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Harman International Industries Inc./DE/ : HARMAN Third Quarter Fiscal Year 2012 Sales Up 16%; Operating Income Up 12%

04/30/2012 | 08:15am US/Eastern

  • Tenth consecutive quarter of year-over-year improvement; all divisions post higher sales
  • Largest ever $2 Billion infotainment order from a leading automaker
  • Largest ever $500M orders for infotainment and audio with Chinese and Indian automakers
  • Release of a deferred tax asset valuation allowance increases EPS by $1.71 to $2.38

Harman International Industries, Incorporated, the leading global audio and infotainment group (NYSE: HAR), today announced results for the third quarter ended March 31, 2012.

Net sales for the third quarter were $1,096 million, an increase of 16 percent compared to the same period last year. In local currency, net sales increased by 19 percent. Third quarter operating income was $60 million, compared to $54 million in the same period last year. Excluding restructuring charges, operating profit in the third quarter grew by 7 percent to $67 million, compared to $63 million in the same period last year. On a GAAP basis, earnings per diluted share were $2.38 for the quarter compared to $0.51 in the same period last year. Excluding the deferred tax asset valuation calculation, earnings per diluted share would have been $0.67. Excluding restructuring charges and the benefit from a tax asset valuation allowance release, compared to $0.60 in the same period last year, non-GAAP earnings per diluted share were $0.74 for the quarter.

Excluding the one-time gain from the sale of intellectual property in the same period last year, operating margin during the quarter improved by 120 basis points on a non-GAAP basis. Last year's EPS of $0.60 included a one-time benefit of $0.17 from the sale of intellectual property.

"Our relentless focus on innovation and execution has earned us ten straight quarters of profitable growth," said Dinesh C. Paliwal, the Company's Chairman, President and CEO. "The luxury car segment we serve has been highly resilient and has outpaced the overall automotive market, and we continue to gain market share. Due to our technology leadership and our strong innovation pipeline, a leading automaker has selected Harman for an infotainment award worth more than $2 billion. It is the largest award ever for Harman. Our successful expansion into the mid-segment with our scalable platform has captured additional growth opportunities. To expand our market, we have invested smartly in high-growth BRIC countries, setting up five new manufacturing and engineering centers. With five hundred million dollars of new orders in India and China, we are on track to more than double our BRIC sales in three years and achieve our $1.5 billion sales target by 2015."

FY 2012 Key Figures - Total Company   Three Months Ended March 31   Nine Months Ended March 31
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions (except per share data)   3M

FY12

  3M

FY11

 

Including

Currency

Changes

Excluding

Currency

Changes2

  9M

FY12

  9M

FY11

 

Including

Currency

Changes

Excluding

Currency

Changes2

Net sales   1,096     948     16 % 19 %   3,273     2,741     19 % 19 %
Gross profit   293     249     18 % 20 %   886     742     19 % 19 %
Percent of net sales   26.7 %   26.2 %         27.1 %   27.1 %      
SG&A & Other   233     195     20 % 22 %   656     578     14 % 13 %
Operating income   60     54     12 % 16 %   229     164     40 % 40 %
Percent of net sales   5.5 %   5.7 %         7.0 %   6.0 %      
Net Income   173     37     n.m.% n.m.%   280     117     140 % 140 %
Diluted earnings per share   2.38     0.51           3.88     1.64        
Restructuring-related costs   8     10           10     12        
Non-GAAP1                            
Gross profit   293     250     17 % 20 %   888     745     19 % 19 %
Percent of net sales   26.8 %   26.4 %         27.1 %   27.2 %      
SG&A & Other   226     187     21 % 23 %   649     569     14 % 13 %
Operating income   67     63     7 % 11 %   240     176     36 % 37 %
Percent of net sales   6.1 %   6.7 %         7.3 %   6.4 %      
Net Income   53     43     23 % 29 %   163     125     31 % 31 %
Diluted earnings per share   0.74     0.60           2.26     1.75        
Shares outstanding - diluted (in millions)   73     72           72     72        
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = not meaningful              

Summary of Operations - Gross Margin and SG&A

Gross margin on a non-GAAP basis increased 40 basis points to 26.8 percent in the third quarter of fiscal 2012. The increase was due to better leverage of fixed costs on higher sales and productivity improvements in the cost base.

SG&A and Other expense as a percentage of sales on a non-GAAP basis in the third quarter of fiscal 2012 increased 90 basis points to 20.6 percent. Excluding the one-time gain from the sale of intellectual property in the same period last year, the SG&A and Other expense was reduced by 80 basis points.

Investor Call on Monday, April 30, 2012

At 11:00 a.m. EDT on Monday, April 30, 2012, HARMAN's management will host an analyst and investor conference call to discuss the third quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 732 6870 (U.S.) or +1 212 231 2902 (International) ten minutes before the call and reference HARMAN, Access Code: 21588697.

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. For your reference during the Analyst and Investor Call, the Company has posted a set of information slides on its website at www.harman.com and accompanying this press release on www.businesswire.com.

A replay of the call will also be available following its completion at approximately 1:00 pm EDT. The replay will be available through June 30, 2012 at 1:00 pm EDT. To listen to the replay, dial 1 800 633 8284 (U.S.) or +1 402 977 9140 (International), Access Code: 21588697.

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 (www.harman.com) designs, manufactures and markets a wide range of audio and infotainment solutions for the automotive, consumer and professional markets -- supported by 15 leading brands, including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon® and Mark Levinson®. The Company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. HARMAN has a workforce of about 13,000 people across the Americas, Europe and Asia, and reported net sales of $4.3 billion for the twelve months ended March 31, 2012. 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. One should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) our ability to maintain profitability in our infotainment division if there are delays in our product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) warranty obligations for defects in our products; (4) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (5) our ability to successfully implement our global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering, procurement and administrative organizations; (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 inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (8) our ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for our critical organizational positions; (9) our failure to implement and maintain a comprehensive disaster recovery program; (10) our failure to comply with governmental rules and regulations, including the Foreign Corrupt Practices Act and U.S. export control laws, and the cost of complying with such laws; (11) our ability to maintain a competitive technological advantage through innovation and leading product designs; (12) our failure to maintain the value of our brands and implementing a sufficient brand protection program; (13) the outcome of pending or future litigation and other claims, including, but not limited to, the current stockholder and Employee Retirement Income Security Act of 1974 lawsuits; (14) our ability to enforce or defend our ownership and use of intellectual property rights; and (15) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2011 and other filings made by the Company with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement except as required by law. This earnings release also makes reference to the Company's awarded business, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company calculates its awarded business using 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, among other factors. These assumptions are updated on an annual basis. The Company updates the estimates quarterly by adding the value of new awards received and subtracting sales recorded during the quarter.

HAR-E

APPENDIX

Infotainment Division

FY 2012 Key Figures - Infotainment   Three Months Ended March 31   Nine Months Ended March 31
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions   3M

FY12

  3M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

  9M

FY12

  9M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

Net sales   610     530     15 %   19 %   1,813     1,477     23 %   22 %
Gross profit   139     99     40 %   45 %   422     295     43 %   42 %
Percent of net sales   22.7 %   18.8 %           23.2 %   20.0 %        
SG&A & Other   95     78     22 %   26 %   281     234     20 %   18 %
Operating income   44     22     102 %   115 %   141     61     131 %   136 %
Percent of net sales   7.2 %   4.1 %           7.8 %   4.1 %        
Restructuring-related costs   1     5             2     9          
Non-GAAP1                                
Gross profit   140     101     39 %   45 %   425     298     43 %   42 %
Percent of net sales   23.0 %   19.0 %           23.4 %   20.2 %        
SG&A & Other   95     74     28 %   32 %   282     228     23 %   22 %
Operating income   45     26     70 %   80 %   143     69     106 %   110 %
Percent of net sales   7.3 %   5.0 %           7.9 %   4.7 %        
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                

Net sales in the third quarter were $610 million, an increase of 15 percent, or 19 percent in local currency. Higher sales were driven by robust demand in the luxury automotive segment and rapid adoption of the scalable platform in the mid segment car market. Continued growth in BRIC countries was led by 26 percent growth in China. Gross margin on a non-GAAP basis in the third quarter increased 4.0 percentage points to 23.0 percent.

As a percentage of sales on a non-GAAP basis, SG&A and Other increased 160 basis points to 15.6 percent. Excluding the one-time gain from the sale of intellectual property in the same period last year, the SG&A and Other expense was reduced by 150 basis points.

The infotainment division has gone through a major transformation from a loss position to an industry profit leader. Third quarter operating margin, on a non-GAAP basis, was 7.3 percent, compared to 5.0 percent in the same period last year. Last year's operating margin included a gain of 3.1 percent from the one-time sale of intellectual property.

Infotainment Division Highlights

HARMAN's strategic focus on the high-growth emerging markets was validated by the largest ever multi-year orders with three domestic automakers in China and India. HARMAN won its first orders with Geely, China's largest domestic automaker, and BAIC Motors. In addition, HARMAN replaced a competitor to supply cross car-line infotainment systems to the domestic Indian automaker Tata Motors.

HARMAN launched a scalable infotainment system for the new Ferrari F12, featuring speech-to-text and text-to-speech options for SMS messaging. Also during the quarter, HARMAN announced that its Aha Radio offering extended its customer base with Acura and rolled out its cloud-based infotainment service in Europe. The Aha platform brings automotive-specific apps and personalized user content safely into vehicles.

At the Geneva Motor Show, the Company introduced its latest innovations in infotainment such as the personalized dashboard, which offers a dynamic interface between driver, car and the connected world around it. In addition, HARMAN demonstrated the integration of 4G/Long Term Evolution (LTE) technology into infotainment systems providing cutting-edge car connectivity.

HARMAN continues to drive innovation in infotainment technologies and was awarded Toyota Motor Corporation's coveted Technology & Development Award.

Lifestyle Division

FY 2012 Key Figures - Lifestyle   Three Months Ended March 31   Nine Months Ended March 31
            Increase (Decrease)           Increase (Decrease)
$ millions   3M

FY12

  3M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

  9M

FY12

  9M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

Net sales   332     276     20 %   22 %   1,001     835     20 %   19 %
Gross profit   92     91     1 %   3 %   283     272     4 %   4 %
Percent of net sales   27.8 %   32.9 %           28.3 %   32.5 %        
SG&A & Other   63     58     8 %   10 %   181     173     5 %   4 %
Operating income   29     32     (10 %)   (9 %)   102     98     3 %   4 %
Percent of net sales   8.8 %   11.7 %           10.2 %   11.8 %        
Restructuring-related costs   0     3             1     4          
Non-GAAP1                                
Gross profit   92     91     1 %   3 %   283     272     4 %   4 %
Percent of net sales   27.8 %   32.9 %           28.3 %   32.5 %        
SG&A & Other   63     56     13 %   15 %   180     169     6 %   6 %
Operating income   30     35     (17 %)   (16 %)   103     102     0 %   1 %
Percent of net sales   8.9 %   12.8 %           10.2 %   12.2 %        
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                

Net sales in the third quarter were $332 million, an increase of 20 percent, or 22 percent in local currency. Higher sales were primarily driven by robust demand in the luxury automotive segment and continued growth in BRIC countries, led by 60 percent growth in China. Pass-through neodymium cost surcharges contributed 5 percent of the growth in revenue at zero margin. Gross margin on a non-GAAP basis in the third quarter decreased 5.1 percentage points to 27.8 percent. The reduction was primarily due to neodymium cost increases and investments related to completion of new production capacity in China and Mexico. We expect favorable margin development due to reduced neodymium cost impact as well as productivity gains as these new facilities fully ramp up in the coming quarters.

SG&A and Other expense as a percentage of sales, on a non-GAAP basis, in the third quarter declined 120 basis points to 18.9 percent.

Lifestyle Division Highlights

The Company entered into a multi-year, cross carline branded audio relationship with BMW AG using the Harman Kardon brand of high performance audio systems for the X3, 5, 6, and 7 series luxury vehicle platforms. The Company also extended its premium audio relationship with Daimler for Harman Kardon branded audio systems on Mercedes M, GLK, A, B, SLK, and SL class luxury vehicle platforms.

HARMAN's expansion into the emerging markets continued with the largest ever branded audio awards in China and India. In China, BAIC selected the JBL brand for their C80 platform, while Great Wall Motors chose the Infinity brand for three new vehicles. In India, Tata Motors will launch a JBL premium branded audio system in the Tata Aria later in 2012. These multi-year contracts further strengthen the strong order backlog for branded audio systems which stands at over $3.2 billion.

The Company also received an order from Volvo for HARMAN's patented audio signal processing technology, eESS (external Engine Sound Synthesis). This award reinforces HARMAN's technology solutions for electric & hybrid vehicles safety requirements. The Company is in discussions with several other car companies for new noise cancelling and sound synthesis technology deployment.

At the Geneva Motor Show HARMAN unveiled several new audio systems together with automotive OEMs. Ferrari unveiled the JBL Professional branded audio system onboard the automaker's new F12 model featuring HARMAN's revolutionary QuantumLogic™ surround sound technology. JBL premium audio was introduced for the new Peugeot 208. Harman Kardon premium branded audio system was launched in the MINI Roadster R59, and Mercedes-Benz unveiled the all new A-Class with a Harman Kardon surround sound system featuring LOGIC7™.

HARMAN's products for home and personal audio achieved significant milestones in this quarter. The JBL On Beat series of iPad docks sold more than 135,000 units year-to-date with the flagship JBL On Beat Xtreme continuing to win rave reviews with sales crossing 23,000 units year-to-date. Harman Kardon BDS continues to set the reference for a premium beautiful sound home theatre experience with more than 47,000 units sold year-to-date.

The Company also extended its global JBL "Hear the Truth" campaign by featuring Sir Paul McCartney on TV and print ads launched during the Grammy awards ceremony. This complements the previously launched JBL "Hear the Truth" campaign featuring Maroon 5 and the "Harman Kardon Beautiful Sound" campaign featuring Jennifer Lopez. These campaigns are helping increase overall brand awareness, driving car audio take rates, home audio and multimedia sales.

Professional Division

FY 2012 Key Figures - Professional   Three Months Ended March 31   Nine Months Ended March 31
            Increase (Decrease)           Increase (Decrease)
$ millions   3M

FY12

  3M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

  9M

FY12

  9M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

Net sales   153     142     8 %   9 %   459     429     7 %   6 %
Gross profit   60     58     3 %   5 %   180     175     3 %   2 %
Percent of net sales   39.4 %   41.2 %           39.2 %   40.8 %        
SG&A & Other   47     39     21 %   22 %   122     109     12 %   11 %
Operating income   14     20     (31 %)   (30 %)   58     66     (13 %)   (14 %)
Percent of net sales   8.9 %   13.8 %           12.6 %   15.5 %        
Restructuring-related costs   7     2             8     (1 )        
Non-GAAP1                                
Gross profit   60     58     3 %   4 %   180     174     3 %   2 %
Percent of net sales   39.4 %   41.2 %           39.3 %   40.7 %        
SG&A & Other   40     37     8 %   9 %   114     109     5 %   4 %
Operating income   20     21     (5 %)   (4 %)   66     66     1 %   0 %
Percent of net sales   13.3 %   15.1 %           14.4 %   15.3 %        
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                

Net sales in the third quarter were $153 million, an increase of 8 percent, or 9 percent in local currency. Gross margin on a non-GAAP basis in the third quarter decreased 180 basis points to 39.4 percent. The primary reason for the gross margin decline was higher costs for neodymium magnets and investments related to completion of new production capacity in China. SG&A and Other expense on a non-GAAP basis in the third quarter was unchanged as a percentage of sales at 26.1 percent. We expect favorable margin development due to reduced neodymium cost impact as well as revenue from high margin new products in the coming quarters.

Professional Division Highlights

HARMAN audio components including JBL loudspeakers and AKG microphones played a crucial role in the live sound reinforcement system at the 54th Annual GRAMMY® Awards at the Staples Center in Los Angeles. JBL loudspeakers with Crown amplifiers were featured in the sound system for the halftime entertainment performance at Super Bowl XLVI, featuring Madonna. The 39th annual American Music Awards show was also supported by JBL loudspeakers.

HARMAN professional audio systems were deployed in a variety of venues including performing arts theaters such as the Gotham and City Center Theaters in New York City; cinemas in India; stadiums in Poland; and the Museum of Science Planetarium in Boston. HARMAN digital broadcasting consoles were deployed in TV and radio studios in Germany, Canada, France, China, Malaysia, and Mexico.

More than 30 new HARMAN products were launched during the quarter, including conferencing and digital performance microphone systems, high powered multi-channel amplifiers, a compact digital mixer, and new music-production and recording plug-ins and other software applications. Several of these newly-introduced HARMAN audio products garnered awards including two Sound On Sound music awards for Lexicon, and a MIPA (Musicmesse International Press Award) for JBL's new VTX loudspeaker system.

Other (Corporate)

FY 2012 Key Figures - Other   Three Months Ended March 31   Nine Months Ended March 31
            Increase (Decrease)           Increase (Decrease)
$ millions   3M

FY12

  3M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

  9M

FY12

  9M

FY11

 

Including

Currency

Changes

 

Excluding

Currency

Changes2

SG&A & Other   28     20   39 %   39 %   73     62   17 %   17 %
Restructuring-related costs   (1 )   0           (1 )   0        
Non-GAAP1                                
SG&A & Other   28     20   39 %   39 %   73     62   17 %   17 %
1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                

The Company continued the rollout of its global marketing campaigns. The Company's Corporate Technology Center is driving and enabling cutting-edge development in connectivity and networking, cloud computing, wireless technologies, digital signal processing, and energy-efficient solutions. The Company is building on its base of more than 4000 patents and patents pending, with more than 200 patents issued and more than 250 patent applications filed worldwide this fiscal year.

(In thousands, except earnings per share data; unaudited)   Three Months Ended
March 31,
  Nine Months Ended
March 31,
      2012       2011       2012       2011  
Net sales   $ 1,095,675     $ 948,196     $ 3,273,307     $ 2,741,223  
Cost of sales     803,045       699,371       2,387,496       1,999,087  
Gross profit     292,630       248,825       885,811       742,136  
Selling, general and administrative expenses     232,755       211,362       656,681       594,108  
Sale of Intellectual Property     0       (16,184 )     (301 )     (16,184 )
Operating income     59,875       53,647       229,431       164,212  
Other expenses:                
Interest expense, net     5,394       5,262       14,729       17,172  
Foreign exchange losses, net     109       161       11,706       786  
Miscellaneous, net     841       1,303       4,240       4,610  
Income before income taxes     53,531       46,921       198,756       141,644  
Income tax expense, net     (119,125 )     10,321       (81,522 )     24,604  
Net income   $ 172,656     $ 36,600     $ 280,278     $ 117,040  
Earnings per share:                
Basic   $ 2.41     $ 0.51     $ 3.93     $ 1.65  
Diluted   $ 2.38     $ 0.51     $ 3.88     $ 1.64  
Weighted average shares outstanding:                
Basic     71,622       71,123       71,395       70,918  
Diluted     72,604       71,924       72,263       71,541  
       

Harman International Industries, Incorporated

Consolidated Balance Sheets

         
(In thousands; unaudited)   March 31,

2012

  June 30,

2011

ASSETS        
Current assets        
Cash and cash equivalents   $ 640,558   $ 603,892
Short-term investments     127,201     317,322
Accounts receivable     689,018     579,272
Inventories     501,071     423,137
Other current assets     237,366     184,532
Total current assets     2,195,214     2,108,155
Property, plant and equipment     437,918     470,300
Goodwill     186,445     119,357
Deferred tax assets, long term     316,964     229,941
Other assets     145,443     130,742
Total assets   $ 3,281,984   $ 3,058,495
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities        
Current portion of long-term debt   $ 391,268   $ 386
Short-term debt     246     1,785
Accounts payable     461,566     473,486
Accrued liabilities     410,356     436,537
Accrued warranties     102,384     122,396
Income taxes payable     12,308     12,991
Total current liabilities     1,378,128     1,047,581
Convertible senior notes     0     378,401
Pension liability     146,542     142,136
Other non-current liabilities     101,597     66,719
Total liabilities     1,626,267     1,634,837
Total equity     1,655,717     1,423,658
Total liabilities and equity   $ 3,281,984   $ 3,058,495
   

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

     
(In thousands, except earnings per share data; unaudited)   Three Months Ended
March 31, 2012
    GAAP Adjustments Non-GAAP
Net sales   $ 1,095,675   $ 0   $ 1,095,675
Cost of sales     803,045   (626)a     802,419
Gross profit     292,630     626     293,256
Selling, general and administrative expenses     232,755   (6,882)b     225,873
Sale of Intellectual Property     0     0     0
Operating income     59,875     7,508     67,383
Other expenses:        
Interest expense, net     5,394       5,394
Foreign exchange losses, net     109       109
Miscellaneous, net     841       841
Income before income taxes     53,531     7,508     61,039
Income tax expense, net     (119,125 )   126,765(c )   7,640
Net income   $ 172,656   $ (119,257 ) $ 53,399
Earnings per share:        
Basic   $ 2.41   $ (1.67 ) $ 0.75
Diluted   $ 2.38   $ (1.64 ) $ 0.74
Weighted average shares outstanding:        
Basic     71,622       71,622
Diluted     72,604       72,604

a) Restructuring expense in Cost of Sales was $0.6 million due to projects to increase efficiency in manufacturing.

b) Restructuring expense in SG&A was $6.9 million due to projects to increase efficiency in engineering and administrative functions.

c) The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the statutory tax rate within that specific country and the release of a deferred tax asset valuation allowance.

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

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

     
(In thousands, except earnings per share data; unaudited)   Nine Months Ended
March 31, 2012
    GAAP Adjustments Non-GAAP
Net sales   $ 3,273,307   $ 0   $ 3,273,307  
Cost of sales     2,387,496   (2,592)a   $ 2,384,904  
Gross profit     885,811     2,592     888,403  
Selling, general and administrative expenses     656,681   (7,829)b     648,852  
Sale of Intellectual Property     (301 )   0     (301 )
Operating income     229,431     10,420     239,851  
Other expenses:        
Interest expense, net     14,729     0     14,729  
Foreign exchange losses, net     11,706     0     11,706  
Miscellaneous, net     4,240     0     4,240  
Income before income taxes     198,756     10,420     209,176  
Income tax expense, net     (81,522 )   127,646(c )   46,124  
Net income   $ 280,278   $ (117,226 ) $ 163,052  
Earnings per share:        
Basic   $ 3.93   $ (1.64 ) $ 2.28  
Diluted   $ 3.88   $ (1.62 ) $ 2.26  
Weighted average shares outstanding:        
Basic     71,395       71,395  
Diluted     72,263       72,263  

a) Restructuring expense in Cost of Sales was $2.6 million due to projects to increase efficiency in manufacturing.

b) Restructuring expense in SG&A was $7.8 million due to projects to increase efficiency in engineering and administrative functions.

c) The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the statutory tax rate within that specific country and the release of a deferred tax asset valuation allowance.

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

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

     
(In thousands, except earnings per share data; unaudited)   Three Months Ended
March 31, 2011
    GAAP Adjustments Non-GAAP
Net sales   $ 948,196   $ 0   $ 948,196  
Cost of sales     699,371   (1,319)a     698,052  
Gross profit     248,825     1,319     250,144  
Selling, general and administrative expenses     211,362   (8,220)b     203,142  
Sale of Intellectual Property     (16,184 )   0     (16,184 )
Operating income     53,647     9,539     63,186  
Other expenses:        
Interest expense, net     5,262     0     5,262  
Foreign exchange losses, net     161     0     161  
Miscellaneous, net     1,303     0     1,303  
Income before income taxes     46,921     9,539     56,460  
Income tax expense, net     10,321     2,762(c )   13,083  
Net income   $ 36,600   $ 6,777   $ 43,377  
Earnings per share:        
Basic   $ 0.51   $ 0.10   $ 0.61  
Diluted   $ 0.51   $ 0.09   $ 0.60  
Weighted average shares outstanding:        
Basic     71,123       71,123  
Diluted     71,924       71,924  

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

b) Restructuring expense in SG&A was $8.2 million due to projects to increase efficiency in engineering and administrative functions.

c) The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the statutory tax rate within that specific country and the release of a deferred tax asset valuation allowance.

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

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

     
(In thousands, except earnings per share data; unaudited)   Nine Months Ended
March 31, 2011
    GAAP Adjustments Non-GAAP
Net sales   $ 2,741,223   $ 0   $ 2,741,223  
Cost of sales     1,999,087   (2,371)a     1,996,716  
Gross profit     742,136     2,371     744,507  
Selling, general and administrative expenses     594,108   (9,344)b     584,764  
Sale of Intellectual Property     (16,184 )   0     (16,184 )
Operating income     164,212     11,715     175,927  
Other expenses:        
Interest expense, net     17,172     0     17,172  
Foreign exchange losses, net     786     0     786  
Miscellaneous, net     4,610     0     4,610  
Income before income taxes     141,644     11,715     153,359  
Income tax expense, net     24,604     3,832(c )   28,436  
Net income   $ 117,040   $ 7,883   $ 124,923  
Earnings per share:        
Basic   $ 1.65   $ 0.11   $ 1.76  
Diluted   $ 1.64   $ 0.11   $ 1.75  
Weighted average shares outstanding:        
Basic     70,918       70,918  
Diluted     71,541       71,541  

a) Restructuring expense in Cost of Sales was $2.4 million due to projects to increase efficiency in manufacturing.

b) Restructuring expense in SG&A was $9.3 million due to projects to increase efficiency in engineering and administrative functions.

c) The tax benefits are calculated by multiplying the actual restructuring charge in each individual country by the statutory tax rate within that specific country and the release of a deferred tax asset valuation allowance.

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

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

       

(In thousands; unaudited)

  Three Months Ended
March 31,
Increase

(Decrease)

    2012 2011  
Net sales - nominal currency   $ 1,095,675 $ 948,196   16 %
Effect of foreign currency translation1       (25,253 )  
Net sales - local currency     1,095,675   922,943   19 %
         
Gross profit - nominal currency     292,630   248,825   18 %
Effect of foreign currency translation1       (5,864 )  
Gross profit - local currency     292,630   242,961   20 %
         
SG&A & Other - nominal currency     232,755   211,362   11 %
Effect of foreign currency translation1       (4,728 )  
SG&A & Other - local currency     232,755   206,634   12 %
         
Operating income - nominal currency     59,875   53,647   12 %
Effect of foreign currency translation1       (2,073 )  
Operating income - local currency     59,875   51,574   16 %
         
1Impact of restating prior year results at current year foreign exchange rates.

Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Company's performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our 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 our consolidated financial statements prepared in accordance with US GAAP.

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

     
EXCLUDING restructuring charges

 

(In thousands; unaudited)

Three Months Ended
March 31,
Increase

(Decrease)

    2012   2011  
Net sales - nominal currency $ 1,095,675 $ 948,196   16 %
Effect of foreign currency translation1     (25,253 )  
Net sales - local currency   1,095,675   922,943   19 %
       
Gross profit - nominal currency   293,257   250,144   17 %
Effect of foreign currency translation1     (5,865 )  
Gross profit - local currency   293,257   244,279   20 %
       
SG&A & Other - nominal currency   225,872   203,142   11 %
Effect of foreign currency translation1     (4,591 )  
SG&A & Other - local currency   225,872   198,551   14 %
       
Operating income - nominal currency   67,384   63,186   7 %
Effect of foreign currency translation1     (2,210 )  
Operating income - local currency   67,384   60,976   11 %
       
1Impact of restating prior year results at current year foreign exchange rates.

Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Company's performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our 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 our consolidated financial statements prepared in accordance with US GAAP.

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

       

(In thousands; unaudited)

  Nine Months Ended
March 31,
Increase

(Decrease)

    2012 2011  
Net sales - nominal currency   $ 3,273,307 $ 2,741,223   19 %
Effect of foreign currency translation1       17,433    
Net sales - local currency     3,273,307   2,758,656   19 %
         
Gross profit - nominal currency     885,811   742,136   19 %
Effect of foreign currency translation1       4,593    
Gross profit - local currency     885,811   746,729   19 %
         
SG&A & Other - nominal currency     656,681   594,108   11 %
Effect of foreign currency translation1       4,333    
SG&A & Other - local currency     656,681   598,441   10 %
         
Operating income - nominal currency     229,431   164,212   40 %
Effect of foreign currency translation1       (676 )  
Operating income - local currency     229,431   163,536   40 %
         
1Impact of restating prior year results at current year foreign exchange rates.

Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Company's performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our 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 our consolidated financial statements prepared in accordance with US GAAP.

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 
EXCLUDING restructuring charges

 

(In thousands; unaudited)

Nine Months Ended
March 31,
Increase

(Decrease)

  2012 2011
Net sales - nominal currency $ 3,273,307 $ 2,741,223   19 %
Effect of foreign currency translation1     17,433    
Net sales - local currency   3,273,307   2,758,656   19 %
       
Gross profit - nominal currency   888,403   744,507   19 %
Effect of foreign currency translation1     4,475    
Gross profit - local currency   888,403   748,982   19 %
       
SG&A & Other - nominal currency   648,852   584,764   11 %
Effect of foreign currency translation1     4,582    
SG&A & Other - local currency   648,852   589,346   10 %
       
Operating income - nominal currency   239,851   175,927   36 %
Effect of foreign currency translation1     (1,042 )  
Operating income - local currency   239,851   174,885   37 %
       
1Impact of restating prior year results at current year foreign exchange rates.

Harman International has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the financial statements with a better understanding of the Company's performance. Because changes in currency exchange rates affect our reported financial results, we show the rates of change both including and excluding the effect of these changes in exchange rates. We encourage readers of our financial statements to evaluate our 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 our consolidated financial statements prepared in accordance with US GAAP.

Harman International Industries, Incorporated

Total Liquidity Reconciliation

 
Total Company Liquidity March 31,

2012

$ millions
Cash & cash equivalents $ 641
Short-term investments   127
Available credit under Revolving Credit Facility   541
Total liquidity $ 1,309

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50257473&lang=en

Harman International Industries, Incorporated
Robert V. Lardon 203-328-3500
robert.lardon@harman.com


© Business Wire 2012
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