Note 2 – Acquisitions

MWM Acoustics

On July 22, 2011 (the “Acquisition Date”), we and our wholly-owned subsidiary, Harman Holding Limited (“Harman Holding”), entered into an equity securities purchase agreement with a group of sellers (the “MWM Sellers”), to acquire all of the issued and outstanding equity interests of MWM Acoustics LLC and certain related entities (“MWM Acoustics”), a leading provider of high performance embedded acoustic solutions (the “MWM Acquisition”), for a purchase price of $80.0 million (the “Fixed Purchase Price”), plus a working capital adjustment of $0.1 million which was determined within 60 days of the Acquisition Date and has been paid. On the Acquisition Date, we and Harman Holding paid the MWM Sellers a total of $72.0 million. The remainder of the Fixed Purchase Price of $8.0 million will be payable on the later of December 31, 2012, or upon the resolution of any outstanding indemnification claims. The MWM Acquisition is also subject to a $57.0 million earn-out, which is payable contingent upon the achievement of certain financial targets in the fiscal year ended June 30, 2014. Our preliminary valuation of the contingent consideration is $22.1 million. The MWM Acquisition complements and expands our existing microphone and embedded acoustic business and provides access to MWM Acoustics’ blue-chip customer base.

The total cost of the MWM Acquisition, including the fair value of the contingent consideration, was allocated to the assets acquired and liabilities assumed based on their fair values at the Acquisition Date, as follows:


	July 22, 2011
Cash and cash equivalents	$	1,465
Accounts receivable		4,434
Inventories		1,062
Other current assets		42

Current assets		7,003
Property, plant and equipment		273
Goodwill		79,757
Intangibles		20,600
Other noncurrent assets		1,091

Total assets		108,724

Accounts payable		5,187
Accrued liabilities		206

Total current liabilities		5,393
Other noncurrent liabilities		1,125

Total liabilities		6,518

Net assets	$	102,206

Goodwill and intangibles were recorded in connection with the acquisition based on third-party valuations and management’s estimates for those acquired intangible assets. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Of the $79.8 million of goodwill recognized, approximately $35.6 million is deductible for tax purposes. Intangible assets included customer relationships of $19.2 million with an approximate useful life of 10 years and technology of $1.4 million with an approximate useful life of four years. Expenses of $0.9 million were recognized in connection with this acquisition and are included in SG&A in our Consolidated Statements of Income for the fiscal year ended June 30, 2012. The operating results of MWM Acoustics, now known as Harman Embedded Audio, are included in our Lifestyle segment. Pro-forma financial information has not been presented as the MWM Acquisition is not material to our results of operations.

3dB Research Limited

On February 10, 2011 (the “3dB Acquisition Date”), we acquired all of the issued and outstanding shares of 3dB Research Limited (“3dB”), a leading developer of music and signal processing technology, for a total purchase price of $3.0 million, which was subject to a working capital adjustment as of the 3dB Acquisition Date of $0.5 million. On the 3dB Acquisition Date, we paid $2.3 million in cash to the sellers, which consisted of 60 percent of the purchase price of $1.8 million plus a working capital adjustment of $0.5 million. The remainder of the purchase price of $1.2 million will be paid in three equal installments on the first, second and third anniversary dates of the 3dB Acquisition Date. The total cost of the acquisition was allocated to the assets acquired and the liabilities assumed based on their estimated fair values. The excess of the purchase price over the net assets acquired was allocated to intangible assets. We incurred less than $0.1 million of transaction costs in connection with this acquisition, which are included in SG&A in our Consolidated Statement of Income for the fiscal year ended June 30, 2011. The operating results of 3dB, now known as Harman International Industries Canada Limited, are included in our Professional segment. Pro-forma financial information has not been presented as 3dB is not material to our results of operations.

Aha Mobile

On September 13, 2010 (the “Aha Acquisition Date”), we acquired Aha Mobile (“Aha”), a provider of on-demand mobile and location-based internet content services, for $1.8 million, which we paid in cash on the Aha Acquisition Date. The total cost of the acquisition was allocated to intangible assets, based on their estimated fair values. We incurred less than $0.1 million of transaction costs in connection with this acquisition, which are included in SG&A in our Consolidated Statement of Income for the fiscal year ended June 30, 2011. The operating results of Aha are included in our Infotainment segment. Pro-forma financial information has not been presented as Aha is not material to our results of operations.

Eletrônica Selenium S.A.

On June 1, 2010, Harman do Brasil Industria Eletrônica e Participacoes Ltda., an indirect wholly-owned subsidiary of Harman purchased all of the issued and outstanding shares of Eletrônica Selenium S.A. (“Selenium”) for an aggregate purchase price of $76.7 million, of which $65.1 million was paid at closing, and approximately $10 million of the remaining portion of the purchase price was due in June 2011. The remaining portion of the purchase price was $11.2 million after adjusting for foreign currency translation and was paid in June 2011. The remaining $1.6 million of the purchase price is payable subject to the resolution of certain contingencies. The results of operations for Selenium are included in our Consolidated Statements of Income as of June 1, 2010. Selenium, now known as Harman do Brasil, is a Brazilian manufacturer of loudspeaker products, using engineered technology based on international standards, and sells a full line of products including loudspeakers, high quality line arrays, multi-systems, amplifiers, drivers and other components related to the sound systems market. As a result of the acquisition, we expect to expand our distribution in Brazil and Latin America and drive more business opportunities in this region across our Infotainment, Lifestyle and Professional segments.

The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their fair values at the acquisition date, as follows:


	June 1, 2010
Cash and cash equivalents	$	1,259
Accounts receivable, net		14,788
Inventories		8,139
Other current assets		2,236

Current assets		26,422
Property, plant and equipment, net		8,903
Goodwill		56,661
Intangibles		14,168

Total assets		106,154

Accounts payable		1,880
Short-term debt		13,706
Accrued liabilities		11,389
Income taxes payable		1,522

Total current liabilities		28,497
Long-term debt		257
Other liabilities		679

Total liabilities		29,433

Net assets	$	76,721

Based on our final valuation, goodwill and intangibles were recorded in connection with the acquisition based on third-party valuations and management’s estimates for those acquired intangible assets. The final amount of goodwill recorded of $56.7 million decreased by $2.3 million during fiscal year 2011, as a result of final adjustments to the acquired net assets. Intangible assets included trade names of $8.9 million with an approximate 70 month life, distribution channels of $4.0 million with approximate useful lives ranging between 15 months to 35 months and a non-compete agreement of $1.3 million with an approximate 20 month to 60 month useful life. Expenses of $1.5 million were recognized in connection with this acquisition and are included in SG&A in our Consolidated Statement of Income for the fiscal year ended June 30, 2010.