Knowles Corp

1. Summary of Significant Accounting Policies

Background - Knowles Corporation (NYSE:KN) is a leading manufacturer of specialty electronic components. The Company designs parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, the Company enables businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification/energy markets. Knowles high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enhance the performance of customer products. The Company's focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enable the Company to deliver innovative solutions across multiple applications. References to "Knowles," "the Company," "we," "our," and "us" refer to Knowles Corporation and its consolidated subsidiaries.

On December 27, 2024, the Company completed the sale of the Consumer MEMS Microphones ("CMM") business to Syntiant Corp. See Note 2. Discontinued Operations for additional information related to this transaction. The Company has classified the results of CMM as discontinued operations for all periods presented.

On November 1, 2023, the Company completed the acquisition of Cornell Dubilier, a manufacturer of film, electrolytic, and mica capacitors used in medtech, military, and industrial electrification applications. See Note 3. Acquisition for additional information related to this transaction.

Financial Statement Presentation- The Consolidated Financial Statements included in this Annual Report on Form 10-K are presented in conformity with U.S. generally accepted accounting principles ("U.S. GAAP").

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and disclosures. These estimates may be adjusted due to changes in future economic, industry, or customer financial conditions, as well as changes in technology or demand. Estimates are used in accounting for, among other items, inventory reserves, restructuring reserves, warranty reserves, pension and post-retirement plans, stock-based compensation, useful lives for depreciation and amortization of long-lived assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, deferred tax assets, uncertain income tax positions, changes in tax laws, and contingencies. Management uses historical experience and all available information to make these estimates. Actual results may ultimately differ from estimates, although management does not believe such differences would materially affect the financial statements in any individual year. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the Consolidated Financial Statements in the period that they are determined.

Corrections of Errors -During the year ended December 31, 2025, the Company identified an error in its historical financial results related to stock-based compensation expense for those individuals that are nearing or have reached retirement eligibility as defined by the equity compensation plan. This error resulted in the understatement of stock-based compensation expense for the years ended December 31, 2024, 2023, and 2022. During the year ended December 31, 2025, the Company corrected its stock-based compensation expense, which resulted in increases to Selling and administrative expenses of $0.9 million, Research and development expenses of $0.1 million, and Cost of goods sold of $0.1 million. This correction decreased Earnings before income taxes and discontinued operations and Earnings from continuing operations by $1.1 million and $1.0 million, respectively, for the year ended December 31, 2025.

In addition, during the year ended December 31, 2025, the Company identified an error in its historical financial results related to working capital adjustments and costs associated with the disposal of CMM in the fourth quarter of 2024. This error resulted in the overstatement of the gain on disposal of business reflected in Loss from discontinued operations, net during the year ended December 31, 2024. The Company corrected this error during the year ended December 31, 2025, resulting in an increase to Loss from discontinued operations, net of $1.3 million.

The Company evaluated the impact of these errors in accordance with Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections, and determined that they were not material to the consolidated financial statements for the current year or to any previously reported annual or interim periods.

Transactions with Syntiant -As partial consideration for the sale of CMM on December 27, 2024, the Company received Series D-2 preferred stock of Syntiant Corp. See Note 2. Discontinued Operations for additional information related to this transaction. The Company accounts for this investment using the cost method, measured at its historical cost, which was the fair value of the consideration received from Syntiant for the sale of CMM, plus any non-cash dividends earned. The balance of this investment was $83.4 million and $77.2 million as of December 31, 2025 and 2024, respectively, and is classified as "Investment in affiliate" on the Consolidated Balance Sheet. During the year ended December 31, 2025, the Company recorded a non-cash dividend on this investment in the form of additional Syntiant Series D-2 shares with a value of $6.2 million, which is reflected as "Dividend income" on the Consolidated Statement of Earnings.

In connection with the sale of CMM, the Company provided financing of $6.4 million to Syntiant, which was utilized to fund Syntiant's requirement to have $40.0 million of cash on its balance sheet at closing. This note is junior to Syntiant's debt financing and matures on March 28, 2029 and bears interest at the prime rate until six months after the closing date of the sale, at which time the interest rate increased to 13.0%. The balance of this note was $5.9 million and $6.4 million as of December 31, 2025 and 2024, respectively, and is classified within "Other assets and deferred charges" on the Consolidated Balance Sheet.

The Company shares in certain separation costs with Syntiant related to the sale of CMM pursuant to a credit of up to $13.5 million. Under the terms of the separation cost credit, the Company is required to reimburse Syntiant 100% for the first $7.0 million of separation costs incurred and 50% for those costs in excess of $7.0 million, up to the maximum established separation cost credit of $13.5 million. The balance of the separation cost credit was $4.8 million and $13.5 million at December 31, 2025 and 2024, respectively and is classified within "Other accrued expenses" on the Consolidated Balance Sheet. As the balance of the separation cost credit is now below the $7.0 million contractual threshold, future costs will be shared equally by the Company and Syntiant.

The Company leases portions of its facilities to Syntiant, for which lease payments to date of $2.8 million have been applied to the separation credit. The Company also subleases portions of its manufacturing facilities to Syntiant at cost. The portion of operating lease right-of-use assets subleased by Syntiant totaled $5.2 million and $0.3 million at December 31, 2025 and 2024, respectively.

The Company recognized revenue totaling $17.3 million during the year ended December 31, 2025 related to transactions with Syntiant. These revenues are reflected in the results of the MedTech & Specialty Audio segment. Receivables, net include $4.2 million and $1.8 million due from Syntiant at December 31, 2025 and 2024, respectively, related to these sales transactions and amounts related to the sale of CMM.

During the year ended December 31, 2025 the Company engaged with Syntiant to sell certain machinery and equipment associated with the MedTech & Specialty Audio segment for a nominal selling price. The Company recorded an impairment charge of $3.6 million for the year ended December 31, 2025 to write down the carrying value of these assets to fair value based on the selling price.

Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits, and temporary cash investments with original maturities less than three months.

Allowance for Doubtful Accounts – The Company maintains allowances for estimated losses as a result of customers' inability to make required payments. Management evaluates the aging of the accounts receivable balances, the financial condition of its customers, historical trends, and relevant forecasts to estimate the amount of accounts receivable that may not be collected in the future and records the appropriate provision.

Inventories – Inventories are stated at the lower of cost or net realizable value, determined on the first-in, first-out ("FIFO") basis. The value of inventory may decline as a result of surplus inventory, price reductions, or technological obsolescence. It is the Company’s policy to carry reserves against the carrying value of inventory when items have no future demand (obsolete inventory) and additionally, where inventory items on hand have demand, yet have insufficient forecasted activity to consume the entire stock within a reasonable period. The Company recognizes reserves against the carrying value of such at-risk inventory items after considering the nature of the risk and any mitigating factors.

Property, Plant, and Equipment - Property, plant, and equipment includes the historic cost of land, buildings, equipment, and significant improvements to existing plant and equipment or, in the case of acquisitions, a fair market value appraisal of such assets completed at the time of acquisition. Property, plant, and equipment also includes the cost of purchased software. Expenditures for maintenance, repairs, and minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and the gain or loss realized on disposition is reflected in earnings. The Company historically depreciates its assets on a straight-line basis over their estimated useful lives as follows: buildings and improvements 5 to 31.5 years; machinery and equipment 1.5 to 7 years; furniture and fixtures 2 to 5 years; vehicles 3 to 5 years; and software 3 to 5 years.

Leases - The Company determines whether an arrangement is a lease at contract inception. Lease liabilities and right-of-use assets are recognized on the lease commencement date based on the net present value of fixed lease payments over the lease term. The Company includes options to extend or terminate a lease within the lease term when it is reasonably certain the option will be exercised. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Lease liabilities represent an obligation to make lease payments arising from a lease while right-of-use assets represent a right to use an underlying asset during the lease term. Right-of-use assets include prepaid fixed lease payments and exclude lease incentives. As the Company's leases do not have a readily determinable implicit rate, the Company uses its incremental borrowing rate to determine the present value of fixed lease payments based on information available at the lease commencement date.

Fixed lease expense for operating leases and right-of-use asset amortization for finance leases are generally recognized on a straight-line basis over the lease term. Variable lease payments, such as payments based on an index rate or usage, are expensed as incurred and excluded from lease liabilities and right-of-use assets. The Company combines lease components and nonlease components such as maintenance into a single lease component, which results in the capitalization of all fixed payments within lease liabilities and right-of-use assets.

Derivative Instruments - The Company uses derivative financial instruments to hedge its exposure to foreign currency exchange rate risk. The Company does not enter into derivative financial instruments for speculative purposes and does not have a material portfolio of derivative financial instruments. Derivative financial instruments used for hedging purposes must be designated and effective as a hedge of the identified risk exposure at inception of the contract. The Company recognizes all derivatives as either assets or liabilities on the Consolidated Balance Sheets and measures those instruments at fair value. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivatives is recorded as a component of other comprehensive earnings and subsequently recognized in net earnings when the hedged items impact earnings.

Goodwill and Indefinite-Lived Intangible Assets - Goodwill represents the excess of purchase consideration over the fair value of the net assets of businesses acquired. Goodwill and certain other intangible assets deemed to have indefinite lives are not amortized. Instead, goodwill and indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if there are events or circumstances indicating the carrying value of individual reporting units or assets may exceed their respective fair values on a more likely than not basis (that is, a likelihood of more than 50 percent). The Company performs its annual impairment assessment in the fourth quarter of each year on October 1.

Recoverability of goodwill is measured at the reporting unit level. The Company hasfour reporting units - High Performance Capacitors ("HPC"), Radio Frequency Microwave Filters ("RFMW"), Cornell Dubilier ("CD"), and MedTech & Specialty Audio ("MSA"). The goodwill balances associated with these reporting units at December 31, 2025 were as follows: $43.6 million for HPC, $19.6 million for RFMW, $69.4 million for CD, and $137.7 million for MSA.

Management first reviews relevant qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If management determines it is more likely than not that the carrying value of a reporting unit might be impaired, a quantitative analysis is performed.

The quantitative impairment assessment compares the fair value of each reporting unit to its carrying value. Impairment is measured as the amount by which the carrying value of a reporting unit exceeds its fair value. Fair value is estimated using a discounted cash flow model that includes the Company’s market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, and other assumptions which are considered reasonable and inherent in the discounted cash flow analysis. 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. These assumptions require significant judgment and actual results may differ from estimated amounts.

The Company performed a qualitative goodwill impairment test for the HPC, RFMW, and MSA reporting units and a quantitative impairment test for the CD reporting unit as of October 1, 2025 . No goodwill impairment charges were recorded in continuing operations for any reporting unit for the years ended December 31, 2025, 2024, or 2023.

Potential circumstances that could have a negative effect on the fair value of our reporting units include, but are not limited to, lower than forecasted revenue and terminal growth rates, decreased profit margins, higher income taxes, increased capital expenditures, higher working capital requirements, and an increase in the weighted average cost of capital. A reduction in the estimated fair value of the reporting units could trigger an impairment in the future. The Company cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and intangible assets.

In testing its indefinite-lived trademarks for impairment, the Company uses a relief-from-royalty method to calculate and compare the fair value of the intangible asset to its carrying value. This method estimates the fair value of trademarks by calculating the present value of royalty income that could hypothetically be earned by licensing the trademark to a third party. Any excess of carrying value over the estimated fair value is recognized as an impairment loss. No impairment of indefinite-lived trademarks was indicated for the years ended December 31, 2025, 2024, or 2023.

See Note 6. Goodwill and Other Intangible Assets for additional information on goodwill and indefinite-lived intangible assets.

Other Intangible and Long-Lived Assets - Other intangible assets with determinable lives consist primarily of customer relationships, developed technology, and trademarks, which are amortized over estimated useful lives typically ranging from 4 to 15 years.

Long-lived assets and intangible assets with determinable lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows is produced and compared to its carrying value. 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.

Investment in Affiliate - This investment reflects Series D-2 preferred stock of Syntiant Corp., a non-marketable equity security. This investment is accounted for using the measurement alternative at cost. The carrying amount is remeasured to its fair value when observable price changes occur (observable prices in orderly transactions for an identical or similar investment of the same issuer), or when it is impaired. Any adjustments to the carrying amount are recorded in earnings.

Other Assets and Deferred Charges - Investments in mutual funds of $8.8 million and $7.4 million are included in "Other assets and deferred charges" as of December 31, 2025 and 2024, respectively. These investments are carried at fair value based on quoted prices for identical assets in active markets, resulting in classification within Level 1 of the fair value hierarchy. Gains and losses related to the investments are recorded within the Consolidated Statements of Earnings as a component of "Other (income) expense, net." Other assets and deferred charges also include non-current deferred tax assets.

Foreign Currency - Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, are translated into U.S. dollars at end-of-period exchange rates. Revenue and expense items are translated using weighted-average exchange rates. Foreign currency translation gains and losses are included as a component of "Accumulated other comprehensive loss." Assets and liabilities of an entity that are denominated in currencies other than an entity’s functional currency are re-measured into the functional currency using end-of-period exchange rates or historical rates where applicable to certain balances. Gains and losses related to these re-measurements are recorded within the Consolidated Statements of Earnings as a component of "Other (income) expense, net."

Revenue Recognition - Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The majority of the Company’s revenue is generated through the manufacture and sale of specialized products and components. For product and component sales, each good sold to a customer typically represents a distinct performance obligation. The Company’s performance obligation to provide goods to a customer is typically satisfied at a point in time upon completion of the shipping process as indicated by the terms of the contract, at which point control is transferred to the customer and revenue is recognized. The Company has no significant arrangements with multiple performance obligations. Remaining performance obligations consist of the aggregate amount of the total transaction price that is unsatisfied or partially satisfied.

Contract liabilities (deferred revenue) primarily relate to arrangements where cash has been collected but transfer of control of all performance obligations to the customer has either partially occurred or not occurred at the balance sheet date. Deferred revenue is classified on the Consolidated Balance Sheet as either a current liability ("Other accrued expenses") or non-current liability ("Other liabilities") based on the timing of when the Company expects to complete the performance obligation.

The terms of a contract or historical business practice can give rise to variable consideration, including customer discounts, rebates, and returns. The Company estimates variable consideration using either the expected value or most likely amount method. We include amounts in the transaction price to the extent it is probable that a significant reversal of revenue will not occur in a subsequent reporting period. Our estimates of variable consideration are based on all reasonably available information (historical, current, and forecasted). Rebates are recognized over the contract period based on expected revenue levels. Sales discounts and rebates totaled $4.2 million, $4.5 million, and $3.1 million for the years ended December 31, 2025, 2024, and 2023, respectively. Returns and allowances totaled $5.5 million, $4.6 million, and $3.1 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The Company accounts for shipping and handling activities that occur after control of the related good transfers to the customer as fulfillment activities rather than evaluating such activities as performance obligations. As a result, all shipping and handling costs related to contracts with customers are recognized in "Cost of goods sold" on the Consolidated Statements of Earnings. Additionally, the Company applies the practical expedient allowing incremental costs of obtaining a contract to be expensed as incurred if the amortization period of the resulting asset would have been less than one year. These costs primarily consist of sales commissions; the Company has no such significant costs exceeding the one-year limit for applying the practical expedient.

Receivables, net from contracts with customers were $91.7 million and $89.5 million as of December 31, 2025 and 2024, respectively. See Note 17. Segment Information for disclosures regarding the disaggregation of revenues.

Stock-Based Compensation – The principal awards issued under the stock-based compensation plans include stock options, restricted stock units ("RSUs"), and performance share units ("PSUs"). The cost for such awards is measured at the grant date based on the fair value of the award. The value of the portion of the award that is expected to ultimately vest is recognized as expense on a straight-line basis generally over the explicit service period of three years (except for retirement-eligible employees) and is included in "Cost of goods sold," "Research and development expenses," and "Selling and administrative expenses" in the Consolidated Statements of Earnings, depending on the functional area of the underlying employees. Expense for awards granted to retirement-eligible employees is recorded over the period from the date of grant through the date the employee first becomes eligible to retire and is no longer required to provide service. At the time of grant, the Company estimates forfeitures, based on historical experience, in order to estimate the portion of the award that will ultimately vest.

The Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted to employees. The fair value of each RSU granted is equal to the share price at the date of the grant. The fair value of each PSU with a market condition is determined using a Monte Carlo simulation. The related expense for PSUs with market conditions is recognized regardless of the expected attainment as the grant date fair value considers the range of possible stock price and total shareholder return outcomes. The fair value of each PSU with a performance condition is equal to the share price at the date of the grant. The related expense for PSUs with performance conditions is recognized based on the expected attainment of performance targets. Changes in estimates for performance conditions that impact the number of shares expected to vest are recognized prospectively through cumulative adjustments to expense. See Note 13. Equity Incentive Program for additional information related to the Company’s stock-based compensation.

Income Taxes - The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company offsets and presents deferred tax liabilities and assets, as well as any related valuation allowance, as a single non-current amount on the Consolidated Balance Sheets on a jurisdictional basis. The Company's policy is to release income tax effects from accumulated other comprehensive loss in the period the underlying item expires.

The Company establishes valuation allowances for its deferred tax assets if, based on all available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making such assessments, significant weight is given to evidence that can be objectively verified. The assessment of the need for a valuation allowance requires considerable judgment on the part of management with respect to the benefits that could be realized from future taxable income, as well as other positive and negative factors. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment.

The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Adjustments are made to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company's financial condition and operating results. The provision for income taxes includes the effects of any reserves that are believed to be appropriate, as well as the related net interest and penalties.

Research and Development Costs – Research and development costs, including qualifying engineering costs, are expensed when incurred.

Share Repurchases - On February 24, 2020, the Company announced that its Board of Directors had authorized a share repurchase program of up to $100.0 million of the Company's common stock. On April 28, 2022, it announced that our Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced that its Board of Directors had increased its share repurchase authorization by an additional $150.0 million in additional aggregate value. The timing and amount of any shares repurchased will be determined by the Company based on its 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. The Company is 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 the Company’s common stock, general market and economic conditions, and applicable legal requirements. Any shares repurchased will be held as treasury stock. During the years ended December 31, 2025, 2024, and 2023, the Company repurchased 3,571,865,2,987,697, and 2,851,604 shares of common stock, respectively, for a total of $65.0 million, $53.7 million, and $47.5 million, respectively. At December 31, 2025, the Company had $129.0 million remaining that may yet be repurchased under the share repurchase program.

Non-cash Investing Activities - Purchases of property, plant, and equipment included in accounts payable were $2.1 million at December 31, 2025, $1.7 million at December 31, 2024, and $1.1 million at December 31, 2023. These amounts reflect both continuing and discontinued operations. These non-cash amounts are not reflected as Capital expenditures within investing activities of the Consolidated Statements of Cash Flows for the respective periods.

On December 27, 2024, the Company completed the sale of the CMM to Syntiant. The total consideration for this transaction was approximately $141.9 million, consisting of $63.6 million in cash ($58.0 million net of cash sold), Syntiant Series D-2 preferred stock with a fair value of $77.2 million, and $1.1 million for estimated purchase price adjustments. The purchase price adjustment is still being finalized and is subject to change. These non-cash amounts are not reflected in "Proceeds from the sale of business" within Investing Activities on the Consolidated Statement of Cash Flows for the year ended December 31, 2024. See Note 2. Discontinued Operations.

The Company completed an asset acquisition in 2023 for a total purchase price of approximately $2.0 million, including contingent consideration with an estimated fair value at acquisition of $1.7 million. This non-cash amount is not reflected in “Acquisition of asset” within Investing Activities on the Consolidated Statement of Cash Flows for the year ended December 31, 2023.

Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09 to enhance the transparency of income tax disclosures. This guidance requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. A public business entity is required to provide an explanation, if not otherwise evident, of the individual reconciling items disclosed, such as the nature, effect, and underlying causes and the judgment used in categorizing the reconciling items. This guidance also requires that all entities disclose, on an annual basis, the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by those individual jurisdictions equal to or greater than five percent of the total. The Company prospectively adopted this standard beginning with its annual reporting for the year ended December 31, 2025. See Note 12. Income Taxes.

In November 2024, the FASB issued ASU 2024-03 to provide additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. This guidance requires that a public business entity disclose amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption presented on the face of the income statement and a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. This standard also requires an entity disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. This standard is effective for the Company for its annual reporting for the year ended December 31, 2027 and for interim reporting for the three months ended March 31, 2028. Early adoption is permitted. This standard may be applied either prospectively to the financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its financial statements.

In November 2025, the FASB issued ASU 2025-09 to clarify certain aspects of the guidance on hedge accounting, namely (1) expanding the hedged risks permitted to be aggregated in a group of individual forecasted transactions, thereby enabling entities to apply hedge accounting to potentially broader portfolios of forecasted transactions, (2) including an alternative model for the application of hedge accounting to cash flow hedges of interest payments on certain debt instruments, (3) expanding hedge accounting for forecasted purchases and sales of nonfinancial assets to allow a company to hedge a component of a purchase or sale price or a subcomponent (in addition to hedging overall purchase or sale price), provided certain criteria are met, (4) accommodating differences in the loan and swap markets that developed after the cessation of the London Interbank Offered Rate ("LIBOR"), and (5) eliminating the recognition and presentation mismatch related to a dual hedge strategy (that is, a hedge for which a foreign-currency denominated debt instrument is both designated as the hedging instrument in a net investment hedge and designated as the hedged item in a fair value hedge of interest rate risk). This standard requires adoption on a prospective basis and is effective for the Company for both interim and annual reporting for the year ended December 31, 2027. The Company does not expect the adoption of this standard to have a significant impact upon the financial statements.

In December 2025, the FASB issued ASU 2025-10 to provide specific authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. The amendments in this guidance require that a government grant received by a business entity should not be recognized until (1) it is probable that a business entity will comply with the conditions attached to the grant and the grant will be received and (2) a business entity meets the recognition guidance for a grant related to an asset or a grant related to income. Adoption of this standard is required using either a modified prospective, modified retrospective, or a retrospective approach. This standard is effective for the Company for both interim and annual reporting for the year ended December 31, 2029. The Company does not expect the adoption of this standard to have a significant impact upon the financial statements.

2. Discontinued Operations

On December 27, 2024, the Company completed the sale of CMM to Syntiant. The total consideration for this transaction was approximately $141.9 million, consisting of $63.6 million in cash ($58.0 million net of cash sold), Syntiant Series D-2 preferred stock with a fair value of $77.2 million, and $1.1 million for estimated purchase price adjustments. The purchase price adjustment is still being finalized and is subject to change. The Company incurred costs to sell related to this transaction of $5.8 million and reclassified $3.4 million of gains from Accumulated other comprehensive loss to earnings upon the sale of CMM.

The Company recorded net adjustments of $2.8 million to the loss on disposal of CMM during the year ended December 31, 2025. This amount includes losses of $1.8 million ($1.3 million, net of tax) related to working capital adjustments and costs associated with the transaction that occurred in the fourth quarter of 2024, but were not recorded at that time. See also Note 1. Summary of Significant Accounting Policies.

The Company shares in certain separation costs pursuant to a credit for up to $13.5 million that Syntiant may apply to specified separation costs post-closing.

The disposition of CMM meets the criteria described in ASC 205-20, Presentation of Financial Statements – Discontinued Operations. In accordance with this guidance, the Company has classified the results of operations of CMM as discontinued operations for all periods presented as this disposal represents a strategic shift that has a major effect on the Company’s results of operations.

Results of the Company’s discontinued operations were as follows:

The Company recorded goodwill impairment charges of $262.5 million during the year ended December 31, 2024 to write down the carrying value of CMM to its fair value prior to its disposition.

During the year ended December 31, 2024, the Company sold certain technology related to CMM to a third party for total proceeds of $7.2 million. After transaction costs of $1.8 million, the Company recognized a net gain on the sale of this asset of $5.4 million during the year ended December 31, 2024. This gain is reflected as “Gain on sale of technology, net” in the results of discontinued operations above.

During the year ended December 31, 2023, the Company entered into an agreement to sell certain of its machinery and equipment related to CMM to a third party for total proceeds of $11.4 million, which were received in their entirety in 2023. In addition, the Company received $1.1 million in 2023, which was initially reserved for a third-party payment. The Company transferred control of a portion of these assets with a fair value of approximately $11.2 million to the buyer during the year ended December 31, 2023, resulting in a gain on sale of approximately $11.0 million. The remaining assets were transferred to the buyer in 2024 for an immaterial gain. During the year ended December 31, 2024, the Company recorded an additional gain on sale of these assets of approximately $1.1 million as a result of changing its estimate on the amount owed to the third party.

These gains on sale are reflected within the results from discontinued operations above as follows:

As the Consolidated Statement of Cash Flows includes the results of CMM in its net cash provided by (used in) operating, investing, and financing activities, the Company has provided the following information related to CMM in accordance with ASC 205-20:

(1) CMM was classified as held-for-sale as of September 30, 2024. At that time, the Company ceased to record depreciation and amortization for its long-lived assets in connection with ASC 360, Property, Plant, and Equipment.

Purchases of property, plant, and equipment related to discontinued operations included in accounts payable were $0.6 million and $0.2 million at December 31, 2024 and 2023, respectively. These non-cash amounts are not reflected as "Capital expenditures" above. There wereno purchases of property, plant, and equipment related to discontinued operations included in accounts payable during the year ended December 31, 2025.

3. Acquisition

On November 1, 2023, the Company acquired (i) all the issued and outstanding shares of Kaplan Electronics, Inc. and (ii) certain assets of Cornell Dubilier Electronics, Inc. and CD Aero, LLC (collectively, "Cornell Dubilier" or "CD") for aggregate consideration of $259.8 million, which equated to a total fair value of consideration transferred of $246.8 million. This purchase price of $246.8 million consisted of $136.9 million in cash payments and an interest-free seller note (the “Seller Note”) with a fair value of $109.9 million (see Note 11. Borrowings).

CD is a manufacturer of film, electrolytic, and mica capacitors used in medtech, defense, and industrial electrification applications. The transaction was accounted for as a business combination under ASC 805. The Company has completed the purchase price allocation for the acquisition of CD.

The table below represents the allocation of the purchase price to net assets acquired as of November 1, 2023:

The fair value for customer relationships was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of expected future cash flows less charges representing the contribution of other assets to those cash flows. The fair value for developed technology and trademarks was determined using the relief-from-royalty method under the income approach. The fair value measurements of the intangible assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of customer relationships, developed technology, and trademarks include forecasted revenue and terminal growth rates, profit margins, customer attrition rates, royalty rates, and discount rates. The weighted-average discount rates applied to expected future cash flows to reflect the risks related to intangible assets identified in connection with the CD acquisition were as follows:

The customer relationships, developed technology, and trademarks identified will be amortized on a straight-line basis over their estimated useful lives. The weighted-average useful lives assigned to these assets were as follows:

The excess of the total purchase price over the total fair value of the identifiable assets and liabilities was recorded as goodwill. The goodwill recognized is primarily attributable to synergies expected to be realized on this transaction and the assembled workforce. Of the total goodwill of $69.3 million recognized for this transaction, approximately $27.5 million is tax deductible. All goodwill related to CD has been allocated to the PD segment, which is the segment expected to benefit from the acquisition.

The Company believes the fair values assigned to intangible assets are based on reasonable assumptions and estimates that approximate the amounts a market participant would pay for these intangible assets as of the acquisition date. Actual results could differ materially from these estimates.

Impact of CD Acquisition and Pro-Forma Summary

Included in the Consolidated Statements of Earnings are CD’s revenues and loss before income taxes of $20.2 million and $1.1 million, respectively, from the date of acquisition through December 31, 2023. The $1.1 million loss before income taxes includes employee retention and intangible asset amortization expense of $1.0 million and $1.6 million, respectively.

In accordance with ASC 805, the following unaudited pro-forma summary presents consolidated financial information as if CD had been acquired as of the beginning of the year prior to the acquisition date. The unaudited pro-forma financial information is based on historical results of operations and financial positions of the Company and CD. The pro-forma earnings are adjusted to reflect the comparable impact of depreciation and amortization expense resulting from the fair value measurement of tangible and intangible assets, nonrecurring deal-related costs, employee retention, inventory step-up charges, and interest expense on borrowings to fund the acquisition.

The unaudited pro-forma financial information does not necessarily represent the results that would have occurred had the transaction occurred as of the beginning of the year prior to the acquisition date. In addition, the unaudited pro-forma information should not be deemed to be indicative of future results.

4. Inventories

The following table details the major components of inventories:

5. Property, Plant, and Equipment, net

The following table details the major components of property, plant, and equipment, net:

Depreciation expense totaled $20.1 million, $20.6 million, and $18.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.

During the year ended December 31, 2025, the Company recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to its selling price. See also "Transactions with Syntiant" in Note 1. Summary of Significant Accounting Policies.

6. Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill by reportable segment are as follows:

The Company recorded measurement period adjustments totaling $0.3 million to goodwill during the year ended December 31, 2024 related to the 2023 acquisition of CD.

The gross carrying value and accumulated amortization for each major class of intangible assets are as follows:

As of December 31, 2025, the weighted average remaining useful lives for the amortizable intangible assets are: trademarks at 12.0 years, customer relationships at 7.4 years, developed technology at 6.9 years, and other at 5.3 years. The weighted average remaining useful life for all amortizable intangible assets was 7.8 years as of December 31, 2025.

Total amortization expense for the years ended December 31, 2025, 2024, and 2023 was $16.2 million, $17.0 million, and $7.5 million, respectively. Amortization expense for the next five years and thereafter, based on current definite-lived intangible balances, is estimated to be as follows:

7. Leases

The Company has leases for manufacturing, sales, support, and engineering facilities, certain manufacturing and office equipment, and vehicles. The majority of the leases have remaining terms of 1 to 9 years, some of which include options to extend the leases for up to 6 years, and some of which include options to terminate the leases within 1 year. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company subleases certain facilities to third parties.

The disclosures below include the results of both continuing and discontinued operations. As stated in Note 1. Summary of Significant Accounting Policies, subsequent to the sale of CMM on December 27, 2024, the Company leases portions of its facilities to Syntiant. The portion of right-of-use operating lease assets subleased by Syntiant totaled $5.2 million and $0.3 million at December 31, 2025 and 2024, respectively.

The following table details the components of lease cost:

(1) Includes short-term and variable lease costs, which were immaterial.

The components of lease cost other than interest on lease liabilities are presented within "Cost of goods sold," "Research and development expenses," and "Selling and administrative expenses" on the Consolidated Statements of Earnings based on the use of the underlying assets. Interest on lease liabilities is presented within "Interest expense, net" on the Consolidated Statements of Earnings.

The following table presents supplemental balance sheet information related to finance leases:

The following table presents supplemental cash flow information related to leases:

(2) Does not include operating lease liabilities of $3.4 million and finance lease liabilities of $0.1 million obtained in the acquisition of CD during the year ended December 31, 2023. See Note 3. Acquisition for more information.

The following table details weighted-average remaining lease terms and discount rates:

The following table details maturities of lease liabilities as of December 31, 2025:

8. Other Accrued Expenses and Other Liabilities

The following table details the major components of other accrued expenses:

(1)In connection with the sale of CMM on December 27, 2024, the Company shares in certain separation costs with the buyer pursuant to a credit of up to $13.5 million that the buyer may apply to specified separation costs post-closing. See Note 2. Discontinued Operations.

The following table details the major components of other liabilities:

Warranty Accruals

Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted for new claims. The changes in the carrying amount of product warranties were as follows:

9. Restructuring and Related Activities

Restructuring and related activities are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions, and other measures to further optimize operations.

During the year ended December 31, 2025, the Company recorded restructuring charges of $3.8 million related to headcount reductions across the Company primarily to rightsize operating expenses subsequent to the sale of CMM. The Company recorded $0.8 million in restructuring charges within "Gross profit" and the remaining $3.0 million within "Operating expenses" on the Consolidated Statement of Earnings for the year ended December 31, 2025.

During the year ended December 31, 2024, the Company recorded restructuring charges within the PD segment of $3.4 million for severance pay and benefits related to headcount reductions and for costs associated with transferring certain capacitors manufacturing to existing facilities to further optimize operations. The Company recorded $1.9 million in restructuring charges within "Gross profit" and the remaining $1.5 million within "Operating expenses" on the Consolidated Statement of Earnings for the year ended December 31, 2024.

During the year ended December 31, 2023, the Company recorded restructuring charges within the PD segment of $2.5 million for severance pay and benefits related to headcount reductions and for costs associated with transferring certain capacitors manufacturing to existing facilities to further optimize operations, and $0.8 million for Corporate charges. The Company recorded $1.1 million in restructuring charges within "Gross profit" and the remaining $2.2 million within "Operating expenses" on the Consolidated Statement of Earnings for the year ended December 31, 2023.

The following table details restructuring charges incurred by reportable segment:

The following table details the Company’s severance and other restructuring accrual activity:

The severance and restructuring accruals are recorded in the following line items on the Consolidated Balance Sheets:

10. Hedging Transactions and Derivative Instruments

The Company is affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as "market risks." The Company uses derivatives as a risk management tool to mitigate the potential impact of certain market risks, which are primarily foreign currency risk related to ongoing business operations.

Cash Flow Hedging

The Company uses cash flow hedges to minimize the variability in cash flows of assets, liabilities, or forecasted transactions caused by fluctuations in foreign currency exchange rates. These derivatives, which are designated cash flow hedges, are carried at fair value. The changes in their fair values are recorded to "Accumulated other comprehensive income (loss)" ("AOCI") and reclassified to current earnings when the hedge contract matures or becomes ineffective.

To manage its exposure to foreign currency exchange rates, the Company has entered into currency deliverable forward contracts. These derivative instruments allow the Company to hedge portions of its forecasted funding needs, which are generally expected to occur within the next twelve months and are denominated in currencies other than the U.S. dollar. The Company maintains a foreign currency cash flow hedging program primarily to reduce the risk that the U.S. dollar net cash inflows and non-U.S. dollar net cash outflows will be adversely affected by changes in foreign currency exchange rates. At December 31, 2025 and 2024, the notional value of the derivatives related to currency forward contracts, principally the Chinese yuan, Malaysian ringgit, Philippine peso, Japanese yen, and Mexican peso was $46.9 million and $43.4 million, respectively. The Company presents the impact of foreign exchange contracts qualifying as cash flow hedges within "Cost of goods sold" on the Consolidated Statements of Earnings, which is the same line used to present the earnings effect of the hedged item.

Economic (Non-Designated) Hedging

In addition to derivative instruments that are designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency risk. Although these derivatives were not designated or did not qualify for hedge accounting, they are effectively economic hedges. The changes in fair value of these economic hedges are immediately recognized in earnings.

The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in non-functional currencies. The Company does not enter into these hedges for speculative reasons. These derivatives are carried at fair value with changes in fair value immediately recognized in earnings within "Other expense (income), net." In addition, these derivative instruments minimize the impact of exchange rate movements on the Company’s balance sheet, as the gains or losses on these derivatives are intended to offset gains and losses from the reduction of the hedged assets and liabilities. At December 31, 2025 and 2024, the notional value of the derivatives related to economic hedging was $181.6 million and $148.7 million, respectively.

The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates or other financial indices. The Company does not view the fair values of its derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying hedged transactions or other exposures. Virtually all of our derivatives are straightforward over-the-counter instruments with liquid markets.

Fair Value Measurements

All derivatives are carried at fair value on the Company’s Consolidated Balance Sheets. ASC 820, Fair Value Measurement, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 - Unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company determines the fair values of its derivatives based on standard valuation models or observable market inputs such as quoted market prices or foreign currency exchange rates; therefore, the Company classifies the derivatives within Level 2 of the valuation hierarchy.

The fair values of derivative instruments held by the Company are as follows (in millions):

The pre-tax amount of unrealized gain (loss) recognized in accumulated other comprehensive loss on derivatives designated as hedging instruments is as follows (in millions):

The table above excludes tax expense of $0.6 million for the year ended December 31, 2025, and a tax benefit of $0.8 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.

The pre-tax impact of derivatives on the Consolidated Statements of Earnings is as follows (in millions):

11. Borrowings

Borrowings consist of the following:

Total debt principal payments over the next five years are as follows:

Revolving Credit Facility

On February 8, 2023, the Company entered into an Amended and Restated Credit Agreement (the "A&R Credit Agreement") that amends and restates the prior Credit Agreement, dated September 4, 2020, and 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 (the "Credit Facility"). The A&R Credit Agreement, among other things, extends the maturity date of the Credit Facility from January 2, 2024 to February 8, 2028, replaces the London Inter-Bank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“Term SOFR”) as a reference rate available for borrowings, amends the minimum Interest Coverage Ratio, and amends certain other financial covenants with which the Company must comply, as described below.

On September 25, 2023, the Company amended its A&R Credit Agreement to, among other things, (a) permit the Company in connection with the acquisition of CD, to incur senior priority seller financing indebtedness (the “Seller Note”) in an aggregate principal amount of $122.9 million secured by certain assets (including equity interests) acquired in connection with such acquisition and the capital stock of Cornell Dubilier, LLC (the “Acquisition Assets”), which matured two years after the effective date of such Seller Note (the “Seller Note Maturity Date”) and (b) extend the requirement to pledge the Acquisition Assets that would otherwise constitute collateral under the Credit Agreement to the date that is 90 days after the Seller Note Maturity Date. All other terms remain the same as the A&R Credit Agreement dated February 8, 2023.

Up to $100.0 million of the Credit Facility will be available in Euro, Pounds Sterling, and other currencies requested by the Company and up to $50.0 million of the Credit Facility will be made available in the form of letters of credit. Undrawn amounts under the Credit Facility accrue a commitment fee at a per annum rate of 0.225% to 0.350%, based on a leverage ratio grid.

At any time during the term of the Credit Facility, the Company may request to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Credit Facility in an aggregate principal amount not to exceed the sum of $200.0 million, plus additional amounts, so long as the senior secured leverage ratio does not exceed 2.00 to 1.00.

The A&R Credit Agreement includes requirements, to be tested quarterly, that the Company maintains (i) a minimum ratio of Consolidated EBITDA to consolidated cash interest expense of 3.00 to 1.00, (the "Interest Coverage Ratio"), (ii) a ratio of total indebtedness, minus netted cash in an aggregate amount not to exceed $50.0 million, to Consolidated EBITDA of 3.75 to 1.00 (the "Total Net Leverage Ratio"), and (iii) a maximum ratio of senior net secured indebtedness to Consolidated EBITDA of 3.25 to 1.00 (the "Senior Secured Net Leverage Ratio"). For these ratios, Consolidated EBITDA and consolidated interest expense are calculated using the most recent four consecutive fiscal quarters in a manner defined in the A&R Credit Agreement. At December 31, 2025, the Company was in compliance with these covenants and it expects to remain in compliance with all of its debt covenants over the next twelve months.

The interest rates under the A&R Credit Facility will be, at the Borrowers' option (1) (A) in the case of borrowings denominated in U.S. dollars Term SOFR, (B) in the case of borrowings denominated in Sterling, Daily Simple Sonia, or (C) for borrowings denominated in Euro, EURIBOR, in each case, plus the rates per annum determined from time to time based on the total net leverage ratio of the Company as of the end of and for the most recent period of four fiscal quarters for which financial statements have been delivered (the "Applicable Margin"); or (2) in the case of borrowings denominated in U.S. dollars, alternate base rate ("ABR") (as defined in the A&R Credit Agreement) plus the Applicable Margin. The Applicable Margin for Term SOFR, Daily Simple Sonia, or EURIBOR could range from 1.50% to 2.50% while the Applicable Margin for ABR could range from 0.50% to 1.50%.

The weighted-average interest rate on the Company's borrowings under the Credit Facility was 6.10%,7.07%, and 6.55% for the years ended December 31, 2025, 2024, and 2023, respectively. The weighted-average commitment fee on the revolving lines of credit was 0.25%,0.26%, and 0.23% for the years ended December 31, 2025, 2024 and 2023, respectively.

Seller Note

In connection with the acquisition of Cornell Dubilier on November 1, 2023, the Company obtained an interest-free Seller Note with aggregate principal payments of $122.9 million. The Company recorded the Seller Note on the acquisition date at its present value of $109.9 million by discounting the future principal payments using an imputed rate of interest of approximately 7.1% in accordance with accounting guidance in ASC 835, Interest. The Company has made a successful indemnity claim against the Seller Note of $0.2 million. The Company repaid $50.0 million of the Seller Note on November 1, 2024 and the remaining $72.7 million on October 31, 2025. The Company recognized imputed interest expense on the Seller Note of approximately $4.2 million, $7.5 million and $1.3 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Interest expense and interest income for the years ended December 31, 2025, 2024, and 2023 were as follows:

12. Income Taxes

The components of earnings before income taxes and discontinued operations were:

Income tax expense (benefit) is comprised of the following:

The Company has adopted ASU 2023-09 prospectively as of the year ended December 31, 2025. The reconciliation of income tax expense at the U.S. Federal income tax rate to the Company’s actual income tax expense (benefit) was as follows:

As previously disclosed for the years ended December 31, 2024 and 2023, the effective income tax rate differs from the statutory federal income tax rate as follows:

The components of the Company’s deferred tax assets and liabilities included the following:

The Company recorded valuation allowances of $45.8 million and $48.7 million at December 31, 2025 and 2024, respectively, against deferred tax assets from continuing operations as the Company believes it is more likely than not that these assets will not be realized. At December 31, 2025, we recognized an income tax benefit of $2.9 million million related to the reversal of deferred tax asset valuation allowance on certain U.S. state tax attributes. The Company routinely reviews the future realization of deferred tax assets based on projected future reversal of taxable temporary differences, available tax planning strategies, and projected future taxable income. Management believes that it is more likely than not that the Company will realize the benefits of the remaining deferred tax assets.

At December 31, 2025, the Company had $2.4 million of U.S. federal net operating losses that are available, of which none will expire within the next 5 years and of which $2.4 million will expire in the next 6 to 10 years. There are $3.0 million of domestic state net operating losses that are available between 2027 and 2043. There are $311.1 million of non-U.S. net operating loss carryforwards, of which $0.1 million will expire in the next 5 years; $3.3 million will expire in the next 6 to 10 years; $307.0 million will expire in the next 11 to 20 years; $0.6 million can be carried forward indefinitely; and $0.1 million is a capital loss carried forward indefinitely.

The Company has $22.3 million of U.S. federal research and development credits that begin to expire in 2026 and $2.3 million of foreign tax credits that begin to expire in 2034. In addition, the Company has $15.2 million of state credits, of which $1.6 million will expire between 2026 and 2040 if unused, and $13.6 million can be carried forward indefinitely.

As of December 31, 2025, the Company has approximately $1.5 billion of undistributed earnings in its foreign subsidiaries. Approximately $0.3 billion of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the U.S. is immaterial. The Company has not provided for deferred taxes on approximately $1.2 billion of undistributed earnings from non-U.S. subsidiaries which are indefinitely reinvested in operations. If these earnings were distributed, they would likely not be subject to U.S. federal income tax because they were previously taxed under the Tax Reform Act. We would likely be required to accrue and pay U.S. state and local taxes and withholding taxes payable to various countries. It is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

Unrecognized Tax Benefits

The Company records interest and penalties associated with unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2025, 2024, and 2023, the Company recorded interest and penalty expense related to unrecognized tax benefits. As of of December 31, 2025 and 2024 the Company accrued interest and penalties of $0.6 million and $0.3 million, respectively, which were included in Other liabilities on the Consolidated Balance Sheets. During the year ended December 31, 2023, the Company recordedno interest or penalty expense.

The Company's tax returns are routinely audited by the tax authorities in the relevant jurisdictions. Our U.S. federal returns remain open to examination for tax years 2022 to 2024. As of December 31, 2025, we have no tax years under examination by the Internal Revenue Service (IRS). The Company conducts business in multiple foreign, non-U.S. jurisdictions including Malaysia, China, Philippines, India, and the United Kingdom; tax years are typically subject to examination for three to ten years. We are currently under audit by local tax authorities in Malaysia and India for tax years 2018-2024 and fiscal year 2023, respectively.

Included in the balance of total unrecognized tax benefits at December 31, 2025 are potential benefits of $1.5 million, which if recognized, would affect the effective rate on earnings from continuing operations. Given the Company's current valuation allowance position, no benefit is expected to result from the reversal of any uncertain tax position associated with the acquired attributes.

The following is a supplemental schedule of cash paid for income taxes for those individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for the year ended December 31, 2025:

13. Equity Incentive Program

The Company maintains equity compensation plans that provide for the issuance of Knowles stock to directors, executive officers, and other employees. The maximum number of shares available for issuance under the plans is 23.4 million, of which 11.4 million were available for future awards at December 31, 2025.

The following table summarizes the stock-based compensation expense:

(1) Stock-based compensation shown here reflects the expense included in continuing operations. Stock-based compensation expense included in discontinued operations totaled $0.6 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively. There wasno stock-based compensation expense included in discontinued operations for the year ended December 31, 2025.

Compensation expense for stock-based awards is measured based on the fair value of the awards as of the date the stock-based awards are granted. Estimated forfeitures are reflected in expense based on historical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Compensation costs for stock-based awards are amortized over their service period.

Stock Options

No stock options were granted during the years ended December 31, 2025, 2024, and 2023.

The exercise price per share for the stock options granted by the Company was equal to the closing price of Knowles' stock on the NYSE on the date of the grant. The period during which options granted by the Company were exercisable was fixed by Knowles' Compensation Committee of the Board of Directors at the time of grant. Generally, stock options vest one-third on each of the first three anniversaries of the grant date and expire seven years from the grant date.

The following table summarizes the Company's stock option activity:

There wasno unrecognized compensation expense related to stock options at December 31, 2025.

Other information regarding the exercise of stock options is listed below:

RSUs

The following table summarizes the Company's RSU activity:

(1) The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.

RSUs vest based on the passage of time. Generally, RSUs have a three year vesting schedule and vest one-third on each of the first three anniversaries of the grant date. The fair value of RSUs vested during the year ended December 31, 2025 was $15.4 million. At December 31, 2025, $16.7 million of unrecognized compensation expense related to RSUs is expected to be recognized over a weighted-average period of 1.4 years.

PSUs

Awards with market conditions

The Company grants PSUs to senior management. In each case, the awards cliff vest three years following the grant date. PSUs are settled in shares of the Company's common stock. Depending on the Company's overall performance relative to the applicable measures, the size of the PSU awards are subject to adjustment, up or down, resulting in awards at the end of the performance period that can range from 0% to 225% of target. The Company ratably recognizes the expense over the applicable service period for each grant of PSUs. The fair value of PSUs with market conditions is determined by using a Monte Carlo simulation. For the awards granted in February 2025, 2024, and 2023, the number of PSUs that may be earned and vest is based on total shareholder return (“TSR”) relative to the component companies of the Russell 2000 Index over a three-year performance period.

The COVID-19 pandemic brought on unique and unprecedented challenges to the Company, particularly in the hearing health and medtech markets. Many of the Company's executive compensation programs were affected, including outstanding PSU awards. Due to the impact of the COVID-19 pandemic on the Company’s overall business performance, effective February 8, 2021, the Company’s Compensation Committee approved certain modifications to PSUs granted in February 2020. For the awards granted in February 2020 (the “2020 PSUs”), the number of PSUs that may be earned and vest was originally based on TSR relative to the component companies of the S&P Semiconductor Select Industry Index over a three-year performance period. The modified award replaces the S&P Semiconductor Select Industry Index with the Russell 2000 Index. The Company is a member of the Russell 2000 Index, which represents a broader, more diversified index that better aligns with the Company's strategy. Service conditions were not modified. The modification of the 2020 PSUs affected eight employees and resulted in total incremental compensation expense of $4.7 million, which was recognized over the remaining service period. In February 2023, the 2020 PSUs were converted from 261,770 PSUs to 120,677 shares of common stock based on achievement of the modification conditions.

Awards with performance conditions

On February 18, 2025 the Company granted a special PSU award to its Chief Executive Officer of 81,788 target PSUs with a grant date fair value of $1.5 million. This award is eligible to vest based on the achievement of a minimum non-GAAP diluted earnings per share amount and specified revenue goals over a potential five-year performance period. If the goals are not met during the initial three-year performance period, it may be extended an additional two years at a reduced payout level. Achievement could range from 0% to 400% of the target number of PSUs. The Company will recognize the expense for this award over the applicable service period and adjust the expense for the expected achievement of performance conditions as necessary.

The following table summarizes the Company's PSU activity:

(1) The number of PSUs shown reflects 100% of the target award; actual payouts may differ based on performance.

(2) The number of PSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.

The fair value of PSUs vested during the year ended December 31, 2025 was $4.1 million. At December 31, 2025, $8.5 million of unrecognized compensation expense related to PSUs is expected to be recognized over a weighted-average period of 1.2 years.

14. Commitments and Contingent Liabilities

From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of its business. The majority of these claims and proceedings relate to commercial, warranty, employment, and intellectual property matters. Although the ultimate outcome of any legal proceeding or claim cannot be predicted with certainty, based on present information, including management’s assessment of the merits of the particular claim, the Company believes that the disposition of these legal proceedings or claims, individually or in the aggregate, after taking into account recorded accruals and the availability and limits of insurance coverage, will not have a material adverse effect on its cash flow, results of operations, or financial condition.

The Company owns many patents and other intellectual property pertaining to its products, technology, and manufacturing processes. Some of the Company's patents have been and may continue to be infringed upon or challenged by others. In appropriate cases, the Company has taken and will take steps to protect and defend its patents and other intellectual property, including through the use of legal proceedings in various jurisdictions around the world. Such steps have resulted in and may continue to result in retaliatory legal proceedings, including litigation or other legal proceedings in various jurisdictions and forums around the world alleging infringement by the Company of patents owned by others. The costs of investigations and legal proceedings relating to the enforcement and defense of the Company’s intellectual property may be substantial. Additionally, in multi-forum disputes, the Company may incur adverse judgments with regard to certain claims in certain jurisdictions and forums while still contesting other related claims against the same opposing party in other jurisdictions and forums.

Intellectual Property Infringement Claims

The Company may, on a limited customer specific basis, provide contractual indemnities for certain losses that arise out of claims that its products infringe on the intellectual property of others. It is not possible to determine the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Historically, the Company has not made significant payments under such indemnity arrangements. The Company’s legal accruals associated with these indemnity arrangements were not significant at December 31, 2025 and 2024.

15. Employee Benefit Plans

Knowles sponsors its own defined contribution plans. The Company's expense relating to defined contribution plans was $6.5 million, $5.5 million, and $5.2 million on a continuing operations basis for the years ended December 31, 2025, 2024, and 2023, respectively.

As of December 31, 2025, Knowles sponsors three defined benefit pension plans to certain non-U.S. employees. The two plans in the U.K. are closed to new participants and substantially all participants in these plans are retirees. The plan in the Philippines is open to new participants. These plans are considered direct obligations of the Company and have been recorded within the accompanying Consolidated Financial Statements. The Company divested its plan in Taiwan with the sale of CMM on December 27, 2024. See Note 2. Discontinued Operations.

Non-U.S. Defined Benefit Pension Plans

Obligations and Funded Status

The following tables summarize the balance sheet impact, including the benefit obligations, assets, and funded status associated with the Company's defined benefit plans for non-U.S. participants:

(1)Reflects the divestiture of the Company's defined benefit plan in Taiwan in connection with the sale of CMM on December 27, 2024 .

Pension plans with projected benefit obligations in excess of plan assets consisted of the following:

Pension plans with accumulated benefit obligations in excess of plan assets consisted of the following:

Net Periodic Benefit Cost

Components of the net periodic benefit cost were as follows:

The components of net periodic benefit cost other than service cost are presented in "Other (income) expense, net" on the Consolidated Statements of Earnings. The service cost component is presented within "Cost of goods sold," "Research and development expenses," and "Selling and administrative expenses" on the Consolidated Statements of Earnings based on the nature of services performed by the related employees.

Assumptions

The Company determines actuarial assumptions on an annual basis. The actuarial assumptions used for the Company’s defined benefit plans for non-U.S. participants will vary depending on the applicable country and as such, the tables below include these assumptions by country, as well as in total.

The assumptions used in determining the benefit obligations were as follows:

(2) The Company's defined benefit plan in Taiwan was divested with the sale of CMM on December 27, 2024. Prior to the sale, the Taiwan benefit obligation was remeasured using the above discount rate and the plan assets were remeasured to fair value.

The assumptions used in determining the net periodic benefit cost were as follows:

The Company’s discount rate assumptions are determined by developing yield curves based on high quality corporate bonds with maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates.

Plan Assets

The primary financial objective of the plans is to secure participant retirement benefits. Accordingly, the key objective in the plans’ financial management is to promote stability and, to the extent appropriate, growth in the funded status. Related and supporting financial objectives are established in conjunction with a review of current and projected plan financial requirements.

As it relates to the funded defined benefit pension plans, the Company’s funding policy is consistent with the funding requirements of applicable local non-U.S. laws. The Company is responsible for overseeing the management of the investments of the plans’ assets and otherwise ensuring that the plans’ investment programs are in compliance with applicable local law, other relevant legislation, and related plan documents. Where relevant, the Company has retained professional investment managers to manage the plans’ assets and investment process. The investment managers, in executing their investment processes, have the authority and responsibility to select appropriate investments in the asset classes specified by the terms of their applicable prospectus or investment manager agreements with the plans.

The assets of the plans are invested to achieve an appropriate return for the plans consistent with a prudent level of risk. The asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds, weighted in the proportions outlined by the asset class exposures identified in the plans’ strategic allocation. The expected return on plan assets assumptions are developed through analysis of historical market returns, statistical analysis, current market conditions, and the past experience of plan asset investments.

Fair Value Measurements

The fair values of plan assets by asset category within the ASC 820 hierarchy were as follows:

See Note 10. Hedging Transactions and Derivative Instruments for additional information on the fair value hierarchy. There were no significant transfers between Level 1 and Level 2 assets during the years ended December 31, 2025 and 2024.

Fixed income investments include government and municipal securities and corporate bonds, which are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Common stock funds consist of mutual funds and collective trusts. Mutual funds are valued by obtaining quoted prices from nationally recognized securities exchanges. Collective trusts are valued using net asset value (the "NAV") as of the last business day of the year. The NAV is based on the underlying value of the assets owned by the fund minus its liabilities and then divided by the number of shares outstanding. The value of the underlying assets is based on quoted prices in active markets.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Future Estimates

Benefit Payments

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:

Contributions

Generally, annual contributions are made at such times and in such amounts as required by law and agreed with the trustees of the non-U.S. defined benefit plans. The Company estimates it will pay $0.9 million during the year ended December 31, 2026 related to contributions to these plans. This amount may vary based on updated funding agreements with the trustees of these plans.

16. Other Comprehensive Earnings

The amounts recognized in other comprehensive earnings (loss) were as follows:

The following table summarizes the changes in balances of each component of accumulated other comprehensive loss, net of tax:

(1)For the year ended December 31, 2024, the cumulative foreign currency translation loss in other comprehensive loss includes a $3.4 million foreign currency translation gain reclassified to earnings upon the sale of CMM. See Note 2. Discontinued Operations for more information.

The following table summarizes the amounts reclassified from accumulated other comprehensive loss to earnings:

17. Segment Information

The Company determines its operating segments consistent with the manner in which it manages its operations and evaluates performance for internal review and decision making. These segments were determined in accordance with ASC 280, Segment Reporting. The Company’s segments engage in business activities from which they earn revenues and incur expenses, have discrete financial information available, and whose financial results are regularly reviewed and used by the chief operating decision maker ("CODM") to evaluate segment performance, allocate resources, and determine management incentive compensation.

The Company's CODM is the President and Chief Executive Officer, who reviews the results and performance for each operating segment to manage operations and make decisions regarding resource allocations. The financial measures used by the CODM to assess segment performance include Revenues, Adjusted cost of goods sold, Adjusted research and development expenses, Adjusted selling and administrative expenses, and Segment adjusted earnings before interest and income taxes. The CODM uses these financial metrics to view operating trends, benchmark performance between periods, and to monitor budget-to-actual variances.

The Precision Devices segment aggregates three operating segments into one reportable segment based on similar economic characteristics stemming from similar products, production processes, type or class of customers, and distribution methods. The MedTech & Specialty Audio reportable segment has one operating segment. The Company'stwo reportable segments are as follows:

•Precision Devices ("PD")

Our PD segment specializes in the custom design and delivery of high performance capacitor products and RF solutions primarily serving the defense, industrial, medtech, and electrification/energy markets. PD has sales, support, and engineering facilities in North America, Europe, and Asia as well as manufacturing facilities in North America and Asia.

•MedTech & Specialty Audio ("MSA")

Our MSA segment designs and manufactures balanced armature speakers and microphones used in hearing health and specialty audio applications that serve the medtech and industrial markets. MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia.

Information regarding the results of the Company's reportable segments is as follows:

(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(1)Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(1)Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

Other information regarding the Company's reportable segments is as follows:

Information regarding assets of the Company's reportable segments is as follows:

(1)Corporate assets include Syntiant Corp. preferred stock of $83.4 million and $77.2 million at December 31, 2025 and 2024, respectively, and a note receivable from Syntiant totaling $5.9 million and $6.4 million at December 31, 2025 and 2024, respectively. Corporate assets also include the portion of right-of-use operating lease assets subleased by Syntiant, which totaled $5.2 million and $0.3 million at December 31, 2025 and 2024, respectively.

The following table details revenues by geographic location. Revenues are attributed to regions based on the location of the Company's direct customer, which in some instances is an intermediary and not necessarily the end user. Long-lived assets are comprised of net property, plant, and equipment and operating lease right-of-use assets. These assets have been classified based on the geographic location of where they reside. The Company's businesses are based primarily in North America, Asia, and Europe.

The Company's customers that accounted for 10% or more of total revenues in 2025 were WS Audiology A/S and TTI, Inc. WS Audiology is a hearing aid manufacturer and TTI is a distributor of electromechanical components. They each represented the following percentages of total Company revenues:

• Less than 10% of total revenues.

18. Earnings per Share

Basic and diluted earnings per share were computed as follows:

For the years ended December 31, 2025, 2024, and 2023, the weighted-average number of anti-dilutive potential common shares for stock-based awards excluded from the calculation of diluted earnings per share above was 0.8 million,0.7 million, and 1.9 million, respectively.