Harman Kardon 2008 Annual Report Download - page 51

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33
We present below a summary of our operating income 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 $ 120,466 4.1% 340,116 13.6% 336,795 15.1%
Consumer (7,454) -1.4% 13,587 2.7% 50,813 10.3%
Professional 91,555 15.0% 80,968 14.4% 59,278 11.5%
Other (66,066) --- (48,284) --- (49,645) ---
Total $ 138,501 3.4% 386,387 10.9% 397,241 12.2%
Interest Expense
Interest expense, net, was $8.6 million in fiscal 2008 compared to $1.5 million in the prior year. Our net
interest expense increased compared to the prior year due to the issuance of the $400 million senior
convertible notes in October 2007. Our fiscal 2008 interest expense, net, included $9.2 million of interest
income primarily related to interest on our cash and cash equivalents and short-term investment balances.
In fiscal 2007 and 2006, interest income was $8.1 million and $12.2 million, respectively.
We had average borrowings outstanding of $401.0 million in fiscal 2008 compared to $170.2 million in
fiscal 2007 and $342.0 million in 2006. Our weighted average interest rate in fiscal 2008 was 3.5 percent.
In fiscal 2007 and 2006, the weighted average interest rates were 5.6 percent and 7.4 percent,
respectively. Our fiscal 2008 weighted average interest rates have decreased compared to the prior year
due to the coupon rate of 1.25% on our senior convertible notes.
Miscellaneous Expenses
We recorded miscellaneous expenses, net, of $5.4 million in fiscal 2008, compared to $2.7 million and
$8.0 million in fiscal 2007 and 2006, respectively. The fiscal 2008 expense was comprised primarily of
bank charges. Bank charges were $3.3 million, $2.6 million and $2.5 million in fiscal 2008, 2007 and
2006, respectively. In fiscal 2006, we incurred a $4.9 million expense for repurchase premiums
associated with the buyback of over 90 percent of our then-outstanding senior notes. These premiums
also include a charge on the termination of interest rate swap contracts.
Income Taxes
Our fiscal 2008 effective tax rate was 13.8 percent. The effective tax rate was lower than the prior year
due to a significant reduction in German statutory tax rates and the effect of permanent deductions on
lower pre-tax income. Also, in fiscal 2008 we settled a German tax audit on terms favorable to our
previous estimates. Exclusive of restructuring and merger costs recorded during fiscal 2008, the tax rate
was 20.9 percent.
The effective tax rates in fiscal 2007 and 2006, were 18.4 percent and 32.4 percent, respectively. In fiscal
2007, the tax rate was impacted by a $51 million net gain resulting from a court decision that allowed
certain taxpayers to recognize additional foreign tax credits. The effective tax rate was also impacted by a
$4 million tax charge resulting from a dividend from South Africa. In fiscal 2006, we repatriated $500