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. Borrowings could 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 Second Amended Credit Agreement).

In 2016, we borrowed $136.0 million under the line of credit to fund the acquisition of DeWAL and an additional $30.0 million to partially fund the acquisition of Diversified Silicone Products. We borrowed $125.0 million under the line of credit under our prior credit agreement in the first quarter of 2015 to fund the acquisition of Arlon, and this amount was refinanced under our Second Amended Credit Agreement in June 2015. During 2016 and 2015, we made principal payments of $103.4 million, and $6.4 million, respectively, on the outstanding debt. We remain obligated to pay $4.1 million on this debt obligation in the next 12 months under the term loan. At December 31, 2016, our outstanding debt balance was comprised of a term loan of $50.2 million and $191.0 million borrowed on the revolving line of credit. In addition, as of December 31, 2016 and 2015 we had a $1.2 million standby letter of credit (LOC) to guarantee Rogers’ workers compensation plans that were backed by the Second Amended Credit Agreement. No amounts were drawn on the LOC as of December 31, 2016 or 2015.

Borrowings under the Second Amended Credit Agreement could be made as alternate base rate loans or Euro-currency loans. Alternate base rate loans bore interest that included a base reference rate plus a spread of 37.5 to 75.0 basis points, depending on our leverage ratio. The base reference rate was the greater of the prime rate; federal funds effective rate plus 50 basis points; or adjusted 1-month LIBOR plus 100 basis points. Euro-currency loans bore interest based on adjusted LIBOR plus a spread of 137.5 to 175.0 basis points, depending on our leverage ratio. At December 31, 2016, the rate charged on our outstanding borrowings under the Second Amended Credit Agreement was the 1-month LIBOR at 0.6250% plus a spread of 1.375%. We incurred interest expense on our outstanding debt of $3.1 million, $3.5 million, and $1.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Cash paid for interest was $3.1 million, $3.3 million, and $2.5 million for 2016, 2015 and 2014, respectively.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Second Amended Credit Agreement, we were 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 Second Amended Credit Agreement. We incurred an unused commitment fee of $0.4 million, $0.3 million, and $0.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.

The financial covenants under the Second Amended Credit Agreement included requirements to maintain (1) a leverage ratio of no more than 3.25 to 1.00, subject to a one-time 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, calculated as defined in the Second Amended Credit Agreement, of no less than 3.00 to 1.00. As of December 31, 2016, we were in compliance with all of the financial covenants in the Second Amended Credit Agreement.

The Second Amended Credit Agreement required mandatory quarterly repayment of principal on amounts borrowed under the term loan, and payment in full of outstanding borrowings by June 30, 2020.

As of December 31, 2016, the aggregate mandatory principal payments were as follows:



Year	Payments Due
2017		$4.1	million
2018		$4.8	million
2019		$5.5	million
2020		$226.8	million

All obligations under the Second Amended Credit Agreement were guaranteed by each of our existing and future material domestic subsidiaries, as defined in the Second Amended Credit Agreement (the “Previous Guarantors”). The obligations were also secured by a Second Amended and Restated Pledge and Security Agreement, dated as of June 18, 2015, entered into by the Company and the Previous Guarantors, which granted 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.

At December 31, 2016, we had $1.6 million of remaining deferred debt issuance costs. These costs will be amortized over the life of the Second Amended Credit Agreement. We incurred amortization expense of $0.5 million in each of the years ended 2016, 2015 and 2014, related to these deferred costs.

In July 2012, we entered into an interest rate swap to hedge the variable interest rate on our term loan debt. This swap expired as of June 30, 2016.

Interest paid on the debt was $3.6 million for the year ended December 31, 2016.

On February 17, 2017, we entered into the Third Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A, as administrative agent, and the lenders party thereto (the “Third Amended Credit Agreement”), which amends and restates the Second Amended Credit Agreement. The Third Amended Credit Agreement refinances the Second Amended Credit Agreement, eliminates the term loan under the Second Amended Credit Agreement, and increases the principal amount of the revolving credit facility to up to $450.0 million borrowing capacity, with an additional $175.0 million accordion feature. All revolving loans under the Third Amended Credit Agreement 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. For additional information regarding the Third Amended Credit Agreement, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Restriction on Payment of Dividends

Our Second Amended Credit Agreement generally permitted us to pay cash dividends to our shareholders, provided that (i) no default or event of default had occurred and was continuing or would result from the dividend payment and (ii) our leverage ratio did not exceed 2.00 to 1.00. If our leverage ratio exceeded 2.00 to 1.00 under the Second Amended Credit Agreement, we could have nonetheless made up to $10.0 million in restricted payments, including dividends, during the fiscal year, provided that no default or event of default had occurred and was continuing or would result from the payments. As of December 31, 2016, our leverage ratio did not exceed 2.00 to 1.00.

Capital Lease

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 December 31, 2016 and 2015 was $5.3 million and $5.8 million, respectively. Depreciation expense related to the capital lease was $0.3 million, $0.3 million and $0.4 million for the years ending December 31, 2016, 2015 and 2014, respectively. Accumulated depreciation as of December 31, 2016 and 2015 was $3.4 million and $3.3 million, respectively. These expenses are included as depreciation expense in cost of sales on our consolidated statements of operations.

We also incurred interest expense on the capital lease of $0.3 million, $0.4 million and $0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. Interest expense related to the debt recorded on the capital lease is included in interest expense on the consolidated statements of operations.