<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: MARCH 31, 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 Identification No.)
corporation or organization)
1101 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20004
(Address of principal executive offices) (Zip code)
(202) 393-1101
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
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.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
15,062,177 shares of Common Stock, $.01 par value at April 30, 1994.
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1994
and June 30, 1993 3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended March 31, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1994 and 1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition 7-10
PART II. OTHER INFORMATION 11-12
SIGNATURES 13
EXHIBIT I.1 (Filed as Exhibit 1.2 to the Company's
Current Report on Form 8-K/A dated March
17, 1994 (File No. 1-9764) and hereby
incorporated by reference.) 14-17
EXHIBIT 10.48 18-21
EXHIBIT 10.49 22-33
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND JUNE 30, 1993
(000s omitted except per share amounts)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
03/31/94 * 6/30/93
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 14,367 $ 2,179
Receivables (less allowance for doubtful
accounts: $12,451 at March 31, 1994,
and $3,435 at June 30, 1993.) 191,290 127,648
Inventories
Finished goods and inventory
purchased for resale 130,305 86,681
Work in process 20,403 11,992
Raw materials and supplies 75,756 38,518
----------- ----------
Total inventories 226,464 137,191
Other current assets 26,936 21,803
----------- ----------
Total current assets 459,057 288,821
Investments 3,958 --
Investments in unconsolidated subsidiaries 2,507 --
Property, plant and equipment, net 129,461 103,058
Other assets 11,626 9,603
Excess of cost over fair value of assets
acquired 33,758 30,244
----------- ----------
Total assets $ 640,367 $ 431,726
=========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes Payable $ 56,276 $ 33,379
Current portion of long-term debt 5,794 4,383
Accounts payable 85,693 54,375
Accrued liabilities 98,763 49,192
----------- ----------
Total current liabilities 246,526 141,329
Other non-current liabilities 9,232 --
Senior long-term debt 42,010 60,583
Subordinated long-term debt 115,000 115,000
Deferred income 2,695 3,665
Minority interest 7,354 --
Shareholder's Equity:
Common stock, $0.01 par value 150 109
Additional paid-in capital 142,710 53,453
Equity adjustment from foreign
currency translation (4,022) (5,083)
Retained earnings 78,712 62,670
----------- ----------
Net shareholders' equity 217,550 111,149
----------- ----------
Total liabilities and
shareholders' equity $ 640,367 $ 431,726
=========== ==========
* Includes AKG, acquired September 1993, and Studer, acquired March 1994.
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1994 AND 1993
(000s omitted except per share amounts)
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 222,915 $ 167,581 $ 609,302 $ 489,640
Cost of Sales 150,787 118,380 420,025 351,456
---------- ---------- ---------- ----------
Gross Profit 72,128 49,201 189,277 138,184
Selling, general and
administrative expenses53,784 36,420 143,958 110,474
---------- ---------- ---------- ----------
Operating income 18,344 12,781 45,319 27,710
Other expenses:
Interest expense 5,527 5,467 17,459 16,904
Miscellaneous, net (61) 579 639 833
---------- ---------- ---------- ----------
Income before income
taxes and
extraordinary items 12,878 6,735 27,221 9,973
Income tax expense 4,699 2,734 10,431 4,001
---------- ---------- ---------- ----------
Income before
extraordinary items 8,179 4,001 16,790 5,972
Extraordinary items,
net of income taxes -- -- (748) --
---------- ---------- ---------- ----------
Net income $ 8,179 $ 4,001 $ 16,042 $ 5,972
========== ========== ========== ==========
Earnings per share of
common stock before
extraordinary items $ 0.55 $ 0.37 $ 1.30 $ 0.55
========== ========== ========== ==========
Earnings per common share $ 0.55 $ 0.37 $ 1.25 $ 0.55
========== ========== ========== ==========
Weighted average number
of common shares
outstanding 14,986 10,849 12,812 10,810
========== ========== ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1994 AND 1993
($000s omitted)
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,042 $ 5,972
---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 22,414 17,190
Amortization of intangible assets 1,506 1,371
Amortization of deferred income (970) (970)
Changes in assets and liabilities, net of effects
from purchase of companies:
(Increase) in:
Receivables (20,540) (10,166)
Inventories (45,890) (8,832)
Other current assets (823) (3,148)
Increase (decrease) in:
Accounts payable 9,202 (3,279)
Accrued liabilities 260 3,523
---------- ----------
Total adjustments $ (34,841) $ (4,311)
---------- ----------
Net cash provided by (used in) operating activities $ (18,799) $ 1,661
Cash flow from investing activities:
Payment for purchase of companies, net of
cash acquired 8,580 --
Investments in unconsolidated subsidiaries (2,500) --
Capital expenditures for property, plant
and equipment (27,444) (16,751)
Other items, net 774 2,512
---------- ----------
Net cash used in investing activities $ (20,590) $ (14,239)
---------- ----------
Cash flow from financing activities:
Net repayments of lines of credit (13,775) (20,932)
Net proceeds from (repayments of) long-term debt (25,007)43,405
Proceeds from issuance of common stock 87,488 --
Proceeds from exercise of stock options 1,810 467
Net change, foreign currency translation 1,061 (8,346)
---------- ----------
Net cash flow provided by
financing activities $ 51,577 $ 14,594
---------- ----------
Net increase (decrease) in cash and
short-term investments 12,188 2,016
Cash and short-term investments at beginning of period 2,179 2,819
---------- ----------
Cash and short-term investments at end of period $ 14,367 $ 4,835
- ---------------------------------- ========== ==========
Supplemental disclosures of cash flow information:
Interest paid $ 19,358 $ 18,853
Income taxes paid $ 7,992 $ 2,813
Supplemental schedule of noncash investing activities:
Fair value of assets acquired $ 134,144 $ --
Cash paid for the capital stock -- --
---------- ----------
Liabilities assumed $ 134,144 $ --
---------- ----------
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
NOTE A - BASIS OF PRESENTATION
The Company's Condensed Consolidated Financial Statements for the
three months and nine months ended March 31, 1994 and 1993 have not
been audited by the Company's independent auditors; however, in the
opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the consolidated financial position of the Company and
subsidiaries as of March 31, 1994 and the results of their
operations and their cash flows for the periods presented.
The results of operations for the three months and nine months
ended March 31, 1994 are not necessarily indicative of the results
to be expected for the full year.
NOTE B - ACQUISITIONS
On March 17, 1994, Harman International Industries, Incorporated,
through its wholly owned subsidiary Harman Investment Company,
Incorporated, acquired from Motor-Columbus AG and its affiliates
Studer Revox AG, a leading company in the professional audio field,
with particular strength in the recording and broadcast areas. The
Studer acquisition was recorded using the purchase method of
accounting.
Under the terms of the purchase agreement by and among the Company,
Harman Investment, Studer and Motor-Columbus, Harman paid 100 Swiss
Francs for 100% of the outstanding shares of Studer after Studer
had sold certain assets unrelated to the professional audio field
to an affiliate of Motor-Columbus.
The results of operations for the third quarter ended March 31,
1994 include the results of Studer for January 1, 1994 through
March 31, 1994, as the acquisition was made effective January 1,
1994. The inclusion of Studer does not have a material impact on
the third quarter consolidated results of the Company. The
Consolidated Balance Sheet as of March 31, 1994 includes
indebtedness of Studer of $15.8 million, as well as other payment
obligations of Studer.
Pro forma combined results of operations as if the Studer
acquisition had occurred on January 1, 1993 are incorporated by
reference from Harman's Current Report on Form 8-K/A filed with the
Securities and Exchange Commission on this date, and attached
hereto as Exhibit I.1.
Pro forma financial data for the nine months ended March 31, 1994
have not been prepared, as it is not practicable to prepare
consolidated financial statements for Studer for interim periods in
the prior year due to practices in existence for interim reporting
at Studer at that time.
6
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
COMPARISON OF THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31,
1994 AND 1993
Net sales for the quarter ended March 31, 1993 totaled $222.9
million, a 33 percent increase over the comparable period in the
prior year. For the first nine months of fiscal 1994, sales
increased 24 percent to $609.3 million. Significant sales
increases were reported by the Professional Group, the Automotive
OEM Group and the Consumer Group. The International Distributing
Group reported lower sales due to the Company's decision to
discontinue the distribution of Maxell tapes at Harman Deutschland.
Sales of Maxell tape products were $11.8 million and $34.0 million
in the prior year's third quarter and first nine months,
respectively.
The Professional Group sales increase reflects the contributions of
AKG, our Austrian microphone manufacturer acquired September 1993,
and Studer Revox, acquired in March 1994, the operations of which
are included as of January 1, 1994. Strong sales of JBL and
Soundcraft products and the inclusion of the sales of Lexicon,
which was acquired in the third quarter of the prior fiscal year,
also generated increases. Contributing to the growth at Soundcraft
was the success of the "Spirit" line of mixing consoles. Higher
sales at JBL primarily reflects increased activity in domestic and
international markets.
Higher Automotive OEM Group sales reflect continued strong sales 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 in which Chrysler/Infinity ISI systems are
installed and increased shipments of Infinity systems to
Mitsubishi. Strong sales of the Ford Explorer and Lincoln Town
Car, in which the Ford/JBL premium sound systems are installed,
also contributed to improved performance.
The Consumer Group sales increase results from strong domestic JBL
and Infinity sales combined with higher Harman Kardon sales
volumes. Sales of the Infinity "Sterling" and "Crescendo"
loudspeaker models at Circuit City and the Infinity "SL"
loudspeaker line at Best Buys have contributed substantially to our
results for the quarter.
The International Distributing Group reported lower sales,
resulting from the discontinuance of Maxell tape distribution as
discussed above. Harman Deutschland is providing administrative
support for Maxell, on a fee basis, through the end of fiscal 1994
while continuing to shift its focus to the distribution of products
manufactured by the Company. Excluding the Maxell sales,
International Distributing Group sales for the quarter and the
7
<PAGE>
first nine months of fiscal 1994 approximate the prior year despite
the difficult economic conditions in Europe and Japan.
The gross profit margin for the quarter ended March 31, 1994 was
32.4 percent compared to 29.4 percent in the prior year. The gross
profit margin for the first nine months of fiscal 1994 was 31.1
percent compared to 28.2 percent in the previous year. The
increases in gross profit margin reflect the effects of corporate
purchasing programs, operating leverage and favorable product mix
at Harman Motive and cost reductions at the Manufacturing Group
associated with improved manufacturing efficiencies at the
Northridge and Audax facilities.
Selling, general and administrative expenses as a percentage of net
sales increased to 24.1 percent for the quarter ended March 31,
1994 from 21.7 percent in the comparable period in the prior year.
Selling, general and administrative expenses for the first nine
months of fiscal 1994 were 23.6 percent of sales compared to 22.6
percent in the prior year. The increases for the quarter and the
first nine months reflect increased marketing costs associated with
the implementation of the Harman Marketing Units, offset by cost
savings in overhead personnel due to the new organizational
structure of the Company and other cost reduction programs.
Operating income as a percentage of sales was 8.2 percent ($18.3
million) for the third quarter ended March 31, 1994 compared with
7.6 percent ($12.8 million) for the same period in the prior year.
Operating income as a percentage of sales was 7.4 percent ($45.3
million) for the first nine months of fiscal 1994 compared with 5.7
percent ($27.7 million) in the first nine months of fiscal 1993.
These increases reflect improved gross profit percentages for the
quarter and the first nine months as discussed above.
Interest expense of $5.5 million for the three months ended March
31, 1994 approximated the amount in the comparable period in the
prior year despite lower average borrowings, reflecting the impact
of higher average interest rates. Average borrowings outstanding
were $202.6 million for the third quarter 1994, down from $219.3
million for the third quarter 1993. However, the average interest
rate on borrowings was 10.91 percent for the third quarter 1994, up
from 10.0 percent for the comparable period in 1993. Interest
expense as a percentage of sales was 2.5 percent for the third
quarter ended March 31, 1994, down from 3.3 percent for the
comparable period in the previous year.
For the nine months ended March 31, 1994, interest expense
increased to $17.5 million from $16.9 million in the previous year,
resulting from higher levels of average borrowings outstanding and
higher average interest rates. The average borrowings outstanding
were $220.5 million for the first nine months of fiscal 1994
compared to $218.2 million for the first nine months of fiscal
1993. The average interest rate on borrowings was 10.56 percent
for the first nine months of fiscal 1994 compared to 10.30 percent
for the comparable period in the prior year. Interest expense as a
percentage of sales for the first nine months of fiscal 1994 was
2.9 percent compared with 3.5 percent in the first nine months of
fiscal 1993.
8
<PAGE>
Higher average interest rates for the quarter and the nine months
ending March 31, 1994 reflect the repayment of short-term debt,
which generally carried lower interest rates than long-term debt,
with the proceeds of the common stock offering combined with higher
interest rates on the debt assumed in the AKG acquisition and
increased interest rates in the United States.
Income before income taxes and extraordinary items for the third
quarter of fiscal 1994 was $12.9 million, up from $6.7 million in
the previous year. For the nine months ended March 31, 1994,
income before income taxes and extraordinary items was $27.2
million compared to $10.0 million for the nine months ended March
31, 1993.
The effective tax rate for the third quarter of fiscal 1994 was
36.5 percent compared with 40.6 percent in the prior year. The
effective tax rate for the first nine months of fiscal 1994 was
38.3 percent compared to a rate of 40.1 percent in the prior year.
The Company calculates its taxes based upon its best estimate of
annual results.
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 Senior
Notes, Series A, due September 30, 1994.
Net income for the three months ended March 31, 1994 was $8.2
million, or $0.55 per share, compared with $4.0 million, or $0.37
per share, in the previous year. Net income for the first nine
months of fiscal 1994 was $16.0 million, or $1.25 per share,
compared with $6.0 million, or $0.55 per share, in the previous
year.
Financial Condition
- -------------------
Net working capital at March 31, 1994 was $212.5 million, compared
with $147.5 million at June 30, 1993. The increase primarily
reflects the repayment of short-term borrowings with the proceeds
of the second quarter common stock issuance combined with higher
inventories and receivables associated with the AKG and Studer
acquisitions and increased sales volumes.
The Company issued 4,025,000 shares of common stock in November
1993, which included full utilization of the over-allotment option
for 525,000 shares. The stock was issued at $23.00 per share,
generating net proceeds to the Company of $87.5 million after
underwriting discount and associated expenses. The proceeds were
used primarily to repay short- and long-term debt.
Other changes in the Company's balance sheet from June 30, 1993,
the end of the preceding fiscal year, to March 31, 1994 are as
follows:
9
<PAGE>
- - Accounts receivable increased by $63.7 million from $127.6
million at June 30, 1993 to $191.3 million at March 31, 1994. Of
this increase, $22.0 million was due to the inclusion of AKG,
$13.9 million reflects the inclusion of Studer, and the remaining
increase results from the impact of higher sales volume.
- - Inventories increased by $89.3 million from $137.2 million to
$226.5 million. Of this increase, $23.3 million is due to the
inclusion of AKG inventories, $24.8 reflects the inclusion of
Studer inventories, and the remainder primarily results from the
requirement for increased inventories to support higher sales
volumes.
Other
- -----
Although the Company's Northridge plant was near the epicenter of
the California earthquake, the manufacturing facility did not
sustain significant structural damage and is again fully
operational. Management believes the Company's insurance coverage
is adequate to cover anticipated losses, and the impact of the
earthquake will not be material to the financial condition of the
Company.
10
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various legal proceedings pending against the
registrant and its subsidiaries but, in the opinion of
management, liabilities, if any, arising from such claims
will not have a materially adverse effect upon the
consolidated financial condition of the registrant.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
The following exhibits are filed as part of this
report.
Exhibit
No. Description
------- -----------
I.1 Pro forma combined results of operations
for the Company and Studer for the year
ended December 31, 1993 to give effect to
the Studer Acquisition as though it
occurred on January 1, 1993.
10.48 Form of Severance Agreement by and
between the Company and Richard James.
10.49 Form of Non-qualified Stock Option
Agreement under the 1992 Executive
Incentive Plan to include Incentive
Pricing.
11
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
Form 8-K, dated March 17, 1994, filed on
March 31, 1994, containing the following items:
Item 2. Description of the acquisition of Studer
Revox AG.
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Registrant)
DATE: May 12, 1994 BY: /s/ Sidney Harman
----------------------
Sidney Harman
Chairman and Chief
Executive Officer
DATE: May 12, 1994 BY: /s/ Bernard A. Girod
----------------------
Bernard A. Girod
President, Chief Operating
Officer, Chief Financial
Officer and Secretary
13
</TABLE>
<PAGE>
EXHIBIT I.1
14
<PAGE>
Pro forma Consolidated Financial Data
The following table presents consolidated statements of
operations for the Company and Studer Revox AG for the twelve
months ended December 31, 1993 and also includes pro forma
consolidated statements for the same period to give effect to the
Studer acquisition as though it occurred on January 1, 1993. The
statement of operations data for Harman International has been
derived from quarterly unaudited consolidated financial statements
of the Company and its subsidiaries. The pro forma financial data
presented does not purport to represent what the Company's results
of operations would have been had such transactions occurred at the
beginning of the period presented or to project the Company's
results of operations for any future period.
15
<PAGE>
Twelve Months Ended December 31, 1993
-----------------------------------------------------
(000 except per Studer
share data) Studer Adjustments(1) Adjusted Harman Pro forma
-----------------------------------------------------
Statements of
Operations:
Net sales $91,176 (16,218) (2) 74,958 729,241 804,199
Cost of sales 56,504 (17,609) (2,5,7) 38,895 510,512 549,407
----------------------------------------------------
Gross profit 34,672 1,391 36,063 218,729 254,792
Operating expenses 53,613 (19,203) (2,3,6) 34,410 165,428 199,838
----------------------------------------------------
Operating
income (loss) (18,941) 20,594 1,653 53,301 54,954
Interest expense 5,978 (4,729) (2,3,4) 1,249 24,061 25,310
Miscellaneous, net 1,818 81 (2) 1,899 (435) 1,464
----------------------------------------------------
Income (loss)
before taxes (26,737) 25,242 (1,495) 29,675 28,180
Income taxes (1,410) (35) (2) (1,445) 11,789 10,344
----------------------------------------------------
Net income (loss)
before extraordinary
items and minority
interest (25,327) 25,277 (50) 17,886 17,836
----------------------------------------------------
Extraordinary items -- -- -- (748) (748)
----------------------------------------------------
Net income (loss)
before minority
interest (25,327) 25,277 (50) 17,138 17,088
Minority interest (37) -- (37) -- (37)
----------------------------------------------------
Net Income (Loss) $(25,364) 25,277 (87) 17,138 17,051
====================================================
Net income per share
before extraordinary
items and minority
interest $1.59 $1.58
======= ======
Net income per share $1.52 $1.51
======= ======
Shares Outstanding 11,274 11,274
16
<PAGE>
Notes to Pro Forma Consolidated Financial Data
(1) Pro forma statements of operations adjustments are based upon
preliminary estimates by the Company. The actual amount of these
adjustments may vary from these estimates, and will not be determined
until the Company completes its review of Studer's business and valuation
of assets and liabilities. The Company believes that the actual amount
of these adjustments, in the aggregate, will not vary materially from
these estimates. Swiss Francs were converted to U.S. dollars based on
the average exchange rate for the period.
(2) Reflects the elimination of the Revox Consumer Electronics Divisions
which were not purchased by the Company, thus eliminating sales of
$16,218,000, cost of sales of $10,145,000, operating expenses of
$14,153,000, interest and miscellaneous costs of $2,089,000 and income
taxes of $35,000.
(3) Represents the elimination of interest costs of approximately
$1,600,000 and depreciation of approximately $1,490,000, real estate
taxes of approximately $914,000 and real estate agents' fees of
approximately $233,000 on buildings not purchased by the Company. The
Company has leased from the seller a portion of the buildings previously
owned rent-free for a period of three years.
(4) Reflects interest expense of approximately $947,000 no longer
required as a result of a capital contribution by the Seller of SFR
17,000,000 or about $11,800,000.
(5) Reflects the elimination of payroll costs for the year 1993 of
approximately $5,800,000 due to the termination of 120 employees in
December 1993.
(6) Reflects the elimination of management fees of approximately
$866,000 which were paid by Studer Revox AG to the Seller in 1993.
(7) Reflects the elimination of non-recurring expenses which were
incurred by Studer Revox AG in 1993, including termination pay of
approximately $1,650,000, non-trading losses in the Vienna operation of
approximately $1,590,000 and other costs of approximately $225,000.
17
<PAGE>
EXHIBIT 10.48
18
<PAGE>
SETTLEMENT AND RELEASE AGREEMENT
Richard James and Harman International, Inc. have reached the
following Agreement in connection with Employee's separation from the
Company. In this Agreement, Richard James is referred to as "Employee"
and Harman International, Inc. is referred to as "the Company."
1. Payment. The Company agrees to give Employee a lump sum
payment of $10,000.00. The Company will deduct from this amount federal
and state withholding taxes and other deductions the Company is required
by law to make from wage payments to employees. Employee acknowledges
that there are no other sums payable to him by the Company, whether
characterized as wages, commissions, reimbursements, bonuses, separation
pay, termination pay, vacation pay, pensions, insurance coverage, or
otherwise.
2. Payment Not Normally Available. Employee acknowledges
that the $10,000.00 payment is provided to him solely in exchange for the
promises in this Agreement, are not normally available under Company
policy or practice to employees whose employment is terminated, and are
in an amount to which he would not otherwise be entitled by virtue of any
contract, Company policy or practice, or any federal, state or local
statute, ordinance, order, or law.
3. Complete Release by Employee. For and on behalf of
himself, his agents, heirs, executors, administrators, and assigns,
Employee hereby releases and forever discharges the Company and all of
its successors and assigns, and all of its and their respective agents,
directors, officers, partners, employees, representatives, insurers,
attorneys, and joint ventures, and each of them, from any and all claims
which are based upon acts or events that occurred on or before the date
on which this Agreement becomes enforceable, including any claim arising
under any state or federal statute or common law, including, but not
limited to, the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C.
section 623, and the California Fair Employment and Housing Act, Cal.
Gov't Code sections 12940, et seq.
4. Complete Release by Company. For itself and for its
successors and assigns, the Company hereby releases and forever
discharges Employee, his agents, heirs, executors, administrators, and
assigns, and each of them, from any and all claims which are based upon
acts or events that occurred on or before the date on which this
Agreement becomes enforceable, including any claim arising under any
state or federal statute or common law.
5. Release of Unknown Claims. Employee and Company are
familiar with Section 1542 of the California Civil Code, which reads as
follows:
A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time or executing the
release, which if known by him must have
materially affected his settlement with the
debtor.
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<PAGE>
Employee and the Company are releasing unknown claims and waive all
rights they have or may have under Civil Code Section 1542 or under any
other statute or common law principle of similar effect. However,
neither party is waiving any rights or claims that may arise out of acts
or events that occur after the date on which this Agreement becomes
enforceable.
6. Additional Facts. Both parties acknowledge that they may
hereafter discover facts different from, or in addition to, those they
now believe to be true with respect to any or all of the claims or
demands herein released. Nevertheless,
Employee and the Company agree that the releases set forth above shall be
and remain effective in all respects, notwithstanding the discovery of
such different or additional facts.
7. No Future Lawsuits. Employee and the Company promise
never to file any lawsuit asserting any claim that is released in
paragraphs 3, 4, and/or 5, above. If either party files any such
lawsuit, that party will pay for all costs incurred by the other party
(or by others released by the party who filed the lawsuit), including
reasonable attorneys' fees, in defending against the claims made in the
lawsuit.
8. Confidential Business Information. While employed by the
Company, Employee has had access to confidential business information and
business ideas belonging to the Company. Employee will not communicate
or disclose any such information or idea to any person or entity at any
time in the future unless required or asked to do so by an officer of the
Company. Further, Employee represents and agrees that Employee will not
now or in the future disrupt, damage, impair or interfere with the
business of Harman; nor shall Employee communicate as to disparage,
malign, cast dispersions on, or discredit Harman. Harman agrees that it
will not now or in the future disparage, malign, cast dispersions on or
discredit Employee.
9. Non-Admission of Wrongdoing. By making this Agreement,
neither Employee nor the Company admits to having engaged in any
wrongdoing.
10. Further Action by Employee. For a period not to exceed
six months from the date of this Agreement, Employee will comply with
reasonable requests to execute Company documents pending when his
employment was terminated and otherwise reasonably to cooperate in the
orderly transfer of his responsibilities.
11. Period for Review and Consideration of Agreement.
Employee has 21 days to consider whether or not to sign this Release and
has been advised in writing to consult with an attorney prior to signing
it.
12. Employee's Right to Revoke Agreement. Employee may revoke
this Agreement at any time on or before the date which is seven (7)
calendar days after the date of his signature on this Agreement. The
Agreement will be effective and enforceable upon the expiration of the
seven-day revocation period.
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<PAGE>
13. Voluntary Execution. Employee and the Company have read
this Agreement and understand all of its terms. They execute it
voluntarily and with full knowledge of its significance.
14. Entire Agreement. This is the entire agreement between
Employee and the Company. There are no written or oral understandings,
promises or agreements directly or indirectly related to this Agreement
that are not incorporated into this Agreement in full. This Agreement
supersedes any and all prior agreements or understandings between the
parties, including, but not limited to, any and all employment
agreements, express or implied.
PLEASE READ CAREFULLY BEFORE SIGNING.
THIS AGREEMENT CONTAINS A GENERAL RELEASE
AND WAIVER OF ALL KNOWN AND UNKNOWN CLAIMS.
3-10-94
_________________ HARMAN INTERNATIONAL, INC.
Date Signed
By: /s/ Sidney Harman
___________________________
Its: Chairman and Chief Executive
Officer
3-10-94 /s/ Richard James
_________________ _____________________________
Date Signed Richard James
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EXHIBIT 10.49
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<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement") dated as
of ________________, by and between HARMAN INTERNATIONAL INDUSTRIES,
INCORPORATED, a Delaware Corporation (the "Company"), and
_________________ (the "Optionee"):
W I T N E S S E T H:
WHEREAS, the Optionee is an employee of the Company or a Subsidiary
of the Company; and
WHEREAS, the execution of a non-qualified stock option agreement in
the form hereof has been duly authorized by a resolution of the
Compensation and Option Committee (the "Committee") of the Board of
Directors (the "Board) of the Company duly adopted on ________________
(the "Date of Grant");
NOW, THEREFORE, in consideration of these premises and the covenants
and agreements set forth in this Agreement, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and the Optionee agree as follows:
1. Grant of Option. Pursuant to the terms and conditions of the
Harman International Industries, Incorporated 1992 Incentive Plan (the
"Plan"), the Company hereby grants to the Optionee an option (the
"Option") to purchase _______ shares (the "Option Shares") of the
Company's Common Stock, par value $0.01 per share ("Common Stock"), at
the following prices (the "Option Prices") which are at a premium over
the $______ per share closing price of the Common Stock on the Date of
Grant:
Number of Option
Shares Price
--------- ------
2. Type of Option. This Option is intended to be a non-qualified
stock option and shall not be treated as an "incentive stock option"
within the meaning of that term under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
3. Vesting of Option. Unless and until terminated as hereinafter
provided, the Option shall become immediately and fully exercisable.
4. Manner of Exercise. (a) The Option may be exercised by the
Optionee at any time, or from time to time, in whole or in part, during
the term thereof, but only in multiples of fifty (50) shares.
(b) The Optionee shall exercise the Option by delivering a
signed written notice to the Company, which notice shall specify the
number of Option Shares to be purchased and the Option Prices thereof and
be accompanied by payment in full of the applicable Option Price for the
number of Option Shares specified for purchase.
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<PAGE>
(c) The Option Price shall be payable (i) in cash or by check
acceptable to the Company, (ii) by transfer to the Company of Common
Stock that has been owned by the Optionee for more than six months prior
to the date of exercise, or (iii) by a combination of any of the
foregoing methods of payment. 5. Repurchase Right. (a) Shares
acquired on exercise may be repurchased by the Company (or if the Options
shall remain unexercised, in whole or in part, the Option or a portion
thereof may be canceled), in the sole discretion of the Committee, at any
time during the period commencing ____________ and ending
________________ at the Option Price paid for the Option Shares to be
repurchased, subject to the conditions and to the extent specified in
this Section 5. For the purpose of this Agreement, the Company's right
to repurchase shares acquired under this Option and right to cancel the
Option shall be referred to collectively as the "Right to Repurchase."
(b) The Right to Repurchase will lapse to the extent of one-
seventh of the total number of Option Shares if, during or with respect
to any fiscal year commencing with the fiscal year ending _____________,
the requirements of Alternative I or Alternative II are met.
(i) Alternative I. The requirements of Alternative I may be
met in a fiscal year if, during such fiscal year, the Company's stock
price per share equals or exceeds the applicable target stock price level
set forth in the following table:
Percent of Option Shares
Subject to Repurchase
Target Level of After Attainment of
Period Stock Price Per Share Target Stock Price Level
------ --------------------- ------------------------
The target stock price level will be deemed to have been attained, for
purposes of this Alternative I, only if the closing price of the
Company's Common Stock (on the composite tape of The New York Stock
Exchange - Listed Securities) equals or exceeds the applicable target
stock price level on 30 trading days out of any consecutive 60 trading
day period.
(ii) Alternative II. The requirements of Alternative II may
be met with respect to a fiscal year if earnings per share (fully
diluted) before adjustment for extraordinary events including
acquisitions and dispositions ("EPS") reported for such fiscal year
equals or exceeds the applicable target EPS set forth in the following
table:
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<PAGE>
Percent of Option
Shares Subject to
Repurchase After
Period Target EPS Level Attainment of Target
------ ---------------- --------------------
(c) Other provisions of this Section 5 notwithstanding, the
Right to Repurchase shall lapse if cumulative EPS for the five fiscal
years ending _____________ equals or exceeds _____ times EPS for
________________ (which represents a cumulative compound growth rate
target of ___ per annum).
(d) The Committee may, in its sole discretion, adjust the
applicable target stock prices in subsection 5 (b) (i) or the applicable
target EPS in subsection 5 (b) (ii) if events or transactions have
occurred after the Date of Grant which are unrelated to the performance
of the Optionee and result in a distortion of the target stock price or
target EPS in an applicable fiscal year.
(e) In the event of Optionee's death, disability,
retirement approved by the Committee or other termination of employment
deemed by the Committee to be in the best interests of the Company, the
Right to Repurchase will lapse. For the purpose of this Section 5,
disability shall be defined to mean the absence of the Optionee from his
duties with the Company on a full-time basis for one hundred eighty (180)
days within any period of three hundred and sixty five (365) consecutive
days as a result of his incapacity due to physical or mental illness as
confirmed by a physician acceptable to the Company.
(f) Option Shares shall not be transferable at any time
prior to such time as the Right to Repurchase has lapsed with respect to
such Option Shares.
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<PAGE>
(g) As the Right to Repurchase lapses in accordance with
Section 5(b) above, it shall lapse in ascending order of Option Price
with the Right to Repurchase lapsing on those shares that have been or
may be acquired by exercise of Options with the lowest Option Price.
Except to the extent the Right to Repurchase has lapsed with respect to
specific Option Shares, shares repurchased by Committee will be
repurchased in ascending order of Option Price; provided, however, if any
such Options have not been exercised, the Committee shall cancel such
unexercised Options starting with the outstanding Options with the lowest
Option Price.
(h) Notwithstanding the other provisions of this Section 5,
the Right to Repurchase shall lapse in its entirety upon the occurrence
of a change in control of the Company, unless such change in control is
caused by or within the control of the Optionee. A change in control of
the Company will be deemed to have occurred if the individuals who
constitute the Board at the beginning of any period of two consecutive
years cease to constitute a majority of the members thereof. For this
purpose, no change will be deemed to have occurred in the composition of
the Board by reason of the appointment or election of any director to
fill a vacancy created by (i) the death or disability of a director or
(ii) the resignation or removal of a director or an increase in the size
of the Board, if such resignation or removal or increase in the size of
the Board is unrelated to a merger or consolidation of the Company with
another corporation, an acquisition of a majority of the voting shares of
the Company's stock or a sale by the Company of substantially all of its
assets. In each of the cases described in clauses (i) and (ii) of the
preceding sentence, the director who is appointed or elected to fill the
26
<PAGE>
vacancy will be treated as a director serving on the Board at the
beginning of the two-year period.
6. Termination. (a) The Option shall terminate on the
earliest of the following dates:
(i) The date written notice is given by the Optionee
or by the Company or Subsidiary terminating Optionee's employment for any
reason other than retirement, death or permanent disability; provided,
however, that the Committee may, in its sole discretion, determine it is
equitable under the circumstances or in the best interests of the Company
to allow Optionee up to 90 days from the date of termination to exercise
the Option; provided further that for purposes of this Agreement, the
Optionee shall not be deemed to have terminated such employment by reason
of (1) the transfer of employment among the Company and its Subsidiaries
or (2) a leave of absence approved by the Board.
(ii) One year after the retirement of the Optionee.
(iii) One year after the death or permanent
disability of the Optionee, if the Optionee dies or becomes permanently
disabled while an employee of the Company or a Subsidiary;
(iv) Committee cancellation resulting from exercise of
the Right to Repurchase.
(v) Ten years after the Date of Grant.
(b) In the event that the Optionee commits an act that the
Committee determines to have been intentionally committed and materially
inimical to the interests of the Company, the Option shall terminate as
of the time of the commission of that act, notwithstanding any other
provision of this Agreement.
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<PAGE>
7. Share Certificates. The Company hereby agrees to cause
certificates for the Option Shares purchased hereunder to be delivered to
the Optionee upon (i) full payment of the applicable Option Price,
subject to the applicable terms and conditions of the Plan and (ii)
subject to the terms and conditions set forth herein (including the lapse
of the Company's repurchase right set forth in Section 5 hereof). All
certificates evidencing Option Shares purchased pursuant hereto (and any
certificates for Common Stock attributable to the shares acquired by
exercise of the Option which, in the opinion of counsel for the Company,
are subject to similar legal requirements) shall have endorsed thereon
before issuance such legends as the Company's counsel may deem necessary
or advisable. In furtherance thereof, until such time as the Right to
Repurchase shall have lapsed, the certificates representing such shares
shall bear a legend to evidence the Right to Repurchase and the related
restriction on transferability, and such certificates shall remain in the
custody of the Company. Optionee agrees to execute and deliver blank
stock powers to the Company at the time of exercise of the Option to
authorize transfer of Option Shares that may be repurchased by the
Company pursuant to the Right to Repurchase. In the event that the
issuance of Option Shares upon exercise constitutes a transaction not
involving a public offering, the Company and any transfer agent shall not
be required thereafter to transfer any such shares unless and until the
Company or its transfer agent shall have received from counsel to the
Company, in a form satisfactory to the Company, an opinion that any such
transfer will not be in violation of any applicable law or regulation.
Optionee agrees not to sell, assign, pledge or otherwise dispose of any
shares without the Company first receiving such an opinion.
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<PAGE>
8. Tax Reimbursement by Optionee. As a condition of this
grant, Optionee agrees that, if and to the extent that any exercise of
the Option or subsequent lapse of the Right to Repurchase would result in
the Company not being permitted to deduct for tax purposes under Section
162(m) of the Code (or any successor provision), remuneration equal to
the amount of remuneration received by Optionee, Optionee will reimburse
the Company in an amount equal to (i) the amount of the tax benefit that
would have resulted to the Company had the deductibility of remuneration
resulting from such exercise or subsequent lapse not been subject to the
limitation under Section 162(m) (or any successor provision), plus (ii)
the amount of taxes payable by the Company as a result of all
reimbursements under (i) and (ii) hereof. All determinations relating to
this provision shall be made by the Company's independent certified
public accountants. Optionee acknowledges that the Option may not
qualify as "performance-based compensation" within the meaning of Section
162(m) of the Code.
9. Transfer. The Option may not be transferred except by will
or the laws of descent and distribution and may not be exercised during
the lifetime of the Optionee except by the Optionee or the Optionee's
guardian or legal representative acting on behalf of the Optionee in a
fiduciary capacity under state law and court supervision.
10. Compliance with Law. The Company shall make reasonable
efforts to comply with all applicable federal and state securities laws
and regulations; provided, however, that notwithstanding any other
provision of this Agreement, the Company will have no obligation to
deliver shares upon exercise if such exercise or delivery would involve a
violation of any such laws and regulations.
29
<PAGE>
11. Adjustments. (a) The Committee may make such adjustments
in the Option Price per share, the target attainment levels for stock
price per share and EPS, and the numbers and kind of shares of stock or
other securities covered by this Agreement as the Committee may in good
faith determine to be equitably required in order to prevent any dilution
or expansion of the Optionee's rights under this Agreement that otherwise
would result from any:
(i) stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company;
(ii) merger, consolidation, spin-off, reorganization,
partial or complete liquidation or issuance of rights or warrants to
purchase securities of the Company; or
(iii) other corporate transaction or event having an
effect similar to any of the foregoing.
(b) In the event that any transaction or event described or
referred to in Section 11(a) above shall occur, the Committee may provide
in substitution of any or all of the Optionee's rights under this
Agreement such alternative consideration as the Committee may in good
faith determine to be equitable under the circumstances.
12. Fractional Shares. The Company shall not be required to
issue any fractional share of Common Stock pursuant to the Option. The
Committee may provide for the elimination of fractions or for the
settlement of fractions in cash.
13. Withholding Taxes. If the Company shall be required to
withhold any federal, state, local or foreign tax in connection with the
exercise of the Option, it shall be a condition of the exercise of the
30
<PAGE>
Option that Optionee pay to the Company the balance of such tax required
to be withheld or make provisions that are satisfactory to the Company
for the payment thereof. The Optionee may elect to have the Company
withhold Option Shares to satisfy tax withholding obligations only if
such shares are not subject to the Company's right of repurchase.
14. Right to Terminate Employment. No provision of this
Agreement shall limit in any way whatsoever any right that the Company or
a Subsidiary may otherwise have to terminate the employment of the
Optionee at any time.
15. Definition of a Subsidiary. For the purposes of this
Agreement, the term "Subsidiary" means any corporation in which the
Company directly or indirectly owns or controls more than 50 percent of
the total combined voting power of all classes of stock issued by the
corporation.
16. Communications. All notices, demands and other
communications required or permitted hereunder or designated to be given
with respect to the rights or interests covered by the Agreement shall be
deemed to have been properly given or delivered when delivered personally
or sent by certified or registered mail, return receipt requested, U.S.
mail or reputable overnight carrier with full postage prepaid and
addressed to the parties as follows:
If to the Company, at: 1101 Pennsylvania Avenue, N.W.
Suite 1010
Washington, DC 20004
Attention: Vice President - Financial Operations
If to the Optionee: Optionee's address provided by
Optionee on the last page hereof
Either the Company or Optionee may change the above designated
address by written notice to the other specifying which new address.
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<PAGE>
17. Interpretation. The interpretation and construction by the
Committee of the Agreement shall be final and conclusive. No member of
the Committee shall be liable for any such action or determination made
in good faith.
18. Amendment in Writing. In accordance with its terms, this
Agreement may be amended, but only in writing which specifically
references this Section and is signed by each of the parties hereto.
19. Integration. The Option is granted pursuant to the Plan,
and this Agreement and the Option are subject to all of the terms and
conditions of the Plan, a copy of which is attached hereto and
incorporated herein by reference. As such, this Agreement embodies the
entire agreement and understanding of the parties hereto with respect to
the Option, and supersedes any prior understandings or agreements,
whether written or oral, with respect to the Option.
20. Severance. In the event that one or more of the provisions
of this Agreement shall be invalidated for any reason by a court of
competent jurisdiction, any provision so invalidated shall be deemed to
be separable from the other provisions hereof and the remaining
provisions hereof shall continue to be valid and fully enforceable.
21. Governing Law. This Agreement is made under, and shall be
construed in accordance with, the laws of the District of Columbia and
applicable provisions of the Delaware General Corporation law and
applicable Federal law.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed by the Company on
the day and year first above written.
HARMAN INTERNATIONAL INDUSTRIES,
INCORPORATED
By: ___________________
Name: ________________
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Non-Qualified Stock Option Agreement and
accepts the Option subject to the applicable terms and conditions of the
Plan and the terms and conditions hereinabove set forth.
Optionee:
_________________
OPTIONEE: Please complete/update the following information.
Name: _____________
Home Address:
___________________________
___________________________
Employee Number: ___________
Date of Hire: ______
Company or Division: _____________________________________
33
