HARMAN Reports Second Quarter Fiscal Year 2014 Results

  • Net sales up 26% to $1.328 billion and non-GAAP EPS up 85% to $1.09
  • Non-GAAP operating income up 90% to $108 million and generated $121 million cash from operations
  • Raising full year revenue guidance from ~$4.7 billion to ~$5.1 billion and EPS from ~$3.85 to ~$4.16
  • Secured $1.1 billion in new automotive awards

STAMFORD, Conn.--()--Harman International Industries, Incorporated, the leading global infotainment and audio group (NYSE:HAR), today announced results for the second quarter ended December 31, 2013.

Net sales for the second quarter were $1.328 billion, an increase of 26 percent compared to the same period last year as all three of the Company’s divisions reported increased sales. The strong sales increase was a result of several initiatives in each division in addition to improved economic conditions. Infotainment net sales increased due to the expansion of recent production launches and higher take rates. Lifestyle growth was primarily driven by new product launches, the impact of increased marketing investments in the home and multimedia business, and increased take rates in the car audio business. The Professional division reported strong growth as a result of the expansion of the Company’s product portfolio into lighting as well as increased demand for the Company’s audio products at live entertainment events and in fixed-installation venues.

On a GAAP basis, second quarter operating income was $102 million, compared to $68 million in the same period last year, and earnings per diluted share were $1.03 for the quarter compared to $0.68. Excluding restructuring and non-recurring charges, second quarter non-GAAP operating income was $108 million, compared to $57 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $1.09 for the quarter compared to $0.59 in the same period last year.

Dinesh C. Paliwal, the Company’s Chairman, President and CEO, said, “We are extremely pleased that for the second consecutive quarter all three of our divisions reported double-digit top-line growth, which also resulted in double-digit profitability improvement. We are confident that the momentum that we built in the first half of the fiscal year is sustainable and therefore we have increased our fiscal year guidance for revenue and EPS.”

Paliwal added, “We also continue to position HARMAN for long term growth with the introduction of proprietary technology solutions that enable safety, cyber security, and rapid app development for in-car systems. These critical and high demand features can only be provided through embedded infotainment systems. They are essential for leading automakers as evidenced by $2.7 billion in new automotive awards in the first half of the fiscal year. Our technologies were further validated with prestigious CES and Red Star innovation and product design awards, and a third technical GRAMMY® Award which we won this year for our Lexicon brand.”

 

FY 2014 Key Figures – Total Company

    Three Months Ended December 31     Six Months Ended December 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions (except per share data)    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

6M
FY14

   

6M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     1,328       1,056       26 %     23 %     2,500       2,054       22 %     19 %
Gross profit     379       272       40 %     38 %     701       550       27 %     25 %
Percent of net sales     28.6 %     25.7 %                 28.0 %     26.8 %            
SG&A & Other     278       203       36 %     34 %     530       403       32 %     29 %
Operating income     102       68       49 %     47 %     171       147       16 %     15 %
Percent of net sales     7.7 %     6.5 %                 6.8 %     7.2 %            
EBITDA     134       99       36 %     34 %     235       206       14 %     12 %
Percent of net sales     10.1 %     9.3 %                 9.4 %     10.0 %            
Net Income     72       47       51 %     48 %     118       102       16 %     13 %
Diluted earnings per share     1.03       0.68       51 %     48 %     1.69       1.47       15 %     13 %
Restructuring-related costs     6       (12 )                 30       (11 )            

Non-GAAP1

                                               
Gross profit     381       273       40 %     38 %     705       551       28 %     26 %
Percent of net sales     28.7 %     25.8 %                 28.2 %     26.8 %            
SG&A & Other     273       216       26 %     25 %     503       415       21 %     19 %
Operating income     108       57       90 %     88 %     201       136       48 %     46 %
Percent of net sales     8.1 %     5.4 %                 8.0 %     6.6 %            
EBITDA     139       86       61 %     59 %     262       194       35 %     33 %
Percent of net sales     10.5 %     8.2 %                 10.5 %     9.4 %            
Net Income     76       41       85 %     81 %     143       96       49 %     46 %
Diluted earnings per share     1.09       0.59       85 %     81 %     2.04       1.38       48 %     45 %
Shares outstanding – diluted (in millions)     70       70                   70       70              
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                        
 

Summary of Operations – Gross Margin and SG&A

Non-GAAP gross margin for the second quarter of fiscal 2014 increased 284 basis points to 28.7 percent. The improvement was primarily due to the impact of higher sales volume on fixed production costs, reduced costs due to productivity initiatives and favorable product mix.

SG&A and Other expense as a percentage of net sales on a non-GAAP basis in the second quarter of fiscal 2014 was 20.6 percent, in line with the prior year.

2014 Outlook

HARMAN today raised its financial outlook for fiscal 2014. The Company now forecasts global revenue of ~$5.1 billion and operational earnings per share of ~$4.16. Details by division are provided below.

 

--January 30, 2014 Revised Guidance --

Fiscal Year 2014     HARMAN     Infotainment Division     Lifestyle Division     Professional Division
Sales     ~$5.100 billion     ~$2.715 billion     ~$1.560 billion     ~$825 million
EBITDA*     ~$535 million     ~$295 million     ~$220 million     ~$140 million
EPS*     ~$4.16            
 
 

--August 8, 2013 Guidance--

Fiscal Year 2014     HARMAN     Infotainment Division     Lifestyle Division     Professional Division
Sales     ~$4.700 billion     ~$2.460 billion     ~$1.425 billion     ~$815 million
EBITDA*     ~$490 million     ~$260 million     ~$200 million     ~$135 million
EPS*     ~$3.85            
 

*Non-GAAP, excluding restructuring and non-recurring items

Investor Call Today, January 30, 2014

At 11:00 a.m. EST today, Harman’s management will host an analyst and investor conference call to discuss the second quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 923 9042 (U.S.) or +1 (212) 231 2909 (International) ten minutes before the call and reference HARMAN, Access Code: 21703048.

In addition, Harman invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal second quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EST, Thursday, January 30, 2014.

A replay of the call will also be available following its completion at approximately 1:00 p.m. EST. The replay will be available through April 30, 2014 at 1:00 p.m. EST. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21703048. 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 designs, manufactures, and markets a wide range of infotainment and audio solutions for the automotive, consumer, and professional markets. It is a recognized world leader across its customer segments with premium brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, and Mark Levinson® and leading-edge connectivity, safety and audio technologies. The Company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. HARMAN has a workforce of 14,800 people across the Americas, Europe, and Asia and reported sales of $4.7 billion for the last twelve months ended December 31, 2013. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR. Please visit www.harman.com for more information.

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

Forward-Looking Information

Except for historical information contained herein, the matters discussed in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the Company’s ability to maintain profitability in its infotainment division if there are delays in its product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) the Company’s ability to successfully implement its global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of its manufacturing, engineering, procurement and administrative organizations; (5) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (6) the inability of the Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (8) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (9) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2013 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.

This earnings release also makes reference to the Company’s awarded business, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters. To validate these awards, the company uses various assumptions including global vehicle production forecasts, customer take rates for the Company’s products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. These assumptions are updated and reported externally on an annual basis. The Company updates the estimates and awarded business quarterly by adding the value of new awards received and subtracting sales recorded during the quarter. These quarterly updates do not include any assumptions for increased take rates, revisions to product life cycle, or any other factors.

HAR-E

APPENDIX

 

Infotainment Division

 

FY 2014 Key Figures – Infotainment

    Three Months Ended December 31     Six Months Ended December 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

6M
FY14

   

6M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     691       540       28 %     24 %     1,330       1,101       21 %     17 %
Gross profit     165       113       46 %     42 %     307       242       27 %     23 %
Percent of net sales     23.9 %     20.9 %                 23.0 %     22.0 %            
SG&A & Other     102       83       24 %     20 %     211       167       27 %     22 %
Operating income     63       30       107 %     104 %     95       75       27 %     24 %
Percent of net sales     9.1 %     5.6 %                 7.1 %     6.8 %            
EBITDA     79       45       75 %     71 %     127       105       21 %     18 %
Percent of net sales     11.4 %     8.3 %                 9.6 %     9.5 %            
Restructuring-related costs     (1 )     (1 )                 21       0              

Non-GAAP1

                                               
Gross profit     167       113       47 %     43 %     309       242       28 %     24 %
Percent of net sales     24.1 %     20.9 %                 23.2 %     22.0 %            
SG&A & Other)     105       83       26 %     22 %     194       167       16 %     12 %
Operating income     61       30       106 %     103 %     116       75       55 %     52 %
Percent of net sales     8.9 %     5.5 %                 8.7 %     6.8 %            
EBITDA     76       45       71 %     67 %     145       105       39 %     35 %
Percent of net sales     11.0 %     8.2 %                 10.9 %     9.5 %            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                        
 

Net sales in the second quarter of fiscal 2014 were $691 million, an increase of 28 percent compared to the prior year, or 24 percent excluding the impact of foreign currency translation. The increase in sales is due to higher automotive production volumes, the expansion of the Company’s recent production launches across car lines, and higher take rates.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin increased 317 basis points to 24.1 percent compared to the prior year primarily due to the impact of improved leverage on fixed production costs, benefits from foot-print migration initiatives, and an increased mix of scalable infotainment systems. SG&A spending decreased 20 basis points to 15.3 percent of net sales primarily due to improved operating leverage on higher sales.

Infotainment Division Highlights

During the quarter, HARMAN secured several new business awards, expanded its recent platform launches across car lines, and launched its next-generation scalable infotainment platform at the Consumer Electronics Show (“CES”) to address safety, cyber security, and application development.

HARMAN secured new awards totaling $725 million from existing and new automotive customers including VW Group, Chang’an, and Geely. The Company won infotainment system orders from Yamaha to equip motorcycles in North America and secured new business from Suzuki, making HARMAN the first non-Asian supplier to deliver an infotainment solution specifically designed for the Japanese market. HARMAN was also awarded infotainment services business from automakers BMW and Jaguar/Land Rover. These services contracts are for installed HARMAN infotainment systems and are designed to “future-proof” the infotainment solution.

HARMAN’s award-winning Uconnect system developed for Fiat/Chrysler continued its rollout on vehicles including the Jeep Cherokee, Fiat 500L, and Alfa Romeo models.

The Company is also continuing to drive its undisputed leadership in infotainment and technology innovation. At CES, HARMAN announced its next-generation scalable infotainment platform based on innovative system architecture that offers rapid development of connected car apps and advanced safety features while protecting the integrity of the system against cyber security threats. The new platform offers an HTML-5 based application environment which paves the way to an app ecosystem in the world of in-car infotainment. In addition, the new platform enhances security with hypervisor-based domain separation securing critical vehicle functions from errant or malicious software. This solution provides a foundation to support the future of autonomous driving.

 

Lifestyle Division

 
FY 2014 Key Figures – Lifestyle     Three Months Ended December 31     Six Months Ended December 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

6M
FY14

   

6M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     430       372       16 %     14 %     764       663       15 %     14 %
Gross profit     136       102       33 %     32 %     243       197       24 %     23 %
Percent of net sales     31.7 %     27.6 %                 31.8 %     29.7 %            
SG&A & Other     85       53       62 %     60 %     151       110       38 %     36 %
Operating income     51       50       3 %     1 %     92       87       6 %     5 %
Percent of net sales     11.9 %     13.4 %                 12.1 %     13.1 %            
EBITDA     59       59       0 %     (1 %)     109       104       4 %     3 %
Percent of net sales     13.8 %     15.9 %                 14.2 %     15.7 %            
Restructuring-related costs     4       (11 )                 6       (11 )            

Non-GAAP1

                                               
Gross profit     136       103       32 %     30 %     243       198       23 %     22 %
Percent of net sales     31.6 %     27.8 %                 31.9 %     29.8 %            
SG&A & Other     81       64       26 %     24 %     145       121       20 %     19 %
Operating income     55       39       41 %     39 %     98       76       29 %     27 %
Percent of net sales     12.9 %     10.5 %                 12.8 %     11.5 %            
EBITDA     63       48       34 %     32 %     114       92       23 %     22 %
Percent of net sales     14.8 %     12.8 %                 14.9 %     13.9 %            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                        
 

Net sales in the second quarter of fiscal 2014 were $430 million, an increase of 16 percent compared to the prior year or 14 percent excluding the impact of foreign currency translation. Revenues increased double digits in both the Company’s home and multimedia product lines and the car audio business. The growth in home and multimedia was primarily due to new product introductions and the impact of the Company’s marketing initiatives. The growth in car audio was primarily due to higher automotive production volumes and increased take rates.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin increased by 384 basis points to 31.6 percent compared to the prior year primarily due to the impact of improved leverage of fixed production costs and reduced costs from foot-print migration initiatives. SG&A expense as a percentage of sales increased by 149 basis points to 18.8 percent primarily due to higher marketing costs.

Lifestyle Division Highlights

The Lifestyle Division continued to gain momentum with its award-winning home and multimedia and car audio solutions. HARMAN launched car audio systems in several vehicles, including a Lexicon system in the Hyundai Genesis and a JBL system in the Toyota Highlander. Furthermore, HARMAN secured several new car audio awards targeted for the fast-growing small car segment. Hyundai, Chang’an, Geely, and SAIC all selected HARMAN scalable audio solutions.

HARMAN won an order from Daimler for its innovative, hands-free MEMS microphones across car lines. As cars become ever more connected, voice control becomes increasingly important as a way for drivers to interact with in-vehicle systems. The MEMS microphones deliver the advantage of a small form factor and superior audio sensitivity.

HARMAN received 15 Red Star and eight CES design and innovation awards for home and multimedia products, bringing the total number of awards for the past two product cycles to a record high 62.

In November, the Company opened its first North American retail location with a flagship store on Madison Avenue in New York City. The HARMAN store is a customer experience center that transforms how consumers interact with audio products.

At CES, the Company also introduced a proprietary software solution, called Signal Doctor™ by HARMAN, which automatically analyzes and improves the audio quality of all types of compressed, digitized and streaming music sources. The technology leverages HARMAN’s expertise in music recording, signal processing, and psycho-acoustics to restore the full sound that is forfeited in the compression process. Signal Doctor™ by HARMAN will be launched by multiple automakers and in a range of home and multimedia products later this year.

 

Professional Division

 

FY 2014 Key Figures – Professional

    Three Months Ended December 31     Six Months Ended December 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

6M
FY14

   

6M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     207       144       45 %     46 %     405       287       41 %     42 %
Gross profit     78       56       39 %     40 %     151       111       36 %     37 %
Percent of net sales     37.4 %     39.0 %                 37.3 %     38.7 %            
SG&A & Other     52       36       44 %     45 %     99       72       38 %     39 %
Operating income     25       20       29 %     31 %     52       40       31 %     34 %
Percent of net sales     12.2 %     13.8 %                 12.8 %     13.8 %            
EBITDA     31       23       33 %     36 %     62       46       35 %     38 %
Percent of net sales     14.9 %     16.1 %                 15.3 %     15.9 %            
Restructuring-related costs     2       0                   2       0              

Non-GAAP1

                                               
Gross profit     78       56       40 %     41 %     152       111       36 %     37 %
Percent of net sales     37.7 %     39.0 %                 37.4 %     38.7 %            
SG&A & Other     51       37       39 %     40 %     98       72       35 %     36 %
Operating income     27       19       40 %     43 %     54       39       38 %     40 %
Percent of net sales     13.0 %     13.5 %                 13.3 %     13.6 %            
EBITDA     32       23       43 %     46 %     64       45       41 %     43 %
Percent of net sales     15.6 %     15.8 %                 15.7 %     15.8 %            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                        
 

Net sales in the second quarter of fiscal 2014 were $207 million, an increase of 45 percent compared to the prior year or 46 percent excluding foreign currency translation. The increase in net sales is primarily due to the expansion of the Company’s product portfolio into lighting as a result of the acquisition of Martin Professional and stronger demand for the Company’s audio products.

On a non-GAAP basis in the second quarter of fiscal 2014, gross margin decreased 136 basis points to 37.7 percent compared to the prior year primarily due to lower gross margins on lighting products. SG&A expense as a percentage of sales decreased 92 basis points to 24.6 percent due to improved operating leverage on higher sales.

Professional Division Highlights

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

In the second quarter, the Company’s audio and lighting solutions were installed at the following venues: BMW World Customer Center in Germany, King Abdullah Sports Center in Saudi Arabia, Salvador International Airport in Brazil, and the St. Louis Cardinals and San Diego Padres baseball parks.

HARMAN’s Professional products were featured in numerous high profile events including the GRAMMY Awards, Grand Central Station’s 100th Anniversary Celebration, and the American and Country Music Awards.

HARMAN was also awarded its third GRAMMY Award for its technical contributions to the recording field. The technical GRAMMY recognized Lexicon’s contributions to the art and science of music recording and reproduction through innovation and excellence in product design. HARMAN is the only audio systems company to earn multiple Technical GRAMMY Awards. The Company’s AKG microphone and headphone brand and JBL brand were recognized in 2010 and 2005, respectively.

 

Other (Corporate)

 
FY 2014 Key Figures – Other     Three Months Ended December 31     Six Months Ended December 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

6M
FY14

   

6M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

SG&A & Other     38     32     18 %     18 %     68     55     25 %     26 %
Restructuring-related costs     2     0                 2     0            

Non-GAAP1

                                               
SG&A & Other     36     32     14 %     14 %     67     55     23 %     23 %
1A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.                        
 

Other (Corporate) SG&A expense includes compensation, benefit and occupancy costs for corporate employees, new technology innovation, and expenses associated with the Company’s brand identity campaign. SG&A expenses as a percentage of net sales decreased by 29 basis points to 2.7%.

 

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,

       

2013

     

2012

     

2013

     

2012

Net sales     $ 1,328,024     $ 1,055,642     $ 2,499,829     $ 2,053,835
Cost of sales       948,574       783,849       1,798,730       1,503,795
Gross profit       379,450       271,793       701,099       550,040
Selling, general and administrative expenses       277,594       203,411       529,861       402,567
Operating income       101,856       68,382       171,238       147,473
Other expenses:                        
Interest expense, net       1,855       3,687       3,825       9,682
Foreign exchange losses, net       3,110       988       3,971       1,139
Miscellaneous, net       1,792       1,430       3,121       2,609
Income before income taxes       95,099       62,277       160,321       134,043
Income tax expense, net       23,470       14,788       42,146       31,999
Equity in loss of unconsolidated subsidiaries       0       0       94       0
Net income     $ 71,629     $ 47,489     $ 118,081     $ 102,044
Earnings per share:                        
Basic     $ 1.04     $ 0.69     $ 1.71     $ 1.48
Diluted     $ 1.03     $ 0.68     $ 1.69     $ 1.47
Weighted average shares outstanding:                        
Basic       68,715       69,009       69,131       68,846
Diluted       69,578       69,734       69,947       69,582
 
 

HARMAN International Industries, Incorporated

Consolidated Balance Sheets

 
(In thousands; unaudited)    

December 31,
2013

   

June 30,
2013

ASSETS            
Current assets            
Cash and cash equivalents     $ 518,556     $ 454,258
Short-term investments       0       10,008
Receivables, net       757,006       722,711
Inventories       655,907       549,831
Other current assets       376,618       352,244
Total current assets       2,308,087       2,089,052
Property, plant and equipment, net       437,653       425,182
Goodwill       251,370       234,342
Deferred tax assets, long-term, net       240,380       260,749
Other assets       248,446       226,360
Total assets     $ 3,485,936     $ 3,235,685
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current liabilities            
Current portion of long-term debt     $ 30,000     $ 30,000
Short-term debt       21,632       4,930
Accounts payable       616,521       498,055
Accrued liabilities       435,623       402,704
Accrued warranties       146,697       128,411
Income taxes payable       21,944       13,414
Total current liabilities       1,272,417       1,077,514
Long-term debt       240,038       255,043
Pension liability       171,888       167,687
Other non-current liabilities       120,664       90,570
Total liabilities       1,805,007       1,590,814
Total shareholders’ equity       1,680,929       1,644,871
Total liabilities and shareholders’ equity     $ 3,485,936     $ 3,235,685
 
 

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, 2013

     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 1,328,024     $ 0       $ 1,328,024
Cost of sales       948,574     (1,384)a         947,190
Gross profit       379,450       1,384         380,834
Selling, general and administrative expenses       277,594     (4,469)b         273,125
Operating income       101,856       5,853         107,709
Other expenses:                  
Interest expense, net       1,855       0         1,855
Foreign exchange losses, net       3,110       0         3,110
Miscellaneous, net       1,792       0         1,792
Income before income taxes       95,099       5,853         100,952
Income tax expense, net       23,470       1,529(c )       24,999
Equity in loss of unconsolidated subsidiaries       0       0         0
Net income     $ 71,629     $ 4,324       $ 75,953
Earnings per share:                  
Basic     $ 1.04     $ 0.06       $ 1.11
Diluted     $ 1.03     $ 0.06       $ 1.09
Weighted average shares outstanding:                  
Basic       68,715             68,715
Diluted       69,578             69,578
 
 
a)     Restructuring expense in Cost of Sales was $2.0 million for projects to increase manufacturing productivity; other non-recurring expense included in Cost of Sales was income of $0.6 million.
b) Restructuring expense in SG&A was $2.9 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense included in SG&A was $1.5 million.
c)

The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.

 

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

 

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, 2013

     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 2,499,829     $ 0       $ 2,499,829
Cost of sales       1,798,730     (3,433)a         1,795,297
Gross profit       701,099       3,433         704,532
Selling, general and administrative expenses       529,861     (26,455)b         503,406
Operating income       171,238       29,888         201,126
Other expenses:                  
Interest expense, net       3,825       0         3,825
Foreign exchange losses, net       3,971       0         3,971
Miscellaneous, net       3,121       0         3,121
Income before income taxes       160,321       29,888         190,209
Income tax expense, net       42,146       5,150(c )       47,296
Equity in loss of unconsolidated subsidiaries       94       0         94
Net income     $ 118,081     $ 24,738       $ 142,819
Earnings per share:                  
Basic     $ 1.71     $ 0.36       $ 2.07
Diluted     $ 1.69     $ 0.35       $ 2.04
Weighted average shares outstanding:                  
Basic       69,131             69,131
Diluted       69,947             69,947
 
 
a)     Restructuring expense in Cost of Sales was $4.0 million due to projects to increase productivity in manufacturing; other non- recurring expense included in Cost of Sales was income of $0.6 million.
b) Restructuring expense in SG&A was $24.9 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense in SG&A was 1.5 million.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.
 

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

 

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

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

Three Months Ended
December 31, 2012

     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 1,055,642     $ 0       $ 1,055,642
Cost of sales       783,849     (956)a         782,893
Gross profit       271,793       956         272,749
Selling, general and administrative expenses       203,411     12,643b         216,054
Operating income       68,382       (11,687 )       56,695
Other expenses:                  
Interest expense, net       3,687       (1,129 )       2,558
Foreign exchange losses, net       988       0         988
Miscellaneous, net       1,430       0         1,430
Income before income taxes       62,277       (10,558 )       51,719
Income tax expense, net       14,788       (4,127 )c       10,661
Equity in loss of unconsolidated subsidiaries       0       0         0
Net income     $ 47,489     $ (6,431 )     $ 41,058
Earnings per share:                  
Basic     $ 0.69     $ 0.09       $ 0.59
Diluted     $ 0.68     $ 0.09       $ 0.59
Weighted average shares outstanding:                  
Basic       69,009             69,009
Diluted       69,734             69,734
 
 
a)     Restructuring expense in Cost of Sales was $1.0 million due to projects to increase efficiency in manufacturing.
b) Non-recurring income in SG&A was $12.6 million primarily due to reduction of a contingent consideration accrual related to the acquisition of HARMAN Embedded Audio LLC, formerly known as MWM Acoustics.
c) The tax benefits are calculated by multiplying the actual restructuring \ non-recurring charge in each individual country by the discrete tax rate within that specific country.
 

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

 

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

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

Six Months Ended
December 31, 2012

     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 2,053,835     $ 0       $ 2,053,835
Cost of sales       1,503,795     (996)a         1,502,799
Gross profit       550,040       996         551,036
Selling, general and administrative expenses       402,567     12,455b         415,022
Operating income       147,473       (11,459 )       136,014
Other expenses:                  
Interest expense, net       9,682       (1,128 )       8,554
Foreign exchange losses, net       1,139       0         1,139
Miscellaneous, net       2,609       (26 )       2,583
Income before income taxes       134,043       (10,305 )       123,738
Income tax expense, net       31,999       (4,064 )c       27,935
Equity in loss of unconsolidated subsidiaries       0       0         0
Net income    

$

102,044

    $ (6,241 )     $ 95,803
Earnings per share:                  
Basic     $ 1.48     $ 0.09       $ 1.39
Diluted     $ 1.47     $ 0.09       $ 1.38
Weighted average shares outstanding:                  
Basic       68,846             68,846
Diluted       69,582             69,582
 
 
a)     Restructuring expense in Cost of Sales was $1.0 million due to projects to increase efficiency in manufacturing.
b) Non-recurring income in SG&A was $12.5 million primarily due to reduction of a contingent consideration accrual related to the acquisition of HARMAN Embedded Audio LLC, formerly known as MWM Acoustics
c) The tax benefits are calculated by multiplying the actual restructuring \ non-recurring charge in each individual country by the discrete tax rate within that specific country.
 

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

 

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

(In thousands; unaudited)

   

Three Months Ended
December 31,

   

Increase
(Decrease)

       

2013

 

   

2012

   
Net sales – nominal currency     $ 1,328,024     $ 1,055,642     26%
Effect of foreign currency translation(1)            

21,622

     
Net sales - local currency       1,328,024       1,077,264     23%
                   
Gross profit – nominal currency       379,450       271,793     40%
Effect of foreign currency translation(1)            

3,902

     
Gross profit – local currency       379,450       275,695     38%
                   
SG&A & Other – nominal currency       277,594       203,411     36%
Effect of foreign currency translation(1)            

3,194

     
SG&A & Other – local currency       277,594       206,605     34%
                   
Operating income – nominal currency       101,856       68,382     49%
Effect of foreign currency translation(1)            

708

     
Operating income – local currency       101,856       69,090     47%
                   
Net income – nominal currency       71,629       47,489     51%
Effect of foreign currency translation(1)             915      
Net income – local currency       71,629       48,404     48%
                   
(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 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. HARMAN 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)

       

2013

     

2012

   
Net sales – nominal currency     $ 1,328,024     $ 1,055,642     26%
Effect of foreign currency translation(1)            

21,622

     
Net sales – local currency       1,328,024       1,077,264     23%
                   
Gross profit - nominal currency       380,834       272,749     40%
Effect of foreign currency translation(1)            

3,937

     
Gross profit - local currency       380,834       276,686     38%
                   
SG&A & Other – nominal currency       273,125       216,054     26%
Effect of foreign currency translation(1)            

3,194

     
SG&A & Other – local currency       273,125       219,248     25%
                   
Operating income – nominal currency       107,709       56,695     90%
Effect of foreign currency translation(1)            

743

     
Operating income – local currency       107,709       57,438     88%
                   
Net income – nominal currency       75,953       41,058     85%
Effect of foreign currency translation(1)             974      
Net income – local currency       75,953       42,032     81%
                   
(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 GAAP to Non-GAAP Results

Foreign Currency Translation Impact

 

(In thousands; unaudited)

   

Six Months Ended
December 31,

   

Increase
(Decrease)

       

2013

     

2012

   
Net sales – nominal currency     $ 2,499,829    

$

2,053,835

    22%
Effect of foreign currency translation(1)            

47,967

     
Net sales - local currency       2,499,829       2,101,802     19%
                   
Gross profit – nominal currency       701,099       550,040     27%
Effect of foreign currency translation(1)            

9,253

     
Gross profit – local currency       701,099       559,293     25%
                   
SG&A & Other – nominal currency       529,861       402,567     32%
Effect of foreign currency translation(1)            

7,365

     
SG&A & Other – local currency       529,861       409,932     29%
                   
Operating income – nominal currency       171,238       147,473     16%
Effect of foreign currency translation(1)            

1,888

     
Operating income – local currency       171,238       149,361     15%
                   
Net income – nominal currency       118,081       102,044     16%
Effect of foreign currency translation(1)             2,213      
Net income – local currency       118,081       104,257     13%
                   
(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 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. HARMAN 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)

 

   

Six Months Ended
December 31,

   


Increase
(Decrease)

       

2013

     

2012

   
Net sales – nominal currency     $ 2,499,829     $ 2,053,835     22%
Effect of foreign currency translation(1)            

47,967

     
Net sales – local currency       2,499,829       2,101,802     19%
                   
Gross profit - nominal currency       704,532       551,036     28%
Effect of foreign currency translation(1)            

9,289

     
Gross profit - local currency       704,532       560,325     26%
                   
SG&A & Other – nominal currency       503,406       415,022     21%
Effect of foreign currency translation(1)            

7,365

     
SG&A & Other – local currency       503,406       422,387     19%
                   
Operating income – nominal currency       201,126       136,014     48%
Effect of foreign currency translation(1)            

1,924

     
Operating income – local currency       201,126       137,938     46%
                   
Net income – nominal currency       142,819       95,803     49%
Effect of foreign currency translation(1)             2,274      
Net income – local currency       142,819       98,077     46%
                   
(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. HARMAN 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

Reconciliation of GAAP to Non-GAAP Results

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

Three Months Ended
December 31, 2013

   

Three Months Ended
December 31, 2012

     

GAAP

   

Adjustments

   

Non-GAAP

   

GAAP

   

Adjustments

   

Non-GAAP

HARMAN:                                    
Operating Income     101,856     5,853       107,709     68,382     (11,687 )     56,695
Depreciation & Amortization     32,526     (1,435 )     31,091     30,299     (956 )     29,343
EBITDA     134,382     4,418       138,800     98,681     (12,643 )     86,038
INFOTAINMENT:                                    
Operating Income     62,691     (1,497 )     61,194     30,251     (566 )     29,685
Depreciation & Amortization     16,198     (1,386 )     14,812     14,815     0       14,815
EBITDA     78,889     (2,883 )     76,006     45,066     (566 )     44,500
LIFESTYLE:                                    
Operating Income     51,103     4,205       55,308     49,832     (10,710 )     39,122
Depreciation & Amortization     8,162     0       8,162     9,329     (932 )     8,397
EBITDA     59,265     4,205       63,470     59,161     (11,642 )     47,519
PROFESSIONAL:                                    
Operating Income     25,404     1,620       27,024     19,742     (413 )     19,329
Depreciation & Amortization     5,407     (49 )     5,358     3,366     (24 )     3,342
EBITDA     30,811     1,571       32,382     23,108     (437 )     22,671
                       

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

 

Harman International Industries, Incorporated

Reconciliation of GAAP to Non-GAAP Results

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

Six Months Ended
December 31, 2013

   

Six Months Ended
December 31, 2012

     

GAAP

   

Adjustments

   

Non-GAAP

   

GAAP

   

Adjustments

   

Non-GAAP

HARMAN:                                    
Operating Income     171,238     29,888       201,126     147,473     (11,459 )     136,014
Depreciation & Amortization     64,239     (3,454 )     60,785     58,843     (996 )     57,847
EBITDA     235,477     26,434       261,911     206,316     (12,455 )     193,861
INFOTAINMENT:                                    
Operating Income     95,118     20,585       115,703     74,925     (294 )     74,631
Depreciation & Amortization     32,240     (2,736 )     29,504     30,055     0       30,055
EBITDA     127,358     17,849       145,207     104,980     (294 )     104,686
LIFESTYLE:                                    
Operating Income     92,343     5,709       98,052     87,091     (10,843 )     76,248
Depreciation & Amortization     16,456     (621 )     15,835     17,066     (932 )     16,134
EBITDA     108,799     5,088       113,887     104,157     (11,775 )     92,382
PROFESSIONAL:                                    
Operating Income     51,884     2,070       53,954     39,513     (322 )     39,191
Depreciation & Amortization     9,916     (97 )     9,819     6,127     (63 )     6,064
EBITDA     61,800     1,973       63,773     45,640     (385 )     45,255
 

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

 

HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

 
Total Company Liquidity    

December 31,
2013

$ millions    
Cash & cash equivalents     $ 519
Short-term investments       0
Available credit under Revolving Credit Facility       744
Total liquidity     $ 1,263

Contacts

HARMAN
Sandy Rowland, 203-328-3500
sandy.rowland@harman.com

HARMAN 2QFY2014 Supporting Slide Deck

HARMAN 2QFY2014 Supporting Slide Deck

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Contacts

HARMAN
Sandy Rowland, 203-328-3500
sandy.rowland@harman.com