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                       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 DECEMBER 31, 1998
                         COMMISSION FILE NUMBER 0-7916
                             ---------------------
 
                            HARMON INDUSTRIES, INC.
 
                       IRS Employer Identification Number
                                   44-0657800
 
                         State or other jurisdiction of
                         incorporation or organization
                                    MISSOURI
 
                     Address of principal executive offices
              1600 NE CORONADO DRIVE, BLUE SPRINGS, MISSOURI 64014
 
               Registrant's telephone number, including area code
                                 (816) 229-3345
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                         NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                             WHICH REGISTERED
---------------------------------------------  ---------------------------------------------
<S>                                            <C>
                    None
</TABLE>
 
          Securities registered pursuant to Section 12(g) of the Act:
                              TITLE OF EACH CLASS
                                  Common Stock
                            ------------------------
 
    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 / /
 
    As of March 15, 1999, 10,741,964 common shares were outstanding. The
aggregate market value of the common stock (based upon the closing price of
these shares per NASDAQ for Over-the-Counter trading) of Harmon Industries, Inc.
held by non-affiliates was approximately $209,039,000.
 
    The information required by Item 405 of Regulation S-K regarding late
filings or failure to file in connection with Form 3, Form 4 or Form 5 is
included herein under Part III, Item 12.
 
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<PAGE>
                      DOCUMENTS INCORPORATED BY REFERENCE
 
<TABLE>
<S>        <C>                                       <C>
PART II
 
Item 6:    Selected Consolidated Financial Data.     Pages 18 and 19 of the Annual Report to
                                                       Shareholders for the year ended
                                                       December 31, 1998.
 
Item 7:    Management's Discussion and Analysis of   Pages 20 through 27 of the Annual Report
             Financial Condition and Results of        to Shareholders for the year ended
             Operations.                               December 31, 1998.
 
Item 8:    Financial Statements and Supplementary    Pages 28 through 47 of the Annual Report
             Data.                                     to Shareholders for the year ended
                                                       December 31, 1998.
 
PART III
 
Item 10:   Directors and Executive Officers of the   Pages 3 through 6 of the Company's Proxy
             Registrant.                               Statement dated April 1, 1999.
 
Item 11:   Executive Compensation and Other          Pages 7 through 16 of the Company's
             Information.                              Proxy Statement dated April 1, 1999.
 
Item 12:   Security Ownership of Certain Beneficial  Pages 2 and 3 of the Company's Proxy
             Owners and Management.                    Statement dated April 1, 1999.
 
Item 13:   Certain Relationships and Related         Page 6 (last paragraph of Director
             Transactions.                             Nominees) and page 6 ("Certain
                                                       Transactions") of the Company's Proxy
                                                       Statement dated April 1, 1999.
</TABLE>
 
                                       2
<PAGE>
                            HARMON INDUSTRIES, INC.
           ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                                     PART I
 
ITEM 1. BUSINESS
 
    Harmon Industries, Inc. ("Harmon" or "the Company") is a leading supplier of
signal, inspection, train control and communications products, systems and
services to freight and transit railroads throughout the world. The Company
sells its products to Class I and short line freight railroads and to rail
transit systems. Harmon designs, manufactures, markets and services a broad line
of products beneficial to the operating efficiency and safety of its customers.
The products include an extensive line of railroad signal, train control and
communications systems and related components and services. The Company
emphasizes innovation and technology to develop timely and sophisticated
solutions to problems that confront its customers. It also provides customized
asset management services through a warehousing and distribution business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
    A rapidly growing share of the Company's sales now involve combining and
customizing individual products to meet specific customer applications,
representing an evolution for the Company from a supplier of separate component
products to an integrator of systems able to provide customers with solutions to
complex problems.
 
INDUSTRY
 
    NORTH AMERICAN FREIGHT RAILROADS
 
    The North American freight railroad industry includes U.S. and Canadian
Class I railroads, Mexican railroads and regional and short line railroads.
 
    The industry is dominated by the nine railroads the Surface Transportation
Board defines as Class I railroads because of their significant annual operating
revenues. From the 1930's to the 1980's, the Class I freight railroads endured a
nearly constant decrease in their share of the total inter-city freight
transportation market.(1) The reversal of this trend is a result of their
ability to offer customers a lower cost and higher quality method of
transporting freight than was provided in the past. Freight railroads achieved
this result through strict cost controls, reductions in train crew sizes and
other employment expenses, divestiture of unprofitable track and other assets
unrelated to the railroad industry and a more marketing oriented operating
strategy. The Company has traditionally sold its products to the freight
railroad industry.
 
    Many Harmon products are designed to assist the railroads in cutting costs.
For example, the 25% decrease in Class I employment levels from 1988 to 1997
required the Class I railroads to look to products like those manufactured by
Harmon to monitor the condition of moving trains, help ensure the safe switching
and passage of trains and facilitate better communication among crew members on
a train and between moving trains and railroad traffic controllers.
 
    Class I railroads have also used Harmon products to increase asset
utilization and productivity. The 22% reduction from 1988 to 1997 in the number
of Class I railroad freight cars in service required the railroads to look to
products like those manufactured by Harmon which permit the railroads to track
more closely the location and performance of a particular train. This improved
utilization of cars and the reduction in employment levels have caused the
freight revenue ton miles per employee hour for Class I railroads to increase by
77% from 1988 to 1997. The Class I railroads have become more profitable despite
a 32% reduction (in constant 1988 dollars) from 1988 to 1997 in revenue per ton
mile.
 
------------------------
 
(1)   This fact and the other statistical information about the Class I
    railroads in this Annual Report come from RAILROAD FACTS, 1998 EDITION, a
    recognized industry source for information on Class I railroads.
 
                                       3
<PAGE>
    Many Class I railroads have entered into alliances with large trucking
organizations that have resulted in an increase in the shipment of "intermodal"
freight (i.e., containerized freight that moves from truck to train and back to
truck) for which the railroads have retained the long haul portion. The amount
of intermodal traffic has increased 50% from 1988 to 1997. The Company believes
that the willingness of the Class I railroads to enter into such alliances with
their former competitors is a positive development. The Company believes that
the cost reductions and improved efficiencies described above will permit the
Class I railroads to better compete in the long haul portion of the freight
transportation market. The growth momentum of the Class I railroads is important
to the success of Harmon.
 
    Class I railroads also have improved profitability by divesting themselves
of assets viewed as unprofitable, including large portions of under-utilized
track. From 1988 to 1997, the Class I railroads reduced their track miles by
19%, to approximately 173,000 miles. These divestitures permit the Class I
railroads to spend more money on products like those manufactured by Harmon for
their high-traffic corridors. From 1988 to 1997, capital expenditures by Class I
railroads per mile of track owned has increased from approximately $17,200 to
$36,300 per mile of track. Many of these expenditures are for products, such as
the Company's Electro Code product, that reduce the significant maintenance
expenses otherwise incurred by Class I railroads.
 
    In recent years, one of the cost containment strategies increasingly adopted
by the freight railroads has been outsourcing of support functions formerly done
internally. In the areas of interest to Harmon, this has included a reduction in
the internal engineering staffs, construction forces and materials management.
This has led to a dramatic increase in opportunities and business for Harmon in
providing direct engineering support, materials management and construction
services for the Class I railroads.
 
    Federal legislation in the early 1980's permitted the Class I railroads to
sell some of their lines to short line railroads rather than abandon such track.
Such sales have increased the number of short line railroads to 541, with 34 of
these short line railroads being above the threshold of either $40.0 million in
annual revenues or 350 miles of railroad track. Short line railroads are able to
profitably operate sections of track deemed unprofitable by Class I railroads
because the short line railroads generally have smaller administrative,
maintenance and engineering staffs, have locally focused management, generally
operate at lower speeds and are typically not burdened with the more restrictive
collective bargaining agreements as are many of the Class I railroads.
 
    The manner in which the short line railroads operate creates significant
opportunities for Harmon. These railroads typically do not have substantial
engineering or maintenance staffs and, therefore, frequently look to Harmon to
provide complete pre-engineered systems. Sales to these customers have become a
meaningful portion of the Company's sales. Harmon expects to continue to develop
products and services that will meet the evolving maintenance and operating
needs of these railroads.
 
    The market in the freight railroad industry for Harmon products is
influenced by the availability of government funding, the relative health of the
freight railroad industry and the changing needs the industry has for various
Harmon products. The Intermodal Surface Transportation Efficiency Act of 1991
(ISTEA) provided federal funds through 1997 for railroad crossing warning
systems in the same amount each year as existed under previous federal
legislation. In 1997, ISTEA was extended for six months through March 1998
pending agreement on a new, long-term transportation bill. This new bill, the
Transportation Equity Act for the 21(st) Century (TEA-21), was signed into law
in June 1998. TEA-21 is the largest infrastructure funding bill ever enacted in
the United States. It provides for up to $217 billion in expenditures over its
six year life. TEA-21 provides for an increase of approximately 55%, or $50
million, in the amount of funds dedicated annually to installing grade crossing
warning devices.
 
    Harmon expects the Class I railroads to continue their recent favorable
financial performance. Accordingly, Harmon expects the equipment maintenance and
capital improvement expenditures of Class I railroads to grow, or at least
remain stable, in coming years.
 
                                       4
<PAGE>
    The Company has identified Canada and Mexico as areas for new or increased
business. In June 1997, Harmon acquired the remaining interest in Vale-Harmon
Enterprises, Ltd. ("Vale Harmon"), located near Montreal, Quebec, Canada, which
it previously did not own. Vale Harmon serves the freight and transit markets in
Canada. In 1998, Harmon established a wholly owned subsidiary in Mexico,
Industrias Harmon de Mexico, S.A. de C.V., to expand the relationship it has
with two customers arising from the recent concessions granted to operate
portions of a state owned rail in Mexico.
 
    RAIL TRANSIT RAILROADS
 
    The rail transit industry includes Amtrak and numerous existing and proposed
commuter and urban transit rail systems. Federal funding generally enhances the
development of such systems. TEA-21 includes $42 billion for transit projects of
which $36 billion is guaranteed. At the guaranteed level, this represents a 50%
increase over appropriated transit funding during the six years of ISTEA. If
fully funded, the increase is nearly 75%.
 
    Harmon's participation in the expansion of existing or construction of new
rail transit systems generally requires a long selling cycle and frequently
results in multi-year contracts. In addition, the selling process requires
Harmon to consult regularly with engineers responsible for designing such
systems. Such consultation permits Harmon to better understand the requirements
of proposed projects and help insure that such projects are designed in a way
that will permit use of many Harmon products. See "Business-Marketing and
Sales."
 
    In addition to the rail transit projects expected to be expanded or
originated in the next several years, Harmon has targeted existing rail transit
systems as potential customers. These systems are under pressure to increase
their capacity and maintain or improve passenger safety. These dual objectives
are met through the increasing use of Harmon products containing advanced
technology to control passenger trains and the installation of equipment that
guards against human error. An example of the Company's ability to swiftly
address safety concerns is the development by Harmon of its Ultra Cab product
after a highly publicized 1987 passenger train accident in the Northeast
Corridor. As a result of that accident, federal regulators required that all
trains operating in the Northeast Corridor be equipped with automatic devices to
guard against human error in responding to signals. Conrail, the major freight
railroad most affected by this requirement, solicited bids from Harmon and its
competitors for development of a product like Ultra Cab. Harmon won this bid and
completed development of Ultra Cab, which now enjoys a substantial share of the
cab signaling market.
 
    Another example of Harmon addressing safety concerns arose in 1991, when an
over-speeding subway train derailed in New York City and caused several
fatalities. As a result, the New York City Transit Authority embarked on a
program of installing speed measurement and enforcement systems at critical
locations along the subway track. Under sub-contract, Harmon developed a
computer-based system for this application and has since been awarded additional
sub-contracts.
 
    Harmon's first major contract for new construction in the rail transit
market was the Bi-State Metro Link project in St. Louis, which totaled $4.7
million, the first phase of which entered service in July 1993. This project has
served as a visible and successful entry by Harmon into the transit market as a
major contractor. In 1998, the Company was awarded the signal and train control
contract on the first extension of this system. The Company's transit business
has grown to include active transit projects in many major cities in North
America. Harmon's first prime contract, with construction under its direction,
was with the Chicago Transit Authority for reconstruction of the signal and
train control system for the Green Line elevated train. This contract exceeded
$13 million. The project was completed successfully and on time under an
extremely aggressive schedule, and established Harmon as a major contender in
this market.
 
    In November 1996, the Company was awarded a $17.6 million contract for the
design and manufacture of the train control system for a new light-rail system
for the New Jersey Transit Authority. This contract award further established
Harmon as a significant supplier in the rail transit market.
 
                                       5
<PAGE>
    In December 1997, Harmon obtained a license agreement from Hughes Aircraft
Company (now Raytheon Company) to develop, build and market a new Advanced
Automatic Train Control (AATC) system which is based in part on a converted
military communications system. Hughes, in combination with the San Francisco
Bay Area Rapid Transit District (BART), developed a prototype of this system and
demonstrated it on BART in 1996. In February 1998, Harmon was awarded, assuming
all options are exercised, the contract to complete the development of the full
AATC system and deploy it over a substantial portion of the BART system by the
end of 2001. Harmon intends to market this system aggressively in the transit
marketplace, both domestically and internationally. The first step in this
international effort has been an agreement with Nippon Signal of Japan to
license the AATC technology in Japan and jointly market AATC systems in the
Pacific Rim.
 
INTERNATIONAL OPPORTUNITIES
 
    The Company has identified certain international markets as opportunities
for growth. Standards for the railroad industry in Mexico, Canada, South
America, Australia, and certain parts of eastern Asia are generally consistent
with the standards of the United States railroad industry. In addition, some
nationalized railroads in Mexico, Europe, and South America have been recently
privatized and United States freight railroads, which are Harmon customers, are
investors in some of these privatizations. The Company's relationships with such
railroads provide it the opportunity to sell its products to these new entities
for international use. Harmon is also pursuing strategic alliances with other
railroad industry suppliers to assist its efforts to penetrate the international
markets. The North American Free Trade Agreement is also expected to provide
opportunities for Harmon in Mexico and Canada because the anticipated growth in
trade will increase the railroad traffic in both directions across the borders.
 
    In July 1996, Harmon acquired Vaughan Systems, Ltd., subsequently renamed
Vaughan Harmon Systems, Ltd. ("Vaughan Harmon"), located in the United Kingdom.
This acquisition established the first international manufacturing operations
for the Company. Vaughan Harmon manufactures train control products which are
complementary to the Company's domestic product lines and provide a base for
introducing the Company's products into the European market. It has several
contracts with Railtrack, including one for the resignaling of the Cromer line
in Norfolk, England. This will be the first project in which Vaughan Harmon
products and Harmon products from the United States will be combined to provide
an integrated system to the customer.
 
    In 1998, Harmon continued its international expansion by purchasing the
operating assets of its long-time Australian affiliate, Henkes-Harmon
Industries, Pty. Ltd., to establish a new wholly owned subsidiary, Harmon
Industries Australia, Pty. Ltd.
 
BUSINESS STRATEGY
 
    Harmon's business strategy is to utilize its technological expertise,
ability to install turnkey systems, broad product lines, extensive sales network
and customer service orientation to provide high quality products and services
to its customers. Harmon plans to continue to expand and improve its product
lines and services to meet its customers' needs. Harmon expects that the
continued development of its product lines may be accomplished, in part, by
strategic acquisitions of product lines or companies that complement the
Company's current product lines. The Company actively pursues potential
acquisitions as part of this strategy. Internal development of new products will
continue, consistent with Harmon's desire to expand its product base.
 
    The Company intends to improve its leadership position as a vendor to the
freight railroad industry by continuing to expand its long-standing
relationships with Class I railroads, continuing to explore opportunities with
short line railroads, developing new technologies to meet customer needs, and by
adding value through its engineering, installation and asset management services
capabilities. The Company has seen and expects to continue to see a shift in its
revenue mix from revenues generated strictly from the sale of its
 
                                       6
<PAGE>
individual products to revenues resulting from the sale of complete systems that
are designed, installed and, potentially, maintained by the Company. The Company
plans to utilize its extensive experience and expertise in the freight railroad
industry to expand its presence in the rail transit market. The Company has
successfully adapted several of its products to the needs of the rail transit
industry and plans to add to the products and services it can offer that market.
 
    In international markets, the Company intends to continue forming strategic
alliances with entities resident in such markets that are familiar with the
local customers, the railroad standards and the individuals making the decisions
to purchase equipment. Growth in this market may also be aided by active pursuit
of additional acquisitions, continued development of distributor relationships
and increased direct presence in international markets. In addition, the
ownership or operation by North American Class I and short line railroads of
railroad track in other countries provides Harmon the opportunity to sell its
products through its existing customers for international use.
 
    The Company will continue its cost control system that subjects all research
and development, acquisition and capital expenditure programs to a return on
investment analysis. If the anticipated return from any such expenditure meets
objectives set by the Company, such expenditure will generally be considered for
implementation. The Company is continuing the process of upgrading its fully
integrated financial, manufacturing and inventory control computer system that
will assist its efforts to further contain costs.
 
    The Company continues to enhance its Total Quality Systems (TQS) in all
aspects of its operation. The Company was one of the first in its industry to
institute such a program. ISO 9000 certification is one of the foundations of
the Company's TQS which is evident by the fact the Company has five ISO
certificates which cover most of its domestic facilities. Continuous
improvement, employee involvement, education and training continue to receive
strong emphasis as a strategic initiative. The Company actively employs TQS
teams to improve processes, reduce scrap and rework and enhance customer service
with up to 50 active teams, at any one time, working on improving internal
systems.
 
PRODUCT CLASSIFICATIONS
 
    The products of the Company can generally be separated into seven
categories. TRAIN CONTROL PRODUCTS & SYSTEMS include all Company products
related to the control of train movement. These include the Company's signal
control track circuits (Electro Code); interlocking control equipment (Electro
Logic, HLC and VHLC); car-borne equipment (Ultra Cab); computer-based traffic
control systems; train describers and other train control systems. CROSSING
PRODUCTS & SYSTEMS include all Company products related to rail/highway crossing
warning systems including: motion detectors (the Company's PMD and HXP products,
among others); flashing lights and cantilevers; and the design, wiring and
installation of these products. ASSET MANAGEMENT SERVICES involve a
single-source, rapid delivery service for railroad components by warehousing
commonly used parts and equipment that are manufactured by the Company and other
vendors. TRAIN INSPECTION PRODUCTS & SYSTEMS include all Company products
related to monitoring a moving train as it passes by a train inspection site.
COMMUNICATION PRODUCTS & SYSTEMS include voice and data communications, security
and dispatching systems used in the transportation industry. PRINTED WIRING
BOARDS include production of custom designed printed wiring boards for use by
Harmon and other electronics manufacturers. OTHER sales include products that do
not readily fit into the other six categories.
 
                                       7
<PAGE>
PROFILE OF CURRENT OPERATIONS
 
    The Company's current products are summarized by product category in the
following table. The table shows yearly sales and percentages of total sales for
each of the past three years.
 
                    SALES BY PRODUCT OR SERVICE FUNCTION(1)
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                              -------------------------------------------------------------------
                                                      1996                   1997                   1998
                                              ---------------------  ---------------------  ---------------------
                                                AMOUNT        %        AMOUNT        %        AMOUNT        %
                                              ----------  ---------  ----------  ---------  ----------  ---------
<S>                                           <C>         <C>        <C>         <C>        <C>         <C>
Train Control Products & Systems............  $   87,080      47.3%  $  101,624      47.4%  $  132,348      50.5%
Crossing Products & Systems.................      48,927      26.6%      55,598      25.9%      53,035      20.3%
Asset Management Services...................      22,217      12.1%      29,913      14.0%      34,928      13.3%
Train Inspection Products & Systems.........      12,906       7.0%      13,407       6.2%      16,312       6.2%
Communication Products & Systems............       1,891       1.0%         655       0.3%       6,606       2.5%
Printed Wiring Boards.......................       5,249       2.9%       5,772       2.7%       5,220       2.0%
Other.......................................       5,598       3.1%       7,458       3.5%      13,547       5.2%
                                              ----------  ---------  ----------  ---------  ----------  ---------
    Total...................................  $  183,868     100.0%  $  214,427     100.0%  $  261,996     100.0%
                                              ----------  ---------  ----------  ---------  ----------  ---------
                                              ----------  ---------  ----------  ---------  ----------  ---------
</TABLE>
 
------------------------
 
(1) Sales volumes shown above do not include cash discounts or deferred contract
    revenue. As a result, there are small differences between the amounts in
    this table and those presented in the "Consolidated Statements of
    Operations". See "Financial Statements." The differences do not affect the
    validity of the discussion and analysis.
 
PRODUCTS
 
    While the Company's principal products and services have been grouped for
purposes of discussion by primary product or service function, each product and
service interrelates or is complementary to other Company products and services.
Substantially all products and services (except printed wiring boards) are
marketed to the freight railroad and rail transit industries.
 
    TRAIN CONTROL PRODUCTS & SYSTEMS include all Company products and services
related to the control of train movement. These include the Company's signal
control track circuits (Electro Code); interlocking control equipment such as
Electro Logic, the Harmon Logic Controller (HLC) and the Vital Harmon Logic
Controller (VHLC); car-borne equipment (Ultra Cab); computer-based dispatch and
traffic control systems; train describers; and the design, wiring and
installation of packages and systems comprised of these products. Signal control
track circuits control signals regulating train traffic by sending and receiving
coded electrical impulses using the rails for transmission. The primary
advantage of this method is the elimination of overhead transmission lines
between signal locations. The product also eliminates the need for some of the
expensive electro-mechanical signal relays. Computer-based dispatch systems
monitor and control train movement over designated tracks from a central
location. These systems provide important information enabling the railroads to
direct the movement of trains over large sections of track, thereby reducing the
number of control towers and related personnel otherwise required. Although the
technology is similar, each system requires some level of individualized design
and specialized software.
 
    Interlocking control equipment controls the track switches and train signals
at intersections or junction points (interlockings) where main tracks cross or
merge, or where trains may cross over between adjacent main tracks at running
speeds. Interlockings generally employ data telemetry to and from a remote
location (site of the computer-based dispatch system) and also frequently
interface to signal
 
                                       8
<PAGE>
control track circuits. Interlockings use standard products but often require
extensive application engineering to define a site-specific configuration.
 
    Ultra Cab communicates speed commands directly to moving locomotives through
electrical currents in the rails, displays the resulting speed requirements to
the engine crew using colored light signals in the cab, and enforces compliance
with the speed commands by initiating an automatic brake application if the
engineer fails to stay within prescribed limits. A more advanced system called
Incremental Train Control System (ITCS) is being developed by the Company. It
uses radio data communications rather than currents in the rails to exchange
data between trains and the wayside equipment, and provides many added features.
An initial installation of ITCS is taking place on an Amtrak line in southern
Michigan under a FRA grant to demonstrate enhanced train control technology for
High-Speed Rail corridors.
 
    Advanced Automatic Train Control (AATC) is a very sophisticated train
control system that uses a radio data network linking trains with wayside
computers to continuously monitor the location of trains and update the
instructions to each train based on the reported locations of other trains. This
will allow much more capacity in high density transit operations such as San
Francisco's Bay Area Rapid Transit District (BART) where the AATC system will
allow reductions in headway between trains from 2.5 minutes to 90 seconds and
permit more trains per hour to handle peak load conditions. It also achieves
this result with a dramatic reduction in the amount of physical equipment
required along the track compared to more conventional train control techniques.
 
    CROSSING PRODUCTS & SYSTEMS include all Company products and services
related to rail/highway crossing warning systems including: motion detectors
(the Company's PMD and HXP products, among others); flashing lights and
cantilevers; and the design, wiring and installation of complete systems
utilizing these products. Rail/highway crossing warning systems activate
flashing lights and audible bells, and initiate the lowering of crossing gates
to provide traffic barriers in installations so equipped. While the Company
offers complete systems, the more sophisticated electronic equipment that
activates the warning lights or crossing gates is often sold separately.
 
    The Harmon Railroad Crossing Processor (HXP) and the Phase Motion Detector
(PMD) are the trade names for the electronic controllers used in most of these
systems. The HXP is the Company's most sophisticated device for control of
railroad crossing warning devices, and is protected by U.S. patent #4,581,700.
It uses microprocessors to calculate the train's speed and distance to the
crossing and provides a consistent warning time. The less-costly PMD activates
the warning device when the approaching train is within a predefined distance
from the crossing and may be used over a wider range of trackside conditions.
The latest versions of these two products, HXP-3 and PMD-3, represent superior
technology and offer the convenience of modular interchangeability between the
two products.
 
    The Highway Crossing Analyzer (HCA) is a recording and monitoring device
intended mostly for use at grade crossings that can monitor and record many
aspects of the warning system operation, detect anomalies and report trouble to
a central reporting location. It is being adopted in many areas as a means for
improving the efficiency of maintenance procedures by providing better and
faster information on the location and nature of potential problems and the
ability to develop pro-active preventative maintenance procedures. The
acquisition of Devtronics, Inc. in 1997 added other related products similar to
the HCA and additional capability and expertise in this area.
 
    ASSET MANAGEMENT SERVICES involve a single-source, rapid delivery service
for railroad components by warehousing commonly used parts and equipment that
are manufactured by the Company and other vendors. The Company provides other
services including purchasing and distribution of communication and signal
inventory. One of the predominant services is the assembly of containerized
construction kits including all material needed for a signal installation
project, some of which is not made by Harmon. These kits greatly improve the
productivity of the railroad's construction crews and are finding growing
acceptance in the industry. Success in this area has helped Harmon diversify
from a predominantly manufacturing operation into the service portion of the
railroad supply industry. The Company expanded its service
 
                                       9
<PAGE>
offering in January 1998 with the acquisition of CSS, Inc., a provider of
installation and maintenance services to domestic freight railroads.
 
    TRAIN INSPECTION PRODUCTS & SYSTEMS include all Company products and
services related to monitoring a moving train as it passes by a train inspection
site and the design, wiring and installation of packages and systems comprised
of these products. The Company's acquisition of Devtronics, Inc. in November
1997 has increased its market share of this product line. The principal product
used in these systems is a hot-bearing detector, which is installed beside the
track and is designed to detect overheated axle bearings of passing rail cars.
Overheated bearings, if not detected in time, may cause derailments, resulting
in substantial expense and potential liability to the railroads. Some hot
bearing detectors include an auxiliary function to provide hot wheel detection.
Hot wheels can result from sticking brakes on a car and can cause severe wheel
damage and even derailments if left unchecked. Other train inspection products
include a device to detect when a rail car is dragging an unwanted object and a
sensor to monitor high or wide loads.
 
    COMMUNICATION PRODUCTS & SYSTEMS include fiber optic communication networks,
tunnel and above ground radio systems, vehicle radio systems, passenger
emergency telephone systems, audio/visual passenger information systems, fire
and intrusion systems, closed circuit television, premise distribution, local
area networks and Supervisory Control and Data Acquisition (SCADA) systems. The
Company's October 1998 acquisitions of SESCO, Inc. and Seaboard Systems Co.,
Inc. significantly enhanced its ability to offer complete communications
solutions to its customers, particularly in the transit market.
 
    PRINTED WIRING BOARDS include production of customer-designed printed wiring
boards (PWB) for shipment to other electronics manufacturers. A substantial
portion of the plant capacity for PWB is used in the Company's own products.
 
    OTHER includes services such as contract engineering, repair, installation
and maintenance as well as the sale of miscellaneous products outside the
categories discussed above.
 
PRODUCT DEVELOPMENT AND PATENTS
 
    The Company considers product development essential to both maintaining its
market position and to future growth. Product innovation has been a major
contributor to the Company's profitability as railroads have sought more
cost-effective methods of controlling and monitoring train operations.
Frequently, a customer's technical staff works closely with the Company's staff
on the design of a system or component parts. The Company will continue to focus
on rapid response to customer needs in its introduction of new products. The
Company anticipates increasing its efforts and expenditures for product
development.
 
    The Company continues to develop new products and new variations of
previously successful products, where market demands and competition dictates
the need. Major development efforts have recently concentrated on several key
areas: (i) the new Incremental Train Control System (ITCS) for initial
application to the FRA funded demonstration project in Michigan, (ii) the
communication-based train control system called Advanced Automatic Train Control
(AATC) which is intended for rail transit applications, and (iii) ongoing
enhancements to most of the existing products including crossing warning
systems, interlocking controls, signal control track circuits, train inspection
systems, and Ultra Cab. Development of these products is expected to maintain
the Company's position in the freight railroad market and improve the Company's
ability to compete in the rail transit market.
 
    Consistent with its objective of protecting its position as a leading
developer of technologically advanced products, the Company spent approximately
$6,331,000, $7,664,000 and $8,454,000 in the years ended December 31, 1996, 1997
and 1998, respectively, on research and development (R&D) activities related
either to the improvement of existing products or to the development of new
products. The AATC system, however, is being developed under a commercial
contract therefore most of its development costs are not considered R&D expense.
 
                                       10
<PAGE>
    The number of engineers involved in research and development activity has
increased significantly, commensurate with the rise in investment in this field.
However, a much larger increase has occurred in the number of engineers
dedicated to Applications Engineering which apply developed products to specific
customer needs and, in part, replace the customer's internal engineering staffs.
 
    In addition to expanding its product line by means of internal R&D, the
Company will consider acquisitions of complementary product lines like those
that have previously allowed the Company rapid entry into new areas of the
railroad equipment market. In conjunction with the purchase of Devtronics, Inc.,
the Company obtained its technology and R&D projects along with a research
workforce that is already in place.
 
    Although the Company believes that its patents and patent applications have
value, the Company relies primarily on trade secrets to protect its technology.
Rapidly changing technology makes the Company's future success dependent on the
technical competence and creative skill of its personnel.
 
MARKETING AND SALES
 
    The Company's products are sold to the freight railroad and rail transit
industries through experienced direct sales employees who work closely with the
Company's customers to identify existing or potential products to improve the
efficiency and enhance the safety of their operations. The Company's sales force
is organized along industry lines. A separate group is primarily responsible for
sales to each market: Class I, short line, rail transit and international.
 
    The United States-based marketing organization is assisted by wholly owned
subsidiaries in the United Kingdom, Canada, Mexico and Australia. The Company
also utilizes foreign nationals to assist the Company's sales staff with sales
in other foreign markets.
 
    The Company is actively pursuing opportunities on freight and passenger
railroads in both the United States and international markets. Sales in the rail
transit market are usually large, multi-year contracts for major new
installations compared with shorter-term projects or individual product sales
that typically occur in the freight market. If the Company is successful in
obtaining such contracts, which are generally awarded on a fixed price bid
basis, significant variations in overall sales and backlog may result.
 
BACKLOG
 
    The Company's backlog of orders was approximately $131.8 million at December
31, 1998. Approximately $95 million of these orders are expected to be filled in
1999 with the balance filled in 2000. The backlog of orders was approximately
$74.5 million at December 31, 1997, the majority of which were filled during
1998. Although the Company has historically experienced few order cancellations
or delays in filling orders, cancellations could occur and delivery dates could
be extended due to customer requests or production scheduling.
 
COMPETITION
 
    The Company's business is highly competitive. The Company competes
effectively on the basis of the reliability and design of its products, customer
service and price. Competition will require the Company to continue to introduce
new products and services. The Company's three major competitors, all of which
are subsidiary units of foreign companies, appear to have greater financial
resources than the Company. Nonetheless, the Company has demonstrated its
ability to develop and introduce new products and expects that a continuation of
such ability will permit it to maintain its competitive position.
 
WARRANTY AND FIELD SERVICE
 
    The Company provides a high level of customer support through warranty and
customer service departments. The Company's engineers and technicians provide
field service support, repairs and customer
 
                                       11
<PAGE>
training in the use and maintenance of the Company's products. These efforts are
important to maintain customer satisfaction and learn of customer needs, but do
not now directly generate significant revenue for the Company.
 
MANUFACTURING
 
    Manufacturing consists of the assembly of component parts either purchased
from others or produced internally and the production of printed wiring boards.
The Company generally manufactures products in response to specific customer
orders and specifications and, as a result, does not maintain a significant
finished goods inventory. Furthermore, an increasing number of the products sold
by the Company are incorporated into a complete system that is assembled by the
Company and delivered as a package.
 
    The Company's employees participate in the Total Quality System, working in
teams to improve processes and products. Harmon was one of the first vendors to
the railroad industry to institute a total quality program and considers its
program to be an important part of its continuing efforts to improve its
manufacturing process and products.
 
    The Company is dependent upon a continuing supply, both domestic and
foreign, of some component parts and materials. The Company occasionally
experiences some delays in the availability of certain component parts and
materials, and in many cases suppliers require long lead times. In recent years,
there has been no significant interruption of the Company's business due to a
shortage of components or manufacturing materials.
 
EMPLOYEES
 
    As of December 31, 1998, the Company had 1,662 full-time employees. There
were 1,161 employees in manufacturing, 212 in engineering, 190 in general and
administrative services and 99 in marketing and sales. In general, the Company
believes its relations with its employees are excellent. Approximately 14 of the
Company's employees are covered by a collective bargaining agreement.
 
                                       12
<PAGE>
ITEM 2. PROPERTIES
 
    The Company owns or leases an aggregate of approximately 800,000 square feet
of space for manufacturing, warehousing, research and general office use. In
addition, the Company owns land zoned for industrial use, on which the Grain
Valley and Warrensburg facilities are located. The following table summarizes
the Company's principal locations.
 
<TABLE>
<CAPTION>
LOCATION                                                             PRINCIPAL USE
-------------------------------------  --------------------------------------------------------------------------
<S>                                    <C>
Grain Valley, Missouri...............  Administration, design and manufacture of electronic products and railroad
                                       signal systems
Warrensburg, Missouri................  Manufacture of railroad crossing warning systems and hardware and printed
                                       wiring boards
Jacksonville, Florida................  Design and manufacture of railroad crossing warning systems and hardware
Atlanta, Georgia.....................  Design and assembly of railroad crossing warning systems
Riverside, California................  Administration, product design, and manufacture of electronic products
Lee's Summit, Missouri...............  Assembly, storage and distribution of products for the railroad industry
Blue Springs, Missouri...............  Corporate headquarters
Ware, England........................  Design and manufacture of electronic products and control systems
St. Laurent, Quebec, Canada..........  Design, manufacture and distribution of products for the railroad industry
Monterrey, Mexico....................  Assembly, storage and distribution of products for the railroad industry
Bayswater, Victoria, Australia.......  Design and distribution of products for the railroad industry
Hingham, Massachusetts...............  Administration, design, project management and installation of
                                       communications systems for the transit industry
</TABLE>
 
    In addition to these principal locations, the Company also owns or leases
various other office, engineering and warehouse facilities. Management believes
that its facilities are adequate for current and foreseeable needs. For
additional discussion and information concerning the Company's lease
commitments, see "Financial Statements--Note 6 of Notes to the Consolidated
Financial Statements."
 
    The Company owns all significant machinery and equipment used in its
manufacturing operations.
 
ITEM 3. LEGAL PROCEEDINGS
 
                              GRAIN VALLEY MATTER
 
    During the last quarter of 1987, officials of the Company discovered ground
contamination from used solvents classified as hazardous waste at the Grain
Valley, Missouri production facility that it owns. A voluntary report was made
to the State of Missouri Department of Natural Resources ("MDNR"), and
negotiations are ongoing regarding the extent of remedial or clean up actions
and monitoring requirements. MDNR has approved the Company's
Closure/Post-Closure plan which sets forth the soil remediation and groundwater
monitoring obligations at this site. The Company and MDNR also have entered into
a Consent Decree which authorizes the Company to implement the approved
Closure/Post-Closure Plan pending the issuance of a post-closure permit. The
Company submitted a post-closure permit application to MDNR in October 1994.
MDNR issued a permit on July 31, 1996. Groundwater and other remediation
requirements are set forth in the post-closure permit. The Company has designed
and installed a system to begin soil remediation and that system will continue
in operation for some time. The Company has
 
                                       13
<PAGE>
established a trust fund to provide financial assurance for the anticipated
post-closure costs of approximately $500,000 to be incurred over approximately
30 years. The market value of assets in this trust exceeded $585,000 at December
31, 1998.
 
    On September 30, 1991, the EPA issued a Complaint against the Company
alleging violations of the Resource Conservation and Recovery Act ("RCRA") and
RCRA regulations in its disposal of the solvents that created the contamination
described above. The Complaint initially sought penalties in the amount of
$2,777,000 and proposed certain compliance actions. On December 6, 1994, EPA
amended its Complaint to decrease the amount of proposed penalties to
$2,343,706.
 
    After several unsuccessful settlement attempts, the case proceeded to
hearing before an EPA administrative law judge on January 12-14, 1994, on the
issue of penalties. Prior to the hearing, the judge found the Company liable for
all alleged violations. The Company presented evidence on several penalty
reduction theories, including good faith, minor potential for harm to human
health and the environment, and minimum economic benefit.
 
    On December 12, 1994, the administrative law judge issued an Initial
Decision in which he assessed penalties against the Company of $586,716.
Additionally, the judge issued a Compliance Order requiring the Company to
obtain liability coverage for sudden and non-sudden accidental occurrences,
despite a Consent Decree with the Missouri Department of Natural Resources which
excused the Company from this requirement as long as the Company continued to
make semi-annual showings that the type of insurance required by the regulations
was unobtainable. On January 9, 1995, the Company filed a Notice of Appeal of
the Initial Decision with the Environmental Appeals Board ("EAB") and on May 1,
1996, the EAB heard oral arguments. The EAB affirmed the penalty of the
administrative law judge. On June 6, 1997, Harmon filed a complaint in the
Federal District Court for the Western District of Missouri seeking judicial
review of the EAB's decision.
 
    On August 25, 1998, the District Court entered its Order Reversing the Final
Decision of the Environmental Appeals Board. The District Court held that RCRA,
as well as Missouri law principles of res judicata, barred EPA from filing a
duplicative enforcement action after the violator has entered a final settlement
with an authorized State agency. The District Court rejected Harmon's argument
that EPA's penalty claim was barred by the applicable statute of limitations and
that the penalty should be reduced based on EPA's failure to properly consider
all relevant circumstances. Nevertheless, the effect of the District Court's
holding is to bar the EPA from collecting penalties from Harmon based on the
alleged violations.
 
    On October 21, 1998, the EPA filed a Notice of Appeal in the United States
Court of Appeals for the Eight Circuit requesting the Appeals Court to reverse
the District Court's order setting aside the penalty against Harmon. On December
28, 1998, the EPA filed its brief in support of its appeal and on January 27,
1999, Harmon filed its responsive brief. The EPA filed its reply brief on
February 24, 1999. Harmon and the EPA have consented to have organizations
interested in the Appeals Court's ruling file amicus briefs stating their
various positions on the issues raised in this litigation. After the Court has
received briefs on the issues, it will set a time to hear oral argument.
 
    Harmon intends to vigorously present its position in the Court of Appeals,
and is supported in its position by a number of amicus briefs. However, because
so few analogous cases have been disposed of by judicial decision, special legal
counsel cannot express an opinion as to the likelihood of Harmon ultimately
prevailing on appeal.
 
                                 OTHER MATTERS
 
    The Company has been named as a defendant in several other lawsuits in the
normal course of its business. In the opinion of management of the Company,
after consulting with legal counsel, the liabilities, if any, resulting from
these matters are not expected to have a material effect on the consolidated
financial statements of the Company.
 
                                       14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1998.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
        MATTERS.
 
    The Company's common stock trades on The NASDAQ Market under the symbol
HRMN. Stock price quotations can be found in major daily newspapers and in The
Wall Street Journal.
 
    At March 4, 1999 the following securities firms were making a dual auction
market in the Company's common stock:
 
        George K. Baum & Company
        Piper Jaffray Companies Inc.
        PaineWebber Inc.
        C.L. King & Associates
        Knight Securities L.P.
        Mayer & Schweitzer, Inc.
        Sherwood Securities Corporation
 
    The approximate number of holders of record for the Company's common stock
as of March 4, 1999 was 608.
 
ITEM 6. SELECTED FINANCIAL DATA
 
    Incorporated by reference.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
    Incorporated by reference.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    The Company's exposure to market risk is limited to interest rate risk
associated with its variable rate credit facilities and foreign currency
exchange rate risk. The Company does not currently use, nor has it historically
used, derivative financial instruments to manage or reduce market risk.
 
    At December 31, 1998, 78% of the Company's total indebtedness contained
fixed rates of interest. A 10% change in interest rates on the Company's
variable rate indebtedness would not have a significant impact on future
earnings.
 
    The Company has operations in Great Britain, Canada, Australia and Mexico.
The functional currency for each of these operations is the respective local
currency. Based upon the amount of business in these countries during 1998, a
10% change in exchange rates would not have a material impact on future
earnings.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    Incorporated by reference.
 
                                       15
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
    There were no disagreements on accounting and financial disclosure as
described in Item 304 of Regulation S-K. There has been no change in the
Company's accountants within the preceding twenty-four months.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The following is a list of the officers and key employees of the Company.
This information should be read in connection with the Company's Proxy
Statement.
 
<TABLE>
<CAPTION>
                                                       PRINCIPAL OCCUPATION FOR THE LAST FIVE
INDIVIDUAL                        OFFICE          AGE                  YEARS
-------------------------  ---------------------  --- ----------------------------------------
<S>                        <C>                    <C> <C>
Breshears, Ronald G......  VP-Human Resources     52  VP-Human Resources of the Company since
                                                        7/1/81.
 
Daniels, Richard A.......  VP-Transit and         58  VP-Transit and International Systems
                           International Systems        Sales of the Company since 1/1/98.
                           Sales                        Prior to that, VP-Transit since
                                                        2/1/93.
 
Foudree, Charles M.......  Executive VP-Finance,  54  Executive VP-Finance of the Company
                           and Secretary                since 9/9/86. Secretary of the Company
                                                        since 2/2/82.
 
Harmon, Robert E.........  Chairman of the Board  59  Chairman of the Board of the Company
                                                        since 2/4/75. Chief Executive Officer
                                                        of the Company from 8/1/90 through
                                                        12/31/94.
 
Heggestad, Robert E......  VP-Technology          60  VP-Technology of the Company since
                                                        10/2/86.
 
John, James R............  VP-Services            50  VP-Services of the Company since 5/1/96.
                                                        Prior to that, President of
                                                        Consolidated Asset Management Company,
                                                        Inc. since 1992.
 
Johnson, John W..........  VP-Domestic Sales      51  VP-Domestic Sales of the Company since
                                                        2/1/93.
 
Kaiser, Lloyd T..........  Executive VP-Domestic  47  Executive VP-Domestic Sales and Service
                           Sales and Service            of the Company since 1/1/98. Prior to
                                                        that, Executive VP-Systems since
                                                        5/1/96. Prior to that, President of
                                                        Harmon Electronics, Inc. since 1992.
 
Marberg, William P.......  Executive VP-Systems   47  Executive VP-Systems Sales and Support
                           Sales and Support            of the Company since 4/13/98. Prior to
                                                        that, President and Chief Executive
                                                        Office of Airsys ATM, Inc. since
                                                        December 1995. Prior to that, Vice
                                                        President-Air Traffic Control of
                                                        Unisys, Inc.
</TABLE>
 
                                       16
<PAGE>
<TABLE>
<CAPTION>
                                                       PRINCIPAL OCCUPATION FOR THE LAST FIVE
INDIVIDUAL                        OFFICE          AGE                  YEARS
-------------------------  ---------------------  --- ----------------------------------------
<S>                        <C>                    <C> <C>
Olsson, Bjorn E..........  President and Chief    53  President and Chief Executive Officer of
                           Executive Officer            the Company since 1/1/95. President of
                                                        the Company since 8/1/90.
 
Rosewall, Raymond A......  Executive              47  Executive VP-Manufacturing since June
                           VP-Manufacturing             1998. Prior to that, VP-Manufacturing
                                                        of the Company since 12/27/95.
                                                        President of Electro Pneumatic
                                                        Corporation from 12/27/95 to 4/30/96.
                                                        Prior to that, Executive VP Worldwide
                                                        Sales and Marketing for QMS, Inc.
                                                        since 1992.
 
Scheerer, William J......  VP-Applications        51  VP-Applications Engineering of the
                           Engineering                  Company since 1/4/94. Prior to that,
                                                        various positions with CSX
                                                        Transportation, most recently Chief
                                                        Engineer-Train Control.
 
Schmitz, Stephen L.......  VP-Controller          45  VP-Controller of the Company since
                                                        11/1/83.
 
Utterback, Jeffery J.....  Vice President and     37  Vice President and General
                           General                      Manager-Riverside Operations of the
                           Manager-Riverside            Company since June 1998. Prior to
                           Operations                   that, Assistant VP-Quality Systems of
                                                        the Company since 1/1/98. Prior to
                                                        that, Director-Quality Assurance since
                                                        1993.
</TABLE>
 
    Although some of the above have employment agreements which provide for
twelve months of continued employment on a rolling basis, all of the above serve
as officers at the pleasure of the Board of Directors and are appointed for one
year terms.
 
                                       17
<PAGE>
    The following is a list of the Board of Directors of the Company:
 
<TABLE>
<CAPTION>
INDIVIDUAL                                                                          AFFILIATION
---------------------------------------------------------------  -------------------------------------------------
<S>                                                              <C>
 
Robert E. Harmon...............................................  Chairman of the Board
 
Bruce M. Flohr.................................................  Founder and Chairman Emeritus RailTex, Inc., San
                                                                 Antonio, Texas
 
Charles M. Foudree.............................................  Executive Vice President-Finance and Secretary
 
Rodney L. Gray.................................................  Vice Chairman
                                                                 Azurix, Houston, Texas
 
Herbert M. Kohn................................................  Attorney-at-Law
                                                                 Bryan Cave LLP, Kansas City, Missouri
 
Douglass Wm. List..............................................  Management Consultant
                                                                 Baltimore, Maryland
 
Gerald E. Myers................................................  Management Consultant
                                                                 Tempe, Arizona
 
Bjorn E. Olsson................................................  President and Chief Executive Officer
 
John A. Sprague................................................  Managing Partner
                                                                 Jupiter Partners, LP, New York, New York
 
Judith C. Whittaker............................................  Vice President, General Counsel/Secretary
                                                                 Hallmark Cards, Inc., Kansas City, Missouri
</TABLE>
 
ITEM 11. EXECUTIVE COMPENSATION
 
    Incorporated by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Incorporated by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Incorporated by reference.
 
                                       18
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
    (a)(1) Financial Statements
 
    The following consolidated financial statements of Harmon Industries, Inc.
and subsidiaries are incorporated by reference from the Company's 1998 Annual
Report to Shareholders at the following pages:
 
<TABLE>
<CAPTION>
                                                                                         PAGE(S)
                                                                                       -----------
<S>                                                                                    <C>
 
Independent Auditors' Report.........................................................          45
 
Consolidated Balance Sheets--December 31, 1998 and 1997..............................       28-29
 
Consolidated Statements of Earnings--Years ended December 31, 1998, 1997 and 1996....          30
 
Consolidated Statements of Stockholders' Equity--Years ended December 31, 1998, 1997
  and 1996...........................................................................          31
 
Consolidated Statements of Cash Flows--Years ended December 31, 1998, 1997 and
  1996...............................................................................          32
 
Notes to Consolidated Financial Statements...........................................       33-44
</TABLE>
 
    (a)(2) Financial Statement Schedules
 
    Selected Financial Data--for the years ended December 31, 1998, 1997 and
1996, are attached hereto at the following pages:
 
<TABLE>
<S>                                                                      <C>
Independent Auditors' Report on Financial Statement Schedule...........         23
 
Schedule VIII--Valuation and Qualifying Accounts.......................         24
</TABLE>
 
    All other schedules are omitted as they are either not applicable or the
required information is presented in the footnotes to the financial statements
in the annual report.
 
                                       19
<PAGE>
    (a)(3) Exhibits:
 
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                                                                 PAGE(S)
-----------                                                                                          ----------------
<S>          <C>                                                                                     <C>
 
     3 (ii)  Amended Bylaws........................................................................   25 through 38
 
        11   Computation of Per Share Earnings.....................................................         39
 
        13   1998 Annual Report to Shareholders....................................................   40 through 89
 
        21   Listing of Subsidiaries...............................................................         90
 
        23   Auditors' Consent.....................................................................         91
 
        27   Financial Data Schedule...............................................................         92
 
      99-1   Forward Looking Information...........................................................  Incorporated by
                                                                                                       reference to
                                                                                                        page 44 of
                                                                                                        Exhibit 13
 
       N/A   Notice of Annual Meeting and Proxy Statement dated April 1, 1999......................   93 through 112
</TABLE>
 
    (b) Reports on Form 8-K:
 
    There were no reports on Form 8-K for the three months ended December 31,
1998.
 
                                       20
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 and 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.
 
<TABLE>
<S>                                          <C>        <C>
                                             HARMON INDUSTRIES, INC.
 
Date: March 19, 1999                         By:                    /s/ BJORN E. OLSSON
                                                        ------------------------------------------
                                                                      Bjorn E. Olsson
                                                                         PRESIDENT
 
Date: March 19, 1999                         By:                  /s/ CHARLES M. FOUDREE
                                                        ------------------------------------------
                                                                    Charles M. Foudree
                                                             EXECUTIVE VICE PRESIDENT-FINANCE
 
Date: March 19, 1999                         By:                  /s/ STEPHEN L. SCHMITZ
                                                        ------------------------------------------
                                                                    Stephen L. Schmitz
                                                                 VICE PRESIDENT-CONTROLLER
</TABLE>
 
                                       21
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in their capacities as directors and on the dates indicated:
 
<TABLE>
  <S>  <C>                                         <C>
  By:              /s/ BRUCE M. FLOHR               Date  March 19, 1999
       ------------------------------------------
                Bruce M. Flohr, DIRECTOR
 
  By:            /s/ CHARLES M. FOUDREE            Date:  March 19, 1999
       ------------------------------------------
              Charles M. Foudree, DIRECTOR
 
  By:              /s/ RODNEY L. GRAY              Date:  March 19, 1999
       ------------------------------------------
                Rodney L. Gray, DIRECTOR
 
  By:             /s/ ROBERT E. HARMON             Date:  March 19, 1999
       ------------------------------------------
               Robert E. Harmon, DIRECTOR
 
  By:             /s/ HERBERT M. KOHN              Date:  March 19, 1999
       ------------------------------------------
               Herbert M. Kohn, DIRECTOR
 
  By:            /s/ DOUGLASS WM. LIST             Date:  March 19, 1999
       ------------------------------------------
              Douglass Wm. List, DIRECTOR
 
  By:             /s/ GERALD E. MYERS              Date:  March 19, 1999
       ------------------------------------------
               Gerald E. Myers, DIRECTOR
 
  By:             /s/ BJORN E. OLSSON              Date:  March 19, 1999
       ------------------------------------------
               Bjorn E. Olsson, DIRECTOR
 
  By:             /s/ JOHN A. SPRAGUE              Date:  March 19, 1999
       ------------------------------------------
               John A. Sprague, DIRECTOR
 
  By:           /s/ JUDITH C. WHITTAKER            Date:  March 19, 1999
       ------------------------------------------
             Judith C. Whittaker, DIRECTOR
</TABLE>
 
                                       22
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders
Harmon Industries, Inc.:
 
    Under date of February 10, 1999, we reported on the consolidated balance
sheets of Harmon Industries, Inc. and subsidiaries as of December 31, 1998 and
1997 and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1998, as contained in the 1998 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1998. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed under item 14 of Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
 
    In our opinion, this 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.
 
KPMG LLP
 
Kansas City, Missouri
February 10, 1999
 
                                       23
<PAGE>
                                                                   SCHEDULE VIII
 
                    HARMON INDUSTRIES, INC. AND SUBSIDIARIES
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                             CHARGED TO
                                                                 BEGINNING    COSTS AND    RECOVERIES       ENDING
DESCRIPTION                                                       BALANCE     EXPENSES    (DEDUCTIONS)      BALANCE
--------------------------------------------------------------  -----------  -----------  -------------  -------------
<S>                                                             <C>          <C>          <C>            <C>
 
Year ended December 31, 1996:
    Allowance for doubtful trade accounts receivable..........   $     362    $      32     $     (87)     $     307
    Warranty reserve..........................................   $      --    $   2,988     $      --      $   2,988
 
Year ended December 31, 1997:
    Allowance for doubtful trade accounts receivable..........   $     307    $      18     $      (7)     $     318
    Warranty reserve..........................................   $   2,988    $      70     $    (335)     $   2,723
 
Year ended December 31, 1998:
    Allowance for doubtful trade accounts receivable..........   $     318    $      59     $     (26)     $     351
    Warranty reserve..........................................   $   2,723    $     217     $    (885)     $   2,055
</TABLE>
 
                                       24