EX-99.1 2 dex991.htm HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED PRESS RELEASE Harman International Industries, Incorporated press release

Exhibit 99.1

         LOGO

April 28, 2011 – FOR IMMEDIATE RELEASE

        

Contact: Robert V. Lardon

203.328.3518

         robert.lardon@harman.com

HARMAN reports 13% Increase in Sales and 100% Increase in Operating Income year over year

 

   

Increases Earnings per Share to $0.51 from $0.21

 

   

Exceeds Target for $400 Million STEP Change Cost Savings

 

   

Wins Large Asian Business and Expands VW Group Award to $1.6 Billion

 

   

Grows Scalable Platform to $3.5 Billion; Backlog of Awarded Business at $13 Billion

STAMFORD, CT, April 28, 2011 – Harman International Industries, Incorporated, the leading global audio and infotainment group (NYSE: HAR), today announced results for the third quarter ended March 31, 2011. Net sales for the quarter were $948 million, an increase of 13 percent compared to the same period last year. Third quarter operating income was $54 million, an improvement of $27 million compared to the same period last year. Earnings from continuing operations per diluted share were $0.51 for the quarter compared to $0.21 in the same period last year. On a non-GAAP basis, earnings per diluted share from continuing operations were $0.60 compared to $0.27 in the same period last year.

“Our continued focus on execution has helped us achieve a sixth consecutive quarter of top and bottom line growth,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO. “I’m pleased that we have achieved our ambitious goal of a $400 million STEP Change Cost Savings program, announced in February 2008. This early decision enabled HARMAN to overcome the global economic downturn and return to profitability faster than the industry. Having developed a culture of efficiency, we have the foundation to capitalize on multiple profitable growth opportunities. The adoption of our innovative next-generation scalable platform continues to accelerate with the VW Group’s Asian business. Awards for this platform now exceed $3.5 billion, bringing our total backlog to $13 billion. We have also won multiple orders from Chinese automotive companies for our branded audio systems. We are executing our emerging market growth strategy and excellent progress is being made across all divisions,” added Paliwal.

 

FY 2011 Key Figures – Total Company    Three Months Ended March 31     Nine Months Ended March 31  
All figures from continuing operations unless otherwise noted               

Increase

(Decrease)

               

Increase

(Decrease)

 
$ millions (except per share data)   

3M

FY11

   

3M

FY10

    Nominal     Local
Currency1
   

9M

FY11

   

9M

FY10

    Nominal     Local
Currency1
 

Net sales

     948        837        13     13     2,741        2,514        9     13

Gross profit

     249        218        14     14     742        661        12     16

Percent of net sales

     26.2     26.0         27.1     26.3    

SG&A & Other

     195        191        2     3     578        601        (4 %)      0

Operating income

     54        27        100     95     164        60        174     167

Percent of net sales

     5.7     3.2         6.0     2.4    

Net Income from continuing operations attributable to Harman International Industries, Incorporated

     37        15        145     131     117        17        n.m.        n.m.   

Diluted earnings per share from continuing operations attributable to Harman International Industries, Incorporated

     0.51        0.21            1.64        0.24       

Restructuring-related costs

     10        6            12        14       

Goodwill impairment charge

     0        0            0        12       

Net Income from discontinued operations

     0        3            0        8       

Diluted earnings per share from Discontinued Operations

     0.00        0.05            0.00        0.12       

Non-GAAP from continuing operations1

                

Gross profit

     250        219        15     14     745        666        12     15

Percent of net sales

     26.4     26.1         27.2     26.5    

SG&A & Other

     187        186        1     1     569        580        (2 %)      2

Operating income

     63        33        93     88     176        86        105     103

Percent of net sales

     6.7     3.9         6.4     3.4    

Net Income from continuing operations attributable to Harman International Industries, Incorporated

     43        19        129     118     125        39        n.m.        n.m.   

Diluted earnings per share from continuing operations attributable to Harman International Industries, Incorporated

     0.60        0.27            1.75        0.55       

Shares outstanding – diluted (in millions)

     72        71            72        71       

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful


Summary of Continuing Operations

Gross margin increased to 26.2 percent for the third quarter ended March 31, 2011, an improvement of 0.2 percentage points. Gross margin on a non-GAAP basis increased to 26.4 percent for the third quarter, an improvement of 0.3 percentage points. SG&A and other expense as a percentage of sales on a non-GAAP basis for the third quarter declined by 2.5 percentage points to 19.7 percent. The Company’s improved operating margin was primarily driven by higher sales, the monetizing of certain intellectual property rights, and improved productivity, largely offset by our temporarily elevated gross R&D costs required to achieve key customer milestones and higher expense related to first time ever participation at several major automotive trade shows.

HARMAN exceeded its goal of $400 million in permanent cost and productivity savings under the Company’s STEP Change Cost Savings program.

Executing Against All Four Strategic Pillars

The Company made significant progress during the quarter against each of its four strategic pillars, which form the foundation for future profitable growth.

1. Growing Automotive Audio

HARMAN’s focused branding and marketing programs with its long-standing customers such as BMW, Hyundai, Lexus/Toyota, and Mercedes Benz, are gaining traction resulting in increased penetration for branded audio systems. HARMAN is also taking its world leadership in premium branded audio to hybrid and electric cars with its patented, energy-efficient GreenEdge™ technology. Recent awards in China include branded audio for a new electric vehicle by the BYD Daimler joint venture company, the Geely Motors Emgrand EC8, and the new BYD e6 electric vehicle. In addition, HARMAN introduced its revolutionary QuantumLogic™ surround technology for its JBL® Professional audio system in Ferrari’s new FF.

2. Growing Smart Infotainment

HARMAN is driving the adoption of new technologies that form the “Connected Car” ecosystem. During the quarter, HARMAN launched industry leading solutions for infotainment. Launched in cooperation with Toyota, the Entune™ infotainment system features ground-breaking connected car applications such as Microsoft Bing search for points of interest, iheartradio, and Pandora music search. HARMAN also launched its innovative navigation solution Becker® MAP PILOT for Mercedes Benz, which gives drivers a feature-rich and upgradeable navigation solution without compromising the convenience of a highly integrated in-dash OEM solution.

The Company continued to leverage its leadership position, gaining scale and penetration through its award for its next-generation platform for Volkswagen Group brands Audi, SEAT, Skoda, and Volkswagen in the Asian markets. The new award builds on HARMAN’s previously announced next-generation scalable infotainment award for the automaker’s European and US marketed vehicles. Total order value of this award is now $1.6 billion, bringing our scalable platform awards to $3.5 billion.

3. Growing in Emerging Markets

HARMAN continues to expand its presence in all businesses in the emerging markets of Brazil, Russia, India and China where the Company is targeting $1.5 billion in revenues by 2015. HARMAN reports that its Dandong facility is nearing completion in China. The custom-built, 460,000 square foot facility will be HARMAN’s largest and most technologically advanced, featuring dual operations for automotive electronics and professional audio systems. The facility is expected to come on-line in July 2011.

4. Getting Costs and Capital Right

The Company noted that while it has exceeded its cost savings goal under the STEP Change program, the discipline gained in the process continues, which included the closure or consolidation of 16 HARMAN facilities and the reduction of 2250 jobs in high-cost countries during the past three years.

The Company continues to deploy its capital wisely through investments in organic growth initiatives such as its new facility in Dandong, a planned expansion of its manufacturing operation in Hungary and its new North American manufacturing and engineering facility in Queretaro, Mexico. Additionally, the Company continues to evaluate and execute a variety of capital strategies intended to drive value to shareholders including selected technology acquisitions, such as 3dB Research Limited in Vancouver Canada, and reinstatement of the quarterly dividend.

 

2


Investor and Analyst Call on April 28, 2011

On Thursday, April 28, 2011 at 11:00 a.m. EDT, HARMAN’s management will host an analyst and investor conference call to discuss the third quarter results. Those who wish to participate via audio in the earnings conference call scheduled at 11:00 a.m. EDT should dial 1.800-891-3493 (U.S.) or +1 (212) 231-2920 (International) ten minutes before the call and reference HARMAN Access Code 21520338.

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 will be posted on the site at approximately 8:00 a.m. EDT, Thursday, April 28, 2011.

A replay of the call will also be available following its completion at approximately 1:00 pm EDT. The replay will be available through June 30, 2011 at 1:00 pm EDT. To listen to the replay, dial 1(800) 633-8284 (U.S.) or +1 (402) 977-9140 (International), Access Code: 21520338.

If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1(800) 473-0602 (US) or +1 (303) 446-4604 (International).

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 12,000 people across the Americas, Europe and Asia, and reported sales of $3.6 billion for the twelve months ending March 31, 2011. The Company’s 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 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 (1) 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; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3)warranty obligations for defects in our products; (4) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (5) 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; (6) the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) our ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for our critical organizational positions; (8) our failure to implement and maintain a comprehensive disaster recovery program; (9) 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; (10) our ability to maintain a competitive technological advantage through innovation and leading product designs; (11) 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; (12) our ability to enforce or defend our ownership and use of intellectual property rights; and (13) other risks detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and other filings made by the Company 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 Company’s sales backlog. The Company’s 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

 

3


APPENDIX

Automotive Division

 

FY 2011 Key Figures – Automotive    Three Months Ended March 31     Nine Months Ended March 31  
                

Increase

(Decrease)

               

Increase

(Decrease)

 
$ millions   

3M

FY11

   

3M

FY10

    Nominal     Local
Currency1
   

9M

FY11

   

9M

FY10

    Nominal     Local
Currency1
 

Net sales

     707        630        12     13     1,978        1,841        8     12

Gross profit

     164        145        13     13     470        439        7     12

Percent of net sales

     23.2     23.0         23.8     23.8    

SG&A & Other

     108        116        (7 %)      (6 %)      322        385        (16 %)      (12 %) 

Operating income

     56        29        92     88     148        54        175     160

Percent of net sales

     7.9     4.6         7.5     2.9    

Restructuring-related costs

     6        1            10        5       

Goodwill impairment charge

     0        0            0        12       

Non-GAAP1

                

Gross profit

     165        145        14     14     473        441        7     12

Percent of net sales

     23.3     23.1         23.9     23.9    

SG&A & Other

     104        115        (10 %)      (9 %)      315        369        (15 %)      (10 %) 

Operating income

     61        31        101     97     159        72        121     114

Percent of net sales

     8.7     4.9         8.0     3.9    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Net sales in the third quarter were $707 million, an increase of 12 percent or 13 percent in local currency, driven by higher production volumes in Automotive and market share gains in the Infotainment business. Gross margin on a non-GAAP basis in the third quarter increased slightly to 23.3 percent from 23.1 percent. SG&A and other expense on a non-GAAP basis in the third quarter was $104 million compared to $115 million in the prior year. The division’s improved operating margin was primarily driven by higher sales, the monetizing of certain intellectual property rights, and improved productivity, largely offset by our temporarily elevated gross R&D costs required to achieve key customer milestones and higher expense related to first time ever participation at several major automotive trade shows.

Automotive Division Highlights

During the quarter, HARMAN launched three industry leading solutions for infotainment and branded audio. Launched in cooperation with Toyota, the Entune™ infotainment system features ground-breaking connected car applications such as Microsoft Bing search for points of interest, iheartradio, and Pandora music search. In addition, HARMAN introduced its revolutionary QuantumLogic™ surround technology for its JBL® Professional audio system in Ferrari’s new FF. HARMAN also launched its innovative navigation solution, Becker® MAP PILOT for Mercedes Benz, which gives drivers a feature-rich and upgradeable navigation solution without compromising the convenience of a highly integrated in-dash OEM solution.

HARMAN demonstrated its broad range of connected infotainment solutions in the Rinspeed “BamBoo” concept car – the world’s first social networking vehicle – at the Geneva Auto Show. Technologies included Aha Radio on-demand, interactive, personalized radio, along with its GreenEdge energy-efficient audio solutions and HALOsonic technologies for electric vehicles.

HARMAN is collaborating with Sierra Wireless, a leader in high-speed mobile computing and wireless machine-to-machine communication, to pioneer 4G broadband connectivity for automotive customers. Together with speech-recognition leader Nuance, HARMAN Automotive is continuing to develop intuitive, intelligent voice solutions for today’s connected car.

HARMAN was awarded additional business to provide next-generation scalable infotainment systems for Volkswagen Group’s new vehicle platforms in the Asian markets. The new award builds on HARMAN’s previously announced next-generation scalable infotainment award for Volkswagen Group’s European and US marketed vehicles. Total order value of this award is now $1.6 Billion. Additional recent awards in China include branded audio for a new electric vehicle by the BYD Daimler joint venture company, the Geely Motors Emgrand EC8, and the new BYD e6 electric vehicle.

 

4


Consumer Division

 

FY 2011 Key Figures – Consumer    Three Months Ended March 31     Nine Months Ended March 31  
                

Increase

(Decrease)

               

Increase

(Decrease)

 
$ millions   

3M

FY11

   

3M

FY10

    Nominal     Local
Currency1
   

9M

FY11

   

9M

FY10

    Nominal     Local
Currency1
 

Net sales

     95        81        17     17     320        292        10     14

Gross profit

     26        22        17     17     93        80        17     21

Percent of net sales

     27.7     27.6         29.0     27.3    

SG&A & Other

     28        23        19     19     83        74        12     15

Operating income

     (1     (1     90     83     10        6        74     138

Percent of net sales

     (1.5 %)      (0.9 %)          3.1     2.0    

Restructuring-related costs

     2        1            2        4       

Goodwill impairment charge

     0        0            0        0       

Non-GAAP1

                

Gross profit

     26        23        16     16     93        80        16     21

Percent of net sales

     27.7     27.8         28.9     27.3    

SG&A & Other

     26        23        12     12     81        70        15     18

Operating income

     1        0        n.m.        n.m.        12        10        23     45

Percent of net sales

     0.7     (0.3 %)          3.7     3.3    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful

Net sales in the third quarter were $95 million, an increase of 17 percent. This growth was driven by increased market share in the Latin American and Asian markets. Gross margin on a non-GAAP basis in the third quarter was basically flat. SG&A expense on a non-GAAP basis in the third quarter was $26 million compared to $23 million in the prior year. The increase was primarily due to expanded sales channel expense and increased marketing activities.

Consumer Division Highlights

HARMAN launched 17 new products during the third quarter, which represented more than 25% of revenue.

The Company reported excellent growth in Brazil, India and China as a result of both strong market demand and increased penetration.

HARMAN continues to add new points of sale and has improved its position with Apple, Best Buy and Target, based on the launch of its JBL OnAir and OnBeat multimedia products.

The harman/kardon BDS Series of home theater systems continues gaining share in Europe and is now launching in the Americas and Asia.

 

5


Professional Division

 

FY 2011 Key Figures – Professional    Three Months Ended March 31     Nine Months Ended March 31  
                

Increase

(Decrease)

               

Increase

(Decrease)

 
$ millions   

3M

FY11

   

3M

FY10

    Nominal     Local
Currency1
   

9M

FY11

   

9M

FY10

    Nominal     Local
Currency1
 

Net sales

     146        126        16     15     442        380        16     17

Gross profit

     59        50        17     15     178        147        21     21

Percent of net sales

     40.1     39.9         40.3     38.8    

SG&A & Other

     39        35        11     10     111        95        16     17

Operating income

     19        15        29     28     68        52        29     29

Percent of net sales

     13.2     11.8         15.3     13.8    

Restructuring-related costs

     2        4            (1     4       

Goodwill impairment charge

     0        0            0        0       

Non-GAAP1

                

Gross profit

     59        51        16     14     178        149        19     19

Percent of net sales

     40.2     40.3         40.2     39.3    

SG&A & Other

     38        32        17     16     111        93        19     20

Operating income

     21        19        12     11     67        56        18     18

Percent of net sales

     14.4     14.9         15.1     14.8    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Net sales in the third quarter were $146 million, an increase of 16 percent, or 15 percent in local currency. This growth was driven by increased market share in the Latin American and Asian markets. Gross margin on a non-GAAP basis in the third quarter decreased slightly to 40.2 percent. SG&A expense on a non-GAAP basis in the third quarter was $38 million compared to $32 million in the prior year. The increase was primarily due to expanded sales channel expense and increased marketing activities.

Professional Division Highlights

HARMAN sound systems were used at the recent GRAMMY® Awards, Super Bowl XLV, the Oscars®, the Country Music Awards, and the Indian National Games. JBL VerTec Subcompact Line Array speakers received the prestigious audio industry TEC Award at the January NAMM music dealers show. JBL’s PRX600 powered speaker product line won the Music & Sound Retailer 2011 Reader’s Award for Best Speaker of 2010.

Notable installations during the quarter included the Houston Astros’ baseball stadium, Ontario, Canada’s court houses, and the Dolphin Resort Hotel at Disney World.

 

6


Other (Corporate)

 

FY 2011 Key Figures – Other    Three Months Ended March 31     Nine Months Ended March 31  
                  

Increase

(Decrease)

                 

Increase

(Decrease)

 
$ millions   

3M

FY11

    

3M

FY10

     Nominal     Local
Currency1
   

9M

FY11

    

9M

FY10

     Nominal     Local
Currency1
 

SG&A & Other

     20         16         23     23     62         48         30     30

Restructuring-related costs

     0         0             0         0        

Non-GAAP1

                    

SG&A & Other

     20         16         24     24     62         48         30     30

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

SG&A expense increased in the third quarter primarily due to investments in corporate technology, innovation and marketing programs. The Company’s Corporate Technology Center (CTC) is driving cutting-edge development in connectivity and networking, mobile Internet (Aha Radio), cloud computing, advanced driver assistance, wireless technologies, and energy-efficiency.

 

7


Harman International Industries, Incorporated

Consolidated Statements of Operations

 

     Three Months Ended
March 31,
     Nine Months Ended
March 31,
 
(In thousands, except earnings per share data; unaudited)    2011     2010      2011     2010  

Net sales

   $ 948,196      $ 837,011       $ 2,741,223      $ 2,513,712   

Cost of sales

     699,371        619,379         1,999,087        1,852,218   
                                 

Gross profit

     248,825        217,632         742,136        661,494   

Selling, general and administrative expenses

     211,362        190,748         594,108        576,055   

Loss on deconsolidation of variable interest entity

     0        0         0        13,122   

Sale of Intellectual Property

     (16,184     0         (16,184     0   

Goodwill impairment

     0        0         0        12,292   
                                 

Operating income

     53,647        26,884         164,212        60,025   

Other expenses:

         

Interest expense, net

     5,262        5,762         17,172        23,950   

Miscellaneous, net

     1,464        1,572         5,396        3,719   
                                 

Income from continuing operations before taxes

     46,921        19,550         141,644        32,356   

Income tax expense

     10,321        4,629         24,604        10,326   
                                 

Income from continuing operations net of taxes

     36,600        14,921         117,040        22,030   

Income from discontinued operations net of taxes

     0        3,339         0        8,145   
                                 

Net income

     36,600        18,260         117,040        30,175   

Less: Net income attributable to non-controlling interest

     0        0         0        5,289   
                                 

Net income attributable to Harman International Industries, Incorporated

   $ 36,600      $ 18,260       $ 117,040      $ 24,886   
                                 

Net income from continuing operations attributable to Harman International Industries, Incorporated:

         

Income from continuing operations, net of taxes

   $ 36,600      $ 14,921       $ 117,040      $ 22,030   

Less: Net income attributable to non-controlling interest

     0        0         0        5,289   
                                 

Net income from continuing operations attributable to Harman International Industries, Incorporated

   $ 36,600      $ 14,921       $ 117,040      $ 16,741   
                                 

Earnings per share from continuing operations attributable to Harman International Industries, Incorporated:

         

Basic

   $ 0.51      $ 0.21       $ 1.65      $ 0.24   

Diluted

   $ 0.51      $ 0.21       $ 1.64      $ 0.24   

Earnings per share from discontinued operations:

         

Basic

   $ 0.00      $ 0.05       $ 0.00      $ 0.12   

Diluted

   $ 0.00      $ 0.05       $ 0.00      $ 0.12   

Earnings per share:

         

Basic

   $ 0.51      $ 0.26       $ 1.65      $ 0.35   

Diluted

   $ 0.51      $ 0.26       $ 1.64      $ 0.35   

Weighted average shares outstanding:

         

Basic

     71,123        70,531         70,918        70,300   

Diluted

     71,924        70,905         71,541        70,536   

 

8


Harman International Industries, Incorporated

Consolidated Balance Sheets

 

(In thousands; unaudited)    March 31,
2011
     June 30,
2010
 

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 426,696       $ 645,570   

Short-term investments

     340,777         0   

Accounts receivable

     599,969         517,092   

Inventories

     455,070         353,123   

Other current assets

     183,539         158,194   
                 

Total current assets

     2,006,051         1,673,979   

Property, plant and equipment

     446,579         421,949   

Goodwill

     116,366         105,922   

Deferred tax assets, long term

     242,750         247,602   

Other assets

     129,504         106,763   
                 

Total assets

   $ 2,941,250       $ 2,556,215   
                 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities

     

Current portion of long-term debt

   $ 960       $ 463   

Short-term debt

     2,073         13,472   

Accounts payable

     428,395         382,985   

Accrued liabilities

     425,732         363,261   

Accrued warranties

     110,768         99,329   

Income taxes payable

     14,821         3,941   
                 

Total current liabilities

     982,749         863,451   

Convertible senior notes

     374,485         362,693   

Other senior debt

     486         1,209   

Other non-current liabilities

     230,381         193,970   
                 

Total liabilities

     1,588,101         1,421,323   
                 

Total equity

     1,353,149         1,134,892   
                 

Total liabilities and equity

   $ 2,941,250       $ 2,556,215   
                 

 

9


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

    

Three Months Ended

March 31, 2011

 
(In thousands, except earnings per share data; unaudited)    GAAP     Adjustments     Non-GAAP  

Net sales

   $ 948,196      $ 0      $ 948,196   

Cost of sales

     699,371        (1,319 )a      698,052   
                        

Gross profit

     248,825        1,319        250,144   

Selling, general and administrative expenses

     211,362        (8,220 )b      203,142   

Loss on deconsolidation of variable interest entity

     0        0        0   

Sale of Intellectual Property

     (16,184     0        (16,184

Goodwill impairment

     0        0        0   
                        

Operating income

     53,647        9,539        63,186   

Other expenses:

      

Interest expense, net

     5,262        0        5,262   

Miscellaneous, net

     1,464        0        1,464   
                        

Income from continuing operations before taxes

     46,921        9,539        56,460   

Income tax expense

     10,321        2,762 c      13,083   
                        

Income from continuing operations net of taxes

     36,600        6,777        43,377   

Less: Net income attributable to non-controlling interest

     0        0        0   
                        

Net income from continuing operations attributable to Harman International Industries, Incorporated

   $ 36,600      $ 6,777      $ 43,377   
                        

Earnings per share from continuing operations attributable to Harman International Industries, Incorporated:

      

Basic

   $ 0.51      $ 0.10      $ 0.61   

Diluted

   $ 0.51      $ 0.09      $ 0.60   

Weighted average shares outstanding:

      

Basic

     71,123          71,123   

Diluted

     71,924          71,924   

 

(a) Restructuring expense in Cost of Sales was $1.3 million due to projects to increase efficiency in manufacturing.
(b) Restructuring expense in SG&A was $8.2 million due to projects to increase efficiency in engineering and administrative functions.
(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 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 our consolidated financial statements prepared in accordance with US GAAP.

 

10


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

     Nine Months Ended
March 31, 2011
 
(In thousands, except earnings per share data; unaudited)    GAAP     Adjustments     Non-GAAP  

Net sales

   $ 2,741,223      $ 0      $ 2,741,223   

Cost of sales

     1,999,087        (2,371 )a      1,996,716   
                        

Gross profit

     742,136        2,371        744,507   

Selling, general and administrative expenses

     594,108        (9,344 )b      584,764   

Loss on deconsolidation of variable interest entity

     0        0        0   

Sale of Intellectual Property

     (16,184     0        (16,184

Goodwill impairment

     0        0        0   
                        

Operating income

     164,212        11,715        175,927   

Other expenses:

      

Interest expense, net

     17,172        0        17,172   

Miscellaneous, net

     5,396        0        5,396   
                        

Income from continuing operations before taxes

     141,644        11,715        153,359   

Income tax expense

     24,604        3,832 c      28,436   
                        

Income from continuing operations net of taxes

     117,040        7,883        124,923   

Less: Net income attributable to non-controlling interest

     0        0        0   
                        

Net income from continuing operations attributable to Harman International Industries, Incorporated

   $ 117,040      $ 7,883      $ 124,923   
                        

Earnings per share from continuing operations attributable to Harman International Industries, Incorporated:

      

Basic

   $ 1.65      $ 0.11      $ 1.76   

Diluted

   $ 1.64      $ 0.11      $ 1.75   

Weighted average shares outstanding:

      

Basic

     70,918          70,918   

Diluted

     71,541          71,541   

 

(a) Restructuring expense in Cost of Sales was $2.4 million due to projects to increase efficiency in manufacturing.
(b) Restructuring expense in SG&A was $9.3 million due to projects to increase efficiency in engineering and administrative functions.
(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 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 our consolidated financial statements prepared in accordance with US GAAP.

 

11


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

     Three Months Ended
March 31, 2010
 
(In thousands, except earnings per share data; unaudited)    GAAP      Adjustments     Non-GAAP  

Net sales

   $ 837,011       $ 0      $ 837,011   

Cost of sales

     619,379         (880 )a      618,499   
                         

Gross profit

     217,632         880        218,512   

Selling, general and administrative expenses

     190,748         (5,036 )b      185,712   

Loss on deconsolidation of variable interest entity

     0         0        0   

Sale of Intellectual Property

     0         0        0   

Goodwill impairment

     0         0        0   
                         

Operating income

     26,884         5,916        32,800   

Other expenses:

       

Interest expense, net

     5,762         0        5,762   

Miscellaneous, net

     1,572         0        1,572   
                         

Income from continuing operations before taxes

     19,550         5,916        25,466   

Income tax expense

     4,629         1,877 c      6,506   
                         

Income from continuing operations net of taxes

     14,921         4,039        18,960   

Less: Net income attributable to non-controlling interest

     0         0        0   
                         

Net income from continuing operations attributable to Harman International Industries, Incorporated

   $ 14,921       $ 4,039      $ 18,960   
                         

Earnings per share from continuing operations attributable to Harman International Industries, Incorporated:

       

Basic

   $ 0.21       $ 0.06      $ 0.27   

Diluted

   $ 0.21       $ 0.06      $ 0.27   

Weighted average shares outstanding:

       

Basic

     70,531           70,531   

Diluted

     70,905           70,905   

 

(a) Restructuring expense in Cost of Sales was $0.9 million due to projects to increase efficiency in manufacturing.
(b) Restructuring expense in SG&A was $5.0 million due to projects to increase efficiency in engineering and administrative functions.
(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 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 our consolidated financial statements prepared in accordance with US GAAP.

 

12


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

    

Nine Months Ended

March 31, 2010

 
(In thousands, except earnings per share data; unaudited)    GAAP      Adjustments     Non-GAAP  

Net sales

   $ 2,513,712       $ 0      $ 2,513,712   

Cost of sales

     1,852,218         (4,253 )a      1,847,965   
                         

Gross profit

     661,494         4,253        665,747   

Selling, general and administrative expenses

     576,055         (9,440 )b      566,615   

Loss on deconsolidation of variable interest entity

     13,122         0        13,122   

Sale of Intellectual Property

     0         0        0   

Goodwill impairment

     12,292         (12,292 )c      0   
                         

Operating income

     60,025         25,985        86,010   

Other expenses:

       

Interest expense, net

     23,950         0        23,950   

Miscellaneous, net

     3,719         0        3,719   
                         

Income from continuing operations before taxes

     32,356         25,985        58,341   

Income tax expense

     10,326         3,977 d      14,303   
                         

Income from continuing operations net of taxes

     22,030         22,008        44,038   

Less: Net income attributable to non-controlling interest

     5,289         0        5,289   
                         

Net income from continuing operations attributable to Harman International Industries, Incorporated

   $ 16,741       $ 22,008      $ 38,749   
                         

Earnings per share from continuing operations attributable to Harman International Industries, Incorporated:

       

Basic

   $ 0.24       $ 0.31      $ 0.55   

Diluted

   $ 0.24       $ 0.31      $ 0.55   

Weighted average shares outstanding:

       

Basic

     70,300           70,300   

Diluted

     70,536           70,536   

 

(a) Restructuring expense in Cost of Sales was $4.3 million due to projects to increase efficiency in manufacturing.
(b) Restructuring expense in SG&A was $9.4 million due to projects to increase efficiency in engineering and administrative functions.
(c) Goodwill impairment charge was $12.3 million.
(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 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 our consolidated financial statements prepared in accordance with US GAAP.

 

13


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

     Three Months Ended
March 31,
    Increase
(Decrease)
 
(In thousands; unaudited)    2011      2010    

Net sales – nominal currency

   $ 948,196       $ 837,011        13

Effect of foreign currency translation1

        (823  
             

Net sales - local currency

     948,196         836,188        13

Gross profit – nominal currency

     248,825         217,632        14

Effect of foreign currency translation1

        165     
             

Gross profit – local currency

     248,825         217,797        14

SG&A & Other – nominal currency

     195,178         190,748        2

Effect of foreign currency translation1

        (539  
             

SG&A & Other – local currency

     195,178         190,209        3

Operating income – nominal currency

     53,647         26,884        100

Effect of foreign currency translation1

        704     
             

Operating income – local currency

     53,647         27,588        95

 

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 Company’s 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.

 

14


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

EXCLUDING restructuring and goodwill charges    Three Months Ended
March 31,
    Increase
(Decrease)
 
(In thousands; unaudited)    2011      2010    

Net sales – nominal currency

   $ 948,196       $ 837,011        13

Effect of foreign currency translation1

        (823  
             

Net sales – local currency

     948,196         836,188        13

Gross profit - nominal currency

     250,144         218,512        15

Effect of foreign currency translation1

        167     
             

Gross profit - local currency

     250,144         218,679        14

SG&A & Other – nominal currency

     186,958         185,712        1

Effect of foreign currency translation1

        (594  
             

SG&A & Other – local currency

     186,958         185,118        1

Operating income – nominal currency

     63,186         32,800        93

Effect of foreign currency translation1

        761     
             

Operating income – local currency

     63,186         33,561        88

 

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 Company’s 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.

 

15


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

     

Nine Months Ended

March 31,

    Increase
(Decrease)
 
(In thousands; unaudited)    2011      2010    

Net sales – nominal currency

   $ 2,741,223       $ 2,513,712        9

Effect of foreign currency translation1

        (89,081  
             

Net sales - local currency

     2,741,223         2,424,631        13

Gross profit – nominal currency

     742,136         661,494        12

Effect of foreign currency translation1

        (20,425  
             

Gross profit – local currency

     742,136         641,069        16

SG&A & Other – nominal currency

     577,924         601,469        (4 %) 

Effect of foreign currency translation1

        (22,017  
             

SG&A & Other – local currency

     577,924         579,452        0

Operating income – nominal currency

     164,212         60,025        174

Effect of foreign currency translation1

        1,592     
             

Operating income – local currency

     164,212         61,617        167

 

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 Company’s 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.

 

16


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

EXCLUDING restructuring and goodwill charges   

Nine Months Ended

March 31,

    Increase
(Decrease)
 
(In thousands; unaudited)    2011      2010    

Net sales – nominal currency

   $ 2,741,223       $ 2,513,712        9

Effect of foreign currency translation1

        (89,081  
             

Net sales – local currency

     2,741,223         2,424,631        13

Gross profit - nominal currency

     744,507         665,747        12

Effect of foreign currency translation1

        (20,721  
             

Gross profit - local currency

     744,507         645,026        15

SG&A & Other – nominal currency

     568,580         579,737        (2 %) 

Effect of foreign currency translation1

        (21,540  
             

SG&A & Other – local currency

     568,580         558,197        2

Operating income – nominal currency

     175,928         86,010        105

Effect of foreign currency translation1

        819     
             

Operating income – local currency

     175,928         86,829        103

 

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 Company’s 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.

 

17


Harman International Industries, Incorporated

Total Liquidity Reconciliation

 

Total Company Liquidity   

As of

March 31,

2011

 

$ millions

  

Cash & cash equivalents

   $ 427   

Short-term investments

     341   

Available credit under Revolving Credit Facility

     543   

Total liquidity

   $ 1,311   

 

 

18