Harman Kardon 2010 Annual Report Download - page 59

upon our interest coverage ratio and senior unsecured debt rating. Interest rates for borrowings under the
Amended Credit Agreement increased to three percent above the applicable base rate and four percent over
LIBOR for Eurocurrency loans.
Miscellaneous Expenses, net
We recorded miscellaneous expenses, net, of $6.3 million, $4.2 million and $5.2 million, in fiscal year 2010,
2009 and 2008, respectively, primarily consisting of bank charges. Bank charges were $5.3 million, $3.6 million
and $3.3 million in fiscal years 2010, 2009 and 2008, respectively.
Income Taxes
Our fiscal year 2010 effective tax rate was an expense of 17.5 percent. The effective tax rate was lower than
the U.S. Federal statutory rate of 35 percent due to the generation of U.S. federal income tax credits and the
income mix and rate differential between the U.S. and foreign jurisdictions. The effective tax rates in fiscal years
2009 and 2008 were 20.2 percent and 12.5 percent, respectively.
Financial Condition
Liquidity and Capital Resources
We primarily finance our working capital requirements through cash generated by operations, borrowings
under the Amended Credit Agreement and trade credit. Cash and cash equivalents increased $59.2 million during
fiscal year 2010. The increase in cash was primarily due to the net proceeds received in connection with the sale
of the QNX Entities and cash generated through our operations, partially offset by a repayment of $228.9 million
of borrowings under the Amended Credit Agreement, the Selenium acquisition for $63.8 million and a decrease
of $11.3 million relating to the deconsolidation of the Harman Navis joint venture. Refer to Note 20 – Investment
in Joint Venture in the Notes to the Consolidated Financial Statements for more information. Cash and cash
equivalents were $645.6 million and $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 operations to meet these requirements. The credit markets have recently experienced
adverse conditions. Our existing cash and cash equivalents may decline and our financial condition may be
adversely affected in the event of continued volatility in the credit markets or further economic deterioration. We
expect that credit market and industry conditions will continue to be weak in the near future. However, we
believe that in this difficult environment our cash on hand of $645.6 million as of June 30, 2010 and our
operating cash flows will be adequate to meet our cash requirements for operations, restructuring and necessary
capital expenditures over the next 12 months. Below is a more detailed discussion of our cash flow activities
during the year ended June 30, 2010.
Operating Activities
Net cash provided by operating activities in fiscal year 2010 was $240.4 million compared to $74.5 million
in fiscal year 2009. Operating cash flows increased primarily due to higher operating income, higher accounts
payable, resulting from better management of our vendor payment terms, partially offset by higher accounts
receivable and inventory balances reflecting higher revenue. At June 30, 2010, working capital, excluding cash,
and short-term debt was $178.9 million compared with $177.0 million at June 30, 2009. The decrease was
primarily due to higher accounts payable, partially offset by higher accounts receivables and inventory.
Investing Activities
Net cash provided by investing activities was $66.7 million in fiscal year 2010 compared to $67.0 million used
in investing activities in fiscal year 2009. Net cash provided by investing activities includes $200 million of
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