Harman Kardon 2011 Annual Report Download - page 48

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Severance and Exit Costs
We recognize liabilities for severance and exit costs based upon the nature of the liability incurred. For
involuntary separation programs that are conducted according to the guidelines of our written involuntary
separation plan, we recognize the liability when it is probable and reasonably estimable. For involuntary
separation programs that are conducted according to the provisions of collective bargaining agreements or
statutes, we recognize the liability when it is probable and reasonably estimable. For one-time termination
benefits, such as additional severance pay, and other exit costs, such as lease and other contract termination costs,
the liability is measured and originally recognized at fair value in the period in which the liability is incurred,
with subsequent changes recognized in earnings in the period of change. Refer to Note 15 – Restructuring in the
Notes to the Consolidated Financial Statements for more information.
Share-Based Compensation
Share-based compensation expense 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 in the Notes to the Consolidated Financial Statements for more information.
Discontinued Operations
The results of operations of businesses that have been sold are presented separately as Income from
discontinued operations, net of income taxes, in our Consolidated Statements of Operations, in the current and
prior periods, where applicable. Refer to Note 3 – Discontinued Operations in the Notes to the Consolidated
Financial Statements for further information.
Results of Operations
Net Sales
Fiscal year 2011 net sales were $3.772 billion, an increase of 12 percent compared to the prior fiscal year or
13 percent excluding foreign currency translation. Foreign currency translation had an unfavorable impact of $17
million when compared to the prior fiscal year. Each 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 agreement under which we exited the PND distribution channel. Under the terms of the
agreement, a third party was permitted to sell our PND inventory over a period of six months, which ended in
June 2010. Thereafter, we are entitled to receive 50 percent of the profits from the sale of PNDs by the third party
for the first five years. Subsequently, we will receive a royalty based on sales of PNDs for the remainder of the
term of the agreement which may be extended for up to 20 years. Our exit of the PND distribution channel
negatively impacted our results of operations for fiscal years 2011 and 2010.
Fiscal year 2010 net sales were $3.364 billion, an increase of 18 percent compared to the prior fiscal year, or
17 percent excluding foreign currency translation. Foreign currency translation had a favorable impact of $28
million when compared to the prior fiscal years. Each 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.
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