As used herein, the "Company", "Rogers", "we", "us", "our" and similar terms include Rogers Corporation and its subsidiaries, unless the context indicates otherwise.

Business Overview

We are a global enterprise that provides our customers with innovative solutions and industry leading products in a variety of markets, including portable communications, communications infrastructure, consumer products, consumer electronics, healthcare, semiconductors, mass transit, automotive, ground transportation, aerospace, defense and alternative energy. We generate revenues and cash flows through the development, manufacture, and distribution of specialty material-based products that are sold to multiple customers, primarily original equipment manufacturers (OEM's) and contract manufacturers that, in turn, produce component products that are sold to end-customers for use in various applications. As such, our business is highly dependent, although indirectly, on market demand for these end-user products. Our ability to forecast future sales growth is largely dependent on management's ability to anticipate changing market conditions and how our customers will react to these changing conditions. It is also highly limited due to the short lead times demanded by our customers and the dynamics of serving as a relatively small supplier in the overall supply chain for these end-user products. In addition, our sales represent a number of different products across a wide range of price points and distribution channels that do not always allow for meaningful quantitative analysis of changes in demand or price per unit with respect to the effect on sales and earnings.

Our current focus is on worldwide markets that have an increasing percentage of materials being used to support growing high technology applications, such as cellular base stations and antennas, handheld wireless devices, and mass transit. We continue to focus on business opportunities around the globe and particularly in the Asian marketplace, as evidenced by the continued investment in our facilities in Suzhou, China, which functions as our manufacturing base to serve our customers in Asia. Our goal is to become the supplier of choice for our customers in all of the various markets in which we participate. To achieve this goal, we strive to make the best products in these respective markets and to deliver the highest level of service to our customers.

At the end of 2008 and through the first half of 2009, we felt the impact of the global recession on our business as sales volumes declined by 27% and 30%, respectively, for the second quarter and first half of 2009 as compared to comparable periods in 2008. We experienced some slight strengthening in volumes towards the end of the second quarter and expect additional incremental sales volumes in the second half of the year, but we believe that 2009 will continue to be a challenging year due to the uncertainty in the global economy. In challenging times like these, we believe that our diversification and position in the overall supply chain help to mitigate the negative impact on our business, as we typically experience order declines later than many other companies that are closer to the ultimate consumer of the end-product. Historically, we recover faster than other companies, as we provide materials and component products to our customers who in turn sell to an end user, although past history is not an indication of the current marketplace nor a direct indication of what will occur in the future. We do believe that we are well positioned to sustain our business through these difficult times, as we have a strong balance sheet with no debt, strong cash flows, and a clear focus on working capital management.

In the second quarter of 2009, our management team strategically reviewed our various businesses and reached certain conclusions as to the future prospects of certain segments and products. These decisions, coupled with the decline in operating performance over the first half of 2009 in certain businesses and geographic locations, were the primary drivers behind the conclusions to impair certain long-lived assets and incur other one-time non-cash charges. These charges included a $53.1 million charge related to a valuation allowance on our US deferred tax assets; $13.4 million of impairment charges on certain fixed assets; $1.7 million in severance charges; and $0.8 million in incremental inventory reserves; partially offset by a $3.3 million deferred tax benefit related to certain impairment charges taken at our foreign locations. We also incurred a $1.9 million charge to accrue for a product liability claim in our Printed Circuit Materials operating segment; $0.5 million charge to record an impairment on our auction rate securities in accordance with new accounting guidance that was adopted in the second quarter of 2009, and an incremental $1.8 million of incentive compensation expense related primarily to the timing of our 2009 stock option grants. (For further discussion of these charges, see the "Restructuring and Impairment Charges" section in Item 2 and Note 14 in Item 1 of these condensed consolidated financial statements.)

Overall, in the second quarter and first half of 2009, sales were $67.4 million and $132.8 million, respectively, as compared to $92.4 million and $190.5 million, respectively, for the comparable periods in 2008, a decline of 27% and 30%, respectively. All of our reportable segments experienced declines in quarterly and year-to-date volumes, including our Custom Electrical Components (CEC) reportable segment (50.4% and 51.9%, respectively), Printed Circuit Materials (PCM) reportable segment (17.1% and 12.8%, respectively) and High Performance Foams (HPF) reportable segment (14.5% and 27.9%, respectively). (For further discussion on our segment results, see "Segment Sales and Operations" below.) However, our joint ventures contributed positively to our results in the second quarter of 2009, particularly our foam joint ventures in China and Japan, which had significant improvement from the losses experienced in the first quarter of 2009 and were consistent with their second quarter 2008 results, although the results in 2009 were generated from lower sales volumes than in 2008. Overall, our consolidated results are still down significantly from 2008 levels, but we did experience a slight increase in volumes at the end of the second quarter and our lower cost structure is enabling us to be more profitable at current sales levels, as well as on potential incremental sales increases in the future, which could positively impact our results going forward.

For the remainder of 2009, we will continue to focus on positioning ourselves to take advantage of the potential opportunities that could arise if and when the economy begins to recover. We will continue to focus on maintaining a strong balance sheet, and believe that the impairments and other charges recorded in the second quarter of 2009 will better position us from a balance sheet perspective going forward. We will continue to focus on new business development initiatives as we pursue internal product extensions as well as external opportunities. As evidence of these efforts, in the second quarter of 2009, we finalized the purchase of certain assets of MTI Global Inc. used in the production of silicone foams. This purchase resulted in a $2.9 million gain on the transaction, as the fair value of the net assets acquired exceeded the $7.4 million purchase price. Also, in the beginning of the third quarter, we made a strategic $5 million investment in Solicore, Inc, a leader for embedded power solutions products, such as lithium polymer batteries for use in smart cards and controlled access cards, among others. This investment gave us a minority equity stake in Solicore, as well as an agreement to jointly develop the next generation of power solution products aimed at strengthening and extending Solicore's market leadership position, which we believe will be a key driver to the future growth of our Company. This agreement also gives us the exclusive right to manufacture a majority of the products that result from this collaboration, if it is successful. These two ventures highlight the focus and importance we continue to place in seeking out new ways to grow our business and to expand our portfolio of products.

Results of Operations

The following table sets forth, for the periods indicated, selected operations
data expressed as a percentage of net sales.

                                               Three Months Ended              Six Months Ended
                                            June 30,        June 29,       June 30,         June 29,
                                              2009            2008           2009             2008

Net sales                                       100.0 %         100.0 %         100.0 %         100.0 %
Manufacturing margins                            25.3            32.8            23.3            32.5

Selling and administrative expenses              27.9            19.7            26.8            18.9
Research and development expenses                 6.3             6.4             7.3             5.9
Restructuring and impairment charges             22.5               -            13.5               -
Operating (loss) income                         (31.4 )           6.7           (24.3 )           7.7

Equity income in unconsolidated joint
ventures                                          2.3             1.6             0.9             1.4
Other income (loss), net                         (0.3 )           1.2            (0.2 )           0.9
Net impairment losses                            (0.7 )             -            (0.4 )             -
Interest income, net                              0.2             0.6             0.2             0.8
Acquisition gain                                  4.3                             2.2
Income (loss) before income taxes               (25.6 )          10.1           (21.6 )          10.8

Income tax (benefit) expense                     74.6            (3.2 )          35.8            (3.2 )

Net (loss) income                              (100.2 )%          6.9 %         (57.4 )%          7.6 %

Net Sales

Net sales for the three month period ended June 30, 2009 were $67.4 million as compared to $92.4 million for the three month period ended June 29, 2008, a decrease of 27%, and $132.8 million versus $190.5 million for the respective six month periods, a decrease of 30%. The declines in the second quarter and year-to-date in 2009 were driven by declines across all of our reportable segments, as the impact of the global recession continues to impact our businesses. See "Segment Sales and Operations" below for further discussion on segment performance.

Manufacturing Margins

Manufacturing margins as a percentage of sales decreased from 32.8% in the second quarter of 2008 to 25.3% in the second quarter of 2009 and from 32.5% to 23.3% for the first half of 2008 and 2009, respectively. The declines are primarily attributable to the overall decline in sales volumes in 2009 as compared to 2008 as all of our reportable segments experienced year over year declines in the respective periods, as well as the negative impact of lower levels of capacity utilization in our manufacturing facilities. However, margins improved across all segments in the second quarter of 2009 as compared to the first quarter of 2009, which can be partly attributable to the cost cutting activities initiated in the first quarter of 2009. See "Segment Sales and Operations" discussion below for additional information.

Selling and Administrative Expenses

Selling and administrative expenses increased from $18.2 million in the second quarter of 2008 to $18.8 million in the second quarter of 2009 and declined from $35.9 million in the first six months of 2008 to $35.6 million in the first six months of 2009. The increase in the second quarter of 2009 was due primarily to the following: an incremental $1.8 million of incentive compensation expense related to the granting of our 2009 stock options to employees and deferred stock units to directors; an additional $1.9 million accrual for certain product liability claims in our Printed Circuit Materials business, which we are evaluating for potential insurance recovery; and $0.7 million of incremental pension and other postretirement benefit costs as the overall expense in 2009 increased due primarily to the poor asset portfolio performance in 2008. These incremental costs were offset to a certain extent by the cost cutting measure initiated in the first quarter of 2009. The year-to-date year over year decrease was primarily driven by our cost cutting initiatives, partially offset by incremental pension and postretirement expense of $1.9 million and the $1.9 million product liability accrual previously described.

Research and Development Expenses

Research and development (R&D) expense declined from $5.9 million to $4.2 million in the second quarter of 2009 as compared to the second quarter of 2008 and decreased slightly from $11.2 million in the first half of 2008 to $9.7 million in the first half of 2009. These declines are due primarily to our cost cutting initiatives, as well as to the timing of R&D related projects. As a percentage of sales, research and development expenses were 6.3% in the second quarter of 2009 as compared to 6.4% in the second quarter of 2008. On a year-to-date basis, R&D expenses as a percentage of sales increased slightly from 5.9% in 2008 to 7.3% in 2009. We continue to target a reinvestment percentage of approximately 6% of sales into R&D activities each year. We are focused on continually investing in R&D, both in our efforts to improve the technology and products in our current portfolio, as well as researching new business development opportunities to further expand and grow the business. We believe that technology is one of the cornerstones of our past success and our future success is dependent on our continued focus on research and development initiatives.

Restructuring and Impairment Charges

In the second quarter of 2009, we recorded approximately $15.9 million in restructuring and impairment charges, of which $0.8 million is recorded in "Cost of sales" on our condensed consolidated statements of operations. The restructuring and impairment charges are comprised of the following:
? $13.4 million in charges related to the impairment of certain long-lived assets in our Flexible Circuit Materials ($7.7 million), Durel ($4.6 million), Advanced Circuit Materials ($0.8 million), and Thermal Management Systems ($0.3 million) operations;

? $1.7 million in severance related to a workforce reduction; and

? $0.8 million in charges related to additional inventory reserves at Durel and Flexible Circuit Materials, which is recorded in "Cost of sales" on our condensed consolidated statements of operations.

Asset Impairments

? Flexible Circuit Materials

In the second quarter of 2009 as part of our strategic planning process, our management team determined that we would exit the flexible circuit materials market and effectively discontinue any new product development or research in this area. Over the past several years, the flexible circuit materials market has experienced increased commoditization of its products, resulting in increased competition and extreme pricing pressures. In 2008, we took certain initial actions to streamline our flexible circuit materials business, including shifting production of certain products to our joint venture in Taiwan, and retaining only certain, higher margin products. However, we determined that the future markets for these products were very limited and did not fit with the strategic direction of the Company. Therefore, we determined that we would immediately stop production of certain remaining flexible circuit materials products and continue to support only select customers for a limited time period going forward, ultimately resulting in the abandonment of our wholly-owned flexible circuit materials business.

As a result of these management decisions, we determined it appropriate to evaluate the assets related to this business for valuation issues. This analysis resulted in an impairment charge related to specific equipment located in our Belgian facility. This equipment was to be used primarily for the development of certain flexible circuit materials-related products; however, based on the decision to abandon the business, this equipment is no longer of use to us. In accordance with FAS 144, we recognized an impairment charge of approximately $6.0 million related to this equipment and wrote it down to an estimated salvage value of approximately $2.0 million. This charge is reported in the "Restructuring and impairment" line item in our condensed consolidated statements of operations.

We also recorded an impairment charge on a building located in Suzhou, China that was built to support our flexible circuit materials business in the Asian marketplace. We are currently marketing this building for sale and, in accordance with FAS 144, have classified it as an "asset held for sale" and recorded an impairment charge of approximately $1.6 million to reflect the current fair market value of the building less costs to sell. The remaining asset value of $4.0 million will be classified as an "asset held for sale" in the "current asset" section of our condensed consolidated statements of financial position. The impairment charge is reported in the "Restructuring and impairment" line item in our condensed consolidated statements of operations.

Further, as part of the decision to exit the flexible circuit materials business, we recorded additional reserves on certain inventory that will no longer be sold, of approximately $0.4 million. This charge is reported as part of cost of sales in our condensed consolidated statements of operations.

Lastly, we recorded an impairment charge on certain residual assets pertaining to the flexible circuit materials business in Asia of approximately $0.1 million, which is reported in the "Restructuring and impairment charges" line item in our condensed consolidated statements of operations.

These charges are reported in our Other Polymer Products reportable segment.

? Durel

Over the past few years, our Durel electroluminescent (EL) lamp business has steadily declined as new technologies have emerged to replace these lamps in cell phone and other related applications. In the second quarter of 2007, we took certain initial steps to restructure the Durel business for this decline, as we shifted the majority of our manufacturing to our China facility and recorded impairment charges on certain U.S. based assets. Since that time, we have continued to produce EL lamps out of our China facility at gradually declining volumes and our management team has initiated efforts to develop new product applications using our screen printing technology. Our initial forecasts indicated the potential for new applications to go to market in the second half of 2009; however, at this point we have not successfully developed any new applications that would generate material cash flows in the future. We concluded that this situation, plus the fact that our EL lamp production is now primarily limited to automotive applications as there are no longer material sales into the handheld market as of the second quarter of 2009, is an indicator of impairment under FAS 144. The resulting analysis concluded that these assets should be treated as "abandoned" under FAS 144, as they are not in use and we do not anticipate the assets being placed in use in the near future. As such, these assets were written down to their current fair value, which in this case approximates salvage value as there is not a readily available market for these assets since the technology is becoming obsolete. Therefore, we recorded an impairment charge of approximately $4.6 million related to these assets, resulting in a remaining book value of approximately $0.7 million. This charge is reported in the "Restructuring and impairment" line item in our condensed consolidated statements of operations.

Further, as a result of reaching end of life on certain handheld applications, we recorded additional inventory reserves of approximately $0.4 million, as this inventory no longer has any value or future use. This charge is reported as part of "Cost of sales" in our condensed consolidated statements of operations.

These charges are reported in our Custom Electrical Components reportable segment.

? Advanced Circuit Materials

Early in 2008, management determined based on forecasts at that time that we would need additional capacity for our high frequency products later that year. Management had already undertaken initiatives to build additional capacity through a new facility on our China campus, which would be operational in early 2010, but needed a solution to fill interim capacity needs. Therefore, we initiated efforts to move idle equipment from our Belgian facility to our Arizona facility and incurred costs of approximately $0.8 million due to these efforts. At the end of 2008, our overall business began to decline due in part to the global recession, and management determined that we would not need this equipment at that time but that we would still need certain capacity later in 2009 prior to the China capacity coming on line. However, in 2009, business did not recover as quickly as anticipated and we now believe that we will not need this equipment as we currently have sufficient capacity to meet our current needs and the China facility will be available in time to satisfy any increase in demand. Therefore, we have determined that the costs incurred related to this relocation of this equipment should be impaired and equipment purchased or refurbished as part of the relocation should be written down to an estimated salvage value, resulting in a charge of approximately $0.8 million which is reflected in the "Restructuring and impairment" line item on our condensed consolidated statements of operations.

These charges are reported in our Printed Circuit Materials reportable segment.

? Thermal Management Systems

In the second quarter of 2009 as part of our strategic planning process, our management team determined that we would abandon the development of certain products related to our thermal management systems start up business, specifically products related to our thermal interface material (TIM). To date, we have not been successful in developing this product and were not confident in its future market potential; therefore, we chose to abandon its development to focus solely on the development of aluminum silicon carbide products, which we believe have a stronger market potential. This decision resulted in a charge of approximately $0.3 million from the impairment of certain assets related to TIM production. This charge is reflected in the "Restructuring and impairment" line item on our condensed consolidated statements of operations.

These charges are reported in our Other Polymer Products reportable segment.

Severance

In the first quarter of 2009, we announced a cost reduction initiative that included a 10% workforce reduction, as well as a significant reduction in our operating and overhead expenses, to better align our cost structure with the lower sales volumes experienced at the end of 2008 and in the first quarter of 2009. In accordance with SFAS No. 112, Employers' Accounting for Postemployment Benefits (SFAS 112), and SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146), we recognized approximately $2.8 million in severance charges and paid out approximately $0.5 million related to severance in the first quarter of 2009.

In the second quarter of 2009, we announced a plan to further reduce our salaried workforce by approximately 5% globally. Severance charges associated with this reduction in force were approximately $1.7 million.

A summary of the activity in the severance accrual is as follows:

Balance at December 31, 2008   $      -
Provisions                        4,498
Payments                         (1,820 )
Balance at June 30, 2009       $  2,678

These charges are included in the "Restructuring and impairment charges" line item on our condensed consolidated statements of operations and are reported across all reportable segments.

Equity Income in Unconsolidated Joint Ventures

Equity income in unconsolidated joint ventures increased from $1.5 million in the second quarter of 2008 to $1.6 million in the second quarter of 2009 and declined from $2.6 million for the first six months of 2008 to $1.2 million for the first six months of 2009. These results are driven primarily by our foam joint ventures, Rogers Inoac Suzhou Corporation (RIS) in China and Rogers Inoac Corporation (RIC) in Japan, as these entities experienced significant volume improvements and a return to profitability in the second quarter of 2009 as compared to the operating losses sustained in the first quarter of 2009.

Other Income (Loss), Net

Other income decreased approximately $1.3 million in the second quarter of 2009 versus the second quarter of 2008 from $1.1 million to a loss of $0.2 million. On a year-to-date basis, other income decreased $2.0 million, from $1.7 million in 2008 to a loss of $0.3 million in 2009. These decreases are due to a combination of a decline in sales commission income from our Polyimide Laminate Systems, LLC (PLS) joint venture and unfavorable foreign currency fluctuations for the quarter ended June 30, 2009.

Interest Income, Net

Interest income decreased from $0.6 million and $1.4 million, respectively, for the three and six month periods ended June 29, 2008 to $0.1 million and $0.3 million, respectively, for the three and six month periods ended June 30, 2009, due primarily to the decline in interest rates as a result of the Federal government's actions to reduce rates in order to stimulate the recessionary economy.

Income Taxes

Our effective tax rate was (291.7%) and 30.9%, respectively, for the three month periods ended June 30, 2009 and June 29, 2008, and (166.7%) and 30.1% respectively, for the six month periods ended June 30, 2009 and June 29, 2008, as compared with the statutory rate of 35.0%. In the three month period ended June 30, 2009, we recorded income tax expense of $53.1 million associated with applying a valuation allowance to our U.S. deferred tax assets. This charge was due primarily to the fact that we are now projecting that we will be in a significant three-year cumulative loss position in the U.S. in the second half of 2009. In both the three and six month periods ended June 30, 2009, our tax rate continued to benefit from favorable tax rates on certain foreign business activity.

In accordance with SFAS 109, Accounting for Income Taxes (SFAS 109), we evaluate our deferred income tax assets quarterly to determine if valuation allowances are required or should be adjusted. SFAS 109 requires that we assess whether valuation allowances should be established against our deferred tax assets based upon the consideration of all available evidence, both positive and negative, using a "more likely than not" standard. Due to the actual losses incurred through the second quarter of 2009 and our revised forecast for the remainder of the year, we are now projecting that during the second half of 2009 we will be . . .