Note 8 – 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 2nd, 3rd and 4th anniversaries, respectively, 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 month periods ended March 31, 2012 were calculated using the following weighted-average assumptions:

	Three Months Ended			Three Months Ended
	March 31, 2012			March 31, 2011
Options granted		46,950			-
Weighted average exercise price	$	41.27		$	-
Weighted-average grant date fair value	$	19.08			-
Assumptions:
Expected volatility		47.70	%		-
Expected term (in years)		5.9			-
Risk-free interest rate		1.43	%		-
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 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, a forfeiture rate of approximately 3% and applied that rate to 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 shares that vest.

During the first quarter of 2012 and 2011, we recognized approximately $0.7 million and $0.5 million of stock option compensation expense, respectively.

A summary of the activity under our stock option plans as of March 31, 2012 and changes during the three month period 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, 2011		2,401,809		$	37.54		5.0	$	12,195,931
Options granted		46,950			41.27
Options exercised		(3,960	)		28.95
Options cancelled		(3,800	)		47.19
Options outstanding at March 31, 2012		2,440,999			37.59		4.9		14,667,018
Options exercisable at March 31, 2012		1,601,981			42.12		3.4		5,404,008
Options vested or expected to vest at March 31, 2012*		2,413,888			37.71		4.9		14,389,127

* 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 three month period ended March 31, 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 de minimis, and the total amount of cash received from the exercise of these options was $0.1 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 three-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. The 2009 grant, which vested as of December 31, 2011, met the performance criteria and was paid out at 97.4% of target.

	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 March 31, 2012		73,458

For the three months ended March 31, 2012 and 2011, we recognized compensation expense for performance-based restricted stock awards of $0.1 million and $0.2 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 three-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		45,460
Stock issued		-
Awards forfeited		(4,035	)
Non-vested awards outstanding at March 31, 2012		128,132

For the three months ended March 31, 2012, we recognized compensation expense for time-based restricted stock awards of $0.5 million.

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 of each year.

	Deferred Stock Units
Non-vested awards outstanding at December 31, 2011		27,350
Awards granted		-
Stock issued		-
Awards forfeited		-
Non-vested awards outstanding at March 31, 2012		27,350

There were no deferred stock units issued in the first quarter of 2012 or 2011 and, therefore, no expense was recognized during these periods on such awards.

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 month 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 in each of the three month periods ended March 31, 2012 and, 2011, respectively.