Company Quick10K Filing
Quick10K
Rogers
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$126.91 18 $2,330
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-07 Officers, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-09-17 Officers, Exhibits
8-K 2018-08-29 Regulation FD, Exhibits
8-K 2018-07-31 Earnings, Regulation FD, Exhibits
8-K 2018-07-09 Regulation FD, Exhibits
8-K 2018-05-18 Officers
8-K 2018-05-03 Shareholder Vote
8-K 2018-04-26 Earnings, Regulation FD, Exhibits
8-K 2018-03-16 Officers, Regulation FD, Exhibits
8-K 2018-02-27 Earnings, Regulation FD, Exhibits
ALB Albemarle
NEU Newmarket
POL Polyone
REGI Renewable Energy Group
TROX Tronox
CDXS Codexis
RYAM Rayonier Advanced Materials
LXFR Luxfer Holdings
NL NL Industries
TANH Tantech Holdings
ROG 2018-09-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Fair Value Measurements
Note 3 - Hedging Transactions and Derivative Financial Instruments
Note 4 - Inventories
Note 5 - Acquisitions
Note 6 - Accumulated Other Comprehensive Loss
Note 7 - Earnings per Share
Note 8 - Equity Compensation
Note 9 - Pension Benefits and Other Postretirement Benefit Plans
Note 10 - Segment Information
Note 11 - Joint Ventures
Note 12 - Debt
Note 13 - Goodwill and Other Intangible Assets
Note 14 - Commitments and Contingencies
Note 15 - Share Repurchases
Note 16 - Income Taxes
Note 17 - Restructuring and Impairment Charges
Note 18 - Assets Held for Sale
Note 19 - Revenue From Contracts with Customers
Note 20 - Supplemental Financial Information
Note 21 - Recent Accounting Standards
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 ex101mludwigemploymentagre.htm
EX-31.1 rog-20180930x10qex311.htm
EX-31.2 rog-20180930x10qex312.htm
EX-32 rog-20180930x10qex32.htm

Rogers Earnings 2018-09-30

ROG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 rog-20180930x10q.htm 10-Q Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
_______________________________
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
or
o
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, Arizona
85224-6155
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (480) 917-6000
_______________________________
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 ý No o

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 ý No o
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 ý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
 
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý
The number of shares outstanding of the registrant’s capital stock as of October 26, 2018 was 18,389,455.






ROGERS CORPORATION
FORM 10-Q

September 30, 2018

TABLE OF CONTENTS
Part I – Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II – Other Information
 
 
 
 
 
Forward-Looking Statements
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. See “Forward-Looking Statements” in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations 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, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net sales
$
226,863

 
$
206,783

 
$
656,149

 
$
612,035

Cost of sales
147,733

 
124,595

 
423,741

 
368,951

Gross margin
79,130

 
82,188

 
232,408

 
243,084

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
39,943

 
39,010

 
123,080

 
113,590

Research and development expenses
7,630

 
7,411

 
24,514

 
21,512

Restructuring and impairment charges
1,052

 
962

 
2,015

 
2,767

Other operating (income) expense, net
863

 
(4,387
)
 
(3,111
)
 
(5,329
)
Operating income
29,642

 
39,192

 
85,910

 
110,544

 
 
 
 
 
 
 
 
Equity income in unconsolidated joint ventures
1,642

 
1,384

 
4,453

 
3,359

Other income (expense), net
(680
)
 
1,991

 
(647
)
 
3,370

Interest expense, net
(2,000
)
 
(1,639
)
 
(4,503
)
 
(4,834
)
Income before income tax expense
28,604


40,928

 
85,213

 
112,439

Income tax expense
8,870

 
15,396

 
22,014

 
38,979

Net income
$
19,734

 
$
25,532

 
$
63,199

 
$
73,460

 
 
 
 
 
 
 
 
Basic earnings per share
$
1.07

 
$
1.40

 
$
3.44

 
$
4.05

Diluted earnings per share
$
1.06

 
$
1.37

 
$
3.39

 
$
3.97

 
 
 
 
 
 
 
 
Shares used in computing:
 

 
 

 
 
 
 
Basic earnings per share
18,403

 
18,181

 
18,360

 
18,126

Diluted earnings per share
18,678

 
18,588

 
18,649

 
18,503


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, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net income
$
19,734

 
$
25,532

 
$
63,199

 
$
73,460

 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(1,608
)
 
6,407

 
(9,901
)
 
23,136

Derivative instruments designated as cash flow hedges:
 
 
 
 
 
 
 
Unrealized gain (loss) on derivative instruments held at period end, net of tax (Note 6)
211

 
(51
)
 
1,308

 
(487
)
Unrealized loss reclassified into earnings (Note 6)

 
115

 

 
222

Accumulated other comprehensive loss pension and post-retirement benefits:
 
 
 
 
 
 
 
Actuarial net gain (loss) incurred in fiscal year, net of tax (Note 6)

 
(300
)
 

 
35

Pension and postretirement benefit plans reclassified into earnings:
 
 
 
 
 
 
 
Amortization of loss, net of tax (Note 6)
44

 

 
131

 
36

Other comprehensive income (loss)
(1,353
)
 
6,171

 
(8,462
)
 
22,942

 
 
 
 
 
 
 
 
Comprehensive income
$
18,381

 
$
31,703

 
$
54,737

 
$
96,402


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)

 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
149,556

 
$
181,159

Accounts receivable, less allowance for doubtful accounts of $1,143 and $1,525
155,706

 
140,562

Contract assets
20,260

 

Inventories
125,885

 
112,557

Prepaid income taxes
2,820

 
3,087

Current portion of asbestos-related insurance receivables
5,682

 
5,682

Assets held for sale

 
896

Other current assets
12,416

 
10,580

Total current assets
472,325

 
454,523

Property, plant and equipment, net of accumulated depreciation of $308,126 and $289,909
241,504

 
179,611

Investments in unconsolidated joint ventures
17,812

 
18,324

Deferred income taxes
4,478

 
6,008

Goodwill
266,304

 
237,107

Other intangible assets, net of amortization
181,618

 
160,278

Asbestos-related insurance receivables
63,511

 
63,511

Other long-term assets
21,873

 
5,772

Total assets
$
1,269,425

 
$
1,125,134

Liabilities and Shareholders’ Equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
39,999

 
$
36,116

Accrued employee benefits and compensation
27,598

 
39,394

Accrued income taxes payable
9,189

 
6,408

Current portion of capital lease obligations
436

 
579

Current portion of asbestos-related liabilities
5,682

 
5,682

Other accrued liabilities
24,686

 
25,629

Total current liabilities
107,590

 
113,808

Borrowings under revolving credit facility
233,482

 
130,982

Non-current portion of capital lease obligations
4,786

 
5,873

Pension liability
268

 
8,720

Retiree health care and life insurance benefits
1,685

 
1,685

Asbestos-related liabilities
69,560

 
70,500

Non-current income tax
10,707

 
12,823

Deferred income taxes
10,936

 
10,706

Other long-term liabilities
4,028

 
3,464

Commitments and contingencies (Note 14)


 


Shareholders’ equity
 

 
 

Capital Stock - $1 par value; 50,000 authorized shares; 18,390 and 18,255 shares issued and outstanding
18,390

 
18,255

Additional paid-in capital
129,659

 
128,933

Retained earnings
751,951

 
684,540

Accumulated other comprehensive loss
(73,617
)
 
(65,155
)
Total shareholders' equity
826,383

 
766,573

Total liabilities and shareholders' equity
$
1,269,425

 
$
1,125,134


The accompanying notes are an integral part of the condensed consolidated financial statements.
5

ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars and shares in thousands)

 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
Operating Activities:
 
 
 
Net income
$
63,199

 
$
73,460

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 

Depreciation and amortization
35,320

 
32,679

Equity compensation expense
8,536

 
8,508

Deferred income taxes
(17
)
 
10,452

Equity in undistributed income of unconsolidated joint ventures
(4,453
)
 
(3,359
)
Dividends received from unconsolidated joint ventures
4,431

 
616

Pension and postretirement benefits
(1,193
)
 
(1,177
)
Realized (gain) loss from sale of property, plant and equipment
(161
)
 
(5,329
)
Impairment of assets/investments
477

 
341

(Benefit) provision for doubtful accounts
(264
)
 
(553
)
Proceeds from insurance related to operations

 
932

Changes in operating assets and liabilities, excluding effects of acquisitions:
 

 
 

Accounts receivable
(14,012
)
 
(12,772
)
Contract assets
(20,260
)
 

Inventories
(11,840
)
 
(16,573
)
Pension and postretirement benefit contributions
(25,347
)
 
(372
)
Other current assets
146

 
(1,283
)
Accounts payable and other accrued expenses
(4,354
)
 
13,325

Other, net
3,216

 
956

Net cash provided by operating activities
33,424

 
99,851

 
 
 
 
Investing Activities:
 

 
 

Acquisition of business, net of cash received
(78,571
)
 
(60,191
)
Capital expenditures
(36,557
)
 
(17,678
)
Isola asset acquisition
(43,434
)
 

Proceeds from insurance claims

 
1,040

Proceeds from the sale of property, plant and equipment, net
1,027

 
8,130

Net cash used in investing activities
(157,535
)
 
(68,699
)
 
 
 
 
Financing Activities:
 

 
 

Proceeds from long-term borrowings
102,500

 

Line of credit issuance costs

 
(1,169
)
Repayment of debt principal and capital lease obligations
(1,046
)
 
(110,285
)
Repurchases of capital stock
(2,999
)
 

Proceeds from the exercise of stock options, net
734

 
1,926

Payments of taxes related to net share settlement of equity awards
(6,492
)
 
(5,145
)
Proceeds from issuance of shares to employee stock purchase plan
1,082

 
895

Net cash provided by (used in) financing activities
93,779

 
(113,778
)
 
 
 
 
Effect of exchange rate fluctuations on cash
(1,271
)
 
5,852

 
 
 
 
Net decrease in cash and cash equivalents
(31,603
)
 
(76,774
)
Cash and cash equivalents at beginning of period
181,159

 
227,767

Cash and cash equivalents at end of period
$
149,556

 
$
150,993

 
 
 
 
Supplemental Disclosures:
 
 
 
  Cash paid during the year for:
 
 
 
  Interest, net of amounts capitalized
$
4,662

 
$
4,539

  Income taxes
$
23,357

 
$
23,989


The accompanying notes are an integral part of the condensed consolidated financial statements.
6

ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands)




 
 
Capital Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total Shareholders’ Equity
Balance at December 31, 2017
 
$
18,255

 
$
128,933

 
$
684,540

 
$
(65,155
)
 
$
766,573

Net income
 

 

 
63,199

 

 
63,199

Other comprehensive income (loss)
 

 

 

 
(8,462
)
 
(8,462
)
Stock options exercised
 
19

 
715

 

 

 
734

Stock issued to directors
 
12

 
(12
)
 

 

 

Shares issued for employee stock purchase plan
 
12

 
1,070

 

 

 
1,082

Shares issued for vested restricted stock units, net of cancellations for tax withholding
 
115

 
(6,607
)
 

 

 
(6,492
)
Shares repurchased
 
(23
)
 
(2,976
)
 

 

 
(2,999
)
Cumulative-effect adjustment of revenue recognition ASC 606
 

 

 
4,212

 

 
4,212

Equity compensation expense
 

 
8,536

 

 

 
8,536

Balance at September 30, 2018
 
$
18,390

 
$
129,659

 
$
751,951

 
$
(73,617
)
 
$
826,383



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 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 of America (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 transactions have been eliminated.
On January 1, 2018, the Company adopted ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost. Upon adoption, the Company reclassified $0.4 million and $1.2 million in net periodic pension benefits from Selling, general and administrative expenses (SG&A) to “Other income (expense), net” for the three and nine months ended September 30, 2017, respectively. See Note 21, “Recent Accounting Standards” for further information.
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 fiscal year ended December 31, 2017.
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.
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, consist of:
 
Derivative Instruments at Fair Value as of September 30, 2018
(Dollars in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Foreign currency contracts
$

 
$
342

 
$

 
$
342

Copper derivative contracts
$

 
$
631

 
$

 
$
631

Interest rate swap
$

 
$
1,710

 
$

 
$
1,710

 
Derivative Instruments at Fair Value as of December 31, 2017
(Dollars in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Foreign currency contracts
$

 
$
(396
)
 
$

 
$
(396
)
Copper derivative contracts
$

 
$
2,016

 
$

 
$
2,016

Interest rate swap
$

 
$
41

 
$

 
$
41


8



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 and commodity pricing risk (primarily related to copper). During 2017, we entered into an interest rate swap to hedge interest rate risk. We do not use derivative financial 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. 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 the constant 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. Overall, fair value is a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate, and volatility.
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 counterparty 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 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). 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 periods during which the hedged transaction affects earnings. As of September 30, 2018 and 2017, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge. For the nine months ended September 30, 2018 and 2017, the hedge was highly effective.
Foreign Currency
During the three months ended September 30, 2018, we entered into Korean Won, Japanese Yen, Euro, Hungarian Forint and Chinese Renminbi 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 income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurs.
As of September 30, 2018 the notional values of these foreign currency forward contracts were:
Notional Values of Foreign Currency Derivatives
KRW/USD
 
2,650,560,000

JPY/EUR
 
¥
465,000,000

EUR/USD
 
12,413,251

EUR/HUF
 
1,582,984

USD/CNY
 
$
10,637,837

Commodity
We currently have 23 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. These contracts provide some coverage over the forecasted 2018 and 2019 monthly copper exposure and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurs. The notional values of our copper contracts outstanding as of September 30, 2018 were:

9



Volume of Copper Derivatives
October 2018 - December 2018
153 metric tons per month
January 2019 - March 2019
189 metric tons per month
April 2019 - June 2019
188 metric tons per month
July 2019 - September 2019
191 metric tons per month
October 2019 - December 2019
144 metric tons per month
Interest Rates
In 2017, we entered into an interest rate swap to hedge the variable interest rate on $75 million of our $450 million revolving credit facility. This transaction has been designated as a cash flow hedge and qualifies for hedge accounting treatment. See Note 12, “Debt” for further discussion regarding the revolving credit facility.
Effects on Financial Statements:
(Dollars in thousands)
 
 
 
The Effect of Current Derivative Instruments on the Financial Statements for the period ended September 30, 2018
 
Fair Values of Derivative Instruments as of September 30, 2018
 
 
 
 
Gain (Loss)
 
Other Current Assets/
(Other Accrued Liabilities)
Foreign Exchange Contracts
 
Location
 
Three Months Ended
 
Nine Months Ended
 
 
Contracts not designated as hedging instruments
 
Other income (expense), net
 
$
29

 
$
(95
)
 
$
342

Copper Derivatives
 
 
 
 
 
 
 
 
Contracts not designated as hedging instruments
 
Other income (expense), net
 
$
(453
)
 
$
(1,637
)
 
$
631

Interest Rate Swap
 
 
 
 
 
 
 
 
Contracts designated as hedging instruments
 
Other comprehensive income (loss)
 
$
270

 
$
1,669

 
$
1,710


(Dollars in thousands)
 
 
 
The Effect of Current Derivative Instruments on the Financial Statements for the period ended September 30, 2017
 
Fair Values of Derivative Instruments as of September 30, 2017
 
 
 
 
Gain (Loss)
 
Other Current Assets/
(Other Accrued Liabilities)
Foreign Exchange Contracts
 
Location
 
Three Months Ended
 
Nine Months Ended
 
 
Contracts not designated as hedging instruments
 
Other income (expense), net
 
(198
)
 
(382
)
 
(382
)
Copper Derivatives
 
 
 
 
 
 
 
 
Contracts not designated as hedging instruments
 
Other income (expense), net
 
474

 
578

 
1,534

Interest Rate Swap
 
 
 
 
 
 
 
 
Contracts designated as hedging instruments
 
Other comprehensive income (loss)
 
100

 
(415
)
 
(638
)

10



Note 4 – Inventories
Inventories are valued at the lower of cost or net realizable value. Inventories were as follows at the end of the periods noted below:
(Dollars in thousands)
September 30, 2018
 
December 31, 2017
Raw materials
$
57,928

 
$
43,092

Work-in-process
29,884

 
28,133

Finished goods
38,073

 
41,332

Total inventories
$
125,885

 
$
112,557

Note 5 – Acquisitions
Griswold LLC
On July 6, 2018, we acquired 100% of the membership interests in Griswold LLC (Griswold) for an aggregate purchase price of $78.6 million, net of cash acquired, pursuant to the terms of the Membership Interest Purchase Agreement, dated July 6, 2018 by and among the Company and the owners of Griswold (the MIPA). We used borrowings of $82.5 million under our revolving credit facility to fund the acquisition. There is a possible earn-out capped at $3.0 million based on certain of Griswold’s 2018 product sales. We have determined that the probability of the earn-out is extremely low, and as a result, have assigned no fair value to the contingent consideration as of the valuation date.
Griswold is a leading manufacturer of a wide range of high-performance engineered cellular elastomer and microcellular polyurethane products and solutions across the automotive, transportation, medical, office products, printing and electronics industries. The acquisition built on our existing Elastomeric Material Solutions (EMS) platform of highly engineered materials and added new products and capabilities to the portfolio of our EMS operating segment.
The acquisition has been accounted for in accordance with applicable purchase accounting guidance. We recorded goodwill primarily related to the expected synergies from combining operations and the value of Griswold’s existing workforce. We also recorded other intangible assets related to acquired customer relationships, developed technology, trademarks and trade names, and a covenant not to compete. As of the filing date of this Form 10-Q, the purchase accounting and purchase price allocation for the Griswold acquisition are preliminary, as we continue to refine our valuation of certain acquired assets and assumed liabilities.
The following table represents the fair values assigned to the acquired assets and liabilities assumed in the transaction:
(Dollars in thousands)
July 6, 2018
Assets:
 
Accounts receivable, less allowance for doubtful accounts
$
2,553

Inventories
2,998

Other current assets
154

Property, plant & equipment
7,554

Other intangible assets
34,120

Goodwill
32,305

Total assets
79,684

 
 

Liabilities:
 

Accounts payable
711

Accrued employee benefits and compensation
299

Other accrued liabilities
103

Total liabilities
1,113

 
 

Fair value of net assets acquired
$
78,571

The other intangible assets consist of customer relationships valued at $22.1 million, developed technology valued at $9.6 million, trademarks and trade names valued at $1.8 million, and a covenant not to compete valued at $0.6 million. The fair value of acquired identified other intangible assets was determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 under the fair value measurements and disclosure guidance.

11



The weighted average amortization period for the other intangible asset classes are 9.5 years for customer relationships, 3.5 years for developed technology, 10.4 years for trademarks and trade names, and 3.2 years for a covenant not to compete, resulting in amortization expenses ranging from $0.7 million to $3.0 million annually. The estimated annual future amortization expense is $0.6 million for the remainder of 2018, $2.8 million for 2019, $3.0 million for 2020, and $2.8 million for 2021, and $2.7 million for 2022.
During 2018, we incurred transaction costs of $1.1 million related to the Griswold acquisition, which were recorded within “Selling, general and administrative expenses” in the condensed consolidated statements of operations.
The results of Griswold have been included in our condensed consolidated financial statements only for the period subsequent to the completion of the acquisition on July 6, 2018, through September 30, 2018. Griswold’s net sales for that period totaled $6.9 million.
Diversified Silicone Products
On January 6, 2017, we acquired the principal operating assets of Diversified Silicone Products, Inc. (DSP), pursuant to the terms of the Asset Purchase Agreement by and among the Company, DSP and the principal shareholders of DSP (the Purchase Agreement). Pursuant to the terms of the Purchase Agreement, we acquired certain assets and assumed certain liabilities of DSP for a total purchase price of approximately $60.2 million. We used borrowings of $30.0 million under our revolving credit facility in addition to cash on hand to fund the acquisition.
DSP is a custom silicone product development and manufacturing business and its acquisition expanded the portfolio of our EMS operating segment in cellular sponge and specialty extruded silicone profile technologies, while strengthening existing expertise in precision-calendered silicone and silicone formulating and compounding.
The results of DSP have been included in our condensed consolidated financial statements only for the periods subsequent to the completion of our acquisition on January 6, 2017.
Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations of Rogers, Griswold, and DSP as if the Griswold acquisition had occurred on January 1, 2017 and as if the DSP acquisition had occurred on January 1, 2016. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the Griswold and DSP acquisitions been completed as of January 1, 2017 and January 1, 2016, respectively, and should not be taken as indicative of our future consolidated results of operations.
(Dollars in thousands)
Three Months Ended September 30, 2018 (unaudited)
 
Nine Months Ended September 30, 2018 (unaudited)
 
Three Months Ended September 30, 2017 (unaudited)
 
Nine Months Ended September 30, 2017 (unaudited)
Net sales
$
226,863

 
$
670,936

 
$
219,707

 
$
650,806

Net income
20,765

 
63,204

 
26,174

 
74,483

Isola Asset Acquisition
On August 28, 2018, the Company entered into an Asset Purchase Agreement (APA) with Isola USA Corp. (Isola) to acquire a production facility and related machinery and equipment located in Chandler Arizona for cash consideration of $43.4 million. In connection with the APA, the Company also entered into a Transition Services Agreement and a Lease Agreement with Isola whereby Isola leases back a portion of the facility and related machinery and equipment from the Company during the transition period through December 31, 2019. We used $43.4 million in cash on hand to fund the asset purchase. This transaction was evaluated under Accounting Standards Codification (ASC) Topic 805 Business Combinations and was determined to be an asset acquisition as the transaction did not meet the definition of a business.

12



The assets acquired in connection with the acquisition were recorded by the Company at their estimated relative fair values as follows:
(Dollars in thousands)
August 28, 2018
Land
$
6,104

Buildings
8,401

Machinery and equipment
18,616

Equipment in process
12,633

Total property, plant and equipment
$
45,754

The $45.8 million of capitalized cost summarized above includes both lease consideration valued at $2.0 million and transaction costs incurred of $0.4 million.
During the third quarter of 2018, the Company recognized $0.2 million of imputed income related to the lease as well as by $0.9 million of depreciation on leased assets in “Other operating (income) expense, net.”
Note 6 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2018 and 2017 were as follows:
(Dollars and accompanying footnotes in thousands)
Foreign currency translation adjustments
 
Funded status of pension plans and other postretirement benefits(1)
 
Unrealized gain (loss) on derivative instruments (2)
 
Total
Beginning Balance December 31, 2017
$
(17,983
)
 
$
(47,198
)
 
$
26

 
$
(65,155
)
Other comprehensive income (loss) before reclassifications
(9,901
)
 

 
1,308

 
(8,593
)
Amounts reclassified from accumulated other comprehensive loss

 
131

 

 
131

Net current-period other comprehensive income (loss)
(9,901
)
 
131

 
1,308

 
(8,462
)
Ending Balance September 30, 2018
$
(27,884
)
 
$
(47,067
)
 
$
1,334

 
$
(73,617
)
 
 
 
 
 
 
 
 
Beginning Balance December 31, 2016
$
(46,446
)
 
$
(45,816
)
 
$

 
$
(92,262
)
Other comprehensive income (loss) before reclassifications
23,136

 

 
(487
)
 
22,649

Actuarial net gain incurred in the fiscal year

 
35

 

 
35

Amounts reclassified from accumulated other comprehensive loss

 
36

 
222

 
258

Net current-period other comprehensive income (loss)
23,136

 
71

 
(265
)
 
22,942

Ending Balance September 30, 2017
$
(23,310
)
 
$
(45,745
)
 
$
(265
)
 
$
(69,320
)
(1) Net of taxes of $9,523 and $9,563 as of September 30, 2018 and December 31, 2017, respectively. Net of taxes of $9,122 and $9,160 as of September 30, 2017 and December 31, 2016, respectively.
(2) Net of taxes of $375 and $15 as of September 30, 2018 and December 31, 2017, respectively. Net of taxes of $151 and $0 as of September 30, 2017 and December 31, 2016, respectively.

13



Note 7 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated:
(Dollars and shares in thousands,
except per share amounts)
Three Months Ended
 
Nine Months Ended
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Numerator:
 
 
 
 
 
 
 
Net income
$
19,734

 
$
25,532

 
$
63,199

 
$
73,460

Denominator:
 
 
 
 
 
 
 

Weighted-average shares outstanding - basic
18,403

 
18,181

 
18,360

 
18,126

Effect of dilutive shares
275

 
407

 
289

 
377

Weighted-average shares outstanding - diluted
18,678

 
18,588

 
18,649

 
18,503

Basic earnings per share
$
1.07

 
$
1.40

 
$
3.44

 
$
4.05

Diluted earnings per share
$
1.06

 
$
1.37

 
$
3.39

 
$
3.97

Certain potential options to purchase shares may be excluded from the calculation of diluted weighted-average shares outstanding where their exercise price is greater than the average market price of our capital stock during the relevant reporting period. For the three months ended September 30, 2018, 37,700 shares were excluded. For the three months ended September 30, 2017, no shares were excluded.
Note 8 – Equity Compensation
Performance-Based Restricted Stock Units
As of September 30, 2018, we had performance-based restricted stock units from 2016, 2017 and 2018 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 2016, 2017 and 2018 awards have one measurement criteria: the three year total shareholder return (TSR) on the performance of our capital stock as compared to that of a specified group of peer companies. The TSR measurement criteria of the awards is considered a market condition. As such, the fair value of this measurement criteria was 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.
Below were the assumptions used in the Monte Carlo calculation:
 
September 17, 2018
 
February 8, 2018
 
February 2, 2017
Expected volatility
36.6%
 
34.8%
 
33.6%
Expected term (in years)
3.0
 
3.0
 
3.0
Risk-free interest rate
2.85%
 
2.28%
 
1.38%
Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility.
Expected term – We use the measurement 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.

14



The following table summarizes the change in number of performance-based restricted stock units outstanding for the nine months ended September 30, 2018:
 
Performance-Based
Restricted Stock Units
Awards outstanding at December 31, 2017
169,202

Awards granted
75,760

Stock issued
(81,230
)
Awards forfeited
(18,599
)
Awards outstanding at September 30, 2018
145,133

During the three and nine months ended September 30, 2018, we recognized compensation expense for performance-based restricted stock units of approximately $1.3 million and $3.1 million, respectively. During the three and nine months ended September 30, 2017, we recognized compensation expense for performance-based restricted stock units of approximately $1.4 million and $2.9 million, respectively.
Time-Based Restricted Stock Units
As of September 30, 2018, we had time-based restricted stock unit awards from 2014, 2015, 2016, 2017 and 2018 outstanding. The 2015, 2016, 2017 and 2018 grants all ratably vest on the first, second and third anniversaries of the original grant date. The remaining outstanding 2014 grants cliff vest on December 17, 2018, the fourth anniversary of the original grant date. Each restricted stock unit represents a right to receive one share of the 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.
The following table summarizes the change in number of time-based restricted stock units outstanding for the nine months ended September 30, 2018:
 
Time-Based
Restricted Stock Units
Awards outstanding at December 31, 2017
173,331

Awards granted
44,610

Stock issued
(79,375
)
Awards forfeited
(16,302
)
Awards outstanding at September 30, 2018
122,264

During the three and nine months ended September 30, 2018, we recognized compensation expense for time-based restricted stock units of approximately $1.4 million and $4.2 million, respectively. During the three and nine months ended September 30, 2017, we recognized compensation expense for time-based restricted stock units of approximately $1.6 million and $4.2 million, respectively.
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.
The following table summarizes the change in number of deferred stock units outstanding during the nine months ended September 30, 2018:
 
Deferred Stock Units
Awards outstanding at December 31, 2017
9,250

Awards granted
8,400

Stock issued
(9,250
)
Awards outstanding at September 30, 2018
8,400


15



During the three months ended September 30, 2018, we recognized no compensation expense associated with the deferred stock units. During the nine months ended September 30, 2018, we recognized $0.9 million of compensation expense associated with the deferred stock units. During the three and nine months ended September 30, 2017, we recognized compensation expense associated with the deferred stock units of $0.1 million and $1.0 million, respectively.
Stock Options
Stock options have been granted under various equity compensation plans, and they generally became exercisable in one-third increments on the second, third and fourth anniversaries of the grant dates. The maximum contractual term for all options was normally ten years. We used the Black-Scholes option-pricing model to calculate the grant-date fair value of an option. We have not granted any stock options since the first quarter of 2012.
The following table summarizes the change in number of stock options outstanding for the nine months ended September 30, 2018:
 
Options Outstanding
 
Weighted- Average Exercise Price Per Share
 
Weighted-Average Remaining Contractual Life in Years
 
Aggregate Intrinsic Value
Outstanding at December 31, 2017
33,283

 
$
36.40

 
2.2
 
$
4,177,655

Options exercised
(19,183
)
 
$
38.26

 
 
 
 
Options forfeited

 
$

 
 
 
 
Options outstanding, vested and exercisable at September 30, 2018
14,100

 
$
33.88

 
2.5
 
$
1,599,534

During the nine months ended September 30, 2018, the total intrinsic value of options exercised (i.e., the difference between the market price at time of exercise and the price paid by the individual to exercise the options) was $2.2 million, and the total amount of cash received from the exercise of these options was $0.7 million.
Employee Stock Purchase Plan
We have an employee stock purchase plan (ESPP) that allows eligible employees to purchase, through payroll deductions, shares of our capital stock at a discount to fair market value. The ESPP has two six month offering periods each year, the first beginning in January and ending in June and the second beginning in July and ending in December. The ESPP contains a look-back feature that allows the employee to acquire shares of our capital stock at a 15% discount from the underlying market price at the beginning or end of the applicable period, whichever is lower. We recognize compensation expense on this plan ratably over the offering period based on the fair value of the anticipated number of shares that will be issued at the end of each offering period. Compensation expense is adjusted at the end of each offering period for the actual number of shares issued. Fair value is determined based on two factors: (i) the 15% discount on the underlying stock’s market value on the first day of the applicable offering period and (ii) the fair value of the look-back feature determined by using the Black-Scholes option-pricing model. We recognized approximately $0.1 million of compensation expense associated with the plan in each of the three-month periods ended September 30, 2018 and 2017 and approximately $0.3 million of compensation expense associated with each of the nine-month periods ended September 30, 2018 and 2017.
Note 9 – Pension Benefits and Other Postretirement Benefit Plans
We have two qualified noncontributory defined benefit pension plans: 1) the Rogers Corporation Employee’s Pension Plan for unionized hourly employees (the Union Plan); and 2) the Rogers Corporation Defined Benefit Pension Plan for (i) all other U.S. employees hired before December 31, 2007 who are salaried employees or non-union hourly employees and (ii) employees of the acquired Arlon business (the Rogers Plan).
The Company also maintains the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2004 and the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2005 (collectively, the Nonqualified Plans). The Nonqualified Plans serve to restore certain retirement benefits that might otherwise be lost due to limitations imposed by federal law on qualified pension plans, as well as to provide supplemental retirement benefits, for certain senior executives of the Company.
In addition, we sponsor multiple fully insured or self-funded medical plans and life insurance plans for certain retirees. The measurement date for all plans is December 31 for each respective plan year.

16



Pension Plan Proposed Termination
The Company currently intends to terminate the Rogers Plan and has requested a determination letter from the Internal Revenue Service (IRS). The termination of the Rogers Plan remains subject to final approval by both management and the IRS. The Company plans to provide for lump sum distributions or annuity payments in connection with the termination of the Rogers Plan and we expect the settlement process to be completed in the first half of 2019. The Company lacks sufficient information as of September 30, 2018 to determine the financial impact of the proposed plan termination. At this time, there are no plans to terminate the Union Plan.
Components of Net Periodic (Benefit) Cost
The components of net periodic (benefit) cost for the periods indicated were:
 
Pension Benefits
 
Retirement Health and
Life Insurance Benefits
(Dollars in thousands)
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
September 30,
 
September 30,
 
September 30,
 
September 30,
Change in benefit obligation:
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
$

 
$

 
$

 
$

 
$
17

 
$
12

 
$
55

 
$
68

Interest cost
1,692

 
1,837

 
5,064

 
5,519

 
16

 
20

 
47

 
51

Expected return of plan assets
(2,164
)
 
(2,302
)
 
(6,497
)
 
(6,920
)
 

 

 

 

Amortization of prior service credit

 

 

 

 
(400
)
 
(411
)
 
(1,201
)
 
(1,191
)
Amortization of net loss (gain)
457

 
445

 
1,370

 
1,311

 

 
16

 

 
(15
)
Net periodic (benefit) cost
$
(15
)
 
$
(20
)
 
$
(63
)
 
$
(90
)
 
$
(367
)
 
$
(363
)

$
(1,099
)
 
$
(1,087
)
Employer Contributions
There were no required contributions to our qualified defined benefit pension plans for the three and nine months ended September 30, 2018, and we are not required to make additional contributions to these plans for the remainder of 2018. We made a voluntary contribution of $25.0 million to the Rogers Plan during the third quarter of 2018 as part of the proposed plan termination process. No additional voluntary contributions were made to our qualified defined benefit pension plans for the nine months ended September 30, 2018. We paid $0.2 million and $0.4 million in required contributions to our qualified defined benefit pension plans for the three and nine months ended September 30, 2017. No voluntary contributions were made to our qualified defined benefit pension plans for the three and nine months ended September 30, 2017.
As there is no funding requirement for the non-qualified unfunded noncontributory defined benefit pension plan or the retiree health and life insurance benefit plans, benefit payments made during the year are funded directly by the Company.

17



Note 10 – Segment Information
Our reporting structure is comprised of the following operating segments: ACS, EMS and PES. 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.
On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers. See Note 19, “Revenue from Contracts with Customers” for further information about this adoption. The Company sells products to fabricators and distributors who then sell directly into various end markets. End markets within the ACS operating segment include wireless infrastructure, aerospace and defense, auto safety and connectivity, and consumer electronics. End markets within the EMS operating segment include general industrial, portable electronics, mass transit, and automotive. End markets within the PES operating segment include industrial, e-mobility, renewable energy, mass transit, and micro channel coolers. End markets in the Other operating segment include automotive and industrial. The following table presents a disaggregation of revenue from contracts with customers for the periods indicated; inter-segment sales have been eliminated from the net sales data:
(Dollars in thousands)
 
Advanced Connectivity Solutions
 
Elastomeric Material Solutions
 
Power Electronics Solutions
 
Other
 
Total
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
Net sales - recognized over time
 
$

 
$
1,790

 
$
54,797

 
$
3,067

 
$
59,654

Net sales - recognized at a point in time
 
71,854

 
93,998

 
425

 
932

 
167,209

Total net sales
 
$
71,854

 
$
95,788

 
$
55,222

 
$
3,999

 
$
226,863

Operating income
 
$
8,451

 
$
15,924

 
$
4,067

 
$
1,200

 
$
29,642

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017 (1)
 
 
 
 
 
 
 
 
 
 
Net sales - recognized over time
 
$

 
$
562

 
$
45,752

 
$
4,823

 
$
51,137

Net sales - recognized at a point in time
 
72,713

 
81,677

 
657

 
599

 
155,646

Total net sales
 
$
72,713

 
$
82,239

 
$
46,409

 
$
5,422

 
$
206,783

Operating income
 
$
14,278

 
$
17,727

 
$
5,340

 
$
1,847

 
$
39,192

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
Net sales - recognized over time
 
$

 
$
3,731

 
$
165,248

 
$
12,332

 
$
181,311

Net sales - recognized at a point in time
 
221,685

 
249,356

 
1,334

 
2,463

 
474,838

Total net sales
 
$
221,685

 
$
253,087

 
$
166,582

 
$
14,795

 
$
656,149

Operating income
 
$
26,946

 
$
38,505

 
$
15,328

 
$
5,131

 
$
85,910

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 (1)
 
 
 
 
 
 
 
 
 
 
Net sales - recognized over time
 
$

 
$
1,644

 
$
131,433

 
$
14,661

 
$
147,738

Net sales - recognized at a point in time
 
225,595

 
235,029

 
1,533

 
2,140

 
464,297

Total net sales
 
$
225,595

 
$
236,673

 
$
132,966

 
$
16,801

 
$
612,035

Operating income
 
$
46,773

 
$
44,451

 
$
13,744

 
$
5,576

 
$
110,544

(1) For comparison purposes, this table reflects the disaggregation of 2017 revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606).

18



Information relating to our segment operations by geographic area for the three months ended September 30, 2018 and 2017 was as follows:
(Dollars in thousands)
 
Net Sales (1)
Region/Country
 
Advanced Connectivity Solutions
 
Elastomeric Material Solutions
 
Power Electronics Solutions
 
Other
 
Total
September 30, 2018
 
 
 
 
 
 
 
 
 
 
United States
 
12,889

 
37,691

 
10,738

 
1,029

 
62,347

Other Americas
 
674

 
8,196

 
145

 
138

 
9,153

Total Americas
 
13,563

 
45,887

 
10,883

 
1,167

 
71,500

China
 
34,798

 
30,849

 
10,432

 
811

 
76,890

Other APAC
 
14,962

 
11,807

 
6,348

 
666

 
33,783

Total APAC
 
49,760

 
42,656

 
16,780

 
1,477

 
110,673

Germany
 
3,515

 
2,019

 
15,464

 
159

 
21,157

Other EMEA
 
5,016

 
5,226

 
12,095

 
1,196

 
23,533

Total EMEA
 
8,531

 
7,245

 
27,559

 
1,355

 
44,690

Total net sales
 
71,854

 
95,788

 
55,222

 
3,999

 
226,863

September 30, 2017
 
 
 
 
 
 
 
 
 
 
United States
 
11,401

 
34,163

 
6,739

 
1,355

 
53,658

Other Americas
 
581

 
2,496

 
286

 
156

 
3,519

Total Americas
 
11,982

 
36,659

 
7,025

 
1,511

 
57,177

China
 
34,561

 
28,881

 
8,083

 
1,241

 
72,766

Other APAC
 
15,138

 
8,923

 
5,569

 
756

 
30,386

Total APAC
 
49,699

 
37,804

 
13,652

 
1,997

 
103,152

Germany
 
6,062

 
2,122

 
14,009

 
185

 
22,378

Other EMEA
 
4,970

 
5,654

 
11,723

 
1,729

 
24,076

Total EMEA
 
11,032

 
7,776

 
25,732

 
1,914

 
46,454

Total net sales
 
72,713

 
82,239

 
46,409

 
5,422

 
206,783

(1) 
Net sales are allocated to countries based on the location of the customer. The table above includes countries with 10% or more of net sales for the periods indicated.


19



Information relating to our segment operations by geographic area for the nine months ended September 30, 2018 and 2017 was as follows:
(Dollars in thousands)
 
Net Sales (1)
Region/Country
 
Advanced Connectivity Solutions
 
Elastomeric Material Solutions
 
Power Electronics Solutions
 
Other
 
Total
September 30, 2018
 
 
 
 
 
 
 
 
 
 
United States
 
39,615

 
111,160

 
27,595

 
3,151

 
181,521

Other Americas
 
2,257

 
12,176

 
826

 
694

 
15,953

Total Americas
 
41,872

 
123,336

 
28,421

 
3,845

 
197,474

China
 
100,337

 
75,714

 
28,794

 
3,539

 
208,384

Other APAC
 
48,888

 
29,291

 
19,891

 
2,108

 
100,178

Total APAC
 
149,225

 
105,005

 
48,685

 
5,647

 
308,562

Germany
 
14,588

 
7,356

 
46,697

 
491

 
69,132

Other EMEA
 
16,000

 
17,390

 
42,779

 
4,812

 
80,981

Total EMEA
 
30,588

 
24,746

 
89,476

 
5,303

 
150,113

Total net sales
 
221,685

 
253,087

 
166,582

 
14,795

 
656,149

September 30, 2017
 
 
 
 
 
 
 
 
 
 
United States
 
35,996

 
108,163

 
22,447

 
3,918

 
170,524

Other Americas
 
2,306

 
7,957

 
847

 
533

 
11,643

Total Americas
 
38,302

 
116,120

 
23,294

 
4,451

 
182,167

China
 
105,939

 
68,349

 
22,334

 
3,655

 
200,277

Other APAC
 
48,049

 
27,558

 
15,844

 
2,673

 
94,124

Total APAC
 
153,988

 
95,907

 
38,178

 
6,328

 
294,401

Germany
 
18,924

 
6,770

 
39,324

 
526

 
65,544

Other EMEA
 
14,381

 
17,876

 
32,170

 
5,496

 
69,923

Total EMEA
 
33,305

 
24,646

 
71,494

 
6,022

 
135,467

Total net sales
 
225,595

 
236,673

 
132,966

 
16,801

 
612,035

(1) 
Net sales are allocated to countries based on the location of the customer. The table above includes countries with 10% or more of net sales for the periods indicated.
Note 11 – Joint Ventures
As of September 30, 2018, we had two joint ventures, each 50% owned, which were accounted for under the equity method of accounting.
Joint Venture
Location
Operating Segment
Fiscal Year-End
Rogers INOAC Corporation (RIC)
Japan
Elastomeric Material Solutions
October 31
Rogers INOAC Suzhou Corporation (RIS)
China
Elastomeric Material Solutions
December 31
We recognized equity income related to the joint ventures of $1.6 million and $4.5 million for the three and nine months ended September 30, 2018, respectively. We recognized equity income related to the joint ventures of $1.4 million and $3.4 million for the three and nine months ended September 30, 2017, respectively. These amounts are included in the condensed consolidated statements of operations.
The summarized financial information for the joint ventures for the periods indicated was as follows:
 
Three Months Ended
 
Nine Months Ended
(Dollars in thousands)
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net sales
$
15,216

 
$
14,020

 
$
43,466

 
$
38,653

Gross profit
$
6,119

 
$
5,463

 
$
16,897

 
$
14,832

Net income
$
3,284

 
$
2,768

 
$
8,906

 
$
6,718


20



Receivables from and payables to joint ventures arise during the normal course of business from transactions between us and the joint ventures. As of September 30, 2018 and December 31, 2017, we had receivables of $1.5 million and $3.7 million, respectively, due from RIC, RIS, our affiliated partner in the joint ventures, as well as its subsidiaries. As of September 30, 2018 and December 31, 2017, we owed payables of $1.8 million and $2.1 million, respectively, to RIC and RIS.
Note 12 – Debt
On February 17, 2017, we entered into a secured five year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Third Amended Credit Agreement), which increased the principal amount of our revolving credit facility to up to $450.0 million borrowing capacity, with sublimits for multicurrency borrowings, letters of credit and swing-line notes, and provided an additional $175.0 million accordion feature. Borrowings may be used to finance working capital needs, for letters of credit and for general corporate purposes in the ordinary course of business, including the financing of permitted acquisitions (as defined in the Third Amended Credit Agreement).
In third quarter of 2018, we borrowed $82.5 million under the revolving credit facility to fund the acquisition of Griswold and an additional $20.0 million to fund the Rogers Plan as part of the proposed plan termination process. 
Borrowings under the Third Amended Credit Agreement can be made as alternate base rate loans or euro-currency loans. Alternate base rate loans bear interest that includes a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio. The base reference rate is the greater of the prime rate; federal funds effective rate (or the overnight bank funding rate, if greater) plus 50 basis points; or adjusted 1-month LIBOR plus 100 basis points. Euro-currency loans bear interest based on adjusted LIBOR plus a spread of 137.5 to 175.0 basis points, depending on our leverage ratio.
In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Third Amended Credit Agreement, we are required to pay a quarterly fee of 20 to 30 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Third Amended Credit Agreement.
The Third Amended Credit Agreement contains customary representations, warranties, covenants, mandatory prepayments and events of default under which our payment obligations may be accelerated. If an event of default occurs, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees. The financial covenants include requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00, subject to an election to increase the maximum leverage ratio to 3.50 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.
All obligations under the Third Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Third Amended Credit Agreement (the Guarantors). The obligations are also secured by a Third Amended and Restated Pledge and Security Agreement, dated as of February 17, 2017, 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 the Guarantors. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.
All revolving loans are due on the maturity date, February 17, 2022. We are not required to make any quarterly principal payments under the Third Amended Credit Agreement, and as of September 30, 2018 we have $233.5 million in outstanding borrowings under our revolving credit facility.
At September 30, 2018, we have $1.8 million of outstanding line of credit issuance costs that will be amortized over the life of the Third Amended Credit Agreement, which will terminate in February 2022. We recorded amortization expense of $0.1 million for each of the three-month periods ended September 30, 2018 and 2017, and $0.4 million for each of the nine-month periods ended September 30, 2018 and 2017, respectively, related to these deferred costs.
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. See further discussion in Note 3, “Hedging Transactions and Derivative Financial Instruments.”
Restriction on Payment of Dividends
Our Third 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 leverage ratio does not exceed 2.75 to 1.00. If our 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 leverage ratio did not exceed 2.75 to 1.00 as of September 30, 2018.

21



Capital Leases
We have a capital lease obligation related to our manufacturing facility in Eschenbach, Germany. Under the terms of the leasing agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon. The total obligation recorded for the lease as of September 30, 2018 is $5.2 million. Depreciation expense related to this capital lease was $0.1 million for each of the three-month periods ended September 30, 2018 and 2017, and was $0.2 million for each of the nine-month periods ended September 30, 2018 and 2017. These expenses are included as depreciation expense in cost of sales on our condensed consolidated statements of operations. Accumulated depreciation at September 30, 2018 and December 31, 2017 was $3.2 million and $3.3 million, respectively.
We also incurred interest expense on this capital lease of $0.1 million for each of the three-month periods ended September 30, 2018 and 2017 and $0.1 million for each of the nine-month periods ended September 30, 2018 and 2017. Interest expense related to the debt recorded on the capital lease is included in interest expense on the condensed consolidated statements of operations.
Note 13 – Goodwill and Other Intangible Assets
On July 6, 2018, we acquired Griswold. For further detail on the goodwill and other intangible assets recorded in connection with the acquisition, see Note 5 - Acquisitions.
Goodwill
The changes in the carrying amount of goodwill for the period ending September 30, 2018, by operating segment, were as follows:
(Dollars in thousands)
Advanced Connectivity Solutions
 
Elastomeric Material Solutions
 
Power Electronics Solutions
 
Other
 
Total
December 31, 2017
$
51,693

 
$
111,575

 
$
71,615

 
$
2,224

 
$
237,107

Acquisition

 
32,305

 

 

 
32,305

Foreign currency translation adjustment

 
(631
)
 
(2,477
)
 

 
(3,108
)
September 30, 2018
$
51,693

 
$
143,249

 
$
69,138

 
$
2,224

 
$
266,304

Other Intangible Assets
 
September 30, 2018
 
December 31, 2017
(Dollars in thousands)
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Customer relationships
$
149,933

 
$
27,985

 
$
121,948

 
$
128,907

 
$
22,514

 
$
106,393

Technology
81,840

 
36,974

 
44,866

 
73,891

 
33,491

 
40,400

Trademarks and trade names
12,024

 
2,934

 
9,090

 
10,213

 
2,157

 
8,056

Covenants not to compete
1,340

 
200

 
1,140

 
1,799

 
1,108

 
691

Total definite-lived other intangible assets
245,137

 
68,093

 
177,044

 
214,810