Rogers Corporation ROG Form 10-Q filing Q3 FY2024

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Statements of Operations 4

Condensed Consolidated Statements of Comprehensive Income 5

Condensed Consolidated Statements of Financial Position 6

Condensed Consolidated Statements of Shareholders’ Equity 7

Condensed Consolidated Statements of Cash Flows 8

Notes to Condensed Consolidated Financial Statements 9

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Position 26

Item 3. Quantitative and Qualitative Disclosures About Market Risk 34

Item 4. Controls and Procedures 34

Part II – Other Information

Item 1. Legal Proceedings 35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35

Item 5. Other 35

Item 6. Exhibits 36

Signatures 37

ROGERS CORPORATION

Defined Terms(1)

 (1)Certain terms used within this Form 10-Q are defined in the table above.

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited):

Item 1. Financial Statements

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

4

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

5

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(Dollars and shares in millions, except par value)

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

6

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

7

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

8

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 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, 2023.

Note 2 – Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component were as follows:

(1) Net of taxes of $1.7 million and $1.8 million as of September 30, 2024 and December 31, 2023, respectively. Net of taxes of $1.8 million and $1.9 million as of September 30, 2023 and December 31, 2022, respectively.

Note 3 – Derivatives and Hedging

The valuation of our derivative contracts used to manage their respective risks is described below:

• Foreign Currency – The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics.
• Commodity – The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models, which are collectively a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate and volatility. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. The time value valuation model incorporates changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date.

As of September 30, 2024, we did not have any derivative contracts that qualified for hedge accounting treatment.

Foreign Currency

During the three months ended September 30, 2024, we entered into U.S. dollar, euro, Korean won, Hungarian forint, and Japanese yen forward contracts. We entered into these foreign currency forward contracts to mitigate certain global transactional exposures. These contracts do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.

As of September 30, 2024, the notional values of the remaining foreign currency forward contracts were as follows:

Commodity

As of September 30, 2024, we had 12 outstanding contracts to hedge exposure related to the purchase of copper in our AES operating segment. These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations in the period in which the adjustment occurred.

As of September 30, 2024, the volume of our copper contracts outstanding was as follows:

Effects on Financial Statements

The impacts from our derivative instruments on the statements of operations and statements of comprehensive income were as follows:

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.

The fair values of derivative instruments measured at fair value on a recurring basis, categorized by contract type and level of inputs used in the valuation, were as follows:

(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the condensed consolidated statements of financial position.

Note 4 – Inventories

The “Inventories, net” line item in the condensed consolidated statements of financial position consisted of the following:

Note 5 - Balance Sheet Items

Restricted Cash

Our restricted cash balance, which was subject to contractual restrictions and not readily available, was recorded in the “Cash and cash equivalents” line item in the condensed consolidated statements of financial position, and served as collateral for letters of credit related to our environmental and workers’ compensation liabilities. This arrangement was terminated in the third quarter of 2024. Our restricted cash balance as of September 30, 2024 and December 31, 2023 was as follows:

Accounts Receivable

The “Accounts receivable, less allowance for credit losses” line item in the condensed consolidated statements of financial position consisted of the following:

Accounts Payable

The “Accounts payable” line item in the condensed consolidated statements of financial position consisted of the following:

Note 6 - Leases

Finance Leases

Amortization expense related to our finance lease right-of-use assets, which is primarily included in the “Cost of sales” line item of the condensed consolidated statements of operations, was immaterial for each of the three- and nine-month periods ended September 30, 2024 and 2023. Interest expense related to our finance lease obligations, which is included in the “Interest expense, net” line item of the condensed consolidated statements of operations, was immaterial for each of the three- and nine-month periods ended September 30, 2024 and 2023.

Operating Leases

We have operating leases primarily related to manufacturing and R&D facilities as well as vehicles. Our expenses and payments for operating leases were as follows:

Lease Balances in Statements of Financial Position

The assets and liabilities balances related to finance and operating leases reflected in the condensed consolidated statements of financial position were as follows:

Net Future Minimum Lease Payments

The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of September 30, 2024:

The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments:

Note 7 – Goodwill and Other Intangible Assets

Goodwill

The changes in the net carrying amount of goodwill by operating segment were as follows:

Other Intangible Assets

The carrying amount of other intangible assets were as follows:

In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations.

Amortization expense was $3.1 million and $3.3 million for the three months ended September 30, 2024 and 2023, respectively and $9.3 million and $10.0 million for the nine months ended September 30, 2024 and 2023, respectively. The estimated future amortization expense is $3.2 million, $11.1 million, $10.7 million, $10.3 million, and $8.0 million in 2024, 2025, 2026, 2027 and 2028, respectively. These amounts could vary based on changes in foreign currency exchange rates.

The weighted average amortization period as of September 30, 2024, by definite-lived other intangible asset class, is presented in the table below:

Note 8 – Pension Benefits and Other Postretirement Benefits

Pension and Other Postretirement Benefit Plans

As of September 30, 2024, we had one qualified noncontributory defined benefit pension plan, the Union Plan, which was frozen and ceased accruing benefits in 2013. Additionally, we sponsor other postretirement benefit plans, including multiple fully insured or self-funded medical plans and life insurance plans for certain retirees. The measurement date for all plans is December 31st for each respective plan year.

Components of Net Periodic Benefit Cost (Credit)

The components of net periodic benefit cost (credit) were as follows:

Employer Contributions

There were no required or voluntary contributions made to the Union Plan for each of the three- and nine-month periods ended September 30, 2024 and 2023. Additionally, we are not required to make additional contributions to the Union Plan for the remainder of 2024.

As there is no funding requirement for the other postretirement benefit plans, we funded these benefit payments as incurred, which were immaterial for each of the three- and nine-month periods ended September 30, 2024 and 2023, using cash from operations.

Note 9 – Debt

On March 24, 2023, we entered into a Fifth Amended Credit Agreement with each of the lenders party thereto, JPMorgan Chase Bank, N.A. as administrative agent, and HSBC Bank USA, National Association, Wells Fargo Bank, National Association, Citibank, N.A. and Citizens Bank, N.A. as Co-Syndication Agents. The Fifth Amended Credit Agreement amends and restates the Fourth Amended Credit Agreement, and provides for (1) a revolving credit facility with up to $450.0 million of revolving loans, with sub-limits for multicurrency borrowings, letters of credit and swing-line notes, and (2) a $225.0 million expansion feature. Borrowings may be used to finance working capital needs, for letters of credit and for general corporate purposes in the ordinary course of business, including the financing of permitted acquisitions (as defined in the Fifth Amended Credit Agreement). The Fifth Amended Credit Agreement extends the maturity, the date on which all amounts borrowed or outstanding under the Fifth Amended Credit Agreement are due, from March 31, 2024 to March 24, 2028.

All obligations under the Fifth Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Fifth Amended Credit Agreement (the Guarantors). The obligations are also secured by a Fifth Amended and Restated Pledge and Security Agreement, dated as of March 24, 2023, entered into by us and the Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of the non-real estate assets of ours and the Guarantors. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.

Borrowings under the Fifth Amended Credit Agreement bear interest based on one of two options. Alternate base rate loans will bear interest at a rate that includes a base reference rate plus a spread of 62.5 to 100.0 basis points, depending on our leverage ratio. The base reference rate will be the greater of the (1) prime rate, (2) federal funds effective rate plus 50 basis points, and (3) one-month Term SOFR plus 110 basis points. Loans bearing an interest rate determined by reference to the Adjusted Term SOFR Rate, the Adjusted EURIBOR, or the Adjusted TIBOR (each as defined in the Fifth Amended Credit Agreement) will bear interest based on the screen rate plus a spread of 162.5 to 200.0 basis points, depending on our leverage ratio. Based on our leverage ratio as of September 30, 2024, the spread was 162.5 basis points.

In addition to interest payable on the principal amount of indebtedness outstanding, we incur an annual fee of 25 to 35 basis points (based upon our leverage ratio), paid quarterly, of the unused amount of the lenders’ commitments under the Fifth Amended Credit Agreement.

The Fifth Amended Credit Agreement contains customary representations and warranties, covenants, mandatory prepayments and events of default under which the Company’s payment obligations may be accelerated. The financial covenants include a requirement to maintain (1) a total net leverage ratio of no more than 3.25 to 1.00, subject to a one-time election to increase the maximum total net leverage ratio to 3.75 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00. We are permitted to net up to $50.0 million of unrestricted domestic cash and cash equivalents in the calculation of the total net leverage ratio. The Fifth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 and our interest coverage ratio was greater than or equal to 3.00 to 1.00 as of September 30, 2024.

There were no borrowings under the Fifth Amended Credit Agreement during the three and nine months ended September 30, 2024 or the three and nine months ended September 30, 2023. We are not required to make any quarterly principal payments under the Fifth Amended Credit Agreement. We made no payments and a $30.0 million discretionary principal payment during the three and nine months ended September 30, 2024, respectively. We made $50.0 million and $135.0 million of discretionary principal payments during the three and nine months ended September 30, 2023, respectively.

We had no outstanding borrowings under our revolving credit facility as of September 30, 2024, and $30.0 million as of December 31, 2023. We had $1.7 million and $2.1 million of outstanding line of credit issuance costs as of September 30, 2024 and December 31, 2023, respectively, which will be amortized over the life of the Fifth Amended Credit Agreement.

Note 10 – Commitments and Contingencies

We are currently engaged in the following material environmental and legal proceedings:

Asbestos

Overview

We, like many other industrial companies, have been named as a defendant in a number of lawsuits filed in courts across the country by persons alleging personal injury from exposure to products containing asbestos. We have never mined, milled, manufactured or marketed asbestos; rather, we made and provided to industrial users a limited number of products that contained encapsulated asbestos, but we stopped manufacturing these products in the late 1980s. Most of the claims filed against us involve numerous defendants, sometimes as many as several hundred. In virtually all of the cases against us, the plaintiffs are seeking unspecified damages above a jurisdictional minimum against multiple defendants who may have manufactured, sold or used asbestos-containing products to which the plaintiffs were allegedly exposed and from which they purportedly suffered injury. Most of these cases are being litigated in Maryland, Illinois, Missouri and New York; however, we are also defending cases in other states. We continue to vigorously defend these cases, primarily on the basis of the plaintiffs’ inability to establish compensable loss as a result of exposure to our products. The indemnity and defense costs of our asbestos-related product liability litigation to date have been substantially covered by insurance.

The following table summarizes the change in number of asbestos claims outstanding for the nine months ended September 30, 2024:

(1) For the nine months ended September 30, 2024, 78 claims were dismissed and 24 claims were settled. Settlements totaled approximately $11.4 million for the nine months ended September 30, 2024.

Impact on Financial Statements

We recognize a liability for asbestos-related contingencies that are probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos-related matters, we record asbestos-related insurance receivables that are deemed probable.

The liability projection period covers all current and future indemnity and defense costs through 2064, which represents the expected end of our asbestos liability exposure with no further ongoing claims expected beyond that date. This conclusion was based on our history and experience with the claims data, the diminished volatility and consistency of observable claims data,

the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants, which is approaching the average life expectancy.

To date, the indemnity and defense costs of our asbestos-related product liability litigation have been substantially covered by insurance. Although we have exhausted coverage under some of our insurance policies, we believe that we have applicable primary, excess and/or umbrella coverage for claims arising with respect to most of the years during which we manufactured and marketed asbestos-containing products. In addition, we have entered into a cost sharing agreement with most of our primary, excess and umbrella insurance carriers to facilitate the ongoing administration and payment of claims covered by the carriers. The cost sharing agreement may be terminated by any party, but will continue until a party elects to terminate it. As of the filing date for this report, the agreement has not been terminated, and no carrier had informed us that it intends to terminate the agreement. We expect to continue to exhaust individual primary, excess and umbrella coverages over time, and there is no assurance that such exhaustion will not accelerate due to additional claims, damages and settlements or that coverage will be available as expected. We are responsible for uninsured indemnity and defense costs, and we incurred an immaterial amount of expenses for each of the three- and nine-month periods ended September 30, 2024 and 2023, respectively, related to such costs.

The amounts recorded for the asbestos-related liability and the related insurance receivables are based on facts known at the time and a number of assumptions. However, projecting for future events, such as the number of new claims to be filed each year, the average cost of disposing of such claims, the length of time it takes to dispose of such claims, coverage issues among insurers and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded. The full extent of our financial exposure to asbestos-related litigation remains very difficult to estimate and could include both compensatory and punitive damage awards.

Changes recorded in the estimated liability and estimated insurance recovery based on projections of asbestos litigation and corresponding insurance coverage, result in the recognition of expense or income.

Our projected asbestos-related liabilities and insurance receivables were as follows:

Environmental Voluntary Corrective Action Program

Our location in Rogers, Connecticut is part of the Connecticut Voluntary Corrective Action Program (VCAP). As part of this program, we partnered with the Connecticut Department of Energy and Environmental Protection (CT DEEP) to determine the corrective actions to be taken at the site related to contamination issues. We evaluated this matter and completed internal due diligence work related to the site in the fourth quarter of 2015. Remediation activities on the site are ongoing and are recorded as reductions to the accrual as they are incurred. We have incurred $0.7 million of aggregate remediation costs through September 30, 2024, and the accrual for future remediation efforts is $2.0 million.

Other Matters

In addition to the above issues, the nature and scope of our business brings us in regular contact with the general public and a variety of businesses and government agencies. Such activities inherently subject us to the possibility of litigation, including environmental and product liability matters that are defended and handled in the ordinary course of business. We have established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation will have a material adverse impact on our results of operations, financial position or cash flows.

Note 11 – Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.

The following table sets forth the computation of basic and diluted earnings per share:

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, 2024 and 2023, an immaterial number of shares were excluded.

Note 12 – Capital Stock and Equity Compensation

Share Repurchases

In 2015, we initiated a share repurchase program (the Program) of up to $100.0 million of the Company’s capital stock to mitigate the dilutive effects of stock option exercises and vesting of restricted stock units granted by the Company, in addition to enhancing shareholder value. In 2024, the Board of Directors authorized an additional $100.0 million to be used for share repurchases. The Program has no expiration date and may be suspended or discontinued at any time without notice. For the three and nine months ended September 30, 2024, we purchased no shares and 72,393 shares, respectively, for a total value of $0.0 million and $7.8 million, respectively, using cash from operations and cash on hand. As of September 30, 2024, $116.2 million remained available to purchase under the Program. Our stock repurchases may occur from time to time through open market purchases, privately negotiated transactions or plans designed to comply with Rule 10b5-1 promulgated under the Exchange Act.

Equity Compensation

Performance-Based Restricted Stock Units

As of September 30, 2024, we had outstanding performance-based restricted stock units with a market condition from 2024 and 2023. 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 performance-based restricted stock units with a market condition 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 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 2024 and 2023:

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.

As of September 30, 2024, we had outstanding performance-based restricted stock units with a performance condition from 2024. These awards generally cliff vest at the end of a two-year performance 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 performance-based restricted stock units with a performance condition have one measurement criterion: 2025 net revenue. The fair value of these awards was determined based on the market value of the underlying stock price at the grant date with cumulative compensation expense recognized to-date being increased or decreased based on the changes in the forecasted payout percentage as of the end of each reporting period. We account for forfeitures as they occur.

A summary of activity of the outstanding performance-based restricted stock units for the nine months ended September 30, 2024 is presented below:

We recognized $1.4 million of compensation expense for performance-based restricted stock units for each of the three month periods ended September 30, 2024 and 2023. We recognized $4.7 million and $2.6 million of compensation expense for performance-based restricted stock units for the nine months ended September 30, 2024 and 2023, respectively.

Time-Based Restricted Stock Units

As of September 30, 2024, we had time-based restricted stock unit awards from 2024, 2023, 2022 and 2021 outstanding. The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed subsequent to the last grant anniversary date. Each time-based restricted stock unit represents a right to receive one share of Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. We account for forfeitures as they occur.

A summary of activity of the outstanding time-based restricted stock units for the nine months ended September 30, 2024 is presented below:

We recognized $1.9 million and $2.5 million of compensation expense for time-based restricted stock units for the three months ended September 30, 2024 and 2023, respectively. We recognized $5.9 million and $7.1 million of compensation expense for time-based restricted stock units for the nine months ended September 30, 2024 and 2023, 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.

A summary of activity of the outstanding deferred stock units for the nine months ended September 30, 2024 is presented below:

We recognized no compensation expense for deferred stock units for the three months ended September 30, 2024, and 2023, respectively. We recognized $1.3 million and $1.2 million of compensation expense for the nine months ended September 30, 2024 and 2023, respectively.

Employee Stock Purchase Plan

We have an 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 mid-December and ending in mid-June and the second beginning in mid-June and ending in mid-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 model. We recognized $0.1 million and $0.4 million of expense associated with the ESPP for the three and nine months ended September 30, 2024, respectively.

Note 13 – Operating Segment Information

Our reporting structure is comprised of the following strategic operating segments: AES and EMS. The remaining operations, which represent our non-core businesses, are reported in the Other operating segment.

Our AES operating segment designs, develops, manufactures and sells circuit materials, ceramic substrate materials, busbars and cooling solutions for applications in EV/HEV, automotive (e.g., ADAS), aerospace and defense (e.g., antenna systems, communication systems and phased array radar systems), renewable energy (e.g., wind and solar), wireless infrastructure (e.g., power amplifiers, antennas and small cells), mass transit, industrial (e.g., variable frequency drives), connected devices (e.g., mobile internet devices and thermal solutions) and wired infrastructure (e.g., computing and internet protocol infrastructure) markets.

Our EMS operating segment designs, develops, manufactures and sells engineered material solutions for a wide variety of applications and markets. These include polyurethane and silicone materials used in cushioning, gasketing and sealing, and vibration management applications for EV/HEV, general industrial, portable electronics, automotive, mass transit, aerospace and defense, footwear and impact mitigation markets; customized silicones used in flex heater and semiconductor thermal applications for EV/HEV, general industrial, portable electronics, automotive, mass transit, aerospace and defense and medical markets; and polytetrafluoroethylene and ultra-high molecular weight polyethylene materials used in wire and cable protection, electrical insulation, conduction and shielding, hose and belt protection, vibration management, cushioning, gasketing and sealing, and venting applications for EV/HEV, general industrial, automotive and aerospace and defense markets.

Our Other operating segment consists of elastomer components for applications in the general industrial market, as well as elastomer floats for level sensing in fuel tanks, motors, and storage tanks applications in the general industrial and automotive markets.

The following table presents a disaggregation of revenue from contracts with customers and other pertinent financial information, for the periods indicated; inter-segment sales have been eliminated from the net sales data:

Net sales by operating segment and by geographic area were as follows:

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

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

We have contract assets primarily related to unbilled revenue for revenue recognized related to products that are deemed to have no alternative use whereby we have the right to payment. Revenue is recognized in advance of billing to the customer in these circumstances as billing is typically performed at the time of shipment to the customer. The unbilled revenue is included in contract assets on the condensed consolidated statements of financial position.

Contract assets by operating segment were as follows:

We did not have any contract liabilities as of September 30, 2024 or December 31, 2023. No impairment losses were recognized for each of the three- and nine-month periods ended September 30, 2024 and 2023, respectively, on any receivables or contract assets arising from our contracts with customers.

Note 14 – Supplemental Financial Information

Restructuring and Impairment Charges

The components of the “Restructuring and impairment charges” line item in the condensed consolidated statements of operations were as follows:

Restructuring Charges - Global Workforce Reduction

On February 16, 2023, we announced a plan to reduce our global workforce that was substantially completed in the first half of 2023, and concluded in the fourth quarter of 2023. The plan significantly reduced our manufacturing costs and operating expenses. We incurred $8.8 million in pre-tax restructuring charges related to this plan, of which $0.7 million and $8.8 million was incurred in the three and nine months ended September 30, 2023, respectively, and substantially all of which was in the form of cash-based expenditures, employee severance and other termination benefits.

Restructuring Charges - Facility Consolidations

In late 2022 and early 2023, we announced our intention to exit certain facilities in the U.S. and Asia. The plan significantly reduced our manufacturing costs and operating expenses. We have incurred $8.3 million in pre-tax restructuring charges to-date related to these facility consolidations, of which an immaterial amount and $0.2 million was incurred in the three and nine months ended September 30, 2024, respectively, and $1.3 million and $7.6 million was incurred in the three and nine months ended September 30, 2023, respectively, the majority of which were in the form of accelerated depreciation.

As part of our facility consolidations plan, in February 2023, we entered into an asset purchase agreement to sell our high-performance engineered cellular elastomer business in our EMS operating segment for a purchase price of $1.8 million. The first phase of the deal, which pertained to the net assets other than the land and building, was completed in late March 2023, while the second phase, which pertained to the sale of the land and building, was completed in early September 2023. Of the $1.8 million purchase price, $1.0 million and $0.8 million were allocated to the first and second phases of the deal, respectively. The first phase of the deal included $3.7 million in assets and $3.1 million in liabilities. The assets were primarily comprised of accounts receivable, contract assets and inventories, while the liabilities were primarily comprised of accounts payable and other accrued liabilities, along with the previously recognized accrual against the net assets of the business based on the estimated fair value of the business in December 2022. We incurred $1.2 million of selling costs in 2023, which were recorded in “Selling, general and administrative expenses” in our condensed consolidated statements of operations.

As of September 30, 2024, and as of December 31, 2023, we included $13.1 million of assets held for sale within the “Other current assets” financial statement line item of our condensed consolidated statements of financial position, representing the land and building at our Price Road facility in Chandler, Arizona. We expect the sale of this facility to be completed in late 2024 or early 2025. In September 2023, we entered into an agreement to sell one of our Suzhou, China facilities, which had a carrying value of $3.0 million, for $6.8 million resulting in a pre-tax gain of $1.9 million, inclusive of selling and disposal costs. The sale was completed in December 2023. The net impact of this transaction was recorded in the “Other operating (income) expense, net” line item in the condensed consolidated statements of operations.

Restructuring Charges - Manufacturing Footprint Consolidation

On June 6, 2024, we announced our intent to consolidate our high frequency circuit material manufacturing operations, impacting our Evergem, Belgium facility. We anticipate the plan to be completed in the second half of 2025. The plan is expected to significantly reduce our manufacturing costs and operating expenses. We estimate this will improve operating income between $7.0 million and $9.0 million annually. We expect to incur approximately $22.0 million to $28.0 million in pre-tax restructuring charges related to this plan, the majority of which are expected to be in the form of cash-based expenditures related to employee severance and other termination benefits. Most of the non-cash expenditures will be in the form of accelerated depreciation.

We incurred $5.9 million of restructuring charges related to this plan in the three months ended September 30, 2024, of which $4.7 million relates to severance and other termination benefits and $1.2 million in the form of accelerated depreciation. We incurred $6.3 million of restructuring charges related to this plan in the nine months ended September 30, 2024, of which $4.7 million relates to severance and other termination benefits and $1.6 million in the form of accelerated depreciation.

Severance and related benefits activity related to the manufacturing footprint consolidation plan is presented in the table below for the nine months ended September 30, 2024:

Restructuring Charges - R&D Facility Exit

On June 13, 2024, we announced that we will close our Burlington, Massachusetts Innovation Center facility by the end of 2024. We expect to incur approximately $1.3 million to $1.7 million in pre-tax restructuring charges related to this plan, almost all of which are expected to be in the form of cash-based expenditures related to employee severance and other termination benefits or non-cash expenditures in the form of accelerated depreciation and amortization.

We incurred $0.4 million in pre-tax restructuring charges in the three months ended September 30, 2024, respectively, of which $0.3 million relates to severance and other termination benefits. We incurred $1.3 million in pre-tax restructuring charges in the nine months ended September 30, 2024, of which $0.6 million relates to severance and other termination benefits and $0.7 million in the form of accelerated depreciation.

Allocation of Restructuring and Impairment Charges to Operating Segments

The following table summarizes the allocation of restructuring and impairment charges to our operating segments:

Other Operating (Income) Expense, Net

The components of “Other operating (income) expense, net” line item in the condensed consolidated statements of operations, were as follows:

In early February 2021, there was a fire at our UTIS manufacturing facility in Ansan, South Korea, which manufactures eSorba® polyurethane foams used in portable electronics and display applications. The site was safely evacuated and there were no reported injuries; however, there was extensive damage to the manufacturing site and some damage to nearby property. Commercial production at our new location in Siheung, South Korea commenced in late January 2023.

In connection with the UTIS fire, we recognized insurance recoveries of $0.7 million and $7.4 million related to our ongoing insurance claims for business interruption and property damage for the three and nine months ended September 30, 2023, respectively. We incurred $0.1 million and $0.6 million for various professional services for the three and nine months ended September 30, 2023, respectively, in connection with the pursuit of our insurance claims.

Interest Expense, Net

The components of “Interest expense, net” line item in the condensed consolidated statements of operations, were as follows:

Note 15 – Income Taxes

The below discussion of the effective tax rate for the periods presented in the consolidated statements of operations is in comparison to the 21% U.S. statutory federal income tax rate.

Our effective tax rate was 20.7% in the third quarter of 2024. During the third quarter of 2024, our effective tax rate was favorably impacted by a decrease of reserves for uncertain tax positions, partially offset by the mix of income in higher tax rate jurisdictions.

During the third quarter of 2023, our effective tax rate was 27.3%. During the third quarter of 2023, our effective tax rate was unfavorably impacted primarily by the mix of income in higher tax rate jurisdictions.

For the first nine months of 2024, the Company’s effective tax rate on its income before taxes was 28.1%. The effective tax rate for the first nine months of 2024 was unfavorably impacted primarily by (i) the write-off of deferred tax assets related to stock compensation and, (ii) the mix of income in higher tax rate jurisdictions, partially offset by (iii) a decrease of reserves for uncertain tax positions.

During the first nine months of 2023, the Company’s effective tax rate on its income before taxes was 30.0%. The effective tax rate for the first nine months of 2023 was unfavorably impacted by (i) the increase in the valuation allowance attributable to loss jurisdictions in which no benefit is anticipated to be realized and (ii) the mix of income in higher tax rate jurisdictions.

The OECD Pillar 2 guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax of 15%. Based on current enacted legislation effective in 2024 and our structure, we do not expect a

material impact in 2024. We are monitoring developments and evaluating the impacts these new rules will have on our future effective income tax rate, tax payments, financial condition, and results of operations.

Note 16 - Recent Accounting Standards

Recently Issued Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances segment reporting under Topic 280 by expanding the breadth and frequency of segment disclosures. This amendment will improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption of the standard requires using the retrospective approach. We will adopt ASU 2023-07 in our 2024 10-K using a retrospective transition method.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption of the standard should be applied on a prospective basis and retrospective application to all periods presented is permitted. We will adopt ASU 2023-09 in our 2025 10-K using a prospective transition method.

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Position

As used herein, the “Company,” “Rogers,” “we,” “us,” “our” and similar terms include Rogers Corporation and its subsidiaries, unless the context indicates otherwise.

Results of Operations

The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales:

Net sales decreased by 8.2% in the third quarter of 2024 compared to the third quarter of 2023. Our AES and EMS operating segments had net sales decreases of 11.2% and 3.9%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV, industrial power systems, ADAS and renewable energy markets in our AES operating segment and lower net sales in the aerospace and defense and portable electronics markets in our EMS operating segment. The decrease was partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets in our AES operating segment and higher net sales in the EV/HEV market in our EMS operating segment. We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjusted to softer end market demand.

Net sales decreased by 9.4% in the first nine months of 2024 compared to the first nine months of 2023. Our AES and EMS operating segments had net sales decreases of 10.9% and 7.1%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV, ADAS, industrial power systems and renewable energy markets in our AES operating segment and lower net sales in the general industrial and aerospace and defense markets in our EMS operating segment. The decrease was partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets in our AES operating segment and higher net sales in the EV/HEV market in our EMS operating segment. We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjusted to softer end market demand.

Gross margin as a percentage of net sales increased approximately 10 basis points to 35.2% in the third quarter of 2024 compared to 35.1% in the third quarter of 2023. Gross margin in the third quarter of 2024 improved due to favorable scrap and yield performance in our AES and EMS operating segments, less manufacturing spend from our factory optimization efforts in our AES operating segment, as well as favorable impacts in factory utilization and lower inventory reserves provisions in our EMS operating segment, partially offset by unfavorable impacts from lower volume and unfavorable mix in our AES and EMS operating segments.

Gross margin as a percentage of net sales decreased approximately 30 basis points to 33.8% in the first nine months of 2024 compared to 34.1% in the first nine months of 2023. Gross margin in the first nine months of 2024 declined due to unfavorable impacts from lower volume and unfavorable mix in our AES and EMS operating segments, as well as unfavorable factory utilization in our AES operating segment. This was partially offset by favorable scrap and yield performance and lower raw material costs in our AES and EMS operating segments, as well as favorable impacts in factory utilization and lower inventory reserves provisions in our EMS operating segment.

SG&A expenses increased 2.0% in the third quarter of 2024 from the third quarter of 2023, primarily due to a $0.8 million increase in software costs and a $0.2 million increase in recruiting, relocation and training expenses and a $0.1 million increase in fixed asset depreciation expense, as well as the non-recurrence of the $0.7 million gain on the sale of our high-performance engineered cellular elastomer business in 2023, partially offset by a $0.5 million decrease in professional services expense, a $0.5 million decrease in compensation and benefits expense and a $0.3 million decrease in other intangible asset amortization expense.

SG&A expenses decreased 4.7% in the first nine months of 2024 from the first nine months of 2023, primarily due to an $7.9 million decrease in professional services expense, a $1.0 million decrease in recruiting, relocation and training expenses and a $0.7 million decrease in other intangible asset amortization expense, partially offset by a $0.8 million increase in compensation and benefits expense, a $1.3 million increase in software costs and a $0.4 million increase in fixed asset depreciation expense, as well as the non-recurrence of the $0.7 million gain on the sale of our high-performance engineered cellular elastomer business in 2023. The decrease in professional services expense was primarily attributable to the non-recurrence of the $7.6 million of non-routine shareholder advisory costs and $1.1 million of expenses in connection with the sale of our high-performance engineered cellular elastomer business.

R&D expenses increased 3.8% in the third quarter of 2024 from the third quarter of 2023 due to a $0.7 million increase in trial costs for alternative raw materials, a $0.4 million increase in professional services expense and a $0.1 million increase in fixed assets depreciation expense, partially offset by a $0.4 million decrease in compensation and benefits expense.

R&D expenses increased 3.9% in the first nine months of 2024 from the first nine months of 2023 due to a $1.8 million increase in trial costs for alternative raw materials and a $0.5 million increase in fixed assets depreciation expense, partially offset by a $0.7 million decrease in compensation and benefits expense.

We incurred restructuring charges and related expenses in 2024 associated with our announced intent to wind down manufacturing operations in our Evergem, Belgium facility for our AES operating segment and our announced exit from our Burlington, Massachusetts Innovation Center facility. We recognized restructuring charges and related expenses pertaining to these restructuring plans of $6.3 million and $7.6 million in the three and nine months ended September 30, 2024.

We incurred restructuring charges and related expenses in 2024 and 2023 associated with the announced reduction of our global workforce along with certain facility consolidation efforts, which were substantially completed as of December 31, 2023. The plans significantly reduced our manufacturing costs and operating expenses. We recognized restructuring charges and related expenses pertaining to these restructuring projects of an immaterial amount and $0.2 million in the three and nine months ended September 30, 2024, respectively, and $2.0 million and $16.4 million in the three and nine months ended September 30, 2023, respectively. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

With respect to other operating (income) expense, net, we recognized no income and income of $0.8 million in the third quarter of 2024 and 2023, respectively, and no income and income of $7.5 million in the first nine months of 2024 and 2023, respectively. The impact in the second quarter and first nine months of 2023 primarily consisted of insurance recoveries, partially offset by professional service costs, from the fire at our UTIS manufacturing facility in Ansan, South Korea. For additional information, refer to “Note 14 – Supplemental Financial Information” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

As of September 30, 2024, we had two unconsolidated joint ventures, each 50% owned: RIC and RIS. Equity income in those unconsolidated joint ventures decreased $0.2 million in the third quarter of 2024 from the third quarter of 2023 and decreased $0.3 million in the first nine months of 2024 from the first nine months of 2023. On a quarter-to-date basis and a year-to-date basis, the decrease was due to lower net sales and unfavorable operational performance for RIS, partially offset by higher net sales and lower SG&A costs for RIC. The higher net sales for RIC was primarily driven by the portable electronics market in Asia.

Other income (expense), net decreased to expense of $1.5 million in the third quarter of 2024 from income of $0.7 million in the third quarter of 2023. On a quarter-to-date basis, the decrease was due to an unfavorable year-over-year change in impacts from our foreign currency transactions and an unfavorable year-over-year change in impacts from our foreign currency derivatives, partially offset by a favorable year-over-year change in impacts from our copper derivative contracts.

Other income (expense), net decreased to expense of $0.8 million in the first nine months of 2024 from income of less than $0.1 million in the first nine months of 2023. On a year-to-date basis, the decrease was due to an unfavorable year-over-year change in impacts from our foreign currency derivatives, partially offset by a favorable year-over-year change in impacts from our foreign currency transactions and a favorable year-over-year change in impacts from our copper derivative contracts.

Interest expense, net, decreased by $2.3 million in the third quarter of 2024 from the third quarter of 2023, and decreased by $7.6 million in the first nine months of 2024 from the first nine months of 2023. The decreases on a year-over-year quarter-to-date basis and a year-to-date basis were primarily due to a lower weighted-average outstanding borrowings under our revolving credit facility.

The below discussion of the effective tax rate for the periods presented in the consolidated statements of operations is in comparison to the 21% U.S. statutory federal income tax rate.

Our effective tax rate was 20.7% in the third quarter of 2024. During the third quarter of 2024, our effective tax rate was favorably impacted by a decrease of reserves for uncertain tax positions, partially offset by the mix of income in higher tax rate jurisdictions.

During the third quarter of 2023, our effective tax rate was 27.3%. During the third quarter of 2023, our effective tax rate was unfavorably impacted primarily by the mix of income in higher tax rate jurisdictions.

For the first nine months of 2024, the Company’s effective tax rate on its income before taxes was 28.1%. The effective tax rate for the first nine months of 2024 was unfavorably impacted primarily by (i) the write-off of deferred tax assets related to stock compensation and, (ii) the mix of income in higher tax rate jurisdictions, partially offset by (iii) a decrease of reserves for uncertain tax positions.

During the first nine months of 2023, the Company’s effective tax rate on its income before taxes was 30.0%. The effective tax rate for the first nine months of 2023 was unfavorably impacted by (i) the increase in the valuation allowance attributable to loss jurisdictions in which no benefit is anticipated to be realized and (ii) the mix of income in higher tax rate jurisdictions.

Operating Segment Net Sales and Operating Income

Advanced Electronics Solutions

AES net sales decreased by 11.2% in the third quarter of 2024 compared to the third quarter of 2023. The decrease in net sales over the third quarter of 2023 was primarily driven by lower net sales in the EV/HEV, industrial power systems, ADAS and renewable energy markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to softer end market demand.

AES net sales decreased by 10.9% in the first nine months of 2024 compared to the first nine months of 2023. The decrease in net sales over the first nine months of 2023 was primarily driven by lower net sales in the EV/HEV, ADAS, industrial power systems and renewable energy markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense markets. We experienced lower EV/HEV net sales as customers continued to manage inventory levels and adjusted to softer end market demand.

We recognized operating income of $0.3 million in the third quarter of 2024 compared to an operating income of $5.7 million in the third quarter of 2023. The decrease in operating income was primarily due to a $4.5 million unfavorable year-over-year change in restructuring charges, unfavorable impacts from lower volume and unfavorable mix and unfavorable factory utilization. The decrease in operating income was partially offset by favorable scrap and yield performance. As a percentage of net sales, the operating income in the third quarter of 2024 was 0.3% compared to 4.5% of operating income reported in the third quarter of 2023.

We recognized operating income of $7.7 million in the first nine months of 2024 compared to operating income of $6.0 million in the first nine months of 2023. The increase in operating income was primarily due to a $3.0 million favorable year-over-year change in restructuring charges, as well as favorable scrap and yield performance and lower raw material costs. The increase in operating income was partially offset by unfavorable impacts from lower volume and unfavorable mix as well as unfavorable factory utilization. As a percentage of net sales, operating income in the first nine months of 2024 was 2.2% compared to 1.5% of operating income reported in the first nine months of 2023.

Elastomeric Material Solutions

EMS net sales decreased by 3.9% in the third quarter of 2024 compared to the third quarter of 2023. The decrease in net sales over the third quarter of 2023 was primarily driven by lower net sales in the aerospace and defense and portable electronics markets, partially offset by higher net sales in the EV/HEV market.

EMS net sales decreased by 7.1% in the first nine months of 2024 compared to the first nine months of 2023. The decrease in net sales over the first nine months of 2023 was primarily driven by lower net sales in the general industrial and aerospace and defense markets, partially offset by higher net sales in the EV/HEV market.

We recognized operating income of $13.2 million in the third quarter of 2024 compared to operating income of $19.9 million in the third quarter of 2023. The decrease in operating income was due to a $0.6 million unfavorable year-over-year change in charges/benefits related to the UTIS fire, higher general and administrative expenses due to our capacity expansion efforts in Suzhou, China, higher trial costs for alternative raw materials and the non-recurrence of the $0.7 million gain on the sale of our high-performance engineered cellular elastomer business in 2023, as well as unfavorable impacts from lower volume and unfavorable mix. The decrease in operating income was partially offset by a $0.2 million favorable year-over-year change in restructuring charges, favorable scrap and yield performance, favorable impacts in factory utilization and lower inventory reserves provisions. As a percentage of net sales, operating income in the third quarter of 2024 was 14.0% compared to an operating income of 20.3% reported in the third quarter of 2023.

We recognized operating income of $25.7 million in the first nine months of 2024 compared to operating income of $43.3 million in the first nine months of 2023. The decrease in operating income was due to a $6.8 million unfavorable year-over-year change in charges/benefits related to the UTIS fire, higher general and administrative expenses due to our capacity expansion efforts in Suzhou, China, higher trial costs for alternative raw materials and the non-recurrence of the $0.7 million gain on the sale of our high-performance engineered cellular elastomer business in 2023, as well as unfavorable impacts from lower volume and unfavorable mix. The decrease in operating income was partially offset by a $5.6 million favorable year-over-year change in restructuring charges, as well as favorable scrap and yield performance, favorable impacts in factory utilization, lower raw material costs and lower inventory reserves provisions. As a percentage of net sales, operating income in the first nine months of 2024 was 9.4% compared to 14.6% reported in the first nine months of 2023.

Other

Net sales in this segment decreased by 18.8% in the third quarter of 2024 from the third quarter of 2023. Operating income decreased 31.3% in the third quarter of 2024 compared to the third quarter of 2023. The decrease in operating income was primarily driven by unfavorable impacts from lower volume. As a percentage of net sales, the operating income in the third quarter of 2024 was 28.2% compared to an operating income of 33.5% reported in the third quarter of 2023.

Net sales in this segment decreased by 14.6% in the first nine months of 2024 from the first nine months of 2023. Operating income decreased 23.6% in the first nine months of 2024 compared to the first nine months of 2023. The decrease in operating income was primarily driven by unfavorable impacts from lower volume and unfavorable factory utilization. As a percentage of net sales, operating income in the first nine months of 2024 was 31.1% compared to 34.6% in the first nine months of 2023.

Liquidity, Capital Resources and Financial Position

We believe that our existing sources of liquidity and cash flows that we expect to generate from our operations, together with our available credit facilities, will be sufficient to fund our operations, currently planned capital expenditures, research and

development efforts and our debt service commitments, for at least the next 12 months. We regularly review and evaluate the adequacy of our cash flows, borrowing facilities and banking relationships in an effort to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives.

The following table illustrates the location of our cash and cash equivalents by our three major geographic areas:

Approximately $93.5 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of September 30, 2024. We did not make any changes in the nine months ended September 30, 2024 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested.

Changes in key financial position accounts and other significant changes in our statements of financial position from December 31, 2023 to September 30, 2024 were as follows:

• Cash and cash equivalents were $146.4 million as compared to $131.7 million as of December 31, 2023, an increase of $14.7 million, or 11.2%. This increase was primarily due to cash flows provided by operations, partially offset by $30.0 million in discretionary principal payments on our revolving credit facility, $40.7 million in capital expenditures, $7.9 million in share repurchases and $1.3 million in tax payments related to net share settlement of equity awards.
• Accounts receivable, net decreased 3.5% to $156.3 million as of September 30, 2024 from $161.9 million as of December 31, 2023. The decrease from year-end was primarily due to a $4.1 million receipt of previously recognized UTIS fire insurance receivables for our business interruption claims and a $1.5 million decrease in our income taxes receivable.
• Inventories, net increased 0.6% to $154.4 million as of September 30, 2024, from $153.5 million as of December 31, 2023, primarily driven by higher finished goods and raw materials levels, partially offset by higher inventory reserves provisions.
• Borrowings under revolving credit facility were nil as of September 30, 2024 compared to $30.0 million as of December 31, 2023. This decrease was due to $30.0 million in discretionary principal payments on our revolving credit facility made in the first three months of 2024. For additional information regarding this facility and the Fifth Amended Credit Agreement, refer to “Note 9 – Debt” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

In 2024, we expect capital spending to be in the range of approximately $50.0 million to $60.0 million. We plan to fund our capital spending in 2024 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.

Restrictions on Payment of Dividends

The Fifth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 as of September 30, 2024.

Contingencies

During the third quarter of 2024, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to “Note 10 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.

Critical Accounting Policies

There were no material changes in our critical accounting policies during the third quarter of 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our exposure to market risk during the third quarter of 2024. For discussion of our exposure to market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” contained in our Annual Report.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We conducted, with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d- 15(e) under the Exchange Act, as of September 30, 2024. Our disclosure controls and procedures are designed (i) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting during the third quarter of the fiscal year ended December 31, 2024, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

Part II - Other Information

Item 1. Legal Proceedings

Refer to the discussion of certain environmental, asbestos and other litigation matters in “Note 10 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Items 2 (a) and (b) are not applicable.

(c) Stock Repurchases

For the three months ended September 30, 2024, we repurchased no shares under a $200.0 million share repurchase program approved by our Board of Directors. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice. As of September 30, 2024, $116.2 million remained for repurchase under the share repurchase program. All repurchases are made using cash from operations. Our stock repurchases may occur from time to time through open market purchases, privately negotiated transactions or plans designed to comply with Rule 10b5-1 promulgated under the Exchange Act.

Item 5. Other

Item 5. Other Information

During the three months ended September 30, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits

List of Exhibits:

10.1 Letter Agreement between the Company and Laura Russell, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on August 12, 2024. 31.1 Certification of President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. 31.2 Certification of Vice President and Interim Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. (32) Certification of President and Chief Executive Officer (Principal Executive Officer) and Vice President and Interim Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith. (101) The following materials from Rogers Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and September 30, 2023, (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and September 30, 2023, (iii) Condensed Consolidated Statements of Financial Position as of September 30, 2024 and December 31, 2023, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and September 30, 2023, (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2024 and September 30, 2023, (vi) Notes to Condensed Consolidated Financial Statements and (vii) Cover Page. (104) The cover page from Rogers Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, formatted in iXBRL and contained in Exhibit 101.