HARMAN Reports Third Quarter Fiscal Year 2014 Results

  • Net sales climb 32% to $1.4 billion; China sales up 60%
  • Non-GAAP operating income up 63% to $108 million and EPS up 41% to $1.12
  • Raises full year revenue guidance by $175 million to $5.275 billion and non-GAAP EPS from ~$4.16 to ~$4.36

STAMFORD, Conn.--()--Harman International Industries, Incorporated (NYSE:HAR), the leading global infotainment and audio group, today announced results for the third quarter ended March 31, 2014.

Net sales for the third quarter were $1.404 billion, an increase of 32 percent compared to the same period last year, as all three of the Company’s divisions reported increased sales. Infotainment net sales were up due to higher automotive production and take rates. Lifestyle growth was driven by one large order from a mobile telecommunications customer and accelerated sales of new products launched earlier in the year in the home and multimedia business, and an increase in automotive production in the car audio business. Professional net sales increased as a result of the expansion of the Company’s product portfolio into lighting.

On a GAAP basis, third quarter operating income was $101 million, compared to $38 million in the same period last year, and earnings per diluted share were $1.05 for the quarter compared to $0.50. Excluding restructuring and non-recurring charges, third quarter non-GAAP operating income was $108 million, compared to $66 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $1.12 for the quarter compared to $0.79 in the same period last year.

“We are extremely pleased that, for the third consecutive quarter, all three of our divisions reported double-digit top-line growth, facilitating a 42 percent improvement in EBITDA,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO. “In our automotive businesses, we are capitalizing on robust demand for an embedded connected car experience and a more favorable production environment. There is pent up demand, particularly in Europe, which we expect will stabilize in the coming quarters. In our other businesses, we continue to gain traction with our award-winning innovative products and the expansion of our distribution channels globally. As a result of our continued success and the current positive trends in automotive industry, we have increased our revenue and EPS forecast for a second time this year.”

 
FY 2014 Key Figures – Total Company     Three Months Ended March 31     Nine Months Ended March 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions (except per share data)    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

9M
FY14

   

9M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     1,404     1,062     32%     31%     3,904     3,116     25%     23%
Gross profit     365     269     36%     34%     1,066     819     30%     28%
Percent of net sales     26.0%     25.4%                 27.3%     26.3%            
SG&A & Other     263     231     14%     13%     793     634     25%     23%
Operating income     101     38     165%     169%     273     186     47%     46%
Percent of net sales     7.2%     3.6%                 7.0%     6.0%            
EBITDA     134     71     88%     89%     370     278     33%     32%
Percent of net sales     9.6%     6.7%                 9.5%     8.9%            
Net Income     73     35     110%     108%     191     137     40%     37%
Diluted earnings per share     1.05     0.50     110%     108%     2.74     1.97     39%     37%
Restructuring-related costs     7     28                 37     17            

Non-GAAP1

                                               
Gross profit     367     273     34%     33%     1,071     824     30%     28%
Percent of net sales     26.1%     25.7%                 27.4%     26.4%            
SG&A & Other     259     207     25%     25%     762     622     23%     21%
Operating income     108     66     63%     61%     309     202     53%     51%
Percent of net sales     7.7%     6.2%                 7.9%     6.5%            
EBITDA     139     98     42%     40%     401     292     37%     35%
Percent of net sales     9.9%     9.2%                 10.3%     9.4%            
Net Income     78     55     41%     37%     221     151     46%     42%
Diluted earnings per share     1.12     0.79     41%     37%     3.16     2.17     46%     42%
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 third quarter of fiscal 2014 increased 43 basis points to 26.1 percent. The improvement was primarily due to the impact of higher sales volume on fixed production costs and favorable product mix in the Infotainment Division, partially offset by lower gross margin in the Lifestyle Division due to a change in product mix.

In the third quarter of fiscal 2014, SG&A and Other expense as a percentage of net sales decreased 103 basis points to 18.4 percent on a non-GAAP basis. The improvement was primarily related to operating leverage from higher sales.

Fiscal 2014 Outlook

HARMAN today raised its financial outlook for fiscal 2014. The Company now forecasts global revenue of ~$5.275 billion, non-GAAP EBITDA of ~$550 million and earnings per share of ~$4.36.

 
FY'14 Guidance     Sales     EBITDA*     EPS*
--Revised May 1, 2014--     ~$5.275 billion     ~$550 million     ~$4.361
--Revised Jan 30, 2014--     ~$5.100 billion     ~$535 million     ~$4.161
--Aug 8, 2013--     ~$4.700 billion     ~$490 million     ~$3.852
*Non-GAAP, excluding restructuring and non-recurring items
1Assumes outstanding share count of 70 million shares
2Assumes outstanding share count of 67 million shares
 

Investor Call Today, May 1, 2014

At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the third quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 785 8944 (U.S.) or +1 (212) 231 2928 (International) ten minutes before the call and reference HARMAN, Access Code: 21713193.

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 third quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT, Thursday, May 1, 2014.

A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through August 1, 2014 at 1:00 p.m. EDT. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21713193. 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 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 15,200 people across the Americas, Europe, and Asia and reported sales of $5.1 billion for the last twelve months ended March 31, 2014. 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, 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 the 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 March 31     Nine Months Ended March 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

9M
FY14

   

9M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     736     569     29%     26%     2,066     1,669     24%     20%
Gross profit     158     110     44%     41%     464     351     32%     28%
Percent of net sales     21.4%     19.3%                 22.5%     21.0%            
SG&A & Other     97     88     10%     8%     309     255     21%     17%
Operating income     60     21     184%     175%     155     96     62%     58%
Percent of net sales     8.2%     3.7%                 7.5%     5.8%            
EBITDA     77     38     105%     99%     204     143     43%     39%
Percent of net sales     10.5%     6.6%                 9.9%     8.5%            
Restructuring-related costs     3     11                 23     11            

Non-GAAP1

                                               
Gross profit     160     110     46%     43%     469     351     34%     30%
Percent of net sales     21.7%     19.3%                 22.7%     21.0%            
SG&A & Other     96     77     25%     24%     290     244     19%     15%
Operating income     63     32     95%     87%     179     107     67%     62%
Percent of net sales     8.6%     5.7%                 8.7%     6.4%            
EBITDA     78     49     59%     54%     223     154     45%     41%
Percent of net sales     10.6%     8.6%                 10.8%     9.2%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the third quarter of fiscal 2014 were $736 million, an increase of 29 percent compared to the prior year, or 26 percent excluding the impact of foreign currency translation. The increase in sales was due to higher automotive production, the expansion of the Company’s recent production launches across car lines, and higher take rates.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin increased 244 basis points to 21.7 percent compared to the same period in the prior year primarily due to the impact of improved leverage on fixed production costs, benefits from footprint migration restructuring initiatives, and an increased mix of scalable infotainment systems. SG&A spending decreased 45 basis points to 13.1 percent of net sales primarily due to improved operating leverage on higher sales.

Infotainment Division Highlights

During the quarter, HARMAN expanded recent platform launches across additional car lines, secured new business awards, and successfully commenced production on new programs globally.

BMW expanded the NBT infotainment system across additional car lines. In addition, Daimler extended the NTG5 infotainment solution previously launched in the Mercedes S-Class flagship vehicle into their C- and V-Class vehicles. The Company also successfully launched programs across a number of VW Group vehicles, including the Audi TT, the Porsche Macan and 911 Targa, and the Lamborghini Huracan.

HARMAN won an award to equip Scion vehicles with a Gen II infotainment system in North America. Toyota Europe also awarded HARMAN follow-on business to supply infotainment solutions across its car models.

At the Geneva Motor Show in March, a number of automotive manufacturers launched new vehicles featuring HARMAN technology. HARMAN also continued its global roll-out of advanced solutions for the connected car with 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 for an app ecosystem for embedded 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.

HARMAN has started integrating smart apps like Apple CarPlay™ and Google Automotive Link™ into its embedded infotainment solutions.

Lifestyle Division

 
FY 2014 Key Figures – Lifestyle     Three Months Ended March 31     Nine Months Ended March 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

9M
FY14

   

9M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     468     327     43%     43%     1,232     991     24%     23%
Gross profit     131     98     33%     33%     374     295     27%     26%
Percent of net sales     27.9%     29.9%                 30.4%     29.7%            
SG&A & Other     79     75     6%     5%     230     184     25%     24%
Operating income     51     23     119%     128%     144     111     30%     30%
Percent of net sales     11.0%     7.2%                 11.7%     11.2%            
EBITDA     60     33     83%     87%     169     137     23%     23%
Percent of net sales     12.8%     10.0%                 13.7%     13.8%            
Restructuring-related costs     2     15                 8     4            

Non-GAAP1

                                               
Gross profit     131     99     32%     31%     374     297     26%     25%
Percent of net sales     27.9%     30.3%                 30.4%     30.0%            
SG&A & Other     78     61     28%     27%     223     182     22%     21%
Operating income     53     39     38%     38%     151     115     32%     31%
Percent of net sales     11.4%     11.8%                 12.3%     11.6%            
EBITDA     62     47     32%     32%     176     139     26%     25%
Percent of net sales     13.2%     14.3%                 14.3%     14.0%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the third quarter of fiscal 2014 were $468 million, an increase of 43 percent compared to same period in the prior year. The growth in the home and multimedia business was primarily due to one large order from a mobile telecommunications customer and accelerated sales of new products launched earlier in the year. The growth in the car audio business was primarily driven by an increase in automotive production and higher take rates.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin decreased by 238 basis points to 27.9 percent compared to the same period in the prior year primarily due to a higher proportion of revenue coming from the home and multimedia business versus the higher margin car audio business. SG&A expense as a percentage of sales decreased by 197 basis points to 16.6 percent primarily due to improved operating leverage.

Lifestyle Division Highlights

The Lifestyle Division continued to gain momentum with its award-winning home and multimedia and car audio solutions. During the quarter, HARMAN entered into an agreement with Softbank (Japan), including its subsidiaries Sprint (U.S.A.), Trikomsel (Indonesia), and Brightstar (worldwide). Softbank is exclusively selling the newly designed Harman Kardon® Onyx Studio™ portable wireless speaker to its customers globally. The Onyx Studio™ is now the third HARMAN product to exceed one million units shipped.

HARMAN also received 19 Red Dot (international), 13 iF (Germany), and eight CES (USA) design and innovation awards for its home and multimedia products. In February, the Company opened a new retail flagship store in Moscow. The Company also has flagship stores in Beijing, New York, Seoul, and Shanghai.

In addition, HARMAN secured new and follow-on car audio awards from Chrysler, Lexus, Toyota, as well as Chinese automakers Brilliance, Great Wall and Dongfeng. Building on its award to provide a high-end Revel audio solution for Ford’s Lincoln vehicles, HARMAN won its first order for HALOsonic External Electronic Sound Synthesis, or eESS. HALOsonic eESS generates engine sounds for ultra-quiet electric vehicles, helping to create a safer environment for other drivers and pedestrians.

Chrysler presented HARMAN with its 2013 Innovation Award for the outstanding performance of the HALOsonic Engine Order Cancellation (EOC) technology. Frost & Sullivan also recognized the Company with its prestigious 2014 Global Product Leadership Award for Premium Automotive Audio. Finally, both Clari-Fi™ and QuantumLogic Surround 3D® each won Plus X Awards for Innovation and High Quality.

HARMAN continued to roll-out its proprietary Clari-Fi™ technology. Previously branded as Signal Doctor™, Clari-Fi™ leverages HARMAN’s expertise in music recording, signal processing and psycho-acoustics to restore the full sound that is forfeited during the compression process. Clari-Fi™ has been launched in the Company’s JBL Authentics product line and debuted in the automotive market in the new Lexus NX vehicle. It is also an integral part of the new HTC One M8 Harman Kardon edition smart phone launched by Sprint in North America earlier this week.

Professional Division

 
FY 2014 Key Figures – Professional     Three Months Ended March 31     Nine Months Ended March 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

9M
FY14

   

9M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

Net sales     200     165     21%     23%     605     453     34%     35%
Gross profit     76     61     25%     26%     227     172     32%     33%
Percent of net sales     38.1%     37.0%                 37.6%     38.1%            
SG&A & Other     52     40     28%     28%     151     112     35%     35%
Operating income     25     21     19%     22%     77     60     27%     30%
Percent of net sales     12.4%     12.6%                 12.7%     13.3%            
EBITDA     30     25     19%     22%     92     71     30%     32%
Percent of net sales     14.9%     15.2%                 15.2%     15.6%            
Restructuring-related costs     1     2                 3     1            

Non-GAAP1

                                               
Gross profit     76     64     20%     21%     228     175     30%     31%
Percent of net sales     38.1%     38.4%                 37.7%     38.6%            
SG&A & Other     50     41     23%     23%     148     113     31%     31%
Operating income     26     22     16%     18%     80     62     30%     32%
Percent of net sales     13.0%     13.6%                 13.2%     13.6%            
EBITDA     31     27     16%     18%     95     72     32%     34%
Percent of net sales     15.5%     16.2%                 15.7%     15.9%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the third quarter of fiscal 2014 were $200 million, an increase of 21 percent compared to the prior year or 23 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.

On a non-GAAP basis in the third quarter of fiscal 2014, gross margin decreased 30 basis points to 38.1 percent compared to the prior year primarily related to new product introduction launch costs. SG&A expense as a percentage of sales increased 33 basis points to 25.2 percent due to integration costs related to acquisitions.

Professional Division Highlights

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

In the third quarter, the Company’s audio and lighting system solutions were installed at FirstEnergy Stadium, home of the Cleveland Browns, and the new Marassi Civic Center in Egypt. The Company’s systems were installed as upgrades for numerous other entertainment, hospitality and transportation facilities, such as the San Francisco Muni Public Transit System.

HARMAN’s Professional products powered a wide range of high-profile televised award shows, special events music festivals, and tours. These included the 47th Annual Super Bowl Halftime Show, the NBA All-Star Game Concert, and the GRAMMY Awards. In Brazil, HARMAN audio systems were also utilized at world-renowned Carnival events in key cities such as Rio de Janeiro and Sao Paulo.

HARMAN’s Professional Division launched 50 new products during the third quarter. At the annual National Association of Music Merchants (NAMM) trade show, the Company’s recently-launched AKG and JBL products won Technical Excellence & Creativity Awards.

Other (Corporate)

 
FY 2014 Key Figures – Other     Three Months Ended March 31     Nine Months Ended March 31
                 

Increase
(Decrease)

               

Increase
(Decrease)

$ millions    

3M
FY14

   

3M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

   

9M
FY14

   

9M
FY13

   

Including
Currency
Changes

   

Excluding
Currency
Changes1

SG&A & Other     35     28     27%     27%     104     82     26%     26%
Restructuring-related costs     1     0                 2     0            

Non-GAAP1

                                               
SG&A & Other     34     28     24%     24%     101     82     23%     23%
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Other (Corporate) SG&A expense includes compensation, benefit and occupancy costs for corporate employees, new technology innovation, and expenses associated with the Company’s brand identity campaign. SG&A expenses as a percentage of the Company’s net sales decreased by 17 basis points to 2.4%.

 

HARMAN International Industries, Incorporated
Consolidated Statements of Income

 
(In thousands, except earnings per share data; unaudited)     Three Months Ended
March 31,
    Nine Months Ended
March 31,
     

2014

   

2013

   

2014

   

2013

Net sales     $ 1,404,235     $ 1,061,772       $ 3,904,064     $ 3,115,607  
Cost of sales       1,039,462       792,577         2,838,192       2,296,372  
Gross profit       364,773       269,195         1,065,872       819,235  
Selling, general and administrative expenses       263,340       230,933         793,201       633,500  
Operating income       101,433       38,262         272,671       185,735  
Other expenses:                        
Interest expense, net       2,111       1,614         5,936       11,296  
Foreign exchange losses (gains), net       774       (1,645 )       4,745       (506 )
Miscellaneous, net       2,682       1,174         5,803       3,783  
Income before income taxes       95,866       37,119         256,187       171,162  
Income tax expense, net       22,369       2,207         64,515       34,206  
Equity in net loss of unconsolidated subsidiaries       112       39         206       39  
Net income     $ 73,385     $ 34,873       $ 191,466     $ 136,917  
Earnings per share:                        
Basic     $ 1.06     $ 0.50       $ 2.77     $ 1.99  
Diluted     $ 1.05     $ 0.50       $ 2.74     $ 1.97  
Weighted average shares outstanding:                        
Basic       68,939       69,109         69,067       68,932  
Diluted       69,888       69,892         69,877       69,676  
 

HARMAN International Industries, Incorporated
Consolidated Balance Sheets

 
(In thousands; unaudited)    

March 31,

2014

   

June 30,

2013

ASSETS            
Current assets            
Cash and cash equivalents     $ 566,873     $ 454,258
Short-term investments       0       10,008
Receivables, net       932,881       722,711
Inventories       654,997       549,831
Other current assets       332,039       352,244
Total current assets       2,486,790       2,089,052
Property, plant and equipment, net       445,100       425,182
Goodwill       257,592       234,342
Deferred tax assets, long-term, net       240,857       260,749
Other assets       237,963       226,360
Total assets     $ 3,668,302     $ 3,235,685
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current liabilities            
Current portion of long-term debt     $ 33,750     $ 30,000
Short-term debt       15,475       4,930
Accounts payable       664,735       498,055
Accrued liabilities       497,458       402,704
Accrued warranties       157,973       128,411
Income taxes payable       23,008       13,414
Total current liabilities       1,392,399       1,077,514
Long-term debt       228,785       255,043
Pension liability       172,358       167,687
Other non-current liabilities       107,585       90,570
Total liabilities       1,901,127       1,590,814
Total shareholders’ equity       1,767,175       1,644,871
Total liabilities and shareholders’ equity     $ 3,668,302     $ 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
March 31, 2014
     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 1,404,235     $ 0       $ 1,404,235
Cost of sales       1,039,462     (2,110)a         1,037,352
Gross profit       364,773       2,110         366,883
Selling, general and administrative expenses       263,340     (4,535)b         258,805
Operating income       101,433       6,645         108,078
Other expenses:                  
Interest expense, net       2,111       0         2,111
Foreign exchange losses, net       774       0         774
Miscellaneous, net       2,682       0         2,682
Income before income taxes       95,866       6,645         102,511
Income tax expense, net       22,369       1,987(c )       24,356
Equity in net loss of unconsolidated subsidiaries       112       0         112
Net income     $ 73,385     $ 4,658       $ 78,043
Earnings per share:                  
Basic     $ 1.06     $ 0.07       $ 1.13
Diluted     $ 1.05     $ 0.07       $ 1.12
Weighted average shares outstanding:                  
Basic       68,939             68,939
Diluted       69,888             69,888
 
 
a) Restructuring expense in Cost of Sales was $2.1 million for projects to increase manufacturing productivity
b) Restructuring expense in SG&A was $2.6 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense included in SG&A was $1.9 million.
c)

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

 

HARMAN has provided a reconciliation of non-GAAP measures in order to provide the users of these 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)     Nine Months Ended
March 31, 2014
     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 3,904,064     $ 0      

$

3,904,064
Cost of sales       2,838,192     (5,543)a         2,832,649
Gross profit       1,065,872       5,543         1,071,415
Selling, general and administrative expenses       793,201     (30,990)b         762,211
Operating income       272,671       36,533         309,204
Other expenses:                  
Interest expense, net       5,936       0         5,936
Foreign exchange losses, net       4,745       0         4,745
Miscellaneous, net       5,803       0         5,803
Income before income taxes       256,187       36,533         292,720
Income tax expense, net       64,515       7,137(c )       71,652
Equity in net loss of unconsolidated subsidiaries       206       0         206
Net income     $ 191,466     $ 29,396       $ 220,862
Earnings per share:                  
Basic     $ 2.77     $ 0.43       $ 3.20
Diluted     $ 2.74     $ 0.42       $ 3.16
Weighted average shares outstanding:                  
Basic       69,067             69,067
Diluted       69,877             69,877
 
 
a) Restructuring expense in Cost of Sales was $6.1 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 $27.6 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring expense in SG&A was 3.4 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
March 31, 2013

     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 1,061,772       $ 0       $ 1,061,772  
Cost of sales       792,577       (3,659)a         788,918  
Gross profit       269,195         3,659         272,854  
Selling, general and administrative expenses       230,933       (24,328)b         206,605  
Operating income       38,262         27,987         66,249  
Other expenses:                  
Interest expense, net       1,614         0         1,614  
Foreign exchange (gains), net       (1,645 )       0         (1,645 )
Miscellaneous, net       1,174         0         1,174  
Income before income taxes       37,119         27,987         65,106  
Income tax expense, net       2,207         7,676(c )       9,883  
Equity in net loss of unconsolidated subsidiaries       39         0         39  
Net income     $ 34,873       $ 20,311       $ 55,184  
Earnings per share:                  
Basic     $ 0.50       $ 0.29       $ 0.80  
Diluted     $ 0.50       $ 0.29       $ 0.79  
Weighted average shares outstanding:                  
Basic       69,109               69,109  
Diluted       69,892               69,892  
 
 
a) Restructuring expense in Cost of Sales was $3.7 million due to projects to increase efficiency in manufacturing.
b) Restructuring expense in SG&A was $24.3 million primarily due to projects to increase efficiency in engineering and administrative functions.
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)     Nine Months Ended
March 31, 2013
     

GAAP

   

Adjustments

   

Non-GAAP

Net sales     $ 3,115,607       $ 0       $ 3,115,607  
Cost of sales       2,296,372       (4,654)a         2,291,718  
Gross profit       819,235         4,654         823,889  
Selling, general and administrative expenses       633,500       (11,872)b         621,628  
Operating income       185,735         16,526         202,261  
Other expenses:                  
Interest expense, net       11,296         (1,128 )       10,168  
Foreign exchange (gains), net       (506 )       0         (506 )
Miscellaneous, net       3,783         (26 )       3,757  
Income before income taxes       171,162         17,680         188,842  
Income tax expense, net       34,206         3,612(c )       37,818  
Equity in net loss of unconsolidated subsidiaries       39         0         39  
Net income     $ 136,917       $ 14,068       $ 150,985  
Earnings per share:                  
Basic     $ 1.99       $ 0.20       $ 2.19  
Diluted     $ 1.97       $ 0.20       $ 2.17  
Weighted average shares outstanding:                  
Basic       68,932               68,932  
Diluted       69,676               69,676  
 
 
a) Restructuring expense in Cost of Sales was $4.7 million due to projects to increase efficiency in manufacturing.
b) Restructuring expense in SG&A was $24.4 million primarily due to projects to increase productivity in engineering and administrative functions; other non-recurring income in SG&A was $12.5 million due to the release of contingent consideration related to the acquisition of 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)     Three Months Ended
March 31, 2014
    Three Months Ended
March 31, 2013
     

GAAP

   

Adjustments

   

Non-GAAP

   

GAAP

   

Adjustments

   

Non-GAAP

HARMAN:                                    
Operating Income     101,433     6,645     108,078     38,262     27,987     66,249
Depreciation & Amortization     33,063     (2,086)     30,977     33,151     (1,226)     31,925
EBITDA     134,496     4,559     139,055     71,413     26,761     98,174
INFOTAINMENT:                                    
Operating Income     60,313     2,894     63,207     21,208     11,235     32,443
Depreciation & Amortization     16,611     (2,087)     14,524     16,377     0     16,377
EBITDA     76,924     807     77,731     37,585     11,235     48,820
LIFESTYLE:                                    
Operating Income     51,381     1,801     53,182     23,431     15,082     38,513
Depreciation & Amortization     8,635     0     8,635     9,445     (1,215)     8,230
EBITDA     60,016     1,801     61,817     32,876     13,867     46,743
PROFESSIONAL:                                    
Operating Income     24,813     1,150     25,963     20,794     1,668     22,462
Depreciation & Amortization     5,104     1     5,105     4,339     (11)     4,328
EBITDA     29,917     1,151     31,068     25,133     1,657     26,790
                       

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)     Nine Months Ended
March 31, 2014
    Nine Months Ended
March 31, 2013
     

GAAP

   

Adjustments

   

Non-GAAP

   

GAAP

   

Adjustments

   

Non-GAAP

HARMAN:                

 

                 
Operating Income     272,671     36,533     309,204     185,735     16,526     202,261
Depreciation & Amortization     97,302     (5,541)     91,761     91,994     (2,222)     89,772
EBITDA     369,973     30,992     400,965     277,729     14,304     292,033
INFOTAINMENT:                                    
Operating Income     155,431     23,479     178,910     96,132     10,941     107,073
Depreciation & Amortization     48,851     (4,823)     44,028     46,432     0     46,432
EBITDA     204,282     18,656     222,938     142,564     10,941     153,505
LIFESTYLE:                                    
Operating Income     143,725     7,510     151,235     110,522     4,240     114,762
Depreciation & Amortization     25,091     (621)     24,470     26,511     (2,148)     24,363
EBITDA     168,816     6,889     175,705     137,033     2,092     139,125
PROFESSIONAL:                                    
Operating Income     76,697     3,220     79,917     60,307     1,346     61,653
Depreciation & Amortization     15,020     (97)     14,923     10,466     (74)     10,392
EBITDA     91,717     3,123     94,840     70,773     1,272     72,045
 

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     March 31,

2014

$ millions    
Cash & cash equivalents     $567
Short-term investments     0
Available credit under Revolving Credit Facility     746
Total liquidity     $1,313
 

Contacts

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

HARMAN 3QFY2014 Supporting Slide Deck

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Contacts

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