Harman International CEO Discusses F1Q2011 Results – Earnings Call Transcript

Harman International Industries, Incorporated (

HAR

)

F1Q2011 Earnings Call Transcript

November 2, 2010 11:00 am ET

Executives

Dinesh Paliwal – Chairman, President and CEO

Herbert Parker – EVP and CFO

Analysts

Himanshu Patel – JPMorgan

Chris Ceraso – Credit Suisse

Keith Schicker – Robert W. Baird

Presentation

Operator

Compare to:
Previous Statements by HAR
» Harman International Industries Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript
» Harman International Industries Inc. Q1 2010 Earnings Call Transcript
» Harman International Industries Inc. F2Q10 (Qtr End 31/12/09) Earnings Call Transcript
» Harman International Industries, Inc. F1Q10 (Qtr End 09/30/09) Earnings Call Transcript

Good morning and welcome to the Harman’s fiscal 2011 first quarter earnings conference call. At this point, all of your phone lines are muted or in a listen-only mode. However, later during the conference, there will be opportunities for questions and those instructions will be given at that time. As a reminder, today’s conference is being recorded.

Please note that certain statements made by the company during this call are forward-looking statements. These statements include the company’s beliefs and expectations as to future events and trends affecting the company’s business and are subject to risks and the uncertainties. Persons participating on the call today are advised to review the reports filed by Harman with the Securities and Exchange Commission regarding these risks and uncertainties.

With that being said, here with our opening remarks is Harman’s Chairman and Chief Executive Officer, Dinesh Paliwal. Please go ahead, Mr. Paliwal.

Dinesh Paliwal

Thank you. Good morning, good afternoon, and good evening for some of you listening from Asia and Europe. Ladies and gentlemen, I thank you for joining the Harman first quarter 2011 Investor and Analyst Call. I’m joined here in Stamford, Connecticut by Herbert Parker, our Chief Financial Officer; and Robert Lardon, Vice President, Investor Relations.

I’m pleased to report another strong performance by the Harman team, extending our streak of year-over-year improvement to four quarters at both top and bottom line. Our sharp focus on execution, innovation, cost management and capital efficiency is clearly paying off for a number of quarters already.

We continue to see steady and continuous improvement in our served markets. We are taking aggressive steps to strengthen our footprint in the emerging markets.

Year-over-year we grew sales for the first quarter by 19% in local currency. Our non-GAAP operating income of $40 million represents a strong improvement from our return to breakeven just a year ago, as to our first quarter earnings of $0.35 per share. Our total liquidity of $875 million has increased 62% from the same period a year ago.

What a different world we have today, reflecting our intense cost, and capital focus and portfolio management. This puts Harman in a strong position as we execute on our large backlog of $12 billion awarded business, continue our rich innovation programs and evaluate potential growth investments.

It is noteworthy both Moody’s and Standard and Poor’s recognize our hard work and last month they upgraded the company two notches. As you know, our cost and productivity improvement programs and emerging markets focus have been instrumental in achieving this solid progress.

We remain ahead of schedule on our STEP Change program. We captured $373 million in permanent savings through September 30 this year, compared to our own target of $317 million. So we’re way ahead of our own program and we will achieve $400 million in coming quarters.

Last week we announced another key emerging market milestone, as we broke ground for Harman’s largest world class manufacturing and development complex in the northern city of Dandong in China, in order to serve the rapid growth of domestic demand in China.

I’m pretty sure you are all aware of the kind of record numbers we are seeing from Audi, from Mercedes and BMW, they are all our customers and they are all posting 60%, 70%, 80%, 90% growth. So it’s something very wonderful happening in China. I just came back from there after nine days.

So this factory will take advantage of local incentives and a fast track approach to complete this new 430,000 square foot Greenfield facility by summer of 2011. Once again such things don’t happen. Typically it takes a year to two years to build a factory to bring it online, but here we will bring it online in seven to eight months. That’s our speed.

This new complex is part of $100 million in investment that we have set aside for our strategic initiatives in China. We enjoy excellent relationships and strong support from key government officials and other stakeholders in China. This was reinforced by a series of high-profile activities in China last week, in which the entire Harman board of directors and top management participated for over a week.

Along with visits to our Shanghai and Suzhou facilities, Harman executives joined me at the Shanghai World Expo. To experience the Harman professional audio systems that have hosted more than 70 million visitors over the past six months from around the world, we also opened a new Harman flagship showroom in downtown Shanghai and met with top government officials and leading research scientists and think tank both in Shanghai and Beijing.

We wrapped up the week with a VIP event in Shanghai’s Grand Theater, drawing 300-plus key customers, executives, C-level suite and partners from 20 countries around the world. That was a show of confidence and satisfaction in Harman from our customers and partners. I’m very confident that this collaboration with our key stakeholders will generate many new opportunities in one of the world’s most important markets, China and of course the rest of the world.

Earlier in the quarter, we formally inaugurated our acquisition of Selenium in Brazil, at the region’s largest trade fair for audio systems. Our new Latin America unit we have renamed Harman to Brazil, put on a highly professional exhibit under the Harman banner. This will drive distribution of existing and new products from both our professional and consumer divisions to local, Brazilian and Latin American markets.

Read the rest of this transcript for free on seekingalpha.com