ROGERS CORPORATION As used herein, the "Company," "Rogers," "we," "us," "our" and similar terms includeRogers Corporation and its subsidiaries, unless the context indicates otherwise. Forward-Looking Statements This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such statements are generally accompanied by words such as "anticipate," "assume," "believe," "could," "estimate," "expect," "foresee," "goal," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "seek," "target" or similar expressions that convey uncertainty as to future events or outcomes. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and the differences between assumed facts and actual results could be material depending upon the circumstances. Where we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and based on assumptions believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur or be achieved or accomplished. Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation: •our ability to complete the proposed merger with DuPont de Nemours, Inc. (DuPont), the termination of which may cause us to incur substantial costs that may adversely affect our financial results and operations and the market price of our capital stock; •the duration and impacts of the novel coronavirus (COVID-19) global pandemic and efforts to contain its transmission and distribute vaccines, including the effect of these factors on our business, suppliers, supply chains, customers, end users and economic conditions generally; •failure to capitalize on, volatility within, or other adverse changes with respect to the Company's growth drivers, including advanced mobility and advanced connectivity, such as delays in adoption or implementation of new technologies; •failure to successfully execute on the Company's long-term growth strategy; •uncertain business, economic and political conditions inthe United States (U.S. ) and abroad, particularly inChina ,South Korea ,Germany ,Belgium ,England andHungary where we maintain significant manufacturing, sales or administrative operations; •the trade policy dynamics between theU.S. andChina reflected in trade agreement negotiations, the imposition of tariffs and other trade restrictions, as well as the potential forU.S. -China supply chain decoupling; •fluctuations in foreign currency exchange rates; •our ability to develop innovative products and the extent to which they are incorporated into end-user products and systems; •the extent to which end-user products and systems incorporating our products achieve commercial success; •the ability and willingness of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely and cost-effective manner; •intense global competition affecting both our existing products and products currently under development; •business interruptions due to catastrophes or other similar events, such as natural disasters, war, terrorism or public health crises; •the impact of sanctions, export controls and other foreign asset or investment restriction; •failure to realize, or delays in the realization of, anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses; •our ability to attract and retain management and skilled technical personnel; •our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights; •changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate; •failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants; •the outcome of ongoing and future litigation, including our asbestos-related product liability litigation; •changes in environmental laws and regulations applicable to our business; and •disruptions in, or breaches of, our information technology systems. Our forward-looking statements are expressly qualified by these cautionary statements, which you should consider carefully, along with the risks discussed in this section and elsewhere in this report, including under the section entitled "Risk Factors" in Part II, Item 1A and in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the Annual Report) and our other reports filed with theSecurities and Exchange Commission , any of which could cause actual results to differ materially from historical results or anticipated results. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. 24 -------------------------------------------------------------------------------- The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the related notes that appear elsewhere in this Form 10-Q along with our audited consolidated financial statements and the related notes thereto in our Annual Report.
Company Background and Strategy
Rogers Corporation designs, develops, manufactures and sells high-performance and high-reliability engineered materials and components to meet our customers' demanding challenges. We operate two strategic operating segments: Advanced Electronics Solutions (AES) and Elastomeric Material Solutions (EMS ). The remaining operations, which represent our non-core businesses, are reported in our Other operating segment. We have a history of innovation and have establishedInnovation Centers for our research and development (R&D) activities inChandler, Arizona ,Burlington, Massachusetts ,Eschenbach ,Germany andSuzhou, China . We are headquartered inChandler, Arizona . Our growth strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergistic mergers and acquisitions, and (4) operational excellence. As a market-driven organization, we are focused on growth drivers, including advanced mobility and advanced connectivity. More specifically, in addition to the impact of COVID-19 discussed below, the key medium- to long-term trends currently affecting our business include the increasing use of advanced driver assistance systems (ADAS) and increasing electrification of vehicles, including electric and hybrid electric vehicles (EV/HEV), in the automotive industry and the growth of 5G smartphones in the portable electronics industry. In addition to our focus on advanced mobility and advanced connectivity in the automotive, portable electronics and telecommunications industries, we sell into a variety of other markets including general industrial, aerospace and defense, mass transit, clean energy and connected devices. Our sales and marketing approach is based on addressing these trends, while our strategy focuses on factors for success as a manufacturer of engineered materials and components: performance, quality, service, cost, efficiency, innovation and technology. We have expanded our capabilities through organic investment and acquisitions and strive to ensure high quality solutions for our customers. We continue to review and re-align our manufacturing and engineering footprint in an effort to maintain a leading competitive position globally. We have established or expanded our capabilities in various locations in support of our customers' growth initiatives. We seek to enhance our operational and financial performance by investing in research and development, manufacturing and materials efficiencies, and new product initiatives that respond to the needs of our customers. We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and major industry trends affecting our business. If we are able to successfully execute on our growth strategy, we see an opportunity to double our annual revenues over the next five years. This robust outlook is supported by our participation in a number of fast-growing markets and by our strong competitive positions in these markets. Advanced connectivity markets, which are comprised of EV/HEV and ADAS, are expected to grow at the fastest rate. Third-party analysis projects that the EV/HEV market will grow at compound annual growth rate of more than 25% over the next five years and ADAS at a rate of more than 15% over that time period. Within the EV/HEV market, we believe our advanced battery cell pads, ceramic substrates and power interconnects provide multiple content opportunities to capitalize on this growth. In each of these areas we have secured a number of design wins and have a strong pipeline, which provides confidence in our growth outlook. In the ADAS market, we continue to build on our current position with new design wins, including those for next-generation automotive radar systems. Other markets with a strong growth trajectory include aerospace and defense, clean energy and portable electronics. These markets are projected to grow at high single digit rates and we expect that they will contribute to our growth strategy's aim of doubling revenues over the next five years. To support our revenue growth opportunity during the five-year strategic planning period, we have initiated a manufacturing expansion plan, which includes expanding capacity at existing Rogers' manufacturing facilities, relocating existing manufacturing capabilities to enhance operational efficiency and adding new manufacturing facilities. This expansion plan will require a significant increase in capital spending together with an associated increase in operating expenses, as compared to historic capital spending and operating expenses over the previous five years. During the five-year strategic planning period, we also will have significant capital expenditures associated with implementing our enterprise resource planning system.
Proposed Merger with DuPont
OnNovember 1, 2021 , we entered into a definitive merger agreement to be acquired by DuPont de Nemours, Inc. (DuPont) in an all-cash transaction at a price of$277.00 per share of the Company's capital stock. The merger agreement provides for the acquisition ofRogers Corporation by DuPont through the merger ofCardinalis Merger Sub, Inc. , a wholly owned subsidiary of DuPont, with and intoRogers Corporation , withRogers Corporation surviving the merger as a wholly owned subsidiary of DuPont. Company shareholders approved the merger agreement at a special shareholder meeting held onJanuary 25, 2022 . The 25 --------------------------------------------------------------------------------
transaction is expected to close late in the second quarter or early in the third quarter of 2022, subject to the satisfaction of other customary closing conditions, including receipt of certain regulatory approvals.
COVID-19 Update
The global COVID-19 pandemic has affected and continues to affect Rogers' business, operations and demand from customers with the emergence and spread of new variants of the virus, such as Delta and Omicron, although to a lesser extent than in 2020, mainly due to the rollout of vaccinations. In response to the outbreak, Rogers prioritized the safety and well-being of its employees-including incentivizing vaccinations, implementing social distancing initiatives in its facilities, providing remote working arrangements for certain employees, expanding personal protective equipment usage, enhancing plant hygiene processes and extending employee benefits, while at the same time taking actions to preserve business continuity. Our non-manufacturing employees transitioned seamlessly to remote working arrangements and are effectively collaborating both internally and with our customers. In some cases, based on local conditions, non-manufacturing employees have returned to their worksites. Recent surges in COVID-19 cases inShanghai, China have resulted in lockdowns in the city, as well as various restrictions in the nearby city ofSuzhou, China . These measures have not disrupted our manufacturing efforts, however, they are causing logistics challenges. We expect that the COVID-19 pandemic will have a continuing but uncertain impact on our business and operations in the short- and medium-term.
Due to the above circumstances and as described generally in this Form 10-Q, our
results of operations for the three months ended
Executive Summary
The following key highlights and factors should be considered when reviewing our results of operations, financial position and liquidity:
•In the first quarter of 2022 as compared to the first quarter of 2021, our net sales increased 8.3% to$248.3 million , our gross margin decreased approximately 460 basis points to 34.4% from 39.0%, and operating income decreased approximately 820 basis points to 8.0% from 16.2%. •With respect to other operating (income) expense, net, we recognized income of$0.5 million and expense of$1.2 million in the first quarter of 2022 and 2021, respectively, primarily related to the financial impacts from the fire at our UTIS manufacturing facility in Ansan,South Korea . •Our net sales and gross margin results were tempered in the first quarter of 2022 due to continued supply chain disruptions, which we expect to continue into the second quarter of 2022.
•In the first quarter of 2022, we incurred
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--------------------------------------------------------------------------------Results of Operations
The following table sets forth, for the periods indicated, selected operations data expressed as a percentage of net sales:
Three Months Ended
March 31, 2022 March 31, 2021
Net sales 100.0 % 100.0 %
Gross margin 34.4 % 39.0 %
Selling, general and administrative expenses 23.2 % 18.5 %
Research and development expenses 3.3 % 3.1 %
Restructuring and impairment charges - % 0.7 %
Other operating (income) expense, net (0.1) % 0.5 %
Operating income 8.0 % 16.2 %
Equity income in unconsolidated joint ventures 0.5 % 1.0 % Other income (expense), net 0.1 % 1.3 % Interest expense, net (0.4) % (0.3) % Income before income tax expense 8.2 % 18.2 % Income tax expense 1.5 % 4.6 % Net income 6.7 % 13.6 %Net Sales and Gross Margin Three Months Ended (Dollars in thousands) March 31, 2022 March 31, 2021 Net sales$ 248,266 $ 229,265 Gross margin$ 85,394 $ 89,499 Percentage of net sales 34.4 % 39.0 % Net sales increased by 8.3% in the first quarter of 2022 compared to the first quarter of 2021. Our AES andEMS operating segments had net sales increases of 1.0% and 20.0%, respectively. The increase in net sales was primarily due to higher net sales in the EV/HEV market in our AES operating segment and higher net sales in the general industrial, consumer and EV/HEV markets in ourEMS operating segment. The increase was partially offset by lower net sales in the wireless infrastructure, ADAS and aerospace and defense markets in our AES operating segment and lower net sales in the portable electronics market in ourEMS operating segment. Additionally, ourEMS operating segment net sales increased by$11.1 million , or 4.8%, reflecting the impact from our acquisition of Silicone Engineering. Net sales were unfavorably impacted by foreign currency impacts of$4.1 million , or 1.8%, due to the depreciation in value of the euro relative to theU.S. dollar. Gross margin as a percentage of net sales decreased approximately 460 basis points to 34.4% in the first quarter of 2022 compared to 39.0% in the first quarter of 2021. Gross margin in the first quarter of 2022 was unfavorably impacted by unfavorable yield performance, higher fixed overhead expenses and higher freight, duties and tariffs expenses in our AES andEMS operating segments, as well as unfavorable product mix in our AES operating segment and unfavorable productivity performance in ourEMS operating segment. This was partially offset by the favorable impacts of commercial actions taken, higher volume and favorable absorption of fixed overhead costs in our AES andEMS operating segments. Supply constraints on raw material and labor availability moderated production levels for ourEMS operating segment, creating operational inefficiencies, which negatively impacted our gross margin. Further, the continuation of the global semiconductor chip shortage and its impact on our customers' ability to continue to manufacture has negatively impacted our net sales, particularly in the ADAS market segment, for our AES operating segment. The recent COVID-19 outbreaks, particularly inAsia , adversely impacted our customers' ability to continue manufacturing operations, which in turn negatively impacted our net sales for both our AES andEMS operating segments in the first quarter of 2022. Additionally, the impacts of the war inUkraine , including sanctions and export controls, has impacted the production efforts of suppliers for certain raw materials, both to us and our customers, which could potentially have an impact on our net sales, as well as our gross margin, in the latter 27 -------------------------------------------------------------------------------- half of 2022, for our AES andEMS operating segments. The global supply chain disruptions experienced in 2022 to-date and their impacts to our net sales and gross margin are expected to continue further into 2022.
Selling, General and Administrative Expenses
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Selling, general and administrative expenses $ 57,705 $ 42,413
Percentage of net sales 23.2 % 18.5 %
Selling, general and administrative (SG&A) expenses increased 36.1% in the first
quarter of 2022 from the first quarter of 2021, primarily due a $9.1 million
increase in total compensation and benefits, a $4.4 million increase in
professional services, a $1.6 million increase in software expenses and a $1.2
million increase in other intangible asset amortization expense, partially
offset by a $0.9 million decrease in depreciation expense.
The increase in total compensation and benefits was primarily due to a $6.5
discretionary RESIP contribution and a $2.2 million impact for retention awards
issued in connection with the DuPont merger. The increase in professional
services expense is primarily due to $2.8 million of expenses incurred related
to the merger with DuPont and $0.5 million of expenses incurred related to our
acquisition of Silicone Engineering.
Research and Development Expenses
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Research and development expenses
3.3 % 3.1 %
R&D expenses increased 15.2% in the first quarter of 2022 from the first quarter
of 2021 due to increases in total compensation and benefits, professional
services expenses and depreciation expense, partially offset by a decrease in
laboratory expenses.
Restructuring and Impairment Charges and Other Operating (Income) Expense, Net
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Restructuring and impairment charges $ 69 $ 1,506
Other operating (income) expense, net $ (531) $ 1,215
We incurred restructuring charges and related expenses associated with our
manufacturing footprint optimization plans involving certain Europe and Asia
manufacturing locations. We recognized an immaterial amount of restructuring
charges and related expenses pertaining to these restructuring projects in the
first quarter of 2022. For additional information, refer to "Note 15 -
Supplemental Financial Information" to the condensed consolidated financial
statements in Part I, Item 1 of this Form 10-Q.
With respect to other operating (income) expense, net, we recognized income of
$0.5 million and expense of $1.2 million in the first quarter of 2022 and 2021,
respectively, primarily related to the financial impacts from the fire at our
UTIS manufacturing facility in Ansan, South Korea . The impact in the first
quarter of 2022 primarily consisted of certain insurance recoveries, partially
offset professional service costs, compensation and benefits for certain of our
UTIS employees, costs incurred due to obligations under our manufacturing
facility lease agreement and inventory charges. The impact in the first quarter
of 2021 primarily consisted of write-offs of fixed assets and inventory
destroyed and/or damaged in the fire, professional services, costs incurred due
to obligations under our manufacturing facility lease agreement, compensation
and benefits for certain of our UTIS employees, partially offset by the
recognition of certain anticipated insurance recoveries. For additional
information, refer to "Note 15 - Supplemental Financial Information" to the
condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
Equity Income in
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Equity income in unconsolidated joint ventures $ 1,275 $ 2,181
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As of March 31, 2022 , we had two unconsolidated joint ventures, each 50% owned:
Rogers INOAC Corporation (RIC) and Rogers INOAC Suzhou Corporation (RIS). Equity
income in those unconsolidated joint ventures decreased 41.5% in the first
quarter of 2022 from the first quarter of 2021. On a quarter-to-date basis, the
decrease was due to lower net sales and unfavorable productivity and operational
performance for RIC, as well as unfavorable productivity and operational
performance for RIS, partially offset by higher net sales for RIS.
Other Income (Expense), Net
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Other income (expense), net $ 267 $ 2,968
Other income (expense), net decreased to expense of $0.3 million in the first
quarter of 2022 from income of $3.0 million in the first quarter of 2021. On a
quarter-to-date basis, the decrease was due to unfavorable impacts from our
copper derivative contracts and foreign currency transactions.
Interest Expense, Net
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Interest expense, net $ (1,069) $ (607)
Interest expense, net, increased by 76.1% in the first quarter of 2022 from the
first quarter of 2021. The increase on a quarter-to-date basis was primarily due
to a higher weighted-average outstanding balance for our borrowings under our
revolving credit facility. We expect interest expense, net to increase on
quarter-to-date and year-to-date bases in the second quarter of 2022 from the
second quarter of 2021, primarily due to recent borrowings under our revolving
credit facility to complete an acquisition.
Income Taxes
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Income tax expense $ 3,764 $ 10,517
Effective tax rate 18.5 % 25.2 %
Our effective income tax rate was 18.5% and 25.2% for the three months ended
March 31, 2022 and 2021, respectively. The decrease from the first quarter of
2021 was primarily due to the beneficial impact of a decrease in current quarter
accruals for uncertain tax positions, as well as an increase in the windfall tax
benefits associated with stock compensation.
Operating Segment
Advanced Electronics Solutions
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Net sales $ 133,153 $ 131,892
Operating income $ 1,304 $ 14,849
AES net sales increased by 1.0% in the first quarter of 2022 compared to the
first quarter of 2021. The increase in net sales over the first quarter of 2021
was primarily driven by higher net sales in the EV/HEV market, partially offset
by lower net sales in the wireless infrastructure, ADAS and aerospace and
defense markets. Net sales were unfavorably impacted by foreign currency
fluctuations of $3.6 million , or 2.7%, due to the depreciation in value of the
euro relative to the U.S. dollar.
Operating income decreased by 91.2% in the first quarter of 2022 from the first
quarter of 2021. The decrease in operating income was primarily due to
unfavorable year-over-year changes in shared service operating expense
allocations driven to costs incurred related to the DuPont merger. The decrease
in operating income was also due to unfavorable yield performance, higher fixed
overhead expenses, higher freight, duties and tariffs expenses and unfavorable
product mix, partially offset by the favorable impacts of commercial actions
taken, higher volume and favorable absorption of fixed overhead costs. As a
percentage of net sales, operating income in the first quarter of 2022 was 1.0%,
an approximately 1,030 basis point decrease as compared to the 11.3% reported in
the first quarter of 2021.
The continuation of the global semiconductor chip shortage and its impact on our
customers' ability to continue to manufacture has negatively impacted our net
sales, particularly in the ADAS market segment. Further, the recent COVID-19
outbreaks, particularly in Asia , adversely impacted our customers' ability to
continue manufacturing operations, which in turn negatively
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impacted our net sales in the first quarter of 2022. Additionally, the impacts
of the war in Ukraine , including sanctions and export controls, has impacted the
production efforts of suppliers for certain raw materials, both to us and our
customers, which could potentially have an impact on our net sales, as well as
our gross margin, in the latter half of 2022. The global supply chain
disruptions experienced in 2022 to-date and their impacts to our net sales and
gross margin are expected to continue further into 2022.
Elastomeric Material Solutions
Three Months Ended
(Dollars in thousands) March 31, 2022 March 31, 2021
Net sales $ 110,240 $ 91,849
Operating income $ 16,997 $ 20,077
EMS net sales increased by 20.0% in the first quarter of 2022 compared to the
first quarter of 2021. The increase in net sales over the first quarter of 2021
was primarily driven by $11.1 million in net sales, or 12.1%, reflecting the
impact from our acquisition of Silicone Engineering, as well as higher net sales
in the general industrial, EV/HEV and consumer markets, partially offset by
lower net sales in the portable electronics market. Net sales were unfavorably
impacted by foreign currency fluctuations of $0.5 million , or 0.5%, due to the
depreciation in value of the euro relative to the U.S. dollar.
Operating income decreased by 15.3% in the first quarter of 2022 from the first
quarter of 2021. The decrease in operating income was primarily due to
unfavorable year-over-year changes in shared service operating expense
allocations due to costs incurred related to the DuPont merger. The decrease in
operating income was also due to unfavorable yield performance, higher fixed
overhead expenses, higher freight, duties and tariffs expenses and unfavorable
productivity performance, partially offset by the favorable impacts of
commercial actions taken, higher volume and favorable absorption of fixed
overhead costs. As a percentage of net sales, operating income in the first
quarter of 2022 was 15.4%, an approximately 650 basis point decrease as compared
to the 21.9% reported in the first quarter of 2021.
Supply constraints on raw material and labor availability moderated production
levels, creating operational inefficiencies, which negatively impacted our gross
margin. Further, the recent COVID-19 outbreaks, particularly in Asia , adversely
impacted our customers' ability to continue manufacturing operations, which in
turn negatively impacted our net sales in the first quarter of 2022.
Additionally, the impacts of the war in Ukraine , including sanctions and export
controls, has impacted the production efforts of suppliers for certain raw
materials, both to us and our customers, which could potentially have an impact
on our net sales, as well as our gross margin, in the latter half of 2022. The
global supply chain disruptions experienced in 2022 to-date and their impacts to
our net sales and gross margin are expected to continue further into 2022.
Other
Three Months Ended
(Dollars in thousands)
$ 4,873 $ 5,524 Operating income$ 1,590 $ 2,267 Net sales in this segment decreased by 11.8% in the first quarter of 2022 from the first quarter of 2021. The decrease in net sales over the first quarter of 2021 was primarily driven by lower net sales in the automotive market. Operating income decreased 29.9% in the first quarter of 2022 compared to the first quarter of 2021. The decrease in operating income was primarily driven by unfavorable product mix and lower volume. As a percentage of net sales, operating income in the first quarter of 2022 was 32.6%, a 840 basis point decrease as compared to the 41.0% reported in the first quarter of 2021.
Liquidity, Capital Resources and Financial Position
We believe that our existing sources of liquidity and cash flows that we expect
to generate from our operations, together with our available credit facilities,
will be sufficient to fund our operations, currently planned capital
expenditures, research and development efforts and our debt service commitments,
for at least the next 12 months. Our merger agreement with DuPont does not
restrict these currently planned capital expenditures. We regularly review and
evaluate the adequacy of our cash flows, borrowing facilities and banking
relationships in an effort to ensure that we have the appropriate access to cash
to fund both our near-term operating needs and our long-term strategic
initiatives.
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--------------------------------------------------------------------------------The following table illustrates the location of our cash and cash equivalents by our three major geographic areas:
(Dollars in thousands) March 31, 2022 December 31, 2021 United States$ 59,564 $ 76,621 Europe 38,093 56,034 Asia 84,487 99,641
Total cash and cash equivalents
Approximately$122.6 million of our cash and cash equivalents were held by non-U.S. subsidiaries as ofMarch 31, 2022 . We did not make any changes in the three months endedMarch 31, 2022 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of ourAsia cash and cash equivalents are held, we continue to assert that historical foreign earnings are indefinitely reinvested. (Dollars in thousands) March 31, 2022 December 31, 2021 Key Financial Position Accounts: Cash and cash equivalents$ 182,144 $ 232,296 Accounts receivable, net$ 173,387 $ 163,092 Inventories$ 152,150 $ 133,384
Borrowings under revolving credit facility
190,000
Changes in key financial position accounts and other significant changes in our statements of financial position fromDecember 31, 2021 toMarch 31, 2022 were as follows: •Accounts receivable, net increased 6.3% to$173.4 million as ofMarch 31, 2022 from$163.1 million as ofDecember 31, 2021 . The increase from year-end was primarily due to higher net sales at the end of the first quarter of 2022 compared to at the end of 2021, partially offset by the receipt of$0.8 million in previously recognized UTIS fire insurance receivables for property damage claims. •Inventories increased 14.1% to$152.2 million as ofMarch 31, 2022 , from$133.4 million as ofDecember 31, 2021 , primarily driven by raw material cost increases as well as the ramp up of raw material purchases and production efforts to meet anticipated demand. Three Months Ended (Dollars in thousands) March 31, 2022 March 31, 2021Key Cash Flow Measures : Net cash (used in) provided by operating activities$ (13,723) $ 36,521 Net cash used in investing activities$ (25,987) $ (3,602) Net cash used in financing activities $
(9,694)
As ofMarch 31, 2022 , cash and cash equivalents were$182.1 million as compared to$232.3 million as ofDecember 31, 2021 , a decrease of$50.2 million , or 21.6%. This decrease was primarily due to cash flows generated by operations, partially offset by$28.2 million in capital expenditures and$10.5 million in tax payments related to net share settlement of equity awards. In 2022, we expect capital spending to be in the range of approximately$155.0 million to$165.0 million . We plan to fund our capital spending in 2022 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.
Restrictions on Payment of Dividends
The Fourth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to$20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 as ofMarch 31, 2022 . Under the terms of the merger agreement with DuPont, we are restricted from paying any dividends or other distributions to our shareholders, or making any material modifications to our dividend policy, without the prior approval of DuPont. 31 --------------------------------------------------------------------------------
Contingencies
During the first quarter of 2022, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to "Note 12 - Commitments and Contingencies" to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.
Critical Accounting Policies
There were no material changes in our critical accounting policies during the first quarter of 2022.
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