(Source: Business Wire)
Harman International Industries, Incorporated (NYSE: HAR) today announced results for the fourth quarter and fiscal year ended June 30, 2009. For the fiscal year 2009, net sales were $2.9 billion, a decrease of 30 percent compared to the prior year. Exclusive of foreign currency translation, net sales declined by 26 percent. Loss per diluted share for the year was ($7.19) compared to earnings per share of $1.73 last year. Excluding restructuring and goodwill charges, non-GAAP loss per diluted share was ($1.01) for the year compared to earnings of $2.35 last year.
Net sales for the fourth quarter were $668 million, a 37 percent decrease compared to $1.1 billion for the same period last year. Exclusive of foreign currency translation, net sales for the fourth quarter declined by 32 percent. Loss per diluted share in the fourth quarter was ($1.05) compared to earnings per share of $0.54 in the same period last year. Excluding restructuring and goodwill charges, non-GAAP loss per diluted share was ($0.45) for the fourth quarter compared to non-GAAP earnings of $0.68.
"Despite the continued global economic challenges, I am impressed by the major progress we are seeing in our key operational initiatives," said Dinesh C. Paliwal, Harman's Chairman, President and CEO. "The cost savings and operational excellence initiatives that we launched in June 2008 are ahead of target in delivering sustainable benefits. We have successfully delivered without exception on a record number of major automotive projects, despite significant market challenges. Building upon this successful track record, we are now in advanced discussions with key automakers to finalize several significant awards in the near future."
FY 2009 Key Figures -- Total Company Three Months Ended June 30 Twelve Months Ended June 30 Increase (Decrease) Increase (Decrease) $ millions (except per share data) Q4 09 Q4 08 Including Currency Changes Excluding Currency Changes(2) FY 2009 FY 2008 Including Currency Changes Excluding Currency Changes(2) Net sales 668 1,067 (37 %) (32 %) 2,891 4,113 (30 %) (26 %) Gross profit 143 283 (50 %) (45 %) 675 1,109 (39 %) (36 %) Percent of net sales 21.3 % 26.5 % 23.3 % 27.0 % Operating income (loss) (83 ) 43 n.m. n.m. (509 ) 139 n.m. n.m. Percent of net sales (12.4 %) 4.0 % (17.6 %) 3.4 % Net Income (loss) (62 ) 32 n.m. n.m. (423 ) 108 n.m. n.m. Diluted earnings (loss) per share (1.05 ) 0.54 (7.19 ) 1.73 Restructuring-related costs 46 12 100 46 Merger-related costs 0 0 0 14 Goodwill impairment charge 3 0 331 0 Non-GAAP Gross profit1 143 286 (50 %) (45 %) 683 1,113 (39 %) (36 %) Percent of net sales1 21.5 % 26.8 % 23.6 % 27.1 % Operating income (loss)1 (34 ) 55 n.m. n.m. (78 ) 199 n.m. n.m. Percent of net sales1 (5.0 %) 5.1 % (2.7 %) 4.8 % Net Income (loss)1 (27 ) 40 n.m. n.m. (59 ) 146 n.m. n.m. Diluted earnings (loss) per share1 (0.45 ) 0.68 (1.01 ) 2.35 Shares outstanding - diluted (in millions) 60 59 59 62 1,2 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. n.m. = Not Meaningful -------------------------------------------------------------------------------
Summary of Operations Fiscal 2009 -- Full Year
Net sales in fiscal 2009 were $2.9 billion, a decrease of 30 percent or 26 percent when adjusted for constant currency compared to the prior year. Net sales declined in all three divisions due to the significant downturn in the automotive industry and lower consumer spending.
Gross margin on a non-GAAP basis in fiscal 2009 decreased 3.5 percentage points to 23.6 percent. The gross margin decline was primarily due to decreased factory utilization associated with lower sales and unfavorable product mix shift. Restructuring costs included in costs of sales were $8.7 million which consisted primarily of accelerated depreciation expenses related to the closure of manufacturing facilities.
SG&A expense on a non-GAAP basis in fiscal 2009 was $761.6 million compared to $914.7 million, representing a decrease of $153.1 million. Foreign currency translation contributed $41.9 million to the decrease in SG&A expense. Other factors included a reduction in engineering costs, net proceeds from the sale of the Automotive Division's speech recognition assets, and overall reductions in travel, selling and other G&A expenses. Restructuring costs included in SG&A were $91.7 million, which were primarily related to the Company's STEP Change program. Operating loss on a non-GAAP basis in fiscal 2009 was ($78.3) million compared to operating income of $198.6 million in the prior year. On a GAAP basis, including goodwill and restructuring expenses, the operating loss was ($509.3) million compared to operating income of $138.5 million.
At June 30, 2009, the cash and cash equivalents balance was $590.6 million compared to $223.1 million in the prior year. The increase in cash is primarily the result of increased borrowing from the Company's revolving credit facility combined with the net proceeds from the Company's common stock offering in June 2009.
Summary of Operations Fiscal 2009 -- Fourth Quarter
Net sales in the fourth quarter were $667.7 million, a decrease of 37 percent or 32 percent when adjusted for constant currency compared to the prior year. Net sales declined in all three divisions primarily due to the continuing economic downturn.
Gross margin on a non-GAAP in the fourth quarter decreased 5.3 percentage points to 21.5 percent compared to the same period last year. The gross margin decline was primarily due to the Automotive Division which experienced decreased factory utilization as a result of lower sales and unfavorable product mix shift during the quarter. Restructuring costs included in costs of sales were $0.9 million which consisted primarily of accelerated depreciation expenses related to the closure of manufacturing facilities.
SG&A expense on a non-GAAP basis in the fourth quarter was $177.1 million compared to $231.5 million, representing a decrease of $54.4 million. Foreign currency translation contributed $18.9 million to the decrease in SG&A expense. Other factors included a reduction in R&D, net proceeds from the sale of the Automotive Division's speech recognition assets, lower compensation & benefits expense, and a reduction in advertising and promotion expense. Restructuring costs included in SG&A were $45.3 million which were primarily related to the Company's STEP Change program.
Operating loss on a non-GAAP basis in the fourth quarter was ($33.7) million compared to operating income of $54.9 million. On a GAAP basis, operating loss was ($82.7) million compared to operating income of $42.8 million in the prior year.
During the quarter, the Company launched and successfully concluded a public offering of 10.7 million shares of its common stock. The offering raised gross proceeds of $200 million, of which $38 million was used to retire existing debt. The Company intends to use the balance toward strengthening its liquidity and for general corporate purposes.
Harman continues to execute ahead of target on its STEP Change cost-savings program. The Company has achieved $190 million in sustainable savings through June 30, 2009, compared to a target of $144 million.
To strengthen global brand penetration and enhance top-line growth in traditional as well as emerging markets, the Company is sponsoring a new television and online music series in cooperation with National Geographic Channels. "The Music Nomad" series will be broadcast around the world beginning in November on Nat Geo Music and Nat Geo Adventure channels which serve an estimated 300 million households.
"Our intense focus on operational excellence and leading-edge innovation is paying significant dividends," said Paliwal. "We have continued to earn the respect of our world-class customers in a very difficult market environment, and we have strengthened the relationships that will drive future revenues. Our technology and product portfolio is among the newest in our industry, and we are well positioned both to capture market share and to capitalize on pent-up market demand."
Investor Call on August 19, 2009
NOTE: For reference during its analyst and investor conference call, the Company has posted a set of informational slides on its web site at www.harman.com and accompanying this press release on www.businesswire.com.
At 4:40 p.m. EDT today, Harman's management will host an analyst and investor conference call to discuss the fourth quarter and year-end results. Those who wish to participate in the call should dial (800) 230-1085 (US) or +1 (612) 234-9959 (International), and reference Harman International.
A replay of the call will also be available following the completion of the call at approximately 6:40 p.m. EDT. The replay will be available through September 16, 2009. To listen to the replay, dial (800) 475-6701 (US) or +1 (320) 365-3844 (International), Access Code: 109061.
AT&T will also be web-casting the presentation. The web-cast can be accessed at http://65.197.1.15/att/confcast, enter the Conference ID: 109061 and click Go. There will also be a link to the web-cast at www.harman.com. Participation through the web-cast will be in listen-only mode. If you need technical assistance, call the toll-free AT&T Conference Casting Support Help Line at (888) 793-6118 (US) or +1 (678) 749-8002 (International).
General Information
Harman International (www.harman.com) designs, manufactures and markets a wide range of audio and infotainment products for the automotive, consumer and professional markets. The Company maintains a strong presence in the Americas, Europe and Asia and employs approximately 9,500 people worldwide. The Harman International family of brands spans some 15 leading names including AKG®, Audioaccess®, Becker®, BSS®, Crown®, dbx®, DigiTech®, Harman Kardon®, Infinity®, JBL®, Lexicon®, Mark Levinson®, Revel®, QNX®, Soundcraft® and Studer®. The Company's stock is traded on the New York Stock Exchange under the symbol 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 are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. One should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to (1) our ability to successfully implement our strategic initiatives, including our STEP Change cost reduction initiatives, and to achieve the intended benefits and anticipated savings of those initiatives; (2) automobile industry sales and production rates and the willingness of automobile purchasers to pay for the option of a premium audio system and/or a multi-function infotainment system; (3) changes in consumer confidence and spending and worsening economic conditions worldwide; (4) customer acceptance of our consumer and professional products; (5) the bankruptcy or financial deterioration of one or more of our major customers or suppliers; (6) the loss of one or more significant customers, including our automotive manufacturer customers, or the loss of a significant platform with an automotive customer; (7) changes in interest rates and availability of financing affecting corporate and consumer spending, including the effects of continued volatility and further deterioration in the financial and credit markets; (8) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. dollar and the euro, and other risks inherent in international trade and business transactions; (9) warranty obligations for defects in our products; (10) our ability to satisfy automotive contract performance criteria, including our ability to meet technical specifications and due dates on new platforms, at expected profit margins; (11) competition in the automotive, consumer or professional markets in which we operate, including pricing pressures in the market for personal navigation devices; (12) our ability to achieve cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering and administrative organizations; (13) model-year changeovers and customer acceptance in the automotive industry; (14) our ability to enforce or defend our ownership and use of intellectual property; (15) our ability to maintain a competitive technological advantage within the systems, services and products we provide into the market place; (16) our ability to effectively integrate acquisitions made by us or manage restructuring and cost migration initiatives; (17) our ability to comply with financial or other covenants in our long-term debt agreements; (18) limitations on our ability to borrow funds under our existing credit facilities; (19) valuation of certain assets, including goodwill, investments and deferred tax assets, considering recent market conditions and operating results; (20) strikes, work stoppages and labor negotiations at our facilities or at a facility of one of our significant customers, or work stoppages at a common carrier or a major shipping location; (21) commodity price fluctuations; (22) availability of key components for the products we manufacture; (23) the outcome of pending or future litigation and other claims, including, but not limited to the current stockholder and ERISA lawsuits; and (24) other risks detailed in Harman International's Annual Report on Form 10-K for the fiscal year ended June 30, 2009 and other filings made by Harman International with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement.
APPENDIX
Automotive Division
FY 2009 Key Figures -- Automotive Three Months Ended June 30 Twelve Months Ended June 30 Increase (Decrease) Increase (Decrease) $ millions Q4 09 Q4 08 Including Currency Changes Excluding Currency Changes(2) FY 2009 FY 2008 Including Currency Changes Excluding Currency Changes(2) Net sales 466 777 (40 %) (34 %) 2,005 2,929 (32 %) (28 %) Gross profit 78 183 (57 %) (52 %) 385 714 (46 %) (43 %) Percent of net sales 16.8 % 23.5 % 19.2 % 24.4 % Operating income (loss) (56 ) 31 n.m. n.m. (440 ) 115 n.m. n.m. Percent of net sales (12.1 %) 4.0 % (21.9 %) 3.9 % Restructuring-related costs 29 6 60 26 Goodwill impairment charge 3 0 295 0 Non-GAAP Gross profit1 79 186 (58 %) (52 %) 393 717 (45 %) (42 %) Percent of net sales1 16.9 % 23.9 % 19.6 % 24.5 % Operating income (loss)1 (25 ) 38 n.m. n.m. (85 ) 140 n.m. n.m.
