Harman Kardon 2008 Annual Report Download - page 50

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32
Restructuring Program
We announced a restructuring program in June 2006 designed to increase efficiency in our
manufacturing, engineering and administrative organizations. The implementation of this program
continued through fiscal years 2007 and 2008.
During the third quarter of fiscal 2008, we expanded our restructuring actions to improve global footprint,
cost structure, technology portfolio, human resources, and internal processes. These programs will reduce
the number of our manufacturing, engineering and operating locations. We also expect significant cost
reductions through moves to low cost countries and optimization of various processes including quality
and risk management.
We have announced plant closings in Northridge, California and Martinsville, Indiana. We have also
closed a plant in South Africa and a small facility in Massachusetts. Our corporate headquarters is
currently transitioning to Stamford, Connecticut.
In fiscal 2008, SG&A expenses included $42.2 million for our restructuring program. Cash paid for these
initiatives was $14.1 million. In addition, we have recorded $3.8 million of accelerated depreciation in
cost of sales.
Below is a rollforward of our restructuring accrual for fiscal years 2008, 2007 and 2006:
June 30, June 30, June 30,
($000s omitted) 2008 2007 2006
Beginning accrued liability $ 7,527 8,533 ---
Expense 42,192 7,071 9,499
Utilization (14,118) (8,077) (966)
Ending accrued liability $ 35,601 7,527 8,533
Please also see Note 14, “Restructuring Program” for additional information.
Operating Income
Fiscal 2008 operating income was $138.5 million or 3.4 percent of net sales. This represents a decrease
of 7.5 percentage points compared to the prior year. The decrease in operating income was primarily due
to lower gross profit margin, restructuring costs, and expenses related to the merger termination.
Our fiscal 2007 operating income was $386.4 million or 10.9 percent of net sales. This represented a
decrease of 1.3 percentage points below fiscal 2006. The decrease in operating income was primarily
driven by lower gross profit margin partially offset by lower SG&A, as a percentage of sales.