-----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, EdHh+TLtcnRJEF1szyly/Rxg8dq6//+OY5ogU8VHsu0os66Or5hbtg+nUoojVQKB eo9X/fIApKZlnC3NMD7oNw== 0000800459-98-000003.txt : 19980515 0000800459-98-000003.hdr.sgml : 19980515 ACCESSION NUMBER: 0000800459-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: SEC FILE NUMBER: 001-09764 FILM NUMBER: 98619934 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, 1998 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. 18,627,022 shares of Common Stock, $.01 par value, at April 30, 1998. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1998 and June 30, 1997 3 Condensed Consolidated Statements of Operations - Three and nine months ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows - Nine months ended March 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition 8-11 PART II. OTHER INFORMATION 12 SIGNATURES 13 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1998 AND JUNE 30, 1997 (000s omitted except per share amounts)

See accompanying Notes to Condensed Consolidated Financial Statements. 3 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1998 AND 1997 (000s omitted except per share amounts) (UNAUDITED)

See accompanying Notes to Condensed Consolidated Financial Statements. 4 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 31, 1998 AND 1997 ($000s omitted) (UNAUDITED)

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, 1998 and 1997, 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, 1998 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. The results of operations for the nine months ended March 31, 1998, are not necessarily indicative of the results to be expected for the full year. The Company has adopted SFAS No. 128, "Earnings Per Share." The Company's financial statements for March 31, 1998, and for the comparable prior periods presented, include the disclosures required by SFAS No. 128. NOTE B - ACQUISITIONS & DISPOSITIONS In August 1997, Harman International Industries, Incorporated, acquired the automotive OEM loudspeaker manufacturing operations of Oxford International Ltd. Harman funded the acquisition of Oxford with funds drawn under its revolving credit facility. In December 1997, Harman International Industries, Incorporated, acquired Audio Electronics Systems (formerly a division of Nokia), a European OEM loudspeaker manufacturer. Harman paid one-half of the purchase price in December 1997 and the remainder in March 1998. The Audio Electronics Systems acquisition was funded with five-year Deutschmark-based senior debt. In March 1997, Harman International Industries, Incorporated, disposed of its German distribution operations. Proceeds of approximately 6 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE B - ACQUISITIONS & DISPOSITIONS (continued) $45 million were received by the Company in April, and approximately $4 million is due to the Company in the form of a promissory note. NOTE C - DILUTION RECONCILIATION

7 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 AND NINE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 Net sales for the quarter ended March 31, 1998 increased 9% to $391.9 million. Exclusive of currency effects, sales rose 13 percent. For the first nine months, sales were $1.124 billion. Sales in the same period last year totaled $1.097 billion. Exclusive of currency effects, sales increased 7 percent. The OEM Group produced excellent results. Including the sales of Oxford and Audio Electronic Systems, total OEM sales for the quarter increased almost 50 percent over the third quarter last year. Also contributing to the growth was the addition of new car models to the Company's customer base including the Dodge Durango (Infinity), the Toyota Aristo (JBL), the BMW Z-3 (Harman Kardon), and the Hyundai Grandeur (JBL). Becker reported continuing growth on higher sales to BMW and Porsche. Becker's new Traffic Star navigation system is selling very well in Europe. Consumer Group sales were down in the third quarter due to currency shifts, weakness in Asia and the previously announced transition in the Company's relationship with Compaq from sourcing to licensing. Sales to Asia were off 39 percent compared to the third quarter last year. Excluding the effects of currency shifts and the Compaq transition, sales were slightly ahead of last year's third quarter. The Professional Group sales were lower in the third quarter, driven principally by the Asian markets where sales declined 45 percent compared to the same quarter last year. Sales in Europe were reduced by the disposition of the Company's distribution companies in France and the United Kingdom. The sales decreases in Europe and Asia were partially offset by higher sales in North America and by the continuing growth in sales at AKG. The gross profit margin for the quarter ended March 31, 1998 was 28.1 percent ($109.9 million) compared to 28.9 percent ($103.5 million) in the prior year. The gross profit margin for the first nine months of fiscal 1998 was 27.5 percent ($309.7 million) compared to 28.8 percent 8 ($315.9 million) in the previous year. The decrease in the gross profit margin rates for the quarter and the first nine months resulted from weakness in Asia, the strength of the U.S. dollar, pricing pressure in consumer electronics markets, start-up costs for new products and the bankruptcy of electronics retailer Nobody Beats the Wiz, which resulted in a $2 million charge against receivables in the second quarter. Operating income as a percentage of sales was 7.5 percent ($29.4 million) for the quarter ended March 31, 1998, compared to 5.8 percent ($20.7 million) for the same period in the prior year. For the first nine months, operating income as a percentage of sales was 6.9 percent ($77.8 million) compared to 6.7 percent ($72.3 million) in the prior year. The operating income percentage increases in the third quarter and first nine months were due to lower selling, general and administrative costs. Selling, general and administrative costs as a percentage of sales decreased to 20.6 percent for the third quarter and 20.6 percent for the nine months, compared to 23.1 percent and 22.1 percent for the same periods in the prior year. Selling, general and administrative costs for the third quarter of fiscal 1998 included $3 million of restructuring costs incurred at the Consumer and Professional Groups for administrative overhead reduction initiatives. Those costs were offset by $3.6 million of income recorded on the sale of the Company's German distribution operations. Selling, general and administrative costs were lower for the quarter and the nine months compared to the prior year due to currency effects, reductions associated with the sale of distribution companies in France and the United Kingdom in the second quarter of fiscal 1998 and reductions in other operating expenses. Interest expense for the three months ended March 31, 1998 was $6.7 million, compared to $6.1 million in the same period last year. For the nine months ended March 31, 1998, interest expense was $19.3 million, compared to $19.0 million last year. Average borrowings outstanding were $417.2 million for the third quarter of fiscal 1998 and $387.9 million for the first nine months, up from $327.9 million and $320.5 million, respectively, for the same periods in the prior year. Higher average borrowings resulted from the August 1997 acquisition of Oxford, the December 1997 acquisition of Audio Electronic Systems and higher working capital levels. The weighted average interest rate on borrowings was 6.4 percent for the third quarter and 6.7 percent for the nine months ended March 31, 1998. The average interest rates for the comparable periods in the prior year were 7.4 percent and 7.9 percent, respectively. The decrease in average interest rates was due in part to the retirement of $64 million 9 of 12.0% notes, which was funded with proceeds from the issuance of the Company's ten-year senior notes bearing interest at 7.32%. Income before income taxes, minority interest and extraordinary item for the third quarter of fiscal 1998 was $21.8 million, compared to $14.6 million in the prior year. For the nine months ended March 31, 1998, income before income taxes, minority interest and extraordinary item was $57.3 million, compared with $53.5 million in the prior year period. The effective tax rate for the third quarter of fiscal 1998 was 31.0 percent compared with 29.1 percent in the same period a year ago. The effective tax rate for the first nine months of fiscal 1998 was 31.0 percent compared with 29.9 percent last year. The effective tax rates were below the U.S. statutory rate due to utilization of tax credits, 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. Income before extraordinary item was $15.1 million, compared to $10.3 million in the prior year. Income before extraordinary item for the nine months ended March 31, 1998 was $39.5 million, compared to $37.4 million in the previous year. The Company reported an extraordinary charge, net of related tax benefit, of $3.6 million in the first quarter of fiscal 1998 due to the early extinguishment of $64 million of 12.0% notes, due August 1, 2002. The debt retirement was funded with proceeds from the issuance of the Company's ten-year senior notes bearing interest at 7.32%. Net income for the three months ended March 31, 1998 was $15.1 million, compared with $10.3 million in the previous year. Net income for the first nine months of fiscal 1998 was $35.9 million, compared with $37.4 million in the prior year. Basic earnings per share were $0.81 for the quarter, compared with $0.56 in the same period in the prior year. Diluted earnings per share were $0.80 for the quarter, compared with $0.55 last year. Basic earnings per share before extraordinary item were $2.13 for the first nine months, and basic earnings per share were $1.94. Basic earnings per share for the first nine months last year were $2.02. 10 Diluted earnings per share before extraordinary item were $2.10 for the first nine months, and diluted earnings per share were $1.91. Diluted earnings per share for the first half last year were $1.98. FINANCIAL CONDITION - --------------------------------- Net working capital at March 31, 1998 was $454.0 million, compared with $428.1 million at June 30, 1997. Current assets increased $73.2 million due to the Oxford and Audio Electronic Systems acquisitions, higher cash and cash equivalents and higher other current assets, which includes approximately $49 million due to the Company for the sale of the German distribution operations. The impact of this increase in other current assets was offset by reductions in accounts receivable and inventories associated with the sale. Current liabilities increased $47.3 million due to acquisitions and an increase in the current portion of long-term debt. Current portion of long-term debt increased by $27.6 million due to the reclassification of the $45.0 million 11.2% Senior Subordinated notes, due December 1, 1998, partially offset by the retirement of $17.5 million of 10.4% Senior notes due September 30, 1997. Borrowings under the revolving credit facility at March 31, 1998 were $181.5 million, comprised of competitive advance borrowings and revolving credit borrowings. Borrowings under the revolving credit facility at June 30, 1997 were $151.1 million, comprised of swing line borrowings of $8.2 million, which are included in short-term borrowings, and competitive advance borrowings and revolving credit borrowings of $142.9 million. Borrowings under the revolving credit facility increased due to the Oxford acquisition and higher working capital requirements as discussed above. 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, competitive products and other risks detailed in the Company's other Securities and Exchange Commission filings. 11 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 None. (b) Reports on Form 8-K None. 12 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: May 14, 1998 BY: /s/ Bernard A. Girod ------------------------------- Bernard A. Girod President, Chief Operating Officer and Secretary DATE: May 14, 1998 BY: /s/ Frank Meredith ------------------------------- Frank Meredith Vice President of Finance and Administration and Chief Financial Officer 13 EX-27 2 ART 5 FDS FOR 10-Q
5 1000 9-MOS JUN-30-1998 MAR-31-1998 12050 312 320839 10553 324075 752507 491934 251477 1186911 298538 359751 186 0 0 497096 1186911 1124150 1124150 643986 814449 0 5222 19294 57263 17751 39512 0 3583 0 35929 1.94 1.91

EX-27.97 3 ART 5 FDS FOR 10-K
5 1000 YEAR JUN-30-1997 JUN-30-1997 4079 151 315346 9116 320102 679299 425866 217919 1014254 251248 266393 185 0 0 466577 1014254 1474094 1474094 845869 1053614 0 1977 23640 77901 22962 54832 0 0 0 54832 2.96 2.90

EX-27.96 4 ART 5 FDS FOR 10-K
5 1000 YEAR JUN-30-1996 JUN-30-1996 (74) 377 308072 9962 308051 651970 394148 193190 996209 274659 254611 186 0 0 436291 996209 1361595 1361595 772736 953470 0 3103 27510 75024 23750 52042 0 0 0 52042 3.16 3.07

EX-27.95 5 ART 5 FDS FOR 10-K
5 1000 YEAR JUN-30-1995 JUN-30-1995 9342 1910 277211 12313 236532 552655 347403 157580 886872 295091 266021 152 0 0 289338 886872 1170224 1170224 668657 806143 0 4263 25284 61157 19642 41435 0 (274) 0 41161 2.58 2.52

EX-27.971 6 ART 5 FDS FOR 10-Q
5 1000 3-MOS JUN-30-1997 SEP-30-1996 1379 196 319670 9850 331636 692106 402650 200378 1036724 286266 276472 186 0 0 443481 1036724 338003 338003 190738 243209 0 630 6158 11131 3562 7569 0 0 0 7569 0.41 0.40

EX-27.972 7 ART 5 FDS FOR 10-Q
5 1000 6-MOS JUN-30-1997 DEC-31-1996 8302 289 333879 10005 329362 708978 414032 208213 1058731 285040 279749 187 0 0 464237 1058731 739322 739322 421104 526934 0 1035 12894 38895 11770 27125 0 0 0 27125 1.46 1.42

EX-27.973 8 ART 5 FDS FOR 10-Q
5 1000 9-MOS JUN-30-1997 MAR-31-1997 4809 142 310094 9459 330232 685337 419296 214472 1022177 247874 294530 185 0 0 451902 1022177 1097462 1097462 625091 781532 0 1798 18971 53513 16024 37449 0 0 0 37449 2.02 1.97

EX-27.961 9 ART 5 FDS FOR 1ST QUARTER 10-Q
5 1000 JUN-30-1996 SEP-30-1995 3-MOS 5763 3040 296357 12478 260947 606113 355479 167922 936391 291053 314421 159 0 0 295554 936391 300474 300474 171740 210988 0 551 6937 9061 3123 5904 0 0 0 5904 0.36 0.35

EX-27.962 10 ART 5 FDS FOR 2ND QUARTER 10-Q
5 1000 6-MOS JUN-30-1996 DEC-31-1995 9542 2814 289524 12402 281077 617986 375494 179264 958802 276541 338092 0 0 160 309305 958802 649143 649143 369658 451742 0 1240 14475 31359 9948 21366 0 0 0 21366 1.31 1.27

EX-27.963 11 ARTICLE 5 FDS 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 2.11

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