Harman Kardon 2011 Annual Report Download - page 27

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Distribution Channels
Automotive
We primarily sell our Automotive infotainment and audio systems directly to automobile manufacturers in
the U.S., Europe, Japan, China and Korea, where they are installed as original equipment.
Consumer
We primarily sell our Consumer products to dealers who sell directly to the end user in both our domestic
and foreign markets. We also sell to distributors who resell our products to retailers in both our domestic and
foreign markets.
Professional
In the U.S. we primarily sell our Professional products to dealers via manufacturer’s representatives.
Outside the U.S. we sell directly to distributors. Manufacturer’s representatives are paid sales agents and
distributors buy and hold the inventory and sell directly to dealers in their markets. Both manufacturer’s
representatives and distributors have a defined geographic region. In the broadcast and recording market, we
primarily solicit business directly with the end users.
Trademarks and Patents
We market our products under numerous brand names that are protected by both pending and registered
trademarks around the world. Our trademark registrations cover use of trademark rights in connection with
various products, such as loudspeakers, speaker systems, speaker system components and other electrical and
electronic devices. We have registered or taken other protective measures for many of these trademarks in
substantially all major industrialized countries.
As of June 30, 2011, we had 1,874 trademark registrations and 414 pending trademark applications around
the world. On that date, we also had 2,531 patents and 1,732 pending patent applications covering various audio,
infotainment and software products.
Seasonality
We experience seasonal fluctuations in sales and earnings. Historically, our first fiscal quarter ending
September 30th is generally the weakest due to automotive model year changeovers and the summer holidays in
Europe. Sales of our consumer products are generally significantly higher in the second quarter of our fiscal year,
due to increased demand for these products during the holiday buying season. Our sales and earnings also vary
due to the timing of the release of new products, customer acceptance of our products, product offerings by our
competitors and general economic conditions.
Key Customers/Industry Concentration
We are subject to various risks related to our dependence on key customers. Net sales to BMW accounted
for 21 percent and net sales to Audi/Volkswagen accounted for 15 percent of our total consolidated net sales for
the fiscal year ended June 30, 2011. Accounts receivable, net due from BMW accounted for 17 percent of total
consolidated accounts receivable, net at June 30, 2011. We anticipate that BMW and Audi/Volkswagen will
continue to account for a significant portion of our net sales and accounts receivable, net for the foreseeable
future.
For the fiscal year ended June 30, 2011, approximately 73 percent of our net sales were to automobile
manufacturers. Our automotive customers are not contractually obligated to any long-term purchase of our
products. The loss of BMW or Audi/Volkswagen or any of our other significant automotive customers would
have a material adverse effect on our consolidated net sales, results of operations and financial condition.
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