Harman Kardon 2009 Annual Report Download - page 29

Download and view the complete annual report

Please find page 29 of the 2009 Harman Kardon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 125

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125

For the fiscal year ended June 30, 2009, approximately 65 percent of our sales were to automobile
manufacturers. Our automotive customers are not contractually obligated to any long-term purchase of our
products. The loss of Audi/Volkswagen, BMW, Daimler, or any of our other significant automotive customers
would have a material adverse effect on our total consolidated net sales, earnings and financial position.
Backlog Orders
We manufacture automotive products and systems on a just-in-time basis and maintain sufficient inventories
of finished goods to meet Consumer and Professional customer orders promptly. As a result, we do not consider
the level of backlog to be an important indication of our future performance. Our backlog was approximately $38
million at June 30, 2009. We expect to deliver these products within the next 12 months.
Warranty Liabilities
We warrant our products to be free from defects in materials and workmanship for periods ranging from six
months to six years from the date of purchase, depending on the business segment and product. The warranty is a
limited warranty, and it may impose certain shipping costs on the customer and exclude deficiencies in
appearance except for those evident when the product is delivered. Dealers and warranty service providers
normally perform warranty service for loudspeakers and electronics in the field, using parts we supply on an
exchange basis. Estimated warranty liabilities are based upon past experience with similar types of products, the
technological complexity of certain products, replacement cost and other factors. We take these factors into
consideration when assessing the adequacy of our warranty provisions for periods still open to claim.
Competition
The audio industry is fragmented and competitive and includes numerous manufacturers offering audio
products that vary widely in price, quality and distribution methods. Consumer home, multimedia and mobile
aftermarket products are offered through audio specialty stores, discount stores, department stores, mail order
firms and Internet merchants. Automotive and computer manufacturers also offer branded audio products as
options. Music instrument retailers, national electronics retailers, audio dealers, contractors and installers offer
professional products and customers can also purchase these products on a contract bid basis. We concentrate
primarily on the higher quality, higher-priced segments of the audio market and compete based upon the strength
of our brand names, the quality of our products, our ability to provide integrated systems and our comprehensive
marketing, engineering and manufacturing resources.
In the automotive audio market, we compete with Bose, Pioneer ASK, Foster Electric and Panasonic in the
sale of audio systems, and Alpine, Bosch, Panasonic, Continental, Visteon, Mitsubishi Electronics, Aisin Seiki
and Denso in the sale of electronics and infotainment systems to automotive manufacturers. We compete based
upon the strength of our brand names and the quality of our products.
We believe our competitive position is enhanced by our technical expertise in designing and integrating
acoustics, navigation, speech recognition and human-machine interfaces into complete infotainment systems
uniquely adapted to the specific requirements of each automobile model.
We believe that we currently have a significant share of the consumer market for loudspeakers, primarily as
a result of the strength of our brand names and our technology. We believe JBL and Infinity are two of the most
recognized loudspeaker brands in the world, and that our high-end loudspeaker brand, Revel, extends our market
position. Principal competitors in the consumer loudspeaker market include Bose, Klipsch, Polk Audio, Bowers
&Wilkins and Boston Acoustics.
Competition in the consumer home electronics market remains intense and is dominated by large Asian
manufacturers. This market is characterized by the short life cycle of products and a need for continuous design
and development efforts. Our competitive strategy is to compete in the higher-quality segments of this market
8