NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation, Organization and Summary of Significant Accounting Policies
As used herein, the terms “Company,” “Rogers,” “we,” “us,” “our” and similar terms mean Rogers Corporation and its consolidated subsidiaries, unless the context indicates otherwise.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, after elimination of intercompany balances and transactions. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States (U.S. GAAP), requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Organization
Our reporting structure is comprised of three strategic operating segments: Advanced Connectivity Solutions (ACS), Elastomeric Material Solutions (EMS) and Power Electronics Solutions (PES). The remaining operations are accumulated and reported as our Other operating segment.
Advanced Connectivity Solutions
Our ACS operating segment designs, develops, manufactures and sells circuit materials and solutions enabling high-performance and high-reliability connectivity for applications in wireless infrastructure (e.g., power amplifiers, antennas and small cells), automotive (e.g., ADAS, telematics and thermal solutions), aerospace and defense (e.g. antenna systems, communication systems and phased array radar systems), connected devices (e.g., mobile internet devices and thermal solutions) and wired infrastructure (e.g., computing and IP infrastructure) markets. We believe these products have characteristics that offer performance and other functional advantages in many market applications that serve to differentiate our products from other commonly available materials. ACS products are sold principally to independent and captive printed circuit board fabricators that convert our laminates to custom printed circuits. Trade names for our ACS products include: RO4000® Series, RO3000® Series, RT/duroid®, CLTE Series®, AD Series®, CuClad® Series, TMM®, Kappa®, XTremeSpeed RO1200TM Laminates, DiClad® Series, IsoClad® Series, COOLSPAN®, MAGTREXTM, TC Series®, IM SeriesTM, 92MLTM, 2929 Bondply and 3001 Bondply Film. As of December 31, 2019, our ACS operating segment had manufacturing and administrative facilities in Chandler, Arizona; Rogers, Connecticut; Bear, Delaware; Evergem, Belgium; 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. These include polyurethane and silicone materials used in cushioning, gasketing and sealing, and vibration management applications for 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 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 general industrial, automotive and aerospace and defense markets. We believe these materials have characteristics that offer functional advantages in many market applications which serve to differentiate Rogers’ products from other commonly available materials. EMS products are sold globally to converters, fabricators, distributors and original equipment manufacturers (OEMs). Trade names for our EMS products include: PORON®, BISCO®, DeWAL®, ARLON®, eSorba®, Griswold®, Diversified Silicone Products®, XRD®, R/bak® and HeatSORB™.
As of December 31, 2019, our EMS operating segment had administrative and manufacturing facilities in Moosup, Connecticut; Rogers, Connecticut; Woodstock, Connecticut; Bear, Delaware; Carol Stream, Illinois; Narragansett, Rhode Island; Ansan, South Korea; and Suzhou, China. 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. INOAC Corporation owns the remaining 50% of both RIC and RIS. RIC has manufacturing facilities at the INOAC facilities in Nagoya and Mie, Japan, and RIS has manufacturing facilities at Rogers’ facilities in Suzhou, China.
In July 2018, we acquired 100% of the membership interests in Griswold LLC (Griswold), a manufacturer of a wide range of high-performance engineered cellular elastomer and microcellular polyurethane products and solutions, for an aggregate purchase price of $78.0 million, net of cash acquired.
Power Electronics Solutions
Our PES operating segment designs, develops, manufactures and sells ceramic substrate materials, busbars and cooling solutions for a variety of applications in EV/HEV, general industrial, mass transit, renewable energy, aerospace and defense and wired infrastructure markets. We sell our ceramic substrate materials and cooling solutions under the curamik® trade name and our busbars under the ROLINX® trade name. As of December 31, 2019, our PES operating segment had manufacturing and administrative facilities in Evergem, Belgium; Eschenbach, Germany; Budapest, Hungary; and Suzhou, China.
Other
Our Other operating segment consists of elastomer components for applications in 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.
Summary of Significant Accounting Policies
Cash Equivalents
Highly liquid investments with original maturities of three months or less are considered cash equivalents. These investments are stated at cost, which approximates fair value.
Investments in Unconsolidated Joint Ventures
We account for our investments in and advances to unconsolidated joint ventures, both of which are 50% owned, using the equity method of accounting.
Foreign Currency
All balance sheet accounts of foreign subsidiaries are translated or remeasured at exchange rates in effect at each year end, and income statement items are translated using the average exchange rates for the year. Translation adjustments for those entities that operate under a local currency are recorded directly to a separate component of shareholders’ equity, while remeasurement adjustments for those entities that operate under the parent’s functional currency are recorded to the income statement as a component of “Other income (expense), net.” Currency transaction gains and losses are reported as income or expense, respectively, in the consolidated statements of operations as a component of “Other income (expense), net.” Such adjustments resulted in losses of $0.9 million in 2019, losses of $0.7 million in 2018 and gains of $0.9 million in 2017.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is determined based on a variety of factors that affect the potential collectability of the related receivables, including the length of time receivables are past due, customer credit ratings, financial stability of customers, specific one-time events and past customer history. In addition, in circumstances where we are made aware of a specific customer’s inability to meet its financial obligations, a specific allowance is established. The majority of accounts are individually evaluated on a regular basis and appropriate reserves are established as deemed appropriate based on the criteria previously mentioned. The remainder of the reserve is based on our estimates and takes into consideration historical trends, market conditions and the composition of our customer base.
Inventories
Inventories are stated at the lower of cost or net realizable value. The cost of inventories is determined using the first in, first out (FIFO) method. An allowance is made for estimated losses due to obsolescence. The allowance is determined for groups of products based on purchases in the recent past and/or expected future demand and market conditions. Abnormal amounts of idle facility expense and waste are not capitalized in inventory. The allocation of fixed production overheads to the inventory cost is based on the normal capacity of the production facilities.
Our “Inventories” line item in the consolidated statements of financial position consisted of the following:
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|
|
|
|
|
|
As of December 31,
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(Dollars in thousands)
|
2019
|
|
2018
|
Raw materials
|
$
|
61,338
|
|
|
$
|
59,321
|
|
Work-in-process
|
30,043
|
|
|
30,086
|
|
Finished goods
|
41,478
|
|
|
43,230
|
|
Total inventories
|
$
|
132,859
|
|
|
$
|
132,637
|
|
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost. For financial reporting purposes, provisions for depreciation are calculated on a straight-line basis over the following estimated useful lives of the underlying assets:
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|
|
Property, Plant and Equipment Classification
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Estimated Useful Lives
|
Buildings and improvements
|
30-40 years
|
Machinery and equipment
|
5-15 years
|
Office equipment
|
3-10 years
|
Software Costs
We capitalize certain internal and external costs of computer software developed or obtained for internal use, principally related to software coding, software configuration, designing system interfaces and installation and testing of the software. We amortize capitalized internal use software costs using the straight-line method over the estimated useful lives of the software, generally from three to five years. Net capitalized software and development costs were $0.2 million and $1.7 million for the years ended December 31, 2019 and 2018, respectively. Capitalized software is included within “Property, plant and equipment, net of accumulated depreciation” in the consolidated statements of financial position.
Goodwill and Other Intangible Assets
We have made acquisitions over the years that included the recognition of intangible assets. Intangible assets are classified into three categories: (1) goodwill; (2) other intangible assets with definite lives subject to amortization; and (3) other intangible assets with indefinite lives not subject to amortization. Other intangible assets can include items such as trademarks and trade names, licensed technology, customer relationships and covenants not to compete, among other things. Each definite-lived other intangible asset is amortized over its respective economic useful life using the economic attribution method.
Goodwill is tested for impairment annually and between annual impairment tests if events or changes in circumstances indicate the carrying value may be impaired. If it is more likely than not that our goodwill is impaired, then we compare the estimated fair value of each of our reporting units to its respective carrying value. If a reporting unit’s carrying value is greater than its fair value, then an impairment is recognized for the excess and charged to operations. We currently have four reporting units with goodwill: ACS, EMS, curamik® and Elastomer Components Division (ECD). Consistent with historical practice, the annual impairment test on these reporting units was performed as of November 30, 2019.
The application of the annual goodwill impairment test requires significant judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units and determination of the fair value of each reporting unit. Determining the fair value is subjective and requires the use of significant estimates and assumptions, including financial projections for net sales, gross margin and operating margin, discount rates, terminal growth rates and future market conditions, among others. We estimated the fair value of our reporting units using an income approach based on the present value of future cash flows through a five year discounted cash flow analysis. The discounted cash flow analysis utilized the discount rates for each of the reporting units ranging from 10.30% for EMS to 11.90% for ACS, and terminal growth rates ranging from 3.3% for curamik® to 4.6% for ACS. We believe this approach yields the most appropriate evidence of fair value as our reporting units are not easily compared to other corporations involved in similar businesses. We further believe that the assumptions and rates used in our annual goodwill impairment test are reasonable, but inherently uncertain. There were no impairment charges resulting from our goodwill impairment analysis for the year ended December 31, 2019. Our ACS, EMS, curamik® and ECD reporting units had allocated goodwill of $51.7 million, $142.0 million, $67.0 million and $2.2 million respectively, as of December 31, 2019.
Indefinite-lived other intangible assets are tested for impairment annually and between annual impairment tests if events or changes in circumstances indicate the carrying value may be impaired. If it is more likely than not that an indefinite-lived other intangible asset is impaired, then we compare the estimated fair value of that indefinite-lived other intangible asset to its respective carrying value. If an indefinite-lived other intangible asset’s carrying value is greater than its fair value, then an impairment charge is recognized for the excess and charged to operations. Consistent with historical practice, the annual impairment test on these reporting units was performed as of November 30, 2019. The application of the annual indefinite-lived other intangible asset impairment test requires significant judgment, including the determination of fair value of each indefinite-lived other intangible asset. Fair value is primarily based on income approaches using discounted cash flow models, which have significant assumptions. Such assumptions are subject to variability from year to year and are directly impacted by global market conditions. There were no impairment charges resulting from our indefinite-lived other intangible assets impairment analysis for the year ended December 31, 2019. The curamik® reporting unit had an indefinite-lived other intangible asset of $4.4 million as of December 31, 2019.
Definite-lived other intangible assets are tested for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. The recoverability test involves comparing the estimated sum of the undiscounted cash flows for each definite-lived other intangible asset to its respective carrying value. If a definite-lived other intangible asset’s carrying value
is greater than the sum of its undiscounted cash flows, then the definite-lived other intangible asset’s carrying value is compared to its estimated fair value and an impairment charge is recognized for the excess and charged to operations. The application of the recoverability test requires significant judgment, including the identification of the asset group and determination of undiscounted cash flows and fair value of the underlying definite-lived other intangible asset. Determination of undiscounted cash flows requires the use of significant estimates and assumptions, including certain financial projections. Fair value is primarily based on income approaches using discounted cash flow models, which have significant assumptions. Such assumptions are subject to variability from year to year and are directly impacted by global market conditions. There were no impairment charges resulting from our definite-lived other intangible assets impairment analysis for the year ended December 31, 2019. Our ACS, EMS and curamik® reporting units had definite-lived other intangible assets of $4.7 million, $140.4 million and $9.5 million, respectively, as of December 31, 2019.
Environmental and Product Liabilities
We accrue for our environmental investigation, remediation, operating and maintenance costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. For environmental matters, the most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each individual site, including existing technology, current laws and regulations and prior remediation experience. For sites with multiple potential responsible parties (PRPs), we consider our likely proportionate share of the anticipated remediation costs and the ability of the other parties to fulfill their obligations in establishing a provision for those costs. When no amount within a range of estimates is more likely to occur than another, we accrue to the low end of the range and disclose the range. When future liabilities are determined to be reimbursable by insurance coverage, an accrual is recorded for the potential liability and a receivable is recorded for the estimated insurance reimbursement amount. We are exposed to the uncertain nature inherent in such remediation and the possibility that initial estimates will not reflect the final outcome of a matter.
We review our asbestos-related projections annually in the fourth quarter of each year unless facts and circumstances materially change during the year, at which time we would analyze these projections. We believe the assumptions made on the potential exposure and expected insurance coverage are reasonable at the present time, but are subject to uncertainty based on the actual future outcome of our asbestos litigation. Our estimates of asbestos-related contingent liabilities and related insurance receivables are based on an independent actuarial analysis and an independent insurance usage analysis prepared annually by third parties. The actuarial 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. Furthermore, any predictions with respect to these assumptions are subject to even greater uncertainty as the projection period lengthens. The insurance usage analysis considers, among other things, applicable deductibles, retentions and policy limits, the solvency and historical payment experience of various insurance carriers, the likelihood of recovery as estimated by external legal counsel and existing insurance settlements.
We believe the assumptions used in our models for determining our potential exposure and related insurance coverage are reasonable at the present time, but such assumptions are inherently uncertain. Given the inherent uncertainty in making projections, we plan to re-examine periodically the assumptions used in the projections of current and future asbestos claims, and we will update them if needed based on our experience, changes in the assumptions underlying our models, and other relevant factors, such as changes in the tort system. Our accrued asbestos liabilities may not approximate our actual asbestos-related indemnity and defense costs, and our accrued insurance recoveries may not be realized. We believe that it is reasonably possible that we may incur additional charges for our asbestos liabilities and defense costs in the future that could exceed existing reserves and insurance recoveries.
Fair Value of Financial Instruments
Management believes that the carrying values of financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the maturities of these instruments. The fair value of our borrowings under credit facility are determined using discounted cash flows based upon our estimated current interest cost for similar type borrowings or current market value, which falls under Level 2 of the fair value hierarchy. Based on our credit characteristics as of December 31, 2019, borrowings would generally bear interest at London interbank offered rate (LIBOR) plus 137.5 basis points. As the current borrowings under the Third Amended Credit Agreement bear interest at adjusted 1-month LIBOR plus 137.5 basis points, we believe the carrying value of our borrowings approximates fair value. For additional information on the calculation of fair value measurements, refer to “Note 2 – Fair Value Measurements.”
Hedging Transactions and Derivative Financial Instruments
From time to time, we use derivative instruments to manage commodity, interest rate and foreign currency exposures. Derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. To qualify for hedge accounting treatment, derivatives used for hedging purposes must be designated and deemed effective as a hedge of the identified underlying risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be
highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.
Derivatives used to hedge forecasted cash flows associated with interest rates, foreign currency commitments, or forecasted commodity purchases are accounted for as cash flow hedges. For those derivative instruments that qualify for hedge accounting treatment, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument are recorded in other comprehensive income (loss). The derivative hedging instrument will be reclassified to earnings when the hedged item impacts earnings. For those derivative instruments that do not qualify for hedge accounting treatment, any related gains and losses are recognized in the consolidated statements of operations as a component of “Other income (expense), net.” For additional information, refer to “Note 3 – Hedging Transactions and Derivative Financial Instruments.”
Concentration of Credit and Investment Risk
We extend credit on an uncollateralized basis to almost all customers. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the large number and general dispersion of accounts that constitute our customer base. We routinely perform credit evaluations on our customers. As of December 31, 2019 and 2018, there were no customers that individually accounted for more than 10% of total accounts receivable. We did not experience significant credit losses on customers’ accounts in 2019, 2018 or 2017.
We are subject to credit and market risk by using derivative instruments. If a counterparty fails to fulfill its performance obligations under a derivative contract, our credit risk will equal the fair value of the derivative instrument. We seek to minimize counterparty credit (or repayment) risk by entering into derivative transactions with major financial institutions with investment grade credit ratings.
We invest excess cash principally in investment grade government securities and time deposits. We have established guidelines relative to diversification and maturities in order to maintain safety and liquidity. These guidelines are periodically reviewed and modified to reflect changes in market conditions.
Income Taxes
We are subject to income taxes in the U.S. and in numerous foreign jurisdictions. We account for income taxes following Accounting Standards Codification (ASC) 740, Income Taxes, recognizing deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of a deferred tax asset will not be realized.
We did not make any changes in 2019 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2019 and 2018, we recorded a deferred tax liability of $1.6 million and $1.8 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we expect that these undistributed earnings may give rise to an estimated $3.5 million of additional tax liabilities as a result of distribution of such earnings. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2019 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate.
We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained by the taxing authorities. If this threshold is not met, no tax benefit of the uncertain position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement.
We recognize interest and penalties within the “Income tax expense” line item in the consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line item in the consolidated statements of financial position.
Revenue Recognition
Recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. We recognize revenue when all of the following criteria are met: (1) we have entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. The majority of our shipping terms permit us to recognize revenue at point of shipment. Some shipping terms require the goods to be cleared through customs or be received by the customer before title passes. In those instances, revenue is not recognized until either the customer has received the goods or they have passed through customs, depending on the circumstances. Shipping and handling costs are treated as fulfillment costs. Sales tax or VAT are excluded from the measurement of the transaction price.
Pension and Other Postretirement Benefits
We provide various defined benefit pension plans for our U.S. employees and we sponsor multiple fully insured or self-funded medical plans and fully insured life insurance plans for retirees. In 2013, the defined benefit pension plans were frozen, so that future benefits no longer accrue. The costs and obligations associated with these plans are dependent upon various actuarial assumptions used in calculating such amounts. These assumptions include discount rates, long-term rates of return on plan assets, mortality rates, and other factors. The assumptions used in these models are determined as follows: (i) the discount rate used is based on the PruCurve bond index; (ii) the long-term rate of return on plan assets is determined based on historical portfolio results, market conditions and our expectations of future returns; and (iii) the mortality rate is based on a mortality projection that estimates current longevity rates and their impact on the long-term plan obligations. We determine these assumptions based on consultation with outside actuaries and investment advisors. Any changes in these assumptions could have a significant impact on future recognized pension costs, assets and liabilities. We review these assumptions periodically throughout the year and update as necessary.
We are required, as an employer, to: (a) recognize in our consolidated statements of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and a plan’s obligations that determine our funded status as of the end of the year; and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur and report these changes in accumulated other comprehensive loss. In addition, actuarial losses (gains) that are not immediately recognized as net periodic pension cost (credit) are recognized as a component of accumulated other comprehensive loss (income) and amortized into net periodic pension cost (credit) in future periods.
Investments were stated at fair value as of the dates reported. Securities traded on a national securities exchange were valued at the last reported sales price on the last business day of the plan year. Fixed-income bonds were valued using price evaluations provided by independent pricing services. The fair value of the guaranteed deposit account was determined through discounting expected future investment cash flow from both investment income and repayment of principal for each investment purchased. The estimated fair values of the participation units owned by the plan in pooled separate accounts were based on quoted redemption values and adjusted for management fees and asset charges, as determined by the recordkeeper, on the last business day of the relevant plan year. Pooled separate accounts are accounts established solely for the purpose of investing the assets of one or more plans. Funds in a separate account are not commingled with other Company assets for investment purposes.
Advertising Costs
Advertising costs are expensed as incurred and amounted to $3.6 million, $3.8 million and $4.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.
Equity Compensation
Equity compensation mainly consists of expense related to restricted stock units and deferred stock units.
Performance-based restricted stock unit compensation expense is based on achievement of both market and service conditions. The fair value of these awards is determined based on a Monte Carlo simulation valuation model on the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period with no changes for final projected payout of the awards.
Time-based restricted stock unit compensation expense is based on the achievement of only service conditions. The fair value of these awards is determined based on the market value of the underlying stock price on the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period.
Deferred stock units, which are granted to non-management directors, are fully vested on the date of grant and the related shares are generally issued on the 13-month anniversary of the grant date unless the director elects to defer the receipt of those shares. The fair value of these awards is determined based on the market value of the underlying stock price on the grant date. The compensation related to these grants is expensed immediately on the date of grant.
Note 2 – Fair Value Measurements
The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
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•
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Level 1 – Quoted prices in active markets for identical assets or liabilities.
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|
•
|
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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•
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Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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From time to time we enter into various instruments that require fair value measurement, including foreign currency contracts, copper derivative contracts and interest rate swaps. Derivative instruments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, include:
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|
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Derivative Instruments at Fair Value as of December 31, 2019
|
(Dollars in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total(1)
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
Copper derivative contracts
|
$
|
—
|
|
|
$
|
1,147
|
|
|
$
|
—
|
|
|
$
|
1,147
|
|
Interest rate swap contract
|
$
|
—
|
|
|
$
|
(1,254
|
)
|
|
$
|
—
|
|
|
$
|
(1,254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments at Fair Value as of December 31, 2018
|
(Dollars in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total(1)
|
Foreign currency contracts
|
$
|
—
|
|
|
$
|
522
|
|
|
$
|
—
|
|
|
$
|
522
|
|
Copper derivative contracts
|
$
|
—
|
|
|
$
|
583
|
|
|
$
|
—
|
|
|
$
|
583
|
|
Interest rate swap contract
|
$
|
—
|
|
|
$
|
461
|
|
|
$
|
—
|
|
|
$
|
461
|
|
(1) All balances were recorded in the “Other current assets” or “Other accrued liabilities” line items in the consolidated statements of financial position, except the 2019 and 2018 interest rate swap balance, which was recorded in the “Other long-term liabilities” and “Other long-term assets” line items, respectively, in the consolidated statements of financial position.
For additional information on our derivative contracts, refer to “Note 3 – Hedging Transactions and Derivative Financial Instruments.”
Note 3 – Hedging Transactions and Derivative Financial Instruments
We are exposed to certain risks related to our ongoing business operations. The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk, commodity pricing risk (primarily related to copper) and interest rate risk. We do not use derivative financial instruments for trading or speculative purposes. The valuation of derivative contracts used to manage each of these risks is described below:
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•
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Foreign Currency – The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics.
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•
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Commodity – The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models, which are collectively a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate and volatility. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. The time value valuation model incorporates changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date.
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•
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Interest Rates – The fair value of interest rate swap instruments is derived by comparing the present value of the interest rate forward curve against the present value of the swap rate, relative to the notional amount of the swap. The net value represents the estimated amount we would receive or pay to terminate the agreements. Settlement amounts for an “in the money” swap would be adjusted down to compensate the counterparty for cost of funds, and the adjustment is directly related to the counterparties’ credit ratings.
|
The guidance for the accounting and disclosure of derivatives and hedging transactions requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the statements of financial position. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies for hedge accounting treatment as defined under the applicable accounting guidance. For derivative instruments that are designated and qualify for hedge accounting treatment as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss). This gain or loss is reclassified into earnings in the same line item of the consolidated statements of operations associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. As of December 31, 2019 and 2018, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge, and the hedge was highly effective.
Foreign Currency
In 2019, we entered into U.S. dollar, Korean won, Japanese yen, euro, Chinese yuan and Chinese renminbi forward contracts. We entered into these foreign currency forward contracts to mitigate certain global transactional exposures. These contracts do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our consolidated statements of operations in the period in which the adjustment occurred.
As of December 31, 2019 the notional values of these foreign currency forward contracts were as follows:
|
|
|
|
|
Notional Values of Foreign Currency Derivatives
|
KRW/USD
|
₩
|
10,413,450,000
|
|
USD/CNY
|
$
|
17,131,000
|
|
EUR/USD
|
€
|
13,408,000
|
|
JPY/EUR
|
¥
|
125,000,000
|
|
Commodity
As of December 31, 2019, we had 30 outstanding contracts to hedge exposure related to the purchase of copper in our PES and ACS operating segments. These contracts are held with financial institutions and are intended to offset rising copper prices and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our consolidated statements of operations in the period in which the adjustment occurred.
As of December 31, 2019, the volume of our copper contracts outstanding were as follows:
|
|
|
Volume of Copper Derivatives
|
January 2020 - March 2020
|
202 metric tons per month
|
April 2020 - June 2020
|
202 metric tons per month
|
July 2020 - September 2020
|
201 metric tons per month
|
October 2020 - December 2020
|
201 metric tons per month
|
January 2021 - March 2021
|
256 metric tons per month
|
Interest Rates
In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $75.0 million of our $450.0 million revolving credit facility. This transaction has been designated as a cash flow hedge and qualifies for hedge accounting treatment. For additional information regarding our revolving credit facility, refer to “Note 9 – Debt.”
Effects on Financial Statements
The following table presents the impact from these instruments on the statement of operations and statements of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
Financial Statement Line Item
|
2019
|
|
2018
|
|
2017
|
Foreign Currency Contracts
|
|
|
|
|
|
|
Contracts not designated as hedging instruments
|
Other income (expense), net
|
$
|
(779
|
)
|
|
$
|
(333
|
)
|
|
$
|
(7
|
)
|
Copper Derivatives Contracts
|
|
|
|
|
|
|
Contracts not designated as hedging instruments
|
Other income (expense), net
|
$
|
(716
|
)
|
|
$
|
(2,101
|
)
|
|
$
|
1,928
|
|
Interest Rate Swap Contract
|
|
|
|
|
|
|
Contract designated as hedging instrument
|
Other comprehensive income (loss)
|
$
|
(1,715
|
)
|
|
$
|
420
|
|
|
$
|
41
|
|
Note 4 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component for each of the fiscal years in the two-year period ended December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars and accompanying footnotes in thousands)
|
Foreign Currency Translation Adjustments
|
|
Pension and Other Postretirement Benefits(1)
|
|
Derivative Instrument Designated as Cash Flow Hedge(2)
|
|
Total
|
Balance as of December 31, 2017
|
$
|
(17,983
|
)
|
|
$
|
(47,198
|
)
|
|
$
|
26
|
|
|
$
|
(65,155
|
)
|
Other comprehensive income (loss) before reclassifications
|
(12,505
|
)
|
|
(1,678
|
)
|
|
519
|
|
|
(13,664
|
)
|
Amounts reclassified to earnings
|
—
|
|
|
176
|
|
|
(191
|
)
|
|
(15
|
)
|
Net other comprehensive income (loss) for period
|
(12,505
|
)
|
|
(1,502
|
)
|
|
328
|
|
|
(13,679
|
)
|
Balance as of December 31, 2018
|
(30,488
|
)
|
|
(48,700
|
)
|
|
354
|
|
|
(78,834
|
)
|
Other comprehensive income (loss) before reclassifications
|
(4,990
|
)
|
|
(6,079
|
)
|
|
(1,171
|
)
|
|
(12,240
|
)
|
Amounts reclassified to earnings
|
—
|
|
|
44,324
|
|
|
(155
|
)
|
|
44,169
|
|
Net other comprehensive income (loss) for period
|
(4,990
|
)
|
|
38,245
|
|
|
(1,326
|
)
|
|
31,929
|
|
Balance as of December 31, 2019
|
$
|
(35,478
|
)
|
|
$
|
(10,455
|
)
|
|
$
|
(972
|
)
|
|
$
|
(46,905
|
)
|
(1) Net of taxes of $2,368, $9,984 and $9,563 for the years ended December 31, 2019, 2018 and 2017, respectively.
(2) Net of taxes of $282, ($106) and ($15) for the years ended December 31, 2019, 2018 and 2017, respectively.
The impacts to the consolidated statements of operations related to items reclassified to earnings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
Financial Statement Line Item
|
2019
|
|
2018
|
Amortization/settlement of pension and other postretirement benefits
|
|
|
|
|
|
Pension settlement charges
|
$
|
(53,213
|
)
|
|
$
|
—
|
|
|
Other income (expense), net(1)
|
(504
|
)
|
|
(227
|
)
|
|
Income tax (expense) benefit
|
9,393
|
|
|
51
|
|
|
Net income
|
$
|
(44,324
|
)
|
|
$
|
(176
|
)
|
Unrealized gains (losses) on derivative instrument(2)
|
|
|
|
|
|
Other income (expense), net
|
$
|
200
|
|
|
$
|
247
|
|
|
Income tax (expense) benefit
|
(45
|
)
|
|
(56
|
)
|
|
Net income
|
$
|
155
|
|
|
$
|
191
|
|
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. For additional details, refer to “Note 11 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan.”
(2) This relates to the derivative instrument designated as a cash flow hedge and held as of the end of the year for each year presented.
Note 5 – Property, Plant and Equipment
Our “Property, plant and equipment, net” line item in the consolidated statements of financial position consisted of the following:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
Land
|
$
|
21,697
|
|
|
$
|
21,525
|
|
Buildings and improvements
|
165,968
|
|
|
175,279
|
|
Machinery and equipment
|
281,771
|
|
|
256,301
|
|
Office equipment
|
68,349
|
|
|
64,886
|
|
Property plant and equipment, gross
|
537,785
|
|
|
517,991
|
|
Accumulated depreciation
|
(341,119
|
)
|
|
(317,414
|
)
|
Property, plant and equipment, net
|
196,666
|
|
|
200,577
|
|
Equipment in process
|
63,580
|
|
|
42,182
|
|
Total property, plant and equipment, net
|
$
|
260,246
|
|
|
$
|
242,759
|
|
Depreciation expense was $31.4 million in 2019, $33.5 million in 2018 and $29.3 million in 2017. Additionally, we recognized $1.5 million of impairment charges in both 2019 and 2018, respectively, primarily relating to certain assets from the Isola asset acquisition.
Note 6 – Goodwill and Other Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the period ending December 31, 2019, by operating segment, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Advanced Connectivity Solutions
|
|
Elastomeric Material Solutions
|
|
Power Electronics Solutions
|
|
Other
|
|
Total
|
December 31, 2018
|
$
|
51,694
|
|
|
$
|
142,588
|
|
|
$
|
68,379
|
|
|
$
|
2,224
|
|
|
$
|
264,885
|
|
Foreign currency translation adjustment
|
—
|
|
|
(558
|
)
|
|
(1,397
|
)
|
|
—
|
|
|
(1,955
|
)
|
December 31, 2019
|
$
|
51,694
|
|
|
$
|
142,030
|
|
|
$
|
66,982
|
|
|
$
|
2,224
|
|
|
$
|
262,930
|
|
Other Intangible Assets
The changes in the carrying amount of other intangible assets for the two-year period ending December 31, 2019, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
(Dollars in thousands)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
Customer relationships
|
$
|
149,317
|
|
|
$
|
39,018
|
|
|
$
|
110,299
|
|
|
$
|
149,753
|
|
|
$
|
30,078
|
|
|
$
|
119,675
|
|
Technology
|
80,938
|
|
|
45,190
|
|
|
35,748
|
|
|
81,535
|
|
|
38,624
|
|
|
42,911
|
|
Trademarks and trade names
|
11,994
|
|
|
4,361
|
|
|
7,633
|
|
|
12,019
|
|
|
3,213
|
|
|
8,806
|
|
Covenants not to compete
|
1,340
|
|
|
505
|
|
|
835
|
|
|
1,340
|
|
|
249
|
|
|
1,091
|
|
Total definite-lived other intangible assets
|
243,589
|
|
|
89,074
|
|
|
154,515
|
|
|
244,647
|
|
|
72,164
|
|
|
172,483
|
|
Indefinite-lived other intangible asset
|
4,432
|
|
|
—
|
|
|
4,432
|
|
|
4,525
|
|
|
—
|
|
|
4,525
|
|
Total other intangible assets
|
$
|
248,021
|
|
|
$
|
89,074
|
|
|
$
|
158,947
|
|
|
$
|
249,172
|
|
|
$
|
72,164
|
|
|
$
|
177,008
|
|
In the table above, gross carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations.
Amortization expense was $17.8 million, $16.5 million and $14.8 million in 2019, 2018 and 2017, respectively. The estimated annual future amortization expense is $14.6 million, $13.8 million, $13.3 million, $12.7 million and $11.4 million in 2020, 2021, 2022, 2023 and 2024, respectively. These amounts could vary based on changes in foreign currency exchange rates.
The weighted average amortization period as of December 31, 2019, by definite-lived other intangible asset class, is presented in the table below:
|
|
|
Definite-Lived Other Intangible Asset Class
|
Weighted Average Remaining Amortization Period
|
Customer relationships
|
7.3
|
Technology
|
4.1
|
Trademarks and trade names
|
4.9
|
Covenants not to compete
|
1.6
|
Total definite-lived other intangible assets
|
6.4
|
Note 7 – Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars and shares in thousands, except per share amounts)
|
2019
|
|
2018
|
|
2017
|
Numerator:
|
|
|
|
|
|
Net income
|
$
|
47,319
|
|
|
$
|
87,651
|
|
|
$
|
80,459
|
|
Denominator:
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
18,573
|
|
|
18,374
|
|
|
18,154
|
|
Effect of dilutive shares
|
140
|
|
|
285
|
|
|
393
|
|
Weighted average shares outstanding - diluted
|
18,713
|
|
|
18,659
|
|
|
18,547
|
|
Basic earnings per share
|
$
|
2.55
|
|
|
$
|
4.77
|
|
|
$
|
4.43
|
|
Diluted earnings per share
|
$
|
2.53
|
|
|
$
|
4.70
|
|
|
$
|
4.34
|
|
Dilutive shares are calculated using the treasury stock method and primarily include unvested restricted stock units. Anti-dilutive shares are excluded from the calculation of diluted shares and diluted earnings per share. For 2019 and 2018, 20,520 and 36,642 shares were excluded, respectively. No shares were excluded in 2017.
Note 8 – Capital Stock and Equity Compensation
Capital Stock
Our 2019 Long-Term Equity Compensation Plan, which was approved by our shareholders in May 2019, permits the granting of restricted stock units and certain other forms of equity awards to officers and other key employees. Under this plan, we also grant each non-management director deferred stock units, which permit non-management directors to receive, at a later date, one share of Rogers capital stock for each deferred stock unit, with no payment of any consideration by the director at the time the shares were received.
Shares of capital stock reserved for possible future issuance were as follows:
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
Shares reserved for issuance under outstanding restricted stock unit awards
|
315,571
|
|
|
413,294
|
|
Deferred compensation to be paid in stock, including deferred stock units
|
7,681
|
|
|
13,498
|
|
Additional shares reserved for issuance under Rogers Corporation 2019 Long-Term Equity Compensation Plan
|
1,063,920
|
|
|
777,385
|
|
Shares reserved for issuance under the Rogers Corporation Global Stock Ownership Plan for Employees
|
91,670
|
|
|
106,344
|
|
Total
|
1,478,842
|
|
|
1,310,521
|
|
Equity Compensation
Performance-Based Restricted Stock Units
As of December 31, 2019, we had performance-based restricted stock units from 2019, 2018 and 2017 outstanding. These awards generally cliff vest at the end of a three-year measurement period. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed during the measurement period. Participants are eligible to be awarded shares ranging from 0% to 200% of the original award amount, based on certain defined performance measures.
The outstanding awards have one measurement criteria: the three-year total shareholder return (TSR) on our capital stock as compared to that of a specified group of peer companies. The TSR measurement criteria of the awards is considered a market condition. As such, the fair value of this measurement criteria is determined on the grant date using a Monte Carlo simulation valuation model. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period with no changes for final projected payout of the awards. We account for forfeitures as they occur.
Below were the assumptions used in the Monte Carlo calculation for each material award granted in 2019, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
June 3, 2019
|
|
February 7, 2019
|
|
September 17, 2018
|
|
February 8, 2018
|
|
February 9, 2017
|
Expected volatility
|
39.7%
|
|
36.7%
|
|
36.6%
|
|
34.8%
|
|
33.6%
|
Expected term (in years)
|
2.6
|
|
2.9
|
|
3.0
|
|
3.0
|
|
3.0
|
Risk-free interest rate
|
1.78%
|
|
2.43%
|
|
2.85%
|
|
2.28%
|
|
1.38%
|
Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility.
Expected term – We use the vesting period of the award to determine the expected term assumption for the Monte Carlo simulation valuation model.
Risk-free interest rate – We use an implied “spot rate” yield on U.S. Treasury Constant Maturity rates as of the grant date for our assumption of the risk-free interest rate.
Expected dividend yield – We do not currently pay dividends on our capital stock; therefore, a dividend yield of 0% was used in the Monte Carlo simulation valuation model.
A summary of activity of the outstanding performance-based restricted stock units for 2019, 2018 and 2017 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
Awards outstanding as of January 1
|
142,434
|
|
|
$
|
110.19
|
|
|
169,202
|
|
|
$
|
97.16
|
|
|
151,769
|
|
|
$
|
89.72
|
|
Awards granted
|
112,160
|
|
|
114.22
|
|
|
75,760
|
|
|
163.55
|
|
|
56,147
|
|
|
110.77
|
|
Stock issued
|
(135,032
|
)
|
|
69.10
|
|
|
(81,230
|
)
|
|
131.72
|
|
|
(34,442
|
)
|
|
86.59
|
|
Awards forfeited
|
(12,619
|
)
|
|
152.22
|
|
|
(21,298
|
)
|
|
114.40
|
|
|
(4,272
|
)
|
|
99.35
|
|
Awards outstanding as of December 31
|
106,943
|
|
|
$
|
161.33
|
|
|
142,434
|
|
|
$
|
110.19
|
|
|
169,202
|
|
|
$
|
97.16
|
|
We recognized $5.0 million, $4.4 million and $4.7 million of compensation expense related to performance-based restricted stock units for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, there was $7.5 million of total unrecognized compensation cost related to unvested performance-based restricted stock units. That cost is expected to be recognized over a weighted average period of 0.9 years.
Time-Based Restricted Stock Units
As of December 31, 2019, we had time-based restricted stock unit awards from 2019, 2018 and 2017 outstanding. The outstanding awards all ratably vest on the first, second and third anniversaries of the original grant date. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed subsequent to the last grant anniversary date. Each time-based restricted stock unit represents a right to receive one share of the Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. We account for forfeitures as they occur.
A summary of activity of the outstanding time-based restricted stock units for 2019, 2018 and 2017 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
Awards outstanding as of January 1
|
117,476
|
|
|
$
|
116.10
|
|
|
173,331
|
|
|
$
|
69.10
|
|
|
239,189
|
|
|
$
|
57.71
|
|
Awards granted
|
62,115
|
|
|
126.92
|
|
|
46,810
|
|
|
143.93
|
|
|
80,535
|
|
|
83.17
|
|
Stock issued
|
(68,111
|
)
|
|
81.53
|
|
|
(82,921
|
)
|
|
84.92
|
|
|
(140,208
|
)
|
|
58.18
|
|
Awards forfeited
|
(9,795
|
)
|
|
116.52
|
|
|
(19,744
|
)
|
|
112.06
|
|
|
(6,185
|
)
|
|
60.70
|
|
Awards outstanding as of December 31
|
101,685
|
|
|
$
|
122.68
|
|
|
117,476
|
|
|
$
|
116.10
|
|
|
173,331
|
|
|
$
|
69.10
|
|
We recognized $5.8 million, $5.6 million and $5.7 million of compensation expense related to time-based restricted stock units for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, there was $7.7 million of total unrecognized compensation cost related to unvested time-based restricted stock units. That cost is expected to be recognized over a weighted average period of 0.9 years.
Deferred Stock Units
We grant deferred stock units to non-management directors. These awards are fully vested on the date of grant and the related shares are generally issued on the 13-month anniversary of the grant date unless the individual elects to defer the receipt of those shares. Each deferred stock unit results in the issuance of one share of Rogers’ capital stock. The grant of deferred stock units is typically done annually during the second quarter of each year. The fair value of the award is determined by the market value of the underlying stock price at the grant date.
A summary of activity of the outstanding deferred stock units for 2019, 2018 and 2017 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
|
Awards Outstanding
|
|
Weighted-
Average
Grant Date Fair Value
|
Awards outstanding as of January 1
|
8,400
|
|
|
$
|
108.86
|
|
|
9,250
|
|
|
$
|
109.48
|
|
|
11,900
|
|
|
$
|
58.82
|
|
Awards granted
|
5,950
|
|
|
183.40
|
|
|
8,400
|
|
|
108.86
|
|
|
9,250
|
|
|
109.48
|
|
Stock issued
|
(7,200
|
)
|
|
108.86
|
|
|
(9,250
|
)
|
|
109.48
|
|
|
(11,900
|
)
|
|
58.82
|
|
Awards outstanding as of December 31
|
7,150
|
|
|
$
|
170.89
|
|
|
8,400
|
|
|
$
|
108.86
|
|
|
9,250
|
|
|
$
|
109.48
|
|
We recognized compensation expense related to deferred stock units of $1.1 million, $0.9 million and $1.0 million, for the years ended December 31, 2019, 2018 and 2017, respectively.
Stock Options
Stock options have previously been granted under various equity compensation plans. The maximum contractual term for all options was normally 10 years. As of December 31, 2019, there were no remaining outstanding stock option awards. The total intrinsic value of options exercised (i.e., the difference between the market price at time of exercise and the price paid by the individual to exercise the options) was $1.6 million, $2.4 million and $6.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. The total amount of cash received from the exercise of these options was $0.3 million, $0.9 million and $3.1 million, for the years ended December 31, 2019, 2018 and 2017, respectively.
A summary of the activity under our stock option plans for 2019, 2018 and 2017, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Options
Outstanding
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
Options
Outstanding
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
Options
Outstanding
|
|
Weighted-
Average
Exercise Price
Per Share
|
Options outstanding, vested and exercisable as of January 1
|
10,950
|
|
|
$
|
31.99
|
|
|
33,283
|
|
|
$
|
36.40
|
|
|
116,575
|
|
|
$
|
37.76
|
|
Options exercised
|
(10,650
|
)
|
|
32.21
|
|
|
(22,333
|
)
|
|
38.57
|
|
|
(83,292
|
)
|
|
37.04
|
|
Options forfeited
|
(300
|
)
|
|
23.86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Options outstanding, vested and exercisable as of December 31
|
—
|
|
|
$
|
—
|
|
|
10,950
|
|
|
$
|
31.99
|
|
|
33,283
|
|
|
$
|
36.40
|
|
Note 9 – Debt
In February 2017, we entered into a secured five-year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Third Amended Credit Agreement), which increased the principal amount of our revolving credit facility to up to $450.0 million borrowing capacity, with sublimits for multicurrency borrowings, letters of credit and swing-line notes, and provided an additional $175.0 million accordion feature. Borrowings may be used to finance working capital needs, for letters of credit and for general corporate purposes in the ordinary course of business, including the financing of permitted acquisitions (as defined in the Third Amended Credit Agreement).
All obligations under the Third Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Third Amended Credit Agreement (the Guarantors). The obligations are also secured by a Third Amended and Restated Pledge and Security Agreement, dated as of February 17, 2017, entered into by us and the Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of the non-real estate assets of the Guarantors. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries. All revolving loans are due on the maturity date, February 17, 2022.
Borrowings under the Third Amended Credit Agreement can be made as alternate base rate loans or euro-currency loans. Alternate base rate loans bear interest that includes a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio. The base reference rate is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank of New York (NYFRB) Rate in effect on such day plus ½ of 1% and (c) the adjusted LIBOR for a one month interest period in dollars on such day (or if such day is not a business day, the immediately preceding business day) plus 1%. Euro-currency loans bear interest based on adjusted LIBOR plus a spread of 137.5 to 175.0 basis points, depending on our leverage ratio. Based on our leverage ratio as of December 31, 2019, the spread was 137.5 basis points.
In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Third Amended Credit Agreement, we are required to pay a quarterly fee of 20 to 30 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Third Amended Credit Agreement.
The Third Amended Credit Agreement contains customary representations, warranties, covenants, mandatory prepayments and events of default under which our payment obligations may be accelerated. If an event of default occurs, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees. The financial covenants include requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00, subject to an election to increase the maximum leverage ratio to 3.50 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00.
The Third Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our leverage ratio does not exceed 2.75 to 1.00. If our leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2019.
In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $75.0 million of our $450.0 million revolving credit facility. For additional information regarding the interest rate swap, refer to “Note 3 – Hedging Transactions and Derivative Financial Instruments.”
We are not required to make any quarterly principal payments under the Third Amended Credit Agreement, however, we made discretionary principal payments totaling $105.5 million, $5.0 million and $110.2 million on our revolving credit facility in 2019,
2018 and 2017, respectively. We had $123.0 million in outstanding borrowings under our revolving credit facility as of December 31, 2019.
We incurred interest expense on our outstanding debt, net of the impacts of our interest rate swap, of $7.2 million, $6.1 million, and $5.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. We incurred an unused commitment fee of $0.6 million for each of the years ended December 31, 2019, 2018 and 2017.
We had $1.2 million and $1.7 million of outstanding line of credit issuance costs as of December 31, 2019 and 2018, respectively, which will be amortized over the life of the Third Amended Credit Agreement. We recorded amortization expense of $0.6 million, $0.6 million and $0.5 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to these deferred costs.
Note 10 – Leases
Finance Leases
We have a finance lease obligation related to our manufacturing facility in Eschenbach, Germany. Under the terms of the lease agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon. Our finance lease obligation related to this facility was $4.5 million and $5.0 million as of December 31, 2019 and 2018, respectively. The finance lease right-of-use asset balance for this facility was $6.3 million and $6.7 million as of December 31, 2019 and 2018, respectively. Accumulated amortization related to our finance lease right-of-use assets was $3.8 million and $3.5 million as of December 31, 2019 and December 31, 2018, respectively. All other finance lease obligations, finance lease right-of-use assets and accumulated amortization were cumulatively immaterial as of December 31, 2019 and 2018.
Amortization expense related to our finance lease right-of-use assets, which is primarily included in the “Cost of sales” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Interest expense related to our finance lease obligations, which is included in the “Interest expense, net” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Payments made on the principal portion of our finance lease obligations were immaterial for each of the years ended December 31, 2019 and 2018.
Operating Leases
We have operating leases primarily related to building space and vehicles. Renewal options are included in the lease term to the extent we are reasonably certain to exercise the option. The exercise of lease renewal options is at our sole discretion. We account for lease components separately from non-lease components. The incremental borrowing rate represents our ability to borrow on a collateralized basis over a similar lease term.
Our expenses and payments for operating leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Operating leases expense
|
$
|
3,119
|
|
|
$
|
3,850
|
|
|
$
|
3,819
|
|
Short-term leases expense
|
$
|
192
|
|
|
$
|
112
|
|
|
$
|
236
|
|
Payments on operating lease obligations
|
$
|
2,967
|
|
|
$
|
3,850
|
|
|
$
|
3,819
|
|
Our assets and liabilities balances related to finance and operating leases reflected in the consolidated statements of financial position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(Dollars in thousands)
|
Financial Statement Line Item
|
2019
|
|
2018
|
Finance lease right-of-use assets
|
Property, plant and equipment, net
|
$
|
6,280
|
|
|
$
|
6,750
|
|
Operating lease right-of-use assets
|
Other long-term assets
|
$
|
4,656
|
|
|
$
|
—
|
|
|
|
|
|
|
Finance lease obligations, current portion
|
Other accrued liabilities
|
$
|
400
|
|
|
$
|
420
|
|
Finance lease obligations, non-current portion
|
Other long-term liabilities
|
$
|
4,140
|
|
|
$
|
4,629
|
|
Total finance lease obligations
|
|
$
|
4,540
|
|
|
$
|
5,049
|
|
|
|
|
|
|
Operating lease obligations, current portion
|
Other accrued liabilities
|
$
|
2,343
|
|
|
$
|
—
|
|
Operating lease obligations, non-current portion
|
Other long-term liabilities
|
$
|
2,334
|
|
|
$
|
—
|
|
Total operating lease obligations
|
|
$
|
4,677
|
|
|
$
|
—
|
|
Net Future Minimum Lease Payments
The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
|
|
Operating
|
(Dollars in thousands)
|
Leases in Effect
|
|
Leases Signed
|
|
Less: Leases Not Yet Commenced
|
|
Leases in Effect
|
2020
|
$
|
532
|
|
|
$
|
2,570
|
|
|
$
|
(128
|
)
|
|
$
|
2,442
|
|
2021
|
4,202
|
|
|
1,649
|
|
|
(128
|
)
|
|
1,521
|
|
2022
|
—
|
|
|
919
|
|
|
(101
|
)
|
|
818
|
|
2023
|
—
|
|
|
332
|
|
|
(101
|
)
|
|
231
|
|
2024
|
—
|
|
|
131
|
|
|
(101
|
)
|
|
30
|
|
Thereafter
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Total lease payments
|
4,734
|
|
|
5,603
|
|
|
(559
|
)
|
|
5,044
|
|
Less: Interest
|
(194
|
)
|
|
(389
|
)
|
|
22
|
|
|
(367
|
)
|
Present Value of Net Future Minimum Lease Payments
|
$
|
4,540
|
|
|
$
|
5,214
|
|
|
$
|
(537
|
)
|
|
$
|
4,677
|
|
The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments:
|
|
|
|
|
|
Finance
Leases
|
|
Operating
Leases
|
Weighted Average Remaining Lease Term
|
1.5 years
|
|
2.5 years
|
Weighted Average Discount Rate
|
3.00%
|
|
6.07%
|
Transition
We adopted Accounting Standards Codification (ASC) 842, Leases, in the first quarter of 2019 using the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restatement of comparative periods. The guidance was applied to all leases that were not completed at the date of implementation. The adoption primarily affected our consolidated statements of financial position through the recognition of $6.2 million of operating lease right-of-use assets and $6.2 million of operating lease obligations, as well as an immaterial impact to retained earnings, as of January 1, 2019. We recognized $0.8 million of operating lease right-of-use assets and $0.8 million of operating lease obligations for the year ended December 31, 2019. The total operating lease right-of use assets and operating lease obligations recognized was $7.0 million and $7.0 million, respectively, for the year ended December 31, 2019.
Practical Expedients
We have elected to recognize lease payments in the consolidated statements of operations on a straight-line basis over the term of the lease for short-term leases. We also elected the package of practical expedients that allows us to carry forward the historical lease classification and accounting for indirect costs for any existing leases.
Note 11 – Pension Benefits, Other Postretirement Benefits and Employee Savings and Investment Plan
Pension and Other Postretirement Benefits
Pension and Other Postretirement Benefit Plans
As of December 31, 2019, we had two qualified noncontributory defined benefit pension plan, the Rogers Corporation Employees’ Pension Plan (the Union Plan) and 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)), which were frozen and had ceased accruing benefits. The Merged Plan was terminated and substantially settled in late 2019, with remaining settlement efforts expected to be completed in the first half of 2020. There are no plans to terminate the Union Plan.
Additionally, we sponsor other postretirement benefit plans including multiple fully insured or self-funded medical plans and life insurance plans for certain retirees. The measurement date for all plans is December 31st for each respective plan year.
Pension Plan Termination
During the second quarter of 2019, following receipt of a determination letter from the Internal Revenue Service (IRS), the Company amended the Merged Plan to (a) terminate the Merged Plan (subject to discretionary approval by the Company’s Chief Executive
Officer) and (b) add a lump sum distribution option in connection with the termination of the Merged Plan, if approved. The Company subsequently provided participants of the Merged Plan an option to elect either a lump sum distribution or an annuity.
On October 17, 2019, the Company’s Chief Executive Officer approved the termination of the Merged Plan. A group annuity contract was purchased with an insurance company for all participants who did not elect a lump sum distribution, for $123.5 million, with a cash settlement date of October 24, 2019. The insurance company is responsible for administering and paying pension benefit payments effective January 1, 2020. The lump sum distributions, which totaled $38.9 million, were all paid out prior to December 31, 2019. The Merged Plan paid an additional $1.3 million of monthly pension benefit payments subsequent to the annuity purchase date during the transition period ending December 31, 2019. The Merged Plan had sufficient assets to satisfy all transaction obligations. The Merged Plan had $9.0 million of net assets remaining as of December 31, 2019.
In addition, we recorded a total non-cash pre-tax settlement charge in connection with the termination of the Merged Plan of $53.2 million during the fourth quarter of 2019. This settlement charge consisted of the immediate recognition into expense of the related unrecognized losses within “Accumulated other comprehensive loss” in the consolidated statements of financial position as of the plan termination date. The settlement charge was recognized in “Pension settlement charges” in the consolidated statements of operations. We expect to incur an additional non-cash pre-tax settlement charge in connection with the remaining settlement efforts of the Merged Plan of approximately $0.7 million during the first half of 2020.
Plan Assets and Plan Benefit Obligations
The following table summarizes the change in plan benefit obligations and changes in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Change in plan benefit obligations:
|
|
|
|
|
|
|
|
Benefit obligation as of January 1
|
$
|
172,608
|
|
|
$
|
185,760
|
|
|
$
|
1,803
|
|
|
$
|
2,037
|
|
Service cost
|
—
|
|
|
—
|
|
|
61
|
|
|
73
|
|
Interest cost
|
5,641
|
|
|
6,758
|
|
|
59
|
|
|
62
|
|
Actuarial (gain) loss
|
23,797
|
|
|
(10,805
|
)
|
|
(51
|
)
|
|
(5
|
)
|
Benefit payments
|
(9,262
|
)
|
|
(9,105
|
)
|
|
(273
|
)
|
|
(364
|
)
|
Pension settlements
|
(162,484
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Benefit obligation as of December 31
|
$
|
30,300
|
|
|
$
|
172,608
|
|
|
$
|
1,599
|
|
|
$
|
1,803
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
Fair value of plan assets as of January 1
|
$
|
191,652
|
|
|
$
|
180,056
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
22,888
|
|
|
(4,299
|
)
|
|
—
|
|
|
—
|
|
Employer contributions
|
41
|
|
|
25,000
|
|
|
273
|
|
|
364
|
|
Benefit payments
|
(9,262
|
)
|
|
(9,105
|
)
|
|
(273
|
)
|
|
(364
|
)
|
Pension settlements
|
(162,484
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Fair value of plan assets as of December 31
|
$
|
42,835
|
|
|
$
|
191,652
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Amount overfunded (underfunded)
|
$
|
12,535
|
|
|
$
|
19,044
|
|
|
$
|
(1,599
|
)
|
|
$
|
(1,803
|
)
|
The decrease in our plan benefit obligations in 2019 was primarily driven by the termination and settlement of our Merged Plan benefit obligations, in addition to actuarial gains and benefit payments, partially offset by interest costs. The decrease in our benefit obligation in 2018 was primarily driven by actuarial gains and benefit payments made, partially offset by interest costs.
Our pension-related balances reflected in the consolidated statements of financial position consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
As of December 31,
|
|
As of December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Assets & Liabilities:
|
|
|
|
|
|
|
|
Non-current assets
|
$
|
12,790
|
|
|
$
|
19,273
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(5
|
)
|
|
(4
|
)
|
|
(282
|
)
|
|
(334
|
)
|
Non-current liabilities
|
(250
|
)
|
|
(225
|
)
|
|
(1,317
|
)
|
|
(1,469
|
)
|
Net assets (liabilities)
|
$
|
12,535
|
|
|
$
|
19,044
|
|
|
$
|
(1,599
|
)
|
|
$
|
(1,803
|
)
|
Accumulated Other Comprehensive Loss:
|
|
|
|
|
|
|
|
Net actuarial (loss) gain
|
$
|
(13,085
|
)
|
|
$
|
(59,972
|
)
|
|
$
|
54
|
|
|
$
|
68
|
|
Prior service benefit
|
—
|
|
|
—
|
|
|
209
|
|
|
1,220
|
|
Accumulated other comprehensive (loss) income
|
$
|
(13,085
|
)
|
|
$
|
(59,972
|
)
|
|
$
|
263
|
|
|
$
|
1,288
|
|
The projected benefit obligation (PBO), accumulated benefit obligation (ABO), and fair value of plan assets for the pension plan with a PBO or ABO in excess of its plan assets were immaterial as of December 31, 2019 and 2018.
The PBO, ABO, and fair value of plan assets for the pension plan with plan assets in excess of its PBO or ABO were $30.0 million, $30.0 million and $42.8 million, respectively, as of December 31, 2019. The PBO, ABO, and fair value of plan assets for the pension plans with plan assets in excess of their PBO or ABO were $172.4 million, $172.4 million and $191.7 million, respectively, as of December 31, 2018.
The PBO and ABO of plan assets for the other postretirement benefit plans with a PBO or ABO in excess of plan assets were both $1.6 million as of December 31, 2019. The PBO and ABO of plan assets for the other postretirement benefit plans with a PBO or ABO in excess of plan assets were both $1.8 million as of December 31, 2018. The other postretirement benefit plans did not have any plan assets as of December 31, 2019 or 2018.
Components of Net Periodic Benefit Cost (Credit)
The components of net periodic benefit cost (credit) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Years Ended December 31,
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
73
|
|
|
$
|
80
|
|
Interest cost
|
5,641
|
|
|
6,758
|
|
|
7,356
|
|
|
59
|
|
|
62
|
|
|
71
|
|
Expected return of plan assets
|
(6,932
|
)
|
|
(8,662
|
)
|
|
(9,221
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,011
|
)
|
|
(1,602
|
)
|
|
(1,602
|
)
|
Amortization of net loss (gain)
|
1,514
|
|
|
1,828
|
|
|
1,755
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlement charge
|
53,213
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net periodic benefit cost (credit)
|
$
|
53,436
|
|
|
$
|
(76
|
)
|
|
$
|
(110
|
)
|
|
$
|
(891
|
)
|
|
$
|
(1,467
|
)
|
|
$
|
(1,451
|
)
|
Plan Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Weighted average assumptions used in benefit obligations:
|
|
|
|
|
|
|
|
Discount rate
|
3.25
|
%
|
|
4.25
|
%
|
|
2.75
|
%
|
|
3.75
|
%
|
Weighted average assumptions used in net periodic benefit costs:
|
|
|
|
|
|
|
|
Discount rate
|
4.25
|
%
|
|
3.70
|
%
|
|
3.75
|
%
|
|
3.25
|
%
|
Expected long-term rate of return on assets
|
4.69
|
%
|
|
4.94
|
%
|
|
—
|
%
|
|
—
|
%
|
For measurement purposes as of December 31, 2019, we assumed an annual health care cost trend rate of 6.75% for covered health care benefits for retirees pre-age 65 or post-age 65. The rate was assumed to decrease gradually by 0.25% annually until reaching 4.50% and remain at that level thereafter. For measurement purposes as of December 31, 2018, we assumed an annual health care cost trend rate of 7.00% for covered health care benefits for retirees pre-age 65 or post-age 65.
Our pension plan assets are invested with the objective of achieving a total rate of return over the long-term that is sufficient to fund future pension obligations. In managing these assets and our investment strategy, we consider future cash contributions to the plan as well as the potential of the portfolio underperforming the market. We set asset allocation target ranges based on current funding status and future projections in order to mitigate the portfolio performance risk while maintaining its funded status. Fixed income securities comprise a substantial percentage of our plan assets portfolio. As of December 31, 2019, we held approximately 92% fixed income and short-term cash securities and 8% equity securities in our portfolio, compared to December 31, 2018 when we held approximately 99% fixed income and short-term cash securities and 1% equity securities.
In determining our investment strategy and calculating the net benefit cost, we utilized an expected long-term rate of return on plan assets, which was developed based on several factors, including the plans’ asset allocation targets, the historical and projected performance on those asset classes, as well as the plan’s current asset composition. To justify our assumptions, we analyzed certain data points related to portfolio performance. For example, we analyze the actual historical performance of our total plan assets, which has generated a return of approximately 6.32% over the past 20-year period. Based on the historical returns and the projected future returns, we determined that a target return of 4.91% is appropriate for the current portfolio.
The following table presents the fair value of the pension plan net assets by asset category and level, within the fair value hierarchy, as of December 31, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Plan Assets as of December 31, 2019
|
(Dollars in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Fixed income bonds
|
$
|
—
|
|
|
$
|
27,704
|
|
|
$
|
—
|
|
|
$
|
27,704
|
|
Mutual funds
|
3,277
|
|
|
—
|
|
|
—
|
|
|
3,277
|
|
Pooled separate accounts
|
—
|
|
|
10,516
|
|
|
—
|
|
|
10,516
|
|
Guaranteed deposit account
|
—
|
|
|
—
|
|
|
1,338
|
|
|
1,338
|
|
Total plan assets at fair value
|
$
|
3,277
|
|
|
$
|
38,220
|
|
|
$
|
1,338
|
|
|
$
|
42,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Plan Assets as of December 31, 2018
|
(Dollars in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Fixed income bonds
|
$
|
—
|
|
|
$
|
186,385
|
|
|
$
|
—
|
|
|
$
|
186,385
|
|
Mutual funds
|
2,691
|
|
|
—
|
|
|
—
|
|
|
2,691
|
|
Pooled separate accounts
|
—
|
|
|
1,216
|
|
|
—
|
|
|
1,216
|
|
Guaranteed deposit account
|
—
|
|
|
—
|
|
|
1,360
|
|
|
1,360
|
|
Total plan assets at fair value
|
$
|
2,691
|
|
|
$
|
187,601
|
|
|
$
|
1,360
|
|
|
$
|
191,652
|
|
The following table presents a summary of changes in the fair value of the guaranteed deposit account’s Level 3 assets for the year ended December 31, 2019:
|
|
|
|
|
|
Guaranteed Deposit Account
|
Balance as of January 1, 2019
|
$
|
1,360
|
|
Change in unrealized gain (loss)
|
41
|
|
Purchases, sales, issuances and settlements (net)
|
(63
|
)
|
Balance as of December 31, 2019
|
$
|
1,338
|
|
Cash Flows
We were not required to make any contributions to our qualified noncontributory defined benefit pension plans in 2019 and 2018. We made a voluntary contribution of $25.0 million to the Merged Plan in 2018 as part of the proposed plan termination process. We made expected benefit payments for our defined benefit pension plans, as well as substantially settled the Merged Plan benefit obligations, through the utilization of plan assets for the funded pension plans in 2019 and 2018. As there is no funding requirement for the other postretirement benefit plans, we funded benefit payments, which were immaterial in 2019 and 2018, as incurred using cash from operations.
The benefit payments are based on the same assumptions used to measure our benefit obligations as of December 31, 2019. The following table sets forth the expected benefit payments to be paid for the pension plans and the other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
2020
|
$
|
2,780
|
|
|
$
|
282
|
|
2021
|
$
|
1,870
|
|
|
$
|
160
|
|
2022
|
$
|
1,818
|
|
|
$
|
121
|
|
2023
|
$
|
1,832
|
|
|
$
|
131
|
|
2024
|
$
|
1,818
|
|
|
$
|
116
|
|
2025-2029
|
$
|
8,928
|
|
|
$
|
774
|
|
Employee Savings and Investment Plan
We sponsor the Rogers Employee Savings and Investment Plan (RESIP), a 401(k) plan for domestic employees. Employees can defer an amount they choose, up to the annual IRS limit of $19,000. Certain eligible participants are also allowed to contribute the maximum catch-up contribution per IRS regulations. Our matching contribution is 6% of an eligible employee’s annual pre-tax contribution at a rate of 100% for the first 1% of the employee’s salary and 50% for the next 5% of the employee’s salary for a total match of 3.5%. Unless otherwise indicated by the participant, the matching dollars are invested in the same funds as the participant’s contributions. RESIP related expense amounted to $4.4 million in 2019, $5.6 million in 2018 and $4.0 million in 2017, which related solely to our matching contributions.
Note 12 – Commitments and Contingencies
Environmental & Legal
We are currently engaged in the following environmental and legal proceedings:
Voluntary Corrective Action Program
Our location in Rogers, Connecticut is part of the Connecticut Voluntary Corrective Action Program (VCAP). As part of this program, we partnered with the Connecticut Department of Energy and Environmental Protection (CT DEEP) to determine the corrective actions to be taken at the site related to contamination issues. We evaluated this matter and completed internal due diligence work related to the site in the fourth quarter of 2015. Remediation activities on the site are ongoing and are recorded as reductions to the accrual as they are incurred. We have incurred aggregate remediation costs of $1.4 million through December 31, 2019, and the accrual for future remediation efforts is $1.5 million.
Asbestos
Overview
We, like many other industrial companies, have been named as a defendant in a number of lawsuits filed in courts across the country by persons alleging personal injury from exposure to products containing asbestos. We have never mined, milled, manufactured or marketed asbestos; rather, we made and provided to industrial users a limited number of products that contained encapsulated asbestos, but we stopped manufacturing these products in the late 1980s. Most of the claims filed against us involve numerous defendants, sometimes as many as several hundred.
The following table summarizes the change in number of asbestos claims outstanding during 2019 and 2018:
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Claims outstanding as of January 1
|
745
|
|
|
687
|
|
New claims filed
|
251
|
|
|
275
|
|
Pending claims concluded*
|
(404
|
)
|
|
(217
|
)
|
Claims outstanding as of December 31
|
592
|
|
|
745
|
|
* For the year ended December 31, 2019, 373 claims were dismissed and 31 claims were settled. For the year ended December 31, 2018, 192 claims were dismissed and 25 claims were settled. Settlements totaled approximately $5.0 million for the year ended December 31, 2019, compared to $7.1 million for the year ended December 31, 2018.
Impacts on Financial Statements
We recognize a liability for asbestos-related contingencies that are probable of occurrence and reasonably estimable. In connection with the recognition of liabilities for asbestos-related matters, we record asbestos-related insurance receivables that are deemed probable.
The liability projection period covers all current and future indemnity and defense costs through 2064, which represents the expected end of our asbestos liability exposure with no further ongoing claims expected beyond that date. This conclusion was based on
our history and experience with the claims data, the diminished volatility and consistency of observable claims data, the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants, which is approaching the average life expectancy.
To date, the indemnity and defense costs of our asbestos-related product liability litigation have been substantially covered by insurance. Although we have exhausted coverage under some of our insurance policies, we believe that we have applicable primary, excess and/or umbrella coverage for claims arising with respect to most of the years during which we manufactured and marketed asbestos-containing products. In addition, we have entered into a cost sharing agreement with most of our primary, excess and umbrella insurance carriers to facilitate the ongoing administration and payment of claims covered by the carriers. The cost sharing agreement may be terminated by any party, but will continue until a party elects to terminate it. As of the filing date for this report, the agreement has not been terminated, and no carrier had informed us it intended to terminate the agreement. We expect to continue to exhaust individual primary, excess and umbrella coverages over time, and there is no assurance that such exhaustion will not accelerate due to additional claims, damages and settlements or that coverage will be available as expected. We are responsible for uninsured indemnity and defense costs, and for the years ended December 31, 2019 and 2018, we paid $0.7 million and $1.2 million, respectively, related to such costs.
The amounts recorded for the asbestos-related liability and the related insurance receivables are based on facts known at the time and a number of assumptions. However, projecting future events, such as the number of new claims to be filed each year, the average cost of disposing of such claims, the length of time it takes to dispose of such claims, coverage issues among insurers and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the U.S., could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded.
Changes recorded in the estimated liability and estimated insurance recovery based on the projections of asbestos litigation and corresponding insurance coverage, result in the recognition of expense or income. For the years ended December 31, 2019, 2018 and 2017, we recognized expense of $1.7 million, $0.7 million and $3.4 million, respectively. The increase in expense in 2019 compared to 2018 was due to an unfavorable change in the defense cost assumptions and the inclusion of non-mesothelioma cases in the cost projections, partially offset by a corresponding favorable change in our insurance recovery expectations. The higher expense recognized in 2017 was primarily attributable to the change in the forecast period from 10 years to 40 years, partially offset by a corresponding favorable change in our insurance recovery expectations.
Our projected asbestos-related claims and insurance receivables were as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(Dollars in millions)
|
2019
|
|
2018
|
Asbestos-related liabilities
|
$
|
85.9
|
|
|
$
|
70.3
|
|
Asbestos-related insurance receivables
|
$
|
78.3
|
|
|
$
|
63.8
|
|
General
In addition to the above issues, the nature and scope of our business brings us in regular contact with the general public and a variety of businesses and government agencies. Such activities inherently subject us to the possibility of litigation, including environmental and product liability matters that are defended and handled in the ordinary course of business. We have established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation will have a material adverse impact on our results of operations, financial position or cash flows.
Note 13 – Income Taxes
The “Income before income tax expense” line item in the consolidated statements of operations consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Domestic
|
$
|
(18,711
|
)
|
|
$
|
14,381
|
|
|
$
|
39,751
|
|
International
|
73,837
|
|
|
96,208
|
|
|
93,174
|
|
Total
|
$
|
55,126
|
|
|
$
|
110,589
|
|
|
$
|
132,925
|
|
The “Income tax expense” line item in the consolidated statements of operations consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Current
|
|
Deferred
|
|
Total
|
2019
|
|
|
|
|
|
Domestic
|
$
|
3,372
|
|
|
$
|
(16,827
|
)
|
|
$
|
(13,455
|
)
|
International
|
21,984
|
|
|
(722
|
)
|
|
21,262
|
|
Total
|
$
|
25,356
|
|
|
$
|
(17,549
|
)
|
|
$
|
7,807
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
Domestic
|
$
|
(341
|
)
|
|
$
|
(3,007
|
)
|
|
$
|
(3,348
|
)
|
International
|
26,604
|
|
|
(318
|
)
|
|
26,286
|
|
Total
|
$
|
26,263
|
|
|
$
|
(3,325
|
)
|
|
$
|
22,938
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
Domestic
|
$
|
7,535
|
|
|
$
|
21,936
|
|
|
$
|
29,471
|
|
International
|
27,418
|
|
|
(4,423
|
)
|
|
22,995
|
|
Total
|
$
|
34,953
|
|
|
$
|
17,513
|
|
|
$
|
52,466
|
|
Deferred tax assets and liabilities as of December 31, 2019 and 2018, were comprised of the following:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2019
|
|
2018
|
Deferred tax assets
|
|
|
|
Accrued employee benefits and compensation
|
$
|
5,730
|
|
|
$
|
4,269
|
|
Tax loss and credit carryforwards
|
17,761
|
|
|
18,604
|
|
Reserves and accruals
|
5,996
|
|
|
4,935
|
|
Operating leases
|
904
|
|
|
—
|
|
Other
|
2,210
|
|
|
1,953
|
|
Total deferred tax assets
|
32,601
|
|
|
29,761
|
|
Less deferred tax asset valuation allowance
|
(14,625
|
)
|
|
(16,889
|
)
|
Total deferred tax assets, net of valuation allowance
|
17,976
|
|
|
12,872
|
|
Deferred tax liabilities
|
|
|
|
Depreciation and amortization
|
4,025
|
|
|
8,335
|
|
Postretirement benefit obligations
|
1,719
|
|
|
3,234
|
|
Unremitted earnings
|
1,624
|
|
|
1,778
|
|
Operating leases
|
908
|
|
|
—
|
|
Other
|
1,803
|
|
|
2,094
|
|
Total deferred tax liabilities
|
10,079
|
|
|
15,441
|
|
Net deferred tax asset (liability)
|
$
|
7,897
|
|
|
$
|
(2,569
|
)
|
As of December 31, 2019, we had state net operating loss carryforwards ranging from $0.2 million to $5.0 million in various state taxing jurisdictions, which expire between 2022 and 2039 and approximately $8.7 million of credit carryforwards in Arizona, which will expire between 2020 and 2034. We also had $5.9 million of federal research and development credit carryforwards that begin to expire in 2026. We believe that it is more likely than not that the benefit from certain of the state net operating loss, state credits and federal research and development credits carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $13.4 million relating to these carryforwards. We currently have approximately $4.6 million of foreign tax credits that begin to expire in 2028.
We had a valuation allowance of $14.6 million as of December 31, 2019 and $16.9 million as of December 31, 2018, against certain of our deferred tax assets, primarily carryforwards expected to expire unused and deferred tax assets that are capital in nature. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. We reached this conclusion after considering the availability of taxable income in prior carryback years, tax planning strategies, and the likelihood of future taxable income exclusive of reversing temporary differences and carryforwards in the respective jurisdictions or entities. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable.
Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Tax expense at Federal statutory income tax rate
|
$
|
11,576
|
|
|
$
|
23,224
|
|
|
$
|
46,529
|
|
Impact of foreign operations
|
107
|
|
|
826
|
|
|
(9,603
|
)
|
Foreign source income, net of tax credits
|
(2,248
|
)
|
|
(197
|
)
|
|
1,087
|
|
State tax, net of federal
|
(690
|
)
|
|
121
|
|
|
279
|
|
Unrecognized tax benefits
|
543
|
|
|
(869
|
)
|
|
2,874
|
|
U.S. Tax Reform
|
—
|
|
|
209
|
|
|
13,683
|
|
Equity compensation excess tax deductions
|
(2,902
|
)
|
|
(2,238
|
)
|
|
(3,867
|
)
|
General business credits
|
(656
|
)
|
|
(2,172
|
)
|
|
(1,080
|
)
|
Distribution related foreign taxes
|
1,240
|
|
|
1,916
|
|
|
2,173
|
|
Valuation allowance change (excluding U.S. Tax Reform)
|
(2,527
|
)
|
|
602
|
|
|
1,393
|
|
Disproportionate tax effect of pension settlement charges
|
2,510
|
|
|
—
|
|
|
—
|
|
Other
|
854
|
|
|
1,516
|
|
|
(1,002
|
)
|
Income tax expense (benefit)
|
$
|
7,807
|
|
|
$
|
22,938
|
|
|
$
|
52,466
|
|
Our effective income tax rate for 2019 was 14.2% compared to 20.7% for 2018. The 2019 rate decrease was primarily due to the impact of changes in valuation allowance against deferred tax assets associated with carried over research and development credits, excess tax deductions on stock-based compensation, and the international provisions from the U.S. tax reform enacted in 2017. This decrease was partially offset by a disproportionate tax impact from the non-cash settlement charge in connection with the termination of the Merged Plan, increase in taxes associated with the repatriation of foreign earnings, and increase in current accruals of reserves for uncertain tax positions.
We did not make any changes in 2019 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2019 and 2018, we had recorded a deferred tax liability of $1.6 million and $1.8 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we expect that these undistributed earnings may give rise to an estimated $3.5 million of additional tax liabilities as a result of distribution of such earnings. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2019 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate.
Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2019 and December 31, 2018, were as follows:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2019
|
|
2018
|
Beginning balance as of January 1
|
$
|
9,801
|
|
|
$
|
14,565
|
|
Gross increases - current period tax positions
|
3,139
|
|
|
2,583
|
|
Gross increases - tax positions in prior periods
|
—
|
|
|
505
|
|
Gross decreases - tax positions in prior periods
|
—
|
|
|
—
|
|
Foreign currency exchange
|
—
|
|
|
(142
|
)
|
Lapse of statute of limitations
|
(2,723
|
)
|
|
(7,710
|
)
|
Ending balance as of December 31
|
$
|
10,217
|
|
|
$
|
9,801
|
|
Included in the balance of unrecognized tax benefits as of December 31, 2019 were $9.9 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefit as of December 31, 2019 were $0.3 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
We recognize interest accrued related to unrecognized tax benefit as income tax expense. Related to the unrecognized tax benefits noted above, at December 31, 2019 and 2018, we had accrued potential interest and penalties of approximately $0.7 million and $0.5 million, respectively. We have recorded a net income tax expense of $0.2 million during 2019, net income tax expense of $0.1 million during 2018 and $0.9 million net income tax benefit during 2017.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2015 through 2019 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2015.
Note 14 – Operating Segment and Geographic Information
Our reporting structure is comprised of the following strategic operating segments: ACS, EMS and PES. The remaining operations, which represent our non-core businesses, are reported in the Other operating segment. We believe this structure aligns our external reporting presentation with how we currently manage and view our business internally.
Operating Segment Information
The following table presents a disaggregation of revenue from contracts with customers and other pertinent financial information, for the periods indicated; inter-segment sales have been eliminated from the net sales data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Advanced Connectivity Solutions
|
|
Elastomeric Material Solutions
|
|
Power Electronics Solutions
|
|
Other
|
|
Total
|
2019
|
|
|
|
|
|
|
|
|
|
Net sales - recognized over time
|
$
|
—
|
|
|
$
|
12,687
|
|
|
$
|
197,702
|
|
|
$
|
18,112
|
|
|
$
|
228,501
|
|
Net sales - recognized at a point in time
|
$
|
316,592
|
|
|
$
|
348,916
|
|
|
$
|
833
|
|
|
$
|
3,418
|
|
|
$
|
669,759
|
|
Total net sales
|
$
|
316,592
|
|
|
$
|
361,603
|
|
|
$
|
198,535
|
|
|
$
|
21,530
|
|
|
$
|
898,260
|
|
Operating income
|
$
|
48,654
|
|
|
$
|
57,080
|
|
|
$
|
(1,437
|
)
|
|
$
|
6,184
|
|
|
$
|
110,481
|
|
Total assets
|
$
|
402,398
|
|
|
$
|
569,484
|
|
|
$
|
278,763
|
|
|
$
|
22,536
|
|
|
$
|
1,273,181
|
|
Capital expenditures
|
$
|
22,156
|
|
|
$
|
8,550
|
|
|
$
|
20,191
|
|
|
$
|
700
|
|
|
$
|
51,597
|
|
Depreciation & amortization
|
$
|
18,267
|
|
|
$
|
19,887
|
|
|
$
|
10,260
|
|
|
$
|
748
|
|
|
$
|
49,162
|
|
Investment in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
16,461
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
16,461
|
|
Equity income in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
5,319
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,319
|
|
2018
|
|
|
|
|
|
|
|
|
|
Net sales - recognized over time
|
$
|
—
|
|
|
$
|
5,788
|
|
|
$
|
221,896
|
|
|
$
|
16,973
|
|
|
$
|
244,657
|
|
Net sales - recognized at a point in time
|
$
|
294,154
|
|
|
$
|
335,576
|
|
|
$
|
1,442
|
|
|
$
|
3,262
|
|
|
$
|
634,434
|
|
Total net sales
|
$
|
294,154
|
|
|
$
|
341,364
|
|
|
$
|
223,338
|
|
|
$
|
20,235
|
|
|
$
|
879,091
|
|
Operating income
|
$
|
33,827
|
|
|
$
|
52,502
|
|
|
$
|
19,648
|
|
|
$
|
6,734
|
|
|
$
|
112,711
|
|
Total assets
|
$
|
396,075
|
|
|
$
|
588,841
|
|
|
$
|
273,212
|
|
|
$
|
21,216
|
|
|
$
|
1,279,344
|
|
Capital expenditures
|
$
|
61,425
|
|
|
$
|
10,917
|
|
|
$
|
18,051
|
|
|
$
|
156
|
|
|
$
|
90,549
|
|
Depreciation & amortization
|
$
|
20,121
|
|
|
$
|
18,501
|
|
|
$
|
10,640
|
|
|
$
|
811
|
|
|
$
|
50,073
|
|
Investment in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
18,667
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,667
|
|
Equity income in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
5,501
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,501
|
|
2017
|
|
|
|
|
|
|
|
|
|
Total net sales
|
$
|
301,092
|
|
|
$
|
312,661
|
|
|
$
|
184,954
|
|
|
$
|
22,336
|
|
|
$
|
821,043
|
|
Operating income
|
$
|
55,410
|
|
|
$
|
50,908
|
|
|
$
|
15,668
|
|
|
$
|
7,153
|
|
|
$
|
129,139
|
|
Total assets
|
$
|
353,786
|
|
|
$
|
489,456
|
|
|
$
|
261,034
|
|
|
$
|
20,858
|
|
|
$
|
1,125,134
|
|
Capital expenditures
|
$
|
9,900
|
|
|
$
|
7,563
|
|
|
$
|
9,238
|
|
|
$
|
514
|
|
|
$
|
27,215
|
|
Depreciation & amortization
|
$
|
16,351
|
|
|
$
|
16,270
|
|
|
$
|
10,572
|
|
|
$
|
906
|
|
|
$
|
44,099
|
|
Investment in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
18,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,324
|
|
Equity income in unconsolidated joint ventures
|
$
|
—
|
|
|
$
|
4,898
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,898
|
|
Operating Segment Net Sales by Geographic Area
The following table presents net sales by our operating segment operations by geographic area for the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Net Sales(1)
|
Region/Country
|
|
Advanced Connectivity Solutions
|
|
Elastomeric Material Solutions
|
|
Power Electronics Solutions
|
|
Other
|
|
Total
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
63,753
|
|
|
$
|
160,918
|
|
|
$
|
31,874
|
|
|
$
|
4,507
|
|
|
$
|
261,052
|
|
Other Americas
|
|
3,348
|
|
|
9,208
|
|
|
365
|
|
|
913
|
|
|
13,834
|
|
Total Americas
|
|
67,101
|
|
|
170,126
|
|
|
32,239
|
|
|
5,420
|
|
|
274,886
|
|
China
|
|
153,127
|
|
|
95,653
|
|
|
40,391
|
|
|
6,086
|
|
|
295,257
|
|
Other APAC
|
|
60,457
|
|
|
55,402
|
|
|
23,401
|
|
|
2,920
|
|
|
142,180
|
|
Total APAC
|
|
213,584
|
|
|
151,055
|
|
|
63,792
|
|
|
9,006
|
|
|
437,437
|
|
Germany
|
|
15,912
|
|
|
13,702
|
|
|
57,761
|
|
|
573
|
|
|
87,948
|
|
Other EMEA
|
|
19,995
|
|
|
26,720
|
|
|
44,743
|
|
|
6,531
|
|
|
97,989
|
|
Total EMEA
|
|
35,907
|
|
|
40,422
|
|
|
102,504
|
|
|
7,104
|
|
|
185,937
|
|
Total net sales
|
|
$
|
316,592
|
|
|
$
|
361,603
|
|
|
$
|
198,535
|
|
|
$
|
21,530
|
|
|
$
|
898,260
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
52,661
|
|
|
$
|
152,284
|
|
|
$
|
37,325
|
|
|
$
|
4,527
|
|
|
$
|
246,797
|
|
Other Americas
|
|
3,104
|
|
|
14,453
|
|
|
931
|
|
|
773
|
|
|
19,261
|
|
Total Americas
|
|
55,765
|
|
|
166,737
|
|
|
38,256
|
|
|
5,300
|
|
|
266,058
|
|
China
|
|
136,315
|
|
|
101,036
|
|
|
39,781
|
|
|
4,959
|
|
|
282,091
|
|
Other APAC
|
|
63,318
|
|
|
40,788
|
|
|
28,414
|
|
|
2,892
|
|
|
135,412
|
|
Total APAC
|
|
199,633
|
|
|
141,824
|
|
|
68,195
|
|
|
7,851
|
|
|
417,503
|
|
Germany
|
|
18,165
|
|
|
9,907
|
|
|
62,359
|
|
|
584
|
|
|
91,015
|
|
Other EMEA
|
|
20,591
|
|
|
22,896
|
|
|
54,528
|
|
|
6,500
|
|
|
104,515
|
|
Total EMEA
|
|
38,756
|
|
|
32,803
|
|
|
116,887
|
|
|
7,084
|
|
|
195,530
|
|
Total net sales
|
|
$
|
294,154
|
|
|
$
|
341,364
|
|
|
$
|
223,338
|
|
|
$
|
20,235
|
|
|
$
|
879,091
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
48,277
|
|
|
$
|
141,508
|
|
|
$
|
30,403
|
|
|
$
|
5,210
|
|
|
$
|
225,398
|
|
Other Americas
|
|
2,946
|
|
|
9,709
|
|
|
1,153
|
|
|
699
|
|
|
14,507
|
|
Total Americas
|
|
51,223
|
|
|
151,217
|
|
|
31,556
|
|
|
5,909
|
|
|
239,905
|
|
China
|
|
143,065
|
|
|
93,039
|
|
|
32,164
|
|
|
5,123
|
|
|
273,391
|
|
Other APAC
|
|
64,077
|
|
|
36,233
|
|
|
21,845
|
|
|
3,421
|
|
|
125,576
|
|
Total APAC
|
|
207,142
|
|
|
129,272
|
|
|
54,009
|
|
|
8,544
|
|
|
398,967
|
|
Germany
|
|
23,925
|
|
|
9,211
|
|
|
54,813
|
|
|
657
|
|
|
88,606
|
|
Other EMEA
|
|
18,802
|
|
|
22,961
|
|
|
44,576
|
|
|
7,226
|
|
|
93,565
|
|
Total EMEA
|
|
42,727
|
|
|
32,172
|
|
|
99,389
|
|
|
7,883
|
|
|
182,171
|
|
Total net sales
|
|
$
|
301,092
|
|
|
$
|
312,661
|
|
|
$
|
184,954
|
|
|
$
|
22,336
|
|
|
$
|
821,043
|
|
(1) Net sales are allocated to countries based on the location of the customer. The table above lists individual countries with 10% or more of net sales for the periods indicated.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, to achieve a consistent application of revenue recognition, resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On January 1, 2018, we adopted ASU 2014-09 retrospectively with the cumulative effect of applying the standard recognized at the date of implementation and without restatement of comparative periods. This application of the new standard resulted in an increase to the January 1, 2018 balance of retained earnings of approximately $4.2 million, net of tax.
The Company manufactures some products to customer specifications which are customized to such a degree that it is unlikely that another entity would purchase these products or that we could modify these products for another customer. These products are deemed to have no alternative use to the Company whereby we have an enforceable right to payment evidenced by contractual termination clauses. In accordance with ASC 606, for those circumstances we recognize revenue on an over-time basis. Revenue recognition does not occur until the product meets the definition of “no alternative use” and therefore, items that have not yet reached that point in the production process are not included in the population of items with over-time revenue recognition.
As appropriate, we record estimated reductions to revenue for customer returns, allowances, and warranty claims. Provisions for such reductions are made at the time of sale and are typically derived from historical trends and other relevant information.
We had contract assets primarily related to unbilled revenue for revenue recognized related to products that are deemed to have no alternative use whereby we have the right to payment. Revenue is recognized in advance of billing to the customer in these circumstances as billing is typically performed at the time of shipment to the customer. The unbilled revenue is included in the contract assets on the consolidated statements of financial position.
Our contract assets by operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
Advanced Connectivity Solutions
|
$
|
—
|
|
|
$
|
—
|
|
Elastomeric Material Solutions
|
1,077
|
|
|
943
|
|
Power Electronics Solutions
|
19,471
|
|
|
19,738
|
|
Other
|
1,907
|
|
|
2,047
|
|
Total contract assets
|
$
|
22,455
|
|
|
$
|
22,728
|
|
We did not have any contract liabilities as of December 31, 2019 or 2018. No impairment losses were recognized for the years ended December 31, 2019 and 2018 on any receivables or contract assets arising from our contracts with customers.
Long-Lived Assets by Geographic Area
Our long-lived assets(1) by geographic area were as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
United States
|
$
|
469,234
|
|
|
$
|
476,560
|
|
China
|
55,078
|
|
|
58,205
|
|
Germany
|
120,869
|
|
|
113,412
|
|
Other
|
36,942
|
|
|
36,475
|
|
Total long-lived assets
|
$
|
682,123
|
|
|
$
|
684,652
|
|
(1) Long-lived assets are based on the location of the asset and are comprised of goodwill, other intangible assets and property, plant and equipment. Countries with 10% of more of long-lived assets have been disclosed.
Note 15 – Supplemental Financial Information
Restructuring and Impairment Charges
The components of “Restructuring and impairment charges” were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Restructuring charges
|
|
|
|
|
|
Global headquarters relocation
|
$
|
—
|
|
|
$
|
550
|
|
|
$
|
2,760
|
|
Facility consolidation
|
948
|
|
|
1,982
|
|
|
—
|
|
Total restructuring charges
|
948
|
|
|
2,532
|
|
|
2,760
|
|
Impairment charges
|
|
|
|
|
|
Fixed assets impairment charges
|
1,537
|
|
|
1,506
|
|
|
—
|
|
Other impairment charges
|
—
|
|
|
—
|
|
|
807
|
|
Total impairment charges
|
1,537
|
|
|
1,506
|
|
|
807
|
|
Total restructuring and impairment charges
|
$
|
2,485
|
|
|
$
|
4,038
|
|
|
$
|
3,567
|
|
Relocation Charges - Facility Consolidation
In 2018, we made the decision to consolidate our Santa Fe Springs, California operations into our facilities in Carol Stream, Illinois and Bear, Delaware. We recorded $0.9 million and $2.0 million of expense in 2019 and 2018, respectively, related to the facility consolidation.
Relocation Charges - Global Headquarters Relocation
In 2017, we relocated our global headquarters from Rogers, Connecticut to Chandler, Arizona. We recorded $0.6 million and $2.8 million of expense in 2018 and 2017, respectively, related to the headquarters relocation.
Impairment Charges
We recognized $1.5 million of impairment charges in both 2019 and 2018 pertaining to our ACS operating segment, primarily relating to certain assets in connection with the Isola asset acquisition. In 2017, we recognized a $0.3 million charge related to the impairment of our remaining investment in BrightVolt, Inc. As this investment did not relate to a specific operating segment, we allocated it ratably among ACS, EMS and PES. Also in 2017, we recognized a $0.5 million impairment charge related to the remaining net book value of an other intangible asset within the ROLINX® product line in our PES operating segment.
Allocation of Restructuring and Impairment Charges to Operating Segments
The following table summarizes the allocation of restructuring and impairment charges to our operating segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Advanced Connectivity Solutions
|
|
|
|
|
|
Allocated restructuring charges
|
$
|
—
|
|
|
$
|
244
|
|
|
$
|
1,305
|
|
Allocated impairment charges
|
1,537
|
|
|
1,506
|
|
|
161
|
|
Elastomeric Material Solutions
|
|
|
|
|
|
Allocated restructuring charges
|
948
|
|
|
2,152
|
|
|
834
|
|
Allocated impairment charges
|
—
|
|
|
—
|
|
|
103
|
|
Power Electronics Solutions
|
|
|
|
|
|
Allocated restructuring charges
|
—
|
|
|
136
|
|
|
621
|
|
Allocated impairment charges
|
—
|
|
|
—
|
|
|
543
|
|
Total restructuring and impairment charges
|
$
|
2,485
|
|
|
$
|
4,038
|
|
|
$
|
3,567
|
|
Other Operating (Income) Expense, Net
The components of “Other operating (income) expense, net” were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Lease income
|
$
|
(989
|
)
|
|
$
|
(948
|
)
|
|
$
|
—
|
|
Depreciation on leased assets
|
1,907
|
|
|
3,512
|
|
|
—
|
|
Loss (gain) on sale or disposal of property, plant and equipment
|
756
|
|
|
(164
|
)
|
|
(5,329
|
)
|
Gain from antitrust litigation settlement
|
—
|
|
|
(4,231
|
)
|
|
—
|
|
Indemnity claim settlements from acquisitions
|
(715
|
)
|
|
(700
|
)
|
|
—
|
|
Economic incentive grants
|
—
|
|
|
(556
|
)
|
|
—
|
|
Total other operating (income) expense, net
|
$
|
959
|
|
|
$
|
(3,087
|
)
|
|
$
|
(5,329
|
)
|
In connection with the transitional leaseback of a portion of the facility and certain machinery and equipment acquired from Isola in August 2018, we recognized lease income and related depreciation on leased assets of $1.0 million and $1.9 million, respectively, in 2019, and $0.9 million and $3.5 million, respectively, in 2018.
In 2019, we recorded a gain of $0.7 million for the settlement of indemnity claims related to the Isola asset acquisition.
In 2018, we recorded a gain from the settlement of antitrust litigation in the amount of $4.2 million as a result of the settlement of a class action lawsuit, filed in 2005, which alleged that Dow Chemical Company and other urethane raw material suppliers unlawfully agreed to fix, raise, maintain or stabilize the prices of polyether polyol products sold in the U.S. from January 1, 1999 through December 31, 2004 in violation of the federal antitrust laws. We also recorded a gain of $0.7 million for the settlement
of indemnity claims related to the DSP acquisition and income of $0.6 million from economic incentive grants related to the relocation of our global headquarters from Rogers, Connecticut to Chandler, Arizona.
In 2017, we recognized other operating income of $5.3 million as a result of the sales of a facility and a parcel of land located in Belgium.
Interest Expense, Net
The components of “Interest expense, net” were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Interest on revolving credit facility
|
$
|
7,378
|
|
|
$
|
6,304
|
|
|
$
|
5,115
|
|
Interest rate swap settlements
|
(200
|
)
|
|
(247
|
)
|
|
51
|
|
Line of credit fees
|
576
|
|
|
573
|
|
|
555
|
|
Debt issuance amortization costs
|
552
|
|
|
552
|
|
|
549
|
|
Interest on finance leases
|
127
|
|
|
172
|
|
|
169
|
|
Interest income
|
(1,610
|
)
|
|
(804
|
)
|
|
(379
|
)
|
Other
|
46
|
|
|
79
|
|
|
71
|
|
Total interest expense, net
|
$
|
6,869
|
|
|
$
|
6,629
|
|
|
$
|
6,131
|
|
Note 16 – Recent Accounting Standards
Recently Issued Standards
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss model with a new expected loss impairment model that applies to most assets measured at amortized cost and certain other financial instruments, including trade receivables and other receivables. This ASU is effective for our fiscal year ending December 31, 2020 and for the interim periods within that year. Early adoption of this update is permitted and it is required to be applied with a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the new guidance is effective. We expect this new guidance to have an immaterial impact on its consolidated financial statements, however, we are still finalizing our analysis.
Recently Adopted Standards Reflected in Our 2019 Financial Statements
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. This ASU is effective for our fiscal year ending December 31, 2020, with early adoption permitted. ASU 2018-14 is required to be applied on a retrospective basis to all periods presented. We early adopted this guidance in October 2019. It did not have a material impact on our consolidated financial statements but it resulted in revised disclosures related to our defined benefit plans.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss). This ASU is effective for our fiscal year ending December 31, 2020 and for the interim periods within that year. Early adoption is permitted. ASU 2018-13 is generally required to be applied retrospectively to all periods presented upon their effective date with the exception of certain amendments that should be applied prospectively to the most recent interim or annual period presented in the year of adoption. We early adopted this guidance in October 2019. It did not have a material impact on our consolidated financial statements or impact our fair value measurement disclosures.
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which permits the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. The amendments in this update were effective for the Company on January 1, 2019 and we will apply them to qualifying new or redesignated hedging relationships.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing costs incurred in the implementation of a hosting arrangement that is a service contract
with the requirements for capitalizing costs incurred to develop or obtain internal use software. We adopted this ASU on January 1, 2019 on a prospective basis and it did not have a material impact on our consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows for reclassification of stranded tax effects resulting from U.S. Tax Reform from accumulated other comprehensive loss to retained earnings but it does not require this reclassification. We adopted this ASU on January 1, 2019 and elected to not reclassify the stranded tax effects resulting from U.S. Tax Reform. As a result of that election, the adoption of ASU 2018-02 did not have an impact on our consolidated financial statements and disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to classify leases as either finance or operating leases and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today. ASU 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allowed for an optional transition method for the adoption of Topic 842. The two permitted transition methods were the modified retrospective approach, which applies the lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We adopted this standard on January 1, 2019 using the optional transition method. We elected to use the practical expedients that allow us to carry forward the historical lease classification. For additional information regarding the impact of the adoption of this standard, refer to “Note 10 – Leases.”
Note 17 – Quarterly Results of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
(Dollars in thousands, except per share amounts)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Net sales
|
$
|
239,798
|
|
|
$
|
242,852
|
|
|
$
|
221,842
|
|
|
$
|
193,768
|
|
Gross margin
|
$
|
85,394
|
|
|
$
|
85,828
|
|
|
$
|
78,867
|
|
|
$
|
64,203
|
|
Net income (loss)
|
$
|
28,399
|
|
|
$
|
24,293
|
|
|
$
|
23,387
|
|
|
$
|
(28,760
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
1.53
|
|
|
$
|
1.31
|
|
|
$
|
1.26
|
|
|
$
|
(1.55
|
)
|
Diluted
|
$
|
1.52
|
|
|
$
|
1.30
|
|
|
$
|
1.25
|
|
|
$
|
(1.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
(Dollars in thousands, except per share amounts)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Net sales
|
$
|
214,611
|
|
|
$
|
214,675
|
|
|
$
|
226,863
|
|
|
$
|
222,942
|
|
Gross margin
|
$
|
76,606
|
|
|
$
|
76,672
|
|
|
$
|
79,130
|
|
|
$
|
78,375
|
|
Net income
|
$
|
26,136
|
|
|
$
|
17,329
|
|
|
$
|
19,734
|
|
|
$
|
24,452
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
1.43
|
|
|
$
|
0.94
|
|
|
$
|
1.07
|
|
|
$
|
1.33
|
|
Diluted
|
$
|
1.40
|
|
|
$
|
0.93
|
|
|
$
|
1.06
|
|
|
$
|
1.31
|
|
Note 18 – Share Repurchases
In 2015, we initiated a share repurchase program (the Program) of up to $100.0 million of the Company’s capital stock. We initiated the Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing shareholder value. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice. As of December 31, 2019, $49.0 million remained of our $100.0 million share repurchase program. There were no share repurchases in 2019.
We repurchased the following shares of capital stock through the Program, using cash from operations and cash on hand, during the years presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2017
|
Shares of capital stock repurchased
|
—
|
|
|
23,138
|
|
|
—
|
|
Value of capital stock repurchased
|
$
|
—
|
|
|
$
|
2,999
|
|
|
$
|
—
|
|
SCHEDULE II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Balance at Beginning of Period
|
|
Charged to (Reduction of) Costs and Expenses
|
|
Taken Against Allowance
|
|
Other (Deductions) Recoveries
|
|
Balance at End of Period
|
Allowance for Doubtful Accounts
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
$
|
1,354
|
|
|
$
|
437
|
|
|
$
|
(100
|
)
|
|
$
|
—
|
|
|
$
|
1,691
|
|
December 31, 2018
|
|
$
|
1,525
|
|
|
$
|
189
|
|
|
$
|
(360
|
)
|
|
$
|
—
|
|
|
$
|
1,354
|
|
December 31, 2017
|
|
$
|
1,952
|
|
|
$
|
(275
|
)
|
|
$
|
(152
|
)
|
|
$
|
—
|
|
|
$
|
1,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Balance at Beginning of Period
|
|
Charged to (Reduction of) Costs and Expenses
|
|
Taken Against Allowance
|
|
Other (Deductions) Recoveries
|
|
Balance at End of Period
|
Valuation on Allowance for Deferred Tax Assets
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
$
|
16,889
|
|
|
$
|
656
|
|
|
$
|
(2,920
|
)
|
|
$
|
—
|
|
|
$
|
14,625
|
|
December 31, 2018
|
|
$
|
8,754
|
|
|
$
|
8,135
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,889
|
|
December 31, 2017
|
|
$
|
6,388
|
|
|
$
|
2,366
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,754
|
|