What changed in ROGERS CORP's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of ROGERS CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+221 added−207 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)
Top changes in ROGERS CORP's 2023 10-K
221 paragraphs added · 207 removed · 136 edited across 7 sections
- Item 1A. Risk Factors+97 / −54 · 37 edited
- Item 7. Management's Discussion & Analysis+73 / −75 · 57 edited
- Item 1. Business+35 / −55 · 29 edited
- Item 3. Legal Proceedings+1 / −10 · 1 edited
- Item 5. Market for Registrant's Common Equity+7 / −6 · 5 edited
Item 1. Business
Business — how the company describes what it does
29 edited+6 added−26 removed27 unchanged
Item 1. Business
Business — how the company describes what it does
29 edited+6 added−26 removed27 unchanged
2022 filing
2023 filing
Biggest changeAmong the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation: • the duration and impacts of the novel coronavirus (COVID-19) global pandemic and efforts to contain its transmission and distribute vaccines, including the effect of these factors on our business, suppliers, supply chains, customers, end users and economic conditions generally; • failure to capitalize on, volatility within, or other adverse changes with respect to the Company’s growth drivers, including advanced mobility and advanced connectivity, such as delays in adoption or implementation of new technologies; • failure to successfully execute on the Company’s long-term growth strategy as a standalone company; • uncertain business, economic and political conditions in the United States (U.S.) and abroad, particularly in China, South Korea, Germany, Belgium, England and Hungary, where we maintain significant manufacturing, sales or administrative operations; • the trade policy dynamics between the U.S. and China reflected in trade agreement negotiations, the imposition of tariffs and other trade restrictions, as well as the potential for U.S.-China supply chain decoupling; • fluctuations in foreign currency exchange rates; • our ability to develop innovative products and the extent to which they are incorporated into end-user products and systems; • the extent to which end-user products and systems incorporating our products achieve commercial success; • the ability and willingness of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely and cost-effective manner; • intense global competition affecting both our existing products and products currently under development; • business interruptions due to catastrophes or other similar events, such as natural disasters, war, terrorism or public health crises; • the impact of sanctions, export controls and other foreign asset or investment restriction; • failure to realize, or delays in the realization of, anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses; • our ability to attract and retain management and skilled technical personnel; • our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights; • changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate; • failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants; • the outcome of ongoing and future litigation, including our asbestos-related product liability litigation; • changes in environmental laws and regulations applicable to our business; • disruptions in, or breaches of, our information technology systems; and • our terminated merger with DuPont de Nemours, Inc.
Biggest changeAmong the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation: • failure to capitalize on, volatility within, or other adverse changes with respect to our growth drivers, such as delays in adoption or implementation of new technologies; • failure to successfully execute on our long-term growth strategy as a standalone company; • uncertain business, economic and political conditions in the U.S. and abroad, particularly in China, South Korea, Germany, Belgium, England and Hungary, where we maintain significant manufacturing, sales or administrative operations; • the trade policy dynamics between the U.S. and China reflected in trade agreement negotiations, the imposition of tariffs and other trade restrictions, as well as the potential for U.S.-China supply chain decoupling; • fluctuations in foreign currency exchange rates; • our ability to develop innovative products and the extent to which they are incorporated into end-user products and systems; • the extent to which end-user products and systems incorporating our products achieve commercial success; • the ability and willingness of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely and cost-effective manner; • intense global competition affecting both our existing products and products currently under development; • business interruptions due to catastrophes or other similar events, such as natural disasters, war, terrorism or public health crises; • the impact of sanctions, export controls and other foreign asset or investment restriction; • failure to realize, or delays in the realization of, anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses; • our ability to attract and retain management and skilled technical personnel; • our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights; • changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate; • failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants; • the outcome of ongoing and future litigation, including our asbestos-related product liability litigation; • changes in environmental laws and regulations applicable to our business; • disruptions in, or breaches of, our information technology systems; and • our terminated merger with DuPont, which may cause us to incur substantial costs that may adversely affect our financial results and operations and the market price of our capital stock, including as a result of litigation.
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 and printing 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; 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.
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; 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.
Other 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 5 markets. We sell our elastomer components under our ENDUR ® trade name and our floats under our NITROPHYL ® trade name.
Other 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. We sell our elastomer components under our ENDUR ® trade name and our floats under our NITROPHYL ® trade name.
Available Information We make available on our website (http://www.rogerscorp.com), or through a link posted on our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, reports filed by our executive officers and directors pursuant to Section 16 of the Exchange Act, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).
Available Information We make available on our website (http://www.rogerscorp.com), or through a link posted on our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed by our executive officers and directors pursuant to Section 16 of the Exchange Act, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
As of December 31, 2022, our AES operating segment had manufacturing and administrative facilities in Chandler, Arizona; Rogers, Connecticut; Bear, Delaware; Eschenbach, Germany; Evergem, Belgium; Budapest, Hungary; and Suzhou, China. Elastomeric Material Solutions Our EMS operating segment designs, develops, manufactures and sells engineered material solutions for a wide variety of applications and markets.
As of December 31, 2023, our AES operating segment had manufacturing and administrative facilities in Chandler, Arizona; Rogers, Connecticut; Bear, Delaware; Eschenbach, Germany; Evergem, Belgium; Budapest, Hungary; and Suzhou, China. Elastomeric Material Solutions Our EMS operating segment designs, develops, manufactures and sells engineered material solutions for a wide variety of applications and markets.
We also make available on our website the charters for our Audit Committee, Compensation and Organization Committee, and Nominating and Governance Committee, in addition to our Corporate Governance Guidelines, Bylaws, Code of Business Ethics, and Compensation Recovery Policy. Our website is not incorporated into or a part of this Form 10-K. 8
We also make available on our website the charters for our Audit Committee, Compensation and Organization Committee, and Nominating and Governance Committee, in addition to our Corporate Governance Guidelines, Bylaws, Code of Business Ethics, and Compensation Recovery Policy. Our website is not incorporated into or a part of this Annual Report on Form 10-K. 8
As of December 31, 2022, our EMS operating segment had manufacturing and administrative facilities in Rogers, Connecticut; Woodstock, Connecticut; Bear, Delaware; Carol Stream, Illinois; Narragansett, Rhode Island; Evergem, Belgium; Blackburn, England; Siheung, South Korea; and Suzhou, China.
As of December 31, 2023, our EMS operating segment had manufacturing and administrative facilities in Rogers, Connecticut; Woodstock, Connecticut; Bear, Delaware; Carol Stream, Illinois; Narragansett, Rhode Island; Evergem, Belgium; Blackburn, England; Siheung, South Korea; and Suzhou, China.
We believe these materials have characteristics that offer performance and other functional advantages in many market applications, which serve to differentiate our products from other commonly available materials. AES products are sold globally to converters, fabricators, distributors and original equipment manufacturers (OEMs).
We believe these materials have characteristics that offer performance and other functional advantages in many market applications, which serve to differentiate our products from other commonly available materials. AES products are sold globally to converters, fabricators, distributors and OEMs.
We also own 50% of two unconsolidated joint ventures: (1) Rogers Inoac Corporation (RIC), a joint venture established in Japan to design, develop, manufacture and sell PORON ® products predominantly for the Japanese market and (2) Rogers INOAC Suzhou Corporation (RIS), a joint venture established in China to design, develop, manufacture and sell PORON ® products primarily for RIC customers in various Asian countries.
We also own 50% of two unconsolidated joint ventures: (1) RIC, a joint venture established in Japan to design, develop, manufacture and sell PORON ® products predominantly for the Japanese market and (2) RIS, a joint venture established in China to design, develop, manufacture and sell PORON ® products primarily for RIC customers in various Asian countries.
Trade names for our AES products include: curamik ® , ROLINX ® , RO4000 ® Series, RO3000 ® Series, RT/duroid ® , CLTE Series ® , TMM ® , AD Series ® , DiClad ® Series, CuClad ® Series, Kappa ® , COOLSPAN ® , TC Series ® , 92ML™, IsoClad ® Series, MAGTREX ® , XTremeSpeed™ RO1200™ Laminates, IM Series™, 2929 Bondply, SpeedWave ® Prepreg, RO4400™/RO4400T™ Series and Radix™.
Trade names for our AES products include: curamik ® , ROLINX ® , RO4000 ® Series, RO3000 ® Series, RT/duroid ® , CLTE Series ® , TMM ® , AD Series ® , DiClad ® Series, CuClad ® Series, Kappa ® , COOLSPAN ® , TC Series ® , IsoClad ® Series, MAGTREX ® , IM Series™, 2929 Bondply, SpeedWave ® Prepreg, RO4400™/RO4400T™ Series and Radix™.
Larry Schmid 61 Senior Vice President, Global Operations and Supply Chain 2023 President, Pilko & Associates, from 2020 to 2023; Global Manufacturing & Engineering Operations Director, The Dow Chemical Company, Performance Materials & Coatings, from 2018 to 2019; Global Operations Director, The Dow Chemical Company, Dow Performance Silicones, from 2016 to 2018.
Larry Schmid 62 Senior Vice President, Global Operations and Supply Chain 2023 President, Pilko & Associates, from January 2020 to January 2023; Global Manufacturing & Engineering Operations Director, The Dow Chemical Company, Performance Materials & Coatings, from June 2018 to June 2019; Global Operations Director, The Dow Chemical Company, Dow Performance Silicones, from June 2016 to June 2018.
Operating Segments Advanced Electronics Solutions Our AES operating segment designs, develops, manufactures and sells circuit materials, ceramic substrate materials, busbars and cooling solutions for applications in EV/HEV, wireless infrastructure (i.e., power amplifiers, antennas and small cells), automotive (i.e., ADAS), telematics and thermal solutions, aerospace and defense (i.e., antenna systems, communication systems and phased array radar systems), mass transit, clean energy (i.e., variable frequency drives, renewable energy), connected devices (i.e., mobile internet devices and thermal solutions) and wired infrastructure (i.e., computing and internet protocol (IP) infrastructure) markets.
Operating Segments Advanced Electronics Solutions 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.
We believe that our diversity, equity and inclusion will make the Company a more desirable workplace and will lead to improved business performance. 7 Information About Our Executive Officers Our executive officers as of March 1, 2023 were as follows: Name Age Present Position Year Appointed to Present Position Other Relevant Positions Held R.
We believe that our diversity, equity and inclusion will make our Company a more desirable workplace and will lead to improved business performance. 7 Information About Our Executive Officers Our executive officers as of February 26, 2024 were as follows: Name Age Present Position Year Appointed to Present Position Other Relevant Positions Held R.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Company Background and Strategy Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers’ demanding challenges.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. 4 Company Background Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers’ demanding challenges. We operate two strategic operating segments: AES and EMS.
Manufacturing and Raw Materials The key raw materials used in our business are as follows: for our AES operating segment, copper, polymer, polytetraflouroethylene, fiberglass materials and ceramic and brazing paste materials, including silver; and for our EMS operating segment, polyol, isocyanates, polytetraflouroethylene, ultra-high molecular weight polyethylene materials and silicone materials.
Manufacturing and Raw Materials The key raw materials used in our business are as follows: for our AES operating segment, copper, including copper foil, polymer, polytetrafluoroethylene, fiberglass materials, ceramic and brazing paste materials, including silver, and various fillers and flame retardants; and for our EMS operating segment, polyol, isocyanates, polytetrafluoroethylene, ultra-high molecular weight polyethylene materials and silicone materials.
Approximately 400 of our domestic employees are covered by collective bargaining agreements or by specific labor agreements and approximately 800 of our European employees are covered by work council arrangements.
Approximately 300 of our domestic employees are covered by collective bargaining agreements or by specific labor agreements and approximately 600 of our European employees are covered by work council arrangements.
As of November 1, 2022, the parties had not received regulatory approval from SAMR. On November 1, 2022, the Company received from DuPont a notice of termination of the merger agreement.
As of November 1, 2022, the parties had not received regulatory approval from SAMR and on that date, DuPont issued a notice of termination of the merger agreement.
Colin Gouveia 59 President and Chief Executive Officer, Director, Principal Executive Officer 2022 Senior Vice President and General Manager of Elastomeric Material Solutions June 2019 to December 2022;Vice President and General Manager, Eastman Chemical Co., from December 2014 to June 2019.
Colin Gouveia 60 President and Chief Executive Officer, Director, Principal Executive Officer 2022 Senior Vice President and General Manager of EMS from June 2019 to December 2022; Vice President and General Manager, Eastman Chemical Co., from December 2014 to June 2019.
Risk Factors” and “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Position” and elsewhere in this report, any of which could cause actual results to differ 3 materially from historical results or anticipated results.
Management’s Discussion and Analysis of Results of Operations and Financial Position” and elsewhere in this Annual Report on Form 10-K, any of which could cause actual results to differ materially from historical results or anticipated results.
The merger agreement provided both Rogers Corporation and DuPont with a right to terminate the merger agreement if the merger had not closed on or before November 1, 2022. Consummation of the merger was subject to various customary closing conditions, including regulatory approval by the State Administration for Market Regulation of China (SAMR).
Consummation of the merger was subject to various customary closing conditions, including regulatory approval by the SAMR, and either party had the right to terminate the merger agreement if the merger had not closed on or before November 1, 2022.
No individual customer represented more than 10% of our total net sales for 2022; however, there are concentrations of OEM customers in our AES operating segment (semiconductor and automotive manufacturers).
We sold to approximately 3,200 customers worldwide in 2023, consisting primarily of OEMs and component suppliers. No individual customer represented more than 10% of our total net sales for 2023; however, there are concentrations of OEM customers in our AES operating segment (semiconductor and automotive manufacturers).
Ramakumar Mayampurath 58 Senior Vice President and Chief Financial Officer, Principal Financial Officer 2021 Vice President, Corporate Finance from December 2020 to May 2021; Vice President, Business Transformation from March 2020 to December 2020; Vice President, Financial Planning and Analysis from November 2014 to December 2020 Brian Larabee 56 Vice President and General Manager of Elastomeric Material Solutions 2022 Senior Director, Product Management from February 2021 to December 2022; Director, EMS New Product and Business Development from November 2016 to February 2021.
Brian Larabee 57 Senior Vice President and General Manager of Elastomeric Material Solutions 2023 Vice President and General Manager of EMS from November 2022 to November 2023; Senior Director, EMS Product Management from February 2021 to December 2022; Director, EMS New Product and Business Development from November 2016 to February 2021.
Health and Safety Promoting the health and safety of our employees is one of our most important objectives. We strive to minimize lost workdays and recordable incidents. To promote awareness and accountability, safety performance data is shared throughout the company and executive compensation includes safety performance factors.
Health and Safety Promoting the health and safety of our employees is one of our most important objectives. We strive to minimize lost workdays and recordable incidents. To promote awareness and accountability, our vision is clear: Everyone, Everywhere goes home safely Every Day.
Terminated Merger Agreement with DuPont On November 1, 2021, we entered into a definitive merger agreement to be acquired by DuPont in an all-cash transaction at a price of $277.00 per share of the Company’s capital stock.
Terminated Merger Agreement with DuPont On November 1, 2021, we entered into a definitive merger agreement to be acquired by DuPont in an all-cash transaction. Our shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022.
Forward-Looking Statements This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).
Item 1. Business As used herein, the “Company,” “Rogers,” “we,” “us,” “our” and similar terms include Rogers Corporation and its subsidiaries, unless the context indicates otherwise. Forward-Looking Statements This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.
Human Capital Management The Company’s continuing success derives from our talented and dedicated employees globally, who are responsible for the innovation, operations and ethics foundational to our business and its future.
Human Capital Management The Company’s continuing success derives from our talented and dedicated employees globally, who are responsible for the innovation, operations and ethics foundational to our business and its future. As of December 31, 2023, we employed approximately 3,300 people, of whom approximately 1,200 were employed in North America, 1,100 in the EMEA region and 1,000 in APAC region.
Pursuant to the terms of the merger agreement, the Company received a regulatory 4 termination fee from DuPont in the amount of $162.5 million, before taxes, and incurred a transaction-related fee of $20.4 million.
Pursuant to the terms of the merger agreement, we received a regulatory termination fee in the amount of $162.5 million, before taxes, and incurred a transaction-related fee of $20.4 million. 5 Sales and Competition We sell our materials and components primarily through direct sales channels positioned near major concentrations of our customers in North America, Europe and Asia.
(DuPont), which may cause us to incur substantial costs that may adversely affect our financial results and operations and the market price of our capital stock, including as a result of litigation. Our forward-looking statements are expressly qualified by these cautionary statements, which you should consider carefully, along with the risks discussed under the headings “Item 1A.
Our forward-looking statements are expressly qualified by these cautionary statements, which you should consider carefully, along with the risks discussed under the headings “Item 1A. Risk Factors” and “Item 7.
The global committee will continue to meet regularly to provide guidance to our organization as circumstances evolve. Employment Experience We take a comprehensive approach to the employment experience, striving to use a fair and inclusive recruiting process to select talented individuals.
Our commitment is to put safety first and we ask for everyone’s commitment to never compromise their safety or the safety of others. Employment Experience We take a comprehensive approach to the employment experience, striving to use a fair and inclusive recruiting process to select talented individuals.
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Item 1. Business As used herein, the “Company,” “Rogers,” “we,” “us,” “our” and similar terms include Rogers Corporation and its subsidiaries, unless the context indicates otherwise.
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Our remaining operations, which represent our non-core businesses, are reported in our Other operating segment. We are headquartered in Chandler, Arizona.
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We operate two strategic operating segments: Advanced Electronics Solutions (AES) and Elastomeric Material Solutions (EMS). The remaining operations, which represent our non-core businesses, are reported in our Other operating segment. We have a history of innovation and have established Innovation Centers for our research and development (R&D) activities in Chandler, Arizona; Burlington, Massachusetts; Eschenbach, Germany; and Suzhou, China.
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Ramakumar Mayampurath 60 Senior Vice President and Chief Financial Officer, Principal Financial Officer 2021 Vice President, Corporate Finance from December 2020 to May 2021; Vice President, Business Transformation from March 2020 to December 2020; Vice President, Financial Planning and Analysis from November 2014 to December 2020.
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We are headquartered in Chandler, Arizona. Our growth and profitability strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence.
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Jeff Tsao 45 Senior Vice President and General Manager of Advanced Electronics Solutions, Senior Vice President of Asia 2023 Vice President and General Manager of AES from September 2019 to November 2023; Vice President of Sales and Marketing of PES from December 2018 to September 2019; Global Sales Director of PES from August 2017 to November 2018.
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Our priorities in executing this strategy are focused on driving near-term improvements to profitability and improving the growth outlook for the Company over the next several years by further strengthening our focus on commercial activities, expanding capacity to meet customer demand and driving innovation.
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Jessica Morton 44 Vice President, General Counsel and Corporate Secretary 2023 Associate General Counsel and Assistant Secretary of FMC Corporation from April 2021 to March 2023; Assistant General Counsel and Assistant Secretary of FMC Corporation from April 2019 to March 2021; Assistant General Counsel of FMC Corporation from July 2016 to March 2019.
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As a market-driven organization, we are focused on capitalizing on growth opportunities in the increasing electrification of vehicles, including electric and hybrid electric vehicles (EV/HEV), and increasing use of advanced driver assistance systems (ADAS) in the automotive industry, the advancement of communication systems in aerospace and defense and the growth of 5G smartphones in the portable electronics industry.
Added
Griffin Gappert 50 Vice President and Chief Technology Officer 2023 Global Head of Innovation for Automotive OEMs at Henkel from April 2021 to August 2023; Vice President of Innovation and Technical Customer Service at Henkel from January 2020 to April 2021; Vice President of Product Development and Technical Customer Service at Henkel from June 2018 to January 2020; Global Technical Director of Industrial Supplies at Ashland Inc from June 2016 to May 2018.
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In addition to our focus on these markets, we sell into a variety of other markets including general industrial, clean energy, wireless infrastructure and mass transit.
Added
Michael Webb 56 Senior Vice President and Chief Administrative Officer 2023 Executive Vice President - Chief Human Resources Officer and Chief Administrative Officer at Nutrien from January 2018 to May 2022; Senior Vice President, Human Resources at Agrium from January 2014 to January 2018; Senior Vice President of Human Resources at HSBC from August 2010 to January 2014.
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Our sales and marketing approach is based on addressing these trends, while our strategy focuses on factors for success as a manufacturer of engineered materials and components: performance, reliability, technical service capabilities, cost, efficiency, innovation and technology. Through this strategy we expect to be able to drive further commercial wins, which provide the potential for higher growth in the future.
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We have also expanded our capabilities through organic investment and acquisitions and strive to ensure high quality solutions for our customers. Our operational excellence efforts are focused on driving significant near-term improvement in our profitability. These efforts include focusing on adding strategic new hires and improving processes and tools to achieve better performance.
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We have also taken specific cost improvement actions in the fourth quarter of 2022 and first quarter of 2023 that will benefit subsequent quarters. These actions include optimizing our manufacturing footprint, divesting non-core product lines and reduction to manufacturing and corporate employees.
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We continue to review and re-align our manufacturing and engineering footprint in an effort to maintain a leading competitive position globally and to support our customers’ growth initiatives. We seek to enhance our operational and financial performance by investing in research and development, manufacturing and materials efficiencies, and new product initiatives that respond to the needs of our customers.
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We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business.
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If we are able to successfully execute on our strategy, we see an opportunity to return to historical levels of profitability and accelerate revenue growth, relative to 2022, over the next several years, led by organic growth and complemented by targeted acquisitions.
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This outlook is supported by our participation in a number of fast-growing markets and by our strong competitive positions in these markets. The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will grow at compound annual growth rate of more than 25% over the next several years.
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Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. In each of these areas we have secured a number of design wins and have a strong pipeline, which provides confidence in our growth outlook.
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Other markets with a strong growth trajectory include ADAS, aerospace and defense, clean energy and portable electronics. Each of these markets is expected to contribute to our growth strategy.
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The merger agreement provided for the acquisition of Rogers Corporation by DuPont through the merger of Cardinalis Merger Sub, Inc., a wholly owned subsidiary of DuPont, with and into Rogers Corporation, with Rogers Corporation surviving the merger as a wholly owned subsidiary of DuPont. Company shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022.
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COVID-19 Update The global COVID-19 pandemic has affected and continues to affect Rogers’ business, operations and demand from customers with the emergence and spread of new variants of the virus.
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In response to the outbreak, Rogers prioritized the safety and well-being of its employees—including incentivizing vaccinations, implementing social distancing initiatives in its facilities, providing remote working arrangements for certain employees, expanding personal protective equipment usage, enhancing plant hygiene processes and extending employee benefits, while at the same time taking actions to preserve business continuity.
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Our non-manufacturing employees transitioned seamlessly to remote working arrangements and are effectively collaborating both internally and with our customers. Surges in COVID-19 cases in China resulted in lockdowns as well as various restrictions. These measures have not disrupted our manufacturing efforts, however, they are causing logistics challenges.
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Even since China ended its zero COVID policy in late 2022, although a significant percentage of our employees in Suzhou, China were diagnosed with COVID, our manufacturing was not materially disrupted and to date we have received no reports of permanent disability or death among our employees.
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We expect that the COVID-19 pandemic will have a continuing but uncertain impact on our business and operations in the short- and medium-term.
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Sales and Competition We sell our materials and components primarily through direct sales channels positioned near major concentrations of our customers in North America, Europe and Asia. We sold to approximately 3,500 customers worldwide in 2022, primarily OEMs and component suppliers.
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In 2022, our employees navigated the challenges from COVID-19, and, with an overarching commitment to health and safety, maintained a steady flow of materials for our customers, including for critical infrastructure and health applications. As of December 31, 2022, we employed approximately 3,800 people, of whom approximately 1,350 were employed in the U.S., 1,300 in Europe and 1,100 in China.
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As part of our efforts to promote employee safety related to COVID-19, we have taken a structured approach to control potential onsite exposures.
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We have global, regional and site-specific pandemic steering committees ensuring that policies and procedures are developed and implemented in accordance with recommendations put forth by the recognized health authorities in each part of the world in which we operate.
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All policy recommendations, new or changed, are reviewed and approved by our executive leadership team, ensuring timely communication to our employees prior to implementation. We continue to follow the guidance issued by recognized authorities around the world and make adjustments to our global, regional, and local policies as necessary.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
37 edited+60 added−17 removed65 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
37 edited+60 added−17 removed65 unchanged
2022 filing
2023 filing
Biggest changeWe are involved in various unresolved legal matters that arise in the ordinary course of our operations or otherwise, including asbestos-related product liability claims related to our operations before the 1990s. For additional information, refer to “Item 3. Legal Proceedings” and “Note 12 – Commitments and Contingencies” to “Item 8.
Biggest changeOur products may contain defects that we do not detect before sale, which may lead to warranty or damage claims against us or product recalls. We are involved in various unresolved legal matters that arise in the ordinary course of our operations or otherwise, including asbestos-related product liability claims related to our operations before the 1990s.
Risks related to our extensive international operations include the following: 9 • foreign currency fluctuations, particularly in the value of the euro, the Chinese renminbi, the South Korean won, the British pound, the Japanese yen and the Hungarian forint against the U.S. dollar; • economic and political instability due to regional or country-specific events or changes in relations between the U.S. and the countries in which we operate; • accounts receivable practices across countries, including longer payment cycles; • export control or customs matters, including tariffs and trade restrictions; • changes in multilateral and bilateral trade relations • complications in complying, and failure to comply, with a variety of laws and regulations applicable to our foreign operations, including due to unexpected changes in the laws or regulations of the countries in which we operate; • failure to comply with the Foreign Corrupt Practices Act or other applicable anti-corruption laws; • greater difficulty protecting our intellectual property; • compliance with foreign employment regulations, as well as work stoppages and labor and union disputes.
Risks related to our extensive international operations include the following: • foreign currency fluctuations, particularly in the value of the euro, the Chinese renminbi, the South Korean won, the British pound, the Japanese yen and the Hungarian forint against the U.S. dollar; • economic and political instability due to regional or country-specific events or changes in relations between the U.S. and the countries in which we operate; • accounts receivable practices across countries, including longer payment cycles; • export control or customs matters, including tariffs and trade restrictions; • changes in multilateral and bilateral trade relations; • complications in complying, and failure to comply, with a variety of laws and regulations applicable to our foreign operations, including due to unexpected changes in the laws or regulations of the countries in which we operate; • failure to comply with the Foreign Corrupt Practices Act or other applicable anti-corruption laws; 11 • greater difficulty protecting our intellectual property; and • compliance with foreign employment regulations, as well as work stoppages and labor and union disputes.
Such export controls, as well as retaliatory controls and tariffs that China has imposed and which remain in place to a certain extent under the Phase 1 agreement reached between the U.S. and China on January 15, 2020, could continue to restrict our ability to do business with Chinese customers.
Export controls, as well as retaliatory controls and tariffs that China has imposed and which remain in place to a certain extent under the Phase 1 agreement reached between the U.S. and China on January 15, 2020, could continue to restrict our ability to do business with Chinese customers.
If we are not successful in protecting our proprietary technology or if the protection afforded to us is not sufficiently broad, our competitors may be able to manufacture and offer products substantially similar to our own, thereby reducing demand for our products and adversely affecting our results of operations and financial position.
If we are not successful in protecting our proprietary technology or if the protection afforded to us is 14 not sufficiently broad, our competitors may be able to manufacture and offer products substantially similar to our own, thereby reducing demand for our products and adversely affecting our results of operations and financial position.
We may incur costs in connection with any obligations to transition away from the usage of PFAS-containing products, to dispose of PFAS-containing waste or to remediate any PFAS contamination, which could have a negative effect on our financial position, results of operations and cash flows.
We may therefore incur costs in connection with any obligations to transition away from the usage of PFAS-containing products, to dispose of PFAS-containing waste or to remediate any PFAS contamination, which could have a negative effect on our financial position, results of operations and cash flows.
Security breaches of our information technology systems, including through mobile devices, could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our customers, suppliers, business partners, employees or other third parties, which could result in our suffering significant financial and reputational damage.
Security 12 breaches of our information technology systems, including through mobile devices, could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our customers, suppliers, business partners, employees or other third parties, which could result in our suffering significant financial and reputational damage.
In addition, if we are unsuccessful in integrating any acquired company or business into our operations or if integration is more difficult than anticipated, we may experience disruptions that could harm our business and result in our failure to realize the anticipated 11 benefits of the acquisitions.
In addition, if we are unsuccessful in integrating any acquired company or business into our operations or if integration is more difficult than anticipated, we may experience disruptions that could harm our business and result in our failure to realize the anticipated benefits of the acquisitions.
The value of any design-in largely depends upon 10 the decision of our customers to manufacture their products or systems in sufficient production quantities, the commercial success of the end product and the extent to which the design of our customers’ products or systems could accommodate substitution of competitor products.
The value of any design-in largely depends upon the decision of our customers to manufacture their products or systems in sufficient production quantities, the commercial success of the end product and the extent to which the design of our customers’ products or systems could accommodate substitution of competitor products.
A consistent failure to introduce new products in a timely manner, achieve design wins or achieve market acceptance on commercially reasonable terms could materially adversely affect our business, results of operations and financial position.
A consistent failure to introduce new products in a timely manner, achieve design wins or 9 achieve market acceptance on commercially reasonable terms could materially adversely affect our business, results of operations and financial position.
This reliance subjects us to risks related to our potential inability to obtain an adequate supply of required raw materials, particularly given our use of lean manufacturing and just-in-time inventory techniques, and our reduced control over pricing and timing of delivery of raw materials.
This reliance subjects us to risks related to our potential inability to obtain an adequate supply of required raw materials, particularly given our use of lean manufacturing and just-in-time inventory techniques, and reduces our control over pricing and timing of delivery of raw materials.
Our credit agreement contains, and any future debt agreements into which we enter may contain, certain financial ratios and certain restrictive covenants that, among other things, limit our ability to incur indebtedness or liens, acquire other businesses, dispose of assets, or make investments.
Our credit agreement with JPMorgan Chase contains, and any future debt agreements into which we enter may contain, certain financial ratios and certain restrictive covenants that, among other things, limit our ability to incur indebtedness or liens, acquire other businesses, dispose of assets, or make investments.
Our proprietary technology supports our ability to compete effectively with other companies, and we seek to protect our intellectual property rights by obtaining domestic and foreign patents, trademarks and copyrights, and maintaining trade secrets for our manufacturing processes.
Our proprietary technology supports our ability to compete effectively with other companies, and we seek to protect our intellectual property rights by obtaining domestic and foreign patents, trademarks and copyrights, and maintaining trade secrets.
We maintain significant manufacturing and administrative operations in China, Germany, Belgium, England, South Korea and Hungary, and approximately 63% of our employees were located outside the U.S. as of December 31, 2022.
We maintain significant manufacturing and administrative operations in China, Germany, Belgium, England, South Korea and Hungary, and approximately 64% of our employees were located outside the U.S. as of December 31, 2023.
For the year ended December 31, 2022, approximately 69% of our net sales resulted from sales in foreign markets, with approximately 40% and 27% of such net sales occurring in Asia and Europe, respectively. We expect our net sales in foreign markets to continue to represent a substantial majority of our consolidated net sales.
For the year ended December 31, 2023, approximately 74% of our net sales resulted from sales in foreign markets, with approximately 40% and 31% of such net sales occurring in Asia and Europe, respectively. We expect our net sales in foreign markets to continue to represent a substantial majority of our consolidated net sales.
For instance, many foreign jurisdictions are actively considering changes to existing tax laws as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (OECD). If these changes are enacted, our tax obligations could increase in countries where we do business or sell our products.
For instance, many foreign jurisdictions are actively considering, and some have enacted, changes to existing tax laws as a result of the base erosion and profit shifting project undertaken by the OECD. As these changes are enacted, our tax obligations could increase in countries where we do business or sell our products.
Such liability may be joint and several, meaning that we could be held responsible for more than our share of the liability involved, or even the entire liability. 14 For additional information regarding our material legal proceedings, refer to “Note 12 – Commitments and Contingencies” to “Item 8. Financial Statements and Supplementary Data.”
Such liability may be joint and several, meaning that we could be held responsible for more than our share of the liability involved, or even the entire liability. For additional information regarding our material legal proceedings, refer to “Note 10 – Commitments and Contingencies” to “Item 8.
Risks Relating to Our Business, Strategy and Operations Failure to capitalize on, volatility within, or other adverse changes with respect to the Company’s growth drivers, including advanced mobility and advanced connectivity, may adversely affect our business.
Risks Relating to Our Business, Strategy and Operations Failure to capitalize on, volatility within, or other adverse changes with respect to the Company’s growth drivers, including significant growth markets and high growth markets, may adversely affect our business.
Our ability to make scheduled payments on these borrowings and to satisfy financial ratios may be adversely affected by changes in economic or business conditions beyond our control, while the restrictive covenants to which we are subject may limit our ability to take advantage of potential business opportunities as they arise. 13 Failure to satisfy these financial ratios or to comply with the covenants in our credit agreement would constitute a default.
Our ability to make scheduled payments on these borrowings and to satisfy financial ratios may be adversely affected by changes in economic or business conditions beyond our control, while the restrictive covenants to which we are subject may limit our ability to take advantage of potential business opportunities as they arise.
In particular, we have experienced and expect that we may in the future experience impacts on our business due to the increase in trade conflicts between the U.S. and China. The May 2019 U.S. Department of Commerce addition of Huawei Technologies Co., Ltd.
In particular, we have experienced in the past and expect that we may in the future experience impacts on our business due to the increase in trade conflicts between the U.S. and China.
Commercial operations resumed in late 2021, with the launch of a replacement production line at one of our Suzhou, China facilities, and commercial production at our new location in Siheung, South Korea commenced in late-January 2023. The extent to which these events will continue to affect our results of operations and financial position remains uncertain.
Commercial operations resumed in late 2021, with the launch of a replacement production line at one of our Suzhou, China facilities, and commercial production at our new location in Siheung, South Korea commenced in late-January 2023.
Financial Statements and Supplementary Data.” We maintain insurance coverage with respect to certain claims, but the policy coverage limits may not be adequate or cover a particular loss.
For additional information, refer to “Item 3. Legal Proceedings” and “Note 10 – Commitments and Contingencies” to “Item 8. Financial Statements and Supplementary Data.” We maintain insurance coverage with respect to certain claims, but the policy coverage limits may not be adequate or cover a particular loss.
If we suffer loss or disruption to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our business could be seriously harmed.
Our continued performance will depend in part on the success of our new leadership. If we suffer loss or disruption to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our business could be seriously harmed.
These trends, combined with supply chain disruptions caused by COVID-19, may lead to increased decoupling of the supply chains for U.S. and Chinese economies, thereby leading to reduced market opportunities and disrupted supply chains for U.S. companies with sales and operations in China. Increased geopolitical tensions between the U.S. and China would likely accelerate these trends.
These trends may lead to increased decoupling of the supply chains for U.S. and Chinese economies, thereby leading to reduced market opportunities and disrupted supply chains for U.S. companies with sales and operations in China. Increased geopolitical tensions between the U.S. and China would likely accelerate these trends. Both countries could pursue policies to reduce their dependence on foreign goods.
Both countries could pursue policies to reduce their dependence on foreign goods. Such policies could have a material adverse impact on our business, results of operations and financial position.
Such policies could have a material adverse impact on our business, results of operations and financial position.
In the European Union (EU), we are subject to the EU regulations (and their related national implementing legislation) including the Registration, Evaluation, Authorization and Restriction of Chemicals, the Regulation on the Classification, Labelling and Packaging of Substances and Mixtures and the Industrial Emissions Directive.
In the EU, we are subject to the EU regulations (and their related national implementing legislation) including the Registration, Evaluation, Authorization and Restriction of Chemicals, the Regulation on the Classification, Labelling and Packaging of Substances and Mixtures and the Industrial Emissions Directive. 13 Compliance with these laws and regulations could require us to incur substantial expenses, including in connection with the acquisition of new equipment.
The interpretation and application of data protection laws in the U.S., Europe, and elsewhere, including the EU General Data Protection Regulation and the California Consumer Privacy Act, are uncertain, 12 evolving and may be inconsistent among jurisdictions.
In addition, the processing and storage of certain information is increasingly subject to privacy and data security regulations, and many such regulations are country-specific. The interpretation and application of data protection laws in the U.S., Europe, and elsewhere, including the EU General Data Protection Regulation and the California Consumer Privacy Act, are uncertain, evolving and may be inconsistent among jurisdictions.
As a result, these transactions may not ultimately create value for us or our shareholders and may harm our reputation and materially adversely affect our business, results of operations and financial position. The failure to attract and retain specialized technical and management personnel could impair our expected growth and future success.
As a result, these transactions may not ultimately create value for us or our shareholders and may harm our reputation and materially adversely affect our business, results of operations and financial position.
An uncured default with respect to one or more of our covenants could result in outstanding borrowings thereunder being declared immediately due and payable, which may also trigger an obligation to repay other outstanding indebtedness. Any such acceleration of our indebtedness would have a material adverse effect on our cash flows, financial position and results of operations.
Failure to satisfy these financial ratios or to comply with the covenants in our credit agreement would constitute a default. An uncured default with respect to one or more of our covenants could result in outstanding borrowings thereunder being declared immediately due and payable, which may also trigger an obligation to repay other outstanding indebtedness.
However, we may not be able to increase our production levels with sufficient speed or efficiency to capitalize on such increases in demand. We have extensive international operations, and events and circumstances that have general international consequence or specific impact in the countries in which we operate may materially adversely affect our business.
We have extensive international operations, and events and circumstances that have general international consequence or specific impact in the countries in which we operate may materially adversely affect our business.
The introduction of new products presents particularly significant business challenges in our business because product development commitments and expenditures must be made well in advance of product sales. Our dependence on sole or limited source suppliers for certain of our raw materials could materially adversely affect our ability to manufacture products and materially increase our costs.
The introduction of new products presents particularly significant business challenges in our business because product development commitments and expenditures must be made well in advance of product sales. Macroeconomic conditions could materially adversely affect our business, financial condition, or results of operations.
To the extent such assumptions are inaccurate, the net liabilities that we have recorded in our financial statements may fail to approximate the losses we could suffer in connection with such claims. We are subject to many environmental laws and regulations as well as potential environmental liabilities that could adversely affect our business.
To the extent such assumptions are inaccurate, the net liabilities that we have recorded in our financial statements may fail to approximate the losses we could suffer in connection with such claims. 15 We may incur substantial costs to comply with climate change legislation and related regulatory initiatives.
For instance, the COVID-19 pandemic and related quarantines and work and travel restrictions have disrupted, and may continue to disrupt, production of and demand for certain of our products. Additionally, there was a fire at our UTIS manufacturing facility in Ansan, South Korea in early February 2021, which resulted in extensive damage to the manufacturing site.
Additionally, there was a fire at our UTIS manufacturing facility in Ansan, South Korea in early February 2021, which resulted in extensive damage to the manufacturing site.
For example, governmental authorities in the U.S. and in other jurisdictions are increasingly focused on potential contamination resulting from the use of so-called “forever chemicals,” most notably per- and polyfluoroalkyl, substances (PFAS). Products containing PFAS have been used in manufacturing, industrial, and consumer applications over many decades, including in some of our engineered materials and components.
By way of example, but not limitation, governmental authorities in the U.S. and in other jurisdictions are increasingly focused on potential contamination resulting from the use of so-called “forever chemicals,” most notable at present are per- and polyfluoroalkyl, substances (PFAS).
We face intense global competition, which could reduce demand for our products or create additional pricing pressure on our products.
However, we may not be able to increase our production levels with sufficient speed or efficiency to capitalize on such increases in demand. We face intense global competition, which could reduce demand for our products or create additional pricing pressure on our products.
We may not succeed in limiting future cost increases. Continued employee benefit cost increases could have an adverse effect on our results of operations, cash flows and financial position. Legal, Compliance and Regulatory Risks Our business may be materially adversely affected if we cannot protect our proprietary technology or if we infringe the proprietary rights of others.
We may not succeed in limiting future cost increases. Continued employee benefit cost increases could have an adverse effect on our results of operations, cash flows and financial position. Changes in accounting guidance may cause us to experience greater volatility in our financial results.
Competition for these personnel from other companies, academic institutions and government entities is intense, and our expected growth and future success will depend, in large part, upon our ability to attract and retain these individuals.
Our ability to compete effectively and our future success depend on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition for these personnel from other companies, academic institutions and government entities is intense.
We derived approximately 32% and 15% of our net sales for the year ended December 31, 2022 from sales relating to the key market growth drivers of advanced mobility and advanced connectivity, respectively. These growth drivers are served by our direct and indirect customers in a variety of markets, including automotive (i.e., ADAS) and EV/HEV, wireless infrastructure and portable electronics.
We derived approximately 22% and 31% of our net sales for the year ended December 31, 2023 from sales relating to the significant growth markets (e.g., EV/HEV) and high growth markets (e.g., ADAS, portable electronics, renewable energy and aerospace and defense), respectively.
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Risks Relating to the COVID-19 Pandemic The COVID-19 pandemic and global responsive measures have impacted our business and results of operations and could materially adversely affect our business, results of operations and financial position in future periods.
Added
Macroeconomic conditions, such as high inflationary pressure, changes to monetary policy, high interest rates, volatile currency exchange rates, credit and sovereign debt concerns, decreasing consumer confidence and spending, including capital spending, concerns about the stability and liquidity of certain financial institutions, the introduction of or changes in tariffs or trade barriers, and global or local recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, or results of operations.
Removed
The COVID-19 pandemic continues to have global impacts and has resulted in governmental authorities implementing numerous responsive measures, such as travel bans and other restrictions, including quarantines, shelter-in-place and stay-home orders, transportation disruptions, closures and shutdowns.
Added
Recent macroeconomic conditions have been adversely impacted by geopolitical instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia and the conflict between Israel and Hamas), and monetary and financial uncertainties.
Removed
We maintain significant manufacturing and administrative operations in the U.S., China, Germany, Belgium, England, South Korea and Hungary, and each of these countries has been significantly affected by the outbreak and taken measures to try to contain it and to distribute vaccines as they are approved.
Added
The results of these macroeconomic conditions, and the actions taken by governments, central banks, companies, and consumers in response, have resulted in, and may continue to result in, higher inflation in the U.S. and globally, which is likely, in turn, to lead to an increase in costs and may cause changes in fiscal and monetary policy, including additional increases in interest rates.
Removed
In particular, the recent end to ‘zero COVID’ policies in China may have unpredictable impacts on our operations, suppliers, and customers. In recent months, a significant percentage of our employees in Suzhou, China were diagnosed with COVID, but to-date we have received no reports of permanent disability or death among our employees.
Added
Other adverse impacts of recent macroeconomic conditions have been, and may continue to be, supply chain constraints, logistics challenges, liquidity concerns in the broader financial services industry, and fluctuations in labor availability. Our dependence on sole or limited source suppliers for certain of our raw materials could materially adversely affect our ability to manufacture products and materially increase our costs.
Removed
We have also modified our business practices in an effort to ensure business continuity while promoting continued employee health and well-being. Collectively, these measures have impacted and are likely to continue to impact our workforce and operations.
Added
Our business strategy includes plans for organic growth, and our results of operations and financial position could be adversely affected if we fail to grow or fail to manage our growth effectively.
Removed
In addition, the outbreak and associated responsive measures have resulted in significant disruption of the global economy, including increased volatility in financial markets, supply chains and demand for certain goods and services, as well as significant intervention and stimulus measures by governments.
Added
As part of our general growth strategy, we expect to continue to pursue organic growth (including the significant capital expenditures associated therewith), while also continuing to evaluate potential acquisitions and expansion opportunities that we 10 believe provide a strategic or geographic fit with our business.
Removed
There is considerable uncertainty regarding the effect of COVID-19 as well as current and future responsive measures on our business, including on our workforce and operations.
Added
Although we have experienced significant growth in our assets and revenues in the past, we may not be able to sustain our historical growth rate or be able to grow at all.
Removed
We may experience sustained demand reductions for our products in certain end markets, be unable to satisfy customer demand and face increased operating costs, asset impairments and cash flow reductions, all of which could have a material adverse effect on our business, results of operations and financial position.
Added
Our growth strategy may divert management from our existing business and may require us to incur additional expenditures to expand our administrative and operational infrastructure and, if we are unable to effectively manage our growth, including to the satisfaction of our regulators, we could be materially and adversely affected.
Removed
(Huawei) to its “entity list,” and subsequently implemented Foreign Direct Products Rules, limited the ability of U.S. and foreign companies to export products and license technologies to Huawei.
Added
Consequently, continued organic growth, if achieved, may place a strain on our administrative and operational infrastructure, which could have a material adverse effect on our financial condition and results of operations. We rely on highly specialized technical personnel and management, and the failure to attract and retain these individuals could impair our expected growth and future success.
Removed
In addition, we have recently appointed a new Chief Executive Officer and have undergone other management changes as we execute on our growth strategy as a standalone company. Our continued performance will depend in part on the success of our new leadership.
Added
In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Outside the U.S., it is increasingly important that we are also able to attract and retain personnel with relevant local qualifications and experience.
Removed
In addition, the processing and storage of certain information is increasingly subject to privacy and data security regulations, and many such regulations are country-specific.
Added
We may not be able to continue to attract and retain the qualified personnel necessary to continue to advance our business and achieve our strategic objectives.
Removed
Our credit agreement historically permitted us to borrow euro-currency loans that bear interest based on the London interbank offered rate (LIBOR), plus a specified spread.
Added
In addition, we have recently appointed several new senior executives, including our new Senior Vice President and General Manager of AES; Senior Vice President and General Manager of EMS; Senior Vice President, Global Operations and Supply Chain; Vice President, General Counsel and Corporate Secretary; Vice President and Chief Technology Officer; and Senior Vice President and Chief Administrative Officer.
Removed
As announced in March 2021 by the United Kingdom’s Financial Conduct Authority (FCA) and LIBOR’s administrator, the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities ceased immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023. Certain LIBOR borrowings may now be unavailable.
Added
Disruptions to our South Korean operations and certain customer relationships in South Korea directly resulting from the closure of the UTIS facility continued to be experienced through 2023. The extent to which these events will continue to affect our results of operations and financial position remains uncertain.
Removed
Rogers Corporation and JPMorgan Chase Bank, N.A. entered into an amendment to our credit agreement that provides for a new benchmark interest rate to replace the discontinued LIBOR reference rates as necessary. There is a risk that this new reference rate may be higher than our projected future LIBOR interest rates, thereby causing the cost of our borrowings to increase.
Added
If we are unsuccessful in adapting to and interpreting the requirements of new guidance, or in clearly explaining to shareholders how the new guidance affects reporting of our results of operations, our share price may decline. We prepare our consolidated financial statements to conform to U.S. GAAP.
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We may be adversely affected by litigation stemming from product liability and other claims. Our products may contain defects that we do not detect before sale, which may lead to warranty or damage claims against us or product recalls.
Added
These accounting principles are subject to interpretation by the SEC, FASB, and various bodies formed to interpret and create accounting rules and regulations. Accounting standards, or the guidance relating to interpretation and adoption of standards, could have a significant effect on our financial results and could affect our business.
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Compliance with these laws and regulations could require us to incur substantial expenses, including in connection with the acquisition of new equipment.
Added
Additionally, the FASB and the SEC are focused on the integrity of financial reporting, and our accounting policies are subject to scrutiny by regulators and the public. We cannot predict the impact of future changes to accounting principles or our related accounting policies on our financial statements going forward.
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In 2021, the Biden Administration announced a multi-agency plan to address PFAS contamination and the U.S. Environmental Protection Agency released its PFAS Strategic Roadmap, which identified a comprehensive approach to addressing PFAS.
Added
In addition, were we to change our accounting estimates, including those related to the timing of revenue recognition and those used to allocate revenue between various performance obligations, our reported revenue and results of operations could be significantly impacted.
Added
If we are unsuccessful in adapting to the requirements of any new standard, then we may experience greater volatility in our quarterly and annual results, which may cause our stock price to decline. We may experience difficulties in implementing our new enterprise resource planning system.
Added
We are in the midst of a multi-year design and implementation of a new enterprise resource planning system (ERP), which will replace our existing financial and operating systems.
Added
The implementation of this ERP requires an investment of significant personnel and financial resources, including substantial expenditures for outside consultants, system hardware and software in addition to other expenses in connection with the transformation of our organizational structure and financial and operating processes.
Added
As we work to complete the implementation phase of this ERP, and even after the implementation phase, we may experience additional delays, increased costs and other difficulties, including potential design defects, miscalculations, testing requirements, re-work due to changes in business plans or reporting standards, and the diversion of management’s attention from day-to-day business operations.
Added
Additional extended delays could also introduce operational risk, including cybersecurity risks, and other complications.
Added
If we are unable to implement this ERP as planned, the effectiveness of our internal control over financial reporting could be adversely affected, our ability to assess those controls adequately could be delayed, and our business, results of operations, cash flows and financial position could be negatively impacted.
Added
Legal, Compliance and Regulatory Risks We are subject to many environmental laws and regulations as well as potential environmental liabilities that could adversely affect our business.
Added
Products containing PFAS have been used in manufacturing, industrial, and consumer applications over many decades, including in some of our engineered materials and components, and are virtually ubiquitous in parts of the environment. Until recently, these substances were largely unregulated. Nevertheless, over the last few years, PFAS regulation has been evolving rapidly. In 2023, the U.S.
Added
Environmental Protection Agency issued a new rule under the Toxic Substances Control Act, requiring manufacturers and importers of PFAS to submit additional reporting information about production volumes, industrial uses, byproducts, worker exposure, and disposal.
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Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeThe following table provides certain information about the material general offices and manufacturing facilities used by our operating segments: Location Floor Space (Square Feet) Type of Facility Leased / Owned Operating Segment United States Chandler, Arizona 147,000 Manufacturing Owned AES Chandler, Arizona 105,100 Manufacturing Owned AES Chandler, Arizona 75,000 Administrative Offices Owned All Chandler, Arizona 17,000 Warehouse Leased through 3/2026 AES Rogers, Connecticut 388,100 Manufacturing / Administrative Offices Owned All Woodstock, Connecticut 150,600 Manufacturing Owned EMS Carol Stream, Illinois 216,600 Manufacturing Owned EMS Bear, Delaware 125,000 Manufacturing / Administrative Offices Owned All Narragansett, Rhode Island 84,600 Manufacturing Owned EMS Burlington, Massachusetts 6,000 R&D Lab / Administrative Offices Leased through 2/2024 All Europe Eschenbach, Germany 149,000 Manufacturing / Administrative Offices Owned AES Eschenbach, Germany 13,000 Warehouse / Administrative Offices Leased through 12/2024 AES Eschenbach, Germany 24,100 Warehouse / Administrative Offices Leased through 8/2023 AES Evergem, Belgium 116,500 Manufacturing / Administrative Offices Owned All Evergem, Belgium 88,200 Warehouse / Administrative Offices Leased through 6/2027 AES Ghent, Belgium 56,700 Warehouse Leased through 3/2024 All Budapest, Hungary 46,800 Manufacturing Leased through 2/2027 AES Blackburn, England 58,000 Manufacturing / Warehouse /Administrative Offices Owned EMS Blackburn, England 9,000 Warehouse Leased through 8/2029 EMS Asia Suzhou, China 821,000 Manufacturing / Administrative Offices Owned All Suzhou, China 77,000 Manufacturing / Administrative Offices Leased through 12/2031 EMS Suzhou, China 75,000 Manufacturing / Administrative Offices Leased through 1/2033 EMS Siheung, South Korea 17,500 Manufacturing / Administrative Offices Leased though 2/2025 EMS
Biggest changeThe following table provides certain information about the material general offices and manufacturing facilities used by our operating segments: Location Floor Space (Square Feet) Type of Facility Leased / Owned Operating Segment North America Chandler, Arizona 147,000 Manufacturing Owned AES Chandler, Arizona 105,100 Manufacturing Owned AES Chandler, Arizona 75,000 Administrative Offices Owned All Chandler, Arizona 17,000 Warehouse Leased through 3/2026 AES Rogers, Connecticut 388,100 Manufacturing / Administrative Offices Owned All Woodstock, Connecticut 150,600 Manufacturing Owned EMS Carol Stream, Illinois 216,600 Manufacturing Owned EMS Bear, Delaware 125,000 Manufacturing / Administrative Offices Owned All Narragansett, Rhode Island 84,600 Manufacturing Owned EMS Burlington, Massachusetts 6,000 Innovation Center / Administrative Offices Leased through 2/2025 All Apodoca, Mexico* 61,500 Manufacturing Leased through 1/2034 AES Europe Eschenbach, Germany 149,000 Manufacturing / Administrative Offices Owned AES Eschenbach, Germany 13,000 Warehouse / Administrative Offices Leased through 12/2024 AES Eschenbach, Germany 24,100 Warehouse / Administrative Offices / Innovation Center Leased through 8/2024 AES Evergem, Belgium 116,500 Manufacturing / Administrative Offices Owned All Evergem, Belgium 88,200 Warehouse / Administrative Offices / Innovation Center Leased through 6/2027 AES Ghent, Belgium 56,700 Warehouse Leased through 3/2024 All Budapest, Hungary 46,800 Manufacturing Leased through 2/2027 AES Blackburn, England 58,000 Manufacturing / Warehouse /Administrative Offices Owned EMS Blackburn, England 9,000 Warehouse Leased through 8/2029 EMS Asia Suzhou, China 769,000 Manufacturing / Administrative Offices / Innovation Center Owned All Suzhou, China 77,000 Manufacturing / Administrative Offices Leased through 12/2031 EMS Suzhou, China 75,000 Manufacturing / Administrative Offices Leased through 5/2033 EMS Suzhou, China 164,000 Manufacturing / Administrative Offices Leased through 9/2033 AES Suzhou, China 27,000 Manufacturing / Administrative Offices Leased through 5/2027 EMS Siheung, South Korea 17,500 Manufacturing / Administrative Offices Leased though 10/2025 EMS * Rogers Corporation is a guarantor to this lease, which was signed in January 2024, to establish a premise of operations for our manufacturing operations through a shelter agreement in Mexico.
Item 2. Properties We operate various general offices and manufacturing facilities throughout the U.S., Europe and Asia.
Item 2. Properties We operate various general offices and manufacturing facilities throughout North America, Europe and Asia.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−9 removed0 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−9 removed0 unchanged
2022 filing
2023 filing
Biggest changeIn addition, we are involved in certain environmental matters, which we do not view as material legal proceedings, either pending or known to be contemplated. For additional information regarding certain of these matters, refer to “Note 12 – Commitments and Contingencies” to “Item 8. Financial Statements and Supplementary Data.” Item 4 . Mine Safety Disclosures Not applicable. 17 Part II
Biggest changeItem 3. Legal Proceedings The information called for by this item is incorporated herein by reference to the information set forth in “Note 10 – Commitments and Contingencies” to “Item 8. Financial Statements and Supplementary Data.” Item 4 . Mine Safety Disclosures Not applicable. 18 Part II
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Item 3. Legal Proceedings Asbestos Products Litigation 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.
Removed
We were a defendant in 537 asbestos-related product liability cases as of December 31, 2022, compared to 543 cases as of December 31, 2021, with the change reflecting new cases, dismissals, settlements and other dispositions.
Removed
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.
Removed
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.
Removed
Most of these cases are being litigated in Maryland, Illinois, Missouri and New York; however, we are also defending cases in other states. We intend 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.
Removed
As of December 31, 2022, the estimated liability and estimated insurance recovery for all current and future indemnity and defense costs projected through 2064 was $65.0 million and $59.8 million, respectively. The indemnity and defense costs of our asbestos-related product liability litigation to date have been substantially covered by insurance.
Removed
As of December 31, 2022, our consolidated statements of financial position include a $5.2 million net accrual of estimated asbestos-related expenses that exceed asbestos-related insurance coverage for all current and future indemnity and 16 defense costs projected through 2064. For additional information regarding our asbestos-related product liability litigation, refer to “Note 12 – Commitments and Contingencies” to “Item 8.
Removed
Financial Statements and Supplementary Data.” Other Matters We are currently involved in a variety of other legal proceedings that we view as ordinary, routine litigation incidental to our business, including commercial disputes, intellectual property matters, personal injury claims, tax claims and employment matters.
Removed
Although the outcome of no legal matter can be predicted with certainty, we do not believe that the outcome of any of these legal proceedings, either individually or in the aggregate, will have a material adverse effect on our business, results of operations, cash flows or financial position.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+2 added−1 removed2 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+2 added−1 removed2 unchanged
2022 filing
2023 filing
Biggest changeIn 2022, we made $25.0 million of share repurchases using cash from operations and cash on hand. There were no share repurchases in 2021 or 2020. As of December 31, 2022, $24.0 million remained available to 18 purchase under the Program. For additional information regarding share repurchases, refer to “Note 8 – Capital Stock and Equity Compensation” to “Item 8.
Biggest changeThe Program has no expiration date and may be suspended or discontinued at any time without notice. There were no share repurchases in 2023 or 2021. In 2022, we made $25.0 million of share repurchases. As of December 31, 2023, 19 $24.0 million remained available to purchase under the Program.
Performance Graph The following graph compares the cumulative total return on Rogers’ capital stock over the past five fiscal years with the cumulative total return on the Standard & Poor’s Industrials Index (S&P Industrials) and the S&P Small Cap 600 Electronic Equipment, Instruments & Components Index.
Performance Graph The following graph compares the cumulative total return on our capital stock over the past five fiscal years with the cumulative total return on the Standard & Poor’s Industrials Index (S&P Industrials) and the S&P Small Cap 600 Electronic Equipment, Instruments & Components Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Capital Stock Market Prices and Dividend Policy Our capital stock is traded on the New York Stock Exchange under the symbol “ROG”. As of the end of business on February 24, 2023, we had 282 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Capital Stock Market Prices and Dividend Policy Our capital stock is traded on the New York Stock Exchange under the symbol “ROG”. As of the end of business on February 23, 2024, we had 251 shareholders of record.
The graph tracks the performance of a $100 investment in the Company’s common stock and in each of the indexes (with the reinvestment of all dividends) on the date specified. Issuer Purchases of Equity Securities In 2015, we initiated a share repurchase program (the Program) of up to $100.0 million of the Company’s capital stock.
The graph tracks the performance of a $100 investment in our capital stock and in each of the indexes (with the reinvestment of all dividends) on the date specified.
We initiated the Program 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. The Program has no expiration date and may be suspended or discontinued at any time without notice.
Issuer Purchases of Equity Securities In 2015, we initiated a share repurchase program (the Program) of up to $100.0 million of our capital stock to mitigate the dilutive effects of stock options exercises and vesting of restricted stock units that we granted, in addition to enhancing shareholder value.
Removed
Financial Statements and Supplementary Data.” (Dollars in thousands, except shares and per share amounts) Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs October 1, 2022 to October 31, 2022 — $ — — $ 49,014 November 1, 2022 to November 30, 2022 140,501 $ 103.45 140,501 $ 34,480 December 1, 2022 to December 31, 2022 97,305 $ 107.55 97,305 $ 24,015 We did not repurchase any shares in the months prior to November 2022.
Added
The actual number of holders of our capital stock is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. This number of holders of record also does not include shareholders whose shares may be held in trust by other entities.
Added
For additional information regarding share repurchases, refer to “Note 12 – Capital Stock and Equity Compensation” to “Item 8. Financial Statements and Supplementary Data.” Item 6. [Reserved] 20
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
57 edited+16 added−18 removed16 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
57 edited+16 added−18 removed16 unchanged
2022 filing
2023 filing
Biggest changeExecutive Summary The following key highlights and factors should be considered when reviewing our results of operations, financial position and liquidity: • In 2022 as compared to 2021, our net sales increased by 4.1% to $971.2 million, our gross margin decreased 430 basis points to 33.1% from 37.4%, and operating income as a percentage of net sales increased 230 basis points to 14.9% from 12.6%. • With respect to other operating (income) expense, net, we recognized income of $144.0 million and expense of $5.3 million in 2022 and 2021, respectively, primarily related to the financial impacts from the regulatory termination fee net of a transaction-related fee, as well as the impacts from the fire at our UTIS manufacturing facility in Ansan, South Korea. • We recognized $1.5 million and $3.1 million of restructuring charges in 2022 and 2021, respectively, related to the manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations, primarily impacting our AES operating segment. • We recognized $65.1 million of impairment charges in 2022, primarily related to certain AES operating segment equipment-in-process and certain EMS operating segment intangibles and fixed assets in the U.S. • We incurred $21.7 million of expenses related to the terminated merger with DuPont, mainly associated with retention awards, a discretionary RESIP contribution and professional services expenses in 2022. • We borrowed $100.0 million on the revolver to fund our operations, and made a $75.0 million repayment at the end of 2022. • On February 16, 2023, we announced a reduction in force plan of our global workforce that is expected to be completed in the first half of 2023.
Biggest changeEach of these markets is expected to contribute to our growth. 21 Executive Summary The following key highlights and factors should be considered when reviewing our results of operations, financial position and liquidity: • In 2023 as compared to 2022, our net sales decreased by 6.5% to $908.4 million, our gross margin increased 70 basis points to 33.8% from 33.1%, and operating income as a percentage of net sales decreased 550 basis points to 9.4% from 14.9%. • We recognized restructuring charges of $16.9 million in 2023 related to our reduction in global workforce and facility consolidation plans. • In 2023, we recognized insurance recoveries of $31.4 million related to our business interruption and property damage insurance claims and incurred $0.9 million of charges for various professional services in connection with the 2021 UTIS fire. • On September 22, 2023, we entered into asset purchase agreement to sell of one of our Suzhou, China facilities for a purchase price of $6.8 million, resulting in a pre-tax gain of $1.9 million, inclusive of selling and disposal costs.
The claim projection analysis contains numerous assumptions, including number of claims that might be received, the type and severity of the disease alleged by each claimant, 26 the long latency period associated with asbestos exposure, dismissal rates, average indemnity costs, average defense costs, costs of medical treatment, the financial resources of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards, including potential tort reform.
The claim projection analysis contains numerous assumptions, including number of claims that might be received, the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, average indemnity costs, average defense costs, costs of medical treatment, the financial resources of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards, including potential tort reform.
Certain accounting policies may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. A summary of our critical accounting estimates is presented below: Product Liabilities We endeavor to maintain insurance coverage with reasonable deductible levels to protect us from potential exposures to product liability claims.
Certain accounting policies may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. A summary of our critical accounting estimates is presented below: 27 Product Liabilities We endeavor to maintain insurance coverage with reasonable deductible levels to protect us from potential exposures to product liability claims.
Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. In each of these areas we have secured a number of design wins and have a strong pipeline, which provides confidence in our growth outlook.
Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. In each of these areas we have secured a number of design wins and have a strong opportunity pipeline, which provides confidence in our growth outlook.
Financial Statements and Supplementary Data, respectively. We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have a current or future material effect on our results of operations or financial position.
Financial Statements and Supplementary Data,” respectively. We do not have any off-balance sheet arrangements that have, or are, in the opinion of management, reasonably likely to have a current or future material effect on our results of operations or financial position.
We have a history of innovation and have established Innovation Centers for our research and development (R&D) activities in Chandler, Arizona; Burlington, Massachusetts; Eschenbach, Germany; and Suzhou, China. We are headquartered in Chandler, Arizona. Our growth and profitability strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence.
We have a history of innovation and have established Innovation Centers for our R&D activities in Chandler, Arizona; Burlington, Massachusetts; Eschenbach, Germany; and Suzhou, China. We are headquartered in Chandler, Arizona. Our growth and profitability strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence.
Restriction on Payment of Dividends 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.
Restriction 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.
We did not make any changes in 2022 to our position on the permanent reinvestment of our historical 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.
We did not make any changes in 2023 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents is held, we continue to assert that historical foreign earnings are indefinitely reinvested.
Financial Statements and Supplementary Data.” The discussion of the comparison of our 2021 and 2020 results was previously disclosed within the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2022 , and has been omitted from this section pursuant to Instruction 1 to Item 303(b) of Regulation S-K.
Financial Statements and Supplementary Data.” The discussion of the comparison of our 2022 and 2021 results was previously disclosed within the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023 , and has been omitted from this section pursuant to Instruction 1 to Item 303(b) of Regulation S-K.
We recognized $65.1 million and $0.5 million of impairment charges in 2022 and 2021, respectively. The impairment charges in 2022 were primarily related to certain AES operating segment equipment-in-process in the U.S. as well as certain EMS operating segment intangibles and fixed assets related to our high-performance engineered cellular elastomer business in the U.S.
We recognized $65.1 million of impairment charges in 2022, primarily related to certain AES operating segment equipment-in-process in the U.S. as well as certain EMS operating segment intangibles and fixed assets related to our high-performance engineered cellular elastomer business in the U.S.
Company Background and Strategy Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers’ demanding challenges. We operate two strategic operating segments: Advanced Electronics Solutions (AES) and Elastomeric Material Solutions (EMS). The remaining operations, which represent our non-core businesses, are reported in our Other operating segment.
Company Overview and Strategy Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers’ demanding challenges. We operate two strategic operating segments: AES and EMS. Our remaining operations, which represent our non-core businesses, are reported in our Other operating segment.
As a market-driven organization, we are focused on capitalizing on growth opportunities in the increasing electrification of vehicles, including electric and hybrid electric vehicles (EV/HEV), and increasing use of advanced driver assistance systems (ADAS) in the automotive industry, the advancement of communication systems in aerospace and defense and the growth of 5G smartphones in the portable electronics industry.
As a market-driven organization, we are focused on capitalizing on growth opportunities in the increasing electrification of vehicles, including EV/HEV, and increasing use of ADAS in the automotive industry, the advancement of communication systems in aerospace and defense, the growth of 5G smartphones in the portable electronics industry, and in renewable energy.
Our Other operating segment operating income decreased by 0.2% in 2022 from 2021. Net sales were unfavorably impacted by foreign currency fluctuations of $0.5 million, or 2.5%, due to the depreciation in value of the Chinese renminbi and euro relative to the U.S. dollar.
Net sales were unfavorably impacted by foreign currency fluctuations of $0.4 million, or 2.0%, due to the depreciation in value of Chinese renminbi relative to the U.S. dollar. Our Other operating segment operating income decreased by 4.3% in 2023 from 2022.
This outlook is supported by our participation in a number of fast-growing markets and by our strong competitive positions in these markets. The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will grow at compound annual growth rate of more than 25% over the next several years.
This outlook is supported by our participation in a number of growth markets and by our strong competitive positions in these markets. The fastest growing market opportunity is expected to be EV/HEV where third-party analysis projects that the market will increase at a compound annual growth rate of between 15% and 20% over the next several years.
We have also taken specific cost improvement actions in the fourth quarter of 2022 and first quarter of 2023 that will benefit subsequent quarters. These actions include optimizing our manufacturing footprint, divesting non-core product lines and reduction to manufacturing and corporate employees.
We have also taken specific cost improvement actions in the fourth quarter of 2022 through the end of 2023 that have benefited subsequent quarters. These actions include optimizing our manufacturing footprint, divesting non-core product lines and reductions to manufacturing and corporate employees.
Excluding $3.9 million of inventory purchase commitments, there are no contractual obligations requiring material cash requirements in 2022 and beyond, excluding those already noted, including those related to our outstanding borrowings under our revolving credit facility, our operating and finance lease obligations and our pension benefit and other postretirement benefit obligations, which are discussed in Note 9 – Debt , Note 10 – Leases and Note 11 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan, to Item 8.
Excluding $1.6 million of inventory purchase commitments, there are no contractual obligations requiring material cash requirements in 2024 and beyond, excluding those already noted, including those related to our outstanding borrowings under our revolving credit facility, our operating and finance lease obligations and our pension benefit and other postretirement benefit obligations, which are discussed in “Note 9 – Debt ,” “ Note 6 – Leases” and “ Note 8 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan,” to “Item 8.
If we are able to successfully execute on our strategy, we see an opportunity to return to historical levels of profitability and accelerate revenue growth, relative to 2022, over the next several years, led by organic growth and complemented by targeted acquisitions.
If we are able to successfully execute on our strategy, we see an opportunity, over the next several years, to return to historical levels of profitability and meaningfully improve revenues from 2023 levels, led by organic growth and complemented by targeted acquisitions.
Selling, General and Administrative Expenses (Dollars in thousands) 2022 2021 Selling, general and administrative expenses $ 218,828 $ 193,153 Percentage of net sales 22.5 % 20.6 % Selling, general and administrative (SG&A) expenses increased 13.3% in 2022 from 2021, primarily due to an $11.2 million increase in professional services expenses, a $5.0 million increase in total compensation and benefits, a $2.5 million increase in software expenses, a $2.4 million increase in travel expenses and a $2.1 million increase in other intangible asset amortization expense. 22 The increase in total compensation and benefits was primarily due to an $8.6 million impact for retention awards issued in connection with the terminated DuPont merger, and a $6.5 million discretionary RESIP contribution, partially offset by lower incentive compensation expense.
Selling, General and Administrative Expenses (Dollars in millions) 2023 2022 Selling, general and administrative expenses $ 202.3 $ 218.8 Percentage of net sales 22.2 % 22.5 % SG&A expenses decreased 7.5% in 2023 from 2022, primarily due to a $11.4 million decrease in compensation and benefits, a $3.8 million decrease in professional services expense and a $3.0 million decrease in other intangible asset amortization expense, partially offset by a $1.0 million increase in fixed asset depreciation expense and $0.5 million increase in travel expenses. 23 The decrease in compensation and benefits was primarily due to the $6.5 million discretionary RESIP contribution in 2022 and a $3.3 million decrease in the impact for retention awards issued in connection with the terminated DuPont merger.
The decrease in net sales was primarily driven by lower net sales in the wireless infrastructure, aerospace and defense, ADAS, and clean energy markets, partially offset by higher net sales in the EV/HEV and mass transit markets.
The decrease in net sales was primarily driven by lower net sales in the power interconnects EV/HEV, aerospace and defense, wireless infrastructure and portable electronics markets, partially offset by higher net sales in the power substrates EV/HEV, renewable energy and ADAS markets.
Net sales were unfavorably impacted by foreign currency fluctuations of $11.2 million, or 3.0%, due to the depreciation in value of the British pound, euro and Chinese renminbi relative to the U.S. dollar. Operating income increased by 0.5% in 2022 from 2021.
Net sales were unfavorably impacted by foreign currency fluctuations of $3.6 million, or 0.9%, due to the depreciation in value of Chinese renminbi relative to the U.S. dollar, partially offset by the appreciation in value of the euro relative to the U.S. dollar. Operating income increased by 26.0% in 2023 from 2022.
As of December 31, 2022, the estimated liabilities and estimated insurance recoveries for all current and future indemnity and defense costs projected through 2064 were $65.0 million and $59.8 million, respectively. 27
As of December 31, 2023, the estimated liabilities and estimated insurance recoveries for all current and future indemnity and defense costs projected through 2064 were $61.5 million and $56.5 million, respectively. 28
Net working capital was $517.3 million and $420.1 million as of December 31, 2022 and 2021, respectively.
Net working capital was $410.5 million and $517.4 million as of December 31, 2023 and 2022, respectively.
Net sales were unfavorably impacted from foreign currency fluctuations of $25.3 million, or 4.7%, due to the depreciation in value of the euro and Chinese renminbi relative to the U.S. dollar. Operating income increased by 53.7% in 2022 from 2021.
Net sales were favorably impacted by foreign currency fluctuations of $0.7 million, or 0.1%, due to the appreciation in value of the euro relative to the U.S. dollar, partially offset by the depreciation in value of Chinese renminbi relative to the U.S. dollar. Operating income decreased by 96.6% in 2023 from 2022.
The decrease in operating income was primarily driven by unfavorable product mix and lower volume, partially offset by favorable yield performance. As a percentage of net sales, operating income in 2022 was 33.0%, an approximately 90 basis point decrease as compared to 33.9% in 2021.
The decrease in operating income was primarily driven by lower volume and unfavorable factory utilization, partially offset by lower freight, duties and tariffs costs. As a percentage of net sales, operating income in 2023 was 33.5%, an approximately 60 basis point increase as compared to 32.9% in 2022.
The business disposition is scheduled to be completed in early March. 21 Results of Operations The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales: 2022 2021 Net sales 100.0 % 100.0 % Gross margin 33.1 % 37.4 % Selling, general and administrative expenses 22.5 % 20.6 % Research and development expenses 3.6 % 3.2 % Restructuring and impairment charges 6.9 % 0.4 % Other operating (income) expense, net (14.8) % 0.6 % Operating income 14.9 % 12.6 % Equity income in unconsolidated joint ventures 0.5 % 0.7 % Pension settlement charges — % (0.1) % Other income (expense), net 0.1 % 0.6 % Interest expense, net (1.0) % (0.3) % Income before income tax expense 14.5 % 13.5 % Income tax expense 2.5 % 1.9 % Net income 12.0 % 11.6 % Net Sales and Gross Margin (Dollars in thousands) 2022 2021 Net sales $ 971,171 $ 932,886 Gross margin $ 321,015 $ 349,139 Percentage of net sales 33.1 % 37.4 % Net sales increased by 4.1% in 2022 compared to 2021.
The sale was completed in September 2023. • We made $185.0 million of discretionary principal payments on our revolving credit facility in 2023. 22 Results of Operations The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales: 2023 2022 Net sales 100.0 % 100.0 % Gross margin 33.8 % 33.1 % Selling, general and administrative expenses 22.2 % 22.5 % Research and development expenses 3.9 % 3.6 % Restructuring and impairment charges 1.9 % 6.9 % Other operating (income) expense, net (3.6) % (14.8) % Operating income 9.4 % 14.9 % Equity income in unconsolidated joint ventures 0.2 % 0.5 % Other income (expense), net (0.1) % 0.1 % Interest expense, net (1.1) % (1.0) % Income before income tax expense 8.4 % 14.5 % Income tax expense 2.2 % 2.5 % Net income 6.2 % 12.0 % Net Sales and Gross Margin (Dollars in millions) 2023 2022 Net sales $ 908.4 $ 971.2 Gross margin $ 307.1 $ 321.0 Percentage of net sales 33.8 % 33.1 % Net sales decreased by 6.5% in 2023 compared to 2022.
Our total net leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2022. For additional information regarding the Fourth Amended Credit Agreement, refer to “Note 9 – Debt” to “Item 8.
Our total net leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2023. For additional information regarding the Fifth Amended Credit Agreement, refer to “Note 9 – Debt” to “Item 8. Financial Statements and Supplementary Data.” Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S.
The increase was further due to higher net sales in the EV/HEV and mass transit markets in our AES operating segment and higher net sales in the general industrial, mass transit and EV/HEV markets in our EMS operating segment, partially offset by lower net sales in the wireless infrastructure, aerospace and defense, ADAS and clean energy markets in our AES operating segment and lower net sales in portable electronics market in our EMS operating segment.
The decrease in net sales was primarily due to lower net sales in the power interconnects EV/HEV, aerospace and defense, wireless infrastructure and portable electronics markets in our AES operating segment and lower net sales in the general industrial, consumer, portable electronics and EV/HEV markets in our EMS operating segment.
Financial Statements and Supplementary Data.” With respect to other operating (income) expense, net, we recognized income of $144.0 million and expense of $5.3 million in 2022 and 2021, respectively, primarily related to the financial impacts from the regulatory termination fee net of a transaction-related fee, as well as the impacts from the fire at our UTIS manufacturing facility in Ansan, South Korea.
With respect to other operating (income) expense, net, we recognized income of $33.1 million and income of $144.0 million in 2023 and 2022, respectively. The income recognized in 2023 was primarily related to insurance recoveries from the fire at our UTIS manufacturing facility in Ansan, South Korea.
The following table illustrates the location of our cash and cash equivalents by our three major geographic areas: As of December 31, (Dollars in thousands) 2022 2021 United States $ 119,931 $ 76,621 Europe 69,877 56,034 Asia 46,042 99,641 Total cash and cash equivalents $ 235,850 $ 232,296 Approximately $115.9 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of December 31, 2022.
The following table illustrates the location of our cash and cash equivalents by our three major geographic areas: As of December 31, (Dollars in millions) 2023 2022 United States $ 60.0 $ 120.0 Europe 37.6 69.9 Asia 34.1 46.0 Total cash and cash equivalents $ 131.7 $ 235.9 Approximately $71.7 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of December 31, 2023.
Equity Income in Unconsolidated Joint Ventures (Dollars in thousands) 2022 2021 Equity income in unconsolidated joint ventures $ 4,437 $ 7,032 As of December 31, 2022, we had two unconsolidated joint ventures, each 50% owned: Rogers INOAC Corporation (RIC) and Rogers INOAC Suzhou Corporation (RIS).
Financial Statements and Supplementary Data.” Equity Income in Unconsolidated Joint Ventures (Dollars in millions) 2023 2022 Equity income in unconsolidated joint ventures $ 1.8 $ 4.4 As of December 31, 2023, we had two unconsolidated joint ventures, each 50% owned: RIC and RIS.
Financial Statements and Supplementary Data.” Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes.
GAAP, which require management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Research and Development Expenses (Dollars in thousands) 2022 2021 Research and development expenses $ 35,207 $ 29,904 Percentage of net sales 3.6 % 3.2 % R&D expenses increased 17.7% in 2022 from 2021, primarily due to a $2.3 million increase in total compensation and benefits, a $2.0 million increase in laboratory expenses and a $0.4 million increase in travel expenses.
Research and Development Expenses (Dollars in millions) 2023 2022 Research and development expenses $ 35.7 $ 35.2 Percentage of net sales 3.9 % 3.6 % R&D expenses increased 1.4% in 2023 from 2022, primarily due to a $1.8 million increase in trial costs for alternative raw materials, partially offset by a $1.0 million decrease in professional services expense and a $0.2 million decrease in compensation and benefits expense.
In 2023, we expect capital spending to be in the range of approximately $65.0 million to $75.0 million, of which we are contractually committed to $16.7 million as of December 31, 2022. We plan to fund our capital spending in 2023 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.
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.
(Dollars in thousands ) As of December 31, Key Financial Position Accounts: 2022 2021 Cash and cash equivalents $ 235,850 $ 232,296 Accounts receivable, net 177,413 163,092 Inventories 182,402 133,384 Borrowings under revolving credit facility 215,000 190,000 Significant changes in our statement of financial position accounts from December 31, 2021 to December 31, 2022 were as follows: • Accounts receivable, net increased 8.8% to $177.4 million as of December 31, 2022, from $163.1 million as of December 31, 2021.
Key Financial Position Accounts As of December 31, (Dollars in millions) 2023 2022 Cash and cash equivalents $ 131.7 $ 235.9 Accounts receivable, net 161.9 177.4 Inventories, net 153.5 182.4 Borrowings under revolving credit facility 30.0 215.0 26 Significant changes in our statement of financial position accounts from December 31, 2022 to December 31, 2023 were as follows: • Cash and cash equivalents were $131.7 million as compared to $235.9 million as of December 31, 2022, a decrease of $104.2 million, or 44.2%.
Operating Segment Net Sales and Operating Income Advanced Electronics Solutions (Dollars in thousands) 2022 2021 Net sales $ 530,215 $ 534,429 Operating income $ 77,163 $ 50,198 Our AES operating segment net sales decreased by 0.8% in 2022 compared to 2021.
Operating Segment Net Sales and Operating Income Advanced Electronics Solutions (Dollars in millions) 2023 2022 Net sales $ 509.7 $ 530.2 Operating income $ 2.6 $ 77.1 Our AES operating segment net sales decreased by 3.9% in 2023 compared to 2022.
The increase reflects $100.0 million in borrowings under our revolving credit facility throughout 2022. This was partially offset by a $75.0 million of discretionary principal payment at the end of 2022. For additional 25 information regarding this facility, as well as the Fourth Amended Credit Agreement, refer to “Note 9 – Debt” to “Item 8.
The decrease was due to $185.0 million in discretionary principal payments on our revolving credit facility made in 2023. For additional information regarding this facility, as well as the Fifth Amended Credit Agreement, refer to “Note 9 – Debt” to “Item 8.
The increase was primarily due to a $13.3 million increase in our income taxes receivable, as well as an increase in days sales outstanding, partially offset by the receipt or settlement of $6.3 million in recognized UTIS fire insurance receivables and lower net sales at the end of 2022 compared to the end of 2021. • Inventories increased 36.7% to $182.4 million as of December 31, 2022, from $133.4 million as of December 31, 2021, primarily driven by raw material cost increases as well as the ramp up of raw material purchases and production efforts to meet anticipated demand. • Borrowings under revolving credit facility increased to $215.0 million as of December 31, 2022, from $190.0 million as of December 31, 2021.
The decrease was primarily due to a $15.4 million decrease in our income taxes receivable as well as lower net sales at the end of 2023 compared to at the end of 2022, partially offset by the recognition of $4.1 million in UTIS fire insurance receivables for our business interruption claims. • Inventories, net decreased 15.8% to $153.5 million as of December 31, 2023, from $182.4 million as of December 31, 2022, primarily driven by a reduction in finished goods stock and raw materials, as well as a $7.5 million increase in inventory reserves provisions. • Borrowings under revolving credit facility decreased to $30.0 million as of December 31, 2023, from $215.0 million as of December 31, 2022.
We have also expanded our capabilities through organic investment and acquisitions and strive to ensure high quality solutions for our customers. Our operational excellence efforts are focused on driving significant near-term improvement in our profitability. These efforts include focusing on adding strategic new hires and improving processes and tools to achieve better performance.
Our operational excellence efforts are focused on driving significant near-term enhancements to our profitability and ongoing cost structure improvements. These efforts include focusing on improving yields, throughput, procurement capabilities and manufacturing processes and selectively adding strategic new hires to achieve better performance.
In addition to our focus on these markets, we sell into a variety of other markets including general industrial, clean energy, wireless infrastructure and mass transit.
In addition to our focus on these markets, we sell into a variety of other markets including general industrial, wireless infrastructure and mass transit. Our growth strategy is based on addressing trends in these markets and applying our repeatable customer engagement process. Our sales engineers and technical service employees work closely with our customers to understand their complex challenges.
The increase in net sales was primarily driven by $32.0 million in net sales, or 8.5%, reflecting the impact of increased net sales from our Silicone Engineering subsidiary, as well as higher net sales in the general industrial and EV/HEV, partially offset by lower net sales in the portable electronics market.
The decrease in net sales was primarily driven by lower net sales in the general industrial, consumer, portable electronics and EV/HEV markets, partially offset by higher net sales in the aerospace and defense market.
As a percentage of net sales, operating income in 2022 was 14.4%, an approximately 150 basis point decrease as compared to 15.9% in 2021. In 2022 and 2021, our EMS operating segment recognized impairment charges of $24.6 million and no charges, respectively, and recognized restructuring charges and related expenses of $0.4 million and $0.1 million, respectively.
In 2022, our EMS operating segment recognized impairment charges of $24.6 million. In 2023 and 2022, our EMS operating segment recognized restructuring charges and related expenses of $6.2 million and $0.4 million, respectively.
Gross margin in 2022 was impacted by unfavorable factory utilization, unfavorable yield performance, higher freight, duties and tariffs expenses and a higher inventory reserves provision in our AES and EMS operating segments, as well as lower volume in our AES operating segment and unfavorable changes in raw material costs in our EMS operating segment.
This was partially offset by lower volume and unfavorable mix, as well as higher inventory reserves provisions and unfavorable yield performance in our AES and EMS operating segments.
We estimate that we will incur approximately $10 million to $13 million in pre-tax restructuring charges related to this plan, all of which are expected to be in the form of cash-based expenditures and substantially all of which are expected to be related to employee severance and other termination benefits. • On February 17, 2023 we entered into an asset purchase agreement to sell our high-performance engineered cellular elastomer business for a net purchase price of $1.8 million.
The sale was completed in December 2023. • On February 17, 2023, we entered into an asset purchase agreement to sell our high-performance engineered cellular elastomer business for a purchase price of $1.8 million.
Net sales was unfavorably impacted from foreign currency impacts of $36.9 million, or 4.0%, due to the depreciation in value of the euro, Chinese renminbi and British pound relative to the U.S. dollar. Gross margin as a percentage of net sales decreased 430 basis points to 33.1% in 2022 compared to 37.4% in 2021.
Net sales were unfavorably impacted by foreign currency impacts of $3.3 million, or 0.3%, due to the depreciation in value of the Chinese renminbi relative to the U.S. dollar, partially offset by the appreciation in value of the euro relative to the U.S. dollar.
Other income (expense), net decreased to $1.1 million of income in 2022 compared to $5.1 million of income in 2021. The decrease was due to unfavorable impacts from our copper derivative contracts and unfavorable impacts from our foreign currency transactions, partially offset by favorable impacts from our foreign currency derivatives.
The decrease was due to unfavorable year-over-year change in impacts from our foreign currency transactions, partially offset by the favorable year-over-year change in impacts from our foreign currency derivatives and copper derivative contracts. 24 Interest Expense, Net (Dollars in millions) 2023 2022 Interest expense, net $ (10.1) $ (9.5) Interest expense, net, increased by $0.6 million in 2023 from 2022, primarily due to a higher weighted-average interest rate, partially offset by a lower weighted-average outstanding balance for our borrowings under our revolving credit facility.
The increase from 2021 was primarily due to the decrease in the current year benefit from the reversal of unrecognized tax benefits.
The increase from 2022 was primarily due to the impact of the decrease in the reversals of unrecognized tax positions in 2022 that did not reoccur in 2023.
Elastomeric Material Solutions (Dollars in thousands) 2022 2021 Net sales $ 420,006 $ 378,017 Operating income $ 60,351 $ 60,051 Our EMS operating segment net sales increased by 11.1% in 2022 compared to 2021.
Financial Statements and Supplementary Data.” Elastomeric Material Solutions (Dollars in millions) 2023 2022 Net sales $ 379.0 $ 420.0 Operating income $ 76.1 $ 60.4 Our EMS operating segment net sales decreased by 9.8% in 2023 compared to 2022.
The increase in operating income was primarily due to favorable year-over-year changes in shared service operating expense allocations driven by the merger termination fee less costs incurred related to the terminated DuPont merger, partially offset by $41.5 million in restructuring and impairment charges.
The unfavorable changes in shared service expense allocations were driven by the merger termination fee less costs incurred related to the terminated DuPont merger in 2022 not recurring, as well as non-routine shareholder advisory costs incurred in 2023, partially offset by favorable year-over-year changes in costs associated with the terminated DuPont merger, including compensation and benefits costs as well as professional services expenses.
In 2021, cash and cash equivalents increased $40.5 million, primarily due to $190.0 million in borrowings under our revolving credit facility and cash flows generated by operations, partially offset by $71.1 million in capital expenditures, a $25.0 million of principal payment made on our outstanding borrowings under our revolving credit facility, as well as $2.9 million in tax payments related to net share settlement of equity awards.
This decrease was primarily due to $185.0 million in discretionary principal payments on our revolving credit facility, $57.0 million in capital expenditures and $3.2 million in tax payments related to net share settlement of equity awards, partially offset by $131.4 million of net cash flow provided by operations. • Accounts receivable, net decreased 8.7% to $161.9 million as of December 31, 2023, from $177.4 million as of December 31, 2022.
Restructuring and Impairment Charges and Other Operating (Income) Expense, Net (Dollars in thousands) 2022 2021 Restructuring and impairment charges $ 66,562 $ 3,570 Other operating (income) expense, net $ (144,014) $ 5,330 We recognized $1.5 million and $3.1 million of restructuring charges 2022 and 2021, respectively, primarily related to the manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations.
Restructuring and Impairment Charges and Other Operating (Income) Expense, Net (Dollars in millions) 2023 2022 Restructuring and impairment charges $ 16.9 $ 66.6 Other operating (income) expense, net $ (33.1) $ (144.0) We recognized $16.9 million and $1.5 million of restructuring charges in 2023 and 2022, respectively.
As a percentage of net sales, operating income in 2022 was 14.6%, an approximately 520 basis point increase as compared to 9.4% in 2021. In 2022 and 2021, our AES operating segment recognized impairment charges of $40.5 million and $0.5 million, respectively, and recognized restructuring charges and related expenses of $1.1 million and $3.0 million, respectively.
In 2022, our AES operating segment recognized impairment charges of $40.5 million. In 2023 and 2022, our AES operating segment recognized restructuring charges and related expenses of $10.7 million and $1.1 million, respectively.
The increase in operating income was primarily due to favorable year-over-year changes in shared service operating expense allocations driven by the merger termination fee less costs incurred related to the terminated DuPont merger, and an $8.6 million favorable change in charges/benefits related to the UTIS fire, partially offset by $25.0 million in restructuring and impairment charges.
The increase in operating income was primarily due to a $28.0 million favorable year-over-year change in charges/benefits related to the UTIS fire and a $24.6 million favorable year-over-year change in impairment charges, as well as lower freight, duties and tariffs costs, lower raw material costs and favorable 25 factory optimization efforts.
For additional information, refer to “Note 15 – Supplemental Financial Information” to “Item 8.
For additional information related to restructuring and impairment charges, as well as the sale of one of our Suzhou, China facilities, refer to “Note 14 – Supplemental Financial Information” to “Item 8.
Equity income in those unconsolidated joint ventures decreased 36.9% in 2022 from 2021 due to lower net sales for RIC and RIS and unfavorable productivity performance for RIC.
Equity income in those unconsolidated joint ventures decreased 59.1% in 2023 from 2022 due to lower net sales for RIC and RIS, which was primarily driven by the portable electronics market in Asia, as well as a change in the business model for RIS to subcontracting manufacturing in the second half of 2023.
The increase in professional services expense is primarily due to $6.4 million of expenses incurred related to the terminated merger with DuPont and $0.8 million of expense incurred related to our acquisition of Silicone Engineering.
The decrease in professional services expense was due to a $6.3 million decrease in expenses incurred related to the terminated merger with DuPont, a $0.7 million decrease in expenses incurred related to our acquisition of Silicone Engineering as well as an overall general reduction of professional service expenses across general and administrative departments, offset by $7.6 million of expenses related to non-routine shareholder advisory costs and $1.1 million of expenses in connection with the sale of our high-performance engineered cellular elastomer business in 2023.
Our sales and marketing approach is based on addressing these trends, while our strategy focuses on factors for success as a manufacturer of engineered materials and components: performance, reliability, technical service capabilities, cost, efficiency, innovation and technology. Through this strategy we expect to be able to drive further commercial wins, which provide the potential for higher growth in the future.
Through this strategy we expect to be able to drive further commercial wins, which provide the potential for higher growth in the future. We have also expanded our capabilities through organic investment and acquisitions and strive to ensure high quality solutions for our customers.
Our AES and EMS operating segments had a net sales decrease of 0.8% and and a net sales increase of 11.1%, respectively. $32.0 million of the increase in net sales, or 3.4%, primarily reflects the impact of increased net sales from our Silicone Engineering subsidiary.
Our AES and EMS operating segments had net sales decreases of 3.9% and 9.8%, respectively.
Removed
Other markets with a strong growth trajectory include ADAS, aerospace and defense, clean energy and portable electronics. Each of these markets is expected to contribute to our growth strategy. 20 Terminated Merger with DuPont On November 1, 2021, we entered into a definitive merger agreement to be acquired by DuPont de Nemours, Inc.
Added
They then leverage our innovation and technology capabilities and deep applications expertise to provide unique solutions to customers’ challenges. In addition to these capabilities, our strategy for success as a manufacturer of engineered materials and components is also built on our reputation for high performance and reliability solutions, trusted customer relationships, a broad product portfolio and custom design capabilities.
Removed
(DuPont) in an all-cash transaction at a price of $277.00 per share of the Company’s capital stock.
Added
Other markets with a good growth trajectory include ADAS, aerospace and defense, portable electronics and renewable energy.
Removed
The merger agreement provided for the acquisition of Rogers Corporation by DuPont through the merger of Cardinalis Merger Sub, Inc., a wholly owned subsidiary of DuPont, with and into Rogers Corporation, with Rogers Corporation surviving the merger as a wholly owned subsidiary of DuPont. Company shareholders approved the merger agreement at a special shareholder meeting held on January 25, 2022.
Added
These decreases in net sales were partially offset by higher net sales in the power substrates EV/HEV, renewable energy and ADAS markets in our AES operating segment and higher net sales in the aerospace and defense market in our EMS operating segment.
Removed
The merger agreement provided both Rogers Corporation and DuPont with a right to terminate the merger agreement if the merger had not closed on or before November 1, 2022. Consummation of the merger was subject to various customary closing conditions, including regulatory approval by the State Administration for Market Regulation of China (SAMR).
Added
Gross margin as a percentage of net sales increased 70 basis points to 33.8% in 2023 compared to 33.1% in 2022. Gross margin in 2023 improved due to lower freight, duties and tariffs costs, lower raw material costs and favorable factory cost optimization efforts in our AES and EMS operating segments.
Removed
As of November 1, 2022, the parties had not received regulatory approval from SAMR. On November 1, 2022, the Company received from DuPont a notice of termination for the merger agreement.
Added
The restructuring charges in 2023 were related to the reduction in global workforce and facility consolidation plans announced in February 2023. The restructuring charges in 2022 were related to the manufacturing footprint optimization plans involving certain Europe and Asia manufacturing locations.
Removed
Pursuant to the terms of the merger agreement, the Company received a regulatory termination fee from DuPont in the amount of $162.5 million, before taxes, and incurred a transaction-related fee of $20.4 million.
Added
The income recognized in 2022 was primarily related to the DuPont merger termination fee less costs incurred, as well as the impacts from the fire at our UTIS manufacturing facility in Ansan, South Korea. For additional information, refer to “ Note 14 – Supplemental Financial Information ” to “Item 8.
Removed
The plan is expected to significantly reduce our manufacturing costs and operating expenses, and are being done in conjunction with other previously announced cost reduction initiatives.
Added
Other Income (Expense), Net (Dollars in millions) 2023 2022 Other income (expense), net $ (0.7) $ 1.1 Other income (expense), net decreased to $0.7 million of expense in 2023 compared to $1.1 million of income in 2022.
Removed
This was partially offset by the favorable impacts of commercial actions taken in our AES and EMS operating segments, as well as favorable changes in raw material costs in our AES operating segment and higher volume in our EMS operating segment.
Added
Income Tax Expense (Dollars in millions) 2023 2022 Income tax expense $ 19.7 $ 23.8 Effective tax rate 25.8 % 16.9 % Our effective income tax rate for 2023 was 25.8% compared to 16.9% for 2022.
Removed
Supply constraints on raw material and labor availability moderated production levels, creating operational headwinds, which negatively impacted our gross margin. Further, the recent COVID-19 outbreaks, particularly in Asia, adversely impacted our customers’ ability to continue manufacturing operations, which in turn negatively impacted our net sales in 2022.
Added
The decrease in operating income was primarily due to unfavorable year-over-year changes in shared service operating expense allocations and a $9.6 million unfavorable year-over-year change in restructuring charges, as well as, lower volumes and unfavorable mix, unfavorable yield performance and higher inventory reserves provisions.
Removed
Pension Settlement Charges and Other Income (Expense), Net (Dollars in thousands) 2022 2021 Pension settlement charges $ — $ (534) Other income (expense), net $ 1,058 $ 5,136 In 2021, we recorded $0.5 million of pre-tax settlement charges related to the termination of the Rogers Corporation Defined Benefit Pension Plan (following its merger with the Hourly Employees Pension Plan of Arlon LLC, Microwave Material and Silicone Technologies Divisions, Bear, Delaware (collectively, the Merged Plan)).
Added
The decrease in operating income was partially offset by a $40.5 million favorable year-over-year change in impairment charges and a $1.8 million net gain on the sale of one of our Suzhou, China facilities, as well as lower freight, duties and tariffs costs, lower raw material costs and favorable factory optimization efforts.
Removed
Interest Expense, Net (Dollars in thousands) 2022 2021 Interest expense, net $ (9,547) $ (2,536) Interest expense, net, increased by $7.0 million in 2022 from 2021, primarily due to a higher weighted-average outstanding balance for our borrowings under our revolving credit facility. 23 Income Tax Expense (Dollars in thousands) 2022 2021 Income tax expense $ 23,751 $ 18,147 Effective tax rate 16.9 % 14.4 % Our effective income tax rate for 2022 was 16.9% compared to 14.4% for 2021.
Added
As a percentage of net sales, operating income in 2023 was 0.5% as compared to 14.5% in 2022.
Removed
Additionally, operating income also increased due to commercial actions taken and favorable changes in raw material costs, partially offset by unfavorable factory utilization, lower volume, unfavorable yield performance, higher freight, duties and tariffs expenses and a higher inventory reserves provision.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
5 edited+1 added−0 removed6 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
5 edited+1 added−0 removed6 unchanged
2022 filing
2023 filing
Biggest changeIn 2022, a 10% strengthening of the U.S. dollar relative to other currencies would have resulted in a decrease to net sales and net income of approximately $38 million and $2 million, respectively, while a 10% weakening of the U.S. dollar relative to other currencies would have resulted in an increase to net sales and net income of approximately $46 million and $3 million, respectively. • Interest Rate Risk As of December 31, 2022, we had $215.0 million in borrowings outstanding under our revolving credit facility.
Biggest changeIn 2023, a 10% strengthening of the U.S. dollar relative to other currencies would have resulted in a decrease to net sales of approximately $41 million, while a 10% weakening of the U.S. dollar relative to other currencies would have resulted in an increase to net sales of approximately $51 million.
Our primary overseas markets are in Europe and Asia, thus exposing us to exchange rate risk from fluctuations in the euro, the Chinese renminbi, British pound, Korean won and certain other currencies.
Our primary overseas markets are in Europe and Asia, thus exposing us to exchange rate risk from fluctuations in the euro, the Chinese renminbi, the British pound, the Japanese yen, the Korean won and certain other currencies.
The interest charged on these borrowings fluctuates with movements in the benchmark LIBOR.
The interest charged on these borrowings fluctuates with movements in the benchmark SOFR.
As of December 31, 2022, the interest rate on our revolving credit facility was 4.87%, and a 100 basis point increase in LIBOR would have increased the amount of interest expense by approximately $2.2 million for the year ended December 31, 2022. • Commodity Risk We are subject to fluctuations in the cost of raw materials used to manufacture our materials and products.
As of December 31, 2023, the interest rate on our revolving credit facility was 7.10%, and a 100 basis point increase in SOFR would have increased the amount of interest expense by approximately $1.6 million for the year ended December 31, 2023. • Commodity Risk We are subject to fluctuations in the cost of raw materials used to manufacture our materials and products.
We currently do not use hedging strategies to minimize the risk of price fluctuations on other commodity-based raw materials; however, we regularly review such strategies to hedge market risk on an ongoing basis. For additional discussion, refer to “Note 2 – Fair Value Measurements” and “Note 3 – Hedging Transactions and Derivative Financial Instruments” to “Item 8.
We currently do not use hedging strategies to minimize the risk of price fluctuations on other commodity-based raw materials; however, we regularly review such strategies to hedge market risk on an ongoing basis. For additional discussion, refer to “Note 3 – Derivatives and Hedging” to “Item 8. Financial Statements and Supplementary Data.” 29
Added
The impacts to net income in either scenario would have been less than $1 million. These impacts are not reflective of the effects of our foreign currency forward contracts. • Interest Rate Risk As of December 31, 2023, we had $30.0 million in borrowings outstanding under our revolving credit facility.