Form 8-K AUDIENCE INC For: Apr 29

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 29, 2015

 

 

AUDIENCE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-35528		91-2061537
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

331 Fairchild Drive Mountain View, CA		94043
(Address of principal executive offices)		(Zip code)

(650) 254-2800

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

x	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

---

Item 1.01 Entry into a Material Definitive Agreement.

Merger Agreement

On April 29, 2015, Audience, Inc., a Delaware corporation (“Audience”), Knowles Corporation, a Delaware corporation (“Knowles”), and Orange Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Knowles (“Merger Sub”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) which contemplates the acquisition by Knowles, through Merger Sub, of Audience in a two-step transaction comprised of a combination cash and stock exchange offer for all of the issued and outstanding shares of Audience common stock (the “Offer”), followed by a merger of Merger Sub with and into Audience (the “Merger”).

In the Offer, each Audience stockholder who participates in the Offer will receive consideration in the form of $2.50 per share in cash (the “Cash Consideration”) and validly issued, fully paid and nonassessable shares of common stock of Knowles (the “Stock Consideration”, and together with the Cash Consideration, the “Offer Consideration”) equal to the quotient, subject to adjustment for stock splits, stock dividends and similar events, obtained by dividing $2.50 by an amount equal to the volume weighted average of the sale prices for the common stock of Knowles (the “Closing Date Average Price”) on each of the 10 consecutive trading days ending on and including the second trading day prior to the expiration of the Offer; provided that the value of the Closing Date Average Price may not exceed $23.35 nor be less than $18.16 (the adjustments to the Closing Date Average Price referred to herein as the “Collar”).

The Merger Agreement provides that Merger Sub will commence the Offer as soon as reasonably practicable after the date of the Merger Agreement and in any event within fifteen business days after the date of the Merger Agreement. The obligation of Merger Sub to accept for exchange and deliver consideration for shares of Audience common stock validly tendered in the Offer (and not validly withdrawn) is subject to a number of conditions set forth in the Merger Agreement, including (i) the condition that there shall have been validly tendered and not validly withdrawn prior to the expiration of the Offer shares of common stock of Audience which, when added to such shares owned by Knowles and its subsidiaries, represent at least a majority of (x) the total number of shares of Audience common stock outstanding as of the expiration of the Offer, including such shares subject to restricted stock units of Audience and such shares deemed issued pursuant to Audience’s employee stock purchase plan, plus (y) the aggregate number of shares of Audience common stock issuable to holders of options to purchase shares of common stock of Audience from which Knowles has received notices of exercise prior to the expiration of the Offer (and as to which such shares have not yet been issued to such exercising holders of options to purchase shares of common stock of Audience); provided that for purposes of determining whether such condition has been satisfied, shares of Audience common stock tendered in the Offer pursuant to guaranteed delivery procedures shall be excluded (the “Minimum Tender Condition”); and (ii) other conditions set forth in Annex II to the Merger Agreement, including that five of six specified key employees have employment arrangements with Knowles, Audience or an Affiliate in full force and effect as of the closing of the Merger.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), by virtue of the Merger, each share of Audience common stock (other than Dissenting Shares) will be converted into the right to receive the Offer Consideration.

Shares of Knowles common stock issuable pursuant to the Offer and the Merger will be registered pursuant to a registration statement to be filed by Knowles with the Securities and Exchange Commission (the “SEC”) and will be publicly traded on the New York Stock Exchange (the “NYSE”). No fractional shares of Knowles common stock will be issuable in the Offer or the Merger and each Audience stockholder who otherwise would be entitled to receive a fraction of a share of Knowles common stock pursuant to the Offer or the Merger will be paid an amount in cash (without interest) equal to such fractional part of a share of Knowles common stock multiplied by the Closing Date Average Price.

---

At the Effective Time, each outstanding option to purchase Audience common stock that is outstanding immediately prior to the Effective Time but has an exercise price per share that exceeds the Per Share Value shall be cancelled for no consideration or payment (each, an “Underwater Option”). The term “Per Share Value” means (x) the Cash Consideration plus (y) the product of (1) the Closing Date Average Price (without any adjustment thereto pursuant to the application of the Collar) multiplied by (2) the number of shares of Knowles common stock issued per share as Stock Consideration.

Audience will cause, immediately prior to the Effective Time, each option to purchase Audience common stock that is not an Underwater Option or listed on a schedule to the Merger Agreement to vest in full (each, a “Vested Option”). At the Effective Time, each outstanding Vested Option shall be cancelled and shall only entitle the holder of such Vested Option to receive (without interest), as soon as reasonably practicable after the Effective Time, (A) the Offer Consideration payable with respect to each share subject to such Vested Option reduced by (B) the sum of the exercise price per share subject to such Vested Option and all applicable taxes required to be withheld with respect to such payment (such amounts payable hereunder, the “Option Payments”). Fifty percent (50%) of the exercise price per share subject to such Vested Option shall be deducted from each of the cash portion and the stock portion of the Offer Consideration, with the value of the stock portion for purposes of such deduction being equal to the Closing Date Average Price (without any adjustment thereto pursuant to the application of the Collar), and fifty percent (50%) of all applicable taxes shall be deducted from each of the cash portion and the stock portion of the Offer Consideration, with the value of the stock portion for purposes of such deduction being equal to an amount equal to the closing sale price for the Knowles common stock on the trading date prior to the first date when the Purchase accepts any Audience common stock for the Offer (the “Acceptance Time”) (without any adjustment thereto pursuant to the applications of the Collar).

At the Effective Time, each option to acquire Audience common stock that is outstanding and unvested immediately prior to the Effective Time, other than an Underwater Option (each, an “Unvested in-the-Money Option”), shall be converted into and become an option to purchase Knowles common stock, and Knowles will assume such Unvested in-the-Money Option converted as provided in the Merger Agreement and the Audience option plan and option agreements underlying such Unvested-in-the Money Options (each, an “Assumed Option”). From and after the Effective Time: (A) each Assumed Option may be exercised solely for shares of Knowles common stock; (B) the number of shares of Knowles common stock subject to each Assumed Option shall be determined by multiplying the number of shares of Audience common stock that were subject to such Assumed Option immediately prior to the Effective Time by the Conversion Ratio (as defined below), and rounding the resulting number down to the nearest whole number of shares of Knowles common stock; (C) the per share exercise price for the shares of Knowles common stock issuable upon exercise of each Assumed Option shall be determined by dividing the per share exercise price of the Audience common stock subject to such Assumed Option, as in effect immediately prior to the Effective Time, by the Conversion Ratio, and rounding the resulting exercise price up to the nearest whole cent; and (D) any restrictions on the exercise of any Assumed Option shall continue in full force and effect and the term, exercisability, vesting schedule and other provisions of such Assumed Option shall otherwise remain unchanged as a result of the assumption of such Assumed Option. The “Conversion Ratio” means the fraction (rounded to the nearest 1/10,000) having a numerator equal to the Per Share Value, and having a denominator equal to the Closing Date Average Price (without any adjustment thereto pursuant to application of the Collar).

At the Effective Time, each Audience restricted stock unit (“RSU”) that is outstanding and unvested immediately prior to the Effective Time (after giving effect to any vesting that is contingent upon the completion of the Merger) shall be converted into and become a right to receive a restricted

---

stock unit with respect to Knowles common stock, and Knowles shall assume such RSU award converted as provided below in accordance with substantially the same terms as those of the applicable RSU award and the agreement by which such RSU award is evidenced. All rights to receive shares of Audience common stock under assumed RSUs shall thereupon be converted into rights to receive restricted stock units with respect to Knowles common stock. Accordingly, from and after the Effective Time: (A) each assumed RSU award may be settled solely in shares of Knowles common stock; (B) the number of shares of Knowles common stock subject to each assumed RSU award shall be determined by multiplying the number of shares of Audience common stock that were subject to such assumed RSU award immediately prior to the Effective Time by the Conversion Ratio, and rounding the resulting number down to the nearest whole number of shares of Knowles common stock; and (C) any performance and employment conditions and restrictions on the receipt of any assumed RSUs shall continue in full force and effect and the term, vesting schedule and other provisions of such assumed RSUs shall otherwise remain unchanged as a result of the assumption of such assumed RSUs.

Prior to the termination of the Effective Time, Audience’s 2011 Employee Stock Purchase Plan (the “ESPP”), and each outstanding offering period then in progress, will terminate and each participant’s accumulated contributions to the ESPP will be used to purchase shares of Audience’s common stock as of such time in accordance with the terms of the ESPP (and any funds that remain in participants’ account after such purchase shall be returned to the applicable participants).

The Merger Agreement further provides that, following the consummation of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will be merged with and into Audience, and Audience will become a wholly-owned subsidiary of Knowles.

The Merger Agreement contains representations, warranties and covenants of Knowles, Merger Sub and Audience. These covenants include an obligation of Audience to, subject to certain exceptions, conduct its operations in the ordinary course of business from the date of the Merger Agreement through the Effective Time, and for each of the parties to, subject to certain exceptions, use reasonable best efforts to cause the Merger to be consummated.

The Merger Agreement generally prohibits Audience’s solicitation of third-party proposals relating to the acquisition of 15% or more of the total consolidated revenues, net income or assets of Audience and its subsidiaries or 15% of the voting power of Audience (an “Acquisition Proposal”) and restricts Audience’s ability to furnish non-public information to, or participate in any discussions or negotiations with, any third party with respect to an Acquisition Proposal, subject to certain limited exceptions.

The Audience board of directors has agreed to recommend that Audience’s stockholders tender all of their outstanding shares of Audience common stock into the Offer and, if necessary, vote in favor of the adoption of the Merger Agreement.

The Merger Agreement may be terminated by either Knowles and Audience under certain circumstances set forth in the Merger Agreement, including the failure of the Offer to be consummated on or before July 31, 2015 (subject to an extension until September 1, 2015 in order to obtain regulatory approvals) and the failure of the Minimum Tender Condition. If the Merger Agreement is terminated (a) in certain circumstances following the receipt by Audience of an Acquisition Proposal, or (b) as a result of the Audience board of directors changing its recommendation in favor of the Offer and the Merger and certain other circumstances, Audience will be obligated to pay a termination fee of $5,000,000 to Knowles, and under certain circumstances following the receipt by Audience of an Acquisition Proposal, Audience will be obligated to provide expense reimbursement to Knowles up to $3,000,000.

---

The description of the Merger Agreement in this Current Report on Form 8-K is qualified in its entirety by reference to the full text of the Merger Agreement filed as Exhibit 2.1 hereto, which is incorporated by reference herein. The Merger Agreement contains representations and warranties of Audience, Knowles and Merger Sub made solely to each other as of specific dates. Those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed to by Audience, Knowles and Merger Sub. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a standard of materiality provided for in the Merger Agreement and have been used for the purpose of allocating risk among Audience, Knowles and Merger Sub rather than establishing matters as facts.

Tender and Support Agreements

As inducement to Knowles to enter into the Merger Agreement, on April 29, 2015, Audience directors and certain members of Audience’s senior management and certain affiliates of Tallwood Venture Capital (each, a “Stockholder”), have signed a form of Tender and Support Agreement, covering all of the shares of Audience common stock beneficially owned by such individuals, as well as any additional shares of which they may become the beneficial owner. These Tender and Support Agreements provide that the signatories thereof will tender their Audience common stock in the Offer and, if necessary, will vote any remaining shares that they own for the Merger. The Tender and Support Agreements terminate upon certain events, including any termination of the Merger Agreement in accordance with its terms and to the extent any amendment or change to the Merger Agreement or the Offer is effected without the Stockholder’s consent that decreases the amount, or changes the form or (except with respect to extensions of the Offer in accordance with the terms of the Merger Agreement) timing, of consideration payable to all of the stockholders of Audience pursuant to the terms of the Merger Agreement, or that imposes conditions to the Offer in addition to those conditions to the Offer set forth in the Merger Agreement or modifies such conditions in a manner adverse to the stockholders of Audience.

The description of the Tender and Support Agreement in this Current Report on Form 8-K is qualified in its entirety by reference to the full text of the form of Tender and Support Agreement filed as Exhibit 10.1 hereto, which is incorporated by reference herein.

On April 30, 2015, Audience and Knowles issued a joint press release announcing the execution of the Merger Agreement. A copy of the press release is attached as Exhibit 99.1 hereto, which is incorporated by reference herein.

Item 2.01 Results of Operations and Financial Conditions.

On April 30, 2015, Audience issued a press release regarding its financial results for the quarter ended March 31, 2015. A copy of the press release is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Audience is making reference to non-GAAP financial information in the press release. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release and financial tables.

---

Item 8.01 Other Events.

The information set forth in Item 1.01 of this Form 8-K is incorporated by reference into this Item 8.01.

Important Additional Information

The tender offer for Audience’s outstanding common stock has not yet commenced. This Current Report is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Audience securities.

The solicitation and the offer to buy common stock of Audience will be made only pursuant to an offer to purchase and related materials that Knowles and Merger Sub intend to file with the SEC on Form S-4 and Schedule TO, respectively, which will include an Offer to Exchange, a letter of transmittal and related documents (the “Tender Materials”). Audience also intends to file a solicitation/recommendation statement on Schedule 14D-9 with respect to the tender offer. Audience stockholders and other investors should read the Tender Materials contained in the Form S-4, Schedule TO and the Schedule 14D-9 to be filed by Knowles, Merger Sub and Audience, respectively, carefully because these documents will contain important information, including the terms and conditions of the tender offer. Audience stockholders may obtain any other Tender Materials subsequently filed with the SEC from its website (at www.sec.gov), without charge.

Materials filed by Knowles and Merger Sub may be obtained for free at Knowles’s web site, www Knowles com. Materials filed by Audience may be obtained for free at Audience’s web site, www.audience.com. Stockholders and other investors are urged to read carefully all tender offer materials prior to making any decisions with respect to the tender offer.

Item 9.01 Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit Number		Description
2.1*		Agreement and Plan of Merger, dated as of April 29, 2015, by and among Knowles Corporation, Orange Subsidiary, Inc. and Audience, Inc.
10.1*		Form of Tender and Support Agreement, dated as of April 29, 2015, between Knowles Corporation and Audience directors and certain members of Audience’s senior management and certain affiliates of Tallwood Venture Capital.
99.1		Joint Press Release of Knowles Corporation and Audience, Inc. dated April 30, 2015.
99.2		Press Release of Audience, Inc., dated April 30, 2015

 

*	To be filed by amendment.

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		AUDIENCE, INC.
Date: April 30, 2015		By:		/s/ Craig Factor
		Name:		Craig Factor
		Title:		Vice President, General Counsel and Secretary

---

EXHIBIT INDEX

 

Exhibit Number		Description
2.1*		Agreement and Plan of Merger, dated as of April 29, 2015, by and among Knowles Corporation, Orange Subsidiary, Inc. and Audience, Inc.
10.1*		Form of Tender and Support Agreement, dated as of April 29, 2015, between Knowles Corporation and Audience directors and certain members of Audience’s senior management and certain affiliates of Tallwood Venture Capital.
99.1		Joint Press Release of Knowles Corporation and Audience, Inc. dated April 30, 2015.
99.2		Press Release of Audience, Inc., dated April 30, 2015

 

*	To be filed by amendment.

Exhibit 99.1

 

		1151 Maplewood Drive, Itasca, IL, 60143 T+1 630 250 5100

Knowles Contacts:

 

Investors		Media
Mike Knapp		Melissa York
Knowles Investor Relations		Knowles Communications
630-238-5236		630-238-5242
[email protected]		[email protected]
Audience Contacts:
Investors		Media and Industry Analysts
The Blueshirt Group
Suzanne Schmidt		Diane Vanasse
415-217-4962		408-242-0027
[email protected]		[email protected]

OR

Melanie Solomon

415-217-4964

[email protected]

Knowles to Acquire Audience

Acquisition accelerates market penetration and expands available market for intelligent audio solutions

 

 

ITASCA, III. – Apr. 30, 2015 –Knowles Corporation (NYSE: KN), a market leader and global supplier of advanced micro-acoustic solutions and specialty components, today announced it has entered into a definitive agreement to acquire Audience, Inc. (NASDAQ: ADNC). The transaction will expand Knowles’ existing expertise in intelligent audio and signal processing solutions through Audience’s strong engineering team and robust patent portfolio. The highly complementary product and technology portfolios will enable Knowles to deliver comprehensive audio solutions to its existing customers.

Under the terms of the transaction, Knowles will pay approximately $5.00 per share, comprised of $2.50 in cash and $2.50 in Knowles common stock, subject to the collar described below. The transaction values Audience at an enterprise value of approximately $85 million, net of Audience’s cash balance of $44 million as of March 31, 2015.

“We are excited to acquire Audience’s world-leading engineering talent focused on audio processing solutions for mobile devices,” said Jeffrey Niew, President and CEO of Knowles. “This acquisition will benefit our customers and shareholders by broadening our intelligent audio offerings, and will uniquely position us to deliver end-to-end solutions for acoustics – from microphones to signal processing to speakers. These solutions will deliver better performance for our customers and drive higher dollar content as we create new applications for the mobile consumer market. In addition, we expect to realize annualized cost synergies of approximately $25 million and expect the transaction to be accretive by Q4 of 2016.”

“Audience and Knowles have pioneered the revolution in connected device audio capabilities,” said Peter Santos, President and CEO of Audience. “The combination of the audio and sensory intelligence of Audience and the acoustic expertise and scale of Knowles creates a truly unique audio and sensory systems company. We are delighted to see our teams come together, in a way that maximizes shareholder value, stimulates innovation by our employees and delivers a new class of compelling solutions to our customers.”

---

Transaction Terms

Knowles will acquire all of the outstanding shares of common stock of Audience through a tender offer, followed by a second-step merger. Knowles will offer to acquire Audience’s common stock for $5.00 per share, consisting of $2.50 in cash and $2.50 in Knowles common stock. The stock portion will be subject to a collar such that Audience stockholders will receive 0.107 of a share of Knowles common stock for each share of Audience common stock if the average Knowles trading price during a specified period preceding closing is equal to or greater than $23.35 or 0.138 of a share of Knowles common stock for each share of Audience common stock if the average Knowles share trading price is less than or equal to $18.16. If the average trading price of Knowles stock during this period is between $18.16 and $23.35, Audience stockholders will receive between 0.107 and 0.138 of a share of Knowles common stock for each share of Audience common stock. The closing of the tender offer is subject to customary closing conditions, including regulatory approvals, and the tender of a majority of outstanding shares of Audience’s common stock, and is expected to close in the third quarter of 2015. Knowles will acquire all remaining shares of Audience’s common stock that are not tendered in the tender offer through a second-step merger which will be completed immediately following the tender and without a vote of Audience’s stockholders.

Knowles expects to fund the cash portion of the transaction through existing cash and a draw down from existing credit lines.

Conference Call Details

Additional information on this transaction will be discussed during a Knowles conference call scheduled for 9:30a.m. CT April 30, 2015.

Conference Call and Webcast Information:

Date: Thursday, April 30, 2015

Time: 9:30 a.m. Central time

U.S. Conference Call Number: (877) 359-9508

International Conference Call Number: (224) 357-2393

Pass Code: 37813497

Webcast: http://investor.knowles.com

Advisors

J.P. Morgan Securities LLC acted as financial advisor, and Sidley Austin LLP acted as legal counsel, to Knowles, and Deutsche Bank Securities, Inc. acted as financial advisor, and Wilson Sonsini Goodrich & Rosati, P.C. acted as legal counsel, to Audience.

About Knowles

Knowles Corporation (NYSE: KN) is a market leader and global supplier of advanced micro-acoustic solutions and specialty components serving the mobile communications, consumer electronics, medical technology, military, aerospace and industrial markets. Knowles has a leading position in micro-electro-mechanical systems microphones, speakers and receivers which are used in smartphones, tablets and mobile handsets. Knowles is also a leading manufacturer of transducers used in hearing aids and other medical devices and has a strong position in oscillators (timing devices) and capacitor components which enable various types of communication. Knowles’ focus on the customer, combined with unique technology, rigorous testing and global scale, helps to deliver innovative solutions and consistently dependable and precise products. Founded in 1946 and headquartered in Itasca, Illinois, Knowles has more than 13,000 employees in 15 countries around the world. For more information, visit www.knowles.com.

---

About Audience

Audience (NASDAQ: ADNC) is the leader in Advanced Voice, and a pioneer in Multisensory processing and natural user experience technology for consumer devices. Its technologies, based in auditory neuroscience, improve the mobile voice experience, as well as enhance speech-based services and audio quality for multimedia. In early 2014, Audience announced its expansion into Multisensory and motion processing. Through the combination of Advanced Voice and Multisensory processing, Audience aims to transform the way consumers engage with devices by enabling seamless natural user experiences and context-aware services. Audience’s products have been shipped in more than 500 million devices worldwide. For more information, see www.audience.com.

Forward Looking Statements

This communication contains certain statements regarding business strategies, market potential, future financial performance, future action, results and other statements that do not directly relate to any historical or current fact which are “forward-looking” statements within the meaning of the safe harbor provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are based on current plans, expectations, forecasts and assumptions and are subject to risks, uncertainties and other factors that could cause actual outcomes or results to differ materially from those projected, anticipated or implied in these forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will be achieved or accomplished. Many factors that could cause actual results or events to differ materially from those anticipated include those matters described under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Knowles’ and Audience’s Annual Reports on Form 10-K for the year ended December 31, 2014, subsequent Reports on Forms 10-Q and 8-K and other filings Knowles and Audience make with the SEC. Any forward-looking statement speaks of as of the date on which it is made and neither Knowles nor Audience assume any obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by applicable law. Risks and uncertainties that could cause results to differ from expectations include: uncertainties as to the timing of the tender offer and the proposed merger; uncertainties as to how many of the holders of shares of common stock of Audience will tender their shares into the tender offer; the possibility that various closing conditions for the tender offer or the proposed merger may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the tender offer or the proposed merger; the effects of disruption from the tender offer or the proposed merger making it more difficult for Knowles or Audience to maintain relationships with employees (including potential difficulties in employee retention), collaboration parties, other business partners or governmental entities; legal proceedings that may be instituted against Knowles, Audience and others following announcement of the business combination; other business effects, including the effects of industrial, economic or political conditions outside of Knowles’ or Audience’s control; transaction costs; actual or contingent liabilities; and other risks and uncertainties discussed in this communication and other documents filed with the SEC by Knowles or Audience, as well as the Schedule TO to be filed with the SEC by Orange Subsidiary, Inc. Neither Knowles nor Audience undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law.

---

Additional Information and Where to Find It

The exchange offer for the outstanding common stock of Audience has not yet commenced. This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares of Audience. Audience’s stockholders are urged to read the relevant exchange offer documents when they become available because they will contain important information that stockholders should consider before making any decision regarding tendering their shares. At the time the offer is commenced, Knowles will file exchange offer materials with the U.S. Securities and Exchange Commission and Audience will file a Solicitation/Recommendation Statement with respect to the offer. The exchange offer materials (including a Prospectus and certain other offer documents) and the Solicitation/Recommendation Statement will contain important information, which should be read carefully before any decision is made with respect to the exchange offer. The Prospectus and certain other offer documents, as well as the Solicitation/Recommendation Statement, will be made available to all stockholders of Audience at no expense to them. The exchange offer materials and the Solicitation/Recommendation Statement will be made available for free at the SEC’s web site at www.sec.gov. Free copies of the Offer to Purchase, the related Letter of Transmittal and certain other offering documents will be made available by Audience free of charge on Audience’s website at audience.com under the heading “Investors” of Audience’s website.

Interests of Certain Persons in the Offer and the Merger

Knowles will be, and certain other persons may be, soliciting Audience stockholders to tender their shares into the exchange offer. The directors and executive officers of Knowles and the directors and executive officers of Audience may be deemed to be participants in Knowles’ solicitation of Audience’s stockholders to tender their shares into the exchange offer. Investors and stockholders may obtain more detailed information regarding the names, affiliations and interests of the directors and officers of Knowles and Audience in the exchange offer by reading the Prospectus and certain other offer documents, as well as the Solicitation/Recommendation Statement, when they become available.

###

Exhibit 99.2

Audience Announces First Quarter 2015 Financial Results

MOUNTAIN VIEW, Calif. – April 30, 2015 – Audience, Inc. (NASDAQ: ADNC), the leader in advanced voice and audio processing for mobile devices, today announced its first quarter 2015 financial results.

Revenue for the first quarter of 2015 was $18.4 million, compared with $36.0 million for the same period in 2014. As reported under U.S. generally accepted accounting principles (GAAP), first quarter 2015 net loss was ($17.6) million, or ($0.75) per diluted share based on weighted average shares outstanding of 23.4 million. This compares with GAAP net loss of ($7.3) million, or ($0.33) per diluted share based on weighted average shares outstanding of 22.2 million, for the same period in 2014. Gross margin on a GAAP basis for the first quarter of 2015 was 42.6% of revenue, compared to 51.7% of revenue for the same period in 2014.

Non-GAAP net loss, as defined below, for the first quarter of 2015 was ($10.8) million, or ($0.46) per diluted share based on weighted average shares outstanding of 23.4 million. This compares with non-GAAP net loss of ($3.4) million, or ($0.15) per diluted share based on weighted average shares outstanding of 22.2 million, for the same period in 2014. Gross margin on a non-GAAP basis for the first quarter of 2015 was 47.0% of revenue, compared to 51.9% of revenue for the same period in 2014.

Agreement and Plan of Merger Signed with Knowles Corporation

On April 30, 2015, Knowles Corporation (NYSE: KN), and Audience issued a release announcing that Knowles, Orange Subsidiary, Inc. and Audience entered into an agreement and plan of merger today, pursuant to which each outstanding share of Audience will receive $5.00 in total consideration, consisting of $2.50 in cash and $2.50 in Knowles stock, subject to a collar as described more completely in the announcement press release, which is available on Audience’s web site (www.audience.com).

“This transaction offers the potential to transform the mobile audio chain and deliver substantial feature, integration and performance benefits to our customers. We believe that it possesses significant strategic synergies and maximizes value for Audience shareholders” said Peter Santos, president and CEO, Audience. “After careful consideration, our board of directors concluded that the opportunity to combine with Knowles represents the best possible outcome for shareholder value. Our board of directors believes that a larger platform will enable the combined company to pursue Audience’s business more effectively. This conclusion was reached in light of material declines in forecast demand over the last thirty days from our largest customer relative to management expectations for 2Q15, combined with the concentration of Audience’s business at that customer. The impact of this forecast change is to dramatically erode projected operating results for 2015 as well as our projected cash balances, and to introduce concerns about our ability to continue as a standalone entity without additional capital.”

Quarterly Conference Call

Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will not be hosting the scheduled conference call today at 2:00 pm (Pacific) / 5:00 pm (Eastern).

Use of Non-GAAP Financial Measures

Audience prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as gross margin, net loss and loss per share information for the three month period ended March 31, 2015 and the similar period from the prior year

---

included in this press release are different from those otherwise presented under GAAP. The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors and consultants. Stock-based compensation expense has been and will continue to be a significant recurring expense for Audience. The expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net loss.

On July 11, 2014, Audience completed its acquisition of Sensor Platforms, Inc. The amortization of purchased intangible assets that were recorded in connection with the acquisition has been excluded from non-GAAP net loss.

The acquisition-related fees and expenses that were recorded in connection with the merger with Knowles have been excluded from non-GAAP net loss.

Non-GAAP financial information is adjusted for a tax rate equal to our three year annual estimated tax rate on non-GAAP income. Our three year estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

Audience has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between quarters and annual growth rates that are not influenced by certain non-cash charges and therefore are helpful in understanding Audience’s underlying operating results. These non-GAAP measures are some of the primary measures Audience’s management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of the GAAP to non-GAAP results are presented at the end of this press release.

Additional Information

The tender offer for Audience’s outstanding common stock has not yet commenced. This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Audience securities. The solicitation and the offer to buy common stock of Audience will be made only pursuant to an offer to purchase and related materials that Knowles and Orange Subsidiary, Inc. intend to file with the SEC on Form S-4 and Schedule TO, respectively, which will include an Offer to Exchange, a letter of transmittal and related documents (the “Tender Materials”). Audience also intends to file a solicitation/recommendation statement on Schedule 14D-9 with respect to the tender offer. Audience stockholders and other investors should read the Tender Materials contained in the Form S-4, Schedule TO and the Schedule 14D-9 to be filed by Knowles, Orange Subsidiary, Inc. and Audience, respectively, carefully because these documents will contain important information, including the terms and conditions of the tender offer. Audience stockholders may obtain any other Tender Materials subsequently filed with the SEC from its website (at www.sec.gov), without charge. Materials filed by Knowles and Orange Subsidiary, Inc. may be obtained for free at Knowles’s web site, www Knowles com. Materials filed by Audience may be obtained for free at Audience’s web site, www.audience.com. Stockholders and other investors are urged to read carefully all tender offer materials prior to making any decisions with respect to the tender offer.

---

Cautionary Note Concerning Forward-Looking Statements

Statements in the press release regarding Audience, Inc., which are not historical facts, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as believe, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. This release contains forward-looking statements that involve risks and uncertainties, including statements regarding the impacts of the pending transaction with Knowles and Audience’s outlook for 2015 and are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those we anticipate as a result of various factors, including among others: the impact of the proposed acquisition on Audience’s financial results, including expenses; Audience’s ability to complete the proposed transaction, including the outcome of regulatory reviews of the proposed transaction, the failure to retain key Audience employees; customer and partner uncertainty regarding the anticipated benefits of the proposed transaction; the failure of Knowles and Audience to achieve the anticipated synergies of the proposed transaction,, completion of our March 31, 2015 review by our independent auditors, and potential fluctuations in the company’s quarterly and annual operating results and financial condition, including but not limited to matters related to tax; our dependence on a single OEM, Samsung Electronics Co. Ltd., for a substantial portion of our revenue; weak demand for high end smartphones integrating our products and the impact on our business; our need to maintain and expand our existing relationships with our OEMs, including Samsung and leading Chinese OEMs, and to establish relationships with new OEMs in order to maintain and increase our revenue; our ability to sustain profitable operations due to our history of losses and accumulated deficit; quarterly fluctuations in our results due to factors such as the timing of OEM product launches and customer purchasing behavior in light of anticipated mobile phone launches; our assessments of whether we have excess or obsolete inventory; increasing competition and new entrants in the market for our products; our need to diversify our sources of revenue; our ability to successfully integrate Sensor Platforms’ team and technology; our ability to enter new end user product markets, as well as new geographic markets; pressure on the average selling prices for our products; our lengthy sales cycle and the lack of certainty as to whether any given OEM’s products will achieve market acceptance; our OEMs’ lengthy and expensive process to qualify our products; our ability to develop new or enhanced products, including codecs, Advanced Voice and Continuous VoiceQ products, in a timely manner that achieve market acceptance; our reliance on third parties to manufacture, assemble and test our products; increased defects that may be present in our products as we scale our manufacturing processes; the impact of future intellectual property litigation and claims for indemnification; changes in tax laws or our ability to utilize our tax structure and net operating losses and other risks inherent in fabless semiconductor businesses. For a discussion of these and other related risks, please refer to “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2014, which is available on the SEC’s website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

About Audience

Audience is the leader in Advanced Voice, and a pioneer in Multisensory processing and natural user experience technology for consumer devices. Its technologies, based in auditory neuroscience, improve the mobile voice experience, as well as enhance speech-based services and audio quality for multimedia. In early 2014, the Company announced its expansion into Multisensory and motion processing. Through the combination of Advanced Voice and Multisensory processing, Audience aims to transform the way consumers engage with

---

devices by enabling seamless natural user experiences and context-aware services. The Company’s products have been shipped in more than 500 million devices worldwide. For more information, see www.audience.com.

For more information on Audience^® products please go here.

# # #

ADNC-F

For more information, contact:

Investors

The Blueshirt Group

Suzanne Schmidt		or		Melanie Solomon
415-217-4962				415-217-4964
[email protected]				[email protected]

Media and Industry Analysts

Diane Vanasse

408-242-0027

[email protected]

---

Audience, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
		March 31, 2015 (unaudited)				December 31, 2014 (1)
Assets
Current assets:
Cash and cash equivalents		$	37,276			$	46,184
Short-term investments			6,998				8,999
Restricted cash			4,200				4,200
Accounts receivable, net			7,810				2,789
Inventories			23,826				27,999
Prepaid expenses and other current assets			3,309				3,880
Total current assets			83,419				94,051
Property and equipment, net			10,407				11,634
Intangibles assets, net			5,292				6,317
Other noncurrent assets			2,990				2,840
Total assets		$	102,108			$	114,842
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	3,247			$	1,582
Accrued and other current liabilities			13,168				12,064
Deferred credits and income			691				725
Total current liabilities			17,106				14,371
Income taxes payable - noncurrent			773				1,114
Deferred rent - noncurrent			2,129				2,046
Other liabilities - noncurrent			214				28
Total liabilities			20,222				17,559
Stockholders’ equity:
Common stock			23				23
Additional paid-in capital			197,508				195,351
Accumulated other comprehensive income (loss)			—				—
Accumulated deficit			(115,645	)			(98,091	)
Total stockholders’ equity			81,886				97,283
Total liabilities and stockholders’ equity		$	102,108			$	114,842

Note 1: The condensed consolidated balance sheet at December 31, 2014 has been derived from audited consolidated financial statements.

---

Audience, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

		Three months ended March 31,
		2015				2014
Revenue:
Hardware		$	17,788			$	34,076
Licensing			657				1,884
Total revenue			18,445				35,960
Cost of revenue			10,587				17,364
Gross profit			7,858				18,596
Operating expenses:
Research and development			13,639				12,188
Selling, general and administrative			11,125				12,245
Total operating expenses			24,764				24,433
Loss from operations			(16,906	)			(5,837	)
Interest income, net			6				18
Other expense, net			(393	)			(33	)
Loss before income taxes			(17,293	)			(5,852	)
Income tax provision			261				1,485
Net loss		$	(17,554	)		$	(7,337	)
Net loss per share:
Basic		$	(0.75	)		$	(0.33	)
Diluted		$	(0.75	)		$	(0.33	)
Weighted average shares used in computing net loss per share:
Basic			23,367				22,221
Diluted			23,367				22,221

---

Audience, Inc.

Reconciliation of GAAP to non-GAAP net loss

(in thousands)

 

		Three months ended March 31,
		2015				2014
GAAP net loss		$	(17,554	)		$	(7,337	)
Non-GAAP adjustments:
Stock-based compensation			2,143				1,576
Amortization of purchased intangible assets			1,025				—
Acquisition - related fees and expenses			559				—
Restructuring charges			32				—
Impairment - related fees and expenses			23				—
Effective tax rate change			2,963				2,340
Non-GAAP net loss		$	(10,809	)		$	(3,421	)

---

Audience, Inc.

Computation of GAAP net loss per share

(in thousands, except for per share amounts)

		Three months ended March 31,
		2015				2014
		(unaudited)				(unaudited)
Computation of GAAP net loss per share:
GAAP net loss		$	(17,554	)		$	(7,337	)
Weighted average shares used in computing net loss per share:
Basic			23,367				22,221
Diluted			23,367				22,221
Net loss per share:
Basic		$	(0.75	)		$	(0.33	)
Diluted		$	(0.75	)		$	(0.33	)

---

Audience, Inc.

Unaudited reconciliation of GAAP to non-GAAP diluted net loss per share

(in thousands, except per share data)

 

		Three months ended March 31,
		2015				2014
GAAP net loss		$	(17,554	)		$	(7,337	)
Non-GAAP adjustments:
Stock-based compensation			2,143				1,576
Amortization of purchased intangible assets			1,025				—
Acquisition - related fees and expenses			559				—
Restructuring charges			32				—
Impairment - related fees and expenses			23				—
Effective tax rate change			2,963				2,340
Non-GAAP net loss		$	(10,809	)		$	(3,421	)
GAAP - diluted weighted average shares			23,367				22,221
Non-GAAP - diluted weighted average shares			23,367				22,221
GAAP - diluted net loss per share		$	(0.75	)		$	(0.33	)
Non-GAAP adjustments:
Stock-based compensation			0.09				0.07
Amortization of purchased intangible assets			0.04				—
Acquisition - related fees and expenses			0.03				—
Restructuring charges			—				—
Impairment - related fees and expenses			—				—
Effective tax rate change			0.13				0.11
Non-GAAP - diluted net loss per share		$	(0.46	)		$	(0.15	)

---

Audience, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands)

(unaudited)

 

		Three months ended March 31, 2015												Three months ended March 31, 2014
		Reported GAAP				Adjustments				Non-GAAP				Reported GAAP				Adjustments				Non-GAAP
Total revenue		$	18,445			$	—			$	18,445			$	35,960			$	—			$	35,960
Cost of revenue (1)			10,587				(814	)			9,773				17,364				(62	)			17,302
Gross profit			7,858				814				8,672				18,596				62				18,658
Total operating expenses (2)			24,764				(2,968	)			21,796				24,433				(1,514	)			22,919
Loss from operations		$	(16,906	)		$	3,782			$	(13,124	)		$	(5,837	)		$	1,576			$	(4,261	)
Loss before income taxes		$	(17,293	)		$	3,782			$	(13,511	)		$	(5,852	)		$	1,576			$	(4,276	)
Income tax provision (benefit) (3)			261				(2,963	)			(2,702	)			1,485				(2,340	)			(855	)
Net loss		$	(17,554	)		$	6,745			$	(10,809	)		$	(7,337	)		$	3,916			$	(3,421	)

 

(1)

For the first quarter of 2015, adjustments are related to amortization of purchased intangible assets of $800 and stock-based compensation expense of $14 recognized for GAAP purposes. For the first quarter of 2014, adjustments are related to stock-based compensation expense of $62 recognized for GAAP purposes.

(2)

For the first quarter of 2015, adjustments are related to stock-based compensation expense of $2,129, acquisition - related fees and expenses of $559, amortization of purchased intangible assets of $225, restructuring charges of $32, and impairment - related fees and expenses of $23 recognized for GAAP purposes. For the first quarter of 2014, adjustments are related to stock-based compensation expense of $1,514 recognized for GAAP purposes.

(3)	Adjustment reflects the tax effect from all non-GAAP adjustments for the periods.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• HOOKIPA Pharma Announces Grant of Inducement Award Under Nasdaq Listing Rule 5635(c)(4)
• TEAMSTERS LEADER SWORN IN AS COMMISSIONER OF SAN FRANCISCO HUMAN RIGHTS COMMISSION
• TScan Therapeutics Announces Launch of $125 Million Proposed Public Offering