Delaware
(State or Other Jurisdiction of Incorporation or Organization)
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90-1002689
(I.R.S. Employer
Identification No.)
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1151 Maplewood Drive, Itasca, IL 60143
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60143
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's telephone number, including area code
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(630) 250-5100
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
þ
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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•
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expectations as to future sales of products;
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ability to protect intellectual property in the United States and abroad;
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estimates regarding capital requirements and needs for additional financing;
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estimates of expenses, future revenues and profitability;
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estimates of the size of the markets for products and services;
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expectations related to the rate and degree of market acceptance of products; and
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estimates of the success of other competing technologies that may become available.
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Page
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Item 14
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•
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MCE designs and manufactures innovative acoustic products, including microphones, speakers and receivers, used in several applications that serve the handset, tablet and other consumer electronic markets. Locations include the corporate office in Itasca, Illinois; sales, support and engineering facilities in North America, Europe and Asia; and manufacturing facilities in Europe and Asia.
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SC specializes in the design and manufacture of specialized electronic components used in medical and life science applications, as well as high-performance solutions and components used in communications infrastructure and a wide variety of other markets. SC’s transducer products are used principally in hearing aid applications within the commercial audiology markets, while its oscillator products predominantly serve the telecom infrastructure market and its capacitor products are used in applications including radio, radar, satellite, power supplies, transceivers and medical implants serving the defense, aerospace, telecommunication and life sciences markets. Operating facilities and sales, support and engineering facilities are located in North America, Europe and Asia.
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Revenue
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Segment Earnings
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||||||||||||||
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Years Ended December 31,
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Years Ended December 31,
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||||||||||||||
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2013
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2012
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2011
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2013
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2012
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2011
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||||||
Mobile Consumer Electronics
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64
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%
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60
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%
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52
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%
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70
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%
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62
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%
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54
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%
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Specialty Components
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36
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%
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40
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%
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48
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%
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30
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%
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38
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%
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46
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%
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(in thousands)
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December 31,
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2013
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2012
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Mobile Consumer Electronics
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$
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1,638,241
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$
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1,561,398
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Specialty Components
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538,659
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487,256
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Corporate / eliminations
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(6,784
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)
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2,438
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Total
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$
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2,170,116
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$
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2,051,092
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•
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Acoustic Components
. Includes analog and digital microphones, MEMs microphones, surface mounted device microphones, receivers, speakers, speaker modules, multi-functional devices, ultrasonic sensors and integrated audio sub-systems.
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Specialty Components
. Includes transducers, oscillators, capacitors and filters.
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Smartphone growth from feature phone substitution
. The smartphones segment within the handset device market has exhibited consistently strong unit growth over the past five years (>40% unit volume compound annual growth rate). There continues to be a positive mix shift from the proliferation of lower-end smartphone devices and the further cannibalization of feature phones (i.e., non-smartphones). The average smartphone continues to drive higher audio content including more microphones and higher value speakers than its feature phone counterpart, compounding the growth of acoustic content as mobile phone sales rise.
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Smartphone OEM market share shifts are likely to remain volatile for some time
. Recently, Nokia and Blackberry have lost significant market share to other U.S. and Asian-based OEMs who have released smartphones that have been more readily accepted due to, among other factors, perceived feature sets and price points. We expect the OEM market to continue to be dynamic over time, characterized by rapid market share shifts driven by new product introductions, price points and feature sets.
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•
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New OEM product line rollouts
. Smartphones continue to shift to Long Term Evolution (“LTE”), a standard for 4G wireless technology, and the shift is expected to buoy unit growth in developed markets and drive the competitive landscape in high-end chipsets through 2014. Aggressive LTE deployments are expected in China, in addition to a build-out of deeper coverage profiles in the U.S., Japan, Korea and Northern Europe. This will likely drive an increase in LTE smartphone units over the next five years, which should help maintain some level of high-end smartphone volume growth despite high market penetration.
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Shortened smartphone upgrade plans at U.S. carriers
. Several U.S. carriers have recently introduced new smartphone plans which offer consumers the option of paying for their phone in monthly installments with no upfront lump sum payment, and the ability to upgrade again in 12 months. Plans such as these could drive greater-than-expected unit growth (turnover) at the high end, as they are most likely to appeal to high-income consumers seeking to upgrade their phone more frequently.
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High-end consumer elasticity
. Consumers are reluctant to downgrade from a high-end smartphone to a low-end smartphone in most circumstances. This is especially true as high-end smartphones will likely continue to offer significant performance advantages and new functionality compared to low-end smartphones.
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Proliferation of premium acoustics
. Consumers are seeking improved acoustics solutions, regardless of the country they live in or the type of device they are using. As a result, acoustic dollar content is generally expanding per device for two primary reasons. First, many of the solutions we are introducing are higher performance and command higher value. Secondly, OEMs are increasing the number of acoustic components per device. Over the past several years, we have seen an increase in the number of microphones used in high end smartphones. The benefits to the user are substantial, including reduced background noise, improved voice recognition, better hands-free communication and enhanced audio recording and playback capabilities. OEMs and their customers recognize the importance of these features in their next-generation products. We believe an additional opportunity exists for these trends to proliferate to mid-range phones and tablets, as well as emerging wearable devices. Knowles can capitalize on these market demands by leveraging our acoustics expertise and proprietary process technologies to deliver solutions that improve the performance of our OEM customers’ devices.
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Medical and life sciences products (i.e., transducers, hearing aids, capacitors).
Product sales are largely driven by aging demographics, healthcare spending, the rise of a middle class in emerging markets and government subsidies.
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Aerospace and defense communications (i.e., capacitors, filters, oscillators).
Aerospace and defense spending and automation (largest end market), telecom regional coverage and bandwidth expansion, and growing industrial power supply requirements are a few of the end market trends driving the product sales in this sector.
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Telecom infrastructure (i.e., capacitors, filters, oscillators).
Sales are typically levered to the expansion of large telecom companies, looking to increase wireless signal in new or existing territories, although these products are also sold to aerospace and defense companies (i.e., airplane radio frequencies).
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MCE:
AAC Technologies and Goertek
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SC:
Sonion for hearing health and a highly fragmented set of competitors across capacitor and oscillator products for each end market
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(in thousands)
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Years Ended December 31,
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2013
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2012
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2011
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Asia
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$
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950,449
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$
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855,450
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$
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681,740
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Europe
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120,751
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110,559
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139,207
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Other Americas
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14,479
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15,182
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14,849
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Other
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6,063
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6,901
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9,404
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Subtotal non-U.S.
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$
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1,091,742
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$
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988,092
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$
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845,200
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United States
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123,061
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129,900
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138,118
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Total
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$
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1,214,803
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$
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1,117,992
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$
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983,318
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•
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Our results may be impacted by domestic and international economic, legal, currency, political and compliance conditions and uncertainties.
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We are subject to risks relating to our existing international operations and to expanding our global business.
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political, social and economic instability and disruptions;
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government embargoes or trade restrictions;
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the imposition of duties and tariffs and other trade barriers;
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import and export controls;
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transportation delays and interruptions;
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labor unrest and current and changing regulatory environments;
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increased compliance costs, including costs associated with disclosure requirements and related due diligence;
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the impact of loss of one or more of our manufacturing facilities;
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difficulties in staffing and managing multi-national operations;
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limitations on our ability to enforce legal rights and remedies and the costs of such enforcement; and
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environmental liabilities arising from our current, historical and future operations and manufacturing sites.
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We face risks arising from the restructuring of our operations globally.
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If we are not able to anticipate, adapt to and capitalize on technological developments, we may not be able to sustain or grow our current level of revenues, operating profits or cash flows.
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Our products must undergo lengthy and expensive qualification processes without any assurance of product sales. The costs associated with new product introductions and imbalances between customer demand and capacity could negatively impact our operating results and profits.
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We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if we are unable to obtain raw materials.
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We rely on sole source and limited source suppliers for certain supplies of critical raw materials and components.
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Customer requirements and new regulations may increase our expenses and impact the availability of certain raw materials, which could adversely affect our revenue and operating profits.
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Our effective tax rate may fluctuate and it could be subject to additional tax liabilities, including in the event of repatriation of our overseas earnings to fund our liquidity needs.
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Our revenue, operating profits and cash flows could be adversely affected if our businesses are unable to protect or obtain patent and other intellectual property rights, or to do so at expected cost levels, or if intellectual property litigation is successful against us.
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o
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pay substantial damages;
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cease the manufacture, import, use, sale or offer for sale of infringing products or processes;
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discontinue the use of infringing technology;
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expend significant resources to develop non-infringing technology; and
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o
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enter into royalty or license agreements from the third party claiming infringement, which license may not be available on commercially reasonable terms.
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Our growth and results of operations may be adversely affected if we are unsuccessful in our capital allocation and acquisitions program.
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Failure to attract, retain and develop personnel or to provide adequate succession plans for key management could have an adverse effect on our operating results.
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We may face wage inflation and increased competition for our employees in the countries where we operate, which could increase our employment costs and our attrition.
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Our business operations may be adversely affected by information systems interruptions or intrusion.
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Our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents or business partners.
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Our exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact our results of operations.
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We depend on a limited number of customers for a substantial portion of our revenues, and the loss of, or a significant reduction in orders from, any key customer could significantly reduce our revenues and adversely impact our operating results.
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Some of our businesses are subject to the cycles inherent in the consumer electronics industry.
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Costs related to product defects and errata may harm our results of operations and business.
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We have limited history operating as an independent publicly-traded company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly-traded company and therefore may not be a reliable indicator of our future results.
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We have made, and will need to continue to make, significant investments to replicate or outsource certain systems, infrastructure and functional expertise as a result of the Separation. These initiatives to develop our independent ability to operate without access to our Former Parent’s existing operational and administrative infrastructure will be costly to implement. We may not be able to operate our business at comparable costs, and our profitability may decline.
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o
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Prior to the Separation, we relied upon our Former Parent for working capital requirements and other cash requirements, including in connection with our previous acquisitions. As a result of the Separation, our Former Parent ceased providing us with funds to finance our working capital or other cash requirements. After the Separation, our access to and cost of debt financing may be different from the historical access to and cost of debt financing from our Former Parent. Differences in access to and cost of debt financing may result in differences in the interest rate charged to us on financings, as well as the amounts of indebtedness, types of financing structures and debt markets that may be available to us, which could have an adverse effect on our business, financial condition and results of operations and cash flows.
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Our Former Parent may fail to perform under various transaction agreements that were executed as part of the Separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
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Potential indemnification liabilities to our Former Parent pursuant to the separation and distribution agreement could materially and adversely affect our business, financial condition, results of operations and cash flows.
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In connection with the Separation, our Former Parent has agreed to indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that our Former Parent’s ability to satisfy its indemnification obligation will not be impaired in the future.
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We are subject to continuing contingent liabilities of our Former Parent following the Separation.
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If the Distribution (as defined below), together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we, our Former Parent and our shareholders could be subject to significant tax liability and, in certain circumstances, we could be required to indemnify our Former Parent for material taxes pursuant to indemnification obligations under the tax matters agreement.
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We may not be able to engage in certain corporate transactions as a result of the Separation.
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entering into any transaction resulting in the acquisition of 40% or more of our stock or substantially all of our assets, whether by merger or otherwise;
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o
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merging, consolidating or liquidating;
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issuing equity securities beyond certain thresholds;
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repurchasing our capital stock; and
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o
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ceasing to actively conduct our business.
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The Separation and related internal restructuring transactions may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.
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Certain of our executive officers and directors may have actual or potential conflicts of interest because of their previous or continuing positions at our Former Parent.
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We may have received better terms from unaffiliated third parties than the terms we will receive in our agreements with our Former Parent.
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We incurred new indebtedness in connection with the Separation, and the degree to which we are leveraged may have a material adverse effect on our business, financial condition or results of operations and cash flows.
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•
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Our stock price may fluctuate significantly.
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Our business profile and market capitalization may not fit the investment objectives of our Former Parent’s shareholders, causing a shift in our investor base, and Knowles’ common stock may not be included in some indices in which our Former Parent’s common stock is included, causing certain holders to sell their shares;
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o
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our quarterly or annual earnings, or those of other companies in our industry;
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o
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the failure of securities analysts to cover Knowles’ common stock;
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o
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actual or anticipated fluctuations in our operating results;
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o
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changes in earnings estimates by securities analysts or our ability to meet those estimates or our earnings guidance;
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o
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the operating and stock price performance of other comparable companies;
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o
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overall market fluctuations and domestic and worldwide economic conditions; and
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other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
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We cannot guarantee the timing, amount or payment of dividends on our common stock.
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Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and of Delaware law, may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.
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the inability of our shareholders to call a special meeting or act by written consent;
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rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;
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the right of our Board of Directors to issue preferred stock without shareholder approval;
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the division of our Board of Directors into three approximately equal classes of directors, with each class serving a staggered three-year term;
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a provision that shareholders may only remove directors for cause;
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the ability of our directors, without a shareholder vote, to fill vacancies on our Board of Directors (including those resulting from an enlargement of the Board of Directors); and
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the requirement that shareholders holding at least 80% of our voting stock are required to amend certain provisions in our amended and restated certificate of incorporation and our amended and restated by-laws.
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Name
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Age
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Position
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Jeffrey S. Niew
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47
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President & Chief Executive Officer
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John S. Anderson
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51
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Senior Vice President & Chief Financial Officer
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Michael A. Adell
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43
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Co-President, Mobile Consumer Electronics-Microphones
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Christian U. Scherp
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48
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Co-President, Mobile Consumer Electronics-Speakers and Receivers
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Gordon A. Walker
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38
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Co-President, Specialty Components-Acoustics & Hearing Health
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David W. Wightman
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59
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Co-President, Specialty Components-Precision Devices
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Raymond D. Cabrera
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47
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Senior Vice President, Human Resources & Chief Administrative Officer
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Paul M. Dickinson
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43
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Senior Vice President, Corporate Development & Treasurer
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Daniel J. Giesecke
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46
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Senior Vice President & Chief Operating Officer
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Joseph W. Schmidt
(1)
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67
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Senior Vice President, General Counsel
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Thomas G. Jackson
(1)
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48
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Senior Vice President, Corporate Secretary
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James F. Wynn
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53
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Senior Vice President, Global Supply Chain
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Bryan E. Mittelman
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43
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Vice President, Controller
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(1)
As previously disclosed, Mr. Schmidt is expected to continue to serve as Senior Vice President and General Counsel until March 31, 2014. Effective April 1, 2014, Mr. Jackson will assume the title of Senior Vice President, General Counsel and Secretary.
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|
2014
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||||||
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Market Prices
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||||||
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High
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Low
|
||||
First Quarter (February 14, 2014 through March 21, 2014)
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$
|
33.66
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|
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$
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27.58
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|
|
|
Years Ended December 31,
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||||||||||||||||||
Statement of Earnings data
(in thousands, except for share and per share amounts):
|
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2013
|
|
2012
|
|
2011
(1)
|
|
2010
|
|
2009 (
Unaudited)
|
||||||||||
Revenue
|
|
$
|
1,214,803
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|
|
$
|
1,117,992
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|
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$
|
983,318
|
|
|
$
|
730,444
|
|
|
$
|
587,006
|
|
Operating earnings
|
|
143,828
|
|
|
136,064
|
|
|
146,404
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|
|
141,527
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|
|
78,571
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|
|||||
Operating margin
|
|
11.8
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%
|
|
12.2
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%
|
|
14.9
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%
|
|
19.4
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%
|
|
13.4
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%
|
|||||
Net earnings
|
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
|
$
|
109,272
|
|
|
$
|
37,295
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
|
$
|
130,912
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|
|
$
|
114,878
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|
|
$
|
84,773
|
|
|
$
|
54,385
|
|
|
$
|
50,678
|
|
Interest expense, net
(2)
|
|
42,024
|
|
|
56,470
|
|
|
39,892
|
|
|
20,253
|
|
|
21,154
|
|
|||||
(Benefit from) provision for income taxes
|
|
(4,304
|
)
|
|
(181
|
)
|
|
7,099
|
|
|
7,535
|
|
|
18,478
|
|
|||||
EBITDA
(3)
|
|
$
|
274,446
|
|
|
$
|
250,264
|
|
|
$
|
230,221
|
|
|
$
|
191,445
|
|
|
$
|
127,605
|
|
EBITDA margin
(3)
|
|
22.6
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%
|
|
22.4
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%
|
|
23.4
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%
|
|
26.2
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%
|
|
21.7
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%
|
|||||
Basic and diluted earnings per share
|
|
$
|
1.24
|
|
|
$
|
0.93
|
|
|
$
|
1.16
|
|
|
$
|
1.29
|
|
|
$
|
0.44
|
|
Basic and diluted shares outstanding
(4)
|
|
85,019,159
|
|
|
85,019,159
|
|
|
85,019,159
|
|
|
85,019,159
|
|
|
85,019,159
|
|
|||||
|
|
As of December 31,
|
||||||||||||||||||
Balance Sheet Data
(in thousands):
|
|
2013
|
|
2012
|
|
2011
(1)
|
|
2010
(Unaudited)
|
|
2009
(Unaudited)
|
||||||||||
Total assets
|
|
$
|
2,170,116
|
|
|
$
|
2,051,092
|
|
|
$
|
2,000,713
|
|
|
$
|
1,034,257
|
|
|
$
|
1,051,138
|
|
Notes payable to Parent, net
|
|
—
|
|
|
528,812
|
|
|
1,419,422
|
|
|
440,486
|
|
|
573,308
|
|
|||||
Total Parent Company equity
|
|
1,887,127
|
|
|
1,188,107
|
|
|
286,650
|
|
|
443,860
|
|
|
330,710
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Years Ended December 31,
|
||||||||||||||||||
Other Data
(in thousands):
|
|
2013
|
|
2012
|
|
2011
(1)
|
|
2010
|
|
2009
(Unaudited)
|
||||||||||
Research and development
|
|
$
|
82,568
|
|
|
$
|
77,321
|
|
|
$
|
65,895
|
|
|
$
|
49,286
|
|
|
$
|
45,014
|
|
Capital expenditures
|
|
91,267
|
|
|
145,647
|
|
|
96,314
|
|
|
32,920
|
|
|
19,323
|
|
•
|
MCE designs and manufactures innovative acoustic products, including microphones, speakers and receivers, used in several applications that serve the handset, tablet and other consumer electronic markets. Locations include the corporate office in Itasca, Illinois; sales, support and engineering facilities in North America, Europe and Asia; and manufacturing facilities in Europe and Asia.
|
•
|
SC specializes in the design and manufacture of specialized electronic components used in medical and life science applications, as well as high-performance solutions and components used in communications infrastructure and a wide variety of other markets. SC’s transducer products are used principally in hearing aid applications within the commercial audiology markets, while its oscillator products predominantly serve the telecom infrastructure market and its capacitor products are used in applications including radio, radar, satellite, power supplies, transceivers and medical implants serving the defense, aerospace, telecommunication and life sciences markets. Operating facilities and sales, support and engineering facilities are located in North America, Europe and Asia.
|
•
|
Acoustic Components
. Includes analog and digital microphones, MEMs microphones, surface mounted device microphones, receivers, speakers, speaker modules, multi-functional devices, ultrasonic sensors and integrated audio sub-systems.
|
•
|
Specialty Components
. Includes transducers, oscillators, capacitors and filters.
|
•
|
Smartphone growth from feature phone substitution
. The smartphones segment within the handset device market has exhibited consistently strong unit growth over the past five years (>40% unit volume compound annual growth rate). There continues to be a positive mix shift from the proliferation of lower-end smartphone devices and the further cannibalization of feature phones (i.e., non-smartphones). The average smartphone continues to drive higher audio content including more microphones and higher value speakers than its feature phone counterpart, compounding the growth of acoustic content as mobile phone sales rise.
|
•
|
Smartphone OEM market share shifts are likely to remain volatile for some time
. Recently, Nokia and Blackberry have lost significant market share to other U.S. and Asian-based OEMs who have released smartphones that have been more readily accepted due to, among other factors, perceived feature sets and price points. We expect the OEM market to continue to be dynamic over time, characterized by rapid market share shifts driven by new product introductions, price points and feature sets.
|
•
|
New OEM product line rollouts
. Smartphones continue to shift to Long Term Evolution (“LTE”), a standard for 4G wireless technology, and the shift is expected to buoy unit growth in developed markets and drive the competitive landscape in high-end chipsets through 2014. Aggressive LTE deployments are expected in China, in addition to a build-out of deeper coverage profiles in the U.S., Japan, Korea and Northern Europe. This will drive an increase in LTE smartphone units over the next five years, which should help maintain some level of high-end smartphone volume growth despite high market penetration.
|
•
|
Shortened smartphone upgrade plans at U.S. carriers
. Several U.S. carriers have recently introduced new smartphone plans which offer consumers the option of paying for their phone in monthly installments with no upfront lump sum payment, and the ability to upgrade again in 12 months. Plans such as these could drive greater-than-expected unit growth (turnover) at the high end, as they are most likely to appeal to high-income consumers seeking to upgrade their phone more frequently.
|
•
|
High-end consumer elasticity
. Consumers are reluctant to downgrade from a high-end smartphone to a low-end smartphone in most circumstances. This is especially true as high-end smartphones will likely continue to offer significant performance advantages and new functionality compared to low-end smartphones.
|
•
|
Proliferation of premium acoustics
. Consumers are seeking improved acoustics solutions, regardless of the country they live in or the type of device they are using. As a result, acoustic dollar content is generally expanding per device for two primary reasons. First, many of the solutions we are introducing are higher performance and command higher value. Secondly, OEMs are increasing the number of acoustic components per device. Over the past several years, we have seen an increase in the number of microphones used in high end smartphones. The benefits to the user are substantial, including reduced background noise, improved voice recognition, better hands-free communication and enhanced audio recording and playback capabilities. OEMs and their customers recognize the importance of these features in their next-generation products. We believe an additional opportunity exists for these trends to proliferate to mid-range phones and tablets, as well as emerging wearable devices. Knowles can
|
•
|
Medical and life sciences products (i.e., transducers, hearing aids, capacitors)
. Product sales are largely driven by aging demographics, healthcare spending, the rise of a middle class in emerging markets and government subsidies.
|
•
|
Aerospace and defense communications (i.e., capacitors, filters, oscillators)
. Aerospace and defense spending and automation (largest end market), telecom regional coverage and bandwidth expansion, and growing industrial power supply requirements are a few of the end-market trends driving the product sales in this sector.
|
•
|
Telecom infrastructure (i.e., capacitors, filters, oscillators)
. Sales are typically levered to the expansion of large telecom companies, looking to increase wireless signal in new or existing territories, although these products are also sold to aerospace and defense companies (i.e., airplane radio frequencies).
|
•
|
MCE:
AAC Technologies and Goertek
|
•
|
SC:
Sonion for hearing health and a highly fragmented set of competitors across capacitor and oscillator products for each end market
|
|
|
Years Ended December 31,
|
|
% Change
|
||||||||||||||
(in thousands, except per share amounts)
|
|
2013
|
|
2012
|
|
2011
(1)
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
||||||||
Revenue
|
|
$
|
1,214,803
|
|
|
$
|
1,117,992
|
|
|
$
|
983,318
|
|
|
8.7
|
%
|
|
13.7
|
%
|
Cost of goods and services
|
|
786,862
|
|
|
711,000
|
|
|
605,298
|
|
|
10.7
|
%
|
|
17.5
|
%
|
|||
Gross profit
|
|
427,941
|
|
|
406,992
|
|
|
378,020
|
|
|
5.1
|
%
|
|
7.7
|
%
|
|||
Gross profit margin
|
|
35.2
|
%
|
|
36.4
|
%
|
|
38.4
|
%
|
|
(1.2
|
)
|
|
(2.0
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Selling and administrative expenses
|
|
284,113
|
|
|
270,928
|
|
|
231,616
|
|
|
4.9
|
%
|
|
17.0
|
%
|
|||
Selling and administrative expenses as a percent of revenue
|
|
23.4
|
%
|
|
24.2
|
%
|
|
23.6
|
%
|
|
(0.8
|
)
|
|
0.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating earnings
|
|
143,828
|
|
|
136,064
|
|
|
146,404
|
|
|
5.7
|
%
|
|
(7.1
|
)%
|
|||
Operating margin
|
|
11.8
|
%
|
|
12.2
|
%
|
|
14.9
|
%
|
|
(0.4
|
)
|
|
(2.7
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Restructuring charges
|
|
16,291
|
|
|
5,864
|
|
|
1,761
|
|
|
177.8
|
%
|
|
233.0
|
%
|
|||
Research and development
|
|
82,568
|
|
|
77,321
|
|
|
65,895
|
|
|
6.8
|
%
|
|
17.3
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Provision for income taxes
|
|
(4,304
|
)
|
|
(181
|
)
|
|
7,099
|
|
|
2,277.9
|
%
|
|
(102.5
|
)%
|
|||
Effective tax rate
|
|
(4.2
|
)%
|
|
(0.2
|
)%
|
|
6.7
|
%
|
|
(4.0
|
)
|
|
(6.9
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings
|
|
105,814
|
|
|
79,097
|
|
|
98,457
|
|
|
33.8
|
%
|
|
(19.7
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share - basic & diluted
(2)
|
|
$
|
1.24
|
|
|
$
|
0.93
|
|
|
$
|
1.16
|
|
|
33.3
|
%
|
|
(19.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(in thousands)
|
|
Years Ended December 31,
|
|
% Change
(1)
|
|
||||||||||||||
|
|
2013
|
|
2012
|
|
2011
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
|
||||||||
Revenue
|
|
$
|
777,171
|
|
|
$
|
670,358
|
|
|
$
|
509,916
|
|
|
15.9
|
%
|
|
31.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating earnings
|
|
$
|
122,530
|
|
|
$
|
102,742
|
|
|
$
|
106,224
|
|
|
19.3
|
%
|
|
(3.3
|
)%
|
|
Other income (expense)
|
|
(493
|
)
|
|
(2,334
|
)
|
|
(477
|
)
|
|
n/m
|
|
|
n/m
|
|
|
|||
Depreciation and amortization
|
|
100,257
|
|
|
79,668
|
|
|
49,076
|
|
|
25.8
|
%
|
|
62.3
|
%
|
|
|||
EBITDA
|
|
$
|
222,294
|
|
|
$
|
180,076
|
|
|
$
|
154,823
|
|
|
23.4
|
%
|
|
16.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating margin
|
|
15.8
|
%
|
|
15.3
|
%
|
|
20.8
|
%
|
|
|
|
|
|
|||||
EBITDA margin
|
|
28.6
|
%
|
|
26.9
|
%
|
|
30.4
|
%
|
|
|
|
|
|
|||||
Other measure:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
|
$
|
53,436
|
|
|
$
|
46,243
|
|
|
$
|
36,021
|
|
|
15.6
|
%
|
|
28.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(in thousands)
|
|
Years Ended December 31,
|
|
% Change
(1)
|
|
||||||||||||||
|
|
2013
|
|
2012
|
|
2011
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
|
||||||||
Revenue
|
|
$
|
437,677
|
|
|
$
|
447,691
|
|
|
$
|
473,472
|
|
|
(2.2
|
)%
|
|
(5.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating earnings
|
|
$
|
64,445
|
|
|
$
|
77,156
|
|
|
$
|
95,732
|
|
|
(16.5
|
)%
|
|
(19.4
|
)%
|
|
Other income (expense)
|
|
509
|
|
|
(106
|
)
|
|
643
|
|
|
n/m
|
|
|
n/m
|
|
|
|||
Depreciation and amortization
|
|
28,792
|
|
|
33,399
|
|
|
33,262
|
|
|
(13.8
|
)%
|
|
0.4
|
%
|
|
|||
EBITDA
|
|
$
|
93,746
|
|
|
$
|
110,449
|
|
|
$
|
129,637
|
|
|
(15.1
|
)%
|
|
(14.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating margin
|
|
14.7
|
%
|
|
17.2
|
%
|
|
20.2
|
%
|
|
|
|
|
|
|
||||
EBITDA margin
|
|
21.4
|
%
|
|
24.7
|
%
|
|
27.4
|
%
|
|
|
|
|
|
|
||||
Other measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Research and development
|
|
$
|
29,132
|
|
|
$
|
31,078
|
|
|
$
|
29,874
|
|
|
(6.3
|
)%
|
|
4.0
|
%
|
|
(in thousands)
|
|
Years Ended December 31,
|
||||||||||
Net Cash Provided By (Used In)
|
|
2013
|
|
2012
|
|
2011
|
||||||
Operating activities
|
|
$
|
174,294
|
|
|
$
|
175,107
|
|
|
$
|
175,082
|
|
Investing activities
|
|
(108,675
|
)
|
|
(101,154
|
)
|
|
(909,189
|
)
|
|||
Financing activities
|
|
29,327
|
|
|
(90,037
|
)
|
|
759,693
|
|
(in thousands)
|
|
Years Ended December 31,
|
||||||||||
Free Cash Flow
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flow provided by operating activities
|
|
$
|
174,294
|
|
|
$
|
175,107
|
|
|
$
|
175,082
|
|
Less: Capital expenditures
|
|
(105,283
|
)
|
|
(132,047
|
)
|
|
(88,470
|
)
|
|||
Free cash flow
|
|
$
|
69,011
|
|
|
$
|
43,060
|
|
|
$
|
86,612
|
|
Free cash flow as a percentage of revenue
|
|
5.7
|
%
|
|
3.9
|
%
|
|
8.8
|
%
|
(in thousands)
|
|
|
|
Payments Due by Period
|
||||||||||||||||
|
|
Total
|
|
Less than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than 5 Years
|
||||||||||
Rental commitments
(1)
|
|
$
|
60,788
|
|
|
$
|
13,867
|
|
|
$
|
14,044
|
|
|
$
|
9,196
|
|
|
$
|
23,681
|
|
Purchase obligations
(2)
|
|
1,557
|
|
|
1,557
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital leases
|
|
2,415
|
|
|
2,235
|
|
|
180
|
|
|
—
|
|
|
—
|
|
|||||
Post-retirement benefits
(3)
|
|
3,987
|
|
|
1,869
|
|
|
239
|
|
|
293
|
|
|
1,586
|
|
|||||
Total obligations
(4) (5)
|
|
$
|
68,747
|
|
|
$
|
19,528
|
|
|
$
|
14,463
|
|
|
$
|
9,489
|
|
|
$
|
25,267
|
|
(1)
Represents off-balance sheet commitments and obligations for rental commitments related to operating leases. Amount also includes approximately $16 million in operating lease payments and $22 million in capital lease payments for a lease that was entered into in September 2013 but for which the lease term will not begin until the third quarter of 2014. See Note 12. Commitments and Contingent Liabilities of the notes to the Combined Financial Statements for additional information.
|
(2)
Represents off-balance sheet commitments for purchase obligations related to open purchase orders with the Company’s vendors.
|
(3)
Amounts represent estimated benefit payments under the Company’s unfunded defined benefit plans. In addition, defined benefit plan contributions of $1.6 million were included for 2014 only as they cannot be determined beyond 2014. See Note 13. Employee Benefit Plans of the notes to the Combined Financial Statements for additional information.
|
(4)
The table above does not reflect the $500 million in borrowings entered into, $400 million of which was incurred, subsequent to December 31, 2013. See the Revolving Credit Facility section below for more information.
|
(5)
The liability related to unrecognized tax benefits has been excluded from the contractual obligations table because a reasonable estimate of the timing and amount of cash out flows from future tax settlements cannot be determined. See Note 10. Income Taxes of the notes to the Combined Financial Statements for additional information.
|
Year after debt execution date
|
|
Per Annum Amount
|
|
|
|
1
|
|
0.0%
|
|
|
|
2
|
|
5.0%
|
|
|
|
3
|
|
10.0%
|
|
|
|
4
|
|
10.0%
|
|
|
|
5
|
|
10.0%
|
•
|
We are involved in various lawsuits, claims and investigations arising in the normal course of our business, including those related to intellectual property which may be owned by us or others. We own many patents which cover our products, technology and manufacturing processes. Some of these patents have been and, we expect, will continue to be challenged by others. In appropriate cases, we have taken and will take steps to protect and defend our patents and other intellectual property, including through the use of legal proceedings in various jurisdictions around the world. Such steps may result in retaliatory litigation, the costs of which may be material. Based on the strength of our intellectual property and our prior experience enforcing it, our current assessment is that the ultimate disposition of these matters is not expected to have a material adverse effect on our operating results or financial
|
•
|
Most recently, we have established liabilities for restructuring activities, in accordance with appropriate accounting principles. These liabilities, for both severance and exit costs, require the use of estimates. Though we believe that these estimates accurately reflect the anticipated costs, actual results may be different than the estimated amounts.
|
Page
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues
|
$
|
1,214,803
|
|
|
$
|
1,117,992
|
|
|
$
|
983,318
|
|
Cost of goods and services
|
786,862
|
|
|
711,000
|
|
|
605,298
|
|
|||
Gross profit
|
427,941
|
|
|
406,992
|
|
|
378,020
|
|
|||
Selling and administrative expenses
|
284,113
|
|
|
270,928
|
|
|
231,616
|
|
|||
Operating earnings
|
143,828
|
|
|
136,064
|
|
|
146,404
|
|
|||
Interest expense, net
|
42,024
|
|
|
56,470
|
|
|
39,892
|
|
|||
Other expense, net
|
294
|
|
|
678
|
|
|
956
|
|
|||
Earnings before income taxes
|
101,510
|
|
|
78,916
|
|
|
105,556
|
|
|||
(Benefit from) provision for income taxes
|
(4,304
|
)
|
|
(181
|
)
|
|
7,099
|
|
|||
Net earnings
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
|
|
|
|
|
|
||||||
Basic and diluted earnings per share
(1)
|
$
|
1.24
|
|
|
$
|
0.93
|
|
|
$
|
1.16
|
|
Basic and diluted average shares outstanding
(1)
|
85,019,159
|
|
|
85,019,159
|
|
|
85,019,159
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Net earnings
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
|
|
|
|
|
|
||||||
Other comprehensive earnings (loss), net of tax
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation
|
32,595
|
|
|
(82,264
|
)
|
|
67,447
|
|
|||
|
|
|
|
|
|
||||||
Employee benefit plans:
|
|
|
|
|
|
|
|
|
|||
Actuarial losses arising during period
|
(4
|
)
|
|
(3,505
|
)
|
|
(2,188
|
)
|
|||
Prior service cost arising during period
|
—
|
|
|
—
|
|
|
40
|
|
|||
Amortization of actuarial losses included in net periodic pension cost
|
164
|
|
|
123
|
|
|
82
|
|
|||
Amortization of prior service costs included in net periodic pension cost
|
5
|
|
|
5
|
|
|
4
|
|
|||
Total employee benefit plans
|
165
|
|
|
(3,377
|
)
|
|
(2,062
|
)
|
|||
|
|
|
|
|
|
||||||
Changes in fair value of cash flow hedges:
|
|
|
|
|
|
|
|
|
|||
Unrealized net (losses) gains arising during period
|
(129
|
)
|
|
914
|
|
|
(832
|
)
|
|||
Net losses (gains) reclassified into earnings
|
129
|
|
|
(80
|
)
|
|
(330
|
)
|
|||
Total cash flow hedges
|
—
|
|
|
834
|
|
|
(1,162
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive earnings (loss), net of tax
|
32,760
|
|
|
(84,807
|
)
|
|
64,223
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive earnings (loss)
|
$
|
138,574
|
|
|
$
|
(5,710
|
)
|
|
$
|
162,680
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
105,588
|
|
|
$
|
10,302
|
|
Receivables, net of allowances of $1,686 and $1,824
|
224,556
|
|
|
217,458
|
|
||
Inventories, net
|
149,168
|
|
|
133,554
|
|
||
Prepaid and other current assets
|
11,803
|
|
|
8,555
|
|
||
Deferred tax assets
|
10,708
|
|
|
7,411
|
|
||
Total current assets
|
501,823
|
|
|
377,280
|
|
||
Property, plant and equipment, net
|
360,997
|
|
|
362,372
|
|
||
Goodwill
|
961,916
|
|
|
946,131
|
|
||
Intangible assets, net
|
318,310
|
|
|
344,793
|
|
||
Other assets and deferred charges
|
27,070
|
|
|
20,516
|
|
||
Total assets
|
$
|
2,170,116
|
|
|
$
|
2,051,092
|
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
143,812
|
|
|
$
|
171,401
|
|
Accrued compensation and employee benefits
|
40,918
|
|
|
37,708
|
|
||
Other accrued expenses
|
25,245
|
|
|
24,313
|
|
||
Total current liabilities
|
209,975
|
|
|
233,422
|
|
||
Notes payable to Parent, net
|
—
|
|
|
528,812
|
|
||
Deferred income taxes
|
45,891
|
|
|
68,405
|
|
||
Other liabilities
|
27,123
|
|
|
32,346
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Parent Company equity:
|
|
|
|
|
|
||
Parent Company investment in Knowles Corporation
|
1,850,602
|
|
|
1,184,342
|
|
||
Accumulated other comprehensive earnings
|
36,525
|
|
|
3,765
|
|
||
Total Parent Company equity
|
1,887,127
|
|
|
1,188,107
|
|
||
Total liabilities and Parent Company equity
|
$
|
2,170,116
|
|
|
$
|
2,051,092
|
|
|
Parent Company Investment
|
|
Accumulated Other Comprehensive Earnings (Loss)
|
|
Total Parent Company Equity
|
||||||
Balance at December 31, 2010
|
$
|
419,511
|
|
|
$
|
24,349
|
|
|
$
|
443,860
|
|
Net earnings
|
98,457
|
|
|
—
|
|
|
98,457
|
|
|||
Other comprehensive earnings, net of tax
|
—
|
|
|
64,223
|
|
|
64,223
|
|
|||
Net transfers to Parent Company
|
(319,890
|
)
|
|
—
|
|
|
(319,890
|
)
|
|||
Balance at December 31, 2011
|
$
|
198,078
|
|
|
$
|
88,572
|
|
|
$
|
286,650
|
|
Net earnings
|
79,097
|
|
|
—
|
|
|
79,097
|
|
|||
Other comprehensive loss, net of tax
|
—
|
|
|
(84,807
|
)
|
|
(84,807
|
)
|
|||
Net transfers from Parent Company
|
907,167
|
|
|
—
|
|
|
907,167
|
|
|||
Balance at December 31, 2012
|
$
|
1,184,342
|
|
|
$
|
3,765
|
|
|
$
|
1,188,107
|
|
Net earnings
|
105,814
|
|
|
—
|
|
|
105,814
|
|
|||
Other comprehensive earnings, net of tax
|
—
|
|
|
32,760
|
|
|
32,760
|
|
|||
Net transfers from Parent Company
|
560,446
|
|
|
—
|
|
|
560,446
|
|
|||
Balance at December 31, 2013
|
$
|
1,850,602
|
|
|
$
|
36,525
|
|
|
$
|
1,887,127
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Operating Activities
|
|
|
|
|
|
||||||
Net earnings
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
Adjustments to reconcile net earnings to cash from operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
130,912
|
|
|
114,878
|
|
|
84,773
|
|
|||
Stock-based compensation
|
2,031
|
|
|
1,901
|
|
|
1,882
|
|
|||
Provision for losses on accounts receivable (net of recoveries)
|
278
|
|
|
683
|
|
|
256
|
|
|||
Deferred income taxes
|
(30,039
|
)
|
|
(16,701
|
)
|
|
(12,452
|
)
|
|||
Employee benefit plan expense
|
1,220
|
|
|
1,231
|
|
|
557
|
|
|||
Contributions to employee benefit plans
|
(2,406
|
)
|
|
(2,139
|
)
|
|
(1,500
|
)
|
|||
Impairment charges and gain/loss on disposal of assets, net
|
3,562
|
|
|
2,329
|
|
|
1,587
|
|
|||
Other, net
|
6,552
|
|
|
(4,311
|
)
|
|
28,140
|
|
|||
Cash effect of changes in assets and liabilities (excluding effects of acquisitions and foreign exchange):
|
|
|
|
|
|
||||||
Accounts receivable
|
(6,787
|
)
|
|
(20,930
|
)
|
|
(24,281
|
)
|
|||
Inventories
|
(14,136
|
)
|
|
(15,481
|
)
|
|
(14,129
|
)
|
|||
Prepaid expenses and other assets
|
(6,322
|
)
|
|
6,370
|
|
|
(9,367
|
)
|
|||
Accounts payable
|
(16,053
|
)
|
|
21,847
|
|
|
36,159
|
|
|||
Accrued compensation and employee benefits
|
665
|
|
|
(3,822
|
)
|
|
(6,528
|
)
|
|||
Accrued expenses and other liabilities
|
(3,106
|
)
|
|
9,252
|
|
|
(7,614
|
)
|
|||
Accrued taxes
|
2,109
|
|
|
903
|
|
|
(858
|
)
|
|||
Net cash provided by operating activities
|
174,294
|
|
|
175,107
|
|
|
175,082
|
|
|||
|
|
|
|
|
|
||||||
Investing Activities
|
|
|
|
|
|
|
|
||||
Additions to property, plant and equipment
|
(105,283
|
)
|
|
(132,047
|
)
|
|
(88,470
|
)
|
|||
Acquisition of Sound Solutions (net of cash acquired), including purchase price adjustments
|
—
|
|
|
45,016
|
|
|
(824,286
|
)
|
|||
Proceeds from the sale of property, plant and equipment
|
5,162
|
|
|
3,950
|
|
|
3,567
|
|
|||
Capitalized patent defense costs
|
(8,554
|
)
|
|
(13,073
|
)
|
|
—
|
|
|||
Other investment
|
—
|
|
|
(5,000
|
)
|
|
—
|
|
|||
Net cash used in investing activities
|
(108,675
|
)
|
|
(101,154
|
)
|
|
(909,189
|
)
|
|||
|
|
|
|
|
|
||||||
Financing Activities
|
|
|
|
|
|
|
|
||||
Change in borrowings, net
|
(574,072
|
)
|
|
(886,825
|
)
|
|
1,062,930
|
|
|||
Net transfers from (to) Parent Company
|
603,399
|
|
|
796,788
|
|
|
(303,237
|
)
|
|||
Net cash provided by (used in) financing activities
|
29,327
|
|
|
(90,037
|
)
|
|
759,693
|
|
|||
|
|
|
|
|
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
340
|
|
|
93
|
|
|
(173
|
)
|
|||
|
|
|
|
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
95,286
|
|
|
(15,991
|
)
|
|
25,413
|
|
|||
Cash and cash equivalents at beginning of period
|
10,302
|
|
|
26,293
|
|
|
880
|
|
|||
Cash and cash equivalents at end of period
|
$
|
105,588
|
|
|
$
|
10,302
|
|
|
$
|
26,293
|
|
|
|
|
|
|
|
||||||
Supplemental information - cash paid during the year for:
|
|
|
|
|
|
||||||
Income taxes
|
$
|
20,684
|
|
|
$
|
15,210
|
|
|
$
|
8,207
|
|
Interest
|
$
|
46,013
|
|
|
$
|
59,689
|
|
|
$
|
43,075
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Raw materials
|
$
|
55,870
|
|
|
$
|
58,211
|
|
Work in progress
|
29,886
|
|
|
25,275
|
|
||
Finished goods
|
92,048
|
|
|
76,517
|
|
||
Subtotal
|
177,804
|
|
|
160,003
|
|
||
Less reserves
|
(28,636
|
)
|
|
(26,449
|
)
|
||
Total
|
$
|
149,168
|
|
|
$
|
133,554
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Land
|
$
|
12,238
|
|
|
$
|
12,869
|
|
Buildings and improvements
|
85,815
|
|
|
91,853
|
|
||
Machinery, equipment and other
|
678,386
|
|
|
613,912
|
|
||
Subtotal
|
776,439
|
|
|
718,634
|
|
||
Less accumulated depreciation
|
(415,442
|
)
|
|
(356,262
|
)
|
||
Total
|
$
|
360,997
|
|
|
$
|
362,372
|
|
|
Mobile Consumer Electronics
|
|
Specialty Components
|
|
Total
|
||||||
Balance at January 1, 2012
|
761,235
|
|
|
185,691
|
|
|
946,926
|
|
|||
Sound Solutions purchase price adjustment
|
(6,998
|
)
|
|
—
|
|
|
(6,998
|
)
|
|||
Foreign currency translation
|
6,530
|
|
|
(327
|
)
|
|
6,203
|
|
|||
Balance at December 31, 2012
|
760,767
|
|
|
185,364
|
|
|
946,131
|
|
|||
Foreign currency translation
|
15,582
|
|
|
203
|
|
|
15,785
|
|
|||
Balance at December 31, 2013
|
$
|
776,349
|
|
|
$
|
185,567
|
|
|
$
|
961,916
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Amortized intangible assets:
|
|
|
|
|
|
|
|
||||||||
Trademarks
|
$
|
8,264
|
|
|
$
|
1,503
|
|
|
$
|
7,986
|
|
|
$
|
935
|
|
Patents
(1)
|
47,543
|
|
|
17,549
|
|
|
39,547
|
|
|
17,533
|
|
||||
Customer Relationships
|
429,429
|
|
|
181,232
|
|
|
419,937
|
|
|
142,945
|
|
||||
Unpatented Technologies
|
65,757
|
|
|
64,574
|
|
|
65,688
|
|
|
58,952
|
|
||||
Other
|
1,564
|
|
|
1,389
|
|
|
1,222
|
|
|
1,222
|
|
||||
Total
|
552,557
|
|
|
266,247
|
|
|
534,380
|
|
|
221,587
|
|
||||
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trademarks
|
32,000
|
|
|
|
|
|
32,000
|
|
|
|
|
||||
Total intangible assets, net
|
$
|
318,310
|
|
|
|
|
|
$
|
344,793
|
|
|
|
|
2014
|
$
|
41,516
|
|
2015
|
40,779
|
|
|
2016
|
38,052
|
|
|
2017
|
29,870
|
|
|
2018
|
29,860
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Warranty
|
$
|
3,677
|
|
|
$
|
3,228
|
|
Accrued volume discounts
|
3,666
|
|
|
6,180
|
|
||
Accrued commissions (non-employee)
|
3,271
|
|
|
3,047
|
|
||
Restructuring and exit
|
5,534
|
|
|
3,012
|
|
||
Accrued taxes, other than income taxes
|
3,760
|
|
|
3,288
|
|
||
Other
(1)
|
5,337
|
|
|
5,558
|
|
||
Total
|
$
|
25,245
|
|
|
$
|
24,313
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Deferred compensation, principally defined benefit plans
|
$
|
18,076
|
|
|
$
|
21,466
|
|
Unrecognized tax benefits
|
6,379
|
|
|
4,643
|
|
||
Warranty
|
137
|
|
|
132
|
|
||
Other
(2)
|
2,531
|
|
|
6,105
|
|
||
Total
|
$
|
27,123
|
|
|
$
|
32,346
|
|
|
2013
|
|
2012
|
||||
Beginning Balance, January 1
|
$
|
3,360
|
|
|
$
|
4,386
|
|
Provision for warranties
|
3,960
|
|
|
1,880
|
|
||
Settlements made
|
(3,601
|
)
|
|
(2,803
|
)
|
||
Other adjustments, including acquisitions and currency translation
|
95
|
|
|
(103
|
)
|
||
Ending balance, December 31
|
$
|
3,814
|
|
|
$
|
3,360
|
|
|
Severance
|
|
Exit
|
|
Total
|
||||||
Balance at December 31, 2010
|
$
|
21
|
|
|
$
|
137
|
|
|
$
|
158
|
|
Restructuring charges
|
559
|
|
|
1,202
|
|
|
1,761
|
|
|||
Payments
|
(563
|
)
|
|
(937
|
)
|
|
(1,500
|
)
|
|||
Other, including foreign currency
|
1
|
|
|
(299
|
)
|
|
(298
|
)
|
|||
Balance at December 31, 2011
|
$
|
18
|
|
|
$
|
103
|
|
|
$
|
121
|
|
Restructuring charges
|
3,738
|
|
|
2,126
|
|
|
5,864
|
|
|||
Payments
|
(1,337
|
)
|
|
(1,702
|
)
|
|
(3,039
|
)
|
|||
Other, including foreign currency
|
51
|
|
|
15
|
|
|
66
|
|
|||
Balance at December 31, 2012
|
$
|
2,470
|
|
|
$
|
542
|
|
|
$
|
3,012
|
|
Restructuring charges
|
11,316
|
|
|
4,975
|
|
|
16,291
|
|
|||
Payments
|
(8,671
|
)
|
|
(4,994
|
)
|
|
(13,665
|
)
|
|||
Other, including foreign currency
|
(115
|
)
|
|
11
|
|
|
(104
|
)
|
|||
Balance at December 31, 2013
|
$
|
5,000
|
|
|
$
|
534
|
|
|
$
|
5,534
|
|
|
|
Fair Value Asset (Liability)
|
||
Prepaid and other current assets
|
|
$
|
85
|
|
Other accrued expenses
|
|
(799
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Current:
|
|
|
|
|
|
||||||
State and local
|
$
|
109
|
|
|
$
|
227
|
|
|
$
|
211
|
|
Foreign
|
25,626
|
|
|
16,650
|
|
|
26,233
|
|
|||
Total current tax expense
|
25,735
|
|
|
16,877
|
|
|
26,444
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
490
|
|
|
$
|
490
|
|
|
$
|
521
|
|
State and local
|
30
|
|
|
16
|
|
|
(30
|
)
|
|||
Foreign
|
(30,559
|
)
|
|
(17,564
|
)
|
|
(19,836
|
)
|
|||
Total deferred tax benefit
|
(30,039
|
)
|
|
(17,058
|
)
|
|
(19,345
|
)
|
|||
Total income tax (benefit) expense
|
$
|
(4,304
|
)
|
|
$
|
(181
|
)
|
|
$
|
7,099
|
|
|
Years Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
U.S. Federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State and local taxes, net of Federal income tax benefit
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
Foreign operations tax effect
|
(41.4
|
)%
|
|
(49.8
|
)%
|
|
(36.0
|
)%
|
Research & experimentation tax credits
|
(0.8
|
)%
|
|
—
|
%
|
|
(1.0
|
)%
|
Valuation allowance
|
0.7
|
%
|
|
11.6
|
%
|
|
2.8
|
%
|
Tax contingencies
|
0.6
|
%
|
|
0.6
|
%
|
|
3.3
|
%
|
Other, principally non-tax deductible items
|
1.6
|
%
|
|
2.3
|
%
|
|
2.5
|
%
|
Effective income tax rate
|
(4.2
|
)%
|
|
(0.2
|
)%
|
|
6.7
|
%
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Deferred tax assets:
|
|
|
|
||||
Accrued compensation, principally postretirement and other employee benefits
|
$
|
3,954
|
|
|
$
|
2,720
|
|
Accrued expenses, principally for state income taxes, interest, and warranty
|
3,049
|
|
|
3,404
|
|
||
Net operating loss and other carryforwards
|
139,455
|
|
|
109,970
|
|
||
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes
|
6,004
|
|
|
7,063
|
|
||
Accounts receivable, principally due to allowance for doubtful accounts
|
210
|
|
|
236
|
|
||
Accrued insurance
|
9
|
|
|
9
|
|
||
Prepaid defined benefit plan assets
|
2,258
|
|
|
3,213
|
|
||
Long-term liabilities, principally warranty, environmental, and exit costs
|
—
|
|
|
27
|
|
||
Plant and equipment, principally due to differences in depreciation
|
225
|
|
|
—
|
|
||
Total gross deferred tax assets
|
155,164
|
|
|
126,642
|
|
||
Valuation allowance
|
(71,518
|
)
|
|
(74,081
|
)
|
||
Total deferred tax assets
|
$
|
83,646
|
|
|
$
|
52,561
|
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Intangible assets, principally due to different tax and financial reporting bases and amortization lives
|
$
|
(105,626
|
)
|
|
$
|
(104,777
|
)
|
Plant and equipment, principally due to differences in depreciation
|
—
|
|
|
(1,767
|
)
|
||
Long-term liabilities, principally warranty, environmental, and exit costs
|
(38
|
)
|
|
—
|
|
||
Other liabilities
|
(3,195
|
)
|
|
(448
|
)
|
||
Total gross deferred tax liabilities
|
(108,859
|
)
|
|
(106,992
|
)
|
||
Net deferred tax liability
|
$
|
(25,213
|
)
|
|
$
|
(54,431
|
)
|
|
|
|
|
||||
Classified as follows in the combined balance sheets:
|
|
|
|
||||
Current deferred tax asset
|
$
|
10,708
|
|
|
$
|
7,411
|
|
Non-current deferred tax assets
|
9,970
|
|
|
6,563
|
|
||
Deferred income taxes (non-current)
|
(45,891
|
)
|
|
(68,405
|
)
|
||
Net deferred tax liability
|
$
|
(25,213
|
)
|
|
$
|
(54,431
|
)
|
Unrecognized tax benefits at January 1, 2011
|
$
|
4,353
|
|
Additions based on tax positions related to the current year
|
246
|
|
|
Additions for tax positions of prior years
|
4,147
|
|
|
Settlements
|
(2,323
|
)
|
|
Unrecognized tax benefits at December 31, 2011
|
6,423
|
|
|
Additions based on tax positions related to the current year
|
82
|
|
|
Additions for tax positions of prior years
|
120
|
|
|
Unrecognized tax benefits at December 31, 2012
|
6,625
|
|
|
Additions based on tax positions related to the current year
|
129
|
|
|
Additions for tax positions of prior years
|
47
|
|
|
Reductions for tax positions of prior years
|
(1,287
|
)
|
|
Unrecognized tax benefits at December 31, 2013
|
$
|
5,514
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Pre-tax compensation expense
|
$
|
2,031
|
|
|
$
|
1,901
|
|
|
$
|
1,882
|
|
Tax benefit
|
(702
|
)
|
|
(646
|
)
|
|
(640
|
)
|
|||
Total stock-based compensation expense, net of tax
|
$
|
1,329
|
|
|
$
|
1,255
|
|
|
$
|
1,242
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Risk-free interest rate
|
1.39
|
%
|
|
1.05
|
%
|
|
2.68
|
%
|
|||
Dividend yield
|
2.06
|
%
|
|
2.03
|
%
|
|
1.70
|
%
|
|||
Expected life (years)
|
7.1
|
|
|
5.7
|
|
|
5.8
|
|
|||
Volatility
|
33.78
|
%
|
|
36.41
|
%
|
|
33.56
|
%
|
|||
Grant price
|
$
|
71.86
|
|
|
$
|
65.38
|
|
|
$
|
66.59
|
|
Fair value at date of grant
|
$
|
20.62
|
|
|
$
|
18.51
|
|
|
$
|
20.13
|
|
|
SARs
|
|
Stock Options
|
||||||||||||||||||||||
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Aggregate Intrinsic Value
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Aggregate Intrinsic Value
|
|
Weighted Average Remaining Contractual Term (Years)
|
||||||||||
Outstanding at 1/1/2013
|
483,098
|
|
|
$
|
52.14
|
|
|
|
|
|
|
41,814
|
|
|
$
|
39.12
|
|
|
|
|
|
||||
Granted
|
120,167
|
|
|
71.86
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
||||||
Exercised
|
(155,425
|
)
|
|
41.44
|
|
|
|
|
|
|
(21,980
|
)
|
|
39.65
|
|
|
|
|
|
||||||
Forfeited / expired
|
(18,193
|
)
|
|
68.16
|
|
|
|
|
|
|
(150
|
)
|
|
35.75
|
|
|
|
|
|
||||||
Transferred out
|
(42,665
|
)
|
|
49.28
|
|
|
|
|
|
|
(5,624
|
)
|
|
39.53
|
|
|
|
|
|
||||||
Outstanding at 12/31/2013
|
386,982
|
|
|
62.13
|
|
|
$
|
13,317
|
|
|
7.5
|
|
14,060
|
|
|
38.17
|
|
|
$
|
821
|
|
|
1.1
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Exercisable at 12/31/2013
|
85,538
|
|
|
$
|
41.07
|
|
|
$
|
4,745
|
|
|
5.0
|
|
14,060
|
|
|
$
|
38.17
|
|
|
$
|
821
|
|
|
1.1
|
|
2013
|
|
2012
|
|
2011
|
||||||
SARs
|
|
|
|
|
|
||||||
Fair value of SARs that became exercisable
|
$
|
1,213
|
|
|
$
|
756
|
|
|
$
|
888
|
|
Aggregate intrinsic value of SARs exercised
|
$
|
6,955
|
|
|
$
|
3,078
|
|
|
$
|
466
|
|
|
|
|
|
|
|
||||||
Stock Options
|
|
|
|
|
|
||||||
Cash received by Dover for exercise of stock options
|
$
|
826
|
|
|
$
|
856
|
|
|
$
|
989
|
|
Aggregate intrinsic value of options exercised
|
$
|
882
|
|
|
$
|
707
|
|
|
$
|
1,017
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Risk-free interest rate
|
0.40
|
%
|
|
0.37
|
%
|
|
1.34
|
%
|
|||
Dividend yield
|
2.06
|
%
|
|
2.03
|
%
|
|
1.61
|
%
|
|||
Expected life (years)
|
2.9
|
|
|
2.9
|
|
|
2.9
|
|
|||
Volatility
|
30.36
|
%
|
|
34.10
|
%
|
|
40.48
|
%
|
|||
Fair value of performance award
|
$
|
80.47
|
|
|
$
|
71.98
|
|
|
$
|
91.41
|
|
|
Number of Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
|||
Unvested at December 31, 2012
|
5,162
|
|
|
$
|
72.43
|
|
Granted
|
3,965
|
|
|
80.47
|
|
|
Vested
(1)
|
(1,950
|
)
|
|
73.16
|
|
|
Unvested at December 31, 2013
|
7,177
|
|
|
$
|
76.67
|
|
(1)
Under the terms of the performance share award, the actual number of shares awarded can range from zero to 200% of the original target grant, depending on Dover's three-year performance relative to the peer group for the relevant performance period. Awards vesting at the end of 2013 were paid out at 136.8% of their original target.
|
|
Operating leases
|
|
Rental Commitments
|
||||
2014
|
$
|
13,212
|
|
|
$
|
655
|
|
2015
|
4,916
|
|
|
3,873
|
|
||
2016
|
1,382
|
|
|
3,873
|
|
||
2017
|
753
|
|
|
3,873
|
|
||
2018
|
697
|
|
|
3,873
|
|
||
2019 and thereafter
|
1,531
|
|
|
22,150
|
|
||
Total
|
$
|
22,491
|
|
|
$
|
38,297
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
Change in benefit obligation:
|
|
|
|
||||
Benefit obligation at beginning of year
|
$
|
58,294
|
|
|
$
|
50,283
|
|
Benefits earned during the year
|
614
|
|
|
602
|
|
||
Interest cost
|
2,416
|
|
|
2,567
|
|
||
Plan participants' contributions
|
7
|
|
|
12
|
|
||
Benefits paid
|
(1,875
|
)
|
|
(2,090
|
)
|
||
Actuarial loss
|
2,344
|
|
|
5,870
|
|
||
Settlement and curtailment gains
|
(3,036
|
)
|
|
(1,026
|
)
|
||
Currency translation and other
|
1,069
|
|
|
2,076
|
|
||
Benefit obligation at end of year
|
59,833
|
|
|
58,294
|
|
||
Change in plan assets:
|
|
|
|
|
|
||
Fair value of plan assets at beginning of year
|
40,108
|
|
|
35,808
|
|
||
Actual return on plan assets
|
4,402
|
|
|
3,601
|
|
||
Company contributions
|
2,406
|
|
|
2,139
|
|
||
Employee contributions
|
7
|
|
|
12
|
|
||
Benefits paid
|
(1,875
|
)
|
|
(2,090
|
)
|
||
Settlements and curtailments
|
—
|
|
|
(1,026
|
)
|
||
Currency translation
|
749
|
|
|
1,664
|
|
||
Fair value of plan assets at end of year
|
45,797
|
|
|
40,108
|
|
||
Funded status
|
$
|
(14,036
|
)
|
|
$
|
(18,186
|
)
|
|
|
|
|
|
|
||
Amounts recognized in the balance sheets consist of:
|
|
|
|
|
|
||
Other assets and deferred charges
|
$
|
73
|
|
|
$
|
—
|
|
Accrued compensation and employee benefits
|
(267
|
)
|
|
(1,509
|
)
|
||
Other liabilities
|
(13,842
|
)
|
|
(16,677
|
)
|
||
Funded status
|
$
|
(14,036
|
)
|
|
$
|
(18,186
|
)
|
|
|
|
|
|
|
||
Accumulated Other Comprehensive Loss (Earnings):
|
|
|
|
|
|
||
Net actuarial losses
|
$
|
10,554
|
|
|
$
|
10,796
|
|
Prior service credit
|
(18
|
)
|
|
(12
|
)
|
||
Deferred taxes
|
(2,682
|
)
|
|
(2,765
|
)
|
||
Total Accumulated Other Comprehensive Loss, net of tax
|
7,854
|
|
|
8,019
|
|
||
Net amount recognized at December 31,
|
$
|
(6,182
|
)
|
|
$
|
(10,167
|
)
|
|
|
|
|
||||
Accumulated benefit obligations
|
$
|
56,382
|
|
|
$
|
54,434
|
|
|
2013
|
|
2012
|
||||
Projected benefit obligation
|
$
|
38,638
|
|
|
$
|
58,294
|
|
Accumulated benefit obligation
|
35,304
|
|
|
54,434
|
|
||
Fair value of plan assets
|
24,529
|
|
|
40,108
|
|
|
Non-U.S. Plans
|
||||||||||
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Service cost
|
$
|
614
|
|
|
$
|
602
|
|
|
$
|
406
|
|
Interest cost
|
2,416
|
|
|
2,567
|
|
|
2,683
|
|
|||
Expected return on plan assets
|
(2,488
|
)
|
|
(2,377
|
)
|
|
(2,650
|
)
|
|||
Amortization:
|
|
|
|
|
|
||||||
Prior service cost
|
6
|
|
|
6
|
|
|
6
|
|
|||
Recognized actuarial loss
|
249
|
|
|
163
|
|
|
112
|
|
|||
Settlement and curtailment loss
|
423
|
|
|
270
|
|
|
—
|
|
|||
Total net periodic benefit cost
|
$
|
1,220
|
|
|
$
|
1,231
|
|
|
$
|
557
|
|
|
Non-U.S. Plans
|
||
Amortization of:
|
|
||
Prior service cost
|
$
|
6
|
|
Recognized actuarial loss
|
242
|
|
|
Total
|
$
|
248
|
|
|
Non-U.S. Plans
|
||||
|
December 31,
|
||||
|
2013
|
|
2012
|
||
Discount rate:
|
|
|
|
||
Austria
|
3.25
|
%
|
|
3.25
|
%
|
Taiwan
|
2.00
|
%
|
|
1.75
|
%
|
United Kingdom
|
4.50
|
%
|
|
4.75
|
%
|
Weighted average
|
4.24
|
%
|
|
4.37
|
%
|
Average wage increase
|
|
|
|
||
Austria
|
3.00
|
%
|
|
3.00
|
%
|
Taiwan
|
4.00
|
%
|
|
4.00
|
%
|
United Kingdom
|
4.40
|
%
|
|
4.00
|
%
|
Weighted average
|
4.05
|
%
|
|
3.71
|
%
|
|
Year Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Discount rate
|
|
|
|
|
|
|||
Austria
|
3.25
|
%
|
|
5.25
|
%
|
|
5.30
|
%
|
Taiwan
|
1.75
|
%
|
|
1.75
|
%
|
|
2.00
|
%
|
United Kingdom
|
4.75
|
%
|
|
5.25
|
%
|
|
5.75
|
%
|
Weighted average
|
4.52
|
%
|
|
5.16
|
%
|
|
5.58
|
%
|
Average wage increase
|
|
|
|
|
|
|||
Austria
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
Taiwan
|
4.00
|
%
|
|
4.00
|
%
|
|
5.25
|
%
|
United Kingdom
|
4.00
|
%
|
|
4.00
|
%
|
|
4.50
|
%
|
Weighted average
|
3.21
|
%
|
|
3.30
|
%
|
|
4.25
|
%
|
Expected return on plan assets
|
|
|
|
|
|
|||
Austria
(1)
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Taiwan
|
2.00
|
%
|
|
2.50
|
%
|
|
2.00
|
%
|
United Kingdom
|
6.50
|
%
|
|
6.63
|
%
|
|
7.38
|
%
|
Weighted average
|
6.46
|
%
|
|
6.56
|
%
|
|
7.31
|
%
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
||||||||||||||||
Asset category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Fixed income investments
|
$
|
—
|
|
|
$
|
13,336
|
|
|
$
|
—
|
|
|
$
|
13,336
|
|
|
$
|
—
|
|
|
$
|
10,882
|
|
|
$
|
—
|
|
|
$
|
10,882
|
|
Common stock funds
|
—
|
|
|
29,309
|
|
|
—
|
|
|
29,309
|
|
|
—
|
|
|
28,303
|
|
|
—
|
|
|
28,303
|
|
||||||||
Cash and equivalents
|
983
|
|
|
—
|
|
|
—
|
|
|
983
|
|
|
164
|
|
|
—
|
|
|
—
|
|
|
164
|
|
||||||||
Other
|
—
|
|
|
2,169
|
|
|
—
|
|
|
2,169
|
|
|
—
|
|
|
759
|
|
|
—
|
|
|
759
|
|
||||||||
Total
|
$
|
983
|
|
|
$
|
44,814
|
|
|
$
|
—
|
|
|
$
|
45,797
|
|
|
$
|
164
|
|
|
$
|
39,944
|
|
|
$
|
—
|
|
|
$
|
40,108
|
|
|
Non-U.S. Plans
|
||
2014
|
$
|
1,838
|
|
2015
|
1,781
|
|
|
2016
|
1,732
|
|
|
2017
|
1,899
|
|
|
2018
|
1,968
|
|
|
2019 - 2023
|
12,954
|
|
|
Year Ended December 31, 2013
|
||||||||||
|
Pre-tax
|
|
Tax
|
|
Net of tax
|
||||||
Foreign currency translation adjustments
|
$
|
32,595
|
|
|
$
|
—
|
|
|
$
|
32,595
|
|
Employee benefit plans
|
249
|
|
|
(84
|
)
|
|
165
|
|
|||
Total other comprehensive earnings
|
$
|
32,844
|
|
|
$
|
(84
|
)
|
|
$
|
32,760
|
|
|
Year Ended December 31, 2012
|
||||||||||
|
Pre-tax
|
|
Tax
|
|
Net of tax
|
||||||
Foreign currency translation adjustments
|
$
|
(82,264
|
)
|
|
$
|
—
|
|
|
$
|
(82,264
|
)
|
Employee benefit plans
|
(4,464
|
)
|
|
1,087
|
|
|
(3,377
|
)
|
|||
Changes in fair value of cash flow hedges
|
1,284
|
|
|
(450
|
)
|
|
834
|
|
|||
Total other comprehensive loss
|
$
|
(85,444
|
)
|
|
$
|
637
|
|
|
$
|
(84,807
|
)
|
|
Year Ended December 31, 2011
|
||||||||||
|
Pre-tax
|
|
Tax
|
|
Net of tax
|
||||||
Foreign currency translation adjustments
|
$
|
67,447
|
|
|
$
|
—
|
|
|
$
|
67,447
|
|
Employee benefit plans
|
(2,819
|
)
|
|
757
|
|
|
(2,062
|
)
|
|||
Changes in fair value of cash flow hedges
|
(1,787
|
)
|
|
625
|
|
|
(1,162
|
)
|
|||
Total other comprehensive earnings
|
$
|
62,841
|
|
|
$
|
1,382
|
|
|
$
|
64,223
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Cumulative foreign currency translation adjustments
|
|
$
|
44,379
|
|
|
$
|
11,784
|
|
Employee benefit plans
|
|
(7,854
|
)
|
|
(8,019
|
)
|
||
Total accumulated other comprehensive earnings
|
|
$
|
36,525
|
|
|
$
|
3,765
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Pension & postretirement benefit plans:
|
|
|
|
|
|
||||||
Amortization of actuarial losses
|
$
|
249
|
|
|
$
|
163
|
|
|
$
|
112
|
|
Amortization of prior service costs
|
6
|
|
|
6
|
|
|
6
|
|
|||
Total before tax
|
255
|
|
|
169
|
|
|
118
|
|
|||
Tax benefit
|
(86
|
)
|
|
(41
|
)
|
|
(32
|
)
|
|||
Net of tax
|
$
|
169
|
|
|
$
|
128
|
|
|
$
|
86
|
|
|
|
|
|
|
|
||||||
Cash flow hedges:
|
|
|
|
|
|
||||||
Net losses (gains) reclassified into earnings
|
$
|
198
|
|
|
$
|
(123
|
)
|
|
$
|
(507
|
)
|
Tax (benefit) / expense
|
(69
|
)
|
|
43
|
|
|
177
|
|
|||
Net of tax
|
$
|
129
|
|
|
$
|
(80
|
)
|
|
$
|
(330
|
)
|
•
|
Mobile Consumer Electronics designs and manufactures innovative acoustic products, including microphones, speakers and receivers, used in several applications that serve the handset, tablet and other consumer electronic markets. Locations include the corporate office in Itasca, Illinois; sales, support and engineering facilities in North America, Europe and Asia; and manufacturing facilities in Europe and Asia.
|
•
|
Specialty Components specializes in the design and manufacture of specialized electronic components used in medical and life science applications, as well as high-performance solutions and components used in communications infrastructure and a wide variety of other markets. Specialty Component's transducer products are used principally in hearing aid applications within the commercial audiology markets, while their oscillator products predominantly serve the telecom infrastructure market and capacitor products are used in applications including radio, radar, satellite, power supplies, transceivers and medical implants serving the defense, aerospace, telecommunication, and life sciences markets. Operating facilities and sales, support and engineering facilities are located in North America, Europe and Asia.
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Mobile Consumer Electronics
|
$
|
777,171
|
|
|
$
|
670,358
|
|
|
$
|
509,916
|
|
Specialty Components
|
437,677
|
|
|
447,691
|
|
|
473,472
|
|
|||
Intra-segment eliminations
|
(45
|
)
|
|
(57
|
)
|
|
(70
|
)
|
|||
Total combined revenue
|
$
|
1,214,803
|
|
|
$
|
1,117,992
|
|
|
$
|
983,318
|
|
|
|
|
|
|
|
||||||
Earnings before interest, taxes, depreciation, and amortization:
|
|
|
|
|
|
||||||
Mobile Consumer Electronics
|
$
|
222,294
|
|
|
$
|
180,076
|
|
|
$
|
154,823
|
|
Specialty Components
|
93,746
|
|
|
110,449
|
|
|
129,637
|
|
|||
Total segments
|
316,040
|
|
|
290,525
|
|
|
284,460
|
|
|||
Corporate expense / other
(1)
|
41,594
|
|
|
40,261
|
|
|
54,239
|
|
|||
Depreciation and amortization
|
130,912
|
|
|
114,878
|
|
|
84,773
|
|
|||
Interest expense, net
|
42,024
|
|
|
56,470
|
|
|
39,892
|
|
|||
Earnings before income taxes
|
101,510
|
|
|
78,916
|
|
|
105,556
|
|
|||
(Benefit from) provision for income taxes
|
(4,304
|
)
|
|
(181
|
)
|
|
7,099
|
|
|||
Net earnings
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
Net earnings margin
|
8.7
|
%
|
|
7.1
|
%
|
|
10.0
|
%
|
|||
|
|
|
|
|
|
||||||
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|||
Mobile Consumer Electronics
|
$
|
100,257
|
|
|
$
|
79,668
|
|
|
$
|
49,076
|
|
Specialty Components
|
28,792
|
|
|
33,399
|
|
|
33,262
|
|
|||
Corporate
|
1,863
|
|
|
1,811
|
|
|
2,435
|
|
|||
Total
|
$
|
130,912
|
|
|
$
|
114,878
|
|
|
$
|
84,773
|
|
|
|
|
|
|
|
||||||
Capital expenditures:
|
|
|
|
|
|
|
|
|
|||
Mobile Consumer Electronics
|
$
|
66,609
|
|
|
$
|
137,545
|
|
|
$
|
79,084
|
|
Specialty Components
|
24,658
|
|
|
8,102
|
|
|
17,230
|
|
|||
Total
|
$
|
91,267
|
|
|
$
|
145,647
|
|
|
$
|
96,314
|
|
|
|
|
|
|
|
||||||
Research and development:
|
|
|
|
|
|
||||||
Mobile Consumer Electronics
|
$
|
53,436
|
|
|
$
|
46,243
|
|
|
$
|
36,021
|
|
Specialty Components
|
29,132
|
|
|
31,078
|
|
|
29,874
|
|
|||
Total
|
$
|
82,568
|
|
|
$
|
77,321
|
|
|
$
|
65,895
|
|
|
Adjusted Working Capital
(1)
|
|
Total Assets
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Mobile Consumer Electronics
|
$
|
137,486
|
|
|
$
|
104,082
|
|
|
$
|
1,638,241
|
|
|
$
|
1,561,398
|
|
Specialty Components
|
92,868
|
|
|
75,585
|
|
|
538,659
|
|
|
487,256
|
|
||||
Corporate / eliminations
|
(442
|
)
|
|
(56
|
)
|
|
(6,784
|
)
|
|
2,438
|
|
||||
Total
|
$
|
229,912
|
|
|
$
|
179,611
|
|
|
$
|
2,170,116
|
|
|
$
|
2,051,092
|
|
|
|
|
|
|
|
|
|
||||||||
(1)
Adjusted Working Capital is calculated as receivables, net of allowances, plus net inventories, less accounts payable.
|
|
Revenue
|
|
Long-Lived Assets
|
||||||||||||||||
|
Years Ended December 31,
|
|
At December 31,
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
||||||||||
Asia
|
$
|
950,449
|
|
|
$
|
855,450
|
|
|
$
|
681,740
|
|
|
$
|
213,139
|
|
|
$
|
191,912
|
|
United States
|
123,061
|
|
|
129,900
|
|
|
138,118
|
|
|
77,350
|
|
|
87,179
|
|
|||||
Europe
|
120,751
|
|
|
110,559
|
|
|
139,207
|
|
|
70,508
|
|
|
83,281
|
|
|||||
Other Americas
|
14,479
|
|
|
15,182
|
|
|
14,849
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
6,063
|
|
|
6,901
|
|
|
9,404
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
1,214,803
|
|
|
$
|
1,117,992
|
|
|
$
|
983,318
|
|
|
$
|
360,997
|
|
|
$
|
362,372
|
|
|
Years Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Net earnings
|
$
|
105,814
|
|
|
$
|
79,097
|
|
|
$
|
98,457
|
|
Basic and diluted earnings per common share
|
$
|
1.24
|
|
|
$
|
0.93
|
|
|
$
|
1.16
|
|
Basic and diluted average shares outstanding
|
85,019,159
|
|
|
85,019,159
|
|
|
85,019,159
|
|
Quarter
|
Revenue
|
|
Gross Profit
|
|
Net Earnings
|
|
Per Share - Basic & Diluted
|
||||||||
2013
|
|
|
|
|
|
|
|
||||||||
First
|
$
|
276,119
|
|
|
$
|
94,563
|
|
|
$
|
11,894
|
|
|
$
|
0.14
|
|
Second
|
296,709
|
|
|
101,228
|
|
|
16,672
|
|
|
0.20
|
|
||||
Third
|
311,641
|
|
|
117,985
|
|
|
44,261
|
|
|
0.52
|
|
||||
Fourth
|
330,334
|
|
|
114,165
|
|
|
32,987
|
|
|
0.38
|
|
||||
|
$
|
1,214,803
|
|
|
$
|
427,941
|
|
|
$
|
105,814
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
||||||||
2012
|
|
|
|
|
|
|
|
||||||||
First
|
$
|
261,098
|
|
|
$
|
88,542
|
|
|
$
|
9,951
|
|
|
$
|
0.12
|
|
Second
|
260,729
|
|
|
92,925
|
|
|
9,972
|
|
|
0.12
|
|
||||
Third
|
299,614
|
|
|
111,547
|
|
|
30,746
|
|
|
0.36
|
|
||||
Fourth
|
296,551
|
|
|
113,978
|
|
|
28,428
|
|
|
0.33
|
|
||||
|
$
|
1,117,992
|
|
|
$
|
406,992
|
|
|
$
|
79,097
|
|
|
$
|
0.93
|
|
(i)
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
|
(ii)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
|
(iii)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
|
(a)
|
|
(b)
|
|
(c)
|
||||
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
(1)
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(2)
|
||||
Equity compensation plans approved by shareholders
|
2,774,549
|
|
|
$
|
25.49
|
|
|
8,408,199
|
|
Equity compensation plans not approved by shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
2,774,549
|
|
|
$
|
25.49
|
|
|
8,408,199
|
|
(1)
|
Column (a) consists of shares issuable pursuant to outstanding restricted stock unit, stock appreciation right (“SAR”) and stock option awards under the Company's 2014 Equity and Cash Incentive Plan (the "2014 Plan"). A portion of these awards were issued to our employees in substitution for such employees’ outstanding awards of our Former Parent. Restricted stock units are not reflected in the weighted exercise price in column (b).
|
(2)
|
Column (c) consists of shares available for future issuance under the 2014 Plan. The 2014 Plan provides for stock options and SAR grants, restricted stock awards, restricted stock unit awards, performance share awards, cash performance awards, directors’ shares and deferred stock units. Shares subject to stock options and SARs will reduce the shares available for awards under the 2014 Plan by one share for every one share granted. Performance share awards, restricted stock, restricted stock units that are settled in shares of common stock, directors’ shares and deferred stock units will reduce the shares available for awards under the 2014 Plan by three shares for every one share awarded. Cash performance awards do not count against the pool of available shares. The number of shares earned when an award is exercised, vests or is paid out will count against the pool of available shares, including shares withheld to pay taxes or an option’s exercise price. Shares subject to an award under the 2014 Plan that is cancelled, terminated or forfeited or that expires will be available for reissuance under the 2014 Plan.
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a)
|
The following documents are filed as part of this report:
|
(1)
|
Financial Statements:
|
i.
|
The financial statements are set forth under “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
|
(2)
|
Financial Statement Schedules:
|
i.
|
The following financial statement schedule is set forth under “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. All other schedules have been omitted because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto.
|
•
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Schedule II – Valuation and Qualifying Accounts
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(3)
|
Exhibits
|
i.
|
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Form 10-K. The exhibits will be filed with the SEC but will not be included in the printed version of the Annual Report to Shareholders.
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|
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KNOWLES CORPORATION
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|
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/s/ JEFFREY S. NIEW
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Jeffrey S. Niew
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President and Chief Executive Officer
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Date:
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March 28, 2014
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Signature
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Title
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Date
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/s/ JEFFREY S. NIEW
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Chief Executive Officer, President and Director
(Principal Executive Officer)
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March 28, 2014
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Jeffrey S. Niew
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/s/ JOHN S. ANDERSON
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Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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March 28, 2014
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John S. Anderson
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/s/ BRYAN E. MITTELMAN
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Vice President, Controller
(Principal Accounting Officer)
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March 28, 2014
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Bryan E. Mittelman
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/s/ JEAN-PIERRE M. ERGAS
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Chairman, Board of Directors
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March 28, 2014
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Jean-Pierre M. Ergas
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/s/ KEITH L. BARNES
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Director
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March 28, 2014
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Keith L. Barnes
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/s/ ROBERT W. CREMIN
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Director
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March 28, 2014
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Robert W. Cremin
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/s/ RONALD JANKOV
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Director
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March 28, 2014
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Ronald Jankov
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/s/ RICHARD K. LOCHRIDGE
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Director
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March 28, 2014
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Richard K. Lochridge
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|
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/s/ DONALD MACLEOD
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Director
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March 28, 2014
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Donald Macleod
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Exhibit Number
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Description
|
|
2.1
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Separation and Distribution Agreement dated February 28, 2014 by and between Dover Corporation and Knowles Corporation, filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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3.1
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Amended and Restated Certificate of Incorporation of Knowles Corporation, filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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3.2
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Amended and Restated By-Laws of Knowles Corporation, filed as Exhibit 3.2 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.1
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Transition Services Agreement dated February 28, 2014 by and between Dover Corporation and Knowles Corporation, filed as Exhibit 10.3 to Registrant's Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.2
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Tax Matters Agreement dated February 28, 2014 by and between Dover Corporation and Knowles Corporation, filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.3
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Employee Matters Agreement dated February 28, 2014 by and between Dover Corporation and Knowles Corporation, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.4†
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Senior Executive Change-in-Control Severance Plan, filed as Exhibit 10.8 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.5†
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|
2014 Equity and Cash Incentive Plan, filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.5.1†
|
|
Form of Restricted Stock Unit Award Agreement, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated March 7, 2014 and incorporated herein by reference thereto
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10.5.2†
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Form of Award Grant Letter for Restricted Stock, filed as Exhibit 10.9 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
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10.5.3†
|
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Form of Award Grant Letter for Stock Settled Appreciation Rights, filed as Exhibit 10.10 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
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10.5.4†
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|
Form of Stock Option Award Agreement, filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated March 7, 2014 and incorporated herein by reference thereto
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10.5.5†
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Form of Replacement SSAR Award Agreement, filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K dated March 7, 2014 and incorporated herein by reference thereto
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10.5.6†
|
|
Form of Replacement Restricted Stock Unit Award Agreement, filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K dated March 7, 2014 and incorporated herein by reference thereto
|
10.5.7†
|
|
Nonemployee Director Deferral Program
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10.6†
|
|
Executive Deferred Compensation Plan, filed as Exhibit 10.6 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.7†
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Executive Severance Plan, filed as Exhibit 10.7 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
|
10.8†
|
|
Executive Officer Annual Incentive Plan, filed as Exhibit 10.5 to Registrant’s Current Report on Form 8-K dated February 28, 2014 and incorporated herein by reference thereto
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10.9†
|
|
Bonus Agreement between David Wightman and Dover Communication Technologies, dated March 21, 2013, filed as Exhibit 10.13 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
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10.10†
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|
Executive Severance Agreement between David Wightman and Dover Corporation, dated as of February 21, 2000, filed as Exhibit 10.14 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
|
10.11†
|
|
Relocation Agreements for Dave Wightman, filed as Exhibit 10.15 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
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10.12
|
|
Credit Agreement among Knowles Corporation, certain subsidiaries of Knowles Corporation, the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent, dated as of January 27, 2014, filed as Exhibit 10.16 to Registrant’s Registration Statement on Form 10 (File No. 001-36102) and incorporated herein by reference thereto
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21.1
|
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Subsidiaries of Knowles Corporation
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23.1
|
|
Consent of PricewaterhouseCoopers LLP
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31.1
|
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Certificate of Chief Executive Officer Required Under Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
|
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Certificate of Chief Financial Officer Required Under Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
|
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Joint Certificate of the Chief Executive Officer and Chief Financial Officer Required Under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
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†
|
|
Indicates the exhibit is a management contract or compensatory plan or arrangement.
|
1.
|
Purpose of Program
|
2.
|
Administration of Program
|
3.
|
Participation
|
4.
|
Election to Defer Payment Date of Shares
|
5.
|
Deferred Stock Unit Account
|
6.
|
Timing of Payment
|
7.
|
Limitations and Conditions
|
8.
|
Stock Adjustments
|
9.
|
Amendment and Termination
|
10.
|
Miscellaneous
|
11.
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Effective Date
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Company Name
|
|
Where Incorporated
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Domestic
|
|
|
Dielectric Laboratories, Inc.
|
|
Delaware
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Knowles Capital Formation, Inc.
|
|
Delaware
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Knowles Capital Holdings, Inc.
|
|
Delaware
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Knowles Electronics, LLC
|
|
Delaware
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Knowles Electronics Holdings, Inc.
|
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Delaware
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Knowles Electronics Sales Corp.
|
|
Delaware
|
Knowles Finance Corporation
|
|
Delaware
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Knowles Intermediate Holding, Inc.
|
|
Delaware
|
Novacap, LLC
|
|
Delaware
|
Vectron International, Inc.
|
|
Delaware
|
Voltronics, LLC
|
|
Delaware
|
|
|
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Foreign
|
|
|
KEP (Philippines) Realty Corporation
|
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Philippines
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Knowles Electronics (Beijing) Co., Ltd.
|
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China
|
Knowles Electronics (Malaysia) Sdn. Bhd.
|
|
Malaysia
|
Knowles Electronics (Philippines) Corporation
|
|
Philippines
|
Knowles Electronics (Suzhou) Co., Ltd.
|
|
China
|
Knowles Electronics (Weifang), Inc.
|
|
China
|
Knowles Electronics Asia Pte. Ltd.
|
|
Singapore
|
Knowles Electronics Austria GmbH
|
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Austria
|
Knowles Electronics Denmark ApS
|
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Denmark
|
Knowles Electronics Japan, K.K.
|
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Japan
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Knowles Electronics Singapore Pte Ltd
|
|
Singapore
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Knowles Electronics Taiwan, Ltd.
|
|
Taiwan
|
Knowles Europe
|
|
United Kingdom
|
Knowles GmbH
|
|
Switzerland
|
Knowles Holdings Austria GmbH
|
|
Austria
|
Knowles IPC (M) Sdn. Bhd.
|
|
Malaysia
|
Knowles Luxembourg Finance S.à r.l.
|
|
Luxembourg
|
Knowles Luxembourg International S.à r.l.
|
|
Luxembourg
|
Knowles Luxembourg S.à r.l.
|
|
Luxembourg
|
Knowles Luxembourg Services S.à r.l.
|
|
Luxembourg
|
Revod (Philippines) Holdings Corporation
|
|
Philippines
|
Syfer Technology Limited
|
|
United Kingdom
|
Vectron International, Ltd.
|
|
Ontario
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Vectron International GmbH
|
|
Germany
|
1.
|
I have reviewed this Annual Report on Form 10-K of Knowles Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ JEFFREY S. NIEW
|
|
Name: Jeffrey S. Niew
|
|
Title: President and Chief Executive Officer
|
|
(principal executive officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of Knowles Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ JOHN S. ANDERSON
|
|
Name: John S. Anderson
|
|
Title: Senior Vice President & Chief Financial Officer
|
|
(principal financial officer)
|
|
/s/ JEFFREY S. NIEW
|
|
Name: Jeffrey S. Niew
|
|
Title: President and Chief Executive Officer
|
|
(principal executive officer)
|
|
Date: March 28, 2014
|
|
|
|
|
|
/s/ JOHN S. ANDERSON
|
|
Name: John S. Anderson
|
|
Title: Senior Vice President & Chief Financial Officer
|
|
(principal financial officer)
|
|
Date: March 28, 2014
|