[August 04, 2015]

HARMAN Reports Fourth Quarter and Full Year Fiscal 2015 Results

Harman International Industries, Incorporated (NYSE:HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the fourth quarter and full year ended June 30, 2015.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20150804005635/en/

Net sales for the fourth quarter were $1.68 billion, an increase of 16 percent compared to the prior year or 28 percent excluding the impact of foreign currency translation (ex-FX). Excluding the impact of foreign currency translation and acquisitions, net sales increased 16 percent compared to the prior year. Infotainment net sales increased seven percent (21 percent ex-FX), due to platform expansions, higher take rates, and stronger automotive production. Lifestyle Audio net sales increased 13 percent (21 percent ex-FX), due to stronger home and multimedia and car audio sales. Net sales in Professional Solutions increased 15 percent (20 percent ex-FX), primarily driven by the acquisition of AMX, which expanded the Company's product portfolio into enterprise automation and video switching.

Excluding restructuring, non-recurring charges and acquisition-related items, fourth quarter operating income increased 24 percent to $150 million compared to $121 million in the prior year, and earnings per diluted share increased 10 percent to $1.37 compared to $1.25 in the prior year. On a GAAP basis, fourth quarter operating income increased 99 percent to $114 million compared to $57 million in the prior year, EBITDA increased 82 percent to $168 million compared to $92 million in the prior year, and earnings per diluted share increased 63 percent to $1.01 compared to $0.62 in the prior year. The Company recorded $36 million of restructuring, non-recurring charges and acquisition-related items, compared to $64 million in the prior year.

Net sales for the full year were $6.16 billion, an increase of 15 percent (22 percent ex-FX) compared to the prior year, as Infotainment, Lifestyle and Professional all reported strong increases in net sales. Excluding the impact of foreign currency translation and acquisitions, net sales increased 15 percent compared to the prior year. Excluding restructuring, non-recurring charges and acquisition-related items, fiscal year 2015 operating income increased 29 percent to $554 million compared to $430 million in the prior year. On the same non-GAAP basis, earnings per diluted share increased 29 percent to $5.71 from $4.41 in the prior year. On a GAAP basis, fiscal year 2015 operating income increased 42 percent to $470 million from $330 million in prior year, EBITDA increased 38 percent to $639 million compared to $462 million in the prior year, and earnings per diluted share increased 44 percent to $4.84 compared to $3.36 in the prior year.

Dinesh C. Paliwal, the Company's Chairman, President and CEO, said "In fiscal 2015, we delivered record revenue, EBITDA and earnings per share. Over the last two years, HARMAN has achieved outstanding growth, adding nearly $2 billion of revenue and increasing non-GAAP earnings per share by 86 percent."

Paliwal continued, "With the introduction of industry first innovations in audio, system solutions, and embedded infotainment, particularly in the areas of cybersecurity and driver safety, we continue to deliver superior offerings for our customers. HARMAN is well positioned to capitalize on the increasing demand for the connected car, connected enterprise and connected lifestyle. In 2015, we further diversified our portfolio through strategic acquisitions, thereby strengthening our software capabilities and scaling connected services to fully address the opportunities presented at the intersection of cloud, mobility and analytics."

The Company will hold an Investor Day in New York City on Thursday, August 6, 2015 and will provide financial guidance for fiscal 2016.

Summary of Operations - Gross Margin and SG&A (Non-GAAP)

Gross margin for the fourth quarter of fiscal year 2015 increased 210 basis points to 29.4 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base and the expansion of the Company's product portfolio into enterprise automation and video switching.

In the fourth quarter of fiscal year 2015, SG&A expense as a percentage of net sales increased 150 basis points to 20.4 percent, primarily due to the expansion of the Company's product portfolio into enterprise automation and video switching and investments in marketing and research and development.

Investor Call Today August 4, 2015

At 11:00 a.m. EDT today, HARMAN's management will host an analyst and investor conference call to discuss the fourth quarter and full year results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 735 5968 (U.S.) or +1 (212) 231 2902 (International) ten minutes before the call and reference HARMAN, Access Code: 21771673.

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 fourth 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 Wednesday, November 4, 2015 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: 21771673. 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 27,000 people across the Americas, Europe, and Asia and reported sales of $6.2 billion during the 12 months ended June 30, 2015. 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, 2014 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, 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

Infotainment Division

Net sales in the fourth quarter of fiscal 2015 were $823 million, an increase of seven percent (21 percent ex-FX) compared to the prior year. The increase in net sales was due to the expansion of recently launched platforms, higher take rates and stronger automotive production.

On a non-GAAP basis in the fourth quarter of fiscal 2015, gross margin increased 230 basis points to 24.6 percent compared to the prior year primarily due to the impact of improved leverage on fixed production costs and benefits from footprint migration restructuring initiatives. SG&A spending as a percent of sales was consistent with the prior year at 13.1 percent.

Infotainment Division Highlights

During the quarter, HARMAN secured new business with Deere & Company to design a new infotainment system for their John Deere farm equipment. The John Deere award is HARMAN's second win in the commercial infotainment market, following a previously announced award with MAN Scania. The Company also earned a follow-on award from Chinese automaker Guangzhou Automotive Group, a joint-venture partner of FIAT Chrysler Automobiles.

Expanding HARMAN's footprint in the Japanese market, the Company launched a new infotainment platform for Suzuki Motor Corporation. First debuting on Suzuki's Spacia and Lapin vehicles, the program will expand across car lines. HARMAN infotainment systems continued to be deployed across car lines in new vehicles worldwide, including the BMW 1-, 2-, 3-, and 7-series, Jaguar XE and XF, the new Mercedes Benz GLC and the Geely Borui.

On July 21, 2015, the Company named Phillip Eyler as President, Infotainment. Mr. Eyler's tenure at HARMAN has spanned nearly two decades through leadership roles of increasing responsibility in Infotainment and Audio systems engineering, project management, quality and manufacturing. Most recently, he served as Senior Vice President and General Manager Global Automotive Audio, and spearheaded industry-first software platforms such as HALOsonic, Clari-Fi™ and Individual Sound Zones.

Lifestyle Division

Net sales in the fourth quarter of fiscal 2015 were $479 million, an increase of 13 percent (21 percent ex-FX) compared to the prior year due to higher home and multimedia and car audio sales.

On a non-GAAP basis in the fourth quarter of fiscal 2015, gross margin improved by 130 basis points to 31 percent compared to the prior year primarily due to improved operating leverage as a result of higher sales volume. SG&A expenses as a percentage of sales increased by 140 basis points to 20.1 percent, primarily due to increased investments in marketing and research and development.

Lifestyle Division Highlights

During the quarter HARMAN secured new car audio awards from BMW, Daimler, Hyundai, and Lexus, among others. The Company's car audio solutions continued to expand across car lines globally. New vehicles launched in the quarter include the Maserati Ghibli and Quattroporte (Harman/Kardon), which also feature HARMAN's Clari-Fi sound restoration technology. Other launches in the quarter included the BMW 7 Series (Bowers & Wilkins), the Lincoln Continental (Revel), and the Hyundai Santa Fe (Infinity), which also includes HARMAN's QuantumLogic™ Surround technology that extracts signals from the original recording and redistributes them into an authentic, multidimensional soundstage for playback that is clear, refined and detailed.

On June 1, HARMAN completed the acquisition of the Bang & Olufsen automotive audio business. During the quarter, Audi launched the A4 featuring a Bang & Olufsen branded audio system.

At its flagship store in New York, HARMAN commercially launched the AKG N90Q, the world's first headphones with personalized sound. Designed in partnership with Quincy Jones, these ultra-luxury headphones feature TRUNOTE™, a revolutionary software solution that automatically calibrate to the listener's ears. The headphones have received industry accolades, including the Best of CES. The Company's home and multimedia products also received four European EISA Best Product awards for JBL, Mark Levinson and AKG products.

Professional Division

Net sales in the fourth quarter of fiscal 2015 were $285 million, an increase of 15 percent (20 percent ex-FX) compared to the prior year. The increase in net sales is primarily due to the acquisition of AMX, which expanded the Company's product portfolio into enterprise automation and video switching.

On a non-GAAP basis in the fourth quarter of fiscal 2015, gross margin increased 140 basis points to 40.1 percent and SG&A expense as a percentage of sales increased to 27 percent compared to 22.3 percent in the prior year. Both of these increases are primarily due to the expansion of the Company's product portfolio into enterprise automation and video switching.

Professional Division Highlights

During the fourth quarter, the Company's audio, video, lighting and enterprise automation solutions were selected by leading system integrators and installers around the world. Notable projects included the SuperVia Urban Trains system in Brazil, the Daytona International Speedway in Florida and NATO Headquarters in Brussels. HARMAN's products also powered a wide range of high-profile special events, music festivals and televised award shows including North America's largest dance music festival.

The division launched 20 major new products during the quarter and many were recognized with innovation awards from industry experts.

Services Division

The Services Division includes the results of Symphony Teleca Corporation, acquired on April 8, 2015. Net sales in fourth quarter of fiscal 2015 were $89 million. On a non-GAAP basis in the fourth quarter of fiscal 2015, gross margin was 30.5 percent, and SG&A expenses as a percentage of sales were 15.6 percent.

Services Division Highlights

HARMAN is now providing product development services at the intersection of cloud, mobility, and analytics to new customers, including Morgan Stanley, Mazda, GoDaddy.com, Kronos and Lava Mobiles. The Company secured follow-on business from Merrill Lynch, Microsoft and BlackBerry.

HARMAN also achieved Automotive SPICE® Organizational Process Capability Level 3 Certification. With this designation, HARMAN is now one of the few organizations in the world to be recognized for its software development capabilities and practices in automotive electronics and embedded systems.

Microsoft named HARMAN the 2015 IoT Partner of the Year for accelerating innovation across connected car, connected home and connected enterprise. HARMAN also announced a collaboration with data platform provider Hortonworks to deliver connected car prognostics solutions to automotive manufacturers. The joint collaboration will help transform the automotive enterprise by enabling the connected car ecosystem with real-time IoT data, insights and prognostics solutions.

Other (Corporate)

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. It also includes the results and operations of Redbend. Other SG&A increased $10 million to $48 million compared to the prior year, primarily due to increased research and development activities in the areas of over-the-air (OTA) updates and cybersecurity, as a result of the acquisition of Redbend and higher investments in brand marketing.

Corporate Highlights

In the quarter, HARMAN's Redbend remote OTA software management solution was selected by KDDI in Japan for IoT devices and by Samsung for Tizen operating system-based 4G LTE smartphones. In May, HARMAN received a top award at the Barcelona International Motor Show for its Redbend secure OTA automotive software management platform.