Harman Kardon 2007 Annual Report Download - page 34

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the information presented in other sections
of this Annual Report on Form 10-K, including “Item 1. Business,” “Item 6. Selected Financial Data,”
and “Item 8. Financial Statements and Supplementary Data.” This discussion contains forward-looking
statements which are based on our current expectations and experience and our perception of historical
trends, current market conditions, including customer acceptance of our new products, current economic
data, expected future developments, including foreign currency exchange rates, and other factors that we
believe are appropriate under the circumstances. These statements involve risks and uncertainties that
could cause actual results to differ materially from those suggested in the forward-looking statements.
See “Risk Factors” included in Item 1A of Part I. of this report.
We begin this discussion with an overview of our company to give you an understanding of our business
and the markets we serve. We then discuss our critical accounting policies. This is followed by a
discussion of our results of operations for the fiscal years ended June 30, 2007, 2006 and 2005. We
include in this discussion an analysis of certain significant year-to-year variances included in our results
of operations and an analysis of our restructuring activities. We also provide specific information
regarding our three reportable business segments: Automotive, Consumer and Professional. We then
discuss our financial condition at June 30, 2007 with a comparison to June 30, 2006. This section contains
information regarding our liquidity and capital resources and cash flows from operating, investing and
financing activities. We complete our discussion with a business outlook for future periods.
Overview
We design, manufacture and market high-quality, high-fidelity audio products and electronic systems for
the automotive, consumer and professional markets. We have developed, both internally and through a
series of strategic acquisitions, a broad range of product offerings sold under renowned brand names in
our principal markets. These brand names have a heritage of technological leadership and product
innovation. Our three reportable business segments, Automotive, Consumer and Professional, are based
on the end-user markets we serve.
Automotive designs, manufactures and markets audio, electronic and infotainment systems for vehicle
applications. Our systems are generally shipped directly to our automotive customers for factory
installation. Infotainment systems are a combination of information and entertainment components that
may include or control GPS navigation, traffic information, voice-activated telephone and climate control,
rear seat entertainment, wireless Internet access, hard disk recording, MP3 playback and a high-end
branded audio system. These systems include scaleable software to allow us to better serve a full range of
vehicles from luxury through entry-level vehicles. Automotive also provides aftermarket products such
as personal navigation devices (“PND”) to customers primarily in Europe. Future infotainment systems
may also provide driver safety capabilities such as lane guidance, pre-crash emergency braking, adaptive
cruise control, and night vision.
Consumer designs, manufactures and markets audio, video and electronic systems for home, mobile and
multimedia applications. Home product applications include systems to provide high-quality audio
throughout the home and to enhance in-home video systems such as home theatres. Our aftermarket