Harman Kardon 2008 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2008 Harman Kardon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

31
Below is a summary of our SG&A expenses by reportable business segment:
Percent Percent Percent
Fiscal of net Fiscal of net Fiscal of net
($000s omitted) 2008 sales 2007 sales 2006 sales
Automotive $ 625,963 21.1% 532,722 21.4% 468,357 20.9%
Consumer 131,932 24.8% 112,805 22.7% 109,399 22.2%
Professional 151,944 24.9% 136,008 24.3% 133,851 25.9%
Other/Unallocated 61,066 --- 43,284 --- 43,722 ---
Total $ 970,905 23.6% 824,819 23.2% 755,329 23.3%
Automotive – Automotive SG&A expenses were 21.1 percent of sales in fiscal 2008, a decrease of 0.3
percentage points compared to the prior year. R&D costs are the largest component of SG&A expenses.
In fiscal 2008, Automotive R&D costs were $322.5 million or 10.9 percent of sales. During the prior
year, R&D costs were $286.5 million or 11.5 percent of sales. Higher costs were incurred to develop and
support 13 infotainment system launches occurring in fiscal years 2008 and 2009, a record number for the
division. Automotive SG&A expenses also include restructuring charges of $24.7 million, $5.7 million
and $7.3 million in fiscal years 2008, 2007 and 2006, respectively.
Consumer – SG&A expenses were 24.8 percent of Consumer sales in fiscal 2008, an increase of 2.1
percentage points compared to the prior year. Selling expenses and R&D costs are the most significant
components of SG&A expenses. Selling expenses were 0.7 percentage points higher in fiscal 2008
primarily due to increased marketing efforts for multimedia products in response to general economic
weakness and a competitive market. R&D costs were $36.1 million, $34.2 million and $36.3 million
during fiscal years 2008, 2007 and 2006, respectively. Consumer SG&A expenses also include
restructuring charges of $8.7 million, $1.0 million and $0.4 million in fiscal years 2008, 2007 and 2006,
respectively.
Professional – Professional SG&A expenses as a percentage of sales were 24.9 percent in fiscal 2008, an
increase of 0.6 percentage points compared to the prior year. Selling expenses and R&D costs are the
most significant components of SG&A expenses. Selling expenses are incurred to support a broad range
of branded audio products. These products are marketed to audio professionals for use in public places
such as concert halls, stadiums and houses of worship. Selling expenses were $54.4 million, $49.6
million and $49.3 million in fiscal 2008, 2007 and 2006, respectively. A significant amount of R&D
costs have been incurred to develop our HiQnet networking protocol and include it on new products.
This protocol simplifies and centralizes the monitoring and control of complex professional audio
systems. R&D costs in fiscal 2008, 2007 and 2006 were $36.9 million, $35.7 million and $33.2 million,
respectively. Professional SG&A expenses include restructuring charges of $6.0 million, $0.4 million
and $1.7 million in fiscal years 2008, 2007 and 2006, respectively.
Other – Other SG&A expenses primarily include compensation, benefit and occupancy costs for
corporate employees. In fiscal 2008, we also had $13.8 million of legal and advisory expenses associated
with the termination of our proposed merger with a company formed by investment funds affiliated with
KKR and GSCP. Additionally, we had $2.8 million of restructuring expenses related to the consolidation
of our corporate headquarters in Stamford, Connecticut.