- Net sales increased 4% to $1.5 billion; Up 14% excluding foreign currency translation
- Operational EPS up 9% to $1.22; Operational EBITDA up 8% to $150 million
- Secured $3.2 billion of new automotive awards; $5.7 billion of awarded business year-to-date
- Acquired Symphony Teleca and Redbend
Harman International Industries, Incorporated (NYSE:HAR), the premier infotainment, audio and software services company, today announced results for the third quarter ended March 31, 2015.
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.”
| FY 2015 Key Figures – Total Company | Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||||||
| Increase (Decrease) |
Increase (Decrease) |
||||||||||||||||
| $ millions (except per share data) | 3M FY15 |
3M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
9M FY15 |
9M FY14 |
Including Currency Changes |
Excluding Currency Changes1 |
|||||||||
| Net sales | 1,464 | 1,404 | 4% | 14% | 4,477 | 3,904 | 15% | 20% | |||||||||
| Gross profit | 418 | 365 | 15% | 23% | 1,326 | 1,066 | 24% | 29% | |||||||||
| Percent of net sales | 28.6% | 26.0% | 29.6% | 27.3% | |||||||||||||
| SG&A | 327 | 263 | 24% | 34% | 970 | 793 | 22% | 27% | |||||||||
| Operating income | 92 | 101 | (10%) | (5%) | 356 | 273 | 31% | 36% | |||||||||
| Percent of net sales | 6.2% | 7.2% | 8.0% | 7.0% | |||||||||||||
| EBITDA | 132 | 134 | (2%) | 4% | 471 | 370 | 27% | 32% | |||||||||
| Percent of net sales | 9.0% | 9.6% | 10.5% | 9.5% | |||||||||||||
| Net Income attributable to HARMAN International Industries, Incorporated | 70 | 73 | (4%) | (0%) | 270 | 191 | 41% | 47% | |||||||||
| Diluted earnings per share | 0.99 | 1.05 | (6%) | (2%) | 3.83 | 2.74 | 40% | 46% | |||||||||
| Restructuring & non-recurring costs | 23 | 7 | 48 | 37 | |||||||||||||
| Non-GAAP – operational1 | |||||||||||||||||
| Gross profit | 422 | 367 | 15% | 23% | 1,318 | 1,071 | 23% | 28% | |||||||||
| Percent of net sales | 28.8% | 26.1% | 29.4% | 27.4% | |||||||||||||
| SG&A | 308 | 259 | 19% | 28% | 914 | 762 | 20% | 24% | |||||||||
| Operating income | 114 | 108 | 6% | 12% | 404 | 309 | 31% | 36% | |||||||||
| Percent of net sales | 7.8% | 7.7% | 9.0% | 7.9% | |||||||||||||
| EBITDA | 150 | 139 | 8% | 15% | 511 | 401 | 28% | 33% | |||||||||
| Percent of net sales | 10.2% | 9.9% | 11.4% | 10.3% | |||||||||||||
| Net Income attributable to HARMAN International Industries, Incorporated | 87 | 78 | 11% | 17% | 305 | 221 | 38% | 44% | |||||||||
| Diluted earnings per share | 1.22 | 1.12 | 9% | 15% | 4.33 | 3.16 | 37% | 43% | |||||||||
| Shares outstanding – diluted (in millions) | 71 | 70 | 70 | 70 | |||||||||||||
| 1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. | |||||||||||||||||
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.
| August 2014 | January 20151 | April 20152 | |||||
| Revenue | ~$6.0 billion | ~$6.0 billion | ~$6.0 billion | ||||
| EBITDA3 | ~$685 million | ~$715 million | ~$695 million | ||||
| EPS3 | ~$5.25 | ~$5.85 | ~$5.65 | ||||
| Interest & Misc. | ~$27M | ~$23M | ~$17M | ||||
| Tax Rate | ~26% | ~24% | ~24% | ||||
| Share Count | ~71 M | ~70.5 M | ~71 M | ||||
| EUR/USD | 1.35 | 1.224 | 1.195 | ||||
1. Excludes Redbend and Symphony Teleca.
2. Includes Redbend and Symphony Teleca.
3. Non-GAAP, excluding restructuring, non-recurring items, and purchase accounting expenses related to acquisitions.
4. Assumed EUR/USD of 1.15 for the second half of fiscal 2015.
5. Assumes EUR/USD of 1.08 for the fourth quarter of fiscal 2015.
