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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
_______________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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)
_______________________________
Massachusetts06-0513860
(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
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, a 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 November 4, 2022 was 18,811,874.


ROGERS CORPORATION
FORM 10-Q

September 30, 2022
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. Refer to “Forward-Looking Statements” in Item 2, Management’s Discussion and Analysis of Results of Operations and Financial Position for additional information.
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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 EndedNine Months Ended
 September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Net sales$247,231 $238,263 $747,467 $702,434 
Cost of sales169,167 146,609 497,491 431,448 
Gross margin78,064 91,654 249,976 270,986 
Selling, general and administrative expenses50,653 47,886 164,496 135,258 
Research and development expenses9,140 7,531 25,450 22,195 
Restructuring and impairment charges373 1,007 1,119 3,260 
Other operating (income) expense, net(578)1,431 (2,852)3,536 
Operating income18,476 33,799 61,763 106,737 
Equity income in unconsolidated joint ventures1,162 1,773 4,237 5,884 
Pension settlement charges— (534)— (534)
Other income (expense), net977 (469)1,563 3,738 
Interest expense, net(2,942)(441)(5,559)(1,452)
Income before income tax expense17,673 34,128 62,004 114,373 
Income tax expense2,835 8,999 12,683 29,371 
Net income$14,838 $25,129 $49,321 $85,002 
Basic earnings per share$0.79 $1.34 $2.62 $4.54 
Diluted earnings per share$0.78 $1.33 $2.60 $4.51 
Shares used in computing:  
Basic earnings per share18,818 18,740 18,804 18,727 
Diluted earnings per share18,999 18,874 18,997 18,831 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)

Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Net income$14,838 $25,129 $49,321 $85,002 
Foreign currency translation adjustment(35,035)(8,126)(80,383)(18,627)
Pension and other postretirement benefits:
Actuarial net loss incurred, net of tax (Note 4)— — (15)— 
Amortization of loss, net of tax (Note 4)87 52 260 173 
Other comprehensive income (loss)(34,948)(8,074)(80,138)(18,454)
Comprehensive income (loss)$(20,110)$17,055 $(30,817)$66,548 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Dollars and shares in thousands, except par value)
September 30, 2022December 31, 2021
Assets  
Current assets  
Cash and cash equivalents$236,461 $232,296 
Accounts receivable, less allowance for credit losses of $1,227 and $1,223
162,929 163,092 
Contract assets41,809 36,610 
Inventories173,610 133,384 
Prepaid income taxes4,008 1,921 
Asbestos-related insurance receivables, current portion3,361 3,176 
Other current assets15,500 13,586 
Total current assets637,678 584,065 
Property, plant and equipment, net of accumulated depreciation of $368,270 and $367,850
374,984 326,967 
Investments in unconsolidated joint ventures12,974 16,328 
Deferred income taxes41,873 32,671 
Goodwill338,312 370,189 
Other intangible assets, net of amortization150,148 176,353 
Pension assets5,461 5,123 
Asbestos-related insurance receivables, non-current portion55,516 59,391 
Other long-term assets8,844 27,479 
Total assets$1,625,790 $1,598,566 
Liabilities and Shareholders’ Equity  
Current liabilities  
Accounts payable$57,200 $64,660 
Accrued employee benefits and compensation35,978 48,196 
Accrued income taxes payable4,046 9,632 
Asbestos-related liabilities, current portion4,048 3,841 
Other accrued liabilities36,644 37,620 
Total current liabilities137,916 163,949 
Borrowings under revolving credit facility290,000 190,000 
Pension and other postretirement benefits liabilities1,495 1,618 
Asbestos-related liabilities, non-current portion60,167 64,491 
Non-current income tax8,013 7,131 
Deferred income taxes24,599 29,451 
Other long-term liabilities13,747 23,031 
Commitments and contingencies (Note 10 and Note 12)
Shareholders’ equity  
Capital stock - $1 par value; 50,000 authorized shares; 18,812 and 18,730 shares issued and outstanding
18,812 18,730 
Additional paid-in capital165,276 163,583 
Retained earnings1,031,146 981,825 
Accumulated other comprehensive loss(125,381)(45,243)
Total shareholders' equity1,089,853 1,118,895 
Total liabilities and shareholders' equity$1,625,790 $1,598,566 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30, 2022September 30, 2021
Operating Activities:  
Net income$49,321 $85,002 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization34,352 31,121 
Equity compensation expense11,576 13,147 
Deferred income taxes(14,076)(1,267)
Equity in undistributed income of unconsolidated joint ventures(4,237)(5,884)
Dividends received from unconsolidated joint ventures4,677 4,965 
Pension settlement charges (benefits)534 
Pension and other postretirement benefits23 (300)
(Gain) loss on sale or disposal of property, plant and equipment(15)(673)
Impairment charges212 385 
UTIS fire fixed asset and inventory write-offs199 1,254 
Provision (benefit) for credit losses331 (310)
Changes in assets and liabilities:
Accounts receivable(23,759)(32,254)
Proceeds from insurance/government subsidies related to operations1,153 264 
Contract assets(9,320)(6,136)
Inventories(47,500)(19,386)
Pension and postretirement benefit contributions(141)(156)
Other current assets(4,919)(144)
Accounts payable and other accrued expenses(12,083)27,495 
Other, net16,040 8,458 
Net cash provided by operating activities1,834 106,115 
Investing Activities:
Acquisition of business, net of cash received(1,300)— 
Capital expenditures(87,000)(43,411)
Proceeds from the sale of property, plant and equipment, net— 714 
Proceeds from insurance claims7,252 — 
Net cash used in investing activities(81,048)(42,697)
Financing Activities:
Proceeds from borrowings under revolving credit facility100,000 — 
Repayment of debt principal and finance lease obligations(202)(29,655)
Payments of taxes related to net share settlement of equity awards(10,751)(2,752)
Proceeds from issuance of shares to employee stock purchase plan950 1,563 
Net cash provided by (used in) financing activities89,997 (30,844)
Effect of exchange rate fluctuations on cash(6,618)(3,458)
Net (decrease) increase in cash and cash equivalents4,165 29,116 
Cash and cash equivalents at beginning of period232,296 191,785 
Cash and cash equivalents at end of period$236,461 $220,901 
Supplemental Disclosures:
Accrued capital additions$9,330 $6,447 
Cash paid during the year for:
Interest, net of amounts capitalized$5,491 $1,285 
Income taxes$19,617 $25,867 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ROGERS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars and shares in thousands)



Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Capital Stock
Balance, beginning of period$18,811 $18,722 $18,730 $18,677 
Shares issued for vested restricted stock units, net of shares withheld for taxes1 1 69 29 
Shares issued for employee stock purchase plan— 6 6 13 
Shares issued to directors— — 7 10 
Balance, end of period18,812 18,729 18,812 18,729 
Additional Paid-In Capital
Balance, beginning of period161,885 154,330 163,583 147,961 
Shares issued for vested restricted stock units, net of shares withheld for taxes(129)(69)(10,820)(2,781)
Shares issued for employee stock purchase plan— 853 944 1,550 
Shares issued to directors— — (7)(10)
Equity compensation expense3,520 4,753 11,576 13,147 
Balance, end of period165,276 159,867 165,276 159,867 
Retained Earnings
Balance, beginning of period1,016,308 933,565 981,825 873,692 
Net income14,838 25,129 49,321 85,002 
Balance, end of period1,031,146 958,694 1,031,146 958,694 
Accumulated Other Comprehensive Loss
Balance, beginning of period(90,433)(29,955)(45,243)(19,575)
Other comprehensive income (loss)(34,948)(8,074)(80,138)(18,454)
Balance, end of period(125,381)(38,029)(125,381)(38,029)
Total Shareholders’ Equity$1,089,853 $1,099,261 $1,089,853 $1,099,261 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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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, 2021. Refer to the discussion below for our restructuring activities significant accounting policy.
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 had a pension surplus investment balance, which was accounted for as an available-for-sale investment as of June 2020. At the end of April, 2022, the entirety of the balance was paid out as a one-time discretionary contribution to all participants of the Rogers Employees Savings Investment Plan. 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, 2022
(Dollars in thousands)Level 1Level 2Level 3Total
Pension surplus investment(1)
$— $— $— $— 
Available-for-Sale Investment at Fair Value as of December 31, 2021
(Dollars in thousands)Level 1Level 2Level 3Total
Pension surplus investment(1)
$6,638 $— $— $6,638 
(1) This balance was invested in funds comprised of short-term cash and fixed income securities, and was recorded in the “Other long-term assets” line item in the condensed consolidated statements of financial position as of December 31, 2021. The fair value of this investment approximated its carrying value as of December 31, 2021.
From time to time we enter into various instruments that require fair value measurement, including foreign currency contracts and copper derivative contracts. Derivative instruments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, were as follows:
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Derivative Instruments at Fair Value as of September 30, 2022
(Dollars in thousands)Level 1Level 2Level 3
Total(1)
Foreign currency contracts$— $25 $— $25 
Copper derivative contracts$— $189 $— $189 
Derivative Instruments at Fair Value as of December 31, 2021
(Dollars in thousands)Level 1Level 2Level 3
Total(1)
Foreign currency contracts$— $(16)$— $(16)
Copper derivative contracts$— $1,344 $— $1,344 
(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the condensed consolidated statements of financial position.
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 and commodity pricing risk (primarily related to copper). 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.
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 periods during which the hedged transaction affects earnings.
Foreign Currency
During the three months ended September 30, 2022, 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 income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.
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As of September 30, 2022, the notional values of the remaining foreign currency forward contracts were as follows:
Notional Values of Foreign Currency Derivatives
USD/CNH$14,173,529 
EUR/USD€4,984,006 
KRW/USD₩8,081,640,000 
Commodity
As of September 30, 2022, we had 12 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment. These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.
As of September 30, 2022, the volume of our copper contracts outstanding was as follows:
Volume of Copper Derivatives
October 2022 - December 2022
69 metric tons per month
January 2023 - March 2023
69 metric tons per month
April 2023 - June 2023
69 metric tons per month
July 2023 - September 2023
69 metric tons per month
Effects on Financial Statements
The impacts from our derivative instruments on the statement of operations and statements of comprehensive income (loss) were as follows:
Three Months EndedNine Months Ended
(Dollars in thousands)Financial Statement Line ItemSeptember 30, 2022September 30, 2021September 30, 2022September 30, 2021
Foreign Currency Contracts
Contracts not designated as hedging instrumentsOther income (expense), net$(101)$(909)$(1,019)$(2,131)
Copper Derivative Contracts 
Contracts not designated as hedging instrumentsOther income (expense), net$(171)$(775)$(969)$3,085 

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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)
Total
Balance as of December 31, 2021$(35,641)$(9,602)$(45,243)
Other comprehensive income (loss) before reclassifications(80,383)(15)(80,398)
Amounts reclassified from accumulated other comprehensive loss— 260 260 
Net current-period other comprehensive income (loss)(80,383)245 (80,138)
Balance as of September 30, 2022$(116,024)$(9,357)$(125,381)
Balance as of December 31, 2020$(10,571)$(9,004)$(19,575)
Other comprehensive income (loss) before reclassifications(18,627)— (18,627)
Amounts reclassified from accumulated other comprehensive loss— 173 173 
Net current-period other comprehensive income (loss)(18,627)173 (18,454)
Balance as of September 30, 2021$(29,198)$(8,831)$(38,029)
(1) Net of taxes of $2,056 and $2,125 as of September 30, 2022 and December 31, 2021, respectively. Net of taxes of $1,902 and $1,951 as of September 30, 2021 and December 31, 2020, respectively.
Note 5 – Inventories
Inventories, which are valued at the lower of cost or net realizable value, consisted of the following:
(Dollars in thousands)September 30, 2022December 31, 2021
Raw materials$81,797 $60,208 
Work-in-process44,235 29,078 
Finished goods47,578 44,098 
Total inventories$173,610 $133,384 
Note 6 – Goodwill and Other Intangible Assets
Goodwill
The changes in the net carrying amount of goodwill by operating segment were as follows:
(Dollars in thousands)Advanced Electronics SolutionsElastomeric Material SolutionsOtherTotal
December 31, 2021$119,567 $248,398 $2,224 $370,189 
Purchase accounting adjustment— (925)— (925)
Foreign currency translation adjustment(9,552)(21,400)— $(30,952)
September 30, 2022$110,015 $226,073 $2,224 $338,312 
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Other Intangible Assets
The gross and net carrying amounts, as well as the accumulated amortization of other intangible assets were as follows:
September 30, 2022December 31, 2021
(Dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships$186,799 $82,103 $104,696 $198,095 $77,870 $120,225 
Technology82,844 55,471 27,373 88,445 54,900 33,545 
Trademarks and trade names22,979 9,676 13,303 25,504 8,968 16,536 
Covenants not to compete2,452 1,535 917 2,693 1,137 1,556 
Total definite-lived other intangible assets295,074 148,785 146,289 314,737 142,875 171,862 
Indefinite-lived other intangible asset3,859 — 3,859 4,491 — 4,491 
Total other intangible assets$298,933 $148,785 $150,148 $319,228 $142,875 $176,353 
In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations.
Amortization expense was $4.1 million and $3.1 million for the three months ended September 30, 2022 and 2021, respectively, and $12.6 million and $9.4 million for the nine months ended September 30, 2022 and 2021, respectively. The estimated future amortization expense is $3.9 million for the remainder of 2022 and $14.9 million, $13.6 million, $11.9 million and $11.3 million for 2023, 2024, 2025 and 2026, respectively.
The weighted average amortization period as of September 30, 2022, by definite-lived other intangible asset class, was as follows:
Definite-Lived Other Intangible Asset ClassWeighted Average Remaining Amortization Period
Customer relationships7.8 years
Technology3.5 years
Trademarks and trade names2.1 years
Covenants not to compete1.0 years
Total definite-lived other intangible assets6.4 years
Note 7 – Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.
The following table sets forth the computation of basic and diluted earnings per share:
(Dollars and shares in thousands, except per share amounts)Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Numerator:   
Net income$14,838 $25,129 $49,321 $85,002 
Denominator:
Weighted-average shares outstanding - basic18,818 18,740 18,804 18,727 
Effect of dilutive shares181 134 193 104 
Weighted-average shares outstanding - diluted18,999 18,874 18,997 18,831 
Basic earnings per share$0.79 $1.34 $2.62 $4.54 
Diluted earnings per share$0.78 $1.33 $2.60 $4.51 
Dilutive shares are calculated using the treasury stock method and primarily include unvested restricted stock units. Anti-dilutive shares are excluded from the calculation of diluted shares and diluted earnings per share. For the three months ended September 30, 2022 and 2021, no shares and 1,994 shares were excluded, respectively.
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Note 8 – Capital Stock and Equity Compensation
Equity Compensation
Performance-Based Restricted Stock Units
As of September 30, 2022, we had performance-based restricted stock units from 2021 and 2020 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, except as noted below in Chief Executive Officer’s 2021 Equity Award Grants. Participants are eligible to be awarded shares ranging from 0% to 200% of the original award amount, based on certain defined performance measures.
The outstanding awards have one measurement criterion: the three-year total shareholder return (TSR) on our capital stock as compared to that of a specified group of peer companies. The TSR measurement criterion of the awards is considered a market condition. As such, the fair value of this measurement criterion 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.
The following table sets forth the assumptions used in the Monte Carlo calculation for each material award granted in 2021:
February 10, 2021
Expected volatility51.0%
Expected term (in years)2.9
Risk-free interest rate0.18%
Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility.
Expected term – We use the vesting period of the award to determine the expected term assumption for the Monte Carlo simulation valuation model.
Risk-free interest rate – We use an implied “spot rate” yield on U.S. Treasury Constant Maturity rates as of the grant date for our assumption of the risk-free interest rate.
Expected dividend yield – We do not currently pay dividends on our capital stock; therefore, a dividend yield of 0% was used in the Monte Carlo simulation valuation model.
A summary of activity of the outstanding performance-based restricted stock units for the nine months ended September 30, 2022 is presented below:
Performance-Based
Restricted Stock Units
Awards outstanding as of December 31, 2021114,554 
Awards granted26,819 
Stock issued(60,053)
Awards cancelled(1,860)
Awards outstanding as of September 30, 202279,460 
We recognized $1.1 million and $2.6 million of compensation expense for performance-based restricted stock units for the three months ended September 30, 2022 and 2021, respectively. We recognized $3.3 million and $5.8 million of compensation expense for performance-based restricted stock units for the nine months ended September 30, 2022 and 2021, respectively.
Time-Based Restricted Stock Units
As of September 30, 2022, we had time-based restricted stock unit awards from 2022, 2021, 2020 and 2019 outstanding. The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed subsequent to the last grant anniversary date, except as noted below in Chief Executive Officer’s 2021 Equity Award Grants. Each time-based restricted stock unit represents a right to receive one share of Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. We account for forfeitures as they occur.
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A summary of activity of the outstanding time-based restricted stock units for the nine months ended September 30, 2022 is presented below:
Time-Based
Restricted Stock Units
Awards outstanding as of December 31, 202196,989 
Awards granted63,150 
Stock issued(47,600)
Awards cancelled(3,766)
Awards outstanding as of September 30, 2022108,773 
We recognized $2.4 million and $2.0 million of compensation expense for time-based restricted stock units for the three months ended September 30, 2022 and 2021, respectively. We recognized $7.0 million and $5.8 million of compensation expense for time-based restricted stock units for the nine months ended September 30, 2022 and 2021, respectively.
Chief Executive Officer’s 2021 Equity Award Grants
The terms of the performance-based and time-based restricted stock unit awards granted to our Chief Executive Officer (CEO), Bruce Hoechner, in February 2021 were modified from the standard language provisions from prior year awards to allow for accelerated vesting of the full awards provided certain criteria are met. Accounting Standards Codification (ASC) Topic 718: Compensation—Stock Compensation requires companies that allow for accelerated vesting of employees’ unvested equity upon retirement to recognize the expense from the date of grant to the date the employee becomes eligible to retire – regardless of whether or not the employee actually retires when he or she is eligible to retire. As a result, the $4.0 million of expense in 2021 related to the awards granted on February 10, 2021 to our CEO, which provide for immediate vesting upon retirement, were expensed from the date of the grant, February 10, 2021, through his retirement eligibility date, November 9, 2021.
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.
A summary of activity of the outstanding deferred stock units for the nine months ended September 30, 2022 is presented below:
Deferred Stock Units
Awards outstanding as of December 31, 20219,500 
Awards granted4,800 
Stock issued(7,450)
Awards outstanding as of September 30, 20226,850 
We recognized no compensation expense for deferred stock units for the three months ended September 30, 2022 and 2021, respectively. We recognized $1.3 million and $1.2 million of compensation expense for deferred stock units for the nine months ended September 30, 2022 and 2021, respectively.
Note 9 – Debt
On October 16, 2020, we entered into the Fourth Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Fourth Amended Credit Agreement). The Fourth Amended Credit Agreement amends and restates the Third Amended Credit Agreement, and provides for a revolving credit facility with up to a $450.0 million borrowing capacity, with sublimits for multicurrency borrowings, letters of credit and swing-line notes, in addition to a $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 Fourth Amended Credit Agreement). The Fourth Amended Credit Agreement extends the maturity, the date on which all amounts borrowed or outstanding under the Fourth Amended Credit Agreement are due, from February 17, 2022 to March 31, 2024.
All obligations under the Fourth Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Fourth Amended Credit Agreement (the Guarantors). The obligations are also secured by a Fourth Amended and Restated Pledge and Security Agreement, dated as of October 16, 2020, entered into by us and the
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Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of our and the Guarantors’ non-real estate assets. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.
On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that immediately after December 31, 2021, publication of most Euro, Swiss Franc, Japanese Yen and Pound Sterling LIBOR settings will permanently cease. On October 15, 2021, Rogers Corporation and JPMorgan Chase Bank, N.A. entered into an amendment (Amendment No. 1) to the Fourth Amended Credit Agreement to adopt a new benchmark interest rate to replace the discontinued LIBOR reference rates.
Borrowings under the Fourth Amended Credit Agreement can be made as alternate base rate loans, euro-currency loans, or RFR loans. Alternate base rate loans bear interest at a base reference rate plus a spread of 62.5 to 100.0 basis points, depending on our leverage ratio. The base reference rate is the greatest of (a) the prime rate in effect on such day, (b) the NYFRB rate in effect on such day plus ½ of 1%, and (c) the adjusted LIBOR for a one month interest period in dollars on such day (or if such day is not a business day, the immediately preceding business day) plus 1%. Euro-currency loans bear interest based on adjusted LIBOR plus a spread of 162.5 to 200.0 basis points, depending on our leverage ratio. RFR loans bears interest based upon the Sterling Overnight Index Average (SONIA) plus 0.0326% plus a spread of 162.5 to 200.0 basis points. Based on our leverage ratio as of September 30, 2022, the spread was 175.0 basis points.
In addition to interest payable on the principal amount of indebtedness outstanding, we incur an annual fee of 25 to 35 basis points (based upon our leverage ratio), paid quarterly, of the unused amount of the lenders’ commitments under the Fourth Amended Credit Agreement.
The Fourth Amended Credit Agreement contains customary representations and 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 total net leverage ratio of no more than 3.25 to 1.00, subject to a one-time election to increase the maximum total net leverage ratio to 3.50 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. We are permitted to net up to $50.0 million of unrestricted domestic cash and cash equivalents against indebtedness in the calculation of the total net leverage ratio.
The Fourth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 as of September 30, 2022.
We borrowed $30.0 million under the Fourth Amended Credit Agreement for the three months ended September 30, 2022, and $100.0 million for the nine months ended September 30, 2022. There were no borrowings for the three and nine months ended September 30, 2021. We are not required to make any quarterly principal payments under the Fourth Amended Credit Agreement. We made no payments for the three and nine months ended September 30, 2022, and no payments for the three months ended September 30, 2021. We made $