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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/d92996d8k.htm

Exhibit 99.1

 

PRESS RELEASE    LOGO  

 

Darrin Shewchuk

Senior Director, Corporate Communications

Tel: +1 203-328-3834

darrin.shewchuk@harman.com

  

Yijing Brentano

Vice President, Investor Relations

Tel: +1 203-328-3500

yijing.brentano@harman.com

OCTOBER 29, 2015

HARMAN REPORTS FIRST QUARTER FISCAL 2016 RESULTS

 

  Q1 Net Sales up 14% to $1.6 Billion

 

  Q1 Operational EPS up 13% to $1.48; Operational EBITDA up 20% to $197 Million

 

  Secured $1.1 Billion in New Automotive Awards

 

  Won Several Leadership Awards for IoT Innovation

STAMFORD, CT – Harman International Industries, Incorporated (NYSE: HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the first quarter ended September 30, 2015.

Net sales for the first quarter were $1.6 billion, an increase of 14 percent compared to the prior year or 23 percent excluding the impact of foreign currency translation (ex-FX). Excluding the impact of acquisitions and foreign currency translation, net sales increased 13 percent compared to the prior year. Connected Car net sales increased eight percent (19 percent ex-FX), due to platform expansions, higher take rates, and stronger automotive production. Lifestyle Audio net sales increased 14 percent (21 percent ex-FX) due to higher consumer audio and car audio sales. Net sales in Professional Solutions decreased three percent (increased one percent ex-FX). Connected Services net sales were $174 million compared to $68 million in the prior year, due to the expansion of the Company’s services portfolio, primarily as a result of the acquisition of Symphony Teleca (STC).

Excluding restructuring, non-recurring charges and acquisition-related items, first quarter operating income increased 24 percent to $158 million compared to $128 million in the prior year, and EBITDA increased 20 percent to $197 million compared to $164 million in the prior year. Earnings per diluted share increased 13 percent to $1.48 compared to $1.31 in the prior year.

On a GAAP basis, first quarter operating income increased 14 percent to $131 million compared to $116 million in the prior year, EBITDA increased 23 percent to $188 million compared to $153 million in the prior year, and earnings per diluted share increased two percent to $1.20 compared to $1.18 in the prior year. The Company recorded $26 million of restructuring, non-recurring charges and acquisition-related items compared to $12 million in the prior year. The increase was primarily due to non-cash amortization of acquired intangible assets.

“HARMAN is off to a solid start to deliver on our fiscal 2016 targets with double-digit revenue and earnings growth in the first quarter, driven by robust demand for connected systems and services in the car,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO. “Demand from automakers for embedded infotainment and car audio solutions remains strong as evidenced by the $1.1 billion in new automotive awards in the quarter, building on our industry-leading backlog of $23 billion as of the end of fiscal 2015.”


FY 2016 Key Figures – Total Company

   Three Months Ended September 30,  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
    3M
FY15
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     1,631        1,429        14     23

Gross profit

     487        415        18     25

Percent of net sales

     29.9     29.0    

SG&A

     356        299        19     27

Operating income

     131        116        14     20

Percent of net sales

     8.1     8.1    

EBITDA1

     188        153        23     30

Percent of net sales

     11.5     10.7    

Net Income attributable to HARMAN International Industries, Incorporated

     87        83        5     10

Diluted earnings per share

     1.20        1.18        2     7

Restructuring & non-recurring costs

     3        12       

Acquisition-related items

     23        0       

Non-GAAP - operational1

        

Gross profit

     489        418        17     25

Percent of net sales

     30.0     29.2    

SG&A

     331        290        14     22

Operating income

     158        128        24     31

Percent of net sales

     9.7     8.9    

EBITDA

     197        164        20     27

Percent of net sales

     12.1     11.5    

Net Income attributable to HARMAN International Industries, Incorporated

     107        92        16     23

Diluted earnings per share

     1.48        1.31        13     19

Shares outstanding – diluted (in millions)

     73        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 first quarter of fiscal year 2016 increased 80 basis points to 30.0 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base, as well as the expansion of our services portfolio.

In the first quarter of fiscal year 2016, SG&A expense as a percentage of net sales was consistent with the prior year at 20.3 percent.

Investor Call Today October 29, 2015

At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the first quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 272-6255 (U.S.) or +1 (303) 223-2685 (International) ten minutes before the call and reference HARMAN, Access Code: 21779582.

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 first quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT today.

 

2


A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through Friday, January 29, 2016 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: 21779582. If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1 (800) 473 0602 (U.S.) or +1 (303) 446 4604 (International).

General Information

HARMAN (harman.com) designs and engineers connected products and solutions for automakers, consumers, and enterprises worldwide, including connected car systems, audio and visual products, enterprise automation solutions; and connected services. With leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, Mark Levinson® and Revel®, HARMAN is admired by audiophiles, musicians and the entertainment venues where they perform around the world. More than 25 million automobiles on the road today are equipped with HARMAN audio and connected car systems. The Company’s software services power billions of mobile devices and systems that are connected, integrated and secure across all platforms, from work and home to car and mobile. HARMAN has a workforce of approximately 28,000 people across the Americas, Europe, and Asia and reported sales of $6.4 billion during the 12 months ended September 30, 2015. 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 presentation are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, 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 if there are delays in its product launches or increased pricing pressure from its customers; (2) the loss of one or more significant customers, the loss of a significant platform with an automotive customer or the in-sourcing of certain services by the Company’s automotive customers; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) 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; (5) the inability of the Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (6) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (7) the Company’s ability to integrate successfully its recently completed and future acquisitions; (8) the Company’s ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for its critical organizational positions; (9) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (10) other risks detailed in the Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2015 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 or “backlog,” 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.

 

3


APPENDIX

Connected Car

 

FY 2016 Key Figures – Connected Car

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
    3M
FY15
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     755        700        8     19

Gross profit

     178        164        9     17

Percent of net sales

     23.5     23.4    

SG&A

     91        91        (1 %)      11

Operating income

     87        73        20     24

Percent of net sales

     11.5     10.4    

EBITDA1

     106        90        18     23

Percent of net sales

     14.0     12.8    

Restructuring & non-recurring costs

     0        1       

Acquisition-related items

     1        0       

Non-GAAP - operational1

        

Gross profit

     179        165        8     17

Percent of net sales

     23.7     23.6    

SG&A

     91        91        (1 %)      11

Operating income

     88        74        19     23

Percent of net sales

     11.7     10.6    

EBITDA

     105        90        17     22

Percent of net sales

     13.9     12.8    

 

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

Net sales in the first quarter of fiscal 2016 were $755 million, an increase of eight percent (19 percent ex-FX) compared to the prior year. The increase in net sales was due to the expansion of recently launched platforms, higher take rates and stronger automotive production.

On a non-GAAP basis in the first quarter of fiscal 2016, gross margin increased 10 basis points to 23.7 percent compared to the prior year. SG&A expenses as a percent of sales declined 100 basis points to 12.0 percent compared to the prior year due to improved operating leverage on higher sales.

Connected Car Highlights

During the quarter, the Connected Car division won follow-on awards with BMW, Daimler, GAC Motor, Suzuki and Tata for their next-generation embedded infotainment solutions. In addition, HARMAN continued to demonstrate its leadership in connectivity solutions, including telematics control units (TCUs). Building on the Company’s earlier TCU win with Daimler, which launches globally later this calendar year, HARMAN won a follow-on award from Daimler to supply next generation TCUs across car lines worldwide.

During the quarter, HARMAN launched embedded infotainment solutions on a number of new vehicle models, including the Audi A4, the Mercedes C-Class Coupe, the Mini Clubman and the Volkswagen Tiguan.

At the Frankfurt Auto Show in September, HARMAN demonstrated several key technologies, including its latest embedded infotainment platform with features such as augmented navigation, gesture control and Over-the-Air (OTA) updates. The Company also highlighted its strategy for enhancing automotive cyber security through its unique 5+1 security framework.

 

4


Lifestyle Audio

 

FY 2016 Key Figures – Lifestyle Audio

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
    3M
FY15
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales*

     462        406        14     21

Gross profit

     151        130        16     22

Percent of net sales

     32.6     32.0    

SG&A

     103        81        27     35

Operating income

     48        49        (3 %)      1

Percent of net sales

     10.3     12.1    

EBITDA1

     61        58        6     10

Percent of net sales

     13.3     14.3    

Restructuring & non-recurring costs

     1        4       

Acquisition-related items

     7        0       

Non-GAAP - operational1

        

Gross profit

     151        132        15     21

Percent of net sales

     32.7     32.4    

SG&A

     96        79        21     29

Operating income

     55        53        5     10

Percent of net sales

     12.0     12.9    

EBITDA

     64        62        4     8

Percent of net sales

     13.8     15.1    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
* Includes intercompany revenues of less than $1 million.

Net sales in the first quarter of fiscal 2016 were $462 million, an increase of 14 percent (21 percent ex-FX) compared to the prior year primarily due to new product introductions in consumer audio and the acquisition of Bang & Olufsen car audio business.

On a non-GAAP basis in the first quarter of fiscal 2016, gross margin improved by 30 basis points to 32.7 percent compared to the prior year, primarily due to improved operating leverage as a result of higher sales volume. SG&A expenses as a percentage of sales increased 130 basis points to 20.7 percent, primarily due to increased investments in research and development to support several new car audio programs included in the Company’s backlog.

Lifestyle Audio Highlights

During the quarter, HARMAN secured new car audio business with Audi, BMW, Great Wall, Hyundai and Toyota, among others. New vehicles launched in the quarter included the Alfa Romeo Giulia (Harman/Kardon), the Lexus RX (Mark Levinson), and the McLaren 570S (Bowers & Wilkins).

HARMAN continued its industry leadership in portable speakers, recording its 15 millionth worldwide portable speaker sale since its launch of the category. In the quarter, the Company launched its third generation of portable speakers, expanding its portfolio with the JBL™ Xtreme, the most powerful speaker in its class.

In September, HARMAN debuted 58 new products at the IFA consumer electronics trade show in Berlin. Notable headphone launches included the AKG™ N60 NC, winner of 2015 EISA, RedDot, and IF Design awards and the AKG Y50 BT headphones, which won a 5-star rating from What Hi-Fi magazine.

 

5


Professional Solutions

 

FY 2016 Key Figures – Professional Solutions

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
    3M
FY15
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales*

     247        254        (3 %)      1

Gross profit

     102        103        (1 %)      3

Percent of net sales

     41.4     40.7    

SG&A

     77        80        (4 %)      (1 %) 

Operating income

     26        23        10     17

Percent of net sales

     10.4     9.1    

EBITDA1

     34        32        6     12

Percent of net sales

     13.8     12.7    

Restructuring & non-recurring costs

     2        5       

Non-GAAP - operational1

        

Gross profit

     103        103        (1 %)      4

Percent of net sales

     41.6     40.7    

SG&A

     75        75        (1 %)      3

Operating income

     28        28        (1 %)      5

Percent of net sales

     11.3     11.1    

EBITDA

     36        37        (4 %)      2

Percent of net sales

     14.5     14.6    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
* Includes intercompany revenues of less than $1 million

Net sales in the first quarter of fiscal 2016 were $247 million, a decrease of three percent (an increase of one percent ex-FX) compared to the prior year.

On a non-GAAP basis in the first quarter of fiscal 2016, gross margin increased 90 basis points to 41.6 percent, driven by an improvement in product mix. SG&A expenses as a percentage of sales increased 70 basis points to 30.3 percent compared to the prior year.

Professional Solutions Highlights

During the first quarter, the Company’s entertainment and enterprise solutions were selected by leading system integrators and installers around the world. Notable projects included the Changi Airport in Singapore and a large enterprise control and automation project for Raytheon. HARMAN’s solutions also powered a wide range of high-profile special events, music festivals and televised award shows, including the iHeartRadio Music Festival in Las Vegas and the Rock in Rio in Brazil.

The division launched 7 major new products during the quarter, and many solutions were recognized with innovation awards from industry experts.

During the quarter, HARMAN started production of certain products at its new facility in Pecs, Hungary as part of the plan to improve its European manufacturing footprint.

 

6


Connected Services

 

FY 2016 Key Figures – Connected Services

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
    3M
FY15
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales*

     174        68        157     208

Gross profit

     58        17        241     300

Percent of net sales

     33.1     25.0    

SG&A

     52        11        364     425

Operating income

     5        6        (7 %)      18

Percent of net sales

     3.0     8.3    

EBITDA1

     19        6        213     301

Percent of net sales

     11.0     9.0    

Restructuring & non-recurring costs

     0        0       

Acquisition-related items

     14        0       

Non-GAAP - operational1

        

Gross profit

     58        17        241     300

Percent of net sales

     33.1     25.0    

SG&A

     38        11        235     280

Operating income

     20        6        251     348

Percent of net sales

     11.3     8.3    

EBITDA

     23        6        276     381

Percent of net sales

     13.2     9.0    

 

1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
* Includes intercompany revenues of $6 million.

Net sales in the first quarter of fiscal 2016 were $174 million compared to $68 million in the prior year, driven primarily by the expansion of the Company’s services portfolio. On a non-GAAP basis, gross margin was 33.1 percent, and SG&A expenses as a percentage of sales were 21.8 percent.

Connected Services Highlights

During the quarter, HARMAN began providing product development services to new customers, including Mozilla, Pepsi and United Healthcare. Connected Services also secured follow-on business from BMW, Hyundai, Intel, Polycom and Toyota. In addition, HARMAN capitalized on its industry-leading OTA update technology, winning awards with Bosch, KDDI and Subaru.

At Cisco’s 24th Annual Supplier Appreciation Event, Cisco Systems named HARMAN one of its top three software development partners, recognizing HARMAN’s commitment to innovation, execution and customer service.

Recently, HfS Research, the leading independent research authority for IT and business services, recognized HARMAN as a global leader in Internet of Things (IoT) software solutions. HARMAN earned a spot in their “Winner’s Circle” with the highest overall score for delivering robust, end-to-end IoT solutions, as well as OTA updates and analytics capabilities.

 

7


Other (Corporate)

 

FY 2016 Key Figures – Other

   Three Months Ended September 30  
                   Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY16
     3M
FY15
     Including
Currency
Changes
    Excluding
Currency
Changes1
 

SG&A

     34         35         (2 %)      (1 %) 

Restructuring & non-recurring costs

     0         0        

Acquisition-related items

     1         2        

Non-GAAP - operational1

          

SG&A

     33         33         1     1

 

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

Other (Corporate) SG&A expenses include compensation, benefit and occupancy costs for corporate employees, new technology innovation and expenses associated with the Company’s brand identity campaign. On a non-GAAP basis, SG&A was $33 million, in-line with the prior year.

 

8


HARMAN International Industries, Incorporated

Consolidated Statements of Income

 

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

   Three Months Ended
September 30
 
     2015     2014  

Net sales

   $ 1,630,888      $ 1,428,922   

Cost of sales

     1,143,490        1,014,290   

Gross profit

     487,398        414,632   

Selling, general and administrative expenses

     355,931        298,849   

Operating income

     131,467        115,783   

Other expenses:

    

Interest expense, net

     8,259        2,677   

Foreign exchange losses (gains), net

     (1,845     60   

Miscellaneous, net

     3,987        2,340   

Income before income taxes

     121,066        110,706   

Income tax expense, net

     33,549        27,772   

Net income

     87,517        82,934   

Net income attributable to non-controlling interest

     418        (39
  

 

 

   

 

 

 

Net income attributable to HARMAN International Industries, Incorporated

   $ 87,099      $ 82,973   
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 1.21      $ 1.20   

Diluted

   $ 1.20      $ 1.18   

Weighted average shares outstanding:

    

Basic

     72,032        69,301   

Diluted

     72,556        70,194   

 

9


HARMAN International Industries, Incorporated

Consolidated Balance Sheets

 

(In thousands; unaudited)

   September 30
2015
     June 30
2015
 

ASSETS

     

Current Assets

     

Cash and cash equivalents

   $ 402,161       $ 649,513   

Receivables, net

     1,046,315         1,024,139   

Inventories

     846,302         693,574   

Other current assets

     575,376         581,544   

Total current assets

     2,870,154         2,948,770   

Property, plant and equipment, net

     547,136         552,421   

Goodwill

     1,348,761         1,287,180   

Deferred tax assets, long-term, net

     71,479         43,706   

Other assets

     973,551         1,097,675   
  

 

 

    

 

 

 

Total assets

   $ 5,811,081       $ 5,929,752   
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities

     

Current portion of long-term debt

   $ 4,474       $ 4,550   

Short-term debt

     480         1,021   

Accounts payable

     870,423         918,910   

Accrued liabilities

     954,724         956,425   

Accrued warranties

     169,551         163,331   

Income taxes payable

     79,210         76,131   

Total current liabilities

     2,078,862         2,120,368   

Borrowings under revolving credit facility

     258,125         283,125   

Long-term debt

     797,642         797,542   

Pension liability

     187,140         186,662   

Other non-current liabilities

     113,807         149,229   

Total liabilities

     3,435,576         3,536,926   

Total HARMAN International Industries, Incorporated shareholders’ equity

     2,356,877         2,374,613   

Noncontrolling interest

     18,628         18,213   

Total equity

     2,375,505         2,392,826   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 5,811,081       $ 5,929,752   
  

 

 

    

 

 

 

 

10


HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

 

(In thousands except earnings per share data;

unaudited)

   Three Months Ended
September 30, 2015
 
     GAAP     Adjustments     Non-GAAP -
Operational
 

Net sales

   $ 1,630,888      $ 0      $ 1,630,888   

Cost of sales

     1,143,490        (1,679 )a      1,141,811   

Gross profit

     487,398        1,679        489,077   

Selling, general and administrative expenses

     355,931        (24,781 )b      331,150   

Operating income

     131,467        26,460        157,927   

Other expenses:

      

Interest expense, net

     8,259        0        8,259   

Foreign exchange losses (gains), net

     (1,845     0        (1,845

Miscellaneous, net

     3,987        (1,225     2,762   

Income before income taxes

     121,066        27,685        148,751   

Income tax expense, net

     33,549        7,759 c      41,308   

Net income

     87,517        19,926        107,443   

Net income attributable to non-controlling interest

     418        0        418   
  

 

 

   

 

 

   

 

 

 

Net income attributable to HARMAN International Industries, Incorporated

   $ 87,099      $ 19,926      $ 107,025   
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

   $ 1.21      $ 0.28      $ 1.49   

Diluted

   $ 1.20      $ 0.27      $ 1.48   

Weighted average shares outstanding:

      

Basic

     72,032          72,032   

Diluted

     72,556          72,556   

 

a) Restructuring expense in Cost of Sales was $1.7 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was a credit of $0.5 million primarily due to revised cost estimates related to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $2.1 million. Acquisition-related expenses were $23.2 million, including $16.2 million of intangible amortization expenses.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.

HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

11


HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

 

(In thousands except earnings per share data;

unaudited)

   Three Months Ended
September 30, 2014
 
     GAAP     Adjustments     Non-GAAP -
Operational
 

Net sales

   $ 1,428,922      $ 0      $ 1,428,922   

Cost of sales

     1,014,290        (2,923 )a      1,011,367   

Gross profit

     414,632        2,923        417,555   

Selling, general and administrative expenses

     298,849        (8,885 )b      289,964   

Operating income

     115,783        11,808        127,591   

Other expenses:

      

Interest expense, net

     2,677        0        2,677   

Foreign exchange losses (gains), net

     60        0        60   

Miscellaneous, net

     2,340        (0     2,340   

Income before income taxes

     110,706        11,808        122,514   

Income tax expense, net

     27,772        2,886 c      30,658   

Equity in net loss of unconsolidated subsidiaries

     0        0        0   

Net income

     82,934        8,922        91,856   

Net income attributable to non-controlling interest

     (39     0        (39
  

 

 

   

 

 

   

 

 

 

Net income attributable to HARMAN International Industries, Incorporated

   $ 82,973      $ 8,922      $ 91,895   
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

   $ 1.20      $ 0.13      $ 1.33   

Diluted

   $ 1.18      $ 0.13      $ 1.31   

Weighted average shares outstanding:

      

Basic

     69,301          69,301   

Diluted

     70,194          70,194   

 

a) Restructuring expense in Cost of Sales was $2.9 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $4.0 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $4.9 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 consolidated financial statements with a better understanding of its non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

12


HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

(In thousands; unaudited)

   Three Months Ended
September 30
    Increase /
(Decrease)
 
     2015      2014    

Net sales - nominal currency

   $ 1,630,888       $ 1,428,922        14

Effects of foreign currency translation (1)

        (108,199  
     

 

 

   

Net sales - local currency

     1,630,888         1,320,723        23

Gross profit - nominal currency

     487,398         414,632        18

Effects of foreign currency translation (1)

        (25,273  
     

 

 

   

Gross profit - local currency

     487,398         389,359        25

SG&A - nominal currency

     355,931         298,849        19

Effects of foreign currency translation (1)

        (18,989  
     

 

 

   

SG&A - local currency

     355,931         279,860        27

Operating income - nominal currency

     131,467         115,783        14

Effects of foreign currency translation (1)

        (6,284  
     

 

 

   

Operating income - local currency

     131,467         109,499        20

Net income attributable to HARMAN International Industries, Incorporated - nominal currency

     87,099         82,973        5

Effects of foreign currency translation (1)

        (4,045  
     

 

 

   

Net income attributable to HARMAN International Industries, Incorporated - local currency

     87,099         78,928        10

 

(1) Impact of restating prior year results at current year foreign exchange rates.

HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of these consolidated financial statements with a better understanding of the 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.

 

13


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
September 30
    Increase /
(Decrease)
 
     2015      2014    

Net sales - nominal currency

   $ 1,630,888       $ 1,428,922        14

Effects of foreign currency translation (1)

        (108,199  
     

 

 

   

Net sales - local currency

     1,630,888         1,320,723        23

Gross profit - nominal currency

     489,077         417,555        17

Effects of foreign currency translation (1)

        (25,691  
     

 

 

   

Gross profit - local currency

     489,077         391,864        25

SG&A - nominal currency

     331,150         289,964        14

Effects of foreign currency translation (1)

        (18,482  
     

 

 

   

SG&A - local currency

     331,150         271,482        22

Operating income - nominal currency

     157,927         127,591        24

Effects of foreign currency translation (1)

        (7,209  
     

 

 

   

Operating income - local currency

     157,927         120,382        31

Net income attributable to HARMAN International Industries, Incorporated - nominal currency

     107,025         91,895        16

Effects of foreign currency translation (1)

        (4,969  
     

 

 

   

Net income attributable to HARMAN International Industries, Incorporated - local currency

     107,025         86,926        23

 

(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.

 

14


Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

 

(In thousands, except earnings per share data;

unaudited)

   Three Months Ended
September 30, 2015
     Three Months Ended
September 30, 2014
 
     GAAP      Adjustments     Non-GAAP -
Operational
     GAAP      Adjustments     Non-GAAP -
Operational
 

HARMAN

               

Operating income

     131,467         26,460        157,927         115,783         11,808        127,591   

Depreciation & Amortization

     56,838         (18,241     38,597         37,427         (1,394     36,033   

EBITDA

     188,305         8,219        196,524         153,210         10,414        163,624   

CONNECTED CAR

               

Operating income

     87,219         1,046        88,265         72,646         1,377        74,023   

Depreciation & Amortization

     18,402         (1,836     16,566         16,959         (1,371     15,588   

EBITDA

     105,621         (790     104,831         89,605         6        89,611   

LIFESTYLE AUDIO

               

Operating income

     47,694         7,550        55,244         49,073         3,518        52,591   

Depreciation & Amortization

     13,587         (5,128     8,459         8,957         0        8,957   

EBITDA

     61,281         2,422        63,703         58,030         3,518        61,548   

PROFESSIONAL SOLUTIONS

               

Operating income

     25,685         2,184        27,869         23,265         4,851        28,116   

Depreciation & Amortization

     8,504         (638     7,866         8,941         (23     8,918   

EBITDA

     34,189         1,546        35,735         32,206         4,828        37,034   

CONNECTED SERVICES

               

Operating income

     5,191         14,474        19,665         5,599         0        5,599   

Depreciation & Amortization

     13,880         (10,639     3,241         500         0        500   

EBITDA

     19,071         3,835        22,906         6,099         0        6,099   

HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these consolidated financial statements with a better understanding of its non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

15


Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 3 Months Ended September 30, 2015

 

(In thousands;

unaudited)

   Connected
Car
     Lifestyle
Audio
     Professional
Solutions
     Connected
Services
     Eliminations     HARMAN  

Net Trade Sales

   $ 755,483       $ 461,752       $ 246,333       $ 167,281       $ 0      $ 1,630,888   

Intercompany Sales

     0         530         773         6,420         (7,723     0   

Net Sales

     755,483         462,282         247,106         173,701         (7,723     1,630,888   

HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

 

Total Company Liquidity

   September 30,
2015
 

$ millions

      

Cash & cash equivalents

   $ 402   

Available credit under Revolving Credit Facility

     937   
  

 

 

 

Total Liquidity

   $ 1,339   
  

 

 

 

 

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