10-K405 1 0001.txt Securities and Exchange Commission Washington, D.C. 20549 Form 10-K Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended June 30, 2000 Commission file number 1-9764 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED (Exact name of Registrant as specified in its charter) Delaware 11-2534306 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1101 Pennsylvania Ave., N.W., Ste. 1010, Washington, D.C. 20004 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (202) 393-1101 Securities registered pursuant Name of each Exchange on to section 12(b) of the Act: which registered: Common Stock, par value $.01 per share New York Stock (Title of class) Exchange, Inc. Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No. The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of August 28, 2000, was $1,172,395,623. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 16,218,782 shares of Common Stock, par value $.01 per share, as of August 28, 2000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended June 30, 2000, are incorporated by reference in Part I, Item 1, and Part II, Items 5, 7 and 8. Portions of the Registrant's definitive Proxy Statement relating to the 2000 Annual Meeting of Stockholders are incorporated by reference in Part III, Items 10 (as related to Directors), 11, 12, and 13. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Page 1 of 311 THIS PAGE LEFT BLANK INTENTIONALLY 2 TABLE OF CONTENTS Page PART I Item 1. Business...................................... 5 Item 2. Properties.................................... 24 Item 3. Legal Proceedings............................. 25 Item 4. Submission of Matters to a Vote of Security Holders.......................... 26 Executive Officers of the Registrant...... 26 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................................... 28 Item 6. Selected Financial Data....................... 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 29 Item 7A. Quantitative and Qualitative Disclosures about Market Risk........... 29 Item 8. Consolidated Financial Statements and Supplementary Data.................... 30 Item 9. Disagreements on Accounting and Financial Disclosure..................... 30 PART III Item 10. Directors and Executive Officers of the Registrant.......................... 31 Item 11. Executive Compensation........................ 31 Item 12. Security Ownership of Certain Beneficial Owners and Management.31 Item 13. Certain Relationships and Related Transactions............................ 31 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.31 List of Financial Statements and Financial Statement Schedules............ 33 Independent Auditor's Report............. 34 Index to Exhibits........................ 37 3 THIS PAGE LEFT BLANK INTENTIONALLY 4 PART I ITEM 1. BUSINESS General Business Harman International Industries, Incorporated (together with its subsidiaries, "Harman" or the "Company"), a Delaware corporation formed in 1980, is a worldwide leader in the manufacture of high-quality high-fidelity audio products targeted at the consumer and professional audio markets. For almost 50 years, the Company and its predecessors have been leaders and innovators in creating loudspeakers and electronic audio products that deliver superior sound. The Company believes that its JBL, Mark Levinson, Infinity and Harman Kardon brand names are well- known worldwide for premium quality and performance. The Company has developed, internally and through a series of strategic acquisitions, a broad range of product offerings sold under renowned brand names in its principal markets. The objective of the Company's development efforts has been to secure engineering, manufacturing and marketing leadership and to strengthen the Company's ability to provide total audio system solutions to its customers. The Company's businesses are organized by the end-user markets they serve. The Consumer Systems Group manufactures loudspeakers and electronics for high fidelity audio reproduction in the home, with computers and in the car. The Professional Group manufactures loudspeakers and electronics used by audio professionals in concert hall, recording, broadcast and cinema applications. Harman's primary manufacturing facilities are located in California, Indiana, Utah, Germany, the United Kingdom, Denmark, Mexico, France, Austria and Hungary. 5 Consumer Systems Group The Consumer Systems Group manufactures loudspeakers and electronics for high fidelity audio reproduction in the home, with computers and in the car. These products are marketed under brand names including JBL, Infinity, Harman Kardon, Mark Levinson, Proceed, Revel and AudioAccess. The Company has the preeminent portfolio of brand names and range of product offerings in the consumer audio market. The JBL, Infinity and Harman Kardon brands are recognized throughout the world for superior sound quality and good value. High-end products bearing the Mark Levinson, Proceed and Revel brands are acclaimed for their superior build quality and state-of-the-art sound reproduction. The Consumer Systems Group offers premium, branded audio systems to retail automobile purchasers through OEM supply agreements with DaimlerChrysler, BMW, Toyota, Mitsubishi, Porsche, Saab, Peugeot and Ferrari, complemented by non-branded loudspeaker supply agreements with other automakers including Audi, Volvo, VW, Ford, Renault and Fiat. The Company's largest automotive OEM customer, DaimlerChrysler, offers Infinity branded audio systems in the majority of its Chrysler, Dodge and Plymouth car, truck and sport-utility vehicle platforms, and offers Becker head units and navigation systems, as well as non-branded loudspeaker systems manufactured by Harman Audio Electronic Systems, in a substantial number of its Mercedes Benz automobiles. Becker also supplies head units to BMW and Porsche. Toyota offers JBL branded audio systems in most of its models, and beginning in model year 2001 added our high-end Mark Levinson audio systems in their Lexus line. The loss of, or a material decrease or delay in purchasing the Company's products by, any of the Company's significant customers could have a material adverse effect on the results of operations of the Company. Sales of the Company's audio products through the automakers are dependent on automobile industry sales and automobile purchasers' willingness to pay for the option of a premium branded automotive audio system. The Consumer Systems Group offers branded audio systems to personal computer users through OEM supply agreements with Apple, Dell and Compaq. These audio systems provide high-quality sound and thus 6 enhance the appeal and capability of the personal computer as an entertainment device. The JBL, Infinity and Harman Kardon brand names are all employed in this market. The Company believes the maturation and broadened acceptance of DVD and digital television will provide growth opportunities for its consumer brands. In addition to the contribution of its new Proceed and Harman Kardon DVD machines, the Company expects DVD and digital television to stimulate loudspeaker sales due to increased customer traffic in audio/video dealers' stores and the improved audio quality potential of DVD and digital television compared to the current analog audio/video and digital audio technologies. Sales expectations are dependent, to a substantial extent, on discretionary spending by consumers, which may be affected by economic conditions. The Company believes excellent growth opportunities are available in the automotive OEM channel through higher penetration levels within existing models, increases in per-vehicle content through the provision of complete systems, increases in the number of models offering the Company's audio systems and supply agreements with additional automakers. Professional Group The Company's Professional Group manufactures professional audio equipment, including loudspeakers, amplifiers, mixing consoles, signal processing equipment, microphones and effects devices. Such products are marketed on a worldwide basis under brand names including JBL Professional, Soundcraft, Allen & Heath, Crown, DOD, Digitech, Lexicon, AKG, dbx, BSS, AMEK, Spirit and Studer. The Professional Group is uniquely equipped to provide turnkey systems solutions for professional audio applications that offer the customer improved performance, ease of installation and reduced cost. The principal market segments served by the Professional Group are sound reinforcement, broadcast and recording and music instrument support. JBL Professional is a leader in the vibrant cinema market, serving customers such as Cineplex Odeon and United Artists Theaters. Stadiums, concert halls, houses of worship and major concert tours rely on sound reinforcement products from the Professional Group, such as 7 JBL loudspeakers, JBL, Crown and BSS amplifiers, AKG microphones, Lexicon, DOD and dbx signal processing equipment, and Soundcraft, AMEK and Allen & Heath mixing consoles, to produce top quality sound. Customers in the recording and broadcast market include radio and television stations and recording studios. Customers in these markets, including AMS Westfunk Radio, Abbey Road Studios and The Hit Factory, are primarily served by Studer, with additional offerings from JBL, Lexicon, Soundcraft and AKG. JBL, Crown, DOD, Digitech and Spirit serve the music instrument support segment of the professional audio market. JBL manufactures and markets loudspeakers, monitors and amplifiers. Crown manufactures professional amplifiers. DOD and Digitech sell sound effects and other signal processors, portable mixing consoles and guitar amplifiers. Spirit markets portable mixing consoles. Music instrument support products are sold through music retail stores such as Guitar Center and Sam Ash. AKG serves certain OEM markets in addition to its professional audio activities. AKG's expertise in the design and manufacture of miniature transducers for special microphone applications has led to market opportunities in the mobile telecommunications equipment and hands-free automotive communications markets. AKG manufactures the earpiece and mouthpiece transducer capsules for mobile telephone manufacturers including Nokia, Kyocera, Ericsson and Sony. AKG also manufactures miniature transducers for hands-free communications applications in Mercedes Benz automobiles. And, beginning in model year 2001, AKG will supply hands-free microphones for the General Motors OnStar system. Operating and Geographic Segment Information Financial information about operating and geographic segments required to be included hereunder is incorporated by reference to Note 10 of Notes to Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for the fiscal year ended June 30, 2000. 8 Description of Business The Company's business is conducted through its wholly owned subsidiaries which include:
Name Principal products ---------------------------------- --------------------------------- AKG Acoustics GmbH Professional electronics Audax Industries S.N.C. Consumer home and automotive loudspeakers Audio Latina S.A. de C.V. Automotive OEM loudspeakers Becker GmbH Automotive OEM and automotive aftermarket electronics Crown Audio, Inc. Professional electronics Harman Audio Electronic Systems GmbH Automotive OEM loudspeakers Harman Audio Electronic Systems KFT. Automotive OEM loudspeakers Harman Music Group, Incorporated Professional electronics Harman Consumer Manufacturing A/S Components, cabinets and loudspeaker systems Harman de Mexico, S.A. de C.V. Loudspeaker cabinets Harman International Industries, Automotive OEM loudspeakers and Limited electronics and professional audio products Harman-Kardon, Incorporated Consumer home and automotive electronics Harman-Motive, Inc. OEM loudspeakers and electronics Harman Wisconsin, Inc. OEM loudspeakers and electronics Infinity Systems, Inc. Consumer home and automotive loudspeakers and electronics
9
Name Principal products ---------------------------------- --------------------------------- JBL Incorporated Consumer, professional and automotive loudspeakers and electronics Lexicon, Incorporated Professional electronics Madrigal Audio Laboratories, Inc. Consumer electronics Studer Professional Audio AG Professional electronics
Markets for Products Based on its knowledge of the audio industry, the Company believes that the consumer and professional audio markets have grown in recent years. In 1997 and 1998, the consumer and professional audio markets slowed somewhat due to uncertainty associated with technology transitions and weakness in Asia. The transition from analog to digital audio technology has changed music recording and reproduction and has led to the development of a new generation of consumer and professional audio products, including software-driven audio systems with integrated digital architecture that permits communication among all components. Although this transition has unsettled markets due to customer confusion and hesitancy, management believes that the new digital technologies and standards are stabilizing and Harman's market position will help the Company to capitalize on the release of pent-up demand as confusion and hesitancy abate. Sales growth in fiscal year 2000 provided evidence of this anticipated trend. Multimedia audio systems has been a growth market for Harman. The Company has developed branded audio systems for personal computers marketed by Apple, Dell, Compaq and IBM. The Company also produces branded aftermarket audio systems for multimedia applications. The Company believes that the number of personal computers equipped with multimedia capabilities will continue to increase. 10 We believe significant growth opportunities exist within the automotive audio market to increase sales by increasing product penetration in platforms currently supplied on an OEM basis, increasing per-vehicle content through the provision of systems with additional functions, expanding the number of automobile models offering our systems and adding new OEM partners. Becker's radio and navigation system products complement the Company's JBL, Infinity and Harman Kardon automotive audio programs and enable the Company to offer fully- integrated multimedia systems through its automobile manufacturing partners. The Company has received commitments for integrated systems on future models from Mercedes, Audi, BMW, Porsche and Renault, and we believe that these will be followed by commitments from other of the world's leading automakers. The professional audio markets served by the Company include sound reinforcement, broadcast and recording and music instrument support. The sound reinforcement market includes theaters (cinema and live performance), stadiums, concert halls, and houses of worship. The broadcast and recording market includes radio and television stations and recording studios. The Company serves the music instrument support market primarily through the provision of portable digital signal processing components, guitar amplifiers and compact, portable loudspeaker systems used by touring performers. Much of the professional audio market is undergoing a transition from analog to digital audio technology, and the Company is well-equipped for this evolutionary period with the engineering and marketing expertise of JBL, Crown, Soundcraft, Studer, Lexicon, Harman Music Group and AKG. Products The Company designs, manufactures and markets worldwide a broad range of high-quality, high-fidelity audio loudspeakers and electronics for the consumer audio market ( in the home, in the car and with computers) and the professional audio market (sound reinforcement, broadcast and recording, and musical instrument support). CONSUMER PRODUCTS. The Company manufactures loudspeakers under the JBL, Infinity and Revel brand names for the consumer market. These loudspeaker lines include models designed for two-channel stereo and multi-channel surround sound applications in the home in a wide 11 range of choices, including floorstanding, bookshelf, powered, low frequency, in-wall, wireless and all-weather, in styles and finishes ranging from high gloss lacquers to genuine wood veneers. The JBL and Infinity product lines also include car loudspeakers, amplifiers and crossovers. The Company manufactures a broad range of consumer audio electronics. The Company's consumer electronics products facilitate the marketing of complete home, car and multimedia systems incorporating the Company's loudspeakers, such as surround sound home theater installations. The Company's Harman Kardon home electronics line includes audio-video receivers featuring Dolby Digital and DTS surround sound processing capabilities and multi-channel amplifiers. A five-disc DVD machine and a CD recorder introduced in fiscal 2000 reflect Harman Kardon's commitment to deliver state-of-the-art audio reproduction equipment to its customers. Madrigal designs and manufactures high-end electronics, including amplifiers, pre-amplifiers, digital signal processors and compact disc transports and players and a new DVD transport. Madrigal markets its products under the renowned Mark Levinson and Proceed brand names. The AudioAccess product line is also part of the Madrigal Group. AudioAccess products provide in-home, multi-source, multi-zone sound system controls, serving home theater and multi-room applications. JBL, Infinity and Harman Kardon branded premium audio systems are offered with personal computers manufactured by Compaq, IBM and Dell and Apple, respectively. Harman participates in this market through design and brand name licensing as well as direct sourcing. These audio systems provide high-quality sound and thus enhance the appeal and capability of the personal computer as an entertainment device. Harman is a leading global manufacturer of premium branded automotive audio systems offered by automakers as an option to their customers. In its offering of loudspeakers, head units, amplifiers and multimedia systems through the automobile manufacturers, the Company leverages its expertise in the design and manufacture of high-quality loudspeakers, radios and other electronics, as well as the reputation for quality associated with its JBL, Infinity, Harman Kardon, Mark Levinson and Becker brand names. Harman engineers are engaged by the automobile manufacturers early in the cabin design process to develop systems that optimize acoustic performance and minimize weight and space requirements. Harman has developed the technical competencies to offer 12 multimedia systems to automobile manufacturers incorporating audio, video, navigation, telematics, internet access, security and cabin quieting. Today, the Company primarily supplies car audio, video and navigation systems products separately. However, the Company has received commitments for integrated systems on year 2002 and 2003 models from Mercedes, Audi, BMW, Renault and Porsche in Europe. We believe that this could be followed by integrated system commitments from other of the world's leading automakers. The Company's Infinity-branded car audio systems are offered by DaimlerChrysler's Chrysler, Dodge, Plymouth and Jeep lines and by Mitsubishi. JBL-branded audio systems are offered by Toyota, Peugeot and Hyundai. Harman Kardon systems are offered by BMW, Jaguar and Saab. Mark Levinson systems are now offered by Lexus, beginning in model year 2001. Becker supplies head units, navigation systems and other electronics to DaimlerChrysler, BMW and Porsche. PROFESSIONAL PRODUCTS. The Company designs, manufactures and markets products in all significant segments of the professional audio market, offering complete systems solutions to professional installations and users around the world. The Professional Group includes many of the most respected names in the industry including JBL Professional, Soundcraft, Allen & Heath, Crown, DOD, Digitech, Lexicon, AKG, BSS, dbx, AMEK and Studer. Professional installations of Harman products include stadiums, opera houses, concert halls, recording studios, broadcast studios, theaters, houses of worship, cinemas and touring performing artists. Sound systems incorporating components manufactured by JBL, Crown, Lexicon, AKG, Studer and Soundcraft are in use around the world in such places as the Experience Music Project in Seattle, the Great Hall of the People in Beijing, China, the Royal Danish Theater in Copenhagen and Abbey Road Studio and the Millennium Dome in England. Harman professional equipment is used on tour by performing artists throughout the world. The professional market has advanced rapidly and is heavily involved in digital technology. Harman's Professional Group is a leader in this market. The Professional Group derives value from its ability to share research and development, engineering talent and other digital resources among its divisions. Soundcraft, Lexicon, Studer and Harman Music Group each have substantial digital resources and work together to achieve common goals by sharing resources and technical expertise. 13 The Professional Group's loudspeaker products are well-known for high quality and superior sound. The JBL Professional portfolio of products includes studio monitors, loudspeaker systems, power amplifiers, sound reinforcement systems, bi-radial horns, theater systems, surround systems and industrial loudspeakers. The Company is a leading manufacturer and marketer of audio electronics equipment for professional use. Such products are marketed on a worldwide basis under various trade names, including Soundcraft, Allen & Heath, Crown, DOD, Digitech, Lexicon, AMEK, AKG, BSS, dbx and Studer, and are often sold in conjunction with the Company's professional loudspeakers. The AMEK and Soundcraft lines of high-quality sound mixing consoles extend from automated multi-track consoles for master recording studios to compact professional mixers for personal recording and home studios. Soundcraft and AMEK products span four main market areas: sound reinforcement, recording studios, broadcast studios and musical instrument dealers. Allen & Heath manufactures cost effective mixing consoles for use in broadcast studios and for use on stage in smaller venues. The Harman Music Group product line is marketed under the DOD, dbx, Digitech and Audio Logic brand names, and is sold primarily to professional audio and musical instrument dealers. Harman Music Group products include signal processing equipment, equalizers, mixers and special effects devices. Lexicon is a leader in the design, manufacture and marketing of high- quality digital audio signal processing equipment for professional use in the audio, video, musical entertainment and broadcasting markets worldwide. Lexicon digital signal processing products are used in live sound applications as well as recording studios to produce sound effects and refine final mixes. Additionally, Lexicon manufactures and markets a series of high-end home theater surround sound processors and amplifiers. AKG is a leading manufacturer of high-quality microphones and headphones. The AKG product line includes microphones, audio headphones, surround-sound headphones and other professional audio products marketed under the AKG brand name. AKG has leveraged its engineering and manufacturing expertise to enter the telecommunications market, supplying miniature transducers to mobile phone makers Nokia, 14 Ericsson, Kyocera and Sony, as well as the automotive hands-free communications market, supplying microphone arrays to Mercedes Benz and General Motors. Crown, acquired in March 2000, is a leading professional amplifier manufacturer based in Elkhart, Indiana. The addition of Crown to our professional audio portfolio has enhanced our ability to provide complete systems solutions to the professional audio market. Studer Professional Audio is recognized for the high quality and reliability of its professional products, which include analog and digital tape recorders, mixing consoles, switching systems, digital audio workstations, professional compact disc players and recorders and turnkey broadcasting studio installations. Manufacturing The Company believes that its manufacturing capabilities are essential to maintaining and improving product quality and performance. The Company manufactures most of the products that it sells other than certain Harman Kardon electronic components. The Company also produces some products for other loudspeaker companies on an OEM basis. The Company's loudspeaker manufacturing capabilities include the production of its own high-gloss lacquer and wooden veneer loudspeaker enclosures, wire milling, voice coil winding and the use of computer controlled lathes and other machine tools to produce its many precision components. The Company's high degree of manufacturing integration enables it to maintain consistent quality levels, resulting in reliable, high- performance products. The Company capitalizes on opportunities to transfer technology and materials developments across product lines to maximize the utility of engineering, design, development and procurement resources. The Company's principal domestic manufacturing facility in Northridge, California, manufactures JBL and Infinity loudspeakers and audio electronics for home, car and professional applications. The Company manufactures car loudspeakers and assembles car sound systems in Martinsville, Indiana. Harman Music Group manufactures professional electronics products at its facility in Salt Lake City, Utah. 15 Lexicon manufactures professional electronics products at its Bedford, Massachusetts facility. Madrigal manufactures consumer electronics at its Middletown, Connecticut facility. Crown International manufactures professional amplifiers at its Elkhart, Indiana facility. During fiscal year 2000, the Company completed construction of new facilities in Kentucky, to manufacture audio systems for Toyota, and in Tijuana, Mexico, to manufacture loudspeaker cabinets. These facilities are now in production. The Company has established a strong manufacturing presence in Europe to better respond to customer demands in that market. European automotive loudspeaker and electronics manufacturing includes the production of loudspeakers and amplifiers in the United Kingdom, Germany, Sweden and Hungary, and car radios, navigation systems, amplifiers and other electronics at Becker in Germany. Audax Industries SNC ("Audax"), a manufacturer of high-quality, high-performance tweeters, woofers and car loudspeaker systems, is located in France, and the Company's Harman Consumer Manufacturing A/S subsidiary manufactures cabinet enclosures and assembles complete JBL and Infinity loudspeakers in Denmark. European professional electronics manufacturing includes Soundcraft in the United Kingdom (mixing consoles), Studer in Switzerland (professional recording and broadcast equipment) and AKG in Austria (microphones and headphones). Marketing and Distribution The Company's products are sold domestically and internationally in the consumer and professional audio markets. The consumer market for audio entertainment systems consists of car, home and multimedia. The professional market includes a wide range of professional uses, including live music applications, recording facilities, entertainment venues such as concert halls, stadiums and movie theaters, broadcast facilities and music instrument support. The Company primarily markets its home and automotive aftermarket audio products through audio and audio-video specialty stores and certain audio-video chain stores, such as Circuit City and Best Buy in North 16 America and MediaMarkt in Europe. The Company enjoys broad distribution of its products and selects dealers who emphasize high- quality audio systems and who are knowledgeable about the features and capabilities of audio products. Sales and marketing activities for these products include dealer education programs, point-of-sale displays, participation in consumer audio trade shows, comprehensive product literature and mass-media advertising. The Company's Consumer Systems Group markets its branded OEM audio products through automobile and personal computer manufacturers and dealers. Automobile manufacturers offering Harman systems include DaimlerChrysler, Toyota, BMW, Ford, Mitsubishi, Volkswagen, Volvo, Audi, Jaguar, Porsche, Range Rover and Saab. Personal computer OEM customers include Apple, Dell, Compaq and IBM. Sales and marketing activities for these products include dealer education programs, point-of- sale displays, participation in consumer audio trade shows and mass- media advertising. The Company's professional audio products are marketed worldwide through professional sound equipment dealers, including sound system contractors that directly assist major users. The Company's sales and marketing group for its professional products is separate and independent from its consumer product sales group. Professional audio sales and marketing activities include dealer education programs, point-of-sale displays, participation in professional audio trade shows and professional audio media advertising. Suppliers Products designed by Harman Kardon are manufactured by several suppliers. In fiscal 1998, Harman Kardon's largest supplier, based in Korea, experienced difficulties associated with the crisis in Asia. Production delays at this supplier negatively affected Harman Kardon's results. Harman Kardon terminated its relationship with this supplier and other sources were secured to manufacture Harman Kardon products. The loss of any of Harman Kardon's primary suppliers would not have a material impact on the consolidated earnings or consolidated financial position of the Company. 17 Northridge Manufacturing relies on several suppliers for a large percentage of certain parts, such as wood, speaker grilles, plastic molded parts and magnets. The loss of any one of these suppliers would not have a material impact on the consolidated earnings or consolidated financial position of the Company. The Company utilizes third-party suppliers to manufacture personal computer audio systems sold to Apple, Dell, Compaq and IBM bearing the JBL, Harman Kardon and Infinity brand names. Production difficulties at these third-party suppliers could have a material impact on the consolidated earnings of the Company. The Company uses externally-sourced microchips in many of its products. This industry has experienced capacity constraints recently. A significant disruption in our microchip supply chain and an inability to obtain alternative sources would have a material impact on the consolidated sales and earnings of the Company. Trademarks and Patents The Company markets its products under numerous trademarks and logos, including JBL, Infinity, Harman Kardon, Citation, Concord, Crown, Audax, Becker, AMEK, Soundcraft, Spirit, DOD, DigiTech, Lexicon, AKG, Studer, BSS, Sound-Web, dbx, Allen & Heath, AudioAccess, Mark Levinson, Proceed, Revel, VMAx, EON, Harman, Control, Compositions, and C-Audio. These trademarks and logos are registered or otherwise protected in substantially all major industrialized countries. The Company's registrations cover use of its trademarks and logos in connection with various applicable products, such as loudspeakers, speaker systems, speaker system components and other electrical and electronic devices. As of June 30, 2000, the Company held approximately 373 United States and foreign patents covering various products, product designs and circuits, and had approximately 324 patent applications pending around the world. The Company vigorously protects and enforces its trademark and patent rights. 18 Seasonality The Company experiences seasonal fluctuations in sales and earnings. The first fiscal quarter is the weakest due to the automotive model changeovers and the July and August holidays in Europe. Variations in seasonal demands among end-user markets may cause operating results to vary from quarter to quarter. Customers Sales to DaimlerChrysler for fiscal year 2000 accounted for 22.3% of the Company's consolidated net sales. The loss of sales to DaimlerChrysler would have a material adverse impact on the consolidated sales, earnings and financial position of the Company. Backlog Orders Because the Company's practice is to maintain sufficient inventories of finished goods to fill orders promptly, the level of backlog is not considered to be an important index of future performance. The Company's backlog was approximately $20.9 million at June 30, 2000. Warranties Harman generally warrants its home products to be free from defects in materials and workmanship for a period ranging from 90 days to five years from the date of purchase, depending on the product. The warranty is a limited warranty, and it imposes certain shipping costs on the customer and excludes deficiencies in appearance except for those evident when the product is delivered. Harman dealers normally perform warranty service for loudspeakers in the field, using parts supplied on an exchange basis by the Company. Warranties in the international markets are generally similar to those in the domestic market, although claims arising under these warranties are the responsibility of the distributor. 19 Competition In general, the audio industry is fragmented and competitive with many manufacturers, large and small, domestic and international, offering audio products that vary widely in price and quality and are distributed through a variety of channels. Consumer products are offered through various channels including audio specialty stores, discount stores, department stores, mail order firms and internet merchants. Consumer products are also offered as OEM options on automobiles and personal computers through the automotive and computer dealer channels. Professional products are offered through music instrument retailers, professional audio dealers, contractors and installers and on a contract bid basis. The Company concentrates on the higher-quality, higher-priced segments of the audio market. The Company believes that it currently has a significant share of the consumer market for loudspeakers (home, automotive and computer), primarily as a result of the strength of its brand names. JBL and Infinity are two of the most recognized loudspeaker brands in the world. The development of our high-end loudspeaker brand, Revel, over the past few years, has extended our market position and complemented our Mark Levinson and Proceed high-end electronics lines. The Company competes based upon its strong brand names, the breadth of its product lines, and its comprehensive marketing, engineering and manufacturing resources. The Company's principal competitors in the consumer loudspeaker market include Bose, Boston Acoustics, B&W, KEF, Celestion, Paradigm, Klipsch, Cambridge SoundWorks and Polk Audio. Principal competitors in the high-end loudspeaker market include Wilson Audio, Snell and B&W. Competition in the consumer electronic components segment remains intense, with this market dominated by large Japanese competitors. The short life cycle of products and a need for continuous design and development efforts characterize this segment. The Company's competitive strategy is to compete in the upper segments of this market and to continue to emphasize the Company's ability to provide systems solutions to customers, including a combination of loudspeakers and electronics products, providing integrated surround sound and home theater systems. Principal electronics competitors for Harman Kardon include Sony, Denon, Onkyo, Nakamichi, Pioneer and Yamaha. The 20 Company competes in the high-end consumer electronics market with the Mark Levinson, Citation and Proceed brands. Principal competitors include Krell, McIntosh, Audio Research, Meridian, Linn and Accuphase. In the personal computer audio market, the Company's Harman Kardon, JBL and Infinity brand names are attached to the premium audio systems offered by Apple and Dell, Compaq and IBM, respectively. These audio systems are provided through licensing and sourcing arrangements. Principal competitors in this segment include Boston Acoustics, Creative Labs, Altec-Lansing and LabTec. In OEM automotive audio, the Company's principal competitors include Bose, Pioneer and Foster Electric in the loudspeaker systems segment and Alpine, Bosch, Panasonic, Siemens, Delphi, Visteon and Mannesman in the electronics segment. The Company is the only supplier of branded loudspeaker systems for Chrysler, Jeep and Mitsubishi automobiles in the United States, and also supplies branded loudspeaker systems to Toyota, BMW, Saab and Peugeot. The Company also supplies non-branded loudspeaker systems to Chrysler, Mercedes Benz, Volkswagen, Audi, Volvo, Ford of Europe and Fiat. The Company is a primary supplier of radio head units to Mercedes-Benz, BMW and Porsche, and also supplies TV tuners, navigation systems and other electronics to Mercedes-Benz, Porsche and Renault. The Company competes based upon the strength of its brand name recognition and the quality of its products together with its technical expertise in designing loudspeaker systems, electronics, navigation systems, man-machine interfaces and complete multimedia systems to fit the acoustic properties of each automobile model. The market for professional sound systems is highly competitive. The Company has historically held a leading market position in the professional loudspeaker market and has complemented its professional loudspeaker line by adding digital professional electronics products and broadcast and recording equipment. The Company competes using its ability to provide systems solutions to meet the complete audio requirements of its professional customers. Harman offers products for most professional audio applications. The Company competes in the sound reinforcement market with many of its brand names, including JBL Professional, AKG, Crown, Soundcraft, AMEK and BSS. Principal competitors in sound reinforcement include the Electro Voice division of Telex, Eastern Acoustic Works/Mackie, QSC, Sennheiser, Tannoy, Peavey, Shure, Audio Technica, Fender, Sony 21 and Yamaha. The Professional Group competes in the broadcast and recording areas with its Studer, AKG, Soundcraft, AMEK and Lexicon brands. Principal recording and broadcast competitors include Sony, Yamaha, Neve, Sennheiser, Denon, SSL, Shure, Tascam, Alesis and Audio Technica. In the Music Instrument area, competitors for the Company's JBL, DOD, Digitech, dbx, Lexicon, Allen & Heath and Spirit products include Yamaha, Peavey, Rane, Roland, Alesis, Marshall, Fender, Sony, Mackie and T.C. Electronics. The Professional Group also competes in the industrial and architectural sound market. Competitors within this market include Siemens, Peavey, Tannoy and Bose. Environmental Matters The Company is subject to various federal, state, local and international environmental laws and regulations, including those governing the use, discharge and disposal of hazardous materials. The Company's manufacturing facilities are believed to be in substantial compliance with current laws and regulations. The cost of compliance with current laws and regulations has not been, and is not expected to be, material. The Company has been named as a "potentially responsible party" with respect to the disposal of hazardous wastes at four hazardous waste sites. In addition, there are other sites to which the Company has sent hazardous wastes which the Company believes are currently under regulatory scrutiny. It is possible that additional environmental issues may arise in the future which the Company cannot now predict. Although ultimate liability cannot be determined with respect to the sites mentioned above, and applicable law provides that a potentially responsible party at any site may be held jointly and severally liable for the total cost of remediation, the Company believes, based upon internal investigations and information made available to the Company with regard to its potential liability at these sites, that its proportionate share of the costs related to the investigation and remedial work at these sites will not exceed $100,000. 22 Research, Development and Engineering The Company's expenditures for research, development and engineering were $76.2 million, $76.0 million and $65.9 million for the fiscal years ending June 30, 2000, 1999 and 1998, respectively. Number of Employees As of June 30, 2000, the Company had 9,807 full-time employees, including 3,839 domestic employees and 5,968 international employees, compared to 8,850 employees at June 30, 1999. The increase in headcount from June 30, 1999, to June 30, 2000, was primarily due to the acquisition of Crown International and increased engineering and manufacturing staffing in our European automotive electronics operations. Disclosures about Segments and Related Information Disclosures about segments and related information to be filed hereunder is incorporated by reference to Note 10 of Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Effects of Inflation and Exchange Rates) on pages 34 and 35 and 17 and 18, respectively, in the Company's Annual Report to Shareholders for the fiscal year ended June 30, 2000. Forward-Looking Statements Except for the historical information contained herein, the matters discussed herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including, without limitation, the effect of economic conditions, product demand, currency exchange rates, labor disputes, competitive products and other risks detailed herein and in the Company's other filings with the Securities and Exchange Commission. 23 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 742,000 Leased 94% JBL, Infinity, Harman Kardon, JBL Professional, Harman Motive Ittersbach, Germany 550,000 Owned 80% Becker 17,000 Leased 100% Worth-Schaitt, Germany 377,500 Owned 80% Becker Martinsville, Indiana 206,000 Owned 100% Harman Motive 40,000 Leased 100% Straubing, Germany 193,000 Owned 95% Harman Audio 37,000 Leased 100% Elec. Systems Elkhart, Indiana 222,700 Owned 100% Crown 7,000 Leased 70% Ringkobing, Denmark 190,000 Owned 90% Harman Consumer 16,000 Leased 90% Manufacturing A/S Tijuana, Mexico 194,000 Leased 100% JBL, Infinity Potters Bar, UK 160,000 Leased 100% Soundcraft, AMEK, BSS, C-Audio Chateau du Loir, France 151,000 Owned 100% Audax, JBL, Infinity, Harman Kardon
24
Square Owned or Percentage Location Footage Leased Utilization Division -------------------------- ---------- ---------- ------------- --------------------- Vienna, Austria 129,000 Leased 100% AKG Sandy, Utah 122,000 Leased 100% Digitech, DOD, dbx Juarez, Mexico 105,000 Leased 60% Audio Latina Bridgend, UK 101,000 Leased 100% Harman Motive Ltd
The company considers its properties to be suitable and adequate for its present needs. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in a lawsuit entitled Bose Corporation v. JBL, Inc., and Infinity Systems, Inc., United States District Court, District of Massachusetts. In this case Bose sued JBL and Infinity for infringement of a U.S. patent owned by Bose relating to the use of elliptically shaped ports in loudspeaker cabinets. On September 1, 2000, the court issued a judgement in favor of Bose in the amount of $5.7 million. In addition, the court issued a permanent injunction prohibiting JBL and Infinity from the manufacture and sale of loudspeakers in the United States utilizing plastic elliptical ports. Management believes the court erred in its ruling and intends to appeal this decision. Management believes that it will ultimately prevail upon appeal. There are various other legal claims pending against the Company, but in the opinion of management, liabilities, if any, arising from such claims will not have a material effect upon the consolidated financial condition or results of operations of the Company. 25 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT
Age at Name August 1, 2000 Position ---------------------- ---------------- --------------------------------------- Sidney Harman 81 Executive Chairman and Chairman of the Board of Directors Bernard A. Girod 58 Vice Chairman of the Board of Directors and Chief Executive Officer Gregory P. Stapleton 53 President, Chief Operating Officer and Director of the Company Frank Meredith 43 Executive Vice President and Chief Financial Officer William S. Palin 57 Vice President - Controller Sandra B. Robinson 41 Vice President - Financial Operations Edwin C. Summers 53 Vice President and General Counsel Floyd E. Toole 54 Vice President - Acoustics
Officers are elected annually by the Board of Directors and hold office at the pleasure of the Board of Directors until the next annual selection of officers or until their successors are elected and qualified. Sidney Harman, Ph.D., the Company's founder, was named Executive Chairman in July 2000. Dr. Harman has been Chairman of the Board, Chief Executive Officer and a Director of the Company since the Com- pany's founding in 1980. From 1977 to 1979, Dr. Harman was the Under Secretary of Commerce of the United States. From 1962 to 1977, Dr. Harman was an officer and director of the Predecessor of the Company. 26 Bernard A. Girod was named Vice Chairman and Chief Executive Officer in July 2000. Mr. Girod has been Chief Executive Officer since November 1998 and a Director of the Company since 1993. From March 1994 to November 1998, Mr. Girod served as President of the Company. From November 1992 to November 1998, Mr. Girod served as Secretary of the Company. From March 1993 to November 1998 Mr. Girod served as Chief Operating Officer of the Company. From September 1986 to August 1995, Mr. Girod served as Chief Financial Officer of the Company. From September 1979 to September 1986, Mr. Girod was the Vice President and General Manager of Permacel, a subsidiary of Avery Dennison and Vice President of Planning and Business Development for Avery Dennison. From 1977 to 1979, Mr. Girod was the Chief Financial Officer of the predecessor of the Company. Gregory P. Stapleton was named President and Chief Operating Officer in July 2000. Mr. Stapleton has been a Director of the Company since November 1997 and the Chief Operating Officer since November 1998. From October 1997 to November 1998, Mr. Stapleton served as President of the Harman OEM Group. Prior to his association with the Company, Mr. Stapleton was Senior Vice President of General Electric Venture Capital Corporation from January 1986 to September 1987, and was General Manager, Industrial Products Section, Factory Automation Products Division, of General Electric Corporation from October 1982 through December 1985. Frank Meredith was named Executive Vice President and Chief Financial Officer in July 2000. Mr. Meredith has been the Chief Financial Officer of the Company since February 1997 and Secretary of the Company since November 1998. Mr. Meredith served as Vice President, General Counsel and Assistant Secretary of the Company from July 1992 to June 1998. Prior to that time, Mr. Meredith held other positions within the Company since May 1985. Prior to joining the Company, Mr. Meredith was employed by the accounting firm Touche Ross & Co. William S. Palin has been Vice President - Controller of the Company since March 1994. Prior to joining the Company, Mr. Palin was a partner of MacHardy Palin & Co. from January 1982 to March 1994. From July 1978 to January 1982, Mr. Palin served as an officer of two of the Company's international subsidiaries. 27 Sandra B. Robinson has been Vice President - Financial Operations since November 1992. Prior to that time, Ms. Robinson was Director of Corporate Accounting and has been employed by the Company since December 1984. Edwin C. Summers has been Vice President and General Counsel of the Company since July 1998. Prior to that time, Mr. Summers was Vice President, General Counsel and Secretary of First Alliance Corporation from 1996. From 1991 to 1995, Mr. Summers was Senior Vice President, General Counsel and Secretary of Transamerica Finance Group. Floyd E. Toole, Ph.D., joined the Company as Vice President - Acoustics in November 1991. Prior to joining the Company, Dr. Toole spent 25 years, most recently as Senior Research Officer, with the National Research Council of Canada's Acoustics and Signal Processing Group, where he developed psychoacoustic-optimized techniques for improving loudspeaker performance. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by Part II, Item 5 is incorporated by reference to the Company's Annual Report to Shareholders for the fiscal year ended June 30, 2000 (Shareholder Information on page 38). 28 ITEM 6. SELECTED FINANCIAL DATA Five-Year Summary (in thousands, except per share data, for the fiscal years ended June 30)
2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ Net sales $1,677,939 $1,500,135 $1,513,255 $1,474,094 $1,361,595 Operating income 121,722 38,663 100,325 101,973 105,378 Income before taxes 102,829 14,447 75,707 77,901 75,024 Net income 72,838 11,723 50,243 54,832 52,042 Diluted EPS 4.13 0.65 2.67 2.90 3.09 Total assets 1,137,505 1,065,755 1,130,684 1,014,254 996,209 Total debt 277,324 311,575 333,640 306,150 287,401 Shareholders' equity 486,333 468,187 511,899 466,762 436,477 Dividends per share 0.20 0.20 0.20 0.20 0.20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by Part II, Item 7 is incorporated by reference to the Company's Annual Report to Shareholders for the fiscal year ended June 30, 2000 (Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 17 through 21). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Securities and Exchange Commission requires that registrants include information about potential effects of changes in interest rates and currency exchange rates in their financial statements. The qualitative information required by Part II, Item 7A is incorporated by reference to pages 21 and 36 of the Company's Annual Report to Shareholders for the 29 fiscal year ended June 30, 2000 (Effects of Inflation and Currency Exchange Rates and Footnote 13, Fair Value of Financial Instruments, respectively). The Company's exposure to interest rate changes is primarily related to its variable rate debt. To assess exposure to interest rate changes, the Company has performed a sensitivity analysis assuming a hypothetical 100 basis point increase in interest rates across all maturities. This analysis indicates that such market movements would reduce fiscal 2001 net income, based on June 2000 positions, by approximately $0.7 million. Based on June 1999 positions, the effect on fiscal 2000 net income of such an increase in interest rates was estimated to be $0.9 million. The Company and its subsidiaries' net unhedged exposure in assets and liabilities denominated in other than their relevant functional currency as of June 30, 2000 and 1999 was not material to the consolidated financial position of the Company. Actual gains and losses in the future may differ materially from the hypothetical gains and losses discussed above based on changes in the timing and amount of interest rate and foreign currency exchange rate movements and the Company's actual exposure and hedges. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Part II, Item 8 is incorporated by reference to the Company's Annual Report to Shareholders for the fiscal year ended June 30, 2000 (Consolidated Financial Statements on pages 24 through 38). ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 30 PART III With the exception of information relating to the executive officers of the Company which is provided in Part I hereof, all information required by Part III (Items 10, 11, 12, and 13) of Form 10-K, including the information required by Item 405 of Regulation S-K, is incorporated by reference to the Company's definitive Proxy Statement relating to the 2000 Annual Meeting of Stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a) 1. Financial statements required to be filed hereunder are indexed on page 33 hereof. 2. Financial statement schedules required to be filed hereunder are indexed on page 33 hereof. 3. The exhibits required to be filed hereunder are indexed on pages 37 through 44 hereof. b) Reports on Form 8-K Form 8-K, dated August 16, 2000, filed on August 18, 2000, containing the following items: Item 5. Announcement of two-for-one stock split to be effected in the form of a stock dividend. Form 8-K, dated August 16, 2000, filed on August 18, 2000, containing the following items: Item 5. June 2000 earnings release and additional financial information. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED By: (Signature and Title) /s/ Bernard A. Girod ---------------------- Bernard Girod, Vice Chairman and Chief Executive Officer Date: September 8, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ Sidney Harman Executive Chairman and September 8, 2000 ------------------------------ Chairman of the Board ------------------------- Sidney Harman of Directors /s/ Bernard A. Girod Vice Chairman, Chief September 8, 2000 ------------------------------ Executive Officer and ------------------------- Bernard A. Girod Director /s/ Gregory P. Stapleton President, Chief Operating September 8, 2000 ------------------------------ Officer and Director ------------------------- Gregory P. Stapleton /s/ Frank Meredith Executive Vice President September 8, 2000 ------------------------------ and Chief Financial ------------------------- Frank Meredith Officer (Principal Accounting Officer) /s/ Shirley M. Hufstedler Director September 8, 2000 ------------------------------ ------------------------- Shirley M. Hufstedler /s/ Ann McLaughlin Director September 8, 2000 ------------------------------ ------------------------- Ann McLaughlin /s/ Edward H. Meyer Director September 8, 2000 ------------------------------ ------------------------- Edward H. Meyer /s/ Stanley A. Weiss Director September 8, 2000 ------------------------------ ------------------------- Stanley A. Weiss
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 38 of the 2000 Annual Report to Shareholders herein incorporated by reference as Exhibit 13.1): Financial Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . 16 Independent Auditor's Reports . . . . . . . . . . . . . . 34 . . . . . . . . 23 Consolidated Balance Sheets as of June 30, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Operations for the years ended June 30, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Shareholders' Equity for the years ended June 30, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 28 Schedules for the years ended June 30, 2000, 1999 and 1998: II Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . . . 35 All other schedules have been omitted because they are not applicable, not required, or the information has been otherwise supplied in the financial statements or notes to the financial statements.
33 INDEPENDENT AUDITOR'S REPORT ON SCHEDULE ---------------------------------------- The Board of Directors Harman International Industries, Incorporated Under the date of August 10, 2000, we reported on the consolidated balance sheets of Harman International Industries, Incorporated and subsidiaries as of June 30, 2000 and 1999, and the related consolidated statements of operations, cash flows and shareholders' equity for each of the years in the three year period ended June 30, 2000, as contained in the 2000 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended June 30, 2000. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in the accompanying index. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Los Angeles, California August 10, 2000 34 Schedule II HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Valuation and Qualifying Accounts and Reserves Years Ended June 30, 2000, 1999 and 1998 ($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, 1998 Allowance for doubtful accounts $ 9,116 $ 4,904 $ 152 (1) $ 4,100 (2) $ 10,072 Inventory reserves $ 49,651 $ 3,110 (4) $ (2,013) (1) $ 12,173 (3) $ 38,575 Year Ended June 30, 1999 Allowance for doubtful accounts $ 10,072 $ 2,662 $ (129) (1) $ 3,873 (2) $ 8,732 Inventory reserves $ 38,575 $ 28,023 (4) $ (1,167) (1) $ 25,315 (3) $ 40,116 Year Ended June 30, 2000 Allowance for doubtful accounts $ 8,732 $ 6,902 $ (394) (1) $ 3,480 (2) $ 11,760 Inventory reserves $ 40,116 $ 32,611 (4) $ 775 (1) $ 33,278 (3) $ 40,224
(1) Net effect of acquisitions, dispositions and foreign currency translation. (2) Deductions for accounts receivable written off net of recoveries. (3) Deductions for scrapping and markdowns. (4) Includes net change in intercompany profit elimination. 35 THIS PAGE LEFT BLANK INTENTIONALLY 36 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 By-Laws of Harman International Industries, Incorporated, as amended December 13, 1999..........................45
37 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 4.2 Rights agreement (including a Form of Certificate of Designation of Series A Junior Participating Preferred Stock as Exhibit A thereto, a Form Right Certificate as Exhibit B thereto and a Summary of Rights to Purchase of Preferred Stock as Exhibit C thereto) (Incorporated by reference to the Form 8-A filed by the Company on December 16, 1999).........................IBR 4.3 Certificate of Designation of Series A Junior Participating Preferred Stock of Harman International Industries, Incorporated, dated January 11, 2000....................................................61 10.1 Lease dated as of June 18, 1987 between Harman International Industries Business Campus Joint Venture and JBL Inc., as amended. (Filed as Exhibit 10.1 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1987 (File No. 0-15147) and hereby incorporated by reference.).............................IBR 10.2 Guaranty dated as of June 18, 1987 by Harman International Industries, Inc. of Lease dated as of June 18, 1987 between Harman International Industries Business Campus Joint Venture and JBL Inc., as amended. (Filed as Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1987 (File No. 0-15147) and hereby incorporated by reference.)........................................IBR 10.18 Harman International Industries, Inc. 1987 Executive Incentive Plan (adopted December 8, 1987). (Filed as Exhibit 10.18 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (File No. 0-15147), and hereby incorporated by reference.)...................IBR
38 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 10.19 Form of Incentive Stock Option Agreement under the 1987 Executive Incentive Plan. (Filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (File No. 0-15147), and hereby incorporated by reference.).............................IBR 10.20 Form of Non-Qualified Stock Option Agreement under the 1987 Executive Incentive Plan. (Filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (File No. 0-15147), and hereby incorporated by reference.)...................IBR 10.21 Form of Non-Qualified Stock Option Agreement with non-officer directors. (Filed as Exhibit 10.21 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (File No. 0-15147), and hereby incorporated by reference.).................................IBR 10.23 Lease Agreement dated April 28, 1988, by and between Harman International Business Campus Joint Venture and Harman Electronics, Inc. (Filed as Exhibit 10.23 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (File No. 0-15147), and hereby incorporated by reference.)........................................................IBR 10.26 Harman International Industries, Incorporated Retirement Savings Plan. (Filed on Form S-8 Registration Statement on June 16, 1989 (Reg. No. 33-28973), and hereby incorporated by reference.)........................................IBR 10.27 Amended and Restated Harman International Industries, Incorporated Supplemental Executive Retirement Plan dated October 1, 1999...............................69
39 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 10.30 Form of Restricted Stock Agreement. (Filed as Exhibit 10.30 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1989 (File No. 0-15147), and hereby incorporated by reference.)...................IBR 10.40 Harman International Industries, Incorporated 1992 Incentive Plan, as amended (Filed as Exhibit B to the Company's Definitive Proxy Statement filed on September 15, 1999 (File No. 001-09764) and hereby incorporated by reference)..................................IBR 10.41 Form of Incentive Stock Option Agreement under the 1992 Incentive Plan.................................................87 10.42 Form of Non-Qualified Stock Option Agreement under the 1992 Incentive Plan.............................................99 10.43 Form of Restricted Stock Agreement under the 1992 Incentive Plan.....................................................111 10.44 Form of Non-Qualified Stock Option Agreement for Non-Officer Directors under the 1992 Incentive Incentive Plan.....................................................123 10.45 Harman International Industries, Inc. Deferred Compensation Plan, effective June 1, 1997 (Filed on Form S-8 Registration Statement on June 9, 1997 (Reg. No. 333-28793), and hereby incorporated by reference.)........................................................IBR 10.46 First Amendment to Harman International Industries, Inc. Deferred Compensation Plan dated October 1, 1999..............................................135
40 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 10.53 Multi-Currency, Multi-Option Credit Agreement dated September 30, 1994, among Harman International Industries, Incorporated, the Subsidiary Borrowers and Subsidiary Guarantors, and the Several Lenders named therein with Chemical Securities, Inc., as Arranger, NationsBank of North Carolina, N.A., as Co-Agent and Chemical Bank, as Administrative Agent. (Filed as Exhibit 10.53 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 (File No. 001-09764), and hereby incorporated by reference.).............................IBR 10.54 First Amendment dated February 15, 1995, to the Multi-Currency, Multi-Option Credit Agreement dated September 30, 1994. (Filed as Exhibit 10.54 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1995 (File No. 001-09764), and hereby incorporated by reference.).................................IBR 10.55 Second Amendment dated November 9, 1995, to the Multi-Currency, Multi-Option Credit Agreement dated September 30, 1994. (Filed as Exhibit 10.55 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 (File No. 001-09764), and hereby incorporated by reference.).............................IBR 10.57 First Amendment to the Lease Agreement by and between Harman International Business Campus Joint Venture and Harman Electronics, Inc. dated October 1995 (Filed as Exhibit 10.57 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1996 (File No. 001-09764), and hereby incorporated by reference.)........................................IBR
41 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 10.58 First Amendment to the Lease Agreement by and between Harman International Business Campus Joint Venture and JBL, Inc. dated October 1995 (Filed as Exhibit 10.58 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1996 (File No. 001-09764), and hereby incorporated by reference.)........................................................IBR 10.59 Fourth Amendment dated June 6, 1997, to the Multi-Currency, Multi-Option Credit Agreement dated September 30, 1994 (Filed as Exhibit 10.59 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1997 (File No. 001-09764), and hereby incorporated by reference.).............................IBR 10.61 Amended and Restated Credit Agreement dated July 5, 2000, among Harman International Industries, Incorporated, Becker Holding GmbH, The Several Lenders from Time to Time Party Thereto and Commerzbank Aktiengesellschaft.........................141 10.63 Amended and Restated Indenture dated as of July 1, 1997 between Harman International Industries, Incorporated and PNC Bank, National Association (Filed as Exhibit 10.63 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (File No. 001-09764), and hereby incorporated by reference.)........................................................IBR 10.65 Employment Agreement between the Company and William Palin dated September 1, 1999 (Filed as Exhibit 10.65 to the Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 001-09764), and hereby incorporated by reference.).................IBR
42 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. 001-09764), and hereby incorporated by reference.).................IBR 10.67 Equipment Financing Agreement between the Company and State Street Bank and Trust dated September 30, 1999 (Filed as Exhibit 10.67 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 001-09764), and hereby incorporated by reference)..................IBR 10.68 Participation Agreement among the Company, State Street Bank and Trust, Four Winds Funding Corporation, Commerzbank, Bank of Tokyo - Mitsubishi Trust Company and BTM Capital dated September 30, 1999 (Filed as Exhibit 10.68 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 001-09764), and hereby incorporated by reference)..................IBR 10.69 Harman International Industries, Incorporated, Key Executive Officers Incentive Plan (Filed as Exhibit A to the Definitive Proxy Statement on Form 14-A for the year ended June 30, 2000 (File No. 001-09764) and hereby incorporated by reference.......................................................IBR 10.70 Fifth Amendment dated July 17, 2000 to the Multi-Currency, Multi-Option Credit Agreement dated September 30, 1994...........................................215
43 INDEX TO EXHIBITS (cont.)
Exhibit Page No. Description No. 10.71 Form of Severance Agreement between the Company and Sidney Harman, Bernard Girod, Gregory Stapleton and Frank Meredith...............................233 10.72 Benefit Agreement under the Supplemental Executive Retirement Plan between Bernard Girod and Harman International Industries, Inc., dated June 22, 2000..........................................261 10.73 Benefit Agreement under the Supplemental Executive Retirement Plan between Gregory Stapleton and Harman International Industries, Inc., dated June 20, 2000..........................................265 10.74 Benefit Agreement under the Supplemental Executive Retirement Plan between Frank Meredith and Harman International Industries, Inc., dated June 21, 2000..........................................269 13.1 Pages 16 through inside back cover of Harman International Industries, Incorporated Annual Report to Shareholders for the fiscal year ended June 30, 2000......................................................273 21.1 Subsidiaries of the Company........................................301 23.1 Consent of Independent Auditors....................................307 27.1 EDGAR Financial Data Schedule......................................311
44