Harman International Reports Significant Net Income Improvement on Stronger Sales
--Positive cash from operations and solid cash position allows repayment of credit revolver balance
--Harman will announce mid-term targets (FY 2013) at an investor and analyst day on April 29, 2010
Harman International Industries, Incorporated (HAR) today
announced results for the Second Quarter FY 2010 ending December 31,
2009. Net sales for the quarter were $937 million, an increase of 24
percent compared to the same period last year. Excluding foreign
currency translation, net sales increased by 15 percent. Sequentially,
sales increased 24 percent compared to the previous quarter. Excluding
non-recurring items, the second quarter generated a non-GAAP operating
profit of $53 million, compared to a non-GAAP operating loss of ($16)
million for the same period last year. On the same non-GAAP basis,
earnings per diluted share were $0.40 for the quarter compared to a loss
per diluted share of ($0.21) for the same period last year. On a GAAP
basis, earnings per diluted share were $0.23 for the quarter compared to
a loss per diluted share of ($5.45) during the same period last year.
"We are encouraged by the double-digit sales increase from the same
period a year ago and by the fact that we are delivering this
improvement to the earnings line," said Dinesh C. Paliwal, the Company’s
Chairman, President and CEO. "Our continued drive for innovation,
productivity improvement and permanent cost savings under our STEP
Change program has become part of our culture, and these will enable
Harman to execute more profitably on its large portfolio of awarded
business. With our technology leadership, we are gaining market share in
our Automotive Division, and our customers continue to reward us with
new orders. Our note holders have recently shown an additional vote of
confidence by amending a debt covenant that now allows us to revolve our
credit facility. By paying down the revolver, we will reduce interest
costs while maintaining the flexibility to adjust our cash position as
necessary."
FY 2010 Key Figures - Total Company Three Months Ended December 31 Six Months Ended December 31
Increase (Decrease) Increase (Decrease)
$ millions (except per share data) Q2 Q2 Including Excluding 1H 1H Including Excluding
FY10 FY09 Currency Currency FY10 FY09 Currency Currency
Changes Changes(2) Changes Changes(2)
Net sales 937 756 24% 15% 1,695 1,625 4% 2%
Gross profit 259 177 46% 36% 458 419 10% 7%
Percent of net sales 27.6% 23.4% 27.0% 25.8%
Operating income (loss) 39 (367) n.m. n.m. 38 (334) n.m. n.m.
Percent of net sales 4.2% (48.5%) 2.2% (20.6%)
Net Income (loss) 16 (319) n.m. n.m. 7 (298) n.m. n.m.
Diluted earnings (loss) per share 0.23 (5.45) 0.09 (5.09)
Restructuring-related costs 4 25 8 36
Goodwill impairment charge 9 325 12 325
Non-GAAP
Gross profit(1) 262 179 46% 36% 462 427 8% 6%
Percent of net sales(1) 27.9% 23.7% 27.2% 26.3%
Operating income (loss)(1) 53 (16) n.m. n.m. 58 27 115% 95%
Percent of net sales(1) 5.6% (2.1%) 3.4% 1.7%
Net Income (loss)(1) 28 (13) n.m. n.m. 25 15 61% 28%
Diluted earnings (loss) per share(1) 0.40 (0.21) 0.35 0.26
Shares outstanding - diluted (in millions) 71 59 71 59
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures
later in this release. n.m. = Not Meaningful
Summary of Operations Fiscal 2010 -- Second Quarter
Net sales in the second quarter were $937 million, an increase of 24
percent or 15 percent when adjusted for constant currency compared to
the prior year. Net sales increased in all three divisions primarily due
to improved global economic conditions combined with market share gain.
Sequentially, sales were up 24 percent compared to the previous quarter.
Gross margin on a non-GAAP basis in the second quarter increased 4.2
percentage points to 27.9 percent compared to the same period last year.
The gross margin improvement was primarily due to higher factory
utilization associated with increased sales and improved productivity as
a result of the STEP Change program. SG&A expense on a non-GAAP basis in
the second quarter was $209 million compared to $195 million in the same
period last year and essentially the same when adjusted for constant
currency. As a percentage of sales, SG&A declined 3.5 percentage points
from 25.8% to 22.3%.
Operating income on a non-GAAP basis in the second quarter was $53
million compared to an operating loss of ($16) million in the same
period last year. On a GAAP basis, operating profit was $39 million
compared to an operating loss of ($367) million during the same period
of the prior year.
Harman continues to execute ahead of schedule on its $400 million STEP
Change permanent cost-savings program. The Company has achieved $285
million in permanent savings through December 31, 2009, compared to a
target of $245 million. The Company has undertaken several new
restructuring initiatives since its last reporting period, including the
decision to close its Portable Navigation Device (PND) business.
At December 31, 2009, the Company’s cash and short-term investments
totaled $630 million compared to $535 million in the prior quarter. The
increase in cash was primarily the result of improved operating income
and a reduction of working capital.
In mid January 2010, the Company’s note holders agreed to amend a
covenant to allow the Company to revolve the debt under its existing
credit facility. By paying down the revolver, the Company will reduce
interest costs while maintaining the flexibility to adjust its cash
position as necessary.
The Company conducted several significant technology and marketing
initiatives during the quarter. These included the successful global
launch of its scalable, next-generation infotainment system at customer
events in Asia, concurrent with the formal inauguration of new regional
operations and technology facilities in China and India. New interactive
Web sites for Harman International, JBL and Harman Kardon were launched
during the quarter as part of a strategic initiative to energize the
Company’s popular brands.
Harman is sponsoring a new music and travel TV series, Music Voyager,
which began broadcasting earlier this month on PBS and National
Geographic channels in some 100 countries. Harman also served as
Official Sound Partner to last month’s 52nd annual GRAMMY(R) Awards, with
high-profile branding activities at events in Los Angeles and New York.
The Company’s microphones and headphones were honored with a prestigious
GRAMMY Award for Technical Excellence.
"We are on track to realize the full benefits of our $400 million STEP
Change program, bringing permanent improvements to every corner of our
operations," said Paliwal. "We will continue to maintain a careful
balance across our tight cost management, cutting edge innovation and
strategic marketing initiatives. While acknowledging the challenges
posed by a fragile global marketplace, we will aggressively position our
leading brands in both traditional and emerging markets".
Investor Call on February 8, 2010
NOTE: For reference during its analyst and investor conference
call, the Company has posted a set of informational slides on its
web site at www.harman.com
and accompanying this press release on www.businesswire.com.
At 4:40 p.m. EST today, Harman’s management will host an analyst and
investor conference call to discuss the second quarter results. Those
who wish to participate in the call should dial (800) 230-1096 (US) or
+1 (612) 332-0107 (International), and reference Harman International.
A replay of the call will also be available following the completion of
the call at approximately 6:40 p.m. EST. The replay will be available
through March 8, 2010. To listen to the replay, dial (800) 475-6701 (US)
or +1 (320) 365-3844 (International), Access Code: 140451.
AT&T will also be web-casting the presentation. The web-cast can be
accessed at http://65.197.1.15/att/confcast,
enter the Conference ID: 140451 and click Go. There will also be a link
to the web-cast at www.harman.com.
Participation through the web-cast will be in listen-only mode. If you
need technical assistance, call the toll-free AT&T Conference Casting
Support Help Line at (888) 793-6118 (US) or +1 (678) 749-8002
(International).
General Information
Harman International (www.harman.com)
designs, manufactures and markets a wide range of audio and infotainment
products for the automotive, consumer and professional markets. The
Company maintains a strong presence in the Americas, Europe and Asia and
employs approximately 10,000 people worldwide. The Harman International
family of brands spans some 15 leading names including AKG(R),
Harman Kardon(R), Infinity(R), JBL(R), Lexicon(R),
and Mark Levinson.(R) The Company’s stock is traded on the New
York Stock Exchange under the symbol 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
21E of the Securities Exchange Act. One should not place undue
reliance on these statements. We base these statements on
particular assumptions that we have made in light of our industry
experience, as well as our perception of historical trends, current
market conditions, current economic data, expected future developments
and other factors that we believe are appropriate under the
circumstances. These statements involve risks and uncertainties
that could cause actual results to differ materially from those
suggested in the forward-looking statements, including but not limited
to (1) our ability to successfully implement our STEP Change cost
reduction initiatives and to achieve the intended benefits and
anticipated savings of those initiatives; (2) our ability to achieve
profitability in our automotive division; (3) the loss of one or more
significant customers, or the loss of a significant platform with an
automotive customer; (4) warranty obligations for defects in our
products; (5) 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 a comprehensive disaster recovery program; (9) our
failure to comply with governmental rules and regulations, including
FCPA 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) acceptance by OEMs
and customers of our mid-platform infotainment system; (12) the outcome
of pending or future litigation and other claims, including, but not
limited to the current stockholder and ERISA lawsuits; (13) our ability
to enforce or defend our ownership and use of intellectual property; and
(14) other risks detailed in Harman International’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2009 and other filings made
by Harman International with the Securities and Exchange Commission. We
undertake no obligation to publicly update or revise any forward-looking
statement.
APPENDIX
Automotive Division
FY 2010 Key Figures - Automotive Three Months Ended December 31 Six Months Ended December 31
Increase Increase
(Decrease) (Decrease)
$ millions Q2 Q2 Including Excluding 1H 1H Including Excluding
FY10 FY09 Currency Currency FY10 FY09 Currency Currency
Changes Changes(2) Changes Changes(2)
Net sales 668 517 29% 18% 1,211 1,134 7% 4%
Gross profit 168 101 65% 50% 293 255 15% 12%
Percent of net sales 25.1% 19.6% 24.2% 22.5%
Operating income (loss) 30 (320) n.m. n.m. 25 (300) n.m. n.m.
Percent of net sales 4.4% (61.9%) 2.0% (26.4%)
Restructuring-related costs 1 7 4 16
Goodwill impairment charge 9 290 12 290
Non-GAAP
Gross profit(1) 170 103 65% 50% 295 262 13% 10%
Percent of net sales(1) 25.4% 19.9% 24.4% 23.1%
Operating income (loss)(1) 40 (23) n.m. n.m. 41 6 n.m. n.m.
Percent of net sales(1) 5.9% (4.5%) 3.4% 0.6%
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures
later in this release. n.m. = Not Meaningful
Automotive net sales for the quarter ended December 31, 2009 were $668
million, an increase of 29 percent or 18 percent when adjusted for
constant currency compared to the prior year. Sequentially, the sales
were up 23 percent compared to the previous quarter. Gross margin on a
non-GAAP basis in the second quarter increased 5.5 percentage points to
25.4 percent. The gross profit margin improvement was due to improved
leverage of fixed manufacturing expenses as a result of higher sales
volume and STEP Change program benefits.
SG&A expense on a non-GAAP basis in the second quarter was $130 million
compared to $126 million in the prior year and $137 million on a
constant currency basis. SG&A as a percentage of sales declined by 4.9
percentage points from 24.3% to 19.4%.This change is primarily the
result of STEP Change savings.
The Company entered into a strategic partnership with Neusoft
Corporation, China’s largest IT solution provider. This will enhance
access to advanced embedded systems and navigation technologies and
accelerate development. As a consequence, the Company will downsize and
eventually eliminate two engineering sites in Germany.
During the quarter, the Company launched several automotive projects,
including Mark Levinson Premium Surround Sound for the 2010 Lexus GX
460; JBL Premium Sound for the 2011 Toyota Sienna in the US; and Harman
Kardon Logic 7 HD system with Range Rover for 2010 mid model year
introduction. Harman was awarded the Infinity branded audio systems for
Chrysler’s next-generation SRT vehicles beginning with the 2012 model
year.
The Harman Automotive Division joined its OEM and technology partners
for a number of key marketing events during the quarter, including
Harman Kardon customer promotion for Mercedes; Harman Kardon sound
lounges at BMW Brand Centers; promotional activities for the Ferrari 458
Italia equipped with Harman audio and infotainment, and dealer
incentives on Harman Kardon systems for MINI.
Consumer Division
FY 2010 Key Figures - Consumer Three Months Ended December 31 Six Months Ended December 31
Increase Increase
(Decrease) (Decrease)
$ millions Q2 Q2 Including Excluding 1H 1H Including Excluding
FY10 FY09 Currency Currency FY10 FY09 Currency Currency
Changes Changes(2) Changes Changes(2)
Net sales 127 116 10% 1% 211 218 (3%) (6%)
Gross profit 35 27 33% 21% 57 53 8% 4%
Percent of net sales 27.8% 22.9% 27.1% 24.3%
Operating income (loss) 6 (25) n.m. n.m. 6 (27) n.m. n.m.
Percent of net sales 4.5% (21.8%) 3.1% (12.3%)
Restructuring-related costs 3 5 3 5
Goodwill impairment charge 0 23 0 23
Non-GAAP
Gross profit(1) 35 27 33% 21% 57 53 8% 4%
Percent of net sales(1) 27.8% 22.9% 27.1% 24.3%
Operating income (loss)(1) 9 2 n.m. n.m. 10 1 n.m. n.m.
Percent of net sales(1) 7.1% 2.0% 4.7% 0.6%
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures
later in this release. n.m. = Not Meaningful
Consumer net sales for the quarter ended December 31, 2009 were $127
million, an increase of 10 percent or 1 percent when adjusted for
constant currency compared to the prior year. Sequentially, sales were
up 52 percent compared to the previous quarter. Gross margin on a
non-GAAP basis in the second quarter increased 4.9 percentage points to
27.8 percent. The increase was primarily the result of cost savings
initiatives related to the STEP Change program.
SG&A expense on a non-GAAP basis in the second quarter was $26 million
compared to $24 million in the same period of the prior year. The
increase was primarily to support marketing activities.
The Harman Consumer Division successfully launched some 15 new products
during the quarter, including JBL Creature III Multimedia Speakers and
the Harman Kardon GLA-55 Desktop Speaker System, each of which was
prominently featured at Apple flagship stores worldwide. The division
announced in January that it has partnered with entertainment leader
Sony to launch a new JBL(R) docking station for Sony’s Walkman(R) digital
media player in Japan and to feature selected JBL products in Sony Style
stores throughout Canada. Other JBL products were featured during
daytime television on the popular Ellen DeGeneres "12 Days of Christmas"
segment, producing some 100 million audience impressions.
The division’s Sound for Vision initiative with Europe’s
Media-Saturn-Holdings (MSH) retail group for bundling of premium 3-D
sound systems with flat-screen television purchases through dedicated
in-store demonstrations exceeded expectations during the quarter. Harman
store-within-a-store installations also opened in Saturn flagship
outlets in France, Belgium and Denmark.
Professional Division
FY 2010 Key Figures - Professional Three Months Ended December 31 Six Months Ended December 31
Increase Increase
(Decrease) (Decrease)
$ millions Q2 Q2 Including Excluding 1H 1H Including Excluding
FY10 FY09 Currency Currency FY10 FY09 Currency Currency
Changes Changes(2) Changes Changes(2)
Net sales 133 113 18% 15% 254 254 0% 0%
Gross profit 51 43 19% 16% 97 98 (1%) (2%)
Percent of net sales 38.3% 37.9% 38.2% 38.7%
Operating income (loss) 21 7 n.m. n.m. 37 28 34% 32%
Percent of net sales 15.5% 6.0% 14.7% 11.0%
Restructuring-related costs 0 6 0 6
Goodwill impairment charge 0 0 0 0
Non-GAAP
Gross profit(1) 52 44 19% 16% 99 99 (1%) (1%)
Percent of net sales(1) 38.9% 38.6% 38.8% 39.0%
Operating income (loss)(1) 20 13 57% 55% 38 34 10% 9%
Percent of net sales(1) 15.2% 11.4% 14.8% 13.5%
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures
later in this release. n.m. = Not Meaningful
Professional net sales for the quarter ended December 31, 2009 were $133
million, an increase of 18 percent or 15 percent when adjusted for
constant currency compared to the same period in the prior year.
Sequentially, the sales increased 9 percent compared to the previous
quarter. Gross margin on a non-GAAP basis in the second quarter
increased 0.3 percentage points to 38.9 percent.
SG&A expense on a non-GAAP basis in the second quarter was $31 million,
which was unchanged from the same period of the prior year.
Audio systems from the Harman Professional Division were utilized during
the quarter by such leading names as Taylor Swift, Alice Cooper,
Metallica, and the world champion New York Yankees. Harman installed
audio systems were commissioned at venues such as New York’s Lincoln
Center, the Norwegian Parliament, and China’s National Day Celebration.
The City Center Las Vegas complex, one of the largest construction
projects in the US, opened in December with audio systems by Harman
Professional.
The Professional Division launched more than 25 new products during the
quarter, leveraging the power of its advanced HiQnet protocol for
systems integration. Nearly 200 Harman Professional channel partners
gathered last month to introduce new technologies and products during
the division’s International Business and Technology Conference and
subsequent NAMM exhibition.
Other (QNX and Corporate)
FY 2010 Key Figures - Other Three Months Ended December 31 Six Months Ended December 31
Increase Increase
(Decrease) (Decrease)
$ millions Q2 Q2 Including Excluding 1H 1H Including Excluding
FY10 FY09 Currency Currency FY10 FY09 Currency Currency
Changes Changes(2) Changes Changes(2)
Net sales 9 10 (5%) (5%) 18 19 (5%) (5%)
Gross profit 5 6 (19%) (19%) 10 13 (18%) (18%)
Percent of net sales 54.4% 63.3% 56.8% 66.0%
Operating income (loss) (16) (28) n.m. n.m. (31) (36) n.m. n.m.
Percent of net sales n.m. n.m. n.m. n.m.
Restructuring-related costs 0 7 0 8
Goodwill impairment charge 0 13 0 13
Non-GAAP
Gross profit(1) 5 6 (19%) (19%) 10 13 (18%) (18%)
Percent of net sales(1) 54.4% 63.3% 56.8% 66.0%
Operating income (loss)(1) (16) (8) n.m. n.m. (31) (15) n.m. n.m.
Percent of net sales(1) n.m. n.m. n.m. n.m.
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures
later in this release. n.m. = Not Meaningful
SG&A expense on a non-GAAP basis in the second quarter was $21 million
compared to $14 million in the same period of the prior year,
representing an increase of $7 million. The unfavorable variance was
primarily due to stock option forfeiture credits recorded in the prior
year, higher variable compensation expense based on improved financial
performance and an increased investment in Corporate R&D.
QNX Software Systems and Alcatel-Lucent launched their joint project, the
LTE Connected Car, a concept vehicle based on the QNX CAR
application platform. The vehicle was showcased at events in New York
and Detroit, and drew extensive coverage from trade and business media.
QNX received a million dollar custom support award from automotive tier
one supplier Denso Corporation in Japan, as well as new software
projects for next-generation medical systems from Abbot Laboratories and
Enigma Diagnostics.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($000s omitted except per share amounts; unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2009 2008 2009 2008
Net sales $ 937,489 $ 755,875 $ 1,694,857 $ 1,625,065
Cost of sales 678,594 579,018 1,236,420 1,206,278
Gross profit 258,895 176,857 458,437 418,787
Selling, general and 197,075 217,955 395,100 427,428
administrative expenses
Loss on deconsolidation of VIE 13,122 -- 13,122 --
Goodwill impairment 9,276 325,445 12,292 325,445
Operating income (loss) 39,422 (366,543 ) 37,923 (334,086 )
Other expenses:
Interest expense, net 8,608 2,740 18,165 6,142
Miscellaneous, net 921 39 2,240 1,028
Income (loss) before income taxes 29,893 (369,322 ) 17,518 (341,256 )
Income tax expense (benefit) 10,180 (50,191 ) 5,603 (43,079 )
Net income (loss) 19,713 (319,131 ) 11,915 (298,177 )
Less: Net Income (loss) attributable
to noncontrolling interest 3,614 - 5,289 (34 )
Net Income (loss) attributable to
Harman International Industries Inc. 16,099 (319,131 ) 6,626 (298,143 )
Basic earnings (loss) per share $ 0.23 ($5.45 ) $ 0.09 ($5.09 )
Diluted earnings (loss) per share $ 0.23 ($5.45 ) $ 0.09 ($5.09 )
Shares outstanding - Basic 70,474 58,555 70,324 58,539
Shares outstanding - Diluted 71,015 58,555 70,729 58,539
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000s omitted; unaudited)
December 31, December 31,
2009 2008
ASSETS
Current assets
Cash and cash equivalents $474,908 $182,016
Short-term investments 154,927 -
Accounts receivable 503,297 395,226
Inventories 366,116 449,883
Other current assets 153,827 231,732
Total current assets 1,653,075 1,258,857
Property, plant and equipment 471,680 551,872
Goodwill 85,961 80,054
Deferred tax assets, long term 272,033 210,533
Other assets 102,017 88,876
Total assets $2,584,766 $2,190,192
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt $631 $585
Accounts payable 318,582 231,345
Accrued liabilities 371,550 354,434
Accrued warranties 89,452 111,450
Income taxes payable 6,009 3,086
Total current liabilities 786,224 700,900
Borrowings under revolving credit facility 222,535 42,500
Convertible senior notes 355,326 340,869
Other senior debt 1,230 1,842
Other non-current liabilities 172,454 139,991
Total liabilities 1,537,769 1,226,102
Harman International shareholders’ equity 1,046,997 964,090
Noncontrolling interest - -
Total equity 1,046,997 964,090
Total liabilities and equity $2,584,766 $2,190,192
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
($000s omitted except per share amounts; unaudited)
Three Months Ended
December 31, 2009
GAAP Adjustments Non-GAAP
Net sales $937,489 -- $937,489
Cost of sales 678,594 ($2,838)a 675,756
Gross profit 258,895 2,838 261,733
Selling, general and 197,075 (1,128)b 195,947
administrative expenses
Loss on deconsolidation of VIE 13,122 -- 13,122
Goodwill impairment 9,276 (9,276)c 0
Operating income (loss) 39,422 13,242 52,664
Other expenses:
Interest expense, net 8,608 -- 8,608
Miscellaneous, net 921 -- 921
Income (loss) before income taxes 29,893 13,242 43,135
Income tax expense (benefit) 10,180 1,011d 11,191
Net income (loss) 19,713 12,231 31,944
Less: Net Income (loss) attributable
to noncontrolling interest 3,614 -- 3,614
Net Income (loss) attributable to
Harman International Industries Inc. 16,099 12,231 28,330
Basic earnings (loss) per share $0.23 $0.40
Diluted earnings (loss) per share $0.23 $0.40
Shares outstanding - Basic 70,474 70,474
Shares outstanding - Diluted 71,015 71,015
(a) Restructuring charges in Cost of Sales in the amount of $2.8 million
were recorded during the second quarter of fiscal 2010. These
charges were primarily related to our decision to close the Portable
Navigation Device (PND) business.
(b) Restructuring charges in SG&A in the amount of $1.1 million were
recorded during the second quarter of fiscal 2010. These charges
were taken to increase efficiency in manufacturing, engineering and
administrative functions.
(c) A goodwill impairment charge of $9.3 million was incurred during the
second quarter of fiscal 2010.
(d) The tax benefits are calculated by multiplying the actual
restructuring charge in each individual country by the discrete tax
rate within that specific country. This weighted average calculation
yielded a tax benefit rate of 25.5%. Tax benefits, if any, applied
to goodwill impairment expense are based on discrete transactions
and disclosed in the goodwill impairment footnotes of our recent SEC
filings.
Harman International has provided a reconciliation of non-GAAP
measures in order to provide the users of these financial statements
with a better understanding of our restructuring and goodwill impairment
charges incurred during the second quarter of fiscal 2010. These
non-GAAP measures are not measurements under accounting principles
generally accepted in the United States. These measurements
should be considered in addition to, but not as a substitute for, the
information contained in our consolidated financial statements prepared
in accordance with US GAAP.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
($000s omitted except per share amounts; unaudited)
Six Months Ended
December 31, 2009
GAAP Adjustments Non-GAAP
Net sales $1,694,857 -- $1,694,857
Cost of sales 1,236,420 ($3,374)a 1,233,046
Gross profit 458,437 3,374 461,811
Selling, general and 395,100 (4,542)b 390,558
administrative expenses
Loss on deconsolidation of VIE 13,122 -- 13,122
Goodwill impairment 12,292 (12,292)c --
Operating income (loss) 37,923 20,208 58,131
Other expenses:
Interest expense, net 18,165 -- 18,165
Miscellaneous, net 2,240 -- 2,240
Income (loss) before income taxes 17,518 20,208 37,726
Income tax expense (benefit) 5,603 2,097d 7,700
Net income (loss) 11,915 18,111 30,026
Less: Net Income (loss) attributable
to noncontrolling interest 5,289 -- 5,289
Net Income (loss) attributable to
Harman International Industries Inc. 6,626 18,111 24,737
Basic earnings (loss) per share $0.09 $0.35
Diluted earnings (loss) per share $0.09 $0.35
Shares outstanding - Basic 70,324 70,324
Shares outstanding - Diluted 70,729 70,729
(a) Restructuring charges in Cost of Sales in the amount of $3.4 million
were recorded during the first six months of fiscal 2010. These
charges were primarily related to our decision to close the Portable
Navigation Device (PND) business.
(b) Restructuring charges in SG&A in the amount of $4.5 million were
recorded during the first six months of fiscal 2010. These charges
were taken to increase efficiency in manufacturing, engineering and
administrative functions.
(c) A goodwill impairment charge of $12.3 million was incurred during
the first six months of fiscal 2010.
(d) The tax benefits are calculated by multiplying the actual
restructuring charge in each individual country by the discrete tax
rate within that specific country. This weighted average calculation
yielded a tax benefit rate of 26.5%. Tax benefits, if any, applied
to goodwill impairment expense are based on discrete transactions
and disclosed in the goodwill impairment footnotes of our recent SEC
filings.
Harman International has provided a reconciliation of non-GAAP
measures in order to provide the users of these financial statements
with a better understanding of our restructuring and goodwill impairment
charges incurred during the first six months of fiscal 2010. These
non-GAAP measures are not measurements under accounting principles
generally accepted in the United States. These measurements
should be considered in addition to, but not as a substitute for, the
information contained in our consolidated financial statements prepared
in accordance with US GAAP.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
($000s omitted except per share amounts; unaudited)
Three Months Ended
December 31, 2008
GAAP Adjustments Non-GAAP
Net sales $755,875 -- $755,875
Cost of sales 579,018 ($2,184)a 576,834
Gross profit 176,857 2,184 179,041
Selling, general and 217,955 (23,067)b 194,888
administrative expenses
Goodwill impairment 325,445 (325,445)c --
Operating income (loss) (366,543) 350,696 (15,847)
Other expenses:
Interest expense, net 2,740 -- 2,740
Miscellaneous, net 39 -- 39
Income (loss) before income taxes (369,322) 350,696 (18,626)
Income tax expense (benefit) (50,191) 44,083d (6,108)
Net income (loss) (319,131) 306,613 (12,518)
Less: Net Income (loss) attributable
to noncontrolling interest -- -- --
Net Income (loss) attributable to
Harman International Industries Inc. (319,131) 306,613 (12,518)
Basic earnings (loss) per share ($5.45) ($0.21)
Diluted earnings (loss) per share ($5.45) ($0.21)
Shares outstanding - Basic 58,555 58,555
Shares outstanding - Diluted 58,555 58,555
(a) Restructuring charges in Cost of Sales in the amount of $2.2 million
were recorded during the second quarter of fiscal 2009. These
charges were taken to increase efficiency in manufacturing.
(b) Restructuring charges in SG&A in the amount of $23.1 million were
recorded during the second quarter of fiscal 2009. Charges were
taken to increase efficiency in manufacturing, engineering and
administrative functions.
(c) A goodwill impairment charge of $325.4 million was incurred during
the second quarter of fiscal 2009.
(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. Tax benefits, if any, applied to
goodwill impairment expense are based on discrete transactions and
disclosed in the goodwill impairment footnotes of our recent SEC
filings.
Harman International has provided a reconciliation of non-GAAP
measures in order to provide the users of these financial statements
with a better understanding of our restructuring and goodwill impairment
charges incurred during the second quarter of fiscal 2009. 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.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
($000s omitted except per share amounts; unaudited)
Six Months Ended
December 31, 2008
GAAP Adjustments Non-GAAP
Net sales $1,625,065 -- $1,625,065
Cost of sales 1,206,278 ($7,795)a 1,198,483
Gross profit 418,787 7,795 426,582
Selling, general and 427,428 (27,936)b 399,492
administrative expenses
Goodwill impairment 325,445 (325,445)c --
Operating income (loss) (334,086) 361,176 27,090
Other expenses:
Interest expense, net 6,142 -- 6,142
Miscellaneous, net 1,028 -- 1,028
Income (loss) before income taxes (341,256) 361,176 19,920
Income tax expense (benefit) (43,079) 47,645d 4,566
Net income (loss) (298,177) 313,531 15,354
Less: Net Income (loss) attributable
to noncontrolling interest (34) -- (34)
Net Income (loss) attributable to
Harman International Industries Inc. (298,143) 313,531 15,388
Basic earnings (loss) per share ($5.09) $0.26
Diluted earnings (loss) per share ($5.09) $0.26
Shares outstanding - Basic 58,539 58,847
Shares outstanding - Diluted 58,539 58,908
(a) Restructuring charges in Cost of Sales in the amount of $7.8 million
were recorded during the first six months of fiscal 2009. These
charges were taken to increase efficiency in manufacturing.
(b) Restructuring charges in SG&A in the amount of $27.9 million were
recorded during the first six months of fiscal 2009. Charges were
taken to increase efficiency in manufacturing, engineering and
administrative functions.
(c) A goodwill impairment charge of $325.4 million was incurred during
the first six months of fiscal 2009.
(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. Tax benefits, if any, applied to
goodwill impairment expense are based on discrete transactions and
disclosed in the goodwill impairment footnotes of our recent SEC
filings.
Harman International has provided a reconciliation of non-GAAP
measures in order to provide the users of these financial statements
with a better understanding of our restructuring and goodwill impairment
charges incurred during the first six months of fiscal 2009. 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.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
RECONCILIATION OF NON-GAAP MEASURES
EXCLUDING EFFECT OF FOREIGN CURRENCY TRANSLATION
($000s Omitted; unaudited)
Three Months Ended Increase
December 31,
2009 2008 (Decrease)
Net sales $937,489 $755,875 24 %
Effect of foreign currency translation(1) -- 59,776
Net sales, excluding effect of foreign currency translation 937,489 815,651 15 %
Operating income (loss) 39,422 (366,543 ) n.m.
Effect of foreign currency translation(1) -- (15,056 )
Operating income (loss), excluding effect of foreign currency 39,422 (381,599 ) n.m.
translation
Net income (loss) attributable to Harman International Industries 16,099 (319,131 ) n.m.
Inc.
Effect of foreign currency translation(1) -- (14,234 )
Net income (loss), excluding effect of foreign currency $16,099 ($333,365 ) n.m.
translation, attributable to Harman International Industries Inc.
(1)Impact of restating prior year results at current year
foreign exchange rates. Constant currency results are calculated by
translating the prior year results from the local currencies into USD at
the same average foreign currency exchange rates used to translate the
current period results.
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.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
RECONCILIATION OF NON-GAAP MEASURES
EXCLUDING EFFECT OF FOREIGN CURRENCY TRANSLATION
($000s Omitted; unaudited)
Six Months Ended Increase
December 31,
2009 2008 (Decrease)
Net sales $1,694,857 $1,625,065 4 %
Effect of foreign currency translation(1) -- 34,225
Net sales, excluding effect of foreign currency translation 1,694,857 1,659,290 2 %
Operating income (loss) 37,923 (334,086 ) n.m.
Effect of foreign currency translation(1) -- (12,922 )
Operating income (loss), excluding effect of foreign currency 37,923 (347,008 ) n.m.
translation
Net income (loss) attributable to Harman International Industries 6,626 (298,143 ) n.m.
Inc.
Effect of foreign currency translation(1) -- (11,651 )
Net income (loss), excluding effect of foreign currency $6,626 ($309,794 ) n.m.
translation, attributable to Harman International Industries Inc.
(1)Impact of restating prior year results at current year
foreign exchange rates. Constant currency results are calculated by
translating the prior year results from the local currencies into USD at
the same average foreign currency exchange rates used to translate the
current period results.
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.
