HARMAN Reports Fourth Quarter and Full Year Fiscal 2014 Results

  • Q4 Net Sales climb 22% to $1.4 billion; Full Year Net Sales up 24% to $5.3 billion
  • Q4 Operational EPS up 38% to $1.25; Full Year Operational EPS up 43% to $4.41
  • Issues guidance for Fiscal Year 2015; Raises Fiscal Year 2016 Revenue outlook $800 million to $6.85 billion
  • Industry-leading automotive backlog grows to record high of $20.5 billion
  • Expands portfolio into enterprise automation and control through the acquisition of AMX

STAMFORD, Conn.--()--Harman International Industries, Incorporated (NYSE:HAR), the premier audio, visual, and infotainment group, today announced results for the fourth quarter and full year ended June 30, 2014.

Net sales for the fourth quarter were $1.444 billion, an increase of 22 percent compared to the same period last year, as all three of the Company’s divisions reported increased sales. Infotainment net sales increased due to the expansion of recent production launches, higher automotive production, and higher take rates. Lifestyle growth was driven by strong demand for the Company’s home and multimedia products launched earlier in the year and an increase in automotive production and take rates in the car audio business. HARMAN’s Professional Division net sales increased as a result of strong demand for the Company’s lighting and audio products.

Excluding restructuring and non-recurring charges, fourth quarter operating income was $121 million, compared to $87 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $1.25 for the quarter compared to $0.91 in the same period last year. On a GAAP basis, fourth quarter operating income was $57 million compared to $16 million in the same period last year, and earnings per diluted share were $0.62 for the quarter compared to $0.08 in the prior year.

Net sales for the full year were $5.348 billion, an increase of 24 percent compared to the prior year, as all three of the Company’s divisions reported increased sales. Excluding restructuring and non-recurring charges, fiscal year 2014 operating income was $430 million compared to $290 million in the prior year. On the same non-GAAP basis, earnings per diluted share were $4.41 for the year compared to $3.07 in the prior year. On a GAAP basis, fiscal year 2014 operating income was $330 million compared to $201 million in prior year, and earnings per diluted share were $3.36 compared to $2.04 in the prior year.

“We are extremely pleased that, for the fourth consecutive quarter, all three of our divisions achieved double-digit top-line growth, facilitating a 38 percent improvement in earnings per share,” 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. In our other businesses, we continue to gain traction with our award winning products and have recently expanded our portfolio into exciting new markets including enterprise automation and control. We are executing our strategy and, as a result, we have issued strong guidance for fiscal year 2015, raised our outlook for fiscal year 2016 and reported a Company record backlog.”

Paliwal continued, “While achieving record performance in fiscal year 2014, we are taking additional restructuring actions as we continue to relentlessly focus on cost management and align our operations with growth markets. We firmly believe that innovation combined with cost leadership continues to position us for sustainable long-term success.”

         
FY 2014 Key Figures – Total Company   Three Months Ended June 30   Twelve Months Ended June 30
           

Increase

(Decrease)

          Increase

(Decrease)

$ millions (except per share data)  

3M

FY14

 

3M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

 

12M

FY14

 

12M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

Net sales   1,444   1,182   22%   20%   5,348   4,298   24%   22%
Gross profit   391   285   37%   35%   1,457   1,104   32%   30%
Percent of net sales   27.1%   24.1%           27.2%   25.7%        
SG&A   334   269   24%   21%   1,127   903   25%   23%
Operating income   57   16   268%   307%   330   201   64%   64%
Percent of net sales   4.0%   1.3%           6.2%   4.7%        
EBITDA   92   52   78%   81%   462   329   40%   39%
Percent of net sales   6.4%   4.4%           8.6%   7.7%        
Net Income attributable to HARMAN International Industries, Incorporated   43   5   n.m.   n.m.   235   142   65%   64%
Diluted earnings per share   0.62   0.08   n.m.   n.m.   3.36   2.04   64%   63%
Restructuring& non-recurring costs   64   72           100   88        

Non-GAAP1

                               
Gross profit   394   316   25%   23%   1,466   1,140   29%   27%
Percent of net sales   27.3%   26.7%           27.4%   26.5%        
SG&A   274   228   20%   18%   1,036   850   22%   21%
Operating income   121   87   38%   38%   430   290   48%   47%
Percent of net sales   8.3%   7.4%           8.0%   6.7%        
EBITDA   154   121   28%   27%   555   413   35%   33%
Percent of net sales   10.7%   10.2%           10.4%   9.6%        
Net Income attributable to HARMAN International Industries, Incorporated   87   63   38%   38%   308   214   44%   41%
Diluted earnings per share   1.25   0.91   38%   38%   4.41   3.07   43%   41%
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 fourth quarter of fiscal 2014 increased 59 basis points to 27.3 percent. The improvement was primarily due to the impact of higher sales volume on fixed production costs.

In the fourth quarter of fiscal 2014, SG&A expense as a percentage of net sales decreased 36 basis points to 18.9 percent on a non-GAAP basis.

Fiscal 2015 and 2016 Outlook

HARMAN today provided guidance for fiscal 2015 and raised its financial outlook for fiscal 2016.

                 
Fiscal Year 2015   HARMAN   Infotainment Division   Lifestyle Division   Professional Division
Sales   ~$6.0 billion   ~$3.1 billion   ~$1.8 billion   ~$1.1 billion
EBITDA*   ~$685 million   ~$375 million   ~$265 million   ~$175 million
EPS*   ~$5.25      
                 
Fiscal Year 2016   HARMAN   Infotainment Division   Lifestyle Division   Professional Division
Sales   ~$6.85 billion   ~$3.7 billion   ~$1.95 billion   ~$1.2 billion
~EBITDA*   ~$880 million   ~$490 million   ~$310 million   ~$215 million

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

 
 

Key planning assumptions are outlined in the Company’s slide deck posted on the Investors section of the Company’s website at: www.harman.com

Investor Call Today, August 7, 2014

At 11:00 a.m. EDT today, HARMAN's management will host an analyst and investor conference call to discuss the fourth quarter and full year results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 785 6380 (U.S.) or +1 (212) 231 2910 (International) ten minutes before the call and reference HARMAN, Access Code: 21721786.

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 fourth quarter earnings release and supporting materials will be posted on the site at approximately 8:00 a.m. EDT, Thursday, August 7, 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 November 7, 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: 21721786.

If you need technical assistance, please 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 16,000 people across the Americas, Europe, and Asia and reported sales of $5.3 billion for the last 12 months ended June 30, 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 of 1934, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the 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 June 30   Twelve Months Ended June 30
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions  

3M

FY14

 

3M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

 

12M

FY14

 

12M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

Net sales   773   614   26%   22%   2,839   2,283   24%   20%
Gross profit   171   131   31%   28%   635   482   32%   28%
Percent of net sales   22.1%   21.3%           22.4%   21.1%        
SG&A   131   136   (4%)   (7%)   440   391   12%   9%
Operating income   40   (5)   n.m.   n.m.   195   91   115%   113%
Percent of net sales   5.2%   (0.9%)           6.9%   4.0%        
EBITDA   57   11   407%   448%   261   154   70%   67%
Percent of net sales   7.4%   1.8%           9.2%   6.7%        
Restructuring& non-recurring costs   31   49           55   60        

Non-GAAP1

                               
Gross profit   172   132   30%   27%   641   483   33%   29%
Percent of net sales   22.3%   21.5%           22.6%   21.2%        
SG&A   101   88   (15%)   (11%)   391   332   18%   14%
Operating income   71   44   62%   61%   250   151   66%   62%
Percent of net sales   9.2%   7.2%           8.8%   6.6%        
EBITDA   87   59   47%   45%   310   213   46%   42%
Percent of net sales   11.2%   9.6%           10.9%   9.3%        
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the fourth quarter of fiscal 2014 were $773 million, an increase of 26 percent compared to the same period in the prior year, or 22 percent excluding the impact of foreign currency translation. The increase in sales was due to the expansion of the Company’s recent production launches across car lines, higher automotive production, and higher take rates.

On a non-GAAP basis in the fourth quarter of fiscal 2014, gross margin increased 77 basis points to 22.3 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 increase in software content. SG&A spending decreased 128 basis points to 13.1 percent of net sales primarily due to improved operating leverage on higher sales.

Infotainment Division Highlights

During the fourth quarter of fiscal 2014, HARMAN secured several new business awards bringing the fiscal 2014 total of new awards to $2.5 billion. The Company will develop premium infotainment solutions for both Bentley and Maserati. HARMAN also won an award from Scania/MAN to develop the Company’s first infotainment solution for commercial vehicles. HARMAN will leverage its scalable hardware and software architecture to enter this new market. In addition, the Company secured an award from Ssangyong to provide an eCall solution. On June, 30, 2014, the Company’s infotainment backlog was $16.2 billion, an all-time high for HARMAN.

In July, HARMAN secured a competitive replacement award from Subaru and a follow-on award from an existing European customer totaling $1.3 billion. HARMAN will supply base, mid, and high level solutions for Subaru across carlines globally. This award follows two previously announced awards from Japanese automakers, Yamaha and Suzuki.

At Google’s I/O conference in June, HARMAN was named as an Open Automotive Alliance partner, joining founding members Audi, General Motors, Google, Honda, Hyundai, and Nvidia. The Open Automotive Alliance was formed in early 2014 to accelerate in-car innovation via a common platform designed for openness, customization and scale. HARMAN’s participation in the new alliance complements the Company’s deep mobile expertise, which spans more than 25 million vehicles on the road today equipped with HARMAN audio and infotainment. 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 June 30   Twelve Months Ended June 30
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions  

3M

FY14

 

3M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

 

12M

FY14

 

12M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

Net sales   424   348   22%   21%   1,656   1,338   24%   22%
Gross profit   124   76   63%   62%   498   371   34%   33%
Percent of net sales   29.3%   21.9%           30.1%   27.7%        
SG&A   97   49   97%   95%   328   234   40%   39%
Operating income   27   27   (1%)   0%   171   137   24%   24%
Percent of net sales   6.3%   7.7%           10.3%   10.3%        
EBITDA   36   37   (2%)   (2%)   205   174   18%   18%
Percent of net sales   8.6%   10.6%           12.4%   13.0%        
Restructuring& non-recurring costs   20   15           27   19        
Non-GAAP1                                
Gross profit   126   99   27%   26%   500   396   26%   25%
Percent of net sales   29.7%   28.5%           30.2%   29.6%        
SG&A   79   57   38%   37%   302   239   26%   25%
Operating income   47   42   11%   11%   198   157   26%   26%
Percent of net sales   11.0%   12.1%           11.9%   11.7%        
EBITDA   56   50   11%   11%   232   189   22%   22%
Percent of net sales   13.2%   14.5%           14.0%   14.2%        
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the fourth quarter of fiscal 2014 were $424 million, an increase of 22 percent compared to the same period in the prior year, or 21 percent excluding the impact of foreign currency translation. The growth in the home and multimedia business was primarily due to 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 due to the increasing importance of audio for a better connected car experience.

On a non-GAAP basis in the fourth quarter of fiscal 2014, gross margin increased by 116 basis points to 29.7 percent compared to the same period in the prior year. This is primarily due to the impact of improved leverage on fixed production costs and benefits from footprint migration restructuring initiatives. SG&A expense as a percentage of sales increased by 223 basis points to 18.7 percent primarily due to increased investment in marketing.

Lifestyle Division Highlights

During the fourth quarter of fiscal 2014, HARMAN secured new branded audio business awards from Alfa Romeo, Hyundai, Kia and Toyota. HARMAN also continued to expand its partnership with Ford in the area of hands-free microphones adding several new car lines including the next-generation F-150. As cars become more connected, voice control becomes more important as a way for drivers to safely interact with embedded in-vehicle systems. HARMAN’s microphone solutions deliver the advantage of small form factor and superior audio sensitivity. HARMAN also secured a similar award for MEMS microphones earlier in the year from Daimler. These new awards now bring the Company’s industry-leading car audio backlog to $4.3 billion.

HARMAN also launched car audio systems in the Hyundai Sonata, Lexus NX, Dodge Challenger, Kia Sedona, Subaru Outback, and Toyota Camry during the quarter.

The Company’s home and multimedia product line also launched several innovative new headphones and portable wireless products. In addition, HARMAN acquired yurbuds, the U.S. market leader in sports headphones. The acquisition will strengthen HARMAN’s position in the fast growing sports headphones and wearables markets.

Professional Division

           
FY 2014 Key Figures – Professional   Three Months Ended June 30   Twelve Months Ended June 30
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions  

3M

FY14

 

3M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

 

12M

FY14

 

12M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

Net sales   248   220   13%   12%   853   673   27%   27%
Gross profit   96   77   24%   23%   323   250   29%   30%
Percent of net sales   38.6%   35.2%           37.9%   37.1%        
SG&A   58   52   12%   11%   209   164   27%   27%
Operating income   37   26   46%   47%   114   86   33%   35%
Percent of net sales   15.1%   11.6%           13.4%   12.8%        
EBITDA   43   32   35%   35%   135   103   31%   33%
Percent of net sales   17.4%   14.5%           15.8%   15.3%        
Restructuring& non-recurring costs   3   8           6   9        

Non-GAAP1

                               
Gross profit   96   84   14%   14%   324   259   25%   26%
Percent of net sales   38.7%   38.1%           38.0%   38.5%        
SG&A   55   51   9%   8%   203   164   24%   24%
Operating income   41   33   23%   23%   121   95   27%   29%
Percent of net sales   16.4%   15.1%           14.1%   14.1%        
EBITDA   46   39   18%   18%   141   112   27%   28%
Percent of net sales   18.7%   17.9%           16.6%   16.6%        
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the fourth quarter of fiscal 2014 were $248 million, an increase of 13 percent compared to the same period in the prior year or 12 percent excluding foreign currency translation. The increase in net sales is primarily due to strong demand for the Company’s lighting and audio products.

On a non-GAAP basis in the fourth quarter of fiscal 2014, gross margin increased 62 basis points to 38.7 percent compared to the same period in the prior year due to stronger profitability of the Company’s lighting products. SG&A expense as a percentage of sales decreased 72 basis points to 22.3 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 live entertainment events and fixed venue installations worldwide.

In the fourth quarter of fiscal 2014, HARMAN’s audio and lighting system solutions were selected for installation at San Diego’s Petco Park, home of the Padres, and the University of Texas - El Paso Sun Bowl Stadium. The Company also upgraded the installed audio system at the Grand Mosque in Mecca, Saudi Arabia as well as numerous entertainment, hospitality and transportation facilities.

HARMAN’s products powered a wide range of high-profile televised award shows, special events, music festivals and tours. These included the Rock and Roll Hall of Fame Induction Ceremony, the Eurovision Song Contest, and Rock In Rio Lisbon. In Brazil, HARMAN audio systems were installed in eight of the 12 stadiums at the FIFA World Cup, and were featured on the field to support the Opening and Closing Ceremonies.

The division launched 44 new products during the fourth quarter. The Soundcraft Vi3000 digital mixing console was awarded Best of Show by the National Association of Broadcasters and the JBL VTX V20 loudspeaker system was honored with Rental & Staging’s Best New Product Award. In addition, the Martin Viper Quadray was honored as Live Design’s Lighting Product of the Year.

In June, HARMAN’s Professional Division acquired AMX LLC, a leading provider of enterprise automation and control systems as well as distributing and switching solutions for audio and video. With the addition of AMX, HARMAN is uniquely positioned to provide complete audio, video, lighting and automation solutions to customers globally.

Other (Corporate)

         
FY 2014 Key Figures – Other   Three Months Ended June 30   Twelve Months Ended June 30
           

Increase

(Decrease)

         

Increase

(Decrease)

$ millions  

3M

FY14

 

3M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

 

12M

FY14

 

12M

FY13

 

Including

Currency

Changes

 

Excluding

Currency

Changes1

SG&A   47   32   47%   48%   151   114   32%   32%
Restructuring& non-recurring costs   9   0           12   0        

Non-GAAP1

                               
SG&A   38   32   19%   19%   139   114   22%   22%

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. In the fourth quarter of 2014, compared to the same period in the prior year, SG&A expenses as a percentage of the Company’s net sales on a non-GAAP basis decreased five basis points to 2.6%.

 

HARMAN International Industries, Incorporated

Consolidated Statements of Income

         
(In thousands, except earnings per share data; unaudited)   Three Months Ended
June 30,
  Twelve Months Ended
June 30,
   

2014

 

2013

 

2014

 

2013

Net sales   $ 1,444,419     $ 1,182,235     $ 5,348,483     $ 4,297,842
Cost of sales     1,053,624       897,350       3,891,816       3,193,722
Gross profit     390,795       284,885       1,456,667       1,104,120
Selling, general and administrative expenses     333,739       269,369       1,126,940       902,869
Operating income     57,056       15,516       329,727       201,251
Other expenses:                
Interest expense, net     2,090       1,572       8,026       12,868
Foreign exchange losses (gains), net     1,190       2,819       5,935       2,313
Miscellaneous, net     2,568       8,017       8,371       11,800
Income before income taxes     51,208       3,108       307,395       174,270
Income tax expense, net     8,095       (2,477 )     72,610       31,729
Equity in net loss of unconsolidated subsidiaries     0       95       206       134
Net income     43,113       5,490       234,579       142,407
Net income attributable to non-controlling interest     (113 )     0       (113 )     0
Net income attributable to HARMAN International Industries, Incorporated   $ 43,226     $ 5,490     $ 234,692     $ 142,407
Earnings per share:                
Basic   $ 0.63     $ 0.08     $ 3.40     $ 2.06
Diluted   $ 0.62     $ 0.08     $ 3.36     $ 2.04
Weighted average shares outstanding:                
Basic     69,088       69,164       69,073       68,990
Diluted     70,058       69,965       69,889       69,736
 
 

HARMAN International Industries, Incorporated

Consolidated Balance Sheets

               
(In thousands; unaudited)      

June 30,

2014

   

June 30,

2013

ASSETS              
Current assets              
Cash and cash equivalents       $ 581,312     $ 454,258
Short-term investments         0       10,008
Receivables, net         894,579       722,711
Inventories         662,128       549,831
Other current assets         320,852       352,244
Total current assets         2,458,871       2,089,052
Property, plant and equipment, net         509,856       425,182
Goodwill         540,952       234,342
Deferred tax assets, long-term, net         170,558       260,749
Other assets         445,353       226,360
Total assets       $ 4,125,590     $ 3,235,685
               
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Current liabilities              
Current portion of long-term debt       $ 35,625     $ 30,000
Short-term debt         3,736       4,930
Accounts payable         697,553       498,055
Accrued liabilities         566,722       402,704
Accrued warranties         155,472       128,411
Income taxes payable         26,544       13,414
Total current liabilities         1,485,652       1,077,514
Long-term debt         519,407       255,043
Pension liability         186,352       167,687
Other non-current liabilities         141,158       90,570
Total liabilities         2,332,569       1,590,814
Total HARMAN International Industries, Incorporated shareholders’ equity         1,792,578       1,644,871
Non-controlling interest total equity         443       0
Total equity         1,793,021       1,644,871
Total liabilities and equity       $ 4,125,590     $ 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
June 30, 2014
     

GAAP

 

Adjustments

 

Non-GAAP

Net sales     $ 1,444,419   $ 0   $ 1,444,419
Cost of sales     1,053,624   (3,295)a   1,050,329
Gross profit     390,795   3,295   394,090
Selling, general and administrative expenses     333,739   (60,225)b   273,514
Operating income     57,056   63,520   120,576
Other expenses:              
Interest expense, net     2,090   0   2,090
Foreign exchange losses, net     1,190   0   1,190
Miscellaneous, net     2,568   46   2,614
Income before income taxes     51,208   63,474   114,682
Income tax expense, net     8,095   19,242c   27,337
Equity in net loss of unconsolidated subsidiaries     0   0   0
Net income     43,113   44,232   87,345
Net income attributable to non-controlling interest     (113)   0   (113)
Net income attributable to HARMAN International Industries, Incorporated     $ 43,226   $ 44,232   $ 87,458
Earnings per share:              
Basic     $ 0.63   $ 0.64   $ 1.26
Diluted     $ 0.62   $ 0.63   $ 1.25
Weighted average shares outstanding:              
Basic     69,088       69,088
Diluted     70,058       70,058
     
a) Restructuring expense in Cost of Sales was $1.7 million for projects to increase manufacturing productivity; other non-recurring expense included in Cost of Sales was $1.6 million.
b) Restructuring expense in SG&A was $48.9 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $11.4 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 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)   Twelve Months Ended
June 30, 2014
   

GAAP

 

Adjustments

 

Non-GAAP

Net sales   $ 5,348,483     $ 0     $ 5,348,483  
Cost of sales     3,891,816     (8,838)a       3,882,978  
Gross profit     1,456,667       8,838       1,465,505  
Selling, general and administrative expenses     1,126,940     (91,215)b       1,035,725  
Operating income     329,727       100,053       429,780  
Other expenses:            
Interest expense, net     8,026       0       8,026  
Foreign exchange losses, net     5,935       0       5,935  
Miscellaneous, net     8,371       46       8,417  
Income before income taxes     307,395       100,007       407,402  
Income tax expense, net     72,610       26,491(c )     99,101  
Equity in net loss of unconsolidated subsidiaries     206       0       206  
Net income     234,579       73,516       308,095  
Net income attributable to non-controlling interest     (113 )     0       (113 )
Net income attributable to HARMAN International Industries, Incorporated   $ 234,692     $ 73,516     $ 308,208  
Earnings per share:            
Basic   $ 3.40     $ 1.06     $ 4.46  
Diluted   $ 3.36     $ 1.05     $ 4.41  
Weighted average shares outstanding:            
Basic     69,073           69,073  
Diluted     69,889           69,889  
     
a) Restructuring expense in Cost of Sales was $7.8 million due to projects to increase productivity in manufacturing; other non-recurring expense included in Cost of Sales was $1.0 million.
b) Restructuring expense in SG&A was $76.4 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense in SG&A was $14.8 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

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

       
(In thousands, except earnings per share data; unaudited)     Three Months Ended
June 30, 2013
     

GAAP

 

Adjustments

 

Non-GAAP

Net sales     $ 1,182,235     $ 0     $ 1,182,235
Cost of sales       897,350     (30,749)a       866,601
Gross profit       284,885       30,749       315,634
Selling, general and administrative expenses       269,369     (41,211)b       228,158
Operating income       15,516       71,960       87,476
Other expenses:              
Interest expense, net       1,572       0       1,572
Foreign exchange losses, net       2,819       0       2,819
Miscellaneous, net       8,017     (5,993)d       2,024
Income before income taxes       3,108       77,953       81,061
Income tax expense, net       (2,477 )     20,020(c )     17,543
Equity in net loss of unconsolidated subsidiaries       95       0       95
Net income attributable to HARMAN International Industries, Incorporated     $ 5,490     $ 57,933     $ 63,423
Earnings per share:              
Basic     $ 0.08     $ 0.84     $ 0.92
Diluted     $ 0.08     $ 0.83     $ 0.91
Weighted average shares outstanding:              
Basic       69,164           69,164
Diluted       69,965           69,965
a)   Restructuring expense in Cost of Sales was $3.2 million for projects to increase manufacturing productivity and a non-recurring expense of $27.5 million related to potential NAFTA customs duties from prior years.
b) Restructuring expense in SG&A was $50.8 million primarily due to the divestment of a German manufacturing operation and projects to increase productivity in engineering and administrative functions; other non-recurring income in SG&A was $9.6 million due to the reduction of a contingent consideration accrual for MWM Acoustics, LLC and certain related entities.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the statutory tax rate within that specific country.
d) Non-recurring expense in miscellaneous, net includes a loss on available for sale securities.
 

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)     Twelve Months Ended
June 30, 2013
     

GAAP

 

Adjustments

 

Non-GAAP

Net sales     $ 4,297,842   $ 0     $ 4,297,842
Cost of sales       3,193,722   (35,404)a       3,158,318
Gross profit       1,104,120     35,404       1,139,524
Selling, general and administrative expenses       902,869   (53,083)b       849,786
Operating income       201,251     88,487       289,738
Other expenses:              
Interest expense, net       12,868     (1,129 )     11,739
Foreign exchange losses, net       2,313     0       2,313
Miscellaneous, net       11,800     (6,019 )     5,781
Income before income taxes       174,270     95,635       269,905
Income tax expense, net       31,729     23,632(c )     55,361
Equity in net loss of unconsolidated subsidiaries       134     0       134
Net income attributable to HARMAN International Industries, Incorporated     $ 142,407   $ 72,003     $ 214,410
Earnings per share:              
Basic     $ 2.06   $ 1.04     $ 3.11
Diluted     $ 2.04   $ 1.03     $ 3.07
Weighted average shares outstanding:              
Basic       68,990         68,990
Diluted       69,736         69,736
a)   Restructuring expense in Cost of Sales was $7.9 million due to projects to increase productivity in manufacturing; other non- recurring expense included in Cost of Sales was $27.5 million for potential NAFTA customs duties from prior years.
b) Restructuring expense in SG&A was $75.2 million primarily due to the divestment of a German manufacturing operation and projects to increase productivity in engineering and administrative functions; other non-recurring income in SG&A was $22.1 million due to reduction of a contingent consideration accrual for MWM Acoustics.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the statutory 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
June 30,
 

Increase

(Decrease)

     

2014

 

2013

 
Net sales – nominal currency     $ 1,444,419   $ 1,182,235   22%
Effect of foreign currency translation(1)          

22,907

   
Net sales - local currency       1,444,419     1,205,142   20%
               
Gross profit – nominal currency       390,795     284,885   37%
Effect of foreign currency translation(1)          

3,948

   
Gross profit – local currency       390,795     288,833   35%
               
SG&A & Other – nominal currency       333,739     269,369   24%
Effect of foreign currency translation(1)          

5,451

   
SG&A & Other – local currency       333,739     274,820   21%
               
Operating income – nominal currency       57,056     15,516   268%
Effect of foreign currency translation(1)          

(1,502)

   
Operating income – local currency       57,056     14,014   307%
               
Net income attributable to HARMAN International Industries, Incorporated – nominal currency       43,226     5,490   687%
Effect of foreign currency translation(1)           (1,617)    
Net income attributable to HARMAN International Industries, Incorporated – local currency       43,226     3,873   1,016%
               
(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
June 30,

Increase

(Decrease)

   

2014

 

2013

 
Net sales – nominal currency   $ 1,444,419   $ 1,182,235   22%
Effect of foreign currency translation(1)        

22,907

   
Net sales – local currency     1,444,419     1,205,142   20%
             
Gross profit - nominal currency     394,090     315,634   25%
Effect of foreign currency translation(1)        

4,089

   
Gross profit - local currency     394,090     319,723   23%
             
SG&A & Other – nominal currency     273,514     228,158   20%
Effect of foreign currency translation(1)        

3,994

   
SG&A & Other – local currency     273,514     232,152   18%
             
Operating income – nominal currency     120,576     87,476   38%
Effect of foreign currency translation(1)        

95

   
Operating income – local currency     120,576     87,571   38%
             
Net income attributable to HARMAN International Industries, Incorporated – nominal currency     87,345     63,423   38%
Effect of foreign currency translation(1)         (19)    
Net income attributable to HARMAN International Industries, Incorporated – local currency     87,345     63,404   38%
             
(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)

   

Twelve Months Ended
June 30,

 

Increase

(Decrease)

     

2014

 

2013

 
Net sales – nominal currency     $ 5,348,483   $ 4,297,842   24%
Effect of foreign currency translation(1)          

84,521

   
Net sales - local currency       5,348,483     4,382,363   22%
               
Gross profit – nominal currency       1,456,667     1,104,120   32%
Effect of foreign currency translation(1)          

15,259

   
Gross profit – local currency       1,456,667     1,119,379   30%
               
SG&A & Other – nominal currency       1,126,940     902,869   25%
Effect of foreign currency translation(1)          

15,452

   
SG&A & Other – local currency       1,126,940     918,321   23%
               
Operating income – nominal currency       329,727     201,251   64%
Effect of foreign currency translation(1)          

(193)

   
Operating income – local currency       329,727     201,058   64%
               
Net income attributable to HARMAN International Industries, Incorporated – nominal currency       234,692     142,407   65%
Effect of foreign currency translation(1)           1,003    
Net income attributable to HARMAN International Industries, Incorporated – local currency       234,692     143,410   64%
               
(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)

    Twelve Months Ended
June 30,
 

Increase

(Decrease)

     

2014

 

2013

 
Net sales – nominal currency     $ 5,348,483   $ 4,297,842   24%
Effect of foreign currency translation(1)          

84,521

   
Net sales – local currency       5,348,483     4,382,363   22%
               
Gross profit - nominal currency       1,465,505     1,139,524   29%
Effect of foreign currency translation(1)          

15,484

   
Gross profit - local currency       1,465,505     1,155,008   27%
               
SG&A & Other – nominal currency       1,035,725     849,786   22%
Effect of foreign currency translation(1)          

12,598

   
SG&A & Other – local currency       1,035,725     862,384   20%
               
Operating income – nominal currency       429,780     289,738   48%
Effect of foreign currency translation(1)          

2,885

   
Operating income – local currency       429,780     292,623   47%
               
Net income attributable to HARMAN International Industries, Incorporated – nominal currency       308,208     214,410   44%
Effect of foreign currency translation(1)           4,106    
Net income attributable to HARMAN International Industries, Incorporated – local currency       308,208     218,516   41%
               
(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
June 30, 2014
  Three Months Ended
June 30, 2013
   

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

HARMAN:                        
Operating Income   57,056   63,520   120,576   15,516   71,960   87,476
Depreciation & Amortization   35,026   (1,418)   33,608   36,175   (3,116)   33,059
EBITDA   92,082   62,102   154,184   51,691   68,844   120,535
INFOTAINMENT:                        
Operating Income   39,972   31,239   71,211   (5,334)   49,282   43,948
Depreciation & Amortization   17,062   (1,398)   15,664   16,577   (1,348)   15,229
EBITDA   57,034   29,841   86,875   11,243   47,934   59,177
LIFESTYLE:                        
Operating Income   26,793   19,812   46,605   26,956   15,012   41,968
Depreciation & Amortization   9,490   0   9,490   10,061   (1,670)   8,391
EBITDA   36,283   19812   56,095   37,017   13,342   50,359
PROFESSIONAL:                        
Operating Income   37,360   3,278   40,638   25,503   7,665   33,168
Depreciation & Amortization   5,844   (16)   5,828   6,416   (97)   6,319
EBITDA   43,205   3,258   46,463   31,919   7568   39,487
 

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)   Twelve Months Ended
June 30, 2014
  Twelve Months Ended
June 30, 2013
   

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

HARMAN:                        
Operating Income   329,727   100,053   429,780   201,251   88,487   289,738
Depreciation & Amortization   132,328   (6,959)   125,369   128,169   (5,338)   122,831
EBITDA   462,055   93,094   555,149   329,420   83,149   412,569
INFOTAINMENT:                        
Operating Income   195,403   54,717   250,120   90,799   60,222   151,021
Depreciation & Amortization   65,912   (6,219)   59,693   63,008   (1,347)   61,661
EBITDA   261,315   48,498   309,813   153,807   58,875   212,682
LIFESTYLE:                        
Operating Income   170,517   27,323   197,840   137,477   19,253   156,730
Depreciation & Amortization   34,581   (622)   33,959   36,572   (3,818)   32,754
EBITDA   205,098   26,701   231,799   174,049   15,435   189,484
PROFESSIONAL:                        
Operating Income   114,057   6,499   120,556   85,810   9,011   94,821
Depreciation & Amortization   20,866   (119)   20,747   16,882   (171)   16,711
EBITDA   134,923   6,380   141,303   102,692   8,840   111,532
 

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       June 30,

2014

$ millions        
Cash & cash equivalents       $581  
Short-term investments       0  
Available credit under Revolving Credit Facility       445  
Total liquidity       $1,026  
     

Contacts

Harman International Industries, Incorporated
Sandy Rowland, 203-328-3500
sandy.rowland@harman.com

HARMAN 4Q and Year End FY2014 Supporting Slide Deck

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Contacts

Harman International Industries, Incorporated
Sandy Rowland, 203-328-3500
sandy.rowland@harman.com