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, 2001
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, 2001, was $1,231,621,301.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 32,083,847
shares of Common Stock, par value $.01 per share, as of August 31, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended June 30, 2001, 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 2001 Annual Meeting of Stockholders are incorporated by reference in
Part III, Items 10 (as related to Directors), 11, 12, and 13.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. X
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TABLE OF CONTENTS
Page
PART I
Item 1. Business.................................. 5
Item 2. Properties................................ 23
Item 3. Legal Proceedings......................... 24
Item 4. Submission of Matters to a Vote of
Security Holders....................... 24
Executive Officers of the Registrant... 25
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.................. 28
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk.......... 28
Item 8. Consolidated Financial Statements
and Supplementary Data................. 29
Item 9. Disagreements on Accounting and
Financial Disclosure................... 29
PART III
Item 10. Directors and Executive Officers of
the Registrant......................... 25
Item 11. Executive Compensation.................... 29
Item 12. Security Ownership of Certain
Beneficial Owners and Management....... 29
Item 13. Certain Relationships and Related
Transactions........................... 29
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 Auditor's Report........... 35
Index to Exhibits...................... 39
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 manufacture of high-quality
high-fidelity audio products targeted at the consumer and professional
audio markets. For almost 50 years, the Company and its predecessors
have been leaders and innovators in creating loudspeakers and electronic
audio products that deliver superior sound. Harman is also a global
leader in the development and application of infotainment systems
for the automotive industry. The Company believes that its JBL,
Infinity, Harman Kardon, Mark Levinson, and Becker brand names are
well-known worldwide for premium quality and performance.
The Company has developed, both internally and through a series of
strategic acquisitions, a broad range of product offerings sold under
renowned brand names in its principal markets. The objective of the
Company's development efforts has been to secure engineering,
manufacturing and marketing leadership and to strengthen the Company's
ability to provide total audio system solutions to its customers.
The Company's businesses are organized by the end-user markets they
serve. The Consumer Systems Group manufactures loudspeakers and
electronics for high fidelity audio reproduction in the home, in vehicles
and with computers. The Professional Group manufactures loudspeakers
and electronics used by audio professionals in concert hall, recording,
broadcast and cinema applications.
Harman's primary manufacturing facilities are located in California,
Indiana, Utah, Kentucky, Germany, the United Kingdom, Denmark,
Mexico, France, Austria, and Hungary.
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Consumer Systems Group
The Consumer Systems Group manufactures loudspeakers and electronics
for high fidelity audio reproduction in the home, in vehicles and with
computers. These products are marketed under brand names including
JBL, Infinity, Harman Kardon, Lexicon, Becker, Mark Levinson, Proceed,
Revel and AudioAccess. The Company believes that it has the preeminent
portfolio of brand names and range of product offerings in the consumer
audio market, and that the JBL, Infinity and Harman Kardon brands are
recognized throughout the world for superior sound quality and good
value. High-end products bearing the Lexicon, Mark Levinson, Proceed
and Revel brands are acclaimed for their superior build quality and
state-of-the-art sound reproduction.
The Consumer Systems Group offers premium, branded audio systems to
retail automobile purchasers through OEM supply agreements with
DaimlerChrysler, BMW, Toyota, Lexus, Mitsubishi, Porsche, Land Rover,
Saab, Peugeot and Ferrari, complemented by non-branded loudspeaker
supply agreements with other automakers including Audi, Volvo, VW,
Ford, Renault and Fiat.
The Consumer Systems Group primarily supplies car audio, video and
navigation systems products separately. However, the Company has
received purchase commitments for integrated systems to be installed in
2002 and 2003 model year vehicles from Mercedes-Benz, Audi, BMW,
and Porsche in Europe. These integrated systems manage functions like
car audio, video and navigation, which are provided by the Company and
manage functions like climate control, telecommunications, and internet
access, which will be provided by third parties. DaimlerChrysler,
the Company's largest automotive OEM customer, offers Infinity
branded car audio systems in the majority of its, Chrysler, Dodge,
and Jeep lines. Mitsubishi also offers Infinity branded car audio
systems. Harman/Becker head units and navigation systems, and
non-branded loudspeaker systems manufactured by Harman/Becker
Automotive Electronic Systems GmbH, are installed in a substantial
number of DaimlerChrysler's Mercedes-Benz automobiles. Becker
also supplies head units, navigation systems and other electronics
to BMW and Porsche. Toyota, Peugeot and Hyundai offer JBL branded
audio systems. BMW and Saab offer Harman Kardon systems. High-end
Mark Levinson audio systems are offered by Lexus.
The loss of, or a material decrease or delay in purchasing the Company's
products by, any of the Company's significant customers could have a
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material adverse effect on the results of operations of the Company.
Sales of the Company's audio products through automakers are dependent
on automobile industry sales and automobile purchasers' willingness to
pay for the option of a premium branded automotive audio system.
The Consumer Systems Group offers branded audio systems to personal
computer users through OEM supply agreements with Dell, Compaq,
Apple, and IBM. Beginning in October 2002 the Company will also offer
branded audio systems to Legend, a computer manufacturer in China.
These audio systems provide high-quality sound and thus enhance the
appeal and capability of the personal computer as an entertainment
device. The JBL, Infinity and Harman Kardon brand names are all employed
in this market. The Company participates in a variety of ways including
design, manufacture, brand name licensing, and direct sourcing.
The Company believes the maturation and broadened acceptance of DVD
and digital television will provide growth opportunities for its consumer
brands. In addition to the contribution of its Proceed and Harman Kardon
DVD machines, the Company expects DVD and digital television to
stimulate loudspeaker sales due to increased customer traffic in
audio/video dealers' stores and the improved audio quality potential of
DVD and digital television compared to the current analog audio/video
and digital audio technologies. Sales expectations are dependent, to a
substantial extent, on discretionary spending by consumers, which may be
affected by general economic conditions.
The Company believes excellent growth opportunities are available in the
automotive OEM channel through increases in per-vehicle content through
the provision of integrated infotainment systems, higher penetration levels
within existing models, increases in the number of models offering the
Company's audio systems, supply agreements with additional automakers
and with new hardware and software licensing agreements. The Company
has recently received major new business from DaimlerChrysler AG's
Mercedes-Benz for integrated infotainment systems for 2002 and 2003
model year vehicles.
Professional Group
The Company's Professional Group designs, manufactures and markets
products in all significant segments of the professional audio market,
offering complete systems solutions to professional installations and
users around the world. The Professional Group includes JBL
Professional, Soundcraft, Crown, DOD, Digitech, dbx, AKG, BSS, and
Studer.
7
The Professional Group is uniquely equipped to provide turnkey systems
solutions for professional audio applications that offer the customer
improved performance, ease of installation and reduced cost. Professional
installations of Harman products include stadiums, opera houses, concert
halls, recording studios, broadcast studios, theaters, houses of worship,
cinemas and touring performing artists. Sound systems incorporating
components manufactured by JBL, Crown, Lexicon, AKG, Studer and
Soundcraft are in use around the world in such places as the Experience
Music Project in Seattle, the Great Hall of the People in Beijing, China,
the Royal Danish Theater in Copenhagen and Abbey Road Studio and the
Millennium Dome in England. The Company's professional equipment is
used on tour by performing artists throughout the world. The principal
market segments served by the Professional Group are sound
reinforcement, musical instrument support, and recording and broadcast.
JBL Professional is a leader in the sound reinforcement and cinema
markets. JBL serves customers such as Cineplex Odeon and United Artist
Theaters in the cinema market. Stadiums, concert halls, houses of worship
and major concert tours rely on sound reinforcement products from the
Professional Group, such as JBL loudspeakers, JBL, Crown and BSS
amplifiers, BSS loudspeaker system management products, AKG
microphones, DOD and dbx signal processing equipment, and Soundcraft
mixing consoles, to produce high quality sound.
AKG is a renowned manufacturer of high-quality microphones and
headphones. AKG serves certain OEM markets in addition to its
professional audio activities. AKG's expertise in the design and
manufacture of miniature transducers for special microphone
applications has led to market opportunities in the mobile
telecommunications equipment and hands-free automotive communications
markets. AKG manufactures the earpiece and mouthpiece transducer
capsules for mobile telephone manufacturers including Nokia,
Kyocera, Ericsson and Sony. AKG also manufactures miniature transducers
for hands-free communications applications in Mercedes-Benz automobiles
and General Motors' automobiles which are equipped with the OnStar
system.
Professional customers in the recording and broadcast market include
radio and television stations, recording studios, postproduction houses,
digital edit suites, and home studios. Customers in these markets,
including AMS Westfunk Radio, Abbey Road Studios and The Hit Factory,
are primarily served by Studer, JBL, Crown, Lexicon, Soundcraft
and AKG.
8
JBL, Crown, DOD, Lexicon and Digitech serve the music instrument
support segment of the professional audio market. JBL manufactures
and markets loudspeakers, monitors and amplifiers. Crown manufactures
professional amplifiers. DOD and Digitech sell sound effects and other
signal processors, portable mixing consoles and guitar amplifiers.
Music instrument support products are sold through music retail stores
such as Guitar Center and Sam Ash.
Operating and Geographic Segment Information
Financial information about operating and 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, 2001.
Description of Business
The Company's business is conducted through its wholly owned
subsidiaries which include:
Name Principal products
--------------------------------------- ------------------------------
AKG Acoustics GmbH Professional electronics
Harman Becker Automotive Systems S.A. de C.V. Automotive OEM loudspeakers
Crown Audio, Inc. Professional electronics
Harman Becker Automotive Automotive OEM and automotive
Systems GmbH aftermarket electronics
Harman Becker Automotive Automotive OEM loudspeakers
Systems KFT
Harman Becker Automotive Systems, Inc. OEM loudspeakers and aftermarket
electronics
Harman Consumer International, SNC Consumer home and automotive
electronics
Harman Consumer Manufacturing A/S Components, cabinets and
loudspeaker systems
Harman Music Group, Incorporated Professional electronics
9
Name Principal products
--------------------------------------- --------------------------------
Harman Audio de Mexico, S.A. de C.V. Consumer loudspeakers
Harman International Industries, Limited Automotive OEM loudspeakers and
electronics and professional
audio products
Harman Kardon, Incorporated Consumer home and automotive
electronics
Infinity Systems, Inc. Consumer home and automotive
loudspeakers and electronics
JBL Incorporated Consumer, professional and
automotive loudspeakers and
electronics
Lexicon, Incorporated Consumer and professional
electronics
Madrigal Audio Laboratories, Inc. Consumer electronics
Studer Professional Audio AG Professional audio equipment
Markets for Products
Based on its knowledge of the audio industry, the Company believes that
retail sales of consumer and professional products will show modest
growth in fiscal 2002. The transition from analog to digital audio
technology has changed music recording and reproduction and has led to
the development of a new generation of consumer and professional audio
products, including software-driven audio systems with integrated digital
architecture that permits communication among all components. This
transition has unsettled markets due to customer confusion and hesitancy,
causing modest sales growth in both markets. Management believes that
the new digital technologies and standards will continue to stabilize and
Harman's market position will help the Company to capitalize on the
release of pent-up demand as confusion and hesitancy abate.
Until recently, Multimedia audio systems has been a growth market for
Harman. The global PC market has been characterized by robust growth
averaging 15 percent on an annualized basis. However, the domestic PC
market declined 3.5 percent in the fourth quarter of last year, and PC
sales remain soft. The Company has developed branded audio systems for
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personal computers marketed by Apple, Dell, Compaq and IBM. The
Company also produces branded aftermarket audio systems for multimedia
applications. The Company believes that sales of personal computers
equipped with multimedia capabilities will continue to be soft.
The Company believes excellent growth opportunities exist within the
automotive audio market to increase sales by increasing per-vehicle
content through the sale of integrated infotainment systems, increasing
product penetration in platforms currently supplied on an OEM basis,
expanding the number of automobile models offering our systems, adding
new OEM partners and the licensing of our automotive multimedia
hardware and software products. Harman/Becker's radio and navigation
system products complement the Company's JBL, Infinity, Mark
Levinson, and Harman Kardon automotive audio programs and enable the
Company to offer fully-integrated multimedia systems through its
automobile manufacturing partners. The Company has received
commitments for integrated infotainment systems from Mercedes-Benz,
BMW, Audi, and Porsche. These integrated systems manage functions
including car audio, video and navigation, which are provided by the
Company and manage functions like climate control, telecommunications,
and internet access, which would be provided by third parties. The
Company believes that it may receive additional commitments from other
leading automaker manufacturers.
The professional audio markets served by the Company include sound
reinforcement, music instrument support and broadcast and recording.
The sound reinforcement market includes theaters (cinema and live
performance), stadiums, concert halls, and houses of worship. The music
instrument support market provides portable digital signal processing
components, guitar amplifiers and portable loudspeaker systems used by
touring performers. The broadcast and recording market includes radio and
television stations and recording studios. Much of the professional
audio market is undergoing a transition from analog to digital audio
technology, and the Company is well-equipped for this evolutionary
period with the engineering and marketing expertise of JBL, Crown,
Lexicon, Soundcraft, Studer, Harman Music Group and AKG.
Products
The Company designs, manufactures and markets worldwide a broad
range of high-quality, high-fidelity audio loudspeakers and electronics
for the consumer audio market (in the home, in vehicles and with
computers)
11
and the professional audio market (sound reinforcement, broadcast and
recording, and musical instrument support).
CONSUMER PRODUCTS. The Company manufactures loudspeakers
under the JBL, Infinity and Revel brand names for the consumer market.
These loudspeaker lines include models designed for two-channel stereo
and multi-channel surround sound applications in the home in a wide
range of choices, including floorstanding, bookshelf, powered, low
frequency, in-wall, wireless and all-weather, in styles and finishes
ranging from high gloss lacquers to genuine wood veneers. The JBL
and Infinity product lines also include car loudspeakers, amplifiers
and crossovers sold in the aftermarket.
The Company manufactures a broad range of consumer audio electronics.
The Company's Harman Kardon home electronics line includes audio-
video receivers featuring Dolby Digital and DTS surround sound
processing capabilities and multi-channel amplifiers, multi-disc DVD
players and CD recorders.
Madrigal designs and manufactures high-end electronics, including
amplifiers, pre-amplifiers, digital signal processors, compact disc
players and transports, DVD transports, amplifiers and surround sound
processors. Madrigal markets its products under the renowned Mark
Levinson and Proceed brand names. AudioAccess, Madrigal Imaging and
Revel are also part of the Madrigal Group. AudioAccess products
provide in-home, multi-source, multi-zone sound system controls,
serving home theater and multi-room applications. Revel loudspeaker
systems are designed to complement the superior performance of
Madrigal's electronic brands for both music and home theater
applications. Madrigal Imaging completes the Group's home theater
range, offering high-end video projection products.
Lexicon is a leader in the design and manufacture of high-quality
home theater surround sound processors and amplifiers. Lexicon
was a pioneer in the development of digital signal processors for
the professional audio market and uses their professional audio
expertise to enhance products sold to consumers.
JBL, Infinity and Harman Kardon branded premium audio systems are
offered with personal computers manufactured by Compaq, IBM, Dell
and Apple, respectively. Harman participates in this market
through design and brand name licensing as well as direct sourcing.
These audio systems
12
provide high-quality sound and thus enhance the appeal and
capability of the personal computer as an entertainment device.
Harman is a leading global manufacturer of premium branded automotive
audio systems offered by automakers as an option to their customers.
In its offering of loudspeakers, head units, amplifiers and
infotainment systems through automobile manufacturers, the Company
leverages its expertise in the design and manufacture of
high-quality loudspeakers, radios and other electronics, as well
as the reputation for quality associated with its JBL, Infinity,
Harman Kardon, Mark Levinson and Becker brand names. Harman
engineers are engaged by the automobile manufacturers early in the
vehicle cabin design process to develop systems that optimize
acoustic performance and minimize weight and space requirements.
Harman has developed the technical competencies to offer multimedia
systems to automobile manufacturers incorporating audio, video,
navigation, telematics, internet access, security and cabin
quieting. The Company currently primarily supplies car audio,
video and navigation systems products separately. However, the
Company has received new commitments for integrated infotainment
systems to be installed in 2002 and 2003 model year vehicles from
Mercedes-Benz, BMW, Audi, and Porsche.
The Company's Infinity-branded car audio systems are offered by
DaimlerChrysler's Chrysler, Dodge and Jeep lines as well as by
Mitsubishi. Toyota, Peugeot and Hyundai offer JBL-branded audio
systems. BMW, Jaguar and Saab offer Harman Kardon branded systems.
Mark Levinson systems are offered by Lexus. Harman/Becker supplies
head units, navigation systems and other electronics to
DaimlerChrysler, BMW, Audi, Porsche and Renault.
PROFESSIONAL PRODUCTS. The Company designs, manufactures
and markets products in all significant segments of the professional
audio market, offering complete systems solutions to professional
installations and users around the world.
The Professional Group includes many of the most respected names
in the industry including JBL Professional, Soundcraft, Crown,
Lexicon, DOD, Digitech, AKG, BSS, dbx, and Studer. Professional
installations of Harman products include stadiums, opera houses,
concert halls, recording studios, broadcast studios, theaters,
houses of worship, cinemas and touring performing artists.
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Sound systems incorporating components manufactured by JBL, Crown,
AKG, Studer and Soundcraft are in use around the world in such places
as the Experience Music Project in Seattle, the Great Hall of the People
in Beijing, China, the Royal Danish Theater in Copenhagen and Abbey Road
Studio and the Millennium Dome in England. Harman professional
equipment is used on tour by performing artists throughout the world.
The professional market has advanced rapidly and is heavily involved
in digital technology. Management believes that 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, Studer, Crown,
Lexicon 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 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, Crown,
Lexicon, DOD, Digitech, AKG, BSS, dbx and Studer, and are often sold in
conjunction with the Company's professional loudspeakers.
The Soundcraft lines of high-quality sound mixing consoles extend from
automated multi-track consoles for master recording studios to compact
professional mixers for personal recording and home studios. Soundcraft
products span four main market areas: sound reinforcement, recording
studios, broadcast studios and musical instrument dealers.
The Harman Music Group product line is marketed under the DOD, dbx,
and DigiTech 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.
AKG is a leading manufacturer of high-quality microphones and
headphones. The AKG product line includes microphones, audio
headphones, surround-sound headphones and other professional audio
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products marketed under the AKG brand name. AKG has leveraged its
engineering and manufacturing expertise to enter the telecommunications
market, supplying miniature transducers to mobile phone makers Nokia,
Ericsson, Kyocera and Sony, as well as the automotive hands-free
communications market, supplying microphone arrays to Mercedes-Benz
and General Motors.
Crown is a leading professional amplifier manufacturer based in Elkhart,
Indiana. Crown enhances the Company's ability to provide complete
systems solutions to the professional audio market.
Lexicon digital signal processing products are used in live sound
applications and in recording studios to produce sound effects and
refine final mixes.
Studer Professional Audio is recognized for the high quality and
reliability of its professional products, which include analog and
digital tape recorders, mixing consoles, switching systems, digital
audio workstations, professional compact disc players and recorders
and turnkey broadcasting studio installations.
Manufacturing
The Company believes that its manufacturing capabilities are essential
to maintaining and improving product quality and performance. The
Company manufactures most of the products that it sells other than
certain Harman Kardon electronic components. The Company also
manufactures certain products for other loudspeaker companies on an
OEM basis.
The Company's loudspeaker manufacturing capabilities include the
production of its own high-gloss lacquer and wooden veneer loudspeaker
enclosures, wire milling, voice coil winding and the use of computer
controlled lathes and other machine tools to produce its many precision
components. The Company's high degree of manufacturing integration
enables it to maintain consistent quality levels, resulting in reliable,
high-performance products. The Company capitalizes on opportunities to
transfer technology and materials developments across product lines to
maximize the utility of engineering, design, development and procurement
resources.
The Company's principal domestic manufacturing facility in Northridge,
California, manufactures JBL and Infinity loudspeakers and audio
15
electronics for home, car and professional applications. 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 consumer and professional
electronics products at its Bedford, Massachusetts facility.
Madrigal manufactures consumer electronics at its Middletown,
Connecticut facility and Crown International manufactures professional
amplifiers at its Elkhart, Indiana facility. The Company's newest
manufacturing facilities are located in Franklin, Kentucky and Tijuana,
Mexico. The Kentucky facility manufactures automotive audio systems
for Toyota and the Tijuana, Mexico facility manufactures loudspeaker
cabinets for JBL and Infinity.
The Company has a strong manufacturing presence in Europe. European
automotive loudspeaker and electronics manufacturing includes the
production of loudspeakers and amplifiers in the United Kingdom,
Germany, Sweden, France and Hungary. Infotainment systems, car radios,
navigation systems, amplifiers and other electronics are manufactured
in Germany. The Company's Harman Consumer Manufacturing A/S subsidiary
manufactures cabinet enclosures and assembles complete JBL and Infinity
loudspeakers in Denmark. European professional electronics manufacturing
includes Soundcraft in the United Kingdom (mixing consoles), Studer in
Switzerland (professional recording and broadcast equipment) and AKG in
Austria (microphones and headphones).
Marketing and Distribution
The Company's products are sold domestically and internationally in the
consumer and professional audio markets. The consumer market for audio
entertainment systems consists of home, car, and multimedia. The
professional market includes a wide range of professional uses, including
live music applications, recording facilities, entertainment venues such
as concert halls, stadiums and movie theaters, broadcast facilities and
music instrument support.
The Company primarily markets its home and automotive aftermarket
audio products through audio and audio-video specialty stores and certain
audio-video chain stores, such as Circuit City and Best Buy in North
America and MediaMarkt in Europe. The Company enjoys broad distribution
of its products and selects dealers who emphasize high-quality audio
systems and who are knowledgeable about the features and capabilities
of audio products. Sales and marketing activities for these
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products include dealer education programs, point-of-sale displays,
participation in consumer audio trade shows, comprehensive product
literature and mass-media advertising.
The Company
markets its OEM audio products through automobile and personal
computer manufacturers and dealers. Automobile manufacturers offering
Harman systems include DaimlerChrysler, Toyota, Lexus, Peugeot,
Hyundai, BMW, Mitsubishi, Volkswagen, Volvo, Audi, Jaguar, Porsche,
Range Rover and Saab. Personal computer OEM customers include
Apple, Dell, Compaq and IBM. Sales and marketing activities for these
products include dealer education programs, point-of-sale displays,
participation in consumer audio trade shows and mass-media advertising.
The Company's professional audio products are marketed worldwide
through professional sound equipment dealers, including sound system
contractors that directly assist major users. The Company's sales and
marketing group for its professional products is separate and independent
from its consumer product sales group. Professional audio sales and
marketing activities include dealer education programs, point-of-sale
displays, participation in professional audio trade shows and professional
audio media advertising.
Suppliers
Products designed by Harman Kardon are manufactured by several
suppliers. The loss of any one of these suppliers would not have a
material impact on the consolidated earnings or consolidated financial
position of the Company.
The Company utilizes certain third-party suppliers to manufacture
personal computer audio systems sold to personal computer
manufacturers. Production difficulties at these third-party suppliers
could have a material impact on the consolidated earnings of the
Company until an alternate supplier is found.
The Company uses externally-sourced microchips in many of its products.
A significant disruption in our microchip supply chain and an inability
to obtain alternative sources would have a material impact on the
consolidated sales and earnings of the Company.
17
Trademarks and Patents
The Company markets its products under numerous trademarks and logos,
including JBL, Infinity, Harman Kardon, Citation, Crown, Audax, Becker,
Soundcraft, Spirit, DOD, DigiTech, Lexicon, AKG, Studer, BSS, Sound-
Web, dbx, AudioAccess, Mark Levinson, Madrigal Imaging, Proceed,
Revel, VMAx, EON, Harman, Control, Compositions, and C-Audio.
These trademarks and logos are registered or otherwise protected in
substantially all major industrialized countries.
The Company's registrations cover use of its trademarks and logos in
connection with various applicable products, such as loudspeakers, speaker
systems, speaker system components and other electrical and electronic
devices. As of June 30, 2001, the Company held approximately 408
United States and foreign patents covering various products, product
designs and circuits, and had approximately 362 patent applications
pending around the world. The Company vigorously protects and enforces
its trademark and patent rights.
Seasonality
The Company experiences seasonal fluctuations in sales and earnings.
The first fiscal quarter is the weakest due to the automotive model
changeovers and the July and August holidays in Europe. Variations
in seasonal demands among end-user markets may cause operating
results to vary from quarter to quarter.
Customers
Sales to DaimlerChrysler for fiscal year 2001 accounted for 20.5% of
the Company's consolidated net sales. The loss of sales to
DaimlerChrysler would have a material adverse effect on the
consolidated sales, earnings and financial position of the Company.
Backlog Orders
Because the Company's practice is to maintain sufficient inventories of
finished goods to fill orders promptly, the level of backlog is not
considered to be an important index of future performance. The
Company's backlog was approximately $21.2 million at June 30, 2001.
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Warranties
Harman warrants its home products to be free from defects in materials
and workmanship for a period ranging from 90 days to five years from the
date of purchase, depending on the product. The warranty is a limited
warranty, and it imposes certain shipping costs on the customer and
excludes deficiencies in appearance except for those evident when the
product is delivered. Harman dealers normally perform warranty service
for loudspeakers in the field, using parts supplied on an exchange basis by
the Company. Warranties in international markets are generally similar to
those in the domestic market, although claims arising under these
warranties are the responsibility of the distributor.
Competition
In general, the audio industry is fragmented and competitive with many
manufacturers, large and small, domestic and international, offering audio
products that vary widely in price and quality and are distributed through a
variety of channels. Consumer products are offered through various
channels including audio specialty stores, discount stores, department
stores, mail order firms and internet merchants. Consumer products are
also offered as OEM options on automobiles and personal computers
through the automotive and computer dealer channels. Professional
products are offered through music instrument retailers, professional audio
dealers, contractors and installers and on a contract bid basis. The
Company concentrates on the higher-quality, higher-priced segments of
the audio market.
The Company believes that it currently has a significant share of the
consumer market for loudspeakers (home, automotive and computer),
primarily as a result of the strength of its brand names. JBL and Infinity
are two of the most recognized loudspeaker brands in the world. The
development of our high-end loudspeaker brand, Revel, over the past few
years, has extended our market position and complemented our Mark
Levinson and Proceed high-end electronics lines. The Company competes
based upon its strong brand names, the breadth of its product lines, and its
comprehensive marketing, engineering and manufacturing resources.
The Company's principal competitors in the consumer loudspeaker market
include Bose, Boston Acoustics, B&W, KEF, Celestion, Paradigm,
Klipsch, Cambridge SoundWorks and Polk Audio.
19
Competition in the consumer electronic components segment remains
intense, with this market dominated by large Asian competitors. The
short life cycle of products and a need for continuous design and
development efforts characterize this segment. The Company's
competitive strategy is to compete in the upper segments of this
market and to continue to emphasize the Company's ability to provide
systems solutions to customers, including a combination of loudspeakers
and electronics products, providing integrated surround sound and
home theater systems. Principal electronics competitors for Harman
Kardon include Marantz, Kenwood, Sony, Denon, Onkyo, Nakamichi,
Pioneer and Yamaha. The Company competes in the high-end consumer
electronics market with the Mark Levinson, Lexicon and Proceed brands.
Principal competitors include Krell, McIntosh, Audio Research,
Meridian, Linn and Accuphase.
In the personal computer audio market, the Company's Harman Kardon,
JBL and Infinity brand names are attached to the premium audio systems
offered by Apple and Dell, Compaq and IBM, respectively. These audio
systems are provided through licensing and sourcing arrangements.
Principal competitors in this segment include Boston Acoustics, Creative
Labs, Altec-Lansing and LabTec.
In OEM automotive audio, the Company's principal competitors include
Bose, Pioneer and Foster Electric in the loudspeaker systems segment
and Alpine, Bosch, Panasonic, Siemens, Delphi, Visteon and Mannesman
in the electronics segment. The Company is the only supplier of
branded loudspeaker systems for Chrysler, Jeep and Mitsubishi
automobiles in the United States, and also supplies branded loudspeaker
systems to Toyota, Lexus, BMW, Saab and Peugeot. The Company also
supplies non-branded loudspeaker systems to Chrysler, Mercedes-Benz,
Volkswagen, Audi, Volvo, Ford of Europe and Fiat. The Company is a
primary supplier of radio head units to Mercedes-Benz, BMW and Porsche,
and also supplies TV tuners, navigation systems and other electronics
to Mercedes-Benz, Porsche and Renault. The Company competes based upon
the strength of its brand name recognition and the quality of its
products together with its technical expertise in designing loudspeaker
systems, electronics, navigation systems, man-machine interfaces and
complete multimedia systems to fit the acoustic properties of each
automobile model.
The market for professional sound systems is highly competitive. The
Company has historically held a leading market position in the
professional loudspeaker market and has complemented its professional
20
loudspeaker line by adding digital professional electronics products
and broadcast and recording equipment. The Company competes using
its ability to provide systems solutions to meet the complete audio
requirements of its professional customers. Harman offers products
for most professional audio applications.
The Company competes in the sound reinforcement market with many of
its brand names, including JBL Professional, AKG, Crown, Soundcraft,
and BSS. Principal competitors in sound reinforcement include the
Electro Voice division of Telex, Eastern Acoustic Works/Mackie, QSC,
Sennheiser, Tannoy, Peavey, Shure, Audio Technica, Fender, Sony
and Yamaha. The Professional Group competes in the broadcast and
recording areas with its Studer, AKG, Soundcraft, and Lexicon brands.
Principal recording and broadcast competitors include Sony, Yamaha,
Neve, Sennheiser, Denon, SSL, Shure, Tascam, Alesis and Audio
Technica. In the Music Instrument area, competitors for the Company's
JBL, DOD, Digitech, dbx, Lexicon, and Spirit products include Yamaha,
Peavey, Rane, Roland, Alesis, Marshall, Fender, Sony, Mackie and T.C.
Electronics.
The Professional Group also competes in the industrial and architectural
sound market. Competitors within this market include Siemens, Peavey,
and Tannoy.
Environmental Matters
The Company is subject to various federal, state, local and international
environmental laws and regulations, including those governing the use,
discharge and disposal of hazardous materials. The Company's
manufacturing facilities are believed to be in substantial compliance with
current laws and regulations. The cost of compliance with current laws
and regulations has not been, and is not expected to be, material.
The Company has been named as a "potentially responsible party" with
respect to the disposal of hazardous wastes at four hazardous waste sites.
In addition, there are other sites to which the Company has sent hazardous
wastes which the Company believes are currently under regulatory
scrutiny. It is possible that additional environmental issues may arise in
the future which the Company cannot now predict. Although ultimate
liability cannot be determined with respect to the sites mentioned above,
and applicable law provides that a potentially responsible party at any site
may be held jointly and severally liable for the total cost of remediation,
21
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 and Development
The Company's expenditures for research and development were $88.7
million, $76.2 million and $76.0 million for the fiscal years ending
June 30, 2001, 2000 and 1999, respectively.
Number of Employees
As of June 30, 2001, the Company had 10,676 full-time employees,
including 3,671 domestic employees and 7,005 international employees,
compared to 9,807 total employees at June 30, 2000. The increase
in headcount from June 30, 2000, to June 30, 2001, was primarily
due to the construction of two new manufacturing facilities in
Kentucky and Tijuana, Mexico and increased manufacturing
staffing in our European automotive electronics operations.
Disclosures about Segments and Related Information
Disclosures about segments and related information to be filed
hereunder is incorporated by reference to Note 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 35 and 36 and 17 through
21, respectively, in the Company's Annual Report to Shareholders
for the fiscal year ended June 30, 2001.
Forward-Looking Statements
Except for the historical information contained herein, the matters
discussed herein contain forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially
from those suggested in the forward-looking statements, including,
without limitation, the effect of economic conditions, product demand,
currency exchange rates, labor disputes, competitive products and other
risks detailed herein and in the Company's other filings with the
Securities and Exchange Commission.
22
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 596,000 Leased 94% JBL, Infinity,
Harman Kardon,
JBL Professional,
Harman Becker &
Multimedia
Ittersbach, Germany 550,000 Owned 80% Harman/Becker
17,000 Leased 100%
Worth-Schaitt, Germany 377,500 Owned 80% Harman Becker
Martinsville, Indiana 206,000 Owned 100% Harman Becker
40,000 Leased
Ringkobing, Denmark 228,000 Owned 90% Harman Consumer
16,000 Leased 90% Manufacturing A/S
Straubing, Germany 230,000 Owned 95% Harman/Becker
Elkhart, Indiana 222,700 Owned 100% Crown Intl.
7,000 Leased 100%
Tijuana, Mexico 194,000 Leased 100% JBL, Infinity
Potters Bar, UK 160,000 Leased 100% Soundcraft,
Dar, BSS
And C-Audio
Chateau du Loir, France 151,000 Owned 100% Harman/Becker, JBL,
Infinity,
Harman Kardon
Vienna, Austria 129,000 Leased 100% AKG
Juarez, Mexico 125,000 Leased 70% Audio Latina
Sandy, Utah 122,000 Leased 100% Digitech,
DOD, dbx
Franklin, KY 110,000 Leased 100% Harman/Becker
23
The company considers its properties to be suitable and adequate for its
present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit entitled Bose Corporation v. JBL,
Inc., and Infinity Systems, Inc., United States District Court, District of
Massachusetts. In this case, Bose sued JBL and Infinity for infringement
of a U.S. patent owned by Bose relating to the use of elliptical ports in
loudspeaker cabinets
On September 1, 2000, the trial court issued a judgment in favor of Bose in
the amount of $5.7 million. In addition, the court initially issued a
permanent injunction prohibiting JBL and Infinity from the manufacture
and sale of loudspeakers in the United States utilizing elliptical ports.
The judgment was increased to $7.2 million, plus interest, to account for
sales for the five months preceding the trial court's judgment and for sales
made from JBL and Infinity inventory between September 27, 2000 and
November 26, 2000 as permitted by the trial court's September 27, 2000
modification of its permanent injunction. Management believes the trial
court erred in its ruling and is appealing the decision, and that the
Company should be successful in its appeal. However, if the Company is
unsuccessful in its appeal and must pay $7.2 million plus interest in
accordance with the trial court's judgment, this would have a material
adverse effect on the results of operations in the period in which the award
would be required to be paid.
There are various other legal claims pending against the Company, but in
the opinion of management, liabilities, if any, arising from such claims will
not have a material effect upon the consolidated financial condition or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
24
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at
Name August 1, 2001 Position
--------------------- ------------------ -------------------------------
Sidney Harman 82 Executive Chairman and Chairman
of the Board of Directors
Bernard A. Girod 59 Vice Chairman of the Board of
Directors and Chief Executive
Officer
Gregory P. Stapleton 54 President, Chief Operating
Officer and Director of the
Company
Frank Meredith 44 Executive Vice President and
Chief Financial Officer
William S. Palin 58 Vice President - Controller
Sandra B. Robinson 42 Vice President - Financial
Operations
Edwin C. Summers 54 Vice President and General
Counsel
Floyd E. Toole 55 Vice President - Acoustics
Officers are elected annually by the Board of Directors and hold office at
the pleasure of the Board of Directors until the next annual selection of
officers or until their successors are elected and qualified.
Sidney Harman, Ph.D., the Company's founder, was named Executive
Chairman in July 2000. Dr. Harman has been Chairman of the Board,
Chief Executive Officer and a Director of the Company since the Com-
pany's founding in 1980. From 1977 to 1979, Dr. Harman was the Under
Secretary of Commerce of the United States. From 1962 to 1977, Dr.
Harman was an officer and director of the predecessor of the Company.
Bernard A. Girod was named Vice Chairman and Chief Executive Officer
in July 2000. Mr. Girod has been Chief Executive Officer since November
1998 and a Director of the Company since 1993. From March 1994 to
November 1998, Mr. Girod served as President of the Company. From
November 1992 to November 1998, Mr. Girod served as Secretary of the
Company. From March 1993 to November 1998 Mr. Girod served as
Chief Operating Officer of the Company. From September 1986 to
25
August 1995, Mr. Girod served as Chief Financial Officer of the
Company. From September 1979 to September 1986, Mr. Girod was the
Vice President and General Manager of Permacel, a subsidiary of Avery
Dennison and Vice President of Planning and Business Development for
Avery Dennison. From 1977 to 1979, Mr. Girod was the Chief Financial
Officer of the predecessor of the Company.
Gregory P. Stapleton was named President and Chief Operating Officer in
July 2000. Mr. Stapleton has been a Director of the Company since
November 1997 and the Chief Operating Officer since November 1998.
From October 1997 to November 1998, Mr. Stapleton served as President
of the Harman OEM Group. Prior to his association with the Company,
Mr. Stapleton was Senior Vice President of General Electric Venture
Capital Corporation from January 1986 to September 1987, and was
General Manager, Industrial Products Section, Factory Automation
Products Division, of General Electric Corporation from October 1982
through December 1985.
Frank Meredith was named Executive Vice President and Chief Financial
Officer in July 2000. Mr. Meredith has been the Chief Financial Officer
of the Company since February 1997 and Secretary of the Company since
November 1998. Mr. Meredith served as Vice President, General Counsel
and Assistant Secretary of the Company from July 1992 to June 1998.
Prior to that time, Mr. Meredith held other positions within the Company
since May 1985. Prior to joining the Company, Mr. Meredith was
employed by the accounting firm Touche Ross & Co.
William S. Palin has been Vice President - Controller of the Company
since March 1994. Prior to joining the Company, Mr. Palin was a partner
of MacHardy Palin & Co. from January 1982 to March 1994. From July
1978 to January 1982, Mr. Palin served as an officer of two of the
Company's international subsidiaries.
Sandra B. Robinson has been Vice President - Financial Operations since
November 1992. Prior to that time, Ms. Robinson was Director of
Corporate Accounting and has been employed by the Company since
December 1984.
Edwin C. Summers has been Vice President and General Counsel of the
Company since July 1998. Prior to that time, Mr. Summers was Vice
President, General Counsel and Secretary of First Alliance Corporation
from 1996. From 1991 to 1995, Mr. Summers was Senior Vice President,
General Counsel and Secretary of Transamerica Finance Group.
26
Floyd E. Toole, Ph.D., joined the Company as Vice President -
Acoustics in November 1991. Prior to joining the Company, Dr.
Toole spent 25 years, most recently as Senior Research Officer,
with the National Research Council of Canada's Acoustics and
Signal Processing Group, where he developed psychoacoustic-
optimized techniques for improving loudspeaker performance.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information required by Part II, Item 5 is incorporated by reference
to the Company's Annual Report to Shareholders for the fiscal year ended
June 30, 2001 (Shareholder Information on page 40).
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary
(in thousands, except per share data, for the fiscal years ended June 30)
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Net sales $ 1,716,547 $ 1,677,939 $ 1,500,135 $ 1,513,255 $ 1,474,094
Operating income 71,228 121,722 38,663 100,325 101,973
Income before taxes 45,099 102,829 14,447 75,707 77,901
Net income 32,364 72,838 11,723 50,243 54,832
Diluted EPS 0.96 2.06 0.32 1.33 1.45
Total assets 1,162,385 1,137,505 1,065,755 1,130,684 1,014,254
Total debt 368,760 277,324 311,575 333,640 306,150
Shareholders' equity 422,942 486,333 468,187 511,899 466,762
Dividends per share 0.10 0.10 0.10 0.10 0.10
Per-share data has been restated to reflect the two-for-one stock split
effective August 2000.
27
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, 2001 (Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 17 through 21).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Securities and Exchange Commission requires that registrants include
information about potential effects of changes in interest rates and
currency exchange rates in their financial statements. The qualitative
information required by Part II, Item 7A is incorporated by reference to
pages 21 and 13 of the Company's Annual Report to Shareholders for the
fiscal year ended June 30, 2001 (Effects of Inflation and Currency
Exchange Rates and Footnote 13, Derivatives, respectively).
The Company's exposure to interest rate changes is primarily related to its
variable rate debt. To assess exposure to interest rate changes, the
Company has performed a sensitivity analysis assuming a hypothetical 100
basis point increase in interest rates across all maturities. This analysis
indicates that such market movements would reduce fiscal 2002 net
income, based on June 2001 positions, by approximately $1.4 million.
Based on June 2000 positions, the effect on fiscal 2001 net income of such
an increase in interest rates was estimated to be $0.7 million.
The Company and its subsidiaries' net unhedged exposure in assets and
liabilities denominated in currencies other than their relevant functional
currencies as of June 30, 2001 and 2000 was not material to the
consolidated financial position of the Company.
Actual gains and losses in the future may differ materially from the
hypothetical gains and losses discussed above based on changes in the
timing and amount of interest rate and foreign currency exchange rate
movements and the Company's actual exposure and hedges.
28
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, 2001 (Consolidated Financial Statements on pages 24 through
39).
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 Items 404 and 405 of Regulation S-K, is incorporated by
reference to the Company's definitive Proxy Statement relating to the 2001
Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1. Financial statements required to be filed hereunder
are indexed on page 33 hereof.
2. Financial statement schedules required to be filed
hereunder are indexed on page 33 hereof.
3. The exhibits required to be filed hereunder are
indexed on pages 39 through 47 hereof.
29
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30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
By: (Signature and Title) /s/ Bernard A. Girdod
-------------------------------------
Bernard A. Girod, Vice Chairman and
Chief Executive Officer
Date: September 14, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended,this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ Sidney Harman Executive Chairman and September 14, 2001
----------------------------- Chairman of the Board ---------------------
Sidney Harman of Directors
/s/ Bernard A. Girod Vice Chairman, Chief September 14, 2001
----------------------------- Executive Officer and ---------------------
Bernard A. Girod Director
/s/ Gregory P. Stapleton President, Chief Operating September 14, 2001
----------------------------- Officer and Director ---------------------
Gregory P. Stapleton
/s/ Frank Meredith Executive Vice President September 14, 2001
----------------------------- and Chief Financial --------------------
Frank Meredith Officer (Principal
Accounting Officer)
/s/ Shirley M. Hufstedler Director September 14, 2001
----------------------------- --------------------
Shirley M. Hufstedler
/s/ Ann McLaughlin Korologos Director September 14, 2001
----------------------------- --------------------
Ann McLaughlin Korologos
/s/ Edward H. Meyer Director September 14, 2001
------------------------- --------------------
Edward H. Meyer
/s/ Stanley A. Weiss Director September 14, 2001
------------------------- --------------------
Stanley A. Weiss
31
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32
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 24
through 40 of the 2001 Annual Report
to Shareholders herein incorporated
by reference as Exhibit 13.1):
Financial Table of Contents ................................................... 16
Independent Auditor's Reports .......................... 35 ................. 23
Consolidated Balance Sheets as of
June 30, 2001 and 2000 .................................................... 24
Consolidated Statements of
Operations for the years ended
June 30, 2001, 2000 and 1999 ............................................. 25
Consolidated Statements of Cash
Flows for the years ended
June 30, 2001, 2000 and 1999 .............................................. 26
Consolidated Statements of Shareholders'
Equity for the years ended June 30,
2001, 2000 and 1999 ....................................................... 27
Notes to Consolidated Financial Statements .................................... 28
Schedules for the years ended June 30, 2001, 2000 and 1999:
II Valuation and Qualifying
Accounts and Reserves ............................. 37
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
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34
INDEPENDENT AUDITOR'S REPORT ON SCHEDULE
----------------------------------------
The Board of Directors
Harman International Industries, Incorporated
Under the date of August 10, 2001, we reported on the consolidated
balance sheets of Harman International Industries, Incorporated and
subsidiaries as of June 30, 2001 and 2000, 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, 2001, as contained
in the 2001 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, 2001. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement
schedule as listed in the accompanying index. The financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG LLP
Los Angeles, California
August 10, 2001
35
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36
Schedule II
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Valuation and Qualifying Accounts and Reserves
Years Ended June 30, 2001, 2000 and 1999
($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, 1999
Allowance for
doubtful accounts $ 10,072 $ 2,662 $ (129) (1) $ 3,873 (2) $ 8,732
Inventory reserves $ 38,575 $ 28,023 (4)$(1,167) (1) $ 25,315 (3) $ 40,116
Year Ended June 30, 2000
Allowance for
doubtful accounts $ 8,732 $ 6,902 $ (394)(1)$ 3,480 (2)$ 11,760
Inventory reserves $ 40,116 $ 32,611 (4) $ 775 (1)$ 33,278 (3)$ 40,224
Year Ended June 30, 2001
Allowance for
doubtful accounts $ 11,760 $ 2,721 $ (824) (1)$ 2,200 (2)$ 11,457
Inventory reserves $ 40,224 $ 18,416 (4) $(2,268) (1)$ 17,737 (3)$ 38,635
(1) Net effect of acquisitions, dispositions and foreign currency translation.
(2) Deductions for accounts receivable written off net of recoveries.
(3) Deductions for scrapping and markdowns.
(4) Includes net change in intercompany profit elimination.
37
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38
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, November 9, 1993 and on
December 14, 2000 ................................... 49
3.2,4.5 By-Laws of Harman International Industries,
Incorporated, as amended December 13, 1999. (Filed as
Exhibit 3.2,4.5 to the Annual Report on Form 10-K for
the fiscal year ended June 30, 2000 (File No. 1-9764),
and hereby incorporated by reference) ................ IBR
4.2 Rights Agreement (including a Form of Certificate of
Designation of Series A Junior Participating Preferred
Stock as Exhibit A thereto, a Form Right Certificate
as Exhibit B thereto and a Summary of Rights to
Purchase of Preferred Stock as Exhibit C thereto)
(Incorporated by reference to the Form 8-A filed by
the Company on December 16, 1999) .................... IBR
39
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
4.3 Certificate of Designation of Series A Junior
Participating Preferred Stock of Harman
International Industries, Incorporated, dated
January 11, 2000. (Filed as Exhibit 4.3 to the Annual
Report on Form 10-K for the fiscal year ended June
30, 2000 (File No. 1-9764), 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
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
40
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, by and
between Harman International Business Campus
Joint Venture and Harman Electronics, Inc. (Filed
as Exhibit 10.23 to the Annual Report on Form
10-K for the fiscal year ended June 30, 1988
(File No. 0-15147), and hereby incorporated by
reference) ........................................... IBR
10.26 Harman International Industries, Incorporated
Retirement Savings Plan, Amended and Restated
effective as of June 27, 2000 ........................ 106
10.27 Amended and Restated Harman International
Industries, Incorporated Supplemental Executive
Retirement Plan dated October 1, 1999. (Filed as
Exhibit 10.27 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 2000 (File No.
1-9764), 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
41
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.40 Harman International Industries, Incorporated 1992
Incentive Plan, as amended. (Filed as Exhibit B to
the Company's Definitive Proxy Statement filed on
September 15, 1999 (File No. 1-9764), 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, 2000 (File No. 1-9764), 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, 2000
(File No. 1-9764), and 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, 2000 (File No. 1-9764), 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, 2000 (File No.
1-9764), and hereby incorporated by reference) ...... IBR
10.45 Harman International Industries, Inc. Deferred
Compensation Plan, effective June 1, 1997. (Filed on
Form S-8 Registration Statement on June 9, 1997 (Reg.
No. 333-28793), and hereby incorporated by reference). IBR
42
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.46 First Amendment to Harman International Industries,
Inc. Deferred Compensation Plan dated October 1,
1999. (Filed as Exhibit 10.46 to the Annual Report
on Form 10-K for the fiscal year ended June 30,
2000 (File No. 1-9764), 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. 1-9764), and hereby incorporated by
reference) .......................................... IBR
10.54 First Amendment dated February 15, 1995, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994. (Filed as Exhibit 10.54
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1995 (File No. 1-9764), 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. 1-9764), and
hereby incorporated by reference) ................... IBR
43
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.57 First Amendment to the Lease Agreement by and
between Harman International Business Campus
Joint Venture and Harman Electronics, Inc. dated
October 1995. (Filed as Exhibit 10.57 to the Annual
Report on Form 10-K for the fiscal year ended
June 30, 1996 (File No. 1-9764), and hereby
incorporated by reference) .......................... IBR
10.58 First Amendment to the Lease Agreement by and
between Harman International Business Campus
Joint Venture and JBL, Inc. dated October 1995.
(Filed as Exhibit 10.58 to the Annual Report on
Form 10-K for the fiscal year ended June 30, 1996
(File No. 1-9764), and hereby incorporated by
reference) .......................................... IBR
10.59 Fourth Amendment dated June 6, 1997, to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994. (Filed as Exhibit 10.59
to the Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (File No. 1-9764),
and hereby incorporated by reference) ............... IBR
10.61 Amended and Restated Credit Agreement, dated
July 5, 2000, among Harman International
Industries, Incorporated, Becker Holding GmbH,
The Several Lenders from Time to Time Party
Thereto and Commerzbank Aktiengesellschaft. (Filed
As Exhibit 10.61 to the Annual Report on Form 10-K
for the fiscal year ended June 30, 2000 (File No.
1-9764), and hereby incorporated by reference) ...... IBR
10.65 Employment Agreement between the Company and
William Palin dated April 4, 2001. (Filed as
Exhibit 10.69 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001 (File No.
1-9764), and hereby incorporated by reference) ...... IBR
44
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.66 Form of Non-Qualified Stock Option Agreement
between the Company and certain executive officers
of the Company dated August 11, 1998. (Filed as
Exhibit 10.66 to the Annual Report on Form 10-K
for the year ended June 30, 1999 (File No.
1-9764), and hereby incorporated by reference) ...... IBR
10.67 Equipment Financing Agreement between the
Company and State Street Bank and Trust dated
September 30, 1999. (Filed as Exhibit 10.67
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No.
1-9764), and hereby incorporated by reference) ...... IBR
10.68 Participation Agreement among the Company,
State Street Bank and Trust, Four Winds Funding
Corporation, Commerzbank, Bank of Tokyo -
Mitsubishi Trust Company and BTM Capital
dated September 30, 1999. (Filed as Exhibit 10.68
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 (File No.
1-9764), and hereby incorporated by reference) ..... IBR
10.69 Harman International Industries, Incorporated,
Key Executive Officers Incentive Plan. (Filed as
Exhibit A to the Definitive Proxy Statement on
Form 14-A for the year ended June 30, 2000
(File No. 1-9764), and hereby incorporated
by reference) ...................................... IBR
10.70 Fifth Amendment dated July 17, 2000 to the
Multi-Currency, Multi-Option Credit Agreement
dated September 30, 1994. (Filed as Exhibit
10.70 to the Annual Report on Form 10-K for the
year ended June 30, 2000 (File No. 1-9764),
and hereby incorporated by reference) .............. IBR
45
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
10.71 Form of Severance Agreement between the
Company and each of Sidney Harman, Bernard Girod,
Gregory Stapleton and Frank Meredith. (Filed as
Exhibit 10.71 to the Annual Report on Form
10-K for the year ended June 30, 2000
(File No. 1-9764), and hereby incorporated
by reference) ..................................... IBR
10.72 Benefit Agreement under the Supplemental
Executive Retirement Plan between Bernard A.
Girod and Harman International Industries,
Inc., dated June 22, 2001. (Filed as Exhibit
10.72 to the Annual Report on Form 10-K for the
year ended June 30, 2000 (File No. 1-9764),
and hereby incorporated by reference) ............. IBR
10.73 Benefit Agreement under the Supplemental
Executive Retirement Plan between Gregory
Stapleton and Harman International Industries,
Inc., dated June 20, 2001. (Filed as Exhibit
10.73 to the Annual Report on Form 10-K for the
year ended June 30, 2000 (File No. 1-9764),
and hereby incorporated by reference) ............. IBR
10.74 Benefit Agreement under the Supplemental
Executive Retirement Plan between Frank
Meredith and Harman International Industries,
Inc., dated June 21, 2000. (Filed as Exhibit
10.74 to the Annual Report on Form 10-K for the
year ended June 30, 2000 (File No. 1-9764),
and hereby incorporated by reference) ............. IBR
13.1 Pages 17 through inside back cover of Harman
International Industries, Incorporated Annual
Report to Shareholders for the fiscal year ended
June 30, 2001 ...................................... 130
46
INDEX TO EXHIBITS (cont.)
Exhibit Page
No. Description No.
21.1 Subsidiaries of the Company ........................ 158
23.1 Consent of Independent Auditors .................... 164
47
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48
EXHIBIT 3.1, 4.1
49
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50
EXHIBIT 10.26
73
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74
EXHIBIT 13.1
130
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131
EXHIBIT 21.1
158
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159
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------------------------------ ----------------------------
AKG Acoustics GmbH Republic of Austria
Audax Industries SNC France
Becker of North America, Inc. Delaware
Becker Service und Verwaltungs GmbH Germany
BSS Audio United Kingdom
Crown Audio, Inc. Delaware
Becker Automotive (Pty) Ltd. South Africa
Harman Audio de Mexico S.A. de C.V. Mexico
Harman de Mexico S.A. de C.V. Mexico
Harman Audio Outlet, Inc. Delaware
Harman Becker Automotive Systems Germany
(Becker Division) GmbH
Harman Becker Automotive Systems Germany
Holding GmbH
Harman Becker Automotive Systems Delaware
(Kentucky), Inc.
Harman Becker Automotive Systems Delaware
(Wisconsin), Inc.
Harman Becker Automotive Systems Germany
(Straubing Division) GmbH
Harman Becker Automotive Systems, Inc. Delaware
160
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------------------------ ------------------------
Harman Becker Automotive Systems KFT Hungary
Harman Becker Automotive Systems S.A. de C.V. Mexico
Harman Belgium N.V. Kingdom of Belgium
Harman Consumer Manufacturing A/S Denmark
Harman Consumer Nederland B.V. Netherlands
Harman Consumer International SNC France
Harman Enterprises, Inc. Delaware
Harman France SNC France
Harman Holding A/S Denmark
Harman Industries SNC France
Harman International
Industries Limited United Kingdom
Harman International Singapore Pte. Ltd. Singapore
Harman Investment Company, Inc. Delaware
Harman-Kardon, Incorporated Delaware
Harman Music Group, Incorporated Delaware
Harman Pro GmbH Germany
Harman Pro North America, Inc. Delaware
Harman (Suzhou) Electronics Co. Ltd. China
161
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
LIST OF SUBSIDIARIES
Subsidiary Jurisdiction
------------------------- -----------------------
Harman UK Limited United Kingdom
Infinity Systems, Inc. California
Innovative Systems GmbH Navigation-Multimedia Germany
JBL Incorporated Delaware
Lexicon, Incorporated Massachusetts
Madrigal Audio Laboratories, Inc. Delaware
Soundcraft Electronics United Kingdom
Studer Austria GmbH Austria
Studer USA, Inc. Delaware
Studer Canada Limited Canada
Studer Deutschland GmbH Germany
Studer Digitec S.A. France
Studer Japan Ltd. Japan
Studer Professional Audio AG Switzerland
Studer U.K. United Kingdom
162
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163
EXHIBIT 23.1
164
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165
CONSENT OF INDEPENDENT AUDITOR
---------------------------------------------------
The Board of Directors
Harman International Industries, Incorporated:
We consent to incorporation by reference in the Registration Statements
Nos. 33-20559, 33-28973, 33-36388, 33-60234, 33-60236, 33-59605, 333-
02197, 333-28793 and 333-32673 on Form S-8 and 333-21021 on Form S-
3 of Harman International Industries, Incorporated of our reports
dated August 10, 2001, relating to the consolidated balance sheets
of Harman International Industries, Incorporated and subsidiaries as
of June 30, 2001 and 2000, and the related consolidated statements of
operations, cash flows and shareholders' equity and related schedule
for each of the years in the three year period ended June 30, 2001,
which reports appear in the June 30, 2001 annual report on Form
10-K of Harman International Industries, Incorporated.
/s/ KPMG LLP
Los Angeles, California
September 14, 2001
166
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167