Harman Kardon 2010 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    2010 Annual Report

  • Page 3
    ... world's leading technologies for premium audio and infotainment have one name in common: HARMAN. We delight customers around the home, in the car and on the go with a range of award-winning products blending rich sound and distinctive design. Our family of respected brands spans more than 60 years...

  • Page 4
    Financial Highlights FIVE YEAR SUMMARY (IN THOUSANDS EXCEPT PER SHARE DATA, FOR THE FISCAL YEARS ENDED JUNE 30) 2010 $ 3,364,428 Net sales 85,555 Operating income (loss) Income (loss) from continuing operations attributable to Harman International Industries, 35,178 Incorporated, net of income ...

  • Page 5
    HARMAN Group Executive Committee (left to right) Sachin Lawande, Executive Vice President, Chief Technology Officer and Co-President Automotive; Blake Augsburger, Executive Vice President, President - Professional, and Country Manager, North America; Michael Mauser, Executive Vice President and Co...

  • Page 6
    ... customers have recognized HARMAN's technology leadership with new multi-year awards. BMW and Daimler selected our premium infotainment systems for their upcoming luxury platforms, and Chrysler specified our branded audio for its SRT series of high-performance vehicles. BMW awarded HARMAN Annual...

  • Page 7
    ...of premium audio with ï¬,at-screen televisions. New HARMAN Consumer web sites now serve customers in more than 25 countries and an expanded social networking presence builds loyalty among the connected generation. We implemented a new direct-to-consumer distribution model in the United States, while...

  • Page 8
    ... our first prime-time television advertising as Official Sound Partner to the GRAMMY® Awards. Our Music Voyager TV series is taking viewers on a musical journey around the world in cooperation with National Geographic Channels and the Public Broadcasting System. We helped entertain more than 200...

  • Page 9

  • Page 10
    ... global automakers, spanning custom in-car branded audio, navigation, hands-free communication and driver assist technologies. Our customers responded by awarding HARMAN with significant new business during the year. BMW and Daimler selected our premium infotainment systems for their upcoming...

  • Page 11

  • Page 12
    ... (below/left) Legendary producer and entertainer Quincy Jones teams with HARMAN to develop and launch a new signature series of AKG headphones for the consumer market. (below/middle) Harman Kardon GLA-55 multimedia speakers, blending rich sound with distinctive design, earned rave reviews during the...

  • Page 13

  • Page 14
    ...facility sound managers continue to depend on HARMAN professional audio for premium sound and seamless systems integration. We travel with the world's top performing artists and amplify the action at major music and sporting events. Our portfolio covers microphones, headphones, amplifiers, speakers...

  • Page 15
    ... business that will support a highly-visible revenue stream over the next several years. (below/left) Innovative iPhone® applications from HARMAN enable wireless monitoring and control of installed professional audio systems throughout large performance venues. (below/center) HARMAN teams up with...

  • Page 16
    ... Principal Executive Offices) 06901 (Zip Code) Registrant's telephone number, including area code (203) 328-3500 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $.01 per share New York Stock Exchange...

  • Page 17
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  • Page 18
    ... Fees and Services ...Exhibits, Financial Statement Schedules ... 23 24 25 43 45 102 102 102 103 103 103 103 103 104 110 Signatures ...The page numbers in this Table of Contents reflect actual page numbers, not EDGAR page tag numbers. References to "Harman International," the "Company," "we," "us...

  • Page 19
    ... or investors. The price of our stock would likely decline if...cost of compliance with such laws; our ability to maintain a competitive technological advantage through innovation and leading product designs; acceptance of our mid-platform infotainment systems by original equipment manufacturers...

  • Page 20
    ... research, publicly available information and industry publications. Estimates are inherently uncertain, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors" which is located in Item 1A of Part I of this report...

  • Page 21
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 22
    ...Automotive products are marketed worldwide under brand names including JBL, Infinity, Mark Levinson, Harman/Kardon, Logic 7®, Lexicon and Becker. We also have an exclusive alliance with Bowers & Wilkins to develop, manufacture, sell and service premium audio systems under the Bowers & Wilkins brand...

  • Page 23
    ... winning design and high fidelity. Aftermarket mobile products include speakers, amplifiers and digital signal processors ("DSPs") that deliver high-quality in-car audio. Our Consumer products are sold in specialty audio stores, mass-market retail stores such as the Apple stores, Best Buy, Target...

  • Page 24
    ... with automotive manufacturers through an increase in the number of models offering our audio, navigation and infotainment systems; increases in per-vehicle content through the provision of integrated infotainment and premium branded audio systems; higher penetration levels of high-level audio and...

  • Page 25
    ... objective is to maintain our leadership position in the infotainment business. We continue to leverage our expertise in the design and manufacture of premium branded audio systems, as well as the reputation for quality associated with our JBL, Infinity, Harman/Kardon, Mark Levinson, Logic 7, 4

  • Page 26
    ... Levinson brand names. Our Harman/Kardon home electronics line includes audio/video receivers featuring Logic 7, Dolby Digital® and DTS® surround sound processing capabilities and multi-channel amplifiers, DVD players and CD players. In the multimedia market, we offer branded iPod docking devices...

  • Page 27
    ... network. This system provides enhanced productivity and facilitates real-time problem diagnosis and correction from a central location. We design high-end electronics, including amplifiers, digital signal processors, multi format digital media players and transports and surround sound processors...

  • Page 28
    ... brands include JBL, Infinity, Harman/Kardon, Lexicon, Mark Levinson, Revel, Crown, Becker, Soundcraft, DigiTech, AKG, Studer, BSS, dbx and Selenium. Our trademark registrations cover use of trademark rights in connection with various products, such as loudspeakers, speaker systems, speaker system...

  • Page 29
    ... Consumer home, multimedia and mobile aftermarket products are offered through audio specialty stores, discount stores, department stores, mail order firms and Internet merchants. Automotive and computer manufacturers also offer branded audio products as options. Music instrument retailers, national...

  • Page 30
    ... Mark Levinson and Lexicon brands. Our principal competitors in this high-end market include Krell, McIntosh, Audio Research, Meridian, Linn and Classe. In the multimedia market, we supply Apple stores and other retailers with JBL and Harman/Kardon speaker systems that serve Apple's iPod and iPhone...

  • Page 31
    ... significant resources to research and development to sustain our competitive position. Number of Employees At June 30, 2010, we had 9,816 full-time employees, including 3,362 employees located in North America and 6,454 employees located outside of North America. Foreign Operations Information...

  • Page 32
    ..., our sales of audio, electronic and infotainment products to automotive customers are dependent on the overall success of the automobile industry, and the success of premium automobiles in particular, as well as the willingness of automobile purchasers to pay for the option of a premium branded...

  • Page 33
    ...material adverse effect on our consolidated sales, earnings and financial condition. Failure to deliver products on time to our automotive customers could adversely affect our financial results. We have products in various stages of development for our automotive customers. If we do not complete our...

  • Page 34
    ... existing or new competitors that may enter our markets. We also compete indirectly with automobile manufacturers that may improve the quality of original equipment audio and electronic systems, reducing demand for our aftermarket mobile audio products, or change the designs of their cars to make...

  • Page 35
    ... the recall, as opposed to generating new car sales volume, and (ii) consumers electing not to purchase automobiles manufactured by the OEM initiating the recall. If OEMs continue to experience a reduction in sales, especially OEMs that are our automotive customers, this may have an adverse effect...

  • Page 36
    ... safeguarding intellectual property rights than in the United States; and difficulty in staffing and managing geographically diverse operations. These and other risks may, among other things, increase the relative price of our products compared to those manufactured in other countries, reducing the...

  • Page 37
    ...our ability to attract and retain key employees and the succession of senior management. Our success largely depends on the performance of our management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key people, our future...

  • Page 38
    diversion of our management's attention from other business concerns, the assumption of unknown liabilities, undisclosed risks impacting the target and potential adverse effects on existing business relationships with our current customers and suppliers. In addition, any acquisitions could involve ...

  • Page 39
    ...Plaintiff") against Harman and certain of our officers in the United States District Court for the District of Columbia (the "Court") seeking compensatory damages and costs on behalf of all persons who purchased our common stock between April 26, 2007 and September 24, 2007 (the "Class Period"). The...

  • Page 40
    ..., 2007, the Boca Raton General Employees' Pension Plan (the "Boca Raton Plaintiff") filed a purported class action lawsuit against Harman and certain of our officers in the Court seeking compensatory damages and costs on behalf of all persons who purchased our common stock between April 26, 2007 and...

  • Page 41
    ... notice of a complaint filed against it by Siemens AG with the Regional Court in Düsseldorf in August 2006 alleging that certain of Harman Becker's infotainment products, including both radio receiver and Bluetooth hands free telephony functionality, infringe upon a patent owned by Siemens AG. In...

  • Page 42
    ... in various positions with QNX Software Systems, most recently as Vice President, Engineering Services. Michael Mauser joined our Company in 1997, and has served as Executive Vice President and Co-President-Automotive Division since April 2010. From May 2005 until April 2010, Mr. Mauser served as...

  • Page 43
    ... for Landis + Gyr Holdings, a leader in the energy management industry, where he directed the company's global brand strategy and evaluated portfolio and architecture investments. From 2007 until 2008, he served as President and Chief Executive Officer of Cellnet + Hunt Group. From 2003 to 2007, Mr...

  • Page 44
    ... Our common stock is listed on the New York Stock Exchange and is reported on the New York Stock Exchange Composite Tape under the symbol HAR. As of July 31, 2010, there were approximately 117 record holders of our common stock. The table below sets forth the reported high and low sales prices for...

  • Page 45
    ... Statements and the Notes to the Consolidated Financial Statements. (In thousands except per share data) 2010(1) 2009 2008 2007 2006 Net sales ...Operating income (loss) ...Income (loss) from continuing operations attributable to Harman International Industries, Incorporated, net of income taxes...

  • Page 46
    ...as digitally integrated infotainment systems for the automotive industry. We have developed a broad range of product offerings which we sell in our principal markets under our renowned brand names, including AKG, Crown, JBL, Infinity, Harman/Kardon, Lexicon, Mark Levinson and Selenium. We report our...

  • Page 47
    ... 2010, Harman do Brasil Industria Eletrônica e Participacoes Ltda., an indirect wholly-owned subsidiary of Harman purchased all of the issued and outstanding shares of Selenium Eletrônica S.A. ("Selenium"), a Brazilian-based manufacturer of such products as loudspeakers, line arrays and amplifiers...

  • Page 48
    ... of specific customer orders within our Automotive segment. After discussions with several of our significant customers, we concluded that the majority of orders would be postponed and not cancelled. We were able to proactively adjust our supply chain demand to match these new customer requirements...

  • Page 49
    ...-for sale in the fiscal year ended June 30, 2010. We did not record any impairment charges for long-lived assets in 2009 and 2008. Pre-Production and Development Costs We incur pre-production and development costs related to infotainment systems that we develop for automobile manufacturers pursuant...

  • Page 50
    ... resulting from the launch of new platforms, the ramp-up of new infotainment business, overall production recovery and new acoustic model launches, partially offset by lower personal navigation device ("PND") net sales due to our exit from this distribution channel. Net sales were higher in our 29

  • Page 51
    ... to move to dual-sourcing on select Mercedes models, as well as reduced production at some of our major Automotive customers including Chrysler, Toyota/Lexus, Porsche and SsangYong. These declines were partially offset by higher volumes at BMW, new infotainment business at Audi/Volkswagen and PSA...

  • Page 52
    ... and Sweden and a warranty center in New Jersey, partially offset by a one-time warranty charge incurred in fiscal year 2008 relating to engineering charges for one of our products. Restructuring costs recorded at these locations relate to accelerated depreciation on machinery and equipment. 31

  • Page 53
    ...-absorption of fixed costs due to lower sales volumes, partially offset by higher product margins due to the exit of unprofitable lines of business. Professional-Professional gross profit as a percentage of net sales increased 1.5 percentage points to 38.7 percent in fiscal year 2010 compared to the...

  • Page 54
    ... by the impact of a settlement of a claim associated with an automotive supply arrangement and unfavorable foreign currency translation of $19.0 million. R&D decreased $3.2 million to $265.9 million, or 10.8 percent of net sales, in fiscal year 2010 compared to $269.1 million, or 13.4 percent of net...

  • Page 55
    ... of the Woodbury, New York facility and numerous headcount reductions across our business units to reduce excess capacity due to decreased sales. The most significant of these programs were in Germany, Austria, the United Kingdom, Sweden and various locations in the United States. We additionally...

  • Page 56
    ... in the beginning of fiscal year 2010. Our results of operations depend on our sales of audio products and electronic systems in the automotive, consumer and professional markets. Our products are sold worldwide, with the largest markets being the United States and Germany. Significant portions of...

  • Page 57
    ... in our Automotive reporting unit and our other reporting units. As a result, we ceased recognizing goodwill impairment charges associated with incremental goodwill that is recognized related to contingent purchase price arrangements. During the year ended June 30, 2010, we recorded $6.1 million of...

  • Page 58
    ... charge, restructuring costs and a lower gross profit margin. Presented below is a summary of our operating income (loss) by business segment: Year Ended June 30, Percentage of Net Sales Percentage of Net Sales Percentage of Net Sales ($ in thousands) 2010 2009 2008 Automotive ...Consumer...

  • Page 59
    ... $586.4 million at June 30, 2010 and 2009, respectively. We will continue to have cash requirements to support seasonal working capital needs, investments in our manufacturing facilities, interest and principal payments and restructuring payments. We intend to use cash on hand and cash generated by...

  • Page 60
    ...new automotive platforms and a new manufacturing facility in China. We expect that our run rate for capital expenditures will increase in fiscal year 2011. Financing Activities Net cash flows used in financing activities were $222.3 million in fiscal year 2010...our public offering of common stock, ...

  • Page 61
    ..., from 50 percent to 20 percent for a limited period of time ending on 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...

  • Page 62
    ...Notes. As of June 30, 2010, we were in compliance with all the financial covenants of the Amended Credit Agreement... Agreement, which matures on December 31, 2011. Under the terms of this Guarantee and... trading period was less than 98 percent of the product of (1) the closing price of our common stock ...

  • Page 63
    ...costs at June 30, 2010...offer to purchase a principal face amount of the Convertible Senior Notes equal...represented the total outstanding borrowings at that time. At June 30, 2010...equipment...Non-cancelable operating ...Financial Statements for more information and for interest payments associated with our long-term...

  • Page 64
    ... to help us improve our cost structure, which we believe will enable us to remain competitive and mitigate the negative effects of this challenging environment. We are continuing to proceed with our 24-month cost improvement and productivity program called STEP Change. This program is designed to...

  • Page 65
    ...in the prior fiscal year. Competitive conditions in the markets in which we operate may limit our ability to increase prices in the event of adverse changes in currency exchange rates. For example, certain products made in Europe are sold in the U.S. Sales of these products are affected by the value...

  • Page 66
    ..., Incorporated is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and the fair presentation of published...

  • Page 67
    ... financial reporting as of June 30, 2010, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board...

  • Page 68
    ... with the standards of the Public Company Accounting Oversight Board (United States), Harman International Industries, Incorporated's internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of...

  • Page 69
    ...2010 2009 Assets Current assets Cash and cash equivalents ...Receivables, net ...Inventories, net ...Other current assets ...Current assets of discontinued operations ...Total current assets ...Property, plant and equipment...Common stock held in treasury ...Total Harman ...financial statements. 48

  • Page 70
    ...HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Year Ended June 30, 2009 (in thousands, except per share data) 2010 2008 Net sales ...Cost of sales...benefit), net ...Income (loss) from continuing operations, net of income taxes ...Gain on sale... consolidated financial statements. 49

  • Page 71
    ...received ...Deconsolidation of variable interest entity ...Contingent purchase price consideration ...Proceeds from sale...stock ...Dividends paid to shareholders ...Share-based payment arrangements ...Debt issuance costs ...Excess tax benefits...period ...Year Ended June 30, 2010 2009 2008 $ 158,769 (9,...

  • Page 72
    ... June 30, 2010, 2009 and 2008 Common Stock Accumulated $.01 Additional Other Number of Par Paid-in Comprehensive Retained Shares Value Capital Income (Loss) Earnings $595,853 $ 82,191 ($ in thousands) Comprehensive income: Net income attributable to Harman International Industries, Incorporated...

  • Page 73
    ...believe we are a leader in digitally integrated infotainment systems for the automotive industry. Our AKG, Crown, JBL, Infinity, Harman/Kardon, Lexicon, dbx, Studer, Soundcraft, Mark Levinson, Selenium and Becker brand names are well-known worldwide for premium quality and performance. We have built...

  • Page 74
    ... six years from the date of purchase, depending on the business segment and product. Our dealers and warranty service providers normally perform warranty service in field locations and regional service centers, using parts and replacement finished goods we supply on an exchange basis. Our dealers 53

  • Page 75
    ... incurred. When production costs are incurred for future advertising, these costs are recorded as an asset and subsequently expensed when the advertisement is first put into service. R&D: R&D is expensed as incurred. Our expenditures for research and development, net of customer reimbursements, were...

  • Page 76
    ...for sale in the fiscal year ended June 30, 2010. We did not record any impairment charges for long-lived assets in 2009 and 2008. Pre-Production and Development Costs: We incur pre-production and development costs primarily related to infotainment systems that we develop for automobile manufacturers...

  • Page 77
    ... key executives designated by our Board of Directors. Certain employees outside the United States are covered by non-contributory defined benefit plans. The defined benefit plans are funded in conformity with applicable government regulations. Generally, benefits are based on age, years of service...

  • Page 78
    ...designed so that changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely has risk management tools and not for trading... is reported in cost of sales, SG...stock options and similar equity instruments awarded to employees...

  • Page 79
    ... stock is recorded as a reduction of common stock and additional paid-in-capital in our Consolidated Balance Sheets at the time such retirement is approved by our Board of Directors. Change in Accounting: On July 1, 2009, we adopted the new accounting guidance issued by the Financial Accounting...

  • Page 80
    ... for the liability and equity components of the instrument. Under the new guidance, the debt should be recognized at the present value of its cash flows discounted using the issuer's nonconvertible debt borrowing rate at the time of issuance and the equity component should be recognized as the...

  • Page 81
    ... in connection with the debt discount. Effect of new guidance reflects a reduction in debt issuance costs allocated to the equity component. Effect of new guidance reflects the unamortized debt discount. Effect of new guidance reflects the recognition of the equity component, net of tax. Effect of...

  • Page 82
    ... than treating as part of the cost of the acquisition and including in the amount recorded for assets acquired. The new guidance applies prospectively to business combinations which occur after July 1, 2009. The impact of these new provisions on our consolidated financial statements were applied...

  • Page 83
    ...provisions require disclosures about fair value of financial instruments for interim reporting periods of publicly-held companies, as well as in annual financial statements. The adoption of the new provisions did not have any impact on our financial condition or results of operations. In August 2009...

  • Page 84
    ...the fair value of the asset. The adoption of the new provisions did not have a material impact on our financial condition or results of operations. Consolidation: In January 2010, FASB issued ASU No. 2010-02, "Accounting and Reporting for Decreases in Ownership of a Subsidiary," which clarifies that...

  • Page 85
    ... 2010. Selenium is a Brazilian manufacturer of loudspeaker products, using engineered technology based on international standards, and sells a full line of products including loudspeakers, high quality line arrays, multi-systems, amplifiers, drivers and other components related to the sound systems...

  • Page 86
    ...the "Purchase Agreement") to sell all of the issued and outstanding shares of QNX Software Systems Co., QNX Software Systems (Wavemakers), Inc. and QNX Software Systems, Inc. (collectively, the "QNX" Entities) for $200 million. The sale closed on June 1, 2010. In connection with this transaction, we...

  • Page 87
    ... lower of cost or market analysis, analysis of historical usage data, forecast demand data and historical disposal rates. Specific product valuation analysis is applied, if practicable, to those items of inventory representing a higher portion of the value of inventory on-hand. At June 30, 2010 and...

  • Page 88
    Harman International Industries, Incorporated and Subsidiaries (Dollars in thousands, except per-share data and unless otherwise indicated) Note 5 - Property, Plant & Equipment, net At June 30, 2010 and 2009, property, plant and equipment from continuing operations consisted of the following: ...

  • Page 89
    ...Employee stock options ...Total weighted average shares outstanding ...Earnings (Loss) per Share: Net income (loss) from continuing operations attributable to Harman... shares of our common stock with exercise prices ranging from $26.64 to $126.94 per share at June 30, 2010 were outstanding and not ...

  • Page 90
    ... the fair value of the goodwill so calculated be less than the carrying value, an impairment is recorded. The annual impairment test conducted on April 30, 2010 indicated that the fair value of each reporting unit was in excess of its carrying value and, as such, no impairment was deemed to exist...

  • Page 91
    ... for the year ended June 30, 2010 were as follows: Automotive Consumer Professional Other Total Balance at June 30, 2009 ...$ - $ - Acquisition of Selenium (Note 2) ...- 30,686 Contingent purchase price consideration associated with the acquisition of Innovative Systems GmbH ...18,419 - Impairment...

  • Page 92
    ...2010 and 2009 are presented net of unamortized discounts of $37.3 million and $52.2 million, respectively, resulting from the adoption of new accounting guidance in fiscal year 2010... ended June 30, 2010, 2009 and 2008, respectively. Cash paid for interest, net of cash interest received, was $15.0 ...

  • Page 93
    ..., from 50 percent to 20 percent for a limited period of time ending on 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...

  • Page 94
    Harman...must be equal to or less than 1:... from the sale of certain assets... 30, 2010, we were in compliance with all the financial covenants of... December 31, 2011. Under the terms... we adopted new accounting guidance relating...Partners VI Fund, L.P. ("GSCP") and companies formed by investment 73

  • Page 95
    ...trading period was less than 98 percent of the product of (1) the closing price of our common stock... debt issuance costs at June 30, 2010 and June ...offer to purchase a principal face amount of the Convertible Senior Notes equal...represented the total outstanding borrowings at that time. At June 30, 2010...

  • Page 96
    ... and currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes. We record all derivative instruments as...

  • Page 97
    ... of materials used in our manufacturing process and to manage currency risk associated with operating costs in certain operating units. These contracts generally mature in one year or less. A portion of these contracts are designated as cash flow hedges. At June 30, 2010 and 2009, we had outstanding...

  • Page 98
    ... the gain or loss on the associated contracts directly in current period earnings in either other expense or cost of sales according to the underlying exposure in our Consolidated Statements of Operations as unrealized exchange gains/(losses). As of June 30, 2010 and 2009, we had $47.5 million and...

  • Page 99
    ...) Years Ended June 30, 2010 2010 2009 2010 2009 Gain/(Loss) from Amounts Excluded from Effectiveness Testing 2010 2009 Derivative Foreign exchange contracts ...Foreign exchange contracts ...Foreign exchange contracts ...Interest rate swap ...Total cash flow hedges ... Cost of sales $27,967 $(5,355...

  • Page 100
    ...are not designated as hedging instruments for the years ended June 30, 2010 and 2009: Derivative Location of Derivative Gain/(Loss) Years Ended June 30, 2010 2009 Foreign exchange contracts ...Foreign exchange contracts ...Note 11 - Fair Value Measurements Other expense Cost of sales $3,357 $ 311...

  • Page 101
    ...a borrowing rate specific to our Company. See Note 10 - Derivatives, for further discussion regarding our derivative financial instruments. Assets... they are held for sale, impaired loans that have been reduced based on the fair value of the underlying collateral, cost and equity method investments ...

  • Page 102
    ...results, future business plans, economic projections, market observable pricing multiples of similar businesses and comparable transactions, and possible control premium. These investments are included in Level 3. Goodwill: Goodwill is tested for impairment annually or more frequently if an event or...

  • Page 103
    ...276 1,259 4,722 Tax benefit from export sales and U.S. production activities ...- - (1,024) Change in valuation allowance ...4,767 9,699 (247) Change in other tax liabilities ...(857) 5,151 (1,497) Difference between Federal and financial accounting for incentive stock option grants ...1,009 1,005...

  • Page 104
    ... of the following: June 30, Assets/(Liabilities) 2010 2009 Federal tax credits ...Inventory costing differences ...Capitalized research and development ...U.S. tax loss carryforward ...Foreign tax loss and credit carryforwards ...Non-qualified stock options-GAAP deductions ...Other assets and other...

  • Page 105
    ... the United States are fiscal years 2006 through the current year. While we expect the amount of unrecognized tax benefits to change, we are unable to quantify the change at this time. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2010...

  • Page 106
    ...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, and received cash proceeds of $189.8 million, net of expenses of $0.7 million. Approximately $0.1 million was recorded as an increase in...

  • Page 107
    ...Stock Units A grant of restricted stock units involves an agreement by our Company to deliver a specified number of shares of common stock or cash to the participant when the award vests. A participant has no ownership or voting rights associated with the underlying shares of common stock. Our Board...

  • Page 108
    ... of our common stock over the expected option term. We use historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options granted is derived using the option valuation model and represents the estimated period of time from the date...

  • Page 109
    ...peer group of publicly listed multinational companies. TSR will be measured as the annualized increase in the aggregate value of a company's stock price plus the value of dividends, assumed to be reinvested into shares of the company's stock at the time of dividend payment. The base price to be used...

  • Page 110
    ... agreement, the Special Bonus Award was cancelled and replaced with the right to an annual equity award for fiscal years 2011 through 2013 (the "Annual Equity Grant"). On September 1, 2009, both time based vesting and performance based vesting restricted stock units were granted to the CEO pursuant...

  • Page 111
    ... of the Woodbury, New York facility and numerous headcount reductions across our business units to reduce excess capacity due to decreased sales. The most significant of these programs were in Germany, Austria, the United Kingdom, Sweden and various locations in the United States. We additionally...

  • Page 112
    ...average compensation during the final years of service. In the United States, we have a SERP that provides retirement, death and termination benefits, as defined in the SERP, to certain key executives designated by our Board. The majority of our defined benefit plans do not have contractual or legal...

  • Page 113
    ... $(107,011) Amounts recognized in AOCI for the fiscal years ended June 30, 2010 and 2009 are as follows: Year Ended June 30, 2010 2009 Amounts recorded in AOCI Prior service cost ...Net actuarial loss ...Income tax benefits related to above items ...Total recognized in AOCI ... $ 10,078 31,586 41...

  • Page 114
    ...,563 Presented below are the components of net periodic benefit costs for the fiscal years ended June 30, 2010, 2009 and 2008: Year Ended June 30, 2010 2009 2008 Components of net periodic benefit cost: Service cost ...Interest cost ...Amortization of prior service cost ...Amortization of net loss...

  • Page 115
    ... equipment by automotive manufacturers. Our Automotive products are marketed worldwide under brand names including JBL, Infinity, Mark Levinson, Harman/Kardon, Logic 7, Lexicon and Becker. Our premium branded audio, video, navigation and infotainment systems are offered to automobile manufacturers...

  • Page 116
    ... indicated) The following table reports net sales, operating income (loss), assets, goodwill, capital expenditures and depreciation and amortization by each reporting segment from continuing operations: 2010 Year Ended June 30, 2009 2008 Net sales: Automotive ...Consumer ...Professional ...Other...

  • Page 117
    ... area as of and for the years ended June 30, 2010, 2009 and 2008. Net sales are attributable to geographic areas based upon the location of the customer. 2010 Year Ended June 30, 2009 2008 Net sales: U.S...Germany ...Other Europe ...Other ...Total ...Long-lived assets: U.S...Germany ...Other...

  • Page 118
    ...Plaintiff") against Harman and certain of our officers in the United States District Court for the District of Columbia (the "Court") seeking compensatory damages and costs on behalf of all persons who purchased our common stock between April 26, 2007 and September 24, 2007 (the "Class Period"). The...

  • Page 119
    ... notice of a complaint filed against it by Siemens AG with the Regional Court in Düsseldorf in August 2006 alleging that certain of Harman Becker's infotainment products, including both radio receiver and Bluetooth hands free telephony functionality, infringe upon a patent owned by Siemens AG. In...

  • Page 120
    ... granted Harman Becker and its affiliated entities, a non-exclusive, worldwide, royalty-free and perpetual license to the patent at issue. Automotive Supply Arrangements We have arrangements with our automotive customers to provide products that meet predetermined technical specifications and...

  • Page 121
    ...to and net accounts receivable due from customers who represent ten percent or more of our net sales or net accounts receivable from continuing operations for the periods presented: Net Sales Year Ended June 30, 2010 2009 Accounts Receivable, Net June 30, 2010 2009 BMW ...Audi/Volkswagen ...Daimler...

  • Page 122
    ... 2008: Three Months Ended September 30 December 31 March 31 June 30 Total Fiscal Year 2010 Net sales ...Gross profit ...Income (loss) from continuing operations attributable to Harman International Industries, Incorporated, net of income taxes ...Income (loss) from discontinued operations, net of...

  • Page 123
    ... under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of...

  • Page 124
    ... III Item 10. Directors, Executive Officers and Corporate Governance. The information required by Item 10 of Part III is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders. Item 11. Executive Compensation. The information required by Item 11 of Part III is...

  • Page 125
    ... April 27, 2007 and hereby incorporated by reference) Certificate of Designation of Series A Junior Participating Preferred Stock of Harman International Industries, Incorporated, dated January 11, 2000. (filed as Exhibit 4.3 to the Annual Report on Form 10-K for the fiscal year ended June 30, 2000...

  • Page 126
    ... Exhibit 4.1 to the Current Report on Form 8-K filed with the Commission on January 13, 2010 and hereby incorporated by reference) Registration Rights Agreement, dated as of October 23, 2007, between Harman International Industries, Incorporated, KKR I-H Limited, GS Capital Partners VI Fund L.P., GS...

  • Page 127
    ...Exhibit 10.11 to the Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and hereby incorporated by reference)** Form of Incentive Stock Option Agreement for Officers and Key Employees under the Harman International Industries, Incorporated 2002 Stock Option and Incentive Plan. (filed...

  • Page 128
    ...No. Exhibit Description 10.20 Form of Restricted Share Unit Agreement for Officers and Key Employees under the Harman International Industries, Incorporated Amended and Restated 2002 Stock Option and Incentive Plan. (filed as Exhibit 10.6 to the Quarterly Report on Form 10-Q for the quarter ended...

  • Page 129
    ... by reference)** Form of Benefit Agreement under the Supplemental Executive Retirement Plan. (filed as Exhibit 10.14 to the Annual Report on Form 10-K for ..., dated May 30, 2008, between Harman Management GmbH and Klaus Blickle. (filed as Exhibit 10.37 to the Annual Report on Form 10-K for the fiscal...

  • Page 130
    ...2010, among Harman International Industries, Incorporated, Harman Holding GmbH & Co. KG, Research In Motion Corporation, 2236008 Ontario Inc. and Research In Motion Limited (filed as Exhibit 10.1 to the Current Report... Directors and Executive Officers (filed as Exhibit 99.1 to the Current Report on...

  • Page 131
    ... ended June 30, 2010, 2009 and 2008, (iv) Consolidated Statements of Shareholders' Equity and Comprehensive Income and (v) Notes to Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall...

  • Page 132
    ..., this report has been signed below by the following persons on behalf of the registrant in the capacities indicated below. /S/ DINESH PALIWAL Dinesh Paliwal Chairman, President and Chief Executive Officer (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal...

  • Page 133
    ...HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Valuation and Qualifying Accounts and Reserves Year Ended June 30, 2010, 2009 and 2008 (in thousands) Balance at beginning of period Charged to costs... in June 2010 and classified as discontinued operations in our consolidated financial statements. 112

  • Page 134
    ... compares changes in cumulative total returns (assuming reinvestment of cash dividends) on shares of the Common Stock for the five-year period ending June 30, 2010 against the S&P Composite-500 Stock Index and the S&P 500 Consumer Discretionary Index. The stock price performance graph assumes an...

  • Page 135
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  • Page 136
    ... to our Annual Report on Form 10-K for the fiscal year ended June 30, 2010. Additionally, in 2009 our Chief Executive Officer submitted the required CEO Certification to the New York Stock Exchange. Registrar and Transfer Agent BNY Mellon Shareowner Services 400 South Hope Street, 4th Floor Los...

  • Page 137
    ... Swift performs with the support of JBL VERTEC® professional loudspeaker arrays from HARMAN. © 2010 Harman International Industries, Incorporated. All rights reserved. AKG®, Becker®, Crown®, dbx®, Harman Kardon®, Infinity®, JBL®, Lexicon®, Mark Levinson®, Soundcraft® and Studer® are...