Harman Kardon 2008 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 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

27
Termination Benefits. For one-time termination benefits, such as additional severance pay, and other exit
costs, such as lease and other contract termination costs, the liability is measured and originally
recognized at fair value in the period in which the liability is incurred, with subsequent changes
recognized in the period of change, in accordance with SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities.
Stock-Based Compensation
On July 1, 2005, we adopted SFAS No. 123R, Share-Based Payment, using the modified prospective
method. Prior to fiscal 2006, we used a fair value based method of accounting for share-based
compensation provided to our employees in accordance with SFAS No. 123. The adoption of this revised
standard did not have a material impact on our results of operations as we have recorded share-based
compensation expense on a fair value basis for all awards granted on or after July 1, 2002. See Note 12,
Stock Option and Incentive Plan, to our consolidated financial statements included in this report for
additional information regarding our share-based compensation.
Results of Operations
Net Sales
Fiscal 2008 net sales were $4.113 billion, an increase of 16 percent compared to the prior year. The
effects of foreign currency translation contributed approximately $275 million to the increase in net sales.
Each of our three reportable business segments had higher net sales in fiscal 2008 compared to the prior
year. The strong growth in net sales was primarily due to full production of an infotainment system for
Chrysler, higher infotainment systems sales to European automakers, and higher sales of professional
audio products.
In fiscal 2007, net sales increased 9 percent to $3.551 billion when compared to the prior year. The
effects of foreign currency translation contributed approximately $144 million during the year. The
growth in net sales was primarily due to higher sales of infotainment systems to automotive customers,
strong sales of multimedia products, and increased sales in the professional market.
We present below a summary of our net sales by reportable business segment:
($000s omitted) Fiscal 2008 Fiscal 2007 Fiscal 2006
Automotive $ 2,970,139 72% 2,492,815 70% 2,237,632 69%
Consumer 531,283 13% 497,673 14% 492,977 15%
Professional 611,081 15% 560,656 16% 517,288 16%
Total $ 4,112,503 100% 3,551,144 100% 3,247,897 100%
Automotive – Automotive net sales increased 19 percent in fiscal 2008 compared to the prior year.
Foreign currency translation contributed approximately $229 million to the net sales increase compared to
the prior year. Since a significant percentage of our sales are to customers in Europe, the majority of our
foreign currency exposure is in the automotive segment. Net sales were higher in North America due to a
full year of producing the MyGig infotainment system for Chrysler, our first infotainment system launch
in North America. We also had higher infotainment system sales to Hyundai/Kia in support of their