UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2017~~2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number 1-4347

ROGERS CORPORATION

(Exact name of Registrant as specified in its charter)



Massachusetts	06-0513860
(State or other jurisdiction of	(I. R. S. Employer Identification No.)
incorporation or organization)

2225 W. Chandler Blvd., Chandler, Arizona	85224-6155
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (480) 917-6000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o
Smaller reporting company o	Emerging growth company o	(Do not check if a smaller reporting company)	~~Emerging growth company~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares outstanding of the registrant’s capital stock as of July ~~27, 2017~~25, 2018 was ~~18,173,591.~~18,385,943.

ROGERS CORPORATION

FORM 10-Q

June 30, ~~2017~~2018



TABLE OF CONTENTS
Part I – Financial Information
	Item 1.	Condensed Consolidated Financial Statements (Unaudited):
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income (Loss)	4
		Condensed Consolidated Statements of Financial Position	5
		Condensed Consolidated Statements of Cash Flows	6
		Condensed Consolidated ~~Statement~~Statements of ~~Shareholders'~~Shareholders’ Equity	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2830
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3839
	Item 4.	Controls and Procedures	3940

Part II – Other Information
	Item 1.	Legal Proceedings	4041
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6.	Exhibits	4041
		Signatures	4142

~~Forward Looking~~Forward-Looking Statements

This Quarterly Report on Form 10-Q contains ~~“forward looking~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. See “Forward-Looking Statements” in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

Part I – Financial Information


Item 1.	Financial Statements

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and shares in thousands, except per share amounts)


	Quarter Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Net sales	$	201,424		$	157,489		$	405,252		$	318,056		$	214,675		$	201,424		$	429,286		$	405,252
Cost of sales	120,878			97,290			244,356			197,349			138,003			120,878			276,007			244,356
Gross margin	80,546			60,199			160,896			120,707			76,672			80,546			153,279			160,896

Selling, general and administrative expenses	39,567			34,369			73,731			64,229			42,540			40,012			83,137			74,580
Research and development expenses	7,141			7,074			14,102			13,622			8,750			7,141			16,884			14,102
Restructuring charges	1,079			—			1,805			—
Gain on sale of long-lived asset	—			—			(942		)	—
Restructuring and impairment charges													541			1,079			963			1,805
Other operating (income) expense, net													(383		)	—			(3,974		)	(942		)
Operating income	32,759			18,756			72,200			42,856			25,224			32,314			56,269			71,351

Equity income in unconsolidated joint ventures	966			708			1,976			1,321			1,804			966			2,811			1,976
Other income (expense), net	(185		)	191			530			(356		)	(34		)	260			32			1,379
Interest expense, net	(1,947		)	(1,115		)	(3,195		)	(2,236		)	(1,292		)	(1,947		)	(2,503		)	(3,195		)
Income before income tax expense	31,593			18,540			71,511			41,585			25,702			31,593			56,609			71,511
Income tax expense	10,697			13,163			23,583			21,280			8,373			10,697			13,144			23,583
Net income	$	20,896		$	5,377		$	47,928		$	20,305		$	17,329		$	20,896		$	43,465		$	47,928

Basic earnings per share	$	1.15		$	0.30		$	2.65		$	1.13		$	0.94		$	1.15		$	2.37		$	2.65
Diluted earnings per share	$	1.13		$	0.29		$	2.60		$	1.11		$	0.93		$	1.13		$	2.33		$	2.60

Shares used in computing:
Basic earnings per share	18,140			18,007			18,098			17,986			18,389			18,140			18,338			18,098
Diluted earnings per share	18,547			18,253			18,460			18,234			18,660			18,547			18,635			18,460

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)


	Quarter Ended						Six Months Ended					Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016		June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Net income	$	20,896		$	5,377		$	47,928		$	20,305	$	17,329		$	20,896		$	43,465		$	47,928

Foreign currency translation adjustment	12,591			(5,729		)	16,730			5,197		(15,294		)	12,591			(8,293		)	16,730
Derivative instruments designated as cash flow hedges:
Unrealized gain (loss) on derivative instruments held at period end, net of tax (Note 6)	(321		)	5			(435		)	11		320			(321		)	1,097			(435		)
Unrealized (gain) loss reclassified into earnings (Note 6)	107			—			107			—
Accumulated other comprehensive income (loss) pension and post-retirement benefits:
Actuarial net gain (loss) incurred in fiscal year, net of tax (Note 6)	334						334
Pension and postretirement benefit plans reclassified into earnings, net of tax (Note 6):
Unrealized loss reclassified into earnings (Note 6)												—			107			—			107
Accumulated other comprehensive loss pension and post-retirement benefits:
Actuarial net gain incurred in fiscal year, net of tax (Note 6)												44			334			87			334
Pension and postretirement benefit plans reclassified into earnings:
Amortization of loss, net of tax (Note 6)	6			36			36			71		—			6			—			36
Other comprehensive income (loss)	12,717			(5,688		)	16,772			5,279		(14,930		)	12,717			(7,109		)	16,772

Comprehensive income (loss)	$	33,613		$	(311	)	$	64,700		$	25,584
Comprehensive income												$	2,399		$	33,613		$	36,356		$	64,700

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(Dollars and shares in thousands)


	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Assets
Current assets
Cash and cash equivalents	$	177,312		$	227,767		$	174,700		$	181,159
Accounts receivable, less allowance for doubtful accounts of $2,015 and $1,952	136,993			119,604
Accounts receivable, less allowance for doubtful accounts of $1,284 and $1,525							148,727			140,562
Contract assets							21,933			—
Inventories	102,549			91,130			117,739			112,557
Prepaid income taxes	4,392			3,020			2,732			3,087
Asbestos-related insurance receivables	7,099			7,099
Current portion of asbestos-related insurance receivables							5,682			5,682
Assets held for sale	2,741			871			381			896
Other current assets	10,355			8,910			13,535			10,580
Total current assets	441,441			458,401			485,429			454,523
Property, plant and equipment, net of accumulated depreciation	173,363			176,916
Property, plant and equipment, net of accumulated depreciation of $300,416 and $289,909							184,478			179,611
Investments in unconsolidated joint ventures	17,949			16,183			19,411			18,324
Deferred income taxes	19,657			14,634			3,501			6,008
Goodwill	232,247			208,431			234,287			237,107
Other intangible assets	167,226			136,676
Other intangible assets, net of amortization							152,009			160,278
Asbestos-related insurance receivables	41,295			41,295			63,511			63,511
Other long-term assets	5,963			3,964			5,503			5,772
Total assets	$	1,099,141		$	1,056,500		$	1,148,129		$	1,125,134
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	35,560		$	28,379		$	37,299		$	36,116
Accrued employee benefits and compensation	30,433			31,104			26,081			39,394
Accrued income taxes payable	12,387			10,921			3,987			6,408
Current portion of lease obligation	383			350
Current portion of long term debt	—			3,653
Asbestos-related liabilities	7,099			7,099
Current portion of capital lease obligations							600			579
Current portion of asbestos-related liabilities							5,682			5,682
Other accrued liabilities	21,349			19,679			25,095			25,629
Total current liabilities	107,211			101,185			98,744			113,808
Borrowings under credit facility	191,188			235,877			130,982			130,982
Long term lease obligation	5,207			4,993
Pension and post-retirement benefit obligations	8,501			8,501
Non-current portion of capital lease obligations							5,404			5,873
Pension liability							8,720			8,720
Retiree health care and life insurance benefits	1,510			1,992			1,685			1,685
Asbestos-related liabilities	44,883			44,883			70,056			70,500
Non-current income tax	7,302			6,238			9,755			12,823
Deferred income taxes	11,559			13,883			13,879			10,706
Other long-term liabilities	3,525			3,162			4,119			3,464
Commitments and Contingencies (Note 14)
Shareholders’ Equity
Capital Stock - $1 par value; 50,000 authorized shares; 18,161 and 18,021 shares outstanding	18,161			18,021
Commitments and contingencies (Note 14)
Shareholders’ equity
Capital Stock - $1 par value; 50,000 authorized shares; 18,380 and 18,255 shares issued and outstanding							18,380			18,255
Additional paid-in capital	123,575			118,678			126,452			128,933
Retained earnings	652,009			591,349			732,217			684,540
Accumulated other comprehensive income (loss)	(75,490		)	(92,262		)
Total shareholders’ equity	718,255			635,786
Total liabilities and shareholders’ equity	$	1,099,141		$	1,056,500
Accumulated other comprehensive loss							(72,264		)	(65,155		)
Total shareholders' equity							804,785			766,573
Total liabilities and shareholders' equity							$	1,148,129		$	1,125,134

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars and shares in thousands)


	Six Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2018			June 30, 2017
Operating Activities:
Net income	$	47,928		$	20,305		$	43,465		$	47,928
Adjustments to reconcile net income to cash from operating activities:
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	21,536			18,312			22,084			21,536
Stock-based compensation expense	5,327			5,740
Equity compensation expense							5,814			5,327
Deferred income taxes	4,813			8,825			3,879			4,813
Equity in undistributed income of unconsolidated joint ventures	(1,976		)	(1,321		)	(2,811		)	(1,976		)
Dividends received from unconsolidated joint ventures	616			426			1,809			616
Pension and postretirement benefits	(794		)	(1,404		)	(796		)	(794		)
Loss (gain) from the sale of property, plant and equipment	(942		)	15
Realized (gain) loss from sale of property, plant and equipment							(383		)	(942		)
Bad debt expense	61			—			(190		)	61
Proceeds from insurance related to operations	826			—			—			826
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable	(13,220		)	(8,693		)	(9,446		)	(13,220		)
Contract assets							(21,933		)	—
Inventories	(6,464		)	616			(6,489		)	(6,464		)
Pension contribution	(147		)	(138		)
Pension and postretirement benefit contributions							(338		)	(147		)
Other current assets	(1,991		)	(2,056		)	(1,299		)	(1,991		)
Accounts payable and other accrued expenses	7,213			12,585			(13,835		)	7,213
Other, net	1,703			(1,908		)	3,287			1,703
Net cash provided by operating activities	64,489			51,304			22,818			64,489

Investing Activities:
Business acquisition	(60,191		)	—
Capital expenditures, net	(9,696		)	(9,992		)
Proceeds from insurance related to property, plant and equipment	922			—
Acquisition of business, net of cash received							—			(60,191		)
Capital expenditures							(20,177		)	(9,696		)
Proceeds from insurance claims							—			922
Proceeds from the sale of property, plant and equipment, net	1,641			—			1,027			1,641
Net cash used in investing activities	(67,324		)	(9,992		)	(19,150		)	(67,324		)

Financing Activities:
Debt issuance costs	(1,169		)	—
Repayment of debt principal and long term lease obligation	(50,178		)	(1,516		)
Line of credit issuance costs							—			(1,169		)
Repayment of debt principal and capital lease obligations							(291		)	(50,178		)
Repurchases of capital stock	—			(3,997		)	(2,999		)	—
Proceeds from the exercise of stock options, net	1,905			2,058			698			1,905
Issuance of shares upon vesting of restricted stock units, net	(2,617		)	(1,201		)
Payments of taxes related to net share settlement of equity awards							(6,427		)	(2,617		)
Proceeds from issuance of shares to employee stock purchase plan	422			427			558			422
Net cash used in financing activities	(51,637		)	(4,229		)	(8,461		)	(51,637		)

Effect of exchange rate fluctuations on cash	4,017			5,728			(1,666		)	4,017

Net increase (decrease) in cash and cash equivalents	(50,455		)	42,811
Net decrease in cash and cash equivalents							(6,459		)	(50,455		)
Cash and cash equivalents at beginning of period	227,767			204,586			181,159			227,767
Cash and cash equivalents at end of period	$	177,312		$	247,397		$	174,700		$	177,312

Supplemental Disclosures:
Cash paid during the year for:
Interest, net of amounts capitalized							$	2,631		$	3,085
Income taxes							$	14,040		$	13,913

ROGERS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)


	Capital Stock/Capital Shares		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Capital Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 31, 2016	$	18,021	$	118,678		$	591,349	$	(92,262	)	$	635,786
Balance at December 31, 2017														$	18,255		$	128,933		$	684,540	$	(65,155	)	$	766,573
Net income	—		—			47,928		—			47,928			—			—			43,465		—			43,465
Other comprehensive income (loss)	—		—			—		16,772			16,772			—			—			—		(7,109		)	(7,109		)
Stock options exercised	50		1,855			—		—			1,905			18			680			—		—			698
Stock issued to directors	12		(12		)	—		—			—			11			(11		)	—		—			—
Shares issued for employees stock purchase plan	8		414			—		—			422
Shares issued for employee stock purchase plan														6			552			—		—			558
Shares issued for vested restricted stock units, net of cancellations for tax withholding	70		(2,687		)	—		—			(2,617		)	113			(6,540		)	—		—			(6,427		)
Cumulative-effect adjustment of change in accounting for share-based compensation	—		—			12,732		—			12,732
Stock-based compensation expense	—		5,327			—		—			5,327
Balance at June 30, 2017	$	18,161	$	123,575		$	652,009	$	(75,490	)	$	718,255
Shares repurchased														(23		)	(2,976		)	—		—			(2,999		)
Cumulative-effect adjustment of revenue recognition ASC 606														—			—			4,212		—			4,212
Equity compensation expense														—			5,814			—		—			5,814
Balance at June 30, 2018														$	18,380		$	126,452		$	732,217	$	(72,264	)	$	804,785

ROGERS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for their fair presentation in accordance with GAAP. All significant intercompany transactions have been eliminated.

~~Certain statement~~On January 1, 2018, the Company adopted ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of ~~financial position reclassifications have been made~~Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost. Upon adoption, the Company reclassified $0.4 million and $0.8 million in net periodic pension benefits from Selling, general and administrative expenses to ~~prior period balances in order to conform to~~Other income (expense), net for the ~~current period’s presentation.~~three and six months ended June 30, 2017, respectively. See Note 21, “Recent Accounting Standards” for further information.

Interim results are not necessarily indicative of results for a full year. For further information regarding our accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~

2017.

Note 2 – Fair Value Measurements

The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

From time to time we enter into various instruments that require fair value ~~measurement. Assets~~measurement, including foreign currency contracts, copper derivative contracts and ~~liabilities~~interest rate swaps. Derivative instruments measured at fair value on a recurring basis, categorized by the level of inputs used in the valuation, ~~included:~~consist of:

(Dollars in thousands) Carrying amount as of June 30, 2017 Level 1 Level 2 Level 3
Foreign currency contracts $ (312 ) $ —
$ (312 ) $ —
Copper derivative contracts $ 1,331
$ —
$ 1,331
$ —
Interest rate swap $ (622 ) $ —
$ (622 ) $ —

(Dollars in thousands) Carrying amount as of December 31, 2016 Level 1 Level 2 Level 3
Foreign currency contracts $ (170 ) $ —
$ (170 ) $ —
Copper derivative contracts $ 1,277
$ —
$ 1,277
$ —



	Derivative Instruments at Fair Value as of June 30, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Foreign currency contracts	$	—	$	118	$	—	$	118
Copper derivative contracts	$	—	$	827	$	—	$	827
Interest rate swap	$	—	$	1,439	$	—	$	1,439



	Derivative Instruments at Fair Value as of December 31, 2017
(Dollars in thousands)	Level 1		Level 2			Level 3		Total
Foreign currency contracts	$	—	$	(396	)	$	—	$	(396	)
Copper derivative contracts	$	—	$	2,016		$	—	$	2,016
Interest rate swap	$	—	$	41		$	—	$	41

Note 3 – Hedging Transactions and Derivative Financial Instruments

We are exposed to certain risks related to our ongoing business operations. The primary risks being managed through our use of derivative instruments are foreign currency exchange rate risk and commodity pricing risk (primarily related to copper). During ~~the first quarter of~~ 2017, we ~~also~~ entered into an interest rate swap to hedge interest rate risk. We do not use derivative financial instruments for trading or speculative purposes. The valuation of derivative contracts used to manage each of these risks is described below:

Foreign Currency - The fair value of any foreign currency option derivative is based upon valuation models applied to current market information such as strike price, spot rate, maturity date and volatility, and by reference to market values resulting from an over-the-counter market or obtaining market data for similar instruments with similar characteristics.

Commodity - The fair value of copper derivatives is computed using a combination of intrinsic and time value valuation models. The intrinsic valuation model reflects the difference between the strike price of the underlying copper derivative instrument and the current prevailing copper prices in an over-the-counter market at period end. The time value valuation model incorporates the constant changes in the price of the underlying copper derivative instrument, the time value of money, the underlying copper derivative instrument’s strike price and the remaining time to the underlying copper derivative instrument’s expiration date from the period end date. Overall, fair value is a function of five primary variables: price of the underlying instrument, time to expiration, strike price, interest rate, and volatility.

Interest Rates - The fair value of interest rate swap instruments is derived by comparing the present value of the interest rate forward curve against the present value of the swap rate, relative to the notional amount of the swap. The net value represents the estimated amount we would receive or pay to terminate the agreements. Settlement amounts for an “in the money” swap would be adjusted down to compensate the counterparty for cost of funds, and the adjustment is directly related to the counterparties’ credit ratings.

The guidance for the accounting and disclosure of derivatives and hedging transactions requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the statements of financial position. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies for hedge accounting treatment as defined under the applicable accounting guidance. For derivative instruments that are designated and qualify for hedge accounting treatment as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss). This gain or loss is reclassified into earnings in the same line item of the condensed consolidated statements of operations associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of the future cash flows of the hedged item (i.e., the ineffective portion) if any, is recognized in the condensed consolidated statements of operations during the current period. As of June 30, ~~2017~~2018, only our interest rate swap qualified for hedge accounting treatment as a cash flow hedge. For the six months ended June 30, 2018 and 2017, ~~there~~the hedge was hedge ineffectiveness of approximately $0.1 million which was recorded in the condensed consolidated statement of operations. For the six months ended June 30, 2016 there was no hedge ineffectiveness.highly effective.

Foreign Currency

During the ~~quarter~~three months ended June 30, ~~2017,~~2018, we entered into Korean Won, Japanese Yen, Euro, ~~and~~ Hungarian Forint and Chinese Renminbi forward contracts. We entered into these foreign currency forward contracts to mitigate certain global transactional exposures. These contracts do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of operations.

As of June 30, ~~2017~~2018 the notional values of these foreign currency forward contracts were:

					Notional Values of Foreign Currency Derivatives
KRW/USD	₩	5,695,550,000	₩	3,454,400,000
JPY/EUR	¥	266,000,000	¥	335,000,000
EUR/USD	€	4,373,956	€	12,822,491
EUR/HUF	€	581,180	€	1,132,697
USD/CNY	$	6,083,500	$	10,637,837

Commodity

We currently have ~~twenty-two~~25 outstanding contracts to hedge exposure related to the purchase of copper in our Power Electronics Solutions (PES) and Advanced Connectivity Solutions (ACS) ~~operations.~~operating segments. These contracts are held with financial institutions and ~~minimize the risk associated with a potential rise in~~are intended to offset rising copper prices. These contracts provide some coverage over the forecasted ~~2017~~2018 and ~~2018~~2019 monthly copper exposure and do not qualify for hedge accounting treatment. As a result, any fair value adjustments required on these contracts are recorded in “Other income (expense), net” in our condensed consolidated statements of ~~operations.~~operations in the period in which the adjustment occurs. The notional values of our copper contracts outstanding as of June 30, ~~2017~~2018 were:



Volume of Copper Derivatives
July ~~2017~~2018 - September ~~2017~~2018	~~122~~	153 metric tons per month
October ~~2017~~2018 - December ~~2017~~2018	~~122~~	153 metric tons per month
January ~~2018~~2019 - March ~~2018~~2019	~~140~~	189 metric tons per month
April ~~2018~~2019 - June ~~2018~~2019	98	188 metric tons per month
July ~~2018~~2019 - September ~~2018~~2019	46	145 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. See Note 12, “Debt” for further discussion regarding the credit facility. ~~In July 2012, we entered into an interest rate swap to hedge the variable interest rate on our previously outstanding term loan debt. This swap expired as of June 30, 2016.~~

Effects on Statements of Operations and of Comprehensive Income (Loss):


(Dollars in thousands)		The Effect of Current Derivative Instruments on the Financial Statements for the period ended June 30, 2017						Fair Values of Derivative Instruments as of June 30, 2017				The Effect of Current Derivative Instruments on the Financial Statements for the period ended June 30, 2018						Fair Values of Derivative Instruments as of June 30, 2018
		Gain (Loss)						Other Assets (Liabilities)				Gain (Loss)						Other Assets (Liabilities)
Foreign Exchange Contracts	Location	Quarter Ended			Six Months Ended						Location	Three Months Ended			Six Months Ended
Contracts not designated as hedging instruments	Other income (expense), net	$	(312	)	$	(291	)	$	(312	)	Other income (expense), net	$	(60	)	$	(124	)	$	118
Copper Derivatives
Contracts not designated as hedging instruments	Other income (expense), net	$	71		$	205		$	1,331		Other income (expense), net	$	(363	)	$	(1,185	)	$	827
Interest Rate Swap
Contract designated as hedging instrument	Other comprehensive income (loss)	$	(335	)	$	(515	)	$	(622	)
Contracts designated as hedging instruments											Other comprehensive income (loss)	$	410		$	1,399		$	1,439


(Dollars in thousands)		The Effect of Current Derivative Instruments on the Financial Statements for the period ended June 30, 2016						Fair Values of Derivative Instruments as of June 30, 2016			The Effect of Current Derivative Instruments on the Financial Statements for the period ended June 30, 2017						Fair Values of Derivative Instruments as of June 30, 2017
		Gain (Loss)						Other Assets (Liabilities)			Gain (Loss)						Other Assets (Liabilities)
Foreign Exchange Contracts	Location	Quarter Ended			Six Months Ended					Location	Three Months Ended			Six Months Ended
Contracts not designated as hedging instruments	Other income (expense), net	$	943		$	908		$	908	Other income (expense), net	$	(312	)	$	(291	)	$	(312	)
Copper Derivatives
Contracts not designated as hedging instruments	Other income (expense), net	$	(79	)	$	(103	)	$	315	Other income (expense), net	$	71		$	205		$	1,331
Interest Rate Swap
Contracts designated as hedging instruments										Other comprehensive income (loss)	$	(335	)	$	(515	)	$	(622	)

Note 4 – Inventories

Inventories are valued at the lower of cost or market. Inventories were as follows at the end of the periods noted below:


(Dollars in thousands)	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Raw materials	$	39,163	$	29,788	$	51,370	$	43,092
Work-in-process	27,074		26,440		29,150		28,133
Finished goods	36,312		34,902		37,219		41,332
Total inventories	$	102,549	$	91,130	$	117,739	$	112,557

Note 5 – Acquisitions

Diversified Silicone Products

On January 6, 2017, we acquired the principal operating assets of Diversified Silicone Products, Inc. (DSP), pursuant to the terms of the Asset Purchase Agreement by and among the Company, DSP and the principal shareholders of DSP (the Purchase Agreement). Pursuant to the terms of the Purchase Agreement, we acquired certain assets and assumed certain liabilities of DSP for a total purchase price of approximately $60.2 million.

We used borrowings of $30.0 million under our credit facility in addition to cash on hand to fund the acquisition.

DSP is a custom silicone product development and manufacturing business and expands the portfolio of ~~Rogers’~~our Elastomeric Material Solutions ~~business~~ (EMS) operating segment in cellular sponge and specialty extruded silicone profile technologies, while strengthening existing expertise in precision-calendered silicone and silicone formulating and compounding.

The acquisition has been accounted for in accordance with applicable purchase accounting guidance. On a preliminary basis, we recorded goodwill primarily related to the expected synergies from combining operations and the value of the existing workforce. We also recorded intangible assets related to acquired customer relationships, developed technology, trademarks, and a covenant not to compete. As of the filing date of this Form 10-Q, the final purchase accounting and purchase price allocation for the DSP acquisition are substantially complete, however, we continue to refine our preliminary valuation of certain acquired assets and the valuations below remain subject to change. The following table represents the preliminary fair market values assigned to the acquired assets and liabilities in the transaction:

(Dollars in thousands) January 6, 2017
Assets:
Accounts receivable $ 2,724
Prepaid expenses 21
Inventory 2,433
Property, plant & equipment 1,589
Intangible assets 35,860
Goodwill 17,793
Total assets 60,420

Liabilities:
Accounts payable 179
Accrued expenses 50
Total liabilities 229

Fair value of net assets acquired $ 60,191

The intangible assets consist of customer relationships valued at $30.5 million, developed technology valued at $1.8 million, trademarks valued at $3.3 million, and a covenant not to compete valued at $0.3 million. The fair value of acquired identified intangible assets was determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 under the fair value measurements and disclosure guidance.

The weighted average amortization period for the intangible asset classes are 11.8 years for customer relationships, 4.3 years for developed technology, 11.7 years for trademarks, and 4.1 years for a covenant not to compete, resulting in amortization expenses

ranging from $1.1 million to $2.0 million annually. The estimated annual future amortization expense is $1.0 million for the remainder of 2017, $1.9 million for 2018, and $1.8 million for each of 2019, 2020, and 2021.

During the first six months of 2017, we incurred transaction costs of $0.5 million related to the DSP acquisition, which were recorded within selling, general and administrative expenses in the condensed consolidated statements of operations.

~~The~~ results of DSP have been included in our condensed consolidated financial statements only for the ~~period~~periods subsequent to the completion of ~~the~~our acquisition on January 6, ~~2017, through June 30,~~ 2017. ~~DSP’s net sales for the three and six months ended June 30, 2017 totaled $5.4 million and $10.9 million, respectively.~~

~~DeWAL~~

On November 23, 2016, we acquired all of the membership interests in DeWAL Industries LLC (DeWAL), pursuant to the terms of the Membership Interest Purchase Agreement, dated November 23, 2016, by and among the Company and the owners of DeWAL for an aggregate purchase price of $135.5 million.

~~We used borrowings of $136.0 million under our credit facility to fund the acquisition.~~

DeWAL is a leading manufacturer of polytetrafluoroethylene and ultra-high molecular weight polyethylene films, pressure sensitive tapes and specialty products for the industrial, aerospace, automotive, and electronics markets.

The acquisition has been accounted for in accordance with applicable purchase accounting guidance. We recorded goodwill, primarily related to the expected synergies from combining operations and the value of the existing workforce. We also recorded intangible assets primarily related to customer relationships, developed technology, trademarks, and a covenant not to compete. As of the filing date of this Form 10-Q, the final purchase accounting and purchase price allocation for the DeWAL acquisition are substantially complete; however, we continue to refine our preliminary valuation of certain acquired assets and the valuations set forth below remain subject to change. The following table represents the preliminary fair values assigned to the acquired assets and liabilities in the transaction:

(Dollars in thousands) November 23, 2016
Assets:
Cash and cash equivalents $ 1,539
Accounts receivable 7,513
Other current assets 691
Inventory 9,915
Property, plant & equipment 9,932
Intangible assets 73,500
Goodwill 35,755
Other long-term assets 101
Total assets 138,946

Liabilities:
Accounts payable 2,402
Other current liabilities 1,062
Total liabilities 3,464

Fair value of net assets acquired $ 135,482

The intangible assets consist of customer relationships valued at $46.7 million, developed technology valued at $22.0 million, trademarks valued at $4.3 million, and a covenant not to compete valued at $0.5 million. The fair value of acquired identified intangible assets was determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 under the fair value measurements and disclosure guidance.

The weighted average amortization period for the intangible asset classes are 13.5 years for customer relationships, 8.6 years for developed technology, 5.2 years for trademarks, and 3.8 years for a covenant not to compete, resulting in amortization expenses ranging from $2.4 million to $4.3 million, annually. The future estimated annual amortization expense is $1.5 million for the remainder of 2017, $3.7 million for 2018, $4.1 million for 2019, and $4.3 million for 2020 and 2021.

During 2016, we incurred transaction costs of $2.1 million related to this acquisition, which were recorded within selling, general and administrative expenses on the consolidated statements of operations.

~~Pro Forma Financial Information~~

The following unaudited pro forma financial information presents the combined results of operations of Rogers, DSP and DeWAL, as if the DSP acquisition had occurred on January 1, 2016 and the DeWAL acquisition had occurred on January 1, 2015. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the DSP and DeWAL acquisitions been completed as of January 1, 2016, and January 1, 2015, respectively, and should not be taken as indicative of our future consolidated results of operations.

(Dollars in thousands) Three months ended June 30, 2016 Six months ended June 30, 2016
Net sales $ 175,533
$ 354,401
Net income 5,313
18,540

Note 6 – Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The changes in accumulated other comprehensive ~~income (loss)~~loss by component for the six months ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows:


(Dollars in tables and footnotes in thousands)	Foreign currency translation adjustments			Funded status of pension plans and other postretirement benefits (1)			Unrealized gain (loss) on derivative instruments (2)			Total
Beginning Balance December 31, 2015	$	(41,365	)	$	(47,082	)	$	(11	)	$	(88,458	)
(Dollars and accompanying footnotes in thousands)													Foreign currency translation adjustments			Funded status of pension plans and other postretirement benefits⁽¹⁾			Unrealized gain (loss) on derivative instruments ⁽²⁾			Total
Beginning Balance December 31, 2017													$	(17,983	)	$	(47,198	)	$	26		$	(65,155	)
Other comprehensive income (loss) before reclassifications	5,197			—			—			5,197			(8,293		)	—			1,097			(7,196		)
Amounts reclassified from accumulated other comprehensive income (loss) (3)	—			71			11			82
Amounts reclassified from accumulated other comprehensive loss													—			87			—			87
Net current-period other comprehensive income (loss)	5,197			71			11			5,279			(8,293		)	87			1,097			(7,109		)
Ending Balance June 30, 2016	$	(36,168	)	$	(47,011	)	$	—		$	(83,179	)
Ending Balance June 30, 2018													$	(26,276	)	$	(47,111	)	$	1,123		$	(72,264	)

Beginning Balance December 31, 2016	$	(46,446	)	$	(45,816	)	$	—		$	(92,262	)	$	(46,446	)	$	(45,816	)	$	—		$	(92,262	)
Other comprehensive income (loss) before reclassifications ~~(4)~~	16,730			—			(435		)	16,295			16,730			—			(435		)	16,295
Actuarial net gain (loss) incurred in the fiscal year (4)	—			334			—			334
Amounts reclassified from accumulated other comprehensive (income) loss (4)	—			36			107			143
Actuarial net gain incurred in the fiscal year													—			334			—			334
Amounts reclassified from accumulated other comprehensive loss													—			36			107			143
Net current-period other comprehensive income (loss)	16,730			370			(328		)	16,772			16,730			370			(328		)	16,772
Ending Balance June 30, 2017	$	(29,716	)	$	(45,446	)	$	(328	)	$	(75,490	)	$	(29,716	)	$	(45,446	)	$	(328	)	$	(75,490	)

(1) Net of taxes of $9,536 and $9,563 as of June 30, 2018 and December 31, 2017, respectively. Net of taxes of $8,961 and $9,160 as of June 30, 2017 and December 31, 2016, respectively.

(2) Net of taxes of ~~$9,840~~$316 and ~~$9,879~~$15 as of June 30, ~~2016~~2018 and December 31, ~~2015,~~2017, respectively.

~~(2)~~ Net of taxes of $187 and $0 as of June 30, 2017 and December 31, 2016, respectively. ~~Net of taxes of $0 and $5 as of June 30, 2016 and December 31, 2015, respectively.~~

~~(3) Net of taxes of $39 and $5 for the pension plans and postretirement benefits and unrealized gain (loss) on derivatives, respectively.~~

~~(4) Net of taxes of $199 and $(187) for the pension plans and postretirement benefits and unrealized gain (loss) on derivatives, respectively.~~

Note 7 – Earnings Per Share

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


(In thousands, except per share amounts)	Quarter Ended				Six Months Ended
(In thousands, except per share amounts)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
(Dollars and shares in thousands, except per share amounts)									Three Months Ended				Six Months Ended
(Dollars and shares in thousands, except per share amounts)									June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Numerator:
Net income	$	20,896	$	5,377	$	47,928	$	20,305	$	17,329	$	20,896	$	43,465	$	47,928
Denominator:
Weighted-average shares outstanding - basic	18,140		18,007		18,098		17,986		18,389		18,140		18,338		18,098
Effect of dilutive shares	407		246		362		248		271		407		297		362
Weighted-average shares outstanding - diluted	18,547		18,253		18,460		18,234		18,660		18,547		18,635		18,460
Basic earnings per share	$	1.15	$	0.30	$	2.65	$	1.13	$	0.94	$	1.15	$	2.37	$	2.65
Diluted earnings per share	$	1.13	$	0.29	$	2.60	$	1.11	$	0.93	$	1.13	$	2.33	$	2.60

Certain potential options to purchase shares may be excluded from the calculation of diluted weighted-average shares outstanding where their exercise price is greater than the average market price of our capital stock during the relevant reporting period. For the ~~quarter~~three months ended June 30, 2018, 27,145 shares were excluded. For the three months ended June 30, 2017, no shares were excluded. ~~For the quarter ended June 30, 2016, 13,500 shares were excluded.~~

Note 8 – ~~Stock-Based Compensation~~

Equity Compensation ~~Awards~~

Performance-Based Restricted Stock Units

As of June 30, ~~2017,~~2018, we had performance-based restricted stock ~~awards~~units from ~~2015,~~ 2016, 2017 and ~~2017~~2018 outstanding. These awards generally cliff vest at the end of a three year measurement period. However, employees whose employment terminates during the measurement period due to death, disability, or, in certain cases, retirement may receive a pro-rata payout based on the number of days they were employed during the ~~vesting~~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. ~~Compensation expense is recognized using the straight line method over the vesting period, unless the employee has an accelerated vesting schedule.~~

The ~~2015~~2016, 2017 and 2018 awards have ~~two~~one measurement ~~criteria on which the final payout of each award is based - (i) the three year return on invested capital (ROIC) compared to that of a specified group of peer companies, and (ii)~~criteria: the three year total shareholder return (TSR) on the performance of our capital stock as compared to that of a specified group of peer companies. The 2016 and 2017 awards have one measurement criteria - the three year TSR on the performance of our capital stock as compared to that of a specified group of peer companies. In accordance with the applicable accounting literature, the ROIC measurement criteria of the 2015 awards is considered a performance condition. As such, the fair value of the ROIC portion is determined based on the market value of the underlying stock price at the grant date, with cumulative compensation expense recognized to date being increased or decreased based on changes in the forecasted pay out percentage at the end of each reporting period. The TSR measurement criteria of the awards is considered a market condition. As such, the fair value of this measurement criteria was determined on the grant date ~~of grant~~ using a Monte Carlo simulation valuation ~~model, with related~~model. We recognize compensation expense ~~fixed~~ on ~~the grant date and expensed~~all of these awards on a straight-line basis over the ~~life of the awards that ultimately vest and~~vesting period with no changes for ~~the~~ final projected payout of the awards. We account for forfeitures as they occur.

Below were the assumptions used in the Monte Carlo calculation:


	June 30, 2017	June 30, 2016	June 30, 2018	June 30, 2017
Expected volatility	33.6%	29.6%	34.8%	33.6%
Expected term (in years)	3.0	3.0	3.0	3.0
Risk-free interest rate	1.38%	0.93%	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~~measurement period of the award to determine the expected term assumption for the Monte Carlo simulation valuation model.

Risk-free interest rate – We use an implied “spot rate” yield on U.S. Treasury Constant Maturity rates as of the grant date for our assumption of the risk-free interest rate.

Expected dividend yield – We do not currently pay dividends on our capital stock; therefore, a dividend yield of 0% was used in the Monte Carlo simulation valuation model.

~~Forfeiture Rate~~ - We previously estimated the forfeiture rate based on historical experience and our expectations regarding future terminations. To the extent our actual forfeiture rate was different from our estimate, stock-based compensation expense was adjusted accordingly. In accordance with the adoption of ASU 2016-09, ~~Improvements to Employee Share-Based Payment Accounting,~~ on January 1, 2017, we now account for forfeitures as they occur. The adoption of this standard, with respect to treatment of forfeitures, did not have a material impact on our condensed consolidated financial statements in the period of adoption.

The following table summarizes the change in number of ~~non-vested~~ performance-based restricted stock ~~awards~~units outstanding ~~since December 31, 2016:~~for the six months ended June 30, 2018:



	Performance-Based Restricted Stock ~~Awards~~Units
~~Non-vested awards~~Awards outstanding at December 31, ~~2016~~2017	~~151,769~~169,202
Awards granted	~~56,147~~72,160
Stock issued	(~~33,887~~81,230	)
Awards forfeited	(~~3,557~~17,489	)
~~Non-vested awards~~Awards outstanding at June 30, ~~2017~~2018	~~170,472~~142,643

During the three and six months ended June 30, 2018, we recognized compensation expense for performance-based restricted stock units of approximately $0.8 million and $1.8 million, respectively. During the three and six months ended June 30, 2017, we recognized compensation expense for performance-based restricted stock ~~awards~~units of approximately $1.6 million and $1.5 million, respectively. ~~During the three and six months ended and June 30, 2016, we recognized compensation expense for performance-based stock awards of approximately $1.4 million and $2.1 million respectively.~~

Time-Based Restricted Stock Units

As of June 30, ~~2017,~~2018, we had time-based restricted stock ~~grants~~unit awards from ~~2013,~~ 2014, 2015, 2016, 2017 and ~~2017~~2018 outstanding. The ~~remaining 2013 grant cliff vests on the fourth anniversary of the original grant date. The 2014,~~ 2015, 2016, 2017 and ~~2017~~2018 grants all ratably vest on the first, second and third anniversaries of the original grant date. The remaining outstanding 2014 grants cliff vest on December 17, 2018, the fourth anniversary of the original grant date. Each restricted stock unit represents a right to receive one share of the Rogers’ capital stock at the end of the vesting period. The fair value of the award is determined by the market value of the underlying stock price at the grant date. We recognize compensation expense on all of these awards on a straight-line basis over the vesting period. ~~The fair value of the award is determined based on the market value of the underlying stock price at the grant date.~~We account for forfeitures as they occur.

The following table summarizes the change in number of ~~non-vested~~ time-based restricted stock ~~awards~~units outstanding ~~since December 31, 2016:~~for the six months ended June 30, 2018:



	Time-Based Restricted Stock ~~Awards~~Units
~~Non-vested awards~~Awards outstanding at December 31, ~~2016~~2017	~~239,189~~173,331
Awards granted	~~77,005~~41,310
Stock issued	(~~68,142~~77,513	)
Awards forfeited	(~~4,725~~14,627	)
~~Non-vested awards~~Awards outstanding at June 30, ~~2017~~2018	~~243,327~~122,501

During the three and six months ended June 30, 2018 we recognized compensation expense for time-based restricted stock units of approximately $1.3 million and $2.9 million, respectively. During the three and six months ended June 30, 2017 we recognized compensation expense for time-based restricted stock ~~awards~~units of approximately $1.7 million and $2.7 million, respectively. ~~During the three and six months ended June 30, 2016 we recognized compensation expense for time-based restricted stock awards of approximately $1.5 million and $2.7 million, respectively.~~

~~Forfeiture Rate~~ - We previously estimated the forfeiture rate based on historical experience and our expectations regarding future terminations. To the extent our actual forfeiture rate was different from our estimate, stock-based compensation expense was adjusted accordingly. In accordance with the adoption of ASU 2016-09 on January 1, 2017, we now account for forfeitures as they occur. The adoption of this standard, with respect to treatment of forfeitures, did not have a material impact on our condensed consolidated financial statements in the period of adoption.

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~~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 ~~based on~~by the market value of the underlying stock price at the grant date.

The following table summarizes the change in number of deferred stock units outstanding ~~since December 31, 2016:~~during the six months ended June 30, 2018:



	Deferred Stock Units
Awards outstanding at December 31, ~~2016~~2017	~~11,900~~9,250
Awards granted	8,400
Stock issued	(~~11,900~~8,400	)
Awards outstanding at June 30, ~~2017~~2018	~~8,400~~9,250

~~For~~During each of the ~~three~~three- and ~~six month~~six-month periods ended June 30, ~~2017~~2018 and ~~2016,~~2017, we recognized compensation expense associated with the deferred stock units of ~~$0.9 million and $0.7 million, respectively.~~$0.9 million.

Stock Options

Stock options have been granted under various equity compensation plans, and they generally became exercisable in one-third increments on the second, third and fourth anniversaries of the grant dates. The maximum contractual term for all options was normally ten years. We used the Black-Scholes option-pricing model to calculate the grant-date fair value of an option. We have not granted any stock options since the first quarter of 2012.

~~A summary~~The following table summarizes the change in number of stock options outstanding for the ~~activity under our stock option plans during the three and~~ six ~~month periods~~months ended June 30, ~~2017 and changes during the six months then ended, is presented below:~~2018:

Options Outstanding Weighted- Average Exercise Price Per Share Weighted-Average Remaining Contractual Life in Years Aggregate Intrinsic Value
Options outstanding at March 31, 2017 94,275
$ 37.46
3.1 $ 4,563,655
Options exercised (29,317 ) $ 38.46

Options forfeited —
$ —

Options outstanding at June 30, 2017 64,958
$ 37.01
3.0 $ 4,651,550
Options exercisable at June 30, 2017 64,958
$ 37.01
3.0 $ 4,651,550
Options vested at June 30, 2017 64,958
$ 37.01
3.0 $ 4,651,550


	Options Outstanding		Weighted- Average Exercise Price Per Share		Options Outstanding		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Options outstanding at December 31, 2016	116,575		$	37.76
Outstanding at December 31, 2017					33,283		$	36.40	2.2	$	4,177,655
Options exercised	(51,617	)	$	36.66	(17,683	)	$	39.48
Options forfeited	—		$	—	—		$	—
Options outstanding at June 30, 2017	64,958		$	37.01
Options outstanding at June 30, 2018					15,600		$	32.91	2.5	$	1,225,308
Options exercisable at June 30, 2018					15,600		$	32.91	2.5	$	1,225,308
Options vested at June 30, 2018					15,600		$	32.91	2.5	$	1,225,308

During the six months ended June 30, ~~2017,~~2018, the total intrinsic value of options exercised (i.e., the difference between the market price at time of exercise and the price paid by the individual to exercise the options) was ~~$2.8~~$2.0 million, and the total amount of cash received from the exercise of these options was ~~$1.9~~$0.7 million.

Employee Stock Purchase Plan

We have an employee stock purchase plan (ESPP) that allows eligible employees to purchase, through payroll deductions, shares of our capital stock at a discount to fair market value. The ESPP has two six month offering periods each year, the first beginning in January and ending in June and the second beginning in July and ending in December. The ESPP contains a look-back feature that allows the employee to acquire shares of our capital stock at a 15% discount from the underlying market price at the beginning or end of the applicable period, whichever is lower. We recognize compensation expense on this plan ratably over the offering period based on the fair value of the anticipated number of shares that will be issued at the end of each offering period. Compensation expense is adjusted at the end of each offering period for the actual number of shares issued. Fair value is determined based on two factors: (i) the 15% discount on the underlying stock’s market value on the first day of the applicable offering period and (ii) the fair value of the look-back feature determined by using the Black-Scholes option-pricing model. We recognized approximately $0.1 million of compensation

expense associated with the plan in each of the ~~quarters~~three-month periods ended June 30, ~~2017~~2018 and ~~2016~~2017 and approximately $0.2 million of compensation expense associated with each of the ~~six month~~six-month periods ended June 30, ~~2017~~2018 and ~~2016.~~2017.

Note 9 – Pension Benefits and Other Postretirement Benefit Plans

We have two qualified noncontributory defined benefit pension plans: 1) the Rogers Corporation Employee’s Pension Plan for unionized hourly employees (the Union Plan); and 2) the Rogers Corporation Defined Benefit Pension Plan for (i) all other U.S. employees hired before December 31, 2007 who are salaried employees or non-union hourly employees and (ii) employees of the acquired Arlon business (the Rogers Plan).

The Company also maintains the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2004 and the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2005 (collectively, the Nonqualified Plans). The Nonqualified Plans serve to restore certain retirement benefits that might otherwise be lost due to limitations imposed by federal law on qualified pension plans, as well as to provide supplemental retirement benefits, for certain senior executives of the Company.

In addition, we sponsor multiple fully insured or self-funded medical plans and life insurance plans for certain retirees. The measurement date for all plans is December 31 for each respective plan year.

Pension Plan Proposed Termination

The Company currently intends to terminate the Rogers Plan and has requested a determination letter from the Internal Revenue Service (IRS). The termination of the Rogers Plan remains subject to final approval by both management and the IRS. The Company plans to provide for lump sum distributions or annuity payments in connection with the termination of the Rogers Plan and we expect the settlement process to be completed in early 2019. The Company lacks sufficient information as of June 30, 2018 to determine the financial impact of the proposed plan termination. At this time, there are no plans to terminate the Union Plan.

Components of Net Periodic (Benefit) Cost

The components of net periodic (benefit) cost for the periods indicated were:


																									Pension Benefits												Retirement Health and Life Insurance Benefits
(Dollars in thousands)	Pension Benefits												Retirement Health and Life Insurance Benefits												Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
(Dollars in thousands)	Quarter Ended						Six Months Ended						Quarter Ended						Six Months Ended						June 30,						June 30,						June 30,						June 30,
Change in benefit obligation:	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			2018			2017			2018			2017			2018			2017			2018			2017
Service cost	$	—		$	—		$	—		$	—		$	17		$	37		$	56		$	74		$	—		$	—		$	—		$	—		$	17		$	17		$	38		$	56
Interest cost	1,841			1,893			3,682			3,786			13			19			31			38			1,692			1,841			3,372			3,682			16			13			31			31
Expected return on plan assets	(2,309		)	(2,706		)	(4,618		)	(5,412		)	—			—			—			—			(2,164		)	(2,309		)	(4,333		)	(4,618		)	—			—			—			—
Amortization of prior service cost (credit)	—			—			—			—			(407		)	(373		)	(780		)	(746		)
Amortization of prior service credit																									—			—			—			—			(400		)	(407		)	(801		)	(780		)
Amortization of net loss (gain)	433			447			866			894			(17		)	(19		)	(31		)	(38		)	457			433			913			866			—			(17		)	—			(31		)
Net periodic (benefit) cost	$	(35	)	$	(366	)	$	(70	)	$	(732	)	$	(394	)	$	(336	)	$	(724	)	$	(672	)	$	(15	)	$	(35	)	$	(48	)	$	(70	)	$	(367	)	$	(394	)	$	(732	)	$	(724	)

Employer Contributions

~~At December 31, 2016 we had met the minimum funding requirements for all of our qualified defined benefit pension plans due to a~~There were no required ~~contribution of $0.3 million to the pension plan that covers employees at our Bear, Delaware facility. We made required~~ contributions ~~of $0.1 million~~ to our qualified defined benefit pension plans infor the ~~first~~three and six months ~~of 2017~~ended June 30, 2018, and ~~2016. We estimate that~~ we ~~will be~~are not required to make additional contributions ~~of $0.2 million~~ to these plans ~~in 2017.~~

Infor the ~~quarter~~remainder of 2018. We paid $0.1 million of required contributions to our qualified defined benefit pension plans for the three and six ~~month periods~~months ended June 30, ~~2017 and 2016, we did not make any~~2017. No voluntary contributions were made to our qualified defined benefit pension ~~plans.~~plans for the three and six months ended June 30, 2018 and 2017. We anticipate making an estimated payment of $25.0 million to the Rogers Plan during the third quarter of 2018 as part of the termination process.

As there is no funding requirement for the non-qualified unfunded noncontributory defined benefit pension plan or the retiree health and life insurance benefit plans, benefit payments made during the year are funded directly by the Company.

Note 10 – Segment Information

Our reporting structure is comprised of the following operating segments: ACS, EMS ~~PES,~~ and ~~Other.~~PES. Our non-core businesses are reported in the Other operating segment. We believe this structure aligns our external reporting presentation with how we currently manage and view our business internally.

~~In November 2016,~~On January 1, 2018, we ~~acquired DeWAL, a leading manufacturer of polytetrafluoroethylene, ultra-high molecular weight polyethylene films, pressure sensitive tapes~~adopted ASU 2014-09, Revenue from Contracts with Customers. See Note 19, “Revenue from Contracts with Customers” for further information about this adoption. The Company sells products to fabricators and ~~specialty products for~~distributors who then sell directly into various end markets. End markets within the ACS operating segment include wireless infrastructure, aerospace and defense, auto safety and connectivity, and consumer electronics. End markets within the EMS operating segment include general industrial, ~~aerospace,~~portable electronics, mass transit, and automotive. End markets within the PES operating segment include industrial, e-mobility, renewable energy, mass transit, and micro channel coolers. End markets in the Other operating segment include automotive and electronics markets. In January 2017, we acquired the principal operating assets of DSP, a custom manufacturer of silicone sheet, extrusions, stripping and compounds. We are in the process of integrating both DeWAL and DSP into our EMS segment.

industrial. The following table ~~sets forth the information about our segments~~presents a disaggregation of revenue from contracts with customers for the periods indicated; inter-segment sales have been eliminated from the net sales data:

Quarter Ended Six Months Ended
(Dollars in thousands) June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Net sales
Advanced Connectivity Solutions $ 74,340
$ 67,222
$ 152,882
$ 140,598
Elastomeric Material Solutions 77,585
45,767
154,434
92,084
Power Electronics Solutions 43,905
38,363
86,557
73,614
Other 5,594
6,137
11,379
11,760
Total $ 201,424
$ 157,489
$ 405,252
$ 318,056

Operating income

Advanced Connectivity Solutions $ 13,208
$ 10,829
$ 32,897
$ 26,729
Elastomeric Material Solutions 14,068
5,348
26,980
10,653
Power Electronics Solutions 3,660
477
8,595
1,773
Other 1,823
2,102
3,728
3,701
Total 32,759
18,756
72,200
42,856

Equity income in unconsolidated joint ventures 966
708
1,976
1,321
Other income (expense), net (185 ) 191
530
(356 )
Interest expense, net (1,947 ) (1,115 ) (3,195 ) (2,236 )
Income before income tax expense $ 31,593
$ 18,540
$ 71,511
$ 41,585



(Dollars in thousands)	Advanced Connectivity Solutions		Elastomeric Material Solutions		Power Electronics Solutions		Other		Total
Three Months Ended June 30, 2018
Net sales - recognized over time	$	—	$	907	$	53,052	$	4,616	$	58,575
Net sales - recognized at a point in time	76,376		78,309		595		820		156,100
Total net sales	$	76,376	$	79,216	$	53,647	$	5,436	$	214,675
Operating income	$	10,594	$	8,421	$	4,239	$	1,970	$	25,224

Three Months Ended June 30, 2017 ⁽¹⁾
Net sales - recognized over time	$	—	$	415	$	43,409	$	4,741	$	48,565
Net sales - recognized at a point in time	74,340		77,170		496		853		152,859
Total net sales	$	74,340	$	77,585	$	43,905	$	5,594	$	201,424
Operating income	$	12,997	$	13,934	$	3,560	$	1,823	$	32,314

Six Months Ended June 30, 2018
Net sales - recognized over time	$	—	$	1,941	$	110,451	$	9,265	$	121,657
Net sales - recognized at a point in time	149,831		155,358		909		1,531		307,629
Total net sales	$	149,831	$	157,299	$	111,360	$	10,796	$	429,286
Operating income	$	18,496	$	22,581	$	11,260	$	3,932	$	56,269

Six Months Ended June 30, 2017 ⁽¹⁾
Net sales - recognized over time	$	—	$	1,082	$	85,681	$	9,838	$	96,601
Net sales - recognized at a point in time	152,882		153,352		876		1,541		308,651
Total net sales	$	152,882	$	154,434	$	86,557	$	11,379	$	405,252
Operating income	$	32,495	$	26,724	$	8,404	$	3,728	$	71,351

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

Information relating to our segment operations by geographic area for the three months ended June 30, 2018 and 2017 was as follows:



(Dollars in thousands)	Net Sales ⁽¹⁾
Region/Country	Advanced Connectivity Solutions	Elastomeric Material Solutions	Power Electronics Solutions	Other	Total
June 30, 2018
United States	14,447	35,777	8,279	866	59,369
Other Americas	758	2,179	323	725	3,985
Total Americas	15,205	37,956	8,602	1,591	63,354
China	32,032	24,071	8,940	1,410	66,453
Other APAC	18,588	8,324	7,092	649	34,653
Total APAC	50,620	32,395	16,032	2,059	101,106
Germany	4,823	2,595	16,524	163	24,105
Other EMEA	5,728	6,270	12,489	1,623	26,110
Total EMEA	10,551	8,865	29,013	1,786	50,215
Total Net sales	76,376	79,216	53,647	5,436	214,675
June 30, 2017
United States	11,372	35,904	7,118	1,348	55,742
Other Americas	1,158	2,989	258	193	4,598
Total Americas	12,530	38,893	7,376	1,541	60,340
China	33,949	22,556	7,884	1,072	65,461
Other APAC	16,984	8,693	5,156	1,002	31,835
Total APAC	50,933	31,249	13,040	2,074	97,296
Germany	6,786	2,355	13,380	158	22,679
Other EMEA	4,091	5,088	10,109	1,821	21,109
Total EMEA	10,877	7,443	23,489	1,979	43,788
Total Net sales	74,340	77,585	43,905	5,594	201,424


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

Information relating to our segment operations by geographic area for the six months ended June 30, 2018 and 2017 was as follows:



(Dollars in thousands)	Net Sales ⁽¹⁾
Region/Country	Advanced Connectivity Solutions	Elastomeric Material Solutions	Power Electronics Solutions	Other	Total
June 30, 2018
United States	26,725	73,469	16,857	2,123	119,174
Other Americas	1,584	3,980	681	555	6,800
Total Americas	28,309	77,449	17,538	2,678	125,974
China	65,539	44,865	18,362	2,727	131,493
Other APAC	33,926	17,484	13,543	1,442	66,395
Total APAC	99,465	62,349	31,905	4,169	197,888
Germany	11,073	5,337	31,234	332	47,976
Other EMEA	10,984	12,164	30,683	3,617	57,448
Total EMEA	22,057	17,501	61,917	3,949	105,424
Total Net sales	149,831	157,299	111,360	10,796	429,286
June 30, 2017
United States	24,595	74,000	15,708	2,563	116,866
Other Americas	1,725	5,461	561	377	8,124
Total Americas	26,320	79,461	16,269	2,940	124,990
China	71,378	39,468	14,251	2,414	127,511
Other APAC	32,911	18,635	10,275	1,917	63,738
Total APAC	104,289	58,103	24,526	4,331	191,249
Germany	12,862	4,648	25,315	341	43,166
Other EMEA	9,411	12,222	20,447	3,767	45,847
Total EMEA	22,273	16,870	45,762	4,108	89,013
Total Net sales	152,882	154,434	86,557	11,379	405,252


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

Note 11 – Joint Ventures

As of June 30, ~~2017,~~2018, we had two joint ventures, each 50% owned, which were accounted for under the equity method of accounting.



Joint Venture	Location	~~Reportable~~Operating Segment	Fiscal Year-End
Rogers INOAC Corporation (RIC)	Japan	Elastomeric Material Solutions	October 31
Rogers INOAC Suzhou Corporation (RIS)	China	Elastomeric Material Solutions	December 31

We recognized equity income related to the joint ventures of $1.8 million and $2.8 million for the three and six months ended June 30, 2018, respectively. We recognized equity income related to the joint ventures of $1.0 million and $2.0 million for the three and six months ended June 30, 2017, ~~respectively. We recognized equity income related to the joint ventures of $0.7 million and $1.3 million for the three and six months ended June 30, 2016,~~ respectively. These amounts are included in the condensed consolidated statements of operations.

The summarized financial information for the joint ventures for the periods indicated was as follows:


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollars in thousands)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	$	12,846	$	11,210	$	24,270	$	20,386	$	14,907	$	12,846	$	28,232	$	24,270
Gross profit	$	4,706	$	3,435	$	9,142	$	6,597	$	5,608	$	4,706	$	11,081	$	9,142
Net income	$	1,932	$	1,416	$	3,952	$	2,642	$	3,609	$	1,932	$	5,622	$	3,952

Receivables from and payables to joint ventures arise during the normal course of business from transactions between us and the joint ventures. WeAs of June 30, 2018 and December 31, 2017, we had receivables of ~~$2.2~~$3.0 million and ~~$2.4~~$3.7 million, respectively, due from RIC, ~~and~~ RIS, our affiliated partner in the joint ventures, as well as its subsidiaries. As of June 30, ~~2017~~2018 and December 31, ~~2016, respectively. We~~2017, we owed payables of ~~$2.4~~$1.9 million and ~~$1.6~~$2.1 million, respectively, to RIC and ~~RIS as of June 30, 2017 and December 31, 2016, respectively.~~

RIS.

Note 12 – Debt

On June 18, 2015, we entered into a secured five year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Second Amended Credit Agreement). The Second Amended Credit Agreement provided (1) a $55.0 million term loan; (2) up to $295.0 million of revolving loans, with sublimits for multicurrency borrowings, letters of credit and swing-line notes; and (3) a $50.0 million expansion feature.

On February 17, 2017, we entered into a secured five year credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the Third Amended Credit Agreement), which amended and restated the Second Amended Credit Agreement. The Third Amended Credit Agreement refinanced the Second Amended Credit Agreement, eliminated the term loan under the Second Amended Credit Agreement, increased the principal amount of ~~the~~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).

Borrowings under the Third Amended Credit Agreement can be made as alternate base rate loans or euro-currency loans. Alternate base rate loans bear interest that includes a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio. The base reference rate is the greater of the prime rate; federal funds effective rate (or the overnight bank funding rate, if greater) plus 50 basis points; or adjusted 1-month LIBOR plus 100 basis points. Euro-currency loans bear interest based on adjusted LIBOR plus a spread of 137.5 to 175.0 basis points, depending on our leverage ratio.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Third Amended Credit Agreement, we are required to pay a quarterly fee of 20 to 30 basis points (based upon our leverage ratio) of the unused amount of the lenders’ commitments under the Third Amended Credit Agreement.

The Third Amended Credit Agreement contains customary representations, warranties, covenants, mandatory prepayments and events of default under which our payment obligations may be accelerated. If an event of default occurs, the lenders may, among other things, terminate their commitments and declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees. The financial covenants include requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00, subject to an election to increase the maximum leverage ratio to 3.50 to 1.00 for one fiscal year in connection with a permitted acquisition, and (2) an interest coverage ratio of no less than 3.00 to 1.00.

All obligations under the Third Amended Credit Agreement are guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Third Amended Credit Agreement (the Guarantors). The obligations are also secured by a Third Amended and Restated Pledge and Security Agreement, dated as of February 17, 2017, entered into by us and the Guarantors which grants to the administrative agent, for the benefit of the lenders, a security interest, subject to certain exceptions, in substantially all of the non-real estate assets of the Guarantors. These assets include, but are not limited to, receivables, equipment, intellectual property, inventory, and stock in certain subsidiaries.

All revolving loans are due on the maturity date, February 17, 2022. We are not required to make any quarterly principal payments under the Third Amended Credit Agreement, ~~however, during the second quarter of 2017, we made a discretionary principal payment of $50.0 million to reduce the amount outstanding on our credit facility. As~~and as of June 30, ~~2017~~2018 we have ~~$191.2~~$131.0 million in outstanding borrowings under our credit facility.

At June 30, ~~2017,~~2018, we have ~~$2.8~~$2.0 million of outstanding ~~deferred debt~~line of credit issuance costs ~~consisting of $1.6 million related to the term loans under the Second Amended Credit Agreement and $1.2 million related to the Third Amended Credit Agreement. These costs~~that will be amortized over the life of the Third Amended Credit Agreement, which will terminate in February 2022. We ~~incurred~~recorded amortization expense of $0.1 million infor each of the ~~three~~three-month periods ended June 30, 2018 and 2017, and $0.3 million and $0.2 million for the six months ended June 30, 2018 and 2017, ~~and 2016~~respectively, related to these deferred costs.

In March 2017, we entered into an interest rate swap to hedge the variable interest rate on $75.0 million of our $450.0 million revolving credit facility. ~~In July 2012, we entered into an interest rate swap to hedge the variable interest rate on our previously outstanding term loan debt. This swap expired as of June 30, 2016.~~

See further discussion in Note 3, “Hedging Transactions and Derivative Financial Instruments.”

Restriction on Payment of Dividends

Our Third Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our leverage ratio does not exceed 2.75 to 1.00. If our leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to ~~$20~~$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 June 30, ~~2017.~~2018.

Capital ~~Lease~~Leases

We have a capital lease obligation related to our manufacturing facility in Eschenbach, Germany. Under the terms of the leasing agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon. The total obligation recorded for the lease as of June 30, ~~2017~~2018 is ~~$5.6~~$5.3 million. Depreciation expense related to ~~the~~this capital lease was $0.1 million for each of the ~~three months~~three-month periods ended June 30, 2018 and 2017, and ~~2016 and~~was $0.2 million for each of the ~~six months~~six-month periods ended June 30, ~~2017~~2018 and ~~2016. Accumulated depreciation at June 30, 2017 and December 31, 2016 was $3.6 million and $3.4 million, respectively.~~2017. These expenses are included as depreciation expense in cost of sales on our condensed consolidated statements of operations. Accumulated depreciation at June 30, 2018 and December 31, 2017 was $3.1 million and $3.3 million, respectively.

We also incurred interest expense on ~~the~~this capital lease of $0.1 million for each of the ~~three month~~three-month periods ended June 30, 2018 and 2017 and ~~2016 and~~ $0.1 ~~million and $0.2~~ million for each of the ~~six month~~six-month periods ended June 30, ~~2017~~2018 and ~~2016.~~2017. Interest expense related to the debt recorded on the capital lease is included in interest expense on the condensed consolidated statements of operations.

In 2017, we entered into two additional capital lease agreements for office related equipment in various worldwide locations. The total obligation recorded for the capital leases as of June 30, 2018 was $0.7 million. Depreciation expense related to the capital leases was $0.1 million for the three and six months ended June 30, 2018. These expenses are included as depreciation expense in selling, general and administrative expenses on the condensed consolidated statements of operations. Accumulated depreciation as of June 30, 2018 was $0.2 million.

Note 13 – Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the period ending June 30, ~~2017,~~2018, by operating segment, were as follows:

(Dollars in thousands) Advanced Connectivity Solutions Elastomeric Material Solutions Power Electronics Solutions Other Total
December 31, 2016 $ 51,693
$ 91,531
$ 62,983
$ 2,224
$ 208,431
Foreign currency translation adjustment —
786
5,121
—
5,907
Purchase accounting adjustment —
116
—
—
116
DSP acquisition —
17,793
—
—
17,793
June 30, 2017 $ 51,693
$ 110,226
$ 68,104
$ 2,224
$ 232,247



(Dollars in thousands)	Advanced Connectivity Solutions		Elastomeric Material Solutions			Power Electronics Solutions			Other		Total
December 31, 2017	$	51,693	$	111,575		$	71,615		$	2,224	$	237,107
Foreign currency translation adjustment	—		(707		)	(2,113		)	—		(2,820		)
June 30, 2018	$	51,693	$	110,868		$	69,502		$	2,224	$	234,287

Other Intangible Assets

June 30, 2017 December 31, 2016
(Dollars in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Trademarks and patents $ 10,161
$ 1,637
$ 8,524
$ 6,825
$ 1,156
$ 5,669
Technology 72,826
29,037
43,789
68,880
24,365
44,515
Covenant not to compete 1,729
1,004
725
1,419
932
487
Customer relationships 127,887
18,205
109,682
96,148
14,311
81,837
Total definite lived intangible assets 212,603
49,883
162,720
173,272
40,764
132,508
Indefinite lived intangible assets 4,506
—
4,506
4,168
—
4,168
Total intangible assets $ 217,109
$ 49,883
$ 167,226
$ 177,440
$ 40,764
$ 136,676



	June 30, 2018						December 31, 2017
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	127,885	$	25,815	$	102,070	$	128,907	$	22,514	$	106,393
Technology	72,374		35,175		37,199		73,891		33,491		40,400
Trademarks and trade names	10,180		2,649		7,531		10,213		2,157		8,056
Covenants not to compete	760		150		610		1,799		1,108		691
Total definite-lived other intangible assets	211,199		63,789		147,410		214,810		59,270		155,540
Indefinite-lived other intangible asset	4,599		—		4,599		4,738		—		4,738
Total other intangible assets	$	215,798	$	63,789	$	152,009	$	219,548	$	59,270	$	160,278

Gross and net carrying amounts and accumulated amortization may differ from prior periods due to foreign exchange rate fluctuations.

Amortization expense for the three and six months ended June 30, ~~2017~~2018 was approximately $3.8 million and ~~$7.1~~$7.7 million, respectively. Amortization expense for the three and six months ended June 30, ~~2016~~2017 was approximately ~~$2.7~~$3.8 million and ~~$5.3~~$7.1 million, respectively. The estimated future amortization expense is $7.6 million for the remainder of ~~2017~~2018 and ~~$15.3~~$15.0 million, ~~$15.1~~$11.7 million, ~~$11.8~~$11.0 million and ~~$11.0~~$10.6 million for ~~2018,~~ 2019, 2020, 2021 and ~~2021,~~2022, respectively.

On November 23, 2016, we acquired DeWAL, and on January 6, 2017, we acquired the principal operating assets of DSP. For further detail on the goodwill and intangible assets recorded in connection with the acquisitions, see Note 5 - Acquisitions.

The indefinite-lived ~~trademark~~other intangible ~~assets were~~asset was acquired as part of the acquisition of ~~curamik~~^®~~. These assets are~~Curamik Electronics GmbH. This asset is assessed for impairment annually, and between annual assessments if an event occurs or ~~if changes in~~ circumstances change that indicate ~~that~~ the carrying ~~values~~value may not be recoverable.

The definite-lived other intangible assets are amortized using a fair value methodology that is based on the projected economic use of the related underlying asset. The weighted average remaining amortization period as of June 30, ~~2017,~~2018, by definite-lived other intangible asset class, is presented in the table below:



Definite-Lived Other Intangible Asset Class		Weighted Average Remaining Amortization Period ~~(Years)~~
~~Trademarks and patents~~		~~7.2~~
~~Technology~~		~~6.0~~
Customer relationships		~~10.3~~8.9
~~Covenant~~Technology		4.8
Trademarks and trade names		5.9
Covenants not to compete		~~3.4~~1.7
Total ~~definite lived~~definite-lived other intangible assets		~~8.9~~7.7

Note 14 – Commitments and Contingencies

~~We are currently engaged in~~Descriptions of the ~~following~~principal environmental and legal ~~proceedings:~~proceedings in which we are engaged are set forth below:

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. We recorded an accrual of $3.2 million as of December 31, 2015 for remediation costs expected to be incurred based on the facts and circumstances known to us at that time. During the third quarter of 2016, the CT DEEP approved a change to our remediation plan for the site that will reduce our overall expected costs. Accordingly, we reduced the accrual by $0.9 million as a result of a change in the level of remediation that needs to take place. This benefit was recorded as an offset to selling, general, and administrative expenses in the condensed consolidated statement of operations. Remediation activities on the site ~~continue, totaling approximately $0.5~~are ongoing and are recorded as reductions to the accrual as they are incurred. We have incurred aggregate remediation costs of $0.7 million through June 30, ~~2017,~~2018, and the ~~remaining~~ accrual for future remediation efforts ~~was $1.8~~is $1.7 million.

~~Superfund Sites~~

We are currently involved as a potentially responsible party (PRP) in one active case involving a waste disposal site, the Chatham Superfund Site. The costs incurred since inception for this claim have been immaterial and have been primarily covered by insurance policies, for both legal and remediation costs. In this matter, we have been assessed a cost sharing percentage of approximately 2% in relation to the range for estimated total cleanup costs of $18.8 million to $29.6 million. We believe we have sufficient insurance coverage to fully cover this liability and have recorded a liability and related insurance receivable of approximately $0.4 million as of June 30, 2017, which approximates our share of the low end of the estimated range. We believe we are a de minimis participant and, as such, have been allocated an insignificant percentage of the total PRP cost sharing responsibility. Based on facts presently known to us, we believe that the potential for the final results of this case having a material adverse effect on our results of operations, financial position or cash flows is remote. This case has been ongoing for many years and we believe that it will continue for the indefinite future. No time frame for completion can be estimated at the present time.

PCB Contamination

We have been working with CT DEEP and the United States Environmental Protection Agency, Region I, in connection with certain polychlorinated biphenyl (PCB) contamination at our facility in Woodstock, Connecticut. The issue was originally discovered in the soil at the facility in the late 1990s, which has been remediated. Further contamination was later found in the groundwater beneath the property, which was addressed with the installation of a pump and treat system in 2011. The future costs related to the maintenance of the groundwater pump and treat system now in place at the site are expected to be minimal. We believe that the remaining remediation activity will continue for several more years and no time frame for completion can be estimated at the present time.

PCB contamination at this facility was also found in the buildings and courtyards original to the site, in addition to surrounding areas, including an on-site pond. We have completed remediation activities for the buildings and courtyards. We currently have a reserve of $0.2 million for the pond remediation recorded in our condensed consolidated statements of financial position. We

believe this reserve will be adequate to cover the remaining remediation work related to the pond contamination based on the information known at this time. However, if additional contamination is found, the cost of the remaining remediation may increase.

Asbestos Litigation

We, like many other industrial companies, have been named as a defendant in a number of lawsuits filed in courts across the country by persons alleging personal injury from exposure to products containing asbestos. 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 ~~presents information about our recent~~summarizes the change in number of asbestos claims ~~activity:~~outstanding during the six months ended June 30, 2018:



	Asbestos Claims ~~Activity~~
Claims outstanding at December 31, ~~2016~~2017	~~605~~687
New claims filed	~~195~~126
Pending claims concluded	(~~184~~127	)
Claims outstanding at June 30, ~~2017~~2018	~~616~~686

For the six months ended June 30, ~~2017, 175~~2018, 110 claims were dismissed and 917 claims were settled. Settlements totaled approximately ~~$1.2~~$4.9 million for the six months ended June 30, ~~2017.~~2018.

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. 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 general assumptions regarding the asbestos-related product liability litigation environment and company-specific assumptions regarding claims rates (including diseases alleged), dismissal rates, average settlement costs and average defense costs. 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 review our asbestos-related forecasts annually in the fourth quarter of each year unless facts and circumstances materially change during the year, at which time we would analyze these forecasts. ~~Currently, these analyses project liabilities~~During 2017, we reviewed the projections of our current and ~~related insurance receivables over a 10-year period. It is probable we will incur additional costs for asbestos-related~~future asbestos claims, ~~following this 10-year~~and determined it was appropriate to extend the liability projection period ~~but we do not believe that any related contingencies are reasonably estimable beyond such period based on, among other things, the significant proportion of~~to cover all current and future claims ~~included~~through 2058. We based our conclusion 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 expectation of a downward trend in claims due to the ~~analysis~~average age of our claimants, which is approaching the average life expectancy. As a result, we believe we are now able to make a reasonable estimate of the actuarially determined liability for current and future asbestos claims through 2058, the ~~lag time between the date a claim is filed and its resolution. Accordingly, no~~expected end of our asbestos liability ~~(or related asset) has yet been recorded for claims that may be asserted subsequent to 2026.~~exposure.

As of December 31, ~~2016,~~2017, the balances of the asbestos-related claims and insurance receivables, ~~for the 10-year projection period~~which are projected to cover all current and future claims through 2058, were ~~$52.0~~$76.2 million and ~~$48.4~~$69.2 million, respectively. ~~As of June 30, 2017, there have been no changes to these projections.~~

To date, the defense and settlement costs of our asbestos-related product liability litigation have been substantially covered by insurance. We have identified continuous coverage for primary, excess and umbrella insurance from the 1950s through the mid-1980s, except for a period in the early 1960s, with respect to which we have entered into an agreement for primary, but not excess or umbrella, coverage. 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 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. ~~As previously disclosed, however,~~During the first quarter of 2018, we received notice that primary coverage for a period of eight years and excess coverage for a period of two years had been exhausted, and as a result, we incurred indemnity and defense costs of $0.2 million and $0.5 million for the three and six months ended June 30, 2018, respectively. These costs reduced our existing asbestos-related liabilities to $75.7 million as of June 30, 2018. We expect 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. Accordingly, while we believe it is reasonably possible that we may incur losses and defense costs in excess of our accruals in the future, we do not have sufficient data to provide a reasonable estimate or range of such losses and defense costs, at this time.

The amounts recorded for the asbestos-related ~~liability~~liabilities and the related insurance receivables described above were 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 United States could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded.

There can be no assurance that our accrued asbestos liabilities will approximate our actual asbestos-related settlement and defense costs, or that our accrued insurance recoveries will 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, which could exceed existing reserves and insurance recovery, but we are unable to estimate the amount of such additional liabilities and costs. We will continue to vigorously defend ourselves and believe we have substantial unutilized insurance coverage to mitigate future costs related to this matter.

General Litigation

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, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position or cash flows.

Note 15 – Share ~~Repurchase~~Repurchases

On August 6, 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~~option exercises and ~~shares~~vesting of restricted stock units granted by the Company, in addition to enhancing shareholder value. The Program has no expiration date, and may be suspended or discontinued at any time without notice. As of June 30, ~~2017, $52.0~~2018, $49.0 million remained available tofor repurchase under the Program.

NoWe repurchased the following shares of capital stock ~~were repurchased~~ during the three and six months ended June 30, ~~2017.~~ 2018:



	Three Months Ended		Six Months Ended
(Dollars in thousands)	June 30, 2018		June 30, 2018
Shares of capital stock repurchased	—		23,138
Value of capital stock repurchased	$	—	$	2,999

All ~~previous~~ repurchases were made using cash from ~~operations and cash on hand.~~operations.

Note 16 – Income Taxes

Our effective income tax rate was ~~33.9%~~32.6% and ~~71.0%~~33.9% for the three months ended June 30, 2018 and 2017, respectively. The decrease was primarily due to a lower U.S. effective tax rate, as a result of U.S. tax reform, and ~~2016, respectively.~~changes in pretax mix across jurisdictions with disparate tax rates, partially offset by an increase in current year accruals for uncertain tax positions. Our effective income tax rate was ~~33.0%~~23.2% and ~~51.2%~~33.0% for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The decrease ~~compared to the same periods in 2016,~~ was primarily due to ~~withholding taxes on off-shore cash movements and the change~~a lower U.S. effective tax rate, as a result of U.S. tax reform, changes in ~~our assertion that certain foreign earnings are permanently reinvested recorded in 2016,~~pretax mix across jurisdictions with disparate tax rates, excess tax deductions on ~~stock based~~equity compensation, ~~recognized in 2017,~~R&D credits and a ~~decrease in current year accruals~~release of reserves for uncertain tax positions, partially offset by ~~a decrease~~an increase in ~~reversal of reserves associated with~~current year accruals for uncertain tax positions.

Historically, our intention was to permanently reinvest the majority of our foreign earnings indefinitely or to distribute them only when it was tax efficient to do so. As a result of certain internal restructuring transactions effectuated to more closely align our foreign subsidiaries from an operational, legal and geographic perspective and improve management of financial resources, with respect to offshore distributions, we modified our assertion of certain foreign subsidiary earnings considered permanently reinvested in 2016. In connection with this change, we recorded a deferred tax liability of $3.4 million associated with distribution-related foreign taxes on prior years’ undistributed earnings of certain of our Chinese subsidiaries in the second quarter of 2016. These taxes become due when distributed to other offshore subsidiaries. In addition, we incurred $5.5 million of withholding taxes related to distributions from China in the second quarter of 2016. With few exceptions, U.S. income taxes have not been provided on undistributed earnings of international subsidiaries. We continue to intend to reinvest these earnings permanently outside the U.S. or to repatriate the earnings only when it is tax effective to do so.

The total amount of unrecognized tax benefits as of June 30, ~~2017~~2018 was ~~$6.6~~$12.4 million, of which ~~$6.2~~$10.9 million would affect our effective tax rate if recognized. It is reasonably possible that approximately ~~$1.6~~$3.6 million of our unrecognized tax benefits as of June 30, ~~2017~~2018 will reverse within the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense. As of June 30, ~~2017,~~2018, we had $0.7 million accrued for the payment of interest.

We are subject to taxation in the U.S. and various state and foreign jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years prior to ~~2012.~~2013.

We adopted ASU 2016-09 on January 1, 2017. Upon adoption, we recognized excess tax benefits of approximately $12.7 million in deferred tax assets that were previously not recognized in a cumulative-effect adjustment to retained earnings. In addition, the new guidance requires that all of the tax effects related to share-based payments at settlement or expiration be recorded through the statement of operations which resulted in the recognition of $0.5 million and $1.6 million of income tax benefits during the three and six months ended June 30, 2017, respectively. See Note 19 - “Recent Accounting Standards” for further information.

Note 17 – Restructuring and Impairment Charges

Global Headquarters Relocation

In the second quarter of 2017, we completed the physical relocation of our global headquarters from Rogers, Connecticut to Chandler, Arizona. The move builds upon our presence in Arizona, where we have major business and manufacturing operations. The move supports our long-term strategy and is an integral part of our plans for growth and expansion. The new global corporate headquarters location is home to approximately 70 employees who support areas such as human resources, information technology, finance and supply chain, among others. The Rogers, Connecticut location continues to have manufacturing, research and development and support services. We recorded ~~$1.1~~$0.1 million and ~~$1.8~~$1.1 million of expense related to this project in the three months ended June 30, 2018 and 2017, respectively and $0.5 million and $1.8 million in the six months ended June 30, ~~2017.~~2018 and 2017, respectively. Severance activity related to the headquarters relocation is presented in the table below for the six months ended June 30, ~~2017:~~2018:


(Dollars in thousands)	Severance related to headquarters relocation			Severance Related to Headquarters Relocation
Balance at December 31, 2016	$	470
Balance at December 31, 2017				$	183
Provisions	320			99
Payments	(566		)	(244		)
Balance at June 30, 2017	$	224
Balance at June 30, 2018				$	38

The fair value of the total severance benefits to be paid (including payments already made) in connection with the relocation is $1.1 million, of which we expensed $0.0 million and $0.1 million in the three months ended June 30, 2018 and 2017, respectively and $0.1 million and $0.3 million in the six months ended June 30, 2018 and 2017, respectively. The total severance costs are being expensed ratably over the required service period for the affected employees.

Facility Consolidation

On April 24, 2018, we made the decision to relocate our Santa Fe Springs, California operations to the Company’s facilities in Carol Stream, Illinois and Bear, Delaware. We expect to incur restructuring expenses of approximately $2.0 million in connection with the closure and transfer of production capabilities to the Carol Stream, Illinois and Bear, Delaware facilities. These costs include approximately $0.8 million in severance and retention expenses and $1.2 million of costs related to the relocation of equipment. The Company estimates that approximately $1.5 million and $0.5 million of the costs will be incurred in fiscal years 2018 and 2019, respectively.Completion of the transfer, and start-up of production at the Carol Stream, Illinois and Bear, Delaware facilities, is expected to require capital expenditures of approximately $1.2 million to $1.4 million. We recorded $0.5 million of expense related to this project in the three and six months ended June 30, 2018, respectively. Severance activity related to the facility consolidation is presented in the table below for the six months ended June 30, 2018:



(Dollars in thousands)	Severance Related to Facility Consolidation
Balance at December 31, 2017	$	—
Provisions	316
Payments	(14		)
Balance at June 30, 2018	$	302

The fair value of the total severance benefits to be paid (including payments already made) in connection with the relocation is $0.8 million. This total is being expensed ratably over the required service period for the affected employees. We incurred ~~$0.1 million and~~ $0.3 million of severance related expenses during the three and six months ended June 30, ~~2017.~~

2018.

Note 18 – Assets Held for Sale

In the second quarter of 2017, we began actively marketing for sale unutilized property in Chandler, Arizona, consisting of a building and two adjacent parcels of land with an aggregate net book value of $0.9 million. In the second quarter of 2018, we completed the sale of the building and one parcel of land and recognized a gain on sale of approximately $0.4 million in operating income. The remaining parcel of land being classified as held for sale has a net book value of $0.4 million.

Note 19 – Revenue from Contracts with Customers

Revenue Recognition

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 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.

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.

Performance Obligations

Manufactured goods are our primary performance obligations. Revenue related to our performance obligations is predominantly recognized at a point in time consistent with our shipping terms. For certain products that meet the criteria of no alternative use whereby the Company has the right to payment, we recognize revenue on an over-time basis.

The selection of a method to measure progress toward completion of a contract requires judgment and is based on the nature of the products or services to be provided. We use the cost incurred method to measure the progress of our contracts with no alternative use products whereby the Company has the right to payment as we believe it is the best depiction of the transferring of value to the customer. Under the cost incurred method, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the contract. Contract costs include labor, materials and subcontractors costs, as well as an allocation of indirect costs. Revenues, including estimated fees or profits, are recorded as costs are incurred.

Performance obligations are typically satisfied within three months of receipt of a customer order; therefore, a change in cost estimates will not have a material impact on the percentage of completion noted at the prior quarter end. Our typical payment terms with customers range from 30 days to 105 days. Product pricing is determined and negotiated on a standalone basis. Product pricing is determined without consideration for the pricing, margin, or other information specific to other products that the same customer or other parties related to that customer may also purchase, whether in the same or a different contract. Management allocates the transaction price to its performance obligations primarily based on stand-alone selling prices that may have been developed via specific customer quote for no alternative use products and non-standard products or standard price lists for standard products. The accounting for the estimate of variable consideration is consistent with our current practice.

Contract modifications occur when there is a change to the products, price, or both. Contract modifications are treated as a separate contract if there are additions to promised goods and services that are distinct and if the price for that separate performance obligation reflects the stand-alone selling price for those goods or services. However, if the obligations in the contract modification are not distinct and are part of a single performance obligation that is only partially satisfied, the contract is not determined to be a separate contract and is accounted for as a revision to an existing contract. These modifications are accounted for prospectively when remaining promises are distinct from those previously transferred, or through a cumulative catch-up adjustment.

Contract Balances

The Company has 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 condensed consolidated statements of financial position.

The Company did not have any contract liabilities as of June 30, 2018.

The following table presents contract assets by operating segment as of June 30, 2018:

June 30, 2018

(Dollars in thousands)

Advanced Connectivity Solutions

Elastomeric Material Solutions

Power Electronics Solutions

Other

Total

Contract Assets

—

384

18,126

3,423

21,933

No impairment losses were recognized during the three and six months ended June 30, 2018 on any receivables or contract assets arising from our contracts with customers.

Transition

We adopted ASU 2014-09 in the first quarter of 2018 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 guidance was applied to all contracts that were not completed at the date of implementation. The primary reason for the impact of adoption is due to over-time revenue recognition.

If the criteria for over-time recognition are not met, revenue is recognized at a point in time. In considering at what point in time control of the product or service has transferred to the customer, we consider qualitative factors such as: 1) present right to payment; 2) legal title to the asset; 3) physical possession; 4) risks and rewards of ownership; and, 5) customer acceptance.

The impact of adoption using the modified retrospective method on the Company’s condensed consolidated financial statements is as follows:



	As of
Condensed Consolidated Statements of Financial Position:	December 31, 2017					January 1, 2018
(Dollars in thousands)	Under ASC 605		Impact of Adoption			Under ASC 606
Contract assets	$	—	$	18,099		$	18,099
Inventories	112,557		(12,307		)	100,250
Deferred income taxes	10,706		1,580			12,286
Retained earnings	684,540		4,212			688,752

The following tables set forth the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606, as compared to the guidance that was in effect before its adoption. The impact of adoption on the condensed consolidated financial statements as of and for the three and six months ended June 30, 2018 is as follows:



Condensed Consolidated Statements of Operations:	Three Months Ended
Condensed Consolidated Statements of Operations:	June 30, 2018					June 30, 2018
(In thousands, except per share amounts)	Under ASC 605		Impact of Adoption			Under ASC 606
Net sales	$	214,782	$	(107	)	$	214,675
Cost of sales	138,076		(73		)	138,003
Income tax expense	8,373		—			8,373
Net income	17,363		(34		)	17,329

Basic earnings per share	$	0.94	$	—		$	0.94
Diluted earnings per share	$	0.93	$	—		$	0.93



Condensed Consolidated Statements of Operations:	Six Months Ended
Condensed Consolidated Statements of Operations:	June 30, 2018				June 30, 2018
(In thousands, except per share amounts)	Under ASC 605		Impact of Adoption		Under ASC 606
Net sales	$	425,452	$	3,834	$	429,286
Cost of sales	273,400		2,607		276,007
Income tax expense	12,811		333		13,144
Net income	42,571		894		43,465

Basic earnings per share	$	2.32	$	0.05	$	2.37
Diluted earnings per share	$	2.28	$	0.05	$	2.33



	As of
Condensed Consolidated Statements of Financial Position:	June 30, 2018					June 30, 2018
(Dollars in thousands)	Under ASC 605		Impact of Adoption			Under ASC 606
Contract assets	$	—	$	21,933		$	21,933
Inventories	132,653		(14,914		)	117,739
Deferred income taxes	1,588		1,913			3,501
Retained earnings	727,111		5,106			732,217



Condensed Consolidated Statements of Cash Flows:	Six Months Ended
	June 30, 2018						June 30, 2018
(Dollars in thousands)	Under ASC 605			Impact of Adoption			Under ASC 606
Cash provided by operating activities:
Net income	$	42,571		$	894		$	43,465
Deferred income taxes	3,546			333			3,879
Contract assets	—			(21,933		)	(21,933		)
Inventories	(21,403		)	14,914			(6,489		)
Other, net	(2,505		)	5,792			3,287
Net cash provided by operating activities	22,818			—			22,818

Practical Expedients

The Company will recognize the incremental costs of obtaining a contract as an expense when incurred as the amortization period of the asset is expected to be one year or less. The Company will not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when the transfer of goods to our customer occurs and when the customer fully pays for the goods will be one year or less. We do not disclose the Company’s unsatisfied performance obligations as they are part of contracts that have an original expected duration of one year or less.

Note 20 – Supplemental Financial Information

The components of Other operating (income) expense, net are as follows:



	Three Months Ended					Six Months Ended
(Dollars in thousands)	June 30, 2018			June 30, 2017		June 30, 2018			June 30, 2017
Gain from antitrust litigation settlement	$	—		$	—	$	(3,591	)	$	—
Gain on sale of long-lived assets	$	(383	)	$	—	$	(383	)	$	(942	)

In the first quarter of 2018, we recorded a gain from the settlement of antitrust litigation in the amount of $3.6 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 United States from January 1, 1999 through December 31, 2004 in violation of the federal antitrust laws.

In the second quarter of 2018, we completed the sale of a building and a parcel of land in Arizona that had been classified as held for sale as of June 30, 2017 and recognized a gain on sale of approximately $0.4 million.

In the first quarter of 2017, we completed the ~~planned~~ sale of a parcel of land in Belgium that had been classified as held for sale as of December 31, ~~2016. We~~2016 and recognized a gain on sale of approximately $0.9 ~~million during that quarter in operating income. Also in the first quarter of 2017, we began actively marketing for sale a facility in Belgium with a net book value of $1.8~~ million. ~~The asset is classified as held for sale as of June 30, 2017 and is no longer being depreciated. We have an agreement to sell this property and expect to close on the sale in the second half of 2017.~~

In the second quarter of 2017, we began actively marketing for sale unutilized property in the U.S. consisting of a building and an adjacent parcel of land with a net book value of $0.9 million. The asset is classified as held for sale as of June 30, 2017 and is no longer being depreciated.

~~As both the Belgian and U.S. facilities held for sale are expected to be sold within the next twelve months, they have been classified as current.~~

Note 1921 – Recent Accounting Standards

In March 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-05, Income Taxes (Topic 740):Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This ASU adds guidance that answers questions regarding how certain income tax effects from the Tax Cuts and Jobs Act (the Act) should be applied to companies’ financial statements. The guidance also lists which financial statement disclosures are required under a measurement period approach.

In February 2018, the FASB issued ASU No. 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 the Act from accumulated other comprehensive income to retained earnings. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the method and impact the adoption of ASU 2018-02 will have on the Company’s consolidated financial statements and disclosures.

In January 2018, the FASB released guidance on the accounting for tax on the Global Intangible Low Tax Income (GILTI) provisions of the Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period costs are both acceptable methods subject to an accounting policy election. Effective in the first quarter of 2018, the Company has elected to treat any potential GILTI inclusions as a period cost.

In December 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, we recorded provisional estimates for the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and tax expense associated with the mandatory deemed repatriation of foreign earnings at December 31, 2017. Management has continued to gather and analyze information associated with these provisional estimates and did not record any adjustments during the three and six months ended June 30, 2018. Any subsequent adjustment to these amounts will be recorded to tax expense in the quarter of 2018 when the analysis is complete.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Adoption of this standard will be applied prospectively to awards modified on or after the adoption date. The impact of this new standard will depend on the extent and nature of future changes to the terms and conditions of the Company’s share-based payment awards. ~~Historically, the~~The Company ~~has~~adopted this standard on January 1, 2018, which did not ~~had significant changes to its share-based payment awards and therefore does not expect adoption of this guidance to~~ have a material effect on the condensed consolidated financial ~~statements upon its adoption in 2018.~~statements.

In March 2017, the FASB issued ~~ASU No. 2017-05 and~~ ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost. The changes to the standard require employers to report the service cost component in the same line item as other compensation costs arising from services rendered by employees during the reporting period. The other components of net periodic pension benefit costs will be presented in the statement of operations separately from the service cost and outside of a subtotal of operating income from operations. In addition, only the service cost component may be eligible for capitalization where applicable. ASU ~~No. 2017-05 and ASU~~ 2017-07 ~~are~~became effective for annual periods beginning after December 15, 2017. The Company ~~expects to adopt~~adopted this ~~guidance when effective and~~standard on January 1, 2018. In conjunction with the ~~adoption is not expected to have a material effect on the financial statements.~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~, in an effort to simplify the subsequent measurement of goodwill and the associated procedures to determine fair value. The amendments of this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, however, the Company has not yet determined if it will adopt prior to 2020. The adoption of this guidance, ~~is not expected to have a material impact on our financial statements.~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, with the intention to reduce diversity in practice, as well as simplify elements of classification within the statement of cash flows for certain transactions. The update was effective for interim and annual reporting periods beginning after December 15, 2016. The accounting update was to be adopted using a retrospective approach. The Company adopted ASU 2016-15 effective January 1, 2017, and it did not have a material impact on our financial statements.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~, which contains amendments intended to simplify various aspects of share-based payment accounting and presentation in the financial statements, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and statutory tax withholding requirements, and classification in the statement of cash flows. The update was effective for interim and annual reporting periods beginning after December 15, 2016. The new standard required a modified retrospective transition through a cumulative-effect adjustment as of the beginning of the period of adoption, with certain provisions requiring either a prospective or retrospective transition. The Company adopted ASU 2016-09 on January 1, 2017. Upon adoption, the Company ~~recognized excess tax benefits of approximately $12.7~~reclassified $0.4 million and $0.8 million in ~~deferred tax assets that were previously not recognized in a cumulative-effect adjustment~~net periodic pension benefits from Selling, general and administrative expenses to ~~retained earnings. In addition,~~Other income (expense), net for the new guidance requires that all of the tax effects related to share-based payments at settlement or expiration be recorded through the statement of operations. The Company also adopted the standard with respect to treatment of forfeitures, which did not have a material impact on our financial statements.three and six months ended June 30, 2017, respectively.

In February 2016, the FASB issued ASU No. 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 new 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 No. 2016-02 supersedes the existing guidance on accounting for leases. The standard is effective for interim and annual reporting periods for fiscal years beginning after December 15, 2018. Early adoption of this standard is permitted and it is to be adopted using a modified retrospective approach. The Company has ~~initiated its implementation plan, which includes~~established an inventory of existing leases and is in the process of evaluating the classification of ~~our~~each lease ~~agreements~~ and quantifying the accounting impact in accordance with the new ~~accounting~~ standard. The Company expects to adopt this accounting standard beginning in fiscal year 2019.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~, to achieve a consistent application of revenue recognition within the U.S., 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 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.

Note 22 – Subsequent Events

Acquisition

On July ~~9, 2015,~~6, 2018, we acquired 100% of the ~~FASB agreed~~membership interests of Griswold LLC (Griswold), a leading manufacturer of a wide range of high-performance engineered cellular elastomer and microcellular polyurethane products and solutions, for a cash-free, debt-free purchase price of $77.9 million plus an earn-out capped at $3.0 million based on certain of Griswold’s 2018 product sales. We used $82.5 million in borrowings under our existing credit facility to ~~delay~~fund the ~~effective date by one year. In accordance with~~transaction. Griswold, headquartered in Moosup, Connecticut, sells to customers across the ~~agreed upon delay,~~automotive, transportation, medical, office products, printing and electronics industries.

Due to the ~~updated standard is effective~~timing of the acquisition, disclosures relating to the acquisition, including the allocation of the purchase price, have been omitted because the initial accounting for ~~us beginning in~~ the ~~first quarter~~transaction was incomplete as of ~~2018. Early adoption is permitted, but not before~~ the ~~original effective~~filing date of the standard. During 2016, the FASB issued new accounting standards updates regarding principal versus agent considerations in determining revenue recognition identifying performance obligations and licensing, collectability, sales tax, non-cash considerations, completed contracts, contract modifications and effect of accounting change. During 2017, the FASB issued new accounting standards updates regarding clarification of determining the customer in a service concession arrangement. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company plans to adopt this standard retrospectively with the cumulative effect approach; however, the Company will continue to evaluate its options as the implementation process continues. The Company has established a cross-functional coordinated implementation team and engaged a third party service provider to assist with the project. The Company is completing its evaluation of contracts and is in the process of quantifying the financial impact of the new standard. The Company is also evaluating and implementing changes to its systems, processes and internal controls, as necessary, to meet the reporting and disclosure requirements. At this stage of the process, the Company has not yet determined if the adoption of the new standard will have a material impact on its consolidated financial statements and disclosures.report.


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

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

~~Forward Looking~~Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are generally accompanied by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “seek,” “target” or similar expressions that convey uncertainty as to future events or outcomes. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and the differences between assumed facts and actual results could be material depending upon the circumstances. Where we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and based on assumptions believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur or be achieved or accomplished. Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation:

failure to capitalize on, or volatility within, or other adverse changes with respect to the Company’s growth drivers, including advanced mobility and advanced connectivity, ~~clean energy, and safety and protection;~~such as delays in adoption or implementation of new technologies;

uncertain business, economic and political conditions in the United States and abroad, particularly in China, South Korea, Germany, Hungary and Belgium, where we maintain significant manufacturing, sales or administrative operations;

changes in trade policy, tariff regulation or other trade restrictions;

fluctuations in foreign currency exchange rates;

our ability to develop innovative products and have them incorporated into end-user products and systems;

the extent to which end-user products and systems incorporating our products achieve commercial success;

the ability of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely or cost-effective manner;

intense global competition affecting both our existing products and products currently under development;

failure to realize, or delays in the realization of, anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses;

our ability to attract and retain management and skilled technical personnel;

our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights;

changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate;

failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants;

the outcome of ongoing and future litigation, including our asbestos-related product liability litigation;

changes in environmental laws and regulations applicable to our business; and

disruptions in, or breaches of, our information technology ~~systems;~~

~~asset impairment and restructuring charges; and~~

~~changes in accounting standards promulgated by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC).~~systems.

Our forward-looking statements are expressly qualified by these cautionary statements, which you should consider carefully, along with the risks discussed in this section and elsewhere in this report and inour other reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (the Annual Report), any of which could cause actual results to differ materially from historical results or anticipated results. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

The following discussion and analysis of our financial condition and results of operations should be read together with ~~the Selected Financial Data and~~ our ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and the related notes that appear elsewhere in this Form 10-Q along with our audited consolidated financial statements and the related notes thereto in our Annual Report.

In the following discussion and analysis, we sometimes provide financial information that was not prepared in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that this non-GAAP information provides meaningful supplemental information regarding the Company’s performance by excluding certain expenses that are generally non-recurring or otherwise may not be indicative of the core business operating results. In general, the Company believes that the additional non-GAAP financial information provided herein is useful to management and investors in assessing the Company’s historical performance and for planning, forecasting and analyzing future periods. However, non-GAAP information has limitations as an analytical tool and should not be considered in isolation from, or solely as an alternative to, financial information prepared in accordance with GAAP. Any time we provide non-GAAP information in the following narrative we identify it as such and in close proximity provide the most directly comparable GAAP financial measure, as well as the information necessary to reconcile the two measures.

Executive Summary

Company Background and Strategy

Rogers Corporation designs, develops, manufactures and sells high-quality and high-reliability engineered materials and components for mission critical applications. We operate principally three strategic ~~business~~operating segments: Advanced Connectivity Solutions (ACS), Elastomeric Material Solutions (EMS) and Power Electronics Solutions (PES). We ~~are now headquartered in Chandler, Arizona. We~~ have a history of innovation and have established ~~two Rogers~~ Innovation Centers for our leading research and development activities in Chandler, Arizona, Burlington, Massachusetts, Eschenbach, Germany and Suzhou, China. We are headquartered in Chandler, Arizona.

Our growth strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence. Our ability to manage the risks inherent in the markets into which we sell our products, and thereby maintain our financial performance in the future, will depend, in part, on our ability to continue to maintain our focus on these principles. As a market-driven organization, we are focused on growth drivers, including advanced mobility and ~~connectivity, clean energy, and safety and protection.~~advanced connectivity. More specifically, the key trends and markets that affect our business include the ~~growth in automotive, automotive radar,~~increased use of advanced driver assistance systems and adoption of electric ~~vehicles,~~and hybrid electric vehicles ~~rail, aviation,~~and new technology adoption in the telecom industry, including next generation wireless ~~internet~~infrastructure. In addition to our focus on advanced mobility and advanced connectivity, we also sell into a variety of other end markets including renewable energy, aerospace and defense and diverse general industrial ~~markets.~~applications.

Our sales and marketing approach is based on addressing these trends, while our strategy focuses on ~~imperatives~~factors for success as a manufacturer of engineered materials and components: quality, service, cost, ~~and~~ efficiency, ~~and~~ innovation and technology. We have expanded our capabilities through organic investment and acquisitions and strive to ensure ~~a full complement of~~ high quality solutions for our customers. We continue to review and re-align our manufacturing and engineering footprint in an effort to attain a leading competitive position globally. We have established or expanded our capabilities in various locations ~~such as Eastern Europe and Asia~~ in support of our customers’ growth initiatives.

We seek to enhance our operational and financial performance by investing in research and development, manufacturing and materials efficiencies, and new product initiatives that respond to the needs of our customers. We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business.

~~In executing on our growth strategy, we have completed three strategic acquisitions: (1) in January 2017,~~On July 6, 2018, we acquired 100% of the ~~principal operating assets~~membership interests of Diversified Silicone Products, Inc. (DSP), a custom silicone product development and manufacturing business, serving a wide range of high reliability applications, (2) in November 2016, we acquired DeWAL IndustriesGriswold LLC ~~(DeWAL)~~(Griswold), a leading manufacturer of ~~polytetrafluoroethylene~~a wide range of high-performance engineered cellular elastomer and ~~ultra-high molecular weight polyethylene films, pressure sensitive tapes~~microcellular polyurethane products and specialty products for the industrial, aerospace, automotive, and electronics markets, and (3) in January 2015, we acquired Arlon LLC and its subsidiaries, other than Arlon India (Pvt) Limited (the acquired entities, collectively, Arlon), a leading manufacturer of high performance materials for the printed circuit board industry and silicone rubber-based materials.solutions.

~~2017~~2018 Second Quarter Executive Summary

In the second quarter of ~~2017~~2018 as compared to the second quarter of ~~2016,~~2017, our net sales increased ~~27.9%~~6.6% to ~~$201.4~~$214.7 million, gross margin ~~increased 180~~decreased 430 basis points to ~~40.0%~~35.7%, and operating margin ~~increased 440~~decreased 430 basis ~~points.~~points to 11.7%. The following key factors should be considered when reviewing our results of operations, financial condition and liquidity for the ~~periods discussed:~~second quarter of 2018:

Our net sales increase in the second quarter of ~~2017~~2018 was attributable to increases in net sales across all three of our strategic business ~~segments, reflecting both organic growth within each business unit,~~segments. Net sales were favorably impacted by $8.4 million, or 4.2%, due to the appreciation in value of the Euro and ~~growth attributable~~Renminbi relative to ~~our recent acquisitions.~~ ~~Each of ACS, EMS~~the U.S. dollar. Net sales were also favorably impacted by higher demand in electric and hybrid electric vehicles, renewable energy, mass transit and variable frequency motor drives applications in the PES ~~recorded net sales growth. ACS experienced continued growth in automotive, portable electronics, and aerospace and defense applications, which was~~operating segment, partially offset by lower demand in portable electronics and wireless ~~telecommunications applications. EMS~~4G LTE applications in the ACS operating segment. The adoption of new accounting guidance for revenue recognition unfavorably impacted net sales ~~increased primarily~~in the second quarter of 2018 by $0.1 million. See Note 19, “Revenue from the recent acquisitions of DeWAL and DSP, and from higher demand from its core markets, including general industrial, portable electronics, automotive, and mass transit applications. PES saw strength across most of their traditional markets, including mass transit applications, laser diode coolers, variable frequency motor drives, and renewable energy. SeeContracts with Customers,” as well as “Segment Sales and ~~Operations.”~~Operations” for further discussion.

Our gross margin ~~improved 180~~decreased 430 basis points and our operating margin ~~improved 440~~decreased 430 basis points in the second quarter of ~~2017 primarily as a result of increased demand and our operational improvement initiatives.~~2018. Our gross margin ~~improved~~decreased to ~~40.0%~~35.7% in the second quarter of ~~2017~~2018 as a result of unfavorable absorption of fixed costs and increased ~~net sales, as described above,~~costs for copper commodities, facility consolidation and ~~continued benefits from operational improvement initiatives. Operating~~multi-site product qualification, including freight.

Our operating income ~~increased~~decreased to ~~$32.8~~$25.2 million in the second quarter of ~~2017,~~2018, as compared to ~~$18.8~~$32.3 million in the second quarter of ~~2016,~~2017, reflecting ~~an increase~~a decrease in ~~net sales that more than offset an~~gross margin, furthered by a $2.5 million increase in selling, general & administrative (SG&A) ~~expense. As~~expenses and a ~~result,~~$1.6 million increase in research and development (R&D) expenses. The increase in SG&A ~~expense declined~~expenses was driven by strategic investments associated with future growth initiatives. SG&A expenses decreased slightly as a percentage of net sales from ~~21.8%~~19.9% in the second quarter of ~~2016~~2017 to ~~19.6%~~19.8% in the second quarter of ~~2017.~~

~~We continue to integrate DeWAL and DSP.~~ ~~Acquisitions remain a core part of our growth strategy, and successful integration efforts are a key element to ensuring our growth strategy is successfully executed.~~2018.

We are an innovation company, and in the second quarter of ~~2017~~2018 we continued our investment in ~~research and development,~~ R&D, with ~~research and development~~R&D expenses comprising ~~3.5%~~4.1% of our quarterly net sales. ~~Research and development (R&D)~~ R&D expenses were ~~$7.1~~$8.8 million in the second quarter of ~~2017,~~2018, which was an increase of ~~$0.1~~$1.6 million, ~~but a decline~~an increase of ~~1.0%~~60 basis points as a percentage of net sales, from the second quarter of ~~2016. The year-over-year decline as a percentage~~2017. We have made concerted efforts to realign our R&D organization to better fit the future direction of ~~net sales is attributable~~our Company, including dedicating resources to ~~net sales growth (including the recent acquisitions),~~focus on current product extensions and ~~we expect the percentage~~enhancements to ~~rebalance closer to historical levels~~meet our expected short-term and long-term technology needs.

We acquired Griswold in July 2018, as we ~~integrate~~continue to execute on our synergistic acquisition strategy. Acquisitions are a core part of our growth strategy, and these particular acquisitions extend the ~~new businesses. Our spending continues to be focused on developing new platforms~~product portfolio and ~~technologies.~~technology capabilities of our EMS operating segment. Griswold is a leading manufacturer of a wide range of high-performance engineered cellular elastomer and microcellular polyurethane products and solutions across the automotive, transportation, medical, office products, printing and electronics industries. We financed our acquisition of Griswold with $82.5 million in borrowings under our revolving credit facility in July 2018. As a result, borrowings under our credit facility will increase in the third quarter of 2018.

Results of Operations

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


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Gross margin	40.0	%	38.2	%	39.7	%	38.0	%	35.7	%	40.0	%	35.7	%	39.7	%

Selling, general and administrative expenses	19.6	%	21.8	%	18.2	%	20.2	%	19.8	%	19.9	%	19.4	%	18.4	%
Research and development expenses	3.5	%	4.5	%	3.5	%	4.3	%	4.1	%	3.5	%	3.9	%	3.5	%
Restructuring charges	0.5	%	—	%	0.4	%	—	%
Gain on sale of long-lived asset	—	%	—	%	(0.2	)%	—	%
Restructuring and impairment charges									0.3	%	0.5	%	0.2	%	0.4	%
Other operating (income) expense, net									(0.2	)%	—	%	(0.9	)%	(0.2	)%
Operating income	16.3	%	11.9	%	17.8	%	13.5	%	11.7	%	16.0	%	13.1	%	17.6	%

Equity income in unconsolidated joint ventures	0.5	%	0.4	%	0.5	%	0.4	%	0.8	%	0.5	%	0.7	%	0.5	%
Other income (expense), net	(0.1	)%	0.1	%	0.1	%	(0.1	)%	—	%	0.1	%	—	%	0.3	%
Interest expense, net	(1.0	)%	(0.7	)%	(0.8	)%	(0.7	)%	(0.6	)%	(1.0	)%	(0.6	)%	(0.8	)%
Income before income tax expense	15.7	%	11.8	%	17.6	%	13.1	%	12.0	%	15.7	%	13.2	%	17.6	%

Income tax expense	5.3	%	8.4	%	5.8	%	6.7	%	3.9	%	5.3	%	3.1	%	5.8	%

Net income	10.4	%	3.4	%	11.8	%	6.4	%	8.1	%	10.4	%	10.1	%	11.8	%


Net Sales	Quarter Ended							Six Months Ended
Net Sales and Gross Margin															Net Sales and Gross Margin
																Three Months Ended							Six Months Ended
(Dollars in thousands)	June 30, 2017			June 30, 2016			Percent Change	June 30, 2017			June 30, 2016			Percent Change		June 30, 2018			June 30, 2017			Percent Change	June 30, 2018			June 30, 2017			Percent Change
Net sales	$	201,424		$	157,489		27.9%	$	405,252		$	318,056		27.4%		$	214,675		$	201,424		6.6%	$	429,286		$	405,252		5.9%
Gross margin	40.0		%	38.2		%		39.7		%	38.0		%			35.7		%	40.0		%		35.7		%	39.7		%

Net sales increased by ~~27.9%~~6.6% in the second quarter of ~~2017~~2018 compared to the second quarter of ~~2016. This increase was driven by higher organic~~2017. The ACS, EMS and PES operating segments had net sales ~~in our three strategic business segments (ACS, EMS~~increases of 2.7%, 2.1% and ~~PES)~~22.2%, ~~as well as from the net sales from our recent acquisitions, DeWAL and DSP.~~respectively. The ~~ACS operating segment had an~~ increase in net sales was primarily driven by favorable currency fluctuations of ~~10.6%~~$8.4 million, or 4.2%, due to ~~higher-end market~~the appreciation in value of the Euro and Renminbi relative to the U.S. dollar. Net sales were also favorably impacted by higher demand in ~~automotive, portable electronics,~~electric and ~~aerospace~~hybrid electric vehicles, renewable energy, mass transit and ~~defense~~variable frequency motor drives applications in the PES operating segment, partially offset by lower demand in portable electronics and wireless ~~and telecommunications applications. EMS had increased organic~~4G LTE applications in the ACS operating segment. The adoption of new accounting guidance for revenue recognition unfavorably impacted net sales in the second quarter of 2018 by $0.1 million.

Net sales increased by 5.9% in the first half of 2018, compared to the first half of 2017. The EMS and PES operating segments had net sales increases of 1.9% and 28.7%, while the ACS operating segment had a net sales decrease of 2.0%. The increase in net sales was primarily driven by favorable currency fluctuations of $17.8 million, or 4.4%, due to higher end-market demand in general industrial, portable electronics, automotive, and mass transit applications (21.4%), as well as from acquisitions (48.1%) for an overall increase of 69.5%. PES had increased net sales of 14.4% also due to higher end-market demand in mass transit, laser diode cooler, variable frequency motor drive, and renewable energy applications. Currency had a negative impact of 2.4% on total net sales, primarily as a result of the ~~depreciation~~appreciation in value of the ~~Renminbi~~Euro and ~~Euro~~Renminbi relative to the U.S. dollar.

~~On a year to date basis,~~ The adoption of new accounting guidance for revenue recognition favorably impacted net sales ~~increased by 27.4% from~~in the first half of ~~2016. The ACS operating segment net~~2018 by $3.8 million, or 0.9%. Net sales ~~increased 8.7%. The EMS operating segment net sales increased 67.7%~~were also favorably impacted by higher demand in electric and hybrid electric vehicles, renewable energy, mass transit and variable frequency motor drives applications in the PES operating segment, ~~net sales increased 17.6%. Both~~partially offset by lower demand in portable electronics and wireless 4G LTE applications in the ACS and PES had net sales increases from higher end-market demand, and EMS experienced higher net sales resulting from the acquisitions of DeWAL and DSP and organic net sales growth. Currency had a negative impact of 2.0% on total net sales, primarily as a result of the depreciation in value of the Renminbi and Euro relative to the U.S. dollar.

~~See “Segment Sales and Operations” below for further discussion on segment performance.~~

~~Gross Margin~~operating segment.

Gross margin as a percentage of net sales ~~increased 180~~decreased 430 basis points to 35.7% in the second quarter of 2018 compared to 40.0% in the second quarter of ~~2017 compared to 38.2% in the second quarter of 2016.~~2017. Gross margin in the second quarter of ~~2017~~2018 was ~~favorably~~unfavorably impacted by ~~an increase in net sales, and operational performance improvements driven by increased capacity utilization, operational process enhancements and automation, conversion~~lower absorption of fixed ~~cost structure to variable, benefits from low cost country manufacturing expansion,~~costs and ~~synergies from~~increased costs for copper commodities, facility consolidation and multi-site product qualification, including freight. The adoption of new accounting guidance for revenue recognition unfavorably impacted gross margin in the ~~recent acquisitions.~~second quarter of 2018 by a de minimis amount.

~~On a year to date basis, gross~~Gross margin as a percentage of net sales ~~increased by 170~~decreased 400 basis points to 35.7% in the first half of 2018 from 39.7% in the first half of ~~2017 from 38.0% in the first half of 2016.~~2017. Gross margin in the first half of ~~2017~~2018 was unfavorably impacted by lower absorption of fixed costs and increased costs for copper commodities, machine downtime, facility consolidation and multi-site product qualification, including freight. The adoption of new accounting guidance for revenue recognition favorably impacted gross margin in the first half of 2018 by ~~an increase in~~$1.2 million, or 0.3% as a percentage of net ~~sales, and~~sales.

operational performance improvements. The first quarter of 2017 included $1.6 million of expense for a non-recurring purchase accounting fair value adjustment for inventory related to the DeWAL and DSP acquisitions.


Selling, General and Administrative Expenses	Quarter Ended							Six Months Ended							Selling, General and Administrative Expenses
																Three Months Ended							Six Months Ended
(Dollars in thousands)	June 30, 2017			June 30, 2016			Percent Change	June 30, 2017			June 30, 2016			Percent Change		June 30, 2018			June 30, 2017			Percent Change	June 30, 2018			June 30, 2017			Percent Change
Selling, general and administrative expenses	$	39,567		$	34,369		15.1%	$	73,731		$	64,229		14.8%		$	42,540		$	40,012		6.3%	$	83,137		$	74,580		11.5%
Percentage of net sales	19.6		%	21.8		%		18.2		%	20.2		%			19.8		%	19.9		%		19.4		%	18.4		%

SG&A expenses increased ~~15.1%~~6.3% in the second quarter of ~~2017~~2018 from the second quarter of ~~2016,~~2017, primarily due ~~principally~~ to ~~$2.7~~a $2.1 million ~~of additional~~increase in sales and marketing investments to support future growth initiatives, a $0.9 million increase in severance expense, a $0.7 million increase in acquisition expenses, partially offset by a $1.2 million decrease in equity ~~and incentive~~ compensation ~~expense, $1.5 million of additional~~expense. SG&A ~~expenses from the operations of the acquired businesses and $1.4 million of additional intangible amortization and depreciation related to the acquisitions. SG&A declined~~decreased as a percent of net sales to ~~19.6%~~19.8% in the second quarter of ~~2017~~2018 from ~~21.8%~~19.9% in the second quarter of ~~2016, as a result of administrative cost containment activities.~~2017.

~~On a year to date basis,~~ SG&A expenses increased ~~14.8%, due principally to $2.6 million of additional SG&A expenses~~11.5% from the ~~operations~~first half of ~~the acquired businesses, $2.5~~2017, primarily due to a $4.2 million ~~of additional~~increase in sales and marketing investments to support future growth initiatives, a $1.9 million increase in severance expense, a $0.7 million increase in other intangible assets amortization, ~~and depreciation related to the acquisitions, $2.1~~a $0.5 million ~~of additional~~increase in equity ~~and incentive~~ compensation expense and ~~$2.1~~a $0.2 million ofincrease in acquisition ~~and integration related costs.~~expenses. SG&A ~~declined~~increased as a percent of net sales to ~~18.2% for the first half of 2017, from 20.2%~~19.4% in the first half of ~~2016, as a result~~2018 from 18.4% in the first half of ~~administrative cost containment activities.~~2017.


Research and Development Expenses	Quarter Ended							Six Months Ended							Research and Development Expenses
																Three Months Ended							Six Months Ended
(Dollars in thousands)	June 30, 2017			June 30, 2016			Percent Change	June 30, 2017			June 30, 2016			Percent Change		June 30, 2018			June 30, 2017			Percent Change	June 30, 2018			June 30, 2017			Percent Change
Research and development expenses	$	7,141		$	7,074		0.9%	$	14,102		$	13,622		3.5%		$	8,750		$	7,141		22.5%	$	16,884		$	14,102		19.7%
Percentage of net sales	3.5		%	4.5		%		3.5		%	4.3		%			4.1		%	3.5		%		3.9		%	3.5		%

R&D expenses increased ~~0.9%~~22.5% in the second quarter of ~~2017~~2018 from the second quarter of ~~2016,~~2017, and increased ~~3.5%~~19.7% in the ~~six months ended June 30, 2017~~first half of 2018 from ~~corresponding prior year period.~~the first half of 2017. The increases are due to ~~continued investments that are targeted at developing new platforms~~concerted efforts to realign our R&D organization to better fit the future direction of our Company, including dedicating resources to focus on current product extensions and ~~technologies focused on~~enhancements to meet our expected short-term and long-term growth initiatives at our innovation centers in the U.S. and Asia. Although R&D expenses as a percentage of net sales declined from the corresponding periods of the prior year, we expect the percentage to rebalance closer to historical levels as we integrate the new business.technology needs.

Other Operating Expenses (Income) Quarter Ended Six Months Ended
(Dollars in thousands) June 30, 2017 June 30, 2016 Percent Change June 30, 2017 June 30, 2016 Percent Change
Restructuring charges $ 1,079
$ —
100.0% $ 1,805
$ —
100.0%
Gain on sale of long-lived asset —
—
100.0% (942 ) —
100.0%



Restructuring and Impairment Charges and Other Operating Expenses (Income), Net
	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2018			June 30, 2017		Percent Change	June 30, 2018			June 30, 2017			Percent Change
Restructuring and impairment charges	$	541		$	1,079	(49.9)%	$	963		$	1,805		(46.6)%
Other operating (income) expense, net	(383		)	—		—%	(3,974		)	(942		)	321.9%

~~The~~We incurred restructuring charges ~~in the second quarter and the first six months of 2017 are~~ associated with the relocation of our global headquarters from Rogers, Connecticut to Chandler, ~~Arizona. These~~Arizona and the relocation of our Santa Fe Springs, California operations to the Company’s facilities in Carol Stream, Illinois and Bear, Delaware. We recognized $0.1 million and $0.5 million of restructuring charges ~~consist of severance expense and other costs~~ associated with ~~relocating employees~~the headquarters relocation and the facility consolidation in the second quarter of 2018, respectively, and $1.1 million of restructuring charges related to the ~~new location.~~headquarters relocation in the second quarter of 2017. We recognized $0.5 million and $0.5 million of restructuring charges associated with the headquarters relocation and facility consolidation in the first half of 2018, respectively, and $1.8 million of restructuring charges related to the headquarters relocation during the six months ended June 30, 2018. We did not recognize any restructuring charges related to the facility consolidation in the three and six months ended June 30, 2017. We estimate that approximately $1.0 million of additional costs will be incurred in the second half of 2018, with $0.5 million of remaining costs expected to be incurred in 2019.

In the second quarter of 2018, we recognized other operating income of $0.4 million as a result of the sale of a building and a parcel of land in Arizona that had been classified as held for sale as of June 30, 2017. Additionally, in the first ~~quarter~~half of 2018, we recorded a gain from the settlement of antitrust litigation in the amount of $3.6 million. In the first half of 2017, we ~~completed~~recognized other operating income of $0.9 million as a result of the ~~planned~~ sale of a parcel of land in Belgium that had been classified as held for sale as of December 31, 2016. ~~We recognized a gain on sale of approximately $0.9 million during the six months ended June 30, 2017.~~


Equity Income in Unconsolidated Joint Ventures	Quarter Ended					Six Months Ended					Equity Income in Unconsolidated Joint Ventures
												Three Months Ended					Six Months Ended
(Dollars in thousands)	June 30, 2017		June 30, 2016		Percent Change	June 30, 2017		June 30, 2016		Percent Change		June 30, 2018		June 30, 2017		Percent Change	June 30, 2018		June 30, 2017		Percent Change
Equity income in unconsolidated joint ventures	$	966	$	708	36.4%	$	1,976	$	1,321	49.6%		$	1,804	$	966	86.7%	$	2,811	$	1,976	42.3%

Equity income in unconsolidated joint ventures increased ~~36.4%~~86.7% in the second quarter of ~~2017~~2018 from the second quarter of ~~2016,~~2017, and ~~year to date~~ increased ~~49.6%.~~42.3% in the first half of 2018 from the first half of 2017. The increases were due to higher demand, primarily in ~~the~~ portable electronics ~~market.~~applications.


Other Income (Expense), Net	Quarter Ended						Six Months Ended						Other Income (Expense), Net
														Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2017			June 30, 2016		Percent Change	June 30, 2017		June 30, 2016			Percent Change		June 30, 2018			June 30, 2017		Percent Change	June 30, 2018		June 30, 2017		Percent Change
Other income (expense), net	$	(185	)	$	191	(196.9)%	$	530	$	(356	)	248.9%		$	(34	)	$	260	(113.1)%	$	32	$	1,379	(97.7)%

Other ~~expense~~income (expense), net decreased 113.1% in the second quarter of 2018 from the second quarter of 2017, ~~was primarily attributable~~and decreased 97.7% in the first half of 2018 from the first half of 2017. The decreases were due to ~~unfavorable~~declines in the value of our copper derivatives partially offset by favorable changes in foreign currency transaction ~~costs of $0.3 million, compared to favorable foreign currency transaction costs of $0.2 million~~costs.



Interest Expense, Net
	Three Months Ended							Six Months Ended
(Dollars in thousands)	June 30, 2018			June 30, 2017			Percent Change	June 30, 2018			June 30, 2017			Percent Change
Interest expense, net	$	(1,292	)	$	(1,947	)	(33.6)%	$	(2,503	)	$	(3,195	)	(21.7)%

Interest expense, net, decreased by 33.6% in the second quarter of ~~2016.~~

In2018 from the second quarter of 2017, and by 21.7% in the first half of 2018 from the first half of 2017, ~~other income was attributable~~due to gains of $0.3 million compared to expenses of $0.1 million in the first half of 2016, primarily related to the value of the copper derivative contracts. In the first half of 2016, we recorded an additional loss related to the sale of the Arlon polimide and thermoset laminate business of $0.2 million.

Interest Expense, Net Quarter Ended Six Months Ended
(Dollars in thousands) June 30, 2017 June 30, 2016 Percent Change June 30, 2017 June 30, 2016 Percent Change
Interest expense, net $ (1,947 ) $ (1,115 ) 74.6% $ (3,195 ) $ (2,236 ) 42.9%

~~Interest expense, net, increased by 74.6% in the second quarter of 2017~~lower average outstanding balances on our credit facilities resulting from the ~~second quarter~~discretionary payments of 2016, and by 42.9% in the first half of 2017 from the first half of 2016. This increase was primarily due to the additional $166.0 million of debt incurred for the DeWAL and DSP acquisitions. As explained in “Liquidity, Capital Resources and Financial Position” below, however, we made a $50.0 million ~~discretionary payment~~and $60.0 million, during the second ~~quarter~~and third quarters of 2017, respectively, to reduce our outstanding borrowings under our credit facility. We expect interest expense to increase during the remainder of the year as a result of the $82.5 million increase in borrowings under our credit facility to ~~$191.2 million, as~~fund the acquisition of ~~June 30, 2017.~~Griswold in July 2018.


Income Taxes	Quarter Ended							Six Months Ended							Income Taxes
																Three Months Ended							Six Months Ended
(Dollars in thousands)	June 30, 2017			June 30, 2016			Percent Change	June 30, 2017			June 30, 2016			Percent Change		June 30, 2018			June 30, 2017			Percent Change	June 30, 2018			June 30, 2017			Percent Change
Income tax expense	$	10,697		$	13,163		(18.7)%	$	23,583		$	21,280		10.8%		$	8,373		$	10,697		(21.7)%	$	13,144		$	23,583		(44.3)%
Effective tax rate	33.9		%	71.0		%		33.0		%	51.2		%			32.6		%	33.9		%		23.2		%	33.0		%

Our effective income tax rate was ~~33.9%~~32.6% and ~~71.0%~~33.9% for the three months ended June 30, 2018 and 2017, respectively. The decrease was primarily due to a lower U.S. effective tax rate, as a result of U.S. tax reform, and ~~2016, respectively.~~changes in pretax mix across jurisdictions with disparate tax rates, partially offset by an increase in current year accruals for uncertain tax positions. Our effective income tax rate was ~~33.0%~~23.2% and ~~51.2%~~33.0% for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The decrease ~~compared to the same periods in 2016,~~ was primarily due to ~~withholding taxes on off-shore cash movements and the change~~a lower U.S. effective tax rate, as a result of U.S. tax reform, changes in ~~our assertion that certain foreign earnings are permanently reinvested recorded in 2016,~~pretax mix across jurisdictions with disparate tax rates, excess tax deductions on ~~stock based~~equity compensation, ~~recognized in 2017~~R&D credits and a ~~decrease in current year accrual~~release of reserves for uncertain tax positions, partially offset ~~a decrease~~by an increase in ~~reversal of reserves associated with~~current year accruals for uncertain tax positions.

Segment Sales and Operations

Advanced Connectivity Solutions


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollars in millions)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
(Dollars in thousands)									June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	$	74.3	$	67.2	$	152.9	$	140.6	$	76,376	$	74,340	$	149,831	$	152,882
Operating income	$	13.2	$	10.8	$	32.9	$	26.7	$	10,594	$	12,997	$	18,496	$	32,495

The ACS operating segment is comprised of high frequency circuit material products used for making circuitry that receives, processes and transmits high frequency communications signals, in a wide variety of ~~markets~~applications and ~~applications,~~markets, including wireless communications, ~~automotive,~~wired infrastructure, high reliability, ~~wired infrastructure, aerospace and defense, and consumer applications, among others.~~

~~Q2 2017 versus Q2 2016~~

~~ACS experienced continued growth in~~ automotive ~~portable electronics,~~radar, and aerospace and defense, ~~applications, offset in part by lower wireless infrastructure demand. Net~~among others.

Q2 2018 versus Q2 2017

ACS net sales ~~in this segment~~ increased by ~~10.6%~~2.7% in the second quarter of ~~2017~~2018 compared to the second quarter of ~~2016.~~2017. The increase was primarily driven by favorable currency fluctuations of $1.9 million, or 2.5%, due to the appreciation in ~~net sales over~~value of the ~~second~~ ~~quarter of 2016 was favorably impacted by demand growth in automotive radar applications for Advanced Driver Assistance Systems (73%), portable electronics (76%),~~Euro and ~~aerospace and defense applications (8%),~~Renminbi relative to the U.S. dollar, partially offset by lower demand in ~~the~~portable electronics and wireless ~~telecom market for~~ 4G LTE ~~applications (-7%).~~applications. Net sales ~~were unfavorably impacted by 1.3% due to currency fluctuations, primarily as a result~~increased in aerospace and defense and automotive radar applications, while net sales decreased in portable electronics and wireless 4G LTE applications. The adoption of ~~the depreciation in value of the Renminbi and Euro relative to the U.S. dollar.~~

~~Operating income increased by 22.2%~~new accounting guidance for revenue recognition did not impact ACS net sales in the second quarter of ~~2017~~2018.

Operating income decreased by 18.5% in the second quarter of 2018 from the second quarter of ~~2016.~~2017. As a percentage of net sales, operating income in the second quarter of ~~2017~~2018 was ~~17.8%~~13.9%, a ~~170~~360 basis point ~~increase~~decrease as compared to the ~~16.1%~~17.5% reported in the second quarter of ~~2016. This increase~~2017. The decrease in operating income is ~~primarily~~ due to ~~the higher net sales previously noted~~increased costs for copper commodities and multi-site product qualification, including freight, as well as ~~lower costs~~higher overhead from ~~continued operational efficiencies and cost reduction initiatives.~~strategic investments in infrastructure. The adoption of new accounting guidance for revenue recognition did not impact ACS operating income in the second quarter of 2018.

YTD ~~2017~~2018 versus YTD ~~2016~~2017

~~On a year to date basis,~~ ACS ~~experienced growth in automotive, aerospace and defense applications, offset in part~~net sales decreased by ~~lower wireless infrastructure demand. Net sales in this segment increased by 8.7%~~2.0% in the first half of ~~2017~~2018 compared to the first half of ~~2016.~~2017. The ~~increase~~decrease in net sales iswas primarily driven ~~by demand growth in automotive radar applications (54%), and aerospace and defense programs (11%), partially offset~~ by lower demand in ~~the~~portable electronics and wireless ~~telecom market for~~ 4G LTE applications, ~~(-7%). Net sales were unfavorably impacted~~partially offset by ~~1.2%~~favorable currency fluctuations of $3.7 million, or 2.4%, due to ~~currency fluctuations, primarily as a result of~~ the ~~depreciation~~appreciation in value of the ~~Renminbi~~Euro and ~~Euro~~Renminbi relative to the U.S. dollar.

~~Operating income improved by 23.2%~~ Net sales increased in aerospace and defense and automotive radar applications, while net sales decreased in wireless 4G LTE and portable electronics applications. The adoption of new accounting guidance for revenue recognition did not impact ACS net sales in the first half of ~~2017~~2018.

Operating income decreased by 43.1% in the first half of 2018 from the first half of ~~2016.~~2017. As a percentage of net sales, the first half of ~~2017~~2018 operating income was ~~21.5%~~12.3%, ~~a 250~~an 900 basis point ~~increase~~decrease as compared to the ~~19.0%~~21.3% reported in the first half of ~~2016. This increase~~2017. The decrease in operating income is ~~primarily~~ due to ~~the higher~~lower net sales, increased costs for copper commodities and multi-site product qualification, including freight, lower capacity utilization due to process issues and machine downtime, unfavorable absorption of fixed costs, as well as ~~lower costs from continued operational efficiencies~~investments in sales and ~~cost reduction~~marketing to support future growth initiatives.

The adoption of new accounting guidance for revenue recognition did not impact ACS operating income in the first half of 2018.

Elastomeric Material Solutions


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollars in millions)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
(Dollars in thousands)									June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	$	77.6	$	45.8	$	154.4	$	92.1	$	79,216	$	77,585	$	157,299	$	154,434
Operating income	$	14.1	$	5.3	$	27.0	$	10.7	$	8,421	$	13,934	$	22,581	$	26,724

The EMS operating segment is comprised of polyurethane and silicone foam products, which are sold into a wide variety of applications and markets, including general industrial, portable electronics, automotive, mass transit and consumer applications. In ~~November 2016,~~July 2018, we ~~completed the acquisition of DeWAL,~~acquired Griswold, a leading manufacturer of polytetrafluoroethylene, ultra-high molecular weight polyethylene films, pressure sensitive tapes and specialty products for the industrial, aerospace, automotive, and electronics markets. In January 2017, we acquired the principal operating assets of DSP, a custom silicone product development and manufacturing business, serving a wide range of ~~high reliability applications.~~high-performance engineered cellular elastomer and microcellular polyurethane products and solutions. We are in the process of integrating ~~DeWAL and DSP~~Griswold into ~~our~~the EMS operating segment.

Q2 ~~2017~~2018 versus Q2 ~~2016~~2017

EMS ~~experienced organic~~ net sales ~~growth in the quarter, as well as growth from net sales stemming from our DeWAL and DSP acquisitions. Net sales in this segment~~ increased by ~~69.5%~~2.1% in the second quarter of ~~2017~~2018 compared to the second quarter of ~~2016.~~2017. The increase in net sales over the second quarter of 2017 was primarily driven by ~~the acquisitions~~favorable currency fluctuations of ~~DeWAL and DSP (48.1%)~~$2.0 million, or 2.6%, as well as an increase in organic net sales (21.4%). Organically, EMS experienced higher demand in general industrial (30%), portable electronics (24%), automotive (51%) and mass transit (5%) applications. Net sales were unfavorably impacted by 2.1% due to ~~currency fluctuations, primarily as a result of~~ the ~~depreciation~~appreciation in value of the ~~Renminbi~~Euro and ~~Euro~~Renminbi relative to the U.S. dollar.

~~Operating income~~ Net sales increased ~~by 166.0%~~in portable electronics, consumer, automotive and mass transit applications, while net sales decreased in general industrial applications. The adoption of new accounting guidance for revenue recognition favorably impacted EMS net sales in the second quarter of ~~2017~~2018 by $0.1 million, or 0.1%.

Operating income decreased by 39.6% in the second quarter of 2018 from the second quarter of ~~2016.~~2017. As a percentage of net sales, second quarter of ~~2017~~2018 operating income was ~~18.2%~~10.6%, a ~~660~~740 basis point ~~increase~~decrease as compared to the ~~11.6%~~18.0% reported in the second quarter of ~~2016. This increase~~2017. The decrease in operating income is primarily due to ~~the higher net sales attributable~~increased costs for raw materials, and increased freight costs related to ~~growth from acquisitions~~capacity optimization and ~~organic growth,~~facility consolidation, unfavorable absorption of fixed costs, as well as ~~lower costs from continued operational efficiencies, partially offset~~investments in sales and marketing to support future growth initiatives. The adoption of new accounting guidance for revenue recognition favorably impacted EMS operating income in the second quarter of 2018 by ~~increases in intangible amortization and depreciation expense of $1.4~~a $0.0 million, ~~related to the DeWAL and DSP acquisitions.~~or 0.2%.

YTD ~~2017~~2018 versus YTD ~~2016~~2017

~~On a year to date basis,~~ EMS ~~experienced strong~~ net sales ~~growth from the added net sales of the DeWAL and DSP acquisitions, as well as organically. Net sales in this segment~~ increased by ~~67.7%~~1.9% in the first half of ~~2017~~2018 compared to the first half of ~~2016.~~2017. The increase in net sales iswas primarily driven by ~~the acquisitions~~favorable currency fluctuations of ~~DeWAL and DSP (48.6%)~~$4.0 million, or 2.6%, as well as an increase in organic net sales (19.1%). Organically, EMS experienced higher demand in portable electronics (29%), general industrial (19%), automotive (50%), and mass transit (17%) applications. Net sales were unfavorably impacted by 1.7% due to ~~currency fluctuations, primarily as a result of~~ the ~~depreciation~~appreciation in value of the ~~Renminbi~~Euro and ~~Euro~~Renminbi relative to the U.S. dollar.

~~Operating income improved by 152.3%~~ Net sales increased in portable electronics, consumer and automotive applications, while net sales decreased in general industrial and mass transit applications. The adoption of new accounting guidance for revenue recognition favorably impacted EMS net sales in the first half of ~~2017~~2018 by $0.2 million, or 0.1%.

Operating income decreased by 15.5% in the first half of 2018 from the first half of ~~2016.~~2017. As a percentage of net sales, the first half of ~~2017~~2018 operating income was ~~17.5%~~14.4%, a ~~590~~290 basis point ~~increase~~decrease as compared to the ~~11.6%~~17.3% reported in the first half of ~~2016. This increase~~2017. The decrease in operating income is primarily due to ~~the higher net sales attributable to both acquisitions~~increased costs for raw materials and ~~organic growth,~~freight, unfavorable absorption of fixed costs, as well as ~~lower costs~~investments in sales and marketing to support future growth initiatives, partially offset by a $3.6 million gain on settlement from ~~continued operational efficiencies. Operating~~antitrust class action litigation, as discussed in Note 20, “Supplemental Financial Information.” The adoption of new accounting guidance for revenue recognition favorably impacted EMS operating income in the first half of ~~2017 included $1.6~~2018 by $0.0 million, of expense for a non-recurring purchase accounting fair value adjustment for inventory related to the DeWAL and DSP acquisitions in addition to $2.1 million of acquisition and integration costs. The first half of 2017 also includes increased intangible amortization and depreciation expense of $2.5 million related to the DeWAL and DSP acquisitions. Despite these expenses, operating income increased due to higher net sales and ongoing operational excellence initiatives.

or 0.2%.

Power Electronics Solutions


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollars in millions)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
(Dollars in thousands)									June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	$	43.9	$	38.4	$	86.6	$	73.6	$	53,647	$	43,905	$	111,360	$	86,557
Operating income	$	3.7	$	0.5	$	8.6	$	1.8	$	4,239	$	3,560	$	11,260	$	8,404

The PES operating segment is comprised of two product lines - curamik^® direct-bonded copper (DBC) substrates that are used primarily in the design of intelligent power management devices, such as IGBT (insulated gate bipolar transistor) modules that enable a wide range of products including highly efficient industrial motor drives, wind and solar energy converters and electrical systems in automobiles, and ROLINX^® busbars that are used primarily in power distribution systems products in electric and hybrid electric vehicles and clean technology applications.

Q2 ~~2017~~2018 versus Q2 ~~2016~~2017

PES ~~experienced~~ net sales ~~growth~~increased by 22.2% in the second quarter of ~~2017 across key markets, as compared to~~2018 from the second quarter of ~~2016.~~2017. Net sales increased in ~~this segment increased by 14.4%~~electric and hybrid electric vehicles, renewable energy, mass transit and variable frequency motor drives applications, primarily due to higher demand. The adoption of new accounting guidance for revenue recognition favorably impacted PES net sales in the second quarter of ~~2017 from the second quarter of 2016. Net sales were positively impacted~~2018 by ~~higher demand for mass transit (36%), laser diode cooler applications (35%), variable frequency motor drives (6%), and renewable energy (15%)~~$0.4 million, or 0.8%. Net sales were ~~unfavorably~~also impacted by ~~4.7%~~favorable currency fluctuations of $4.3 million, or 9.8%, due to ~~currency fluctuations, primarily as a result of~~ the ~~depreciation~~appreciation in value of the Euro and Renminbi relative to the U.S. dollar.

Operating income for the quarter increased by ~~640.0%~~19.1% in the second quarter of ~~2017~~2018 from the second quarter of ~~2016.~~2017. As a percentage of net sales, second quarter of ~~2017~~2018 operating income was ~~8.4%~~7.9%, a ~~710~~20 basis point ~~increase~~decrease as compared to the ~~1.3%~~8.1% reported in the second quarter of ~~2016. This~~2017. The increase in operating income is primarily due to higher net sales from increased demand, partially offset by a provision for a commercial settlement, capacity optimization and ~~increased equipment utilization, supply chain volume discounts,~~facility consolidation efforts, as well as investments in sales and ~~improved productivity from operational excellence~~marketing to support future growth initiatives. The adoption of new accounting guidance for revenue recognition PES operating income in the second quarter of 2018 by $0.1 million, or 3.3%.

YTD ~~2017~~2018 versus YTD ~~2016~~2017

~~Net~~PES net sales ~~in this segment~~ increased by ~~17.6%~~28.7% in the first half of ~~2017~~2018 from the first half of ~~2016.~~2017. Net sales ~~increase was driven by higher demand for laser diode cooler applications (55%),~~increased in electric and hybrid electric vehicles, renewable energy, ~~(22%),~~mass transit and variable frequency motor drives ~~(8%), hybrid electric vehicles (18%), and mass transit (24%)~~applications, primarily due to higher demand. The adoption of new accounting guidance for revenue recognition favorably impacted PES net sales in the first half of 2018 by $4.6 million, or 5.4%. Net sales were ~~unfavorably~~also impacted by ~~3.8%~~favorable currency fluctuations of $9.6 million, or 11.1%, due to ~~currency fluctuations, primarily as a result of~~ the ~~depreciation~~appreciation in value of the Euro and Renminbi relative to the U.S. dollar.

Operating income increased ~~377.8%~~34.0% in the first half of ~~2017~~2018 from the first half of ~~2016.~~2017. As a percentage of net sales, the first half of ~~2017~~2018 operating income was ~~9.9%~~10.1%, a ~~750~~40 basis point increase as compared to the ~~2.4%~~9.7% reported in the first half of ~~2016. This~~2017. The adoption of new accounting guidance for revenue recognition favorably impacted PES operating income in the first half of 2018 by $1.5 million, or 17.7%. The increase in operating income is ~~primarily~~also due to higher net sales from increased demand, partially offset by a provision for a commercial settlement, process issues, capacity optimization and ~~increased equipment utilization, supply chain volume discounts,~~facility consolidation efforts, as well as investments in sales and ~~improved productivity from operational excellence~~marketing to support future growth initiatives.

Other


	Quarter Ended				Six Months Ended				Three Months Ended				Six Months Ended
(Dollars in millions)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
(Dollars in thousands)									June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales	$	5.6	$	6.1	$	11.4	$	11.8	$	5,436	$	5,594	$	10,796	$	11,379
Operating income	$	1.8	$	2.1	$	3.7	$	3.7	$	1,970	$	1,823	$	3,932	$	3,728

~~Our~~The Other operating segment consists of our elastomer rollers and floats business, as well as our inverter distribution business.

Q2 ~~2017~~2018 versus Q2 ~~2016~~2017

Net sales in this segment decreased by ~~8.9%~~2.8% in the second quarter of ~~2017~~2018 from the second quarter of ~~2016, and~~2017. The decrease in net sales over the second quarter of 2017 was primarily driven by the adoption of new accounting guidance for revenue recognition, which resulted in a $0.6 million unfavorable impact, or 10.0%. Currency fluctuations had a ~~negative currency~~$0.2 million favorable impact on net sales during the second quarter of ~~2.0%, primarily as a result of~~2018 due to the ~~depreciation~~appreciation in value of the Euro and Renminbi relative to the U.S. dollar.

Operating income ~~decreased 14.3%~~increased 8.1% in the second quarter of ~~2017~~2018 compared to the second quarter of ~~2016.~~2017. As a percentage of net sales, second quarter of 2018 operating income ~~decreased~~was 36.2%, a 360 basis point increase as compared to ~~32.1%~~the 32.6% reported in the second quarter of ~~2017 from 34.4%~~2017. This increase was primarily driven by operational improvements and efficiency initiatives. Operating income in the second quarter of ~~2016. This decrease~~2018 was ~~primarily driven~~unfavorably impacted by ~~lower net sales.~~$0.2 million, or 9.8%, from the adoption of new accounting guidance for revenue recognition.

YTD ~~2017~~2018 versus YTD ~~2016~~2017

Net sales in this segment decreased by ~~3.2%~~5.1% in the first half of ~~2017~~2018 from the first half of ~~2016,~~2017. The decrease in net sales is primarily driven by the adoption of new accounting guidance for revenue recognition, which resulted in a $1.0 million unfavorable impact, or 8.5%. Currency fluctuations had a $0.5 million favorable impact on net sales during the first half of 2018 due to ~~a negative currency impact of 2.0% resulting from an increase~~the appreciation in ~~the~~ value of the Euro and Renminbi relative to the U.S. dollar.

Operating income increased by 5.5% in the first half of ~~2017~~2018 from the first half of 2017. As a percentage of net sales, second quarter of 2018 operating income was ~~flat~~36.4%, a 360 basis point increase as compared to the 32.8% reported in the second quarter of 2017. This increase is primarily due to operational improvements and efficiency initiatives. Operating income in the first half of ~~2016. This~~2018 was ~~due to lower net sales offset~~unfavorably impacted by $0.3 million, or 8.3%, from the ~~impact~~adoption of ~~continuing operating efficiencies.~~new accounting guidance for revenue recognition.

Liquidity, Capital Resources and Financial Position

~~We believe that our ability to generate cash from operations to reinvest in our business is one of our fundamental strengths.~~ We believe that our existing sources of liquidity and cash flows that are expected to be generated from our operations, together with our available credit facilities, will be sufficient to fund our operations, currently planned capital expenditures, research and development efforts and our debt service commitments. We ~~continually~~regularly review and evaluate the adequacy of our cash flows, borrowing facilities and banking relationships seeking to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives.


(Dollars in thousands)	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Key Balance Sheet Accounts:
Cash and cash equivalents	$	177,312	$	227,767	$	174,700	$	181,159
Accounts receivable, net	$	136,993	$	119,604	$	148,727	$	140,562
Contract assets					$	21,933	$	—
Inventories	$	102,549	$	91,130	$	117,739	$	112,557
Outstanding borrowing on credit facilities (short term and long term)	$	191,188	$	241,188
Borrowings under credit facility					$	130,982	$	130,982

Six Months Ended
(Dollars in thousands)
June 30, 2017 June 30, 2016
Key Cash Flow Measures:

Cash provided by operating activities $ 64,489
$ 51,304
Cash used in investing activities $ (67,324 ) $ (9,992 )
Cash used in financing activities $ (51,637 ) $ (4,229 )

~~At the end~~As of ~~the second quarter of 2017,~~June 30, 2018, cash and cash equivalents were ~~$177.3~~$174.7 million as compared to ~~$227.8~~$181.2 million ~~at the end~~as of ~~2016,~~December 31, 2017, a decrease of ~~$50.5~~$6.5 million, or ~~22.2%~~3.6%. This decrease was primarily due ~~primarily~~ to ~~our use of $60.2 million for the acquisition of DSP, a $50.0 million discretionary principal payment on our outstanding credit facility, and $9.7~~$20.2 million in capital expenditures, $6.4 millionin tax payments related to net share settlement of equity awards and$3.0 millionin repurchases of capital stock, partially offset by ~~strong~~ cash generated by ~~operations.~~operations during the first half of 2018. We financed our acquisition of Griswold with $82.5 million in borrowings under our revolving credit facility in July 2018. As a result, borrowings under our credit facility will increase in the third quarter of 2018.

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


(Dollars in thousands)	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
U.S.	$	19,467	$	95,481
United States					$	33,987	$	35,653
Europe	54,799		37,791		43,386		41,307
Asia	103,046		94,495		97,327		104,199
Total cash and cash equivalents	$	177,312	$	227,767	$	174,700	$	181,159

~~Cash~~Approximately $140.7 million of our cash and cash equivalents were held ~~in certain foreign locations~~by non-U.S. subsidiaries as of June 30, 2018. As a result of U.S. tax reform, unremitted earnings as of December 31, 2017 were subjected to U.S. tax through the transition tax, but a portion could be subject to additional foreign income taxes if ~~we repatriate such amounts back to~~they are redeployed outside of their country of origin. With the U.S. or offshore subsidiaries. In 2016, as a result of certain internal restructuring transactions effectuated to more closely align our foreign subsidiaries from an operational, legal and geographic perspective and improve management of financial resources, we changed our estimate of the amount of foreign subsidiary earnings considered permanently reinvested. Undistributed earningsexception of certain of our Chinese subsidiaries, we have historically asserted and continue to assert that foreign earnings are ~~no longer considered~~ indefinitely ~~reinvested and may be distributed to other offshore subsidiaries. We~~reinvested. While we have not changed our assertion with respect to ~~distributions~~foreign earnings compared to prior years, we are currently evaluating the impact of U.S. tax reform on our global structure and any associated impacts it may have on our assertion on a go forward basis, and as such have not changed our assertion with respect to distribution of earnings that would require the accrual of ~~U.S.~~additional deferred income ~~tax.~~taxes.

Significant changes in our balance sheet accounts from December 31, ~~2016~~2017 to June 30, ~~2017~~2018 were as follows:

Accounts receivable increased ~~14.5%~~5.8% to ~~$137.0~~$148.7 million as of June 30, ~~2017,~~2018, from ~~$119.6~~$140.6 million at December 31, ~~2016.~~2017. The increase from ~~year end~~year-end was primarily due to higher net sales inat the end of the second quarter of ~~2017, in comparison with~~2018 compared to at the ~~fourth quarter~~end of ~~2016. Additionally, accounts receivable increased by $3.4~~the 2017.

We recorded contract assets of $21.9 million as of June 30, ~~2017 due~~2018 related to the ~~acquisition~~adoption of ~~DSP~~ASU 2014-09. See further discussion in ~~January 2017.~~Note 19, “Revenue from Contracts with Customers” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Inventory increased ~~12.5%~~4.6% to ~~$102.5~~$117.7 million as of June 30, ~~2017,~~2018, from ~~$91.1~~$112.6 million at December 31, ~~2016~~2017, primarily as a result of inventory buildup to meet future demand in anticipation of ~~increased demand in~~long supply lead times, supplier transition and planned machinery downtime, partially offset by the ~~second half of 2017 within our EMS and PES segments. Additionally, inventory increased $2.1 million due to the acquisition of DSP in January 2017.~~

~~Deferred income tax assets increased 34.3% to $19.7 million as of June 30, 2017,~~impact from ~~$14.6 million at December 31, 2016. The increase is primarily due to the recognition of $12.7 million in deferred tax assets previously not recognized in accordance with~~ the adoption of new accounting guidance ~~offset by $7.9 million decrease~~for revenue recognition. See discussion in ~~deferred tax assets in the U.S. associated~~Note 19, “Revenue from Contracts with ~~tax credit utilization~~Customers.”

Accrued employee benefits and ~~timing differences.~~

~~Goodwill increased 11.4%~~compensation decreased to ~~$232.2~~$26.1 million as of June 30, ~~2017,~~2018, from ~~$208.4~~$39.4 million at December 31, ~~2016. The increase~~2017. This decrease is primarily due to incentive compensation payouts of $18.2 million that occurred in the ~~acquisition~~first half of ~~DSP in January 2017.~~2018, partially offset by $3.6 million of accruals for projected incentive compensation payouts for the current performance year.

~~Other intangible assets increased 22.4% to $167.2~~

During the six months ended June 30, 2018, we repurchased 23,138 shares of our capital stock for $3.0 million asunder a $100.0 million share repurchase program approved by our Board of Directors on August 6, 2015. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice. As of June 30, ~~2017,~~2018, $49.0 million remained for repurchase under our share repurchase program. All purchases were made using cash from ~~$136.7 million at December 31, 2016. This overall increase is due to the acquisition of DSP in January 2017.~~operations.

On February 17, 2017, we entered into ~~the Third Amended and Restated Credit Agreement~~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 amended and restated the Second Amended Credit Agreement. The Third Amended Credit Agreement refinanced the Second Amended Credit Agreement, eliminated the term loan under the Second Amended Credit Agreement, and increased the principal amount of ~~the~~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. ~~All revolving loans under~~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~~Agreement).

All revolving loans are due on the maturity date, February 17, 2022. We are not required to make any quarterly principal payments under the Third Amended Credit Agreement. ~~During the second quarter of 2017, we made a discretionary principal payment of $50.0 million to reduce the amount outstanding on our credit facility.~~ As of June 30, ~~2017,~~2018, we ~~had $191.2~~have $131.0 million in outstanding borrowings under our credit facility.

~~The~~Our Third Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our leverage ratio does not exceed 2.75 to 1.00. If our leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our leverage ratio did not exceed 2.75 to 1.00 as of June 30, ~~2017.~~2018.

During the second quarter of ~~2017,~~2018, there were not any material new developments related to our capital ~~lease.~~leases. Refer to Note 12, - “Debt” ~~of Notes~~ to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion on liquidity matters.

Contingencies

During the second quarter of ~~2017,~~2018, we did not become aware of any material new developments related to environmental matters or other contingencies or incur any material costs or capital expenditures related to environmental matters. Refer to Note 14, - “Commitments and Contingencies” ~~of Notes~~ to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion on ongoing environmental and other contingencies.

Off-Balance Sheet Arrangements

As of June 30, ~~2017,~~2018, we did not have any off-balance sheet arrangements that have or are, in the opinion of management, likely to have a current or future material effect on our financial condition or results of operations.

Critical Accounting Policies

~~There were no material changes~~Revenue Recognition

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. With the adoption of ASU 2017-09, 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 ~~critical accounting policies during~~shipping terms permit us to recognize revenue at point of shipment. Some shipping terms require the ~~second quarter~~goods to be 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 ~~2017.~~

the transaction price.

Recent Accounting Pronouncements

See Note ~~19 -~~21, “Recent Accounting Standards” ~~of Notes~~ to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for discussion of recent accounting pronouncements including ~~the respective~~ expected dates of adoption.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no ~~significant~~material changes in our exposure to market risk during the second quarter of ~~2017.~~2018. For discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, contained in our Annual Report.


Item 4.	Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company, with the participation of our Chief Executive Officer and ~~Chief~~Principal Financial Officer, conducted an evaluation of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of June 30, ~~2017.~~2018. The Company’s disclosure controls and procedures are designed (i) to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is accumulated and communicated to its management, including its Chief Executive Officer and ~~Chief~~Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our Chief Executive Officer and ~~Chief~~Principal Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, ~~2017.~~2018.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting during its most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. This evaluation excluded the operations of DeWAL Industries LLC, which we acquired on November 23, 2016 and Diversified Silicone Products, Inc., which we acquired on January 6, 2017. As part of the ongoing integration activities for both acquisitions, we are completing an assessment of DeWAL’s and DSP’s existing controls and incorporating our controls and procedures into the acquired operations, as appropriate.

Part II - Other Information


Item 1.	Legal Proceedings

See a discussion of environmental, asbestos and other litigation matters in Note 14, - “Commitments and Contingencies,” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.


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

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



(Dollars in thousands, except per share amounts)
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
March 1, 2018 to March 31, 2018	23,138	$	129.62	23,138	$	49,013
April 1, 2018 to April 30, 2018	—	$	—	—	$	49,013
May 1, 2018 to May 31, 2018	—	$	—	—	$	49,013
June 1, 2018 to June 30, 2018	—	$	—	—	$	49,013

During the six months ended June 30, 2018, we repurchased 23,138 shares of our capital stock for $3.0 million under a $100.0 million share repurchase program approved by our Board of Directors in 2015. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice. As of June 30, 2018, $49.0 million remained for repurchase under the share repurchase program. All repurchases were made using cash from operations. Our share repurchases may occur from time to time through open market purchases, privately negotiated transactions or plans designed to comply with Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended.

Item 6. Exhibits



List of Exhibits:

3.1	Restated Articles of Organization of Rogers Corporation, as amended, incorporated by reference to Exhibit 3a to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the 2006 Form 10-K) (File No. 001-04347).

3.2	Amended and Restated Bylaws of Rogers Corporation, effective February 11, 2016, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 26, 2016.

31.1	Certification of President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2	Certification of ~~Vice President, Finance and Chief~~Principal Financial Officer ~~(Principal Financial Officer)~~ pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32	Certification of President and Chief Executive Officer (Principal Executive Officer) and ~~Vice President, Finance and Chief~~Principal Financial Officer ~~(Principal Financial Officer)~~ pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101	The following materials from Rogers Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, ~~2017~~2018 formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, (iii) Condensed Consolidated Statements of Financial Position at June, 30 ~~2017~~2018 and December 31, ~~2016,~~2017, (iv) ~~Condensed Consolidated Statement of Shareholders’ Equity at June 30, 2017 and December 31, 2016, (v)~~ Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2017~~2018 and June 30, ~~2016~~2017 and ~~(vi)~~(v) Notes to Condensed Consolidated Financial Statements.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ROGERS CORPORATION

(Registrant)



/s/ ~~Janice E. Stipp~~Mark Weaver
~~Janice E. Stipp~~ ~~Senior~~ Mark Weaver Vice President, ~~Finance and Chief Financial Officer,~~ Principal Financial Officer, Chief Accounting Officer and ~~Principal Accounting Officer~~Corporate Controller

Dated: ~~August 1, 2017~~ July 31, 2018

4142



(Dollars in thousands)	Carrying amount as of June 30, 2017			Level 1		Level 2			Level 3
Foreign currency contracts	$	(312	)	$	—	$	(312	)	$	—
Copper derivative contracts	$	1,331		$	—	$	1,331		$	—
Interest rate swap	$	(622	)	$	—	$	(622	)	$	—



(Dollars in thousands)	Carrying amount as of December 31, 2016			Level 1		Level 2			Level 3
Foreign currency contracts	$	(170	)	$	—	$	(170	)	$	—
Copper derivative contracts	$	1,277		$	—	$	1,277		$	—



(Dollars in thousands)	January 6, 2017
Assets:
Accounts receivable	$	2,724
Prepaid expenses	21
Inventory	2,433
Property, plant & equipment	1,589
Intangible assets	35,860
Goodwill	17,793
Total assets	60,420

Liabilities:
Accounts payable	179
Accrued expenses	50
Total liabilities	229

Fair value of net assets acquired	$	60,191



(Dollars in thousands)	November 23, 2016
Assets:
Cash and cash equivalents	$	1,539
Accounts receivable	7,513
Other current assets	691
Inventory	9,915
Property, plant & equipment	9,932
Intangible assets	73,500
Goodwill	35,755
Other long-term assets	101
Total assets	138,946

Liabilities:
Accounts payable	2,402
Other current liabilities	1,062
Total liabilities	3,464

Fair value of net assets acquired	$	135,482



(Dollars in thousands)	Three months ended June 30, 2016		Six months ended June 30, 2016
Net sales	$	175,533	$	354,401
Net income	5,313		18,540



Other Operating Expenses (Income)	Quarter Ended					Six Months Ended
(Dollars in thousands)	June 30, 2017		June 30, 2016		Percent Change	June 30, 2017			June 30, 2016		Percent Change
Restructuring charges	$	1,079	$	—	100.0%	$	1,805		$	—	100.0%
Gain on sale of long-lived asset	—		—		100.0%	(942		)	—		100.0%