FORM 10-K - Harman

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Contractual Obligations We have obligations and commitments to make future payments under debt agreements and operating leases. The following table details our financing obligations by due date: Year Ending June 30, 2010 2011 2012 2013 2014 Thereafter Total Senior notes(a) .................. $ — $ — $ — $400,000 $ — $ — $ 400,000 Capital leases(a) ................. 546 438 427 — — — 1,411 Other long-term obligations(a) ...... Firm commitments for capital 91 100 227,424 110 115 254 228,094 expenditures .................. 10,685 — — — — — 10,685 Purchase obligations(b) ........... 188,094 160 72 1 1 1 188,329 Non-cancelable operating leases(c) . . 35,106 29,017 28,233 27,826 24,755 60,800 205,737 Uncertain tax positions(d) .......... 10,533 — — — — — 10,533 Total contractual cash obligations . . . $245,055 $29,715 $256,156 $427,937 $24,871 $61,055 $1,044,789 (a) Refer to Note 6 – Debt in the Notes to the Consolidated Financial Statements for more information and for interest payments associated with our long-term debt. (b) Includes amounts committed under enforceable agreements for purchase of goods and services with defined terms as to quantity, price and timing of delivery. (c) Refer to Note 9 – Leases in the Notes to the Consolidated Financial Statements. (d) Refer to Note 10 – Income Taxes in the Notes to the Consolidated Financial Statements. Equity Total shareholders’ equity at June 30, 2009 was $973.8 million compared with $1.340 billion at June 30, 2008. The decrease is primarily due to the goodwill impairment charges totaling $330.6 million. There were no shares of our common stock repurchased during the fiscal year ended June 30, 2009. Business Outlook With the current turmoil in the global credit and financial markets, investor and consumer confidence have been negatively affected. We continued to see these effects on our results through most of fiscal year 2009. Our future outlook may continue to be impacted by the contraction in consumer discretionary spending. Our outlook could also be affected by changes in foreign currency exchange rates (primarily the Euro compared to the U.S. dollar), potentially resulting in reduced sales. To mitigate the potential impacts of the declining economic markets, we have accelerated many of the strategic initiatives implemented in the prior fiscal year and also approved additional restructuring actions during fiscal year 2009. We continue to focus on improving our global footprint, cost structure, technology portfolio, human resources and internal processes. We are continuing to proceed with our 24-month cost improvement and productivity program called STEP Change. This program is designed to yield $400 million in sustainable savings by fiscal year 2011. We have accelerated the timing of severance actions in order to help us improve our cost structure to enable us to remain competitive and mitigate the negative effects of this challenging environment. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are required to include information about potential effects of changes in interest rates and currency exchange rates in our periodic reports filed with the Securities and Exchange Commission. 41
Interest Rate Sensitivity/Risk At June 30, 2009, interest on approximately 64 percent of our borrowings was determined on a fixed rate basis. The interest rates on the balance of our debt are subject to changes in U.S. and European short-term interest rates. To assess exposure to interest rate changes, we have performed a sensitivity analysis assuming a hypothetical 100 basis point increase or decrease in interest rates across all outstanding debt and investments. Our analysis indicates that the effect on fiscal year 2009 net income of such an increase and decrease in interest rates would be approximately $2.4 million. Based on June 30, 2008 positions, the impact of such changes in interest rates were approximately $1.7 million to fiscal year 2008 net income. The following table provides information as of June 30, 2009 about our financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related average interest rates by contractual maturity dates. Weighted average variable rates are generally based on LIBOR as of the reset dates. The information is presented in U.S. dollar equivalents as of June 30, 2009. Principal Payments and Interest Rates by Contractual Maturity Dates Year Ended June 30, Fair Value ($ in millions) 2010 2011 2012 2013 Thereafter Total Liabilities Debt obligation ..................... $ 0.1 $ 0.1 $227.4 $ 0.1 $ 0.3 $228.0 $228.0 Average interest rate ................. 5.00% 5.00% 5.94% 5.00% 5.00% 5.00% 5.00% Foreign Currency Risk We maintain significant operations in Germany, the United Kingdom, France, Austria, Hungary, Mexico, and China. As a result, we are subject to market risks arising from changes in foreign currency exchange rates, principally the change in the value of the Euro versus the U.S. Dollar. Our subsidiaries purchase products and raw materials in various currencies. As a result, we may be exposed to cost changes relative to local currencies in the markets to which we sell our products. To mitigate these transactional risks, we enter into foreign exchange contracts. Also, foreign currency positions are partially offsetting and are netted against one another to reduce exposure. We presently estimate the effect on projected 2010 income before income taxes, based upon a recent estimate of foreign exchange transactional exposure, of a uniform strengthening or uniform weakening of the transaction currency rates of 10 percent would be to increase or decrease income before income taxes by approximately $54.4 million. As of June 30, 2009, we had hedged a portion of our estimated foreign currency transactions using forward exchange contracts. We presently estimate the effect on projected 2010 income before income taxes, based upon a recent estimate of foreign exchange translation exposure (translating the operating performance of our foreign subsidiaries into U.S. Dollars), of a uniform strengthening or weakening of the U.S. Dollar by 10 percent would be to increase or decrease income before income taxes by approximately $3.3 million. Changes in currency exchange rates, principally the change in the value of the Euro compared to the U.S. Dollar have an impact on our reported results when the financial statements of foreign subsidiaries are translated into U.S. Dollars. Over half our sales are denominated in Euros. The average exchange rate for the Euro versus the U.S. Dollar for the year ended June 30, 2009 decreased 6.8 percent from the same period in the prior year. 42
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Financial Highlights FIVE-YEAR SUMM
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To Our Shareholders FROM THE CHAIRM
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Harman’s Professional Division la
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Page 23 and 24: electronic devices. Our branded aud
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Page 39 and 40: On November 30, 2007, the Boca Rato
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Page 47 and 48: assets and liabilities. Actual resu
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Page 51 and 52: Consumer net sales increased 7 perc
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Page 55 and 56: Other SG&A expenses increased $16.9
Page 57 and 58: our cash and cash equivalents and s
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Page 69 and 70: CONSOLIDATED STATEMENTS OF OPERATIO
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Page 83 and 84: Note 5 - Goodwill Harman Internatio
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Item 9. Changes in and Disagreement
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Part IV Item 15. Exhibits and Finan
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Exhibit No. Exhibit Description 10.
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Exhibit No. Exhibit Description 10.
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Schedule II Classification HARMAN I
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400 Atlantic Street, Suite 1500 Sta
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FORM 10-K - Harman

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