Q2 Revenue In Line Driven by Solid Y/Y Growth in Microphones
Strong Sequential Revenue Growth Expected Through Remainder of 2017
ITASCA, Ill.--(BUSINESS WIRE)--
Knowles Corporation (NYSE: KN), a market leader and global supplier of
advanced micro-acoustic, audio processing, and precision device
solutions, today announced results for the second quarter ended June 30,
2017.
“We delivered Q2 revenue that was in line with the midpoint of our
guidance range,” said Jeffrey Niew, president and CEO of Knowles. “Sales
in our Audio segment were down 2 percent year-over-year and came in
largely as expected with robust microphone sales growth in IoT partially
offset by the Chinese handset inventory correction we referenced last
quarter. As anticipated, sales in our hearing health business decreased
from the prior year as a result of being more disciplined with our
pricing. In the Precision Device segment, Q2 sales grew about 4 percent
year-over-year due to stronger demand across our defense, industrial,
and medical markets. In addition, gross margin and EPS came in at the
high end of our guidance range, highlighting improved product mix and
disciplined cost controls.”
“We expect full year growth in revenue and EPS in 2017, with strong
sequential growth in Q3 and Q4. The industry trends around audio input
and improved performance continue to provide a favorable backdrop for us
as we enter the second half of the year. While we anticipate a
later-than-normal ramp at our North American customer and a more muted
Q3 recovery in China, we are uniquely positioned across our end markets
and well aligned with our customers’ roadmaps to deliver best in class
audio input solutions for their next generation platforms in 2017 and
beyond. Longer term, we continue to invest in higher value,
differentiated solutions, and remain the only supplier in the industry
with a broad based product portfolio, and control over MEMS, ASIC,
packaging, signal processing and software. In addition, design activity
around smart mics and our new DSP solutions is high and I am expecting
design wins this year that will drive revenue in 2018,” continued Niew.
Financial Highlights
The following table highlights the Company’s financial performance on
both a GAAP and supplemental non-GAAP basis for continuing operations*
(in millions except for per share data):
|
|
|
Q2FY17
|
|
Q1FY17
|
|
Q2FY16
|
|
Sequential
Change
|
|
Year Ago
Period Change
|
|
|
Revenue
|
|
$190.2
|
|
$193.7
|
|
$190.3
|
|
(2)%
|
|
Flat
|
|
|
Gross Profit
|
|
$71.7
|
|
$67.6
|
|
$72.9
|
|
6%
|
|
(2)%
|
|
|
(as % of revenue)
|
|
37.7%
|
|
34.9%
|
|
38.3%
|
|
|
|
|
|
|
Non-GAAP Gross Profit
|
|
$75.0
|
|
$73.7
|
|
$75.1
|
|
2%
|
|
Flat
|
|
|
(as % of revenue)
|
|
39.4%
|
|
38.0%
|
|
39.5%
|
|
|
|
|
|
|
Diluted loss per share**
|
|
$(0.34)
|
|
$(0.05)
|
|
$(0.08)
|
|
NM***
|
|
NM***
|
|
|
Non-GAAP Diluted Earnings Per Share
|
|
$0.13
|
|
$0.12
|
|
$0.13
|
|
8%
|
|
Flat
|
|
* Continuing operations excludes the results of our speaker and receiver
product line which was sold on July 7, 2016.
** Current period results include $21.3 million impairment of long-lived
assets, $6.3 million in stock-based compensation, $2.3 million from
amortization of intangibles, $2.2 million in restructuring charges, $2.0
million in production transfer costs and $1.4 million of amortization of
debt.
*** Not Meaningful
In addition to the GAAP results included in this press release, Knowles
has presented supplemental non-GAAP gross profit, earnings before
interest and income taxes, adjusted earnings before interest and income
taxes, non-GAAP diluted earnings (loss) per share, as well as other
metrics on a non-GAAP basis that exclude certain amounts that are
included in the most directly comparable GAAP measure to facilitate
evaluation of Knowles’ operating performance. Non-GAAP results are not
presented in accordance with GAAP. Non-GAAP information should be
considered a supplement to, and not a substitute for, financial
statements prepared in accordance with GAAP. In addition, the non-GAAP
financial measures included in this press release do not have standard
meanings and may vary from similarly titled non-GAAP financial measures
used by other companies. Knowles believes that non-GAAP measures are
useful as supplements to its GAAP results of operations to evaluate
certain aspects of its operations and financial performance, and its
management team primarily focuses on non-GAAP items in evaluating
Knowles’ performance for business planning purposes. Knowles also
believes that these measures assist it with 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
including, for example, stock-based compensation, certain intangibles
amortization expense, fixed asset impairment charges, restructuring,
production transfer costs, and other charges which management considers
to be outside our core operating results. 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.
Third Quarter 2017 Outlook
The forward looking guidance for the quarter ending September 30, 2017
on a continuing operations basis is as follows:
|
|
|
GAAP
|
|
Adjustments
|
|
Non-GAAP
|
|
|
Revenue
|
|
$205 to $235 million
|
|
-
|
|
$205 to $235 million
|
|
|
Gross Profit Margin
|
|
37 to 40%
|
|
1%
|
|
38 to 41%
|
|
|
EPS
|
|
$0.07 to $0.13
|
|
$0.16
|
|
$0.23 to $0.29
|
|
Q3 2017 GAAP results for continuing operations are expected to include
approximately $0.06 per share from a higher effective tax rate, $0.05
per share in stock-based compensation, $0.02 per share in amortization
of intangibles, $0.02 per share in production transfer costs and $0.01
per share in amortization of debt discount. Expected Q3 2017 GAAP
results exclude potential restructuring 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 today through
11:59 p.m. Central time on January 24, 2018.
Investors can also listen to the conference 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 today through 11:59 p.m. Central time on August 2,
2017 at (855) 859-2056 (United States) or (404) 537-3406
(International). The access code is 51412224.
About Knowles
Knowles Corporation (NYSE: KN) is a market leader and global supplier of
advanced micro-acoustic, audio processing, and precision device
solutions, serving the mobile consumer electronics, communications,
medical, military, aerospace, and industrial markets. Knowles uses its
leading position in MEMS (micro-electro-mechanical systems) microphones
and strong capabilities in audio processing technologies to optimize
audio systems and improve the user experience in smartphones, tablets,
and wearables. Knowles is also the leader in acoustics components used
in hearing aids and has a strong position in high-end oscillators
(timing devices) and capacitors. Knowles’ focus on the customer,
combined with unique technology, proprietary manufacturing techniques,
rigorous testing and global scale, enables it to deliver innovative
solutions that optimize the user experience. Founded in 1946 and
headquartered in Itasca, Illinois, Knowles is a global organization with
employees in 12 countries. For more information, visit 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,” “expect,”
“anticipate,” “project,” “estimate,” “budget,” “continue,” “could,”
“intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,”
“will,” “would,” “objective,” “forecast,” “goal,” “guidance,” “outlook,”
“effort,” “target” and similar expressions, among others, generally
identify forward-looking statements, which speak only as of the date the
statements were made. 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: MEMS microphone demand
from our largest customers, in particular, two large North American OEM
customers, a large Korean OEM customer and Chinese OEMs; the success and
rate of multi-microphone and smart microphone adoption and market
adoption of our “intelligent audio” solutions; the pace and success of
achieving the cost savings from our announced restructurings and
acquisitions; our ability to slow and offset price erosion in certain of
our microphone products; 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 of OEM product launches;
customer purchasing behavior in light of current and anticipated mobile
phone launches; downward pressure on the average selling prices for our
products; risks associated with increasing our inventories in advance of
anticipated orders by customers; macroeconomic conditions, both in the
U.S. and internationally; foreign currency exchange rate fluctuations;
our ability to achieve continued reductions in our operating expenses;
our ability to qualify our products and facilities with customers; risks
and costs inherent in litigation; our ability to obtain, enforce, defend
or monetize our intellectual property rights; increases in the costs of
critical raw materials and components; availability of raw materials and
components; delays in customer product introductions and other related
customer challenges that may occur; our ability to successfully
consummate acquisitions and divestitures, and our ability to integrate
acquisitions following consummation; our obligations and risks under a
tax matters agreement that was executed as part of our spin-off from our
former parent company; 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; our ability to maintain and expand our existing relationships
with leading OEMs and to establish relationships with new OEMs in order
to maintain and increase our revenue; fluctuations in demand by our
telecom and other customers and telecom end markets; increasing
competition and new entrants in the market for our products; our ability
to develop new or enhanced products or technologies in a timely manner
that achieve market acceptance; our reliance on third parties to
manufacture, assemble and test our products and sub-components; changes
in tax laws or our ability to utilize our tax structure and any net
operating losses and 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, 2016, subsequent Reports on Forms 10-Q
and 8-K and our other filings we make with the U.S. Securities and
Exchange Commission. 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.
|
INVESTOR SUPPLEMENT - SECOND QUARTER 2017
|
|
|
|
|
|
|
|
|
|
KNOWLES CORPORATION
|
|
CONSOLIDATED STATEMENTS OF EARNINGS
|
|
(in millions except share and per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
June 30, 2017
|
|
March 31, 2017
|
|
June 30, 2016
|
|
Revenues
|
|
$
|
190.2
|
|
$
|
193.7
|
|
$
|
190.3
|
|
Cost of goods sold
|
|
|
117.7
|
|
|
121.8
|
|
|
117.2
|
|
Impairment charges
|
|
|
1.4
|
|
|
-
|
|
|
-
|
|
Restructuring charges - cost of goods sold
|
|
|
(0.6)
|
|
|
4.3
|
|
|
0.2
|
|
Gross profit
|
|
|
71.7
|
|
|
67.6
|
|
|
72.9
|
|
Research and development expenses
|
|
|
26.7
|
|
|
26.2
|
|
|
25.8
|
|
Selling and administrative expenses
|
|
|
38.7
|
|
|
38.1
|
|
|
45.2
|
|
Impairment charges
|
|
|
19.9
|
|
|
-
|
|
|
-
|
|
Restructuring charges
|
|
|
2.8
|
|
|
0.7
|
|
|
3.7
|
|
Operating expenses
|
|
|
88.1
|
|
|
65.0
|
|
|
74.7
|
|
Operating (loss) earnings
|
|
|
(16.4)
|
|
|
2.6
|
|
|
(1.8)
|
|
Interest expense, net
|
|
|
5.1
|
|
|
5.2
|
|
|
5.8
|
|
Other expense (income), net
|
|
|
1.5
|
|
|
2.3
|
|
|
(2.2)
|
|
Loss before income taxes and discontinued operations
|
|
|
(23.0)
|
|
|
(4.9)
|
|
|
(5.4)
|
|
Provision for (benefit from) income taxes
|
|
|
7.3
|
|
|
(0.2)
|
|
|
1.4
|
|
Loss from continuing operations
|
|
|
(30.3)
|
|
|
(4.7)
|
|
|
(6.8)
|
|
Earnings (loss) from discontinued operations, net
|
|
|
0.6
|
|
|
1.5
|
|
|
(17.8)
|
|
Net loss
|
|
$
|
(29.7)
|
|
$
|
(3.2)
|
|
$
|
(24.6)
|
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.34)
|
|
$
|
(0.05)
|
|
$
|
(0.08)
|
|
Diluted
|
|
$
|
(0.34)
|
|
$
|
(0.05)
|
|
$
|
(0.08)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from discontinued operations:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
(0.20)
|
|
Diluted
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
(0.20)
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.33)
|
|
$
|
(0.04)
|
|
$
|
(0.28)
|
|
Diluted
|
|
$
|
(0.33)
|
|
$
|
(0.04)
|
|
$
|
(0.28)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
89,361,352
|
|
|
88,973,503
|
|
|
88,652,453
|
|
Diluted
|
|
|
89,361,352
|
|
|
88,973,503
|
|
|
88,652,453
|
|
KNOWLES CORPORATION
|
|
CONSOLIDATED STATEMENTS OF EARNINGS
|
|
(in millions except share and per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
|
Revenues
|
|
$
|
383.9
|
|
$
|
375.6
|
|
Cost of goods sold
|
|
|
239.5
|
|
|
234.5
|
|
Impairment charges
|
|
|
1.4
|
|
-
|
|
Restructuring charges - cost of goods sold
|
|
|
3.7
|
|
|
1.4
|
|
Gross profit
|
|
|
139.3
|
|
|
139.7
|
|
Research and development expenses
|
|
|
52.9
|
|
|
51.9
|
|
Selling and administrative expenses
|
|
|
76.8
|
|
|
88.3
|
|
Impairment of intangible assets
|
|
|
19.9
|
|
|
-
|
|
Restructuring charges
|
|
|
3.5
|
|
|
7.2
|
|
Operating expenses
|
|
|
153.1
|
|
|
147.4
|
|
Operating loss
|
|
|
(13.8)
|
|
|
(7.7)
|
|
Interest expense, net
|
|
|
10.3
|
|
|
9.5
|
|
Other expense (income), net
|
|
|
3.8
|
|
|
(1.7)
|
|
Loss before income taxes and discontinued operations
|
|
|
(27.9)
|
|
|
(15.5)
|
|
Provision for income taxes
|
|
|
7.1
|
|
|
3.8
|
|
Loss from continuing operations
|
|
|
(35.0)
|
|
|
(19.3)
|
|
Earnings (loss) from discontinued operations, net
|
|
|
2.1
|
|
|
(34.7)
|
|
Net loss
|
|
$
|
(32.9)
|
|
$
|
(54.0)
|
|
|
|
|
|
|
|
Loss per share from continuing operations:
|
|
|
|
|
|
Basic
|
|
$
|
(0.39)
|
|
$
|
(0.22)
|
|
Diluted
|
|
$
|
(0.39)
|
|
$
|
(0.22)
|
|
|
|
|
|
|
|
Earnings (loss) per share from discontinued operations:
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
$
|
(0.39)
|
|
Diluted
|
|
$
|
0.02
|
|
$
|
(0.39)
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
Basic
|
|
$
|
(0.37)
|
|
$
|
(0.61)
|
|
Diluted
|
|
$
|
(0.37)
|
|
$
|
(0.61)
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
Basic
|
|
|
89,168,499
|
|
|
88,594,597
|
|
Diluted
|
|
|
89,168,499
|
|
|
88,594,597
|
|
KNOWLES CORPORATION
|
|
|
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES (1)
|
|
|
(in millions, except for share and per share amounts)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
2017
|
|
March 31,
2017
|
|
June 30,
2016
|
|
|
June 30,
2017
|
|
June 30,
2016
|
|
|
Gross profit
|
|
$
|
71.7
|
|
|
$
|
67.6
|
|
|
$
|
72.9
|
|
|
|
$
|
139.3
|
|
|
$
|
139.7
|
|
|
|
Gross profit as % of revenues
|
|
|
37.7
|
%
|
|
|
34.9
|
%
|
|
|
38.3
|
%
|
|
|
|
36.3
|
%
|
|
|
37,2
|
%
|
|
|
Stock-based compensation expense
|
|
|
0.5
|
|
|
|
0.4
|
|
|
|
0.5
|
|
|
|
|
0.9
|
|
|
|
1.0
|
|
|
|
Impairment charges
|
|
|
1.4
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
|
1.4
|
|
|
|
0.3
|
|
|
|
Restructuring charges
|
|
|
(0.6
|
)
|
|
|
4.3
|
|
|
|
0.2
|
|
|
|
|
3.7
|
|
|
|
1.4
|
|
|
|
Production transfer costs (2)
|
|
|
2.0
|
|
|
|
1.4
|
|
|
|
1.2
|
|
|
|
|
3.4
|
|
|
|
2.5
|
|
|
|
Non-GAAP gross profit
|
|
$
|
75.0
|
|
|
$
|
73.7
|
|
|
$
|
75.1
|
|
|
|
$
|
148.7
|
|
|
$
|
144.9
|
|
|
|
Non-GAAP gross profit as % of revenues
|
|
|
39.4
|
%
|
|
|
38.0
|
%
|
|
|
39.5
|
%
|
|
|
|
38.7
|
%
|
|
|
38.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
$
|
26.7
|
|
|
$
|
26.2
|
|
|
$
|
25.8
|
|
|
|
$
|
52.9
|
|
|
$
|
51.9
|
|
|
|
Stock-based compensation expense
|
|
|
(1.5
|
)
|
|
|
(1.4
|
)
|
|
|
(1.3
|
)
|
|
|
|
(2.9
|
)
|
|
|
(2.2
|
)
|
|
|
Impairment charges
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
Non-GAAP research and development expenses
|
|
$
|
25.2
|
|
|
$
|
24.8
|
|
|
$
|
24.4
|
|
|
|
$
|
50.0
|
|
|
$
|
49.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses
|
|
$
|
38.7
|
|
|
$
|
38.1
|
|
|
$
|
45.2
|
|
|
|
$
|
76.8
|
|
|
$
|
88.3
|
|
|
|
Stock-based compensation expense
|
|
|
(4.3
|
)
|
|
|
(4.3
|
)
|
|
|
(3.8
|
)
|
|
|
|
(8.6
|
)
|
|
|
(7.8
|
)
|
|
|
Intangibles amortization expense
|
|
|
(2.3
|
)
|
|
|
(3.0
|
)
|
|
|
(5.6
|
)
|
|
|
|
(5.3
|
)
|
|
|
(11.2
|
)
|
|
|
Other (3)
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
Non-GAAP selling and administrative expenses
|
|
$
|
31.9
|
|
|
$
|
30.8
|
|
|
$
|
35.5
|
|
|
|
$
|
62.7
|
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
88.1
|
|
|
$
|
65.0
|
|
|
$
|
74.7
|
|
|
|
$
|
153.1
|
|
|
$
|
147.4
|
|
|
|
Stock-based compensation expense
|
|
|
(5.8
|
)
|
|
|
(5.7
|
)
|
|
|
(5.1
|
)
|
|
|
|
(11.5
|
)
|
|
|
(10.0
|
)
|
|
|
Intangibles amortization expense
|
|
|
(2.3
|
)
|
|
|
(3.0
|
)
|
|
|
(5.6
|
)
|
|
|
|
(5.3
|
)
|
|
|
(11.2
|
)
|
|
|
Impairment charges
|
|
|
(19.9
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
|
(19.9
|
)
|
|
|
(0.2
|
)
|
|
|
Restructuring charges
|
|
|
(2.8
|
)
|
|
|
(0.7
|
)
|
|
|
(3.7
|
)
|
|
|
|
(3.5
|
)
|
|
|
(7.2
|
)
|
|
|
Other (3)
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
Non-GAAP operating expenses
|
|
$
|
57.1
|
|
|
$
|
55.6
|
|
|
$
|
59.9
|
|
|
|
$
|
112.7
|
|
|
$
|
118.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(30.3
|
)
|
|
$
|
(4.7
|
)
|
|
$
|
(6.8
|
)
|
|
|
$
|
(35.0
|
)
|
|
$
|
(19.3
|
)
|
|
|
Interest expense, net
|
|
|
5.1
|
|
|
|
5.2
|
|
|
|
5.8
|
|
|
|
|
10.3
|
|
|
|
9.5
|
|
|
|
Provision for (benefit from) income taxes
|
|
|
7.3
|
|
|
|
(0.2
|
)
|
|
|
1.4
|
|
|
|
|
7.1
|
|
|
|
3.8
|
|
|
|
(Loss) earnings from continuing operations before interest and
income taxes
|
|
|
(17.9
|
)
|
|
|
0.3
|
|
|
|
0.4
|
|
|
|
|
(17.6
|
)
|
|
|
(6.0
|
)
|
|
|
(Loss) earnings from continuing operations before interest and
income taxes as % of revenues
|
|
|
-9.4
|
%
|
|
|
0.2
|
%
|
|
|
0.2
|
%
|
|
|
|
-4.6
|
%
|
|
|
-1.6
|
%
|
|
|
Stock-based compensation expense
|
|
|
6.3
|
|
|
|
6.1
|
|
|
|
5.6
|
|
|
|
|
12.4
|
|
|
|
11.0
|
|
|
|
Intangibles amortization expense
|
|
|
2.3
|
|
|
|
3.0
|
|
|
|
5.6
|
|
|
|
|
5.3
|
|
|
|
11.2
|
|
|
|
Impairment charges
|
|
|
21.3
|
|
|
|
-
|
|
|
|
0.4
|
|
|
|
|
21.3
|
|
|
|
0.5
|
|
|
|
Restructuring charges
|
|
|
2.2
|
|
|
|
5.0
|
|
|
|
3.9
|
|
|
|
|
7.2
|
|
|
|
8.6
|
|
|
|
Production transfer costs (2)
|
|
|
2.0
|
|
|
|
1.4
|
|
|
|
1.2
|
|
|
|
|
3.4
|
|
|
|
2.5
|
|
|
|
Other loss (gain) (4)
|
|
|
0.2
|
|
|
|
-
|
|
|
|
(1.7
|
)
|
|
|
|
0.2
|
|
|
|
(1.7
|
)
|
|
|
Adjusted earnings from continuing operations before interest and
income taxes
|
|
$
|
16.4
|
|
|
$
|
15.8
|
|
|
$
|
15.4
|
|
|
|
$
|
32.2
|
|
|
$
|
26.1
|
|
|
|
Adjusted earnings from continuing operations before interest and
income taxes as % of revenues
|
|
|
8.6
|
%
|
|
|
8.2
|
%
|
|
|
8.1
|
%
|
|
|
|
8.4
|
%
|
|
|
6.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
$
|
5.1
|
|
|
$
|
5.2
|
|
|
$
|
5.8
|
|
|
|
$
|
10.3
|
|
|
$
|
9.5
|
|
|
|
Interest expense, net non-GAAP reconciling adjustments (5)
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
1.6
|
|
|
|
|
2.8
|
|
|
|
1.6
|
|
|
|
Non-GAAP interest expense
|
|
$
|
3.7
|
|
|
$
|
3.8
|
|
|
$
|
4.2
|
|
|
|
$
|
7.5
|
|
|
$
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
7.3
|
|
|
$
|
(0.2
|
)
|
|
$
|
1.4
|
|
|
|
$
|
7.1
|
|
|
$
|
3.8
|
|
|
|
Income tax effects of non-GAAP reconciling adjustments
|
|
|
(6.9
|
)
|
|
|
1.2
|
|
|
|
(1.9
|
)
|
|
|
|
(5.7
|
)
|
|
|
(4.8
|
)
|
|
|
Non-GAAP provision (benefit from) for income taxes
|
|
$
|
0.4
|
|
|
$
|
1.0
|
|
|
$
|
(0.5
|
)
|
|
|
$
|
1.4
|
|
|
$
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(30.3
|
)
|
|
$
|
(4.7
|
)
|
|
$
|
(6.8
|
)
|
|
|
$
|
(35.0
|
)
|
|
$
|
(19.3
|
)
|
|
|
Non-GAAP reconciling adjustments (6)
|
|
|
34.3
|
|
|
|
15.5
|
|
|
|
15.0
|
|
|
|
|
49.8
|
|
|
|
32.1
|
|
|
|
Interest expense, net non-GAAP reconciling adjustments (5)
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
1.6
|
|
|
|
|
2.8
|
|
|
|
1.6
|
|
|
|
Income tax effects of non-GAAP reconciling adjustments
|
|
|
(6.9
|
)
|
|
|
1.2
|
|
|
|
(1.9
|
)
|
|
|
|
(5.7
|
)
|
|
|
(4.8
|
)
|
|
|
Non-GAAP net earnings
|
|
$
|
12.3
|
|
|
$
|
11.0
|
|
|
$
|
11.7
|
|
|
|
$
|
23.3
|
|
|
$
|
19.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share from continuing operations
|
|
$
|
(0.34
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.08
|
)
|
|
|
$
|
(0.39
|
)
|
|
$
|
(0.22
|
)
|
|
|
Earnings per share non-GAAP reconciling adjustment
|
|
$
|
0.47
|
|
|
$
|
0.17
|
|
|
$
|
0.21
|
|
|
|
$
|
0.64
|
|
|
$
|
0.43
|
|
|
|
Non-GAAP diluted earnings per share
|
|
$
|
0.13
|
|
|
$
|
0.12
|
|
|
$
|
0.13
|
|
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares outstanding
|
|
|
89,361,352
|
|
|
|
88,973,503
|
|
|
|
88,652,453
|
|
|
|
|
89,168,499
|
|
|
|
88,594,597
|
|
|
|
Non-GAAP adjustment (7)
|
|
|
3,336,773
|
|
|
|
3,177,224
|
|
|
|
2,394,692
|
|
|
|
|
3,299,206
|
|
|
|
1,921,514
|
|
|
|
Non-GAAP diluted average shares outstanding (7)
|
|
|
92,698,125
|
|
|
|
92,150,727
|
|
|
|
91,047,145
|
|
|
|
|
92,467,705
|
|
|
|
90,516,111
|
|
|
|
Notes:
|
|
|
|
(1) In addition to the GAAP financial measures included
herein, Knowles has presented certain non-GAAP financial measures.
Knowles believes that non-GAAP measures are useful as supplements to
its GAAP results of operations to evaluate certain aspects of its
operations and financial performance, and its management team
primarily focuses on non-GAAP items in evaluating Knowles'
performance for business planning purposes. Knowles also believes
that these measures assist it with 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 duplicate costs
incurred to migrate manufacturing to facilities primarily in Asia.
These amounts are included in the corresponding Gross profit and
(Loss) earnings from continuing operations before interest and
income taxes for each period presented.
|
|
|
|
(3) In 2017, Other primarily represents expenses related
to the acquisition of certain assets of a capacitors manufacturer.
In 2016, Other primarily represents expenses related to the Audience
acquisition.
|
|
|
|
(4) In 2017, Other loss (gain) primarily represents
expenses related to the acquisition of certain assets of a
capacitors manufacturer. In 2016, Other loss (gain) primarily
represents a gain on the sale of investment related to
non-controlling interest in a MEMs timing device company partially
offset by expenses related to the Audience acquisition.
|
|
|
|
(5) Under GAAP, certain convertible debt instruments that
may be settled in cash (or other assets) upon conversion are
required to be separately accounted for as liability (debt) and
equity (conversion option) components of the instrument in a manner
that reflects the issuer’s nonconvertible debt borrowing rate.
Accordingly, for GAAP purposes we are required to recognize imputed
interest expense on the Company’s $172.5 million of convertible
senior notes due 2021 that were issued in a private placement in May
2016. The imputed interest rate is 8.12% for the convertible notes
due 2021, while the actual coupon interest rate of the notes was
3.25%. The difference between the imputed interest expense and the
coupon interest expense is excluded from management’s assessment of
the Company’s operating performance because management believes that
this non-cash expense is not indicative of its core, ongoing
operating performance.
|
|
|
|
(6) The Non-GAAP reconciling adjustments are those
adjustments made to reconcile (Loss) earnings from continuing
operations before interest and income taxes to Adjusted earnings
from continuing operations before interest and income taxes.
|
|
|
|
(7) 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.
|
|
KNOWLES CORPORATION
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(in millions, except for share and per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
48.6
|
|
|
$
|
66.2
|
|
|
Receivables, net of allowances of $1.6 and $1.7
|
|
|
129.7
|
|
|
|
145.1
|
|
|
Inventories, net
|
|
|
142.7
|
|
|
|
108.2
|
|
|
Prepaid and other current assets
|
|
|
13.8
|
|
|
|
10.6
|
|
|
Total current assets
|
|
|
334.8
|
|
|
|
330.1
|
|
|
Property, plant and equipment, net
|
|
|
191.5
|
|
|
|
186.2
|
|
|
Goodwill
|
|
|
907.8
|
|
|
|
894.6
|
|
|
Intangible assets, net
|
|
|
59.2
|
|
|
|
77.4
|
|
|
Other assets and deferred charges
|
|
|
22.5
|
|
|
|
25.8
|
|
|
Assets of discontinued operations
|
|
|
0.7
|
|
|
|
0.9
|
|
|
Total assets
|
|
$
|
1,516.5
|
|
|
$
|
1,515.0
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
13.3
|
|
|
$
|
9.7
|
|
|
Accounts payable
|
|
|
79.0
|
|
|
|
71.8
|
|
|
Accrued compensation and employee benefits
|
|
|
29.5
|
|
|
|
34.7
|
|
|
Other accrued expenses
|
|
|
29.6
|
|
|
|
26.0
|
|
|
Federal and other taxes on income
|
|
|
5.4
|
|
|
|
6.8
|
|
|
Total current liabilities
|
|
|
156.8
|
|
|
|
149.0
|
|
|
Long-term debt
|
|
|
284.8
|
|
|
|
288.5
|
|
|
Deferred income taxes
|
|
|
22.3
|
|
|
|
21.7
|
|
|
Other liabilities
|
|
|
40.8
|
|
|
|
41.4
|
|
|
Liabilities of Discontinued Operations
|
|
|
1.9
|
|
|
|
6.0
|
|
|
Commitments and contingencies
|
|
|
|
|
|
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;
89,409,233 and 88,737,284 shares issued at June 30, 2017 and
December 31, 2016, respectively
|
|
|
0.9
|
|
|
|
0.9
|
|
|
Additional paid-in capital
|
|
|
1,510.8
|
|
|
|
1,499.8
|
|
|
Accumulated deficit
|
|
|
(393.1
|
)
|
|
|
(360.2
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(108.7
|
)
|
|
|
(132.1
|
)
|
|
Total stockholders' equity
|
|
|
1,009.9
|
|
|
|
1,008.4
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,516.5
|
|
|
$
|
1,515.0
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170726006069/en/
Source: Knowles Corporation