Knowles Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Knowles Corporation on February 11, 2016. The filing primarily addresses a material amendment to the Company's credit agreement and the announcement of financial results for the fiscal year and quarter ended December 31, 2015.
Key Financial Metrics and Agreements
The filing details a Third Amendment to the Amended and Restated Credit Agreement entered into on February 9, 2016. Key terms include:
- Revolving Commitment Reduction: The aggregate revolving commitment was permanently reduced from $350,000,000 to $300,000,000.
- EBITDA Adjustments: The definition of Consolidated EBITDA was amended to allow adjustments for net losses and cash costs related to the "Speaker and Receiver Discontinued Operations" (the anticipated sale of the Mobile Consumer Electronics speaker and receiver product line).
- Adjustment Cap: There is an aggregate cap of $45,000,000 on adjustments attributable to cash costs and expenses incurred on or prior to March 31, 2017.
- Leverage Ratio: Adjustments to Consolidated EBITDA regarding discontinued operations are disregarded when calculating the leverage ratio for determining the Applicable Rate.
Specific revenue, profit, cash flow, and margin figures for the fiscal year ended December 31, 2015, are not contained within the text of this 8-K filing; they are referenced in the Press Release (Exhibit 99.1) and Presentation Slides (Exhibit 99.2).
Material Changes and Strategic Actions
The primary material change is the restructuring of the credit facility to accommodate the divestiture of the Speaker and Receiver Product Line. The amendment facilitates the accounting treatment of this segment as discontinued operations, allowing for specific EBITDA add-backs for losses and costs associated with the disposal, abandonment, or discontinuation of these assets.
Outlook, Risks, and Contingencies
The effectiveness of the Third Amendment is conditioned upon the payment of an amendment fee and the permanent reduction of the revolving commitment. The filing notes that the Company issued a Press Release and posted presentation slides regarding its results of operations for the period ended December 31, 2015, and held a quarterly financial conference call on February 11, 2016. The filing explicitly states that the information furnished under Item 2.02 (Results of Operations) is not deemed "filed" for purposes of the Securities Exchange Act of 1934.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) and Exhibit 99.2 (Presentation Slides) for specific revenue, net income, and cash flow figures for the fiscal year ended December 31, 2015.
- Verify the status and timeline of the anticipated sale of the Speaker and Receiver Product Line.
- Confirm the impact of the $50 million reduction in revolving credit commitment on the Company's current liquidity position.
- Examine the full text of the Third Amendment (Exhibit 10.1) for detailed covenants and definitions regarding the $45 million adjustment cap.