Harman Kardon 2010 Annual Report Download - page 52

Professional—Professional net sales increased 6 percent in fiscal year 2010 compared to the prior fiscal
year. Foreign currency translation had a favorable impact on net sales of approximately $2 million compared to
the prior fiscal year. Net sales were higher compared to the prior fiscal year in our Professional segment
primarily due to new product introductions and higher net sales as markets continued to rebound.
Professional net sales decreased 21 percent in fiscal year 2009 compared to the prior fiscal year. Foreign
currency translation contributed approximately $15 million to the net sales decrease compared to the prior fiscal
year. The decline in sales compared to the prior fiscal year was due to the effect of the weak economy on both
our distributors’ liquidity and market demand.
Gross Profit
Gross profit as a percentage of net sales increased 3.7 percentage points to 26.3 percent in fiscal year 2010
compared to the prior fiscal year. The increase in gross profit in fiscal year 2010 compared to the prior fiscal year
was primarily due to lower restructuring charges relating to accelerated depreciation, improved leverage of fixed
overhead costs due to higher sales volumes and savings achieved through our STEP Change initiatives, partially
offset by inventory write-downs associated with our exit from the PND business.
Gross profit as a percentage of net sales decreased 3.9 percentage points to 22.6 percent in fiscal year 2009
compared to the prior fiscal year. The decrease in fiscal year 2009 compared to the prior fiscal year was due to
decreased factory utilization associated with lower sales, product mix and the loss of the Daimler business due to
their decision to move to dual-sourcing on select Mercedes models. Restructuring costs included in cost of sales
were $8.7 million in fiscal year 2009 compared to $4.7 million in the prior fiscal year which consists primarily of
accelerated depreciation expenses due to the closure of manufacturing facilities.
A summary of our gross profit by business segment is presented below:
Year Ended June 30,
($ in thousands) 2010
Percentage
of Net
Sales 2009
Percentage
of Net
Sales 2008
Percentage
of Net
Sales
Automotive ...................... $587,248 23.8% $385,406 19.2% $ 713,916 24.4%
Consumer ........................ 99,062 26.6% 83,072 23.3% 124,084 24.1%
Professional ...................... 202,558 38.7% 183,211 37.2% 243,894 38.9%
Other ........................... (3,710) * (6,339) * (4,244) *
Total ............................ $885,158 26.3% $645,350 22.6% $1,077,650 26.5%
* Percent not meaningful.
Automotive—Automotive gross profit as a percentage of net sales increased 4.6 percentage points to 23.8
percent in fiscal year 2010 compared to the prior fiscal year. The increase in gross profit for the year ended
June 30, 2010 compared to the prior fiscal year was primarily due to improved leverage of fixed overhead costs
due to higher sales volumes and savings achieved through our STEP Change initiatives and lower warranty
expense, partially offset by unfavorable product mix.
Automotive gross profit as a percentage of net sales declined 5.1 percentage points to 19.2 percent in fiscal
year 2009 compared to the prior fiscal year. The decline in gross profit was due to lower factory utilization
associated with the decrease in sales, Daimler’s strategic decision to move to dual-sourcing on select models,
changes in sales mix at Audi/Volkswagen, BMW and Porsche and restructuring costs incurred in connection with
announced plant downsizings or closings in California, Indiana, France 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.
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