ACQUISITIONS

DeWAL

On November 23, 2016, we acquired all of the membership interests in DeWAL Industries (“DeWAL”), pursuant to the terms of the Membership Interest Purchase Agreement, dated November 23, 2016, by and among the Company and the members of DeWAL Industries LLC (the “DeWAL Purchase Agreement”) 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 trademarks, developed technology and customer relationships. As of the filing date of this Form 10-K, 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 such as intangible assets. 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	9,929
Intangible assets	73,500
Goodwill	35,638
Other long-term assets	221
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 9.6 years for customer relationships, 6.3 years for developed technology, 3.4 years for trademarks and 2.5 years for a covenant not to compete, resulting in amortization expenses ranging from $5.2 million to $5.3 million, annually. The future estimated annual amortization expense is $5.3 million for each of the years ending 2017, 2018, 2019 and 2020, and $5.2 million in 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.

The results of DeWAL have been included in our consolidated financial statements only for the period subsequent to the completion of our acquisition. During this period, net sales attributable to DeWAL totaled $5.4 million and operating income attributable to DeWAL totaled $2.0 million.

Arlon

On January 22, 2015, we completed the 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 “Arlon Purchase Agreement”).

Pursuant to the terms of the Arlon Purchase Agreement, we acquired Arlon and assumed certain liabilities related to the acquisition for an aggregate purchase price of approximately $157.0 million. 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 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 related to trademarks, technology and customer relationships. As of the filing date of this Form 10-K, the process of valuing the net assets of the business is complete. The following table represents the fair market values assigned to the acquired assets and liabilities in the transaction:



(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	1,084
Property, plant & equipment	30,667
Intangible assets	50,020
Goodwill	85,565
Other long-term assets	106
Total assets	195,657

Liabilities:
Accounts payable	4,958
Other current liabilities	4,385
Deferred tax liability	23,225
Other long-term liabilities	4,540
Total liabilities	37,108

Fair value of net assets acquired	$	158,549

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 $5.8 million for each of the years ending 2017, 2018 and 2019.

During 2015, we incurred transaction costs of $1.5 million related to the Arlon acquisition, which were recorded within selling, general and administrative expenses on the consolidated statements of operations.

The results of Arlon have been included in our consolidated financial statements only for the period subsequent to the completion of our acquisition. During the year ended December 31, 2015, net sales attributable to Arlon totaled $100.0 million and operating income attributable to Arlon totaled $25.1 million.

On December 21, 2015 we sold an Arlon business, which makes polyimide and thermoset epoxy laminate products. This operation was acquired as part of our acquisition of Arlon. The operations were previously reported with our Other business. We received proceeds of $1.3 million and recognized a loss of $4.8 million, which was recorded in “Other income (expense), net” within the consolidated statements of operations.

Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations of Rogers, DeWAL and Arlon, as if the DeWAL acquisition had occurred on January 1, 2015 and the Arlon acquisition 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 that would have been reported had the DeWAL and Arlon acquisitions been completed as of January 1, 2015 and January 1, 2014, respectively, and should not be taken as indicative of our future consolidated results of operations.



(Dollars in thousands)	Year Ended December 31, 2016		Year Ended December 31, 2015		Year Ended December 31, 2014
Net sales	$	703,603	$	693,462	$	714,303
Net income	47,556		40,559		63,751