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t201944\t221842\t591911\t704492\nCost of sales\t126426\t142975\t380794\t454403\nGross margin\t75518\t78867\t211117\t250089\nSelling general and administrative expenses\t50230\t40448\t132254\t127349\nResearch and development expenses\t7085\t7830\t22185\t23282\nRestructuring and impairment charges\t9413\t580\t9413\t2485\nOther operating (income) expense net\t(4)\t124\t(96)\t1075\nOperating income\t8794\t29885\t47361\t95898\nEquity income in unconsolidated joint ventures\t937\t1498\t3177\t4077\nPension settlement charges\t0\t0\t(55)\t0\nOther income (expense) net\t1446\t(918)\t1294\t(915)\nInterest expense net\t(3553)\t(1747)\t(6539)\t(5723)\nIncome before income tax expense\t7624\t28718\t45238\t93337\nIncome tax expense\t618\t5331\t10453\t17258\nNet income\t7006\t23387\t34785\t76079\nBasic earnings per share\t0.37\t1.26\t1.86\t4.10\nDiluted earnings per share\t0.37\t1.25\t1.86\t4.07\nShares used in computing:\t\t\t\t\nBasic earnings per share\t18688\t18581\t18678\t18569\nDiluted earnings per share\t18713\t18724\t18695\t18715\n", "q10k_tbl_3": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet income\t7006\t23387\t34785\t76079\nForeign currency translation adjustment\t11269\t(10187)\t10004\t(12262)\nPension and other postretirement benefits:\t\t\t\t\nPension settlement benefits net of tax (Note 4)\t0\t0\t(48)\t0\nActuarial net gain incurred net of tax (Note 4)\t3\t0\t629\t0\nAmortization of loss net of tax (Note 4)\t66\t172\t199\t485\nDerivative instrument designated as cash flow hedge:\t\t\t\t\nChange in unrealized loss before reclassifications net of tax (Note 4)\t(638)\t(158)\t(1504)\t(1362)\nUnrealized loss (gain) reclassified into earnings net of tax (Note 4)\t2810\t(32)\t2476\t(188)\nOther comprehensive income (loss)\t13510\t(10205)\t11756\t(13327)\nComprehensive income\t20516\t13182\t46541\t62752\n", "q10k_tbl_4": "\tSeptember 30 2020\tDecember 31 2019\nAssets\t\t\nCurrent assets\t\t\nCash and cash equivalents\t186123\t166849\nAccounts receivable less allowance for doubtful accounts of $1366 and $1691\t138611\t122285\nContract assets\t22061\t22455\nInventories\t109733\t132859\nPrepaid income taxes\t3406\t4524\nAsbestos-related insurance receivables current portion\t4292\t4292\nOther current assets\t10217\t10838\nTotal current assets\t474443\t464102\nProperty plant and equipment net of accumulated depreciation of $370164 and $341119\t266104\t260246\nInvestments in unconsolidated joint ventures\t12755\t16461\nDeferred income taxes\t26907\t17117\nGoodwill\t265781\t262930\nOther intangible assets net of amortization\t132818\t158947\nPension assets\t4337\t12790\nAsbestos-related insurance receivables non-current portion\t74024\t74024\nOther long-term assets\t14871\t6564\nTotal assets\t1272040\t1273181\nLiabilities and Shareholders' Equity\t\t\nCurrent liabilities\t\t\nAccounts payable\t35886\t33019\nAccrued employee benefits and compensation\t35991\t29678\nAccrued income taxes payable\t6235\t10649\nAsbestos-related liabilities current portion\t5007\t5007\nOther accrued liabilities\t23237\t21872\nTotal current liabilities\t106356\t100225\nBorrowings under revolving credit facility\t60000\t123000\nPension and other postretirement benefits liabilities\t1654\t1567\nAsbestos-related liabilities non-current portion\t80540\t80873\nNon-current income tax\t15509\t10423\nDeferred income taxes\t9497\t9220\nOther long-term liabilities\t11460\t13973\nCommitments and contingencies (Note 10 and Note 12)\t\t\nShareholders' equity\t\t\nCapital stock - $1 par value; 50000 authorized shares; 18676 and 18577 shares issued and outstanding\t18676\t18577\nAdditional paid-in capital\t145010\t138526\nRetained earnings\t858487\t823702\nAccumulated other comprehensive loss\t(35149)\t(46905)\nTotal shareholders' equity\t987024\t933900\nTotal liabilities and shareholders' equity\t1272040\t1273181\n", "q10k_tbl_5": "\tNine Months Ended\t\n\tSeptember 30 2020\tSeptember 30 2019\nOperating Activities:\t\t\nNet income\t34785\t76079\nAdjustments to reconcile net income to cash provided by operating activities:\t\t\nDepreciation and amortization\t48562\t37176\nEquity compensation expense\t10317\t9294\nDeferred income taxes\t(9987)\t(5565)\nEquity in undistributed income of unconsolidated joint ventures\t(3177)\t(4077)\nDividends received from unconsolidated joint ventures\t7075\t5375\nPension settlement benefits\t(63)\t0\nPension and other postretirement benefits\t(149)\t(503)\nAsbestos-related charges\t0\t67\nLoss on sale or disposal of property plant and equipment\t49\t278\nImpairment charges\t386\t1537\nProvision (benefit) for doubtful accounts\t(63)\t16\nChanges in assets and liabilities:\t\t\nAccounts receivable\t(14702)\t3668\nContract assets\t394\t(1342)\nInventories\t25008\t(7788)\nPension and postretirement benefit contributions\t(248)\t(16)\nOther current assets\t1876\t641\nAccounts payable and other accrued expenses\t5236\t(2552)\nOther net\t8374\t3384\nNet cash provided by operating activities\t113673\t115672\nInvesting Activities:\t\t\nCapital expenditures\t(28944)\t(38827)\nProceeds from the sale of property plant and equipment net\t0\t9\nReturn of capital from unconsolidated joint ventures\t0\t2625\nNet cash used in investing activities\t(28944)\t(36193)\nFinancing Activities:\t\t\nProceeds from borrowings under revolving credit facility\t150000\t0\nRepayment of debt principal and finance lease obligations\t(213299)\t(98294)\nPayments of taxes related to net share settlement of equity awards\t(5107)\t(7309)\nProceeds from the exercise of stock options net\t0\t344\nProceeds from issuance of shares to employee stock purchase plan\t1373\t1249\nNet cash provided by (used in) financing activities\t(67033)\t(104010)\nEffect of exchange rate fluctuations on cash\t1578\t(2460)\nNet increase (decrease) in cash and cash equivalents\t19274\t(26991)\nCash and cash equivalents at beginning of period\t166849\t167738\nCash and cash equivalents at end of period\t186123\t140747\nSupplemental Disclosures:\t\t\nAccrued capital additions\t1493\t1999\nCash paid during the year for:\t\t\nInterest net of amounts capitalized\t4301\t6449\nIncome taxes\t21645\t16018\n", "q10k_tbl_6": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nCapital Stock\t\t\t\t\nBalance beginning of period\t18668\t18559\t18577\t18395\nShares issued for vested restricted stock units net of shares withheld for taxes\t1\t2\t86\t139\nStock options exercised\t0\t1\t0\t11\nShares issued for employee stock purchase plan\t7\t8\t13\t15\nShares issued to directors\t0\t2\t0\t12\nBalance end of period\t18676\t18572\t18676\t18572\nAdditional Paid-In Capital\t\t\t\t\nBalance beginning of period\t141092\t131836\t138526\t132360\nShares issued for vested restricted stock units net of shares withheld for taxes\t(79)\t113\t(5193)\t(7448)\nStock options exercised\t0\t16\t0\t333\nShares issued for employee stock purchase plan\t702\t647\t1360\t1234\nShares issued to directors\t0\t(2)\t0\t(12)\nEquity compensation expense\t3295\t3151\t10317\t9294\nBalance end of period\t145010\t135761\t145010\t135761\nRetained Earnings\t\t\t\t\nBalance beginning of period\t851481\t829075\t823702\t776403\nNet income\t7006\t23387\t34785\t76079\nCumulative-effect adjustment for lease accounting\t0\t0\t0\t(20)\nBalance end of period\t858487\t852462\t858487\t852462\nAccumulated Other Comprehensive Loss\t\t\t\t\nBalance beginning of period\t(48659)\t(81956)\t(46905)\t(78834)\nOther comprehensive income (loss)\t13510\t(10205)\t11756\t(13327)\nBalance end of period\t(35149)\t(92161)\t(35149)\t(92161)\nTotal Shareholders' Equity\t987024\t914634\t987024\t914634\n", "q10k_tbl_7": "\tAvailable-for-Sale Investment at Fair Value as of September 30 2020\t\t\t\n(Dollars in thousands)\tLevel 1\tLevel 2\tLevel 3\tTotal\nPension surplus investment(1)\t6911\t2416\t0\t9327\n", "q10k_tbl_8": "\tDerivative Instruments at Fair Value as of September 30 2020\t\t\t\n(Dollars in thousands)\tLevel 1\tLevel 2\tLevel 3\tTotal(1)\nForeign currency contracts\t0\t(106)\t0\t(106)\nCopper derivative contracts\t0\t2640\t0\t2640\nInterest rate swap contract\t0\t0\t0\t0\n", "q10k_tbl_9": "\tDerivative Instruments at Fair Value as of December 31 2019\t\t\t\n(Dollars in thousands)\tLevel 1\tLevel 2\tLevel 3\tTotal(1)\nForeign currency contracts\t0\t(6)\t0\t(6)\nCopper derivative contracts\t0\t1147\t0\t1147\nInterest rate swap contract\t0\t(1254)\t0\t(1254)\n", "q10k_tbl_10": "Notional Values of Foreign Currency Derivatives\t\t\nUSD/CNH\t30138505\t\nEUR/USD\t€\t9430781\nKRW/USD\t₩\t11684000000\n", "q10k_tbl_11": "Volume of Copper Derivatives\t\nOctober 2020 - December 2020\t201 metric tons per month\nJanuary 2021 - March 2021\t256 metric tons per month\nApril 2021 - June 2021\t256 metric tons per month\nJuly 2021 - September 2021\t222 metric tons per month\n", "q10k_tbl_12": "\t\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tFinancial Statement Line Item\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nForeign Currency Contracts\t\t\t\t\t\nContracts not designated as hedging instruments\tOther (expense) income net\t(823)\t181\t(1378)\t(406)\nCopper Derivative Contracts\t\t\t\t\t\nContracts not designated as hedging instruments\tOther (expense) income net\t1238\t(543)\t1067\t(1008)\nInterest Rate Swap\t\t\t\t\t\nContract designated as hedging instrument\tOther comprehensive income (loss)\t2771\t(240)\t1254\t(1985)\n", "q10k_tbl_13": "(Dollars and accompanying footnotes in thousands)\tForeign Currency Translation Adjustments\tPension and Other Postretirement Benefits(1)\tDerivative Instrument Designated as Cash Flow Hedge(2)\tTotal\nBalance as of December 31 2019\t(35478)\t(10455)\t(972)\t(46905)\nOther comprehensive income (loss) before reclassifications\t10004\t629\t(1504)\t9129\nAmounts reclassified from accumulated other comprehensive loss\t0\t151\t2476\t2627\nNet current-period other comprehensive income (loss)\t10004\t780\t972\t11756\nBalance as of September 30 2020\t(25474)\t(9675)\t0\t(35149)\nBalance as of December 31 2018\t(30488)\t(48700)\t354\t(78834)\nOther comprehensive loss before reclassifications\t(12262)\t0\t(1362)\t(13624)\nAmounts reclassified from accumulated other comprehensive loss\t0\t485\t(188)\t297\nNet current-period other comprehensive income (loss)\t(12262)\t485\t(1550)\t(13327)\nBalance as of September 30 2019\t(42750)\t(48215)\t(1196)\t(92161)\n", "q10k_tbl_14": "(Dollars in thousands)\tSeptember 30 2020\tDecember 31 2019\nRaw materials\t52105\t61338\nWork-in-process\t26452\t30043\nFinished goods\t31176\t41478\nTotal inventories\t109733\t132859\n", "q10k_tbl_15": "(Dollars in thousands)\tAdvanced Connectivity Solutions\tElastomeric Material Solutions\tPower Electronics Solutions\tOther\tTotal\nDecember 31 2019\t51694\t142030\t66982\t2224\t262930\nForeign currency translation adjustment\t0\t(176)\t3027\t0\t2851\nSeptember 30 2020\t51694\t141854\t70009\t2224\t265781\n", "q10k_tbl_16": "\tSeptember 30 2020\t\t\tDecember 31 2019\t\t\n(Dollars in thousands)\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\nCustomer relationships\t149891\t58935\t90956\t149317\t39018\t110299\nTechnology\t82102\t50776\t31326\t80938\t45190\t35748\nTrademarks and trade names\t11986\t6676\t5310\t11994\t4361\t7633\nCovenants not to compete\t1340\t746\t594\t1340\t505\t835\nTotal definite-lived other intangible assets\t245319\t117133\t128186\t243589\t89074\t154515\nIndefinite-lived other intangible asset\t4632\t0\t4632\t4432\t0\t4432\nTotal other intangible assets\t249951\t117133\t132818\t248021\t89074\t158947\n", "q10k_tbl_17": "(Dollars and shares in thousands except per share amounts)\tThree Months Ended\t\t\t\tNine Months Ended\t\t\nSeptember 30 2020\t\tSeptember 30 2019\t\tSeptember 30 2020\t\tSeptember 30 2019\nNumerator:\t\t\t\t\t\t\t\nNet income\t7006\t\t23387\t\t34785\t\t76079\nDenominator:\t\t\t\t\t\t\t\nWeighted-average shares outstanding - basic\t18688\t\t18581\t\t18678\t\t18569\nEffect of dilutive shares\t25\t\t143\t\t17\t\t146\nWeighted-average shares outstanding - diluted\t18713\t\t18724\t\t18695\t\t18715\nBasic earnings per share\t0.37\t\t1.26\t\t1.86\t\t4.10\nDiluted earnings per share\t0.37\t\t1.25\t\t1.86\t\t4.07\n", "q10k_tbl_18": "\tFebruary 12 2020\tJune 3 2019\tFebruary 7 2019\nExpected volatility\t41.0%\t39.7%\t36.7%\nExpected term (in years)\t2.9\t2.6\t2.9\nRisk-free interest rate\t1.41%\t1.78%\t2.43%\n", "q10k_tbl_19": "\tPerformance-Based Restricted Stock Units\nAwards outstanding as of December 31 2019\t106943\nAwards granted\t87244\nStock issued\t(75486)\nAwards forfeited\t(5866)\nAwards outstanding as of September 30 2020\t112835\n", "q10k_tbl_20": "\tTime-Based Restricted Stock Units\nAwards outstanding as of December 31 2019\t101685\nAwards granted\t58288\nStock issued\t(48901)\nAwards forfeited\t(4962)\nAwards outstanding as of September 30 2020\t106110\n", "q10k_tbl_21": "\tDeferred Stock Units\nAwards outstanding as of December 31 2019\t7150\nAwards granted\t9400\nStock issued\t(5100)\nAwards outstanding as of September 30 2020\t11450\n", "q10k_tbl_22": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nOperating leases expense\t846\t843\t2268\t2336\nShort-term leases expense\t154\t68\t384\t150\nPayments on operating lease obligations\t719\t719\t2187\t2243\n", "q10k_tbl_23": "(Dollars in thousands)\tLocation in Statements of Financial Position\tSeptember 30 2020\tDecember 31 2019\nFinance lease right-of-use assets\tProperty plant and equipment net\t6307\t6280\nOperating lease right-of-use assets\tOther long-term assets\t4039\t4656\nFinance lease obligations current portion\tOther accrued liabilities\t4433\t400\nFinance lease obligations non-current portion\tOther long-term liabilities\t0\t4140\nTotal finance lease obligations\t\t4433\t4540\nOperating lease obligations current portion\tOther accrued liabilities\t2135\t2343\nOperating lease obligations non-current portion\tOther long-term liabilities\t2023\t2334\nTotal operating lease obligations\t\t4158\t4677\n", "q10k_tbl_24": "\tFinance\t\t\tOperating\t\t\n(Dollars in thousands)\tLeases Signed\tLess: Leases Not Yet Commenced\tTotal Leases\tLeases Signed\tLess: Leases Not Yet Commenced\tTotal Leases\n2020\t139\t0\t139\t674\t(2)\t672\n2021\t4584\t(193)\t4391\t2002\t(12)\t1990\n2022\t193\t(193)\t0\t1096\t(17)\t1079\n2023\t186\t(186)\t0\t454\t(15)\t439\n2024\t0\t0\t0\t211\t(5)\t206\nThereafter\t0\t0\t0\t5\t0\t5\nTotal lease payments\t5102\t(572)\t4530\t4442\t(51)\t4391\nLess: Interest\t(124)\t27\t(97)\t(236)\t3\t(233)\nPresent Value of Net Future Minimum Lease Payments\t4978\t(545)\t4433\t4206\t(48)\t4158\n", "q10k_tbl_25": "\tPension Benefits\t\t\t\tOther Postretirement Benefits\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\tSeptember 30\t\tSeptember 30\t\n(Dollars in thousands)\t2020\t2019\t2020\t2019\t2020\t2019\t2020\t2019\nService cost\t0\t0\t0\t0\t17\t12\t51\t48\nInterest cost\t223\t1790\t685\t5359\t10\t14\t30\t44\nExpected return of plan assets\t(394)\t(2187)\t(1180)\t(6571)\t0\t0\t0\t0\nAmortization of prior service credit\t0\t0\t0\t0\t(28)\t(252)\t(84)\t(758)\nAmortization of net loss\t99\t476\t327\t1386\t0\t0\t0\t0\nSettlement benefit\t0\t0\t(63)\t0\t0\t0\t0\t0\nNet periodic benefit (credit) cost\t(72)\t79\t(231)\t174\t(1)\t(226)\t(3)\t(666)\n", "q10k_tbl_26": "\tAsbestos Claims\nClaims outstanding as of January 1 2020\t592\nNew claims filed\t88\nPending claims concluded(1)\t(122)\nClaims outstanding as of September 30 2020\t558\n", "q10k_tbl_27": "(Dollars in thousands)\tSeptember 30 2020\tDecember 31 2019\nAsbestos-related liabilities\t85547\t85880\nAsbestos-related insurance receivables\t78316\t78316\n", "q10k_tbl_28": "(Dollars in thousands)\tAdvanced Connectivity Solutions\tElastomeric Material Solutions\tPower Electronics Solutions\tOther\tTotal\nThree Months Ended September 30 2020\t\t\t\t\t\nNet sales - recognized over time\t219\t2612\t47827\t3568\t54226\nNet sales - recognized at a point in time\t63495\t83832\t100\t291\t147718\nTotal net sales\t63714\t86444\t47927\t3859\t201944\nOperating income (loss)\t4981\t7372\t(4691)\t1132\t8794\nThree Months Ended September 30 2019\t\t\t\t\t\nNet sales - recognized over time\t0\t3429\t42906\t4504\t50839\nNet sales - recognized at a point in time\t78983\t91511\t225\t284\t171003\nTotal net sales\t78983\t94940\t43131\t4788\t221842\nOperating income (loss)\t13778\t17995\t(3358)\t1470\t29885\nNine Months Ended September 30 2020\t\t\t\t\t\nNet sales - recognized over time\t219\t8106\t139288\t10295\t157908\nNet sales - recognized at a point in time\t198988\t233490\t580\t945\t434003\nTotal net sales\t199207\t241596\t139868\t11240\t591911\nOperating income (loss)\t26067\t21884\t(3929)\t3339\t47361\nNine Months Ended September 30 2019\t\t\t\t\t\nNet sales - recognized over time\t0\t9400\t153827\t13421\t176648\nNet sales - recognized at a point in time\t251982\t272196\t780\t2886\t527844\nTotal net sales\t251982\t281596\t154607\t16307\t704492\nOperating income (loss)\t45301\t46752\t(976)\t4821\t95898\n", "q10k_tbl_29": "(Dollars in thousands)\tNet Sales(1)\t\t\t\t\nRegion/Country\tAdvanced Connectivity Solutions\tElastomeric Material Solutions\tPower Electronics Solutions\tOther\tTotal\nThree Months Ended September 30 2020\t\t\t\t\t\nUnited States\t18058\t29733\t5901\t980\t54672\nOther Americas\t497\t2517\t36\t144\t3194\nTotal Americas\t18555\t32250\t5937\t1124\t57866\nChina\t26641\t34016\t11229\t754\t72640\nOther APAC\t11588\t11150\t4633\t530\t27901\nTotal APAC\t38229\t45166\t15862\t1284\t100541\nGermany\t1973\t5450\t12074\t99\t19596\nOther EMEA\t4957\t3578\t14054\t1352\t23941\nTotal EMEA\t6930\t9028\t26128\t1451\t43537\nTotal net sales\t63714\t86444\t47927\t3859\t201944\nThree Months Ended September 30 2019\t\t\t\t\t\nUnited States\t17671\t41232\t8115\t1237\t68255\nOther Americas\t807\t2452\t11\t271\t3541\nTotal Americas\t18478\t43684\t8126\t1508\t71796\nChina\t37398\t26461\t7642\t908\t72409\nOther APAC\t13813\t14385\t6269\t675\t35142\nTotal APAC\t51211\t40846\t13911\t1583\t107551\nGermany\t4251\t3868\t10528\t171\t18818\nOther EMEA\t5043\t6542\t10566\t1526\t23677\nTotal EMEA\t9294\t10410\t21094\t1697\t42495\nTotal net sales\t78983\t94940\t43131\t4788\t221842\n", "q10k_tbl_30": "(Dollars in thousands)\tNet Sales(1)\t\t\t\t\nRegion/Country\tAdvanced Connectivity Solutions\tElastomeric Material Solutions\tPower Electronics Solutions\tOther\tTotal\nNine Months Ended September 30 2020\t\t\t\t\t\nUnited States\t49907\t98373\t19562\t2666\t170508\nOther Americas\t2122\t6634\t222\t503\t9481\nTotal Americas\t52029\t105007\t19784\t3169\t179989\nChina\t86846\t72550\t28657\t2003\t190056\nOther APAC\t35482\t33938\t13857\t1531\t84808\nTotal APAC\t122328\t106488\t42514\t3534\t274864\nGermany\t8354\t13883\t40829\t292\t63358\nOther EMEA\t16496\t16218\t36741\t4245\t73700\nTotal EMEA\t24850\t30101\t77570\t4537\t137058\nTotal net sales\t199207\t241596\t139868\t11240\t591911\nNine Months Ended September 30 2019\t\t\t\t\t\nUnited States\t47014\t126067\t23800\t3606\t200487\nOther Americas\t2598\t6725\t260\t668\t10251\nTotal Americas\t49612\t132792\t24060\t4274\t210738\nChina\t129220\t72726\t29989\t4374\t236309\nOther APAC\t44980\t44407\t18232\t2244\t109863\nTotal APAC\t174200\t117133\t48221\t6618\t346172\nGermany\t12674\t10775\t46780\t447\t70676\nOther EMEA\t15496\t20896\t35546\t4968\t76906\nTotal EMEA\t28170\t31671\t82326\t5415\t147582\nTotal net sales\t251982\t281596\t154607\t16307\t704492\n", "q10k_tbl_31": "(Dollars in thousands)\tSeptember 30 2020\tDecember 31 2019\nAdvanced Connectivity Solutions\t186\t0\nElastomeric Material Solutions\t1090\t1077\nPower Electronics Solutions\t19132\t19471\nOther\t1653\t1907\nTotal contract assets\t22061\t22455\n", "q10k_tbl_32": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nRestructuring charges\t9027\t(1)\t9027\t948\nImpairment charges\t386\t581\t386\t1537\nTotal restructuring and impairment charges\t9413\t580\t9413\t2485\n", "q10k_tbl_33": "(Dollars in thousands)\tManufacturing Footprint Optimization Restructuring Severance\nBalance as of December 31 2019\t0\nProvisions\t8754\nPayments\t(5)\nForeign currency translation adjustment\t(78)\nBalance as of September 30 2020\t8671\n", "q10k_tbl_34": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nLease income\t0\t(57)\t0\t(932)\nDepreciation on leased assets\t0\t179\t0\t1729\nLoss on sale or disposal of property plant and equipment\t(4)\t2\t49\t278\nEconomic incentive grants\t0\t0\t(145)\t0\nTotal other operating (income) expense net\t(4)\t124\t(96)\t1075\n", "q10k_tbl_35": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nInterest on revolving credit facility\t612\t1873\t3079\t6303\nInterest rate swap settlements\t2769\t(40)\t3191\t(241)\nLine of credit fees\t112\t125\t430\t378\nDebt issuance amortization costs\t138\t138\t414\t414\nInterest on finance leases\t35\t29\t100\t92\nInterest income\t(135)\t(398)\t(724)\t(1262)\nOther\t22\t20\t49\t39\nTotal interest expense net\t3553\t1747\t6539\t5723\n", "q10k_tbl_36": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t100.0%\t100.0%\t100.0%\t100.0%\nGross margin\t37.4%\t35.6%\t35.7%\t35.5%\nSelling general and administrative expenses\t24.9%\t18.2%\t22.3%\t18.1%\nResearch and development expenses\t3.5%\t3.5%\t3.7%\t3.3%\nRestructuring and impairment charges\t4.7%\t0.3%\t1.6%\t0.4%\nOther operating (income) expense net\t(0.1)%\t0.1%\t0.1%\t0.1%\nOperating income\t4.4%\t13.5%\t8.0%\t13.6%\nEquity income in unconsolidated joint ventures\t0.5%\t0.7%\t0.5%\t0.6%\nOther income (expense) net\t0.7%\t(0.5)%\t0.2%\t(0.2)%\nInterest expense net\t(1.8)%\t(0.8)%\t(1.1)%\t(0.8)%\nIncome before income tax expense\t3.8%\t12.9%\t7.6%\t13.2%\nIncome tax expense\t0.3%\t2.4%\t1.7%\t2.4%\nNet income\t3.5%\t10.5%\t5.9%\t10.8%\n", "q10k_tbl_37": "Net Sales and Gross Margin\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t201944\t221842\t591911\t704492\nGross margin\t75518\t78867\t211117\t250089\nPercentage of net sales\t37.4%\t35.6%\t35.7%\t35.5%\n", "q10k_tbl_38": "Selling General and Administrative Expenses\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nSelling general and administrative expenses\t50230\t40448\t132254\t127349\nPercentage of net sales\t24.9%\t18.2%\t22.3%\t18.1%\n", "q10k_tbl_39": "Research and Development Expenses\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nResearch and development expenses\t7085\t7830\t22185\t23282\nPercentage of net sales\t3.5%\t3.5%\t3.7%\t3.3%\n", "q10k_tbl_40": "Restructuring and Impairment Charges and Other Operating (Income) Expense Net\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nRestructuring and impairment charges\t9413\t580\t9413\t2485\nOther operating (income) expense net\t(4)\t124\t(96)\t1075\n", "q10k_tbl_41": "Equity Income in Unconsolidated Joint Ventures\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nEquity income in unconsolidated joint ventures\t937\t1498\t3177\t4077\n", "q10k_tbl_42": "Pension Settlement Charges and Other (Expense) Income Net\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nPension settlement charges\t0\t0\t(55)\t0\nOther income (expense) net\t1446\t(918)\t1294\t(915)\n", "q10k_tbl_43": "Interest Expense Net\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nInterest expense net\t(3553)\t(1747)\t(6539)\t(5723)\n", "q10k_tbl_44": "Income Taxes\t\t\t\t\n\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nIncome tax expense\t618\t5331\t10453\t17258\nEffective tax rate\t8.1%\t18.6%\t23.1%\t18.5%\n", "q10k_tbl_45": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t63714\t78983\t199207\t251982\nOperating income\t4981\t13778\t26067\t45301\n", "q10k_tbl_46": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t86444\t94940\t241596\t281596\nOperating income\t7372\t17995\t21884\t46752\n", "q10k_tbl_47": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t47927\t43131\t139868\t154607\nOperating loss\t(4691)\t(3358)\t(3929)\t(976)\n", "q10k_tbl_48": "\tThree Months Ended\t\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\tSeptember 30 2020\tSeptember 30 2019\nNet sales\t3859\t4788\t11240\t16307\nOperating income\t1132\t1470\t3339\t4821\n", "q10k_tbl_49": "(Dollars in thousands)\tSeptember 30 2020\tDecember 31 2019\nUnited States\t43143\t39354\nEurope\t46560\t31166\nAsia\t96420\t96329\nTotal cash and cash equivalents\t186123\t166849\n", "q10k_tbl_50": "(Dollars in thousands)\tSeptember 30 2020\tDecember 31 2019\nKey Financial Position Accounts:\t\t\nCash and cash equivalents\t186123\t166849\nAccounts receivable net\t138611\t122285\nInventories\t109733\t132859\nBorrowings under revolving credit facility\t60000\t123000\n", "q10k_tbl_51": "\tNine Months Ended\t\n(Dollars in thousands)\tSeptember 30 2020\tSeptember 30 2019\nKey Cash Flow Measures:\t\t\nNet cash provided by operating activities\t113673\t115672\nNet cash used in investing activities\t(28944)\t(36193)\nNet cash provided by (used in) financing activities\t(67033)\t(104010)\n", "q10k_tbl_52": "List of Exhibits:\t\n3.1\tRestated Articles of Organization of Rogers Corporation as amended incorporated by reference to Exhibit 3a to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31 2006.\n3.2\tAmended and Restated Bylaws of Rogers Corporation effective February 11 2016 incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on February 26 2016.\n10.1\tFourth Amended and Restated Credit Agreement dated as of October 16 2020 incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on October 16 2020.\n31.1\tCertification of President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.\n31.2\tCertification of Senior Vice President Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.\n32\tCertification of President and Chief Executive Officer (Principal Executive Officer) and Senior Vice President Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.\n99.1\tRogers Corporation Employee Stock Purchase Plan as amended and restated on October 7 2020 (formerly known as the Rogers Corporation Global Stock Ownership Plan for Employees).\n101\tThe following materials from Rogers Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30 2020 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 30 2020 and September 30 2019 (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30 2020 and September 30 2019 (iii) Condensed Consolidated Statements of Financial Position as of September 30 2020 and December 31 2019 (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30 2020 and September 30 2019 (v) Condensed Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30 2020 and September 30 2019 (vi) Notes to Condensed Consolidated Financial Statements and (vii) Cover Page.\n104\tThe cover page from Rogers Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30 2020 formatted in iXBRL and contained in Exhibit 101.\n"}{"bs": "q10k_tbl_4", "is": "q10k_tbl_2", "cf": "q10k_tbl_5"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-4347
_______________________________
ROGERS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
_______________________________
Massachusetts
06-0513860
(State or Other Jurisdiction of
(I. R. S. Employer Identification No.)
Incorporation or Organization)
2225 W. Chandler Blvd., Chandler, Arizona85224-6155
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (480) 917-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock,
par value $1.00 per share
ROG
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No ☒
The number of shares outstanding of the registrant’s capital stock as of October 26, 2020 was 18,675,798.
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Refer to “Forward-Looking Statements” in Item 2, Management’s Discussion and Analysis of Results of Operations and Financial Position for additional information.
2
Part I – Financial Information
Item 1. Financial Statements
ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Net sales
$
201,944
$
221,842
$
591,911
$
704,492
Cost of sales
126,426
142,975
380,794
454,403
Gross margin
75,518
78,867
211,117
250,089
Selling, general and administrative expenses
50,230
40,448
132,254
127,349
Research and development expenses
7,085
7,830
22,185
23,282
Restructuring and impairment charges
9,413
580
9,413
2,485
Other operating (income) expense, net
(4)
124
(96)
1,075
Operating income
8,794
29,885
47,361
95,898
Equity income in unconsolidated joint ventures
937
1,498
3,177
4,077
Pension settlement charges
—
—
(55)
—
Other income (expense), net
1,446
(918)
1,294
(915)
Interest expense, net
(3,553)
(1,747)
(6,539)
(5,723)
Income before income tax expense
7,624
28,718
45,238
93,337
Income tax expense
618
5,331
10,453
17,258
Net income
$
7,006
$
23,387
$
34,785
$
76,079
Basic earnings per share
$
0.37
$
1.26
$
1.86
$
4.10
Diluted earnings per share
$
0.37
$
1.25
$
1.86
$
4.07
Shares used in computing:
Basic earnings per share
18,688
18,581
18,678
18,569
Diluted earnings per share
18,713
18,724
18,695
18,715
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Net income
$
7,006
$
23,387
$
34,785
$
76,079
Foreign currency translation adjustment
11,269
(10,187)
10,004
(12,262)
Pension and other postretirement benefits:
Pension settlement benefits, net of tax (Note 4)
—
—
(48)
—
Actuarial net gain incurred, net of tax (Note 4)
3
—
629
—
Amortization of loss, net of tax (Note 4)
66
172
199
485
Derivative instrument designated as cash flow hedge:
Change in unrealized loss before reclassifications, net of tax (Note 4)
(638)
(158)
(1,504)
(1,362)
Unrealized loss (gain) reclassified into earnings, net of tax (Note 4)
2,810
(32)
2,476
(188)
Other comprehensive income (loss)
13,510
(10,205)
11,756
(13,327)
Comprehensive income
$
20,516
$
13,182
$
46,541
$
62,752
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Dollars and shares in thousands, except par value)
September 30, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$
186,123
$
166,849
Accounts receivable, less allowance for doubtful accounts of $1,366 and $1,691
138,611
122,285
Contract assets
22,061
22,455
Inventories
109,733
132,859
Prepaid income taxes
3,406
4,524
Asbestos-related insurance receivables, current portion
4,292
4,292
Other current assets
10,217
10,838
Total current assets
474,443
464,102
Property, plant and equipment, net of accumulated depreciation of $370,164 and $341,119
Pension and other postretirement benefits liabilities
1,654
1,567
Asbestos-related liabilities, non-current portion
80,540
80,873
Non-current income tax
15,509
10,423
Deferred income taxes
9,497
9,220
Other long-term liabilities
11,460
13,973
Commitments and contingencies (Note 10 and Note 12)
Shareholders’ equity
Capital stock - $1 par value; 50,000 authorized shares; 18,676 and 18,577 shares issued and outstanding
18,676
18,577
Additional paid-in capital
145,010
138,526
Retained earnings
858,487
823,702
Accumulated other comprehensive loss
(35,149)
(46,905)
Total shareholders' equity
987,024
933,900
Total liabilities and shareholders' equity
$
1,272,040
$
1,273,181
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30, 2020
September 30, 2019
Operating Activities:
Net income
$
34,785
$
76,079
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
48,562
37,176
Equity compensation expense
10,317
9,294
Deferred income taxes
(9,987)
(5,565)
Equity in undistributed income of unconsolidated joint ventures
(3,177)
(4,077)
Dividends received from unconsolidated joint ventures
7,075
5,375
Pension settlement benefits
(63)
—
Pension and other postretirement benefits
(149)
(503)
Asbestos-related charges
—
67
Loss on sale or disposal of property, plant and equipment
49
278
Impairment charges
386
1,537
Provision (benefit) for doubtful accounts
(63)
16
Changes in assets and liabilities:
Accounts receivable
(14,702)
3,668
Contract assets
394
(1,342)
Inventories
25,008
(7,788)
Pension and postretirement benefit contributions
(248)
(16)
Other current assets
1,876
641
Accounts payable and other accrued expenses
5,236
(2,552)
Other, net
8,374
3,384
Net cash provided by operating activities
113,673
115,672
Investing Activities:
Capital expenditures
(28,944)
(38,827)
Proceeds from the sale of property, plant and equipment, net
—
9
Return of capital from unconsolidated joint ventures
—
2,625
Net cash used in investing activities
(28,944)
(36,193)
Financing Activities:
Proceeds from borrowings under revolving credit facility
150,000
—
Repayment of debt principal and finance lease obligations
(213,299)
(98,294)
Payments of taxes related to net share settlement of equity awards
(5,107)
(7,309)
Proceeds from the exercise of stock options, net
—
344
Proceeds from issuance of shares to employee stock purchase plan
1,373
1,249
Net cash provided by (used in) financing activities
(67,033)
(104,010)
Effect of exchange rate fluctuations on cash
1,578
(2,460)
Net increase (decrease) in cash and cash equivalents
19,274
(26,991)
Cash and cash equivalents at beginning of period
166,849
167,738
Cash and cash equivalents at end of period
$
186,123
$
140,747
Supplemental Disclosures:
Accrued capital additions
$
1,493
$
1,999
Cash paid during the year for:
Interest, net of amounts capitalized
$
4,301
$
6,449
Income taxes
$
21,645
$
16,018
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars and shares in thousands)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Capital Stock
Balance, beginning of period
$
18,668
$
18,559
$
18,577
$
18,395
Shares issued for vested restricted stock units, net of shares withheld for taxes
1
2
86
139
Stock options exercised
—
1
—
11
Shares issued for employee stock purchase plan
7
8
13
15
Shares issued to directors
—
2
—
12
Balance, end of period
18,676
18,572
18,676
18,572
Additional Paid-In Capital
Balance, beginning of period
141,092
131,836
138,526
132,360
Shares issued for vested restricted stock units, net of shares withheld for taxes
(79)
113
(5,193)
(7,448)
Stock options exercised
—
16
—
333
Shares issued for employee stock purchase plan
702
647
1,360
1,234
Shares issued to directors
—
(2)
—
(12)
Equity compensation expense
3,295
3,151
10,317
9,294
Balance, end of period
145,010
135,761
145,010
135,761
Retained Earnings
Balance, beginning of period
851,481
829,075
823,702
776,403
Net income
7,006
23,387
34,785
76,079
Cumulative-effect adjustment for lease accounting
—
—
—
(20)
Balance, end of period
858,487
852,462
858,487
852,462
Accumulated Other Comprehensive Loss
Balance, beginning of period
(48,659)
(81,956)
(46,905)
(78,834)
Other comprehensive income (loss)
13,510
(10,205)
11,756
(13,327)
Balance, end of period
(35,149)
(92,161)
(35,149)
(92,161)
Total Shareholders’ Equity
$
987,024
$
914,634
$
987,024
$
914,634
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
ROGERS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
As used herein, the terms “Company,” “Rogers,” “we,” “us,” “our” and similar terms mean Rogers Corporation and its consolidated subsidiaries, unless the context indicates otherwise.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for their fair presentation in accordance with GAAP. All significant intercompany balances and transactions have been eliminated.
Interim results are not necessarily indicative of results for a full year. For further information regarding our accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. Refer to the discussion below for our restructuring activities significant accounting policy.
We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of September 30, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for doubtful accounts, equity compensation, the carrying value of our goodwill, other intangible assets as well as other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.
Restructuring Activities
We record charges associated with restructuring activities, such as employee termination benefits, which represent a one-time benefit, 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.
Note 2 – Fair Value Measurements
The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:
•Level 1 – Quoted prices in active markets for identical assets or liabilities.
•Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As a result of our pension termination and settlement efforts in late 2019 and the first half of 2020, we have a pension surplus investment balance, which is now accounted for as an available-for-sale investment as of June 2020. For additional information regarding this balance, refer to “Note 11 – Pension Benefits and Other Postretirement Benefits.” Available-for-sale investments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, were as follows:
Available-for-Sale Investment at Fair Value as of September 30, 2020
(Dollars in thousands)
Level 1
Level 2
Level 3
Total
Pension surplus investment(1)
$
6,911
$
2,416
$
—
$
9,327
(1) This balance was invested in funds comprised of short-term cash and fixed income securities, and was recorded in the “Other long-term assets” line item in the condensed consolidated statements of financial position. As of September 30, 2020, the fair value of this investment approximated its carrying value.
8
From time to time we enter into various instruments that require fair value measurement, including foreign currency contracts, copper derivative contracts and interest rate swaps. Derivative instruments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, were as follows:
Derivative Instruments at Fair Value as of September 30, 2020
(Dollars in thousands)
Level 1
Level 2
Level 3
Total(1)
Foreign currency contracts
$
—
$
(106)
$
—
$
(106)
Copper derivative contracts
$
—
$
2,640
$
—
$
2,640
Interest rate swap contract
$
—
$
—
$
—
$
—
Derivative Instruments at Fair Value as of December 31, 2019
(Dollars in thousands)
Level 1
Level 2
Level 3
Total(1)
Foreign currency contracts
$
—
$
(6)
$
—
$
(6)
Copper derivative contracts
$
—
$
1,147
$
—
$
1,147
Interest rate swap contract
$
—
$
(1,254)
$
—
$
(1,254)
(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the condensed consolidated statements of financial position, except the 2019 interest rate swap balance, which was recorded in the “Other long-term liabilities” line item.
For additional information on derivative contracts, refer to “Note 3 – Hedging Transactions and Derivative Financial Instruments.”
Note 3 – Hedging Transactions and Derivative Financial Instruments
We are exposed to certain risks related to our ongoing business operations. The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk, commodity pricing risk (primarily related to copper) and interest rate risk. We do not use derivative instruments for trading or speculative purposes. The valuation of derivative contracts used to manage each of these risks is described below:
•Foreign Currency – The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics.
•Commodity –The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models, which are collectively a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate and volatility. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. The time value valuation model incorporates changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date.
•Interest Rates – The fair value of interest rate swap instruments is derived by comparing the present value of the interest rate forward curve against the present value of the swap rate, relative to the notional amount of the swap. The net value represents the estimated amount we would receive or pay to terminate the agreements. Settlement amounts for an “in the money” swap would be adjusted down to compensate the counterparties for cost of funds, and the adjustment is directly related to the counterparties’ credit ratings.
The guidance for the accounting and disclosure of derivatives and hedging transactions requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the condensed consolidated statements of financial position. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies for hedge accounting treatment as defined under the applicable accounting guidance. For derivative instruments that are designated and qualify for hedge accounting treatment as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) in the condensed consolidated statements of comprehensive income (loss). This gain or loss is reclassified into earnings in the same line item of the condensed consolidated statements of operations associated with the forecasted transaction and in the same period or
9
periods during which the hedged transaction affects earnings. As of September 30, 2019, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge, and the hedge was highly effective.
Foreign Currency
During the three months ended September 30, 2020, we entered into U.S. dollar, euro, and Korean won forward contracts. We entered into these foreign currency forward contracts to mitigate certain global transactional exposures. These contracts do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other (expense) income, net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.
As of September 30, 2020, the notional values of the remaining foreign currency forward contracts were as follows:
Notional Values of Foreign Currency Derivatives
USD/CNH
$
30,138,505
EUR/USD
€
9,430,781
KRW/USD
₩
11,684,000,000
Commodity
As of September 30, 2020, we had 21 outstanding contracts to hedge exposure related to the purchase of copper in our Power Electronics Solutions (PES) and Advanced Connectivity Solutions (ACS) operating segments. These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other (expense) income, net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.
As of September 30, 2020, the volume of our copper contracts outstanding was as follows:
Volume of Copper Derivatives
October 2020 - December 2020
201 metric tons per month
January 2021 - March 2021
256 metric tons per month
April 2021 - June 2021
256 metric tons per month
July 2021 - September 2021
222 metric tons per month
Interest Rates
In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $75.0 million of our $450.0 million revolving credit facility. This transaction was designated as a cash flow hedge and qualified for hedge accounting treatment. We terminated the interest rate swap on September 30, 2020. As a result, we settled the interest rate swap for $2.4 million on October 2, 2020, representing the fair value of the interest rate swap on the date of termination. Both Rogers and the counterparties released each other from all obligation under the interest rate swap agreement, including the obligation to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to the agreed upon notional principal amount of $75.0 million. As a result of the termination of the interest rate swap, there is an offsetting decrease in the forecasted interest expense, net over the remaining term of the now-terminated interest rate swap, which was set to expire in February 2022. For additional information regarding our revolving credit facility, refer to “Note 9 – Debt.”
10
Effects on Financial Statements
The impacts from our derivative instruments on the statement of operations and statements of comprehensive income (loss) were as follows:
Three Months Ended
Nine Months Ended
(Dollars in thousands)
Financial Statement Line Item
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Foreign Currency Contracts
Contracts not designated as hedging instruments
Other (expense) income, net
$
(823)
$
181
$
(1,378)
$
(406)
Copper Derivative Contracts
Contracts not designated as hedging instruments
Other (expense) income, net
$
1,238
$
(543)
$
1,067
$
(1,008)
Interest Rate Swap
Contract designated as hedging instrument
Other comprehensive income (loss)
$
2,771
$
(240)
$
1,254
$
(1,985)
Note 4 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component were as follows:
(Dollars and accompanying footnotes in thousands)
Foreign Currency Translation Adjustments
Pension and Other Postretirement Benefits(1)
Derivative Instrument Designated as Cash Flow Hedge(2)
Total
Balance as of December 31, 2019
$
(35,478)
$
(10,455)
$
(972)
$
(46,905)
Other comprehensive income (loss) before reclassifications
10,004
629
(1,504)
9,129
Amounts reclassified from accumulated other comprehensive loss
—
151
2,476
2,627
Net current-period other comprehensive income (loss)