NOTE 13 - SHAREHOLDERS' EQUITY AND STOCK OPTIONS

Accumulated Other Comprehensive Income (Loss)

Accumulated balances related to each component of accumulated other comprehensive income (loss) are as follows:


(Dollars in thousands)	December 31, 2011			December 31, 2010

Foreign currency translation adjustments, net of tax	$	5,875		$	12,507
Funded status of pension plans and other post retirement benefits, net of tax		(67,239	)		(24,996	)
Unrealized loss on marketable securities, net of tax		(1,168	)		(1,058	)
Unrealized gain (loss) on derivative instruments, net of tax		(270	)		-
Accumulated other comprehensive income (loss)	$	(62,802	)	$	(13,547	)

Capital Stock and Equity Compensation Awards

Under the Rogers Corporation 2009 Long-Term Equity Compensation Plan, we may grant stock options to officers, directors, and other key employees at exercise prices that are at least equal to the fair market value of our stock on the date of grant. Under our older plans, stock options to officers, directors, and other key employees could be granted at exercise prices that were as low as 50% of the fair market value of our stock as of the date of grant. However, in terms of these older plans, virtually all such options were granted at exercise prices equal to the fair market value of our stock as of the date of grant. With shareholder approval of the Rogers Corporation 2009 Long-Term Equity Compensation Plan, no new equity awards will be granted from our older plans. Regular options granted to employees in the United States generally become exercisable over a four-year period from the grant date and expire ten years after such grant. Stock option grants were also made to non-management directors, on a semi-annual basis, with the last of such grants being made in June 2008.

Beginning in December 2008, each non-management director was awarded deferred stock units instead of stock options. Such deferred stock units permit non-management directors to receive, at a later date, one share of Rogers stock for each deferred stock unit with no payment of any consideration by the director at the time the shares are received. For director stock options, the exercise price was equal to the fair market value of our stock as of the grant date, are immediately exercisable, and expire ten years after the date of grant. Our 2005 Equity Compensation Plan and our 2009 Long-Term Equity Compensation Plan also permit the granting of restricted stock and certain other forms of equity awards to officers and other key employees, although, as mentioned above, no new equity awards are being made pursuant to the 2005 plan. Stock grants in lieu of cash compensation are also made to non-management directors and the Stock Acquisition Program, approved in 2009, is now being used for such grants if a non-management director chooses to receive Rogers stock in lieu of cash compensation.

Bruce D. Hoechner, President and Chief Executive Officer, was granted three equity awards when he joined as our new President and Chief Executive Officer in October of 2011. This consisted of two time-based restricted stock unit awards with different vesting schedules and a non-qualified stock option award. The Board of Directors (including a majority of its independent directors) approved these equity inducement awards in reliance on an employment inducement exception to shareholder approval provided for in the New York Stock Exchange governance rules.

Shares of capital stock reserved for possible future issuance are as follows:

	December 31, 2011		December 31, 2010

Stock acquisition program		120,883		120,883
Stock options and restricted stock		2,892,809		2,898,871
Rogers Employee Savings and Investment Plan		205,908		193,126
Rogers Corporation Global Stock Ownership Plan for Employees		227,050		254,490
Deferred compensation to be paid in stock		48,247		53,971
Total		3,494,897		3,521,341

Each outstanding share of Rogers capital (common) stock has attached to it a stock purchase right. One stock purchase right entitles the holder to buy one share of Rogers capital (common) stock at an exercise price of $240.00 per share. The rights become exercisable only under certain circumstances related to a person or group acquiring or offering to acquire a substantial block of Rogers capital (common) stock. In certain circumstances, holders may acquire Rogers stock, or in some cases the stock of an acquiring entity, with a value equal to twice the exercise price. The rights expire on March 30, 2017, but may be exchanged or redeemed earlier. If such rights are redeemed, the redemption price would be $0.01 per right.

Stock Options

We currently grant stock options 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 to employees options that vest and become exercisable in one-third increments on the 2nd, 3rd and 4th anniversaries of the grant dates. The maximum contractual term for all options is 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 in 2011, 2010 and 2009 were calculated using the following weighted average assumptions:

	December 31, 2011	December 31, 2010	December 30, 2009
Options granted	131,750	340,150	356,375
Weighted average exercise price	$46.29	$24.26	$23.59
Weighted-average grant date fair value	21.08	11.40	9.62
Assumptions:
Expected volatility	46.92%	45.41%	47.37%
Expected term (in years)	5.6	5.9	5.9
Risk-free interest rate	2.13%	3.12%	2.79%
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 the risk-free interest rate.

Expected dividend yield – We currently do not 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. 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 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, a forfeiture rate of approximately 3%. 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 shares that vest.

Our employee stock option agreements contain a retirement provision, which results in the vesting of any unvested options immediately upon retirement. This provision affects the timing of option expense recognition for optionees meeting the criteria for retirement. We are recognizing compensation expense over the period from the date of grant to the date retirement eligibility is met if it is shorter than the required service period or upon grant if the employee is eligible for retirement.

A summary of the activity under our stock option plans as of December 31, 2011 and changes during the year 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 December 31, 2010		2,626,371		$	36.63
Options granted		131,750			46.29
Options exercised		(329,964	)		33.61
Options cancelled		(26,348	)		30.77
Options outstanding at December 31, 2011		2,401,809			37.54		5.0	$	12,195,931
Options exercisable at December 31, 2011		1,609,982			42.10		3.7		4,207,635
Options vested or expected to vest at December 31, 2011 *		2,378,054			37.63		5.0		11,956,282

*	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.

During the years ended December 31, 2011 and 2010, 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 $4.1 million and $0.1 million, respectively. The total amount of cash received from the exercise of these options was $11.1 million and $0.8 million, respectively. The total grant-date fair value of stock options that vested during the years ended December 31, 2011 and 2010 was approximately $3.6 million and $4.0 million, respectively.

As of December 31, 2011, there was $2.9 million of total unrecognized compensation cost related to unvested stock option awards. That cost is expected to be recognized over a weighted-average period of 1.6 years.

We recognized $3.6 million and $4.0 million of compensation expense related to stock options for the years ended December 31, 2011 and December 31, 2010, respectively.

A summary of activity under the stock options plans for the fiscal years ended 2011, 2010 and 2009 is presented below:

	2011					2010					2009
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price

Stock Options
Outstanding at beginning of year		2,626,371		$	36.63		2,401,318		$	38.40		2,184,878		$	40.11
Granted		131,750			46.29		340,150			24.26		356,375			23.59
Exercised		(329,964	)		33.61		(30,675	)		31.33		(61,620	)		17.51
Cancelled		(26,348	)		30.77		(84,422	)		38.92		(78,315	)		35.29
Outstanding at year-end		2,401,809			37.54		2,626,371			36.63		2,401,318			38.40
Options exercisable at end of year		1,609,982					1,674,979					1,586,720

Restricted Stock

In 2006, we began granting restricted stock to certain key executives. The restricted stock granted is either time-based or performance-based. The performance-based grants award shares of common stock of the Company at the end of a three-year measurement period. Awards associated with this program granted in 2008 cliff vested at the end of the three-year period and eligible participants were eligible to be awarded shares ranging from 0% to 200% of the original award amount, based on defined performance measures associated with earnings per share. The 2008 grant did not meet performance measures and there was no payout. The 2009, 2010 and 2011 grants cliff vest at the end of their respective three-year periods, except for awards granted to those individuals who are retirement eligible during the grant period, which are subject to accelerated vesting as the award is earned over the course of the grant (i.e. a pro-rata payout occurs upon retirement). Eligible participants can be awarded shares ranging from 0% to 200% of the original award amount, based on defined performance measures associated with a combined measure using earnings per share, net sales and free cash flow. In 2011, we granted 20,630 performance-based restricted stock awards.

We recognize compensation expense on these awards ratably over the vesting period, or on an accelerated basis if the recipient is retirement eligible at the time of grant. The fair value of the award will be determined based on the market value of the underlying stock price at the grant date. The amount of compensation expense recognized over the vesting period will be based on our projections of the performance measure over the requisite service period and, ultimately, how that performance compares to the defined performance measure. If, at any point during the vesting period, we conclude that the ultimate result of this measure will change from that originally projected, we will cumulatively adjust the compensation expense during that period and recognize future expense ratably over the remaining vesting period based on the new projected payouts.

We also grant time-based restricted stock awards to certain key employees. In 2011, we granted 84,667 time-based restricted stock awards, which cliff vest at the end of a three-year period. We recognize compensation expense on these awards ratably over the vesting period, or on an accelerated basis if the recipient is retirement eligible at the time of grant. The fair value of the award will be determined based on the market value of the underlying stock price at the grant date.

A summary of activity under the restricted stock plans for the fiscal years ended 2011, 2010 and 2009 is presented below:

	2011			2010			2009
Non-vested shares outstanding at beginning of year		117,750			100,900			78,950
Awards granted		105,297			37,350			46,250
Awards issued		-			-			(24,300	)
Awards expired		(34,610	)		(20,500	)		-
Non-vested shares outstanding at year end		188,437			117,750			100,900

As of the first quarter of 2011, the restricted stock granted in 2008 was forfeited, due to the performance target not being reached that was required for vesting of this grant.

We recognized $3.3 million and $1.4 million of compensation expense related to restricted stock for the years ended December 31, 2011 and 2010, respectively. The 2011 expense represents an 97% projected payout for the 2009 performance-based grants, and a projected payout of 200% for the performance-based awards granted in 2010 and 2011, respectively. The 2010 expense represented no projected payout for the 2008 performance-based grants, and a projected payout of 67% and 200% for the performance-based awards granted in 2009 and 2010, respectively.

As of December 31, 2011, there was $4.0 million of total unrecognized compensation cost related to unvested restricted stock. That cost is expected to be recognized over a weighted-average period of 1.6 years.

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 13th 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.

	2011			2010			2009
Awards outstanding at beginning of year		30,250			41,200			13,200
Awards granted		16,650			25,100			28,000
Stock issued		(19,550	)		(36,050	)		-
Awards outstanding at year end		27,350			30,250			41,200

For the years ended December 31, 2011 and 2010, we recognized compensation expense of $0.7 million related to deferred stock units in each 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 85% of the fair market value. The ESPP has two six-month offering periods per 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 respective 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 respective 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 respective plan period, and (ii) the fair value of the look-back feature determined by using the Black-Scholes model. We recognized approximately $0.5 million of compensation expense associated with the plan in each of the years ended December 31, 2011 and 2010.