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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/ | d919023d8k.htm |
Exhibit 99.1
Contact: | ||
Christopher Ferris | Darrin Shewchuk | |
203.328.3500 | 203.328.3500 | |
chris.ferris@harman.com | darrin.shewchuk@harman.com |
HARMAN Reports Third Quarter Fiscal Year 2015 Results
| Net sales increased 4% to $1.5 billion; Up 14% excluding foreign currency translation |
| Operational EPS up 9% to $1.22; Operational EBITDA up 8% to $150 million |
| Secured $3.2 billion of new automotive awards; $5.7 billion of awarded business year-to-date |
| Acquired Symphony Teleca and Redbend |
STAMFORD, CT, April 30, 2015 Harman International Industries, Incorporated (NYSE: HAR), the premier infotainment, audio and software services company, today announced results for the third quarter ended March 31, 2015.
Net sales for the third quarter were $1.46 billion, an increase of four percent compared to the same period in the prior year or 14 percent excluding the impact of foreign currency translation (ex-FX). Infotainment net sales increased six percent, or 19 percent (ex-FX), due to platform expansions, higher take rates, and stronger automotive production. Lifestyle net sales declined six percent (up two percent ex-FX). Last years third quarter benefited from an unusually large order from a mobile telecommunications customer. In the third quarter, stronger car audio sales partially offset this impact. Net sales in the Professional division increased 21 percent (26 percent ex-FX) primarily driven by the acquisition of AMX which expanded the Companys product portfolio into enterprise automation and control and video switching.
Excluding restructuring and other non-recurring items, third quarter operating income was $114 million compared to $108 million in the same period in the prior year, and earnings per diluted share were $1.22 compared to $1.12 in the same period last year. On a GAAP basis, third quarter operating income was $92 million compared to $101 million in the same period in the prior year, and earnings per diluted share were $0.99 for the quarter compared to $1.05 in the same period in the prior year. The Company recorded $23 million of restructuring and non-recurring acquisition-related costs, compared to $7 million in the prior year.
This marks the eighth consecutive quarter of top and bottom line growth. We delivered another solid quarter of growth, particularly in our automotive businesses, despite unprecedented foreign exchange headwinds. Our professional business was hit harder due to a strong US dollar and a softening in some emerging and European markets, commented Dinesh C. Paliwal, the Companys Chairman, President and Chief Executive Officer. HARMAN continues to lead the industry with best-in-class connected car solutions, as evidenced by new awards for embedded infotainment and car audio systems from global industry leaders, including BMW and Daimler. Year-to-date, we have secured $5.7 billion of new automotive awards.
Paliwal continued, We also recently completed the acquisitions of Symphony Teleca and Redbend, which will give us immediate scale in software services and better position HARMAN to capitalize on the rapid growth of the Internet of Things. We can now deliver more powerful solutions at the intersection of cloud, mobility, and analytics for our core markets of automotive and the enterprise and diversify to a wider range of industries such as telecommunications, media, and retail.
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FY 2015 Key Figures Total Company |
Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||||||||
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||||||||
$ millions (except per share data) |
3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
||||||||||||||||||||||||
Net sales |
1,464 | 1,404 | 4 | % | 14 | % | 4,477 | 3,904 | 15 | % | 20 | % | ||||||||||||||||||||
Gross profit |
418 | 365 | 15 | % | 23 | % | 1,326 | 1,066 | 24 | % | 29 | % | ||||||||||||||||||||
Percent of net sales |
28.6 | % | 26.0 | % | 29.6 | % | 27.3 | % | ||||||||||||||||||||||||
SG&A |
327 | 263 | 24 | % | 34 | % | 970 | 793 | 22 | % | 27 | % | ||||||||||||||||||||
Operating income |
92 | 101 | (10 | %) | (5 | %) | 356 | 273 | 31 | % | 36 | % | ||||||||||||||||||||
Percent of net sales |
6.2 | % | 7.2 | % | 8.0 | % | 7.0 | % | ||||||||||||||||||||||||
EBITDA |
132 | 134 | (2 | %) | 4 | % | 471 | 370 | 27 | % | 32 | % | ||||||||||||||||||||
Percent of net sales |
9.0 | % | 9.6 | % | 10.5 | % | 9.5 | % | ||||||||||||||||||||||||
Net Income attributable to HARMAN International Industries, Incorporated |
70 | 73 | (4 | %) | (0 | %) | 270 | 191 | 41 | % | 47 | % | ||||||||||||||||||||
Diluted earnings per share |
0.99 | 1.05 | (6 | %) | (2 | %) | 3.83 | 2.74 | 40 | % | 46 | % | ||||||||||||||||||||
Restructuring & non-recurring costs |
23 | 7 | 48 | 37 | ||||||||||||||||||||||||||||
Non-GAAP - operational1 |
||||||||||||||||||||||||||||||||
Gross profit |
422 | 367 | 15 | % | 23 | % | 1,318 | 1,071 | 23 | % | 28 | % | ||||||||||||||||||||
Percent of net sales |
28.8 | % | 26.1 | % | 29.4 | % | 27.4 | % | ||||||||||||||||||||||||
SG&A |
308 | 259 | 19 | % | 28 | % | 914 | 762 | 20 | % | 24 | % | ||||||||||||||||||||
Operating income |
114 | 108 | 6 | % | 12 | % | 404 | 309 | 31 | % | 36 | % | ||||||||||||||||||||
Percent of net sales |
7.8 | % | 7.7 | % | 9.0 | % | 7.9 | % | ||||||||||||||||||||||||
EBITDA |
150 | 139 | 8 | % | 15 | % | 511 | 401 | 28 | % | 33 | % | ||||||||||||||||||||
Percent of net sales |
10.2 | % | 9.9 | % | 11.4 | % | 10.3 | % | ||||||||||||||||||||||||
Net Income attributable to HARMAN International Industries, Incorporated |
87 | 78 | 11 | % | 17 | % | 305 | 221 | 38 | % | 44 | % | ||||||||||||||||||||
Diluted earnings per share |
1.22 | 1.12 | 9 | % | 15 | % | 4.33 | 3.16 | 37 | % | 43 | % | ||||||||||||||||||||
Shares outstanding diluted (in millions) |
71 | 70 | 70 | 70 |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. |
Summary of Operations Gross Margin and SG&A
Non-GAAP gross margin for the third quarter of fiscal 2015 increased 268 basis points to 28.8 percent. The improvement was primarily due to the impact of higher sales volume utilizing a more efficient fixed production cost base and the expansion of the Companys product portfolio into enterprise automation and control and video switching.
In the third quarter of fiscal 2015, SG&A expense as a percentage of net sales increased 258 basis points to 21.0 percent on a non-GAAP basis, primarily due to higher marketing and research and development expenses and the expansion of the Companys product portfolio into enterprise automation and control and video switching.
2015 Guidance Update
HARMAN updated its financial outlook for fiscal 2015. The Company now forecasts fiscal 2015 revenue of $6.0 billion and operational earnings per share of $5.65. The majority of the EPS reduction is related to weakness in certain geographic markets in our Professional business, with the remainder being foreign currency translation impact on the total Company. This revised guidance includes the closing of the Symphony Teleca and Redbend acquisitions, which will contribute approximately $100 million in revenue in the fourth quarter of FY 2015 and has no impact on operational earnings per share, as the net earnings from these acquisitions will be offset by financing costs and an increase in the Companys share count.
August 2014 | January 20151 | April 20152 | ||||||||||
Revenue |
~$ | 6.0 billion | ~$ | 6.0 billion | ~$ | 6.0 billion | ||||||
EBITDA3 |
~$ | 685 million | ~$ | 715 million | ~$ | 695 million | ||||||
EPS3 |
~$ | 5.25 | ~$ | 5.85 | ~$ | 5.65 | ||||||
Interest & Misc. |
~$ | 27M | ~$ | 23M | ~$ | 17M | ||||||
Tax Rate |
~26 | % | ~24 | % | ~24 | % | ||||||
Share Count |
~71 M | ~70.5 M | ~71 M | |||||||||
EUR/USD |
1.35 | 1.22 | 4 | 1.19 | 5 |
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1. | Excludes Redbend and Symphony Teleca. |
2. | Includes Redbend and Symphony Teleca. |
3. | Non-GAAP, excluding restructuring, non-recurring items, and purchase accounting expenses related to acquisitions. |
4. | Assumed EUR/USD of 1.15 for the second half of fiscal 2015. |
5. | Assumes EUR/USD of 1.08 for the fourth quarter of fiscal 2015. |
Investor Call Today April 30th, 2015
At 11:00 a.m. EDT today, HARMANs management will host an analyst and investor conference call to discuss the third quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 735 5968 (U.S.) or +1 (212) 231 2902 (International) ten minutes before the call and reference HARMAN, Access Code: 21766413.
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. The fiscal third quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT today.
A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through Friday, July 31st, 2015 at 1:00 p.m. EDT. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21766413. If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1 (800) 473 0602 (U.S.) or +1 (303) 446 4604 (International).
General Information
HARMAN (harman.com) designs and engineers connected products and solutions for consumers, automakers, and enterprises worldwide, including audio, visual and infotainment systems; enterprise automation solutions; and software services. With leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon® , Mark Levinson ® and Revel®, HARMAN is admired by audiophiles, musicians and the entertainment venues where they perform around the world. HARMAN also is a technology and integration services leader for the Automotive, Mobile, Telecommunications and Enterprise markets. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. The Companys software solutions power billions of mobile devices and systems that are connected, integrated, personalized, adaptive and secure across all platforms, from the work and home to car and mobile. HARMAN has a workforce of approximately 25,000 people across the Americas, Europe, and Asia and reported sales of $5.9 billion during the last 12 months ended March 31, 2015. The Companys shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.
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 in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the Companys ability to maintain profitability in its infotainment division if there are delays in its product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) the Companys ability to successfully implement its global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of its manufacturing, engineering, procurement and administrative organizations; (5) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (6) the inability of the Companys suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) the
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Companys ability to maintain a competitive technological advantage through innovation and leading product designs; (8) the Companys ability to integrate successfully our recently completed and future acquisitions; (9) the Companys failure to maintain the value of its brands and implementing a sufficient brand protection program; and (10) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2014 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.
This earnings release also makes reference to the Companys awarded business, which represents the estimated future lifetime net sales for all customers. The Companys future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters from its customers. To validate these awards, the company uses various assumptions including global vehicle production forecasts, customer take rates for the Companys products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. These assumptions are updated and reported externally on an annual basis. The Company updates the estimates and awarded business quarterly by adding the value of new awards received and subtracting sales recorded during the quarter. These quarterly updates do not include any assumptions for increased take rates, revisions to product life cycle, or any other factors.
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APPENDIX
Infotainment Division
FY 2015 Key Figures Infotainment | Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||||||||
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||||||||
$ millions (except per share data) | 3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
||||||||||||||||||||||||
Net sales |
779 | 736 | 6 | % | 19 | % | 2,302 | 2,066 | 11 | % | 18 | % | ||||||||||||||||||||
Gross profit |
180 | 158 | 15 | % | 25 | % | 553 | 464 | 19 | % | 25 | % | ||||||||||||||||||||
Percent of net sales |
23.2 | % | 21.4 | % | 24.0 | % | 22.5 | % | ||||||||||||||||||||||||
SG&A |
98 | 97 | 1 | % | 14 | % | 303 | 309 | (2 | %) | 4 | % | ||||||||||||||||||||
Operating income |
82 | 60 | 36 | % | 42 | % | 249 | 155 | 60 | % | 66 | % | ||||||||||||||||||||
Percent of net sales |
10.5 | % | 8.2 | % | 10.8 | % | 7.5 | % | ||||||||||||||||||||||||
EBITDA |
99 | 77 | 29 | % | 37 | % | 301 | 204 | 47 | % | 53 | % | ||||||||||||||||||||
Percent of net sales |
12.7 | % | 10.5 | % | 13.1 | % | 9.9 | % | ||||||||||||||||||||||||
Restructuring & non-recurring costs |
1 | 3 | 5 | 23 | ||||||||||||||||||||||||||||
Non-GAAP - operational1 |
||||||||||||||||||||||||||||||||
Gross profit |
182 | 160 | 14 | % | 25 | % | 557 | 469 | 19 | % | 25 | % | ||||||||||||||||||||
Percent of net sales |
23.3 | % | 21.7 | % | 24.2 | % | 22.7 | % | ||||||||||||||||||||||||
SG&A |
99 | 96 | 3 | % | 16 | % | 302 | 290 | 4 | % | 10 | % | ||||||||||||||||||||
Operating income |
83 | 63 | 31 | % | 37 | % | 255 | 179 | 42 | % | 47 | % | ||||||||||||||||||||
Percent of net sales |
10.6 | % | 8.6 | % | 11.1 | % | 8.7 | % | ||||||||||||||||||||||||
EBITDA |
99 | 78 | 27 | % | 35 | % | 303 | 223 | 36 | % | 41 | % | ||||||||||||||||||||
Percent of net sales |
12.7 | % | 10.6 | % | 13.1 | % | 10.8 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. |
Net sales in the third quarter of fiscal 2015 were $779 million, an increase of six percent compared to the same period in the prior year or 19 percent excluding the impact of foreign currency translation. The increase in net sales was due to the expansion of recently launched platforms, higher take rates, and stronger automotive production partially offset by unfavorable foreign currency translation.
On a non-GAAP basis in the third quarter of fiscal 2015, gross margin increased 159 basis points to 23.3 percent compared to the prior year primarily due to the impact of improved leverage on fixed production costs and benefits from footprint migration restructuring initiatives. SG&A spending decreased 42 basis points to 12.7 percent primarily due to improved operating leverage on higher sales.
Infotainment Division Highlights
HARMAN recently secured approximately $2.1 billion of new awards to design and build the next generation infotainment systems for BMW and Daimler. Both embedded systems will feature the most sophisticated connected car technologies, including over-the-air (OTA) updates.
HARMAN infotainment systems continued to be deployed across car lines globally. New vehicles entering the market with HARMAN designed and built infotainment systems included the new VW Touran, Skoda Superb, Seat Leon, Audi Q7 and R8, the BMW 1-series, Ssangyong Tivoli, Jaguar F-type, and Land Rover Evoque.
HARMAN also continues to demonstrate its leadership in advanced connectivity through numerous industry events and partnerships. At the Geneva International Motor Show, HARMAN displayed its vision for autonomous driving together with concept car producer Rinspeed. The electric vehicle was equipped with an intelligent HARMAN infotainment system featuring next-generation navigation, entertainment, driver assistance and service functions which continuously learn the habits and preferences of the driver and passengers to predict their actions. Using an integrated telematics communication module, the vehicle remains future-proofed through OTA updates and provides real-time analytics to extend system functionality. This enables high speed data streaming and vehicle-to-vehicle communication which will be fundamental to autonomous driving.
HARMAN announced it was a founding member of the University of Michigan Mobility Transformation Center Affiliates Program, a major research partnership of industry, government, and academia that is laying the foundation for a commercially viable system of connected and automated vehicles. HARMAN also announced its participation in the European FANCI (Face and Body Analysis Natural Computer Interaction) project. With funding from the European Unions Research and Innovation program, the program will identify and integrate multi-modal human-machine technologies onto a single in-car computing platform. The project will aim to make advanced safety features such as facial recognition and body analytics an affordable and viable option for tomorrows advanced vehicles.
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Lifestyle Division
FY 2015 Key Figures Lifestyle | Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||||||||
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||||||||
$ millions (except per share data) | 3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
||||||||||||||||||||||||
Net sales |
441 | 468 | (6 | %) | 2 | % | 1,408 | 1,232 | 14 | % | 20 | % | ||||||||||||||||||||
Gross profit |
136 | 131 | 4 | % | 10 | % | 455 | 374 | 22 | % | 26 | % | ||||||||||||||||||||
Percent of net sales |
30.8 | % | 27.9 | % | 32.3 | % | 30.4 | % | ||||||||||||||||||||||||
SG&A |
91 | 79 | 15 | % | 23 | % | 303 | 230 | 32 | % | 36 | % | ||||||||||||||||||||
Operating income |
45 | 51 | (12 | %) | (8 | %) | 152 | 144 | 6 | % | 9 | % | ||||||||||||||||||||
Percent of net sales |
10.2 | % | 11.0 | % | 10.8 | % | 11.7 | % | ||||||||||||||||||||||||
EBITDA |
57 | 60 | (5 | %) | (1 | %) | 182 | 169 | 8 | % | 12 | % | ||||||||||||||||||||
Percent of net sales |
12.9 | % | 12.8 | % | 13.0 | % | 13.7 | % | ||||||||||||||||||||||||
Restructuring & non-recurring costs |
8 | 2 | 23 | 8 | ||||||||||||||||||||||||||||
Non-GAAP - operational1 |
||||||||||||||||||||||||||||||||
Gross profit |
138 | 131 | 6 | % | 12 | % | 447 | 374 | 19 | % | 23 | % | ||||||||||||||||||||
Percent of net sales |
31.4 | % | 27.9 | % | 31.7 | % | 30.4 | % | ||||||||||||||||||||||||
SG&A |
86 | 78 | 11 | % | 18 | % | 272 | 223 | 22 | % | 26 | % | ||||||||||||||||||||
Operating income |
53 | 53 | (1 | %) | 4 | % | 175 | 151 | 16 | % | 20 | % | ||||||||||||||||||||
Percent of net sales |
11.9 | % | 11.4 | % | 12.4 | % | 12.3 | % | ||||||||||||||||||||||||
EBITDA |
62 | 62 | 0 | % | 6 | % | 203 | 176 | 16 | % | 20 | % | ||||||||||||||||||||
Percent of net sales |
14.1 | % | 13.2 | % | 14.4 | % | 14.3 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. |
Net sales in the third quarter of fiscal 2015 were $441 million, a decrease of six percent compared to the same period in the prior year, or an increase of two percent excluding the impact of foreign currency translation. Last years third quarter benefited from an unusually large order from a mobile telecommunications customer. In the third quarter, stronger car audio sales partially offset this impact.
On a non-GAAP basis in the third quarter of fiscal 2015, gross margin improved by 346 basis points to 31.4 percent compared to the prior year due to product mix. SG&A expenses as a percentage of sales increased by 290 basis points to 19.5 percent, primarily due to increased investments in marketing and research and development.
Lifestyle Division Highlights
HARMAN secured new car audio awards from BMW, Ford, Fiat Chrysler, Geely, and Hyundai. HARMAN also won awards for its HALOsonic suite of sound management products. Fiat/Chrysler group will integrate HALOsonic Engine Order Cancellation (EOC) and microphone technologies into numerous vehicles. Daimler will add Internal Electronic Sound Synthesis (iESS), which creates speed and throttle-dependent sounds to improve engine feedback. Year to date, the Company has secured $1.6 billion of new awards.
At the HARMAN flagship store in New York City, Fords Lincoln division unveiled the new Lincoln Continental concept vehicle, which will feature HARMANs Revel sound system. At the same event, Ford also previewed the 2016 Lincoln MKX, which will be the first vehicle to market featuring Revel audio. Other car launches in the quarter included the Toyota Alphard (JBL) and the Hyundai Sonata Hybrid (Infinity). On March 31, 2015, HARMAN entered into an agreement to acquire the Bang & Olufsen (B&O) car audio business. HARMAN will assume all of B&Os existing automotive programs, which include Audi, Aston Martin, and BMW. HARMAN will also leverage the distinctive B&O and B&O PLAY brands to pursue new business with the high-end luxury and mass luxury markets, respectively. The B&O brands will complement HARMANs industry leading portfolio of audio brands.
HARMAN also received 13 Red Dot (International) and 15 iF (Germany) new product and innovation awards for its home and multimedia products. To supplement HARMANs innovation pipeline, the Company recently announced a partnership with crowd-sourcing platform Quirky to jointly develop next generation audio products.
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Professional Division
FY 2015 Key Figures Professional |
Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||||||||
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||||||||
$ millions (except per share data) |
3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
||||||||||||||||||||||||
Net sales |
242 | 200 | 21 | % | 26 | % | 764 | 605 | 26 | % | 29 | % | ||||||||||||||||||||
Gross profit |
101 | 76 | 32 | % | 38 | % | 315 | 227 | 39 | % | 42 | % | ||||||||||||||||||||
Percent of net sales |
41.5 | % | 38.1 | % | 41.3 | % | 37.6 | % | ||||||||||||||||||||||||
SG&A |
84 | 52 | 64 | % | 72 | % | 240 | 151 | 59 | % | 64 | % | ||||||||||||||||||||
Operating income |
16 | 25 | (35 | %) | (33 | %) | 75 | 77 | (2 | %) | (1 | %) | ||||||||||||||||||||
Percent of net sales |
6.6 | % | 12.4 | % | 9.8 | % | 12.7 | % | ||||||||||||||||||||||||
EBITDA |
24 | 30 | (19 | %) | (16 | %) | 100 | 92 | 9 | % | 11 | % | ||||||||||||||||||||
Percent of net sales |
10.0 | % | 14.9 | % | 13.1 | % | 15.2 | % | ||||||||||||||||||||||||
Restructuring & non-recurring costs |
6 | 1 | 8 | 3 | ||||||||||||||||||||||||||||
Non-GAAP - operational1 |
||||||||||||||||||||||||||||||||
Gross profit |
101 | 76 | 32 | % | 38 | % | 312 | 228 | 37 | % | 40 | % | ||||||||||||||||||||
Percent of net sales |
41.5 | % | 38.1 | % | 40.8 | % | 37.7 | % | ||||||||||||||||||||||||
SG&A |
79 | 50 | 56 | % | 65 | % | 229 | 148 | 55 | % | 59 | % | ||||||||||||||||||||
Operating income |
22 | 26 | (16 | %) | (14 | %) | 83 | 80 | 4 | % | 5 | % | ||||||||||||||||||||
Percent of net sales |
9.0 | % | 13.0 | % | 10.9 | % | 13.2 | % | ||||||||||||||||||||||||
EBITDA |
30 | 31 | (4 | %) | (1 | %) | 108 | 95 | 13 | % | 15 | % | ||||||||||||||||||||
Percent of net sales |
12.3 | % | 15.5 | % | 14.1 | % | 15.7 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. |
Net sales in the third quarter of fiscal 2015 were $242 million, an increase of 21 percent compared to the prior year, or 26 percent excluding foreign currency impact. The increase in net sales is due to the expansion of the Companys product portfolio into enterprise automation and control and video switching. The strong US dollar is creating a competitive disadvantage as the majority of the business is transacted in US dollars. In addition, this business also has greater macro-economic exposure in the emerging markets where the economies have underperformed.
On a non-GAAP basis in the third quarter of fiscal 2015, gross margin increased 335 basis points to 41.5 percent, and SG&A expense as a percentage of sales increased 735 basis points to 32.5 percent compared to the prior year. It is important to note that the enterprise automation and control portfolio generates higher gross margins and has higher SG&A expenses. This business has seasonality and typically generates lower sales in the third quarter, resulting in lower leverage of its fixed cost base.
Professional Division Highlights
During the third quarter, the Companys audio, video, lighting and enterprise automation and control system solutions were selected by leading system integrators and installers around the world. Notable projects included Auckland Airport, Hard Rock Hotel in Las Vegas, National Museum of Natural History in Paris, and the Council of European Union Headquarters in Brussels.
HARMANs products also powered a wide range of high-profile special events, music festivals and televised award shows including the 57th Annual GRAMMY Awards, the 48th Annual Super Bowl Halftime Show, and the iHeartRadio Music Festival.
The division launched 56 new products during the quarter. Several HARMAN products, including AKGs studio headphones, JBLs loudspeakers, Soundcrafts mixing console, and DigiTechs guitar pedal were honored with innovation awards from industry experts.
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Other (Corporate)
FY 2015 Key Figures Other |
Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||||||||
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||||||||
$ millions (except per share data) |
3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
||||||||||||||||||||||||
SG&A |
53 | 35 | 51 | % | 52 | % | 123 | 104 | 19 | % | 19 | % | ||||||||||||||||||||
Restructuring & non-recurring costs |
9 | 1 | 11 | 2 | ||||||||||||||||||||||||||||
Non-GAAP - operational1 |
||||||||||||||||||||||||||||||||
SG&A |
44 | 34 | 28 | % | 29 | % | 111 | 101 | 10 | % | 10 | % |
1 | A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. |
Other (Corporate) SG&A expense includes compensation, benefit and occupancy costs for corporate employees, new technology innovation, and expenses associated with the Companys brand identity campaign. It also includes the results and operations of Redbend Ltd., which the company acquired on February 26, 2015. Other SG&A increased $10 million to $44 million compared to the prior year period, primarily due to increased research and development investments in safety, security, and Redbend operations.
8
HARMAN International Industries, Incorporated
Consolidated Statements of Income
(In thousands, except earnings per share data; unaudited) |
Three Months Ended March 31, |
Nine Months Ended March 31, |
||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net sales |
$ | 1,464,193 | $ | 1,404,235 | $ | 4,476,664 | $ | 3,904,064 | ||||||||
Cost of sales |
1,046,063 | 1,039,462 | 3,150,736 | 2,838,192 | ||||||||||||
Gross profit |
418,130 | 364,773 | 1,325,928 | 1,065,872 | ||||||||||||
Selling, general and administrative expenses |
326,623 | 263,340 | 969,881 | 793,201 | ||||||||||||
Operating income |
91,507 | 101,433 | 356,047 | 272,671 | ||||||||||||
Other expenses: |
||||||||||||||||
Interest expense, net |
3,001 | 2,111 | 7,861 | 5,936 | ||||||||||||
Foreign exchange (gains) losses, net |
(3,406 | ) | 774 | (4,366 | ) | 4,745 | ||||||||||
Miscellaneous, net |
2,294 | 2,682 | 6,932 | 5,803 | ||||||||||||
Income before income taxes |
89,618 | 95,866 | 345,620 | 256,187 | ||||||||||||
Income tax expense, net |
19,346 | 22,369 | 76,250 | 64,515 | ||||||||||||
Equity in net loss of unconsolidated subsidiaries |
23 | 112 | 23 | 206 | ||||||||||||
Net income |
70,249 | 73,385 | 269,347 | 191,466 | ||||||||||||
Net income attributable to non-controlling interest |
(46 | ) | 0 | (156 | ) | 0 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to HARMAN International Industries, Incorporated |
$ | 70,295 | $ | 73,385 | $ | 269,503 | $ | 191,466 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 1.00 | $ | 1.06 | $ | 3.87 | $ | 2.77 | ||||||||
Diluted |
$ | 0.99 | $ | 1.05 | $ | 3.83 | $ | 2.74 | ||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
69,946 | 68,939 | 69,557 | 69,067 | ||||||||||||
Diluted |
70,795 | 69,888 | 70,322 | 69,877 |
9
HARMAN International Industries, Incorporated
Consolidated Balance Sheets
(In thousands; unaudited) | March 31, 2015 |
June 30, 2014 |
||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 592,359 | $ | 581,312 | ||||
Receivables, net |
952,672 | 894,579 | ||||||
Inventories |
726,354 | 662,128 | ||||||
Other current Assets |
471,227 | 320,852 | ||||||
Total current assets |
2,742,612 | 2,458,871 | ||||||
Property, plant and equipment, net |
462,903 | 509,856 | ||||||
Goodwill |
710,599 | 540,952 | ||||||
Deferred tax assets, long-term, net |
88,897 | 170,558 | ||||||
Other assets |
712,854 | 445,353 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,717,865 | $ | 4,125,590 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 0 | $ | 35,625 | ||||
Short-term debt |
2,656 | 3,736 | ||||||
Accounts payable |
809,829 | 697,553 | ||||||
Accrued liabilities |
674,988 | 566,722 | ||||||
Accrued warranties |
155,789 | 155,472 | ||||||
Income taxes payable |
32,377 | 26,544 | ||||||
Total current liabilities |
1,675,639 | 1,485,652 | ||||||
Borrowings under revolving credit facility |
593,448 | 300,000 | ||||||
Long-term debt |
25 | 219,407 | ||||||
Pension liability |
165,341 | 186,352 | ||||||
Other non-current liabilities |
118,707 | 141,158 | ||||||
Total liabilities |
2,553,160 | 2,332,569 | ||||||
Total HARMAN International Industries, Incorporated shareholders equity |
2,164,418 | 1,792,578 | ||||||
Noncontrolling interest |
287 | 443 | ||||||
Total equity |
2,164,705 | 1,793,021 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 4,717,865 | $ | 4,125,590 | ||||
|
|
|
|
10
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) |
Three Months Ended March 31, 2015 |
|||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
||||||||||
Net sales |
$ | 1,464,193 | $ | 0 | $ | 1,464,193 | ||||||
Cost of sales |
1,046,063 | (3,599 | )a | 1,042,464 | ||||||||
Gross profit |
418,130 | 3,599 | 421,729 | |||||||||
Selling, general and administrative expenses |
326,623 | (18,999 | )b | 307,624 | ||||||||
Operating income |
91,507 | 22,598 | 114,105 | |||||||||
Other expenses: |
||||||||||||
Interest expense, net |
3,001 | 0 | 3,001 | |||||||||
Foreign exchange gains, net |
(3,406 | ) | 0 | (3,406 | ) | |||||||
Miscellaneous, net |
2,294 | (0 | ) | 2,294 | ||||||||
Income before income taxes |
89,618 | 22,598 | 112,216 | |||||||||
Income tax expense, net |
19,346 | 6,170 | c | 25,516 | ||||||||
Equity in loss of unconsolidated subsidiary |
23 | 0 | 23 | |||||||||
Net income |
70,249 | 16,428 | 86,677 | |||||||||
Net income attributable to non-controlling interest |
(46 | ) | 0 | (46 | ) | |||||||
|
|
|
|
|
|
|||||||
Net income attributable to HARMAN International Industries, Incorporated |
$ | 70,295 | $ | 16,428 | $ | 86,723 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | 1.00 | $ | 0.23 | $ | 1.24 | ||||||
Diluted |
$ | 0.99 | $ | 0.23 | $ | 1.22 | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
69,946 | 69,946 | ||||||||||
Diluted |
70,795 | 70,795 |
a) | Restructuring expense in Cost of Sales was $3.6 million for projects to increase manufacturing productivity. |
b) | Restructuring expense in SG&A was $11.2 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $7.8 million including M&A deal related expenses. |
c) | The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country. |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
11
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) |
Nine Months Ended March 31, 2015 | |||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
||||||||||
Net sales |
$ | 4,476,664 | $ | 0 | $ | 4,476,664 | ||||||
Cost of sales |
3,150,736 | 8,014 | a | 3,158,750 | ||||||||
Gross profit |
1,325,928 | (8,014 | ) | 1,317,914 | ||||||||
Selling, general and administrative expenses |
969,881 | (55,966 | )b | 913,915 | ||||||||
Operating income |
356,047 | 47,952 | 403,999 | |||||||||
Other expenses: |
||||||||||||
Interest expense, net |
7,861 | 0 | 7,861 | |||||||||
Foreign exchange gains, net |
(4,366 | ) | 0 | (4,366 | ) | |||||||
Miscellaneous, net |
6,932 | 0 | 6,932 | |||||||||
Income before income taxes |
345,620 | 47,952 | 393,572 | |||||||||
Income tax expense, net |
76,250 | 12,799 | c | 89,049 | ||||||||
Equity in net loss of unconsolidated subsidiaries |
23 | 0 | 23 | |||||||||
Net income |
269,347 | 35,153 | 304,500 | |||||||||
Net income attributable to non-controlling interest |
(156 | ) | 0 | (156 | ) | |||||||
|
|
|
|
|
|
|||||||
Net income attributable to HARMAN International Industries, Incorporated |
$ | 269,503 | $ | 35,153 | $ | 304,656 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | 3.87 | $ | 0.51 | $ | 4.38 | ||||||
Diluted |
$ | 3.83 | $ | 0.50 | $ | 4.33 | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
69,557 | 69,557 | ||||||||||
Diluted |
70,322 | 70,322 |
a) | Restructuring expense in Cost of Sales was $7.9 million for projects to increase manufacturing productivity, offset by a $15.9M accrual reversal for a US Customs / NAFTA related exposure. |
b) | Restructuring expense in SG&A was $38.9 million primarily due to projects to increase productivity in engineering and administrative functions. Other non-recurring expense includes in SG&A was $17.1M including acquisition-related expenses. |
c) | The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the statutory tax rate within that specific country. |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
12
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) |
Three Months Ended March 31, 2014 |
|||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
||||||||||
Net sales |
$ | 1,404,235 | $ | 0 | $ | 1,404,235 | ||||||
Cost of sales |
1,039,462 | (2,110 | )a | 1,037,352 | ||||||||
Gross profit |
364,773 | 2,110 | 366,883 | |||||||||
Selling, general and administrative expenses |
263,340 | (4,535 | )b | 258,805 | ||||||||
Operating income |
101,433 | 6,645 | 108,078 | |||||||||
Other expenses: |
||||||||||||
Interest expense, net |
2,111 | 0 | 2,111 | |||||||||
Foreign exchange losses, net |
774 | 0 | 774 | |||||||||
Miscellaneous, net |
2,682 | (0 | ) | 2,682 | ||||||||
Income before income taxes |
95,866 | 6,645 | 102,511 | |||||||||
Income tax expense, net |
22,369 | 1,987 | c | 24,356 | ||||||||
Equity in net loss of unconsolidated subsidiaries |
112 | 0 | 112 | |||||||||
Net income |
73,385 | 4,658 | 78,043 | |||||||||
Net income attributable to non-controlling interest |
0 | 0 | 0 | |||||||||
|
|
|
|
|
|
|||||||
Net income attributable to HARMAN International Industries, Incorporated |
$ | 73,385 | $ | 4,658 | $ | 78,043 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | 1.06 | $ | 0.07 | $ | 1.13 | ||||||
Diluted |
$ | 1.05 | $ | 0.07 | $ | 1.12 | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
68,939 | 68,939 | ||||||||||
Diluted |
69,888 | 69,888 |
a) | Restructuring expense in Cost of sales was $2.1 million for projects to increase manufacturing productivity. |
d) | Restructuring expense in SG&A was $2.6 million primarily due to projects to increase productivity in engineering and administrative functions. Other non-recurring expense included in SG&A was $1.9 million. |
b) | The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the statutory tax rate within that specific country. |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
13
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) |
Nine Months Ended March 31, 2014 |
|||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
||||||||||
Net sales |
$ | 3,904,064 | $ | 0 | $ | 3,904,064 | ||||||
Cost of sales |
2,838,192 | (5,543 | )a | 2,832,649 | ||||||||
Gross profit |
1,065,872 | 5,543 | 1,071,415 | |||||||||
Selling, general and administrative expenses |
793,201 | (30,990 | )b | 762,211 | ||||||||
Operating income |
272,671 | 36,533 | 309,204 | |||||||||
Other expenses: |
||||||||||||
Interest expense, net |
5,936 | 0 | 5,936 | |||||||||
Foreign exchange losses, net |
4,745 | 0 | 4,745 | |||||||||
Miscellaneous, net |
5,803 | (0 | ) | 5,803 | ||||||||
Income before income taxes |
256,187 | 36,533 | 292,720 | |||||||||
Income tax expense, net |
64,515 | 7,137 | c | 71,652 | ||||||||
Equity in net loss of unconsolidated subsidiaries |
206 | 0 | 206 | |||||||||
Net income |
191,466 | 29,396 | 220,862 | |||||||||
Net income attributable to non-controlling interest |
0 | 0 | 0 | |||||||||
|
|
|
|
|
|
|||||||
Net income attributable to HARMAN International Industries, Incorporated |
$ | 191,466 | $ | 29,396 | $ | 220,862 | ||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic |
$ | 2.77 | $ | 0.43 | $ | 3.20 | ||||||
Diluted |
$ | 2.74 | $ | 0.42 | $ | 3.16 | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
69,067 | 69,067 | ||||||||||
Diluted |
69,877 | 69,877 |
a) | Restructuring expense in Cost of Sales was $6.1 million due to projects to increase productivity in manufacturing; other non- recurring expense included in Cost of Sales was income of $0.6 million. |
b) | Restructuring expense in SG&A was $27.6 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense in SG&A was 3.4 million. |
c) | The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country. |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
14
HARMAN International Industries, Incorporated
Selected Financial Data
Reconciliation of GAAP to Non-GAAP Results
Foreign Currency Translation Impact
(In thousands; unaudited) |
Three Months Ended March 31, |
Increase / (Decrease) |
||||||||||
2015 | 2014 | |||||||||||
Net sales - nominal currency |
$ | 1,464,193 | $ | 1,404,235 | 4 | % | ||||||
Effects of foreign currency translation (1) |
(124,870 | ) | ||||||||||
|
|
|||||||||||
Net sales - local currency |
1,464,193 | 1,279,365 | 14 | % | ||||||||
Gross profit - nominal currency |
418,130 | 364,773 | 15 | % | ||||||||
Effects of foreign currency translation (1) |
(24,565 | ) | ||||||||||
|
|
|||||||||||
Gross profit - local currency |
418,130 | 340,208 | 23 | % | ||||||||
SG&A - nominal currency |
326,623 | 263,340 | 24 | % | ||||||||
Effects of foreign currency translation (1) |
(19,267 | ) | ||||||||||
|
|
|||||||||||
SG&A - local currency |
326,623 | 244,073 | 34 | % | ||||||||
Operating income - nominal currency |
91,507 | 101,433 | -10 | % | ||||||||
Effects of foreign currency translation (1) |
(5,298 | ) | ||||||||||
|
|
|||||||||||
Operating income - local currency |
91,507 | 96,135 | -5 | % | ||||||||
Net income attributable to HARMAN International Industries, Incorporated - nominal currency |
70,295 | 73,385 | -4 | % | ||||||||
Effects of foreign currency translation (1) |
(2,876 | ) | ||||||||||
|
|
|||||||||||
Net income attributable to HARMAN International Industries, Incorporated - local currency |
70,295 | 70,509 | 0 | % |
(1) | Impact of restating prior year results at current year foreign exchange rates. |
HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of these consolidated financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect its reported financial results, the Company shows the rates of change both including and excluding the effect of these changes in exchange rates. The Company encourages readers of its financial statements to evaluate its 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
15
HARMAN International Industries, Incorporated
Selected Financial Data
Reconciliation of Non-GAAP Results
Foreign Currency Translation Impact
EXCLUDING restructuring and non-recurring charges (In thousands; unaudited) |
Three Months Ended March 31, |
Increase / (Decrease) |
||||||||||
2015 | 2014 | |||||||||||
Net sales - nominal currency |
$ | 1,464,193 | $ | 1,404,235 | 4 | % | ||||||
Effects of foreign currency translation (1) |
(124,870 | ) | ||||||||||
|
|
|||||||||||
Net sales - local currency |
1,464,193 | 1,279,365 | 14 | % | ||||||||
Gross profit - nominal currency |
421,729 | 366,883 | 15 | % | ||||||||
Effects of foreign currency translation (1) |
(24,965 | ) | ||||||||||
|
|
|||||||||||
Gross profit - local currency |
421,729 | 341,918 | 23 | % | ||||||||
SG&A - nominal currency |
307,624 | 258,805 | 19 | % | ||||||||
Effects of foreign currency translation (1) |
(18,740 | ) | ||||||||||
|
|
|||||||||||
SG&A - local currency |
307,624 | 240,065 | 28 | % | ||||||||
Operating income - nominal currency |
114,105 | 108,078 | 6 | % | ||||||||
Effects of foreign currency translation (1) |
(6,224 | ) | ||||||||||
|
|
|||||||||||
Operating income - local currency |
114,105 | 101,854 | 12 | % | ||||||||
Net income attributable to HARMAN International Industries, Incorporated - nominal currency |
86,723 | 78,043 | 11 | % | ||||||||
Effects of foreign currency translation (1) |
(3,803 | ) | ||||||||||
|
|
|||||||||||
Net income attributable to HARMAN International Industries, Incorporated - local currency |
86,723 | 74,240 | 17 | % |
(1) | Impact of restating prior year results at current year foreign exchange rates. |
HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the consolidated financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect its reported financial results, the Company shows the rates of change both including and excluding the effect of these changes in exchange rates. The Company encourages readers of its financial statements to evaluate its 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
16
HARMAN International Industries, Incorporated
Selected Financial Data
Reconciliation of GAAP to Non-GAAP Results
Foreign Currency Translation Impact
(In thousands; unaudited) |
Nine Months Ended March 31, |
Increase / (Decrease) |
||||||||||
2015 | 2014 | |||||||||||
Net sales - nominal currency |
$ | 4,476,664 | $ | 3,904,064 | 15 | % | ||||||
Effects of foreign currency translation (1) |
(179,247 | ) | ||||||||||
|
|
|||||||||||
Net sales - local currency |
4,476,664 | 3,724,817 | 20 | % | ||||||||
Gross profit - nominal currency |
1,325,928 | 1,065,872 | 24 | % | ||||||||
Effects of foreign currency translation (1) |
(38,869 | ) | ||||||||||
|
|
|||||||||||
Gross profit - local currency |
1,325,928 | 1,027,003 | 29 | % | ||||||||
SG&A - nominal currency |
969,881 | 793,201 | 22 | % | ||||||||
Effects of foreign currency translation (1) |
(28,658 | ) | ||||||||||
|
|
|||||||||||
SG&A - local currency |
969,881 | 764,543 | 27 | % | ||||||||
Operating income - nominal currency |
356,047 | 272,671 | 31 | % | ||||||||
Effects of foreign currency translation (1) |
(10,211 | ) | ||||||||||
|
|
|||||||||||
Operating income - local currency |
356,047 | 262,460 | 36 | % | ||||||||
Net income attributable to HARMAN International Industries, Incorporated - nominal currency |
269,503 | 191,466 | 41 | % | ||||||||
Effects of foreign currency translation (1) |
(7,876 | ) | ||||||||||
|
|
|||||||||||
Net income attributable to HARMAN International Industries, Incorporated - local currency |
269,503 | 183,590 | 47 | % | ||||||||
(1) Impact of restating prior year results at current year foreign exchange rates. |
HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of these consolidated financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect its reported financial results, the Company shows the rates of change both including and excluding the effect of these changes in exchange rates. The Company encourages readers of its financial statements to evaluate its 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
17
HARMAN International Industries, Incorporated
Selected Financial Data
Reconciliation of Non-GAAP Results
Foreign Currency Translation Impact
EXCLUDING restructuring and non-recurring charges (In thousands; unaudited) |
Nine Months Ended March 31, |
Increase / (Decrease) |
||||||||||
2015 | 2014 | |||||||||||
Net sales - nominal currency |
$ | 4,476,664 | $ | 3,904,064 | 15 | % | ||||||
Effects of foreign currency translation (1) |
(179,247 | ) | ||||||||||
|
|
|||||||||||
Net sales - local currency |
4,476,664 | 3,724,817 | 20 | % | ||||||||
Gross profit - nominal currency |
1,317,914 | 1,071,415 | 23 | % | ||||||||
Effects of foreign currency translation (1) |
(39,367 | ) | ||||||||||
|
|
|||||||||||
Gross profit - local currency |
1,317,914 | 1,032,048 | 28 | % | ||||||||
SG&A - nominal currency |
913,915 | 762,211 | 20 | % | ||||||||
Effects of foreign currency translation (1) |
(27,707 | ) | ||||||||||
|
|
|||||||||||
SG&A - local currency |
913,915 | 734,504 | 24 | % | ||||||||
Operating income - nominal currency |
403,999 | 309,204 | 31 | % | ||||||||
Effects of foreign currency translation (1) |
(11,660 | ) | ||||||||||
|
|
|||||||||||
Operating income - local currency |
403,999 | 297,544 | 36 | % | ||||||||
Net income attributable to HARMAN International Industries, Incorporated - nominal currency |
304,656 | 220,862 | 38 | % | ||||||||
Effects of foreign currency translation (1) |
(9,324 | ) | ||||||||||
|
|
|||||||||||
Net income attributable to HARMAN International Industries, Incorporated - local currency |
304,656 | 211,538 | 44 | % | ||||||||
(1) Impact of restating prior year results at current year foreign exchange rates. |
HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the consolidated financial statements with a better understanding of the Companys performance. Because changes in currency exchange rates affect its reported financial results, the Company shows the rates of change both including and excluding the effect of these changes in exchange rates. The Company encourages readers of its financial statements to evaluate its 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
18
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(In thousands, except earnings per share data; unaudited) |
Three Months Ended March 31, 2015 |
Three Months Ended March 31, 2014 |
||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
GAAP | Adjustments | Non-GAAP - Operational |
|||||||||||||||||||
HARMAN: |
||||||||||||||||||||||||
Operating income |
91,507 | 22,598 | 114,105 | 101,433 | 6,645 | 108,078 | ||||||||||||||||||
Depreciation & Amortization |
40,262 | (4,552 | ) | 35,710 | 33,063 | (2,086 | ) | 30,977 | ||||||||||||||||
EBITDA |
131,769 | 18,046 | 149,815 | 134,496 | 4,559 | 139,055 | ||||||||||||||||||
INFOTAINMENT: |
||||||||||||||||||||||||
Operating income |
82,136 | 563 | 82,699 | 60,313 | 2,894 | 63,207 | ||||||||||||||||||
Depreciation & Amortization |
17,122 | (1,165 | ) | 15,957 | 16,611 | (2,087 | ) | 14,524 | ||||||||||||||||
EBITDA |
99,258 | (602 | ) | 98,656 | 76,924 | 807 | 77,731 | |||||||||||||||||
LIFESTYLE |
||||||||||||||||||||||||
Operating income |
45,078 | 7,505 | 52,583 | 51,381 | 1,801 | 53,182 | ||||||||||||||||||
Depreciation & Amortization |
11,795 | (2,323 | ) | 9,472 | 8,635 | 0 | 8,635 | |||||||||||||||||
EBITDA |
56,873 | 5,182 | 62,055 | 60,016 | 1,801 | 61,817 | ||||||||||||||||||
PROFESSIONAL |
||||||||||||||||||||||||
Operating income |
16,043 | 5,659 | 21,702 | 24,813 | 1,150 | 25,963 | ||||||||||||||||||
Depreciation & Amortization |
8,129 | (98 | ) | 8,031 | 5,104 | 1 | 5,105 | |||||||||||||||||
EBITDA |
24,172 | 5,561 | 29,733 | 29,917 | 1,151 | 31,068 |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
19
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(In thousands, except earnings per share data; unaudited) |
Nine Months Ended March 31, 2015 |
Nine Months Ended March 31, 2014 |
||||||||||||||||||||||
GAAP | Adjustments | Non-GAAP - Operational |
GAAP | Adjustments | Non-GAAP - Operational |
|||||||||||||||||||
HARMAN: |
||||||||||||||||||||||||
Operating income |
356,047 | 47,952 | 403,999 | 272,671 | 36,533 | 309,204 | ||||||||||||||||||
Depreciation & Amortization |
114,808 | (7,337 | ) | 107,471 | 97,302 | (5,541 | ) | 91,761 | ||||||||||||||||
EBITDA |
470,855 | 40,615 | 511,470 | 369,973 | 30,992 | 400,965 | ||||||||||||||||||
INFOTAINMENT: |
||||||||||||||||||||||||
Operating income |
249,362 | 5,248 | 254,610 | 155,431 | 23,479 | 178,910 | ||||||||||||||||||
Depreciation & Amortization |
51,801 | (3,828 | ) | 47,973 | 48,851 | (4,823 | ) | 44,028 | ||||||||||||||||
EBITDA |
301,163 | 1,420 | 302,583 | 204,282 | 18,656 | 222,938 | ||||||||||||||||||
LIFESTYLE |
||||||||||||||||||||||||
Operating income |
151,655 | 23,299 | 174,954 | 143,725 | 7,510 | 151,235 | ||||||||||||||||||
Depreciation & Amortization |
30,741 | (2,379 | ) | 28,362 | 25,091 | (621 | ) | 24,470 | ||||||||||||||||
EBITDA |
182,396 | 20,920 | 203,316 | 168,816 | 6,889 | 175,705 | ||||||||||||||||||
PROFESSIONAL |
||||||||||||||||||||||||
Operating income |
75,128 | 7,910 | 83,038 | 76,697 | 3,220 | 79,917 | ||||||||||||||||||
Depreciation & Amortization |
24,650 | (165 | ) | 24,485 | 15,020 | (97 | ) | 14,923 | ||||||||||||||||
EBITDA |
99,778 | 7,745 | 107,523 | 91,717 | 3,123 | 94,840 |
HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. 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 HARMANs consolidated financial statements prepared in accordance with US GAAP.
20
HARMAN International Industries, Incorporated
Total Liquidity Reconciliation
Total Company Liquidity | March 31, 2015 |
|||
$ millions | ||||
Cash & cash equivalents |
$ | 592 | ||
Short-term investments |
0 | |||
Available credit under Revolving Credit Facility |
602 | |||
|
|
|||
Total Liquidity |
$ | 1,194 | ||
|
|
21