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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended June 30, 1995
Commission file number 1-9764
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
Delaware 11-2534306
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1101 Pennsylvania Ave., N.W., Ste. 1010, Washington, D.C. 20004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 393-1101
Securities registered pursuant Name of each Exchange on
to section 12(b) of the Act: which registered:
Common Stock, par value $.01 per share New York Stock
(Title of class) Exchange, Inc.
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
X Yes No.
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of August 31, 1995, was $585,602,912.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date:
16,242,113 shares of Common Stock, par value $.01 per share, as of
August 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for
the fiscal year ended June 30, 1995, are incorporated by reference in Part
I, Item 1, and Part II, Items 5, 6, 7 and 8.
Portions of the Registrant's definitive Proxy Statement relating
to the 1995 Annual Meeting of Stockholders are incorporated by
reference in Part III, Items 10 (as related to Directors), 11, 12, and 13.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K. _____
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TABLE OF CONTENTS
PART I
Page
Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 23
Item 3. Legal Proceedings....................................................... 24
Item 4. Submission of Matters to a Vote of Security Holders... 24
Executive Officers of the Registrant............................. 24
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters....................................... 27
Item 6. Selected Financial Data................................................ 27
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 27
Item 8. Consolidated Financial Statements and
Supplementary Data.................................................... 27
Item 9. Disagreements on Accounting and Financial
Disclosure................................................................... 27
PART III
Item 10. Directors and Executive Officers of the Registrant........ 28
Item 11. Executive Compensation............................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................................ 28
Item 13. Certain Relationships and Related Transactions............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................................ 29
List of Financial Statements and
Financial Statement Schedules...................................... 33
Independent Auditors' Report........................................ 35
Index to Exhibits........................................................... 37
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PART I
ITEM 1. BUSINESS
General Business
Harman International Industries, Incorporated ("Harman" or the
"Company"), a Delaware corporation formed in 1980, is a leader in the
design, manufacture and marketing of high-quality, high-fidelity audio
products for professional, consumer (both home and automotive
aftermarket), and automotive original equipment manufacturer ("OEM")
markets in the United States and around the world. The Company's
professional market includes a wide range of professional uses, from sound
reinforcement, broadcast and recording and musical instrument support to
commercial and public installations. The consumer market for audio
entertainment systems consists of home loudspeakers and electronic
components and automotive aftermarket loudspeakers and amplifiers. The
Automotive OEM market includes components sold directly to automobile
manufacturers (on either a branded or generic basis).
The Company's product offerings in the professional audio market
include: JBL, Turbosound, Precision Devices, and Quested loudspeakers;
and JBL, Soundcraft, Spirit, AKG, Studer, Studer Dyaxis, Allen & Heath,
DOD, Digitech, BSS, Orban, dbx, Lexicon and UREI professional
electronics. The Company's product offerings in the consumer audio
market include: JBL, Infinity and Pyle loudspeakers; Harman Kardon
electronic components; Becker automotive aftermarket radios and
electronics; AudioAccess in-home, multi-source, multi-zone sound system
controls; and Citation home theater products. The Company's product
offerings in the automotive OEM market are represented by premium
loudspeaker systems designed and manufactured for factory installation by
automobile manufacturers, including Chrysler, Ford, Mitsubishi, Toyota,
Jaguar, Saab, Range Rover and BMW, bearing the brand names Infinity,
JBL and Harman Kardon and Becker radios and electronics designed and
manufactured for factory installation by automobile manufacturers including
Mercedes Benz, BMW, Opel and Porsche.
For more than 40 years, products bearing the Company's brand
names have been designed to appeal to high-fidelity users, both professionals
and enthusiasts, who desire premium quality and performance. The
respected, established brand names and breadth of the Company's
professional product offerings allow Harman to provide turnkey systems
solutions as well as unique products for special market
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niches to professional customers. The Company offers an impressive array
of world-class professional products which enable performing artists to
produce high-quality, high-fidelity sound, both on stage and in the studio.
The Company has identified three major areas to serve within the
professional audio market: sound reinforcement, musical instrument support
and broadcast and recording.
The increasing popularity of home entertainment media has
stimulated consumer demand for high-quality audio products and prompted
the expansion of Harman's consumer product portfolio to include home
theater products, wireless loudspeakers, surround sound processors and
multimedia loudspeakers. The Company has concentrated its efforts on the
higher-quality, higher-priced segment of the consumer audio market.
Harman believes, based on its knowledge of the industry, that it is
among the largest and most experienced manufacturers of high-quality
professional audio products, and that it offers a broader range of these
products than any other manufacturer. In addition, the Company and its
predecessors have been leaders and innovators in loudspeaker production
and technology for more than 40 years, and the Company believes its JBL
and Infinity loudspeaker lines are among the world's premier loudspeaker
brands. The Company's manufacturing, distribution and marketing
capabilities have been expanded to support the growing markets it serves.
The Company's strategic plan for the manufacture and marketing of
high-quality brand name products involves three principal interrelated
elements. First, manufacturing on a highly integrated basis; second,
marketing aggressively both domestically and internationally; and third,
achieving competitive productivity through a balance between automation
and a highly motivated, skilled work force.
Management believes that JBL, Infinity, Soundcraft, Harman
Kardon, Studer, AKG, Becker and the other Company brand names are
well-recognized worldwide for premium quality and performance. In order
to better expand and capitalize upon this reputation, Harman has invested
significant management and capital resources over the years in developing an
international design, engineering, manufacturing and marketing capability,
while emphasizing communication among these integrated functions in order
to respond more effectively to customer needs and to assure product quality
and manufacturing efficiency.
In collaboration with the Chrysler Corporation ("Chrysler"), Ford
Motor Company ("Ford"), Mercedes Benz ("Mercedes"), Mitsubishi Motor
Company ("Mitsubishi"), BMW, Jaguar, Rover and Saab, the Company
designs and manufactures customized high-fidelity automotive loudspeaker
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systems, radios and electronics for factory installation. Infinity sound
systems are now available on most Chrysler models, including the Dodge
Intrepid, Caravan, Stealth, Ram Van and the Dakota and T-300 pickup
trucks, the Eagle Vision, the Plymouth Voyager and the Chrysler Concord,
New Yorker, Town & Country and LHS models. The Jeep Grand
Cherokee also offers an Infinity premium audio system. "Ford/JBL" brand
name systems are installed in Lincoln's Continental, Town Car and Mark
VIII and Ford's Windstar, Crown Victoria, Taurus and Explorer. Infinity
systems are also offered on certain Mitsubishi models, including the
3000GT, Eclipse, Diamante and Galant. Harman Kardon systems are offered
on the Jaguar XJS, the Saab 9000 and the Range Rover by Land Rover. A
high-end audio system produced by Harman Motive is offered in the Toyota
Avalon. In 1996, BMW will be added to the loudspeaker system customer
base. Becker radios and electronics are offered on most Mercedes models
and certain BMW, Opel and Porsche models.
HISTORICAL DEVELOPMENT
Since its formation in 1980, the Company has developed internally
and through acquisitions the capacity to design, manufacture and market its
products to compete worldwide in the most significant areas of the high-
quality, high-fidelity audio markets. While the Company has existed in its
current form since only 1980, its significant subsidiaries have been in
business for substantially longer periods, some previously as part of the same
enterprise and most under their current management.
In 1953, Dr. Sidney Harman, Chairman and Chief Executive Officer
of the Company, co-founded Harman Kardon to design, manufacture and
market high-fidelity consumer electronic audio components. Harman
Kardon was the first domestic manufacturer to produce and market a high-
fidelity receiver (a combination of tuner, preamplifier and power amplifier in
one chassis). In 1962, Harman Kardon was acquired by a predecessor of the
Company (the "Predecessor"). The Predecessor expanded its participation
in the high-fidelity field in 1969 by acquiring James B. Lansing Sound (JBL),
a top U.S. manufacturer of high-quality loudspeakers. Founded in 1946,
JBL was a driving force in the introduction of professional loudspeakers
developed for the movie industry. (Amplifiers of the 1940's had limited
power, therefore, transducers had to be efficient and loud for the audience to
hear the movie, thus the term loudspeaker.) JBL also extended its offerings
to provide its technological legacy to consumers by producing high-quality
loudspeakers for consumers who were accustomed to JBL's professional
quality.
The Predecessor also formed international subsidiaries to market and
distribute its audio products in Europe and Japan, where JBL and Harman
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Kardon were, and continue to be, top brand names.
In August 1977, the Predecessor was acquired by Beatrice Foods
Co. (now Beatrice Companies, Inc. ("Beatrice"), when Dr. Harman became
the Under Secretary of Commerce of the United States. In January 1980, at
the conclusion of his service as Under Secretary of Commerce, Dr. Harman
organized the Company to re-acquire from Beatrice the JBL loudspeaker
business and the international distributing companies, which together
represented approximately 60% of the Predecessor's business. Harman
Kardon and other parts of the business had been sold by Beatrice in the
intervening years.
Since 1980, the Company has grown steadily by internal expansion
and a series of strategic acquisitions. Harman's growth has been fueled by a
focus on three areas of the audio industry: (1) professional audio, providing
a complete range of audio products offered to the broadcast, recording,
sound reinforcement and music instrument markets; (2) consumer audio,
broadening its range of product offerings from the traditional base of
loudspeakers and electronic components to include wireless loudspeakers,
surround sound processors and home theater products and broadening its
customer base to include large retailers in the U.S. such as Circuit City and
Best Buy; and (3) automotive/OEM audio, offering branded audio systems
for installation as original equipment in automobiles and broadening its base
of customers to include Chrysler, Ford, Mercedes, Jeep, BMW, Mitsubishi,
Saab, Range Rover, Jaguar and Toyota.
The JBL professional loudspeaker business provided the foundation
for the development of the Company's professional audio business, which
has been realized through a series of strategic acquisitions. In 1983, the
Company acquired the UREI professional amplifier business to expand its
presence in the professional audio electronics arena. In April 1988, the
Company acquired Soundcraft, a U.K. manufacturer of professional mixing
boards, as a logical progression of the exclusive U.S. distribution of
Soundcraft products by JBL Professional. In March 1990, the Company
acquired DOD to bring the Professional Group into the musical
instrument/effects market. The digital electronics expertise of DOD and
Soundcraft engineers have also contributed significantly to the Company. In
September 1991, the Company acquired Allen & Heath Brennell, Limited,
and its subsidiaries, a U.K. producer of professional mixing boards. In April
1993, Harman acquired Lexicon, a U.S. manufacturer of professional digital
audio signal processing equipment and disk-based audio production systems,
further augmenting the Company's digital audio product offerings.
Austrian microphone manufacturer AKG was acquired in September
1993, providing the Company the ability to offer complete system solutions
for the sound reinforcement market. The AKG product line also includes
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audio headphones, audio signal processing devices, professional
loudspeakers and other professional audio products. Effective January
1994, the Company acquired Studer, a Swiss manufacturer of professional
recording and broadcast equipment, expanding the Company's presence in
these key segments of the professional audio market. As a result of the
acquisition and development of these professional audio companies and the
renowned brand names which they offer, management believes that Harman
is now the world leader in the professional audio market.
The Company's consumer business has been built around the
markets served by JBL, Infinity and Harman Kardon. The Infinity consumer
loudspeaker business was acquired in 1983, adding another true high-end
speaker brand to the Company's product offerings. The Harman Kardon
consumer electronics business was acquired from Shin Shirasuna in 1985,
which had purchased Harman Kardon from Beatrice.
The addition of the renowned Harman Kardon brand name served to
further strengthen the Company's consumer product portfolio. Also in 1985,
the Company acquired Pyle Industries to expand its presence in the
automotive aftermarket loudspeaker business. The Company acquired the
Epicure Products, Inc. ("EPI") loudspeaker business in October 1986. The
Company expanded its electronic audio components business and entered
the home theater market through its acquisition of Fosgate, Inc. ("Fosgate-
Audionics" or "Fosgate") in January 1991. The Company's consumer
electronics presence was expanded further through the fiscal 1994
acquisition of AudioAccess, a manufacturer of home audio/video system
control devices and the fiscal 1995 acquisition of NewMediaWare, renamed
Harman Interactive, which has strengthened the Company's multimedia
market presence.
In June 1981, the Company entered the automotive OEM market for
loudspeakers through the acquisition of the Essex Loudspeaker Division of
United Technologies, which was renamed Harman Motive, U.S. The
Company strengthened its position in the European automotive OEM
loudspeaker market through the acquisition of Harman Motive, Ltd.,
formerly ELAC, a U.K. automotive OEM loudspeaker manufacturer, in
December 1989. The Company has derived value from its strategic entry
into the automotive OEM market by optimizing engineering, design and
manufacturing processes and by leveraging the market strength of its brand
names, such as Infinity, JBL and Harman Kardon. In March 1995, the
company expanded its automotive OEM markets and capabilities with the
acquisition of Becker GmbH, a German manufacturer of radios and other
electronics for the automotive OEM market and the automotive aftermarket.
The loudspeaker manufacturing capabilities of the Company include
North American and European operations. Primary loudspeaker
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manufacturing sites are located in California, Denmark and France.
The Company maintains marketing offices in Hong Kong, Denmark,
Japan, Singapore and Brazil to support and protect the Harman brand names
worldwide. These organizations maintain close contact with their markets,
interpret user needs and facilitate product discussion between distributors
and the Professional and Consumer Group companies.
ORGANIZATION
The Company is organized in three core groups - Professional,
Consumer and Automotive OEM - with each group incorporating all related
manufacturing, marketing and distribution operations. The Professional
Group contributed approximately 38% of fiscal 1995 total net sales, the
Consumer Group accounted for approximately 37% of net sales, and the
Automotive OEM Group generated approximately 25% of net sales.
Financial Information about Geographic Segments
Financial information about geographic segments required to be
included hereunder is incorporated by reference to Note 10 of Notes to
Consolidated Financial Statements contained in the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 1995.
Description of Business
The Company's business is conducted through its wholly owned
subsidiaries which include:
Name Principal products
- - -------------------------------------- -----------------------------------------
AKG Akustiche u. Kino-Gerate
Gessellschaft m.b.H. Professional electronics
Allen & Heath Limited Professional electronics
Audax Industries, S.A. Consumer home, automotive and
professional loudspeakers; automotive
OEM loudspeakers
Becker GmbH Automotive OEM and automotive
aftermarket electronics
BSS Audio Ltd Professional electronics
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Name Principal products
- - -------------------------------------- -----------------------------------------
DOD Electronics Corporation Professional electronics
Harman Belgium NV Consumer home, automotive and
professional high-fidelity products
Harman Consumer Europe A/S Consumer home and automotive
electronics
Harman Deutschland GmbH Consumer home, automotive and
professional high-fidelity products
Harman France, S.N.C. Consumer home, automotive and
professional high-fidelity products
Harman International Industries, Consumer home, automotive and
Limited professional high-fidelity products
Harman International Japan Consumer home, automotive and
Co., Limited professional high-fidelity products
Harman-Kardon, Incorporated Consumer home and automotive
electronics
Harman-Motive, Inc. (U.S.) Automotive OEM loudspeakers
and electronics
Harman Motive Limited (U.K.) Automotive OEM loudspeakers
Infinity Systems, Inc. Consumer home and automotive
loudspeakers and electronics
JBL Incorporated Consumer and professional
loudspeakers and electronics
Lexicon, Incorporated Professional electronics
Lydig of Scandinavia A/S Components, cabinets and
loudspeaker systems
Pyle Industries, Inc. Consumer automotive
loudspeakers and electronics
Soundcraft Electronics, Limited Professional electronics
Studer Professional Audio AG Professional electronics
Turbosound Ltd. Professional loudspeakers
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Markets for Products
Based on the Company's experience in, and knowledge of, the
industry, the Company believes that the professional, consumer and
automotive OEM markets, both domestic and international, have
experienced significant growth in recent years. The growth of digital audio
technology has changed the way music is recorded and reproduced and has
led to the development of a new generation of professional and consumer
audio products. The Company is well-positioned to meet the digital
requirements of the professional market with the expertise of its professional
companies, particularly Soundcraft, Studer, Lexicon and DOD.
Market growth in consumer audio is particularly strong in home
theater and multimedia. The Company is meeting consumer demand with
products carrying its respected and well-known brand names JBL, Infinity,
Citation and Harman/Kardon.
Harman is a leader in the design and production of premium,
branded high-fidelity systems for automobile manufacturers. Consumers are
placing increasing emphasis on the quality of the sound system in the
automobile purchase process. The Company's Infinity, JBL, Harman
Kardon and Becker brand names have been successful in raising the standard
for excellence in car audio.
Products
The Company designs, engineers, manufactures and markets
worldwide a broad range of high-quality, high-fidelity audio loudspeakers
and electronics for the professional (broadcast and recording, sound
reinforcement, and musical instrument support), consumer (both home and
automotive aftermarket), and automotive OEM markets. The Company also
distributes a small amount of complementary audio products manufactured
by other companies. The Professional Group accounted for approximately
38% of the Company's fiscal 1995 sales. The Consumer Group contributed
approximately 37% of fiscal 1995 sales, of which 82% was attributable to
home loudspeaker and automotive aftermarket systems and 18% was from
electronic components. The Automotive OEM Group generated
approximately 25% of fiscal 1995 sales.
PROFESSIONAL PRODUCTS. The Company designs,
manufactures and markets products in all significant segments of the
professional market, offering complete systems solutions to professional
installations and users around the world.
The Professional Group includes many of the most respected names
in the industry including JBL, Soundcraft, Allen & Heath, DOD, Lexicon,
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AKG, BSS, dbx, Orban, Turbosound, Studer and UREI. Professional
installations of Harman products include stadiums, opera houses, concert
halls, recording studios, broadcast studios, theaters, cinemas and touring
performing artists.
Sound systems incorporating components manufactured by JBL,
UREI, Lexicon, AKG, Studer and Soundcraft are in use around the world in
such places as Wolf Trap Farm Park for the Performing Arts in Virginia, the
Kennedy Center in Washington, D.C., Disney World and Epcot Center in
Florida, the Great Hall of the People in Beijing, China, Tanglewood Music
Shed in Massachusetts, Frankfurt Opera House in Germany, the Royal
Danish Theater in Copenhagen and Abbey Road Studio in England.
Performing artists such as Peter Gabriel, Bruce Springsteen, David Bowie,
REM, Pink Floyd, Randy Travis, Michael Jackson, Elton John, Eric Clapton,
Billy Joel, U2 and The Rolling Stones use Harman professional equipment
on tour.
The professional market has advanced rapidly and is heavily involved
in digital technology. Harman's Professional Group is a leader in this
market. The strength of the Professional Group is derived from its ability to
share research and development, engineering talent and other substantial
digital resources among its divisions. Soundcraft, Lexicon, Studer and DOD
each have substantial digital resources and work together to achieve
common goals by blending each company's areas of strength and expertise
with the combined resources of the group.
The Professional Group's loudspeaker products are well-known for
high quality and superior sound. The JBL Professional portfolio of products
includes studio monitors, loudspeaker systems, power amplifiers, sound
reinforcement systems, bi-radial horns, theater systems and surround sound
systems as well as industrial loudspeakers. The AKG acquisition has
provided the Company with additional professional loudspeaker market
strength through the addition of the Turbosound Floodlight and Flashlight
loudspeaker lines and the Quested studio monitor models.
The Company is a leading manufacturer and marketer of audio
electronics equipment for professional use. Such products are marketed on
a worldwide basis under various trade names, including Soundcraft, Allen &
Heath, DOD, Digitech, Lexicon, AKG, BSS, dbx, Orban, Studer, Audio
Logic, and UREI, and are often sold in conjunction with the Company's
professional loudspeakers.
The Soundcraft line of high-quality sound mixing consoles extends
from automated multi-track consoles for master recording studios to
compact professional mixers for personal recording and home studios.
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Soundcraft products span four main market areas: sound reinforcement,
recording studios, broadcast studios and musical instrument dealers. Allen
& Heath manufactures cost effective mixing consoles for use in broadcast
studios and for use on stage in smaller venues.
The DOD product line is marketed under the DOD, dbx, Digitech
and Audio Logic brand names, and is sold primarily to professional audio
and musical instrument dealers. DOD products include signal processing
equipment, equalizers, mixers and special effects devices. Performing artists
who have used DOD products on tour include: Van Halen, Aerosmith, the
Rolling Stones, Trent Reznor of Nine Inch Nails, David Gilmour of Pink
Floyd and Prince.
Lexicon is a leader in the design, manufacture and marketing of
high-quality digital audio signal processing equipment and disk-based audio
production systems for professional use in the audio, video, musical
entertainment and broadcasting markets worldwide. Broadcasters use
Lexicon products to edit, shape and synchronize their programming.
Recording studios around the world use Lexicon digital signal processing
products to process sound effects and refine final mixes. Additionally,
Lexicon designs, manufactures and markets a series of high-end consumer
ambiance and Home Theater Surround Sound processors.
AKG is one of the world's largest manufacturers of high-quality
microphones and headphones. The AKG product line includes
microphones, audio headphones and other professional audio products
marketed under the AKG brand name. AKG also owns several companies
that manufacture and market professional audio products, including: digital
signal processing devices distributed worldwide under the brand names BSS
and Orban; and amplifiers, loudspeakers and other professional audio
products sold worldwide under the brand names BSS, Precision Devices,
Quested and Turbosound.
Studer Professional Audio has brought the Professional Group to a
strong position in both the broadcast and the recording arenas. Studer is
recognized for the high quality and reliability of its professional products,
which include analog and digital tape recorders, mixing consoles, switching
systems, digital audio workstations, professional compact disc players and
recorders and turnkey broadcasting studio installations.
CONSUMER PRODUCTS. The Company designs, manufactures
and markets loudspeakers principally under the JBL and Infinity brand
names for the consumer market. Since its formation in 1948, JBL has
designed loudspeakers to appeal to audio enthusiasts who desire
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superior-quality sound reproduction. JBL loudspeakers sold to the
consumer market employ techniques originally developed by the Company
for products used in recording studios, concert halls, theaters, airports and
other acoustically demanding environments. JBL's diverse product line gives
customers a wide range of speaker choices: floorstanding, bookshelf, built-
in, wireless, transportable and wall or ceiling mountable loudspeakers, in
styles and finishes ranging from high gloss piano lacquer to genuine wood
veneers. JBL's recent introduction of wireless technology in the
SoundEffects speaker system allows easy home theater and multi-room
installation.
From its beginning in 1968, Infinity has developed high quality
loudspeakers with their own audio character, which is commonly identified
as "linear," "symmetrical," or "neutral." These characteristics are expressed
in sophisticated acoustic configurations utilizing injection-molded graphite
speaker cone material, electro-magnetic induction tweeters and mid-range
drivers. Compostions, Infinity's new home theater loudspeakers, have
received excellent reviews from the high fidelity audio press for outstanding
design and performance.
The more expensive JBL and Infinity loudspeakers are housed in
high-gloss lacquer or wooden veneer cabinets which complement the quality
components they enclose. The Company has made significant investments in
its loudspeaker cabinet production facilities at Northridge Manufacturing in
Northridge, California and at Lydig in Denmark and believes that they are
among the most advanced cabinet production facilities in the world. Both
JBL and Infinity also offer premium automotive aftermarket loudspeaker and
amplifier products.
The Company designs, manufactures and markets a broad range of
consumer audio electronics products on a worldwide basis. The Company's
consumer electronics products facilitate the marketing of complete systems
incorporating the Company's loudspeakers, such as surround sound home
theater installations.
Founded in 1953, Harman Kardon has been a leading innovator in
the development of high-quality audio components which improve the
listening experience and reflect a commitment to value and ease-of-use. The
realization of these principles is reflected in Harman Kardon's current
product offerings, including audio-video stereo receivers, surround sound
processors featuring Dolby Pro-Logic and Lucasfilm Home THX, and front-
loading, bit stream compact disc changers.
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Citation is a designer and manufacturer of high-end surround sound
processors, amplifiers and loudspeakers for the growing U.S. and
international home theater market. Citation products feature "THX" and
provide solutions for all component and system needs for home theater and
home audio.
Pyle Industries manufactures and markets aftermarket automotive
speakers, amplifiers and electronics.
AudioAccess is a leader in the field of in-home, multi-source, multi-
zone sound system controls. AudioAccess adds to the Consumer Group's
ability to provide complete home theater solutions.
In 1993, the Company acquired a 20 percent minority interest in
Madrigal, with an option on the remaining shares. Madrigal is the
manufacturer of the renowned Mark Levinson and Proceed brand high-
fidelity product lines. The Company plans to exercise its option to acquire
the remaining 80 percent early in fiscal 1996.
AUTOMOTIVE OEM. Harman International believes it is the
world's largest manufacturer of premium, branded, automotive OEM audio
systems. In fiscal 1995, sales of automotive OEM products accounted for
approximately 25% of the Company's consolidated net sales. In its sale of
loudspeakers, head units (radio/cassette deck/CD player) and other audio
products to the automotive OEM market, the Company takes advantage of
its expertise in the design and manufacture of high-quality loudspeakers,
radios and other electronics, as well as the reputation for quality associated
with its JBL, Infinity, Harman Kardon and Becker brand names. The
Company's expertise in designing and manufacturing transducers utilizing
special materials allows the Company to collaborate with automobile
manufacturers to design lighter sound systems, thereby contributing to
increases in automobile fuel efficiency. The addition of head unit and other
electronics expertise through the Becker acquisition enables the Company to
provide complete high-fidelity audio systems solutions to the automobile
manufacturers.
The Company manufactures audiophile OEM sound systems for
automobiles, including the Infinity systems sold to Chrysler and Mitsubishi,
the JBL systems sold to Ford and the Harman Kardon systems sold to
Jaguar, Saab and Range Rover, as well as a non-branded premium system
sold to Toyota for the Avalon. Becker supplies head units and other
electronics to Mercedes, BMW, Opel and Porsche. These premium OEM
audio systems are engineered individually for each automobile model to
maximize acoustic performance.
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Infinity has collaborated with Chrysler in developing customized
automotive systems which are available as options under the
"Chrysler/Infinity" brand name for Chrysler's Concord, New Yorker, Town
& Country and LHS models; Dodge's Intrepid and Caravan models;
Plymouth's Voyager model; and Eagle's Vision model. Infinity also offers
customized brand name audio systems which are available as options for
selected Mitsubishi models, including the Mitsubishi 3000GT, Diamante,
Eclipse and Galant along with the Dodge Stealth, which is manufactured by
Mitsubishi. Chrysler/Infinity systems are also offered in the Jeep Grand
Cherokee and the Dodge Ram Van and Dakota and T300 pickup trucks.
The Company expects that the majority of new models currently planned by
Chrysler will include "Chrysler/Infinity" systems as customer options.
JBL has created customized automotive audio systems utilizing
various loudspeaker and amplifier configurations in collaboration with Ford.
These systems are available as an option under the "Ford/JBL" brand name
in Lincoln's Town Car, Continental and Mark VIII models; Ford's Taurus,
Windstar, Explorer and Crown Victoria models; and Mercury's Sable
model. The Company provides the total system, including all electronic
components, other than the head unit (radio/cassette deck/CD player) and
subwoofer amplifiers, for selected models.
Harman Kardon branded systems are offered in the Saab 9000,
Jaguar XJS and the Range Rover by Land Rover. Harman provides a
premium system for the Toyota Avalon, and in 1996, the customer base will
be expanded to include BMW.
Strict security has been maintained with respect to the independent
engineering development of the branded audio systems for each automotive
customer in order to promote technical competition and to protect the
proprietary interests of the automobile manufacturers.
The Company's Harman Motive, U.S., subsidiary enjoys a Q-1
certified supplier rating from Ford and holds the Q-E certification from
Chrysler. A Q-1 certification is awarded to suppliers that meet or exceed the
rigorous requirements of the Q-1 quality evaluation process set by Ford.
The Q-E certification from Chrysler recognizes superior supplier
performance in the area of quality.
The Company's Harman Motive, Limited, subsidiary in the United
Kingdom, also a Q-1 supplier to Ford, is a specialized designer and
manufacturer of loudspeakers and packaged assemblies for the automotive
OEM industry in Europe. Each product is fully customized to meet the
automobile manufacturer's specific mechanical and performance criteria.
Harman Motive, Limited currently produces a variety of loudspeaker
13 17
systems which are installed in automobiles manufactured by Ford, Rover,
Jaguar and Saab. In addition, the Company's Audax transducer
manufacturer, located in France, currently manufactures and sells
loudspeakers directly to French automobile manufacturer Citroen.
Harman's existing product lines continue to be augmented by the
development of new products. During the past two years the following
products were among the new products introduced:
1995: The JBL EON portable performance system, the Infinity
Compositions home theater loudspeaker system, the Lexicon PCM-
80 digital effects processor, the JBL GTS 600 200-watt variable
crossover car amplifier, the BSS FCS-388 OmniDrive DSP
loudspeaker management system, the Harman Kardon AVR25
audio/video receiver, the Citation THX home theater controller/
amplifier/loudspeaker system, the Orban 8208 digital stereo encoder,
the JBL AF2222 high output foldback loudspeaker, the Studer
VideoMix non-linear video recording and playback system, the AKG
C680 boundary layer microphone, the JBL 404GTi car midwoofer
with titanium tweeter, the DOD FX32 sub-harmonic generator for
bass guitar, the Lexicon 500T programmable touchscreen infrared
system commander, the JBL Synthesis S650 5-channel home theater
amplifier, the dbx 290 stereo reverb processor, the Turbosound
TSW718 sub-bass loudspeaker, the Studer D941 fully digital on-air
mixing console, the Harman Kardon FL8450 CD changer, the JBL
Array Series 4895PL and 4896PL proprietary tour sound systems,
the JBL Array Series ASC24 analog system controller, the Infinity
Kappa cs Series automotive component systems, the dbx dual 31
band graphic equalizer, the Studer CDPress mastering system, the
Becker Energy 600 automotive audio system amplifier, the Infinity
Minuette series loudspeakers.
1994: The Lexicon JamMan digital audio effects processor, the
Soundcraft Delta Theater mixing console, the Orban 8282 TV
Optimod digital television audio processor, the AKG WMS50 and
WMS100 wireless microphones, the JBL C236A-S101 sound power
controller, the Digitech Bass Whammy Pedal, the BSS Varicurve
remote console series, the Studer Numisys II digital audio
workstation, the JBL Control 8SR/pt mini sound reinforcement
system, the Turbosound Floodlight TCS612 loudspeaker system, the
Lexicon Vortex digital audio effects processor, the Spirit Folio S1, 4
and RacPac portable mixers, the DOD Vintage 2 guitar processor,
the JBL Control 1E Power Control 1 monitor, the dbx 242 Project 1
parametric equalizer, the AKG C535WLTM900 hand-held
microphone, the Studer MultiDesk digital audio workstation, the
14 18
JBL SC305 center channel loudspeaker, the Harman Kardon
FL8400 front-loading carousel CD changer, the Infinity Epsilon
planar monopole loudspeaker, the Pyle Driver automotive speakers,
the Fosgate-Audionics Model 3A surroundsound processor with
amplifier, the JBL SFX Series mini surround sound loudspeaker
systems, the Harman Kardon AVR15 audio/video receiver, the JBL
SYN3 Synthesis Series home theater speaker system and the Infinity
Reference Standard Car Audio Series automotive speakers.
Manufacturing
The Company believes that its manufacturing capabilities are
essential to maintaining and improving the quality and performance of its
products. The success of the Company's conversion of its primary
manufacturing facilities to a continuous flow manufacturing process has
reduced product cycle times, increased flexibility and improved efficiency.
The benefits of these improvements are reflected in higher product quality
and lower purchase and overhead costs.
The Company manufactures most of the products that it sells other
than the Harman Kardon electronic components. The Company also
produces some products for other loudspeaker companies on an OEM basis.
Notable among the Company's manufacturing capabilities with
respect to loudspeakers are the production of its own high-gloss lacquer and
wooden veneer loudspeaker enclosures, the milling of its own wire, the
winding of its own voice coils and the use of numerically controlled lathes
and other machine tools to produce its many precision components. The
Company's high degree of manufacturing integration, it believes, permits it to
produce more consistently uniform high performance products. Moreover,
the Company's internal manufacturing expertise has provided opportunities
to transfer advances in technology and materials to multiple product lines,
thereby leveraging gains from product development and process
improvement efforts. The Company uses common manufacturing facilities
to achieve economies of scale, while maintaining competition among its
subsidiaries in engineering, product development and marketing.
The Company's principal U.S. manufacturing facility is located in
Northridge, California where it manufactures JBL and Infinity loudspeakers,
including cabinets, for professional, consumer and automotive aftermarket
markets, amplifiers for the OEM and automotive aftermarket markets, and
UREI electronics. The Company manufactures loudspeakers and assembles
sound systems for the OEM automotive market in Martinsville, Indiana. Its
Pyle subsidiary in Huntington, Indiana, manufactures loudspeakers for
15 19
automotive aftermarket and OEM applications. DOD manufactures
professional electronics products at its facility in Salt Lake City, Utah.
Lexicon manufactures professional and consumer electronics products
primarily at its Waltham, Massachusetts facility.
In addition to the Company's U.S. manufacturing capacity, the
Company has established a strong international manufacturing presence to
better respond to customer demands in world markets. Becker
manufactures automotive OEM radios and other electronics in Germany.
AKG manufactures microphones and headphones in Austria, with additional
manufacturing operations in India. Studer manufactures professional
recording and broadcast equipment in Switzerland. Audax, whose products
include high-quality, high-performance tweeters, manufactures transducers
in France, and the Company's Lydig subsidiary manufactures cabinet
enclosures and assembles complete JBL and Infinity loudspeakers in
Denmark for sale in European markets. Harman Motive, Limited
manufactures automotive OEM loudspeakers and Soundcraft manufactures
mixing boards at their respective facilities in the United Kingdom. Also
manufactured in the United Kingdom are Turbosound loudspeakers, Allen &
Heath mixing boards and BSS professional amplifiers. The Company's
international automotive OEM electronics, loudspeaker and professional
electronics manufacturing facilities enable the Company to compete more
effectively in Europe.
Marketing
The Company's products are sold domestically and internationally in
the professional, consumer, and automotive OEM markets. Approximately
60% of the Company's sales are outside the United States. The Company's
professional market includes a wide range of professional uses, from sound
reinforcement, broadcast and recording and musical instrument support to
commercial and public installations, which accounted for approximately 38%
of the Company's consolidated net sales in fiscal 1995. The consumer
market for audio products consists of home and automotive aftermarket
products, which accounted for approximately 37% of fiscal 1995
consolidated net sales. The OEM market includes automobile manufacturers
who purchase components and systems (loudspeakers, radios, amplifiers)
primarily on a branded basis. In fiscal 1995, sales of automotive OEM
products accounted for approximately 25% of consolidated net sales.
The Company's professional audio products are marketed worldwide
through professional sound equipment dealers, including engineered-sound
contractors which directly assist major users. The Company's sales and
marketing group for its professional products is separate and independent
from its consumer products sales and marketing group.
16 20
The Company primarily markets its consumer audio products
through audio and audio-video specialty stores and certain audio-video chain
stores, including Circuit City and Best Buy. The Company enjoys broad
distribution of its products and particularly seeks dealers who emphasize
high-quality audio systems and who are knowledgeable about the
characteristics of audio products. The Company's sales and marketing
activities include dealer education programs and comprehensive product
literature to enable salespeople to understand and explain the price and
performance features offered by the Company's products. The Company's
dealers typically stock a number of home audio equipment lines including
competing products (sometimes both JBL and Infinity loudspeakers) and
may also carry automobile audio systems and other consumer-oriented
electronics products.
The Company markets its automotive products in a variety of ways.
The Company currently markets its automotive aftermarket products to
consumers through its existing home audio dealer network and through
automotive audio specialty dealers. At the OEM level, in addition to the
brand name systems described previously, the Company sells non-branded
systems directly to Chrysler, Ford, Rover and other automotive
manufacturers (such as Citroen) for installation in vehicles during
production.
Suppliers
Products designed by Harman Kardon in the United States are
manufactured by several suppliers. The Company believes it has good
working relationships with these suppliers. The use of multiple vendors
helps to mitigate risks associated with potential disruption.
One supplier provides a significant number of components to several
subsidiaries of the Company. The loss of this supplier could create
disruptions in production for these subsidiaries until alternate sources for
these components could be found and could have a material impact on the
cost of these products.
Northridge Manufacturing relies on several suppliers for a large
percentage of certain parts, such as speaker grilles, plastic molded parts and
magnets. The loss of any one of these suppliers would have a material
impact on the earnings of Northridge Manufacturing until alternate sources
for these components could be found.
17 21
Trademarks and Patents
The Company markets its products under numerous trademarks and
logos, including JBL, Infinity, Harman Kardon, UREI, Pyle, Citation, JB
Lansing, James B. Lansing Sound, Concord, Audax, Becker, Lydig of
Scandinavia, Soundcraft, Spirit, DOD, Audio Logic, DigiTech, Fosgate-
Audionics, Lexicon, AKG, Studer, Studer Dyaxis, BSS, Orban, Precision
Devices, dbx, AudioAccess, Turbosound, Quested, Auto Azimuth and
Dynamic Midi which are registered or otherwise protected in substantially all
major industrialized countries. The Company's registrations cover use of its
trademarks and logos in connection with various applicable products, such
as loudspeakers, speaker systems, speaker system components and other
electrical and electronic devices. As of June 30, 1995, the Company held
approximately 289 United States and foreign patents covering various
products, product designs and circuits, and had approximately 214 patent
applications pending around the world. The Company vigorously protects
and enforces its trademark and patent rights.
Seasonality
Overall, the Company's consolidated net sales are not materially
impacted by seasonality. However, the first fiscal quarter is usually weakest
due to the July and August holidays in Europe and the automotive OEM
model changeovers. Variations in seasonal demands among end-user
markets may cause operating results to vary from quarter to quarter.
Customers
Sales to Chrysler for fiscal year 1995 accounted for 9.5% of the
Company's consolidated net sales. The loss of automotive OEM system
sales to Chrysler would have a material adverse impact on the sales and
earnings of Harman Motive and the Company as a whole. The Company's
next two largest customers, Circuit City and Ford, accounted for an
aggregate of 12.3% of its consolidated net sales for the year ended June 30,
1995, and the loss of either of these customers would also have a material
adverse impact on the sales and earnings of the Company. The Company
anticipates that Mercedes Benz will be a significant customer in fiscal 1996,
and the loss of this customer would have a material adverse impact on the
sales and earnings of the Company.
Backlog Orders
Because the Company's practice is to maintain sufficient inventories
of finished goods to fill orders promptly, the level of backlog is not
considered to be an important index of future performance. The Company's
18 22
backlog was approximately $31.3 million at June 30, 1995, and $27.3
million at June 30, 1994.
Backlog Orders
Because the Company's practice is to maintain sufficient inventories
of finished goods to fill orders promptly, the level of backlog is not
considered to be an important index of future performance. The Company's
backlog was approximately $31.3 million at June 30, 1995, and $27.3
million at June 30, 1994.
Warranties
Harman generally warrants its home products to be free from defects
in materials and workmanship for a period ranging from 90 days to five years
from the date of purchase by the consumer, depending on the product. The
warranty is a "limited" warranty insofar as it imposes certain shipping costs
on the consumer, and excludes deficiencies in appearance except for those
evident when the product is delivered. Harman dealers normally perform
warranty service for loudspeakers in the field, using parts supplied on an
exchange basis by the Company.
Warranties in the international markets are generally similar to those
in the domestic market, although claims arising under these warranties are
the responsibility of the distributor, including the Company's distributing
subsidiaries.
Competition
In general, the audio industry is fragmented and competitive with
many manufacturers, large and small, domestic and international, offering
audio products which vary widely in price and quality and are marketed
through a variety of channels. Professional products are offered through
music instrument retailers, professional audio dealers, contractors and
installers and on a contract bid basis. Consumer products are offered
through various channels including audio specialty stores, discount stores,
department stores and mail order firms. The Company concentrates on the
higher-quality, higher-priced segments of the audio industry.
While the Company manufactures and markets many compatible and
complementary products, other products that the Company manufactures
and markets compete directly. For example, Soundcraft professional mixing
consoles are compatible with and marketed by the same staff as JBL
professional loudspeakers. However, JBL Consumer and Infinity
loudspeakers compete directly and are two of the top loudspeaker brands in
19 23
the world. The Company's strategy uses its brand leadership to increase
market share.
The market for professional sound systems is highly competitive.
The Company has historically held a leading market position in the
professional loudspeaker market and has complemented its professional
loudspeaker line by adding digital professional electronics products and
recording and broadcast equipment. The Company competes using its
ability to provide complete systems solutions to meet the complete audio
requirements of its professional customers. Harman offers a product for
virtually every professional audio application.
The Company competes in the sound reinforcement market with
many of its brand names, including JBL, Turbosound, UREI, AKG,
Soundcraft and BSS. Its principal competitors in sound reinforcement
include Electro Voice, Inc. and Altec Lansing (subsidiaries of Mark IV
Industries), TOA, Tannoy, Bose, Peavy, Tascam, Klark-Teknik, Marshall,
Fender and Sony. The Professional Group competes in the broadcast and
recording areas with its Studer, AKG, Soundcraft, Lexicon and Orban
brands. Principal competitors in broadcast and recording include: Sony,
Neve, Sennheiser, Denon, SSL, Shure and Audio Technica. In the Music
Instrument area the Company's DOD, Digitech, dbx, Lexicon and Spirit
products meet competitors Yamaha, Peavy, Rane, Roland, Alesis, Marshall,
Fender and Sony.
The Professional Group also competes in the industrial and
architectural sound market; competitors within this market include Siemens,
Peavy and TOA.
The Company believes that it currently has a significant share of the
consumer market for loudspeakers (home and aftermarket automotive),
primarily as a result of the strength of its brand names. JBL and Infinity are
two of the most recognized loudspeaker brands in the world. The Company
competes based upon its ability to meet customer demands through new
product introduction, the breadth of its product lines, world-class marketing
and its ability to take advantage of the economies of scale resulting from the
Company's use of common manufacturing facilities.
The Company's principal competitors in the consumer loudspeaker
market include Bose, Boston Acoustics, Bowers & Wilkins, KEF, Celestion,
Paradigm, Acoustic Research, Cambridge SoundWorks and Polk Audio.
Harman's principal competitors in the consumer automotive aftermarket area
include Alpine, Kenwood, Bose, Nakamichi, Clarion, Rockford-Fosgate and
Blaupunkt.
20 24
Competition in the consumer electronic components segment
remains intense, with this market dominated by large Japanese competitors.
The short life cycle of products and a need for continuous design and
development efforts characterize this segment. The Company's competitive
strategy is to compete in the upper segments of this market and to continue
to emphasize the Company's ability to provide systems solutions to
customers, including a combination of loudspeakers and electronics
products, providing integrated surround sound and home theater systems.
Principal electronics competitors include Sony, Denon, Onkyo, Nakamichi,
Pioneer and Kenwood.
In the automotive OEM market, the Company's principal
competitors include Bose, International Jensen, Oxford Electric, and Foster
Electric in the loudspeaker systems segment and Alpine, Blaupunkt and
Panasonic in the electronics segment. The Company is the only supplier of
branded loudspeaker systems for Ford, Chrysler, Jeep and Mitsubishi
automobiles in the United States, and also supplies branded loudspeaker
systems to Ford, Jaguar, Rover and Saab in Europe as well as supplying the
Toyota Avalon. Additionally, the company is the primary supplier of radio
head units to Mercedes-Benz. The Company competes based upon the
strength of its brand name recognition and the quality of its products
together with its technical expertise in designing loudspeaker systems and
electronics to fit the acoustic properties of each automobile model. Harman
International is unique in its ability to provide multiple brands, each with
its own unique characteristics and loyal consumer following, and also in its
ability to provide complete, branded audio systems to the automobile
manufacturers.
Environmental Matters
The Company is subject to various federal, state, local and
international environmental laws and regulations, including those governing
the use, discharge and disposal of hazardous materials. The Company's
manufacturing facilities are believed to be in substantial compliance with
current laws and regulations. The cost of compliance with current laws and
regulations has not been, and is not expected to be, material.
During fiscal 1995, the Company gave notice to certain state
agencies that an environmental release had occurred at one of its facilities.
The company has proposed a remediation plan to the state agency and is
awaiting their response. The Company believes that the future cost to
remediate this site will not exceed $600,000.
The Company has been named as a "potentially responsible party"
with respect to the disposal of hazardous wastes at four hazardous waste
21 25
sites. In addition, there are other sites to which the Company has sent
hazardous wastes which the Company believes are currently under
regulatory scrutiny. It is possible that additional environmental issues may
arise in the future which the Company cannot now predict. Although
ultimate liability cannot be determined with respect to the sites mentioned
above, and applicable law provides that a potentially responsible party at any
site may be held jointly and severally liable for the total cost of remedia-
tion, the Company believes, based upon internal investigations and
information made available to the Company with regard to its potential
liability at these sites, that its proportionate share of the costs related to
the investigation and remedial work at these sites will not exceed $100,000.
Research, Development and Engineering
The Company's expenditures for research, development and
engineering were $40,257,000, $22,324,000, and $11,980,000 for the fiscal
years ending June 30, 1995, 1994 and 1993, respectively. The increase in
expenditures in fiscal 1995 reflects the inclusion of Becker, acquired
effective January 1995, and a full year of development efforts at AKG and
Studer, acquired in September 1993 and March 1994, respectively.
Number of Employees
As of June 30, 1995, the Company had 7,929 full-time employees,
including 3,717 domestic employees and 4,212 international employees. The
increase in number of employees as of June 30, 1995 compared to the prior
year primarily results from the Becker acquisition.
Financial Information about Foreign & Domestic Operations &
Export Sales
Financial information about foreign and domestic operations and
export sales to be filed hereunder is incorporated by reference to Note 10 of
Notes to Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations (Effects of
Inflation and Exchange Rates) on pages 39 and 29, respectively, in the
Company's Annual Report to Shareholders for the fiscal year ended June 30,
1995.
22 26
ITEM 2. PROPERTIES
The Company's principal activities are conducted at the facilities
described in the following table.
Square Owned or Percentage
Location Footage Leased Utilization Division
- - ---------------------------- ---------- --------- ------------ -----------------
Northridge, California 620,384 Leased 100% JBL, Harman
Motive
Ittersbach, Germany 226,810 Owned 61% Becker
4,320 Leased 100%
Ontario, California 212,600 Owned 100% JBL, Infinity
Martinsville, Indiana 181,856 Owned 100% Harman Motive
Huntington, Indiana 167,557 Owned 100% Pyle
Ringkobing, Denmark 134,366 Owned 100% Lydig
20,753 Leased 100%
Potters Bar, UK 143,000 Leased 100% Soundcraft
Vienna, Austria 128,593 Leased 100% AKG
Sandy, Utah 122,000 Leased 100% DOD
Heilbronn, Germany 48,571 Owned 92% Harman
63,183 Leased 60% Deutschland
Bridgend, UK 101,400 Leased 100% Harman Motive
Worth-Schaitt, Germany 89,640 Owned 70% Becker
Regensdorf, Switzerland 86,111 Leased 100% Studer
San Leandro, California 78,125 Leased 100% Orban
Chateau-du-Loir, France 66,712 Owned 100% Audax
The company considers its properties to be suitable and adequate for
its present needs.
23 27
ITEM 3. LEGAL PROCEEDINGS
There are various legal claims pending against the Company, but in
the opinion of management, liabilities, if any, arising from such claims will
not have a material effect upon the consolidated financial condition and
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at
Name August 1, 1995 Position
- - --------------------- ------------------- -----------------------------------------
Sidney Harman 76 Chairman, Chief Executive Officer
and Director of the Company
Bernard A. Girod 53 President, Chief Operating Officer,
Secretary and Director of the
Company
F. Michael Budd 48 President - Harman Manufacturing Group
Philip J. Hart 50 President - Harman Professional Group
Thomas Jacoby 41 President - Harman Consumer Group
Gregory P. Stapleton 48 President - Automotive OEM Group
F. Gordon Bitter 52 Vice President - Finance & Administration
and Chief Financial Officer
Jerome H. Feingold 53 Vice President - Quality
Frank Meredith 38 Vice President and General Counsel
William S. Palin 52 Vice President and Director International
Audit
Sandra B. Robinson 36 Vice President - Financial Operations
Floyd E. Toole 49 Vice President - Engineering
Officers are elected annually by the Board of Directors and hold
office at the pleasure of the Board of Directors until the next annual selec-
tion of officers or until their successors are elected and qualified.
24 28
Sidney Harman, Ph.D., the Company's founder, has been Chairman
of the Board and Chief Executive Officer and a director of the Company
since the Company's founding in 1980. From 1977 to 1979, Dr. Harman
was the Under Secretary of Commerce of the United States. From 1962 to
1977, Dr. Harman was an officer and director of the Predecessor of the
Company.
Bernard A. Girod has been President of the Company since March
1994, Chief Operating Officer of the Company since March 1993, a Director
of the Company since July 1993, Secretary of the Company since November
1992 and Chief Financial Officer from September 1986 to September 1995.
From September 1979 to September 1986, Mr. Girod was the Vice
President and General Manager of Permacel, a subsidiary of Avery
International and Vice President of Planning and Business Development for
Avery International. From 1977 to 1979, Mr. Girod was the Chief Financial
Officer of the Predecessor of the Company.
F. Michael Budd has been the President of the Harman
Manufacturing Group since June 1989.
Philip J. Hart has been President of the Harman Professional Group
since November 1993. Prior to that time, Mr. Hart served as President of
Soundcraft since Harman's 1988 acquisition.
Thomas Jacoby has been President of the Harman Consumer Group
since February 1993. Prior to that time, Mr. Jacoby served as President of
JBL Consumer since August 1990. From July 1988 to August 1990, Mr.
Jacoby served as Executive Vice President of Harman Kardon.
Gregory P. Stapleton has been President of the Automotive OEM
Group since October 1987.
F. Gordon Bitter was appointed Vice President - Finance and
Administration of the Company on September 7, 1995. Prior to that time,
Mr. Bitter was: Senior Vice President - Finance and Accounting of the
Chicago and North Western Transportation Company from October 1994 to
April 1995; President of the Metco Division of The Perkin-Elmer
Corporation from 1992 to 1993; Senior Vice President - Finance and
Administration of The Perkin-Elmer Corporation from 1988 to 1991; and
Senior Vice President - Finance and Accounting of The Singer Company
from 1984 to 1988.
Jerome H. Feingold has been the Vice President-Quality of the
Company since January 1992. Prior to that time, Mr. Feingold served as
President of Harman Speaker Manufacturing since July 1985.
25 29
Frank Meredith has been General Counsel of the Company since
August 1994. Prior to that time, Mr. Meredith served as Vice President-
Tax/Legal and Assistant Secretary of the Company since July 1992. Prior to
that time, Mr. Meredith held other positions within the Company since May
1985.
William S. Palin has been Vice President and Director International
Audit since March 1994. Prior to that time he was the director of his own
accounting and consulting firm which handled numerous assignments for the
Company over the years, including significant acquisition support. Prior to
1981, Mr. Palin was the Chief Financial Officer for Harman Europe and
Managing Director of Harman Audio, both a part of the Predecessor
company.
Sandra B. Robinson has been Vice President-Financial Operations
since November 1992. Prior to that time, Ms. Robinson was Director of
Corporate Accounting and has been employed by the Company since
December 1984.
Floyd E. Toole, Ph.D., joined the Company as Vice President-
Acoustic Research in November 1991. Prior to joining the Company, Dr.
Toole spent 25 years, most recently as Senior Research Officer, with the
National Research Council of Canada's Acoustics and Signal Processing
Group. At the National Research Council, Dr. Toole worked to develop
psychoacoustic-optimized adaptive digital techniques for improving the
performance of loudspeakers in rooms.
26 30
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by Part II, Item 5 is incorporated by
reference to the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1995 (Shareholder Information on page 42).
ITEM 6. SELECTED FINANCIAL DATA
The information required by Part II, Item 6 is incorporated by
reference to the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1995 (Financial Highlights on page 1).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by Part II, Item 7 is incorporated by
reference to the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1995 (Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 27 through 29).
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The information required by Part II, Item 8 is incorporated by
reference to the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1995 (Consolidated Financial Statements on pages 30
through 41).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27 31
PART III
With the exception of information relating to the executive officers
of the Company which is provided in Part I hereof, all information required
by Part III (Items 10, 11, 12, and 13) of Form 10-K, including the
information required by Item 405 of Regulation S-K, is incorporated by
reference to the Company's definitive Proxy Statement relating to the 1995
Annual Meeting of Stockholders.
28 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
a) 1. Financial statements required to be filed hereunder
are indexed on page 33 hereof.
2. Financial statement schedules required to be filed
hereunder are indexed on page 33 hereof.
3. The exhibits required to be filed hereunder are
indexed on pages 37 through 43 hereof.
b) Reports on Form 8-K
None.
29 33
THIS PAGE LEFT BLANK INTENTIONALLY
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
(Registrant): HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
By: (Signature and Title) /s/ Sidney Harman
----------------------------------------------------
Sidney Harman, Chairman of the Board and
Chief Executive Officer
Date: September 18, 1995
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Sidney Harman Chairman of the Board, September 18, 1995
- - ------------------------------ Chief Executive Officer ------------------------
Sidney Harman and Director
/s/ Bernard A. Girod President, Chief Operating September 18, 1995
- - ------------------------------ Officer, Secretary and ------------------------
Bernard A. Girod Director
/s/ Shirley M. Hufstedler Director September 18, 1995
- - ------------------------------ ------------------------
Shirley M. Hufstedler
/s/ Edward Meyer Director September 18, 1995
- - ------------------------------ ------------------------
Edward Meyer
/s/ Alan Patricof Director September 19, 1995
- - ------------------------------ ------------------------
Alan Patricof
/s/ F. Gordon Bitter Chief Financial Officer September 18, 1995
- - ------------------------------ (Principal Accounting ------------------------
F. Gordon Bitter Officer)
31 35
THIS PAGE LEFT BLANK INTENTIONALLY
36
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
Index to Item 14(a)
Page Reference
----------------------------------
Annual
Report to
Form 10-K Shareholders
----------------------------------
Consolidated Financial Data (pages 30 through 41
of the 1995 Annual Report to Shareholders
herein incorporated by reference as Exhibit 13.1):
Consolidated Balance Sheets as of June 30, 1995
and 1994 30
Consolidated Statements of Operations for the years
ended June 30, 1995, 1994 and 1993 31
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 32
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1995, 1994 and 1993 33
Notes to Consolidated Financial Statements 34
Independent Auditors' Report 35 41
Schedules for the years ended June 30, 1995,
1994 and 1993:
II Valuation and Qualifying Accounts and Reserves 34
All other schedules have been omitted because they are not applicable, not
required, or the information has been otherwise supplied in the financial
statements or notes to the financial statements.
33 37
Schedule II
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Three Years Ended June 30, 1995
($000's omitted)
- - ---------------------------------------------------------------------------------------------------------------
Charged
Balance at Charged to To Other Balance
Beginning Costs and Accounts Deductions at End
Classification of Period Expenses Describe Describe of Period
- - ---------------------------------------------------------------------------------------------------------------
Year Ended
June 30, 1993
Allowance for
doubtful
accounts $ 3,664 $ 2,216 $ 77 (1) $ 2,522 (2) $ 3,435
Year Ended
June 30, 1994
Allowance for
doubtful
accounts $ 3,435 $ 2,757 $ 7,189 (3) $ 3,140 (2) $10,241
Year Ended
June 30, 1995
Allowance for
doubtful
accounts $10,241 $ 4,263 $ 2,217 (4) $ 4,408 (2) $ 12,313
(1) Addition due to Lexicon acquisition.
(2) Deductions for accounts receivable written off net of recoveries.
(3) Addition due to AKG, Studer and Harman Belgium (Beltronics)
acquisitions.
(4) Addition due to Becker, D.A.V.I.D. and Harman Interactive
(NewMediaWare) acquisitions.
34 38
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------
The Board of Directors
Harman International Industries, Incorporated
Under date of August 11, 1995, we reported on the consolidated balance
sheets of Harman International Industries, Incorporated and subsidiaries as
of June 30, 1995 and 1994, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the years in the
three year period ended June 30, 1995, as contained in the 1995 annual
report to shareholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year ended June 30, 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed in the accompanying index. The
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
August 11, 1995
39
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40
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
INDEX TO EXHIBITS
The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement or
report, such statement or report is identified in parenthesis.
There are omitted from the exhibits filed with this Annual Report on
Form 10-K certain promissory notes and other instruments and agreements
with respect to long-term debt of the Company, none of which authorizes
securities in a total amount that exceeds 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. Pursuant to Item
601(b)(4)(iii) of Regulation S-K, the Company hereby agrees to file with the
Securities and Exchange Commission copies of all such omitted promissory
notes and other instruments and agreements as the Commission requests.
Exhibit
Page
No. Description No.
3.1, 4.1 Restated Certificate of Incorporation, as amended,
filed with the Delaware Secretary of State on
October 7, 1986. (Filed as Exhibits 3.1 and 4.1 to
the Registration Statement on Form S-1 (Reg. No.
33-8538) and hereby incorporated by reference.)............IBR
4.3, 10.17 Composite conformed copy of the Note Purchase
Agreements dated June 30, 1987, relating to the sale
of $25.0 million principal amount of 10.08% Senior
Notes due September 30, 1994, and $17.5 million
principal amount of 10.40% Senior Notes due
September 30, 1997, including as exhibits thereto the
form of 10.08% Senior Notes due September 30, 1994,
and 10.40% Senior Notes due September 30, 1997.
(Filed as Exhibit 4 to the Quarterly Report on Form
10-Q for the quarter ended December 31, 1988 (File
No. 0-15147), and hereby incorporated by reference.)....IBR
37 41
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
4.4, 10.29 Composite conformed copy of the Note Purchase
Agreement dated December 1, 1988, relating to the
sale of $45.0 million principal amount of 11.2% Senior
Subordinated Notes due December 1, 1998, including
as an exhibit thereto the form of 11.2% Senior
Subordinated Notes due December 1, 1998. (Filed as
Exhibit 4 to the Quarterly Report on Form 10-Q for the
quarter ended December 31, 1988 (File No. 0-15147),
and hereby incorporated by reference.) ...........................IBR
4.5 Amended By-Laws of Harman International
Industries, Incorporated. (Filed as Exhibit 4.5 to the
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992 (File No. 0-15147) and hereby
incorporated by reference.)..............................................IBR
4.6 Indenture dated June 4, 1992, between Harman
International Industries, Incorporated and Security
Trust Company N.A., as Trustee, relating to
$70,000,000 principal amount of 12.0% Senior
Subordinated Notes due 2002, including as an
exhibit thereto the form of 12.0% Senior
Subordinated Notes due 2002. (Filed as Exhibit
4.6 to the Annual Report on Form 10-K for the
year ended June 30, 1992 (File No. 0-15147),
and hereby incorporated by reference.) ...........................IBR
4.7 First Amendment to Note Agreement Dated June 30,
1987, dated as of December 14, 1988, relating to
the sale of $25.0 million principal amount of
10.08% Series A Senior Notes due September 30,
1994, and $17.5 million principal amount of 10.40%
Series B Senior Notes due September 30, 1997.
(Filed as Exhibit 4.7 to the Registration Statement
on Form S-2 (Reg. No. 33-49692) and hereby
incorporated by reference.) ............................................IBR
38 42
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.1 Lease dated as of June 18, 1987 between Harman
International Industries Business Campus Joint
Venture and JBL Inc., as amended. (Filed as Exhibit
10.1 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1987 (File No. 0-15147)
and hereby incorporated by reference.)............................IBR
10.2 Guaranty dated as of June 18, 1987 by Harman
International Industries, Inc. of Lease dated as of
June 18, 1987 between Harman International
Industries Business Campus Joint Venture and JBL
Inc., as amended. (Filed as Exhibit 10.2 to the
Annual Report on Form 10-K for the fiscal year
ended June 30, 1987 (File No. 0-15147) and hereby
incorporated by reference.)..............................................IBR
10.10 Agreement dated as of June 20, 1985, among
Harman International Industries, Inc., Harman-
Motive, Inc., JBL Inc. and Ford Motor Co.
(Filed as Exhibit 10.10 to the Registration Statement
on Form S-1 (Reg. No. 33-8538) and hereby
incorporated by reference.)..............................................IBR
10.18 Harman International Industries, Inc. 1987 Executive
Incentive Plan (adopted December 8, 1987). (Filed
as Exhibit 10.18 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 1988 (File No.
0-15147), and hereby incorporated by reference.)...........IBR
10.19 Form of Incentive Stock Option Agreement under
the 1987 Executive Incentive Plan. (Filed as Exhibit
10.19 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1988 (File No. 0-15147),
and hereby incorporated by reference.)............................IBR
39 43
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.20 Form of Non-Qualified Stock Option Agreement
under the 1987 Executive Incentive Plan. (Filed as
Exhibit 10.20 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 1988 (File No.
0-15147), and hereby incorporated by reference.)...........IBR
10.21 Form of Non-Qualified Stock Option Agreement
with non-officer directors. (Filed as Exhibit 10.21
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1988 (File No. 0-15147), and
hereby incorporated by reference.)..................................IBR
10.23 Lease Agreement dated April 28, 1988, among
Alaskan Permanent Fund Corp. and the National
Bank of Washington, as trustee of the National Bank
of Washington Multi-Employer Property Trust
and Harman Electronics, Inc. (Filed as Exhibit 10.23
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1988 (File No. 0-15147),
and hereby incorporated by reference.)...........................IBR
10.24 Promissory Note dated August 3, 1993, among
Harman International Industries, Inc., JBL
Incorporated and Banc One Arizona Leasing
Corporation. (Filed as Exhibit 10.24 to the Annual
Report on Form 10-K for the fiscal year ended
June 30, 1993 (File No. 0-15147), and hereby
incorporated by reference.).............................................IBR
10.26 Harman International Industries, Incorporated
Retirement Savings Plan. (Filed on Form S-8
Registration Statement on June 16, 1989
(Reg. No. 33-28973), and hereby incorporated
incorporated by reference.).............................................IBR
40 44
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.27 Harman International Industries, Incorporated
Supplemental Executive Retirement Plan. (Filed
as Exhibit 10.27 to the Annual Report on Form
10-K for the fiscal year ended June 30, 1989
(File No. 0-15147), and hereby
incorporated by reference.).............................................IBR
10.28 Form of Benefit Agreement under the Supplemental
Executive Retirement Plan. (Filed as Exhibit A to
the Supplemental Executive Retirement Plan at
Exhibit 10.27 and hereby incorporated by reference.).....IBR
10.30 Form of Restricted Stock Agreement. (Filed as
Exhibit 10.30 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 1989 (File No.
0-15147), and hereby incorporated by reference.)...........IBR
10.32 Note dated September 7, 1989, between Harco
Properties, Incorporated and New England Mutual
Life Insurance Company. (Filed as Exhibit 10.32
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989 (File No. 0-15147), and
hereby incorporated by reference.)...................................IBR
10.38 Amendment to the Harman International Industries,
Incorporated Supplemental Executive Retirement
Plan. (Filed as Exhibit 19.1 to the Quarterly Report
Report on Form 10-Q for the quarter ended March
31, 1992 (File No. 0-15147), and hereby
incorporated by reference.)..............................................IBR
41 45
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.41 Form of Incentive Stock Option Agreement under the
1992 Executive Incentive Plan. (Filed as Exhibit 10.41
to the Annual Report on Form 10-K for the fiscal year
ended June 30, 1993 (File No. 0-15147), and
hereby incorporated by reference.)...................................IBR
10.42 Form of Non-qualified Stock Option Agreement under
the 1992 Executive Incentive Plan. (Filed as Exhibit
10.42 to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1993 (File No. 0-15147), and
hereby incorporated by reference.)...................................IBR
10.43 Form of Restricted Stock Agreement under the 1992
Executive Incentive Plan. (Filed as Exhibit 10.43 to
the Annual Report on Form 10-K for the fiscal year
ended June 30, 1993 (File No. 0-15147), and hereby
incorporated by reference.)..............................................IBR
10.44 Form of Non-qualified Stock Option Agreement for
Non-officer Directors under the 1992 Executive
Incentive Plan. (Filed as Exhibit 10.44 to the Annual
Report on Form 10-K for the fiscal year ended
June 30, 1993 (File No. 0-15147), and hereby
incorporated by reference.).............................................IBR
10.45 Harman International Industries, Inc. Executive
Deferred Compensation Plan. (Filed as Exhibit
10.45 to the Annual Report on Form 10-K for the
fiscal year ended June 30, 1993 (File No. 0-15147),
and hereby incorporated by reference.)............................IBR
10.46 Harman International Industries, Inc. Executive
Deferred Compensation Plan Split-Dollar Life
Insurance Agreement. (Filed as Exhibit 10.46 to
the Annual Report on Form 10-K for the fiscal year
ended June 30, 1993 (File No. 0-15147), and
hereby incorporated by reference.)...................................IBR
42 46
INDEX TO EXHIBITS (cont.)
Exhibit
Page
No. Description No.
10.53 Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994, among Harman
International Industries, Incorporated, the Subsidiary
Borrowers and Subsidiary Guarantors, and the
Several Lenders named therein with Chemical
Securities, Inc., as Arranger, NationsBank of North
Carolina, N.A., as Co-Agent and Chemical Bank,
as Administrative Agent ...............................................IBR
10.54 First Amendment dated February 15, 1995, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994 .............................................49
13.1 Harman International Industries, Incorporated
Annual Report to Shareholders for the fiscal
year ended June 30, 1995...............................................61
21.1 Subsidiaries of the Company........................................109
23.1 Consent of Independent Auditors................................115
27.1 EDGAR Financial Data Schedule................................119
43 47
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