By Mel Lambert / content-creators.com
Los Angeles (August 25, 2009)--Last week's fourth quarter and fiscal year-end results from Harman International Industries (NYSE: HAR) indicate that, while sales were down by upwards of 30 percent compared to last year, the numbers for Q4 ending June 30 showed a dramatic turnaround, possibly signaling that the worldwide economy is recovering faster than anticipated. And the professional audio division is fairing the best, with improved sales across brand sectors.
For the fiscal year ending June 30, net sales were $2.9 billion, a decrease of 30 percent compared to 2008, or 26 percent exclusive of foreign-currency translation. Professional net sales in fiscal 2009 were $492.9 million, a decrease of 21 percent/20 percent adjusted compared to the prior year. But pro-audio net sales in the fourth quarter were $124.3 million, a decrease of only 26 percent/23 percent adjusted compared to 2008--the automotive sector, by comparison, was down 40 percent and the consumer sector down 37 percent during the same period. But pro-audio sales in Q4 were up 9 percent compared to Q3; Harman attributes the improved performance in the final quarter to lower selling expenses and tight cost controls implemented across all business units.
The company also reports that its $400 million STEP Change initiatives are running ahead of schedule, with a lower cost base now providing sustainable competitive advantages. A $591 million cash balance is described in a company statement as representing "a solid liquidity position that provides fiscal flexibility." The STEP Change cost-savings program comprises three main elements: Organizational Simplicity, by realizing synergies between divisions; Supply Chain Excellence, including consolidating suppliers and leveraging global purchasing power; and Footprint Optimization of engineering and production sites, consolidating locations and leveraging global costs.
The latter cost-saving element includes the continuing downsizing and/or consolidation of Harman's various European and North American operations, including the loss of 1,900 jobs in high-cost countries--plus an additional 300 temporary production-related reductions--along with the staffing up of Indian and Chinese R&D and engineering centers. (Harman Pro's Northridge campus headquarters, for example, having now outsourced high-volume loudspeaker manufacturing to Mexico, will soon give up 8400 Balboa Boulevard, after relocating sales and marketing staff plus the JBL Custom Shop to another building.)
"The cost savings and [other] initiatives that we launched in June 2008 are ahead of target in delivering sustainable benefits," says Dinesh C. Paliwal, Harman's Chairman, President and CEO. "We have successfully delivered without exception on a record number of projects, despite significant market challenges." Other cost-saving measures include suspending company 401(k) contributions, implementing a salary freeze and reducing T&E expenses by 30 percent.
On the release of these 2009 figures, the Harman International share price rose to $29 before settling back to around $27. Two years ago, the stock was priced at $100. The Securities and Exchange Commission has also filed a civil lawsuit in the US District Court of Manhattan regarding false Harman takeover rumors that were spread by a Kuwait-based operation in late-July (See PSN Online) and which reportedly realized profits of more than $5 million from stock trades.