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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, 1995
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
(Title of class) Exchange, Inc.
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, 1995, was $585,602,912.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date:
16,242,113 shares of Common Stock, par value $.01 per share, as of
August 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for
the fiscal year ended June 30, 1995, 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 1995 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. _____
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TABLE OF CONTENTS
PART I
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Page
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Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 23
Item 3. Legal Proceedings....................................................... 24
Item 4. Submission of Matters to a Vote of Security Holders... 24
Executive Officers of the Registrant............................. 24
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters....................................... 27
Item 6. Selected Financial Data................................................ 27
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 27
Item 8. Consolidated Financial Statements and
Supplementary Data.................................................... 27
Item 9. Disagreements on Accounting and Financial
Disclosure................................................................... 27
PART III
Item 10. Directors and Executive Officers of the Registrant........ 28
Item 11. Executive Compensation............................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................................ 28
Item 13. Certain Relationships and Related Transactions............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................................ 29
List of Financial Statements and
Financial Statement Schedules...................................... 33
Independent Auditors' Report........................................ 35
Index to Exhibits........................................................... 37
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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 around the world. 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,
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; Becker automotive aftermarket radios and
electronics; AudioAccess in-home, multi-source, multi-zone sound system
controls; and Citation 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, Mitsubishi, Toyota,
Jaguar, Saab, Range Rover and BMW, bearing the brand names Infinity,
JBL and Harman Kardon and Becker radios and electronics designed and
manufactured for factory installation by automobile manufacturers including
Mercedes Benz, BMW, Opel and Porsche.
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
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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 increasing popularity of home entertainment media has
stimulated consumer demand for high-quality audio products and prompted
the expansion of Harman's consumer product portfolio to include home
theater products, wireless loudspeakers, surround sound processors and
multimedia loudspeakers. 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 manufacturers of high-quality
professional audio products, and that it offers a broader range of these
products than any other 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.
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, Harman
Kardon, Studer, AKG, Becker 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"), Mercedes Benz ("Mercedes"), Mitsubishi Motor
Company ("Mitsubishi"), BMW, Jaguar, Rover and Saab, the Company
designs and manufactures customized high-fidelity automotive loudspeaker
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systems, radios and electronics 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. Harman Kardon systems are offered
on the Jaguar XJS, the Saab 9000 and the Range Rover by Land Rover. A
high-end audio system produced by Harman Motive is offered in the Toyota
Avalon. In 1996, BMW will be added to the loudspeaker system customer
base. Becker radios and electronics are offered on most Mercedes models
and certain BMW, Opel and Porsche models.
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.
The Predecessor also formed international subsidiaries to market and
distribute its audio products in Europe and Japan, where JBL and Harman
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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, Mercedes, Jeep, BMW, Mitsubishi,
Saab, Range Rover, Jaguar and Toyota.
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
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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") 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 and the fiscal 1995 acquisition of NewMediaWare, renamed
Harman Interactive, which has strengthened the Company's multimedia
market presence.
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, JBL and Harman Kardon. In March 1995, the
company expanded its automotive OEM markets and capabilities with the
acquisition of Becker GmbH, a German manufacturer of radios and other
electronics for the automotive OEM market and the automotive aftermarket.
The loudspeaker manufacturing capabilities of the Company include
North American and European operations. Primary loudspeaker
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manufacturing sites are located in California, Denmark and France.
The Company maintains marketing offices in Hong Kong, Denmark,
Japan, Singapore and Brazil 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.
ORGANIZATION
The Company is organized in three core groups - Professional,
Consumer and Automotive OEM - with each group incorporating all related
manufacturing, marketing and distribution operations. The Professional
Group contributed approximately 38% of fiscal 1995 total net sales, the
Consumer Group accounted for approximately 37% of net sales, and the
Automotive OEM Group generated approximately 25% 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, 1995.
Description of Business
The Company's business is conducted through its wholly owned
subsidiaries which include:
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Name Principal products
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AKG Akustiche u. Kino-Gerate
Gessellschaft m.b.H. Professional electronics
Allen & Heath Limited Professional electronics
Audax Industries, S.A. Consumer home, automotive and
professional loudspeakers; automotive
OEM loudspeakers
Becker GmbH Automotive OEM and automotive
aftermarket electronics
BSS Audio Ltd Professional electronics
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Name Principal products
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DOD Electronics Corporation Professional electronics
Harman Belgium NV Consumer home, automotive and
professional high-fidelity products
Harman Consumer Europe A/S Consumer home and automotive
electronics
Harman Deutschland GmbH Consumer home, automotive and
professional high-fidelity products
Harman France, S.N.C. Consumer home, automotive and
professional high-fidelity products
Harman International Industries, Consumer home, automotive and
Limited professional high-fidelity products
Harman International Japan Consumer home, automotive and
Co., Limited professional high-fidelity products
Harman-Kardon, Incorporated Consumer home and automotive
electronics
Harman-Motive, Inc. (U.S.) Automotive OEM loudspeakers
and electronics
Harman Motive Limited (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
Turbosound Ltd. Professional loudspeakers
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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.
Market growth in consumer audio is particularly strong in home
theater and multimedia. The Company is meeting consumer demand with
products carrying its respected and well-known brand names JBL, Infinity,
Citation and Harman/Kardon.
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, Harman
Kardon and Becker 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 complementary audio products manufactured
by other companies. The Professional Group accounted for approximately
38% of the Company's fiscal 1995 sales. The Consumer Group contributed
approximately 37% of fiscal 1995 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 25% of fiscal 1995 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,
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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 in Virginia, 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 in Copenhagen and Abbey Road Studio in England.
Performing artists such as Peter Gabriel, Bruce Springsteen, David Bowie,
REM, Pink Floyd, Randy Travis, Michael Jackson, Elton John, Eric Clapton,
Billy Joel, U2 and The Rolling Stones 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 each company's areas of strength and expertise
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, sound
reinforcement systems, 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.
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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.
The DOD product line is marketed under the DOD, dbx, 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: Van Halen, Aerosmith, the
Rolling Stones, Trent Reznor of Nine Inch Nails, David Gilmour of Pink
Floyd and Prince.
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. Broadcasters use
Lexicon products to edit, shape and synchronize their programming.
Recording studios around the world use Lexicon digital signal processing
products to process sound effects and refine final mixes. 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 and headphones. 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: digital
signal processing devices distributed worldwide under the brand names BSS
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 both the broadcast and the recording arenas. 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
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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 or 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. Compostions, Infinity's new home theater loudspeakers, have
received excellent reviews from the high fidelity audio press for outstanding
design and performance.
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 Northridge 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, surround sound
processors featuring Dolby Pro-Logic and Lucasfilm Home THX, and front-
loading, bit stream compact disc changers.
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Citation is a designer and manufacturer of high-end surround sound
processors, amplifiers and loudspeakers for the growing U.S. and
international home theater market. Citation products feature "THX" and
provide solutions for all component and system needs for home theater and
home audio.
Pyle Industries manufactures and markets aftermarket automotive
speakers, amplifiers and electronics.
AudioAccess 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.
In 1993, the Company acquired a 20 percent minority interest in
Madrigal, with an option on the remaining shares. Madrigal is the
manufacturer of the renowned Mark Levinson and Proceed brand high-
fidelity product lines. The Company plans to exercise its option to acquire
the remaining 80 percent early in fiscal 1996.
AUTOMOTIVE OEM. Harman International believes it is the
world's largest manufacturer of premium, branded, automotive OEM audio
systems. In fiscal 1995, sales of automotive OEM products accounted for
approximately 25% of the Company's consolidated net sales. In its sale of
loudspeakers, head units (radio/cassette deck/CD player) 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,
radios and other electronics, as well as the reputation for quality associated
with its JBL, Infinity, Harman Kardon and Becker brand names. The
Company's expertise in designing and manufacturing transducers utilizing
special materials allows the Company to collaborate with automobile
manufacturers to design lighter sound systems, thereby contributing to
increases in automobile fuel efficiency. The addition of head unit and other
electronics expertise through the Becker acquisition enables the Company to
provide complete high-fidelity audio systems solutions to the automobile
manufacturers.
The Company manufactures audiophile OEM sound systems for
automobiles, including the Infinity systems sold to Chrysler and Mitsubishi,
the JBL systems sold to Ford and the Harman Kardon systems sold to
Jaguar, Saab and Range Rover, as well as a non-branded premium system
sold to Toyota for the Avalon. Becker supplies head units and other
electronics to Mercedes, BMW, Opel and Porsche. These premium OEM
audio systems are engineered individually for each automobile model to
maximize acoustic performance.
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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; Ford's Taurus,
Windstar, Explorer and Crown Victoria models; and Mercury's Sable
model. The Company provides the total system, including all electronic
components, other than the head unit (radio/cassette deck/CD player) and
subwoofer amplifiers, for selected models.
Harman Kardon branded systems are offered in the Saab 9000,
Jaguar XJS and the Range Rover by Land Rover. Harman provides a
premium system for the Toyota Avalon, and in 1996, the customer base will
be expanded to include BMW.
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 Harman Motive, U.S., subsidiary 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.
The Company's Harman Motive, Limited, 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, Limited currently produces a variety of loudspeaker
13 17
<PAGE>
systems which are installed in automobiles manufactured by Ford, Rover,
Jaguar and Saab. In addition, the Company's Audax transducer
manufacturer, located in France, currently manufactures and sells
loudspeakers directly to French automobile manufacturer Citroen.
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:
1995: The JBL EON portable performance system, the Infinity
Compositions home theater loudspeaker system, the Lexicon PCM-
80 digital effects processor, the JBL GTS 600 200-watt variable
crossover car amplifier, the BSS FCS-388 OmniDrive DSP
loudspeaker management system, the Harman Kardon AVR25
audio/video receiver, the Citation THX home theater controller/
amplifier/loudspeaker system, the Orban 8208 digital stereo encoder,
the JBL AF2222 high output foldback loudspeaker, the Studer
VideoMix non-linear video recording and playback system, the AKG
C680 boundary layer microphone, the JBL 404GTi car midwoofer
with titanium tweeter, the DOD FX32 sub-harmonic generator for
bass guitar, the Lexicon 500T programmable touchscreen infrared
system commander, the JBL Synthesis S650 5-channel home theater
amplifier, the dbx 290 stereo reverb processor, the Turbosound
TSW718 sub-bass loudspeaker, the Studer D941 fully digital on-air
mixing console, the Harman Kardon FL8450 CD changer, the JBL
Array Series 4895PL and 4896PL proprietary tour sound systems,
the JBL Array Series ASC24 analog system controller, the Infinity
Kappa cs Series automotive component systems, the dbx dual 31
band graphic equalizer, the Studer CDPress mastering system, the
Becker Energy 600 automotive audio system amplifier, the Infinity
Minuette series loudspeakers.
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
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
14 18
<PAGE>
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 surroundsound 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.
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's internal manufacturing expertise has provided opportunities
to transfer advances in technology and materials to multiple product lines,
thereby leveraging gains from product development and process
improvement efforts. The Company uses common manufacturing facilities
to achieve economies of scale, while maintaining competition among its
subsidiaries in engineering, product development and marketing.
The Company's principal U.S. 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
15 19
<PAGE>
automotive aftermarket and OEM applications. DOD manufactures
professional electronics products at its facility in Salt Lake City, Utah.
Lexicon manufactures professional and consumer electronics products
primarily 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. Becker
manufactures automotive OEM radios and other electronics in Germany.
AKG manufactures microphones and headphones in Austria, with additional
manufacturing operations in India. 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, Limited
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, Allen &
Heath mixing boards and BSS professional amplifiers. The Company's
international automotive OEM electronics, loudspeaker 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. Approximately
60% of the Company's sales are outside the United States. 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 38%
of the Company's consolidated net sales in fiscal 1995. The consumer
market for audio products consists of home and automotive aftermarket
products, which accounted for approximately 37% of fiscal 1995
consolidated net sales. The OEM market includes automobile manufacturers
who purchase components and systems (loudspeakers, radios, amplifiers)
primarily on a branded basis. In fiscal 1995, sales of automotive OEM
products accounted for approximately 25% of consolidated net sales.
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.
16 20
<PAGE>
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 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) for installation in vehicles during
production.
Suppliers
Products designed by Harman Kardon in the United States are
manufactured by several suppliers. The Company believes it has good
working relationships with these suppliers. The use of multiple vendors
helps to mitigate risks associated with potential disruption.
One supplier provides a significant number of components to several
subsidiaries of the Company. The loss of this supplier could create
disruptions 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 and
magnets. The loss of any one of these suppliers would have a material
impact on the earnings of Northridge Manufacturing until alternate sources
for these components could be found.
17 21
<PAGE>
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, Becker, 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, 1995, the Company held
approximately 289 United States and foreign patents covering various
products, product designs and circuits, and had approximately 214 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
Sales to Chrysler for fiscal year 1995 accounted for 9.5% of the
Company's consolidated net sales. The loss of automotive OEM system
sales to Chrysler would have a material adverse impact on the sales and
earnings of Harman Motive and the Company as a whole. The Company's
next two largest customers, Circuit City and Ford, accounted for an
aggregate of 12.3% of its consolidated net sales for the year ended June 30,
1995, and the loss of either of these customers would also have a material
adverse impact on the sales and earnings of the Company. The Company
anticipates that Mercedes Benz will be a significant customer in fiscal 1996,
and the loss of this customer would have a material adverse impact on the
sales and earnings of the Company.
Backlog Orders
Because the Company's practice is to maintain sufficient inventories
of finished goods to fill orders promptly, the level of backlog is not
considered to be an important index of future performance. The Company's
18 22
<PAGE>
backlog was approximately $31.3 million at June 30, 1995, and $27.3
million at June 30, 1994.
Backlog Orders
Because the Company's practice is to maintain sufficient inventories
of finished goods to fill orders promptly, the level of backlog is not
considered to be an important index of future performance. The Company's
backlog was approximately $31.3 million at June 30, 1995, and $27.3
million at June 30, 1994.
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.
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 retailers, professional audio dealers, contractors and
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 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
19 23
<PAGE>
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 sound reinforcement
include Electro Voice, Inc. and Altec Lansing (subsidiaries of Mark IV
Industries), TOA, Tannoy, Bose, Peavy, Tascam, Klark-Teknik, Marshall,
Fender 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: Sony,
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, Alesis, Marshall,
Fender and Sony.
The Professional Group also competes in the industrial and
architectural sound market; competitors within this market include Siemens,
Peavy and TOA.
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, Boston Acoustics, Bowers & Wilkins, KEF, Celestion,
Paradigm, Acoustic Research, Cambridge SoundWorks and Polk Audio.
Harman's principal competitors in the consumer automotive aftermarket area
include Alpine, Kenwood, Bose, Nakamichi, Clarion, Rockford-Fosgate and
Blaupunkt.
20 24
<PAGE>
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 Sony, Denon, Onkyo, Nakamichi,
Pioneer and Kenwood.
In the automotive OEM market, the Company's principal
competitors include Bose, International Jensen, Oxford Electric, and Foster
Electric in the loudspeaker systems segment and Alpine, Blaupunkt and
Panasonic in the electronics segment. The Company is the only supplier of
branded loudspeaker systems for Ford, Chrysler, Jeep and Mitsubishi
automobiles in the United States, and also supplies branded loudspeaker
systems to Ford, Jaguar, Rover and Saab in Europe as well as supplying the
Toyota Avalon. Additionally, the company is the primary supplier of radio
head units to Mercedes-Benz. 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 and
electronics 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, and also in its
ability to provide complete, branded audio systems to the automobile
manufacturers.
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.
During fiscal 1995, the Company gave notice to certain state
agencies that an environmental release had occurred at one of its facilities.
The company has proposed a remediation plan to the state agency and is
awaiting their response. The Company believes that the future cost to
remediate this site will not exceed $600,000.
The Company has been named as a "potentially responsible party"
with respect to the disposal of hazardous wastes at four hazardous waste
21 25
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 remedia-
tion, 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 $40,257,000, $22,324,000, and $11,980,000 for the fiscal
years ending June 30, 1995, 1994 and 1993, respectively. The increase in
expenditures in fiscal 1995 reflects the inclusion of Becker, acquired
effective January 1995, and a full year of development efforts at AKG and
Studer, acquired in September 1993 and March 1994, respectively.
Number of Employees
As of June 30, 1995, the Company had 7,929 full-time employees,
including 3,717 domestic employees and 4,212 international employees. The
increase in number of employees as of June 30, 1995 compared to the prior
year primarily results from the Becker acquisition.
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 39 and 29, respectively, in the
Company's Annual Report to Shareholders for the fiscal year ended June 30,
1995.
22 26
<PAGE>
ITEM 2. PROPERTIES
The Company's principal activities are conducted at the facilities
described in the following table.
<TABLE>
Square Owned or Percentage
Location Footage Leased Utilization Division
- - ---------------------------- ---------- --------- ------------ -----------------
<S> <C> <C> <C> <C>
Northridge, California 620,384 Leased 100% JBL, Harman
Motive
Ittersbach, Germany 226,810 Owned 61% Becker
4,320 Leased 100%
Ontario, California 212,600 Owned 100% JBL, Infinity
Martinsville, Indiana 181,856 Owned 100% Harman Motive
Huntington, Indiana 167,557 Owned 100% Pyle
Ringkobing, Denmark 134,366 Owned 100% Lydig
20,753 Leased 100%
Potters Bar, UK 143,000 Leased 100% Soundcraft
Vienna, Austria 128,593 Leased 100% AKG
Sandy, Utah 122,000 Leased 100% DOD
Heilbronn, Germany 48,571 Owned 92% Harman
63,183 Leased 60% Deutschland
Bridgend, UK 101,400 Leased 100% Harman Motive
Worth-Schaitt, Germany 89,640 Owned 70% Becker
Regensdorf, Switzerland 86,111 Leased 100% Studer
San Leandro, California 78,125 Leased 100% Orban
Chateau-du-Loir, France 66,712 Owned 100% Audax
</TABLE>
The company considers its properties to be suitable and adequate for
its present needs.
23 27
<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
<TABLE>
Age at
Name August 1, 1995 Position
- - --------------------- ------------------- -----------------------------------------
<S> <C> <C>
Sidney Harman 76 Chairman, Chief Executive Officer
and Director of the Company
Bernard A. Girod 53 President, Chief Operating Officer,
Secretary and Director of the
Company
F. Michael Budd 48 President - Harman Manufacturing Group
Philip J. Hart 50 President - Harman Professional Group
Thomas Jacoby 41 President - Harman Consumer Group
Gregory P. Stapleton 48 President - Automotive OEM Group
F. Gordon Bitter 52 Vice President - Finance & Administration
and Chief Financial Officer
Jerome H. Feingold 53 Vice President - Quality
Frank Meredith 38 Vice President and General Counsel
William S. Palin 52 Vice President and Director International
Audit
Sandra B. Robinson 36 Vice President - Financial Operations
Floyd E. Toole 49 Vice President - Engineering
</TABLE>
Officers are elected annually by the Board of Directors and hold
office at the pleasure of the Board of Directors until the next annual selec-
tion of officers or until their successors are elected and qualified.
24 28
<PAGE>
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 Chief Financial Officer from September 1986 to September 1995.
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.
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.
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.
F. Gordon Bitter was appointed Vice President - Finance and
Administration of the Company on September 7, 1995. Prior to that time,
Mr. Bitter was: Senior Vice President - Finance and Accounting of the
Chicago and North Western Transportation Company from October 1994 to
April 1995; President of the Metco Division of The Perkin-Elmer
Corporation from 1992 to 1993; Senior Vice President - Finance and
Administration of The Perkin-Elmer Corporation from 1988 to 1991; and
Senior Vice President - Finance and Accounting of The Singer Company
from 1984 to 1988.
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.
25 29
<PAGE>
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
1981, 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.
26 30
<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, 1995 (Shareholder Information on page 42).
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, 1995 (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, 1995 (Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 27 through 29).
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, 1995 (Consolidated Financial Statements on pages 30
through 41).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27 31
<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 1995
Annual Meeting of Stockholders.
28 32
<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 33 hereof.
2. Financial statement schedules required to be filed
hereunder are indexed on page 33 hereof.
3. The exhibits required to be filed hereunder are
indexed on pages 37 through 43 hereof.
b) Reports on Form 8-K
None.
29 33
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
34
<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 18, 1995
------------------------
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.
<TABLE>
Signature Title Date
<S> <C> <C>
/s/ Sidney Harman Chairman of the Board, September 18, 1995
- - ------------------------------ Chief Executive Officer ------------------------
Sidney Harman and Director
/s/ Bernard A. Girod President, Chief Operating September 18, 1995
- - ------------------------------ Officer, Secretary and ------------------------
Bernard A. Girod Director
/s/ Shirley M. Hufstedler Director September 18, 1995
- - ------------------------------ ------------------------
Shirley M. Hufstedler
/s/ Edward Meyer Director September 18, 1995
- - ------------------------------ ------------------------
Edward Meyer
/s/ Alan Patricof Director September 19, 1995
- - ------------------------------ ------------------------
Alan Patricof
/s/ F. Gordon Bitter Chief Financial Officer September 18, 1995
- - ------------------------------ (Principal Accounting ------------------------
F. Gordon Bitter Officer)
</TABLE>
31 35
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36
<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 30 through 41
of the 1995 Annual Report to Shareholders
herein incorporated by reference as Exhibit 13.1):
Consolidated Balance Sheets as of June 30, 1995
and 1994 30
Consolidated Statements of Operations for the years
ended June 30, 1995, 1994 and 1993 31
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 32
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1995, 1994 and 1993 33
Notes to Consolidated Financial Statements 34
Independent Auditors' Report 35 41
Schedules for the years ended June 30, 1995,
1994 and 1993:
II Valuation and Qualifying Accounts and Reserves 34
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.
33 37
<PAGE>
Schedule II
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Three Years Ended June 30, 1995
($000's omitted)
<TABLE>
<S> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------
Charged
Balance at Charged to To Other Balance
Beginning Costs and Accounts Deductions at End
Classification of Period Expenses Describe Describe of Period
- - ---------------------------------------------------------------------------------------------------------------
Year Ended
June 30, 1993
Allowance for
doubtful
accounts $ 3,664 $ 2,216 $ 77 (1) $ 2,522 (2) $ 3,435
Year Ended
June 30, 1994
Allowance for
doubtful
accounts $ 3,435 $ 2,757 $ 7,189 (3) $ 3,140 (2) $10,241
Year Ended
June 30, 1995
Allowance for
doubtful
accounts $10,241 $ 4,263 $ 2,217 (4) $ 4,408 (2) $ 12,313
</TABLE>
(1) Addition due to Lexicon acquisition.
(2) Deductions for accounts receivable written off net of recoveries.
(3) Addition due to AKG, Studer and Harman Belgium (Beltronics)
acquisitions.
(4) Addition due to Becker, D.A.V.I.D. and Harman Interactive
(NewMediaWare) acquisitions.
34 38
<PAGE>
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------
The Board of Directors
Harman International Industries, Incorporated
Under date of August 11, 1995, we reported on the consolidated balance
sheets of Harman International Industries, Incorporated and subsidiaries as
of June 30, 1995 and 1994, 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, 1995, as contained in the 1995 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, 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed in the accompanying index. The
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
August 11, 1995
39
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40
<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 and its subsidiaries on a consolidated basis. Pursuant to Item
601(b)(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 Statement 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
37 41
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
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
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
38 42
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
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
10.10 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
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
39 43
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
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
incorporated by reference.).............................................IBR
40 44
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
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
10.38 Amendment to the Harman International Industries,
Incorporated Supplemental Executive Retirement
Plan. (Filed as Exhibit 19.1 to the Quarterly Report
Report on Form 10-Q for the quarter ended March
31, 1992 (File No. 0-15147), and hereby
incorporated by reference.)..............................................IBR
41 45
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
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
42 46
<PAGE>
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.53 Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994, among Harman
International Industries, Incorporated, the Subsidiary
Borrowers and Subsidiary Guarantors, and the
Several Lenders named therein with Chemical
Securities, Inc., as Arranger, NationsBank of North
Carolina, N.A., as Co-Agent and Chemical Bank,
as Administrative Agent ...............................................IBR
10.54 First Amendment dated February 15, 1995, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994 .............................................49
13.1 Harman International Industries, Incorporated
Annual Report to Shareholders for the fiscal
year ended June 30, 1995...............................................61
21.1 Subsidiaries of the Company........................................109
23.1 Consent of Independent Auditors................................115
27.1 EDGAR Financial Data Schedule................................119
43 47
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48
<PAGE>
EXHIBIT 10.54
49
<PAGE>
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50
<PAGE>
FIRST AMENDMENT
FIRST AMENDMENT, dated as of February 15, 1995 (this
"Amendment"), to the MULTI-CURRENCY, MULTI-OPTION
CREDIT AGREEMENT, dated as of September 30, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"; terms defined therein being used herein as therein defined),
among HARMAN INTERNATIONAL INDUSTRIES,
INCORPORATED, the Subsidiary Borrowers and Subsidiary
Guarantors parties thereto, the Lenders parties thereto,
NATIONSBANK OF NORTH CAROLINA, N.A., as Co-Agent,
CHEMICAL SECURITIES INC., as Arranger and CHEMICAL BANK,
as Administrative Agent.
W I T N E S S E T H:
WHEREAS, the parties to this Amendment wish to amend the
Credit Agreement in the manner hereinafter set forth; and
WHEREAS, this Amendment is entered into in accordance with
the provisions of subsection 14.1 of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, the
parties hereto hereby agree as follows:
1. Amendment of Schedule II to the Credit Agreement.
(a) Studer S.E. Asia Pte., Ltd., a wholly owned Subsidiary of the
Company (the "New Subsidiary Borrower"), by its signature below,
hereby acknowledges that it has received and reviewed a copy (in
execution form) of the Credit Agreement, and agrees, from and after the
effective date of this Amendment (the "Effective Date"), to (i) join the
Credit Agreement as a Subsidiary Borrower, (ii) be bound by all
covenants, agreements and acknowledgements attributable to a
Subsidiary Borrower in the Credit Agreement and (iii) perform all
obligations required of it by the Credit Agreement.
(b) The New Subsidiary Borrower hereby represents and
warrants that the representations and warranties with respect to it
contained in, or made or deemed made by it in, Section 7 of the Credit
Agreement are true and correct on the date hereof and on the Effective
Date.
(c) The address and jurisdiction of incorporation of the 0New
Subsidiary Borrower is set forth in Annex I to this Amendment.
(d) Each of the parties hereto agrees that (i) this Amendment
shall be deemed to be a Joinder Agreement, in form and substance
satisfactory for all purposes of the Credit Agreement, and (ii) the
Administrative Agent shall be entitled to, concurrently with the
effectiveness of this Amendment, amend and replace Schedule II to the
Credit Agreement to reflect the addition of the New Subsidiary
Borrower.
51
<PAGE>
2. Addition of Midland Bank Plc as a Lender. (a) By its
execution of this Amendment, Midland Bank Plc (the "New Lender") (i)
agrees to all of the provisions of the Credit Agreement, (ii) becomes a
party thereto, from and after the Effective Date, as a Lender with an
obligation to make Extensions of Credit prior to the Termination Date to
the Borrowers in accordance with, and subject to, all of the terms and
conditions contained in the Credit Agreement and (iii) agrees to provide
to the Administrative Agent all administrative information in respect of
the New Lender as is necessary or advisable for the Administrative
Agent to add the New Lender as a Lender under the Credit Agreement.
(b) The New Lender's Commitment, as of the Effective Date,
shall be in the amount of $20,000,000 and the Administrative Agent shall
be entitled to, concurrently with the effectiveness of this Amendment,
amend and replace Schedule I to the Credit Agreement to reflect the
addition of the New Lender's Commitment. (It being understood and
agreed that the New Lender's Commitment will be in addition to, and not
in replacement of, any of the existing Lenders' Commitments and,
following the Effective Date, the aggregate Commitments shall be
$220,000,000.)
(c) Each of the Borrowers and the existing Lenders (the
"Existing Lenders") agree that, in order to add the New Lender as a
Lender with a pro rata interest in the outstanding Loans (other than any
outstanding Competitive Advance Loans) and the outstanding Letters of
Credit and notwithstanding anything contained in the Credit Agreement
to the contrary, the following modifications to the applicable borrowing
procedures shall apply until such time as the New Lender has such pro
rata interests in such Loans and such Letters of Credit (at which time all
of the existing borrowing procedures which have been modified as set
forth below in this subsection 2(c) shall automatically be reinvoked for
all purposes of the Credit Agreement):
(i) with respect to any Committed Rate Loans which are
outstanding on the Effective Date, (A) automatically upon each
conversion or continuation of such Committed Rate Loans, (I) the New
Lender shall make available by the applicable Funding Time to the
Administrative Agent an amount (in the appropriate Currency and in
immediately available funds) equal to its pro rata share of such converted
or continued Committed Rate Loan and (II) the Administrative Agent
shall distribute, in like funds as received, to the Existing Lenders their
pro rata portions (based on their respective Commitment Percentages
prior to giving effect to the addition of the New Lender's Commitment)
of such amount, and (B) in the case of any prepayment of such
Committed Rate Loan (to the extent that the New Lender has not made
available its pro rata share of such Loan in accordance with clause (A)
above), the amount so prepaid shall be distributed by the Administrative
Agent solely to the
52
<PAGE>
Existing Lenders based on their respective Commitment Percentages
prior to giving effect to the addition of the New Lender's Commitment;
(ii) with respect to any Swing Line Loans (A) the Swing Line
Currency of which is Pounds Sterling and (B) which are outstanding on
the Effective Date, on the date which is 60 days following the Effective
Date (the "Swing Line Conversion Date"), to the extent such Swing Line
Loans remain outstanding, the New Lender shall make available by the
applicable Funding Time to Chemical Bank (the related Swing Line
Lender for such Loans) an amount (in Pounds Sterling and in
immediately available funds) equal to the aggregate principal amount of
such Swing Line Loans and, following such Swing Line Conversion Date
(but solely to the extent of its advances in respect thereof), the New
Lender shall be the Swing Line Lender for such Swing Line Loans (it
being agreed and understood, as between the New Lender and Chemical
Bank, that Chemical Bank shall be entitled to receive any interest
accruing on such Swing Line Loans up to but excluding such Swing Line
Conversion Date); and
(iii) with respect to any Letters of Credit which are outstanding
on the Effective Date, (A) the New Lender shall automatically become
an L/C Participant in respect of such Letters of Credit for an undivided
interest equal to the New Lender's Commitment Percentage of the
related Issuing Banks' obligations and rights under such Letters of Credit
(and the New Lender shall be entitled to its pro rata share, from and after
the Effective Date, of any commissions in respect of such Letters of
Credit) and (B) each L/C Participant's interests in such Letters of Credit
shall be automatically reduced to an amount which is calculated based on
such L/C Participant's Commitment Percentage (after giving effect to the
addition of the New Lender's Commitment).
With respect to any new Extensions of Credit which are made by the
Lenders under the Credit Agreement on or following the Effective Date,
such Extensions of Credit shall be made, to the extent applicable, based
on the Commitment Percentages of all the Lenders (including the New
Lender).
3. Amendment of Schedule III to the Credit Agreement.
(a) The New Lender shall, from and after the Effective Date, become the
Swing Line Lender for each Borrower listed on Schedule III of the
Credit Agreement in respect of which the related Swing Line Currency is
Pounds Sterling. Notwithstanding the last sentence of subsection
14.1(b)(iii) of the Credit Agreement, Chemical Bank, as the existing
Swing Line Lender for such Borrowers, shall cease to be such a Swing
Line Lender following the repayment of its Swing Line Loans to such
Borrowers in accordance with subsection 2(c)(ii) above.
53
<PAGE>
(b) The New Lender agrees to provide to the Administrative
Agent all administrative information in respect of the New Lender as is
necessary or advisable for the Administrative Agent to add the New
Lender as a Swing Line Lender under the Credit Agreement. In
addition, each of the parties hereto agrees that (i) this Amendment shall
be deemed to be a Schedule Amendment, in form and substance
satisfactory for the purposes of making the changes to the Credit
Agreement set forth in this subsection, and (ii) the Administrative Agent
shall be entitled to, concurrently with the effectiveness of this
Amendment, amend and replace Schedule III to the Credit Agreement to
reflect the foregoing changes.
4. Amendment of Schedule IV to the Credit Agreement.
(a) Schedule IV to the Credit Agreement is hereby amended by adding to
Sections I.A., I.B., I.C. and I.D. of such Schedule IV, as the last entry in
each such Section, the information in respect of Canadian Dollars
provided to the Administrative Agent in respect thereof.
(b) Schedule IV to the Credit Agreement is further amended
by (i) replacing the interest rate set forth in Section I.A. of such
Schedule under the heading "Austrian Schillings" with the interest rate
set forth in such Section under the heading "Danish Kroner" and (ii)
replacing the interest rate set forth in Section I.A. of such Schedule
under the heading "Danish Kroner" with the interest rate set forth in such
Section under the heading "Austrian Schillings".
(c) Each of the parties hereto agrees that (i) this Amendment
shall be deemed to be a Schedule Amendment, in form and substance
satisfactory for the purposes of making the changes to the Credit
Agreement set forth in this subsection, and (ii) the Administrative Agent
shall be entitled to, concurrently with the effectiveness of this
Amendment, amend and replace Schedule IV to the Credit Agreement to
reflect the foregoing changes.
5. Amendment of Section 1.1 of the Credit Agreement. The
definition of "Available Foreign Currencies" set forth in subsection 1.1 of
the Credit Agreement is hereby amended by inserting, on the fourth line
thereof and immediately following "Swiss Francs," the following:
"Canadian Dollars,".
6. Amendment of Section 5 of the Credit Agreement. (a)
Section 5 of the Credit Agreement is hereby amended by inserting, as a
new subsection 5.9, the following:
"5.9 Issuance of Letters of Credit as Time Drafts.
Notwithstanding anything to the contrary contained in this
Section 5, each Borrower may request that any Letter of Credit
permit drawings thereunder to be by means of acceptance by the
Issuing Bank of a time draft (a "Time Draft") rather than by
payment of a sight draft. Each Time Draft shall (in addition to
satisfying all of the provisions
54
<PAGE>
set forth in this Section 5, except to the extent such provisions
conflict with the provisions in this subsection 5.9 (in which case
this subsection 5.9 shall be controlling)) expire no later than the
earliest of (i) 90 days following the acceptance of such Time
Draft by the related Issuing Bank, (ii) 5 Business Days prior to
the Termination Date and (iii) 180 days after the issuance of the
Commercial Letter of Credit pursuant to which such Time Draft
is made. Notwithstanding anything to the contrary in this
Agreement:
(a) in calculating the outstanding amount of L/C
Obligations for purpose of determining the amount of the
Commitments available for usage as Letters of Credit
under subsection 5.1(a), the face amount of each outstanding and
accepted Time Draft shall be deemed to constitute L/C
Obligations;
(b) in calculating the undrawn face amount of any Letter
of Credit for purposes of determining the amount of Letter of
Credit commission payable pursuant to subsection 5.3(a), each
Letter of Credit under which a Time Draft has been issued and
accepted shall be deemed undrawn to the extent of the face
amount of such Time Draft until such Time Draft has been paid;
and
(c) each L/C Participant shall be deemed to have an
undivided interest equal to such L/C Participant's Commitment
Percentage in the Issuing Bank's rights and obligations under any
Time Draft accepted by such Issuing Bank under any Letter of
Credit."
(b) Section 5.1(a) of the Credit Agreement is hereby amended by
inserting, on the third line thereof and immediately prior to "'Letter of
Credit'", the following: "(including any Time Draft referred to
subsection 5.9)".
(c) Section 5.2 of the Credit Agreement is hereby amended by
deleting the last sentence thereof in its entirety and replacing it with the
following:
"Such Issuing Bank shall promptly (and in no event later
than the Business Day following its issuance of any Letter of
Credit) advise the Administrative Agent of the terms of such
Letter of Credit (or provide the Administra- tive Agent with a
copy of such Letter of Credit), and each Lender shall be entitled
to receive from the Administrative Agent, following such
Lender's request therefor, any materials so provided to the
Administrative Agent."
7. Amendment of Section 6.9(b) of the Credit
Agreement. Section 6.9(b) of the Credit Agreement is hereby
55
<PAGE>
amended by deleting such Section in its entirety and replacing it with the
following:
"(b) The Administrative Agent will calculate the
aggregate amount of the Exposure (including the aggregate
amount of L/C Obligations) from time to time, and in any event
not less frequently than once during each calendar week. In
making such calculations, the Administrative Agent will rely on
the information most recently received by it from the Swing Line
Lenders in respect of outstanding Swing Line Loans, from
Lenders in respect of outstanding Competitive Advance Loans
and from Issuing Banks in respect of outstanding Letters of
Credit (including, with respect to such Issuing Banks, the
conversion ratios in respect of the non-Dollar denominated
Letters of Credit provided to the Administrative Agent by such
Issuing Banks on the fifteenth day and the end of each month (or
on the Business Day nextsucceeding such days)). Upon making
each such calculation, the Administrative Agent will inform the
Company of the results thereof and, upon the request of any
Lender, inform such Lender of the results thereof."
8. Representations and Warranties. The Company
hereby represents and warrants that, after giving effect to the
amendments effected hereby, the representations and warranties
contained in Section 7 of the Credit Agreement are true and correct on
the date hereof.
9. Conditions to Effectiveness. (a) This
Amendment shall become effective upon the receipt by the
Administrative Agent (which effectiveness shall be confirmed to the
other parties hereto by the Administrative Agent's delivery to such
parties of notice of such effectiveness) of counterparts of this
Amendment, duly executed and delivered by the Company, the New
Lender and (i) in the case of all of the Amendments hereunder other than
the amendment provided for in Section 4 hereof, the Majority Lenders
and (ii) in the case of the amendment provided for in Section 4 hereof, all
of the Lenders.
(b) In addition to the foregoing conditions to
effectiveness, this Amendment shall become effective with respect to the
addition of the New Subsidiary Borrower upon the receipt by the
Administrative Agent (which effectiveness shall be confirmed to the
other parties hereto by the Administrative Agent's delivery to such
parties of a fully executed copy of this Amendment) of the following:
(i) counterparts of this Amendment, duly executed by the
New Subsidiary Borrower; and
(ii) copies of corporate resolutions, other corporate
documents and legal opinions in respect of such New Subsidiary
Borrower, which resolutions, documents and opinions are substantially
equivalent to comparable
56
<PAGE>
materials delivered on the Closing Date in respect of the other Foreign
Subsidiary Borrowers.
10. Miscellaneous. Except as expressly amended
herein, the Credit Agreement shall continue to be, and shall remain, in
full force and effect in accordance with its terms. This Amendment may
be executed by the parties hereto in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument. The Company agrees to pay or reimburse
the Administrative Agent for all its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution
of this Amendment including, without limitation, the fees and
disbursements of counsel to the Agent. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
57
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Amendment to be duly executed and delivered by its proper and duly
authorized officer as of the day and year first above written.
HARMAN INTERNATIONAL INDUSTRIES,
INCORPORATED
By: /s/ Bernard A. Girod
---------------------------------------
Name: Bernard A. Girod
Title: President
STUDER S.E. ASIA PTE., LTD.
By: /s/ Kheng Wah Chan
---------------------------------------
Name: Kheng Wah Chan
Title: Managing Director
ACKNOWLEDGED AND AGREED TO:
- - ---------------------------------------------------
CHEMICAL BANK,
as Administrative Agent and Lender
By: /s/ Roland F. Driscoll
--------------------------------------
Title: Vice President
BANK OF MONTREAL
By: /s/ Thomas Peer
--------------------------------------
Title: Director
THE BANK OF NOVA SCOTIA
By: /s/ James Trimble
--------------------------------------
Title: Senior Relationship Manager
COMMERZBANK AG, LOS ANGELES BRANCH
By: /s/ Steven F. Larsen /s/ Werner Schmidbauer
-------------------------------------- --------------------------------
Title: Vice President Title: Vice President
58
<PAGE>
GIROCREDIT BANK
By: /s/ Richard Stone /s/ Sharad Gupta
--------------------------------------------------
MIDLAND BANK PLC
By: /s/ John Holsey
--------------------------------------------------
Title: Executive Vice President
THE MITSUBISHI BANK, LTD.
By: /s/ Frank H. Madden
--------------------------------------------------
Title: Joint General Manager
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Sara Parsons
--------------------------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Steffen Crowther
--------------------------------------------------
Title: Vice President
SOCIETE GENERAL
By: /s/ Gordon St. Denis
--------------------------------------------------
Title: Assistant Vice President
59
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THIS PAGE LEFT BLANK INTENTIONALLY
60
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EXHIBIT 13.1
61
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THIS PAGE LEFT BLANK INTENTIONALLY
62
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Harman International
1995 Annual Report
63
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Mozart's music has always been there. It is part of the inner beauty of
the universe, simply waiting to be revealed.
Albert Einstein
(text above in graphic form)
64
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FINANCIAL HIGHLIGHTS
1
(graph here)
<TABLE>
- - -------------------------------------------------------------------------------------------------------
in thousands, except per share data, 1991 1992 1993 1994 1995
for the fiscal years ended June 30,
<S> <C> <C> <C> <C> <C>
Net sales $586,941 $604,454 $664,913 $862,147 $1,170,224
Operating income 3,385 27,547 41,255 66,332 87,449
Income (loss) before taxes (20,646) 5,893 18,570 42,686 61,157
Net income (loss) (19,764) 3,487 11,246 25,664 41,161
Net income (loss) per share (2.26) .39 1.04 1.92(1) 2.70(2)
Pro forma net income (loss)
per share (3) (2.15) .37 .99 1.83 2.58
Total assets 359,402 415,909 431,726 680,691 886,872
Long-term debt 132,809 132,675 175,583 156,577 266,021
Shareholders' equity 80,781 111,241 111,149 232,021 289,490
</TABLE>
(1) 1.98 before extraordinary items in 1994.
(2) 2.72 before extraordinary items in 1995.
(3) Reflects 5% stock dividend declared in
August 1995 in all periods.
65
<PAGE>
2
"Fiscal 1995 was a very good year for Harman."
LETTER FROM THE CHAIRMAN
(picture here) 1995 concludes a three-year program during which we
have brought clear purpose to our work. From a fragmented collection
of 23 enterprises, three thriving business units have emerged. Each has
a singular role to play, but each also illuminates, informs and drives the
others.
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<PAGE>
LETTER FROM THE CHAIRMAN 3
Throughout this letter, I hope to provide insight into the Company's
development and a realistic vision of its future_what we have been and
what we will become. Our Chief Operating Officer Bernie Girod reviews
the financial details of 1995 in his report on page 6.
Group Overview. Through a combination of creative design, unqualified
commitment to the mission and a fair element of luck, each of our three
operating divisions has positioned itself for dramatic growth. Each is led
by an experienced, young executive who, together with Bernie Girod
and me, represent the leadership of the company and the key to its
future.
The Consumer Group includes three legendary names in the home high
fidelity field_JBL, Harman Kardon and Infinity. Another of comparable
power will be added when we complete the acquisition of Madrigal
Audio Laboratories early in the new fiscal year. With it, we will add the
prestigious Mark Levinson and Proceed lines of U.S. manufactured
electronics.
The Professional Group is widely regarded as peerless in the fields of
broadcast, recording, musical instrument support and sound
reinforcement. Spearheaded by such key brands as Soundcraft, Lexicon,
DOD, Studer, JBL and AKG, this Group represents a singular
combination of marketing and high technology, particularly in digital
signal processing. It is truly the turnkey company in the professional
sound field.
The Automotive Group leads the original equipment field for optional,
factory installed, premium performance, branded in-car high fidelity
systems. With the addition of Becker GmbH in 1995, we have completed
a folio of brand names, unrivaled in the industry. Furthermore, last year
we added several important new customers (Toyota, Jaguar, Saab,
Range Rover and BMW) even as the automakers, with our help,
increased by 3 points the percentage of their cars in which our systems
were installed.
Becker means more to us than the addition of one of the world's leading
radio frequency technology centers. The company is rich with system
experience. With Philips, Matsushita and Sony as its partners, Becker
has developed a potent, fiber optic bus which will function as the heart
of a completely digital multimedia communication system. Becker is a
fine example of one operating group within the Company providing
technical muscle to another because, without question, the Professional
Group will be a prime beneficiary of Becker's special competence in this
area.
Digital Transformation. We are leaving the analog world_a vertical
world in which governance runs from top down, one in which process is
step-by-step, sequential, a chain of hardware boxes, each driving the
next.
Now we move into a vivid new era, one that can be characterized as the
most important in industry since the dawn of the industrial revolution.
For, make no mistake about it, despite the excessive hyperbole, the
digital revolution is for real. Every aspect of life will change, and there
are some profound realities for us. The digital world is truly different and
transforming. Where analog is vertical, digital is horizontal,
multidisciplined, systemic. Where the analog image is the relay race or
the stepladder, the digital image is the basketball or soccer team.
67
<PAGE>
4 "Our knowledge of the consumer is more important now than
ever..."
In the digital world, the chain of black boxes yields to a system with
three characteristic expressions: the user interface, the central processing
core, and the technical or hardware interface between the core and the
outside world. Where we now sell stand-alone components, we will offer
integrated systems. Even as you read these pages, the cost of storage for
digital data continues to fall and Digital Signal Processing (DSP)
techniques improve the performance and reduce the cost of transmitting
data. DSP has also spawned new compression techniques in both the
audio and video domains, promising still greater facility and further cost
reductions. As we move into Fiscal 1996 and beyond, the products we
develop will no longer be defined solely in audio terms.
On Convergence. Digital multimedia technology has application in every
corner of our business. The widely heralded confluence of consumer
electronics and the computer industry has, in fact, occurred with respect
to technology and media. But the most important intersection of these
two industries_the market_has not yet seen convergence. Personal
computers have not suddenly become so well understood and so easy to
use that every consumer can successfully realize their potential.
Similarly, the consumer's desire for reliable and readily accessible
entertainment devices has not been replaced by an irresistible urge to
struggle with DOS commands and Windows configuration files. People
still do not expect to "boot up" their stereo systems.
In the near term, convergence in the marketplace will look more like
parallel paths. Entertainment capabilities will continue to be added to the
personal computer. Consumer electronics products will incorporate new
digital technology, driven by multimedia and the digital delivery of
entertainment material. But for some time there will remain two distinct
markets: one for PC accessories providing audio and video entertainment
and the other for traditional consumer electronic products, such as music
systems and television, reincarnated as intelligent digital multimedia
devices. Our knowledge of the consumer is, therefore, more important
now than ever before. I am certain that eventually these paths will
coalesce into a new mutant industry, producing products that resemble
neither contemporary computer nor consumer electronics products.
New Resources. All of this spells enormous opportunity for our
Company. As personal computers begin to offer audio and video
performance sufficient to justify their use as serious entertainment
platforms, they need more of the products we make today. They will also
need new products that capitalize on the intellectual capital we have
acquired over the years. As a result, we have formed a new business
unit, Harman Interactive, to provide relevant accessories and subsystems
to the PC market. These products are provided on an OEM basis to PC
makers and are also marketed through leading computer retailers. You
will see new JBL and Infinity speakers on multimedia PCs from leading
computer makers in the new year.
To accelerate the development of our digital products, we have
established the Advanced Technology Center in San Jose, in the heart of
the Silicon Valley. This Center will focus on critical digital core
technologies such as DSP, data compression, networking, control, digital
delivery and software development. The Center will serve all of our
companies.
68
<PAGE>
LETTER FROM THE CHAIRMAN 5
Our Professional companies are particularly well arranged to exploit
these developments. Our transducer companies, JBL, AKG and
Turbosound, provide the input and output to a system. Our signal
processing companies, Lexicon, DOD and BSS, have well developed and
still developing expertise in DSP. Our central processing core
companies, Soundcraft and Studer, are developing the networking skills
that will pull the systems together. We have invested and will continue to
invest in activities that generate new digital solutions for old problems.
More important, we are generating solutions which will create totally
new markets.
Organizational Transformation. As this new digital world, now upon us,
requires powerful intellectual and technological resources, it also
requires a matching mindset in the management of our business.
Companies which fail to satisfy these fundamentals are doomed to
struggle and are likely to fail. The requirement that management itself
take on the character of the digital world should not be lightly regarded.
At Harman, we are committed to this dual and mutually reflexive
activity. Throughout our three Groups, new products and services are
taking on system form_and digital technology is its master.
Organizationally we now function in the digital mode. Old lines of
authority and function are yielding to multidisciplined teamwork in
engineering, production and management.
Although we continue three Operating Groups, there is multiplying inter-
connection among them. The voluntary subsuming of the previously
autonomous Manufacturing unit within the Consumer Group is an
excellent example. Consumer Group engineering resources have, in turn,
been put at the service of Harman Interactive, our new PC accessory
unit, to develop a line of active loudspeakers for the many computer
makers now incorporating progressive audio in their offerings. That
same program has led us to examine our traditional twelve-month
product development cycle. If two months is the right cycle for the
computer field, there is no reason why we cannot make it the right cycle
in our Consumer, Professional and Automotive activities.
Operational Change. That same attitude has moved us to review the
operating profit percentage we experience across the Company. You will
note that in Fiscal 1995, our consolidated operating profit was 7.5%. I
have long argued that we must reach 10% before it can be said that we
are truly effective. Last December I presented a calendar year-end
review to all our management, arguing that we should adjust our target
to 15%. I had no thought then that altering the target would
automatically improve the actual result, but I felt strongly that we
needed a major change in mind-set if we were to effect operating
changes which could achieve the new target. I wanted our managers to
ask themselves, "How in the world can we ever get there?"
That they have done, and a number of important initiatives have emerged
because everyone recognizes that we will not get there doing things the
way we have traditionally done them. We have, for example, reviewed
the way we distribute our consumer products worldwide and concluded
that our company-owned distributing firms in Great Britain, Germany,
France and Belgium have served their historic purpose.
CONTINUED ON PAGE 7
69
<PAGE>
6
picture here LETTER FROM THE PRESIDENT
Fiscal 1995 was a record year for Harman International. Sales increased
36% over 1994 and passed the $1 billion mark, totaling $1,170,224,000.
Income before taxes increased 43% to $61.2 million and earnings per
share increased 41% to $2.70 per share. In May 1995, the Company
increased its quarterly cash dividend from $0.04 per share to $0.05 per
share; in August 1995, a 5% stock dividend was declared.
We achieved these results while continuing to build the Company. In
early 1995, we acquired Becker GmbH, a leader in the field of
automotive radios and electronics, and a key supplier to Mercedes Benz
and other German automobile manufacturers. Becker adds a new
dimension to the Company, opening the door to substantial product,
market and technological opportunities.
The establishment of Harman China, a Hong Kong based joint venture
charged with the marketing and distribution of Harman consumer
products in Hong Kong and mainland China, was another significant
building block. Since its formation in early 1995, results have been most
impressive.
The organizational structure of the Company was streamlined and made
more effective by the integration of all manufacturing and distribution
operations into their respective groups. The simplification of operations
has already provoked significant productivity gains.
The balance sheet received considerable attention in Fiscal 1995. In
September 1994, we concluded a five-year multi-currency revolving
credit agreement with a consortium of leading international banks. The
net result was a committed line of credit of $220 million at very
attractive rates. Inventory performance improved materially; the increase
in sales of $308 million (more than $400 million including the full year
effect of the Becker acquisition) was accommodated with no increase in
inventories _ in fact, with a modest decrease.
Each of the three key operating Groups achieved significant growth in
sales and operating earnings. Consumer Group sales increased 18%. JBL
Consumer sales reflected improved aftermarket automotive sales and the
success of SoundEffects, a versatile home theater system. Infinity
achieved excellent results as it refined its distribution worldwide and
introduced many new products including the state-of-the-art
"Compositions." Harman Kardon had a most constructive year; sales
increased 21% due to the success of its audio/video receiver line.
The Professional Group prospered. Sales increased 37% in total, and
23% excluding the effect of acquisitions. All operating units were
profitable, including AKG and Studer which completed their first full
year as part of Harman International. Over 100 new products from
Professional companies helped to generate the increased sales including
JBL's EON sound reinforcement system, the Lexicon PCM80 digital
sound effects processor and BSS's Omnidrive, a unique DSP speaker
processing system. This Group employs more than 300 engineers, over
60% of whom are engaged in the development of digital products.
Sales at the Automotive Group were up 69%, in large part because of
the Becker acquisition; excluding Becker, sales rose 19%. In North
America, we supplied audio systems for the new Toyota Avalon. We
also introduced Infinity audio systems in the Mitsubishi Galant and
Eclipse, Eagle Talon, Plymouth Sebring and Dodge Avenger. In Europe,
Harman Kardon audio systems were offered for the first time in Jaguar,
Saab and Range Rover.
During the six months of our ownership, Becker launched an aggressive
automotive aftermarket program in Europe and Asia, while also
developing a North American plan. Engineering was accelerated to
support new programs at Mercedes Benz, BMW, Opel and Porsche.
Significant productivity programs are now underway to reduce the cost
of purchased materials, improve plant efficiencies and reduce overhead
costs.
Capital expenditures totaled $55 million in Fiscal 1995. In Fiscal 1996,
we expect to spend $75 million. These increases will support new
product programs, capacity increases for transducer manufacturing
equipment, surface-mount electronic facilities and various cost reduction
programs. The Company's capital allocation process ensures that only
the projects with the most attractive returns are approved.
We achieved excellent results in Fiscal 1995. More important, we
continued to build the Company so that it will continue to deliver good
results in Fiscal 1996 and beyond.
/s/ Bernard A. Girod
Bernard A. Girod
President and Chief Operating Officer
70
<PAGE>
LETTER FROM THE CHAIRMAN 7
"We're designing ourselves to operate in the digital world..."
Continued from page 5
These company-owned distributing firms provided us with a position in
key European markets, which enhanced our ability to know what the
markets needed, and encouraged us to be responsive. We will now do
better by creating a centralized, European inventory and distribution
center while increasing our marketing forces in each of those nations.
This change will produce significant inventory reductions in Europe and
will move the product from inception to ultimate user through a far more
efficient chain. That will, of course, make us more competitive and
generate improved margins. Further, the integration of manufacturing
into the Consumer Group has ended the cumbersome and costly practice
of intercompany transfer pricing.
Emerging Markets. We are serious about designing ourselves to operate
in the new digital world and we expect to enhance and enlarge our
activities in each of the three Operating Groups. Nowhere will this be
more manifest than on the Professional side where our growing abilities
in DSP and system design promise far more performance at less cost. We
will create totally new markets for our companies by achieving
performance those markets could simply not previously afford.
On the Consumer side, we will put the technology at the service of the
user for whom better performance and ease of use will be the watch
words. Technology must serve consumers, not intimidate them.
Ultimately, we will achieve fully integrated systems within the car:
systems which provide navigation, communication, cabin quieting,
security and music reproduction with better performance, less weight
and lower cost than is possible today.
Historic Competencies. Throughout the Company there are major new
projects underway which will lead to innovative new products and
services responsive to the digital age. Among them are programs that
can set new standards in the broadcast, recording, sound reinforcement
and automotive fields. With one very important exception, all will
change dramatically over the next three to five years, and we expect to
be in the forefront of the revolution.
The dramatic exception is the man/machine interface: the transducer.
Regardless of what may happen in multimedia, communication,
transportation or signal processing, the input and output devices will
continue to be transducers_our historic central competence. Today our
transducers take the form of microphones and loudspeakers. They
represent the one certain oasis amid what otherwise appears as a
turbulent and somewhat unpredictable technological sea. Transducers
accounted for almost 60% of our $1.2 billion in sales in fiscal 1995. We
could easily sit back and argue that "no matter what goes on in the
digital world, everybody will need us and our transducers. Gravity is our
ally. Just let the ripe fruit fall."
Instead, understanding how fortunate we are, we will in the course of the
next three years multiply our transducer engineering and manufacturing
facilities around the world. In Wales, France, Denmark and Austria, in
California and Indiana, we now produce over thirty million transducers
annually. We intend to double that capacity to respond to surging
demand for microphones and loudspeakers in computers, surround
sound, automobiles and sound reinforcement systems.
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8
The Future. I am justifiably proud of our accomplishments, especially in
the past three years. We have grown large, but we are tightly knit. We
are profitable and becoming more efficient and more profitable. I enjoy
my work and I credit myself with much of the Company's progress over
the past years. They have been years of extraordinary effort and
considerable success_and they have been truly vitalizing for me. I am in
splendid health. I never miss a day's work and virtually never take a
holiday. The work and our progress satisfy my needs. Still I must pay
attention to mortality and to the odds that declare "this cannot go on
forever." Happily, the Company is blessed with young leaders who have
developed their still-growing skills right here over the years. They work
well with me and, more important, they work well together.
I expect our sales and earnings to continue to grow vigorously over the
next three years. I see those years as a crucial time in which we will
come to digital maturity and during which we will build a foundation for
the next decade. And I see my work as CEO being completed in those
three critical years. Then, although I plan to stay as Chairman, I will
yield the Chief Executive Officer role because I am confident that Bernie
Girod and his colleagues will continue to manage the Company's day to
day activities superbly.
T.S. Eliot, the great English poet, asked almost a century ago: "Where is
the wisdom lost in knowledge, where is the knowledge lost in
information?" I add, "Where is the information lost in data?" We must be
vigilant if wisdom, knowledge and information are not to be obscured by
the crush of information age data and rhetoric.
For clearly bits and bytes are transforming the very nature of business.
Great waves of data are in motion. And powerful new ideas are
struggling to come alive. Businesses of all sizes are subject to these
forces and are tempted frequently to "just do something." All too often,
under pressure to act, that something is an undifferentiated decision
which leads to failure.
Navigating change requires the ability to distinguish information from
data and knowledge from wisdom. And wisdom is the ultimate key.
I see Harman International as a company with a compass. Having
achieved an unusual degree of success in the fields of our engagement,
we are now positioned to prosper from extraordinary opportunities in
what I think of as "the wisdom business." I know I speak for myself and
my colleagues when I say: "We are determined to realize those
opportunities fully."
Cordially,
/s/ Sidney Harman
Sidney Harman
Chairman and Chief Executive Officer
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9
performance
recording and broadcast
soundscaping
audio in motion
audio at home
the journey of sound
Harman products are used at every stage of the sound journey_
in concert, on tour, in the studio, at the movies, in restaurants and stores,
in cars and homes_across soundscapes worldwide.
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10
Harman branded products serve all audiences associated with live
performance...
the musicians, the audio engineers who create the sound mix for the
audience and the performers, the recording engineers who creatively
preserve the event for release in other media, and the broadcast
engineers who transmit the music to listeners in their cars or at home.
From an improvisational jazz performance in an intimate cafe or an
elaborate, choreographed rock festival in a vast stadium; to a
sophisticated, classical concert in a symphonic hall, performers in all
genres rely on Harman brands to help them create and preserve great
original performances.
AUTOMOTIVE OEM
CONSUMER
PROFESSIONAL
Live on stage.
Versatile JBL EON powered loudspeakers (shown top right) can be used
either as stage monitors or as primary speakers. EON speakers and
matching mixers respond to an international demand for simple, portable
JBL branded sound reinforcement systems.
(picture)
The great musician
Wynton Marsalis
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<PAGE>
11
(picture here)
Mixed Live.
The performance standards of Soundcraft's front-of-house mixing and
stage monitoring equipment are reflected in simpler, cost effective Spirit
mixers for use by musicians.
DOD-Digitech signal processors help musicians adjust their audio output
on stage, while BSS audio processors help bands adjust their sound to
the acoustics of the venue.
(picture here)JBL EON
Recorded live.
Sound engineers use Allen & Heath and Soundcraft mixing consoles to
manage the multitude of sound feeds from a live performance.
Studer analog and digital tape machines accurately record each
individual sound in the live performance, including single instruments,
vocals, room acoustics, audience reaction, and ambiance.
(picture here)
(Logos) JBL STUDER AKG SPIRIT
Soundcraft Allen & Heath DigiTech BSS Orban
Live en route.
The JEEP Cherokee/Infinity sound system is acoustically matched to the
interior of the vehicle for concert hall sound right off the showroom
floor.
(picture here)
Live at home.
Active-tracking tuning circuitry in Harman Kardon FM tuners ensures
audiophile-quality reception by eliminating adjacent channel interference.
(picture here)
Broadcast live.
Studer broadcast mixing consoles provide studio-quality performance for
relaying live performances for radio and TV broadcast.
Broadcast engineers use Orban Optimod FM audio processors
to give unique character to their radio stations, to customize audio
transmission for the time of day and to apply appropriate processing for
live and prerecorded material.
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<PAGE>
12
(Logos) AKG STUDER dbx DOD
Lexicon Soundcraft
(picture here)
Recording and Editing
AUTOMOTIVE OEM
CONSUMER
PROFESSIONAL
Record and tracklay.
Whether recording original tracks or overdubs to complement a live
performance, AKG Acoustics studio microphones and headphones are
tools found in the majority of top class professional studios.
Studer digital tape machines and Soundcraft and Studer mixing consoles
combine precision electronics and creative flair for professional
tracklaying.
Add effects.
For more than two decades, Lexicon digital audio processing equipment
has become the choice of musicians and studio engineers. Today, our
state-of-the-art software and hardware based solutions are said to have
added the "Lexicon Sound" to more than 80% of all commercially
released albums.
Eliminate noise.
Signal processing can also enhance specific elements of a recording, add
clarity and texture to a track or reduce noise from the mix.
DBX compressor/limiters and other products are studio-standard audio
engineering tools.(picture here)
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<PAGE>
13
Harman products help manage the production process in nearly seven
out of every ten studios. From multitrack studios where an artist creates
original material or lays down overdubs to enhance a live recording, to
editing suites where songwriters compose and arrange with sophisticated
analog and digital tools, to mixing rooms where producers orchestrate
the final cut from diverse streams of acoustic information, our brands
dominate the audio profession. Before any mix is transferred to digital or
magnetic tape anywhere in the world today, there is every likelihood that
en route the sound was managed by Harman resources.
(picture here)
Review the mix.
Producers mixing music for broadcast will often create a cassette
duplicate of work in progress on a high-end consumer deck, such as this
Harman Kardon cassette recorder. They will then review the tape under
driving conditions on a premium auto sound system such as the Harman
ensemble in the Saab 9000, before agreeing on the final mix.
Studer tape machine (picture here)
(picture here)
Edit tracks.
The Lexicon Opus digital workstation, in use by studios throughout the
world, provides digital editing precision in the audio-for-video
environment.
Mixdown.
Once the original tracks for an album or the audio tracks of a movie have
been recorded, a group of specialized mixdown tools fine-tune the final
blend of the recording prior to its release for reproduction and
distribution. To create the mix, engineers use Studer or Soundcraft
consoles, and Lexicon and DOD-Digitech effects processors, to combine
the recorded tracks into the final mix.
Studer Editech's PostTrio turn-key postproduction workstation with
VideoMix, brings on-line quality non-linear video recording and
playback into the postproduction and broadcast editing suite.
The most important instruments in the mixdown process are the ears of
the mix engineers. Audio professionals rely on JBL loudspeakers to
reveal all the subtleties.
JBL 4206 near-field studio monitor speakers create a stereo sweet spot
within which a producer can fine-tune the nuances of a recording.
The final mix is monitored on powerful UREI studio monitors that are
precisely matched to the acoustics of the suite and are intimately familiar
to the ears of the mastering engineer.
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<PAGE>
14
The initial release of much programming occurs in the broadcast
medium, a sector where Harman innovation is creating intelligent radio
and TV station operations. Harman brands have long been workhorses in
broadcast control rooms and production centers. Now Harman's
approach to automated media management is generating software-based
solutions for broadcasters who are re-engineering for a digital future.
AUTOMOTIVE OEM
(picture here)
PROFESSIONAL
(picture here) Broadcast signal processing.
Orban broadcast sound processing tools equip AM, FM and TV stations
to manage every aspect of their broadcast audio. The Orban DSE-7000
digital on-air workstation provides a flexible method of controlling the
radio station's output.
Routing and distribution.
To control the program output, Studer Digitec provides both analog and
digital routing and distribution systems which meet the most demanding
performance standards in the broadcast environment.
Broadcast automation.
Studer Digitec and DAVID radio automation systems provide intelligent,
software-based networks for sequencing and distribution of program
material in modern broadcast facilities.
Production support.
Versatile, high performance Studer broadcast mixing consoles, used in
leading public and private studios around the world, help broadcast
engineers to mix voices, music, news feeds, live audio, taped
commercials and other source material.
Broadcast audio.
Professional Studer CD players deliver precise, high quality playback
even if the disc is flawed, and are equal to the rigorous demands of
sustained use in a broadcast environment.
(picture here)
78
<PAGE>
(Logos) Studer Orban David
(picture here)
79
<PAGE>
16
(picture here)
80
<PAGE>
(picture here)
"Production ruled the performance, and the sound quality was nothing
short of amazing...when Tim Renwick strummed his acoustic guitar to
start `Wish You Were Here,' the strings snapped crisply and clearly, as if
he was sitting in his living room in front of the fire."
Joel Selvin
The San Francisco Chronicle
The Pink Floyd `94 World Tour featured a 200-speaker quadraphonic
sound system designed by our Turbosound division.
81
<PAGE>
18
Harman shapes the sounds that shape life. We call this soundscaping.
At work, at play, on vacation, when traveling, everywhere, all the time,
music and sound complement our daily experiences. And Harman
products create soundscapes for more public and private venues of all
sizes and types around the world than any other company. Listen to the
difference our products make in the soundscapes of premier retailers
where you shop. In the museums, stadiums and theme parks you
frequent. At restaurants, clubs and cafes around the world or around the
corner. Enjoy us in premier concert halls, theaters and music pavilions
whenever you travel. Including our appearances on stage with top
touring musicians. Experience us in nearly 70% of cinemas built in the
last ten years, where JBL is the prime provider of breathtakingly realistic
multichannel audio. Sound shapes life. Harman shapes sound.
Hippodrome, London
Planet Hollywood
The Original House of Blues
The Academy of Motion Picture Arts and Sciences
LucasFilm Studios
Monterey Jazz Festival
Disney
Aspen Music Festival
Metropolis, Belgium
Jamz, Indonesia
Radio City Music Hall
Sydney Opera House
Virgin Megastores
Superbowl XXIX
Cineplex Odeon
Mile High Stadium
Hollywood Bowl
Royal Danish
Cinetropolis
The Kitchen, Dublin
Nordstrom
Village Vanguard
Hard Rock Cafe
Warner Hollywood Studios
Moscow Circus
82
<PAGE>
(picture here)
Wafer-thin JBL titanium dome membranes with diamond-patterned
surrounds convert electrical energy into accurate, high frequency sound
waves.
83
<PAGE>
20
(picture here)
(logos) Infinity JBL Becker
Harman/Kardon
AUTOMOTIVE OEM
Aboard fleets worldwide...
Harman designed and factory-installed JBL, Infinity and Harman Kardon
systems satisfy consumer demand for car audio performance to match
their increasingly sophisticated home systems and are found on board
most major automobile lines.
Including Mercedes-Benz.
Becker is the original and continuing provider of radios and head units
for Mercedes-Benz and brings technologically advanced radio frequency
(RF) electronics capability to the Harman-Motive team.
(Logos) Chrysler Corporation Mercedes-Benz Ford
Mitsubishi Jaguar Saab
84
<PAGE>
21
Harman automotive products help put high fidelity audio in motion
(picture here) JBL at Epcot
Our Harman-Motive products enjoy increasing presence on board new
cars sold throughout the U.S., Asia and Europe. Our new Becker
Automotive unit has a long-standing position as the prime supplier of
high quality radios and head units for Mercedes-Benz. A force in the fast
evolving factory-installed premium sound market, Becker's advanced
technology and electronics savvy extend Harman-Motive expertise into
RF and navigation. Continued worldwide growth in the automotive
audio aftermarket has inspired aggressive product development and
marketing initiatives at Harman's legendary automotive brands, Infinity,
JBL and Harman Kardon.
CONSUMER
(picture here) Custom installations.
New high-performance, space-efficient JBL GTi loudspeakers employ
technologies developed by the Harman Professional Group. New JBL
Speaker-Shop software equips installers to design custom subwoofer
enclosures.
Retail aftermarket.
Point-of-sale programs, developed for key retailers this year, highlight
the performance story associated with JBL and Infinity. They also
demonstrate the dramatic return on investment stores register through
focused marketing of our premium brands.
Harman + Disney.
JBL is the featured sponsor of the car audio segment of the electronics
exhibit at the Innoventions pavilion of Disney World's Epcot Center in
Orlando, Florida.
Direct sales.
Sales of JBL, Infinity and Harman Kardon products at our new Harman
Factory Outlet Store in Oxnard, California, put us in direct contact with
consumers, whose views we interpret in our products.
85
<PAGE>
(picture here) Consumers demand products that simplify their control of
audio at home.
Sophisticated Harman components help manage music and media
choices. New product introductions throughout the Harman Consumer
Group reflect a well researched understanding of shifting listening habits
and habitats, forward-thinking product architecture and user-centered
design. The full integration of Fosgate technology in Harman Kardon
Citation products and the acclaimed introduction of the Infinity
Compositions line of home cinema speakers further assert our audiophile
preeminence.
OEM (picture here)
Multimedia resources.
New multimedia PCs from the Digital Equipment Corporation PC
Business Unit arrive with Pentium chips inside and JBL loudspeakers on
board and are representative of our growing multimedia OEM presence.
CONSUMER (picture here)
Ultimate home cinema.
After attending the 1995 Consumer Electronics Show, Lawrence B.
Johnson of the New York Times wrote, "a critics' consensus might have
bestowed Product of the Show on Infinity's new home theater speaker
array called Compositions."
Audiophile sound.
The Harman Kardon Citation Series features premier electronics and
loudspeakers for music and home cinema sound. Citation AV
controllers include the Jim Fosgate-designed 6-axis steering logic, a
patented advance in multichannel sound imaging.
Multiroom solutions.
Custom installations by Harman's Phoenix Systems group push the
envelope in home audio and video system design, integrate multiroom
and multizone products from our AudioAccess division and match media
resources to families' habits and habitats.
Lifestyle products.
Small, versatile loudspeakers in the JBL SoundEffects system are ideal
for listening to music, include matching home cinema ensembles, and can
be easily reconfigured as needs change.
(picture here) (picture here)
86
<PAGE>
23
(picture here)
(Logos) JBL Harman/Kardon Infinity
Citation Lexicon AudioAccess
Phoenix Systems
(picture here)
Audio for video.
The Harman Kardon AVR25 receiver provides remote control for up to
four audio and four video sources, versatile amplification configurations
and diverse listening options for multichannel music and movies.
Shown above left:
Consumer Group development work for future products includes
exploration of intelligent system controllers that will simplify the
relationship between individuals and their media systems.
Zone 4 living room surround
Artist Wynton Marsalis
Title Live at the Blue L
Track
Digital Broadcast
<Record>
87
<PAGE>
Today, Harman International includes nearly 8,000 people from
36 companies working in 12 countries worldwide.
(picture here)
North America 46%
South America, Central America, Caribbean 1%
PROFESSIONAL BRANDS
AKG Microphones, headphones Austria, India
Allen & Heath Mixers Great Britain
BSS Audio Signal processing Great Britain
DAVID Broadcast automation Germany
dbx Signal processing U.S. (Utah)
DOD-Digitech Electronics Signal processing U.S. (Utah)
JBL Professional Loudspeakers U.S. (California)
Lexicon Signal processing U.S.(Massachusetts)
Orban Radio broadcast U.S. (California)
Precision Devices Loudspeakers Great Britain
Quested Monitor loudspeakers Great Britain
Soundcraft Electronics Mixers Great Britain
Spirit by Soundcraft Mixers Great Britain
Studer Digitec Broadcast automation France
Studer Editech Editing, storage U.S. (California)
Studer Professional Audio Recording, storage, mixers Switzerland
Turbosound Loudspeakers Great Britain
UREI Amplifiers U.S. (California)
CONSUMER BRANDS
Infinity Loudspeakers, car audio U.S. (California)
JBL Loudspeakers, car audio U.S. (California,
New York)
Harman Kardon Electronics U.S. (California,
New York)
Pyle Car audio U.S. (Indiana)
Concord Car audio U.S. (California,
New York)
AudioAccess Multiroom components U.S. (California)
Phoenix Systems Custom installations U.S. (California)
88
<PAGE>
25
1995 Sales Revenue
Sixty percent of our sales take place outside the United States. We do
not think in terms of export; rather, we address strategic and emerging
markets of the world through an active presence. This map has been
drawn to suggest the relative proportion of our present sales in world
markets where we are active.
(picture here)Europe 34%
Mid-East Mediterranean 1%
Africa 1%
Asia 16%
Pacific Rim 1%
AUTOMOTIVE OEM BRANDS
Harman Motive complete high fidelity systems for:
Chrysler-Plymouth, Jeep-Eagle, Dodge, Mitsubishi Infinity
Ford, Lincoln-Mercury JBL
Toyota Toyota
BMW, Land Rover, Saab, Jaguar Harman
Kardon
Becker Automotive world class radios for:
Mercedes-Benz, BMW, Opel, Porsche Becker
Consumer Marketing Network
Harman Marketing Asia Japan,
Singapore
Harman Marketing China Hong Kong
Harman Marketing Europe Denmark
Harman Marketing Intercontinental Brazil
Consumer Supplemental
Manufacturing Resources
Audax Transducers, loudspeakers France
Lydig Home loudspeakers Denmark
Pyle Car loudspeakers U.S.
(Indiana)
Northridge Manufacturing Transducers, loudspeakers, U.S.
electronics (California)
89
<PAGE>
26 Financial Information Table of Contents
Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
Consolidated Financial Statements
Balance Sheets 30
Statements of Operations 31
Statements of Cash Flows 32
Statements of Shareholders' Equity 33
Notes to Consolidated Financial Statements 34
Independent Auditors' Report 41
Statement of Management Responsibility 42
Shareholder Information 42
Officers and Directors inside back cover
Annual Meeting inside back cover
90
<PAGE>
Management's Discussion and Analysis of Financial 27
Condition and Results of Operations
Results of Operations
Net sales for fiscal 1995 increased by 35.7 percent to $1,170.2 million
from the fiscal 1994 level of $862.1 million and in fiscal 1994 increased
by 29.7 percent from fiscal 1993 sales of $664.9 million. The sales
increases for both fiscal 1995 and fiscal 1994 result from the growth of
the Professional Group, the Consumer Group and the Automotive OEM
Group.
The sales increase reported by the Professional Group is partially
attributable to AKG and Studer, both of which were acquired in the
prior year. Studer was acquired January 1, 1994, and thus not
represented in the first half last year, and AKG was acquired September
30, 1993, and thus not represented in the first quarter last year. Strong
sales of products offered by JBL Professional, Soundcraft and DOD also
contributed to the growth. JBL Professional's introduction of EON, a
new line of compact sound reinforcement components and systems, was
enthusiastically received by the professional audio market. EON
shipments began in May against a sizable backlog of customer orders.
Higher sales were reported by the Consumer Group, driven by increases
at JBL, Infinity and Harman Kardon. The growth at JBL reflects higher
automotive aftermarket sales and the success of the versatile
SoundEffects line of home theater products. Infinity reported higher
sales in both domestic and international markets. Strong demand for
audio/video receiver components contributed to Harman Kardon's fiscal
1995 results.
Automotive OEM Group growth was driven by increased sales volume
at Harman Motive and by the acquisition of Becker GmbH, a leading
German manufacturer of automotive radios and electronics and a key
supplier to Mercedes Benz and other German automobile manufacturers.
Becker was acquired effective January 1, 1995. The growth at Harman
Motive is attributable to increased shipments of Infinity high fidelity
systems for the Jeep Grand Cherokee, higher sales of Ford/JBL premium
systems for the Ford Explorer and the success of the new Toyota
Avalon, which offers a high-end audio system supplied by Harman
Motive. Robust sales and earnings growth was also reported by Harman
Motive, Ltd., due to sales to new customers Jaguar, Saab and Range
Rover.
Overall, the Company's consolidated net sales are not materially
impacted by seasonality. However, the first fiscal quarter is usually the
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 1995 was 31.1 percent, compared to
31.2 percent in fiscal 1994 and 28.7 percent in fiscal 1993. The gross
profit percentage decreased slightly in fiscal 1995 primarily due to the
Becker acquisition, which contributed substantially to sales at a gross
margin percentage lower than the Company's average. This impact was
partially offset by higher margin contribution from the Professional
Group, primarily reflecting gains at AKG and DOD, and the favorable
effects of operating leverage and product mix at the Automotive OEM
Group. The fiscal 1994 increase was primarily due to operating leverage
and favorable product mix at the Automotive OEM Group and
improvements in manufacturing efficiencies at the Northridge, California
and Audax (France) manufacturing operations.
Selling, general and administrative expenses as a percentage of sales
were 23.6 percent in fiscal 1995 compared with 23.5 percent in fiscal
1994 and 22.5 percent in fiscal 1993. The slight fiscal 1995 increase in
selling, general and administrative expenses as a percentage of sales
primarily resulted from higher product development and engineering
costs, and costs associated with new marketing and advertising programs
intended to promote awareness of the Company's brands.
Operating income as a percentage of net sales was 7.5 percent for fiscal
1995 compared with 7.7 percent for fiscal 1994 and 6.2 percent for fiscal
1993. The decrease for fiscal 1995 resulted from the decrease in gross
profit percentage and the slight increase in selling, general and
administrative expenses, primarily due to the inclusion
91
<PAGE>
28 Management's Discussion and Analysis of Financial
Condition and Results of Operations continued
of Becker. The increase for fiscal 1994 resulted primarily from the
increase in gross profit percentage.
Interest expense in fiscal 1995 was $25.3 million compared with $22.1
million in fiscal 1994 and $23.6 million in fiscal 1993. Interest expense
increased in fiscal 1995 primarily due to increased levels of average
borrowings. Fiscal 1995 average borrowings were $276.6 million
compared with $222.8 million in fiscal 1994 and $215.5 million in fiscal
1993. The increase in average borrowings in fiscal 1995 primarily
resulted from the Becker acquisition and increased working capital
requirements associated with higher sales volumes.
The weighted average interest rate in fiscal 1995 was 9.1 percent,
compared with 9.9 percent in fiscal 1994 and 10.9 percent in fiscal 1993.
The decrease in average interest rates in fiscal 1995 reflects the
refinancing of unsecured lines of credit with a $220 million committed
revolving credit facility agreement completed on September 30, 1994.
In fiscal 1995 the Company reported income before income taxes,
minority interest and extraordinary item of $61.2 million, compared with
$42.7 million in fiscal 1994 and $18.6 million in fiscal 1993.
In fiscal 1995 the Company reported income tax expense of $19.6
million, reflecting an effective tax rate of 32.1 percent. This compares
with an income tax expense of $16.2 million and an effective tax rate of
38.1 percent in fiscal 1994. The fiscal 1993 tax provision was $7.3
million with an effective tax rate of 39.4 percent. The effective tax rate
for fiscal 1995 is below the U.S. statutory rate primarily due to the
restructuring of certain foreign subsidiaries to take advantage of losses
which they had incurred. The effective tax rates in the prior years were
above the U.S. statutory rate primarily due to higher effective tax rates
at the international subsidiaries and state income taxes.
The Company reported extraordinary charges, net of related tax benefits,
of $274,000 in fiscal 1995 associated with the early extinguishment of
$5.5 million of the 12.0% Senior Subordinated Notes, due August 1,
2002. The Company reported an extraordinary charge, net of a related
tax benefit, of $748,000 in fiscal 1994 associated with the early
extinguishment of, through an in-substance defeasance, of the 10.08%
$25.0 million Senior Notes, Series A, due September 30, 1994.
Net income for fiscal 1995 was $41.2 million, compared with $25.7
million in fiscal 1994 and $11.2 million in fiscal 1993.
In August 1995, the Company declared a special 5 percent stock
dividend payable on August 25, 1995, on shares outstanding as of
August 11, 1995.
The Company expects continued vigorous growth in its sales and
earnings during the next three years. Dr. Sidney Harman, the Company's
Chairman and Chief Executive Officer, has indicated that to effect an
orderly succession, he plans to retire as Chief Executive Officer at the
conclusion of the 1998 fiscal year and to remain as Chairman of the
Board of Directors.
Financial Condition
Liquidity and Capital Resources
Harman International primarily finances its working capital requirements
through cash generated by operations, the revolving credit facility and
normal trade credit.
At June 30, 1995, the Company had outstanding indebtedness under the
revolving credit facility of $115.9 million. The indebtedness at June 30,
1995, consists of committed rate loans, which bear interest at the
London Interbank Offered Rate of the lending bank plus 0.30 percent,
and swing line borrowings, which bear interest at base rates. The
revolving credit facility is committed through September 30, 1999.
At June 30, 1995, certain international subsidiaries of the Company
maintained unsecured short-term lines of credit of $22.3 million and had
outstanding indebtedness thereunder of approximately $17.5 million.
In November 1993, the Company issued 4,025,000 shares of Common
Stock, using the net proceeds of $87.5 million to repay short-term and
long-term debt.
Capital expenditures were $54.7 million in fiscal 1995, compared with
$40.7 million in fiscal 1994 and $25.6 million in fiscal 1993.
Expenditures in fiscal 1995 and
92
<PAGE>
29
fiscal 1994 were primarily for new product tooling and machinery and
equipment required to increase manufacturing capacity and efficiency.
The Company anticipates capital expenditures of approximately $75
million during the next fiscal year. Firm commitments of approximately
$7.1 million existed as of June 30, 1995, for capital expenditures during
fiscal 1996. The Company anticipates that a portion of these capital
expenditures will be financed through lease financing arrangements.
Net working capital at June 30, 1995, was $257.6 million compared with
$215.9 million at June 30, 1994. The increase is primarily due to the
repayment of short-term unsecured lines of credit with funds drawn on
the five-year revolving credit facility.
Inventories decreased to $236.5 million at June 30, 1995 from $238.1
million at June 30, 1994. Inventories were reduced during the year
despite increased sales levels and the addition of Becker, which had
$22.0 million of inventory at acquisition, due to the success of the
company-wide inventory reduction program.
Excess of cost over fair value of assets acquired increased to $122.5
million at June 30, 1995, from $34.4 million at June 30, 1994. The
increase resulted primarily from the acquisition of Becker in February
1995 and the acquisition of the remaining 24 percent of AKG in July
1994.
Shareholders' equity was $289.5 million at June 30, 1995, compared
with $232.0 million at June 30, 1994, and $111.1 at June 30, 1993.
Foreign currency translation produced positive adjustments of $5.8
million in fiscal 1995 and $5.5 million in fiscal 1994 with a negative
adjustment of $11.9 million in fiscal 1993.
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 February 1995, the Company acquired Becker GmbH, effective
January 1, 1995, for 9.0 million Deutschmarks (approximately $6.0
million) and up to 400,000 shares of Harman Common Stock and
assumed post-acquisition indebtedness of approximately 86 million
Deutschmarks (approximately $57.7 million). The Company funded its
acquisition of Becker utilizing its revolving credit facility. Becker
manufactures and markets automotive OEM and consumer automotive
aftermarket electronics.
In July 1994, the Company acquired the remaining 24 percent of AKG
for 41.0 million Austrian schillings (approximately $3.7 million).
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 currency of those countries where its subsidiaries are located.
The subsidiaries of the Company purchase certain products and parts
denominated in Japanese yen, German marks, Danish kroner, Austrian
schillings, Swiss francs, French 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 contracts and other hedging activities, as appropriate.
A portion of the Company's revenues and earnings relate 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
transactions, the Company's foreign currency positions are partially
offsetting.
93
<PAGE>
30 Consolidated Balance Sheets
Harman International Industries, Incorporated and Subsidiaries
<TABLE>
June 30, 1995 and 1994
($000s omitted except share amounts)
ASSETS 1995 1994
------------- ------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 11,252 9,724
Receivables (less allowance for doubtful accounts
of $12,313 in 1995 and $10,241 in 1994) 264,898 206,801
Inventories (note 2) 236,532 238,095
Other current assets 39,973 35,202
------------- ------------
Total current assets 552,655 489,822
------------- ------------
Property, plant and equipment, net (notes 3, 5 and 6) 189,823 138,555
Excess of cost over fair value of assets acquired
(less accumulated amortization of $8,702
in 1995 and $6,543 in 1994) 122,504 34,360
Other assets 21,890 17,954
------------- ------------
Total assets $ 886,872 680,691
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable/swing lines (notes 4 and 5) $ 27,208 63,140
Current portion of long-term debt (note 5) 13,006 6,114
Accounts payable _ trade 90,755 91,516
Accrued liabilities 148,834 102,353
Income taxes payable 15,288 10,821
------------- ------------
Total current liabilities 295,091 273,944
------------- ------------
Borrowings under revolving credit facility (note 5) 106,244 _
Senior long-term debt (note 5) 50,277 41,577
Subordinated long-term debt (note 5) 109,500 115,000
Other non-current liabilities 31,199 8,514
Deferred income 1,082 2,372
Minority interest 3,989 7,263
Shareholders' equity (notes 5, 7, 8 and 16)
Preferred stock, $.01 par value. Authorized
5,000,000 shares; none issued and
outstanding _ _
Common stock, $.01 par value. Authorized
50,000,000 shares; issued and
outstanding 15,461,997 shares in
1995 and 15,068,027 shares in 1994
(16,235,096 and 15,821,428 shares,
respectively, adjusted for stock dividend
_ note 16) 152 151
Additional paid-in capital 156,257 143,144
Equity adjustment from foreign currency
translation 6,157 392
Retained earnings 126,924 88,334
------------- ------------
Total shareholders' equity 289,490 232,021
------------- ------------
Commitments, contingencies and subsequent events
(notes 6, 13, 14 and 16)
Total liabilities and shareholders' equity $ 886,872 680,691
------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
94
<PAGE>
Consolidated Statements of Operations 31
Harman International Industries, Incorporated and Subsidiaries
<TABLE>
Years Ended June 30, 1995, 1994 and 1993
($000s omitted except share and per share amounts)
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $ 1,170,224 862,147 664,913
Cost of sales 806,143 592,985 474,350
--------------- --------------- ---------------
Gross profit 364,081 269,162 190,563
Selling, general and
administrative expenses 276,632 202,830 149,308
--------------- --------------- ---------------
Operating income 87,449 66,332 41,255
Other expenses (income)
Interest expense 25,284 22,110 23,566
Miscellaneous, net 1,008 1,536 (881)
--------------- --------------- ---------------
Income before income
taxes, minority
interest and
extraordinary item 61,157 42,686 18,570
Income tax expense (note 9)
Federal 12,012 12,589 2,825
Foreign and state 7,630 3,659 4,499
--------------- --------------- ---------------
Total income tax expense 19,642 16,248 7,324
--------------- --------------- ---------------
Minority interest 80 26 _
--------------- --------------- ---------------
Income before extraordinary item 41,435 26,412 11,246
Extraordinary item, net of
income tax effect of $182
in 1995 and $495 in 1994 (274) (748) _
--------------- --------------- ---------------
Net income $ 41,161 25,664 11,246
--------------- --------------- ---------------
Income per common share before
extraordinary item $ 2.72 1.98 1.04
Extraordinary item, net of tax (.02) (.06) _
--------------- --------------- ---------------
Net income per common share $ 2.70 1.92 1.04
--------------- --------------- ---------------
Weighted average number of
common shares outstanding 15,219,194 13,373,497 10,825,608
--------------- --------------- ---------------
Pro forma net income per
common share (note 16) $ 2.58 1.83 .99
--------------- --------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
95
<PAGE>
32 Consolidated Statements of Cash Flows
Harman International Industries, Incorporated and Subsidiaries
<TABLE>
Years Ended June 30, 1995, 1994 and 1993
($000s omitted)
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 41,161 25,664 11,246
--------------- --------------- ---------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 40,772 31,210 22,959
Amortization of intangible assets 4,972 2,342 1,414
Amortization of deferred income (1,294) (1,293) (1,294)
Changes in assets and liabilities, net of
effects from purchase of companies:
Decrease (increase) in:
Receivables (38,053) (35,566) (12,485)
Inventories 23,837 (56,510) (425)
Other current assets (5,150) (8,253) (2,608)
Increase (decrease) in:
Accounts payable - trade (18,340) 14,052 (528)
Accrued liabilities (11,010) 12,035 4,415
--------------- --------------- ---------------
Total adjustments $ (4,266) (41,983) 11,448
--------------- --------------- ---------------
Net cash provided by (used in)
operating activities $ 36,895 (16,319) 22,694
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 1,257 1,418 2,847
Payment for purchase of companies,
net of cash acquired (9,457) 6,852 (4,697)
Investments in unconsolidated
subsidiaries _ (2,500) _
Capital expenditures for property,
plant and equipment (54,654) (40,720) (25,563)
Other items, net (369) (3,637) (2,482)
--------------- --------------- ---------------
Net cash used in investing activities $ (63,223) (38,587) (29,895)
--------------- --------------- ---------------
Cash flows from financing activities:
Net borrowings (repayments)
under lines of credit $ (80,598) (8,007) (30,084)
Proceeds from issuance of
long-term debt 114,991 7,559 76,112
Repayments of long-term debt (11,482) (32,309) (28,129)
Proceeds from issuance of
common stock _ 87,488 _
Dividends paid to shareholders (2,571) _ _
Proceeds from exercise of stock
options 1,751 2,245 521
Net change, foreign currency
translation 5,765 5,475 (11,859)
--------------- --------------- ---------------
Net cash provided by financing
activities $ 27,856 62,451 6,561
--------------- --------------- ---------------
Net increase (decrease) in cash
and short-term investments 1,528 7,545 (640)
Cash and short-term investments
at beginning of year 9,724 2,179 2,819
--------------- --------------- ---------------
Cash and short-term investments
at end of year 11,252 9,724 2,179
--------------- --------------- ---------------
Supplemental schedule of non-cash
investing activities:
Fair value of assets acquired $ 153,071 138,861 7,484
Cash paid for the capital stock 10,610 1,858 4,994
--------------- --------------- ---------------
Liabilities assumed $ 142,461 137,003 2,490
--------------- --------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
96
<PAGE>
Consolidated Statements of Shareholders' Equity 33
Harman International Industries, Incorporated and Subsidiaries
<TABLE>
Years Ended June 30, 1995, 1994, and 1993
($000s omitted)
Equity
adjustment
Common Additional from foreign Net
Stock $.01 paid in currency Retained Shareholders'
par value capital translation earnings equity
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
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
Exercise of stock
options 1 1,195 _ _ 1,196
Tax benefit
attributable
to stock option
plan _ 555 _ _ 555
Foreign currency
equity
adjustment _ _ 5,765 _ 5,765
Stock to be issued
for Becker
acquisition _ 11,363 _ _ 11,363
Dividends ($.17
per share) _ _ _ (2,571) (2,571)
Net income _ _ _ 41,161 41,161
------------- ------------- ------------- ------------- -------------
Balance,
June 30, 1995 $ 152 156,257 6,157 126,924 289,490
------------- ------------- ------------- ------------- -------------
</TABLE>
97
<PAGE>
34 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 1995 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. The 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 foreign subsidiaries. Such income taxes are
substantially offset by foreign tax credits.
Some non-domestic 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 dilutive stock options. Pro forma net income per
common share has been presented on the income statement giving effect
to the 5 percent stock dividend to stockholders of record as of August
11, 1995, paid on August 25, 1995.
Foreign Currency Translation. Assets and liabilities in foreign functional
currencies 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 the intangible assets through comparisons
of projected cash flows from the related assets.
Research and Development. Research and development costs are
expensed as incurred. The Company's expenditures for research and
development were $40,257,000, $22,324,000 and $11,980,000 for the
fiscal years ending June 30, 1995, 1994 and 1993, respectively.
2. Inventories
Inventories consist of the following:
June 30 ($000s omitted) 1995 1994
------------ ------------
Raw materials and supplies $ 61,988 66,469
Work in process 28,412 20,200
Finished goods and inventory
purchased for resale 146,132 151,426
------------ ------------
Total $ 236,532 238,095
------------ ------------
98
<PAGE>
35
3. Property, Plant and Equipment
Property, plant and equipment is composed of the following:
June 30 ($000s omitted) 1995 1994
------------ ------------
Land $ 6,050 4,140
Buildings and improvements 80,484 56,085
Machinery and equipment 228,468 188,279
Furniture and fixtures 32,401 20,891
------------ ------------
347,403 269,395
Less accumulated depreciation
and amortization (157,580) (130,840)
------------ ------------
Property, plant and
equipment, net $189,823 138,555
------------ ------------
4. Notes Payable
At June 30, 1995, the Company had unsecured short-term lines of credit
for certain international subsidiaries aggregating $22.3 million with
outstanding borrowings of approximately $17.5 million. Interest rates
based on various indices ranged from 5.3 percent in Austria to 19.5
percent in India. All other short-term credit lines were cancelled during
the year and replaced with the revolving credit facility (see note 5).
The Company utilizes the swing line feature of the revolving credit
facility to meet its short-term borrowing requirements. At June 30, 1995,
the Company had $9.7 million drawn on its swing lines at base rates in
the local countries where the funds were drawn, ranging from 2.4
percent in Japan to 8.3 percent in France.
5. Long-Term Debt
On September 30, 1994, the Company and certain of its subsidiaries
entered into a five-year multicurrency revolving credit facility with a
group of eleven banks committing $220 million to the Company for cash
borrowings and letters of credit. At June, 30, 1995, the Company had
borrowings of $115.9 million on the revolving credit facility (including
swing line, competitive advance and revolving credit borrowings) and
outstanding letters of credit of $9.6 million. The unused credit under the
revolving credit facility at June 30, 1995, was $94.5 million. Interest
rates, based on the London Interbank Offered Rate of the lending bank
plus 0.30 percent, ranged from 1.6 percent in Japan to 7.7 percent in
France. The Company is required under the revolving credit agreement
to maintain certain financial ratios and meet certain net worth and
indebtedness tests.
Additionally, 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. Under
the most restrictive provisions, limited amounts of dividends may be paid
as of June 30, 1995.
Interest paid for both short- and long-term borrowings was $23,148,000,
$22,443,000 and $18,364,000 during the fiscal years ended June 30,
1995, 1994 and 1993, respectively.
99
<PAGE>
36 Notes to Consolidated Financial Statements continued
Harman International Industries, Incorporated and Subsidiaries
Long-term debt is composed of the following:
June 30 ($000s omitted) 1995 1994
------------ ------------
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% 64,500 70,000
Borrowings under revolving
credit facility, due September 30,
1999, with rates ranging from
1.6% to 7.7% at June 30, 1995 106,244 _
Obligations under
capital leases (note 6) 9,893 11,044
Other unsubordinated loans
due in installments through
2012, some of which vary with
the prime rate, bearing interest
at an average effective rate of
8.5% at June 30, 1995 35,890 19,147
------------ ------------
Total 279,027 162,691
Less current installments (13,006) (6,114)
------------ ------------
Long-term debt $ 266,021 156,577
------------ ------------
In fiscal 1995, the Company purchased at a premium $5.5 million of the
12.0% Senior Subordinated Notes, due August 1, 2002. The purchases
resulted in extraordinary charges of $274,000, net of related tax benefits,
or $.02 per share.
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:
1996 $ 13,006
1997 14,688
1998 22,705
1999 48,544
2000 109,142
Thereafter 70,942
6. Leases
The following analysis represents property under capital leases:
June 30 ($000s omitted) 1995 1994
------------ ------------
Capital lease assets $ 14,822 17,561
Less accumulated amortization (4,625) (5,271)
------------ ------------
$ 10,197 12,290
------------ ------------
At June 30, 1995, 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):
($000s omitted) Capital Leases Operating Leases
----------------- --------------------
1996 $ 3,229 $ 20,980
1997 2,759 15,953
1998 1,903 14,097
1999 1,264 12,221
2000 823 11,697
Thereafter 3,073 36,974
----------------- --------------------
Total minimum lease payments 13,051 $ 111,922
--------------------
Less interest 3,158
-----------------
Present value of minimum
lease payments $ 9,893
-----------------
Operating lease expense, net of deferred income amortization
($1,294,000, $1,293,000 and $1,294,000 for the years ended June 30,
1995, 1994 and 1993, respectively) and subrental income under
operating leases having noncancelable terms of greater than
100
<PAGE>
37
one year for the years ended June 30, 1995, 1994 and 1993 was
$21,849,000, $15,677,000 and $11,329,000, 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.
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, key employees and consultants
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, 1995. Options to purchase shares of Common Stock have been
granted under both the Plans. Options granted are at prices not less than
market value on the date of grant and, under the terms of the 1992 Plan,
may not be repriced. 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:
Years ended June 30 1995 1994 1993
------------ ------------ ------------
Balance at beginning of year 910,750 625,720 781,450
Granted 464,250 553,500 63,000
Canceled (30,260) (85,400) (153,810)
Exercised (93,970) (183,070) (64,920)
------------ ------------ ------------
Balance at end of year 1,250,770 910,750 625,720
------------ ------------ ------------
Exercisable stock options 618,960 487,545 278,600
------------ ------------ ------------
Price range of options:
Outstanding at end of period 6.63-38.88 6.63-33.94 6.63-20.63
Granted during period 25.13-38.88 19.25-33.94 10.63-16.88
Exercised during period 6.63-25.63 6.63-20.63 6.63-12.63
At June 30, 1995, a total of 5,520 shares of Common Stock were
reserved for issuance under the 1987 Plan and 292,250 were reserved for
issuance under the 1992 Plan.
101
<PAGE>
38 Notes to Consolidated Financial Statements continued
Harman International Industries, Incorporated and Subsidiaries
9. Income Taxes
Income tax expense (benefit) consists of the following:
Years ended June 30 1995 1994 1993
($000s omitted) ------------ ------------ ------------
Current:
Federal $ 8,566 16,716 554
State 923 1,894 620
Foreign 6,501 2,246 4,086
------------ ------------ ------------
15,990 20,856 5,260
------------ ------------ ------------
Deferred:
Federal 3,446 (4,127) 2,271
State 206 (481) (207)
------------ ------------ ------------
3,652 (4,608) 2,064
------------ ------------ ------------
Total $ 19,642 16,248 7,324
------------ ------------ ------------
The tax provisions and analysis of effective income tax rates are
comprised of the following items:
Years ended June 30 1995 1994 1993
($000s omitted) ------------ ------------ ------------
Provision for Federal income
taxes before credits at
statutory rate $ 21,405 14,940 6,314
State income taxes 1,126 1,413 413
Difference between Federal
statutory rate and foreign
effective rate (999) (1,466) 454
Permanent differences between
financial and tax accounting
income 354 211 200
Tax exempt foreign sales
corporation earnings (883) (1,136) (386)
Change in valuation reserve 4,204 1,973 (1,137)
Losses without (with)
income tax benefit (4,944) 1,683 1,466
Federal income tax credits (514) (250) _
Other (107) (1,120) _
------------ ------------ ------------
Total $ 19,642 16,248 7,324
------------ ------------ ------------
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:
Assets/(liabilities)
June 30 ($000s omitted) 1995 1994
------------ ------------
Inventory costing differences $ 4,950 2,065
Deferred income 410 901
Valuations and other reserves 12,959 14,351
------------ ------------
Total gross deferred tax asset $ 18,319 17,317
Less valuation reserve (9,418) (4,826)
------------ ------------
Deferred tax asset $ 8,901 12,491
------------ ------------
Total gross deferred tax liability
from fixed asset depreciation (4,159) (3,191)
------------ ------------
Net deferred tax asset $ 4,742 9,300
------------ ------------
Management believes the results of future operations will generate
sufficient taxable income to realize the net deferred tax asset.
The Company acquired loss carryforwards from foreign subsidiary
Becker of approximately 100 million Deutschmarks which do not expire.
The effect of these loss carryforwards has not been included in the
preceding schedules, and future recognition of associated tax benefits
will first be applied to reduce the goodwill of Becker.
The Company acquired 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 from the date incurred, 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
of the associated entity.
Cash paid for Federal, state and foreign income taxes was $12,422,000,
$14,095,000 and $4,701,000, during fiscal years ended June 30, 1995,
1994 and 1993, respectively.
10. Business Segment Data
The Company's predominant business is the design, manufacture and
distribution of high fidelity audio
102
<PAGE>
39
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 9.5% and 13.7% of consolidated net sales for the years
ended June 30, 1995 and 1994. Another customer accounted for 10.5%
of consolidated net sales in fiscal 1993.
The following tables show net sales, operating income and other
financial information by geographic segment for the years ended June 30,
1995, 1994 and 1993.
The net sales shown below for the United States include export and
military sales of $209.5 million, $179.1 million and $154.5 million for the
fiscal years ended June 30, 1995, 1994 and 1993, respectively.
Geographic Segmentation
June 30 ($000s omitted) 1995 1994 1993
------------- ------------ ------------
Net sales:
U.S. $ 784,989 673,305 499,254
International 502,809 282,191 228,052
Intercompany/
Interregion (117,574) (93,349) (62,393)
------------- ------------ ------------
Total $1,170,224 862,147 664,913
------------- ------------ ------------
Operating income:
U.S. $ 81,901 73,539 33,479
International 20,871 12,039 10,330
Unallocated
operating expenses (15,323) (19,246) (2,554)
------------- ------------ ------------
Total $ 87,449 66,332 41,255
------------- ------------ ------------
Identifiable assets:
U.S. $ 427,777 418,840 295,097
International 438,435 252,360 122,367
Corporate 20,660 9,491 14,262
------------- ------------ ------------
Total $ 886,872 680,691 431,726
------------- ------------ ------------
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, 1995, 1994
and 1993 totaled $4,152,000, $3,536,000 and $2,556,000, 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,
1995, 1994 and 1993 were $875,000, $667,000 and $646,000,
respectively.
Additionally, certain of the Company's non-domestic subsidiaries
maintain defined benefit pension plans. These plans are not material to
the accompanying consolidated financial statements.
12. Fair Value of Financial Instruments
The estimated fair value amounts of the Company's financial instruments
have been determined using appropriate market information and
valuation methodologies. 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 foreign currency contracts approximated fair value
at June 30, 1995.
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 obligations under capital leases and unsubordinated loans
are $233.2 million and $239.0 million, respectively, at June 30, 1995.
In August 1992, the Company entered into two non-hedge variable
interest rate swap agreements. The agreements were terminated six
months later and the
103
<PAGE>
40 Notes to Consolidated Financial Statements continued
Harman International Industries, Incorporated and Subsidiaries
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, 1995, the
Company had contracts maturing through September 1995 to purchase
approximately 151,400,000 Japanese yen, 5,760,000 Austrian schillings,
and 676,000 British pounds, equivalent to approximately U.S.
$3,475,000 at the spot rate on the maturity date. The Company had
contracts maturing through June 1996 to purchase approximately U.S.
$6,507,000 with 2,917,000 Austrian schillings, 14,296,000 Danish
kroner, 4,180,000 German marks, 250,000 British pounds and
28,295,000 Japanese yen at the spot rate on the maturity date. The
Company had a contract maturing December 1995 to purchase
1,085,000 British pounds with 2,418,000 German marks at the spot rate
on the maturity date. The Company had contracts maturing July 1995 to
purchase approximately 23,428,000 Austrian schillings, 6,512,000
Danish kroner and 302,175,000 Japanese yen with 4,500,000 British
pounds 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.
15. Acquisitions
In February 1995, the Company acquired Becker GmbH, a leading
German manufacturer of automotive OEM and automotive aftermarket
electronics for consideration of approximately U.S. $6.0 million, up to
400,000 shares of the Company's Common Stock and assumption of
post-acquisition indebtedness of approximately U.S. $57.7 million. The
purchase was effective January 1, 1995.
In March 1994, the Company acquired Studer Revox AG, a prominent
manufacturer of professional recording and broadcast equipment for
consideration of approximately U.S. $70.00 and assumption of post-
acquisition bank indebtedness of approximately U.S. $16 million. The
purchase was effective January 1, 1994.
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 for consideration of
approximately U.S. $7.00 and assumption of post-acquisition bank
indebtedness of approximately U.S. $24.5 million. The Company
subsequently acquired the remaining 24% of AKG in July 1994 for
consideration of approximately U.S. $3.7 million.
The Becker, AKG and Studer acquisitions were recorded using the
purchase method of accounting and the financial statements include their
operations from the acquisition date. The related goodwill is being
amortized over 40 years using the straight-line method. None of the
companies prepared interim consolidated financial statements since all
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, 1993, are not available and such
preparation is not practical. The Company has prepared pro forma
financial data assuming the acquisitions occurred on January 1, 1993,
based upon the calendar year-ends of the acquired companies and
comparable quarterly financial data of the Company. Unaudited pro
forma data is presented below:
12 months ended December 31, 1995 1994
-------------- --------------
($000s omitted except per share
amounts)
Net sales $ 1,154,297 1,026,963
Net income before
extraordinary item $ 38,796 14,525
Net income $ 38,522 13,777
Income per share before
extraordinary item $ 2.58 1.29
Income per share $ 2.56 1.22
16. Subsequent Event
In August 1995, the Company declared a 5 percent stock dividend to
stockholders of record on August 11, 1995, payable on August 25,
1995.
104
<PAGE>
41
17. Quarterly Summary of Operations (Unaudited)
The following is a summary of operations by quarter for fiscal 1995 and
1994:
<TABLE>
Three months ended:
($000s omitted except share amounts)
FISCAL 1995 Sep 30 Dec 31 Mar 31 Jun 30
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $228,607 288,718 310,493 342,406
Gross profit $ 75,866 90,837 93,895 103,483
Income before
extraordinary items $ 4,198 12,170 11,372 13,695
Net income $ 4,150 11,944 11,372 13,695
Income per share
before extraordinary
items $ .28 .80 .75 .88
Net income per
common share $ .28 .79 .75 .88
Pro forma net income
per common share
(note 16) $ .27 .75 .72 .84
FISCAL 1994
Net sales $163,661 222,726 222,915 252,845
Gross profit $ 46,792 70,357 72,128 79,885
Income before
extraordinary items $ 1,044 7,567 8,179 9,622
Net income $ 1,044 6,819 8,179 9,622
Income per share
before extraordinary
items* $ .10 .59 .55 .64
Net income per
common share* $ .10 .54 .55 .64
Pro forma net income
per common share
(note 16)* $ .09 .51 .52 .61
</TABLE>
*Quarters do not add to full year for fiscal 1994 due to differences in
number of shares outstanding in the quarters.
- - ---------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
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, 1995 and 1994 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, 1995. 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,
1995 and 1994 and the results of their operations and their cash flows
for each of the years in the three-year period ended June 30, 1995 in
conformity with generally accepted accounting principles.
Los Angeles, California
/s/ KPMG Peat Marwick LLP
August 11, 1995
105
<PAGE>
42 Statement of Management Responsibility
Harman International Industries, Incorporated and Subsidiaries
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 judgements.
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
President & Chief Operating Officer
Shareholder Information
Market Price Fiscal 1995 Fiscal 1994 Fiscal 1993
HIGH LOW HIGH LOW HIGH LOW
First quarter ended
September 30 $34.875 $26.125 $21.50 $17.75 $12.75 $9.00
Second quarter ended
December 31 38.00 32.00 29.125 18.875 15.25 9.25
Third quarter ended
March 31 42.00 36.375 33.25 27.375 18.25 14.50
Fourth quarter ended
June 30 40.50 34.125 31.125 25.125 21.00 16.00
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, 1995, the Company's
Common Stock was held by approximately 221 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, 1995, 1994, and 1993. 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 dividends during fiscal 1995 of $.17 per share, with a
dividend of $.04 paid in each of the first three quarters and a dividend of
$.05 paid in the fourth quarter. In August 1995 a special 5 percent stock
dividend was declared, payable on August 25, 1995.
106
<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 Controller
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
Advanced Technology Council
Michael Watts
Chairman
Erich Geiger
Vice Chairman
Directors
Sidney Harman
Bernard A. Girod
Shirley Mount Hufstedler
Ann McLaughlin*
Edward H. Meyer
Alan Patricof
Atsushi Suzuki
Counselor to the Executive Committee
Annual Meeting
The annual meeting of shareholders will be held on November 14, 1995,
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 25, 1995, at which time proxies for the
meeting were requested.
Registrar and Transfer Agent
Chemical Mellon Shareholder Services
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
*Effective November 14, 1995.
Design: Fitch, Inc. Printing: Daniels Printing
Photography: Page 10: Frank Stewart. Page 15: Peter Rice. Page 16-17:
Mike Leghby. Page 18 gatefold: John Shotwell. Page 19 and 22-23:
Tom Wedell.
107
<PAGE>
(picture here)
Harman International Industries, Incorporated
1101 Pennsylvania Avenue, NW
Suite 1010
Washington, DC 20004
(202) 393-1101
108
<PAGE>
EXHIBIT 21.1
109
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110
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------ -------------
AKG Acoustics GmbH Germany
AKG Acoustics, Inc. Delaware
AKG Acoustics India, Ltd. India
AKG Akustische u. Kino-Gerate
Gessellschaft m.b.H. Republic of Austria
Allen & Heath Limited United Kingdom
Audax Industries, S.A. France
Audax of America, Inc. Delaware
Becker Automotive (Pty) Ltd. South Africa
Becker GmbH Germany
Becker Holding GmbH Germany
Becker of North America Delaware
Becker Service und Verwaltungs GmbH Germany
BSS Audio Ltd United Kingdom
D.A.V.I.D. GmbH Germany
DOD Electronics Corporation Utah
Edge Technology Group Ltd. United Kingdom
Fosgate, Inc. Delaware
Harco Properties, Inc. Delaware
Harman Belgium NV Kingdom of Belgium
111
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------ -------------
Harman Consumer Europe A/S Denmark
Harman Deutschland GmbH Germany
Harman France, S.N.C. France
Harman Holding Europe A/S Denmark
Harman Integrated Design
Group Incorporated Delaware
Harman Enterprises, Inc. Delaware
Harman Interactive, Inc. 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, Incorporated Delaware
Harman Marketing Europe A/S Denmark
Harman-Motive, Inc. Delaware
Harman Motive Limited United Kingdom
Harman Audio Outlet, Inc. Delaware
Harman UK Limited United Kingdom
Infinity Systems, Inc. California
112
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------ -------------
JBL Incorporated Delaware
JBL TM Corporation Delaware
Lexicon, Incorporated Massachusetts
Lydig of Scandinavia A/S Denmark
Precision Devices, Ltd United Kingdom
Pyle Industries, Inc. Indiana
Soundcraft Electronics, Limited United Kingdom
Soundcraft Magnetics Limited United Kingdom
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 S.A. France
Turbosound Ltd. United Kingdom
113
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114
<PAGE>
EXHIBIT 23.1
115
<PAGE>
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116
<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, 33-60236 and 33-59605 on
Form S-8 of Harman International Industries, Incorporated of our report
dated August 11, 1995, relating to the consolidated balance sheets of
Harman International Industries, Incorporated and subsidiaries as of June 30,
1995 and 1994, and the related consolidated statements of operations, cash
flows and shareholders' equity and related schedule for each of the years in
the three year period ended June 30, 1995, which report appears in the June
30, 1995 annual report on Form 10-K of Harman International Industries,
Incorporated.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
September 18, 1995
117
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118
<PAGE>
EXHIBIT 27.1
119
<PAGE>
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120
<TABLE> <S> <C>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 9342
<SECURITIES> 1910
<RECEIVABLES> 277211
<ALLOWANCES> 12313
<INVENTORY> 236532
<CURRENT-ASSETS> 552655
<PP&E> 347403
<DEPRECIATION> 157580
<TOTAL-ASSETS> 886872
<CURRENT-LIABILITIES> 295091
<BONDS> 266021
<COMMON> 152
0
0
<OTHER-SE> 289338
<TOTAL-LIABILITY-AND-EQUITY> 886872
<SALES> 1170224
<TOTAL-REVENUES> 1170224
<CGS> 668657
<TOTAL-COSTS> 806143
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4263
<INTEREST-EXPENSE> 25284
<INCOME-PRETAX> 61157
<INCOME-TAX> 19642
<INCOME-CONTINUING> 41435
<DISCONTINUED> 0
<EXTRAORDINARY> (274)
<CHANGES> 0
<NET-INCOME> 41161
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 2.70
</TABLE>
