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8-K - FORM 8-K - HARMAN INTERNATIONAL INDUSTRIES INC /DE/d266804d8k.htm

Exhibit 99.1

 

PRESS RELEASE    LOGO

 

Darrin Shewchuk

Senior Director, Corporate Communications

  

Yijing Brentano

Vice President, Investor Relations

Tel: +1 203-328-3834

darrin.shewchuk@harman.com

  

Tel: +1 203-328-3500

yijing.brentano@harman.com

NOVEMBER 3, 2016

HARMAN REPORTS FIRST QUARTER FISCAL 2017 RESULTS

 

  Net Sales Up 8% to $1.8 Billion

 

  GAAP EBITDA Up 7% to $202 Million; Operational EBITDA Up 15% to $227 Million

 

  GAAP EPS Up 20% to $1.45; Operational EPS Up 27% to $1.87

 

  Secured $2 Billion in New Automotive Awards

 

    Complements $24.1 Billion FY 2016 Year-End Automotive Order Backlog

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, 2016.

Net sales for the first quarter were $1.8 billion, an increase of eight percent compared to the prior year. Lifestyle Audio net sales increased 19 percent due to higher sales in both consumer and car audio. Connected Car net sales increased six percent due to higher take rates and stronger production. Connected Services net sales increased four percent primarily due to higher demand for automotive services, while Professional Solutions net sales decreased three percent.

On a GAAP basis, first quarter operating income increased 15 percent to $151 million compared to $131 million in the prior year, and EBITDA increased seven percent to $202 million compared to $188 million in the prior year. Earnings per diluted share increased 20 percent to $1.45 compared to $1.20 in the prior year.

Excluding restructuring, acquisition-related items and non-recurring charges, first quarter operating income increased 19 percent to $187 million compared to $158 million in the prior year, and EBITDA increased 15 percent to $227 million compared to $197 million in the prior year. Earnings per diluted share increased 27 percent to $1.87 compared to $1.48 in the prior year.

“HARMAN delivered a solid first quarter, with strong revenue growth and outstanding EBITDA and EPS performance. We secured $2 billion in new automotive awards in the quarter, demonstrating increasing demand from automakers and their drivers for a rich in-car experience, including embedded infotainment, cloud connectivity and sound management solutions. With cyber security an underlying and fundamental component of the connected car and autonomous driving, I am proud to add that NHTSA and the University of Michigan rated HARMAN’s suite of intrusion detection and mitigation technologies as the best performing solution,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO.

Continued Paliwal, “On top of our strong automotive performance, HARMAN’s strong brands and award-winning design are driving market share gains with our consumer audio products. We remain focused on innovation, execution and driving cost leadership in all of our businesses, and are on track to meet our fiscal 2017 guidance.”


FY 2017 Key Figures – Total Company

   Three Months Ended September 30  
                 Increase (Decrease)  

$ millions (except per share data)

   3M
FY17
    3M
FY16
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     1,760        1,631        8     8

Gross profit

     541        487        11     11

Percent of net sales

     30.8     29.9    

SG&A

     390        356        10     10

Operating income

     151        131        15     16

Percent of net sales

     8.6     8.1    

EBITDA

     202        188        7     8

Percent of net sales

     11.5     11.5    

Net Income attributable to HARMAN International Industries, Incorporated

     103        87        18     20

Diluted earnings per share

     1.45        1.20        20     22

Restructuring & non-recurring costs

     13        5       

Acquisition-related items

     24        21       

Non-GAAP - operational1

        

Gross profit

     542        489        11     11

Percent of net sales

     30.8     30.0    

SG&A

     354        331        7     7

Operating income

     187        158        19     20

Percent of net sales

     10.7     9.7    

EBITDA

     227        197        15     16

Percent of net sales

     12.9     12.1    

Net Income attributable to HARMAN International Industries, Incorporated

     134        107        25     26

Diluted earnings per share

     1.87        1.48        27     28

Shares outstanding – diluted (in millions)

     71        73       

 

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

Summary of Operations – Gross Margin and SG&A

On an operational basis, gross margin for the first quarter of fiscal year 2017 increased 80 basis points to 30.8 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base. Operational SG&A expense as a percent of net sales decreased 20 basis points to 20.1 percent compared to 20.3 percent in the prior year.

On a GAAP basis in the first quarter of fiscal year 2017, gross margin increased 90 basis points to 30.8 percent. SG&A expense as a percent of net sales increased 40 basis points to 22.2 percent compared to 21.8 percent in the prior year, primarily due to higher restructuring expenses.

Investor Call Today November 3, 2016

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) 410-1397 (U.S.) or +1 (303) 223-4381 (International) ten minutes before the call and reference HARMAN, Access Code: 21819781.

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, February 3, 2017 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: 21819781. 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 30,000 people across the Americas, Europe, and Asia and reported sales of $7.0 billion during the 12 months ended September 30, 2016. 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 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 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; (2) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (3) the Company’s ability to maintain profitability if there are delays in its product launches or increased pricing pressure from its customers; (4) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (5) the inability of the Company’s suppliers to deliver materials, parts and components including, without limitation, microchips and displays, at the scheduled rate and disruptions arising in connection therewith; (6) 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; (7) the Company’s failure to protect the security of its products and systems against cyber crime; (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, 2016 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 of the Company’s automotive customers. The Company’s 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. The term “take rate” represents the number of units sold by the Company divided by an estimate of the total number of vehicles of a specific vehicle line produced during the same timeframe. The assumptions the Company uses to validate these awards are updated and reported externally on an annual basis.

 

3


APPENDIX

Connected Car

 

FY 2017 Key Figures – Connected Car

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY17
    3M
FY16
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     797        755        6     5

Gross profit

     198        178        11     11

Percent of net sales

     24.8     23.5    

SG&A

     103        91        14     13

Operating income

     95        87        9     9

Percent of net sales

     11.9     11.5    

EBITDA

     115        106        9     10

Percent of net sales

     14.5     14.0    

Restructuring & non-recurring costs

     2        0       

Acquisition-related items

     1        1       

Non-GAAP - operational1

        

Gross profit

     198        179        11     11

Percent of net sales

     24.8     23.7    

SG&A

     100        91        10     10

Operating income

     98        88        11     11

Percent of net sales

     12.2     11.7    

EBITDA

     117        105        12     12

Percent of net sales

     14.7     13.9    

 

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

Net sales in the first quarter of fiscal 2017 were $797 million, an increase of six percent compared to the prior year. The increase in net sales was due to higher take rates and stronger production.

On an operational basis in the first quarter of fiscal 2017, gross margin increased 110 basis points to 24.8 percent compared to the prior year primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base. SG&A expense as a percent of net sales increased 60 basis points to 12.6 percent compared to the prior year to support growth in awarded business.

On a GAAP basis in the first quarter of fiscal 2017, gross margin increased 130 basis points to 24.8 percent compared to the prior year. SG&A expense as a percent of net sales increased 90 basis points to 12.9 percent compared to the prior year.

Connected Car Highlights

HARMAN secured new and follow-on awards to provide connected car solutions for customers including Audi, Geely, Maruti Suzuki, Mercedes Benz, Porsche and heavy truck manufacturer MAN. During the quarter, HARMAN launched embedded infotainment solutions in the Audi Q5, Land Rover Discovery, Porsche Panamera 4 E-Hybrid, Skoda Kodiaq and the Toyota C-HR.

The Company also began providing embedded infotainment solutions to the commercial truck market, launching solutions in VW Group’s MAN and Scania trucks. MAN’s Multimedia Truck (MMT) advanced infotainment system, developed by HARMAN, includes expanded telematics features including DAB+ (digital radio reception), hands free telephony and truck-specific navigation. The HARMAN system for Scania includes innovations such as dual mobile phone connectivity, real time navigation and connectivity to their fleet management system.

During the quarter, HARMAN and AT&T announced a strategic partnership to support the telematics ecosystem. AT&T selected HARMAN’s Telematics Control Unit (TCU) for its Mobile Broadband Accelerator program to enable rapid deployment of the pre-certified TCU solution.

 

4


HARMAN continues to receive accolades for its industry leadership. In September, HARMAN received an emerging technology award from CTIA wireless, a prominent industry association, for the Company’s pupil-based monitoring technology. Germany’s Connect Magazine named HARMAN-powered features as “best in category” for navigation system, voice control, smartphone connection, in-car hotspot, sound management, and best overall connected car solution for systems in Audi, BMW, Mercedes and Volkswagen vehicles.

Lifestyle Audio

 

FY 2017 Key Figures – Lifestyle Audio

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY17
    3M
FY16
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     568        476        19     19

Gross profit

     201        154        30     30

Percent of net sales

     35.3     32.4    

SG&A

     122        107        14     14

Operating income

     79        47        67     67

Percent of net sales

     13.8     9.9    

EBITDA

     93        61        52     52

Percent of net sales

     16.3     12.8    

Restructuring & non-recurring costs

     3        3       

Acquisition-related items

     5        5       

Non-GAAP - operational1

        

Gross profit

     201        155        30     30

Percent of net sales

     35.4     32.5    

SG&A

     115        100        15     15

Operating income

     86        55        58     58

Percent of net sales

     15.2     11.5    

EBITDA

     95        64        50     51

Percent of net sales

     16.8     13.3    

 

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

Net sales in the first quarter of fiscal 2017 were $568 million, an increase of 19 percent on a nominal basis compared to the prior year, primarily due to higher consumer audio sales, reflecting strong demand for connected, smart audio products, and higher car audio sales due to higher take rates and stronger automotive production.

On an operational basis in the first quarter of fiscal 2017, gross margin improved 290 basis points to 35.4 percent compared to the prior year, primarily due to margin expansion in car audio as a result of operating leverage and manufacturing excellence. While research and development in car audio increased to support new awarded business, total SG&A expense as a percent of net sales decreased 70 basis points to 20.2 percent due to improved operating leverage on higher sales.

On a GAAP basis in the first quarter of fiscal 2017, gross margin improved 290 basis points to 35.3 percent compared to the prior year. SG&A expense as a percent of net sales decreased 100 basis points to 21.5 percent compared to the prior year.

Lifestyle Audio Highlights

During the quarter, HARMAN expanded its business with Ford, winning a global cross-car line award to supply B&O PLAY branded car audio systems. HARMAN also secured additional business awards with Lincoln vehicles (Revel), Maserati (Bowers & Wilkins) and Toyota (JBL). HARMAN launched car audio solutions in the Alfa Romeo (Harman Kardon), Lexus ES (Mark Levinson) and the Toyota Camry and C-HR (JBL). In addition, HARMAN launched HALOsonic and Advanced Transducer audio solutions in Mercedes AMG E class and AMG CLS class vehicles.

 

5


In September, HARMAN introduced 33 new products at the IFA consumer electronics trade show in Berlin, including the JBL E-Series BluetoothTM headphones and the JBL Reflect Contour Mini Bluetooth headphones.

The Company won EISA Design and Innovation awards for the AKG N90Q headphones, the JBL Reflect Mini Bluetooth headphones and the JBL Charge 3 Portable Bluetooth speaker. This fall, the Company also launched the JBL-Under Armour co-branded wireless heart rate monitoring headphones, the second product introduced as part of a strategic partnership between HARMAN and Under Armour.

HARMAN also introduced the JBL Playlist home audio speaker featuring Google CastTM Technology. JBL Playlist enables instant WiFi streaming directly from the cloud to the speaker without Bluetooth pairing, enabling better quality audio and providing access to roughly 200 streaming audio services such as Spotify and Pandora.

Professional Solutions

 

FY 2017 Key Figures – Professional Solutions

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY17
    3M
FY16
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     240        247        (3 %)      (2 %) 

Gross profit

     94        102        (8 %)      (8 %) 

Percent of net sales

     39.2     41.4    

SG&A

     82        77        7     8

Operating income

     12        26        (55 %)      (54 %) 

Percent of net sales

     4.9     10.4    

EBITDA

     19        34        (45 %)      (44 %) 

Percent of net sales

     7.9     13.8    

Restructuring & non-recurring costs

     8        2       

Acquisition-related items

     1        —         

Non-GAAP - operational1

        

Gross profit

     94        103        (8 %)      (8 %) 

Percent of net sales

     39.2     41.6    

SG&A

     73        75        (2 %)      (2 %) 

Operating income

     21        28        (25 %)      (24 %) 

Percent of net sales

     8.7     11.3    

EBITDA

     28        36        (23 %)      (22 %) 

Percent of net sales

     11.5     14.5    

 

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

Net sales for the first quarter of fiscal 2017 were $240 million, a decrease of three percent (two percent ex-FX) compared to the prior year. On an operational basis in the first quarter of fiscal 2017, gross margin decreased 240 basis points to 39.2 percent compared to the prior year driven by product mix. SG&A expense as a percent of net sales increased 20 basis points to 30.5 percent compared to the prior year.

On a GAAP basis in the first quarter of fiscal 2017, gross margin decreased 220 basis points to 39.2 percent. SG&A expense as a percent of net sales increased 330 basis points to 34.3 percent compared to prior year primarily due to restructuring charges.

 

6


Professional Solutions Highlights

HARMAN’s entertainment and enterprise solutions were selected by eBay Corporation, Dubai Parks and Resorts, London Business School and the U.S. Presidential Inauguration to be held in January. Notable installations included the John F. Kennedy Center for the Performing Arts in Washington, D.C., the Phoenix Sky Harbor Airport and the U.S. Space and Naval Systems Command in San Diego. HARMAN’s solutions also powered a wide range of high-profile special events, music festivals, summer concert tours and televised award shows, including the Tony Award® winning musical Hamilton and the Metallica and Coldplay world tours.

HARMAN and IBM announced a strategic partnership bringing together HARMAN’s end-to-end solutions with IBM Watson’s cognitive computing capabilities. Together, HARMAN and IBM will integrate artificial intelligence and smart connectivity, enabling IoT in HARMAN’s audio, video and lighting products for enterprise applications. This collaboration has produced a successful pilot at Thomas Jefferson University Hospital in Philadelphia.

The division launched 19 new products during the quarter, several of which were recognized with innovation awards from industry experts.

Connected Services

 

FY 2017 Key Figures – Connected Services

   Three Months Ended September 30  
                 Increase
(Decrease)
 

$ millions (except per share data)

   3M
FY17
    3M
FY16
    Including
Currency
Changes
    Excluding
Currency
Changes1
 

Net sales

     167        160        4     6

Gross profit

     52        54        (4 %)      (3 %) 

Percent of net sales

     31.1     33.9    

SG&A

     50        49        4     4

Operating income

     2        6        (72 %)      (69 %) 

Percent of net sales

     0.9     3.5    

EBITDA

     9        19        (53 %)      (51 %) 

Percent of net sales

     5.5     12.0    

Restructuring & non-recurring costs

     1        —         

Acquisition-related items

     17        14       

Non-GAAP-operational1

        

Gross profit

     52        54        (4 %)      (3 %) 

Percent of net sales

     31.1     33.9    

SG&A

     32        34        (5 %)      (4 %) 

Operating income

     20        20        (3 %)      0

Percent of net sales

     11.7     12.6    

EBITDA

     22        23        (6 %)      (4 %) 

Percent of net sales

     13.0     14.4    

 

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

Net sales in the first quarter of fiscal 2017 were $167 million, an increase of four percent (six percent ex-FX) due to higher demand for automotive services.

On an operational basis, gross margin declined 280 basis points to 31.1 percent primarily due to higher revenue recognition on high-margin engineering change orders in the prior year. SG&A expense as a percent of net sales decreased 200 basis points to 19.3 percent due to productivity improvements as a result of footprint migration initiatives related to the Company’s integration of Redbend OTA.

On a GAAP basis, gross margin decreased 280 basis points to 31.1 percent. SG&A expense as a percent of net sales declined 30 basis points to 30.1 percent.

 

7


Connected Services Highlights

HARMAN secured awards to provide software services for customers including Honeywell, Intel and Microsoft, among others. The Company also won a number of awards for its cloud-based Over-The-Air (OTA) software update technology from customers including Daimler and LG Electronics.

For the fourth straight year, Cisco Systems named HARMAN one of its top three software development partners at its Annual Supplier Appreciation Event, recognizing HARMAN’s commitment to innovation, execution and customer service.

HARMAN also continued to gain recognition for its industry leadership as an IoT services provider. The Company emerged as a top leader in the 2016 Zinnov Zones IoT ratings for both the Product Development Engineering and Software Platform Engineering and Management categories.

Other (Corporate)

 

FY 2017 Key Figures – Other

   Three Months Ended September 30  
                   Increase (Decrease)  

$ millions (except per share data)

   3M
FY17
     3M
FY16
     Including
Currency
Changes
    Excluding
Currency
Changes1
 

SG&A

     36         34         3     4

Restructuring & non-recurring costs

     (1      —          

Acquisition-related items

     —           1        

Non-GAAP - operational1

          

SG&A

     37         33         10     10

 

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. On an operational basis, Corporate SG&A as a percent of total net sales increased 10 basis points compared to the prior year. On a GAAP basis, Corporate SG&A as a percent of total net sales decreased 10 basis points compared to 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,
 
     2016     2015  

Net sales

   $ 1,759,522      $ 1,630,888   

Cost of sales

     1,218,251        1,143,490   

Gross profit

     541,271        487,398   

Selling, general and administrative expenses

     390,460        355,931   

Operating income

     150,811        131,467   

Other expenses:

    

Interest expense, net

     9,324        8,259   

Foreign exchange gains, net

     (967     (1,845

Miscellaneous, net

     2,895        3,987   

Income before income taxes

     139,559        121,066   

Income tax expense, net

     37,423        33,549   

Equity in income of unconsolidated subsidiaries

     (981     —     

Net income

     103,117        87,517   

Net income attributable to non-controlling interest

     —          418   
  

 

 

   

 

 

 

Net income attributable to HARMAN International Industries, Incorporated

     103,117        87,099   
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 1.45      $ 1.21   

Diluted

   $ 1.45      $ 1.20   

Weighted average shares outstanding:

    

Basic

     70,889        72,032   

Diluted

     71,358        72,556   

 

9


HARMAN International Industries, Incorporated

Consolidated Balance Sheets

 

(In thousands; unaudited)

   September 30,
2016
     June 30,
2016
 

ASSETS

     

Current Assets

     

Cash and cash equivalents

   $ 511,705       $ 602,300   

Receivables, net

     1,162,461         1,122,920   

Inventories

     831,900         706,084   

Other current assets

     527,048         487,151   

Total current assets

     3,033,114         2,918,455   

Property, plant and equipment, net

     595,256         593,290   

Intangible assets, net

     461,843         476,284   

Goodwill

     1,511,380         1,510,279   

Deferred tax assets, net

     135,643         140,181   

Other assets

     426,614         409,380   
  

 

 

    

 

 

 

Total assets

   $ 6,163,850       $ 6,047,869   
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

     

Current liabilities

     

Current portion of long-term debt

   $ 59,715       $ 86,641   

Short-term debt

     1,226         —     

Accounts payable

     940,389         867,279   

Accrued liabilities

     708,210         670,746   

Accrued warranties

     185,124         178,367   

Income taxes payable

     37,223         28,773   

Total current liabilities

     1,931,887         1,831,806   

Borrowings under revolving credit facility

     483,000         523,000   

Long-term debt

     791,568         787,333   

Pension liability

     217,657         216,016   

Other non-current liabilities

     230,978         237,241   

Total liabilities

     3,655,090         3,595,396   

Total equity

     2,508,760         2,452,473   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 6,163,850       $ 6,047,869   
  

 

 

    

 

 

 

 

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, 2016  
     GAAP     Adjustments     Non-GAAP -
Operational
 
Net sales    $ 1,759,522      $ 0      $ 1,759,522   
Cost of sales      1,218,251        (688 )a      1,217,563   
Gross profit      541,271        688        541,959   
Selling, general and administrative expenses      390,460        (35,998 )b      354,462   
Operating income      150,811        36,686        187,497   
Other expenses:       
Interest expense, net      9,324        —          9,324   
Foreign exchange gains, net      (967     —          (967
Miscellaneous, net      2,895        (969     1,926   
Income before income taxes      139,559        37,655        177,214   
Income tax expense, net      37,423        7,180 c      44,603   
Equity in income of unconsolidated subsidiaries      (981     —          (981
Net income      103,117        30,475        133,592   
  

 

 

   

 

 

   

 

 

 
Net income attributable to HARMAN International Industries, Incorporated    $ 103,117      $ 30,475      $ 133,592   
  

 

 

   

 

 

   

 

 

 
Earnings per share:       
Basic    $ 1.45      $ 0.43      $ 1.88   
Diluted    $ 1.45      $ 0.43      $ 1.87   
Weighted average shares outstanding:       
Basic      70,889          70,889   
Diluted      71,358          71,358   

 

a) Restructuring expense in Cost of Sales was $0.7 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $11.9 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; acquisition-related expenses were $23.7 million, including $11.8 million of intangible amortization expenses; other non-recurring expense included in SG&A was $0.4 million, which primarily relates to incremental costs incurred related to productivity improvement initiatives.
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 restructuring, acquisition-related, and 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, 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        —          8,259   

Foreign exchange gains, net

     (1,845     —          (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        —          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 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 $4.0 million. Acquisition-related expenses were $21.3 million, including $16.2 million of intangible amortization expenses.
c) The tax (expense) 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 restructuring, acquisition-related, and 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)
 
     2016      2015    

Net sales - nominal currency

   $ 1,759,522       $ 1,630,888        8

Effects of foreign currency translation (1)

        (705  
     

 

 

   

Net sales - local currency

   $ 1,759,522       $ 1,630,183        8
     

 

 

   

Gross profit - nominal currency

   $ 541,271       $ 487,398        11

Effects of foreign currency translation (1)

        (1,283  
     

 

 

   

Gross profit - local currency

   $ 541,271       $ 486,115        11
     

 

 

   

SG&A - nominal currency

   $ 390,460       $ 355,931        10

Effects of foreign currency translation (1)

        (59  
     

 

 

   

SG&A - local currency

   $ 390,460       $ 355,872        10
     

 

 

   

Operating income - nominal currency

   $ 150,811       $ 131,467        15

Effects of foreign currency translation (1)

        (1,224  
     

 

 

   

Operating income - local currency

   $ 150,811       $ 130,243        16
     

 

 

   

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

   $ 103,117       $ 87,099        18

Effects of foreign currency translation (1)

        (1,228  
     

 

 

   

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

   $ 103,117       $ 85,871        20
     

 

 

   

 

(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)
 
     2016      2015    

Net sales - nominal currency

   $ 1,759,522       $ 1,630,888        8

Effects of foreign currency translation (1)

        (705  
     

 

 

   

Net sales - local currency

   $ 1,759,522       $ 1,630,183        8
     

 

 

   

Gross profit - nominal currency

   $ 541,959       $ 489,077        11

Effects of foreign currency translation (1)

        (1,279  
     

 

 

   

Gross profit - local currency

   $ 541,959       $ 487,798        11
     

 

 

   

SG&A - nominal currency

   $ 354,462       $ 331,150        7

Effects of foreign currency translation (1)

        (41  
     

 

 

   

SG&A - local currency

   $ 354,462       $ 331,109        7
     

 

 

   

Operating income - nominal currency

   $ 187,497       $ 157,927        19

Effects of foreign currency translation (1)

        (1,238  
     

 

 

   

Operating income - local currency

   $ 187,497       $ 156,689        20
     

 

 

   

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

   $ 133,592       $ 107,025        25

Effects of foreign currency translation (1)

        (1,240  
     

 

 

   

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

   $ 133,592       $ 105,785        26
     

 

 

   

 

(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, 2016      Three Months Ended September 30, 2015  
     GAAP      Adjustments     Non-GAAP -
Operational
     GAAP      Adjustments     Non-GAAP -
Operational
 

HARMAN

               

Operating income

     150,811         36,686        187,497         131,467         26,460        157,927   

Depreciation & Amortization

     51,188         (11,887     39,301         56,838         (18,241     38,597   

EBITDA

     201,999         24,799        226,798         188,305         8,219        196,524   

CONNECTED CAR

               

Operating income

     94,918         2,703        97,621         87,219         1,046        88,265   

Depreciation & Amortization

     20,446         (878     19,568         18,402         (1,836     16,566   

EBITDA

     115,364         1,825        117,189         105,621         (790     104,831   

LIFESTYLE AUDIO

               

Operating income

     78,682         7,732        86,414         47,253         7,542        54,795   

Depreciation & Amortization

     13,954         (4,977     8,977         13,835         (5,128     8,707   

EBITDA

     92,636         2,755        95,391         61,088         2,414        63,502   

PROFESSIONAL SOLUTIONS

               

Operating income

     11,682         9,294        20,976         25,685         2,184        27,869   

Depreciation & Amortization

     7,256         (584     6,672         8,504         (638     7,866   

EBITDA

     18,938         8,710        27,648         34,189         1,546        35,735   

CONNECTED SERVICES

               

Operating income

     1,563         18,019        19,582         5,631         14,473        20,104   

Depreciation & Amortization

     7,554         (5,448     2,106         13,631         (10,638     2,993   

EBITDA

     9,117         12,571        21,688         19,262         3,835        23,097   

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 restructuring, acquisition-related, and 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, 2016

 

(In thousands; unaudited)

   Connected
Car
     Lifestyle
Audio
     Professional
Solutions
     Connected
Services
     Eliminations
and Other
    HARMAN  

Net Trade Sales

   $ 797,101       $ 567,692       $ 239,740       $ 154,989       $ 0      $ 1,759,522   

Intercompany Sales

     16         690         483         11,682         (12,871     —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net Sales

     797,117         568,382         240,223         166,671         (12,871     1,759,522   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

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
and Other
    HARMAN  

Net Trade Sales

   $ 755,483       $ 475,541       $ 246,333       $ 153,492       $ 39      $ 1,630,888   

Intercompany Sales

     0         530         773         6,420         (7,723     —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net Sales

     755,483         476,071         247,106         159,912         (7,684     1,630,888   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

 

Total Company Liquidity

   September 30,
2016
 

$ millions

  

Cash & cash equivalents

   $ 512   

Available credit under Revolving Credit Facility

     713   
  

 

 

 

Total Liquidity

   $ 1,225   
  

 

 

 

 

16