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Harman Posts Q3 Net Loss Despite Sales Gain

5/07/2008 09:31:00 AM Eastern

Washington — Harman International boosted third-quarter sales 17 percent to $1.033 billion, but the company posted a net loss of $3 million, compared with a year-ago net gain of $71 million, because of “unprecedented charges for warranty issues,” declining consumer division sales, and restructuring costs resulting from a shift in manufacturing and engineering facilities to lower-cost locations, the company said.

The company’s third-quarter operating loss was $7 million compared with a year-ago operating profit of $71 million.

Consumer sales fell 4.5 percent to $113 million, and the division posted an operating loss of $13 million compared with a year-ago operating profit of $2 million.

The unexpected warranty costs occurred in the OEM automotive division. “Due to a supplier discontinuation about two years ago,” the company said, “Harman deployed a new memory chip with existing software during the life cycle of an existing product. Although extensive testing was performed to validate this change, the software/memory chip combination developed an incompatibility over time.”

For the nine months through March, the company posted operating and net profits, which were nonetheless lower than during the year-ago period. Sales were up 15.3 percent to $3.05 billion. Operating income fell 68.6 percent to $95.7 million, and net income fell 63.6 percent to $76.1 million.

Meanwhile, the company announced several changes in the members of its group executive committee. Changes include a new chief financial officer, chief technology officer and automotive division CEO. The company’s chief financial officer, Kevin Brown, will not move to the new Connecticut offices for personal reasons, the company added. Harman also created a new position of operational excellence senior VP.

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