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<TABLE> Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended June 30, 1994
Commission file number 1-9764
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its
charter)
Delaware 11-2534306
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1101 Pennsylvania Ave., N.W., Ste. 1010, Washington,
D.C. 20004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202)
393-1101
Securities registered pursuant Name of each
Exchange on
to section 12(b) of the Act: which
registered:
Common Stock, par value $.01 per share New York Stock
Exchange, Inc.
(Title of class)
Securities registered pursuant to section 12(g) of the
Act: None
Indicate by check mark whether the registrant (1) has
filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the
registrant was required to file such reports), and (2) has been
subject to such
filing requirements for the past 90 days. X Yes No
The aggregate market value of the voting stock held by
nonaffiliates of the
Registrant as of August 31, 1994, was $374,289,168.
Indicate the number of shares outstanding of each of the
registrant's
classes of common stock, as of the latest practicable date:
15,079,067 shares
of Common Stock, par value $.01 per share, as of August 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders
for the fiscal
year ended June 30, 1994, are incorporated by reference in Part I,
Item 1, and
Part II, Items 5, 6, 7 and 8.
Portions of the Registrant's definitive Proxy Statement
relating to the
1994 Annual Meeting of Stockholders are incorporated by reference
in Part III,
Items 10 (as related to Directors), 11, 12, and 13.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will
not be contained, to the best of the registrant's knowledge, in
definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K
or any amendment to this Form 10-K. X
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TABLE OF CONTENTS
PART I
Page
Item 1. Business............................................
1
Item 2.
Properties..........................................18
Item 3. Legal
Proceedings...................................20
Item 4. Submission of Matters to a Vote of Security
Holders.20
Executive Officers of the
Registrant................20
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder
Matters........................22
Item 6. Selected Financial
Data.............................22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of
Operations................22
Item 8. Consolidated Financial Statements and
Supplementary
Data.................................22
Item 9. Disagreements on Accounting and Financial
Disclosure.........................................22
PART III
Item 10. Directors and Executive Officers of the
Registrant..23
Item 11. Executive
Compensation..............................23
Item 12. Security Ownership of Certain Beneficial Owners and
Management.........................................23
Item 13. Certain Relationships and Related
Transactions......23
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form
8-K............................24
List of Financial Statements and
Financial Statement
Schedules......................27
Independent Auditors'
Report........................33
Index to
Exhibits...................................35
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PART I
ITEM 1. BUSINESS
General Business
Harman International Industries, Incorporated ("Harman" or
the "Company"),
a Delaware corporation formed in 1980, is a leader in the design,
manufacture and
marketing of high-quality, high-fidelity audio products for
professional,
consumer (both home and automotive aftermarket), and automotive
original
equipment manufacturer ("OEM") markets in the United States and
overseas. The
Company's professional market includes a wide range of professional
uses, from
sound reinforcement, broadcast and recording and musical instrument
support to
commercial and public installations. The consumer market for audio
entertainment
systems consists of home loudspeakers and electronic components and
automotive
aftermarket loudspeakers and amplifiers. The Automotive OEM market
includes
components sold directly to automobile manufacturers (on either a
branded or
generic basis).
The Company's product offerings in the professional audio
market include:
JBL, Turbosound, Precision Devices, and Quested loudspeakers; and
JBL,
Soundcraft, Spirit, AKG, Studer, Studer Dyaxis, Allen & Heath
Brenell, DOD,
Digitech, BSS, Orban, dbx, Lexicon and UREI professional
electronics. The
Company's product offerings in the consumer audio market include:
JBL, Infinity
and Pyle loudspeakers; Harman Kardon electronic components;
AudioAccess in-home,
multi-source, multi-zone sound system controls; and
Fosgate-Audionics home
theater products. The Company's product offerings in the
automotive OEM market
are represented by premium loudspeaker systems designed and
manufactured for
factory installation by automobile manufacturers, including
Chrysler, Ford and
Mitsubishi, bearing the brand names Infinity, JBL and, beginning in
fiscal 1995,
Harman Kardon.
For more than 40 years, products bearing the Company's
brand names have
been designed to appeal to high-fidelity users, both professionals
and
enthusiasts, who desire premium quality and performance. The
respected,
established brand names and breadth of the Company's professional
product
offerings allow Harman to provide turnkey systems solutions as well
as unique
products for special market niches to professional customers. The
Company offers
an impressive array of world-class professional products which
enable performing
artists to produce high-quality, high-fidelity sound, both on stage
and in the
studio. The Company has identified three major areas to serve
within the
professional audio market: sound reinforcement, musical instrument
support and
broadcast and recording.
The growth of compact disc players, video cassette
recorders, and stereo
commercial television broadcasting has stimulated consumer demand
for high-
quality audio products and prompted the expansion of Harman's
consumer product
portfolio to include wireless loudspeakers, surround sound
processors and home
theater products. The Company has concentrated its efforts on the
higher-
quality, higher-priced segment of the consumer audio market.
Harman believes, based on its knowledge of the industry,
that it is among
the largest and most experienced domestically-based manufacturers
of high-quality
professional audio products, and that it offers a broader range of
these products
than any other domestic manufacturer. In addition, the Company and
its
predecessors have been leaders and innovators in loudspeaker
production and
technology for more than 40 years, and the Company believes its JBL
and Infinity
loudspeaker lines are among the world's premier loudspeaker brands.
The
Company's manufacturing, distribution and marketing capabilities
have been
expanded to support the growing markets it serves.
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The Company's strategic plan for the manufacture and
marketing of high-
quality brand name products involves three principal interrelated
elements.
First, manufacturing on a highly integrated basis; second,
marketing
aggressively both domestically and internationally; and third,
achieving
competitive productivity through a balance between automation and
a highly
motivated, skilled work force.
Management believes that JBL, Infinity, Soundcraft,
Studer, AKG and the
other Company brand names are well-recognized worldwide for premium
quality and
performance. In order to better expand and capitalize upon this
reputation,
Harman has invested significant management and capital resources
over the years
in developing an international design, engineering, manufacturing
and marketing
capability, while emphasizing communication among these integrated
functions in
order to respond more effectively to customer needs and to assure
product quality
and manufacturing efficiency.
In collaboration with the Chrysler Corporation
("Chrysler"), Ford Motor
Company ("Ford") and Mitsubishi Motor Company ("Mitsubishi"), the
Company designs
and manufactures customized high-fidelity automotive audio systems
for factory
installation. Infinity sound systems are now available on most
Chrysler models,
including the Dodge Intrepid, Caravan, Stealth, Ram Van and the
Dakota and T-300
pickup trucks, the Eagle Vision, the Plymouth Voyager and the
Chrysler Concord,
New Yorker, Town & Country and LHS models. The Jeep Grand Cherokee
also offers
an Infinity premium audio system. "Ford/JBL" brand name systems
are installed
in Lincoln's Continental, Town Car and Mark VIII and Ford's
Windstar, Crown
Victoria, Taurus and Explorer. Infinity systems are also offered
on certain
Mitsubishi models, including the 3000GT, Eclipse, Diamante and
Galant. In fiscal
1995, Harman branded systems will be offered in the automobiles of
new customers
Saab, Jaguar and Range Rover. Also, in 1995 Harman will provide a
premium system
for the Toyota Avalon, and in 1996 the customer base will be
expanded to include
BMW. The Harman Kardon brand name will be offered for use in
branded audio
systems for automobiles in 1995.
HISTORICAL DEVELOPMENT
Since its formation in 1980, the Company has developed
internally and
through acquisitions the capacity to design, manufacture and market
its products
to compete worldwide in the most significant areas of the
high-quality, high-
fidelity audio markets. While the Company has existed in its
current form since
only 1980, its significant subsidiaries have been in business for
substantially
longer periods, some previously as part of the same enterprise and
most under
their current management.
In 1953, Dr. Sidney Harman, Chairman and Chief Executive
Officer of the
Company, co-founded Harman Kardon to design, manufacture and market
high-fidelity
consumer electronic audio components. Harman Kardon was the first
domestic
manufacturer to produce and market a high-fidelity receiver (a
combination of
tuner, preamplifier and power amplifier in one chassis). In 1962,
Harman Kardon
was acquired by a predecessor of the Company (the "Predecessor").
The
Predecessor expanded its participation in the high-fidelity field
in 1969 by
acquiring James B. Lansing Sound (JBL), a top U.S. manufacturer of
high-quality
loudspeakers. Founded in 1946, JBL was a driving force in the
introduction of
professional loudspeakers developed for the movie industry.
(Amplifiers of the
1940's had limited power, therefore, transducers had to be
efficient and loud for
the audience to hear the movie, thus the term loudspeaker.) JBL
also extended
its offerings to provide its technological legacy to consumers by
producing high-
quality loudspeakers for consumers who were accustomed to JBL's
professional
quality.
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The Predecessor also formed international subsidiaries to
market and
distribute its audio products in Europe and Japan, where JBL and
Harman Kardon
were, and continue to be, top brand names.
In August 1977, the Predecessor was acquired by Beatrice
Foods Co. (now
Beatrice Companies, Inc. ("Beatrice"), when Dr. Harman became the
Under Secretary
of Commerce of the United States. In January 1980, at the
conclusion of his
service as Under Secretary of Commerce, Dr. Harman organized the
Company to re-
acquire from Beatrice the JBL loudspeaker business and the
international
distributing companies, which together represented approximately
60% of the
Predecessor's business. Harman Kardon and other parts of the
business had been
sold by Beatrice in the intervening years.
Since 1980, the Company has grown steadily by internal
expansion and a
series of strategic acquisitions. Harman's growth has been fueled
by a focus on
three areas of the audio industry: (1) professional audio,
providing a complete
range of audio products offered to the broadcast, recording, sound
reinforcement
and music instrument markets; (2) consumer audio, broadening its
range of product
offerings from the traditional base of loudspeakers and electronic
components to
include wireless loudspeakers, surround sound processors and home
theater
products and broadening its customer base to include large
retailers in the U.S.
such as Circuit City and Best Buy; and (3) automotive/OEM audio,
offering branded
audio systems for installation as original equipment in automobiles
and
broadening its base of customers to include Chrysler, Ford, Jeep
and Mitsubishi
and by adding Saab, Range Rover, Jaguar and Toyota for 1995 and BMW
for 1996.
The JBL professional loudspeaker business provided the
foundation for the
development of the Company's professional audio business, which has
been realized
through a series of strategic acquisitions. In 1983, the Company
acquired the
UREI professional amplifier business to expand its presence in the
professional
audio electronics arena. In April 1988, the Company acquired
Soundcraft, a U.K.
manufacturer of professional mixing boards, as a logical
progression of the
exclusive U.S. distribution of Soundcraft products by JBL
Professional. In March
1990, the Company acquired DOD to bring the Professional Group into
the musical
instrument/effects market. The digital electronics expertise of
DOD and
Soundcraft engineers have also contributed significantly to the
Company. In
September 1991, the Company acquired Allen & Heath Brennell,
Limited, and its
subsidiaries, a U.K. producer of professional mixing boards. In
April 1993,
Harman acquired Lexicon, a U.S. manufacturer of professional
digital audio signal
processing equipment and disk-based audio production systems,
further augmenting
the Company's digital audio product offerings.
Austrian microphone manufacturer AKG was acquired in
September 1993,
providing the Company the ability to offer complete system
solutions for the
sound reinforcement market. The AKG product line also includes
audio headphones,
audio signal processing devices, professional loudspeakers and
other professional
audio products. Effective January 1994 the Company acquired
Studer, a Swiss
manufacturer of professional recording and broadcast equipment,
expanding the
Company's presence in these key segments of the professional audio
market. As
a result of the acquisition and development of these professional
audio companies
and the renowned brand names which they offer, management believes
that Harman
is now the world leader in the professional audio market.
The Company's consumer business has been built around the
markets served
by JBL, Infinity and Harman Kardon. The Infinity consumer
loudspeaker business
was acquired in 1983, adding another true high-end speaker brand to
the Company's
product offerings. The Harman Kardon consumer electronics business
was acquired
from Shin Shirasuna in 1985, which had purchased Harman Kardon from
Beatrice.
The addition of the renowned Harman Kardon brand name served to
further
strengthen the Company's consumer product portfolio. Also in 1985,
the Company
acquired Pyle Industries to expand its presence in the automotive
aftermarket
loudspeaker business. The Company acquired the Epicure Products,
Inc. ("EPI")
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loudspeaker business in October 1986. The Company expanded its
electronic audio
components business and entered the home theater market through its
acquisition
of Fosgate, Inc. ("Fosgate-Audionics" or "Fosgate") in January
1991. The
Company's consumer electronics presence was expanded further
through the fiscal
1994 acquisition of AudioAccess, a manufacturer of home audio/video
system
control devices.
In June 1981, the Company entered the automotive OEM
market for
loudspeakers through the acquisition of the Essex Loudspeaker
Division of United
Technologies, which was renamed Harman Motive, U.S. The Company
strengthened its
position in the European automotive OEM loudspeaker market through
the
acquisition of Harman Motive, Ltd. (formerly ELAC), a U.K.
automotive OEM
loudspeaker manufacturer, in December 1989. The Company has
derived value from
its strategic entry into the automotive OEM market by optimizing
engineering,
design and manufacturing processes and by leveraging the market
strength of its
brand names, such as Infinity and JBL.
The loudspeaker manufacturing capabilities of the Company
have been
strategically expanded to include European operations. In November
1987, the
Company acquired the assets of Audax, a French transducer
manufacturer, and in
April 1988, the Company completed its purchase of Lydig of
Scandinavia A/S
("Lydig"), a loudspeaker cabinet manufacturer. Lydig manufactures
speaker
cabinets for JBL and Infinity which are fitted with transducers
manufactured by
Audax and sold in European markets.
The Company's international distributing operations
include operating units
in Germany, France, Japan, the U.K. and Belgium.
In fiscal 1994, the Company established the Harman
Marketing Units
("HMU's") located in Hong Kong, Denmark, Japan, Singapore and the
U.S. to support
and protect the Harman brand names worldwide. These organizations
maintain close
contact with their markets, interpret user needs and facilitate
product
discussion between distributors and the Professional and Consumer
Group
companies.
BUSINESS STRATEGY
Harman is a leading manufacturer and marketer of
high-fidelity audio
products. The Company's goal is to capitalize on its technical
expertise and
reputation for superior sound and translate this expertise into
increased market
share in existing markets and into new product areas wherever an
in-depth
understanding of sound gives Harman a competitive edge. The key
elements of its
strategy are:
Superior Sound. Harman strives to provide its
customers
with products that deliver high-quality, high-fidelity sound.
The
Company and its predecessors have been leaders and innovators
in
loudspeaker production and technology for more than 40 years.
Brand Equity. The Company's brand names are well-
recognized worldwide for premium quality and performance.
Harman
believes that this strong brand name recognition will enable
it
to expand its product offerings and market share in the
professional, consumer and automotive OEM markets.
Market Expansion. The Company's growth strategy has
emphasized utilization of its strengths in delivering
professional quality sound in the consumer and automotive OEM
markets. The Company moved into the microphone and headphone
market with the acquisition of AKG and moved more broadly
into
the broadcast and recording arenas with the acquisition of
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Studer. Harman has expanded its consumer product offerings
to
include home theater, surround sound and wireless speaker
technology. Harman has expanded its market for automotive
OEM
systems to Europe with the addition of Saab, Jaguar and Range
Rover as customers for 1995 and BMW for 1996. New customer
Toyota will also be added in 1995.
Systems Solutions. The Company has emphasized the
provision of professional systems solutions. The strategic
acquisitions of AKG and Studer now enable Harman to provide
complete systems solutions for sound reinforcement, broadcast
and
recording customers.
Manufacturing. Harman believes that the Company's
integrated manufacturing facilities are essential for the
manufacture of innovative, high quality products at
reasonable
costs. The Company integrates the disciplines of marketing,
design, engineering and manufacturing. By linking
engineering to
process development in the manufacturing facilities, the
Company
can develop manufacturing techniques that cannot be
duplicated by
most competitors.
OPPORTUNITIES
The Company's growth strategy is to continue to capitalize on
its
strong name brands and to provide internal support to each division
within
each group structure to maximize their resource utilization.
Potential
growth areas include:
Increased Presence in Professional Markets. The Company is
now
offering complete systems solutions utilizing a number of Harman
products to
provide custom solutions for the broadcast, recording, sound
reinforcement
and music instrument markets. In many cases the Company provides
one-stop
shopping to professional customers. The Company's products
including JBL,
Soundcraft, Lexicon, Allen & Heath, DOD, UREI, Studer, AKG, BSS,
Turbosound,
dbx, Orban, Digitech and Audio Logic are among the most
well-respected in the
world.
Operating Improvements at AKG and Studer. During fiscal
1994, the
Company acquired AKG and Studer, primarily because of their strong
brand
names and excellent reputations for quality. The Company is in the
process
of updating the manufacturing facilities and engineering
capabilities of AKG
and Studer. In addition, the product offerings are being updated
to include,
among other developments, wireless microphones at AKG and
additional digital
products at Studer.
Broadened Consumer Customer Base. The Company has broadened
its range
of products in the consumer loudspeaker area to accommodate both
specialty
audio retailers and large consumer electronics retailers such as
Circuit City
and Best Buy. In fiscal 1994, Infinity introduced two loudspeaker
lines
exclusively for sale to Circuit City. This program has been
enormously
successful.
Broadened Base of Automotive OEM Customers. The Company is
currently
selling branded premium audio systems for factory installation in
automobiles
under the brand names Infinity and JBL to Chrysler, Ford, Jeep and
Mitsubishi. New customers Saab, Jaguar, Toyota and Range Rover
will be added
in 1995 and BMW will be added in 1996. Significant is the addition
of
automobiles made in Europe as this expands the geographic base of
customers.
The Company will also begin offering systems under the Harman
Kardon brand
name in 1995, leveraging the market presence of another of the
Company's
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Worldwide Marketing Efforts. The Company has increased its
marketing
efforts to increase the public's awareness of the Company's brand
names and
to target "sell-through" rather than relying extensively on
retailers to
promote Harman products. In addition, the Company has increased
its efforts
in the training of retail sales people regarding Harman products.
The
Automotive OEM Group is also for the first time making the buying
public
aware of its ability to transform an automobile into a "concert
hall on
wheels" by promoting the Company's branded audio systems for
automobiles.
ORGANIZATION
The Company is organized in three core groups and three
functional
support groups. The core groups are Professional, Consumer and
Automotive
OEM. The functional support groups are Manufacturing, Marketing
and
Distributing. The Professional Group contributed approximately 39%
of fiscal
1994 total net sales, the Consumer Group accounted for
approximately 38% of
net sales, and the Automotive OEM Group generated approximately 23%
of net
sales.
Financial Information about Geographic Segments
Financial information about geographic segments required to
be included
hereunder is incorporated by reference to Note 10 of Notes to
Consolidated
Financial Statements contained in the Company's Annual Report to
Shareholders
for the fiscal year ended June 30, 1994.
Description of Business
The Company's business is conducted through its wholly owned
subsidiaries which include:
Name Principal products
AKG Acoustics GmbH Professional electronics
Allen & Heath Brenell Limited Professional electronics
Audax Industries, S.A. Consumer home, automotive and
professional loudspeakers;
automotive
OEM loudspeakers
DOD Electronics Corporation Professional electronics
Fosgate, Inc. Consumer home electronics
Harman Audio Outlet, Inc. Consumer home and automotive
high-
fidelity products
Harman Belgium NV Consumer home, automotive and
professional high-fidelity
products
Harman Deutschland GmbH Consumer home, automotive and
professional high-fidelity
products
Harman France, S.A. Consumer home, automotive and
professional high-fidelity
products
Harman International Industries, Consumer home, automotive and
Limited professional high-fidelity
products
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Name Principal products
Harman International Japan Consumer home, automotive and
Co., Limited professional high-fidelity
products
Harman-Kardon, Incorporated Consumer home and automotive
electronics
Harman-Kardon Europa A/S Consumer home and automotive
electronics
Harman-Motive, Inc. (U.S.) Automotive OEM loudspeakers and
electronics
Harman-Motive, Ltd. (U.K.) Automotive OEM loudspeakers
Infinity Systems, Inc. Consumer home and automotive
loudspeakers and electronics
JBL Incorporated Consumer and professional
loudspeakers
and electronics
Lexicon, Incorporated Professional electronics
Lydig of Scandinavia A/S Components, cabinets and
loudspeaker
systems
Pyle Industries, Inc. Consumer automotive
loudspeakers and
electronics
Soundcraft Electronics, Limited Professional electronics
Studer Professional Audio AG Professional electronics
Markets for Products
Based on the Company's experience in, and knowledge of, the
industry,
the Company believes that the professional, consumer and automotive
OEM
markets, both domestic and international, have experienced
significant growth
in recent years. The growth of digital audio technology has
changed the way
music is recorded and reproduced and has led to the development of
a new
generation of professional and consumer audio products. The
Company is well-
positioned to meet the digital requirements of the professional
market with
the expertise of its professional companies, particularly
Soundcraft, Studer,
Lexicon and DOD.
Harman is a leader in the design and production of premium,
branded
high-fidelity systems for automobile manufacturers. Consumers are
placing
increasing emphasis on the quality of the sound system in the
automobile
purchase process. The Company's Infinity, JBL, and, starting in
1995, Harman
Kardon brand names have been successful in raising the standard for
excellence in car audio.
Products
The Company designs, engineers, manufactures and markets
worldwide a
broad range of high-quality, high-fidelity audio loudspeakers and
electronics
for the professional (broadcast and recording, sound reinforcement,
and
musical instrument support), consumer (both home and automotive
aftermarket),
and automotive OEM markets. The Company also distributes a small
amount of
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complementary audio products manufactured by other companies. The
Professional Group accounted for approximately 39% of the Company's
fiscal
1994 sales. The Consumer Group contributed approximately 38% of
fiscal 1994
sales, of which 82% was attributable to home loudspeaker and
automotive
aftermarket systems and 18% was from electronic components. The
Automotive
OEM Group generated approximately 23% of fiscal 1994 sales.
Professional Products. The Company designs, manufactures and
markets
products in all significant segments of the professional market,
offering
complete systems solutions to professional installations and users
around the
world.
The Professional Group includes many of the most respected
names in the
industry including JBL, Soundcraft, Allen & Heath, DOD, Lexicon,
AKG, BSS,
dbx, Orban, Turbosound, Studer and UREI. Professional
installations of
Harman products include stadiums, opera houses, concert halls,
recording
studios, broadcast studios, theaters, cinemas and touring
performing artists.
Sound systems incorporating components manufactured by JBL,
UREI,
Lexicon, AKG, Studer and Soundcraft are in use around the world in
such
places as Wolf Trap Farm Park for the Performing Arts and the
Kennedy Center
in Washington, D.C., Disney World and Epcot Center in Florida, the
Great Hall
of the People in Beijing, China, Tanglewood Music Shed in
Massachusetts,
Frankfurt Opera House in Germany, the Royal Danish Theater and
Abbey Road
Studio in England. Performing artists such as Neil Diamond, Bruce
Springsteen, David Bowie, Madonna, Pink Floyd, Alabama, Michael
Jackson,
Elton John, Kenny Rogers, Billy Joel, U-2, The Rolling Stones and
The Who use
Harman professional equipment on tour.
The professional market has advanced rapidly and is heavily
involved in
digital technology. Harman's Professional Group is a leader in
this market.
The strength of the Professional Group is derived from its ability
to share
research and development, engineering talent and other substantial
digital
resources among its divisions. Soundcraft, Lexicon, Studer and DOD
each have
substantial digital resources and work together to achieve common
goals by
blending the individual strengths and qualities of the operating
units with
the combined resources of the group.
The Professional Group's loudspeaker products are well-known
for high
quality and superior sound. The JBL Professional portfolio of
products
includes studio monitors, loudspeaker systems, power amplifiers,
musical
instrument and sound reinforcement loudspeakers, bi-radial horns,
theater
systems and surround sound systems as well as industrial
loudspeakers. The
AKG acquisition has provided the Company with additional
professional
loudspeaker market strength through the addition of the Turbosound
Floodlight
and Flashlight loudspeaker lines and the Quested studio monitor
models.
The Company is a leading manufacturer and marketer of audio
electronics
equipment for professional use. Such products are marketed on a
worldwide
basis under various trade names, including Soundcraft, Allen &
Heath, DOD,
Digitech, Lexicon, AKG, BSS, dbx, Orban, Studer, Audio Logic, and
UREI, and
are often sold in conjunction with the Company's professional
loudspeakers.
The Soundcraft line of high-quality sound mixing consoles
extends from
automated multi-track consoles for master recording studios to
compact
professional mixers for personal recording and home studios.
Soundcraft
products span four main market areas: sound reinforcement,
recording studios,
broadcast studios and musical instrument dealers. Allen & Heath
manufactures
cost effective mixing consoles for use in broadcast studios and for
use on
stage in smaller venues.
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The DOD product line is marketed under the DOD, Digitech and
Audio
Logic brand names, and is sold primarily to professional audio and
musical
instrument dealers. DOD products include signal processing
equipment,
equalizers, mixers and special effects devices. Performing artists
who have
used DOD products on tour include: Def Leppard, Damn Yankees, Skid
Row,
Frank Gambale, Steve Vai, George Lynch, Peter Gabriel, Marshall
Tucker and
Jennifer Batten (lead guitarist for Michael Jackson).
Lexicon is a leader in the design, manufacture and marketing
of high-
quality digital audio signal processing equipment and disk-based
audio
production systems for professional use in the audio, video,
musical
entertainment and broadcasting markets worldwide. Lexicon's OPUS
disk-
based audio production systems are used in film and video post
production
studios. OPUS provides recording, non destructive editing, mixing
and signal
processing all in the digital domain. Broadcasters also use
Lexicon products
to edit, shape and synchronize their programming. Additionally,
Lexicon
designs, manufactures and markets a series of high-end consumer
ambiance and
Home Theater Surround Sound processors.
AKG is one of the world's largest manufacturers of
high-quality
microphones. The AKG product line includes microphones, audio
headphones and
other professional audio products marketed under the AKG brand
name. AKG
also owns several companies that manufacture and market
professional audio
products, including: audio signal processing devices distributed
worldwide
under the brand names dbx and Orban; and amplifiers, loudspeakers
and other
professional audio products sold worldwide under the brand names
BSS,
Precision Devices, Quested and Turbosound.
Studer Professional Audio has brought the Professional Group
to a
strong position in the high-end broadcast arena. Studer is
recognized for
the high quality and reliability of its professional products,
which include
analog and digital tape recorders, mixing consoles, switching
systems,
digital audio workstations, professional compact disc players and
recorders
and turnkey broadcasting studio installations.
Consumer Products. The Company designs, manufactures and
markets
loudspeakers principally under the JBL and Infinity brand names for
the
consumer market. Since its formation in 1948, JBL has designed
loudspeakers
to appeal to audio enthusiasts who desire superior-quality sound
reproduction. JBL loudspeakers sold to the consumer market employ
techniques
originally developed by the Company for products used in recording
studios,
concert halls, theaters, airports and other acoustically demanding
environments. JBL's diverse product line gives customers a wide
range of
speaker choices: floorstanding, bookshelf, built-in, wireless,
transportable
and wall of ceiling mountable loudspeakers, in styles and finishes
ranging
from high gloss piano lacquer to genuine wood veneers. JBL's
recent
introduction of wireless technology in the SoundEffects speaker
system allows
easy home theater and multi-room installation.
From its beginning in 1968, Infinity has developed high
quality
loudspeakers with their own audio character, which is commonly
identified as
"linear," "symmetrical," or "neutral." These characteristics are
expressed
in sophisticated acoustic configurations utilizing injection-molded
graphite
speaker cone material, electro-magnetic induction tweeters and
mid-range
drivers. Epsilon, the latest addition to the Infinity Reference
Standard
line of high performance loudspeakers, features a proprietary
planar monopole
design which delivers wide, smooth power response with exceptional
spaciousness and "air" while eliminating the drawbacks of planar
dipole
speaker systems.
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The more expensive JBL and Infinity loudspeakers are housed
in high-
gloss lacquer or wooden veneer cabinets which complement the
quality
components they enclose. The Company has made significant
investments in its
loudspeaker cabinet production facilities at Harman Speaker
Manufacturing in
Northridge, California and at Lydig in Denmark and believes that
they are
among the most advanced cabinet production facilities in the world.
Both JBL
and Infinity also offer premium automotive aftermarket loudspeaker
and
amplifier products.
The Company designs, manufactures and markets a broad range
of consumer
audio electronics products on a worldwide basis. The Company's
consumer
electronics products facilitate the marketing of complete systems
incorporating the Company's loudspeakers, such as surround sound
home theater
installations.
Founded in 1953, Harman Kardon has been a leading innovator
in the
development of high-quality audio components which improve the
listening
experience and reflect a commitment to value and ease-of-use. The
realization of these principles is reflected in Harman Kardon's
current
product offerings, including audio-video stereo receivers, bit
stream compact
disc changers, "smart" tape decks and high fidelity all-in-one
compact
systems.
Fosgate Audionics is a designer and manufacturer of high-end
surround
sound processors, amplifiers and loudspeakers for the growing U.S.
and
international home theater market. Fosgate Audionics provides
solutions for
all component and system needs for home theater and home audio.
Fosgate
offers home "THX" loudspeaker components and surround sound
processor/"THX"
controllers.
Pyle Industries manufactures and markets aftermarket
automotive
speakers, amplifiers and electronics.
In 1993, the Company acquired AudioAccess, which is a leader
in the
field of in-home, multi-source, multi-zone sound system controls.
AudioAccess adds to the Consumer Group's ability to provide
complete home
theater solutions. Also in 1993, the Company acquired a minority
interest in
Madrigal, with an option on the remaining shares. Madrigal is the
manufacturer of the legendary Mark Levinson amplifiers and Proceed
brand
high-fidelity product lines.
Automotive OEM. Harman International believes it is the
world's
largest manufacturer of premium branded, automotive OEM audio
systems. In
fiscal 1994, sales of automotive OEM products accounted for
approximately 23%
of the Company's consolidated net sales. In its sale of
loudspeakers and
other audio products to the automotive OEM market, the Company
takes
advantage of its expertise in the design and manufacture of
high-quality
loudspeakers, as well as the reputation for quality associated with
its JBL,
Infinity and Harman Kardon brand names. In particular, the
Company's
expertise in designing and manufacturing transducers utilizing
special
materials allows the Company to collaborate with automobile
manufacturers to
design lighter audio sound systems, thereby contributing to
increases in
automobile fuel efficiency.
The Company manufactures premium OEM sound systems for
automobiles,
including the Infinity audiophile systems sold to Chrysler and
Mitsubishi and
the JBL audiophile systems sold to Ford, as well as a limited
amount of
loudspeakers sold for installation as components of non-branded
standard
equipment sound systems. The Company's subsidiaries customize
these
automotive audio systems individually for each automobile model to
maximize
the acoustic performance for each model's interior.
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Infinity has collaborated with Chrysler in developing
customized
automotive systems which are available as options under the
"Chrysler/Infinity" brand name for Chrysler's Concord, New Yorker,
Town &
Country and LHS models; Dodge's Intrepid and Caravan models;
Plymouth's
Voyager model; and Eagle's Vision model. Infinity also offers
customized
brand name audio systems which are available as options for
selected
Mitsubishi models, including the Mitsubishi 3000GT, Diamante,
Eclipse and
Galant along with the Dodge Stealth, which is manufactured by
Mitsubishi.
Chrysler/Infinity systems are also offered in the Jeep Grand
Cherokee and the
Dodge Ram Van and Dakota and T300 pickup trucks. The Company
expects that
the majority of new models currently planned by Chrysler will
include
"Chrysler/Infinity" systems as customer options.
JBL has created customized automotive audio systems utilizing
various
loudspeaker and amplifier configurations in collaboration with
Ford. These
systems are available as an option under the "Ford/JBL" brand name
in
Lincoln's Town Car, Continental and Mark VIII models; and Ford's
Taurus,
Windstar, Explorer and Crown Victoria models. The Company provides
the total
system, including all electronic components, other than the head
unit
(receiver/cassette deck/CD player) and subwoofer amplifiers, for
selected
models.
In fiscal 1995, Harman branded systems will be offered in the
automobiles of new customers Saab, Jaguar and Range Rover. Also,
in 1995
Harman will provide a premium system for the all-new Toyota Avalon,
and in
1996, the customer base will be expanded to include BMW. The
Harman Kardon
brand name will be offered for use in branded audio systems for
automobiles
in 1995.
Strict security has been maintained with respect to the
independent
engineering development of the branded audio systems for each
automotive
customer in order to promote technical competition and to protect
the
proprietary interests of the automobile manufacturers.
The Company's U.S. automotive OEM subsidiary (Harman Motive,
U.S.)
enjoys a Q-1 certified supplier rating from Ford and holds the Q-E
certification from Chrysler. A Q-1 certification is awarded to
suppliers
that meet or exceed the rigorous requirements of the Q-1 quality
evaluation
process set by Ford. The Q-E certification from Chrysler
recognizes superior
supplier performance in the area of quality. Harman Motive was
also awarded
the U.S. Senate-sponsored Productivity Award.
The Company's Harman Motive, Ltd. subsidiary in the United
Kingdom,
also a Q-1 supplier to Ford, is a specialized designer and
manufacturer of
loudspeakers and packaged assemblies for the automotive OEM
industry in
Europe. Each product is fully customized to meet the automobile
manufacturer's specific mechanical and performance criteria.
Harman Motive,
Ltd. currently produces a variety of loudspeaker systems which are
installed
in such makes as Ford, Rover and Jaguar. In addition, the
Company's Audax
transducer manufacturer, located in France, currently manufactures
and sells
loudspeakers directly to automobile manufacturers in France for
Peugeot,
Citroen and Renault models.
Harman's existing product lines continue to be augmented by
the
development of new products. During the past two years the
following
products were among the new products introduced:
1994: The Lexicon JamMan digital audio effects processor, the
Soundcraft Delta Theater mixing console, the Orban 8282
TV
Optimod digital television audio processor, the AKG
WMS50 and
WMS100 wireless microphones, the JBL C236A-S101 sound
power
controller, the Digitech Bass Whammy Pedal, the BSS
Varicurve
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remote console series, the Studer Numisys II digital
audio
workstation, the JBL Control 8SR/pt mini sound
reinforcement
system, the Turbosound Floodlight TCS612 loudspeaker
system, the
Lexicon Vortex digital audio effects processor, the
Spirit Folio
S1, 4 and RacPac portable mixers, the DOD Vintage 2
guitar
processor, the JBL Control 1E Power Control 1 monitor,
the dbx
242 Project 1 parametric equalizer, the AKG C535WLTM900
hand-held
microphone, the Studer MultiDesk digital audio
workstation, the
JBL SC305 center channel loudspeaker, the Harman Kardon
FL8400
front-loading carousel CD changer, the Infinity Epsilon
planar
monopole loudspeaker, the Pyle Driver automotive
speakers, the
Fosgate-Audionics Model 3A surround sound processor
with
amplifier, the JBL SFX Series mini surround sound loudspeaker
systems, the Harman Kardon AVR15 audio/video receiver,
the JBL
SYN3 Synthesis Series home theater speaker system and
the
Infinity Reference Standard Car Audio Series automotive
speakers.
1993: The JBL HT/THX Loudspeaker System, the JBL G Series
loudspeakers,
the JBL PS Series Powered Subwoofers, the Soundcraft
Spirit Folio
Portable Mixer, the JBL Array Series loudspeakers, the
UREI
Platform Series electronics, the M2020 Lexicon effects
processor,
the Pyle Multi-Element Automotive Speakers, the
Soundcraft LM1
mixer, the Harman Video Series II/LD-1 Data Projector,
the
Concord IS5000 Surround Sound Processor, the Digitech
(DOD) TR3
Multi-Effects Pedal, the Digitech (DOD) Grunge
Distortion Pedal,
the Fosgate-Audionics Model Four surround controller,
the
Fosgate-Audionics Model MC-110 speaker, the JBL Base
Wave
Amplifier, the Harman Kardon AVR30 audio/video
receiver, the
Harman Kardon HD7725 CD player, the Infinity
Environmental
Reference Standard Series loudspeakers (ERS), the
Infinity KAPPA
MKII loudspeaker series and the JBL Control Monitor
Loudspeaker
Series.
Manufacturing
The Company believes that its manufacturing capabilities are
essential
to maintaining and improving the quality and performance of its
products.
The success of the Company's conversion of its primary
manufacturing
facilities to a continuous flow manufacturing process has reduced
product
cycle times, increased flexibility and improved efficiency. The
benefits of
these improvements are reflected in higher product quality and
lower purchase
and overhead costs.
The Company manufactures most of the products that it sells
other than
the Harman Kardon electronic components. The Company also produces
some
products for other loudspeaker companies on an OEM basis.
Notable among the Company's manufacturing capabilities with
respect to
loudspeakers are the production of its own high-gloss lacquer and
wooden
veneer loudspeaker enclosures, the milling of its own wire, the
winding of
its own voice coils and the use of numerically controlled lathes
and other
machine tools to produce its many precision components. The
Company's high
degree of manufacturing integration, it believes, permits it to
produce more
consistently uniform high performance products. Moreover, the
Company has
been able to apply technology and materials developed for one line
of
products to other of its product lines. The Company uses common
manufacturing facilities to achieve economies of scale, while
maintaining
competition among its subsidiaries in engineering, product
development and
marketing.
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The Company's principal domestic manufacturing facility is
located in
Northridge, California where it manufactures JBL and Infinity
loudspeakers,
including cabinets, for professional, consumer and automotive
aftermarket
markets, amplifiers for the OEM and automotive aftermarket markets,
and UREI
electronics. The Company manufactures loudspeakers and assembles
sound
systems for the OEM automotive market in Martinsville, Indiana.
Its Pyle
subsidiary in Huntington, Indiana, manufactures loudspeakers for
automotive
aftermarket and OEM applications. DOD manufactures its products at
its
facility in Salt Lake City, Utah. Lexicon manufactures its
products
predominantly at its Waltham, Massachusetts facility.
In addition to the Company's U.S. manufacturing capacity, the
Company
has established a strong international manufacturing presence to
better
respond to customer demands in world markets. AKG manufactures
microphones
and headphones in Austria, with additional manufacturing operations
in India,
and Studer manufactures professional recording and broadcast
equipment in
Switzerland. Audax, whose products include high-quality,
high-performance
tweeters, manufactures transducers in France, and the Company's
Lydig
subsidiary manufactures cabinet enclosures and assembles complete
JBL and
Infinity loudspeakers in Denmark for sale in European markets.
Harman
Motive, Ltd. manufactures automotive OEM loudspeakers and
Soundcraft
manufactures mixing boards at their respective facilities in the
United
Kingdom. Also manufactured in the United Kingdom are Turbosound
loudspeakers
and BSS professional amplifiers. The Company's international
speaker and
professional electronics manufacturing facilities enable the
Company to
compete more effectively in Europe.
Marketing
The Company's products are sold domestically and
internationally in the
professional, consumer, and automotive OEM markets. The Company's
professional market includes a wide range of professional uses,
from sound
reinforcement, broadcast and recording and musical instrument
support to
commercial and public installations, which accounted for
approximately 39% of
the Company's consolidated net sales in fiscal 1994. The consumer
market for
audio products consists of home and automotive aftermarket
products, which
accounted for approximately 38% of fiscal 1994 consolidated net
sales. The
OEM market includes automobile manufacturers who purchase
components and
systems primarily on a branded basis. In fiscal 1994, sales of
automotive
OEM products accounted for approximately 23% of consolidated net
sales.
In fiscal 1994, the Company implemented marketing specialist
organizations located in Denmark, Hong Kong, Singapore, Japan and
the U.S.
(which serves the Latin American, African and Middle Eastern
markets) to
support and protect the Harman brand names worldwide. These
organizations,
called the Harman Marketing Units ("HMU's"), stay in intimate
contact with
their markets, interpret user needs and facilitate product
discussion between
distributors and the Professional and Consumer Group companies.
The HMU's
also sponsor advertising and promotional events to enhance public
awareness
of the Company's brands.
The Company's professional audio products are marketed
worldwide
through professional sound equipment dealers, including
engineered-sound
contractors which directly assist major users. The Company's sales
and
marketing group for its professional products is separate and
independent
from its consumer products sales and marketing group, although both
groups
are supported by the HMU's.
The Company primarily markets its consumer audio products
through audio
and audio-video specialty stores and certain audio-video chain
stores,
including Circuit City and Best Buy. The Company enjoys broad
distribution
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of its products and particularly seeks dealers who emphasize
high-quality
audio systems and who are knowledgeable about the characteristics
of audio
products. The Company's sales and marketing activities include
dealer
education programs and comprehensive product literature to enable
salespeople
to understand and explain the price and performance features
offered by the
Company's products. The Company's dealers typically stock a number
of home
audio equipment lines including competing products (sometimes both
JBL and
Infinity loudspeakers) and may also carry automobile audio systems
and other
consumer-oriented electronics products.
The Company markets its automotive products in a variety of
ways. The
Company currently markets its automotive aftermarket products to
consumers
through its existing home audio dealer network and through
automotive audio
specialty dealers. At the OEM level, in addition to the brand name
systems
described previously, the Company sells non-branded systems
directly to
Chrysler, Ford, Rover and other automotive manufacturers (such as
Citroen,
Peugeot and Renault) for installation in vehicles during
production.
Distributing
The Company's International Distributing Group units in
Germany,
France, Great Britain, Japan and Belgium generally market products
made by
JBL, Soundcraft, Allen & Heath, DOD, UREI, AKG, Studer, Lexicon,
BSS, dbx,
Orban, Turbosound, Infinity, Harman Kardon, Pyle, AudioAccess and
Fosgate on
an exclusive basis in their respective countries. These Harman
products are
also distributed by other independent distributing firms in most
other major
world markets.
Harman Deutschland, the Company's largest European
distribution
subsidiary, completed an agreement to withdraw from the exclusive
distribution of Maxell audio and video tapes in Germany at the end
of fiscal
1993. Harman Deutschland continued to provide administrative
support on a
fee basis for Maxell in Germany through the end of fiscal 1994.
Excluding
the distribution of Maxell products, which accounted for
approximately $40.0
million of Harman Deutschland's sales in fiscal 1993, fiscal 1994
sales
approximated the prior year despite the difficult economic
conditions in
Germany. The termination of Harman Deutschland's distribution of
Maxell
products has not materially affected the Company's earnings.
Suppliers
Currently, products designed by Harman Kardon in the United
States are
manufactured predominantly by Technol Ace Corporation in Japan.
Technol Ace
has provided uninterrupted delivery to Harman Kardon for the past
eight
years. The Company believes it has had, and continues to have, an
excellent
working relationship with Technol Ace; however, the uninterrupted
availability of the products currently manufactured in Japan
depends upon the
continued cooperation of Technol Ace. The loss of this supplier
would have
a significant impact on the sales and earnings of Harman Kardon
until a new
supplier could be located. Harman Kardon has begun using multiple
vendors
and has thus limited its reliance on Technol Ace.
One supplier provides a significant number of components to
several
subsidiaries of the Company. The loss of this supplier would
create a
significant disruption in production for these subsidiaries until
alternate
sources for these components could be found and could have a
material impact
on the cost of these products.
Northridge Manufacturing relies on several suppliers for a
large
percentage of certain parts, such as speaker grilles, plastic
molded parts
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and magnets. The loss of any one of these suppliers would have a
material
impact on the earnings of Harman Manufacturing until alternate
sources for
these components could be found.
Trademarks and Patents
The Company markets its products under numerous trademarks
and logos,
including JBL, Infinity, Harman Kardon, UREI, Pyle, Citation, JB
Lansing,
James B. Lansing Sound, Concord, Audax, Polydax, Lydig of
Scandinavia,
Soundcraft, Spirit, DOD, Audio Logic, DigiTech, Fosgate-Audionics,
Lexicon,
AKG, Studer, Studer Dyaxis, BSS, Orban, Precision Devices, dbx,
AudioAccess,
Turbosound, Quested, Auto Azimuth and Dynamic Midi which are
registered or
otherwise protected in substantially all major industrialized
countries. The
Company's registrations cover use of its trademarks and logos in
connection
with various applicable products, such as loudspeakers, speaker
systems,
speaker system components and other electrical and electronic
devices. As of
June 30, 1994, the Company held approximately 245 United States and
foreign
patents covering various products, product designs and circuits,
and had
approximately 136 patent applications pending around the world.
The Company
vigorously protects and enforces its trademark and patent rights.
Seasonality
Overall, the Company's consolidated net sales are not
materially
impacted by seasonality. However, the first fiscal quarter is
usually
weakest due to the July and August holidays in Europe and the
automotive OEM
model changeovers. Variations in seasonal demands among end-user
markets may
cause operating results to vary from quarter to quarter.
Customers
The loss of automotive OEM system sales to Chrysler and/or
Ford would
have a material adverse impact on the earnings of Harman Motive,
U.S., Harman
Motive, Ltd. and the Company as a whole. Sales to Chrysler for
fiscal year
1994 accounted for 13.7% of the Company's consolidated net sales.
The
Company's next two largest customers accounted for an aggregate of
12.2% of
its consolidated net sales for the year ended June 30, 1994.
Backlog Orders
Because the Company's practice is to maintain sufficient
inventories of
finished goods to fill orders promptly, the Company does not view
the level
of backlog to be an important index of future performance. The
Company's
backlog was approximately $27.3 million at June 30, 1994 and $26.3
million at
June 30, 1993.
Warranties
Harman generally warrants its home products to be free from
defects in
materials and workmanship for a period ranging from 90 days to five
years
from the date of purchase by the consumer, depending on the
product. The
warranty is a "limited" warranty insofar as it imposes certain
shipping costs
on the consumer, and excludes deficiencies in appearance except for
those
evident when the product is delivered. Harman dealers normally
perform
warranty service for loudspeakers in the field, using parts
supplied on an
exchange basis by the Company. The Company does not usually
reimburse
dealers for their labor in performing warranty service on its
loudspeaker
products.
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Warranties in the international markets are generally similar
to those
in the domestic market, although claims arising under these
warranties are
the responsibility of the distributor, including the Company's
distributing
subsidiaries.
Competition
In general, the audio industry is fragmented and competitive
with many
manufacturers, large and small, domestic and international,
offering audio
products which vary widely in price and quality and are marketed
through a
variety of channels. Professional products are offered through
music
instrument and professional dealers, contractors, installers and on
a
contract bid basis. Consumer products are offered through various
channels
including audio specialty stores, discount stores, department
stores and mail
order firms. The Company concentrates its efforts on the
higher-quality,
higher-priced segments of the audio industry.
While the Company manufactures and markets many compatible
and
complementary products, other products that the Company
manufactures and
markets compete directly. For example, Soundcraft professional
mixing
consoles are compatible with and marketed by the same staff as JBL
professional loudspeakers. However, JBL Consumer and Infinity
loudspeakers
compete directly and are two of the top loudspeaker brands in the
world. The
Company's strategy uses its brand leadership to increase market
share.
The market for professional sound systems is highly
competitive. The
Company has historically held a leading market position in the
professional
loudspeaker market and has complemented its professional
loudspeaker line by
adding digital professional electronics products and recording and
broadcast
equipment. The Company competes using its ability to provide
complete
systems solutions to meet the complete audio requirements of its
professional
customers. Harman offers a product for virtually every
professional audio
application.
The Company competes in the sound reinforcement market with
many of its
brand names, including JBL, Turbosound, UREI, AKG, Soundcraft and
BSS. Its
principal competitors in the sound reinforcement area include
Electro Voice,
Inc. and Altec Lansing (subsidiaries of Mark IV Industries), TOA,
Tannoy,
Bose, Peavy, Tascam, Klark-Teknik and Sony. The Professional Group
competes
in the broadcast and recording areas with its Studer, AKG,
Soundcraft,
Lexicon and Orban brands. Principal competitors in broadcast and
recording
include: Neve, Sennheiser, Denon, SSL, Shure and Audio Technica.
In the
Music Instrument area the Company's DOD, Digitech, dbx, Lexicon and
Spirit
products meet competitors Yamaha, Peavy, Rane, Roland, Furman,
Alesis,
Eventide and Sony.
The Professional Group also competes in the industrial and
architectural sound market; competitors within this market include
Peavy, TOA
and Siemens.
The Company believes that it currently has a significant
share of the
consumer market for loudspeakers (home and aftermarket automotive),
primarily
as a result of the strength of its brand names. JBL and Infinity
are two of
the most recognized loudspeaker brands in the world. The Company
competes
based upon its ability to meet customer demands through new product
introduction, the breadth of its product lines, world-class
marketing and its
ability to take advantage of the economies of scale resulting from
the
Company's use of common manufacturing facilities.
The Company's principal competitors in the consumer
loudspeaker market
include Bose Corp., Boston Acoustics, Inc., Bowers & Wilkins, KEF,
Sony Corp.
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and Polk Audio, Inc. Harman's principal competitors in the
consumer
automotive aftermarket area include Bose, Alpine Electronics, Inc.,
Kenwood
Corp., and Blaupunkt-Werke GmbH.
Competition in the consumer electronic components segment
remains
intense, with this market dominated by large Japanese competitors.
The short
life cycle of products and a need for continuous design and
development
efforts characterize this segment. The Company's competitive
strategy is to
compete in the upper segments of this market and to continue to
emphasize the
Company's ability to provide systems solutions to customers,
including a
combination of loudspeakers and electronics products, providing
integrated
surround sound and home theater systems. Principal electronics
competitors
include Denon, Onkyo, Nakamichi Corp., Pioneer and Kenwood.
In the automotive OEM market, the Company's principal
competitors
include Bose, International Jensen Inc., Oxford Electric, and
Foster Electric
Inc. The Company is the only supplier of branded loudspeaker
systems for
Ford, Chrysler, Jeep and Mitsubishi automobiles in the United
States, and
also supplies loudspeaker systems to Ford and Rover in the United
Kingdom.
The Company competes based upon the strength of its brand name
recognition
and the quality of its products together with its technical
expertise in
designing loudspeaker systems to fit the acoustic properties of
each
automobile model. Harman International is unique in its ability to
provide
multiple brands, each with its own unique characteristics and loyal
consumer
following.
Environmental Matters
The Company is subject to various federal, state, local and
international environmental laws and regulations, including those
governing
the use, discharge and disposal of hazardous materials. The
Company's
manufacturing facilities are believed to be in substantial
compliance with
current laws and regulations. The cost of compliance with current
laws and
regulations has not been, and is not expected to be, material. The
Company
has been named as a "potentially responsible party" with respect to
the
disposal of hazardous wastes at four hazardous waste sites. In
addition,
there are other sites to which the Company has sent hazardous
wastes which
the Company believes are currently under regulatory scrutiny. It
is possible
that additional environmental issues may arise in the future which
the
Company cannot now predict.
Although ultimate liability cannot be determined with respect
to the
sites mentioned above, and applicable law provides that a
potentially
responsible party at any site may be held jointly and severally
liable for
the total cost of remediation, the Company believes, based upon
internal
investigations and information made available to the Company with
regard to
its potential liability at these sites, that its proportionate
share of the
costs related to the investigation and remedial work at these sites
will not
exceed $100,000.
Research, Development and Engineering
The Company's expenditures for research, development and
engineering
were $22,324,000, $11,980,000, and $10,689,000 for the fiscal years
ending
June 30, 1994, 1993 and 1992, respectively. The increase in
expenditures in
fiscal 1994 includes development efforts at AKG and Studer,
acquired in
fiscal 1994, and a full year of expenditures of Lexicon, which was
acquired
in the fourth quarter of fiscal 1993.
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Number of Employees
As of June 30, 1994, the Company had 6,849 full-time
employees,
including 4,043 domestic employees and 2,806 international
employees. The
increase in number of employees as of June 30, 1994 compared to the
prior
year primarily results from the AKG and Studer acquisitions.
Financial Information about Foreign & Domestic Operations & Export
Sales
Financial information about foreign and domestic operations
and export
sales to be filed hereunder is incorporated by reference to Note 10
of Notes
to Consolidated Financial Statements and Management's Discussion
and Analysis
of Financial Condition and Results of Operations (Effects of
Inflation and
Exchange Rates) on pages 33 and 23, respectively, in the Company's
Annual
Report to Shareholders for the fiscal year ended June 30, 1994.
ITEM 2. PROPERTIES
The Company's principal activities are conducted at the
facilities
described in the following table.
Square Owned or
Percentage
Location Footage Leased
Utilization
Northridge, California 616,792 Leased
100%
Vienna, Austria 284,867 Leased
100%
Ontario, California 212,600 Owned
100%
Martinsville, Indiana 181,856 Owned
100%
Huntington, Indiana 172,427 Owned
100%
Ringkobing, Denmark 134,366 Owned
100%
20,753 Leased
100%
Sandy, Utah 122,000 Leased
100%
Heilbronn, Germany 56,910 Owned
92%
63,183 Leased
60%
Potters Bar, UK 110,000 Leased
100%
Bridgend, UK 101,400 Leased
100%
Regensdorf, Switzerland 86,111 Leased
100%
San Leandro, California 78,125 Leased
60%
Chateau-du-Loir, France 66,712 Owned
100%
Chatsworth, California 59,000 Leased
60%
Chatsworth, California 55,000 Leased
100%
Chatou, France 54,972 Leased
88%
18
20
<PAGE>
Of the above facilities, the Northridge, California facility
is used by
JBL Incorporated and Harman Motive; the Vienna, Austria facility is
used by
AKG Acoustics GmbH; the Ontario, California facility is used by JBL
Incorporated and Infinity Systems, Inc.; the Martinsville, Indiana
facility
is used by Harman Motive, Inc.; the Huntington, Indiana facility is
used by
Pyle Industries, Inc.; the Ringkobing, Denmark facility is used by
Lydig of
Scandinavia A/S; and the Sandy, Utah facility is used by DOD
Electronics
Corporation.
The Heilbronn, Germany facility is used by Harman Deutschland
GmbH; the
Potters Bar, U.K. facility is used by Soundcraft Electronics,
Limited; the
Bridgend, U.K. facility is used by Harman Motive, Ltd.; the
Regensdorf,
Switzerland facility is used by Studer Professional Audio AG; the
San
Leandro, California facility is used by Orban; the Chateau-du-Loir,
France
facility is used by Audax Industries, S.A.; the Chatsworth,
California
facilities are used by JBL International (59,000 square feet) and
Infinity
Systems, Inc. (55,000 square feet); and the Chatou, France facility
is used
by Studer Digitec SA.
The Company considers its properties to be suitable and
adequate for
its present needs.
19
21
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are various legal claims pending against the Company,
but in the
opinion of management, liabilities, if any, arising from such
claims will not
have a material effect upon the consolidated financial condition
and results
of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at
Name August 1, 1994 Position
Sidney Harman 75 Chairman, Chief Executive
Officer and
Director of the Company
Bernard A. Girod 52 President, Chief Operating
Officer, Chief
Financial Officer,
Secretary and
Director of the Company
F. Michael Budd 47 President - Harman
Manufacturing Group
Philip J. Hart 49 President - Harman Professional
Group
Thomas Jacoby 40 President - Harman Consumer
Group
Gregory P. Stapleton 47 President - Automotive OEM
Group
Jerome H. Feingold 52 Vice President - Quality
Frank Meredith 37 Vice President and General
Counsel
William S. Palin 51 Vice President and Director
International
Audit
Sandra B. Robinson 35 Vice President - Financial
Operations
Floyd E. Toole 48 Vice President - Engineering
Officers are elected annually by the Board of Directors and
hold office
at the pleasure of the Board of Directors until the next annual
selection of
officers or until their successors are elected and qualified.
Sidney Harman, Ph.D., the Company's founder, has been
Chairman of the
Board and Chief Executive Officer and a director of the Company
since the
Company's founding in 1980. From 1977 to 1979, Dr. Harman was the
Under
Secretary of Commerce of the United States. From 1962 to 1977, Dr.
Harman
was an officer and director of the Predecessor of the Company.
Bernard A. Girod has been President of the Company since
March 1994,
Chief Operating Officer of the Company since March 1993, a Director
of the
Company since July 1993, Secretary of the Company since November
1992 and
20
22
<PAGE>
Chief Financial Officer since September 1986. From September 1979
to
September 1986, Mr. Girod was the Vice President and General
Manager of
Permacel, a subsidiary of Avery International and Vice President of
Planning
and Business Development for Avery International. From 1977 to
1979, Mr.
Girod was the Chief Financial Officer of the Predecessor of the
Company.
F. Michael Budd has been the President of the Harman
Manufacturing
Group since June 1989. From October 1984 to June 1989, Mr. Budd
served as
President of the Automotive Components division of ITT Corporation.
Philip J. Hart has been President of the Harman Professional
Group
since November 1993. Prior to that time, Mr. Hart served as
President of
Soundcraft since Harman's 1988 acquisition. Prior to that time,
Mr. Hart was
General Manager of Soundcraft.
Thomas Jacoby has been President of the Harman Consumer Group
since
February 1993. Prior to that time, Mr. Jacoby served as President
of JBL
Consumer since August 1990. From July 1988 to August 1990, Mr.
Jacoby
served as Executive Vice President of Harman Kardon.
Gregory P. Stapleton has been President of the Automotive OEM
Group
since October 1987.
Jerome H. Feingold has been the Vice President-Quality of the
Company
since January 1992. Prior to that time, Mr. Feingold served as
President of
Harman Speaker Manufacturing since July 1985. Prior to 1985, Mr.
Feingold
held various management positions within the manufacturing division
of the
Company.
Frank Meredith has been General Counsel of the Company since
August
1994. Prior to that time, Mr. Meredith served as Vice
President-Tax/Legal
and Assistant Secretary of the Company since July 1992. Prior to
that time,
Mr. Meredith held other positions within the Company since May
1985.
William S. Palin has been Vice President and Director
International
Audit since March 1994. Prior to that time he was the director of
his own
accounting and consulting firm which handled numerous assignments
for the
Company over the years, including significant acquisition support.
Prior to
that time Mr. Palin was the Chief Financial Officer for Harman
Europe and
Managing Director of Harman Audio, both a part of the Predecessor
company.
Sandra B. Robinson has been Vice President-Financial
Operations since
November 1992. Prior to that time, Ms. Robinson was Director of
Corporate
Accounting and has been employed by the Company since December
1984.
Floyd E. Toole, Ph.D., joined the Company as Vice
President-Acoustic
Research in November 1991. Prior to joining the Company, Dr. Toole
spent 25
years, most recently as Senior Research Officer, with the National
Research
Council of Canada's Acoustics and Signal Processing Group. At the
National
Research Council, Dr. Toole worked to develop
psychoacoustic-optimized
adaptive digital techniques for improving the performance of
loudspeakers in
rooms.
21
23
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER
MATTERS
The information required by Part II, Item 5 is incorporated
by
reference to the Company's Annual Report to Shareholders for the
fiscal year
ended June 30, 1994 (Shareholder Information on page 36).
ITEM 6. SELECTED FINANCIAL DATA
The information required by Part II, Item 6 is incorporated
by
reference to the Company's Annual Report to Shareholders for the
fiscal year
ended June 30, 1994 (Financial Highlights on page 1).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
The information required by Part II, Item 7 is incorporated
by
reference to the Company's Annual Report to Shareholders for the
fiscal year
ended June 30, 1994 (Management's Discussion and Analysis of
Financial
Condition and Results of Operations on pages 21 through 23).
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The information required by Part II, Item 8 is incorporated
by
reference to the Company's Annual Report to Shareholders for the
fiscal year
ended June 30, 1994 (Consolidated Financial Statements on pages 24
through
35).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
22
24
<PAGE>
PART III
With the exception of information relating to the executive
officers of
the Company which is provided in Part I hereof, all information
required by
Part III (Items 10, 11, 12, and 13) of Form 10-K, including the
information
required by Item 405 of Regulation S-K, is incorporated by
reference to the
Company's definitive Proxy Statement relating to the 1994 Annual
Meeting of
Stockholders.
23
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a) 1. Financial statements required to be filed
hereunder are
indexed on page 27 hereof.
2. Financial statement schedules required to be
filed
hereunder are indexed on page 27 hereof.
3. The exhibits required to be filed hereunder are
indexed on
pages 35 through 39 hereof.
b) Reports on Form 8-K
None.
24
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant): HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
By: (Signature and Title) /s/ Sidney Harman
Sidney Harman, Chairman of the Board
and
Chief Executive Officer
Date: September 19, 1994
Pursuant to the requirements of the Securities Exchange Act
of 1934, this
report has been signed below by the following persons on behalf of
the registrant
and in the capacities and on the dates indicated.
Signature Title
Date
/s/ Sidney Harman Chairman of the Board,
September 19, 1994
Sidney Harman Chief Executive Officer
and Director
/s/ Bernard A. Girod President, Chief Operating
September 19, 1994
Bernard A. Girod Officer, Chief Financial
Officer (Principal
Financial Accounting
Officer), Secretary and
Director
/s/ Shirley M. Hufstedler Director
September 19, 1994
Shirley M. Hufstedler
/s/ Edward Meyer Director
September 19, 1994
Edward Meyer
/s/ Alan Patricof Director
September 19, 1994
Alan Patricof
25
27
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
26
28
<PAGE>
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
Index to Item 14(a)
Page
Reference
_______________________
Annual
Report to
Form 10-K
Shareholders
_______________________
Consolidated Financial Data (pages 24 through 35
of the 1994 Annual Report to Shareholders
herein incorporated by reference as Exhibit 13.1):
Consolidated Balance Sheets as of June 30, 1994
and
1993............................................................24
Consolidated Statements of Operations for the years
ended June 30, 1994, 1993 and
1992..................................25
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and
1992..................................26
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1994, 1993 and
1992........................27
Notes to Consolidated Financial
Statements............................28
Independent Auditors'
Report...........................33.............35
Schedules for the years ended June 30, 1994,
1993 and 1992:
V Property, Plant and Equipment....................28
VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment....29
VIII Valuation and Qualifying Accounts and Reserves...30
IX Short-Term Borrowings............................31
X Supplemental Income Statement Information........32
All other schedules have been omitted because they are not
applicable, not
required, or the information has been otherwise supplied in the
financial
statements or notes to the financial statements.
27
29
<PAGE>
SCHEDULE V
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Property, Plant and Equipment
Three Years Ended June 30, 1994
($000's omitted)
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________
______________________
Column Column Column Column
Column Column
A B C D
E F
_________________________________________________________________
______________________
Other
Balance at
Changes Balance
Beginning Additions Retire-
Add(Deduct) at End
Classification of Period at Cost ments
Describe1 of Period
_________________________________________________________________
______________________
<S> <C> <C> <C>
<C> <C>
Year Ended June 30, 1992
Land $ 4,493 $ 2 $ --
$ -- $ 4,495
Buildings and Improvements 38,565 4,203 258
2,050 44,560
Machinery and Equipment 109,682 14,249 3,329
7,172 127,774
Furniture and Fixtures 11,072 2,549 214
2,411 15,818
-------- ------- -------
- - -------- --------
TOTAL $163,812 $21,003 $ 3,801
$11,633 $192,647
======== ======= =======
======== ========
Year Ended June 30, 1993
Land $ 4,495 $ -- $ 546
$ -- $ 3,949
Buildings and Improvements 44,560 2,183 2,875
(1,458) 42,410
Machinery and Equipment 127,774 22,082 6,418
767 144,205
Furniture and Fixtures 15,818 1,298 449
(3,185) 13,482
-------- ------- -------
- - -------- --------
TOTAL $192,647 $25,563 $10,288
$(3,876) $204,046
======== ======= =======
======== ========
Year Ended June 30, 1994
Land $ 3,949 $ -- $ 324
$ 515 $ 4,140
Buildings and Improvements 42,410 3,258 1,265
11,682 56,085
Machinery and Equipment 144,205 34,045 4,557
14,586 188,279
Furniture and Fixtures 13,482 3,417 890
4,882 20,891
-------- ------- -------
- - -------- --------
TOTAL $204,046 $40,720 $ 7,036
$31,665 $269,395
======== ======= =======
======== ========
1 Transfers from other assets and between fixed asset categories
and effect of foreign
currency translation in 1992. Purchase of Lexicon, transfers from
other assets and
between fixed asset categories and effect of foreign currency
translation in 1993.
Purchase of AKG, Studer and Beltronics, transfers from other assets
and between fixed
asset categories and effect of foreign currency translation in
1994.
28
30
<PAGE>
SCHEDULE VI
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Three Years Ended June 30, 1994
($000's omitted)
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________
______________________
Column Column Column Column
Column Column
A B C D
E F
_________________________________________________________________
______________________
Additions
Other
Balance at Charged to
Changes Balance
Beginning Costs and Retire-
Add(Deduct) at End
Classification of Period Expenses ments
Describe1 of Period
_________________________________________________________________
______________________
<S> <C> <C> <C>
<C> <C>
Year Ended June 30, 1992
Buildings and Improvements $ 8,164 $ 3,031 $ 481
$ (109) $ 10,605
Machinery and Equipment 46,023 16,870 1,840
6,707 67,760
Furniture and Fixtures 5,686 1,970 198
672 8,130
-------- ------- -------
- - -------- --------
TOTAL $ 59,873 $21,871 $ 2,519
$ 7,270 $ 86,495
======== ======= =======
======== ========
Year Ended June 30, 1993
Buildings and Improvements 10,605 3,255 837
(348) 12,675
Machinery and Equipment 67,760 17,878 5,629
(485) 79,524
Furniture and Fixtures 8,130 1,826 973
(194) 8,789
-------- ------- -------
- - -------- --------
TOTAL $ 86,495 $22,959 $ 7,439
$(1,027) $100,988
======== ======= =======
======== ========
Year Ended June 30, 1994
Buildings and Improvements 12,675 4,499 119
1,575 18,630
Machinery and Equipment 79,524 23,282 2,467
996 101,335
Furniture and Fixtures 8,789 3,429 732
(611) 10,875
-------- ------- -------
- - -------- --------
TOTAL $100,988 $31,210 $ 3,318
$ 1,960 $130,840
======== ======= =======
======== ========
1 Transfers between fixed asset categories and effect of foreign
currency translation in
1992, 1993 and 1994.
29
31
<PAGE>
SCHEDULE VIII
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Three Years Ended June 30, 1994
($000's omitted)
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________
______________________
Column Column Column Column
Column Column
A B C D
E F
_________________________________________________________________
______________________
Charged
Balance at Charged to To Other
Balance
Beginning Costs and Accounts
Deductions at End
Classification of Period Expenses Describe
Describe of Period
_________________________________________________________________
______________________
<S> <C> <C> <C>
<C> <C>
Year Ended June 30, 1992
Allowance for doubtful
accounts $ 3,878 $ 2,373 $ 42 1
$ 2,629 2 $ 3,664
======= ======= =======
======= =======
Year Ended June 30, 1993
Allowance for doubtful
accounts $ 3,664 $ 2,216 $ 77 3
$ 2,522 2 $ 3,435
======= ======= =======
======= =======
Year Ended June 30, 1994
Allowance for doubtful
accounts $ 3,435 $ 2,757 $ 7,189 4
$ 3,140 2 $10,241
======= ======= =======
======= =======
1 Addition due to Allen & Heath Brennell acquisition.
2 Deductions for accounts receivable written off net of recoveries.
3 Addition due to Lexicon acquisition.
4 Addition due to AKG, Studer and Harman Belgium (Beltronics)
acquisitions.
30
32
<PAGE>
SCHEDULE IX
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Short-Term Borrowings
Three Years Ended June 30, 1994
($000's omitted)
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________
______________________
Column Column Column Column
Column Column
A B C D E
F
_________________________________________________________________
______________________
Maximum
Average Weighted
Weighted Amount
Amount Average
Category of Balance Average Outstanding
Outstanding Interest
Aggregate at End Interest During the During
the Rate During
Short-Term Debt of Period Rate Period
Period The Period1
_________________________________________________________________
______________________
<S> <C> <C> <C> <C>
<C>
June 30, 1992
Notes payable-banks $ 63,463 8.7% $ 88,766 $
67,025 8.9%
June 30, 1993
Notes payable-banks $ 33,379 6.2% $ 75,333 $
42,574 8.6%
June 30, 1994
Notes payable-banks $ 63,140 6.3% $ 98,008 $
52,760 6.4%
1 Weighted average interest rate during the period is computed as
related interest expense
divided by the average outstanding balance during the year.
31
33
<PAGE>
SCHEDULE X
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Supplemental Income Statement Information
Three Years Ended June 30, 1994
($000's omitted)
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________
______________________
Column A Column
B
_________________________________________________________________
______________________
Charged to Cost
and Expenses
For the Year
Ended June 30,
1992 1993
1994
_________________________________________________________________
______________________
<S> <C> <C>
<C>
1. Maintenance and repairs * *
*
2. Depreciation and amortization
of intangible assets * *
*
3. Taxes other than payroll and
income taxes * *
*
4. Royalties * *
*
5. Advertising costs $ 19,666 $
20,293 $ 18,933
* Does not exceed 1% of sales.
32
34
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Harman International Industries, Incorporated:
Under date of August 12, 1994, we reported on the consolidated
balance sheets of Harman
International Industries, Incorporated and subsidiaries as of June
30, 1994 and 1993, and
the related consolidated statements of operations, cash flows and
shareholders' equity for
each of the years in the three year period ended June 30, 1994, as
contained in the 1994
annual report to shareholders. These consolidated financial
statements and our report
thereon are incorporated by reference in the annual report on Form
10-K for the year ended
June 30, 1994. In connection with our audits of the aforementioned
consolidated financial
statements, we also have audited the related financial statement
schedules as listed in
the accompanying index. These financial statement schedules are
the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered
in relation to the
basic consolidated financial statements taken as a whole, present
fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
August 12, 1994
33
35
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
34
36
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
INDEX TO EXHIBITS
The following exhibits are filed as part of this report.
Where such filing is made
by incorporation by reference to a previously filed statement or
report, such statement
or report is identified in parenthesis.
There are omitted from the exhibits filed with this Annual
Report on Form 10-K
certain promissory notes and other instruments and agreements with
respect to long-term
debt of the Company, none of which authorizes securities in a total
amount that exceeds
10 percent of the total assets of the Company on a consolidated
basis. Pursuant to Item
61(d)(4)(iii) of Regulation S-K, the Company hereby agrees to file
with the Securities and
Exchange Commission copies of all such omitted promissory notes and
other instruments and
agreements as the Commission requests.
Exhibit
Page
No. Description
No.
3.1, 4.1 Restated Certificate of Incorporation, as amended,
filed
with the Delaware Secretary of State on October 7,
1986.
(Filed as Exhibits 3.1 and 4.1 to the Registration
State-
ment on Form S-1 (Reg. No. 33-8538) and hereby
incorporated
by
reference.)......................................................
...IBR
4.3, 10.17 Composite conformed copy of the Note Purchase
Agreements
dated June 30, 1987, relating to the sale of $25.0
million
principal amount of 10.08% Senior Notes due September
30,
1994, and $17.5 million principal amount of 10.40%
Senior
Notes due September 30, 1997, including as exhibits
thereto
the form of 10.08% Senior Notes due September 30, 1994,
and
10.40% Senior Notes due September 30, 1997. (Filed as
Exhibit 4 to the Quarterly Report on Form 10-Q for the
quarter ended December 31, 1988 (File No. 0-15147), and
hereby incorporated by
reference.).....................................IBR
4.4, 10.29 Composite conformed copy of the Note Purchase Agreement
dated December 1, 1988, relating to the sale of $45.0
million
principal amount of 11.2% Senior Subordinated Notes due
December 1, 1998, including as an exhibit thereto the
form
of 11.2% Senior Subordinated Notes due December 1,
1998.
(Filed as Exhibit 4 to the Quarterly Report on Form
10-Q
for the quarter ended December 31, 1988 (File No.
0-15147),
and hereby incorporated by
reference.).................................IBR
4.5 Amended By-Laws of Harman International Industries,
Incorporated. (Filed as Exhibit 4.5 to the Quarterly
Report
on Form 10-Q for the quarter ended March 31, 1992 (File
No.
0-15147) and hereby incorporated by
reference.)........................IBR
35
37
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description
No.
4.6 Indenture dated June 4, 1992, between Harman
International
Industries, Incorporated and Security Trust Company
N.A., as
Trustee, relating to $70,000,000 principal amount of
12.0% Senior
Subordinated Notes due 2002, including as an exhibit
thereto
the form of 12.0% Senior Subordinated Notes due 2002.
(Filed as
Exhibit 4.6 to the Annual Report on Form 10-K for the
year ended
June 30, 1992 (File No. 0-15147), and hereby
incorporated by
reference.)......................................................
......IBR
4.7 First Amendment to Note Agreement Dated June 30, 1987,
dated as of December 14, 1988, relating to the sale of
$25.0
million principal amount of 10.08% Series A Senior
Notes due
September 30, 1994, and $17.5 million principal amount
of 10.40%
Series B Senior Notes due September 30, 1997. (Filed
as Exhibit
4.7 to the Registration Statement on Form S-2 (Reg. No.
33-49692) and hereby incorporated by
reference.).......................IBR
10.1 Lease dated as of June 18, 1987 between Harman
International
Industries Business Campus Joint Venture and JBL Inc.,
as
amended. (Filed as Exhibit 10.1 to the Annual Report
on
Form 10-K for the fiscal year ended June 30, 1987 (File
No. 0-15147) and hereby incorporated by
reference.)....................IBR
10.2 Guaranty dated as of June 18, 1987 by Harman
International
Industries, Inc. of Lease dated as of June 18, 1987
between
Harman International Industries Business Campus Joint
Venture and JBL Inc., as amended. (Filed as Exhibit
10.2
to the Annual Report on Form 10-K for the fiscal year
ended June 30, 1987 (File No. 0-15147) and hereby
incorporated by
reference.)............................................IBR
10.3 Chatsworth Industrial Park Lease Agreement dated as of
July 31, 1984, between Almo Properties and Infinity
Systems,
Inc. (Filed as Exhibit 10.3 to the Registration
Statement
on Form S-1 (Reg. No. 33-8538) and hereby incorporated
by
reference.)......................................................
......IBR
10.9 Distributor Agreement dated April 27, 1981 between
Maxell
Europe GmbH and Harman Deutschland GmbH, as amended.
(Filed
as Exhibit 10.9 to the Registration Statement on Form
S-1
(Reg. No. 33-8538) and hereby incorporated by
reference.)..............IBR
10.10 Agreement dated as of June 20, 1985, among Harman
International
Industries, Inc., Harman-Motive, Inc., JBL Inc. and
Ford Motor
Co. (Filed as Exhibit 10.10 to the Registration
Statement on
Form S-1 (Reg. No. 33-8538) and hereby incorporated by
reference.)......................................................
......IBR
10.18 Harman International Industries, Inc. 1987 Executive
Incentive Plan (adopted December 8, 1987). (Filed as
Exhibit 10.18 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1988 (File No. 0-15147), and
hereby incorporated by
reference.).....................................IBR
36
38
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description
No.
10.19 Form of Incentive Stock Option Agreement under the 1987
Executive Incentive Plan. (Filed as Exhibit 10.19 to
the
Annual Report on Form 10-K for the fiscal year ended
June 30,
1988 (File No. 0-15147), and hereby incorporated by
reference.)........IBR
10.20 Form of Non-Qualified Stock Option Agreement under the
1987
Executive Incentive Plan. (Filed as Exhibit 10.20 to
the
Annual Report on Form 10-K for the fiscal year ended
June 30,
1988 (File No. 0-15147), and hereby incorporated by
reference.)........IBR
10.21 Form of Non-Qualified Stock Option Agreement with
non-officer
directors. (Filed as Exhibit 10.21 to the Annual
Report on
Form 10-K for the fiscal year ended June 30, 1988 (File
No. 0-15147), and hereby incorporated by
reference.)...................IBR
10.23 Lease Agreement dated April 28, 1988, among Alaskan
Permanent
Fund Corp. and the National Bank of Washington, as
trustee
of the National Bank of Washington Multi-Employer
Property
Trust and Harman Electronics, Inc. (Filed as Exhibit
10.23
to the Annual Report on Form 10-K for the fiscal year
ended
June 30, 1988 (File No. 0-15147), and hereby
incorporated
by
reference.)......................................................
...IBR
10.24 Promissory Note dated August 3, 1993, among Harman
International Industries, Inc., JBL Incorporated and
Banc
One Arizona Leasing Corporation. (Filed as Exhibit
10.24 to
the Annual Report on Form 10-K for the fiscal year
ended
June 30, 1993 (File No. 0-15147), and hereby
incorporated
by
reference.)......................................................
...IBR
10.26 Harman International Industries, Incorporated
Retirement
Savings Plan. (Filed on Form S-8 Registration
Statement on
June 16, 1989 (Reg. No. 33-28973), and hereby
incorporated by
reference.)......................................................
......IBR
10.27 Harman International Industries, Incorporated
Supplemental
Executive Retirement Plan. (Filed as Exhibit 10.27 to
the
Annual Report on Form 10-K for the fiscal year ended
June
30, 1989 (file No. 0-15147), and hereby incorporated by
reference.)......................................................
......IBR
10.28 Form of Benefit Agreement under the Supplemental
Executive Retirement Plan. (Filed as Exhibit A to the
Supplemental Executive Retirement Plan at Exhibit
10.27 and hereby incorporated by
reference.)...........................IBR
10.30 Form of Restricted Stock Agreement. (Filed as Exhibit
10.30
to the Annual Report on Form 10-K for the fiscal year
ended
June 30, 1989 (File No. 0-15147), and hereby
incorporated by
reference.)......................................................
......IBR
10.32 Note dated September 7, 1989, between Harco Properties,
Incorporated and New England Mutual Life Insurance
Company.
(Filed as Exhibit 10.32 to the Quarterly Report on Form
10-Q
for the quarter ended September 30, 1989 (File No.
0-15147),
and hereby incorporated by
reference.).................................IBR
37
39
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description
No.
10.38 Amendment to the Harman International Industries,
Incorporated
Supplemental Executive Retirement Plan. (Filed as
Exhibit 19.1
to the Quarterly Report on Form 10-Q for the quarter
ended
March 31, 1992 (File No. 0-15147), and hereby
incorporated by
reference.)......................................................
......IBR
10.39 Agreement dated July 1, 1992, between Harman
Deutschland GmbH
and Maxell Europe GmbH, related to the termination of
the
Distributor Agreement dated April 27, 1981. (Filed as
Exhibit
10.39 to the Annual Report on Form 10-K for the fiscal
year
ended June 30, 1992 (File No. 0-15147), and hereby
incorporated
by
reference.)......................................................
...IBR
10.41 Form of Incentive Stock Option Agreement under the 1992
Executive Incentive Plan. (Filed as Exhibit 10.41 to
the
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 (File No. 0-15147), and hereby
incorporated
by
reference.)......................................................
...IBR
10.42 Form of Non-qualified Stock Option Agreement under the
1992
Executive Incentive Plan. (Filed as Exhibit 10.42 to
the
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 (File No. 0-15147), and hereby
incorporated
by
reference.)......................................................
...IBR
10.43 Form of Restricted Stock Agreement under the 1992
Executive
Incentive Plan. (Filed as Exhibit 10.43 to the Annual
Report
on Form 10-K for the fiscal year ended June 30, 1993
(File
No. 0-15147), and hereby incorporated by
reference.)...................IBR
10.44 Form of Non-qualified Stock Option Agreement for
Non-officer
Directors under the 1992 Executive Incentive Plan.
(Filed as
Exhibit 10.44 to the Annual Report on Form 10-K for the
fiscal
year ended June 30, 1993 (File No. 0-15147), and hereby
incorporated by
reference.)............................................IBR
10.45 Harman International Industries, Inc. Executive
Deferred
Compensation Plan. (Filed as Exhibit 10.45 to the
Annual
Report on Form 10-K for the fiscal year ended June 30,
1993
(File No. 0-15147), and hereby incorporated by
reference.).............IBR
10.46 Harman International Industries, Inc. Executive
Deferred
Compensation Plan Split-Dollar Life Insurance
Agreement.
(Filed as Exhibit 10.46 to the Annual Report on Form
10-K
for the fiscal year ended June 30, 1993 (File No.
0-15147),
and hereby incorporated by
reference.).................................IBR
10.47 Escrow Agreement, dated as of December 30, 1993, by and
between the Company and PNC Bank, N.A. (Filed as
Exhibit
10.47 to the Quarterly Report on Form 10-Q for the
quarter
ended December 31, 1993 (File No. 0-15147) and hereby
incorporated by
reference.)............................................IBR
38
40
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description
No.
10.48 Share Purchase Agreement, dated as of July 19, 1994, by
and
between the Company and Girocredit for purchase of
remaining
24% of AKG Acoustics
GmbH...............................................43
10.49 Promissory Note dated September 30, 1993 between Harman
International Industries, Incorporated and PNC Bank,
N.A.
(Filed as Exhibit 19.5 to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1993 (File No.
0-15147) and hereby incorporated by
reference.)........................IBR
10.50 Promissory Note dated September 28, 1993 between Harman
International Industries, Incorporated and Citicorp
USA,
Inc. (Filed as Exhibit 19.6 to the Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993
(File
No. 0-15147) and hereby incorporated by
reference.)....................IBR
10.51 Promissory Note dated May 17, 1994 among Harman
International Industries, Incorporated, certain of its
subsidiaries and Chemical
Bank..........................................57
10.52 Promissory Note dated May 5, 1994 among Harman
International Industries, Incorporated, certain of its
subsidiaries and NationsBank.
..........................................81
13.1 Harman International Industries, Incorporated Annual
Report
to Shareholders for the fiscal year ended June 30,
1994.................97
21.1 Subsidiaries of the
Company............................................139
23.1 Consent of Independent
Auditors........................................143
27.1 EDGAR Financial Data
Schedule..........................................147
39
41
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42
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EXHIBIT 10.48
43
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44
<PAGE>
SHARE PURCHASE AGREEMENT
Dated as of July 19, 1994
by and among
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
8500 Balboa Boulevard
Northridge, California 91329, USA
HARMAN INVESTMENT COMPANY, INC.
8500 Balboa Boulevard
Northridge, California 91329, USA
GIROCREDIT BANK AKTIENGESELLSCHAFT DER
SPARKASSEN
Schubertring 5
A-1010 Vienna, AUSTRIA
and
GIROCREDIT VERMoGENSVERWALTUNGSGESELLSCHAFT
m.b.H.
Traungasse 12
A-1030 Vienna, AUSTRIA
concerning shares in
AKG AKUSTISCHE U. KINO-GERATE GESELLSCHAFT
m.b.H.
45
<PAGE>
SHARE PURCHASE AGREEMENT
This SHARE PURCHASE AGREEMENT (this "Agreement") made as of the
19th day of July, 1994
between, Harman International Industries, Incorporated, a
corporation organized under the
laws of Delaware, U.S.A. (the "Purchaser") having an address at
8500 Balboa Boulevard,
Northridge, California 91329 USA, Harman Investment Company, Inc.,
a corporation organized
under the laws of Delaware, U.S.A. ("HIC") having an address at
8500 Balboa Boulevard,
Northridge, California, GiroCredit Bank Aktiengesellschaft der
Sparkassen, a stock
corporation (Aktiengesellschaft) organized under the laws of
Austria ("GiroCredit") having
an address at Schubertring 5, A-1010 Vienna, Austria, and
GiroCredit
Vermogensverwaltungsgesellschaft m.b.H., a limited liability
company organized under the
laws of Austria ("Shareholder") having an address at Traungasse 12,
A-1030 Vienna,
Austria.
Capitalized terms used and not defined herein shall have the
meanings indicated in
Exhibit A to this Agreement and incorporated herein by reference.
ARTICLE 1
SALE AND PURCHASE
1.1 Object of Purchase: The Share. Shareholder holds a
share in the nominal amount
of AS 4,800,000.-- in AKG (this share of Shareholder in AKG is
referred to as the
"Share").
1.2 Sale, Purchase and Transfer.
(a) Sale and Purchase. Shareholder hereby sells and
transfers the Share in AKG
to the Purchaser. The Purchaser accepts such sale and transfer of
the Share.
(b) Notarial Transfers. To effect the transfers of the
Share, Shareholder and the
Purchaser shall on the date of this Agreement execute a transfer
agreement in the form of
a notarial deed in substantially the form attached hereto as
Exhibit B.
46
<PAGE>
ARTICLE 2
PURCHASE PRICES AND PAYMENTS
2.1 Share Purchase Price. The aggregate consideration for
the Share is AS
41,000,000.-- (Forty One Million Austrian Schilling), payable to
Shareholder, due within
15 days of the date of execution of the notarial deed of transfer.
2.2 Transfer Taxes. Purchaser shall be liable for and pay
all applicable sales,
documentary, recording, filing, transfer, and other similar taxes
and fees payable as a
result of the consummation of the transactions contemplated by
Articles 1 and 2 of this
Agreement, including notarial fees.
ARTICLE 3
GUARANTEES (GARANTIEN), REPRESENTATIONS AND
WARRANTIES OF THE SELLERS
Sellers, jointly and severally, in conjunction with the remedies
provided by the
indemnification provisions of Article 6 hereof, absolutely,
irrevocably and
unconditionally guarantee, represent, and warrant to the Purchaser
as of the date of this
Agreement, that:
3.1 Organization; Corporate Power and Authority.
Shareholder is a Gesellschaft mit
beschrankter Haftung (GmbH) duly organized and existing under the
laws of Austria and has
all necessary power and authority to own its property and carry on
its business as
presently owned and conducted. GiroCredit is an Aktiengesellschaft
(AG) duly organized
and existing under the laws of Austria and has all necessary power
and authority to own
its property and carry on its business as presently owned and
conducted. Each Seller has
duly authorized, executed, and delivered this Agreement and has
full power and authority
to execute and deliver, and to perform its obligations under, this
Agreement. This
Agreement, when executed and delivered by all parties hereto,
constitutes the valid and
binding obligation of each Seller, enforceable in accordance with
its terms.
3.2 Capital. The Share is owned legally and beneficially by
Shareholder, free and
clear of any Liens. The Share is duly authorized, validly issued,
and fully paid and not
subject to assessment. No Seller or any Affiliate thereof holds
legally or beneficially
any securities (whether issued, reserved for issuance, convertible,
or outstanding) of or
any other interests
47
<PAGE>
or rights in AKG of any kind and there are no restrictions with
respect to transferability
of the Shares. No Seller or any Affiliate thereof holds any
options, offers, warrants,
conversion rights, preemptive rights, subscriptions or agreements
or rights of any kind
to subscribe for or to purchase, or commitments to issue (either
formal or informal, firm
or contingent), share or equity capital or securities of or
interests or rights in AKG
(whether debt, equity, or a combination thereof) or obligating AKG
to grant, extend, or
enter into any such agreement or commitment. Upon the sale,
assignment, and delivery of
the Share as herein contemplated, the Purchaser will have full
legal and beneficial
ownership of and title to the Share free of all Liens.
3.3 Governmental Approvals. No approval, consent, decree,
or order of any Austrian
Governmental Authority, other than those obtained by Sellers on or
prior to the date
hereof, is required in connection with the execution and delivery
of this Agreement by any
Seller, the performance of their obligations hereunder, or the
consummation by each of
them of the transactions contemplated hereby.
3.4 Third Party Consents. No consent, approval, or
authorization of any Person
("Third Party Consent"), other than Third Party Consents obtained
by Sellers on or prior
to the date hereof, is required in connection with the execution,
delivery, or performance
of this Agreement by any Seller.
3.5 Brokers. No Seller is directly or indirectly obligated
to anyone acting as a
broker, finder, or in any similar capacity in connection with this
Agreement or the
transactions contemplated hereby.
ARTICLE 4
GUARANTIES (GARANTIEN), REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
The Purchaser, in conjunction with the remedies provided by the
indemnification
provisions of Article 6 hereof, absolutely, irrevocably and
unconditionally guarantees,
represents and warrants to the Sellers as of the date of this
Agreement as follows:
4.1 Organization; Corporate Power and Authority. The
Purchaser is a corporation,
duly organized and validly existing under the laws of Delaware, and
has all necessary
power and authority to own its property and carry on its business
as
48
<PAGE>
presently owned and conducted. The Purchaser has duly authorized,
executed, and delivered
this Agreement and has full power and authority to execute and
deliver, and to perform its
obligations under, this Agreement. This Agreement, when executed
and delivered by all
parties hereto, constitutes the valid and binding obligation of the
Purchaser, enforceable
in accordance with its terms.
4.2 Brokers. The Purchaser is not directly or indirectly
obligated to anyone
acting as a broker, finder, or in any other similar capacity in
connection with this
Agreement or the transactions contemplated hereby.
ARTICLE 5
CERTAIN COVENANTS
5.1 Expenses. Except as otherwise provided in this
Agreement, the Sellers and the
Purchaser shall each bear their own costs and expenses incurred in
connection with this
Agreement and the transactions contemplated hereby.
5.2 Cooperation. The Purchaser and the Sellers shall use
their reasonable efforts
to execute all documents or certificates as may be necessary,
appropriate, or desirable,
on the advice of counsel, for the consummation of the transactions
contemplated by this
Agreement.
5.3 Assurances. Each Seller shall take all actions and
execute and deliver all
documents necessary or desirable to effectively convey record and
beneficial ownership,
free of all Liens, of the Share to the Purchaser.
5.4 No Effect. The parties agree that this Agreement shall
have no effect on and
shall not in any way constitute a waiver, modification, amendment
or other change in the
rights, liabilities or obligations of the parties under the
Original Share Purchase
Agreement.
5.5 Waiver of Put and Call. HIC hereby unconditionally
waives its rights under the
Notariatsakt No. 9415 of the notary Dr. Christian Kleemann in
Vienna dated September 24,
1993 consisting of an Option Agreement between HIC and Shareholder.
Shareholder hereby
unconditionally waives its rights under the Notariatsakt No. 9416
of the notary Dr.
Christian Kleemann in Vienna dated September 24, 1993 consisting of
an Option Agreement
between Shareholder and HIC.
49
<PAGE>
ARTICLE 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival of Guarantees, Representations, and Warranties.
The period during
which claims under the respective guarantees, representations, and
warranties of each
Seller contained in Article 3 and of the Purchaser contained in
Article 4 shall be
pursuable in accordance with Section 6.4 hereof is two (2) years
ending at midnight of
July 18th, 1996, except that such period for claims under Section
3.2 (Capital) shall be
5 years.
6.2 Indemnification by Sellers. Each Seller shall, jointly
and severally, defend,
indemnify, and hold harmless any Indemnified Purchaser, from and
against any Losses,
including interest thereon, caused by or arising out of (a) any
failure by a Seller to
perform its covenants or obligations as set forth in this Agreement
or in any instrument
or agreement delivered by a Seller pursuant to this Agreement and
(b) subject to the
limitations contained in Sections 6.1 and 6.4, any breach by a
Seller of any guarantee,
representation, and warranty to Purchaser contained in Article 3 of
this Agreement.
6.3 Indemnification by Purchaser. The Purchaser hereby
agrees to defend,
indemnify, and hold harmless any Indemnified Seller from and
against any Losses, including
interest thereon, caused by or arising out of (a) any failure by
the Purchaser to perform
its covenants or obligations to such Seller as set forth in this
Agreement or in any
instrument or agreement delivered by the Purchaser pursuant to this
Agreement and (b)
subject to the limitations contained in Sections 6.1 and 6.4, any
breach by the Purchaser
of any guarantee, representation, and warranty to the Sellers
contained in Article 4 of
this Agreement.
6.4 Indemnification Procedure. The indemnification
procedure provisions set forth
in Section 6.4 of the Original Share Purchase Agreement shall apply
to this Agreement as
if set forth fully in this Section 6.4; provided, however, that the
exceptions in Section
6.4 of the Original Share Purchase Agreement relating to Sections
3.10 and 5.4 thereof
shall not apply to this Agreement since they have no relevance in
this Agreement.
50
<PAGE>
ARTICLE 7
MISCELLANEOUS
7.1 Notices. Except as otherwise provided herein, any
notice required hereunder
shall be in writing, and shall be deemed to have been validly
served, given or delivered
upon delivery thereof to the party to be notified (in the case of
a fax, by delivery with
confirmation of receipt), in each case to the address of the party
to be notified, as
follows:
(a) If to the Purchaser or HIC:
Harman International Industries, Incorporated
8500 Balboa Boulevard
Northridge, California 91329, USA
Attention: Bernard A. Girod
Telephone: 1-818-893-8411
Telefax: 1-818-891-7345
With copies to:
Jones, Day, Reavis & Pogue
Metropolitan Square
1450 G Street, N.W.
Washington, D.C. 20005-2088, USA
Attention: J. Lawrence Manning, Jr., Esq.
Telephone: 1-202-879-3939
Telefax: 1-202-737-2832
(b) If to Shareholder:
GiroCredit Vermogensverwaltungsgesellschaft m.b.H.
Traungasse 12
A-1030 Vienna, AUSTRIA
Attention: Dr. Michael Matt
Telephone: 43-1-71194-2265
Telefax: 43-1-71-71194-2269
(c) If to GiroCredit:
GiroCredit Bank Aktiengesellschaft der Sparkassen
Schubertring 5
A-1010 Vienna, AUSTRIA
Attention: Dr. Michael Matt
Telephone: 43-1-71194-2265
Telefax: 43-1-71-71194-2269
51
<PAGE>
or to such other address or addresses as the Purchaser, Shareholder
or GiroCredit may from
time to time designate by notice as provided herein.
7.2 Assignment. No party shall assign or delegate this
Agreement or any rights or
obligations hereunder to any Person, except with the prior written
consent of the other
parties; except that the Purchaser may assign or delegate the
Agreement to any of its
majority-owned Affiliates other than by delegation of the
obligation to pay the Purchase
Price.
7.3 Waiver. Any party may, by written notice to the other
party, (a) extend the
time for the performance of any of the obligations or other actions
of such other under
this Agreement; (b) waive compliance with any of the conditions or
covenants of such other
contained in this Agreement; or (c) waive or modify performance of
any of the obligations
of such other under this Agreement. Except as provided in the
preceding sentence, no
action taken pursuant to this Agreement, including, without
limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking
such action of compliance with any of the covenants, conditions,
agreements, or
indemnities contained in this Agreement. The waiver by any party
hereto of a breach of
any provision of this Agreement shall not operate or be construed
as a waiver of any
subsequent breach.
7.4 Entire Agreement. This Agreement, together with the
Exhibits hereto which are
incorporated into this Agreement by reference, supersedes any other
agreement, whether
written or oral, that may have been made or entered into by any of
the parties relating
to the matters contemplated hereby, and constitutes the entire
agreement of the parties.
7.5 Amendments, Supplements. This Agreement may be amended
or supplemented only
by an instrument in writing executed and delivered by a duly
authorized director or
officer of each of the parties hereto.
7.6 Captions. The captions in this Agreement are for
convenience only and shall
not be considered a part of or affect the construction or
interpretation of any provision
of this Agreement.
7.7 Counterparts. This Agreement may be executed in two or
more counterparts, each
of which shall be an original, but all of which together shall
constitute one and the same
instrument.
52
<PAGE>
7.8 Successors and Assigns. This Agreement shall be binding
upon, inure to the
benefit of, and may be enforced by, the Purchaser and any Seller,
and their respective
successors and permitted assigns.
7.9 Governing Law. This Agreement shall be governed by the
laws of Austria.
7.10 Arbitration. All disputes arising in connection with
the present agreement
shall be finally settled by arbitration under the Rules of
Arbitration of the
International Chamber of Commerce ("ICC Rules") by either one or
three arbitrators
appointed in accordance with the ICC Rules. The parties expressly
agree that where the
dispute is to be referred to three arbitrators, the party or
parties submitting a request
for arbitration shall jointly nominate one co-arbitrator and the
party or parties
designated as defendant(s) therein shall likewise jointly nominate
one co-arbitrator,
pursuant to the time periods set forth in Article 2 of the ICC
Rules.
The place of arbitration shall be Zurich, Switzerland. The
language of the arbitral
proceedings shall be English.
7.11 Severability. Should any provision or portion of this
Agreement be held
unenforceable or invalid for any reason, the remaining provisions
and portions of this
Agreement shall be unaffected by such holding, unless to do so
would alter substantially
the intended effect of this Agreement, in which case the remaining
provisions or portions
of this Agreement shall be read together so as to give effect to
the extent possible to
the intentions of the parties.
7.12 Gender and Number. The masculine, feminine, or neuter
gender and the singular
or plural shall each be deemed to include the others whenever the
context so indicates.
53
<PAGE>
IN WITNESS WHEREOF, the Purchaser, Shareholder and GiroCredit
have duly executed and
delivered this Agreement as of the date first above written.
HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
HARMAN INVESTMENT COMPANY,
INC.
By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
GIROCREDIT BANK
AKTIENGESELLSCHAFT DER
SPARKASSEN
By: /s/ Dr. Herbert Lugmayr
Name: Dr. Herbert Lugmayr
Title: Vorstandsvorsitzender
By: /s/ Dksm. Peter Holler
Name: Dksm. Peter Holler
Title: Director
GIROCREDIT
VERMoGENSVERWALTUNGSGESELLSCHAFT
m.b.H.
By: /s/ Dr. Michael Matt
Name: Dr. Michael Matt
Title: Bankangestellter
54
<PAGE>
EXHIBIT A
1."Affiliate" means, with respect to any party to this Agreement,
any Person controlled
by or under common control with, under the control of, or
controlling such party or a
Person in which such party or such controlling Person owns any
interest.
2."Agreement" means this Agreement of Purchase and Sale.
3."AKG" means AKG Akustische u. Kino-Gerate Gesellschaft m.b.H., an
Austrian limited
liability company.
4."Austrian Governmental Authority" means any Governmental
Authority located in the
Republic of Austria or having jurisdiction over the businesses of
AKG in Austria.
5."GiroCredit" means GiroCredit Aktiengesellschaft der Sparkassen,
an Austrian stock
company.
6."Governmental Authority" means any court, governmental authority,
governmental body, or
other regulatory or administrative agency or commission of any
government of any country
or any private or governmental arbitration or conciliation
authority or other similar
body.
7."Lien" means any lien, encumbrance, restriction, or other
conflicting ownership, equity,
or security interest.
8."Losses" means claims asserted, actions, deficiencies, damages,
losses, costs, taxes,
penalties, expenses, and liabilities (including reasonable
attorneys' fees, court costs,
investment expenses and any other costs incident to or interest
chargeable on any of the
foregoing).
9."Original Share Purchase Agreement" means the Share Purchase
Agreement dated September
24, 1993 between Harman International Industries, Incorporated,
Harman Investment Company,
Inc., GiroCredit, IU Holding Ges.m.b.H., GiroCredit
Vermogensverwaltungsgesellschaft
m.b.H. and AKG.
10."Person" means an individual, a corporation, a partnership, a
joint stock company, a
joint venture, an estate, a trust, an unincorporated organization,
a Governmental
Authority, or any other entity.
11."Purchaser" means Harman International Industries, Incorporated,
a Delaware
corporation.
12."Seller" or "Sellers" means either or both of Shareholder and
GiroCredit.
13."Shareholder" means GiroCredit Vermogensverwaltungsgesellschaft
m.b.H., an Austrian
limited liability company.
55
<PAGE>
14."Share" means "Share" as defined in Section 1.1 of this
Agreement.
15."Third Party Consent" means "Third Party Consent" as defined in
Section 3.4 of this
Agreement.
<S> <C>
56
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EXHIBIT 10.51
57
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58
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PROMISSORY NOTE
$30,000,00
New York, New York
May 17, 1994
1. FOR VALUE RECEIVED, HARMAN INTERNATIONAL INDUSTRIES, INC., JBL
INCORPORATED, AKG
ACOUSTICS, INC., STUDER EDITECH, CORP., HARMAN KARDON, INC., HARMAN
MOTIVE, INC., INFINITY
SYSTEMS, INC., JBL PROFESSIONAL INC., NORTHRIDGE MANUFACTURING
GROUP, EPICURE PRODUCTS,
INC., PYLE INDUSTRIES, INC., DOD ELECTRONICS CORPORATION, HARCO
PROPERTIES, INC., FOSGATE,
INC., LEXICON, INC. AND HARMAN INVESTMENT COMPANY, INC.
(individually a "Borrower" and
collectively the "Borrowers"), jointly and severally, by this
promissory note (the "Note")
promises to pay to the order of CHEMICAL BANK (the "Bank") the
principal amount of THIRTY
MILLION ($30,000,000.00) DOLLARS (the "Facility") or the aggregate
unpaid principal amount
of all advances (individually and "Advance" and collectively
"Advances"), made by the Bank
to the Borrowers or any of them and recorded on the schedules
attached hereto, whichever
is less, as selected by the Borrowers as follows:
(a) Advances made available by the Bank to a Borrower at the
Lending Office and to
pay interest on each such Advance on the date indicated on Schedule
A attached hereto and
made a part hereto at a rate per annum which may be fixed for an
Interest Period. The
rate to be charged on each such Advance shall be .75% above the
rate per annum, adjusted
as provided in the last sentence of this paragraph (a), at which
U.S. dollar deposits are
offered to the Lending Office in the interbank eurodollar market in
which such Lending
Office customarily deals as a 10:00 a.m., local time of such
Lending Office, two Working
Days prior to the date of such Advance in an amount equal to the
amount of such Advance
for delivery on the date of such Advance for the number of days
such Advance will be
outstanding. The interest rate determined hereunder shall be
adjusted by dividing such
interest rate by the number equal to 1.00 minus the blended rate
(expressed as a decimal
fraction) of reserves which are required to be maintained (or which
will be required to
be maintained), under Regulation D of the Board of Governors of the
Federal Reserve System
(as in effect on the date of determination of such interest rate),
against "Eurocurrency
liabilities" (as such term is defined in Regulation D) from time to
time during the period
for which the interest rate is determined;
(b) Advances made available by the Bank to a Borrower, at
the Bank's office located
at 270 Park Avenue, New York, New York and to pay interest on each
such Advance at the
Bank's Prime Rate; and
(c) Advances made available at the Negotiated Rate; made
available by the Bank to
a Borrower at the Bank's office located at 270 Park Avenue, New
York, New York.
59
<PAGE>
(d) Definitions:
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which the
Bank is authorized to close under the laws of the State of New
York.
"Domestic Dollar Rate" shall mean the rate of interest
described in paragraph (b) or (c)
above.
"Domestic Dollar Loan(s)" shall mean Advance(s) made pursuant
to paragraph (b) or (c)
above.
"Eurodollar Rate" shall mean the rate of interest described
in paragraph (a) above.
"Eurodollar Rate Loan(s)" shall mean Advance(s) made pursuant
to paragraph (a) above.
"Fixed Rate Loan" shall mean a Eurodollar Rate Loan or a
Negotiated Rate Loan.
"Interest Period" shall mean with respect to each Eurodollar
Rate Loan, the period
beginning on the borrowing date of such Eurodollar Rate Loan and
ending one, two or three
months thereafter.
"Lending Office" shall mean the Bank's eurodollar lending
office designated by the Bank
with respect to a Eurodollar Rate Loan.
"Negotiated Rate" shall mean the fixed rate of interest per
annum set by the Bank for
a specified period of time for any particular Advance.
"Negotiated Rate Loan" shall mean an Advance(s) at the
Negotiated Rate.
"Prime Rate" shall mean the rate of interest as is publicly
announced by the Bank at its
principal office from time to time as its Prime Rate, adjusted as
of the date of each such
change.
"Prime Rate Loans" shall mean Advance(s) made pursuant to
paragraph (b) above.
"Working Day" shall mean any day on which dealings in
currencies and exchange between
banks may be carried on in New York, New York, the place where the
Lending Office is located
and the place where the relevant eurodollar market is located.
2. If all or a portion of any Advance hereunder shall not be
paid when due (whether as
stated, by acceleration or otherwise), such Advance, if a
Eurodollar Rate Loan or a Negotiated
Rate Loan shall be converted to a Domestic Dollar Loan at the end
of the Interest Period
applicable thereto, and the overdue principal amount shall bear
interest at a rate per annum
which is 2% above the rate which would otherwise be applicable
hereunder.
3. Each Advance made pursuant to Paragraphs 1(a) and 1(c) of
this Note shall be in a
principal amount of not less than $500,000. Each Advance made
pursuant to Paragraph 1(b) of
this Note shall be in a principal amount of not less than $100,000.
60
<PAGE>
4. Advances made pursuant to Paragraphs 1(a) or 1(c) of this
Note may not be prepaid
without the prior written consent of the Bank. All or any portion
of Prime Rate Loans may be
repaid at any time and from time to time.
5. If the Bank determines that circumstances affect the
interbank eurodollar market make
it impracticable to ascertain the interest rate applicable for any
Interest Period or
impossible to lend at the Eurodollar Rate, the Bank shall promptly
notify the Borrowers of
such determination and, until such notice is withdrawn, any
subsequent Advance shall be a
Prime Rate Loan.
6. Each Advance hereunder, the rate charged thereon, and the
maturity date, if applicable,
shall be noted on the schedules attached hereto and made a part
hereof. This Note shall be
used to record all payments of principal made hereunder until it is
surrendered to the
Borrowers by the Bank. The failure of the Bank, however, to record
any advance shall not
relieve the Borrowers of their obligation to repay such Advance
with interest thereon as
provided herein.
7. The total amounts advanced to the Borrowers by the Bank
shall not exceed $30,000,000
at any time. The total amount advanced by the Bank hereunder shall
be decreased by: (a) the
aggregate outstanding principal amount of the United States dollar
equivalent, as determined
by the Bank in its sole discretion, of any Japanese yen overdrafts
by Harman Kardon, Inc.
honored by the Tokyo branch of the Bank; (b) the aggregate
outstanding face amount of letters
of credit issued by the Bank for the account of Harman Kardon,
Inc., Epicure Products, Inc.,
Infinity Systems, Inc. or JBL, Incorporated, AKG Acoustics, Inc.,
Studer Editech, Corp., JBL
Professional Inc., Harman Motive, Northridge Manufacturing Group,
Lexicon, Inc. and DOD
Electronics Corporation plus the aggregate outstanding amount of
drafts drawn thereunder for
which the Bank has not been reimbursed; (c) the aggregate
outstanding principal amount of the
United States dollar equivalent, as determined by the Bank in its
sole discretion, of any
Danish Kroner borrowings under a certain grid note dated August 16,
1993 executed by JBL,
Incorporated payable to the Bank; and (d) the aggregate outstanding
principal amount of the
United States dollar equivalent, as determined by the Bank in its
sole discretion, of any
Japanese Yen borrowings under a certain grid note dated May 17,
1994 executed by JBL,
Incorporated payable to the Bank.
8. Advances shall be credited to any account of the Borrower
requesting such Advance
maintained at the Bank and the Bank's records shall be conclusive
evidence thereof.
9. Interest on Domestic Dollar Loans shall be payable monthly
on the first day of each
month on the first day of each month and upon payment or prepayment
in full of the unpaid
principal amount thereof. Interest on Eurodollar Rate Loans shall
be payable on the maturity
date of each such Advance and upon payment in full of the unpaid
principal amount thereof.
The principal amount of all Prime Rate Loans shall be payable on
demand. The principal amount
of all Eurodollar Rate Loans or Negotiated Rate shall be payable on
the maturity date of each
such Advance.
61
<PAGE>
10. If any Domestic Dollar Loan payment becomes due and payable
on a Saturday, Sunday or
legal holiday under the laws of the State of New York, the maturity
thereof shall be extended
to the next succeeding Business Day and interest thereon shall be
payable at the then
applicable rate during such extension. If any Eurodollar rate Loan
payment becomes due and
payable on a day which is not a Working Day, such payment shall be
made on, and interest
payable to, the succeeding Working Day, unless the succeeding
Working Day shall fall in the
succeeding calendar month, in which event such payment shall be
made on the preceding Working
Day, and any relevant Interest Period shall be adjusted accordingly
by the Bank.
11. Interest on Domestic Dollar Loans shall be computed on the
basis of a 365 day year for
the actual number of days elapsed. Interest on Eurodollar Rate
Loans shall be computed on the
basis of a 360 day year for the actual number of days elapsed.
12. All payments to be made hereunder by the Borrowers shall be
made in immediately
available funds at the office of the Bank located at 270 Park
Avenue, New York, New York in
the case of Domestic Dollar Loans at the office of the Bank located
at 4 New York Plaza, New
York, New York in the case of Eurodollar Rate Loans.
13(a). If any existing or future applicable law, regulation or
directive, or any change
therein or in the interpretation thereof, or compliance by the Bank
with any request (whether
or not having the force of law) of any relevant central bank or
other comparable agency,
subjects the Bank to any tax of any kind whatsoever with respect to
this Note or changes the
basis of taxation of payments to the Bank of principal, interest or
any other amount payable
hereunder (except for changes in the rate of any tax presently
imposed on the Bank) or
imposes, modifies or deems applicable any reserve, special deposit
or similar requirement
against assets held by, or deposits or other liabilities in or for
the account of, or advances
or loans by, or other credit extended by, or any other acquisition
of funds by, any office of
the Bank which are not otherwise included in the determination of
the Eurodollar Rate
hereunder, or imposes on the Bank any other condition with respect
to the Eurodollar market,
the certificate of deposit market, this Note or the Advances
evidenced hereby, and the result
of any of the foregoing is to increase the cost to the Bank of
maintaining Advances or credit
hereunder or to reduce any amount receivable in respect thereof,
then the Borrowers and each
of them agree to pay to the Bank, upon demand, additional amounts
which will compensate the
Bank for such increased cost or reduced amount receivable as
determined by the Bank with
respect to this Note. The Bank's certificate as to any additional
amounts payable pursuant
to the preceding sentence shall be conclusive as to the amounts due
in the absence of manifest
error or protest of any such payment by the Borrowers.
(b) If after the date hereof, the Bank shall have determined
that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or
any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or
compliance by the Bank with any request or directive regarding
capital adequacy (whether or
not having the force of law) or any such authority, central bank or
comparable agency, has or
would have the effect of reducing the rate of return on the Bank's
capital as a consequence
of its obligations hereunder to a level below that which the Bank
could have achieved but for
such adoption, change or compliance (taking into consideration the
Bank's policies with
respect to capital adequacy) by an amount deemed by the Bank to be
material, then from time
to time, within 15 days after demand by the Bank, the Borrowers
shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such
reduction. The Bank will
promptly notify the Borrowers of any event of which it has
knowledge, occurring after the date
hereof, which will entitle the Bank to compensation pursuant to
this Paragraph 13(b).
62
<PAGE>
(c) The Borrowers shall reimburse the Bank on demand for any
loss incurred or to be
incurred by it in the reemployment of the funds released by any
prepayment or conversion of
any Fixed Rate Loan required or permitted by any provision of this
Note, in each case if such
Advance is prepaid or converted other than on the last day of an
interest period for such
Advance. The Borrowers further agree to reimburse the Bank on
demand for any loss incurred
or to be incurred by it in the reemployment of the funds released
by any refusal by the
Borrowers to accept any requested Fixed Rate Loan or any requested
continuation thereof or
conversation thereto. If any prepayment hereunder makes it
necessary to apply any principal
installment payment on the Note to interest due pursuant to a Fixed
Rate Loan, with an
interest period extending beyond the date of such installment
payment, the Borrowers shall
reimburse the Bank upon demand for any loss incurred or to be
incurred by the Bank (determined
in accordance with the immediately preceding sentence and based on
whether such prepayment was
voluntary or required) in the reemployment of funds realized on
such installment payment and
applied to such Fixed Rate Loan.
14. The Borrowers agree to pay all of the Bank's costs and
out-of-pocket expenses
(including, without limitation, reasonable fees and disbursements
of counsel) arising in
connection with the enforcement of, and preservation of rights
under, this Note.
15. The Borrowers agree to indemnify the Bank for, and to hold
the Bank harmless from, any
loss or expense which the Bank may sustain or incur as a
consequence of the default by the
Borrowers in payment of the principal amount of, or interest on,
this Note, including any
interest payment by the Bank to lenders of funds borrowed by it in
order to make or maintain
any Advance evidenced hereby. This covenant shall survive payment
of this Note.
16. Upon the occurrence, with respect to any Borrower, or any
endorser or guarantor of the
Note, of any of the following: default in payment of this Note or
any other monetary
obligation of any nature or description to Bank (collectively the
"Obligations"); calling a
meeting of any creditors; filing of a voluntary or involuntary
petition under the Federal
Bankruptcy Code which, in the case of an involuntary petition, is
not dismissed, discharged
or bonded within 60 days; insolvency; failure to pay or remit any
tax when assessed or due
unless contested in good faith and by appropriate proceedings;
dissolution; suspension or
liquidation of usual business; failing to furnish financial
information to the Bank or to
permit inspection of books or records by the Bank; making any
misrepresentations to the Bank
in obtaining credit; or, in the Bank's opinion, material impairment
of financial
responsibility of any of them; then the Obligations shall be due
and payable immediately
without notice or demand.
17. The Bank shall have a continuing right of set-off on
deposits (general and special)
and credits with Bank of every Borrower and endorser, and may apply
all or part of same to the
Obligations (whether contingent or unmatured), at any time or
times, without notice.
18. The Borrower hereby irrevocably (a) submits, in any legal
proceeding relating to this
Note, to the non-exclusive jurisdiction of any state or United
States court of competent
jurisdiction sitting in the State of New York and agrees to suit
being brought in any such
court, (b) agrees to service of process in any such legal
proceeding by mailing of copies
thereof (by registered or certified mail, if practicable) postage
prepaid, or by telex, to the
Borrowers at the following address:
Harman International Industries, Inc.
8500 Balboa Blvd.
Northridge, CA 91329
Attn: Bernard A. Girod
63
<PAGE>
and (c) agrees that nothing contained herein shall affect the
Bank's right to effect service
of process in any other manner permitted by law.
19. This Note shall be governed by and construed in accordance
with the laws of the State
of New York.
HARMAN INTERNATIONAL INDUSTRIES, INC.
By: /s/ Bernard A. Girod
Title: President
JBL INCORPORATED
By: /s/ Bernard A. Girod
Title: President
JBL PROFESSIONAL, INC.
By: /s/ Bernard A. Girod
Title: President
HARMAN KARDON, INC.
By: /s/ Bernard A. Girod
Title: President
HARMAN MOTIVE, INC.
By: /s/ Bernard A. Girod
Title: President
INFINITY SYSTEMS, INC.
By: /s/ Bernard A. Girod
Title: President
64
<PAGE>
AKG ACOUSTICS, INC.
By: /s/ Bernard A. Girod
Title: President
STUDER EDITECH, CORP.
By: /s/ Bernard A. Girod
Title: President
EPICURE PRODUCTS, INC.
By: /s/ Bernard A. Girod
Title: President
PYLE INDUSTRIES, INC.
By: /s/ Bernard A. Girod
Title: President
HARCO PROPERTIES, INC.
By: /s/ Bernard A. Girod
Title: President
HARMAN INVESTMENT COMPANY, INC.
By: /s/ Bernard A. Girod
Title: President
DOD ELECTRONICS CORPORATION
By: /s/ Bernard A. Girod
Title: President
FOSGATE, INC.
By: /s/ Bernard A. Girod
Title: President
LEXICON, INC.
By: /s/ Bernard A. Girod_
Title: President
HARMAN MOTIVE
By: /s/ Bernard A. Girod
Title: President
65
<PAGE>
NORTHRIDGE MANUFACTURING GROUP
By: /s/ Bernard A. Girod
Title: President
66
<PAGE>
SCHEDULE A
(1(a) (Eurodollar Rate Loans)
Interest Amount of Unpaid
Date of Name of Amount of Maturity Rate Per Principal
Notation
Advance Borrower Advance Date Annum Paid Balance Made
By
67
<PAGE>
SCHEDULE B
(1(b) (Prime Loans)
Amount of Unpaid
Date of Name of Amount of Principal Principal
Notation
Advance Borrower Advance Paid Balance
Made By
68
<PAGE>
PROMISSORY NOTE
Danish Kroner (See Attached Schedule)
New York, New York
May 17, 1994
1. JBL, INCORPORATED (the "Borrower"), by this promissory note
(the "Note") promises to
pay to the order of CHEMICAL BANK (the "Bank") the aggregate unpaid
principal amount of all
advances (individually an "Advance" and collectively "Advances"),
made by the Bank to the
Borrower and recorded on the schedule attached hereto, as follows:
Advances made available by the Bank to the Borrower at the
Lending Office and to pay
interest on each such Advance on the dates indicated on
Schedule A attached hereto
and made a part hereof at a rate per annum which may be fixed
for an Interest Period.
The rate to be charged on each Advance shall be .75% above
the rate per annum,
adjusted as provided in the last sentence of this paragraph,
in the interbank
eurocurrency market in which such Lending Office customarily
deals as at 10:00 a.m.,
local time of such Lending Office, two Working Days prior to
the date of such Advance
in an amount equal to the amount of such Advance for delivery
on the date of such
Advance for the number of days such Advance will be
outstanding. The interest rate
determined hereunder shall be adjusted by dividing such
interest rate by the number
equal to 1.00 minus the blended rate (expressed as a decimal
fraction) of reserves
which are required to be maintained (or which will be
required to be maintained),
under Regulation D of the Board of Governors of the Federal
Reserve System (as in
effect on the date of determination of such interest rate),
against "Eurocurrency
liabilities" (as such term is defined in Regulation D) from
time to time during the
period for which the interest rate is determined;
"Eurokroner Rate" shall mean the rate of interest described in
paragraph 1 hereof.
"Interest Period" shall mean with respect to each Advance
hereunder, the period
beginning on the borrowing date of such Advance and ending two,
three and six months
thereafter.
"Lending Office" shall mean the Bank's eurocurrency lending
office designated by the
Bank with respect to an Advance hereunder.
69
<PAGE>
"Reserve Percentage" shall mean for any day, that percentage
(expressed as a decimal)
which is in effect on such day, as prescribed by the Board of
Governors of the Federal
Reserve System (or any successor), for determining the reserve
requirement for a member
bank of the Federal Reserve System in New York City with deposits
exceeding one billion
dollars in respect of new non-personal time deposits in dollars in
New York City having a
maturity comparable to the relevant Interest Period for any advance
and in an amount of
$100,000 or more.
"Working Day" shall mean any day on which dealings in currencies
and exchange between
banks may be carried on in New York, New York, the place where the
relevant Lending Office
is located and the place where the relevant eurocurrency market is
located.
2. Each Advance made hereunder shall be in a principal amount
of not less than the
Danish Kroner equivalent of U.S. Dollars $100,000, as the Bank
shall determine in its sole
discretion.
3. Advances made hereunder may not be prepaid without the prior
written consent of the
Bank.
4. If the Bank determines that circumstances affecting the
interbank eurocurrency
market make it impracticable to ascertain the interest rate
applicable for any Interest
Period or impossible to lend at the Eurokroner Rate, the Bank shall
promptly notify the
Borrower of such determination and, if such notice is not withdrawn
by the last day of such
Interest Period prepay the outstanding principal of the affected
Advance plus accrued
interest thereon in full.
5. Each advance hereunder, the rate charged thereon, and the
maturity date, if
applicable shall be noted on the schedule attached hereto and made
a part hereof. This
Note shall be used to record all payments of principal made
hereunder until it is
surrendered to the Borrower by the Bank. The failure of the Bank,
however, to record any
Advance shall not relieve the Borrower of its obligation to repay
such Advance with
Interest thereon as provided herein.
6. The obligation of the Borrower hereunder to make payments in
Danish Kroner shall not
be discharged or satisfied by any tender or recovery pursuant to
any judgement expressed in
or converted into any other currency except to the extent that such
tender or recovery
results in the effective receipt by the Bank (and the Bank shall
have an additional legal
claim) for any difference between such full amount and the amount
effectively received by
the Bank pursuant to any such tender or recovery. The Bank's
determination of amounts
effectively received by it shall be conclusive.
70
<PAGE>
7. Advances shall be credited to any account of the Borrower
requesting such Advance
maintained at the Bank and the Bank's records shall be conclusive
evidence thereof.
8. Interest on Advances hereunder shall be payable at the
maturity of each such
Advance, on the ninetieth day of any Interest Period of 6 months
and upon payment in full
of the unpaid principal amount thereof. The principal amount of
Advances hereunder shall
be payable at the maturity date of each such Advance.
9. If any payment on any Advances becomes due and payable on a
day which is not a
Working Day, such payment shall be made on, and interest payable
to, the succeeding Working
Day, unless the succeeding Working Day shall fall in the succeeding
calendar month, in
which event such payment shall be made on the preceding Working
Day, and any relevant
Interest Period shall be adjusted accordingly by the Bank.
10. Interest on Advances made hereunder shall be computed on
the basis of a 360 day
year for the actual number of days elapsed.
11. All payments to be made hereunder shall be in immediately
available funds in Danish
Kroner at such banking institution in Denmark as the Bank may
designate, for the account of
the Nassau, Bahamas branch of the Bank, or such other Lending
Office as the Bank may
designate from time to time.
12. The Borrower agrees to indemnify Bank for, and hold Bank
harmless from, any present
or future claim or liability for any registration charge or any
stamp, excise or other
similar taxes and any penalties or interest with respect thereto,
which may be imposed by
any jurisdiction in connection with this Note or enforcement
thereof.
13. (a) If any existing or future applicable law, regulation or
directive, or any
change therein or in the interpretation thereof, or compliance by
the Bank with any request
(whether or not having the force of law) of any relevant central
bank or other comparable
agency, subjects the Bank to any tax of any king whatsoever with
respect to this Note or
changes the basis of taxation of payments to the Bank of principal,
interest or any other
amount payable hereunder (except for changes in the rate of any tax
presently imposed on
the Bank) or imposes, modifies or deems applicable any reserve,
special deposit or similar
requirement against assets held by, or deposits or other
liabilities in or for the account
of, or advances or loans by, or other credit extended by, or any
other acquisition of funds
by, any office of the Bank which are not otherwise included in the
determination of the
Eurokroner rate, or imposes on the Bank any other condition with
respect to the
eurocurrency market, this Note or the Advances evidenced hereby,
and the result of any of
the foregoing is to increase the cost to the Bank of maintaining
Advances or credit
hereunder or to reduce any amount receivable in respect thereof,
then the Borrower agrees
to pay to the Bank, upon demand, additional amounts which will
compensate the Bank for such
71
<PAGE>
increased cost or reduced amount receivable as determined by the
Bank with respect to this
Note. The Bank's certificate as to any additional amounts payable
pursuant to the
preceding sentence shall be conclusive as to the amounts due in the
absence of manifest
error or protest of any such payment by the Borrower.
(b) If after the date hereof, the Bank shall have determined
that the adoption of
any applicable law, rule or regulation regarding capital adequacy,
or any change therein,
or any change in the interpretation or administration thereof by
any governmental
authority, central bank or comparable agency charged with the
interpretation or
administration thereof, or compliance by the Bank with any request
or directive regarding
capital adequacy (whether or not having the force of law) or any
such authority, central
bank or agency, has or would have the effect of reducing the rate
of return on the Bank's
capital as a consequence of its obligations hereunder to a level
below that which the Bank
could have achieved but for such adoption, change or compliance
(taking into consideration
the Bank's policies with respect to capital adequacy) by an amount
deemed by the Bank to be
material, then from time to time, within 15 days after demand by
the Bank, the Borrower
shall pay to the Bank such additional amount or amounts as will
compensate the Bank for
such reduction. The Bank will promptly notify the Borrower of any
event of which it has
knowledge, occurring after the date hereof, which will entitle the
Bank to compensation
pursuant to this Paragraph 13(b).
14. The Borrower agrees to pay all of the Bank's costs and
out-of-pocket expenses
(including, without limitation, reasonable fees and disbursements
of counsel) arising in
connection with the enforcement of, and preservation of rights
under, this Note.
15. The Borrower agrees to indemnify the Bank for, and to hold
the Bank harmless from,
any loss or expense which the Bank may sustain or incur as a
consequence of the default by
the Borrower in payment of the principal amount of, or interest on,
this Note, including
any interest payment by the Bank to lenders of funds borrowed by it
in order to make or
maintain the loan evidenced hereby. This covenant shall survive
payment of this Note.
16. Upon the occurrence, with respect to any Borrower, or any
endorser or guarantor of
the Note, of any of the following: default in payment of this Note
or any other monetary
obligation of any nature or description to Bank (collectively the
"Obligations"); calling a
meeting of any creditors; filing of a voluntary or involuntary
petition under the Federal
Bankruptcy Code which, in the case of an involuntary petition, is
not dismissed, discharged
or bonded within 60 days; insolvency; failure to pay or remit any
tax when assessed or due
unless contested in good faith and by appropriate proceedings;
dissolution; suspension or
liquidation of usual business; failing to furnish financial
information to the Bank or to
permit inspection of books or records by the Bank; making any
misrepresentations to the
Bank in obtaining credit; or, in the Bank's opinion, material
impairment of financial
responsibility of any of them; then the Obligations shall be due
and payable immediately
without notice or demand.
72
<PAGE>
17. The Bank shall have a continuing right of set-off on
deposits (general and
special) and credits with Bank of every Borrower and endorser, and
may apply all or part of
same to the Obligations (whether contingent or unmatured), at any
time or times, without
notice.
18. The Borrower hereby irrevocably (a) submits, in any legal
proceeding relating to
this Note, to the non-exclusive in personam jurisdiction of any
state or United States
court of competent jurisdiction sitting in the State of New York
and agrees to suit being
brought in any such court, (b) agrees to service of process in any
such legal proceeding by
mailing of copies thereof (by registered or certified mail, if
practicable) postage
prepaid, or by telex, to the Borrower at the following address:
JBL, Incorporated
8500 Balboa Boulevard
Northridge, CA 91329
and (c) agrees that nothing contained herein shall affect the
Bank's right to effect
service of process in any other manner permitted by law.
19. This Note shall be governed by and construed in accordance
with the laws of the
State of New York.
JBL INCORPORATED
By: /s/ Bernard A. Girod
Title:_President____________
74
<PAGE>
SCHEDULE A
ADVANCES
Interest Amount of
Unpaid
Date of Name of Amount of Maturity Rate Per Principal
Principal Notation
Principal Borrower Advance Date Annum Paid
Balance Made By
75
<PAGE>
PROMISSORY NOTE
Japanese Yen (See Attached Schedule)
New York, New York
May 17, 1994
1. JBL, INCORPORATED (the "Borrower"), by this promissory note
(the "Note") promises to
pay to the order of CHEMICAL BANK (the "Bank") the aggregate unpaid
principal amount of all
advances (individually an "Advance" and collectively "Advances"),
made by the Bank to the
Borrower and recorded on the schedule attached hereto, as follows:
Advances made available by the Bank to the Borrower at the
Lending Office and to pay
interest on each such Advance on the dates indicated on
Schedule A attached hereto
and made a part hereof at a rate per annum which may be fixed
for an Interest Period.
The rate to be charged on each Advance shall be .75% above
the rate per annum,
adjusted as provided in the last sentence of this paragraph,
in the interbank
eurocurrency market in which such Lending Office customarily
deals as at 10:00 a.m.,
local time of such Lending Office, two Working Days prior to
the date of such Advance
in an amount equal to the amount of such Advance for delivery
on the date of such
Advance for the number of days such Advance will be
outstanding. The interest rate
determined hereunder shall be adjusted by dividing such
interest rate by the number
equal to 1.00 minus the blended rate (expressed as a decimal
fraction) of reserves
which are required to be maintained (or which will be
required to be maintained),
under Regulation D of the Board of Governors of the Federal
Reserve System (as in
effect on the date of determination of such interest rate),
against "Eurocurrency
liabilities" (as such term is defined in Regulation D) from
time to time during the
period for which the interest rate is determined;
"Euroyen Rate" shall mean the rate of interest described in
paragraph 1 hereof.
"Interest Period" shall mean with respect to each Advance
hereunder, the period
beginning on the borrowing date of such Advance and ending two,
three and six months
thereafter.
"Lending Office" shall mean the Bank's eurocurrency lending
office designated by the
Bank with respect to an Advance hereunder.
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"Reserve Percentage" shall mean for any day, that percentage
(expressed as a decimal)
which is in effect on such day, as prescribed by the Board of
Governors of the Federal
Reserve System (or any successor), for determining the reserve
requirement for a member
bank of the Federal Reserve System in New York City with deposits
exceeding one billion
dollars in respect of new non-personal time deposits in dollars in
New York City having a
maturity comparable to the relevant Interest Period for any advance
and in an amount of
$100,000 or more.
"Working Day" shall mean any day on which dealings in currencies
and exchange between
banks may be carried on in New York, New York, the place where the
relevant Lending Office
is located and the place where the relevant eurocurrency market is
located.
2. Each Advance made hereunder shall be in a principal amount
of not less than the
Japanese Yen equivalent of U.S. Dollars $100,000, as the Bank shall
determine in its sole
discretion.
3. Advances made hereunder may not be prepaid without the prior
written consent of the
Bank.
4. If the Bank determines that circumstances affecting the
interbank eurocurrency
market make it impracticable to ascertain the interest rate
applicable for any Interest
Period or impossible to lend at the Eurokroner Rate, the Bank shall
promptly notify the
Borrower of such determination and, if such notice is not withdrawn
by the last day of such
Interest Period prepay the outstanding principal of the affected
Advance plus accrued
interest thereon in full.
5. Each advance hereunder, the rate charged thereon, and the
maturity date, if
applicable shall be noted on the schedule attached hereto and made
a part hereof. This
Note shall be used to record all payments of principal made
hereunder until it is
surrendered to the Borrower by the Bank. The failure of the Bank,
however, to record any
Advance shall not relieve the Borrower of its obligation to repay
such Advance with
Interest thereon as provided herein.
6. The obligation of the Borrower hereunder to make payments in
Japanese Yen shall not
be discharged or satisfied by any tender or recovery pursuant to
any judgement expressed in
or converted into any other currency except to the extent that such
tender or recovery
results in the effective receipt by the Bank of the full amount of
Japanese Yen payable
hereunder and the Borrower shall indemnify the Bank (and the Bank
shall have an additional
legal claim) for any difference between such full amount and the
amount effectively
received by the Bank pursuant to any such tender or recovery. The
Bank's determination of
amounts effectively received by it shall be conclusive.
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<PAGE>
7. Advances shall be credited to any account of the Borrower
requesting such Advance
maintained at the Bank and the Bank's records shall be conclusive
evidence thereof.
8. Interest on Advances hereunder shall be payable at the
maturity of each such
Advance, on the ninetieth day of any Interest Period of 6 months
and upon payment in full
of the unpaid principal amount thereof. The principal amount of
Advances hereunder shall
be payable at the maturity date of each such Advance.
9. If any payment on any Advances becomes due and payable on a
day which is not a
Working Day, such payment shall be made on, and interest payable
to, the succeeding Working
Day, unless the succeeding Working Day shall fall in the succeeding
calendar month, in
which event such payment shall be made on the preceding Working
Day, and any relevant
Interest Period shall be adjusted accordingly by the Bank.
10. Interest on Advances made hereunder shall be computed on
the basis of a 360 day
year for the actual number of days elapsed.
11. All payments to be made hereunder shall be in immediately
available funds in
Japanese Yen at such banking institution in Japan as the Bank may
designate, for the
account of the Nassau, Bahamas branch of the Bank, or such other
Lending Office as the Bank
may designate from time to time.
12. The Borrower agrees to indemnify Bank for, and hold Bank
harmless from, any present
or future claim or liability for any registration charge or any
stamp, excise or other
similar taxes and any penalties or interest with respect thereto,
which may be imposed by
any jurisdiction in connection with this Note or enforcement
thereof.
13. (a) If any existing or future applicable law, regulation or
directive, or any
change therein or in the interpretation thereof, or compliance by
the Bank with any request
(whether or not having the force of law) of any relevant central
bank or other comparable
agency, subjects the Bank to any tax of any king whatsoever with
respect to this Note or
changes the basis of taxation of payments to the Bank of principal,
interest or any other
amount payable hereunder (except for changes in the rate of any tax
presently imposed on
the Bank) or imposes, modifies or deems applicable any reserve,
special deposit or similar
requirement against assets held by, or deposits or other
liabilities in or for the account
of, or advances or loans by, or other credit extended by, or any
other acquisition of funds
by, any office of the Bank which are not otherwise included in the
determination of the
Eurokroner rate, or imposes on the Bank any other condition with
respect to the
eurocurrency market, this Note or the Advances evidenced hereby,
and the result of any of
the foregoing is to increase the cost to the Bank of maintaining
Advances or credit
hereunder or to reduce any amount receivable in respect thereof,
then the Borrower agrees
to pay to the Bank, upon demand, additional amounts which will
compensate the Bank for such
78
<PAGE>
increased cost or reduced amount receivable as determined by the
Bank with respect to this
Note. The Bank's certificate as to any additional amounts payable
pursuant to the
preceding sentence shall be conclusive as to the amounts due in the
absence of manifest
error or protest of any such payment by the Borrower.
(b) If after the date hereof, the Bank shall have determined
that the adoption of
any applicable law, rule or regulation regarding capital adequacy,
or any change therein,
or any change in the interpretation or administration thereof by
any governmental
authority, central bank or comparable agency charged with the
interpretation or
administration thereof, or compliance by the Bank with any request
or directive regarding
capital adequacy (whether or not having the force of law) or any
such authority, central
bank or agency, has or would have the effect of reducing the rate
of return on the Bank's
capital as a consequence of its obligations hereunder to a level
below that which the Bank
could have achieved but for such adoption, change or compliance
(taking into consideration
the Bank's policies with respect to capital adequacy) by an amount
deemed by the Bank to be
material, then from time to time, within 15 days after demand by
the Bank, the Borrower
shall pay to the Bank such additional amount or amounts as will
compensate the Bank for
such reduction. The Bank will promptly notify the Borrower of any
event of which it has
knowledge, occurring after the date hereof, which will entitle the
Bank to compensation
pursuant to this Paragraph 13(b).
14. The Borrower agrees to pay all of the Bank's costs and
out-of-pocket expenses
(including, without limitation, reasonable fees and disbursements
of counsel) arising in
connection with the enforcement of, and preservation of rights
under, this Note.
15. The Borrower agrees to indemnify the Bank for, and to hold
the Bank harmless from,
any loss or expense which the Bank may sustain or incur as a
consequence of the default by
the Borrower in payment of the principal amount of, or interest on,
this Note, including
any interest payment by the Bank to lenders of funds borrowed by it
in order to make or
maintain the loan evidenced hereby. This covenant shall survive
payment of this Note.
16. Upon the occurrence, with respect to any Borrower, or any
endorser or guarantor of
the Note, of any of the following: default in payment of this Note
or any other monetary
obligation of any nature or description to Bank (collectively the
"Obligations"); calling a
meeting of any creditors; filing of a voluntary or involuntary
petition under the Federal
Bankruptcy Code which, in the case of an involuntary petition, is
not dismissed, discharged
or bonded within 60 days; insolvency; failure to pay or remit any
tax when assessed or due
unless contested in good faith and by appropriate proceedings;
dissolution; suspension or
liquidation of usual business; failing to furnish financial
information to the Bank or to
permit inspection of books or records by the Bank; making any
misrepresentations to the
Bank in obtaining credit; or, in the Bank's opinion, material
impairment of financial
responsibility of any of them; then the Obligations shall be due
and payable immediately
without notice or demand.
79
<PAGE>
17. The Bank shall have a continuing right of set-off on
deposits (general and
special) and credits with Bank of every Borrower and endorser, and
may apply all or part of
same to the Obligations (whether contingent or unmatured), at any
time or times, without
notice.
18. The Borrower hereby irrevocably (a) submits, in any legal
proceeding relating to
this Note, to the non-exclusive in personam jurisdiction of any
state or United States
court of competent jurisdiction sitting in the State of New York
and agrees to suit being
brought in any such court, (b) agrees to service of process in any
such legal proceeding by
mailing of copies thereof (by registered or certified mail, if
practicable) postage
prepaid, or by telex, to the Borrower at the following address:
JBL, Incorporated
8500 Balboa Boulevard
Northridge, CA 91329
and (c) agrees that nothing contained herein shall affect the
Bank's right to effect
service of process in any other manner permitted by law.
19. This Note shall be governed by and construed in accordance
with the laws of the
State of New York.
JBL INCORPORATED
By: /s/ Bernard A. Girod
Title:_President____________
80
<PAGE>
SCHEDULE A
ADVANCES
Interest Amount of
Unpaid
Date of Name of Amount of Maturity Rate Per Principal
Principal Notation
Principal Borrower Advance Date Annum Paid
Balance Made By
81
<C> <S>
</TABLE>
<TABLE>
<PAGE>
EXHIBIT 10.52
81
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THIS PAGE LEFT BLANK INTENTIONALLY
82
<PAGE>
May 5, 1994
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned (the "Borrowers"), jointly
and severally promise
unconditionally to pay to the order of NationsBank of North
Carolina, N.A., its successors
or assigns (the "Bank"), during regular business hours at the
office of the Bank as the
Bank may from time to time designate in writing to the Borrowers),
the principal amount of
all Advances (as hereinafter defined), together with all interest
thereon and all other
amounts payable hereunder, at the times and in accordance with the
terms and conditions set
forth herein.
1. Advances.
(a) The Borrowers, in accordance with the terms
hereof, may from time to time
until February 28, 1995(the "Termination Date"), request
advances from the Bank for
the general corporate purposes of the Borrower in U.S.
Dollars based upon Offered
Rates (as defined below) offered by the Bank and accepted by
the Borrowers (the "U.S.
Dollar Advances") or in Applicable Non-U.S. Currencies based
upon Adjusted
Eurocurrency Rates (as defined below) and offered by the Bank
and accepted by the
Borrowers (the "Eurocurrency Advances") (hereinafter the U.S.
Dollar Advances and the
Eurocurrency Advances shall be referred to collectively as
the "Advances" or
individually as an "Advance"), provided that the U.S. Dollar
equivalent of the
aggregate amount of such Advances at any time outstanding (as
determined by the Bank
in its sole discretion) shall not exceed U.S. $15,000,000.00.
Upon receipt of such a
request for an Advance hereunder, the Bank shall make any
such Advance hereunder on
the terms and conditions set forth herein; provided, however,
the Bank shall not be
obligated to make such Advance if immediately after the
making of such Advance, the
U.S. Dollar equivalent of the outstanding principal balance
of all Advances (as
determined by the Bank in its sole discretion) would exceed
U.S. $15,000,000.00.
(b) To request an offer for a Eurocurrency Advance
hereunder, the Borrowers
shall make a written request (hereinafter, a "Request for
Eurocurrency Advance") not
later than 10:30 a.m. (local time of the Lending Office)
three Business Days before
the proposed Eurocurrency Advance which notice shall specify
(i) that the requested
Eurocurrency Advance would be made under this Note, (ii) the
date of the requested
Eurocurrency Advance (which shall be a Business Day), (iii)
the Applicable Non-U.S.
Currency for the requested Eurocurrency Advance, (iv) the
amount of the requested
Eurocurrency Advance which shall be no less than minimum
amounts established by the
Bank from time to time, and (v) the requested Interest Period
with respect thereto.
In response to any such Request for Eurocurrency Advance, the
Bank shall respond to
the Borrowers by 10:30 a.m. (local time of the Lending
Office) on the second Business
Day before the proposed Eurocurrency Advance specifying the
applicable Adjusted
Eurocurrency Rate for such Eurocurrency Advance (the "Offer
for Eurocurrency
Advance") and the Borrowers may then in their sole
discretion, accept or reject the
Offer for Eurocurrency Advance. Failure by the Borrowers to
accept an Offer for
Eurocurrency Advance by the appropriate time shall be deemed
to be rejection of such
Offer for Eurocurrency Advance. The terms of each
Eurocurrency Advance shall be
noted on the schedule attached hereto, the terms of which
shall be presumed correct
absent evidence of error; provided, however that any failure
to make such notation
(or any inaccuracy in such notation) shall not limit or
otherwise affect the
obligations of the Borrowers hereunder.
83
<PAGE>
(c) To request an offer for a U.S. Dollar Advance
hereunder, the Borrowers
shall make a written request (hereinafter, a "Request for
U.S. Dollar Advance") not
later than 10:00 a.m. (local time of the Lending Office) on
the Business Day of the
proposed U.S. Dollar Advance which notice shall specify (i)
that the requested U.S.
Dollar Advance would be made under this Note, (ii) the amount
of the requested U.S.
Dollar Advance which shall be no less than minimum amounts
established by the Bank
from time to time, and (iii) the requested Interest Period
with respect thereto. In
response to any such Request for U.S. Dollar Advance, the
Bank shall respond to the
Borrowers by 11:00 a.m. (local time of the Lending Office) on
the Business Day of the
proposed U.S. Dollar Advance specifying the applicable
Offered Rate for such Advance
(the "Offer for U.S. Dollar Advance"). The Borrowers may
then by telephone or
telecopy (and if by telephone, promptly confirmed by
telecopy) by 12:00 noon (local
time of the Lending Office) on the Business Day of the
proposed U.S. Dollar Advance,
in their sole discretion, accept or reject the Offer for U.S.
Dollar Advance.
Failure by the Borrowers to accept an Offer for U.S. Dollar
Advance by the
appropriate time shall be deemed to be rejection of such
Offer for U.S. Dollar
Advance. The terms of each U.S. Dollar Advance shall be
noted on the schedule
attached hereto, the terms of which shall be presumed correct
absent evidence of
error; provided, however that any failure to make such
notation (or any inaccuracy in
such notation) shall not limit or otherwise affect the
obligations of the Borrowers
hereunder.
(d) As used herein, the following terms shall have
the following meanings:
"Adjusted Eurocurrency Rate" means for the
respective Interest
Period with respect to any Eurocurrency Advance, a per
annum interest rate equal
to the per annum rate obtained by dividing (a) the rate of
interest determined by
the Bank to be the average (rounded upward to the nearest
whole multiple of 1/16
of 1% per annum, if such average is not such a multiple)
of the per annum rates at
which deposits in the Applicable Non-U.S. Currency are
offered to the Lending
Office in the interbank eurocurrency market in which such
Lending Office
customarily deals at 11:00 a.m. (local time of such
Lending Office), in each case
on the first day of such Interest Period in an amount
substantially equal to the
requested Advance and for a period equal to such Interest
Period by (b) a
percentage equal to 100% minus maximum reserve
requirements which may be
applicable with respect to such Eurocurrency Advance;
"Applicable Non-U.S. Currencies" means
Canadian Dollars, U.K.
Pounds Sterling, German Deutsche Marks, Hong Kong Dollars,
Belgium Francs, French
Francs, Austrian Schillings, Danish Kroner, Swiss Francs
and Japanese Yen;
"Business Day" shall mean any day on which
dealings in currencies
and exchange between banks may be carried on in the place
where the relevant
Lending Office is located and in the case of Eurocurrency
Advances, the place
where the relevant eurocurrency market is located;
"Interest Period" means (i) with respect to
U.S. Dollar Advances,
the period of time selected by the Borrowers and agreed to
by the Bank which shall
not be less than 1 day nor greater than 29 days; and (ii)
with respect to
Eurocurrency Advances, a period of one, two, three or six
months duration as may
be selected by the Borrowers; provided, however, that (A)
each Interest Period
which would otherwise end on a day which is not a Business
Day shall end on the
next succeeding Business Day unless such succeeding
Business Day falls in the next
calendar month and then
84
<PAGE>
in such case on the next preceding Business Day and (B) no
Interest Period shall
extend beyond the Termination Date;
"Lending Office" shall mean (i) the Bank's
eurocurrency lending
office designated by the Bank with respect to a
Eurocurrency Advance hereunder and
(ii) the Bank's Charlotte, North Carolina office with
respect to a U.S. Dollar
Advance; and
"Offered Rate" means with respect to any
U.S. Dollar Advance, the
interest rate offered by the Bank to the Borrower with
respect thereto for the
applicable Interest Period.
2. Principal. The outstanding principal balance of each
Advance together with all
accrued and unpaid interest thereon shall be due and payable ON
DEMAND; provided, however,
if demand is not sooner made, such amounts shall be due and payable
on the earlier of (i)
the last day of the respective Interest Period for such Advance or
(ii) the Termination
Date; provided further, if the U.S. Dollar equivalent of the
outstanding principal balance
of the Advances (as determined by the Bank in its sole discretion)
shall at any time exceed
U.S. $15,000,000.00, the Borrowers shall make an immediate
repayment to the Bank for
purposes of eliminating such excess.
3. Interest. Each Eurocurrency Advance shall bear interest on
the outstanding balance
hereunder at a per annum interest rate equal to the Adjusted
Eurocurrency Rate relating to
such Eurocurrency Advance plus 1.15% per annum. Each U.S. Dollar
Advance shall bear
interest on the outstanding principal balance thereof at a per
annum interest rate equal to
the Offered Rate. Unless otherwise agreed, accrued interest with
respect to each Advance
shall be payable in arrears on the last day of an Interest Period
for such Advance, but in
any event not less frequently than once every month on the first
day of each month.
Whenever a payment on this Note is stated to be due on a day which
is not a Business Day,
such payment shall be made on the next succeeding Business Day with
interest accruing to
the date of payment. Interest hereunder shall be computed on the
basis of actual number of
days elapsed over a year of 360 days.
4. Payments. All payments made on a Eurocurrency Advance shall
be made in the
Applicable Non-U.S. Currency in which such Eurocurrency Advance was
made. All payments on
a U.S. Dollar Advance shall be made in U.S. Dollars.
5. Prepayments. Prepayments are not permitted prior to maturity
of Interest Periods.
The Borrowers agree to indemnify the Bank against all reasonable
losses, expenses and
liabilities sustained by the Bank on account of the Borrowers (i)
failing to accept an
Advance after notice to the Bank of its acceptance of any such
Advance and (ii) making a
prepayment on an Advance prior to the last day of an Interest
period.
6. Yield Indemnification. In the event the Bank shall determine
(which determination
shall be presumed correct absent evidence of error) that:
(i) Unavailability. On any date for determining the
appropriate Adjusted
Eurocurrency Rate for any Interest Period, that by reason of
any changes arising on
or after the date of this Note affecting the interbank
eurocurrency market, deposits
in the Applicable Non-U.S. Currency in the principal amount
requested are not
generally available or adequate and fair means do not exist
for ascertaining the
applicable interest rate on the basis provided for in the
definition of Adjusted
Eurocurrency Rate, then Eurocurrency Advances in such
currency hereunder will not be
available until such time as the Bank shall notify the
Borrowers that the
circumstances giving rise thereto no longer exist.
(ii) Increased Costs. At any time, that the
Bank shall incur increased
costs or reductions in the amounts received or receivable
85
<PAGE>
hereunder with respect to any Eurocurrency Advances because
of any change since the
date of this Note in any applicable law, governmental rule,
regulation, guideline or
order (or in the interpretation or administration thereof and
including the
introduction of any new law or governmental rule, regulation,
guideline or order)
including without limitation the imposition, modification or
deemed applicability of
any reserves, deposits or similar requirements as related to
any Eurocurrency
Advances (such as, for example, but not limited to, a change
in official reserve
requirements, but, in all events, excluding reserves to the
extent included in the
computation of the Adjusted Eurocurrency Rate; then the
Borrowers shall pay to the
Bank promptly upon written demand therefor, such additional
amounts (in the form of
an increased rate of, or a different method of calculating,
interest or otherwise as
the Bank may determine in its reasonable discretion) as may
be required to compensate
the Bank for such increased costs or reductions in amounts
receivable hereunder
(written notice as to the additional amounts owed to the
Bank, showing the basis for
calculation thereof, shall, absent evidence of error, be
binding on all parties
hereto).
(iii) Illegality. At any time, that the making
or continuance of any
Eurocurrency Advance in any Applicable Non-U.S. Currency has
become unlawful by
compliance by the Bank in good faith with any law,
governmental rule, regulation,
guideline or order (or would conflict with any such
governmental rule, regulation,
guideline or order not having the force of law even though
the failure to comply
therewith would not be unlawful), or has become impractical
as a result of a
contingency occurring after the date of this Note which
materially and adversely
affects the interbank eurocurrency market, then Eurocurrency
Advances in such
Applicable Non-U.S. Currency will no longer be available.
7. Capital Adequacy. If the Bank shall have determined that the
adoption or
effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any
change therein, or any change after the date hereof in the
interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the
interpretation of administration thereof, or compliance by the Bank
with any request or
directive regarding capital adequacy (whether or not having the
force of law) of any such
authority, central bank or comparable agency, has the effect of
materially reducing the
rate of return on the Bank's capital or assets as a consequence of
its commitments or
obligations hereunder to a level below that which the Bank could
have achieved but for such
adoption, effectiveness, change or compliance (taking into
consideration the Bank's
policies with respect to capital adequacy), then from time to time,
within 15 days after
demand by the Bank the Borrowers shall pay to the Bank such
additional amount or amounts as
will compensate the Bank for such reduction. Upon determining in
good faith than any
additional amounts will be payable pursuant to this Section, the
Bank will give prompt
written notice thereof to the Borrowers, which notice shall set
forth the basis of the
calculation of such additional amounts, although the failure to
give any such notice shall
not release or diminish any of the Borrowers' obligations to pay
additional amounts
pursuant to this paragraph. Determination by the Bank of amounts
owing under this
paragraph shall, absent evidence of error, be binding on the
parties hereto. Failure on
the part of the Bank to demand compensation for any period
hereunder shall not constitute a
waiver of the Bank's rights to demand any such compensation in such
period or in any other
period.
8. Taxes. All payments made by the Borrowers hereunder will be
made without (but
without waiving any rights with respect to) setoff or counterclaim.
Promptly upon notice
from the Bank to the Borrowers, the Borrowers will pay, prior to
the date on which
penalties attach thereto, but without duplication, all present and
future, stamp and other
taxes, levies, or costs and charges whatsoever imposed, assessed,
levied or collected on or
in respect of Eurocurrency Advances hereunder solely as a result of
the interest
86
<PAGE>
rate being determined by reference to the Adjusted Eurocurrency
Rate and/or the provisions
of this Note relating to the Adjusted Eurocurrency Rate and/or the
recording, registration,
notarization or other formalization of any thereof and/or any
payments of principal,
interest or other amounts made on or in respect of advances
hereunder when the interest
rate is determined by reference to the Adjusted Eurocurrency Rate
and any increases thereof
(all such taxes, levies, costs and charges being herein
collectively call "Taxes"),
provided that Taxes shall not include taxes imposed on or measured
by the income of the
Bank by the United States of America or any political subdivision
or taxing authority
thereof or therein, or taxes on or measured by the overall net
income of any foreign
office, branch or subsidiary of the Bank by any foreign country of
subdivision thereof in
which that office, branch or subsidiary is doing business.
Promptly after the date on
which payment of any such Tax is due pursuant to applicable law,
the Borrowers will at the
request of the Bank, furnish to the Bank evidence, in form and
substance satisfactory to
the Bank, that the Borrowers have met their obligations under this
paragraph. The
Borrowers will indemnify the Bank against, and reimburse the Bank
on demand for, any Taxes,
as determined by the Bank in its good faith discretion. The Bank
shall provide the
Borrowers with appropriate receipts for any payments or
reimbursements made by the
Borrowers pursuant to this Section.
9. Late Charge. If the Borrowers fail to make any payment due
hereunder within fifteen
(15) days of the date such payment is due and payable, the
Borrowers shall pay to the Bank
on demand a late charge ("Late Charge") equal to five percent (5%)
of the amount of any
such payment. Such charge shall be in addition to, and not in lieu
of, any other right or
remedy the Bank may have, including the right to receive principal
and interest and to
reimbursement of costs and expenses. Such charge, if not
previously paid shall, at the
option of the Bank, be added to and become a part of the next
succeeding payment to be made
hereunder.
10. Default Interest Rate. After the maturity of this Note
(whether by acceleration,
declaration, extension or otherwise), the principal amount
outstanding on the date of
maturity plus accrued and unpaid interest earned to maturity shall
bear interest at the
rate of interest which is otherwise applicable on this Note, plus
two percent (2%) per
annum.
11. Letters of Credit. The Bank agrees to issue letters of
credit (the "Letters of
Credit") for the benefit of the Borrowers for the general corporate
purposes of the
Borrowers provided that (i) the Borrowers and the Bank have
mutually agreed upon the terms
and conditions of such Letters of Credit and the obligations of the
Borrowers to the Bank
with respect thereto prior to the issuance of any such Letter of
Credit, (ii) no Letter of
Credit shall have an expiration date beyond the Termination Date,
(iii) the aggregate
undrawn amounts of the Letters of Credit plus the outstanding
principal amount of amounts
drawn under the Letters of Credit and not reimbursed by the
Borrowers (hereinafter
collectively referred to as the "Letter of Credit Obligations")
shall not exceed U.S.
$5,000,000.00 at any time outstanding, (iv) the Letter of Credit
Obligations shall
constitute usage of the aggregate amount of Advances available to
the Borrowers under this
Note and (v) the U.S. Dollar equivalent of the outstanding
principal balance of the
Advances plus the Letter of Credit Obligations (as determined by
the Bank in its sole
discretion) shall not exceed U.S. $15,000,000.00 at any time
outstanding.
12. Obligations. The full and punctual observance and
performance of all present and
future duties, covenants and responsibilities due to the Bank by
the Borrowers of any
nature whatsoever, including to the fullest extent permitted by
applicable law, all past,
present and future indebtedness and liabilities of the Borrowers to
the Bank for the
payment of money (extending to all principal, interest, fees,
expense payments, liquidation
costs, and attorney's fees and expenses), whether similar or
dissimilar, related or
unrelated, matured or unmatured, direct or indirect, contingent or
noncontingent, primary
or secondary, alone or jointly with others, now due or
87
<PAGE>
to become due, now existing or hereafter created, and whether or
not now contemplated shall
collectively be referred to as the "Obligations".
13. Loan Documents. The Obligations of the Borrowers
evidenced by this Note are
secured by, guaranteed by, and are a part of the obligations
referred to in, any note,
letter agreement, line of credit agreement, commercial financing
agreement, security
agreement, guaranty of payment, mortgage, deed of trust, pledge
agreement, loan agreement,
hypothecation agreement, indemnity agreement, letter of credit
application and agreement,
assignment, or any other document or agreement previously,
simultaneously or hereafter
executed and delivered by the Borrowers and/or by any other
Obligor, as hereinafter
defined, singly or jointly with another person or persons to the
Bank, in connection with
Obligations, whether or not this Note is specifically referred to
therein. (as the same may
from time to time be amended, restated, supplemented or otherwise
modified, collectively,
the "Loan Documents").
14. Waiver. The Borrowers and, upon signing this Note, any
other Obligor (which term
shall mean individually and collectively, the Borrowers, each
endorser, guarantor and
surety of this Note, any person who is primarily or secondarily
liable for the repayment of
this Note or any of the Obligations, or any portion thereof, and
any person who has granted
security for the repayment of this Note or any of the Obligations)
hereby jointly and
severally waive demand, presentment for payment, protest, notice of
demand, of non-payment,
of dishonor and of protest and agree that at any time and from time
to time and with or
without consideration, the Bank may, without notice to or further
consent of the Borrowers
or any such other Obligor and without in any manner releasing,
lessening or affecting the
obligations of the Borrowers or any Obligor hereunder and under any
of the Loan Documents:
(a) release, surrender, waive, add, substitute, settle, exchange,
compromise, modify,
extend or grant indulgences with respect to, (i) this Note, (ii)
any of the Loan Documents,
(iii) all or any part of any collateral or security for this Note,
and/or (iv) any Obligor;
(b) complete any blank space in this Note according to the terms
upon which the loan
evidenced hereby is made; and (c) grant any extension or other
postponements of the time of
payment hereof.
15. Provision of Financial Information. The Borrowers shall
promptly provide, and
shall cause any or all of the Obligors to promptly provide to the
Bank, such financial,
operational or business information in each instance and in such
form as the Bank shall at
any time and from time to time in its sole discretion require
including:
* Borrowers' fiscal year balance sheet and income
statement reviewed by an
independent certified public accountant, together with all
relevant schedules and
notes, prepared in accordance with generally accepted
accounting principles, within
120 days after the fiscal year end; and
* Borrowers' quarterly prepared income statements and
balances sheets, prepared in
accordance with generally accepted accounting principles, and
upon the Bank's
request, completed borrower's certificates in form and
substance satisfactory to the
Bank and certified by the Borrowers' chief financial officer
to be true, correct and
complete (or such other officer as is acceptable to the Bank)
within 45 days after
quarter end; and
16. Demand Note. The Borrowers acknowledge and agree that
this Note is payable
immediately upon demand by the Bank, and that the recitation of
defaults in any of the Loan
Documents is intended merely to provide examples of events which
may result in the Bank
making demand for payment hereunder. Under no circumstances shall
the Bank's demand for
payment be conditioned upon the existence or non-existence of any
event of default
contained in any of the Loan Documents or any other circumstance,
including the imposition
of any condition or duty, such as a duty of good faith or a duty to
demand only upon the
existence of an event of default contained in any of the Loan
Documents. The Bank shall at
all times be entitled to demand payment of all or any
88
<PAGE>
portion of the Obligations at any time and from time to time in its
sole and absolute
discretion, without prior notice to or consent of the Borrowers or
any other Obligor.
17. Rights and Remedies. If this Note is not paid upon
demand, the Bank may, at its
option and without notice to Borrowers or any Obligor: (a) declare
all or any part of the
unpaid Obligations, together with all accrued and unpaid interest
thereon, to be
immediately due and payable without presentment, demand or notice
which are hereby
expressly waived; (b) exercise its right of setoff against any
money, funds, credits or
other property of any nature whatsoever of Borrowers or any Obligor
signing this Note, now
or at any time hereafter in the possession of, in transit to or
from, under the control or
custody of, or on deposit with, the Bank or any affiliate of the
Bank in any capacity
whatsoever, including without limitation, any balance of any
deposit account and any
credits with the Bank or any affiliate of the Bank; and (c)
exercise any or all rights,
powers, and remedies provided for in the Loan Documents or now or
hereafter existing at law
or in equity or by statute or otherwise. Regardless of whether the
Bank elects to make
demand hereunder, upon any failure by the Borrowers to perform,
observe or comply with any
of its Obligations, the Bank may, in its sole discretion and
without notice to Borrowers or
any other Obligor who signs this Note, terminate any outstanding
commitments of the Bank to
the Borrowers or any other Obligor who signs this Note.
18. Collection. If this Note is placed in the hands of an
attorney for collection
after its maturity (whether by acceleration, declaration, extension
or otherwise), the
Borrowers shall pay to the Bank on demand all costs and expenses
including, without
limitation, all attorney's fees and expenses incurred by the Bank
in collecting the unpaid
balance of the principal amount hereunder or in successfully
defending any counterclaim
brought by the Borrowers contesting the Bank's right to collect the
unpaid balance of such
principal amount. All of such costs and expenses shall bear
interest at the default rate
of interest described herein, from the date of payment by the Bank
until repaid in full.
19. Other Security. As security for the payment of the
Obligations under this Note or
any of the Loan Documents, the Borrowers and any Obligor who signs
this Note hereby grants
a security interest in and authorizes the Bank to offset against
all property of the
Borrowers and such Obligor now or at any time hereafter in the
possession of, in transit
to, under the control of, or on deposit with, the Bank or any
affiliate of the Bank in any
capacity whatsoever, including without limitation, any balance of
any deposit account and
any credits with the Bank or any affiliate of the Bank.
20. Environmental Laws. The Borrowers have obtained or will
obtain, all permits,
licenses and other authorizations,which are required under any and
all federal, state,
local and foreign statutes, laws, regulations and other such
authorities relating to the
environment or the release of any materials into the environment
("Environmental Laws").
The Borrowers are and will remain in compliance with the terms and
conditions of all such
permits, licenses and authorizations, and is and will remain in
compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations,
schedules and timetables contained in any applicable Environmental
Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice
or demand letters
issued, entered, promulgated or approved thereunder. No notice,
notification, demand,
request for information, citation, summons or order has been
issued, no complaint has been
filed, no penalty has been assessed and no investigation or review
is pending or threatened
by any governmental or other entity (a) with respect to any alleged
failure by the
Borrowers to have any permit, license or authorization required in
connection with the
conduct of the business of the Borrowers, or (b) with respect to
any generation, treatment,
storage, recycling, transportation, release or disposal, or any
release as defined in 42
U.S.C. 9601(22) ("Release"), of any substance regulated under
Environmental Laws
("Hazardous Material") generated by the Borrowers. No oral or
written
89
<PAGE>
notification of a Release of a Hazardous Material has been filed by
or on behalf of the
Borrowers and no property now or previously owned or leased by the
Borrowers is listed or
proposed for listing on the National Priorities List under the
Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on
any similar state list
of sites requiring investigation or clean-up. There are no liens
arising under or pursuant
to any Environmental Laws on any of the real property or properties
owned or leased by the
Borrowers and no governmental actions have been taken or are in
process which could subject
any of such properties to such liens such that the Borrowers would
be required to place any
notice or restriction relating to the presence of Hazardous
Materials at any property owned
by it in any deed of such property.
21. Remedies Cumulative. Each right, power and remedy of the
Bank hereunder, under
the Loan Documents or now or hereafter existing at law or in equity
by statute or other
applicable laws shall be cumulative and concurrent, and the
exercise of any one or more of
them shall not preclude the simultaneous or later exercise by the
Bank of any or all such
other rights, powers or remedies. No failure or delay by the Bank
to insist upon the
strict performance of any one or more provisions of this Note or of
the Loan Documents or
to exercise any right, power or remedy consequent upon a breach
thereof or default
hereunder shall constitute a waiver thereof, or preclude the Bank
from exercising any such
right, power or remedy. By accepting full or partial payment after
the due date of any
amount of principal of or interest on this Note, or other amounts
payable on demand, the
Bank shall not be deemed to have waived the right either to require
prompt payment when due
and payable of all other amounts of principal of or interest on
this Note or other amounts
payable on demand, or to exercise any rights and remedies available
to it in order to
collect all such other amounts due and payable under this Note.
22. Choice of Law; Consent to Jurisdiction. This Note shall
be governed by, construed
and interpreted in accordance with the laws of the State of North
Carolina (excluding the
choice of law rules thereof). The Borrowers and all other Obligors
signing this Note
hereby irrevocably submit to the non-exclusive jurisdiction of any
state or federal court
sitting in the State of North Carolina in any action or proceeding
arising out of or
relating to this Note, and hereby irrevocably waive any objection
they may have to the
laying of venue of any such action or proceeding in any such court
and any claim they may
have that any such action or proceeding has been brought in an
inconvenient forum. A final
judgment in any such action or proceeding shall be conclusive and
may be enforced in any
other jurisdiction by suit on the judgment or in any other manner
provided by law.
23. Service of Process. The Borrowers and each Obligor who
signs this Note hereby
consents to process being served in any suit, action or proceeding
instituted in connection
with this Note by the mailing of a copy thereof by certified mail,
postage prepaid, return
receipt requested, to Borrowers and such Obligor. The Borrowers
and each Obligor who signs
this Note hereby irrevocably agrees that such service shall be
deemed to be service of
process upon the Borrowers and such Obligor in any such suit,
action or proceeding.
Nothing in this Note shall affect the right of the Bank to serve
process in any other
manner otherwise permitted by law and nothing in this Note will
limit the right of the Bank
otherwise to bring proceedings against the Borrowers or any Obligor
in the courts of any
other jurisdiction or jurisdictions.
24. Notice. Any notice, demand, request or other
communication which the Bank or any
Obligor may be required to give hereunder shall be in writing, and
shall be given: (a) by
hand-delivery; (b) by facsimile transmission; (c) by commercial
overnight courier; or (d)
by United States regular mail, postage prepaid. Such notice,
demand, request or other
communication shall be addressed as follows, or to such other
addresses as the parties may
designate by like notice:
90
<PAGE>
If to the Obligor:
See Exhibit A
If to the Bank:
__________________________
__________________________
__________________________
Facsimile Number: (___) __________
ATTENTION: William White
Any communication hereunder will be deemed given and
effective (f) when actually
received, in the case of hand delivery, (g) when deposited in the
United States mail or
with such courier, in the case of first class mail or overnight
courier, or (h) when
completely sent and received, as evidenced by a transmission report
from sender's facsimile
machine, in the case of facsimile transmission.
25. Invalidity of Any Part. In the event that any of one or
more of the provisions of
this Note shall for any reason be held to be invalid, illegal or
unenforceable, in whole or
in part or in any respect, or in the event that any one or more of
the provisions of this
Note operate or would prospectively operate to invalidate this
Note, then and in any of
those events, the following shall occur: (a) the provision(s)
shall he enforced to the
fullest extent of its validity, legality and enforceability; or,
(b) if such provisions
would operate so as to invalidate this entire Note, only such
provision(s) shall be void as
though not herein contained, and the remainder of the clauses and
provisions of this Note
will remain in full force and effect. In any event, if any such
provision pertains to the
repayment of the indebtedness evidenced by this Note, then and in
such event, at the Bank's
option, the outstanding principal amount hereunder, together with
all accrued and unpaid
interest thereon, shall become immediately due and payable. In no
event shall this Note or
the Loan Documents operate to cause the payment to the Bank by the
Borrowers or any Obligor
of any amounts, whether for the use, forbearance or detention of
money or for any other
matter governed by the Loan Documents, which exceed the permitted
maximum amounts therefor
under applicable law. If for any circumstances whatsoever
fulfillment of such provision
shall be proscribed by law, than the obligation to be fulfilled
shall be reduced to the
limit of such validity.
26. Commercial Purposes. The Borrowers acknowledge and
warrant that (a) the
indebtedness evidenced by this Note and the "Obligations", as used
herein, are incurred for
the purpose of acquiring and carrying on a business or commercial
enterprise and that such
indebtedness and Obligations are "commercial loans" within the
meaning of Title 12 of the
Commercial Law Article of the Annotated Code of Maryland (1990 Rep.
Vol.), as amended, and
(b) all proceeds arising from the indebtedness and Obligations will
be used solely in
connection with such business or commercial enterprise.
27. Miscellaneous. The paragraph headings of this Note are
for convenience only, and
shall not limit or otherwise affect any of the terms hereof. Words
used herein shall be
deemed to refer to the singular, plural, masculine, feminine or
neuter as the identity of
the person or entity or the context may require. This Note and
related Loan Documents, if
any, constitute the entire agreement between the parties with
respect to their subject
matter and supersede all prior letters, representations, or
agreements, oral or written,
with respect thereto. If this Note is a renewal, extension or
modification of the terms of
any existing obligation of the Borrowers to the Bank, which
obligation is secured by an
interest in real property, the Borrowers and the Bank agree that
this Note is not intended
as a novation, but is rather intended only to renew, extend or
modify the Obligation to the
extent applicable. The Bank may, without notice to, or consent of
the Borrowers, sell,
assign, transfer or grant participations in all or any part of the
Obligations evidenced by
this Note to others at any time and from time
91
<PAGE>
to time, and the Bank may divulge to any potential assignee,
transferee or participant,
and to any affiliate or subsidiary of the Bank all information,
reports, financial
statements and documents obtained in connection with this Note and
any other Loan Documents
or otherwise. No modification, change, waiver or amendment of this
Note shall be deemed to
be made by the Bank unless in writing signed by the Bank, and each
such waiver, if any,
shall apply only with respect to the specific instance involved.
No course of dealing or
conduct shall be effective to amend, modify, waive, release or
change any provisions of
this Note or any of the other Loan Documents. In addition,
notwithstanding the entry of
any judgment under or in connection with this Note, the unpaid
balance of the principal
amount hereunder shall continue to bear interest at the applicable
rate or rates provided
for in this Note. All Obligations of the Borrowers to the Bank
shall be binding upon and
enforceable against the Borrowers and the Borrowers' personal
representatives, successors,
heirs and assigns. This Note may be executed in any number of
counterparts, all of which,
when taken together shall constitute one Note.
28. WAIVER OF JURY TRIAL. THE BORROWERS AND EACH OBLIGOR WHO
SIGNS THIS NOTE HEREBY
(i) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY A
JURY, AND (ii) WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE BANK, THE
BORROWERS AND ANY ONE OR MORE OF THE OBLIGORS MAY BE PARTIES,
ARISING OUT OF, IN CONNECTION
WITH OR IN ANY WAY PERTAINING TO THIS NOTE, ANY OF THE LOAN
DOCUMENTS AND/OR ANY
TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR
THE LACK OF ANY OF THE
FOREGOING) RELATING IN ANY WAY TO THE BORROWER-LENDER RELATIONSHIP
BETWEEN THE PARTIES. IT
IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL
CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, CLAIMS
AGAINST PARTIES WHO ARE
NOT PARTIES TO THIS NOTE. THIS WAIVER OF JURY TRIAL IS SEPARATELY
GIVEN, KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS AND EACH OBLIGOR
WHO SIGNS THIS NOTE AND
THE BORROWERS, AND EACH SUCH OBLIGOR HEREBY AGREE THAT NO
REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF
TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BANK IS HEREBY
AUTHORIZED TO SUBMIT THIS NOTE TO
ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER, THE
BORROWERS AND SUCH OBLIGOR SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY
JURY. THE BORROWERS
AND EACH OBLIGOR WHO SIGNS THIS NOTE REPRESENTS AND WARRANTS THAT
IT HAS BEEN REPRESENTED
IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WELL, AND/OR THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS
WAIVER WITH COUNSEL.
92
<PAGE>
IN WITNESS WHEREOF, the Borrower(s) have duly executed this Note
under seal as of the
day and year first hereinabove set forth. Each of the undersigned
adopts as his or her
seal the word ("SEAL") appearing beside or near his or her
signature below.
BORROWER:
[SEAL]
ATTEST/WITNESS: HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: JBL, INCORPORATED
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: HARMAN KARDON, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: HARMAN-MOTIVE, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: INFINITY SYSTEMS, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: HARMAN ELECTRONICS, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: EPICURE PRODUCTS, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
93
<PAGE>
[SEAL]
ATTEST/WITNESS: PYLE INDUSTRIES, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: DOD ELECTRONICS
CORPORATION
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: HARCO PROPERTIES, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: HARMAN INVESTMENT
COMPANY, INC.
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
[SEAL]
ATTEST/WITNESS: LEXICON, INCORPORATED
/s/ Sandra B. Robinson By: /s/ Bernard A. Girod
Name: Bernard A. Girod
Title: President
94
<PAGE>
Exhibit A
HARMAN INTERNATIONAL INDUSTRIES
1101 Pennsylvania Avenue, N.W.
Suite 1010
Washington, D.C. 20004
Fax: (202) 393-2402
JBL, INCORPORATED
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
HARMAN KARDON, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
HARMAN-MOTIVE, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
INFINITY SYSTEMS, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
HARMAN ELECTRONICS, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
EPICURE PRODUCTS, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
PYLE INDUSTRIES, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
DOD ELECTRONICS CORPORATION
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
HARCO PROPERTIES, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
HARMAN INVESTMENT COMPANY, INC.
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
LEXICON, INCORPORATED
8500 Balboa Blvd.
Northridge, CA. 91329
Fax: (818) 891-7345
95
<PAGE>
SCHEDULE A TO THE
PROMISSORY NOTE
DATED APRIL __, 1994
Name of
Principal
Person
Applicable Amount of Applicable Payment
Making
Date Currency Advance Interest Rate Principal
Interest Notation
<C> <S>
96
</TABLE>
<TABLE>
<PAGE>
EXHIBIT 13.1
97
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
98
<PAGE>
HARMAN INTERNATIONAL
1994 ANNUAL REPORT
99
<PAGE>
Harman International is a leader in the design, manufacture and
marketing of high quality, high-fidelity audio products. We are
organized in three core groups and three functional support groups.
The
core groups are Professional, Consumer and Automotive OEM. The
functional groups are Manufacturing, Marketing and Distribution.
Each of
the six concentrates on a central aspect of our business and each
is
headed by a president who, with the Chief Executive Officer and
Chief
Operating Officer of Harman International, form the Company's
management
committee.
About the front cover: The Tonhalle in Zurich, Switzerland is home
to
great classical performances. A Studer 990 digitally controlled
sound
recording and mixing console, renowned for its sonic excellence and
reliability, is superimposed in the foreground. Studer professional
products are used worldwide in many leading broadcast stations,
recording studios and performance venues.
<C> <S>
100
<PAGE>
Five Year Summary
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
- - -------
1990 1991 1992 1993 1994
- - -----------------------------------------------------------------
- - -------
(in thousands, except per share data for the fiscal years ended
June 30)
<S> <C> <C> <C> <C> <C>
Net sales $ 556,695 $ 586,941 $ 604,454 $ 664,913
$
862,147
Operating income 42,989 3,385 27,547
41,255 66,332
Income (loss) before taxes 23,011 (20,646) 5,893
18,570 42,686
Net income (loss) 14,057 (19,764) 3,487
11,246 25,664
Net income (loss) per share1.61 (2.26) 0.39
1.04 1.921]
Total assets 393,014 359,402 415,909 431,726
680,691
Long-term debt 133,476 132,809 132,675 175,583
156,577
Shareholders' equity102,003 80,781 111,241 111,149
232,021
101
<PAGE>
Letter to the Shareholders
Harman International set sales and earnings records in the fiscal
year
ending June 30, 1994. On sales of $862.1 million, the Company
produced
net income of $25.7 million equal to $1.92 per share on 13.4
million
average shares outstanding. Last year, we reported sales of $664.9
million and net income of $11.2 million equal to $1.04 per share on
10.8
million shares.
We continued the accelerated pace of sales and earnings growth
which
began in 1992-a pace which has moved Harman International into the
ranks
of the Fortune 500 and has generated substantial shareholder
support for
our Company's common stock.
Through the course of the year, we fine-tuned the reorganization
which began in fiscal 1993 and thus provided the organizational
architecture for our next decade of growth. Today, we are a defined
company, arranged in three strategic core groups to pursue the
Company's
goals. These groups are Professional, Consumer and Automotive OEM.
They
are supported functionally by the Manufacturing, Marketing and
Distributing Groups. The six group presidents join me and Bernie
Girod,
our Chief Operating Officer, to form the management committee of
the
Company and to assure cohesive, long-term leadership for Harman
International.
Each of the core groups functions to drive, inform and
illuminate the
others. Thus, the Professional Group, which is now at the forefront
of
the recording industry, provides much of the equipment which is key
to
the live concerts by performing artists and to the CD recordings
which
reproduce those performances at home. Because our brands are so
deeply
engaged in the recording and professional reproducing process,
public
awareness of them is heightened. In similar fashion, our consumer
brand
names: JBL, Infinity and Harman Kardon decorate the premium in-car
high
fidelity systems which we design and produce for the major
automobile
makers. Thus the JBL brand appears in cars manufactured by Ford,
the
Infinity label
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<PAGE>
in cars manufactured by Chrysler, Jeep and Mitsubishi and the
Harman
Kardon label in Jaguar, Range Rover and Saab. Our eminent labels
confirm
the superior performance of the premium systems and legitimize the
engagement of the auto makers in high fidelity.
Our expanding energy in the marketing of our products is
evidenced by
the major advertising campaign illustrated on page 16 of this
report.
This promotion of our automotive systems also enhances the brand
names
of our consumer and professional companies.
We expect that the steps we took in fiscal 1994 to strengthen
our
position on the professional side will produce substantial rewards
in
fiscal 1995. Today, we possess many of the most respected names in
professional audio. The combination of JBL, Soundcraft, Lexicon,
Studer,
AKG, Spirit, DOD, Digitech, UREI, dbx, Allen & Heath, BSS and
Turbosound
represents a formidable galaxy of brand names and market position
in a
field we are determined to lead. This assembly places our
Professional
Group in a unique position to serve its markets and to provide
turnkey
solutions to the increasingly complex problems in the field.
In the pages that follow, we offer further information on our
three
core groups. Principal coverage is provided for the Professional
Group
which is expected to represent over 40% of our total sales in
fiscal
1995-a fact which may come as a surprise to some of our readers.
Beyond the growing power and effectiveness of our engagement in
the
professional, consumer and automotive OEM segments of the industry,
the
past year was notable for two significant acquisitions and for
major
advances in our manufacturing capabilities around the world. In the
September 1993 acquisition of AKG and the March 1994 acquisition of
Studer, we added two world-class companies to our Professional
Group. In
AKG, we acquired one of the premier microphone makers in the world,
and
in Studer we added the
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most respected name in the arenas of recording and broadcast. Each
of
these companies has had a fabled history, but each had experienced
some
decline in recent years. We believe that their addition strengthens
our
leadership in professional audio significantly. We, in turn, will
provide the resources and guidance to restore them as leaders.
The microphone is in major technological transformation.
Wireless
is a critical dimension. Happily, we find that AKG is now possessed
of the most impressive technology in this field. And, fortunately,
we
are possessed of talent around the Company which can help AKG
greatly. Studer poses a greater challenge with a potentially
greater set
of rewards. The recording industry is moving through seascape
technological change. Analog is being replaced by digital; tape by
tapeless machines. Although these changes create understandable
short-
term uncertainties in the marketplace, they herald the coming of
powerful new activity. Our job is to harness the unique history,
skills
and reputation of Studer so that the Company can convert market
uncertainty into market leadership.
We strengthened the Consumer Group when we acquired AudioAccess
this
year and, through an investment, acquired a minority equity
position in
Madrigal Laboratories. With that investment we obtained an option
to
purchase the balance of the company and with it, complete control
of its
Mark Levinson division. We have distributed Mark Levinson in Japan
for
years, and know it to be the leading electronics brand at the high
end
of high fidelity. We have thus taken a strong step to secure our
position across the full high-fidelity spectrum.
This report illustrates products designed and built to respond
to
real consumer needs-products which reject the arrogant view that
one's
technological ability to produce something is reason enough to make
it.
We are determined to produce products which are justified by the
fact
that they respond to real needs of real people.
In last year's report, I spoke of our determination to move from
a
"better mouse trap" company to a world-class marketing company. You
remember the old saw that "if you build a better mouse trap the
world
will beat a path
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to your door." However valid it may have been at one time, it is
evident
today that paraphrasing an old adage, "the world is from Missouri,"
and
it needs to be shown. We intend to show it.
Fiscal 1994 was also a year that dramatized our conviction that
in
our people, we hold the secret to truly impressive advances in
productivity, competitiveness and profitability. Programs such as
the
Senior Executive Service and OLE (Off-Line Enterprises) which we
reviewed in last year's report were vigorously pursued through the
year.
The commitment of each of our senior executives to serious time on
the
production lines has equipped each of us with a far better
understanding
of the production process, and has established close relationships
between the managers and those they manage in our Company.
OLE, as you know, is a series of programs designed to create a
pool
of serious and dignified jobs into which our people can move if and
when
they become redundant because of their own efforts to increase
productivity. By creating the reservoir and investing in the
training of
our people, we have added to a substantial existing pool of
goodwill.
The value of that goodwill was never better expressed than after
the
earthquake that shattered Northridge, California on January 17,
1994.
Our workers were heroic in their response and the plant was
restored in
astonishingly quick order. Those who have visited the Northridge,
California plant since its restoration will agree that it is more
effective in appearance and performance today than before the
quake.
Such a response would not have been possible but for the high level
of
mutual goodwill at the Company. We intend to build on it and to
provide
increased security for our employees and increased returns for our
shareholders.
Sincerely,
/s/ Sidney Harman
Sidney Harman
Chairman & Chief Executive Officer
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Results of Operations
We achieved record results in fiscal 1994. Sales increased 30% to
$862.1
million. Income before taxes more than doubled from $18.6 million
to
$42.7 million; earnings per share increased 85% to $1.92 per share.
Our
balance sheet was strengthened significantly through the issuance
of
4.025 million shares of common stock in November 1993, increasing
shareholders' equity by $87.5 million and reducing debt by a like
amount. At year end, our equity exceeded total short-term and
long-term
debt. By contrast, last year the Company's debt equaled 1.9 times
shareholders' equity.
In September 1993, the Company acquired a 76% interest in AKG,
a
leading manufacturer of microphones and headphones headquartered in
Vienna, Austria. We acquired the remaining 24% on favorable terms
in
July 1994. In March 1994, the Company acquired Studer-Revox, a
renowned
manufacturer of professional recording and broadcast equipment.
With
these additions, we believe that Harman International has become
the
leading professional audio company in the world.
Our principal operating groups performed very well. The
Professional
Group, which represented 39% of our total sales in fiscal 1994,
recorded
significant gains in sales and earnings. Its JBL Pro and Soundcraft
divisions saw substantial expansion in the year, particularly in
international markets. Sales in China and the rest of Asia were
particularly brisk. DOD Electronics, Lexicon and AKG also
contributed
positively to operating results.
The Consumer Group accounted for 38% of total sales in fiscal
1994.
Its operating profit increased 37% over the previous year. These
results
were achieved through an 18% growth in sales and impressive
penetration
of emerging new markets. JBL and Infinity each recorded sales
growth of
approximately 25%. JBL's new SoundEffects line, a versatile modular
home
theater loud-speaker system, was a great success in its first year
of
introduction in the U.S. It will be introduced in international
markets
in fiscal 1995. Infinity had a number of very successful product
introductions: the "Sterling" and "Crescendo" models at Circuit
City,
the "SL" model at Best Buy and the Epsilon audiophile product
worldwide.
Harman Kardon's new Festival model was introduced in
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Europe to great critical acclaim. Pyle's sales and earnings
rebounded
sharply in the second half after a slow first half.
Sales of the Automotive OEM Group rose over 40%. Infinity
branded
premium systems were introduced in the Jeep Grand Cherokee, several
Dodge truck lines and certain Mitsubishi models, including the 3000
GT.
Sales of our systems in the continuing Ford Explorer, Chrysler
Minivan
and LH increased at a robust pace. This fall, the Automotive Group
will
supply Harman Kardon systems for the new Jaguar X-300, the Saab
9000 and
the Range Rover.
The Manufacturing Group performed superbly despite the severe
damage
caused by the January earthquake. It made a substantial
contribution to
total profits through volume increases and the implementation of
manufacturing improvements. The International Distributing Group
had a
difficult year as a result of the poor economic conditions and
currency
disruptions in the markets in which it operates.
Although the Company's balance sheet was strengthened
significantly
through our equity offering in November, working capital
performance
slipped somewhat. The Company's inventories are valued
conservatively
and all appropriate reserves have been provided. Nonetheless, we
believe
our inventory levels are too high. We are taking aggressive
corrective
action, and intend to reduce inventories by mid-year despite
expected
sales increases. Capital expenditures totaled $40.7 million. In
fiscal
1995, we expect capital expenditures to total $45 million. Our
capital
projects generally enjoy attractive returns and short payback
periods.
We are pleased with the results we achieved in fiscal 1994 and
look
forward to an excellent fiscal 1995.
/s/ Bernard A. Girod
Bernard A. Girod
President and Chief Operating Officer
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PICTURE
108
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World Class Marketing
MARGIN NOTE: The intensity of our marketing reflects the wide
diversity
of the products themselves. Our focus is: emphasize the strengths
of the
individual brands while clearly linking them to Harman
International's
reputation for the highest quality standards and sonic excellence.
In earlier reports, we spoke of our commitment to convert Harman
International from a traditional "better mousetrap" company,
convinced
that if it made the right product, customers would somehow beat a
path
to our door. That conversion, we said, must be to a world-class
marketing company with emphasis on creating demand rather than the
more
familiar practice of "pushing" the product to the customer.
Stimulated by the way in which we organized ourselves to do
business,
we have made substantial progress during the course of the year.
Through
the creation of the Professional Group, the Consumer Group and the
Automotive OEM Group we have made it possible, for the first time,
to
engage in integrated marketing activities which are at once
coherent
within the Groups and mutually supportive among them.
This report is illustrated with copies of advertisements
produced by
the Groups. They are, of course, only representative of our larger
and
increasing presence in the printed media, on billboards across the
country and on selected television. We are also initiating a series
of
advertisements to increase awareness of our branded in-car high
fidelity
systems among automotive buyers. We had previously left promotion
of
those systems to our clients, the auto makers.
We see vast new opportunities in emerging markets. China,
Vietnam,
India and the developing nations of Latin and South America are
fertile
markets for each of our three Groups - and we will cultivate them
vigorously. Through concerts, seminars and other promotional
activities,
we intend to make our brand names widely recognized in each of
these
potentially enormous marketplaces.
Our Company was built on engineering excellence and a commitment
to
quality. We will never lose that focus. In the past two years, we
have
brought our manufacturing competence and efficiency to a very high
level. Now it is our purpose and our commitment to expand our focus
to
one of equivalent intensity and professionalism in marketing.
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PICTURE
110
<PAGE>
MARGIN NOTE: Our Professional Group brand names: JBL, Soundcraft,
Spirit, Studer, Studer Dyaxis, AKG, DOD, Digitech, Lexicon,
Turbosound,
Orban, BSS, dbx, UREI, Allen & Heath, Audio Logic, Precision
Devices and
Quested.
The professional audio market is complex and diverse; a mixture of
large
homogeneous sectors and fragmented niches. It has clients who seek
the
convenience of a systems solution and others who wish to be served
by
one company and one product. It encompasses the unknown musician
aspiring to greatness and the digital multi-track recording studio
where
greatness, already achieved, is mixed and mastered for public
consumption. It stretches from a self-operated radio station in the
Australian outback to the digital production suites of the BBC
studios
in London and the film studios in Hollywood. Above all it is a
market
driven by technology, but still somewhat uncertain about the
direction
that technology will take.
This adds up to either confusion or opportunity. It takes a
special
kind of company to cope with that diversity, to identify the
opportunities and to exploit them. The Harman Professional Group is
a
unique collection of just such companies. It includes many of the
most
respected names in the professional audio world; names which have
helped
to shape the industry - names representing quality and technical
excellence. All have transcended mere product and company
boundaries to
become world class brands. In loudspeaker design: JBL and
Turbosound. In
mixer technology: Soundcraft, Spirit and Allen & Heath. In signal
processing: DOD, Lexicon, BSS and dbx. Our Professional Group also
includes companies which produce unique products for special
niches.
Orban, for example, provides a highly specialized audio processor
for
the radio broadcast market.
The acquisition of AKG in September 1993 and of Studer in March
1994
brought additional prestige brands to our professional portfolio.
They
complete our audio chain by providing the highest quality
microphones
and world renowned recording and storage devices.
But the strength of our Professional Group does not lie simply
in its
impressive list of products. It is derived from the way in which
the
talent and innovation in our operating units have been harnessed.
For
example, the
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PICTURE
112
<PAGE>
MARGIN NOTE: Our Professional Group alliances focus on each of the
major markets we serve: Sound Reinforcement, Musical Instrument
Support
and Broadcast and Recording.
extraordinary advances made in the digital field by Studer's
research
engineers, combined with the digital signal processing (DSP) work
underway at our DOD, Lexicon, BSS and Soundcraft units have
generated
new digital products which will come to market during the new
fiscal
year.
Pulling together the diverse talents and skills in our
Professional
Group is no easy task. This is not a loose federation of
independent
companies. They share a vision of the future and work together to
achieve common goals. To release the energy of each company, we
have
created three Alliances, each focused on one of the major markets
we
serve.
The first is the Sound Reinforcement Alliance, devoted to
developing
products and services for tour sound, theaters, installed sound
systems
and cinema. Its members include JBL, Soundcraft, Turbosound, BSS
and
AKG. Each holds a strong position in the market, but each
participates
in sharing market knowledge and technology with its colleagues.
The Musical Instrument Support Alliance is led by DOD and Spirit
with
support from dbx and Allen & Heath. Committed to the development of
new
products for sale through music stores around the world, the
Musical
Instrument Support Alliance will be one to watch for speed to
market,
for product innovation and for eye-catching promotions.
The third Alliance is most exciting. Dedicated to the recording
and
broadcast markets, it gathers the digital and systems expertise of
Studer, Studer Dyaxis and Lexicon to create technology standards
for a
new generation of broadcast and recorded products. Here, the
increasing
complexity and diversity of system components demand an integrated
solution. Within this Broadcast and Recording Alliance, we can
offer a
networking system which provides central control of audio
processing.
Thus, our Numysis system provides central control of all functions
from
the scheduling of CD playlists through advertising and billing to
clients.
Our Professional Group responds to the diversity and complexity
of
the markets it serves by blending the individual strengths and
qualities
of the operating units with the combined resources of the full
Group. We
believe this to be unique in the industry and a platform for
continued
growth in sales and profitability.
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PICTURE
114
<PAGE>
MARGIN NOTE: Our Consumer Group brand names: JBL, Infinity, Harman
Kardon, Pyle, AudioAccess, Fosgate and Concord.
The past year was one of great change in our consumer business. We
gathered JBL Consumer, Harman Kardon and Infinity into a single,
coherent group, so as to harness, effectively, the substantial
strengths
of our market leading brands. We created the Consumer Group to meet
the
challenge of sweeping transformation in the consumer electronics
business. That transformation can be characterized as a shift from
the
selling of products derived from "technology for its own sake" to
interpreting the needs of consumers and providing customer
satisfying
solutions. The Harman Consumer Group has redirected its energy from
"selling-in" to "selling-through."
Our newest programs address key and still evolving customer
demand
patterns. JBL's SoundEffects, for example, is a fifteen-product
line,
designed to respond to the needs of the emerging A/V market. It
encourages customers to begin with a first-class music system and
to
grow by reasonable steps to a complete wireless surround-sound home
cinema system.
Infinity's new Epsilon loudspeaker system represents a leap in
high-
end loudspeaker performance. Harman Kardon's Festival, an elegant,
simple-to-use system for home and office, brings high fidelity
component
performance to the mini-system category. It has won the U.S.
Electronic
Industry Association's "Innovations Award." It has won the
prestigious
"Red Dot" design excellence award in Germany and the "European
Compact
System of the Year" award from the leading audio and video magazine
of
13 countries in Europe.
Each of the members of the Consumer Group is actively involved
in the
emerging surround-sound, multi-channel and home theater fields.
Each is
developing special skills in merchandising at the retail level. We
are
training a cadre of "young tigers" to become the industry's leading
merchandising force and to help our dealers implement creative
merchandising techniques.
Beyond the Group's commitment to product and market solutions,
we see
major growth opportunities in emerging markets around the world.
China,
South America, Vietnam and India hold substantial promise for the
innovative thinking and customer-centered products to which we are
committed.
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PICTURE
116
<PAGE>
MARGIN NOTE: Our Automotive OEM brand names: Infinity, JBL and
Harman Kardon
The Automotive OEM Group is experiencing substantial growth, fueled
by the
extension of our audio systems into the light truck market and by
a dramatic
increase in our worldwide customer base. The automobile has become
the final
refuge for the enjoyment of high quality music reproduction.
As a consequence, growing numbers of consumers are making
automobile
purchase decisions, strongly influenced by the available sound
system. This
relatively new phenomenon is catching on. Approximately 6 percent
of the 15
million vehicles produced in the United States this past year were
equipped
with such premium branded systems. We provide a majority of the
total, and
there is impressive opportunity for significant growth.
In North America, our Infinity sound systems are available on
virtually all
Chrysler models: the very successful new Grand Cherokee, the Dodge
Intrepid,
Eagle Vision, Chrysler Concorde, Chrysler New Yorker and Chrysler
LHS. The new
Chrysler Minivan, scheduled for introduction next year, will
feature the all
new Infinity Acoustic 10 System. JBL's excellence in professional
and consumer
audio is manifest in the impressive Ford JBL system, available in
the
Continental, the Mark VIII, Crown Victoria, Town Car, Windstar,
Taurus and the
very successful Explorer.
The Infinity systems available on Mitsubishi's high performance
3000 GT and
its upscale Diamante have been very successful. New systems will be
featured
on the Eclipse and the Galant this year.
A Harman audio system will be available for the first time on a
Toyota
vehicle this autumn. The all-new Avalon, slated to be Toyota's U.S.
produced
flagship vehicle, will offer a high-end music system designed and
produced by
Harman Motive.
In Europe, we were awarded the system worldwide for BMW's
3-Series. It will
be introduced in the 1996 model year. Further, the legendary Harman
Kardon
brand will appear on the new Range Rover, Saab and Jaguar systems.
We are buttressed against the traditionally cyclical nature of
the
automotive industry; first by the growing number of our clients.
Second, and
perhaps more important, less than 3 percent of cars and light
trucks produced
worldwide are equipped with such branded systems. We are confident
that the
percentage will grow substantially over the next decade.
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PICTURE
118
<PAGE>
Harman Worldwide
MARGIN NOTE: Approximately 55% of our sales are effected outside
of the
United States. We do not think in terms of export; rather, we
address
the strategic and emerging markets of the world through an active
presence. Opposite page: the market place in Pan Yu, southern
China. A
vivid and accelerating market for JBL and other Harman products
currently exists in the Far East. We believe this market will grow
and
others will proliferate.
Corporate Offices Washington, D.C. and California
Primary Groups
Professional Group
AKG Acoustics Austria and India Precision Devices
England
Allen & Heath England Quested
England
BSS Audio England Soundcraft Electronics
England
dbx Utah Spirit by Soundcraft
England
DOD Electronics Utah Studer Digitech
France
JBLProfessional California Studer Editech
California
and Tennessee
Lexicon Massachusetts Studer Professional Audio
Switzerland
Orban California Turbosound
England
Consumer Group
AudioAccess California JBL Consumer California
and
New York
Fosgate California and Utah Phoenix Systems
California
Harman Kardon California and New York Pyle
Indiana
Infinity Systems California
Automotive OEM Group
Harman Motive California, Indiana, Michigan and Wales
Support Groups
Manufacturing Group
Audax France Northridge Manufacturing
California
Lydig of Scandinavia Denmark Polydax
Massachusetts
Distributing Group
AKG Acoustics Germany Harman France France
Harman Audio England Harman Japan Japan
Harman Belgium Belgium Studer Professional Audio
Harman Deutschland Germany Canada, Germany,
Singapore, Japan
Marketing Group
Harman Marketing Asia Japan,Singapore Harman Marketing
Intercontinental
Harman Marketing China Hong Kong California
Harman Marketing Europe Denmark
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Financial Information Table of Contents
Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Consolidated Financial Statements
Balance Sheets 24
Statements of Operations 25
Statements of Cash Flows 26
Statements of Shareholders' Equity 27
Notes to Consolidated Financial Statements 28
Independent Auditors' Report 35
Statement of Management Responsibility 36
Shareholder Information 36
Officers and Directors inside back
cover
Annual Meeting inside back cover
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Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Results of Operations
Net sales for fiscal 1994 increased by 29.7 percent to $862.1
million from the
fiscal 1993 level of $664.9 million and in fiscal 1993 increased by
10.0 percent
from fiscal 1992 sales of $604.5 million. The sales increase in
fiscal 1994
primarily reflects the sales growth of the Professional Group, the
Consumer Group
and the Automotive OEM Group. The sales increase in fiscal 1993 was
primarily driven
by the performance of the Automotive OEM Group and the Consumer
Group.
The sales increase at the Professional Group in fiscal 1994
reflects the
contributions of AKG, our Austrian microphone manufacturer acquired
in September
1993, and Studer Revox acquired effective January 1, 1994. Strong
sales of JBL and
Soundcraft products also generated increases. Contributing to the
growth at
Soundcraft was the success of the Spirit line of mixing consoles.
Higher sales at
JBL reflect increased activity in both domestic and international
markets, including
significant growth in China and other emerging Asian markets.
Sales increases were also reported at the Consumer Group in
fiscal 1994, most
significantly at JBL, Infinity and Harman Kardon. Sales of the
Infinity Sterling and
Crescendo loudspeaker models at Circuit City, the Infinity SL
loudspeaker line at
Best Buy and the Epsilon audiophile product worldwide have
contributed substantially
to fiscal 1994 results.
Sales increases at the Automotive OEM Group were fueled by
Harman Motive which
reported higher sales in fiscal 1994 to the automobile
manufacturers. Contributing
to the growth were the successful introduction of the Infinity Gold
premium audio
system in the Jeep Grand Cherokee, the success of the Chrysler LH
automobile line
and several Dodge truck lines in which Chrysler/Infinity premium
systems are
installed and increased shipments of Infinity systems to
Mitsubishi. Strong sales of
the Ford Explorer, in which the Ford/JBL premium sound system is
installed, also
contributed to improved performance.
The International Distributing Group continues to focus on the
distribution of
products manufactured by the Company's divisions. The International
Distributing
Group reported lower sales for fiscal 1994 due to the Company's
decision to
discontinue the distribution of Maxell tapes at Harman Deutschland,
which accounted
for approximately 6% of consolidated Company sales in fiscal 1993.
Harman
Deutschland provided administrative support for Maxell, on a fee
basis, in fiscal
1994 while continuing to increase its focus on the distribution of
products
manufactured by the Company. Excluding the Maxell sales, fiscal
1994 International
Distributing Group sales approximated the prior year despite the
difficult economic
conditions in Europe and Japan.
Overall, the Company's consolidated net sales are not materially
impacted by
seasonality. However, the first fiscal quarter is usually weakest
due to the July
and August holidays in Europe and the Automotive OEM model
changeovers. Variations
in seasonal demands among end-user markets may cause operating
results to vary from
quarter to quarter.
The gross profit percentage in fiscal 1994 was 31.2 percent,
compared to 28.7
percent in fiscal 1993 and 27.2 percent in fiscal 1992. The
increase in gross profit
percentage in fiscal 1994 reflects operating leverage and favorable
product mix at
the Automotive OEM Group, and substantial improvements in
manufacturing efficiencies
at the Northridge, California and Audax (France) manufacturing
operations. The
increase in fiscal 1993 was primarily due to improved gross profit
margins at the
Automotive OEM Group, with improvements in the Company's domestic
manufacturing
operations also contributing to the increase.
Selling, general and administrative expenses as a percentage of
sales were 23.5
percent in fiscal 1994 compared with 22.5 percent in fiscal 1993
and 22.7 percent in
fiscal 1992. The fiscal 1994 increase in selling, general and
administrative
expenses reflects the impact of increased marketing costs
associated with the
implementation of the Harman Marketing Units offset by cost savings
in overhead
personnel realized through the company-wide operating expense
reduction program
initiated in fiscal 1993.
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Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
Operating income as a percentage of net sales was 7.7 percent
for fiscal 1994
compared with 6.2 percent for fiscal 1993 and 4.6 percent for
fiscal 1992. The
increase for fiscal 1994 resulted primarily from the increase in
gross profit
percentage, and the increase in fiscal 1993 resulted from higher
gross profit
percentage combined with reduced selling, general and
administrative expenses.
Interest expense in fiscal 1994 was $22.1 million compared with
$23.6 million in
fiscal 1993 and $21.1 million in fiscal 1992. Interest expense
decreased in fiscal
1994 despite increased levels of average borrowings due to a
decrease in the
weighted average interest rate. Fiscal 1994 average borrowings were
$222.8 million
compared with $215.5 million in fiscal 1993 and $204.3 million in
fiscal 1992. The
increase in average borrowings in fiscal 1994 primarily results
from debt assumed in
fiscal 1994 acquisitions offset by the proceeds of the November
1993 equity
offering.
The weighted average interest rate in fiscal 1994 was 9.9
percent, compared with
10.9 percent in fiscal 1993 and 10.3 percent in fiscal 1992. The
decrease in average
interest rates in fiscal 1994 reflects the impacts of the Company's
re negotiation
of its domestic short-term lines of credit and lower interest rates
on debt assumed
in fiscal 1994 acquisitions. Fiscal 1994 interest expense as a
percentage of net
sales was 2.6 percent, down from 3.5 percent in fiscal 1993 and
1992.
In fiscal 1994 the Company reported income before income taxes,
minority interest
and extraordinary items of $42.7 million, compared with $18.6
million in fiscal 1993
and $5.9 million in fiscal 1992.
In fiscal 1994 the Company reported income tax expense of $16.2
million,
reflecting an effective tax rate of 38.1 percent. This compares
with an income tax
expense of $7.3 million and an effective rate of 39.4 percent in
fiscal 1993. The
fiscal 1992 tax provision was $2.4 million with an effective tax
rate of 40.8
percent. The effective tax rates in all years are above the U.S.
statutory rate
primarily due to higher effective tax rates at the international
subsidiaries and
state income taxes.
The Company reported an extraordinary charge, net of a related
tax benefit, of
$748,000 in the second quarter of fiscal 1994 associated with the
extinguishment of
$25.0 million of debt through an in-substance defeasance of the
10.08% $25.0 million
Series A Senior Notes, due September 30, 1994.
Net income for fiscal 1994 was $25.7 million compared with $11.2
million in
fiscal 1993 and $3.5 million in fiscal 1992.
Financial Condition
Liquidity and Capital Resources
Harman International primarily finances its working capital
requirements through
cash generated by operations, short-term lines of credit and normal
trade credit.
The Company recently began negotiations with its banks to
establish a $200
million committed credit facility to replace its uncommitted lines
of credit.
Although there can be no assurance that negotiations will be
completed successfully
on terms acceptable to the Company, the Company currently believes
that the facility
will be established by the end of September 1994.
At June 30, 1994, the Company maintained unsecured, domestic
short-term lines of
credit of $73.3 million and had outstanding indebtedness of $17.8
million under
these lines of credit. The indebtedness at June 30, 1994 bears
interest, at the
option of the Company, at either (i) the prime rate of the lending
bank, or (ii) the
London Interbank Offered Rate of the lending bank plus .75 percent,
and is payable
upon demand.
At June 30, 1994, the Company's international subsidiaries
maintained unsecured
short-term lines of credit of $90.0 million and had outstanding
indebtedness of
approximately $45.3 million thereunder. This indebtedness is
payable upon demand and
bears interest at the corporate base rate of the lending bank plus,
in some cases,
additional basis points.
In November 1993, the Company issued 4,025,000 shares of common
stock, using the
net proceeds of $87.5 million to repay short- and long-term debt.
122
<PAGE>
Capital expenditures were $40.7 million in fiscal 1994, compared
with $25.6
million in fiscal 1993 and $21.0 million in fiscal 1992.
Expenditures in fiscal 1994
were primarily for new product tooling and machinery and equipment
required to
increase manufacturing capacity. Expenditures in fiscal 1993 were
principally for
new product tooling, quality improvements, cost reduction programs
and systems
improvements.
The Company anticipates capital expenditures of approximately
$45 million during
the next fiscal year. Firm commitments of approximately $3.7
million existed as of
June 30, 1994 for capital expenditures during fiscal 1995. The
Company anticipates
that a portion of these capital expenditures will be financed
through lease
financing arrangements.
Net working capital at June 30, 1994 was $215.9 million compared
with $147.5
million at June 30, 1993. The increase is primarily due to the
impacts of the fiscal
1994 acquisitions of AKG and Studer and the repayment of short-term
borrowings with
the proceeds of the November 1993 common stock offering.
Inventories increased to $238.1 million at June 30, 1994 from
$137.2 million at
June 30, 1993. Of this increase, $41.1 million results from the
acquisitions of AKG
and Studer, and the balance reflects higher inventory levels
required to support
increased sales volumes and new product introductions as well as
the effect of the
Northridge, California earthquake on inventory management systems
and processes. The
Company believes inventory levels at June 30, 1994 are too high and
plans to reduce
inventories by mid-year, despite expected sales increases.
Shareholders' equity was $232.0 million at June 30, 1994
compared with $111.1
million at June 30, 1993 and $111.2 million at June 30, 1992.
Foreign currency
translation produced a positive adjustment of $5.5 million in
fiscal 1994, a
negative adjustment of $11.9 million in fiscal 1993 and a positive
adjustment of
$8.0 million in fiscal 1992.
Certain of the Company's subsidiaries may be subject to exchange
controls or
local bank agreements which may restrict the non domestic transfer
of funds from
these subsidiaries.
Acquisitions
In September 1993, the Company acquired 76 percent of AKG, a
designer and
manufacturer of high-quality microphones, audio headphones and
other professional
audio equipment, for 76 Austrian schillings (approximately U.S.
$7.00) and assumed
post-acquisition bank indebtedness of approximately 282 million
Austrian schillings
(approximately U.S. $24.5 million). In July 1994, the Company
acquired the remaining
minority interest in AKG for 41 million Austrian schillings
(approximately U.S. $3.7
million).
In March 1994, the Company acquired Studer Revox AG, effective
January 1, 1994,
for 100 Swiss francs (approximately U.S. $70.00) and assumed
post-acquisition
indebtedness of approximately 23 million Swiss francs
(approximately U.S. $16
million). Studer is a leading company in the professional audio
field with
particular strength in the recording and broadcast areas.
Effects of Inflation and Currency Exchange Rates
The Company maintains significant assets and operations in Germany,
the United
Kingdom, France, Denmark, Austria, Switzerland and Japan. As a
result, it has direct
and continuing exposure to foreign currency gains and losses. The
Company hedges a
portion of its foreign currency exposure by incurring liabilities,
including bank
debt, denominated in the local currencies of those countries where
its subsidiaries
are located.
The Company purchases some of its Harman Kardon electronic
products at prices
denominated in Japanese yen. The international subsidiaries of the
Company also
purchase certain products in prices denominated in Japanese yen, as
well as German
marks, Danish kroner, Austrian schillings, Swiss francs and U.S.
dollars. As a
result of its procurement of products in multiple currencies, the
Company may be
exposed to cost increases relative to local currencies in the
markets in which it
sells. To mitigate such adverse trends, the Company enters into
forward purchasing
contracts and other hedging activities, as appropriate.
A portion of the Company's revenues and earnings relates to
loudspeaker products
made in the U.S. and sold abroad. As a result, sales of such
products are somewhat
dependent on the value of the U.S. dollar relative to other
currencies. Any long-
term strengthening of the U.S. dollar could have an adverse effect
on these sales.
Competitive conditions in the Company's markets may limit its
ability to increase
the prices of its products in the face of adverse currency
movements; however, due
to the multiple currencies involved in the Company's business and
the netting effect
of various simultaneous currency transactions, the Company's
foreign currency
positions are partially offsetting.
123
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND JUNE 30, 1993
($000s omitted except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
1994
1993
-----------
----------
<S> <C>
<C>
ASSETS
Current assets
Cash and short-term investments $ 9,724
2,179
Receivables (less allowance for doubtful
accounts of $10,241 in 1994 and $3,435
in 1993) 206,801
127,648
Inventories (note 2) 238,095
137,191
Other current assets 35,202
21,803
-----------
----------
Total current assets 489,822
288,821
Property, plant and equipment, net (notes 3,5 and 6) 138,555
103,058
Excess of cost over fair value of assets
acquired (less accumulated amortization of
$6,543 in 1994 and $5,476 in 1993) 34,360
30,244
Other assets 17,954
9,603
-----------
----------
Total assets $ 680,691
431,726
===========
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable (note 4) $ 63,140
33,379
Current portion of long-term debt (note 5) 6,114
4,383
Accounts payable - trade 91,516
54,375
Accrued liabilities 102,353
45,891
Income taxes payable 10,821
3,301
-----------
----------
Total current liabilities 273,944
141,329
Senior long-term debt (note 5) 41,577
60,583
Subordinated long-term debt (note 5) 115,000
115,000
Other non-current liabilities 8,514
--
Deferred income 2,372
3,665
Minority interest 7,263
--
Shareholders' Equity (notes 5,7 and 8)
Preferred Stock, $.01 par value. Authorized
5,000,000 shares; none issued and outstanding --
--
Common stock, $0.01 par value. Authorized
50,000,000 shares, issued and outstanding
15,068,027 in 1994; authorized 15,000,000
shares, issued and outstanding 10,859,957
in 1993 151
109
Additional paid-in capital 143,144
53,453
Equity adjustment from foreign
currency translation 392
(5,083)
Retained earnings 88,334
62,670
-----------
----------
Net shareholders' equity 232,021
111,149
-----------
----------
Commitments and contingencies (notes 6, 13 and 14)
Total liabilities and
shareholders' equity $ 680,691
431,726
===========
==========
See accompanying notes to consolidated financial statements.
124
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
($000s omitted except share and per share amounts)
</TABLE>
<TABLE>
<CAPTION>
1994 1993
1992
---------- ----------
- - ----------
<S> <C> <C>
<C>
Net sales $ 862,147 664,913
604,454
Cost of sales 592,985 474,350
439,832
---------- ----------
- - ----------
Gross profit 269,162 190,563
164,622
Selling, general and
administrative expenses 202,830 149,308
137,075
---------- ----------
- - ----------
Operating income 66,332 41,255
27,547
Other expenses (income)
Interest expense 22,110 23,566
21,075
Miscellaneous, net 1,536 (881)
579
---------- ----------
- - ----------
Income before income
taxes, minority interest
and extraordinary item 42,686 18,570
5,893
Income tax expense (note 9)
Federal 12,589 2,825
519
Foreign and state 3,659 4,499
1,887
---------- ----------
- - ----------
Total income tax expense 16,248 7,324
2,406
Minority interest 26 --
--
---------- ----------
- - ----------
Income before
extraordinary item 26,412 11,246
3,487
Extraordinary item, net of
income tax effect of $495 in 1994 (748) --
--
---------- ----------
- - ----------
Net income $ 25,664 11,246
3,487
========== ==========
==========
Income per common share before
extraordinary item $ 1.98 1.04
0.39
Extraordinary item, net of tax (.06) --
--
---------- ----------
- - ----------
Net income per common share $ 1.92 1.04
0.39
========== ==========
==========
Weighted average number of
common shares outstanding 13,373,497 10,825,608
8,924,799
========== ==========
=========
See accompanying notes to consolidated financial statements.
125
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
($000s omitted)
</TABLE>
<TABLE>
<CAPTION>
1994
1993 1992
----------
- - ---------- ----------
<S> <C>
<C> <C>
Cash flows from operating activities:
Net income $ 25,664
11,246 3,487
----------
- - ---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 31,210
22,959 21,871
Amortization of intangible assets 2,342
1,414 1,564
Amortization of deferred income (1,293)
(1,294) (1,294)
Changes in assets and liabilities, net of
effects from purchase of companies:
(Increase) in:
Receivables (35,566)
(12,485) (14,798)
Inventories (56,510)
(425) (30,232)
Other current assets (8,253)
(2,608) (4,363)
Increase (decrease) in:
Accounts payable - trade 14,052
(528) 9,675
Accrued liabilities 12,035
4,415 7,678
----------
- - ---------- ----------
Total adjustments $ (41,983)
11,448
(9,899)
- - ---------- ----------
- - ----------
Net cash provided by (used in)
operating activities $ (16,319)
------------
22,694 (6,412)
-------- ----------
Cash flow from investing activities:
Proceeds from sale of property, plant
and equipment 1,418
2,847 1,282
Payment for purchase of companies, net
of cash acquired 6,852
(4,697) 24
Investments in unconsolidated subsidiaries (2,500)
-- --
Capital expenditures for property, plant
and equipment (40,720)
(25,563) (21,003)
Other items, net (3,637)
(2,482) (6,357)
----------
- - ---------- ----------
Net cash used in investing activities $ (38,587)
(29,895) (26,054)
----------
- - ---------- ----------
Cash flow from financing activities:
Net borrowings (repayments) under lines of credit $ (8,007)
(30,084) 8,531
Proceeds from issuance of long-term debt 7,559
76,112 2,485
Repayments of long-term debt (32,309)
(28,129) (6,460)
Proceeds from issuance of common stock 87,488
-- 18,908
Proceeds from exercise of stock options 2,245
521 80
Net change, foreign currency translation 5,475
(11,859) 7,985
----------
- - ---------- ----------
Net cash flow provided by financing activities $ 62,451
6,561 31,529
----------
- - ---------- ----------
Net increase (decrease) in cash and
short-term investments 7,545
(640) (937)
Cash and short-term investments at beginning of year 2,179
2,819 3,756
----------
- - ---------- ----------
Cash and short-term investments at end of year $ 9,724
2,179 2,819
- - ---------------------------------- ==========
========== ==========
Supplemental schedule of noncash investing activities:
Fair value of assets acquired $ 138,861
7,484 2,915
Cash paid for the capital stock 1,858
4,994 25
----------
- - ---------- ----------
Liabilities assumed $ 137,003
2,490 2,890
==========
========== ==========
See accompanying notes to consolidated financial statements.
126
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND
1992
($000s omitted)
</TABLE>
<TABLE>
<CAPTION>
Equity
Common adjustment
Net
Stock Additional from foreign
share-
$.01 par Paid-in currency
Retained holders'
value capital translation
earnings equity
-------- --------- ----------
-------- -------
<S> <C> <C> <C>
<C> <C>
Balance, June 30, 1991 $ 88 33,965 (1,209)
47,937 80,781
Issuance of common stock 20 18,888 --
-- 18,908
Exercise of stock options -- 80 --
-- 80
Foreign currency
equity adjustment -- -- 7,985
-- 7,985
Net income -- -- --
3,487 3,487
-------- --------- ----------
-------- -------
Balance, June 30, 1992 $ 108 52,933 6,776
51,424 111,241
Exercise of stock options 1 520 --
-- 521
Foreign currency
equity adjustment -- -- (11,859)
-- (11,859)
Net income -- -- --
11,246 11,246
-------- --------- ----------
-------- -------
Balance, June 30, 1993 $ 109 53,453 (5,083)
62,670 111,149
Issuance of common stock 40 87,448 --
-- 87,488
Exercise of stock options 2 2,243 --
-- 2,245
Foreign currency
equity adjustment -- -- 5,475
-- 5,475
Net income -- -- --
25,664 25,664
-------- --------- ----------
-------- -------
Balance, June 30, 1994 $ 151 143,144 392
88,334 232,021
======== ========= ==========
======== =======
See accompanying notes to consolidated financial statements.
127
<PAGE>
Notes to Consolidated Financial Statements
Harman International Industries, Incorporated and Subsidiaries
1. Summary of Significant Accounting Policies
Consolidation and Revenue Recognition Principles
The consolidated financial statements include the accounts of the
Company and
subsidiaries after the elimination of significant intercompany
transactions and
accounts.
Revenue is primarily recognized upon shipment of goods.
Where necessary, prior years' information has been
reclassified to conform to the 1994
consolidated financial statement presentation.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined
principally by the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost or, in the case
of capitalized
leases, at the present value of the future minimum lease payments.
Depreciation
and amortization of property, plant and equipment is provided
primarily using
the straight-line method over useful lives estimated from 3 to 35
years.
Amortization of leasehold improvements is provided by the
straight-line method
over the estimated useful lives of the assets or the terms of the
lease,
whichever is shorter.
Income Taxes
Effective July 1991, the Company adopted Statement of Financial
Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
Adoption of
SFAS No. 109 at June 30, 1991 did not affect income tax accounts
prepared using
SFAS No. 96. Therefore, no cumulative effect adjustment was
required for the
adoption of SFAS No. 109.
Under SFAS No. 109, a deferred income tax asset or liability is
determined by
applying currently enacted tax laws and rates to the expected
reversal of the
cumulative temporary differences between the carrying value of
assets and
liabilities for financial statement and income tax purposes.
Deferred income tax
expense is measured by the change in the net deferred income tax
asset or
liability during the year.
The Company accrues, as an expense, income taxes attributable to
the
undistributed earnings of the foreign subsidiaries. Such income
taxes are
substantially offset by foreign tax credits.
Some nondomestic subsidiaries may
be subject to exchange controls or local bank agreements which may
restrict
transfer of funds from these subsidiaries.
Net Income per Common Share
Net income per common share is based upon the weighted average
number of shares
outstanding during each period, adjusted for stock options which
are considered
common stock equivalents, when dilutive.
Foreign Currency Translation
Assets and liabilities of foreign operations are translated into
U.S. dollars
based upon the prevailing currency exchange rates in effect at the
balance sheet
date. Translation gains and losses are not included in the
determination of net
income but are accumulated in a separate component of shareholders'
equity.
Deferred Income
Deferred income, which arose principally from the sale and
leaseback of the
Northridge, California property in June 1986, is being amortized as
an offset to
rental expense over the noncancelable term of the lease.
Excess of Cost Over Fair Value of Assets Acquired
The net excess of cost over fair value of assets acquired is being
amortized
over periods not to exceed 40 years, using the straight-line
method. The Company
evaluates the recoverability of intangible assets through
comparisons of
projected cash flows from the related assets.
128
<PAGE>
Research and Development
Research and development costs are expensed as incurred. The
Company's
expenditures for research and development were $22,324,000,
$11,980,000 and
$10,689,000 for the fiscal years ending June 30, 1994, 1993 and
1992,
respectively.
2. Inventories
Inventories consist of the following:
</TABLE>
<TABLE>
<CAPTION)
June 30 ($000s omitted) 1994 1993
<S> <C> <C>
Raw materials and supplies $ 66,469 $ 38,518
Work in process 20,200 11,992
Finished goods and inventory
purchased for resale 151,426 86,681
--------- ---------
Total $238,095 137,191
========= =========
3. Property, Plant and Equipment
Property, plant and equipment are composed of the following:
</TABLE>
<TABLE>
<CAPTION>
June 30 ($000s omitted) 1994 1993
<S> <C> <C>
Land $ 4,140 $ 3,949
Buildings and improvements 56,085 42,410
Machinery and equipment 188,279 144,205
Furniture and fixtures 20,891 13,482
---------- ----------
269,395 204,046
Less accumulated depreciation
and amortization (130,840) (100,988)
---------- ----------
Property, plant and
equipment, net $ 138,555 $ 103,058
========== ==========
4. Notes Payable
At June 30, 1994, the Company had unsecured short-term lines of
credit with
various banks aggregating $163.3 million. Interest rates based on
various indices
varied from 3.0% in Japan to 19.5% in India. Unused lines of credit
were $100.2
million at June 30, 1994.
5. Long-Term Debt
The Company must comply with the terms of its long-term debt
agreements. Under the
most restrictive provisions, limited amounts of dividends may be
paid as of
June 30, 1994.
The Company's long-term debt agreements contain covenants that,
among other
things, limit the ability of the Company and its subsidiaries to
incur additional
indebtedness, create restrictions on subsidiary dividends and
distributions, limit
the Company's ability to encumber certain assets, restrict the
Company's ability
to issue capital stock of its subsidiaries and allow each holder of
the 12.0%
notes to require the Company to repurchase such notes above par
upon the
occurrence of a Change of Control, as defined in the agreements.
Interest paid for both short- and long-term borrowings was
$22,443,000,
$18,364,000 and $18,916,000 during fiscal years ended June 30,
1994, 1993 and
1992, respectively.
Long-term debt is composed of the following:
</TABLE>
<TABLE>
<CAPTION>
June 30 ($000s omitted) 1994 1993
--------- ----------
<S> <C> <C>
Series A unsecured senior
notes, due September 30, 1994,
interest payments due
semiannually at 10.08% $ -- 25,000
Series B unsecured senior notes,
due September 30, 1997, interest
payments due semiannually
at 10.4% 17,500 17,500
Senior subordinated notes,
unsecured, due December 1, 1998,
interest payments due
semiannually at 11.2% 45,000 45,000
Senior subordinated notes,
unsecured, due August 1, 2002,
interest payments due
semiannually at 12.0% 70,000 70,000
Obligations under
capital leases (note 6) 11,044 7,847
Other unsubordinated loans, due in
installments through 2012, some
of which vary with the prime
rate, bearing interest at an
average effective rate of
9.6% at June 30, 1994 19,147 14,619
--------- ---------
Total 162,691 179,966
Less current installments (6,114) (4,383)
--------- ---------
Long-term debt $156,577 $175,583
========= =========
129
<PAGE>
Notes to Consolidated Financial Statements, continued
Harman International Industries, Incorporated and Subsidiaries
In December 1993, the Company utilized funds from the November
1993 Common
Stock offering to purchase United States government securities at
a cost of $26.9
million which were deposited irrevocably with PNC Bank, N. A. to
satisfy principal
and interest payments through the stated maturity on the Company's
$25.0 million
10.08% Series A Senior Notes, due September 30, 1994. The debt and
accrued
interest thereon were removed from the balance sheet in an
in-substance defeasance transaction resulting in an extraordinary
loss, net of tax
benefit, of $748,000.
Long-term debt, including obligations under capital leases,
maturing in each of
the next five fiscal years ($000s omitted) is as follows:
1995 $6,114
1996 5,665
1997 9,418
1998 19,449
1999 46,171
Thereafter 75,874
6. Leases
The following analysis represents property under capital leases:
</TABLE>
<TABLE>
<CAPTION>
June 30 ($000s omitted) 1994 1993
--------- ---------
<S> <C> <C>
Machinery and equipment $ 40,136 $ 35,214
Less accumulated amortization (22,663) (18,646)
--------- ---------
$ 17,473 $ 16,568
========= =========
At June 30, 1994, the Company is liable for the following minimum
lease
commitments under terms of noncancelable lease agreements (the
operating lease
commitments do not reflect the offset of the amortization of
deferred income -
note 1):
</TABLE>
<TABLE>
<CAPTION>
Capital Operating
($000S Omitted) leases leases
--------- ---------
<S> <C> <C>
Fiscal year:
1995 $ 4,273 $ 14,442
1996 2,370 13,379
1997 2,098 12,494
1998 1,443 11,447
1999 821 10,766
Thereafter 3,105 31,721
--------- ---------
Total minimum lease payments 14,110 $ 94,249
Less interest (3,066) =========
---------
Present value of minimum
lease payments $ 11,044
=========
Operating lease expense, net of deferred income amortization
($1,293,000,
$1,294,000 and $1,294,000 for the years ended June 30, 1994, 1993
and 1992,
respectively) and subrental income under operating leases having
noncancelable
terms of greater than one year for the years ended June 30, 1994,
1993 and 1992
was $15,677,000, $11,329,000 and $10,544,000, respectively.
7. Capital Stock
In fiscal 1994 the total number of shares of capital stock the
Company is
authorized to issue was increased to 55,000,000, including
5,000,000 shares
authorized for $.01 preferred stock and 50,000,000 shares
authorized for common
stock. The rights, preferences and restrictions of the preferred
stock, none of
which has been issued, will be established by the Board of
Directors at the time
of issuance.
130
<PAGE>
8. Stock Option Plan
The 1992 Incentive Plan (the 1992 Plan) provides for the grant of
stock options,
stock appreciation rights in tandem with options, restricted stock
and performance
units to officers and key employees of the Company and its
subsidiaries. In
addition, the 1992 Plan provides for the automatic annual grant of
options to the
non-officer directors of the Company and for a further automatic
grant to such
non-officer directors each year in which the Company achieves a
specified level
of return on consolidated equity.
The 1992 Plan is intended to supplement the Company's 1987 Plan
(the 1987 Plan)
and to add the automatic grant feature for non-officer directors.
While both plans
remain in effect, the Compensation and Option Committee will retain
the ability to
make awards under both Plans. The 1987 Plan will be terminated upon
the grant of
awards with respect to the shares of Common Stock remaining
available thereunder.
Automatic awards to non-officer directors will only be made under
the 1992 Plan.
When the 1987 Plan is ultimately terminated, options previously
granted pursuant
to the 1987 Plan will remain outstanding and will be exercisable in
accordance
with the terms of the 1987 Plan.
Stock appreciation rights allow the holders to receive a
predetermined
percentage of the spread between the option price and the current
value of the
shares. A grant of restricted stock involves the immediate transfer
to a
participant of ownership of a specified number of shares of common
stock in
consideration of the performance of services. The participant is
entitled
immediately to voting, dividend and other share ownership rights.
A transfer of
restricted stock may be made without consideration or in
consideration of a
payment by the participant that is less than current market value,
as the
Compensation and Option Committee may determine. A performance unit
is the
equivalent of $100 and is granted for the achievement of specified
management
objectives.
No stock appreciation rights or performance units were
outstanding at June 30,
1994. Options to purchase shares of common stock have been granted
under both
Plans. Options granted are at prices not less than market value on
the date of
grant. Options granted pursuant to the 1987 and 1992 plans
generally vest over
five years and expire ten years from the date of grant.
Changes in the status of options are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30 1994 1993
1992
--------- ---------
- - ---------
<S> <C> <C> <C>
Balance at beginning
of year 625,720 781,450
516,850
Granted 553,500 63,000
292,000
Canceled (85,400) (153,810)
(18,600)
Exercised (183,070) (64,920)
(8,800)
--------- ---------
- - ---------
Balance at end of year 910,750 625,720
781,450
========= =========
=========
Exercisable stock
options 487,545 278,600
233,945
========= =========
=========
Price range of options:
Outstanding at end
of period $ 6.63-33.94 6.63-20.63
6.63-20.63
------------ ------------
- - ------------
Granted during period $19.25-33.94 10.63-16.88
7.75-12.50
------------- ------------
- - ------------
Exercised during period $ 6.63-20.625 6.63-12.63
6.63-12.63
============= ============
============
At June 30, 1994, 71,010 shares of common stock were reserved for
issuance under
the 1987 Plan and 160,750 were reserved for issuance under the 1992
Plan.
9. Income Taxes
Income tax expense (benefit) consists of the following:
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30
($000s omitted) 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 16,716 554 (1,517)
State 1,894 620 40
Foreign 2,246 4,086 2,593
--------- --------- ---------
20,856 5,260 1,116
--------- --------- ---------
Deferred:
Federal (4,127) 2,271 2,036
State (481) (207) (746)
--------- --------- ---------
(4,608) 2,064 1,290
--------- --------- ---------
Total $ 16,248 7,324 2,406
========= ========= =========
131
<PAGE>
Notes to Consolidated Financial Statements, continued
Harman International Industries, Incorporated and Subsidiaries
The tax provisions and analysis of effective income tax rates are
comprised of the
following items:
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30
($000s omitted) 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Provision for Federal
income taxes before
credits at statutory
rate $ 14,940 6,314 2,004
State income taxes 1,413 413 40
Difference between
Federal statutory rate
and foreign effective
rate (1,466) 454 915
Permanent differences
between financial and
tax accounting income 211 200 140
Tax-exempt foreign sales
corporation earnings (1,136) (386) --
Utilization of tax
loss carryforward -- -- (2,107)
Change in valuation
reserve 1,973 (1,137) --
Losses without income
tax benefit 1,683 1,466 1,414
Federal income tax
credits (250) -- --
Other impacts
including deferred tax
impact of Federal
rate increase (1,120) -- --
--------- --------- ---------
Total $ 16,248 7,324 2,406
========= ========= =========
Deferred taxes are recorded based upon differences between the
financial statement
and tax basis of assets and liabilities and available tax loss
carryforwards. The
following deferred taxes are recorded:
</TABLE>
<TABLE>
<CAPTION>
Assets/(liabilities)
June 30 ($000s omitted) 1994 1993
--------- ---------
<S> <C> <C>
Inventory costing differences $ 2,065 1,298
Deferred income 901 1,479
Valuations and other reserves 14,351 7,583
--------- ---------
Total gross deferred
tax asset $ 17,317 10,360
Less valuation reserve (4,826) (2,853)
--------- ---------
Deferred tax asset $ 12,491 7,507
--------- ---------
Total gross deferred tax
liability from fixed
asset depreciation $ (3,191) (3,077)
--------- ---------
Net deferred tax asset $ 9,300 4,430
========= =========
Management believes the results of future operations will generate
sufficient
taxable income to realize the net deferred tax asset.
The Company has loss carryforwards from foreign subsidiaries AKG
and Studer of
approximately 250 million Austrian schillings and 70 million Swiss
francs,
respectively. These loss carryforwards expire within 5 to 7 years,
and their
effect has not been included in the preceding schedules. Future
recognition of tax
benefits related to these loss carryforwards will be applied to
reduce the
goodwill recorded for the associated entity.
Cash paid for Federal, state and foreign income taxes was
$14,095,000,
$4,701,000 and $1,345,000, during fiscal years ended June 30, 1994,
1993 and 1992,
respectively.
132
<PAGE>
10. Business Segment Data
The Company's predominant business is the design, manufacture and
distribution of
high fidelity audio products. The Company's activities comprise the
domestic and
international distribution of products manufactured by the Company
and by other
manufacturers.
In the domestic and international segments, one customer
accounted for
approximately 13.7% of consolidated net sales for the year ended
June 30, 1994.
Another customer accounted for 10.5% of consolidated net sales in
fiscal 1993 and
10.4% in fiscal 1992.
The following tables show net sales, operating income and other
financial
information by geographic segment for the years ended June 30,
1994, 1993 and
1992.
The net sales shown below for the United States include export
and military
sales of $179.1 million, $154.5 million and $129.1 million for the
fiscal years
ended June 30, 1994, 1993 and 1992, respectively.
Geographic Segmentation
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30
($000s omitted) 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
U.S. $ 673,305 499,254 451,512
International 282,191 228,052 217,248
Intercompany/
interregion (93,349) (62,393) (64,306)
---------- ---------- ----------
$ 862,147 664,913 604,454
========== ========== ==========
Operating income:
U.S. $ 73,539 33,479 22,693
International 12,039 10,330 9,960
Unallocated
operating expenses (19,246) (2,554) (5,106)
---------- ---------- ----------
$ 66,332 41,255 27,547
========== ========== ==========
Identifiable assets:
U.S. $ 418,840 295,097 255,427
International 252,360 122,367 146,619
Corporate 9,491 14,262 13,863
---------- ---------- ----------
$ 680,691 431,726 415,909
========== ========== ==========
11. Employee Benefit Plans
Under the Retirement Savings Plan, domestic employees may
contribute to the
Retirement Savings Plan by deferring up to 12.0% of their pretax
compensation.
With the approval of the Board of Directors, each division may also
make a basic
contribution equal to 2.0% of a participating employee's salary; a
matching
contribution of up to 3.0% (50.0% on the first 6.0% of an
employee's tax-deferred
contribution); and a profit sharing contribution. Profit sharing
and matching
contributions vest at a rate of 25.0% for each year of service with
the employer,
beginning with the third full year of service. Expenses related to
the Retirement
Savings Plan for the years ended June 30, 1994, 1993 and 1992
totaled $3,536,000,
$2,556,000 and $2,229,000, respectively.
The Company also has a Supplemental Executive Retirement Plan
(SERP) that
provides normal retirement, preretirement and termination benefits,
as defined, to
certain key executives designated by the Board of Directors.
Expenses related to
the SERP for the years ended June 30, 1994, 1993 and 1992 were
$667,000, $646,000
and $433,000, respectively.
Additionally, certain nondomestic subsidiaries maintain defined
benefit pension
plans. These plans are not material to the accompanying
consolidated financial
statements.
12. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 ("SFAS No.
107"), "Disclosures
about Fair Value of Financial Instruments," requires disclosure of
fair value
information about financial instruments. In the measurement of the
fair value of
certain financial instruments, quoted market prices were
unavailable and other
valuation techniques were utilized. These derived fair value
estimates are
significantly affected by the assumptions used.
Foreign Currency Contracts-The fair value of foreign currency
contracts used
for hedging purposes is estimated by obtaining quotes from brokers.
The cost of
the foreign currency contracts approximated fair value at June 30,
1994.
Long-Term Debt-Fair values of long-term debt are based on market
prices where
available. When quoted market prices are not available, fair values
are estimated
using discounted cash flow analysis, based on the Company's current
incremental
borrowing rates for similar types of borrowing arrangements. The
carrying value
and fair value of long-term debt, excluding
133
<PAGE>
Notes to Consolidated Financial Statements, continued
Harman International Industries, Incorporated and Subsidiaries
obligations under capital leases and unsubordinated loans are
$132.5 million and
$149.6 million, respectively, at June 30, 1994.
In August 1992, the Company entered two non-hedge variable
interest rate swap
agreements. The agreements were terminated six months later and the
resulting
income of approximately $1.0 million was included in other income
in fiscal 1993.
13. Foreign Currency Transactions
The Company enters into foreign exchange contracts as a hedge
against transactions
denominated in foreign currencies.
At June 30, 1994, the Company had contracts maturing through
October 1994 to
purchase approximately 171,600,000 Japanese yen and 260,000 German
marks,
equivalent to approximately U.S. $1,800,000 at the spot rate on the
maturity date.
The Company had contracts maturing through December 1994 to
purchase approximately
U.S. $12,800,000 with approximately 3,300,000 Austrian schillings,
11,200,000
French francs, 12,400,000 Danish kroner, 10,000,000 German marks,
100,000 British
pounds and 242,900,000 Japanese yen at the spot rate on the
maturity date.
14. Commitments and Contingencies
The Company and its subsidiaries are involved in several legal
actions. The
results cannot be predicted with certainty; however, management,
based upon advice
from legal counsel, believes such actions are either without merit
or do not
represent a potential material liability.
Commitments as of June 30, 1994 arising out of normal business
operations
include outstanding letters of credit of approximately $14.0
million.
The Company experienced damages as a result of the January 17,
1994 Northridge,
California earthquake and has filed various claims under its
insurance policy. The
Company does not believe it will sustain any expenses in addition
to those
reflected in the current year consolidated statement of operations.
15. Acquisitions
In September 1993, the Company acquired a 76% interest in AKG, a
leading
manufacturer of microphones, headphones and other professional
audio equipment
headquartered in Vienna, Austria. The Company subsequently acquired
the remaining
24% of AKG in July 1994.
In March 1994, the Company acquired Studer Revox AG, a prominent
manufacturer
of professional recording and broadcast equipment. The purchase was
effective
January 1, 1994.
Both acquisitions were recorded using the purchase method of
accounting.
Neither AKG nor Studer prepared interim consolidated financial
statements since
both were domiciled in countries where such financial statements
were neither
customarily prepared nor required. Therefore, interim financial
statements needed
to prepare pro forma financial statements, giving effect to the
acquisitions as of
July 1, 1992, are not available and such preparation is not
practical. The Company
has prepared pro forma financial data assuming the acquisitions
occurred on
January 1, 1991 based upon the calendar year-ends of the acquired
companies and
combining comparable quarterly financial data of the Company.
Unaudited pro forma
data is presented below:
</TABLE>
<TABLE>
<CAPTION>
12 months ended December 31 1993 1992
---------- ----------
<S> <C> <C>
Net sales $ 865,808 836,033
Net income before
extraordinary item $ 17,399 7,975
Net income $ 16,651 7,975
Income per share before
extraordinary item $ 1.54 .82
Income per share $ 1.48 .82
134
<PAGE>
16. Quarterly Summary of Operations (Unaudited)
The following is a summary of operations by quarter for fiscal 1994
and 1993
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1994 ($000s omitted except per share amounts):
Three months ended Sept. 30 Dec. 31 Mar. 31
Jun. 30
---------- ---------- ----------
- - ----------
<S> <C> <C> <C> <C>
Net sales $ 163,661 222,726 222,915
252,845
Gross profit 46,792 70,357 72,128
79,885
Income before
extraordinary item $ 1,044 7,567 8,179
9,622
Net income $ 1,044 6,819 8,179
9,622
Income per share before
extraordinary item* $ .10 .59 .55
.64
Net income per
common share* $ .10 .54 .55
.64
* Quarters do not add to full-year for fiscal 1994 due to
differences in number
of shares outstanding in the quarters.
_________________________________________________________________
_________________
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1993 ($000s omitted except per share amounts):
Three months ended Sept. 30 Dec. 31 Mar. 31
Jun. 30
---------- ---------- ----------
- - ----------
<S> <C> <C> <C> <C>
Net sales $ 144,745 177,314 167,581
175,273
Gross profit $ 39,576 49,407 49,201
52,379
Net income (loss) $ (1,364) 3,335 4,001
5,274
Net income (loss) per
common share $ (.13) .31 .37
.49
_________________________________________________________________
_________________
The Board of Directors and Shareholders
Harman International Industries, Incorporated:
We have audited the accompanying consolidated balance sheets of
Harman
International Industries, Incorporated and subsidiaries as of June
30, 1994 and
1993 and the related consolidated statements of operations, cash
flows and
shareholders' equity for each of the years in the three-year period
ended June 30,
1994. These consolidated financial statements are the
responsibility of the
Company's management. Our responsibility is to express an opinion
on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to obtain
reasonable assurance about whether the financial statements are
free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes
assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement
presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present
fairly, in all material respects, the financial position of Harman
International
Industries, Incorporated and subsidiaries as of June 30, 1994 and
1993 and the
results of their operations and their cash flows for each of the
years in the
three-year period ended June 30, 1994 in conformity with generally
accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
August 12,1994
135
<PAGE>
Statement of Management Responsibility
The consolidated financial statements and accompanying information
were prepared
by, and are the responsibility of, the management of Harman
International
Industries, Incorporated. The statements were prepared in
conformity with
generally accepted accounting principles and, as such, include
amounts that are
based on management's best estimates and judgments.
The Company's internal control systems are designed to provide
reliable
financial information for the preparation of financial statements,
to safeguard
assets against loss or unauthorized use and to ensure that
transactions are
executed consistent with Company policies and procedures.
Management believes that
existing internal accounting control systems are achieving their
objectives and
that they provide reasonable assurance concerning the accuracy of
financial
statements.
Oversight of management's financial reporting and internal
accounting control
responsibilities is exercised by the Board of Directors through an
audit committee
which consists solely of outside directors. The Committee meets
periodically with
financial management and the independent auditors to ensure that
each is meeting
its responsibilities and to discuss matters concerning auditing,
accounting
control and financial reporting. The independent auditors have free
access to meet
with the Audit Committee without management's presence.
/s/ Bernard A. Girod
Bernard A. Girod
President & Chief Operating Officer
_________________________________________________________________
_________________
Shareholder Information
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
Fiscal 1992
Market Price High Low High Low
High Low
<S> <C> <C> <C> <C> <C>
<C>
First quarter
ended
September 30 $ 21.50 $ 17.75 $ 12.75 $ 9.00 $
11.125 $ 9.875
Second quarter
ended
December 31 29.125 18.875 15.25 9.25
10.125 6.625
Third quarter
ended
March 31 33.25 27.375 18.25 14.50
14.25 8.875
Fourth quarter
ended
June 30 31.125 25.125 21.00 16.00
14.00 10.25
The Common Stock of the Company is listed on the New York Stock
Exchange and is
reported on the New York Stock Exchange Composite Tape under the
symbol HAR. As of
June 30, 1994, the Company's Common Stock was held by approximately
207 record
holders.
The table above sets forth the reported high and low sales
prices of the
Company's Common Stock for each quarterly period for fiscal years
ending June 30,
1994, 1993, and 1992. The information set forth in the table
represents the
reported high and low sales prices on the New York Stock Exchange
Composite Tape.
The Company paid a dividend on August 15, 1994 of $0.04 per
share to owners of
record as of July 29, 1994.
136
<PAGE>
Corporate Officers
Sidney Harman
Chairman & Chief Executive Officer
Bernard A. Girod
President, Chief Operating Officer & Chief Financial Officer
Jerome H. Feingold
Vice President-Quality
Frank Meredith
Vice President & General Counsel
William S. Palin
Vice President-International Audit
Sandra B. Robinson
Vice President-Financial Operations
Floyd E. Toole
Vice President-Engineering
Group Presidents
Philip Hart
Professional Group
Thomas Jacoby
Consumer Group
Gregory Stapleton
Automotive/OEM Group
F. Michael Budd
Manufacturing Group
Niels Jespersen
Marketing Group
Klaus Schulz-Hanssen
International Distributing Group
Directors
Sidney Harman
Bernard A. Girod
Shirley Mount Hufstedler
Hufstedler & Kaus
Edward H. Meyer
Grey Advertising, Inc.
Alan Patricof
Patricof & Co.
Annual Meeting
The annual meeting of shareholders will be held on November 2,
1994, at Chemical
Bank, 270 Park Avenue, New York, New York 10017 at 11:00 a.m. EST.
A proxy
statement was sent to shareholders on or about September 28, 1994,
at which time
proxies for the meeting were requested.
Registrar and Transfer Agent
Chemical Trust Company of California
300 South Grand Avenue
Los Angeles, CA 90071
(213) 621-8251
Securities Traded
New York Stock Exchange
Symbol: HAR
Independent Auditors
KPMG Peat Marwick LLP
725 South Figueroa Street
Los Angeles, CA 90017
(213) 972-4000
Corporate Headquarters
1101 Pennsylvania Avenue, NW
Suite 1010
Washington, D.C. 20004
(202) 393-1101
137
PAGE
HARMAN INTERNATIONAL
1994 ANNUAL REPORT
138
</TABLE>
<TABLE>
<PAGE>
EXHIBIT 21.1
139
<PAGE>
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140
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
AKG Acoustics GmbH Germany
AKG Acoustics, Inc. Delaware
AKG Acoustics India, Ltd. India
AKG Acoustics plc United Kingdom
AKG Akustische u. Kino-Gerate
Gessellschaft m.b.H. Republic of
Austria
Allen & Heath Brenell Limited United Kingdom
Amek Systems and Controls Ltd. United Kingdom
Amek Technology Group Plc United Kingdom
Atlantex Music Limited United Kingdom
Audax Industries, S.A. France
Audax of America, Inc. Delaware
Bandive Limited United Kingdom
BSS Audio Ltd United Kingdom
DOD Electronics Corporation Utah
Edge Technology Group Ltd. United Kingdom
Entel, Ltd. United Kingdom
Environmental Investments, Ltd. United Kingdom
Epicure Products, Inc. Delaware
Fosgate, Inc. Delaware
Gatehit Limited United Kingdom
Hall Effects Laboratories, Ltd United Kingdom
Harco Properties, Inc. Delaware
Harman Belgium NV Kingdom of
Belgium
Harman Deutschland GmbH Germany
Harman France, S.A. France
Harman Holding A/S Denmark
Harman Integrated Design
Group Incorporated Delaware
Harman International
Foreign Sales Corporation Guam
Harman International
Industries Limited United Kingdom
Harman International
Japan Co., Limited Japan
Harman Investment Company, Inc. Delaware
Harman-Kardon Europa A/S Denmark
Harman-Kardon, Incorporated Delaware
Harman-Motive, Inc. Delaware
141
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
Harman Motive Limited United Kingdom
Harman Audio Outlet, Inc. Delaware
Harman UK Limited United Kingdom
Infinity Systems, Inc. California
JBL Incorporated Delaware
JBL TM Corporation Delaware
Lexicon, Incorporated Massachusetts
Lydig Export A/S Denmark
Lydig of Scandinavia A/S Denmark
MBI Broadcast Systems Limited United Kingdom
MBI Consulting and Commissioning
Limited United Kingdom
Precision Devices, Ltd United Kingdom
Pyle Industries, Inc. Indiana
Quested Monitoring Systems Limited United Kingdom
Riverend Limited United Kingdom
SCJ and AKG Ltd. Japan
Sescord Limited United Kingdom
Son-Audax Loudspeakers Limited United Kingdom
Soundcraft Electronics, Limited United Kingdom
Soundcraft Magnetics Limited United Kingdom
Studer Capital Inc. Tennessee
Studer Deutschland GMBH Germany
Studer Editech Corp. California
Studer Professional Audio AG Switzerland
Studer Canada Limited Canada
Studer Japan Ltd. Japan
Studer S.E. Asia Pte Ltd Singapore
Studer U.K. Limited United Kingdom
Studer Wien Ges.MbH Republic of
Austria
Studer Digitec S.A. France
Total Audio Concepts Ltd. United Kingdom
Turbo Sound Ltd. United Kingdom
Turbo Sound Rentals Ltd. United Kingdom
Turbo Sound Sales, Ltd. United Kingdom
Turnkey Ltd. United Kingdom
142
<S> <C>
</TABLE>
<TABLE>
<PAGE>
EXHIBIT 23.1
143
<PAGE>
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144
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Harman International Industries, Incorporated
We consent to incorporation by reference in the Registration
Statement Nos. 33-
20559, 33-28973, 33-36388, 33-60234 and 33-60236 on Form S-8 of
Harman
International Industries, Incorporated of our report dated August
12, 1994,
relating to the consolidated balance sheets of Harman International
Industries,
Incorporated and subsidiaries as of June 30, 1994 and 1993, and the
related
consolidated statements of operations, cash flows and shareholders'
equity and
related schedules for each of the years in the three year period
ended June 30,
1994, which report appears in the June 30, 1994 annual report on
Form 10-K of
Harman International Industries, Incorporated.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
September 19, 1994
145
<PAGE>
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146
<PAGE>
EXHIBIT 27.1
147
<PAGE>
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148
<S> <C>
</TABLE>
