Company Quick10K Filing
Knowles
Price20.83 EPS1
Shares94 P/E18
MCap1,955 P/FCF179
Net Debt85 EBIT121
TEV2,040 TEV/EBIT17
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-29
10-Q 2020-03-31 Filed 2020-05-05
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-10-28
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-04-30
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-07-30
10-Q 2018-03-31 Filed 2018-04-30
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-10-30
10-Q 2017-06-30 Filed 2017-07-31
10-Q 2017-03-31 Filed 2017-04-28
10-K 2016-12-31 Filed 2017-02-21
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-25
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-28
8-K 2020-09-04
8-K 2020-07-29
8-K 2020-06-12
8-K 2020-05-15
8-K 2020-05-04
8-K 2020-04-27
8-K 2020-04-13
8-K 2020-02-24
8-K 2020-02-04
8-K 2020-01-24
8-K 2019-12-20
8-K 2019-10-29
8-K 2019-10-24
8-K 2019-10-16
8-K 2019-09-17
8-K 2019-09-11
8-K 2019-07-24
8-K 2019-06-06
8-K 2019-05-31
8-K 2019-05-09
8-K 2019-04-24
8-K 2019-04-04
8-K 2019-02-07
8-K 2018-10-24
8-K 2018-07-24
8-K 2018-06-22
8-K 2018-06-18
8-K 2018-05-01
8-K 2018-04-26
8-K 2018-02-16
8-K 2018-02-07

KN 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 a2020630exhibit311.htm
EX-31.2 a2020630exhibit312.htm
EX-32.1 a2020630exhibit321.htm

Knowles Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02014201620182020
Assets, Equity
0.40.30.20.0-0.1-0.22014201620182020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12014201620182020
Ops, Inv, Fin

kn-20200630
2020000158752312/31June 30, 202091,641,1092020Q210-QfalseJune 30, 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020.


or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number: 001-36102

Knowles Corporation
(Exact name of registrant as specified in its charter)

Delaware90-1002689
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

1511 Maplewood Drive, Itasca, IL
(Address of Principal Executive Offices)


60143
(Zip Code)

(630) 250-5100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, $0.01 par value per shareKNNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No  

The number of shares outstanding of the registrant’s common stock as of July 27, 2020 was 91,641,109.




Knowles Corporation
Form 10-Q
Table of Contents

Page



Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except share and per share amounts)
(unaudited)

 Three Months Ended June 30, Six Months Ended June 30,
 2020201920202019
Revenues$152.2  $205.2  $315.3  $385.0  
Cost of goods sold103.5  128.4  209.0  239.2  
Restructuring charges - cost of goods sold0.9  0.4  2.3  0.9  
Gross profit47.8  76.4  104.0  144.9  
Research and development expenses22.6  25.0  48.3  49.7  
Selling and administrative expenses31.1  38.9  67.3  76.5  
Restructuring charges6.5  0.1  10.4  1.9  
Operating expenses60.2  64.0  126.0  128.1  
Operating (loss) earnings(12.4) 12.4  (22.0) 16.8  
Interest expense, net4.1  3.6  7.8  7.1  
Other expense (income), net1.9  (0.5) (0.8) 0.5  
(Loss) earnings before income taxes and discontinued operations(18.4) 9.3  (29.0) 9.2  
Provision for income taxes1.1  3.4  3.3  6.0  
(Loss) earnings from continuing operations(19.5) 5.9  (32.3) 3.2  
Earnings from discontinued operations, net    3.7    
Net (loss) earnings$(19.5) $5.9  $(28.6) $3.2  
(Loss) earnings per share from continuing operations:
Basic$(0.21) $0.06  $(0.35) $0.04  
Diluted$(0.21) $0.06  $(0.35) $0.03  
Earnings per share from discontinued operations:
Basic$  $  $0.04  $  
Diluted$  $  $0.04  $  
Net (loss) earnings per share:
Basic$(0.21) $0.06  $(0.31) $0.04  
Diluted$(0.21) $0.06  $(0.31) $0.03  
Weighted-average common shares outstanding:
Basic91,589,156  91,018,213  91,721,440  90,780,035  
Diluted91,589,156  92,507,279  91,721,440  92,184,274  
See accompanying Notes to Consolidated Financial Statements
1

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KNOWLES CORPORATION 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(in millions)
(unaudited)

 Three Months Ended June 30, Six Months Ended June 30,
 2020201920202019
Net (loss) earnings$(19.5) $5.9  $(28.6) $3.2  
Other comprehensive earnings (loss), net of tax
Foreign currency translation3.4  (2.5) (4.1) 1.5  
Employee benefit plans:
Amortization or settlement of actuarial losses and prior service costs
0.3  0.2  0.2  0.3  
Net change in employee benefit plans0.3  0.2  0.2  0.3  
Changes in fair value of cash flow hedges:
Unrealized net gains (losses) arising during period
0.3  (0.4) (0.9) 0.2  
Net losses reclassified into earnings0.3    0.4  0.1  
Total cash flow hedges0.6  (0.4) (0.5) 0.3  
Other comprehensive earnings (loss), net of tax4.3  (2.7) (4.4) 2.1  
Comprehensive (loss) earnings$(15.2) $3.2  $(33.0) $5.3  

See accompanying Notes to Consolidated Financial Statements

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KNOWLES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
(unaudited)

 June 30, 2020December 31, 2019
Current assets:  
Cash and cash equivalents$168.3  $78.4  
Receivables, net of allowances of $1.9 and $0.8101.6  159.6  
Inventories, net162.5  141.8  
Prepaid and other current assets10.6  8.6  
Total current assets443.0  388.4  
Property, plant, and equipment, net192.8  206.5  
Goodwill909.9  909.9  
Intangible assets, net85.2  91.7  
Operating lease right-of-use assets31.3  33.6  
Other assets and deferred charges25.5  24.5  
Total assets$1,687.7  $1,654.6  
Current liabilities:  
Current maturities of long-term debt$100.0  $  
Accounts payable75.0  87.7  
Accrued compensation and employee benefits21.5  32.1  
Operating lease liabilities9.8  9.3  
Other accrued expenses19.7  16.5  
Federal and other taxes on income5.8  5.9  
Total current liabilities231.8  151.5  
Long-term debt160.9  156.8  
Deferred income taxes2.2  2.2  
Long-term operating lease liabilities22.4  25.1  
Other liabilities26.0  29.9  
Liabilities of discontinued operations0.6  0.6  
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock - $0.01 par value; 10,000,000 shares authorized; none issued
    
Common stock - $0.01 par value; 400,000,000 shares authorized; 92,637,218 and 91,641,109 shares issued and outstanding at June 30, 2020, respectively, and 91,701,745 shares issued and outstanding at December 31, 2019
0.9  0.9  
Treasury stock - at cost; 996,109 shares at June 30, 2020(15.0)   
Additional paid-in capital1,578.0  1,574.7  
Accumulated deficit(203.7) (175.1) 
Accumulated other comprehensive loss(116.4) (112.0) 
Total stockholders' equity1,243.8  1,288.5  
Total liabilities and stockholders' equity$1,687.7  $1,654.6  

See accompanying Notes to Consolidated Financial Statements

3

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KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)

 Common StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance at March 31, 2020$0.9  $(15.0) $1,572.8  $(184.2) $(120.7) $1,253.8  
Net loss—  —  —  (19.5) —  (19.5) 
Other comprehensive earnings, net of tax—  —  —  —  4.3  4.3  
Stock-based compensation expense—  —  4.1  —  —  4.1  
Common stock issued for exercise of stock options—  —  1.3  —  —  1.3  
Tax on restricted and performance stock unit vesting—  —  (0.2) —  —  (0.2) 
Balance at June 30, 2020$0.9  $(15.0) $1,578.0  $(203.7) $(116.4) $1,243.8  

 Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance at March 31, 2019$0.9  $1,548.7  $(226.9) $(106.2) $1,216.5  
Net earnings—  —  5.9  —  5.9  
Other comprehensive loss, net of tax—  —  —  (2.7) (2.7) 
Stock-based compensation expense—  7.3  —  —  7.3  
Common stock issued for exercise of stock options—  0.9  —  —  0.9  
Tax on restricted stock unit vesting—  (0.7) —  —  (0.7) 
Balance at June 30, 2019$0.9  $1,556.2  $(221.0) $(108.9) $1,227.2  

 
See accompanying Notes to Consolidated Financial Statements


 

















4

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KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)

 Common StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance at December 31, 2019$0.9  $  $1,574.7  $(175.1) $(112.0) $1,288.5  
Net loss—  —  —  (28.6) —  (28.6) 
Other comprehensive loss, net of tax—  —  —  —  (4.4) (4.4) 
Repurchase of common stock—  (15.0) —  —  —  (15.0) 
Stock-based compensation expense—  —  7.6  —  —  7.6  
Common stock issued for exercise of stock options and other—  —  1.7  —  —  1.7  
Tax on restricted and performance stock unit vesting—  —  (6.0) —  —  (6.0) 
Balance at June 30, 2020$0.9  $(15.0) $1,578.0  $(203.7) $(116.4) $1,243.8  

 Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance at December 31, 2018$0.9  $1,545.9  $(224.2) $(111.0) $1,211.6  
Net earnings—  —  3.2  —  3.2  
Other comprehensive earnings, net of tax—  —  —  2.1  2.1  
Stock-based compensation expense—  14.0  —  —  14.0  
Common stock issued for exercise of stock options and other—  1.8  —  —  1.8  
Tax on restricted stock unit vesting—  (5.5) —  —  (5.5) 
Balance at June 30, 2019$0.9  $1,556.2  $(221.0) $(108.9) $1,227.2  

 
See accompanying Notes to Consolidated Financial Statements
5

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KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 Six Months Ended June 30,
20202019
Operating Activities  
Net (loss) earnings$(28.6) $3.2  
Adjustments to reconcile net (loss) earnings to cash from operating activities:
Depreciation and amortization30.5  27.0  
Stock-based compensation7.6  14.0  
Non-cash interest expense and amortization of debt issuance costs4.3  4.1  
Write-off of fixed assets1.7    
Deferred income taxes(1.0) (0.7) 
Other, net(2.2) 1.1  
Changes in assets and liabilities (excluding effects of foreign exchange):
Receivables, net58.1  5.7  
Inventories, net(22.1) (17.7) 
Prepaid and other current assets(2.6) (3.0) 
Accounts payable(10.9) (9.1) 
Accrued compensation and employee benefits(10.2) (11.2) 
Other accrued expenses3.6  1.0  
Accrued taxes(2.8) 0.8  
Other non-current assets and non-current liabilities(0.4) (4.3) 
Net cash provided by operating activities25.0  10.9  
Investing Activities  
Additions to property, plant, and equipment(14.6) (24.5) 
Acquisitions of business (net of cash acquired)  (11.4) 
Net cash used in investing activities(14.6) (35.9) 
Financing Activities  
Borrowings under revolving credit facility100.0  10.0  
Repurchase of common stock(15.0)   
Tax on restricted and performance stock unit vesting(6.0) (5.5) 
Payments of finance lease obligations(0.9) (0.9) 
Payment of consideration owed for acquisitions  (0.2) 
Net proceeds from exercise of stock-based awards1.5  1.6  
Net cash provided by financing activities79.6  5.0  
Effect of exchange rate changes on cash and cash equivalents(0.1) 0.1  
Net increase (decrease) in cash and cash equivalents89.9  (19.9) 
Cash and cash equivalents at beginning of period78.4  73.5  
Cash and cash equivalents at end of period$168.3  $53.6  
Supplemental information - cash paid for:
Income taxes$8.2  $6.9  
Interest$4.1  $3.8  

See accompanying Notes to Consolidated Financial Statements
6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation

Description of Business - Knowles Corporation (NYSE:KN) is a market leader and global provider of advanced micro-acoustic, audio processing, and precision device solutions, serving the mobile consumer electronics, communications, medtech, defense, automotive, and industrial markets. The Company uses its leading position in micro-electro-mechanical systems ("MEMS") microphones and strong capabilities in audio processing technologies to optimize audio systems and improve the user experience in mobile, ear, and Internet of Things ("IoT") applications. Knowles is also a leader in acoustic components, high-end capacitors, and mmWave radio frequency solutions for a diverse set of markets. The Company's focus on the customer, combined with its unique technology, proprietary manufacturing techniques, rigorous testing, and global scale, enable the Company to deliver innovative solutions that optimize the user experience. References to "Knowles," "the Company," "we," "our," and "us" refer to Knowles Corporation and its consolidated subsidiaries.

Financial Statement Presentation - The accompanying unaudited interim Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) for complete financial statements. These unaudited interim Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K.

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Management uses historical experience and all available information to make these estimates, including considerations for the impact of the COVID-19 pandemic on the macroeconomic environment. The situation related to the COVID-19 pandemic continues to be complex and rapidly evolving. The Company cannot reasonably estimate the duration of the COVID-19 pandemic or fully ascertain its impact on the Company’s future results and market capitalization, which could adversely impact estimates such as the recoverability of goodwill and long-lived assets and the realizability of deferred tax assets. The unaudited interim Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods.

On February 24, 2020, the Company announced that its Board of Directors had authorized a share repurchase program of up to $100 million of the Company's common stock. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. The actual timing, number, and share price of shares repurchased will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. Any shares repurchased will be held as treasury stock. During the six months ended June 30, 2020, the Company repurchased 996,109 shares of common stock for a total of $15.0 million. In connection with the COVID-19 pandemic, the Company has temporarily suspended share repurchases. However, the Company may resume the share repurchase program at any time when it believes it is prudent to do so and without further notice.

On December 20, 2019, the Company acquired substantially all of the assets of the MEMS Microphone Application-specific integrated circuit Design Business (“ASIC Design Business”). See Note 4. Acquisitions for additional information related to the transaction.

Non-cash Investing Activities - Purchases of property, plant, and equipment included in accounts payable at June 30, 2020 and 2019 were $3.3 million and $3.1 million, respectively. These non-cash amounts are not reflected as outflows to "Additions to property, plant, and equipment" within "Investing Activities" of the Consolidated Statements of Cash Flows for the respective periods.

Leases not yet Commenced - As of June 30, 2020, the Company has an additional operating lease for a research and development and administrative facility that has not yet commenced with fixed lease payments of approximately $5.0 million. The lease is expected to commence in fiscal 2020 with a lease term of approximately 5 years.

7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2. Recent Accounting Standards

Recently Issued Accounting Standards

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12 to simplify the accounting for income taxes. This guidance removes certain exceptions to the general principles in Accounting Standards Codification ("ASC") 740 and amends existing guidance to improve consistent application. The standard is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted and prospective application of the guidance is required. The Company has not yet determined the impact of the standard on its Consolidated Financial Statements or its adoption date.

3. Disposed and Discontinued Operations

Management and the Board of Directors periodically conduct strategic reviews of the Company's businesses.

On November 28, 2017, the Company completed the sale of its high-end oscillators business (“Timing Device Business”), part of the Precision Devices (“PD”) segment, for $130.0 million, plus purchase price adjustments for a net amount of $135.1 million. On July 7, 2016, the Company completed the sale of its speaker and receiver product line (“Speaker and Receiver Product Line”) for $45.0 million in cash, less purchase price adjustments for a net amount received of $40.6 million.

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the results of operations and financial positions of the Timing Device Business and Speaker and Receiver Product Line have been reclassified to discontinued operations for all periods presented as these disposals represent strategic shifts that had a major effect on the Company's results of operations.

Summarized results of the Company's discontinued operations are as follows:
(in millions)Six Months Ended June 30, 2020
Revenues$  
Cost of goods sold  
Gross profit  
Operating income  
Earnings from discontinued operations before taxes (1)
  
Benefit from income taxes (2)
(3.7) 
Earnings from discontinued operations, net of tax$3.7  
(1) The Company's policy is to not allocate interest expense to discontinued operations unless it is directly attributable to the operations. The discontinued operations did not have any such interest expense in the periods presented.
(2) The Company recorded a tax benefit for a refund received during the first quarter of 2020 related to the Timing Device Business.

Assets and liabilities of discontinued operations are summarized below:
(in millions)June 30, 2020December 31, 2019
Liabilities of discontinued operations:
Other liabilities (1)
$0.6  $0.6  
Total liabilities$0.6