Knowles(US:KN)2020-02-12 21:04Revenue and Sales Performance - The Audio segment accounted for 80% of consolidated revenues for fiscal 2019, with the top five customers contributing approximately 49% of Audio's revenues [46]. - Sales of MEMS microphones represented about 57% of consolidated revenues for fiscal 2019, indicating a strong reliance on this product line [47]. - The mobile handset market contributed approximately 27% to consolidated revenues for fiscal 2019, highlighting its significance to overall performance [48]. - The company's consolidated revenues for 2019 were $854.8 million, an increase of 3.5% from $826.9 million in 2018 [243]. - Revenues from discontinued operations were $92.2 million in 2017, with a gross profit of $30.2 million for that year [298]. - Revenues from continuing operations for 2018 were reported at $826.9 million, a 11.1% increase from $744.2 million in 2017 [318]. Financial Results and Earnings - Gross profit for 2019 was $328.0 million, slightly up from $322.6 million in 2018, indicating a stable gross margin [243]. - Operating earnings increased to $81.2 million in 2019, compared to $77.8 million in 2018, reflecting a growth of 4.4% [243]. - Net earnings for 2019 were $49.1 million, down from $67.7 million in 2018, representing a decline of 27.4% [243]. - Earnings per share from continuing operations were $0.55 for 2019, compared to $0.73 in 2018, a decrease of 24.7% [243]. - The total comprehensive earnings for 2019 were $48.1 million, down from $56.7 million in 2018 [245]. - The company recorded total impairment charges of $21.3 million in 2017, with $16.2 million related to intangible assets [320]. Assets and Liabilities - As of December 31, 2019, the balance of goodwill, other intangible assets, and long-lived assets was $1.2 billion, while the total market value of the Company's outstanding shares was $1.9 billion [83]. - Total current assets increased to $388.4 million in 2019 from $365.0 million in 2018, representing a growth of 6.8% [247]. - Total assets rose to $1,654.6 million in 2019, compared to $1,547.9 million in 2018, reflecting an increase of 6.9% [247]. - The company reported a total long-term debt of $156.8 million in 2019, slightly down from $158.1 million in 2018 [247]. - Total liabilities decreased from $34.3 million in 2018 to $29.9 million in 2019, primarily due to a reduction in long-term finance leases from $10.1 million to $6.9 million [333]. Research and Development - Research and development expenses for 2019 were $96.8 million, a decrease from $100.6 million in 2018 [243]. - The company is heavily reliant on technological and product innovations, with intense competition for experienced technical personnel, particularly in China, California, and India [62]. - The Company expects the in-process research and development project to be completed in 2021, after which it will be amortized over its estimated useful life [305]. Risks and Challenges - Global economic conditions, particularly in China, have adversely affected sales, with potential for continued impact from economic slowdowns [55]. - Changes in U.S. trade policy and tariffs could negatively affect the company's operations and financial condition [56]. - The company faces risks from customers potentially developing in-house solutions due to restrictive export laws, which could affect market share [59]. - The company faces reputational harm risks due to associations with customers under U.S. regulatory scrutiny, potentially leading to loss of investors and customers [60]. - The competitive landscape necessitates significant investment in new product development, with no guarantee of sales success [52]. Acquisitions and Investments - The company acquired the ASIC Design Business for a net consideration of $58 million, which included a developed technology intangible asset valued at $33 million [237]. - The Company acquired the MEMS Microphone ASIC Design Business on December 20, 2019, enhancing its product offerings in audio processing [254]. - The Company acquired DITF for $11.1 million, generating revenues of $8.9 million and earnings before income taxes of $0.3 million from the acquisition date through December 31, 2019 [311]. Tax and Financial Regulations - The effective tax rate may fluctuate due to geographic earnings composition and changes in tax regulations, impacting future financial results [67]. - The Company recorded a pre-tax unrealized gain of $0.2 million on cash flow hedges for foreign exchange contracts in 2019, compared to a loss of $(2.5) million in 2018 [353]. Stockholder and Market Information - The Company has experienced substantial stock price volatility, with a range from $22.74 to $12.38 per share during 2019 [93]. - The conversion of outstanding Notes could dilute the ownership interests of existing stockholders and potentially depress the price of common stock [87]. - The Company issued $172.5 million in 3.25% convertible senior notes in May 2016, with interest payable semiannually, and the initial conversion price set at $18.4250 per share [357].