HARMAN INTERNATIONAL INDUSTRIES INC /DE/ - FORM 8-K - EX-99.1

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Exhibit 99.1


PRESS RELEASE

Darrin Shewchuk		Yijing Brentano
Senior Director, Corporate Communications		Vice President, Investor Relations
Tel: +1 203-328-3834		Tel: +1 203-328-3500
darrin.shewchuk@harman.com		yijing.brentano@harman.com

JANUARY 26, 2017

HARMAN REPORTS SECOND QUARTER FISCAL 2017 RESULTS

•

Net Sales Up 10% to $1.95 Billion

•

GAAP EBITDA Up 4% to $227 Million; Operational EBITDA Up 19% to $268 Million

•

GAAP EPS Down 11% to $1.39; Operational EPS Up 20% to $2.22

•

Secured $2.7 Billion in New Automotive Awards Year-to-Date

•

Samsung Acquisition on Track to Close in Mid Calendar 2017

STAMFORD, CT — Harman International Industries, Incorporated (NYSE: HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the second quarter ended December 31, 2016.

Net sales for the second quarter were $1.95 billion, an increase of 10 percent,11 percent excluding the impact of foreign exchange (Ex-FX), compared to the prior year. Lifestyle Audio net sales increased 19 percent due to higher sales in both consumer and car audio. Connected Services net sales increased 13 percent primarily due to higher demand for automotive services. Connected Car net sales increased four percent due to stronger production and the expansion of recently launched programs. Professional Solutions net sales increased three percent primarily due to stronger sales in Asia.

On a GAAP basis, second quarter operating income increased nine percent to $174 million compared to $159 million in the prior year, and EBITDA increased four percent to $227 million compared to $217 million in the prior year. During the quarter, the Company recognized approximately $23 million of non-recurring incremental U.S. income tax from deemed income on foreign earnings. As a result, earnings per diluted share decreased 11 percent to $1.39 compared to $1.55 in the prior year.

Non-GAAP Operating income increased 22 percent to $228 million compared to $186 million in the prior year, and EBITDA increased 19 percent to $268 million compared to $225 million in the prior year, excluding restructuring, acquisition-related items, costs associated with the pending Samsung transaction and one-time stock compensation costs. Earnings per diluted share increased 20 percent to $2.22 compared to $1.84 in the prior year.

Dinesh C. Paliwal, the Company’s Chairman, President and CEO said, “HARMAN delivered solid second quarter results, including double digit revenue, EBITDA and EPS growth led by strong performance in our Lifestyle Audio division. Additionally, we continue to leverage our success in Connected Car and Connected Services to develop broader end-to-end solutions for immersive and personalized experiences.

“The pending acquisition of HARMAN by Samsung will accelerate connected and autonomous driving innovation and technology deployment faster than if HARMAN were to remain a standalone company. The transaction also delivers immediate and compelling cash value to our shareholders. We remain on track to close the transaction in mid-2017.”


FY 2017 Key Figures — Total Company	Three Months Ended December 31												Six Months Ended December 31
							Increase (Decrease)												Increase (Decrease)
$ millions (except per share data)	3M FY17			3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17			6M FY16			Including Currency Changes			Excluding Currency Changes¹
Net sales		1,947			1,772			10	%		11	%		3,707			3,403			9	%		9	%
Gross profit		608			545			12	%		13	%		1,149			1,032			11	%		12	%
Percent of net sales		31.2	%		30.8	%								31.0	%		30.3	%
SG&A		434			386			12	%		13	%		824			742			11	%		11	%
Operating income		174			159			9	%		11	%		325			291			12	%		13	%
Percent of net sales		8.9	%		9.0	%								8.8	%		8.5	%
EBITDA		227			217			4	%		6	%		429			405			6	%		7	%
Percent of net sales		11.6	%		12.3	%								11.6	%		11.9	%
Net Income attributable to HARMAN International Industries, Incorporated		99			113			(12	)%		(11	)%		203			200			1	%		2	%
Diluted earnings per share		1.39			1.55			(11	)%		(10	)%		2.83			2.76			3	%		4	%
Restructuring & non-recurring costs		38			7									51			12
Acquisition-related items		16			20									40			41
Non-GAAP — operational¹
Gross profit		609			546			11	%		12	%		1,151			1,035			11	%		12	%
Percent of net sales		31.3	%		30.8	%								31.0	%		30.4	%
SG&A		381			360			6	%		6	%		735			692			6	%		7	%
Operating income		228			186			22	%		24	%		415			344			21	%		22	%
Percent of net sales		11.7	%		10.5	%								11.2	%		10.1	%
EBITDA		268			225			19	%		21	%		495			422			17	%		19	%
Percent of net sales		13.8	%		12.7	%								13.4	%		12.4	%
Net Income attributable to HARMAN International Industries, Incorporated		159			134			19	%		20	%		293			241			21	%		23	%
Diluted earnings per share		2.22			1.84			20	%		22	%		4.10			3.33			23	%		24	%
Shares outstanding — diluted (in millions)		72			73									72			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 second quarter of fiscal year 2017 increased 50 basis points to 31.3 percent, primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base. Operational SG&A expenses as a percent of net sales decreased 70 basis points to 19.6 percent compared to 20.3 percent in the prior year due to favorable product mix.

On a GAAP basis in the second quarter of fiscal year 2017, gross margin increased 40 basis points to 31.2 percent. SG&A expenses as a percent of net sales increased 50 basis points to 22.3 percent compared to 21.8 percent in the prior year, primarily due to higher restructuring expenses.

Withdrawal of Guidance and Suspension of Conference Calls

As announced on November 14, 2016, Samsung Electronics, Co. Ltd. (“Samsung”) and Harman International Industries, Incorporated (“HARMAN”) entered into a definitive agreement under which Samsung will acquire HARMAN for $112 per share in cash. On January 20, 2017, HARMAN filed a definitive proxy statement with the U.S. Securities and Exchange Commission in connection with a special meeting of its stockholders to consider the adoption of the merger agreement. The special meeting is scheduled to be held on February 17, 2017.

In light of the pending transaction, HARMAN is withdrawing its financial outlook and will not be hosting earnings conference calls.

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 $7.2 billion during the 12 months ended December 31, 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. In addition, the Company may be subject to certain risks during the pendency of the Samsung transaction, and may not be able to complete the proposed transaction on the terms described herein or other acceptable terms or at all because of a number of factors, including without limitation (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (ii) the failure to obtain the requisite approval of the Company’s stockholders or the failure to satisfy the other closing conditions, (iii) risks related to disruption of management’s attention from the Company’s ongoing business operations due to the pending transaction and (iv) the effect of the announcement of the pending transaction on the ability of the Company to retain and hire key personnel, maintain relationships with its customers and suppliers, and maintain its operating results and business generally. 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.

APPENDIX

Connected Car


FY 2017 Key Figures — Connected Car	Three Months Ended December 31												Six Months Ended December 31
							Increase (Decrease)												Increase (Decrease)
$ millions (except per share data)	3M FY17			3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17			6M FY16			Including Currency Changes			Excluding Currency Changes¹
Net sales		769			737			4	%		5	%		1,566			1,492			5	%		5	%
Gross profit		203			183			11	%		12	%		401			361			11	%		12	%
Percent of net sales		26.4	%		24.8	%								25.6	%		24.2	%
SG&A		126			99			28	%		29	%		229			189			21	%		21	%
Operating income		77			84			(9	%)		(8	%)		172			171			0	%		1	%
Percent of net sales		10.0	%		11.4	%								11.0	%		11.5	%
EBITDA		97			103			(6	%)		(5	%)		213			209			2	%		3	%
Percent of net sales		12.7	%		14.0	%								13.6	%		14.0	%
Restructuring & non-recurring costs		20			4									22			4
Acquisition-related items		1			—									2			1
Non-GAAP — operational¹
Gross profit		203			184			10	%		11	%		401			363			10	%		11	%
Percent of net sales		26.4	%		25.0	%								25.6	%		24.3	%
SG&A		105			96			9	%		10	%		205			187			10	%		10	%
Operating income		98			88			11	%		13	%		196			176			11	%		12	%
Percent of net sales		12.7	%		11.9	%								12.5	%		11.8	%
EBITDA		118			105			12	%		13	%		235			210			12	%		13	%
Percent of net sales		15.3	%		14.3	%								15.0	%		14.1	%

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

Net sales in the second quarter of fiscal 2017 were $769 million, an increase of four percent (5 percent ex-FX) compared to the prior year. The increase in net sales was due to the expansion of recently launched programs and stronger production.

On an operational basis in the second quarter of fiscal 2017, gross margin increased 140 basis points to 26.4 percent compared to the prior year primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base and favorable product mix. SG&A expenses as a percent of net sales increased 70 basis points to 13.7 percent compared to the prior year primarily due to higher research and development expenses to support awarded business.

On a GAAP basis in the second quarter of fiscal 2017, gross margin increased 160 basis points to 26.4 percent compared to the prior year. SG&A expenses as a percent of net sales increased 300 basis points to 16.4 percent compared to the prior year primarily due to higher expenses for restructuring and research and development.

Connected Car Highlights

During the quarter, HARMAN launched embedded infotainment solutions on a variety of vehicle models, including the Audi SQ5, the VW Atlas, and feature upgrades to the Discover Pro infotainment system across Volkswagen’s Golf lineup. HARMAN also launched a next generation, fully integrated embedded infotainment solution including CarPlay and Android Auto for Subaru. HARMAN will supply the entry, mid and high embedded infotainment solutions for Subaru vehicles over the next several years.

Earlier this month at the Consumer Electronics Show in Las Vegas, HARMAN unveiled a number of new industry-first solutions centered on addressing autonomous mobility and intelligent personalization. Showcased in the Oasis concept car, HARMAN demonstrated a wide-view full windshield heads-up display using holographic augmented reality technology, as well as demonstrating an augmented reality concierge, predictive collision prevention, and intelligent e-mirrors. The Company also demonstrated its new intelligent cockpit design leveraging HARMAN’s integrated compute platform (LIVS) to deliver a connected and unified personal user experience across the car, home and office. During CES, the Company was presented the 2016 Internet of Things (IoT) Breakthrough Award for the LIVS connected car platform.

Lifestyle Audio


FY 2017 Key Figures — Lifestyle Audio	Three Months Ended December 31												Six Months Ended December 31
							Increase (Decrease)												Increase (Decrease)
$ millions (except per share data)	3M FY17			3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17			6M FY16			Including Currency Changes			Excluding Currency Changes¹
Net sales		765			641			19	%		20	%		1,333			1,117			19	%		19	%
Gross profit		260			208			25	%		26	%		460			362			27	%		27	%
Percent of net sales		33.9	%		32.4	%								34.5	%		32.4	%
SG&A		134			125			7	%		8	%		256			232			10	%		11	%
Operating income		126			83			52	%		53	%		204			130			57	%		58	%
Percent of net sales		16.4	%		12.9	%								15.3	%		11.7	%
EBITDA		140			97			45	%		46	%		233			158			48	%		49	%
Percent of net sales		18.4	%		15.1	%								17.5	%		14.1	%
Restructuring & non-recurring costs		—			(1	)								3			2
Acquisition-related items		5			8									10			13
Non-GAAP — operational¹
Gross profit		260			208			25	%		26	%		461			363			27	%		28	%
Percent of net sales		34.0	%		32.4	%								34.6	%		32.4	%
SG&A		129			118			9	%		10	%		244			217			12	%		12	%
Operating income		131			90			45	%		46	%		218			145			50	%		51	%
Percent of net sales		17.2	%		14.1	%								16.3	%		13.0	%
EBITDA		141			99			42	%		43	%		236			163			45	%		46	%
Percent of net sales		18.4	%		15.5	%								17.7	%		14.6	%

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

Net sales in the second quarter of fiscal 2017 were $765 million, an increase of 19 percent (20 percent ex-FX) compared to the prior year, primarily due to higher consumer audio sales, reflecting increased demand for smart audio products and headphones, as well as higher car audio sales due to higher take rates and automotive production.

On an operational basis in the second quarter of fiscal 2017, gross margin improved 160 basis points to 34.0 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 awarded business, total SG&A expenses as a percent of net sales decreased 150 basis points to 16.8 percent due to improved operating leverage on higher sales.

On a GAAP basis in the second quarter of fiscal 2017, gross margin improved 150 basis points to 33.9 percent compared to the prior year. SG&A expenses as a percent of net sales decreased 200 basis points to 17.5 percent compared to the prior year.

Lifestyle Audio Highlights

HARMAN’s consumer audio products won a number of industry accolades. The Company earned nine CES innovation awards for products including the JBL Everest Elite and JBL BassPro Go, as well as three Red Dot design awards.

During the quarter, HARMAN secured new car audio business awards with Audi (Bang & Olufsen), SAIC-GM-Wuling (Infinity) and Volvo (Bowers & Wilkins).The Company launched car audio solutions in the BMW 5 Series (Bowers & Wilkins and Harman Kardon), the Great Wall Haval H7 (Infinity), the Chrysler Pacifica (Sound Management), the Lexus LC (Mark Levinson) and the Subaru Impreza (Harman Kardon).

At CES 2017, HARMAN showcased new car audio technologies. The HARMAN SUMMIT premium audio platform and the seamless, scalable HARMAN Voyager smart audio platform are both designed with a strong focus on intelligent, personalized and connected in-car experiences for consumers.

Professional Solutions


FY 2017 Key Figures – Professional Solutions	Three Months Ended December 31												Six Months Ended December 31
							Increase (Decrease)												Increase (Decrease)
$ millions (except per share data)	3M FY17			3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17			6M FY16			Including Currency Changes			Excluding Currency Changes¹
Net sales		256			249			3	%		3	%		496			496			(0	%)		0	%
Gross profit		96			103			(7	%)		(7	%)		190			206			(8	%)		(7	%)
Percent of net sales		37.4	%		41.4	%								38.2	%		41.4	%
SG&A		85			79			8	%		8	%		168			156			8	%		8	%
Operating income		10			24			(57	%)		(57	%)		22			50			(56	%)		(56	%)
Percent of net sales		4.0	%		9.6	%								4.4	%		10.0	%
EBITDA		18			33			(44	%)		(44	%)		37			67			(45	%)		(44	%)
Percent of net sales		7.1	%		13.2	%								7.5	%		13.5	%
Restructuring & non-recurring costs		2			5									10			7
Acquisition-related items		3			—									5			—
Non-GAAP — operational¹
Gross profit		96			103			(7	%)		(7	%)		190			206			(8	%)		(7	%)
Percent of net sales		37.4	%		41.4	%								38.3	%		41.5	%
SG&A		80			75			7	%		8	%		153			149			2	%		3	%
Operating income		16			29			(45	%)		(45	%)		37			56			(35	%)		(35	%)
Percent of net sales		6.2	%		11.5	%								7.4	%		11.4	%
EBITDA		23			37			(39	%)		(38	%)		50			73			(31	%)		(30	%)
Percent of net sales		8.8	%		14.8	%								10.1	%		14.6	%

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

Net sales for the second quarter of fiscal 2017 were $256 million, an increase of three percent on a nominal and ex-FX basis compared to the prior year, primarily due to stronger sales in Asia. On an operational basis in the second quarter of fiscal 2017, gross margin decreased 400 basis points to 37.4 percent compared to the prior year as a result of geographic and product mix. SG&A expenses as a percent of net sales increased 130 basis points to 31.2 percent compared to the prior year, primarily as a result of higher research and development costs to support new product introductions.

On a GAAP basis in the second quarter of fiscal 2017, gross margin decreased 400 basis points to 37.4 percent. SG&A expenses as a percent of net sales increased 160 basis points to 33.4 percent compared to prior year.

Professional Solutions Highlights

HARMAN secured new and follow-on orders for its entertainment and enterprise solutions from the U.S. Strategic Command, Warner Brothers Park in the UAE and Nike. Notable installations included the University of Nebraska, the Norwegian Cruise Line Ships, and Samsung Hall in Switzerland. HARMAN’s solutions also powered a wide range of high-profile special events, music festivals, concerts and events including the U.S. Presidential Inauguration.

HARMAN and Cinemark entered a strategic partnership appointing HARMAN as the exclusive audio equipment provider for Cinemark theaters for the next three years. Cinemark is a leader in the motion picture exhibition industry with 522 theaters and 5,865 screens in the U.S. and Latin America.

The division also launched 11 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 December 31												Six Months Ended December 31
							Increase (Decrease)												Increase (Decrease)
$ millions (except per share data)	3M FY17			3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17			6M FY16			Including Currency Changes			Excluding Currency Changes¹
Net sales		173			154			13	%		16	%		340			313			8	%		11	%
Gross profit		54			53			2	%		6	%		106			107			(1	%)		1	%
Percent of net sales		31.0	%		34.2	%								31.1	%		34.0	%
SG&A		34			48			(28	%)		(28	%)		84			96			(12	%)		(11	%)
Operating income		20			5			304	%		433	%		21			10			102	%		141	%
Percent of net sales		11.3	%		3.2	%								6.2	%		3.3	%
EBITDA		27			19			40	%		49	%		36			39			(6	%)		(2	%)
Percent of net sales		15.7	%		12.6	%								10.7	%		12.3	%
Restructuring & non-recurring costs		1			1									2			1
Acquisition-related items		6			14									23			28
Non-GAAP — operational¹
Gross profit		54			53			3	%		7	%		106			107			(1	%)		2	%
Percent of net sales		31.3	%		34.2	%								31.2	%		34.0	%
SG&A		28			34			(18	%)		(16	%)		60			68			(12	%)		(10	%)
Operating income		26			19			41	%		50	%		46			39			18	%		24	%
Percent of net sales		15.2	%		12.2	%								13.5	%		12.4	%
EBITDA		28			22			30	%		38	%		50			45			12	%		16	%
Percent of net sales		16.4	%		14.2	%								14.7	%		14.3	%

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

Net sales in the second quarter of fiscal 2017 were $173 million, an increase of 13 percent (16 percent ex-FX) compared to the prior year due to higher demand for automotive services.

On an operational basis, gross margin declined 290 basis points to 31.3 percent primarily due to higher revenue recognition on high-margin engineering change orders in the prior year. SG&A expenses as a percent of net sales decreased 600 basis points to 16.0 percent due to productivity improvements as a result of footprint migration initiatives.

On a GAAP basis, gross margin decreased 320 basis points to 31.0 percent. SG&A expenses as a percent of net sales decreased from 31.1 percent in the prior year to 19.7 percent primarily driven by productivity improvements and lower amortization of acquired intangible assets.

Connected Services Highlights

HARMAN secured awards to provide software services for customers including AT&T, Hitachi, Intel, Microsoft, Sprint and Verizon, among others. The Company also won a number of awards for its cloud-based Over-The-Air (OTA) software update technology from customers including a U.S. Automaker, Porsche and Renault.

For the second straight year, HfS Research, a leading authority and global network for IT and business services, recognized HARMAN with a place in its “Winner’s Circle”, recognizing the Company’s excellence in design and cloud-driven product modernization services.

Other (Corporate)


FY 2017 Key Figures – Other	Three Months Ended December 31											Six Months Ended December 31
						Increase (Decrease)											Increase (Decrease)
$ millions (except per share data)	3M FY17		3M FY16			Including Currency Changes			Excluding Currency Changes¹			6M FY17		6M FY16			Including Currency Changes			Excluding Currency Changes¹
SG&A		58		37			56	%		56	%		93		71			31	%		31	%
Restructuring & non-recurring costs		15		(1	)								14		(1	)
Acquisition-related items		0		(2	)								0		(1	)
Non-GAAP — operational¹
SG&A		43		40			7	%		7	%		79		73			8	%		8	%

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

Other (Corporate) SG&A expenses 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 expenses as a percent of total net sales remained consistent with the prior year. On a GAAP basis, Corporate SG&A expenses as a percent of total net sales increased 90 basis points compared to the prior year due to costs associated with the pending Samsung transaction and one-time stock compensation costs.

HARMAN International Industries, Incorporated

Consolidated Statements of Income


(In thousands, except earnings per share data; unaudited)	Three Months Ended December 31,				Six Months Ended December 31,
	2016		2015		2016			2015
Net sales	$	1,947,474	$	1,772,157	$	3,706,996		$	3,403,045
Cost of sales		1,339,513		1,227,065		2,557,764			2,370,555
Gross profit		607,961		545,092		1,149,232			1,032,490
Selling, general and administrative expenses		433,947		385,939		824,407			741,870
Operating income		174,014		159,153		324,825			290,620
Other expenses:
Interest expense, net		9,214		7,666		18,538			15,925
Foreign exchange losses (gains), net		2,365		887		1,398			(958	)
Miscellaneous, net		1,916		4,363		4,811			8,350
Income before income taxes		160,519		146,237		300,078			267,303
Income tax expense, net		60,865		33,050		98,288			66,600
Equity in loss (income) of unconsolidated subsidiaries		205		—		(776	)		—
Net income		99,449		113,187		202,566			200,703
Net income attributable to non-controlling interest		—		289		—			707
Net income attributable to HARMAN International Industries, Incorporated		99,449		112,898		202,566			199,996

Earnings per share:
Basic	$	1.40	$	1.57	$	2.86		$	2.78
Diluted	$	1.39	$	1.55	$	2.83		$	2.76
Weighted average shares outstanding:
Basic		70,986		72,079		70,938			72,060
Diluted		71,712		72,830		71,510			72,549

HARMAN International Industries, Incorporated

Consolidated Balance Sheets


(In thousands; unaudited)	December 31, 2016		June 30, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	683,351	$	602,300
Receivables, net		1,195,761		1,122,920
Inventories		787,559		706,084
Other current assets		584,653		487,151
Total current assets		3,251,324		2,918,455
Property, plant and equipment, net		579,039		593,290
Intangible assets, net		435,930		476,284
Goodwill		1,500,499		1,510,279
Deferred tax assets, long-term, net		131,681		140,181
Other assets		433,150		409,380
Total assets	$	6,331,623	$	6,047,869


LIABILITIES AND EQUITY
Current liabilities
Current portion of long-term debt	$	55,543	$	86,641
Short-term debt		2,832		—
Accounts payable		1,001,822		867,279
Accrued liabilities		724,759		670,746
Accrued warranties		185,656		178,367
Income taxes payable		40,762		28,773
Total current liabilities		2,011,374		1,831,806
Borrowings under revolving credit facility		513,000		523,000
Long-term debt		766,601		787,333
Pension liability		210,471		216,016
Other non-current liabilities		253,718		237,241
Total liabilities		3,755,164		3,595,396
Total equity		2,576,459		2,452,473
Total liabilities and equity	$	6,331,623	$	6,047,869

HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results


(In thousands except earnings per share data; unaudited)	Three Months Ended December 31, 2016
	GAAP		Adjustments			Non-GAAP – Operational
Net sales	$	1,947,474	$	0		$	1,947,474
Cost of sales		1,339,513		(742	)^a		1,338,771
Gross profit		607,961		742			608,703
Selling, general and administrative expenses		433,947		(53,073	)^b		380,874
Operating income		174,014		53,815			227,829
Other expenses:
Interest expense, net		9,214		0			9,214
Foreign exchange losses (gains), net		2,365		0			2,365
Miscellaneous, net		1,916		4			1,920
Income before income taxes		160,519		53,811			214,330
Income tax expense, net		60,865		(5,987	)^c		54,878
Equity in loss (income) of unconsolidated subsidiaries		205		—			205
Net income		99,449		59,798			159,247
Net income attributable to HARMAN International Industries, Incorporated	$	99,449	$	59,798		$	159,247

Earnings per share:
Basic	$	1.40	$	0.84		$	2.24
Diluted	$	1.39	$	0.83		$	2.22
Weighted average shares outstanding:
Basic		70,986					70,986
Diluted		71,712					71,712

a)	Restructuring expense in Cost of Sales was $0.7 million for projects to increase manufacturing productivity.

Restructuring expense in SG&A was $20.4 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; acquisition-related expenses were $15.7 million, including $11.7 million of intangible amortization expenses; other non-recurring expenses included in SG&A were $17.0 million, which primarily relate to the planned acquisition of HARMAN by Samsung and one-time stock compensation costs.

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. Also included is a discrete tax charge of $22.7 million from deemed income on foreign earnings attributable to fiscal years 2014, 2015 and 2016.

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.

HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results


(In thousands except earnings per share data; unaudited)	Six Months Ended December 31, 2016
	GAAP			Adjustments			Non-GAAP – Operational
Net sales	$	3,706,996		$	0		$	3,706,996
Cost of sales		2,557,764			(1,430	)^a		2,556,334
Gross profit		1,149,232			1,430			1,150,662
Selling, general and administrative expenses		824,407			(89,071	)^b		735,336
Operating income		324,825			90,501			415,326
Other expenses:
Interest expense, net		18,538			—			18,538
Foreign exchange losses (gains), net		1,398			—			1,398
Miscellaneous, net		4,811			(966	)		3,845
Income before income taxes		300,078			91,467			391,545
Income tax expense, net		98,288			1,194	^c		99,482
Equity in loss (income) of unconsolidated subsidiaries		(776	)		—			(776	)
Net income		202,566			90,273			292,839
Net income attributable to HARMAN International Industries, Incorporated	$	202,566		$	90,273		$	292,839

Earnings per share:
Basic	$	2.86		$	1.27		$	4.13
Diluted	$	2.83		$	1.26		$	4.10
Weighted average shares outstanding:
Basic		70,938						70,938
Diluted		71,510						71,510

a)	Restructuring expense in Cost of Sales was $1.4 million for projects to increase manufacturing productivity.

Restructuring expense in SG&A $32.3 million due engineering, manufacturing and administrative functions; acquisition-related expenses were $39.4 million, including $23.5 million of intangible amortization expenses; other non-recurring expense included in SG&A was $17.4 million primarily related to the planned acquisition of HARMAN by Samsung and one-time stock compensation costs.

HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results


(In thousands except earnings per share data; unaudited)	Three Months Ended December 31, 2015
	GAAP		Adjustments			Non-GAAP – Operational
Net sales	$	1,772,157	$	0		$	1,772,157
Cost of sales		1,227,065		(1,322	)^a		1,225,743
Gross profit		545,092		1,322			546,414
Selling, general and administrative expenses		385,939		(25,522	)^b		360,417
Operating income		159,153		26,844			185,997
Other expenses:
Interest expense, net		7,666		—			7,666
Foreign exchange losses (gains), net		887		—			887
Miscellaneous, net		4,363		(1,914	)		2,449
Income before income taxes		146,237		28,758			174,995
Income tax expense, net		33,050		7,426	^c		40,476
Net income		113,187		21,332			134,519
Net income attributable to non-controlling interest		289		0			289
Net income attributable to HARMAN International Industries, Incorporated	$	112,898	$	21,332		$	134,230

Earnings per share:
Basic	$	1.57	$	0.30		$	1.86
Diluted	$	1.55	$	0.30		$	1.84
Weighted average shares outstanding:
Basic		72,079					72,079
Diluted		72,830					72,830

a)	Restructuring expense in Cost of Sales was $1.3 million for projects to increase manufacturing productivity.

Restructuring expense in SG&A was $3.6 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $4.5 million. Acquisition-related expenses were $17.4 million, including $17.0 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.

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results


(In thousands except earnings per share data; unaudited)	Six Months Ended December 31, 2015
	GAAP			Adjustments			Non-GAAP – Operational
Net sales	$	3,403,045		$	0		$	3,403,045
Cost of sales		2,370,555			(3,001	)^a		2,367,554
Gross profit		1,032,490			3,001			1,035,491
Selling, general and administrative expenses		741,870			(50,296	)^b		691,574
Operating income		290,620			53,297			343,917
Other expenses:
Interest expense, net		15,925			—			15,925
Foreign exchange losses (gains), net		(958	)		—			(958	)
Miscellaneous, net		8,350			(3,137	)		5,213
Income before income taxes		267,303			56,434			323,737
Income tax expense, net		66,600			15,186	^c		81,786
Net income		200,703			41,248			241,951
Net income attributable to non-controlling interest		707			—			707
Net income attributable to HARMAN International Industries, Incorporated	$	199,996		$	41,248		$	241,244

Earnings per share:
Basic	$	2.78		$	0.57		$	3.35
Diluted	$	2.76		$	0.57		$	3.33
Weighted average shares outstanding:
Basic		72,060						72,060
Diluted		72,549						72,549

a)	Restructuring expense in Cost of Sales was $3.0 million for projects to increase manufacturing productivity.

Restructuring expense in SG&A was $3.1 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $6.4 million. Acquisition-related expenses were $40.8 million, including $33.2 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 International Industries, Incorporated

Selected Financial Data

Reconciliation of Non-GAAP Results

Foreign Currency Translation Impact


(In thousands; unaudited)	Three Months Ended December 31,					Increase / (Decrease)
	2016		2015			Increase / (Decrease)
Net sales — nominal currency	$	1,947,474	$	1,772,157			10	%
Effects of foreign currency translation⁽¹⁾				(12,346	)

Net sales — local currency	$	1,947,474	$	1,759,811			11	%

Gross profit — nominal currency	$	607,961	$	545,092			12	%
Effects of foreign currency translation⁽¹⁾				(4,844	)

Gross profit — local currency	$	607,961	$	540,248			13	%

SG&A— nominal currency	$	433,947	$	385,939			12	%
Effects of foreign currency translation⁽¹⁾				(2,156	)

SG&A — local currency	$	433,947	$	383,783			13	%

Operating income — nominal currency	$	174,014	$	159,153			9	%
Effects of foreign currency translation⁽¹⁾				(2,688	)

Operating income — local currency	$	174,014	$	156,465			11	%
Net income attributable to HARMAN International Industries, Incorporated — nominal currency	$	99,449	$	112,898			(12	%)
Effects of foreign currency translation⁽¹⁾				(946	)

Net income attributable to HARMAN International Industries, Incorporated — local currency	$	99,449	$	111,952			(11	%)

(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.

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of Non-GAAP Results

Foreign Currency Translation Impact


EXCLUDING restructuring and non-recurring charges (In thousands; unaudited)	Three Months Ended December 31,					Increase / (Decrease)
	2016		2015			Increase / (Decrease)
Net sales — nominal currency	$	1,947,474	$	1,772,157			10	%
Effects of foreign currency translation⁽¹⁾				(12,346	)

Net sales — local currency	$	1,947,474	$	1,759,811			11	%

Gross profit — nominal currency	$	608,703	$	546,414			11	%
Effects of foreign currency translation⁽¹⁾				(4,860	)

Gross profit — local currency	$	608,703	$	541,554			12	%

SG&A — nominal currency	$	380,874	$	360,417			6	%
Effects of foreign currency translation⁽¹⁾				(1,918	)

SG&A — local currency	$	380,874	$	358,499			6	%

Operating income — nominal currency	$	227,829	$	185,997			22	%
Effects of foreign currency translation⁽¹⁾				(2,947	)

Operating income — local currency	$	227,829	$	183,050			24	%

Net income attributable to HARMAN International Industries, Incorporated — nominal currency	$	159,247	$	134,230			19	%
Effects of foreign currency translation⁽¹⁾				(1,200	)

Net income attributable to HARMAN International Industries, Incorporated — local currency	$	159,247	$	133,030			20	%

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

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact


(In thousands; unaudited)	Six Months Ended December 31,					Increase / (Decrease)
	2016		2015			Increase / (Decrease)
Net sales — nominal currency	$	3,706,996	$	3,403,045			9	%
Effects of foreign currency translation⁽¹⁾				(13,051	)

Net sales — local currency	$	3,706,996	$	3,389,994			9	%

Gross profit — nominal currency	$	1,149,232	$	1,032,490			11	%
Effects of foreign currency translation⁽¹⁾				(6,127	)

Gross profit — local currency	$	1,149,232	$	1,026,363			12	%

SG&A — nominal currency	$	824,407	$	741,870			11	%
Effects of foreign currency translation⁽¹⁾				(2,215	)

SG&A — local currency	$	824,407	$	739,655			11	%

Operating income — nominal currency	$	324,825	$	290,620			12	%
Effects of foreign currency translation⁽¹⁾				(3,912	)

Operating income — local currency	$	324,825	$	286,708			13	%

Net income attributable to HARMAN International Industries, Incorporated — nominal currency	$	202,566	$	199,996			1	%
Effects of foreign currency translation⁽¹⁾				(2,173	)

Net income attributable to HARMAN International Industries, Incorporated — local currency	$	202,566	$	197,823			2	%

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

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact


EXCLUDING restructuring and non-recurring charges (In thousands; unaudited)	Six Months Ended December 31,					Increase / (Decrease)
	2016		2015			Increase / (Decrease)
Net sales — nominal currency	$	3,706,996	$	3,403,045			9	%
Effects of foreign currency translation⁽¹⁾				(13,051	)

Net sales — local currency	$	3,706,996	$	3,389,994			9	%

Gross profit — nominal currency	$	1,150,662	$	1,035,491			11	%
Effects of foreign currency translation⁽¹⁾				(6,139	)

Gross profit — local currency	$	1,150,662	$	1,029,352			12	%

SG&A — nominal currency	$	735,336	$	691,574			6	%
Effects of foreign currency translation⁽¹⁾				(1,960	)

SG&A — local currency	$	735,336	$	689,614			7	%

Operating income — nominal currency	$	415,326	$	343,917			21	%
Effects of foreign currency translation⁽¹⁾				(4,178	)

Operating income — local currency	$	415,326	$	339,739			22	%

Net income attributable to HARMAN International Industries, Incorporated — nominal currency	$	292,839	$	241,244			21	%
Effects of foreign currency translation⁽¹⁾				(2,429	)

Net income attributable to HARMAN International Industries, Incorporated — local currency	$	292,839	$	238,815			23	%

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

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results


(In thousands, except earnings per share data; unaudited)	Three Months Ended December 31, 2016							Three Months Ended December 31, 2015
	GAAP		Adjustments			Non-GAAP - Operational		GAAP		Adjustments			Non-GAAP - Operational
HARMAN
Operating income		174,014		53,815			227,829		159,153		26,844			185,997
Depreciation & Amortization		52,592		(12,312	)		40,280		57,997		(18,904	)		39,093
EBITDA		226,606		41,503			268,109		217,150		7,940			225,090
CONNECTED CAR
Operating income		76,958		20,997			97,955		84,266		3,733			87,999
Depreciation & Amortization		20,515		(856	)		19,659		19,016		(1,807	)		17,209
EBITDA		97,473		20,141			117,614		103,282		1,926			105,208
LIFESTYLE AUDIO
Operating income		125,798		5,460			131,258		83,018		7,481			90,499
Depreciation & Amortization		14,614		(4,839	)		9,775		13,595		(5,003	)		8,592
EBITDA		140,412		621			141,033		96,613		2,478			99,091
PROFESSIONAL SOLUTIONS
Operating income		10,228		5,509			15,737		23,952		4,632			28,584
Depreciation & Amortization		8,000		(1,162	)		6,838		8,854		(620	)		8,234
EBITDA		18,228		4,347			22,575		32,806		4,012			36,818
CONNECTED SERVICES
Operating income		19,629		6,726			26,355		4,865		13,880			18,745
Depreciation & Amortization		7,495		(5,456	)		2,039		14,515		(11,475	)		3,040
EBITDA		27,124		1,270			28,394		19,380		2,405			21,785

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results


(In thousands, except earnings per share data; unaudited)	Six Months Ended December 31, 2016							Six Months Ended December 31, 2015
	GAAP		Adjustments			Non-GAAP - Operational		GAAP		Adjustments			Non-GAAP - Operational
HARMAN
Operating income		324,825		90,501			415,326		290,620		53,297			343,917
Depreciation & Amortization		103,780		(24,199	)		79,581		114,837		(37,145	)		77,692
EBITDA		428,605		66,302			494,907		405,457		16,152			421,609
CONNECTED CAR
Operating income		171,876		23,700			195,576		171,485		4,779			176,264
Depreciation & Amortization		40,961		(1,734	)		39,227		37,419		(3,643	)		33,776
EBITDA		212,837		21,966			234,803		208,904		1,136			210,040
LIFESTYLE AUDIO
Operating income		204,480		13,192			217,672		130,271		15,023			145,294
Depreciation & Amortization		28,568		(9,816	)		18,752		27,430		(10,131	)		17,299
EBITDA		233,048		3,376			236,424		157,701		4,892			162,593
PROFESSIONAL SOLUTIONS
Operating income		21,910		14,803			36,713		49,637		6,816			56,453
Depreciation & Amortization		15,256		(1,746	)		13,510		17,359		(1,258	)		16,101
EBITDA		37,166		13,057			50,223		66,996		5,558			72,554
CONNECTED SERVICES
Operating income		21,192		24,745			45,937		10,496		28,353			38,849
Depreciation & Amortization		15,049		(10,904	)		4,145		28,146		(22,113	)		6,033
EBITDA		36,241		13,841			50,082		38,642		6,240			44,882

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 3 Months Ended December 31, 2016


Three Months Ended December 31, 2016	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
(In thousands; unaudited)	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
Net Trade Sales	$	769,293	$	764,260	$	254,630	$	159,291		—		$	1,947,474
Intercompany Sales		6		762		1,020		14,017		(15,805	)		—
Net Sales		769,299		765,022		255,650		173,308		(15,805	)		1,947,474

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 3 Months Ended December 31, 2015


Three Months Ended December 31, 2015	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
(In thousands; unaudited)	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
Net Trade Sales	$	736,969	$	640,573	$	248,275	$	146,340		—		$	1,772,157
Intercompany Sales		—		736		596		7,200		(8,532	)
Net Sales		736,969		641,309		248,871		153,540		(8,532	)		1,772,157

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 6 Months Ended December 31, 2016


Six Months Ended December 31, 2016	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
(In thousands; unaudited)	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
Net Trade Sales	$	1,566,394	$	1,331,952	$	494,370	$	314,280		—		$	3,706,996
Intercompany Sales		22		1,452		1,503		25,699		(28,676	)		—
Net Sales		1,566,416		1,333,404		495,873		339,979		(28,676	)		3,706,996

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 6 Months Ended December 31, 2015


Six Months Ended December 31, 2015	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
(In thousands; unaudited)	Connected Car		Lifestyle Audio		Professional Solutions		Connected Services		Other & Eliminations			HARMAN
Net Trade Sales	$	1,492,452	$	1,116,110	$	494,608	$	299,836	$	39		$	3,403,045
Intercompany Sales		—		1,270		1,369		13,617		(16,256	)
Net Sales		1,492,452		1,117,380		495,977		313,453		(16,217	)		3,403,045

HARMAN International Industries, Incorporated

Total Liquidity Reconciliation


Total Company Liquidity	December 31, 2016
$ millions	December 31, 2016
Cash & cash equivalents	$	683
Available credit under Revolving Credit Facility		683

Total Liquidity	$	1,366

HARMAN INTERNATIONAL INDUSTRIES INC /DE/ - FORM 8-K - EX-99.1 - January 26, 2017

Attached files

HARMAN INTERNATIONAL INDUSTRIES INC /DE/ Reports