News Details

ITASCA, Ill.--(BUSINESS WIRE)--Oct. 27, 2014-- Knowles Corporation (NYSE: KN), a market leader and global supplier of advanced micro-acoustic solutions and specialty components, today announced results for the third quarter ended September 30, 2014 and provided projections for the fourth quarter of 2014.

“Our third quarter was in line with the preliminary results we issued earlier this month,” said Jeffrey Niew, President and CEO of Knowles. “While the impact of the microphone situation we experienced during the quarter presents a challenge, we continue to be encouraged by the broader trends we are experiencing in our Mobile Consumer Electronics and Specialty Components segments. Mobile consumer revenue was up 9.5 percent sequentially driven primarily by growth in China and improving trends at a Korean OEM. We also saw record quarterly revenue in our hearing health business within Specialty Components on broad-based strength at hearing aid OEMs.”

“In addition, our restructuring efforts remain on track and we expect significant margin improvement in Q4 and in 2015 driven by the closure of our Vienna production facility, the ramp up of our Cebu plant, and the continued consolidation of our capacitor facilities.”

Financial Highlights

The following highlights the Company’s financial performance on both a GAAP and supplemental non-GAAP basis. The Company provides supplemental information regarding its gross profit, operating expenses, earnings before interest and income taxes, adjusted earnings before interest and income taxes, net earnings and diluted earnings per share on a non-GAAP basis that excludes stock compensation as well as certain intangibles amortization expense, restructuring and production transfer costs, and other charges which management considers to be outside our core operating results. Non-GAAP results are not presented in accordance with GAAP and may not be comparable to similarly titled non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is attached to this press release.

• Revenue for the third quarter of 2014 was $300.8 million compared with $311.6 million reported in the same period one year ago.
• Gross profit for the third quarter of 2014 was $52.2 million compared with gross profit of $118.0 million reported in the same period one year ago. Non-GAAP gross profit for the third quarter of 2014 was $94.4 million compared with non-GAAP gross profit of $122.0 million reported in the same period one year ago.
• Loss before interest and income taxes for the third quarter of 2014 was $(14.1) million compared with earnings before interest and income taxes of $50.5 million in the year ago period. Current period results include $15.0 million from the resolution of customer claims for products no longer produced, $13.9 million of fixed asset and related inventory charges, $10.6 million from amortization of intangibles, $8.4 million in production transfer costs, $5.8 million in restructuring charges, and $2.6 million in stock-based compensation.
• Adjusted earnings before interest and income taxes for the third quarter of 2014 were $42.2 million compared with $67.5 million reported in the same period one year ago.
• Benefit from income taxes for the third quarter of 2014 was $1.5 million compared with a benefit from income taxes of $6.0 million reported in the same period one year ago. Benefit from income taxes for the third quarter of 2014 included discrete tax expense of $1.8 million, primarily related to certain 2013 foreign withholding taxes.
• Net loss for the third quarter of 2014 was $(14.6) million compared with net earnings of $44.3 million reported in the same period one year ago. Non-GAAP net earnings for the third quarter of 2014 was $32.7 million compared with $50.9 million reported in the same period one year ago.
• Loss per diluted share for the third quarter of 2014 was $(0.17) compared with EPS of $0.52 per diluted share in the same period one year ago.
• Non-GAAP EPS for the third quarter of 2014 was $0.38 per diluted share, which includes a $0.02 per share expense from certain discrete tax effects, compared with $0.60 in the same period one year ago.

Fourth Quarter 2014 Outlook

The forward looking guidance for the quarter ending December 31, 2014, which has been compiled below, is based on our assumptions, and expected business trends and conditions:

• Revenue: $280 million to $300 million
• Non-GAAP Gross Margin: 32 percent to 34 percent
• Adjusted EBIT Margin: 12 percent to 14 percent
• Non-GAAP EPS: $0.30 to $0.38

Q4 2014 GAAP results are expected to include approximately $3 million in stock based compensation, $10 million in amortization of intangibles, $5 million to $9 million in production transfer related costs, $2 million to $3 million in restructuring costs, and related tax effects on these items.

Webcast and Conference Call Information

Investors can listen to a live or replay webcast of the Company’s quarterly financial conference call at http://investor.knowles.com. The live webcast will begin today at 3:30 p.m. Central time. The webcast replay will be available after 7:00 p.m. Central time.

Investors can also listen to the live call at 3:30 p.m. Central time today by calling (877) 359-9508 (United States) or (224) 357-2393 (International). The conference call replay will be available after 7:00 p.m. Central time on October 27, 2014 through 11:59 p.m. Central time on November 3, 2014 at (855) 859-2056 (United States) or (404) 537-3406 (International). The access code is 21921679.

About Knowles:

Knowles Corporation (NYSE: KN) is a market leader and global supplier of advanced micro-acoustic solutions and specialty components serving the mobile communications, consumer electronics, medical technology, military, aerospace and industrial markets. Knowles has a leading position in micro-electro-mechanical systems microphones, speakers and receivers which are used in smartphones, tablets and mobile handsets. Knowles is also a leading manufacturer of transducers used in hearing aids and other medical devices and has a strong position in oscillators (timing devices) and capacitor components which enable various types of communication. Knowles’ focus on the customer, combined with unique technology, rigorous testing and global scale, helps to deliver innovative solutions and consistently dependable and precise products. Founded in 1946 and headquartered in Itasca, Illinois, Knowles has more than 11,000 employees in 36 locations around the world. For more information, visit www.knowles.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. The words “believe,” “project,” “expect,” and similar expressions, among others, generally identify forward-looking statements. The statements in this news release are based on current plans, expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes or results to differ materially from those outcomes or results that are projected, anticipated or implied in these statements. These risks and uncertainties include, but are not limited to: the pace and success of achieving the cost savings from our announced restructurings; fluctuations in our stock's market price; fluctuations in operating results and cash flows; our ability to prevent or identify quality issues in our products or to promptly remedy any such issues that are identified; the timing related to the resumption of our production and shipments of the new microphone products referenced in this release; unexpected technological obsolescence and the emergence of new technologies; changes in macroeconomic conditions, both in the U.S. and internationally; our financial performance during and after the current economic conditions; foreign currency exchange rate fluctuations; our ability to maintain and improve costs, quality and delivery for our customers; our ability to qualify our products and facilities with customers; risks and costs inherent in litigation; our ability to obtain, protect, defend or monetize our intellectual property rights; whether our announced restructurings will adversely affect our cost structure; increases in the costs of critical raw materials and components; availability of raw materials and components; competition; anticipated growth for us and adoption of our technologies and solutions that may not occur; managing rapid growth; managing rapid declines in customer demand for certain of our products or solutions and other related customer challenges that may occur; our ability to successfully consummate acquisitions and divestitures; our obligations and risks under various transaction agreements that were executed as part of our spin-off from our former parent company, Dover Corporation; managing the integration of our businesses which were included in our recent spin-off from Dover Corporation; managing new product ramps and introductions for our customers; risks associated with international sales and operations; retaining key personnel; our dependence on a limited number of large customers; business and competitive factors generally affecting the advanced micro-acoustic solutions and specialty components industry, our customers and our business; other factors that we may not have currently identified or quantified; and other risks, relevant factors and uncertainties identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, subsequent Reports on Forms 10-Q and 8-K and our other filings we make with the SEC. Knowles disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Supplemental Information

The financial results disclosed in this release include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP results included in this press release, Knowles has presented supplemental, non-GAAP gross profit, operating expenses, earnings before interest and income taxes, adjusted earnings before interest and income taxes, net earnings, diluted earnings per share to facilitate evaluation of Knowles’ operating performance. These non-GAAP financial measures exclude certain amounts that are included in the most directly comparable GAAP measure. In addition, these non-GAAP financial measures do not have standard meanings and may vary from similarly titled non-GAAP financial measures used by other companies. Knowles uses non-GAAP measures as supplements to its GAAP results of operations in evaluating certain aspects of its business, and its Board of Directors and executive management team focus on non-GAAP items as key measures of Knowles’ performance for business planning purposes. These measures assist Knowles in comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles’ opinion, do not reflect its core operating performance. Knowles believes that its presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation table accompanying this release.

⁽¹⁾ On February 28, 2014, Dover shareholders of record as of the close of business on February 19, 2014 received one share of Knowles common stock for every two shares of Dover's common stock held as of the record date. The computation of basic and diluted earnings per common share for all periods through December 31, 2013 is calculated using the shares distributed on February 28, 2014.

⁽¹⁾ On February 28, 2014, Dover shareholders of record as of the close of business on February 19, 2014 received one share of Knowles common stock for every two shares of Dover's common stock held as of the record date. The computation of basic and diluted earnings per common share for all periods through December 31, 2013 is calculated using the shares distributed on February 28, 2014.

Notes:

⁽¹⁾ In addition to the GAAP financial measures included herein, Knowles has presented certain non-GAAP financial measures. Knowles uses non-GAAP measures as supplements to its GAAP results of operations in evaluating certain aspects of its business, and its Board of Directors and executive management team focus on non-GAAP items as key measures of Knowles' performance for business planning purposes. These measures assist Knowles in comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles' opinion, do not reflect its core operating performance. Knowles believes that its presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance.

⁽²⁾ Production Transfer Costs represent one-time and duplicate costs incurred to migrate manufacturing to new or existing facilities in Asia. These amounts are included in the corresponding Gross Profit, Research and Development Expenses, Selling and Administrative Expenses, Operating Expenses and Earnings Before Interest and Income Taxes for each period presented.

⁽³⁾ In the third quarter of 2014, Other represents a charge related to the resolution of customer claims for products no longer produced.

⁽⁴⁾ On February 28, 2014, Dover shareholders of record as of the close of business on February 19, 2014 received one share of Knowles common stock for every two shares of Dover's common stock held as of the record date. The computation diluted earnings per common share for all periods through December 31, 2013 is calculated using the shares distributed on February 28, 2014.

⁽⁵⁾ The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.

Source: Knowles Corporation

Financial Contact:
Knowles Investor Relations
Mike Knapp
Phone: (630) 238-5236
Email: mike.knapp@knowles.com
Media Contact:
Knowles Communications
Melissa York
Phone: (630) 238-5242
Email: melissa.york@knowles.com