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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/d716738d8k.htm

Exhibit 99.1

 

      LOGO
      Contact: Sandy Rowland
      203.328.3500
      sandy.rowland@harman.com

HARMAN Reports Third Quarter Fiscal Year 2014 Results

 

    Net sales climb 32% to $1.4 billion; China sales up 60%

 

    Non-GAAP operating income up 63% to $108 million and EPS up 41% to $1.12

 

    Raises full year revenue guidance by $175 million to $5.275 billion and non-GAAP EPS from ~$4.16 to ~$4.36

STAMFORD, CT, May 1, 2014 – Harman International Industries, Incorporated (NYSE: HAR), the leading global infotainment and audio group, today announced results for the third quarter ended March 31, 2014.

Net sales for the third quarter were $1.404 billion, an increase of 32 percent compared to the same period last year, as all three of the Company’s divisions reported increased sales. Infotainment net sales were up due to higher automotive production and take rates. Lifestyle growth was driven by one large order from a mobile telecommunications customer and accelerated sales of new products launched earlier in the year in the home and multimedia business, and an increase in automotive production in the car audio business. Professional net sales increased as a result of the expansion of the Company’s product portfolio into lighting.

On a GAAP basis, third quarter operating income was $101 million, compared to $38 million in the same period last year, and earnings per diluted share were $1.05 for the quarter compared to $0.50. Excluding restructuring and non-recurring charges, third quarter non-GAAP operating income was $108 million, compared to $66 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $1.12 for the quarter compared to $0.79 in the same period last year.

“We are extremely pleased that, for the third consecutive quarter, all three of our divisions reported double-digit top-line growth, facilitating a 42 percent improvement in EBITDA,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO. “In our automotive businesses, we are capitalizing on robust demand for an embedded connected car experience and a more favorable production environment. There is pent up demand, particularly in Europe, which we expect will stabilize in the coming quarters. In our other businesses, we continue to gain traction with our award-winning innovative products and the expansion of our distribution channels globally. As a result of our continued success and the current positive trends in automotive industry, we have increased our revenue and EPS forecast for a second time this year.”

 

FY 2014 Key Figures – Total Company

   Three Months Ended March 31     Nine Months Ended March 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    9M
FY14
    9M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     1,404        1,062        32     31     3,904        3,116        25     23

Gross profit

     365        269        36     34     1,066        819        30     28

Percent of net sales

     26.0     25.4         27.3     26.3    

SG&A & Other

     263        231        14     13     793        634        25     23

Operating income

     101        38        165     169     273        186        47     46

Percent of net sales

     7.2     3.6         7.0     6.0    

EBITDA

     134        71        88     89     370        278        33     32

Percent of net sales

     9.6     6.7         9.5     8.9    

Net Income

     73        35        110     108     191        137        40     37

Diluted earnings per share

     1.05        0.50        110     108     2.74        1.97        39     37

Restructuring-related costs

     7        28            37        17       

Non-GAAP1

                

Gross profit

     367        273        34     33     1,071        824        30     28

Percent of net sales

     26.1     25.7         27.4     26.4    

SG&A & Other

     259        207        25     25     762        622        23     21

Operating income

     108        66        63     61     309        202        53     51

Percent of net sales

     7.7     6.2         7.9     6.5    

EBITDA

     139        98        42     40     401        292        37     35

Percent of net sales

     9.9     9.2         10.3     9.4    

Net Income

     78        55        41     37     221        151        46     42

Diluted earnings per share

     1.12        0.79        41     37     3.16        2.17        46     42

Shares outstanding – diluted (in millions)

     70        70            70        70       

 

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

 

1


Summary of Operations – Gross Margin and SG&A

Non-GAAP gross margin for the third quarter of fiscal 2014 increased 43 basis points to 26.1 percent. The improvement was primarily due to the impact of higher sales volume on fixed production costs and favorable product mix in the Infotainment Division, partially offset by lower gross margin in the Lifestyle Division due to a change in product mix.

In the third quarter of fiscal 2014, SG&A and Other expense as a percentage of net sales decreased 103 basis points to 18.4 percent on a non-GAAP basis. The improvement was primarily related to operating leverage from higher sales.

Fiscal 2014 Outlook

HARMAN today raised its financial outlook for fiscal 2014. The Company now forecasts global revenue of ~$5.275 billion, non-GAAP EBITDA of ~$550 million and earnings per share of ~$4.36.

 

FY’14 Guidance

   Sales    EBITDA*    EPS*

Revised May 1, 2014

   ~$5.275 billion    ~$550 million    ~$4.361

Revised Jan 30, 2014

   ~$5.100 billion    ~$535 million    ~$4.161

Aug 8, 2013

   ~$4.700 billion    ~$490 million    ~$3.852

 

* Non-GAAP, excluding restructuring and non-recurring items
1  Assumes outstanding share count of 70 million shares
2  Assumes outstanding share count of 67 million shares

Investor Call Today, May 1, 2014

At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the third quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 785 8944 (U.S.) or +1 (212) 231 2928 (International) ten minutes before the call and reference HARMAN, Access Code: 21713193.

In addition, HARMAN invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal third quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT, Thursday, May 1, 2014.

A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through August 1, 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: 21713193. 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 (www.harman.com) 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 15,200 people across the Americas, Europe, and Asia and reported sales of $5.1 billion for the last twelve months ended March 31, 2014. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.

A reconciliation of the non-GAAP measures included in this press release to the most comparable GAAP measures is provided in the tables contained at the end of this press release. HARMAN does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.

Forward-Looking Information

Except for historical information contained herein, the matters discussed 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 the 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.

HAR-E

 

3


APPENDIX

Infotainment Division

 

FY 2014 Key Figures – Infotainment

   Three Months Ended March 31     Nine Months Ended March 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    9M
FY14
    9M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     736        569        29     26     2,066        1,669        24     20

Gross profit

     158        110        44     41     464        351        32     28

Percent of net sales

     21.4     19.3         22.5     21.0    

SG&A & Other

     97        88        10     8     309        255        21     17

Operating income

     60        21        184     175     155        96        62     58

Percent of net sales

     8.2     3.7         7.5     5.8    

EBITDA

     77        38        105     99     204        143        43     39

Percent of net sales

     10.5     6.6         9.9     8.5    

Restructuring-related costs

     3        11            23        11       

Non-GAAP1

                

Gross profit

     160        110        46     43     469        351        34     30

Percent of net sales

     21.7     19.3         22.7     21.0    

SG&A & Other

     96        77        25     24     290        244        19     15

Operating income

     63        32        95     87     179        107        67     62

Percent of net sales

     8.6     5.7         8.7     6.4    

EBITDA

     78        49        59     54     223        154        45     41

Percent of net sales

     10.6     8.6         10.8     9.2    

 

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

Net sales in the third quarter of fiscal 2014 were $736 million, an increase of 29 percent compared to the prior year, or 26 percent excluding the impact of foreign currency translation. The increase in sales was due to higher automotive production, the expansion of the Company’s recent production launches across car lines, and higher take rates.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin increased 244 basis points to 21.7 percent compared to the same period in the prior year primarily due to the impact of improved leverage on fixed production costs, benefits from footprint migration restructuring initiatives, and an increased mix of scalable infotainment systems. SG&A spending decreased 45 basis points to 13.1 percent of net sales primarily due to improved operating leverage on higher sales.

Infotainment Division Highlights

During the quarter, HARMAN expanded recent platform launches across additional car lines, secured new business awards, and successfully commenced production on new programs globally.

BMW expanded the NBT infotainment system across additional car lines. In addition, Daimler extended the NTG5 infotainment solution previously launched in the Mercedes S-Class flagship vehicle into their C- and V-Class vehicles. The Company also successfully launched programs across a number of VW Group vehicles, including the Audi TT, the Porsche Macan and 911 Targa, and the Lamborghini Huracan.

HARMAN won an award to equip Scion vehicles with a Gen II infotainment system in North America. Toyota Europe also awarded HARMAN follow-on business to supply infotainment solutions across its car models.

At the Geneva Motor Show in March, a number of automotive manufacturers launched new vehicles featuring HARMAN technology. HARMAN also continued its global roll-out of advanced solutions for the connected car with 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 for an app ecosystem for embedded 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.

HARMAN has started integrating smart apps like Apple CarPlay™ and Google Automotive Link™ into its embedded infotainment solutions.

 

4


Lifestyle Division

 

FY 2014 Key Figures – Lifestyle

   Three Months Ended March 31     Nine Months Ended March 31  
                 Increase
(Decrease)
                Increase
(Decrease)
 

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    9M
FY14
    9M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     468        327        43     43     1,232        991        24     23

Gross profit

     131        98        33     33     374        295        27     26

Percent of net sales

     27.9     29.9         30.4     29.7    

SG&A & Other

     79        75        6     5     230        184        25     24

Operating income

     51        23        119     128     144        111        30     30

Percent of net sales

     11.0     7.2         11.7     11.2    

EBITDA

     60        33        83     87     169        137        23     23

Percent of net sales

     12.8     10.0         13.7     13.8    

Restructuring-related costs

     2        15            8        4       

Non-GAAP1

                

Gross profit

     131        99        32     31     374        297        26     25

Percent of net sales

     27.9     30.3         30.4     30.0    

SG&A & Other

     78        61        28     27     223        182        22     21

Operating income

     53        39        38     38     151        115        32     31

Percent of net sales

     11.4     11.8         12.3     11.6    

EBITDA

     62        47        32     32     176        139        26     25

Percent of net sales

     13.2     14.3         14.3     14.0    

 

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

Net sales in the third quarter of fiscal 2014 were $468 million, an increase of 43 percent compared to same period in the prior year. The growth in the home and multimedia business was primarily due to one large order from a mobile telecommunications customer and accelerated sales of new products launched earlier in the year. The growth in the car audio business was primarily driven by an increase in automotive production and higher take rates.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin decreased by 238 basis points to 27.9 percent compared to the same period in the prior year primarily due to a higher proportion of revenue coming from the home and multimedia business versus the higher margin car audio business. SG&A expense as a percentage of sales decreased by 197 basis points to 16.6 percent primarily due to improved operating leverage.

Lifestyle Division Highlights

The Lifestyle Division continued to gain momentum with its award-winning home and multimedia and car audio solutions. During the quarter, HARMAN entered into an agreement with Softbank (Japan), including its subsidiaries Sprint (U.S.A.), Trikomsel (Indonesia), and Brightstar (worldwide). Softbank is exclusively selling the newly designed Harman Kardon® Onyx Studio™ portable wireless speaker to its customers globally. The Onyx Studio™ is now the third HARMAN product to exceed one million units shipped.

HARMAN also received 19 Red Star (China), 13 iF (Germany), and eight CES (USA) design and innovation awards for its home and multimedia products. In February, the Company opened a new retail flagship store in Moscow. The Company also has flagship stores in Beijing, New York, Seoul, and Shanghai.

In addition, HARMAN secured new and follow-on car audio awards from Chrysler, Lexus, Toyota, as well as Chinese automakers Brilliance, Great Wall and Dongfeng. Building on its award to provide a high-end Revel audio solution for Ford’s Lincoln vehicles, HARMAN won its first order for HALOsonic External Electronic Sound Synthesis, or eESS. HALOsonic eESS generates engine sounds for ultra-quiet electric vehicles, helping to create a safer environment for other drivers and pedestrians.

Chrysler presented HARMAN with its 2013 Innovation Award for the outstanding performance of the HALOsonic Engine Order Cancellation (EOC) technology. Frost & Sullivan also recognized the Company with its prestigious 2014 Global Product Leadership Award for Premium Automotive Audio. Finally, both Clari-Fi™ and QuantumLogic Surround 3D® each won Plus X Awards for Innovation and High Quality.

HARMAN continued to roll-out its proprietary Clari-Fi™ technology. Previously branded as Signal Doctor™, Clari-Fi™ leverages HARMAN’s expertise in music recording, signal processing and psycho-acoustics to restore the full sound that is forfeited during the compression process. Clari-Fi™ has been launched in the Company’s JBL Authentics product line and debuted in the automotive market in the new Lexus NX vehicle. It is also an integral part of the new HTC One M8 Harman Kardon edition smart phone launched by Sprint in North America earlier this week.

 

5


Professional Division

 

FY 2014 Key Figures – Professional

   Three Months Ended March 31     Nine Months Ended March 31  
                 Increase (Decrease)                 Increase (Decrease)  

$ millions

   3M
FY14
    3M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
    9M
FY14
    9M
FY13
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     200        165        21     23     605        453        34     35

Gross profit

     76        61        25     26     227        172        32     33

Percent of net sales

     38.1     37.0         37.6     38.1    

SG&A & Other

     52        40        28     28     151        112        35     35

Operating income

     25        21        19     22     77        60        27     30

Percent of net sales

     12.4     12.6         12.7     13.3    

EBITDA

     30        25        19     22     92        71        30     32

Percent of net sales

     14.9     15.2         15.2     15.6    

Restructuring-related costs

     1        2            3        1       

Non-GAAP1

                

Gross profit

     76        64        20     21     228        175        30     31

Percent of net sales

     38.1     38.4         37.7     38.6    

SG&A & Other

     50        41        23     23     148        113        31     31

Operating income

     26        22        16     18     80        62        30     32

Percent of net sales

     13.0     13.6         13.2     13.6    

EBITDA

     31        27        16     18     95        72        32     34

Percent of net sales

     15.5     16.2         15.7     15.9    

 

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

Net sales in the third quarter of fiscal 2014 were $200 million, an increase of 21 percent compared to the prior year or 23 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.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin decreased 30 basis points to 38.1 percent compared to the prior year primarily related to new product introduction launch costs. SG&A expense as a percentage of sales increased 33 basis points to 25.2 percent due to integration costs related to acquisitions.

Professional Division Highlights

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

In the third quarter, the Company’s audio and lighting system solutions were installed at FirstEnergy Stadium, home of the Cleveland Browns, and the new Marassi Civic Center in Egypt. The Company’s systems were installed as upgrades for numerous other entertainment, hospitality and transportation facilities, such as the San Francisco Muni Public Transit System.

HARMAN’s Professional products powered a wide range of high-profile televised award shows, special events music festivals, and tours. These included the 47th Annual Super Bowl Halftime Show, the NBA All-Star Game Concert, and the GRAMMY Awards. In Brazil, HARMAN audio systems were also utilized at world-renowned Carnival events in key cities such as Rio de Janeiro and Sao Paulo.

HARMAN’s Professional Division launched 50 new products during the third quarter. At the annual National Association of Music Merchants (NAMM) trade show, the Company’s recently-launched AKG and JBL products won Technical Excellence & Creativity Awards.

 

6


Other (Corporate)

 

FY 2014 Key Figures – Other

   Three Months Ended March 31     Nine Months Ended March 31  
                   Increase (Decrease)                   Increase (Decrease)  

$ millions

   3M
FY14
     3M
FY13
     Including
Currency
Changes
    Excluding
Currency
Changes1
    9M
FY14
     9M
FY13
     Including
Currency
Changes
    Excluding
Currency
Changes1
 

SG&A & Other

     35         28         27     27     104         82         26     26

Restructuring-related costs

     1         0             2         0        

Non-GAAP1

                    

SG&A & Other

     34         28         24     24     101         82         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 the Company’s net sales decreased by 17 basis points to 2.4%.

 

7


HARMAN International Industries, Incorporated

Consolidated Statements of Income

 

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

   Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2014      2013     2014      2013  

Net sales

   $ 1,404,235       $ 1,061,772      $ 3,904,064       $ 3,115,607   

Cost of sales

     1,039,462         792,577        2,838,192         2,296,372   

Gross profit

     364,773         269,195        1,065,872         819,235   

Selling, general and administrative expenses

     263,340         230,933        793,201         633,500   

Operating income

     101,433         38,262        272,671         185,735   

Other expenses:

          

Interest expense, net

     2,111         1,614        5,936         11,296   

Foreign exchange losses (gains), net

     774         (1,645     4,745         (506

Miscellaneous, net

     2,682         1,174        5,803         3,783   

Income before income taxes

     95,866         37,119        256,187         171,162   

Income tax expense, net

     22,369         2,207        64,515         34,206   

Equity in net loss of unconsolidated subsidiaries

     112         39        206         39   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 73,385       $ 34,873      $ 191,466       $ 136,917   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share:

          

Basic

   $ 1.06       $ 0.50      $ 2.77       $ 1.99   

Diluted

   $ 1.05       $ 0.50      $ 2.74       $ 1.97   

Weighted average shares outstanding:

          

Basic

     68,939         69,109        69,067         68,932   

Diluted

     69,888         69,892        69,877         69,676   

 

 

8


HARMAN International Industries, Incorporated

Consolidated Balance Sheets

 

(In thousands; unaudited)

   March 31,
2014
     June 30,
2013
 

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 566,873       $ 454,258   

Short-term investments

     0         10,008   

Receivables, net

     932,881         722,711   

Inventories

     654,997         549,831   

Other current assets

     332,039         352,244   

Total current assets

     2,486,790         2,089,052   

Property, plant and equipment, net

     445,100         425,182   

Goodwill

     257,592         234,342   

Deferred tax assets, long-term, net

     240,857         260,749   

Other assets

     237,963         226,360   
  

 

 

    

 

 

 

Total assets

   $ 3,668,302       $ 3,235,685   
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities

     

Current portion of long-term debt

   $ 33,750       $ 30,000   

Short-term debt

     15,475         4,930   

Accounts payable

     664,735         498,055   

Accrued liabilities

     497,458         402,704   

Accrued warranties

     157,973         128,411   

Income taxes payable

     23,008         13,414   

Total current liabilities

     1,392,399         1,077,514   

Long-term debt

     228,785         255,043   

Pension liability

     172,358         167,687   

Other non-current liabilities

     107,585         90,570   

Total liabilities

     1,901,127         1,590,814   

Total shareholders’ equity

     1,767,175         1,644,871   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,668,302       $ 3,235,685   
  

 

 

    

 

 

 

 

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HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

 

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

   Three Months Ended
March 31, 2014
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 1,404,235       $ 0      $ 1,404,235   

Cost of sales

     1,039,462         (2,110 )a      1,037,352   

Gross profit

     364,773         2,110        366,883   

Selling, general and administrative expenses

     263,340         (4,535 )b      258,805   

Operating income

     101,433         6,645        108,078   

Other expenses:

       

Interest expense, net

     2,111         0        2,111   

Foreign exchange losses, net

     774         0        774   

Miscellaneous, net

     2,682         0        2,682   

Income before income taxes

     95,866         6,645        102,511   

Income tax expense, net

     22,369         1,987 c      24,356   

Equity in net loss of unconsolidated subsidiaries

     112         0        112   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 73,385       $ 4,658      $ 78,043   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 1.06       $ 0.07      $ 1.13   

Diluted

   $ 1.05       $ 0.07      $ 1.12   

Weighted average shares outstanding:

       

Basic

     68,939           68,939   

Diluted

     69,888           69,888   

 

a) Restructuring expense in Cost of Sales was $2.1 million for projects to increase manufacturing productivity
b) Restructuring expense in SG&A was $2.6 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense included in SG&A was $1.9 million.
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)

   Nine Months Ended
March 31, 2014
 
     GAAP      Adjustments     Non-GAAP  

Net sales

   $ 3,904,064       $ 0      $ 3,904,064   

Cost of sales

     2,838,192         (5,543 )a      2,832,649   

Gross profit

     1,065,872         5,543        1,071,415   

Selling, general and administrative expenses

     793,201         (30,990 )b      762,211   

Operating income

     272,671         36,533        309,204   

Other expenses:

       

Interest expense, net

     5,936         0        5,936   

Foreign exchange losses, net

     4,745         0        4,745   

Miscellaneous, net

     5,803         0        5,803   

Income before income taxes

     256,187         36,533        292,720   

Income tax expense, net

     64,515         7,137 c      71,652   

Equity in net loss of unconsolidated subsidiaries

     206         0        206   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 191,466       $ 29,396      $ 220,862   
  

 

 

    

 

 

   

 

 

 

Earnings per share:

       

Basic

   $ 2.77       $ 0.43      $ 3.20   

Diluted

   $ 2.74       $ 0.42      $ 3.16   

Weighted average shares outstanding:

       

Basic

     69,067           69,067   

Diluted

     69,877           69,877   

 

a) Restructuring expense in Cost of Sales was $6.1 million due to projects to increase productivity in manufacturing; other non- recurring expense included in Cost of Sales was income of $0.6 million.
b) Restructuring expense in SG&A was $27.6 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense in SG&A was 3.4 million.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.

HARMAN 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
March 31, 2013
 
     GAAP     Adjustments     Non-GAAP  

Net sales

   $ 1,061,772      $ 0      $ 1,061,772   

Cost of sales

     792,577        (3,659 )a      788,918   

Gross profit

     269,195        3,659        272,854   

Selling, general and administrative expenses

     230,933        (24,328 )b      206,605   

Operating income

     38,262        27,987        66,249   

Other expenses:

      

Interest expense, net

     1,614        0        1,614   

Foreign exchange (gains), net

     (1,645     0        (1,645

Miscellaneous, net

     1,174        0        1,174   

Income before income taxes

     37,119        27,987        65,106   

Income tax expense, net

     2,207        7,676 c      9,883   

Equity in net loss of unconsolidated subsidiaries

     39        0        39   
  

 

 

   

 

 

   

 

 

 

Net income

   $ 34,873      $ 20,311      $ 55,184   
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

   $ 0.50      $ 0.29      $ 0.80   

Diluted

   $ 0.50      $ 0.29      $ 0.79   

Weighted average shares outstanding:

      

Basic

     69,109          69,109   

Diluted

     69,892          69,892   

 

a) Restructuring expense in Cost of Sales was $3.7 million due to projects to increase efficiency in manufacturing.
b) Restructuring expense in SG&A was $24.3 million primarily due to projects to increase efficiency in engineering and administrative functions.
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)

   Nine Months Ended
March 31, 2013
 
     GAAP     Adjustments     Non-GAAP  

Net sales

   $ 3,115,607      $ 0      $ 3,115,607   

Cost of sales

     2,296,372        (4,654 )a      2,291,718   

Gross profit

     819,235        4,654        823,889   

Selling, general and administrative expenses

     633,500        (11,872 )b      621,628   

Operating income

     185,735        16,526        202,261   

Other expenses:

      

Interest expense, net

     11,296        (1,128     10,168   

Foreign exchange (gains), net

     (506     0        (506

Miscellaneous, net

     3,783        (26     3,757   

Income before income taxes

     171,162        17,680        188,842   

Income tax expense, net

     34,206        3,612 c      37,818   

Equity in net loss of unconsolidated subsidiaries

     39        0        39   
  

 

 

   

 

 

   

 

 

 

Net income

   $ 136,917      $ 14,068      $ 150,985   
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

   $ 1.99      $ 0.20      $ 2.19   

Diluted

   $ 1.97      $ 0.20      $ 2.17   

Weighted average shares outstanding:

      

Basic

     68,932          68,932   

Diluted

     69,676          69,676   

 

a) Restructuring expense in Cost of Sales was $4.7 million due to projects to increase efficiency in manufacturing.
b) Restructuring expense in SG&A was $24.4 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring income in SG&A was $12.5 million due to the release of contingent consideration related to the acquisition of 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

Reconciliation of GAAP to Non-GAAP Results

 

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

   Three Months Ended
March 31, 2014
     Three Months Ended
March 31, 2013
 
     GAAP      Adjustments     Non-GAAP      GAAP      Adjustments     Non-GAAP  

HARMAN:

               

Operating Income

     101,433         6,645        108,078         38,262         27,987        66,249   

Depreciation & Amortization

     33,063         (2,086     30,977         33,151         (1,226     31,925   

EBITDA

     134,496         4,559        139,055         71,413         26,761        98,174   

INFOTAINMENT:

               

Operating Income

     60,313         2,894        63,207         21,208         11,235        32,443   

Depreciation & Amortization

     16,611         (2,087     14,524         16,377         0        16,377   

EBITDA

     76,924         807        77,731         37,585         11,235        48,820   

LIFESTYLE:

               

Operating Income

     51,381         1,801        53,182         23,431         15,082        38,513   

Depreciation & Amortization

     8,635         0        8,635         9,445         (1,215     8,230   

EBITDA

     60,016         1,801        61,817         32,876         13,867        46,743   

PROFESSIONAL:

               

Operating Income

     24,813         1,150        25,963         20,794         1,668        22,462   

Depreciation & Amortization

     5,104         1        5,105         4,339         (11     4,328   

EBITDA

     29,917         1,151        31,068         25,133         1,657        26,790   

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.

 

14


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

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

   Nine Months Ended
March 31, 2014
     Nine Months Ended
March 31, 2013
 
     GAAP      Adjustments     Non-GAAP      GAAP      Adjustments     Non-GAAP  

HARMAN:

               

Operating Income

     272,671         36,533        309,204         185,735         16,526        202,261   

Depreciation & Amortization

     97,302         (5,541     91,761         91,994         (2,222     89,772   

EBITDA

     369,973         30,992        400,965         277,729         14,304        292,033   

INFOTAINMENT:

               

Operating Income

     155,431         23,479        178,910         96,132         10,941        107,073   

Depreciation & Amortization

     48,851         (4,823     44,028         46,432         0        46,432   

EBITDA

     204,282         18,656        222,938         142,564         10,941        153,505   

LIFESTYLE:

               

Operating Income

     143,725         7,510        151,235         110,522         4,240        114,762   

Depreciation & Amortization

     25,091         (621     24,470         26,511         (2,148     24,363   

EBITDA

     168,816         6,889        175,705         137,033         2,092        139,125   

PROFESSIONAL:

               

Operating Income

     76,697         3,220        79,917         60,307         1,346        61,653   

Depreciation & Amortization

     15,020         (97     14,923         10,466         (74     10,392   

EBITDA

     91,717         3,123        94,840         70,773         1,272        72,045   

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.

 

15


HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

 

Total Company Liquidity

   March 31,
2014
 

$ millions

  

Cash & cash equivalents

   $ 567   

Short-term investments

     0   

Available credit under Revolving Credit Facility

     746   
  

 

 

 

Total liquidity

   $ 1,313   
  

 

 

 

 

16