Harman Kardon 2009 Annual Report Download - page 53

HiQnet products as we achieved economies of scale with additional product generations. Further initiatives to
reduce manufacturing costs included the migration of some production from our Northridge, California facility to
our expanded facility in Tijuana, Mexico.
Other—Other gross profit as a percentage of net sales declined 5.0 percentage points to 62.3 percent in
fiscal year 2009 compared to the prior year due to unallocated facility costs retained in Corporate and increased
2.8 percentage points in fiscal year 2008 compared to the prior year, due to higher margins in our QNX business.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses were $853.3 million in fiscal year 2009 compared
to $970.9 million in fiscal year 2008, a decrease of $117.6 million. Despite the decline in SG&A expenses,
SG&A as a percentage of net sales for fiscal year 2009 increased 5.9 percentage points to 29.5 percent compared
to the prior year due to the decrease in net sales. Foreign currency translation contributed $43.6 million to the
decrease in SG&A expenses when compared to the prior year. Other factors contributing to the decrease in
SG&A included an overall reduction in selling, advertising, promotion and other general and administrative
expenses resulting from prior restructuring actions, a reduction in research and development expenses (“R&D”)
of $64.2 million, of which $22.4 million was related to foreign currency translation, $15.4 million due to net
proceeds from the sale of certain of our speech recognition assets within our Automotive segment, $13.3 million
of lower share-based compensation expense and lower benefit expenses due to the suspension of 401(k) match
and profit sharing contributions, a benefit from stock option forfeitures due to executive retirements, a benefit
from our profit sharing accrual as the fiscal year 2008 contribution was not approved and reductions in selling,
advertising and promotion expenses. These decreases were partially offset by an increase in restructuring
expenses of $49.5 million and SG&A included $13.8 million in merger costs in fiscal year 2008. R&D costs were
$331.7 million or 11.5 percent of net sales in fiscal year 2009 compared to $395.9 million or 9.6 percent of net
sales in the prior year. Employee compensation and benefit costs are also included in SG&A expenses.
SG&A expenses were $970.9 million in fiscal year 2008, compared to $824.8 million in the prior year, an
increase of $146.1 million. SG&A as a percentage of sales increased 0.4 percentage points to 23.6 percent in
fiscal year 2008 primarily due to higher R&D costs of $395.9 million or 9.6 percent of net sales versus $356.7
million or 10.0 percent of net sales in the prior year. The increase in R&D costs in fiscal year 2008 when
compared to the prior year was primarily due to increased costs to support infotainment system programs for our
Automotive customers.
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. We recorded restructuring
charges in SG&A of $91.7 million, $42.4 million and $7.1 million in fiscal years 2009, 2008 and 2007,
respectively. Restructuring is further described under the caption Restructuring later in this discussion.
Below is a summary of our SG&A expenses by business segment:
Year Ended June 30,
($ in thousands) 2009
Percentage
of Net
Sales 2008
Percentage
of Net
Sales 2007
Percentage
of Net
Sales
Automotive ........................ $530,283 26.5% $599,131 20.5% $505,015 20.5%
Consumer ......................... 110,348 31.0% 127,895 24.8% 109,288 22.7%
Professional ........................ 138,848 28.2% 155,981 24.9% 139,525 24.2%
Other ............................. 73,848 * 87,898 * 70,991 *
Total ............................. $853,327 29.5% $970,905 23.6% 824,819 23.2%
* Percent not meaningful.
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