Note 18 – Business Segment Data

Effective July 1, 2016, we revised our business segments in order to better align them with our strategic approach to the markets and customers we serve. Prior period segment amounts throughout the condensed consolidated financial statements have been reclassified to the new segment structure. The reclassification of historical business segment information had no impact on our basic financial statements.

The accounting principles applied at the operating segment level in determining income (loss) from operations are the same as those applied at the consolidated financial statement level. Goodwill was allocated to our segments based on the relative fair value of the components of our reporting units that were affected by our change in segments. Refer to Note 8 – Goodwill and Intangible Assets, Net for more information.

We design and engineer connected products and solutions, including connected car, audio and visual products, enterprise automation solutions and connected services for consumers, automakers, and enterprises worldwide. Our chief operating decision maker evaluates performance and allocates resources based on net sales, operating income and working capital in each of the operating segments which are also our reporting segments.

Connected Car

Our Connected Car segment designs, manufactures and markets connected car systems for vehicle applications to be installed primarily as original equipment by automotive manufacturers. Our scalable connected car platforms deliver enhanced and connected capabilities to the car, including intelligent high-performance navigation with embedded solutions for multimedia, premium entertainment tuners, and on-board and off-board connectivity that addresses a wide range of vehicle categories. Leveraging a software-driven computer platform, we offer an integrated suite of technologies that extends beyond infotainment to encompass telematics, connected safety, and over-the-air update capabilities. We also offer a comprehensive suite of automotive cyber security solutions through a multi-layer architecture that can protect not only future vehicles, but connected cars on the road today. Global customers for our connected car systems include BMW, Daimler, Fiat Chrysler Automobiles, Ford, Geely, General Motors, Hyundai, Qoros, Subaru, Suzuki, TATA, Toyota/Lexus, Ssangyong, the Volkswagen Group and Yamaha. We also produce an infotainment system for Harley-Davidson touring motorcycles.

Lifestyle Audio

Our Lifestyle Audio segment designs, manufactures and markets car audio systems for vehicle applications to be installed primarily as original equipment by automotive manufacturers, as well as a wide range of consumer audio products including mid-to high-end loudspeaker and electronics, headphones, embedded audio products for consumer electronics and branded portable wireless speakers. Our Lifestyle Audio segment also now includes our car audio aftermarket services business which was previously included in our Connected Services segment. We believe that we continue to redefine audio excellence for the home, the car and on-the-go listening. Our Lifestyle Audio products are marketed worldwide under renowned brand names including AKG^®, Harman/Kardon^®, Infinity^®, JBL^®, JBL Professional, JBL Synthesis^®, Lexicon^®, Mark Levinson^® and Revel^®. We also have rights to use the Bowers & Wilkins^®, Bang & Olufsen^® and Canton^® brand names within the automotive space. Global customers for our premium car audio systems include Aston Martin, BMW, Brilliance, Chang’an, Daimler, Dongfeng, Fiat Chrysler Automobiles, Ford, Geely, General Motors, Great Wall, Hyundai, McLaren, PSA Peugeot Citroën, SAIC, Subaru, Tesla, Toyota/Lexus and the Volkswagen Group. Our car audio products feature innovative technologies such as Clari-Fi^TM, HALOsonic^TM and Quantum Logic Surround™. Our consumer audio products are sold in mass-market retail stores such as Apple, Best Buy, Target, Media Markt and Fnac, specialty audio stores, Harman stores, through online retailers such as Amazon.com, and directly online at Harmanaudio.com.

Professional Solutions

Our Professional Solutions segment designs, manufactures and markets an extensive range of audio, lighting, video and control, and automation solutions for entertainment and enterprise applications, including live concerts and festivals, stadiums, airports, hotels and resorts, conference centers, educational institutions, command centers and houses of worship. We offer a variety of products, including loudspeakers, amplifiers, digital signal processors, microphones, headphones, mixing consoles, guitar pedals, lighting, video and control, and enterprise automation solutions. Our Professional Solutions audio products are used at important events in prestigious venues, such as the GRAMMY® Awards, the Emmy® Awards, the Super Bowl®, the Oscars®, the MTV® Video Music Awards, the Country Music Awards® and Yankee Stadium. Our Professional Solutions products are marketed globally under a number of well-established brand names, including AKG, AMX^®, BSS^®, Crown^®, dbx^®, DigiTech^®, JBL Professional, Lexicon, Martin^®, Soundcraft^® and Studer^®.

Connected Services

Our Connected Services segment includes the operating results of Symphony Teleca Corporation (“STC”), and Redbend and our automotive services business. Our Connected Services segment creates innovative software solutions that integrate design, mobility, cloud and analytics and brings the benefits of the connected world to the automotive, retail, mobile, healthcare, media and consumer electronics markets. Our Connected Services segment offers services and solutions in order to help customers understand and visualize their data so they can make faster and more informed decisions, cloud-enable their businesses, support technical agility and exploit omni-channel strategies. Our Connected Services segment customers include BMW, British Telecom, Daimler, Jaguar Land Rover, Microsoft, Polycom and the Volkswagen Group.

Other

Other includes compensation, benefits and occupancy costs for corporate employees, net of reporting segment allocations, expenses associated with new technology innovation and our corporate brand identity campaign.

The following tables report Net sales and Operating income (loss) by each reporting segment for the three and six months ended December 31, 2016 and 2015:

	Three Months Ended December 31,						Six Months Ended December 31,
	2016			2015			2016			2015
Net sales:
Connected Car	$	769,299		$	736,969		$	1,566,416		$	1,492,452
Lifestyle Audio		765,022			641,309			1,333,404			1,117,380
Professional Solutions		255,650			248,871			495,873			495,977
Connected Services		173,308			153,540			339,979			313,453
Other		-			-			-			39
Eliminations **		(15,805	)		(8,532	)		(28,676	)		(16,256	)
Total	$	1,947,474		$	1,772,157		$	3,706,996		$	3,403,045
Operating income (loss):
Connected Car	$	76,958		$	84,266		$	171,876		$	171,485
Lifestyle Audio		125,798			83,018			204,480			130,271
Professional Solutions		10,228			23,952			21,910			49,637
Connected Services		19,629			4,865			21,192			10,496
Other		(58,599	)		(36,948	)		(94,633	)		(71,269	)
Total	$	174,014		$	159,153		$	324,825		$	290,620

	Three Months Ended December 31, 2016
	Net Sales			Eliminations **			Third Party Sales
Net sales:
Connected Car	$	769,299		$	(6	)	$	769,293
Lifestyle Audio		765,022			(762	)		764,260
Professional Solutions		255,650			(1,020	)		254,630
Connected Services		173,308			(14,017	)		159,291
Other		-			-			-
Eliminations **		(15,805	)		15,805			-
Total	$	1,947,474		$	-		$	1,947,474

	Three Months Ended December 31, 2015
	Net Sales			Eliminations **			Third Party Sales
Net sales:
Connected Car	$	736,969		$	-		$	736,969
Lifestyle Audio		641,309			(736	)		640,573
Professional Solutions		248,871			(596	)		248,275
Connected Services		153,540			(7,200	)		146,340
Other		-			-			-
Eliminations **		(8,532	)		8,532			-
Total	$	1,772,157		$	-		$	1,772,157

	Six Months Ended December 31, 2016
	Net Sales			Eliminations **			Third Party Sales
Net sales:
Connected Car	$	1,566,416		$	(22	)	$	1,566,394
Lifestyle Audio		1,333,404			(1,452	)		1,331,952
Professional Solutions		495,873			(1,503	)		494,370
Connected Services		339,979			(25,699	)		314,280
Other		-			-			-
Eliminations **		(28,676	)		28,676			-
Total	$	3,706,996		$	-		$	3,706,996

	Six Months Ended December 31, 2015
	Net Sales			Eliminations **			Third Party Sales
Net sales:
Connected Car	$	1,492,452		$	-		$	1,492,452
Lifestyle Audio		1,117,380			(1,270	)		1,116,110
Professional Solutions		495,977			(1,369	)		494,608
Connected Services		313,453			(13,617	)		299,836
Other		39			-			39
Eliminations **		(16,256	)		16,256			-
Total	$	3,403,045		$	-		$	3,403,045

**Represents elimination of inter-segment activity.