Stamford, Conn. — Harman International posted operating and net losses in its fiscal second quarter and first half, compared with year-ago gains, as sales declined during both periods in its automotive OEM, consumer electronics and professional-audio divisions.
Automotive OEM is Harman’s largest division, accounting for 68 percent on net sales in the second quarter, ended Dec. 31.
For the quarter, total net sales slipped 29 percent to $756 million, producing an operating loss of $367 million compared with the year-ago $61 million operating income and a net loss of $317 million compared with a year-ago net income of $43 million.
For the half, net sales slid 19 percent to $1.63 billion, producing an operating loss of $334 million compared with a year-ago income of $102 million and a net loss of $294 million compared with the year-ago $79 million net income.
The losses, which include the effects of currency fluctuations, are likely to continue for awhile if sales remain as low as they are for awhile, said chairman/CEO Dinesh Paliwal. “The realization of savings [from restructuring] takes a good nine to 12 months,” he said. “If sales remain at such low levels, it will be a challenge to do something magical here.”
In the consumer division, second-quarter net sales slid 35 percent to $120 million, and first-half sales were down 26 percent to $226 million. The division posted operating losses in both periods compared with operating profits in the year-ago periods. Second-quarter operating losses came to $25 million compared twith a year-ago operating income of $17 million. First-half- operating losses came to $26 million compared to a year-ago operating income of $14 million.
The second-quarter results include $25.2 million in restructuring costs and $325 million in good-will impairment charges. First-half results include $36 million in restructuring costs and $325 million in good-will impairment charges. Even after excluding these one-time items, the company would have posted a $16 million operating loss and $10 million net loss in the second quarter compared with year-ago profits of $70 million and $46 million, respectively. First-half operating and net income would have come to $27 million and $20 million, respectively, down 77 percent and 79 percent from the year-ago periods.
In the automotive division, beset by declining new-car sales, net sales dropped 28 percent for the quarter to $517 million and 19 percent for the half to $1.13 billion. The division posted operating losses in both periods compared with operating profits during the year-ago periods. Second-quarter operating losses came to $320 million compared to year-ago operating income of $34 million, and first-half losses came to $300 million compared to a year-ago income of $79 million.
As part of its previously announced restructuring plans, Harman reduced employment by more than 900 jobs in the first half and will eliminate another 1,100 during the remainder of the fiscal year ending in July. The company previously announced it was closing its Woodbury, N.Y., offices home to consumer and pro division employees. “[The economic] environment brought new urgency to our cost-savings programs,” Paliwal said.
The company, however, is in a strong cash position to ride out the storm, he said. “We have limited long-term debt and ample liquidity to execute our plans,” Paliwal said. The company has $182 million in cash and short-term investments, a $300 million revolving credit facility with $42.5 million drawn, and $400 million in convertible notes maturing October 2012. By way of comparison, the company’s 2008 fiscal sales were $4.1 billion.
Only the professional division posted an operating income, though it was down 74 percent in the quarter and 38 percent for the half.