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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, 1996
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, 1996, was $785,574,153.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 18,636,983
shares of Common Stock, par value $.01 per share, as of August 31,
1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended June 30, 1996, 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
1996 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
PART I
Page
Item 1. Business............................................ 5
Item 2. Properties.......................................... 27
Item 3. Legal Proceedings............................. 28
Item 4. Submission of Matters to a Vote of
Security Holders................................ 28
Executive Officers of the Registrant.. 29
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters.............................................. 31
Item 6. Selected Financial Data.................... 32
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations......................... 32
Item 8. Consolidated Financial Statements
and Supplementary Data.................... 32
Item 9. Disagreements on Accounting and
Financial Disclosure.......................... 33
PART III
Item 10. Directors and Executive Officers of
the Registrant.................................... 33
Item 11. Executive Compensation.................. 33
Item 12. Security Ownership of Certain
Beneficial Owners and Management.33
Item 13. Certain Relationships and Related
Transactions...................................... 33
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.33
List of Financial Statements and
Financial Statement Schedules......... 37
Independent Auditors' Report.......... 39
Index to Exhibits.............................. 41
3
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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 design, manufacture and
marketing of high-quality, high-fidelity audio products targeted primarily
at the consumer, professional and original equipment manufacturer
("OEM") markets. For almost 50 years, the Company and its
predecessors have been leaders and innovators in creating loudspeaker
and electronic products that deliver superior sound. The Company
believes that its JBL, Infinity and Harman Kardon brand names are well-
known worldwide for premium quality and performance. In order to
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 that enables it to respond effectively to customer needs, assure
product quality and increase manufacturing efficiency.
In the last three years, the Company's operations have been
repositioned to provide better customer focus and improved efficiency.
The Company's operations are now centered around three primary
Groups: the Consumer Group, the Professional Group and the OEM
Group. During this same three-year period, the Company completed a
number of strategic acquisitions to improve its competitive position in
terms of market, product and technology. These acquisitions include:
AKG Akustiche und Kino-Gerate Gesselschaft m.b.H. ("AKG"), a
manufacturer of microphones based in Austria; Studer Revox AG
("Studer"), a manufacturer of broadcast and recording systems based in
Switzerland; Becker GmbH ("Becker"), a high technology manufacturer
of automotive head units (radio/cassette deck/CD player) based in
Germany; and Madrigal Audio Laboratories, Inc. ("Madrigal"), the
manufacturer of the prestigious Mark Levinson and Proceed brands of
consumer electronics products, based in Connecticut. Through these
acquisitions, the Company believes it has positioned each Group to offer a
more complete line of products, thereby enabling the Company to
compete more effectively in its markets.
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Consumer Group
The Company designs, manufactures and markets loudspeakers under
the JBL and Infinity brand names for the consumer market. The
Company also designs, manufactures and markets a broad range of
consumer electronics products. During fiscal 1996, the Company's
principal consumer electronics division, Harman Kardon, Incorporated
("Harman Kardon"), achieved record sales. The Company's principal
loudspeaker divisions, JBL Incorporated ("JBL") and Infinity Systems,
Inc. ("Infinity"), also achieved record sales in fiscal 1996. The Company
continues to capitalize on these strong brand names by targeting growing
markets, such as home theater, and by developing new and innovative
products. The Company continually seeks to improve its market position
in its core loudspeaker business by introducing new products that offer
greater efficiency and reduced size.
Professional Group
The Company is a leading manufacturer and marketer of professional
audio electronics equipment, including loudspeakers, amplifiers, mixing
consoles, signal processing equipment, microphones and broadcast and
recording products. Such products are marketed worldwide under various
trade names, including: JBL, Soundcraft, Allen & Heath, DOD, Lexicon,
AKG, dbx, BSS, Turbosound, Orban, Spirit and Studer.
The acquisitions of AKG in September 1993 and Studer in March
1994 enable the Professional Group to supply a complete range of
professional audio products and turnkey systems to the principal segments
of the industry, including broadcast and recording, sound reinforcement,
and musical instrument support. The Professional Group is developing
digital systems that are integrated by means of a proprietary digital
architecture that permits all of the components to communicate and
allows for a single point of control. The ability to integrate all of the
audio components in the system also provides the opportunity for better
performance and lower costs.
OEM Group
Automotive Audio Systems. Harman is one of the world's largest
manufacturers of premium branded automotive OEM audio systems.
During the past few years, the Company has invested heavily to
streamline its manufacturing operations and establish relationships with
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new customers. During fiscal 1995 and fiscal 1996, the Company's OEM
Group recorded significant sales increases due to an increase in the
number of automobile models offering the Company's audio systems and
higher penetration levels within existing models. The Company's largest
automotive OEM customer, Chrysler, offers Infinity branded audio
systems as options in thirteen different models. Harman Kardon branded
systems are offered in models from BMW, Saab, Jaguar and Range
Rover. Becker supplies head units to Mercedes, BMW and Porsche.
Other customers include Mitsubishi, Rover and Toyota.
The Company believes significant growth opportunities continue to
exist in the automotive OEM market through higher penetration levels
within existing models, increases in the number of models offering the
Company's audio systems and the addition of new automotive OEM
customers. Furthermore, the acquisition of Becker enables the OEM
Group to offer completely integrated audio systems that include the head
unit, amplifiers, loudspeakers and associated electronics. The Company
believes this integrated audio system provides a platform for further
expansion into associated automotive electronic products such as
communications, security and navigation.
The Company has discontinued Ford's exclusive automotive OEM use
of the JBL brand name and made it available to Toyota, Peugeot and
others from whom commitments have been received beginning in model
year 1998. The JBL program for the Ford Explorer will conclude with
model year 1997 and for the Lincoln line with model year 1998. The
Company believes that these developments will generate increased sales
of JBL branded systems to a larger number of automotive manufacturers.
Audio for Computers. During fiscal 1996, the Company began to
design and manufacture branded audio systems and loudspeakers for
manufacturers of personal computers. The Company intends to develop
its computer OEM audio systems business based on the model of its
established automotive OEM audio systems business. Through an
alliance with Compaq Computer Corporation, the Company began
production of audio systems that will be incorporated as standard
equipment in Compaq's new Presario line of personal computers.
Shipments to Compaq began in June 1996. The Harman designed and
manufactured systems are badged "JBL-Professional."
A complete Harman Kardon surround system was designed for
Gateway 2000 during 1996. The surround system is offered by Gateway
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as an option on its Destination product line. The Destination product is a
new generation of "TV Computers" that combines familiar personal
computer functions with traditional home high fidelity and television
reception functions. The software incorporated in Destination, which
facilitates reception of detailed television program information, has been
developed by the Company's Smart TV Group and is branded Harman
Smart TV. The Company is in discussions with a number of additional
computer makers to whom it hopes to market Harman Smart TV and
OEM audio and loudspeaker systems.
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 as many as fifty years previous, some as part of the same
enterprise and 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 later extended its product
offerings to include loudspeakers for the home in response to demand
from consumers who recognized and appreciated the professional quality
sound of JBL's movie theater loudspeakers.
The Predecessor also formed international subsidiaries to market and
distribute its audio products in Europe and Japan, where JBL and Harman
Kardon were, and continue to be, top brand names.
8
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) 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 such as Circuit City in the U.S.
and MediaMarkt in Germany; (2) professional audio, providing a
complete range of audio products offered to the sound reinforcement,
broadcast and recording, and music instrument markets; and (3) OEM
audio, offering branded audio systems for installation as original
equipment in automobiles and broadening its base of automotive
customers to include Chrysler, Mercedes, Ford, Jeep, BMW, Mitsubishi,
Toyota, Porsche, Saab, Range Rover and Jaguar, as well as developing the
OEM audio for computers market, including current customers Compaq
and Gateway 2000.
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.
The Company has made a number of small acquisitions of consumer
loudspeaker and electronics companies to expand its consumer electronics
portfolio and to add product expertise to meet strategic requirements.
Among these, the Company expanded its electronic audio components
business and entered the home theater market through its acquisition of
Fosgate, Inc. in January 1991. The Company's consumer electronics
9
presence was expanded further through the fiscal 1994 acquisition of
AudioAccess, a manufacturer of home audio/video system control devices
and the fiscal 1996 acquisition of Madrigal, manufacturer of the renowned
Mark Levinson and Proceed lines of high end electronics.
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 Electronics to bring the Professional Group into
the musical instrument and digital signal processing markets. In
September 1991, the Company acquired Allen & Heath Brennell,
Limited, 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, adding to the Company's digital audio product offerings.
Austrian microphone and headphone manufacturer AKG was acquired
in September 1993, providing the Company the ability to offer complete
system solutions for the sound reinforcement market. Other brands added
to the Harman portfolio through the AKG acquisition include:
Turbosound professional loudspeakers; BSS professional amplifiers,
loudspeaker management systems and signal processing devices; and
Orban broadcast electronics. In March 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
a world leader in the professional audio market.
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
10
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 February
1995, the company expanded its automotive OEM market position with
the acquisition of Becker GmbH, a German manufacturer of radios and
other electronics for the automotive OEM market and the automotive
aftermarket. Becker is a principal automotive audio head unit supplier to
Mercedes Benz. The addition of Becker enables the OEM Group to offer
completely integrated audio systems that include the head unit, amplifiers,
loudspeakers and associated electronics.
The Company has developed its computer OEM business through the
use of internal resources such as its multimedia software capabilities, its
automotive OEM marketing and management talent and its established
brand names - JBL, Harman Kardon and Infinity.
The manufacturing capabilities of the Company include North
American and European operations. Primary manufacturing sites are
located in California, Denmark, France and the United Kingdom.
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 - Consumer,
Professional and OEM - with each group incorporating all related
manufacturing, marketing and distribution operations. The Consumer
Group contributed approximately 34% of fiscal 1996 total net sales, the
Professional Group accounted for approximately 34% of net sales, and the
OEM Group generated approximately 32% of net sales.
Financial Information about Geographic Segments
Financial information about geographic segments required to be
included hereunder is incorporated by reference to Note 9 of Notes to
Consolidated Financial Statements contained in the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 1996.
11
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
Audax Industries, SNC Consumer home, automotive and
professional loudspeakers;
OEM loudspeakers
Becker GmbH Automotive OEM and automotive
aftermarket electronics
Harman Music Group, Incorporated Professional electronics
Harman Belgium NV Consumer home, automotive and
professional audio products
Harman Consumer Europe A/S Consumer home and automotive
electronics
Harman Deutschland GmbH Consumer home, automotive and
professional audio products
Harman France, S.N.C. Consumer home, automotive and
professional audio products
Harman International Industries, Consumer home and automotive,
Limited automotive OEM loudspeakers
and electronics and professional
audio products
Harman International Japan Consumer home, automotive,
Co., Limited and professional audio
products
Harman-Kardon, Incorporated Consumer home and automotive
electronics
Harman-Motive, Inc. OEM loudspeakers
and electronics
Infinity Systems, Inc. Consumer home and automotive
loudspeakers and electronics
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Name Principal products
- --------------------------------------- ------------------------------------------
JBL Incorporated Consumer and professional
loudspeakers and electronics
Lexicon, Incorporated Professional electronics
Lydig of Scandinavia A/S Components, cabinets and
loudspeaker systems
Madrigal Audio Laboratories, Inc. Consumer electronics
Studer Professional Audio AG Professional electronics
Markets for Products
Based on the Company's experience in, and knowledge of, the
industry, the Company believes that the consumer, professional and 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 consumer and professional audio
products, including software-driven audio systems with integrated digital
architecture that permits communication among all components.
Market growth in consumer audio is particularly strong in home
theater and multimedia. The advent of the digital video disc (DVD) will
provide additional growth opportunities in the consumer market. The
Company is meeting consumer demand with products carrying its
respected and well-known brand names JBL, Infinity, Harman Kardon,
Mark Levinson, Proceed and Citation.
The Company is well-positioned to meet the digital requirements of
the professional market with the expertise of its professional companies,
particularly JBL, Soundcraft, Studer, Lexicon, Harman Music Group and
AKG.
Harman is a leader in the design and production of premium, branded
high-fidelity systems for automobile manufacturers. The Company
believes significant growth opportunities exist within the automotive
audio market to increase sales by increasing product penetration in OEM
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models currently supplied, expanding the number of automobile models
offering its systems and adding new OEM customers. The Becker
acquisition complements the Company's JBL, Infinity and Harman
Kardon automotive audio programs and enables the Company to offer
fully-integrated audio systems to the automobile manufacturers.
The Company has broadened its OEM business to include personal
computers by developing branded audio systems for Compaq, Gateway
and other manufacturers of personal computers. The Company believes
that the number of personal computers equipped with multimedia
capabilities will continue to increase at a high rate on a worldwide basis,
and that the Company is well-positioned to capitalize on this emerging
market segment with its JBL, Infinity and Harman Kardon brand names.
Products
The Company designs, engineers, manufactures and markets
worldwide a broad range of high-quality, high-fidelity audio loudspeakers
and electronics for the consumer (home and automotive aftermarket),
professional (sound reinforcement, broadcast and recording, and musical
instrument support), and OEM (automotive and computer) markets. The
Company also distributes a small amount of complementary audio
products manufactured by other companies. The Consumer Group
accounted for approximately 34% of the Company's fiscal 1996 sales, of
which 80% was attributable to home loudspeaker and automotive
aftermarket systems and 20% was from home electronic components.
The Professional Group contributed approximately 34% of fiscal 1996
sales The OEM Group generated approximately 32% of fiscal 1996 sales.
CONSUMER PRODUCTS. The Company designs, manufactures and
markets loudspeakers principally under the JBL and Infinity brand names
for the consumer market. JBL loudspeakers sold to the consumer market
employ techniques originally developed 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
introduction of wireless technology in its SoundEffects speaker systems
provides improved speaker placement flexibility and simplifies
installation for home theater and multi-room applications.
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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 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 in California
and Denmark and believes that they are among the most advanced cabinet
production facilities in the world.
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 AC-3 technology and Lucasfilm
Home THX, and front-loading, bit stream compact disc changers.
Madrigal is a designer and manufacturer of high-end digital
electronics, including amplifiers, pre-amplifiers, digital signal processors,
and compact disc transports and players. Madrigal markets its products
under the renowned Mark Levinson and Proceed brand names.
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 patented Six-
Axis steering logic surround processing and provide solutions for all
component and system needs for home theater and home audio.
AudioAccess products provide in-home, multi-source, multi-zone sound
system controls, serving home theater and multi-room applications.
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The Company's automotive aftermarket products include loudspeakers
and amplifiers marketed under the JBL and Infinity brand names and
Becker head units (radios with either cassette or compact disc functions),
amplifiers and compact disc changers.
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,
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,
Lexicon, AKG, Turbosound, Studer and Soundcraft are in use around the
world in such places as the Great Hall of the People in Beijing, China, the
Royal Danish Theater in Copenhagen and Abbey Road Studio in
England. Performing artists such as Pink Floyd, U2, The Rolling Stones,
Oasis and Wynton Marsalis 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 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.
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 Turbosound
Floodlight and Flashlight professional loudspeaker lines were added to
the Company's portfolio through the acquisition of AKG.
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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.
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 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. Performers who have used Harman Music Group
products on tour include: Van Halen, Aerosmith, the Rolling Stones,
Trent Reznor of Nine Inch Nails, and David Gilmour of Pink Floyd.
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. Lexicon digital
signal processing products are used in live sound applications as well as
recording studios 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, surround-sound headphones and other
professional audio products marketed under the AKG brand name.
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.
17
OEM PRODUCTS. Harman is a leading global manufacturer of
premium branded automotive OEM audio systems. In its sale of
loudspeakers, head units, amplifiers and other audio products to 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 and Becker brand names. The Company's
ability to design and manufacture transducers utilizing special materials
enables the Company to collaborate with automobile manufacturers to
design lighter sound systems that contribute to increases in automobile
fuel efficiency. The addition of head unit and other electronics design and
manufacturing capabilities through the Becker acquisition enables the
Company to provide complete high-fidelity audio systems solutions to
automobile manufacturers.
The Company manufactures audiophile OEM sound systems for
automobiles, including Infinity systems sold to Chrysler and Mitsubishi in
models such as the Jeep Grand Cherokee and the Mitsubishi 3000GT,
JBL systems sold to Ford in models such as the Lincoln Continental and
the Ford Explorer and Harman Kardon systems sold to BMW (3-series),
Jaguar, Saab and Land Rover (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 and Porsche. These
premium OEM audio systems are engineered for each automobile to
maximize acoustic performance and complement interior design.
The Company discontinued Ford's exclusive automotive OEM use of
the JBL brand name and made it available to Toyota, Peugeot and others
from whom new commitments have been received beginning in model
year 1998. The JBL program for the Ford Explorer will conclude with
model year 1997 and for the Lincoln line with model year 1998. The
Company believes these developments will generate increased sales of
JBL branded systems to a larger number of automotive manufacturers.
The Company manufactures a series of "JBL-Professional" branded
audio systems for Compaq's Presario line of personal computers and a
higher-powered Harman Kardon system for Gateway's new Destination
TV-PC product. Destination also includes Harman's Smart TV. These
audio systems provide high-quality sound and thus enhance the appeal
and capability of the personal computer as an entertainment device.
18
Manufacturing
The Company believes that its manufacturing capabilities are essential
to maintaining and improving the quality and performance of its products.
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. Many
of the Company's manufacturing facilities are certified as conforming to
the requirements of ISO 9000 for manufacturing, engineering and service.
The Company's manufacturing capabilities with respect to
loudspeakers include the production of its own high-gloss lacquer and
wooden veneer loudspeaker enclosures, wire milling, voice coil winding
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 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 benefits accruing from
investments in engineering, design and development.
The Company's principal domestic manufacturing facility is located in
Northridge, California (Northridge Manufacturing) where it manufactures
JBL and Infinity loudspeakers, including cabinets, for consumer,
professional, automotive aftermarket and personal computer applications
and amplifiers for the automotive OEM market and the automotive
aftermarket. The Company manufactures loudspeakers and assembles
sound systems for the OEM automotive market in Martinsville, Indiana.
Harman Music Group manufactures professional electronics products at
its facility in Salt Lake City, Utah. Lexicon manufactures its professional
electronics products at its Waltham, Massachusetts facility. Madrigal
manufactures consumer electronics at its Middletown, Connecticut
facility.
The Company has established a strong manufacturing presence in
Europe to better respond to customer demands in that market. Audax
Industries SNC ("Audax"), a manufacturer of high-quality, high-
performance tweeters, manufactures speakers in France, and the
Company's Lydig of Scandinavia A/S ("Lydig") subsidiary manufactures
cabinet enclosures and assembles complete JBL and Infinity loudspeakers
in Denmark. The Company also manufactures drivers for its Turbosound
line of professional loudspeakers at its Precision Devices manufacturing
19
site in the United Kingdom. Final assembly of Turbosound loudspeakers
is performed in the United Kingdom. Cabinet production will begin in
the United Kingdom during fiscal 1997 at the Company's new factory in
Cornwall to supply the Turbosound line and to meet increased demand for
JBL Professional loudspeakers in Europe.
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)
European automotive loudspeaker and electronics manufacturing
includes the production of automotive OEM loudspeakers in the United
Kingdom and automotive OEM and automotive aftermarket radios and
other electronics at Becker in Germany.
Marketing and Distribution
The Company's products are sold domestically and internationally in
the consumer, professional and OEM markets. The consumer market for
audio entertainment systems consists of home and automotive
aftermarket. 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 OEM market
includes automobile manufacturers which purchase components and
systems on either a branded or generic basis and manufacturers of
personal computers.
The Company primarily markets its consumer audio products through
audio and audio-video specialty stores and certain audio-video chain
stores, such as Circuit City in North America and MediaMarkt in
Germany. 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. The
Company's sales and marketing activities include dealer education
programs and comprehensive product literature. 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.
20
The Company's professional audio products are marketed worldwide
through professional sound equipment dealers, including sound system
contractors which 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.
The Company markets its branded OEM audio products to automobile
and personal computer manufacturers. OEM customers include Chrysler,
Mercedes Benz, Ford, Mitsubishi, Toyota, BMW, Jaguar, Porsche, Range
Rover and Saab in the automotive segment and Compaq and Gateway in
the personal computer segment.
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. However, the
loss of the largest supplier would have a material impact on the earnings
of Harman Kardon until alternate sources could be found.
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 have a
material impact on the earnings of Northridge Manufacturing until
alternate sources for these components could be found.
Trademarks and Patents
The Company markets its products under numerous trademarks and
logos, including JBL, Infinity, Harman Kardon, Citation, Concord,
Audax, Becker, Soundcraft, Spirit, DOD, Audio Logic, DigiTech,
Lexicon, AKG, Studer, Numisys, BSS, Orban, Precision Devices, dbx,
AudioAccess, Turbosound, Mark Levinson, Proceed, EON, Harman
SmartTV, Control, Compositions, Optimod, C-Audio, 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,
1996, the Company held approximately 352 United States and foreign
21
patents covering various products, product designs and circuits, and had
approximately 195 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 1996 accounted for 10.4% 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 largest customer, Mercedes Benz, accounted for 7.7% of
the Company's consolidated net sales for the year ended June 30, 1996.
The loss of automotive OEM sales to Mercedes Benz 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 backlog was approximately $36.2 million at June 30, 1996,
and $31.3 million at June 30, 1995.
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
22
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, Turbosound professional
loudspeakers are compatible with and marketed by the same staff as BSS
professional amplifiers and loudspeaker management systems. However,
JBL and Infinity home loudspeakers compete directly and are two of the
leading loudspeaker brands in the world. The Company's strategy uses its
brand leadership to increase market share.
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.
23
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.
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. With the addition of Madrigal
in fiscal 1996, the Company competes in the high end of the consumer
electronics market with the Mark Levinson and Proceed brands. Principal
competitors include: Krell, McIntosh, Audio Research, Meridian, Linn
and Accuphase.
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 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, AKG, Soundcraft, and
BSS. Its principal competitors in sound reinforcement include Electro
Voice, Inc. and Altec Lansing (subsidiaries of Mark IV Industries),
Eastern Acoustic Works, Crest, Sennheiser, 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
24
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 Tannoy.
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
BMW, Jaguar, Rover and Saab as well as supplying systems for the
Toyota Avalon. Additionally, the company is a 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.
In the developing computer OEM market, the Company supplies audio
systems for Compaq's Presario line of personal computers and the
Gateway Destination TV-PC. Principal competitors in this segment
include Bose, Altec-Lansing and LabTec.
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 agreed to a remediation plan with the state agency. The
25
Company has begun the remediation of this site and does not believe that
the future cost will exceed $250,000.
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.
Research, Development and Engineering
The Company's expenditures for research, development and
engineering were $59,171,000, $40,257,000, and $22,324,000 for the
fiscal years ending June 30, 1996, 1995 and 1994, respectively. The
increase in expenditures in fiscal 1996 results from: the development of
the new OEM audio for computers business; the addition of Becker,
which was included for only six months in fiscal 1995; the inclusion of
Madrigal, acquired September 1995; and increased product development
activity at JBL Professional, Studer and Harman Motive. The increase in
expenditures in fiscal 1995 reflects the inclusion of Becker, acquired
February 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, 1996, the Company had 8,369 full-time employees,
including 4,179 domestic employees and 4,190 international employees.
The increase in number of employees as of June 30, 1996 compared to the
prior year primarily results from the acquisition of Madrigal and the
expansion of the Company's OEM business into the personal computer
segment.
26
Financial Information - 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 9 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 33 and 23,
respectively, in the Company's Annual Report to Shareholders for the
fiscal year ended June 30, 1996.
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,
competitive products and other risks detailed herein and in the Company's
other filings with the Securities and Exchange Commission.
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 693,932 Leased 100% JBL, Harman
Motive
Martinsville, Indiana 224,107 Owned 100% Harman Motive
Ontario, California 212,600 Leased 100% JBL, Infinity
Ringkobing, Denmark 145,119 Owned 100% Lydig
25,920 Leased 80%
27
Square Owned or Percentage
Location Footage Leased Utilization Division
- ----------------------------- ----------- ---------- ------------- -----------------
Ittersbach, Germany 169,465 Owned 61% Becker
Huntington, Indiana 167,557 Owned 100% Pyle
Potters Bar, UK 160,000 Leased 100% Soundcraft
Vienna, Austria 128,593 Leased 100% AKG
Sandy, Utah 122,000 Leased 100% Harman Music
Group
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 50% Becker
Regensdorf, Switzerland 86,111 Leased 100% Studer
Chateau-du-Loir, France 66,712 Owned 100% Audax
The company considers its properties to be suitable and adequate for
its present needs.
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.
28
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at
Name August 1, 1996 Position
- --------------------------- ------------------- ------------------------------------------------
Sidney Harman 77 Chairman of the Board of Directors
and Chief Executive Officer
Bernard A. Girod 54 President, Chief Operating Officer,
Chief Financial Officer, Secretary
and Director of the Company
Philip J. Hart 51 President - Harman Professional Group
Thomas Jacoby 42 President - Harman Consumer Group
Gregory P. Stapleton 49 President - OEM Group
Jerome H. Feingold 54 Vice President - Quality
Frank Meredith 39 Vice President and General Counsel
William S. Palin 53 Vice President-International Controller
Sandra B. Robinson 37 Vice President - Financial Operations
Floyd E. Toole 50 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 selection of
officers or until their successors are elected and qualified.
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,
Secretary of the Company since November 1992 and a Director of the
Company since July 1993. Mr. Girod also serves as Chief Financial
29
Officer of the Company, a position he held from September 1986 to
August 1995 and again since March 1996. 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.
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 OEM Group since
October 1987. 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.
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. Prior to
1985, Mr. Feingold held various management positions within the
manufacturing division of the Company.
Frank Meredith has been Vice President, General Counsel 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-International 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.
30
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.
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, 1996 (Shareholder Information on page 36).
31
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary
(in thousands, except per share data,
for the fiscal years ended June 30)
1996 1995 1994 1993 1992
------------ ------------ ----------- ----------- -----------
Net sales $1,361,595 $1,170,224 $862,147 $664,913 $604,454
Operating income 105,378 87,449 66,332 41,255 27,547
Income before taxes 75,024 61,157 42,686 18,570 5,893
Net income 52,042 41,161 25,664 11,246 3,487
Net income per share 3.16 2.58 1.83 .99 .37
Total assets 996,209 886,872 680,691 431,726 415,909
Long-term debt 254,611 266,021 156,577 175,583 132,675
Shareholders' equity 436,477 289,490 232,021 111,149 111,241
Dividends per share 0.20 0.17 -- -- --
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, 1996 (Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 20 through 23).
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, 1996 (Consolidated Financial Statements on pages 20
and 24 through 35).
32
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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
1996 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 37 hereof.
2. Financial statement schedules required to be filed
hereunder are indexed on page 37 hereof.
3. The exhibits required to be filed hereunder are
indexed on pages 41 through 48 hereof.
b) Reports on Form 8-K
None.
33
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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 13, 1996
-------------------------
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 13, 1996
- ------------------------------ Chief Executive Officer -------------------------
Sidney Harman and Director
/s/ Bernard Girod President, Chief Operating September 13, 1996
- ------------------------------ Officer, Chief Financial -------------------------
Bernard A. Girod Officer (Principal Accounting
Officer), Secretary and
Director
/s/ Shirley M. Hufstedler Director September 13, 1996
- ------------------------------ -------------------------
Shirley M. Hufstedler
/s/ Ann McLaughlin Director September 13, 1996
- ------------------------------ -------------------------
Ann McLaughlin
/s/ Edward Meyer Director September 13, 1996
- ------------------------------ -------------------------
Edward Meyer
35
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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 20 and
24 through 35 of the 1996 Annual Report
to Shareholders herein incorporated
by reference as Exhibit 13.1):
Financial Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Balance Sheets as of
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of
Operations for the years ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash
Flows for the years ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Consolidated Statements of Shareholders'
Equity for the years ended June 30,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 28
Independent Auditors' Report . . . . . . . . . . . . . . .39 . . . . . . . . . . . . 35
Schedules for the years ended June 30,
1996, 1995 and 1994:
II Valuation and Qualifying
Accounts and Reserves . . . . . . . . . . . . . . . . 38
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.
37
Schedule II
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Three Years Ended June 30, 1996
($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, 1994
Allowance for
doubtful
accounts $ 3,435 $ 2,757 $ 7,189 (1) $ 3,140 (2) $10,241
Year Ended June 30, 1995
Allowance for
doubtful
accounts $10,241 $ 4,263 $ 2,217 (3) $ 4,408 (2) $12,313
Year Ended June 30, 1996
Allowance for
doubtful
accounts $12,313 $ 3,103 $ (1,405) (4) $ 4,049 (2) $ 9,962
(1) Additions due to AKG, Studer and Harman Belgium (Beltronics) acquisitions.
(2) Deductions for accounts receivable written off net of recoveries.
(3) Additions due to Becker, D.A.V.I.D. and Harman Interactive (NewMediaWare)
acquisitions.
(4) Deductions due to account reclassifications, foreign currency translation,
and sale of Studer Singapore.
38
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------
The Board of Directors
Harman International Industries, Incorporated
Under date of August 15, 1996, we reported on the consolidated balance
sheets of Harman International Industries, Incorporated and subsidiaries
as of June 30, 1996 and 1995, 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, 1996, as contained in the 1996
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, 1996. 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 15, 1996
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 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 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
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
4.6 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
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
42
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
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
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
43
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
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
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
10.38 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
44
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.40 Harman International Industries, Incorporated 1992
Incentive Plan. (Filed as Exhibit A to the Definitive
Proxy Statement for the fiscal year ended June 30,
1995 as approved by shareholders at the November
1995 Annual Meeting of Shareholders (File No.
001-09764) and hereby incorporated by reference..........IBR
10.41 Form of Incentive Stock Option Agreement under the
1992 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 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
hereby incorporated by reference.)..................................IBR
10.43 Form of Restricted Stock Agreement under the 1992
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 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
45
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
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
10.47 Share Purchase Agreement between Harman
International Industries, Inc., Roland Becker and
Becker Holding S.A. (Filed as Exhibit 2.1 to the
Current Report on Form 8-K dated February 27,
1995 (File No. 001-09764), and hereby
incorporated by reference...............................................IBR
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
46
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
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
10.56 Amendment and Settlement Agreement dated
March 20, 1996, between Harman International
Industries, Inc., Roland Becker and Becker Holding
S.A. (Filed as Exhibit 10.56 to the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996
(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.....................................................................49
10.58 First Amendment to the Lease Agreement by and
between Harman International Business Campus
Joint Venture and JBL, Inc. dated October 1995.............55
47
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
13.1 Pages 20 through inside back cover of Harman
International Industries, Incorporated Annual
Report to Shareholders for the fiscal year ended
June 30, 1996....................................................................61
21.1 Subsidiaries of the Company...........................................81
23.1 Consent of Independent Auditors....................................87
27.1 EDGAR Financial Data Schedule...................................91
48