Harman Kardon 2007 Annual Report Download - page 23

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10
Risks Related to Harman
Currency fluctuations may reduce profits on our foreign sales or increase our costs, either of which
could adversely affect our financial results.
A significant amount of our assets and operations are located outside the United States. Consequently, we
are subject to fluctuations in foreign currency exchange rates, especially the Euro. Translation losses
resulting from currency fluctuations may adversely affect the profits from our foreign operations and have
a negative impact on our financial results. In addition, we purchase certain foreign-made products.
Although we hedge a portion of our foreign currency exposure and, due to the multiple currencies
involved in our business, foreign currency positions partially offset and are netted against one another to
reduce exposure, we cannot assure you that fluctuations in foreign currency exchange rates will not make
these products more expensive to purchase. Increases in our cost of purchasing these products could
negatively impact our financial results if we are not able to pass those increased costs on to our
customers.
Failure to maintain relationships with our largest customers and failure by our customers to continue
to purchase expected quantities of our products due to changes in market conditions would have an
adverse effect on our operations.
We anticipate that our automotive customers, including DaimlerChrysler, will continue to account for a
significant portion of our sales for the foreseeable future. However, DaimlerChrysler, or our other
automotive customers are not obligated to any long-term purchases of our products. The loss of sales to
DaimlerChrysler, or to any of our other significant automotive customers, would have a material adverse
effect on our consolidated sales, earnings and financial position.
Our products may not satisfy shifting consumer demand or compete successfully with competitors’
products.
Our business is based on the demand for audio and video products and our ability to introduce distinctive
new products that anticipate changing consumer demands and capitalize upon emerging technologies. If
we fail to introduce new products, misinterpret consumer preferences or fail to respond to changes in the
marketplace, consumer demand for our products could decrease and our brand image could suffer. In
addition, our competitors may introduce superior designs or business strategies, impairing our distinctive
image and our products’ desirability. If any of these events occur, our sales could decline.
A decrease in discretionary spending would likely reduce our sales.
Our sales are dependent on discretionary spending by consumers, which may be adversely impacted by
economic conditions affecting disposable consumer income and retail sales. In addition, our sales of
audio, electronic and infotainment products to automotive customers are dependent on the overall success
of the automobile industry, as well as the willingness of automobile purchasers to pay for the option of a
premium branded automotive audio system or a multi-function digital infotainment system.