Harman Kardon 2011 Annual Report Download - page 57

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Financial Condition
Liquidity and Capital Resources
We will continue to have cash requirements to support seasonal working capital needs, investments in our
manufacturing facilities, including major investments related to manufacturing and research facilities in China,
interest and principal payments for our debt service, dividend payments and restructuring payments. We
primarily intend to use cash on hand and cash generated by operations to meet these requirements, and to the
extent necessary, borrowings under our revolving credit facility.
We believe that our existing cash and cash equivalents of $603.9 million and our short-term investments of
$317.3 million at June 30, 2011, together with our operating cash flows, and our availability of $542.7 million
under our existing revolving credit facility, will be sufficient to cover our working capital needs, capital
expenditures, investment requirements, acquisitions, commitments and quarterly dividends for at least the next
12 months.
Our ability to maintain positive liquidity going forward depends on our ability to continue to generate cash
from operations and maintain access to the financial markets, both of which are subject to general economic,
financial, competitive, legislative, regulatory and other market factors beyond our control. We earn a significant
amount of our operating income outside the U.S., which income is deemed to be permanently reinvested in
foreign jurisdictions. For at least the next 12 months, we have sufficient cash in the U.S., availability under our
existing revolving credit facility and forecasted domestic cash flow to sustain our operating activities and cash
commitments for investing and financing activities, such as quarterly dividends and repayment of debt, such that
we will not have to repatriate earnings. In addition, we expect existing foreign cash and cash equivalents, short-
term investments, and cash flows from operations to continue to be sufficient to fund our foreign operating
activities and cash commitments for investing activities, such as material capital expenditures, for at least the
next 12 months. Below is a more detailed discussion of our cash flow activities during the fiscal year ended
June 30, 2011.
Operating Activities
Net cash provided by operating activities in fiscal year 2011 was $331.8 million compared to $240.4 million
in fiscal year 2010. Operating cash flows increased primarily due to higher operating income, lower payments to
vendors for accounts payable resulting from better management of our vendor payment terms, lower warranty
and income tax payments. These increases were partially offset by increases in inventory purchases in
anticipation of future sales and lower collections of accounts receivable. At June 30, 2011, working capital,
excluding cash, short-term investments and short-term debt was $141.5 million compared with $178.9 million at
June 30, 2010. The decrease was primarily due to higher accounts payable, accrued liabilities and accrued
warranties, partially offset by higher accounts receivable and inventories.
Investing Activities
Net cash used in investing activities was $434.5 million in fiscal year 2011 compared to $66.7 million in
fiscal year 2010. The increase in net cash used in investing activities compared to the same period in the prior
year was primarily due to an increase of $317.3 million of short-term investments, consisting of commercial
paper, 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 for the same period in the
prior year. Capital spending was higher due to expansion of production capacity, increases in information
technology related programs and product improvement programs. In June 2011, we paid an additional $11.2
million of the remaining purchase price for Selenium. In February 2011 we completed the acquisition of 3dB for
a total purchase price of $3.0 million, plus a working capital adjustment of $0.5 million, of which $2.3 million
was paid in fiscal year 2011. In September 2010, we completed the acquisition of Aha for $1.8 million. Refer to
Note 2 – Acquisitions in the Notes to the Consolidated Financial Statements for further information. We expect
that our run rate for capital expenditures will be similar to the current year.
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