2008 Annual Report - Harman

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4 Harman InternatIonal annual report 2008 Similar transformation characterized the company’s executive management team during Fiscal Year 2008, with appointments including Herbert Parker as Chief Financial Officer; John Stacey as Chief Human Resources Officer; Richard Sorota as President, Consumer Division; Dr. Klaus Blickle as CEO, Automotive Division; and David Karch as Vice President of Operational Excellence. As this annual report goes to press, Todd A. Suko is joining us as Vice President, General Counsel and Secretary. These executives strengthen key functional roles while adding deep expertise in areas such as global footprint optimization, mergers and acquisitions, governance, supply chain and sourcing, legal, human resources and brand management. While executing on a record backlog of new automotive platform launches, Harman continues to enjoy the confidence of prestigious customers. Project awards in fiscal year 2008 include new or extended contracts from such customers as Audi, Ferrari and Mercedes. Ferrari also honored us with its prestigious Technology Award for 2008. Successful project launches extended our penetration of the Asian markets at Subaru and Ssangyong. We also formed an exclusive global alliance with UK-based Bowers & Wilkins, adding another premium brand to our automotive infotainment portfolio. During 2008, the Consumer division launched a number of innovations including new docking stations for Apple ® iPod ® and iPhone products, a new line of premium aftermarket automotive speakers, and new home theater solutions. The Professional Division continues to serve an array of world-class entertainers and venues with its smart audio products, enabled and integrated with our robust HiQnet communications protocol. 2008 events such as the Academy Awards, NFL Super Bowl and NBA All Star Game featured Harman systems, while tour artists including Celine Dion, Rod Stewart and Bob Dylan performed with our products. Harman systems were installed in more than a dozen venues at the 2008 Summer Olympic Games in China and played a starring role in the remarkable Olympic Opening and Closing Ceremonies from Beijing’s “Bird’s Nest” stadium. Amidst these achievements, we recognize the need for continuous and significant operational and structural improvements. It became clear during Fiscal Year 2008 that our organization was not fully equipped to execute cost effectively on its record business backlog. We also concluded that the company lacked the clarity of a strong, single voice in promoting its diverse product and brand range. During May, we completed a comprehensive review of long-term business strategy with the Harman Board. This blueprint recognizes both challenges and opportunities, including more aggressive penetration of emerging markets, global footprint optimization, and aligning our technology efforts with evolving market trends. Harman is privileged to enjoy a large and diverse product portfolio that far surpasses its competitors. We will leverage this advantage to provide customers with a rich and integrated experience and to attract a greater share of their discretionary purchases. To help drive profitable growth, Harman continues to invest in world-class innovation based on our deep expertise in areas such as acoustics, signal processing, software, and systems integration. We have launched a major market opportunity analysis and channel strategy for China, to accelerate the deployment of our
premium brands in this large, fast-growing region. This initiative will also provide a template for expansion of our activities in Russia and India. To characterize the new energy of Harman International and to unify its voice, we have implemented programs to strengthen both internal and external collaboration. A cross-functional team spanning executive management, functional and geographic managers now guides key decisions. A new group Intranet and town hall meetings with executives are reinforcing to employees the rewards of working as One Harman and embracing key strategic principles. New corporate advertising and sponsorship activities will commence in the fall of 2008 to strengthen our brand presence and highlight the “star power” that characterizes every element of our global business. While facing up to challenge and opportunity, we have dramatically sharpened the impact of our most important asset – People. New initiatives are in place to attract, develop and motivate the best team in the business. A measurable approach to compensation clearly links group strategy and vision with rewards at every level. A clear spirit of social responsibility remains in the forefront as we support the communities where we operate and contribute generously to those affected by natural disasters at home and around the world. Complementing these initiatives, we launched a sweeping productivity improvement program called STEP Change on July 1st. This 24-month initiative will employ a “bottom up” approach, involving every level of the organization to deliver measurable operational and structural cost savings. Consistent with and inclusive of the goals we outlined in February, this program is targeted to yield about $400 million in sustainable enterprise – wide savings beyond 2010. Along with other initiatives, STEP Change will contribute substantially toward lifting our company’s operating margins into the double digit range. As I reflect on my first year at the helm of Harman International, I am pleased but not yet satisfied with the company’s achievements. Most important, I am energized by the opportunities that lie ahead. Just as Fiscal Year 2008 was a year of dramatic transition, the next twelve months will be a time of decisive execution toward our vision of achieving clear industry leadership in market impact, shareholder value creation, and profitable growth. We will delight our customers by delivering a superior audio and infotainment experience, shaped through an environment of innovation, operational excellence and integrity. With our strategy and vision clearly defined, we will focus on measuring our progress and raising the bar of our performance at every strategic milestone. Continuous improvement will be the guiding principle as we leverage Harman’s robust product portfolio, talented people and global market opportunities to create sustained value for our shareholders. Best regards, Dinesh C. Paliwal Chairman and Chief Executive Officer Harman InternatIonal annual report 2008 5
Page 1 and 2: ��
Page 3 and 4: Financial HigHligHts Five-Year Summ
Page 5: From tHe CHaIrman and CHIeF exeCutI
Page 9 and 10: Harman’s Automotive Division has
Page 11 and 12: The Harman Consumer Division caters
Page 13 and 14: Harman Professional Division system
Page 15 and 16: UNITED STATES SECURITIES AND EXCHAN
Page 17 and 18: Forward-Looking Statements This rep
Page 19 and 20: Part I Item 1. Business We believe
Page 21 and 22: and Lexicon brand names. As a resul
Page 23 and 24: Manufacturing We believe that our m
Page 25 and 26: Competition The audio industry is f
Page 27 and 28: website, www.sec.gov, that contains
Page 29 and 30: Obligations to correct product defe
Page 31 and 32: Covenants in our existing debt agre
Page 33 and 34: Item 2. Properties Our corporate he
Page 35 and 36: On March 24, 2008, the Court ordere
Page 37 and 38: Item 4. Submission of Matters to a
Page 39 and 40: The following table provides inform
Page 41 and 42: Overview We design, manufacture and
Page 43 and 44: Allowance for Doubtful Accounts Our
Page 45 and 46: Termination Benefits. For one-time
Page 47 and 48: In fiscal 2007, Professional net sa
Page 49 and 50: Below is a summary of our SG&A expe
Page 51 and 52: We present below a summary of our o
Page 53 and 54: Financing Activities Net cash flows
Page 55 and 56: Company also closed its Consumer ma
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Item 8. Consolidated Financial Stat
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Report of Independent Registered Pu
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Consolidated Statements of Operatio
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Consolidated Statements of Sharehol
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Allowance for Doubtful Accounts. We
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elieve is more likely than not to b
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Fair Value Measurements for Purpose
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Note 3 - Property, Plant and Equipm
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Note 7 - Convertible Senior Notes O
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The carrying value and fair value o
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During the fourth quarter of fiscal
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A grant of restricted stock units i
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Modification of Certain Stock Optio
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Note 14 - Restructuring Program We
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Summary Plan Results The following
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We rely on historical long-term rat
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The following table reports net sal
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District Court for the District of
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We intend vigorously to continue de
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Note 20 - Investment in Joint Ventu
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Item 9B. Other Information None. Pa
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4.3 Certificate of Designation of S
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effective December 16, 2003. (filed
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SIGNATURES Pursuant to the requirem
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Schedule II Classification Year end
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Corporate Officers Dinesh C. Paliwa
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2008 Annual Report - Harman

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