Stock-Based Compensation

Equity Compensation Awards

Stock Options

Stock options have been granted under various equity compensation plans. While we may grant options to employees that become exercisable at different times or within different periods, we have generally granted options to employees that vest and become exercisable in one-third increments on the 2^nd, 3^rd and 4^th anniversaries of the grant dates. The maximum contractual term for all options is normally ten years.

We use the Black-Scholes option-pricing model to calculate the grant-date fair value of an option. The fair value of options granted during the three and nine month periods ended September 30, 2012 and 2011 were calculated using the following weighted-average assumptions:



	Three Months Ended					Nine Months Ended
	September 30, 2012		September 30, 2011			September 30, 2012			September 30, 2011
Options granted	—		50,000			46,950			108,550
Weighted average exercise price	$	—	$	48.70		$	41.27		$	48.26
Weighted-average grant date fair value	—		21.33			19.08			21.86

Assumptions:
Expected volatility	—		48.17		%	47.70		%	46.54		%
Expected term (in years)	—		5.0			5.9			5.6
Risk-free interest rate	—		1.90		%	1.43		%	2.30		%
Expected dividend yield	—		—			—			—

Expected volatility – In determining expected volatility, we have considered a number of factors, including historical volatility and implied volatility.

Expected term – We use historical employee exercise data to estimate the expected term assumption for the Black-Scholes valuation.

Risk-free interest rate – We use the yield on zero-coupon U.S. Treasury securities for a period commensurate with the expected term assumption as its risk-free interest rate.

Expected dividend yield – We do not currently pay dividends on our common stock; therefore, a dividend yield of 0% was used in the Black-Scholes model.

In most cases, we recognize expense using the straight-line attribution method for stock option grants. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. We currently expect, based on an analysis of our historical forfeitures, an annual forfeiture rate of approximately 3% and applied that rate to the grants issued. This assumption will be reviewed periodically and the rate will be adjusted as necessary based on these reviews. Ultimately, the actual expense recognized over the vesting period will only be for those options that vest.

During the three and nine month periods ended September 30, 2012, we recognized approximately $0.4 million and $1.7 million of stock option compensation expense, respectively. During the three and nine month periods ended September 30, 2011, we recognized approximately $0.7 million and $2.0 million of stock option compensation expense, respectively.

A summary of the activity under our stock option plans as of September 30, 2012 and changes during the three and nine month periods then ended, is presented below:



	Options Outstanding		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Options outstanding at June 30, 2012	2,299,469		$	38.07	4.8	14,513,131
Options granted	—		—
Options exercised	(168,310	)	40.34
Options cancelled	(32,950	)	54.45
Options outstanding at September 30, 2012	2,098,209		38.74		4.6	15,874,392
Options exercisable at September 30, 2012	1,517,217		41.52		3.6	9,055,841
Options vested or expected to vest at September 30, 2012*	2,078,839		38.84		4.6	15,669,835

* In addition to the vested options, we expect a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.



	Options Outstanding		Weighted- Average Exercise Price Per Share
Options outstanding at December 31, 2011	2,401,809		$	37.54
Options granted	46,950		41.27
Options exercised	(284,801	)	39.99
Options cancelled	(65,749	)	43.31
Options outstanding at September 30, 2012	2,098,209

During the nine month period ended September 30, 2012, 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 $3.5 million, and the total amount of cash received from the exercise of these options was $7.9 million.

Performance-Based Restricted Stock

In 2006, we began granting performance-based restricted stock grants to certain key executives. These grants cliff vest at the end of the 3 year measurement period, except for grants to those individuals who are retirement eligible during the grant period as such awards are subject to accelerated vesting as the grant is earned over the course of the vesting period (i.e. a pro-rata payout occurs based on the retirement date). 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 ratably over the vesting period, unless the employee has an accelerated vesting schedule. Additionally, compensation expense is increased or decreased based on changes in the estimated pay out percentages each quarter. The fair value of the award is determined based on the market value of the underlying stock price at the grant date.

Actual performance during the relevant period for the 2009 grant, which vested as of December 31, 2011, met the target performance criteria and shares were paid out at 97.4% of target during the first quarter of 2012.



	Performance Based Restricted Stock Awards
Non-vested awards outstanding at December 31, 2011	101,730
Awards granted	22,120
Stock issued	(43,750	)
Awards forfeited	(6,642	)
Non-vested awards outstanding at September 30, 2012	73,458

During the three and nine month periods ended September 30, 2012, due to reductions in the estimated payout percentages of outstanding grants, we recognized expense for performance-based restricted stock awards of approximately $0.2 million and income of approximately $0.2 million, respectively. During the three and nine month periods ended September 30, 2011, we recognized expense for performance-based restricted stock awards of approximately $1.0 million and $2.1 million, respectively.

Time-Based Restricted Stock

In 2011, we began granting time-based restricted stock awards to certain key executives and other key members of the Company’s management team. Time-based restricted stock grants typically cliff vest at the end of the 3 year vesting period, and we recognize compensation expense on these awards ratably 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.



	Time-Based Restricted Stock Awards
Non-vested awards outstanding at December 31, 2011	86,707
Awards granted	46,180
Stock issued	(13,020	)
Awards forfeited	(5,395	)
Non-vested awards outstanding at September 30, 2012	114,472

During the three and nine month periods ended September 30, 2012, we recognized expense for time-based restricted stock awards of approximately $0.4 million and $1.2 million, respectively. During the three and nine month periods ended September 30, 2011, we recognized expense for time-based restricted stock awards of approximately $0.3 million and $0.5 million respectively.

Deferred Stock Units

We grant deferred stock units to non-management directors. These awards are fully vested on the date of grant and the related shares are generally issued on the 13^th month anniversary of the grant date unless the individual elects to defer the receipt of these shares. Each deferred stock unit results in the issuance of one share of Rogers’ stock. The grant of deferred stock units is typically done annually in the second quarter of each year. The fair value of the award is determined based on the market value of the underlying stock price at the grant date.



	Deferred Stock Units
Non-vested awards outstanding at December 31, 2011	27,350
Awards granted	17,600
Stock issued	(14,800	)
Non-vested awards outstanding at September 30, 2012	30,150

For each of the nine month periods ended September 30, 2012 and 2011, we recognized compensation expense of $0.7 million related to deferred stock units. There was no expense associated with these grants in the third quarter of either year.

Employee Stock Purchase Plan

We have an employee stock purchase plan (ESPP) that allows eligible employees to purchase, through payroll deductions, shares of our common stock at a discount to fair market value. The ESPP has two six months 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 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 amount on the underlying stock’s market value on the first day of the applicable offering period, and (ii) the fair value of the look-back feature determined by using the Black-Scholes model. We recognized approximately $0.1 million of compensation expense associated with the plan for each of the three month periods ended September 30, 2012 and 2011, and approximately $0.3 million of compensation expense associated with the nine month periods ended September 30, 2012 and 2011.