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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, 2000
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 28, 2000, was $1,172,395,623.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 16,218,782
shares of Common Stock, par value $.01 per share, as of August 28, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended June 30, 2000, are incorporated by reference in Part I,
Item 1, and Part II, Items 5, 7 and 8.
Portions of the Registrant's definitive Proxy Statement relating to
the 2000 Annual Meeting of Stockholders are incorporated by reference in
Part III, Items 10 (as related to Directors), 11, 12, and 13.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. X
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TABLE OF CONTENTS
Page
PART I
Item 1. Business...................................... 5
Item 2. Properties.................................... 24
Item 3. Legal Proceedings............................. 25
Item 4. Submission of Matters to a Vote of
Security Holders.......................... 26
Executive Officers of the Registrant...... 26
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters................................... 28
Item 6. Selected Financial Data....................... 29
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations..................... 29
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk........... 29
Item 8. Consolidated Financial Statements
and Supplementary Data.................... 30
Item 9. Disagreements on Accounting and
Financial Disclosure..................... 30
PART III
Item 10. Directors and Executive Officers of
the Registrant.......................... 31
Item 11. Executive Compensation........................ 31
Item 12. Security Ownership of Certain
Beneficial Owners and Management.31
Item 13. Certain Relationships and Related
Transactions............................ 31
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.31
List of Financial Statements and
Financial Statement Schedules............ 33
Independent Auditor's Report............. 34
Index to Exhibits........................ 37
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PART I
ITEM 1. BUSINESS
General Business
Harman International Industries, Incorporated (together with its
subsidiaries, "Harman" or the "Company"), a Delaware corporation
formed in 1980, is a worldwide leader in the manufacture of high-quality
high-fidelity audio products targeted at the consumer and professional
audio markets. For almost 50 years, the Company and its predecessors
have been leaders and innovators in creating loudspeakers and electronic
audio products that deliver superior sound. The Company believes that its
JBL, Mark Levinson, Infinity and Harman Kardon brand names are well-
known worldwide for premium quality and performance.
The Company has developed, internally and through a series of strategic
acquisitions, a broad range of product offerings sold under renowned
brand names in its principal markets. The objective of the Company's
development efforts has been to secure engineering, manufacturing and
marketing leadership and to strengthen the Company's ability to provide
total audio system solutions to its customers.
The Company's businesses are organized by the end-user markets they
serve. The Consumer Systems Group manufactures loudspeakers and
electronics for high fidelity audio reproduction in the home, with
computers and in the car. The Professional Group manufactures
loudspeakers and electronics used by audio professionals in concert hall,
recording, broadcast and cinema applications.
Harman's primary manufacturing facilities are located in California,
Indiana, Utah, Germany, the United Kingdom, Denmark, Mexico, France,
Austria and Hungary.
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Consumer Systems Group
The Consumer Systems Group manufactures loudspeakers and electronics
for high fidelity audio reproduction in the home, with computers and in
the car. These products are marketed under brand names including JBL,
Infinity, Harman Kardon, Mark Levinson, Proceed, Revel and
AudioAccess. The Company has the preeminent portfolio of brand names
and range of product offerings in the consumer audio market. The JBL,
Infinity and Harman Kardon brands are recognized throughout the world
for superior sound quality and good value. High-end products bearing the
Mark Levinson, Proceed and Revel brands are acclaimed for their
superior build quality and state-of-the-art sound reproduction.
The Consumer Systems Group offers premium, branded audio systems to
retail automobile purchasers through OEM supply agreements with
DaimlerChrysler, BMW, Toyota, Mitsubishi, Porsche, Saab, Peugeot and
Ferrari, complemented by non-branded loudspeaker supply agreements
with other automakers including Audi, Volvo, VW, Ford, Renault and
Fiat.
The Company's largest automotive OEM customer, DaimlerChrysler,
offers Infinity branded audio systems in the majority of its Chrysler,
Dodge and Plymouth car, truck and sport-utility vehicle platforms, and
offers Becker head units and navigation systems, as well as non-branded
loudspeaker systems manufactured by Harman Audio Electronic Systems,
in a substantial number of its Mercedes Benz automobiles. Becker also
supplies head units to BMW and Porsche. Toyota offers JBL branded
audio systems in most of its models, and beginning in model year 2001
added our high-end Mark Levinson audio systems in their Lexus line.
The loss of, or a material decrease or delay in purchasing the Company's
products by, any of the Company's significant customers could have a
material adverse effect on the results of operations of the Company. Sales
of the Company's audio products through the automakers are dependent
on automobile industry sales and automobile purchasers' willingness to
pay for the option of a premium branded automotive audio system.
The Consumer Systems Group offers branded audio systems to personal
computer users through OEM supply agreements with Apple, Dell and
Compaq. These audio systems provide high-quality sound and thus
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enhance the appeal and capability of the personal computer as an
entertainment device. The JBL, Infinity and Harman Kardon brand
names are all employed in this market.
The Company believes the maturation and broadened acceptance of DVD
and digital television will provide growth opportunities for its consumer
brands. In addition to the contribution of its new Proceed and Harman
Kardon DVD machines, the Company expects DVD and digital television
to stimulate loudspeaker sales due to increased customer traffic in
audio/video dealers' stores and the improved audio quality potential of
DVD and digital television compared to the current analog audio/video
and digital audio technologies. Sales expectations are dependent, to a
substantial extent, on discretionary spending by consumers, which may be
affected by economic conditions.
The Company believes excellent growth opportunities are available in the
automotive OEM channel through higher penetration levels within
existing models, increases in per-vehicle content through the provision of
complete systems, increases in the number of models offering the
Company's audio systems and supply agreements with additional
automakers.
Professional Group
The Company's Professional Group manufactures professional audio
equipment, including loudspeakers, amplifiers, mixing consoles, signal
processing equipment, microphones and effects devices. Such products
are marketed on a worldwide basis under brand names including JBL
Professional, Soundcraft, Allen & Heath, Crown, DOD, Digitech,
Lexicon, AKG, dbx, BSS, AMEK, Spirit and Studer. The Professional
Group is uniquely equipped to provide turnkey systems solutions for
professional audio applications that offer the customer improved
performance, ease of installation and reduced cost. The principal market
segments served by the Professional Group are sound reinforcement,
broadcast and recording and music instrument support.
JBL Professional is a leader in the vibrant cinema market, serving
customers such as Cineplex Odeon and United Artists Theaters.
Stadiums, concert halls, houses of worship and major concert tours rely
on sound reinforcement products from the Professional Group, such as
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JBL loudspeakers, JBL, Crown and BSS amplifiers, AKG microphones,
Lexicon, DOD and dbx signal processing equipment, and Soundcraft,
AMEK and Allen & Heath mixing consoles, to produce top quality
sound.
Customers in the recording and broadcast market include radio and
television stations and recording studios. Customers in these markets,
including AMS Westfunk Radio, Abbey Road Studios and The Hit
Factory, are primarily served by Studer, with additional offerings from
JBL, Lexicon, Soundcraft and AKG.
JBL, Crown, DOD, Digitech and Spirit serve the music instrument
support segment of the professional audio market. JBL manufactures and
markets loudspeakers, monitors and amplifiers. Crown manufactures
professional amplifiers. DOD and Digitech sell sound effects and other
signal processors, portable mixing consoles and guitar amplifiers. Spirit
markets portable mixing consoles. Music instrument support products are
sold through music retail stores such as Guitar Center and Sam Ash.
AKG serves certain OEM markets in addition to its professional audio
activities. AKG's expertise in the design and manufacture of miniature
transducers for special microphone applications has led to market
opportunities in the mobile telecommunications equipment and hands-free
automotive communications markets. AKG manufactures the earpiece
and mouthpiece transducer capsules for mobile telephone manufacturers
including Nokia, Kyocera, Ericsson and Sony. AKG also manufactures
miniature transducers for hands-free communications applications in
Mercedes Benz automobiles. And, beginning in model year 2001, AKG
will supply hands-free microphones for the General Motors OnStar
system.
Operating and Geographic Segment Information
Financial information about operating and 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, 2000.
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Description of Business
The Company's business is conducted through its wholly owned
subsidiaries which include:
<TABLE>
<CAPTION>
Name Principal products
---------------------------------- ---------------------------------
<S> <C>
AKG Acoustics GmbH Professional electronics
Audax Industries S.N.C. Consumer home and automotive
loudspeakers
Audio Latina S.A. de C.V. Automotive OEM loudspeakers
Becker GmbH Automotive OEM and automotive
aftermarket electronics
Crown Audio, Inc. Professional electronics
Harman Audio Electronic
Systems GmbH Automotive OEM loudspeakers
Harman Audio Electronic
Systems KFT. Automotive OEM loudspeakers
Harman Music Group, Incorporated Professional electronics
Harman Consumer Manufacturing A/S Components, cabinets and
loudspeaker systems
Harman de Mexico, S.A. de C.V. Loudspeaker cabinets
Harman International Industries, Automotive OEM loudspeakers and
Limited electronics and professional
audio products
Harman-Kardon, Incorporated Consumer home and automotive
electronics
Harman-Motive, Inc. OEM loudspeakers
and electronics
Harman Wisconsin, Inc. OEM loudspeakers
and electronics
Infinity Systems, Inc. Consumer home and automotive
loudspeakers and electronics
</TABLE>
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<TABLE>
<CAPTION>
Name Principal products
---------------------------------- ---------------------------------
<S> <C>
JBL Incorporated Consumer, professional and
automotive loudspeakers and
electronics
Lexicon, Incorporated Professional electronics
Madrigal Audio Laboratories, Inc. Consumer electronics
Studer Professional Audio AG Professional electronics
</TABLE>
Markets for Products
Based on its knowledge of the audio industry, the Company believes that
the consumer and professional audio markets have grown in recent years.
In 1997 and 1998, the consumer and professional audio markets slowed
somewhat due to uncertainty associated with technology transitions and
weakness in Asia. The transition from analog to digital audio technology
has changed music recording and reproduction and has led to the
development of a new generation of consumer and professional audio
products, including software-driven audio systems with integrated digital
architecture that permits communication among all components.
Although this transition has unsettled markets due to customer confusion
and hesitancy, management believes that the new digital technologies and
standards are stabilizing and Harman's market position will help the
Company to capitalize on the release of pent-up demand as confusion and
hesitancy abate. Sales growth in fiscal year 2000 provided evidence of
this anticipated trend.
Multimedia audio systems has been a growth market for Harman. The
Company has developed branded audio systems for personal computers
marketed by Apple, Dell, Compaq and IBM. The Company also
produces branded aftermarket audio systems for multimedia applications.
The Company believes that the number of personal computers equipped
with multimedia capabilities will continue to increase.
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We believe significant growth opportunities exist within the automotive
audio market to increase sales by increasing product penetration in
platforms currently supplied on an OEM basis, increasing per-vehicle
content through the provision of systems with additional functions,
expanding the number of automobile models offering our systems and
adding new OEM partners. Becker's radio and navigation system
products complement the Company's JBL, Infinity and Harman Kardon
automotive audio programs and enable the Company to offer fully-
integrated multimedia systems through its automobile manufacturing
partners. The Company has received commitments for integrated systems
on future models from Mercedes, Audi, BMW, Porsche and Renault, and
we believe that these will be followed by commitments from other of the
world's leading automakers.
The professional audio markets served by the Company include sound
reinforcement, broadcast and recording and music instrument support.
The sound reinforcement market includes theaters (cinema and live
performance), stadiums, concert halls, and houses of worship. The
broadcast and recording market includes radio and television stations and
recording studios. The Company serves the music instrument support
market primarily through the provision of portable digital signal
processing components, guitar amplifiers and compact, portable
loudspeaker systems used by touring performers. Much of the
professional audio market is undergoing a transition from analog to digital
audio technology, and the Company is well-equipped for this evolutionary
period with the engineering and marketing expertise of JBL, Crown,
Soundcraft, Studer, Lexicon, Harman Music Group and AKG.
Products
The Company designs, manufactures and markets worldwide a broad
range of high-quality, high-fidelity audio loudspeakers and electronics for
the consumer audio market ( in the home, in the car and with computers)
and the professional audio market (sound reinforcement, broadcast and
recording, and musical instrument support).
CONSUMER PRODUCTS. The Company manufactures loudspeakers
under the JBL, Infinity and Revel brand names for the consumer market.
These loudspeaker lines include models designed for two-channel stereo
and multi-channel surround sound applications in the home in a wide
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range of choices, including floorstanding, bookshelf, powered, low
frequency, in-wall, wireless and all-weather, in styles and finishes ranging
from high gloss lacquers to genuine wood veneers. The JBL and Infinity
product lines also include car loudspeakers, amplifiers and crossovers.
The Company manufactures a broad range of consumer audio electronics.
The Company's consumer electronics products facilitate the marketing of
complete home, car and multimedia systems incorporating the Company's
loudspeakers, such as surround sound home theater installations. The
Company's Harman Kardon home electronics line includes audio-video
receivers featuring Dolby Digital and DTS surround sound processing
capabilities and multi-channel amplifiers. A five-disc DVD machine and
a CD recorder introduced in fiscal 2000 reflect Harman Kardon's
commitment to deliver state-of-the-art audio reproduction equipment to
its customers.
Madrigal designs and manufactures high-end electronics, including
amplifiers, pre-amplifiers, digital signal processors and compact disc
transports and players and a new DVD transport. Madrigal markets its
products under the renowned Mark Levinson and Proceed brand names.
The AudioAccess product line is also part of the Madrigal Group.
AudioAccess products provide in-home, multi-source, multi-zone sound
system controls, serving home theater and multi-room applications.
JBL, Infinity and Harman Kardon branded premium audio systems are
offered with personal computers manufactured by Compaq, IBM and Dell
and Apple, respectively. Harman participates in this market through
design and brand name licensing as well as direct sourcing. These audio
systems provide high-quality sound and thus enhance the appeal and
capability of the personal computer as an entertainment device.
Harman is a leading global manufacturer of premium branded automotive
audio systems offered by automakers as an option to their customers. In
its offering of loudspeakers, head units, amplifiers and multimedia
systems through the automobile manufacturers, the Company leverages
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, Mark Levinson and
Becker brand names. Harman engineers are engaged by the automobile
manufacturers early in the cabin design process to develop systems that
optimize acoustic performance and minimize weight and space
requirements. Harman has developed the technical competencies to offer
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multimedia systems to automobile manufacturers incorporating audio,
video, navigation, telematics, internet access, security and cabin quieting.
Today, the Company primarily supplies car audio, video and navigation
systems products separately. However, the Company has received
commitments for integrated systems on year 2002 and 2003 models from
Mercedes, Audi, BMW, Renault and Porsche in Europe. We believe that
this could be followed by integrated system commitments from other of
the world's leading automakers. The Company's Infinity-branded car
audio systems are offered by DaimlerChrysler's Chrysler, Dodge,
Plymouth and Jeep lines and by Mitsubishi. JBL-branded audio systems
are offered by Toyota, Peugeot and Hyundai. Harman Kardon systems
are offered by BMW, Jaguar and Saab. Mark Levinson systems are now
offered by Lexus, beginning in model year 2001. Becker supplies head
units, navigation systems and other electronics to DaimlerChrysler, BMW
and Porsche.
PROFESSIONAL PRODUCTS. The Company designs, manufactures
and markets products in all significant segments of the professional audio
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 Professional, Soundcraft, Allen & Heath, Crown,
DOD, Digitech, Lexicon, AKG, BSS, dbx, AMEK and Studer.
Professional installations of Harman products include stadiums, opera
houses, concert halls, recording studios, broadcast studios, theaters,
houses of worship, cinemas and touring performing artists.
Sound systems incorporating components manufactured by JBL, Crown,
Lexicon, AKG, Studer and Soundcraft are in use around the world in such
places as the Experience Music Project in Seattle, the Great Hall of the
People in Beijing, China, the Royal Danish Theater in Copenhagen and
Abbey Road Studio and the Millennium Dome in England. Harman
professional equipment is used on tour by performing artists throughout
the world.
The professional market has advanced rapidly and is heavily involved in
digital technology. Harman's Professional Group is a leader in this
market. The Professional Group derives value from its ability to share
research and development, engineering talent and other digital resources
among its divisions. Soundcraft, Lexicon, Studer and Harman Music
Group each have substantial digital resources and work together to
achieve common goals by sharing resources and technical expertise.
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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, surround systems
and industrial loudspeakers.
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, Crown, DOD, Digitech, Lexicon, AMEK, AKG, BSS, dbx and
Studer, and are often sold in conjunction with the Company's professional
loudspeakers.
The AMEK and Soundcraft lines of high-quality sound mixing consoles
extend from automated multi-track consoles for master recording studios
to compact professional mixers for personal recording and home studios.
Soundcraft and AMEK 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 Harman Music Group 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. Harman Music Group
products include signal processing equipment, equalizers, mixers and
special effects devices.
Lexicon is a leader in the design, manufacture and marketing of high-
quality digital audio signal processing equipment for professional use in
the audio, video, musical entertainment and broadcasting markets
worldwide. Lexicon digital signal processing products are used in live
sound applications as well as recording studios to produce sound effects
and refine final mixes. Additionally, Lexicon manufactures and markets a
series of high-end home theater surround sound processors and amplifiers.
AKG is a leading manufacturer of high-quality microphones and
headphones. The AKG product line includes microphones, audio
headphones, surround-sound headphones and other professional audio
products marketed under the AKG brand name. AKG has leveraged its
engineering and manufacturing expertise to enter the telecommunications
market, supplying miniature transducers to mobile phone makers Nokia,
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Ericsson, Kyocera and Sony, as well as the automotive hands-free
communications market, supplying microphone arrays to Mercedes Benz
and General Motors.
Crown, acquired in March 2000, is a leading professional amplifier
manufacturer based in Elkhart, Indiana. The addition of Crown to our
professional audio portfolio has enhanced our ability to provide complete
systems solutions to the professional audio market.
Studer Professional Audio 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.
Manufacturing
The Company believes that its manufacturing capabilities are essential to
maintaining and improving product quality and performance. The
Company manufactures most of the products that it sells other than certain
Harman Kardon electronic components. The Company also produces
some products for other loudspeaker companies on an OEM basis.
The Company's loudspeaker manufacturing capabilities include the
production of its own high-gloss lacquer and wooden veneer loudspeaker
enclosures, wire milling, voice coil winding and the use of computer
controlled lathes and other machine tools to produce its many precision
components. The Company's high degree of manufacturing integration
enables it to maintain consistent quality levels, resulting in reliable, high-
performance products. The Company capitalizes on opportunities to
transfer technology and materials developments across product lines to
maximize the utility of engineering, design, development and
procurement resources.
The Company's principal domestic manufacturing facility in Northridge,
California, manufactures JBL and Infinity loudspeakers and audio
electronics for home, car and professional applications. The Company
manufactures car loudspeakers and assembles car sound systems in
Martinsville, Indiana. Harman Music Group manufactures professional
electronics products at its facility in Salt Lake City, Utah.
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Lexicon manufactures professional electronics products at its Bedford,
Massachusetts facility. Madrigal manufactures consumer electronics at its
Middletown, Connecticut facility. Crown International manufactures
professional amplifiers at its Elkhart, Indiana facility.
During fiscal year 2000, the Company completed construction of new
facilities in Kentucky, to manufacture audio systems for Toyota, and in
Tijuana, Mexico, to manufacture loudspeaker cabinets. These facilities
are now in production.
The Company has established a strong manufacturing presence in Europe
to better respond to customer demands in that market. European
automotive loudspeaker and electronics manufacturing includes the
production of loudspeakers and amplifiers in the United Kingdom,
Germany, Sweden and Hungary, and car radios, navigation systems,
amplifiers and other electronics at Becker in Germany. Audax Industries
SNC ("Audax"), a manufacturer of high-quality, high-performance
tweeters, woofers and car loudspeaker systems, is located in France, and
the Company's Harman Consumer Manufacturing A/S subsidiary
manufactures cabinet enclosures and assembles complete JBL and Infinity
loudspeakers in Denmark.
European professional electronics manufacturing includes Soundcraft in
the United Kingdom (mixing consoles), Studer in Switzerland
(professional recording and broadcast equipment) and AKG in Austria
(microphones and headphones).
Marketing and Distribution
The Company's products are sold domestically and internationally in the
consumer and professional audio markets. The consumer market for
audio entertainment systems consists of car, home and multimedia. The
professional market includes a wide range of professional uses, including
live music applications, recording facilities, entertainment venues such as
concert halls, stadiums and movie theaters, broadcast facilities and music
instrument support.
The Company primarily markets its home and automotive aftermarket
audio products through audio and audio-video specialty stores and certain
audio-video chain stores, such as Circuit City and Best Buy in North
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America and MediaMarkt in Europe. The Company enjoys broad
distribution of its products and selects dealers who emphasize high-
quality audio systems and who are knowledgeable about the features and
capabilities of audio products. Sales and marketing activities for these
products include dealer education programs, point-of-sale displays,
participation in consumer audio trade shows, comprehensive product
literature and mass-media advertising.
The Company's Consumer Systems Group markets its branded OEM
audio products through automobile and personal computer manufacturers
and dealers. Automobile manufacturers offering Harman systems include
DaimlerChrysler, Toyota, BMW, Ford, Mitsubishi, Volkswagen, Volvo,
Audi, Jaguar, Porsche, Range Rover and Saab. Personal computer OEM
customers include Apple, Dell, Compaq and IBM. Sales and marketing
activities for these products include dealer education programs, point-of-
sale displays, participation in consumer audio trade shows and mass-
media advertising.
The Company's professional audio products are marketed worldwide
through professional sound equipment dealers, including sound system
contractors that directly assist major users. The Company's sales and
marketing group for its professional products is separate and independent
from its consumer product sales group. Professional audio sales and
marketing activities include dealer education programs, point-of-sale
displays, participation in professional audio trade shows and professional
audio media advertising.
Suppliers
Products designed by Harman Kardon are manufactured by several
suppliers. In fiscal 1998, Harman Kardon's largest supplier, based in
Korea, experienced difficulties associated with the crisis in Asia.
Production delays at this supplier negatively affected Harman Kardon's
results. Harman Kardon terminated its relationship with this supplier and
other sources were secured to manufacture Harman Kardon products. The
loss of any of Harman Kardon's primary suppliers would not have a
material impact on the consolidated earnings or consolidated financial
position of the Company.
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Northridge Manufacturing relies on several suppliers for a large
percentage of certain parts, such as wood, speaker grilles, plastic molded
parts and magnets. The loss of any one of these suppliers would not have
a material impact on the consolidated earnings or consolidated financial
position of the Company.
The Company utilizes third-party suppliers to manufacture personal
computer audio systems sold to Apple, Dell, Compaq and IBM bearing
the JBL, Harman Kardon and Infinity brand names. Production
difficulties at these third-party suppliers could have a material impact on
the consolidated earnings of the Company.
The Company uses externally-sourced microchips in many of its products.
This industry has experienced capacity constraints recently. A significant
disruption in our microchip supply chain and an inability to obtain
alternative sources would have a material impact on the consolidated sales
and earnings of the Company.
Trademarks and Patents
The Company markets its products under numerous trademarks and
logos, including JBL, Infinity, Harman Kardon, Citation, Concord,
Crown, Audax, Becker, AMEK, Soundcraft, Spirit, DOD, DigiTech,
Lexicon, AKG, Studer, BSS, Sound-Web, dbx, Allen & Heath,
AudioAccess, Mark Levinson, Proceed, Revel, VMAx, EON, Harman,
Control, Compositions, and C-Audio. These trademarks and logos 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, 2000, the Company held
approximately 373 United States and foreign patents covering various
products, product designs and circuits, and had approximately 324 patent
applications pending around the world. The Company vigorously
protects and enforces its trademark and patent rights.
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Seasonality
The Company experiences seasonal fluctuations in sales and earnings.
The first fiscal quarter is the weakest due to the automotive model
changeovers and the July and August holidays in Europe. Variations in
seasonal demands among end-user markets may cause operating results to
vary from quarter to quarter.
Customers
Sales to DaimlerChrysler for fiscal year 2000 accounted for 22.3% of the
Company's consolidated net sales. The loss of sales to DaimlerChrysler
would have a material adverse impact on the consolidated sales, earnings
and financial position 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 backlog was approximately $20.9 million at June 30, 2000.
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, depending on the product. The warranty
is a limited warranty, and it imposes certain shipping costs on the
customer 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.
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Competition
In general, the audio industry is fragmented and competitive with many
manufacturers, large and small, domestic and international, offering audio
products that vary widely in price and quality and are distributed through
a variety of channels. Consumer products are offered through various
channels including audio specialty stores, discount stores, department
stores, mail order firms and internet merchants. Consumer products are
also offered as OEM options on automobiles and personal computers
through the automotive and computer dealer channels. Professional
products are offered through music instrument retailers, professional
audio dealers, contractors and installers and on a contract bid basis. The
Company concentrates on the higher-quality, higher-priced segments of
the audio market.
The Company believes that it currently has a significant share of the
consumer market for loudspeakers (home, automotive and computer),
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
development of our high-end loudspeaker brand, Revel, over the past few
years, has extended our market position and complemented our Mark
Levinson and Proceed high-end electronics lines. The Company
competes based upon its strong brand names, the breadth of its product
lines, and its comprehensive marketing, engineering and manufacturing
resources.
The Company's principal competitors in the consumer loudspeaker
market include Bose, Boston Acoustics, B&W, KEF, Celestion,
Paradigm, Klipsch, Cambridge SoundWorks and Polk Audio. Principal
competitors in the high-end loudspeaker market include Wilson Audio,
Snell and B&W.
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 for Harman Kardon
include Sony, Denon, Onkyo, Nakamichi, Pioneer and Yamaha. The
20
<PAGE>
Company competes in the high-end consumer electronics market with the
Mark Levinson, Citation and Proceed brands. Principal competitors
include Krell, McIntosh, Audio Research, Meridian, Linn and Accuphase.
In the personal computer audio market, the Company's Harman Kardon,
JBL and Infinity brand names are attached to the premium audio systems
offered by Apple and Dell, Compaq and IBM, respectively. These audio
systems are provided through licensing and sourcing arrangements.
Principal competitors in this segment include Boston Acoustics, Creative
Labs, Altec-Lansing and LabTec.
In OEM automotive audio, the Company's principal competitors include
Bose, Pioneer and Foster Electric in the loudspeaker systems segment and
Alpine, Bosch, Panasonic, Siemens, Delphi, Visteon and Mannesman in
the electronics segment. The Company is the only supplier of branded
loudspeaker systems for Chrysler, Jeep and Mitsubishi automobiles in the
United States, and also supplies branded loudspeaker systems to Toyota,
BMW, Saab and Peugeot. The Company also supplies non-branded
loudspeaker systems to Chrysler, Mercedes Benz, Volkswagen, Audi,
Volvo, Ford of Europe and Fiat. The Company is a primary supplier of
radio head units to Mercedes-Benz, BMW and Porsche, and also supplies
TV tuners, navigation systems and other electronics to Mercedes-Benz,
Porsche and Renault. 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, electronics,
navigation systems, man-machine interfaces and complete multimedia
systems to fit the acoustic properties of each automobile model.
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
broadcast and recording equipment. The Company competes using its
ability to provide systems solutions to meet the complete audio
requirements of its professional customers. Harman offers products for
most professional audio applications.
The Company competes in the sound reinforcement market with many of
its brand names, including JBL Professional, AKG, Crown, Soundcraft,
AMEK and BSS. Principal competitors in sound reinforcement include
the Electro Voice division of Telex, Eastern Acoustic Works/Mackie,
QSC, Sennheiser, Tannoy, Peavey, Shure, Audio Technica, Fender, Sony
21
<PAGE>
and Yamaha. The Professional Group competes in the broadcast and
recording areas with its Studer, AKG, Soundcraft, AMEK and Lexicon
brands. Principal recording and broadcast competitors include Sony,
Yamaha, Neve, Sennheiser, Denon, SSL, Shure, Tascam, Alesis and
Audio Technica. In the Music Instrument area, competitors for the
Company's JBL, DOD, Digitech, dbx, Lexicon, Allen & Heath and Spirit
products include Yamaha, Peavey, Rane, Roland, Alesis, Marshall,
Fender, Sony, Mackie and T.C. Electronics.
The Professional Group also competes in the industrial and architectural
sound market. Competitors within this market include Siemens, Peavey,
Tannoy and Bose.
Environmental Matters
The Company is subject to various federal, state, local and international
environmental laws and regulations, including those governing the use,
discharge and disposal of hazardous materials. The Company's
manufacturing facilities are believed to be in substantial compliance with
current laws and regulations. The cost of compliance with current laws
and regulations has not been, and is not expected to be, material.
The Company has been named as a "potentially responsible party" with
respect to the disposal of hazardous wastes at four hazardous waste sites.
In addition, there are other sites to which the Company has sent hazardous
wastes which the Company believes are currently under regulatory
scrutiny. It is possible that additional environmental issues may arise in
the future which the Company cannot now predict. Although ultimate
liability cannot be determined with respect to the sites mentioned above,
and applicable law provides that a potentially responsible party at any site
may be held jointly and severally liable for the total cost of remediation,
the Company believes, based upon internal investigations and information
made available to the Company with regard to its potential liability at
these sites, that its proportionate share of the costs related to the
investigation and remedial work at these sites will not exceed $100,000.
22
<PAGE>
Research, Development and Engineering
The Company's expenditures for research, development and engineering
were $76.2 million, $76.0 million and $65.9 million for the fiscal years
ending June 30, 2000, 1999 and 1998, respectively.
Number of Employees
As of June 30, 2000, the Company had 9,807 full-time employees,
including 3,839 domestic employees and 5,968 international employees,
compared to 8,850 employees at June 30, 1999. The increase in
headcount from June 30, 1999, to June 30, 2000, was primarily due to the
acquisition of Crown International and increased engineering and
manufacturing staffing in our European automotive electronics
operations.
Disclosures about Segments and Related Information
Disclosures about segments and related information 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 34 and 35 and 17 and 18, respectively, in the
Company's Annual Report to Shareholders for the fiscal year ended June
30, 2000.
Forward-Looking Statements
Except for the historical information contained herein, the matters
discussed herein contain forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those suggested in the forward-looking statements, including, without
limitation, the effect of economic conditions, product demand, currency
exchange rates, labor disputes, competitive products and other risks
detailed herein and in the Company's other filings with the Securities and
Exchange Commission.
23
<PAGE>
ITEM 2. PROPERTIES
The Company's principal activities are conducted at the facilities
described in the following table.
<TABLE>
<CAPTION>
Square Owned or Percentage
Location Footage Leased Utilization Division
-------------------------- ---------- ---------- ------------- ---------------------
<S> <C> <C> <C> <C>
Northridge, California 742,000 Leased 94% JBL, Infinity,
Harman Kardon,
JBL Professional,
Harman Motive
Ittersbach, Germany 550,000 Owned 80% Becker
17,000 Leased 100%
Worth-Schaitt, Germany 377,500 Owned 80% Becker
Martinsville, Indiana 206,000 Owned 100% Harman Motive
40,000 Leased 100%
Straubing, Germany 193,000 Owned 95% Harman Audio
37,000 Leased 100% Elec. Systems
Elkhart, Indiana 222,700 Owned 100% Crown
7,000 Leased 70%
Ringkobing, Denmark 190,000 Owned 90% Harman Consumer
16,000 Leased 90% Manufacturing A/S
Tijuana, Mexico 194,000 Leased 100% JBL, Infinity
Potters Bar, UK 160,000 Leased 100% Soundcraft,
AMEK, BSS,
C-Audio
Chateau du Loir, France 151,000 Owned 100% Audax, JBL,
Infinity,
Harman Kardon
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Square Owned or Percentage
Location Footage Leased Utilization Division
-------------------------- ---------- ---------- ------------- ---------------------
<S> <C> <C> <C> <C>
Vienna, Austria 129,000 Leased 100% AKG
Sandy, Utah 122,000 Leased 100% Digitech, DOD, dbx
Juarez, Mexico 105,000 Leased 60% Audio Latina
Bridgend, UK 101,000 Leased 100% Harman Motive Ltd
</TABLE>
The company considers its properties to be suitable and adequate for its
present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit entitled Bose Corporation v.
JBL, Inc., and Infinity Systems, Inc., United States District Court, District
of Massachusetts. In this case Bose sued JBL and Infinity for
infringement of a U.S. patent owned by Bose relating to the use of
elliptically shaped ports in loudspeaker cabinets. On September 1, 2000,
the court issued a judgement in favor of Bose in the amount of $5.7
million. In addition, the court issued a permanent injunction prohibiting
JBL and Infinity from the manufacture and sale of loudspeakers in the
United States utilizing plastic elliptical ports. Management believes the
court erred in its ruling and intends to appeal this decision. Management
believes that it will ultimately prevail upon appeal.
There are various other 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
or results of operations of the Company.
25
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Age at
Name August 1, 2000 Position
---------------------- ---------------- ---------------------------------------
<S> <C> <C>
Sidney Harman 81 Executive Chairman and
Chairman of the Board of Directors
Bernard A. Girod 58 Vice Chairman of the Board
of Directors and Chief
Executive Officer
Gregory P. Stapleton 53 President, Chief Operating Officer
and Director of the Company
Frank Meredith 43 Executive Vice President and
Chief Financial Officer
William S. Palin 57 Vice President - Controller
Sandra B. Robinson 41 Vice President - Financial Operations
Edwin C. Summers 53 Vice President and General Counsel
Floyd E. Toole 54 Vice President - Acoustics
</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 selection of
officers or until their successors are elected and qualified.
Sidney Harman, Ph.D., the Company's founder, was named Executive
Chairman in July 2000. Dr. Harman has been Chairman of the Board,
Chief Executive Officer and a Director of the Company since the Com-
pany'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.
26
<PAGE>
Bernard A. Girod was named Vice Chairman and Chief Executive Officer
in July 2000. Mr. Girod has been Chief Executive Officer since
November 1998 and a Director of the Company since 1993. From March
1994 to November 1998, Mr. Girod served as President of the Company.
From November 1992 to November 1998, Mr. Girod served as Secretary
of the Company. From March 1993 to November 1998 Mr. Girod served
as Chief Operating Officer of the Company. From September 1986 to
August 1995, Mr. Girod served as Chief Financial Officer of the
Company. From September 1979 to September 1986, Mr. Girod was the
Vice President and General Manager of Permacel, a subsidiary of Avery
Dennison and Vice President of Planning and Business Development for
Avery Dennison. From 1977 to 1979, Mr. Girod was the Chief Financial
Officer of the predecessor of the Company.
Gregory P. Stapleton was named President and Chief Operating Officer in
July 2000. Mr. Stapleton has been a Director of the Company since
November 1997 and the Chief Operating Officer since November 1998.
From October 1997 to November 1998, Mr. Stapleton served as President
of the Harman OEM Group. Prior to his association with the Company,
Mr. Stapleton was Senior Vice President of General Electric Venture
Capital Corporation from January 1986 to September 1987, and was
General Manager, Industrial Products Section, Factory Automation
Products Division, of General Electric Corporation from October 1982
through December 1985.
Frank Meredith was named Executive Vice President and Chief Financial
Officer in July 2000. Mr. Meredith has been the Chief Financial Officer
of the Company since February 1997 and Secretary of the Company since
November 1998. Mr. Meredith served as Vice President, General
Counsel and Assistant Secretary of the Company from July 1992 to June
1998. Prior to that time, Mr. Meredith held other positions within the
Company since May 1985. Prior to joining the Company, Mr. Meredith
was employed by the accounting firm Touche Ross & Co.
William S. Palin has been Vice President - Controller of the Company
since March 1994. Prior to joining the Company, Mr. Palin was a partner
of MacHardy Palin & Co. from January 1982 to March 1994. From July
1978 to January 1982, Mr. Palin served as an officer of two of the
Company's international subsidiaries.
27
<PAGE>
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.
Edwin C. Summers has been Vice President and General Counsel of the
Company since July 1998. Prior to that time, Mr. Summers was Vice
President, General Counsel and Secretary of First Alliance Corporation
from 1996. From 1991 to 1995, Mr. Summers was Senior Vice President,
General Counsel and Secretary of Transamerica Finance Group.
Floyd E. Toole, Ph.D., joined the Company as Vice President - Acoustics
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,
where he developed psychoacoustic-optimized techniques for improving
loudspeaker performance.
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, 2000 (Shareholder Information on page 38).
28
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary
(in thousands, except per share data,
for the fiscal years ended June 30)
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $1,677,939 $1,500,135 $1,513,255 $1,474,094 $1,361,595
Operating income 121,722 38,663 100,325 101,973 105,378
Income before taxes 102,829 14,447 75,707 77,901 75,024
Net income 72,838 11,723 50,243 54,832 52,042
Diluted EPS 4.13 0.65 2.67 2.90 3.09
Total assets 1,137,505 1,065,755 1,130,684 1,014,254 996,209
Total debt 277,324 311,575 333,640 306,150 287,401
Shareholders' equity 486,333 468,187 511,899 466,762 436,477
Dividends per share 0.20 0.20 0.20 0.20 0.20
</TABLE>
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, 2000 (Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 17 through 21).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Securities and Exchange Commission requires that registrants include
information about potential effects of changes in interest rates and
currency exchange rates in their financial statements. The qualitative
information required by Part II, Item 7A is incorporated by reference to
pages 21 and 36 of the Company's Annual Report to Shareholders for the
29
<PAGE>
fiscal year ended June 30, 2000 (Effects of Inflation and Currency
Exchange Rates and Footnote 13, Fair Value of Financial Instruments,
respectively).
The Company's exposure to interest rate changes is primarily related to its
variable rate debt. To assess exposure to interest rate changes, the
Company has performed a sensitivity analysis assuming a hypothetical
100 basis point increase in interest rates across all maturities. This
analysis indicates that such market movements would reduce fiscal 2001
net income, based on June 2000 positions, by approximately $0.7 million.
Based on June 1999 positions, the effect on fiscal 2000 net income of
such an increase in interest rates was estimated to be $0.9 million.
The Company and its subsidiaries' net unhedged exposure in assets and
liabilities denominated in other than their relevant functional currency as
of June 30, 2000 and 1999 was not material to the consolidated financial
position of the Company.
Actual gains and losses in the future may differ materially from the
hypothetical gains and losses discussed above based on changes in the
timing and amount of interest rate and foreign currency exchange rate
movements and the Company's actual exposure and hedges.
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, 2000 (Consolidated Financial Statements on pages 24 through
38).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
<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
2000 Annual Meeting of Stockholders.
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 44 hereof.
b) Reports on Form 8-K
Form 8-K, dated August 16, 2000, filed on August 18,
2000, containing the following items:
Item 5. Announcement of two-for-one stock split to
be effected in the form of a stock dividend.
Form 8-K, dated August 16, 2000, filed on August 18,
2000, containing the following items:
Item 5. June 2000 earnings release and additional
financial information.
31
<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/ Bernard A. Girod
----------------------
Bernard Girod, Vice Chairman
and Chief Executive Officer
Date: September 8, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, 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>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Sidney Harman Executive Chairman and September 8, 2000
------------------------------ Chairman of the Board -------------------------
Sidney Harman of Directors
/s/ Bernard A. Girod Vice Chairman, Chief September 8, 2000
------------------------------ Executive Officer and -------------------------
Bernard A. Girod Director
/s/ Gregory P. Stapleton President, Chief Operating September 8, 2000
------------------------------ Officer and Director -------------------------
Gregory P. Stapleton
/s/ Frank Meredith Executive Vice President September 8, 2000
------------------------------ and Chief Financial -------------------------
Frank Meredith Officer (Principal
Accounting Officer)
/s/ Shirley M. Hufstedler Director September 8, 2000
------------------------------ -------------------------
Shirley M. Hufstedler
/s/ Ann McLaughlin Director September 8, 2000
------------------------------ -------------------------
Ann McLaughlin
/s/ Edward H. Meyer Director September 8, 2000
------------------------------ -------------------------
Edward H. Meyer
/s/ Stanley A. Weiss Director September 8, 2000
------------------------------ -------------------------
Stanley A. Weiss
</TABLE>
32
<PAGE>
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Index to Item 14(a)
<TABLE>
<CAPTION>
Page Reference
----------------------------------
Annual
Report to
Form 10-K Shareholders
----------------------------------
<S> <C> <C>
Consolidated Financial Data (pages 24
through 38 of the 2000 Annual Report
to Shareholders herein incorporated
by reference as Exhibit 13.1):
Financial Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . 16
Independent Auditor's Reports . . . . . . . . . . . . . . 34 . . . . . . . . 23
Consolidated Balance Sheets as of
June 30, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of
Operations for the years ended
June 30, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash
Flows for the years ended
June 30, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . 26
Consolidated Statements of Shareholders'
Equity for the years ended June 30,
2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 28
Schedules for the years ended June 30,
2000, 1999 and 1998:
II Valuation and Qualifying
Accounts and Reserves . . . . . . . . . . . . . . . 35
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.
</TABLE>
33
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SCHEDULE
----------------------------------------
The Board of Directors
Harman International Industries, Incorporated
Under the date of August 10, 2000, we reported on the consolidated
balance sheets of Harman International Industries, Incorporated and
subsidiaries as of June 30, 2000 and 1999, 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, 2000, as contained in the
2000 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, 2000. 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 LLP
Los Angeles, California
August 10, 2000
34
<PAGE>
Schedule II
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Years Ended June 30, 2000, 1999 and 1998
($000's omitted)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Charged
Balance at Charged to To Other Balance
Beginning Costs and Accounts Deductions at End
Classification of Period Expenses Describe Describe of Period
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1998
Allowance for
doubtful accounts $ 9,116 $ 4,904 $ 152 (1) $ 4,100 (2) $ 10,072
Inventory reserves $ 49,651 $ 3,110 (4) $ (2,013) (1) $ 12,173 (3) $ 38,575
Year Ended June 30, 1999
Allowance for
doubtful accounts $ 10,072 $ 2,662 $ (129) (1) $ 3,873 (2) $ 8,732
Inventory reserves $ 38,575 $ 28,023 (4) $ (1,167) (1) $ 25,315 (3) $ 40,116
Year Ended June 30, 2000
Allowance for
doubtful accounts $ 8,732 $ 6,902 $ (394) (1) $ 3,480 (2) $ 11,760
Inventory reserves $ 40,116 $ 32,611 (4) $ 775 (1) $ 33,278 (3) $ 40,224
</TABLE>
(1) Net effect of acquisitions, dispositions and foreign currency translation.
(2) Deductions for accounts receivable written off net of recoveries.
(3) Deductions for scrapping and markdowns.
(4) Includes net change in intercompany profit elimination.
35
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
36
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
INDEX TO EXHIBITS
The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed
statement or report, such statement or report is identified in parenthesis.
There are omitted from the exhibits filed with this Annual Report
on Form 10-K certain promissory notes and other instruments and
agreements with respect to long-term debt of the Company, none of which
authorizes securities in a total amount that exceeds 10 percent of the total
assets of the Company 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.
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
3.1, 4.1 Restated Certificate of Incorporation filed with the
Delaware Secretary of State on October 7, 1986,
as amended by the Certificates of Amendment
filed with the Delaware Secretary of State on
November 13, 1986 and on November 9, 1993.
(Filed as Exhibit 4.1 to Amendment 1 to the
Company's Registration Statement on Form S-3
dated November 15, 1993 (File No. 1-9764) and
hereby incorporated by reference.).................................IBR
3.2,4.5 By-Laws of Harman International Industries,
Incorporated, as amended December 13, 1999..........................45
</TABLE>
37
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
4.2 Rights agreement (including a Form of Certificate
of Designation of Series A Junior Participating
Preferred Stock as Exhibit A thereto, a Form Right
Certificate as Exhibit B thereto and a Summary of
Rights to Purchase of Preferred Stock as Exhibit C
thereto) (Incorporated by reference to the Form 8-A
filed by the Company on December 16, 1999).........................IBR
4.3 Certificate of Designation of Series A Junior
Participating Preferred Stock of Harman
International Industries, Incorporated, dated
January 11, 2000....................................................61
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
10.18 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
</TABLE>
38
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
10.19 Form of Incentive Stock Option Agreement under
the 1987 Executive Incentive Plan. (Filed as Exhibit
10.19 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1988 (File No. 0-15147),
and hereby incorporated by reference.).............................IBR
10.20 Form of Non-Qualified Stock Option Agreement
under the 1987 Executive Incentive Plan. (Filed as
Exhibit 10.20 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 1988 (File No.
0-15147), and hereby incorporated by reference.)...................IBR
10.21 Form of Non-Qualified Stock Option Agreement
with non-officer directors. (Filed as Exhibit 10.21
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1988 (File No. 0-15147), and
hereby incorporated by reference.).................................IBR
10.23 Lease Agreement dated April 28, 1988, by and
between Harman International Business Campus
Joint Venture 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
10.26 Harman International Industries, Incorporated
Retirement Savings Plan. (Filed on Form S-8
Registration Statement on June 16, 1989
(Reg. No. 33-28973), and hereby
incorporated by reference.)........................................IBR
10.27 Amended and Restated Harman International
Industries, Incorporated Supplemental Executive
Retirement Plan dated October 1, 1999...............................69
</TABLE>
39
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
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
10.40 Harman International Industries, Incorporated 1992
Incentive Plan, as amended (Filed as Exhibit B to
the Company's Definitive Proxy Statement filed on
September 15, 1999 (File No. 001-09764) and
hereby incorporated by reference)..................................IBR
10.41 Form of Incentive Stock Option Agreement under the
1992 Incentive Plan.................................................87
10.42 Form of Non-Qualified Stock Option Agreement under
the 1992 Incentive Plan.............................................99
10.43 Form of Restricted Stock Agreement under the 1992
Incentive Plan.....................................................111
10.44 Form of Non-Qualified Stock Option Agreement
for Non-Officer Directors under the 1992 Incentive
Incentive Plan.....................................................123
10.45 Harman International Industries, Inc. Deferred
Compensation Plan, effective June 1, 1997 (Filed
on Form S-8 Registration Statement on June 9, 1997
(Reg. No. 333-28793), and hereby incorporated by
reference.)........................................................IBR
10.46 First Amendment to Harman International
Industries, Inc. Deferred Compensation Plan
dated October 1, 1999..............................................135
</TABLE>
40
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
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. (Filed as Exhibit 10.53
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 (File No. 001-09764),
and hereby incorporated by reference.).............................IBR
10.54 First Amendment dated February 15, 1995, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994. (Filed as Exhibit 10.54
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1995 (File No. 001-09764), and
hereby incorporated by reference.).................................IBR
10.55 Second Amendment dated November 9, 1995, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994. (Filed as Exhibit 10.55
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (File No. 001-09764),
and hereby incorporated by reference.).............................IBR
10.57 First Amendment to the Lease Agreement by and
between Harman International Business Campus
Joint Venture and Harman Electronics, Inc. dated
October 1995 (Filed as Exhibit 10.57 to the Annual
Report on Form 10-K for the fiscal year ended
June 30, 1996 (File No. 001-09764), and hereby
incorporated by reference.)........................................IBR
</TABLE>
41
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
10.58 First Amendment to the Lease Agreement by and
between Harman International Business Campus
Joint Venture and JBL, Inc. dated October 1995
(Filed as Exhibit 10.58 to the Annual Report on
Form 10-K for the fiscal year ended June 30, 1996
(File No. 001-09764), and hereby incorporated by
reference.)........................................................IBR
10.59 Fourth Amendment dated June 6, 1997, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994 (Filed as Exhibit 10.59
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (File No. 001-09764),
and hereby incorporated by reference.).............................IBR
10.61 Amended and Restated Credit Agreement dated
July 5, 2000, among Harman International
Industries, Incorporated, Becker Holding GmbH,
The Several Lenders from Time to Time Party
Thereto and Commerzbank Aktiengesellschaft.........................141
10.63 Amended and Restated Indenture dated as of July 1, 1997
between Harman International Industries, Incorporated
and PNC Bank, National Association (Filed as
Exhibit 10.63 to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998
(File No. 001-09764), and hereby incorporated by
reference.)........................................................IBR
10.65 Employment Agreement between the Company and
William Palin dated September 1, 1999 (Filed as
Exhibit 10.65 to the Annual Report on Form 10-K
for the year ended June 30, 1999 (File No.
001-09764), and hereby incorporated by reference.).................IBR
</TABLE>
42
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
10.66 Form of Non-Qualified Stock Option Agreement
between the Company and certain executive officers
of the Company dated August 11, 1998 (Filed as
Exhibit 10.66 to the Annual Report on Form 10-K
for the year ended June 30, 1999 (File No.
001-09764), and hereby incorporated by reference.).................IBR
10.67 Equipment Financing Agreement between the
Company and State Street Bank and Trust dated
September 30, 1999 (Filed as Exhibit 10.67
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No.
001-09764), and hereby incorporated by reference)..................IBR
10.68 Participation Agreement among the Company,
State Street Bank and Trust, Four Winds Funding
Corporation, Commerzbank, Bank of Tokyo -
Mitsubishi Trust Company and BTM Capital
dated September 30, 1999 (Filed as Exhibit 10.68
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No.
001-09764), and hereby incorporated by reference)..................IBR
10.69 Harman International Industries, Incorporated,
Key Executive Officers Incentive Plan (Filed as
Exhibit A to the Definitive Proxy Statement on
Form 14-A for the year ended June 30, 2000
(File No. 001-09764) and hereby incorporated
by reference.......................................................IBR
10.70 Fifth Amendment dated July 17, 2000 to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994...........................................215
</TABLE>
43
<PAGE>
INDEX TO EXHIBITS (cont.)
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
<S> <C> <C>
10.71 Form of Severance Agreement between the
Company and Sidney Harman, Bernard Girod,
Gregory Stapleton and Frank Meredith...............................233
10.72 Benefit Agreement under the Supplemental
Executive Retirement Plan between Bernard
Girod and Harman International Industries,
Inc., dated June 22, 2000..........................................261
10.73 Benefit Agreement under the Supplemental
Executive Retirement Plan between Gregory
Stapleton and Harman International Industries,
Inc., dated June 20, 2000..........................................265
10.74 Benefit Agreement under the Supplemental
Executive Retirement Plan between Frank
Meredith and Harman International Industries,
Inc., dated June 21, 2000..........................................269
13.1 Pages 16 through inside back cover of Harman
International Industries, Incorporated Annual
Report to Shareholders for the fiscal year ended
June 30, 2000......................................................273
21.1 Subsidiaries of the Company........................................301
23.1 Consent of Independent Auditors....................................307
27.1 EDGAR Financial Data Schedule......................................311
</TABLE>
44
