<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1996
Commission File Number: 1-9764
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2534306
- ---------------------------------- --------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1101 PENNSYLVANIA AVENUE, NW WASHINGTON, D.C. 20004
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(Address of principal executive offices) (Zip code)
(202) 393-1101
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
18,645,767 shares of Common Stock, $.01 par value, at October 31, 1996.
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1996 and June 30, 1996 3
Condensed Consolidated Statements of Operations -
Three months ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of the Results
of Operations and Financial Condition 7-9
PART II. OTHER INFORMATION 10
SIGNATURES 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND JUNE 30, 1996
(000s omitted except per share amounts)
<TABLE>
(Unaudited) (Audited)
ASSETS 09/30/96 06/30/96
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<S> <C> <C>
Current assets
Cash and short-term investments $ 1,575 303
Receivables (less allowance for doubtful
accounts of $9,850 at September 30,
1996 and $9,962 at June 30, 1996) 309,820 298,110
Inventories 331,636 308,051
Other current assets 49,075 45,506
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Total current assets 692,106 651,970
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Property, plant and equipment, net 202,272 200,958
Excess of cost over fair value of assets
acquired, net 129,225 129,940
Other assets 13,121 13,341
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Total assets $1,036,724 996,209
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 25,202 26,367
Current portion of long-term debt 23,919 6,423
Accounts payable 107,695 109,565
Accrued liabilities 129,450 132,304
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Total current liabilities 286,266 274,659
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Borrowings under revolving credit
facility 149,316 107,986
Senior long-term debt 18,406 37,125
Subordinated long-term debt 108,750 109,500
Other non-current liabilities 29,528 29,603
Minority interest 791 859
Shareholders' equity
Common stock, $.01 par value 186 186
Additional paid-in capital 294,443 293,993
Equity adjustment from foreign currency
translation (4,803) (4,906)
Retained earnings 153,841 147,204
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Total shareholders' equity 443,667 436,477
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Total liabilities and shareholders' equity $1,036,724 996,209
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(000s omitted except per share amounts)
(UNAUDITED)
<TABLE>
Three Months Ended
September 30,
1996 1995
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<S> <C> <C>
Net sales $ 338,003 300,474
Cost of sales 243,209 210,988
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Gross profit 94,794 89,486
Selling, general and administrative
expenses 77,285 73,213
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Operating income 17,509 16,273
Other expenses:
Interest expense 6,158 6,937
Miscellaneous, net 220 275
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Income before income taxes
and minority interest 11,131 9,061
Income tax expense 3,562 3,123
Minority interest -- 34
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Net income $ 7,569 5,904
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Net income per common share $ 0.41 0.36
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Weighted average number of
common shares outstanding 18,632 16,235
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
($000s omitted) (UNAUDITED)
<TABLE>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,569 5,904
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Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 12,257 12,393
Amortization of intangible assets 1,326 1,335
Amortization of deferred income -- (323)
Changes in assets and liabilities, net of effects
from purchase of companies:
Decrease (increase) in:
Receivables (11,710) (16,979)
Inventories (23,585) (20,294)
Other current assets (3,569) (7,642)
Increase (decrease) in:
Accounts payable (1,870) 2,785
Accrued liabilities (2,854) (14,517)
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Total adjustments $ (30,005) (43,242)
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Net cash provided by (used in) operating activities $ (22,436) (37,338)
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Cash flows from investing activities:
Payment for purchase of companies,
net of cash acquired $ -- (9,133)
Capital expenditures (13,741) (13,424)
Other items, net (364) 2,995
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Net cash used in investing activities $ (14,105) (19,562)
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Cash flows from financing activities:
Net borrowings under (repayments of)
lines of credit $ (1,165) 1,718
Net proceeds from long-term debt 39,357 52,414
Dividends paid to shareholders (932) (875)
Effect of stock option program 450 319
Net change, foreign currency translation 103 875
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Net cash flow provided by financing activities $ 37,813 54,451
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Net increase (decrease) in cash and
short-term investments 1,272 (2,449)
Cash and short-term investments
at beginning of period 303 11,252
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Cash and short-term investments at end of period $ 1,575 8,803
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Supplemental disclosures of cash flow information:
Interest paid $ 6,937 7,221
Income taxes paid $ 3,678 5,901
Supplemental schedule of non-cash investing activities:
Fair value of assets acquired $ -- 11,788
Cash paid for the capital stock -- 9,826
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Liabilities assumed $ -- 1,962
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
NOTE A - BASIS OF PRESENTATION
The Company's Condensed Consolidated Financial Statements for the
three months ended September 30, 1996 and 1995, have not been
audited by the Company's independent auditors; however, in the
opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the
consolidated financial position of the Company and subsidiaries as of
September 30, 1996 and the results of their operations and their cash
flows for the periods presented.
The results of operations for the three months ended September 30,
1996, are not necessarily indicative of the results to be expected for the
full year.
6
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ------------------------------------
COMPARISON OF THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
Net sales for the quarter ended September 30, 1996 totaled $338.0
million, a 12.5 percent increase over the comparable period in the prior
year. Sales increased 15.1 percent exclusive of currency effects. The
Consumer, Professional and OEM Groups all reported higher sales.
The Consumer Group reported higher sales as JBL, Infinity and Harman
Kardon increased market share both domestically and abroad. Infinity's
launch of the new Compositions Overture line of high performance
loudspeakers contributed to the growth.
The Professional Group contributed higher sales for the quarter. JBL
Professional sales benefited from vigorous cinema installation activity
in most major markets worldwide. Soundcraft's higher sales reflected
strong demand for its new Ghost mixing console. AKG and Studer
operations both improved substantially.
The OEM Group produced sales growth in excess of 20 percent. Its
Audio for Computers unit completed the first full quarter of sales of
JBL-Pro branded audio systems to Compaq for its new line of Presario
personal computers. Shipments of high fidelity systems to the
automakers increased over last year in part because of the addition of
new models at Chrysler, Toyota and Mitsubishi. Audio system
shipments for the Chrysler Minivan and the Dodge Ram Pickup in the
United States were particularly strong. Becker reported increased sales
to its major customers, Mercedes Benz, BMW and Porsche. During the
first quarter, BMW awarded all BMW 5-Series radio production for the
1998 model year to Becker.
The gross profit margin for the quarter ended September 30, 1996 was
28.0 percent ($94.8 million) compared to 29.8 percent ($89.5 million) in
the prior year. The decrease in the gross profit margin rate for the
quarter reflects the impact of start-up costs associated with the new
Audio for Computers unit and aggressive pricing in certain consumer
product lines to build market share.
7
<PAGE>
Operating income as a percentage of sales was 5.2 percent ($17.5
million) for the quarter ended September 30, 1996 compared with 5.4
percent ($16.3 million) for the same period in the prior year. The lower
operating income percentage results from lower gross margin as
discussed above partially offset by a decrease in selling, general and
administrative expenses as a percentage of sales.
Interest expense for the three months ended September 30, 1996 of $6.2
million was down from last year's $6.9 million. Average borrowings
outstanding were $307.1 million for the first quarter of fiscal 1997,
down from $323.8 million for the same period in the prior year. Lower
average borrowings result from the May 1996 secondary stock offering,
partially offset by increased working capital requirements and cash
outlays for the Madrigal acquisition and the final settlement of the
Becker acquisition.
The average interest rate on borrowings was 8.0 percent for the first
quarter, down from 8.6 percent for the first quarter of the prior year.
The decrease in average interest rates results from changes in the mix of
borrowings to include a larger portion under the committed revolving
credit facility, which carries interest rates at LIBOR plus 0.25 percent.
The borrowing rate was reduced during the first quarter from LIBOR
plus 0.30 percent due to the achievement of certain financial criteria in
fiscal 1996. Interest expense as a percentage of sales was 1.8 percent
for the first quarter of fiscal 1997, down from 2.3 percent for the
comparable period in the previous year.
Income before income taxes and minority interest for the first quarter of
fiscal 1997 was $11.1 million, up from $9.1 million in the prior year.
The effective tax rate for the first quarter of fiscal 1997 was 32.0 percent
compared with 34.5 percent in the same period a year ago. The
decrease in the effective tax rate is due to the restructuring of certain
foreign subsidiaries to take advantage of prior years' tax losses and the
utilization of tax loss carryforwards at certain foreign subsidiaries. The
Company calculates its effective tax rate based upon its current estimate
of annual results.
Net income for the three months ended September 30, 1996 was $7.6
million, or $0.41 per share, compared with $5.9 million, or $0.36 per
share, in the previous year.
8
<PAGE>
FINANCIAL CONDITION
- ---------------------------------
Net working capital at September 30, 1996 was $405.8 million,
compared with $377.3 million at June 30, 1996. Working capital
increased primarily due to the increase in inventories from $308.1
million at June 30, 1996 to $331.6 million at September 30, 1996.
Higher inventory levels result from increased sales volume and new
product introductions.
Borrowings under the revolving credit facility at September 30, 1996
were $159.4 million, comprised of swing line borrowings of $10.1
million, which are included in notes payable, and competitive advance
borrowings and revolving credit borrowings of $149.3 million.
Borrowings under the revolving credit facility at June 30, 1996 were
$120.9 million, comprised of swing line borrowings of $12.9 million
and competitive advance borrowings and revolving credit borrowings of
$108.0 million. Increased borrowings reflect the financing of higher
working capital requirements as discussed above.
OTHER
The Company sold its Pyle Industries automotive aftermarket
manufacturing unit in October 1996. The disposition does not
materially impact the financial position of the Company.
Except for historical information contained herein, the matters
discussed are forward-looking statements which involve risks
and uncertainties that could cause actual results to differ
materially from those suggested in the forward-looking
statements, including, but not limited to the effect of
economic conditions, product demand, competitive products and
other risks detailed in the Company's other Securities and
Exchange Commission filings.
9
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various legal proceedings pending against the
registrant and its subsidiaries, but, in the opinion of
management, liabilities, if any, arising from such claims will not
have a materially adverse effect upon the consolidated financial
condition of the registrant.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
None.
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Registrant)
<TABLE>
<S> <C> <C>
DATE: November 7, 1996 BY: /s/ Sidney Harman
-------------------------------
Sidney Harman
Chairman and Chief
Executive Officer
DATE: November 7, 1996 BY: /s/ Bernard A. Girod
-------------------------------
Bernard A. Girod
President, Chief Operating
Officer, Chief Financial
Officer and Secretary
</TABLE>
11
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1379
<SECURITIES> 196
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<ALLOWANCES> 9850
<INVENTORY> 331636
<CURRENT-ASSETS> 692106
<PP&E> 402650
<DEPRECIATION> 200378
<TOTAL-ASSETS> 1036724
<CURRENT-LIABILITIES> 286266
<BONDS> 276472
<COMMON> 186
0
0
<OTHER-SE> 443481
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</TABLE>
