HARMAN Reports Third Quarter Fiscal Year 2013 Results

HARMAN Reports Third Quarter Fiscal Year 2013 Results

  • Third quarter net sales of $1.062 billion; operating income of $38 million
  • Company raises fiscal 2013 EPS guidance to $3.00 from previous guidance of $2.70 - $2.90
  • Restructuring program on track to deliver $30-35 million in annualized savings starting in fiscal 2014
  • Martin acquisition expands Professional Division portfolio
  • iOnRoad acquisition accelerates the roll-out of advanced safety infotainment solutions

STAMFORD, Conn.--(BUSINESS WIRE)-- Harman International Industries, Incorporated, the leading global infotainment, audio and lighting group (NYS: HAR) , today announced results for the third quarter ended March 31, 2013.

Net sales for the third quarter were $1.062 billion, a decrease of three percent compared to the same period last year. Net sales decreased due to the lower automotive production in Western Europe as a result of the economic slowdown partially offset by sales growth in home and multimedia products in the Lifestyle Division and in the Professional Division.

Third quarter operating income was $38 million, compared to $60 million in the same period last year. Excluding restructuring and non-recurring charges, operating profit in the third quarter was $66 million, compared to $67 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $0.79 for the quarter compared to $0.74 in the same period last year. On a GAAP basis, earnings per diluted share were $0.50 for the quarter compared to $2.38 in the same period last year. In the third quarter last year, the Company released a deferred tax asset valuation allowance, which increased EPS by $1.71.

The Company today also announced it has raised its fiscal 2013 operational earnings per share guidance to $3.00 from its previous range of $2.70 - $2.90. HARMAN now expects revenue to be at the mid- to high-end of its previously announced range of $4.175 - $4.250 billion. The Company also expects operating profit and EBITDA to meet the high end of its previously announced range of $265 - $280 million and $385 - $400 million, respectively.

Dinesh C. Paliwal, the Company's Chairman, President and CEO, said, "I am pleased with the double digit growth in our Lifestyle Division's home and multimedia product lines and the expansion of our Professional business with the acquisition of Martin. Despite the prolonged economic slow-down in Europe, we are successfully executing our operational and cost management programs and delivered improved earnings per share. As a result, we have raised our earnings per share guidance for fiscal 2013."

Mr. Paliwal continued, "We are on track to complete the restructuring program that we announced last quarter and these actions will further improve the Company's competitiveness over the long-term. We continue to pursue accretive, bolt-on acquisitions that expand our market opportunities and expedite our top-line growth. With our powerful portfolio of brands and technologies, along with our higher margin order backlog, we are confident that fiscal 2014 and 2015 will be stronger years for HARMAN."

FY 2013 Key Figures - Total Company  Three Months Ended March 31  Nine Months Ended March 31
      Increase      Increase
         (Decrease)        (Decrease)
Including  ExcludingIncluding  Excluding
$ millions (except per share data)3M3MCurrencyCurrency9M9MCurrencyCurrency
   FY13  FY12  Changes  


  FY13  FY12  Changes  


Net sales  1,062  1,096  (3%)  (3%)  3,116  3,273  (5%)  (2%)
Gross profit  269  293  (8%)  (8%)  819  886  (8%)  (5%)
Percent of net sales  25.4%  26.7%        26.3%  27.1%      
SG&A & Other  231  233  (1%)  (1%)  634  656  (4%)  (1%)
Operating income  38  60  (36%)  (36%)  186  229  (19%)  (16%)
Percent of net sales  3.6%  5.5%        6.0%  7.0%      
Net Income  35  173  (80%)  (80%)  137  280  (51%)  (50%)
Diluted earnings per share  0.50  2.38  (79%)  (79%)  1.97  3.88  (49%)  (48%)
Restructuring-related costs and other non-

GAAP items

  28  8        17  10      
Gross profit(1)  273  293  (7%)  (7%)  824  888  (7%)  (4%)
Percent of net sales(1)  25.7%  26.8%        26.4%  27.1%      
SG&A & Other(1)  207  226  (9%)  (9%)  622  649  (4%)  (1%)
Operating income(1)  66  67  (2%)  (1%)  202  240  (16%)  (13%)
Percent of net sales(1)  6.2%  6.1%        6.5%  7.3%      
Net Income(1)  55  53        151  163  (7%)  (3%)
Diluted earnings per share(1)  0.79  0.74  7%  8%  2.17  2.26  (4%)  0%
Shares outstanding - diluted (in millions)  70  73        70  72      
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 2013 decreased 110 basis points to 25.7 percent. The decline was primarily due to the impact of lower sales volume on fixed production costs.

SG&A and Other expense as a percentage of net sales on a non-GAAP basis in the third quarter of fiscal 2013 decreased 110 basis points to 19.5 percent. This change was primarily related to higher recovery of customer project engineering costs.

Investor Call Today, May 2, 2013

Today, May 2, 2013 at 11:00 a.m. EDT, HARMAN's management will host an analyst and investor conference call to discuss the fiscal third quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 918 9476 (U.S.) or +1 (212) 231 2902 (International) ten minutes before the call and reference HARMAN, Access Code: 21654797.

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 will be posted on the site at approximately 8:00 a.m. EDT, Thursday, May 2, 2013.

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 August 2, 2013 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: 21654797.

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 designs, manufactures, and markets a wide range of audio, lighting and infotainment solutions for the automotive, consumer, and professional markets. It is a recognized world leader across its customer segments with premium brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, and Mark Levinson® and leading-edge connectivity, safety and audio technologies. The company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 25 million automobiles on the road today are equipped with Harman audio and infotainment systems. Harman has a workforce of about 14,300 people across the Americas, Europe, and Asia and reported sales of $4.4 billion for the fiscal year ended June 30, 2012. The company's shares are traded on the New York Stock Exchange under the symbol NYSE:HAR. Please visit www.harman.com for more information.

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. 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 maintain profitability in our infotainment division if there are delays in our product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) our ability to successfully implement our global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering, procurement and administrative organizations; (5) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (6) the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) our ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for our critical organizational positions; (8) our failure to implement and maintain a comprehensive disaster recovery program; (9) our failure to comply with governmental rules and regulations, including the Foreign Corrupt Practices Act and U.S. export control laws, and the cost of complying with such laws; (10) our ability to maintain a competitive technological advantage through innovation and leading product designs; (11) our failure to maintain the value of our brands and implementing a sufficient brand protection program; and (12) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2012 and other filings made by the Company with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement except as required by law.

This earnings release also makes reference to the Company's awarded business, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company calculates its awarded business using 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, among other factors. These assumptions are updated on an annual basis. The Company updates the estimates quarterly by adding the value of new awards received and subtracting sales recorded during the quarter.



Infotainment Division

FY 2013 Key Figures - Infotainment  Three Months Ended March 31  Nine Months Ended March 31
    Increase    Increase
         (Decrease)        (Decrease)
Including  ExcludingIncluding  Excluding
$ millions3M3MCurrencyCurrency9M9MCurrencyCurrency
   FY13  FY12  Changes  


  FY13  FY12  Changes  


Net sales  569  610  (7%)  (7%)  1,669  1,813  (8%)  (4%)
Gross profit  110  139  (21%)  (21%)  351 
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