Harman Kardon 2014 Annual Report Download - page 4

In addition, we opened flagship experience cen-
ters in New York, Moscow and Tokyo. These sites
complement our existing corporate-owned stores
in Beijing, Seoul and Shanghai and a growing
network of licensed retail outlets in India, China
and Dubai.
Grow Emerging Markets
Despite challenging economic environments in
Brazil, Russia, India and China, we grew our BRIC
revenue 31% this year to more than $700 million.
China led the way with 48% growth. We expect
our upward trajectory to continue in China in par-
ticular and are bolstering our internal capabilities
there, as well as initiating strategic partnerships
with other companies and institutions, such as
the renowned Tsinghua University in the area of
automotive technologies.
As we look forward, we expect that our
growth in emerging markets will significantly
outperform the rest of the world. To fulfill the
expected demand, we are investing in additional
manufacturing capacity in Brazil, India, China
and Hungary.
Optimize Cost and Capital Structure
I often say that innovation combined with cost
leadership is the formula for sustainable long-
term success. HARMAN cannot win on good
ideas or sound strategy alone; we must also win
on execution. This requires a vigilant focus
on managing our costs and capital, even in good
times. In fiscal year 2014, HARMAN’s gross
margin improved primarily due to the impact
of higher sales volumes on fixed production
costs and reduced costs due to footprint migra-
tion initiatives.
We continued to take restructuring actions in
Europe to best align our engineering and manu-
facturing operations with changing customer
demands and proximity within growth markets.
While these decisions are never easy, HARMAN
understands that we must continue to take proac-
tive steps to protect our competitive position and
stay ahead of industry and macroeconomic shifts.
Regarding our capital structure, we repurchased
1.3 million shares this year and after doubling the
dividend for three consecutive years, increased it
by 10% for fiscal year 2015.
Diversify Portfolio
HARMAN completed three acquisitions outside
of the automotive sector during the fiscal year.
In our Professional Division we acquired Duran
Audio and AMX. The Duran acquisition provided
us with access to innovative electro-acoustic and
software-based directivity control technologies.
AMX is the leading provider of enterprise auto-
mation and control systems and video switching
and distributing solutions. AMX customers span
high security government institutions, commer-
cial, educational, industrial and financial markets,
including the Pentagon, NATO, IBM, Bank of
America and Deutsche Bank, to name a few.
Now, HARMAN is uniquely positioned to provide
complete audio, video, lighting and automation
solutions to our customers globally.
In June, we acquired Yurbuds, the U.S. market
leader in sports headphones. This acquisition
strengthens our position in the fast growing
sports headphones and wearables market.
Collectively, we expect that these three acqui-
sitions will contribute more than $200 million
to our fiscal year 2015 revenues.
We also expect Automotive Services to
play a strong role in our growth story, includ-
ing Infotainment, Application Services and
Aftermarket Audio. While we grew this business
by approximately 15% this past year, we also
are evaluating inorganic options to expand our
software capabilities and scale. We believe this
will allow us to accelerate growth in this high
value-add and high-margin space.
In summary, we will stay the course with our
five strategic pillars and advance our business
transformation with great innovations and
exceptional execution.
Inspiring an Innovation Culture
The key to winning begins and ends with our
people. In fiscal 2014, we took significant steps
to strengthen our organization and culture. We
launched six “Innovation Studio” internal crowd-
sourcing challenges to harness the collective
intelligence and creativity of our employees. In
the area of Inclusion, we built diversity metrics
into senior executive performance measure-
ments, launched the HARMAN Women’s Network
and established a Diversity and Inclusion online
portal. Importantly, we also created the HARMAN
Sustainability Council with responsibility for
setting the Company’s sustainability strategy and
executing and tracking our progress. We believe
that by pursuing ambitious environmental and
social sustainability goals, we will deliver value
to our bottom line, improve the supply chain
performance of our customers and enhance the
communities where we do business.
A Look Ahead
HARMAN sees a bright future ahead. In August
2014, we issued strong financial guidance for
fiscal year 2015 and increased our outlook
for fiscal year 2016. We increased our mid-term
revenue outlook for fiscal year 2016 by $800 mil-
lion to $6.85 billion. This is a significant jump
and is based on a number of key assumptions,
namely global GDP growth, global automotive
production growth and increasing global industry
infotainment take rates. We also increased our
fiscal year 2016 EBITDA* guidance from approxi-
mately $785 million to $880 million. Importantly,
we expect new product launches and the demand
for connected car solutions will continue to
accelerate global take rates to 27-28% and there-
fore are projecting Infotainment growth of 19%
in fiscal year 2016. This is an exciting outlook
for HARMAN.
I am proud of HARMAN’s record performance
in fiscal year 2014 and determined to give our
many fans an encore as we enable and enhance
the connected car, the connected enterprise and
the connected lifestyle. HARMAN has a great
story to tell. Fiscal year 2014 was an outstanding
chapter, and I am inspired to show the world
that – even with more than 60 years behind us
and many milestones to our name – HARMAN’s
story has actually just begun.
Dinesh C. Paliwal
Chairman, President and Chief Executive Officer
Corporate Headquarters
400 Atlantic Street
Stamford, CT 06901
203-328-3500
To view the full 10-K report visit www.harman.com.
Harman Kardon, Infinity and JBL are trademarks of Harman
International Industries, Incorporated, registered in the
United States and/or other countries. Clari-Fi is a trademark
of Harman International Industries, Incorporated. All other
marks are the property of their respective owners.
© 2014 Harman International Industries, Incorporated.
All rights reserved.
* Excludes restructuring and non-recurring items, a non-GAAP
measure. See reconciliation of non-GAAP measures in the
August 7, 2014, press release.