KNOWLES CORPORATION The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a market leader and global provider of advanced micro-acoustic, audio
processing, and precision device solutions, serving the mobile consumer
electronics, communications, medtech, defense, automotive, and industrial
markets. We use our leading position in micro-electro-mechanical systems
("MEMS") microphones and strong capabilities in audio processing technologies to
optimize audio systems and improve the user experience in mobile, ear, and
Internet of Things ("IoT") applications. We are also a leader in acoustic
components, high-end capacitors, and mmWave radio frequency ("RF") solutions for
a diverse set of markets. Our focus on the customer, combined with unique
technology, proprietary manufacturing techniques, rigorous testing, and global
scale, enables us to deliver innovative solutions that optimize the user
experience. References to "Knowles," the "Company," "we," "our," or "us" refer
to Knowles Corporation and its consolidated subsidiaries, unless the context
otherwise requires.
We are organized into two reportable segments based on how management analyzes
performance, allocates capital, and makes strategic and operational decisions.
These segments were determined in accordance with Financial Accounting Standards
Board Accounting Standards Codification 280 - Segment Reporting and are
comprised of (i) Audio and (ii) Precision Devices ("PD"). The segments are
aligned around similar product applications serving our key end markets, to
enhance focus on end market growth strategies.
•Audio Segment
Our Audio group designs and manufactures innovative audio products, including
microphones and balanced armature speakers, audio processors, and software and
algorithms used in applications that serve the mobile, ear, and IoT markets.
Locations include the sales, support, and engineering facilities in North
America , Europe , and Asia , as well as manufacturing facilities in Asia .
•PD Segment
Our PD group specializes in the design and delivery of high performance
capacitor products and mmWave RF solutions for technically demanding
applications. Our high performance capacitor products are used in applications
such as power supplies and medical implants, which sell to a diverse set of
customers for mission critical applications across the communications, medtech,
defense, automotive, and industrial markets. Our mmWave RF solutions primarily
solve high frequency filtering challenges for our military customers, who use
them in their satellite communication and radar systems, as well as our
telecommunications infrastructure customers deploying mmWave 5G base stations.
Locations include the sales, support, engineering, and manufacturing facilities
in North America , Europe , and Asia .
We sell our products directly to original equipment manufacturers ("OEMs") and
to their contract manufacturers and suppliers and to a lesser extent through
distributors worldwide.
COVID-19 Impact
During the first quarter of 2020, COVID-19, the most recently discovered
coronavirus, has spread throughout areas of the world where we operate. In March
2020 , the World Health Organization declared COVID-19 a pandemic and recommended
containment and mitigation measures worldwide. This has resulted in global
business disruption, which has impacted our business operations, results of
operations, customer demand, and the productivity of our facilities,
particularly in China , Malaysia , and the Philippines .
Beginning at the end of the first quarter, we have taken steps to minimize the
negative impact of the COVID-19 pandemic on our business and to protect the
health and safety of our employees. Such steps include, but are not limited to,
suspending employee travel; having office workers work remotely; suspending our
share repurchase program; suspending annual wage increases and temporarily
reducing salaries of employees, including the CEO and executive team; and
reducing the cash compensation of our board of directors.
The situation related to COVID-19 continues to be complex and rapidly evolving.
We cannot reasonably estimate the duration of the pandemic or fully ascertain
its impact to our future results, but we currently expect that full year
revenues, net income, and cash flow will be lower than 2019. During the first
quarter of 2020, we considered and determined that there was no impact on our
long-lived assets (including goodwill and intangible assets, property, plant,
and equipment, and lease right-of-use assets). We concluded that it is not more
likely than not that any of our long-lived assets have carrying values exceeding
their respective fair values. Our analysis considered, among other factors; the
nature of our products and services as well as our position within our industry
and our expectation that we will continue generating positive operating cash
flows over the long-term. In addition, we have not experienced and do not
anticipate a material impact to the realizability of current assets, such as
accounts receivable or inventories.
For additional information on risk factors that could impact our future results,
please refer to "Risk Factors" in Part II, Item 1A. of this Quarterly Report on
Form 10-Q.
ASIC Design Business Acquisition
OnDecember 20, 2019 , we acquired substantially all of the assets of the MEMS Microphone Application-specific integrated circuit Design Business ("ASIC Design Business") from ams AG for$57.9 million . The acquired business, which does not generate revenues, includes intellectual property and an assembled workforce. The acquisition's operations are included in the Audio segment. For additional information, refer to Note 4. Acquisitions to our Consolidated Financial Statements.
Non-GAAP Financial Measures
In addition to the GAAP financial measures included in this item, we have
presented certain non-GAAP financial measures. We use non-GAAP measures as
supplements to our GAAP results of operations in evaluating certain aspects of
our business, and our executive management team and Board of Directors focus on
non-GAAP items as key measures of our performance for business planning
purposes. These measures assist us in comparing our performance between various
reporting periods on a consistent basis, as these measures remove from operating
results the impact of items that, in our opinion, do not reflect our core
operating performance. We believe that our presentation of non-GAAP financial
measures is useful because it provides investors and securities analysts with
the same information that we use internally for purposes of assessing our core
operating performance. The Company does not consider these non-GAAP financial
measures to be a substitute for the information provided by GAAP financial
results. For a reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures, see the reconciliation included
herein.
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Results of Operations for the Three Months Ended
Three Months Ended March 31,
(in millions, except per share amounts) 2020 2019
Revenues $ 163.1 $ 179.8
Gross profit $ 56.2 $ 68.5
Non-GAAP gross profit $ 58.2 $ 69.9 (Loss) earnings from continuing operations before interest and income taxes
$ (6.9) $ 3.4 Adjusted earnings from continuing operations before interest and income taxes
$ 5.5 $ 16.7
Provision for income taxes $ 2.2 $ 2.6
Non-GAAP provision for income taxes $ 0.4 $ 3.1
Loss from continuing operations $ (12.8) $ (2.7)
Non-GAAP net earnings from continuing operations $ 3.2 $ 11.8
Loss per share from continuing operations - diluted $ (0.14) $ (0.03) Non-GAAP diluted earnings per share from continuing operations $
0.03 $ 0.13
Revenues
Revenues for the first quarter of 2020 were $163.1 million , compared with $179.8
million for the first quarter of 2019, a decrease of $16.7 million or 9.3%.
Audio revenues decreased $19.0 million , primarily due to the impacts of the
COVID-19 pandemic, which caused lower demand for hearing health products and
MEMS microphones in the mobile, ear, and IoT markets, particularly in China .
Audio revenues were also impacted by lower average pricing on mature products.
PD revenues increased $2.3 million , primarily due to higher shipments to the
defense, automotive, and medtech markets, partially offset by lower shipments to
the communications market.
Cost of Goods Sold
Cost of goods sold ("COGS") for the first quarter of 2020 was $105.5 million ,
compared with $110.8 million for the first quarter of 2019, a decrease of $5.3
million or 4.8%. This decrease was primarily the result of lower shipping
volumes in Audio and product cost reductions, partially offset by our reduced
plant productivity and capacity utilization as a result of the disruptions
related to the COVID-19 pandemic that we experienced within our manufacturing
operations across Asia .
Restructuring Charges
During the first quarter of 2020, we recorded restructuring charges of $1.4
million within Gross profit, primarily for fixed asset write-off costs directly
associated with actions to rationalize the Audio segment workforce. We also
recorded restructuring charges of $3.9 million within Operating expenses,
primarily for actions associated with rationalizing the workforce. We expect
cost reductions associated with the Audio segment to continue through the
remainder of the fiscal year, with related restructuring charges primarily being
incurred in the second quarter of 2020.
During the first quarter of 2019, we recorded restructuring charges of $0.5
million within Gross profit, primarily for actions associated with transferring
certain operations of capacitors manufacturing to other existing facilities in
order to further optimize operations in the PD segment. We also recorded
restructuring charges of $1.8 million within Operating expenses, primarily for
actions associated with rationalizing the Audio segment workforce.
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Gross Profit and Non-GAAP Gross Profit
Gross profit for the first quarter of 2020 was$56.2 million , compared with$68.5 million for the first quarter of 2019, a decrease of$12.3 million or 18.0%. Gross profit margin (gross profit as a percentage of revenues) for the first quarter of 2020 was 34.5%, compared with 38.1% for the first quarter of 2019. The decreases were primarily due to lower Audio revenue volumes and lower average pricing on mature Audio products. In addition, we experienced disruptions due to the COVID-19 pandemic within our manufacturing operations acrossAsia , which negatively impacted plant productivity and capacity utilization in our Audio segment, partially offset by product cost reductions. Non-GAAP gross profit for the first quarter of 2020 was$58.2 million , compared with$69.9 million for the first quarter of 2019, a decrease of$11.7 million or 16.7%. Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the first quarter of 2020 was 35.7%, compared with 38.9% for the first quarter of 2019. The decreases were primarily due to lower Audio revenue volumes and lower average pricing on mature Audio products. In addition, we experienced disruptions due to the COVID-19 pandemic within our manufacturing operations acrossAsia , which negatively impacted plant productivity and capacity utilization in our Audio segment, partially offset by product cost reductions.
Research and Development Expenses
Research and development expenses for the first quarter of 2020 were$25.7 million , compared with$24.7 million for the first quarter of 2019, an increase of$1.0 million or 4.0%. Research and development expenses as a percentage of revenues for the first quarter of 2020 and 2019 were 15.8% and 13.7%, respectively. The increase in expenses was primarily driven by our acquisition of the ASIC Design Business, partially offset by the benefits of our operating cost reductions in our existing Audio research group as a result of headcount reductions to optimize the Audio workforce. We expect cost reductions associated with the Audio segment to continue through the remainder of the fiscal year, with related restructuring charges primarily being incurred in the second quarter of 2020. The increase in expenses as a percentage of revenues was primarily due to a decrease in revenues, along with the increase in expenses.
Selling and Administrative Expenses
Selling and administrative expenses for the first quarter of 2020 were$36.2 million , compared with$37.6 million for the first quarter of 2019, a decrease of$1.4 million or 3.7%. Selling and administrative expenses as a percentage of revenues for the first quarter of 2020 and 2019 were 22.2% and 20.9%, respectively. The decrease in expenses was primarily driven by reduced stock-based compensation, lower deferred compensation costs, and reduced shareholder activism costs, partially offset by higher legal expenses related to protecting our intellectual property.
Interest Expense, net
Interest expense for the first quarter of 2020 was$3.7 million , compared with$3.5 million for the first quarter of 2019, an increase of$0.2 million . The increase is primarily due to higher outstanding borrowings. For additional information on borrowings and interest expense, refer to Note 9. Borrowings to our Consolidated Financial Statements.
Other (income) expense, net
Other income for the first quarter of 2020 was$2.7 million , compared with a loss of$1.0 million for the first quarter of 2019, an increase of$3.7 million . The increase is primarily due to favorable impacts from foreign currency exchange rate changes in the first quarter of 2020. 26
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Provision for Income Taxes and Non-GAAP Provision for Income Taxes
The effective tax rate ("ETR") from continuing operations for the first quarter
of 2020 was a 20.8% provision, compared with a 2,600.0% provision for the first
quarter of 2019. The 2020 year-to-date provision for income taxes was $2.2
million , as compared to the 2019 year-to-date provision of $2.6 million . The
Company accrues taxes in various countries where it generates income and applies
a valuation allowance in other jurisdictions (primarily the U.S. ), which
resulted in the provision for both the first quarter of 2020 and 2019. The
unusually high ETR for the first quarter of 2019 was driven by the near
break-even loss before income taxes and discontinued operations.
The non-GAAP ETR from continuing operations for the first quarter of 2020 was an
11.1% provision, compared with a 20.8% provision for the first quarter of 2019.
The non-GAAP ETR from continuing operations for the first quarter of 2020 was
impacted by a net discrete benefit totaling $0.5 million due to a change in the
indefinite reinvestment assertion related to a portion of undistributed earnings
of our Malaysian subsidiary. The non-GAAP ETR from continuing operations for the
first quarter of 2019 was impacted by net discrete expense totaling $1.2
million , primarily related to a change in the Company's uncertain tax positions.
Absent the discrete items, the non-GAAP ETR from continuing operations for
the first quarter of 2020 and 2019 was a 25.0% provision and a 12.8% provision,
respectively. The change in the non-GAAP ETR was due to the mix of earnings and
losses by taxing jurisdictions.
The ETR and non-GAAP ETR deviate from the statutory U.S. federal income tax
rate, mainly due to the taxing jurisdictions where we generate taxable income or
loss, the favorable impact of our significant tax holidays in Malaysia , and
judgments as to the realizability of our deferred tax assets. A significant
portion of our pre-tax income is subject to a lower tax rate as a result of our
Malaysian tax holidays, subject to our annual satisfaction of certain conditions
we expect to continue to satisfy. Unless extended or renegotiated, our existing
significant tax holiday in Malaysia will expire on December 31, 2021 . For
additional information on these tax holidays, refer to Note 11. Income Taxes to
our Consolidated Financial Statements.
Loss from Continuing Operations
Loss from continuing operations for the first quarter of 2020 was$12.8 million , compared with$2.7 million for the first quarter of 2019, an increase of$10.1 million . The increase is primarily due to lower gross profit and an increase in restructuring charges as described above, partially offset by favorable impacts from foreign currency exchange rate changes.
(Loss) Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
Loss before interest and income taxes from continuing operations for the first quarter of 2020 was$6.9 million , compared with earnings of$3.4 million for the first quarter of 2019, a decrease of$10.3 million . The decrease was primarily due to lower gross profit and an increase in restructuring charges as described above, partially offset by favorable impacts from foreign currency exchange rate changes. Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the first quarter of 2020 was$5.5 million , compared with$16.7 million for the first quarter of 2019, a decrease of$11.2 million . Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the first quarter of 2020 was 3.4%, compared with 9.3% for the first quarter of 2019. The decreases in Adjusted EBIT and Adjusted EBIT margin were primarily due to lower non-GAAP gross profit and an increase in non-GAAP operating expenses, partially offset by favorable impacts from foreign currency exchange rate changes.
Earnings from Discontinued Operations, net
Earnings from discontinued operations was$3.7 million in the first quarter of 2020 compared with no impact in the first quarter of 2019. We recorded a tax benefit for a refund received during the first quarter of 2020 related to the Timing Device Business. 27
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Diluted Loss per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations
Diluted loss per share from continuing operations was$0.14 for the first quarter of 2020, compared with a$0.03 loss per share for the first quarter of 2019. The decrease in diluted earnings per share was primarily due to a higher loss before interest and income taxes as described above. Non-GAAP diluted earnings per share from continuing operations was$0.03 for the first quarter of 2020, compared with$0.13 for the first quarter of 2019. The decrease in Non-GAAP diluted earnings per share was mainly driven by lower Adjusted EBIT as described above, partially offset by a lower Non-GAAP provision for income taxes as described above. 28
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Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1)
Three Months Ended
March 31,
(in millions, except share and per share amounts) 2020 2019
Gross profit $ 56.2 $ 68.5
Stock-based compensation expense 0.5 0.4
Restructuring charges 1.4 0.5
Production transfer costs (2) 0.1 0.5
Non-GAAP gross profit $ 58.2 $ 69.9
Loss from continuing operations $ (12.8) $ (2.7)
Interest expense, net 3.7 3.5
Provision for income taxes 2.2 2.6
(Loss) earnings from continuing operations before interest and income taxes
(6.9) 3.4
Stock-based compensation expense 3.5 6.7
Intangibles amortization expense 3.3 1.8
Restructuring charges 5.3 2.3
Production transfer costs (2) 0.1 0.5
Other (3) 0.2 2.0
Adjusted earnings from continuing operations before interest
and income taxes $ 5.5 $ 16.7
Interest expense, net $ 3.7 $ 3.5
Interest expense, net non-GAAP reconciling adjustments (4) 1.8 1.7
Non-GAAP interest expense $
1.9
Provision for income taxes $ 2.2$ 2.6 Income tax effects of non-GAAP reconciling adjustments (5) (1.8) 0.5 Non-GAAP provision for income taxes $
0.4
Loss from continuing operations$ (12.8) $ (2.7) Non-GAAP reconciling adjustments (6) 12.4 13.3 Interest expense, net non-GAAP reconciling adjustments (4) 1.8 1.7 Income tax effects of non-GAAP reconciling adjustments (5) (1.8) 0.5 Non-GAAP net earnings from continuing operations $
3.2
Diluted loss per share from continuing operations$ (0.14) $ (0.03) Earnings per share non-GAAP reconciling adjustment 0.17 0.16
Non-GAAP diluted earnings per share from continuing operations $
0.03
Diluted average shares outstanding 91,795,980 90,535,188
Non-GAAP adjustment (7) 3,180,724 3,185,581
Non-GAAP diluted average shares outstanding (7) 94,976,704 93,720,769
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(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. Knowles believes that non-GAAP measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating Knowles' performance for business planning purposes. Knowles also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles' opinion, do not reflect its core operating performance. 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 inAsia . These amounts are included in the corresponding Gross profit and (Loss) earnings from continuing operations before interest and income taxes for each period presented. (3) In 2020, Other expenses represent expenses related to shareholder activism. In 2019, Other expenses represent expenses related to shareholder activism and the acquisition ofDITF Interconnect Technology, Inc. ("DITF") by the PD segment. (4) Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's nonconvertible debt borrowing rate. Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the Company's$172.5 million of convertible senior notes due 2021 that were issued in a private placement inMay 2016 . The imputed interest rate is 8.12% for the convertible notes due 2021, while the actual coupon interest rate of the notes was 3.25%. The difference between the imputed interest expense and the coupon interest expense is excluded from management's assessment of the Company's operating performance because management believes that this non-cash expense is 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. (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. (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. In addition, the Company entered into convertible note hedge transactions to offset any potential dilution from the convertible notes. 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. 30
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Segment Results of Operations for the Three Months Ended
The following is a summary of the results of operations of our two reportable segments: Audio and PD.
See Note 15. Segment Information to the Consolidated Financial Statements for
(i) a reconciliation of segment revenues to our consolidated revenues and (ii) a
reconciliation of segment earnings (loss) from continuing operations before
interest and income taxes to our consolidated loss from continuing operations.
Audio
Three Months Ended March 31 ,
(in millions) 2020
Percent of Revenues 2019 Percent of Revenues
Revenues $ 120.1 $ 139.1
(Loss) earnings from continuing operations before
interest and income taxes $ (6.1) NM (1) $ 11.8 8.5%
Stock-based compensation expense 3.4 3.6
Intangibles amortization expense 2.6 1.2
Restructuring charges 4.1 1.8
Adjusted earnings from continuing operations before
interest and income taxes $ 4.0 3.3% $ 18.4 13.2%
(1) Not meaningful.
Revenues
Revenues were $120.1 million for the first quarter of 2020, compared with $139.1
million for the first quarter of 2019, a decrease of $19.0 million or 13.7%.
Revenues decreased primarily due to the impacts of the COVID-19 pandemic, which
caused lower demand for hearing health products and MEMS microphones in the
mobile, ear, and IoT markets, particularly in China . Audio revenues were also
impacted by lower average pricing on mature products..
(Loss) Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
Loss from continuing operations before interest and income taxes was$6.1 million for the first quarter of 2020, compared with earnings of$11.8 million for the first quarter of 2019, a decrease of$17.9 million . The decrease was primarily driven by the impacts of the COVID-19 pandemic, which lowered demand for our Audio products and disrupted our manufacturing operations acrossAsia , reducing plant productivity and capacity utilization. In addition, we were also impacted by lower average pricing on mature products, higher legal expenses related to protecting our intellectual property, increased restructuring charges, and higher warranty claims, which were partially offset by product cost reductions, benefits of our operating cost reductions, and favorable foreign currency exchange rate changes. Adjusted EBIT was$4.0 million for the first quarter of 2020, compared with$18.4 million for the first quarter of 2019, a decrease of$14.4 million . Adjusted EBIT margin for the first quarter of 2020 was 3.3%, compared to 13.2% for the first quarter of 2019. The decreases were primarily driven by the impacts of the COVID-19 pandemic, which lowered demand for our Audio products and disrupted our manufacturing operations acrossAsia , reducing plant productivity and capacity utilization. In addition, we were also impacted by lower average pricing on mature products, higher legal expenses related to protecting our intellectual property, and higher warranty claims, which were partially offset by product cost reductions, benefits of our operating cost reductions, and favorable foreign currency exchange rate changes. 31
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Precision Devices
Three Months Ended March 31,
(in millions) 2020 Percent of Revenues 2019 Percent of Revenues
Revenues $ 43.0 $ 40.7 Earnings from continuing operations before interest and income taxes
$ 7.1 16.5%$ 7.5 18.4% Stock-based compensation expense 0.1 0.3 Intangibles amortization expense 0.7 0.6 Restructuring charges - 0.3 Production transfer costs (1) 0.1 0.5 Other (2) - 0.5
Adjusted earnings from continuing operations before interest and income taxes
$ 8.0 18.6%$ 9.7 23.8% (1) Production transfer costs represent duplicate costs incurred to migrate manufacturing to existing facilities. These amounts are included in earnings from continuing operations before interest and income taxes for each period presented. (2) In 2019, Other represents expenses related to the acquisition of DITF.
Revenues
Revenues were$43.0 million for the first quarter of 2020, compared with$40.7 million for the first quarter of 2019, an increase of$2.3 million or 5.7%. Revenues increased primarily due to higher shipments to the defense, automotive, and medtech markets, partially offset by lower shipments to the communications market.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
Earnings from continuing operations before interest and income taxes ("EBIT")
was $7.1 million for the first quarter of 2020, compared with $7.5 million for
the first quarter of 2019, a decrease of $0.4 million . EBIT margin for the first
quarter of 2020 was 16.5%, compared to 18.4% for the first quarter of 2019. The
decreases were primarily driven by higher product costs and factory overhead
increases to support higher production volumes and manufacturing capacity,
partially offset by the benefits of productivity initiatives and increased
shipments.
Adjusted EBIT was $8.0 million for the first quarter of 2020, compared with $9.7
million for the first quarter of 2019, a decrease of $1.7 million . Adjusted EBIT
margin for the first quarter of 2020 was 18.6%, compared with 23.8% for the
first quarter of 2019. The decreases were primarily driven by higher product
costs and factory overhead increases to support higher production volumes and
manufacturing capacity, partially offset by the benefits of productivity
initiatives and increased shipments.
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Liquidity and Capital Resources
Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our operations and capital needs will depend on our ongoing ability to generate cash from operations and access to capital markets. We believe that our future cash flow from operations and access to capital markets will provide adequate resources to fund our working capital needs, dividends (if any), capital expenditures, and strategic investments. We have secured a revolving line of credit inthe United States from a syndicate of commercial banks to provide additional liquidity. Furthermore, if we were to require additional cash above and beyond our cash on the balance sheet, the free cash flow generated by the business, and availability under our revolving credit facility, we would most likely seek to raise long-term financing through theU.S. debt or bank markets. InMay 2016 , we sold$172.5 million aggregate principal amount of 3.25% convertible senior notes dueNovember 1, 2021 ("the Notes") and concurrently entered into convertible note hedge transactions with respect to our common stock to minimize the potential dilution upon conversion of the Notes. In addition, we entered into warrant transactions whereby we sold warrants to acquire shares of our common stock at a strike price of$21.1050 per share. The Notes will mature in 2021, unless earlier converted. The Notes are unsecured, senior obligations and interest is payable semi-annually in arrears. The Notes will be convertible into cash, shares of our common stock, or a combination thereof, at our election. We have primarily used the net proceeds to reduce borrowings outstanding. For additional information, refer to Note 9. Borrowings to our Consolidated Financial Statements. OnJanuary 3, 2019 , we acquired substantially all of the assets of DITF for$11.1 million . The acquired business provides thin film components to the defense, telecommunication, industrial, and medtech markets. This acquisition's operations are included in the PD segment. For additional information, refer to Note 4. Acquisitions to our Consolidated Financial Statements. OnDecember 20, 2019 , we acquired substantially all of the assets of the ASIC Design Business for$57.9 million . The acquired business, which does not generate revenues, includes intellectual property and an assembled workforce. The acquisition's operations are included in the Audio segment. For additional information, refer to Note 4. Acquisitions to our Consolidated Financial Statements. OnFebruary 24, 2020 , we announced that our Board of Directors had authorized a share repurchase program of up to$100 million of our common stock. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. The actual timing, number, and share price of shares repurchased will depend on a number of factors, including the market price of our common stock, general market and economic conditions, and applicable legal requirements. Any shares repurchased will be held as treasury stock. During the three months endedMarch 31, 2020 , we repurchased 996,109 shares of common stock for a total of$15.0 million . In connection with the COVID-19 pandemic, we have temporarily suspended share repurchases. However, we may resume the share repurchase program at any time when we believe it is prudent to do so and without further notice. Our ability to make payments on and to refinance our indebtedness, as well as any debt that we may incur in the future, will depend on our ability in the future to generate cash from operations and financings. Due to the global nature of our operations, a significant portion of our cash is generated and typically held outsidethe United States . Our cash and cash equivalents totaled$147.8 million and$78.4 million atMarch 31, 2020 andDecember 31, 2019 , respectively. Of these amounts, cash held by our non-U.S. operations totaled$58.7 million and$74.6 million as ofMarch 31, 2020 andDecember 31, 2019 , respectively.
To the extent we repatriate these funds to the
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