-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UH4n6X2Jyw0pJv/K7O2O94cZMBYbd4maHMgHWJVcwWuhPlzOKkPGe4B6ZTvBwNBs X0Rcr+ykTFDH/dSONBIFEg== 0000800459-96-000003.txt : 19960501 0000800459-96-000003.hdr.sgml : 19960501 ACCESSION NUMBER: 0000800459-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960430 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARMAN INTERNATIONAL INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000800459 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 112534306 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09764 FILM NUMBER: 96553610 BUSINESS ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE N W STREET 2: STE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 BUSINESS PHONE: 2023931101 MAIL ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE NW STREET 2: SUITE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 10-Q 1 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: MARCH 31, 1996 Commission File Number: 1-9764 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 11-2534306 - ---------------------------------- -------------------------------------- (State or other jurisdiction (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. 16,270,953 shares of Common Stock, $.01 par value, at April 30, 1996. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1996 and June 30, 1995 3 Condensed Consolidated Statements of Operations - Nine months ended March 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Nine months ended March 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition 7-10 PART II. OTHER INFORMATION 11 SIGNATURES 12 EXHIBIT 10.56 13 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND JUNE 30, 1995 (000s omitted except per share amounts) (Unaudited) (Audited) 03/31/96 06/30/95 ASSETS --------------- --------------- Current Assets: Cash and short-term investments $ 9,876 $ 11,252 Receivables (less allowance for doubtful accounts: $13,061 at March 31, 1996, and $12,313 at June 30, 1995) 269,865 264,898 Inventories Finished goods and inventory purchased for resale 196,983 146,132 Work in process 25,786 28,412 Raw materials and supplies 79,788 61,988 --------------- --------------- Total inventories 302,557 236,532 Other current assets 51,390 39,973 --------------- --------------- Total current assets 633,688 552,655 Property, plant and equipment, net 198,051 189,823 Other assets 16,822 21,890 Excess of cost over fair value of assets acquired, net 136,946 122,504 --------------- --------------- Total assets $ 985,507 $ 886,872 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 21,831 $ 27,208 Current portion of long-term debt 12,932 13,006 Accounts payable 103,567 90,755 Accrued liabilities 150,995 164,122 --------------- --------------- Total current liabilities 289,325 295,091 Other non-current liabilities 26,238 31,199 Borrowings under Revolving Credit Facility 205,858 106,244 Senior long-term debt 38,416 50,277 Subordinated long-term debt 109,800 109,500 Deferred income 259 1,082 Minority interest 3,896 3,989 Shareholders' Equity: Common stock, $0.01 par value 160 152 Additional paid-in capital 182,950 156,257 Equity adjustment from foreign currency translation (2,621) 6,157 Retained earnings 131,226 126,924 --------------- --------------- Net shareholders' equity 311,715 289,490 --------------- --------------- Total liabilities and shareholders' equity $ 985,507 $ 886,872 ========= ========= See accompanying Notes to Condensed Consolidated Financial Statements.
3 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (000s omitted except per share amounts) (UNAUDITED) Three Months Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 --------------- --------------- --------------- --------------- Net sales $ 339,339 $ 310,493 $ 988,482 $ 827,818 Cost of sales 235,909 216,598 687,651 567,220 --------------- --------------- --------------- --------------- Gross profit 103,430 93,895 300,831 260,598 Selling, general and administrative expenses 75,712 70,839 226,414 198,567 --------------- --------------- --------------- --------------- Operating income 27,718 23,056 74,417 62,031 Other expenses: Interest expense 7,207 7,155 21,682 19,064 Miscellaneous, net 258 217 1,123 1,628 --------------- --------------- --------------- --------------- Income before income taxes, minority interest and extraordinary items 20,253 15,684 51,612 41,339 Income tax expense 6,384 4,300 16,332 13,466 Minority interest (18) 12 27 133 --------------- --------------- --------------- --------------- Income before extraordinary items 13,887 11,372 35,253 27,740 Extraordinary items, net of income taxes -- -- -- (274) --------------- --------------- --------------- --------------- Net income $ 13,887 $ 11,372 $ 35,253 $ 27,466 ========= ========= ========= ========= Earnings per share of common stock before extraordinary items $ 0.86 $ 0.72 $ 2.17 $ 1.76 ========= ========= ========= ========= Earnings per common share $ 0.86 $ 0.72 $ 2.17 $ 1.74 ========= ========= ========= ========= Weighted average number of common shares outstanding 16,242 15,888 16,177 15,858 ========= ========= ========= =========
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 31, 1996 AND 1995 ($000s omitted) (UNAUDITED) 1996 1995 --------------- --------------- Cash flows from operating activities: Net income $ 35,253 $ 27,466 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 35,110 33,610 Amortization of intangible assets 4,567 1,905 Amortization of deferred income (969) (971) Changes in assets and liabilities, net of effects from purchase of companies: (Increase) decrease in: Receivables (2,799) (14,387) Inventories (62,152) 11,492 Other current assets (6,659) (21,181) Increase (decrease) in: Accounts payable 11,962 (46,012) Accrued liabilities (28,871) 9,432 --------------- --------------- Total adjustments (49,811) (26,112) --------------- --------------- Net cash provided by (used in) operating activities $ (14,558) $ 1,354 --------------- --------------- Cash flow from investing activities: Payment for purchase of companies, net of cash acquired $ (18,650) $ (9,556) Proceeds from asset dispositions 7,013 -- Capital expenditures for property, plant and equipment (53,175) (34,632) Other items, net 5,104 (4,783) --------------- --------------- Net cash used in investing activities $ (59,708) $ (48,971) --------------- --------------- Cash flow from financing activities: Net repayments of lines of credit $ (5,472) $ (82,762) Net proceeds from long-term debt 87,960 129,772 Dividends paid to stockholders (2,396) (1,813) Proceeds from exercise of stock options 1,576 1,043 Net change, foreign currency translation (8,778) 7,495 --------------- --------------- Net cash provided by financing activities $ 72,890 $ 53,735 --------------- --------------- Net increase (decrease) in cash and short-term investments (1,376) 6,118 Cash and short-term investments at beginning of period 11,252 9,724 --------------- --------------- Cash and short-term investments at end of period $ 9,876 $ 15,842 ========= ========= Supplemental disclosures of cash flow information: Interest paid $ 20,361 $ 18,648 Income taxes paid $ 13,401 $ 13,153 Supplemental schedule of non-cash investing activities: Fair value of assets acquired $ 14,650 $ 151,384 Cash paid for the capital stock 11,757 10,715 --------------- --------------- Liabilities assumed $ 2,893 $ 140,669 --------------- --------------- 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 for the three months and nine months ended March 31, 1996 and 1995, 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 March 31, 1996 and the results of their operations and their cash flows for the periods presented. The results of operations for the nine months ended March 31, 1996, are not necessarily indicative of the results to be expected for the full year. NOTE B - ACQUISITIONS On August 30, 1995, Harman International Industries, Incorporated, exercised its option to purchase the remaining 80% of the issued and outstanding shares of Madrigal Audio Laboratories, Inc. ("Madrigal"), increasing its ownership to 100%. Harman paid approximately $9.8 million for the remaining shares and related acquisition costs. Harman funded its acquisition of Madrigal utilizing its revolving credit facility. The results of operations include nine months for Madrigal as the acquisition was made effective July 1, 1995. In March 1996, the Company settled its remaining consideration due for the acquisition of Becker GmbH ("Becker"). The settlement resulted in total consideration paid of 20.7 million Deutschmarks (approximately $14.2 million) and 220,000 shares of Harman common stock. NOTE C - STOCK DIVIDEND In August 1995, the Company declared a special 5 percent stock dividend to stockholders of record on August 11, 1995, payable on August 25, 1995. Outstanding shares and earnings per share have been retroactively restated to give effect to the stock dividend. In accordance with ARB 43, the stock dividend was accounted for by transferring from retained earnings to the common stock and additional paid-in capital accounts an amount equal to the fair value of the additional shares. 6 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - ------------------------------------ COMPARISON OF THE THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 Net sales for the quarter ended March 31, 1996, totaled $339.3 million, a 9 percent increase over the comparable period in the prior year. Excluding Becker, sales increased 17%. Becker sales in the quarter were lower than the comparable period in the prior year due to the phase-out of a group of activities which were irrelevant to our business, such as sewing machine circuit boards and air bag sensors. For the first nine months of the year, sales of $988.5 million were 19% above the prior year and 12% higher excluding the sales contribution of Becker from both years (Becker sales were reported for the first time in our third quarter last year). The Consumer Group reported higher sales for the third quarter and the nine months. Harman Kardon sales virtually doubled as the unit gained market share in North America and Europe. Infinity reported vigorous sales growth, especially in Germany. The addition of the Mark Levinson and Proceed lines through the September 1995 acquisition of Madrigal Audio Laboratories contributed to the growth. The Professional Group contributed higher sales for the third quarter and the nine months, with virtually all operations reporting increased sales. JBL Professional sales were enhanced by the international success of its EON line of compact, portable sound reinforcement systems. Studer sales were lower due to several large contracts completed in the prior year. The OEM Group produced higher sales for the third quarter and the nine months. Shipments of high fidelity systems for the Chrysler Minivan, Ford Explorer, Jeep Grand Cherokee and Chrysler T-300 pickup truck were excellent. Becker reported lower sales in the quarter due to the phase-out of the non-core businesses referred to above. The gross profit margin for the quarter ended March 31, 1996, was 30.5 percent ($103.4 million) compared to 30.2 percent ($93.9 million) in the 7 prior year. The increase in the gross profit margin rate for the quarter reflects increased operating leverage at the automotive OEM factories in North America and the United Kingdom and improved performance by Harman Kardon. The gross profit margin for the first nine months of fiscal 1996 was 30.4 percent ($300.8 million) compared to 31.5 percent ($260.6 million) in the previous year. The decrease in the gross margin percentage in the nine months primarily reflects the inclusion of Becker, which was acquired in the third quarter last year. Operating income as a percentage of sales was 8.2 percent ($27.7 million) for the third quarter ended March 31, 1996, up from 7.4 percent ($23.1 million) for the same period in the prior year. The increase results from improved gross margin as discussed above and lower selling, general and administrative expenses as a percentage of sales. For the first nine months, operating income as a percentage of sales was 7.5 percent, equivalent to the prior year. Interest expense for the three months ended March 31, 1996, of $7.2 million was equal to the third quarter of the prior year. For the nine months ended March 31, 1996, interest expense was $21.7 million, up from $19.1 million for the nine months ended March 31, 1995. Average borrowings outstanding were $379.7 million for the third quarter of fiscal 1996 and $354.6 million for the nine months, up from $287.3 million and $266.2 million, respectively, for the same periods in the prior year. Higher average borrowings in fiscal 1996 result from the Becker and Madrigal acquisitions and the financing of increased working capital requirements. The impact of the increase in average borrowings on interest expense was offset by a substantial reduction in the average interest rate on borrowings. The average interest rate on borrowings was 7.6 percent for the third quarter and 8.2 percent for the nine months ended March 31, 1996, down from 10.0 percent for the third quarter and 9.6 percent for the nine months ended March 31, 1995. The decrease in average interest rates results from generally lower market interest rates worldwide and the refinancing of unsecured lines of credit with a committed revolving credit facility agreement in September 1994. Interest expense as a percentage of sales was 2.2 percent for the first nine months of fiscal 1996, down from 2.3 percent for the comparable period in the previous year. Income before income taxes, minority interest and extraordinary items for the third quarter of fiscal 1996 was $20.3 million, up from $15.7 million in the previous year. For the nine months ended March 31, 1996, income before income taxes, minority interest and extraordinary 8 items increased to $51.6 million, compared with $41.3 million in the prior year period. The effective tax rate for the third quarter of fiscal 1996 was 31.5 percent compared with 27.4 percent in the same period a year ago. The effective tax rate for the first nine months of fiscal 1996 was 31.6 percent compared with 32.6 percent in the prior year. The effective tax rates are below United States statutory rates due to the restructuring of certain foreign subsidiaries to take advantage of prior years' tax losses. The Company calculates its effective tax rate based upon its current estimate of annual results. Net income for the three months ended March 31, 1996, was $13.9 million, or $0.86 per share, compared with $11.4 million, or $0.72 per share, in the previous year. Net income for the first nine months of fiscal 1996 was $35.3 million, or $2.17 per share, compared with $27.5 million, or $1.74 per share, in the previous year. Prior year earnings per share data has been restated to give effect to the special 5 percent stock dividend declared and issued in August 1995. FINANCIAL CONDITION - --------------------------------- Net working capital at March 31, 1996, was $344.4 million, compared with $257.6 million at June 30, 1995. Working capital increased primarily due to the increase in inventories from $236.5 million at June 30, 1995, to $302.6 million at March 31, 1996. Higher inventory levels reflect the support of increased sales volumes, requirements for new product launches in the fourth quarter and the acquisition of Madrigal. Borrowings under the revolving credit facility at March 31, 1996, were $212.6 million, comprised of swing line borrowings of $6.7 million, which are included in notes payable, and competitive advance borrowings and revolving credit borrowings of $205.9 million. Borrowings under the revolving credit facility at June 30, 1995, were $115.9 million, comprised of swing line borrowings of $9.7 million and competitive advance borrowings and revolving credit borrowings of $106.2 million. Increased borrowings reflect the financing of capital expenditures, additional working capital requirements, the Madrigal acquisition, and final payments for the Becker acquisition. In the second quarter of fiscal 1996, the revolving credit facility was amended and increased from $220 million to $275 million, and the maturity was extended one year to September 30, 2000. 9 Accrued liabilities decreased $13.1 million, from $164.1 million to $151.0 million, primarily due to the funding of previously announced restructuring programs to enhance the productivity of recent acquisitions. Excess of cost over fair value of assets acquired increased $14.4 million, from $122.5 million to $136.9 million, reflecting final acquisition accounting adjustments for Becker and the acquisition of Madrigal. 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, competitive products and other risks detailed in the Company's other Securities and Exchange Commission filings. 10 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings There are various legal proceedings pending against the registrant and its subsidiaries, but, in the opinion of management, liabilities, if any, arising from such claims will not have a materially adverse effect upon the consolidated financial condition of the registrant. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K The following exhibits are filed as part of this report. Exhibit No. Description -------------- ------------------------------------------------------------ 10.56 Amendment and Settlement Agreement, dated as of March 20, 1996, to the Share Purchase Agreement dated February 16, 1995, between Harman International Industries, Incorporated, Roland Becker, and Becker Holding S.A. (b) Reports on Form 8-K None. 11 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: April 30, 1996 BY: /s/ Sidney Harman ------------------------------- Sidney Harman Chairman and Chief Executive Officer DATE: April 30, 1996 BY: /s/ Bernard A. Girod ------------------------------- Bernard A. Girod President, Chief Operating Officer, Chief Financial Officer and Secretary 12 EX-10 2 EXHIBIT 10.56 13 AMENDMENT AND SETTLEMENT AGREEMENT This AMENDMENT AND SETTLEMENT AGREEMENT (this "Agreement" made as of the 20th day of March 1996, between Harman International Industries, having an address at 8500 Balboa Boulevard, Northridge, California 91329 U.S.A., and Roland Becker ("Shareholder One"), an individual residing in Courtedoux, Switzerland, and Becker Holding S.A. ("Shareholder Three"), a societe anonyme organized under the laws of Switzerland and having an address in Courtedoux, Switzerland (Shareholder One and Shareholder Three are referred to collectively as the "Sellers"). Capitalized terms used and not defined herein shall have the same meaning as indicated in the notarial Share Purchase Agreement (the "SPA") dated February 16, 1995, between the Purchaser and the Sellers. RECITALS A. The Sellers and Purchaser entered into the SPA on February 16, 1995. B. The Sellers and Purchaser desire to amend the SPA and settle certain claims that have arisen or may arise out of the SPA. NOW THEREFORE, the parties to this agreement agree as follows: 1. Payments in Settlement of Claims. (a) In full settlement of all claims that any Seller may have against Purchaser or, other than the Unwaived Claims (as hereinafter defined), that Purchaser may have against the Sellers arising out of the SPA, Purchaser shall deliver to Shareholder One the following: March 20, 1996 14 - -2- (i) 220,000 shares of the Harman Stock (the "Stock Payment"); and (ii) DM 10,873,000 (Deutsche Mark 10,873,000) (the "Cash Consideration"). (b) Purchaser shall make the Stock Payment and transfer the Cash Consideration to Shareholder One within ten (10) Business Days of the date of this Agreement. (c) For purposes of this Agreement, "Unwaived Claims" shall mean any and all claims arising now or in the future out of paragraph 1 of Sections 5.3(a) (Release and Waiver Authority), 3.2 (Capital), 5.8 (Non-Competition), 5.10 (Becker Name) and 5.11 (Confidentiality) of the SPA. The sections in the SPA relating to the Unwaived Claims shall remain in full force and effect including the indemnification provisions contained in Article 6 of the SPA with respect to such sections. 2. Waiver of Claims. (a) Conditioned only upon payment of the Stock Payment and transfer of the Cash Consideration by Purchaser to Shareholder One, each of the Sellers hereby unconditionally and irrevocably waives any claims they may now or in the future have against any indemnified Purchaser arising out of the SPA or arising out of facts or circumstances existing prior to the execution of this Agreement. (b) Conditioned only upon payment of the Stock Payment and delivery of the Cash Consideration by Purchaser to Shareholder One and subject to the provisions of this Agreement with respect to Unwaived Claims, Purchaser, on behalf of itself and each Indemnified Purchaser, hereby unconditionally and irrevocably waives any claims arising out of the SPA that Purchaser or such Indemnified Purchaser may now or in the future have against Sellers. 3. Miscellaneous. The provision of Sections 7.1 through Section 7.10 of the SPA shall apply to this Agreement as if set forth herein. March 20, 1996 15 - -3- IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement as of the date first set forth above. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED /s/ Sidney Harman - -------------------------------------------- By: Sidney Harman BECKER HOLDING S.A. /s/ Roland Becker - ------------------------------------------- By: Roland Becker /s/ Roland Becker - -------------------------------------------- ROLAND BECKER March 20, 1996 16 EX-27 3 ARTICLE 5 FDC FOR 3RD QUARTER 10-Q
5 1000 9-MOS JUN-30-1996 MAR-31-1996 8985 891 282926 13061 302557 633688 384538 186487 985507 289325 354074 0 0 160 311555 985507 988482 988482 558622 687651 0 3635 21682 51612 16332 35253 0 0 0 35253 2.17 2.17
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