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Disclaimer on Forward Looking Statements
Certain statements made by the Company in this presentation are forward-looking statements. These statements include comments as to the Company’s beliefs and expectations as to future events and trends affecting the Company’s business. These forward-looking statements are based upon management’s current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside the control of the Company. The factors stated under the heading “Forward-Looking Statements” in Management’s Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Company’s Annual Report on Form 10-K for the year ended June 30, 2007, and the Company’s most recent 10-Q filings with the SEC, as well as other factors, could cause actual results to differ materially from such statements.
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Automobile 79%
Professional17%
Consumer4%
Automobile 70%
Professional16%
Consumer14%
Harman Today
SUMMARY BUSINESS OVERVIEW
Leader in the development, manufacture and marketing of high-quality, high fidelity audio products and electronic systems
11,000+ employees
Manufacturing facilities in North America, Europe and Asia
Operations at 44 locations
Products distributed worldwide
Unmatched brand name recognition
Three business segments
Automotive
Consumer
Professional
FY 2007 REVENUE BY DIVISION
FY 2007 EBITDA BY DIVISION
Total = $514 million
Total = $3,551 million
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Company Overview
Automotive Division Professional Division Consumer Division
World leader in Branded Automotive Audio Systems
Leader in high-end Infotainment Systems enabled by innovative technological advancements
Designs, manufactures and markets loudspeakers and electronic systems used by audio professionals in concert halls, stadiums, airports, houses of worship and theme attractions
Leading designer and producer of audio, video and electronic systems for home, mobile and multimedia applications
Brands
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Recent Company Events
Dinesh Paliwal joins Harman as Vice Chairman, President & CEO Dinesh comes to Harman from ABB where he was President of Global Markets and Technology as well as
President and CEO of ABB North America. The ABB Group is a global technology and engineering company with $24 billion in annual revenues and operations in 100+ countries.
Termination of the Merger Agreement Harman, KKR and GSCP agreed to terminate merger agreement without litigation or a termination fee
Company avoids a protracted and costly legal battle Senior management fully focused on running the business
KKR and GSCP invested $400 million in 1.25% convertible senior notes and have agreed not to hedge or sell position for one year
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Recent Company Events
Accelerated Share Repurchase Agreement Company used the proceeds from the convertible notes to repurchase more than 4.7 million shares (approximately 7% of outstanding
shares) which were retired immediately EPS accretion in F’08 estimated to be approximately 4%
Expansion of the Board of Directors Brian Carroll, member of KKR, joins the Harman International Board. Mr. Carroll is also a member of the board of directors of Rockwood
Specialties Group, Inc. and Sealy Corporation. Dr. Harald Einsmann, brings significant experience from both his board service and senior management roles in a variety of multinational
companies.
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889
1,0321,153
1,211
651
32.8% 34.0% 35.5% 34.1%
29.2%
0
300
600
900
1,200
1,500
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Gross Profit % of Sales
3,5513,248
3,031
2,229
2,711
0
1,000
2,000
3,000
4,000
FY2003 FY2004 FY2005 FY2006 FY2007
Revenue and Gross Profit
($ in millions)
CAGR: 10%
($ in millions)
CAGR: 13%
REVENUE
GROSS PROFIT
9
417458 453 468
341
15.3%13.2%14.0%15.1%15.4%
0
200
400
600
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Other SG&A ex R&D % of Sales
Historical SG&A
RESEARCH AND DEVELOPMENT EXPENSES, net($ in millions)
OTHER SELLING, GENERAL & ADMINISTRATION EXCLUDING R&D
217 223
302357
143
6.4%
10.1%9.3%7.3%8.0%
0
200
400
600
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
R&D % of Sales
10
EBITDA
EBITDA
($ in millions)
361
256
470527 514
0
200
400
600
FY2003 FY2004 FY2005 FY2006 FY2007
CAGR: 15%
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Automotive Division - Q1 F’08 Highlights
Strong Sales Growth 14% Q1 F’08 v. Q1 F’07 Sales increases to luxury automakers, mid-segment and
personal navigation devices (“PND”)
Gross Margin Decreases 9 points New program ramp slower than anticipated Higher material costs Product mix consisted of more mid-range infotainment
systems and PND’s
R&D costs higher $4.3 million Q1 F’08 v. Q1 F’07 To deliver on record number of new programs
Operating Profit decline primarily due to gross margin decrease
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Major New Product Launches
FISCAL YEAR 2008 LAUNCHES
Chrysler Hyundai BH program BMW Ssangyong Chairman Audi 3G Porsche PSA RNEG
FISCAL YEAR 2009 LAUNCHES
BMW L6 PSA NG4 Hyundai VI Porsche PCM3.1 Mercedes E-class Mid-level Mercedes S-class facelift
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Consumer Division - Q1 F’08
Strong Sales Growth 28% Q1 F’08 v. Q1 F’07Solid sales increases Internationally and in the US
to Best Buy
Gross Margin declined nearly 2 pointsCompetition in multimedia space
Operating Loss of 2.6% in Q1 F’08 improved 2.2 points versus Q1 F’07
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Professional Division – Q1 F’08
Strong Sales Growth 11% Q1 F’08 v. Q1 F’07Strong sales at JBL Pro,
Soundcraft/Studer and Harman Music Group
Gross Margin increased slightly to 38.5%
Operating Expenses fell as a % of Sales to 24.4%
Operating profit margin increased by 100 basis points to 14.0%
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HiQnet Overview
HiQnet allows Harman Pro to offer a complete system from microphone to speaker
Control and monitoring of devices on the network
Automatically learns device capabilities
Primarily large install and touring
67 HiQnet enabled products, representing 22% of Q1 FY08 revenues
HiQnet System Architect
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F’08 Initiatives
Significant restructuring program announced -- $25 million to $30 million to be completed in the second half of F’08
Optimize cost structure – global procurement strategies “shopping smart”, consolidating manufacturing and engineering footprint
Improve and simplify internal processes – consolidate and coordinate activities, e.g. engineering efforts, shared services centers
Build global team -- monthly business reviews, new key metrics, add key resources (HR, Strategy)