Harman Kardon 2010 Annual Report Download - page 46

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the information presented in other sections of
this Annual Report on Form 10-K, including “Item 1. Business,” “Item 6. Selected Financial Data,” and “Item
8. Financial Statements and Supplementary Data.” This discussion contains forward-looking statements which
are based on our current expectations and experience and our perception of historical trends, current market
conditions, including customer acceptance of our new products, current economic data, expected future
developments, including foreign currency exchange rates, and other factors that we believe are appropriate
under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ
materially from those suggested in the forward-looking statements. See “Risk Factors” included in Item 1A of
Part I of this report. Unless otherwise indicated, “Harman,” “the Company,” “we,” “our,” and “us” are used
interchangeably to refer to Harman International Industries, Incorporated and its consolidated subsidiaries.
We begin our discussion with an overview of our Company to give you an understanding of our business
and the markets we serve. We then discuss recent developments. This is followed by a discussion of our critical
accounting policies, and then by a discussion of our results of operations for the fiscal years ended June 30, 2010,
2009 and 2008. We include in this discussion an analysis of certain significant period-to-period variances in our
Consolidated Statements of Operations and an analysis of our restructuring program. We also provide specific
information regarding our four business segments: Automotive, Consumer, Professional and Other. We then
discuss our financial condition at June 30, 2010 with a comparison to June 30, 2009. This section contains
information regarding our liquidity, capital resources and cash flows from operating, investing and financing
activities. We complete our discussion with an update on our business outlook.
Executive Overview
We believe we are a global leader in the development, manufacture and marketing of high-quality, high-
fidelity audio products and electronic systems, as well 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 business on the basis of four segments. Our Automotive, Consumer and Professional
segments are based on the end-user markets we serve. Our fourth segment, Other, includes compensation, benefit
and occupancy costs for corporate employees. On June 1, 2010 we sold our QNX business, which we previously
reported in our Other segment. The results of operations for QNX have been reclassified to discontinued
operations in all periods presented. Refer to the heading “Discontinued Operations” below and to Note 3 –
Discontinued Operations in the Notes to the Consolidated Financial Statements for more information.
We continued to experience the effects of the worldwide economic crisis in our results through fiscal year
2010. However, we do believe that the markets are beginning to recover. Our future outlook may continue to be
impacted by the contraction in consumer discretionary spending. Our outlook could also be affected by changes
in foreign currency exchange rates which could potentially result in reduced sales.
To mitigate the potential impacts of the weak economic markets, we continued to accelerate many of our
strategic initiatives and restructuring actions, and hence we continue to incur costs relating to our STEP Change
restructuring program. We are also continuing to focus our efforts on improving our global footprint, technology
portfolio, human resources and internal processes 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 yield $400 million in sustainable savings by fiscal year 2011. Restructuring is further
described under the caption Restructuring later in this discussion.
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