10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: December 31, 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 (I.R.S. Employer Identification No.) of incorporation or organization) 1101 PENNSYLVANIA AVENUE, NW WASHINGTON, D.C. 20004 ------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (202) 393-1101 ----------------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE ------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) 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. YES X NO ------- ------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 31,998,378 shares of Common Stock, $.01 par value, at January 31, 2001. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 2000 and June 30, 2000 3 Condensed Consolidated Statements of Operations - Three and six months ended December 31, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows - Six months ended December 31, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6-11 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition 12-15 PART II. OTHER INFORMATION 16-17 SIGNATURES 18 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND JUNE 30, 2000 (000s omitted except per share amounts)
ASSETS 12/31/00 06/30/00 -------------- -------------- Current assets Cash and cash equivalents $ 7,414 4,365 Receivables (less allowance for doubtful accounts of $11,453 at December 31, 2000 and $11,760 at June 30, 2000) 322,938 306,596 Inventories 368,636 298,273 Other current assets 66,319 61,792 -------------- -------------- Total current assets 765,307 671,026 -------------- -------------- Property, plant and equipment, net 265,798 251,737 Excess of cost over fair value of assets acquired, net 160,420 166,647 Other assets 39,079 48,095 -------------- -------------- Total assets $ 1,230,604 1,137,505 -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings $ 17,486 14,969 Current portion of long-term debt 4,392 7,537 Accounts payable 136,055 161,333 Accrued liabilities 173,545 177,542 -------------- -------------- Total current liabilities 331,478 361,381 -------------- -------------- Borrowings under revolving credit facility 173,907 11,835 Senior long-term debt 242,592 242,983 Other non-current liabilities 34,975 33,918 Minority interest 1,062 1,055 Shareholders' equity Common stock, $.01 par value 377 188 Additional paid-in capital 294,927 292,897 Accumulated other comprehensive income (loss) (63,903) (59,131) Retained earnings 352,161 322,383 Less common stock held in treasury (136,972) ( 70,004) -------------- -------------- Total shareholders' equity 446,590 486,333 -------------- -------------- Total liabilities and shareholders' equity $ 1,230,604 1,137,505 -------------- --------------
See accompanying Notes to Condensed Consolidated Financial Statements. 3 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 (000s omitted except per share amounts)
Three Months Ended Six Months Ended December 31, December 31, 2000 1999 2000 1999 --------- --------- --------- --------- Net sales $ 438,176 450,826 833,152 807,599 Cost of sales 316,583 324,335 601,849 584,865 --------- --------- --------- --------- Gross profit 121,593 126,491 231,303 222,734 Selling, general and administrative expenses 81,910 88,937 175,477 172,863 --------- --------- --------- --------- Operating income 39,683 37,554 55,826 49,871 Other expense Interest expense 5,615 5,077 11,345 9,707 Miscellaneous, net 48 381 251 975 --------- --------- --------- --------- Income before income taxes 34,020 32,096 44,230 39,189 Income tax expense 9,866 9,789 12,831 11,988 --------- --------- --------- --------- Net income $ 24,154 22,307 31,399 27,201 --------- --------- --------- --------- Basic earnings per share $ .75 .65 .96 .78 --------- --------- --------- --------- Diluted earnings per share $ .72 .64 .92 .77 --------- --------- --------- --------- Weighted average shares outstanding - basic 32,130 34,386 32,573 34,666 --------- --------- --------- --------- Weighted average shares outstanding - diluted 33,764 34,948 34,118 35,168 --------- --------- --------- ---------
See accompanying Notes to Condensed Consolidated Financial Statements. 4 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 ($000s omitted)
2000 1999 -------------- -------------- Cash flows from operating activities: Net income $ 31,399 27,201 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 28,519 27,566 Amortization of intangible assets 7,758 3,469 Changes in assets and liabilities: (Increase) decrease in: Receivables (15,592) (13,681) Inventories (70,408) (9,469) Other current assets (4,170) 1,859 (Decrease) increase in: Accounts payable (24,134) 7,914 Accrued liabilities (3,953) 6,438 Other operating activities 477 (270) -------------- -------------- Net cash provided by (used in) $ (50,104) 51,027 operating activities -------------- -------------- Cash flows from investing activities: Payment for purchase of companies, net of cash acquired $ -- (11,691) Proceeds from disposition of assets -- 7,134 Loan collections 12,259 2,670 Capital expenditures (45,256) (33,036) Purchased and capitalized software expenditure (7,148) (3,572) Other items, net 2,563 (712) -------------- -------------- Net cash used in investing activities $ (37,582) (39,207) -------------- -------------- Cash flows from financing activities: Borrowings on (repayments of) lines of credit $ 2,316 (4,566) Net proceeds from long-term debt 155,228 24,141 Shares repurchases (66,968) (25,745) Dividends paid to shareholders (1,621) (1,731) Proceeds from exercise of stock options 2,218 376 -------------- -------------- Net cash provided by (used in) $ 91,173 (7,525) financing activities -------------- -------------- Effect of exchange rates on cash (438) (152) -------------- -------------- Net increase (decrease) in cash and cash equivalents $ 3,049 4,143 Cash and cash equivalents at beginning of period 4,365 2,963 -------------- -------------- Cash and cash equivalents at end of period $ 7,414 7,106 -------------- -------------- Supplemental disclosures of cash flow information: Interest paid $ 11,940 9,678 Income taxes paid $ 8,391 5,283 Supplemental disclosures of non-cash investing activities: Fair value of assets acquired $ -- 21,549 Payment for purchase of company -- 11,691 -------------- -------------- Liabilities assumed $ -- 9,858 -------------- --------------
See accompanying Notes to Condensed Consolidated Financial Statements. 5 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE A - BASIS OF PRESENTATION The Company's Condensed Consolidated Financial Statements as of December 31, 2000, and for the three and six months ended December 31, 2000 and 1999, have not been audited by the Company's independent auditors; however, in the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the consolidated financial position of the Company and subsidiaries as of December 31, 2000 and the results of their operations and their cash flows for the periods presented. Where necessary, prior years' information has been reclassified to conform to the current year consolidated financial statement presentation. These financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. The results of operations for the three and six months ended December 31, 2000, are not necessarily indicative of the results to be expected for the full year. NOTE B - COMPREHENSIVE INCOME Comprehensive income and its components for the three and six months ended December 31, 2000 and 1999 are presented below.
Three months Ended Six months Ended December 31, December 31, (Dollars in thousands) 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 24,154 22,307 31,399 27,201 Other comprehensive income: Foreign currency translation adjustments 16,022 (10,524) (4,751) (2,673) Change in fair value of foreign currency cash flow hedges (2,100) -- (21) -- ----------- ----------- ----------- ----------- Total comprehensive income (loss) $ 38,076 11,783 26,627 24,528 ----------- ----------- ----------- -----------
6 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE B - COMPREHENSIVE INCOME (continued) The components of accumulated other comprehensive income as of December 31, 2000 and June 30, 2000 and the activity for the six months ended December 31, 2000 are presented below.
Cumulative Accumulated Accumulated Other Translation Derivative Comprehensive Adjustment Gain/(Loss) income(loss) --------------- ------------- ------------------ June 30, 2000 $ (59,131) -- (59,131) Foreign currency translation adjustments (4,751) -- (4,751) Change in fair value of foreign currency cash flow hedges -- (21) (21) --------------- ------------- ------------------ December 31, 2000 $ (63,882) (21) (63,903) --------------- ------------- ------------------
NOTE C - EARNINGS PER SHARE INFORMATION
Three Months Ended December 31, 2000 1999 ------------------ ------------------ (000's omitted except per share amounts) Basic Diluted Basic Diluted -------- -------- -------- -------- Net income $ 24,154 24,154 22,307 22,307 -------- -------- -------- -------- Weighted average shares outstanding 32,130 32,130 34,386 34,386 Employee stock options -- 1,634 -- 562 -------- -------- -------- -------- Total weighted average shares outstanding 32,130 33,764 34,386 34,948 -------- -------- -------- -------- Earnings per share $ .75 .72 .65 .64 -------- -------- -------- --------
7 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE C - EARNINGS PER SHARE INFORMATION (continued)
Six Months Ended December 31, 2000 1999 -------------------- -------------------- (000's omitted except per share amounts) Basic Diluted Basic Diluted --------- --------- --------- --------- Net income $ 31,399 31,399 27,201 27,201 --------- --------- --------- --------- Weighted average shares outstanding 32,573 32,573 34,666 34,666 Employee stock options -- 1,545 -- 502 --------- --------- --------- --------- Total weighted average shares outstanding 32,573 34,118 34,666 35,168 --------- --------- --------- --------- Earnings per share $ .96 .92 .78 .77 --------- --------- --------- ---------
NOTE D - SEGMENTATION The Company is engaged in the design, manufacture and marketing of high fidelity audio products. Our businesses are organized based on the end-user markets served-consumer and professional. The Consumer Systems Group manufactures loudspeakers and electronics for high fidelity audio and video reproduction in the home, with computers and in vehicles. Home applications include two channel audio, multi-channel audio/video and personal computer audio. Vehicle applications include audio, video, navigation, telematics, multi-media and wireless internet. Consumer products are marketed under brand names including JBL, Harman Kardon, Infinity, Becker, Revel, Lexicon, Mark Levinson and Proceed. The Professional Group manufactures loudspeakers and electronics used by audio professionals in concert halls, cinemas, recording studios, broadcasting operations and live music events. Professional products are marketed worldwide under brand names including JBL, AKG, Studer, Soundcraft, Crown, DOD, Digitech and dbx. 8 HARMAN INTERNATIONAL INDUSTRIES,INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE D - SEGMENTATION (continued) The following table reports external sales and operating income by segment for the three and six months ended December 31, 2000 and 1999.
Three Months Ended Six Months Ended December 31, December 31, ($000s omitted) 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net sales: Consumer Systems Group $ 326,406 338,718 611,765 599,603 Professional Group 111,770 112,108 221,387 207,996 Other -- -- -- -- ----------- ----------- ----------- ----------- Total $ 438,176 450,826 833,152 807,599 ----------- ----------- ----------- ----------- Operating income (loss): Consumer Systems Group $ 33,214 34,327 54,464 46,460 Professional Group 9,373 7,481 16,048 10,025 Other (2,904) (4,254) (14,686) (6,614) ----------- ----------- ----------- ----------- Total $ 39,683 37,554 55,826 49,871 ----------- ----------- ----------- ----------- Consumer Systems Group sales for the three and six months ended December 31, 2000 have been reduced by $16.6 million for a non-recurring repurchase of inventory from a European consumer electronics distributor. Other operating income (loss) is primarily comprised of corporate expenses less subsidiary allocations. NOTE E - INVENTORIES Inventories consist of the following:
December 31, June 30, ($000's omitted) 2000 2000 -------------- -------------- Finished goods and inventory purchased for resale $ 171,871 134,038 Work in process 49,314 40,815 Raw materials and supplies 147,451 123,420 -------------- -------------- Total inventories $ 368,636 298,273 -------------- --------------
9 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE F - DERIVATIVES The Company uses foreign currency forward contracts to hedge a portion of its forecasted transactions. These forward contracts are designated as foreign currency cash flow hedges and recorded at fair value in the statement of financial position. The recorded fair value is balanced by an entry to other comprehensive income (loss) in the statement of financial position until the underlying forecasted foreign currency transaction occurs. When the transaction occurs, the gain or loss from the derivative designated as a hedge of the transaction is reclassified from accumulated other comprehensive income (loss) to the same income statement line item in which the foreign currency gain or loss on the underlying hedged transaction is recorded. If the underlying forecasted transaction does not occur, the amount recorded in accumulated other comprehensive income (loss) is reclassified to the miscellaneous, net line of the income statement in the then-current period. Because the amounts and the maturities of the derivatives approximate those of the forecasted exposures, changes in the fair value of the derivatives are highly effective in offsetting changes in the cash flows of the hedged items. Any ineffective portion of the derivatives is recognized in current earnings. The ineffective portion of the derivatives, which was immaterial for all periods presented, primarily results from discounts or premiums on forward contracts. As of December 31, 2000, the Company had contracts maturing through June 2001 to purchase and sell the equivalent of approximately $23.2 million of various currencies to hedge future foreign currency purchases and sales. The Company recorded approximately $0.7 million in net losses from cash flow hedges related to forecasted foreign currency transactions in the six months ended December 31, 2000. These losses were offset by equivalent gains on the underlying hedged items. The amount as of December 31, 2000, that will be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months that is associated with these hedges is not material. The Company has also purchased forward contracts to hedge future cash flows due from foreign consolidated subsidiaries under operating lease agreements. As of December 31, 2000, the Company had such 10 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE F - DERIVATIVES (continued) contracts in place to purchase and sell the equivalent of approximately $36.1 million of various currencies to hedge quarterly lease commitments through September 2004. The amount as of December 31, 2000 that will be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months that is associated with these hedges is a gain of $0.1 million. NOTE G - STOCK SPLIT On August 16, 2000, the Company announced that its Board of Directors had approved a two-for-one split of its common stock in the form of a 100% stock dividend with a record date of August 28, 2000, and a distribution date of September 19, 2000. Share and per share amounts have been restated to reflect the stock split for all periods presented. NOTE H - 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 judgement 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 judgement will be increased to $7.2 million, plus interest, to account for sales for the five months preceding the trial court's judgement 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. If the Company is unsuccessful in its appeal and must pay $7.2 million plus interest in accordance with the trial court's judgement, this will have a material adverse effect on the results of operations. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS COMPARISON OF THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 2000 AND 1999 Net sales for the three months ended December 31, 2000 were $438.2 million after reducing sales for a non-recurring $16.6 million repurchase of inventory from a European consumer electronics distributor. Gross sales for the second quarter totaled $482.3 million. Gross sales in the same period last year were $476.1 million. Excluding currency effects, gross sales increased 10 percent. Net sales for the six months ended December 31, 2000 were $833.2 million after reducing sales for the inventory repurchase, a 12 percent increase excluding currency effects. Gross sales for the six months were $895.7 million, up 5 percent versus the same period in the prior year and 14 higher excluding currency effects. The Consumer Systems Group reported sales of $326.4 million for the three months ended December 2000. Excluding the non-recurring $16.6 million inventory repurchase, the group reported sales of $343.0 million for the quarter, an increase of 1 percent over the prior year and 11 percent higher excluding currency effects. Sales of consumer audio products were slightly higher than last year while sales to the personal computer manufacturers decreased. Sales to the automakers increased 2 percent over last year's second quarter and 14 percent excluding currency effects. In North America and Asia, the introduction of new Mark Levinson digital audio systems for Lexus and strong gains with Toyota and Mitsubishi offset lower sales to Chrysler. In Europe, Becker reported strong sales to the Mercedes Benz division of DaimlerChrysler and robust sales of navigation systems in the aftermarket. The Consumer Systems Group reported sales of $611.8 million for the six months ended December 2000. Excluding the $16.6 million inventory repurchase, the Group reported sales of $628.4 million for the six months ended December 2000, a 5 percent increase over the same period last year and a 14 percent increase excluding currency effects. Sales of consumer audio products exceeded last year. Sales to the computer manufacturers were lower than last year. Sales to the automakers increased 7 percent over the same period last year and 18 percent excluding the effects of currency translation. In North American and Asia, the introduction of new Mark Levinson digital audio systems for Lexus and strong gains with Toyota and Mitsubishi offset lower sales to Chrysler. In Europe, Becker reported strong sales to the Mercedes Benz division of DaimlerChrysler and robust sales of navigation systems in the aftermarket. The Professional Group reported flat sales of $111.8 million for the quarter. Excluding currency effects, sales increased 8 percent. JBL 12 Professional was affected by softness in cinema sales. AKG sales to the wireless telephone makers were lower than last year, but this was mostly offset by new business with General Motors for hands-free microphones used in the OnStar system. The June 2000 divestiture of Orban reduced sales results. The March 2000 acquisition of Crown increased sales results. The Professional Group reported sales of $221.4 million for the six months ended December 2000, a 6 percent increase over the same period last year and a 14 percent increase excluding currency effects. Crown, acquired March 2000, contributed to the growth, offset by the June 2000 divestiture of Orban. AKG sales to the wireless telephone makers were lower than last year, but this was mostly offset by the new hands-free microphone business with General Motors OnStar. JBL Professional was affected by softness in cinema sales. The gross profit margin for the quarter ended December 2000 was 27.7 percent ($121.6 million) compared to 28.1 percent ($126.5 million) in the same period last year. Gross profit margin for the six months ended December 2000 was 27.8 percent ($231.3 million) compared to 27.6 percent ($222.7 million) last year. The gross profit margin for the second quarter was slightly lower due to lower than anticipated sales levels and the clearance of certain older products in our international consumer division. The gross profit margin for the six months ended December 2000 was higher due to changes in sales mix and improved factory leverage. Selling, general and administrative costs as a percentage of sales were 18.7 percent ($81.9 million) for the second quarter and 21.1 percent ($175.5 million) for the six months ended December 2000. Selling, general and administrative costs were 19.7 percent of sales ($88.9 million) for the second quarter and 21.4 percent ($172.9 million) for the six months ended December 1999. Selling, general and administrative costs for the second quarter were lower than last year due to lower advertising costs and lower corporate expenses. Selling, general and administrative costs for the six months ended December 2000 were lower as a percent of sales due to costs incurred in the prior year to complete the integration of Oxford, acquired August 1997, into the North American automotive OEM operations, lower corporate expenses and lower advertising partially offset by a non-cash charge totaling $5.5 million for the vesting of executive performance stock options and increased research and development expenses. Operating income as a percent of sales was 9.1 percent ($39.7 million) for the second quarter and 6.7 percent ($55.8 million) for the six months 13 ended December 2000. Last year, operating income as a percent of sales was 8.3 percent ($37.6 million) for the second quarter and 6.2 percent ($49.9 million) for the first half. Interest expense for the three months ended December 2000 was $5.6 million compared to $5.1 million in the same quarter last year. For the six months ended December 2000, interest expense was $11.3 million, compared to $9.7 million last year. Interest expense increased due to higher borrowings. Average borrowings outstanding were $415.6 million for the second quarter of fiscal 2000 and $378.9 million for the first half, compared to $343.9 million and $339.2 million, respectively, for the same periods in the prior year. The weighted average interest rate on borrowings was 5.4 percent for the second quarter and 6.0 percent for the six months ended December 2000. The weighted average interest rates for the comparable periods in the prior year were 5.9 percent and 5.7 percent, respectively. Income before income taxes for the second quarter was $34.0 million, compared to $32.1 million in the prior year. For the six months ended December 2000, income before taxes was $44.2 million compared to $39.2 million in the same period last year. The effective tax rate for the three and six months ended December 2000, was 29.0 percent, compared to 30.5 percent reported for the same periods last year. The effective tax rates were below the U.S. statutory rate due to utilization of tax credits, realization of certain tax benefits for United States exports and the utilization of tax loss carryforwards at certain foreign subsidiaries. The Company calculates its effective tax rate based upon its current estimate of annual results. Net income for the three months ended December 2000 was $24.2 million, compared to a net income of $22.3 million in the prior year. Net income for the six months ended December 2000 was $31.4 million, compared to $27.2 million in the same period last year. Basic earnings per share for the three months ended December 2000 were $.75, and diluted earnings per share were $.72. In the same period last year, basic earnings per share were $.65 and diluted earnings per share were $.64. Basic earnings per share for the six months ended December 2000 were $.96, and diluted earnings per share were $.92. For the six months last year, basic earnings per share were $.78 and diluted earnings per share were $.77. 14 FINANCIAL CONDITION Net working capital at December 31, 2000 was $433.8 million, compared with $309.6 million at June 30, 2000. The working capital increase was primarily due to higher receivables and inventories and lower accounts payable at December compared to June. Inventories were higher at December 2000 due to anticipated increased sales level for the following quarter, higher safety stocks of difficult to procure integrated circuits in our automotive electronics businesses, lower than anticipated sales late in the quarter ended December 2000 and the non-recurring repurchase of inventory from a European consumer electronics distributor. Accounts payable decreased due to the timing of vendor payments. The Company continued its common stock repurchase program. In the first half of fiscal 2000, the Company acquired and placed in treasury 2,201,300 shares of its common stock at a cost of $67.0 million. The common stock repurchase program has been temporarily suspended until substantive reductions in working capital levels are achieved. Borrowings under the revolving credit facility at December 31, 2000 were $177.8 million, comprised of swing line borrowings of $3.9 million, which were included in short-term borrowings, and competitive advance borrowings and revolving credit borrowings of $173.9 million. Borrowings under the revolving credit facility at June 30, 2000 were $15.0 million, comprised of swing line borrowings of $3.2 million and competitive advance borrowings and revolving credit borrowings of $11.8 million. Borrowings under the revolving credit facility increased due to higher working capital levels, common stock repurchases and capital expenditures. Prospects for the Company's third quarter are less favorable as the Company forecasts a decline in Multimedia sales as personal computer sales continue to falter, and softness in Consumer sales both domestically and abroad. Additionally, the Company plans a $12 to $15 million restructuring in the third quarter to complete the reorganization of the Consumer International Group. This will include costs to consolidate five warehouses into two, termination costs and other costs to convert from two-step distribution to direct sales to retailers. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no material changes in the Company's market risk exposures since June 30, 2000. 15 Except for historical information contained herein, the matters discussed are forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including, but not limited to, the effect of economic conditions, product demand, currency exchange rates, labor disputes, availability of key components, competitive products and other risks detailed in the Company's other Securities and Exchange Commission filings. PART II - OTHER INFORMATION Item 1. 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 judgement 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 judgement will be increased to $7.2 million, plus interest, to account for sales for the five months preceding the trial court's judgement 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. If the Company is unsuccessful in its appeal and must pay $7.2 million plus interest in accordance with the trial court's judgement, this will have a material adverse effect on the results of operations. 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 adverse effect on the Company's business, results of operations or financial condition. Item 2. Changes in Securities and use of proceeds None. 16 Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. PART II - OTHER INFORMATION (continued) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K None. (b) Reports on Form 8-K None. 17 SIGNATURES Pursuant to the requirements 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. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED (Registrant) DATE: February 14, 2001 BY: /s/ Bernard A. Girod ------------------------------- Bernard A. Girod Vice Chairman and Chief Executive Officer DATE: February 14, 2001 BY: /s/ Frank Meredith ------------------------------- Frank Meredith Executive Vice President and Chief Financial Officer 18