Knowles Corp Files Q3 2024 10-Q

TL;DR

Knowles Corp's Q3 2024 10-Q is in. Check financials.

AI Summary

Knowles Corporation filed its 10-Q for the period ending September 30, 2024. The filing details financial performance and operational updates for the third quarter of 2024. Key financial figures and business segment information are presented, reflecting the company's ongoing activities in the household audio and video equipment sector.

Why It Matters

This filing provides investors with a detailed look at Knowles Corp's financial health and operational performance during the third quarter of 2024, influencing investment decisions.

Risk Assessment

Risk Level: medium — The filing is a standard quarterly report, but the company operates in the competitive electronics sector, which carries inherent risks.

Key Players & Entities

• Knowles Corp (company) — Filer of the 10-Q
• 20240930 (date) — End of the reporting period
• 20241029 (date) — Filing date
• 3651 (dollar_amount) — Standard Industrial Classification Code

FAQ

Key Financial Figures

• $0.01 — ange on which registered Common stock, $0.01 par value per share KN New York Stock E

Filing Documents

• kn-20240930.htm (10-Q) — 1612KB
• a2024930ex311continuingope.htm (EX-31.1) — 11KB
• a2024930ex312continuingope.htm (EX-31.2) — 11KB
• a2024930ex321continuingope.htm (EX-32.1) — 8KB
• 0001587523-24-000083.txt ( ) — 8508KB
• kn-20240930.xsd (EX-101.SCH) — 50KB
• kn-20240930_cal.xml (EX-101.CAL) — 71KB
• kn-20240930_def.xml (EX-101.DEF) — 358KB
• kn-20240930_lab.xml (EX-101.LAB) — 752KB
• kn-20240930_pre.xml (EX-101.PRE) — 596KB
• kn-20240930_htm.xml (XML) — 1101KB

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 1 Consolidated Statements of Earnings (unaudited) for the three and nine months ended September 30, 2024 and 2023 1 Consolidated Statements of Comprehensive Earnings (unaudited) for the three and nine months ended September 30, 2024 and 2023 2 Consolidated Balance Sheets (unaudited) at September 30, 2024 and December 31, 2023 3 Consolidated Statements of Stockholders' Equity (unaudited) for the three and nine months ended September 30, 2024 and 2023 4 Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2024 and 2023 6

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 7

Forward-Looking Statements

Forward-Looking Statements 25 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 26 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 44 Item 4.

Controls and Procedures

Controls and Procedures 44

— OTHER INFORMATION

PART II — OTHER INFORMATION 44 Item 1.

Legal Proceedings

Legal Proceedings 44 Item 1A.

Risk Factors

Risk Factors 45 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 45 Item 5. Other Information 45 Item 6. Exhibits 46

SIGNATURES

SIGNATURES 47 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues $ 142.5 $ 108.1 $ 411.0 $ 317.6 Cost of goods sold 79.5 57.5 235.7 172.2 Restructuring charges - cost of goods sold 0.1 0.2 1.4 0.2 Gross profit 62.9 50.4 173.9 145.2 Research and development expenses 10.2 8.1 29.2 24.0 Selling and administrative expenses 33.9 29.4 106.8 87.3 Restructuring charges 0.1 1.5 1.5 1.8 Operating expenses 44.2 39.0 137.5 113.1 Operating earnings 18.7 11.4 36.4 32.1 Interest expense, net 3.9 0.6 12.9 2.2 Other expense (income), net 2.6 ( 0.5 ) 2.5 0.5 Earnings before income taxes and discontinued operations 12.2 11.3 21.0 29.4 Provision for (benefit from) income taxes 3.0 ( 3.9 ) 8.0 ( 9.6 ) Earnings from continuing operations 9.2 15.2 13.0 39.0 (Loss) earnings from discontinued operations, net ( 8.7 ) 1.4 ( 269.3 ) ( 14.0 ) Net earnings (loss) $ 0.5 $ 16.6 $ ( 256.3 ) $ 25.0 Earnings per share from continuing operations: Basic $ 0.10 $ 0.17 $ 0.15 $ 0.43 Diluted $ 0.10 $ 0.17 $ 0.14 $ 0.42 (Loss) earnings per share from discontinued operations: Basic $ ( 0.09 ) $ 0.01 $ ( 3.02 ) $ ( 0.16 ) Diluted $ ( 0.09 ) $ 0.01 $ ( 2.98 ) $ ( 0.15 ) Net earnings (loss) per share: Basic $ 0.01 $ 0.18 $ ( 2.87 ) $ 0.27 Diluted $ 0.01 $ 0.18 $ ( 2.84 ) $ 0.27 Weighted-average common shares outstanding: Basic 88.7 90.8 89.2 91.2 Diluted 89.7 91.4 90.2 91.9 See accompanying Notes to Consolidated Financial Statements 1 Table of Contents KNOWLES CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (in millions) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net earnings (loss) $ 0.5 $ 16.6 $ ( 256.3 ) $ 25.0 Other comprehensive earnings (loss), net of tax Foreign currency translation 17.1 ( 1.2 ) 10.5 ( 10.9 ) Em

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) Results of the Company's discontinued operations were as follows: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Revenues $ 72.8 $ 68.4 $ 208.9 $ 178.1 Cost of goods sold 53.4 46.6 154.1 130.0 Gain on sale of fixed assets — ( 5.2 ) ( 1.1 ) ( 10.0 ) Restructuring charges - cost of goods sold — ( 0.1 ) — ( 1.7 ) Gross profit 19.4 27.1 55.9 59.8 Research and development expenses 10.1 11.7 32.6 35.5 Selling and administrative expenses 7.0 5.2 20.6 17.6 Goodwill impairment 13.1 — 262.5 — Restructuring charges — — — 1.3 Operating expenses 30.2 16.9 315.7 54.4 Operating (loss) earnings ( 10.8 ) 10.2 ( 259.8 ) 5.4 Loss on disposal of business 2.3 — 2.3 — Gain on sale of asset, net — — ( 5.4 ) — (Loss) earnings from discontinued operations before taxes ( 13.1 ) 10.2 ( 256.7 ) 5.4 (Benefit from) provision for income taxes ( 4.4 ) 8.8 12.6 19.4 (Loss) earnings from discontinued operations, net $ ( 8.7 ) $ 1.4 $ ( 269.3 ) $ ( 14.0 ) During the three and nine months ended September 30, 2024, the Company recorded goodwill impairment charges of $ 13.1 million and $ 262.5 million, respectively, to write down the carrying value of CMM to its fair value. In addition, the Company recorded an impairment charge of $ 2.3 million during the three and nine months ended September 30, 2024 to write down the carrying value of the CMM business to its fair value less costs to sell. This impairment is reflected as "Loss on disposal of business" in the results of discontinued operations above. During the nine months ended September 30, 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 nine months ended September 30, 2024. This gain is reflected as "Gain on sale of a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) These gains on sale are reflected within the results from discontinued operations above as follows: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2023 2024 2023 Gain on sale of fixed assets $ ( 5.2 ) $ ( 1.1 ) $ ( 10.0 ) Restructuring charges - cost of goods sold ( 0.1 ) — ( 1.0 ) Total $ ( 5.3 ) $ ( 1.1 ) $ ( 11.0 ) Assets and liabilities of discontinued operations are summarized below: (in millions) September 30, 2024 December 31, 2023 Assets of discontinued operations: Receivables $ 38.0 $ 44.6 Inventories 62.4 69.4 Prepaid and other assets 2.6 2.9 Total current assets 103.0 116.9 Property, plant and equipment, net 27.0 33.5 Goodwill 7.7 270.2 Intangible assets, net 9.3 13.8 Operating lease right-of-use assets 1.6 2.9 Other assets and deferred charges 1.5 1.7 Valuation allowance on CMM business (1) ( 2.3 ) — Total non-current assets 44.8 322.1 Total assets $ 147.8 $ 439.0 Liabilities of discontinued operations: Accounts payable $ 23.3 $ 24.3 Accrued compensation and employee benefits 10.2 9.8 Operating lease liabilities 1.5 2.0 Other accrued expenses 2.7 4.1 Federal and other taxes on income 0.3 0.3 Total current liabilities 38.0 40.5 Long-term operating lease liabilities 0.7 2.1 Other liabilities 1.5 1.8 Total non-current liabilities 2.2 3.9 Total liabilities $ 40.2 $ 44.4 (1) The valuation allowance reflects the write down of the carrying value of CMM to its fair value less expected costs to sell that was recorded in the third quarter of 2024 when the held-for-sale criteria were met. In accordance with ASC 205-20, this loss was not allocated to the major classes of assets and liabilities of the discontinued operation. 10 Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As the Consolidated Statement of Cash Flows includes the results of CMM in its net cash provided by (used in) operating, investing, and financing activities, the Company has provided the following information related to CMM in accordance with ASC 205-20: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Depreciation $ 2.6 $ 3.1 $ 8.1 $ 11.3 Amort

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