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HARMAN Full Year Sales Up 12%; Operating Income Increases 122% to $190M; Cash Increases to $921M 

10-August-2011 
 

·   Seventh consecutive quarter of year-over-year improvement in sales and earnings

·   Q4 EPS of $0.34 impacted by $0.13 due to temporary interruption of higher margin audio business

·   Global market share gains continue as full-year sales in BRIC countries increase by 68%

·   Awarded business grows to $14.5B, with $4.4B in higher-margin scalable platform

·   Launched Toyota Entune™; first scalable infotainment platform in Europe and North America

 

Stamford, CT, August 10, 2011 – Harman International Industries, Incorporated, the leading global audio and infotainment group (NYSE: HAR), today announced results for the fourth quarter and fiscal year ended June 30, 2011. 

The Company also noted, that in a separate release, it was reorganizing its businesses in order to unlock earnings growth and to better align with consumer lifestyle preferences.  While the Company’s Professional Division will remain largely unaffected, the Company will reorganize its Automotive and Consumer Divisions to create two new Divisions, Infotainment and Lifestyle.

Net sales for the fiscal year were $3.8 billion, an increase of 12 percent compared to the prior year. Excluding foreign currency translation, net sales increased by 13 percent.  On a GAAP basis, operating profit from continuing operations increased by 122 percent to $190 million compared to $86 million in fiscal 2010.  Excluding restructuring expenses, annual operating profit from continuing operations was $211 million, an increase of 82% compared to $116 million in fiscal 2010. On the same non-GAAP basis, earnings per diluted share from continuing operations were $2.08 for the year, an increase of 145 percent versus $0.85 reported in the prior year.  On a GAAP basis, earnings per diluted share from continuing operations were $1.90 for the year compared to $0.50 in the prior year.

Net sales for the fourth quarter were $1,031 million, an increase of 21 percent compared to the same period last year.  Excluding foreign currency translation, net sales increased by 12 percent.  Fourth quarter operating income was $26 million, compared to $26 million in the same period last year.  Excluding restructuring charges, operating profit from continuing operations in the fourth quarter grew by 17 percent to $35 million, compared to $30 million in the same period last year.  On the same non-GAAP basis, earnings per diluted share from continuing operations were $0.34 for the quarter compared to $0.30 in the same period last year. On a GAAP basis, earnings from continuing operations per diluted share were $0.26 for the quarter, the same as last year.

During this quarter, the Company’s profit margins were impacted by four discrete issues.  First, earnings were significantly affected by higher overall infotainment sales while we experienced a decline of higher margin branded audio sales to Japanese customers due to the tsunami earthquake disaster.  The Company believes that this effect, an approximate $15 million reduction of operating income in the fourth quarter, is temporary.  The Company further noted that vehicle production related to these customers has already begun to improve and is expected to normalize in the near term.  Second, the Company incurred $3.7 million of expense for a customer claim related to a software fix.  Third, we were not able to realize some $8 million of planned price reductions from our suppliers due to tighter component supply and raw materials.  Finally, the Company incurred $2.0 million in higher costs for neodymium magnets, a key high-performance speaker component. 

At June 30, 2011, the Company’s cash and short term investments balance was $921 million, compared to $767 million as of March 31, 2011.  This increase was primarily the result of positive cash from operations.

Dinesh C. Paliwal, the Company’s Chairman, President and CEO, said, “With a double digit sales increase and operating income more than doubling, we are proud of our continued improvements to the top and bottom line for the year.  With 200 new patent disclosures this year added to our 2,500 active patents, our investments in research and development continue to create a competitive advantage and growth opportunity while enhancing our position as one of the world’s leading technology companies.  We believe that our leadership in technology and our rapid emerging market growth will enable the Company to prosper, even in a continued difficult global macro-economic environment.”

To create superior value for its shareholders, the Company noted that it will continue to invest in organic growth initiatives such as investments in BRIC countries, which have resulted in 68% profitable annual growth in the last year.  It also continues to pursue accretive strategic acquisitions, such as Aha Mobile and MWM Acoustics, which are expanding its technology solutions within the core businesses. Additionally, it will continue to evaluate share buy-back opportunities and is committed to providing a sustainable dividend.  In fiscal 2011 the Company increased the dividend to $0.30 per share.

“Operationally, our business is in great shape, but recent price increases and supply constraints of rare earth minerals, specifically neodymium, will increase our gross costs by $85 million in fiscal 2012,” said Paliwal.  “To date, we have been able to identify some $30 million cost mitigation actions. In coming months, we will continue to work with our product design teams for material substitution, and price increases to distributors, channel partners and automakers to further lower this cost impact. We believe by the end of the first quarter of fiscal 2012, we will have much better information about our customer negotiations and product design changes. We will update the market on this issue together with our next earnings release. In spite of these headwinds, we expect our overall year-over-year profitability to improve.”

“The consumer trends toward seamless, energy efficient and safe connectivity is guiding our innovation strategy and will drive growth not only in automotive infotainment but in our lifestyle premium audio products as well,” added Paliwal.  “HARMAN will seize these opportunities with a leaner cost base, an expanded product portfolio and a more customer-focused organization. Looking at the year ahead, we are confident that we have the right strategy to continue to take market share and improve profitability.”

 

Download the full earnings release (PDF, 275KB)

Download the supporting slide presentation (PDF, 1.6MB)

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