Acquisition

On January 22, 2015, we completed the previously announced acquisition of Arlon and its subsidiaries, other than Arlon India (Pvt) Limited (collectively, “Arlon”), pursuant to the terms of the Stock Purchase Agreement, dated December 18, 2014, by and among the Company, Handy & Harman Group, Ltd. (“H&H Group”) and its subsidiary Bairnco Corporation (“Bairnco”) (as amended, the “Purchase Agreement”).

Pursuant to the terms of the Purchase Agreement, we acquired Arlon and assumed certain liabilities related to the acquisition for an aggregate purchase price of approximately $157 million. The purchase price is subject to final post-closing adjustments under the terms of the Purchase Agreement.

We used borrowings of $125.0 million under our bank credit facility in addition to cash on hand, to fund the acquisition.

Arlon manufactures high performance materials for the printed circuit board industry and silicone rubber-based materials. The acquisition of Arlon and its integration into our operating segments is expected to provide increased scale and complementary product offerings, allowing us to enhance our ability to support our customers.

The acquisition has been accounted for in accordance with applicable purchase accounting guidance. The following table represents the preliminary fair market values assigned to the acquired assets and liabilities in the transaction. 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 trademarks, technology and customer relationships. As of the filing date of this Form 10-Q, the process of valuing the net assets of the business is substantially complete. These values may be updated until certain items are settled in the final agreement.



(Dollars in thousands)
	January 22, 2015
Assets:
Cash	$	142
Accounts receivable	17,301
Other current assets	856
Inventory	9,916
Deferred income tax assets, current	1,278
Property, plant & equipment	30,667
Intangible assets	50,020
Goodwill	86,337
Total assets	196,517

Liabilities:
Accounts payable	4,958
Other current liabilities	4,249
Deferred tax liability	23,706
Other long-term liabilities	5,056
Total liabilities	37,969

Fair value of net assets acquired	$	158,548

The intangible assets consist of developed technology valued at $15.8 million, customer relationships valued at $32.7 million and trademarks valued at $1.6 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 5.7 years for developed technology, 6.0 years for customer relationships and 3.2 years for trademarks, resulting in amortization expenses ranging from $1.8 million to $5.8 million annually. The estimated annual future amortization expense is $3.2 million for the remainder of 2015, and $5.8 million for each of the years ending 2016, 2017, 2018 and 2019.

During the first six months of 2015, we incurred transaction costs of $1.5 million, which were recorded within selling and administrative expenses on the condensed consolidated statement of income.

The results of Arlon have been included in our consolidated financial statements only for the period subsequent to the completion of our acquisition on January 22, 2015. Arlon's revenues for the three and six month periods ended June 30, 2015 totaled $25.4 million and $45.6 million, respectively.

The following unaudited pro forma financial information presents the combined results of operations of Rogers and Arlon for the three and six months ended June 30, 2014, as if the acquisition had occurred on January 1, 2014. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported had the Arlon acquisition been completed as of January 1, 2014 and should not be taken as indicative of our future consolidated results of operations or financial position.



	June 30, 2014
	Three months ended		Six months ended
(Dollars in thousands)
Net sales	$	180,441	$	353,441
Net income	$	14,569	$	31,964