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What changed in Knowles Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Knowles Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+246 added−264 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-09)

Top changes in Knowles Corp's 2023 10-K

246 paragraphs added · 264 removed · 194 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+7 added−10 removed28 unchanged
Biggest changeOur customers are adopting these higher value microphones and balanced armature speakers to improve the overall audio performance of their devices which in turn improves the end user experience. For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, yield improvements, and equipment efficiency.
Biggest changeFor products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency. In the CMM segment, our investments in research and development enable us to introduce new products with improved features and performance in a highly competitive, technology-based industry.
Our Company We are a market leader and global provider of advanced micro-acoustic microphones and balanced armature speakers, audio solutions, and high performance capacitors and radio frequency ("RF") filtering products, serving the medtech, defense, consumer electronics, electric vehicle, industrial, and communications markets.
Our Company We are a market leader and global provider of high performance capacitors and radio frequency ("RF") filtering products, balanced armature speakers, advanced micro-acoustic microphones, and audio solutions serving the medtech, defense, electric vehicle, industrial, communications, consumer electronics markets.
Our Strategy The Company is focused on delivering high value, differentiated solutions to a diverse set of end markets. In our Precision Devices ("PD") segment, our high performance capacitors and RF filtering solutions enable some of the most demanding applications in the defense, medtech, and electric vehicle markets.
Our Strategy The Company is focused on delivering high value, differentiated solutions to a diverse set of end markets. In the Precision Devices ("PD") segment, our high performance capacitors and RF filtering solutions enable some of the most demanding applications in the defense, medtech, and electric vehicle markets.
The segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies. This change was made to enhance transparency into the Company's performance and to better align with how management reviews its financial results to drive business decision making.
The segments are aligned around similar product applications serving our key end markets to enhance focus on growth strategies. This change was made to enhance transparency into the Company's performance and to better align with how management reviews its financial results to drive business decision making.
Additional information regarding Knowles' activities related to its people and sustainability, as well as workforce diversity data, can be found in the Knowles 2022 Corporate Sustainability Report, which is located on our website. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.
Additional information regarding Knowles' activities related to its people and sustainability, as well as workforce diversity data, can be found in the Knowles 2023 Corporate Sustainability Report, which is located on our website. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.
Additionally, it is important for suppliers to have flexibility and quick time-to-market to meet clients’ needs. Key competitors include: • PD - Kyocera Corporation, Murata, and Yageo Corporation • MSA - Sonion • CMM - AAC Technologies, Goertek, and Infineon In the PD segment, the end markets tend to have less pricing pressure.
Additionally, it is important for suppliers to have flexibility and quick time-to-market to meet clients’ needs. Key competitors include: • PD - Kyocera Corporation, Murata, Yageo Corporation, and TDK Corporation • MSA - Sonion • CMM - AAC Technologies, Goertek Inc., and Infineon Technologies In the PD segment, the end markets tend to have less pricing pressure.
We do not anticipate any material effect on our business due to any patents expiring in 2023, and we continue to obtain new patents through our ongoing research and development. We have maintained U.S. federal trademark registrations for KNOWLES and Knowles logo designs, along with various other trademarks.
We do not anticipate any material effect on our business due to any patents expiring in 2024, and we continue to obtain new patents through our ongoing research and development. We have maintained U.S. federal trademark registrations for KNOWLES and Knowles logo designs, along with various other trademarks.
Intellectual Property and Intangible Assets We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. Our U.S. patents expire in calendar years 2023 through 2042. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents.
Intellectual Property and Intangible Assets We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. Our U.S. patents expire in calendar years 2024 through 2043. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents.
Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver innovative solutions across multiple applications. Knowles, founded in 1946 and headquartered in Itasca, Illinois, has approximately 7,000 employees at facilities located in 13 countries around the world.
Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver innovative solutions across multiple applications. Knowles, founded in 1946 and headquartered in Itasca, Illinois, has approximately 7,100 employees at facilities located in 14 countries around the world.
In 2021, we launched our partnership with PEAK (Partnership to Educate and Advance Kids), a Chicago-based nonprofit that is focused on providing academically average students from the city's most challenging and under-served neighborhoods with financial, educational, and personal support through their high school years.
In 2023, we continued our partnership with PEAK (Partnership to Educate and Advance Kids), a Chicago-based nonprofit that is focused on providing academically average students from the city's most challenging and under-served neighborhoods with financial, educational, and personal support through their high school years.
We work collaboratively with customers to ensure that our solutions meet their size, broad frequency response, and low power or custom acoustic module requirements. Our expertise in the traditional hearing aid market enables us to capitalize on emerging markets like Over the Counter ("OTC") hearing aids.
We work collaboratively with customers to ensure that our solutions meet their size, broad frequency response, and low power or custom acoustic module requirements. Our expertise in traditional hearing aids enables us to capitalize on emerging product spaces like Over the Counter ("OTC") hearing aids.
We continue to focus on sales growth and improved margins by leveraging our core strengths in manufacturing and research and development. In our Consumer MEMS Microphones ("CMM") segment the Company benefits from the positive audio trends across consumer devices.
We continue to focus on sales growth and improved margins by leveraging our core strengths in manufacturing and research and development. In the Consumer MEMS Microphones ("CMM") segment, the Company benefits from the positive audio trends across a variety of consumer products.
Our customers include some of the largest OEMs and operators in these markets. In addition, many of our OEM customers outsource to contract manufacturers. Other customers include global mobile phone manufacturers, hearing aid manufacturers, and many of the largest global contract manufacturing companies, particularly in China.
In addition, many of our OEM customers outsource to contract manufacturers. Other customers include global mobile phone manufacturers, hearing aid manufacturers, and many of the largest global contract manufacturing companies, particularly in China.
As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers, if commodity prices trend upward, we attempt to control such costs through fixed-price contracts with suppliers and various other programs.
Commodity pricing for various metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates. As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers, if commodity prices trend upward, we attempt to control such costs through fixed-price contracts with suppliers and various other programs.
Our Business Segments During the fourth quarter of 2022, we determined each operating segment represents a single reportable segment; thus, we now report three segments. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting and are comprised of (i) PD, (ii) MSA, and (iii) CMM.
Our Business Segments In 2022, we determined each operating segment represents a single reportable segment; since then, we have been reporting three segments. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting and are comprised of (i) PD, (ii) MSA, and (iii) CMM.
The Company's customers that accounted for 10% or more of total revenues were as follows: Revenues Years Ended December 31, 2022 2021 2020 Apple Inc. 15 % 16 % 23 % We manufacture and develop our products as well as maintain sales and technical customer support offices in North America, Europe, and Asia.
The Company's customers that accounted for 10% or more of total revenues were as follows: Revenues Years Ended December 31, 2023 2022 2021 Apple Inc. 16 % 15 % 16 % WS Audiology A/S 10 % * * * Less than 10% of total revenues. 5 Table of Contents We manufacture and develop our products and maintain sales and technical customer support offices in North America, Europe, and Asia.
For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, yield improvements, equipment efficiency, and movement to lower-cost manufacturing locations. Customers, Sales, and Distribution We serve customers in the medtech, defense, electric vehicle, industrial, communications, and consumer electronics markets.
For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency. Customers, Sales, and Distribution We serve customers in the medtech, defense, electric vehicle, industrial, communications, and consumer electronics markets. Our customers include some of the largest OEMs and operators in these markets.
To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties. See Item 1A. Risk Factors for additional information regarding risks related to our business. Cybersecurity We regularly perform risk assessments relating to cybersecurity and technology risks.
To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties. See Item 1A. Risk Factors for additional information regarding risks related to our business. Seasonality Our PD segment is not typically subject to seasonality.
We strive to create and maintain a workplace environment that embraces the diversity of thoughts, ideas, beliefs, and experiences, brought by our team members. We recognize that nurturing an inclusive workplace enables us to attract, develop, and retain our team members regardless of their race, color, gender identity, language, national origin, religion, orientation, or age.
We recognize that nurturing an inclusive workplace enables us to attract, develop, and retain our team members regardless of their race, color, gender identity, language, national origin, religion, orientation, or age.
Our MSA segment tends to have stronger revenues in the fourth quarter of each fiscal year, while our CMM segment, which serves the consumer electronics market, varies based on the timing of OEM product launches and can impact our quarterly revenues, earnings, and cash flow.
Our MSA segment tends to have stronger revenues in the fourth quarter of each fiscal year, while our CMM segment, which serves the consumer electronics market, varies based on the timing of OEM product launches and can impact our quarterly revenues, earnings, and cash flow. 6 Table of Contents Human Capital Management As of December 31, 2023, Knowles had approximately 7,100 employees at facilities located in 14 countries around the world.
Our goal is to build a pipeline of multi-generational talent and accelerate the development of women engineers into advanced technical and leadership positions at Knowles. Additionally, we are focused on increasing the representation of women in leadership roles at Knowles.
Our goal is to build a pipeline of multi-generational talent and accelerate the development of women engineers into advanced technical and leadership positions at Knowles. We have also worked to increase underrepresented groups in our candidate pool, among our new hires, and in leadership positions.
Geographic Trends We strive to maintain our manufacturing facilities in close proximity to our direct customers. In PD, we operate 6 facilities in North America and 1 facility in Asia for the manufacturing of products that support our global customers, as well as their suppliers and contract manufacturers.
In PD, we operate 10 facilities in North America and 1 facility in Asia for the manufacturing of products that support our global customers, as well as their suppliers and contract manufacturers. In MSA, we currently operate 4 facilities in Asia to serve the leading hearing health manufacturers largely based in Europe, China, and North America.
In the CMM segment, our investments in research and development enable us to introduce new products with improved features and performance in a highly competitive, technology-based industry. Our customers are adopting these higher value microphones to improve the overall audio performance of their devices which in turn improves the end user experience.
In the MSA segment, our leading technology and our investments in research and development enable us to introduce new products focused on high reliability, size, broad frequency response, and low power. Our customers are adopting these high-value microphones and balanced armature speakers to improve the overall audio performance of their devices which in turn improves the end user experience.
Typically, our new products have higher average selling prices than the products they are replacing. Once introduced, the pricing for these products trend lower, as is typical in the consumer electronics market.
Our customers are adopting these high-value microphones to improve the overall audio performance of their products which in turn improves the end user experience. Typically, our new products have higher average selling prices than the products they are replacing. Once introduced, the price for these products trend lower, as is typical in the consumer electronics market.
We supplement our direct sales force with external sales representatives and distributors. Our global distribution center is located in Penang, Malaysia. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines to various customer bases. For further detail and for additional disclosures regarding sales and long-lived assets by geographic location, see Note 18.
We supplement our direct sales force with external sales representatives and distributors. We ship our products primarily from our global distribution center located in Penang, Malaysia or directly from certain manufacturing sites. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines to various customer bases.
Fostering a Safe Work Environment We believe it is important to provide a healthy and safe workplace for our employees. We continue to maintain an Environmental, Health, and Safety Policy that reflects our goals to ensure the health, safety, and welfare of our employees.
Fostering a Safe Work Environment We believe it is important to provide a healthy and safe workplace for our employees. As part of our Environmental, Health, and Safety Policy, we train employees and managers on preventing work-related injuries and illnesses.
Market Trends In our PD segment, we sell high reliability, high voltage and high temperature ceramic capacitors, and electromagnetic interference filters across diverse end markets. Portions of this segment face much greater exposure to capital investment cycles and government spending, both direct and indirect, as some of these end markets are largely dependent on project upgrades, expansion, and government contracts.
Portions of this segment face much greater exposure to capital investment cycles and government spending, both direct and indirect, as some of these end markets are largely dependent on project upgrades, expansion, and government contracts. Excess customer and channel inventory has resulted in decreased demand for some of our products.
We see a fragmented set of competitors across high end capacitors and filters for a diverse set of end markets including defense, medtech, industrial, electric vehicle, and communications. In the MSA segment, our leading technology and our investments in research and development enable us to introduce new products focused on high reliability, size, broad frequency response, and low power.
We see a fragmented set of competitors across high end capacitors and filters for a diverse set of end markets including defense, medtech, industrial, electric vehicle, and communications. Our leading technology and our investments in research and development enable us to design products to solve customer-specific challenges. Our proprietary manufacturing processes provide advantages in speed, flexibility, and product customization.
Segment Information to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 5 Table of Contents Raw Materials We use a wide variety of raw materials, primarily metals, ceramic powder, and semi-processed or finished components. Commodity pricing for various metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates.
For further detail and for additional disclosures regarding sales and long-lived assets by geographic location, see Note 18. Segment Information to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Raw Materials We use a wide variety of raw materials, primarily metals, ceramic powder, and semi-processed or finished components.
Our key initiatives with respect to human capital management include: Recruitment, Training, and Development We understand that our most important resource is our people. We utilize a variety of recruitment vehicles to source top talent.
Our Chief Human Resources Officer is responsible for developing and executing on our human capital strategy, with oversight by the Compensation Committee of our Board of Directors. Our key initiatives with respect to human capital management include: Recruitment, Training, and Development We understand that our most important resource is our people.
Our Chief Human Resources Officer annually reviews with the Board of Directors our overall talent management strategy and progress. Commitment To Diversity, Inclusion, and Equality We believe our diverse teams, with their unique ideas, thoughts, and perspectives, form the building blocks for our culture of innovation at Knowles.
Commitment To Diversity, Inclusion, and Equality We believe our diverse teams, with their unique ideas, thoughts, and perspectives, form the building blocks for our culture of innovation at Knowles. We strive to create and maintain a workplace environment that embraces the diversity of thoughts, ideas, beliefs, and experiences, brought by our team members.
We are building relationships with organizations that support the advancement of underrepresented minority groups to sustain a pipeline of diverse talent for opportunities across our Company. We are also working to increase diversity within our professional and management positions and have implemented customized development programs to meet the unique needs of our employees' growth trajectories.
We utilize a variety of recruitment vehicles to source top talent. We are building relationships with organizations that support the advancement of underrepresented minority groups to sustain a pipeline of diverse talent for opportunities across our Company.
For our 2022 corporate summer internship program, 50% of our engineering internship positions were filled by women engineering students. 7 Table of Contents We are fully committed to supporting our communities and the advancement of underrepresented minority groups.
In addition, in 2023 approximately 37% of our new hires in the United States were women. 7 Table of Contents We are fully committed to supporting our communities and the advancement of underrepresented minority groups.
Across ear, IoT, computing, and mobile markets, consumers want to engage with technology through natural spoken commands, and OEMs are developing and deploying the technology to enable it. Our unique capabilities in MEMS microphones and digital signal processing place us in a competitive position to enhance audio performance and enable voice input.
Voice assistants are proliferating throughout a variety of applications from smartphones to headsets, and from smart speakers to household appliances. Across ear, IoT, computing, and mobile markets, consumers want to engage with technology through natural spoken commands, and OEMs are developing and deploying the technology to enable it.
We also invest in the ongoing training and development of our employees by offering tuition and continuous education reimbursement, leveraging an e-learning platform, and implementing formal mentorship programs. Knowles has a formal Succession Planning initiative with the primary objective of identifying and developing our next generation leaders.
We are also working to increase diversity within our professional and management positions and have implemented customized development programs to meet the unique needs of our employees' growth trajectories. We also invest in the ongoing training and development of our employees by offering tuition and continuous education reimbursement, leveraging an e-learning platform, and implementing formal mentorship programs.
Since 2018 we have completed four tuck-in acquisitions where we have strong market positions and attractive margin profiles, including defense, medtech, industrial, electric vehicle, and communications applications. In our Medtech & Specialty Audio ("MSA") segment, our primary focus is to deliver high reliability and industry leading balanced armature speakers and microphones to leading hearing health manufacturers and premium audio markets.
We continue to focus on sales growth and improved margins by expanding our presence in profitable markets through strategic investments and acquisitions. In the Medtech & Specialty Audio ("MSA") segment, our primary focus is to deliver high reliability and industry leading balanced armature speakers and microphones to leading hearing health manufacturers and premium audio markets.
In addition, demand has increased as a result of the expansion of small implantable devices to monitor and correct a host of chronic health issues. In our MSA segment, sales within the hearing aid market are largely driven by aging demographics, healthcare spending, increasing affluence in emerging markets, and government subsidies.
The timing of defense projects has also influenced demand for certain products. In our MSA segment, sales within the hearing aid market are largely driven by aging demographics, healthcare spending, increasing affluence in emerging markets, and government subsidies. Our microphones and balanced armature speakers are also utilized to produce high-definition audio for higher performance True Wireless Stereo ("TWS") applications.
In the United States, approximately 42% of our employees identify as female and approximately 48% of our employees self-identified as belonging to a racial/ethnic minority group. We believe our success is dependent upon attracting, developing, and retaining high performing employees at all levels of the organization.
This includes employees from our newly acquired Cornell Dubilier business. Approximately 70% of our employees are located in Asia and approximately 68% of our employees globally identify as female. In the United States, approximately 44% of our employees identify as female and approximately 42% of our employees self-identified as belonging to a racial/ethnic minority group.
An important component of achieving this goal is fostering a workplace environment that embraces diversity and inclusion. Our Chief Human Resources Officer is responsible for developing and executing on our human capital strategy, with oversight by the Compensation Committee of our Board of Directors.
We believe our success is dependent upon attracting, developing, and retaining high performing employees at all levels of the organization. An important component of achieving this goal is fostering a workplace environment that embraces diversity and inclusion.
Removed
Our capacitor portfolio includes products with highly specialized requirements including high voltage, high temperature, and high reliability. We also deliver RF filtering solutions across a broad range of applications and frequencies primarily serving the defense market. We continue to focus on sales growth and improved margins by expanding our presence in profitable markets through organic initiatives and acquisitions.
Added
The acquisition of Cornell Dubilier ("CD") on November 1, 2023 expands our portfolio offering to include high-performance film, electrolytic, and mica capacitors used in medtech, defense, and industrial electrification applications. Our capacitor portfolio includes products with highly specialized requirements, such as high voltage, high temperature, and high reliability.
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We have been experiencing increased demand for our products driven by the upgrading of large rotary radars, deployment of communication satellites, build-out of 5G communication systems, and the rapid replacement of combustion engine vehicles with electric vehicles.
Added
Additionally, we deliver RF filtering solutions across a broad range of applications and frequencies primarily serving the defense market. The combination of CD's broad selection of capacitors, coupled with our organic PD offerings, significantly expands our serviceable available market.
Removed
Our microphones and balanced armature speakers are also utilized to produce high-definition audio for higher performance True Wireless Stereo ("TWS"). In our CMM segment, voice has been embraced as a primary user interface across consumer electronic devices. Voice assistants are proliferating throughout a variety of applications from smartphones to headsets, and from smart speakers to household appliances.
Added
Market Trends In our PD segment, we sell high reliability, high voltage and high temperature ceramic, high-quality film, electrolytic, and mica capacitors, and electromagnetic interference filters across diverse end markets, including mission critical applications. Our products are designed to solve customer-specific challenges and our proprietary manufacturing processes provide advantages in speed, flexibility, and customization.
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In MSA, we currently operate 4 facilities in Asia to serve the leading hearing health manufacturers largely based in Europe, China, and North America. Although end-user demand for hearing aids is global and marketing activities occur globally, the majority of our manufacturing is located in the Philippines and Malaysia.
Added
In addition, we expect to be able to capitalize on the emerging Over the Counter hearing aid product space, due to our expertise in traditional hearing aids. In our CMM segment, voice has been embraced as a primary user interface across consumer electronic products.
Removed
We have a risk-based cybersecurity program, dedicated to protecting our data as well as data belonging to our customers and partners. We utilize a defensive in-depth strategy, with multiple layers of security controls to protect our data and solutions.
Added
Our unique capabilities in MEMS microphones and digital signal processing place us in a competitive position to enhance audio performance and enable voice input. Geographic Trends We strive to maintain our manufacturing facilities in close proximity to our direct customers.
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We mitigate cybersecurity risks by employing extensive measures, including employee training, systems monitoring and testing, and maintenance of protective systems and contingency plans. We continually evaluate ourselves for appropriate business continuity and disaster recovery planning, with test scenarios that include simulations and penetration tests.
Added
Knowles has a formal Succession Planning initiative with the primary objective of identifying and developing our next generation leaders. Our Chief Human Resources Officer annually reviews with the Board of Directors our overall talent management strategy and progress.
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We also install and regularly update antivirus software on all Company-managed systems to detect and prevent malicious code from impacting our systems. For more information on risks related to data security, see Item 1A.
Added
For our 2023 summer internship program, 67% of our corporate intern class consisted of minority and/or women students, and 50% of our corporate tech interns were women.
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"Risk Factors - Risks Related to Intellectual Property and Cybersecurity - Our business and operations could suffer in the event of security breaches, cybersecurity incident, other unauthorized disclosures, or network disruptions." 6 Table of Contents Seasonality Our PD segment is not typically subject to seasonality.
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Human Capital Management As of December 31, 2022, Knowles had approximately 7,000 employees at facilities located in 13 countries around the world. Approximately 82% of our employees are located in Asia and approximately 71% of our employees globally identify as female.
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During 2022, environmental, health, and safety training and instruction were provided at all levels within the Company.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+10 added−11 removed113 unchanged
Biggest changeGlobal economic conditions and changes in U.S. and international trade policy could materially adversely impact our business, results of operations, and financial position. In the past, the Company's business and operating results have been adversely affected by these global economic conditions and remain vulnerable to future adverse impacts.
Biggest changeIn the past, the Company's business and operating results have been adversely affected by these global economic conditions and remain vulnerable to future adverse impacts. Any prolonged economic deceleration in China may have a material adverse effect on our sales to customers in China, our operating results, and our financial condition.
Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill, other intangible assets, or long-lived assets may not be recoverable, include, but are not limited to, a sustained decline in stock price and market capitalization, significant negative variances between actual and expected financial results, reduced future cash flow estimates, adverse changes in legal factors, failure to realize anticipated synergies from acquisitions, and slower growth rates in our industry.
Other factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill, other intangible assets, or long-lived assets may not be recoverable, include, but are not limited to, a sustained decline in stock price and market capitalization, significant negative variances between actual and expected financial results, reduced future cash flow estimates, adverse changes in legal factors, failure to realize anticipated synergies from acquisitions, and slower growth rates in our industry.
In addition, current Delaware law includes provisions which limit the ability of persons that, without prior board approval, acquire more than 15% of the outstanding voting stock of a Delaware corporation from engaging in any business combination with that corporation, including by merger, consolidation, or purchases of additional shares, for a three-year period following the acquisition by such persons of more than 15% of the corporation’s outstanding voting stock. 19 Table of Contents In light of present circumstances, we believe these provisions taken as a whole protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal.
In addition, current Delaware law includes provisions which limit the ability of persons that, without prior board approval, acquire more than 15% of the outstanding voting stock of a Delaware corporation from engaging in any business combination with that corporation, including by merger, consolidation, or purchases of additional shares, for a three-year period following the acquisition by such persons of more than 15% of the corporation’s outstanding voting stock. 18 Table of Contents In light of present circumstances, we believe these provisions taken as a whole protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal.
The loss of any one of CMM’s top customers or a reduction in the purchases of CMM’s products by such customers would reduce our total revenues and may have a material adverse effect on our operating results, and any delay of a significant volume of purchases by any one of our top customers, even if only temporary, would reduce our revenues in the period of the delay and may have a material adverse effect on our operating results.
The loss of any one of our top customers or a reduction in the purchases of our products by such customers would reduce our total revenues and may have a material adverse effect on our operating results, and any delay of a significant volume of purchases by any one of our top customers, even if only temporary, would reduce our revenues in the period of the delay and may have a material adverse effect on our operating results.
To offset average selling price erosion, we must either continue to be successful with these initiatives or increase our selling prices. If we are unable to offset average selling price erosion, the average selling prices of our products may decrease and our future operating results may be materially adversely affected.
To offset average selling price erosion, we must either be successful with these initiatives or increase our selling prices. If we are unable to offset average selling price erosion, the average selling prices of our products may decrease and our future operating results may be materially adversely affected.
In the past, we have obtained amendments from the lenders under the credit agreement which have allowed us to comply with the financial covenants, but there can be no assurance that in the future the lenders will agree to such amendments, and our inability to comply with the covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition, and operating results. 18 Table of Contents There are risks associated with our indebtedness, which could have a material adverse effect on our financial condition.
In the past, we have obtained amendments from the lenders under the credit agreement which have allowed us to comply with the financial covenants, but there can be no assurance that in the future the lenders will agree to such amendments, and our inability to comply with the covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition, and operating results. 17 Table of Contents There are risks associated with our indebtedness, which could have a material adverse effect on our financial condition.
The smartphone industry is also subject to intense competition that could result in decreased demand and/or declining average selling prices for our products and those of our OEM customers.
Further, the smartphone industry is also subject to intense competition that could result in decreased demand and/or declining average selling prices for our products and those of our OEM customers.
The expense of protecting, defending, and enforcing our intellectual property, or defending claims that our products, technology, or manufacturing processes infringe the intellectual property rights of others, can vary significantly period to period and, in any given period, could have a material adverse effect on our operating results. 17 Table of Contents Our business and operations could suffer in the event of security breaches, cybersecurity incident, other unauthorized disclosures, or network disruptions.
The expense of protecting, defending, and enforcing our intellectual property, or defending claims that our products, technology, or manufacturing processes infringe the intellectual property rights of others, can vary significantly period to period and, in any given period, could have a material adverse effect on our operating results. 16 Table of Contents Our business and operations could suffer in the event of security breaches, cybersecurity incident, other unauthorized disclosures, or network disruptions.
Our business and results of operations have in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, consumer spending rates, rising interest rates, the negative impacts caused by pandemics and public health crises, such as the COVID-19 pandemic, as well as the potential impacts of geopolitical uncertainties, including the ongoing conflict between Russia and Ukraine.
Our business and results of operations have in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, consumer spending rates, rising interest rates, the negative impacts caused by pandemics and public health crises, such as the COVID-19 pandemic, as well as the potential impacts of geopolitical uncertainties (including the ongoing conflict between Russia and Ukraine, and China-Taiwan relations).
In addition, increasing focus on environmental, social, and governance ("ESG") responsibility, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors.
Increasing focus on environmental, social, and governance ("ESG") responsibility, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors.
In addition, we conduct a significant amount of business outside the United States and adverse movements in currency exchange rates, particularly the Malaysian ringgit, the Chinese renminbi (yuan), and the Philippine peso, in any period or periods, could have a material adverse effect on our business and our operating results due to a number of factors, including, among others: 16 Table of Contents o our products are manufactured and sold outside the United States which increases our net exposure to changes in foreign exchange rates; o our products, which are typically sold in U.S. dollars, may become less price-competitive outside the United States as a result of unfavorable foreign exchange rates; o certain of our revenues that are derived from customer sales denominated in foreign currencies could decrease; o our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and lower margins; o the cost of materials, products, services, and other expenses outside the United States could be materially impacted by a weakening of the U.S. dollar; and o a sustained weakening of the U.S. dollar for an extended period could have a material adverse impact on our operating results and financial position.
As a result, significant changes in commodity prices, particularly for various precious metals, could have a substantial adverse effect on our financial condition and results of operations. 15 Table of Contents In addition, we conduct a significant amount of business outside the United States and adverse movements in currency exchange rates, particularly the Malaysian ringgit, the Chinese renminbi (yuan), and the Philippine peso, in any period or periods, could have a material adverse effect on our business and our operating results due to a number of factors, including, among others: o our products are manufactured and sold outside the United States which increases our net exposure to changes in foreign exchange rates; o our products, which are typically sold in U.S. dollars, may become less price-competitive outside the United States as a result of unfavorable foreign exchange rates; o certain of our revenues that are derived from customer sales denominated in foreign currencies could decrease; o our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and lower margins; o the cost of materials, products, services, and other expenses outside the United States could be materially impacted by a weakening of the U.S. dollar; and o a sustained weakening of the U.S. dollar for an extended period could have a material adverse impact on our operating results and financial position.
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Future events or factors considered a change in circumstances may occur which would adversely affect the fair value of the Company's assets and require impairment charges.
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 9 Table of Contents Future events or factors considered a change in circumstances may occur which would adversely affect the fair value of the Company's assets and require impairment charges.
Accordingly, if current market and industry dynamics continue, our CMM segment’s revenues will continue to depend largely upon, and be impacted by the timing, volume, and mix of future purchases by a limited number of our OEM customers.
Accordingly, if current market and industry dynamics continue, revenues, particularly for our CMM segment, will continue to depend largely upon, and be impacted by the timing, volume, and mix of future purchases by a limited number of our OEM customers.
We depend on the smartphone market for a significant portion of our revenues, the downturn in this market has significantly reduced our revenues and adversely impacted our operating results. The smartphone market accounted for approximately 16% of our consolidated revenues for fiscal 2022.
We depend on the smartphone market for a significant portion of our revenues, the downturn in this market has significantly reduced our revenues and adversely impacted our operating results. The smartphone market accounted for approximately 13% of our consolidated revenues for fiscal 2023.
We hold significant amounts of goodwill, other intangible assets, and long-lived assets, and the balances of these assets could increase in the future if we acquire other businesses. At December 31, 2022, the balance of our goodwill, other intangible assets, and long-lived assets was $730.5 million and the total market value of the Company’s outstanding shares was $1.5 billion.
We hold significant amounts of goodwill, other intangible assets, and long-lived assets, and the balances of these assets could increase in the future if we acquire other businesses. At December 31, 2023, the balance of our goodwill, other intangible assets, and long-lived assets was $918.6 million and the total market value of the Company’s outstanding shares was $1.6 billion.
For example, in fiscal 2022 global economic conditions and COVID-19 mitigation measures contributed to a decline in demand for smartphones in China, a geographic region with high concentrations of smartphone users, resulting in an adverse impact on our operating results.
For example, in fiscal 2022 global economic conditions and COVID-19 mitigation measures contributed to a decline in demand for smartphones in China, a geographic region with high concentrations of smartphone users, resulting in an adverse impact on our operating results. The decrease in demand for smartphones, particularly in China, continued through fiscal 2023.
As a consequence of such policy, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, which may adversely impact our results of operations and financial condition.
Additionally, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, which may adversely impact our results of operations and financial condition.
Income Taxes to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Moreover, tax rates and laws in the countries where we operate may change, or tax reforms may be enacted domestically or in foreign jurisdictions which may increase tax uncertainty and may adversely affect our liquidity, cash flows, and future reported financial results or our ability to continue to structure and conduct our business as is done currently.
Moreover, tax rates and laws in the countries where we operate may change, or tax reforms may be enacted domestically or in foreign jurisdictions which may increase tax uncertainty and may adversely affect our liquidity, cash flows, and future reported financial results or our ability to continue to structure and conduct our business as is done currently.
Like most technology sectors, the smartphone industry has traditionally experienced an erosion of average selling prices due to a number of factors, including intense competition, component pricing trends, changes in demand mix, excess inventories, and rapid obsolescence resulting from technology advances.
An inability to offset erosion of average selling prices in our CMM segment adversely affected our gross margins. Like most technology sectors, the smartphone industry has traditionally experienced an erosion of average selling prices due to a number of factors, including intense competition, component pricing trends, changes in demand mix, excess inventories, and rapid obsolescence resulting from technology advances.
Our effective tax rate may fluctuate which will impact our future financial results. Our effective tax rate is highly dependent upon the geographic composition of our worldwide earnings as we are subject to income taxes in both the U.S. and various foreign jurisdictions.
Our effective tax rate is highly dependent upon the geographic composition of our worldwide earnings as we are subject to income taxes in both the U.S. and various foreign jurisdictions.
Within our CMM segment, while average selling prices vary significantly on a product to product basis, we have traditionally been successful with largely offsetting price erosion by shifting our product mix to new, higher end or higher performance microphones and gradually shifting customers from analog microphones to higher value digital microphones.
Within our CMM segment, while average selling prices vary significantly on a product to product basis, our strategy has been to offset price erosion by shifting our product mix to new, higher end or higher performance microphones and gradually shifting customers from analog microphones to higher value digital microphones.
Potential events or occurrences which could cause business or supply disruptions or affect the ability or willingness of a supplier or foundry to continue to supply us include changes in market strategy, the acquisition of, sale, or other change in control or ownership structure of a supplier or foundry, strategic divestiture, bankruptcy, insolvency or other financial difficulties, business disruptions (including COVID-19-related supplier plant shutdowns or slowdowns, governmental regulatory and enforcement actions, and work stoppages), operational issues, or capacity constraints at a supplier or foundry. 10 Table of Contents If we are unable to offset erosion of average selling prices in our CMM segment our gross margins may be adversely affected.
Potential events or occurrences which could cause business or supply disruptions or affect the ability or willingness of a supplier or foundry to continue to supply us include changes in market strategy, the acquisition of, sale, or other change in control or ownership structure of a supplier or foundry, strategic divestiture, bankruptcy, insolvency or other financial difficulties, business disruptions (including COVID-19-related supplier plant shutdowns or slowdowns, governmental regulatory and enforcement actions, and work stoppages), operational issues, or capacity constraints at a supplier or foundry.
Moreover, to the extent a defect in one of our products is caused by a defective component supplied to us by a third party, we may, nonetheless, be liable to the customer and be unsuccessful in seeking indemnification from that third party.
Moreover, to the extent a defect in one of our products is caused by a defective component supplied to us by a third party, we may, nonetheless, be liable to the customer and be unsuccessful in seeking indemnification from that third party. We are subject to potentially material liability for breaches of confidentiality agreements with certain of our top customers.
We derive a substantial portion of our revenues from MEMS microphones and a significant reduction in our sales of MEMS microphones significantly reduced our revenues and adversely impact our operating results. Sales of MEMS microphones accounted for approximately 46% of our consolidated revenues for fiscal 2022.
We derive a substantial portion of our revenues from MEMS microphones and a significant reduction in our sales of MEMS microphones may significantly reduce our revenues and adversely impact our operating results. Sales of MEMS microphones by our CMM and MSA segments accounted for approximately 44% of our consolidated revenues for fiscal 2023.
Such acquisitions and strategic investments naturally entail significant risks and uncertainties, some of which are beyond our control. We may not, for example, be able to retain key employees, customers, or suppliers of acquired companies, derive value from acquired technology or assets and we may experience delays in achieving cost synergies or higher than expected costs in implementing them.
We may not, for example, be able to retain key employees, customers, or suppliers of acquired companies, derive value from acquired technology or assets and we may experience delays in achieving cost synergies or higher than expected costs in implementing them.
A significant portion of our consolidated revenues are derived from acoustic components and audio solutions that are required to go through extensive customer qualification processes before being selected by customers for inclusion in their end products.
If our new products are not designed into a customer's product or qualified by a customer our operating results could be negatively impacted. A significant portion of our consolidated revenues are derived from acoustic components and audio solutions that are required to go through extensive customer qualification processes before being selected by customers for inclusion in their end products.
Our future success depends largely on the continued service and efforts of our executive officers and other key management and technical personnel and on our ability to continue to identify, attract, retain, and motivate them, particularly in an environment of cost reductions and a general move toward more performance-based compensation for executives and key management.
Our future success depends largely on the continued service and efforts of our executive officers and other key management and technical personnel and on our ability to continue to identify, attract, retain, and motivate them, particularly in an environment of cost reductions and a general move toward more performance-based compensation for executives and key management. 11 Table of Contents Implementing our business strategy also requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations.
Our CMM segment derives a significant portion of its revenues from a limited number of OEM customers. If revenues derived from these customers decrease or the timing of such revenues fluctuates, our operating results could be adversely affected. Our CMM segment accounted for 38% of our consolidated revenues for fiscal 2022.
If revenues derived from these customers decrease or the timing of such revenues fluctuates, our operating results could be adversely affected. Our CMM and MSA segments rely on a limited number of customers for a significant portion of their sales. Our CMM segment accounted for 36% of our consolidated revenues for fiscal 2023.
Any prolonged economic deceleration in China may have a material adverse effect on our sales to customers in China, our operating results, and our financial condition. 15 Table of Contents Political actions, including trade and/or national security protection policies, or other actions by governments, particularly the U.S. and Chinese governments, have in the past, currently are, and could in the future limit or prevent us from transacting business with certain of our customers or suppliers.
Political actions, including trade and/or national security protection policies, or other actions by governments, particularly the U.S. and Chinese governments, have in the past, currently are, and could in the future limit or prevent us from transacting business with certain of our customers or suppliers.
Product ramps typically involve greater volumes of scrap and risks to execution such as higher costs due to inefficiencies and delays in production, all of which can have a material adverse effect on our operating results. 14 Table of Contents Risks Related to Operating a Global Business Our foreign operations and supply chain are each subject to various risks that could materially adversely impact our results of operations and financial condition.
Product ramps typically involve greater volumes of scrap and risks to execution such as higher costs due to inefficiencies and delays in production, all of which can have a material adverse effect on our operating results.
Future events or factors, such as a continued decline in forecasted revenue for our CMM segment, or changes to underlying assumptions used to calculate fair value could result in additional impairment charges which could result in a significant charge to earnings.
Future events or factors, such as the outcome of our strategic alternatives review of the CMM segment which could result in either a sale or a restructuring of our CMM segment, or if there are changes to underlying assumptions used to calculate fair value, could result in additional impairment charges and a significant charge to earnings.
If we are unable to anticipate or match our competitors’ development or launch of new products, identify customer needs and preferences on a timely basis, or successfully launch or ramp production of our new products, our business and operating results may be materially adversely affected.
If we are unable to anticipate or match our competitors’ development or launch of new products, identify customer needs and preferences on a timely basis, or successfully launch or ramp production of our new products, our business and operating results may be materially adversely affected. 13 Table of Contents We operate in the highly competitive smartphone industry, which requires us to invest significant capital in developing, qualifying, and ramping production of new products without any assurance of product sales.
Implementing our business strategy also requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. Competition for such experienced technical personnel in our industry and where we are located is intense, and we cannot assure that we can continue to recruit and retain such personnel.
Competition for such experienced technical personnel in our industry and where we are located is intense, and we cannot assure that we can continue to recruit and retain such personnel.
During 2022, our closing stock price ranged from a high of $23.59 per share to a low of $11.90 per share.
During 2023, our closing stock price ranged from a high of $20.04 per share to a low of $12.98 per share.
We rely on highly specialized suppliers for a variety of highly engineered or specialized components, and other inputs for which we may not be able to readily identify alternatives or substitutes in the event of a supply disruption or capacity constraint at or by any of these suppliers, which could have a material adverse impact on our results of operations.
For example, during fiscal 2022, our CMM segment experienced weak demand for our MEMS microphones product line due to weak global demand for consumer electronics, COVID-19 related shutdowns in China, excess inventory in the supply chain, and our shift away from commoditized products. 10 Table of Contents We rely on highly specialized suppliers for a variety of highly engineered or specialized components, and other inputs for which we may not be able to readily identify alternatives or substitutes in the event of a supply disruption or capacity constraint at or by any of these suppliers, which could have a material adverse impact on our results of operations.
While our diversification strategy has tempered the impact of the recent slowing of growth in this market, a continued significant downturn in the smartphone market could continue to have a material adverse effect on our business and operating results. 11 Table of Contents We have invested and continue to make strategic investments and acquisitions that, if not successful, could have a material adverse effect on our business and financial results.
While our diversification strategy and increasing focus on other non-mobile markets has tempered the impact of the recent slowing of growth in this market, a continued significant downturn in the smartphone market could continue to have a material adverse effect on our business and operating results. Our effective tax rate may fluctuate which will impact our future financial results.
GAAP to record a non-cash charge to our earnings which could have a material adverse effect on our business, results of operations, and financial condition. 13 Table of Contents We are subject to potentially material liability for breaches of confidentiality agreements with certain of our top customers.
GAAP to record a non-cash charge to our earnings which could have a material adverse effect on our business, results of operations, and financial condition. We derive a significant portion of our revenues from a limited number of OEM customers.
Our CMM segment derives a significant portion of revenues from a small number of OEM customers. For 2022, CMM's top five customers accounted for approximately 63% of its revenues. For the year ended December 31, 2022, Apple Inc. accounted for approximately 40% of CMM’s revenues and 15% of consolidated company revenues.
For 2023, CMM's top five customers accounted for approximately 66% of its revenues. For the year ended December 31, 2023, Apple Inc. accounted for approximately 44% of CMM’s revenues and 16% of consolidated company revenues. For 2023, MSA's top five customers accounted for approximately 80% of its revenues.
Removed
Financial condition and results of operations have been and are expected to continue to be adversely impacted by the recent COVID-19 pandemic.
Added
Our pursuit of strategic alternatives for our CMM business may not result in the identification or consummation of any transaction or may result in the restructuring of the CMM business.
Removed
The effects on our operations due to the public health crisis caused by the COVID-19 pandemic and the measures being taken to limit COVID-19's spread have negatively impacted our operations and financial results and future impacts are uncertain and difficult to predict, but may include: ◦ The effects of the COVID-19 pandemic on our business may extend well beyond the current health crisis and immediate related governmental action.
Added
Any potential transaction or a restructuring, and the related valuations, would be dependent upon a number of factors, some of which may be beyond our control, including, among others, market conditions, industry trends, the interest of third parties, and availability of financing to potential buyers on reasonable terms.
Removed
Disruptions resulting from COVID-19 may cause some of our customers to take cost-cutting actions.
Added
For the year ended December 31, 2023, WS Audiology A/S accounted for approximately 32% of MSA's revenues and 10% of consolidated company revenues.
Removed
In addition, shifts in consumer spending and market downturns due to the measures taken to contain its spread have negatively impacted demand for some of our products, particularly in our CMM segment, and may continue to have a significant negative impact to our financial results. ◦ We may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions, and other actions and restrictions that may be requested or mandated by governmental authorities. 9 Table of Contents The ultimate impact of the COVID-19 pandemic on our business and results of operations depends on future developments, which are uncertain, rapidly changing, and difficult to predict, including but not limited to the severity and duration of the COVID-19 pandemic; the availability, adoption, and efficacy of vaccines; the emergence, spread, and severity of new variants of COVID-19; actions taken by governmental authorities and other third parties in response; and when and to what extent normal business, economic, and social activity and conditions resume.
Added
For example, in fiscal year 2023, excess industry inventory and an inability to shift product mix, resulted in a decrease in average selling prices of our products. If we are unsuccessful in implementing our investment and acquisition strategy, or integrating acquired companies, our business and financial results may be adversely effected.
Removed
For example, during fiscal 2022, we experienced weak demand for our MEMS microphones product line due to weak global demand for consumer electronics, COVID-19 related shutdowns in China, excess inventory in the supply chain, and our shift away from commoditized products.
Added
Such acquisitions and strategic investments naturally entail significant risks and uncertainties, some of which are beyond our control. To the extent we are successful in making acquisitions, such as our acquisition of Cornell Dubilier, we may not realize the expected benefits of our acquisitions or strategic transactions, or be able to retain those benefits even if realized.
Removed
Our effective tax rate is favorably impacted by tax holidays granted to us by certain foreign jurisdictions, which lowers the tax rates we are subject to for a period of time as compared to the countries' statutory tax rates.
Added
Risks Related to Operating a Global Business Our foreign operations and supply chain are each subject to various risks that could materially adversely impact our results of operations and financial condition.
Removed
These tax holidays are subject to the satisfaction of certain conditions, including exceeding certain annual thresholds of operating expenses and gross sales. If we fail to satisfy such conditions, our effective tax rate may be materially adversely impacted.
Added
Evolving social and environmental responsibility regulations, as well as demands from investors, customers and other stakeholders, could result in additional costs, harm to our reputation and a loss of customers.
Removed
As the result of the rapid decline in demand for global consumer electronics during fiscal 2022, we will not satisfy all of the conditions of our tax holiday in Malaysia that was in effect for 2022.
Added
In addition, we have publicly announced certain corporate responsibility goals, which reflect our current plans and aspirations based on known conditions.
Removed
While this did not result in a material adverse impact to our effective tax rate for 2022, if we are unable to re-negotiate our tax holiday in Malaysia, our effective tax rate in future years may be materially negatively impacted. For additional detail, see Note 13.
Added
Any failure to achieve such goals (or achieve the goals within the set timeframe) or the perception by stakeholders of such failure may result in reputational or financial harm. 14 Table of Contents Global economic conditions and changes in U.S. and international trade policy could materially adversely impact our business, results of operations, and financial position.
Removed
We operate in the highly competitive smartphone industry, which requires us to invest significant capital in developing, qualifying, and ramping production of new products without any assurance of product sales. If our new products are not designed into a customer's product or qualified by a customer our operating results could be negatively impacted.
Added
As a consequence of such policy, revenue for our PD segment has been adversely impacted and may continue to be adversely impacted.
Removed
As a result, significant changes in commodity prices, particularly for various precious metals, could have a substantial adverse effect on our financial condition and results of operations.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeOur material properties used in connection with manufacturing, sales, research and development, and corporate administrative operations, and the segments served at that facility, are as follows: Location Principal Function(s) Owned or Leased Segment Square Footage (in thousands) Suzhou, China Manufacturing and administrative Leased PD, MSA, CMM 495 Cebu, the Philippines Manufacturing and administrative Owned MSA 215 Penang, Malaysia Manufacturing and administrative Owned MSA, CMM 187 Cazenovia, New York Manufacturing, research and development, sales, and administrative Owned PD 133 Itasca, Illinois Corporate headquarters, research and development, sales, and administrative Owned MSA, CMM 95 We believe that the owned and leased facilities we utilize are well-maintained and suitable for our operations.
Biggest changeOur material properties used in connection with manufacturing, sales, research and development, and corporate administrative operations, and the segments served at that facility, are as follows: Location Principal Function(s) Owned or Leased Segment Square Footage (in thousands) Suzhou, China Manufacturing and administrative Leased PD, MSA, CMM 495 Cebu, the Philippines Manufacturing and administrative Owned MSA 215 Penang, Malaysia Manufacturing and administrative Owned MSA, CMM 187 Liberty, South Carolina Manufacturing, sales, and administrative Owned PD 155 Cazenovia, New York Manufacturing, research and development, sales, and administrative Owned PD 133 Mexicali, Baja California, Mexico Manufacturing and administrative Leased PD 119 New Bedford, Massachusetts Distribution center Leased PD 110 Itasca, Illinois Corporate headquarters, research and development, sales, and administrative Owned PD, MSA, CMM 95 We believe that the owned and leased facilities we utilize are well-maintained and suitable for our operations. 20 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of contingencies related to legal proceedings, see Note 15. Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Except as otherwise noted above, there have been no material developments in legal proceedings. 20 Table of Contents
Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of contingencies related to legal proceedings, see Note 15. Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Except as otherwise noted above, there have been no material developments in legal proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed12 unchanged
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 21 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following sets forth information regarding our executive officers, as of February 9, 2023. Name Age Position Jeffrey S. Niew 56 President & Chief Executive Officer John S. Anderson 59 Senior Vice President & Chief Financial Officer Raymond D.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 21 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following sets forth information regarding our executive officers, as of February 21, 2024. Name Age Position Jeffrey S. Niew 57 President & Chief Executive Officer John S. Anderson 60 Senior Vice President & Chief Financial Officer Raymond D.
Cabrera 56 Senior Vice President, Human Resources & Chief Administrative Officer Daniel J. Giesecke 55 Senior Vice President & Chief Operating Officer Robert J. Perna 59 Senior Vice President, General Counsel & Secretary Jeffrey S. Niew has served as President & Chief Executive Officer since September 2013 and as a member of our Board of Directors since February 2014.
Cabrera 57 Senior Vice President, Human Resources & Chief Administrative Officer Daniel J. Giesecke 56 Senior Vice President & Chief Operating Officer Robert J. Perna 60 Senior Vice President, General Counsel & Secretary Jeffrey S. Niew has served as President & Chief Executive Officer since September 2013 and as a member of our Board of Directors since February 2014.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−2 removed6 unchanged
Biggest changeAs of December 31, 2022, the remaining amount authorized for share repurchases was $145.2 million. 23 Table of Contents Performance Graph This performance graph does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Biggest changeBelow is a summary of share repurchases for the three months ended December 31, 2023: (in millions, except share and per share amounts) Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program November 2023 741,163 $ 15.96 741,163 $ 105.9 December 2023 480,280 $ 17.05 480,280 $ 97.7 Total Activity 1,221,443 $ 16.39 1,221,443 23 Table of Contents Performance Graph This performance graph does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access to the capital markets. Holders The number of holders of record of our common stock as of February 7, 2023 was approximately 750. Recent Sales of Unregistered Securities None.
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access to the capital markets. Holders The number of holders of record of our common stock as of February 16, 2024 was approximately 707. Recent Sales of Unregistered Securities None.
Data Source: NYSE *Total return assumes reinvestment of dividends. The graph assumes $100 invested on December 31, 2017 in Knowles Corporation common stock, the PHLX / Semiconductor Sector Index, Dow Jones U.S. Electrical Components & Equipment, and the Russell 2000.
Data Source: NYSE *Total return assumes reinvestment of dividends. The graph assumes $100 invested on December 31, 2018 in Knowles Corporation common stock, the Dow Jones U.S. Electrical Components & Equipment Index, and the Russell 2000 index. ITEM 6. [RESERVED] 24 Table of Contents
Any shares repurchased will be held as treasury stock. The Company did not repurchase any shares of its common stock during the three months ended December 31, 2022.
Any shares repurchased will be held as treasury stock.
Removed
Going forward, the Company intends to replace the PHLX Semiconductor Index used in the performance graph in prior fiscal years with the Dow Jones U.S. Electrical Components & Equipment Index. We selected the Dow Jones U.S.
Removed
Electrical Components & Equipment Index because we believe there is a more meaningful and representative comparison between our company and the numerous and diversified companies on that index. ITEM 6. [RESERVED] 24 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+35 added−47 removed51 unchanged
Biggest changeAs described above, the decrease was primarily due to lower non-GAAP gross profit, partially offset by lower non-GAAP operating expenses. 30 Table of Contents Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1) Years Ended December 31, (in millions, except per share amounts) 2022 2021 2020 Gross profit $ 276.3 $ 359.5 $ 271.2 Stock-based compensation expense 1.6 1.6 1.7 Restructuring charges 32.2 — 2.3 Production transfer costs (2) — — 0.2 Other (3) — 1.0 — Non-GAAP gross profit $ 310.1 $ 362.1 $ 275.4 (Loss) earnings from continuing operations $ (430.1) $ 150.2 $ 2.9 Interest expense, net 3.9 14.2 16.4 Provision for (benefit from) income taxes 11.9 (45.6) 8.4 (Loss) earnings from continuing operations before interest and income taxes (414.3) 118.8 27.7 Stock-based compensation expense 28.6 32.1 17.3 Intangibles amortization expense 12.2 15.9 13.0 Impairment charges 470.9 4.0 7.6 Restructuring charges 41.8 0.5 12.3 Production transfer costs (2) — — 0.2 Other (3) 3.2 3.0 1.2 Adjusted earnings from continuing operations before interest and income taxes $ 142.4 $ 174.3 $ 79.3 Interest expense, net $ 3.9 $ 14.2 $ 16.4 Interest expense, net non-GAAP reconciling adjustments (4) — 6.6 7.4 Non-GAAP interest expense $ 3.9 $ 7.6 $ 9.0 Provision for (benefit from) income taxes $ 11.9 $ (45.6) $ 8.4 Income tax effects of non-GAAP reconciling adjustments (5) 7.3 65.4 (1.3) Non-GAAP provision for income taxes $ 19.2 $ 19.8 $ 7.1 (Loss) earnings from continuing operations $ (430.1) $ 150.2 $ 2.9 Non-GAAP reconciling adjustments (6) 556.7 55.5 51.6 Interest expense, net non-GAAP reconciling adjustments (4) — 6.6 7.4 Income tax effects of non-GAAP reconciling adjustments (5) 7.3 65.4 (1.3) Non-GAAP net earnings $ 119.3 $ 146.9 $ 63.2 Diluted (loss) earnings per share from continuing operations $ (4.69) $ 1.59 $ 0.03 Earnings per share non-GAAP reconciling adjustment 5.95 (0.06) 0.64 Non-GAAP diluted earnings per share $ 1.26 $ 1.53 $ 0.67 Diluted average shares outstanding 91.7 94.7 92.9 Non-GAAP adjustment (7) 2.9 1.1 1.5 Non-GAAP diluted average shares outstanding (7) 94.6 95.8 94.4 31 Table of Contents (1) In addition to the GAAP financial measures included herein, Knowles has presented certain non-GAAP financial measures that exclude certain amounts that are included in the most directly comparable GAAP measures.
Biggest changeAs described above, the decrease was primarily due to lower non-GAAP gross profit and higher non-GAAP operating expenses. 30 Table of Contents Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1) Years Ended December 31, (in millions, except per share amounts) 2023 2022 2021 Gross profit $ 283.4 $ 276.3 $ 359.5 Stock-based compensation expense 2.1 1.6 1.6 Restructuring charges (1.3) 32.2 — Production transfer costs (2) 0.4 — — Acquisition-related costs (3) 0.8 — 1.0 Non-GAAP gross profit $ 285.4 $ 310.1 $ 362.1 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Interest expense, net 5.4 3.9 14.2 (Benefit from) provision for income taxes (27.4) 11.9 (45.6) Earnings (loss) from continuing operations before interest and income taxes 50.4 (414.3) 118.8 Stock-based compensation expense 29.0 28.6 32.1 Intangibles amortization expense 13.5 12.2 15.9 Impairment charges — 470.9 4.0 Restructuring charges 2.2 41.8 0.5 Production transfer costs (2) 0.4 — — Acquisition-related costs (3) 9.4 — 1.5 Other (4) 0.9 3.2 1.5 Adjusted earnings from continuing operations before interest and income taxes $ 105.8 $ 142.4 $ 174.3 Interest expense, net $ 5.4 $ 3.9 $ 14.2 Interest expense, net non-GAAP reconciling adjustments (5) — — 6.6 Non-GAAP interest expense $ 5.4 $ 3.9 $ 7.6 (Benefit from) provision for income taxes $ (27.4) $ 11.9 $ (45.6) Income tax effects of non-GAAP reconciling adjustments (6) 6 45.6 7.3 65.4 Non-GAAP provision for income taxes $ 18.2 $ 19.2 $ 19.8 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Non-GAAP reconciling adjustments (7) 55.4 556.7 55.5 Interest expense, net non-GAAP reconciling adjustments (5) — — 6.6 Income tax effects of non-GAAP reconciling adjustments (6) 45.6 7.3 65.4 Non-GAAP net earnings $ 82.2 $ 119.3 $ 146.9 Diluted earnings (loss) per share from continuing operations $ 0.79 $ (4.69) $ 1.59 Earnings per share non-GAAP reconciling adjustment 0.09 5.95 (0.06) Non-GAAP diluted earnings per share $ 0.88 $ 1.26 $ 1.53 Diluted average shares outstanding 91.6 91.7 94.7 Non-GAAP adjustment (8) 2.3 2.9 1.1 Non-GAAP diluted average shares outstanding (8) 93.9 94.6 95.8 31 Table of Contents (1) In addition to the GAAP financial measures included herein, Knowles has presented certain non-GAAP financial measures that exclude certain amounts that are included in the most directly comparable GAAP measures.
Our Business We are a market leader and global provider of advanced micro-acoustic microphones and balanced armature speakers, audio solutions, and high performance capacitors and radio frequency ("RF") filtering products, serving the medtech, defense, consumer electronics, electric vehicle, industrial, and communications markets.
Our Business We are a market leader and global provider of high performance capacitors and radio frequency ("RF") filtering products, balanced armature speakers, advanced micro-acoustic microphones, and audio solutions, serving the medtech, defense, electric vehicle, industrial, communications, and consumer electronics markets.
(3) In 2022, Other expenses represent an adjustment to pre-spin-off pension obligations of $3.4 million, which was recorded during the second quarter of 2022 in the Other (income) expense, net line on the Consolidated Statements of Earnings, and the ongoing net lease cost related to facilities not used in operations.
In 2022, Other expenses represent an adjustment to pre-spin-off pension obligations of $3.4 million, which was recorded during the second quarter of 2022 in the Other (income) expense, net line on the Consolidated Statements of Earnings, and the ongoing net lease cost related to facilities not used in operations.
Leases to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." (3) Represents off-balance sheet commitments for purchase obligations related to open purchase orders with our vendors. 41 Table of Contents Risk Management We are exposed to certain market risks which exist as part of our ongoing business operations, including changes in currency exchange rates, the dependence on key customers, price volatility for certain commodities, and changes in interest rates.
Leases to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." (3) Represents off-balance sheet commitments for purchase obligations related to open purchase orders with our vendors. 38 Table of Contents Risk Management We are exposed to certain market risks which exist as part of our ongoing business operations, including changes in currency exchange rates, the dependence on key customers, price volatility for certain commodities, and changes in interest rates.
In addition, the Company entered into convertible note hedge transactions that expired upon maturity of the convertible notes to offset any potential dilution from the convertible notes.
In addition, the Company entered into convertible note hedge transactions that expired in 2021 upon maturity of the convertible notes to offset any potential dilution from the convertible notes.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 9, 2022. Non-GAAP Financial Measures In addition to the GAAP financial measures included in this item, we have presented certain non-GAAP financial measures.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 9, 2023. Non-GAAP Financial Measures In addition to the GAAP financial measures included in this item, we have presented certain non-GAAP financial measures.
(4) Under GAAP in effect for the Company through 2021, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion were required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflected the issuer’s nonconvertible debt borrowing rate.
(5) Under GAAP in effect for the Company through 2021, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion were required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflected the issuer’s nonconvertible debt borrowing rate.
The difference between the imputed interest expense and the coupon interest expense was excluded from management’s assessment of the Company’s operating performance because management believes that this non-cash expense was not indicative of its core, ongoing operating performance. (5) Income tax effects of non-GAAP reconciling adjustments are calculated using the applicable tax rates in the jurisdictions of the underlying adjustments.
The difference between the imputed interest expense and the coupon interest expense was excluded from management’s assessment of the Company’s operating performance because management believes that this non-cash expense was not indicative of its core, ongoing operating performance. (6) Income tax effects of non-GAAP reconciling adjustments are calculated using the applicable tax rates in the jurisdictions of the underlying adjustments.
(7) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.
(8) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.
Excluding the CMM reporting unit, holding all other assumptions used in the 2022 fair value measurement constant, a 1% increase in the weighted-average cost of capital, a 1% reduction in revenue growth, or a 1% reduction in EBITDA margin assumption for our MSA and PD reporting units would not result in any impairment.
Excluding the CMM reporting unit, holding all other assumptions used in the 2023 fair value measurement constant, a 1% increase in the weighted-average cost of capital, a 1% reduction in revenue growth, or a 1% reduction in EBITDA margin assumption for our MSA and PD reporting units would not result in any impairment.
Based on our current sales and manufacturing activity, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $19.2 million, excluding the impact of our hedging program. See Note 11.
Based on our current sales and manufacturing activity, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $17.2 million, excluding the impact of our hedging program. See Note 11.
Dependence on Key Customers; Concentration of Credit The loss of any key customer and our inability to replace revenues provided by a key customer may have a material adverse effect on our business and financial condition. For the years ended December 31, 2022, 2021, and 2020, Apple Inc. accounted for approximately 15%, 16%, and 23% of our total revenues, respectively.
Dependence on Key Customers; Concentration of Credit The loss of any key customer and our inability to replace revenues provided by a key customer may have a material adverse effect on our business and financial condition. For the years ended December 31, 2023, 2022, and 2021, Apple Inc. accounted for approximately 16%, 15%, and 16% of our total revenues, respectively.
No impairment of other intangible or long-lived assets was recorded for the year ended December 31, 2022. 44 Table of Contents Income Taxes: We use judgment in determining our provision for income taxes, including our assessment of the need for a valuation allowance against our deferred tax assets and our determination of whether tax positions will be sustained on examination by taxing authorities based on the technical merits of the positions.
No impairment of other intangible or long-lived assets was recorded for the years ended December 31, 2023 and 2022. 41 Table of Contents Income Taxes: We use judgment in determining our provision for income taxes, including our assessment of the need for a valuation allowance against our deferred tax assets and our determination of whether tax positions will be sustained on examination by taxing authorities based on the technical merits of the positions.
Free cash flow and free cash flow as a percentage of revenues are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry.
Free cash flow and free cash flow as a percentage of revenues are not GAAP measures and may not be comparable to similarly titled measures used by other companies in our industry.
Although the anti-dilutive impact of the convertible note hedges is not reflected under GAAP, the Company includes the anti-dilutive impact of the convertible note hedges in non-GAAP diluted average shares outstanding, if applicable. 32 Table of Contents Segment Results of Operations for the Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021 Precision Devices Years Ended December 31, (in millions) 2022 Percent of Revenues 2021 Percent of Revenues 2020 Percent of Revenues Revenues $ 242.9 $ 201.1 $ 173.1 Earnings from continuing operations before interest and income taxes $ 56.1 23.1% $ 43.7 21.7% $ 31.7 18.3% Stock-based compensation expense 2.6 2.7 0.8 Intangibles amortization expense 5.8 5.0 2.4 Restructuring charges — 0.1 0.1 Production transfer costs (1) — — 0.2 Other (2) 3.4 1.0 — Adjusted earnings from continuing operations before interest and income taxes $ 67.9 28.0% $ 52.5 26.1% $ 35.2 20.3% (1) Production transfer costs represent duplicate costs incurred to migrate manufacturing to existing facilities.
Although the anti-dilutive impact of the convertible note hedges is not reflected under GAAP, the Company includes the anti-dilutive impact of the convertible note hedges in non-GAAP diluted average shares outstanding, if applicable. 32 Table of Contents Segment Results of Operations for the Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Precision Devices Years Ended December 31, (in millions) 2023 Percent of Revenues 2022 Percent of Revenues 2021 Percent of Revenues Revenues $ 221.4 $ 242.9 $ 201.1 Earnings from continuing operations before interest and income taxes $ 25.0 11.3% $ 56.1 23.1% $ 43.7 21.7% Stock-based compensation expense 3.5 2.6 2.7 Intangibles amortization expense 7.5 5.8 5.0 Restructuring charges 2.5 — 0.1 Production transfer costs (1) 0.4 — — Acquisition-related costs (2) 1.6 — 1.0 Other (3) — 3.4 — Adjusted earnings from continuing operations before interest and income taxes $ 40.5 18.3% $ 67.9 28.0% $ 52.5 26.1% (1) Production transfer costs represent costs incurred to migrate manufacturing to existing facilities.
Of these amounts, cash held by our non-U.S. operations totaled $40.0 million and $64.9 million as of December 31, 2022 and 2021, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs.
Of these amounts, cash held by our non-U.S. operations totaled $71.8 million and $40.0 million as of December 31, 2023 and 2022, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs.
Knowles believes that its presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance. (2) Production transfer costs represent duplicate costs incurred to migrate manufacturing to facilities primarily in Asia.
Knowles believes that its presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance. (2) Production transfer costs represent costs incurred to migrate manufacturing to facilities primarily within the United States.
At any time during the term of the 2020 Credit Facility, we were permitted to increase the commitments under the 2020 Credit Facility or to establish one or more incremental term loan facilities under the 2020 Credit Facility in an aggregate principal amount not to exceed $200.0 million for all such incremental facilities.
At any time during the term of the Credit Facility, we will be permitted to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the New Credit Facility in an aggregate principal amount not to exceed $200.0 million for all such incremental facilities.
Holding all other assumptions used in the 2022 fair value measurement constant, changes in the assumptions below would reduce fair value of the CMM reporting unit and result in impairment charges of approximately: 1% increase in the weighted-average cost of capital $ 41.9 1% reduction in revenue growth $ 40.2 1% reduction in EBITDA margin $ 29.2 The MSA and PD reporting units comprised the remaining goodwill at December 31, 2022.
Holding all other assumptions used in the 2023 fair value measurement constant, changes in the assumptions below would reduce fair value of the CMM reporting unit and result in impairment charges of approximately: 1% increase in the weighted-average cost of capital $ 11.2 1% reduction in revenue growth $ 8.8 1% reduction in EBITDA margin $ — The MSA and PD reporting units comprised the remaining goodwill at December 31, 2023.
Subsequent Events to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100 million of our common stock.
Acquisitions to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 36 Table of Contents On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100 million of our common stock.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein. 26 Table of Contents Results of Operations for the Year Ended December 31, 2022 compared with the Year Ended December 31, 2021 Years Ended December 31, (in millions, except per share amounts) 2022 2021 2020 Revenues $ 764.7 $ 868.1 $ 764.3 Gross profit $ 276.3 $ 359.5 $ 271.2 Non-GAAP gross profit $ 310.1 $ 362.1 $ 275.4 (Loss) earnings from continuing operations before interest and income taxes $ (414.3) $ 118.8 $ 27.7 Adjusted earnings from continuing operations before interest and income taxes $ 142.4 $ 174.3 $ 79.3 Provision (benefit from) for income taxes $ 11.9 $ (45.6) $ 8.4 Non-GAAP provision for income taxes $ 19.2 $ 19.8 $ 7.1 (Loss) earnings from continuing operations $ (430.1) $ 150.2 $ 2.9 Non-GAAP net earnings $ 119.3 $ 146.9 $ 63.2 Diluted (loss) earnings per share from continuing operations $ (4.69) $ 1.59 $ 0.03 Non-GAAP diluted earnings per share $ 1.26 $ 1.53 $ 0.67 Revenues Revenues for the year ended December 31, 2022 were $764.7 million, compared with $868.1 million for the year ended December 31, 2021, a decrease of $103.4 million or 11.9%.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein. 26 Table of Contents Results of Operations for the Year Ended December 31, 2023 compared with the Year Ended December 31, 2022 Years Ended December 31, (in millions, except per share amounts) 2023 2022 2021 Revenues $ 707.6 $ 764.7 $ 868.1 Gross profit $ 283.4 $ 276.3 $ 359.5 Non-GAAP gross profit $ 285.4 $ 310.1 $ 362.1 Earnings (loss) from continuing operations before interest and income taxes $ 50.4 $ (414.3) $ 118.8 Adjusted earnings from continuing operations before interest and income taxes $ 105.8 $ 142.4 $ 174.3 (Benefit from) provision for income taxes $ (27.4) $ 11.9 $ (45.6) Non-GAAP provision for income taxes $ 18.2 $ 19.2 $ 19.8 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Non-GAAP net earnings $ 82.2 $ 119.3 $ 146.9 Diluted earnings (loss) per share from continuing operations $ 0.79 $ (4.69) $ 1.59 Non-GAAP diluted earnings per share $ 0.88 $ 1.26 $ 1.53 Revenues Revenues for the year ended December 31, 2023 were $707.6 million, compared with $764.7 million for the year ended December 31, 2022, a decrease of $57.1 million or 7.5%.
Due to the global nature of our operations, a significant portion of our cash is generated and typically held outside the United States. Our cash and cash equivalents totaled $48.2 million and $68.9 million at December 31, 2022 and 2021, respectively.
Due to the global nature of our operations, a significant portion of our cash is generated and typically held outside the United States. Our cash and cash equivalents totaled $87.3 million and $48.2 million at December 31, 2023 and 2022, respectively.
Cash flows are summarized in the following table: Years Ended December 31, (in millions) 2022 2021 2020 Net cash flows provided by (used in): Operating activities $ 86.3 $ 182.1 $ 128.1 Investing activities (32.7) (129.6) (35.1) Financing activities (73.2) (131.4) (23.9) Effect of exchange rate changes on cash and cash equivalents (1.1) — 0.3 Net (decrease) increase in cash and cash equivalents $ (20.7) $ (78.9) $ 69.4 Operating Activities Cash provided by operating activities reflects net earnings adjusted for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, restructuring charges, changes in deferred income taxes, and the effects of changes in operating assets and liabilities.
Cash flows are summarized in the following table: Years Ended December 31, (in millions) 2023 2022 2021 Net cash flows provided by (used in): Operating activities $ 122.7 $ 86.3 $ 182.1 Investing activities (141.6) (32.7) (129.6) Financing activities 58.2 (73.2) (131.4) Effect of exchange rate changes on cash and cash equivalents (0.2) (1.1) — Net increase (decrease) in cash and cash equivalents $ 39.1 $ (20.7) $ (78.9) Operating Activities Cash provided by operating activities adjusts net earnings for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, and the effects of changes in operating assets and liabilities.
The following table reconciles our free cash flow to cash flow provided by operating activities: (in millions) Years Ended December 31, Free Cash Flow 2022 2021 2020 Cash flow provided by operating activities $ 86.3 $ 182.1 $ 128.1 Less: Capital expenditures (32.1) (48.6) (31.9) Free cash flow $ 54.2 $ 133.5 $ 96.2 Free cash flow as a percentage of revenues 7.1 % 15.4 % 12.6 % In 2022, we generated free cash flow of $54.2 million, representing 7.1% of revenues, compared to free cash flow in 2021 of $133.5 million, representing 15.4% of revenues.
The following table reconciles our free cash flow to cash flow provided by operating activities: (in millions) Years Ended December 31, Free Cash Flow 2023 2022 2021 Cash flow provided by operating activities $ 122.7 $ 86.3 $ 182.1 Less: Capital expenditures (16.9) (32.1) (48.6) Free cash flow $ 105.8 $ 54.2 $ 133.5 Free cash flow as a percentage of revenues 15.0 % 7.1 % 15.4 % In 2023, we generated free cash flow of $105.8 million, representing 15.0% of revenues, compared to free cash flow in 2022 of $54.2 million, representing 7.1% of revenues.
A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2022 would increase our annual interest expense by approximately $0.5 million. 42 Table of Contents Critical Accounting Estimates Our Consolidated Financial Statements are based on the application of GAAP.
A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2023 would increase our annual interest expense by approximately $2.7 million. 39 Table of Contents Critical Accounting Estimates Our Consolidated Financial Statements are based on the application of GAAP.
As of the 2022 fair value measurement date the estimated fair value of each of these reporting units exceeded the carrying values by at least 230%.
As of the 2023 fair value measurement date the estimated fair value of each of these reporting units exceeded the carrying values by at least 180%.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes 2022 Versus 2021 MSA EBIT from continuing operations was $84.6 million for the year ended December 31, 2022, compared with $77.0 million for the year ended December 31, 2021, an increase of $7.6 million or 9.9%.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes MSA EBIT from continuing operations was $85.2 million for the year ended December 31, 2023, compared with $84.6 million for the year ended December 31, 2022, an increase of $0.6 million or 0.7%.
Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the year ended December 31, 2022 was 40.6%, compared with 41.7% for the year ended December 31, 2021.
Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the year ended December 31, 2023 was 40.3%, compared with 40.6% for the year ended December 31, 2022.
Gross profit margin (gross profit as a percentage of revenues) for the year ended December 31, 2022 was 36.1%, compared with 41.4% for the year ended December 31, 2021.
Gross profit margin (gross profit as a percentage of revenues) for the year ended December 31, 2023 was 40.1%, compared with 36.1% for the year ended December 31, 2022.
Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Contractual Obligations and Off-Balance Sheet Arrangements A summary of our significant contractual obligations and commitments as of December 31, 2022 and the years when these obligations are expected to be due is as follows: Payments Due by Period (in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt (1) $ 45.0 $ — $ 45.0 $ — $ — Operating leases (2) 16.0 8.8 6.2 1.0 — Purchase obligations (3) 61.6 61.6 — — — Finance leases (2) 4.1 2.5 1.5 0.1 — Total obligations $ 126.7 $ 72.9 $ 52.7 $ 1.1 $ — (1) Relates to the maturity of indebtedness under our 2020 Credit Facility; does not give effect to any early repayment of or future amounts which may be drawn.
Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Contractual Obligations and Off-Balance Sheet Arrangements A summary of our significant contractual obligations and commitments as of December 31, 2023 and the years when these obligations are expected to be due is as follows: Payments Due by Period (in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt (1) $ 282.9 $ 50.0 $ 72.9 $ 160.0 $ — Operating leases (2) 14.5 5.5 5.7 3.1 0.2 Purchase obligations (3) 67.8 67.8 — — — Finance leases (2) 2.3 1.6 0.6 0.1 — Total obligations $ 367.5 $ 124.9 $ 79.2 $ 163.2 $ 0.2 (1) Relates to the maturity of indebtedness under our New Credit Facility and the Seller Note; does not give effect to any early repayment of or future amounts which may be drawn under the New Credit Facility.
Provision for (Benefit from) Income Taxes and Non-GAAP Provision for Income Taxes The effective tax rate ("ETR") for the year ended December 31, 2022 was (2.8)% or a $11.9 million tax provision, compared with (43.6)% or a $45.6 million tax benefit for the year ended December 31, 2021.
(Benefit from) Provision for Income Taxes and Non-GAAP Provision for Income Taxes The effective tax rate ("ETR") for the year ended December 31, 2023 was (60.9)% or a $27.4 million tax benefit, compared with (2.8)% or a $11.9 million tax provision for the year ended December 31, 2022.
Our Business Segments During the fourth quarter of 2022, we determined each operating segment represents a single reportable segment; thus, we now report three segments. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting and are comprised of (i) PD, (ii) MSA, and (iii) CMM.
Our Business Segments In 2022, we determined each operating segment represents a single reportable segment; since then, we have been reporting three segments. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting and are comprised of (i) PD, (ii) MSA, and (iii) CMM.
Cash used in financing activities during 2021 was primarily related to the $172.5 million principal payment on the convertible senior notes, the $44.5 million used to repurchase shares of our common stock in the open market, and the $7.7 million payment of taxes related to net share settlement of equity awards, partially offset by the $70.0 million of borrowings under our revolving credit facility and proceeds of $25.6 million from the exercise of options. 40 Table of Contents Free Cash Flow In addition to measuring our cash flow generation and usage based upon the operating, investing, and financing classifications included in the Consolidated Statements of Cash Flows, we also measure free cash flow and free cash flow as a percentage of revenues.
Cash used in financing activities during 2022 was primarily related to the $44.0 million of repurchases of common stock, $25.0 million net repayment of revolving credit facility, and the $6.9 million payment of taxes related to net share settlement of equity awards, partially offset by proceeds of $7.5 million from the exercise of options. 37 Table of Contents Free Cash Flow In addition to measuring our cash flow generation and usage based upon the operating, investing, and financing classifications included in the Consolidated Statements of Cash Flows, we also measure free cash flow and free cash flow as a percentage of revenues.
Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2022 was 18.6%, compared with 20.1% for the year ended December 31, 2021. The decrease in Adjusted EBIT and Adjusted EBIT margin was primarily due to lower non-GAAP gross profit, partially offset by lower non-GAAP operating expenses.
Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2023 was 15.0%, compared with 18.6% for the year ended December 31, 2022. The decreases were primarily due to lower non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.
The change in the ETR was primarily due to the nondeductible goodwill impairment recorded during 2022 compared to the $59.1 million benefit in 2021 related to the release of a significant portion of the valuation allowance in the U.S. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.
In 2023 the change in the ETR was primarily due to the impact of intangible property transfers and the release of a portion of the valuation allowance in the U.S., compared to the nondeductible goodwill impairment recorded during 2022. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.
In 2023, we expect capital expenditures to be in the range of 4.0% to 5.0% of revenues. We expect to fund these capital expenditures through our existing cash balances and cash flows from operating activities.
Our 2023 and 2022 capital expenditures as a percentage of revenues were 2.4% and 4.2%, respectively. In 2024, we expect capital expenditures to be in the range of 3.0% to 4.0% of revenues. We expect to fund these capital expenditures through our existing cash balances and cash flows from operating activities.
Non-GAAP gross profit for the year ended December 31, 2022 was $310.1 million, compared with $362.1 million for the year ended December 31, 2021, a decrease of $52.0 million or 14.4%.
Non-GAAP gross profit for the year ended December 31, 2023 was $285.4 million, compared with $310.1 million for the year ended December 31, 2022, a decrease of $24.7 million or 8.0%.
Rising interest and income tax rates could impact the weighted average cost of capital used in our estimates of fair value for our reporting units. Additionally, high inflation could negatively impact the consumer electronics market.
Changes in interest and income tax rates could impact the weighted average cost of capital used in our estimates of fair value for our reporting units.
Research and Development Expenses Research and development expenses for the years ended December 31, 2022 and 2021 were $81.7 million and $92.8 million, respectively, a decrease of $11.1 million or 12.0%. Research and development expenses as a percentage of revenues for the years ended December 31, 2022 and 2021 were 10.7%.
Research and Development Expenses Research and development expenses for the years ended December 31, 2023 and 2022 were $78.5 million and $81.7 million, respectively, a decrease of $3.2 million or 3.9%. Research and development expenses as a percentage of revenues for the years ended December 31, 2023 and 2022 were 11.1% and 10.7%, respectively.
As a result, we recorded total restructuring charges of $32.2 million within Gross profit and $9.6 million within Operating expenses. For additional information, refer to Note 10. Restructuring and Related Activities to our Consolidated Financial Statements. During the year ended December 31, 2021, there were $0.5 million in restructuring charges within Operating expenses related to a reduction in workforce.
As a result, we recorded total restructuring charges of $32.2 million within Gross profit and $9.6 million within Operating expenses. For additional information, refer to Note 10. Restructuring and Related Activities to our Consolidated Financial Statements.
Although some cost increases may be recovered through increased prices to customers if commodity prices trend upward, we also attempt to control such costs through fixed-price contracts with suppliers and various other programs through our global supply chain activities. Interest Rates Borrowings under our 2020 Credit Facility are at variable interest rates.
As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers if commodity prices trend upward, we also attempt to control such costs through fixed-price contracts with suppliers and various other programs through our global supply chain activities.
No goodwill impairment charges were recorded during the years ended December 31, 2021 or 2020. 43 Table of Contents Fair value was estimated using a discounted cash flow model that included market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, determination of appropriate discount rates, and other assumptions which were considered reasonable in the discounted cash flow analysis.
Fair value was estimated using a discounted cash flow model that included market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, determination of appropriate discount rates, and other assumptions which were considered reasonable in the discounted cash flow analysis.
Adjusted EBIT margin for the year ended December 31, 2022 was 28.0%, compared with 26.1% for the year ended December 31, 2021. The increases were primarily due to higher revenues and higher non-GAAP gross profit margins, partially offset by an increase in non-GAAP operating expenses.
Adjusted EBIT margin for the year ended December 31, 2023 was 38.6%, compared with 38.1% for the year ended December 31, 2022. The increases were primarily due to higher non-GAAP gross profit margin, partially offset by higher non-GAAP operating expenses.
Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the year ended December 31, 2022 was $142.4 million, compared with $174.3 million for the year ended December 31, 2021, a decrease of $31.9 million or 18.3%.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes PD EBIT from continuing operations was $25.0 million for the year ended December 31, 2023, compared with $56.1 million for the year ended December 31, 2022, a decrease of $31.1 million or 55.4%.
A strengthening of foreign currencies relative to the U.S. dollar would positively affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would have a negative effect on the cost of materials, products, and services purchased overseas. Our foreign currency exposure is primarily driven by changes in the Chinese renminbi (yuan), the Malaysian ringgit, and the Philippine peso.
A strengthening of foreign currencies relative to the U.S. dollar would positively affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would have a negative effect on the cost of materials, products, and services purchased overseas.
A reduction in the estimated fair value of the reporting units could trigger an impairment in the future. As of December 31, 2022, the carrying value of goodwill was $471.0 million, of which $270.1 million relates to the CMM reporting unit.
A reduction in the estimated fair value of the reporting units including due to the potential sale or restructuring of the CMM business, could trigger an impairment in the future. As of December 31, 2023, the carrying value of goodwill was $540.7 million, of which $270.2 million relates to the CMM reporting unit.
EBIT margin for the year ended December 31, 2022 was 23.1%, compared with 21.7% for the year ended December 31, 2021. The increases were primarily due to higher revenues and higher gross profit margins, partially offset by an increase in operating expenses and an adjustment to pre-spin-off pension obligations.
EBIT margin for the year ended December 31, 2023 was 11.3%, compared with 23.1% for the year ended December 31, 2022. The decreases were primarily due to lower revenues, lower gross profit margin, and increased operating expenses, partially offset by the absence of adjustments to pre-spin-off pension obligations in 2023.
As a result of the impairment charges recorded in 2022, the carrying value of the CMM reporting unit currently approximates its fair value. The Company cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. We continue to monitor the evolving macroeconomic landscape.
As of the 2023 fair value measurement date, the estimated fair value of the CMM reporting unit exceeded the carrying value by approximately 7%. The Company cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. We continue to monitor the evolving macroeconomic landscape.
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Interest Expense, net Interest expense, net for the year ended December 31, 2022 was $3.9 million, compared with $14.2 million for the year ended December 31, 2021, a decrease of $10.3 million or 72.5%. The decrease was primarily due to lower outstanding borrowings.
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Interest Expense, net Interest expense, net for the year ended December 31, 2023 was $5.4 million, compared with $3.9 million for the year ended December 31, 2022, an increase of $1.5 million or 38.5%.
Details regarding restructuring programs undertaken during the reporting period are as follows: 27 Table of Contents During the year ended December 31, 2022, we committed to two restructuring programs within our CMM segment designed to rightsize manufacturing capacity and operating expenses in the MEMS microphones product line.
Restructuring and Related Activities to our Consolidated Financial Statements. During the year ended December 31, 2022, we committed to two restructuring programs within our CMM segment designed to rightsize manufacturing capacity and operating expenses in the MEMS microphones product line.
(Loss) Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes 2022 Versus 2021 CMM loss before interest and income taxes from continuing operations was $504.5 million for the year ended December 31, 2022, compared with EBIT of $60.0 million for the year ended December 31, 2021, a decrease of $564.5 million or 940.8%.
Earnings (Loss) and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes CMM EBIT from continuing operations was $13.6 million for the year ended December 31, 2023, compared with a loss of $504.5 million for the year ended December 31, 2022, an increase of $518.1 million or 102.7%.
Acquisition to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." On September 4, 2020, we entered into a Credit Agreement (the "2020 Credit Agreement"), which provided for a senior secured revolving credit facility (the "2020 Credit Facility") with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million.
On February 8, 2023, we entered into the A&R Credit Agreement that amends and restates the prior Credit Agreement (the "2020 Credit Agreement"), which provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes 2022 Versus 2021 PD EBIT from continuing operations was $56.1 million for the year ended December 31, 2022, compared with $43.7 million for the year ended December 31, 2021, an increase of $12.4 million or 28.4%.
Earnings (Loss) and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes Earnings before interest and income taxes from continuing operations ("EBIT") for the year ended December 31, 2023 was $50.4 million, compared with a loss of $414.3 million for the year ended December 31, 2022, an increase of $464.7 million or 112.2%.
During the second quarter of 2022, the Company identified a triggering event requiring an interim impairment assessment for the CMM reporting unit, which resulted in a goodwill impairment charge of $239.8 million. This reporting unit was previously referred to as "Mobile Consumer Electronics" or "MCE" prior to the change in the Company's reportable segments in the fourth quarter of 2022.
During the second quarter of 2022, the Company identified a triggering event requiring an interim impairment assessment for the CMM reporting unit, which resulted in a goodwill impairment charge of $239.8 million.
EBIT margin for the year ended December 31, 2022 was a loss of 172.8%, compared to 13.8% for the year ended December 31, 2021. The decrease was primarily due to higher impairment charges, lower revenues, increased restructuring charges, and lower gross profit margin, partially offset by lower operating expenses and reduced intangible amortization.
EBIT margin for the year ended December 31, 2023 was 5.3%, compared to a loss of 172.8% for the year ended December 31, 2022. The increase was primarily due to impairment charges in 2022 that did not recur in 2023, higher gross margins, and lower operating expenses, partially offset by lower revenues.
Cost of Goods Sold Cost of goods sold ("COGS") for the year ended December 31, 2022 was $456.2 million, compared with $508.6 million for the year ended December 31, 2021, a decrease of $52.4 million or 10.3%.
Cost of Goods Sold Cost of goods sold ("COGS") for the year ended December 31, 2023 was $435.5 million, compared with $455.7 million for the year ended December 31, 2022, a decrease of $20.2 million or 4.4%.
The change is primarily due an adjustment to pre-spin-off pension obligations and the unrealized losses in our investment balances, partially offset by favorable impacts from foreign currency exchange rate changes.
Income in 2022 primarily represents favorable impacts from foreign currency exchange rate changes, partially offset by an adjustment to pre-spin-off pension obligations.
In 2021, Other expenses represent the ongoing net lease cost related to facilities not used in operations and expenses related to the acquisition of IMC by the PD segment. In 2020, Other expenses represent the ongoing net lease cost related to facilities not used in operations and expenses related to shareholder activism.
In 2021, Other expenses represent the ongoing net lease cost related to facilities not used in operations.
Our 2021 plant productivity has improved due to our factories returning to pre-pandemic production levels. 36 Table of Contents Consumer MEMS Microphones Years Ended December 31, (in millions) 2022 Percent of Revenues 2021 Percent of Revenues 2020 Percent of Revenues Revenues $ 291.9 $ 435.7 $ 417.6 (Loss) earnings from continuing operations before interest and income taxes $ (504.5) (172.8)% $ 60.0 13.8% $ 22.6 5.4% Stock-based compensation expense 6.2 7.5 8.1 Intangibles amortization expense 6.4 10.9 10.6 Impairment charges 470.9 4.0 7.6 Restructuring charges 41.2 0.3 9.3 Other (1) (0.2) 1.4 0.8 Adjusted earnings from continuing operations before interest and income taxes $ 20.0 6.9% $ 84.1 19.3% $ 59.0 14.1% (1) In 2022, 2021, and 2020, Other represents the ongoing net lease cost (income) related to facilities not used in operations.
The higher non-GAAP gross profit margin was driven by product cost reductions and favorable foreign currency exchange rates, partially offset by lower factory capacity utilization. 34 Table of Contents Consumer MEMS Microphones Years Ended December 31, (in millions) 2023 Percent of Revenues 2022 Percent of Revenues 2021 Percent of Revenues Revenues $ 256.2 $ 291.9 $ 435.7 Earnings (loss) from continuing operations before interest and income taxes $ 13.6 5.3% $ (504.5) (172.8)% $ 60.0 13.8% Stock-based compensation expense 6.2 6.2 7.5 Intangibles amortization expense 6.0 6.4 10.9 Impairment charges — 470.9 4.0 Restructuring charges (1.1) 41.2 0.3 Other (1) (1.2) (0.2) 1.4 Adjusted earnings from continuing operations before interest and income taxes $ 23.5 9.2% $ 20.0 6.9% $ 84.1 19.3% (1) Other represents the ongoing net lease (income) cost related to facilities not used in operations.
For additional information on borrowings and interest expense, refer to Note 12. Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Other Income, net Other income for the year ended December 31, 2022 was $0.5 million, compared with income of $3.0 million for the year ended December 31, 2021, a change of $2.5 million.
Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Other Expense (Income), net Other expense for the year ended December 31, 2023 was $0.7 million, compared with income of $0.5 million for the year ended December 31, 2022, a change of $1.2 million. Expense in 2023 primarily represents unfavorable foreign currency exchange rate impacts.
Adjusted EBIT margin for the year ended December 31, 2022 was 6.9%, compared with 19.3% for the year ended December 31, 2021. The decrease was primarily due to lower revenues and lower non-GAAP gross profit margin, partially offset by lower non-GAAP operating expenses.
Adjusted EBIT margin for the year ended December 31, 2023 was 18.3%, compared with 28.0% for the year ended December 31, 2022. The decreases were primarily due to lower revenues and non-GAAP gross profit margin.
On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150 million in additional aggregate value.
On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150 million in additional aggregate value. At December 31, 2023, we have $97.7 million remaining that may yet be purchased under our share repurchase program.
PD Adjusted EBIT was $52.5 million for the year ended December 31, 2021, compared with $35.2 million for the year ended December 31, 2020, an increase of $17.3 million or 49.1%. Adjusted EBIT margin for the year ended December 31, 2021 was 26.1%, compared with 20.3% for the year ended December 31, 2020.
CMM Adjusted EBIT was $23.5 million for the year ended December 31, 2023, compared with $20.0 million for the year ended December 31, 2022, an increase of $3.5 million or 17.5%. Adjusted EBIT margin for the year ended December 31, 2023 was 9.2%, compared with 6.9% for the year ended December 31, 2022.
Financing Activities Cash used in financing activities during 2022 is primarily related to the $44.0 million of repurchases of common stock, $25.0 million net repayment of revolving credit facility, and the $6.9 million payment of taxes related to net share settlement of equity awards, partially offset by proceeds of $7.5 million from the exercise of options.
Financing Activities Cash provided by financing activities during 2023 is primarily related to the $115.0 million net borrowing of revolving credit facility, $47.5 million of repurchases of common stock, and the $6.2 million payment of taxes related to net share settlement of equity awards.
In addition, the Company’s assumptions for weighted average cost of capital and income tax rates increased as a result of rising interest rates and not satisfying certain tax holiday conditions. The goodwill impairment charges are presented within Impairment charges in Operating expenses on the Consolidated Statements of Earnings.
In addition, the Company’s assumptions for weighted average cost of capital and income tax rates increased as a result of rising interest rates and not satisfying certain tax holiday conditions. No goodwill impairment charges were recorded during the years ended December 31, 2023 or 2021.
Significant assumptions used in the model included forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital. The fair value measurements for reporting units are based on significant unobservable inputs. Fair value measurements require considerable judgment and are sensitive to changes in underlying assumptions.
Significant assumptions used in the model included forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital.
This decrease was primarily due to lower shipping volumes, product cost reductions, benefits of the CMM restructuring actions, and favorable foreign currency exchange rate changes, partially offset by lower factory capacity utilization in our CMM segment. Restructuring Charges We undertake restructuring programs from time to time to better align our operations with current market conditions.
This decrease was primarily due to product cost reductions, lower shipping volumes, benefits of prior year restructuring actions, and favorable foreign currency exchange rate changes, partially offset by our acquisition of CD and lower factory capacity utilization.
The non-GAAP gross profit margin increase was driven by favorable product mix, product cost reductions, and higher factory capacity utilization, partially offset by lower average pricing on mature products and unfavorable foreign currency exchange rate changes.
The decrease in non-GAAP gross profit margin was primarily due to lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, and unfavorable product mix, partially offset by product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes.
The decreases were primarily due to restructuring charges, lower factory capacity utilization in our CMM segment, and lower average pricing on mature products, partially offset by product cost reductions, benefits of the CMM segment restructuring actions, and net favorable foreign currency exchange rate changes .
The increase in gross profit margin was primarily due to lower restructuring charges, product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes, partially offset by lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, and unfavorable product mix.
Diluted (Loss) Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share Diluted loss per share from continuing operations was $4.69 for the year ended December 31, 2022, compared with earnings of $1.59 for the year ended December 31, 2021, a decrease of $6.28.
Earnings from Discontinued Operations, net There was no activity during 2023 or 2022. Diluted Earnings (Loss) per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share Diluted earnings per share from continuing operations was $0.79 for the year ended December 31, 2023, compared with a loss of $4.69 for the year ended December 31, 2022, an increase of $5.48.
The decreases were primarily due to lower factory capacity utilization in our CMM segment and lower average pricing on mature products, partially offset by product cost reductions , benefits of the CMM segment restructuring actions, and net favorable foreign currency exchange rate changes.
The increase in gross profit was primarily due to lower restructuring charges, product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes, partially offset by lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, lower shipping volumes, and unfavorable product mix.
As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future.
The fair value measurements for reporting units are based on significant unobservable inputs. 40 Table of Contents Fair value measurements require considerable judgment and are sensitive to changes in underlying assumptions. As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future.
If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value as determined by an estimate of discounted future cash flows.
If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value as determined by an estimate of discounted future cash flows. We recorded impairment charges of $4.0 million during the year ended December 31, 2021, related to facilities in our Intelligent Audio product line.
Our 2021 plant productivity has improved due to our factories returning to pre-pandemic production levels. 34 Table of Contents MedTech & Specialty Audio Years Ended December 31, (in millions) 2022 Percent of Revenues 2021 Percent of Revenues 2020 Percent of Revenues Revenues $ 229.9 $ 231.3 $ 173.6 Earnings from continuing operations before interest and income taxes $ 84.6 36.8% $ 77.0 33.3% $ 22.3 12.8% Stock-based compensation expense 2.9 2.4 2.5 Restructuring charges — 0.1 1.2 Adjusted earnings from continuing operations before interest and income taxes $ 87.5 38.1% $ 79.5 34.4% $ 26.0 15.0% Revenues 2022 Versus 2021 MSA revenues were $229.9 million for the year ended December 31, 2022, compared with $231.3 million for the year ended December 31, 2021, a decrease of $1.4 million or 0.6%.
The non-GAAP gross profit margin decrease was primarily driven by lower factory capacity utilization, partially offset by product cost reductions and a decrease in precious metal costs. 33 Table of Contents MedTech & Specialty Audio Years Ended December 31, (in millions) 2023 Percent of Revenues 2022 Percent of Revenues 2021 Percent of Revenues Revenues $ 230.0 $ 229.9 $ 231.3 Earnings from continuing operations before interest and income taxes $ 85.2 37.0% $ 84.6 36.8% $ 77.0 33.3% Stock-based compensation expense 3.5 2.9 2.4 Restructuring charges — — 0.1 Adjusted earnings from continuing operations before interest and income taxes $ 88.7 38.6% $ 87.5 38.1% $ 79.5 34.4% Revenues MSA revenues were $230.0 million for the year ended December 31, 2023, compared with $229.9 million for the year ended December 31, 2022, an increase of $0.1 million.
The increases were primarily due to increased revenues, higher non-GAAP gross profit margin, and lower legal expenses in connection with the protection of our intellectual property, partially offset by increases in incentive compensation.
The increases were primarily due to higher non-GAAP gross profit margins and lower non-GAAP operating expenses, partially offset by lower revenues.
As described above, the decrease was primarily due to increased impairment charges and lower gross profit. Non-GAAP diluted earnings per share for the year ended December 31, 2022 was $1.26, compared with $1.53 for the year ended December 31, 2021, a decrease of $0.27.
Non-GAAP diluted earnings per share for the year ended December 31, 2023 was $0.88, compared with $1.26 for the year ended December 31, 2022, a decrease of $0.38.
In 2021, these adjustments include a valuation allowance release of $59.1 million for our U.S. subsidiaries. (6) The non-GAAP reconciling adjustments are those adjustments made to reconcile (Loss) earnings from continuing operations before interest and income taxes to Adjusted earnings from continuing operations before interest and income taxes .
These adjustments include the impact of one-time tax benefits. (7) The non-GAAP reconciling adjustments are those adjustments made to reconcile Earnings (loss) from continuing operations before interest and income taxes to Adjusted earnings from continuing operations before interest and income taxes .
While the required raw materials are generally available, commodity pricing for various precious metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates. As a result, our operating results are exposed to such fluctuations.
Commodity Pricing We use a wide variety of raw materials, primarily metals and semi-processed or finished components, which are generally available from a number of sources. While the required raw materials are generally available, commodity pricing for various precious metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates.
As described above, the decrease is primarily due to increased impairment charges and lower gross profit. 29 Table of Contents (Loss) Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes Loss before interest and income taxes from continuing operations for the year ended December 31, 2022 was $414.3 million, compared with earnings of $118.8 million for the year ended December 31, 2021, a decrease of $533.1 million or 448.7%.
The change is primarily due to impairment charges recorded in 2022 that did not recur in 2023 and higher gross profit, partially offset by higher operating expenses. 29 Table of Contents Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the year ended December 31, 2023 was $105.8 million, compared with $142.4 million for the year ended December 31, 2022, a decrease of $36.6 million or 25.7%.
These amounts are included in the corresponding Gross profit and Earnings from continuing operations before interest and income taxes for each period presented.
These amounts are included in the corresponding Gross profit and Earnings (loss) before interest and income taxes for each period presented. (3) In 2023, these expenses are related to the acquisition of CD by the PD segment. In 2021, these expenses are related to the acquisition of IMC by the PD segment.

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