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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/d665519d8k.htm

Exhibit 99.1

 

  LOGO
 

  Contact: Sandy Rowland

  203.328.3500

  sandy.rowland@harman.com

HARMAN Reports Second Quarter Fiscal Year 2014 Results

 

  Net sales up 26% to $1.328 billion and non-GAAP EPS up 85% to $1.09

 

  Non-GAAP operating income up 90% to $108 million and generated $121 million cash from operations

 

  Raising full year revenue guidance from ~$4.7 billion to ~$5.1 billion and EPS from ~$3.85 to ~$4.16

 

  Secured $1.1 billion in new automotive awards

STAMFORD, CT, January 30, 2014 – Harman International Industries, Incorporated, the leading global infotainment and audio group (NYSE: HAR), today announced results for the second quarter ended December 31, 2013.

Net sales for the second quarter were $1.328 billion, an increase of 26 percent compared to the same period last year as all three of the Company’s divisions reported increased sales. The strong sales increase was a result of several initiatives in each division in addition to improved economic conditions. Infotainment net sales increased due to the expansion of recent production launches and higher take rates. Lifestyle growth was primarily driven by new product launches, the impact of increased marketing investments in the home and multimedia business, and increased take rates in the car audio business. The Professional division reported strong growth as a result of the expansion of the Company’s product portfolio into lighting as well as increased demand for the Company’s audio products at live entertainment events and in fixed-installation venues.

On a GAAP basis, second quarter operating income was $102 million, compared to $68 million in the same period last year, and earnings per diluted share were $1.03 for the quarter compared to $0.68. Excluding restructuring and non-recurring charges, second quarter non-GAAP operating income was $108 million, compared to $57 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $1.09 for the quarter compared to $0.59 in the same period last year.

Dinesh C. Paliwal, the Company’s Chairman, President and CEO, said, “We are extremely pleased that for the second consecutive quarter all three of our divisions reported double-digit top-line growth, which also resulted in double-digit profitability improvement. We are confident that the momentum that we built in the first half of the fiscal year is sustainable and therefore we have increased our fiscal year guidance for revenue and EPS.”

Paliwal added, “We also continue to position HARMAN for long term growth with the introduction of proprietary technology solutions that enable safety, cyber security, and rapid app development for in-car systems. These critical and high demand features can only be provided through embedded infotainment systems. They are essential for leading automakers as evidenced by $2.7 billion in new automotive awards in the first half of the fiscal year. Our technologies were further validated with prestigious CES and Red Star innovation and product design awards, and a third technical GRAMMY® Award which we won this year for our Lexicon brand.”

 

FY 2014 Key Figures – Total Company

   Three Months Ended December 31     Six Months Ended December 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    6M
FY14
    6M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     1,328        1,056        26     23     2,500        2,054        22     19

Gross profit

     379        272        40     38     701        550        27     25

Percent of net sales

     28.6     25.7         28.0     26.8    

SG&A & Other

     278        203        36     34     530        403        32     29

Operating income

     102        68        49     47     171        147        16     15

Percent of net sales

     7.7     6.5         6.8     7.2    

EBITDA

     134        99        36     34     235        206        14     12

Percent of net sales

     10.1     9.3         9.4     10.0    

Net Income

     72        47        51     48     118        102        16     13

Diluted earnings per share

     1.03        0.68        51     48     1.69        1.47        15     13

Restructuring-related costs

     6        (12         30        (11    

 

1


Non-GAAP1

                

Gross profit

     381        273        40     38     705        551        28     26

Percent of net sales

     28.7     25.8         28.2     26.8    

SG&A & Other

     273        216        26     25     503        415        21     19

Operating income

     108        57        90     88     201        136        48     46

Percent of net sales

     8.1     5.4         8.0     6.6    

EBITDA

     139        86        61     59     262        194        35     33

Percent of net sales

     10.5     8.2         10.5     9.4    

Net Income

     76        41        85 %     81     143        96        49     46

Diluted earnings per share

     1.09        0.59        85 %     81     2.04        1.38        48 %     45 %

Shares outstanding – diluted (in millions)

     70        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 second quarter of fiscal 2014 increased 284 basis points to 28.7 percent. The improvement was primarily due to the impact of higher sales volume on fixed production costs, reduced costs due to productivity initiatives and favorable product mix.

SG&A and Other expense as a percentage of net sales on a non-GAAP basis in the second quarter of fiscal 2014 was 20.6 percent, in line with the prior year.

2014 Outlook

HARMAN today raised its financial outlook for fiscal 2014. The Company now forecasts global revenue of ~$5.1 billion and operational earnings per share of ~$4.16. Details by division are provided below.

—January 30, 2014 Revised Guidance—

 

Fiscal Year 2014

   HARMAN      Infotainment Division      Lifestyle Division      Professional Division  

Sales

   ~$ 5.100 billion       ~$ 2.715 billion       ~$ 1.560 billion       ~$ 825 million   

EBITDA*

   ~$ 535 million       ~$ 295 million       ~$ 220 million       ~$ 140 million   

EPS*

   ~$ 4.16            

—August 8, 2013 Guidance—

 

Fiscal Year 2014

   HARMAN      Infotainment Division      Lifestyle Division      Professional Division  

Sales

   ~$ 4.700 billion       ~$ 2.460 billion       ~$ 1.425 billion       ~$ 815 million   

EBITDA*

   ~$ 490 million       ~$ 260 million       ~$ 200 million       ~$ 135 million   

EPS*

   ~$ 3.85            

 

* Non-GAAP, excluding restructuring and non-recurring items

Investor Call Today, January 30, 2014

At 11:00 a.m. EST today, Harman’s management will host an analyst and investor conference call to discuss the second quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 923 9042 (U.S.) or +1 (212) 231 2909 (International) ten minutes before the call and reference HARMAN, Access Code: 21703048.

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 second quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EST, Thursday, January 30, 2014.

A replay of the call will also be available following its completion at approximately 1:00 p.m. EST. The replay will be available through April 30, 2014 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: 21703048. 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).

 

2


General Information

HARMAN designs, manufactures, and markets a wide range of infotainment and audio solutions for the automotive, consumer, and professional markets. It is a recognized world leader across its customer segments with premium brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, and Mark Levinson® and leading-edge connectivity, safety and audio technologies. The Company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. HARMAN has a workforce of 14,800 people across the Americas, Europe, and Asia and reported sales of $4.7 billion for the last twelve months ended December 31, 2013. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR. Please visit www.harman.com for more information.

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 Company’s 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 Company’s 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 Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (8) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (9) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2013 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 Company’s awarded business, which represents the estimated future lifetime net sales for all customers. The Company’s future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters. To validate these awards, the company uses various assumptions including global vehicle production forecasts, customer take rates for the Company’s 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.

 

3


HAR-E

APPENDIX

Infotainment Division

 

FY 2014 Key Figures – Infotainment

   Three Months Ended December 31     Six Months Ended December 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    6M
FY14
    6M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     691        540        28     24     1,330        1,101        21     17

Gross profit

     165        113        46     42     307        242        27     23

Percent of net sales

     23.9     20.9         23.0     22.0    

SG&A & Other

     102        83        24     20     211        167        27     22

Operating income

     63        30        107     104     95        75        27     24

Percent of net sales

     9.1     5.6         7.1     6.8    

EBITDA

     79        45        75     71     127        105        21     18

Percent of net sales

     11.4     8.3         9.6     9.5    

Restructuring-related costs

     (1     (1         21        0       

Non-GAAP1

                

Gross profit

     167        113        47     43     309        242        28     24

Percent of net sales

     24.1     20.9         23.2     22.0    

SG&A & Other

     105        83        26     22     194        167        16     12

Operating income

     61        30        106     103     116        75        55     52

Percent of net sales

     8.9     5.5         8.7     6.8    

EBITDA

     76        45        71     67     145        105        39     35

Percent of net sales

     11.0     8.2         10.9     9.5    

 

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

Net sales in the second quarter of fiscal 2014 were $691 million, an increase of 28 percent compared to the prior year, or 24 percent excluding the impact of foreign currency translation. The increase in sales is due to higher automotive production volumes, the expansion of the Company’s recent production launches across car lines, and higher take rates.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin increased 317 basis points to 24.1 percent compared to the prior year primarily due to the impact of improved leverage on fixed production costs, benefits from foot-print migration initiatives, and an increased mix of scalable infotainment systems. SG&A spending decreased 20 basis points to 15.3 percent of net sales primarily due to improved operating leverage on higher sales.

Infotainment Division Highlights

During the quarter, HARMAN secured several new business awards, expanded its recent platform launches across car lines, and launched its next-generation scalable infotainment platform at the Consumer Electronics Show (“CES”) to address safety, cyber security, and application development.

HARMAN secured new awards totaling $725 million from existing and new automotive customers including VW Group, Chang’an, and Geely. The Company won infotainment system orders from Yamaha to equip motorcycles in North America and secured new business from Suzuki, making HARMAN the first non-Asian supplier to deliver an infotainment solution specifically designed for the Japanese market. HARMAN was also awarded infotainment services business from automakers BMW and Jaguar/Land Rover. These services contracts are for installed HARMAN infotainment systems and are designed to “future-proof” the infotainment solution.

HARMAN’s award-winning Uconnect system developed for Fiat/Chrysler continued its rollout on vehicles including the Jeep Cherokee, Fiat 500L, and Alfa Romeo models.

The Company is also continuing to drive its undisputed leadership in infotainment and technology innovation. At CES, HARMAN announced its next-generation scalable infotainment platform based on innovative system architecture that offers rapid development of connected car apps and advanced safety features while protecting the integrity of the system against cyber security threats. The new platform offers an HTML-5 based application environment which paves the way to an app ecosystem in the world of in-car infotainment. In addition, the new platform enhances security with hypervisor-based domain separation securing critical vehicle functions from errant or malicious software. This solution provides a foundation to support the future of autonomous driving.

 

4


Lifestyle Division

 

FY 2014 Key Figures – Lifestyle

   Three Months Ended December 31     Six Months Ended December 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    6M
FY14
    6M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     430        372        16     14     764        663        15     14

Gross profit

     136        102        33     32     243        197        24     23

Percent of net sales

     31.7     27.6         31.8     29.7    

SG&A & Other

     85        53        62     60     151        110        38     36

Operating income

     51        50        3     1     92        87        6     5

Percent of net sales

     11.9     13.4         12.1     13.1    

EBITDA

     59        59        0     (1 %)      109        104        4     3

Percent of net sales

     13.8     15.9         14.2     15.7    

Restructuring-related costs

     4        (11         6        (11    

Non-GAAP1

                

Gross profit

     136        103        32     30     243        198        23     22

Percent of net sales

     31.6     27.8         31.9     29.8    

SG&A & Other

     81        64        26     24     145        121        20     19

Operating income

     55        39        41     39     98        76        29     27

Percent of net sales

     12.9     10.5         12.8     11.5    

EBITDA

     63        48        34     32     114        92        23     22

Percent of net sales

     14.8     12.8         14.9     13.9    

 

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

Net sales in the second quarter of fiscal 2014 were $430 million, an increase of 16 percent compared to the prior year or 14 percent excluding the impact of foreign currency translation. Revenues increased double digits in both the Company’s home and multimedia product lines and the car audio business. The growth in home and multimedia was primarily due to new product introductions and the impact of the Company’s marketing initiatives. The growth in car audio was primarily due to higher automotive production volumes and increased take rates.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin increased by 384 basis points to 31.6 percent compared to the prior year primarily due to the impact of improved leverage of fixed production costs and reduced costs from foot-print migration initiatives. SG&A expense as a percentage of sales increased by 149 basis points to 18.8 percent primarily due to higher marketing costs.

Lifestyle Division Highlights

The Lifestyle Division continued to gain momentum with its award-winning home and multimedia and car audio solutions. HARMAN launched car audio systems in several vehicles, including a Lexicon system in the Hyundai Genesis and a JBL system in the Toyota Highlander. Furthermore, HARMAN secured several new car audio awards targeted for the fast-growing small car segment. Hyundai, Chang’an, Geely, and SAIC all selected HARMAN scalable audio solutions.

HARMAN won an order from Daimler for its innovative, hands-free MEMS microphones across car lines. As cars become ever more connected, voice control becomes increasingly important as a way for drivers to interact with in-vehicle systems. The MEMS microphones deliver the advantage of a small form factor and superior audio sensitivity.

HARMAN received 15 Red Star and eight CES design and innovation awards for home and multimedia products, bringing the total number of awards for the past two product cycles to a record high 62.

In November, the Company opened its first North American retail location with a flagship store on Madison Avenue in New York City. The HARMAN store is a customer experience center that transforms how consumers interact with audio products.

At CES, the Company also introduced a proprietary software solution, called Signal Doctor by Harman, which automatically analyzes and improves the audio quality of all types of compressed, digitized and streaming music sources. The technology leverages HARMAN’s expertise in music recording, signal processing, and psycho-acoustics to restore the full sound that is forfeited in the compression process. Signal Doctor by Harman will be launched by multiple automakers and in a range of home and multimedia products later this year.

 

5


Professional Division

 

FY 2014 Key Figures – Professional

   Three Months Ended December 31     Six Months Ended December 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    6M
FY14
    6M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     207        144        45     46     405        287        41     42

Gross profit

     78        56        39     40     151        111        36     37

Percent of net sales

     37.4     39.0         37.3     38.7    

SG&A & Other

     52        36        44     45     99        72        38     39

Operating income

     25        20        29     31     52        40        31     34

Percent of net sales

     12.2     13.8         12.8     13.8    

EBITDA

     31        23        33     36     62        46        35     38

Percent of net sales

     14.9     16.1         15.3     15.9    

Restructuring-related costs

     2        0            2        0       

Non-GAAP1

                

Gross profit

     78        56        40     41     152        111        36     37

Percent of net sales

     37.7     39.0         37.4     38.7    

SG&A & Other

     51        37        39     40     98        72        35     36

Operating income

     27        19        40     43     54        39        38     40

Percent of net sales

     13.0     13.5         13.3     13.6    

EBITDA

     32        23        43     46     64        45        41     43

Percent of net sales

     15.6     15.8         15.7     15.8    

 

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

Net sales in the second quarter of fiscal 2014 were $207 million, an increase of 45 percent compared to the prior year or 46 percent excluding foreign currency translation. The increase in net sales is primarily due to the expansion of the Company’s product portfolio into lighting as a result of the acquisition of Martin Professional and stronger demand for the Company’s audio products.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin decreased 136 basis points to 37.7 percent compared to the prior year primarily due to lower gross margins on lighting products. SG&A expense as a percentage of sales decreased 92 basis points to 24.6 percent due to improved operating leverage on higher sales.

Professional Division Highlights

The Professional Division continued to experience robust demand for its audio and lighting products for use at a wide range of live entertainment events and fixed-venue installations worldwide.

In the second quarter, the Company’s audio and lighting solutions were installed at the following venues: BMW World Customer Center in Germany, King Abdullah Sports Center in Saudi Arabia, Salvador International Airport in Brazil, and the St. Louis Cardinals and San Diego Padres baseball parks.

HARMAN’s Professional products were featured in numerous high profile events including the GRAMMY Awards, Grand Central Station’s 100th Anniversary Celebration, and the American and Country Music Awards.

HARMAN was also awarded its third GRAMMY Award for its technical contributions to the recording field. The technical GRAMMY recognized Lexicon’s contributions to the art and science of music recording and reproduction through innovation and excellence in product design. HARMAN is the only audio systems company to earn multiple Technical GRAMMY Awards. The Company’s AKG microphone and headphone brand and JBL brand were recognized in 2010 and 2005, respectively.

 

6


Other (Corporate)

 

FY 2014 Key Figures – Other

   Three Months Ended December 31     Six Months Ended December 31  
                   Increase
(Decrease)
                  Increase
(Decrease)
 

$ millions

   3M
FY14
     3M
FY13
     Including
Currency
Changes
    Excluding
Currency
Changes1
    6M
FY14
     6M
FY13
     Including
Currency
Changes
    Excluding
Currency
Changes1
 

SG&A & Other

     38         32         18     18     68         55         25     26

Restructuring-related costs

     2         0             2         0        

Non-GAAP1

                    

SG&A & Other

     36         32         14     14     67         55         23     23

 

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 Company’s brand identity campaign. SG&A expenses as a percentage of net sales decreased by 29 basis points to 2.7%.

 

7


HARMAN International Industries, Incorporated

Consolidated Statements of Income

 

(In thousands, except earnings per share data; unaudited)

   Three Months Ended
December 31,
     Six Months Ended
December 31,
 
     2013      2012      2013      2012  

Net sales

   $ 1,328,024       $ 1,055,642       $ 2,499,829       $ 2,053,835   

Cost of sales

     948,574         783,849         1,798,730         1,503,795   

Gross profit

     379,450         271,793         701,099         550,040   

Selling, general and administrative expenses

     277,594         203,411         529,861         402,567   

Operating income

     101,856         68,382         171,238         147,473   

Other expenses:

           

Interest expense, net

     1,855         3,687         3,825         9,682   

Foreign exchange losses, net

     3,110         988         3,971         1,139   

Miscellaneous, net

     1,792         1,430         3,121         2,609   

Income before income taxes

     95,099         62,277         160,321         134,043   

Income tax expense, net

     23,470         14,788         42,146         31,999   

Equity in loss of unconsolidated subsidiaries

     0         0         94         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 71,629       $ 47,489       $ 118,081       $ 102,044   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic

   $ 1.04       $ 0.69       $ 1.71       $ 1.48   

Diluted

   $ 1.03       $ 0.68       $ 1.69       $ 1.47   

Weighted average shares outstanding:

           

Basic

     68,715         69,009         69,131         68,846   

Diluted

     69,578         69,734         69,947         69,582   

 

8


HARMAN International Industries, Incorporated

Consolidated Balance Sheets

 

(In thousands; unaudited)

   December 31,
2013
     June 30,
2013
 

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 518,556       $ 454,258   

Short-term investments

     0         10,008   

Receivables, net

     757,006         722,711   

Inventories

     655,907         549,831   

Other current assets

     376,618         352,244   
  

 

 

    

 

 

 

Total current assets

     2,308,087         2,089,052   
  

 

 

    

 

 

 

Property, plant and equipment, net

     437,653         425,182   

Goodwill

     251,370         234,342   

Deferred tax assets, long-term, net

     240,380         260,749   

Other assets

     248,446         226,360   
  

 

 

    

 

 

 

Total assets

   $ 3,485,936       $ 3,235,685   
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities

     

Current portion of long-term debt

   $ 30,000       $ 30,000   

Short-term debt

     21,632         4,930   

Accounts payable

     616,521         498,055   

Accrued liabilities

     435,623         402,704   

Accrued warranties

     146,697         128,411   

Income taxes payable

     21,944         13,414   
  

 

 

    

 

 

 

Total current liabilities

     1,272,417         1,077,514   
  

 

 

    

 

 

 

Long-term debt

     240,038         255,043   

Pension liability

     171,888         167,687   

Other non-current liabilities

     120,664         90,570   
  

 

 

    

 

 

 

Total liabilities

     1,805,007         1,590,814   
  

 

 

    

 

 

 

Total shareholders’ equity

     1,680,929         1,644,871   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,485,936       $ 3,235,685   
  

 

 

    

 

 

 

 

9


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
December 31, 2013
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 1,328,024       $ 0      $ 1,328,024   

Cost of sales

     948,574         (1,384 )a      947,190   

Gross profit

     379,450         1,384        380,834   

Selling, general and administrative expenses

     277,594         (4,469 )b      273,125   

Operating income

     101,856         5,853        107,709   

Other expenses:

       

Interest expense, net

     1,855         0        1,855   

Foreign exchange losses, net

     3,110         0        3,110   

Miscellaneous, net

     1,792         0        1,792   

Income before income taxes

     95,099         5,853        100,952   

Income tax expense, net

     23,470         1,529 c      24,999   

Equity in loss of unconsolidated subsidiaries

     0         0        0   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 71,629       $ 4,324      $ 75,953   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 1.04       $ 0.06      $ 1.11   

Diluted

   $ 1.03       $ 0.06      $ 1.09   

Weighted average shares outstanding:

       

Basic

     68,715           68,715   

Diluted

     69,578           69,578   

 

a) Restructuring expense in Cost of Sales was $2.0 million for projects to increase manufacturing productivity; other non-recurring expense included in Cost of Sales was income of $0.6 million.
b) Restructuring expense in SG&A was $2.9 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense included in SG&A was $1.5 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 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

10


HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

 

(In thousands, except earnings per share data; unaudited)

   Six Months Ended
December 31, 2013
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 2,499,829       $ 0      $ 2,499,829   

Cost of sales

     1,798,730         (3,433 )a      1,795,297   

Gross profit

     701,099         3,433        704,532   

Selling, general and administrative expenses

     529,861         (26,455 )b      503,406   

Operating income

     171,238         29,888        201,126   

Other expenses:

       

Interest expense, net

     3,825         0        3,825   

Foreign exchange losses, net

     3,971         0        3,971   

Miscellaneous, net

     3,121         0        3,121   

Income before income taxes

     160,321         29,888        190,209   

Income tax expense, net

     42,146         5,150 c      47,296   

Equity in loss of unconsolidated subsidiaries

     94         0        94   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 118,081       $ 24,738      $ 142,819   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 1.71       $ 0.36      $ 2.07   

Diluted

   $ 1.69       $ 0.35      $ 2.04   

Weighted average shares outstanding:

       

Basic

     69,131           69,131   

Diluted

     69,947           69,947   

 

a) Restructuring expense in Cost of Sales was $4.0 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 $24.9 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense in SG&A was 1.5 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 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

 

(In thousands, except earnings per share data; unaudited)

   Three Months Ended
December 31, 2012
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 1,055,642       $ 0      $ 1,055,642   

Cost of sales

     783,849         (956 )a      782,893   

Gross profit

     271,793         956        272,749   

Selling, general and administrative expenses

     203,411         12,643 b      216,054   

Operating income

     68,382         (11,687     56,695   

Other expenses:

       

Interest expense, net

     3,687         (1,129     2,558   

Foreign exchange losses, net

     988         0        988   

Miscellaneous, net

     1,430         0        1,430   

Income before income taxes

     62,277         (10,558     51,719   

Income tax expense, net

     14,788         (4,127 )c      10,661   

Equity in loss of unconsolidated subsidiaries

     0         0        0   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 47,489       $ (6,431   $ 41,058   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 0.69       $ 0.09      $ 0.59   

Diluted

   $ 0.68       $ 0.09      $ 0.59   

Weighted average shares outstanding:

       

Basic

     69,009           69,009   

Diluted

     69,734           69,734   

 

a) Restructuring expense in Cost of Sales was $1.0 million due to projects to increase efficiency in manufacturing.
b) Non-recurring income in SG&A was $12.6 million primarily due to reduction of a contingent consideration accrual related to the acquisition of HARMAN Embedded Audio LLC, formerly known as MWM Acoustics.
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 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

 

(In thousands, except earnings per share data; unaudited)

   Six Months Ended
December 31, 2012
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 2,053,835       $ 0      $ 2,053,835   

Cost of sales

     1,503,795         (996 )a      1,502,799   

Gross profit

     550,040         996        551,036   

Selling, general and administrative expenses

     402,567         12,455 b      415,022   

Operating income

     147,473         (11,459     136,014   

Other expenses:

       

Interest expense, net

     9,682         (1,128     8,554   

Foreign exchange losses, net

     1,139         0        1,139   

Miscellaneous, net

     2,609         (26     2,583   

Income before income taxes

     134,043         (10,305     123,738   

Income tax expense, net

     31,999         (4,064 )c      27,935   

Equity in loss of unconsolidated subsidiaries

     0         0        0   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 102,044       $ (6,241   $ 95,803   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 1.48       $ 0.09      $ 1.39   

Diluted

   $ 1.47       $ 0.09      $ 1.38   

Weighted average shares outstanding:

       

Basic

     68,846           68,846   

Diluted

     69,582           69,582   

 

a) Restructuring expense in Cost of Sales was $1.0 million due to projects to increase efficiency in manufacturing.
b) Non-recurring income in SG&A was $12.5 million primarily due to reduction of a contingent consideration accrual related to the acquisition of HARMAN Embedded Audio LLC, formerly known as MWM Acoustics
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 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

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

(In thousands; unaudited)

   Three Months Ended
December 31,
     Increase
(Decrease)
 
     2013      2012         

Net sales – nominal currency

   $ 1,328,024       $ 1,055,642         26

Effect of foreign currency translation(1)

        21,622      
     

 

 

    

Net sales - local currency

     1,328,024         1,077,264         23

Gross profit – nominal currency

     379,450         271,793         40

Effect of foreign currency translation(1)

        3,902      
     

 

 

    

Gross profit – local currency

     379,450         275,695         38

SG&A & Other – nominal currency

     277,594         203,411         36

Effect of foreign currency translation(1)

        3,194      
     

 

 

    

SG&A & Other – local currency

     277,594         206,605         34

Operating income – nominal currency

     101,856         68,382         49

Effect of foreign currency translation(1)

        708      
     

 

 

    

Operating income – local currency

     101,856         69,090         47

Net income – nominal currency

     71,629         47,489         51

Effect of foreign currency translation(1)

        915      

Net income – local currency

     71,629         48,404         48

 

(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 financial statements with a better understanding of the Company’s 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. HARMAN 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

14


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
December 31,
     Increase
(Decrease)
 
     2013      2012         

Net sales – nominal currency

   $ 1,328,024       $ 1,055,642         26

Effect of foreign currency translation(1)

        21,622      
     

 

 

    

Net sales – local currency

     1,328,024         1,077,264         23

Gross profit - nominal currency

     380,834         272,749         40

Effect of foreign currency translation(1)

        3,937      
     

 

 

    

Gross profit - local currency

     380,834         276,686         38

SG&A & Other – nominal currency

     273,125         216,054         26

Effect of foreign currency translation(1)

        3,194      
     

 

 

    

SG&A & Other – local currency

     273,125         219,248         25

Operating income – nominal currency

     107,709         56,695         90

Effect of foreign currency translation(1)

        743      
     

 

 

    

Operating income – local currency

     107,709         57,438         88

Net income – nominal currency

     75,953         41,058         85

Effect of foreign currency translation(1)

        974      

Net income – local currency

     75,953         42,032         81

 

(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 Company’s 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

15


HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

(In thousands; unaudited)

   Six Months Ended
December 31,
     Increase
(Decrease)
 
     2013      2012         

Net sales – nominal currency

   $ 2,499,829       $ 2,053,835         22

Effect of foreign currency translation(1)

        47,967      
     

 

 

    

Net sales - local currency

     2,499,829         2,101,802         19

Gross profit – nominal currency

     701,099         550,040         27

Effect of foreign currency translation(1)

        9,253      
     

 

 

    

Gross profit – local currency

     701,099         559,293         25

SG&A & Other – nominal currency

     529,861         402,567         32

Effect of foreign currency translation(1)

        7,365      
     

 

 

    

SG&A & Other – local currency

     529,861         409,932         29

Operating income – nominal currency

     171,238         147,473         16

Effect of foreign currency translation(1)

        1,888      
     

 

 

    

Operating income – local currency

     171,238         149,361         15

Net income – nominal currency

     118,081         102,044         16

Effect of foreign currency translation(1)

        2,213      

Net income – local currency

     118,081         104,257         13

 

(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 financial statements with a better understanding of the Company’s 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. HARMAN 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

16


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)

   Six Months Ended
December 31,
     Increase
(Decrease)
 
     2013      2012         

Net sales – nominal currency

   $ 2,499,829       $ 2,053,835         22

Effect of foreign currency translation(1)

        47,967      
     

 

 

    

Net sales – local currency

     2,499,829         2,101,802         19

Gross profit - nominal currency

     704,532         551,036         28

Effect of foreign currency translation(1)

        9,289      
     

 

 

    

Gross profit - local currency

     704,532         560,325         26

SG&A & Other – nominal currency

     503,406         415,022         21

Effect of foreign currency translation(1)

        7,365      
     

 

 

    

SG&A & Other – local currency

     503,406         422,387         19

Operating income – nominal currency

     201,126         136,014         48

Effect of foreign currency translation(1)

        1,924      
     

 

 

    

Operating income – local currency

     201,126         137,938         46

Net income – nominal currency

     142,819         95,803         49

Effect of foreign currency translation(1)

        2,274      

Net income – local currency

     142,819         98,077         46

 

(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 Company’s 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. HARMAN 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

17


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

(In thousands, except earnings per share data; unaudited)

   Three Months Ended
December 31, 2013
     Three Months Ended
December 31, 2012
 
     GAAP      Adjustments     Non-GAAP      GAAP      Adjustments     Non-GAAP  

HARMAN:

               

Operating Income

     101,856         5,853        107,709         68,382         (11,687     56,695   

Depreciation & Amortization

     32,526         (1,435     31,091         30,299         (956     29,343   

EBITDA

     134,382         4,418        138,800         98,681         (12,643     86,038   

INFOTAINMENT:

               

Operating Income

     62,691         (1,497     61,194         30,251         (566     29,685   

Depreciation & Amortization

     16,198         (1,386     14,812         14,815         0        14,815   

EBITDA

     78,889         (2,883     76,006         45,066         (566     44,500   

LIFESTYLE:

               

Operating Income

     51,103         4,205        55,308         49,832         (10,710     39,122   

Depreciation & Amortization

     8,162         0        8,162         9,329         (932     8,397   

EBITDA

     59,265         4,205        63,470         59,161         (11,642     47,519   

PROFESSIONAL:

               

Operating Income

     25,404         1,620        27,024         19,742         (413     19,329   

Depreciation & Amortization

     5,407         (49     5,358         3,366         (24     3,342   

EBITDA

     30,811         1,571        32,382         23,108         (437     22,671   

HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these 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 HARMAN’s 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)

   Six Months Ended
December 31, 2013
     Six Months Ended
December 31, 2012
 
     GAAP      Adjustments     Non-GAAP      GAAP      Adjustments     Non-GAAP  

HARMAN:

               

Operating Income

     171,238         29,888        201,126         147,473         (11,459     136,014   

Depreciation & Amortization

     64,239         (3,454     60,785         58,843         (996     57,847   

EBITDA

     235,477         26,434        261,911         206,316         (12,455     193,861   

INFOTAINMENT:

               

Operating Income

     95,118         20,585        115,703         74,925         (294     74,631   

Depreciation & Amortization

     32,240         (2,736     29,504         30,055         0        30,055   

EBITDA

     127,358         17,849        145,207         104,980         (294     104,686   

LIFESTYLE:

               

Operating Income

     92,343         5,709        98,052         87,091         (10,843     76,248   

Depreciation & Amortization

     16,456         (621     15,835         17,066         (932     16,134   

EBITDA

     108,799         5,088        113,887         104,157         (11,775     92,382   

PROFESSIONAL:

               

Operating Income

     51,884         2,070        53,954         39,513         (322     39,191   

Depreciation & Amortization

     9,916         (97     9,819         6,127         (63     6,064   

EBITDA

     61,800         1,973        63,773         45,640         (385     45,255   

HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these 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 HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

19


HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

 

Total Company Liquidity

   December 31,
2013
 

$ millions

  

Cash & cash equivalents

   $ 519   

Short-term investments

     0   

Available credit under Revolving Credit Facility

     744   
  

 

 

 

Total liquidity

   $ 1,263   
  

 

 

 

 

20