Harman Kardon 2011 Annual Report Download - page 82

During the first half of fiscal year 2010, we determined that goodwill related to our Automotive segment
was impaired and we recognized an impairment charge of $12.3 million in our Consolidated Statement of
Operations for the fiscal year ended June 30, 2010. During the second half of fiscal year 2010, as a result of the
sustained improvements in the operating results of our Automotive reporting unit due to improvements in
economic conditions and realized savings resulting from our cost cutting initiatives, we performed a preliminary
goodwill impairment test which demonstrated that the calculated fair value of our reporting units exceeded the
respective carrying values and therefore no impairment existed in our Automotive reporting unit and our other
reporting units. As a result, we ceased recognizing goodwill impairment charges associated with incremental
goodwill that is recognized related to contingent purchase price arrangements.
Goodwill was $119.4 million at June 30, 2011 compared with $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 $5.7 million and goodwill related to the acquisition of 3dB of $0.6 million,
offset by approximately $4.5 million of purchase price adjustments for prior year acquisitions, primarily related
to the acquisition of Selenium. Refer to Note 2 – Acquisitions 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.
Note 9 – Debt
Short Term Borrowings
At June 30, 2011 and 2010, we had $1.8 million and $13.5 million of short-term borrowings outstanding,
respectively. At June 30, 2011 and 2010, we maintained lines of credit in the aggregate of $20.8 million and
$13.6 million, respectively, in Hungary, the U.S., Austria and Brazil.
We classify our debt based on the contractual maturity dates of the underlying debt instruments. We defer
costs associated with debt issuance over the applicable term of the debt. These costs are amortized to Interest
expense, net in our Consolidated Statements of Operations.
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