Knowles Corporation Files 10-Q for Period Ending March 31, 2024

TL;DR

<b>Knowles Corporation submitted its Q1 2024 10-Q filing on May 1, 2024.</b>

AI Summary

Knowles Corp (KN) filed a Quarterly Report (10-Q) with the SEC on May 1, 2024. Knowles Corporation filed its quarterly report (10-Q) for the period ending March 31, 2024. The filing covers the first quarter of fiscal year 2024. The company's fiscal year ends on December 31st. Knowles Corporation is classified under Household Audio & Video Equipment (SIC 3651). The filing was submitted on May 1, 2024.

Why It Matters

For investors and stakeholders tracking Knowles Corp, this filing contains several important signals. This 10-Q filing provides investors with the latest financial performance and operational updates for Knowles Corporation for the first quarter of 2024. Understanding the details within this report is crucial for assessing the company's current financial health, strategic direction, and potential risks moving forward.

Risk Assessment

Risk Level: low — Knowles Corp shows low risk based on this filing. The filing is a standard quarterly report (10-Q) and does not contain immediate, significant negative news or events that would elevate the risk level.

Analyst Insight

Review the detailed financial statements and management discussion within the 10-Q to understand the company's performance and outlook for Q1 2024.

Key Numbers

• 2024-03-31 — Period of Report (Quarterly report)
• 2024-05-01 — Filing Date (10-Q submission)
• 3651 — SIC Code (Household Audio & Video Equipment)

Key Players & Entities

• Knowles Corp (company) — Filer
• 2024-03-31 (date) — Period of report
• 2024-05-01 (date) — Filed as of date
• 3651 (industry_code) — Standard Industrial Classification
• DE (state) — State of incorporation
• 1231 (date) — Fiscal year end
• 001-36102 (filing_id) — SEC file number

FAQ

Industry Context

Knowles Corporation operates in the Household Audio & Video Equipment sector, indicated by its SIC code 3651.

Regulatory Implications

The filing is a standard 10-Q, adhering to the reporting requirements of the Securities Exchange Act of 1934.

What Investors Should Do

1. Analyze the financial statements (balance sheet, income statement, cash flow) for Q1 2024.
2. Read the Management's Discussion and Analysis (MD&A) section for insights into performance drivers and trends.
3. Identify any new risk factors or updates to existing ones disclosed in the filing.

Key Dates

• 2024-03-31: Quarter End Date — End of the reporting period for the 10-Q
• 2024-05-01: Filing Date — Date the 10-Q was officially submitted to the SEC

Year-Over-Year Comparison

This is the first 10-Q filing for the fiscal year 2024, providing the initial quarterly financial data for the year.

Key Financial Figures

• $0.01 — ange on which registered Common stock, $0.01 par value per share KN New York Stock E
• $5.1 million — Contract Termination and Other Costs of $5.1 million and $6.1 million were reflected within
• $6.1 million — ion and Other Costs of $5.1 million and $6.1 million were reflected within Other accrued exp
• $400.0 million — ions) March 31, 2024 December 31, 2023 $400.0 million Revolving Credit Facility $ 180.0 $ 160

Filing Documents

• kn-20240331.htm (10-Q) — 1071KB
• a2024331exhibit311.htm (EX-31.1) — 11KB
• a2024331exhibit312.htm (EX-31.2) — 11KB
• a2024331exhibit321.htm (EX-32.1) — 8KB
• 0001587523-24-000040.txt (&nbsp;) — 6683KB
• kn-20240331.xsd (EX-101.SCH) — 42KB
• kn-20240331_cal.xml (EX-101.CAL) — 65KB
• kn-20240331_def.xml (EX-101.DEF) — 298KB
• kn-20240331_lab.xml (EX-101.LAB) — 631KB
• kn-20240331_pre.xml (EX-101.PRE) — 515KB
• kn-20240331_htm.xml (XML) — 856KB

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 1 Consolidated Statements of Earnings (unaudited) for the three months ended March 3 1 , 202 4 and 202 3 1 Consolidated Statements of Comprehensive Earnings (unaudited) for the thre e months ended March 3 1 , 202 4 and 20 23 2 Consolidated Balance Sheets (unaudited) at March 3 1 , 202 4 and December 31, 202 3 3 Consolidated Statements of Stockholders' Equity (unaudited) for the three months ended March 3 1 , 202 4 and 202 3 4 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 3 1 , 202 4 and 202 3 5

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 6

Forward-Looking Statements

Forward-Looking Statements 19 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 32 Item 4.

Controls and Procedures

Controls and Procedures 32

— OTHER INFORMATION

PART II — OTHER INFORMATION 32 Item 1.

Legal Proceedings

Legal Proceedings 32 Item 1A.

Risk Factors

Risk Factors 32 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33 Item 5. Other Information 33 Item 6. Exhibits 33

SIGNATURES

SIGNATURES 34 Table of Contents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements KNOWLES CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share amounts) (unaudited) Three Months Ended March 31, 2024 2023 Revenues $ 196.4 $ 144.3 Cost of goods sold 125.5 90.4 Restructuring charges - cost of goods sold 1.0 0.1 Gross profit 69.9 53.8 Research and development expenses 20.6 20.0 Selling and administrative expenses 43.5 33.8 Restructuring charges 1.5 1.0 Operating expenses 65.6 54.8 Operating earnings (loss) 4.3 ( 1.0 ) Interest expense, net 4.4 0.8 Other (income) expense, net ( 0.4 ) 2.3 Gain on sale of asset, net ( 5.4 ) — Earnings (loss) before income taxes 5.7 ( 4.1 ) Provision for income taxes 3.2 1.1 Net earnings (loss) $ 2.5 $ ( 5.2 ) Net earnings (loss) per share: Basic $ 0.03 $ ( 0.06 ) Diluted $ 0.03 $ ( 0.06 ) Weighted-average common shares outstanding: Basic 89.6 91.4 Diluted 90.5 91.4 See accompanying Notes to Consolidated Financial Statements 1 Table of Contents KNOWLES CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (in millions) (unaudited) Three Months Ended March 31, 2024 2023 Net earnings (loss) $ 2.5 $ ( 5.2 ) Other comprehensive (loss) earnings, net of tax Foreign currency translation ( 3.4 ) 3.6 Employee benefit plans: Amortization or settlement of actuarial losses and prior service costs 0.1 0.2 Net change in employee benefit plans 0.1 0.2 Changes in fair value of cash flow hedges: Unrealized net (losses) gains arising during period ( 1.3 ) 0.1 Net losses reclassified into earnings 1.0 0.1 Total cash flow hedges ( 0.3 ) 0.2 Other comprehensive (loss) earnings, net of tax ( 3.6 ) 4.0 Comprehensive loss $ ( 1.1 ) $ ( 1.2 ) See accompanying Notes to Consolidated Financial Statements 2 Table of Contents KNOWLES CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except share and per share amounts) (unaudited) March 31, 2024 December 31, 2023 Current assets: Cash and cash equivalents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation Background - Knowles Corporation (NYSE:KN) is a market leader and global provider of high performance capacitors and radio frequency ("RF") products, balanced armature speakers, advanced micro-acoustic microphones, and audio solutions, serving the medtech, defense, electric vehicle, industrial, communications, and consumer electronics markets. The Company uses its leading position in SiSonic TM micro-electro-mechanical systems ("MEMS") microphones and strong capabilities in audio processing technologies to optimize audio systems and improve the user experience across consumer applications. Knowles is also a leader in hearing health acoustics, high performance capacitors, and RF solutions for a diverse set of markets. The Company's focus on the customer, combined with its unique technology, proprietary manufacturing techniques, and global operational expertise, enable the Company to deliver innovative solutions across multiple applications. 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, 2023 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 est

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 2. Recent Accounting Standards In November 2023, the FASB issued ASU 2023-07 to expand reportable segment disclosure requirements. This guidance requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss. All annual disclosures about a reportable segment's profit or loss and assets currently required by ASC 280 must also be disclosed in interim periods. Additionally, this standard requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This standard is effective for the Company beginning with its annual reporting for the year ended December 31, 2024 and its interim reporting for the three months ended March 31, 2025. Early adoption is permitted. The standard requires adoption on a retrospective basis for all prior periods presented in the financial statements. The Company does not expect the adoption of this standard to have a significant impact upon the financial statements. In December 2023, the FASB issued ASU 2023-09 to enhance the transparency of income tax disclosures. This guidance requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. A public business entity is required to provide an explanation, if not otherwise evident, of the individual reconciling items disclosed, such as the nature, effect, and underlying causes and the judgment used in categorizing the reconciling items. This guidance also requires that all entities disclose, on an annual basis, the amount of income taxes paid (ne

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The table below represents a preliminary allocation of the purchase price to net assets acquired as of November 1, 2023: (in millions) Receivables $ 13.4 Inventories 40.1 Property, plant, and equipment 30.7 Customer relationships 82.5 Developed technology 19.1 Trademarks 14.0 Operating lease right-of-use assets 3.4 Other assets and deferred charges 3.6 Goodwill 69.4 Current liabilities assumed ( 10.9 ) Deferred income taxes ( 15.8 ) Long-term operating lease liabilities ( 2.7 ) Total purchase price $ 246.8 The following unaudited pro-forma summary presents consolidated financial information as if CD had been acquired on January 1, 2022. The unaudited pro-forma financial information is based on historical results of operations and financial positions of the Company and CD. The pro-forma earnings are adjusted to reflect the comparable impact of depreciation and amortization expense resulting from the fair value measurement of tangible and intangible assets, nonrecurring deal-related costs, employee retention, inventory step-up charges, and interest expense on borrowings to fund the acquisition. The unaudited pro-forma financial information does not necessarily represent the results that would have occurred had the acquisition occurred on January 1, 2022. In addition, the unaudited pro-forma information should not be deemed to be indicative of future results. Three Months Ended March 31, (in millions) 2024 2023 Revenues: As reported $ 196.4 $ 144.3 Pro-forma 196.4 181.5 Net earnings (loss): As reported $ 2.5 $ ( 5.2 ) Pro-forma 6.3 ( 6.7 ) Basic earnings (loss) per share: As reported $ 0.03 $ ( 0.06 ) Pro-forma 0.07 ( 0.07 ) Diluted earnings (loss) per share: As reported $ 0.03 $ ( 0.06 ) Pro-forma 0.07 ( 0.07 ) 8 Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 4. Inventories, net The following table details the major components of inventories, net: (in millions) March 31, 2024 December 31, 2023 Raw materials $ 147.5 $ 140.3 Work in progress 36.8 36.7 Finished goods 65.1 63.0 Subtotal 249.4 240.0 Less reserves ( 46.0 ) ( 43.6 ) Total $ 203.4 $ 196.4 5. Property, Plant, and Equipment, net The following table details the major components of property, plant, and equipment, net: (in millions) March 31, 2024 December 31, 2023 Land $ 14.2 $ 14.3 Buildings and improvements 121.6 122.5 Machinery, equipment, and other 512.6 518.2 Subtotal 648.4 655.0 Less accumulated depreciation ( 482.1 ) ( 479.6 ) Total $ 166.3 $ 175.4 Depreciation expense totaled $ 8.1 million and $ 9.2 million for the three months ended March 31, 2024 and 2023, respectively. 6. Goodwill and Other Intangible Assets The changes in the carrying value of goodwill by reportable segment for the three months ended March 31, 2024 are as follows: (in millions) Precision Devices MedTech & Specialty Audio Consumer MEMS Microphones Total Gross value at December 31, 2023 $ 132.8 $ 137.7 $ 741.1 $ 1,011.6 Accumulated impairment loss — — ( 470.9 ) ( 470.9 ) Net carrying value at December 31, 2023 132.8 137.7 270.2 540.7 Measurement period adjustments ( 0.2 ) — — ( 0.2 ) Net carrying value at March 31, 2024 $ 132.6 $ 137.7 $ 270.2 $ 540.5 The Company recorded measurement period adjustments totaling $ 0.2 million to goodwill during the three months ended March 31, 2024 related to the 2023 acquisition of CD. 9 Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Other Intangible Assets The gross carrying value and accumulated amortization for each major class of intangible assets are as follows: March 31, 2024 December 31, 2023 (in millions) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Trademarks $ 16.0 $ 1.5 $ 16.0 $ 1.2 Customer relationships 120.6 19.4 121.1 16.0 Developed technology 64.5 29.6 64.5 27.4 Other 2.4 2.0 2.4 2.0 Total 203.5 52.5 204.0 46.6 Unamortized intangible assets: Trademarks 32.0 32.0 Total intangible assets, net $ 183.0 $ 189.4 During the three months ended March 31, 2024, the Company sold certain technology related to the CMM segment to a third party for total proceeds of $ 7.2 million. After transaction costs of $ 1.8 million, the Company recognized a net gain on the sale of this asset of $ 5.4 million during the three months ended March 31, 2024. The Company recorded measurement period adjustments totaling $ 0.5 million to customer relationships during three months ended March 31, 2024 related to acquisitions completed in 2023. Amortization expense totaled $ 5.9 million and $ 2.9 million for the three months ended March 31, 2024 and 2023, respectively. Amortization expense for the next five years, based on current definite-lived intangible balances, is estimated to be as follows: (in millions) Q2-Q4 2024 $ 17.1 2025 22.4 2026 16.5 2027 16.5 2028 15.8 2029 and thereafter 62.7 Total $ 151.0 7. Restructuring and Related Activities Restructuring and related activities are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions, and other measures to further optimize operations. The Company recorded restructuring charges of $ 1.8 million during the three months ended March 31, 2024 related to headcount reductions and $ 0.7 million for costs associ

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table details restructuring charges incurred by reportable segment for the periods presented: Three Months Ended March 31, (in millions) 2024 2023 Precision Devices $ 2.5 $ — Consumer MEMS Microphones — 0.8 Corporate — 0.3 Total $ 2.5 $ 1.1 The following table details the Company's severance and other restructuring accrual activity: (in millions) Severance Pay and Benefits (1) Contract Termination and Other Costs (2) Total Balance at December 31, 2023 $ 2.4 $ 16.8 $ 19.2 Restructuring charges 2.1 0.4 2.5 Payments ( 1.6 ) ( 5.7 ) ( 7.3 ) Other, including foreign currency — ( 1.4 ) ( 1.4 ) Balance at March 31, 2024 $ 2.9 $ 10.1 $ 13.0 (1) All accruals for Severance Pay and Benefits are reflected within Other accrued expenses on the Consolidated Balance Sheet. (2) Accruals for Contract Termination and Other Costs of $5.1 million and $6.1 million were reflected within Other accrued expenses on the Consolidated Balance Sheet at March 31, 2024 and December 31, 2023, respectively. The remaining balances are reflected within Other liabilities. The severance and restructuring accruals are recorded in the following line item on the Consolidated Balance Sheets: (in millions) March 31, 2024 December 31, 2023 Other accrued expenses $ 8.0 $ 8.5 Other liabilities 5.0 10.7 Total $ 13.0 $ 19.2 8. Borrowings Revolving credit facility borrowings consist of the following: (in millions) March 31, 2024 December 31, 2023 $400.0 million Revolving Credit Facility $ 180.0 $ 160.0 Seller Note 113.2 111.2 Total 293.2 271.2 Less current maturities of Seller Note 48.0 47.1 Total long-term debt $ 245.2 $ 224.1 Total debt principal payments over the next five years are as follows: (in millions) Q2-Q4 2024 $ 50.0 2025 72.9 2026 — 2027 — 2028 180.0 11 Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Revolving Credit Facility On February 8, 2023, the Company entered into an Amended and Restated Credit Agreement (the "A&R Credit Agreement") that amends and restates the prior Credit Agreement, dated September 4, 2020, and provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $ 400.0 million (the "Credit Facility"). The A&R Credit Agreement, among other things, extends the maturity date of the Credit Facility from January 2, 2024 to February 8, 2028, replaces the London Inter-Bank Offered Rate ("LIBOR") with the Term Secured Overnight Financing Rate ("Term SOFR") as a reference rate available for borrowings, amends the minimum Interest Coverage Ratio, and amends certain other financial covenants with which the Company must comply, as described below. On September 25, 2023, the Company amended its A&R Credit Agreement to, among other things, (a) permit the Company in connection with the acquisition of CD, to incur senior priority seller financing indebtedness (the "Seller Note") in an aggregate principal amount of $ 122.9 million secured by certain assets (including equity interests) acquired in connection with such acquisition and the capital stock of Cornell Dubilier, LLC (the "Acquisition Assets"), which shall mature two years after the effective date of such Seller Note (the "Seller Note Maturity Date"), (b) extends the requirement to pledge the Acquisition Assets that would otherwise constitute collateral under the Credit Agreement to the date that is 90 days after the Seller Note Maturity Date, and (c) restricts, until the Seller Note Matu

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