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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/ | d8k.htm |
Exhibit 99.1
November 2, 2010 For Immediate Release
Contact: Robert V. Lardon 203.328.3517 robert.lardon@harman.com |
HARMAN Reports Double-Digit Sales Growth and 5.6 Percentage Point Improvement in Operating Margin
| Net sales increase 19% in local currency |
| Credit rating upgraded two notches by both Moodys and Standard & Poors |
| Acquired Aha Mobile to enable on-demand internet content for cars and consumer devices |
| Investing additional $100M in China; two new factories, R&D and test labs to be added by summer 2011 |
Stamford, CT, November 2, 2010 Harman International Industries, Incorporated, the leading global audio and infotainment group (NYSE: HAR), today announced results for the first quarter ended September 30, 2010. Net sales for the quarter were $837 million, an increase of 12 percent compared to the same period last year. In local currency, net sales increased by 19 percent. First quarter operating income was $43 million, an improvement of $47 million versus a prior year loss. Earnings from continuing operations per diluted share were $0.39 for the quarter compared to a loss per diluted share of ($0.17) in the same period last year. On a non-GAAP basis, earnings from continuing operations were $0.35 compared to a loss of ($0.08) in the same period last year.
We are very pleased by this continued progress, marking four consecutive quarters of year-on-year improvement in both top line and profitability, said Dinesh C. Paliwal, the Companys Chairman, President and CEO. Our innovation pipeline and our $12 billion backlog of awarded business reinforce HARMANs leadership position. Our successful STEP Change cost reduction program and emerging markets footprint expansion are yielding both cost advantages and new market opportunities. Our recent two-notch credit upgrades reflect our strong balance sheet, new business awards, permanent cost reductions and improved conditions in our served markets.
During the last three years, we have transformed the Companys global footprint, created a best in class cost structure and installed world class business processes, Paliwal added. Harman is now focusing on profitable growth, both organic and through acquisitions. After posting triple digit growth in emerging markets last year, we are adding significant new capacity to meet the rising domestic demand in China and other emerging markets. We have a strong balance sheet and we are generating positive cash flow. Our recent acquisitions of Selenium in Brazil and Aha Mobile in the US are having a positive impact. We will continue to look for companies in both western and emerging markets which have attractive valuations, key technologies, and strong sales channels.
Summary of Continuing Operations
Gross margin increased to 26.8 percent for the first quarter ended September 30, 2010, an improvement of 1.1 percentage points. Gross margin on a non-GAAP basis increased to 26.7 percent for the first quarter, an improvement of 0.9 percentage points. SG&A expense as a percentage of sales on a non-GAAP basis for the first quarter was reduced by 3.4 percentage points to 22.0 percent. The Companys improved operating margin was primarily driven by higher sales, improved productivity, and lower restructuring expense. HARMAN continues to execute ahead of schedule on its $400 million STEP Change cost-savings program and has achieved $373 million in permanent savings through September 30, 2010, compared to a target of $317 million.
Strategic Initiatives
During the First Quarter, the Company completed the acquisition of Aha Mobile, an innovative Silicon Valley provider of on-demand mobile and location-based Internet content services. The new units online application complements HARMANs offering for hands-free, eyes-free automotive Infotainment and consumer devices. This expands the content available to todays connected mobile generation while providing a safe, interactive experience. The Company also highlighted the recent acquisition of Selenium, now operating as Harman do Brasil in Latin America, at the regions largest music industry trade exhibition during September.
To meet fast rising domestic demand in China, the Company announced a new $100 million investment for strategic initiatives. This will include construction of two greenfield world class factories in China for Automotive, Professional and Consumer products. Fast execution will allow these new factories to come online in summer of 2011. To complement existing sales channels for consumer audio products, the Company also opened its first flagship store in Shanghai.
1
FY 2011 Key Figures Total Company |
Three Months Ended September 30 | |||||||||||||||
All figures from continuing operations unless otherwise noted |
Increase (Decrease) | |||||||||||||||
$ millions (except per share data) |
3M FY11 |
3M FY10 |
Nominal | Local Currency1 |
||||||||||||
Net sales |
837 | 748 | 12 | % | 19 | % | ||||||||||
Gross profit |
225 | 192 | 17 | % | 23 | % | ||||||||||
Percent of net sales |
26.8 | % | 25.7 | % | ||||||||||||
SG&A |
182 | 196 | (7 | %) | (2 | %) | ||||||||||
Operating income (loss) |
43 | (4 | ) | n.m. | n.m. | |||||||||||
Percent of net sales |
5.1 | % | (0.5 | %) | ||||||||||||
Net Income (loss) from continuing operations attributable to Harman International Industries, Incorporated |
27 | (10 | ) | n.m. | n.m. | |||||||||||
Diluted earnings (loss) per share from continuing operations attributable to Harman International Industries, Incorporated |
0.39 | (0.17 | ) | |||||||||||||
Restructuring-related costs |
(3 | ) | 4 | |||||||||||||
Goodwill impairment charge |
0 | 3 | ||||||||||||||
Net Income from discontinued operations |
0 | 2 | ||||||||||||||
Diluted earnings (loss) per share from discontinued operations |
0.00 | 0.03 | ||||||||||||||
Non-GAAP from continuing operations |
||||||||||||||||
Gross profit1 |
224 | 193 | 16 | % | 22 | % | ||||||||||
Percent of net sales1 |
26.7 | % | 25.8 | % | ||||||||||||
SG&A1 |
184 | 190 | (3 | %) | 3 | % | ||||||||||
Operating income (loss)1 |
40 | 3 | n.m. | n.m. | ||||||||||||
Percent of net sales1 |
4.8 | % | 0.4 | % | ||||||||||||
Net Income (loss)1 from continuing operations attributable to Harman International Industries, Incorporated |
25 | (4 | ) | n.m. | n.m. | |||||||||||
Diluted earnings (loss) per share1 from continuing operations attributable to Harman International Industries, Incorporated |
0.35 | (0.08 | ) | |||||||||||||
Shares outstanding diluted (in millions) |
71 | 69 |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful |
Investor and Analyst Call on November 2, 2010
HARMAN will conduct an investor and analyst call at 11:00 am EDT today, hosted by the Companys Chairman and CEO, Dinesh Paliwal, and Chief Financial Officer, Herbert Parker. Those who wish to participate via audio in the earnings conference call should dial 888-223-5152 (U.S.) or +1 (303) 223-2680 (International) ten minutes before the call and reference HARMAN. Following the call, a replay will be available beginning at approximately 1:00 p.m. EDT. The replay will remain available through January 1, 2011 at 1:00 p.m. To listen to the replay, dial (800) 633-8284 (U.S.) or +1 (402) 977-9140 (International), Access Code: 21483155.
NOTE: For reference during its analyst and investor conference call, the Company has posted a set of informational slides on its web site at www.harman.com and accompanying this press release on www.businesswire.com. In addition, Harman invites you to visit the Investors section of its website at www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents.
General Information
HARMAN (www.harman.com) designs, manufactures and markets a wide range of audio and infotainment solutions for the automotive, consumer and professional markets supported by 15 leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon® and Mark Levinson®. The Company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 20 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. HARMAN has a workforce of about 11,000 people across the Americas, Europe and Asia, and reported sales of $3.5 billion over the last twelve months. The Companys shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.
2
A reconciliation of the non-GAAP measures included in this press release to the most comparable GAAP measures is provided in the tables contained at the end of this press release. HARMAN does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Forward-Looking Information
Except for historical information contained herein, the matters discussed are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act. One should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to (1) our ability to achieve the intended benefits and anticipated savings of our STEP Change cost reduction initiatives; (2) our ability to maintain profitability in our automotive division if there are delays in our product launches, which may give rise to significant penalties and increased engineering expense; (3) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (4) warranty obligations for defects in our products; (5) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. dollar and the Euro; (6) our ability to successfully implement our global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering, procurement and administrative organizations; (7) the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (8) our ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for our critical organizational positions; (9) our failure to implement and maintain a comprehensive disaster recovery program; (10) our failure to comply with governmental rules and regulations, including the Foreign Corrupt Practices Act and U.S. export control laws, and the cost of compliance with such laws; (11) our ability to maintain a competitive technological advantage through innovation and leading product designs; (12) acceptance of our mid-platform infotainment systems by original equipment manufacturers and consumers; (13) the outcome of pending or future litigation and other claims, including, but not limited to, the current stockholder and Employee Retirement Income Security Act of 1974 lawsuits; (14) our ability to enforce or defend our ownership and use of intellectual property rights, and (15) other risks detailed in Harman Internationals Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and other filings made by Harman International with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement, except as required by law. This press release also makes reference to the Companys sales backlog. The Companys sales backlog reflects anticipated net sales from formally awarded new programs and open replacement programs, less phased-out and cancelled programs. The sales backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new and replacement programs, foreign currency exchange rates and the timing of major program launches.
HAR-E
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APPENDIX
Automotive Division
FY 2011 Key Figures Automotive |
Three Months Ended September 30 | |||||||||||||||
Increase (Decrease) | ||||||||||||||||
$ millions |
3M FY11 |
3M FY10 |
Nominal | Local Currency1 |
||||||||||||
Net sales |
607 | 543 | 12 | % | 20 | % | ||||||||||
Gross profit |
141 | 126 | 12 | % | 20 | % | ||||||||||
Percent of net sales |
23.3 | % | 23.2 | % | ||||||||||||
SG&A |
105 | 131 | (20 | %) | (13 | %) | ||||||||||
Operating income (loss) |
36 | (5 | ) | n.m. | n.m. | |||||||||||
Percent of net sales |
6.0 | % | (0.9 | %) | ||||||||||||
Restructuring-related costs |
1 | 3 | ||||||||||||||
Goodwill impairment charge |
0 | 3 | ||||||||||||||
Non-GAAP |
||||||||||||||||
Gross profit1 |
141 | 126 | 12 | % | 20 | % | ||||||||||
Percent of net sales1 |
23.3 | % | 23.2 | % | ||||||||||||
SG&A1 |
104 | 124 | (16 | %) | (9 | %) | ||||||||||
Operating income (loss)1 |
37 | 1 | n.m. | n.m. | ||||||||||||
Percent of net sales1 |
6.1 | % | 0.3 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful |
Net sales in the first quarter were $607 million, an increase of 12 percent, or 20 percent in local currency in comparison to the same period last year. Gross margin on a non-GAAP basis in the first quarter increased from 23.2 percent to 23.3 percent. SG&A expense on a non-GAAP basis in the first quarter was $104 million compared to $124 million in the prior year. As a percentage of sales, SG&A was reduced 5.7 percentage points from 22.9% to 17.2%. These improvements were primarily driven by higher sales and improved productivity.
The Automotive Division received several significant awards from major automakers during the first quarter. HARMAN was selected by Chrysler Group and Fiat to provide integrated infotainment systems for the automakers vehicles sold worldwide. Building upon its scalable infotainment system win with Toyota in Europe, the Company was also selected to provide systems for Toyota vehicles sold in North America. The Company was also selected by Daimler AG to equip new Mercedes-Benz models worldwide with in-car entertainment modules incorporating the Companys GRAMMY®-Award winning wireless headphone technology.
Diverse automotive model launches during the quarter underscore the Companys successful initiatives to broaden its penetration of premium HARMAN systems beyond the luxury segment. First quarter launches included JBL Professional audio for the Ferrari California and Italia 458; Harman Kardon audio systems for Range Rover; JBL premium audio for the Peugeot 508; Lexicon surround sound audio for the 2011 Hyundai Equus; and Infinity premium audio for the 2011 Kia Optima. The Company introduced a new in-vehicle computing module developed in cooperation with Intel, and new mobile Wi-Fi hotspot capabilities developed with Marvell Technology Group.
4
Consumer Division
FY 2011 Key Figures Consumer |
Three Months Ended September 30 | |||||||||||||||
Increase (Decrease) | ||||||||||||||||
$ millions |
3M FY11 |
3M FY10 |
Nominal | Local Currency1 |
||||||||||||
Net sales |
86 | 84 | 3 | % | 9 | % | ||||||||||
Gross profit |
25 | 22 | 12 | % | 19 | % | ||||||||||
Percent of net sales |
28.5 | % | 26.1 | % | ||||||||||||
SG&A |
24 | 21 | 14 | % | 19 | % | ||||||||||
Operating income (loss) |
0 | 1 | n.m. | n.m. | ||||||||||||
Percent of net sales |
0.6 | % | 0.9 | % | ||||||||||||
Restructuring-related costs |
0 | 0 | ||||||||||||||
Goodwill impairment charge |
0 | 0 | ||||||||||||||
Non-GAAP |
||||||||||||||||
Gross profit1 |
25 | 22 | 12 | % | 19 | % | ||||||||||
Percent of net sales1 |
28.4 | % | 26.1 | % | ||||||||||||
SG&A1 |
24 | 21 | 16 | % | 21 | % | ||||||||||
Operating income (loss)1 |
0 | 1 | n.m. | n.m. | ||||||||||||
Percent of net sales1 |
0.1 | % | 1.0 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful |
Net sales in the first quarter were $86 million, an increase of 3 percent, or 9 percent in local currency. Gross margin on a non-GAAP basis in the first quarter increased to 28.4 percent, an increase of 2.3 percentage points. SG&A expense on a non-GAAP basis in the first quarter was $24 million compared to $21 million in the prior year. The increase was primarily due to the new Global Product Development Center in Shenzhen, China and brand marketing activities.
At Berlins IFA Consumer Electronics Show during September, the division booked more than $25 million in on-site orders amidst strong new product introductions. Innovations showcased at the exhibition included the Signature Series line of headphones developed and launched with music legend Quincy Jones; a high-performance integrated amplifier from Harman Kardon; Studio 1 Series speakers from JBL; and significant enhancements to receiver and home theater systems.
The Companys JBL brand also launched the new OnStage® family of designer docking stations for iPod® and iPhone® users and the award-winning MS-8 Series of aftermarket amplifiers for automotive audio enthusiasts. HARMAN won two prestigious Best Product awards from the European Imaging and Sound Association (EISA).
5
Professional Division
FY 2011 Key Figures Professional |
Three Months Ended September 30 | |||||||||||||||
Increase (Decrease) | ||||||||||||||||
$ millions |
3M FY11 |
3M FY10 |
Nominal | Local Currency1 |
||||||||||||
Net sales |
144 | 121 | 19 | % | 20 | % | ||||||||||
Gross profit |
59 | 46 | 27 | % | 28 | % | ||||||||||
Percent of net sales |
40.8 | % | 38.2 | % | ||||||||||||
SG&A |
34 | 30 | 14 | % | 16 | % | ||||||||||
Operating income (loss) |
25 | 17 | 48 | % | 48 | % | ||||||||||
Percent of net sales |
17.3 | % | 13.8 | % | ||||||||||||
Restructuring-related costs |
(3 | ) | 1 | |||||||||||||
Goodwill impairment charge |
0 | 0 | ||||||||||||||
Non-GAAP |
||||||||||||||||
Gross profit1 |
58 | 47 | 23 | % | 24 | % | ||||||||||
Percent of net sales1 |
40.1 | % | 38.7 | % | ||||||||||||
SG&A1 |
36 | 30 | 22 | % | 24 | % | ||||||||||
Operating income (loss)1 |
22 | 17 | 24 | % | 24 | % | ||||||||||
Percent of net sales1 |
15.0 | % | 14.4 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful |
Net sales in the first quarter were $144 million, an increase of 19 percent, or 20 percent in local currency. This increase was driven in part by the recent acquisition of Selenium in Brazil. Gross margin on a non-GAAP basis in the first quarter increased to 40.1 percent, an increase of 1.4 percentage points. SG&A expense on a non-GAAP basis in the first quarter was $36 million compared to $30 million in the prior year driven in part by continued investment in emerging market build up of sales and service.
The Professional Division continued to support landmark sporting and entertainment events around the world, wrapping up an official sponsorship at Shanghai World Expo 2010 where more than 70 million visitors experienced HARMAN audio systems across more than 20 venues. The Companys professional audio systems also welcomed visitors to the FIFA World Cup competition in South Africa and the recent Commonwealth Games in India.
The division provided professional audio systems for several high-profile entertainment events during the quarter, including the Prime Time Emmy Awards, Miss Universe Pageant, and MTV Music Video Awards. The Companys digital mixing consoles were commissioned at Austrias historic Vienna Konzerthaus. Other HARMAN systems supported such leading events and entertainers as American Idol Live, the James Taylor/Carole King USA tour, Sheryl Crow, and European tours with U2, Elton John, GunsnRoses, Sting, and Bon Jovi.
6
Other (Corporate)
FY 2011 Key Figures Other |
Three Months Ended September 30 | |||||||||||||||
Increase (Decrease) | ||||||||||||||||
$ millions |
3M FY11 |
3M FY10 |
Nominal | Local Currency1 |
||||||||||||
SG&A |
19 | 15 | 27 | % | 27 | % | ||||||||||
Restructuring-related costs |
0 | 0 | ||||||||||||||
Non-GAAP |
||||||||||||||||
SG&A1 |
19 | 15 | 26 | % | 26 | % | ||||||||||
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful |
SG&A expense increased in the first quarter primarily due to investments in technology, innovation and marketing programs. The Companys Corporate Technology Center (CTC) is driving cutting-edge development in areas such as connectivity and networking, mobile Internet such as Aha Mobile, cloud computing, advanced driver assistance, wireless technologies and energy-efficiency.
7
Harman International Industries, Incorporated
Consolidated Statements of Operations
(000s omitted except per share amounts; unaudited) |
Three Months Ended September 30, |
|||||||
2010 | 2009 | |||||||
Net sales |
$ | 836,946 | $ | 748,428 | ||||
Cost of sales |
612,375 | 556,200 | ||||||
Gross profit |
224,571 | 192,228 | ||||||
Selling, general and administrative expenses |
181,825 | 193,309 | ||||||
Goodwill impairment |
| 3,016 | ||||||
Operating income (loss) |
42,746 | (4,097 | ) | |||||
Other expenses: |
||||||||
Interest expense, net |
6,146 | 9,563 | ||||||
Miscellaneous, net |
1,527 | 1,244 | ||||||
Income (loss) from continuing operations before taxes |
35,073 | (14,904 | ) | |||||
Income tax expense (benefit) |
7,685 | (5,003 | ) | |||||
Income (loss) from continuing operations net of taxes |
27,388 | (9,901 | ) | |||||
Income (loss) from discontinued operations net of taxes |
0 | 2,103 | ||||||
Net income (loss) |
27,388 | (7,798 | ) | |||||
Less: Net income (loss) attributable to non-controlling interest |
0 | 1,675 | ||||||
Net income (loss) attributable to Harman |
$ | 27,388 | $ | (9,473 | ) | |||
Net income (loss) from continuing operations attributable to Harman International Industries, Incorporated: |
||||||||
Income (loss) from continuing operations, net of taxes |
$ | 27,388 | $ | (9,901 | ) | |||
Less: Net income (loss) attributable to non-controlling interest |
0 | 1,675 | ||||||
Net income (loss) from continuing ops attributable to Harman International Industries, Incorporated |
$ | 27,388 | $ | (11,576 | ) | |||
Earnings (loss) per share from continuing operations attributable to Harman International Industries, Incorporated: |
||||||||
Basic |
$ | 0.39 | $ | (0.17 | ) | |||
Diluted |
$ | 0.39 | $ | (0.17 | ) | |||
Earnings (loss) per share from discontinued operations: |
||||||||
Basic |
$ | 0.00 | $ | 0.03 | ||||
Diluted |
$ | 0.00 | $ | 0.03 | ||||
Earnings (loss) per share: |
||||||||
Basic |
$ | 0.39 | $ | (0.14 | ) | |||
Diluted |
$ | 0.39 | $ | (0.14 | ) | |||
Weighted average shares outstanding: |
||||||||
Basic |
70,655 | 69,254 | ||||||
Diluted |
71,094 | 69,254 |
8
Harman International Industries, Incorporated
Consolidated Balance Sheet
(000s omitted; unaudited) |
September 30, 2010 |
June 30, 2010 |
||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 567,676 | $ | 645,570 | ||||
Short-term investments |
81,804 | | ||||||
Accounts receivable |
551,402 | 517,092 | ||||||
Inventories |
439,206 | 353,123 | ||||||
Other current assets |
155,473 | 158,194 | ||||||
Total current assets |
1,795,561 | 1,673,979 | ||||||
Property, plant and equipment |
436,821 | 421,949 | ||||||
Goodwill |
114,650 | 105,922 | ||||||
Deferred tax assets, long term |
229,979 | 247,602 | ||||||
Other assets |
116,510 | 106,763 | ||||||
Total assets |
$ | 2,693,521 | $ | 2,556,215 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 376 | $ | 463 | ||||
Short-term debt |
4,467 | 13,472 | ||||||
Accounts payable |
391,941 | 382,985 | ||||||
Accrued liabilities |
387,873 | 363,261 | ||||||
Accrued warranties |
119,134 | 99,329 | ||||||
Income taxes payable |
7,057 | 3,941 | ||||||
Total current liabilities |
910,848 | 863,451 | ||||||
Convertible senior notes |
366,652 | 362,693 | ||||||
Other senior debt |
953 | 1,209 | ||||||
Other non-current liabilities |
194,799 | 193,970 | ||||||
Total liabilities |
1,473,252 | 1,421,323 | ||||||
Total equity |
1,220,269 | 1,134,892 | ||||||
Total liabilities and equity |
$ | 2,693,521 | $ | 2,556,215 | ||||
9
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(000s omitted except per share amounts; unaudited) |
Three Months Ended September 30, 2010 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
Net sales |
$ | 836,946 | $ | | $ | 836,946 | ||||||
Cost of sales |
612,375 | 971 | a | 613,346 | ||||||||
Gross profit |
224,571 | (971 | ) | 223,600 | ||||||||
Selling, general and administrative expenses |
181,825 | 1,934 | b | 183,759 | ||||||||
Goodwill impairment |
| | | |||||||||
Operating income (loss) |
42,746 | (2,905 | ) | 39,841 | ||||||||
Other expenses: |
||||||||||||
Interest expense, net |
6,146 | | 6,146 | |||||||||
Miscellaneous, net |
1,527 | | 1,527 | |||||||||
Income (loss) from continuing operations before taxes |
35,073 | (2,905 | ) | 32,168 | ||||||||
Income tax expense (benefit) |
7,685 | (732 | )c | 6,953 | ||||||||
Income (loss) from continuing operations net of taxes |
27,388 | (2,173 | ) | 25,215 | ||||||||
Less: Net income (loss) attributable to non-controlling interest |
| | | |||||||||
Net income (loss) from continuing operations attributable to Harman International Industries, Incorporated |
$ | 27,388 | $ | (2,173 | ) | $ | 25,215 | |||||
Earnings (loss) per share from continuing operations attributable to Harman International Industries, Incorporated: |
||||||||||||
Basic |
$ | 0.39 | $ | (0.03 | ) | $ | 0.36 | |||||
Diluted |
$ | 0.39 | $ | (0.03 | ) | $ | 0.35 | |||||
Weighted average shares outstanding: |
||||||||||||
Basic |
70,655 | 70,655 | ||||||||||
Diluted |
71,094 | 71,094 |
(a) | Restructuring expense included in Cost of sales was a credit of ($1 million) due to a revision in estimate related to a production outsourcing project in the Professional Division. |
(b) | Restructuring expense in SG&A was a credit of ($2 million) due to a partial reversal of severance costs related to a production outsourcing project in the Professional Division. |
(c) | The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the discrete tax rate within that specific country. |
Harman International has provided a reconciliation of non-GAAP measures in order to provide the users of these financial statements with a better understanding of our restructuring charges incurred during the first quarter of fiscal 2011. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in our consolidated financial statements prepared in accordance with US GAAP.
10
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(000s omitted except per share amounts; unaudited) |
Three Months Ended September 30, 2009 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
Net sales |
$ | 748,428 | $ | | $ | 748,428 | ||||||
Cost of sales |
556,200 | (536 | )a | 555,664 | ||||||||
Gross profit |
192,228 | 536 | 192,764 | |||||||||
Selling, general and administrative expenses |
193,309 | (3,329 | )b | 189,980 | ||||||||
Goodwill impairment |
3,016 | (3,016 | )c | 0 | ||||||||
Operating income (loss) |
(4,097 | ) | 6,881 | 2,784 | ||||||||
Other expenses: |
||||||||||||
Interest expense, net |
9,563 | | 9,563 | |||||||||
Miscellaneous, net |
1,244 | | 1,244 | |||||||||
Income (loss) from continuing operations before taxes |
(14,904 | ) | 6,881 | (8,023 | ) | |||||||
Income tax expense (benefit) |
(5,003 | ) | 1,086 | d | (3,917 | ) | ||||||
Income (loss) from continuing operations net of taxes |
(9,901 | ) | 5,795 | (4,106 | ) | |||||||
Less: Net income (loss) attributable to non-controlling interest |
1,675 | | 1,675 | |||||||||
Net income (loss) from continuing operations attributable to Harman International Industries, Incorporated |
$ | (11,576 | ) | $ | 5,795 | $ | (5,781 | ) | ||||
Earnings (loss) per share from continuing operations attributable to Harman International Industries, Incorporated: |
||||||||||||
Basic |
$ | (0.17 | ) | $ | 0.09 | $ | (0.08 | ) | ||||
Diluted |
$ | (0.17 | ) | $ | 0.09 | $ | (0.08 | ) | ||||
Weighted average shares outstanding: |
||||||||||||
Basic |
69,254 | 69,254 | ||||||||||
Diluted |
69,254 | 69,254 |
(a) | Restructuring charges in Cost of sales in the amount of $0.5 million were recorded during the first quarter of fiscal 2010. These charges were primarily related to accelerated depreciation. |
(b) | Restructuring charges in SG&A in the amount of $3.3 million were recorded during the first quarter of fiscal 2010. These charges were taken to increase efficiency in manufacturing, engineering and administrative functions. |
(c) | Goodwill impairment charge of $3.0 million was taken in the first quarter of fiscal 2010. |
(d) | The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the discrete tax rate within that specific country. |
Harman International has provided a reconciliation of non-GAAP measures in order to provide the users of these financial statements with a better understanding of our restructuring and goodwill impairment charges incurred during the first quarter of fiscal 2010. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in our consolidated financial statements prepared in accordance with US GAAP.
11
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(Foreign Currency Translation Impact)
($000s Omitted; unaudited) |
Three Months Ended September 30, |
Increase (Decrease) |
||||||||||
2010 | 2009 | |||||||||||
Net sales nominal currency |
$ | 836,946 | $ | 748,428 | 12 | % | ||||||
Effect of foreign currency translation1 |
(43,564 | ) | ||||||||||
Net sales local currency |
836,946 | 704,864 | 19 | % | ||||||||
Gross profit nominal currency |
224,571 | 192,228 | 17 | % | ||||||||
Effect of foreign currency translation1 |
(9,721 | ) | ||||||||||
Gross profit local currency |
224,571 | 182,507 | 23 | % | ||||||||
SG&A nominal currency |
181,825 | 196,325 | (7 | %) | ||||||||
Effect of foreign currency translation1 |
11,727 | |||||||||||
SG&A local currency |
181,825 | 184,598 | (2 | %) | ||||||||
Operating income (loss) nominal currency |
42,746 | (4,097 | ) | n.m. | ||||||||
Effect of foreign currency translation1 |
2,007 | |||||||||||
Operating income (loss) local currency |
42,746 | (2,091 | ) | n.m. |
1 | Impact of restating prior year results at current year foreign exchange rates. |
Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our financial performance excluding the impact of foreign currency translation. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. This measurement should be considered in addition to, but not as a substitute for, the information contained in our consolidated financial statements prepared in accordance with US GAAP.
12
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(Foreign Currency Translation Impact)
EXCLUDING restructuring and goodwill charges ($000s Omitted; unaudited) |
Three Months Ended September 30, |
Increase (Decrease) |
||||||||||
2010 | 2009 | |||||||||||
Net sales nominal currency |
$ | 836,946 | $ | 748,428 | 12 | % | ||||||
Effect of foreign currency translation1 |
(43,564 | ) | ||||||||||
Net sales local currency |
836,946 | 704,864 | 19 | % | ||||||||
Gross profit nominal currency |
223,600 | 192,763 | 16 | % | ||||||||
Effect of foreign currency translation1 |
(9,781 | ) | ||||||||||
Gross profit local currency |
223,600 | 182,982 | 22 | % | ||||||||
SG&A nominal currency |
183,758 | 189,980 | (3 | %) | ||||||||
Effect of foreign currency translation1 |
11,273 | |||||||||||
SG&A local currency |
183,758 | 178,707 | 3 | % | ||||||||
Operating income (loss) nominal currency |
39,841 | 2,783 | n.m. | |||||||||
Effect of foreign currency translation1 |
1,492 | |||||||||||
Operating income (loss) local currency |
39,841 | 4,275 | n.m. |
1 | Impact of restating prior year results at current year foreign exchange rates. |
Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our financial performance excluding the impact of foreign currency translation. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. This measurement should be considered in addition to, but not as a substitute for, the information contained in our consolidated financial statements prepared in accordance with US GAAP.
13
Harman International Industries, Incorporated
Q1 and Q2 Fiscal 2010 Discontinued Operations
(000s omitted; unaudited) |
Three Months Ended September 30, 2009 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
As Previously Reported (including QNX): 1 |
||||||||||||
Sales |
$ | 757,368 | $ | | $ | 757,368 | ||||||
Operating profit |
(1,499 | ) | 6,965 | 5,466 | ||||||||
Net income attributable to Harman International industries, Inc. |
(7,798 | ) | 5,879 | (1,919 | ) | |||||||
Continuing Operations: |
||||||||||||
Sales |
$ | 748,428 | $ | | $ | 748,428 | ||||||
Operating profit |
(4,097 | ) | 6,880 | 2,783 | ||||||||
Net income from continuing operations |
(9,901 | ) | 5,794 | (4,107 | ) | |||||||
Discontinued Operations: |
||||||||||||
Sales |
$ | 8,940 | $ | | $ | 8,940 | ||||||
Operating profit |
2,598 | 85 | 2,683 | |||||||||
Gain on discontinued operations, net of tax |
| | | |||||||||
Net income from discontinued operations |
2,103 | 85 | 2,188 | |||||||||
(000s omitted; unaudited) |
Three Months Ended December 31, 2009 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
As Previously Reported (including QNX): 1 |
||||||||||||
Sales |
$ | 937,489 | $ | | $ | 937,489 | ||||||
Operating profit |
39,422 | 13,242 | 52,664 | |||||||||
Net income attributable to Harman International industries, Inc. |
19,713 | 12,231 | 31,944 | |||||||||
Continuing Operations: |
||||||||||||
Sales |
$ | 928,273 | $ | | $ | 928,273 | ||||||
Operating profit |
37,238 | 13,181 | 50,419 | |||||||||
Net income from continuing operations |
17,010 | 12,170 | 29,179 | |||||||||
Discontinued Operations: |
||||||||||||
Sales |
$ | 9,216 | $ | | $ | 9,216 | ||||||
Operating profit |
2,184 | 61 | 2,245 | |||||||||
Gain on discontinued operations, net of tax |
| | | |||||||||
Net income from discontinued operations |
2,703 | 61 | 2,765 |
1 | QNX was sold in the fourth quarter of fiscal 2010. As a result, the first three quarters of 2010 were reported included QNX in continuing operations and the fourth quarter was reported with QNX included in discontinued operations. |
14
Harman International Industries, Incorporated
Q3 and Q4 Fiscal 2010 Discontinued Operations
(000s omitted; unaudited) |
Three Months Ended March 31, 2010 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
As Previously Reported (including QNX): 1 |
||||||||||||
Sales |
$ | 848,232 | $ | | $ | 848,232 | ||||||
Operating profit |
30,574 | 5,936 | 36,510 | |||||||||
Net income attributable to Harman International Industries, Inc, |
18,260 | 4,058 | 22,318 | |||||||||
Continuing Operations: |
||||||||||||
Sales |
$ | 837,011 | $ | | $ | 837,011 | ||||||
Operating profit |
26,884 | 5,916 | 32,800 | |||||||||
Net income from continuing operations |
14,921 | 4,038 | 18,959 | |||||||||
Discontinued Operations: |
||||||||||||
Sales |
$ | 11,221 | $ | | $ | 11,221 | ||||||
Operating profit |
3,690 | 20 | 3,710 | |||||||||
Gain on discontinued operations, net of tax |
| | | |||||||||
Net income from discontinued operations |
3,339 | 20 | 3,359 | |||||||||
(000s omitted; unaudited) |
Three Months Ended June 30, 2010 |
|||||||||||
GAAP | Adjustments | Non-GAAP | ||||||||||
As Previously Reported (including QNX): 1 |
||||||||||||
Sales |
$ | 856,648 | $ | | $ | 856,648 | ||||||
Operating profit |
26,540 | 4,193 | 30,733 | |||||||||
Net income attributable to Harman International Industries, Inc, |
133,883 | 2,827 | 136,710 | |||||||||
Continuing Operations: |
||||||||||||
Sales |
$ | 850,716 | $ | | $ | 850,716 | ||||||
Operating profit |
25,530 | 4,181 | 29,711 | |||||||||
Net income from continuing operations |
18,437 | 2,815 | 21,252 | |||||||||
Discontinued Operations: |
||||||||||||
Sales |
$ | 5,933 | $ | | $ | 5,933 | ||||||
Operating profit |
1,010 | 12 | 1,022 | |||||||||
Gain on discontinued operations, net of tax |
114,197 | | 114,197 | |||||||||
Net income from discontinued operations |
1,248 | 12 | 1,261 |
1 | QNX was sold in the fourth quarter of fiscal 2010. As a result, the first three quarters of 2010 were reported included QNX in continuing operations and the fourth quarter was reported with QNX included in discontinued operations. |
15
Harman International Industries, Incorporated
Total Liquidity Reconciliation
Total Company Liquidity |
As of September 30, | |||||||||||
$ millions |
2010 | 2009 | Increase (Decrease) |
|||||||||
Cash & cash equivalents |
568 | 540 | 5 | % | ||||||||
Short-term investments |
82 | 0 | n/a | |||||||||
Available credit under Revolving Credit Facility |
225 | 0 | n/a | |||||||||
Total liquidity |
875 | 540 | 62 | % |
Harman International Industries, Incorporated
Adjusted EBITDA Reconciliation
$ millions |
Q2 FY09 |
Q3 FY09 |
Q4 FY09 |
Q1 FY10 |
Q2 FY10 |
Q3 FY10 |
Q4 FY10 |
Q1 FY11 |
||||||||||||||||||||||||
Operating income (loss) |
(356 | ) | (95 | ) | (84 | ) | (4 | ) | 37 | 27 | 26 | 43 | ||||||||||||||||||||
Operating income (loss), Adjustments1 |
338 | 21 | 49 | 7 | 13 | 6 | 4 | (3 | ) | |||||||||||||||||||||||
Operating income (loss), Non-GAAP |
(18 | ) | (74 | ) | (35 | ) | 3 | 50 | 33 | 30 | 40 | |||||||||||||||||||||
Deprecation & Amortization |
35 | 32 | 42 | 34 | 34 | 32 | 28 | 28 | ||||||||||||||||||||||||
Deprecation & Amortization, Adjustments2 |
(3 | ) | 0 | 0 | (1 | ) | (1 | ) | (1 | ) | 0 | 1 | ||||||||||||||||||||
Deprecation & Amortization, Non-GAAP |
32 | 32 | 42 | 33 | 33 | 31 | 28 | 29 | ||||||||||||||||||||||||
EBITDA |
14 | (43 | ) | 7 | 36 | 84 | 63 | 58 | 69 | |||||||||||||||||||||||
Last-Twelve-Months EBITDA |
14 | 83 | 189 | 241 | 274 |
1 | Consists primarily of restructuring in SG&A related to efficiency projects in manufacturing, engineering and administrative functions and goodwill impairment charges. |
2 | Consists primarily of restructuring charges in cost of sales related to accelerated depreciation. |
16