fourth quarter and fy 2011 highlights -...

25
Dinesh C. Paliwal - Chairman, President and CEO Herbert Parker - Chief Financial Officer August 10, 2011 Fourth Quarter and FY 2011 Highlights

Upload: truonganh

Post on 06-Apr-2018

215 views

Category:

Documents


1 download

TRANSCRIPT

Dinesh C. Paliwal - Chairman, President and CEOHerbert Parker - Chief Financial Officer

August 10, 2011

Fourth Quarter and FY 2011 Highlights

Forward Looking Information

1

Except for historical information contained herein, the matters discussed are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. One should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) our ability to maintain profitability in our automotive division if there are delays in our 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) warranty obligations for defects in our products; (4) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (5) our ability to successfully implement our global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of our manufacturing, engineering, procurement and administrative organizations; (6) 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; (7) the inability of our suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (8) our ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for our critical organizational positions; (9) our failure to implement and maintain a comprehensive disaster recovery program; (10) our failure to comply with governmental rules and regulations, including the Foreign Corrupt Practices Act and U.S. export control laws, and the cost of compliance with such laws; (11) our ability to maintain a competitive technological advantage through innovation and leading product designs; (12) our failure to maintain the value of our brands and implementing a sufficient brand protection program; (13) acceptance of our mid-platform infotainment systems by original equipment manufacturers and consumers; (14) the outcome of pending or future litigation and other claims, including, but not limited to, the current stockholder and Employee Retirement Income Security Act of 1974 lawsuits; (15) our ability to enforce or defend our ownership and use of intellectual property rights; and (16) other risks detailed in Harman International Industries, Incorporated (“Harman” or “the Company”) ) Annual Report on Form 10-K for the fiscal year ended June 30, 2011 and other filings made by Harman with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement except as required by law. These supporting slide materials also make reference to the Company’s sales backlog. The Company's sales backlog reflects anticipated net sales from formally awarded new programs and openreplacement programs, less phased-out and cancelled programs. The sales backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new and replacement programs, foreign currency exchange rates and the timing of major program launches.

Significant Recent News

2

HARMAN Acquires MWM Acoustics

HARMAN Wins Ferrari Innovation Award

Acoustic technology provider for audio and video conferencing systems, automotive active noise control systems, enterprise telephony, and Bluetooth™ headset / hands-free acoustic devices

Blue Chip Customers: Cisco, GM, Jawbone, Magna, Polycom and market leading smart phone and smart tablet makers

Ferrari Chairman Luca di Montezemolo and CEO Amedeo Felisa presented the award to HARMAN for its “high-end audio, navigation and telematics”

Quantum Logic™: HARMAN introduced its surround-sound technology, new Ferrari FF model the first production vehicle to include this unique technology

Automotive awarded business backlog reached all time high level of $14.5B. Scalable Platform to $4.4B

Group Overview – Q4 FY11

3

Core Businesses

Automotive Division$2,738M

Navigation, Multimedia, Telematics & Connectivity for High and Mid Systems

High performance, energy efficient audio & noise management systems

Automotive Audio

Automotive Infotainment

$649M$2,089M

Global Leader Global Leader

Professional Division$613M

Premium solutions for recording, broadcast, tour & installed sound

Professional Audio

Global Leader

LTM Rev ~$3.8 B ~12,000 Employees

Consumer Division$420M

Consumer Audio

Premium Niche

Home, multimedia, and mobile audio solutions

Financial Performance – FY11 Q4 and YTD

4

($ in millionsexcept EPS) Q4 '11 Q4 '10 % Change FY11 FY10 % ChangeHARMAN

Sales 1,031 851 21% 3,772 3,364 12%Operating Income 35 30 17% 211 116 82%

% Margin 3.4% 3.5% 5.6% 3.4%EPS 0.34 0.30 2.08 0.85

AutomotiveSales 760 627 21% 2,738 2,468 11%

Operating Income 31 33 ‐7% 190 105 80%% Margin 4.1% 5.3% 6.9% 4.3%

ProfessionalSales 171 142 20% 613 523 17%

Operating Income 30 24 28% 97 80 21%% Margin 17.8% 16.7% 15.8% 15.3%

ConsumerSales 100 81 24% 420 373 13%

Operating Income (5) (7) 33% 7 3 NM% Margin ‐4.7% ‐8.5% 1.7% 0.7%

Full YearQuarter Year‐Over‐Year

Income and EPS are non-GAAP measures and exclude non-recurring items

Consistent Improvement Continues – Seven Quarters of Growth At Top and Bottom Line

5

2,743

2,926

3,174

3,364

3,453 3,481

3,592

3,772

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

241

274

292

320328

14

83

189

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

LTM Revenues $M LTM EBITDA* $M

LTM – Last Twelve Months * Non-GAAP, excluding restructuring expenses, from continuing operations

434400

190

350

Actual FY09 Actual FY10 Actual FY11 FY11 Target

79 90

153 158

Actual FY08 Actual FY09 Actual FY10 Actual FY11

R&D/Engineering Over Sales (%)

Global Footprint Index (GFI %)

China 5-year Growth Plan ($M)

STEP Change Savings to Date ($M)

Note: Savings earned based on Fiscal ’08 base line

Quarterly Updates Annual Updates

Quarterly Updates Annual Updates

Note: The Global Footprint Index is defined as the sum of percentage of Capex, Sourcing and Workforce in Best-Cost Countries

11.49.6 9.0

8.1 8.0

ActualFY09

ActualFY10

FY11Target

ActualFY11

FY12Target

Dashboard: Long Term Growth Drivers

400667269250

199

333

200

ActualFY10

FY11Target

FY11Actual

FY13Target

FY15Target

Organic growth Inorganic Growth

600

1000

6

Executing On All Four Strategic Pillars

7

Market Leader with Aggressive Growth Plans

1. Growing Automotive AudioProfit and Market Leader in the industry with $2.8B order backlogGrowing e.g. Toyota. BMW, Fiat and new awards for Chinese automakers

2. Growing Smart Infotainment Profit and Market Leader in the industry with $11.7B order backlog900k ‘Aha’ Mobile Social Media (MSM) units sold to automakersLaunched Toyota Entune™ in NA and EU - scalable platform

3. Growing Emerging MarketsBRIC Countries sales up by 68% to over $400MBuilding three new world class factories in China (2) and Mexico

4. Getting Costs and Capital Structure Right$434M in permanent cost savings, exceeding $400M Step Change targetTotal liquidity up by $154m to $1.5 billion. Dividend increase to $0.30

Automotive Division Highlights - Orders

8

Innovation and Execution Drive Continued Growth

Infotainment Solutions (total order backlog $11.7B)Chrysler Group and Fiat vehicles worldwide – Scalable Platform ‘Mid’, approx $2B

VW Group: VW, Audi, Skoda and Seat – Scalable Platforms ‘High’, approx $1.6B

Daimler AG new Mercedes-Benz models

BMW Group

Branded Audio (total order backlog $2.8B)

Maserati to supply QuantumLogic surround technology

Ferrari to supply JBL Professional Audio for the FF, 458 Italia Spider and California

BMW Group for the new MINI Countryman, BMW 1 and 3 Series

China’s BYD for its E6 electric MPV vehicle (GreenEdge)

Joint Venture of China’s BYD & Daimler Benz (GreenEdge)

China’s GEELY Motors for its new luxury segment sedan, the Emgrand EC8

Automotive Division Highlights – SOP Launches

9

Technology Drives Cutting-Edge Innovation

Infotainment Solutions launched inToyota (Entune™) in NA and EU – Scalable Platform

New Audi A7, A6 Limousine, Q3 and A1.

Mercedes-Benz CLS as well as Becker Map Pilot

Porsche Panamera and Cayenne

Branded Audio solutions forLand Rover Range Rover ‘Autobiography’ and throughout the model range

Ferrari´s new FF model platform

New Mercedes-Benz CLS

New Peugeot 508

Consumer Division Highlights

10

Speed of Innovation Drives Profitable GrowthInnovation accelerating growth

Several new product launches in FY 2011New products represent more than 37% of revenue for Q4

Rapid sales growth in Brazil, India and China

New technologies, features and category expansion accelerate revenue growth across all BIC markets

Strengthening channels

BDS Home System continues gaining share in Europe and now launches in Americas and Asia

Expanded JBL-Roxy headphone business with new products including Quiksilver and covering both headphones and multimedia

Apple Retail Stores / Disney Retail Stores

Madison Square Garden, NY / Florida Marlins Baseball Stadium, FL

Paramount Studios / Warner Bros LA

Carnegie Hall, NY

HARMAN Soundcraft Si Compact wins MIPA 2011 award for Live Sound Console, the 10th industry award for Si Series in two years

65th Tony Awards use HARMAN Studer Consoles and JBL speakers

Expanding Our World-Class Professional Audio Footprint

11

Professional Division Highlights

Awards and Recognition:

JBL tops reader poll in 2011 Pro AV Brand Leaders in two loudspeaker categories.

JBL speakers tops retail sales in MI SalesTrak dealer survey.

JBL Professional PRX600 Series named “Best Loudspeaker for the Staging Market” at June InfoComm.

JBL Control 65P/T Pendant Speaker best in class by Commercial Integrator Magazine.

HARMAN manufacturing facility, in Tijuana certified as one of Mexico’s Top 100 Great Places to Work.

Expanding Our World-Class Professional Audio Footprint

12

Professional Division Highlights

Liquidity and Capital Structure

13

Total Liquidity Increased to $1.5 Billion

$6

$921

$543

2011 June due 2012 Oct

Un-drawn

Cash

R/C availability

Cash & Short-term Investments

1.25% Convertible Senior Notes

12-24 months Capital / Cash Allocation Considerations

Return to investment grade and reduce cost of capital

Continue to pay dividends at current or higher level

Invest in organic growth (ROIC~20+%)

Invest in CAPEX projects with short-term pay back

Strategic acquisitions with accretive EPS

Buy-back shares

Capital Allocation Considerations

14

Cash fromDivestitures + Operations + Financing

Investment opportunities with ROIC >20%

Return capital Yes / No Yes Invest in profitable growth

Share Repurchase Organic GrowthReduce

leverage Inorganic Growth

Growth: CAPEX, Working Capital

Growth: M&A and JVs

Return cash to shareholders as dividend

FY 2011 Highlights

15

Q4 sales increase 21% and Operating Income up 17%, full year up 82%

LTM EBITDA $328M or 8.7% of sales. Seven quarters of profitable growth!

Total liquidity up by $154m to $1.5 B. Dividend increases from $0.10 to $0.30

$434M in permanent cost savings, exceeding $400M Step Change target

Rapid adoption of scalable platform; 37% of $11.7B infotainment awards

Technology Leadership and Innovation pipeline drives double digit growth

$5.0B in new automotive awards in FY11 increases backlog to record $14.5B

900k ‘Aha’ Mobile Social Media (MSM) units sold to automakers

BRIC Countries sales up by 68% to over $400M

To support growth, building three new world class factories in China (2) and Mexico

Strong Momentum for Shareholder Value Creation

Transforming HARMANAligned with Market TrendsImprove Profitability

Infotainment Division– Pure-play technology innovator

– Sharpened focus on:

Profitability

Emerging Market Growth

Research and development

– Accelerate advanced driver safety systems (i.e. camera-based system solutions, NHTSA – RCD)

Lifestyle Division– Pure-play branded audio leadership

– Expands revenue opportunities

– Improve take rate of car audio

– Accelerates time-to-market

– Scale leverages R&D, procurement, consumer research and marketing

– Integrated marketing and promotion

Rationale for Change – Profitable Growth

Market Leadership in All Divisions for Pricing Power

– HARMAN serves affluent consumers whose lifestyle demands luxury and high technology

– HARMAN’s innovation leadership delivers simplicity, portability, and connectivity

– HARMAN’s world-class lifestyle brands set the bar for high-performance audio products

Uniquely Positioned to Address Convergence in Car, Home and Office

16

Transformed Structure Aligned with Markets

HARMAN FY2011Revenue:$3,772MEBIT: $211M, 5.6%

EBITDA: $328M, 8.7%FY 2011 Structure FY2011 New Structure

Branded Audio

Consumer Audio

Luxury Home Audio

Infotainment

Professional

AUTOMOTIVE

Revenue: $2,738MEBIT: $190, 6.9%

CONSUMER

Revenue: $420MEBIT: $7M, 1.7%

PROFESSIONAL

Revenue: 613MEBIT: $97M, 15.8%

PROFESSIONAL

Revenue: $596MEBIT: $94M, 15.8%

LIFESTYLE

Revenue: $1,087MEBIT: $109M, 10.0%

INFOTAINMENT

Revenue: $2,089MEBIT: $88M, 4.2%

Unaudited 17

$3,364

$3,772

$4,023

FY10A FY11A FY12B

$1,540

$1,836$2,089

FY09A FY10A FY11A

$1,024

$1,087

$1,196

FY10A FY11A FY12B

$477$504

$596

FY09A FY10A FY11A

$2,855$3,364

$3,772

FY09A FY10A FY11A

$838

$1,024$1,087

FY09A FY10A FY11A

New Structure - Revenues

HARMAN INFOTAINMENT

LIFESTYLE PROFESSIONAL

Unaudited 18

($86)

$116 $211

-3.0%

3.4%5.6%

FY09A FY10A FY11A

($140)

$1 $88

-9.1%

0.1%4.2%

FY09A FY10A FY11A

$42

$111 $109

5.1%

10.9% 10.0%

FY09A FY10A FY11A

$61

$76 $94

12.7%

15.0%15.8%

FY09A FY10A FY11A

New Structure – EBIT

Unaudited

HARMAN INFOTAINMENT

LIFESTYLE PROFESSIONAL

19

2009 – AVNU was founded -Ethernet AVB

1998 – MOST was founded

MOST = Media Oriented Systems Transport

Distributing Content from “Within Car” to a Cloud-Based “Connected Car”

20

Playing a Broader Rolein the Technology Ecosystem

ContentAggregator

EmbeddedCell phone

Mode ofConnection

ContentProvider

Vehicle Head Unit

USB

WiFi

BT

WirelessCarrier

Data over voice

DUN/SPP

“MiFi”

App

licat

ions

Applets

SMS

21

HARMAN Connects to the ConsumerAnytime, Anywhere, Anyplace

• User preferences• User behavior• Location services• Predictive search

• Voice network• Adaptive Text-to-Speech (TTS)• Publishing API• Mobile Advertising

API = Application Programming Interface

In the Car On the Go

At Home, Office, or at Concert Hall

22