HARMAN Reports Third Quarter Fiscal Year 2015 Results

Net sales for the third quarter were $1.46 billion, an increase of four percent compared to the same period in the prior year or 14 percent excluding the impact of foreign currency translation (ex-FX). Infotainment net sales increased six percent, or 19 percent (ex-FX), due to platform expansions, higher take rates, and stronger automotive production. Lifestyle net sales declined six percent (up two percent ex-FX). Last year’s third quarter benefited from an unusually large order from a mobile telecommunications customer. In the third quarter, stronger car audio sales partially offset this impact. Net sales in the Professional division increased 21 percent (26 percent ex-FX) primarily driven by the acquisition of AMX which expanded the Company’s product portfolio into enterprise automation and control and video switching.

Excluding restructuring and other non-recurring items, third quarter operating income was $114 million compared to $108 million in the same period in the prior year, and earnings per diluted share were $1.22 compared to $1.12 in the same period last year. On a GAAP basis, third quarter operating income was $92 million compared to $101 million in the same period in the prior year, and earnings per diluted share were $0.99 for the quarter compared to $1.05 in the same period in the prior year. The Company recorded $23 million of restructuring and non-recurring acquisition-related costs, compared to $7 million in the prior year.

“This marks the eighth consecutive quarter of top and bottom line growth. We delivered another solid quarter of growth, particularly in our automotive businesses, despite unprecedented foreign exchange headwinds. Our professional business was hit harder due to a strong US dollar and a softening in some emerging and European markets,” commented Dinesh C. Paliwal, the Company’s Chairman, President and Chief Executive Officer. “HARMAN continues to lead the industry with best-in-class connected car solutions, as evidenced by new awards for embedded infotainment and car audio systems from global industry leaders, including BMW and Daimler. Year-to-date, we have secured $5.7 billion of new automotive awards.”

Paliwal continued, “We also recently completed the acquisitions of Symphony Teleca and Redbend, which will give us immediate scale in software services and better position HARMAN to capitalize on the rapid growth of the Internet of Things. We can now deliver more powerful solutions at the intersection of cloud, mobility, and analytics for our core markets of automotive and the enterprise and diversify to a wider range of industries such as telecommunications, media, and retail.”

Summary of Operations – Gross Margin and SG&A

Non-GAAP gross margin for the third quarter of fiscal 2015 increased 268 basis points to 28.8 percent. The improvement was primarily due to the impact of higher sales volume utilizing a more efficient fixed production cost base and the expansion of the Company’s product portfolio into enterprise automation and control and video switching.

In the third quarter of fiscal 2015, SG&A expense as a percentage of net sales increased 258 basis points to 21.0 percent on a non-GAAP basis, primarily due to higher marketing and research and development expenses and the expansion of the Company’s product portfolio into enterprise automation and control and video switching.

2015 Guidance Update

HARMAN updated its financial outlook for fiscal 2015. The Company now forecasts fiscal 2015 revenue of $6.0 billion and operational earnings per share of $5.65. The majority of the EPS reduction is related to weakness in certain geographic markets in our Professional business, with the remainder being foreign currency translation impact on the total Company. This revised guidance includes the closing of the Symphony Teleca and Redbend acquisitions, which will contribute approximately $100 million in revenue in the fourth quarter of FY 2015 and has no impact on operational earnings per share, as the net earnings from these acquisitions will be offset by financing costs and an increase in the Company’s share count.

At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the third quarter results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 735 5968 (U.S.) or +1 (212) 231 2902 (International) ten minutes before the call and reference HARMAN, Access Code: 21766413.

In addition, HARMAN invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal third quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT today.

A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through Friday, July 31st, 2015 at 1:00 p.m. EDT. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21766413. If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1 (800) 473 0602 (U.S.) or +1 (303) 446 4604 (International).

General Information

HARMAN (harman.com) designs and engineers connected products and solutions for consumers, automakers, and enterprises worldwide, including audio, visual and infotainment systems; enterprise automation solutions; and software services. With leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon® , Mark Levinson ® and Revel®, HARMAN is admired by audiophiles, musicians and the entertainment venues where they perform around the world. HARMAN also is a technology and integration services leader for the Automotive, Mobile, Telecommunications and Enterprise markets. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. The Company’s software solutions power billions of mobile devices and systems that are connected, integrated, personalized, adaptive and secure across all platforms, from the work and home to car and mobile. HARMAN has a workforce of approximately 25,000 people across the Americas, Europe, and Asia and reported sales of $5.9 billion during the last 12 months ended March 31, 2015. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.

A reconciliation of the non-GAAP measures included in this press release to the most comparable GAAP measures is provided in the tables contained at the end of this press release. HARMAN does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.

Forward-Looking Information

Except for historical information contained herein, the matters discussed in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the Company’s ability to maintain profitability in its infotainment division if there are delays in its product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) the Company’s ability to successfully implement its global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of its manufacturing, engineering, procurement and administrative organizations; (5) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (6) the inability of the Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (8) the Company’s ability to integrate successfully our recently completed and future acquisitions; (9) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (10) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2014 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.

This earnings release also makes reference to the Company’s awarded business, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters from its customers. To validate these awards, the company uses various assumptions including global vehicle production forecasts, customer take rates for the Company’s products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. These assumptions are updated and reported externally on an annual basis. The Company updates the estimates and awarded business quarterly by adding the value of new awards received and subtracting sales recorded during the quarter. These quarterly updates do not include any assumptions for increased take rates, revisions to product life cycle, or any other factors.