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Share Name | Share Symbol | Market | Type |
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Harman International Industries, Incorporated | NYSE:HAR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 111.50 | 0 | 01:00:00 |
HARMAN International Industries, Incorporated (NYSE:HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the third quarter ended March 31, 2016.
This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160428005568/en/
Net sales for the third quarter were $1.6 billion, an increase of 11 percent compared to the prior year or 12 percent excluding the impact of foreign currency translation (ex-FX). Connected Car net sales increased five percent (six percent ex-FX) primarily due to higher take rates. Lifestyle Audio net sales increased 11 percent (12 percent ex-FX) due to the acquisition of Bang & Olufsen Automotive, higher car audio take rates and higher consumer audio sales. Net sales in Professional Solutions decreased four percent (three percent ex-FX) mainly due to lower demand in Brazil and certain European markets, as well as channel rationalization to support a solutions-based go-to-market structure. Connected Services net sales were $166 million compared to $67 million in the prior year, primarily due to the expansion of the Company’s services portfolio as a result of the acquisition of Symphony Teleca (STC).
On a GAAP basis, third quarter operating income increased 48 percent to $135 million compared to $92 million in the prior year and EBITDA increased 41 percent to $186 million compared to $132 million in the prior year. Earnings per diluted share increased 23 percent to $1.22 compared to $0.99 in the prior year. The Company recorded $13 million of restructuring, non-recurring charges and acquisition-related items compared to $23 million in the prior year. The decrease was primarily due to lower restructuring costs compared to the prior year.
Excluding restructuring, non-recurring charges and acquisition-related items, third quarter operating income increased 30 percent to $148 million compared to $114 million in the prior year, and EBITDA increased 26 percent to $189 million compared to $150 million in the prior year. Earnings per diluted share were $1.36 compared to $1.22 in the prior year.
“For the 12th consecutive quarter, HARMAN has delivered top and bottom line growth, and in the quarter, we grew EBITDA 26 percent year-over-year. Our Connected Car and Lifestyle Audio divisions, which represent approximately 75 percent of our revenue, continue to deliver strong results. In our Professional Solutions division, we are taking decisive actions to improve performance and better position HARMAN for growth,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO.
“HARMAN is capitalizing on the robust demand for seamless, secure connectivity across the full vehicle market. On top of the record $6.2 billion in automotive awards we announced in fiscal 2015, I am very pleased with the additional $3.5 billion of new automotive awards secured year-to-date, including a breakthrough display audio infotainment award.”
FY 2016 Key Figures – Total Company Three Months Ended March 31 Nine Months Ended March 31Increase(Decrease)
Increase(Decrease)
$ millions (except per share data) 3M FY16 3M FY15IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16 9M FY15IncludingCurrencyChanges
ExcludingCurrencyChanges1
Net sales 1,628 1,464 11% 12% 5,031 4,477 12% 18% Gross profit 493 418 18% 19% 1,525 1,326 15% 20% Percent of net sales 30.3% 28.6% 30.3% 29.6% SG&A 358 327 9% 11% 1,099 970 13% 18% Operating income 135 92 48% 48% 426 356 20% 23% Percent of net sales 8.3% 6.2% 8.5% 8.0% EBITDA 186 132 41% 42% 592 471 26% 30% Percent of net sales 11.4% 9.0% 11.8% 10.5% Net Income attributable to HARMAN International Industries, Incorporated 89 70 26% 25% 289 270 7% 10% Diluted earnings per share 1.22 0.99 23% 22% 3.98 3.83 4% 7% Restructuring & non-recurring costs 12 13 32 32 Acquisition-related items 1 10 34 15Non-GAAP - operational1
Gross profit 495 422 17% 18% 1,531 1,318 16% 21% Percent of net sales 30.4% 28.8% 30.4% 29.4% SG&A 347 308 13% 14% 1,038 914 14% 18% Operating income 148 114 30% 30% 492 404 22% 27% Percent of net sales 9.1% 7.8% 9.8% 9.0% EBITDA 189 150 26% 27% 611 511 19% 24% Percent of net sales 11.6% 10.2% 12.1% 11.4% Net Income attributable to HARMAN International Industries, Incorporated 99 87 14% 13% 340 305 12% 16% Diluted earnings per share 1.36 1.22 11% 10% 4.69 4.33 8% 12% Shares outstanding – diluted (in millions) 73 71 73 70 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Summary of Operations – Gross Margin and SG&A (Non-GAAP)
Gross margin for the third quarter of fiscal year 2016 increased 160 basis points to 30.4 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base and productivity initiatives.
In the third quarter of fiscal year 2016, SG&A expense as a percentage of net sales increased 30 basis points to 21.3 percent compared to 21.0 percent in the prior year due to higher selling and marketing expenses.
2016 Guidance Update
HARMAN updated its financial outlook for fiscal 2016. The Company now forecasts fiscal 2016 revenue of approximately $6.825 billion and operational earnings per share of $6.20. The majority of the revenue and EPS reduction is related to weakness in the Professional Solutions division as well as supply constraints as a result of the recent earthquakes in Japan.
August 2015 April 20161 Revenue ~$7.0 billion ~$6.825 billion EPS2 ~$6.50 ~$6.201. Includes the previously announced $0.05 reduction for the impact of the TowerSec acquisition.
2. Non-GAAP, excluding restructuring, non-recurring items, and purchase accounting expenses related to acquisitions.Investor Call Today April 28, 2016
At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the third quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (888) 224-7971 (U.S.) or +1 (303) 223-2684 (International) ten minutes before the call and reference HARMAN, Access Code: 21809222.
In addition, HARMAN invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal third quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT 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, July 29, 2016 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: 21809222. 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 29,000 people across the Americas, Europe, and Asia and reported sales of $6.7 billion during the 12 months ended March 31, 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 presentation 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 if there are delays in its product launches or increased pricing pressure from its customers; (2) 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; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) 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; (5) the inability of the Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (6) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (7) the Company’s ability to integrate successfully its recently completed and future acquisitions; (8) the Company’s ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for its critical organizational positions; (9) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (10) other risks detailed in the Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2015 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 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.
APPENDIX
Connected Car
FY 2016 Key Figures – Connected Car Three Months Ended March 31 Nine Months Ended March 31Increase (Decrease)
Increase (Decrease)
$ millions (except per share data) 3M FY16 3M FY15IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16 9M FY15IncludingCurrencyChanges
ExcludingCurrencyChanges1
Net sales 767 730 5% 6% 2,259 2,153 5% 11% Gross profit 202 164 23% 23% 562 503 12% 17% Percent of net sales 26.3% 22.5% 24.9% 23.4% SG&A 106 91 17% 18% 295 280 5% 13% Operating income 96 74 30% 29% 267 223 20% 22% Percent of net sales 12.5% 10.1% 11.8% 10.4% EBITDA 115 91 27% 27% 324 275 18% 21% Percent of net sales 15.0% 12.4% 14.4% 12.8% Restructuring & non-recurring costs 2 1 5 5 Acquisition-related items 1 - 3 -Non-GAAP - operational1
Gross profit 203 165 23% 23% 566 507 12% 17% Percent of net sales 26.4% 22.7% 25.0% 23.6% SG&A 104 91 14% 16% 291 279 4% 12% Operating income 98 74 32% 31% 275 228 20% 23% Percent of net sales 12.8% 10.2% 12.2% 10.6% EBITDA 116 90 29% 28% 326 276 18% 21% Percent of net sales 15.2% 12.3% 14.4% 12.8% 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Net sales in the third quarter of fiscal 2016 were $767 million, an increase of five percent (six percent ex-FX) compared to the prior year. The increase in net sales was due to higher take rates.
On a non-GAAP basis in the third quarter of fiscal 2016, gross margin increased 370 basis points to 26.4 percent compared to the prior year primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base, lower warranty costs and supplier productivity. SG&A expenses as a percent of sales increased 110 basis points to 13.6 percent compared to the prior year due to higher information technology costs to support future business.
Connected Car Highlights
HARMAN continues to expand and diversify its Connected Car offerings with global automakers. The Company secured embedded infotainment business with a new North American customer to provide a display audio solution across multiple car lines. HARMAN won a global expansion award from a European OEM to support higher take rates, as well a platform refresh for 2017 vehicles. In addition, the Company received a follow-on award to expand the next generation integrated telematics program for Daimler.
HARMAN launched embedded infotainment solutions in a number of new vehicles, including the Audi Q2 crossover, the Seat (VW) Alteca SUV and Maserati (FCA) Levante supercar. In Japan, HARMAN launched an embedded infotainment system featuring Apple CarPlay on the new Suzuki Ignis. The Company also launched model refreshes and line extensions featuring its embedded infotainment solutions in the Porsche Macan, 911, and 718 Boxster, as well as the Mercedes Benz C-class convertible, GLC Coupe and AMG GLC43.
HARMAN continued to reinforce its leadership in technology innovations that advance connectivity, driver safety, and autonomous driving. During the Geneva Motor Show, HARMAN demonstrated its full suite of connected car technologies through the LIVS (Life-enhancing Intelligent Vehicle System) automotive compute platform. The Company also expanded its partnership with NXP to add V2X support, which allows ADAS alerts to be delivered to vehicles from other cars and surrounding infrastructure to warn drivers about potentially hazardous traffic situations.
In March, HARMAN completed the acquisition of TowerSec, a leading global provider of automotive cybersecurity solutions. TowerSec’s products, featuring intrusion detection and prevention systems as well as secure telematics offerings, will be integrated into HARMAN’s “5+1” cybersecurity framework.
Lifestyle Audio
FY 2016 Key Figures – Lifestyle Audio Three Months Ended March 31 Nine Months Ended March 31Increase(Decrease)
Increase(Decrease)
$ millions (except per share data)3M FY16
3M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16
9M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
Net sales 473 424 11% 12% 1,560 1,350 16% 20% Gross profit 167 133 26% 27% 522 442 18% 22% Percent of net sales 35.4% 31.3% 33.5% 32.8% SG&A 107 88 21% 22% 331 294 13% 18% Operating income 61 45 36% 37% 191 148 29% 30% Percent of net sales 12.8% 10.5% 12.3% 11.0% EBITDA 74 56 33% 34% 232 178 30% 32% Percent of net sales 15.7% 13.2% 14.9% 13.2% Restructuring & non-recurring costs 1 7 7 19 Acquisition-related items 2 1 12 4Non-GAAP - operational1
Gross profit 168 135 24% 25% 523 434 21% 25% Percent of net sales 35.5% 31.8% 33.5% 32.1% SG&A 104 83 26% 27% 314 262 20% 24% Operating income 64 52 23% 23% 210 172 22% 26% Percent of net sales 13.5% 12.3% 13.4% 12.7% EBITDA 72 61 18% 19% 235 199 18% 21% Percent of net sales 15.3% 14.4% 15.1% 14.7% 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Net sales in the third quarter of fiscal 2016 were $473 million, an increase of 11 percent (12 percent ex-FX) compared to the prior year primarily due to the acquisition of Bang & Olufsen Automotive, higher car audio take rates and higher consumer audio sales.
On a non-GAAP basis in the third quarter of fiscal 2016, gross margin improved by 370 basis points to 35.5 percent compared to the prior year, primarily due to improved operating leverage as a result of higher sales volume, the acquisition of Bang & Olufsen Automotive and supplier productivity. SG&A expenses as a percentage of sales increased 250 basis points to 22.0 percent primarily due to higher research and development to support new car audio awards.
Lifestyle Audio Highlights
HARMAN won new business awards with Lincoln, Toyota and Subaru. During the quarter, the Company launched branded car audio solutions in the Maserati Levante (Harman Kardon / Bowers & Wilkins), the Lincoln MKZ (Revel), the new Alfa Romeo Giulia (Harman Kardon) and the Ferrari GTC 4 Lusso (JBL Pro).
HARMAN inaugurated a new global development center in Suzhou, China. The center is now the Company’s largest comprehensive research and development center for car audio products worldwide.
The Company entered into a multi-year agreement with Lufthansa to supply award-winning AKG branded active noise cancelling headphones for all business class seats beginning in September 2016. This quarter, HARMAN’s Consumer Audio products were again recognized for their design and innovation, winning a record 23 Red Dot awards.
Professional Solutions
FY 2016 Key Figures – Professional Solutions Three Months Ended March 31 Nine Months Ended March 31Increase(Decrease)
Increase(Decrease)
$ millions (except per share data)3M FY16
3M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16
9M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
Net sales 232 242 (4%) (3%) 728 764 (5%) (2%) Gross profit 78 100 (23%) (22%) 283 315 (10%) (8%) Percent of net sales 33.5% 41.5% 38.9% 41.3% SG&A 75 84 (11%) (10%) 231 240 (4%) (1%) Operating income 3 16 (83%) (83%) 52 75 (30%) (28%) Percent of net sales 1.1% 6.6% 7.2% 9.8% EBITDA 12 24 (52%) (51%) 79 100 (21%) (19%) Percent of net sales 5.0% 10.0% 10.8% 13.1% Restructuring & non-recurring costs 4 6 11 8Non-GAAP - operational1
Gross profit 78 101 (22%) (21%) 284 312 (9%) (6%) Percent of net sales 33.7% 41.5% 39.0% 40.8% SG&A 71 79 (10%) (9%) 220 229 (4%) (1%) Operating income 7 22 (67%) (67%) 64 83 (23%) (21%) Percent of net sales 3.1% 9.0% 8.7% 10.9% EBITDA 15 30 (48%) (48%) 88 108 (18%) (16%) Percent of net sales 6.6% 12.3% 12.1% 14.1% 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Net sales in the third quarter of fiscal 2016 were $232 million, a decrease of four percent (a decrease of three percent ex-FX) compared to the prior year. The decrease in net sales is primarily due to lower demand in Brazil and certain European markets, as well as channel rationalization to support a solutions-based go-to-market structure.
On a non-GAAP basis in the third quarter of fiscal 2016, gross margin decreased 780 basis points to 33.7 percent, driven by discounts on older inventory and to partially offset foreign currency impacts. In addition, the Company incurred incremental costs associated with migrating manufacturing to Hungary and reduced operating leverage as a result of lower sales. SG&A expense as a percentage of sales decreased 190 basis points to 30.6 percent compared to 32.5 percent in the prior year, driven by tighter expense controls.
Professional Solutions Highlights
HARMAN’s entertainment and enterprise solutions were selected by leading system integrators and installers around the world. Notable installations included Norwegian Cruise Line’s The Pride of America and Raymond James Stadium in Tampa Bay. The Company’s enterprise solutions were installed in meeting rooms across the globe for customers including eBay and Societe Generale. The Company’s solutions also powered a wide range of high-profile special events, music festivals and televised award shows, including the Super Bowl 50 Halftime Show and the 58th Annual Grammy Awards.
Connected Services
FY 2016 Key Figures – Connected Services Three Months Ended March 31 Nine Months Ended March 31Increase (Decrease)
Increase(Decrease)
$ millions (except per share data)3M FY16
3M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16
9M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
Net sales 166 67 147% 159% 509 208 144% 177% Gross profit 48 21 131% 138% 162 63 155% 184% Percent of net sales 28.7% 30.7% 31.7% 30.4% SG&A 36 14 150% 157% 140 36 283% 314% Operating income 12 6 87% 96% 22 27 (19%) (6%) Percent of net sales 7.1% 9.4% 4.3% 12.9% EBITDA 18 8 135% 146% 57 29 94% 125% Percent of net sales 11.0% 11.6% 11.2% 14.1% Restructuring & non-recurring costs 3 - 8 - Acquisition-related items (1) - 22 -Non-GAAP - operational1
Gross profit 48 21 131% 138% 162 63 155% 184% Percent of net sales 28.7% 30.7% 31.7% 30.4% SG&A 34 14 135% 142% 109 36 199% 224% Operating income 14 6 121% 131% 52 27 94% 125% Percent of net sales 8.4% 9.4% 10.3% 12.9% EBITDA 18 8 132% 143% 63 29 115% 148% Percent of net sales 10.9% 11.6% 12.4% 14.1% 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Net sales in the third quarter of fiscal 2016 were $166 million compared to $67 million in the prior year, driven primarily by the expansion of the Company’s services portfolio. On a non-GAAP basis, gross margin was 28.7 percent and SG&A expenses as a percentage of sales were 20.3 percent.
Connected Services Highlights
HARMAN secured business to provide product development services for Blackberry, British Telecom, Intel and Sony, among others. In addition, the Company continued to capitalize on its industry-leading over-the-air (OTA) software update technology, winning a cross-car line award with a global automaker. Over the air updates are the foundation technology for the connected car, allowing automakers to quickly enable new features, fix bugs, upgrade firmware, and offer a rich suite of end-to-end services.
In conjunction with the HARMAN Service Delivery Platform, the Company introduced its Automotive Service Provider Program. The program facilitates the integration of a variety of enterprise and vehicle-centric applications and services from leading providers. HARMAN added 10 new data, workflow and content service providers for its open platform, which enables automakers to provide a wide range of context-based services, including real-time traffic, location based services, shopping, parking, streaming audio and live news.
HARMAN also received a number of industry accolades for its products and services. Respected advisory firm Zinnov recognized the Company for the second time, naming HARMAN a top engineering services provider. HARMAN was placed in the “Leadership Zone” for the Information Services, New Media and Gaming categories. HfS Research also honored HARMAN with a place in its “Winner’s Circle”, recognizing the Company’s excellence in software product engineering services.
Other (Corporate)
FY 2016 Key Figures – Other
Three Months Ended March 31
Nine Months Ended March 31
Increase (Decrease)
Increase(Decrease)
$ millions (except per share data)3M FY16
3M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
9M FY16
9M FY15
IncludingCurrencyChanges
ExcludingCurrencyChanges1
SG&A 36 49 (28%) (28%) 107 119 (10%) (10%) Restructuring & non-recurring costs 1 - 1 - Acquisition-related items - 9 (2) 12 Non-GAAP - operational1 SG&A 35 40 (12%) (12%) 108 107 1% 1% 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release.Other (Corporate) SG&A expenses include compensation, benefit and occupancy costs for corporate employees, new technology innovation and expenses associated with the Company’s brand identity campaign. On a non-GAAP basis, Corporate SG&A as a percentage of total Company net sales decreased 60 basis points to 2.2 percent.
HARMAN International Industries, Incorporated
Consolidated Statements of Income
(In thousands, except earnings per share data; unaudited)Three Months EndedMarch 31,
Nine Months EndedMarch 31,
2016
2015
2016
2015
Net sales $1,628,082 $1,464,193 $5,031,127 $4,476,664 Cost of sales 1,135,215 1,046,063 3,505,770 3,150,736 Gross profit 492,867 418,130 1,525,357 1,325,928 Selling, general and administrative expenses 357,514 326,623 1,099,384 969,881 Operating income 135,353 91,507 425,973 356,047 Other expenses: Interest expense, net 8,633 3,001 24,558 7,861 Foreign exchange losses (gains), net 3,570 (3,406) 2,612 (4,366) Miscellaneous, net 2,912 2,294 11,262 6,932 Income before income taxes 120,238 89,618 387,541 345,620 Income tax expense, net 31,419 19,346 98,019 76,250 Equity in net loss of unconsolidated subsidiaries - 23 - 23 Net income 88,819 70,249 289,522 269,347 Net (loss) income attributable to non-controlling interest (5) (46) 702 (156) Net income attributable to HARMAN International Industries, Incorporated88,824
70,295
288,820
269,503
Earnings per share: Basic $1.23 $1.00 $4.01 $3.87 Diluted $1.22 $0.99 $3.98 $3.83 Weighted average shares outstanding: Basic 72,020 69,946 72,046 69,557 Diluted 72,642 70,795 72,524 70,322HARMAN International Industries, Incorporated
Consolidated Balance Sheets
(In thousands; unaudited) March 31, June 30,2016
2015
ASSETS Current Assets Cash and cash equivalents $360,420 $649,513 Receivables, net 1,087,327 1,024,139 Inventories 840,216 693,574 Other current assets 502,943 461,366 Total current assets 2,790,906 2,828,592 Property, plant and equipment, net 576,788 552,421 Intangible assets, net 496,289 669,667 Goodwill 1,426,202 1,287,180 Deferred tax assets, long-term, net 116,212 100,032 Other assets 382,000 428,008 Total assets$5,788,397
$5,865,900
LIABILITIES AND EQUITY Current liabilities Current portion of long-term debt $4,227 $4,550 Short-term debt 812 1,021 Accounts payable 781,962 918,910 Accrued liabilities 673,371 907,024 Accrued warranties 173,479 163,331 Income taxes payable 29,022 76,131 Total current liabilities 1,662,873 2,070,967 Borrowings under revolving credit facility 483,000 283,125 Long-term debt 803,809 797,542 Pension liability 189,259 186,662 Other non-current liabilities 174,865 134,778 Total liabilities 3,313,806 3,473,074 Total HARMAN International Industries, Incorporated shareholders' equity 2,474,573 2,374,613 Noncontrolling interest 18 18,213 Total equity 2,474,591 2,392,826 Total liabilities and equity$5,788,397
$5,865,900
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) Three Months Ended March 31, 2016GAAP
Adjustments
Non-GAAP - Operational
Net sales $1,628,082 $0 $1,628,082 Cost of sales 1,135,215 (2,213)a 1,133,002 Gross profit 492,867 2,213 495,080 Selling, general and administrative expenses 357,514 (10,666)b 346,848 Operating income 135,353 12,879 148,232 Other expenses: Interest expense, net 8,633 - 8,633 Foreign exchange losses (gains), net 3,570 (1) 3,569 Miscellaneous, net 2,912 (408) 2,504 Income before income taxes 120,238 13,288 133,526 Income tax expense, net 31,419 3,482c 34,901 Net income 88,819 9,806 98,625 Net income attributable to non-controlling interest (5) - (5) Net income attributable to HARMAN International Industries, Incorporated$88,824
$9,806
$98,630
Earnings per share: Basic $1.23 $0.14 $1.37 Diluted $1.22 $0.13 $1.36 Weighted average shares outstanding: Basic 72,020 72,020 Diluted 72,642 72,642a) Restructuring expense in Cost of Sales was $2.2 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $3.4 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $7.3 million. Acquisition-related expenses were $1.2 million, including $7.9 million of intangible amortization expenses.
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 non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) Nine Months Ended March 31, 2016GAAP
Adjustments
Non-GAAP - Operational
Net sales $5,031,127 $0 $5,031,127 Cost of sales 3,505,770 (5,214)a 3,500,556 Gross profit 1,525,357 5,214 1,530,571 Selling, general and administrative expenses 1,099,384 (60,963)b 1,038,421 Operating income 425,973 66,177 492,150 Other expenses: Interest expense, net 24,558 - 24,558 Foreign exchange losses (gains), net 2,612 (1) 2,611 Miscellaneous, net 11,262 (3,545) 7,717 Income before income taxes 387,541 69,723 457,264 Income tax expense, net 98,019 18,668c 116,687 Equity in net loss of unconsolidated subsidiaries - - - Net income 289,522 51,055 340,577 Net income attributable to non-controlling interest 702 - 702 Net income attributable to HARMAN International Industries, Incorporated$288,820
$51,055
$339,875
Earnings per share: Basic $4.01 $0.71 $4.72 Diluted $3.98 $0.70 $4.69 Weighted average shares outstanding: Basic 72,046 72,046 Diluted 72,524 72,524
a) Restructuring expense in Cost of Sales was $5.2 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $6.5 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $54.5 million. Acquisition-related expenses were $34.4 million, including $41.2 million of intangible amortization expenses.
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 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 March 31, 2015GAAP
Adjustments
Non-GAAP - Operational
Net sales $1,464,193 $0 $1,464,193 Cost of sales 1,046,063 (3,599)a 1,042,464 Gross profit 418,130 3,599 421,729 Selling, general and administrative expenses 326,623 (18,999)b 307,624 Operating income 91,507 22,598 114,105 Other expenses: Interest expense, net 3,001 - 3,001 Foreign exchange losses (gains), net (3,406) - (3,406) Miscellaneous, net 2,294 - 2,294 Income before income taxes 89,618 22,598 112,216 Income tax expense, net 19,346 6,170c 25,516 Equity in loss of unconsolidated subsidiary 23 - 23 Net income 70,249 16,428 86,677 Net income attributable to non-controlling interest (46) - (46) Net income attributable to HARMAN International Industries, Incorporated$70,295
$16,428
$86,723
Earnings per share: Basic $1.00 $0.23 $1.24 Diluted $0.99 $0.23 $1.22 Weighted average shares outstanding: Basic 69,946 69,946 Diluted 70,795 70,795a) Restructuring expense in Cost of Sales was $3.6 million for projects to increase manufacturing productivity.
b) Restructuring expense in SG&A was $11.2 million primarily due to projects to increase productivity in engineering, manufacturing and administrative functions; other non-recurring expense included in SG&A was $7.8 million including M&A deal related expenses.
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 non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.
HARMAN International Industries, Incorporated
Consolidated Statement of Income
Reconciliation of GAAP to Non-GAAP Results
(In thousands except earnings per share data; unaudited) Nine Months Ended March 31, 2015GAAP
Adjustments
Non-GAAP - Operational
Net sales $4,476,664 $0 $4,476,664 Cost of sales 3,150,736 8,014 3,158,750 Gross profit 1,325,928 (8,014)a 1,317,914 Selling, general and administrative expenses 969,881 (55,966)b 913,915 Operating income 356,047 47,952 403,999 Other expenses: Interest expense, net 7,861 - 7,861 Foreign exchange losses (gains), net (4,366) - (4,366) Miscellaneous, net 6,932 - 6,932 Income before income taxes 345,620 47,952 393,572 Income tax expense, net 76,250 12,799c 89,049 Equity in net loss of unconsolidated subsidiaries 23 - 23 Net income 269,347 35,153 304,500 Net income attributable to non-controlling interest (156) - (156) Net income attributable to HARMAN International Industries, Incorporated$269,503
$35,153
$304,656
Earnings per share: Basic $3.87 $0.51 $4.38 Diluted $3.83 $0.50 $4.33 Weighted average shares outstanding: Basic 69,557 69,557 Diluted 70,322 70,322a) Restructuring expense in Cost of Sales was $7.9 million for projects to increase manufacturing productivity, offset by a $15.9M accrual reversal for a US Customs / NAFTA related exposure.
b) Restructuring expense in SG&A was $38.9 million primarily due to projects to increase productivity in engineering and administrative functions. Other non-recurring expense includes in SG&A was $17.1M including acquisition-related expenses.
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 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 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 March 31,
Increase /(Decrease)
2016
2015
Net sales - nominal currency $1,628,082 $1,464,193 11% Effects of foreign currency translation (1)(15,917)
Net sales - local currency $1,628,082 $1,448,276 12% Gross profit - nominal currency $492,867 $418,130 18% Effects of foreign currency translation (1)(3,254)
Gross profit - local currency $492,867 $414,876 19% SG&A - nominal currency $357,514 $326,623 9% Effects of foreign currency translation (1)(3,127)
SG&A - local currency $357,514 $323,496 11% Operating income - nominal currency $135,353 $91,507 48% Effects of foreign currency translation (1)(127)
Operating income - local currency $135,353 $91,380 48% Net income attributable to HARMAN International Industries, Incorporated - nominal currency $88,824 $70,295 26% Effects of foreign currency translation (1)825
Net income attributable to HARMAN International Industries, Incorporated - local currency $88,824 $71,120 25% (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 March 31,Increase /(Decrease)
2016
2015
Net sales - nominal currency $1,628,082 $1,464,193 11% Effects of foreign currency translation (1)(15,917)
Net sales - local currency $1,628,082 $1,448,276 12% Gross profit - nominal currency $495,080 $421,729 17% Effects of foreign currency translation (1)(3,219)
Gross profit - local currency $495,080 $418,510 18% SG&A - nominal currency $346,848 $307,624 13% Effects of foreign currency translation (1)(3,114)
SG&A - local currency $346,848 $304,510 14% Operating income - nominal currency $148,232 $114,105 30% Effects of foreign currency translation (1)(105)
Operating income - local currency $148,232 $114,000 30% Net income attributable to HARMAN International Industries, Incorporated - nominal currency $98,630 $86,723 14% Effects of foreign currency translation (1)846
Net income attributable to HARMAN International Industries, Incorporated - local currency $98,630 $87,569 13% (1) Impact of restating prior year results at current year foreign exchange rates.HARMAN has provided a reconciliation of the non-GAAP measures in the table above to provide the users of the 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) Nine Months Ended March 31,Increase /(Decrease)
2016
2015
Net sales - nominal currency $5,031,127 $4,476,664 12% Effects of foreign currency translation (1)(214,786)
Net sales - local currency $5,031,127 $4,261,878 18% Gross profit - nominal currency $1,525,357 $1,325,928 15% Effects of foreign currency translation (1)(51,602)
Gross profit - local currency $1,525,357 $1,274,326 20% SG&A - nominal currency $1,099,384 $969,881 13% Effects of foreign currency translation (1)(40,629)
SG&A - local currency $1,099,384 $929,252 18% Operating income - nominal currency $425,973 $356,047 20% Effects of foreign currency translation (1)(10,973)
Operating income - local currency $425,973 $345,074 23% Net income attributable to HARMAN International Industries, Incorporated - nominal currency $288,820 $269,503 7% Effects of foreign currency translation (1)(6,853)
Net income attributable to HARMAN International Industries, Incorporated - local currency $288,820 $262,650 10% (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
EXCLUDING restructuring and non-recurring charges(In thousands; unaudited)
Nine Months Ended March 31,Increase /(Decrease)
2016
2015
Net sales - nominal currency $5,031,127 $4,476,664 12% Effects of foreign currency translation (1)(214,786)
Net sales - local currency $5,031,127 $4,261,878 18% Gross profit - nominal currency $1,530,571 $1,317,914 16% Effects of foreign currency translation (1)(52,150)
Gross profit - local currency $1,530,571 $1,265,764 21% SG&A - nominal currency $1,038,421 $(913,915) 14% Effects of foreign currency translation (1)36,824
SG&A - local currency $1,038,421 $(877,091) 18% Operating income - nominal currency $492,150 $403,999 22% Effects of foreign currency translation (1)(15,326)
Operating income - local currency $492,150 $388,673 27% Net income attributable to HARMAN International Industries, Incorporated - nominal currency $339,875 $304,656 12% Effects of foreign currency translation (1)(11,206)
Net income attributable to HARMAN International Industries, Incorporated - local currency $339,875 $293,450 16% (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 March 31, 2016 Three Months Ended March 31, 2015GAAP
Adjustments
Non-GAAP - Operational
GAAP
Adjustments
Non-GAAP - Operational
HARMAN Operating income $135,353 $12,879 $148,232 $91,507 $22,598 $114,105 Depreciation & Amortization 51,005 (10,144) 40,861 40,262 (4,552) 35,710 EBITDA 186,358 2,735 189,093 131,769 18,046 149,815 CONNECTED CAR Operating income 95,617 2,689 98,306 73,661 563 74,224 Depreciation & Amortization 19,760 (1,880) 17,880 17,043 (1,166) 15,877 EBITDA 115,377 809 116,186 90,704 (603) 90,101 LIFESTYLE AUDIO Operating income 60,574 3,333 63,907 44,626 7,506 52,132 Depreciation & Amortization 13,853 (5,287) 8,566 11,410 (2,324) 9,086 EBITDA 74,427 (1,954) 72,473 56,036 5,182 61,218 PROFESSIONAL SOLUTIONS Operating income 2,667 4,415 7,082 16,043 5,659 21,702 Depreciation & Amortization 8,935 (631) 8,304 8,129 (99) 8,030 EBITDA 11,602 3,784 15,386 24,172 5,560 29,732 CONNECTED SERVICES Operating income 11,799 2,147 13,946 6,303 - 6,303 Depreciation & Amortization 6,484 (2,348) 4,136 1,482 - 1,482 EBITDA 18,283 (201) 18,082 7,785 - 7,785HARMAN 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 non-recurring charges. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in HARMAN’s consolidated financial statements prepared in accordance with US GAAP.
Harman International Industries, Incorporated
Reconciliation of GAAP to Non-GAAP Results
(In thousands, except earnings per share data; unaudited) Nine Months Ended March 31, 2016 Nine Months Ended March 31, 2015GAAP
Adjustments
Non-GAAP - Operational
GAAP
Adjustments
Non-GAAP - Operational
HARMAN Operating income $425,973 $66,177 $492,150 $356,047 $47,952 $403,999 Depreciation & Amortization 165,841 (47,289) 118,552 114,808 (7,337) 107,471 EBITDA 591,814 18,888 610,702 470,855 40,615 511,470 CONNECTED CAR Operating income 267,102 7,468 274,570 223,007 5,247 228,254 Depreciation & Amortization 57,179 (5,523) 51,656 51,565 (3,828) 47,737 EBITDA 324,281 1,945 326,226 274,572 1,419 275,991 LIFESTYLE AUDIO Operating income 191,283 18,379 209,662 148,475 23,299 171,774 Depreciation & Amortization 40,673 (15,416) 25,257 29,512 (2,379) 27,133 EBITDA 231,956 2,963 234,919 177,987 20,920 198,907 PROFESSIONAL SOLUTIONS Operating income 52,304 11,231 63,535 75,128 7,910 83,038 Depreciation & Amortization 26,294 (1,890) 24,404 24,650 (165) 24,485 EBITDA 78,598 9,341 87,939 99,778 7,745 107,523 CONNECTED SERVICES Operating income 21,857 30,476 52,333 26,912 - 26,912 Depreciation & Amortization 35,239 (24,461) 10,778 2,484 - 2,484 EBITDA 57,096 6,015 63,111 29,396 - 29,396HARMAN 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 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 March 31, 2016
Three Months Ended March 31, 2016
Connected Car
Lifestyle Audio
Professional Solutions
Connected Services
Eliminations HARMAN (In thousands; unaudited) Net Trade Sales $766,757 $472,234 $231,551 $157,540 $0 $1,628,082 Intercompany Sales - 547 465 8,475 (9,487) - Net Sales 766,757 472,781 232,016 166,015 (9,487) 1,628,082Harman International Industries, Incorporated
Intercompany Revenue Reconciliation, 9 Months Ended March 31, 2016
Nine Months Ended March 31, 2016
Connected Car
Lifestyle Audio
Professional Solutions
Connected Services
Eliminations HARMAN (In thousands; unaudited) Net Trade Sales $2,259,209 $1,558,408 $726,159 $487,312 $39 $5,031,127 Intercompany Sales - 1,802 1,834 22,129 (25,765) - Net Sales 2,259,209 1,560,210 727,993 509,441 (25,765) 5,031,127HARMAN International Industries, Incorporated
Total Liquidity Reconciliation
Total Company LiquidityMarch 31, 2016
$ millions Cash & cash equivalents $360 Short-term investments 0 Available credit under Revolving Credit Facility 713 Total Liquidity $1,073
View source version on businesswire.com: http://www.businesswire.com/news/home/20160428005568/en/
Harman InternationalDarrin Shewchuk, +1 203-328-3834Senior Director, Corporate Communicationsdarrin.shewchuk@harman.comorYijing Brentano, +1 203-328-3500Vice President, Investor Relationsyijing.brentano@harman.com
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