Harman Kardon 2010 Annual Report Download - page 37

as do the laws of the United States. Despite our efforts to protect our proprietary information, third parties may
obtain, disclose or use our proprietary information without our authorization, which could adversely affect our
business. From time to time, third parties have alleged that we infringe their proprietary rights. These claims or
similar future claims could subject us to significant liability for damages, result in the invalidation of our
proprietary rights, limit our ability to use infringing intellectual property or force us to license third-party
technology rather than dispute the merits of any infringement claim. Even if we prevail, any associated litigation
could be time consuming and expensive and could result in the diversion of our time and resources.
We are engaged in ongoing litigation and may be the subject of additional litigation that may result in
payments to third parties, which could harm our business and financial results.
We are currently involved in litigation arising out of or relating to the events leading up to the termination
of the proposed acquisition of our Company in October 2007 and certain earnings guidance provided by us. In
addition, similar litigation has been and may be initiated against us and others based on the alleged activities and
disclosures at issue in the pending litigation. We cannot predict the outcome of any such proceeding or the
likelihood that further proceedings will be instituted against us. In the event that there is an adverse ruling in any
legal proceeding, we may be required to make payments to third parties that could harm our business or financial
results. Furthermore, regardless of the merits of any claim, the continued maintenance of these legal proceedings
may result in substantial legal expense and could also result in the diversion of our management’s time and
attention away from our business.
We have deferred tax assets in our consolidated financial statements.
Our consolidated financial statements include net deferred tax assets of $264.8 million as of June 30, 2010,
which relate to temporary differences (differences between the assets and liabilities in the consolidated financial
statements and the assets and liabilities in the calculation of taxable income). The valuation of deferred tax assets
is based on various projections for future taxable income. Thus, when actual taxable income differs from
projections, it may become necessary to adjust the valuation of our deferred tax assets, which could impact our
results of operations and financial condition.
Harman International Industries, Incorporated is a holding company with no operations of its own and
therefore our cash flow and ability to service debt is dependent upon distributions from our subsidiaries.
Our ability to service our debt and pay dividends is dependent upon the operating earnings of our
subsidiaries. The distribution of those earnings, or advances or other distributions of funds by those subsidiaries
to Harman International Industries, Incorporated, all of which could be subject to statutory or contractual
restrictions, are contingent upon the subsidiaries’ earnings and are subject to various business considerations.
Our success depends upon our ability to attract and retain key employees and the succession of senior
management.
Our success largely depends on the performance of our management team and other key employees. If we
are unable to attract and retain talented, highly qualified senior management and other key people, our future
operations could be adversely affected. In addition, if we are unable to effectively provide for the succession of
senior management, including our chief executive officer, our business may be materially adversely affected.
While we follow a disciplined, ongoing succession planning process and have succession plans in place for
senior management and other key executives, these do not guarantee that the services of qualified senior
executives will continue to be available to us at particular moments in time.
Any acquisitions we make could disrupt our business and materially harm our financial condition, results of
operations and cash flows.
We may, from time to time, consider acquisitions of complementary companies, products or technologies.
Acquisitions involve numerous risks, including difficulties in the assimilation of the acquired businesses, the
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