Harman Kardon 2009 Annual Report Download - page 56

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Goodwill
Goodwill was $81.9 million at June 30, 2009 compared with $436.4 million at June 30, 2008. The decrease
is primarily related to non-cash goodwill impairment charges of $330.6 million, unfavorable foreign currency
translation of $35.3 million and contingent purchase price consideration associated with the acquisition of
Innovative Systems GmbH of $11.3 million. In fiscal year 2008, goodwill increased by $32.7 million primarily
due to foreign currency translation and contingent purchase price consideration. Refer to Note 5 – Goodwill in
the Notes to the Consolidated Financial Statements for more information.
The changes in the carrying amount of goodwill for the year ended June 30, 2009 were as follows:
Automotive Consumer Professional Other Total
Balance at June 30, 2008 ...................... $367,492 $ 23,369 $45,586 $ — $ 436,447
Realignment of business segments (Note 15) ...... (52,497) — — 52,497 —
Contingent purchase price consideration associated
with the acquisition of Innovative Systems
GmbH .................................. 11,290 — — — 11,290
Impairment charge .......................... (295,080) (22,663) — (12,820) (330,563)
Other adjustments(1) .......................... (31,205) (706) (3,386) — (35,297)
Balance at June 30, 2009 ...................... $ — $ — $42,200 $ 39,677 $ 81,877
(1) The other adjustments to goodwill primarily consist of foreign currency translation adjustments.
The contingent purchase price consideration associated with the acquisition of Innovative Systems GmbH
continues through August 2025, unless the buyout option is exercised by either the buyer or the seller in
September 2010. There is also approximately $10 million of contingent purchase price consideration associated
with the acquisition of QNX which is payable in November 2009 when the contingency lapses.
Operating (Loss) Income
Fiscal year 2009 operating loss was $(509.3) million or (17.6) percent of net sales. This represents a
decrease of 21.0 percentage points compared to the prior year. The decrease in operating income was primarily
due to a goodwill impairment charge, restructuring costs and a lower gross profit margin.
Fiscal year 2008 operating income was $138.5 million or 3.4 percent of net sales. This represents a decrease
of 7.5 percentage points compared to the prior year. The decrease in operating income was primarily due to a
lower gross profit margin, restructuring costs, and expenses related to the merger termination.
Presented below is a summary of our operating (loss) income by business segment:
Year Ended June 30,
($ in thousands) 2009
Percentage
of Net
Sales 2008
Percentage
of Net
Sales 2007
Percentage
of Net
Sales
Automotive ....................... $(439,957) (21.9)% $114,786 3.9% $341,428 13.9%
Consumer ......................... (49,939) (14.0)% (3,811) (0.7)% 18,670 3.9%
Professional ....................... 44,363 9.0% 87,912 14.0% 75,885 13.1%
Other ............................ (63,741) * (60,386) * (49,596) *
Total ............................. $(509,274) (17.6)% $138,501 3.4% $386,387 10.9%
Interest Expense, net
Interest expense, net, was $6.9 million, $8.6 million and $1.5 million in fiscal year 2009, 2008 and 2007,
respectively. Interest income included within Interest expense, net was $8.4 million, $9.2 million and $8.1
million and interest expense included within Interest expense, net was $15.3 million, $17.8 million and $9.6
million in fiscal years 2009, 2008 and 2007, respectively. Interest income primarily relates to interest earned on
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