Harman Kardon 2011 Annual Report Download - page 55

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Statements for further information. The contingent purchase price consideration associated with the acquisition
of innovative is calculated pursuant to the terms of an agreement between the parties. On March 31, 2011, the
innovative sellers sent us a letter to exercise their option to have the value of the future contingent purchase
consideration determined by a major international accounting firm. The parties are currently disputing certain
terms under such agreement and until such time as the dispute is resolved we will not be able to calculate the
final purchase price.
The goodwill impairment charge for the fiscal year ended June 30, 2009 consisted of $295.1 million in our
Automotive segment and $22.7 million in our Consumer segment.
The changes in the carrying amount of goodwill by business segment for the fiscal year ended June 30, 2011
were as follows:
Automotive Consumer Professional Other Total
Balance, June 30, 2010 ........................... $ 6,127 $30,686 $69,109 $0 $105,922
Acquisition adjustments .......................... 0 (1,476) (2,426) 0 (3,902)
Contingent purchase price consideration associated with
the acquisition of innovative ..................... 5,737 0 0 0 5,737
Other adjustments(1) .............................. 1,495 4,667 5,438 0 11,600
Balance, June 30, 2011 ........................... $13,359 $33,877 $72,121 $0 $119,357
(1) The other adjustments to goodwill primarily consist of foreign currency translation adjustments.
Operating Income (Loss)
Fiscal year 2011 operating income was $190.1 million, or 5.0 percent of net sales. This represents an
increase of 2.5 percentage points compared to the prior fiscal year. The increase in operating income was
primarily due to higher net sales.
Fiscal year 2010 operating income was $85.6 million, or 2.5 percent of net sales. This represents an increase
of 20.1 percentage points compared to the operating loss in the prior fiscal year. The increase in operating
income was primarily due to lower goodwill impairment charges and higher net sales.
A summary of our operating income (loss) by business segment is as follows:
Year Ended June 30,
($ in thousands) 2011
Percentage
of Net
Sales 2010
Percentage
of Net
Sales 2009
Percentage
of Net
Sales
Automotive ........................ $177,077 6.5% $ 88,113 3.6% $(439,957) (21.9)%
Consumer ......................... 2,457 0.6% (5,026) (1.3)% (49,939) (14.0)%
Professional ....................... 93,962 15.3% 75,179 14.4% 44,363 9.0%
Other ............................. (83,445) * (72,711) * (58,279) *
Total ............................. $190,051 5.0% $ 85,555 2.5% $(503,812) (17.6)%
* Percent not meaningful.
Interest Expense, net
Interest expense, net, was $22.6 million, $30.2 million and $20.6 million in fiscal years 2011, 2010 and
2009, respectively. Interest income included within interest expense, net was $9.9 million, $3.6 million and $8.1
million and gross interest expense included within interest expense, net was $32.5 million, $33.8 million and
$28.7 million in fiscal years 2011, 2010 and 2009, respectively. Gross interest expense consisted of $19.3
million, $17.4 million and $14.8 million of non-cash interest expense and $13.2 million, $16.4 million and $13.9
million of cash interest expense, in fiscal years 2011, 2010 and 2009, respectively. Cash interest expense
primarily relates to interest for the 1.25 percent Convertible Senior Notes (the “Convertible Senior Notes”), our
short-term debt and our existing and prior revolving credit facilities. Refer to the heading “New Revolving Credit
37