Presentation on theme: "Baird Conference November 2007. 1 Disclaimer on Forward Looking Statements Certain statements made by the Company in this presentation are forward- looking."— Presentation transcript:
1 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 Companys beliefs and expectations as to future events and trends affecting the Companys business. These forward-looking statements are based upon managements 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 Managements Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Companys Annual Report on Form 10-K for the year ended June 30, 2007, and the Companys most recent 10-Q filings with the SEC, as well as other factors, could cause actual results to differ materially from such statements.
2 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
3 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
4 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
5 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 F08 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.
11 Automotive Division - Q1 F08 Highlights Strong Sales Growth 14% Q1 F08 v. Q1 F07 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 PNDs R&D costs higher $4.3 million Q1 F08 v. Q1 F07 To deliver on record number of new programs Operating Profit decline primarily due to gross margin decrease
12 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
14 Consumer Division - Q1 F08 Strong Sales Growth 28% Q1 F08 v. Q1 F07 Solid sales increases Internationally and in the US to Best Buy Gross Margin declined nearly 2 points Competition in multimedia space Operating Loss of 2.6% in Q1 F08 improved 2.2 points versus Q1 F07
15 Product Road Map AVR Wireless iPhone Docking iPhone dock + HD Radio + speakerphone GPS 800/ MS 8
17 Professional Division – Q1 F08 Strong Sales Growth 11% Q1 F08 v. Q1 F07 Strong 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%
18 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
19 F08 Initiatives Significant restructuring program announced -- $25 million to $30 million to be completed in the second half of F08 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)