Harman Kardon 2009 Annual Report Download - page 46

We continue to incur costs relating to our restructuring program, which is designed to address our global
footprint, cost structure, technology portfolio, human resources and internal processes. Restructuring is further
described under the caption Restructuring later in this discussion.
Recent Events
Issuance of Common Stock
On June 23, 2009, we completed a public offering of 10,667,000 shares of our common stock at the offering
price of $18.75 per share, less a 4.75 percent underwriting discount. We received cash proceeds of $189.8
million, net of expenses of $0.7 million. In connection with this transaction, approximately $0.1 million was
recorded as an increase in our common stock and $189.7 million was recorded as an increase in additional
paid-in capital in our Consolidated Balance Sheet at June 30, 2009.
Reduction in Available Credit Under the Amended Credit Agreement
In connection with our public offering of common stock, described above and in Note 11 – Shareholder’s
Equity and Share-Based Compensation, in the Notes to the Consolidated Financial Statements, on June 15, 2009,
we and our wholly-owned subsidiary, Harman Holding GmbH & Co. KG, entered into the First Amendment to
the Second Amended and Restated Multi-Currency, Multi-Option Credit Agreement (the “First Amendment”).
The purpose of the First Amendment was to reduce the Equity Prepayment Percentage, as defined in the Second
Amended and Restated Multi-Currency, Multi-Option Credit Agreement dated March 31, 2009, by and among
Harman International Industries, Incorporated, Harman Holding GmbH & Co. KG, JPMorgan Chase Bank, N.A.,
as administrative agent, and the several banks party thereto (the “Amended Credit Agreement”) from 50 percent
to 20 percent for a limited period of time ending June 30, 2009. The Equity Prepayment Percentage is the
amount, expressed as a percentage, of net cash proceeds received from the public offering of our common stock
that we had to repay under the revolving credit facility. As a result, we repaid $38 million of borrowings under
the Amended Credit Agreement, which represented 20 percent of the net cash proceeds received from the public
offering. In addition, our borrowing capacity under the Amended Credit Agreement was reduced by $38 million,
to a net borrowing capacity of $232 million at June 30, 2009. In connection with the reduction in our borrowing
capacity, we wrote off $1.2 million of debt issuance costs to interest expense in our Consolidated Statements of
Operations, representing our net reduction in borrowing capacity in accordance with EITF 98-14, “Debtor’s
Accounting for Changes in Line-of-Credit or Revolving Debt Agreements.” At June 30, 2009, the unamortized
balance of debt issuance costs was $7.5 million.
At June 30, 2009, we had no available borrowing capacity under the Amended Credit Agreement and
outstanding borrowings of $234.7 million, consisting of $227.3 million under the revolving credit facility and
outstanding letters of credit of $7.4 million. Our total borrowings exceeded our borrowing capacity due to foreign
currency translation. The Amended Credit Agreement contains a provision that allows our total outstanding
borrowings to exceed the borrowing capacity by 5 percent which is equal to $243.6 million. At June 30, 2009, we
had not exceeded this amount.
The Amended Credit Agreement contains financial and other covenants that require us to maintain certain
specified ratios and liquidity levels, and imposes certain limitations on us and certain of our subsidiaries, which
are more fully described in the section entitled Financial Condition, within this Management’s Discussion and
Analysis and in Note 6 – Debt in our Notes to the Consolidated Financial Statements.
Critical Accounting Policies
The methods, estimates and judgments we use in applying our accounting policies, in conformity with
generally accepted accounting principles in the United States (“GAAP”), have a significant impact on the results
we report in our financial statements. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. The estimates affect the carrying values of
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