Harman Kardon 2011 Annual Report Download - page 51

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Professional gross profit as a percentage of net sales increased 1.5 percentage points to 38.7 percent in fiscal
year 2010 compared to the prior fiscal year. The increase in gross profit as a percentage of net sales was
primarily due to improved leverage of fixed overhead costs due to higher sales volumes, savings achieved
through our STEP Change cost reduction program and favorable product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A”) were $813.8 million in fiscal year 2011 compared
to $774.2 million in the prior fiscal year, an increase of $39.6 million. The increase in SG&A was primarily due
to higher overall selling and marketing expenses and SG&A attributable to Selenium, our recently acquired
Brazilian operation, partially offset by favorable foreign currency translation of $7.6 million and a $5.9 million
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 engineering, were $304.6 million, or
8.1 percent of net sales, in fiscal year 2011 compared to $322.7 million or 9.6 percent of net sales in the prior
fiscal year. Employee compensation and benefit costs for indirect labor are also included in SG&A.
SG&A was $774.2 million in fiscal year 2010 compared to $831.4 million in the prior fiscal year, a decrease
of $57.2 million. The decrease in SG&A was primarily due to lower restructuring expenses of $77.4 million and
lower R&D, partially offset by unfavorable foreign currency translation of $20.5 million and higher variable
compensation and benefit expenses due to improved performance. As a percentage of net sales, SG&A decreased
6.1 percentage points to 23.0 percent in fiscal year 2010 compared to the prior fiscal year. R&D was $322.7
million, or 9.6 percent of net sales, in fiscal year 2010 compared to $325.1 million or 11.4 percent of net sales in
the prior fiscal year.
We continued to incur costs relating to our restructuring programs, which were designed to address our
global footprint, cost structure, technology portfolio, human resources and internal processes. We recorded
restructuring charges in SG&A of $16.5 million, $13.5 million and $90.9 million in fiscal years 2011, 2010 and
2009, respectively. Restructuring is further described under the caption “Restructuring” later in this discussion.
A summary of our SG&A by business segment is as follows:
Year Ended June 30,
($ in thousands) 2011
Percentage
of Net
Sales 2010
Percentage
of Net
Sales 2009
Percentage
of Net
Sales
Automotive ........................ $460,587 16.8% $473,721 19.2% $530,283 26.5%
Consumer ......................... 115,742 27.5% 104,088 27.9% 110,348 31.0%
Professional ........................ 153,210 25.0% 127,379 24.4% 138,848 28.2%
Other ............................. 84,270 * 69,001 * 51,940 *
Total ............................. $813,809 21.6% $774,189 23.0% $831,419 29.1%
* Percent not meaningful.
Automotive—Automotive SG&A decreased $13.1 million to $460.6 million in fiscal year 2011 compared to
the prior fiscal year. The decrease in SG&A was primarily due to a net decrease in R&D of $30.1 million,
favorable foreign currency translation of $8.9 million and a $5.9 million decline in charges related to automotive
supply arrangements, partially offset by higher general and administrative expenses. As a percentage of net sales,
SG&A decreased 2.4 percentage points to 16.8 percent in fiscal year 2011 compared to the prior fiscal year.
R&D, net of reimbursements, including engineering, decreased $30.1 million to $235.9 million, or 8.6 percent of
net sales in fiscal year 2011 compared to $265.9 million, or 10.8 percent of net sales in the prior fiscal year
primarily due to higher net reimbursements of $40.6 million, partially offset by higher gross spending of $10.5
million in fiscal year 2011 as compared to the prior fiscal year.
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