Harman Reports First Quarter Fiscal 2017 Results

  • Net Sales Up 8% to $1.8 Billion
  • GAAP EBITDA Up 7% to $202 Million; Operational EBITDA Up 15% to $227 Million
  • GAAP EPS Up 20% to $1.45; Operational EPS Up 27% to $1.87
  • Secured $2 Billion in New Automotive Awards
    • Complements $24.1 Billion FY 2016 Year-End Automotive Order Backlog

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HARMAN 1QFY17 Earnings Results Supporting Slide Deck

STAMFORD, Conn.--()--Harman International Industries, Incorporated (NYSE:HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the first quarter ended September 30, 2016.

Net sales for the first quarter were $1.8 billion, an increase of eight percent compared to the prior year. Lifestyle Audio net sales increased 19 percent due to higher sales in both consumer and car audio. Connected Car net sales increased six percent due to higher take rates and stronger production. Connected Services net sales increased four percent primarily due to higher demand for automotive services, while Professional Solutions net sales decreased three percent.

On a GAAP basis, first quarter operating income increased 15 percent to $151 million compared to $131 million in the prior year, and EBITDA increased seven percent to $202 million compared to $188 million in the prior year. Earnings per diluted share increased 20 percent to $1.45 compared to $1.20 in the prior year.

Excluding restructuring, acquisition-related items and non-recurring charges, first quarter operating income increased 19 percent to $187 million compared to $158 million in the prior year, and EBITDA increased 15 percent to $227 million compared to $197 million in the prior year. Earnings per diluted share increased 27 percent to $1.87 compared to $1.48 in the prior year.

“HARMAN delivered a solid first quarter, with strong revenue growth and outstanding EBITDA and EPS performance. We secured $2 billion in new automotive awards in the quarter, demonstrating increasing demand from automakers and their drivers for a rich in-car experience, including embedded infotainment, cloud connectivity and sound management solutions. With cyber security an underlying and fundamental component of the connected car and autonomous driving, I am proud to add that NHTSA and the University of Michigan rated HARMAN’s suite of intrusion detection and mitigation technologies as the best performing solution,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO.

Continued Paliwal, “On top of our strong automotive performance, HARMAN’s strong brands and award-winning design are driving market share gains with our consumer audio products. We remain focused on innovation, execution and driving cost leadership in all of our businesses, and are on track to meet our fiscal 2017 guidance.”

         
FY 2017 Key Figures – Total Company       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
Net sales       1,760     1,631     8%     8%
Gross profit       541     487     11%     11%
Percent of net sales       30.8%     29.9%            
SG&A       390     356     10%     10%
Operating income       151     131     15%     16%
Percent of net sales       8.6%     8.1%            
EBITDA       202     188     7%     8%
Percent of net sales       11.5%     11.5%            
Net Income attributable to HARMAN International Industries, Incorporated       103     87     18%     20%
Diluted earnings per share       1.45     1.20     20%     22%
Restructuring & non-recurring costs       13     5            
Acquisition-related items       24     21            

Non-GAAP - operational1

                         
Gross profit       542     489     11%     11%
Percent of net sales       30.8%     30.0%            
SG&A       354     331     7%     7%
Operating income       187     158     19%     20%
Percent of net sales       10.7%     9.7%            
EBITDA       227     197     15%     16%
Percent of net sales       12.9%     12.1%            
Net Income attributable to HARMAN International Industries, Incorporated       134     107     25%     26%
Diluted earnings per share       1.87     1.48     27%     28%
Shares outstanding – diluted (in millions)       71     73            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Summary of Operations – Gross Margin and SG&A

On an operational basis, gross margin for the first quarter of fiscal year 2017 increased 80 basis points to 30.8 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base. Operational SG&A expense as a percent of net sales decreased 20 basis points to 20.1 percent compared to 20.3 percent in the prior year.

On a GAAP basis in the first quarter of fiscal year 2017, gross margin increased 90 basis points to 30.8 percent. SG&A expense as a percent of net sales increased 40 basis points to 22.2 percent compared to 21.8 percent in the prior year, primarily due to higher restructuring expenses.

Investor Call Today November 3, 2016

At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the first quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 410-1397 (U.S.) or +1 (303) 223-4381 (International) ten minutes before the call and reference HARMAN, Access Code: 21819781.

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 first quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT today.

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 Friday, February 3, 2017 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: 21819781. 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 (harman.com) designs and engineers connected products and solutions for automakers, consumers, and enterprises worldwide, including connected car systems, audio and visual products, enterprise automation solutions; and connected services. With leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, Mark Levinson® and Revel®, HARMAN is admired by audiophiles, musicians and the entertainment venues where they perform around the world. More than 25 million automobiles on the road today are equipped with HARMAN audio and connected car systems. The Company’s software services power billions of mobile devices and systems that are connected, integrated and secure across all platforms, from work and home to car and mobile. HARMAN has a workforce of approximately 30,000 people across the Americas, Europe, and Asia and reported sales of $7.0 billion during the 12 months ended September 30, 2016. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.

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

Forward-Looking Information

Except for historical information contained herein, the matters discussed in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the loss of one or more significant customers, the loss of a significant platform with an automotive customer or the in-sourcing of certain services by the Company’s automotive customers; (2) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (3) the Company’s ability to maintain profitability if there are delays in its product launches or increased pricing pressure from its customers; (4) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (5) the inability of the Company’s suppliers to deliver materials, parts and components including, without limitation, microchips and displays, at the scheduled rate and disruptions arising in connection therewith; (6) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (7) the Company’s failure to protect the security of its products and systems against cyber crime; (8) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (9) other risks detailed in the Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2016 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.

This earnings release also makes reference to the Company’s awarded business or “backlog”, which represents the estimated future lifetime net sales for all of the Company’s automotive customers. The Company's awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters. To validate these awards, the Company uses various assumptions including global vehicle production forecasts, customer take rates for the Company’s products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. The term “take rate” represents the number of units sold by the Company divided by an estimate of the total number of vehicles of a specific vehicle line produced during the same timeframe. The assumptions the Company uses to validate these awards are updated and reported externally on an annual basis.

APPENDIX

Connected Car

         
FY 2017 Key Figures – Connected Car       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
Net sales       797     755     6%     5%
Gross profit       198     178     11%     11%
Percent of net sales       24.8%     23.5%            
SG&A       103     91     14%     13%
Operating income       95     87     9%     9%
Percent of net sales       11.9%     11.5%            
EBITDA       115     106     9%     10%
Percent of net sales       14.5%     14.0%            
Restructuring & non-recurring costs       2     0            
Acquisition-related items       1     1            

Non-GAAP - operational1

                         
Gross profit       198     179     11%     11%
Percent of net sales       24.8%     23.7%            
SG&A       100     91     10%     10%
Operating income       98     88     11%     11%
Percent of net sales       12.2%     11.7%            
EBITDA       117     105     12%     12%
Percent of net sales       14.7%     13.9%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.
 

Net sales in the first quarter of fiscal 2017 were $797 million, an increase of six percent compared to the prior year. The increase in net sales was due to higher take rates and stronger production.

On an operational basis in the first quarter of fiscal 2017, gross margin increased 110 basis points to 24.8 percent compared to the prior year primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base. SG&A expense as a percent of net sales increased 60 basis points to 12.6 percent compared to the prior year to support growth in awarded business.

On a GAAP basis in the first quarter of fiscal 2017, gross margin increased 130 basis points to 24.8 percent compared to the prior year. SG&A expense as a percent of net sales increased 90 basis points to 12.9 percent compared to the prior year.

Connected Car Highlights

HARMAN secured new and follow-on awards to provide connected car solutions for customers including Audi, Geely, Maruti Suzuki, Mercedes Benz, Porsche and heavy truck manufacturer MAN. During the quarter, HARMAN launched embedded infotainment solutions in the Audi Q5, Land Rover Discovery, Porsche Panamera 4 E-Hybrid, Skoda Kodiaq and the Toyota C-HR.

The Company also began providing embedded infotainment solutions to the commercial truck market, launching solutions in VW Group’s MAN and Scania trucks. MAN’s Multimedia Truck (MMT) advanced infotainment system, developed by HARMAN, includes expanded telematics features including DAB+ (digital radio reception), hands free telephony and truck-specific navigation. The HARMAN system for Scania includes innovations such as dual mobile phone connectivity, real time navigation and connectivity to their fleet management system.

During the quarter, HARMAN and AT&T announced a strategic partnership to support the telematics ecosystem. AT&T selected HARMAN’s Telematics Control Unit (TCU) for its Mobile Broadband Accelerator program to enable rapid deployment of the pre-certified TCU solution.

HARMAN continues to receive accolades for its industry leadership. In September, HARMAN received an emerging technology award from CTIA wireless, a prominent industry association, for the Company’s pupil-based monitoring technology. Germany’s Connect Magazine named HARMAN-powered features as “best in category” for navigation system, voice control, smartphone connection, in-car hotspot, sound management, and best overall connected car solution for systems in Audi, BMW, Mercedes and Volkswagen vehicles.

Lifestyle Audio

         
FY 2017 Key Figures – Lifestyle Audio       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
Net sales       568     476     19%     19%
Gross profit       201     154     30%     30%
Percent of net sales       35.3%     32.4%            
SG&A       122     107     14%     14%
Operating income       79     47     67%     67%
Percent of net sales       13.8%     9.9%            
EBITDA       93     61     52%     52%
Percent of net sales       16.3%     12.8%            
Restructuring & non-recurring costs       3     3            
Acquisition-related items       5     5            

Non-GAAP - operational1

                         
Gross profit       201     155     30%     30%
Percent of net sales       35.4%     32.5%            
SG&A       115     100     15%     15%
Operating income       86     55     58%     58%
Percent of net sales       15.2%     11.5%            
EBITDA       95     64     50%     51%
Percent of net sales       16.8%     13.3%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Net sales in the first quarter of fiscal 2017 were $568 million, an increase of 19 percent on a nominal basis compared to the prior year, primarily due to higher consumer audio sales, reflecting strong demand for connected, smart audio products, and higher car audio sales due to higher take rates and stronger automotive production.

On an operational basis in the first quarter of fiscal 2017, gross margin improved 290 basis points to 35.4 percent compared to the prior year, primarily due to margin expansion in car audio as a result of operating leverage and manufacturing excellence. While research and development in car audio increased to support new awarded business, total SG&A expense as a percent of net sales decreased 70 basis points to 20.2 percent due to improved operating leverage on higher sales.

On a GAAP basis in the first quarter of fiscal 2017, gross margin improved 290 basis points to 35.3 percent compared to the prior year. SG&A expense as a percent of net sales decreased 100 basis points to 21.5 percent compared to the prior year.

Lifestyle Audio Highlights

During the quarter, HARMAN expanded its business with Ford, winning a global cross-car line award to supply B&O PLAY branded car audio systems. HARMAN also secured additional business awards with Lincoln vehicles (Revel), Maserati (Bowers & Wilkins) and Toyota (JBL). HARMAN launched car audio solutions in the Alfa Romeo (Harman Kardon), Lexus ES (Mark Levinson) and the Toyota Camry and C-HR (JBL). In addition, HARMAN launched HALOsonic and Advanced Transducer audio solutions in Mercedes AMG E class and AMG CLS class vehicles.

In September, HARMAN introduced 33 new products at the IFA consumer electronics trade show in Berlin, including the JBL E-Series BluetoothTM headphones and the JBL Reflect Contour Mini Bluetooth headphones.

The Company won EISA Design and Innovation awards for the AKG N90Q headphones, the JBL Reflect Mini Bluetooth headphones and the JBL Charge 3 Portable Bluetooth speaker. This fall, the Company also launched the JBL-Under Armour co-branded wireless heart rate monitoring headphones, the second product introduced as part of a strategic partnership between HARMAN and Under Armour.

HARMAN also introduced the JBL Playlist home audio speaker featuring Google CastTM Technology. JBL Playlist enables instant WiFi streaming directly from the cloud to the speaker without Bluetooth pairing, enabling better quality audio and providing access to roughly 200 streaming audio services such as Spotify and Pandora.

Professional Solutions

         
FY 2017 Key Figures – Professional Solutions       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
Net sales       240     247     (3%)     (2%)
Gross profit       94     102     (8%)     (8%)
Percent of net sales       39.2%     41.4%            
SG&A       82     77     7%     8%
Operating income       12     26     (55%)     (54%)
Percent of net sales       4.9%     10.4%            
EBITDA       19     34     (45%)     (44%)
Percent of net sales       7.9%     13.8%            
Restructuring & non-recurring costs       8     2            
Acquisition-related items       1     -            

Non-GAAP - operational1

                         
Gross profit       94     103     (8%)     (8%)
Percent of net sales       39.2%     41.6%            
SG&A       73     75     (2%)     (2%)
Operating income       21     28     (25%)     (24%)
Percent of net sales       8.7%     11.3%            
EBITDA       28     36     (23%)     (22%)
Percent of net sales       11.5%     14.5%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Net sales for the first quarter of fiscal 2017 were $240 million, a decrease of three percent (two percent ex-FX) compared to the prior year. On an operational basis in the first quarter of fiscal 2017, gross margin decreased 240 basis points to 39.2 percent compared to the prior year driven by product mix. SG&A expense as a percent of net sales increased 20 basis points to 30.5 percent compared to the prior year.

On a GAAP basis in the first quarter of fiscal 2017, gross margin decreased 220 basis points to 39.2 percent. SG&A expense as a percent of net sales increased 330 basis points to 34.3 percent compared to prior year primarily due to restructuring charges.

Professional Solutions Highlights

HARMAN’s entertainment and enterprise solutions were selected by eBay Corporation, Dubai Parks and Resorts, London Business School and the U.S. Presidential Inauguration to be held in January. Notable installations included the John F. Kennedy Center for the Performing Arts in Washington, D.C., the Phoenix Sky Harbor Airport and the U.S. Space and Naval Systems Command in San Diego. HARMAN’s solutions also powered a wide range of high-profile special events, music festivals, summer concert tours and televised award shows, including the Tony Award® winning musical Hamilton and the Metallica and Coldplay world tours.

HARMAN and IBM announced a strategic partnership bringing together HARMAN’s end-to-end solutions with IBM Watson’s cognitive computing capabilities. Together, HARMAN and IBM will integrate artificial intelligence and smart connectivity, enabling IoT in HARMAN’s audio, video and lighting products for enterprise applications. This collaboration has produced a successful pilot at Thomas Jefferson University Hospital in Philadelphia.

The division launched 19 new products during the quarter, several of which were recognized with innovation awards from industry experts.

Connected Services

         
FY 2017 Key Figures – Connected Services       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

 

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
Net sales       167     160     4%     6%
Gross profit       52     54     (4%)     (3%)
Percent of net sales       31.1%     33.9%            
SG&A       50     49     4%     4%
Operating income       2     6     (72%)     (69%)
Percent of net sales       0.9%     3.5%            
EBITDA       9     19     (53%)     (51%)
Percent of net sales       5.5%     12.0%            
Restructuring & non-recurring costs       1     -            
Acquisition-related items       17     14            

Non-GAAP - operational1

                         
Gross profit       52     54     (4%)     (3%)
Percent of net sales       31.1%     33.9%            
SG&A       32     34     (5%)     (4%)
Operating income       20     20     (3%)     0%
Percent of net sales       11.7%     12.6%            
EBITDA       22     23     (6%)     (4%)
Percent of net sales       13.0%     14.4%            
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.

Net sales in the first quarter of fiscal 2017 were $167 million, an increase of four percent (six percent ex-FX) due to higher demand for automotive services.

On an operational basis, gross margin declined 280 basis points to 31.1 percent primarily due to higher revenue recognition on high-margin engineering change orders in the prior year. SG&A expense as a percent of net sales decreased 200 basis points to 19.3 percent due to productivity improvements as a result of footprint migration initiatives related to the Company’s integration of Redbend OTA.

On a GAAP basis, gross margin decreased 280 basis points to 31.1 percent. SG&A expense as a percent of net sales declined 30 basis points to 30.1 percent.

Connected Services Highlights

HARMAN secured awards to provide software services for customers including Honeywell, Intel and Microsoft, among others. The Company also won a number of awards for its cloud-based Over-The-Air (OTA) software update technology from customers including Daimler and LG Electronics.

For the fourth straight year, Cisco Systems named HARMAN one of its top three software development partners at its Annual Supplier Appreciation Event, recognizing HARMAN’s commitment to innovation, execution and customer service.

HARMAN also continued to gain recognition for its industry leadership as an IoT services provider. The Company emerged as a top leader in the 2016 Zinnov Zones IoT ratings for both the Product Development Engineering and Software Platform Engineering and Management categories.

Other (Corporate)

         
FY 2017 Key Figures – Other       Three Months Ended September 30
              Increase (Decrease)
                           
$ millions (except per share data)

3M
FY17

3M
FY16

Including
Currency
Changes

   

Excluding
Currency
Changes1

                           
SG&A       36     34     3%     4%
Restructuring & non-recurring costs       (1)     -            
Acquisition-related items       -     1            

Non-GAAP - operational1

                         
SG&A       37     33     10%     10%
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. On an operational basis, Corporate SG&A as a percent of total net sales increased 10 basis points compared to the prior year. On a GAAP basis, Corporate SG&A as a percent of total net sales decreased 10 basis points compared to the prior year.

HARMAN International Industries, Incorporated

Consolidated Statements of Income

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

2016

   

2015

Net sales       $1,759,522     $1,630,888
Cost of sales       1,218,251     1,143,490
Gross profit       541,271     487,398
Selling, general and administrative expenses       390,460     355,931
Operating income       150,811     131,467
Other expenses:              
Interest expense, net       9,324     8,259
Foreign exchange gains, net       (967)     (1,845)
Miscellaneous, net       2,895     3,987
Income before income taxes       139,559     121,066
Income tax expense, net       37,423     33,549
Equity in income of unconsolidated subsidiaries       (981)     -
Net income       103,117     87,517
Net income attributable to non-controlling interest       -     418
Net income attributable to HARMAN International Industries, Incorporated      

103,117

   

87,099

Earnings per share:              
Basic       $1.45     $1.21
Diluted       $1.45     $1.20
Weighted average shares outstanding:              
Basic       70,889     72,032
Diluted       71,358     72,556
         

HARMAN International Industries, Incorporated

Consolidated Balance Sheets

               
(In thousands; unaudited)       September 30,     June 30,
       

2016

   

2016

ASSETS              
Current Assets              
Cash and cash equivalents       $511,705     $602,300
Receivables, net       1,162,461     1,122,920
Inventories       831,900     706,084
Other current assets       527,048     487,151
Total current assets       3,033,114     2,918,455
Property, plant and equipment, net       595,256     593,290
Intangible assets, net       461,843     476,284
Goodwill       1,511,380     1,510,279
Deferred tax assets, net       135,643     140,181
Other assets       426,614     409,380
Total assets      

$6,163,850

   

$6,047,869

               
LIABILITIES AND EQUITY              
Current liabilities              
Current portion of long-term debt       $59,715     $86,641
Short-term debt       1,226     -
Accounts payable       940,389     867,279
Accrued liabilities       708,210     670,746
Accrued warranties       185,124     178,367
Income taxes payable       37,223     28,773
Total current liabilities       1,931,887     1,831,806
Borrowings under revolving credit facility       483,000     523,000
Long-term debt       791,568     787,333
Pension liability       217,657     216,016
Other non-current liabilities       230,978     237,241
Total liabilities       3,655,090     3,595,396
Total equity       2,508,760     2,452,473
Total liabilities and equity      

$6,163,850

   

$6,047,869

   

HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

         
(In thousands except earnings per share data; unaudited)       Three Months Ended September 30, 2016
                     
       

GAAP

   

Adjustments

   

Non-GAAP - Operational

Net sales       $1,759,522     $0     $1,759,522
Cost of sales       1,218,251     (688)a     1,217,563
Gross profit       541,271     688     541,959
Selling, general and administrative expenses       390,460     (35,998)b     354,462
Operating income       150,811     36,686     187,497
Other expenses:                    
Interest expense, net       9,324     -     9,324
Foreign exchange gains, net       (967)     -     (967)
Miscellaneous, net       2,895     (969)     1,926
Income before income taxes       139,559     37,655     177,214
Income tax expense, net       37,423     7,180c     44,603
Equity in income of unconsolidated subsidiaries       (981)     -     (981)
Net income       103,117     30,475     133,592
Net income attributable to HARMAN International Industries, Incorporated      

$103,117

   

$30,475

   

$133,592

Earnings per share:                    
Basic       $1.45     $0.43     $1.88
Diluted       $1.45     $0.43     $1.87
Weighted average shares outstanding:                    
Basic       70,889           70,889
Diluted       71,358           71,358
a)   Restructuring expense in Cost of Sales was $0.7 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $11.9 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; acquisition-related expenses were $23.7 million, including $11.8 million of intangible amortization expenses; other non-recurring expense included in SG&A was $0.4 million, which primarily relates to incremental costs incurred related to productivity improvement initiatives.
c) The tax benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.
 

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

 

 HARMAN International Industries, Incorporated

Consolidated Statement of Income

Reconciliation of GAAP to Non-GAAP Results

         
(In thousands except earnings per share data; unaudited)       Three Months Ended September 30, 2015
                     
       

GAAP

   

Adjustments

   

Non-GAAP - Operational

Net sales       $1,630,888     $0     $1,630,888
Cost of sales       1,143,490     (1,679)a     1,141,811
Gross profit       487,398     1,679     489,077
Selling, general and administrative expenses       355,931     (24,781)b     331,150
Operating income       131,467     26,460     157,927
Other expenses:                    
Interest expense, net       8,259     -     8,259
Foreign exchange gains, net       (1,845)     -     (1,845)
Miscellaneous, net       3,987     (1,225)     2,762
Income before income taxes       121,066     27,685     148,751
Income tax expense, net       33,549     7,759c     41,308
Net income       87,517     19,926     107,443
Net income attributable to non-controlling interest       418     -     418
Net income attributable to HARMAN International Industries, Incorporated      

$87,099

   

$19,926

   

$107,025

Earnings per share:                    
Basic       $1.21     $0.28     $1.49
Diluted       $1.20     $0.27     $1.48
Weighted average shares outstanding:                    
Basic       72,032           72,032
Diluted       72,556           72,556
a)   Restructuring expense in Cost of Sales was $1.7 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was a credit of $0.5 million due to revised cost estimates related to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $4.0 million. Acquisition-related expenses were $21.3 million, including $16.2 million of intangible amortization expenses.
c) The tax (expense) benefits are calculated by multiplying the actual restructuring / non-recurring charge in each individual country by the discrete tax rate within that specific country.
 

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

 

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of GAAP to Non-GAAP Results

Foreign Currency Translation Impact

               
(In thousands; unaudited)       Three Months Ended September 30,     Increase / (Decrease)
               
        2016     2015      
Net sales - nominal currency       $1,759,522     $1,630,888     8%
Effects of foreign currency translation (1)            

(705)

     
Net sales - local currency       $1,759,522     $1,630,183     8%
                     
Gross profit - nominal currency       $541,271     $487,398     11%
Effects of foreign currency translation (1)            

(1,283)

     
Gross profit - local currency       $541,271     $486,115     11%
                     
SG&A - nominal currency       $390,460     $355,931     10%
Effects of foreign currency translation (1)            

(59)

     
SG&A - local currency       $390,460     $355,872     10%
                     
Operating income - nominal currency       $150,811     $131,467     15%
Effects of foreign currency translation (1)            

(1,224)

     
Operating income - local currency       $150,811     $130,243     16%
                     
Net income attributable to HARMAN International Industries, Incorporated - nominal currency       $103,117     $87,099     18%
Effects of foreign currency translation (1)            

(1,228)

     
Net income attributable to HARMAN International Industries, Incorporated - local currency       $103,117     $85,871     20%
                     
(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 these consolidated financial statements with a better understanding of the Company’s performance. Because changes in currency exchange rates affect its reported financial results, the Company shows the rates of change both including and excluding the effect of these changes in exchange rates. The Company encourages readers of its financial statements to evaluate its financial performance excluding the impact of foreign currency translation. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. This measurement should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.

 

HARMAN International Industries, Incorporated

Selected Financial Data

Reconciliation of Non-GAAP Results

Foreign Currency Translation Impact

               

EXCLUDING restructuring and non-recurring charges

(In thousands; unaudited)

      Three Months Ended September 30,     Increase / (Decrease)
               
       

2016

   

2015

     
Net sales - nominal currency       $1,759,522     $1,630,888     8%
Effects of foreign currency translation (1)            

(705)

     
Net sales - local currency       $1,759,522     $1,630,183     8%
                     
Gross profit - nominal currency       $541,959     $489,077     11%
Effects of foreign currency translation (1)            

(1,279)

     
Gross profit - local currency       $541,959     $487,798     11%
                     
SG&A - nominal currency       $354,462     $331,150     7%
Effects of foreign currency translation (1)            

(41)

     
SG&A - local currency       $354,462     $331,109     7%
                     
Operating income - nominal currency       $187,497     $157,927     19%
Effects of foreign currency translation (1)            

(1,238)

     
Operating income - local currency       $187,497     $156,689     20%
                     
Net income attributable to HARMAN International Industries, Incorporated - nominal currency       $133,592     $107,025     25%
Effects of foreign currency translation (1)            

(1,240)

     
Net income attributable to HARMAN International Industries, Incorporated - local currency       $133,592     $105,785     26%
                     
(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

Reconciliation of GAAP to Non-GAAP Results

             
(In thousands, except earnings per share data; unaudited)     Three Months Ended September 30, 2016     Three Months Ended September 30, 2015
                                     
     

GAAP

   

Adjustments

   

Non-GAAP - Operational

   

GAAP

   

Adjustments

   

Non-GAAP - Operational

HARMAN                                    
Operating income     150,811     36,686     187,497     131,467     26,460     157,927
Depreciation & Amortization     51,188     (11,887)     39,301     56,838     (18,241)     38,597
EBITDA     201,999     24,799     226,798     188,305     8,219     196,524
CONNECTED CAR                                    
Operating income     94,918     2,703     97,621     87,219     1,046     88,265
Depreciation & Amortization     20,446     (878)     19,568     18,402     (1,836)     16,566
EBITDA     115,364     1,825     117,189     105,621     (790)     104,831
LIFESTYLE AUDIO                                    
Operating income     78,682     7,732     86,414     47,253     7,542     54,795
Depreciation & Amortization     13,954     (4,977)     8,977     13,835     (5,128)     8,707
EBITDA     92,636     2,755     95,391     61,088     2,414     63,502
PROFESSIONAL SOLUTIONS                                    
Operating income     11,682     9,294     20,976     25,685     2,184     27,869
Depreciation & Amortization     7,256     (584)     6,672     8,504     (638)     7,866
EBITDA     18,938     8,710     27,648     34,189     1,546     35,735
CONNECTED SERVICES                                    
Operating income     1,563     18,019     19,582     5,631     14,473     20,104
Depreciation & Amortization     7,554     (5,448)     2,106     13,631     (10,638)     2,993
EBITDA     9,117     12,571     21,688     19,262     3,835     23,097
 

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

 

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 3 Months Ended September 30, 2016

                                     
(In thousands; unaudited)     Connected Car     Lifestyle Audio     Professional Solutions     Connected Services     Eliminations and Other     HARMAN
Net Trade Sales     $797,101     $567,692     $239,740     $154,989     $0     $1,759,522
Intercompany Sales     16     690     483     11,682     (12,871)     -
Net Sales     797,117     568,382     240,223     166,671     (12,871)     1,759,522
                       

Harman International Industries, Incorporated

Intercompany Revenue Reconciliation, 3 Months Ended September 30, 2015

                                     
(In thousands; unaudited)     Connected Car     Lifestyle Audio     Professional Solutions     Connected Services     Eliminations and Other     HARMAN
Net Trade Sales     $755,483     $475,541     $246,333     $153,492     $39     $1,630,888
Intercompany Sales     0     530     773     6,420     (7,723)     -
Net Sales     755,483     476,071     247,106     159,912     (7,684)     1,630,888
                       

HARMAN International Industries, Incorporated

Total Liquidity Reconciliation

       
Total Company Liquidity     September 30, 2016
$ millions      
Cash & cash equivalents     $512
Available credit under Revolving Credit Facility     713
Total Liquidity     $1,225

Contacts

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

Contacts

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