Harman Kardon 2011 Annual Report Download

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2011 ANNUAL REPORT
SOUND STRATEGIES

Table of contents

  • Page 1
    SOUND STRATEGIES 2011 ANNUAL REPORT

  • Page 2
    ...market to work more closely with customers. We have continued the track record of innovation that has distinguished our company and its brands for more than 60 years. Our loyal customers have responded to these sound strategies, rewarding HARMAN with profitable repeat business, a multi-year backlog...

  • Page 3
    ...scal years ended June 30) 2011 Net sales Operating income (loss) Net income (loss) from continuing operations attributable to Harman ... share Cash & cash equivalents $ 3,772,345 190,051 135,916 - 135,916 135,916 $ 2010 3,364,428 85,555 35,178 123,591 164,058 158,769 $ 2009 2,854,895 (503...

  • Page 4
    ...Group Executive Committee (Left to Right) Michael Mauser, Executive Vice President and Co-President - Infotainment and Lifestyle; John Stacey, Executive Vice President and Chief Human Resources Officer; Blake Augsburger, Executive Vice President, President - Professional, and Country Manager - North...

  • Page 5
    ... Group and Fiat selected HARMAN to equip their new vehicles sold worldwide, energizing our established relationship with Chrysler, and bringing an exciting new global brand, Fiat, to our portfolio. This multi-year agreement puts our advanced connectivity, integrated on-board navigation and audio...

  • Page 6
    ... that can service the needs of the country's growing consumer demand for premium audio products and automotive infotainment solutions. We will continue to aggressively develop our emerging market resources, seizing new business opportunities and added competitiveness through best-cost operations...

  • Page 7
    ... initiatives as the model for additional improvements. Recognizing that HARMAN employees are integral to this success, we continue to empower our team through innovative programs. The annual HARMAN People Cycle includes regular evaluations, clear target setting for the year ahead, and compensation...

  • Page 8

  • Page 9
    ...mobile infotainment. We introduced an innovative "tethered" navigation system with Mercedes Benz, and our Aha Radio online broadcasting application was selected by Pioneer Electronics for its aftermarket products. These innovations helped contribute to a backlog of awarded HARMAN automotive business...

  • Page 10

  • Page 11
    ... as Apple, Best Buy and Target. Other new HARMAN consumer products serve customers with packaged solutions for premium home theater and optimizing of installed car stereo systems. The division's AKG Noise Cancelling Headphones earned top ratings from leading independent researcher Consumer Reports...

  • Page 12

  • Page 13
    ... fair, in cooperation with the company's new unit, Selenium. Participants in the Miss Universe China competition stepped out with support from HARMAN audio systems, as part of the Company's title sponsorship of the pageant. HARMAN digital mixing consoles were recently installed at the famed Vienna...

  • Page 14
    ... technology takes mobile infotainment to the next level, delivering news, entertainment and social networking via hands-free, eyes-free interaction. HARMAN's new engineering, manufacturing and training facility in Dandong, China will become the Company's largest worldwide, serving customers in both...

  • Page 15
    ... 31, 2010 (the last business day of the registrant's most recently completed second fiscal quarter) was $3,214,964,584 based upon the closing price of the shares on the New York Stock Exchange on that date. Indicate the number of shares outstanding of each of the registrant's classes of common stock...

  • Page 16
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  • Page 17
    ... 13. Item 14. Part IV Item 15. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal...

  • Page 18
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  • Page 19
    ...; fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; the inability of our suppliers to deliver products at the scheduled rate...

  • Page 20
    ...Risk Factors" which is located in Item 1A of Part I of this report. We undertake no obligation to publicly update or revise any forward-...report, we refer to information regarding market data obtained from internal sources, market research, publicly available information and industry publications...

  • Page 21
    ... including JBL, Infinity, Mark Levinson, Harman/Kardon, Logic 7®, Lexicon and Becker. We also have an exclusive license with Bowers & Wilkins to develop, manufacture, sell and service premium audio systems under the Bowers & Wilkins brand name. Global automotive customers for our premium audio and...

  • Page 22
    ... 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, Media...

  • Page 23
    ...-have helped establish our Company as a leader in the primary markets we serve. Our brand portfolio includes such renowned names as AKG, Becker, Crown, Harman/Kardon, Infinity, JBL, Lexicon, Mark Levinson and Selenium. We have successfully leveraged these brands across our Automotive, Consumer and...

  • Page 24
    .... Our Infinity branded car audio systems are offered by Chrysler, Hyundai and Kia in the U.S. BMW, Daimler AG, Land Rover, General Motors and Saab provide Harman/Kardon branded audio systems in their vehicles. Our premium Mark Levinson digital audio system is offered by Lexus. Lexicon branded audio...

  • Page 25
    ... 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, Blu-ray players and CD players. In the multimedia market, we offer branded iPad, iPod and iPhone docking...

  • Page 26
    ..., multi format digital media players and transports and surround sound processors that we market under the renowned Mark Levinson brand. We believe that we are a leader in the design and manufacture of high-quality home theater surround sound processors and amplifiers under the Lexicon name. Lexicon...

  • Page 27
    ... Channels Automotive We primarily sell our Automotive infotainment and audio systems directly to automobile manufacturers in the U.S., Europe, Japan, China and Korea, where they are installed as original equipment. Consumer We primarily sell our Consumer products to dealers who sell directly...

  • Page 28
    ...consumer electronics market with our 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...

  • Page 29
    ... line by adding digital professional electronic products and broadcast and recording equipment. We compete by utilizing our ability to provide systems solutions to meet the complete audio requirements of our professional customers. With our HiQnet networking protocol software, our professional brand...

  • Page 30
    ... years ended June 30, 2011, 2010 and 2009, respectively. We expect to continue to devote significant resources to research and development to sustain our competitive position. Number of Employees At June 30, 2011, we had 10,103 full-time employees, including 3,260 employees located in North America...

  • Page 31
    Website Information Our corporate website is located at www.harman.com. We make available free of charge on our investor relations website under "SEC Filings" our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as...

  • Page 32
    ...well as the willingness of automobile purchasers to pay for the option of a premium branded automotive audio system or a multi-function digital infotainment system. Global demand for, and production of premium vehicles, including certain vehicle models that incorporate our products, could decline in...

  • Page 33
    ... conditions have adversely affected our supplier base. Lower production levels for some of our key customers and increases in certain raw material, commodity and energy costs have resulted in severe financial distress among many companies within the automotive supply base. Several large suppliers 15

  • Page 34
    ...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 installation...

  • Page 35
    ... of our business. Other incidents may arise from events that are or may be beyond our ability to control and may damage our brands, such as counterfeit and knock-off products, litigation and claims, and illegal activity targeted at us or others. Consumer demand for our products and our brands' value...

  • Page 36
    ... to those manufactured in other countries, reducing the demand for our products. Our business could be adversely affected by a strike or work stoppage at one of our manufacturing plants or at a facility of one of our significant customers or at a common carrier or major shipping location. Workers at...

  • Page 37
    ... business considerations. Our success depends upon 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...

  • Page 38
    ... 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 original complaint...

  • Page 39
    ... alleged in the original complaint, Harman also violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by "knowingly failing to disclose "significant problems" relating to its Personal Navigation Device ("PND") sales forecasts, production, pricing, and inventory...

  • Page 40
    ...of Directors and hold office at the pleasure of the Board until the next annual election of officers or until their successors are elected and qualified. Each of our current executive officers is identified below together with information about each officer's age, position and employment history for...

  • Page 41
    ... center in India as part of Harman's strategy for optimizing its global footprint. From 2001 through 2008, Mr. Lawande served 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...

  • Page 42
    ...our common stock. The table below sets forth the reported high and low sales prices for our common stock, as reported on the New York Stock Exchange, for each quarterly period for fiscal years ended June 30, 2011 and 2010. Years Ended June 30, 2011 2010 High Low High Low Market Price First quarter...

  • Page 43
    ...for each of the five fiscal years presented. The information should be read in conjunction with Management's Discussion and Analysis of Financial...) 2011(1) 2010(1) 2009 2008 2007 Net sales ...Operating income (loss) ...Net income (loss) from continuing operations attributable to Harman International...

  • Page 44
    ...of high-quality, highfidelity 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. We report our business on...

  • Page 45
    ... the passage of title to goods transfers to unaffiliated customers and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable and collection is reasonably assured. Sales are reported net of estimated returns, discounts, rebates and incentives...

  • Page 46
    ... adjust our supply chain demand to match these new customer requirements, thereby reducing our exposure to inventory write-downs. There was no significant movement in our inventory reserves in fiscal year 2011 compared with the end of the prior fiscal year. At June 30, 2011 and 2010 our inventory...

  • Page 47
    ... 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 and warranty service providers also install updates...

  • Page 48
    ...of our three business segments reported higher sales compared to the prior fiscal year although the increase in overall net sales was primarily attributable to our Automotive segment. In January 2010, we reorganized our personal navigation device ("PND") business and entered into a trademark license...

  • Page 49
    ... of new infotainment business, overall production recovery and new acoustic model launches. These increases were partially offset by lower PND net sales of $24 million, due to our exit from this distribution channel in January 2010 resulting in lower year over year sales. Consumer-Consumer net sales...

  • Page 50
    ... year 2011 compared to the prior fiscal year. The decrease in gross profit as a percentage of net sales was primarily due to unfavorable product mix, specifically an increase in lower margin infotainment business and a temporary reduction in higher margin audio business due to customer production...

  • Page 51
    ... decrease in charges for claims related to automotive supply arrangements compared to the prior fiscal year. As a percentage of net sales, SG&A decreased 1.4 percentage points to 21.6 percent in fiscal year 2011 compared to the prior fiscal year. Research and development costs ("R&D"), including...

  • Page 52
    ... SG&A primarily includes compensation, benefit and occupancy costs for our corporate employees, expenses associated with new technology innovation and our corporate brand identity campaign, as well SG&A for Aha. Other SG&A increased $15.3 million to $84.3 million in fiscal year 2011 primarily due to...

  • Page 53
    ...our manufacturing capabilities in China and the exit of the PND distribution channel in Germany. In fiscal year 2011, we announced the relocation of certain manufacturing activities from Washington, Missouri to Mexico, the outsourcing of certain manufacturing activities to third party suppliers, and...

  • Page 54
    ...The annual goodwill impairment test conducted as of April 30, 2011 indicated that the fair value of each reporting unit was substantially in excess of its carrying value and, as such, no impairment was deemed to exist. During the first half of fiscal year 2010, we determined that goodwill related to...

  • Page 55
    ...business segment is as follows: Percentage of Net Sales Year Ended June 30, Percentage of Net 2010 Sales Percentage of Net Sales ($ in thousands) 2011 2009 Automotive ...Consumer...expense, in fiscal years 2011, 2010 and 2009, respectively. Cash interest expense primarily relates to interest for ...

  • Page 56
    ... and Luxury Home Audio, which was previously reported in our Professional segment. This change is designed to unlock earnings growth and to better align with consumer lifestyle preferences. Acquisition On July 22, 2011 (the "MWM Acquisition Date"), we and our wholly-owned subsidiary, Harman Holding...

  • Page 57
    ..., short-term deposits and government bonds, time deposits, and treasury bills with original maturities of greater than three months and less than one year. Capital expenditures for the fiscal year ended June 30, 2011 were $108.4 million, in support of new automotive awards, compared to $60.0 million...

  • Page 58
    ... million. New Revolving Credit Facility On December 1, 2010, we and one of our wholly-owned subsidiaries, Harman Holding GmbH & Co. KG ("Harman KG") , entered into a multi-currency credit agreement (the "Credit Agreement") with a group of banks. The Credit Agreement provides for a five-year secured...

  • Page 59
    ...sale...timely payments, breaches of representations or covenants, or a change in control of our Company, as defined in the Credit Agreement. At June 30, 2011...line basis. In addition, we wrote off $0.7 million of debt issuance costs, associated with the 2009 Credit Agreement, which represented... Harman KG...

  • Page 60
    ... Arrangements We enter into operating leases for land, buildings and equipment in the normal course of business which are not included in our Consolidated Balance Sheets. In addition... agreements for purchase of goods and services with defined terms as to quantity, price and timing of delivery. 42

  • Page 61
    ... in the supply of rare earth minerals, specifically neodymium, used in our products, will increase our costs by approximately $85 million in fiscal year 2012 and may continue to have a negative impact on our profitability. We are currently investigating alternative design solutions utilizing...

  • Page 62
    ... ended June 30, 2011 increased 1.9 percent from the same period 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...

  • Page 63
    ... Financial Reporting The management of Harman International Industries, 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...

  • Page 64
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Harman International Industries, Incorporated and subsidiaries as of June 30, 2011 and 2010, and the related consolidated statements of operations, shareholders' equity...

  • Page 65
    ... 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, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of...

  • Page 66
    ...2011 2010 Assets Current assets Cash and cash equivalents ...Short-term investments ...Receivables, net ...Inventories, net ...Other current assets ...Total current assets ...Property, plant and equipment... ...Total liabilities ...Preferred stock ...Common stock ...Additional paid-in capital...

  • Page 67
    HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended June 30, 2010 (in thousands, except per share data) 2011 2009 Net sales ...Cost of sales ...Gross profit ...Selling, general and administrative expenses ...Sale of intellectual ...

  • Page 68
    ...thousands) 2011 Year Ended June 30, 2010 2009 Cash flows from operating activities: Net income (loss) attributable to Harman International ..., net of cash received ...Deconsolidation of variable interest entity ...Contingent purchase price consideration ...Proceeds from sale of QNX Entities,...

  • Page 69
    ... (LOSS) Years Ended June 30, 2011, 2010 and 2009 Common Stock Accumulated $.01 Additional Other Number of Par Paid-in Comprehensive Retained Shares Value Capital Income (Loss) Earnings $676,648 $ 191,531 ($ in thousands) Comprehensive loss: Net income attributable to Harman International Industries...

  • Page 70
    ... 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...

  • Page 71
    ... 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 and warranty service providers also install updates...

  • Page 72
    ... are recorded as an asset and subsequently expensed when the advertisement is first put into service. R&D: Research and development is expensed as incurred. R&D, net of customer reimbursements, were $304.6 million, $322.7 million and $325.1 million for the fiscal years ending June 30, 2011, 2010 and...

  • Page 73
    ... to facilities that were held-for-sale in the fiscal year ended June 30, 2010. Pre-Production and Development Costs: We incur pre-production and development costs related to infotainment systems that we develop for automobile manufacturers pursuant to long-term supply arrangements. Portions of these...

  • Page 74
    ... issues...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 75
    ... is recognized based on the estimated fair value of stock options and similar equity instruments awarded to employees. Refer to Note 14 - Shareholders' Equity and Share-Based Compensation for more information. AOCI: At June 30, 2011 and 2010 AOCI consisted of the following: June 30, Income/(Loss...

  • Page 76
    ... at the time such retirement is approved by our Board of Directors. Recently Adopted Accounting Pronouncements Variable Interest Entities: On July 1, 2010, we adopted the new accounting guidance issued by the Financial Accounting Standards Board ("FASB") within Accounting Standards Update ("ASU...

  • Page 77
    ... the combined entity should be disclosed as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The new guidance applies prospectively to us for business combinations which occur on or after July...

  • Page 78
    ... 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 79
    ...159) (0.16) In fiscal year 2009, a $12.8 million goodwill impairment charge was recorded related to the QNX Entities. Note 4 - Inventories, net At June 30, 2011 and 2010, inventories from continuing operations consisted of the following: June 30, 2011 2010 Finished goods ...Work in process ...Raw...

  • Page 80
    ...represents foreign currency translation. Note 7 - Earnings (Loss) Per Share 2011 Basic Diluted Year Ended June 30, 2010...159) (9,159) Net income (loss) attributable to Harman International Industries, Incorporated ...$135,916 $135,916 $... shares outstanding ...Employee stock options ...Total weighted...

  • Page 81
    ... if the price of our common stock exceeds the conversion price of the Convertible Senior Notes. Refer to Note 9 - Debt for further information. Note 8 - Goodwill We test for impairment at the reporting unit level on an annual basis as of April 30th of every year and between annual tests if an...

  • Page 82
    ... $105.9 million at June 30, 2010. The increase in goodwill in the fiscal year ended June 30, 2011 versus the prior fiscal year is primarily related to foreign currency translation, contingent purchase price consideration associated with the acquisition of innovative Systems GmbH ("innovative") of...

  • Page 83
    ... discounts of $21.6 million and $37.3 million, respectively, resulting from the adoption of new accounting guidance in fiscal year 2010. The fair value of the Convertible Senior Notes at June 30, 2011 and 2010 was $383.9 million and $351.2 million, respectively. Interest expense is reported...

  • Page 84
    ...Subject to certain conditions set forth in the ... 1, 2010, and... to pay an annual facility fee on the... for general corporate purposes. Interest...sale...timely payments, breaches of representations or covenants, or a change in control of our Company, as defined in the Credit Agreement. At June 30, 2011...

  • Page 85
    ... 30 2011 and 2010 which were issued on October 23, 2007 (the "Issuance Date") and are due on October 15, 2012. The Convertible Senior Notes were issued at ... the Convertible Senior Notes as a debt discount. This amount represents the excess proceeds received over the fair value of the Convertible ...

  • Page 86
    ... were recorded in ...years ended June 30, 2011, 2010 and 2009, includes $5.0 million in all fiscal years of contractual cash interest expense and an additional $15.7 million, $14.8 million and $13.9 million of noncash interest expense, respectively, related to the amortization of the discount... time as...

  • Page 87
    ... and to manage currency risk associated with operating costs in certain operating units, including foreign currency denominated intercompany loans and other foreign currency denominated assets. These contracts generally mature in one year or less. A portion of these contracts are designated as cash...

  • Page 88
    ... our Consolidated Statements of Operations, in the then-current period. Amounts relating to such reclassifications were immaterial for the years ended June 30, 2011, 2010 and 2009. Changes in the fair value of the derivatives are highly effective in offsetting changes in the cash flows of the hedged...

  • Page 89
    ...For the years ended June 30, 2011, 2010 and 2009, we recognized $1.2 million, $0.1 million and $2.4 million, respectively, in net gains related to the...is designated as a cash flow hedge. At the end of each reporting period, the discounted fair value of the swap contract is calculated and recorded in ...

  • Page 90
    ...716 325 (9,684) 5,898 $(36,103) $25,600 The following tables show derivative activity for derivatives designated as cash flow hedges for the years ended June 30, 2011, 2010 and 2009: Location of Derivative Gain/(Loss) Recognized in Income Gain/(Loss) Recognized Gain/(Loss) in Income on Reclassified...

  • Page 91
    ... gains and losses from our derivative instruments that are not designated as hedging instruments for the years ended June 30, 2011, 2010 and 2009: Derivative Location of Derivative Gain/(Loss) Years Ended June 30, 2011 2010 2009 Foreign exchange contracts ...Foreign exchange contracts ...Note 11...

  • Page 92
    ...on a non-recurring basis and the losses recorded during the periods presented: Fair Value at June 30, 2011 Fair Value at June 30, 2010 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Total Losses for the Year Ended June 30, 2011 2010 2009 Description of Assets Equity method investments ...Goodwill...

  • Page 93
    ...using a discounted cash flow model, comparative ...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...

  • Page 94
    ..., 2011, we are obligated for the following minimum lease commitments under terms of non-cancelable lease agreements: Capital Leases Operating Leases 2012 ......benefit) from continuing operations for the years ended June 30, 2011, 2010 and 2009 consisted of the following: 2011 Year Ended June 30, 2010...

  • Page 95
    ... or liability to which they relate or, when applicable, based on the expected timing of the reversal. The net current deferred tax assets of $52.4 million and $21.9 million are recorded in Other current assets in the Consolidated Balance Sheets at June 30, 2011 and 2010, respectively. The net non...

  • Page 96
    ... discontinued operations for fiscal year 2010 includes an expense of $35 million relating to tax on previously permanently reinvested earnings. We intend to repatriate a portion of these earnings, as a result of the sale of the QNX Entities and therefore have recorded a deferred income tax liability...

  • Page 97
    ...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 98
    ...2011. Share-based compensation expense was higher for fiscal year 2010 compared to the prior fiscal year due to stock option forfeitures recorded in connection with the retirement of senior executives in fiscal year 2009. 2002 Plan On December 8, 2010, we amended the 2002 Plan to increase the number...

  • Page 99
    ... our Board of Directors could extend the time period to exercise vested options 90 days beyond the employment termination date for certain employees. During the fiscal year ended June 30, 2011 and 2010, the Compensation and Option Committee used this authority. This action represented a modification...

  • Page 100
    ... total shareholder return ("TSR") to a selected peer group of publicly listed multinational companies. TSR was 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...

  • Page 101
    ... 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 102
    ...in China and the exit of the personal navigation device ("PND") distribution channel in Germany. In fiscal year 2011, we announced the relocation of certain manufacturing activities from Washington, Missouri to Mexico, the outsourcing of certain manufacturing activities to third party suppliers, and...

  • Page 103
    ... from our Board of Directors at the end of each fiscal year. Management eliminated the profit sharing contribution as of December 28, 2010. No amount was accrued for profit sharing contribution for each of the fiscal years ended June 30, 2011, 2010 and 2009. Expenses related to the Retirement...

  • Page 104
    ...as of and for the fiscal years ended June 30, 2011 and 2010: Year Ended June 30, 2011 2010 Change in benefit obligation: Benefit obligation at beginning of year ...Benefit obligation at the beginning of the year of plans not previously reported(1) ...Service cost ...Interest cost ...Actuarial (gain...

  • Page 105
    ... obligations and net periodic pension and other postretirement benefit costs are as follows: 2011 Year Ended June 30, 2010 2009 Assumptions: Weighted average rates used to determine benefit obligations at June 30: Range of discount rates for pension plans ...Range of rates of compensation increase...

  • Page 106
    ... to be installed primarily as original 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...

  • Page 107
    ... depreciation and amortization by each reporting segment from continuing operations: 2011 Year Ended June 30, 2010 2009 Net sales: Automotive ...Consumer ...Professional ...Other ...Total ...Operating income (loss): Automotive ...Consumer ...Professional ...Other ...Total ...Discontinued operations...

  • Page 108
    ... and net assets by geographic area as of and for the years ended June 30, 2011, 2010 and 2009. Net sales are attributable to geographic areas based upon the location of the customer. 2011 Year Ended June 30, 2010 2009 Net sales: U.S...Germany ...Other Europe ...Other ...Total ...Long-lived assets...

  • Page 109
    ...the violations alleged in the original complaint, Harman also violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by "knowingly failing to disclose "significant problems" relating to its PND sales forecasts, production, pricing, and inventory" prior to January...

  • Page 110
    ... motion is now fully briefed. As of June 30, 2011, the case remained open with no new developments. Automotive Supply Arrangements We have arrangements with our automotive customers to provide products that meet predetermined technical specifications and delivery dates. In the event that we do not...

  • Page 111
    ... time to time we enter into transactions with related parties. In December 2009, we entered into a three-year agreement for engineering and software development services with Neusoft Corporation ("Neusoft"), a Shanghai exchange listed technology solutions provider. A member of our Board of Directors...

  • Page 112
    ... of net sales 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: Accounts Receivable, Net June 30, 2011 2010 Net Sales Year Ended June 30, 2011 2010 BMW ...Audi...

  • Page 113
    ...is a summary of operations by quarter for fiscal years 2011, 2010 and 2009: September 30 Three Months Ended December 31 March 31 June 30 Total Fiscal Year 2011 Net sales ...Gross profit ...Income from continuing operations attributable to Harman International Industries, Incorporated, net of income...

  • Page 114
    ... in our Other segment. Our Lifestyle segment consists of the audio business previously reported in our Automotive segment, our Consumer segment and Luxury Home Audio, which was previously reported in our Professional segment. This change is designed to realign our organization to unlock earnings...

  • Page 115
    ... 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 116
    ... 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 2011 Annual Meeting of Stockholders. Item 11. Executive Compensation. The information required by Item 11 of Part III is...

  • Page 117
    ... Firm on Internal Control over Financial Reporting . . Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of June 30, 2011 and 2010 ...Consolidated Statements of Operations for the years ended June 30, 2011, 2010 and 2009 ...Consolidated Statements of Cash...

  • Page 118
    ... 31, 2010 and hereby incorporated by reference)** Form of Nonqualified Stock Option Agreement for Non-Officer Directors under the Harman International Industries, Incorporated 2002 Stock Option and Incentive Plan. (filed as Exhibit 10.11 to the Annual Report on Form 10-K for the fiscal year ended...

  • Page 119
    ... by reference)** Form of Restricted Share Unit Agreement for Non-Officer Directors under the Harman International Industries, Incorporated Amended and Restated 2002 Stock Option and Incentive Plan. (filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q for the quarter ended December 31, 2008...

  • Page 120
    ...Form 10-Q for the quarter ended December 31, 2002 and hereby incorporated 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 the fiscal year ended June 30, 2006 and hereby incorporated by reference...

  • Page 121
    ... Stacey and Todd Suko (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission on April 26, 2010 and hereby incorporated by reference)** Agreement between and among Harman Management GmbH and Dr. Klaus Blickle, dated February 23, 2011. (filed as Exhibit 10.1 to the Current...

  • Page 122
    ... with Directors and Executive Officers (filed as Exhibit 99.1 to the Current Report on Form...years ended June 30, 2011, 2010 and 2009 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...

  • Page 123
    ...registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Date: August 11, 2011 By: /S/ DINESH PALIWAL Dinesh Paliwal Chairman, President and Chief Executive Officer Pursuant to the requirements of...

  • Page 124
    ... II HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Valuation and Qualifying Accounts and Reserves Year Ended June 30, 2011, 2010 and 2009 (in thousands) Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Balance at End of Period Classification Deductions Year...

  • Page 125
    ..., 2011 against the S&P Composite-500 Stock Index and the S&P 500 Consumer Discretionary Index. The stock price performance graph assumes an initial investment of $100 at the market close on June 30, 2006. Dates on the chart represent the last trading day of the indicated fiscal year. The stock price...

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  • Page 127
    ...cer required under Section 302 of the SarbanesOxley Act have been filed as Exhibits 31.1 and 31.2 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2011. Additionally, in 2010 our Chief Executive Officer submitted the required CEO Certification to the New York Stock Exchange.

  • Page 128
    © 2011 Harman International Industries, Incorporated. All rights reserved. AKG, Becker, Crown, dbx, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson, Soundcraft and Studer are trademarks of Harman International Industries, Incorporated, registered in the United States and/or other countries. ...